Entrepreneur of the Year business posts operating profit of €27m

The educational technology business led by EY Entrepreneur of the Year Martin McKay last year recorded operating profit of £23.2 million (€27 million).

Accounts filed with the Companies Office by Mr McKay’s Toucan Topco Ltd show that the business recorded the earnings before interest tax depreciation and amortisation (Ebitda) of £23.2m while revenues totalled £30.8m in the 10 months to the end of September 2021. Still the firm posted a pretax loss of £40.66 million amid interest and other outgoings.

The principal activity of the business is the development and sale of computer software to support literacy and remote learning. The company commenced business at the end of November 2020 as part of a group restructuring and brought together three companies, Lingit, Wizkids and Texthelp.

[ EY Awards: Texthelp founder Martin McKay named Entrepreneur of the Year ]

The directors state that they “expect Ebitda, Ebitda margin and cash generation performance to continue to improve during fiscal 2022″.

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The directors reveal that net billings – invoiced sales less reseller commission – were £46.6 million across the group, representing 14 per cent growth on the prior year.

They state that the North American market remains a key growth driver accounting for 37 per cent of group sales and has performed strongly with sales growing by 12 per cent to £17 million.

The accounts show that the business recorded pretax losses of £40.66 million. This arose chiefly from combined non-cash amortisation and depreciation costs of £26.15 million and interest payments of £21 million. The interest payments are made up of bank interest payments of £4.08 million, £8.6 million in shareholder loan interest and £7.98 million in preference shares interest.

The pretax loss also takes into account exceptional costs of £4.79 million that are made up of bonus acquisition costs of £3.67 million, restructuring professional fees of £1 million and transaction costs of €97,000.

Numbers employed by the business totalled 244 and staff costs amounted to £14.13 million.

Directors’ pay last year totalled £755,725, with the highest paid director receiving £196,667.

The group was busy on the acquisition trail in the year under review. It paid out £206 million for Ensco 1320 Ltd in December 2020, which included cash of £171.39 million. Ensco 1320 contributed revenues of £22.4 million and pretax profits of £6m in fiscal 2021.

In March, the group purchased Aracari Bidco for £77m, which included cash of £63 million. The entity contributed revenues of £6.8m last year.

The group also purchased Docens Bidco for £19 million, which included cash of £18.16 million.

Since the end of last September, the accounts reveal, the group acquired a US competitor, Don Johnston Inc, and it was financed by debt drawdown of $65 million (€61.7 million).