Final Results for the year ended 31 March 2022

RNS Number : 4352R

D4T4 Solutions PLC

06 July 2022

 

6 July 2022

D4t4 Solutions Plc

Final Results for the year ended 31 March 2022

Significant ARR growth and developing pipeline

D4t4 Solutions Plc (AIM: D4T4, "the Group", "D4t4"), the data solutions provider, announces its final results for the year ended 31 March 2022.

Financial Highlights

· Annual recurring revenue* (ARR) up 32% to £14.0 million (2021: £10.6 million)

· Revenues up 7.3% to £24.5 million (2021: £22.8 million)

· ARR as percentage of total revenue increased to 57% (2021: 47%), delivering significant progress against medium term target of 65%

· Gross profit margin of 51.9% (2021: 62.4%)

· Adjusted profit before tax** of £3.3 million (2021: £4.4 million), and statutory profit before tax of £1.8 million (2021: £3.0 million)

· Diluted Adjusted EPS of 7.1p (2021: 9.5p), and Diluted Basic EPS of 4.1p (2021: 6.75p)

· Proposed final dividend of 2.07p (2021: 2.00p), making a total dividend for the year of 2.92p (2021: 2.81p), an increase of 3.9%

· Year-end cash position £11.4 million (2021: £14.2 million), increased to free cash of £26.5 million as at 30 June 2022.

· Proposed special dividend of 12.5p per share.

Operational Highlights

· Launch of Celebrus FDP to address the needs of customers in protecting their end-customers against fraud.

· Key wins and upsells in the period including;

o  A new win in the Healthcare sector

o  An upsell of an existing banking customer of our CDM business to both the FDP and the CDP which marks our first paying customer of the FDP

o  Continued conversion of existing customers onto ARR based contracts

· Prickly Cactus acquisition fully integrated and assisting in bringing stronger account management disciplines and relationships with customers.

· Started building a direct sales channel, and investing in the marketing automation to support, whilst also seeking new strategic partnerships for sales.

· Continued development of the pipeline of CDP/FDP opportunities with a strong year end position.

· Valuable enhancements to CDP product during the year including the Identity Graph and 100 new marketing signals.

· Numerous key hires at senior level to strengthen the management team, including in Sales, Marketing, HR and Information Security.

· Investment into a group-wide systems infrastructure to better support scalability and growth.

· Restructured plc board and newly formed Operations Board working effectively, with a clear separation between strategy, operations and execution.

· Improvements to corporate governance and publication of the Group's first ESG report including a carbon audit.

Outlook

· Delivering ARR growth remains our key strategic focus.

· Trading during the new financial year has been in line with the Board's expectations with good levels of both existing and new client activity

· Strong pipeline of sales opportunities at last year end has continued to build in FY23 .

· Market conditions are moving in the Group's favour, with growing distrust and reduced usage of third-party cookies, and tighter regulation of financial institutions to enforce better management of fraud

· Continued investment, into marketing, sales, and product development to grow ARR and maintain the Group's competitive advantage.

· Board is highly confident in the Group's strategy and ability to deliver results and create significant shareholder value in the coming years

· After the period, we secured another FDP win in the Retail sector.

* ARR (Annual Recurring Revenue) is the amount of revenue currently contracted at a point in time that is expected to recur within the next twelve months.

** Adjusted profit before tax is calculated before amortisation of intangibles, restructuring costs, acquisition costs, foreign exchange gains/losses and share based payment charges.

Bill Bruno, CEO of D4t4 Solutions, said:

"This has been a transformational year for the Group as we built for scale globally. That we have been able to do so whilst delivering a strong financial performance and building our key ARR metric is a tribute to all concerned. We have made good progress in strengthening the management team to maximise our potential in the fast-growing markets of customer experience/digital marketing and cybersecurity/fraud prevention as market trends and increased regulation continue to evolve in our favour.

With a strong commercial pipeline and improved revenue visibility, we enter the new financial year confident of delivering further growth while continuing to strategically invest to support our anticipated growth in future years."

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014, as retained and applicable in the UK pursuant to S3 of the European Union (Withdrawal) Act 2018 ("MAR").

Enquiries

D4t4 Solutions Plc Bill Bruno, Chief Executive Officer Ash Mehta, Chief Financial Officer	[phone] [e-mail]
finnCap (Nominated Adviser & Joint Broker) Julian Blunt / E dward Whiley, Corporate Finance Alice Lane, ECM	[phone]
Canaccord Genuity (Joint Broker) Simon Bridges / Andrew Potts	[phone]
Instinctif Partners Rozi Morris / Joe Quinlan	[phone] [e-mail]

About D4t4 Solutions plc

D4t4 Solutions plc (AIM: D4t4) was founded around a passion for helping global enterprises derive value from their data assets.

Supporting customers in financial services, retail, travel, healthcare, and telecommunications across 27 countries, D4t4 enables businesses to make smarter, informed decisions via Celebrus, the company's flagship first party product suite. Celebrus CDP automatically captures, contextualises, and activates user-based behavioural data in real-time across all digital channels. Through behavioural biometrics and analytics, Celebrus FDP helps companies prevent fraud before it happens. Celebrus CDM provides an enterprise platform that automates the integration and transformation of customer data from all relevant data sources, whether on-premises or cloud, to deliver customer and regulatory analytics.

The Group has offices in the UK, USA, India, and Australia with key talent in all markets to drive the growth of the business. Celebrus is fully compliant with all major data privacy regulations and the Group is accredited to ISO27001: Information Security Management.

For more information, please see www.d4t4solutions.com

Chairman's statement

I'm very pleased with the progress that we have made over the last year. This has seen a transition to a restructured board, a strengthened management team, improvements to our corporate governance and the production of our first ESG report. It has also seen investment into a new product launch, an acquisition and significant ARR growth, all whilst delivering market expectations for revenue and adjusted profit before tax.

As I outlined in last year's statement, during this past year we have restructured the board to create a leaner board focused on strategy and governance, with the creation of an Operations Board to focus on execution of the strategy. We believe this is the right structure to deliver growth in future periods. The board now consists of three non-executive directors and two executive directors. Peter Kear stepped down from the board on 31 March 2022 and left the Group on 30 June 2022, after a successful handover of the CEO role to Bill Bruno. We thank Peter for his contribution to the Group's success over the last 37 years and wish him well for his retirement. In June 2021, Jim Dodkins and Mark Boxall stepped down from the D4t4 Board. Jim continues to work for D4t4 on a part-time basis whilst Mark left the Company earlier this year. I would personally like to take this opportunity to thank Jim and Mark for all their hard work and support over the years.

The Nominations Committee undertook two major searches last year for the roles of CEO and CFO and we are delighted to have chosen Bill Bruno, as CEO, who was previously our VP North America, and Ash Mehta as CFO who has a track record in growing public companies.

Since his appointment in August 2021, Bill has created a Group Operations Board with the successful recruitment of key talent into vital roles such as VP Global Sales, VP Marketing, Head of HR People and Culture and most recently a Chief Security Officer. The latter role signifies the importance we place on information security and the trust our multinational customers place in us in helping them manage their critical data. With this management team in place, I am confident we have the right people to drive future growth.

With the change in board structure, we have taken the opportunity to review and strengthen our corporate governance with the adoption of new Terms of Reference for our Board committees as well as a new Matters Reserved for the Board schedule, in line with current best practice. This clarifies the split of responsibilities between the main Board and the Operations Board ensuring firm oversight of operational matters.

I'm pleased to report that we have produced our first ever ESG report, having appointed consultants to undertake a carbon audit. The report provides a valuable insight into our carbon footprint and actions we plan to take to reduce our impact on the environment, as well as outlining how we interface with our communities and protect and support our employees.

During the year, we launched a new product, the Celebrus Fraud Data Platform, to address the needs of our customers in protecting their end-customers in real-time across all digital devices, using automated behavioural touchpoints. Fraud is an ever-growing threat causing distress and financial loss to a growing number of victims, and the current regulatory focus on addressing this problem creates a strong opportunity for our product especially as regulators move towards holding banks fully responsible for compensating customers who become victims of fraud. This provides an impetus to banks to address the issue to avoid such losses. Our first sale of FDP was made in December 2021 and with several organisations currently trialing the product, we anticipate further contract wins in the coming months.

As well as launching FDP, during the year we have made numerous product developments to our CDP product to maintain our competitive advantage in the market and add further value to our customers.

Against this backdrop of significant change within the business, we have successfully met market expectations delivering on Revenue and Adjusted Profit before Tax, as well as growing ARR by 32%, generating cash and paying a growing dividend.

The Board is today proposing a final dividend, subject to shareholder approval at the 2022 AGM, of 2.07p per share which along with the interim dividend paid of 0.85p per share in January 2022 brings the full year dividend to 2.92p per share, an increase of 3.9% over last year. The final dividend is expected to be paid on 24 August 2022 to shareholders on the register as at the close of business on 15 July 2022.

Whilst the Group has increased investment in recent years, cash generation continues to be strong. The board has considered uses for the cash, and although the search for acquisition opportunities is an ongoing one, with no such opportunities in sight the board will focus investment on organic growth, in the knowledge that our product set is market-leading, and the market opportunity is large.

We will maintain a regular dialogue with shareholders on potential uses for the cash, but even after allowing for all investments that may be required as we continue to grow, the Board is of the view that we are in a position to return some excess cash to shareholders.

Therefore, I'm delighted to announce that as a result of the Group's healthy cash balance, the board is also proposing a special dividend of 12.5p per share payable to shareholders on the register as at the close of business on 7 October 2022. The special dividend is expected to be paid on 27 October 2022.

The Group's significant progress in the year is a testament to our many staff across our four locations around the world and I thank them for their efforts, especially during a period when we have had the instability of intermittent coronavirus lockdowns still ongoing. We are increasing our focus on our people. The new Executive team is evolving the Group culture to be one which is more empowered, accountable and enjoyable, as we aim to become an even better company to work for. This is vital in a global economy, post-lockdown, in which there is a shortage of talent and intense competition for good people.

Outlook

We start the new financial year in a good position with products well aligned with market requirements and trends, a strengthened management team, a healthy cash balance, and most importantly a strong pipeline of sales opportunities. I'm delighted to say that the Board is highly confident in the Group's strategy and our ability to deliver results and create significant shareholder value in the coming years. Therefore, we will continue to invest wisely where we see opportunities for good returns on investment.

Peter Simmonds
Chairman

6 July 2022

Chief Executive Officer's statement

I'm delighted to present my first annual statement to shareholders since taking on the CEO role in October 2021, and I'd like to thank Peter Kear, the outgoing CEO, for his contribution to building the company we have today. We have market-leading products which can form the basis of a sizeable business, creating significant shareholder value over the coming years.

Since my appointment, our Chief Financial Officer and I have been focused on implementing the building blocks to drive and manage the growth we anticipate. Core to this has been ensuring that the business is scalable and that we minimise the growing pains that arise during periods of growth. This covers ongoing investment into a number of areas including internal systems, processes, reporting, employee empowerment and accountability and not least company culture.

This is being undertaken in parallel with ensuring that the day-to-day business continues to perform, and I'm pleased to report a good set of financial results for the year ended 31 March 2022 ("FY22") with Revenue up by 7.3% during the year and a very healthy growth in ARR of 32%.

Strategy and Market trends

Our strategy remains unchanged, with the key objective being to grow ARR through increased sales of CDP and FDP to customers. The market trends during the year have been in our favour and we aim to capitalise on these in the coming year through our strengthened Sales and Marketing teams.

For the CDP product, the trends towards greater control of privacy of data are evidenced by the deprecation of third-party cookies, the impacts of Apple Intelligent Tracking Prevention (ITP) and other browser changes relating to privacy for consumers. Celebrus CDP is not impacted by any of these as we help our clients collect first-party data, utilising our IP, which is not affected by these trends in the way that our competitors' products are. Our approach to compliance, identity, and instant data activation provides us with a strong go-to-market strategy. This ultimately has allowed us to retain and upsell our existing account base, while also building significant pipeline activity through both key partners and our direct sales capacity.

On the fraud side, there are two key trends: the speed at which fraud occurs and the ongoing regulatory discussions in many jurisdictions about reimbursing consumers who are victims of scams. This regulatory trend is strongest in Europe, and like GDPR which was a European initiative, we believe best practice will quickly be adopted around the world. With millisecond data capture and contextualisation, our Celebrus FDP ultimately helps brands catch the fraudster before the fraud. The data that we capture offers unique and differentiated solutions for preventing scams, saving banks millions of pounds and ultimately protecting consumers.

Products and technologies

Of course, despite market trends being in our favour we continue to develop functionality to maintain our market leading position in the realm of data capture, data contextualisation, and data management.

During the year, we added another 100+ automated marketing signals to CDP providing customers with greater ability to identify and convert valuable potential end-customers, as well as adding the world's only first-party real-time Identity Graph to better identify end-customers across a range of devices they might be using.

We have continued our commitment of providing two major platform updates each year for the Celebrus CDP and FDP, which is driven by our product roadmap. That roadmap has several inputs: our experience and expertise, feedback from our customers during Advisory Board meetings, our Partners, and research projects within our Engineering team which we continue to grow.

Our technology focus is on innovation and differentiation and the ability to cater for the ever-growing needs of our customers. Most recently, this was demonstrated by our ability to rapidly establish CDP to be HIPAA compliant in the United States. HIPAA is a series of regulations covering the use and disclosure of health information in the United States, and CDP compliance is a requisite for our healthcare customers.

In June 2022, our technologies received recognition from The Global InfoSec Awards in the categories of "Most Comprehensive in Identity Management" and "Most Comprehensive in Account Takeover Protection", as well as from IDC MarketScape which named Teradata Vantage (powered by Celebrus CDP) as a "Leader" in the CDP market.

We will continue to innovate our Celebrus CDP and FDP to ensure we remain differentiated and are able to solve some of the most complex data challenges in the industry today.

Route to market

This past year had some great wins for our business, including our first contracted customer for FDP just six months after its launch in June 2021. This was an existing customer: a major financial institution in the United States, and they upsold to both our CDP and FDP in addition to our existing CDM relationship with the bank. We are in dialogue with other existing customers, particularly in the Financial Services and retail sectors, and we have built up our partner program in the fraud sector to build a healthy pipeline of FDP opportunities.

Our customer success team, boosted by the addition of the Prickly Cactus team acquired in August 2021, has done a great job instilling new account management disciplines and focus and expanding our relationships with existing accounts, while our new business team has continued to win in our core markets of Financial Services, Insurance, Healthcare, and Telcos.

We continue to focus on driving pipeline and measuring what is working and what isn't in the market so that we can learn and adapt rapidly around the globe.

Traditionally our business has gone to market exclusively via partners. While that continues to be a strategic pillar of our business, during the year we began to build a direct sales channel.  This has already yielded success in the United States, and we are now supporting a global rollout of direct sales via our restructured and better-aligned Sales and Marketing teams.

We believe that the industry trends described above make this an opportune time to build up the direct sales channel, to supplement our partner's efforts with our own direct approach. This will support our objective of accelerating sales growth by building as many revenue streams as possible to create a stronger pipeline for better, sustained growth in the coming years.

Partners

We have had some great success in our key markets with technology partners including Teradata, Pega, SAS, Quantexa, and Dell. We have deepened our relationships with partners at a corporate level but also at a local level across all territories to reinforce the value-add that CDP and FDP provide to partner offerings. This is illustrated by the announcement, in May 2022, that CDP will be integrated into Always-On Insights, a new offering combining the capabilities of Pegasystems' Customer Decision Hub™ with Celebrus CDP.

We launched our API connector in v9.5 of our CDP and FDP product last November, and at that time we signaled to the market that we would focus on bringing our data together with leading technology across the globe in a meaningful and simple way that creates a synergistic offering for our customers. I'm pleased to say that we are in discussions about new partner opportunities that bring a unique offering to our customers, and we look forward to further progress on this in the coming year.

In addition to technology partners, we continue to seek opportunities to expand our Solution Integrator (SI) partnerships. While we focus on innovating our software and IP, we need partners that can efficiently implement these platforms to assist our objective of building a scalable business and minimising growing pains. This approach will also help us manage costs as we grow. We are building a partner toolkit encompassing training and certifications for SI partners for rapid onboarding and success.

Branding

Since the year-end, we have revamped the branding not only of our Celebrus product family, but also of the D4t4 brand. The new branding is the work of our Marketing team led by our new VP Marketing based in the United States and is more representative of our ethos, messaging, and approach to the market. The message is simpler, conversationally sophisticated, and focuses on being a disruptor in the market. The new branding has enabled us to align Marketing and Sales more closely around the globe to ensure better coordination and success in the coming year.

Robust systems to support growth

We have been busy in the year improving transparency, accountability and reporting whilst establishing greater automation with a view to creating a group-wide systems infrastructure to better support scalability and growth.

We have implemented a new Customer Relationship Management system to support our Sales Strategy. This system will manage our customer lifecycle all the way from lead generation to winning new customers through to customer satisfaction and advocacy.

We are also implementing an HR system which will enable us to automate and better manage key HR processes, and most importantly better engage and communicate with our employee base in four countries and time zones.

We have started to implement a new Finance system which will provide us with better visibility and granularity into our performance to support our initiative of increased empowerment and accountability for our teams.

These systems will set up our teams for better, measurable success and create transparency for our teams globally to better understand what we are trying to do as a business and the role they play in helping us achieve our goals. These systems and processes will also help us create better accountability amongst our leaders across the business, a key value of our culture, so that we can make efficient decisions globally.

Our employees

From a people perspective, we have restructured the business and brought in top talent to drive growth in our key markets. We formalised the Operations Board, established our Leadership Team, brought in new talent to the global roles of VP-Marketing and VP-Global Sales both in the United States, as well as creating new roles such as Head of HR, People, and Culture and Chief Security Officer both in the UK.

The role of Head of HR, People, and Culture is a crucial one because we regard an effective culture established and created by our talent throughout the business as critical in building high-performance teams to drive our growth plans. That culture will be one of openness, empowerment, and accountability.

The Chief Security Officer role is also a vital part of our strategy in the coming year. Whilst the Group has always placed data and cybersecurity high on its priorities the increasing complexity in this area demands a role dedicated to this activity.

I'd like to thank all our employees around the world, who have helped us deliver great results in this past year, during a time of global economic uncertainty, and internal transformation and change.

We recognise the competitive global environment for talent, and we believe that the new culture will provide greater engagement and job satisfaction for our employees which we will consider supplementing with further enhancements to remuneration and benefit packages where appropriate.

Outlook

Our goal in the year ahead will be to continue to improve our go-to-market approach, rapidly develop new partners, and ensure our brand platform and market share continues to grow. These targeted measures are what we believe will deliver ARR growth and shareholder value.

We will also continue to increase investment into sales and marketing activities and product development whilst ensuring we can still generate healthy profits and cash for future investment. It's important that we look ahead, as part of our three-year plan, to ensure we are investing in the right places now to support that desired growth.

As well as seeking organic growth, we will continue to monitor the space for potential acquisition opportunities to grow the business or bring bolt-on technology into our CDP or FDP products.

We have started the new financial year with a stronger pipeline, revenue already committed to the current financial year, solid growth in ARR. I believe we have an experienced team that can deliver, and I am optimistic about the year ahead.

Bill Bruno
Chief Executive Officer

Chief Financial Officer's Report

Overview

This has been a year of strong financial performance which is all the more pleasing given the significant organisational change we have been making over the same period.

Whilst investing significantly in our new FDP product we have delivered against expectations on Revenue and Adjusted PBT, as well as increasing Annual Recurring Revenue by 32%. The overall performance and financial position of the Group provides us with ample comfort to be able to increase the full year dividend by 3.9% over last year, as well as propose a special dividend of 12.5p per share.

During the year, we also strengthened the business by an acquisition which provides us with improved account management expertise to better service, maintain and grow share of wallet with our new and existing customers alike.

We undertook a share buyback programme to hold shares in Treasury to mitigate the dilutive effect of future share option exercises.

We believe that all these measures along with additional steps described below put us on a strong footing for future growth.

Income Statement

Group Revenue grew 7.3% to £24.5m (FY21: £22.8m) during a year when the ongoing impact of the pandemic along with the global economic situation continued to slow down buying decisions by our prospective customers.  However, the quality of revenues increased significantly, with ARR growing 32% to £14.0m (FY21: £10.6m) and now accounting for approximately 57% (FY21: 47%) of revenues. We expect this ratio to continue to increase up to a level of around 65% in the medium term.

The gross margin was 51.9% (FY21: 62.4%) due to a change in mix of revenues. In the year there was a higher proportion of third-party products supplied to customers which have a much lower gross margin than the other revenue streams. We expect this to revert in the current year to a figure in line with historic levels.

Operating expenses reduced during the year to £11.0 million (FY21: £11.2 million). This includes restructuring charges of £0.4m (FY21: £0.1 million) arising from the board changes and creation of the Operations Board. The average number of employees increased during the year to 149 (FY21: 139) primarily due to investment into Sales and Marketing and addition of staff with domain expertise in the fraud space.

The adjusted profit before tax was £3.3 million (FY21: £4.4 million), whilst the unadjusted profit before tax was £1.8 million (FY21: £3.0 million). The increased difference between the adjusted and unadjusted figures is due to a higher non-cash charge for share-based payments arising from share option grants during the year of £0.7 million (FY21: £0.3 million) and restructuring costs of £0.4 million (FY21: £0.1 million).

Foreign currency risk

There was a high degree of volatility during the last few months of the year. This impacts the Group which has around 70% of revenues in US Dollars, but just 37% of Group expenses. The Group's tighter policies and management of foreign currency risk meant that the foreign currency loss was £0.1 million (FY21: £0.7 million).

Taxation

Taxable profits were lower for the year and the tax charge is also lower for the year at an effective rate of 3.9% (FY21: 9.0%). This low level is assisted by our significant investment into research and development, much of which qualifies for R&D and Patent Box tax credits in the UK. Proposed changes to qualifying costs under the UK R&D tax credit scheme may result in smaller claims being made in future, and a higher effective tax charge.

Financial position

The Intangibles balance of £10.3 million (FY21: £9.6 million) is comprised of Goodwill of £9.4 million (FY21: £8.7 million) from the acquisition of Celebrus in 2015, and £0.7 million from the acquisition of Prickly Cactus during 2021. The balance of £0.8 million (FY21: £0.9 million) is comprised of purchased IPR, trade names and capitalised development costs. The Group expenses the majority of its R&D costs and capitalised just £0.2 million in the year (FY21: £0.2 million).

Trade creditors decreased to £0.8 million (FY21: £1.4 million); this was due to normal operating cycles. The Group seeks to pay all suppliers within terms and the supplier payment days at the year-end were 25 days (FY21: 40 days).

Deferred revenue increased to £14.2 million (FY21: £6.3 million) partly due to a number of three-year contracts signed during the year, as well as payment for services due to be delivered in the first half of the current year.

Trade debtors were high at £25.0m (FY21: £10.2m) due to two of our major partners paying just after the year end. Both of these partners account for a number of end clients and the payments were received during April.

The cash balance at the year-end was £11.4 million (FY21: £14.2 million) for the reasons described above. Due to the size and financial strength of our end customers, credit risk is not a major risk for the Group and bad debt write-offs during the year were nil (FY21: nil). Following the partner payments mentioned above the free cash balance had increased to £26.5 million as at 30 June 2022.

Cashflow and funds

The Group used net cash in operations of £0.7 million (FY21: net cash generated £3.3 million) primarily due to movements in working capital from the delayed payment of debtors as described above.

Financing activities in the year were £1.5 million (FY21: £1.7 million) comprised mainly of dividends paid of £1.1 million (FY21: £1.1 million) and a net purchase of own shares of £0.4 million (FY21: £0.9 million).

The Group continues to be debt free and maintains a robust financial position whilst having claimed no funds from any government support schemes.

The healthy cash balance is important not just to enable the Group to invest in future growth as appropriate, but also to counter any concerns about vendor risk from our customers, who are typically large multinational businesses.

Annual Recurring Revenue

We define ARR as the amount of revenue contracted with a customer, at a given point in time, that is expected to recur within the next twelve months. As a recognised driver of shareholder value in software businesses we use this as one of our primary metrics.

Group ARR grew by £3.4m to £14.0 million (FY21: £10.6 million) during the year. The current ARR is comprised of Licenses of £6.3 million (FY21: £3.0 million) and Support and Maintenance of £7.7 million (FY21: £7.6 million). Therefore, for the first time since the Group announced the move to an ARR model the ARR value accounts for more than 50%, with a value of 57% (FY21: 47%).

We see future growth in ARR coming primarily from CDP and FDP sales and expect that the ARR/Revenue ratio could reach around 65% in the medium term. We have some existing CDP customers still under perpetual license that we will seek to convert to term licenses with ARR. Moreover, all new proposals to prospective customers are being issued as term licenses.

Acquisition of Prickly Cactus

In August 2021, the Company acquired Prickly Cactus Limited ("Prickly Cactus"), a UK data and analytics consultancy, for up to £0.75 million. The Prickly Cactus team is experienced in product management having previously worked with several of D4t4's partners and customers in the key markets of Financial Services, Telecoms and Insurance. Since the acquisition the Prickly Cactus team has been instrumental in deepening our relationships with existing customers identifying opportunities for greater customer engagement and satisfaction as well as helping develop relationships with new customers and partners.

A sum of £0.5 million is held as Deferred Consideration payable to the Prickly Cactus vendors (all of whom have been retained by D4t4) in the Statement of Financial Position contingent upon the team's contribution to existing customer growth and the acquisition of new customers for the CDP and FDP product groups, in the period from acquisition to September 2023.

Earnings per share

Basic EPS for the year was 4.21p (2021: 6.88p) and diluted basic EPS was 4.14p (2021: 6.75p). The basic figure has been calculated using the weighted average number of shares in issue being 40,240,799 (2021: 40,235,856) and the diluted figure using 40,966,020 (2021: 41,007,252).

Adjusted basic EPS was 7.24p (2021: 9.72p) and adjusted diluted EPS was 7.11p (2021: 9.54p) following adjustments for amortisation, share based payments, exceptional items, foreign exchange expense and tax on these adjustments.

Dividend

The Board is today proposing a final dividend, subject to shareholder approval at the 2022 AGM, of 2.07p per share (2021: 2.0p), which along with the interim dividend paid of 0.85p per share (2021: 0.81p) in January 2022 brings the full year dividend to 2.92p per share (2021: 2.81p), an increase of 3.9%.  The final dividend is expected to be paid on 24 August 2022 to shareholders on the register as at the close of business on 15 July 2022.

The board is also proposing a special dividend of 12.5p per share , subject to shareholder approval at the 2022 AGM, payable to shareholders on the register as at the close of business on 7 October 2022. The special dividend is expected to be paid on 27 October 2022.

Purchase of own shares

In December 2021, the Company commenced a share buyback programme to acquire up to 200,000 ordinary shares of 2p in the capital of the Company. The shares will be held for the purpose of satisfying future obligations in relation to its employees' or other share schemes, thereby mitigating dilution for existing investors.

By 31 March 2022, 64,434 shares had been acquired at an average price of 291p bringing the number of shares held in Treasury to 224,932. Since the year end, the programme has continued and the shares held in Treasury now total 268,936.

Equity

At the year end, the Group had £31.9 million (FY21: £30.9 million) attributable to the shareholders of the company. The increase in the year was mainly due to retained earnings in the year of £1.7 million (FY21: £2.8 million) set off against dividends paid during the year of £1.1 million (FY21: £1.1 million), and share buybacks of £0.4 million (FY21: £0.9 million).

Ash Mehta
Chief Financial Officer

Consolidated income statement for the year ended 31 March 2022

			Note	2022		2021
				£'000		£'000
Continuing operations
	Revenue		3	24,459		22,792
	Cost of sales			(11,755)		(8,566)
Gross Profit				12,704		14,226
	Administration expenses			(11,000)		(11,234)
	Other operating income			58		58
Profit from operations				1,762		3,050
	Finance income			22		25
	Financing costs			(21)		(32)
Profit before tax			4	1,763		3,043
	Tax			(68)		(274)
Attributable to equity holders of the parent				1,695		2,769
Earnings per share from continuing operations attributable to the equity holders of the parent
Statutory
	Basic		5	4.21p		6.88p
	Diluted		5	4.14p		6.75p

Consolidated statement of comprehensive income for the year ended 31 March 2022

				2022		2021
				£'000		£'000
Attributable to equity holders of the parent				1,695		2,769
Other comprehensive income:
Items that will not be reclassified to profit or loss
	Gains on property revaluation			70		70
	Exchange differences on translation of foreign operations			(21)		61
Total comprehensive income for the year attributable
to equity holders of the parent				1,744		2,900

Consolidated statement of changes in equity attributable to

Equity Holders of the Parent for the year ended 31 March 2022

	Share capital	Share premium	Merger reserve	Revaluation reserve	Own shares	Equity reserve	Retained earnings	Total £'000
Balance at 1 April 2020	808	3,365	5,981	1,170	(340)	-	18,280	29,264
Dividends paid	-	-	-	-	-	-	(1,090)	(1,090)
Purchase of own shares	-	-	-	-	(868)	-	-	(868)
Settlement of share-based payments	-	-	-	-	666	-	(262)	404
Share-based payment charge	-	-	-	-	-	-	276	276
Transactions with equity holders	-	-	-	-	(202)	-	(1,076)	(1,278)
Profit for the year	-	-	-	-	-	-	2,769	2,769
Other comprehensive income	-	-	-	70	-	-	61	131
Total comprehensive income	-	-	-	70	-	-	2,830	2,900
Balance at 1 April 2021	808	3,365	5,981	1,240	(542)	-	20,034	30,886
Dividends paid	-	-	-	-	-	-	(1,147)	(1,147)
Purchase of own shares	-	-	-	-	-	(377)	-	(377)
Issue of new shares: exercise of share options	1	-	50	-	-	-	-	51
Settlement of share-based payments	-	-	-	-	-	249	(140)	109
Share-based payment charge	-	-	-	-	-	-	619	619
Transactions with equity holders	1	-	50	-	-	(128)	(668)	(745)
Profit for the year	-	-	-	-	-	-	1,695	1,695
Other comprehensive income	-	-	-	70	-	-	(21)	49
Total comprehensive income	-	-	-	70	-	-	1,674	1,744
Balance at 31 March 2022	809	3,365	6,031	1,310	(670)	-	21,040	31,885

Consolidated statement of financial position as at 31 March 2022

				Note	2022		2021
					£'000		£'000
Non-current assets
	Goodwill				9,446		8,696
	Other intangible assets				808		872
	Property, plant and equipment				4,012		4,141
	Deferred tax assets				232		-
					14,498		13,709
Current assets
	Trade and other receivables		7		27,385		13,362
	Tax receivables				573		414
	Inventories				-		129
	Cash and cash equivalents				11,430		14,241
					39,388		28,146
Total assets					53,886		41,855
Current liabilities
	Trade and other payables			8	(21,344)		(10,691)
	Lease obligations				(54)		(83)
					(21,398)		(10,774)
Non-current liabilities
	Lease obligations				(146)		(194)
	Deferred tax liabilities				(457)		(1)
					(603)		(195)
Total liabilities					(22,001)		(10,969)
Net assets					31,885		30,886
Equity
	Share capital				809		808
	Share premium account				3,365		3,365
	Merger reserve				6,031		5,981
	Revaluation reserve				1,310		1,240
	Own shares				(670)		(542)
	Retained earnings				21,040		20,034
Attributable to equity holders of the parent					31,885		30,886

Consolidated cash flow statement for the year ended 31 March 2022

			2022		2021
		Note	£'000		£'000
Operating activities
	Profit before tax		1,763		3,043
Adjustments for:
	Depreciation of property, plant and equipment		391		395
	Amortisation of intangible assets		306		279
	Finance income		(22)		(25)
	Finance expense		21		32
	Share-based payments		619		276
	Settlement of Share-based payments		-		42
	Gain on sale of property, plant and equipment		(16)		(8)
Operating cash flows before movements in working capital			3,062		4,034
	(Increase) in receivables		(14,023)		(3,225)
	Decrease in inventories		129		1,137
	Increase in payables		10,171		1,312
Cash generated from operations			(661)		3,258
	Taxes received / (paid)		1		80
Net cash generated from operating activities			(660)		3,338
Investing activities
	Interest received		22		25
	Purchase of property, plant and equipment		(197)		(34)
	Acquisition of subsidiary, net of cash acquired   9		(200)		-
	Capitalisation of development costs		(242)		(195)
Net cash used in investing activities			(617)		(204)
Financing activities
	Dividends paid		(1,147)		(1,090)
	Lease repayments		(98)		(79)
	Interest paid		(21)		(32)
	Purchase of own shares		(377)		(868)
	Exercise of share options		109		404
Net cash used in financing activities			(1,534)		(1,665)
Net increase in cash and cash equivalents			(2,811)		1,469
	Cash and cash equivalents at start of year		14,241		12,772
Cash and cash equivalents at end of year			11,430		14,241

Notes to the financial statements

1.  General information

D4t4 Solutions plc is a public limited company incorporated and domiciled in England and Wales and quoted on the AIM Market, hence there is no ultimate controlling party.

2.   Significant accounting policies

Basis of preparation

The financial statements have been prepared in accordance with International Accounting Standards adopted by the Companies Act 2006 applicable to companies reporting under International Accounting Standards.

The financial statements have been prepared under the historical cost convention, with the exception of land and buildings which are held at valuation.

The presentation and functional currency of the financial statements is British Pounds and amounts are rounded to the nearest thousand pounds.

The financial information contained in this announcement does not constitute the Group's statutory accounts for the year ended 31 March 2022 but is derived from those accounts which have been audited and which will be filed with the Registrar of Companies in due course. 

The auditors' report on the Annual Report and Financial Statements for the year ended 31 March 2022 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.

The 2022 Annual Report will be made available on the Company's website for the purposes of the AIM Rules for Companies on 12 July 2022.

Going concern

The Group and Company's business activities, together with the factors likely to affect its future development, performance and position and the risks and uncertainties have been considered along with any impact from the global economic situation and any further impact of coronavirus.

The Directors have reviewed stress tests for future cashflows over the 18 months to 30 September 2023 to ensure there are sufficient financial resources, together with income from existing contracts with a number of customers, to cover budgeted future cashflows. On this basis, the Directors have adopted the going concern basis in preparing these accounts.

3.   Business and geographical segments

IFRS 8 Operating Segments requires these to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and assess their performance.

Whilst having three product groups, the Group operates the business as a single business with no separation into divisions or allocation or people or assets to a particular division. The management team is responsible for all three product groups with no individual having responsibility for a particular product group. This is consistent with the internal reporting for management purposes. Management does however monitor revenues by revenue type.

Information is presented to the Board on the revenue analysis below:

· Product - Own IP

· Product - 3rd party

· Delivery services

· Support and maintenance

The revenue analysis set out below is consistent with that provided to the Board of Directors.

						Group
						2022		2021
						£'000		£'000
	Products - Own IP					6,137		9,005
	Products - 3rd party					7,001		4,403
	Delivery services					4,194		2,886
	Support & Maintenance					7,127		6,498
	Revenue					24,459		22,792

Major customers (partners) over 10% of revenue

			2022		2021
			£'000	£'000	£'000	£'000
			Customer 1	Customer 2	Customer 1	Customer 2
Products - Own IP			2,086	1,577	3,682	1,154
Products - 3rd party			7,001	-	3,775	-
Delivery services			2,337	17	769	-
Support & Maintenance			2,538	1,159	2,764	1,663
Total Revenue			13,962	2,753	10,990	2,817

Geographical information
				Group
				2022		2021
				£'000		£'000
	United Kingdom			3,962		2,983
	Rest of Europe			2,421		2,396
	United States of America			16,859		16,699
	Others			1,217		714
				24,459		22,792

The geographical revenue is determined by the domicile of the customer.

4.   Adjusted profit before tax

				2022 £'000		2021 £'000
	Profit before tax			1,763		3,043
	Amortisation of intangible assets			306		279
	Share-based payment			678		318
	Net foreign exchange differences			93		746
	Costs related to acquisition during the year			36		-
	Restructuring costs			390		58
	Adjusted profit before tax			3,266		4,444

5  Earnings per share
The calculation of earnings per share is based on profit attributable to owners of the parent and the weighted average number of ordinary shares in issue during the year.
The adjusted earnings per share figures have been calculated based on earnings before adjusted items. These have been presented to provide shareholders with an additional measure of the Group's year-on-year performance. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares arising from share options granted to employees where the exercise price is less than the market price of the Company's ordinary shares at the year end. Details of the adjusted earnings per share are set out below:

							2022		2021
							£'000		£'000
Profit attributable to owners of the parent							1,695		2,769
Amortisation of intangible assets							306		279
Share-based payment							677		318
Net foreign exchange differences							93		746
Costs related to acquisition during the year							36		-
Restructuring costs							390			58
Tax on the adjustments							(284)		(260)
Adjusted profit attributable to owners of the parent							2,913		3,910
							2022 No.		2021 No.
Basic weighted average number of shares, excluding own shares, in issue							40,240,799		40,235,856
Dilutive effect of share options							725,221		791,396
Diluted weighted average number of shares, excluding own shares, in issue							40,966,020		41,007,252
							2022		2021
							Pence per share		Pence per share
Basic Earnings per share							4.21		6.88
Diluted Earnings per share							4.14		6.75
Adjusted Basic Earnings per share							7.24		9.72
Adjusted Diluted Earnings per share							7.11		9.54

6.   Dividends

							2022		2021
							£'000		£'000
Amounts recognised as distributions to equity holders
	Final dividend for the year ended 31 March 2021 of 2.0p (for the year ended 31 March 2020: 1.9p) per share						805		765
	Interim dividend for the year ended 31 March 2022 of 0.85p (31 March 2021: 0.81p) per share						342		325
							1,147		1,090

The proposed final dividend for the year ended 31 March 2022 of 2.07p, and the proposed special dividend of 12.5p, are subject to shareholder approval at the AGM and have not been included as a liability in these financial statements. The final dividend is expected to be paid on 24 August 2022 to shareholders on the register as at the close of business on 15 July 2022, whilst the proposed special dividend of 12.5p is expected to be paid on 27 October 2022 to shareholders on the register as at the close of business on 7 October 2022.

7.   Trade and other receivables

			Group
			2022	2021
			£'000	£'000
Trade receivables			24,992	10,165
Other debtors			66	48
Prepayments			670	595
Accrued Income			1,657	2,554
			27,385	13,362
			2022	2021
			£'000	£'000
Less than 30 days			2,699	7,070
31 to 60 days			52	126
61 to 90 days			14	2,099
91 to 120 days			22,227	870
			24,992	10,165

The majority of the debtors shown in 91-120 days were received in April 2022.

The average credit period taken on sales of goods and services was 111 days (2021: 80 days).   

In accordance with IFRS 9, the Group performed a year end impairment exercise to determine whether any write down in amounts receivable was required, using an expected credit loss model. The expected loss rate for receivables less than 120 days old is 0% and above 120 days has not been considered on the basis of immateriality. In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. 

8.   Trade and other payables

			Group
			2022	2021
			£'000	£'000
Trade payables			840	1,450
Other taxes and social security			396	274
Other creditors			1,239	36
Contingent consideration			500	-
Accruals			4,169	2,643
Deferred income			14,200	6,288
			21,344	10,691

There is no material difference between the fair value of payables and their carrying value.   

Trade payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 25 days (2021: 40 days). Their carrying value approximates to their fair value.

Contingent consideration relates to the acquisition of Prickly Cactus Limited as described in note 9.

9.   Acquisition

On 2 August 2021, the Group acquired Prickly Cactus Limited ("Prickly Cactus"). Prickly Cactus provides digital transformation consulting to companies across the globe and has had a strategic relationship with D4t4 for some time.   

The Prickly Cactus team are experienced in product management and customer relationships, and have previously worked with several of D4t4's partners and customers. Within D4t4, they are focused on driving customer success in the key markets of Financial Services, Telecoms and Insurance and building a stable of new Celebrus customers via partners and direct relationships. 

The acquisition was part of D4t4's investment in specialist resources to capitalise on the market opportunity for both its Celebrus Customer Data Platform (CDP) and Fraud Data Platform (FDP). The addition of the Prickly Cactus team was to have a positive impact on the Group's performance in the coming periods. 

The total consideration comprised an initial consideration of £0.25 million which was satisfied by £0.2 million in cash (funded from current cash reserves) and by the allotment of 13,897 new ordinary shares of 2p each in D4t4 and an earn-out of up to approximately £0.5 million over the period to 31 December 2023 tied to both existing customer growth and the acquisition of new customers for the CDP and FDP.  The earn-out will also be satisfied by a mixture of cash and shares at the Company's election. 

Details of the fair value of identifiable assets and liabilities acquired, and the purchase consideration are as follows:   

	Balance sheet on acquisition	Fair value adjustments	Fair value of assets and liabilities acquired
	£'000	£'000	£'000
Trade receivables and other assets	1	(1)	-
Net assets acquired	1	(1)	-
Amount settled and to be settled in cash and shares
to the sellers
Total consideration			750
Goodwill			750

Prickly Cactus contributed £nil to Group revenues and £275,000 loss to Group results between the date of acquisition and 31 March 2022.

10.   Investor presentation

The investor presentation will be available on the company's website www.d4t4solutions.com/ later today.

Bill Bruno (CEO) and Ash Mehta (CFO) will provide a live presentation relating to the full year results via the Investor Meet Company platform today at 3.00pm BST.

Investors can sign up to Investor Meet Company for free and add to meet D4t4 via:

https://www.investormeetcompany.com/d4t4-solutions-plc/register-investor

10.  Annual Report and Accounts

The 2022 Annual Report will be posted on the company's website on 12 July 2022 for purposes of the AIM Rules for Companies. Hard copies will also be available from the Company's registered office Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, Middlesex, TW16 7EF.

11.   Annual General Meeting

The 2022 Annual General Meeting of the Company will be held at 9am on Wednesday 3 August at the Company's registered office. This will comprise formal business only. The directors plan to broadcast a Q&A session later in the day via videocall. Further information will be available on the Company's website in due course.

 

END

 

 

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