Microlise sees double digit revenue growth boosted by strong customer demand

In its unaudited trading update, covering the expected financial results for the year ending 31 December 2023, the group said revenue is anticipated to increase by 13% to £71.7m (2022: £63.2m) with adjusted EBITDA growth of 14%, slightly ahead of market expectations.

The trading update comes ahead of the group’s full year results for the period, which are expected to be published in early April 2024.

Microlise, which specialises in transport management software, revealed ”continued strong demand” from OEM customers and increased revenue from direct customers, towards the end of the year, aided by an improved supply of new vehicle in H2, which allowed the group to deliver against a ”record orderbook”.

During the period annual recurring revenue (ARR) grew 11%, of which 10% was organic, rising to £47.2m (2022: £42.6m), contributing to total recurring revenue of £45m (2022: £40.5m). An increase in hardware and installation activity in H2 also saw non-recurring revenue increase by around 17.5% year-on-year.

The group’s net cash at 31 December 2023 was £16.8m (31 December 2022: £16.7m), after net cash spend of £3m on three acquisitions during the period, which includes £1.86m for Vita Software, a £1m payment relating to its 2020 TruTac acquisition, and £0.14m in relation to the acquisition of K-Safe.  

The group added 450 new customers during the year with key customer wins including McCulla, BCA/ECM, LF&E and two ”significant” customer wins in Australia - one of its key target markets. Microlise also extended its relationships with numerous existing customers including Tesco, Culina and Bidfood.

The company also delivered high rates of customer retention, with a low churn of just 0.7% during the period, which it said reflected the strength of its customer relationships.

Microlise also continued on its acquisition trail during the period, announcing two acquisitions for a total maximum consideration of £10.6m. This included the acquisition of Vita Software in March 2023, and Enterprise Software Systems (ESS) in January 2024. A third acquisition of K-Safe was completed in December 2023 and announced in January 2024.

The trading update added: ”The positive impact of these acquisitions is already evident, with successful sales of Vita software’s TMS offering and a growing pipeline for the ESS and Flare Aware (K-Safe Product) products amongst our existing customers.”

Turning to this year, Microlise said it expects to deliver strong revenue growth in FY24, driven by further organic growth and recent merger and acquistion activity. The group is also investing in its transport management system offering, following the acquisitions of Vita Software and ESS.

The update said: ”Looking ahead, the board sees an opportunity for organic growth to improve from current levels as we move through the year supported by a healthy orderbook and pipeline of opportunities across OEM and direct customer divisions. Operating margins are expected to trend upwards in FY24 and beyond, as we focus on careful management of the cost base and efficiently scaling the group.”

 Nadeem Raza, chief executive, Microlise commented: “Trading momentum improved in the second half supported by an increase in delivery to direct customers towards the end of the period and strong uptake from OEM customers. This continues to drive double digit growth in ARR, an increasing base of recurring revenues and good cashflows.

“The three acquisitions made during the period have resulted in an improved and expanded offering which is already having a positive effect on trading momentum and pipeline. This, together with the resolution of the microchip supply crisis, gives us confidence in the group’s continued success.”