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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Falanx Group Limited | LSE:FLX | London | Ordinary Share | VGG3338A1075 | ORD NPV (DI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.525 | 0.50 | 0.55 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMFLX
RNS Number : 7264U
Falanx Group Limited
07 December 2021
Falanx Group Limited
("Falanx" or "the Company")
Interim results
Falanx Group Limited ("Falanx", AIM: FLX), the global cyber security and intelligence services** provider, announces its interim results for the six months ended 30 September 2021.
Highlights for six months to 30 September 2021
Cyber Security division (continuing business) in line with the trading update given on 13 October 2021
-- Revenues from continuing operations GBP1.80m (2020: GBP1.40m) an increase of 28% -- Gross margin from continuing operations 40% (2020: 27%) driven by high utilisation levels and lower external licence fees following successful customer migration to single cyber security monitoring platform ("Triarii") -- Ongoing cyber division adjusted EBITDA* profit of GBP0.1m (2020: loss GBP0.28m) -- Continuing Group adjusted EBITDA loss GBP0.40m (2020: GBP0.67m), a reduction of 40% -- GBP1.0m loan investment by BOOST&Co in August 2021 -- Cash balances at 30 September 2021 GBP0.51m (2020: GBP0.22m), normal working capital position and HMRC in terms -- Loss per share 0.13p (2020: 0.33p) from continuing operations -- Shareholders' funds GBP1.99m (2020: GBP3.58m)
Post Period Financial Highlights
-- The Assynt Strategic Intelligence ("Assynt") division disposed 6 October 2021 for a cash enterprise value of GBP4.6m. In the six months to 30 September 2021 this division recorded revenues of GBP1.00m (2020: GBP1.05m) and an adjusted EBITDA loss of GBP0.02m (2020: profit GBP0.05m) -- Second GBP1.5m tranche of loan investment from BOOST&Co received October 2021 on the same terms as the August drawdown. Total amount GBP2.5m. -- Cash balance at 30 November 2021 GBP4.3m, trade debtors were GBP0.55m, and trade creditors were GBP0.24m
Operational highlights
-- Disposal of the Assynt Strategic intelligence division allows expansion of and investment in the Cyber Security division -- Strong inflow of customer orders in the Cyber Division, with high staff utilisation levels has contributed to the adjusted EBITDA profitability -- Move to a single Triarii monitoring service complete, leading to significantly lower support costs whilst increasing customer functionality -- Largest ever cyber order received in April 2021 for GBP1m of penetration testing to be delivered over three years from a global financial services company -- N-Able completed spinout from Solar Winds in July 2021, confirming the opportunity to address this market of 25,000 MSP users and 500,000 end user customers with our cyber security services. Conversations are ongoing and Falanx expects this to start benefitting the next financial year -- The launch of the new f:CEL (falanx: Cyber Exposure Level) product designed to help customers understand their Cyber risk at an affordable price point, supporting SMEs through to larger organisations, with Enterprise class service available for SMEs. Increasing partner interest supports confidence in its growth potential
* Adjusted EBITDA is a non-IFRS headline measure used by management to measure the Group's performance and is based on operating profit before the impact of financing costs, IFRS16, share based payment charges, depreciation, amortisation, impairment charges and highlighted items
** Former operations sold in October 2021
Alex Hambro, (Non-executive Chairman) of Falanx, commented:
" Following the disposal of Assynt in October 2021, Falanx is now a 'pure play' Cyber Security services business which is well positioned and financed to address the growing market opportunity created by constantly increasing risks in the digital world. Customer demand has grown significantly compared with the pre-pandemic environment. Our new initiatives are gaining interest from both direct customers and from our larger partners, and we are beginning to achieve sales of these innovative services. Our core service offerings of penetration testing, and protective monitoring are doing well, have moved into profitability and provide us with a solid foundation for growth with their large customer bases.
We view the future for Falanx with increasing optimism. We are operating in an exciting high growth market where there is increasing corporate and customer activity, and we look forward to updating shareholders with our progress over the next few months. "
Enquiries:
Falanx Group Limited Via IFC Alex Hambro Chairman Mike Read CEO Ian Selby CFO Stifel Nicolaus Europe Limited, Nomad and Joint Broker Alex Price / Fred Walsh + 44 (0) 207 710 7600 IFC Advisory Ltd Financial PR & IR Graham Herring / Zach Cohen +44 (0) 203 934 663
About Falanx
Falanx Group Limited, is a cyber defence provider providing enterprise class defensive and offensive security solutions to SME. For further information: http://www.falanx.com/
Business Review
The business review focusses solely on the ongoing cyber operations of the Group.
Falanx Cyber Defence has achieved a much-improved financial performance in the six months to 30 September 2021. The division recorded revenues of GBP1.8m (2020: GBP1.4m) and adjusted EBITDA profits of GBP0.1m (2002: loss GBP0.28m). Gross margins were 40% (2020: 27%) with the improvement arising from much improved utilisation of professional services staff which were adversely impacted by project delays during the COVID-19 crisis in 2020. Gross margins also increased due to the cyber security monitoring service moving to a single Triarii platform and the consequent elimination of certain 3(rd) party licence fees from July 2021 onwards.
The division won GBP2.5m (2020: GBP1.5m) of orders for penetration testing in the period. Included in this was the division's largest ever contract which was won in April 2021. This was from an existing global financial services customer and is for the provision of Penetration Testing services over a three-year period.
Triarii MDR / "Detection in Depth"
Triarii as the service brand gives our customers and partners a choice of technology stack, depending on their personal and technical preference. Our standard (default) Triarii offering is built on the enterprise-class elastic stack, including the big data database, SIEM tool and Elastic Endpoint Security (formerly Endgame). Our alternate offering replaces these technology components with Microsoft Azure sentinel and Endpoint technologies and are especially relevant for clients already heavily invested in Microsoft Azure.
Both stacks are then supported by a range of other tools looking at activity in a range of places both within and outside a client's network, resulting in our Detection in Depth approach wherein we look in multiple locations for signs of potential hostile activity.
The licensing cost of running Triarii has been significantly reduced from our previous technologies - which have both now been retired from service.
Falanx : Cyber Exposure Level ("f:CEL")
This new solution plays an important role in protecting a company from cyber-attacks. The more an organisation understands its security posture, the more it understands the risk it carries of being attacked. f:CEL emulates the reconnaissance phase often adopted by criminals in deciding whether to attack a business. A rapidly deployed, automated service, this can be offered at mass levels to get a view of the overall risk of an entire community of companies (e.g., customers, suppliers, policy holders and many more) providing insight into the risk carried by a community and the steps to take to mitigate that risk at individual entity level.
Pricing for f:CEL is disruptive, being affordable by even the smallest of businesses. The user can select the timing and frequency as to when they run the service so an ongoing picture of their security situation can be obtained. f:CEL is sold mainly by annual subscriptions (with an effective average monthly price of circa GBP40) which generates a predictable stream of high-quality recurring revenue. Users can select when to run their reports during the subscription period, so that they can have an ongoing view as to how their security profile is changing and with comparison to a wider cohort. The reports create a valuable database which can be used to help provide users, depending on the outcome of their report and in relation to a wider cohort, with their cyber security needs such as penetration testing or protective monitoring, and as the userbase expands this data is expected to become an increasingly valuable asset.
The platform has been developed internally using a combination of proprietary and standard components. This has allowed us to leverage our deep experience and sector expertise, to create a platform which can be highly configured to deal with a particular client or market requirement, which increases the relevance of our reports to their users. We are in discussions with several larger partners (in addition to N-able) who each have thousands of potential f:CEL users, and we look forward to announcing further progress on this in the coming months.
Outlook Statement
The investment in our Triarii and f:CEL services has created two new service lines each with strong potential and increasing demand. They are typically sold on a recurring revenue basis which generates predictable cash flows and revenues over a period, and therefore increases the quality of our revenues and profits. The Cyber Security business has had high levels of interest shown by both longer term and newer partners. Our partners have large market access (typically with several thousand end user clients) and are engaging with us on its deployment, and we are adding further similar partners. With these services we are well positioned to address the growing needs of SMEs for increased defensive cyber security protection, and this fits alongside our highly skilled penetration testing teams who carry out offensive testing of our clients' IT infrastructures.
The board believes that the results of f:CEL reporting will improve the awareness in organisations as to their cyber vulnerabilities and risks and will provide a channel for further potential sales of XDR and penetration testing into large userbases.
To properly exploit the potential of these services, the division will be using its increased financial resources to expand its sales and marketing efforts with the recruitment of certain strategic hires, initiation of marketing programs and ongoing investment in service delivery and innovation. We will also be expanding the highly skilled penetration testing team to satisfy growing demand.
The Group's much stronger financial position, supported by good trading so far in the second half of the year, will also help enable acquisitions of complementary cyber security business to be made. Acquisitions are filtered to have highly relevant products and services, addressable customer bases and to be both earnings enhancing and cash generative.
Financial Performance
Continuing Operations (Cyber Security Division)
Revenues from continuing operations grew by 28% to GBP1.8m from GBP1.4m in the previous year, and much improved utilisation, and a streamlined technology platform, helped the gross margin to increase to 40% (2020: 27%). This combined with firm control of the division's operating cost base (which fell by a further 4%), helped the division to produce an adjusted EBTIDA profit of cGBP0.1m (2020: GBP0.28m loss). Central costs were GBP0.49m (2020: GBP0.39m), with the prior period benefitting from the salary sacrifice scheme which was initiated as part of the Group's initial response to the COVID-19 crisis.
Overall, the adjusted EBITDA loss from continuing operations was reduced by 40% to GBP0.4m (2020: GBP0.6m).
Adjusting items were much lower at GBP0.02m (2020: GBP0.21m) and reflected lower investment costs and professional fees.
Discontinued Operations (Assynt Strategic Intelligence Division)
The Assynt strategic intelligence recorded revenues of GBP1.0m (2020: GBP1.1m) and its gross margin declined to 23% from 28%, and it produced an adjusted EBITDA loss of GBP0.02m (2020: GBP0.05m profit). This division was disposed of on 6 October 2021, and on disposal approximately GBP0.43m of divisional liabilities were taken on by the purchaser.
Overall Group
Overall, the Group's revenues were GBP2.8m (2020: GBP2.5m) with a gross margin of 34% (2020: 27%) and had an adjusted EBTIDA loss of GBP0.4m (2020: GBP0.6m).
Depreciation and amortisation charges were GBP0.25m (2020: GBP0.26m), with the vast majority being the routine amortisation of the customer bases acquired in 2018, as well as property lease costs related to IFRS16. Share option charges were GBP0.02m (2020: GBP0.24m), with the comparative period representing higher costs associated with the grant of share options under the salary sacrifice scheme in April 2020.
Interest payable GBP0.04m (2020: GBP0.02m) included financing costs associated with the lease of the Reading office as well as the interest payable on the loan from BOOST&Co which commenced in August 2021.
Overall, the loss from continuing operations for the period fell to GBP0.71m (2020: GBP1.33m) against an overall loss of GBP0.75m (2020: GBP1.35m). The loss per share (both on a basic and fully diluted basis) from continuing operations was 0.13p (2020: 0.33p) and on an overall basis was 0.15p (2020: 0.34p)
Consolidated Statements of Financial Position at & Cash Flow
Non-current assets were GBP4.0m (2020: GBP5.8m) and principally comprised of the acquired customers bases and associated goodwill. The GBP1.44m investment in Furnace Technology (which was spun out of Falanx in December 2019) was fully impaired in the year ended 31 March 2021.
Cash receipts were strong, with no incidence of bad debt being recorded, and debtor days were 42 (2020: 48 days). Net cash outflow from operations was GBP0.88m (2020: inflow GBP0.19m). This reflected the positive impact of HMRC deferrals in the prior year as a response to COVID-19, and the consequent repayments of circa GBP0.25m in the current year, as well as timings of certain large customer receipts at the start of the period.
At 30 September net liabilities (mainly related to deferred incomes) of approximately GBP0.43m were held on the balance sheet related to the discontinued business and these were transferred to the purchaser on 6 October 2021.
In August 2021 the Company drew down the first GBP1.0m (of a GBP2.5m facility & before costs) of secured loan form BOOST&Co, the key terms of which are:
-- Annual interest of 11%, and straight-line amortisation of the loan commencing after 12 months
-- The loan carries a 3% early prepayment fee on the then amount outstanding
The proceeds of this loan (and its subsequent extension) are to provide investment capital in the expansion of the Cyber division both through the investment in sales and marketing, service innovation and the expansion of delivery capability, as well as supporting value enhancing acquisitions of cyber security businesses.
Cash balances as at 30 September 2021 were GBP0.51m (2020: GBP0.22m) and overall shareholders' funds were GBP2.0m (2020: GBP3.9m).
Events after the reporting period
-- On 6 October 2021 the Group disposed of the Assynt strategic intelligence division. This included Falanx Assynt Ltd and including its four overseas wholly owned subsidiaries in the UAE, USA, Hong Kong, and Ireland. Assynt was acquired by Cross Atlantic Solutions Partners LLC, ("CAS") which is backed by funds advised by a US based investment firm focused on investing in information, marketing, and tech-enabled services businesses.
The consideration (before usual deal costs) was comprised of a total consideration of GBP4.6 million before the deduction of a working capital adjustment of approximately GBP0.5 million. GBP0.35 million of the consideration is held in a 3(rd) party escrow account against any potential warranty claims against standard issues for twelve months from completion.
Falanx made certain warranties to CAS in respective of Assynt's historic business and the Company has put in a normalised level of working capital at completion as referenced above. All of Assynt's employees transferred as part of the transaction, and Falanx is providing certain administration services to Assynt until the end of January 2022 as part of an orderly hand over under an agreement negotiated on an arm's length basis.
-- On 13(th) October 2021 the Group drew down the final GBP1.5m of the Boost loan facility, under identical terms as the initial GBP1.5m drawdown in August 2021 outlined above.
-- Cash balances on 30 November 2021 were GBP4.3m following the payment of the vast majority of deal costs related to the disposal of Assynt, working capital adjustments and certain cyclical payments. At this date trade debtors were GBP0.55m, and trade creditors were GBP0.24m and the group had a normal working capital profile, with all amounts due to HMRC being within agreed terms.
FALANX GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS PERIODED 30 SEPTEMBER 2021
6 Months 6 Months Year to to to 30 Sep 2021 30 Sep 31 Mar 2020 2021 (Unaudited) (Unaudited) (Audited) GBP GBP GBP ------------------------------------------- ------------ ------------ ------------ Revenue - continuing operations 1,794,862 1,400,414 3,119,724 Revenue - discontinued operations 993,735 1,062,481 2,124,437 -------------------------------------------- ------------ ------------ ------------ Revenue 2,788,597 2,462,895 5,244,161 Cost of sales (1,844,979) (1,786,474) (3,668,176) -------------------------------------------- ------------ ------------ ------------ Gross profit - continuing operations 718,920 379,819 1,016,937 Gross profit - discontinued operations 224,698 296,602 559,048 -------------------------------------------- ------------ ------------ ------------ Gross profit 943,618 676,421 1,575,985 Administrative expenses (1,654,212) (2,010,370) (5,095,355) Operating loss (710,594) (1,333,949) (3,519,370) Operating loss from continuing operations (671,435) (1,297,963) (3,455,158) Operating loss from discontinued operations (39,159) (35,986) (64,212) -------------------------------------------- ------------ ------------ ------------ Analysis of operating loss
Operating loss (710,594) (1,333,949) (3,519,370) Share option expense 20,000 242,478 175,949 Depreciation and amortisation 254,865 258,294 533,482 Impairment of Furnace equity investment - - 340,000 Impairment of Furnace loan receivable - - 1,100,000 Highlighted costs 26,264 212,287 110,354 Adjusted EBITDA loss from continuing operations (385,734) (673,714) (1,350,520) Adjusted EBITDA loss from discontinued operations (23,731) 52,824 90,935 Finance income - 4 4 Finance expense (36,312) (16,810) (32,574) -------------------------------------------- ------------ ------------ ------------ Net finance expense (36,312) (16,806) (32,570) Loss before income tax (746,906) (1,350,755) (3,551,940) Income tax credit 1,050 - - ------------------------------------------- ------------ ------------ ------------ Loss for the period from continuing operations (707,506) (1,334,769) (3,487,728) Loss from discontinued operations, net of tax (38,350) (35,986) (64,212) -------------------------------------------- ------------ ------------ ------------ Loss for the period (745,856) (1,350,755) (3,551,940) -------------------------------------------- ------------ ------------ ------------ Other comprehensive income: Re-translation of foreign subsidiaries (1,432) (2,684) 5,403 (1,432) (2,684) 5,430 Total comprehensive loss for the period (747,288) (1,353,439) (3,546,537) -------------------------------------------- ------------ ------------ ------------ Loss per share from continuing operations ------------------------------------------- ------------ ------------ ------------ (0.33) (0.75) Basic loss per share (0.13) p p p (0.33) (0.75) Diluted loss per share (0.13) p p p -------------------------------------------- ------------ ------------ ------------ Loss per share from continuing and discontinued operations ---------------------------------------------------------- ------------ ------------ (0.34) (0.77) Basic loss per share (0.14) p p p (0.34) (0.77) Diluted loss per share (0.14) p p p
FALANX GROUP LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2021
6 Months 6 Months Year to to to 30 Sep 2021 30 Sep 2020 31 Mar 2021 (Unaudited) (Unaudited) (Audited) GBP GBP GBP Assets Non-current assets Property, plant & equipment 125,679 187,165 155,831 Intangible assets 3,531,661 3,729,594 3,702,840 Right of use asset 308,781 417,762 363,271 Investments with fair value through Profit and Loss - 340,000 - Loan Receivable - 1,100,000 - 3,966,121 5,774,521 4,221,942 ------------------------------------------- ----------- ------------ ----------- Current assets Trade and other receivables 930,628 1,103,389 1,076,216 Cash and cash equivalents 512,972 223,054 545,321 1,443,600 1,326,443 1,621,537 ------------------------------------------- ----------- ------------ ----------- Assets in a disposal group classified as held for sale 190,214 - - ------------------------------------------- ----------- ------------ ----------- Total assets 5,599,935 7,100,964 5,843,479 ------------------------------------------- ----------- ------------ ----------- Equity Capital and reserves attributable to equity holders of the Company Share premium account 4,039,125 17,903,427 4,033,161 Translation reserve (109,209) (115,864) (107,777) Share based payment reserve 767,243 829,803 747,243 2022 liabilities reserve 1,000,000 - 1,000,000 Retained earnings (3,689,845) (14,758,835) (2,943,989) Total equity 2,007,314 3,858,531 2,728,638 ------------------------------------------- ----------- ------------ ----------- Liabilities Non-current liabilities Deferred tax liability 8,479 9,529 9,529 Lease liability 203,081 301,339 252,874 Borrowings 968,830 - 42,129 Other payables 5,532 242,734 5,409 ------------------------------------------- ----------- ------------ ----------- 1,185,922 553,602 309,401 Current liabilities Trade and other payables 1,286,839 1,688,178 1,592,715 Contract liabilities 386,677 907,658 1,108,317 Lease liability 99,926 92,995 95,997 Borrowings 9,594 - 7,871 1,783,036 2,688,831 2,804,900 ------------------------------------------- ----------- ------------ ----------- Liabilities directly associated with assets in the disposal group classified as held for sale 623,663 - - ------------------------------------------- ----------- ------------ ----------- Total liabilities 3,592,620 3,242,433 3,114,841 ------------------------------------------- ----------- ------------ ----------- Total equity and liabilities 5,599,935 7,100,964 5,843,479 ------------------------------------------- ----------- ------------ -----------
FALANX GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Accumulated Translation Share based 2022 capital losses Reserve payment Liabilities Total reserve reserve GBP GBP GBP GBP GBP ---------------------------- ------------- ------------- ------------ ------------ ------------ ------------ Balance at 1 April 2020 17,903,427 (13,408,080) (113,180) 587,325 - 4,969,492 Loss for the year - (3,551,940) - - - (3,551,940) Re-translation of foreign subsidiaries - - 5,403 - - 5,403 Transactions with owners: Capital reconstruction (15,000,000) 14,000,000 - - 1,000,000 - Issue of share capital 1,247,600 - - - - 1,247,600 Costs of issue of share capital (117,866) - - - - (117,866) Share based payment charge - - - 175,949 - 175,949 Forfeited share options reversed through reserves - 16,031 - (16,031) - - Balance at 31 March 2021 4,033,161 (2,943,989) (107,777) 747,243 1,000,000 2,728,638 ---------------------------- ------------- ------------- ------------ ------------ ------------ ------------ Loss for the year - (745,856) - - - (745,856) Re-translation of foreign subsidiaries - - (1,432) - - (1,432) Transactions with owners: Issue of share capital 5,964 - - - - 5,964 - - - 20,000 - 20,000 Balance as at 30 September
2021 4,039,125 (3,689,845) (109,209) 767,243 1,000,000 2,007,314 ---------------------------- ------------- ------------- ------------ ------------ ------------ ------------
FALANX GROUP LIMITED
CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIODED 30 SEPTEMBER 2021
6 Months 6 Months Year to to to 30 Sep 30 Sep 2020 31 Mar 2021 2021 (Unaudited) (Unaudited) (Audited) GBP GBP GBP Cash flows from operating activities Profit/(Loss) before tax (746,906) (1,350,755) (3,551,940) Adjustments for: Depreciation 33,608 39,588 75,753 Amortisation of intangibles 166,766 164,215 348,748 Amortisation of right of use assets 54,491 54,491 108,981 Impairment of investment in Furnace - - 340,000 Impairment of loan receivable - - 1,100,000 Share based payment 20,000 242,478 175,949 Loss on disposal of equipment / fixtures 77 - - and fittings Amortisation of borrowing cost 2,361 - - Net finance cost recognised in profit or loss 36,312 16,806 32,569 (433,291) (833,177) (1,369,940) Changes in working capital: Increase/(decrease) in trade and other receivables (39,760) 1,066,247 1,093,419 Decrease in trade and other payables (403,510) (44,627) (126,756) --------------------------------------------- ------------ ------------ ------------ Cash generated from / used in operations (876,561) 188,443 (403,277) Interest paid (11,003) (1,605) (3,774) Tax paid 1,050 - - --------------------------------------------- ------------ ------------ ------------ Net cash used in / generated from operating activities (886,514) 186,838 (407,277) --------------------------------------------- ------------ ------------ ------------ Cash flows from investing activities Interest received - 4 4 Acquisition of property, plant and equipment (3,987) (31,330) (36,161) Expenditure on development cost - - (157,779) Net cash used in investing activities (3,987) (31,326) (193,936) --------------------------------------------- ------------ ------------ ------------ Cash flows from financing activities Repayment under finance lease (47,133) (43,851) (89,413) Interest paid on lease liabilities (11,923) (15,205) (28,799) Proceeds from bank borrowing - 50,000 50,000 Repayment of bank borrowing (3,104) - - Proceeds from borrowing 1,000,000 - - Loan transaction costs (70,834) - - Interest paid on borrowing (13,386) - - Proceeds from issue of shares 5,964 - 1,247,600 Costs of share issuance - - (117,866) Net cash used in financing activities 859,584 (9,056) 1,061,623 --------------------------------------------- ------------ ------------ ------------ Decrease/(increase) in cash equivalents (30,917) 146,456 (460,636) Cash and cash equivalents at beginning of the period 545,321 79,282 79,282 Foreign exchange gains on cash and cash equivalents (1,432) (2,684) 5,403 --------------------------------------------- ------------ ------------ ------------ Cash and cash equivalents at end of the period 512,972 223,054 545,321 --------------------------------------------- ------------ ------------ ------------
FALANX GROUP LIMITED
NOTES TO INTERIM FINANCIAL STATEMENTS FOR THE PERIODED 30 SEPTEMBER 2021
1. General information
Falanx (the "Company") and its subsidiaries (together the "Group") operate in the security and intelligence markets.
The Company is a public limited company which is listed on AIM on the London Stock Exchange and is incorporated and domiciled in the British Virgin Islands. The address of its registered office is PO Box 173, Road Town, Tortola, British Virgin Islands.
2. Basis of preparation
These interim statements have been prepared on a basis consistent with International Financial Reporting Standards (IFRS). They do not contain all the information required for full financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2021. These interim financial statements do not constitute statutory accounts within the meaning of the Companies Act.
The interim financial information has not been reviewed nor audited by the auditors. The interim financial information was approved by the Board of Directors on 6 December 2021. The information for the year ended 31 March 2021 is extracted from the statutory financial statements for that year which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report was unqualified.
The accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended and as at 31 March 2020. The interim report is the responsibility of, and has been, approved by the Directors. The Directors are responsible for preparing the interim financial statements in accordance with the AIM rules for Companies.
Going Concern
These interim financial statements have been prepared on a going concern basis, which notwithstanding the loss incurred for the six-month period to 30 September 2021.
-- On 6(th) October 2021 the group disposed of its Assynt strategic intelligence division for an enterprise value of GBP4.6m cash. This division had been loss making in this six-month period following a reduction in both revenue and gross margins.
-- On 13th October 2021 the Group drew down the final GBP1.5m of loan from BOOST&Co. Both post balance sheet events have very significantly improved the Group's cash position.
-- Trading has remained solid in the cyber security division with strong order intake and a healthy pipeline of new business, including significant opportunities for its Triarii and f:CEL services which have recurring revenues with high gross margin. The ongoing business is now purely focussed on the Cyber security division, which benefits from very favourable macro-economic conditions with the move to an online environment for many businesses and the consequent rise in cyber security risks which need to be mitigated.
-- The Group adjusted EBITDA loss for October 2021 was approximately GBP90,000 and cash balances at 30 November 2021 were GBP4.3m All amounts due to HMRC are either current or are the subject to agreed payment plans which are being adhered to. The Group's debtor book is performing well, and cash receipts are strong, and on 30 November 2021 trade debtors and creditors stood at GBP0.55m and GBP0.24m respectively
-- The Group has produced stress test as well as base case financial forecasts which cover the period to 31 December 2022. These reflect investment in organic expansion, and the stress test scenario has been prepared on losses running at over three times the current run rate for 12 months with no mitigation and no growth in business. This shows that the Group should still have a positive cash balance in December 2022.
Should this stringent stress test scenario not be achieved, then further mitigating actions would be carried out to ensure that the Group remains within its resources, and these would include a reduction of planned capital expenditure, headcount reduction, reducing discretionary spend and sales investment, freezing or reducing pay and cancelling recruitment, and all of these are within the director's control. Further actions could include seeking further support from existing and new shareholders and debt providers.
Based on the above, the Group expects to have will have sufficient resources to meets its liabilities as they fall due for at least 12 months from the date of these interim results.
Discontinued operations
In accordance with IFRS 5 'Non-current assets held for sale and discontinued operations', the net results of Assynt Group Limited and subsidiaries ("Assynt") are presented withing discontinued operations in the consolidated statement of comprehensive income (for which comparatives are restated) and the assets and liabilities of these operations are presented separately on the consolidated statement of financial position. Please see note 6 for further details.
3. Critical accounting estimates and judgements
The preparation of financial information in accordance with generally accepted accounting practice, in the case of the Group being IFRS as adopted by the European Union, requires the Directors to make estimates and judgements that affect the reported amount of assets, liabilities, income and expenditure and the disclosures made in the financial statements. Such estimates and judgements must be continually evaluated based on historical experience and other factors, including expectations of future events.
The significant judgements made by management in applying the Group's accounting policies were the same as those applied in the last annual financial statements for the year ended 31 March 2021.
4. Segmental reporting
The Directors consider that the Group's internal financial reporting is organised along product and service lines and, therefore, segmental information has been presented about business segments. The segmental analysis of the Group's business was derived from its principal activities as set out below. The information below also comprises the disclosures required by IFRS 8 in respect of products and services as the Directors consider that the products and services sold by the disclosed segments are essentially similar and, therefore, no additional disclosure in respect of products and services is required. The other segment below and overleaf is made up of the parent company's administrative operation.
Reportable segments
The reportable segment results for the period ended 30 September 2021 are as follows:
Corporate Total Cyber segment Continuing Discontinued Total operations operations GBP GBP GBP GBP GBP ------------------------------- ---------- ----------- ------------ ------------- ---------- Assynt report - - 972,633 972,633 Professional services 1,407,699 - 1,407,699 21,102 1,428,801 Monitoring managed services 387,163 - 387,163 387,163 ------------------------------- ---------- ----------- ------------ ------------- ---------- Revenues from external customers 1,794,832 - 1,794,832 993,735 2,788,597 ------------------------------- ---------- ----------- ------------ ------------- ---------- Gross margin 718,920 - 718,920 224,698 943,618 ------------------------------- ---------- ----------- ------------ ------------- ---------- Segment Reported EBITDA 105,369 (515,186) (409,817) (25,912) (435,729) Exceptional costs (21,242) 45,325 24,083 2,181 26,264 Segment Adjusted EBITDA 84,127 ( 469,861) (385,734) (23,731) (409,465) ------------------------------- ---------- ----------- ------------ ------------- ---------- (1 8,435 Finance costs - net ) (17,636) (60,071) (241) (104,785) Depreciation and amortisation (155,954) (85,664) (241,618) (13,247) (254,865) Share option expense - ( 20,000) (20,000) - (20,000) Segment profit/(loss) for the period (69,020) (638,486) (707,506) (39,400) (749,906) ------------------------------- ---------- ----------- ------------ ------------- ----------
The reportable segment results for the period ended 30 September 2020 are as follows:
Corporate Total Cyber segment Continuing Discontinued Total operations operations GBP GBP GBP GBP GBP ------------------------------- ---------- ----------- ------------ ------------- ------------ Assynt report - - - 1,018,606 1,018,606 Professional services 941,496 - 941,496 43,875 985,371 Monitoring managed services 458,918 - 458,918 - 458,918 ------------------------------- ---------- ----------- ------------ ------------- ------------ Revenues from external customers 1,400,414 - 1,400,414 1,062,481 2,462,895 ------------------------------- ---------- ----------- ------------ ------------- ------------ Gross margin 379,819 - 379,819 296,602 676,421 ------------------------------- ---------- ----------- ------------ ------------- ------------ Segment Reported EBITDA (320,562) ( 492,160) (812,722) (20,455) (833,177) Exceptional costs 40,478 9 8,530 139,008 7 3,279 212,287 (393,630 Segment Adjusted EBITDA (280,084) ) (673,714) 52,824 (620,890) ------------------------------- ---------- ----------- ------------ ------------- ------------ Finance costs - net ( 491) (16,315) (16,806) - (16,806) Depreciation and amortisation (144,538) (98,225) (242,763) (15,531) (258,294) Share option expense - (242,478) (242,478) - (242,478) Segment profit/(loss) for the period (485,591) (849,178) (1,334,769) (35,986) (1,350,755) ------------------------------- ---------- ----------- ------------ ------------- ------------
The reportable segment results for the year ended 31 March 2021 are as follows:
Corporate Total Cyber segment Continuing Discontinued Total operations operations GBP GBP GBP GBP GBP Assynt report - - - 2,016,062 2,016,062 Professional services 2,272,951 - 2,272,951 108,375 2,381,326 Monitoring managed services 846,773 - 846,773 - 876,773 ------------------------------- ---------- ------------ ------------ ------------- ------------ Revenues from external customers 3,119,724 - 3,119,724 2,124,437 5,244,161 ------------------------------- ---------- ------------ ------------ ------------- ------------ Gross Margin 1,016,937 - 1,016,937 559,048 1,575,985 Segment Reported EBITDA (419,020) (918,607) (1,337,627) (32,312) (1,369,939) Highlighted costs (Note 5) (27,369) 14,476 (13,093) 123,247 110,354 Segment Adjusted EBITDA (446,389) (904,131) (1,350,520) 90,935 (1,259,585) ------------------------------- ---------- ------------ ------------ ------------- ------------ Finance costs-net (1,346) (31,224) (32,570) - (32,570) Depreciation and amortisation (308,590) (195,305) (503,895) (29,587) (533,482) Impairment of Furnace equity investment - (340,000) (340,000) - (340,000) Impairment of Furnace loan investment - (1,100,000) (1,100,000) - (1,100,000) Share option expense (8,112) (165,524) (173,636) (2,313) (175,949) Segment loss before tax for the year (737,068) (2,750,660) (3,487,728) (64,212) (3,551,940) ------------------------------- ---------- ------------ ------------ ------------- ------------
Segment assets and liabilities as at 30 September 2021 and capital expenditure for the period then ended are as follows:
Corporate Total Cyber segment Continuing Discontinued Total operations operations GBP GBP GBP GBP GBP ----------------------- ----------- ---------- ------------ ------------- ---------- Contract assets 2,688 - 2,688 - 2,688 Other assets 3,811,082 1,535,630 5,346,712 250,535 5,597,247 Contract liabilities (deferred income) 386,677 - 386,677 442,927 829,604 Other liabilities 1,4 07,674 1,174,606 2,582,280 180,736 2,763,016 Capital expenditure - tangible 3,017 970 (3,987) - 3,987 Capital expenditure - - - - - - intangible ----------------------- ----------- ---------- ------------ ------------- ----------
Segment assets and liabilities as at 30 September 2020 and capital expenditure for the period then ended are as follows:
Corporate Total Cyber segment Continuing Discontinued Total operations operations GBP GBP GBP GBP GBP ----------------------- ---------- ---------- ------------ ------------- ---------- Contract assets 56,925 - 56,925 21,811 78,736 Other assets 3,667,703 2,914,037 (6,584,740) 440,488 7,022,228 Contract liabilities (deferred income) 266,008 - 266,008 641,650 907,658 Other liabilities 603,845 1,388,925 (1,992,770) 342,004 2,334,774 Capital expenditure - tangible 2 7,046 4 ,284 (31,330) - 3 1,330 Capital expenditure - - - - - - intangible ----------------------- ---------- ---------- ------------ ------------- ----------
Segment assets and liabilities as at 31 March 2021 and capital expenditure for the year then ended are as follows:
Corporate Total Cyber segment Continuing Discontinued Total operations operations GBP GBP GBP GBP GBP ----------------------- ---------- ---------- ------------ ------------- ---------- Contract assets 62,141 - 62,141 1,551 63,692 Other assets 3,741,016 1,526,695 5,267,711 374,615 5,642,326 Contract liabilities (deferred income) 465,000 - 465,000 643,317 1,108,317 Other liabilities 588,087 1,029,262 (1,617,349) 389,175 2,006,524 Capital expenditure - Tangible 31,007 5,154 36,161 - 36,161 Capital expenditure - Intangible 157,780 - 157,780 - 157,780 ----------------------- ---------- ---------- ------------ ------------- ---------- 5. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
6 Months 6 Months Year to to to 30 Sep 2021 30 Sep 31 Mar 2021 2020 (Unaudited) (Unaudited) (Audited) Loss attributable to equity holders of the company (GBP) (794,329) (1,350,755) (3,551,940) Weighted average number of ordinary shares in issue 526,001,185 400,401,185 462,675,158 Basic loss per share (pence per share) (0.15) (0.34) (0.77) ---------------------------------------- ------------ ------------ ------------
As at 30 September 2021, the potentially dilutive ordinary shares were anti-dilutive because the Group was loss-making.
6. Events after the reporting period
Disposal of Assynt
On 6 October 2021, Falanx announced that it had disposed of the Assynt Strategic Intelligence Division ("Assynt") for an enterprise value of GBP4.6 million in cash to Cross Atlantic LLC. As substantial progress towards a sale had been made before 30 September 2021, the results of Assynt have been disclosed as discontinued operations in the consolidated statement of comprehensive income and the assets and liabilities of Assynt have been classified as a disposal group held for sale in the consolidated statement of financial position.
The estimated fair value less costs to sell exceeds the carrying value of Assynt's net assets, and accordingly no impairment losses have been recognised on reclassification as a disposal group.
The tables below show the results of the discontinued operations which are included in the consolidated statement of comprehensive income and consolidated cash flow statement, together with the classes of assets and liabilities comprising the operations as held for sale on the consolidated statement of financial position.
Income Statement for discontinued 6 Months 6 Months Year to operations to to 30 Sep 2021 30 Sep 31 Mar 2020 2021 (Unaudited) (Unaudited) (Audited) GBP GBP GBP Revenue 993,735 1,062,481 2,124,437 Cost of sales (769,037) (765,879) (1,562,389) ------------------------------------ ------------ ------------ ------------ Gross profit 224,698 296,602 559,048 Administrative expenses (263,857) (332,188) (623,260) Operating Loss (39,159) (35,986) (64,212) Finance income Finance expense (241) - - ----------------------------------- ------------ ------------ ------------ Net finance expense (241) - - Loss before income tax (39,400) (35,986) (64,212) Income tax credit 1050 - - ----------------------------------- ------------ ------------ ------------ Loss for the period (38,350) (35,986) (64,212) ------------------------------------ ------------ ------------ ------------ As at 30 Sep 2021 (Unaudited) GBP Assets of the disposal group Property, plant & equipment 453 Intangible assets 4,413 Trade and other receivables 185,348 Cash and cash equivalents Total assets 190,214 ------------------------------------------ ----------- Liabilities of the disposal group Deferred tax liability Trade and other payables 180,736 Contract liabilities 442,927 Total liabilities 623,663 ------------------------------------------ ----------- Net liabilities of the disposal group (433,449) ------------------------------------------ -----------
On 13(th) October 2021 the Group drew down the final GBP1.5m of the Boost loan facility, under identical terms as the initial GBP1.0m drawdown in August 2021 outlined above.
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December 07, 2021 01:59 ET (06:59 GMT)
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