Software Circle (SFT) H2 23/24 earnings summary

Executive summary

• Revenue from continuing operations increased 38% year-over-year to £16.2m, driven by full-year contributions from prior acquisitions and new additions, notably Arc Technology Limited and Be The Brand Experience Limited.

• Operating EBITDA rose to £2.8m (17% margin), and adjusted EBITDA reached £1.7m (10% margin), reflecting improved profitability from acquired businesses.

• Recurring revenues grew from 35% to 57% of total sales, with gross margin improving to 63% from 49% year-over-year.

• Net cash position improved to £6.9m from net debt of £16.7m, following a £23.1m equity raise and bond repurchases.

• The company reported a total comprehensive loss of £2.4m, impacted by higher amortisation and exceptional items.

Financial highlights

• Revenue: £16.2m (2023: £12.5m); Operating EBITDA: £2.8m (2023: £1.3m); Adjusted EBITDA: £1.7m (2023: £0.4m).

• Total comprehensive loss: £2.4m (2023: £1.6m); EPS: -0.9p (2023: -1.4p).

• Cash generated from operations: £2.6m (2023: £0.3m); Cash and equivalents: £15.4m (2023: £2.0m).

• Net cash: £6.9m (2023: net debt £16.7m); Operating cash flow per share: 0.6p (2023: -0.1p).

• Gross margin: 63% (2023: 49%); Operating EBITDA margin: 17% (2023: 11%).

Outlook and guidance

• Focus remains on deploying remaining capital to acquire further VMS businesses, targeting annualised sales of £25m and an aEBITDA run rate of 15-20% of sales.

• Plans to restructure the balance sheet and redeem remaining £6.7m of bonds to enable access to institutional debt and reduce cost of capital.

• Cautiously optimistic for the upcoming year, with annualised sales run-rate at £18m and aEBITDA target of 12-15% of sales.