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| 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 |
From May 2019 to May 2024
TIDMECSC
RNS Number : 7817Z
ECSC Group PLC
23 September 2020
Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information for the purposes of Article 7 under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.
23 September 2020
ECSC Group plc
('ECSC' or the 'Company' or the 'Group')
Unaudited interim results for the six months ended 30 June 2020
Return to profit, positive cash flow and a strong outlook for Q4
ECSC Group plc (AIM: ECSC), the provider of cyber security services, announces its unaudited interim results for the six months ended 30 June 2020 and an update on current trading.
Financial Highlights
-- Managed Detection and Response ("MDR") division (managed services and incident response) recurring revenue up 25% to GBP1.17m (H1 2019: GBP0.94m)
-- MDR order book of GBP2.9m (30 June 2019: GBP2.7m)
-- Assurance* division (testing, standards and certification services) revenue up 4% to GBP1.24m (H1 2019: GBP1.19m)
-- Group revenue of GBP2.61m (H1 2019: GBP2.63m) -- Adjusted** EBITDA*** profit of GBP52k (H1 2019: GBP184k loss)
-- Partner programme contributing to 27% of new client recurring revenue MDR order book, and 7% of Assurance revenue
-- Successful placing in April 2020 to raise GBP0.5m (gross)
-- Cash of GBP1.26m at period end (30 June 2019: GBP0.19m), including GBP0.77m of COVID-19 related medium-term government support relating to VAT and PAYE deferral. The Group's bank facility of GBP0.5m remains unutilised
Operational Highlights
-- 48 new Assurance clients secured (H1 2019: 59)
-- Appointment of Gemma Basharan as Chief Financial Officer and Ian Castle as Chief Technology Officer in March 2020
-- Launch of AI supported Nebula Cloud cyber security breach detection service in May 2020
Post-Period Highlights
-- Strong recovery of Assurance revenue, with July 2020 up 33% on the Q2 average -- Assurance total bookings mid-September 2020 up 75% on H1 average -- Continued Adjusted** EBITDA*** profitability -- Cash of GBP1.64m at 18 September 2020 and unutilised bank facility of GBP0.5m
* Previously termed Consulting division
**Adjusted EBITDA excludes one-off charges and share based charges
***EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation
Ian Mann, Chief Executive Officer of ECSC, commented:
"We are delighted to report a return to Adjusted EBITDA profit with record levels of recurring revenues and orders within our Managed Detection and Response division, partly driven by an increase in cyber security incidents as organisations have accelerated the existing trend towards remote and cloud working during the COVID-19 pandemic.
"It is also pleasing to note that our Assurance division is recovering strongly as clients are beginning to resume projects (both on-site and working remotely), with an increase in both revenues and bookings in this sector. We continue to see an uptake in our Partner Programme, with 120 registered partners generating over 160 sales opportunities by the end of the period, which had a material contribution to revenue.
"We have so far exceeded our stated objective of maintaining a break-even Adjusted EBITDA position throughout the COVID-19 crisis. We remain focused on our strategy of growing our Managed Detection and Response division in order to build our recurring revenue streams and target this fast-growing sector of the market. We continue to innovate our technologies and deliver quality services to our expanding client base.
"In summary, ECSC is well positioned in the growing global cyber security marketplace, and we look forward with confidence to delivering improved operating results and shareholder value. We will continue to update the market on our progress in due course."
Enquiries:
ECSC Group plc David Mathewson (Non-Executive Chairman) +44 (0) 1274 736 Ian Mann (Chief Executive Officer) 223 Allenby Capital Limited (NOMAD and Broker) David Hart / Asha Chotai (Corporate Finance) +44 (0) 203 3285 Tony Quirke (Equity Sales) 656 Yellow Jersey (PR and IR) Sarah Hollins Annabel Atkins +44 (0) 203 004 Matthew McHale 9512
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.
ECSC is led by a highly experienced senior management team with over 80 years' combined experience within the company, and has delivered consecutive organic growth for the last 20 years.
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
The Group has managed its way through COVID-19 so far with excellent remote working practices, and a return to Adjusted EBITDA profitability throughout the period reflects well on the capable and experienced management team who are now focused on the many opportunities arising in the market.
Improved financial performance across the business has led to a return to profit for the period, positive cash flow, and a strong Q4 outlook. Our successful fund-raise in April 2020 further strengthened our cash position.
Cyber security remains a key priority for all Boards, with breaches continuing to attract media attention and an increasing regulatory framework, particularly with the impact of GDPR.
The ECSC Kepler Artificial Intelligence (AI) technology, released in 2018, delivered through the global Security Operation Centres (SOCs), continues to be integral to the growth in the Managed Detection and Response division. Clients increasingly recognise that 24/7/365 cyber security breach detection and expert incident response is vital to the protection of personal information and maintenance of critical IT systems. For all but the largest global organisations, the outsourcing of these critical functions is the logical choice, and ECSC has the technology, expertise and processes to deliver.
On behalf of the Board, I would like to thank all of our clients, staff, channel partners and advisors for their continued support, together with our new institutional shareholders that participated in the fund-raise completed in April 2020.
Despite the temporary interruption to our progress with COVID-19, ECSC is well positioned in a growing cyber security marketplace, and we look forward with confidence to broadening our base of clients and delivering improved operating results.
David Mathewson
Non-Executive Chairman
23 September 2020
Chief Executive Officer's Statement
COVID-19 Strategy
As anticipated, the first significant impact of COVID-19 was seen in April, where a number of Assurance division engagements were postponed.
The management team took early action to mitigate the impact in four areas:
1 All services were re-engineered to be delivered remotely, as the Company anticipated that this would be the preferred model of clients until at least the end of 2020.
2 Adjustments were made to the cost base and delivery capacity, as forecasted 2020 growth was unlikely to materialise.
3 A placing of GBP0.5m (gross) was completed by mid-April 2020 to reduce overall cash risk through uncertain times. This was fully subscribed by both new and existing investors.
4 Once available, government support was utilised where appropriate, in both the UK and Australia.
We are therefore pleased to report that, to date, our stated aim of maintaining a break-even trading position throughout the pandemic has been exceeded, reflected in our growing cash balance.
Ongoing Strategy
Our strategy of delivering sustained and profitable organic growth remains our primary focus.
The Company's Managed Detection and Response division, comprising managed services and incident response, continues to be our priority for growth as we see the opportunity to secure recurring revenue streams through multi-year contracts. ECSC delivers a superior service to clients in this division by deploying and managing its proprietary cyber security technology (including Artificial Intelligence), avoiding the issues end-users continue to have with other vendor companies where cyber security technology is being sold without appropriate in-house resource, expert management or effective 24/7 monitoring.
Success in this area is reflected in the Managed Detection and Response division now accounting for 47% of revenue, compared with 29% at the time of the Company's IPO (end of 2016).
The Assurance division, comprising of testing, standards, and certifications, remains key for new client acquisition, and still sees a relatively large proportion of repeat revenue.
Our Partner Programme, launched in 2019, allows primarily IT Value Added Resellers to directly sell selected ECSC services whilst referring more complex projects to the ECSC sales team to deliver. As of the end of June 2020, 120 partners have signed up to the programme, generating more than 160 sales opportunities and contributing to both new client acquisition and having a material contribution to revenue.
We have continued to invest in ECSC proprietary technologies, including continuing development of our MDR Artificial Intelligence (AI) embedded within many of our managed services.
Outlook
The UK cyber security market remains an attractive segment of the wider IT sector. Against this backdrop, we are confident that the organic growth strategy of ECSC remains appropriate. Managed Detection and Response services remains the strategic focus of the Board, to build our recurring revenue streams and target the fastest growing segment of the market. The team continues to acquire new clients, deliver quality services, develop our technologies, and build a solid base for continuing progress and improving financial performance.
Key Performance Indicators
The following Key Performance Indicators were established in mid-2018, and expanded in 2019, to enable meaningful performance measurement:
Hot Features
Premium
Jun Dec Jun
Performance Rationale 2020 2019 2019
Indicator (interim) (full (interim)
year)
Measurement of the success
Revenue Growth of the organic growth strategy (1%) 10% (0.6%)
------------------------- ------------------------------------ ---------- -------
Visibility of the success of
Managed Detection increasing the percentage of
and Response Recurring revenue from long-term recurring
Revenue Growth revenues 25% 27% 28%
------------------------- ------------------------------------ ---------- -------
Visibility of the success of
Managed Detection increasing the percentage of
and Response Recurring revenue from long-term recurring
Revenue Proportion revenues 45% 34% 35%
------------------------- ------------------------------------ ---------- -------
Managed Detection Combined measurement of new GBP2.9m GBP2.6m GBP2.7m
and Response Order client contracts together with
Book renewals of existing client
contracts
------------------------- ------------------------------------ ---------- -------
Managed Detection
and Response Gross
Margin Delivery efficiency measurement 67% 68% 69%
------------------------- ------------------------------------ ---------- -------
Assurance Repeat Quasi-recurring from longer-term
Revenue consulting clients 69% 73% 77%
------------------------- ------------------------------------ ---------- -------
Assurance Gross
Margin Delivery efficiency measurement 51% 54% 47%
------------------------- ------------------------------------ ---------- -------
Contract Liabilities Contracted and invoiced revenue GBP1.4m GBP1.2m GBP1.1m
(Deferred Income) yet to be recognised
------------------------- ------------------------------------ ---------- -------
Investment in future cyber
Research and Development technologies, service enhancements
(of revenue) and intellectual property 14% 13% 12%
------------------------- ------------------------------------ ---------- -------
Ian Mann
Chief Executive Officer
23 September 2020
Financial Review
Principal Activities
The principal activity of the Group during the period continued to be the provision of professional cyber security services, including Assurance, Managed Detection and Response Services and the sale of Vendor Products.
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Revenue
Assurance 1,241 1,193 2,922
Managed Detection and
Response 1,239 1,244 2,585
Vendor Products 70 87 162
Other 58 110 236
2,608 2,634 5,905
------------------------------ --------- --------- -----------
Gross Profit
Assurance 633 558 1,574
Managed Detection and
Response 834 862 1,745
Vendor Products 14 16 29
Other (19) 4 12
1,462 1,440 3,360
------------------------------ --------- --------- -----------
Adjusted EBITDA*
Other Income 211 103 263
Sales & Marketing Costs (844) (943) (1,958)
Administration Expenses (777) (784) (1,664)
52 (184) 1
------------------------------ --------- --------- -----------
EBITDA**
Share Based Payments (57) (65) (105)
Exceptional Items (54) - (6)
(59) (249) (110)
------------------------------ --------- --------- -----------
Depreciation and Amortisation (260) (290) (594)
Adjusted Operating Loss* (208) (474) (593)
------------------------------ --------- --------- -----------
Operating Loss (319) (539) (704)
------------------------------ --------- --------- -----------
* Adjusted Operating Loss and Adjusted EBITDA excludes one-off charges and share based charges
** EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation
Revenue & Organic Growth
Total revenue in the period ended 30 June 2020 was GBP2.61m, down 1% on the comparable prior period (revenue in the six months ended 30 June 2019 was GBP2.63m). Within this, Assurance revenue was up by 4% to GBP1.24m (June 2019: GBP1.19m).
Managed Detection and Response division revenue remained the same in the period at GBP1.24m (June 2019: GBP1.24m). Within this division, Incident Response revenues fell to GBP0.07m (June 2019: GBP0.31m) during the period. The drop in incidents, whilst historically quite variable, is likely to be due to reduced organisational activities during COVID-19 related 'lock-down'.
Vendor Products revenue in the period fell by 20% to GBP0.07m, (June 2019: GBP0.09m), but remains small contributing only 3% of revenues.
Margin Generation
Gross Profit in the period was GBP1.46m, representing a 56% margin (prior year interim period: GBP1.44m at 55% margin). This was due to improved margins in the Assurance division.
Assurance margin rose to 51% in the period (prior year interim period: 47%), due to the 4% increase in revenue over the prior period.
Managed Detection and Response margin fell to 67% (prior year interim period: 69%), this was due to a fall in Incident Response revenue during the period.
EBITDA & Operating Loss
Adjusted EBITDA for the period, which excludes one-off charges and share based charges, was a profit of GBP0.05m (June 2019: loss of GBP0.18m). EBITDA in the period was a loss of GBP0.06m (June 2019: loss of GBP0.25m). The Group has achieved the COVID-19 target of operating on a break-even Adjusted EBITDA basis.
Adjusted Operating loss in the period was GBP0.21m (June 2019: Operating loss of GBP0.47m). Operating loss in the period was GBP0.32m (June 2019: operating loss of GBP0.54m).
Exceptional items
During the period the Group undertook a cost restructure to reduce its operating costs. This restructure resulted in exceptional costs totalling GBP0.05m during the period, which included payments in lieu of notice and redundancy payments.
Consolidated Statement of Financial Position
The Group's Balance Sheet at 30 June 2020 had Net Assets of GBP0.56m (June 2019: GBP0.57m).
Consolidated Cash Flow Statement
Cash and cash equivalents increased by GBP0.91m to GBP1.26m as at 30 June 2020 primarily due to achieving an Adjusted EBITDA profit, equity raise of GBP0.50m (gross) and GBP0.77m of COVID-19 related medium-term government support.
Lease payment costs increased to GBP0.1m (June 2019: GBP0.09m) and development costs for the period increase to GBP0.11m (June 2019: GBP0.09m) as investment continues in this area.
The Group will continue to prioritise cash management and monitor the cash position closely to ensure that the Group has adequate liquidity to meet all its financial commitments as they arise.
Gemma Basharan
Chief Financial Officer
23 September 2020
Consolidated Statement of Comprehensive Income
For the 6 months ended 30 June 2020
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
Revenue 5 2,608 2,634 5,905
Cost of Sales (1,146) (1,194) (2,545)
Gross Profit 5 1,462 1,440 3,360
Other Income 6 211 103 263
Sales & Marketing Costs (844) (943) (1,958)
Administration Expenses (1,148) (1,139) (2,369)
Operating Loss before Exceptional
Items (208) (474) (593)
Share Based Payments 57 65 105
Exceptional Items 54 - 6
---------------------------------- ---- --------- --------- -----------
Operating Loss (319) (539) (704)
Finance Income - - -
Finance Cost (21) (19) (46)
Loss before Taxation (340) (558) (750)
Taxation Credit/ (Charge) 7 23 12 (26)
Loss for the Period (317) (546) (776)
---------------------------------- ---- --------- --------- -----------
Other Comprehensive Income - - -
Total Comprehensive Loss for the
Period (317) (546) (776)
---------------------------------- ---- --------- --------- -----------
Attributed to Equity Holders of
the Company
Loss per Share 8 pence pence pence
Basic Loss per Share (3.2) (6.0) (8.5)
Diluted Loss per Share (3.2) (6.0) (8.5)
Consolidated Statement of Financial Position
As at 30 June 2020
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
ASSETS
Non-current Assets
Intangible Assets 9 446 418 429
Property, Plant and Equipment 212 370 283
Right of use Assets 825 946 896
Deferred Tax Asset 7 86 126 77
Total Non-current Assets 1,569 1,860 1,685
------------------------------ ---- --------- --------- -----------
Current Assets
Inventory 10 39 26
Trade and Other Receivables 1,127 1,243 1,210
Corporation Tax Recoverable 472 258 265
Cash and Cash Equivalents 10 1,258 190 351
Total Current Assets 2,867 1,730 1,852
------------------------------ ---- --------- --------- -----------
TOTAL ASSETS 4,436 3,590 3,537
------------------------------ ---- --------- --------- -----------
LIABILITIES
Current Liabilities
Trade and Other Payables (2,911) (1,928) (2,137)
Lease Liabilities (153) (154) (150)
Total Current Liabilities (3,064) (2,082) (2,287)
------------------------------ ---- --------- --------- -----------
Non-current Liabilities
Deferred Tax Liability 7 (85) (111) (99)
Lease Liabilities (730) (828) (781)
Total Non-current Liabilities (815) (939) (880)
------------------------------ ---- --------- --------- -----------
TOTAL LIABILITIES (3,879) (3,021) (3,167)
------------------------------ ---- --------- --------- -----------
NET ASSETS 557 569 370
------------------------------ ---- --------- --------- -----------
EQUITY
Equity attributable to Owners
of the Parent:
Share Capital 100 91 91
Share Premium Account 6,099 5,661 5,661
Share Option Reserve 348 251 291
Retained Earnings (5,990) (5,434) (5,673)
TOTAL EQUITY 557 569 370
------------------------------ ---- --------- --------- -----------
Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2020
Share Share
Share Premium Option Retained
Capital Account Reserve Earnings 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 Expenditure
Loss for the year ended 30 June
2020 - - - (317) (317)
Transactions with shareholders
Issue of Shares 9 491 - - 500
Share Issue Costs - (53) - - (53)
Share Based Payments - - 57 - 57
Balance as at 30 June 2020 100 6,099 348 (5,990) 557
----------------------------------------- ------- ------- ------- -------- -------
Consolidated Cash Flow Statement
For the 6 months ended 30 June 2020
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
Cash Flow from Operating Activities
Loss before Taxation (340) (558) (750)
Adjustment for:
Amortisation of Intangibles 9 89 85 177
Depreciation of right-of use asset 69 114 200
Depreciation of Property, Plant
and Equipment 102 91 217
Profit on Disposal of Equipment (4) - (1)
Finance Costs 21 19 46
Share Based Payment 57 65 105
Cash from Operating Activities
before
changes in Working Capital (6) (184) (6)
Change in Inventory 16 (21) (8)
Change in Trade and Other Receivables (124) (220) (349)
Change in Trade and Other Payables 774 219 428
Change in Other Non Cash Items - (13) (13)
Cash from/ (used in) Operating
Activities 660 (219) 52
Corporation Tax received - - 152
Net Cash Flow from/ (used in)
Operations 660 (219) 204
-------------------------------------- ---- --------- --------- -----------
Acquisition of Property, Plant
and Equipment (2) (65) (129)
Disposal Proceeds 6 - 16
Development Costs Capitalised 9 (106) (91) (194)
Net Cash Flow used in Investing
Activities (102) (156) (307)
-------------------------------------- ---- --------- --------- -----------
Principal paid on lease liabilities (98) (85) (195)
Interest paid on loans and borrowings - - (1)
Net proceeds from the Share Issue 447 - -
Net Cash used in Financing Activities 349 (85) (196)
Net increase/ (decrease) in Cash
& Cash Equivalents 907 (460) (299)
-------------------------------------- ---- --------- --------- -----------
Cash & Cash Equivalents at beginning
of period 351 650 650
Cash & Cash Equivalents at end
of period 1,258 190 351
-------------------------------------- ---- --------- --------- -----------
Notes to the Financial Statements
For the 6 months ended 30 June 2020
1. Corporate Information
ECSC Group plc is incorporated in England and Wales and quoted on the London Stock Exchange's Alternative Investment Market (AIM: ECSC). Further copies of these financial statements will be available at the Company's registered office: 28 Campus Road, Listerhills Science Park, Bradford, West Yorkshire, BD7 1HR. These condensed consolidated interim financial statements as at and for the six months ended 30 June 2020 were approved by the Board of Directors on 23 September 2020.
2. General Information
These financial statements 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
These interim financial statements for the period ended 30 June 2020 have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively 'IFRS') issued by the International Accounting Standards Board ('IASB') as adopted by the European Union ('adopted IFRS').
The financial statements for the period ended 30 June 2020 (and comparative) have been prepared on a consolidated basis. The consolidated financial statements present the results of the Company and its subsidiaries ('the Group') as if they formed a single entity. The financial statements of the Group and Company are both prepared in accordance with IFRS. They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of changes in the Group's financial position and performance since the last annual statements.
Alternative performance measures (APM)
In the reporting of financial information, the Directors have adopted the APM 'Adjusted EBITDA" (APMs were previously termed 'Non-GAAP measures'), which is not defined or specified under International Financial Reporting Standards (IFRS).
This measure is not defined by IFRS and therefore may not be directly comparable with other companies' APMS, including those in the Group's industry. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.
Purpose
The Directors believe that this APM assists in providing additional useful information on the underlying trends, performance and position of the Group. This APM is also used to enhance the comparability of information between reporting periods and business units, by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid the user in understanding the Group's performance.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes and this remains consistent with the prior year. Adjusted APMs are used by the Group in order to understand underlying performance and exclude items which distort compatibility, as well as being consistent with public broker forecasts and measures (see note 13).
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.
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 EU endorsement
effective date status
New Standards
---------------------- ------------ ---------------
IFRS 17 Insurance 18-May-2017 01-Jan-2021* TBC
contracts
---------------------- ------------ ---------------
Amendments to
existing standards
---------------------- ------------ ---------------
Amendments to 29-May-2018 01-Jan-2020 Endorsed
References to
the Conceptual
Framework in IFRS
Standards
---------------------- ------------ ---------------
Amendments to 22-Oct-2018 01-Jan-2020 Expected Q1 2020
IFRS 3 Business
Combinations -
Definition of
a Business
---------------------- ------------ ---------------
Definition of 31-Oct-2018 01-Jan-2020 Endorsed
Material - Amendments
to IAS 1 and IAS
8
---------------------- ------------ ---------------
Interest Rate 26-Sept-2019 01-Jan-2020 Endorsed January
Benchmark Reform 2020
(Amendments to
IFRS 9, IAS 39
and IFRS 7)
---------------------- ------------ ---------------
Amendments to 23-Jan-2020 01-Jan-2022 TBC
IAS 1: Classification
of Liabilities
as Current or
Non-current
---------------------- ------------ ---------------
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. 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 the event that this revenue and cost performance is not achieved, the Directors have also considered a sensitivity analysis based on lower revenue growth and have formulated contingency plans for this scenario, which enable the Group to preserve its financial resources.
The Group's objective was to maintain a break-even Adjusted EBITDA position throughout the COVID-19 crisis. This was achieved by undertaking a cost restructuring and making use of the UK Government's furlough scheme. The Group also made use of medium-term government support relating to VAT and PAYE deferral. During this period the Group successfully completed a placing in April 2020 raising GBP0.5m (gross). As of 30 June 2020 the Group's cash balance was GBP1.26m (30 June 2019: GBP0.19).
The Board have renewed the invoice discounting facility with Barclay's of GBP0.5m following the annual review in August 2020. The facility will be formally reviewed again in August 2021. As of the 30 June 2020 this facility was unutilised.
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. Consequently, the Directors have adopted the going concern basis in preparing the interim 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 Assurance 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 Detection and Response contracts includes:
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 the Managed Detection and Response 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 Assurance Consultancy are recognised in the month of invoice.
These costs are recognised in the Consolidated Statement of Comprehensive Income within Sales & Marketing costs.
Contract Balances
Contract Contract Contract Contract
Assets Assets Liabilities Liabilities
30 June 31 December 30 June 31 December
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 43 49 (1,186) (949)
Commission expensed during the
period (28) (28) - -
Commissions paid in advanced
of contract completion 27 22 - -
Recognised as revenue during
the period - - 1,584 2,429
Invoiced in advanced of performance
during period - - (1,794) (2,666)
42 43 (1,396) (1,186)
------------------------------------ -------- ----------- ----------- -----------
4.4 Finance Income
Finance income is accrued on an annual basis, by reference to the principal outstanding at the applicable effective credit interest rate.
4.5 Government Grant Income
A government grant is recognised only when there is reasonable assurance that (a) the entity will comply with any conditions attached to the grant; and (b) the grant will be received.
The grant is recognised as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis.
Government Grant Income is recognised in the Statement of Comprehensive Income over the period in which the Company recognises expenses for the related costs for which the grants are intended to compensate. Grants relating to income are deducted from the related expense.
Government tax credits available on eligible Research and Development expenditure ('R&D Tax Credits') and not reclaimable through other means are recognised as Other Income.
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), Managed Detection and Response, 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, 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's revenue and gross profit by operating segment for the year ended 30 June 2020 were as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Revenue
Assurance 1,241 1,193 2,922
Managed Detection
and Response 1,239 1,244 2,585
Vendor Products 70 87 162
Other 58 110 236
Total Revenue 2,608 2,634 5,905
---------------------- --------- --------- -----------
Gross Profit
Assurance 633 558 1,574
Managed Detection
and Response 834 862 1,745
Vendor Products 14 16 29
Other (19) 4 12
Gross Profit 1,462 1,440 3,360
---------------------- --------- --------- -----------
Operating Loss (319) (539) (704)
---------------------- --------- --------- -----------
Finance Income - - -
Finance Cost (21) (19) (46)
Loss before Taxation (340) (558) (750)
---------------------- --------- --------- -----------
6. Other Income
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Gain on sale of Asset 4 - 1
R&D Tax Credits 207 103 262
Total 211 103 263
--------- --------- -----------
7. Taxation
Recognised in the Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Corporation Tax Charge/(Credit) - - -
Deferred Tax Charge/(Credit) (23) (12) 26
Total Tax Credit (23) (12) 26
--------------------------------- --------- --------- -----------
Reconciliation of Total Tax Charge Credit
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2019 2019 2019
GBP'000 GBP'000 GBP'000
Loss before Tax (340) (558) (750)
--------- --------- -----------
UK Corporation at rate of 19% (65) (106) (143)
Expenses not deductible for tax
purposes 2 1 2
Income not taxable for tax purposes - - -
Exercise of Share Options - - -
Difference between current and - - -
Deferred Tax rates
Over/under provision in prior - - -
period - Corporation Tax
Over/under provision in prior
period - Deferred Tax (23) (12) 26
Tax losses on which Deferred
Tax not recognised 63 105 141
Total Tax Credit (23) (12) 26
--------- --------- -----------
Deferred Tax Assets & Liabilities
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2019 2019 2019
GBP'000 GBP'000 GBP'000
Deferred Tax Assets 86 126 77
Deferred Tax Liabilities (85) (111) (99)
Deferred Tax - Net Liabilities 1 15 (22)
-------------------------------- --------- --------- -----------
Deferred Tax Assets of GBP86k is recognised in respect of unutilised trading losses, Share Based Payments and short-term timing differences. Deferred Tax Liabilities of GBP86k 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 17%, being the rate of Corporation Tax rate expected to be in force when the timing differences reverse.
Unutilised Trading Losses
The Company continues to carry forward unutilised trading losses of GBP5.71m (June 2019: GBP4.96m). A Deferred Tax Asset of GBP22k has been recognised as at 30 June 2020 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.
8. Earnings per Share
Basic Earnings per Share is calculated by dividing the Profit 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 Profit 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 Profit by Diluted Number of Ordinary Shares.
The calculation of Basic, Diluted and Adjusted Earnings per Share is as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Net Loss attributable to Equity
Holders of the Company (317) (546) (776)
Add back: Exceptional Costs 54 - 6
Add back: Share Based Payments 57 65 105
Adjusted Loss (206) (481) (665)
----------------------------------- --------- --------- -----------
Number of Ordinary Shares ('000)
Initial Weighted Average 9,098 9,098 9,098
Equity Raise 909 - -
----------------------------------- --------- --------- -----------
Basic Number of Ordinary Shares 10,007 9,098 9,098
Weighted Average Dilutive Shares
in Period 769 598 661
Diluted Number of Ordinary Shares 10,776 9,696 9,759
----------------------------------- --------- --------- -----------
Earnings per Share (pence):
Basic Earnings per Share (3.2) (6.0) (8.5)
Diluted Earnings per Share** (3.2) (6.0) (8.5)
Adjusted Earnings per Share (2.1) (5.3) (7.3)
** In accordance with IAS 33, the effect of anti-dilutive potential shares has been ignored
9. Intangible Assets
GROUP & COMPANY
Development Costs
Costs GBP'000 As at 01 January 2019 891 Additions 194 As at 31 December 2019 1,085 --------------------- ------- As at 01 January 2020 1,085 Additions (6 months) 106 As at 30 June 2020 1,191 --------------------- ------- Amortisation As at 01 January 2019 479 Additions 177 As at 31 December 2019 656 --------------------- ------- As at 01 January 2020 656 Additions (6 months) 89 As at 30 June 2020 745 --------------------- ------- Net Book Value As at 31 December 2019 429 --------------------- ------- As at 30 June 2020 446 --------------------- -------
10. Cash & Cash Equivalents
Unaudited Unaudited Audited
GROUP GROUP GROUP
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Cash & Cash Equivalents 1,258 190 351
--------- --------- -----------
11. Secured Facilities
The Group has been provided with payments facilities by Barclays Bank plc, including a BACS payment facility and a credit card facility.
Barclay's are also providing an invoice discounting facility of GBP500,000.
These payment facilities are secured by a debenture in favour of Barclays that creates fixed and floating charges over the assets of the Company.
12. Controlling Party
ECSC Group plc does not have an ultimate controlling party.
13. Adjusted (Loss) before Taxation and Adjusted EBITDA
Adjusted (Loss)/Profit before Taxation
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Loss before Taxation (340) (558) (750)
----------------------- --------- --------- -----------
Share Based Payments 57 65 105
Exceptional Items 54 - 6
Adjusted (Loss) before
Taxation (229) (493) (639)
----------------------- --------- --------- -----------
Adjusted EBITDA:
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Operating Loss (319) (539) (704)
------------------------------ --------- --------- -----------
Depreciation and Amortisation 260 290 594
EBITDA** (59) (249) (110)
------------------------------ --------- --------- -----------
Share Based Payments 57 65 105
Exceptional Items 54 - 6
Adjusted EBITDA* 52 (184) 1
------------------------------ --------- --------- -----------
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Operating Loss (319) (539) (704)
------------------------------ --------- --------- -----------
Share Based Payments 57 65 105
Exceptional Items 54 - 6
Adjusted Operating Loss* (208) (474) (593)
------------------------------ --------- --------- -----------
14. Subsidiary Undertakings
ECSC Group plc currently has the following wholly-owned subsidiaries, which are incorporated and registered in England and Wales:
Name of Subsidiary Registered Office Date of Incorporation Principal Activity
ECSC Services 28 Campus Road 18 April 2017 Dormant
Limited Listerhills Science
Park
Bradford
BD7 1HR
ECSC Labs Limited 28 Campus Road 18 April 2017 Dormant
Listerhills Science
Park
Bradford
BD7 1HR
ECSC Australia 28 Campus Road 29 September 2016 Intermediary holding
Limited Listerhills Science company
Park
Bradford
BD7 1HR
ECSC Australia Limited currently has the following wholly-owned subsidiary, which is incorporated and registered in Australia:
Name of Subsidiary Registered Office Date of Incorporation Principal Activity
ECSC Australia Governor Phillip 20 March 2017 Provision of professional
Pty Limited Tower Level 36 cyber security
1 Farrer Place services
Sydney
NSW 2000
The share capital of each Group entity is as follows:
Entity Ordinary Shares Nominal Value Investment at
in Issue Cost
ECSC Services 1 share GBP1 GBP1
Limited
ECSC Labs Limited 1 share GBP1 GBP1
ECSC Australia 1 share GBP1 GBP1
Limited
ECSC Australia 100 shares AUD 1 AUD 100
Pty Limited
Total GBP60
* AUD = Australian dollars
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