IP : Actual Experience plc - Preliminary results for the year ended 30 September 2017

Actual Experience plc (AIM: ACT), the analytics as a service company, is pleased to announce its preliminary results for the year ended 30 September 2017.

Highlights

· 2017 was a year in which we prepared the business for large scale production with our Channel Partners
· Signing of a multi-year framework agreement with Proquire, the procurement arm of Accenture, our fourth Master Service Agreement
· Increased headcount to support Channel Partner development from 57 to 80
· Improvement of processes throughout the business to enable better working with our partners
· Improvement of product in terms of stability and automation in order to be able to operate at scale with partners· Revenue of £0.36m (2016: £0.72m); this decrease reflects our decision to focus entirely on our four channel partners, and this strategy is expected to deliver significant revenue progress in 2018

Dave Page, CEO of Actual Experience plc, said: 'In 2017, we have seen initial small scale commercial deployments through our Channel Partners and, working with them, have implemented product and process improvements. This was no small challenge and has drawn heavily on the skills and experience of our employees. As a result, we believe we are now ready to do business with our Channel Partners at the scale and speed they require. We are confident that 2018 will bring the first fruits of the hard work of previous years, with significantly larger scale deployments and accompanying revenue.'

Enquiries:

About Actual Experience

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

Actual Experience is listed on the AIM market of the London Stock Exchange (ACT). Our development headquarters are in Bath, UK, and we have sales staff based out of London and the United States. Actual Experience's unique digital Analytics-as-a-Service ('AaaS') is founded on ten years of cutting-edge research at Queen Mary University of London.

www.actual-experience.com

I am pleased to report that 2017 was a year in which we made significant progress towards production with our global Channel Partners. After we signed a fourth global Channel Partner early in the year, the next stage of development has been to support those partners for widescale deployment of our service within their customer bases.

Given the huge opportunity within these customer bases, the Board took the decision to focus efforts solely on those existing partners and to provide them with the tools and levels of support needed for wider deployment.

Investment has been made into refining our technology, both in terms of its operation and scalability and how it operates within the processes of our Channel Partners. Those refinements have been successfully developed and tested and we now look forward to significant commercial deployment.

The importance of cyber security has never been more apparent to all organisations and I am proud to report that Actual Experience has gained both Cyber Essentials and Cyber Essentials Plus accreditation. These reflect industry best practice and foster confidence for our Channel Partners and their customers.

Our people are critical to our success and I'm delighted to relay that employee engagement scores are high both by internal and external measures. On behalf of the Board, I thank all of our colleagues for their exceptional commitment.

Fundraise

I would also like to thank our shareholders, both pre-existing and those who joined the register in 2017. These include institutions who participated in raising £17.5 million in the year to fund the increased investment in accelerated deployment.

Outlook

Revenues decreased in 2017 as a consequence of our strategy to focus solely on existing Channel Partners. 2018 is a year in which we will see our first significant commercial deployment and revenues. It is a year in which we must deliver and we look forward with eager anticipation and confidence.

Stephen Davidson
Chairman

Chief Executive's statement

Introduction

2017 has seen the Company make continued progress against its strategic objectives. At the start of the financial year an agreement was signed with Proquire, the procurement arm of Accenture plc. This meant that four of the world's largest service providers were now actively preparing to take our offering to their customer bases, and the Board therefore took the decision to focus all of the Company's resources and efforts during the year on taking those partners through to production.

Following a successful fundraise in February 2017, we have been able to commit further investment into each of our Channel Partners, to truly understand their processes and provide them with the support that they need for deployment of our technology. It has been a learning process, both for the Company and each of its partners and through what we have learnt we have been able to adapt, modify and enhance our product.

The first production deployments have been successfully made, on a small scale, and we have come a long way towards larger scale deployments which we expect to take place in the fiscal year 2018.

It is pleasing to note that progress with our most recently signed Channel Partner has been faster and smoother than with previous engagements. This underlines our belief that the need for our Analytics-as-a-Service is becoming ever more important in an increasingly digital world, as well as reflecting improvements in our product and implementation processes.

Strategy Overview

In 2017, we increasingly focussed all of our efforts on our four signed Channel Partners. In turn, they are focussing their deployment of Actual Experience into their largest enterprise customers.

Our digital AaaS is being embedded into the processes and products of our Channel Partners, enabling them to deliver a consistent and reliable digital experience across complex global digital supply chains for their enterprise customers, to the benefit of the customers and employees of those enterprises.

We believe we are approaching an inflection point for the business in 2018. We have been readying our product and partners for production since the initial signing of Master Service Agreements (MSAs). This year should see more and larger deployments as they build towards large scale global rollout. To ensure the success of these rollouts, we will remain focussed on our four Channel Partners. This focus will enable us to achieve operational excellence and ensure partner satisfaction.

We continue to maintain a small base of important direct enterprise customers. Their feedback has been, and continues to be, extremely useful in helping to develop our product.

Market Opportunity

In 2017 the global digital economy reached over $25 trillion, and the number of transactions that make up this economy is growing year on year. As the digital world becomes an increasingly important utility for businesses, the need for quality and consistency to support these valuable transactions is only increasing.

The global digital economy is made up of an increasing number of businesses, that in turn are part of the global digital supply chain. As the value of the global digital economy increases, business leaders demand digital quality for their staff and customers. While hundreds of products exist that can manage the individual components, we believe that our AaaS is the only product that has been built from the ground up to manage the entire global digital supply chain, providing the insight required to improve the quality and consistency of staff and customer digital experiences.

Operational review

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

· Organisational structure

Overall headcount during the year increased from 57 to 80, with the majority of investment being in R&D and operational staff, reflecting the Company's focus on its existing Channel Partners. Whilst overall numbers have increased, the business has streamlined, resulting in a more effective organisation singularly focussed on execution excellence with our Channel Partners.

· Product development

Through 2017 we have learnt, together with our partners, how their processes and our product can be simplified and improved to aid deployment at global scale. For instance, in August, we were pleased to announce that we had received an open PO from one of our Channel Partners. This PO reflected certain procurement process improvements made, enabling us to more easily fulfil orders from that partner. As with the open PO, the other process and product developments support our ability to deploy our product globally at scale, and therefore to tap into our partners' vast customer bases.

· Channel Partner update

The progress that we have made within each of our Channel Partners throughout the course of the year has vindicated our strategic decision to concentrate on them solely.

At the time of the Placing in February, the Company was able to announce that it had received the first order from a Channel Partner to begin production rollout of a major customer. Since then, further deployments have taken place within further customers. The overall demand from our Channel Partners is greater than we had originally envisaged, with the desire for faster and more widespread deployment balanced by the operational need to get it right first time, every time.

Current trading and outlook

In 2017, we have seen initial small scale commercial deployments through our Channel Partners and, working with them, have implemented product and process improvements. This was no small challenge and has drawn heavily on the skills and experience of our employees. As a result, we believe we are now ready to do business with our Channel Partners at the scale and speed they require. We are confident that 2018 will bring the first fruits of the hard work of previous years, with significantly larger scale deployments and accompanying revenue.

Dave Page
Chief Executive Officer

Revenue

Revenue recognised in the year ended 30 September 2017 was £364,832 (2016: £716,346) and relates to the supply of analytical services and associated consultancy activities to customers. 68% of revenue was derived from sales to channel customers (2016: 60%) with the balance arising from direct sales. This increased percentage reflects the Group's strategic focus on generating revenue growth from its Channel Partners.

Gross loss

As noted in the Chief Executive's statement, the Group continued to make significant investment during the year to establish the infrastructure required to fully support its Channel Partners, including a 24-hour support centre. The set-up costs of this support infrastructure resulted in a gross loss for the year of £935,852 (2016: loss of £238,466).

Expenses

Administrative expenses comprising R&D, operational support, sales and marketing, finance and administration costs, and foreign exchange gains and losses totalled £6,976,814, an increase of £1,170,515 compared to the prior year. This increase reflects the continued investment made by the Group in technology development and operational support infrastructure. Personnel costs continue to be the largest expense and represent approximately 68% of the Group's cost base. The functional cost breakdown is as follows:

Tax

The tax credits recognised in the current and previous financial year arose from the receipt of R&D tax credits.

Loss for the year

Losses after tax for the year ended 30 September 2017 totalled £7,397,149 (2016: loss of £5,671,072). These losses are primarily generated by employee costs and related expenses.

Loss per share

The loss per share for the year was 17.72p (2016: loss of 15.21p). Earnings per share have been impacted by the increases in operating costs.

Dividend

No dividend has been proposed for the year ended 30 September 2017 (2016: £nil).

Cash flow

Actual Experience is investing in the growth of its operations to address what it believes to be a significant commercial opportunity and its cash flow from operations was therefore negative during the year ended 30 September 2017, and in line with expectations. The Group's costs are mostly operating related, with very little investment required for capital infrastructure. Cash used by operating activities was £7,086,016 for the year, compared to cash used of £5,210,287 for the year ended 30 September 2016. This operating cash requirement was substantially funded by cash reserves and the Group ended the year with cash and term deposits totalling £18,209,850 (2016: £9,415,886).

Software development capitalisation

The Directors believe that the software development capitalisation criteria in IAS38 have been met and accordingly development costs, net of amortisation charges, of £1,266,261 have been capitalised as at 30 September 2017 (2016: £516,041).

Accounting policies

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

Principal risks and uncertainties

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

Key performance indicators

As the Group is in the process of development and commercialisation of its services, the Directors consider the key quantitative performance indicators to be sales revenues of £364,832 (2016: £716,346) and the level of cash and term deposits held in the business of £18,209,850 (2016: £9,415,886). The Board performs regular reviews of actual results against budget, and management monitors cash balances on a monthly basis to ensure that the business has sufficient resources to enact its current strategy. Certain non-financial measures, such as the number of deployed Digital Users, are monitored on a monthly basis.

The Board will continue to review the KPIs used to assess the business as it grows.

Environmental matters

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

Human rights policy

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

Employees

As at 30 September 2017 the Group employed 80 people in three offices (2016: 57 people), of which 56 were male and 24 were female. As at the date of this document, of the six senior members of management, one is female.

Directors

Details of the Directors who served during the year ending 30 September 2017 are noted in the Directors remuneration report. All seven of the Directors serving on the Board at the year end were male.

On behalf of the Board.

Steve Bennetts
Chief Financial Officer

For the full RNS announcement, please click here.