Half-year Results

Financial highlights

1 Earnings before interest, tax, depreciation and amortisation (EBITDA) before impairments, exceptional costs, acquisition related costs, central group administration costs and the capitalisation of qualifying development costs

2 Operating EBITDA less central group administration costs

3 Cash flow from operating activities and other investing activities divided by the weighted average number of shares

Full definitions and basis for application of our Alternative Performance Measures (APMs) can be found on page 18 of our latest full annual financial statements, available at www.softwarecircle.com/reports-downloads

Operational highlights

• Two further acquisitions added to the Group, Bethebrand and Link Maker
• Revenue increased by £0.7m, an 8% increase
• Operating EBITDA growth of 54%
• Positive aEBITDA of £1.5m, a 50% increase
• 5% organic revenue growth achieved across our acquisitions
• 19% organic growth in Operating EBITDA
• £1.8m sale of printing.com domain completed

In our Annual Report, we said that our focus for the upcoming year would be to continue our search for businesses that match our acquisition criteria. Utilising the funds that we raised through equity to acquire Vertical Market Software ("VMS") businesses. Focussing on deploying capital in a disciplined way, driving organic growth and improving Earnings Per Share which in turn, builds long term value for our Shareholders.

In the interim period, we've seen that focus bear fruit. We've expanded our portfolio by adding two further acquisitions. We've continued to drive organic growth within our acquired portfolio and have improved earnings.

We've also seen some rotations in our 'NED Squad' as announced as part of our Trading Update on 18 September 2024. We have welcomed Brad Ormsby and Marc Maurer who bring new experience and talent to the Board. At the same time, we are immensely grateful to Jan Mohr and Conrad Bona who step away having been an instrumental part in guiding the Group through significant change.

That change has seen us grow to become a home for eight software business units across multiple sectors. Our portfolio of businesses operate within the following sectors: Graphics and Ecommerce, Professional Services, Property, Education, Health and Social Care.

The two new businesses and teams we've welcomed during the six-month period ended 30 September 2024 were Bethebrand, a marketing compliance and digital asset management platform which was acquired at the end of May, contributing to four months in the period. Followed by Link Maker, an adoption platform acquired at the end of July, contributing to two months in the period.

I'm pleased to report that trading continues to align with our internal forecasts and our Trading Update on 18 September 2024. The performance of our acquired business units remains encouraging, meeting our expectations and reinforcing the strength of our strategic direction.

As always, we sincerely thank our talented teams across all of our businesses for their efforts and dedication in helping continue the Group's growth both in revenue and profitability.

Financial Results and Cash

With our newly acquired businesses contributing in part, revenue rose to £8.9m (2023: £8.2m), an increase of 8%. We've driven organic growth in revenue of 5% from the acquired operating units during the interim period. However, an expected decline in the lower margin, non-recurring revenue within our Nettl Systems business, following a turbulent previous financial year, resulted in an overall decline in like-for-like revenue of 8% for the Group. Moving forward we expect Nettl's revenues to stabilise at this year's level. A focus on profitability and a new revenue mix means it has seen growth in EBITDA for the interim period.

Gross profit for the Group rose to £6.3m (2023: £5.1m) and our gross margin percentage increased to 71% (2023: 61%). As the profile of our business continues to evolve, more of our revenue will come from recurring revenues. As this continues to grow, Nettl's lower margin product-led revenues become an ever smaller part of the overall Group. We would therefore expect the trend towards increasing gross margin percentage to continue as we acquire more VMS businesses.

As a result of the two further acquisitions made, our total operating costs increased, with staff costs of £3.1m (2023: £2.5m) and total other operating charges increasing to £1.3m (2023: £0.9m). Those additional costs came with additional recurring revenues. This, along with the earnings growth delivered from the existing portfolio, has meant our Operating EBITDA increased to £2.3m (2023: £1.5m) equating to 26% of revenue (2023: 18%).

Central costs at £0.8m (2023: £0.6m) are slightly higher than originally expected, 9% of revenue compared to an expected 7%. This is due to one-off costs relating to Non-Executive Director recruitment, investment in our finance platforms and other costs brought forward into this half of the year. It is our expectation and intention to reduce central costs as a percentage of sales over time, as we scale. Right now, we're 'tooling up' for growth. After these Central Costs, our aEBITDA improved to £1.5m (2023: £1.0m) a 50% increase, representing 17% of revenue (2023: 12%).

After accounting for acquisition-related costs, the completion of the £1.8m sale of the printing.com domain, and £2.2m (2023: £1.6m) in amortisation charges on intangible assets primarily related to ongoing acquisitions, our Operating Profit improved to £1.4m (2023: loss of £1.6m). Capital expenditure totalled £0.9m (2023: £0.6m), with nearly all of it dedicated to developing our platforms, which support operations and generate ongoing revenue across our business units.

At 30 September 2024, the Company had cash of £12.7m (2023: £18.7m) and debt of £10.3m (2023: £12.0m). Our operating activities generated £1.5m of cash (2023: £1.2m) impacted by the settlement of £0.6m of lease liabilities provided for in the prior year financial statements.

Trading Review

£5.5m of revenue was generated by our seven acquired VMS businesses, the first time the majority of our revenues has come from acquisitions. Collectively, they are growing organically and tracking ahead of valuation expectations. In the interim period, we've improved the Operating EBITDA of the Group by 19%, an increase of £0.4m compared with last year.

This has meant that our Return on Capital Deployed ("ROCD"), which measures the total cash invested to date, including related expenses, versus the Operating EBITDA for the period, is 30% for our seven acquisitions and 26% for the Group overall.

We use several metrics internally to provide insight, improve and measure success within our portfolio. Our Quality Score, that measures year-on-year Revenue Growth % + EBITDA %, is a useful barometer of health. 40% being an industry standard indicator, showing a healthy balance between growth and profitability. By this measure, for the interim period our portfolio of acquired business units are now collectively at 41%. Reflecting improvements in both earnings and revenue growth.

The Group has continued to drive an increase in recurring revenues. Adding to the stability of our revenue streams. For the seven acquisitions that now form part of the Group, recurring revenues are above 90%. That has meant that recurring revenues now contribute 67% (2023: 60%) of the Group's total revenue. The vast majority of revenue streams in businesses we look to acquire are recurring and therefore, as we add more to the Group, that percentage is likely to increase further.

We've said that maximising Operating Cash Flow Per Share, a measure that demonstrates the Group's cash generating ability on a per share basis, in the long term is the number one financial priority for us. This measure for the interim period is 0.2p (2023: 0.5p), an inevitable reduction following the equity capital raise in September 2023. The continued redeployment of this capital and disciplined execution of our acquisition strategy is what will compound our Operating Cash Flow Per Share in the years to come. Building our acquisition flywheel and implementing our business systems to drive organic growth are our twin growth engines.

Outlook

Our annualised revenue run-rate, trading and profitability remains in line with management expectations. On a run-rate basis, without any new acquisitions, our annualised revenue would be approximately £20m which is a 20% increase on last year. Adjusted EBITDA above 15% of revenue, is a realistic target. We therefore remain cautiously optimistic about the remaining year.

Our search for VMS businesses continues as we look to effectively and diligently deploy further funds on acquisitions that meet our specific criteria.

We previously announced on 24 July 2024, in our final results for the year ended 31 March 2024, the Group's intention to restructure its balance sheet and redeem the remaining £6.7m of bonds at par. To that end, as announced on 25 November 2024, we have entered into a new £16.7m funding facility with Shawbrook Bank Limited. We've now utilised £6.7m to settle the bonds and have in place an additional drawdown facility of £10.0m for further acquisitions. This is a key step in enhancing the Group's ability to fund M&A opportunities in the future.

Matthias Riechert Gavin Cockerill

Chairman Chief Executive Officer

Unaudited Interim Results for the period ended 30 September 2024

Consolidated Statement of Comprehensive Income

for the six months ended 30 September 2024

Notes

(forming part of the interim financial statements)

1 Basis of preparation

Software Circle plc (the "Company") is a company incorporated and domiciled in the UK.

These financial statements do not include all information required for full annual financial statements and should be read in conjunction with the financial statements of the Company as at and for the year ended 31 March 2024. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was: (i) unqualified; (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These interim financial statements are prepared on the same basis as the financial statements for the year ended 31 March 2024, in which our full set of accounting policies, including critical judgements and key sources of estimation uncertainty, can be found.

To mitigate these risks, the Directors have implemented the following measures:

After considering the Company's strong cash position, the comprehensive risk management strategies in place, and the ability to adjust the pace of acquisitions if required, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these interim financial statements.

These condensed consolidated interim financial statements were approved by the Board of Directors on 4 December 2024.

2 Significant accounting policies

The accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements for the year ended 31 March 2024.

3 Segmental information

Analysis by location of revenue

Revenue generated outside the UK is in Belgium, France, Ireland, New Zealand, the Netherlands and the USA. No single customer provided the Group with over 2% of its revenue.

Disaggregation of revenue and EBITDA

Exceptional items

On 2 April 2024, the Company announced the sale of the printing.com domain to JAL Equity Corp for £1,772,000. Related disposal costs totalled £60,000. £51,000 of restructuring costs were incurred in our Health & social care division to enable the required reinvestment into development of the operating unit's platform, future proofing and preparing that business for growth.

5 Earnings per share

The calculations of earnings per share are based on the following profits and numbers of shares:

Diluted earnings per share is calculated based on the treasury method prescribed in IAS 33. This calculates the theoretical number of shares that could be purchased at the average market price in the period from the proceeds of exercised options. The difference between the number of shares under option and the theoretical number of shares that could be purchased from the proceeds of their exercise is deemed liable to be issued at nil value and represents the dilution. Where the Group has reported a net loss after tax, including the options would be anti-dilutive, therefore all outstanding options have no dilutive effect.

6 Intangible assets

10 Dividend

The Directors have not declared an Interim Dividend (2023: Nil).

11 Acquisitions

Acquisition of Be The Brand Experience Limited (Bethebrand)

The entire issued share capital of Bethebrand, a provider of marketing compliance and digital asset management workflow solutions for businesses providing financial services, was acquired on 30 May 2024 for consideration of £3,500,000. The initial consideration paid at completion was £2,800,000, with deferred consideration of £700,000 to be paid on the first anniversary of completion. In addition, the consideration was increased by a further £413,000 in respect of surplus cash within the business at the acquisition, £171,000 of which was paid on completion with the remainder deferred until the agreement of completion accounts. The present value of expected consideration payments at acquisition totalled £3,838,000.

Bethebrand met Software Circle's acquisition criteria by being a software business and having a prominent position in its vertical market. Delivering solutions that generate revenues of a recurring nature.

In the period during the current financial period that Bethebrand was owned by the Group, it contributed revenue of £652,000 and a profit before tax of £203,000. Had it been owned by the Group for the full period, it would have contributed revenue of £960,000 and a profit before tax of £327,000.

Net assets of Bethebrand on acquisition:

3,838

An income approach was used to value contractual customer lists and relationships, using a discount factor of 12.1%. The useful life has been estimated at 10 years. The technology was valued by using a relief from royalty approach, based on a royalty rate of 50% and using a discount factor of 12.1%. The useful life has been estimated at 3 years.

Trade and other receivables include gross contractual amounts due of £148,000 of which £nil was expected to be uncollectible at the date of acquisition.

The goodwill arising from the acquisition of Bethebrand is attributable to a number of factors, including the specialised knowledge and expertise of the assembled workforce and the market position.

Acquisition of Link Maker Systems Limited (Link Maker)

The entire issued share capital of Link Maker, whose adoption platform joins-up children's social care across the UK, was acquired on 25 July 2024 for consideration of £4,500,000. The initial consideration paid at completion was £3,000,000. Up to a further £1,500,000 is payable contingent upon the achievement of certain targets relating to the future financial performance of Link Maker and may be achieved over the 12 months following the 1st anniversary of completion. In addition, the consideration was increased by a further £580,000 in respect of surplus cash within the business at the acquisition, payable in full on the agreement of completion accounts. The present value of expected consideration payments at acquisition totalled £4,774,000.

Link Maker met Software Circle's acquisition criteria by being a software business and having a prominent position in its vertical market. Delivering solutions that generate revenues of a recurring nature.

In the period during the current financial period that Link Maker was owned by the Group, it contributed revenue of £267,000 and a profit before tax of £131,000. Had it been owned by the Group for the full period, it would have contributed revenue of £729,000 and a profit before tax of £355,000.

Net assets of Link Maker on acquisition:

4,774

An income approach was used to value contractual customer lists and relationships, using a discount factor of 12.1%. The useful life has been estimated at 10 years. The technology was valued by using a relief from royalty approach, based on a royalty rate of 50% and using a discount factor of 12.1%. The useful life has been estimated at 3 years.

Trade and other receivables include gross contractual amounts due of £206,000 of which £nil was expected to be uncollectible at the date of acquisition.

The goodwill arising from the acquisition of Link Maker is attributable to a number of factors, including the specialised knowledge and expertise of the assembled workforce and the market position.

12 Post balance sheet events

On 22 November 2024 the Company entered into a new 5-year loan facility of up to £16,700,000 with Shawbrook Bank Limited.

On 25 November 2024, £6,700,000 of the facility was used to repay the outstanding bonds in issue, at face value, from the Company's perpetual bond facility established in July 2020. A value adjustment loss on settlement of £867,000 will be recognised in the second half of this financial year.

£3,350,000 of the facility utilised to repay the outstanding bonds is repayable in monthly instalments over the 5 years, attracting interest over SONIA of 4.95%. The remaining £3,350,000 is repayable at the end of the loan term and attracts interest over SONIA of 5.55%.

The remaining £10,000,000 of the agreed facility is structured specifically to enable the Company to continue with its acquisition strategy, and is to be utilised by 22 May 2027, attracting interest over SONIA of 5.55% on funds drawn during this time. Subsequently, 50% of funds drawn at 22 May 2027 will convert to an amortising facility, repaying monthly on a 5-year schedule with the balance due at the end of the loan term, attracting interest over SONIA of 4.95%. The remaining 50% is repayable at the end of the loan term and attracts interest over SONIA of 5.55%.