ACT.L Regulatory News (ACT)

12 June 2023

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

UNAUDITED CONSOLIDATED INTERIM RESULTS

for the six months ended 31 March 2023

Company turnaround substantially completed, with a clear focus on sales execution

Actual Experience plc (AIM: ACT), the Digital Workplace Management Platform (DWMP) company, announces its unaudited consolidated interim results for the six months ended 31 March 2023.

Financial Highlights

· Revenue of £0.23m (H1 FY22: £0.82m)

· Gross loss of £0.07m (H1 FY22: £0.35m)

· Operating loss of £2.54m (H1 FY22: loss of £2.84m)

· Loss per share of 1.16p (H1 FY22: loss per share of 4.97p)

· Cash and cash equivalents at 31 March 2023 of £3.10m (30 September 2022: £2.87m)

Operational Highlights

· Successful early commercial release of the new Digital Workplace Management Platform (DWMP) in October with Defra, leading to the first sale of the Company's new product offering less than 6 months after launching.

· Significant automation of the delivery process for DWMP content, significantly reducing the load on manual resources and facilitating operational leverage.

· Sales pipeline increasing due to a combination of reinvigorated partner relations and the bolstering of the sales team.

· Several significant pipeline opportunities progressed to advanced stages in the funnel during the period.

· Further strengthening of the Board with the addition of two highly experienced Non-Executive Directors.

· Recruitment of an experienced CEO after the period end, marking the beginning of the next phase of the Company's growth. 

Current trading and outlook

· Market demand is reflected in the increasing volume of interest in Digital Workplace Experience (DEX) as shown by commentary from Gartner and Forrester. Organisations will prioritise investment in technologies that optimise their digital infrastructure for the new era of hybrid working, often termed 'the new ways of working'. The Company's board believes that it is in a strong position to capitalise on this significant market opportunity.

· Feedback from partners and enterprises for our recently launched DWMP continues to be very positive, and we will seek to maintain our technology leadership by developing a rich roadmap of features and capabilities.

· With the recruitment of an experienced CEO, the turn-around phase is largely complete and resources are increasingly focused on optimising sales execution to deliver strong revenue growth.

· Immediate focus remains on generating orders from our more advanced sales opportunities. In addition, sales and marketing outreach campaigns are delivering increased numbers of prospects into our sales pipeline and we will seek to ensure efficient progression through the sales stages.

· Our first DEX customer, Defra, remains an important relationship for Actual, and we will seek to expand the size and scope of this deployment while also working to engage with other central government departments.

· We will continue to tightly manage operating expenses and seek to derive further economies while investing in sales and marketing activities.

Kirsten English, Chair of Actual Experience plc, said: "As detailed in the 2022 Annual Report, Actual Experience has implemented fundamental and extensive changes to the business in the last 12 months. Since the beginning of the current financial year, the Company has completed the goals that were set by the Board for this turnaround phase, and the focus will now move to execution and growth with predictable revenue and strong customer fulfilment at the top of the agenda. With the new CEO, fresh ideas and a proven track record of execution will open the next chapter for Actual Experience."

Iain McCready, CEO of Actual Experience plc, said: "I'm delighted to be joining Actual at this important time. The measures taken by the Board and Leadership team over the last year have positioned the Company to leverage its excellent technology to establish a leading position in the rapidly developing DEX technology market sector. My focus will be to translate this potential into strong revenue growth through effective sales and marketing execution."

Enquiries:

About Actual Experience

Actual Experience's goal is to make the digital world work for everyone, everywhere, all of the time. As the working world evolves post-pandemic, the global shift to a flexible hybrid model has brought with it a significant challenge; how do businesses create an environment that gives their people what they need to thrive, whilst protecting the commercial efficiency of the business and driving growth at the same time?

For further information please visit www.actual-experience.com

Market

As the emerging technology category of Digital Employee Experience (DEX) continues to gain rapid momentum, analysts are increasingly emphasising its importance and commenting that this will become a major area of enterprise focus and investment in the coming years.

The market definition and scope of what DEX entails is still in its infancy, with an element of confusion arising from multiple technology suppliers promoting differing visions, each aligned to their individual capabilities.

With a standardised approach yet to be defined within the market, Actual's DWMP offering is well placed to provide a practical starting point for enterprise DEX transformations. The Company's proprietary HX Score is unique in its capability to provide a reliable baseline of the overall employee experience of the digital workplace as well as delivering a prioritised list of improvement projects, ranked by business impact and enterprise value creation. The Company's technology is quick to deploy and is partner agnostic, meaning it forms an ideal foundation to any wider DEX transformation programme.

Product development

At the beginning of the period, the Company launched an early release of its newly built DWMP. During a six-month pilot, the team worked closely with the customer, Defra, to understand their use of the insights and data, making iterative improvements month-on-month. The DWMP showed quantified before and after productivity savings due to improvements made by the customer. At the end of the pilot, the Company was delighted to announce the first sale of the new platform. The Actual Experience team were praised for their deep knowledge of the complex area of Digital Experience Management and the usefulness of the DWMP insights, which allow firms to navigate successfully through transformational change over the total enterprise.

Following the early commercial release, the CPO set up a new cross-functional process encouraging the sales and customer facing teams to connect openly with the R&D and product functions within the business. The Company remains committed to building and improving the DWMP based on tested market problems to ensure the commercial viability of the platform.

After the period end, the next version of the product was released, with extensive improvements and new features including a new Equality Grade metric (which models how even the distribution of digital wellness is across an organisation) to better support business leaders with DE&I initiatives. 

In addition to customer-facing improvements, the Company also made substantial progress in automating the customer insights creation process, reducing the amount of manual resource needed to service clients on a continuous basis.

Several new development opportunities have been identified to increase the Company's product portfolio, including a lighter version of the platform with a number of use cases and a regulatory based tool to track the impact of hybrid working patterns on scope 3 carbon emissions. 

Sales & Marketing

During the period, Actual continued to apply the lessons learned from early engagements with prospective customers and further refined its sales focus and approach, both in terms of partner projects and direct sales efforts. This has led to positive sales pipeline development, with increased numbers of active prospects and also good momentum through the various sales stages. This progress has been further supported by greater enterprise awareness of, and focus on, the need for transformation of their digital infrastructure to ensure efficient business processes in the more complex, hybrid working environment.

As noted in the Company's Annual Report, sales cycles remain lengthy, and efforts to reduce this have been hampered by the challenging general business environment and, specifically, the weak macroeconomic conditions. Notwithstanding this, several of our sales engagements are now progressing to the point where customer decisions will be made, and we hope to be able to announce further customer orders in the near future.

Over the period, the Company has formed a strong market positioning based on learnings from the sales cycles and the commentary on the emergent DEX category. A key priority moving forward will be to re-establish a marketing function within the business to further drive sales activities.

Strategy

As a small company with market-leading technology, we will continue to leverage our existing strong relationships with Verizon and Vodafone while putting in place further sales and technology partnerships with leading technology companies. In this way, we are planning to achieve significant market penetration by accessing our partners' large global enterprise customers.

At the same time, our direct sales team will continue to engage directly with prospective customers to ensure we continue to understand evolving market requirements and trends.

Typically, new enterprise sales engagements will commence with a subset of the total addressable opportunity in each account, such as employees in a region, country, or division. Over time, we expect that the initial engagement will expand to address the whole digital estate. This is the approach adopted with Defra, and we term this a 'land and expand' strategy.

As well as growing our customer base in this way, a further driver of top-line growth is expected to arise from new product expansion initiatives that are planned in our development roadmap. An example of this is the opportunity to develop further our work that leverages our existing technology to estimate the carbon impact (scope 3 emissions) of commuting and business travel dynamics across an organisation.

This product development road map is aimed at ensuring we maintain our technology leadership in the DEX sector. In addition, we will continue to enhance the scalability of our service clouds, driving down per-seat costs and ensuring that we can handle the demands of the world's largest enterprises.

Board Changes

The Board has been significantly strengthened in the period by the appointment, in October 2022, of Harmesh Suniara and Barry Hoffman, in February 2023. Harmesh and Barry bring to the board extensive experience in capital markets and people management respectively. After the period end, in June 2023, we welcomed Iain McCready to the board as CEO and Executive Director.

After almost ten years of service, Stephen Davidson stepped down from the board in March 2023 and his contribution to the development of the Company is appreciated.

Outlook

With the recent appointment of a new CEO, the turnaround of the Company is now largely complete. Management and the board are now keenly focused on taking the business to the next stage of growth and achieving its strategic objectives.

Since launching the new platform at the start of the current financial year, the Company continues to receive consistent and positive feedback from both commercial prospects and partners alike, as demonstrated by a growing sales pipeline and reinvigorated relationships with our partners. In late May 2023, after the period end, the Company completed development on the next version of the platform, enhancing the offering based on market feedback. This resulted in significant improvement in both the capability and usefulness of the data. Furthermore, several promising additional value creation opportunities have been identified and the resulting rich product development roadmap will lead to value-enhancing adjacent features and capabilities. 

The Digital Employee Experience (DEX) category is emergent and there remains a general lack of clarity for business leaders on how to deliver effective digital workplaces. Actual's platform is outcome-oriented, which means it is perfectly placed within the market to guide customers through these complex, enterprise-wide transformation projects. 

This requirement is clearly a market problem which the DWMP can address, as shown in current RFIs and RFPs that the Company has been invited to participate in. Working closely with leading analysts as well as investing in marketing and brand building will be key to the growth of the business and maintaining the Company's technology leadership position. Actual's ability to support multiple business leaders by quantifying the ROI of improvements to productivity, reportable ESG efforts and employee wellbeing remains a unique capability in the market. 

The Company has progressed with its sales strategy and execution and has achieved a first sale for the new DWMP within 6 months of launch. There are several advanced sales engagements in the pipeline that are expected to lead to outcomes in the coming months. It is also noted that due to the current macroeconomic climate SaaS sales cycles are lengthening; however, the Company has put significant focus on communicating the productivity element of the insights which can estimate the operational dollar recovery of identified projects, thus adding critical value for potential customers as cost optimisation efforts become prevalent across the market. 

Actual Experience has delivered the milestones set out a year ago. There is a new team, a new SaaS product and a first, contracted client using that product. In the interim, the Company has seen the appetite for Digital Workplace Experience tools increasing in the market and are uniquely placed to take advantage of this trend. The new CEO has a track record of taking companies and instilling execution and delivery and this is now the strategic focus. There is a clean slate to build upon and the path ahead is clear.

FINANCIAL REVIEW

Consolidated Income Statement

Total revenue for the six months to 31 March 2023 was £225,271, a decrease on the prior year of 73% (H1 FY22: £824,706). This decrease reflects the previously announced cancellation of longstanding contracts that relied on our legacy product offering, partly offset by new DWMP revenues. The Company maintained its focus on developing a direct sales capability during the period, while continuing to work with its partners on indirect sales opportunities. Revenues from Channel Partners in the period account for 100% of sales (H1 FY22: 96.4%).

A gross loss of £66,088 was made in the period, compared to the gross profit of £354,386 in the corresponding period in 2022. This decrease in gross margin reflects the impact of fixed support costs during a lower revenue period and investment made in cloud infrastructure to support new DWMP revenue opportunities.

Administrative costs amounted to £2,470,384, compared to £3,194,804 in the six months to 31 March 2022. This significant expense reduction reflects previously announced cost reduction measures taken towards the end of FY22 which have materially reduced headcount and the cost base in the current fiscal year.

The functional cost breakdown is as follows:

It is anticipated that administrative costs will be slightly higher in the in the second half of the year, due primarily to a modest increase in sales headcount.

As disclosed in the notes to the Company's 2022 Financial Statements, and in accordance with the requirements of IAS 38, qualifying development expenditure is capitalised and amortised over the estimated useful life of the developed assets. Total expenditure on research and development in the six months to 31 March 2023, prior to IAS 38 adjustments, was £779,760 (H1 FY22: £976,956).

A summary of the Group's results is set out below:

Balance sheet

The Group has a debt-free balance sheet. Cash and cash equivalents increased during the period, from £2,871,344 at 30 September 2022 to £3,097,389 at 31 March 2023, in line with expectations. This increase arose as a result of net proceeds of £2,893,842 received from the October 2022 funding round, offset by operating losses arising in the period.

Free cash flow for the period was £(2,660,226) (H1 FY22: £(2,796,982)). This slight improvement reflects the lower operating loss; as noted above, this primarily arose from a reduction in operating expenses. Free cash flow is defined as net cash flows used in operating activities, plus development of intangible assets, plus purchase of property, plant and equipment.

Trade and other receivables of £327,551 at 31 March 2023 (31 March 2022: £393,161) comprise trade debtors of £11,364, prepayments of £196,483 and other debtors of £119,704.

Cash flow statement

The movement in cash and cash equivalents during the period was:

Going concern

As described in Note 2, Basis of Preparation, the amounts and timing of future revenues remain uncertain. If the Group is unable to secure an appropriate combination of new revenue contracts, cost reductions, and/or further funding, then it may not have sufficient resources to meet its liquidity requirements for the foreseeable future. Accordingly, material uncertainty exists which may cast significant doubt about its ability to continue as a going concern.

Actual Experience plc

Consolidated income statement and statement of comprehensive income

For the six months ended 31 March 2023

Actual Experience plc

Consolidated statement of financial position

As at 31 March 2023

Actual Experience plc

Consolidated statement of changes in equity

For the six months ended 31 March 2023

Actual Experience plc

Consolidated statement of cash flows

for the six months ended 31 March 2023

Notes to the consolidated interim report

For the six months ended 31 March 2023

1 General information

Actual Experience plc (the "Company") is a public limited company domiciled in the UK and incorporated in England and Wales (registered number 06838738) and its registered office is Quay House, The Ambury, Bath, BA1 1UA.

The principal activity of Actual Experience plc ("the Company") and its subsidiary company Actual Experience Inc (together "Actual Experience" or "the Group") is the provision of digital experience quality analytics services and associated consultancy services. 

The interim condensed consolidated financial information approved for issue on 9 June 2023.

2 Basis of preparation

This unaudited interim condensed consolidated financial information has been prepared under the historical cost convention, and in accordance with International Accounting Standards and AIM Rules for Companies. The interim condensed consolidated financial information has been prepared on a going concern basis and is presented in Sterling to the nearest £1.

The interim financial information does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 September 2022, which has been prepared in accordance with "International Accounting Standards in conformity with the requirements of the Companies Act 2006", and any public announcements made by Actual Experience during the interim reporting period. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

The interim condensed consolidated financial information for the six months ended 31 March 2023 and for the six months ended 31 March 2022 do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and are unaudited. The financial information for the six months ended 31 March 2023 presents financial information for the consolidated group, including the financial results of the Company's wholly owned US subsidiary, Actual Experience Inc. Comparative figures in the Interim Report for the year ending 30 September 2022 have been taken from the Group's audited financial statements. 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, although included an emphasis of matter in respect of material uncertainty around going concern and (ii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Going concern

As in previous years, the Group and Company have continued to utilise their cash resources to fund losses while the sales pipeline is being further developed. The cash balance as at 31 March 2023 was £3.10m. Based on the Group's latest "base case" assessment, and in the absence of cost reductions or significant commercial progress, the Group and Company is not forecast to maintain positive cash reserves throughout the going concern period and is forecast to run out of cash by December 2023. In addition, the Directors have also prepared a severe, but plausible downside scenario, based on significantly more pessimistic sales forecasts, with corresponding reductions in controllable costs. In this scenario, the Group and Company is forecast to run out of cash by November 2023. The amounts and timing of future revenues in the Group's budgets remain uncertain. The Group is experiencing an encouraging level of interest in its services and it is in active discussions with its Channel Partners and several large potential end-customers. The discussions are well progressed and are expected to result in additional revenue for the Group. However, at present a substantial proportion of the forecast revenue remains uncommitted and if the Group and Company are unable to secure an appropriate combination of new revenue contracts, cost reductions, and/or further funding, then the Group and Company may not have sufficient resources to meet their liquidity requirements over the foreseeable future. Accordingly, a material uncertainty exists which may cast significant doubt about the Group's and the Company's ability to continue as going concerns. Nevertheless, after making appropriate enquiries and considering the assumptions and uncertainties described above, the Directors have a reasonable expectation that the Group and Company will have adequate resources to continue operating at least until 30 June 2024. Therefore, the Directors continue to adopt the going concern basis in preparing the interim condensed consolidated financial information and does not include any of the adjustments that would be required if the Group or Company were unable to continue as going concerns.

3 Segmental reporting

The Directors consider that there is one identifiable business segment that is engaged in providing individual products or services or a group of related products and services that comprise the core business.

The information reported to the Chief Executive Officer, who is considered to be the Chief Operating Decision Maker ("CODM"), for the purposes of resource allocation and assessment of performance is based wholly on the overall activities of the Group. Due to the current size and activities of the Group there is a high degree of centralisation of activities. The Directors therefore consider that there is one operating, and hence one reportable, segment for the purposes of presenting information under IFRS 8; that of "Digital experience quality analytics services and associated consultancy services". There are no differences between the segment results and the condensed statement of comprehensive income. The assets and liabilities information presented to the CODM is consistent with the Statement of Financial Position. All of the Group's assets and operations are located in the UK and the USA.

4 Tax

Tax on loss on ordinary activities

5 Loss per share

The calculation of basic and diluted loss per share for the six months to 31 March 2023 was based upon the loss attributable to ordinary shareholders of £2,396,707 (six months to 31 March 2022: £2,849,540, year ended 30 September 2022: £5,274,002) and a weighted average number of ordinary shares in issue of 207,122,200 (six months to 31 March 2022: 57,294,806, year ended 30 September 2022: 57,400,891), calculated as follows:

Weighted average number of ordinary shares

Due to the losses incurred there is no dilutive effect from the issue of share options.

6 Related party transactions

There were no transactions entered into with related parties during the period. No amounts were outstanding to or from the related parties at 31 March 2023.

During each financial period, the Company entered into numerous transactions with its subsidiary company, which net off on consolidation; these have not been shown above.

7. Availability of Interim Report

Electronic copies of this Interim Report will be available on the Company's website at www.actual-experience.com.

Forward-looking statements

This announcement may include certain forward-looking statements, beliefs or opinions, including statements with respect to the Group's business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other various or comparable terminology. These statements are made by the Directors in good faith based on the information available to them at the date of this announcement and reflect the Directors' beliefs and expectations. By their nature these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, developments in the global economy, changes in government policies, spending and procurement methodologies, and failure in health, safety or environmental policies. No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of this announcement and the Company and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this announcement. No statement in the announcement is intended to be, or intended to be construed as, a profit forecast or to be interpreted to mean that earnings per share for the current or future financial years will necessarily match or exceed the historical earnings. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.

The Directors of Actual Experience plc and their functions are listed below.

Further information for Shareholders