REG - React Group PLC - Final Results
29/01/2025 07:00
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RNS Number : 0317V React Group PLC 29 January 2025
29 January 2025
REACT Group plc
("REACT", the "Group" or the "Company")
Final results for the year ended 30 September 2024
REACT (AIM: REAT), the leading specialist support services provider to the
facility management (FM) sector, is pleased to announce its audited final
results for the year ended 30 September 2024.
Financial highlights
· Revenue increased by 6% to £20.7m (2023: £19.6m)
- 87% recurring revenue (2023: 87%)
- Fifth successive year of organic growth against strong prior year
· Gross profit strengthened 9% to £5.7m (2023: £5.2m)
· Gross profit margin enhanced by 80 basis points to 27.6% (2023: 26.8%)
· Adjusted EBITDA(1) up 6% to £2.4m (2023: £2.3m)
· Free cash flow of £2.3m (2023: £2.1m)
· Cash of £1.8m (2023: £2.1m)
( )
Operational highlights
· Achieved sustained organic growth in both revenue and profits by retaining
customers, successfully leveraging cross-selling and upselling opportunities
and driving operational efficiencies, alongside a steady stream of new
customer wins
· Secured multiple contract awards with the majority being small and medium
sized engagements
· Enhanced its range of services with the late October 2024 acquisition of 24hr
Aquaflow strengthening regional coverage of specialist FM support services
alongside its nationwide specialist cleaning and window cleaning operations
Current trading and outlook
· Transformative acquisition of 24hr Aquaflow which is being successfully
incorporated into the Group, showing strong business performance and is
expected to make a material contribution to Group profits from this year
onwards
· Despite the macroeconomic headwinds, commenced the current year with good
momentum, delivering trading performance in line with management expectations
· Well-positioned to capitalise on considerable opportunities including
development of cross selling and upselling initiatives, driving of cost
efficiencies and with a robust pipeline of early-stage opportunities, with
emphasis on earnings enhancing, accretive and cash generative prospects
Commenting on the results Shaun Doak, Chief Executive Officer of REACT, said:
"I am pleased to share the strong performance of the REACT, reflecting a
period of significant achievement driven by robust organic growth and enhanced
profitability.
"The first few months of FY25 have delivered results that align with our
expectations for the Group. While we remain mindful of the ongoing
macroeconomic uncertainty in our markets, demand for our essential reactive
and planned services remains strong. To address subdued demand in specific end
markets and rising operating costs, including increases in National Insurance
contributions and the National Living Wage, the Group is taking proactive
steps to mitigate these challenges.
"Our reactive services have proven to be resilient, and our market-leading
businesses, supported by an experienced management team, have a strong track
record of navigating challenging times. Looking ahead, we see significant
opportunities as we focus on integrating the Group, enhancing cross-selling
and upselling efforts, and driving cost efficiencies to strengthen our
position further."
(1)Adjusted EBITDA represents earnings before separately disclosed acquisition
costs, impairment of intangibles, share-based payments & and other
restructuring costs (as well as before interest, tax, depreciation and
amortisation)
The Report and Accounts for the year ended 30 September 2024 will be posted to
shareholders and will be available on the Group's website www.reactsc.co.uk
(https://url.uk.m.mimecastprotect.com/s/lJVKCpyxinPwDxTPfvSGMjrS?domain=reactsc.co.uk)
on 29 January 2025.
For more information:
REACT Group Tel: +44 (0) 1283 550 503
Shaun Doak, Chief Executive Officer
Spencer Dredge, Chief Financial Officer
Mark Braund, Chairman
Singer Capital Markets - Nominated Adviser & Joint Broker Tel: +44 (0) 207 496 3000
Philip Davies / Alex Bond / Oliver Platts
Dowgate Capital - Joint Broker Tel: +44 (0) 20 3903 7715
Nicholas Chambers
IFC Advisory - Financial PR & IR Tel: +44 (0) 20 3934 6630
Graham Herring / Zach Cohen
About Us:
REACT Group plc, the UK's leading support services provider to the facility
management (FM) sector, operates with four divisions: LaddersFree, one of the
largest commercial window cleaning businesses in the UK; Fidelis Contract
Services ("Fidelis"), a contract cleaning and soft facilities maintenance
business; REACT business, which primarily provides a solution to emergency and
specialist cleaning situations, both through long-term framework agreements
and on an ad-hoc basis and recently acquired 24hr Aquaflow Services Ltd, a
commercial drainage and plumbing services business which delivers services to
clients in the south east of England.
Executive Chairman's Statement
For the year ended 30 September 2024
The Board is pleased to report that REACT has delivered growth in the year
under review and continued to deliver material improvements in operational
efficiencies and performance, profit contribution, as well as cash conversion.
The Group's performance is outlined in the reports below by the Chief
Executive and the Chief Financial Officer.
For the year ended 30 September 2024, sales revenue was £20,749,000, up 6.0%
on the strong prior year (2023: £19,582,000). The underlying revenue growth
is 11.0% when normalised against the core contract base, removing one anomaly
that manifested during COVID-19 and continued until the middle of 2024.
Adjusted EBITDA(1) was £2,410,000, up 6.1% on the comparatively strong prior
year, (2023: £2,272,000), and sales revenue was £20,749,000, up 6.0% on the
strong prior year (2023: £19,582,000).
Despite strong macroeconomic headwinds the Group performance represents
like-for-like organic growth of 6.0%, the fifth successive year the Group has
reported solid organic growth. Additionally, the Group has continued to focus
on quality of earnings; 87.0% of revenue is contracted and recurring, with
gross margins improving a further 80-basis points to 27.6% (2023: 26.8%).
The business has consistently demonstrated its resilience and ability to
create value through several years of challenging markets. These include the
impact of COVID-19, the wars in Europe and the Middle East, the 'cost of
living crises' and more recently the uncertainty brought about by the change
of government and the Autumn Budget - all of which have impacted the sectors
within which we operate. Despite these challenges, the Group continues to
achieve growth in market share, drive earnings through operational
efficiencies and cash conversion at scale.
The Group began a period of investment during the year to combine the
portfolio of growing businesses into one unified business, streamlining key
systems and processes thereby promoting its scale as an important consolidator
of specialist and valued support services to the facilities management sector.
A key part of this was a programme to invest in people, processes and systems;
much of the plans involved the development of talent already inside the
business. Talented managers have been promoted to lead on both a divisional
and a functional basis, and the Group has successfully recruited experience
into senior roles in Finance, including the appointment of Spencer Dredge as
Chief Financial Officer.
Amongst these investments was Project 'Sparkle' the development of a unified
digital platform to automate, support and scale the nationwide commercial
window cleaning business and in doing so, enhance the ability to cross-sell
other relevant services bought by the same customers, and potentially
delivered by the same membership resource. At the very least, the Group will
improve operational efficiency and scale with robust systems. Better still,
the Group will establish a platform on which its commercial IP can return
significant value to shareholders. Project Sparkle is in the final stages of
testing before going live. The implementation will be phased to ensure
success, with full roll out expected by March 2025.
To support the operational effectiveness of the business and its growth
ambitions, the Group has successfully moved its banking facilities to one
consolidated relationship with HSBC.
Investment will continue over the course of this current financial year and
into the next, and whilst the Board anticipates that the benefits will be most
evident in future years, it does expect to see some positive effect in the
nearer term.
The Group will continue to drive organic growth and, where relevant, augment
this with selective
accretive and/or strategic M&A activity.
The post-period acquisition of 24hr Aquaflow, announced on 28 October 2024, is
an important example of an earnings enhancing and highly accretive acquisition
aimed at providing high-value services complementary to the facilities
management sector, especially valued at times of crises. Since acquisition,
integration into the Group has progressed well, and the business has been
strong and it is expected to make a material contribution to Group profits
going forward.
With markets challenged, there is an opportunity to be a leading consolidator,
providing a great home for quality 'bolt-on' businesses that share the Group's
core values. The Group has a healthy pipeline of early-stage opportunities to
evaluate, alongside the Group's strict criteria with an emphasis on being
earnings enhancing, accretive and cash generative.
The strategy for growth remains clear; the Group will continue to build a
leading position across its business through organic growth, margin
enhancement, improvements in operational efficiency and, if quality
opportunities present themselves, through strategic M&A.
(1)Adjusted EBITDA represents earnings before separately disclosed
acquisition, impairment of intangibles, share-based payments and other
restructuring costs (as well as before interest, tax, depreciation and
amortisation). This is a non-IFRS measure.
Mark Braund
Chair
29 January 2025
Chief Executive Officer's Report and Strategic Review
REACT has delivered a strong performance for the year ended 30 September 2024.
For the year ended 30 September 2024, Adjusted EBITDA(1) was £2,410,000, up
6.1% on the comparatively strong prior year, (2023: £2,272,000), and sales
revenue was £20,749,000, up 6.0% on the strong prior year (2023:
£19,582,000).
The Group achieved 6.0% organic sales revenue growth and 6.1% Adjusted EBITDA
growth despite the well documented macroeconomic headwinds and a sector
challenged by supply chain disruptions, inflation, and increases to both the
Minimum, and National Living Wage.
The underlying organic sales growth in our core business was more impressive
at 11.0%. This figure excludes a specific contract in the rail sector secured
during the COVID-19 period, which has since been modified and downgraded, no
longer requiring the Group's specialist capabilities.
The business faced further challenges from some customers struggling in their
end-markets and seeking cost reductions. We supported these customers by
temporarily agreeing to reduce cleaning frequencies of some less critical
cleaning services which impacted revenue and gross margin contribution.
Despite these headwinds, the Group continued to prosper achieving organic
growth across each of its key performance indicators including revenue, gross
margins, adjusted EBITDA and cash conversion. Consequently, REACT continued to
gain market share during the year.
All three of the Group's divisions performed well, collectively achieving
organic growth and improving the overall margin by 80-basis points to 27.6%
(2023: 26.8%), reflecting the value of our proposition and improved business
mix.
Growth is driven by strong customer relationships underpinned by an
exceptional customer experience. This has enabled the Group to retain
customers and grow through effective cross-selling and upselling alongside a
steady stream of new customer wins. Evidence of this is underpinned by
multiple contract awards, many of which are small and medium sized, however
material contract wins announced during the year include:
· Renewal and expansion of contracted maintenance, cleaning and hygiene services
within the education sector for a major university, valued at approximately
£3.8m over three years. This represents a near doubling in value of the
original contract awarded three years ago.
· Renewal and expansion of a facilities management ('FM') soft services
agreement with an NHS trust in the Midlands. This agreement has a minimum
three-year term with an option to extend to five years and is valued at
approximately £0.79m, over three years.
· Extension for a further two years of the Core Vendor agreement. This agreement
was established three years ago with the UK operation of one of the world's
largest FM companies.
· Upsell into an incremental new contract with a large FM customer, where the
Group provides emergency specialist services to a large public sector ministry
spending approximately £0.5m per year.
These contract wins demonstrate REACT's continued success in securing new
business and expanding its service offerings.
(1)Adjusted EBITDA represents earnings before separately disclosed
acquisition, impairment of intangibles, share-based payments and other
restructuring costs (as well as before interest, tax, depreciation and
amortisation). This is a non-IFRS measure.
Strategy
REACT has enhanced its range of services with the post-period acquisition of
24hr Aquaflow strengthening regional coverage of soft FM services and
nationwide specialist cleaning & window cleaning. The Group is positioning
itself strongly as both a consolidator and the go-to provider of specialist
support services to the facilities management sector.
These services are in high demand where confidence in the quality, frequency
and speed of response is often critical to customers. It builds upon the
Group's focus on high-value, high-margin services and continues the focus on
strong predictable revenues that come from contracted and recurring income
streams.
The Group remains committed to being a 'customer experience driven-growth
business', by retaining and growing customers as it delivers services that
meet and exceed expectations.
As highlighted in the Chairman's statement, the Board sees significant
opportunity for the recently developed digital platform to enable the Group to
scale its nationwide commercial window cleaning business. This platform will
also permit the business to sell other relevant services to the same
customers, improve operational efficiency, and create a scalable model that
enhances enterprise value.
Simultaneously, the Company will continue to invest further in sales and
marketing to unlock the huge potential of its target market. By leveraging the
right tools and strategies, it will increase the opportunity to engage with
prospective clients and drive market expansion.
Key Performance Indicators (KPIs)
The Group prioritises key performance indicators (KPIs) to ensure value
creation and ensure comprehensive visibility into operational performance at
all levels. These well-defined KPIs align employee behaviour with strategic
objectives and facilitate effective performance monitoring.
The Group's core service offerings encompass three key areas:
1. Planned Services: delivering scheduled cleaning and maintenance services
across diverse sectors, including healthcare, education, retail, industrial,
and some public transport.
2. Emergency Response: providing 24/7/365 on-call services to address urgent
client needs through formal contracts and framework agreements.
3. Project Services: addressing one-off situations outside of standard contracts.
On behalf of the Board, I extend a sincere 'thank you' to our customers and
stakeholders for their valuable contributions throughout the year. Your open
communication and collaborative spirit have been instrumental in enabling us
to effectively address our customers' challenges and deliver compelling
solutions.
I also express my deepest appreciation to our dedicated colleagues across the
Group. Their unwavering commitment, tireless efforts, and resilience are the
foundation of our success. I am confident that by continuing to work together,
we will achieve even greater heights in the years to come.
Outlook
Despite the anticipated slow down across the festive period, the first few
months of FY25 have delivered trading performance which is in-line with
management expectations for the Group.
The Board is mindful of the macroeconomic uncertainty in the markets in which
the Group operates. It anticipates continued strong demand for the Group's
essential reactive and planned services, but the Board retain a more cautious
view on the prospects for project and other discretionary work. The Group is
focused on taking appropriate actions to mitigate subdued demand in certain
end markets and increased operating costs due to the increase in National
Insurance contributions and the National Living Wage.
The Group's reactive services are naturally resilient, whilst its
market-leading businesses and experienced management team have successfully
navigated previous periods of challenge. There remains considerable
opportunity ahead, as management integrate the Group, develop cross selling
and upselling initiatives and drive cost efficiencies.
Shaun D Doak
Chief Executive Officer
29 January 2025
Chief Financial Officer's Report
Revenue and profitability
It is pleasing to report another set of solid results for REACT, in a year
where we have reported record first half year performance, and a second half
of the year where we have had a change of UK government and a resulting
Budget, both of which has undoubtedly contributed to a slowing down of UK
economic activity and output.
Revenue for the year ended 30 September 2024 was £20,749,000, up 6.0% on the
prior year (2023: £19,582,000). Revenue performance was negatively impacted
with the loss of a material client commitment in the second half of the year
for a client in the rail sector. Revenue generated from this contract during
the year was £1,224,158 (2023: £2,022,867).
This revenue performance generated a gross profit contribution of £5,725,000,
up 9.0% on the prior year (2023: £5,239,000) with a gross margin of 27.6%
(2023: 26.7%).
Group overheads of £5,438,000 (2023; £4,988,000) increased 9.0% during the
year. The increase in overheads during the year of £450,000 was primarily due
to additional employee expenses of £310,000, resulting from investments made
in management, sales and operational employee hires of £250,000 and more
generally higher employment costs, resulting from cost of living inflationary
pressures of £60,000. The remaining cost increases are largely attributed to
restructuring the Groups banking arrangements, the share consolidation and
capital restructure and costs associated with finalising prior year
acquisition arrangements.
The solid trading performance has resulted in an Adjusted EBITDA of
£2,410,000, up 6.0% on the prior year (2023: £2,272,000). Adjusted EBITDA is
a non-IFRS measure, calculated by taking operating profit before interest,
tax, depreciation and amortisation and excludes separately disclosed
acquisition and other costs along with share-based payments. The directors
believe that Adjusted EBITDA and adjusted measures of earnings per share
provide shareholders with a meaningful representation of the underlying
earnings arising from the Group's core business.
Reconciliation of Profit before Interest and Tax to Adjusted EBITDA
2024 2023
£'000 £'000
Profit before Interest and Tax 287 251
Depreciation & Amortisation 1,781 1,809
EBITDA 2,138 2,060
Acquisition costs/restructuring costs 253 131
Share based payments 89 81
342 212
Adjusted EBITDA 2,410 2,272
Adjusted EBITDA 2,410 2,272
Weighted average shares in issue 23,593,858 23,267,417
Adjusted EBITDA earnings per share 11.18p 10.75p
Earnings per share
The basic profit per share from continuing operations was 0.08p (2023:0.24p).
The adjusted EBITDA per share which excludes interest, tax, depreciation and
amortisation along with exceptional items and share-based payments was 11.18p
(2023:10.75p).
Intangible assets and goodwill
The Group has intangible assets of £7,840,000 (2023: £9,483,000) comprising
of Goodwill £5,446,000 (2023: £5,446,000) and intangible assets £2,394,000
(2023: £4,037,000). Goodwill has been tested for impairment and management
believe the current carrying value of goodwill is supported by the current
financial projections, there was no impairment charge in the prior year. An
amortisation charge of £1,643,000 (2023: £1,643,000) was recorded against
intangible assets; these intangible assets acquired through business
combinations are amortised over four years, the balance as at 30 September
2024 will be fully amortised in less than 18 months.
Cash flow
Cash and cash equivalents as at 30 September 2024 were £1,778,000 (2023:
£1,640,000) and increased in the year by £138,000 (2023: £661,000) as a
result of cash generated from operating activities in the year, offset by
outflows from financing activities and investment activities. Cash and cash
equivalents at 30 September 2024 were fully held at bank whereas the prior
year £2,120,000 was held at bank with drawings from the invoice discount
facility of £480,000.
Operating cash inflows in the year of £2,788,000 (2023: £2,444,000) resulted
from trading, favourable movement in working capital of £640,000 (2023:
£527,000) off-set by depreciation and amortisation charges £1,781,000 (2023:
£1,809,000) and after paying corporate taxes of £9,000 (2023: £226,000).
The net cash outflow from financing activities of £233,000 (2023: £360,000)
resulted from the repayment of the term loan of £138,000 (2023: £181,000)
and interest payments of £113,000 (2023: £203,000) offset by cash generated
from a new share issue of £60,000 following an exercise of employee share
warrants (2023: £24,000).
Cash outflows from investing activities of £2,417,000 (2023: £1,423,000)
mainly resulted from deferred consideration payments made in the year of
£2,007,000 (2023: £1,309,000) and investments made in fixed assets during
the year of £410,000 (2023: £119,000). Deferred consideration payments made
during the year were against acquisitions made in previous years, Fidelis of
£175,000 and LaddersFree for £1,832,000.
Based on current financial projections, the Group has sufficient available
cash resources to support its current plans.
Taxation
The Group has reported a small profit in the year which is after a recording a
tax charge of £138,000 (2023: credit of £2,000). At the balance sheet date,
the Group has a deferred tax asset of £58,000 (2023: £123,000), and deferred
tax liability of £576,000 (2023: £908,0000) mainly as a result of tax
associated with the intangible asset recognised on acquisitions of £562,000
(2023: £908,0000). Available historical losses and management fees available
to the Group for tax purposes, that can be off-set against future taxable
profits are approximately £200,000 (2023: £500,000).
Statement of financial position
The Group's balance sheet has strengthened with net assets at the year-end of
£8,662,000 (2023: £8,495,000).
The loan was drawn down in May 2022, therefore the loan has 2.75 years of the
five-year term to run under the current loan arrangements.
Share consolidation & capital reduction
The share consolidation and capital reduction were approved by shareholders at
the annual general meeting of the Company held on 28 March 2024.
The 50:1 share consolidation became effective in the second half of the year
on the 2 April 2024, effecting both the capital structure and all employee
share options. For the purposes of calculating the earnings per share, these
accounts and the comparative period have been prepared on the basis that the
share consolidation was effective for all reporting periods.
Following the Court hearing on 30 April 2024, the Company has affected a
capital reduction by effectively cancelling both the Share Premium account of
£10,909,617 and Capital Redemption Reserve account of £3,336,916 and
creating a distributable reserve equal to the balance of both.
Post balance sheet events
Following the year end, the Group has acquired 100% of the issued share
capital of 24hr Aquaflow Services Limited, a successful commercial drainage
and plumbing business headquartered in Essex providing services to customers
based in London and the South East of England. The acquisition is expected to
be immediately earnings enhancing, and along with broadening the Group's
service offering as well as enlarging the Groups client base, we anticipate
the combination will further enable cross selling of wider group services.
The acquisition brings with it an impressive management capability, the
directors of 24hr Aquaflow joining the senior management team for the REACT
and committing to continue in their existing roles for the coming years. The
most recent set of accounts to 30 April 2024 for 24hr Aquaflow reported
revenues of £6,086,000, gross profit of £3,380,000 representing a gross
margin of 56% delivering an adjusted EBITDA of £1,169,000. The business has
experienced impressive growth with annual revenue growth of 29.0% and we look
forward to continuing this growth story within the REACT group of businesses.
24hr Aquaflow was acquired for an initial consideration of £4,977,667,
payable as £4,000,000 cash and £500,000 through the issue of new ordinary
shares and equity consideration and deferred consideration of £476,667. A
further £2,383,333 of contingent consideration is payable subject to 24hr
Aquaflow meeting certain performance conditions over a two year earn out
period. The acquisition has a total capped consideration of £7,360,000 should
the performance conditions be fully met.
To fund the business combination, the Group has entered into a new loan
arrangement with HSBC, which has a coupon of 3.0% above the bank of England
base rate, repayable over a four-year period. As a result of this new loan
arrangement the Group now has two separate term loans from HSBC. The new loan
arrangement is subject to three banking covenants as follows; debt service,
net debt to EBITDA and EBITDA interest cover.
Spencer Dredge
Chief Financial Officer
29 January 2025
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2024
Note 2024 2023
£'000 £'000
Continuing Operations
Revenue 2 20,749 19,582
Cost of sales (15,024) (14,343)
Gross profit 5,725 5,239
Administrative expenses (5,438) (4,988)
Adjusted EBITDA* 2,410 2,272
Depreciation (138) (166)
Amortisation (1,643) (1,643)
Exceptional items (253) (131)
Share-based payments (89) (81)
Operating profit 287 251
Finance charge (131) (203)
Taxation 3 (138) 2
Profit for the year 18 50
Other comprehensive Income - -
Total comprehensive profit for the year attributable to the equity holders of 18 50
the company
Basic and diluted earnings per share - pence 4
Basic profit per share 0.08p 0.24p
Diluted profit per share 0.08p 0.21p
Consolidated Statement of Financial Position
As at 30 September
2024
2024 2023
ASSETS £'000 £'000
Non-current assets
Intangible assets - Goodwill 5,446 5,446
Intangible assets - Other 2,394 4,037
Property, plant & equipment 427 172
Right-of-use assets 95 78
Deferred tax asset 58 123
8,420 9,856
Current assets
Stock 3 7
Trade and other receivables 3,720 4,425
Cash and cash equivalents 1,778 2,120
5,501 6,552
TOTAL ASSETS 13,921 16,408
EQUITY
Shareholders' Equity
Called-up equity share capital 2,694 2,644
Share premium account 10 10,910
Reverse acquisition reserve (5,726) (5,726)
Capital redemption reserve - 3,337
Merger relief reserve 1,328 1,328
Share-based payments 214 125
Accumulated surplus/(deficit) 10,142 (4,123)
Total Equity 8,662 8,495
LIABILITIES
Current liabilities
Trade and other payables 3,240 3,601
Loans and other borrowings 235 641
Lease liabilities within one year 48 40
Deferred consideration - 1,758
Corporation tax 659 262
4,182 6,302
Non-current liabilities
Loans and other borrowings 452 665
Lease liabilities after one year 49 38
Deferred tax liability 576 908
1,077 1,611
TOTAL LIABILITIES 5,259 7,913
TOTAL EQUITY AND LIABILITIES 13,921 16,408
Consolidated Statement of Changes in Equity
For the year ended 30 September 2024
Share capital Share Merger Relief Reserve Capital Redemption Reserve Reverse Acquisition Reserve Share-Based Payments Accumulated Surplus / (deficit) Total
Premium Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 October 2022 2,624 10,905 1,328 3,337 (5,726) 44 (4,173) 8,339
Issue of shares 20 5 - - - - - 25
Share-based payments - - - - - 81 - 81
Profit for the year - - - - - - 50 50
At 30 September 2023 2,644 10,910 1,328 3,337 (5,726) 125 (4,123) 8,495
Issue of shares 50 10 - - - - - 60
Share-based payments - - - 89 - 89
Capital reduction - (10,910) - (3,337) - - 14,247 -
Profit for the year - - - - 18 18
At 30 September 2024 2,694 10 1,328 - (5,726) 214 10,142 8,662
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the amount subscribed for shares in excess of the
nominal value, net of any directly attributable issue costs.
Merger relief reserve arises from the 100% acquisition of REACT SC Holdings
Limited and REACT Specialist Cleaning Limited in August 2015 whereby the
excess of the fair value of the issued ordinary share capital issued over the
nominal value of these shares is transferred to this reserve in accordance
with section 612 of the Companies Act 2006.
Accumulated surplus/(deficit) represents the cumulative profits/(losses) of
the Group attributable to the owners of the company.
Reverse acquisition reserve is the effect on equity of the reverse acquisition
of REACT Specialist Cleaning Limited.
The capital redemption reserve represents the value of deferred shares
cancelled as a result of a share buyback.
The share-based payments reserve represents the cumulative expense in relation
to the fair value of share options and warrants granted.
Following the Court hearing on the 30 April 2024, the Company affected a
capital reduction by effectively cancelling both the share premium account of
£10,909,617 and capital redemption reserve account of £3,336,916, enabling a
distributable reserve equal to the balance of both.
Consolidated Statement of Cash Flows
For the year ended 30 September 2024
2024 2023
£'000 £'000
Cash flows from operating activities
Cash generated by operations 2,788 2,444
Net cash inflow from operating activities 2,788 2,444
Cash flows from financing activities
Proceeds of share issue 60 24
Lease liability payments (42) -
Bank loans (138) (181)
Interest paid (113) (203)
Net cash outflow from financing activities (233) (360)
Cash flows from investing activities
Disposal of fixed assets - 5
Capital expenditure (410) (119)
Acquisition of subsidiary (2,007) (1,309)
Net cash outflow from investing activities (2,417) (1,423)
Increase in cash, cash equivalents and overdrafts 138 661
Cash, cash equivalents and overdrafts at beginning of year 1,640 979
Cash, cash equivalents and overdrafts at end of year 1,778 1,640
Notes to the Consolidated Statement of Cash Flows
For the year ended 30 September 2024
Reconciliation of profit for the year to cash inflow from operations
2024 2023
£'000 £'000
Profit after taxation 18 50
Decrease in stocks 4 4
Decrease/(Increase) in trade and other receivables 741 (50)
(Decrease)/Increase in trade and other payables (105) 573
Depreciation and amortisation charges 1,781 1,809
Finance cost 131 203
Tax charge/(credit) 138 (2)
Loss/(profit) on disposal of fixed assets - 2
Share based payment 89 81
Tax paid (9) (226)
Net cash inflow from operations 2,788 2,444
Cash and cash equivalents and overdrafts
2024 2023
£'000 £'000
Cash at bank and in hand 1,778 2,120
Invoice Discounting - (480)
1,778 1,640
1. General Information
Basis of preparation of financial statements
While the financial information included in this annual financial results
announcement has been prepared in accordance with the recognition and
measurement principles of International Accounting Standards in conformity of
the requirements of the Companies Act 2008, this announcement does not contain
sufficient information to comply therewith.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2024 or 2023 but is
derived from those accounts. Statutory accounts for the year ended 30
September 2023 have been delivered to the Registrar of Companies and those for
the year ended 30 September 2024 will be delivered following the Company's
annual general meeting.
The auditors have reported on those accounts; their reports were unqualified
and did not include references to any matters to which the auditors drew
attention by way of emphasis without qualifying their reports.
Their reports for the year end 30 September 2024 and 30 September 2023 did not
contain statements under s498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements are drawn up in sterling. The functional
currency of REACT Group plc.
The level of rounding for the financial statements is the nearest thousand
pounds.
2. Segmental Reporting
In the opinion of the Directors, the Group has one class of business, with the
following specialisms, in specialist cleaning, decontamination and hygiene
sector, contracted commercial cleaning, commercial window cleaning and
specialist emergency decontamination work. Although the Group operates in only
one geographic segment, which is the UK, it has also analysed the sources of
its business into the segments of Contract Maintenance, Contract Reactive or
Ad Hoc work.
2024
Contract Maintenance Contract Reactive Ad Hoc Plc/Holdings Ltd Total
£000 £000 £000 £000 £000
Revenue 15,450 2,629 2,670 - 20,749
Cost of sales (10,297) (1,899) (1,818) - (14,014)
Direct costs (699) (156) (155) - (1,010)
Gross profit 4,454 574 697 - 5,725
Administrative Expenses (1,994) (330) (409) (2,705) (5,438)
Operating Profit/(loss) for the year 2,460 244 288 (2,705) 287
Adjusted EBITDA 2,575 278 322 (765) 2,410
Total Assets 4,079 441 661 8,740 13,921
Total Liabilities (3,061) (286) (450) (1,462) (5,259)
2023
Contract Maintenance Contract Reactive Ad Hoc Plc/Holdings Ltd Total
£000 £000 £000 £000 £000
Revenue 14,321 2,751 2,510 - 19,582
Cost of sales (9,927) (1,805) (1,674) (13,406)
Direct costs (548) (194) (195) - (937)
Gross profit 3,846 752 641 - 5,239
Administrative Expenses (1,655) (464) (453) (2,417) (4,988)
Operating Profit/(loss) for the year 2,191 288 188 (2,417) 251
Adjusted EBITDA 2,286 315 224 (553) 2,272
Total Assets 4,827 1,088 1,014 9,479 16,408
Total Liabilities (2,764) (685) (609) (3,855) (7,913)
3. Taxation
2024 2023
£'000 £'000
Current tax (507) (261)
Adjustment: prior periods 102 53
(405) (208)
Deferred tax 267 210
Tax (charge)/credit (138) 2
Analysis of tax expense:
2024 2023
£'000 £'000
Profit on ordinary activities before income tax 156 48
39 11
Profit on ordinary activities multiplied by the standard rate of corporation
tax in UK of 25% (2023: 22.01%)
Effects of:
Expenses not deductible for tax 130 62
Adjustments relating to previous periods (28) (53)
Other timing differences (3) (22)
Corporation tax charge/(credit) 138 (2)
The Group has estimated excess management expenses carried forward of
approximately £200,000 (2023: £500,000). The tax losses have resulted in a
deferred tax asset of approximately £58,000 (2023: £123,000) which has been
recognised this year as the positive trading outlook for the Group means that
there is likely to be sufficient future taxable profits to utilise the
remaining losses.
4. Earnings per Share (basic and adjusted)
The calculations of earnings per share (basic and adjusted) are based on the
net profit and adjusted EBITDA per share (before; interest, tax, depreciation,
amortisation of acquired intangible assets, exceptional items and share-based
payments). Earnings per share calculation is based on the new capital
structure resulting from the 50:1 share consolidation which is effect from 30
April 2024. The comparative periods earnings per share have been calculated
on the same basis.
For diluted earnings per share, the weighted average number of shares is
adjusted to assume conversion of all dilutive potential ordinary shares.
2024 2023
£'000 £'000
Profit/Loss for the financial period 18 50
Finance 131 203
cost
Taxation 138 (2)
Operating profit 287 251
Adjustments:
Depreciation 138 166
Amortisation 1,643 1,643
Exceptional items 253 131
Share based payments 89 81
Adjusted EBITDA 2,410 2,272
Number Number
Weighted average shares in issue for basic earnings per share 21,551,761 21,130,245
Weighted average dilutive share options and warrants 2,042,097 2,137,172
Average number of shares used for dilutive earnings per share 23,593,858 23,267,417
pence pence
Basic profit/(loss) per share 0.08p 0.24p
Diluted profit/(loss) per share 0.08p 0.21p
Adjusted EBITDA earnings per share 11.18p 10.75p
Adjusted diluted EBITDA earnings per share 10.22p 9.76p
5. Post Balance sheet event
On 25 October 2024, the Group acquired 100% of the issued share capital and
voting rights of 24hr Aquaflow Services Limited, a commercial drainage and
plumbing business headquartered in Essex providing services to customers based
in London and the South East of England.
Aquaflow was acquired for an initial consideration of £4,976,667, payable as
£4,000,000 cash and £500,000 through the issue of new ordinary shares and
equity consideration and deferred consideration of £476,667. A further
£2,383,333 of contingent consideration is payable subject to Aquaflow meeting
certain performance conditions over a two year earn out period. The
acquisition has a total capped consideration of £7,360,000 should the
performance conditions be fully met.
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