REG - Shearwater Group PLC - Interim Results
22/11/2023 07:15
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RNS Number : 2065U Shearwater Group PLC 22 November 2023
22 November 2023
SHEARWATER GROUP PLC
("Shearwater" or the "Group")
Interim Results for the six months ended 30 September 2023
Resilient performance despite the backdrop, with an encouraging pipeline
across both divisions
Shearwater Group plc, the cybersecurity, advisory and managed security
services group, announces its unaudited results for the six months ended 30
September 2023.
Financial summary
· Group revenue of £10.5m (H1 FY23: £10.8m).
· Adjusted EBITDA1 of £0.6m (H1 FY23: £0.1m).
· Adjusted loss before tax2 of £0.1m (H1 FY23: adjusted loss £0.5
million).
· Healthy balance sheet, with cash as at 30 September 2023 of
£2.2m (H1 FY23: £0.9m).
Operational summary
· Customer engagement levels have remained high, winning 41 new
clients in H1, notwithstanding the challenging market.
· Decisive action to streamline and optimise operations, emerging a
leaner, more unified business:
- GeoLang integrated into SecurEnvoy
- Xcina integrated into Brookcourt Solutions
· Encouraging pipeline remains across the Services division with
focus on building strategic and scalable relationships with major blue chip
organisations.
· Integrated Software division now benefiting from enhanced
opportunities, with full product set now introduced across the Group's global
distribution network.
· Winner of five significant industry awards, serving as a
testament to the value of the Group's offering.
Board Update
· Adam Hurst appointed as Interim CFO in October and appointed to
the Board as an Executive Director in early November.
Outlook
· Board currently expects to meet full year management expectations
based on the visibility of the sales opportunities, including securing
remaining Services deals which were deferred from prior periods.
· Services pipeline underpinned by offering major corporates
specialist solutions that assist in meeting their regulatory security
obligations.
· Higher margin Software division pursuing a number of promising
opportunities.
· Clear H2 objective of converting the pipeline of opportunities
across both divisions.
(1. Adjusted EBITDA is defined as loss before tax, before one off
exceptional items, share based payment charges, finance charges, impairment of
intangible assets, other income, depreciation and amortisation. )
(2. Adjusted Loss Before Tax defined as net loss before tax, exceptional
items, share based payments, other income and amortisation of acquired
intangible assets.)
Phil Higgins, Chief Executive Officer of Shearwater Group PLC, commented: "We
have traded resiliently in the first half despite continuing to contend with a
challenging market, and we are already seeing benefits from the recent
operational enhancements we have implemented. We move into the second half
strengthened by a healthy balance sheet and clearly focused on the conversion
of our pipeline of opportunities across each division."
Enquiries:
Shearwater Group plc www.shearwatergroup.com
David Williams, Chairman c/o Alma
Phil Higgins, CEO
Adam Hurst, Interim CFO
Cavendish Securities plc - NOMAD +44 (0) 20 7397 8900
Adrian Hadden / Ben Jeynes- Corporate Finance
Henry Nicol / Dale Bellis / Michael Johnson - Sales
Alma shearwater@almastrategic.com (mailto:shearwater@almastrategic.com)
Justine James / Joe Pederzolli +44 (0) 20 3405 0205
About Shearwater Group plc
Shearwater Group plc is an award-winning group providing cyber security,
managed security and professional advisory solutions to create a safer online
environment for organisations and their end users.
The Group's differentiated full service offering spans identity and access
management and data security, cybersecurity solutions and managed security
services, and security governance, risk and compliance. Its growth strategy is
focused on building a scalable group that caters to the entire spectrum of
cyber security and managed security needs, through a focused buy and build
approach.
The Group is headquartered in the UK, serving customers globally across a
broad spectrum of industries.
Shearwater shares are listed on the London Stock Exchange's AIM under the
ticker "SWG". For more information, please visit www.shearwatergroup.com
(http://www.shearwatergroup.com/) .
Chief Executive's review
The first half of the financial year has seen the Group trade resiliently
amidst a challenging backdrop. While we continue to see a healthy number of
opportunities within our pipeline, we continue to experience hesitancy from
some customers in the commencement of projects in response to continuing wider
market uncertainty. While contracts in the Group's robust order book are
continuing to be fulfilled, some timings continue to be deferred into future
periods.
In the traditionally quieter first half, the Group delivered revenue of
£10.5m (H1 FY23: £10.8m) and adjusted EBITDA of £0.6m (H1 FY23: £0.1m).
Our underlying business remains robust and engagement levels are high,
notwithstanding the current volatility in the market. We are pleased with
the benefits already being seen from the recent operational enhancements,
which have streamlined our offering and strengthened our positioning.
We continue to be supported by a healthy balance sheet, with cash as at 30
September 2023 of £2.2m (H1 FY23: £0.9m). The outflow since March is as
expected by management and in line with previous years, due to the seasonal
nature of contracting and impact on working capital flows.
Moving into the second half the Group is bolstered by an encouraging pipeline
of opportunities, with revenues identified from either contracted, scheduled
or existing contract renewals, including a £1.3m Government agency win in
October, and other new projects identified from new and existing customers.
Consequently the Board currently anticipates it will meet management's
expectations for the full year.
Following the reorganisation of the business reported at the time of the full
year results, our Services and Software divisions are now much better
positioned to capitalise on the long-term growth opportunities we are seeing.
While customers continue to face unfavourable market conditions and the timing
of orders is difficult to predict, we are encouraged that engagement levels
remain high moving into the second half. Shearwater continues to provide a
best-in class service and the underlying long-term drivers of the Group's end
markets remain strong, providing confidence in delivery in the second half of
the year and beyond.
Operational Review
The Group comprises two divisions, Services (89% revenue) and Software (11%
revenue). We serve a number of multinational, blue-chip organisations with
clients spanning a range of sectors.
Notwithstanding the current market conditions impacting short-term customer
decision-making and ongoing uncertainty regarding contract timing, we are
encouraged by the pipeline in both Services and Software, and continue to win
new clients. We are continuing to benefit from renewals and cross-selling
successes, especially from our penetration and consulting services where we
are particularly pleased with the rate at which new business is being won.
Following the reorganisation of the business, with GeoLang now successfully
integrated into SecurEnvoy and Xcina into Brookcourt, staff numbers have
remained broadly consistent with the prior period, ensuring we are rightsized
to capitalise on the long-term growth opportunities we are seeing.
Brookcourt has enlisted its inaugural commission-only sales representative to
promote our proprietary SecurEnvoy software and strategic solutions. This
innovative sales strategy complements our current approach, eliminating a
fixed salary and relying solely on commissions, which are disbursed
exclusively upon the successful conclusion of a sale. Our intention is to
expand this initiative by bringing in more personnel.
As outlined in the Full Year results, the Group took decisive action to
streamline and optimise its operations, in order to emerge a leaner, more
unified business. The action taken has resulted in a strengthened positioning,
with a robust pipeline of opportunities across our Services division and our
integrated Software business benefiting from a global distribution network.
While in the context of the slower decision-making of the corporates we work
with, our resilient performance provides optimism moving forwards. Our clear
H2 objective is to convert the opportunities across both divisions.
In the period, we are once again pleased to report the Group has continued to
win significant awards which serve as a clear testament to the value of the
Shearwater offering. SecurEnvoy was honoured as the Identity & Access
Management Solution of the Year at the Computing Security Magazine Awards
2023, while also achieving recognition in the Security Software Solution of
the Year category for Data Discovery. Brookcourt received the Customer Service
Award at the same event. Earlier in the year Brookcourt won the Logo
Acquisition Award 2023 at Proofpoint channel event for the successful
acquisition of an Enterprise bank over a three-year sales cycle. Finally,
Pentest emerged as the winner at Pwn2Own Toronto for successfully compromising
the Samsung Galaxy S23.
Services
Services revenue was generated from contract wins and renewals from the
company's large customer base. In the first half Brookcourt Solutions
delivered contracts across a diverse range of clients. These included a
leading British mobile network operator, a prominent European Cyber Managed
Security Services Provider (MSSP), an international retail chemist and
cosmetics company and an essential security services contract for a UK
government department. These clients generated a total contract value of
£5.5m which is being recognised in FY24. It was particularly pleasing to add
a new vertical to our customer base with the award of our first significant
Government contract.
The merging of Xcina Consulting into Brookcourt Solutions has resulted in
greater traction and new business opportunities which are being converted.
Recent wins include a disaster recovery planning contract for a global
manufacturing group in Germany, information security framework development for
an Australian-based international mining group and PCI-DSS engagement for an
ASX-listed food sector operator headquartered in the Netherlands.
Pentest has had a strong first half, ahead of management expectations. The
Company continues to secure new business and uphold its prominent status and
successfully fulfilled contracts that had been delayed from the previous
financial year. Additionally the company achieved success with its Secure Code
Workshop, acquiring a new client and securing ongoing onsite workshops for a
large team of developers. The company has expanded its 'Internet of Things'
testing capability, resulting in a growing number of engagements, and has
secured 15 new accounts, including a leading financial services company, a
global technology company in the energy sector, a prominent UK education
business, and a significant win with a leading technology and services
provider.
H1 FY24 H1 FY23 YOY 12 months to 31 March 2023
£000 £000 % £000
Revenue 9,334 9,136 +2% 23,830
Gross profit 2,330 1,571 +48% 4,657
Gross profit margin % 25% 17% 20%
Overheads (1,366) (1,738) (4,508)
Adjusted EBITDA 964 (167) 149
Adjusted EBITDA % 10% (2%) 1%
Software
While the Software business has seen a softened performance against the prior
period, renewals are tracking ahead of management expectations and we are
already seeing the effects of integration and operational efficiencies
following the merging of SecurEnvoy with Geolang to form a unified software
division. The unified company is benefiting from 350 resellers across the
world, with Geolang seeing an increase in opportunities now coming in through
SecurEnvoy's reseller network, which had not been the case previously.
SecurEnvoy has maintained a consistently robust release schedule for its
Access Management Solution since May 2023, highlighted by the notable V3.R3
update in October. This release not only fulfils elevated security standards
essential for government and critical networks but also broadens deployment
options to encompass On-Premise (Windows & LINUX) and Private Cloud (Azure
& AWS). Additionally the introduction of an MSP edition caters to the
escalating demand for managed services and streamlining of billing processes.
The expansion of channel partnerships through new agreements further
underscores SecurEnvoy's commitment to innovation and collaboration in the
evolving landscape.
H1 FY24 H1 FY23 YOY 12 months to 31 March 2023
£000 £000 % £000
Revenue 1,167 1,654 -29% 2,856
Gross profit 822 1,144 -28% 1,793
Gross profit margin % 70% 69% 63%
Overheads (357) (441) (818)
Adjusted EBITDA 465 703 977
Adjusted EBITDA % 40% 43% 34%
Board Update
In September 2023, Paul McFadden, CFO, informed the Board of his decision to
step down from the Board, remaining with the Group until his successor was
appointed and for a short transition period. In October 2023, Adam Hurst was
appointed Interim CFO and in early November Adam was appointed to the Board as
Executive Director.
Current trading and outlook
Management continues to expect to meet its full year expectations based on the
current sales pipeline and opportunities. From regular customer engagement, we
remain confident in securing the Services deals which were deferred from
previous periods, and in parallel we are encouraged by the opportunities for
higher margin software deals which will have a meaningful impact on top line
growth. We move into the second half with cautious optimism and our core
objective for the remainder of the period will be to convert our pipeline of
opportunities.
Phil Higgins
Chief Executive Officer
21 November 2023
Finance review
Revenue
Revenue of £10.5 million (H1 FY23: £10.8 million) was slightly behind the
prior year with some growth in the Services business offset by the impact of
lower sales in the Software division.
Adjusted EBITDA
Adjusted EBITDA of £0.6 million (H1 FY22: £0.1 million) was ahead of the
prior year. The prior year was adversely impacted by a £0.9 million
unrealised foreign exchange charge. Excluding this impact Adjusted EBITDA was
slightly lower than the prior year, broadly in line with revenue performance.
The income statement below details both statutory and alternative measures
which, in the Directors' opinion, provides additional relevant information to
the reader in assessing the adjusted performance of the business.
H1 FY24 H1 FY23 Change 12 months to 31 March 2023
£000 £000 % £000
Revenue 10,501 10,790 -3% 26,686
Gross profit 3,152 2,715 +16% 6,450
Gross profit margin % 30% 25% 24%
Overheads (2,559) (2,654) -4% 6,651
Adjusted EBITDA 593 61 (201)
Adjusted EBITDA margin % 6% 1% -1%
Finance charge (net) (38) (31) (77)
Depreciation (137) (127) (240)
Amortisation of intangible assets - computer software (511) (396) (792)
Adjusted loss before tax (93) (493) (1,310)
Amortisation of acquired intangible assets (1,050) (1,050) (2,099)
Share based payments (42) (82) (85)
Exceptional items (202) - (6,139)
Loss before tax (1,387) (1,625) (9,633)
Taxation credit 440 306 1,458
Loss after tax (947) (1,319) (8,175)
Net finance charges
Net finance charges are slightly above the prior year due mainly to increased
interest on capitalised leases.
Depreciation
Depreciation, which includes Right of Use assets, is broadly in line with the
previous year.
Amortisation of intangibles assets - computer software
Increased amortisation compared to the prior year reflects software developed
in previous periods that has been released in the first half this year.
Adjusted loss before tax
Adjusted loss before tax of £0.1 million (H1 FY23: adjusted loss £0.5
million) is an improvement on the prior year due to the absence of a foreign
exchange loss in the current year.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets of £1.1 million (H1 FY23: £1.1
million) is in line with the previous year.
Exceptional costs
Exceptional costs of £0.2 million were incurred in connection with completing
the restructuring that commenced at the end of the previous financial year and
largely comprises redundancy costs.
Share based payments
The share based payments charge relates to long-term incentive plans and is
lower than the prior year due to fewer participants in the share schemes.
Loss before tax
Loss before tax in the period was £1.4 million (H1 FY23: £1.6 million) and
recognises the year-on-year improvement in adjusted loss before tax partly
offset by the exceptional item in the first half.
Taxation
The credit in the period was £0.4 million (H1 FY23: £0.3 million) giving an
effective tax rate of 32% (H1 FY22: 19%). The tax rate benefited from the
impact of enhanced allowances in the UK on research and development spend.
Earnings/Loss per share
Adjusted basic and diluted earnings per share was £0.01 (H1 FY23: loss per
share £0.01) incorporates the year-on-year improvement in adjusted
profit/(loss) after tax. Reported basic and diluted loss per share was £0.04
(H1 FY23: basic loss and diluted per share £0.06).
Statement of Cash flow
The second half weighted trading performance of the Group in recent years has
typically resulted in an expected cash outflow in the first half of the year.
The operating cash outflow to September 2023 of £1.4 million was an
improvement on the £3.9 million outflow in the first half of the prior year,
which arose mainly due to timing of cash receipts on certain large contracts
arising in the previous year. Cash held at 30 September of £2.2 million
compares to £0.9 million at the same point in the prior year and has been
maintained at a similar level at the end of October 2023.
The Group continues to invest in the development of internally created
software, with expenditure of £0.5 million in the period (H1 FY23: £0.7
million). This is slightly lower than the previous year due to efficiencies
in the nature of spend arising from the increased use of internal staff and a
reduction in external contracting.
6 months to 30 September
H1 FY24 H1 FY23 12 months to 31 March 2023
£000 £000 £000
Adjusted EBITDA 593 61 (201)
Movements in working capital and exceptional items (1,989) (3,959) 485
Cash used / generated from operations (1,396) (3,898) 284
Capital expenditure (net of disposal proceeds) (528) (686) (1,337)
Tax received / (paid) 301 - (285)
Interest paid (31) (26) (83)
Payments of lease liabilities (124) (108) (200)
FX and other - 13 10
Movement in cash (1,778) (4,705) (1,611)
Opening cash and cash equivalents 3,964 5,575 5,575
Closing cash and cash equivalents 2,186 870 3,964
Alternative performance measures
This review includes alternative performance measures ('APMs') alongside the
standard IFRS measures. The Directors believe that alternative measures
provide additional relevant information regarding the adjusted performance of
the business. APMs are used to enhance the comparability of information
between reporting periods by adjusting for one off exceptional and other items
that affect the IFRS measure. Consequently, the Directors and management use
APM's in addition to IFRS measures to assess the adjusted performance of the
business.
Alternative performance measures used include:
§ Adjusted EBITDA
§ Adjusted loss before tax
§ Adjusted loss after tax
§ Adjusted earnings/loss per share
Adjusting items include:
Exceptional items which are one off by their nature such as acquisition costs
or re-organisation costs and do not form part of the underlying operational
cost of the business.
Share based payment charges awarded from long-term remuneration incentives to
certain staff. Despite the plans not having a cash cost to the business, a
share-based payment charge is taken to the statement of comprehensive income
which the directors believe does not form part of the underlying operating
cost of the business.
Amortisation of identified intangible assets acquired as part of an
acquisition is charged to the statement of comprehensive income but does not
form part of the underlying operating cost of the business.
A full reconciliation between adjusted and reported results is detailed below:
Six months to 30 September H1 FY24 H1 FY23
£000 £000
Adjusted EBITDA 593 61
Exceptional items (202) -
Share based payments charge (42) (82)
EBITDA 349 (21)
Adjusted loss before tax (93) (493)
Amortisation of acquired intangibles (1,050) (1,050)
Exceptional items (202) -
Share based payments charge (42) (82)
Reported loss before tax (1,387) (1,625)
Adjusted profit/(loss) after tax 152 (298)
Amortisation of acquired intangibles (net of tax) (905) (939)
Exceptional items (net of tax) (152) -
Share based payments charge (42) (82)
Reported loss after tax (947) (1,319)
£ £
Adjusted basic & diluted earnings/(loss) per share 0.01 (0.01)
Amortisation of acquired intangibles (0.04) (0.04)
Exceptional items (0.01) -
Share based payments charge (0.00) (0.01)
Reported basic & diluted loss per share (0.04) (0.06)
Principal risks and uncertainties
The Group works to minimise its exposure to operational, financial and other
risks, however in pursuit of achieving its growth strategy there will always
be an element of risk that needs to be considered. The Group's principal risks
and uncertainties, as detailed in the financial statements for the year ended
31 March 2023, are all still considered to be valid.
Statement of Directors' responsibilities
We confirm that to the best our knowledge that:
§ The condensed interim set of financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the United
Kingdom;
§ The interim report includes a fair review of information required by DTR
4.2.7R (indication of important events during the first six months and
description of principal risks and uncertainties for the remaining six months
of the year); and
§ The interim report includes a fair review of the information required by
DTR 4.2.8R (disclosure of related parties transactions and any change
therein).
Adam Hurst
Interim Chief Financial Officer
21 November 2023
Unaudited condensed consolidated statement of comprehensive income
for the 6 months to 30 September 2023
2023 2022
Note £000 £000
Revenue 3 10,501 10,790
Cost of sales (7,349) (8,075)
Gross profit 3,152 2,715
Administrative expenses (2,803) (2,736)
Depreciation and amortisation (1,698) (1,573)
Total operating costs (4,501) (4,309)
Operating loss (1,349) (1,594)
Adjusted EBITDA 3 593 61
Depreciation and amortisation (1,698) (1,573)
Exceptional items (202) -
Share-based payments (42) (82)
Operating loss (1,349) (1,594)
Finance cost 4 (43) (31)
Finance income 4 5 -
Loss before taxation (1,387) (1,625)
Income tax credit 5 440 306
Loss for the period and attributable to equity holders of the Company (947) (1,319)
Other comprehensive income
Items that may be classified to profit and loss:
Exchange differences on translation of foreign operations 0 14
Total comprehensive loss for the period (947) (1,305)
Earnings / (Loss) per ordinary share attributable to the owners of the parent £ £
(Restated)
Basic (£ per share) 6 (0.04) (0.06)
Diluted (£ per share) 6 (0.04) (0.06)
Adjusted basic and diluted (£ per share) 6 0.01 (0.01)
Unaudited condensed consolidated statement of financial position
as at 30 September 2023
2023 2022
(Restated)
Note £000 £000
Assets
Non-current assets
Intangible assets 43,901 51,779
Property, plant and equipment 388 213
Deferred tax 903 -
Trade and other receivables 7 4,151 8,326
Total non-current assets 49,343 60,318
Current assets
Trade and other receivables 8 11,389 12,728
Cash and cash equivalents 2,186 870
Total current assets 13,575 13,598
Total assets 62,918 73,916
Liabilities
Current liabilities
Trade and other payables 9 9,806 10,573
Total current liabilities 9,806 10,573
Non-current liabilities
Creditors: amounts falling due after more than one year 10 5,894 8,360
Total non-current liabilities 5,894 8,360
Total liabilities 15,700 18,933
Net assets 47,218 54,983
Capital and reserves
Share capital 11 22,278 22,278
Share premium 34,581 34,581
Other reserves 23,484 24,468
Translation reserve 30 37
Accumulated losses (33,155) (26,381)
Equity attributable to owners of the Company 47,218 54,983
Total equity and liabilities 62,918 73,916
Unaudited condensed consolidated statement of changes in equity
for the 6 months to 30 September 2023
Share capital Share premium Other reserves Translation reserve Accumulated losses Total Equity
£000 £000 £000 £000 £000 £000
At 31 March 2022 (audited) 22,278 34,581 24,386 23 (25,062) 56,206
Loss for the period - - - - (1,319) (1,319)
Other comprehensive profit for the period - - - 14 - 14
Total comprehensive loss for the period - - - 14 (1,319) (1,305)
Contributions by and distributions to owners
Share-based payments - - 82 - - 82
At 30 September 2022 (unaudited) 22,278 34,581 24,468 37 (26,381) 54,983
Loss for the period - - - - (6,856) (6,856)
Other comprehensive loss for the period - - - (7) - (7)
Expiry of share options - - (1,029) - 1,029 -
Total comprehensive loss for the period - - (1,029) (7) (5,827) (6,863)
Contributions by and distributions to owners
Share-based payments - - 3 - - 3
At 31 March 2023 (audited) 22,278 34,581 23,442 30 (32,208) 48,123
Loss for the period - - - - (947) (947)
Other comprehensive profit/loss for the period - - - - - -
Total comprehensive profit/loss for the period - - - - (947) (947)
Contributions by and distributions to owners
Share-based payments - - 42 - - 42
At 30 September 2023 (unaudited) 22,278 34,581 23,484 30 (33,155) 47,218
Unaudited condensed consolidated cash flow statement
for the 6 months to 30 September 2023
2023 2022
£000 £000
Cash flows from operating activities
Loss for the period (947) (1,319)
Adjustments for:
Amortisation of intangible assets 1,561 1,446
Depreciation of right of use assets 113 101
Depreciation of property, plant and equipment 24 26
Share-based payment charge 42 82
Exceptional items 202 -
Finance costs 43 31
Finance income (5) -
Income tax (440) (306)
Cash flows from operating activities before changes in working capital 593 61
Decrease/(increase) in trade and other receivables 3,699 (726)
(Decrease)/increase in trade and other payables (5,486) (3,233)
Cash used in operations (1,194) (3,898)
Net foreign exchange movements - 12
Finance costs paid (31) (26)
Tax received 301 -
Net cash used in operating activities before exceptional items (924) (3,912)
Net cash flows on exceptional items (202) -
Net cash used in operating activities (1,126) (3,912)
Investing activities
Purchase of property, plant and machinery (5) (25)
Purchase of intangibles (523) (661)
Net cash used in investing activities (528) (686)
Financing activities
Repayment of lease liabilities (124) (108)
Net cash used in financing activities (124) (108)
Net decrease in cash and cash equivalents (1,778) (4,706)
Foreign exchange movements on cash and cash equivalents - 1
Cash and cash equivalents at the beginning of the period 3,964 5,575
Cash and cash equivalents at the end of the period 2,186 870
Notes
1. General information
The unaudited interim condensed consolidated financial information was
authorised by the board of directors for issue on 22 November 2023. The
information for the six-month period ended 30 September 2023 has not been
audited and does not constitute statutory accounts as defined in section 434
of the Companies Act 2006, and should therefore be read in conjunction with
the audited consolidated financial statements of the Company and its
subsidiaries for the year ended 31 March 2023, which have been prepared in
accordance with UK Adopted International Accounting Standards (IFRS) and filed
with the Registrar of Companies. The Independent Auditor's Report on that
Annual Report and Financial Statements for 2023 was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a statement
under 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
a) Basis of preparation
These unaudited interim condensed consolidated financial statements have been
prepared on the historical cost accounting basis, in accordance with UK
adopted International Accounting Standards ('IFRS') and with those parts of
the Companies Act 2006 applicable to companies reported under IFRS and are
consistent with those that are expected to be adopted in the annual statutory
financial statements for the year ended 31 March 2024.
The interim consolidated financial information does not comply with IAS 34
Interim Financial Reporting, as permissible under the rules of AIM.
Prior year interim information has been restated, as follows:
- Diluted loss per share for the six month period to 30 September
2022 was previously reported as £0.05 per share. It has been restated to
£0.06 per share as the potential dilutive shares were anti-dilutive for the
period as the Group was loss making.
- On the Statement of Financial Position, consistent with the
accounts to the year to 31 March 2023, Accrued income of £1,232,000 within
Current Assets, Trade and Other Receivables has been reclassified to Accrued
income within Non-Current Assets, Trade and Other Receivables; in addition,
Accruals and Other Payables of £1,139,000 within Current Liabilities has been
reclassified to Accruals and Other Payables within Non-Current Liabilities.
b) Going concern
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for at least
twelve months from the date of publication of these interim financial
statements. Accordingly, they continue to adopt the going concern basis in
preparing these consolidated financial statements.
The Directors have reviewed the Group's going concern position taking into
account its current business activities, performance to date against budgeted
targets and the factors likely to affect its future development which include
the Group's strategy, principal risks and uncertainties and its exposure to
credit and liquidity risks.
The Group's £4.0 million 3-year revolving credit facility with Barclays Bank
plc, signed on the 25 March 2021 remains in place which can provide working
capital support if required. To date this facility remains unutilised.
The Directors have reviewed a detailed reforecast of trading which includes a
cash flow forecast for a period which covers a period of trading to December
2024 and have challenged the assumptions used to create these forecasts. This
forecast demonstrates that the Group is able to pay its debts as they fall due
during this period.
The Directors have reviewed a highly sensitised stress test which has factored
in what the Directors believe would be an extreme scenario which incorporates
a significant reduction in new business revenues across both segments of the
Group, a reduction of renewal rates in our software division and a scaling
back of revenues within our Services division. Costs have also been scaled
back in line with the reduction in revenues. Overall, the sensitised cash flow
forecast demonstrates that the Group will be able to pay its debts as they
fall due for the period to at least 31 December 2024.
c) Critical accounting judgements estimates and assumptions
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the amounts reported for
income and expenses during the year and that affect the amounts reported for
assets and liabilities at the reporting date.
The significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were the
same as those described in the last annual financial statements.
Revenue recognition
Management make judgements, estimates and assumptions in determining the
revenue recognition of material contracts sold by the Group's Services
division. The Group work with large enterprise clients, providing services and
solutions to support the clients' needs. In many cases a third-party's
products or services will be provided as part of a solution. Management will
consider the implications around timing of recognition, with factors such as
determining the point control passes to the client and the subsequent
fulfilment of the Group's performance obligations. In addition to this
management will consider if it is acting as agent or principal.
Impairment of goodwill, intangible assets and investment in subsidiaries
Management make judgements, estimates and assumptions in supporting the fair
value of goodwill, intangible assets and investments in subsidiaries. The
Group carry out annual impairment reviews to support the fair value of these
assets. In doing so management will estimate future growth rates, weighted
average cost of capital and terminal values.
Leases
Management make judgements, estimates and assumptions regarding the life of
leases. Management continue to review all existing leases, which all relate to
office space, and will look to reduce the number of offices across the Group
if they are not sufficiently utilised. For this reason management have assumed
that the life of leases does not extend past the current contracted expiry
date. A judgement has been taken with regard to the incremental borrowing rate
based upon the rate at which the Group can borrow money.
3. Segmental information
In accordance with IFRS 8, the Group's operating segments are based on the
operating results reviewed by the Board, which represents the chief operating
decision maker. The Group reports its results in two segments as this
accurately reflects the way the Group is managed.
The Group is organised into two reportable segments based on the types of
products and services from which each segment derives its revenue - software
and services.
Segment information for the 6 months ended 30 September 2023 is presented
below and excludes intersegment revenue, as it is not material, and assets as
the Directors do not review assets and liabilities on a segmental basis.
Six-month period ended 30 September
2023 2023 2022 2022
Revenue Profit Revenue Profit
(unaudited) (unaudited) (unaudited) (unaudited)
£000 £000 £000 £000
Services 9,334 964 9,136 (167)
Software 1,167 465 1,654 703
Group total 10,501 1,429 10,790 536
Group costs (836) (475)
Adjusted EBITDA 593 61
Amortisation of intangibles (1,561) (1,446)
Depreciation (137) (127)
Share-based payments (42) (82)
Exceptional items (202) -
Finance costs (net) (38) (31)
Loss before tax (1,387) (1,625)
The Group is domiciled in the United Kingdom and currently the majority of its
revenues come from external customers that are transacted in the United
Kingdom. A number of transactions which are transacted from the United Kingdom
represent global framework agreements, meaning our services, whilst transacted
in the United Kingdom, are delivered globally. The geographical analysis of
revenue detailed below is on the basis of country of origin in which the
master agreement is held with the customer (where the sale is transacted).
Six-month period ended 30 September
2023 2022
(unaudited) (unaudited)
£000 £000
United Kingdom 6,532 6,888
Rest of Europe 2,364 2,667
North America 1,499 972
Rest of the world 106 263
10,501 10,790
4. Finance costs and income
Six-month period ended 30 September
2023 2022
(unaudited) (unaudited)
Finance costs £000 £000
Revolving Credit Facility charges 31 26
Interest payable on lease liabilities 12 5
43 31
Finance income in the period was £5k (H1 FY23: Nil)
5. Income Tax
The tax credit recognised reflects management estimates of the tax for the
period and has been calculated using the estimated average tax rate of UK
corporation tax for the financial period of 25% (FY23: 19%)
6. Earnings/(loss) per share
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period. For diluted loss per share, the weighted
average number of shares in issue is adjusted to assume conversion of all the
potential dilutive ordinary shares. The potential dilutive shares were
anti-dilutive for the six months ended 30 September 2023 and six months ended
30 September 2022 as the Group was loss making.
Adjusted earnings per share has been calculated using adjusted earnings
calculated as profit after taxation but before amortisation of acquired
intangibles after tax, share based payments, impairment of intangible assets
and exceptional items after tax. The potential dilutive shares were
anti-dilutive for the six months ended 30 September 2022 as the Group was loss
making.
The calculation of the basic and diluted earnings per share from total
operations attributable to shareholders is based on the following data:
Six-month period ended 30 September
2023 2022
(unaudited) (unaudited)
£000 £000
Net loss from total operations
Loss for the purposes of basic and diluted earnings / loss per share being net (947) (1,319)
loss attributable to shareholders:
Add/(remove)
Amortisation of acquired intangibles (net of tax) 905 939
Share based payments 42 82
Exceptional items (net of tax) 152 -
Adjusted earnings for the purpose of adjusted earnings per share 152 (298)
Number of shares No No
(Restated)
Weighted average number of ordinary shares for the purpose of basic and 23,826,379 23,818,059
adjusted earnings per share
Weighted average number of ordinary shares for the purpose of basic and 23,826,379 23,818,059
adjusted diluted earnings per share
Earnings/(Loss) per share £ £
(Restated)
Basic loss per share (0.04) (0.06)
Diluted loss per share (0.04) (0.06)
Adjusted Basic and diluted earnings/(loss) per share 0.01 (0.01)
7. Non-current assets: Trade and other receivables
Period ended 30 September
2023 2022
(unaudited) (unaudited, restated)
£000 £000
Trade receivables 1,245 7,094
Accrued income 2,906 1,232
4,151 8,326
8. Current assets: Trade and other receivables
Period ended 30 September
2023 2022
(unaudited) (unaudited, restated)
£000 £000
Trade receivables 6,946 10,043
Accrued income 4,098 2,035
Prepayments and other receivables 345 469
Deferred tax asset - 181
11,389 12,728
9. Trade and other payables
Period ended 30 September
2023 2022
(unaudited) (unaudited, restated)
£000 £000
Trade payables 837 2,757
Accruals and other payables 8,053 5,570
Other taxation and social security 606 1,261
Deferred income 203 454
Corporation tax 6 444
Lease liabilities 101 87
9,806 10,573
10. Creditors: amounts falling due after more than one year
Period ended 30 September
2023 2022
(unaudited) (unaudited, restated)
£000 £000
Deferred tax 3,341 3,744
Accruals and other payables 2,359 4,600
Lease liabilities 194 16
5,894 8,360
11. Share capital
The table below details movements in share capital during the year:
Six-month period ended 30 September
In thousands of shares 2023 2022
000 000
In issue at 31 March 23,826 23,810
In issue at 30 September 23,826 23,810
Allotted, called up and fully paid £000 £000
Ordinary shares of £0.10 each 2,382 2,382
Deferred shares of £0.90 each 19,896 19,896
22,278 22,278
The Company did not issue any shares in the six-month period ended 30
September 2023.
12. Related party transactions
The Directors of the Group and their immediate relatives have an interest of
19% (H1 FY23: 18%) of the voting shares of the Group.
13. Events after the reporting date
There are no material events after the reporting period to report.
14. Cautionary statement
This Interim Report has been prepared solely to provide additional information
to shareholders to assess the Company's strategies and the potential for these
strategies to succeed. The Interim Report should not be relied on by any other
party or for any purpose. The Interim Report contains certain forward-looking
statements with respect to the financial condition, results of operations and
businesses of the Company. These statements are made in good faith based on
the information available to them up to the time of their approval of this
report. However, such statements should be treated with caution as they
involve risk and uncertainty because they relate to events and depend upon
circumstances that will occur in the future. There are a number of factors
that could cause actual results or developments to differ materially from
those expressed or implied by these forward-looking statements. The continuing
uncertainty in global economic outlook inevitably increases the economic and
business risks to which the Company is exposed. Nothing in this announcement
should be construed as a profit forecast.
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