Company Announcements

12 September 2022

MADE TECH GROUP PLC

("Made Tech" or the "Group")

AUDITED FINAL RESULTS

Strong accelerating growth in FY22 with significant opportunities ahead

Made Tech Group plc, a leading provider of digital, data and technology services to the UK public sector, announces its audited final results for the year to 31 May 2022 ("FY22" or the "period"), which show significant growth in revenue and profit.

FY22 was a period of exceptional and accelerating growth, delivered by a dedicated and rapidly expanding team. Made Tech is well positioned to continue to build on our success and structure the Group to meet the significant and long-term market opportunity ahead.

Financial summary

Highlights

Rory MacDonald, CEO, commented: 

"This has been a landmark year in the history of Made Tech and I am hugely proud of everything that the business has achieved.  We have made strong operational and strategic progress, in our first year as a quoted company, and taken significant steps forward in the delivery of our mission to improve public services.

The digital transformation market is substantial and growing and Made Tech is well positioned to capitalise on the opportunity. Over the last three years, since focussing solely on the public sector, we have demonstrated our ability to attract, secure and win new clients, new contracts and new talent. Our strong FY22 financial performance and our successful IPO in September 2021 have strengthened the Group's balance sheet, which, together with our ongoing cash generative operations, enables us to continue investing in the high quality strategic opportunities, which will support the sustainable growth of our business.

As a final point, I would like to thank our employees, partners and clients personally for their contribution and ongoing support."

Enquiries:

About Made Tech

Made Tech is a high-growth provider of digital, data and technology services to the UK public sector. Founded in 2008 and with a headcount of over 470 people across multiple UK locations, Made Tech provides services that enable central government, healthcare and local government organisations to digitally transform.

CHAIR'S REPORT

I am pleased to present the Group's first set of full year results as a quoted company, which show a year of exceptional and accelerating growth, delivered by a dedicated and rapidly expanding team, as we continue to build on our success and structure the Group to meet the significant and long-term market opportunity ahead.

We have increased revenues by 120% to £29.3m (FY21: £13.3m), doubled our year-end headcount with high quality recruits to 478 (FY21: 235), secured 12 new clients (FY21: 11 new clients), increased sales bookings and contracted backlog by 181% and 133% respectively. The Group has moved ahead significantly during the period and is well set and in a strong position to continue to deliver further growth.

Our stock market admission in 2021 was a key milestone for the Group, with our quoted status and new capital structure enhancing our profile, incentivising our people and enabling us to invest in our ambitious growth plans. The management team remains well invested in the business' success, having retained circa 51% of the Company's total issued share capital at IPO, and I am confident that Made Tech will continue to grow rapidly and deliver value for shareholders over the longer term.

Culture

Our people are central to the Group's success and to delivering on the Board's growth ambitions. We have made significant investment to establish a structure that supports an inclusive culture, based on wellbeing and fostering an environment that is welcoming, social and supportive.

We have a dedicated People team, which conducts a quarterly "happiness survey" to help us ensure we are meeting the needs of our people.

Decentralised community groups are encouraged and supported. These have been particularly important following the changes to working practices resulting from the pandemic. They develop organically, without interference, to best benefit their communities. With no measures, expectations or targets, these groups have led to the development of social spaces online, in-person events, guest speaker events and Company-wide showcases.

Our people are encouraged to socialise, either remotely or in person. During the pandemic, we initiated the use of an application to pair colleagues for a catch-up. This is now being extended to introduce new colleagues to the wider team, facilitating and accelerating integration, both of which are extremely important during the rapid expansion of the business.

Made Tech believes that, in order to deliver its mission, to transform public services and create a fairer, more equitable society, a diverse team is needed and this is welcomed by our clients. We have established an ESG Committee with enthusiastic representatives from across the organisation, to drive this agenda in a meaningful way. Made Tech values transparency and has taken the initiative to begin publishing gender and racial pay reports before reaching the threshold for mandatory reporting. The Group produces a Diversity, Equity and Inclusion report and, in our latest report published in June 2022, we have successfully improved diversity and inclusivity throughout the business. Since we last reported in 2021, we have increased ethnic diversity to 20.4%, which is 7.6% higher than the UK population, and 14.3% of the team identifies as LGBTQ+. We have increased the women in leadership positions from 28.6% to 38.6% and have increased the leadership representation of all ethnic groups other than White from 10.7% to 12.3%.

Learning and mentoring are core values. Ongoing training to support career development, and a knowledge-sharing and mentoring mindset helps to provide continuous learning.

As the business grows, we will continue to resource our People team to support the expanding Group.

Strategy and growth

On admission to AIM, the Group raised £13.5m net to provide growth capital and repay a bank loan of £1.25m. Our strategy for growth is primarily focused on driving organic growth in the multi-billion-pound digital transformation market, specialising in the UK public sector as our unique selling point. However, the Group will also consider relevant bolt-on acquisitions should suitable opportunities arise to complement its organic expansion and to accelerate overall growth.

Our organic growth is driven by four initiatives:

• maintaining our exclusive focus on government services, which we believe delivers competitive advantage through our deep understanding of and close alignment with our public sector clients' needs. This was endorsed in the year as we won several significant contracts, including NHS Digital;

• expanding our UK regional coverage in line with the government's levelling-up agenda - we recruited new employees in Scotland, the North East and the Midlands during the year and increased our headcount from 235 to 478 in FY22;

• growing our market share within the health, local government and central government sectors - we added 12 major new clients in the year; and

• extending our services and solutions in support of our clients' needs - we expanded our capabilities in the period, to cover data engineering and data science, cybersecurity, managed services, and research and development.

Environmental, social and governance

As an important partner of our UK public sector customers, we understand the importance of not only working efficiently and collaboratively but also in a manner which reduces our impact on the environment. With the UK being the first major global economy to commit to carbon net zero by 2050, Made Tech is also committed to being carbon net zero by that date.

While our direct impact on the environment is low, we take responsibility for monitoring and reducing energy use and emissions. Within the current financial year, the Group is progressing to achieve validated Carbon Neutral Company status by 2050, as assessed by independent experts against ISO 14064 and the GHG Protocol Emissions Standard. This important activity, which progressively moves Made Tech closer to its carbon net zero ambition, is delivered in three stages: calculate, offset and certify. Our ESG committee was formed in FY22, and we will continue to deepen the measurement of, and action on all of our emissions in the next financial year.

Board and governance

I was appointed to the Board as Chair on Admission to AIM in September 2021, and I am joined by Helen Gilder and Phil Pavitt as Independent Non-Executive Directors, who also joined at Admission. Together, the Board has extensive experience in dealing with a broad range of market conditions and rapid strategic growth. I am pleased to have such diverse knowledge and expertise around the Board table.

As Chair, it is my responsibility to ensure that Made Tech has both sound corporate governance and an effective Board. Since the Company was admitted to AIM, we have chosen to adopt the Quoted Companies Alliance's Corporate Governance Code for Small and Mid-Size Quoted Companies (the "QCA Code"), to the extent it is appropriate, having regard to the Company's size, Board structure, stage of development and resources.

To meet the requirements of the QCA Code, the Board has worked to introduce new structures and processes to improve corporate governance across the Group. We are committed to continuing to evolve and develop these in line with corporate governance best practices.

Outlook

We are mindful of the recent changes within government and the potential impact of this may have on our public sector clients. However, our high level of order bookings, significant proportion of contracted revenues and the embedded and long-term nature of our client relationships and contracts give us confidence in our prospects for the coming year and beyond.

We will maintain our exclusive focus on government services and continue to build on our competitive advantage as a purely public sector focused provider. We see clear opportunities to grow our market share further within the health, local government and central government sectors, as well as to extend into new areas, as illustrated by our recent engagement by the Met Office. We have expanded our UK regional coverage in line with the government's levelling-up agenda, by recruitment in the North of England and Scotland. As the UK moves to a new hybrid working model, we intend to support this investment by adding regional hubs in Newcastle and Glasgow. We have also extended our capability coverage and are developing new sought-after capabilities, including cybersecurity and managed services.

It is our firm intention to achieve sustained revenue, profit and cash flow growth, by delivering these initiatives though the current financial year and into 2024. Made Tech works closely with its public sector clients to help them provide a better experience and better outcomes for citizens. We see government increasing digitisation spend and believe this is a major and long-term trend. With the funds from the IPO, we have significantly invested into our core operations and are now well positioned to support this ambition, as we expand into new regions, industries and capabilities.

FY22 was a successful year for the Group, despite the challenges. On behalf of the Board, I would like to thank everyone who has contributed to delivering services and solutions to our clients and also those who have supported them.

Our aspiration is digital services that are user centric, data driven and free from legacy technology. The market opportunity is huge and we look forward to reporting on further progress over the coming year.

Joanne Lake

Non-Executive Chair

CHIEF EXECUTIVE OFFICER'S REPORT

Following our Admission to AIM in September 2021, I am pleased to report the Group's full year results for the year ended 31 May 2022, demonstrating a further year of strong growth.

Revenue for the period grew by 120% to £29.3m (FY21: £13.3m). Adjusted EBITDA increased by 618% to £2.6m (FY21: loss of £0.5m). Sales bookings during the year more than doubled to £51.1m (FY21: £23.8m), with the overall contracted backlog increasing by 133% to £38.2m (FY21: £16.4m). We finished the period with a cash balance of £12.3m (FY21: £0.9m).

Our stock market listing in 2021 was a key milestone for the Group, with the new capital structure enhancing our profile, incentivising our people and enabling us to invest in delivering our ambitious growth plans. The management team remains invested in the business' success, having retained approximately 51% of the Company's total issued share capital at IPO.

The Group's client base and depth of client relationships continue to strengthen. In the period to 31 May 2022, the Group acquired 12 new clients and won new mandates with existing clients, including the DVLA, the Ministry of Justice, HMRC, the Department for International Trade, the Department for Education and the Department for Levelling Up, Housing and Communities. The Group has 28 active clients, with nine of those being strategic client accounts, contributing between £1m and £10m a year on an annualised run-rate basis. Across our industry verticals, 63% of revenue is derived from central government (FY21: 62%), 25% from local government (FY21: 20%) and 12% from healthcare (FY21: 18%).

People

Made Tech has 478 people operating across the UK, which is an increase from the 243 people we had at IPO. Our people are central to everything the Group achieves and we value them highly. We are committed to building a culture of positive engagement throughout the business, encouraging strong career development opportunities and recognition of people's contribution to the business. As well as raising the profile of the Group, the IPO provided a new capital structure which we can now use to incentivise our people. We launched our Group Restricted Share Plan on 30 September 2021 to provide the opportunity for our teams to share in the value of the Group that they have helped to create.

We are committed to promoting diversity in all its forms and to attracting, developing and retaining the strongest talent to work in an environment in which individual differences are embraced. We continually seek feedback from employees across all areas and levels of the business and use it to drive improvements in how our colleagues are rewarded, motivated and nurtured.

FY22 was a very challenging year to recruit and retain talent, with well-reported wage inflation, the Great Resignation and a global shortage of digital skills. Despite these challenges, we delivered exceptionally, increasing our headcount by 243 (an increase of 103%) and achieving an employee retention rate of 73% (FY21: 86%). The increase in billable staff costs was offset through increased utilisation and a rise in our average billable day rate. As a result, our gross margin for FY22 increased to 38.4% (FY21: 37.6%).

Our academy, which has been set up to attract, recruit and train new entrants, ran two academy programmes in FY22 and is planning to run three in FY23. Broadening capability and geographic coverage is key to Made Tech's strategy to diversify revenue and deliver further organic growth. To support its growth, the Group expanded the academy's capabilities in May 2022 to include user centred design, and we are planning to expand the programme further in FY23 to include data and delivery.

Our people are our most important asset, and talent acquisition is essential to the Group's future growth. We expect to increase our permanent headcount in FY23 significantly and have built an in-house recruitment team (which now has a proven track record of hiring at pace), so we are confident in our ability to bring talent into the business as required.

Products and services

The Group has made significant progress in expanding its service offering, which is a critical part of our strategy to provide a comprehensive and integrated set of digital transformation services to government and public service organisations.

Within the period, we enhanced our digital service offering and developed new offerings around user centred design, data, cybersecurity, managed services and transformation advisory. We also started to develop IP solutions tailored to the industries we serve. We expect to continue investing in these new service lines and for them to unlock new revenue streams from FY24 onwards.

Market

The Group operates within the digital transformation market, which has grown steadily for 10 years and is expected to continue growing at 22% CAGR through to 2030. The UK public sector, which is the Group's chosen market, increased spending to £12.9bn in 2020, with central government spending at £5bn, health spending at £2.1bn, local government spending at £2.13bn and defence spending at £2.0bn.

In June 2022, the UK government launched a new Digital Strategy, setting out a bold new vision and set of commitments on how the government will use digital, data and technology to improve public services. The new strategy, increasing digital transformation market, and UK public sector spending on digital, highlight the significant opportunity ahead, both within the UK and in international markets.

Board and governance

On Admission to AIM, the Group welcomed Joanne Lake as Chair, and Helen Gilder and Phil Pavitt as Independent Non-Executive Directors. The Board has extensive experience in dealing with a broad range of market conditions and rapid strategic growth. I am very pleased to have such diverse knowledge and expertise around the Board table.

Since becoming a listed company, we have worked with the Board to introduce new structures and processes to improve our corporate governance. We have set out the details later in our Annual Report 2022 and are committed to continuing to evolve and develop these in line with corporate governance best practices.

Outlook and current trading

The Group made substantial progress in FY22, delivering a strong set of financial results, whilst enhancing the business fundamentals and investing in new products and services which will drive future growth. Our profile within the public sector market has enhanced, and we continue to be trusted as a key partner to many public sector organisations, which has led to a significant number of new contracts, a strong order backlog and a robust sales pipeline for the months ahead.

The Group has had a strong start to FY23, signing £13.3m of new contracts, and achieving an annualised revenue run-rate of £40m, in the first two months of the year. Our balance sheet remains strong, and we're confident the Group's exceptional organic growth is set to continue in FY23 and into FY24.

Whilst our outlook is strong, the macroeconomic climate has evolved and has the potential to create headwinds later in the year. Although this is a risk, we have a dynamic and motivated management team which is focused on the delivery of our plans. We are confident in both the short-term and long-term prospects for the Group.

As a final point, I would like to personally thank our employees, partners and clients for their contribution and ongoing support.

Rory MacDonald
Chief Executive Officer

CHIEF FINANCIAL OFFICER'S REPORT

Overview

This is the first Annual Report and Accounts issued by Made Tech Group Plc following its Admission to trading on AIM on 30 September 2021. The results reflect another successful year for the Group with significant growth in the scale of the business.

Adjusted Performance Measures

The Group uses adjusted measures as key performance indicators in addition to those reported under IFRS, as they are more representative of the underlying performance of the business and enable comparability between periods. These adjusted measures exclude certain non-operational and exceptional items and have been consistently applied in all years presented.

Revenue

Revenue for FY22 was £29.3m (FY21: £13.3m), growth of 120%. The organic growth arose from a combination of strong growth from existing key clients and winning contracts with new clients.

Gross profit

Gross profit as a percentage of turnover increased during the year by 0.83ppt from 37.6% to 38.4%. The increase is mainly due to an increase in utilisation, which improved from 78% to 81%. The increase in margin is pleasing given the impact of the well reported wage inflation pressures and an increased reliance on contractors at higher rates than anticipated during this period. We have now reached a scale where we can hire at pace through our expanded Talent Acquisitions team and, as a result, we are anticipating a sustainable rate of 10% contractor usage for FY23 onwards.

Operating loss

The £0.3m operating loss for the year (FY21: £0.78m operating loss) includes a £2.38m share-based payment charge (FY21: £nil) and exceptional items of £0.2m (FY21: nil).

Total operating expenses were £11.5m (FY21: £5.8m). Operating expenses excluding share-based payment charges increased by 54% to £8.9m (FY21: £5.8m), which is in line with revenue growth

Share-based payment charge

The total charge for the period under IFRS 2 Share-based Payment was £2.4m (FY21: £nil). This charge related to the 2022 awards made under the Long Term Incentive Plan and the Group Restricted Share Plan ("RSP") launched in FY22.

Exceptional costs

Exceptional costs in the year were £224,000 (FY21: £nil). Costs in FY22 comprised £180,000 relating to the Group's Admission to AIM in September 2021. A further £45,000 related to severance payments.

Taxation

The total taxation charge was £19,760 (FY21: credit of £55,000) giving rise to an effective tax charge of -7% (FY21: 3%). The charge is lower than the UK standard rate of taxation due to the use of tax losses brought forward. In future years, we would expect the Group's effective rate of tax to move closer to the UK corporation tax rate.

Basic earnings per share

The earnings per share analysis above covers both adjusted earnings per share (profit after tax before amortisation of intangibles, share-based payment charge and exceptional items divided by the weighted average number of shares in issue during the year), and statutory earnings per share (profit attributable to equity holders divided by the weighted average number of shares in issue during the year). Adjusted Profit after tax was £2.3m (FY21: loss of £0.8m), an increase in adjusted basic earnings per share of 2.45 pence. Basic earnings per share was negative in both years due to the loss position.

Cash flow

Cash at year end was £12.3m (FY21: £0.9m) following the receipt of the proceeds of the IPO (net £13.5m) and the repayment of the coronavirus business interruption loan (£1.25m). The Group's current cash reserves provide sufficient capital to fund current planned product development and working capital as the business continues to grow. Cash flow for the year is set out below.

The combined underlying trade debtor and other receivables totalled £6.1m (FY21: £2.4m). The increase of 167% is in line with expectations, given revenue growth.

Adjusted operating cash flow

Operating cash flow before tax payments, net finance costs and payments in respect of exceptional items reduced by £473k. This includes £2.3m of capital expenditure investment, of which £1.9m related to ongoing investment in IP to support future growth.

Balance sheet and shareholders' funds

Net assets increased in the year by £15.6m. The principal reason for this was the Group's IPO, which resulted in the government Coronavirus Business Interruption Loan being repaid, and a significant increase in cash balance to fund ongoing investments. The balance sheet is summarised below.

Capitalised product development and IP solutions costs

The Group continues to invest in product development and IP solutions. Our IP solutions act as business accelerators for the clients we serve. These include business solutions encompassing commercial software embedded within our end-to-end service, and digital enablers such as methodologies and frameworks to drive change across business and IT processes. Where these investments are expected to result in future revenue, costs incurred that meet the definition of product development and IP solutions in accordance with IAS 38 Intangible Assets are capitalised in the statement of financial position. During the year the Group capitalised £1.9m in respect of product development (FY21: £nil).

Dividend policy

In line with the Group's dividend policy set out at IPO, the Directors do not intend to declare a dividend in respect of FY22. The Group's intention in the short to medium term is to invest in order to deliver capital growth for shareholders. The Board will review the decision to pay a dividend in FY23, and will provide an update in the Company's half year results, scheduled for announcement in February 2023.

Alternative performance measures ("APMs")

Throughout the Annual Report and Accounts the Group has used a number of APMs. These are used to provide additional clarity to the Group's financial performance and are used internally by management to monitor business performance, in its budgeting and forecasting and also for determination of Directors' and senior management's remuneration. These APMs are not defined under IFRS and, therefore, may not be directly comparable with adjusted measures presented by other companies. The non-GAAP measures are not intended to be a substitute for or superior to any IFRS measures of performance. However, they are considered by management to be important measures used in the business for assessing performance.

The following are key non-GAAP measures identified by the Group and used in the Strategic Report and financial statements:

The adjusted profit measures can be reconciled to the reported statutory numbers as follows:

Deborah Lovegrove
Chief Financial Officer

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1.   Company information

The consolidated financial information represents the results of Made Tech Group Plc (the "Company") and its subsidiary, together comprising the Group ("Made Tech Group Plc" or the "Group").

Made Tech Group Plc is a company incorporated and domiciled in England and Wales, registration number 12204805. The address of its registered office is 4 O'Meara St, London, SE1 1TE.

Made Tech Group Plc is quoted on the London Stock Exchange.

The principal activity of Made Tech Group Plc (the "Company") is that of a holding company. The main trading company of the Group is Made Tech Limited (company number 06591591) and the principal activity of this company is a provider of digital, data and technology services to the UK public sector. Service offerings include digital service delivery, embedded capabilities, data infrastructure and insights and legacy application transformation.

2.   Accounting policies

Accounting convention

The financial information has been prepared using the historical cost convention as modified to use a different measurement basis where necessary to comply with IFRS. The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. They have been consistently applied to the periods presented. The financial statements are presented in Sterling rounded to the nearest thousand (£'000) except where specified.

Basis of preparation of the consolidated financial statements

The Group financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Company financial statements have been prepared under FRS 102. Both financial statements have been prepared on the historical cost basis with the exception of certain items which are measured at fair value as disclosed in the principal accounting policies set out below. These policies have been consistently applied to all years presented unless otherwise stated.

The date of transition to IFRS is 1 June 2018. The prior year comparatives were audited on admission to AIM. IFRS was first adopted when preparing consolidated historical financial information for the AIM admission and was applied for the periods ended 31 May 2019, 31 May 2020 and 31 May 2021.

Going concern

The Directors have considered the Group's cash flow forecasts and they have no grounds for concern regarding the Group's ability to meet its obligations as they fall due and continue to operate within the existing cash balance and working capital facilities, thus requiring no additional funding to maintain liquidity.

In reaching their decision to prepare the financial statements on a going concern basis, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

Standards and amendments to existing standards adopted in these accounts

In the current year, the Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 June 2021:

• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)

• Interest Rate Benchmark Reform - "Phase 2" (Amendments to IFRS 7)

• IFRS 3 Business Combinations (Amendment - Definition of Business)

• Revised Conceptual Framework for Financial Reporting

• COVID-19 Related Rent Concessions (Amendments to IFRS 16)

Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company in the 31 May 2022 financial statements

At the date of authorisation of these financial statements, certain new accounting standards and interpretations have been published that are not mandatory for 31 May 2022 reporting periods and have not been early adopted by the Group. The Directors continue to monitor developments in the accounting standards they see as relevant, but do not expect that the adoption of these standards will have a material impact on the financial statements of the Group in the current or future reporting periods and on foreseeable future transactions.

Basis of consolidation

The Group's financial statements consolidate those of the parent company and all of its subsidiary drawn up to 31 May 2022. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated on the date control ceases.

Inter-company transactions, balances and unrealised gains and losses (where they do not provide evidence of impairment of the asset transferred) on transactions between Group companies are eliminated.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the Group.

Revenue recognition

Revenue is the fair value of the total amount receivable by the Group for supplies of services. VAT or similar local taxes and trade discounts are excluded. The Group's only source of revenue is from the provision of digital, data and technology services to the UK public sector, all of which are recognised in the same manner.

Contracts for the provision of services are typically "time and materials" contracts whereby the customer is contractually bound to pay for services for each hour or day spent in delivering a contractually agreed services scope. Materials are incidental expenses incurred whilst delivering the services. These contracts typically have no payment milestones or bundling with other services and have no variable element. Revenue is therefore recognised in line with the chargeable "time and materials" which are allocated to the contracted project.

The Group recognised revenue each month once as it provides these services for the duration of the contract. At the balance sheet date, an asset is recognised for unbilled amounts for services provided yet to be invoiced Payment for the services is based on the agreed payment terms.

Revenue contract liability is recorded when cash payments are received in advance of satisfying the performance obligation. Contract liabilities are recognised in profit or loss in the period when the Company completes the agreed services to the customers. In all other cases payments are due from customers within 30-60 days (depending on the credit terms applicable) of the service being agreed and invoiced.

Interest income and expenditure are reported on an accruals basis.

EBITDA and adjusted EBITDA

Earnings before interest, taxation, depreciation and amortisation ("EBITDA") and adjusted EBITDA are non-GAAP measures used by management to assess the operating performance of the Group. EBITDA is defined as operating profit before depreciation and amortisation. Exceptional items and share-based payment charge are excluded from EBITDA to calculate adjusted EBITDA.

The Directors primarily use the adjusted EBITDA measure when making decisions about the Group's activities. As they are non-GAAP measures, EBITDA and adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.

Exceptional items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. Costs incurred in the year which are classified as exceptional are those which are material in nature and derive from events or transactions that do not fall within the ordinary activities of the Group and which are individually, or in aggregate, of such size or incidence to require specific disclosure. This is consistent with the way financial performance is measured by management and reported to the Board.

Intangible assets

Internally generated intellectual property

An internally generated intangible asset consisting of intellectual property arising from development (or the development phase) of an internal project is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset and use or sell it;

• the ability to use or sell the intangible asset;

• how the intangible asset will generate probable future economic benefits;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. Internally generated intangibles not yet in use are not amortised but are subject to annual impairment testing.

As yet, no internally generated intangible assets are being amortised. Internally generated intangible assets are expected to be amortised over 3-5 years.

Research expenditure is recognised as an expense in the period in which it is incurred.

Tangible assets

Tangible assets are recorded at cost net of accumulated depreciation and any provision for impairment. Depreciation is provided to write off the cost of the asset less any residual value over its useful economic life in line with below. The residual values of assets are reviewed annually and revised where necessary. Assets' useful economic lives are as follows:

Furniture and fittings                      25% reducing balance

Office equipment                 3 years straight line

Leasehold improvements   25% reducing balance

Right-of-use lease assets straight line over the lease term

Impairment

For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

Intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds the recoverable amount of the asset or cash-generating unit. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. The cash flow evaluations are a result of the Directors' estimation of future sales and expenses based on their past experience and the current market activity within the business. With the exception of goodwill, which the Group does not currently have, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

Any impairment charge arising from the review of the carrying value of assets, where material, is disclosed separately on the face of the consolidated income statement.

Financial assets

Financial assets and liabilities are recognised when the Group becomes party to the contractual obligations of a financial instrument. They are measured initially at fair value, net of transaction costs. The Group subsequently classifies and measures its financial assets as either financial assets at fair value through profit or loss, at amortised cost or fair value through comprehensive income, as appropriate. The classification depends on the purpose for which the financial assets were acquired. At the reporting year end the financial assets of the Group were all classified as loans or receivables held at amortised cost.

Trade receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers but also incorporate other types of contractual monetary assets.

They are initially recognised at fair value and measured subsequent to initial recognition at amortised cost using the effective interest method, less any impairment loss.

The Group's financial assets comprise trade receivables, other receivables (excluding prepayments) and cash and cash equivalents.

Trade and other receivables - impairment

The Group applies an expected credit loss model to calculate the impairment losses on its trade receivables. The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. Trade receivables at the reporting date have been put into groups based on days past the due date for payment and an expected loss percentage has been applied to each group to generate the expected credit loss provision for each group and a total expected credit loss provision has thus been calculated.

Financial liabilities

The Group's financial liabilities include trade and other payables and borrowings which include lease liabilities.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest-related charges are recognised as an expense in the income statement.

Trade payables are recognised initially at their fair value, net of transaction costs and subsequently measured at amortised cost less settlement payments.

Leases

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

At inception the Group assesses whether a contract contains a lease. This assessment involved the exercise of judgement about whether the Group obtains substantially all the economic benefits from the use of that asset and whether the Group has the right to direct the use of the asset.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets which it defines as having a purchase cost of £5,000 or less. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The lease liability is measured at amortised cost using the effective interest method.

The Group presents right-of-use assets in 'property, plant and equipment' and lease liabilities in 'borrowings' in the statement of financial position.

Taxation

Current tax

Current income tax assets and liabilities comprise those obligations to fiscal authorities in the countries in which the Group carries out its operations. They are calculated according to the tax rates and tax laws applicable to the fiscal period and the country to which they relate. All changes to current tax liabilities are recognised as a component of tax expense in the income statement unless the tax relates to an item taken directly to equity, in which case the tax is also taken directly to equity. Tax relating to items recognised in other comprehensive income is recognised in other comprehensive income.

Deferred tax

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets, such as those resulting from assessing deferred tax on the expense of share-based payments, are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Provisions, contingent liabilities and contingent assets

Provisions are recognised when the present obligations arising from legal or constructive commitment resulting from past events will probably lead to an outflow of economic resources from the Group which can be estimated reliably.

Provisions are measured at the present value of the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date taking into account risks and uncertainties surrounding the obligation.

All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Employee benefits

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

Termination benefits are recognised immediately as an expense when the Group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Defined contribution pension plan

The Company operates a defined contribution pension scheme. The assets are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and is further detailed at note 7. Other creditors include £190,148 (2021: £79,323) in respect of pension contributions committed but not yet paid at year end.

The cost of pensions in respect of the Group's defined contribution scheme is charged to the income statement in the period in which the related employee services were provided.

Share-based payments

The Group operates equity settled share-based compensation plans for the remuneration of its employees.

All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g. profitability or sales growth targets).

All share-based compensation is ultimately recognised as an expense in the income statement with a corresponding credit to the share-based payment reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment to expense recognised in prior periods is made if fewer share options ultimately are exercised than originally estimated. The impact of the revision of the original estimates, if any, is recognised in the Statement of Comprehensive Income over the remaining vesting period, with a corresponding adjustment to the Share Based Payment Reserve.

Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, up to the nominal value of the shares issued are reallocated to share capital with any excess being recorded as additional share premium.

Where modifications are made to the vesting or lapse dates of options the excess of the fair value of the revised options over the fair value of the original options at the modification date is expensed over the remaining vesting period.

Equity and reserves

Issued share capital

Ordinary shares are classified as equity. The nominal value of shares is included in issued capital.

Share premium

The share premium account represents the excess over nominal value of the fair value of consideration received for equity shares, net of the expenses of the share issue.

Share-based payment reserve

The share-based payment reserve represents the total value expensed at the balance sheet date in relation to the fair value of the share options at their grant date expensed over the vesting period under the relevant share option schemes.

Deferred shares

Ordinary deferred shares are classified as equity. The nominal value of shares is included in deferred share capital.

Retained earnings

The retained earnings include all current and prior period results for the Group and the results of the Group's subsidiaries as determined by the income statement net of dividends paid.

Dividends

Final equity dividends to the shareholders of the Group are recognised in the period that they are approved by shareholders. Interim equity dividends are recognised in the period that they are paid. Dividends receivable are recognised when the Group's right to receive payment is established.

3.   Judgements in applying accounting policies and key sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, estimations and assumptions that affect the amounts reported for assets and liabilities as at the year-end date and the amounts reported for revenues and expenses during the year. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, their historical experience and other factors including expectations of future events. Actual results may differ from the amounts included in the financial statements. The estimates and assumptions that have a significant risk of material adjustment to the carrying amount of assets and liabilities within the next financial years are summarised below:

Research and development costs

Capitalisation of development costs in accordance with IAS 38 requires analysis of the technical feasibility and commercial viability of the project in the future. This in turn requires a long-term judgement to be made about the development of the industry in which the development will be marketed. Where the Directors consider that sufficient evidence exists surrounding the technical feasibility and commercial viability of the project which indicates that the costs incurred will be recovered they are capitalised within intangible fixed assets. The amount of the capitalisation is based on estimates to judge the percentage of the time relevant staff spend on projects. Where insufficient evidence exists, the costs are expensed to the income statement.

Valuation of share-based payments

The valuation of share-based payments is calculated by using valuation models. The estimated fair value of the share-based payments was calculated by applying a Black Scholes valuation model. The valuation of employee share options is inherently subjective as it involves a number of inputs which are not market observable. See further details in Note 25

Sources of estimation uncertainty

- Impairment of intangible assets Determining whether intangible assets are impaired requires an estimation of the value in use of the cash-generating unit to which the intangibles have been allocated. The value in use calculations require an estimation of the future cash flows expected to arise from the cash-generating units and a suitable discount rate to calculate the present value.

4.   Financial Instruments - risk management

The Board of Directors of Made Tech Group Plc has overall responsibility for the determination of the Group's risk management objectives and policies. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board.

The Group does not enter into derivative transactions or trade in financial instruments and the Directors believe the Group is not materially exposed to commodity price risk.

The Group is exposed to the following financial risks:

• credit risk;

• liquidity risk; and

• interest rate risk.

The Group is exposed to risks that arise from its use of financial instruments. The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

• trade and other receivables;

• cash and cash equivalents; and

• trade and other payables.

To the extent financial instruments are not carried at fair value in the consolidated statement of financial position, book value approximates to fair value.

Trade and other receivables are measured at amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period.

Trade and other payables are measured at amortised cost.

Financial instruments by category

The key risks to the Group and the policies and procedures put in place by management to manage them are summarised below:

Interest rate risk

The Group is exposed to cash flow interest rate risk from bank borrowings at variable rates. The Group's bank borrowings are disclosed in note 21. As at 31 May 2022 there are no loans outstanding (FY21: £1.25 million), therefore there is no material exposure to interest rate risk.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. The Group's net trade receivables for the two reported periods are disclosed in the financial assets table above.

The Group considers that its exposure to credit risk is insignificant as it carries out work for public sector entities without the risks attached to normal commercial credit sales.

The Directors do not consider that there is any concentration of risk within other receivables.

Credit risk on cash and cash equivalents is considered to be small as the counterparties are substantial banks with high credit ratings. The maximum exposure is the amount of the deposit. To date, the Group has not experienced any losses on its cash and cash equivalent deposits.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

Capital management

The Group's capital is made up as follows:

The Group's objectives when maintaining capital are:

• to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

• to provide an adequate return to shareholders by pricing services commensurately with the level of risk.

The capital structure of the Group consists of shareholders' equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources, fundraising and borrowings.

5.   Operating profit/(loss)

The operating profit/(loss) has been arrived at after charging/(crediting):

Other services provided by the Groups' auditors relate to professional services in connection with the Group's IPO in September 2021.

6.   Finance expense

7.   Exceptional items

Exceptional items relate to the following:

• Transaction and IPO-related costs - incremental external one-off costs relating to the IPO.

• Termination costs - relating to severance for three employees exited in the year.

8.   Taxation

The following tax was recognised in the income statement:

The tax assessed for the year is different from the standard rate of corporation tax as applied in the respective trading domains where the Company operates.

The Group's tax charge can be reconciled to the profit/(loss) in the income statement and effective tax rate as follows:

Current taxes comprise the income taxes of the Group companies which posted a taxable profit for the year, while deferred taxes show changes in deferred tax assets and liabilities which were recognised by the Group on the temporary differences between the carrying amount of assets and liabilities and their amount calculated for tax purposes, and on consolidation adjustments, calculated using the rates that are expected to apply in the year these differences will reverse.

Factors that may affect future tax charges

The government made a number of budget announcements on 3 March 2021. These include confirming that the rate of corporation tax will increase to 25% from 1 April 2023. This new law was substantively enacted on 24 May 2021. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

9.   Loss per ordinary share

The weighted average number of ordinary shares for the prior year has been restated for events in the current year including a bonus issue of shares, share splits and reverse share splits (see note 21) in compliance with IAS 33.

Where a loss has been recorded the effect of options is not dilutive and therefore the basic and diluted figure is the same.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. The Company has potentially dilutive ordinary shares arising from share options granted to employees. Options are dilutive under the Group Restricted Share Plan ("RSP"), where the exercise price, together with the future IFRS 2 charge of the option, is less than the average market price of the Company's ordinary shares during the year. Options under the LTIP schemes, as defined by IFRS 2, are contingently issuable shares and are therefore only included within the calculation of diluted EPS if the performance conditions, as set out in note 25, are satisfied at the end of the reporting period, irrespective of whether this is the end of the vesting period or not.

The Company currently has 12,184,554 non-redeemable deferred shares of £0.001 in issue with no voting, dividend or other distribution rights. The stated intention from their creation upon Admission was that they would be purchased in their entirety by the Company. As no rights of conversion nor pre-arranged formula to convert deferred shares into ordinary shares were included in the Articles of Association, they have never been considered "convertible securities". Accordingly, deferred shares have not been included in the calculation of diluted earnings per share.

The calculation of adjusted earnings per share is based on the after tax adjusted operating loss after adding back certain costs as detailed in the table below. Adjusted earnings per share figures are given to exclude the effects of share-based payments and exceptional items, all net of taxation, and are considered to show the underlying performance of the Group.

The Adjusted basic earnings per share is calculated by dividing the adjusted profit/(loss) after tax for the year by the weighted average number of ordinary shares in issue during the period.

10. Intangible assets

During the year the Group has capitalised costs relating to intellectual property. This is an internally generated intangible asset that is currently still in the process of completion. Upon completion the intellectual property is expected to be amortised over a useful life of 3-5 years. Personnel costs of £1,809,293 (2021: £nil) have been capitalised as intangible assets.

11. Tangible assets

12. Leases

The Company leases office premises. Under IFRS 16 this lease has been classified as a right-of-use asset. The lease liability is included within Tangible assets on the statement of financial position. There are no other long-term leased assets.

Right-of-use assets are included within tangible assets in the consolidated statement of financial position.

Amounts recognised in the Consolidated income statement

The Consolidated income statement shows the following amounts relating to leases:

Any expense for short-term and low value leases is not material and has not been presented.

13. Bank loans and borrowings

Bank loan facility - secured

On 8 August 2020 the Company entered into a COVID-19 Business Interruption Loan ("CBIL") facility agreement with HSBC UK Bank Plc. The maximum loan facility was £1,250,000 which was fully repayable on 17 August 2026. The current interest rate that applies to the loan is 4.09% per annum. The loan was covered by the bank's fixed and floating charge over all assets of the Company. During the year the Company repaid the loan in full, on 12 October 2021.

Analysis of net debt

14. Deferred tax

Deferred tax liabilities are analysed as follows.

Changes during each year are as follows:

15. Share-based payments

In the year ended 31 May 2022 the Group recognised total expenses of £2,376,000 (2021: £nil) in respect of equity-settled share-based payment awards under IFRS 2 Share-based Payment.

Executive Directors and selected Group employees were granted awards under the Made Tech Group Plc Long Term Incentive Plan ("LTIP") on 30 September 2021 over 2,443,643 (2021: nil) shares which were structured as nominal cost options. LTIP awards vest subject to continued employment and, in the most part, Group-based performance conditions.

In addition, selected employees of the Company were granted Restricted Share Awards ("RSAs") under the Restricted Share Plan ("RSP") on 30 September 2021, 21 December 2021 and 7 April 2022 over 4,262,866 (2021: nil) shares. Awards were structured as nominal or nil cost options. RSAs vest over one, two and three years based on continued employment but with no performance conditions.

Details of the maximum number of ordinary shares which may be issued in future periods in respect of LTIP awards and RSAs outstanding at 31 May 2022 are shown below:

The fair value at grant date of each respective award was independently determined using an adjusted form of the Black-Scholes model which includes a Stochastic simulation model that takes into account the following inputs.

* While the deed of grant was dated 24 September 2021, as the grant was contingent on the Admission of the Company, as per IFRS 2, the grant date did not take place until Admission. As such, the Admission date of 30 September 2021 has been used as the grant date for the IFRS 2 statutory valuations.

 ** The vesting of these LTIP awards is subject to the Group achieving the following performance targets:

16. Post balance sheet events

There are no significant events after the balance sheet date to report