Ingenta plc

(the 'Group' or the 'Company')

Final Audited Results

Ingenta plc (AIM: ING) a leading provider of software and services to the global publishing industry, announces its final audited results for the year ended 31 December 2022.

Financial Key Points

·      Revenue increased 4% to £10.5m (2021: £10.1m).

·      Annual Recurring Revenue (ARR)* of £9.0m representing 86% of total revenue (2021: £8.9m, 88%).

·      Operating cash inflows increased 25% to £2.5m in the year (2021: £2.0m).

·      Cash balances at year end of £2.4m (2021: £3.0m). The adjusted cash balance prior to share purchase costs was £4.6m (2021: £3.3m).

·      Completion of a £2m tender offer in November 2022 comprising 1,796,484 shares at a tender price of 115 pence (2021: 440,826 shares purchased for £315,771).

·      Adjusted EBITDA** increased 33% to £2.0m (2021: £1.5m).

·      Net profit of £1.5m*** (2021: £1.8m).

·      Full year dividend increased 15% to 3.45 pence (2021: 3.0 pence). Proposed final dividend of 2.25 pence per share, subject to shareholder approval at the 2023 AGM (2022: 2 pence).

·      Earnings per share of 9.02 pence (2021: 10.93 pence). The earnings per share has been impacted by a tax credit of £0.3m in the year (2021: £1.1m).

Operational Key Points

·      Two Customers transitioned along a defined upgrade path from Ingenta Connect to Edify. The product upgrade path allows customers to add functionality to their software as they grow and evolve over time.

·      Expertise and success in offering managed and hosting services in our Commercial unit is being rolled out across the business. These services incorporate a wider remit over a customer's technology environment and management of the Ingenta application.

·      Expansion of sales and marketing efforts with a focus on leveraging revenue gains made in 2022. The Group will be adding key skills and experience to the existing teams in order to improve sales conversion rates in strategic markets.  

Current trading

·      Strong trading in early 2023 as a number of key projects complete, generating growth in revenues and profit over the prior period.

·      Revenue growth is being driven by existing customers, with extended sales cycles persisting for sales to new customers.

·      New Canadian media customer added to the Commercial customer base. This addition further widens the reach into new vertical markets for the Group's intellectual property management solutions.

* ARR - Revenue generated and recognised in the year from annually recurring software support contracts, hosting services and managed services.

**Adjusted EBITDA - EBITDA before impairment, gain / loss on disposal of fixed assets, foreign exchange gain / loss and exceptional non-recurring costs. See note 2 for details.

***Net profit in 2022 includes a £0.3m deferred tax credit movement (2021: £1.1m).

Scott Winner, Chief Executive Officer, commented:

"After all the hard work remodelling the core functions of the business, and revitalising our product suite, I am extremely pleased to report on a full year of revenue growth. These changes were fundamental to not only allow us to grow but to do so profitably and the numbers released today are a testament to that. However, this is only the beginning, and we are now fully focussed on delivering success in 2023.

Our Intellectual Property management solutions and web-based content platforms will be central to driving growth, augmented by our proven expertise in offering wrap around technology and resource services to customers who no longer wish to service Ingenta's applications themselves.

Diversification of our markets remains an important part of our sales and marketing strategy, and I am pleased to report we will be expanding our teams to capitalise on the momentum achieved in 2022."

Certain of the information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

For further information please contact:

Ingenta plc

Scott Winner / Jon Sheffield                              Tel: 01865 397 800

Cenkos Securities plc

Katy Birkin / Callum Davidson                          Tel: 020 7397 8900

Chairman's statement

Overview

2022 has been a significant year for the Group, in that it layers revenue growth onto the previously reported successes made in streamlining and optimising operations to drive efficiency. These results are enormously encouraging given the uplift in all our key profitability measures and give a hint of the potential for the business going forward. The revenue growth demonstrates the resonance of our offering with customers and provides further insight into future opportunities.

Within the Commercial business, growth has been driven by our wrap around service offering which is designed to take technology and resourcing concerns away from customers and allow them to concentrate on their core activities. Examples of this include our expertise in deploying tailored hosting environments for our software solutions. This has been a real success story and has been taken up by several key customers, and we hope more will follow. Furthermore, we have also supplied additional recurring managed services resource to take on peripheral technology routines and services to support the customer's chosen deployment. Looking forward, although some of these activities are already prevalent in the Content business, we have identified opportunities to cross sell the managed service offering to target specific data management and reporting routines customers seek to outsource.

The Content business had a slightly different flavour of success in 2022. Here, we industrialised the upgrade path of our solutions and successfully migrated two significant Ingenta Connect customers onto our enterprise focussed Edify solution. This is an important opportunity for the Group as it allows our customers to grow with us, adding features and functionality at a time that suits them. In addition to these upgrades, the Content business also added a new US customer within the wider trade organisation space and this diversification away from traditional publishing markets towards trade associations and NGOs remains a strategic objective for the Group.

Shareholders' returns and dividends

Ingenta successfully returned £2.07m of cash to shareholders by way of a tender offer completed in November 2022. A total of 1,796,484 Ordinary shares were repurchased and cancelled at a fixed price of 115 pence. The Group also paid an interim dividend of 1.2 pence per share (2021: 1 pence) and the Directors declared their intention to pay a final dividend of 2.25 pence per share (2022: 2 pence) subject to approval at the forthcoming AGM. The Board remains committed to generating shareholder value by a combination of capital appreciation, share buybacks and dividend payments.

Outlook

The results for 2022 have demonstrated the Group's ability to leverage its sound fundamentals and drive returns for all stakeholders. In that respect, I'm pleased to report that the business has stepped up its activities in business development and is enhancing its sales and marketing teams to build on 2022's growth. The Group believe this growth will be driven by its Content and Commercial business units which offer a broad spectrum of products and services which are applicable to both new and existing customers. Additionally, the target markets are widening as an increasing number of organisations look to better manage their intellectual property and our sales pipeline activity fully reflects this.

M C Rose

Chairman

10 May 2023

Financial review

Business Strategy

Ingenta is a provider of mission critical software and services to the publishing sector, with growth aspirations in adjacent industries. Operationally, the Group has moved to a product agnostic services architecture enabling it to offer an integrated approach to servicing customers whereby service levels and software are standardised, and as a result, resources are utilised more efficiently. The Group's focus is to accelerate growth in recurring revenue via the sale of software as a service wherever possible.

Product review

Ingenta Commercial

Ingenta Commercial provides a variety of modular publishing management systems for both print and digital products. A core area of expertise is within Intellectual Property and the Group is looking to leverage its existing expertise in contracts, rights and royalties management by expanding into adjacent verticals. The Group's conChord solution is designed for the music industry and has already been deployed and we believe there are further opportunities in other verticals where IP management is an increasing concern for customers.

Reported revenues increased by £0.6m to £7.3m (2021: £6.7m) driven by the increased uptake of hosting consultancy services and the Group's managed service revenue stream which aims to provide peripheral support for customers wishing to outsource internal IT activities. As anticipated, this increased the proportion of revenues that are recurring in nature from £6.1m to £6.4m. Adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA - see note 2) increased from £0.78m to £1.62m. This marked improvement has been achieved via a number of factors. Firstly, operations have been optimised so that activities can be completed as efficiently as possible. Furthermore, improvements have been made to reduce the support burden which had been evident in prior years. Also, as mentioned in the Ingenta Content section below, there was a review and reallocation of group costs relating to each business unit's consumption of cloud based infrastructure.

Ingenta Content

The Ingenta Content suite of products enable publishers of any size, discipline or technical proficiency to convert, store, deliver and monetise digital content on the web.

Annual revenue decreased slightly from £2.4m to £2.3m largely as a result of new sales taking longer to convert in 2022. Two of the three new implementation projects only started earning revenue in Q4 although this will add to reported revenue in 2023. Importantly, two of the new implementations were upgrade projects for existing customers wanting to migrate from Ingenta Connect to Edify which ensures the Group can accommodate its customers as they grow. Adjusted EBITDA (see note 2) decreased from £0.5m to £0.2m and was a result of the lower new sales and a reallocation of group costs relating to shared cloud infrastructure.

Ingenta Advertising

Ingenta Advertising provides a complete browser-based multimedia advertising, CRM and sales management platform for content providers.

The business anticipates that the Group's Advertising offering will become a component of the larger Commercial and Content Products divisions and, in time, its revenues will be less clearly distinguished as a separate CGU. Revenue declined to £0.6m (2021: £0.8m) as project work was restricted in the year as customers held back on system enhancements due to economic uncertainty. Adjusted EBITDA for the advertising division (note 2) decreased marginally from £0.24m to £0.16m, largely as a result of declining revenue.

PCG

The PCG consulting arm provides a range of non-software services designed to support and drive a business's sales strategy. Strategically, the team's skills are being increasingly used to drive sales pipeline for the wider Group in addition to their own customer portfolio work.

Annual revenue was stable at £0.3m (2021: £0.3m). The division's business is driven from sales commission and retainer fees both of which remained consistent over the periods. As expected, adjusted EBITDA (note 2) was stable at a loss of £0.1m. The Group's policy is to make use of PCG resources to enhance the wider Group marketing function in order to improve sales pipeline growth across the business. Going forward, it is envisaged that PCG and Advertising will no longer be reported as separate business units and will fold into Ingenta Content and Ingenta Commercial.

Financial Performance

Group revenue increased to £10.5m (2021: £10.1m) with the recurring element calculated at £9.0m or 86% (2021: £8.9m and 88%). Although revenue has increased, the Group's cost of sales declined from £5.5m to £5.3m as the previous actions taken to streamline operational efficiency became fully functional. Consequently, gross profit increased to £5.1m (2021: £4.7m).

Sales and marketing spend was stable at £0.7m but is expected to increase in 2023 as the Group seeks to build on the sales momentum achieved this year. Administrative costs have also remained broadly stable at £3.2m helping deliver profit from operations of £1.2m (2021: £0.8m).

No significant tax charge is anticipated for 2022 as the Group continues to utilise brought forward tax losses. Going forward, the Group estimate they will be able to use £15.4m and $6.7m of the available tax losses in the UK and US (see note 8 for further details). Additionally, the Group's assessment of its deferred tax asset relating to these losses increased, generating a tax credit in the year of £0.3m (see note 3 for further details).

Financial Position

Non-current assets include goodwill and intangibles recognised on historic acquisitions. In 2022, Goodwill relates solely to the core Content platform software which will be used to drive growth in the future. Goodwill relating to historic acquisitions is tested for impairment each year using discounted cashflows. No impairment was identified in 2022. Property, plant and equipment reductions are a direct result of the Group's infrastructure strategy which has seen the Group leverage more Cloud based services and reduce its physical business premises. The Group's deferred tax asset has also been recalculated and increased based on the current assessment of trading performance and utilisation of available tax losses.

Current assets have decreased from £4.8m to £4.2m. This reduction in current assets is due to lower year end cash balances after using approximately £2.2m on the tender offer which partially offset strong operating cash inflows of £2.5m.

Total liabilities have increased from £4.6 to £4.9m driven by increased deferred revenue in the year. Deferred revenue increases relate to additional invoiced Ingenta Commercial project work which will be recognised in 2023.

Cashflow

The Group performed strongly generating a cash inflow from operations of £2.5m compared to £2.0m in 2021. The Group restructuring has improved efficiency and margins which flows through to cash generation. Additionally, significant historic leasing commitments are nearing completion which benefited cashflow, and will have further incremental benefits in 2023. Outside of normal operational activity, the Group has paid dividends of £0.5m (2021: £0.4m) and completed a share repurchase which amounted to an outflow of £2.2m (2021: £0.3m). Closing cash balances were £2.4m (2021: £3.0m)

Key Performance Indicators

The Board and senior management review a number of KPI's continually throughout the year, all of which form part of the monthly management accounts process and include:

·      Revenue versus budget and monthly reforecast

·      Adjusted EBITDA (see note 2 for calculation) versus budget

·      Group cashflow versus budget

·      Sales pipeline growth and conversion analysis

·      Time utilisation statistics

Any deviations or anomalies are investigated by senior management, and corrective action taken where appropriate.

Full year revenues were below budget because of delays in delivering new sales. To try and rectify this, the Group have revisited the sales and marketing plans to strengthen the teams in certain areas and align skills and activity to the opportunities existing in the sales pipeline.

Adjusted EBITDA was higher than budget as the Group delayed staff hiring activity whilst it reappraised its sales and marketing strategy. These plans were firmed up later in the year but execution will not be fully complete until later in 2023.

Year-end cash balances were £0.5m below budget reflecting the unplanned tender offer expenditure only being partially offset by strong operating performance.

The Group monitor sales activity with reference to monthly sales pipeline reports. These reports detail sales opportunities by product with metrics around expected project timelines and revenue recognition estimates so that management can deploy resources adequately to ensure the best chance of success in the bidding process. When any items are removed from the pipeline due to either a successful sale or a lost opportunity, management carry out a detailed analysis to ensure the reasons are understood and any actions required are taken.

The business monitors time utilisation at a contract level to enable accurate pricing decisions to be made ensuring profitable service delivery. Internal development costs are also reviewed to ensure the appropriate effort is spent supporting the products and deliver an effective product roadmap.

Going concern

The core fundamentals of the Group remain strong with cash reserves at the end of March 2023 of over £1.7m and no debt beyond leasing arrangements. The new business structure is now firmly in place allowing profitable operations to continue whilst offering capacity to grow. Management are satisfied that cash is sufficient for the needs of the business based on the cash flow forecast. The going concern review covered the period to the end of June 2024.

Although the threat of Covid has receded, there remains an element of caution in the wider economy that adds uncertainty to financial forecasting and modelling. These cautionary factors include conflict in Ukraine and a pessimistic view of economic activity in the UK. However, at an operating profit level, the Group's results so far in 2023 have been better than budget. In addition, sales pipeline activity is strong and although timing of new sales wins is inherently uncertain, the Board are confident targets are achievable. The Group continues to embrace established flexible working practices which have been successful in mitigating Covid restrictions without any significant impact to services. The Group have no direct customer or supplier relationships in Ukraine or Russia but remain vigilant of any wider impact on the business. The Group has modelled various downside scenarios and consider it appropriate to use the going concern basis to compile these financial statements. Further details on going concern are included in the accounting policies section of the financial statements.

Outlook

After a period of transition, Ingenta have successfully combined revenue growth with operational efficiency. We believe this growth to be sustainable and now spans a broader range of customers in both traditional and adjacent markets. Combined with a fully referenceable product set, and investment in our sales and marketing teams, the Group is increasingly confident that it has the necessary structure in place to capitalise on a growing pipeline of sales opportunities.

J R Sheffield

Chief Financial Officer

10 May 2023

Group Statement of Comprehensive Income

For the year ended 31 December 2022

All activities are classified as continuing

Group Statement of Financial Position

As at 31 December 2022

Group Statement of Changes in Equity

For the year ended 31 December 2022

Group Statement of Cash Flows

For the year ended 31 December 2022

1. Basis of preparation

The nancial information of the Group set out above does not constitute statutory accounts for the purposes of Section 435 of the Companies Act 2006.  The nancial information for the year ended 31 December 2022 has been extracted from the Group's audited nancial statements which were approved by the Board of directors on 10 May 2023.

The nancial information for the year ended 31 December 2022 has been extracted from the Group's nancial statements for that period. The report of the auditor on the 2022 nancial statements was unqualied, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

Whilst the nancial information included in this preliminary announcement has been prepared in accordance with UK adopted international accounting standards ("IASs") in conformity with the requirements of the Companies Act 2006, the International Financial Reporting Interpretations Committee ("IFRIC"), interpretations issued by the International Accounting Standards Boards ("IASB") that are effective or issued and adopted as at the time of preparing these financial statements, and in accordance with the provisions of the Companies Act 2006 that are relevant to companies that report under UK adopted IASs, this announcement does not itself contain sucient information to comply with those IASs. This nancial information has been prepared in accordance with the accounting policies set out in the 2021 Report and Accounts and updated for new standards adopted in the current year.

Items included in the nancial information of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated nancial information is presented in UK sterling (£), which is the Group's presentational currency.

The Company is a public limited company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by the London Stock Exchange.

The principal activity of Ingenta plc and its subsidiaries is the sale of software and ancillary services.

2. Profit from operations

Profit from operations has been arrived at after charging:

An analysis reconciling the profit from operations to adjusted EBITDA is provided below.

Exceptional non-recurring costs include restructuring costs, premises exit costs, non-recurring professional fees and debt write offs.

3. Tax

The Group has unutilised tax losses at 31 December 2022 in the UK and the USA of £15.4m (2021: £16.3m) and $8.2m (2021: $11.2m) respectively. These losses have been agreed with the tax authorities in the UK and USA. The Board intends to make use of all losses wherever possible.

Some of the US tax losses are restricted to $491K per annum as a result of change of control legislation. Losses carried forward from the change of control in April 2008 are restricted and must be used within 20 years. The Board believes the Group will be able to make use of $6.7m (2021: $7.4m) of the total unutilised losses at 31 December 2022.

No deferred tax has been recognised in accordance with advice from US tax accountants on the basis that the US losses are restricted and there is uncertainty on the value of losses which will be able to be used.

From 1 April 2023, the corporation tax rate applicable to companies with taxable profits above £250,000 will be 25 per cent. Companies with profits below £50,000 will, however, continue to pay tax at the current rate of 19 per cent. Those with taxable profits between £50,000 and £250,000 will benefit from marginal relief, similar to that which applied before the previous incarnation of the small companies' rate of corporation tax was abolished with effect from 1 April 2015.

The differences are explained below:

United Kingdom Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the year.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

4. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive ordinary share options. Management estimate 145,535 ordinary shares will be issued (2021: 669,578) in respect of share options. In the current year, this calculation would have an antidilutive effect on earnings per share so has been ignored.

Dividends

On 30 August 2022 the Company paid a final dividend of 2 pence per share for the year ended 31 December 2021. On 4 November 2022 an interim dividend of 1.2 pence per share was paid in respect of the year ended 31 December 2022.

After the year end, the Directors declared their intention to pay a final dividend of 2.25p for the year ended 31 December 2022, subject to approval at the forthcoming Annual General Meeting.

5. Share capital

There is one class of ordinary shares and holders are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholder meetings.

Share transactions

During the year, the Company purchased 1,796,484 shares at a tender price of 115 pence. The shares were subsequently cancelled (2021: the Company purchased 440,826 shares for £315,771 which were retained as treasury shares). There were no shares issued during the year (2021: None).

6. Publication of non-statutory accounts

The financial information set out in this announcement does not constitute statutory accounts as defined in the Companies Act 2006.

The Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Equity, Group Statement of Cash Flows and associated notes have been extracted from the Group's 2022 statutory financial statements upon which the auditor's opinion is unqualified and which do not include any statement under section 498 of the Companies Act 2006.

Those financial statements will be delivered to the Registrar of Companies following the release of this announcement.

This announcement and the annual report and accounts, including the Notice of Annual General Meeting, are available on the Company's website www.ingenta.com. A copy of the report and accounts will be sent to shareholders who have elected to receive a printed copy with details of the annual general meeting in due course.