TIDMSWG
RNS Number : 2065U
Shearwater Group PLC
22 November 2023
22 November 2023
SHEARWATER GROUP PLC
("Shearwater" or the "Group")
Interim Results for the six months ended 30 September 2023
Resilient performance despite the backdrop, with an encouraging
pipeline across both divisions
Shearwater Group plc, the cybersecurity, advisory and managed
security services group, announces its unaudited results for the
six months ended 30 September 2023.
Financial summary
-- Group revenue of GBP10.5m (H1 FY23: GBP10.8m).
-- Adjusted EBITDA1 of GBP0.6m (H1 FY23: GBP0.1m).
-- Adjusted loss before tax2 of GBP0.1m (H1 FY23: adjusted loss GBP0.5 million).
-- Healthy balance sheet, with cash as at 30 September 2023 of GBP2.2m (H1 FY23: GBP0.9m).
Operational summary
-- Customer engagement levels have remained high, winning 41 new
clients in H1, notwithstanding the challenging market.
-- Decisive action to streamline and optimise operations,
emerging a leaner, more unified business:
- GeoLang integrated into SecurEnvoy
- Xcina integrated into Brookcourt Solutions
-- Encouraging pipeline remains across the Services division
with focus on building strategic and scalable relationships with
major blue chip organisations.
-- Integrated Software division now benefiting from enhanced
opportunities, with full product set now introduced across the
Group's global distribution network.
-- Winner of five significant industry awards, serving as a
testament to the value of the Group's offering.
Board Update
-- Adam Hurst appointed as Interim CFO in October and appointed
to the Board as an Executive Director in early November.
Outlook
-- Board currently expects to meet full year management
expectations based on the visibility of the sales opportunities,
including securing remaining Services deals which were deferred
from prior periods.
-- Services pipeline underpinned by offering major corporates
specialist solutions that assist in meeting their regulatory
security obligations.
-- Higher margin Software division pursuing a number of promising opportunities.
-- Clear H2 objective of converting the pipeline of opportunities across both divisions.
(1. Adjusted EBITDA is defined as loss before tax, before one
off exceptional items, share based payment charges, finance
charges, impairment of intangible assets, other income,
depreciation and amortisation.)
(2. Adjusted Loss Before Tax defined as net loss before tax,
exceptional items, share based payments, other income and
amortisation of acquired intangible assets.)
Phil Higgins, Chief Executive Officer of Shearwater Group PLC,
commented: "We have traded resiliently in the first half despite
continuing to contend with a challenging market, and we are already
seeing benefits from the recent operational enhancements we have
implemented. We move into the second half strengthened by a healthy
balance sheet and clearly focused on the conversion of our pipeline
of opportunities across each division."
Enquiries:
Shearwater Group plc www.shearwatergroup.com
David Williams, Chairman c/o Alma
Phil Higgins, CEO
Adam Hurst, Interim CFO
Cavendish Securities plc - NOMAD
Adrian Hadden / Ben Jeynes- Corporate
Finance
Henry Nicol / Dale Bellis / Michael Johnson
- Sales +44 (0) 20 7397 8900
Alma shearwater@almastrategic.com
Justine James / Joe Pederzolli +44 (0) 20 3405 0205
About Shearwater Group plc
Shearwater Group plc is an award-winning group providing cyber
security, managed security and professional advisory solutions to
create a safer online environment for organisations and their end
users.
The Group's differentiated full service offering spans identity
and access management and data security, cybersecurity solutions
and managed security services, and security governance, risk and
compliance. Its growth strategy is focused on building a scalable
group that caters to the entire spectrum of cyber security and
managed security needs, through a focused buy and build
approach.
The Group is headquartered in the UK, serving customers globally
across a broad spectrum of industries.
Shearwater shares are listed on the London Stock Exchange's AIM
under the ticker "SWG". For more information, please visit
www.shearwatergroup.com .
Chief Executive's review
The first half of the financial year has seen the Group trade
resiliently amidst a challenging backdrop. While we continue to see
a healthy number of opportunities within our pipeline, we continue
to experience hesitancy from some customers in the commencement of
projects in response to continuing wider market uncertainty. While
contracts in the Group's robust order book are continuing to be
fulfilled, some timings continue to be deferred into future
periods.
In the traditionally quieter first half, the Group delivered
revenue of GBP10.5m (H1 FY23: GBP10.8m) and adjusted EBITDA of
GBP0.6m (H1 FY23: GBP0.1m). Our underlying business remains robust
and engagement levels are high, notwithstanding the current
volatility in the market. We are pleased with the benefits already
being seen from the recent operational enhancements, which have
streamlined our offering and strengthened our positioning.
We continue to be supported by a healthy balance sheet, with
cash as at 30 September 2023 of GBP2.2m (H1 FY23: GBP0.9m). The
outflow since March is as expected by management and in line with
previous years, due to the seasonal nature of contracting and
impact on working capital flows.
Moving into the second half the Group is bolstered by an
encouraging pipeline of opportunities, with revenues identified
from either contracted, scheduled or existing contract renewals,
including a GBP1.3m Government agency win in October, and other new
projects identified from new and existing customers. Consequently
the Board currently anticipates it will meet management's
expectations for the full year.
Following the reorganisation of the business reported at the
time of the full year results, our Services and Software divisions
are now much better positioned to capitalise on the long-term
growth opportunities we are seeing.
While customers continue to face unfavourable market conditions
and the timing of orders is difficult to predict, we are encouraged
that engagement levels remain high moving into the second half.
Shearwater continues to provide a best-in class service and the
underlying long-term drivers of the Group's end markets remain
strong, providing confidence in delivery in the second half of the
year and beyond.
Operational Review
The Group comprises two divisions, Services (89% revenue) and
Software (11% revenue). We serve a number of multinational,
blue-chip organisations with clients spanning a range of
sectors.
Notwithstanding the current market conditions impacting
short-term customer decision-making and ongoing uncertainty
regarding contract timing, we are encouraged by the pipeline in
both Services and Software, and continue to win new clients. We are
continuing to benefit from renewals and cross-selling successes,
especially from our penetration and consulting services where we
are particularly pleased with the rate at which new business is
being won.
Following the reorganisation of the business, with GeoLang now
successfully integrated into SecurEnvoy and Xcina into Brookcourt,
staff numbers have remained broadly consistent with the prior
period, ensuring we are rightsized to capitalise on the long-term
growth opportunities we are seeing.
Brookcourt has enlisted its inaugural commission-only sales
representative to promote our proprietary SecurEnvoy software and
strategic solutions. This innovative sales strategy complements our
current approach, eliminating a fixed salary and relying solely on
commissions, which are disbursed exclusively upon the successful
conclusion of a sale. Our intention is to expand this initiative by
bringing in more personnel.
As outlined in the Full Year results, the Group took decisive
action to streamline and optimise its operations, in order to
emerge a leaner, more unified business. The action taken has
resulted in a strengthened positioning, with a robust pipeline of
opportunities across our Services division and our integrated
Software business benefiting from a global distribution network.
While in the context of the slower decision-making of the
corporates we work with, our resilient performance provides
optimism moving forwards. Our clear H2 objective is to convert the
opportunities across both divisions.
In the period, we are once again pleased to report the Group has
continued to win significant awards which serve as a clear
testament to the value of the Shearwater offering. SecurEnvoy was
honoured as the Identity & Access Management Solution of the
Year at the Computing Security Magazine Awards 2023, while also
achieving recognition in the Security Software Solution of the Year
category for Data Discovery. Brookcourt received the Customer
Service Award at the same event. Earlier in the year Brookcourt won
the Logo Acquisition Award 2023 at Proofpoint channel event for the
successful acquisition of an Enterprise bank over a three-year
sales cycle. Finally, Pentest emerged as the winner at Pwn2Own
Toronto for successfully compromising the Samsung Galaxy S23.
Services
Services revenue was generated from contract wins and renewals
from the company's large customer base. In the first half
Brookcourt Solutions delivered contracts across a diverse range of
clients. These included a leading British mobile network operator,
a prominent European Cyber Managed Security Services Provider
(MSSP), an international retail chemist and cosmetics company and
an essential security services contract for a UK government
department. These clients generated a total contract value of
GBP5.5m which is being recognised in FY24. It was particularly
pleasing to add a new vertical to our customer base with the award
of our first significant Government contract.
The merging of Xcina Consulting into Brookcourt Solutions has
resulted in greater traction and new business opportunities which
are being converted. Recent wins include a disaster recovery
planning contract for a global manufacturing group in Germany,
information security framework development for an Australian-based
international mining group and PCI-DSS engagement for an ASX-listed
food sector operator headquartered in the Netherlands.
Pentest has had a strong first half, ahead of management
expectations. The Company continues to secure new business and
uphold its prominent status and successfully fulfilled contracts
that had been delayed from the previous financial year.
Additionally the company achieved success with its Secure Code
Workshop, acquiring a new client and securing ongoing onsite
workshops for a large team of developers. The company has expanded
its 'Internet of Things' testing capability, resulting in a growing
number of engagements, and has secured 15 new accounts, including a
leading financial services company, a global technology company in
the energy sector, a prominent UK education business, and a
significant win with a leading technology and services
provider.
12 months to
H1 FY24 H1 FY23 YOY 31 March 2023
GBP000 GBP000 % GBP000
--------- --------- ------ ----------------
Revenue 9,334 9,136 +2% 23,830
--------- --------- ------ ----------------
Gross profit 2,330 1,571 +48% 4,657
--------- --------- ------ ----------------
Gross profit margin
% 25% 17% 20%
--------- --------- ------ ----------------
Overheads (1,366) (1,738) (4,508)
--------- --------- ------ ----------------
Adjusted EBITDA 964 (167) 149
--------- --------- ------ ----------------
Adjusted EBITDA % 10% (2%) 1%
--------- --------- ------ ----------------
Software
While the Software business has seen a softened performance
against the prior period, renewals are tracking ahead of management
expectations and we are already seeing the effects of integration
and operational efficiencies following the merging of SecurEnvoy
with Geolang to form a unified software division. The unified
company is benefiting from 350 resellers across the world, with
Geolang seeing an increase in opportunities now coming in through
SecurEnvoy's reseller network, which had not been the case
previously.
SecurEnvoy has maintained a consistently robust release schedule
for its Access Management Solution since May 2023, highlighted by
the notable V3.R3 update in October. This release not only fulfils
elevated security standards essential for government and critical
networks but also broadens deployment options to encompass
On-Premise (Windows & LINUX) and Private Cloud (Azure &
AWS). Additionally the introduction of an MSP edition caters to the
escalating demand for managed services and streamlining of billing
processes. The expansion of channel partnerships through new
agreements further underscores SecurEnvoy's commitment to
innovation and collaboration in the evolving landscape.
12 months to
H1 FY24 H1 FY23 YOY 31 March 2023
GBP000 GBP000 % GBP000
--------- --------- ------ ----------------
Revenue 1,167 1,654 -29% 2,856
--------- --------- ------ ----------------
Gross profit 822 1,144 -28% 1,793
--------- --------- ------ ----------------
Gross profit margin
% 70% 69% 63%
--------- --------- ------ ----------------
Overheads (357) (441) (818)
--------- --------- ------ ----------------
Adjusted EBITDA 465 703 977
--------- --------- ------ ----------------
Adjusted EBITDA
% 40% 43% 34%
--------- --------- ------ ----------------
Board Update
In September 2023, Paul McFadden, CFO, informed the Board of his
decision to step down from the Board, remaining with the Group
until his successor was appointed and for a short transition
period. In October 2023, Adam Hurst was appointed Interim CFO and
in early November Adam was appointed to the Board as Executive
Director.
Current trading and outlook
Management continues to expect to meet its full year
expectations based on the current sales pipeline and opportunities.
From regular customer engagement, we remain confident in securing
the Services deals which were deferred from previous periods, and
in parallel we are encouraged by the opportunities for higher
margin software deals which will have a meaningful impact on top
line growth. We move into the second half with cautious optimism
and our core objective for the remainder of the period will be to
convert our pipeline of opportunities.
Phil Higgins
Chief Executive Officer
21 November 2023
Finance review
Revenue
Revenue of GBP10.5 million (H1 FY23: GBP10.8 million) was
slightly behind the prior year with some growth in the Services
business offset by the impact of lower sales in the Software
division.
Adjusted EBITDA
Adjusted EBITDA of GBP0.6 million (H1 FY22: GBP0.1 million) was
ahead of the prior year. The prior year was adversely impacted by a
GBP0.9 million unrealised foreign exchange charge. Excluding this
impact Adjusted EBITDA was slightly lower than the prior year,
broadly in line with revenue performance.
The income statement below details both statutory and
alternative measures which, in the Directors' opinion, provides
additional relevant information to the reader in assessing the
adjusted performance of the business.
12 months
to 31 March
H1 FY24 H1 FY23 Change 2023
GBP000 GBP000 % GBP000
-------------------------------------- --------- --------- -------- --------------
Revenue 10,501 10,790 -3% 26,686
Gross profit 3,152 2,715 +16% 6,450
Gross profit margin % 30% 25% 24%
Overheads (2,559) (2,654) -4% 6,651
-------------------------------------- --------- --------- -------- --------------
Adjusted EBITDA 593 61 (201)
Adjusted EBITDA margin % 6% 1% -1%
Finance charge (net) (38) (31) (77)
Depreciation (137) (127) (240)
Amortisation of intangible assets
- computer software (511) (396) (792)
-------------------------------------- --------- --------- -------- --------------
Adjusted loss before tax (93) (493) (1,310)
Amortisation of acquired intangible
assets (1,050) (1,050) (2,099)
Share based payments (42) (82) (85)
Exceptional items (202) - (6,139)
Loss before tax (1,387) (1,625) (9,633)
Taxation credit 440 306 1,458
Loss after tax (947) (1,319) (8,175)
-------------------------------------- --------- --------- -------- --------------
Net finance charges
Net finance charges are slightly above the prior year due mainly
to increased interest on capitalised leases.
Depreciation
Depreciation, which includes Right of Use assets, is broadly in
line with the previous year.
Amortisation of intangibles assets - computer software
Increased amortisation compared to the prior year reflects
software developed in previous periods that has been released in
the first half this year.
Adjusted loss before tax
Adjusted loss before tax of GBP0.1 million (H1 FY23: adjusted
loss GBP0.5 million) is an improvement on the prior year due to the
absence of a foreign exchange loss in the current year.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets of GBP1.1 million (H1
FY23: GBP1.1 million) is in line with the previous year.
Exceptional costs
Exceptional costs of GBP0.2 million were incurred in connection
with completing the restructuring that commenced at the end of the
previous financial year and largely comprises redundancy costs.
Share based payments
The share based payments charge relates to long-term incentive
plans and is lower than the prior year due to fewer participants in
the share schemes.
Loss before tax
Loss before tax in the period was GBP1.4 million (H1 FY23:
GBP1.6 million) and recognises the year-on-year improvement in
adjusted loss before tax partly offset by the exceptional item in
the first half.
Taxation
The credit in the period was GBP0.4 million (H1 FY23: GBP0.3
million) giving an effective tax rate of 32% (H1 FY22: 19%). The
tax rate benefited from the impact of enhanced allowances in the UK
on research and development spend.
Earnings/Loss per share
Adjusted basic and diluted earnings per share was GBP0.01 (H1
FY23: loss per share GBP0.01) incorporates the year-on-year
improvement in adjusted profit/(loss) after tax. Reported basic and
diluted loss per share was GBP0.04 (H1 FY23: basic loss and diluted
per share GBP0.06).
Statement of Cash flow
The second half weighted trading performance of the Group in
recent years has typically resulted in an expected cash outflow in
the first half of the year. The operating cash outflow to September
2023 of GBP1.4 million was an improvement on the GBP3.9 million
outflow in the first half of the prior year, which arose mainly due
to timing of cash receipts on certain large contracts arising in
the previous year. Cash held at 30 September of GBP2.2 million
compares to GBP0.9 million at the same point in the prior year and
has been maintained at a similar level at the end of October
2023.
The Group continues to invest in the development of internally
created software, with expenditure of GBP0.5 million in the period
(H1 FY23: GBP0.7 million). This is slightly lower than the previous
year due to efficiencies in the nature of spend arising from the
increased use of internal staff and a reduction in external
contracting.
6 months to 30
September
12 months
to 31 March
H1 FY24 H1 FY23 2023
GBP000 GBP000 GBP000
---------------------------------------- --------- --------- --------------
Adjusted EBITDA 593 61 (201)
Movements in working capital and
exceptional items (1,989) (3,959) 485
---------------------------------------- --------- --------- --------------
Cash used / generated from operations (1,396) (3,898) 284
Capital expenditure (net of disposal
proceeds) (528) (686) (1,337)
Tax received / (paid) 301 - (285)
Interest paid (31) (26) (83)
Payments of lease liabilities (124) (108) (200)
FX and other - 13 10
---------------------------------------- --------- --------- --------------
Movement in cash (1,778) (4,705) (1,611)
Opening cash and cash equivalents 3,964 5,575 5,575
Closing cash and cash equivalents 2,186 870 3,964
---------------------------------------- --------- --------- --------------
Alternative performance measures
This review includes alternative performance measures ('APMs')
alongside the standard IFRS measures. The Directors believe that
alternative measures provide additional relevant information
regarding the adjusted performance of the business. APMs are used
to enhance the comparability of information between reporting
periods by adjusting for one off exceptional and other items that
affect the IFRS measure. Consequently, the Directors and management
use APM's in addition to IFRS measures to assess the adjusted
performance of the business.
Alternative performance measures used include:
-- Adjusted EBITDA
-- Adjusted loss before tax
-- Adjusted loss after tax
-- Adjusted earnings/loss per share
Adjusting items include:
Exceptional items which are one off by their nature such as
acquisition costs or re-organisation costs and do not form part of
the underlying operational cost of the business.
Share based payment charges awarded from long-term remuneration
incentives to certain staff. Despite the plans not having a cash
cost to the business, a share-based payment charge is taken to the
statement of comprehensive income which the directors believe does
not form part of the underlying operating cost of the business.
Amortisation of identified intangible assets acquired as part of
an acquisition is charged to the statement of comprehensive income
but does not form part of the underlying operating cost of the
business.
A full reconciliation between adjusted and reported results is
detailed below:
Six months to 30 September H1 FY24 H1 FY23
GBP000 GBP000
Adjusted EBITDA 593 61
Exceptional items (202) -
Share based payments charge (42) (82)
------------------------------ --------- ---------
EBITDA 349 (21)
------------------------------ --------- ---------
Adjusted loss before tax (93) (493)
Amortisation of acquired intangibles (1,050) (1,050)
Exceptional items (202) -
Share based payments charge (42) (82)
--------------------------------------- --------- ---------
Reported loss before tax (1,387) (1,625)
--------------------------------------- --------- ---------
Adjusted profit/(loss) after tax 152 (298)
Amortisation of acquired intangibles (net
of tax) (905) (939)
Exceptional items (net of tax) (152) -
Share based payments charge (42) (82)
-------------------------------------------- ------- ---------
Reported loss after tax (947) (1,319)
-------------------------------------------- ------- ---------
GBP GBP
Adjusted basic & diluted earnings/(loss)
per share 0.01 (0.01)
Amortisation of acquired intangibles (0.04) (0.04)
Exceptional items (0.01) -
Share based payments charge (0.00) (0.01)
------------------------------------------- -------- --------
Reported basic & diluted loss per share (0.04) (0.06)
------------------------------------------- -------- --------
Principal risks and uncertainties
The Group works to minimise its exposure to operational,
financial and other risks, however in pursuit of achieving its
growth strategy there will always be an element of risk that needs
to be considered. The Group's principal risks and uncertainties, as
detailed in the financial statements for the year ended 31 March
2023, are all still considered to be valid.
Statement of Directors' responsibilities
We confirm that to the best our knowledge that:
-- The condensed interim set of financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the United Kingdom;
-- The interim report includes a fair review of information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- The interim report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties transactions
and any change therein).
Adam Hurst
Interim Chief Financial Officer
21 November 2023
Unaudited condensed consolidated statement of comprehensive
income
for the 6 months to 30 September 2023
2023 2022
Note GBP000 GBP000
------------------------------------------------- ------ --------- ------------
Revenue 3 10,501 10,790
Cost of sales (7,349) (8,075)
---------------------------------------------------- ------ --------- ------------
Gross profit 3,152 2,715
Administrative expenses (2,803) (2,736)
Depreciation and amortisation (1,698) (1,573)
Total operating costs (4,501) (4,309)
Operating loss (1,349) (1,594)
Adjusted EBITDA 3 593 61
Depreciation and amortisation (1,698) (1,573)
Exceptional items (202) -
Share-based payments (42) (82)
Operating loss (1,349) (1,594)
---------------------------------------------------- ------ --------- ------------
Finance cost 4 (43) (31)
Finance income 4 5 -
Loss before taxation (1,387) (1,625)
---------------------------------------------------- ------ --------- ------------
Income tax credit 5 440 306
Loss for the period and attributable to equity
holders of the Company (947) (1,319)
---------------------------------------------------- ------ --------- ------------
Other comprehensive income
Items that may be classified
to profit and loss:
Exchange differences on translation of
foreign operations 0 14
Total comprehensive loss for
the period (947) (1,305)
---------------------------------------------------- ------ --------- ------------
Earnings / (Loss) per ordinary share attributable
to the owners of the parent GBP GBP
(Restated)
Basic (GBP per share) 6 (0.04) (0.06)
Diluted (GBP per share) 6 (0.04) (0.06)
Adjusted basic and diluted (GBP
per share) 6 0.01 (0.01)
Unaudited condensed consolidated statement of financial
position
as at 30 September 2023
2022
2023 (Restated)
Note GBP000 GBP000
------------------------------------ ---- ---- ---- ------ ---------- --------------
Assets
Non-current assets
Intangible assets 43,901 51,779
Property, plant and equipment 388 213
Deferred tax 903 -
Trade and other receivables 7 4,151 8,326
Total non-current assets 49,343 60,318
------------------------------------------------------ ------ ---------- --------------
Current assets
Trade and other receivables 8 11,389 12,728
Cash and cash equivalents 2,186 870
Total current assets 13,575 13,598
------------------------------------------------------ ------ ---------- --------------
Total assets 62,918 73,916
------------------------------------------------------ ------ ---------- --------------
Liabilities
Current liabilities
Trade and other payables 9 9,806 10,573
Total current liabilities 9,806 10,573
------------------------------------------------------ ------ ---------- --------------
Non-current liabilities
Creditors: amounts falling due after
more than one year 10 5,894 8,360
Total non-current liabilities 5,894 8,360
------------------------------------------------------ ------ ---------- --------------
Total liabilities 15,700 18,933
------------------------------------------------------ ------ ---------- --------------
Net assets 47,218 54,983
------------------------------------------------------ ------ ---------- --------------
Capital and reserves
Share capital 11 22,278 22,278
Share premium 34,581 34,581
Other reserves 23,484 24,468
Translation reserve 30 37
Accumulated losses (33,155) (26,381)
Equity attributable to owners
of the Company 47,218 54,983
------------------------------------------------------ ------ ---------- --------------
Total equity and liabilities 62,918 73,916
------------------------------------------------------ ------ ---------- --------------
Unaudited condensed consolidated statement of changes in equity
for the 6 months to 30 September 2023
Share Share Other Translation Accumulated Total
capital premium reserves reserve losses Equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- ---------- ---------- ----------- ------------- ------------- ---------
At 31 March 2022 (audited) 22,278 34,581 24,386 23 (25,062) 56,206
Loss for the period - - - - (1,319) (1,319)
Other comprehensive profit
for the period - - - 14 - 14
------------------------------------- ---------- ---------- ----------- ------------- ------------- ---------
Total comprehensive loss
for the period - - - 14 (1,319) (1,305)
Contributions by and distributions
to owners
Share-based payments - - 82 - - 82
------------------------------------- ---------- ---------- ----------- ------------- ------------- ---------
At 30 September 2022 (unaudited) 22,278 34,581 24,468 37 (26,381) 54,983
Loss for the period - - - - (6,856) (6,856)
Other comprehensive loss
for the period - - - (7) - (7)
Expiry of share options - - (1,029) - 1,029 -
------------------------------------- ---------- ---------- ----------- ------------- ------------- ---------
Total comprehensive loss
for the period - - (1,029) (7) (5,827) (6,863)
Contributions by and distributions
to owners
Share-based payments - - 3 - - 3
------------------------------------- ---------- ---------- ----------- ------------- ------------- ---------
At 31 March 2023 (audited) 22,278 34,581 23,442 30 (32,208) 48,123
Loss for the period - - - - (947) (947)
Other comprehensive profit/loss
for the period - - - - - -
------------------------------------- ---------- ---------- ----------- ------------- ------------- ---------
Total comprehensive profit/loss
for the period - - - - (947) (947)
Contributions by and distributions
to owners
Share-based payments - - 42 - - 42
At 30 September 2023 (unaudited) 22,278 34,581 23,484 30 (33,155) 47,218
------------------------------------- ---------- ---------- ----------- ------------- ------------- ---------
Unaudited condensed consolidated cash flow statement
for the 6 months to 30 September 2023
2023 2022
GBP000 GBP000
----------------------------------------------- --------- ---------
Cash flows from operating
activities
Loss for the period (947) (1,319)
Adjustments for:
Amortisation of intangible
assets 1,561 1,446
Depreciation of right of use
assets 113 101
Depreciation of property, plant
and equipment 24 26
Share-based payment charge 42 82
Exceptional items 202 -
Finance costs 43 31
Finance income (5) -
Income tax (440) (306)
--------------------------------------------------- --------- ---------
Cash flows from operating activities before
changes in working capital 593 61
Decrease/(increase) in trade and other
receivables 3,699 (726)
(Decrease)/increase in trade
and other payables (5,486) (3,233)
Cash used in operations (1,194) (3,898)
--------------------------------------------------- --------- ---------
Net foreign exchange movements - 12
Finance costs paid (31) (26)
Tax received 301 -
Net cash used in operating activities before
exceptional items (924) (3,912)
--------------------------------------------------- --------- ---------
Net cash flows on exceptional
items (202) -
Net cash used in operating
activities (1,126) (3,912)
--------------------------------------------------- --------- ---------
Investing activities
Purchase of property, plant
and machinery (5) (25)
Purchase of intangibles (523) (661)
Net cash used in investing
activities (528) (686)
--------------------------------------------------- --------- ---------
Financing activities
Repayment of lease liabilities (124) (108)
Net cash used in financing
activities (124) (108)
--------------------------------------------------- --------- ---------
Net decrease in cash and cash
equivalents (1,778) (4,706)
--------------------------------------------------- --------- ---------
Foreign exchange movements on cash and
cash equivalents - 1
Cash and cash equivalents at the beginning
of the period 3,964 5,575
Cash and cash equivalents at the
end of the period 2,186 870
------------------------------------------------ --------- ---------
Notes
1. General information
The unaudited interim condensed consolidated financial
information was authorised by the board of directors for issue on
22 November 2023. The information for the six-month period ended 30
September 2023 has not been audited and does not constitute
statutory accounts as defined in section 434 of the Companies Act
2006, and should therefore be read in conjunction with the audited
consolidated financial statements of the Company and its
subsidiaries for the year ended 31 March 2023, which have been
prepared in accordance with UK Adopted International Accounting
Standards (IFRS) and filed with the Registrar of Companies. The
Independent Auditor's Report on that Annual Report and Financial
Statements for 2023 was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
a) Basis of preparation
These unaudited interim condensed consolidated financial
statements have been prepared on the historical cost accounting
basis, in accordance with UK adopted International Accounting
Standards ('IFRS') and with those parts of the Companies Act 2006
applicable to companies reported under IFRS and are consistent with
those that are expected to be adopted in the annual statutory
financial statements for the year ended 31 March 2024.
The interim consolidated financial information does not comply
with IAS 34 Interim Financial Reporting, as permissible under the
rules of AIM.
Prior year interim information has been restated, as
follows:
- Diluted loss per share for the six month period to 30
September 2022 was previously reported as GBP0.05 per share. It has
been restated to GBP0.06 per share as the potential dilutive shares
were anti-dilutive for the period as the Group was loss making.
- On the Statement of Financial Position, consistent with the
accounts to the year to 31 March 2023, Accrued income of
GBP1,232,000 within Current Assets, Trade and Other Receivables has
been reclassified to Accrued income within Non-Current Assets,
Trade and Other Receivables; in addition, Accruals and Other
Payables of GBP1,139,000 within Current Liabilities has been
reclassified to Accruals and Other Payables within Non-Current
Liabilities.
b) Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for at least twelve months from the date of
publication of these interim financial statements. Accordingly,
they continue to adopt the going concern basis in preparing these
consolidated financial statements.
The Directors have reviewed the Group's going concern position
taking into account its current business activities, performance to
date against budgeted targets and the factors likely to affect its
future development which include the Group's strategy, principal
risks and uncertainties and its exposure to credit and liquidity
risks.
The Group's GBP4.0 million 3-year revolving credit facility with
Barclays Bank plc, signed on the 25 March 2021 remains in place
which can provide working capital support if required. To date this
facility remains unutilised.
The Directors have reviewed a detailed reforecast of trading
which includes a cash flow forecast for a period which covers a
period of trading to December 2024 and have challenged the
assumptions used to create these forecasts. This forecast
demonstrates that the Group is able to pay its debts as they fall
due during this period.
The Directors have reviewed a highly sensitised stress test
which has factored in what the Directors believe would be an
extreme scenario which incorporates a significant reduction in new
business revenues across both segments of the Group, a reduction of
renewal rates in our software division and a scaling back of
revenues within our Services division. Costs have also been scaled
back in line with the reduction in revenues. Overall, the
sensitised cash flow forecast demonstrates that the Group will be
able to pay its debts as they fall due for the period to at least
31 December 2024.
c) Critical accounting judgements estimates and assumptions
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported for income and expenses during the year and that affect
the amounts reported for assets and liabilities at the reporting
date.
The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those described in the last annual
financial statements.
Revenue recognition
Management make judgements, estimates and assumptions in
determining the revenue recognition of material contracts sold by
the Group's Services division. The Group work with large enterprise
clients, providing services and solutions to support the clients'
needs. In many cases a third-party's products or services will be
provided as part of a solution. Management will consider the
implications around timing of recognition, with factors such as
determining the point control passes to the client and the
subsequent fulfilment of the Group's performance obligations. In
addition to this management will consider if it is acting as agent
or principal.
Impairment of goodwill, intangible assets and investment in
subsidiaries
Management make judgements, estimates and assumptions in
supporting the fair value of goodwill, intangible assets and
investments in subsidiaries. The Group carry out annual impairment
reviews to support the fair value of these assets. In doing so
management will estimate future growth rates, weighted average cost
of capital and terminal values.
Leases
Management make judgements, estimates and assumptions regarding
the life of leases. Management continue to review all existing
leases, which all relate to office space, and will look to reduce
the number of offices across the Group if they are not sufficiently
utilised. For this reason management have assumed that the life of
leases does not extend past the current contracted expiry date. A
judgement has been taken with regard to the incremental borrowing
rate based upon the rate at which the Group can borrow money.
3. Segmental information
In accordance with IFRS 8, the Group's operating segments are
based on the operating results reviewed by the Board, which
represents the chief operating decision maker. The Group reports
its results in two segments as this accurately reflects the way the
Group is managed.
The Group is organised into two reportable segments based on the
types of products and services from which each segment derives its
revenue - software and services.
Segment information for the 6 months ended 30 September 2023 is
presented below and excludes intersegment revenue, as it is not
material, and assets as the Directors do not review assets and
liabilities on a segmental basis.
Six-month period ended 30 September
2023 2023 2022 2022
Revenue Profit Revenue Profit
(unaudited) (unaudited) (unaudited) (unaudited)
GBP000 GBP000 GBP000 GBP000
------------------------------ ------------- ------------- ------------- -------------
Services 9,334 964 9,136 (167)
Software 1,167 465 1,654 703
------------------------------ ------------- ------------- ------------- -------------
Group total 10,501 1,429 10,790 536
Group costs (836) (475)
------------------------------ ------------- ------------- ------------- -------------
Adjusted EBITDA 593 61
Amortisation of intangibles (1,561) (1,446)
Depreciation (137) (127)
Share-based payments (42) (82)
Exceptional items (202) -
Finance costs (net) (38) (31)
Loss before tax (1,387) (1,625)
------------------------------ ------------- ------------- ------------- -------------
The Group is domiciled in the United Kingdom and currently the
majority of its revenues come from external customers that are
transacted in the United Kingdom. A number of transactions which
are transacted from the United Kingdom represent global framework
agreements, meaning our services, whilst transacted in the United
Kingdom, are delivered globally. The geographical analysis of
revenue detailed below is on the basis of country of origin in
which the master agreement is held with the customer (where the
sale is transacted).
Six-month period ended
30 September
2023 2022
(unaudited) (unaudited)
GBP000 GBP000
-------------------- ------------- -------------
United Kingdom 6,532 6,888
Rest of Europe 2,364 2,667
North America 1,499 972
Rest of the world 106 263
10,501 10,790
-------------------- ------------- -------------
4. Finance costs and income
Six-month period ended
30 September
2023 2022
(unaudited) (unaudited)
Finance costs GBP000 GBP000
---------------------------------------- ------------- -------------
Revolving Credit Facility charges 31 26
Interest payable on lease liabilities 12 5
43 31
---------------------------------------- ------------- -------------
Finance income in the period was GBP5k (H1 FY23: Nil)
5. Income Tax
The tax credit recognised reflects management estimates of the
tax for the period and has been calculated using the estimated
average tax rate of UK corporation tax for the financial period of
25% (FY23: 19%)
6. Earnings/(loss) per share
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period. For
diluted loss per share, the weighted average number of shares in
issue is adjusted to assume conversion of all the potential
dilutive ordinary shares. The potential dilutive shares were
anti-dilutive for the six months ended 30 September 2023 and six
months ended 30 September 2022 as the Group was loss making.
Adjusted earnings per share has been calculated using adjusted
earnings calculated as profit after taxation but before
amortisation of acquired intangibles after tax, share based
payments, impairment of intangible assets and exceptional items
after tax. The potential dilutive shares were anti-dilutive for the
six months ended 30 September 2022 as the Group was loss
making.
The calculation of the basic and diluted earnings per share from
total operations attributable to shareholders is based on the
following data:
Six-month period ended
30 September
2023 2022
(unaudited) (unaudited)
GBP000 GBP000
--------------------------------------------- ------------- -------------
Net loss from total operations
Loss for the purposes of basic and diluted
earnings / loss per share being net loss
attributable to shareholders: (947) (1,319)
Add/(remove)
Amortisation of acquired intangibles (net
of tax) 905 939
Share based payments 42 82
Exceptional items (net of tax) 152 -
Adjusted earnings for the purpose of
adjusted earnings per share 152 (298)
----------------------------------------------- ------------- -------------
No
Number of shares No (Restated)
--------------------------------------------- ------------- -------------
Weighted average number of ordinary shares
for the purpose of basic and adjusted
earnings per share 23,826,379 23,818,059
Weighted average number of ordinary shares
for the purpose of basic and adjusted
diluted earnings per share 23,826,379 23,818,059
----------------------------------------------- ------------- -------------
GBP
Earnings/(Loss) per share GBP (Restated)
Basic loss per share (0.04) (0.06)
Diluted loss per share (0.04) (0.06)
Adjusted Basic and diluted earnings/(loss)
per share 0.01 (0.01)
---------------------------------------------- ------------- -------------
7. Non-current assets: Trade and other receivables
Period ended 30 September
2023 2022
(unaudited,
(unaudited) restated)
GBP000 GBP000
-------------------- --------------- ---------------
Trade receivables 1,245 7,094
Accrued income 2,906 1,232
4,151 8,326
-------------------- --------------- ---------------
8. Current assets: Trade and other receivables
Period ended 30 September
2023 2022
(unaudited,
(unaudited) restated)
GBP000 GBP000
------------------------------------ --------------- ---------------
Trade receivables 6,946 10,043
Accrued income 4,098 2,035
Prepayments and other receivables 345 469
Deferred tax asset - 181
11,389 12,728
------------------------------------ --------------- ---------------
9. Trade and other payables
Period ended 30 September
2023 2022
(unaudited,
(unaudited) restated)
GBP000 GBP000
------------------------------------- -------------- -------------
Trade payables 837 2,757
Accruals and other payables 8,053 5,570
Other taxation and social security 606 1,261
Deferred income 203 454
Corporation tax 6 444
Lease liabilities 101 87
9,806 10,573
------------------------------------- -------------- -------------
10. Creditors: amounts falling due after more than one year
Period ended 30 September
2023 2022
(unaudited,
(unaudited) restated)
GBP000 GBP000
------------------------------ -------------- -------------
Deferred tax 3,341 3,744
Accruals and other payables 2,359 4,600
Lease liabilities 194 16
5,894 8,360
------------------------------ -------------- -------------
11. Share capital
The table below details movements in share capital during the
year:
Six-month period ended
30 September
2023 2022
In thousands of shares 000 000
--------------------------- ------------ ------------
In issue at 31 March 23,826 23,810
In issue at 30 September 23,826 23,810
--------------------------- ------------ ------------
Allotted, called up and fully paid GBP000 GBP000
Ordinary shares of GBP0.10 each 2,382 2,382
Deferred shares of GBP0.90 each 19,896 19,896
------------------------------------- --------- ---------
22,278 22,278
------------------------------------- --------- ---------
The Company did not issue any shares in the six-month period
ended 30 September 2023.
12. Related party transactions
The Directors of the Group and their immediate relatives have an
interest of 19% ( H1 FY23 : 18%) of the voting shares of the
Group.
13. Events after the reporting date
There are no material events after the reporting period to
report.
14. Cautionary statement
This Interim Report has been prepared solely to provide
additional information to shareholders to assess the Company's
strategies and the potential for these strategies to succeed. The
Interim Report should not be relied on by any other party or for
any purpose. The Interim Report contains certain forward-looking
statements with respect to the financial condition, results of
operations and businesses of the Company. These statements are made
in good faith based on the information available to them up to the
time of their approval of this report. However, such statements
should be treated with caution as they involve risk and uncertainty
because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied by these forward-looking statements. The
continuing uncertainty in global economic outlook inevitably
increases the economic and business risks to which the Company is
exposed. Nothing in this announcement should be construed as a
profit forecast.
This information is provided by RNS, the news service of the
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END
IR FFLLLXFLXFBK
(END) Dow Jones Newswires
November 22, 2023 02:00 ET (07:00 GMT)
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