Minds + Machines Group Limited (AIM: MMX)  continues progress with strong FY19 Results and moves into the Black 

Strong trading experienced during Q3 and Q4 2019 has continued into Q1 2020, with “healthy” trading being experienced across all regions and no initial signs to date that automated sales (notably in China) are being negatively impacted by the outbreak of COVID-19.  

Strong organic growth and improved revenue was coupled with an improved overall geographic revenue mix.  US and European revenues improved by 36% and 51% respectively, reflecting in part a full-year of the Company’s ICM contribution.  The US now represents 62% of revenue, Europe 17% and Asia 21%.  An onerous contract and other supplier contracts have been renegotiated, leading to improved operational efficiencies.  Investment has continued in product, commercial and corporate development teams. 

However, whilst both cashflow and the balance sheet look strong, the uncertainty generated by COVID-19 has prompted the Company to take the precautionary measure of delaying any decision on the final dividend, previously indicated in the January trading update, until September 2020.  

Financial Highlights Include:  

  • Revenues up 25% to $18.9m (2018: $15.1m)  

  • US and European revenues improved by 36% and 51% respectively  

  • US now representing 62% of revenue, Europe 17% and Asia 21%  

  • Operating EBITDA, net of $0.6m auction revenue, up 79% to $6.4m (2018: $3.6m)  

  • Profit after tax improved to $4.7m compared to 2018 loss of $12.6m  

  • EPS improved to $0.51 (2018 $1.68 loss)  

  • 170% improvement in cashflow from operations to $6.2m (2018: $2.3m) including receipts of $1.6m from private auctions.  

  • Cash at the year-end standing at $6.6m (2018: $10.4m)  

Trading & Outlook 

The momentum experienced in Q3 and Q4, (when MMX launched its new brand protection service: AdultBlock, which sold some 2,000 blocks, generating $1.1m in revenue) has continued into the first quarter.  AdultBlock allows corporates to protect their online reputation has been very well received by the market. 

The Company suggests that any initial effect from its switch to remote working and the curtailing of international travel in light of the COVID-19 outbreak, will be mostly limited to its brokered sales, which accounted for only 10% of sales for FY19.  

Furthermore, whilst the extent to which the wider economic environment may impact the Company is an unknown, the high levels of recurring revenue from online should limit the worst effects of the immediate slowdown in global growth. But to believe that MMX, as with any small-cap growth company is fully insulated from the global crisis, would be unwise.  

Commenting on the results, Toby Hall, CEO of MMX, said: "We are pleased to report a strong set of results. We have worked hard, repaired the balance sheet and delivered a robust, scalable platform with highly predictable and balanced revenue streams that mirror a SaaS-type business model. This achievement is based on continued organic growth through the online retail channel, augmented by ongoing innovation and selective acquisition. With a largely fixed operating cost, and capacity across the platform, we expect future growth to be incrementally positive."