TIDMESYS
RNS Number : 2160R
essensys PLC
28 February 2023
28 February 2023
essensys plc
("essensys" or the "Group")
Half Year Trading Update
Revenue growth of 18%, accelerated implementation of plan for
profit and cash generation
essensys plc (AIM:ESYS), the leading global provider of flexible
workspace technology, announces an unaudited trading update for the
half year ended 31 January 2023 ("H1 FY23").
Financial Highlights
-- Trading during H1 FY23 was in line with management's expectations
-- Total revenue grew by 18% to GBP12.9m (H1 FY22: GBP10.9m),
driven primarily by the Group's North American business, which
generated growth of 36% to GBP8.1m (H1 FY22: GBP5.9m)
-- New site deliveries increased by 31% year on year resulting
in non-recurring revenue of GBP2.3m in H1 FY23, twice that of H1
FY22 (GBP1.1m), reflecting higher volume and value of sites, with
average non-recurring revenue per site up 69%
-- New sites are generating 17% higher contracted recurring
revenue per site than closed sites on average, mitigating impact of
lower value churn
-- 76% of new sites live in H1 FY23 with strategic customers(1)
-- 89% of new deals signed in H1 FY23 with strategic customers(1)
-- GBP1.5m ARR from contracted sites not yet live at 31 January 2023
-- Net cash at the period end was GBP12.6m (31 July 2022:
GBP24.1m) due to the timing of working capital movements, expected
to normalise post-period end; the Group remains debt free
-- Accelerated strategy to drive profit and cash generation
Accelerated strategy to drive profit and cash generation
In line with previous guidance, the Group has commenced a
reorganisation of its global operations to position it for
sustainable growth, profitability and a return to cash generation
whilst remaining within its existing cash reserves. This
reorganisation is expected to deliver a total of GBP7.5m annualised
cost savings and will result in the Group being run-rate Adjusted
EBITDA positive during the first quarter of FY24 and run-rate cash
flow positive by the end of FY24 with the Group expected to
maintain a minimum cash balance of at least GBP3m going
forward.
This simplification of global operations and move from regional
to functional leadership will also deliver an improved customer
journey with better alignment.
The reorganisation comprises a centralisation of the sales and
marketing function, reorganisation of operational capabilities and
streamlining the executive and regional management structures. The
Group's go-to-market capability has been centralised under the
leadership of a newly appointed Group Chief Revenue Officer, Daniel
Brown, who will be responsible for all sales and marketing
activities globally. The Group's APAC operations have been
centralised in a hub location in Sydney, Australia, resulting in
the closure of its Singapore and Hong Kong based offices. All Group
customer operations have been streamlined into global functional
teams. Collectively, these actions have removed the need for
regional executive leadership and as a result the regional CEO
positions have been removed.
The Board has concluded that the reorganisation and resultant
simplification of operational structures has also removed the need
for a Chief Operating Officer ("COO"). As a consequence and by
mutual agreement, Alan Pepper will be leaving the business. Alan
has been a valued and important leader at essensys as CFO and COO
in the past five years, helping to oversee the significant
development of the business including its culture, strategy and
global operations. Alan will step down as an executive director
immediately but remain with the business until the end of May 2023
to provide an orderly handover of responsibilities.
Management will provide further detail on this reorganisation
following the publication of the Group's half year results.
Customers
New strategic customers with whom we have taken first sites live
during H1 FY23 include: a global commercial real estate leader with
over 500 locations in over 100 countries; a North American operator
with 100+ locations; the largest owner of offices and logistical
assets in Dublin; one of Australia's leading flexible workspace
consultants; and a Singapore based innovative provider of urban
space solutions.
This solid performance with strategic customers and higher value
accounts was achieved despite continued macroeconomic volatility
which has seen continued churn at the lower end of our customer
base. Large customers continued to close lower value sites as part
of their ongoing focus on entering premium spaces to drive their
growth plans; this was particularly prevalent in the second quarter
of the financial year. The Group closed H1 FY23 with 459 Connect /
essensys Platform sites, an increase of 1 on the FY22 closing
position.
Outlook
-- Early trading and outlook for H2 FY23 continues in line with
management's expectations, with increasing value of pipeline
including a number of significant new strategic customer
opportunities globally.
-- The Group remains on track to deliver revenue and Adjusted
EBITDA(2) in line with market expectations(3) . Cash at the end of
FY23 will be lower than expected as a result of the restructuring
and inventory levels, but underlying net cash outflow will be lower
than H1 FY23 as a result of working capital timing.
-- The Group's focused approach on addressing the needs of and
driving further growth with its strategic customer accounts, in
particular in the US and EMEA regions, alongside a focus on
profitable growth through its tried and tested land and expand
go-to-market approach underpins the Board's confidence in
delivering value to shareholders over the long term.
Jon Lee, Chairman of essensys, said:
"I would like to thank Alan on behalf of the Board and
colleagues across essensys for his commitment and support during
his five years with the business. Alan has been an integral part of
the executive management team, as CFO and more recently as COO
during a transformative period for the business. He will leave with
our best wishes for his future career."
Mark Furness, Chief Executive Officer of essensys, said:
"essensys grew revenues strongly in the first half of our
financial year and is accelerating plans to return to profitability
and cash generation. Our performance has been positive despite
challenging market conditions - and I would like to thank our
people for their continued hard work and dedication, including
those who have recently left us. Our customer base, focused on
best-in-class global real-estate leaders, is benefiting from
long-term, structural demand for premium flexible workspace.
The strength of our platform and market position is helping us
win new customers which match our ambitions for significant growth
through our proven 'land and expand' strategy. This is reflected in
increases in the amount of revenue we are making from our sites.
essensys has a clear strategy, a proven track record of growth and
innovation and a clear plan to return to profitability in FY24 and
generate positive annualised cash flow by the end of FY24."
This announcement contains inside information for the purposes
of UK Market Abuse Regulation. The persons responsible for
arranging the release of this announcement on behalf of the Company
are Mark Furness, Chief Executive Officer, and Sarah Harvey, Chief
Financial Officer.
For further information, please contact:
+44 (0)20 3102
essensys plc 5252
Mark Furness, Chief Executive Officer
Sarah Harvey, Chief Financial Officer
Singer Capital Markets (Nominated Adviser +44 (0)20 7496
and Broker) 3000
Peter Steel / Harry Gooden / George Tzimas
FTI Consulting
Jamie Ricketts / Eve Kirmatzis / Talia Shirion +44 (0)20 3727
/ Victoria Caton 1000
About essensys plc
essensys is the leading global provider of software and
technology for flexible, digitally-enabled buildings, spaces and
portfolios. As the intelligent digital backbone, essensys provides
a powerful platform that simplifies the delivery and management of
next generation, flexible commercial real estate.
The real estate industry is transforming - it must be flexible
to changing market demands, to accommodate hybrid working styles,
agile, move-in ready spaces and the delivery of on-demand digital
services. The office sector is becoming an increasingly
digital-first landscape - driven by end-user demand, delivering
digitally enabled spaces is key to success. The essensys Platform
has been designed and developed to help solve the complex
operational challenges faced by landlords and flexible workspace
operators as they grow and scale their operations. It helps our
customers to deliver a simple, secure and scalable proposition,
responding to changing occupier demands, providing seamless
occupier experiences, and realising smart building and ESG
ambitions.
Founded in 2006 and listed on the AIM market of the London Stock
Exchange since 2019, essensys is active in the UK, Europe, North
America and APAC.
Notes:
1. Strategic customers are those customers who have potential
for at least 20 sites and $1m ARR.
2. Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, exceptional costs and other non-trading
items such as impairment, exchange differences and share option
charges
3. The Board of essensys consider that current market
expectations for the year ended 31 July 2023 are total revenue of
GBP27.8m and an Adjusted EBITDA loss of GBP6.9m.
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END
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