Interim Results

Microlise Group PLC

24 September 2024

 

 24 September 2024

Microlise Group plc

("Microlise", "the Group" or "the Company")

Interim Results for the Six Months Ended 30 June 2024

Strong performance driven by consistent strategic execution

Microlise Group plc (AIM: SAAS), a leading provider of transport management software to fleet operators, announces its unaudited results for the six months ended 30 June 2024.

		H1 FY24	H1 FY23	Change
Financial	Revenue	£39.1m	£33.9m	15.4%
	Recurring Revenue	£26.6m	£21.9m	21.5%
	Recurring revenue as % of Group revenue	67.9%	64.5%	3.4ppts
	Gross Profit	£25.6m	£20.5m	24.9%
	Gross Profit Margin %	65.5%	60.5%	5.0ppts
	Operating Profit	£0.5m	£1.3m	(61)%
	Adjusted EBITDA (1)	£5.2m	£4.5m	16.8%
	Adjusted EBITDA %	13.4%	13.2%	0.2ppts
	Profit before tax	£0.3m	£1.5m	(78.3)%
	Adjusted Profit before tax (2)	£2.8m	£2.6m	7.8%
	Adjusted Profit before tax %	7%	8%	(1)ppts
	Basic EPS (p)	0.00p	1.05p	(100)%
	Adjusted Basic EPS (p) (3)	2.18p	2.02p	7.7%
	Cash and cash equivalents	£8.9m	£14.1m	(36.4)%
KPIs	ARR run rate (4)	£54.0m	£44.8m	20.6%
	Number of subscriptions (5)	827,000	626,000	32.1%
	Long-term contract customer churn by value	0.5%	0.5%	-
1.        Adjusted EBITDA excludes, exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of loss of associate, interest, tax and share based payments. 2.        Adjusted Profit before taxation excludes exceptional costs in relation to acquisitions and restructuring costs, share based payments, loss of share of associate and amortisation charges as a result of business combinations 3.        Adjusted Basic EPS is calculated by dividing the Adjusted Profit after taxation by the weighted average number of ordinary shares outstanding. Adjusted Profit after taxation excludes exceptional costs in relation to acquisitions and restructuring costs, share based payments, loss of share of associate and amortisation charges as a result of business combinations. 4.        ARR run rate change figure and % compare the annualised recurring revenue figure for June 2024 with the annualised recurring revenue figure for June 2023.       5.        Subscriptions change figure and % compare the subscriptions as at 30 June 2024 with the subscriptions as at 30 June 2023, these include ESS subscriptions.

Financial Highlights

·    Increase in total revenue to £39.1m (H1 2023: £33.9m) driven by strong recurring revenue growth and the enlarged contribution from Enterprise Software Systems ("ESS") and Vita Software acquisitions.

·   Recurring revenues increased 21.5% to £26.6m with 10.8% organic growth following strong delivery against direct order book in H2 2023 as vehicle availability improved.

·    ARR growth of 21%, of which 11% represented organic growth, to £54.0m (H1 2023: 10.2%    and £44.8m) supported by strong direct customer contract wins and extensions in the period.

·   Vehicle availability constraints in Australia have temporarily impacted new project deployments in the region and are expected to improve by the end of the financial year.

·    Adjusted EBITDA increased 16.8% to £5.2m (H1 2022: £4.5m). Adjusted EBITDA margin has increased to 13.4% (FY22: 13.2%).

·    The Group's net cash at 30 June 2024 was £8.9m (30 June 2023: £14.1m), after net cash spend of £6.4m on acquisitions during the period and £2m on the Company's maiden dividend.

·    The Board has recommended an interim dividend of 0.57p (H1 2023: nil) per share.

Strategic and Operational Highlights

·   Five-year contract renewal signed with J.C. Bamford Excavators Limited ("JCB") covering recurring SaaS software licences and hardware sales.

·    New customer acquisition particularly strong with 202 new direct customers added during the period and strong demand for the expanding product suite.

·    Several major, multi-year, contract wins including WooliesX, GSF Car Parts, Foodstuffs North Island, STAF, Romac & One Stop, demonstrating execution of international expansion and Company cross-sell and up-sell strategies.

·    Several major multi-year renewals signed in the period including Goldstar, DPD and M&S.

·   Completion of acquisition of ESS with a number of contract wins secured for its Transport Management System ("TMS") product with new and existing customers.

·    Customer retention remains very strong with churn at 0.5% (H1 2023: 0.5%).

·  Key appointment of new Chief Revenue Officer, Mike Blackburn, who succeeds the Group's former Business Development Director.

Nadeem Raza, CEO of Microlise, commented: "Microlise delivered a solid performance in the first half of 2024. Market conditions have greatly improved following the resolution of component supply issues, and localised delays in new vehicle rollouts are expected to resolve by year-end. Ongoing market consolidation is also expected to benefit Microlise as our solutions are tailored toward larger companies which now dominate the sector.

The positive reception to our new products, coupled with the continued integration of our recent acquisitions and the increasing interoperability of our solutions, has enhanced the appeal of our offering. As a result, we are seeing improvements in our sales pipeline both in the UK and in target geographies where our brand is becoming increasingly recognised.

With the appointment of a new Chief Revenue Officer, we hope to be able to accelerate the growth of our pipeline while improving its conversion into contracted business. The Company looks to the future with confidence and expects to meet market forecasts for the full year."

For further information, please contact:

Microlise Group plc
Nadeem Raza, CEO Nick Wightman, CFO	C/O SEC Newgate
Singer Capital Markets (Nominated Adviser & Broker)
Steve Pearce / James Moat / Sam Butcher	Tel: [phone]
SEC Newgate (Financial Communications)
Bob Huxford / Molly Gretton / Harry Handyside	[e-mail]

About Microlise

Microlise Group Plc is a leading provider of transport management software to fleet operators helping them to improve efficiency, safety, and reduce emissions. These improvements are delivered through reduced fuel use, reduced mileage travelled, improved driver performance, fewer accidents, elimination of paperwork and delivery of an enhanced customer experience.

Established in 1982, Microlise is an award-winning business with over 400 enterprise clients. With c. 575 employees based in the UK, the Company also has offices in France, Australia, and India, with a total global staff base of over 775.  

Microlise is listed on the AIM market of the London Stock Exchange (AIM: SAAS) and qualifies for the London Stock Exchange's Green Economy Mark.

Chairman's Statement

On behalf of the Board, I am delighted to report that Microlise has sustained its momentum, delivering another impressive set of results for the six-month period ending 30 June 2024. Achieving robust performance, with continued revenue and recurring revenue growth, despite the macroeconomic challenges faced by our sector in recent years, is a testament to the strength of our high-quality product offering, the effectiveness of our strategy, and the dedication of our team.

Revenue for the period grew by 15.4%, increasing to £39.1m from £33.9m in H1 2023, driven largely by a 21.5% rise in recurring revenues (11% organic), which reached £26.6m. This growth reflects improved vehicle availability toward the end of FY 2023 and the acquisitions of Vita Software and Enterprise Software Systems. Recurring revenues now account for 68% of our total revenues, up from 65% in H1 2023. Our financial results highlight our commitment to growth and operational efficiency.

During H1 2024, we made significant strides in the technical integration of our recent acquisitions, with all personnel now operating within the Microlise Group. Notably, the TMS solutions acquired through Vita Software and Enterprise Software Systems have attracted new customers and significantly enhanced our capacity to upsell and cross-sell products to existing customers, increasing customer engagement and revenue potential. Additionally, the successful integration of K-Safe, with the Flare app network securing new contracts, has expanded Microlise's comprehensive end-to-end product suite, from depot operations to last-mile delivery.

Our strong performance has not only been limited to the UK market but has also extended internationally, with notable contract wins in Australia, New Zealand, and France. We secured a 5-year, £10.6m contract with Woolworths in Australia, along with a five-year contract with Foodstuffs South Island in New Zealand, cementing our position in the ANZ region. Additionally, securing our largest contract to date in France, with STAF, reinforces Microlise's growing reputation and capabilities in international markets.

While we have seen a return to normal in terms of component availability and new vehicle lead times in the UK, we remain vigilant to any changes that could impact our operations or customers. Our continued investment in product development and security measures is crucial to maintaining our competitive edge and ensuring the resilience of our business-critical systems for our customers.

On behalf of the Board, we extend our thanks to everyone at Microlise for their dedication and hard work, which have been instrumental in us achieving these results. We also thank our shareholders who have supported us throughout the period. I am confident that Microlise is well-positioned to continue to deliver strong growth, improved visibility, and value for shareholders.

Jon Lee, Non-Executive Chairman

CEO's Statement

Introduction

Microlise delivered a solid performance in H1 2024 with growth across a range of financial metrics. The Company has benefitted from improving market conditions, which, combined with our growing and increasingly interoperable product suite, has led to us continuing to secure new customers while expanding remits with existing clients across all our core markets.

Meanwhile, our customer churn remains extremely low, demonstrating the importance of our solutions to our customer base and the value they place on the calibre, industriousness, and diligence of the Microlise team. Our strong performance has continued post period-end as our growth engine continues to rapidly grow our sales pipeline.

Market

With global supply chain issues, chip shortages, and delays to the production of vehicles now behind us in the UK, the markets in which we operate are more robust than we've seen in recent periods. A substantial backlog of orders remains across the logistics market, which now appears to be in a sustained period of growth.

Previous supply chain issues forced many smaller companies within the logistics market into administration, resulting in consolidation by the larger companies. This consolidation has driven the growth of these larger companies, which form the core of Microlise's customer base. As such, Microlise is extremely well positioned at the heart of a rapidly expanding and consolidating logistics market.

Customer Base

During the six months under review, the Group added 202 new direct customers (H1 2023: 250), securing new business across all its target geographies.

Microlise strengthened its position in the UK market, both through new customers and cross-sales of recently acquired and developed products, which have been positively received by its customer base. New customer wins secured in the period include GSF, Bensons for Beds, Slicker Recycling, and SEDA. Significant contract wins were also secured with Light Goods Vehicle (LGV) fleet operators, a target market into which the Group is seeking to expand.

Significant contract renewals with UK customers include DPD, Goldstar and M&S, which include the upsell of additional products. The Group has continued to experience strong demand from its existing customers for its expanding product suite. Notably, Microlise also signed a new 10-year contract with an existing customer for the Group's recently acquired TMS solution.

The Group has also entered a five-year contract renewal with JCB, which will see Microlise continue to provide the global construction manufacturer with its advanced Industrial Internet of Things (IIoT) platform until September 2029. This renewed collaboration builds upon a successful 14-year relationship between the two companies.  

Post period end the Company has continued to secure new and enlarged contracts, as detailed in our recent announcement dated 11 September 2024. These included 5-year contract wins with Romac Logistics, a leading third-party logistics provider specialising in temperature-controlled transport and warehouse; Goldstar Heathrow, a haulage and warehousing provider for airports; and OneStop, a retail convenience business owned by Tesco.

Microlise's international business continues to grow at pace, securing several significant contracts in France and ANZ. In France, the Group won its largest contract to date in the region with STAF, a leading company in the transport of mass distribution and agri-foods. This achievement highlights the broad applicability of Microlise's product range to wider markets within the region and enhances the profile of the Group within France.

In ANZ, the Group won a 5-year, £10.6m contract with Woolworths and a five-year contract with FSSI, the largest grocery retailer in New Zealand's South Island. Microlise now serves three of the four largest supermarket chains in Australia and the two largest supermarket chains in New Zealand. These notable contract wins have also increased awareness of Microlise in ANZ which is driving a strong sales pipeline in the region.

As noted in our Trading Update, published on 30 July 2024, the roll-out of our solutions in Australia has been delayed owing to a lack of vehicle availability. This is a consequence of the build of a proportion of new vehicles having only begun once the prior component supply issues had been resolved. The situation is naturally resolving, and we expect the supply of vehicles to have returned to normal by the end of 2024.

The Company has also maintained its excellent customer retention rate with churn of just 0.5% during the six-month period, highlighting the quality and essential nature of our product offerings to our loyal and valued customers.

Product Offering

Microlise's solutions help its fleet management customers make the most efficient use of their assets, reducing fuel use, driving time, wear and tear on vehicles, and accidents. During the first half of 2024, Microlise continued to integrate its solutions to ensure common functionality and data sharing across solutions. In addition, the Company expanded its product range to encompass the entire delivery journey, from the warehouse directly to the consumer's doorstep.

This follows the successful acquisition of K-Safe, completed during the period, which has added some of the biggest names in consumer delivery services to Microlise's client roster including Just Eat and Deliveroo. K-Safe has enhanced Microlise's Driver Hazard Warning (DHW) solution to provide awareness of two-wheeled vehicles such as cyclists, motorcyclists, and e-scooters, even when in a driver's blind spot.

Microlise has also begun shipping its Proximity Beacons product, launched shortly after the period end, to JCB, and is in a number of conversations with other existing customers for this solution. Microlise's Proximity Beacons offers customers a low-cost asset tracking system that creates a consolidated view of all assets under management. The product aims to minimise the loss of unpowered assets, such as cargo and trailers, to theft, a major issue for UK retailers with £7.9 billion of losses reported in 2023.

Strategic Focus

We are currently focused on the following core strategic objectives:

Expanding Our International Presence - We have remained focused on international expansion into key regions including New Zealand and France, where we secured substantial new contracts during the period under review. These successes underscore the market-leading nature of our products and have prompted us to increase investment in our sales functions to capitalise on the growing awareness of our business in these regions.

Expanding Our UK Presence - We continue to focus on domestic growth by targeting the mid-market operators with fleets ranging between 100 to 500 vehicles.  We are still expanding our presence in the enterprise space with several new customers.

Integrating Recent Acquisitions - Our recent acquisitions are being successfully integrated with all staff now within the Microlise organisation and technology solutions are being incorporated into the Microlise architecture. Full integration reinforces our unique selling proposition as an end-to-end integrated solution and will enhance our ability to upsell, cross-sell, and attract new customers.

Enhancing Margins Through Improved Efficiencies - We have multiple initiatives underway to improve the efficiency of our operations by streamlining internal processes, which will allow us to scale the business more effectively and reduce third party costs. While some details of these initiatives are commercially sensitive, our goal remains clear: to increase margins.

Ongoing Investment in Product Development - We are committed to investing in product development to ensure we remain at the forefront of our industry, bringing new, innovative solutions to our platform that benefit our customers.

Investment into security measures for our blue-chip customer base - We have invested in improving the robustness of our infrastructure during the period.  In addition, we continue to invest in new security systems to protect our customers from Ransomware attacks. These attacks have not impacted Microlise directly but their effects on our clients could cause major disruption to their operations. Logistics companies are relied upon to work to tight schedules assurance and resilience of our business-critical systems are therefore of paramount importance to our customers. Of all of our strategic initiatives, this is responsible for the largest capital spend but the outlay is necessary to ensure we both attract and retain our strong customer base.

Unifying Our Product Portfolio into a Seamlessly Integrated Suite - Our R&D team is actively progressing with the integration of our systems architecture across all of our products and some initial functionality has already been released. The initiative will facilitate data sharing and synchronisation and common functionality across all of our products. This will make our product suite more attractive to potential customers while also facilitating the sales of additional products to existing customers.

M&A - M&A is central to our strategy and we continue to assess acquisition opportunities from a substantial and growing pipeline. Our focus is on international business, both in new geographies and those in which we already operate.

People

Mike Blackburn has been appointed as Microlise's new Chief Revenue Officer, succeeding Paul Jurevicius, who retired after 15 years with the business, and 5 years as Business Development Director. With extensive experience in SaaS, technology, and professional services, Mike will now lead the sales and marketing teams, focusing on driving revenue generation and accelerating growth.

Mike's impressive career has been marked by an ability to drive innovation and create value with a focus on sales scale-up and transformation.  His strategic leadership has consistently delivered sustained growth by securing new customers and executing cross-sell and upsell strategies across diverse markets.

In his new role, Mike will be responsible for overseeing all revenue-related activities, ensuring alignment between sales and marketing teams to identify long-term sales opportunities, while maximising profitability. His appointment signals a new chapter of growth for Microlise as it continues to expand its presence in the technology and transport industry.

We would like to extend our sincere thanks to Paul for his dedication and contributions to the Company.

ESG

Microlise's solutions are wholly beneficial in terms of their ESG impact. By ensuring the most efficient and safe use of vehicles, Microlise reduces emissions, improves the safety of drivers and their fellow road users, and extends the lifetime of assets.

Furthermore, Microlise is committed to meeting its own net zero goals through the improvement of its ESG credentials. The Company continues to expand its use of solar panels at its Nottingham HQ, with the objective of reducing the site's annual carbon footprint by over 80 tonnes of CO2.

The incentive plan of Microlise's executives also includes an ESG element and everybody at Microlise has contributed during the period toward making our net zero goals a reality.

In terms of the social element of ESG, we achieved 'Great Place to Work' accreditations in 2024, including 'Best Workplaces for Wellbeing' and 'Best Workplaces for Women'. We also ranked 64^th for 'Best Large Workplaces'. In August 2024, we were recognised in India as a 'Best Workplace for Millennials', ranking 33^rd in Great Place to Work's top 50.  

Outlook

Microlise delivered a solid performance in the first half of 2024. Market conditions have greatly improved following the resolution of component supply issues, and localised delays in new vehicle rollouts are expected to resolve by year-end. Ongoing market consolidation is also expected to benefit Microlise, as our solutions are tailored toward larger companies, which now dominate the sector.

The positive reception to our new products, coupled with the continued integration of our recent acquisitions and the increasing interoperability of our solutions, has enhanced the appeal of our offering. As a result, we are seeing improvements in our sales pipeline both in the UK and in target geographies where our brand is becoming increasingly recognised.

With the appointment of a new Chief Revenue Officer, we hope to be able to accelerate the growth of our pipeline while improving its conversion into contracted business. The Company looks to the future with confidence and expects to meet market forecasts for the full year.

Nadeem Raza, Chief Executive Officer

CFO's Statement

The unaudited financial results for the six-month period to 30 June 2024 reflect another period of profitable growth for Microlise.

Key Performance Indicators

The following key performance indicators for the 6-month period to 30 June 2024 include a comparison to the unaudited statutory results for the 6-months to 30 June 2023.

			H1 FY24	H1 FY23	Change
	Financial	Revenue	£39.1m	£33.9m	15.4%
		Recurring Revenue	£26.6m	£21.9m	21.5%
		Recurring revenue as % of Group revenue	67.9%	64.5%	3.4ppts
		Gross Profit	£25.6m	£20.5m	24.9%
		Gross Profit Margin %	65.5%	60.5%	5.0ppts
		Operating Profit	£0.5m	£1.3m	(61)%
		Adjusted EBITDA (1)	£5.2m	£4.5m	16.8%
		Adjusted EBITDA %	13.4%	13.2%	0.2ppts
		Profit before tax	£0.3m	£1.5m	(78.3)%
		Adjusted Profit before tax (2)	£2.8m	£2.6m	7.8%
		Adjusted Profit before tax %	7%	8%	(1)ppts
		Basic EPS (p)	0.00p	1.05p	(100)%
		Adjusted Basic EPS (p) (3)	2.18p	2.02p	7.7%
		Cash and cash equivalents	£8.9m	£14.1m	(36.4)%
	KPIs	ARR run rate (4)	£54.0m	£44.8m	20.6%
		Number of subscriptions (5)	827,000	626,000	32.1%
		Long-term contract customer churn by value	0.5%	0.5%	-
1.        Adjusted EBITDA excludes, exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of loss of associate, interest, tax and share based payments. 2.        Adjusted Profit before taxation excludes exceptional costs in relation to acquisitions and restructuring costs, share based payments, loss of share of associate and amortisation charges as a result of business combinations 3.        Adjusted Basic EPS is calculated by dividing the Adjusted Profit after taxation by the weighted average number of ordinary shares outstanding. Adjusted Profit after taxation excludes exceptional costs in relation to acquisitions and restructuring costs, share based payments, loss of share of associate and amortisation charges as a result of business combinations. 4.        ARR run rate change figure and % compare the annualised recurring revenue figure for June 2024 with the annualised recurring revenue figure for June 2023.       5.        Subscriptions change figure and % compare the subscriptions as at 30 June 2024 with the subscriptions as at 30 June 2023, these include ESS subscriptions.

Revenue

KPIs for the six months ended 30 June 20246		H1 FY24	H1 FY23	Change
	Group revenue	39.1	33.9	15.4%
	Organic Group revenue growth Recurring revenue	7.8% 26.6	10.2% 21.9	21.5%
	Organic recurring revenue growth Recurring revenue as % of Group revenue	10.8% 67.9%	9.8% 64.5%	3.4%
	Annual recurring revenue (ARR)	54.0	44.8	20.6%
	Non-recurring revenue	12.6	12.0	4.4%
	Installation	2.1	1.3	55.9%
	Hardware	8.5	9.5	(10.7)%
	Professional services	2.0	1.2	64.0%

The results for first half of the year, include a full six-month contribution from the Vita acquisition, completed in March 2023, compared to three months in the previous half year and a five-and-a-half-month contribution from the acquisition of ESS, completed on 10 January 2024.

Revenue grew by 15.4% to £39.1m (H1 2023: £33.9m), driven by strong growth in recurring revenues which have grown 21.5% to £26.6m (H1 2023: £21.9m). Delivery increased towards the end of the prior year as the Group was able to deliver on its strong direct customer order book as new vehicle availability improved driving 11% organic recurring revenue growth. Recurring revenues contributed 67.9% to overall revenue (H1 2023: 64.5%).

ARR increased 20.6% (11% organic) to £54.0m (H1 2023: £44.8m) with further contributions from key contract wins such as GSF, Foodstuffs North Island, STAF and Woolworths expected to positively impact as delivery continues in H2.

Non-recurring revenues increased by 4.4% (1.9% organic) to £12.6m (H1 2023: £12.0m). Hardware revenue decreased by 10.7% to £8.5m (H1 2023: £9.5m) following an anticipated reduction in hardware shipments to OEMs⁽¹⁾ in the half because of higher stock holding in H2 2023. This has not impacted the quantity of new OEM software subscriptions which has increased slightly vs H1 2023 and OEM orderbooks for H2 are in line with budget for the full financial year.

Professional services and installation revenues have increased by 64% to £2.0m (H1 2023: £1.2m) and 56% to 2.1m (H1 2023: £1.3m) respectively, driven by implementation and integration support for both projects with direct and OEM customers.

Gross Profit

Gross profit for the 6 months ended 30 June 2024 increased by 24.9% to £25.6m (H1 2023 £20.5m), of which 14.3% is organic (H1: 2023 11.8%). Gross margin increased from 61% to 65% of revenue reflecting the strong recurring revenue performance and gross margin improvements in both recurring and non-recurring revenues. Non-recurring revenue margin increased by c.9.0% driven primarily by strong performance from increased revenues from direct customers. Recurring revenue gross margin also saw a c.1.0% increase as a result of increased subscription revenues coupled with effective cost management and efficiency programmes offset by proportionately higher hosting costs at ESS (which presents further opportunity to drive cost savings).

Administrative Expenses

Administrative expenses before exceptional administrative charges, amortisation and depreciation, and share based payment charges, in the 6-month period ended 30 June 2024 increased 26% to £20.9m (H1 2023: £16.6m) reflecting the increased contribution of Vita and ESS. Like for like admin expenses increased 15% (H1 2023: 15%).

Staff costs in the 6 months ended 30 June 2024 increased 24% to £17.5m (H1 2023: £14.2m) which includes the impact of the acquisitions of ESS and K-Safe, as well as a 12% like-for-like increase in staff costs (H1 2023: 14%) due to performance related bonuses and increased sales commissions reflecting the increased new customer win rate and investment into our key strategic objectives. Average headcount in the period was 789 overall (H1 2023: 703), with 40 of this increase attributable to the acquisitions.

Marketing costs in the 6 months ended 30 June 2024 increased 74% to £1m (H1 2023: £0.6m) as the Group has continued to focus on growth with spend targeted on lead generation activities in all territories and all industries.

Administration costs in the 6 months ended 30 June 2024 increased 35% to £1.9m (H1 2023: £1.4m) partly reflecting the increased investment in IT infrastructure for both customer facing systems and internal business systems. The increase included higher Microsoft licencing costs as well as an increase in licensing costs to further enhance the Group's security posture.

Capitalised development costs in the period were £1.4m (H1 2023: £1.3m), reflecting the continued investment into the product portfolio, whilst amortisation of capitalised development costs in the period ended 30 June 2024 was £0.8m (H1 2023: £0.5m).

Adjusted EBITDA⁽²⁾

The growth in revenue and gross margin has enabled the Group to deliver an adjusted EBITDA in the 6 months ended 30 June 2024 of £5.2m (H1 2023 £4.5m), an increase of 17%. Adjusted EBITDA margin for the period is 13.4% (H1 2023: 13.2%). To provide a guide to the underlying business performance, adjusted EBITDA excludes exceptional administrative costs, depreciation, amortisation, interest, tax and share based payments.

The Group is executing on several additional efficiency initiatives which will start to contribute positively to margin in FY25. These include the simplification of direct customer hardware solutions as well as the rationalisation of technical infrastructure to reduce 3^rd party supplier and licensing spend.

Depreciation and amortisation increased to £2.5m (H1 2023: £1.8m) following increased investment in both intangible assets and plant, property and equipment in FY2023.   

Adjusted Profit Before Tax⁽³⁾

Adjusted profit before taxation for the 6 months ended 30 June 2024 increased 8% to £2.8m (H1 2023: £2.6m). The adjusted profit before taxation excludes exceptional costs in relation to acquisitions and restructuring, share of loss of associate and share based payments and amortisation charges as a result of business combinations. Reported profit before taxation in the period decreased 74% to £0.3m (H1 2023: £1.5m).

Amortisation charges as a result of business combinations increased to £1.4m (H1 2023: £1.1m) following the recent acquisitions.

Exceptional Costs

During the period, the Group incurred a number of one-off charges relating to acquisition fees and subsequent restructuring and integration activities.  The total of these charges in the period ended 30 June 2024 was £0.3m (H1 2023: £0m).

Taxation

The tax charge in the 6 months ended 30 June 2024 was £0.3m (H1 2023: £0.3m). The effective tax rate for the 6 months ended 30 June 2024 increased to 79% (H1 FY23 20%). This is largely driven by the impact of the share of loss of associate net of tax of £0.3m (H1 FY23 £0.2m profit) which is not a deductible expense.

The effective tax rate against profit before taxation excluding associates is 48% (H1 FY23 23%) which is higher than the main rate of corporation tax of 25% (H1 2023: 19%/25%). The principal factor driving this increase is the deferred tax charges that relate to the reassessment of the likelihood of future deductions from the exercise of share options. The cessation of the super-deduction capital allowance scheme on 31 March 2023 and the increase in the corporation tax rate have also contributed to the increase upon comparison with the prior year.

Adjusted Profit after Tax and EPS⁽⁴⁾

Adjusted profit after tax increased 8% to £2.5m (H1 2023: £2.3m). As a result, adjusted basic earnings per share for the 6 month period ended 30 June 2024 increased to 2.18p (H1 2023: 2.02p) and adjusted diluted earnings per share was 2.16p for share for the 6 month period ended 30 June 2024 (H1 2023: 2.02p).

Reported profit after taxation in the period of £0.0m (H1 2023: £1.2m). As a result, the reported basic earnings per share for the 6 month period ended 30 June 2024 was 0.003p (H1 2023: 1.05p) and diluted earnings per share was 0.003p for share for the 6 month period ended 30 June 2024 (H1 2023: 1.05p).

Dividend

The Group announced the introduction of its maiden full year dividend of 1.72 pence per share that was paid on 28 June 2024 to shareholders on the register at close of business on 7 June 2024.

The Board has recommended an interim dividend of 0.57p (H1 2023: nil) per share, £0.7m in aggregate, in line with the Group's progressive dividend policy which was implemented at the FY23 annual results. The interim dividend will be paid on 7 November 2024 to shareholders on the register on 11 October 2024. The ex-dividend date is therefore 10 October 2024.

Group Statement of Financial Position

The Group had net assets of £74.2m at 30 June 2024 (H1 2023: £74.9m). Intangible assets increased by £8.4m reflecting the £11.4m of acquired assets and goodwill resulting from the acquisition of ESS, capitalised development costs less amortisation charges.

Adjusted Cashflow⁽⁵⁾ & Net Cash

Adjusted cash flows generated from operations ⁽⁶⁾ remains healthy at £3.8m in the period (H1 2023: £3.6m), this represents a cash conversion rate⁽⁴⁾ of 72% (H1 2023: 80%). Reported cash flows generated from operations in the period was £3.3m (H1 2023: £3.5m). Following net acquisition consideration of £6.2m ESS, £0.2m deferred consideration payment relating to the Vita acquisition and the £2m dividend payment, the Group ended the 6-month period to 30 June 2024 with cash and cash equivalents of £8.9m (H1 2023: £14.1m).

 Banking Facility

The Group renewed its facility with HSBC with an agreed £10m committed revolving cash flow facility and a £20m accordion. The Group has not utilised any of this facility to date and remains comfortably within its banking covenants. The Group's gross cash of £8.9m (H1 2023: £14.1m) and the undrawn £10.0m facility gives the Group £18.9m of liquidity, which the Directors believe provides ample headroom for Microlise to deliver against its strategic goals.

Additional Notes

1.     OEM is an abbreviation for Original Equipment Manufacturers

2.     Adjusted EBITDA excludes exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of profit or loss of associate, interest, tax and share based payments.

3.     Adjusted Profit before tax excludes exceptional costs in relation to acquisitions and restructuring costs, share of profit or loss of associate and amortisation charges as a result of business combinations     

4.     Adjusted Profit after tax excludes exceptional costs in relation to acquisitions and restructuring costs, share of profit or loss of associate and amortisation charges as a result of business combinations. Adjusted EPS is calculated by dividing the Adjusted Profit after tax by the weighted average number of ordinary shares outstanding as reported in note 4 of the financial statements    

5.     Adjusted cash flow generated from operations adds back exceptional costs in relation to integration and restructuring costs   

6.     Cash conversion is calculated by dividing adjusted cash flow generated from operations by adjusted EBITDA.

Nick Wightman, Chief Financial Officer

Interim unaudited Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2024

		Six months ended 30 June	Six months ended 30 June
		2024	2023
	Note	£'000	£'000
Revenue	1	39,118	33,887
Cost of sales		(13,503)	(13,374)
Gross profit		25,615	20,513
Other operating income		547	541
Administrative expenses		(25,650)	(19,728)
Operating profit		512	1,326
Interest income		225	151
Interest expense		(147)	(160)
Share of (loss)/profit of associate net of tax		(260)	204
Profit before tax		330	1,521
Taxation	3	(326)	(299)
Profit for the period		4	1,222
Other comprehensive income/(expense) for the period
Currency translation differences		8	(64)
Total comprehensive income for the period attributable to the equity shareholders of Microlise Group PLC		12	1,158
Earnings per share
Basic earnings per share (pence)	4	0.003	1.05
Diluted earnings per share (pence)	4	0.003	1.05

Interim unaudited consolidated Statement of Changes in Equity

	Share Capital	Share Premium	Retained earnings	Total Equity
	£'000	£'000	£'000	£'000
At 1 January 2023	116	17,630	55,722	73,468
Comprehensive income for the period to 30 June 2023
Profit for the period	-	-	1,222	1,222
Other comprehensive expenses	-	-	(64)	(64)
Total comprehensive income for the period	-	-	1,158	1,158
Share based payment	-	-	245	245
Total transactions with owners	-	-	245	245
At 30 June 2023	116	17,630	57,125	74,871
Comprehensive income for the period to 31 December 2023
Profit for the period	-	-	354	354
Other comprehensive expenses	-	-	(38)	(38)
Total comprehensive income for the period	-	-	316	316
Share based payment	-	-	486	486
Total transactions with owners	-	-	486	486
At 31 December 2023	116	17,630	57,927	75,673
Profit for the period	-	-	4	4
Other comprehensive income	-	-	8	8
Total comprehensive income for the period	-	-	12	12
Share based payment	-	-	520	520
Dividends paid	-	-	(2,000)	(2,000)
Total transactions with owners	-	-	(1,480)	(1,480)
At 30 June 2024	116	17,630	56,459	74,205

Interim unaudited Consolidated Statement of Financial Position

as at 30 June 2024

	Note	30 June	31 December	30 June
		2024	2023	2023
		£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		9,425	8,947	9,414
Intangible assets	5	84,986	76,228	76,595
Investments in associate		1,333	1,593	1,572
Loan to associate	7	1,000	-	1,000
Trade and other receivables		3,407	2,841	2,976
Total non-current assets		100,151	89,609	91,557
Current assets
Inventories		3,842	3,348	3,335
Loan to associate		-	1,000	-
Trade and other receivables		18,244	18,757	22,714
Corporation tax recoverable		1,907	1,665	1,437
Cash and cash equivalents		8,946	16,800	14,063
Total current assets		32.939	41,570	41,549
Current liabilities
Lease liabilities		(895)	(907)	(1,056)
Trade and other payables		(35,289)	(32,630)	(34,372)
Total current liabilities		(36,184)	(33,537)	(35,428)
Non current liabilities
Lease liabilities		(704)	(646)	(718)
Trade and other payables		(15,140)	(15,701)	(16,830)
Deferred tax		(6,857)	(5,622)	(5,259)
Total non current liabilities		(22,701)	(21,969)	(22,807)
Total liabilities		(58,885)	(55,506)	(58,235)
Net assets		74,205	75,673	74,871
Equity
Issued share capital		116	116	116
Share premium account		17,630	17,630	17,630
Retained earnings		56,459	57,927	57,125
Total equity		74,205	75,673	74,871

Interim unaudited Consolidated Statement of Cash Flows

for the period ended 30 June 2024

		Six months ended 30 June	Six months ended 30 June
	Note	2024	2023
		£'000	£'000
Cash flows from operating activities
Cash generated from operations	A	3,451	3,571
Tax paid		(138)	(38)
Net cash generated from operating activities		3,313	3,533
Cash flows from investing activities
Purchase of property, plant and equipment		(840)	(1,593)
Proceeds on disposal of property, plant and equipment		-	53
Additions to intangible assets		(1,430)	(1,262)
Purchase of subsidiaries (TruTac Limited deferred consideration paid)		-	(1,000)
Purchase of subsidiaries (Vita Software Limited)		(200)	(1,803)
Purchase of subsidiaries (Enterprise Software Systems Limited)		(6,212)	-
Interest received		225	151
Net cash used in investing activities		(8,457)	(5,454)
Cash flows from financing activities
Dividends paid		(2,000)	-
Interest paid		(147)	(155)
Lease liability payments		(565)	(535)
Net cash used in financing activities		(2,712)	(690)
Net (decrease in cash and cash equivalents		(7,856)	(2,611)
Cash and cash equivalents at beginning of the year		16,800	16,683
Foreign exchange (losses)/gains		2	(9)
Cash and cash equivalents at end of the year	B	8,946	14,063

Notes to the interim unaudited consolidated statement of cash flows

for the period ended 30 June 2024

A. Cash generated from operations

The reconciliation of profit for the period to cash generated from operations is set out below:

		Six months ended 30 June	Six months ended 30 June
		2024	2023
		£'000	£'000
Profit for the period		4	1,222
Adjustments for:
Depreciation		1,580	1,223
Amortisation		877	601
Amortisation - business combination assets		1,404	1,080
Profit on disposal of tangible fixed assets		-	(18)
Share based payments		520	245
Net interest costs		(78)	9
Share of loss/(profit) of associate		260	(204)
Tax charge		326	299
		4,893	4,457
Working capital movements:
Increase in inventories		(494)	(700)
Increase in trade and other receivables		(2,754)	(6,013)
Increase in trade and other payables		1,806	5,827
Cash generated from operations		3,451	3,571

B. Analysis of net cash

	At 1 January 2023	Cash flow	Non-cash changes	At 30 June
				2023
	£'000	£'000	£'000	£'000
Lease liabilities	(1,747)	535	(562)	(1,774)
Liabilities arising from financing activities	(1,747)	535	(562)	(1,774)
Cash and cash equivalents	16,683	(2,611)	(9)	14,063
Net cash	14,936	(2,076)	(571)	12,289

	At 1 January	Cash flow	Non-cash changes	At 30 June
	2024			2024
	£'000	£'000	£'000	£'000
Lease liabilities	(1,553)	565	(611)	(1,599)
Liabilities arising from financing activities	(1,553)	565	(611)	(1,599)
Cash and cash equivalents	16,800	(7,856)	2	8,946
Net cash	15,247	(7,291)	(609)	7,347

Notes to the interim unaudited financial information

General information    
 
The parent company is a holding company, and its subsidiaries are businesses that provide technological transport and fleet management solutions. Its technology is designed to help businesses improve efficiency, reduce emissions, lower costs, and increase safety on the road. The company is a public limited company listed on AIM, limited by shares, incorporated and domiciled in England. The address of the registered office is Farrington Way, Eastwood, Nottingham, NG16 3AG.

Basis of preparation

This interim announcement and condensed consolidated interim financial information have been prepared in accordance with the recognition and measurement requirements of UK adopted International Accounting Standards as effective for periods beginning on or after 1 January 2024 ('IFRS').

In preparing these interim financial statements, the Board have considered the impact of any new standards or interpretations which will become applicable for the next Annual Report and Accounts which deal with the year ending 31 December 2024 and there are not expected to be any changes in the Group's accounting policies compared to those applied at 31 December 2023, a full description of which are contained in the financial statements for the year ended 31 December 2023 which are available on our website.

There are no new standards, interpretations or amendments in issue which are not yet effective in these financial statements and expected to have a material effect on the Group's future financial statements.

The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 December 2024.

The financial information does not contain all the information that is required to be disclosed in a full set of IFRS financial statements. The financial information for the periods ended 30 June 2024 and 30 June 2023 is unaudited and does not constitute the Group's statutory financial statements for the period.

The statutory audited financial statements for the year ended 31 December 2023 have been filed at Companies House. The auditor's report on those financial statements was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

The interim financial information has been prepared under the historical cost convention unless otherwise specified within these accounting policies. The financial information and the notes to the financial information are presented in thousands of pounds sterling ('£'000'), the functional and presentation currency of the Group, except where otherwise indicated.

The policies have been consistently applied to all periods presented, unless otherwise stated.

Exceptional items

Exceptional items are significant items of income or expense which, because of their size, nature and infrequency of the events giving rise to them, merit separate presentation to provide further understanding of the underlying financial performance of the Group during the period.

Going concern

The Group had cash balances of £8.9m as at 30 June 2024 and an undrawn committed revolving cash flow facility of £10 million and a £20m accordion facility available until April 2027. The facility may be used for general corporate and working capital purposes and for permitted acquisitions.

The Group has prepared forecasts for the period to 31 December 2025 and a range of sensitivities have been run on the working capital model. The directors consider a scenario in which the business will face liquidity issues or breach covenant conditions in respect of facilities is remote. As part of the sensitivity analysis the directors have considered the impact of a reduction in turnover from their principal customer and the impact on working capital and are satisfied that in such a scenario the Group has sufficient liquid resources to restructure and continue as a going concern servicing the remaining customer base. 

In view of the funds and facilities available to the Group the directors consider that there is significant cash headroom in the forecasts and the going concern basis of preparation is therefore appropriate.

1.   Segmental information

Recurring revenue represents the sale of the Group's full vehicle telematics solutions, support and maintenance. Non-recurring revenue represents the sale of hardware, installation and professional services. 

Revenue in respect of the setup, supply of hardware and software installation is recognised at a point in time. Professional services including project management, managed services and support services income is recognised over the period when services are provided.

		Six months ended 30 June 2024	Six months ended 30 June 2023
		£'000	£'000
By type
Revenue recognised at a point in time:
Supply of hardware and installation		10,472	10,811
Revenue recognised over time:
Professional services including project management		2,007	1,221
Managed service agreement income		23,883	20,185
Other support and maintenance services		2,756	1,670
		28,646	23,076
		39,118	33,887
By destination:
UK		36,246	30,661
Rest of Europe		887	472
Rest of the World		1,985	2,754
Total revenue		39,118	33,887

One customer contributed £11.9m and 30% of revenue to the six months ended 30 June 2024 (£12.2m and 36% to the six months ended 30 June 2023).

Due to the nature of revenue, there is not considered to be seasonality in relation to the reported results.

The directors previously considered the Group to comprise two complementary segments in respect of fleet management services (Microlise) and tachograph specific software and analysis services (TruTac). Further acquisitions have since been made, broadening the range of fleet management and compliance services. All acquired businesses have now been transferred and integrated within Microlise Limited including TruTac Limited for which the trade, assets and liabilities were transferred to Microlise Limited on 31 December 2023. The board no longer reviews the results of a distinct TruTac segment and views operations as one business with a focus on areas within this including geographical expansion and selling complementary services to the existing customer base. 

2.   Alternative performance measures

In reporting financial information, the Group presents alternative performance measures (APMs), which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide depth and understanding to the users of the financial statements to allow for further assessment of the underlying performance of the Group. The Group's primary results measure, which is considered by the directors of the Group to represent the underlying and continuing performance of the Group, is adjusted EBITDA as set out below. EBITDA is a commonly used measure in which earnings are stated before net finance income, tax, amortisation and depreciation as a proxy for cash generated from trading.

The group qualifies for large company R&D tax reliefs with the RDEC credit included in other operating income above operating profit and in line with common practice is included in the Group's calculation of EBITDA.

				Six months ended 30 June 2024	Six months ended 30 June 2023
				£'000	£'000
Operating profit before share of associate				512	1,326
Share based payment				520	245
Amortisation of intangible assets that arose from business combinations				1,404	1,080
Depreciation				1,580	1,223
Amortisation of other intangible assets				877	601
Post acquisition restructuring and integration expenses				335	-
Adjusted EBITDA				5,228	4,475

3.   Tax on profit

			Six months ended 30 June 2024	Six months ended 30 June 2023
			£'000	£'000
Current taxation
UK corporation tax			(30)	-
Current period overseas tax			(85)	(62)
Adjustments in respect of prior periods			(48)	1
			(163)	(61)
Deferred taxation
Origination and reversal of timing differences			(212)	(238)
Adjustments in respect of prior periods			49	-
			(163)	(238)
Tax charge on profit			(326)	(299)

The Finance Act 2021 enacted a UK corporation tax rate of 25% applying to taxable profits from April 2023 (19% applicable until March 2023). This has accordingly been applied at 30 June 2023 and 2024 to deferred tax balances.

3.    Tax on profit (continued)

Factors affecting the tax for the period

The tax charge on the profit for the period differs from applying the average standard rate of corporation tax in the UK of 25% (2023: 22%).  The differences are reconciled below:

			Six months ended 30 June 2024	Six months ended 30 June 2023
			£'000	£'000
Profit before taxation			330	1,521
Corporation tax at standard rate			83	335
Factors affecting charge for the period:
Disallowable expenses			233	58
Additional capital super deductions			-	(100)
Other differences including higher overseas tax rates			10	6
Tax charge on profit			326	299

In addition, RDEC credits of £354,000 are included in other operating income for the period ended 30 June 2024 (2023: £255,000).

4.    Earnings per share

		Six months ended 30 June 2024	Six months ended 30 June 2023
Profit used in calculating EPS (£'000)		4	1,222
Weighted average number of shares for basic EPS		115,945,956	115,945,956
Weighted average number of shares for diluted EPS		116,927,513	116,063,069
Basic earnings per share (pence)		0.003	1.05
Diluted earnings per share (pence)		0.003	1.05

There were 5,091,622 unexercised share options in place at 30 June 2024 (2023: 2,709,522) of which 981,557 (2023: 141,509) were potentially dilutive in the period at their nominal exercise price and are included in the weighted average for diluted EPS.

3.   Intangible fixed assets

		Goodwill	Customer relationships	Brands	Technology - business combinations	Total business combination assets	Developed technology products	Software	Overall total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2023		52,778	17,780	2,711	6,422	79,691	4,731	1,091	85,513
Additions		-	-	-	-	-	1,262	-	1,262
Acquisition		1,513	406	-	283	2,202	-	-	2,202
Reclassification		-	-	-	-	-	-	(246)	(246)
At 30 June 2023		54,291	18,186	2,711	6,705	81,893	5,993	845	88,731
Amortisation
At 1 January 2023		-	4,652	756	3,099	8,507	1,664	311	10,482
Charge for the period		-	587	90	403	1,080	530	71	1,681
Reclassification		-	-	-	-	-	-	(27)	(27)
At 30 June 2023		-	5,239	846	3,502	9,587	2,194	355	12,136
Net book value
At 30 June 2023		54,291	12,947	1,865	3,203	72,306	3,799	490	76,595
Cost
At 1 January 2024		54,291	18,186	2,711	6,868	82,056	7,254	864	90,174
Additions		-	-	-	-	-	1,356	74	1,430
Acquisition (note 6)		5,901	1,837	319	1,552	9,609	-	-	9,609
At 30 June 2024		60,192	20,023	3,030	8,420	91,665	8,610	938	101,213
Amortisation
At 1 January 2024		-	5,837	937	3,917	10,691	2,816	439	13,946
Charge for the period		-	685	141	578	1,404	802	75	2,281
At 30 June 2024		-	6,522	1,078	4,495	12,095	3,618	514	16,227
Net book value
At 30 June 2024		60,192	13,501	1,952	3,925	79,570	4,992	424	84,986

Intangible assets have arisen principally on acquisition with a continuing investment in technology and software.

5.    Acquisition of subsidiaries

On 10 January 2024, the company acquired all of the ordinary share capital of Enterprise Software Systems Limited, a leading provider of transport management system solutions to customers in the logistics and retail sectors that are complementary to the existing Group services.

The acquisition had the following provisional effect on the Group's assets and liabilities.

			Book value £'000	Fair value adjustments £'000	Fair value £'000
Intangible assets - customer, tradename, technology			-	3,708	3,708
Property, plant and equipment			1,107	-	1,107
Cash and cash equivalents			4,373	-	4,373
Receivables			1,032	-	1,032
Payables			(3,043)	-	(3,043)
Lease liabilities			(500)	-	(500)
Corporation tax			(68)	-	(68)
Deferred tax			(147)	(927)	(1,074)
					5,535
Goodwill					5,901
Consideration payable					11,436

The cash outflow, net of cash acquired, at the date of acquisition was £6,213,000 with £850,000 of deferred consideration payable in January 2025. The deferred consideration has not been discounted on the basis of materiality.

The intangible fixed assets acquired are in relation to the brand, technology and customer relationships. The brand acquired is valued at £319,000 on a relief from royalty method and with a deemed useful life of 3 years technology acquired is valued at £1,552,000, valued on a cost savings method with a deemed useful life of 5 years. Customer relationships have been valued at £1,837,000 using a multi-period excess earnings method approach, with a useful life of 10 years assumed in line with the existing trends.

The trade and assets of Enterprise Software Systems Limited transferred to Microlise Limited on 31 May 2024.

6.    Transactions with associate

The group holds 20% of the shares in Trakm8 Holdings plc. The £1,000,000 convertible loan advanced to this company in a prior period was originally due for repayment in September 2024 or convertible into a fixed number of shares. In April 2024, the repayment date was extended to September 2025 with interest earned increasing from 12% to 18% and with a revised conversion option at 8.1 pence per share. It is considered that the fair value of the loan continues to be approximately £1,000,000 and the convertible element has no separate material equity value.

 

END