Right then, let’s dive into Software Circle’s preliminary results for the year ended 31 March 2025. If you’ve been following this AIM-listed serial acquirer of vertical market software (VMS) businesses, you’ll know they’ve been executing a deliberate pivot from legacy print operations towards a decentralised software group. This set of numbers? It’s the clearest signal yet that the strategy’s gaining serious traction.
A Stellar Leap in Profitability
The standout figure? A 71% surge in Operating EBITDA (oEBITDA) to £4.8 million (FY2024: £2.8m). That’s not just growth – it’s acceleration. Digging deeper:
- Revenue climbed 13% to £18.3m, though organic growth tells a more nuanced story: acquired businesses delivered 5% organic growth, while legacy unit Nettl Systems saw a deliberate retreat from low-margin work.
- Recurring revenue now dominates at 70% of total income (up from 57%), hitting £12.7m. This is the holy grail for software investors – predictable, sticky income.
- Adjusted EBITDA (aEBITDA) jumped 88% to £3.2m, pushing the margin to 17% (from 10%) – smashing their 15% target.
- Operating Return on Capital Deployed (oROCD) hit 24% (up from 21%) – proof that acquired businesses are being integrated effectively.
The one slight blemish? Operating Cash Flow Per Share (OCFPS) dipped to 0.5p (from 0.6p). But context is key: this reflects the full-year dilution from September 2023’s £23.1m equity raise – dry powder now being deployed. Expect this metric to rebound sharply as new acquisitions bed in.
Strategic Execution: M&A, Debt, and a Cultural Shift
Software Circle isn’t just buying businesses; it’s building an ecosystem. Three strategic pillars defined this year:
1. Disciplined M&A Engine
The group onboarded three new VMS businesses:
- Be The Brand Experience (marketing compliance for financial services)
- Link Maker Systems (adoption platform for children’s social care)
- Total Drive (software for driving instructors)
Total consideration? Around £16.1m. Critically, these weren’t vanity purchases. Each fits strict criteria: mission-critical software in niche verticals, recurring revenue models, and strong cash generation. The pipeline remains “robust,” signalling more to come.
2. Financial Firepower Secured
A major milestone was the £16.7m debt facility with Shawbrook Bank, replacing restrictive legacy bonds. This provides:
- Immediate liquidity (£6.7m term loan used to settle bonds).
- A £10m committed acquisition facility (undrawn at year-end).
Leverage sits at a prudent 0.7x aEBITDA – leaving ample headroom for deals while maintaining discipline.
3. Operational & Cultural Integration
The inaugural Software Circle Summit wasn’t just a jolly. It crystallised the group’s “decentralised but aligned” ethos. Founders and teams retain autonomy (“No Meddling”), but benefit from shared best practices. As CEO Gavin Cockerill noted: “Autonomy must be underpinned by a strong cultural foundation – openness, collaboration, shared ambition.” This cultural glue is vital for organic growth.
Leadership & The Road Ahead
New Chair Matthias Riechert (a shareholder-turned-Chair) brings sharp focus. His mantra? “Clarity and alignment.” The Board now includes heavyweights from Constellation Software and Judges Scientific – serial acquirers with stellar track records. Their remit: ensure every deal clears high hurdles on quality and return thresholds.
CEO Gavin Cockerill’s outlook is confident:
- Run-rate revenue ~£20m entering FY2026.
- Continued organic growth focus alongside M&A.
- AI integration explored pragmatically – as an enabler, not a “silver bullet.”
Why This Matters for Investors
Software Circle is maturing from a promising pivot story into a credible, cash-generative VMS consolidator. The numbers validate their model:
- Recurring revenue up, margins expanding, ROCD improving.
- Balance sheet primed for disciplined growth (cash £8.6m, undrawn £10m facility).
- Leadership aligned with long-term per-share value creation (OCFPS remains their “ultimate benchmark”).
The slight net debt position (£2.2m vs net cash £6.9m last year) reflects capital deployment – exactly what shareholders funded. As new acquisitions contribute fully and organic momentum builds, the path towards sustained profitability and rising OCFPS looks tangible.
In essence? Software Circle isn’t just changing its name – it’s changing the game. One vertical at a time.
