itim Group plc (LON:ITIM) Chief Executive Officer Ali Athar caught up with DirectorsTalk for an exclusive interview to discuss highlights from their full year results, strong recurring revenue base, what they do for their clients, their new retail advisory committee and what we can expect in the next 12 months.
Q1: First off, congratulations on itim Group’s results that you released this morning. Can you just take us the highlights please?
A1: We announced, as you said, our results for the year ending December last year and the good news is that we met and slightly beat market expectations and our forecasts which we’d given at the time of the IPO.
The reason why the results are strong results is because our main objective, although we showed £3.5 million of revenues for last year, was to focus on recurring revenue and our ARR – annual recurring revenue – that’s booked. our recurring revenue is at 77% and our ARR as a percentage of revenue at the end of last year was around 82%. So, we’re heading in the absolute right direction, which is we want to be a strong subscription-based software business, showing strong recurring revenues.
The good news about us, unlike our many of our competitors, we’re managing to drive recurring revenue growth whilst staying EBITDA positive and that’s been a hallmark of our business since we’ve started that we’ve tried to stay cash positive. Although we raised about £8 million in the float last year, at the end of the year we still had £6.2 million in cash.
So, basically, we ended the year as we wanted to, strong, and reflecting that the proposition that we have is a strong one and well received by the market.
Q2: You talked about the strong recurring revenue base, it must give you confidence to achieve market expectations?
A2: Yes, definitely. The truth is SaaS-based companies, the markets now believe that we have to drive strong revenue growth and in the long term forecast that we submitted as part of the float, we predicted that we would achieve 30% annual increase going forward from the end of last year. So, achieving our ARR is very important because that’s what the market expects us to do is to achieve it and then to drive that growth going forward.
The other aspect, obviously, for any software business is that the recurring revenues are the real value drivers so that’s really what we are focusing on.
Q3: Just drilling down then, you’re working with more than 50 major retailers, including WH Smith, Majestic Wine. Can you just run us through some of your clients and talk us through what you’re doing for these customers?
A3: So, basically there’s two major themes that are running through what we’re trying to do for retailers.
The first is the theme is omnichannel. We’re trying to help retailers become omnichannel excellent, and the reason for that is we believe that if they are truly omnichannel, they can offer their consumers direct home delivery direct from their stores including things like click and collect and varied customer journeys that consumers are now demanding. What that means is that these omnichannel retailers end up being more convenient, provide better service than their online competitors. So, omnichannel has been a strong theme in terms of what we’re trying to help retailers achieve. Mainly our omnichannel proposition is targeted to retailers anywhere from £50 million in turnover to just shy of £1 billion in revenue so it’s what we call tier two retailers.
In addition to that, we have what we call our AI-driven propositions, which are all around optimizing so optimising stock, ranging, pricing and so forth, and we’ve been very, very successful in pushing that to what we are calling tier one retailers, which are retailers over £1 billion in revenues.
Our omnichannel platform is seen significant growth, particularly international so we have over 30 retailers using omnichannel platform in South America, we’ve been breaking into the US and obviously building on our strong UK customer base.
So, those are the two halves, if you like, about business. International sales now account for about 30% of our total revenues and we’re obviously targeting to expand internationally more aggressively as we grow as a business.
Q4: Now, the company also has a new retail advisory committee. Can you tell us more about that?
A4: What is clear is that when we floated, one of the criticisms of our business was that we were one of the best kept secrets in retail and part of the floatation was to try and increase our visibility and make sure that we can get to more retailers and that we become a market leader. One of the best ways of doing that is to demonstrate that experienced retailers are either on our Board, have invested in us or are advising us going forward.
So, as you know, Justin King is on our Board and is also a shareholder but in addition to that, we have attracted a number of retailers to become our advisory board members. Really the purpose of this is that they act as brand ambassador for the company, both in terms of helping direct our strategy but also in communicating the proposition that we have to people they know or they meet and so on.
In addition to Justin, we’ve got Lee Williams who used to be the Finance Director of French Connection also on our Board, we have Beth Butterwick who’s the CEO of Jigsaw and Simon Forster, who was for 10 years the CEO of Selfridges. We also have Chris Brook-Carter who’s currently the CEO of The Retail Trust, which is the largest retail charity and obviously knows a lot of retailers, and before that he was Managing Director of Ascential.
Basically, the idea is that the advisory board is there to help us, guide us, and act as brand ambassador for us going forward.
Q5: Looking forward, what can we expect to see from itim Group in the next year?
A5: Well, as we said to our investors, our objective is to continuously drive growth. We’re trying to drive 30% growth per annum on our recurring revenues, our recurring revenues at the end of last year, ARR, if you like, was £11 million, we said we were going to do £14 million at the end of this year.
We just did a trading update about three weeks back and where we are is that we were saying we were going to increase our recurring revenue by £3 million this year and by the start of May, we’d already booked £2 million of that. So, it was a very positive trading update as far as investors were concerned, because they said, you’ve done two thirds of your target revenue by May so obviously they’re hoping and anticipating that we do better than our forecast by the year end.
We believe that we will achieve our numbers but more important, we think there’s a good appetite for the propositions that we’re bringing to the market and we have a strong prospect list that we’re targeting.
However, having said that, it’s very important to understand that the retail environment is changing, not only have we had a war in Ukraine but we’ve had energy increases, we are seeing massive cost increases, supply chain problems and staff wages are going up. So, I believe retailers will be under profit pressure this year and we believe that should force them to be more aggressive in their drive to increase productivity and that drive’s going to come to increased digitisation. We hope that that will act as a spurt in what we’re trying to do in supporting them in their growth rising profits.