THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION FOR THE PURPOSES OF UK MARKET ABUSE
REGULATION. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
WITHIN THE PUBLIC DOMAIN.
25 April 2024
Checkit plc
("Checkit", the "Company" or the "Group")
Final
results for the
Year Ended 31 January 2024
Checkit plc (AIM: CKT), the
augmented workflow and smart sensor automation company for
frontline workers, is pleased to report its audited final results
for the year ended 31 January 2024
("FY24"). The audited accounts and annual report for FY24 will be
published ahead of the Company's Annual General Meeting, which is
expected to take place on 6 June 2024.
The Group's management team will host a live webinar
which will include an opportunity for questions at 14:00 (BST)
today. The webinar can be accessed via the news area of the
website at https://www.checkit.net/news/
or by using this link:
https://www.investormeetcompany.com/checkit-plc/register-investor
FY24
HIGHLIGHTS
·
Annual recurring revenue ("ARR") growth of 16% to £13.3m*
(FY23: £11.5m) in line with market expectations, despite a
challenging global economy
·
Recurring revenue increased +17% to £11.2m (FY23:
£9.6m)
·
Compound recurring revenue growth of 30% since FY20,
reflecting strategic focus on subscription based
sales
·
Total Group revenue from continuing operations of £12.0m
(+17%) (FY23: £10.3m)
· Net
revenue retention ("NRR") of 111%**, demonstrating land and expand
strategy
· New
product functionality, enabling customers to deliver sustainability
and energy saving initiatives
·
Progress towards profitability, with a 46% improvement in
adjusted LBITDA*** from continuing operations of £3.4m (FY23:
loss of £6.4m), driven by revenue growth of 17%, an increase in
gross margins to 67% (FY23: 63%) and an 11% reduction in operating
costs
· Net
cash at year end of £9.0m (FY23: £15.6m), with a 23%
reduction in cash burn in FY24 vs. FY23
Outlook
·
Trading since the start of the new financial year has seen
continued momentum in line with the Board's and market
expectations. We continue to execute against our growth strategy
and develop our technology, while progressing on our path to
profitability.
· The
Board expects to reach breakeven in FY27 (calendar year 2026) and
are confident the Company has sufficient resources to achieve
this.
Kit Kyte, CEO
of Checkit, commented: "Checkit has successfully reduced its
financial losses by 46% this fiscal year while continuing to
escalate our growth through strategic 'land and expand'
opportunities. We are on track to become cashflow breakeven
and anticipate posting a positive EBITDA performance in FY27.
The launch of our new product Asset Intelligence marks an exciting
chapter in the evolution of our offering and demonstrates the
synergies in the Checkit product ecosystem as data collected from
IoT sensors acts as a catalyst for future software growth. We
continue to focus on our twin goals of expedited profitability
whilst driving top-line growth in the business and look forward to
FY25 with confidence."
NOTES
* Annual Recurring Revenue ("ARR") is defined
as the annualised value of contracted recurring revenue from
subscription services as at the period end, including committed
annual recurring revenue from new wins.
** Net retention revenue ("NRR") is defined as
the amount of recurring revenue from existing customers retained
over the year, excluding new wins in the last 12 months.
*** Adjusted LBITDA is the loss on operating
activities before depreciation and amortisation, share based
payment charges and non-recurring or special items.
Checkit
plc
www.checkit.net
Kit Kyte (Chief Executive Officer)
Greg Price (Chief Financial and Operations
Officer)
|
+44 (0) 1223 643
313
|
|
|
Singer Capital
Markets (Nominated Adviser and Broker)
Shaun Dobson / Harry Gooden / James Fischer
|
+44 (0) 207 496
3000
|
Tavistock
(Financial PR)
Lulu Bridges / Katie Hopkins / Simon
Hudson
|
+44 (0) 20
7920 3150
|
CHAIRMAN'S
STATEMENT
Dear Shareholders
Despite the economic uncertainty
that has characterised the financial year ending 31 January 2024,
Checkit has delivered an operating performance in line with Board
and market expectations with annual revenues increased by 17% over
last year. I am particularly pleased that we delivered losses
(adjusted LBITDA) better than expected and nearly halving for the
year to £3.4m (FY23: LBITDA of £6.4m) whilst recurring revenues now
account for 93% of total revenues.
After transitioning to an
exclusively subscription-based model, our goal now is to enhance
revenue growth in our key markets of Western Europe and North
America. With a solid financial foundation, we are well-positioned
to pursue our growth objectives, advance our technology, improve
operational efficiencies, and hasten our progress towards
profitability. I should like to thank Chief Executive Officer Kit
Kyte and the rest of the senior management team who led the Group
effectively during what was a difficult macro-economic environment.
You will read more about the team's vision
below.
We are helping large blue-chip
customers to be as productive, efficient, and compliant as possible
in the face of cost pressures and operational complexities. Our
industry-leading customer retention rates demonstrate how embedded
our growing range of capabilities have become within our clients'
technology stacks; a trend we expect to continue as the tailwinds
of digital transformation, operational efficiency imperatives, and
automation strengthen.
In FY24, we have re-examined each of
our markets and products and concluded there is substantial
long-term value to be created by continuing to invest in product
innovation to spearhead the growth of our high quality recurring
subscription revenue. Our levels of recurring revenue give us
excellent future income visibility and provide a stable platform
from which to expedite the path to profitability, a key Company
priority over the next two years.
On behalf of the Board, I would like
to thank each member of our teams in Cambridge, London, Fleet and
Tampa for their commitment in FY24. Across the business, our people
consistently demonstrate their ingenuity, tenacity, ambition and
humanity. They are our most valuable asset and the reason for our
success.
Keith Daley
Chair
CEO'S
STATEMENT
Reflecting on a year filled with
macro-economic challenges, we are both excited about our progress
and proud of the support we've provided to our customers, equipping
them with the insights, tools, and strategies needed to succeed in
difficult times. Our 'land and expand' strategy of up-selling and
cross-selling has generated growth from our existing customer base,
whilst at the same time we have actively identified areas of
expansion and opportunity both geographically and vertically.
With recurring revenues now representing 93% of the total and our
high net revenue retention of 111%, we have a sound base to pursue
our drive towards profitability.
Financial performance
Checkit's financial results for FY24
were in line with Board and market expectations, generating an
overall increase in ARR of 16% to £13.3m (FY23: £11.5m). Revenue
has grown by 17% to £12.0m, despite the challenging global economy.
This represents a fourth consecutive year of high-quality
recurring revenue growth.
Our focus on gross margin expansion
continues to deliver with a 4% improvement to 67%. We delivered
losses (adjusted LBITDA) better than expected and nearly halving
for the year to £3.4m (2023: LBITDA of £6.4m) as we drive
operational efficiencies and carefully manage costs across the
business.
The Company continues to expand into
the extensive US market, achieving 21% year-on-year growth in US
ARR contribution from £2.8m in FY23 to £3.4m in FY24. This steady
expansion demonstrates the measurable benefits we offer to
customers, including operational insight, enhanced staff retention,
cost-effectiveness, and heightened compliance.
Our drive to profitability continues
with an improvement in LBITDA for the year to £3.4m (FY23: £6.4m),
driven by the growth in revenues and reduced operating costs.
Product development spend reduced by 7% to £3.9m (FY23: £4.2m),
although the amount capitalised increased by 11% to £2.0m (FY23:
£1.8m), as the Group invested in developing AI capability and
unifying products around our platform. Sales and marketing
investment decreased by 12% to £2.6m (FY23: 3.0m), with a focus on
existing customers and identifying opportunities in adjacent
markets and geographies.
Through our "land and expand"
customer strategy, we win new business in a discreet customer
location or function and form close customer bonds that allow us to
expand the services we offer over time. We do this by building
trust through valuable insights and enhancing our customers' own
operational performance. Our ability to grow with our customers is
demonstrated by a net retention rate of 111% and provides
visibility on future ARR growth.
The economic environment remains
challenging and the Board remains cautious about the impact of
geopolitical trends on the development of the business. As a
result, our focus is to achieve an accelerated path to
profitability by balancing our growth ambitions with an increased
emphasis on cost efficiency. This was demonstrated in FY24 by an
increased gross margin of 67% (FY23: 63%), as well as operational
cost savings across the business. The net cash position of £9m as
at 31 January 2024 means we are well positioned to continue on our
growth trajectory, and to develop our technology at the same time
as achieving further cost efficiencies.
Growth strategy and
ambitions
Our growth strategy is showing
results. We are fulfilling market needs with a comprehensive
solution that excels in data and analytics, offering insights that
empower our customers to make informed decisions. Our goal to lead
in augmented workflow management for the deskless industry is
within reach. We've made significant strides in transforming
Checkit into a predominantly subscription-based model, with
non-recurring revenues now only 7% of our total revenue. This shift
enhances our revenue predictability and strengthens our customer
engagements, paving the way for increased contract
values.
The Group's focus is around building
a sustainable and higher conversion rate pipeline across the
retail, healthcare, facilities management, franchise and biopharma
verticals. We are increasing customer loyalty by continuously
investing in our platform, including its capacity to incorporate
external technologies, positioning us at the forefront of the
market. Our sales and marketing efforts are geared towards
generating high-quality leads with improved conversion rates,
especially in our key sectors and expanding further into the US
market. Checkit's new customer pipeline in the US - a key growth
market - includes a number of multi-site organisations across the
healthcare, food retail, hospitality, and biopharma sectors. The US
remains on course to be the largest contributor to Group
revenues.
Concurrently, we are committed to
refining our operational efficiencies to expedite profitability and
deliver shareholder value. Looking ahead, we are open to strategic
partnerships that could further scale our business. However,
balancing cost management with growth initiatives will be crucial
to maintain a culture of excellence within the Checkit
team.
Innovation
Our vision is to reshape business
performance through a combination of automation and human
ingenuity. Our ambition is to pioneer in leveraging the
transformative potential of three pivotal technological trends: the
integration of Internet of Things (IoT) sensors, the digitisation
of frontline work, and the application of Artificial Intelligence
(AI). Individually, each of these technologies offers significant
advantages; however, their true power is realised when they are
seamlessly integrated, unlocking unparalleled value for our
clients.
The essence of our innovation lies
in the intelligent orchestration of IoT sensors, digital workflows,
and AI. IoT sensors revolutionise traditional data collection
methods with continuous and automated sensing capabilities. When
coupled with AI, these sensors not only capture and monitor data
but also unveil opportunities to enhance customer performance and
foresee potential issues. This integration is further amplified
when combined with digital workflows, enabling real-time,
actionable responses by dedicated workforces.
Our digital workflows transform
outdated manual processes into streamlined, guided procedures for
our customers. This transformation is exponentially enhanced by IoT
automation and AI-driven insights, facilitating process
improvements and targeted training opportunities. AI's capability
to process and analyse vast data sets becomes significantly more
valuable when integrated with IoT and digital workflows, allowing
for immediate application of insights and converting them into
tangible actions.
At the core of Checkit's strategy
and competitive edge is the exploitation of these combined
capabilities within a unified platform. This unique capability
positions us to solve a broad spectrum of our customers' business
challenges. Our initial focus has been on critical areas such as
food safety, service operations, and the monitoring of medical and
life science environments-sectors that demand rigorous continuous
monitoring and efficient workflow management, areas where the
synergy of modern analytics and AI surpasses traditional human
oversight.
As we continue to navigate this
journey, we are resolved to harness emerging technological
opportunities that are relevant. We are committed to expanding our
reach and enhancing the value we deliver. The road ahead is filled
with promise, and we are eager to lead the way in transforming how
businesses leverage technology for unparalleled efficiency and
effectiveness.
Positive
outlook
Our mission is to streamline and
digitise the work and processes of the deskless workforce, a goal
that has never been more critical. We understand the profound
effect that simplifying operational management can have on
organisational success, employee wellbeing, and customer
satisfaction.
Alongside our Chair and management
team, I extend heartfelt thanks to our global team for their
resilience and dedication. I am immensely proud of what we have
accomplished, from establishing a leading market position to
building a robust, long-term customer base with international,
blue-chip clients. We are just at the beginning of our journey and
the potential for growth is vast. Current global supply chain
issues, increasing labour costs and higher compliance demands
highlight the growing importance of making deskless work simpler
and more efficient. Looking forward, the Board is optimistic about
meeting market expectations for FY25 and confident in our ability
to continue to achieve strong, sustained organic growth.
Kit Kyte
CEO
FINANCIAL
REVIEW
Progressing on
the path to profitability
Financial results in FY24 reflect
execution against a wide range of metrics with revenue growth,
increasing gross margins and reducing operating
cost.
Revenue has grown by 17% to £12.0m,
in line with market expectations despite the challenging global
economy. Our 'Land and Expand' strategy of up-selling and
cross-selling has generated growth from our existing customer base,
whilst at the same time we have actively identified areas of
expansion and opportunity both geographically and
vertically.
Adjusted LBITDA of £3.4m (FY23:
£6.4m), an improvement of 46%, reflects the Group's strategic
priority to balance growth with driving operational efficiencies.
As a result, gross margin increased to 67% (FY23: 63%) and
operating expenses reduced by 11%.
With recurring revenues now
representing 93% of the total and our high net revenue retention of
111%, we have a sound base to pursue our drive towards
profitability. The Group continues to benefit from a strong balance
sheet and with the economic
environment remaining challenging,
will continue to execute against its growth strategy and develop
its technology, whilst also driving further operating efficiencies
and progressing on the path to profitability.
ARR and Revenue
ARR grew by
16% to £13.3m (FY23 £11.5m), in line with market
expectations.
Total Group revenue for FY24 was
£12.0m, an increase of 17% compared to the prior year (FY23
£10.3m).
(£'m) Reported
|
Twelve months
to
|
|
31 January
2024
|
31
January 2023
|
%
Change
|
ARR1
|
13.3
|
11.5
|
16%
|
|
|
|
|
Revenue
|
|
|
|
Recurring
|
11.2
|
9.6
|
+17
%
|
Non-recurring
|
0.8
|
0.7
|
+18
%
|
Total Group
|
12.0
|
10.3
|
+17
%
|
|
|
|
|
ARR growth was achieved through both sales to new
customers, as well as upsell with existing customers and improved
pricing, as we continued to benefit from our "land and expand"
strategy and maintained high retention
rates.
Sales bookings have benefitted from a number of small
wins with potential for future upsell, supported by a master
service agreement signed with Compass Contract Services (U.K)
Limited ("Compass") for the provision of CAM and CWM to their end
users, primarily in the food services sector. Since signing the MSA
with Compass, Checkit has entered into several new contracts with
Compass and is in discussion over further
opportunities.
We have also secured our largest contract renewal,
with John Lewis plc, at £6m total contract value over three
years. Although the sales cycle has lengthened as a result of
customer caution in the current environment, our pipeline remains
strong.
The Group has also continued to grow in the US, with
21% growth in ARR to £3.4m (FY23: £2.8m).
Our land and expand strategy, where we look to prove
our value in an initial relationship with customers and then build
over time, allows us to grow with our customers, identifying
additional use cases, extending our footprint and driving price
initiatives. This is evidenced in a net retention rate of
111%2 and a gross retention rate
of 99%2.
LBITDA
Checkit's adjusted LBITDA for the year was £3.4m
(FY23: £6.4m), an improvement of 46%, reflecting a milestone on our
path to profitability. As we balance our growth strategy with an
increased focus on operational efficiency, this has maintained
revenue growth of 17%, while improving gross margin to 67% and
reduced operating costs by 11%.
Gross margin improvement to 67% (FY23: 63%) was
driven by increased efficiency from utilising third party providers
in our delivery model, as well as the full year effect of
procurement savings secured in our platform costs.
Operating expenses reduced by 11%, as we controlled
costs in the face of the challenging economic environment and
pursued efficiency opportunities in our operations. These included
the introduction of automated call handling and offshoring
part of the customer support team in H2.
As a result of the focus on cost management,
investment in sales and marketing reduced by 12% in the year to
£2.6m (FY23: £3.0m), with a focus on our existing customer base and
identifying opportunities in adjacent markets and
geographies.
New product development (NPD) spend also reduced by
7% to £3.9m (FY23: £4.2m) as a result of efficiencies achieved,
although the amount capitalised increased to £2.0m (FY23: £1.8m),
as the Group invested in developing our AI capabilities and
unifying our products around our platform.
This tailored investment allows us to introduce
innovation to our technology and offer increased scope and value to
customers, which will drive the next phase of our growth and enable
continuing progress towards
profitability.
Non-recurring or special
items
Non-recurring or special items in the year of £0.2m
related to amortisation of acquired intangible assets, and
restructuring costs related to the cost efficiency
programme:
|
FY24
£m
|
Restructuring costs
|
0.1
|
Amortisation of acquired intangible
assets
|
0.1
|
|
|
Total non-recurring
or special items
|
0.2
|
Taxation
The Group is currently loss making and therefore no
corporate tax charge is reported for the year FY24. There remains
over £30m in group carried forward taxable losses and therefore
there is no expectation of tax payments in the short to medium
term.
Contingent
liability
Checkit plc and HMRC have been in
correspondence since early 2022 regarding matters of input tax
recoverability. The matter is ongoing and the substance of
discussions remains unchanged from the prior year. A statutory
review of the case is being conducted and management continue to
disagree with HMRC's position. Specialist tax advice has been
sought throughout the correspondence. The total amount of input tax
claimed since VAT registration to 31 January 2023 is £1.2m. Given
the uncertainty and materiality of the issue, we do not consider it
appropriate at this stage to provide for this and are disclosing as
a contingent liability.
EPS - continuing
operations
The weighted average number of shares in issue in
FY24 was 108.0m. Loss per share (basic & diluted) was 4.2 pence
(FY23: 11.2 pence)
Cash
The Group cash position at 31 January 2024 was £9.0m
(31 January 2023: £15.6m), reflecting the 46% reduction in
LBITDA and the strategic purchase of inventory to mitigate supply
chain constraints in the market. We expect this position to unwind
over the next 12-18 months, supporting further revenue growth. FY24
saw a 23% reduction in cash burn in comparison to FY23. With the
completion of inventory purchases, we expect cash burn to continue
to reduce into FY25. The strong cash position bolsters Checkit's
strategic drive to profitability, whilst maintaining its growth
strategy and technology development.
Consolidated statement of
comprehensive income
year ended 31 January 2024
|
|
|
|
|
|
Revenue
|
2
|
12.0
|
10.3
|
|
|
|
|
|
|
Gross profit
|
|
8.0
|
6.5
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortisation
|
|
(1.3)
|
(1.0)
|
|
Share-based payment charge
|
|
(0.2)
|
(0.2)
|
|
Non-recurring or special
items
|
|
|
|
|
Operating loss
|
3
|
(5.1)
|
(12.4)
|
|
|
|
|
|
|
Loss before taxation
|
|
(4.6)
|
(12.0)
|
|
|
|
|
|
|
Loss from continuing
operations
|
|
(4.5)
|
(12.0)
|
|
Loss from discontinued
operations
|
|
|
|
|
Loss for the year attributable to
equity shareholders
|
|
|
|
|
Other comprehensive
income/(expense)
|
|
|
|
|
Exchange differences on translation
of foreign operations
|
|
-
|
-
|
|
Reclassification of exchange
differences to income statement for discontinued items
|
|
|
|
|
Total comprehensive expense for the
financial year attributable to equity shareholders
|
|
|
|
|
Loss per share from continuing
operations
|
|
|
|
|
Basic EPS
|
6
|
(4.2)p
|
(11.2)p
|
|
|
|
|
|
*Adjusted loss before interest, tax,
depreciation and amortisation ("LBITDA") is calculated by taking
operating profit and adding back depreciation & amortisation,
share-based payment charge and non-recurring or special
items
Consolidated balance sheet
as at 31 January 2024
|
|
|
|
Assets
|
|
|
|
Non-current assets
|
|
|
|
Goodwill arising on
acquisition
|
7
|
0.2
|
0.2
|
Other intangible assets
|
7
|
4.8
|
3.8
|
Property, plant and
equipment
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
Inventories
|
|
3.8
|
2.4
|
Trade and other
receivables
|
|
4.5
|
4.5
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
Trade and other payables
|
|
7.8
|
7.5
|
Contract lease liabilities
|
|
|
|
Total current liabilities
|
|
|
|
Non-current liabilities
|
|
|
|
Deferred tax liabilities
|
|
-
|
-
|
Long-term contract lease
liabilities
|
|
0.3
|
0.3
|
|
|
|
|
Total non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to the owners of
the Company
|
|
|
|
Called up share capital
|
|
5.4
|
5.4
|
Share premium
|
|
23.3
|
23.3
|
Capital redemption reserve
|
|
6.4
|
6.4
|
Other reserves
|
|
0.5
|
0.3
|
|
|
|
|
|
|
|
|
Consolidated statement of changes in
equity
year ended 31 January 2024
|
|
|
Capital
redemption
reserve
£m
|
|
|
|
|
At 31 January 2022
|
5.4
|
23.3
|
6.4
|
0.1
|
-
|
(4.2)
|
31.0
|
Loss for the year
|
-
|
-
|
-
|
-
|
-
|
(12.3)
|
(12.3)
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
-
|
-
|
(12.3)
|
(12.3)
|
|
|
|
|
|
|
|
|
Transaction with owners
|
-
|
-
|
-
|
0.2
|
-
|
-
|
20.2
|
At 31 January 2023
|
5.4
|
23.3
|
6.4
|
0.3
|
-
|
(16.5)
|
18.9
|
Loss for the year
|
-
|
-
|
-
|
-
|
-
|
(4.5)
|
(4.5)
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
-
|
-
|
(4.5)
|
(4.5)
|
Share based payments
|
-
|
-
|
-
|
0.2
|
-
|
-
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of cash
flows
|
|
|
|
Net cash outflow from operating
activities
|
|
|
|
Investing activities
|
|
|
|
Interest received on bank
deposits
|
|
0.5
|
0.1
|
Purchase of property, plant and
equipment
|
|
(0.1)
|
(0.2)
|
Investment in product development
projects
|
|
(2.0)
|
(1.8)
|
Investment in other
intangibles
|
|
-
|
(0.2)
|
Sale of businesses (net of cash
sold)
|
|
|
|
Net cash used in investing
activities
|
|
|
|
Financing activities
|
|
|
|
Repayment of contract lease
liabilities
|
|
|
|
Net cash utilised by financing
activities
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
(6.6)
|
(8.6)
|
Cash and cash equivalents at the
beginning of the year
|
|
|
|
Cash and cash equivalents at the end
of the year
|
|
|
|
1. Basis
of Preparation
The consolidated statement of
comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated cash
flow statement and the associated notes for the year ended 31
January 2024 have been extracted from the Group's financial
statements upon which the auditor's opinion is unqualified and does
not include any statement under section 498 of the Companies Act
2006.
There were no new standards or
amendments or interpretations to existing standards that became
effective during the year that were material to the
Group.
No new standards, amendments or
interpretations to existing standards having an impact on the
financial statements that have been published and that are
mandatory for the Group's accounting periods beginning on or before
1 February 2024, or later periods, have been adopted
early.
Whilst the financial information
included in this announcement has been computed in accordance with
international accounting standards, this announcement does not
itself contain sufficient information to comply with all IFRS
disclosure requirements. The Company's 2024 Annual Report and
Accounts will be prepared in compliance with UK-adopted
International Accounting Standards (IFRS).
This announcement does not
constitute a dissemination of the annual financial report and does
not therefore need to meet the dissemination requirements for
annual financial reports. A separate dissemination announcement in
accordance with Disclosure and Transparency Rules (DTR) 6.3 will be
made when the annual report and audited financial statements are
available on the Company's website.
Statutory Information
The financial information included
in this announcement does not constitute statutory accounts and is
consistent with the accounting policies of the Group, which were
set out on pages 55 to 61 of the 2023 Annual Report and
Accounts.
The statutory accounts for the year
ended 31 January 2024 will be finalised on the basis of the
financial information presented by the directors in this
announcement and will be delivered to the Registrar of Companies
following the Group's Annual General Meeting. The announcement of
the results was approved on behalf of the Board of directors on 24
April 2024.
2. Segmental reporting
Management provides information
reported to the Chief Operating Decision Maker ("CODM") as a single
operating segment for the purpose of assessing performance and
allocating resources. The CODM is the Chief Executive
Officer.
The Group's main activities are the
supply of Connected Workflow Management, automated monitoring,
Internet of Things ("IoT"), and operational insight-based products
and services.
Revenue by type of the continuing
operations
The following table presents the
different revenue streams of Checkit:
|
|
|
Recurring revenues from subscription
services
|
11.2
|
9.6
|
Consultancy and other
services
|
|
|
|
|
|
Geographical information
|
Revenue
from external customers
|
|
|
|
United Kingdom
|
8.9
|
7.7
|
|
|
|
|
|
|
Information about major customers of
the continuing operations
During FY24, the Group had one
customer who generated revenues of 17% of total revenue (FY23:
16%).
Revenue expected to be
recognised
The Group expects to recognise
revenue amounting to £4.6m (FY23: £4.1m) in FY25 relating to
performance obligations from existing contracts that are
unsatisfied or partially satisfied as at 31 January
2024.
3. Operating loss - continuing
operations
|
|
|
Operating loss is stated after
charging:
|
|
|
Product development costs
expensed
|
1.9
|
2.4
|
Depreciation on owned property, plant
and equipment
|
0.1
|
0.1
|
Depreciation on right-of-use
assets
|
0.3
|
0.4
|
Amortisation on development
costs
|
0.7
|
0.3
|
Amortisation on computer
software
|
|
|
Auditor's remuneration:
|
|
|
- fees payable to the Company's
auditor for the audit of the Company's annual accounts
|
0.1
|
-
|
- fees payable to the Company's
auditor for the audit of the Company's subsidiaries pursuant to
legislation
|
|
|
Total audit fees for audit
services
|
0.2
|
0.1
|
|
|
|
Total auditor's
remuneration
|
|
|
Non-recurring or special
items:
|
|
|
- restructuring and integration
costs
|
0.1
|
-
|
- impairment of goodwill
|
-
|
4.3
|
- amortisation of acquired intangible
assets
|
|
|
Total non-recurring or special
items
|
|
|
Included within auditor's
remuneration for audit services in FY24 is a sum for less than
£0.1m (2023: less than £0.1m) for the audit of overseas
subsidiaries carried out by an auditor other than Cooper Parry
Group Limited.
Cooper Parry Group Limited was paid
£nil for tax advisory and compliance services (2023:
£nil).
4. Net cash flows from operating
activities
|
|
|
|
Loss before interest and
taxation
|
|
|
|
- from continuing
operations
|
|
(5.1)
|
(12.3)
|
- from discontinued operations
(before tax)
|
8
|
-
|
(0.3)
|
Adjustments for:
|
|
|
|
Depreciation
|
|
0.4
|
0.5
|
Amortisation
|
|
1.0
|
1.0
|
Impairment of goodwill
|
|
-
|
4.3
|
Share-based payments
|
|
0.2
|
0.2
|
Operating cash flow before working
capital changes
|
|
(3.5)
|
(6.6)
|
Decrease/(increase) in trade and
other receivables
|
|
0.1
|
(1.7)
|
Increase in inventories
|
|
(1.4)
|
(0.6)
|
Increase in trade and other
payables
|
|
|
|
Operating cash flow after working
capital changes
|
|
(4.5)
|
(6.5)
|
(Decrease)/increase in
provisions
|
|
|
|
Cash utilised by
operations
|
|
(4.7)
|
(6.5)
|
|
|
|
|
Net cash outflow from operating
activities
|
|
|
|
5. Taxation
(a) Analysis of tax credit for the
year - continuing operations
|
|
|
Current taxation:
|
|
|
UK corporation tax (credit) on loss
for the year
|
(0.1)
|
(0.1)
|
Adjustment in respect of prior
periods
|
-
|
(0.1)
|
|
|
|
Deferred tax:
|
|
|
On separately identifiable acquired
intangibles (as a result of amortisation)
|
|
|
|
|
|
Tax credit on continuing
operations
|
|
|
(b) Analysis of tax charge for the
year - discontinued operations
|
|
|
Current taxation:
|
|
|
UK corporation tax charge on profit
for the year
|
-
|
-
|
Overseas corporation tax charge on
profit for the year
|
-
|
-
|
Overprovision for prior year -
UK
|
|
|
|
|
|
Deferred tax:
|
|
|
Origination and reversal of temporary
differences
|
-
|
-
|
Under provision in respect of prior
years
|
|
|
|
|
|
Tax charge on discontinued
operations
|
|
|
(c) Factors affecting taxation
credit for the year - continuing operations
The effective tax rate for the year
was 24%.
|
|
|
|
|
|
|
|
|
|
Loss on ordinary activities before
taxation
|
|
(4.6)
|
|
|
(12.0)
|
Loss on ordinary activities
multiplied by weighted average standard rate of corporation tax
in the UK of 24%
|
|
|
|
|
|
Effects of:
|
|
|
|
|
|
Expenses not deductible for tax
purposes
|
(3.2%)
|
0.1
|
|
(7.5%)
|
0.9
|
Income not deductible
|
2.1%
|
(0.1)
|
|
-
|
-
|
Prior year adjustments
|
-
|
-
|
|
1.0%
|
(0.1)
|
Temporary differences not
recognised
|
(18.7%)
|
0.9
|
|
(1.6)%
|
0.2
|
Tax losses not recognised
|
-
|
-
|
|
(9.2)%
|
1.1
|
R&D tax credit
|
(1.6%)
|
0.1
|
|
1.0%
|
(0.1)
|
Surrender of losses to discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
|
(d) Factors affecting taxation
charge for the year - discontinued operations
|
|
|
|
|
|
|
|
|
|
Loss on ordinary activities before
taxation
|
|
-
|
|
|
(0.3)
|
Loss on ordinary activities
multiplied by weighted average standard rate of corporation tax in
the UK of 19%
|
|
|
|
|
|
Effects of:
|
-
|
-
|
|
|
|
Temporary differences not
recognised
|
-
|
-
|
|
19.0%
|
0.1
|
|
|
|
|
|
|
(e) Factors that may affect future
taxation charges
Deferred taxation assets amounting to
£7.7m (2023: £6.5m) have not been provided in respect of unutilised
income tax losses of £30.8m (2023: £25.8m) that can only be carried
forward against future taxable income of that same trade as there
is currently insufficient evidence that these assets will be
recovered.
The UK Budget 2021 announcements on 3
March 2021 included measures to support economic recovery as a
result of the ongoing COVID-19 pandemic. These included an increase
to the UK's main corporation tax rate to 25%, which was effective
from 1 April 2023. These changes were substantively enacted at the
balance sheet date and hence, any deferred tax balances have been
calculated as at 25%.
6. Earnings per share
Earnings per share (EPS) is the
amount of post-tax profit attributable to each share (excluding
those held by the Company). Basic EPS measures are calculated as
the Group profit for the year attributable to equity shareholders
divided by the weighted average number of shares in issue during
the year. Diluted EPS takes into account the dilutive effect of all
outstanding share options priced below the market price, in
arriving at the number of shares used in its
calculation.
Both of these measures are also
presented on an adjusted basis, to remove the effects of
non-recurring or special items, being items of both income and
expense which are sufficiently large, volatile or one-off in
nature, to assist the reader of the financial statements to get a
better understanding of the underlying performance of the Group.
The note below demonstrates how this calculation has been
performed.
|
|
|
|
Weighted average number of shares for
the purpose of basic earnings per share
|
A
|
108.0
|
108.0
|
Dilutive effect of employee share
options1
|
|
|
|
Weighted average number of shares for
the purpose of diluted earnings per share
|
|
|
|
|
|
|
|
Loss for the year
|
F
|
(4.5)
|
(12.3)
|
Loss from discontinued operations,
net of tax
|
|
|
|
Continuing loss for the year
attributable to equity shareholders
|
C
|
(4.5)
|
(12.0)
|
Total non-recurring or special items
net of tax
|
|
|
|
|
|
|
|
|
|
|
|
EPS measures
|
|
|
|
Basic and diluted1 continuing EPS
|
|
|
|
Adjusted EPS measures
|
|
|
|
Adjusted basic and
diluted1 continuing EPS
|
|
|
|
The adjusted EPS information is
considered to provide a fairer representation of the Group's
trading performance.
Discontinued earnings per
share
|
|
|
|
EPS measures
|
|
|
|
Basic EPS
|
E/A
|
-
|
(0.3)p
|
|
|
|
|
Total earnings per share for the
year attributable to equity shareholders
|
|
|
|
EPS measures
|
|
|
|
Basic EPS
|
F/A
|
(4.2)p
|
(11.5)p
|
|
|
|
|
*
In the current and prior year, the dilutive impact of employee
share options is ignored since there is no dilutive impact on
continuing operations EPS measures given the continuing loss for
the year.
7. Intangible assets
|
|
|
Acquired
intangible
assets
£m
|
|
|
Cost
|
|
|
|
|
|
At 1 February 2022
|
8.0
|
0.8
|
4.3
|
4.5
|
17.6
|
Additions
|
1.8
|
0.2
|
-
|
-
|
2.0
|
|
|
|
|
|
|
At 31 January 2023
|
9.8
|
1.0
|
4.3
|
4.5
|
19.6
|
Additions
|
2.0
|
-
|
-
|
-
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
At 1 February 2022
|
6.5
|
0.1
|
3.7
|
-
|
10.3
|
Charge for the year
|
0.3
|
0.2
|
0.5
|
-
|
1.0
|
Impairment
|
-
|
-
|
-
|
4.3
|
4.3
|
|
|
|
|
|
|
At 31 January 2023
|
6.8
|
0.3
|
4.2
|
4.3
|
15.6
|
Charge for the year
|
0.7
|
0.2
|
0.1
|
-
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired intangible assets are made
up of the separately identified intangibles acquired with the
purchase of Next Control Systems in May 2019 and those acquired
with the purchase of Tutela LLC in February 2021.
Impairment testing for
goodwill
The Group identifies cash-generating
units (CGUs) at the operating company level, as this represents the
lowest level at which cash inflows are largely independent of other
cash inflows. Goodwill acquired in a business combination is
allocated, at acquisition, to the groups of CGUs that are expected
to benefit from that business combination.
Goodwill relates to the acquisition
of Checkit UK Limited in May 2019 and of Checkit LLC in February
2021.
Goodwill values have been tested for
impairment by comparing them against the "value in use" in
perpetuity of the relevant CGU group. The value in use calculations
were based on projected cash flows, derived from the latest
forecasts prepared by management and budgets approved by the Board,
discounted at CGU specific, risk adjusted, discount rates to
calculate their net present value.
Key assumptions used in "value in
use" calculations
The calculation of "value in use" is
most sensitive to the CGU specific operating and growth
assumptions, that are reflected in management forecasts for the
five years to January 2029. CGU specific operating assumptions are
applicable to the forecasted cash flows and relate to revenue
forecasts and forecast operating margins in each of the operating
companies and are based on the strategic plans for the Group.
Long-term growth rates are capped at 1%.
The revenue growth rates used in the
cash flow forecast are based on management's expectations of the
future opportunities for the Checkit platform and the ability to
upsell to existing customers on a global basis, including the
planned US expansion. The forecasts include the costs associated
with delivering the Checkit platforms, which are directly linked to
the forecast sales growth.
Discount rates are based on
estimations of the assumptions that market participants operating
in similar sectors would make, using the Group's economic profile
as a starting point and adjusting appropriately. Sensitivity to the
discount rate has been applied to evaluate impairment testing using
discount rates ranging from 10% to 20%.
Following the decision to close the
BEMS business unit, management has assessed that the carrying value
of the goodwill associated with the acquisition of Checkit UK
should continue to be fully impaired.
The carrying value in relation to the
acquisition of Checkit LLC has not identified any
impairment.
8. Discontinued
operations
During the prior year, the Group
discontinued its activity in Building Energy Management Systems,
consequently the results from this revenue stream were included as
discontinued operations.
Total discontinued operations
comprise:
|
|
|
Revenue
|
-
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
loss from discontinued operations
before gain on disposal
|
|
|
Gain on disposal and loss on
re-measurement
|
|
|
|
|
|
Loss from discontinued operations
attributable to equity shareholders
|
|
|
Foreign currency reserve
reclassification
|
|
|
Other comprehensive income from
discontinued operations
|
|
|
Building Energy Management
Systems
The results of ceasing operations of
Building Energy Management Systems, which have been included in the
consolidated statement of comprehensive income, were as
follows:
|
|
|
Revenue
|
-
|
0.6
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax
|
-
|
(0.3)
|
|
|
|
Profit/(loss) from Building Energy
Management Systems
|
-
|
(0.3)
|
Gain on sale and loss on
re-measurement to fair value
|
|
|
Profit/(loss) from Building Energy
Management Systems discontinued operation attributable to equity
shareholders
|
|
|
Cash flows from Building Energy
Management Systems
|
|
|
Net cash outflow from operating
activities
|
|
|
Net
cash inflow from investing activities
|
|
|
Cash received on sale of
assets
|
-
|
-
|
Expenditure on intangible
assets
|
|
|
Total net cash inflow from investing
activities
|
|
|
|
|
|
Total net cash inflow from financing
activities
|
|
|
9. Contingent liabilities
Checkit plc and HMRC have been in
correspondence since early 2022 regarding matters of input tax
recoverability. The matter is ongoing and the substance of
discussions remains unchanged from the prior year. A statutory
review of the case is being conducted and management continue to
disagree with HMRC's position. Specialist tax advice has been
sought throughout the correspondence. The total amount of input tax
claimed since VAT registration to 31 January 2023 is £1.2m. Given
the uncertainty and materiality of the issue, we do not consider it
appropriate at this stage to provide for this and are disclosing as
a contingent liability.
10. Non-GAAP performance
measures
A reconciliation of non-GAAP
performance measures to reported results is set out
below:
Profit measures - LBITDA -
continuing operations
|
|
|
LBITDA
|
(3.4)
|
(6.4)
|
Depreciation and
amortisation
|
(1.3)
|
(1.0)
|
Share based payment charge
|
(0.2)
|
(0.2)
|
Non-recurring or special
items
|
|
|
Operating loss for the
year
|
|
|