TIDMCKT
RNS Number : 1285X
Checkit PLC
24 April 2023
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.
24 April 2023
Checkit plc
("Checkit", the "Company" or the "Group")
Preliminary results for the Year Ended 31 January 2023
Checkit plc (AIM: CKT), the intelligent operations platform for
the deskless worker, is pleased to report its audited preliminary
results for the year ended 31 January 2023 ("FY23"). The audited
accounts and annual report for FY23 will be published ahead of the
Company's Annual General Meeting, which is expected to take place
on 8 June 2023.
The Group's management team will host a live webinar which will
include an opportunity for questions at 12:00 (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
FY23 HIGHLIGHTS
-- FY23 results ahead of market expectations, with annual
recurring revenue ("ARR") increasing 28% to GBP11.5m* (FY22:
GBP9.0m)
-- ARR has doubled over the last two years, reflecting the
Group's strategy to focus solely on subscription based sales, with
recurring revenue accounting for 93% of total FY23 revenues
-- US footprint expansion, with 91% year-on-year growth in US ARR to GBP2.8m (FY22: GBP1.5m)
-- Continued success in retaining and growing the existing
customer base, with net revenue retention ("NRR") of 116%**
-- Closure of Building Energy Management Systems ("BEMS") division completed as planned
-- Path to profitability accelerated, with increased focus on
cost efficiency, resulting in improving gross margins of 63% (FY22:
54%***)
-- Recurring revenue increased +41% to GBP9.6m (FY22: GBP6.8m)
-- Total Group revenue from continuing operations of GBP10.3m (+22%) (FY22: GBP8.4m***)
-- Adjusted LBITDA **** from continuing operations of GBP6.4m (FY22: loss of GBP5.6m***)
-- Net cash at year end of GBP15.6m (FY22: GBP24.2m), with the
emphasis in H2 on operational efficiency resulting in a 17%
reduction in net cash outflows during H2 compared to H1
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. This has been restated from the prior year (reported
ARR of GBP8.2m), where it related only to contracts that were
installed.
** 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
*** Continuing operations only
**** Adjusted LBITDA is the loss on operating activities before
depreciation and amortisation, share based payment charges and
non-recurring or special items
Outlook
-- FY24 has started well, with continued sales momentum in line
with the Board's expectations. We continue to execute against our
growth strategy and develop our technology, while progressing
further operating efficiencies and accelerating our path to
profitability.
-- The Board expects to meet market expectations for FY24 and
remains confident that the Group is well positioned to deliver
strong, sustainable organic growth in the years ahead.
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 / George Tzimas +44 (0) 207 496 3000
CHAIRMAN'S STATEMENT
Dear Shareholders
Despite the economic uncertainty that has characterised the
financial year ending 31 January 2023, Checkit has delivered a
strong set of results ahead of Board and market expectations. I am
particularly pleased that recurring revenues now account for more
than 90% of total revenues. Following our successful transformation
into a pure subscription business, we are focused on growing
revenues within our core markets of Western Europe and North
America. The Group continues to benefit from a strong balance sheet
which will allow it to continue to execute against its growth
strategy and develop its technology, whilst driving further
operating efficiencies and accelerating the path to
profitability.
We have continued to examine board composition particularly with
a view to improving diversity and focus and recently announced the
appointment of Alex Curran as a Non-Executive Director. Alex brings
a wealth of experience from growing and scaling software businesses
in North America, a primary growth region for us, where she is
currently regional chief executive officer for Aptitude Software.
At the same time, John Wilson, previously Senior Independent
Non-Executive Director made the decision to step down from the
Board. I should like to pay tribute to the significant contribution
that John has made to Checkit. In 2019 he led the disposal of
Bulgin from the Group which enabled the return of GBP81 million to
shareholders. Since that time he remained as a Non-Executive
Director and Chair of the Remuneration and Audit Committees.
Shareholders have benefited greatly from the value he has created
and I am personally grateful for his wise counsel over a long
period.
Finally, and importantly, I should like to thank all past and
present employees of Checkit for their energy and dedication in
creating value for shareholders, which will ensure that the future
for Checkit is bright.
Keith Daley
Chair
CEO'S STATEMENT
Checkit's financial results for FY23 were ahead of Board and
market expectations, generating an overall increase in ARR of 28%
to GBP11.5m (FY22: GBP9.0m). The results are reflective of the
continuing success of the Group's strategy to transition the
business exclusively to higher quality and higher value recurring
revenues.
The results are all the more impressive in the context of a
turbulent economic and political backdrop in addition to growing
inflationary pressures. These challenges have, so far, been
navigated successfully with a focus on driving operational
efficiencies and preserving cash. Together with the ongoing
development of its technology, Checkit continues to accelerate its
path to profitability.
Financial performance
Checkit has delivered a third consecutive year of high quality
recurring revenue growth. ARR has doubled over the last two years,
from GBP5.7m in FY21 to GBP11.5m in FY23 and now accounts for over
90% of total revenue. The increase in ARR resulted in 41% growth in
reported recurring revenues of GBP9.6m (FY22: GBP6.8m). Pleasingly,
the Company continues to expand into the US market, achieving 91%
year-on-year growth in US ARR contribution from GBP1.5m in FY22 to
GBP2.8m in FY23.
This consistent growth reflects the quantifiable value we
provide to customers through operational insight, increased staff
retention, cost efficiencies and improved compliance. 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 116%
and provides great visibility over future ARR growth.
Our transition into a subscription-only business, with an
emphasis on technology solutions, led to the planned closure of the
BEMS business unit, which is now reported as a discontinued
operation.
Adjusted LBITDA for the year increased to GBP6.4m (FY22:
GBP5.6m), reflecting the ongoing investment in product development
and sales and marketing capabilities to support the strong revenue
growth. New product development spend increased to GBP4.2m (FY22:
GBP3.4m), of which GBP1.8m was capitalised (FY22: GBP1.5m), with
investments in the evolution of the platform and new analytics
dashboards. Sales and marketing investment increased by 13% to
GBP3.0m to maintain growth rates.
The economic environment has become more challenging and whilst
the on-going conflict in Ukraine has no direct impact on the
Group's activities, the Board remains cautious about its indirect
impact together with the potential for general inflationary cost
pressures. As a result, we have weighed our growth ambitions with
an increased emphasis on cost efficiency, as we execute an
accelerated path to profitability. This is demonstrated by an
increased gross margin of 63% (FY22: 54%), as well as operational
cost savings across the business. Our cash burn peaked in H1 and
has reduced by 17% in H2.
The net cash position of GBP15.6m as at 31 January 2023 means we
are well positioned to continue on our growth trajectory, and
develop our technology at the same time as achieving further cost
efficiencies.
New business pipeline
The Group's focus is around building sustainable and higher
conversion rate pipeline across retail, healthcare, facilities
management, franchise and biopharma verticals. Meanwhile, our 'land
and expand' sales strategy is focused on the quality of our
pipeline with increased traction into mid- and large-enterprise
accounts.
The split of the sales pipeline by target organisation size at
the end of the year between tier one (large enterprise), tier two
(enterprise) and tier three (midsize) targets was 67%, 13% and 14%
respectively. Checkit's new customer pipeline in the US - a key
growth market - now includes a number of multi-site organisations
across the healthcare, food retail and hospitality sectors. The US
remains on course to be the largest contributor to Group
revenues.
Growth strategy and ambitions
Our growth strategy is proving effective. We are meeting market
demand with an unrivalled end-to-end solution, with powerful data
and analytics capabilities which provide meaningful insights and
enable our customers to make data driven decisions.
We are on track to deliver our longer-term objective: to become
the market leader in augmented workflow management for the deskless
industry. We have had considerable success in converting Checkit
into a pure-subscription business - with non-recurring revenues now
representing less than 10% of total revenue. This transition
provides us with visibility over future revenue, enabling us to
deepen customer relationships and opportunities to enhance contract
values. We are facilitating our customer 'stickiness' through
continued investment in our platform, which has the ability to
integrate third-party technology, to create a market leading
platform. Our sales and marketing strategy is focused around
developing higher quality, higher conversion rate sales pipelines
across our target sectors as well as further expansion into the US.
In the meantime we remain focused on optimising our operating costs
so that we can pivot into profitability and deliver value to our
investors.
Going forward, we will consider compelling partner opportunities
as an additional scale opportunity. Of paramount importance will be
our ability to balance cost and growth initiatives in order to
cultivate and maintain a high achieving mentality across the
Checkit workforce.
Positive outlook
Our purpose is to simplify and digitise operational activity for
the deskless workforce - and never has that been more important. We
know that simplifying how organisations manage operational
performance has a transformative impact on organisational success,
the wellbeing of employees and the outcomes for customers.
When we look back at what was a tumultuous year for us all, we
are excited at the progress we have made as a business and proud of
the support we have given our customers, providing them with the
insight, tools, and methodology to thrive in these challenging
times.
I join our Chairman and the rest of the management team in
thanking our entire team around the world for their support through
what has been a tough year for so many. I am incredibly proud of
everything the team has achieved to date, building a market leading
offering as well as a long term, international, blue-chip customer
base.
We are very much still at the start of our journey, but the
opportunities ahead of us are immense. Global supply chain
challenges, the rising cost of labour and increased compliance
requirements mean that the premium on simplifying deskless
operations has never been more relevant.
The Board expects to meet FY24 market expectations and remains
confident that the Group is well positioned to deliver strong,
sustainable organic growth.
Kit Kyte
CEO
FINANCIAL REVIEW
Executing on our Strategy
FY23 saw another year of strong performance for Checkit,
continuing to deliver strong top line growth, while making
operational efficiencies to accelerate the path to
profitability.
ARR has doubled over the last two years to GBP11.5m, reflecting
the Group's decision to focus solely on recurring revenues from our
technology solutions and to invest in its growth. The success of
this strategy can be seen through recurring revenue, which now
represents 93% of total revenue, and in the US where ARR grew by
91% year-on-year.
Adjusted LBITDA of GBP6.4m (FY22: GBP5.6m) reflects ongoing
investment in the Group's product development and sales and
marketing capabilities. At the same time, the Group has recognised
the changing and challenging economic environment it is operating
within and so has sought to balance its longer term vision with a
focus on cash preservation, delivering cost savings which have
resulted in gross margin expansion to 63% (FY22: 54%).
The Group continues to benefit from a strong balance sheet and
in light of market conditions, will continue to execute against its
growth strategy and develop its technology, whilst also driving
further operating efficiencies and accelerating its path to
profitability.
ARR and Revenue
ARR grew by 28% to GBP11.5m (FY22 GBP9.0m), driven by consistent
sales momentum, despite a challenging economic and political
environment.
Revenue from continuing operations for FY23 was GBP10.3m, an
increase of 22% compared to the prior year.
(GBP'm) Reported Twelve months to
31 January 31 January % Change
2023 2022
Actual Actual
ARR (1) 11.5 9.0 28%
Revenue from continuing
operations
Recurring 9.6 6.8 +41%
Non-recurring 0.7 1.6 (58) %
Total Group 10.3 8.4 22%
ARR growth benefited from both sales to new customers, as well
as upsell with existing customers and improved pricing.
New business reflects the attractiveness of our technology with
new customers, where we look to secure an initial relationship and
then build over time. This land and expand strategy has allowed us
to grow with our customers, identifying additional use cases and
extending our footprint, resulting in a net retention rate of
116%.
The Group has continued to grow in the US market, achieving 91%
year-on-year ARR growth to GBP2.8m as a result of a number of
contract wins, including continued growth in its footprint with its
biopharma customers and a new contract with a large resort and
casino operator. These new contract wins have the potential to grow
significantly over time. Our US business is on track to be the
largest revenue contributor of the Group.
Checkit has also renewed one of its largest existing enterprise
contracts with an integrated energy company in the UK to provide
real time operations management capability to over 300 sites, which
evidences the value and stickiness of the platform and IoT
offering. This stickiness is reflected in the low churn experienced
by the Group, with a gross retention rate of 99%.
Recurring revenue growth has exceeded 30% for the third
consecutive year and now accounts for 93% of total revenue,
demonstrating Checkit's successful transition into a
subscription-based model.
While recurring revenue grew by 41%, non-recurring revenue
declined in line with management's expectations, driven by the
ongoing conversion of US customers from maintenance contracts to
subscription income during the year.
Following the decision to close the BEMS business unit, this is
now reported as a discontinued operation. Revenue from discontinued
operations in the year amounted to GBP0.6m (FY22: GBP4.9m). The
Group is now wholly focused on delivering recurring revenue from
its technology solutions.
LBITDA
Checkit's adjusted LBITDA for the year was GBP6.4m (FY22:
GBP5.6m), reflecting the strong growth in revenue in the year,
alongside continuing investment behind this growth.
Investment in sales and marketing has identified new solution
areas and use cases across several industries, including
hospitality, facilities management and senior living. Investment in
sales and marketing grew by 13% in the year to GBP3.0m (FY22:
GBP2.6m).
New product development (NPD) spend totaled GBP4.2m (FY22:
GBP3.4m), of which GBP1.8m was capitalised (FY22: GBP1.5m), as the
Group invested in the evolution of the platform and new analytics
dashboards.
At the same time, the Group has balanced its growth strategy
with an increased focus on operational efficiency, as it pursues a
clear path to profitability. This has resulted in gross margin
improvement to 63% (FY22: 54%), as the Group was able to reduce the
cost of delivery and secure procurement savings in its platform
costs.
The Group was also able to deliver efficiencies in operating
costs, especially in H2 where operating costs reduced by GBP0.5m
from H1, as the Group undertook targeted headcount reductions of
10% in its operations and ceased to use outsourced software
development capacity for NPD, bringing all work in-house.
Non-recurring or special items
Non-recurring or special items in the year of GBP4.8m related to
the impairment of goodwill and amortisation of acquired intangible
assets. These are non-cash items:
FY23
GBPm
Impairment of goodwill 4.3
Amortisation of acquired intangible
assets 0.5
Total non-recurring or special items 4.8
------------------------------------- -----
Following the decision to close the BEMS business unit, the
Group carried out a thorough impairment review of the goodwill
relating to the acquisition of Checkit UK Limited (formerly Next
Control Systems Limited) and concluded that this goodwill should be
fully impaired. This business unit is now reported as a
discontinued operation.
Taxation
The Group is currently loss making and therefore no corporate
tax charge is reported for the year FY23. A tax credit of GBP0.3m
arises from R&D tax credits claimed and the amortisation of
intangible assets arising on the acquisition of Checkit UK Limited.
There remains over GBP25m in Group carried forward taxable losses
and therefore there is no expectation of tax payments in the short
to medium term.
EPS - continuing operations
Following the successful placing in November 2021, where the
Group raised net proceeds of approximately GBP20.0m, the weighted
average number of shares in issue in FY23 increased to 108.0m
(FY22: 68.1m). Loss per share (basic & diluted) was 11.2 pence
(FY22: 12.0 pence).
Cash
The Group cash position at 31 January 2023 was GBP15.6m (31
January 2022: GBP24.2m; 31 July 2022: GBP19.5m). As a result of the
strong revenue growth and increased focus on operational efficiency
seen in FY23, the average cash burn per month peaked in H1 and
reduced by 17% in H2. The Group is consequently well placed to
execute against its growth strategy and develop its technology,
whilst also driving further operating efficiencies and accelerating
its path to profitability.
Consolidated statement of comprehensive income
year ended 31 January 2023
Restated
2023 2022
Notes GBPm GBPm
---------------------------------------------------------- ----- ------- --------
Revenue 2 10.3 8.4
Cost of sales (3.8) (3.8)
---------------------------------------------------------- ----- ------- --------
Gross profit 6.5 4.6
Operating expenses (12.9) (10.2)
---------------------------------------------------------- ----- ------- --------
Adjusted LBITDA* (6.4) (5.6)
---------------------------------------------------------- ----- ------- --------
Depreciation and amortisation (1.0) (0.5)
Share-based payment charge (0.2) -
Non-recurring or special items 3 (4.8) (2.4)
---------------------------------------------------------- ----- ------- --------
Operating loss 3 (12.4) (8.5)
Finance income 0.1 -
---------------------------------------------------------- ----- ------- --------
Loss before taxation (12.3) (8.5)
Taxation 5 0.3 0.3
---------------------------------------------------------- ----- ------- --------
Loss from continuing operations (12.0) (8.2)
Profit from discontinued operations 8 (0.3) 1.4
---------------------------------------------------------- ----- ------- --------
Loss for the year attributable to equity shareholders (12.3) (6.8)
---------------------------------------------------------- ----- ------- --------
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations - -
Reclassification of exchange differences to income
statement for discontinued items - -
---------------------------------------------------------- ----- ------- --------
Total comprehensive income for the financial year
attributable to equity shareholders (12.3) (6.8)
---------------------------------------------------------- ----- ------- --------
Loss per share from continuing operations
Basic EPS 6 (11.2)p (12.0)p
Diluted EPS 6 (11.2)p (12.0)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 2023
2023 2022
Notes GBPm GBPm
------------------------------------------------- ----- ------ -----
Assets
Non-current assets
Goodwill arising on acquisition 7 0.2 4.5
Other intangible assets 7 3.8 2.8
Property, plant and equipment 0.9 1.0
------------------------------------------------- ----- ------ -----
Total non-current assets 4.9 8.3
------------------------------------------------- ----- ------ -----
Current assets
Inventories 2.4 1.8
Trade and other receivables 4.5 3.0
Cash and cash equivalents 15.6 24.2
------------------------------------------------- ----- ------ -----
Total current assets 22.5 29.0
------------------------------------------------- ----- ------ -----
Total assets 27.4 37.3
------------------------------------------------- ----- ------ -----
Current liabilities
Trade and other payables 7.5 5.2
Contract lease liabilities 0.3 0.5
------------------------------------------------- ----- ------ -----
Total current liabilities 7.8 5.7
------------------------------------------------- ----- ------ -----
Non-current liabilities
Deferred tax liabilities - 0.1
Long-term contract lease liabilities 0.3 0.2
Long-term provisions 0.4 0.3
------------------------------------------------- ----- ------ -----
Total non-current liabilities 0.7 0.6
------------------------------------------------- ----- ------ -----
Total liabilities 8.5 6.3
------------------------------------------------- ----- ------ -----
Net assets 18.9 31.0
------------------------------------------------- ----- ------ -----
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 0.3 0.1
Retained earnings (16.5) (4.2)
------------------------------------------------- ----- ------ -----
Total equity 18.9 31.0
------------------------------------------------- ----- ------ -----
Consolidated statement of changes in equity
year ended 31 January 2023
Capital
Share Share redemption Other Translation Retained
capital premium reserve reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------- -------- ----------- --------- ----------- --------- ------
At 31 January 2021 3.1 5.4 6.4 - - 2.6 17.6
Loss for the year - - - - - (6.8) (6.8)
--------------------- -------- -------- ----------- --------- ----------- --------- ------
Total comprehensive
income for the year - - - - - (6.8) (6.8)
--------------------- -------- -------- ----------- --------- ----------- --------- ------
Issue of new shares 2.3 17.9 - - - - 20.2
Share based payments - - - - - - -
--------------------- -------- -------- ----------- --------- ----------- --------- ------
Transaction with
owners 2.3 17.9 - - - - 20.2
--------------------- -------- -------- ----------- --------- ----------- --------- ------
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)
Share based payments - - - 0.2 - - 0.2
--------------------- -------- -------- ----------- --------- ----------- --------- ------
Transaction with
owners - - - 0.2 - - 0.2
--------------------- -------- -------- ----------- --------- ----------- --------- ------
At 31 January 2023 5.4 23.3 6.4 0.3 - (16.5) 18.9
--------------------- -------- -------- ----------- --------- ----------- --------- ------
Consolidated statement of cash flows
year ended 31 January 2023
2023 2022
Notes GBPm GBPm
------------------------------------------------------- ----- ----- -----
Net cash outflow from operating activities 4 (6.4) (4.9)
------------------------------------------------------- ----- ----- -----
Investing activities
Interest received on bank deposits 0 .1 -
Purchase of property, plant and equipment (0.2) (0.1)
Investment in product development projects (1.8) (1.5)
Investment in other intangibles (0.2) (0.7)
Purchase of business (net of GBP0.2m cash acquired) - (0.4)
Sale of businesses (net of cash sold) 8 0.2 0.4
------------------------------------------------------- ----- ----- -----
Net cash used in investing activities (1.9) (2.3)
------------------------------------------------------- ----- ----- -----
Financing activities
Issue of new shares - 20.2
Repayment of contract lease liabilities (0.3) (0.3)
------------------------------------------------------- ----- ----- -----
Net cash generated by financing activities (0.3) 19.9
------------------------------------------------------- ----- ----- -----
Net increase / (decrease) in cash and cash equivalents (8.6) 12.7
Cash and cash equivalents at the beginning of the
year 24.2 11.5
------------------------------------------------------- ----- ----- -----
Cash and cash equivalents at the end of the year 15.6 24.2
------------------------------------------------------- ----- ----- -----
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 2023 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 2023, or later periods,
have been adopted early.
Whilst the financial information included in this preliminary
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 2023 Annual Report and Accounts will be
prepared in compliance with UK-adopted International Accounting
Standards (IFRS).
The unaudited preliminary 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 preliminary
announcement does not constitute statutory accounts and is
consistent with the accounting policies of the Group, which were
set out on pages 60 to 67 of the 2022 Annual Report and
Accounts.
The statutory accounts for the year ended 31 January 2023 will
be finalised on the basis of the financial information presented by
the directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Group's
Annual General Meeting. The announcement of the preliminary results
was approved on behalf of the Board of directors on 21 April
2023.
Restatement of prior year
During the year, the Group discontinued its activity in Building
Energy Management Systems. Consequently, the results from this
revenue stream are included as discontinued operations.
The prior year consolidated statement of comprehensive income
and related notes have been restated to show continuing activities,
allowing for suitable comparison between periods. The overall
operating loss for the year for the Group remains unchanged.
Quantitative impact of restatement on financial results
Discontinued
operations
As originally (note
reported 8) As restated
Year ended 31 January 2022 GBPm GBPm GBPm
---------------------------------------- ------------- ------------ -----------
Consolidated statement of comprehensive
income
Revenue 13.3 4.9 8.4
Cost of sales (7.1) (3.3) (3.8)
Gross profit 6.2 1.6 4.6
Operating expenses (10.4) (0.2) (10.2)
Adjusted EBITDA (4.2) 1.4 (5.6)
Depreciation and amortisation 0.5 - 0.5
Share-based payment charge - - -
Non-recurring or special items 2.4 - 2.4
Operating loss (7.1) 1.4 (8.5)
---------------------------------------- ------------- ------------ -----------
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:
Restated
2023 2022
GBPm GBPm
---------------------------------------------- ----- --------
Recurring revenues from subscription services 9.6 6.8
Consultancy and other services 0.7 1.6
---------------------------------------------- ----- --------
Total 10.3 8.4
---------------------------------------------- ----- --------
Geographical information
The Group considers its operations to be in the following
geographical regions:
Revenue from
external customers
---------------------
2023 2022
GBPm GBPm
--------------- ---------- ---------
United Kingdom 7.7 6.8
The Americas 2.6 1.6
--------------- ---------- ---------
Total 10.3 8.4
--------------- ---------- ---------
Information about major customers of the continuing
operations
During FY22, the Group had one customer who generated revenues
of 16% of total revenue (FY22: 22%).
Revenue expected to be recognised
The Group expects to recognise revenue amounting to GBP4.1m
(2022: GBP2.3m) in FY24 relating to performance obligations from
existing contracts that are unsatisfied or partially satisfied as
at 31 January 2023.
3. Operating loss - continuing operations
2023 2022
GBPm GBPm
--------------------------------------------------------- ----- -----
Operating loss is after charging:
Product development costs expensed 2.4 1.9
Depreciation on owned property, plant and equipment 0.1 0.2
Depreciation on right-of-use assets 0.4 0.3
Amortisation on development costs 0.3 -
Amortisation on computer software 0.2 -
--------------------------------------------------------- ----- -----
Auditor's remuneration:
----- -----
- fees payable to the Company's auditor for the audit of
the Company's annual accounts - -
- fees payable to the Company's auditor for the audit of
the Company's subsidiaries pursuant to legislation 0.1 0.2
----- -----
Total audit fees for audit services 0.1 0.2
Tax services - -
--------------------------------------------------------- ----- -----
Total auditor's remuneration 0.1 0.2
--------------------------------------------------------- ----- -----
Non-recurring or special items:
----- -----
- Restructuring and integration costs - 0.7
- Costs incurred in issue of new shares - 0.1
- Disposal costs of India operations - 0.2
- Impairment of goodwill 4.3 -
- Amortisation of acquired intangible assets 0.5 1.4
Total non-recurring or special items 4.8 2.4
--------------------------------------------------------- ----- -----
Included within auditor's remuneration for audit services in
FY23 is a sum for less than GBP0.1m (2021: less than GBP0.1m) for
the audit of overseas subsidiaries carried out by an auditor other
than Cooper Parry Group Limited.
Cooper Parry Group Limited was paid GBPnil for tax advisory and
compliance services (2022: Grant Thornton UK LLP: less than
GBP0.1m).
4. Net cash flows from operating activities
2023 2022
Notes GBPm GBPm
--------------------------------------------------- ----- ------ -----
(Loss)/profit before taxation
- from continuing operations (12.3) (8.5)
- from discontinued operations (before tax) 8 (0.3) 1.4
Adjustments for:
Depreciation 0.5 0.5
Amortisation 1.0 1.4
Impairment of goodwill 4.3 -
Share-based payments 0.2 -
--------------------------------------------------- ----- ------ -----
Operating cash flow before working capital changes (6.6) (5.2)
(Increase)/decrease in trade and other receivables (1.7) 1.6
Increase in inventories (0.6) (0.6)
Increase/(decrease) in trade and other payables 2.3 (0.8)
--------------------------------------------------- ----- ------ -----
Operating cash flow after working capital changes (6.6) (5.0)
Increase in provisions 0.1 -
--------------------------------------------------- ----- ------ -----
Cash generated by operations (6.5) (5.0)
Tax credit received 0.1 0.1
--------------------------------------------------- ----- ------ -----
Net cash out fl ow from operating activities (6.4) (4.9)
--------------------------------------------------- ----- ------ -----
5. Taxation
(a) Analysis of tax (credit)/charge for the year - continuing
operations
2023 2022
GBPm GBPm
------------------------------------------------------ ------------- -----
Current taxation:
UK corporation tax charge on loss for the year (0.1) -
Adjustment in respect of prior periods (0.1)
Total current taxation (0.2) -
------------------------------------------------------ ------------- -----
Deferred tax:
On separately identifiable acquired intangibles (as a
result of amortisation) (0.1) (0.3)
------------------------------------------------------ ------------- -----
Total deferred taxation (0.1) (0.3)
------------------------------------------------------ ------------- -----
Tax credit on continuing operations (0.3) (0.3)
------------------------------------------------------ ------------- -----
(b) Analysis of tax charge for the year - discontinued
operations
2023 2022
GBPm GBPm
------------------------------------------------------ ----- -----
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 - -
------------------------------------------------------ ----- -----
Total current taxation - -
------------------------------------------------------ ----- -----
Deferred tax:
Origination and reversal of temporary differences - -
Under provision in respect of prior years - -
------------------------------------------------------ ----- -----
Total deferred taxation - -
------------------------------------------------------ ----- -----
Tax charge on discontinued operations - -
------------------------------------------------------ ----- -----
(c) Factors affecting taxation charge for the year - continuing
operations
The effective tax rate for the year was 19%.
2023 2022
--------------- ---------------
Tax rate GBPm Tax rate GBPm
----------------------------------------------- -------- ----- -------- -----
Loss on continuing operations before taxation (7.1) (5.3)
Loss on continuing operations multiplied by
weighted average standard rate of corporation
tax in the UK of 19% 19.0% (2.3) 19.0% (1.3)
----------------------------------------------- -------- ----- -------- -----
Effects of:
Expenses not deductible for tax purposes (7.5%) 0.9 (1.3)% 0.1
Prior year adjustments 1.0% (0.1)
Temporary differences not recognised (1.6%) 0.2 (2.1)% 0.1
Tax losses not recognised (9.2%) 1.1 (11.3)% 0.8
R&D Tax Credit 1.0% (0.1)
Surrender of losses to discontinued operations 0% - 0% -
----------------------------------------------- -------- ----- -------- -----
(2.5)% (0.3) (4.3)% (0.3)
----------------------------------------------- -------- ----- -------- -----
(d) Factors affecting taxation charge for the year -
discontinued operations
2023 2022
--------------- --------------
Tax rate GBPm Tax rate GBPm
------------------------------------------------ -------- ----- -------- ----
Loss on discontinued operations before taxation (0.3) -
Loss on ordinary activities multiplied by
weighted average standard rate of corporation
tax in the UK of 19% 19.0% (0.1) - -
------------------------------------------------ -------- ----- -------- ----
Effects of:
Profits not subject to tax - - - -
Temporary differences not recognised 19.0% 0.1 - -
Surrender of losses from continuing operations - - - -
Prior year adjustments - - - -
------------------------------------------------ -------- ----- -------- ----
- - - -
------------------------------------------------ -------- ----- -------- ----
(e) Factors that may affect future taxation charges
Deferred taxation assets amounting to GBP6.5m (2022: GBP4.1m)
have not been provided in respect of unutilised income tax losses
of GBP25.8m (2022: GBP22.0m) 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 is due to be effective from 1
April 2023. These changes were substantively enacted at the balance
sheet date and hence any deferred tax balances have been calculated
at 25%.
6. Earnings per share
Earnings per share (EPS) is the amount of post-tax profit
attributable to each share (excluding those held in the Employee
Benefit Trust or 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.
Restated
2023 2022
Key m m
-------------------------------------------------- ---- ----- --------
Weighted average number of shares for the purpose
of basic earnings per share A 108.0 68.1
Dilutive effect of employee share options([) *(]) - -
-------------------------------------------------- ---- ----- --------
Weighted average number of shares for the purpose
of diluted earnings per share B 108.0 68.1
-------------------------------------------------- ---- ----- --------
Key GBPm GBPm
---------------------------------------------------- ---- ------ -----
Loss for the year (12.3) (6.8)
Profit from discontinued operations, net of tax E 0.3 (1.4)
---------------------------------------------------- ---- ------ -----
Continuing loss for the year attributable to equity
shareholders C (12.0) (8.2)
Total non-recurring or special items net of tax 4.5 2.1
---------------------------------------------------------- ------ -----
Loss for adjusted EPS D (7.5) (6.1)
---------------------------------------------------- ---- ------ -----
Restated
Key 2023 2022
-------------------------------------------------- ---- ------- --------
EPS measures
Basic and diluted([) *(]) continuing EPS C/A (11.2)p (12.0)p
-------------------------------------------------- ---- ------- --------
Adjusted EPS measures
Adjusted basic and diluted([) *(]) continuing EPS D/A (6.9)p (9.0)p
-------------------------------------------------- ---- ------- --------
The adjusted EPS information is considered to provide a fairer
representation of the Group's trading performance.
Discontinued earnings per share
Restated
Key 2023 2022
-------------------- ---- ------ --------
EPS measures
Basic EPS E/A (0.3)p 2.1p
Diluted EPS([) *(]) E/B (0.3)p 2.1p
-------------------- ---- ------ --------
Total earnings per share for the year attributable to equity
shareholders
Key 2023 2022
-------------------- ---- ------- -------
EPS measures
Basic EPS (11.5)p (10.0)p
Diluted EPS([) *(]) (11.5)p (10.0)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
Development Computer intangible
costs software assets Goodwill Total
GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- --------- ----------- ---------- -----
Cost
At 1 February 2021 6.5 0.1 4.0 4.3 14.9
Additions 1.5 0.7 - - 2.2
Businesses acquired - - 0.3 0.2 0.5
Disposals - - - - -
-------------------- ----------- --------- ----------- ---------- -----
At 31 January 2022 8.0 0.8 4.3 4.5 17.6
Additions 1.8 0.2 - - 2.0
Disposals - - - - -
-------------------- ----------- --------- ----------- ---------- -----
Disposals - - - - -
At 31 January 2023 9.8 1.0 4.3 4.5 19.6
-------------------- ----------- --------- ----------- ---------- -----
Amortisation
At 1 February 2021 6.5 0.1 2.3 - 8.9
Charge for the year - - 1.4 - 1.4
Disposals - - - - -
-------------------- ----------- --------- ----------- ---------- -----
At 31 January 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
Disposals - - - - -
-------------------- ----------- --------- ----------- ---------- -----
At 31 January 2023 6.8 0.3 4.2 4.3 15.6
-------------------- ----------- --------- ----------- ---------- -----
Carrying amount
At 1 February 2021 - - 1.7 4.3 6.0
-------------------- ----------- --------- ----------- ---------- -----
At 31 January 2022 1.5 0.7 0.6 4.5 7.3
-------------------- ----------- --------- ----------- ---------- -----
At 31 January 2023 3.0 0.7 0.1 0.2 4.0
-------------------- ----------- --------- ----------- ---------- -----
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 at 31 January 2021 all relates to the acquisition of
Checkit UK Limited in May 2019. Goodwill acquired in the year
ending 31 January 2022 relates to the acquisition of Tutela 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 2028. 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 be fully
impaired.
The carrying value in relation to the acquisition of Checkit LLC
has not identified any impairment.
8. Discontinued operations
During the year the Group discontinued its activity in Building
Energy Management Systems, consequently the results from this
revenue stream are included as discontinued operations.
During the year ending 31 January 2021, the Group sold assets
relating to its Elektron Eye Technology business. Consequently, the
business has continued to be included as discontinued
operations.
Total discontinued operations comprise:
Restated
2023 2022
GBPm GBPm
------------------------------------------------------------ ----- --------
Revenue 0.6 5.1
Cost of sales (0.7) (3.5)
------------------------------------------------------------ ----- --------
Gross profit (0.1) 1.6
------------------------------------------------------------ ----- --------
Operating expenses (0.2) (0.2)
------------------------------------------------------------ ----- --------
Profit before tax (0.3) 1.4
------------------------------------------------------------ ----- --------
Attributable tax - -
------------------------------------------------------------ ----- --------
Profit from discontinued operations before gain on disposal (0.3) 1.4
------------------------------------------------------------ ----- --------
Gain on disposal and loss on remeasurement - -
------------------------------------------------------------ ----- --------
Attributable tax to gain - -
------------------------------------------------------------ ----- --------
Profit from discontinued operations attributable to equity
shareholders (0.3) 1.4
------------------------------------------------------------ ----- --------
Foreign currency reserve reclassification - -
------------------------------------------------------------ ----- --------
Other comprehensive income from discontinued operations (0.3) 1.4
------------------------------------------------------------ ----- --------
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:
2023 2022
GBPm GBPm
------------------------------------------------------------ ----- -----
Revenue 0.6 4.9
Cost of sales (0.7) (3.3)
------------------------------------------------------------ ----- -----
Gross (Loss)/Profit (0.1) 1.6
------------------------------------------------------------ ----- -----
Operating expenses (0.2) (0.2)
------------------------------------------------------------ ----- -----
(Loss)/Profit before tax (0.3) 1.4
Attributable tax - -
------------------------------------------------------------ ----- -----
(Loss)/Profit from Building Energy Management Systems (0.3) 1.4
Gain on sale and loss on re-measurement to fair value - -
------------------------------------------------------------ ----- -----
(Loss)/Profit from Building Energy Management Systems
discontinued operation attributable to equity shareholders (0.3) 1.4
------------------------------------------------------------ ----- -----
Cash flows from Building Energy Management Systems
2023 2022
GBPm GBPm
---------------------------------------------------------- ----- -----
Net cash inflow from operating activities (0.3) 1.4
---------------------------------------------------------- ----- -----
Net cash inflow/(outflow) from investing activities
Cash received on sale of assets - -
Expenditure on intangible assets - -
---------------------------------------------------------- ----- -----
Total net cash inflow/(outflow) from investing activities - -
---------------------------------------------------------- ----- -----
Interest payable - -
---------------------------------------------------------- ----- -----
Total net cash outflow from financing activities - -
---------------------------------------------------------- ----- -----
Elektron Eye Technology
The results of the Elektron Eye Technology discontinued
operation, which have been included in the consolidated statement
of comprehensive income, were as follows:
2023 2022
GBPm GBPm
----------------------------------------------------------- ----- -----
Revenue - 0.2
Cost of sales - (0.2)
----------------------------------------------------------- ----- -----
Gross profit - -
----------------------------------------------------------- ----- -----
Operating expenses - -
----------------------------------------------------------- ----- -----
Profit before tax - -
Attributable tax - -
----------------------------------------------------------- ----- -----
Profit from Elektron Eye Technology - -
Gain on Sale and loss on remeasurement to fair value - -
----------------------------------------------------------- ----- -----
Profit from Elektron Eye Technology discontinued operation
attributable to equity shareholders - -
----------------------------------------------------------- ----- -----
Cash flows from Elektron Eye Technology
2023 2022
GBPm GBPm
----------------------------------------------------------- ----- -----
Net cash inflow from operating activities - -
----------------------------------------------------------- ----- -----
Net cash inflow / (outflow) from investing activities
Cash received on sale of assets 0.2 0.4
Expenditure on intangible assets - -
----------------------------------------------------------- ----- -----
Total net cash inflow/ (outflow) from investing activities 0.2 0.4
----------------------------------------------------------- ----- -----
Interest payable - -
----------------------------------------------------------- ----- -----
Total net cash outflow from financing activities - -
----------------------------------------------------------- ----- -----
On 1 July 2020 and 13 January 2021, the Group disposed of assets
relating to its Elektron Eye Technology business for a total net
proceeds of GBP0.9m, with GBPnil (2022: GBP0.2m) payable as
deferred consideration at the end of the year.
9. Businesses acquired - Checkit LLC
In the prior financial year, the Group acquired 100% of the
equity of Checkit LLC (formerly Tutela Monitoring Systems LLC), a
US-based business. The results for the comparative year ended 31
January 2022 incorporate results from the date of acquisition,
being 4 February 2021.
Checkit LLC generated a loss of GBP0.2m on sales of GBP1.6m for
the period from 4 February 2021 to 31 January 2022. If Checkit LLC
had been acquired on 1 February 2021, revenues and profits would
have been unchanged for the comparative period.
10. Non-GAAP performance measures
A reconciliation of non-GAAP performance measures to reported
results is set out below:
Profit measures - LBITDA - continuing operations
Restated
2023 2022
GBPm GBPm
------------------------------- ------ --------
LBITDA (6.4) (5.6)
Depreciation and amortisation (1.0) (0.5)
Share based payment charge (0.2) -
Non-recurring or special items (4.8) (2.4)
------------------------------- ------ --------
Operating loss for the year (12.4) (8.5)
------------------------------- ------ --------
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END
FR IBMRTMTITBJJ
(END) Dow Jones Newswires
April 24, 2023 02:00 ET (06:00 GMT)
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