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.

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