# itim Group achieves important strategic milestones

- Link: https://www.directorstalkinterviews.com/itim-group-achieves-important-strategic-milestones/4121114574
- Published: 2023-04-14T07:10:00+01:00
- Author: Madison Wilson

**[itim Group plc](https://www.directorstalkinterviews.com/company/itim-group-plc/itim.l)**(
[LON:ITIM](https://www.directorstalkinterviews.com/company/itim-group-plc/itim.l)),
a SaaS based technology company that enables store-based retailers to optimise their
businesses to improve financial performance, has announced its audited results for
the year ended 31 December 2022.

**Financial Highlights**

| ·      | Group revenues increased by 4% to £14 million (2021: £13.5 million)  | 
| ·      | Annual recurring revenue (“ARR”) is £13.2 million (2021: £11.1 million)   | 
| ·      | Group Adjusted EBITDA* £0.2 million (2021: £2.2 million)   | 
| ·      | Adjusted EBITDA* margin decreased by 19 percentage points (“PPT”) to 2% (2021: 17%)  | 
| ·      | Adjusted Earnings per share** -2.01 pence (2021: 3.75 pence)  | 
| ·      | Closing cash balances were £3.9 million at 31 December 2022, down from £6.2 million at 31 December 2021  |

| _*_ | _EBITDA has been adjusted to exclude share-based payment charges, exceptional items, along with depreciation, amortisation, interest and tax from the measure of profit_ | 
| _**_ | _The profit measure has been adjusted to exclude exceptional items and share option charge_ |

Copies of the Annual Report and Accounts for FY2022 with the notice of annual general
meeting have been posted to shareholders today and are available on the Company’s
website www.itim.com. The Company intends to hold its annual general meeting at 
11am on 12th May 2023 at the offices of DMH Stallard LLP, 6 New Street Square, London
EC4A 3BF.

itim was established in 1993 by its founder, and current Chief Executive Officer,
Ali Athar. itim was initially formed as a consulting business, helping retailers
effect operational improvement. From 1999 the Company began to expand into the provision
of proprietary software solutions and by 2004 the Company was focused exclusively
on digital technology. itim has grown both organically and through a series of acquisitions
of small, legacy retail software systems and associated applications which itim 
has redeveloped to create a fully integrated end to end Omni-channel platform.

**CHAIRMAN’S STATEMENT**

I am pleased to report that itim’s focus on product development, strengthening recurring
revenues and diversifying its customer base has insulated it from significant impact
in the difficult economic climate which prevailed in 2022 following Russia’s invasion
of Ukraine early in the year. It is also a credit to the team that we achieved some
important strategic milestones in the year to ensure we remained in line with customer
requirements in the prevailing business environment.

I said in my report last year that itim entered 2022 in a solid financial position
following the IPO fundraise and growing subscription revenues and client activity.
A keynote is that we continued to invest significant sums in our R&D programme in
2022 alongside investing in our staff base.

Furthermore, we have identified exciting growth opportunities for 2023 including
a relaunch of our consultancy business as a complement to our technology offering
and to enable our customers to gain the maximum benefit from it.

We also see a great opportunity in launching a payment hub designed to meet the 
needs of our retailer customers with the potential to offer them considerable cost
savings when compared to traditional bank offerings.

Overall, excellent progress was made.

**Financial results**

Revenues increased by 4% year on year increasing from £13.5m in 2021 to £14m in 
2022. Importantly, annual recurring revenues (“ARR”) at the year-end increased significantly
from £11.1m to £13.2m an increase of 19% with recurring revenues representing 84%
of total revenues (2021: 77%). Gross margins fell however to 32% (2021: 41%) principally
due to vital investment in headcount and ensuring the team remain committed and 
incentivised, but also due to the fact that many of our new customer contracts are
subscription only with no up-front fees as previously with income consequently being
delayed later into the cycle. This one-off impact should reverse out over time as
subscription revenues kick in.

**People**

Itim’s business is built around its people and products and as mentioned we have
invested heavily in both. The team’s commitment and passion to deliver first-rate
services to our customers is evident and I continue to be immensely impressed with
their high calibre and commitment. We review the effectiveness of the team and any
areas where we could benefit from bringing in new expertise on an ongoing basis 
and I am pleased to report that a considerable number of new appointments were made
during the year.

**Outlook**

We believe the need for itim’s products and services is greater than ever as it 
becomes paramount for our customers to maintain profitability by driving efficiencies
throughout their businesses. With the investment we have made in team, technology
and products we are well placed to deliver on these requirements. We believe these
factors together with the new developments outlined above will maintain momentum
during 2023 and I am optimistic that 2023 will see continued growth in revenues 
and profits.

The Board and I extend our thanks to our loyal team, our partners and customers 
for their support.

**Michael Jackson**

**Chairman**

**13th April 2023****

**CHIEF EXECUTIVE’S REVIEW**

I am pleased to report that the solid platform for growth that was laid in 2021 
has indeed led to the growth in sales in 2022 in what can only be described as a
difficult trading period. Revenues in the year increased by 4% over 2021 with booked
recurring revenue for the year of £11.8m representing 84% of Group turnover.

Itim currently has close to 80 customers using all or some elements of our platform
providing us with a stable, recurring revenue base. We also have a good mix of business
in the UK and growing international revenues.

The challenges caused by inflationary pressures should result in our customers homing
in on all possible [cost effective] efficiencies to improve or at least maintain
performance. Itim’s business is designed precisely to meet such objectives and we
therefore anticipate that although 2023 is likely to be a challenging year for retailers,
itim’s business will nevertheless fare well in this climate.

Within our own business we focused on two objectives in 2022. First, we focused 
on improving our EBITDA margin as investor sentiment turned to cash conservation,
and we have taken various steps in this regard. Second, we looked to ensure that
sales growth is matched by cash generation. To these ends we have and will continue
to reduce the incentives we have previously offered customers. We are also keenly
aware that rapid sales growth has sometimes resulted in pressures on cash flows.
We have therefore amended our business plan to seek out growth opportunities that
satisfy these two objectives. Alongside these steps and in order to protect itim
for the future, we have continued to invest in R&D, increasing spend in 2022 and
invested in building and protecting our staff base.

Key business developments planned for 2023 are:

To relaunch our consultancy business with the objective of assisting customers maximise
the benefits from deploying itim’s technology and enabling them to remain firmly
focused on their own businesses. We firmly believe that many of our customers would
welcome our expertise to help them maximise the benefits of our technology.

To launch an extension to our Retail Suite to allow us to provide Merchandising 
applications like line cards, and WSSI. Critical processes for retailers.

A second development planned for 2023 is to launch a payment hub which we have been
funding over the past two years.

Itim provides an application called Didos which does invoice matching for about 
30 major UK retailers. Invoice matching is how retailers approve supplier invoices.
We have been approached by fintechs who want to collaborate with us in facilitating
international payments to suppliers and also allowing retailers to offer invoice
discounting services.

Itim provides EDI services and our ‘itim hub’ application to allow retailers and
suppliers to digitally collaborate.

The payment hub is an extension of both those offerings. It is an application in
the ‘itim hub’ that will allow us to collaborate with some of these fintech businesses.

In summary, our existing applications and new developments and consulting services
will I believe ensure that itim is well placed to continue to win new customers 
and we see numerous opportunities within our existing customer base to increase 
our revenues.

**Ali Athar**

**Chief Executive Officer**

**13th April 2023****

**CHIEF FINANCIAL OFFICER’S REVIEW**

**Income Statement**

_Overview_

Our 2022 financial year was overshadowed by global events which drove double digit
inflation which in turn fed into costs. The year post IPO was forecast as an investment
year with additional headcount being taken on to deliver projects and improve quality.
With headcount costs representing over 60% of our cost base and average pay increases
of over 11% during the year management expected a detrimental impact on the full
years result.

_Revenue_

With the uncertainty of global events and the impact on retailers of increasing 
cost of goods, wage pressure and spiralling transportation costs, we observed that
retailer’s decision making timescales lengthened which we believe was due to them
hunkering down to weather the uncertainties. This led to longer sales cycles for
itim but also slowed project delivery timescales. However despite this, the Group
still achieved an uplift on revenues during 2022 of 4.2% moving revenue to £14.0m
from £13.5m in 2021 with Annual Recurring Revenue (ARR) increasing 19% to £13.2m
at the year-end (2021: £11.1m). Additionally the quality and certainty of 2022 revenues
improved with 84% of turnover coming from recurring revenues (2021: 77%).

_Gross profit_

2022 was the first full year in which the Group had secured new contracts that were
subscription only with no upfront services fees. Where no services fees are being
charged to the customer for implementation, the cost of implementation is being 
absorbed by the business. As a consequence, with no revenues in the year of implementation
of a project – margins and EBITDA will be depressed in that year. Additionally with
the gearing up of headcount ahead of projects and the inflationary impact on cost
of sales it was inevitable that the gross margin of the group would drop in the 
year. This should improve over time when the subscriptions revenues commence. As
a result the overall gross margin dropped to 32% in 2022 (2021: 41%) but should 
improve on the commencement of the subscription revenue of those contracts.

_Administrative expenses_

The 30% increase in administrative expenditure over the 2021 cost was caused by 
three main factors. Firstly inflationary increases on salaries, secondly pulling
forward investment in sales and administrative hires that were scheduled for 2023
into 2022, and lastly the full year’s impact of being a listed business over the
six monthly cost incurred in 2021.

_Foreign exchange rates_

With 35% of revenues denominated in foreign currencies, the table below sets out
the percentage of annual contracts in the foreign currencies we trade in and the
impacts of those foreign currencies at the Balance Sheet date and the average movements
over the course of the year for P&L purpose.

Foreign exchange rates have remained volatile during the year with an overall weakening
of Sterling against all our functional currencies throughout the year and at the
year end. The most significant impact for itim has been the 16% depreciation of 
Sterling against the Brazilian Real between December 2021 and December 2022 as 18%
of our contracts are denominated in Reals. The Sterling to Euro rate has experienced
similar volatility with Sterling ending the year 5% weaker at 31st December 2022
when compared to 31st December 2021 with 9% of our contracts in Euro’s.

Despite phasing of movements over the current and prior year the weighted monthly
average exchange rate of translating from functional currencies also remained volatile,
with the Brazilian Real and US Dollar strengthening against Sterling by 14% and 
10% respectively.

| **FX Rates** | **31-Dec-21** | **31-Dec-22** | **31-Dec-22** | **2021 Average** | **2022 Average** | **2022** | 
| (% of ARR at year end) | FX rate | FX rate | Variance % | FX rate | FX rate | Variance % | 
|  |  |  |  |  |  |  | 
| £GBP/Euro (ARR 9%) | 1.191 | 1.129 | -5% | 1.163 | 1.150 | -1% | 
| £GBP/BRL (ARR 18%) | 7.612 | 6.386 | -16% | 7.42 | 6.389 | -14% | 
| £GBP/USD (ARR 8%) | 1.354 | 1.209 | -11% | 1.376 | 1.238 | -10% |

_Financing costs_

Total net interest costs in the year were nil (2021: £67k).

The reduction in interest payable on external loans was due to repayment of borrowing
during the year ended 31st December 2021 leaving the business debt free.

_Exceptional items_

Exceptional costs incurred during the year were £nil (2021:

£0.7m). The comparative cost relates to the initial public offering and admission
to AIM which could not be directly attributed to the raising of new equity and therefore
were expensed through the P&L.

_Taxation_

The Group continues to take advantage of R&D tax credits as it continues to innovate
its technology offering. The current year tax credit is made of up of a net current
tax credit of

£0.62m (2021: £0.26m) and a deferred tax charge of £0.03m (2021: £0.2m).

_Earnings/(Loss) per share_

Basic EPS for the year was -2.2p (2021: 0.88p) and the diluted EPS was -2.2p (2021:
0.78p).

On an adjusted profit basis after adjusting for exceptional items and the share 
option charge the adjusted earnings basic EPS was -2.01p (2021: 3.75p) and the adjusted
earnings diluted EPS was -2.01p (2021: 3.32p).

_Dividend_

The Board does not propose to pay a dividend in respect of the financial year (2021:
£nil).

**Group Statement of Financial position**

The Group had net assets of £12m at 31st December 2022 (2021: £13m) a decrease of
£1m attributable to the loss for the year.

**Cash flow and working capital**

The Group ended the year with a cash balance of £3.9m (2021: £6.2m).

Cash generated from operating activities for the year amounted to £0.5m (2021: £
2.1m). There were no further inflows from investing activities during the year (
2021: £7.7m).

Cash expended was on capitalised product development of £2.2m (2021: £1.4m) payment
of debt, interest, lease liabilities and equipment of £0.5m (2021:£4.3m). Additionally
a further loan of £0.1m was made to a fintech start up to explore the disintermediation
of banks on retailer’s cost of bank payments. Which taken together with our opening
cash balance of £6.2m gives the closing cash balance at the year- end.

**IPO and admission to AIM**

In June 2021 itim was admitted to AIM, a market of the London Stock Exchange after
a successful initial public offering raising £8m (gross) to support its growth strategy
as it continues to transition to a subscription-based revenue model.

**Equity**

There were no changes in equity during the year.

On the 28th June 2021 the Company issued 5,194,806 new 5p shares at 154p each raising
£8m in new equity.

In May 2021 as part of the listing process, the Company purchased 110,251,743 deferred
shares for 1p and subsequently cancelled that class of share whilst creating a capital
redemption reserve of the same value.

Additionally, the Company undertook a capital reduction transferring £10,468,919
of share premium to retained earnings.

**Ian Hayes**

**Chief Financial Officer**

**13th April 2023**

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