REG - Mind Gym PLC - Final results for the year ended 31 March 2024
17/06/2024 07:15
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RNS Number : 5873S Mind Gym PLC 17 June 2024
Mind Gym PLC
("MindGym", the "Group" or the "Company")
Final results for the year ended 31 March 2024
Improvement in performance in second half with a new strategy for medium term
growth and profitability
MindGym (AIM: MIND), the global provider of human capital and business
improvement solutions, announces its audited results for the year ended 31
March 2024.
Results summary
12 months to 31 Mar 2024 (FY24) 12 months to 31 Mar 2023 (FY23) Change
Revenue £44.9m £55.0m -18%
Gross profit margin 86.2% 88.4% -220 bps
Adjusted EBITDA profit/ (loss) £(0.3m)(1) £5.3m -106.5%
Statutory profit/(loss) before tax £(12.1m) £3.0m -507.2%
Diluted EPS (adjusted) (4.25p)(1) 2.84p -7.09p
Diluted EPS (unadjusted) (10.86p) 2.84p -13.7p
Cash (used in)/ generated from operations £(3.1m) £4.4m -£7.5m
Cash at bank £1.4m £7.6m - £6.2m
Capital expenditure £4.2m £5.1m -18%
( )
( )
(1) Adjusted results exclude the impact of £8.9m of exceptional costs
incurred in the period
Financial and Operating highlights
· Market dynamics resulted in a challenging FY24, particularly in
Q2; revenues of £44.9m were down 18% on FY23 (£55.0m):
o Macroeconomic headwinds affected confidence in key sectors, including tech
(especially in US) and consumer/manufacturing companies who are dependent on
global supply chains
o Increased caution on HR budgets has affected the buying cycle, with more
client stakeholders needed to sign off budgets:
§ growing requirements for pilots to establish proof of concept first
§ fewer big-ticket requests for proposal
o There has been increased competition for client budgets resulting from
unprecedented investment in HR platforms and technology in recent years
o The market has seen a material decline in client spend on DEI, a
significant revenue stream for MindGym, particularly in the US; this
contributed to the 32% US revenue decline vs prior year
o EMEA performance was broadly flat on prior year
· Significant cost reduction plan implemented providing greater
operating resilience; profitability was restored in H2:
o Annualised reduction of more than £11m across operating and capital
expenditure implemented in FY24, notwithstanding some reinvestment in
leadership and marketing capability. This contributed to:
§ Adjusted operating expenditure (excluding exceptional items, depreciation
and amortisation) of £39.1m, down 10% on FY23 (£43.4m)
§ Capital expenditure of £4.2m, down 17.5% on FY23 (£5.1m)
§ Capital expenditure in H2 reduced to £1.2m from £3.0m in H1 (59%
half-on-half reduction)
o Return to adjusted EBITDA profitability in H2:
§ Full year adjusted EBITDA loss of £0.3m (FY23: profit of £5.3m), was
comprised of an H1 loss of £4.1m, largely offset by a profit in H2 of £3.8m
o Exceptional costs of £8.9m, comprised the following items:
§ Digital asset impairment - £6.6m
§ Non-cash impairment of lease on US Office - £0.5m
§ Restructuring costs - £1.8m
o Loss before tax of £12.1m (FY23: profit of £3.0m), driven by reduced
revenue and the impact of the exceptional costs
· MindGym retains sufficient cash and liquidity:
o At 31 March 2024, the Group had cash of £1.4m (FY24: £7.6m), which was
stable vs December 2023 (£1.2m)
o Entered FY25 with a significantly reduced run-rate of operating and
capital expenditure
o The Group retains access to a £2m undrawn loan facility
Board evolution
· Appointment of Christoffer Ellehuus as CEO as part of planned
succession (joined in January 2024)
· Octavius Black transitioned to Executive Chair with
responsibilities focusing on increasing MindGym's market presence, further
development of thought leadership and building relations with major clients
New strategy for growth and profitability making MindGym solutions easy to
buy, easy to deliver, and easy to renew
· New strategy for growth and profitability outlined in CEO report
with a focus on evolving MindGym from being a provider of individual
behavioural change programmes to becoming a strategic behavioural change
partner for CHROs. The strategy is built on 2 components:
o Short-term: Focus on commercial execution; laying the foundations for
sustained growth
o Medium-term: Packaging IP, products, and data to scale the business for
accelerated growth
Current Trading and Outlook
· FY25 will be a year of recalibration as we implement the new
strategy which will return MindGym to its historic performance levels
· Whilst it will take time before the full benefit of this new
strategy is realised, the Board expects EBITDA profitability and cash
generation in FY25
· The opportunity for MindGym in a highly fragmented $80bn Human
Capital Advisory market is as compelling as ever
· In the medium-term, the Board is therefore confident that the
business will deliver revenue growth in excess of 10% CAGR, with EBITDA
margins between 15% and 20%
Christoffer Ellehuus, Chief Executive Officer of MindGym, said:
"I believe that we have all the right foundations for future growth: strong
client relationships, innovative solutions, and a very talented team. I am
excited about leading MindGym forward on a path of profitable, sustainable
growth, profitability making MindGym solutions easy to buy, easy to deliver,
and easy to renew."
The Company will host a webcast and conference call for analysts and investors
at 9:00am BST today. If you would like to attend the webcast and conference
call, please contact mindgym@mhpgroup.com (mailto:mindgym@mhpc.com) .
Enquiries
Mind Gym plc +44 (0) 20 7376 0626
Christoffer Ellehuus (CEO)
Dominic Neary (CFO)
Liberum (Nominated Adviser and Broker) +44 (0) 20 3100 2000
Nick How
Edward Mansfield
MHP (for media enquiries) +44 (0) 20 3128 8100
Reg Hoare mindgym@mhpgroup.com
Katie Hunt
Veronica Farah
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated by the Market Abuse Regulation EU
no.596/2014, as it forms part of the UK law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"). Upon the publication of this announcement
via Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
About Mind Gym
Mind Gym is a company that delivers business improvement solutions using
scalable, proprietary products which are based on behavioural science. The
Group operates in three global markets: business transformation, human capital
management and learning & development.
Mind Gym is listed on the London Stock Exchange Alternative Investment Market
(ticker: MIND) and headquartered in London. The business has offices in
London, New York and Singapore.
Further information is available at www.themindgym.com
(https://protect.checkpoint.com/v2/___http:/www.themindgym.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzpkNDA5NTRiMDJhNmY0MjA0M2EzZjQ3ZTVhNmVhNDg4MDo2OjVlMmY6M2U5MGUzNTlkYzhlNDI0OTE2YTEyMDNhODRmZjE0NzY3MGEzZGY5OTkwOGQ0MmNkY2IxN2EyYjQwNzRiMTAzZDpwOlQ)
Statement of the Executive Chair
Over the past 23 years, MindGym has built a reputation as a global leader,
advising many of the world's most ambitious companies on how to harness the
soft power of their talent to deliver hard business results.
Our research has led the market, our portfolio of live products has been
adopted in c.50 countries with 4 million people, and our loyal clients stay
with us for many years, consistently accounting for between 80% and 90% of
annual revenue. We have won countless awards for our client partnerships to
deliver lasting impact.
What happened in FY24
Even so, we were unable to escape the headwinds that have been felt widely
across HR services. Business leaders are giving greater scrutiny to HR
investments which has extended buying cycles and, in some cases, recalibrated
overall spend. For example, during the year we won a number of large projects
only for our HR client to then discover that their budget had been altered and
so the scope needed to be reduced or the programme postponed.
In addition, unprecedented investment in HR platforms and technology in recent
years has created a more crowded market for HR services. While clients are
increasingly disenchanted with the low employee take-up and negligible impact
of many of these new platforms, this temporary growth in new offers increased
competition for HR budgets.
These trends, combined with a change in priorities, including a significant
reduction in DEI investment, (which particularly impacted our US business),
resulted in a year-on-year revenue reduction of 18%.
We acted swiftly to reset the cost base of the business in response to the
sudden reduction in revenue. In this context, I am pleased with the improved
financial performance during the second half of FY24, largely mitigating the
losses from the first half and delivering an H2 EBITDA margin closer to the
historic norm.
While the market turbulence and corresponding client caution may continue into
FY25, we are seeing a return to client demand both for leadership programmes
and integrated solutions with a significant live, both in person and virtual,
element. This plays to MindGym's signature strengths.
Our investment in technology
We made a commitment to invest in new technology, some of which has created
new avenues for growth.
Our new one-to-one coaching platform, Performa, was chosen by Burberry to
replace their existing coaching platform and went on to win the Brandon Hall
Excellence Award for 'Best Advance in Coaching and Mentoring'.
Our new diagnostic platform provides the basis for our emerging diagnostics
business with a number of new clients in the year and significant opportunity
for growth.
In response to the downturn in revenue, however, several of our other digital
product investments were stopped. This resulted in an impairment of £6.6m in
the period.
Digital revenues, including SaaS style services, currently account for 10% of
revenue. We continue to explore ways to embed elements of our existing
technologies, as well as AI, into our existing solutions and create a model
that is set up for easier renewal.
A new era for MindGym
The most significant news this year is the appointment of a new CEO. In
January 2023, I asked the Board to look for my successor and I'm delighted
that we found an excellent candidate in Christoffer Ellehuus, who joined the
company in January 2024 as CEO Designate and formally became CEO and a member
of the Board in April 2024.
Christoffer comes to MindGym with a track record of successful commercial,
product and digital leadership in our market, both in leading divisions of
major advisory businesses as well as CEO of a smaller global learning
business. Christoffer has worked and lived in both the US and EMEA and so
understands our core markets well.
The immediate priority is commercial execution. This requires taking MindGym's
remarkable proprietary IP and unique blend of live, virtual and digital
experiences and data, and making MindGym's proposition easier to buy, easier
to sell and, in due course, easier to renew. The simplification that
Christoffer is leading will help shorten the buying cycle and demonstrate the
commercial value of HR investments to business leaders.
At the same time, we will build what we have currently termed the 'Rosetta
Stone for behavioural change'. This will use primary data from MindGym,
combined with our clients' metrics, to advise business leaders on how to
invest in their talent to deliver the greatest impact on business performance.
This will give clients the opportunity to take a much more integrated and
data-driven approach to maximising human performance, with MindGym at the
core.
The Board
Following Christoffer's transition to the CEO role, I am excited to take on
the mantle of Executive Chair. In this role I will remain fully engaged with
the business with particular focus, beyond chairing the Board, on promoting
MindGym in the market and building our relationships with the leaders of many
of the world's most ambitious companies, I will also remain involved with
identifying emerging market trends and the development of MindGym's new
pioneering human capital solutions.
As a result of these changes, Ruby McGregor Smith stepped down from the Board
and her role as Chair in April, slightly ahead of the planned end to her
tenure at the AGM in July. I'm immensely grateful to Ruby for her sterling
service as Chair of MindGym, helping steer us through the external turbulence
of COVID, the uncertainty due to the conflict in Ukraine and the
cost-of-living crisis. She has been a very supportive partner throughout these
challenging times.
The search for a new Independent Non-Executive Director has now commenced and
an update will be provided in due course.
As previously communicated, Joanne Cash has continued in her role as
Non-Executive Director but is not seeking reappointment at the AGM in July
2024. I'm profoundly grateful for Joanne's guidance over the last 15 years
and, in particular, her role as Chair in taking MindGym through its successful
IPO. MindGym would not have become what it is without her.
ParentGym
MindGym has a strong track record with all our stakeholders. In 2009, we
launched ParentGym, a programme providing free training to parents of children
aged 2-11, and in FY24 we ran sessions for c.1,200 families with the aim of
helping them to grow the next generation. This was an increase of over 30% on
the number of families we supported in FY23. We also continued our partnership
with the Prison Advice and Care Trust (PACT), running a bespoke programme to
support parents in prison and their families. In FY25 we aim to further
increase the number of families with support through our six-week programme,
in addition to exploring our digital strategy to reach a wider audience of
parents.
Dividend
No dividend has been paid or proposed for the year ended 31 March 2024. The
Board will continue to keep the appropriateness of dividend payments under
periodic review and will provide an update at the time of the H1 FY25 interim
results announcement.
Outlook
The changes we have made to realign the cost base mean that we will be
profitable and cash generative in FY25 which will be a year of recalibration
as Christoffer implements his strategy to make it easy to buy, easy to sell
and easy to renew MindGym Solutions.
This will bear fruit in FY26 and beyond, taking us, in the medium term, back
to our historic double-digit revenue growth and margins.
The opportunity for MindGym in the highly fragmented Human Capital market is
as compelling as ever. With our new CEO and his focus on both commercial
execution and building the 'Rosetta Stone' for behavioural change, the
business is positioned well to capitalise on its future opportunities.
Octavius Black
Board Chair
14 June 2024
CEO's review
FY24 Review
FY24 was a challenging year for MindGym in common with the vast majority of HR
services providers.
In this market, EMEA revenues remained flat while US saw significant decline.
The US market has been challenging for MindGym since COVID. MindGym has a
strong offer in DEI which has been a significant part of US revenue (but less
so in EMEA). There was a slight decline in demand for DEI during FY23 which
was followed by a much more significant drop in FY24.
MindGym's brand awareness is also lower in US, which is a larger and more
crowded market. Investments in digital marketing capability and building the
right mix of skills in our US team will position the business for sustainable
future growth, but it will take time for the impact of these to be seen in
higher revenue.
In response to the decline in revenue, management acted quickly to reset the
cost base of the business and improve cash and liquidity. This resulted in an
annualised reduction of more than £11m in operating and capital expenditure,
which was partially made possible by the investments in global operations that
the business has made over the past 18 months.
The impact of these changes, coupled with half-on-half revenue growth, was
seen in improved second half performance in FY24. The full year adjusted
EBITDA loss of £0.3m (FY23: profit of £5.3m) was comprised of a loss of
£4.1m during H1 and a profit of £3.8m in H2.
Market opportunity:
The $320bn Learning and Development market is vast and highly fragmented.
Within this MindGym's core markets of Leadership and Interpersonal Skills will
represent c. $80bn in 2025.
The increasing speed of technological developments such as AI, coupled with
geo-political and economic uncertainty, mean that the workplace is changing at
a faster rate than ever before. As a result, CEOs recognise the need for
investment in their leaders, people and culture, to create adaptable and
resilient organisations that can perform during uncertainty.
Despite the size of the opportunity, the Learning and Development market
remains highly fragmented, with a high number of suppliers who often provide
overlapping solutions, many of which do not yet deliver promised utilisation
and return on investment for clients.
MindGym's strength in IP, coupled with our ability to deliver highly engaging
learning experiences using both live and digital components complemented by
data and diagnostics, positions the business well for success.
Building on strong foundations:
Since joining the company in January 2024, I have had the opportunity to spend
time with clients and our teams in both Europe and the US. My overall
impression, based on my 25 years of experience in this market, is that we have
a strong and loyal client base, competitive IP and products, and an amazingly
competent and passionate team. In short, we have a strong foundation from
which to grow and scale the business, but we need to focus on
commercialisation.
Here are my top observations as it relates to the strengths and opportunities
for the business:
Clients: I have been hugely impressed by the loyalty and advocacy of MindGym's
client base. Our client feedback scores remain exceptionally high; 85% of new
sales come from existing or past clients due to the previous positive
experience they had with MindGym solutions and the quality of our content, and
we are deeply committed to customer-centric innovations that we can package
and scale to the broader MindGym client base.
Our people: I am immensely grateful to all the highly competent and passionate
colleagues at MindGym. There is no doubt that FY24 was a challenging year for
the organisation with significant headcount reductions and changes. However, I
find at the core of MindGym culture a strong passion for our mission and an
equally strong spirit of ingenuity and generosity for our clients and each
other.
Intellectual Property: MindGym has market leading IP on culture, leadership,
and performance based on our 23 years of psychology-based research and data
analysis. This is supported by a proven library of more than 700 assets, tried
and tested with more than 4 million business leaders in c.50 countries. To
enable the next phase of growth, we have an opportunity to integrate all this
research and data into a simpler and more holistic model for behaviour change
that allows us to tie our solutions more directly to client business outcomes
and expand client conversations.
Digital Marketing - go-to-market strategy: MindGym's world-class research
insights form a strong differentiated basis for our market awareness-building
activities through client roundtable discussions, webinars, and events.
However, we lack the digital marketing infrastructure to tap into a
significant pool of previous clients who no longer do business with us and to
expand engagements with existing clients who often only do one smaller defined
project with us currently.
Commercial effectiveness: MindGym has built an impressive library of more than
700 tried-and-tested product assets that our team use to create engaging
solutions for clients. However, there is an opportunity to combine these
product assets into market-facing packages that address common client
challenges, which in turn makes it easier to sell and buy MindGym solutions.
Capability to deliver at scale: MindGym has the ability to deliver both
virtually and in person for clients all around the world. We have a wide
network of certified facilitators and coaches who can deliver our solutions at
scale. However, as many of our clients today also consume Learning and
Development products through human capital and learning platforms, there's an
opportunity for us to further expand our reach by integrating into partner
ecosystems.
Strategy for growth
Based on my observations of the business and the existing strong foundations,
I believe there is a strategic opportunity to take MindGym from the trusted,
but episodical, training provider it is today to becoming a true strategic
behavioural change partner for the world's leading organisations. This vision
will form the foundation for my strategy for growth, which will have two
distinct phases (as outlined in greater detail in the business model and
strategy section of the Annual Report and Accounts):
· In the short term, we will focus on strengthening how we operate
- making MindGym's products easier to buy, easier to deliver, and easier to
renew. This focuses on rebuilding our sales force, improving commercial
effectiveness, and enhancing our digital marketing capability to drive lead
generation with more packaged go-to market messages and solution sets.
· Over the medium term, we will be investing in further
productising and digitising our IP and products as well as enhancing our
diagnostic offering to be able to measure the business- performance impact of
our solutions. This will allow us to expand our strategic and commercial
relationship with clients across multiple behavioural change projects all
anchored in a Unified Behavioural Change Model, underpinned by data.
As we enter FY25, the speed at which we can deliver on this strategic ambition
will of course depend on our ability to generate profit that allows for
investments needed in the product and marketing capabilities referenced above.
Outlook:
FY25 will be a year of calibration as it will take time before the benefits of
the new strategy are realised.
The actions taken during FY24 to reduce the cost base of the business mean
that MindGym enters FY25 in a more resilient financial and operating position;
the Board expects EBITDA profitability in the year and cash generation in
FY25.
In the medium term, the opportunity for MindGym in this highly fragmented
market is significant. The strategy I have outlined will set the business up
to return to revenue growth of >10% p.a. and 15% to 20% operating EBITDA
margins over the medium term.
I believe that we have all the right foundations for future growth potential:
strong client relationships, innovative solutions, and a very talented team. I
am excited about leading MindGym forward on a path of profitable, sustainable
growth.
Christoffer Ellehuus
Chief Executive Officer
14 June 2024
Financial review
Revenue for the year of £44.9m represented a year-on-year reduction of 18%
(FY23: £55.0m), reflecting macro headwinds, greater scrutiny of HR
investments by business leaders and increased competition for client budgets
from the unprecedented investment in HR technology and platforms in recent
years. US performance was particularly adversely impacted by a material
decline in client spend on DEI.
Revenue in H2 of £24.0m (FY23 H2: £28.3m) represented a 15% half-on-half
increase from £20.9m in H1 (FY23 H1: £26.8m).
In response to H1 performance, management reacted to realign the cost base of
the business to ensure that MindGym remains profitable and cash generative.
This involved reducing annualised expenditure by over £11.0m, comprising a
reduction of more than £7m in operating expenditure and a £4m reduction in
capital expenditure.
Circa 50% of the reductions related to lower volumes, with the remaining cuts
being in Technology and Innovation. This meant that several of our digital
product investments were stopped. We continue to explore how to embed this
technology into our existing solutions as opposed to focusing on them as
standalone platforms.
These changes resulted in one-off exceptional charges in the period of £8.9m
comprising of:
- £6.6m digital asset impairment
- £1.8m staff restructuring
- £0.5m impairment of US office operating lease
As a result of both the increase in revenue and the significant cost reduction
programme undertaken during the period, there was a significant half-on-half
improvement in profitability across the period. In H1 there was an adjusted
EBITDA 1 (#_ftn1) loss of £4.1m (FY23 H1: £1.9m profit).
In H2 there was an adjusted EBITDA profit of £3.8m (FY23 H2: £3.4m) - albeit
H2 benefited relatively by circa £1.2m due to lower bonus accrual costs and
bonus accrual releases. This resulted in an overall adjusted EBITDA loss for
the year of £0.3m (FY23: £5.3m profit).
There was a loss before tax for the year of £12.1m, impacted by the
exceptional charges for the period. This compared to a profit in FY23 of
£3.0m.
This loss, partially offset by the resulting tax credit, resulted in an
adjusted diluted EPS of (4.25p) (FY23: 2.84p) and an unadjusted diluted EPS of
(10.86p) (FY23: 2.84p).
The group anticipates cash generation by the end of FY25 and MindGym retains
sufficient and improving liquidity:
· Cash at 31(st) March 2024 was £1.4m (vs. £1.2m at 31(st)
December 2023)
· Liquidity is improving in line with MindGym's 12-month EBITDA;
headroom with the RCF facility will double in H1 FY25 from £2m today
· MindGym's current facility ends in September 2024, at which point
the business intends to switch to a more cost-effective overdraft facility of
circa £4m
· MindGym's $1m annual US lease ends in February 2025
Revenue
Economic headwinds impacting US market
The economic headwinds that impacted performance in the period were most
pronounced in the US, particularly in the technology sector. As a result,
revenue for the US region fell 32% YoY to £21.2m (FY23: £31.3m).
Revenue in EMEA was more resilient, boosted by the major energy framework,
which is receiving strong positive client feedback, and which continues into
FY25.
Year to March 31st 2024 Year to March 31st 2023 Change
Group Statutory View 44,914 55,011 -18%
EMEA 23,729 23,742 0%
US 21,185 31,269 -32%
Continued return to in-person deliveries
Delivery revenues grew proportionally by 710 bps in the period to comprise 67%
of total revenue for FY24. This movement, which was anticipated in the prior
year annual report, was mostly impacted by commencement of the Delivery phase
of the major energy framework contract.
It also reflected a reduction in the proportion of Design and Advisory
(D&A) revenue in the period. D&A revenue typically occurs at the
commencement of larger programmes. This component of revenue was impacted by
the delays we have seen to the commencement of new programmes.
Revenue mix by type compared to previous year
FY24 FY23 % change
Delivery 67.4% 60.3% 7.1%
Design 13.0% 17.2% -4.2%
Advisory 1.5% 1.4% 0.1%
Digital 10.2% 13.1% -2.9%
Licensing and certification 5.0% 5.6% -0.6%
Other services 2.9% 2.4% 0.5%
Total 100% 100%
Year ended 31 March 2024
Revenue type EMEA US Global
Delivery 67.1% 67.8% 67.4%
Design 15.0% 10.9% 13.0%
Advisory 2.1% 0.7% 1.5%
Digital 9.6% 10.7% 10.2%
Licensing and certification 2.2% 8.2% 5.0%
Other services 4.0% 1.7% 2.9%
Total 100% 100% 100%
Year ended 31 March 2023
Revenue type EMEA US Global
Delivery 60.2% 60.6% 60.3%
Design 19.0% 15.7% 17.2%
Advisory 1.7% 1.1% 1.4%
Digital 13.4% 12.8% 13.1%
Licensing and certification 3.3% 7.5% 5.6%
Other services 2.4% 2.3% 2.4%
Total 100% 100% 100%
Gross profit
Gross margin of 86.2% represented a reduction of 2.2% (FY23: 88.4%). This
primarily reflected the shift in product mix, with a reduced proportion of
Design and Advisory work, the costs for which are included within
administrative costs.
The reduction was more marked in EMEA, where the gross margin declined 3.1% to
85.4% (FY23: 88.5%), impacted by the increased proportion of in-person
delivery revenues under the major energy framework.
In US, the gross margin of 87.1% represented a reduction of 1.3% on FY23
(88.4%).
Operating expenditure and profitability
Adjusted administrative expenses, excluding depreciation, amortisation and
exceptional charges were £39.1m in the period. This represented a
year-on-year reduction of 10% (FY23: £43.4m), primarily reflecting the
in-year impact of the major cost reduction exercise.
This resulted in an Adjusted EBITDA loss for the period of £0.3m (FY23:
£5.3m profit), at margin of -0.8% (FY23: 9.6%).
The loss before tax for the year was £12.1m (FY23: profit of £3.0m). This
figure was impacted by £8.9m of one-off exceptional costs, which included
£1.8m of restructuring costs required to deliver the £11.0m of ongoing
expenditure reduction.
Capital expenditure
During the period a major review of digital product expenditure was
undertaken, which resulted in a decision to focus investment on digital assets
that were already revenue-generating, principally Performa and Diagnostics,
and to pause spend on other products.
A proportion of the features and underlying technology built in the
development of these assets on which development was paused will be utilised
in the integrated products and solutions MindGym continues to deliver to
clients. However, since it is now not clear that this technology will form
part of discrete and separately identifiable products in line with IAS38, the
directors have taken the decision to fully impair the carrying value of the
impacted products. This resulted in a one-off impairment charge of £6.6m in
the period.
This sharpened product focus contributed to a 17.5% year-on-year reduction in
capital expenditure to £4.2m (FY23: £5.1m). Within the year, the reduction
was even more marked, with capital expenditure of £3.0m in H1 reducing to
£1.2m in H2.
Taxation
During FY24 MindGym surrendered losses in relation to R&D tax credits of
£8.7m in respect of FY22 and £4.3m in respect of FY23, in return for cash of
£1.9m.
This resulted in a reduction in the deferred tax asset of £3.3m, which
partially offset the impact of the tax credit resulting from the loss in the
period and the value of further R&D tax credits relating to FY24.
FY24 FY23
Reported Reported
£'000 £'000
Profit/(loss) before tax (12,147) 2,964
Tax credit/(charge) 1,259 (29)
PAT (earnings) (10,888) 2,935
ETR % 10.36% 0.98%
This resulted in a full year tax credit for FY24 of £1.3m (FY23: charge of
£0.0m).
At the end of FY24 we recorded a deferred tax asset of £3.6m in respect of
tax losses, predominantly arising as a result of the impact of the UK R&D
regime (FY23: £5.3m). This is partially offset by a £1.5m deferred tax
liability (FY23: £2.4m) being the timing difference linked to capitalised
development costs
Earnings per share
There was an adjusted diluted loss per share in the period of 4.25p (FY23:
2.84p profit). The unadjusted diluted loss per share was 10.86p (FY23: 2.84p
profit).
On an undiluted basis the adjusted loss per share was 4.25p (FY23: 2.93p
profit) and the unadjusted loss per share was 10.86p (FY23: 2.93p profit).
Dividends
No dividend has been paid or proposed for the year ended 31 March 2024. The
Board will continue to keep the appropriateness of dividend payments under
periodic review and will next provide an update at the time of the H1 FY25
interim announcement.
Cash flow and balance sheet
Cash and cash equivalents decreased from £7.6m in FY23 to £1.4m in FY24.
This included the impact of £4.2m of capital expenditure in the period,
reduced from £5.1m in FY23. The run rate on capital expenditure decreased
even more significantly through the year, with £3.0m in H1, reducing to
£1.2m in H2.
Following the improved half-on-half profitability, the cash position improved
slightly during Q4 of FY24, and management expect cash generation in FY25.
Net trade receivables reduced by £0.7m from FY23, with the proportion of
overdue receivables at 31 March 2024 reducing to 6%, down from 7% in FY23 and
9% in FY22.
Cash conversion 31 March 2024 31 March 2023
£'000 £'000
Cash generated from operations -3,094 4,393
EBITDA -9,226 5,294
Add back non-cash exceptionals* 7,121 0
EBITDA excl non-cash exceptionals -2,105 5,294
Cash conversion (Cash from operations /EBITDA) 147% 83%
*Adjusting for impact of non-cash exceptional charge in the period in respect
of intangible asset and US office lease impairments.
Cash conversion 31 March 2024 31 March 2023
£'000 £'000
Overdue debtors % 6% 7%
Going concern
The Board has reviewed scenario analyses to help assess their forward-looking
assessment of the viability of the Group. The Directors are confident that the
Group has adequate resources to continue in operational existence for the
foreseeable future. The Board has reviewed scenarios including a range of
revenues and cost-reduction actions that could be taken to mitigate a
downturn. This is supported by strong cash management and financial controls,
reduced expenditure heading into FY25 and sufficient and improving liquidity.
Financial risk management
The Group has a diverse portfolio in excess of 500 clients across many
industrial sectors and countries. The largest client (our Energy Framework)
accounted for 13% of Group revenue in the year; the next client accounts for
less than 5% of group revenue.
The Group has translational foreign currency exposure arising on the
consolidation of overseas company results into Sterling. Where possible the
exposure is naturally hedged; for example, by matching US Dollar revenues with
US Dollar costs in the US subsidiary. The Group does not currently use forward
exchange contracts or currency options to hedge currency risk.
Forward-looking statements
Certain statements in this announcement constitute forward-looking statements.
Any statement in this announcement that is not a statement of historical fact
including, without limitation, those regarding the Company's future
expectations, operations, financial performance, financial condition and
business is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties include, among other factors,
changing economic, financial, business or other market conditions. These and
other factors could adversely affect the outcome and financial effects of the
plans and events described in this announcement and the Company undertakes no
obligation to update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this announcement
should be constructed as a profit forecast.
Dominic Neary
Chief Financial Officer
14 June 2024
MINDGYM PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year to Year to
31 March 2024 31 March 2023
Note £'000
£'000
Continuing operations
Revenue 3 44,914 55,011
Cost of sales (6,194) (6,360)
Gross profit 38,720 48,651
Administrative expenses (50,734) (45,568)
3,4 (12,014) 3,083
Operating (loss)/ profit
Finance income 8 30 55
Finance costs 8 (163) (174)
(12,147) 2,964
(Loss)/profit before tax
Adjusted loss before tax (3,264) -
Adjusting items 5 (8,883) -
Total adjustments (8,883) -
(Loss)/profit before tax (12,147) 2,964
9 1,259 (29)
Tax on (loss)/profit
(10,888) 2,935
(Loss)/profit for the financial period from continuing operations attributable
to owners of the parent
Items that may be reclassified subsequently to profit or loss
Exchange translation differences on consolidation (98) 297
Other comprehensive (loss)/income for the period attributable to the owners of
the parent
(98) 297
Total comprehensive (loss)/income for the period attributable to the owners of
the parent
(10,986) 3,232
(Loss)/earnings per share (pence)
Basic 10
(10.86) 2.93
Diluted
(10.86) 2.84
Adjusted (loss)/earnings per share (pence)
Basic 10
(4.25) 2.93
Diluted
(4.25) 2.84
MINDGYM PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 31 March
2024 2023
Note £'000
£'000
Non-current assets
Intangible assets 12 8,252 12,320
Property, plant and equipment 13 2,100 3,691
Deferred tax assets 9 2,281 3,229
Other receivables 15 - 230
12,633 19,470
Current assets
Inventories 14 40 53
Trade and other receivables 15 7,787 9,527
Current tax receivable 551 779
Cash and cash equivalents 1,369 7,587
9,747 17,946
Total assets 22,380 37,416
Current liabilities
Trade and other payables 16 8,474 11,423
Lease liability 17 980 1,121
Redeemable preference shares 18 50 50
Current tax payable 1 20
9,505 12,614
Non-current liabilities
Lease liability 17 1,038 1,988
Total liabilities 10,543 14,602
Net assets 11,837 22,814
Equity
Share capital 21 1 1
Share premium 258 242
Share option reserve 481 496
Retained earnings 11,097 22,075
Equity attributable to owners of the parent company 11,837 22,814
The financial statements were approved and authorised for issue by the Board
of Directors on 14 June 2024 and were signed on its behalf by:
Dominic Neary
Chief Financial Officer
MINDGYM PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Share option reserve Retained earnings Total equity
Note £'000 £'000 £'000 £'000 £'000
1 213 608 18,804 19,626
At 1 April 2022
- - - 2,935 2,935
Profit for the period
Other comprehensive income:
Exchange translation differences on consolidation - - - 297 297
Total comprehensive income for the period - - - 3,232 3,232
Exercise of options - 29 (39) 39 29
Credit to equity for share-based payments 22 - - (73) - (73)
1 242 496 22,075 22,814
At 31 March 2023
- - - (10,888) (10,888)
Loss for the period
Other comprehensive loss:
Exchange translation differences on consolidation - - - (98) (98)
Total comprehensive loss for the period - - - (10,986) (10,986)
Exercise of options - 16 (8) 8 16
Credit to equity for share-based payments 22 - - (7) - (7)
1 258 481 11,097 11,837
At 31 March 2024
MINDGYM PLC CONSOLIDATED STATEMENT OF CASH FLOWS
Year to Year to
31 March 2024 31 March 2023
Note £'000
£'000
Cash flows from operating activities
(Loss)/Profit for the financial period (10,888) 2,935
Adjustments for:
Amortisation of intangible assets 12 1,615 743
Impairment of intangible asset 12 6,604 -
Depreciation of property, plant and equipment 13 1,173 1,468
Impairment of right of use asset 13 517 -
Net finance costs 8 133 119
Taxation (credit)/charge 9 (1,259) 29
Decrease/(Increase) in inventories 13 (46)
Decrease in trade and other receivables 1,970 524
(Decrease) in payables and provisions (2,965) (1,306)
Share-based payment (credit)/charge 22 (7) (73)
Cash (used in)/generated from operations (3,094) 4,393
Net tax received/(paid) 1,363 (766)
R&D refund on account 1,066 -
Net cash (used in)/generated from operating activities (665) 3,627
Cash flows from investing activities
Purchase of intangible assets 12 (4,151) (4,888)
Purchase of property, plant and equipment 13 (82) (240)
Interest received 8 30 54
Net cash used in investing activities (4,203) (5,074)
Cash flows from financing activities
Cash repayment of lease liabilities (1,229) (1,298)
Issuance of ordinary shares 16 29
Interest paid (47) (52)
Net cash used in financing activities (1,260) (1,321)
Net decrease in cash and cash equivalents (6,129) (2,768)
Cash and cash equivalents at beginning of period 7,587 10,021
Effect of foreign exchange rate changes (90) 334
Cash and cash equivalents at the end of period 1,369 7,587
Cash and cash equivalents at the end of period comprise:
Cash at bank and in hand 1,369 7,587
MINDGYM PLC NOTES TO THE GROUP FINANCIAL STATEMENTS
1. General information
MindGym plc ('the Company') is a public limited company incorporated in
England and Wales, and its ordinary shares are traded on the Alternative
Investment Market of the London Stock Exchange ('AIM'). The address of the
registered office is 160 Kensington High Street, London W8 7RG. The group
consists of MindGym plc and its subsidiaries, MindGym (USA) Inc., MindGym
Performance (Asia) Pte. Ltd, and MindGym (Canada) Inc. (together 'the Group').
The principal activity of the Group is to apply behavioural science to
transform the performance of companies and the lives of the people who work in
them. The Group does this primarily through research, strategic advice,
management and employee development, employee communication, digital products
and related services.
2. Summary of material accounting policies
Basis of preparation
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 March 2024 or 31 March 2023, but is
derived from those accounts. Statutory accounts for 2023 have been delivered
to the registrar of companies, and those for 2024 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified; (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
The financial information included in this preliminary announcement has been
prepared in accordance with UK-adopted international accounting standards and
with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards. The Group expects to distribute full accounts
that comply with UK-adopted international accounting standards and with the
requirements of the Companies Act 2006.
The consolidated financial statements have been prepared on a going concern
basis under the historical cost convention.
The consolidated financial statements are presented in Pounds Sterling. All
values are rounded to £1,000 except where otherwise indicated.
Going concern
The Group meets its day-to-day working capital requirements from the cash
flows generated by its trading activities and its available cash resources. As
at 31 March 2024, the Group had £1.4 million of cash, £7.8 million of trade
and other receivables, and £2m of lease liabilities.
The Group prepares cash flow forecasts and re-forecasts regularly as part of
the business planning process. The Directors have reviewed forecasted cash
flows for a period of at least 12 months for the Group from the date of the
approval of the financial statements and consider that the Group will have
sufficient cash resources available to meet its liabilities as they fall
due. These cash flow forecasts have been analysed in light of inflationary
pressure and other medium-term macro-economic impacts and subjected to stress
testing and scenario modelling which the Directors consider sufficiently
robust. The impact of these inflationary pressures is further discussed in
the Statement of the Board Chair. The scenario modelling has assessed the
impact of various degrees of downturn in medium-term revenues generated. The
Directors note that in a downturn scenario the Group also has the option to
rationalise its cost base, including cuts to discretionary capital and
overhead expenditure. The Directors consider that the required level of change
to the Group's forecasted cash flows to give rise to a material risk over
going concern is sufficiently remote. Furthermore, the Directors do not
foresee any covenant compliance issues within the going concern period under
both the base scenario and sensitivity modelling. The last measurement
period for which is 30 June 2024.
As a result of these assessments, the Group's cash position and its clients
predominantly comprising blue-chip corporates, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and Accounts.
3. Segmental analysis
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker, who is responsible
for allocating resources and assessing performance of the business. The chief
operating decision-maker has been identified as the Board. The Group has two
operating segments: EMEA (comprising the United Kingdom and Singapore) and
America (comprising the United States and Canada).
Both segments derive their revenue from a single business activity, the
provision of human capital and business improvement solutions.
The Group's business is not highly seasonal, and the Group's customer base is
diversified with no individually significant customer.
Segment results for the year ended 31 March 2024
Segment result
EMEA America Total
£'000 £'000 £'000
Revenue 23,729 21,185 44,914
Cost of sales (3,465) (2,729) (6,194)
Administrative expenses (32,453) (18,281) (50,734)
(Loss)/profit before inter-segment charges (12,189) 175 (12,014)
Inter-segment charges 75 (75) -
Operating (loss)/profit - segment result (12,114) 100 (12,014)
Finance income 30
Finance costs (163)
Loss before taxation (12,147)
Adjusted (loss)/profit before tax EMEA America Total
£'000 £'000 £'000
Operating (loss)/profit - segment result (12,114) 100 (12,014)
Adjusting items 7,693 1,190 8,883
Adjusted LBIT/EBIT (4,421) 1,290 (3,131)
Finance income 30
Finance costs (163)
Loss before taxation (3,264)
Management does not report segmental assets and liabilities internally and as
such an analysis is not reported.
The mix of revenue for the year ended 31 March 2024 is set out below.
EMEA America Group
Delivery 67.1% 67.8% 67.4%
Design 15.0% 10.9% 13.0%
Digital 9.6% 10.7% 10.2%
Licensing and certification 2.2% 8.2% 5.0%
Other 4.0% 1.7% 2.9%
Advisory 2.1% 0.7% 1.5%
The vast majority of the Group's contracts are for the delivery of services
within the next 12 months. The Group has therefore taken advantage of the
practical expedient in paragraph 121(a) of IFRS 15 not to disclose information
about remaining performance obligations.
Segment results for the year ended 31 March 2023
Segment result
EMEA America Total
£'000 £'000 £'000
Revenue 23,742 31,269 55,011
Cost of sales (2,740) (3,620) (6,360)
Administrative expenses (23,092) (22,476) (45,568)
(Loss)/profit before inter-segment charges (2,090) 5,173 3,083
Inter-segment charges 5,067 (5,067) -
Operating profit - segment result 2,977 106 3,083
Finance income 55
Finance costs (174)
Profit before taxation 2,964
Adjusted profit before tax EMEA America Total
£'000 £'000 £'000
Operating profit - segment result 2,977 106 3,083
Adjusted EBIT 2,977 106 3,083
Finance income 55
Finance costs (174)
Profit before taxation 2,964
Management does not report segmental assets and liabilities internally and as
such an analysis is not reported.
The mix of revenue for the year ended 31 March 2023 is set out below.
EMEA America Group
Delivery 60.2% 60.6% 60.3%
Design 19.0% 15.7% 17.2%
Digital 13.4% 12.8% 13.1%
Licensing and certification 3.3% 7.5% 5.6%
Other 2.4% 2.3% 2.4%
Advisory 1.7% 1.1% 1.4%
The vast majority of the Group's contracts are for the delivery of services
within the next 12 months. The Group has therefore taken advantage of the
practical expedient in paragraph 121(a) of IFRS 15 not to disclose information
about remaining performance obligations.
4. Operating (loss)/profit
Operating (loss)/profit is stated after charging/(crediting):
31 March 2023
31 March 2024
£'000
£'000
External coach costs 4,573 4,960
Staff costs (Note 7) 31,789 34,962
Payroll restructuring costs included in adjusted items 1,722 -
Other restructuring costs included in adjusted items 40 -
Amortisation of intangible assets 1,615 743
Impairment - Digital Asset 6,604 -
Depreciation of property, plant and equipment 1,173 1,468
Impairment - Lease 517 -
Short-term and low-value lease expense 14 18
Impairment/(Write-back) of trade receivables 11 (106)
5. Adjusting items
31 March 2023
31 March 2024
£'000
£'000
Restructuring costs 1,762 -
Impairment of right of use asset 517 -
Impairment of intangibles 6,604 -
8,883 -
Restructuring costs in the year ended 31 March 2024 include redundancy costs
and associated legal costs related to the headcount reduction exercise
undertaken to reduce the cost base.
Impairment of intangible assets are excluded from the adjusted results of the
Group since the costs are one-off charges. These relate to digital assets not
in use that are no longer being developed.
The Group tested right-of-use assets for impairment and recognised an
impairment loss on a leased asset.
6. Auditor remuneration
31 March 2023
31 March 2024
£'000
£'000
Fees for audit of the Company and consolidated financial statements 150 134
Fees for audit of the Company's subsidiaries pursuant to legislation 26 24
Total audit fees 176 158
Tax compliance services - 20
Tax advisory services - -
Other services 18 15
Total fees payable to the auditor 194 193
7. Employees
Staff costs were as follows:
31 March 2023
31 March 2024
£'000
£'000
Wages and salaries 28,059 31,036
Social security costs 2,678 2,944
Pension costs - defined contribution plans 1,059 1,055
Share-based payments (7) (73)
31,789 34,962
Restructuring payroll costs included in adjusted items 1,722 -
33,511 34,962
The average number of the Group's employees by function was:
31 March 2023
31 March 2024
Delivery 211 218
Support 79 79
Digital 41 44
331 341
The year-end number of the Group's employees by function was:
31 March 2023
31 March 2024
Delivery 175 241
Support 79 86
Digital 16 46
270 373
Key management personnel include all Directors and a number of senior managers
across the Group who together have responsibility and authority for planning,
directing and controlling the activities of the Group. The compensation paid
to key management personnel for services provided to the Group was:
31 March 2023
31 March 2024
£'000
£'000
Salaries, bonuses and other short-term employee benefits 2,823 2,624
Post-employment benefits 84 72
Termination benefits 20 -
Share-based payments (3) (109)
Total compensation 2,924 2,587
Details of Directors' remuneration and share options are set out in the Annual
Report on Remuneration.
8. Net finance costs
31 March 2023
31 March 2024
£'000
£'000
Finance income
Bank interest receivable 30 54
Finance lease income - 1
30 55
Finance costs
Bank interest payable (47) (52)
Lease interest (116) (122)
(163) (174)
(133) (119)
9. Tax
The tax (credit)/charge for the year comprises:
31 March 2023
31 March 2024
£'000
£'000
UK current tax (463) -
UK adjustment in respect of prior periods (1,864) -
Withholding tax 2 8
Foreign current tax 16 73
Foreign adjustment in respect of prior periods 105 322
Total current tax (credit)/charge (2,204) 403
Deferred tax - current year (2,350) (131)
Deferred tax - adjustment in respect of prior periods (R&D claims) 3,295 (154)
Effect of changes in tax rates - (89)
Total deferred tax charge/(credit) 945 (374)
Total tax (credit)/charge (1,259) 29
During FY24, Management took the decision to resubmit the UK Corporation Tax
returns for FY22 and FY23 to surrender tax losses for cash. This has resulted
in a prior year adjustment for both current and deferred tax of £1.9m and
£3.3m respectively.
No current or deferred tax has been recognised in Equity in the years ended 31
March 2023 or 31 March 2024.
The tax (credit)/charge for the year can be reconciled to accounting
(loss)/profit as follows:
31 March 2023
31 March 2024
£'000
£'000
(Loss)/profit before tax (12,147) 2,964
Expected tax (credit)/charge based on the standard rate of tax in the UK of (3,037) 563
25% (2023: 19%)
Differences in overseas tax rates 7 11
Expenses not deductible for tax purposes 23 846
Adjustments to tax in respect of prior periods 1,536 168
Enhanced R&D deduction (535) (1,466)
Tax rate changes - (89)
Losses surrendered under SME regime 694 -
Other tax adjustments 53 (4)
Total tax (credit)/charge (1,259) 29
The main categories of deferred tax assets recognised by the Group are:
Tax losses Intangible assets Other Total
£'000 £'000 £'000 £'000
At 1 April 2022 4,049 (1,526) 323 2,846
Charged to income 1,205 (848) 15 372
Exchange differences - - 11 11
At 31 March 2023 5,254 (2,374) 349 3,229
Credited to income (1,704) 924 (166) (946)
Exchange differences - - (2) (2)
At 31 March 2024 3,550 (1,450) 181 2,281
From 1 April 2023 the main corporation tax rate increased to 25% (2023:
19%). This increase was substantially enacted at the balance sheet date.
The Group has recognised £3.6 million of deferred tax assets relating to
carried forward tax losses. These losses have been recognised as it is
probable that future taxable profits will allow these deferred tax assets to
be recovered. The Group has performed a continuing evaluation of its deferred
tax asset valuation allowance on an annual basis to estimate whether
sufficient future taxable income will be generated to permit use of the
existing deferred tax assets.
The Group has recognised a corresponding £1.5 million of deferred tax
liabilities relating to timing differences on intangible assets.
Other deferred tax assets include deferred tax on shared based payments in the
UK and other temporary timing differences.
10. Earnings per share
Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to shareholders of the Company by the weighted average number of
ordinary shares in issue during the year. The Company has potentially dilutive
shares in respect of the share-based payment plans (see Note 22).
31 March 2023
31 March 2024
Weighted average number of shares in issue 100,186,450 100,143,571
Potentially dilutive shares (weighted average) 7,921,037 3,141,506
Diluted number of shares (weighted average) 108,107,487 103,285,077
31 March 2024 31 March 2023
Basic EPS Diluted EPS Basic EPS Diluted EPS
£'000 pence Pence £'000 pence pence
Net (loss)/profit attributable to shareholders (10,888) (10.86) (10.86) 2,935 2.93 2.84
Adjusted (loss)/profit attributable to shareholders (4,262) (4.25) (4.25) 2,935 2.93 2.84
11. Dividends
No dividends have been paid or proposed for the year ended 31 March 2024
(2023: nil).
12. Intangible assets
Patents Development costs Total
£'000 £'000 £'000
Cost
At 1 April 2022 63 10,384 10,447
Additions 58 4,830 4,888
Disposals - (41) (41)
At 31 March 2023 121 15,173 15,294
Additions 23 4,128 4,151
At 31 March 2024 144 19,301 19,445
Amortisation
At 1 April 2022 63 2,209 2,272
Amortisation charge 3 740 743
Disposals - (41) (41)
At 31 March 2023 66 2,908 2,974
Amortisation charge 7 1,608 1,615
Impairment - 6,604 6,604
At 31 March 2024 73 11,120 11,193
Net book value
At 31 March 2023 55 12,265 12,320
At 31 March 2024 71 8,181 8,252
Development cost additions in the year to 31 March 2024 include software
development costs directly incurred in the creation of new digital assets.
In October 2023 the Group decided to significantly reduce the amount invested
in development projects. The decision led to a potential indicator of
impairment and triggered a review of all intangible digital assets. Each cash
generating unit (CGU) was assessed and tested for impairment. The recoverable
amount was estimated based on its value in use. For digital assets that were
not yet complete and where no further investment is expected, the Directors
determined the recoverable amount of the asset to be nil and therefore the
assets were impaired in full. An impairment charge of £6.6 million was
recognised in the Consolidated Statement of Comprehensive Income.
At 31 March 2024, unfinished assets were reviewed for impairment using a
detailed net present value ('NPV') calculation, including sensitivity analysis
of 4 scenarios. In all scenarios, the NPV exceeded the carrying value of the
incomplete assets and therefore the Directors determined that no further
impairment should be recognised.
13. Property, plant and equipment
Right-of-use asset Leasehold improvements Fixtures, fittings and equipment Total
£'000 £'000 £'000 £'000
Cost
At 1 April 2022 4,088 519 1,509 6,116
Additions 1,937 2 238 2,177
Exchange differences 164 17 46 227
At 31 March 2023 6,189 538 1,793 8,520
Additions 36 - 82 118
Disposals - - (517) (517)
Exchange differences (57) (6) (17) (80)
At 31 March 2024 6,168 532 1,341 8,041
Depreciation
At 1 April 2022 2,184 287 830 3,301
Depreciation charge 1,013 86 369 1,468
Exchange differences 38 1 21 60
At 31 March 2023 3,235 374 1,220 4,829
Depreciation charge 772 83 318 1,173
Impairment 517 - - 517
Disposals - - (517) (517)
Exchange differences (47) (1) (13) (61)
At 31 March 2024 4,477 456 1,008 5,941
Net book value
At 31 March 2023 2,954 164 573 3,691
At 31 March 2024 1,691 76 333 2,100
Following the pandemic and with the move to hybrid working, a significant
proportion of the US workforce work remotely and therefore the Directors
deemed it appropriate to vacate a proportion of the New York office. In doing
this, management considered there to be two lease components for the
right-of-use asset. The lease component that is no longer accessible and not
in use by the business triggered an impairment review. Accordingly, management
estimated the recoverable amount of the CGU to be nil. This resulted in an
impairment of the right of use asset by £517,000. This was recognised in the
Consolidated Statement of Comprehensive Income.
14. Inventories
31 March 2023
31 March 2024
£'000
Finished goods 40 53
Write-down of inventory amounted to £1,000 (2023: £32,000).
The cost of inventories recognised as an expense and included in cost of sales
amounted to £558,000 (2023: £392,000).
15. Trade and other receivables
31 March 2023
31 March 2024
£'000
£'000
Non-current
Prepayments in respect of property deposits - 230
- 230
Current
Trade receivables 6,005 6,730
Less provision for impairment (113) (102)
Net trade receivables 5,892 6,628
Other receivables 27 80
Prepayments in respect of property deposits 226 -
Prepayments 796 1,125
Accrued income 846 1,694
7,787 9,527
Trade receivables have been aged with respect to the payment terms as follows:
31 March 2023
31 March 2024
£'000
£'000
Not past due 5,617 6,282
Past due 0-30 days 313 336
Past due 31-60 days 39 74
Past due 61-90 days 35 12
Past due more than 90 days 1 26
6,005 6,730
The movement in the allowance for impairment losses was:
31 March 2023
31 March 2024
£'000
£'000
At the beginning of the period 102 212
Addition/(Write-back) 11 (110)
Utilisation of provision - (5)
Foreign exchange adjustment - 5
At the end of the period 113 102
The Group has applied the simplified approach to measuring expected credit
losses, as permitted by IFRS 9, and recognises a loss allowance based on the
lifetime expected credit loss.
16. Trade and other payables
31 March 2023
31 March 2024
£'000 £'000
Trade payables 1,172 1,257
Other taxation and social security 1,525 744
Other payables 323 396
Accruals 3,055 4,606
Deferred income 2,399 4,420
8,474 11,423
17. Lease liability
The lease liabilities included in the statement of financial position are:
31 March 2023
31 March 2024
£'000
£'000
Current 980 1,121
Non-current 1,038 1,988
2,018 3,109
The related right-of-use asset is disclosed in Note 13.
The movements in the lease liability were as follows:
31 March 2023
31 March 2024
£'000
£'000
At the beginning of the year 3,109 2,205
Additions 41 1,948
Finance cost 116 122
Lease payments (1,229) (1,298)
Exchange differences (19) 132
At the end of the year 2,018 3,109
The maturity analysis of the contractual undiscounted cash flows is:
31 March 2023
31 March 2024
£'000
£'000
Less than one year 1,045 1,227
Between one and five years 1,098 2,094
Total future lease payments 2,143 3,321
Total future interest payments (125) (212)
Total lease liability
2,018 3,109
18. Redeemable preference shares
The Company allotted and issued 50,000 redeemable preference shares of £1.00
each to Octavius Black in June 2018. The shares are fully paid up. Under the
Articles of Association, the Company may redeem the preference shares at their
nominal amount at any time specified by either the Directors or the preference
share holder. The preference share capital, however, counts towards the
£50,000 minimum share capital required under the Companies Act 2006 and
cannot therefore be redeemed unless the Company increases its other share
capital. The preference shares are non-voting, give no rights to dividends or
interest and entitle the holder to the return of the nominal value on a
winding up.
19. Borrowings
The Group entered into a £10 million debt facility (£6 million Revolving
Credit Facility, £4 million accordion) on 30 September 2021 which matures
after three years. The facility remains undrawn as at 14 June 2024.
20. Financial instruments and financial risk management
Financial instruments by category
Trade and other receivables (excluding prepayments), cash and cash equivalents
and trade and other payables are initially measured at fair value and
subsequently held at amortised cost.
31 March 2023
31 March 2024
£'000
£'000
Net trade receivables 5,892 6,628
Other receivables 27 80
Prepayments in respect of property deposits - 230
Cash and cash equivalents 1,369 7,587
Financial assets at amortised cost
7,288 14,525
Trade payables 1,172 1,257
Other payables 323 396
Lease liabilities 2,018 3,109
Financial liabilities at amortised cost
3,513 4,762
The Group holds no assets or liabilities that are held at fair value through
income statement or OCI.
As the trade and other receivables and trade and other payables have a
maturity of less than one year, the notional amount is deemed to reflect the
fair value.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, to provide returns for shareholders
and benefits for other stakeholders and to maintain an optimal capital
structure.
The Group's sources of funding currently comprise cash flows generated from
operations, and equity contributed by shareholders. The Group has no
borrowings and is not subject to any externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders to
the extent allowed by the Company's articles or issue new shares.
Financial risk management
The Group's risk management is overseen by the Audit and Risk Committee. The
Group is exposed to a variety of financial risks that result from its
operations, including credit risk, liquidity risk and foreign currency risk.
Since the Group has no debt it is not significantly exposed to interest rate
risk. The Group has not entered into any derivative transactions, such as
interest rate swaps or forward foreign exchange contracts.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks, or the methods used to measure them from previous periods unless
otherwise stated in this note.
Credit risk
Credit risk arises principally from the Group's trade receivables from
customers and monies on deposit with financial institutions.
Credit risk on trade receivables is considered to be relatively low as the
Group's customers mainly consist of large credit-worthy organisations. Credit
exposure is spread over a large number of customers and so there is no
significant concentration of credit risk. Outstanding and overdue balances are
regularly reviewed and resulting actions are put in place on a timely basis.
The Group establishes an allowance for impairment. This is based on a review
of individual balances taking into account the results of credit control
communications and our knowledge about the customer relationship. See Note 15
Trade and other receivables for further information on ageing and impairment
of trade receivables.
Credit risk also arises from cash and cash equivalents and deposits with banks
and financial institutions. For banks and financial institutions, only
independently rated parties are accepted, and management maintain a close
relationship with the Group's banks.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at the reporting date was:
31 March 2023
31 March 2024
£'000
£'000
Trade receivables 5,892 6,628
Other receivables 27 80
Prepayments in respect of property deposits - 230
Cash and cash equivalents 1,369 7,587
At the end of the period 7,288 14,525
Liquidity risk
The Group ensures, as far as possible, that it has sufficient funds to meet
foreseeable operational expenses. Cash flow forecasting is performed by Group
Finance who monitor rolling forecasts of the Group's liquidity requirements.
Such forecasting takes into consideration expected cash receipts, regular
spending and payment of taxes such as VAT, payroll and corporate income tax.
Currently, the Group's liquidity risk is low as it has a surplus of cash in
all entities and the £10 million debt facility available (set out in Note
19). All Group liabilities in the current and prior year are due within three
months of the reporting date, apart from lease liabilities. The maturity of
the lease liability is set out in Note 17.
Foreign currency risk
The Group operates internationally and is exposed to foreign currency risk on
sales and purchases that are denominated in a currency other than Sterling.
The currencies giving rise to this risk are primarily the US Dollar and the
Euro. Where possible the exposure is mitigated by a natural hedge. For
example, US Dollar revenues are partially matched by US Dollar costs in the US
subsidiary.
The Group holds cash in the UK in Sterling, Euro and US Dollar bank accounts
and in the USA in US Dollar and Canadian Dollar bank accounts.
Trade receivables and cash and cash equivalents are analysed by currency as
follows:
GBP USD EUR Other Total
£'000 £'000 £'000 £'000 £'000
At 31 March 2024
Net trade receivables 2,884 2,324 658 26 5,892
Cash and cash equivalents 306 793 241 29 1,369
At 31 March 2023
Net trade receivables 2,981 3,070 351 226 6,628
Cash and cash equivalents 4,659 2,631 136 161 7,587
The Group does not currently use forward foreign exchange contracts or
currency options to hedge currency risk.
21. Share capital
31 March 2024 31 March 2024 31 March 2023 31 March 2023
Cost Cost
Number £'000 Number £'000
Ordinary shares of £0.00001 at 1 April 100,167,584 1 100,105,660 1
Issue of shares to satisfy options 30,880 - 61,924 -
Ordinary shares of £0.00001 at 31 March 100,198,464 1 100,167,584 1
An Employee Benefit Trust ('EBT') has been established in connection with the
Group's Share Incentive Plan. The movements in own shares held by the Employee
Benefit Trust and the market value of the shares held at the year-end are
shown below.
31 March 2024 31 March 2024 31 March 2023 31 March 2023
Cost Cost
Number £'000 Number £'000
As at 1 April 111,655 - 111,655 -
Issue of new shares to EBT - - - -
Removed from the Trust (21,304) - - -
Ordinary shares of £0.00001 at 31 March 90,351 - 111,655 -
Market value at 31 March 62 76
22. Share-based payments
The Group awards options to selected employees under a Long-Term Incentive
Share Option Plan ('LTIP'). The options granted to date vest subject only to
remaining employed up to the vesting date. Unexercised options do not entitle
the holder to dividends or to voting rights.
The Group operates the MindGym plc Share Incentive Plan (SIP). An initial
award of £1,000 of free shares was granted in October 2018 to all employees
at the IPO price of 146 pence. The shares are held in an employee benefit
trust and vested after three years subject only to remaining employed up to
the vesting date. The holder was entitled to dividends over the vesting
period. Many employees elected to leave their shares in the trust for a
further two years for tax purposes.
On 30 September 2019, the Group launched a Save As You Earn scheme ('SAYE')
and an Employee Share Purchase Plan ('ESPP') for all eligible employees in the
UK and USA respectively. New schemes have been launched annually since 2019.
The total share-based payments expense was:
31 March 2023
31 March 2024
£'000
£'000
Equity settled share-based payments (7) (73)
23. Controlling party
The Group was controlled by O. Black and J. Cash by virtue of their joint
shareholding in the Company throughout the period.
There were the following related party transactions during the year and
balances at the end of the year:
· Key management compensation as disclosed in Note 7.
24. Events after the reporting period
There were no post-balance sheet events.
1 (#_ftnref1) Adjusted EBITDA, is earnings before interest, tax,
depreciation and amortisation, adjusted to eliminate the impact of exceptional
charges in the period.
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