Software Circle FY2026 results: recurring revenue and cash flow climb as debt rises

What happened in Software Circle's full-year results?

Software Circle delivered a sizeable increase in revenue, recurring income and cash generation during the year ended 31 March 2026, as its acquisition-led growth strategy gathered pace.

Revenue rose 22% to £22.3 million, while recurring revenue increased 33% to £16.8 million. Recurring income now represents 76% of group revenue, compared with 70% a year earlier.

Profitability improved faster than sales. Operating EBITDA, which measures earnings generated by the operating businesses before central costs, rose 61% to £7.6 million. Adjusted EBITDA, which includes central costs, increased 83% to £5.8 million.

That progress did not fully reach the statutory bottom line. Operating profit was unchanged at £0.7 million, while the statutory loss widened to £0.8 million from £0.3 million. Higher amortisation of acquisition-related intangible assets was a major factor.

Software Circle's key FY2026 figures

Metric	FY2026	FY2025	Change
Revenue	£22.3 million	£18.3 million	22%
Recurring revenue	£16.8 million	£12.7 million	33%
Operating EBITDA	£7.6 million	£4.8 million	61%
Adjusted EBITDA	£5.8 million	£3.2 million	83%
Adjusted EBITDA margin	26%	17%	9 percentage points
Operating profit	£0.7 million	£0.7 million	Flat
Cash generated from operating activities	£5.9 million	£2.9 million	102%
Operating cash flow per share	1.1p	0.5p	More than doubled
Net debt	£11.4 million	£2.2 million	Increased
Loss per share	0.2p	0.1p	Widened

The combination of higher recurring revenue and an improving adjusted EBITDA margin is important. It suggests the group is adding relatively predictable software income without allowing its central cost base to grow at the same rate.

Central costs increased to £1.8 million from £1.6 million, but fell from 33% to 24% of operating EBITDA.

Acquisitions and organic growth both contributed

Software Circle describes itself as a permanent owner of vertical market software businesses. These are specialist software platforms embedded in particular industries and customer workflows.

The group deployed £12.1 million during the year, including acquisition costs and deferred consideration. It acquired Artificial Intelligence Finance, known as Online Application, and Broker Information Services, creating its first financial services software cluster.

Together, the two businesses contributed £2.5 million of revenue and £1.0 million of operating EBITDA during the periods in which they were owned.

Across the acquired portfolio, organic revenue grew 7% and organic operating EBITDA increased 23%. This is encouraging because the strategy depends on more than buying additional earnings. Existing acquisitions also need to develop after joining the group.

Group-wide organic revenue still declined by 1%, however. The main drag was Nettl, where revenue fell by £1.1 million as non-recurring income continued to reduce.

Which divisions performed best?

Professional and Financial Services revenue doubled to £6.2 million from £3.1 million, helped by the two new Irish financial software acquisitions. The segment produced £2.6 million of operating EBITDA.

Education revenue increased to £2.6 million from £1.3 million, while operating EBITDA climbed to £1.5 million from £0.5 million. The businesses in this division generated 15% organic revenue growth.

Property also performed well. TopFloor delivered 15% organic revenue growth and 21% organic operating EBITDA growth, supported by new open-banking modules and customer wins.

The weaker point remained Graphics and Ecommerce. Revenue declined 11.5% to £7.7 million, although operating EBITDA held at around £1.0 million due to cost discipline at Nettl and growth from Vertical Plus.

This leaves the group more diversified than it was a year ago, but Nettl's decline remains a visible offset to progress elsewhere.

Cash generation improved, but so did debt

Cash generated from operating activities rose to £5.9 million from £2.9 million. Operating cash flow per share, Software Circle's preferred measure of long-term value creation, more than doubled to 1.1p.

The other side of the acquisition strategy is a more leveraged balance sheet. Cash and cash equivalents fell to £3.9 million from £8.6 million, while net debt increased to £11.4 million from £2.2 million.

Reported leverage rose to 2.0 times adjusted EBITDA from 0.7 times. Management said leverage would be 1.8 times after adjusting for contingent consideration and the full run-rate contribution from acquired businesses.

After the year end, Software Circle replaced its Shawbrook borrowing facility with a £25.0 million committed revolving credit facility from Santander. There is also a £10.0 million uncommitted accordion option, which could increase the facility subject to approval.

The new funding provides additional acquisition capacity and is priced at between 2.00% and 3.00% over SONIA, depending on leverage. Management intends to keep group leverage below three times adjusted EBITDA.

For investors, the extra funding is both an opportunity and a risk. It allows Software Circle to pursue more acquisitions without issuing additional shares, but it also increases the importance of disciplined deal selection and reliable cash generation.

Why did statutory profit lag behind EBITDA?

Despite the sharp increase in adjusted EBITDA, operating profit remained flat at £0.7 million and the statutory loss widened.

Depreciation and amortisation increased to £6.1 million from £4.6 million. This included £4.8 million of non-cash amortisation related to acquisitions. Net finance costs also rose to £1.8 million from £1.4 million.

Alternative performance measures such as EBITDA can be useful for assessing underlying operations, but shareholders should not ignore statutory earnings, financing costs or the cash required for acquisitions and deferred payments.

No dividend was proposed.

Outlook and what investors should watch

Trading since April is in line with internal expectations, while the acquisition pipeline remains healthy. Before further deals, the group is generating annualised revenue of approximately £25.0 million at an adjusted EBITDA margin of 27%.

Software Circle has passed its £5 million annualised adjusted EBITDA milestone and is now targeting £15 million. Management presented an illustrative scenario in which this could be reached within three to four years, but stressed that it is not a forecast.

The main positives are accelerating recurring revenue, wider margins, stronger operating cash flow and organic growth across the acquired portfolio. The key concerns are rising net debt, the continuing decline at Nettl, higher financing costs and a statutory business that remains loss-making.

Future results will need to show that Software Circle can keep improving acquired businesses while maintaining acquisition discipline and controlling leverage. That is the central test of whether its proposed compounding model is working for shareholders.