Made Tech Group Plc (MTEC) Earnings Call Transcript & Summary

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 of Made Tech. I'm joined this morning by Neil, our Chief Financial Officer. We'd like to thank you for your time today. Looking forward to taking you through what we did in FY '24 and providing some guidance around what we're expecting to happen over FY '25. Here's a quick overview of today's agenda. We've got about 30 minutes to go through the presentation. I'll start with some of the highlights from the last year. Neil will talk you through the results. I'll then provide a bit of an operational update on a number of different areas. We'll then talk through our outlook for FY '25, including some of the recent wins and the future growth opportunities. We will then close out with Q&A and answering any questions anyone has. So in terms of highlights for the year, I think we've 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've 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 budget, project scope and generally, the IT services and digital transformation market being a little bit more challenging over the last 12 months. Despite this, we've managed to improve our margins, so we increased gross profit from 35.8% to 36.3% and improved EBITDA by 56% to GBP 2.4 million. We're really pleased with the progress we've 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're expecting to be cash flow positive in FY '25. So overall, business is in a good place, and we're well positioned to capture future growth opportunities as they arise. The early announcement of the general election was a positive surprise for us. It's 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's really minimal operational impact during this period, which is 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've 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're really pleased with that, and we'll continue to prioritize client satisfaction moving forward. Recognizing the need to gear up for the next wave of growth, we've made significant enhancements to our sales operation over the last 12 months. We've recruited new sales leaders across a variety of industry verticals, including public safety, national security, energy and utilities, defence. We strengthened our bid team. So there's a new leader in that place, and we've kind of scaled up that team. And really, that enables us to kind of pursue and secure higher-value contracts as we look to gain market share from some of our competitors. We're 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're really pleased with that. We turn to strategy. Earlier in the year, we undertook a pretty comprehensive strategic review to ensure our sort of long-term objectives we're aligning with the sort of evolving market landscape. Yes, this was a process where there's close collaboration between the exec team, the Board and a number of external advisers. And as a result, we've agreed a new long-term plan for the group, structured around kind of 3 different kind of stages, sets a kind of really clear roadmap for how we can deliver sustainable growth over the coming years. And we're looking forward to kind of sharing more details around that at our Capital Markets Day in 2025. So we'll share a lot more details of that in due course. So those are the key highlights I wanted to call out. I'm going to hand across to Neil, who's going to talk through some of the financials.

Thank you, Rory. So the following is a snapshot of the financial highlights for Made Tech's 2024 results being the year ended 31st of May 2024. Unless stated otherwise, comparative figures related to the equivalent prior period being the 12 months ended 31st of May 2023. The government procurement market for digital services in FY '24 was subdued and as a result of the uncertainty in the run-up to the general election and budget constraints within government. As a result, sales bookings were down substantially from GBP 69.9 million in FY '23 to GBP 36 million in FY '24. 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 '23 to GBP 14 million in FY '24, gross margin has actually increased by 50 basis points to 36.3%. This increase in gross margin was 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 '23 to GBP 7.6 million at 31st of May. That said, cash generated from operations of GBP 0.5 million (sic) [ GBP 0.4 million ] was ahead of operating cash outflows of GBP 700,000 in the same period last year, and I will give more detail on cash flows later. Turning to look at revenue in a little bit more detail, all Made Tech revenues are generated in the U.K. and almost all revenues generated by services rather than product sales. Also the vast majority of revenues 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. Majority of Made Tech's revenue is sourced through long-term and framework contracts often over multiyear periods, allowing for some visibility of future revenue even where sales bookings are impacted in the short term as we saw in FY '24. It is an aim of management that over time, we will improve the quality of earnings by fulfilling a greater proportion of revenue through managed services and longer-term milestone-based contracts. You will see in the left-hand chart, a continuation of the 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 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. And 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; and secondly, to address a more fragmented and unserved 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 businesses has retained all key clients since IPO, and you will see it 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 rightsizing the workforce and adaptations to staffing mix over the year as well as increasing billable utilization rates. We have, over the past 6 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 up 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 '25 and anticipate this will continue to have a positive impact on the profitability of business despite ongoing pricing pressures to the market. As previously mentioned, sales bookings of GBP 36 million in the year were disappointing, particularly against tough prior period comparators of almost GBP 70 million in FY '23 and GBP 51 million in FY '22. 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 '24 was a contract with DLUHC, now renamed the Ministry of Housing, Communities and Local Government, for GBP 19.5 million over 3 years and other notable wins included a GBP 5 million 2-year contract for the government digital services and a GBP 3.8 million, 1.5-year contract with the Ministry of Justice. What the strong sales booking in 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 '25 has got off to a very strong start with over GBP 27 million of sales bookings in the first 4 months of the year, including a GBP 7.6 million contract with Met Office over 2 years and a GBP 13.2 million contract with the Department of Education over the next 3 years announced earlier this month. While we remain mindful of the broader economic challenges and outcome of the upcoming autumn budget, strong contracted backlog provides a good underpinning to revenue expectations for the remainder of FY '25. The following slide shows a bridge from statutory operating loss to adjusted EBITDA. The operating loss increased from GBP 1.5 million in FY '23 to GBP 3.2 million in FY '24, primarily as a result of the impairment of a number of intangible assets during the year. We have categorized intangibles into 2 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, 3 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 is longer than we had originally anticipated. And as a result, we have 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 each product in what is a fragmented and underserved market, and we are continuing to pursue these opportunities. Capability IP includes investments that we've made in our core capabilities such as data and AI and cybersecurity. And 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 REF, 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 useful economic life of 3 years. Share-based payments have reduced substantially from circa GBP 2 million in FY '23 to GBP 100,000 in FY '24. And the primary driver of reduction is being a 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 '25 as the business continues to invest in its senior leadership team and launches a share save scheme that will be made available to all eligible employees. Other than the impairment, there were no other exceptional charges in the year. As 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, and we expect these productivity gains to continue into FY '25. 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 debt has 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 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 has increased to GBP 8.6 million and the group also has no debt. And lastly, turning to cash flow. You will see on the right-hand chart, how the cash position of the group is tracked over the last couple of years. Of note is that in FY '24, 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 '23 to GBP 1.3 million in FY '24 as we have moved to the commercialization phase of these investments. The main bridging element from adjusted EBITDA to net cash outflow of GBP 800,000 in the year was a negative movement in working capital, driven by the accelerated payment of creditors, and we do not expect the same adverse movement in FY '25. The company has also invested GBP 350,000 in an employee benefit trust for the settlement of future vested share options and the average purchase price per share is circa 14.5p. We anticipate that with continuing improved profitability, improvements in working capital and reduction of the intangible spend, Made Tech will generate positive free cash flow in FY '25 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. And with that, I'll hand back to Rory.

Super. Thank you, Neil. So for those of you who are new to the Made Tech story, we provide digital transformation services to government and U.K. public sector. So we effectively kind of 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 of Education, NHS England, HMRC, Met Office. These are all significant government bodies that collectively spend billions annually on technology and change. We're 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're a technology services business with approximately 400 technologists employed by the business in the U.K. We've 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've made significant strides in supporting and developing our team. We launched the people forum about 12 months ago. So 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's been really instrumental in fostering a more collaborative culture in the organization. We've invested over 7,000 hours in skill development training. This investment in our people's professional development ensures that our team remains at the forefront of industry advancements, enabling us to deliver the best solutions for our clients. We've 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 culture and values of the organization. We're pleased to see the employee retention improved and reached 81% in FY '24. 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're operating. So we're focused on the U.K. market opportunity. And over the last 12 months, we've delivered approximately 80 work streams across 30 clients in central government, health care and local government. Within FY '24, we started to transition to a more industry-focused go-to-market structure. So this reorganization allows us to tailor our services more effectively to the different needs of each subsector and really helps 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've 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're already making a real positive impact on our business development efforts and helping us to address the unique needs of each area. We've also initiated the development of industry-aligned propositions. So by focusing on industry-specific challenges and opportunities, we're 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 kind of 3 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 is delivered by a very kind of small team of specialists. The delivery side of our organization 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 provisional 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's broken down into these areas you see here around cloud engineering, delivery management, UCD, data and AI. These practices all work together to deliver the outcomes for our clients and cross-functional teams. We then have the kind of runs 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've seen some really good progress in a number of these areas. There's a couple I want to kind of call out. So managed services, we've seen an increased number of customers looking to use our managed services offering. As a reminder, managed services is about providing a run capability for our clients and is built 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 '22, and we're 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. So we're really pleased to see that coming through in the organization. An area we've not spoken about before is our partnerships with cloud providers. This is an area we've not really kind of focused on too much previously. But over the last 12 months, we've really kind of strengthened our partnership with AWS, and that's played through into a number of areas in the organization and is helping us to build a stronger pipeline and stronger client relationships. We expect this to be an important area for the business moving forward. We've also kind of scaled our data and AI practice over the last 12 months. We've seen a lot of strong demand for the services in this space from lots of different parts of the 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. So really good to see the kind of progress we're making in those areas. We jump on to the next slide. I'm going to talk about a couple of the kind of specific things we've been working on. So the Met Office is a client we've been working with now 2 years, with Met office's digital delivery partner, and we've actually just secured a renewal of that contract for a further 2 years. So the Met Office is the U.K.'s National Weather and Climate Service. They deliver sort of meteorological predictions from the public, weather service for aviation, for defence and other sectors. And the weather models that they use are at the absolute core of their organization. And one of the real challenges is evaluating the success of a new weather model. It's a complex challenge and requires sort of lots of data and input to kind of work out how successful it's 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 and feedback they're getting through their mobile and kind of web applications. It wouldn't have been possible to detect and get that feedback without the natural language processing system that we put in place. It's really helped them to have a kind of centralized location where they can capture that user feedback and kind of make decisions off the back of it. As a result of the work we've done on this, the Met office can now measure the impact of new weather models in near real time, and they're better positioned to harness the power of their own data leading to a more accurate forecast and improved user experience. Jump on to the next slide. Another example of something we're doing in the data space is with Skills for Care. So Skills for Care is a strategic workforce development and planning body for adult social care in England. We've been working with Skills for Care for approximately 4 years now. So they're a long-term client of Made Tech. And accurately reporting data is absolutely critical for adult social care. Historically, it's been really challenging for them to do that effectively and the process around collecting, cleaning and 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. And we use a number of different machine learning models to do that, and it's really enabled them to get that data out into central government bodies much more efficiently, and it enables them to drive more accurate reports and empower ministers and MPs to make much better data-driven decisions around adult social care sector. So ultimately, the work we've 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've been doing there and something we've been pleased to be involved in. So in FY '24, we've made progress in commercializing our software portfolio. And really, this is designed to kind of address the recurring challenges faced with the local government and the housing associations. We've launched 3 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 3 products we've launched. Repairs is focused on managing housing repairs, streamlining the repair process for local authorities and housing associations, enables them 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 represent a significant challenge to housing associations as properties left vacant reduced rental income and increased 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 but also addresses housing shortages by ensuring properties are not empty. And 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 it's an important part of helping to drive operational efficiency within local authorities. So 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. So the pressures that they have seen in this market are kind of really impacting the sales cycle we're seeing on this. That being said, we've signed up 3 initial customers onto long-term subscriptions for these products. We've got Barking & Dagenham, which was signed pretty recently, Camden and London Borough of Redbridge. So we're excited to have these 3 customers onboard and using the products. And the engagement from them early on has been really positive. So we're really pleased to see that. Clearly, moving forward, there's a lot more work for us to do to kind of drive the further adoption of these products within the market. So these 3 kind of high-profile clients to start with, we're really pleased with. So why is kind of Software-as-a-Service and software products important to our strategy. So 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 subscription mix to become larger and more important part of our organization and help to drive kind of higher margins and long-term revenue visibility. So 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 want to kind of touch on ESG and kind of social value briefly. So at Made Tech, ESG is a real extension of our core organizational purpose. We use technology to improve society for everyone. I mean, we measure that both by financial returns but also by the impact of 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 partnered with [indiscernible] 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 ethically diverse, 18% of our team neurodivergent. So we're seeing kind of well above national averages in our diversity and inclusion statistics. From a health and well-being 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 kind of pleasing to say. From a skills development point of view, we've launched a DevOps apprenticeship program. We continue to invest in our sort of entry-level talent, and we see that as a really important kind of route to bring in 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 finish using them within our organization, and really that helps to combat digital exclusion. So 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, 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 suppliers. So 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-centered design approach, so minimizing the environmental impact of our projects. And 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, kind of lots going on from a social value point of view, and we see that as a really important part of our organization moving forward 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 of the previously delayed client decisions and is starting to provide a clearer set of priorities for our customers moving forward. We've had a really strong start to FY '25 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 '25 and 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. So 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 wanted to cover, and we're going to hand across to Q&A.

And we'll go to Robert Plant from H2 Radnor.

Rory, 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?

Yes. So there's definitely a lot going on within government at the moment around -- particularly orientated around the five missions that the labor have set out in their manifesto and then right through into kind of delivery of government. So there's a lot of structural work that's happening at the moment around how those five missions get delivered, and there's a big focus on really the technology that is required to support those five missions. So there's new mission boards and technology for mission boards that have been set up in different parts of government. There's been a fairly kind of quick restructure of certain government responsibilities around digital and technology. So they've been centralized into one part of government. So there's a lot happening. We're expecting that, 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 sort of the setup that is required to start delivering on a lot of the technology to underpin what the new government is looking to achieve.

And we'll go to [indiscernible] Canaccord Genuity.

I have a couple of questions on that linked around short-term trading. And it seems that the government sort of instituted new sign-off processes, right, for deals above GBP 1 million. And 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 projects 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? And then linked to that, I guess, I haven't seen sort of formal guidance for fiscal '25. 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?

Yes, I'll start with what we're seeing from clients. So Yes, 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, we've had minimal -- there's been minimal impact on our organization from those. The one thing I would caveat that with is there is one contract extension, which has been -- that's waiting for an approval that we're very much expecting to get, but it's been pushed out a couple of months. So that was the sort of one thing that we felt kind of impacted us over the last few months. But by and large, we haven't seen as much of an impact as some of our competitors may have seen over the last few months. So for us, I think trading is pretty good. Things are moving forward with all of our key customers. So we're not having that kind of same level of impact that you might have seen in other places. Do you want to touch on guidance, Neil?

Yes, happy to. I mean, [indiscernible] you're right. I think at the moment, guidance for FY '25 is that, yes, we would see a small dropoff 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've got in place, which we see continuing into FY '25 in terms of increased productivity. So I think we are -- there's an expectation that margins will tick up. And also as we're able to report in terms of the cash position of the business as well, we've increased the cash position GBP 1 million in the first 3 months of this year, up to GBP 8.6 million. So I think in terms of the foundations which we built in the business, we're in a very strong position. As we just said, I don't think we've seen the subdued trading that maybe some of the competitors have seen in the market, but we are nevertheless cautious. We think there are very strong tailwinds at the minute in terms of government's priorities. I think we're probably like some other players waiting for the autumn budget, which is now only a month away. And our expectation is that, yes, there will be some more bid work flowing through from that. So yes, I think it's cautious guidance at this stage. We are also looking to put out FY '26 guidance as well. But I think we're hopeful that we'll be able to update the market over the next few months with some positive news if those things come on.

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? And 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?

Yes, sure thing. So yes, I think -- if we look back over the last 12 months, we've definitely been very deliberately managing utilization very, very closely and keeping tight controls on the supply-demand mix in the organization to make sure we're continuing to kind of drive bottom line performance, but also with a view to kind of what does the forward view looks like and what does the opportunity pipeline look like and how do we make sure we've got sufficient kind of headroom in the organization to be able to staff up and grow revenue through new contracts and new areas. So that's a kind of constant thing we are looking at day in, day out really in the organization as we looking at kind of pipeline data and contracts and things that happen across our customers. There is a kind of mixture of different things we are doing in terms of kind of stuff we are starting up. So the DfE example that we touched on the new contract we won there. So we're booting that up at this point in time. So we've got kind of team on the ground doing that. And one of the sort of things that helps us is that a number of our contracts and typically, our contracts are longer-term contracts, so DfE contract is a 4-year contract. So we can kind of 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. So we try and kind of balance all these things as best as we can. Definitely, at this point in time, we are looking forward and looking at hiring and kind of what we need to be doing to kind of fulfill what we expect to be a busy 12 months.

Okay. Great. I mean, can you give us any sort of feel for where utilization is at the moment?

Yes, it's -- we're running nice and hot, not too hot, but nice and hot in the organization at this point in time.

And we'll go to Martin O'Sullivan Shore Cap.