Earnings Call: H2 2024

Sep 30, 2024

Summary

FY 2024 revenue fell 4%, but margin gains lifted adjusted EBITDA 56% to £2.4m. More than £27m of early FY 2025 bookings and a £65.6m backlog supported growth prospects, though guidance anticipated a small revenue decline.

Good morning, everyone. Welcome to the Made Tech results presentation for the year ending 31st of May 2024. I am Rory MacDonald, Founder and Chief Executive at Made Tech. I am joined this morning by Neil, our Chief Financial Officer. We would like to thank you for your time today. Looking forward to taking you through what we did in FY 2024, and providing some guidance around what we are expecting to happen over FY 2025. Here is a quick overview of today's agenda. We have about 30 minutes to go through the presentation. I will start with some of the highlights from the last year. Neil will talk you through the results. I will then provide a bit of an operational update on a number of different areas, then talk through outlook for FY 2025, including some of the recent wins, and then the future growth opportunities. We will then close out with Q&A and answering any questions anyone has. In terms of highlights for the year, I think we have done a pretty good job at navigating a tricky period. We focused on really improving fundamentals while continuing to put the building blocks in place that will enable us to deliver long-term growth and success for our clients, our shareholders, and our people. We have reported revenue of GBP 38.6 million, which is a slight decrease of 4% compared to last year. This dip really reflects a more challenging macro environment, which was impacted by client budgets, project scopes, and generally the IT services and disruptive digital transformation market being a little bit more challenging over the last 12 months. Despite this, we have managed to improve our margins, so we have increased gross profit from 35.8% to 36.3%, and improved EBITDA by 56% to GBP 2.4 million. We are really pleased with the progress we have made there. Our cash flow performance has also strengthened. We ended the year with a net cash position of GBP 7.6 million. At the end of August, we had GBP 8.6 million in the bank. We are expecting to be cash flow positive in FY 2025. So overall, business is in a good place. We are well-positioned to capture future growth opportunities as they arise. The early announcements of the general election was a positive surprise for us. It has really removed a lot of uncertainty for our clients, enabling them to start planning for the long term. We had been anticipating a sort of more protracted period of uncertainty in the run-up to the general election, so to have it announced at the end of May and complete in early July was a real positive for us. There was really minimal operational impact during this period, which was great for our business. Our client relationships continue to be strong. All of the key clients that we had at IPO continue to be key clients today. Those long-term relationships really underscore the trust and confidence our clients place in us, and the consistent delivery of high-quality services that we have been delivering to our clients for many years now. And really this has been reflected in the latest kind of CSAT survey that we undertook this year, scoring 8.1 out of 10. We are really pleased with that and we will continue to prioritize client satisfaction moving forwards. Recognizing the need to gear up for the next wave of growth, we have made significant enhancements to our sales operation over the last 12 months. We have recruited new sales leaders across a variety of industry verticals, including public safety, national security, energy and utils, defense. We strengthened our bid team, so there is a new leader in that place, and we have scaled up that team. That really enables us to pursue and secure higher value contracts as we look to gain market share from some of our competitors. We are starting to see the impact from some of these investments last year and sales performance in the first few months of this year points to that, so we are really pleased with that. We turn to strategy. Earlier in the year, we undertook a pretty comprehensive strategic review to ensure our long-term objectives were aligning with the evolving market landscape. This was a process where there was close collaboration between the exec team, the board, and a number of external advisors. As a result, we have agreed a new long-term plan for the group, structured around three different stages. It is a really clear roadmap for how we are going to deliver sustainable growth over the coming years. We are looking forward to sharing more details around that at Capital Markets Day in 2025. We will share a lot more details of that in due course. Those are the key highlights I wanted to call out. I am going to hand across to Neil, who is going to talk through some of the financials. Thank you, Rory. The following is a snapshot of the financial highlights for Made Tech's 2024 results, being the year ending 31st of May 2024. Unless stated otherwise, comparative figures relate to the equivalent prior period, being the 12 months ending 31st of May 2023. The government procurement market for digital services in FY 2024 was subdued as a result of the uncertainty in the run-up to the general election and the budget constraints within government. As a result, sales bookings were down substantially from GBP 69.9 million in FY 2023 to GBP 36 million in FY 2024. Revenue, however, was only down 4% at GBP 38.6 million as a result of the company being able to work through its existing contracted backlog. Although this fall in revenue resulted in a small drop in gross profit of 3% from GBP 14.4 million in FY 2023 to GBP 14 million in FY 2024, gross margins actually increased by 50 basis points to 36.3%. This increase in gross margins was as a result of the focus on improving productivity by increasing billable utilization through improved processes and management reporting. That, combined with further cost rationalization, particularly in select support functions, resulted in a significant increase of adjusted EBITDA margins of 240 basis points to 6.2%, up from 3.8% in the prior year. Net cash declined from GBP 8.5 million at the end of FY 2023 to GBP 7.6 million at 31st of May. That said, cash generated from operations of GBP 0.5 million was ahead of operating cash outflows of GBP 700,000 in the same period last year. I will give more detail on cash flows later. Turning to look at revenue in a little bit more detail, all of Made Tech's revenues are generated in the U.K., and almost all revenue is generated by services rather than product sales. Also, the vast majority of revenue is based on time and material-based contracts, with only a small but growing proportion of revenue being generated from managed services and milestone-based contracts. The majority of Made Tech's revenue is sourced through long-term and framework contracts, often over multi-year periods, allowing for some visibility of future revenue, even where sales bookings are impacted in the short term, as we saw in FY 2024. It is the aim of management that over time we will improve the quality of earnings by fulfilling a greater proportion of revenue through managed service and longer-term milestone-based contracts. You will see in the left-hand chart a continuation of a trend that we have seen for a number of years of an increasing proportion of revenue being represented by central government and health clients and a reducing proportion by local government. Central government represented 73% of total revenue, up slightly from 72% in the prior year, and health represented 16% of total revenue, up from 12% in the prior year. This is part of a deliberate policy to firstly target larger contracts, as evidenced by our investment in client partners with specialist knowledge of vertical markets. Secondly, to address a more fragmented and underserved local government market with targeted SaaS solutions which should deliver repeatable revenue over time. You will see on the right-hand chart that Made Tech enjoys good client retention. The business has retained all key clients since IPO, and you will see continues to generate revenue from clients signed up over a number of years. Despite the reduction in revenue and absolute gross profit, year-on-year margins have increased by 50 basis points to 36.3%. This improvement reflects the right sizing of the workforce and adaptations to staffing mix over the year as well as increasing billable utilization rates. We have, over the past six months, increased the proportion of contractors in the business in order to give us more flexibility, partly because of the as then anticipated prolonged run to the general election, which was then foreshortened, but also because of specific client requirements. Our aim is that over time, we will again reduce the proportion of contractors to employees in the business. We are looking to build on these achievements with further initiatives and progress in productivity, capacity management, improved reporting, and cost control during FY 2025, and anticipate that this will continue to have a positive impact on the profitability of the business despite ongoing pricing pressures in the market. As previously mentioned, sales bookings of GBP 36 million in the year were disappointing, particularly against tough prior period comparisons of almost GBP 70 million in FY 2023 and GBP 51 million in FY 2022. Given Made Tech's size and the relative size, nature, and timing of some of the contracts for which we bid, it should not be a surprise that we will see peaks and troughs in contract awards. The largest win in FY 2024 was a contract with DLUHC, now renamed the Ministry of Housing, Communities & Local Government, for GBP 19.5 million over three years. Other notable wins included a GBP 5 million two-year contract with the Government Digital Service and a GBP 3.8 million one and a half year contract with the Ministry of Justice. What the strong sales booking of the prior periods does mean is that the contracted backlog of GBP 65.6 million at the end of the year is still the second highest that it has ever been at Made Tech, down from GBP 67.9 million at the 31st of May 2023. Furthermore, FY 2025 has got off to a very strong start, with over GBP 27 million of sales bookings in the first four months of the year, including a GBP 7.6 million contract with Met Office over two years and a GBP 13.2 million contract with the Department for Education over the next three years, announced earlier this month. While we remain mindful of the broader economic challenges and outcome of the upcoming autumn budget, the strong contracted backlog provides a good underpinning to revenue expectations for the remainder of FY 2025. The following slide shows the bridge from statutory operating loss to adjusted EBITDA. The operating loss increased from GBP 1.5 million in FY 2023 to GBP 3.2 million in FY 2024, primarily as a result of the impairment of a number of intangible assets during the year. We have categorized intangibles into two categories: technology platforms and capability IP. Technology platforms represent the investment that we've been making in a number of SaaS products focused on the local government market. Three of these, Repairs, Voids, and Evidence, were launched earlier in the year, and we saw some early success. At the time of the interims, we confirmed that we had moved to the commercialization stage of these products and reduced the spend rate on these developments. At the end of the year, we have concluded the sales cycle are longer than we had originally anticipated, and as a result, we've decided to fully write down the carrying value of these assets at a charge of GBP 3.5 million. That said, we continue to believe that there is still a need for these products in what is a fragmented and underserved market, and we are continuing to pursue these opportunities. Capability IP includes investments that we have made in our core capabilities such as data and AI and cybersecurity. As we announced at the time of the interims, we decided to fully impair the investment made in Made Tech's Apprenticeship Academy. This was a venture that had been developed alongside government departments such as HMRC and DfE, but over the past year or so, we have seen a change in demand from government clients, which meant that we no longer view this as a core revenue-generating offering, although the IP is still being used in the business. The charge in the period for that is circa GBP 900,000. All other investments in capability IP remain and are being amortized over a useful economic life of three years. Share-based payments have reduced substantially from circa GBP 2 million in FY 2023 to GBP 100,000 in FY 2024. The primary driver of the reduction has been the waiver of LTIP options by Rory, the group COO, and other options that have lapsed during the period. We expect the share-based payment charge to increase in FY 2025 as the business continues to invest in its senior leadership team and launches a Sharesave scheme that will be made available to all eligible employees. Other than the impairment, there were no other exceptional charges in the year. As a result of the above, underlying adjusted EBITDA increased substantially by 240 basis points from GBP 1.5 million to GBP 2.4 million, or 6.2%, driven largely by the gains in productivity discussed earlier. We expect these productivity gains to continue into FY 2025. Made Tech continues to have a strong balance sheet. Whilst the value of intangible assets has reduced for the reasons set out a moment ago, trade and other debtors increased to GBP 6.7 million, up from GBP 6.2 million at the same time last year. Included within this, trade debtors of GBP 4.4 million were almost wholly with government counterparties, with a good track record of prompt payment and little bad debt risk. Debtor days increased only marginally from 39 days to 42 days during the period. Liabilities, including trade creditors, have also reduced, highlighting Made Tech's focus on making prompt payments to suppliers. Furthermore, the group had GBP 7.6 million of cash at the end of the year, which at the end of August had increased to GBP 8.6 million. The group also has no debt. Lastly, turning to cash flow. You will see on the right-hand chart how the cash position of the group has tracked over the past couple of years. Of note is that in FY 2024, Made Tech generated net operating cash flows of GBP 400,000, compared with net operating cash outflows of GBP 700,000 in the prior year. Spend on the development of internally generated IP has also reduced from GBP 3.1 million in FY 2023 to GBP 1.3 million in FY 2024, as we have moved to the commercialization phase of these investments. The main bridging element from adjusted EBITDA to net cash outflow of over GBP 800,000 in the year was a negative movement in working capital, driven by the accelerated payment of creditors. We do not expect the same adverse movement in FY 2025. The company has also invested GBP 350,000 in an employee benefit trust for the settlement of future vested share options. The average purchase price per share is circa 14.5p. We anticipate that with continuing improved profitability, improvements in working capital, and reduction of intangible spend, Made Tech will generate positive free cash flow in FY 2025 and be in a position to reinvest in further organic growth opportunities and/or leverage its balance sheet to consider acquisitions in the medium to long term as part of our growth strategy. With that, I will hand back to Rory. Super. Thank you, Neil. For those of you who are new to the Made Tech story, we provide digital transformation services to government and U.K. public sector. We effectively support government bodies to move from paper-based processes and legacy operations to an approach which is digital at core, enabling public bodies to deliver improved services to citizens and generally to operate more efficiently. Our clients are organizations like the Home Office, the Ministry of Justice, Department for Education, NHS England, HMRC, Met Office. These are all significant government bodies that collectively spend billions annually on technology and change. We are really proud to count 8 of the 10 largest government bodies as active clients and pleased to support them on their transformation journeys in delivering government policies and initiatives. At our core, we are a technology services business with approximately 400 technologists employed by the business in the U.K. We have got offices in London, Manchester, Bristol, Swansea, and use a mixture of on-site and hybrid working to deliver for our clients. Our people are absolutely critical to the business success, and over the last 12 months, we have made significant strides in supporting and developing our team. We launched a people forum about 12 months ago. This is a new structure which has enhanced communication and engagement across the organization, allowing team members to voice their ideas, concerns, and feedback directly to leadership. It has been really incremental in fostering a more collaborative culture in the organization. We have invested over 7,000 hours in skill development training. This investment in our people's professional development ensures that our team remain at the forefront of industry advancement, enabling us to deliver the best solutions for our clients. We have become an apprenticeship training provider and onboarded apprenticeships through a new entry-level training program. This initiative helps us to cost-effectively build a pipeline of skilled professionals who align with the culture and values of the organization. We are pleased to see the employee retention improved and reach 81% in FY 2024. This improvement is in line with where we would expect the steady state retention levels to remain and will contribute to stability in the organization and continued delivery of quality services to our clients. I want to talk a little bit about the market where we are operating. We are focused on the U.K. market opportunity, and over the last 12 months, we have delivered approximately 80 work streams across 30 clients in central government, healthcare, and local government. Within FY 2024, we started to transition to a more industry-focused go-to-market structure. This reorganization allows us to tailor our services more effectively to the different needs of each subsector and really helped us to provide a better understanding of the industry challenges and deliver more impactful solutions for our clients. To support this new go-to-market structure, we have recruited industry-aligned sales leaders with deep expertise in specific industries, and they really enhance our ability to engage our clients at a more strategic level. They are already making a real positive impact on our business development efforts and helping us to address the unique needs of each area. We have also initiated the development of industry-aligned propositions. By focusing on industry-specific challenges and opportunities, we are able to offer more targeted and relevant solutions to our clients. This strengthens our position as a trusted partner within each industry and subsector we serve. Our organization is organized around three broad service lines, transform, deliver, and run. In transform, we advise our clients on their digital transformation journey, supporting them in areas like changes to their operating model, disaggregation of legacy contracts, business case creation, submissions to treasury, et cetera. The work in this area is nearly always very early stages, and it is delivered by a very kind of small team of specialists. The delivery side of our organizations is really where we work with our clients to deliver their digital transformation plans. Typically, this involves us delivering large-scale digital services using cloud-based technologies. Sometimes it will be citizen-facing, things like applying for a professional driving license. Other times it will be more of a back-office piece of delivery, like a data platform or an insights platform. Our delivery group is really kind of where the bulk of our workforce currently sits. It is broken down into these areas you see here around cloud and engineering, delivery management, UCD, data and AI. These practices all work together to deliver the outcomes for our clients in cross-functional teams. We then have the kind of run side of our organization where we support our customers to run their live systems via our managed service offering and through our software products. Over the last 12 months, we have seen some really good progress in a number of these areas. There is a couple I want to kind of call out. Managed services, we have seen an increased number of customers looking to use our managed services offering. As a reminder, managed services is about providing a running capability for our clients and is billed on a service level rather than a time and materials basis. We invested into building a managed service offering in, I think it was FY 2022, and we are starting to see this play through into our numbers and through a number of different contracts with our clients. The recent DfE STA win that we announced has a significant managed service component to it, and we couldn't have won that deal without this capability. We are really pleased to see that coming through in the organization. An area we have not spoken about before is our partnerships with cloud providers. This is an area we have not really focused on too much previously, but over the last 12 months, we have really strengthened our partnership with AWS, and that has played through into a number of areas in the organization and has helped us to build stronger pipeline and stronger client relationships. We expect this to be an important area for the business moving forwards. We have also scaled our data and AI practice over the last 12 months. We have seen lots of strong demand for the services in this space from lots of different parts of government. The hype around AI has clearly helped with this and is leading to lots of organizations looking at their data infrastructure and what is required to have the right foundations in place to use AI effectively. Really good to see the kind of progress we are making in those areas. If we jump onto the next slide, I am going to talk about a couple of the specific things we have been working on. The Met Office is a client we have been working with now two years. We are the Met Office's digital delivery partner, and we have actually just secured a renewal of that contract for a further two years. The Met Office is the U.K.'s National Weather and Climate Service. They deliver meteorological predictions for the public weather service, for aviation, for defense, and other sectors, and the weather models that they use are at the absolute core of their organization. One of the real challenges is evaluating the success of a new weather model. It is a complex challenge and requires lots of data and input to work out how successful it has been. We implemented a natural language processing system for the Met Office to help them automate sentiment analysis around their weather models. This technology enables them to identify patterns and trends in feedback they are getting through their mobile and web applications. It would not have been possible to detect and get that feedback without the natural language processing system that we put in place. It has really helped them to have a centralized location where they can capture that user feedback and make decisions off the back of it. As a result of the work we have done on this, the Met Office can now measure the impact of new weather models in near real time, and they are better positioned to harness the power of their own data, leading to more accurate forecasts and improved user experience. Jump onto the next slide. Another example of something we are doing in the data space is with Skills for Care. Skills for Care are the strategic workforce development and planning body for adult social care in England. We have been working with Skills for Care for approximately four years now, so they are a long-term client of Made Tech. Accurately reporting data is absolutely critical for adult social care. Historically, it has been really challenging for them to do that effectively, and the process around collecting, cleaning, analyzing their data was semi-manual, and it was very time-consuming. It would take months and months and months for them to complete this process. We put in place a solution that would enable them to maintain that data, clean that data, and put it into a structure that they could use to report their data to different government bodies much more time efficiently. We use a number of different machine learning models to do that, and it has really enabled them to get that data out into central government bodies much more efficiently. It enables them to drive more accurate reports and empower ministers and MPs to make much better data-driven decisions around the adult social care sector. Ultimately, the work we have been doing here will help to contribute to better planning resource allocation, improving outcomes for adult social care services in the U.K. So really, really important piece of work we have been doing there and something we have been pleased to be involved in. In FY 2024, we have made progress in commercializing our software portfolio, and really this is designed to address the recurring challenges faced within local government and in housing associations. We've launched three key products as part of our strategy really to diversify our revenue streams and reduce reliance on service-based contracts. Made Tech Repairs, Made Tech Voids, and Made Tech Evidence are the three products we've launched. Repairs is focused on managing housing repairs, streamlining the repair process for local authorities and housing associations. It enables them to schedule, track, and complete repairs more efficiently, reducing both costs and tenant dissatisfaction. Repairs management is a very significant pain point in the social housing sector. The solution we've launched enables an end-to-end automated and reduced administrative burden for the organizations who use it. Voids or unoccupied properties represents a significant challenge for housing associations as properties left vacant reduce rental income and increase maintenance costs. Our Made Tech Voids product helps clients manage the turnaround of these properties, accelerate the process of getting them out to new tenants. Not only does it increase the revenue, it also addresses housing shortages by ensuring properties are not empty. Evidence, our third product, is a platform for local authorities to gather, analyze, and present data to support decisions around policy and service improvement. By integrating multiple data sources, Made Tech Evidence simplifies the process for making evidence-based decisions and is an important part of helping to drive operational efficiency within local authorities. The adoption of these products has been slower than anticipated, and we've seen over the last 12 months, the sales cycle on these has been longer than we had hoped. We're hearing from a number of different local authorities that there's so much going on, it's difficult for them to adopt new kind of technologies because they have so many things in flight at the moment. The pressures that we're seeing in this market are really impacting the sales cycle we're seeing on this. That being said, we've signed up three initial customers onto long-term subscriptions for these products. We've got Barking and Dagenham, which we signed pretty recently, Camden, and London Borough of Redbridge. We're excited to have these three customers on board and using the products. The engagement from them early on has been really positive. We're really pleased to see that. Clearly moving forward, there's lots more work for us to do to kind of drive the further adoption of these products within the market. But these three kind of high-profile clients to start with, we're really pleased with. Why is kind of Software as a Service and software products important to our strategy? Really these products are part of our broader, longer-term plan to diversify our revenue base and have a mixture of service-based revenue and recurring subscription revenue in the organization. Over time, we expect that mix and that subscription mix to become larger and more important part of our organization and help to drive kind of higher margins and longer-term revenue visibility. It's an important part of our organization. Something we're expecting to continue to kind of push forward on in the long term. But recognize that there's more work to do in this area, and we need to kind of keep pushing forward on it in the weeks and months ahead. Just wanted to kind of touch on ESG and kind of social value briefly. Made Tech ESG is a real extension of our core organizational purpose. We use technology to improve society for everyone, and we measure that both by financial returns, but also by the impact the work we have on people's lives. We've made great strides in the last year in a number of different ESG-related activities. From an environmental perspective, we've partnered with C3 to achieve carbon neutrality by 2030, including a number of different innovative ways to reduce emissions from remote work. From a diversity and inclusion point of view, we've exceeded industry benchmarks with 23% of our team being ethnically diverse, 18% of our team neurodivergent. So we're seeing well above national averages in our diversity inclusion statistics. From a health and wellbeing perspective, our employee net promoter score increased by 27 points, and now we've got 4% of our team who are trained as mental health first aiders, which is really pleasing to see. From a skill development point of view, we've launched a DevOps apprenticeship program. We continue to invest in our sort of entry-level talent. We see that as a really important route to bringing the entry-level talent into our organization and having a positive impact from an ESG point of view. We've improved sustainability through partnership with the Good Things Foundation, where we donate IT devices to them when we've finished using them within our organization. That really helps to combat digital exclusion. So we're really pleased to be doing that. We've also deepened our partnership with charities like Coding Black Females, and a number of other organizations. So we're really doing lots in the business to really push the ESG agenda. We've also integrated social value very deeply into our bids process. It's a really important part of how public sector buyers evaluate a particular supplier. It's really important for us to deeply embed social value into our organization, and we've put in place a number of different initiatives and things we're doing to support our customers on their social value initiatives. We've also committed to a planet-centred design approach, so minimizing the environmental impact of our projects. As part of our supply chain responsibility, we're holding our suppliers to the same carbon reduction standards we aim for, including a recent move to a B Corp certified office in Manchester. So overall, lots going on from a social value point of view, and we see that as a really important part of our organization moving forwards, for our people, for society, and for our clients as well. Just turning to outlook. The timing of the general election was a positive surprise. It removed much of the uncertainty that previously delayed client decisions and is starting to provide a clearer set of priorities for our customer moving forwards. We've had a really strong start to FY 2025, with more than GBP 27 million in sales bookings, including the new contract with the Department for Education, worth GBP 13.2 million. We're confident that the strong performance will continue throughout FY 2025. This is supported by both the strong start and a growing pipeline that we're seeing build in the business. The productivity improvements and cost controls that we introduced last year will continue, and we're expecting to be free cash flow positive this year. Overall, U.K. public sector market remains a long-term growth market, and we're well positioned to capture new opportunities as they arrive, especially as the new government emphasizes the role of technology in delivering its priorities. Overall, we are really optimistic about our near-term and our long-term outlook, and we look forward to driving further growth and delivering value to all of our stakeholders. I think that was everything we want to cover, and we are going to hand across for Q&A. We will go to Robert Plant from h2Radnor. Robert, you just mentioned that the new government has talked a lot about technology improving services and the shift to digital. Is there anything concrete yet coming out of government or your chats with government in terms of specific benefits or areas where you think that Made Tech will be advantaged? Thanks. Yeah. There is definitely a lot going on within government at the moment around particularly orientated around the five missions that Labour have set out in their manifesto, and then right through into kind of delivery of government. There is a lot of structural work that is happening at the moment around how those five missions get delivered. There is a big focus on really the technology that is required to support those five missions. There are new mission boards and technology for mission boards that have been set up in different parts of government. There has been a fairly kind of quick restructure of certain government responsibilities around digital and technology. They have been centralized into one part of government. There is lots happening. We are expecting that will then start flowing through into new programs of work, new activity over the coming months. There's bits of it happening now, but I think the full weight of it hasn't really flown through yet. But what we are seeing is the setup that is required to start delivering on a lot of the technology to underpin what the new government was looking to achieve. We'll go to Kai Korschelt, Canaccord Genuity. I had a couple of questions, and they're sort of linked around short-term trading. It seems that the government sort of instituted new sign-off processes, right, for deals above GBP 1 million. I think a couple of your competitors have talked about weak short-term trading because of that, in terms of being able to generate revenue. So not necessarily about backlog, but really just sort of converting existing projects or the ramp up of new project into revenues. So I'm just wondering, your sentiment in your statement sounds a lot more positive. So I'm just wondering kind of how we should think about why you might be seeing perhaps slightly different trends than other players in your market. Then linked to that, I guess, I haven't seen sort of formal guidance for FY 2025. I think consensus seems to expect a sort of high single-digit revenue decline. I'm just wondering if that is correct and if that kind of is your expectation. It just sounds like both your backlog bookings, et cetera, would perhaps paint a much more upbeat picture. Thank you. Yeah. I will start with what we are seeing from clients. Yeah, absolutely, there is some additional kind of spend approval hurdles that have been put in place in certain pockets of government. I think to date, there has been minimal impact on our organization from those. The one thing I would caveat with that with is there is one contract extension which has been, that is waiting for an approval that we are very much expecting to get, but it has been pushed out a couple of months. That was the sort of one thing that we felt kind of impacted us over the last few months. But by and large, we have not seen as much of an impact as some of our competitors may have seen over the last few months. For us, I think trading is pretty good. Things are moving forwards with all of our key customers. We are not having that same level of impact that you might be seeing in other places. Do you want to touch on guidance now? Yeah, happy to. I mean, Kai, you are right. I think at the moment, guidance for FY 2025 is that, yes, we would see a small drop-off in revenue this year. In that context, we are also expecting an increase in the profitability of the business. As I talked there about a number of initiatives we have got in place, which we see continuing to FY 2025 in terms of increased productivity. I think there is an expectation that margins will tick up, and also as we were able to report in terms of the cash position of the business as well, we have increased the cash position by GBP 1 million in the first three months of this year up to GBP 8.6 million. I think in terms of the foundations which we have built in the business, we are in a very strong position. As Rory MacDonald just said, I do not think we have seen the subdued trading that maybe some other competitors have seen in the market yet. But we are nevertheless cautious. We think there are very strong tailwinds at the minute in terms of the government's priorities. I think we are probably like some other players waiting for the autumn budget, which is now only months away. Our expectation is that, yes, there will be some more bid work flowing through from that. Yes, I think cautious guidance at this stage. We are also looking to put out FY 2026 guidance as well. But I think we are hopeful that we will be able to update the market over the next few months with some positive news, if those things come off. We've got a question from Peter McNally at Stifel. Just around your. I'm just wondering what your. I know you had some headcount cuts during the year, and your gross margin has been pretty healthy. I'm just wondering, I know you don't report utilization, but how much sort of capacity do you have now to take on new contracts going forward with your current workforce? How would you? You've been winning some bigger contracts. How would you handle those newer contracts at this stage? Would that be to increase sort of the third-party consultants, or how would you go about that, please? Thank you. Yeah, sure thing. I think, if we look back over the last 12 months, we've definitely been very deliberately managing utilization very closely, and keeping tight controls on the supply-demand mix in the organization and making sure we're continuing to drive bottom line performance, but also with a view to what does the forward view look like and what does the opportunity pipeline look like, and how do we make sure we've got sufficient headroom in the organization to be able to staff up and grow revenue through new contracts and new areas. That's a constant thing we are looking at day in, day out, really in the organization as we're looking at pipeline data and contracts and things that are happening across our customers. There is a mixture of different things we are doing in terms of stuff we are starting up. The DfE example that we touched on, the new contract that we won there. We're booting that up at this point in time. We've got a team on the ground doing that. One of the sorts of things that helps us is that a number of our contracts, and typically our contracts are longer-term contracts. The DfE contract is a four-year contract. We can ramp those things up gradually with the right teams without having to hold too much capacity in the organization without the revenue flowing through it. We try and balance all these things as best as we can. Definitely at this point in time, we are looking forwards and looking at hiring and what we need to be doing to fulfill what we expect to be a busy 12 months. Okay, great. Thank you. Can you give us any sort of feel for where utilization is at the moment? Yeah. We're running nice and hot. Not too hot, but nice and hot in the organization at this point in time. We'll go to Martin Sullivan at ShoreCap. I just had a question on the sales booking in FY 2025 to date, the more than GBP 27 million. That feels like a big step up in new bookings. Obviously, you've had the Department for Education was a big part of that, and you alluded to new sales leaders and the managed services capability. I'm just wondering, what else do you feel you're doing well in terms of the bidding process? Where are you really hitting your stride? In what particular areas of the market are you seeing notable success? Is it cloud engineering? Is it user-centered design? Data and AI? Any comment there? Yeah would be appreciated. Thanks. Yeah, sure. From a services point of view, I think we continue to see strong demand across that full delivery life cycle. So, the user design side of things at the early stage, helping to kind of shape and design new services right through into the sort of the digital engineering side of our organization. The data side of things, so the analysis and the data engineering side of things. And then right through then to managed services now, we're seeing this sort of increased uptick there. So I think across the board, we're seeing a good mix of demand in all of those areas. The AI sort of data, sort of positivity and the sort of buoyance around kind of AI is definitely impacting the public sector, and there's a lot people are looking to do. Continues to be the case that from an AI perspective, a lot of it is still sort of proof of concepts, trying out things, and then the bigger programs, the bigger activities are really about data platforms, data infrastructure, the underlying ecosystems required to enable AI. So we're seeing that sort of mix continue to be the case across the board. From a demand client sales leader perspective, we're seeing good opportunities across the board. So public safety and national security, so places like the Home Office and the Ministry of Justice, policing, seeing good pipelines built in those areas. Interesting opportunities in those areas across a number of different scales. Different parts of central government, we're seeing strong pipeline in a number of different places there as well. Health is a lot more positive than it was a couple of years ago. And we're expecting that to continue to be strong. So really, lots of different parts of the organization are pretty positive at this point in time. So overall, I think the demand environment is stronger than we've seen it for a while. And I think stronger than some of our competitors have seen it at the moment. I think one of the things that has been fortunate for us is that we started to make a number of changes around the sales, the bid team, probably over 12 months ago now, as part of expecting general election to come up and there to be a sort of hotter environment post general election, post new government coming in. So we were deliberately starting to look at what are the investments we can make, where are the areas we think are going to be important, and therefore, where can we bring the right people into the organization to try and capitalize on that future opportunity. And the election has come earlier than we anticipating, so we're kind of having to push forward more quickly than we might have expected. But we had a lot of the work done already in the organization to try and get the right people in place. So we're benefiting, I think, from some of that right now. And so would it be fair to say that AI and automation is a bit of a slow burn at the moment? Or do you think it's going to gather momentum during FY 2025? I think there will continue to be good opportunities in that space. I think it will drive the fixing the data infrastructure, and there'll be a lot of expectation. There'll continue to be lots of programs of work around that across government. And I know that that's one of the key things we're hearing quite a lot about in central government at the moment is what needs to be done around that, because that's going to be so important in driving productivity moving forward. So we think those big sort of data infrastructure type programs will be really, really important. And I think off the back of those, you'll then see some more and more sort of use of AI and things of that nature to drive productivity. Just on the quarterly bookings, should we expect that future quarterly bookings will be quite lumpy, or is it fair to say that they are on a more sustainable uptrend from here? I think the scale of the contracts will mean there is likely to be lumpiness. I would hope to see continued momentum over a 12-month period year on year. The challenge can be that there will be a big contract that you expect to win in a March, April time, and it gets pushed out to a June, July time because of something in government. The timing of these things can move around a bit and can be out of our control somewhat. Generally speaking, we would expect the investment we have made into the sales organization, the forward environment, we expect there to be good momentum in sales bookings. A touch of lumpiness, but overall should be a positive environment. We will go to George O'Connor from Progressive Equity Research. Hi there. Good morning. Many thanks for taking my questions. Two quickies, if you would not mind. Firstly, Neil, DSO is stretched. I mean, they are still fine, there is no particular challenge there, but do you have a target, and what is the direction of travel? Then for Rory. Rory, when you talk about future-proofing the business, you tend to talk about the run activities, if I can put it that way. Then we had a long discourse on what you were doing on the delivery side. In terms of winning, your phrase, next wave business, shouldn't there be a stronger emphasis on the transform team? I appreciate these people are expensive prima donnas at the best of times, but are they somewhat the orphans in the organization? Many thanks, both. Okay. Thanks, George. In terms of DSO, we are running about 40 days. I think that is probably about as much as we should reasonably expect. Most government contracts undertake to pay us within 30 days. There is always a few who are slightly over that, but I think where we are at the minute, we might see a little bit of improvement back to where we were in FY 2023. No, I think we are running pretty tight, and it is pretty good in that respect. On the mix, I think we would expect the core delivery organization should continue to be really the core of our business, right? That will continue to grow and develop. I think the point I was trying to make earlier is that we think. If I look back historically at our business, the way we really operated was we would go in, we would deliver, and then we would hand over things to a client organization for them to run. It meant that some of the longevity of revenue for different engagements we were doing in government, we would lose out on some of that, because we did not have things like managed services in the organization to offer that to our customers. When I talk about looking at changes around the run side of things, it is about trying to make sure we are able to deliver and be a really strong partner who can then provide that run for them as well. So using the multitude kind of routes to build the business. The transformation prima donnas as I believe you described them, I think that part of our organization is pretty small and focused, right? So it is the early stage shaping up of new programs of work, and that is quite a complicated environment to be operating in because those things, there is lots of moving parts and I think there are lots of people playing in different areas there. For us, the strength we have got is advising, but then the delivery of it and being a really strong delivery partner. There are customers where we need to advise and guide, but that delivery part is really where our strength is and then the run. So being clear about that. Bob Liao from Zeus. First of all, just a question around the revenue profile of the business. Maybe just a bit of a feel for maybe the mix in the business in terms of where we are in terms of managed services, in terms of software, recurring revenues. Just some sort of indications of that and how importantly that will change over the next three to five years. The second question was on sales. Obviously, you've been getting some good traction with some of your changes. George, I wanted to see if you could provide a bit more detail on what specifically is working with respect to the sales execution and what further improvements you might see over the next six to nine months. Yeah. Thanks, Bob. In terms of the revenue mix, in terms of the split between services and product is a very small element. Rory obviously went through the SaaS products we have, which is very early stage. The vast majority of our revenue is in the services space. Within that mix, again, there's a journey we're on and a transition. So things like managed services, again, we're seeing growth there in data and AI, but I would put those into single digit, maybe just getting into sort of double digit territory. Again, over time, we're seeing those, our expectations that those will grow as a proportion of the business. Particularly around software and products, we obviously invested in our own IP there. There is maybe as we grow and as we develop the cash position of the business and opportunity to leverage our balance sheet, there is maybe an opportunity to look at acquisition opportunities, potentially in the products and SaaS space as appropriate. But also to supplement our services offering as well. So I think we see this as being a transition over the medium to longer term and overall to improve the quality of earnings in the business with longer term, more milestone driven contracts, more managed service contracts. So early stages yet, but definitely moving in the right direction. And then on the sales side, I think a few things to kind of touch on there. I think one part is a number of the kind of people we've been bringing into the organization, what we're looking to do is kind of go further and further upstream and kind of engage at more senior parts of our client organization. The more influential kind of people who are kind of setting things at earlier points in the cycle. We've seen some success from that, and that's been pretty effective. I think we've tightened up qualification as well, so I think we are much stricter about what we are going for and what we're not going for. So our success rate is higher, and I guess we're able to use resources in the organization more effectively. We've seen some good success from that over the last 12 months. I think generally, just the quality of kind of our sales activity has improved, and we'd expect it to continue improving moving forward. So the combination of things there. I think the underlying thing that kind of helps us is being positioned as a, I guess a disruptive digital kind of transformation kind of provider into this market. We are of sufficient scale now where we can win a number of the sort of larger programs of work. There is appetite for sort of organizations like Made Tech, U.K. based modern digital organizations to be much more heavily involved in the delivery of large government programs. I think we'll have all seen some of the challenges people like Fujitsu all have had, the organizations will have had in the market over the last few years. I think there's real appetite to kind of continue to see that sort of supplier base in government evolve. I think that's kind of one of the things that kind of really helps us and kind of enables us to kind of drive some strong sales success. So it's a combination of those things. A lot of those underlying things have been themed for a number of years now. That's the end of questions. Rory, do you have any closing remarks? Just a big thank you to everyone for attending today. Looking forward to updating you as we continue to make good progress. Thank you all. Have a-