REG - Shearwater Group PLC - Interim Results
26/11/2024 07:00
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RNS Number : 5936N Shearwater Group PLC 26 November 2024
26 November 2024
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 (as amended), which forms part of domestic UK law
pursuant to the European Union (Withdrawal) Act 2018. Upon publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
Shearwater Group plc
("Shearwater", or the "Group")
Contract win and Interim Results for the six months ended 30 September 2024
Resilient financial performance and continued operational progress
Shearwater Group plc, the cybersecurity, advisory and managed security
services group, announces a significant new contract win together with its
interim results for the six months ended 30 September 2024.
Contract Win
Group company Brookcourt Solutions ("Brookcourt"), has secured a $12.8m,
five-year contract, with a leading global mobile telecommunications company.
Revenue will be phased across the contract duration, with c.$3.5m expected to
fall within the current financial year.
Under the terms of the contract, Brookcourt will provide hardware, software
and support services that will enable our client to enhance its monitoring
capacity, allowing for improved services and performance for its subscribers.
The deal aligns with the telco's long-term growth strategy, supporting its
ambition to expand and innovate within the telecommunications industry,
particularly in the deployment and expansion of cutting-edge 5G networks.
Interim Results
Financial Highlights
● Group revenue of £11.3m (H1 FY24: £10.5m) during typically quieter H1
period, with growth driven by Services business
● Adjusted EBITDA(1) loss of £(0.4m) (H1 FY24: profit of £0.6m)
● Adjusted loss before tax(2) of £(1.1m) (H1 FY24: loss before tax(2) of
£(0.1m))
● Healthy balance sheet with net cash as at 30 September 2024 of £3.0m (H1
FY24: £2.2m)
● Reduced profitability in period, reflecting:
○ Reduction in gross margin resulting from a lower % of revenue coming from the
Group's Software and Pentest businesses and the impact of a high-value sale,
at a lower margin to a strategically significant account
○ Reduced impact of FX gains on retranslation of forward balances, which had
benefited the FY24 H1 results
Operational Highlights
● Notable contract wins and renewals in Services with blue-chip organisations
across the telecoms, media, software and banking sectors
● Customer engagement levels continue to improve, although timelines for
decision making and contracting remain extended
● Ongoing development of AI integration within the Group's offerings further
strengthens our market positioning, ensuring cutting-edge protection for
clients and differentiating us from competitors
● Continued improvement of our product portfolio across the Software division,
including the release of upgraded cloud-based Access Management product during
H1
Board Update
● Jonathan Hall appointed as CFO and joined the Board on 24 September, with Adam
Hurst stepping down following completion of his tenure as Interim CFO.
Outlook
● Strong start to H2 with £3.7m sale delivered to leading media and telecoms
business in October 2024 and $12.8m multi-year contract with global teleco
business announced today
● Post-period end, Brookcourt achieved 'approved supplier' status to central and
local government departments under the G-Cloud 14 framework, opening up
considerable scope for expansion into the public sector
● Sector outlook remains strong, driven by an increasingly complex threat
environment. Group is well positioned to capitalise on this through its
market leading reputation, expertise, client relationships and proprietary IP
● Strong pipeline provide pathway to delivery of full year results in line with
market expectations and driving sustainable growth into the coming years
(1) Adjusted EBITDA is defined as profit before tax, before one off
exceptional items, share based payment charges, finance charges, impairment of
intangible assets, depreciation and amortisation.
(2) Adjusted Loss Before Tax defined as net profit before tax, exceptional
items, share based payments and amortisation of acquired intangible assets.
Phil Higgins, CEO of Shearwater Group, commented: "This period has been one of
continued progress in a broad range of sectors, building a robust foundation
for delivering growth in both revenue and profitability in FY25. We have
achieved significant multi-year wins across our Services division,
strengthened relationships with global blue-chip clients and enhanced our
products across our Software business. This momentum has continued into H2,
as highlighted by the contract wins secured post period end.
"Becoming an approved supplier on the G-Cloud portal marks a significant
moment in the Group's strategy, unlocking a multitude of opportunities with
government departments as they look to approved providers like Shearwater for
their cybersecurity needs. Our cutting-edge cybersecurity solutions, within
the backdrop of a high growth market, position us well to meet evolving
demands and deliver long-term value for all stakeholders.
"Alongside our interim results, we are delighted to announce a significant
$12.8 million deal with a global leader in mobile telecommunications. This
partnership is a testament to the strength of our solutions and our shared
commitment to driving innovation. By enhancing the client's capacity, we are
proud to support its growth strategy and the continued rollout of 5G
technology. This win underscores our dedication to delivering value to our
clients and solidifies our position as a trusted partner in the telecom
sector."
Investor Presentation
Shearwater Group's CEO, Phil Higgins and CFO, Jonathan Hall, will host an
investor presentation via the Investor Meet Company platform on Wednesday 27
November 2024 at 1.30pm.
Investors can sign up to Investor Meet Company for free and add to meet
Shearwater Group via:
https://www.investormeetcompany.com/shearwater-group-plc/register-investor
(https://www.investormeetcompany.com/shearwater-group-plc/register-investor)
Enquiries:
Shearwater Group plc www.shearwatergroup.com
David Williams, Chairman c/o Alma
Phil Higgins, CEO
Jonathan Hall, CFO
Cavendish Securities plc +44 (0) 20 7397 8900
Adrian Hadden / Ben Jeynes - Corporate Finance
Charlie Combe / Dale Bellis / Michael Johnson - Broking/ Sales
Alma shearwater@almastrategic.com (mailto:shearwater@almastrategic.com)
Justine James / Joe Pederzolli / Emma Thompson +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
Overview
This period has been one of resilient financial performance and strong
operational progress for the Group. This was largely driven by notable
multi-year Services division wins with blue-chip organisations across
telecommunications, financial services and media with the new addition of
central government.
In the typically quieter first half, performance was in line with
expectations, with the Group delivering revenue of £11.3m (H1 FY24: £10.5m)
and an adjusted EBITDA loss of £(0.4m) (H1 24: profit of £0.6m) We continue
to be supported by a healthy balance sheet with cash as at 30 September 2024
of £3.0m (H1 FY24: £2.2m).
Customer engagement levels have continued to improve, however, with a
continuing high level of economic uncertainty, sales cycles have remained
extended. Post-period end, we have seen an uplift in high-value contracts,
including two significant wins with leading media and telecoms businesses. The
combination of strong customer engagement, a growing client base, and our
innovative solutions provides a solid foundation for future success.
Market Opportunity
The continued growth of the global cyber-security market is supported by
several key macro-economic trends that reinforces the need for the Group's
solutions. The technological landscape is advancing at pace, with the rapid
deployment of Artificial Intelligence (AI) and a significant increase in
decentralised working practises and cloud-based systems, creating more areas
of vulnerability for clients. As a result, the number of cybersecurity
breaches continue to rise, with 50% of all businesses and 74% of large
businesses having experienced some form of cybersecurity breach or attack in
the last 12 months 1 (#_ftn1) .
As well as the direct threat to security, businesses are increasingly aware of
tightening regulation around data and more severe penalties for companies that
experience breaches. As such, companies are increasingly investing in
cybersecurity, demonstrated by the rapid growth of the global cybersecurity
industry which is estimated to be worth $268bn in 2024, rising to $878bn in
the next 10 years. 2 (#_ftn2) To mitigate against the risk, organisations
look to integrate advanced cybersecurity solutions that are trusted, in turn
ensuring the long-term growth drivers of the Group remain strong.
Services
H1 FY25 H1 FY24 YOY 12 months to 31 March 2024
(unaudited) (unaudited)
£m £m % £m
Revenue 10.2 9.3 +10% 20.2
Gross profit 1.7 2.3 -26% 5.4
Gross profit margin % 17% 25% 27%
Overheads (1.6) (1.3) (3.9)
Adjusted EBITDA 0.1 1.0 1.5
Adjusted EBITDA % 1% 10% 7%
The Services division delivered revenue of £10.2m in H1 (H1 FY24: £9.3m),
generated from contract wins across new and existing clients. This included
a significant three-year contract with a leading British telecommunications
company, worth $4.8 million. This has been followed post period end with a
further contract valued at £3.7m secured in October 2024, together with the
contract win announced today for an estimated $12.8m.
Further to these confirmed contract wins, following the period end, it was
also announced that Brookcourt achieved 'approved supplier' status with the
Crown Commercial Service. Under the G-Cloud 14 framework, Brookcourt is now
recognised as an official supplier to central and local government departments
and agencies, and is able to provide a broad array of cybersecurity services
to these public sector organisations. This progress opens up considerable
scope for expansion into the public sector, a key pillar of the Group's growth
strategy.
Margins in the period were impacted by an increased weighting towards
licensing of third-party software and a reduced contribution from the Group's
Pentest business, in which H1 FY24 results were boosted by a £1.1m one-off
contract with a major North American software business, which hasn't repeated
in the current period. During H1, however, Pentest secured a £0.5m contract
with a European Software company, delivery of which will commence in H2.
The Group continues to benefit from the strategic advantages resulting from
the successful integration of Xcina into Brookcourt Solutions last year,
including improved internal efficiencies and streamlined operations. We are
currently integrating in-house AI solutions that enable us to improve
efficiencies, drive productivity, and optimise sales and marketing techniques.
These solutions are currently being trialled at Brookcourt and are set to
launch in H2.
Incorporating AI both internally and as part of our offering allows us to
ensure cutting-edge protection for our clients and strengthen our overall
market position. We continue to expand our AI-based cybersecurity solutions
already on offer to our customer base, to personalise customer experiences and
improve product development. We already provide AI based technologies as part
of our solutions to clients and we are continuously looking for innovative
opportunities to optimise our solutions, using AI tools that will empower our
customers with the most advanced security tools.
As a result of this strong operational progress and the commercial wins
achieved, both during H1 and subsequently, the Services business is positioned
well for strong growth in H2 and beyond.
Software
H1 FY25 H1 FY24 YOY 12 months to 31 March 2024
(unaudited) (unaudited)
£m £m % £m
Revenue 1.1 1.2 -3% 2.4
Gross profit 0.8 0.8 0% 1.7
Gross profit margin % 67% 70% 71%
Overheads (0.3) (0.3) 0.8
Adjusted EBITDA 0.4 0.5 0.9
Adjusted EBITDA % 39% 40% 38%
The Software division has delivered a resilient performance in H1. Revenue of
£1.1m, represented a 3% reduction on the equivalent period in the prior year
(H1 FY24: £1.2m), generating £0.4m of adjusted EBITDA.
The demand for existing products remains robust as businesses increasingly
turn to trusted solutions in line with the growing need for secure data
protection. During H1, the Group launched upgraded versions of its Access
Management and Data Discovery products, with significant feature
enhancements. Offering both On-Premise and Private Cloud solutions sets
Shearwater apart and allows us to cater to a broad customer base, both
strengthening our market position and expanding the range of services we can
offer our customers. As a result, customer engagement continued to improve in
H1, and new customer acquisitions increased with a total of 19 new customers
in H1 (H124: 14), serving as material evidence of the continued recognition of
our services in the market.
New channel partner registrations were up 18% year on year which serves as a
promising indicator of momentum building into the second half of FY25 as new
partner relationships open up growth avenues.
Key client wins in the period included a three-year contract to provide our
multi-factor authentication solution for securing remote access for a major
supplier to the UK Ministry of Defence, serving thousands of users, along with
sales to a number of financial services institutions and a leading online
betting provider. These are principally related to the ability to deploy an
on-premise multi-factor authentication solution.
We continue to strengthen and expand our product portfolio across the Software
division. AI is already being leveraged to enhance SecurEnvoy's offering with
advanced threat detection and response mechanisms. The plan to offer the
Access Management product line on the AWS Marketplace in North America is on
track to go live in the second half of FY25, making SecurEnvoy available to
over 180,000 active customers on the platform. We have also been advancing new
updates across Access Management and Data Discovery to ensure state of the art
protection for our clients. Geographically, the Middle East & Africa
continues to be an area of strategic focus for the Group, demonstrating strong
progress this period with 20 new deal registrations, up 111% from this period
last year.
Board update
As previously announced, Jonathan Hall was appointed as Chief Financial
Officer and joined the Company on 28 August 2024 and the Board on 24 September
2024.
Following a successful transition period, Interim Chief Financial
Officer, Adam Hurst, completed his tenure and stepped down from the Board on
24 September 2024.
Current Trading and Outlook
Momentum is building through the second half of FY25 highlighted by the two
large deals secured post period end, supporting the group's ability to deliver
results for the full year in line with current market expectations.
Becoming an approved supplier on the G-Cloud portal marks a significant moment
in the Group's strategy, unlocking a multitude of opportunities with
government departments and agencies as they look to approved providers like
Shearwater for their cybersecurity needs. It enables the acceleration of our
expansion into the public sector, a key area of growth potential for the
Group, which we expect to have a material impact on our sales pipeline for
Services. Looking to the next half and FY26 we are looking to invest in this
space, to ensure the best resources are in place to capitalise on this new
growth avenue.
In the context of the global shift to cloud-based technology and rapid
adoption of AI, cyber security breaches continue to rise more rapidly than
ever. With our next-generation technology offering a unique toolset, our
trusted reputation, and a large growth market, the Group looks to H2 and
beyond with optimism.
Philip Higgins
CEO
26 November 2024
Financial review
The six-month period to September 2024 saw revenue grow by 8%, driven by an
increase within the Services segment of the business. A significant
proportion of this growth resulted from a material contract with a major UK
media and telecoms business, which included a significant element of licensing
of third-party software, reducing the gross margin. This, aligned with a
reduction in revenue from the Group's Pentest business, where H1 FY24 results
benefited from one significant contract, which did not repeat in FY25, meant
that the gross margin within the Services segment of the business dropped from
25% to 17%, bringing the overall Group gross margin down from 30% to 22%.
As a result, despite the increase in revenue, the Group recorded an Adjusted
EBITDA loss for the period of £0.4m (H1 FY24 profit of £0.6m).
Heading into H2, the Group has a strong pipeline, which has already started to
convert into revenue as demonstrated by two material contract wins. As a
result, directors are confident in seeing strong revenue growth and a return
to EBITDA profitability in H2 and on into FY26.
Revenue
Revenue of £11.3m represented an increase of 8% on the equivalent period in
the prior year (FY24 H1: £10.5m), driven by an increase in licensing revenue
within the Services business. This more than offset a small reduction in the
Software business.
Adjusted EBITDA
An adjusted EBITDA loss for the period of £0.4m (H1 FY24: profit of £0.6m),
primarily reflected a reduction in gross margin from 30% to 22%, which in turn
reflected the mix of revenues in the year, with a higher proportion of
revenues generated from the licensing of third-party software solutions within
the Services segment of the business.
Overheads of £2.9m include a gain of £0.1m from FX movements on forward
contracts. In H1 FY24, the equivalent value was a £0.3m gain. Excluding
the impact of this, Administrative expenses increased 3% year on year.
H1 FY25 H1 FY24 Change 12 months to 31 March 2024
£m £m % £m
Revenue 11.3 10.5 +8% 22.6
Gross profit 2.5 3.2 -22% 6.9
Gross margin (%) 22% 30%
Overheads (2.9) (2.6) -8% (6.0)
Adjusted EBITDA (0.4) 0.6 0.9
Adjusted EBITDA margin % (3%) 6% 4%
Finance charge (net) - (0.1) (0.1)
Depreciation (0.1) (0.1) (0.2)
Amortisation of intangible assets - computer software (0.6) (0.5) (1.2)
Adjusted loss before tax (1.1) (0.1) (0.6)
Amortisation of acquired intangible assets (1.0) (1.1) (2.1)
Exceptional items & Share-based payments (0.02) (0.2) (0.6)
Loss before tax (2.1) (1.4) (3.3)
Taxation credit 0.5 0.5 1.1
Loss after tax (1.6) (0.9) (2.2)
Finance charge (net)
Net finance charges in the period show a slight reduction on the prior year,
as interest on increased cash deposits in the period offset interest charged
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
Amortisation showed a slight increase in the period, reflecting software
development expenditure, with enhanced versions of the Group's Access
Management and Data Discovery products launched in the period.
Adjusted loss before tax
The adjusted loss before tax of £1.1m compares to a figure of £0.1m in H1
FY24. This principally reflects the revised margin profile experienced
during H1, which in turn reflected the mix of revenues during the period, with
an increased weighting towards lower-margin licensing of third party software.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets of £1.0 million (H1 FY24: £1.1
million) is broadly in line with the previous year.
Exceptional costs and share based payments
There were minimal costs incurred during the period in respect of exceptional
items and share based payments (H1 FY24: £0.1m), with no material
restructuring activities undertaken in the period and the cost of options
granted between 2017 and 2020 now largely accounted for.
Loss before tax
The net impact of all the points outlined above resulted in a Loss before tax
of £2.1m (H1 FY24: £1.4m).
Taxation
The credit in the period was £0.5 million (H1 FY24: £0.4 million) giving an
effective tax rate of 23% (H1 FY24: 32%).
Loss per share
Adjusted basic and diluted loss per share was £0.03 (H1 FY24: earnings per
share £0.01). Reported basic and diluted loss per share was £0.07 (H1 FY23:
basic and diluted loss per share £0.04).
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 2024 of £1.3 million remained flat
YoY.
The Group retains a healthy balance sheet with cash held at 30 September of
£3.0 million (H1 FY24: £2.2m). This balance has remained at a similar
level since the period end.
The Group continues to invest in the development of internally created
software, with expenditure of £0.5 million in the period (H1 FY24: £0.5
million). This is in line with the previous year. A tax receipt of £0.3m
in respect of expenditure on research and development was received in November
2024, following the period end. In the prior period £0.3m had been received
during H1.
6 months to 30 September
H1 FY25 H1 FY24 12 months to 31 March 2024
(unaudited) (unaudited)
£m £m £m
Adjusted EBITDA (0.4) 0.6 0.9
Movements in working capital and exceptional items (1.0) (2.0) 1.1
Cash used / generated from operations (1.4) (1.4) 2.0
Capital expenditure (net of disposal proceeds) (0.5) (0.5) (1.1)
Tax received / (paid) 0.0 0.3 0.3
Interest paid 0.03 (0.03) (0.1)
Payments of lease liabilities (0.1) (0.1) (0.2)
Movement in cash (2.0) (1.8) 1.0
Opening cash and cash equivalents 5.0 4.0 4.0
Closing cash and cash equivalents 3.0 2.2 5.0
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.
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 2024, 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).
Jonathan Hall
Chief Financial Officer
26 November 2024
Unaudited condensed consolidated statement of comprehensive income
for the 6 months to 30 September 2024
H1 FY 25 H1 FY24
Note £m £m
Revenue 3 11.3 10.5
Cost of sales (8.8) (7.3)
Gross profit 2.5 3.2
Administrative expenses (2.9) (2.8)
Depreciation and amortisation (1.7) (1.7)
Total operating costs (4.6) (4.5)
Operating loss (2.1) (1.3)
Adjusted EBITDA 3 (0.4) 0.6
Depreciation and amortisation (1.7) (1.7)
Exceptional items - (0.2)
Share-based payments - -
Operating loss (2.1) (1.3)
Finance cost 4 - (0.1)
Finance income 4 - -
Loss before taxation (2.1) (1.4)
Income tax credit 5 0.5 0.4
Loss for the period and attributable to equity holders of the Company (1.6) (0.9)
Other comprehensive loss
Items that may be classified to profit and loss:
Exchange differences on translation of foreign operations - -
Total comprehensive loss for the period (1.6) (0.9)
(Loss) per ordinary share attributable to the owners of the parent £ £
Basic (£ per share) 6 (0.07) (0.04)
Diluted (£ per share) 6 (0.07) (0.04)
Adjusted basic and diluted (£ per share) 6 (0.03) (0.01)
Unaudited condensed consolidated statement of financial position
as at 30 September 2024
H1 FY25 H1 FY24
Note £m £m
Assets
Non-current assets
Intangible assets 41.6 43.9
Property, plant and equipment 0.4 0.4
Deferred tax 1.5 0.9
Trade and other receivables 7 - 4.1
Total non-current assets 43.5 49.3
Current assets
Trade and other receivables 8 8.4 11.4
Cash and cash equivalents 3.0 2.2
Total current assets 11.4 13.6
Total assets 54.9 62.9
Liabilities
Current liabilities
Trade and other payables 9 7.4 9.8
Total current liabilities 7.4 9.8
Non-current liabilities
Creditors: amounts falling due after more than one year 10 3.1 5.9
Total non-current liabilities 3.1 5.9
Total liabilities 10.5 15.7
Net assets 44.4 47.2
Capital and reserves
Share capital 11 22.3 22.3
Share premium 34.6 34.6
Other reserves 23.1 23.5
Translation reserve - -
Accumulated losses (35.6) (33.2)
Equity attributable to owners of the Company 44.4 47.2
Total equity and liabilities 54.9 63.0
Unaudited condensed consolidated statement of changes in equity
for the 6 months to 30 September 2024
Share capital Share premium Other reserves Translation reserve Accumulated losses Total Equity
£000 £000 £000 £000 £000 £000
At 31 March 2023 (audited) 22.3 34.6 23.4 0 (32.2) 48.1
Loss for the period - - - - (0.9) (0.9)
Other comprehensive profit for the period - - - -
Total comprehensive loss for the period - - - - (0.9) (0.9)
Contributions by and distributions to owners
Share-based payments - - - - - -
At 30 September 2023 (unaudited) 22.3 34.6 23.5 - (33.2) 47.2
Loss for the period - - - - (1.2) (1.2)
Other comprehensive loss for the period - - - - - -
Expiry of share options - - (0.4) - 0.4 -
Total comprehensive loss for the period - - (0.4) - (0.8) (1.2)
Contributions by and distributions to owners
Share-based payments - - - - - -
At 31 March 2024 (audited) 22.3 34.6 23.1 - (34.0) 46.0
Loss for the period - - - - (1.6) (1.6)
Other comprehensive profit/loss for the period - - - - - -
Total comprehensive profit/loss for the period - - - - (1.6) (1.6)
Contributions by and distributions to owners
Share-based payments - - - -
At 30 September 2024 (unaudited) 22.3 34.6 23.1 - (35.6) 44.4
Unaudited condensed consolidated cash flow statement
for the 6 months to 30 September 2024
H1 FY25 H1 FY24
£m £m
Cash flows from operating activities
Loss for the period (1.6) (0.9)
Adjustments for:
Amortisation of intangible assets 1.6 1.6
Depreciation of right of use assets 0.1 0.1
Depreciation of property, plant and equipment - -
Share-based payment charge - -
Exceptional items - 0.2
Finance costs - -
Finance income - -
Income tax (0.5) (0.4)
Cash flows (used in)/ from operating activities before changes in working (0.4) 0.6
capital
Decrease/(increase) in trade and other receivables 4.8 3.7
(Decrease)/increase in trade and other payables (5.7) (5.5)
Cash used in operations (1.3) (1.2)
Net foreign exchange movements - -
Finance costs paid - -
Tax received - 0.3
Net cash used in operating activities before exceptional items (1.3) (0.9)
Net cash flows on exceptional items - (0.2)
Net cash used in operating activities (1.3) (1.1)
Investing activities
Purchase of property, plant and machinery - -
Purchase of intangibles (0.5) (0.5)
Net cash used in investing activities (0.5) (0.5)
Financing activities
Repayment of lease liabilities (0.2) (0.2)
Net cash used in financing activities (0.2) (0.2)
Net decrease in cash and cash equivalents (2.0) (1.8)
Foreign exchange movements on cash and cash equivalents -
Cash and cash equivalents at the beginning of the period 5.0 4.0
Cash and cash equivalents at the end of the period 3.0 2.2
Notes
1. General information
The unaudited interim condensed consolidated financial information was
authorised by the board of directors for issue on 25 November 2024. The
information for the six-month period ended 30 September 2024 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 2025.
The interim consolidated financial information does not comply with IAS 34
Interim Financial Reporting, as permissible under the rules of AIM.
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 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
2025 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. 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 2025.
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 2024 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
2024 2024 2023 2023
Revenue Profit Revenue Profit
(unaudited) (unaudited) (unaudited) (unaudited)
£m £m £m £m
Services 10.2 0.1 9.3 1.0
Software 1.1 0.4 1.2 0.5
Group total 11.3 0.5 10.5 1.5
Group costs (0.9) 0.8
Adjusted EBITDA (0.4) 0.6
Amortisation of intangibles (1.6) (1.6)
Depreciation (0.1) (0.1)
Share-based payments - -
Exceptional items - (0.2)
Finance costs (net) - (0.1)
Loss before tax (2.1) (1.4)
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
2024 2023
(unaudited) (unaudited)
£m £m
United Kingdom 10.0 6.5
Rest of Europe 0.6 2.4
North America 0.6 1.5
Rest of the world 0.1 0.1
11.3 10.5
4. Finance costs and income
Six-month period ended 30 September
2024 2023
(unaudited) (unaudited)
Finance costs £m £m
Revolving Credit Facility charges - 0.1
Interest payable on lease liabilities - -
- 0.1
Finance income in the period was £28k (H1 FY24: 5k)
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% (FY24: 25%)
6. (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 2024 and six months ended
30 September 2023 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 2023 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
2024 2023
(unaudited) (unaudited)
£000 £000
Net loss from total operations
Loss for the purposes of basic and diluted loss per share being net loss (2.1) (0.9)
attributable to shareholders:
Add/(remove)
Amortisation of acquired intangibles (net of tax) 1.1 0.9
Share based payments - 0.04
Exceptional items (net of tax) - 0.2
Adjusted earnings for the purpose of adjusted earnings per share (1.0) 0.2
Number of shares No No
Weighted average number of ordinary shares for the purpose of basic and 23,826,379 23,826,379
adjusted earnings per share
Weighted average number of ordinary shares for the purpose of basic and 23,826,379 23,826,379
adjusted diluted earnings per share
(Loss) per share £ £
Basic loss per share (0.07) (0.04)
Diluted loss per share (0.07) (0.04)
Adjusted Basic and diluted (loss) per share (0.03) (0.01)
7. Non-current assets: Trade and other receivables
Period ended 30 September
2024 2023
(unaudited) (unaudited)
£m £m
Trade receivables - 1.2
Accrued income - 2.9
- 4.1
8. Current assets: Trade and other receivables
Period ended 30 September
2024 2023
(unaudited) (unaudited)
£m £m
Trade receivables 2.0 6.9
Accrued income 6.1 4.1
Prepayments and other receivables 0.3 0.3
Deferred tax asset -
8.4 11.4
9. Trade and other payables
Period ended 30 September
2024 2023
(unaudited) (unaudited)
£m £m
Trade payables 0.7 0.8
Accruals and other payables 5.9 8.1
Other taxation and social security 0.5 0.6
Deferred income 0.2 0.2
Corporation tax - -
Lease liabilities 0.1 0.1
7.4 9.8
10. Creditors: amounts falling due after more than one year
Period ended 30 September
2024 2023
(unaudited) (unaudited)
£m £m
Deferred tax 2.9 3.3
Accruals and other payables - 2.4
Lease liabilities 0.2 0.2
3.1 5.9
11. Share capital
The table below details movements in share capital during the year:
Six-month period ended 30 September
In thousands of shares 2024 2023
000 000
In issue at 31 March 23,826 23,826
In issue at 30 September 23,826 23,826
Allotted, called up and fully paid £m £m
Ordinary shares of £0.10 each 2.4 2.4
Deferred shares of £0.90 each 19.9 19.9
22.3 22.3
The Company did not issue any shares in the six-month period ended 30
September 2024.
12. Related party transactions
The Directors of the Group and their immediate relatives have an interest of
19% (H1 FY24: 19%) 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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