ACT.L Regulatory News (ACT)

19 January 2017

Actual Experience plc(the "Group", the "Company" or "Actual Experience")

Preliminary Results

Actual Experience plc (AIM: ACT), the analytics as a service company, is pleased to announce its preliminary results for the year ended 30 September 2016.

Highlights

· Signing of a third multi-year framework agreement, with Vodafone

· Subsequent to year end, signing of a fourth multi-year agreement, with Accenture

· Ongoing progress towards commercialisation within two existing channel partners:

o Verizon Enterprise Solutions; and

o a leading global brand

· Significant white-labelling project with a Fortune 100 global technology company

· Continued investment to ensure readiness for channel partners entering the revenue

generation phase, including: augmenting our leadership team, introducing enhanced structures and processes, moving to a new headquarters, investing in 24x7 customer support, scaling our datacentre operations and creating a global sales structure

· To support live operation with our global channels, we have increased the focus on scaling and technical security within our datacentres, developed the first mobile Digital User, worked on transforming the User Interface, and continued to improve our algorithms

· Revenue of £0.72m (2015: £0.70m), with 60% of the revenue being derived from channel customers (2015: 33%)

Dave Page, CEO of Actual Experience plc, said:

"2016 has been a year of significant progress for Actual Experience. We have considerably enhanced our scalability as a business while receiving strong market endorsement for our digital analytics service through the signing of two further major channel partner agreements, bringing the total to four major channel partners. These agreements mean that some of the world's largest services companies, such as Vodafone, Verizon and Accenture are now actively preparing to take our offering out to their global customer bases, either directly or integrated within their offerings.

"The channel partner agreements that we have signed and the sheer size of the pipeline for potential customers that each represents, we believe, vindicates the Board's decision to focus our sales efforts solely on channel partners rather than through selling direct to individual customers. Revenues to date bear no resemblance to the market opportunity nor to the progress being made within each of our agreements, and it is this progress that underlines our belief that we are on the right path towards building a business of real scale."

Enquiries:

About Actual Experience

Actual Experience's analytics provide the digital Voice of the Customer. This is a real-time, data-driven view of what end users would say about the quality of a company's digital products and services, and why. Our customers can analyse everything that impacts the experience quality in their digital supply chains, for any service, type of user or the Internet of Things. It gives them complete transparency from the point of provision to the point of use and whether inside or outside their business's control. The insights can be used to make continuous improvements to their business performance.

Actual Experience is listed on the AIM market of the London Stock Exchange (ACT). Our development headquarters are in Bath, UK, and we have offices in London, New York and Seattle. Actual Experience's unique digital analytics as a service is founded on ten years of cutting-edge research at Queen Mary University of London.

www.actual-experience.com

Chairman's statement

Market and customers

I am delighted to be able to report upon a year of substantial progress at Actual Experience. We entered the year with the objective of building a global channel partner programme and ensuring the business had the infrastructure to support that channel. Working through channel partners, who themselves may have tens of thousands of customers, and being built into their offering provides us with an opportunity to address that vast market. It is on this area that the Company is focused.

Both of these objectives have been achieved. We have now signed Master Services Agreements with four major channel partners, each of whom is progressing towards the point of significant revenue generation, with more to come. Meanwhile, the investment in our people and infrastructure means we have a scalable business, capable of providing 24x7 global channel support.

As is to be expected, it has taken many months of diligent application by our teams to bring these types of partnerships to this point. We have worked closely with our partners to progress the engagements through the various preparatory phases, including product integration, marketing collateral development and partner education. The year has taught us much in this respect and we believe we now have a replicable process, which can be applied to future partners.

While revenues in the year have remained steady, this masks a positive trend which has seen our channel customer revenue increase to 60% of total revenue, up from 33% in the prior year. Once our analytics are being used within our channel partners' customer bases we expect this revenue to increase substantially. While we believe the significant size of our opportunity merits investment, we are committed to good financial management and general cost discipline, resulting in effective cash management.

This operational progress has been achieved against an increasingly positive market backdrop. The Board believes the size and scope of our market opportunity is greater than ever. Digital capability, quality and security are now top boardroom priorities and our analytics and the actionable insight they provide are key to digital quality. We continue to be pleased by the market validation of our technology vision as businesses increasingly recognise the need for consistently high levels of digital quality as a critical business enabler for their employees and customers.

Board and employees

We were delighted to welcome Paul Spence to the Board as Non-executive Director in February 2016. Having spent much of his career with Capgemini and its predecessor companies, including the role of CEO of Capgemini Global Outsourcing Services, Paul brings with him a wealth of knowledge and extensive international experience which will be important as we seek to develop our geographical reach.

As I noted in my report last year, Robin Young stepped down from his position as Non-executive Director to assume an operational role at the Company, being appointed Chief Operating Officer with effect from October 2015. Under his leadership the business has undergone significant operational change, ensuring we have a scalable business capable of supporting our customers globally.

I would like to take this opportunity to thank our employees for their passion and commitment to ensuring the success of Actual Experience, and our customers and shareholders for their ongoing support.

Outlook

The focus of the year ahead will be on delivering the significant revenue potential of our existing channel partners while signing further global partners. We will continue to invest in the scalability of our technology, infrastructure and people. While much remains to be done, the Board is pleased with the progress made by the business in positioning itself to continue to pioneer its leadership of the digital experience quality market and continues to be excited by the scale of the opportunity. The Board believes that Actual Experience is well positioned to execute on this opportunity and looks forward to another year of significant advances.

Stephen Davidson

Chairman

CEO Statement

Introduction

2016 has been a year of significant progress for Actual Experience. We have considerably enhanced our scalability as a business while receiving strong market endorsement for our digital analytics service through the signing of an additional major channel partner agreement which, combined with a further agreement announced following the end of the year, brings the total to four major channel partners. These agreements mean that some of the world's largest services companies, such as Vodafone, Verizon and Accenture are now actively preparing to take our offering out to their global customer bases, either directly or integrated within their offerings.

We have performed well against our stated strategic objectives during the year, as evidenced by the growing number of channel partners and the strengthening relationship with each. Since completion of our fund raising exercise in June 2015, our efforts have focused around ensuring our readiness for these channel partners to enter the revenue generation phase. This has included augmenting our leadership team, introducing enhanced structures and processes, moving to a new headquarters, investing in 24x7 customer support, scaling our datacentre operations and creating a global sales structure. This has all been completed while deepening our relationships with our existing channel partners; moving them through the stages towards production, as well as securing new partnerships.

Having built the operational machine, the focus for the current year will be on execution through our current partners, developing our pipeline of additional channel partners and the emergence of key business metrics against which the progress of our Company can be judged.

Strategy overview

In 2016, our strategy transitioned towards achieving market penetration for our enterprise offering, Actual Work, via channel partners. We are initially targeting service providers, who sell to large enterprises. A secondary tier of targets will be home broadband and mobile broadband and service providers selling to consumers.

Our digital Analytics as a Service is being embedded into their processes and products, enabling service providers to deliver a consistent and reliable digital experience across complex global digital supply chains for enterprises, their customers and employees.

We sell our service providers analytic capacity in our cloud. The greater the required capacity, the greater the charge. For a single service provider's multinational enterprise customer, the analytic capacity has the potential to generate in excess of $500k per annum for us.

Our channel partners have hundreds of multinational customers and thousands of small and medium-sized business customers.

Whilst the opportunity is significant, these channel partners take time to reach maturity. With the channel's individual customers taking between six and eighteen months to fully adopt, we anticipate our channel partners to achieve full deployment within three to five years.

We continue to maintain a small base of important direct enterprise customers for Actual Work and consumer customers for our consumer product, Actual Home. Our focus with direct enterprise customers has shifted from revenue generation to using their feedback to help develop Actual Work. This means we can better support the channel with their customers. Direct revenue has reduced in the year due to this transition.

We also have a base of consumers using our Actual Home product which diagnoses issues with broadband and wifi in the home. We are investing in this as the opportunity emerges.

Market opportunity

The service provider market for our proposition is large. We believe there are more than 800 service providers around the globe with revenue opportunities similar to those anticipated with our four publicly announced channel customers.

Our traction with this target audience indicates a gap in the market, and a growing need, for our Actual Work product.

We are seeing our channel partners benefit from our Analytics as a Service, using it to drive service innovation and create competitive advantage, whilst enabling their own enterprise customers to boost productivity and enhance brand reputation.

In addition, the underlying trends are in our favour, with market statistics indicating a strong focus on investment in infrastructure to underpin digital initiatives and a shift in responsibility for digital transformation from IT to the Chief Executive's office. We believe this suggests that digital transformation is becoming a strategic imperative where investment is growing.

The performance management tools market is therefore growing, with new players continuing to enter. However Actual Work benefits from key differences making it appropriate for use by global enterprises. Firstly, we have developed a way of getting our Digital Users to take measurements all the way down the delivery chain of the service. All other tools just look at one particular part.

Secondly, other tools measure network or application system parameters to help monitor system performance. Following a decade of academic research at Queen Mary University of London, we have developed algorithms that transform system parameters into a reliable proxy for human experience of a digital service. This enables digital experience to be managed for the first time.

Being able to do those two things mentioned above is extremely difficult. Others have tried and failed. We firmly believe that, in order to create a solution of similar quality and with such far reaching effect would take a similar period of research, by which time our own offering will have continued to evolve and be deeply embedded within our channel partners' customer bases. Actual Experience products also benefit from high levels of patent protection which further strengthen its competitive advantage.

Operational review

We have made considerable progress in the year across many areas of our operations:

Leadership and structure

Two highly experienced individuals joined our leadership team in the year, Rachel Fairley as Chief Marketing Officer and Robin Young as Chief Operating Officer. Robin's background in FTSE 250 companies has provided us with the skill-set to transition the business from early stage to a business ready for service with some of the world's largest organisations. Rachel brings considerable experience in brand building which will be important as we grow our global presence. We have introduced greater levels of structure to the business enabling us to continue to operate smoothly while growing our employee base from 33 at the start of the year to 57, bolstering our expertise in R&D, Operations, and Sales and Support, with further growth to come.

Global sales

We have shifted from an early-stage theatre-based sales execution to a globally coordinated global sales leadership for all go to market activities. This is specifically designed to allow us to interact efficiently and effectively with our large, global channel partners.

Product development and testing process

We have invested in security and scaling within our datacentres. In addition, we have continued to evolve our Actual Work service during the year, focusing on the design and user experience to simplify and continue the thrust towards self-service and the lessening of skill requirements to use the service. The first mobile Digital User has been developed and is undergoing testing. We have spent time on the continuous enhancement of our algorithms. We are constantly tuning and improving our algorithms as the digital world evolves.

As part of the preparedness for live operation with our global channel partners, we have increased our focus on security, not only at our datacentres but also all buildings and processes.

The year ahead will see us bring the new User Interface into production. We will continue to invest in security and scaling within the datacentres, in the ongoing evolution of our algorithms, and the launch into production of our first mobile Digital Users.

Marketing

Our marketing strategy has aligned closely to business strategy and we have shifted our focus towards service providers as potential channel partners. During 2016, we refreshed our brand and continued to create the category 'digital experience quality' for our brand to occupy. Whilst brand and category building remain important for the service provider market, our priority is now shifting towards targeting initiatives that enable and accelerate sales traction within specific prospective and existing channel accounts.

Channel partner update

Actual Experience's analytics service has far-reaching applicability, with the potential to benefit any organisations with a digital business or footprint. We intend to service the global business markets primarily through channel partners, but will maintain select direct customer engagements.

Actual Experience has signed multi-year framework agreements with four global technology businesses and a significant white-labelling project with a Fortune 100 global technology company.

Our channel partners incorporate the Company's capabilities in one or more of the following methods:

· Analytics services sold through the channel to the channel's corporate customers as standalone product;

· Analytics services incorporated in a technology product or portfolio and sold to the channel's customer as part of the product; or

· Analytics services incorporated in large, complex partner agreements, all with the ultimate goal to better serve the channel partner's customers or to improve their customers' digital experience.

Typically, for all categories, the signing of the Master Services Agreement is the start of a complex, multi-phase implementation process, prior to significant revenue generation. This can involve productisation, the development of marketing materials, sales team training and, ultimately, the building of a sales pipeline.

New agreements signed in the year

In January 2016, Actual Experience received a significant order to white label the Company's service for a Fortune 100 global technology company.

In March 2016, the Company signed a five-year framework agreement with Vodafone. Actual Experience's digital experience quality analytics will be integrated into Vodafone's long-term quality improvement processes and key performance indicators, across Vodafone's enterprise and consumer markets, products and services.

The two agreements signed prior to the period under review were a three-year agreement with Verizon Enterprise Solutions (September 2015) and a three-year agreement with a Top 100 global brand (May 2015).

Following the close of the year, we announced the signing of a Global Framework Agreement with Accenture.

Implementation update

All of the five agreements mentioned above are at various stages within the implementation process, with Verizon Enterprise Solutions being the most advanced. We have been encouraged by the scale of their growing sales pipeline.

Looking to the future, we are now in the position for the first time to be able to state that we believe one or more of our channel partners will generate significant revenues within the current calendar year. We anticipate adding further global businesses to our channel partner roster in the year ahead.

Current trading and outlook

The channel partner agreements that we have signed and the sheer size of the pipeline for potential customers that each represents, we believe, vindicates the Board's decision to focus our sales efforts solely on channel partners rather than through selling direct to individual customers. Revenues to date bear no resemblance to the market opportunity nor to the progress being made within each of our agreements, and it is this progress that underlines our belief that we are on the right path towards building a business of real scale.

Dave Page

Chief Executive Officer

Financial Review

Revenue

Revenue recognised in the year ended 30 September 2016 was £716,346 (2015: £700,449) and relates to the supply of analytical services and associated consultancy activities to customers. 60% of revenue was derived from sales to channel customers (2015: 33%) with the balance arising from direct sales. This increased percentage reflects the Group's strategic focus on generating revenue growth from its channel partners.

Gross profit/(loss)

As noted in the Chief Executive's Statement, the Group has made a significant investment during the year to establish the infrastructure required to fully support its channel partners, including the establishment of a 24/7 support centre. The set-up costs of this support infrastructure resulted in a gross loss for the year of £238,466 (2015: profit of £193,266).

Expenses

Administrative expenses comprising R&D, operational support, sales and marketing, and finance and administration costs totalled £5,806,299, an increase of £3,188,620 compared to the prior year. This increase reflects the continued investment made by the Group in technology development and customer-facing teams. Personnel costs continue to be the largest expense and represent approximately 62% of the Group's cost base. The functional cost breakdown is as follows:

Tax

The tax credits recognised in the current and previous financial year relate to R&D tax credit claims.

Foreign exchange

The Group is subject to currency fluctuations as a result of its US operations. Primarily related to the EU referendum in June 2016, foreign exchange gains of £144,889 (2015: £448) were recorded in operating expenses. These gains were primarily driven by US dollar cash deposits held.

A translation loss of £105,310 (2015: loss of £4,684) was recorded in the Consolidated Statement of Comprehensive Income due to the elimination of intercompany charges on consolidation.

Loss for the year

Losses after tax for the year ended 30 September 2016 totalled £5,671,072 (2015: loss of £2,225,455). These losses are primarily generated by employee costs and related expenses.

Loss per share

The loss per share for the year was 15.21p (2015: loss of 7.12p). Earnings per share have been impacted by the increases in operating costs.

Dividend

No dividend has been proposed for the year ended 30 September 2016 (2015: £nil).

Cash flow

Actual Experience is investing in the growth of its operations to address what it believes to be a significant commercial opportunity and its cash flow from operations was therefore negative during the year ended 30 September 2016, and in line with expectations. The Group's costs are mostly operating related, with very little investment required for capital infrastructure. Cash used by operating activities was £5,210,287 for the year, compared to cash used of £1,973,356 for the year ended 30 September 2015. This operating cash requirement was substantially funded by cash reserves and the Group ended the year with cash and cash equivalent assets totalling £9,415,886 (2015: £15,275,222).

Software development capitalisation

The Directors believe that the software development capitalisation criteria in IAS38 have been met and accordingly development costs, net of amortisation charges, of £516,041 have been capitalised as at 30 September 2016 (2015: £366,386).

Accounting policies

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards. The Group's significant accounting policies have been applied consistently throughout the year as described in the Group's Report and Accounts.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group are set out in the Group's Report and Accounts.

Key performance indicators

As the Group is in the process of development and commercialisation of its services, the Directors consider the key quantitative performance indicators to be sales revenues of £716,346 (2015: £700,449) and the level of cash and cash equivalents held in the business of £9,415,886 (2015: £15,275,222). The Board performs regular reviews of actual results against budget, and management monitors cash balances on a monthly basis to ensure that the business has sufficient resources to enact its current strategy. Certain non-financial measures, such as the number of data analytics and deployed Digital Users, are monitored on a monthly basis. The Board will continue to review the KPIs used to assess the business as it grows.

Environmental matters

As far as the Directors are aware the Group's business does not cause an adverse impact on the environment.

Human rights policy

Actual Experience has adopted a formal equal opportunities policy which is contained in its employee handbook. The aim of the policy is to ensure that there is no discrimination against any employee or job applicant either directly or indirectly on the grounds of race, sex, disability, sexual orientation, marriage or civil partnership, pregnancy or maternity, religion or belief, or age.

Employees

As at 30 September 2016 the Group employed 57 people in three offices (2015: 33 people), of which 45 were male and 12 were female. As at the date of this document of the seven senior members of management, one is female.

Directors

Details of the Directors who served during the year ending 30 September 2016 are noted in the Remuneration Report. All seven of the Directors serving on the Board at the year end were male.

On behalf of the Board

Steve Bennetts

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2016

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2016

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 SEPTEMBER 2016

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2016

1 BASIS OF PREPARATION

Actual Experience plc is a public limited company domiciled in the United Kingdom and incorporated in England. The financial statements of Actual Experience plc are audited financial statements for the year to 30 September 2016. These include comparatives for the year ended 30 September 2015.

The accounts for the year to 30 September 2015 have been delivered to the Registrar of Companies. The accounts for the year ended 30 September 2016 have not yet been delivered to the Registrar of Companies.

The Preliminary Announcement does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

The Company's registered office is Quay House, The Ambury, Bath, BA1 1UA.

The unaudited Preliminary Announcement has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 30 September 2016.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2015, as described in those financial statements. New standards or interpretations which came into effect for the current reporting period did not have a material impact on the net assets or results of the Group.

Going Concern

At 30 September 2016, the Group had a cash and cash equivalents position of £9,415,886 with no bank debt. The Directors have prepared detailed monthly projections of future cash flows for the remainder of the financial year to September 2017 and the subsequent financial year, 2018. The base case forecast includes expected revenue growth, together with further investment in the cost base, leading to the commencement of positive monthly cash flows during the latter part of 2017. Additional scenarios have been modelled reflecting differing revenue growth rates with corresponding adjustments to the level of investment in the Group's cost base; these scenarios indicate broadly similar cash flow trends.

After due consideration, the Directors have concluded that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

2 LOSS FROM OPERATIONS

3 TAXATION

Tax on loss on ordinary activities

Factors affecting the current tax credits

The tax assessed for the year varies from the standard UK company rate of corporation tax as explained below:

The Group has tax losses carried forward of approximately £10,060,000 (2015: £3,820,000).

The standard rate of corporation tax in the UK changed from 21% to 20% from 1 April 2015. Accordingly the Group's losses for the accounting period are based on an effective rate of 20.00%.

During the year the Group has incurred qualifying expenditure on research and development projects which has given rise to tax credits due from HM Revenue and Customs to the Group of £340,259 (2015: £192,000).

At 30 September 2016, the Group had unrecognised deferred tax assets totalling £1,710,288 (2015: £732,776), which relate to losses. The Group has not recognised this asset in the Consolidated Statement of Financial Position due to the uncertainty in the timing when it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.

4 LOSS PER SHARE

Basic loss per share is calculated by dividing the loss attributable to the owners of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume conversion of all dilutive potential ordinary shares.

The Company has one class of potentially dilutive ordinary shares, being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. However, due to losses incurred in both the current and previous financial year there is no dilutive effect from the potential exercise of these dilutive shares.

The weighted average number of shares in issue throughout the year is as follows:

5 CASH AND CASH EQUIVALENTS

The above gives an analysis of the credit rating of the financial institutions where cash balances are held.

All of the Group's cash and cash equivalents at 30 September 2016 are held in instant access current accounts or short-term deposit accounts. Balances are denominated in UK sterling (£) and US dollars ($) as follows:

The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.

6 REPORT AND ACCOUNTS

The Company's Report and Accounts for the year ended 30 September 2016, together with a notice convening the Company's annual general meeting, will be posted to shareholders in due course.