Final Results

RNS Number : 0532C

Actual Experience PLC

17 January 2018

 

17 January 2018

Actual Experience plc
(the "Group", the "Company" or "Actual Experience")

Preliminary Results

Actual Experience plc (AIM: ACT), the analytics as a service company, is pleased to announce its preliminary results for the year ended 30 September 2017.

Highlights

·    2017 was a year in which we prepared the business for large scale production with our Channel Partners

·    Signing of a multi-year framework agreement with Proquire, the procurement arm of Accenture, our fourth Master Service Agreement

·     Increased headcount to support Channel Partner development from 57 to 80

·     Improvement of processes throughout the business to enable better working with our partners

·     Improvement of product in terms of stability and automation in order to be able to operate at scale with partners

·     Revenue of £0.36m (2016: £0.72m); this decrease reflects our decision to focus entirely on our four channel partners, and this strategy is expected to deliver significant revenue progress in 2018

Dave Page, CEO of Actual Experience plc, said: "In 2017, we have seen initial small scale commercial deployments through our Channel Partners and, working with them, have implemented product and process improvements. This was no small challenge and has drawn heavily on the skills and experience of our employees. As a result, we believe we are now ready to do business with our Channel Partners at the scale and speed they require. We are confident that 2018 will bring the first fruits of the hard work of previous years, with significantly larger scale deployments and accompanying revenue."

Enquiries:

Actual Experience plc Dave Page, Chief Executive Officer Steve Bennetts, Chief Financial Officer	via Alma PR
N+1 Singer Advisory LLP Shaun Dobson Lauren Kettle	Tel: [phone]
Alma PR
Josh Royston	Tel: [phone]
Caroline Forde	Tel: [phone]
Robyn Fisher	Tel: [phone]

About Actual Experience 

Actual Experience's analytics provide the digital Voice of the Customer. This is a real-time, data-driven view of what end users would say about the quality of a company's digital products and services, and why. Our customers can analyse everything that impacts the experience quality in their digital supply chains, for any service, type of user or the Internet of Things. It gives them complete transparency from the point of provision to the point of use, whether the target being analysed is inside or outside of their business's control. The insights can be used to make continuous improvements to their business performance.

Actual Experience is listed on the AIM market of the London Stock Exchange (ACT). Our development headquarters are in Bath, UK, and we have sales staff based out of London and the United States. Actual Experience's unique digital Analytics-as-a-Service ("AaaS") is founded on ten years of cutting-edge research at Queen Mary University of London.

www.actual-experience.com

Chairman's statement

I am pleased to report that 2017 was a year in which we made significant progress towards production with our global Channel Partners. After we signed a fourth global Channel Partner early in the year, the next stage of development has been to support those partners for widescale deployment of our service within their customer bases.

Given the huge opportunity within these customer bases, the Board took the decision to focus efforts solely on those existing partners and to provide them with the tools and levels of support needed for wider deployment.

Investment has been made into refining our technology, both in terms of its operation and scalability and how it operates within the processes of our Channel Partners. Those refinements have been successfully developed and tested and we now look forward to significant commercial deployment.

The importance of cyber security has never been more apparent to all organisations and I am proud to report that Actual Experience has gained both Cyber Essentials and Cyber Essentials Plus accreditation. These reflect industry best practice and foster confidence for our Channel Partners and their customers. 

Our people are critical to our success and I'm delighted to relay that employee engagement scores are high both by internal and external measures. On behalf of the Board, I thank all of our colleagues for their exceptional commitment.

Fundraise

I would also like to thank our shareholders, both pre-existing and those who joined the register in 2017. These include institutions who participated in raising £17.5 million in the year to fund the increased investment in accelerated deployment.

Outlook

Revenues decreased in 2017 as a consequence of our strategy to focus solely on existing Channel Partners. 2018 is a year in which we will see our first significant commercial deployment and revenues. It is a year in which we must deliver and we look forward with eager anticipation and confidence.

Stephen Davidson

Chairman

Chief Executive's statement

Introduction

2017 has seen the Company make continued progress against its strategic objectives. At the start of the financial year an agreement was signed with Proquire, the procurement arm of Accenture plc. This meant that four of the world's largest service providers were now actively preparing to take our offering to their customer bases, and the Board therefore took the decision to focus all of the Company's resources and efforts during the year on taking those partners through to production.

Following a successful fundraise in February 2017, we have been able to commit further investment into each of our Channel Partners, to truly understand their processes and provide them with the support that they need for deployment of our technology. It has been a learning process, both for the Company and each of its partners and through what we have learnt we have been able to adapt, modify and enhance our product.

The first production deployments have been successfully made, on a small scale, and we have come a long way towards larger scale deployments which we expect to take place in the fiscal year 2018.

It is pleasing to note that progress with our most recently signed Channel Partner has been faster and smoother than with previous engagements. This underlines our belief that the need for our Analytics-as-a-Service is becoming ever more important in an increasingly digital world, as well as reflecting improvements in our product and implementation processes.

Strategy Overview

In 2017, we increasingly focussed all of our efforts on our four signed Channel Partners. In turn, they are focussing their deployment of Actual Experience into their largest enterprise customers.

Our digital AaaS is being embedded into the processes and products of our Channel Partners, enabling them to deliver a consistent and reliable digital experience across complex global digital supply chains for their enterprise customers, to the benefit of the customers and employees of those enterprises.

We believe we are approaching an inflection point for the business in 2018. We have been readying our product and partners for production since the initial signing of Master Service Agreements (MSAs). This year should see more and larger deployments as they build towards large scale global rollout. To ensure the success of these rollouts, we will remain focussed on our four Channel Partners. This focus will enable us to achieve operational excellence and ensure partner satisfaction.

We continue to maintain a small base of important direct enterprise customers. Their feedback has been, and continues to be, extremely useful in helping to develop our product.

Market Opportunity

In 2017 the global digital economy reached over $25 trillion, and the number of transactions that make up this economy is growing year on year. As the digital world becomes an increasingly important utility for businesses, the need for quality and consistency to support these valuable transactions is only increasing.

The global digital economy is made up of an increasing number of businesses, that in turn are part of the global digital supply chain. As the value of the global digital economy increases, business leaders demand digital quality for their staff and customers. While hundreds of products exist that can manage the individual components, we believe that our AaaS is the only product that has been built from the ground up to manage the entire global digital supply chain, providing the insight required to improve the quality and consistency of staff and customer digital experiences.

Operational review

We have made considerable progress in the year across our operations:

·     Organisational structure

Overall headcount during the year increased from 57 to 80, with the majority of investment being in R&D and operational staff, reflecting the Company's focus on its existing Channel Partners. Whilst overall numbers have increased, the business has streamlined, resulting in a more effective organisation singularly focussed on execution excellence with our Channel Partners.

·     Product development

Through 2017 we have learnt, together with our partners, how their processes and our product can be simplified and improved to aid deployment at global scale. For instance, in August, we were pleased to announce that we had received an open PO from one of our Channel Partners. This PO reflected certain procurement process improvements made, enabling us to more easily fulfil orders from that partner. As with the open PO, the other process and product developments support our ability to deploy our product globally at scale, and therefore to tap into our partners' vast customer bases.

·     Channel Partner update

The progress that we have made within each of our Channel Partners throughout the course of the year has vindicated our strategic decision to concentrate on them solely.

At the time of the Placing in February, the Company was able to announce that it had received the first order from a Channel Partner to begin production rollout of a major customer. Since then, further deployments have taken place within further customers. The overall demand from our Channel Partners is greater than we had originally envisaged, with the desire for faster and more widespread deployment balanced by the operational need to get it right first time, every time.

Current trading and outlook

In 2017, we have seen initial small scale commercial deployments through our Channel Partners and, working with them, have implemented product and process improvements. This was no small challenge and has drawn heavily on the skills and experience of our employees. As a result, we believe we are now ready to do business with our Channel Partners at the scale and speed they require. We are confident that 2018 will bring the first fruits of the hard work of previous years, with significantly larger scale deployments and accompanying revenue.

Dave Page

Chief Executive Officer

Financial review

Revenue

Revenue recognised in the year ended 30 September 2017 was £364,832 (2016: £716,346) and relates to the supply of analytical services and associated consultancy activities to customers. 68% of revenue was derived from sales to channel customers (2016: 60%) with the balance arising from direct sales. This increased percentage reflects the Group's strategic focus on generating revenue growth from its Channel Partners.

Gross loss

As noted in the Chief Executive's statement, the Group continued to make significant investment during the year to establish the infrastructure required to fully support its Channel Partners, including a 24-hour support centre. The set-up costs of this support infrastructure resulted in a gross loss for the year of £935,852 (2016: loss of £238,466).

Expenses

Administrative expenses comprising R&D, operational support, sales and marketing, finance and administration costs, and foreign exchange gains and losses totalled £6,976,814, an increase of £1,170,515 compared to the prior year. This increase reflects the continued investment made by the Group in technology development and operational support infrastructure. Personnel costs continue to be the largest expense and represent approximately 68% of the Group's cost base. The functional cost breakdown is as follows:

	2017 £	2016 £
Research and development	2,268,142	1,215,950
Operational support	925,777	476,912
Sales and marketing	2,635,094	3,320,447
Finance and administration	1,030,139	937,878
Foreign exchange losses/(gains)	117,662	(144,888)
Total	6,976,814	5,806,299

Tax

The tax credits recognised in the current and previous financial year arose from the receipt of R&D tax credits.

Loss for the year

Losses after tax for the year ended 30 September 2017 totalled £7,397,149 (2016: loss of £5,671,072). These losses are primarily generated by employee costs and related expenses.

Loss per share

The loss per share for the year was 17.72p (2016: loss of 15.21p). Earnings per share have been impacted by the increases in operating costs.

Dividend

No dividend has been proposed for the year ended 30 September 2017 (2016: £nil).

Cash flow

Actual Experience is investing in the growth of its operations to address what it believes to be a significant commercial opportunity and its cash flow from operations was therefore negative during the year ended 30 September 2017, and in line with expectations. The Group's costs are mostly operating related, with very little investment required for capital infrastructure. Cash used by operating activities was £7,086,016 for the year, compared to cash used of £5,210,287 for the year ended 30 September 2016. This operating cash requirement was substantially funded by cash reserves and the Group ended the year with cash and term deposits totalling £18,209,850 (2016: £9,415,886).

Software development capitalisation

The Directors believe that the software development capitalisation criteria in IAS38 have been met and accordingly development costs, net of amortisation charges, of £1,266,261 have been capitalised as at 30 September 2017 (2016: £516,041).

Accounting policies

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards. The Group's significant accounting policies have been applied consistently throughout the year as described in the Group's Report and Accounts.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group are set out in the Group's Report and Accounts.

Key performance indicators

As the Group is in the process of development and commercialisation of its services, the Directors consider the key quantitative performance indicators to be sales revenues of £364,832 (2016: £716,346) and the level of cash and term deposits held in the business of £18,209,850 (2016: £9,415,886). The Board performs regular reviews of actual results against budget, and management monitors cash balances on a monthly basis to ensure that the business has sufficient resources to enact its current strategy. Certain non-financial measures, such as the number of deployed Digital Users, are monitored on a monthly basis.

The Board will continue to review the KPIs used to assess the business as it grows.

Environmental matters

As far as the Directors are aware the Group's business does not cause an adverse impact on the environment.

Human rights policy

Actual Experience has adopted a formal equal opportunities policy which is contained in its employee handbook. The aim of the policy is to ensure that there is no discrimination against any employee or job applicant either directly or indirectly on the grounds of race, sex, disability, sexual orientation, marriage or civil partnership, pregnancy or maternity, religion or belief, or age.

Employees

As at 30 September 2017 the Group employed 80 people in three offices (2016: 57 people), of which 56 were male and 24 were female. As at the date of this document, of the six senior members of management, one is female.

Directors

Details of the Directors who served during the year ending 30 September 2017 are noted in the Directors remuneration report. All seven of the Directors serving on the Board at the year end were male.

On behalf of the Board.

Steve Bennetts

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 September 2017

		2017	2016
	Note	£	£
REVENUE		364,832	716,346
Cost of sales		(1,300,684)	(954,812)
GROSS LOSS		(935,852)	(238,466)
Administrative expenses	2	(6,976,814)	(5,806,299)
OPERATING LOSS		(7,912,666)	(6,044,765)
Finance income		40,849	61,946
LOSS BEFORE TAX		(7,871,817)	(5,982,819)
Tax	3	474,668	311,747
LOSS FOR THE YEAR		(7,397,149)	(5,671,072)
Other comprehensive income/(expense):
Items that may be reclassified to profit or loss:		70,693
Foreign currency difference on translation of overseas operations			(105,310)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR		(7,326,456)	(5,776,382)
LOSS PER ORDINARY SHARE
Basic and diluted	4	(17.72)p	(15.21)p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 September 2017

			(Accumulated
			losses)/
	Share	Share	retained	Total
	capital	premium	earnings	equity
	£	£	£	£
At 1 October 2015	74,027	14,774,154	874,855	15,723,036
Loss for the year	-	-	(5,671,072)	(5,671,072)
Other comprehensive expense for the year	-	-	(105,310)	(105,310)
Total comprehensive loss for the year	-	-	(5,776,382)	(5,776,382)
Issue of shares	869	61,016	-	61,885
Share-based payment expense	-	-	233,361	233,361
At 30 September 2016	74,896	14,835,170	(4,668,166)	10,241,900
Loss for the year	-	-	(7,397,149)	(7,397,149)
Other comprehensive income for the year	-	-	70,693	70,693
Total comprehensive loss for the year	-	-	(7,326,456)	(7,326,456)
Issue of shares	14,626	17,588,902	-	17,603,528
Cost of share issue	-	(615,942)	-	(615,942)
Share-based payment expense	-	-	154,987	154,987
At 30 September 2017	89,522	31,808,130	(11,839,635)	20,058,017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 September 2017

			2017	2016
		Note	£	£
ASSETS
Non-current assets			350,704
Property, plant and equipment				281,476
Intangible assets			1,266,261	516,041
TOTAL NON-CURRENT ASSETS			1,616,965	797,517
Current assets			487,189
Trade and other receivables				352,129
Income tax receivable		3	568,102	340,259
Investments			5,000,000	-
Cash and cash equivalents		5	13,209,850	9,415,886
TOTAL CURRENT ASSETS			19,265,141	10,108,274
TOTAL ASSETS			20,882,106	10,905,791
LIABILITIES
Non-current liabilities			(37,744)
Deferred tax		3		(20,960)
TOTAL NON-CURRENT LIABILITIES			(37,744)	(20,960)
Current liabilities			(786,345)
Trade and other payables				(642,931)
TOTAL CURRENT LIABILITIES			(786,345)	(642,931)
TOTAL LIABILITIES			(824,089)	(663,891)
NET ASSETS			20,058,017	10,241,900
EQUITY			89,522
Share capital				74,896
Share premium			31,808,130	14,835,170
Accumulated losses			(11,839,635)	(4,668,166)
TOTAL EQUITY			20,058,017	10,241,900

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 30 September 2017

		2017	2016
	Note	£	£
Cash flows from operating activities
Loss before tax		(7,871,817)	(5,982,819)
Adjustment for non-cash items:
Depreciation of property, plant and equipment		107,233	49,376
Amortisation of intangible assets		162,059	345,129
Loss on disposal of property, plant and equipment		1,014	-
Share-based payment charge		154,987	233,361
Finance income		(40,849)	(61,946)
Operating cash outflow before changes in working capital		(7,487,373)	(5,416,899)
Movement in trade and other receivables		(83,913)	(63,961)
Movement in trade and other payables		221,661	94,983
Cash flows used in operations		(7,349,625)	(5,385,877)
Tax received		263,609	175,590
Net cash flows used in operating activities		(7,086,016)	(5,210,287)
Cash flows from investing activities
Development of intangible assets		(912,279)	(494,784)
Purchases of property, plant and equipment		(177,584)	(286,180)
Transfers to term deposits with more than 3 months maturity		(5,000,000)	-
Finance income		40,849	61,946
Net cash outflow from investing activities		(6,049,014)	(719,018)
Cash flows from financing activities		16,987,586
Proceeds from issue of share capital, net of costs			61,885
Loan to Employee Benefit Trust		(55,950)	-
Net cash inflow from financing activities		16,931,636	61,885
Increase/(decrease) in cash and cash equivalents		3,796,606	(5,867,420)
Effect of exchange rate fluctuations on cash held		(2,642)	8,084
Cash and cash equivalents at start of year		9,415,886	15,275,222
Cash and cash equivalents at end of year	5	13,209,850	9,415,886

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 September 2017

1 Basis of preparation

Actual Experience plc is a public limited company domiciled in the United Kingdom and incorporated in England. The financial statements of Actual Experience plc are audited financial statements for the year to 30 September 2017. These include comparatives for the year ended 30 September 2016.

The accounts for the year to 30 September 2016 have been delivered to the Registrar of Companies. The accounts for the year ended 30 September 2017 have not yet been delivered to the Registrar of Companies.

The Preliminary Announcement does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

The Company's registered office is Quay House, The Ambury, Bath, BA1 1UA.

The unaudited Preliminary Announcement has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 30 September 2017.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2016, as described in those financial statements. New standards or interpretations which came into effect for the current reporting period did not have a material impact on the net assets or results of the Group.

Going concern

At 30 September 2017, the Group had a cash and cash equivalents position of £13,209,850 with no bank debt. In addition, the Group had current asset investments in the form of bank deposit account with maturity of more than 3 months, amounting to £5,000,000.  The Directors have prepared detailed monthly projections of future cash flows for the remainder of the financial year to September 2018 and the subsequent financial year, 2019. The base case forecast includes expected revenue growth, together with further investment in the cost base, leading to the commencement of positive monthly cash flows during 2019. Additional scenarios have been modelled reflecting differing revenue growth rates with corresponding adjustments to the level of investment in the Group's cost base; these scenarios indicate broadly similar cash flow trends.

After due consideration, the Directors have concluded that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

2 Loss from operations

		2017	2016
		£	£
Loss from operations is stated after charging/(crediting) to administrative expenses:
Depreciation on property, plant and equipment		107,233	49,376
Amortisation of intangible assets		162,059	345,129
Loss on disposal of property, plant and equipment		1,014	-
Operating lease rentals - land and buildings		257,877	286,907
Employee costs		4,761,152	3,724,443
Foreign exchange losses/(gains)		117,662	(144,889)
Auditors' remuneration:
Audit of these financial statements		33,000	28,550
Total auditors' remuneration		33,000	28,550

3 Taxation

Tax on loss on ordinary activities

	2017	2016
	£	£
Current tax:
UK Corporation tax on losses of the year	(568,102)	(340,264)
Overseas taxes	76,650	16,415
Deferred tax:
Origination and reversal of timing differences	16,784	12,102
Total tax credit	(474,668)	(311,747)

Factors affecting the current tax credits

The tax assessed for the year varies from the standard UK company rate of corporation tax as explained below:

	2017	2016
	£	£
Loss on ordinary activities before tax	(7,871,817)	(5,982,819)
Tax at the UK corporate tax of 20.00% (2016: 20.00%)	(1,574,363)	(1,196,564)
Effects of:
Expenses not deductible for tax purposes	75,001	134,841
Unrecognised deferred tax asset on losses	1,803,286	1,335,159
Tax relief in respect of exercise of share options	(150,275)	(217,254)
Research and development enhancement in respect of the current year	(625,354)	(364,226)
Prior year adjustment	-	(5)
Change in rate of tax used to calculate deferred tax liability	(2,963)	(3,698)
Tax credit for the year	(474,668)	(311,747)

The Group has tax losses carried forward of approximately £17,754,000 (2016: £10,060,000).

During the year the Group has incurred qualifying expenditure on research and development projects which has given rise to tax credits due from HM Revenue and Customs to the Group of £568,102 (2016: £340,259).

Deferred tax

Deferred tax relates to the following:

	2017	2016
	£	£
Accelerated depreciation for tax purposes	37,744	20,960
Deferred tax liability	37,744	20,960
	2017	2016
	£	£
Balance at the beginning of the year	20,960	8,858
Charge to the Consolidated Statement of Comprehensive Income	16,784	12,102
Balance at the end of the year	37,744	20,960

Reconciliation of deferred tax liabilities

At 30 September 2017, the Group had unrecognised deferred tax assets totalling £3,018,180 (2016: £1,710,288), which relate to losses. The Group has not recognised this asset in the Consolidated Statement of Financial Position due to the uncertainty in the timing of when it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.

4 Loss per share

Basic loss per share is calculated by dividing the loss attributable to the owners of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume conversion of all dilutive potential ordinary shares.

The Company has one class of potentially dilutive ordinary shares, being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. However, due to losses incurred in both the current and previous financial year there is no dilutive effect from the potential exercise of these dilutive shares.

	2017	2016
	£	£
Total loss attributable to the equity holders of the parent	(7,397,149)	(5,671,072)
	No.	No.
Weighted average number of ordinary shares in issue during the year	41,733,648	37,288,000
Loss per share
Basic and diluted on loss for the year	(17.72)p	(15.21)p
	2017	2016
Issued ordinary shares at the beginning of the year	37,447,838	37,013,338
Effect of shares issued in October 2015	-	118,532
Effect of shares issued in March 2016	-	154,363
Effect of shares issued in August 2016	-	1,767
Effect of shares issued in November 2016	58,284	-
Effect of shares issued in January 2017	6,658	-
Effect of shares issued in February 2017	4,182,192	-
Effect of shares issued in March 2017	21,847	-
Effect of shares issued in July 2017	15,462	-
Effect of shares issued in September 2017	1,367	-
Weighted average number of shares at the end of the year	41,733,648	37,288,000

The weighted average number of shares in issue throughout the year is as follows:

5 Cash and cash equivalents

	2017	2016
Bank credit rating:	£	£
A+	2,549,604	5,035,122
A3	-	82,819
BBB+	8,607,282	4,297,945
BBB-	2,052,964	-
Cash and cash equivalents	13,209,850	9,415,886

The above gives an analysis of the credit rating of the financial institutions where cash balances are held.

All of the Group's cash and cash equivalents at 30 September 2017 are held in instant access current accounts or short-term deposit accounts. Balances are denominated in UK sterling (£) and US dollars ($) as follows:

	2017	2016
	£	£
Denominated in UK sterling	12,961,619	9,188,484
Denominated in US dollars	248,231	227,402
Cash and cash equivalents	13,209,850	9,415,886

The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.

6      Report and Accounts

 The Company's Report and Accounts for the year ended 30 September 2017, together with a notice convening the Company's annual general meeting, will be posted to shareholders in due course.

 

END

 

 

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