5 August 2019

The Panoply Holdings PLC

("The Panoply", or the "Group")

Preliminary results for the year ended 31 March 2019

Maiden results demonstrate success of model, philosophy and market opportunity

The Panoply (AIM: TPX), a digitally native technology-enabled services company, is pleased to announce its unaudited results for the year ended 31 March 2019.

Pro Forma Financial highlights¹

Statutory financial highlights³

Pro Forma operational highlights

Transactions

Post-period highlights

Neal Gandhi, Chief Executive Officer, commented:

"I am very pleased to be reporting our first year end results as a public company, delivered ahead of our expectation at the time of our IPO in December 2018. Since we joined the market, our existing businesses have experienced strong continued growth and in the period we successfully completed a further three acquisitions, bringing two leading companies in key technologies, and D/SRUPTION into the Group. We also launched human+, enabling The Panoply Group to deliver robotic process automation to our clients.

Post-period, we completed our eighth and largest acquisition to date with the purchase of FutureGov. The Panoply now operates as a very strong disrupter to the large IT services incumbents in the public and health sectors, and we are excited to be driving forward the Group's development in this field.

We are very excited by the opportunity ahead, particularly as we begin to combine our offerings into specific vertical markets. We are beginning to reach critical mass in the public sector, health and not for profit sectors and at the same time are beginning to win substantially larger commercial sector clients. All of this bodes well for continued organic growth across the Group. At the same time, we continue to focus on M&A that strengthens our business. As a result of both strategies running in parallel, we are confident that the Group will be able to sustain momentum over the year and achieve market expectations for FY2020."

¹ All figures are reported proforma and on a similar basis as in Panoply's recent Admission Document on the assumption that Manifesto Digital Limited, Not Binary Limited, Questers Global Group Limited and Bene Agere Norden AS were owned for the full period and Deeson Group Holdings Limited, iDisrupted Ltd and Greenshoot Labs from the date of acquisition. The information was prepared in this way in order to provide investors with a clearer picture of the performance of the entities on a combined basis.

² Adjusted EBITDA is a non-IFRS measure that the Company uses to measure its performance and is defined as earnings before interest, taxation, depreciation and amortisation and after add back of exceptional items related to the IPO and acquisitions made by the Group, share based payments and fair value movements

³ The Statutory accounts reflect the revenue and profits of the subsidiaries from the date of acquisition rather than on a pro forma basis

⁴ Based on all companies acquired during the year

Enquiries:

About The Panoply

The Panoply is a digitally native technology-enabled services company, built to service clients' digital transformation needs. Founded in 2016, with the aim of identifying and acquiring best-of-breed specialist information technology, design and innovation consulting businesses across Europe, the Group collaborates with its clients to deliver the technology outcomes they're looking for at the pace that they expect and demand.

www.thepanoply.com 

Chairman's statement

I am delighted to be reporting on an eventful and successful year for The Panoply, with the team having reached a number of milestones in just twelve short months. Most seminal of those was our successful IPO in December 2018, which saw The Panoply take shape, and our four initial Group companies acquired.

Following the IPO, strong momentum has been maintained with four further key events taking place in the period, including the acquisition of a leading digital agency and an artificial intelligence business, the launch of human+, an early stage investment into the high growth area of robotic process automation, and the acquisition of D/SRUPTION. Post-period a further, transformational deal was completed with the purchase of FutureGov, which opens up additional opportunities for all of our Group companies and means that The Panoply now offers an end-to-end solution to public sector and health clients as an alternative to the big systems integrators.

Alongside the growth of the UK cluster, The Panoply's central offering has been significantly developed over the period, with the M&A team strengthened and our Group marketing platform created through the acquisition and progression of D/SRUPTION.

It has been a particularly exciting period for those of us who have been with The Panoply since inception, seeing the team grow from a group of just three individuals with an ambitious vision to change the digital service consultancy model, to a Group which, as at 30 June 2019, now employs over 300 people and is at work delivering value for end clients every day.

Corporate governance

Despite having been incorporated less than three years ago, The Panoply Board has committed to a corporate governance approach commensurate with more mature businesses and has applied the principles set out in the QCA code to the Group.

Alongside our central governance function, a non-executive director is appointed by the Board to the board of each Panoply Group Company to provide governance support. All new acquisitions go through a 100 day integration plan which covers areas such as back office finance functions and KPI reporting. This is designed to provide the central Group with the ability to impose robust standards on all Group companies.

As an early-stage business, it is a priority to keep all our shareholders up-to-date and engaged. The IPO attracted investment from both private and institutional investors. We appreciate that they share our longer-term ambition and we are committed to transparency in all our corporate communications. 

People

The different companies' teams working under The Panoply umbrella are connected by shared values; they strive to be entrepreneurial, creative, ego-free and conscious in all that they do. Alongside this we have a management team who have clearly shown their dedication, ambition and skill in their execution of these encouraging results.

Purpose

Since inception, we have made it clear that The Panoply is a purpose driven Group that wants to leave the world a better place than it found it.

This represents a key differentiating factor for our staff, and the businesses which choose to work with us. Over the last few months our focus has been on identifying exactly how we can make the maximum positive impact possible, in a way which benefits all our stakeholders and the wider community.

We are in the business of innovation, but we understand that change is not always good for everyone. Therefore, we are committed to building sustainable futures. By collaborating with clients, colleagues and communities to drive positive change, we help them to thrive tomorrow and beyond.

The Group's Sustainable Futures work is divided between four primary focus areas: helping communities to thrive in a digital future, making the tech industry fair and accessible, putting employee wellbeing first and minimising our environmental impact. In order to hold itself accountable, The Panoply is publishing targets in each of these areas and progress against those targets each year in the annual report.

Outlook

The Group has made huge strides in a very short space of time to create a business that can address the evolving needs of its customers, whilst serving a clear purpose and delivering tangible benefits to all stakeholders.

The current year has started well, and we are confident in meeting our full year ambitions. With the investments made in new service areas not expected to deliver returns until later in the year and taking into consideration the enlarged central cost base of the Company following IPO, we would expect profitability for the year to be largely second half weighted.

We continue to have a strong pipeline of potential acquisitions and as our success builds, believe we will become an increasingly attractive home for well run, entrepreneurial businesses keen to displace the incumbent model in the market.

Chief Executive's review

I am very pleased to be reporting our first full year results, delivered ahead of our expectations set at the time of our IPO in December 2018.

Having listed with just under four months remaining in our financial year, it was at this point that we could begin in earnest the execution of our growth strategy through the pursuit of complementary acquisitions and cultivation of collaboration between Group companies. We made considerable progress in both these areas, with seven acquisitions successfully completed, including the initial four on IPO, and multiple collaborations seen across Group companies.

At an operational level, we have begun the bedding in of our differentiated, 21^st century operating model and building a central team capable of overseeing further growth.

The level of market demand for The Panoply's services is continuing to grow at pace as we extend the capabilities and reach of the Group. The opportunities available are larger in scale than expected at inception and we will be focused on delivering against this growing opportunity in the year ahead.

Admission to AIM

Our IPO led to the formation of The Panoply and gives us the financial strength and stability to grow our business. This stability gives clients the confidence to trust us with ever more strategic and high value engagements. It provides us with the necessary working capital to invest in each of our business units, as well as providing an equity base to achieve our acquisition ambitions.

Growth strategy

The Panoply Group's strategy comprises of two primary elements: to acquire best-in-class technology service businesses in order to build regional clusters of complementary companies which together offer the full suite of digital transformation services; and to help those acquired companies to achieve accelerated organic growth through cross selling, upselling and creating joint propositions, as well as investing in new growth opportunities where there is a clear demand.

The Group is targeting the acquisition of companies providing certain services in key emerging technologies. It aims to acquire businesses that buy into the values of the group and provide one or more of the below:

·      additional capability

·      entry to new sectors

·      scale

The Group also invests into new teams, new practices, and supports either internal or external startups where there is clear demand. At the heart of our strategy is the Group's acquisition formula, which is designed to attract ambitious companies, confident in their ability to grow profitably.

We support acquired companies to achieve enhanced long-term organic growth through access to listed status, cross-selling opportunities, enhanced marketing and an improved ability to attract talent.

Overview of performance

The year to March 2019 relates to a time period both before and after we became a public company. On a pro forma basis the Group has delivered combined revenue growth for the year of £22.1m, an increase of 42% over the corresponding period last year. Pro forma adjusted EBITDA also saw strong growth, increasing 30%.

This growth was driven by an increase in customer numbers across our constituent companies, up 18% to 191 again on a pro forma basis. Notable customers include DVLA, Ministry for Housing, Communities and Local Government, News UK and the National Trust.

The Group saw particularly strong growth from the not-for-profit, health and public sectors. This increase was mostly organic, driven by the strong presence Group companies have in these markets. Following The Panoply's post-period acquisition of FutureGov, we expect circa 45% of Group revenue, on a proforma basis, to originate from the health and public sectors. With Public suggesting the UK GovTech market could be worth £20 billion by 2025 (Unlocking the Potential of Startups to solve public problems, Public.io report 2017), the Group is excited about its ability to offer a truly differentiated proposition to the incumbent larger systems integrators in this industry and grow market share.

As a breakdown of services, the greatest proportion of Group revenue currently originates from the provision of Experience, XaaS and Transformation services (26%, 27% and 36% respectively). Intelligence and Automation, whilst currently a smaller proportion of the Group's business, are significant potential growth areas with large client opportunities in the pipeline.  

In the period we launched human+, a robotic process automation business that believes success is achieved through enabling and re-training the people central to its adoption. human+ has worked closely with Blue Prism and Thoughtonomy (which was recently acquired by Blue Prism). The primary focus for human+ is the public and health sectors with post-period contract wins including UCL and NHS Wales.

Performance against growth strategy: Acquisitions

Following Admission to trading on AIM on 4 December 2018 and the resulting completion of our target acquisitions, alongside the completion of three subsequent acquisitions during the year, the launch of human+ as a subsidiary of Notbinary, and the post-period acquisition of FutureGov, the Group now comprises:

All acquisitions were completed in line with the Group's strategy and have added either entry into new sectors with growing market opportunity, such as conversational interfaces, or additional scale. All management teams have demonstrated their commitment to The Panoply's values and ethos. All are subject to the acquisition formula.

Also acquired in the period was D/SRUPTION, a digital transformation community, focused around a magazine, newsletter, research papers and events, in order to provide a marketing platform for The Panoply's Group companies. The D/SRUPTION's flagship event, the European summit, is scheduled for September 2019 and will see The Panoply leading a dedicated track focused on the public sector and health as well as a workshop targeted at not for profits. Combined with whitepapers, round table dinners and advertisements, D/SRUPTION has already demonstrated that it has the capacity to provide a more powerful marketing umbrella for our Group companies than they would be able to create for themselves.

Our Group company, Greenshoot Labs, has released OpenDialog, an open source conversational management framework focused particularly on regulated industries in public sector, health, not for profits and the commercial sector, particularly financial services. Post period contract wins for Greenshoot Labs include the Defence Science and Technology Laboratory and global audit firm BDO.

We are particularly excited about the post period acquisition of FutureGov. Over more than a decade FutureGov has built an enviable reputation for the delivery of scaled digital transformation and organisational change across government organisations, saving money and improving outcomes for citizens at local and national level across health and public services. Digital transformation in the public sector follows a defined process from Discovery, where the suitability and need for a new service is assessed, through to Alpha where a proof of concept is created, then to Beta where a scaled full version is delivered and then to Live. Historically, FutureGov has had a reputation for Discovery and Alpha phases, typically ending their engagements there or partnering with third party organisations for the Beta and Live phases. On the other hand, NotBinary has typically succeeded in winning engagements from the Alpha phase onwards. By combining the sales efforts of the two, we now have an end to end proposition that is a credible alternative to the large systems integrators, and we will look to further develop this into single holistic offering where appropriate this deal is a game changer that cements our public sector and health and we are hopeful that it leads to considerable future success.

Performance against growth strategy: The Panoply multiplier effect

Whilst the businesses under The Panoply umbrella have been working in tandem and with the ethos of The Panoply for a limited period, and for some only a number of weeks, we are already beginning to see signs of success from their collaborative efforts.

Since IPO the Group has won numerous new collaborative projects, including work with Food Standards Agency, Cancer Research UK and Young Epilepsy along with Norway based BBL Digital.

Outlook

The board and I are delighted with the progress the team has made since listing and believe these maiden results have begun to demonstrate the success of our model, philosophy and the strength of the market opportunity.

Based on these strong results and the opportunities we see ahead of us, we made the decision to invest further in our new service lines, particularly in the fast growing areas of robotic process automation, applied artificial intelligence and conversational interfaces, with an emphasis on regulated industries.

These investments, together with the cost of now being a listed company, will impact the Group's EBITDA in the first half of the year, leaving it lower than the pro forma interim results announced in December 2018. However, the strong ongoing performance of the Group businesses, contracts won post period end and the growing pipeline of opportunity underpins the Board's confidence in achieving market expectations for the year as a whole. In line with the Board's confidence for the second half FY20, the Company makes no changes to its full year guidance and in line with our Admission Document reiterate our intention to pay a dividend following the conclusion of the results for the financial year ended 31 March 2020.

We are excited about the year ahead and to continue delivering on our vision to build a 21^st Century provider to solve our clients' 21^st Century problems. The digital transformation journey for many organisations remains at the earliest stages and we are increasingly well placed to help clients on those journeys, and as a result deliver over the year and continue to create value for all our stakeholders.

Neal Gandhi

Chief Executive Officer

Financial review

In our Admission document we reported financial information on a pro forma basis. This showed the results of the Group as if The Panoply had owned Manifesto Digital Limited, Not Binary Limited, Questers Global Group Limited and Bene Agere Norden AS throughout the reported periods.  The information was prepared in this way in order to provide investors with a clearer picture of the performance of the entities on a combined basis.

These maiden full year results have been prepared on a statutory basis. As such they only reflect the revenue and profits of the entities above since the date of acquisition on 4 December 2018 as well as including the results of Deeson Group Holdings Limited, iDisrupted Ltd and Greenshoot Labs Limited from the date of acquisition.

In order to compare the results of the Group with the Admission document and our interim results, we have also prepared certain pro forma information for the year to 31 March 2019.  The pro forma numbers are prepared on a similar basis to those numbers included in the Admission Document, on the assumption that Manifesto Digital Limited, Not Binary Limited, Questers Global Group Limited and Bene Agere Norden AS were owned for the full period and Deeson Group Holdings Limited, iDisrupted Ltd and Greenshoot Labs Limited from the date of acquisition.

Statutory results

Statutory revenue for the year was £8.2m reflecting the initial acquisitions completing on 4 December 2018 and the three subsequent acquisitions completing prior to 31 March 2019.  Adjusted EBITDA prior to exceptional items was £0.4m and the loss after tax was £1.7m.

Negative operating cash flows of £0.9m are a reflection of the exceptional costs relating to the acquisitions and the IPO totalling £1.4m. There were other significant cash movements during the period including the £5m placing completed in December 2018, £7.0m taken over from subsidiaries acquired in the year as well as £5.6m cash paid out as part of the acquisitions to vendors.

The Group's cash position was strong at the end of the period with £5.7m on balance sheet reflecting the oversubscribed placing at the IPO which raised gross proceeds of £5m.  Post year-end we completed the acquisition of FutureGov which included the payment of consideration including cash and ordinary shares. In order to help fund the acquisition The Panoply entered into a three year £5m revolving credit facility with HSBC (the "RCF Facility") pursuant to which £3.55m was drawn-down to pay a proportion of the cash consideration. The undrawn facility is available to use for further acquisitions or working capital.

As at 31 May 2019, assuming all payments in connection with the acquisition of FutureGov had been made as at that date, the Group retained cash reserves of approximately £4.75m.

Pro forma results

The following table shows the results of the Group on a pro forma basis and reconciliation back to the statutory numbers.

* This shows the unaudited results for the four subsidiaries acquired at IPO from 1 April 2018 to 4 December 2018.

** Revenue of £621,000 and an Adjusted EBITDA loss of £89,000 relate to Deeson Group Holding Limited, iDisrupted Ltd and Greenshoot Labs. This reflects the results of these businesses between acquisition and 31 March 2019.

On a pro forma basis the Group has seen significant growth in both revenue and EBITDA during the year. Revenue has increased by 42% from £22.1m to £15.6m.  4% of this growth related to the three acquisitions completed after the IPO with the remaining 38% being organic growth. Adjusted EBITDA has increased from £2.7m to £3.5m.

This growth has been driven largely by our established businesses operating across the Experience, and Transformation service lines. We have made investment into the Automation and Intelligence service lines with the incorporation of human+ and through the acquisition of Greenshoot Labs in the latter part of the financial period. As a result, we expect these lines to grow in the coming year.

We also monitor revenue across Commercial, NGO and Government and we have seen significant growth in our government sector business, which accounted for 33% (2018: 13%) of pro forma revenue in the year.  We expect this to increase further following the acquisition of FutureGov in June 2019.

Whilst we have seen a rise in EBITDA margins (excluding central costs) from 19% to 20% in the current year, including central costs the EBITDA margin has fallen from 17% to 16%.  Central costs were £0.97m in the period. In FY2020 the Group will see this rise with the impact of a full year of an enlarged cost base, a reflection of the key recruitment completed after IPO, as well as the associated costs of being an AIM quoted company. Going forward, it is not anticipated that significant increases to the cost base are needed in order to scale.

We expect to see a reduction in EBITDA margin in the first half of the current year as a result of the additional central costs and investments made into new service lines as set out above.

Because of the 15 month period reported in the Admission Document, this year it has been difficult to show certain information on a like for like basis.  In following periods we intend to show full details of revenue split by services and sector.

Additional consideration

As a result of the strong trading during the period and growth in three of the four businesses acquired at IPO, a total of £10.9m is payable as earn out consideration in ordinary shares in the Group.  These shares are to be issued at the higher of 74p (being our price at IPO) and the prevailing share price at the time of issue. The maximum total number of shares to be issued therefore in respect of results during the period is 14,665,516 which reduces to 11,130,751 based on the closing share price on the day prior to this announcement. The ordinary share consideration is payable over the next twenty-four months subject to certain performance targets being met. At present these targets have not been met and as a result the consideration payments have not yet been made. 

The earn out period on the initial four acquisitions runs until the results to 31 March 2020 and we therefore expect further adjustments subject to performance during the current year.

Oliver Rigby

Chief Financial Officer