REG - React Group PLC - Trading Update

ReactAnnouncement

26/10/2022 07:17

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RNS Number : 0992E  React Group PLC  26 October 2022

 

26 October 2022

REACT Group plc

("REACT", the "Group" or the "Company")

Trading Update

REACT Group plc (AIM:REAT.L), the leading specialist cleaning, hygiene and
decontamination company is pleased to announce a trading update in respect of
the year ended 30 September 2022 ("FY22").

In our interim results, announced on 30 June 2022, we reported a strong start
to the second half of FY22 ("H2") with LaddersFree, acquired on 12 May 2022,
performing in line with management expectations and that the outlook for the
Group as a whole remained positive.

The Group continued to make good progress in H2. The LaddersFree performance
has been strong, underpinned by multiple new contract wins in the schools and
colleges, and commercial sectors. A key feature of these contracts is that
they have the potential for the Company to extend the range of services to
customers and provide the Group with additional recurring income.

Fidelis, our hygiene and maintenance division, has also performed well and has
been a significant contributor to EBITDA for the full year. In order to better
position and facilitate additional anticipated growth in Fidelis and across
the wider Group, the Group has stepped up its capacity and taken on increased
overheads through additional operations and senior sales and marketing hires.
Whilst this has increased costs during the year, and therefore impacted EBITDA
margin, the investment has already, and is continuing to have, a positive
impact with increased sales momentum particularly with small to medium sized
contract wins and a growing pipeline of potential new contracts across the
Group.

Performance in our emergency and decontamination division, React, where
contracts are higher margin and tend to be more one-off and reactive, is still
in the process of returning to normal levels following the end of lockdown
measures and changes in working practices arising from this. Despite slower
than expected growth in this division in FY22, performance has shown an
improvement with increasing revenues generated in this division and a
particularly strong Q4 which has persisted into the start of the current
financial year.

Subject to audit, revenues for the year ended 30 September 2022 are expected
to be approximately £13.6 million (FY22 market forecast: £13.6m) (30
September 2021: £7.1 million) with Adjusted EBITDA* of approximately £1.0
million (FY22 market forecast: £1.3m) (30 September 2021: £0.79 million).
 The Group's balance sheet remains strong, the Company's cash balance on 30
September 2022 was approximately £1.53 million (30 September 2021: £0.57
million).  In addition to the cash balance in the bank, the Company has an ID
facility of £2.0 million, against which it had drawn down £0.5 million on 30
September 2022 and a 5-year term loan of £1.0 million.

*adjusted for exceptional items relating to the acquisition of LaddersFree,
Fidelis and investigating other potential acquisition targets, as well as
costs associated with the new loan facility.

Trading in the last three months of the year ended 30 September 2022, and into
the current financial year, has been especially strong across the Group, with
all divisions continuing to win a broad spread of business providing the
positive margin contribution and cash generation we are seeking. This positive
start underpins the Board's optimistic outlook for the current financial year.

The Board also provides a further update on the deferred consideration payable
in cash to the vendors of Fidelis. During the year to 31 March 2022, Fidelis
generated revenue of £6.6 million, gross profit of £1.5 million and EBITDA
of £0.5 million. As such, the Board now anticipates the maximum deferred
consideration payable, including associated acquisition costs due to advisers,
will be up to approximately £0.3 million and will be made in four equal
instalments between October 2022 and March 2024.

 Commenting on the trading update Shaun Doak, Chief Executive Officer of
REACT, said:

"Our cautious but positive outlook following H1 proved to be an accurate
assessment of H2 performance in our Fidelis and React divisions, although in
both cases Q4 performance has shown good growth which has continued so far in
the current financial year. LaddersFree has performed particularly well since
acquisition and has seen a number of new contract wins. The nature of these
contracts provides us with both recurring income and potential to provide
ancillary services. Despite the volatile macro-economic domestic and
international background, the markets we are addressing are large and
fragmented, providing significant opportunities for growth. We remain
confident that the high quality services the Group provides will continue to
be very much in demand and that we will meet our growth expectations for the
current year."

 

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)
 Will Goode / Amanda Gray (Corporate Finance)  Tel: +44 (0) 207 496 3000

 Rachel Hayes (Corporate Broking)

 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.

 

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