Chief Financial Officer’s review
Robust financial performance funds future growth
Overview of financial performance We have delivered another strong set of financial results. Group revenues increased by 17.9% on a constant currency basis 1 , and at actual rates Group revenues increased by 16.4% (2021: 2.6%); the difference to actual rates was mainly owing to the strengthening of Sterling against the US Dollar. Group revenues excluding the recent IPM acquisition increased by 10.3% on a constant currency basis 1 (8.9% at actual rates). In Assurance, the North American and UK and APAC Assurance businesses grew by 14.6% and 11.8% on a constant currency basis 1 (13.8% and 11.6% at actual rates) and our EU region increased 8.0% on a constant currency basis 1 (2.7% at actual rates). As a result of the acquisition of IPM, Software Resilience revenue grew by 55.1% on a constant currency basis 1 (53.8% at actual rates). However, excluding the acquisition of IPM, Software Resilience revenue declined by 0.6% on a constant currency basis 1 (1.4% at actual rates), mainly due to a decline in UK and US contract revenue performance as terminations were greater than new business sales. Gross profit increased by 19.9% to £132.6m (2021: £110.6m) with gross margin percentage increasing to 42.1% (2021: 40.9%). The margin increase was due to the impact of the IPM acquisition, offset by the underlying gross margin of our Assurance business slightly declining by 0.4% pts, as we invested and grew our technical talent, and a 3.2% decline in our existing Software Resilience business gross margin as a result of the investment in people to return it to sustainable growth. Total administrative expenses have increased by £4.6m compared to the prior year. The main elements were the inclusion of IPM overhead base and integration costs of £7.0m, an increase in the amortisation of acquired intangibles of £2.2m due to the IPM acquisition, people and Securing Growth Together (SGT) investment, recruitment and training of £9.7m, share-based payments of £1.1m, resumption in non-client travel and office costs of £1.6m and a prior year profit on disposal of £0.5m, offset by an increase in current year R&D tax credits of £0.4m, a reduction in depreciation and amortisation of £2.2m, a reduction in foreign exchange of £2.1m and a reduction in Individually Significant Items of £11.8m. Operating profit has increased by 100.6% to £34.7m (2021: £17.3m) following an improvement in gross margin offset by increased administrative expenses noted above. Adjusted operating profit 1 increased by 22.7% to £48.1m (2021: £39.2m). Adjusted EBITDA 1 increased by 12.8% to £59.2m (2021: £52.5m).
Our Group trading performance benefited from a successful and strategically significant acquisition of IPM, strong North America and UK and APAC Assurance growth and a return to growth in H2 for Software Resilience excluding IPM. ”
Tim Kowalski Chief Financial Officer
2021/22 key activities • Acquisition and successful integration of IPM • Continued to demonstrate effective cash management 2022/23 priorities • Finalise the full operational review of the combined Software Resilience division to create additional Group contribution from FY24 of £5m • Effectively manage global inflationary pressures and increase delivered day rates • Maintain strong cash conversion and reduce borrowings
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