itim Group plc (LON:ITIM) Chief Financial Officer Ian Hayes caught up with DirectorsTalk for an exclusive interview to discuss the 260% increase in EBITDA, new contract wins & extensions, strong cash position, The Entertainer contract extension, and what we can expect from the Group in the coming year.
Q1: Ian, could you start by explaining the key factors behind the significant 260% increase in EBITDA?
A1: itim Group’s goal for 2024 was to break even as a business, so I’m delighted that we’ve moved into profitable territory and exceeded expectations. To understand the increase, it’s important to consider our revenue streams.
We have subscription revenues, which are recurring and build long-term growth and stability. These generally arise from big transformation projects and can take up to 12 months to implement, generating large subscription values. Then we have services revenues, which are generally smaller short-term projects completed within about three months. This drive in-year profitability and cash.
As market sentiment changed, we listened to our investors and adjusted our focus. In 2024, we undertook more short-term customer projects, driving services revenues and cash. We also reviewed our cost base and made adjustments in Q1 2024. Together, these actions have driven the substantial increase in EBITDA.
Q2: What new contract wins or extensions contributed to the revenue growth, and do you anticipate similar opportunities in the near future?
A2: In 2024, we refreshed our Board, bringing in two ex-McKinsey consultants. The addition of Colin, our Chairman, and Dennis, one of our non-executive directors, has definitely impacted conversations with new logo customers, driving a strong pipeline for 2025.
While we can’t win everything, we are cautiously optimistic about new contract wins in 2025. Additionally, our customers have lists of projects to drive their own growth and profitability, providing a good pipeline of short-term services revenues that will drive profitability in 2025.
Q3: The group ended the year with cash balances of £3.8 million, significantly ahead of expectations. What were the main drivers behind that strong cash position?
A3: At the end of 2023, our cash balance wasn’t where I expected it to be due to some collections we didn’t make. This year, we made a concerted effort to collect outstanding amounts, which was successful. Additionally, although the contract with The Entertainer took a while to complete, we finalised it in Q4 and backdated the renewal to February 2024. This led to a significant uplift in billing in the last quarter, driving the cash balance to nearly £4 million.
Q4: Can you share more details about the five-year contract extension with The Entertainer and its expected impact?
A4: In April, we announced that The Entertainer had asked itim Group to undertake a project to enable their partnership with Tesco. The project was a great success, delivered on time, and resulted in a five-year renewal of the subscription. This reflects the successful outcome of the project and The Entertainer’s confidence in itim, locking us in for the long term.
We are now processing more transactions as increased sales of The Entertainer’s toys are being sold through Tesco, which has uplifted the subscription value in 2025 and will continue to increase as sales grow.
Q5: Looking ahead, what can we expect from itim Group over the next year?
A5: We aim to build on the success of 2024 and continue our profitability into 2025. However, this optimism is tempered with caution. The budget has not been kind to business, and we’ve faced increases in our cost base due to changes affecting employees. The retail sector has been hit hard with the removal of business rates relief, increases in the minimum wage, and national insurance contributions. However, this could be a blessing for the group, as retailers look to drive efficiencies in their cost base while growing their top line, turning to itim to help them maximise their performance and transform their businesses.
