Continued growth


Continued growth

Growth and investment

Our growth journey continued through FY20, with order intake levels increasing by more than 30% and year-on-year revenue increasing by 6.5% to £13.2m. Furthermore, our order backlog as we entered FY21 was more than 80% higher than it was at the start of FY20. Significant investment ahead of this and future growth impacted profitability, with our normalised pro forma EBITDA decreasing to £0.9m.


Increasing revenue in FY20 by 6.5% to £13.2m continued our growth journey through our third year, albeit at a slower rate than that delivered in our first two years. All growth delivered in FY20 was organic and it was encouraging that the higher margin services revenue generated from our Incrementalists, which accounts for more than 80% of our overall revenue, grew by 10% in the year. In contrast, other revenues marginally declined as large perpetual licence sales and maintenance agreements continued to give way to recurring subscription licences; a key source of annuity revenue.

Organic revenue growth reflected a healthy mix of deepening relationships with existing customers and the addition of 60 new customers starting out on their transformation journey, which has enabled us to continue the diversification of our geographic footprint across the UK and deepen our experience in our core markets.

The confidence from delivering organic revenue growth of more than 50% per annum in our first two years, spurred us to make significant investment in both our delivery and sales teams as we kicked off FY20. This investment was a key component of the strategic shift to a cellular business model that saw us create five individual business units to facilitate and drive continued organic growth. As well as further investment in our delivery capacity, expanding leadership, governance and sales capability to support the new structure required a significant step up in our overhead base.

With hindsight, aspects of the strategic shift at the outset of FY20 did not provide the anticipated return through the year. Identifying and recruiting new sales resources and the ramp in period for them to start achieving quotas took longer than we had expected. This manifested in the timing profile of our order intake being weighted towards the second half of FY20, notwithstanding that uncertainties and delays in respect of Brexit also influenced the timing profile in the first half of the year. While our order intake was significantly up year-on-year, a large element of this could not be delivered in-year; limiting our FY20 revenue growth but resulting in a substantial increase in order backlog ahead of FY21.

The cellular model is the correct approach for driving and delivering organic growth but the FY20 pace of growth did not support five separate business units and the accompanying infrastructure and cost base. We undertook an organisational restructure in the second half of the year to consolidate the business into two business units. This completed before the end of FY20, providing a platform of two robust business units with strong leadership in place to drive performance and growth through FY21.

The curtailed revenue growth experienced because of the delayed order intake pattern also impacted profitability as we invested ahead of the anticipated growth to expand our delivery capacity in late FY19 and into early FY20. After normalising direct delivery costs for non-recurring items and the pro forma impact of the restructuring actions, maintaining an underutilised delivery capacity until the order intake growth arrived in the second half of the year resulted in our gross margin dipping.

Investment in the required leadership, governance and sales capability to support our five business unit structure resulted in a substantial increase in our overhead base during FY20, however, a large proportion of this increased cost was subsequently removed. After normalising for non-recurring charges and the pro forma impact of the restructuring actions, the underlying year-on-year increase in the overhead base was 15%, reflecting our net investment for future growth.

Our operating loss is clear evidence that the significant organisational change and subsequent restructuring to refine that strategic gear change has had a substantial short-term cost on our profitability. Nonetheless, removing exceptional items1 from the operating loss shows a normalised pro forma EBITDA profit of £0.9m; a lower EBITDA margin than FY19 that reflects the net investment for future growth, including the FY21 delivery of the significantly increased order backlog.

FY21 and beyond

Having experienced a challenging FY20, our timely and decisive actions to revisit and evolve the cellular business model positions us well as businesses accelerate their digital transformation plans to help them succeed in the post-Covid environment.

Our new organisational structure is delivering well in early FY21. Both business units are now established, and the overall business is performing significantly better in both revenue and EBITDA compared to the same period last year. This performance is ahead of our budget set before Covid-19 hit the UK. Achieving this budget will see us return to double-digit revenue growth and EBITDA margins.

Our ambition therefore remains unchanged – creating more than 600 highly skilled jobs and growing revenues to more than £75m. The organisational restructuring undertaken in FY20 will drive continued and accelerated organic growth but also positions and strengthens the business for a return to acquisitive growth in FY21.

In previous years we have successfully acquired and integrated organisations. We expect to acquire complementary organisations again in FY21 that will increase our capability and capacity. We are focused on ensuring that these acquisitions are conducted in a controlled manner and our cellular business model will help ensure that these acquisitions can be undertaken with minimal interruption to the wider organisation.

1 Exceptional items comprise costs and charges in relation to (i) restructuring; (ii) an onerous lease; (iii) a change in accounting estimate; and (iv) share options, together with the pro forma impact of such costs being removed from FY20.