Learning and development products and services provider Mind Gym (LON: MIND) returned to profit in the six months to March 2022 following a loss in the second half of the previous year. New framework agreements underpin growth over the next 18 months.
There is an enormous opportunity for AIM-quoted Mind Gym in what is a fragmented market. The investment in new digital products helps to differentiate the company from competitors and win business.
In the first half, revenues were 11% ahead at £26.8m with US revenues growing by.20%, helped by currency movements. The ending of lockdowns meant that in-person delivery increased from 4% to 15%. Pre-tax profit improved from £17,000 to £641,000 and it should be much higher for the full year. That is despite higher amortisation charges on product investment.
There was a working capital outflow of £3.34m, which was predominantly down to a £3.49m increase in trade receivables. There is normally a first half cash outflow due to bonus payments and the first half outflow should unwind.
Capitalised development was £2.12m and total development spending is likely to rise as more products are developed. There was still £4.5m in the bank at the end of September 2022, plus an unused debt facility.
A £10m framework agreement has been won with an energy company which should generate revenues over the next two years. The timing of the revenues is not contracted, but there will be a second half contribution. Other new frameworks will also contribute.
The share price has fallen by one-third this year to 92.5p, but strong progress has been made. Profit should start to grow from this year and the cash position will rebuild.