REG - Crossword Cybersec - H1 Trading Update & Issue of Loan Notes

Crossword CybersecurityAnnouncement

31/08/2023 07:00

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RNS Number : 8722K  Crossword Cybersecurity PLC  31 August 2023

Crossword Cybersecurity Plc

H1 Trading Update & Issue of Loan Notes

2024 revenue growth target of 30% to c£8m and monthly breakeven

 

31 August 2023 - London, UK -  Crossword Cybersecurity Plc
(http://www.crosswordcybersecurity.com/) (AIM:CCS, "Crossword", the "Company"
or the "Group"), the cybersecurity solutions company focused on cyber strategy
and risk, is pleased to update the market on trading in the six months to 30
June 2023 and to announce the issue of £2.015m new Convertible Loan Notes.

In the first half of 2023, Crossword shifted its focus towards establishing a
clear path to profitability.  Profitability will be underpinned by continuing
strong revenue growth, margin improvement and cost containment.

 

Revenue Growth

Crossword expects to report revenue of £1.9m (unaudited) for the 6 months
ended 30 June 2023, an increase of 27% from the same period in the previous
year and has not seen a slow-down in cyber security spend amongst its core
regulated and critical national infrastructure clients. Strong revenue growth
was experienced across all revenue lines and ARR at the end of H1 2023 was
£2.7m, growth of 35% compared to the same period in the prior year.
Software Engineering services revenue in H1 2023 helped to strengthen ties
with a key partner and provided a valuable development opportunity for
staff.  Crossword continued to leverage its' 100+ client base to cross sell
and has increased emphasis on targeting its larger clients that can make full
use of Crossword's range of products and services.

Revenue for the full year to 31 December 2023 is on track to meet market
expectations, and Crossword's diversified product and services offering will
drive scale while managing risk.

 

Margin Improvement

In H1 2023, overall gross margin has increased by 4 percentage points over the
same period in the prior year. Consulting margin continues to improve as
revenue scales to achieve critical mass.  80% growth in the higher margin
product revenues helped to drive margin improvement.

 

Costs

Administrative expenses have stabilised in 2023, with a strong foundation now
in place to drive the revenue growth and path to profitability.  Excluding
one off professional fees in H1 2023, administrative expenses have increased
by less than 2% over the same period in the prior year.  With increasing
revenue, this represents a reduction of 20% in administrative expenses as a
percentage of revenue in H1 2023.  Crossword is targeting a drop by half in
administrative expenses as a percentage of revenue in 2024 compared to 2022.

Profitability and Breakeven

The momentum from 2022 places Crossword in a strong position to achieve
revenue growth to circa £6m in 2023 and focus on margin improvement will
ensure that there is a clear, carefully managed route to achieving
profitability in the medium term.  Furthermore, the Company is projecting the
revenue growth rate for 2024 to be circa 30%, to achieve total revenue of
circa £8m in 2024.  Crossword is aiming to deliver EBITDA and cash breakeven
on a monthly basis during the second half of 2024.

 

 

Convertible Loan Notes

The Company today announces that it has entered into agreements for a five
year, unsecured, convertible loan up to the value of £2,015,000.  The funds
raised will be used to support sales and marketing, product and services
development and to provide general working capital.

Following the General Meeting in July 2023, the company has authority to issue
£2.5m additional debt.  Following issue of these new Convertible Loan Notes,
the Company will have £485,000 capacity for further debt.  The Company
intends to use the £2.015m funding to achieve EBITDA and cash breakeven in
the second half of 2024.

The terms of the loan are as follows;

 Term               Five Years from the date of the loan agreement
 Interest rate      12 per cent., payable at the end of the term
 Early Repayment    At the company's sole discretion, subject to a minimum repayment amount of
                    £10,000
 Form of repayment  Either in cash or in Crossword ordinary shares of 0.5p each ("Ordinary
                    Shares"). The conversion price for Ordinary Shares will be lower of the price
                    (subject to a 15% discount) for each Ordinary Share which equates to the
                    middle market price per share of the Ordinary Shares (as derived from the
                    daily official list of the London Stock Exchange) on the last Business Day
                    before the date of the relevant Conversion Notice and 6.5 pence, being the
                    price (subject to a 15% discount) for each Ordinary Share which equates to the
                    middle market price per share of the Ordinary Shares  (as derived from the
                    daily official list of the London Stock Exchange) on the last Business Day
                    before the date of the Loan Agreement.
 Warrants           None

 

Related Party transactions

Gresham House Asset Management Limited ("Gresham House") has subscribed for
convertible loan notes to the value of £2,000,000. As Gresham House is a
substantial shareholder in the Company, their investment constitutes a related
party transaction under Rule 13 of the AIM Rules for Companies. The Crossword
directors consider, having consulted with the Company's nominated adviser,
that the terms of the investment by Gresham House are fair and reasonable
insofar as the Company's Shareholders are concerned.

Tom Ilube CBE, CEO at Crossword Cybersecurity Plc, said:

 

"As the economic landscape continues to be challenging for many, Crossword is
fortunate to be operating in the cyber security sector where client spend has
held up well in the first half of the year.  In an environment of increasing
number and complexity of cyber-attacks, Crossword's business model centred
around specialist cyber security products and services with distinct USPs and
a strongly growing Consulting division, saw continued strong revenue growth in
the first half of 2023.

 

We are grateful for the continued support of our shareholders.  This latest
investment round is intended to take Crossword to EBITDA and cash breakeven in
the second half of 2024.  Investments in Crossword to date have enabled us to
create a strong portfolio of products and services, and with our sole focus on
organic growth, put us on a clear path to profitability.

 

I am excited about the opportunities with AI and LLMs (Large Language
Models).  We are exploring initiatives with industry partners and leading
academics to investigate the application of Generative AI to cyber security.
It is extremely challenging for a single company to keep track of and evaluate
the many applications that are emerging, so Crossword is looking to bring
together its major clients to engage with this exciting area.

 

2023 is shaping up to be another year of strong growth for Crossword, and we
are forecasting continued growth into 2024, with revenue growth of 30% to
circa £8m."

 

- Ends -

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.

 

Contacts

 

Crossword Cybersecurity plc - Tel: +44 (0) 333 090 2587

Email: info@crosswordcybersecurity.com

Tom Ilube, Chief Executive Officer

Mary Dowd, Chief Financial Officer

 

Grant Thornton (Nominated Adviser) - Tel: +44 (0) 20 7383 5100

Colin Aaronson / Jamie Barklem / Ciara Donnelly

 

Hybridan LLP (Broker) - Tel: +44 (0)203 764 2341

Claire Louise Noyce

 

For media enquiries contact:

Duncan Gurney, GingerPR

duncan@gingerpr.co.uk - Tel: +44 (0)1932 485 300

 

About Crossword Cybersecurity plc

Crossword offers a range of cyber security solutions to help companies
understand and reduce cyber security risk. We do this through a combination of
people and technology, in the form of SaaS and software products, consulting,
and managed services. Crossword's areas of emphasis are cyber security
strategy and risk, supply chain cyber, threat detection and response, and
digital identity and the aim is to build up a portfolio of cyber security
products and services with recurring revenue models in these four areas. We
work closely with UK universities and our products and services are often
powered by academic research-driven insights. In the area of cybersecurity
strategy and risk our consulting services include cyber maturity assessments,
industry certifications, and virtual chief information security officer
(vCISO) managed services.

Crossword's end-to-end supply chain cyber standard operating model (SCC SOM)
is supported by our best-selling SaaS platform, Rizikon Assurance, along with
cost-effective cyber audits, security testing services and complete managed
services for supply chain cyber risk management. Threat detection and response
services include our Nightingale AI-based network monitoring, our Trillion and
Arc breached credentials tracking platforms, and incident response.
Crossword's work in digital identity is based on the World Wide Web Consortium
W3C verifiable credentials standard and our current solution, Identiproof,
enables secure digital verification of individuals to prevent fraud.

Crossword serves medium and large clients including FTSE 100, FTSE 250 and
S&P listed companies in various sectors, such as defence, insurance,
investment and retail banks, private equity, education, technology and
manufacturing and has offices in the UK, Poland and Oman. Crossword is traded
on the AIM market of the London Stock Exchange.

Visit Crossword at https://www.crosswordcybersecurity.com/
(https://www.crosswordcybersecurity.com/)

 

 

 

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