14 November 2024

AdvancedAdvT Limited

Interim results - strong revenue and EBITDA growth

AdvancedAdvT Limited (LSE: ADVT, "AdvT", the "Group"), the international software solutions provider for business, compliance, and resource management, has published its unaudited interim results for the six months to 31 August 2024, following the Group's change of year end to 28 February. 

Financial performance

Proforma financial performance

Highlights

Vin Murria, AdvancedAdvT's Executive Chairperson, said:

"In the short time since we acquired the Capita businesses, their operational performance has improved markedly with, a number of multi-year million pound contracts secured with proforma revenue growth of 16.6% and EBITDA growth of 53.7%³.

"We are pleased to have established a core software platform for developing the Group further and continue to identify and prioritise the best potential acquisition opportunities to complement and broaden the existing product range. The acquisition of Celaton, a machine learning automation platform, in July is a prime example of this strategy and has already resulted in sales to the existing customer base.

"We remain optimistic about the opportunities for organic and acquisitive growth ahead."

2 Pre-tax profit includes £4.26m increase in the fair value of the investment in M&C Saatchi plc

3 Unaudited proforma results for the 6 months to 31 August 2024 and 6 months to 31 August 2023 for the 4 acquired businesses on 31 July 2023 (excluding Celaton that was recently acquired on 1 July 2024)

Enquiries:

Note to Editors

AdvancedAdvT Limited (AdvT) provides software solutions and platforms across two business transformational areas: business solutions & healthcare compliance, and human capital management.

The Group's operations are IBSS (financial management software), CHKS (AI based healthcare intelligence compliance and accreditation software), Retain (global resource planning and talent management software), WFM (workforce management software provider) and Celaton, a machine-learning AI based intelligent process automation ("IPA") platform (inSTREAM).

AdvT is an agent for change. The Group enables the delivery of Artificial Intelligence ("AI"), data analytics and business intelligence, all of which are key future drivers for growth in these sectors where long term digitisation trends are set to transform the workplace for professionals. 

AdvT is developing both organically and through acquisitions, by expanding its presence across adjacent markets, geographical boundaries and digital sectors.

Interim Report

AdvT made significantly good progress in the six months to 31 August 2024.  The Group focused on implementing operational and financial best practice in the acquired businesses, which resulted in a significant improvement in the financial performance of the initial four acquisitions - revenue up 16.6% and EBITDA growth of 53.7%4.

In July 2024, the Group acquired Celaton, a machine-learning AI based intelligent process automation ("IPA") platform ("inSTREAM"). This business is complementary to the Group, with our public sector clients expected to be the primary beneficiaries with three clients already signing up to the inSTREAM platform

Strategic overview

The Group's strategy is centred around backing sectors characterised by long term AI, digital transformation, data analytics and business intelligence trends that are in the early stages of adoption and set to transform the professional workplace for the next few decades. Embracing a long-term perspective, the aim is to build a lasting and thriving business.

M&A continues to be a core part of the Group's strategy and there has been a notable increase in inbound opportunities alongside the outbound opportunities we identify. The Board will continue to evaluate these against its acquisition criteria.

The Group continues to hold a 9.8% stake in M&C Saatchi plc.

Current trading and outlook

The year-on-year proforma performance provides a strong foundation on which to develop and execute both existing and future revenue opportunities. Building on this momentum, we are well positioned to leverage our expertise in digital and cloud software and services to deliver added value for our clients.

Current trading remains strong and aligned with our strategic objectives and Board's expectations. We anticipate continued growth as we capitalise on our commitment to client engagement, expertise in digital software solutions, and our recent inclusion on the G-Cloud14 procurement framework. Looking ahead, we are confident that our focused approach will enable sustained progress and deliver strong results across our expanding client base.

Operational review

Our business solutions and healthcare compliance operations, comprising IB Software and Solutions (Ireland) Limited and Integrated Business Software and Solutions Limited (together "IBSS"), CHKS Limited ("CHKS") and Celaton Limited ("Celaton") have placed heightened emphasis on the Go To Market strategy and the clients evolving needs in order to maximise the value of the software and digital solutions delivered.

Within the human capital management operations, Retain International Software Limited and Retain International Software USA LLC (together "Retain"), and Workforce Management Software Limited ("WFM"), successfully secured and increased the value of a number of multi-year contracts and onboarded several new clients to its SaaS platform. Additionally, both continue to invest in their roadmap and product strategy.

As anticipated, the Group is seeing positive digitalisation trends across both business solutions and healthcare compliance operations. The recently launched automated clinical coding solution continues to deliver value and to attract further opportunities. Client demand for the new Centros cloud platform remains strong, with over 60 of the clients either live or in the process of migrating to it. Additionally, the Ireland-based operation is experiencing growing demand for digital services and solutions.

Human capital management operations are also experiencing strong client demand as both new and existing clients increasingly adopt the cloud-based resources platform. This shift has resulted in a 92% increase in annual recurring revenue ("ARR") on the SaaS solution over the 12 months ending 31 August 2024. The platform plays a crucial role in streamlining and standardising best practice processes, enabling broader adoption of AI capabilities, and is supported by an adaptability engine in the latest releases.

Financial review

For the six months ended 31 August 2024 continuing operations generated revenues of £19.9 million from the acquired businesses5 (6 months to December 2023: £15.1m6). Recurring revenue from continuing operations as a proportion of total revenue was 80% during the period (6 months to December 2023 76%). This revenue increase and improved revenue ratio were driven by the successful renegotiation of a number of multi-year contracts, incorporating enhanced pricing, and a focus on a cloud strategy with its clients. Additionally, Celaton contributed £0.6m in revenue within the two months following its acquisition.

Adjusted EBITDA from continuing operations, which is a key underlying measurement of the Group, was £4.0 million for the period (6 months to December 2023: £3.7m7). The table below reconciles to the Condensed Consolidated Statement of Comprehensive Income and is accompanied by further detail in notes 4 and 5.

Based on its cash reserves, the Group had a net finance income of £1.9m (6 months to December 2023: £1.8m) and profit before tax from continuing operations of £8.3m (6 months to December 2023: £3.4m).

As we continue to standardise, optimise and integrate the acquired businesses we believe this will lead to improved margins, albeit initially offset by the activities and related costs of decoupling from the Capita plc systems and services.

Net cash was £83.3 million at 31 August 2024 (29 February 2024: £82.1m).

Adjusted Operating Cashflow was £4.7 million representing 117% cash conversion of adjusted EBITDA (6 months to December 2023: £4.3m and 116%⁵).

Free cash flow, as presented below, from continuing activities was £6.0 million (6 months to December 2023: £4.4m⁵).

Basic and diluted EPS was 5.89pence (December 2023: 2.36pence). The Board is not recommending the payment of an interim dividend.

The Group has an investment in M&C Saatchi plc. This Level 1 Financial asset is held at fair value through profit or loss (FVTPL) and was valued at £25.1 million at 31 August 2024 (£20.8 million at 29 February 2024). An increase of £4.26 million in fair value was recognised in the Condensed Consolidated Statement of Comprehensive Income during the period.

On 1 July 2024, the Group acquired Celaton, the operator of an intelligent document processing platform inSTREAM, for cash consideration of £4.8 million net of cash acquired of £1.7m.

Results

The Group's profit after taxation for the six months to 31 August 2024 was £7.9 million (31 December 2023: £3.1 million). The Group held cash and cash equivalents at 31 August 2024 of £83.3 million (31 December 2023: £78.7 million).

Dividend policy

The Directors are not currently recommending a dividend. The Board intends to evaluate the Group's dividend policy following significant deployment of the raised capital and will only commence the payment of dividends when it becomes commercially prudent to do so.

4 Unaudited proforma results for the 6 months to 31 August 2024 and 6 months to 31 August 2023 for the 4 acquired businesses on 31 July 2023 (excluding Celaton that was only recently acquired on 1 July 2024)

5 This includes two months of trading from Celaton (acquired 1^st July 2024)

6 6 months to December 2023 included 5 months of trading from the original 4 acquisitions

7 6 months to December 2023 included 5 months of trading from the original 4 acquisitions and excluded AIM plc running costs which commenced in January 2024

Condensed Consolidated Statement of Comprehensive Income

Other than the discontinued operations included above and detailed in note 22, the Group's activities derive from continuing operations.

The notes on form an integral part of these Interim Results.

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

The notes form an integral part of these Interim Results.

Condensed Consolidated Statement of Cash Flows

The notes form an integral part of these Interim Results.

Notes to the Condensed Consolidated Financial Statements

1.   GENERAL INFORMATION

AdvancedAdvT Limited was incorporated on 31 July 2020 in the British Virgin Islands ("BVI") as a BVI business company (registered number 2040954) under the BVI Business Company Act, 2004. The Company was admitted to the AIM Market of the London Stock Exchange on 10 January 2024 and has its registered address at Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, British Virgin Islands VG1110 and UK establishment address at 11 Buckingham Street, London WC2N 6DF.

The Company has acquired five software and services businesses. The Group provides software solutions and platforms across two business transformational areas: business solutions & healthcare compliance, and human capital management. The Group's operations are IBSS (financial management software), CHKS (AI based healthcare intelligence compliance and accreditation software), Retain (global resource planning and talent management software), WFM (workforce management software provider) and Celaton (Intelligent Process Automation software solutions). The Company is an agent for change, enabling the delivery of Artificial Intelligence ("AI"), data analytics and business intelligence, all of which are key future drivers for growth in these sectors where long term digitisation trends are set to transform the workplace for professionals. 

The Group is developing both organically and through acquisitions, by expanding its presence across adjacent markets, geographical boundaries and digital sectors.

The Company was listed on the Main Market of the London Stock Exchange from 4 December 2020, the acquisitions on 31 July 2023 constituted a reverse takeover and shares were therefore suspended from 8 June 2023, the Company was subsequently admitted to AIM from 10 January 2024.

The accounting reference date was changed from 30 June to 29 February (or 28 February, as the case may be). resulting in a short accounting period of 8 months, with the results of the acquired entities being included for 7 months from the date of acquisition. A shorter accounting period was selected to align with Admission to AIM.

The members of the Group's accounting reference date have also been changed to 29 February (or 28 February, as the case may be).

The Company's wholly-owned subsidiaries are set out in note 11, together with the Company, the "Group".

2.   MATERIAL ACCOUNTING POLICIES

(a)  Basis of preparation

The Interim Results have been prepared in accordance with the IAS 34 Interim Financial Reporting and are presented on a condensed basis.

The Interim Report does not include all the notes of the type normally included in an annual financial report. The Interim Report should be read in conjunction with the annual consolidated financial statements for the year ended 29 February 2024, which were prepared in accordance with International Accounting Standards as adopted by the EU ("IFRS"), and the public announcements made by the Company during the interim period, in particular the Admission Document dated 8 January 2024 which are available on the Company's website.

The principal accounting policies adopted in the preparation of the Interim Results are set out below and have been consistently applied throughout the period presented.

(b)  Going concern

The Group meets its day-to-day working capital requirements from the positive cash flows generated by its trading activities and its available cash resources. The information in these Interim Results has been prepared on a going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due within the next 12 months from the date of approval.

The Directors confirm that they have re-assessed the principal risks and reviewed current performance and forecasts, combined with expenditure commitments and including capital expenditure. The Group's forecasts demonstrate it should generate profits and cash in the year ending 28 February 2025 and beyond and the Directors are satisfied that the Group has sufficient cash reserves to enable it to meet its obligations as they fall due for a period of at least 12 months from the date of signing these financial statements.

(c)  New standards and amendments to International Financial Reporting Standards

Standards, amendments and interpretation effective and adopted by the Group

IFRSs applicable to the Interim Results of the Group for the period from 1 March 2024 to 31 August 2024 have been applied.

Standards issued but not yet effective

The following standards are issued but not applicable for the six months to 31 August 2024. The Group intends to adopt these standards, if applicable, when, and as they become effective. It is not expected that these standards will have a material impact on the Group.

* subject to EU endorsement

(d)  Basis of consolidation

Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The Consolidated Financial Statements incorporate the results of business combinations using the acquisition method. In the Statement of Financial Position, the acquiree's identifiable assets and liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Condensed Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Intragroup balances, and any gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the Interim Results.

(e)  Revenue recognition

The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer and revenue has been earned.

In determining the amount of revenue and profits to record, and related balance sheet items (such as contractual liabilities, contract fulfilment assets, trade receivables and accrued income) to recognise in the period, management is required to form a number of key judgements and assumptions. These include an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised. These judgements are inherently subjective and may cover future events such as the achievement of contractual milestones, performance KPIs and planned cost savings. In addition, key assumptions are made concerning contract extensions and amendments, as well as opportunities to use the contract developed systems and technologies on other similar projects.

Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.

In determining the transaction price, this includes, but is not limited to, estimating variable consideration, adjusting the consideration for the effects of the time value of money and measuring non-cash consideration.

The Group determines if the arrangement with a customer creates enforceable rights and obligations. The Group enters into contracts which contain extension periods, where either the customer or both parties can choose to extend the contract or there is an automatic annual renewal, and/or termination clauses that could impact the actual duration of the contract. Judgement is applied to assess the impact that these clauses have when determining the appropriate contract term. The term of the contract impacts both the period over which revenue from performance obligations may be recognised and the period over which contract fulfilment assets and capitalised costs to obtain a contract are expensed.

For contracts with multiple components to be delivered, management applies judgement to consider whether those promised goods and services are (i) distinct - to be accounted for as separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.

At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the present contract. This includes an assessment of any variable consideration where the Group's performance may result in additional revenues based on the achievement of agreed KPIs. Such amounts are only included based on the expected value or the most likely outcome method, and only to the extent that it is highly probable that no revenue reversal will occur.

The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are agreed.

Transactional (point in time) contracts

The Group delivers a range of goods and services in all reportable segments that are transactional services for which revenue is recognised at the point in time when control of the goods or services has transferred to the customer. This may be at the point of physical delivery of goods and acceptance by a customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria.

The nature of contracts or performance obligations categorised within this revenue type is diverse and includes (i) fees received in relation to delivery of professional services; (ii) passive software licence agreements; (iii) provision of IT hardware goods; and (iv) commission received as agent from the sale of third party software.

Performance obligations over time contracts

Passive software licences are licences which have significant stand-alone functionality and the contract does not require, and the customer does not reasonably expect, the Group to undertake activities that significantly affect the licence code. Any ongoing maintenance or support services for passive licences are typically separate performance obligations.

Software licences delivered by the Group can either be right to access ('active') or right to use ('passive') licences. Active licences are licences which require continuous upgrade and updates for the software to remain useful, often as part of a subscription or SaaS obligation. All other licences are treated as passive licences and recognised upon delivery. The assessment of whether a licence is active or passive involves judgement. The key determinant of whether a licence is active is whether the Group is required to undertake activities that significantly affect the licensed intellectual property and code (or the customer has a reasonable expectation that it will do so), so that the customer is, therefore, exposed to positive or negative impacts resulting from those changes.

The Group considers for each contract that includes a separate licence performance obligation all the facts and circumstances in determining whether the licence revenue is recognised over time or at a point in time from the go live date of the licence.

Consultancy, training and upgrades are typically assessed as a service contract to provide distinct service work based on clear statements of work, demonstrating separately identifiable obligations and standalone benefit to the customer. The services are contracted for on either a time and materials or fixed priced basis. Time and materials are recognised in the period in which it is performed. Fixed price work is recognised on a percentage completion basis of the remaining unbilled milestones. The percentage completed is determined with reference to time incurred to date and time required to complete the agreed works.

Support and maintenance, hosting and managed service revenue is typically recognised over the period of the contract as the customer simultaneously receives and consumes the benefits of the services provided by the Group consistently over the contract term.

Contract modifications

The Group's contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group's measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways:

a.     prospectively as an additional separate contract;

b.     prospectively as a termination of the existing contract and creation of a new contract;

c.     as part of the original contract using a cumulative catch up; or

d.     as a combination of (b) and (c).

For contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same pattern of transfer where revenue is recognised over time, the modification will always be treated under either (a) or (b); (d) may arise when a contract has a part termination and a modification of the remaining performance obligations.

The facts and circumstances of any contract modification are considered individually as the types of modifications will vary contract by contract and may result in different accounting outcomes.

Principal versus agent

The Group has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent as more than one party is involved in providing the goods and services to the customer. The Group acts as a principal if it controls a promised good or service before transferring that good or service to the customer. The Group is an agent if its role is to arrange for another entity to provide the goods or services. Factors considered in making this assessment are most notably the discretion the Group has in establishing the price for the specified good or service, whether the Group has inventory risk and whether the Group is primarily responsible for fulfilling the promise to deliver the service or good.

This assessment of control requires judgement in particular in relation to certain service contracts. Where the Group is acting as a principal, revenue is recorded on a gross basis. Where the Group is acting as an agent revenue is recorded at a net amount reflecting the margin earned.

Contract fulfilment assets

Contract fulfilment costs are divided into (i) costs that give rise to an asset; and (ii) costs that are expensed as incurred.

When determining the appropriate accounting treatment for such costs, the Group firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognised under IFRS 15.

If other standards are not applicable to contract fulfilment costs, the Group applies the following criteria which, if met, result in capitalisation: (i) the costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) the costs are expected to be recovered.

The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable. Contract fulfilment assets are amortised on a systematic basis consistently with the transfer of goods or services related to the asset.

Contractual liabilities and contract assets

The Group's customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and services being provided. These payment schedules may include performance-based payments or progress payments as well as regular monthly or quarterly payments for ongoing service delivery. Payments for transactional goods and services may be at delivery date, in arrears or part payment in advance.

Where payments received are greater than the revenue recognised at the period end date, the Group recognises a contractual liability for this difference. Where payments received are less than the revenue recognised at the period end date, the Group recognises an accrued income contract asset for this difference.

At each reporting date, the Group assesses whether there is any indication that accrued income assets may be impaired by considering whether the revenue remains highly probable that no revenue reversal will occur. Where an indicator of impairment exists, the Group makes a formal estimate of the asset's recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. There are no obligations for refunds or returns.

The period between when it is expected that the services will be transferred to the customer and when payment will be made at contract inception is less than one year, and the Group therefore applies IFRS 15's practical expedient, removing the need to adjust the promised amount of consideration for the effects of a significant financing component.

Impairment

Financial Assets: impairment is based on expected credit losses for all financial assets not held at fair value through profit or loss, reflecting the Group's expectation of the creditworthiness of the financial asset and includes accrued income.

Non-Financial Assets: including contract fulfilment assets, are subject to impairment tests when there is an indication that the asset may be impaired, comparing the carrying amount of the asset with its recoverable amount, which is the higher of its fair value less costs to sell and its value in use.

(f)   Intangible assets

All intangible assets, except goodwill, are stated at cost less accumulated amortisation and any accumulated impairment losses.

Goodwill

Goodwill represents the amount by which the fair value of the cost of a business combination exceeds the fair value of the net assets acquired. Goodwill is not amortised and is stated at cost less any accumulated impairment losses.

The recoverable amount of goodwill is tested for impairment annually or when events or changes in circumstance indicate that it might be impaired. Impairment charges are deducted from the carrying value and recognised immediately in the income statement. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Acquisition-related intangible assets

Net assets acquired as part of a business combination includes an assessment of the fair value of separately identifiable acquisition-related intangible assets, in addition to other assets, liabilities and contingent liabilities purchased. These are amortised on a straight-line basis over their useful lives which are individually assessed.

Branding
Branding intangible value Is the deemed fair value attributable to the acquired brands.

Customer relationships

Customer relationships intangible is the allocated fair value of the customer relationships of the acquired companies.

Software and IP on acquisition
Software and IP intangible value is the allocated fair value to the software and IP acquired. 

Internal software development
Research and development expenditure
Research expenditure is recognised as an expense when it is incurred and included in administrative expenses.

Capitalised internally generated research and development expenditure

Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised only if it meets the criteria for capitalisation under IAS 38.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as an asset in subsequent periods.

Capitalised development expenditure is amortised using the straight-line method over a period of between five and ten years when the products or services are ready for sale or use. In the event that it is no longer probable that the expected future economic benefits will be recovered, the development expenditure is written down to its recoverable amount. The amortisation charge is recognised within operating expenses.

Amortisation periods of intangible assets

(g)  Functional and foreign currencies

(i) Functional and presentation currency

The individual Financial Statements of each entity in the Group are presented in the currency of the primary economic environment in which the entity operates, which is the functional currency.

The Interim Results are presented in Pounds Sterling, which is the Group's presentation currency.

(ii) Transactions and balances

Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are recognised in profit or loss.

(iii) Foreign operations

Assets and liabilities of foreign operations are translated to Pounds Sterling at the rates of exchange ruling at the

end of the reporting period. Revenues and expenses of foreign operations are translated at the average rate of exchange. All exchange differences arising from translation are taken directly to other comprehensive income and accumulated in equity under the foreign exchange translation reserve.

Goodwill and fair value adjustments arising from the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the end of the reporting period. Exchange differences are recognised in other comprehensive income.

(h)  Discontinued operations

A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of profit or loss and other comprehensive income.

(i)   Stated capital

Ordinary shares and sponsor shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in the associated stated capital as a deduction from the proceeds.

(j)   Share based payments

The A ordinary shares in MAC I (BVI) Limited (the "Incentive Shares"), represent equity-settled share-based payment arrangements under which the Company receives services as a consideration for the additional rights attached to these equity shares.

Equity-settled share-based payments to Directors and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value is expensed, with a corresponding increase in equity, on a straight-line basis from the grant date to the expected exercise date. Where the equity instruments granted are considered to vest immediately, the services are deemed to have been received in full, with a corresponding expense and increase in equity recognised at grant date.

(k)  Warrants

On 4 December 2020, the Company issued 700,000 ordinary shares and matching warrants. Under the terms of the warrant instrument, warrant holders can acquire one ordinary share per warrant at a price of £1 per ordinary share.  The Warrants are exercisable until 4 December 2025 being any time up to five years after the IPO date (4 December 2020). Warrants are accounted for as equity instruments under IAS 32 and are measured at fair value at the date of issue. Fair value of the warrants has been calculated using a Black Scholes option pricing methodology, which considered the exercise price, expected volatility, risk free rate, expected dividends, and expected term of the Warrants. Of these factors estimates and judgement are required when determining the expected volatility, dividends, and warrant term. No revisions have been made in the period. Details of which are contained in the audited financial statements to 29 February 2024.

(l)   Earnings per ordinary share

Earnings per ordinary share ("EPS") is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potentially dilutive instruments into ordinary shares.

(m) Provisions

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Onerous contracts

If the Group has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. However, before a separate provision for an onerous contract is established, the Group recognises any impairment loss that has occurred on assets dedicated to that contract. An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities).

(n)  Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets
Initial recognition and measurement

Financial assets are classified, at initial recognition, and subsequently measured at fair value through profit or loss ("FVPL"), amortised cost, or fair value through other comprehensive income ("FVOCI").

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. In order for a financial asset to be classified and measured at amortised cost or FVOCI, it needs to give rise to cash flows that are 'solely payments of principal and interest' on the principal amount outstanding (the "SPPI Criterion").

Financial assets are initially measured at their fair value plus, for those financial assets not at fair value through profit or loss, transaction costs.

Subsequent measurement

For the purposes of subsequent measurement, all of the Group's financial assets (except its Level 1 financial asset as detailed below) are classified as financial assets at amortised cost. Financial assets at amortised cost comprise of assets that are held within a business model with the objective to hold the financial assets to collect contractual cash flows that meet the SPPI Criterion. This category includes the Group's other receivables. These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses, interest income, foreign exchange gains and losses and impairment losses are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

The Group holds an investment in M&C Saatchi plc which it has classified as a Level 1 financial asset as detailed in note 11.  The Company accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment at FVOCI. The fair value was determined in line with the requirements of IFRS 13 'Fair Value Measurement'. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions.

As at the balance sheet date the Group has not classified any assets as being financial assets at FVOCI.

Derecognition

A financial asset is primarily derecognised and removed from the Consolidated Statement of Financial Position when the rights to receive cash flows from the asset have expired.

Financial liabilities
Initial recognition and measurement

Financial liabilities are classified as financial liabilities at fair value through profit or loss or amortised cost. All financial liabilities are recognised initially at fair value and, in the case of payables, net of directly attributable transaction costs.

Subsequent measurement

Financial liabilities are subsequently measured at amortised cost and in the case of interest-bearing financial liabilities at amortised cost using the effective interest rate method. Gains and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

3.   CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Financial Statements under IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Key sources of estimation uncertainty

Identifiable assets acquired and liabilities assumed

As required by IFRS 3, we have measured the assets acquired and liabilities assumed on the acquisitions in the period at their fair value on acquisition. The fair values of contract liabilities at acquisition dates were estimated to obtain a price that would be paid to transfer the liability in an orderly transaction between market participants. The approach used was based on a market participant's estimate of the costs that will be incurred to fulfil the obligation plus a normal profit margin, based on the overall cost profile over the life of the contract.

The determination of the fair value of assets and liabilities including goodwill arising on the acquisition of businesses, the acquisition of branding, customer relationships and intellectual property, whether arising from separate purchases or from the acquisition as part of business combinations, and development expenditure which is expected to generate future economic benefits, are based, to a considerable extent, on management's estimations.

The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset

where no active market for the assets exists. The use of different assumptions for the expectations of future cash

flows and the discount rate would change the valuation of the intangible assets.

Whilst the accounting for business combinations is substantially complete, certain acquisition fair value estimates are in the process of being finalised.  Management have engaged with specialists in this regard and at the date of this report do not expect any differences to have a material effect on the numbers as reported in these Interim Results.

Critical accounting judgements

Revenue recognition

There are a number of areas where judgement has been applied in respect of revenue recognition.  A description of the way in which revenue and associated assets are recognised is detailed in note 2. In applying IFRS 15 Revenue from Contracts with Customers significant judgement which may affect the determination of the amount and timing of revenue from contracts with customer include: assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised.

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Provisions

Onerous contract provisions are recognised where the unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.

For the period to 31 August 2024, the Directors do not consider that they have made any other significant estimates, judgments or assumptions which would materially affect the balances and results reported in these Financial Statements.

4.   ALTERNATIVE PERFORMANCE MEASURES

In reporting financial information, the Group presents alternative performance measures ("APMs") which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for IFRS measures, provide stakeholders with additional useful information on the underlying trends, performance and position of the Group and are consistent with how business performance is measured internally. The alternative performance measures are not defined by IFRS and therefore may not be directly comparable with other companies' alternative performance measures. The key APMs that the Group uses are outlined below.

5.   SEGMENT INFORMATION

Revenue from continuing operations

Revenue is recognised for each category as follows:

• Recurring revenues: income occurring continuously and repeatedly.

• Transactional revenues: recognised at the point of transfer (delivery) to a customer

Operating segments

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision makers to allocate resources to the segments and to assess their performance.

The chief operating decision makers have been identified as the Executive Directors. The Group revenue is derived from the sale and subscription of recurring and transactional revenue engagements with its customers. Consequently, the Executive Directors review the two revenue streams, but as the costs are not recorded in the same way, the information on costs is presented as one segment and as such the information included below is presented in line with management information.

6.   EMPLOYEES AND DIRECTORS

(a)   Employment costs for the Group during the period:

(b)   Key management/executive compensation

The Board considers the Directors of the Company, to be the key management personnel of the Group. 

During the six months ended 31 August 2024, the Company had the following Executive Directors: Vin Murria, Gavin Hugill and Karen Chandler.   

Full details in respect of the Directors' roles and remuneration are set out in the Company's admission document dated January 8th, 2024 and in the financial results to 29 February 2024. Since this date no changes were made to directors remuneration.

Vin Murria, Gavin Hugill, Karen Chandler and Mark Brangstrup Watts all have a beneficial interest in the A ordinary shares (Incentive Shares) issued by the Company's subsidiary. This is disclosed in note 19 of these Interim Results.

(c)   Employed persons

The average monthly number of persons employed by the Group (including Directors) during the period was as follows (persons from Acquisitions included for five of the six months):

7.   OPERATING EXPENSES ARE STATED AFTER CHARGING

8.   TAXATION

Income tax expense is recognised based on management's estimate of the weighted average income tax rate expected for the full financial year.  Tax is charged at 20.4% for the six months ended 31 August 2024 (31 December 2023: 22.8%) representing the best estimate of the average annual tax rate expected to apply for the full year applied to the pre-tax income of the six month period.

The effective rate applied for 2024 was lower than the standard rate of UK corporation tax due to the brought forward tax losses held by the Group and it subsidiaries and the effective rate of tax in Ireland.  The effective tax rate applied for the interim period to 31 August 2024 is affected by deferred tax liability releases in relation to the intangibles created upon the business combination.

9.   PROFIT/LOSS PER ORDINARY SHARE

Basic EPS is calculated by dividing the profit/(loss) attributable to equity holders of a company by the weighted average number of ordinary shares in issue during the year. Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potentially dilutive instruments into ordinary shares.

The Company has issued 700,000 warrants, each of which is convertible into one ordinary share.

As more fully detailed in the annual financial statements to 29 February 2024, incentive shares in MAC I (BVI) Limited have been issued. On exercise, the value of these shares is expected to be delivered by the Company issuing new ordinary shares, and hence the Incentive Shares could have a dilutive effect, although the Company has the right at all times to settle such value in cash. Whilst the Preferred Return is currently being achieved, the Incentive Shares have not vested and therefore not been included in the calculation of diluted EPS.

The Company has issued two sponsor shares, the sponsor shares have no right to receive distributions and so have been ignored for the purposes of IAS 33.

Adjusted operating profit has been calculated using the definitions in note 4 with further detail in note 5 to these financial statements.

10. INTANGIBLE ASSETS

Celaton acquired 1^st July 2024 with further detail in note 17.

11. SUBSIDIARIES AND INVESTMENTS

Principal subsidiary undertakings of the Group

The Company owns directly the whole of the issued ordinary share capital of its subsidiary undertaking. Details of the Company's direct subsidiary is presented below:

The registered office of MAC I (BVI) Limited Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, British Virgin Islands VG1110.

Details of the indirectly held subsidiaries are presented below:

(1)   Integrated Business Software and Solutions Limited and IB Software and Solutions Limited together "IBSS".

(2)   Retain International Software Limited and Retain International Software USA Limited together "Retain".

On 1 July 2024, the Company acquired Celaton and as such these Interim Results include 2 months of results from Celaton.

Financial assets

The Group directly owns an equity investment in M&C Saatchi plc which is classified as FVTPL.

There were no transfers between levels for fair value measurements during the year. The Group's policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.

a)     Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in level 1.

b)    Level 2: The fair value of financial instruments that are not traded in an active market (e.g. over-the counter derivatives) is determined using valuation techniques that maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

c)     Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.

During the period, the following gains/(losses) were recognised in profit or loss:

12. TRADE AND OTHER RECEIVABLES

There is no material difference between the book value and the fair value of the receivables. Receivables are considered to be past due once they have passed their contracted due date.

13. CASH AND CASH EQUIVALENTS

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions.

14. TRADE AND OTHER PAYABLES

There is no material difference between the book value and the fair value of the trade and other payables.

15. CONTRACTUAL LIABILITIES

The contractual liabilities balance relates to revenue from contracts with customers.

16. PROVISIONS

A provision has been recognised upon acquisition for certain contracts with customers of IBSS, for which the unavoidable costs of meeting the obligations, relating to hosting costs at a data centre, exceed the economic benefits expected to be received. It is anticipated that these costs will be incurred over the next two to three financial years. No reimbursement is expected.

17. ACQUISITIONS

In the period, the Group acquired 100% of the equity interests in Celaton. Outlined below is a summary of the consideration paid, the provisional fair value of acquired intangible assets, the provisional fair value of other acquired assets and liabilities assumed at the acquisition date and the resulting goodwill for each entity acquired, subject to the finalisation of the purchase price allocation report.

On 1 July 2024, AdvancedAdvT Limited completed the acquisition of Celaton for cash consideration of £6.5 million, funded from the Company's cash resources. The net cash outflow as detailed below reflects the consideration paid, net of the cash acquired.  Details on each of the entity's acquired is set out below:

Celaton provides of intelligent process automation software solutions that streamline data intensive clerical tasks.

The following table summarises the consideration paid for acquisitions, the fair value of assets acquired and liabilities assumed at the acquisition date.

Acquisition related costs of £0.1 million has been charged to the statement of comprehensive income within administration expenses in the six months to 31^st August 2024.

Goodwill arises due to: expectation of future economic benefits, going concern value, excess business income, reputation, brand recognition, and proprietary technology, strong and loyal customer base expertise of employees, social impact of the company, stability and experience and synergistic benefits that do not qualify for separate recognition as an intangible. None of the goodwill is expected to be deductible for tax purposes. None of the goodwill is expected to be deductible for tax purposes.

The acquisition recognised £0.6 million of revenue for the period between the date of acquisition and the balance sheet date and £0.04 million of profit before tax attributable to equity holders of the parent. As a preliminary assessment, had the acquisition been completed on the first day of the period, as opposed to the completion date of 1 July 2024, Group revenues from continuing activities would have been approximately £1.1 million higher and group profit before tax attributable to equity holders of the parent would have been approximately £0.1 million higher.

18. EQUITY AND RESERVES

19. RELATED PARTY TRANSACTIONS

Transactions between Group undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Vin Murria, Gavin Hugill, Karen Chandler, Mark Brangstrup Watts and Antoinette Vanderpuije (the Company Secretary) have beneficial interests in the Incentive Shares issued by the Company's subsidiary. 

Details of their respective interests can be found in the Company's annual financial statements to 29 February 2024, there have been no changes to these interests in the period.

The acquisition of Celaton constituted a related party transaction for the purposes of the AIM Rules for Companies. Vin Murria, a Director and substantial shareholder of AdvT, and BGF Investment Management, a substantial shareholder of AdvT, each owned approximately 45% of Celaton. In addition, Karen Chandler, a Director of AdvT, was Chief Operating Officer and a minority shareholder of Celaton.

The Directors independent of the acquisition (Gavin Hugill, Mark Bangstrup Watts, Paul Gibson and Barbara Firth) having consulted with the Group's nominated adviser, Singer Capital Markets, considered that the terms of the acquisition to be fair and reasonable insofar as shareholders are concerned.

20. COMMITMENTS AND CONTINGENT LIABILITIES

There were no commitments or contingent liabilities outstanding at 31 August 2024 that require disclosure or adjustment in these financial statements.

21. POST BALANCE SHEET EVENTS

No other matter or circumstance has arisen since 31 August 2024 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs as at the date of this report.

22. DISCONTINUED OPERATIONS  

On 26 January 2024, the Company sold Synaptic. Synaptic has been classified was a discontinued operation within the 2023 Interim Financial Statements.

Results of Synaptic Software Limited included in the group consolidation for the period are presented below: 

The discontinued operation was not material to the calculation of earnings per share as set out in note 9.

Carrying amounts of assets and liabilities disposed:

Details of the disposal