REG - GRC Intnl.Group PLC - Interim Results
14/12/2021 07:00
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RNS Number : 4975V GRC International Group PLC 14 December 2021
14 December 2021
GRC International Group PLC
Unaudited interim results for the six months ended 30 September 2021
Strong organic revenue growth with improved margins and positive EBITDA
GRC International Group PLC (AIM: GRC), an integrated cyber security and
privacy solutions business,
announces its unaudited interim results for the six months ended 30 September 2021.
Financial highlights
· Revenue up 22% to £6.6m (H1 FY21: £5.4m).
· Recurring and contracted revenue billings2 up 33% to £4.0m (H1
FY21: £3.0m).
· Total billings1 up 27% to £7.1m (H1 FY21: £5.6m).
· Gross margin 58% (H1 FY21: 50%). The improvement of 800 basis
points was due to operational gearing from subscription services, overall
revenue growth and improved utilisation rates.
· EBITDA2 of £0.4m (H1 FY21: £0.8m loss).
· Substantial 67% reduction in loss before tax of £0.5m (H1
FY21: £1.5m loss).
· Net cash at period end of £0.1m (H1 FY21: £0.2m). Borrowings
(excluding lease obligations) of £1.3m (H1 FY21: £1.2m).
Operational highlights
· Surge in customer satisfaction, with significant increase in NPSs
(Net Promoter Scores).
· On 30 November 2021, the Group achieved the important milestone
of more than 5,000 active subscribers to online subscription products and
services. The first online subscription service was launched two years ago on
1 December 2019.
· Website visits up by 21% to more than
2.0m (H1 FY21: 1.7m).
· 57% of transactions in the period were from returning existing
customers, with the remainder from new customers.
· Services division continued to increase contracted and recurring
revenue internationally, with high-profile clients and in key sectors.
1 Billings equate to the total value (net of VAT) of invoices raised and cash
sales through the Group's websites. This figure does not take account of
accrued or deferred income adjustments that are required to comply with
UK-adopted International Financial Reporting Standards ("IFRS") but is
considered to provide useful information to the users of the Group's financial
information. Billings is considered by the Board to be a key metric for
managing the business due to its direct relationship with cash flow. Cash
receipts are driven by billings achieved each month rather than revenue
recognised in accordance with IFRS.
2 EBITDA is defined in the Financial Review within this announcement.
Commenting on the results, Alan Calder, Chief Executive Officer, said:
"We have seen notably strong revenue and billings growth across the business
in the first half. This has resulted in our first H1 positive EBITDA since our
Admission to AIM in 2018 and strong positive cash flow. Importantly, 55% of
our billings are now recurring.
"We operate in fragmented and rapidly growing international markets, and
through our one-stop approach provide peace of mind to our customers: 'Our
expertise - your peace of mind' resonates strongly with customers in today's
cyber risk environment.
"We now have momentum as well as growing forward visibility, and a
comprehensive suite of products and services, and are well positioned to
execute on our strategy to grow organically and by acquisition."
Enquiries:
GRC International Group PLC +44 (0)330 999 0222
Alan Calder, Chief Executive Officer
Christopher Hartshorne, Finance Director
Grant Thornton UK LLP (Nominated
Adviser)
+44 (0)20 7383 5100
Philip Secrett, Daphne Zhang
Dowgate Capital Limited
(Broker)
+44 (0)20 3903 7715
James Serjeant, Russell Cook, Nicholas Chambers
Meare
Consulting
+44 (0)7990 858548
Adrian Duffield
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 (as it forms part of domestic law
of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018).
About GRC International Group PLC ("GRC" or "the Group")
GRC provides a comprehensive suite of practical and unique cyber security and
privacy solutions.
GRC has a portfolio of proprietary market-leading brands. The Group's one-stop
integrated capability and complementary range of products and services provide
peace of mind - 'Our expertise - your peace of mind' - to its international
and domestic corporate customers across all industrial sectors.
GRC's three operating divisions - Software as a Service (SaaS), e-Commerce and
Services - offer a wide range of products and services encompassing: IT
governance, risk management, compliance with data protection and cyber
security regulation, online and in-person training and staff awareness,
consultancy, online publishing and distribution as well as software. The
Group's capabilities also include products and services to enable corporates
to address wider governance issues such as money laundering and bribery.
In addition to its UK business, GRC has operations in the EU and the US.
Chief Executive Review
Strategic overview
The cyber security market is forecast to grow to £353 billion by 2025, at a
14.5% CAGR(( 1 (#_ftn1) )), with sophisticated cyber criminals and
nation-state bad actors outperforming their targets. The attack surface has
expanded dramatically with millions more insecure network endpoints being
exploited due to factors including the increasingly widespread use of IoT
(Internet of Things) and the rapid growth of remote/hybrid working.
Digital transformation and hybrid working initiatives, which are also
priorities for most organisations, bring new and different risks that,
combined with customer and supply chain pressure to improve security and
privacy, and proliferating national and international data protection
regulations, have made cyber and privacy risk a critical agenda item for many
boards.
Our clients recognise that cyber security and privacy are two sides of the
same coin. In this environment, GRC is uniquely positioned to meet the rapidly
growing, international demand from organisations of all sizes to protect
critical digital assets and comply with an increasingly complex web of laws
and regulations.
There is at the same time a global shortage in qualified security and privacy
professionals.(( 2 (#_ftn2) )) It is increasingly difficult, therefore, for
most organisations to resource appropriate responses. That leads them to look
for external expertise and our 'one-stop' offering is uniquely positioned to
help them deal with current and future challenges. We provide peace of mind to
our customers: 'Our expertise - your peace of mind'.
Against this backdrop, GRC had a very strong first half to FY22. We continued
to build on the growth we achieved in the second half of the previous
financial year. Our first-half billings were up 26% against the comparative
period, and notably our recurring and contracted billings are up by 33%. All
our divisions saw jumps in revenue with, in particular, Software as a Service
revenues up 34% and e-Commerce revenues up 60%. Group gross margin improved by
800 basis points from 50% to 58%.
In an increasingly digital business world, our ongoing investment in
e-Commerce and Software as a Service is clearly a competitive advantage. It
has driven the increases in Group billings, in contracted and recurring
revenues, and in gross margins. That front-end investment, combined with
ongoing automation of our back-office processes and control of overhead,
resulted in our first H1 positive EBITDA, £400,000, since we were admitted to
trading on AIM in 2018.
Our initial two acquisitions (GDPR.co.uk, a SaaS platform for the UK schools
sector, and DQM GRC, a privacy solutions business) both made useful
contributions to our overall result.
Our strategy is to grow organically and by acquisition. We have a blue chip
and wide customer base and a portfolio of income streams. Our continuing
investment in building and improving our online subscription services is
driving continual improvements in customer retention and forward revenue
visibility, which will widen our gross margin due to the inherent operational
gearing in the business.
In fragmented markets, we are also looking to enhance our capabilities by
acquiring products and services both domestically and internationally.
Current trading and outlook
On 7 December 2021, we announced that by 30 November 2021 we had signed up
more than 5,000 active, paying subscribers to 6 lines of the Group's online
products and services. The first online subscription service was launched two
years ago on 1 December 2019, with others added during the COVID-19 pandemic.
Our marketing team continues to ensure that customers readily find us on the
web, which drives the increases in web traffic and, with assistance from our
sales teams, the increases in billings. While COVID-19 and geopolitics may
have a destabilising impact on the economy, those two factors also increase
cyber and privacy risk.
GRC, after a strong H1, has good momentum and growing forward visibility, and
is well positioned to execute on its strategy to grow organically and by
acquisition.
The Group has now seen 18 months of period-on-period trading improvement and
we expect this to continue into H2 FY22. We look with optimism to the second
half and to next year.
Operational review
Software as a Service
Our Software as a Service division achieved a revenue increase against H1 FY21
of 34% and continues to deliver a 90% gross margin. The increasing complexity
of cyber threats and privacy requirements is pushing organisations to look for
robust platforms that can support their compliance and staff awareness
training initiatives.
We have grown the number of subscription customers from 3,600 in March 2021 to
5,000 by November 2021, a 39% increase.
We added vulnerability and PCI DSS (Payment Card Industry Data Security
Standard) scanning services to our subscription product range during the
period and are working on a series of initiatives to:
· Make the most of our subscription services available through the
Group's IT Governance one-stop shop websites in the EU and the US;
· Improve the customer experience, improve retention and increase
cross-selling; and
· Build out the ecosystems and partner networks for each of our
platforms.
e-Commerce
Our e-Commerce division achieved a revenue increase against H1 FY21 of 60% and
continues to deliver a gross margin of 64%. The revenue increase reflects the
global professional skills shortage and the continued resurgence in demand -
after the pandemic-induced retraction that we saw in Q1 of FY21 - for
professional qualifications.
Our technology-enabled 'Learn from Anywhere' delivery model facilitated a
significant improvement in classroom training course attendance. Our ongoing
investment in making training courses available in an on-demand,
distance-learning format helps us reach wider markets and more distant time
zones.
Our publishing business, IT Governance Publishing, is successfully expanding
its portfolio from cyber security and privacy across technology, risk and
compliance, into related governance areas such as anti-bribery management and
ESG. Audiobooks are also a key growth format for us.
Increasingly effective content management - reusing content across multiple
platforms and services - is core to the service integration our clients expect
from us. This is also being enhanced by the speed with which we are able to
launch new product ranges to meet new regulations and changing customer
demand.
Services
A key focus in our Services division this year has been on improving the gross
margin by concentrating on pricing, delivery effectiveness and utilisation. We
succeeded in raising the divisional gross margin from 27% to 38%, while also
achieving a 5% revenue increase against H1 FY21.
The other key focus for us is increasing the percentage of our Services
revenue that is contracted forward on a multi-month/multi-year basis.
Approximately 80% of our business in GRCI Law and DQM GRC, and across the IT
Governance brands approaching 60% of our business, is signed on this basis.
Our Services division is increasingly important in driving customer uptake of
our Software as a Service and e-Commerce offerings. The traditional 'land and
expand' business model should, in our case, enable us to drive significant
increases in customer lifetime value. This will in future become a key
performance indicator for the Group.
Quality management
Alongside multiple third-party product and service accreditations, the Group
has over the past 18 months made customer feedback a key driver of product
improvement. NPS (net promoter score) results pushing into 'World Class' are
increasingly a feature of offerings such as our classroom training, our online
staff awareness offering and our CyberComply platform.
Quality and expertise enable the Group to deliver customer peace of mind.
Alan Calder
Chief Executive Officer
Financial Review
Revenue
Revenue for the six months ended 30 September 2021 was up 22% to £6.6m (H1
FY21: £5.4m). The comparative period was particularly impacted by the effects
of the early months of COVID-19. Revenue was up 3% on the previous six months
(H2 FY21: £6.4m), despite continuing uncertainty in the wider economy over
the ongoing impact of COVID-19.
Recurring and contracted revenue billings (before accrued and deferred income
adjustments) are up 33% on the comparative period to £4.0m (H1 FY21: £3.0).
This accounts for 56% of total billings (H1 FY21: 56%). Total billings were
£7.1m (H1 FY21: £5.6m).
The most significant revenue growth was in the e-Commerce division, which
includes sales of public training courses and documentation toolkits. These
were hardest hit during the pandemic. The growth in the Software as a Service
division reflects the Group's focus on and investment in developing its high
margin and highly scalable recuring revenue.
£'m Services Software as a Service (SaaS) e-Commerce Total
H1 FY22 3.2 1.6 1.8 6.6
H1 FY21 3.1 1.2 1.1 5.4
FY FY21 6.7 2.7 2.4 11.8
Period-on-period % Services Software as a Service (SaaS) e-Commerce Total
H1 FY22 vs H1 FY21 3% 33% 64% 22%
International revenue was up 40% to £1.4m (H1 FY21: £1m), representing 23%
of total Group revenue. The Group saw growth in both its US and European
revenues, notwithstanding the differing rates of general economic recovery
from the pandemic around the world.
Gross profit
Gross profit was up 41% to £3.8m (H1 FY21: £2.7m), with gross margin
also up by 800 basis points to 58% (H1 FY21: 50%).
The majority of the Group's direct cost base relates to headcount for
consultants and client delivery staff. The COVID-19-related sudden and
dramatic revenue drop in the early part of the comparative period meant that
sales revenue was temporarily out of alignment with the Group's
costs. Where possible, the Group focused on retaining the staff it needed to
deliver the expected strong growth and client delivery coming out of the
pandemic, resulting in better consultant utilisation rates and therefore
better margins in the Services division as revenue recovered. This, along with
the Group's focus on higher-margin subscription services, has driven the
overall improvement in margin.
Notably, the Group's two fastest-growing revenue divisions, SaaS and
e-Commerce, have the highest gross margin:
Division H1 FY21 Revenue increase H1 FY22
Revenue Gross profit % Revenue Gross profit
£ £ % £ £ %
Services 3.1 0.9 29% 3% 3.2 1.2 38%
SaaS 1.2 1.1 92% 33% 1.6 1.5 94%
e-Commerce 1.1 0.7 64% 64% 1.8 1.1 61%
Total 5.4 2.7 50% 22% 6.6 3.8 58%
Administrative expenses
Compared with revenue increasing by 22%, administrative
expenses increased by only £0.3m (7%) to £4.4m (H1 FY21: £4.1m).
The increase in administrative expenses is mostly due to staff costs and
related expenses, with only a small increase in headcount required to support
the growth in revenue. The Group's investment in automation and focus on SaaS
revenue lines means that top-line growth is achievable without proportionate
increases in staff. This is expected to result in a continued widening of
margins.
EBITDA
Although EBITDA (earnings before interest, tax, depreciation and amortisation)
is not a statutory measure, it is considered by the Board an important key
performance indicator that is helpful to investors as a more accurate measure
of underlying business performance as it removes the impact of non-cash
accounting adjustments.
EBITDA was £0.4m (H1 FY21: £0.8m loss). The Group reported in its 2021
year-end results that it had achieved positive EBITDA for Q4 FY21. That
positive performance continued through each of the months in H1 FY22,
delivering the Group's first positive EBITDA six-month trading period reported
since its first set of results after admission to AIM in 2018.
£'000 HY1 FY22 HY2 FY21 HY1 FY21
Revenue 6,633 6,347 5,413
Operating loss (385) (1,161) (1,427)
Depreciation 137 193 157
Amortisation 668 605 502
EBITDA 420 (363) (768)
EBITDA as % revenue 6% (6)% (14)%
Finance expense
The net finance expense of £0.1m (H1 FY21: £0.1m) relates to interest on the Group's
borrowings and leases accounted for under IFRS 16.
Loss before tax
Loss before tax was £0.5m (H1 FY21: £1.5m loss).
Taxation
No provision for tax has been made in the period (H1 FY21: £Nil). The tax
credit of £19k recognised relates to the unwinding of deferred tax on
the acquisition of DQM GRC.
Earnings per share
Loss per share was 0.47 pence (H1 FY21: 1.53 pence loss per share).
Dividend
The Group is not paying a dividend.
Cash flow and cash/debt
The Group's closing cash position
net of a bank overdraft was £0.1m (30 September 2020: £0.2m).
Borrowings (excluding
lease obligations) at period end were £1.3m (31 March 2021: £1.4m, 30 September 2020: £1.2m).
The Group has banking facilities to provide adequate headroom for unforeseen
working capital requirements by way of an invoice discounting facility that
was inherited as part of the acquisition of DQM GRC in 2019.
In addition, the unsecured loan facility provided by Andrew Brode for the
amount of £700,000 at an interest rate of 5% above the Bank of England base
rate to provide additional working capital is available to the Company until
at least 31 December 2022 and shall automatically renew for a further 12
months unless terminated by either party. As at the period end and the date of
this report, £350,000 remained available to be drawn down.
Further information on Going Concern is provided in the Financial Statements
Note 2 (Basis of preparation) of the half-year report.
Statement of financial position
Net assets were £6.4m (31 March 2021: £6.9m, 30 September 2020:
£7.9m).
Net current liabilities at period end were up by £0.4m during the
six months to
£5.6m (31 March 2021: £5.2m, 30 September 2020: £4.4m).
The main factors in the overall increase in net current liabilities of £0.4m are the reduction in trade receivables of £0.2m
and the increase in trade and other payables of £0.2m. The reduction
in trade receivables is a normal seasonal trend as certain types of the
Group's customer base seek to spend remaining budget at the end of March. The
trade and other payables balance includes a deferred income balance of £1.6m
(31 March 2021: £1.1m, 30 September 2020: £1.0m), relating to training and
consultancy projects due to be delivered after the statement
of financial position date. The increase in this balance signifies
improving revenue trends and provides some visibility of income to be
recognised in H2.
Intangible assets
The Group's accounting policy is that only directly attributable staff costs of the technical teams developing the assets are capitalised. No management
time is capitalised, and neither is any proportion of overheads or
borrowing costs.
Additions of £0.6m (H1 FY21: £0.5m) relate to software, website development
and the development of courseware.
Capital structure
The issued share capital at 30 September 2021 was 99,931,509 (31 March 2021:
99,931,509, 30 September 2020: 99,931,509) ordinary shares of £0.001 each.
There were no share options granted in the period to 30 September
2021.
Risks and uncertainties
The Board continually assesses and monitors the key risks of the business. The
key risks that could affect the Group's performance, and the factors that
mitigate these risks, have not significantly changed from those set out on
pages 22 to 23 of the Group's Annual Report for 2021 (a
copy of which is available from our website, www.grci.group).
Chris Hartshorne
Finance Director
Unaudited Consolidated Income Statement for the six months ended 30 September 2021
Notes 6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
£'000 £'000 £'000
Revenue 3 6,633 11,760 5,413
Cost of sales (2,813) (5,614) (2,761)
Gross profit 3,820 6,146 2,652
Administrative expenses (4,369) (8,882) (4,101)
Other operating income 164 148 19
Operating loss (385) (2,588) (1,430)
Net financing costs (107) (247) (111)
Loss before taxation (492) (2,835) (1,541)
Taxation 19 264 19
Loss for the financial period (473) (2,571) (1,522)
Loss for the financial period attributable to:
The Group's equity shareholders (473) (2,571) (1,522)
Basic loss per share (pence) 4 (0.47) (2.58) (1.53)
Diluted loss per share (pence) 4 (0.47) (2.58) (1.53)
All the Group's loss relates to continuing operations.
The accompanying accounting policies and notes form an integral part of these financial statements.
Unaudited Consolidated Statement of Comprehensive Income for the six months ended 30 September 2021
6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
£'000 £'000 £'000
Loss for the financial period (473) (2,571) (1,522)
Other comprehensive profit/(loss) - items that may subsequently be reclassified to profit/loss:
Exchange differences on translation of foreign operations (2) 4 (6)
Other comprehensive loss for the financial period, net of tax (2) 4 (6)
Total comprehensive income for the financial period (475) (2,567) (1,528)
Total comprehensive loss attributable to equity shareholders of the parent
(475) (2,567) (1,528)
The accompanying accounting
policies and notes form an integral part of these financial statements.
Unaudited Consolidated Statement of Financial Position as at 30 September 2021
Notes 6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 6,804 6,804 6,804
Intangible assets 5 5,699 5,765 5,752
Property, plant and equipment 301 426 654
Investments accounted for using the equity method 20 7 7
Deferred tax - - 148
12,824 13,002 13,365
Current assets
Inventories 31 33 63
Trade and other receivables 1,535 1,694 1,408
Cash at bank 147 233 217
1,713 1,960 1,688
Current liabilities
Trade and other payables (6,188) (5,986) (4,832)
Borrowings (879) (863) (886)
Contingent consideration - - (50)
Lease obligations (122) (197) (255)
Current tax (129) (127) (108)
(7,318) (7,173) (6,131)
Net current liabilities (5,605) (5,213) (4,443)
Non-current liabilities
Borrowings (412) (460) (302)
Lease obligations (52) (83) (154)
Deferred tax liability (324) (340) (566)
(788) (883) (1,022)
Net assets 6,431 6,906 7,900
Equity
Share capital 6 100 100 100
Share premium 13,227 13,227 13,227
Merger reserve 4,276 4,276 4,276
Share-based payment reserve 126 126 126
Translation reserve (10) (8) (18)
Accumulated deficit (11,288) (10,815) (9,811)
Total equity 6,431 6,906 7,900
Unaudited Consolidated Statement of Changes in Equity for the six months ended 30 September 2021
Share capital Share premium Merger reserve Share-based payment reserve Retained earnings Translation reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2020 (audited) 100 13,182 4,276 171 (8,289) (12) 9,428
Loss for the period - - - - (1,522) - (1,522)
Foreign exchange difference on consolidation - - - - - (6) (6)
Total comprehensive loss for the period - - - - (1,522) (6) (1,528)
Shares issued - 45 - (45) - - -
Transactions with owners - 45 - (45) - - -
At 30 September 2020 (unaudited) 100 13,227 4,276 126 (9,811) (18) 7,900
Share capital Share premium Merger reserve Share-based payment reserve Retained earnings Translation reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2020 (audited) 100 13,182 4,276 171 (8,289) (12) 9,428
Loss for the period - - - - (2,571) - (2,571)
Foreign exchange difference on consolidation - - - - - 4 4
Total comprehensive loss for the period - - - - (2,571) 4 (2,567)
Shares issued - 45 - (45) 45 - 45
Transactions with owners - 45 - (45) 45 - 45
At 31 March 2021 (audited) 100 13,227 4,276 126 (10,815) (8) 6,906
Loss for the period - - - - (473) - (473)
Foreign exchange difference on consolidation - - - - - (2) (2)
Total comprehensive loss for the period - - - - (473) (2) (475)
At 30 September 2021 (unaudited) 100 13,227 4,276 126 (11,288) (10) 6,431
The accompanying accounting policies and notes form an integral part of these financial statements.
Unaudited Consolidated Statement of Cash Flows for the six months ended 30 September 2021
Notes 6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
£'000 £'000 £'000
Cash flow from operating activities
Loss before tax (492) (2,835) (1,541)
Depreciation 137 350 157
Amortisation 5 668 1,107 502
Loss on disposal of fixed assets - 4 -
Foreign exchange gains/(losses) 10 (22) 18
Finance costs 107 247 111
Operating cash flows before changes in working capital 430 (1,149) (753)
Taxation refund - 187 186
Decrease/(Increase) in inventories 2 28 (2)
Decrease in trade and other receivables 161 588 838
Increase in trade and other payables 191 2,560 1,173
Net cash outflow from operating activities 784 2,214 1,442
Cash flow from investing activities
Purchase of intangible assets (602) (1,168) (547)
Acquisition of joint venture investment (13) - -
Purchase of plant and equipment (11) (35) (27)
Net cash outflow in operating activities (626) (1,203) (574)
Net cash flow from financing activities
Repayment of acquired consideration liability - (100) (50)
Proceeds from borrowings 276 710 70
Repayment of borrowings (316) (1,249) (728)
Interest paid (85) (186) (90)
Interest on lease liability on right of use asset (13) (43) (21)
Payment of lease liabilities on right of use assets (107) (168) (78)
Net cash outflow from financing liabilities (245) (1,036) (897)
Net decrease in cash and cash equivalents (87) (25) (29)
Cash and cash equivalents at beginning of financial period 233 245 245
Effects of exchange rate changes 1 13 1
Cash and cash equivalents at end of financial period 147 233 217
Comprising
Cash at bank 147 233 217
The accompanying accounting policies and notes form an integral part of these financial statements.
1. Nature of operations and general information
GRC International Group PLC ('GRC International Group' or 'the Company') is a
public limited company limited by shares, incorporated and domiciled in
England and Wales. The registered company number is 11036180 and the
registered office is Unit 3 Clive Court,
Bartholomew's Walk, Cambridgeshire Business Park, Ely,
Cambridgeshire, CB7 4EA.
The principal activities of GRC International Group and its subsidiary
companies are as a one-stop shop for IT Governance including books,
tools, learning and consultancy services.
The interim financial
statements have not been audited or reviewed by the auditors.
2. Basis of preparation of half-year report
The condensed consolidated interim financial report for the half-year
reporting period ended 30 September 2021 has been prepared
in accordance with Accounting Standard IAS 34
Interim Financial Reporting.
The results include the results of GRC International Group PLC and its subsidiaries.
A subsidiary is a company controlled directly by the Group. Control is achieved where the
Group has the power over the investee, rights to
variable returns and the ability to
use the power to affect the investee's returns.
Income and expenses of subsidiaries acquired during the year are included in
the Consolidated Income Statement from the effective date
of control. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used
by the Company.
All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation.
The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in
conjunction with the annual report for the year ended 31 March 2021 and any
public announcements made by GRC International Group
PLC during the interim period.
Half-yearly (interim) reports
The comparative financial information for the year ended 31 March 2021 in this
interim report does not constitute statutory accounts for that year.
The statutory accounts for the year ended 31 March 2021 have been delivered to
the Registrar of Companies. The auditors' report on those accounts was
unqualified and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006, but drew attention to a material uncertainty related to
going concern by way of emphasis.
Going concern
The Group has recorded a loss for the period of £0.5m (H1 FY21: £1.5m loss)
and at 30 September 2021 its current liabilities exceeded its current assets
by £5.6m. Notwithstanding this, the Directors consider it appropriate to
prepare the financial statements on a going concern basis. The key
considerations relating to this judgement are described below.
Trading in the prior year (FY21) was significantly impacted by the pandemic.
As previously reported in the Annual Report for 2021, monthly performance
began to notably improve from late November 2020 and the Group saw strong
positive momentum through the rest of the year, delivering an EBITDA positive
Q4. The Group has maintained that strong positive momentum throughout H1 FY22,
delivering an EBITDA positive set of half-year results The Board remains
encouraged by current trading.
As previously reported, in response to the pandemic from Spring 2020, the
Board increased the regularity of its short- and medium-term cash flow
planning, implemented a number of key cost-reduction measures and took
advantage of government initiatives in the geographies that the Group operates
in order to preserve liquidity, supplemented by deferring the payment of
payroll tax liabilities to HMRC, which amounted to approximately £1.6m.
Additionally, in March 2021, certain subsidiaries of the Group joined the HMRC
VAT deferral scheme to defer repayment of VAT liabilities totalling £0.4m
falling due in FY21 until FY22. During the six-months period to 30 September
2021, the cash generated through trading has been sufficient to reduce the
deferred payroll tax liabilities to approximately £0.9m at the balance sheet
date, and the deferred VAT liability to approximately £0.3m, in line with the
VAT deferral scheme payment plan.
Notwithstanding the easing of trading conditions and subsequent improvement in
performance since the outbreak of the global pandemic reached the United
Kingdom (which represents around 82% of the Group's revenue in FY21), the
Directors acknowledge that trading conditions will remain uncertain for the
foreseeable future. Those uncertainties include:
- The possibility of further local or national restrictions;
- The lack of visibility over future levels of revenue in the
context of weakened demand for the Group's products and services;
- Should the Group need to further reduce its scalable cost base,
its ability to make those adjustments and realise the benefits from doing that
on a timely basis;
- The continued availability of existing financing, including HMRC
arrangements (summarised above), existing borrowings and flexibility allowed
by suppliers; and
- The ability to access new financing, including further
government support in its various forms, sufficient to fund any further cash
requirement over the foreseeable future.
Based on the forecasts, the Directors have identified that they have a
reasonable expectation of being able to reduce costs sufficiently in the
required time frame should revenue levels cause this to be necessary, and that
the Group will remain within its currently available facility levels, none of
which has any financial covenant compliance requirements. Central to those
facilities is the £700,000 unsecured loan facility provided by Andrew Brode,
which is at present 50% utilised, and which remains in place until at least 31
December 2022. Additionally, the Group has access to additional liquidity
through its uncommitted invoice discounting facility.
The Directors have reviewed the Group's forecasts and projections to 31 March
2023, which, taking account of reasonably possible changes in trading
performance, show that the Group is able to generate sufficient liquidity to
continue in operational existence for the foreseeable future. On this basis,
the Directors believe that the Group will be able to generate sufficient cash
through its normal business trading to enable it to continue its operations,
and continue to meet, as and when they fall due, its planned and committed
liabilities for at least the next 12 months from the date of this report. For
this reason, the Directors continue to adopt the going concern basis in the
preparation of these unaudited interim results.
However, should the Group not be able to generate cash inflows sufficient to
meet its current operational obligations and legacy deferred obligations as
they fall due, it would need to secure additional funding, with no guarantee
such funding would be secured.
The interim results do not include the adjustments that would be required
should the going concern basis of preparation no longer be appropriate.
3. Revenue
Revenue is all derived from continuing operations. The analysis of revenue by
category:
6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
£'000 £'000 £'000
Sale of goods 436 740 355
Provision of services 6,197 11,020 5,058
6,633 11,760 5,413
Other income 164 148 19
Total revenue 6,797 11,908 5,432
4. Earnings per share
Basic earnings per
share is based on the (loss)/profit after tax for the year and the weighted average number of shares in issue during each year.
6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
Loss attributable to equity holders of the Group £'000 (473) (2,571) (1,522)
Weighted average number of shares in issue 99,754,064 99,754,064 99,579,523
Basic loss per share (pence) (0.47) (2.58) (1.53)
Diluted earnings per share is calculated by adjusting the average number of
shares in issue during the year to assume conversion of all dilutive
potential ordinary shares.
Taking the Group's share options into consideration in respect of the Group's
weighted average number of ordinary shares for the purposes of
diluted earnings per share, is as follows:
6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
Number of shares 99,754,064 99,754,064 99,579,523
Dilutive (potential dilutive) effect of share options - - -
Weighted average number of ordinary shares for the purposes of diluted earnings per share 99,754,064 99,754,064 99,579,523
Diluted loss per share (pence) (0.47) (2.58) (1.53)
For the purpose of diluted earnings per share, in a loss-making situation, options are not
dilutive.
5. Intangible assets
Marketing tools Publishing products Consultancy products and courseware Software and website costs Trademarks Customer relationships Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 April 2020 (audited) 63 333 881 5,234 466 1,843 8,820
Additions - 67 158 943 - - 1,168
Foreign exchange movement - - (3) - - - (3)
At 31 March 2021 63 400 1,036 6,177 466 1,843 9,985
Additions - 26 82 494 - - 602
Foreign exchange movement - - - - - - -
At 30 September 2021 63 426 1,118 6,671 466 1,843 10,587
Accumulated depreciation
At 1 April 2020 (audited) 61 234 325 2,274 54 166 3,114
Charge for year 2 32 90 783 46 154 1,107
Foreign exchange movement - - (1) - - - (1)
At 31 March 2021 63 266 414 3,057 100 320 4,220
Charge for period - 26 53 488 24 77 668
Foreign exchange movement - - - - - - -
At 30 September 2021 63 292 467 3,545 124 397 4,888
Net book value
At 30 September 2021 - 134 651 3,126 342 1,446 5,699
At 31 March 2021 - 134 622 3,120 366 1,523 5,765
Amortisation is included within administrative expenses.
6. Authorised, allotted, issued and fully paid
6 months to 30 September 2021 12 months to 31 March 2021 6 months to 30 September 2020
unaudited
unaudited
audited
Number £'000 Number £'000 Number £'000
Ordinary shares of £0.001 each 99,931,509 100 99,931,509 100 99,931,509 100
99,931,509 100 99,931,509 100 99,931,509 100
7. Events after the reporting period
There have been no events that
require disclosure in accordance with IAS10, 'Events after the balance sheet date'.
1 (#_ftnref1) Cybersecurity Market Trends, Size| Industry Growth 2021 to
2026 With COVID Impact - Mordor Intelligence
(https://www.mordorintelligence.com/industry-reports/cyber-security-market)
2 (#_ftnref2) Cybersecurity Jobs Report: 3.5 Million Openings In 2025 -
cybersecurityventures.com (https://cybersecurityventures.com/jobs/)
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