We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Ecsc Group Plc | LSE:ECSC | London | Ordinary Share | GB00BYMJ4J99 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 52.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMECSC
RNS Number : 6792F
ECSC Group PLC
23 March 2022
23 March 2022
ECSC Group plc
('ECSC' or the 'Company' or the 'Group')
Final Results for the Year Ended 31 December 2021
Strong revenue growth delivering positive Adjusted EBITDA
ECSC Group plc (AIM: ECSC) a leading provider of cyber security services, announces its audited final results for the year ended 31 December 2021.
Financial Highlights
-- Organic revenue up 8% to GBP6.14m (2020: GBP5.66m)
-- Managed Detection and Response ("MDR") division recurring revenue growth of 7% to GBP2.59m (2020: GBP2.42m)
-- Assurance division repeat revenue increased to 81% (2020: 73%) -- Adjusted EBITDA* profit GBP0.17m (2020: GBP0.38m) -- Agreed a new GBP1.0m loan to support Group's organic growth plans
-- Cash at the period end was GBP1.17m, including new GBP1.0m loan and GBP0.02m of Covid-19 related government support (31 December 2020: GBP1.12m, including GBP0.42m of Covid-19 related government support).
* Adjusted EBITDA excludes one-off charges and share based charges (see note 13)
Operational Highlights
-- Continued development of partner programme, partner revenue proportion increased to 11% (2020: 4%)
-- Continued development of proprietary Artificial Intelligence (AI) software, 15% of revenue (2020: 14%)
Ian Mann, Chief Executive Officer of ECSC, commented:
"The Group made good progress during the 2021 financial year, and we are pleased to report a return to growth in both divisions, and continued to be Adjusted EBITDA positive.
"Responding to the Covid-19 pandemic, the Group re-engineered its sales and delivery processes to reflect and cater for the new working patterns of our clients, with a renewed focus on our core strengths and expertise. As a result, we have been able to deliver increased value to our clients in preventing, detecting, and responding to cyber security breaches, with a marked increase in sales across both divisions.
"Market demand remains strong as businesses continue to recognise the value of sound cyber security solutions to avoid costly breaches and disruptive down time, especially with the return to office working.
"Momentum has continued into Q1 2022, and we look forward to keeping the market updated on our progress."
Enquiries:
ECSC Group plc +44 (0) 1274 736 223
David Mathewson (Non-Executive Chairman)
Ian Mann (Chief Executive Officer)
Allenby Capital (Nominated Adviser and Broker) +44 (0) 203 3285 656
David Hart / Piers Shimwell (Corporate Finance)
Tony Quirke (Equity Sales and Corporate Broking)
Yellow Jersey (PR and IR) +44 (0) 203 0049 512
Sarah Hollins
Annabel Atkins
For more information please visit the following: https://investor.ecsc.co.uk/
Notes to Editors:
Founded in 2000, ECSC Group plc (AIM: ECSC) is the UK's longest running full-service cyber security service provider. With an extensive range of in-house developed proprietary technologies, including advanced Artificial Intelligence (AI) systems, ECSC provides expert security breach prevention and advisory support to organisations across all sectors.
ECSC operates from two Security Operations Centres (SOCs): one in Yorkshire, UK, and the other in Brisbane, Australia. ECSC offers flexible 24/7/365 cyber security monitoring, detection, and response support to its clients, either as a fully managed service or to enhance an organisation's existing cyber security systems. In addition, ECSC's Assurance division provides guidance, certification to industry standards, and extensive testing services to allow organisations to assess their cyber security protection.
The Company's broad client base ranges from e-commerce start-ups to global blue-chip organisations, including 10% of the FTSE 100.
For more information please visit the following: https://investor.ecsc.co.uk/
Chairman's Statement
These results show a clear return to growth across the Group, both within Managed Detection and Response ("MDR") and Assurance divisions. It is also pleasing to see that the percentage of Group revenue from MDR recurring revenue has now grown to nearly half from being about a quarter at the IPO. This confirms the ongoing requirements for all organisations to maintain their cyber security defences and breach detection capability. We continue to emerge from the challenges of the Covid-19 pandemic in a stronger position.
Despite some ongoing impact caused by the pandemic and the economic risks associated with Brexit, the Group has continued to demonstrate resilience and financial progress based on quality of delivery and unrivalled client reputation and retention. I am proud of the way the team has adapted and innovated as business practices continue to change, affecting both sales and delivery processes.
The ongoing risk of ransomware and its potentially catastrophic impact, combined with the multi-million-pound fines related to the UK General Data Protection Regulation (UK-GDPR), substantiate that all organisations must build resilience into their cyber security protection, detection and response capabilities. ECSC remains a trusted partner to help organisations of all sizes achieve this.
The continued growth in 24/7/365 detection services, delivered through the Security Operations Centres (SOCs) in the UK and Australia, supported by the ECSC Kepler Artificial Intelligence (AI), shows the importance of early breach detection to contain an incident and limit damaging consequences such as ransomware. For all but the largest global organisations, the outsourcing of this critical function continues to be the logical choice, and ECSC has the technology, people, and certified processes to deliver.
The Group's successful agreement of a GBP1.0m new growth loan demonstrates additional confidence in our operations and results.
On behalf of the board, I would like to thank all of our clients, partners, team, advisors, and investors for their continued support throughout a challenging year for us all.
ECSC continues to be well-positioned in the growing cyber security marketplace, and we are now firmly back on our organic growth strategy and related recruitment activities.
David Mathewson
Non-Executive Chairman
22 March 2022
Chief Executive Officer's Review
T he Group made good progress during the 2021 financial year, and we are pleased to report a return to growth in both divisions, and continued to be Adjusted EBITDA positive.
The Assurance division has also seen a significant increase in repeat revenue from existing clients, confirming the exceptional service quality and value perceived by clients in their breach prevention and certification activities.
Post Covid-19 Challenges and Opportunities
The Covid-19 pandemic has demanded changes to both our sales and delivery processes, presented the opportunity to challenge existing beliefs and, in the process, re-engineer operations to reflect new realities.
A good example of this is our sales process that, pre-pandemic, relied extensively on multiple face-to-face meetings. The necessities of our Covid-19 response meant that we had to rapidly change this approach and embrace remote, video-based, sales and scoping processes. As a result, we have completely re-engineered the sales operation and supporting functions, reflecting the new working patterns of our clients and reducing the direct sales headcount, whilst increasing sales in the process.
We have then extended a wider strategic review of our core strengths and associated target clients to facilitate a better fit with more profitable services lines and client relationships.
Inflationary Pressures
2021 saw significant inflationary pressures and wage expectations of skilled and experienced cyber security professionals. As a result, we have instigated a formal annual pricing review. This resulted in increases in daily consulting rates averaging 10% in August 2021. We anticipate this price pressure to continue with the current global uncertainties and resulting UK and global inflation. ECSC's committed staff policy is to pay in the top 20% of market rates for each role, combined with industry leading career development.
Current Ukraine Conflict
Many clients are concerned about the potential for an increase in cyber attacks originating from Russia. These concerns may be well-placed, and confirm the importance of achieving and maintaining an appropriate level of cyber security protection and breach detection for all organisations.
Growth Strategy
We are confident that the organic growth strategy of ECSC remains appropriate. Despite the continued challenges of 2021, we are seeing the results of process re-engineering and a focus on our core expertise and delivering value to our clients in preventing, detecting, and responding to, cyber security breaches.
Key Performance Indicators
The Key Performance Indicators below were established in 2018 to enable meaningful measurement of the Group's performance.
Performance Rationale 2021 2020 2019 Management Comment Indicator The Group saw an increase in Assurance and MDR Measurement of revenue due to further the success of investment in the organic the organic growth growth strategy and Revenue Growth strategy 8% (4%) 10% recovery from Covid ---------------------- -------------------------- ----------- ----------- ----------- Visibility of
the success of increasing the percentage of Continued growth due MDR Recurring revenue from long-term to new contract wins Revenue Growth recurring revenues 7% 22% 27% and contract expansions ---------------------- -------------------------- ----------- ----------- ----------- Visibility of the success of increasing the percentage In line with the of revenue from strategy MDR Recurring long-term to increase this Revenue Proportion recurring revenues 42% 43% 34% proportion ---------------------- -------------------------- ----------- ----------- ----------- Combined measurement MDR Order of GBP2.2m GBP2.6m GBP2.6m The management team's Book new client contracts favoured overall measure together with of progress in managed renewals of existing services client contracts ---------------------- -------------------------- ----------- ----------- ----------- MDR Gross Delivery efficiency Increased investment Margin measurement 61% 73% 68% in this division ---------------------- -------------------------- ----------- ----------- ----------- Indicative of strong Quasi-recurring client retention and Assurance from longer- term continued trust in Repeat Revenue consulting clients 81% 73% 73% ECSC quality ---------------------- -------------------------- ----------- ----------- ----------- A reflection on capacity required for growth and management of Assurance Delivery efficiency consultant Gross Margin measurement 63% 58% 54% workload ---------------------- -------------------------- ----------- ----------- ----------- Continued investment Research in technology Increased investment and Development and intellectual in technologies for (% of revenue) property development 15% 14% 13% the future ---------------------- -------------------------- ----------- ----------- -----------
Ian Mann
Chief Executive Officer
22 March 2022
Financial Review
Principal Activities
The principal activity of the Group during the year continued to be the provision of professional cyber security services, including Assurance, MDR and the sale of Vendor Products.
Comparative Financial Information
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Revenue Assurance 3,123 2,724 MDR 2,886 2,732 Vendor Products 93 125 Other 42 82 6,144 5,663 ------------------------------ ----------- ----------- Gross Profit Assurance 1,965 1,576 MDR 1,757 1,994 Vendor Products 15 25 Other (63) (47) 3,674 3,548 ------------------------------ ----------- ----------- Adjusted EBITDA* Other Income 282 297 Sales & Marketing Costs (2,018) (1,713) Administration Expenses (1,773) (1,757) 165 375 ------------------------------ ----------- ----------- EBITDA** Share Based Payments (100) (101) Exceptional Items (145) (65) (80) 209 ------------------------------ ----------- ----------- Depreciation and Amortisation (400) (480) Adjusted Operating Loss* (235) (105) ------------------------------ ----------- ----------- Operating Loss (480) (271) ------------------------------ ----------- -----------
* Adjusted Operating Loss and Adjusted EBITDA excludes exceptional charges and share based charges.
* * EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation
(As defined in note 13 in the Financial Statement).
Revenue & Organic Growth
In the year ended 31 December 2021, total revenue increased by 8% to GBP6.14m (2020: GBP5.66m). Within this, our Assurance division saw strong sales with revenue growing by 15% to GBP3.12m (2020: GBP2.72m).
The MDR division also saw a growth in revenue of 6% in the year to GBP2.89m (2020: GBP2.73m). This includes recurring revenue which rose to GBP2.59m (2020: GBP2.42m), workshop and event revenue of GBP0.02m (2020: nil) and Incident Response revenue which fell to GBP0.28m (2020: GBP0.31m).
Vendor Products revenue in the year fell by 26% to GBP0.09m (2020: GBP0.13m).
Margin Generation
Gross Profit for the year was GBP3.67m, yielding a 60% margin (2020: GBP3.55m, yielding a 63% margin). This small margin decrease was a consequence of a fall in the margin in the MDR division to 61% (2020: 73%) due to significant investment and significant wage inflation in that area of the business. The Board expects the MDR margin to increase in the future.
The Assurance margin rose to 63% in the year (2020: 58%). This was due to cost controls over the period. The Board expects the Assurance margin to continue at a similar level in the future.
EBITDA & Operating Loss
Adjusted EBITDA for the year, which excludes one-off charges and share based charges, was GBP0.17m (2020: GBP0.38m). EBITDA for the year was a loss of GBP0.08m (2020: profit of GBP0.21m). During 2020 the Group benefited from Government grants of GBP0.3m (2021: GBPnil).
Adjusted Operating Loss for the year, which excludes one-off charges and share based charges, was GBP0.23m (2020: loss of GBP0.11m). The Operating Loss in the year was GBP0.48m (2020: loss of GBP0.27m).
Cash Flow
Cash and cash equivalents increased by GBP0.05m (2020: GBP0.77m) to GBP1.17m (2020: GBP1.12m) as at 31 December 2021 primarily due to increase margin across the Assurance division and the proceeds from the GBP1.0m loan taken on during the year. During the year GBP0.40m was repaid of Covid-19 related government support received in 2020, GBP0.02m of government support remains outstanding as at 31 December 2021. The Group continued to invest in Research and Development during the year, receiving a refund of GBP0.21m (2020: GBP0.29m) from HMRC in respect of a surrender of R&D Tax Credits from earlier periods.
Intangible Asset
Intangible asset costs have increased to GBP1.47m (2020: GBP1.28m). This is offset by accumulated amortisation of GBP0.99m (2020: GBP0.82m). The Group's development cost for the year was GBP0.19m. The Net Book Value of Intangible Assets as at 31 December 2021 was therefore GBP0.48m (2020: GBP0.46m).
Tangible Asset
Property, plant and equipment (PPE) cost have increased to GBP0.98m (2020: GBP0.95m). This is offset by accumulated depreciation of GBP0.89m (2020: GBP0.81m). The Group's capital expenditure for the year was GBP0.03m. The Net Book Value of Tangible Assets as at 31 December 2021 was GBP0.09m (2020: GBP0.15m). The Group plans to increase investment in tangible assets in the future.
Trade and other receivables
Trade and other receivables decreased to GBP0.68m (2020: GBP0.81m) as at 31 December 2021. This includes GBP0.46m of Trade receivables (2020: GBP0.61m).
Trade and other payables
Trade and other payables decreased to GBP1.49m (2020: GBP2.09m) as at 31 December 2021. This includes GBP0.68m of deferred income (2020: GBP0.88m).
Borrowings
In December 2021, the Group entered into a new five-year Growth loan facility with Growth Lending Limited. The net proceeds of this facility will be used for working capital purposes and to support the Group's overall organic growth strategy.
The new borrowing facility compromises an initial advance upon completion of a GBP1.0m, with the option to draw down a further advance of GBP0.5m after six months, subject to an agreed level of adjusted EBITDA being achieved.
The facility term is 60 months with straight-line amortisation of the loan commencing after six months. The interest rate on each advance is at the higher of 9.0% per annum or the monthly average SONIA plus 7%. There is an arrangement fee of 1.5% of the facility amount paid on completion, with a 5% early prepayment charge.
The loan was arranged by Funding Friends Limited which received a fee of 1% of the loan on completion in respect of advisory fees. The Loan facility is secured by a fixed charge over the assets of the Company.
As at the year end the carrying value of the loan was GBP963k (2020: GBPnil) which is the principal amount of GBP1.0m stated after direct fees incurred and interest accrued to the year end.
Key Performance Indicators
The Key Performance Indicators are set out above.
Capital reduction
On 26 August 2021, the Company completed a reduction of its share capital, whereby the entire amount of GBP6.1 million standing to the credit of the Company's share premium account was cancelled thereby creating distributable reserves, which will allow the Company to pay dividends or make distributions to its shareholders and/or undertake a buyback of its ordinary shares in due course, should it be appropriate or desirable to do so.
The Capital Reduction has no effect on the overall net asset position of the Company.
Balance Sheet
The Group's Balance Sheet as at 31 December 2021 had Net Assets of GBP0.22m (2020: GBP0.65m). Retained Earnings and Distributable Reserves as at 31 December 2021 were a cumulative loss of GBP0.37m after the capital reduction (2020: cumulative loss of GBP5.94m).
Going Concern
The Directors have assessed the going concern status of the Group by reference to a number of factors. In particular, the Directors have considered the strong rate of growth in the cyber security market; the fact that business continues to attract new clients and is not overly dependent on any single client; the fact that the business continues to retain key staff, and that the Group has a secured new loan facility with Growth Lending Limited, the net proceeds of which will be used for working capital purposes and to support the Group's overall organic growth strategy. The new borrowing facility compromises an initial GBP1.0m term loan received on 24 December 2021 and a further GBP0.5m loan to be drawn down after six months, subject an agreed level of adjusted EBITDA being achieved. The facility term is 60 months with an interest rate at the higher of 9% per annum or the monthly average SONIA plus 7% . T he Board is positive about the future EBITDA trajectory of the Company and continues to manage the cash position of the Company carefully. These factors give the Directors confidence in relation to going concern.
The Board have included the above factors in determining its financial forecasts for the period through to December 2023. In those forecasts they have considered the available headroom against the facilities available to them and considered scenarios under which the level of revenue expected may not be achieved but taking in to account mitigating actions. The directors are satisfied that under reasonable downside scenarios they still have financial resources to met liabilities as they fall due.
Dividend
The Board has not declared a dividend for the year ended 31 December 2021 (2020: GBPnil).
Gemma Basharan
Chief Financial Officer
22 March 2022
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Year ended Year ended 31 December 31 December 2021 2020 Note GBP'000 GBP'000 Revenue 5 6,144 5,663 Cost of Sales (2,470) (2,115) ---------------------------------- ---- ----------- ----------- Gross Profit 5 3,674 3,548 Other Income 282 297 Sales & Marketing Costs (2,018) (1,713) Administration Expenses (2,418) (2,403) Operating Loss before Exceptional Items and Share Based Payments (235) (105) Share Based Payments 100 101 Exceptional Items 145 65 ---------------------------------- ---- ----------- ----------- Operating Loss (480) (271) ---------------------------------- ---- ----------- ----------- Finance Cost (42) (48) Loss before Taxation 13 (522) (319) Taxation Charge/(Credit) 6 (5) 50 ---------------------------------- ---- ----------- ----------- Loss for the year (527) (269) ---------------------------------- ---- ----------- ----------- Other Comprehensive Income - - ---------------------------------- ---- ----------- ----------- Total Comprehensive Loss for the year (527) (269) ---------------------------------- ---- ----------- ----------- Attributed to Equity Holders of the Company (527) (269) Loss per Share pence pence Basic Loss per Share 7 (5.3) (2.7) Diluted Loss per Share 7 (5.3) (2.7)
Consolidated Statement of Financial Position
As at 31 December 2021
Year ended Year ended 31 December 31 December 2021 2020 Note GBP'000 GBP'000 ASSETS Non-current Assets Intangible Assets 8 483 455 Property, Plant and Equipment 9 88 148 Right-of-use Assets 11 613 746 Deferred Tax Asset 6 147 118 Total Non-current Assets 1,331 1,467 ------------------------------ ---- ----------- ----------- Current Assets Inventory 9 9 Trade and Other Receivables 675 811 Corporation Tax Recoverable 289 216 Cash and Cash Equivalents 10 1,168 1,122 Total Current Assets 2,141 2,158 ------------------------------ ---- ----------- ----------- TOTAL ASSETS 3,472 3,625 ------------------------------ ---- ----------- ----------- LIABILITIES Current Liabilities Trade and Other Payables (1,489) (2,085) Borrowings 12 (105) - Lease Liability 11 (107) (143) Total Current Liabilities (1,701) (2,228) ------------------------------ ---- ----------- ----------- Non-current Liabilities Deferred Tax Liability 6 (124) (90) Borrowings 12 (858) - Lease Liability 11 (568) (659) Total Non-current Liabilities (1,550) (749) ------------------------------ ---- ----------- ----------- TOTAL LIABILITIES (3,251) (2,977) ------------------------------ ---- ----------- ----------- NET ASSETS 221 648 ------------------------------ ---- ----------- ----------- EQUITY Equity attributable to Owners of the Parent: Share Capital 100 100 Share Premium Account - 6,098 Share Option Reserve 492 392 Retained Earnings/(Losses) (371) (5,942) TOTAL EQUITY 221 648 ------------------------------ ---- ----------- -----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share Share Retained Share Premium Option Earnings/ Capital Account Reserve (Losses) Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Balance as at 31 December 2019 91 5,661 291 (5,673) 370 ------------------------------------- ------- ------- ------- --------- ------- Loss and Total Comprehensive: Total comprehensive loss for the year - - - (269) (269) ------------------------------------- ------- ------- ------- --------- ------- Transactions with shareholders Issue of Shares 9 437 - - 446 Share Based Payments - - 101 - 101 Total transactions with shareholders 9 437 101 - 547 ------------------------------------- ------- ------- ------- --------- ------- Balance as at 31 December 2020 100 6,098 392 (5,942) 648 ------------------------------------- ------- ------- ------- --------- ------- Loss and Total Comprehensive: Total comprehensive loss for the year - - - (527) (527) ------------------------------------- ------- ------- ------- --------- ------- Transactions with shareholders Share Based Payments - - 100 - 100
Reduction of capital - (6,098) - 6,098 - Total transactions with shareholders - (6,098) 100 - 100 ------------------------------------- ------- ------- ------- --------- ------- Balance as at 31 December 2021 100 - 492 (371) 221 ------------------------------------- ------- ------- ------- --------- -------
Consolidated Cash Flow Statement
For the year ended 31 December 2021
Year ended Year ended 31 December 31 December 2021 2020 Note GBP'000 GBP'000 Cash Flow from Operating Activities Loss before Taxation (522) (319) Adjustment for: Amortisation of Intangibles 8 166 168 Depreciation of Right-of-use Assets 11 143 175 Depreciation of Property, Plant and Equipment 9 91 137 Loss/(gain) on Disposal of Tangible Asset 4 (4) Finance costs 42 48 Share Based Payments 100 101 --------------------------------------------- ---- ----------- ----------- Cash used up in Operating Activities before changes in Working Capital 24 306 Change in Inventory - 17 Change in Trade and Other Receivables (146) (214) Change in Trade and Other Payables (624) 268 Cash (used in)/ generated from Operating Activities (746) 377 R&D tax credit received 209 343 Net Cash (used in)/ generated from Operating Activities (537) 720 Acquisition of Property, Plant and Equipment (34) (5) Disposal Proceeds - 6 Development Costs capitalised (194) (194) Net Cash Flow used in Investing Activities (228) (193) Principal paid on lease liabilities (172) (195) Interest paid on loans and borrowings (2) (7) Net proceeds from issue of loan 985 - Proceeds from issue of shares - 500 Costs of share issuance - (54) Net Cash generated from Financing Activities 811 244 Net increase in Cash & Cash Equivalents 46 771 --------------------------------------------- ---- ----------- ----------- Cash & Cash Equivalents at beginning of period 1,122 351 Cash & Cash Equivalents at end of period 1,168 1,122 --------------------------------------------- ---- ----------- -----------
Notes
1. Corporate Information
ECSC Group plc is incorporated in England and Wales and admitted to trading on the AIM market of the London Stock Exchange (AIM: ECSC).
2. General Information
This results announcement may contain certain statements about the future outlook of ECSC Group plc. Although the Directors believe their expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.
3. Basis of Preparation
This financial information for the year ended 31 December 2021 has been prepared in accordance with UK adopted international accounting standards (collectively 'UKIAS) and as applied in accordance with the provisions of the Companies Act 2006.
The information in this preliminary statement has been extracted from the financial statements for the year ended 31 December 2021 and, as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with IFRS. The Group's Annual Report for the year ended 31 December 2021 has yet to be delivered to the Registrar of Companies. The auditors have reported on these accounts. The figures for the year ended 31 December 2021 and the ended 31 December 2020 do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The financial statements have been presented in thousands of Pounds Sterling (GBP'000, GBP) as this is the currency of the primary economic environment that the Company operates in.
The preliminary announcement was approved by the Board on 22 March 2022 and authorised for issue.
The statutory accounts for the year ended 31 December 2021 were approved by the Board on 22 March 2022 and will be delivered to the Registrar of Companies in due course. The statutory accounts for the period ended 31 December 2021 will be made available on the Company's website www.ecsc.co.uk at least 21 days before the Annual General Meeting.
4. Accounting Policies
The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.
4.1 Basis of Accounting
The financial statements have been prepared on the historical cost basis except as stated.
New IFRS standards, amendments to and interpretations not applied to published standards
The following new standards, amendments to standards and interpretations will be mandatory for the first time in future financial years:
Issued date IASB mandatory UK Adoption status effective date (EU pre 31 December (UK mandatory effective 2020) date) New Standards -------------------------- --------------- ------------------------ IFRS 17 Insurance 18-May-2017 and 01-Jan-2023 TBC contracts including 25-June 2020 Amendments to IFRS 17 (issued on 25 June 2020) -------------------------- --------------- ------------------------ Amendments to existing standards -------------------------- --------------- ------------------------ Amendments to IAS 23-Jan-2020 01-Jan-2023 TBC 1: Classification of Liabilities as Current or Non-current -------------------------- --------------- ------------------------ Amendments to: 14-May-2020 01-Jan-2022 TBC IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets -------------------------- --------------- ------------------------ Annual Improvements 14-May-2020 01-Jan-2022 TBC to IFRSs (2018-2020 Cycle): IFRS 1, IFRS 9, Illustrative Examples accompanying IDRS 16, IAS 41 -------------------------- --------------- ------------------------ Amendments to IFRS 28-May-2020 01-Jun-2020 Endorsed 16 Leases COVID 19-Related Rent Concessions -------------------------- --------------- ------------------------ Amendments to IFRS 25-June-2020 01-Jan-2021 Adopted by UKEB 4 Insurance Contracts - deferral of IFRS 9 -------------------------- --------------- ------------------------ Amendments to IFRS 27-Aug-2020 01-Jan-2021 Adopted by UKEB 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2 -------------------------- --------------- ------------------------ Amendments to IAS 12-Feb-2021 01-Jan-2023 TBC 8 - Definition of Accounting Estimates -------------------------- --------------- ------------------------ Amendments to IAS 12-Feb-2021 01-Jan-2023 TBC 1 and IFRS Practice Statement 2 - Disclosure of Accounting policies -------------------------- --------------- ------------------------ Amendments to IFRS 31-Mar-2021 01-Apr-2021 Adopted by UKEB 16 Leases COVID 19-Related Rent Concessions beyond 30 June 2021 -------------------------- --------------- ------------------------ Amendments to IAS 07-Feb-2021 01-Jan-2023 TBC 12 - Deferred Tax related to Assets and Liabilities arising from a single Transaction -------------------------- --------------- ------------------------
The application of these standards and interpretations is not expected to have a material impact on the Group's reporting financial performance or position.
4.2 Going Concern
The Directors have reviewed whether the Group has adequate resources to continue in operational existence for the foreseeable future, being no shorter than 12 months from the date of approving the Annual Report. In conducting this review, the Directors have considered a range of factors, including the market prospects for cyber security services, client relationships and dependency, supplier relationships and dependency, actual or potential litigation, staff retention and reliance, relationships with HMRC and regulators, financing arrangements, historic trading and cash flow performance, current trading and cash flow performance, and future trading and cash flow expectations. In undertaking their review, the Directors have prepared financial projections for the years ending 31 December 2022 and 2023, a review which assumes continued revenue growth and cost efficiency.
The budget figures are closely monitored against actuals on a monthly basis. Variances that may arise are discussed a Board level on a monthly basis during a review of the monthly numbers. In the event that this revenue and cost performance is not achieved, the Directors have also considered a sensitivity analysis based on lower revenue growth, increase in salaries inflation and have formulated contingency plans for this scenario, which enable the Group to preserve its financial resources.
In light of the continued COVID-19 pandemic, the Directors have continued to carefully monitor the situation especially the Group's going concern position to ensure the Group is in a robust place to manage additional risks and uncertainties created by the pandemic. During 2021, the Group demonstrated its ability to grow under these challenging conditions achieving an 8% growth in revenue and maintained a positive adjusted EBITDA profit. As at 31 December 2021, the Group had an adjusted EBITDA profit of GBP0.2m (2020: GBP0.4m), and an operating loss of GBP0.5m (2020: GBP0.3m) due to an increase in Sales and Marketing costs.
In December 2021, the Group entered into a borrowing facility with Growth Lending Limited . The net proceeds of which will be used for working capital purposes and to support the Group's overall organic growth strategy. The new borrowing facility compromises an initial GBP1.0m term loan received on 24 December 2021 and a further GBP0.5m loan to be drawn down after six months subject to an agreed level of adjusted EBITDA being achieved. The facility term is 60 months with an interest rate at the higher of 9% per annum or the monthly average SONIA plus 7% . The borrowings will support the short to medium term needs of the business and improve the ability to drive growth. The Loan facility is secured by a fixed charge over the assets of the Company. As at 31 December 2021, the Group had cash and cash equivalents of GBP1.17m (2020: GBP1.12m).
Based on this review, the Directors have concluded that the Group has adequate resources to meet its liabilities as they fall due and continue in operational existence for the foreseeable future, which is considered to be at least the next 12 months from the date of approval of the financial statements. Consequently, the Directors have adopted the going concern basis in preparing the financial statements.
4.3 Revenue Recognition
The core principle is that revenue should only be recognised as the client receives the benefit of the goods or services provided under a commercial contract, in an amount that reflects the consideration to which the provider expects to be entitled for the transfer of the goods or services.
Performance obligations and timing of revenue recognition
Revenue comprises the sales value of goods and services supplied during the year, exclusive of Value Added Tax and trade discounts. Revenue from the provision of Consulting services is recognised as services are rendered, based on the contracted daily billing rate and the number of days delivered during the period.
Revenue from pre-paid contracts are deferred in the balance sheet and recognised on utilisation of service by the client. Pre-paid revenue is included within Assurance in note 5. Revenue from Managed Services & response (MDR) contracts include multiple performance obligation as set out below:
-- Hardware - hardware revenue is recognised on delivery and is included within other revenue as set out in note 5. This is when control of hardware passes to the customer.
-- Device build - Device build revenue is deferred and recognised on a straight line basis over the term of the contract.
-- Licensing - deferred and recognised on a straight line basis over the invoice period, due to the performance obligation not being considered distinct from management and monitoring performance obligation
-- Management and monitoring - deferred and recognised on a straight line basis over the invoice period.
-- Revenue from the sale of products (vendor) is recognised when control passes to the customer, which is considered to occur when the software or hardware product has been delivered to the client.
Determining the transaction price
The Group's revenue is derived from fixed price contracts and therefore the amount of revenues to be earned from each contract is determined by reference to those fixed prices.
Costs of obtaining long-term contracts and costs of fulfilling contracts
Commissions paid to sales staff for work in obtaining Managed Service contracts are prepaid and amortised over the terms of the contract on a straight line basis.
Commissions paid to sales staff for work in obtaining the Prepaid Consultancy contracts are recognised in the month of invoice.
5. Revenue and Segment Information
The Group's principal revenue is derived from the provision of cyber security professional services.
During this period, the Directors received information on financial performance on a divisional basis. The Directors consider that there are three reportable operating segments: Assurance (including Remote Support services), MDR, and Vendor Products. There were a small number of other transactions recorded during each period which are not considered to be part of either of the three reportable operating segments. These are presented below within the 'Other' caption and are not significant.
The Directors do not receive any information on the financial position of each segment, including information on assets and liabilities. Accordingly, no such information has not been presented.
The Group is not reliant on any single client, with no single client accounting for 10% or more of revenue. All revenue recognised is derived from external clients.
The Group has PPE located in the UK (cost of GBP919k; NBV of GBP88k) and Australia (cost of GBP57k; NBV nil). The Group's revenue and gross profit by operating segment for the year ended 31 December 2021 were as follows:
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Revenue Assurance 3,123 2,724 MDR 2,886 2,732 Vendor Products 93 125 Other 42 82 Total Revenue 6,144 5,663 --------------------- ----------- ----------- Gross Profit Assurance 1,965 1,576 MDR 1,757 1,994 Vendor Products 15 25 Other (63) (47) Gross Profit 3,674 3,548 --------------------- ----------- ----------- Operating Loss (480) (271) --------------------- ----------- ----------- Finance Cost (42) (48) --------------------- Loss before Taxation (522) (319) --------------------- ----------- -----------
Revenue by country for the year ended 31 December 2021 was as follows:
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 United Kingdom 5,911 5,294 Europe 107 278 United States 36 - Channel Islands 87 89 Other Countries 3 2 Total 6,144 5,663 ---------------- ----------- -----------
The Group's United Kingdom revenue by operating segment for the year ended 31 December 2021 was as follows:
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Revenue United Kingdom Assurance 3,025 2,367 MDR 2,759 2,724 Vendor Products 88 124 Other 39 79 Total 5,911 5,294 ----------------------- ----------- -----------
Contract Balances
Contract Contract Contract Contract Assets Assets Liabilities Liabilities 2021 2020 2021 2020 GBP'000 GBP'000 GBP'000 GBP'000 At 1 January 34 43 (878) (866) Commission expensed during the period (91) (62) - Commissions paid in advanced of contract completion 77 53 - Recognised as revenue during the period - 3,286 3,390 Cash received in advanced of performance during period - (3,091) (3,402) At 31 December 2021 20 34 (683) (878) ----------------------------- -------- -------- ----------- ----------- 6. Taxation
Recognised in the Statement of Comprehensive Income
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Corporation Tax Charge/(Credit) - - Deferred Tax Charge/(Credit) 5 (50) Total Tax Charge/(Credit) 5 (50) --------------------------------- ----------- -----------
Reconciliation of Total Tax Charge/(Credit)
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Loss before Tax (522) (319) ------------------------------------------ ----------- ----------- UK Corporation at rate of 19% (2020: 19%) (99) (61) Expenses not deductible for tax purposes 2 2 Over/under provision in prior period - Deferred Tax 5 (50) Tax losses on which Deferred Tax not recognised 97 59 Total Tax Charge/(Credit) 5 (50) ------------------------------------------ ----------- -----------
Deferred Tax Asset
2021 2020 GBP'000 GBP'000 At 1 Jan 118 77 Disallowable provisions 2 3 Profit and loss debit in respect of losses realised 87 13 Share based payments (60) 25 At 31 Dec 147 118 ---------------------------------- ------- -------
Deferred Tax Liability
2021 2020 GBP'000 GBP'000 At 1 Jan (90) (99) Profit and loss credit in request of timing differences (34) 9 At 31 Dec (124) (90) ----------------------------------- ------- -------
Deferred Tax Assets of GBP147k is recognised in respect of unutilised trading losses, Share options of GBP19k (2020: GBP78k) and short-term timing differences of GBP7k (2020: GBP5k). Deferred Tax Liabilities of GBP124k arise on timing differences in the carrying value of certain of the Company's assets for financial reporting purposes and for corporation tax purposes. These will reverse as the fair value of the related assets are depreciated over time. Deferred Tax balances have been calculated at the rate of 25% (2020: 19%), being the rate of Corporation Tax expected to be in force when the timing differences reverse.
Unutilised Trading Losses
The Company continues to carry forward unutilised trading losses of GBP5,448k (2020: GBP5,111k). A Deferred Tax Asset of GBP122k (2019: GBP35k) has been recognised as at 31 December 2021 in respect of the unutilised trading losses. No further Deferred Tax Asset has been recognised because the Board envisages that a significant period of time will be required to generate sufficient profits to utilise the trading losses carried forward.
7. Earnings per Share
Basic Earnings per Share is calculated by dividing the loss for the period attributable to Equity Holders of the Company by the weighted average number of Ordinary Shares outstanding during the period ('Basic Number of Ordinary Shares').
Diluted Earnings per Share is calculated by dividing the loss for the period attributable to Equity Holders of the Company by the weighted average number of Ordinary Shares outstanding during the period plus the weighted average number of Ordinary Shares that would be issued on conversion of all the potential dilutive Ordinary Shares ('Diluted Number of Ordinary Shares'), subject to the effect of anti-dilutive potential shares being ignored in accordance with IAS 33.
Adjusted Earnings per Share is calculated by dividing Adjusted loss (after adding-back exceptional costs incurred in the period; see note 13) by Diluted Number of Ordinary Shares.
The calculation of Basic, Diluted and Adjusted Earnings per Share is as follows:
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Net Loss attributable to Equity Holders of the Company (527) (269) Add back: Exceptional Costs 145 65 Add back: Share Based Payments 100 101 Adjusted Loss (282) (103) ---------------------------------------- ----------- ----------- Number of Ordinary Shares ('000) Initial Weighted Average 10,007 9,098 Shares issued in April 2020 - 909 ---------------------------------------- Basic Number of Ordinary Shares 10,007 10,007 Weighted Average Dilutive Shares in Period 1,160 906 Diluted Number of Ordinary Shares 11,167 10,913 ---------------------------------------- ----------- ----------- Earnings per Share (pence): Basic Losses per Share (5.3) (2.7) Diluted Losses per Share** (5.3) (2.7) Adjusted Losses per Share (2.8) (1.0)
** In accordance with IAS 33, the effect of anti-dilutive potential shares has been ignored.
During the prior year ended 31 December 2020, the following dilutive events have occurred:
-- On 17 April 2020, 909,091 ordinary shares were issued for GBP0.45m (net of expenses of GBP0.05m).
-- On 21 August 2020, the Company granted options over 588,037 Ordinary Shares to selected employees, including 144,758 to Director Lucy Sharp, 103,602 to Director Ian Castle and 64,651 to Director Gemma Basharan, of which 587,107 remain outstanding as at 31 December 2020.
-- On 28 August 2020, the Company granted options over 450,000 Ordinary Shares to selected employees, including 100,000 to Director Ian Mann, 100,000 to Director Lucy Sharp, 80,000 to Director Ian Castle and 80,000 to Director Gemma Basharan, of which 450,000 remain outstanding as at 31 December 2020.
These dilutive events were taken into account in calculating Diluted Number of Ordinary Shares.
8. Intangible Assets
Development Costs
Costs GBP'000 As at 1 January 2020 1,085 Additions 194 As at 31 December 2020 1,279 ----------------------- ------- As at 1 January 2021 1,279 Additions 194 As at 31 December 2021 1,473 ----------------------- ------- Amortisation As at 1 January 2020 656 Charges for the year 168 As at 31 December 2020 824 ----------------------- ------- As at 1 January 2021 824 Charges for the year 166 As at 31 December 2021 990 ----------------------- ------- Net Book Value As at 31 December 2020 455 ----------------------- ------- As at 31 December 2021 483 ----------------------- -------
9. Property, Plant and Equipment
Leasehold Office Computer Motor Property Equipment Equipment Vehicles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Cost At 1 January 2020 115 136 679 23 953 Additions - - 5 - 5 Disposals - - (5) - (5) At 31 December 2020 115 136 679 23 953 -------------------- --------- --------- --------- -------- ------- Additions - - 34 - 34 Disposals (7) (4) - - (11) At 31 December 2021 108 132 713 23 976 -------------------- --------- --------- --------- -------- ------- Depreciation At 1 January 2020 63 75 518 14 670 Charge for Period 16 21 95 5 137 Disposals - - (2) - (2) At 31 December 2020 79 96 611 19 805 -------------------- --------- --------- --------- -------- ------- Charge for Period 16 18 55 2 91
Disposals (5) (3) - - (8) At 31 December 2021 90 111 55 2 888 -------------------- --------- --------- --------- -------- ------- Net Book Value At 31 December 2020 36 40 68 4 148 -------------------- --------- --------- --------- -------- ------- At 31 December 2021 18 21 658 21 88 -------------------- --------- --------- --------- -------- ------- 10. Cash & Cash Equivalents GROUP GROUP COMPANY COMPANY As at As at As at As at 31 December 31 December 31 December 31 December 2021 2020 2021 2020 GBP'000 GBP'000 GBP'000 GBP'000 Cash & Cash Equivalents 1,168 1,122 1,165 1,119 ------------------------ ----------- ----------- ----------- ----------- 11. Leases of low-value assets
On commencement of a contract (or part of a contract) which gives the group the right to use an asset for a period of time in exchange for consideration, the group recognises a right-of-use asset and a lease liability unless the lease qualifies as a 'short-term' lease or a 'low-value' lease.
All leases are accounted for by recognising a right-of-use and a lease liability except for:
-- Leases of low-value assets
Leases where the underlying asset is 'low-value', GBP5k lease payments are recognised as an expense on a straight-line basis over the lease term. The group has elected to apply the 'low-value' lease exemption to all qualifying leases, but the election can be made on a lease-by-lease basis.
-- Short term lease
Where the lease term is twelve months or less and the lease does not contain an option to purchase the leased asset, lease payments are recognised as an expense on a straight-line basis over the lease term.
The group sometimes negotiates break clauses in its property leases. On a case-by-case basis, the group will consider whether the absence of a break clause would exposes the group to excessive risk. Typically factors considered in deciding to negotiate a break clause include:
-- the length of the lease term; -- the economic stability of the environment in which the property is located; and -- whether the location represents a new area of operations for the group. -- Short-term lease expense GBP61k -- Low value lease expense GBP3k
Right-of-use Assets
A right-of-use asset is recognised at commencement of the lease and initially measured at the amount of the lease liability, plus any incremental costs of obtaining the lease and any lease payments made at or before the leased asset is available for use by the group.
The right-of-use asset is subsequently measured at cost less accumulated amortisation and any accumulated impairment losses. The amortisation methods applied is on a straight-line basis over the term of the lease.
Amortisation charge for the year included in 'administrative expenses' for right-of-use assets.
Office Motor IT buildings vehicles equipment Total GBP'000 GBP'000 GBP'000 GBP'000 At 1 January 2020 849 26 21 896 Additions - 22 - 22 Variable lease payment adjustment 4 - (1) 3 Amortisation (133) (22) (20) (175) NBV at 31 December 2020 720 26 - 746 ------------------------ --------- -------- --------- ------- At 1 January 2021 720 26 - 746 Additions - 23 - 23 Disposal (13) - - (13) Amortisation (123) (20) (143) NBV at 31 December 2021 584 29 - 613 ------------------------ --------- -------- --------- -------
Lease Liability
The lease liability is initially measured at the present value of the lease payments during the lease term discounted using the interest rate implicit in the lease, or the incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined.
The lease term is the non-cancellable period of the lease plus extension periods that the group is reasonably certain to exercise and termination periods that the group is reasonably certain not to exercise.
The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the lease liability and reduced for lease payments.
Interest expense for the year on lease liabilities is recognised in 'finance costs'.
Office Motor IT buildings vehicles equipment Total GBP'000 GBP'000 GBP'000 GBP'000 At 1 January 2020 889 23 19 931 Additions - 22 - 22 Variable lease payment adjustment 4 - (1) 3 Interest expense 37 2 2 41 Lease payments (150) (24) (21) (195) NBV at 31 December 2020 780 23 (1) 802 ------------------------ --------- -------- --------- ------- At 1 January 2021 780 23 (1) 802 Additions - 23 - 23 Disposal (12) - - (12) Interest expense 31 2 1 34 Lease payments (150) (22) - (172) At 31 December 2021 649 26 - 675 ------------------------ --------- -------- --------- -------
Group and Company
Up to 12 1 to 5 more than At 31 December 2021 months years 5 years GBP'000 GBP'000 GBP'000 Lease payments 135 433 213 Interest expense (28) (69) (9) Lease Liabilities 107 364 204 --------------------- -------- ------- --------- 12. Borrowings 2021 2020 Current GBP'000 GBP'000 Loan 108 - Interest 6 - Direct fees (9) - Net Borrowings 105 - ---------------- ------- ------- 2021 2020 Non-current GBP'000 GBP'000 Loan 892 - Direct fees (34) - Net Borrowings 858 - ---------------- ------- -------
The Group has been provided with payments facilities by Barclays Bank PLC, including a BACS payment facility and a credit card facility.
New borrowing facility
In December 2021, the Group entered into a new borrowing five-year Growth loan facility with Growth Lending Limited, the net proceeds of which will be used for working capital purposes and to support the Group's overall organic growth strategy.
The new borrowing facility compromises an initial advance upon completion of GBP1.0m and a further advance of GBP0.5m to be drawn down after six months subject to an agreed level of adjusted EBITDA being achieved.
The facility term is 60 months with straight-line amortisation of the loan commencing after 6 months. The interest rate on each advance is set at the higher of 9.0% per annum or the monthly average SONIA plus 7%. There is an arrangement fee of 1.5% of the facility amount paid on completion with a 5% early prepayment.
The loan was arranged by Funding Friends Limited which received a fee of 1% of the loan on completion in respect of advisory fees. The Loan facility is secured by a fixed charge over the assets of the Company.
The effective interest rates on the Group's borrowings were as follows:
2021 2020 % % Borrowings - GBP1m 9.0 - ------------ ---- ----
The Maturity profile of the Group's non-current borrowing was as follows:
2021 2020 GBP'000 GBP'000 Between one and two years 214 - Between two and five years 644 - 858 - ------- -------
The Group's bank borrowing bear interest at floating rates, which represent prevailing market rates.
13. Adjusted Loss before Taxation and Adjusted EBITDA
Adjusted Loss before Taxation
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Loss before Taxation (522) (319) ------------------------------ ----------- ----------- Share Based Payments 100 101 Exceptional Items 145 65 Adjusted Loss before Taxation (277) (153) ------------------------------ ----------- -----------
Adjusted EBITDA:
Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Operating Loss (480) (271) ------------------------------ ----------- ----------- Depreciation and Amortisation 400 480 EBITDA** (80) 209 ------------------------------ ----------- ----------- Share Based Payments 100 101 Exceptional Items 145 65 Adjusted EBITDA* 165 375 ------------------------------ ----------- ----------- Year ended Year ended 31 December 31 December 2021 2020 GBP'000 GBP'000 Operating Loss (480) (271) ------------------------- ----------- ----------- Share Based Payments 100 101 Exceptional Items 145 65 Adjusted Operating Loss* (235) (105) ------------------------- ----------- -----------
* Adjusted Operating Loss and EBITDA excludes exceptional items and share based payments.
* * EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
FR DZGZFFZFGZZZ
(END) Dow Jones Newswires
March 23, 2022 03:00 ET (07:00 GMT)
1 Year Ecsc Chart |
1 Month Ecsc Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions