In a trading update for the financial year ended 31 March, Software Circle said that “some unpleasant headwinds” from discontinued operations were now “firmly in our rear-view mirror”.
Nettl is currently Software Circle’s biggest business. Its studios offer services spanning websites, design, printing and signage.
Sales at the unit were down by the equivalent of £100,000 a month, or 12.6%, at £8.3m.
Nettl was impacted by the fallout after PFI Group (Rymack Sign Solutions) failed to meet the terms of its £3.17m purchase of Works Manchester, a situation that culminated with the collapse of the business at the end of last year.
The associated hit accounts for most of the £2.4m in exceptional costs Software Circle will file this year, with the remainder related to the liquidation of the group’s French entity.
Software Circle also had to source new production partners for Nettl.
“The downturn was driven by the impact of Works Manchester Limited's administration during the year, along with the wider macro-economic environment remaining uncertain throughout,” the group stated.
“Some bad debt provisions accumulated from previous years further impacted Nettl's profitability for the financial year,” the firm stated.
In better news, its raft of acquired specialist software businesses grew, boosting total sales to £16.1m (2023: £11.7m).
Overall operating EBITDA more than doubled from £1.3m to £2.8m.
Software Circle said it was cautiously optimistic about the new financial year and its potential M&A pipeline remained healthy.
The group will announce its final results in July.
The £1.8m sale of the coveted Printing.com domain name came after the year-end.
Software Circle also has a new top ten shareholder after Investmentaktiengesellschaft für langfristige Investoren sold its entire 6.1% stake in the group to former hedge fund boss Wui Yen Liow.
Software Circle CEO Gavin Cockerill told Printweek: “We’re excited to have Yen on board. He has a lot of experience working with serial acquirers, as many of our recent new shareholders do.”
Shares in Software Circle have risen by nearly 41% since the start of the year, and were trading at 19.00p at the time of writing, not far off the 52-week high of 21.00p (low: 7.92p).
