MIND Mind Gym Plc

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.

 

 

Enquiries    

 

Mind Gym plc Christoffer Ellehuus (CEO) Dominic Neary (CFO)	+44 (0) 20 7376 0626
Liberum (Nominated Adviser and Broker) Nick How Edward Mansfield	+44 (0) 20 3100 2000
MHP (for media enquiries) Reg Hoare Katie Hunt Veronica Farah	+44 (0) 20 3128 8100 mindgym@mhpgroup.com

 

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

 

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] 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 Reported	FY23 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 31 March 2024	Year to 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)
Operating (loss)/ profit	3,4	(12,014)	3,083
Finance income	8	30	55
Finance costs	8	(163)	(174)
(Loss)/profit before tax		(12,147)	2,964
Adjusted loss before tax		(3,264)	-
Adjusting items	5	(8,883)	-
Total adjustments		(8,883)	-
(Loss)/profit before tax		(12,147)	2,964
Tax on (loss)/profit	9	1,259	(29)
(Loss)/profit for the financial period from continuing operations attributable to owners of the parent		(10,888)	2,935
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