REG - React Group PLC - Half-year Report
29/06/2023 07:00
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RNS Number : 3042E React Group PLC 29 June 2023
29 June 2023
REACT Group plc
("REACT", the "Group" or the "Company")
Half Year Results FY 2023
REACT Group plc (AIM:REAT.L), the leading specialist cleaning, hygiene and
decontamination company announces its unaudited results for the six-month
period ended 31 March 2023.
Financial Summary
HY 2023 HY 2022
Revenue (£'000) 9,320 5,125
Gross profit (£'000) 2,484 1,156
Gross profit margin 26.7% 22.6%
Adjusted EBITDA (£'000)* 927 162
Adjusted profit before amortisation of acquired intangible assets and 773 88
exceptional items (£'000)*
Net loss for the period (£'000) (86) (92)
Adjusted earnings per share (basic) (pence) 0.07 0.02
Adjusted earnings per share (diluted) (pence) 0.07 0.01
Net debt (excluding lease liabilities) (£'000) 257 43
*These measures are explained and reconciled in the Alternative Performance
Measures section in Note 5 below.
Highlights (including post period highlights):
· Revenue increased by 82% to £9,320k (2022: £5,125k)
· Adjusted EBITDA up materially to £927k (2022: £162k)
· Gross margins up at 27% from 23% in H1 2022
· £800k multi-year contract win to provide services, through a
coordinated programme from all three segments of the business to a large
fast-service restaurant chain across c. 350 sites in the UK
· £500k 18-month contract with a sizeable Midlands-based school
alongside numerous contract renewals which include another school worth around
£540k over three years and an annual contract with an NHS Trust worth almost
£200k
· Improved mix of recurring revenue as well as higher margins provides
the business with greater visibility and a more dependable revenue stream
Commenting on the results Shaun Doak, Chief Executive Officer of REACT, said:
"We are delighted to report a strong trading performance for the business with
revenue and profit at record levels. All three divisions have traded well in
the period and this momentum has continued into the second half.
"The Group has benefitted from notable customer wins including an £800k
contract to provide services, through a coordinated programme from all three
segments of the business to a large fast-service food chain across all its
sites in the UK. This major contract win illustrates how strategic
acquisitions provide significant cross-selling opportunities for the Group
once successfully integrated.
"The enhanced mix of recurring revenue and increased margins provides the
business with greater visibility and a more dependable revenue stream. This
combined with the strength of our pipeline for the remainder of the year
provides the Board with cautious optimism and reinforces its confidence in
achieving full-year results in line with market expectations.
"On behalf of the Board, I would once again like to thank all my colleagues
for their ongoing support, commitment, tenacity and quality of work."
For more information:
REACT Group Plc
Shaun Doak, Chief Executive Officer Tel: +44 (0) 1283 550 503
Andrea Pankhurst, Chief Financial Officer
Mark Braund, Chairman
Singer Capital Markets
(Nominated Adviser / Broker)
Phil Davies / James Moat (Corporate Finance) Tel: +44 (0) 207 496 3000
IFC Advisory
(Financial PR / IR)
Graham Herring / Zach Cohen Tel: +44 (0) 20 3934 6630
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"). Upon the
publication of this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public domain.
RESULTS SUMMARY & STRATEGY
Strategy
The REACT business performed strongly during the six months to 31 March 2023,
trading in the period has been robust and the positive contract win momentum
has continued with good sales growth across all three divisions of the
business.
The Group achieved record revenue and profit growth during the six-month
period. The combination of growing recurring revenue as well as higher margins
provides the business with greater visibility and a more dependable revenue
stream. Recurring revenue is key to our strategy and the contract maintenance
segment of the business typically allows customers to purchase our services
over a contracted period of several years. Within these contracts, price
increases are implemented at certain points to mitigate wage-inflation
pressures. The Group has benefitted from its ability to cross sell other
business services into existing and new customers. Evidence of this is the
recent contract win, with an estimated value of £800k in the current
financial year, to provide services, through a coordinated programme from all
three segments of the business to a large fast-service food restaurant across
all its sites in the UK. This positive contract win momentum has continued,
with good sales growth in all three divisions of the business across the
six-month period.
In May last year, the Group acquired LaddersFree, one of the largest
commercial window cleaning businesses in the UK. The business has been
integrated well and its revenues have grown by over 25% in its first year as
part of the Group. This has been achieved despite the gloom on the UK high
street resulting in customer site closures and economic pressures over the
last year. The Board is looking to scale the business whilst professionalising
its operating systems. LaddersFree continues to be awarded contracts to
provide services for retailers, restaurants, hotels and car dealerships
amongst others. The division continues to attract higher margin contracts
helping to deliver a considerable contribution to Group profits.
It has now been over two years (March 2021) since the Group acquired Fidelis
Contract Services ("Fidelis"), a contract cleaning and facilities maintenance
business. Fidelis had a slightly slower start to H1, this then improved
greatly reporting record revenues over the latter stages of the six-month
period. Fidelis has been awarded a £500k 18-month contract with a sizeable
Midlands-based school and alongside this, numerous contract renewals which
include another school worth around £540k over three years and an annual
contract with an NHS Trust worth almost £200k.
The Fidelis business is now generating twice as much revenue as it was in the
12-months prior to acquisition, demonstrating not only its strategic value to
the Group but also the manner in which the Company has been able to integrate
and grow the business, adding a more scalable management team and more
sophisticated systems to support its continuing growth ambitions.
The 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, has had a buoyant period of business as its bespoke
services remain in demand. Margins remain a focus of this division as these
continue to rise as a result of a changing mix of business.
People
The Group performs bespoke training and development projects and, as a
consequence, has been able to develop the roles of a number of important
personnel and promote internally. As an aspiring expanding Group, it continues
to take efforts to invest in its people to promote greater performance and job
satisfaction of all employees.
Due to the nature of REACT's service delivery department, this is undertaken
by people who are considered experts in their field, supported by a dedicated
customer-centric team, who have now fully adapted to working conditions since
all COVID restrictions have been lifted. The strong financials reported in H1
are bolstered by the efforts of the entire team and each individual has played
a crucial role in our collective achievements.
I would like to take this opportunity to extend our gratitude and appreciation
to our esteemed colleagues for their unwavering dedication and hard work. It
is through their collective efforts and commitment that we have achieved our
targets during this period and reached new heights.
Outlook
Trading in the second half of the year has continued well building on the
momentum of the first half. The enhanced mix of recurring revenue and
increased margins provides the business with greater visibility and a more
dependable revenue stream. This combined with the strength of our pipeline for
the remainder of the year provides the Board with cautious optimism and
reinforces its confidence in achieving full-year results in line with market
expectations.
Shaun Doak
Chief Executive Officer
29 June 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2023
Unaudited Unaudited Audited
6 months ended 31 March 2023 6 months ended 31 March 2022 Year ended
30 September 2022
Note £'000 £'000 £'000
Continuing Operations
Revenue 9,320 5,125 13,671
Cost of Sales (6,836) (3,969) (10,414)
Gross Profit 2,484 1,156 3,257
Administrative expenses (2,499) (1,241) (3,768)
Adjusted operating profit before amortisation of acquired intangible assets 844 91 775
and exceptional items
Amortisation of acquired intangible assets (821) (147) (743)
Exceptional costs (38) (29) (543)
Operating loss (15) (85) (511)
Finance cost (71) (3) (56)
Corporation tax charge - (4) (134)
Loss for the period (86) (92) (701)
Other comprehensive Income - - -
Loss for the financial period attributable to equity holders of the company (86) (92) (701)
Basic and diluted profit per share 4
Basic loss per share (0.01)p (0.02)p (0.09)p
Diluted loss per share (0.01)p (0.02)p (0.09)p
Adjusted basic earnings per share 0.07p 0.02p 0.08p
Adjusted diluted earnings per share 0.07p 0.01p 0.07p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2023
Unaudited Unaudited Audited
As at 31 As at 31 March 2022 As at 30
March September 2022
2023
Assets Note £'000 £'000 £'000
Non-current assets
Intangibles - Goodwill 4,209 1,854 4,209
Intangibles - Other 4,859 881 5,680
Property, plant and equipment 185 168 203
Right-of-use assets 73 68 100
Deferred tax asset 244 240 244
9,570 3,211 10,436
Current assets
Stock 11 10 11
Trade and other receivables 4,301 2,305 4,254
Cash and cash equivalents 650 (43) 979
4,962 2,272 5,244
Total assets 14,532 5,483 15,680
Equity
Shareholders' Equity
Called-up equity share capital 2,644 1,270 2,624
Share premium account 10,910 6,028 10,905
Reverse acquisition reserve (5,726) (5,726) (5,726)
Capital redemption reserve 3,337 3,337 3,337
Merger relief reserve 1,328 1,328 1,328
Share based payments 68 33 44
Accumulated losses (4,259) (3,564) (4,173)
Total Equity 8,302 2,706 8,339
Liabilities
Current liabilities
Trade and other payables 4,176 2,309 4,230
Loans and other borrowings 161 - 161
Lease liabilities within one year 50 46 57
Corporation tax 195 - 271
4,582 2,355 4,719
Non-current liabilities
Loans and other borrowings 746 - 808
Lease liabilities after one year 34 30 53
Other creditors 868 392 1,761
1,648 422 2,622
Total liabilities 6,230 2,777 7,341
Total Liabilities and Equity 14,532 5,483 15,680
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 March 2023
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 March 2023 31 March 2022 ended
30 September 2022
£'000 £'000 £'000
Net cash inflow/(outflow) from operations 829 7 (773)
Cash flows from financing activities
Proceeds of share issue 25 - 6,500
Expenses of share issue - - (269)
Lease liability payments (37) (27) (80)
Bank Loans (62) (50) 902
Interest paid (71) - (56)
Net cash (outflow)/inflow from financing (145) (77) 6,997
activities
Net cash from investing activities - - 20
Disposal of fixed assets
Capital expenditure (37) (64) (115)
Acquisition of subsidiary (938) (525) (7,776)
Exceptional costs paid (38) (17) (543)
Net cash outflow from investing activities (1,013) (606) (8,414)
Net decrease in cash, cash (329) (676) (2,190)
equivalents and overdrafts
Cash, cash equivalents and overdrafts at 979 633 633
beginning of period
Cash on acquisition of subsidiaries - - 2,536
Cash, cash equivalents and overdrafts at end of period 650 (43) 979
Analysis of cash, cash equivalents and overdrafts:
Cash at bank and in hand 1,379 214 1,529
Overdrafts (729) (257) (550)
650 (43) 979
Reconciliation of profit for the period to cash outflow from operations
Unaudited Unaudited Audited
6 months 6 months ended Year
ended 31 March 2022 ended
31 March 30 September 2022
2023
£'000 £'000 £'000
Loss for the period (86) (92) (701)
Decrease/(increase) in stocks - 2 1
(Increase)/decrease in receivables (47) (206) (2,155)
Increase in payables 1 38 374
Depreciation and amortisation charges 904 219 921
Impairment charge - - 567
Finance costs 71 3 56
Tax charge/(credit) - 4 134
Acquisition assets acquired (excluding cash) - - 119
Exceptional acquisition costs 38 29 (24)
Profit on disposal of fixed assets - - (6)
Share based payment 24 10 21
Tax paid (76) - (80)
Net cash inflow from operations 829 7 (773)
Consolidated Statement of Changes in Equity
For the six months ended 31 March 2023
Share Capital Share Merger Relief Capital Reverse Share Based Payments Accumulated Deficit Total Equity
Premium Reserve Redemption Acquisition Reserve
Reserve Reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 September 2021 1,270 6,028 1,328 3,337 (5,726) 23 (3,472) 2,788
Share based payments - - - - - 10 - 10
Loss for the period - - - - - - (92) (92)
At 31 March 2022 1,270 6,028 1,328 3,337 (5,726) 33 (3,564) 2,706
Issue of shares 1,354 4,877 - - - - - 6,231
Share based payments - - - - - 11 - 11
Loss for the period - - - - - - (609) (609)
At 30 September 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 - - - - - 24 - 24
Loss for the period - - - - - - (86) (86)
At 31 March 2023 2,644 10,910 1,328 3,337 (5,726) 68 (4,259) 8,302
Notes to the interim financial statements
1. Basis of preparation
These consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as
adopted by the European Union and on a historical basis, using the accounting
policies which are consistent with those set out in the Group's annual report
and accounts for the year ended 30 September 2022. The interim financial
information for the six months ended 31 March 2023, which complies with IAS 34
'Interim Financial Reporting' were approved by the Board of Directors on 29
June 2023.
The unaudited interim financial information for the six months ended 31 March
2023 does not constitute statutory accounts within the meaning of Section 435
of the Companies Act 2006. The comparative figures for the year ended 30
September 2022 are extracted from the statutory financial statements which
have been filed with the Registrar of Companies and contain an unqualified
audit report and did not contain statements under Section 498 to 502 of the
Companies Act 2006.
2. Principal Accounting Policies
The principal accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 September 2022.
3. Segmental Reporting
In the opinion of the Directors, the Group has one class of business, being
that of specialist cleaning and decontamination services. 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.
Unaudited 6 months ended Unaudited 6 months ended
31 March 2023 31 March 2022
Contract Contract Ad Hoc Total Contract Contract Ad Hoc Total
Maintenance Reactive Work Maintenance Reactive Work
Work Work Work Work
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 6,807 1,181 1,332 9,320 3,268 933 924 5,125
Gross profit 1,883 296 305 2,484 520 281 355 1,156
Profit before 689 36 48 773 38 20 26 84
amortisation and
exceptional items
Total Assets 13,213 450 869 14,532 2,466 1,334 1,683 5,483
Total Liabilities (5,665) (193) (372) (6,230) (1,249) (675) (853) (2,777)
4. Earnings per Share (basic and adjusted)
The calculations of earnings per share (basic and adjusted) are based on the
net loss and adjusted profit before amortisation of acquired intangible assets
and exceptional items* respectively and the ordinary shares in issue during
the period.
Unaudited Unaudited Audited
6 months 6 months ended Year
ended 31 March 2022 ended
31 March 30 September 2022
2023
£'000 £'000 £'000
Net Loss for period (86) (88) (701)
Adjustments:
Amortisation on acquired intangible assets 821 147 743
Exceptionals 38 29 543
Adjusted profit before amortisation of 773 88 585
acquired intangible assets and exceptional items
Number Number Number
Weighted average shares in issue for basic earnings per share 1,055,369,702 508,006,026 718,622,464
Weighted average dilutive share options and warrants 91,750,707 62,247,272 62,247,272
Average number of shares used for dilutive earnings per share 1,147,120,409 570,253,298 780,869,736
pence pence pence
Basic loss per share (0.01)p (0.02)p (0.09)p
Diluted loss per share (0.01)p (0.02)p (0.09)p
Adjusted basic earnings per share 0.07p 0.02p 0.08p
Adjusted diluted earnings per share 0.07p 0.02p 0.07p
*These measures are explained and reconciled in the Alternative Performance
Measures section in Note 5 below.
5. Alternative Performance Measures
The Board monitors performance principally through adjusted comparative
performance measures. Adjusted profit and earnings per share measures
exclude certain items including amortisation of acquired intangible assets and
exceptional items. The Board believes that these alternative measures
provide a clearer understanding of the Group's underlying trading performance,
as they exclude one-off and non-cash items.
They key measures used as APMs are reconciled below:
HY 2023 HY 2022
£'000 £'000
Loss before tax as per Statement of Comprehensive Income (86) (88)
Amortisation of acquired intangible assets 821 147
Exceptional items 38 29
Adjusted profit before amortisation of acquired intangible assets and 773 88
exceptional items
Interest 71 2
Depreciation 83 72
Adjusted EBITDA 927 162
Copies of this Interim Report are available from the Company Secretary, Holly
House, Shady Lane, Birmingham B44 9ER and on the Company's website
www.reactsc.co.uk/react-group-plc (http://www.reactsc.co.uk/react-group-plc)
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