TIDMSWG
RNS Number : 5251T
Shearwater Group PLC
25 November 2021
25 November 2021
SHEARWATER GROUP PLC
("Shearwater", or the "Group")
Results for the six months ended 30 September 2021
Enhanced margins across the Group and strong adjusted EBITDA
growth
Shearwater Group plc, the organisational resilience group, is
pleased to announce its unaudited results for the six months ended
30 September 2021.
Financial highlights:
-- Adjusted EBITDA(1) of GBP1.3 million, an increase of 19% (H1 FY21: GBP1.1 million)
-- Improved adjusted EBITDA margin of 12% (H1 FY21: 10%)
-- Revenue of GBP10.6 million (H1 FY21: GBP11.2 million), driven
by a number of contracts moving into the second half
-- Net cash of GBP4.4 million as at 30 September 2021, after
increased investment expenditure during the period and settling
GBP1.1 million VAT relating to the Covid-19 VAT deferral scheme
introduced by the Government
Business highlights:
-- Advisory revenues significantly ahead of the same period in
the prior year, with enquiries back to pre-Covid levels. Pentesting
now better understood as a compliance requirement
-- Increased Software revenues, with more features and new
innovations now providing a springboard for further growth from our
end customer base of over 1,000
-- R&D expenditure increased 67% to GBP421k as the push for organic growth gains momentum
-- c.50% of revenues have already been identified for our second
half, of which c.90% comes from long term clients
-- Post period end, the final outstanding deferred consideration
loan balance was repaid ahead of schedule, leaving the Balance
Sheet debt free with c.GBP4 million net cash and substantial
undrawn bank facilities
-- Confident outlook with the Group trading in line with the
market's EBITDA expectations for the full year
(1) Adjusted EBITDA is defined as profit before tax, before one
off exceptional items, share based payment charges, finance
charges, impairment of intangible assets, fair value adjustments to
deferred consideration, other income, depreciation and
amortisation
Phil Higgins, Chief Executive Officer of Shearwater Group PLC,
commented:
"We have seen both our divisions grow profits in the period
under review with growth in our Software sales and a strong rebound
in advisory business. The increasing quality of our earnings
coupled with investment in our subsidiaries, enabled by our strong
cash position, gives us confidence in the outcome for the full
year, especially with c.50% of second half revenues
identified."
Enquiries:
Shearwater Group plc www.shearwatergroup.com
David Williams c/o Alma PR
Phil Higgins
Cenkos Securities plc - NOMAD and
Joint Broker
Ben Jeynes / Max Gould - Corporate
Finance
Julian Morse / Michael Johnson
- Sales +44 (0) 20 7397 8900
Berenberg - Joint Broker
Matthew Armitt / Mark Whitmore +44 (0) 20 3207 7800
Alma PR shearwater@almapr.co.uk
Susie Hudson / Caroline Forde / +44 (0) 20 3405 0205
Joe Pederzolli
About Shearwater Group plc
Shearwater Group plc is an award-winning group providing cyber
security, managed security and professional advisory solutions to
help create a safer online environment for organisations and their
end users.
The Group's differentiated full service offering spans identity
and access management and data security, cybersecurity solutions
and managed security services, and security governance, risk and
compliance. Its growth strategy is focused on building a scalable
group that caters to the entire spectrum of cyber security and
managed security needs, through a focused buy and build
approach.
The Group is headquartered in the UK, serving customers across
the globe across a broad spectrum of industries.
Shearwater shares are listed on the London Stock Exchange's AIM
under the ticker "SWG". For more information, please visit
www.shearwatergroup.com .
Chief Executive's review
Overview
It has been another positive period for the Group as we
continued to develop the business, winning 90 net new clients,
drove further cross-selling and secured major renewals with key
customers.
Most pleasingly both divisions delivered an enhanced margin,
reflecting our ever-improving quality of earnings, which drove
significant adjusted EBITDA growth of 19% in the period to GBP1.3m
(H1 FY21: GBP1.1m).
Whilst revenue was slightly below the prior year at GBP10.6m (H1
FY21: GBP11.2m) we were pleased to see growth in our Software
division and a strong rebound in advisory business. Meanwhile, the
majority of the Group's managed service sales are anticipated to be
weighted towards the final quarter of the year when organisations
often finalise their annual budgets. As we move into our
traditionally busier period we have good visibility with c. 50% of
H2 revenues identified from existing contract renewals. In addition
to this, a healthy pipeline of new business opportunities exists
with both new and existing clients within what remains a buoyant
cyber-security market.
Looking to the second half and beyond, the opportunity exists
to:
-- maintain and increase recurring revenue from our Software
division (currently 80% recurring)
-- upsell additional Software modules or products to existing
customers
-- grow the proportion of revenue which is re-occurring
(contracted or with renewal opportunities) in our Services
division
-- cross-sell Software products into our existing blue-chip
Services division clients
-- attract new clients to our continuously expanding portfolio
of products and services
Looking forward, the Group has visibility on an increasing
amount of identified renewal opportunities from existing clients as
the gradual shift away from appliance-based computing to
software-based solutions creating additional renewal opportunities.
In excess of GBP15.5m has already been identified for FY23 and the
company would hope that this will grow in excess 15% per annum in
the periods thereafter.
As at 30 September 2021 we had a net cash balance of GBP4.4m (30
September 2020: GBP3.0m) following the repayment of GBP1.1m of VAT
deferrals during the period (GBP0.2m remaining). We also repaid
GBP0.3m of outstanding legacy loan liabilities over the period and
a further GBP0.5m post-period end, leaving the business now
debt-free. We continue to forecast cash generation in H2 leading to
a robust year end net cash position in line with expectations. The
Group also continues to benefit from an undrawn revolving facility
of GBP4.0m.
Growth strategy
With Covid-19 restrictions easing and vaccination programmes
progressing, we are focused on executing our M&A strategy and,
being cognisant of further dilution at the current share price
levels, are pleased to also have the option to finance acquisitions
via cash reserves and bank debt available to us if required. We are
currently assessing potential targets of a variety of sizes which
are in line with our strategy of either enhancing our Software
division or adding scale to our Services division.
As communicated in the full year results statement, we are
hiring across all Group businesses, with a budgeted plan to
increase headcount in both sales and technical roles to support
long-term growth. Whilst we are not immune to the labour shortage
challenges which have been widely publicised across many
industries, we continue to focus on hiring to support long term
growth.
Current trading and outlook
Trading in Q3 has started positively with the Group continuing
to deliver enhanced profitability across both divisions. We also
continue to see a conversion from the sale of appliance-based
computing into more lucrative software and subscription-based
sales.
The risks that organisations face in the digital world continue
to increase, with the NCSC reporting their offering of support to
777 significant incidents(2) , up from 723 the previous year.
Hybrid working, technological advancements including 5G and a more
widespread use of the cloud, as well as the continued evolution of
corporate compliance all present new security risks for businesses
and present a great opportunity for Shearwater.
We have a strong reputation in our industry, a strong financial
position and a clear strategy for growth.
We look forward to executing further on that strategy in H2 and
building the business towards our vision of becoming the provider
of choice delivering next generation technology, professional
advisory, and cyber security services and solutions.
Operational review
Our Group comprises of two divisions, Software (18% revenue, 50%
operating profit) and Services (82% revenue, 50% operating profit).
Our Services division clients are largely blue chips, and we have
particular strength in the banking, telco and technology sectors.
Our Software offerings are sold through distributors to the global
reseller channel.
Whilst we are largely UK-focused, we will continue to build our
international reach. We are in the process of opening a new
location in the Netherlands to satisfy client demand and in order
to be able to capitalise on future opportunities with enterprise
clients based in the region.
Our Group offering is made up of managed services and
warranties, security solutions, software licences (from owned IP)
and advisory & engineering. Over time we continue to look to
replace lower margin activities with more profitable activities,
leading to increased margins and improved future visibility of our
earnings.
Key strengths include our very strong client relationships (61%
of clients have been serviced by the Group for three years or
longer), our inclusion in critical networks and the quality of our
offering, as reflected in the 11 industry award nominations
Shearwater received in H1 alone.
KPI Review
The Group tracks its progress against a number of KPIs, as
recorded below:
-- 90 new customer wins in the period (30 September 2020: 62)
-- New software revenue of GBP0.4m (30 September 2020: GBP0.5m)
-- Reported repeatable revenues represent c. 50% of total revenues
-- Whilst early in development, 2% of revenues are now generated
through cross-selling (2020: 0.27%) with an element of this being
repeatable in nature
Divisional review
Software
Our Software division performed well, with revenue up 1% on H1
last year. Further growth is anticipated in the second half, which
is expected to be driven by the upsell of our enhanced product sets
to new and existing clients. Renewal rates for Software customers
remain stable at c.80%.
The division has delivered an improved EBITDA margin of 48%
(2020: 41%) generating an adjusted EBITDA of GBP0.9m (2020:
GBP0.8m), 20% ahead of the prior period.
Software
---------------------------------------------------------
H1 FY22 H1 FY21 YOY
GBP (000) GBP (000) %
Revenue 1,887 1,861 1%
Gross profit 1,462 1,441 1%
Gross profit margin % 77% 77% -%
Overheads 552 682 19%
------------------------ ----------- ----------- -----
Adjusted EBITDA 910 759 20%
Adjusted EBITDA % 48% 41% 7%
As previously communicated, our Software division is working
towards becoming a leading Security-as-a-Service converged platform
provider - a 'one stop shop' for all an organisation's Access
Management needs (forecast by Gartner to grow to a US$9.2bn
industry globally by 2025).
Progress made towards this ambition in the first half includes
the continued enhancement to our cloud offerings. We have also had
good success selling a new software product (which secures
open-platform technology) into a major financial institution. This
product has therefore proven its value in this vertical and
generated significant new business leads with similar
organisations.
Services
Our Services division delivered revenue of GBP8.7m in the first
six months, driven by strong growth in advisory revenues, offset by
a number of contracts which have moved into the second half.
Margins increased to 10% (2020: 8%), leading to an adjusted
EBITDA performance of GBP0.9m (2020: GBP0.8m).
Services
-----------------------------------------------------------
H1 FY22 H1 FY21 YOY
GBP (000) GBP (000) %
Revenue 8,689 9,312 (7%)
Gross profit 2,639 2,257 17%
Gross profit margin % 30% 24% 6%
Overheads 1,735 1,488 (17%)
------------------------ ----------- ----------- -------
Adjusted EBITDA 905 769 18%
Adjusted EBITDA % 10% 8% 2%
We are pleased that our professional advisory businesses have
returned to pre-pandemic levels of activity, with utilisation rates
significantly improved from the prior year as demand for advisory
services continues to grow.
Significant contract renewals concluded in the period included a
$1 million contract with a global technology corporation by Pentest
and a significant contract renewal with a leading British
telecommunications and media company by Brookcourt Solutions.
(2) National Cyber Security Centre Annual Review 2021
Finance review
Financial performance
Revenue
Revenues of GBP10.6 million (H1 FY20: GBP11.2 million) reflects
a small year-on-year deficit which is driven by some timing of
renewal opportunities within Services division detailed below.
Whilst the Group's Services division has witnessed increased
demand for its advisory services which has led to a healthy
year-on-year improvement in advisory revenues in the period, there
has been some timing impact on security solutions as well as
managed services and warranties revenues. It is however encouraging
to see a healthy pipeline of renewal opportunities in H2 which
provides the opportunity to recover the H1 deficit.
The Group's Software division has delivered a marginal
year-on-year improvement, benefitting from c. 40 new clients.
During the period renewal rates have been maintained at c. 80% and
as we go into H2 the addition of new products/modules provides an
opportunity to drive incremental revenue growth with both new and
existing customers.
Adjusted EBITDA
The Group delivered enhanced adjusted profitability in H1
generating adjusted EBITDA of GBP1.3m, 19% ahead of the prior
period with both divisions reporting improved year-on-year
profitability which contributed to an improved adjusted EBITDA
margin for the Group of 12% (30 September 2020: 10%). Additional
overhead costs of GBP0.2m reflect investments, into infrastructure
and marketing, as well as one off savings made in the prior
year.
The income statement below details both statutory and
alternative measures which, in the Directors' opinion provides
additional relevant information to the reader in assessing the
adjusted performance of the business.
2021 2020 Change
GBP (000) GBP (000) %
-------------------------------------- ----------- ----------- --------
Revenue 10,576 11,173 (5%)
Gross profit 4,101 3,697 11%
Gross profit margin % 39% 33%
Overheads 2,840 2,635 (8%)
-------------------------------------- ----------- ----------- --------
Adjusted EBITDA 1,261 1,062 19%
Adjusted EBITDA margin % 12% 10%
Finance charge 56 140
Depreciation 136 178
Amortisation of intangible assets
- computer software 526 379
-------------------------------------- ----------- ----------- --------
Adjusted profit before tax 543 365 49%
Amortisation of acquired intangible
assets 1,050 1,050
Other income 20 -
Fair value adjustment for deferred
consideration - (37)
Share based payments 31 132
-------------------------------------- ----------- ----------- --------
Loss before tax (518) (780) 34%
Taxation (credit)/charge (138) (78)
Loss after tax (380) (702) 46%
-------------------------------------- ----------- ----------- --------
Finance charges
A year-on-year reduction in Finance charges reflect a material
reduction in loan liabilities held by the Group following the
repayment of loan liabilities in the prior period. During the
period the Group settled in full one of the remaining two loans
liabilities, twelve months early, generating additional interest
savings.
Depreciation
A year-on-year reduction in the depreciation of right of use
assets relating to office space recognises some consolidation of
office space.
Amortisation of intangibles assets - computer software
An increased amortisation charge in the period incorporates the
amortisation of internally developed products for our software
division which have gone live.
Adjusted profit before tax
Adjusted profit before tax of GBP0.5m (H1 FY21: GBP0.4m) is 49%
ahead of the prior period and in addition to the improved adjusted
EBITDA incorporates the savings in finance charges and depreciation
less the increase in amortisation of computer software intangible
assets which is detailed above.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets of GBP1.1m (H1 FY21:
GBP1.1m) is in line with the previous year.
Other income
Other income consist of the early repayment discount made
relating to a GBP0.3m loan liability which was repaid in April
2021.
Fair value adjustment to deferred consideration
A credit in the period relates to a fair value adjustment for
deferred share consideration owed to the previous owners of GeoLang
Holdings Limited which was settled in full in the previous fiscal
period.
Share based payments
A charge of GBP0.03million (H1 FY20: GBP0.1 million) has been
incurred in relation to long-term incentive plans.
Earnings per share
Adjusted basic and diluted earnings per share of GBP0.02 (H1
FY21: GBP0.01) incorporates the positive year-on-year improvement
in adjusted profit before tax which has been driven by improved
profitability from trading. Reported basic and diluted loss per
share of GBP0.02 (H1 FY21: loss per share GBP0.03) represents a
continued year-on-year improvement.
Loss before tax
A reduced loss before tax in the period of GBP0.5million (2020:
GBP0.8m) recognises the year-on-year improvement in adjusted profit
before tax and savings in share-based payments recognised in the
period.
Statement of Cash flow
Following two years of strong cash flow where the Group
delivered strong adjusted cash conversion (FY21 143% and FY20
165%), the Group has experienced some unwinding of its working
capital which has contributed to a cash outflow in the period. In
addition to these working capital movements, there were a number of
other adjusting items which are detailed below the summarised cash
flow statement below which resulted in a cash outflow in H1:
2021 2020
GBP (000) GBP (000)
------------------------------------------------- ----------- -----------
Adjusted EBITDA 1,261 1,062
Movements in working capital (3,523) 677
Cash used / generated from operations (2,262) 1,739
Adjusted cash used / generated from operations (876) 1,245
Adjusting items (1,386) 494
Cash used / generated from operations (2,262) 1,739
------------------------------------------------- ----------- -----------
Capital expenditure (net of disposal proceeds) (433) (284)
Tax paid (31) -
Interest paid (35) (12)
Payments of lease liabilities (112) (149)
Proceeds from issue of share capital - 3,750
Loan repayments (250) (4,151)
FX and other (3) (469)
------------------------------------------------- ----------- -----------
Movement in cash (3,126) 424
Opening cash and cash equivalents 8,049 3,343
Closing cash and cash equivalents 4,923 3,767
------------------------------------------------- ----------- -----------
Loans (520) (752)
Net cash / (debt) 4,403 3,015
------------------------------------------------- ----------- -----------
2021 2020
Adjusting items GBP (000) GBP (000)
------------------------------------------ ----------- -----------
Repayment of deferred VAT liability (1,120) 494
VAT prepayment (191) -
Other specific new external investment (75) -
Adjusting items (1,386) 494
------------------------------------------ ----------- -----------
In addition to the adjusting items highlighted above, during the
period the Group has increased its investment into internal
development of its software products and repaid loan liabilities in
advance of their contracted repayment date. The resulting savings
from the early repayment of loan liabilities in the period and post
the period end are expected to generate savings in excess of
GBP0.1m this year.
Despite the operating cash outflow in H1 the Group continued to
collect cash in an efficient manner, maintaining strong cash
collection with minimal bad debts.
Events after the balance sheet date
On 15 October 2021, the Group settled the remaining loan balance
held with Secarma Limited (contracted repayment date was 9 April
2022) securing an early repayment discount of GBP50,000 plus any
future interest. Following the repayment, the Group has no loan
liabilities outstanding.
The Group's clean balance sheet, (including an undrawn revolving
credit facility) puts the Group in a healthy position as it looks
to execute on the next phases of its growth strategy.
Alternative performance measures
This review includes alternative performance measures ('APMs')
alongside the standard IFRS measures. The Directors believe that
alternative measures provide additional relevant information
regarding the adjusted performance of the business. APMs are used
to enhance the comparability of information between reporting
periods by adjusting for one off exceptional and other items that
affect the IFRS measure. Consequently, the Directors and management
use APM's in addition to IFRS measures to assess the adjusted
performance of the business.
Alternative performance measures used include:
-- Adjusted EBITDA
-- Adjusted profit before tax
-- Adjusted profit after tax
-- Adjusted earnings per share
Adjusting items include:
Exceptional items which are one off by their nature such as
acquisition costs or re-organisation costs and do not form part of
the underlying operational cost of the business.
Share based payment charges awarded form a long-term
remuneration incentive to certain staff. Despite this plan not
having a cash cost to the business, a share-based payment charge is
taken to the statement of comprehensive income which we believe
does not form part of the underlying operating cost of the
business.
Other income generated from early repayments discounts for loan
liabilities is one off in its nature and therefore not a consistent
income stream.
Fair value adjustment on deferred consideration represents an
adjustment to revalue deferred share consideration liability. We
consider that these charges/credits do not form part of the
underlying operational cost base of the business and we therefore
exclude from our adjusted measures.
Acquisition amortisation of identified intangible assets
acquired as part of an acquisition are charged to the statement of
comprehensive income but do not form part of the underlying
operating cost of the business.
A full reconciliation between adjusted and reported results is
detailed below:
Six months to 30 September H1 FY22 H1 FY21
GBP (000) GBP (000)
=================================================== =========== ===========
Adjusted EBITDA 1,261 1,062
Share based payments charge (31) (132)
Fair value adjustment for deferred consideration - 37
EBITDA 1,230 967
=================================================== =========== ===========
Six months to 30 September H1 FY22 H1 FY21
GBP (000) GBP (000)
=================================================== =========== ===========
Adjusted profit before tax 543 365
Acquisition amortisation (1,050) (1,050)
Share based payments charges (31) (132)
Other income 20 -
Fair value adjustment for deferred consideration - 37
Reported loss before tax (518) (780)
=================================================== =========== ===========
Six months to 30 September H1 FY22 H1 FY21
GBP (000) GBP (000)
=================================================== =========== ===========
Adjusted profit after tax 570 332
Acquisition amortisation (939) (939)
Share based payments charge (31) (132)
Other income 20 -
Fair value adjustment for deferred consideration - 37
Reported loss after tax (380) (702)
=================================================== =========== ===========
Six months to 30 September H1 FY22 H1 FY21
GBP (000) GBP (000)
=================================================== =========== ===========
Adjusted EPS 0.02 0.01
Acquisition amortisation (0.04) (0.04)
Share based payments charge (0.00) (0.01)
Other income 0.00 0.00
Fair value adjustment for deferred consideration 0.00 0.00
Reported EPS (0.02) (0.03)
=================================================== =========== ===========
Principal risks and uncertainties
The Group works to minimise its exposure to operational,
financial and other risks however in pursuit of achieving its
growth strategy there will always be an element of risk that needs
to be considered. The Group's principal risks and uncertainties, as
detailed in the financial statements for the year ended 31 March
2021, are all still considered to be valid. Over the past six
months these risks and uncertainties have remained very much in
place.
Statement of Directors' responsibilities
We confirm that to the best our knowledge that:
-- The condensed interim set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the European Union;
-- The interim report includes a fair review of information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- The interim report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties transactions
and any change therein).
Phil Higgins Paul McFadden
Chief Executive Officer Chief Financial Officer
Consolidated statement of comprehensive income
for the 6 months to 30 September 2021
2021 2020
(unaudited) (unaudited)
Note GBP (000) GBP (000)
---------------------------------------------------- ------ ------------- -------------
Revenue 3 10,576 11,173
Cost of sales (6,475) (7,476)
---------------------------------------------------- ------ ------------- -------------
Gross profit 4,101 3,697
Administrative expenses (2,871) (2,767)
Depreciation and amortisation (1,712) (1,607)
Other operating expenses/income 20 37
Total operating costs (4,563) (4,337)
---------------------------------------------------- ------ ------------- -------------
Operating loss (462) (640)
Adjusted EBITDA 1,261 1,062
Depreciation and amortisation (1,712) (1,607)
Exceptional items - -
Share-based payments (31) (132)
Other operating expenses/income 20 37
Operating loss (462) (640)
---------------------------------------------------- ------ ------------- -------------
Finance income - 2
Finance cost 4 (56) (142)
Loss before taxation (518) (780)
---------------------------------------------------- ------ ------------- -------------
Income tax credit 5 138 78
Loss for the period and attributable to
equity holders of the Company (380) (702)
---------------------------------------------------- ------ ------------- -------------
Other comprehensive income
Items that may be reclassified to profit
and loss:
Change in financial assets at fair value
through OCI - -
Exchange differences on translation of
foreign operations 1 (2)
Total comprehensive loss for the period (379) (704)
---------------------------------------------------- ------ ------------- -------------
Earnings / (loss) per ordinary share attributable
to the owners of the parent
Basic and diluted (GBP per share) 6 (0.02) (0.03)
Adjusted basic and diluted (GBP per share) 6 0.02 0.01
Adjusted EBITDA is a non-GAAP company specific measure which is
considered to be a key performance indicator of the Group's financial
performance.
The results above are derived from continuing operations.
Consolidated statement of financial position
as at 30 September 2021
2021 2020
(unaudited) (unaudited)
Note GBP (000) GBP (000)
-------------------------------- ------ ------------- -------------
Assets
Non-current assets
Intangible assets 53,461 55,590
Property, plant and equipment 281 546
Deferred tax asset - 87
Total non-current assets 53,742 56,223
---------------------------------- ------ ------------- -------------
Current assets
Trade and other receivables 7 5,580 8,336
Cash and cash equivalents 4,923 3,767
Total current assets 10,503 12,103
---------------------------------- ------ ------------- -------------
Total assets 64,245 68,326
---------------------------------- ------ ------------- -------------
Liabilities
Current liabilities
Trade and other payables 8 5,153 8,711
Total current liabilities 5,153 8,711
---------------------------------- ------ ------------- -------------
Non-current liabilities
Creditors: amounts falling
due after more than one
year 9 2,952 4,152
Total non-current liabilities 2,952 4,152
---------------------------------- ------ ------------- -------------
Total liabilities 8,105 12,863
---------------------------------- ------ ------------- -------------
Net assets 56,140 55,463
---------------------------------- ------ ------------- -------------
Capital and reserves
Share capital 10 22,277 22,276
Share premium 34,581 34,581
FVTOCI reserve 14 14
Other reserves 24,407 24,198
Translation reserve 25 25
Accumulated losses (25,164) (25,631)
Equity attributable to owners
of the Company 56,140 55,463
--------------------------------- ------ ------------- -------------
Total equity and liabilities 64,245 68,326
---------------------------------- ------ ------------- -------------
Consolidated statement of changes in equity
for the 6 months to 30 September 2021
Share
capital
(Note Share FVTOCI Other Translation Accumulated Total
10) premium reserve reserves reserve losses equity
GBP GBP GBP
GBP (000) GBP (000) (000) (000) GBP (000) GBP (000) (000)
-------------------------- ----------- ----------- ---------- ----------- ------------- ------------- ---------
At 31 March 2020
(audited) 22,107 34,581 14 20,714 27 (24,929) 52,514
Loss for the period - - - - - (702) (702)
Other comprehensive
loss for the period - - - - (2) - (2)
-------------------------- ----------- ----------- ---------- ----------- ------------- ------------- ---------
Total comprehensive
loss for the period - - - - (2) (702) (704)
Contribution by and distribution
to owners
Issue of share capital 169 - - - - - 169
Merger relief reserve - - - 3,352 - - 3,352
Share based payments - - - 132 - - 132
-------------------------- ----------- ----------- ---------- ----------- ------------- ------------- ---------
At 30 September 2020
(unaudited) 22,276 34,581 14 24,198 25 (25,631) 55,463
Profit for the period - - - - - 847 847
Other comprehensive
loss for the period - - - - (1) - (1)
-------------------------- ----------- ----------- ---------- ----------- ------------- ------------- ---------
Total comprehensive
loss for the period - - - - (1) 847 846
Contribution by and distribution
to owners
Issue of share capital 1 - - (1) - - -
Share based payments - - - 179 - - 179
-------------------------- ----------- ----------- ---------- ----------- ------------- ------------- ---------
At 31 March 2021
(audited) 22,277 34,581 14 24,376 24 (24,784) 56,488
Loss for the period - - - - - (380) (380)
Other comprehensive
loss for the period - - - - 1 - 1
-------------------------- ----------- ----------- ---------- ----------- ------------- ------------- ---------
Total comprehensive
loss for the period - - - - 1 (380) (379)
Contribution by and distribution
to owners
Issue of share capital - - - - - - -
Merger relief reserve - - - - - - -
Share based payments - - - 31 - - 31
-------------------------- ----------- ----------- ---------- ----------- ------------- ------------- ---------
At 30 September 2021
(unaudited) 22,277 34,581 14 24,407 25 (25,164) 56,140
Consolidated cash flow statement
for the 6 months to 30 September 2021
2021 2020
(unaudited) (unaudited)
Note GBP (000) GBP (000)
--------------------------------------------- ------- ------------- -------------
Cash flows from operating activities
Loss for the period (380) (702)
Adjustments for:
Amortisation of intangible
assets 1,576 1,429
Depreciation of property, plant
and equipment 136 178
Share-based payment charge 31 132
Other income (20) -
Fair value adjustment of deferred
consideration - (37)
Finance income - (2)
Finance cost 56 142
Income tax (138) (78)
Cash flow from operating activities
before changes in working capital 1,261 1,062
Decrease/(increase) in trade
and other receivables 4,031 1,983
(Decrease)/increase in trade
and other payables (7,554) (1,306)
Cash used / generated from operations (2,262) 1,739
---------------------------------------------- ------- ------------- -------------
Net foreign exchange movements (3) (3)
Finance cost paid (35) (12)
Tax (paid) / credit (31) -
---------------------------------------------- ------- ------------- -------------
Net cash used / generated from
operating activities (2,331) 1,724
---------------------------------------------- ------- ------------- -------------
Investing activities
Purchase of property, plant and
machinery (12) (32)
Purchase of software (421) (252)
Net cash used in investing activities (433) (284)
---------------------------------------------- ------- ------------- -------------
Financing activities
Proceeds from issue of share
capital - 3,750
Repayment of loan liabilities (250) (4,151)
Expenses paid in connection with
share issues - (466)
Repayment of lease liabilities (112) (149)
Net cash used in financing activities (362) (1,016)
---------------------------------------------- ------- ------------- -------------
Net increase/(decrease) in cash and
cash equivalents (3,126) 424
----------------------------------------------- ------- ------------- -------------
Foreign exchange movement on cash and
cash equivalents - -
Cash and cash equivalents at the beginning
of the period 8,049 3,343
Cash and cash equivalents at
the end of the period 4,923 3,767
---------------------------------------------- ------- ------------- -------------
Notes
1. General information
The interim consolidated financial information was authorised by
the board of directors for issue on 25 November 2021. The
information for the six-month period ended 30 September 2021 has
not been audited and does not constitute statutory accounts as
defined in section 434 of the Companies Act 2006, and should
therefore be read in conjunction with the audited financial
statements of the Company and its subsidiaries for the year ended
31 March 2021, which have been prepared in accordance with
International Financial Reporting Standards (IFRS). The interim
consolidated financial information does not comply with IAS 34
Interim Financial Reporting, as permissible under the rules of
AIM.
2. Statement of accounting policies
The significant accounting policies applied in preparing the
financial statements are outlined below. These policies have been
consistently applied for all the years presented, unless otherwise
stated
a) Basis of preparation
These interim consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards ('IFRS'), including International Accounting Standards
(IAS) and interpretations (IFRS ICs) issued by the International
Accounting Standards board (IASB) and its committees, as adopted in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006.
The Consolidated financial statements have been prepared under
the historic cost convention, except for certain financial
instruments that have been measured at fair value. The Consolidated
financial statements are presented in Sterling, the functional
currency of Shearwater Group plc, the Parent Company. All values
are rounded to the nearest thousand pounds (GBP'000s) except where
otherwise indicated.
b) Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for at least twelve months from the date of
publication of these interim financial statements. Accordingly,
they continue to adopt the going concern basis in preparing these
consolidated financial statements.
The Directors have reviewed the Group's going concern position
taking into account its current business activities, performance to
date against budgeted targets and the factors likely to affect its
future development which include the Group's strategy, principal
risks and uncertainties and its exposure to credit and liquidity
risks.
In addition to this the Directors continue to monitor the
evolution of the COVID19 pandemic and have taken steps to ensure
that the Group is in a robust position should any future trading
downturn occur. Throughout the COVID19 pandemic the Group has
demonstrated its ability to trade through challenging conditions,
and it is encouraging to now see our advisory businesses, which
were particularly impacted by the initially lockdown now delivering
improved results through a hybrid delivery model.
The Group has recorded improved year-on-year adjusted EBITDA
profit for the first six months to 30 September 2021, which is in
line with its budgeted target. At 30 September 2021 the Group had
cash and cash equivalents of GBP4.9m ( H1 FY21 : GBP3.8m) and
whilst H1 has seen a cash outflow owing to some unwinding of
working capital, in addition to increased investment spend, the
repayment of deferred VAT and loan liabilities the Group is in an
improved year-on-year net cash position of GBP4.4m (H1 FY21:
GBP3.0m). At 30 September 2021 net assets of GBP56.1m ( H1 FY21 :
GBP55.5m) and net current assets of GBP5.4m ( H1 FY21 : net current
liabilities GBP3.4m) show favourable year-on-year positions.
The Group has a GBP4.0 million 3-year revolving credit facility
with Barclays Bank plc, signed on the 25 March 2021 which can
provide working capital support if required. To date this facility
remains un-utilised.
The Directors have reviewed a detailed reforecast of trading
which includes a cash flow forecast for a period which covers a
period of trading to March 2023 and have challenged the assumptions
used to create these forecasts. This forecast demonstrates that the
Group is able to pay its debts as they fall due during this
period.
The Directors have reviewed a highly sensitised reverse stress
test scenario which has factored in what the Directors believe
would be an extreme scenario which incorporates the removal of all
new business revenues across both segments of the Group, a
reduction of renewal rates in our software division to 60%, scaling
back of revenues within our Services division leaving just critical
managed services revenues and already contracted revenues. Costs
have been scaled back sensitively in line with the reduction in
revenues. Overall the sensitised cash flow forecast demonstrates
that the Group will be able to pay its debts as they fall due for
the period to at least 31 March 2023.
c) Critical accounting judgements estimates and assumptions
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported for income and expenses during the year and that affect
the amounts reported for assets and liabilities at the reporting
date.
The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those described in the last annual
financial statements.
Business Combinations
Management make judgments, estimates and assumptions in
assessing the fair value of the net assets acquired on a business
combination, in identifying and measuring intangible assets arising
on a business combination, and in determining the fair value of the
consideration. If the consideration includes an element of
contingent consideration, the final amount of which is dependent on
the future performance of the business, management assess the fair
value of that contingent consideration based on their reasonable
expectations of future performance. In determining the fair value
of intangible assets acquired, key assumptions used include
expected future cashflows, growth rates and the weighted average
cost of capital.
Impairment of goodwill, intangible assets and investment in
subsidiaries
Management make judgements, estimates and assumptions in
supporting the fair value of goodwill, intangible assets and
investments in subsidiaries. The Group carry out annual impairment
reviews to support the fair value of these assets. In doing so
management will estimate future growth rates, weighted average cost
of capital and terminal values.
Leases
Management make judgements, estimates and assumptions regarding
the life of leases. At present management are assessing all
existing leases which all relate to office space as we look to
reduce the number of offices across the Group. For this reason
management have assumed that the life of leases does not extend
past the current contracted expiry date. A judgement has been taken
with regards to the incremental borrowing rate based upon the rate
at which the Group can borrow money.
d) Basis of consolidation
The group's interim consolidated financial statements
incorporate the results and net assets of Shearwater Group plc and
all its subsidiary undertakings made up to 30 September each year.
Subsidiaries are all entities over which the group has control. The
group controls an entity when the group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the group. They are deconsolidated
from the date that control ceases. Where necessary, adjustments are
made to the financial statements of subsidiaries to bring the
accounting policies used into line with those used by the group.
All inter-group transactions, balances, income and expenses are
eliminated on consolidation.
e) Business combinations and goodwill
Business combinations are accounted for using the acquisition
accounting method. This involves recognising identifiable assets
(including previously unrecognised intangible assets) and
liabilities of the acquired business at fair value. Any excess of
the cost of the business combination over the Group's interest in
the net fair value of the identifiable assets and liabilities is
recognised in the consolidated statement of financial position as
goodwill and is not amortised. To the extent that the net fair
value of the acquired entity's identifiable assets and liabilities
is greater than the cost of the investment, a gain is recognised
immediately in the consolidated statement of comprehensive
income.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment at least annually and whenever events or
changes in circumstances indicate that the carrying value may be
impaired. Goodwill assets considered significant in comparison to
the Group's total carrying amount of such assets have been
allocated to cash-generating units or groups of cash-generating
units. Where the recoverable amount of the cash-generating unit is
less than its carrying amount including goodwill, an impairment
loss is recognised in the consolidated statement of comprehensive
income.
Acquisition costs are recognised in the consolidated statement
of comprehensive income as incurred.
f) Revenue
The Group recognises revenue in accordance with IFRS 15 Revenue
from Contracts with Customers. Revenue with customers is evaluated
based on the five-step model under IFRS 15 'Revenue from Contracts
with Customers': (1) identify the contract with the customer; (2)
identify the performance obligations in the contract; (3) determine
the transaction price; (4) allocate the transaction price to
separate performance obligations; and (5) recognise revenues when
(or as) each performance obligation is satisfied.
The Group's revenues are comprised of a number of different
products and services across our two divisions, details of which
are provided below:
Software
-- Software licences whereby the customer buys a software that
it sets up and maintains on its premises is recognised fully at the
point the licence key / access has been granted to the client. The
Group sells the majority of its software products through channels
and distributors who are responsible for providing 1(st) and 2(nd)
line support to the client.
-- Software licences for the new 'Authentication as a Services'
product whereby the customer accesses the product via a cloud
environment maintained by the Company is recognised in two parts
whereby 80% of the subscription is recognised at the point that the
licence key is provided to the customer with the remaining 20%
recognised evenly over the length of the contract. This deferred
proportion represents the obligation to maintain and support the
platform that the software runs on.
Services
-- Sale of third-party hardware, software and warranties:
a) Where the contract entails only one performance obligation to
provide software or hardware, revenue is recognised in full at a
point in time upon delivery of the product to the end client. This
delivery will either be in the form of the physical delivery of a
product or the e-mailing of access codes to the client for them to
access third party software or warranties; and
b) Where a contract to supply external hardware, software and/or
warranties also include an element of ongoing internal support,
multiple performance obligations are identified and an allocation
of the total contract value is allocated to each performance
obligation based on the standalone costs of each performance
obligation. The respective costs of each performance obligations
are traceable to supplier invoice and applying the fixed margins,
standalone selling prices are determined. Internal support is
recognised equally over the period of time detailed in the
contract.
-- Sale of consultancy services are usually based on a number of
consultancy days that make up the contracted consideration.
Consultancy days generally comprise of field work and (where
required) report writing and delivery which are considered to be of
equal value to the client. Revenue is recognised over time based on
the number of consultancy days provided within the period compared
to the total in the contract.
Revenue recognised in the statement of comprehensive income but
not yet invoiced is held on the statement of financial position
within accrued income. Revenue invoiced but not yet recognised in
the statement of comprehensive income is held on the statement of
financial position within deferred revenue.
g) Use of additional performance measures
The Group presents adjusted EBITDA information which is used by
the directors for internal performance analysis and may not be
comparable with similarly titled measures reported by other
companies. The term "adjusted EBITDA" refers to operating profit or
loss excluding amortisation of intangibles, depreciation and
impairment, share-based payments charge, exceptional items, income
tax expense, finance income, finance expenses or fair value
adjustments to deferred consideration provisions and contingent
consideration paid.
h) Segmental reporting
For internal reporting and management purposes, the Group is
organised into two reportable segments based on the types of
products and services from which each segment derives its revenue -
software and services. The Group's operating segments are
identified on the basis of internal reports that are regularly
reviewed by the chief operating decision maker in order to allocate
resources to the segment and to assess its performance. Please see
note 3 for more details.
i) Intangible assets
Intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets
acquired as part of a business combination are recognised outside
goodwill if the assets are separable or arises from contractual or
other legal rights and their fair value can be measured reliably.
Material expenditure on internally developed intangible assets is
taken to the consolidated statement of financial position if it
satisfies the 6 step criteria required under IAS 38.
Intangible assets with a finite life have no residual value and
are amortised over their expected useful lives as follows:
Computer software 2-5 years straight line basis
Customer relationships 1-15 years straight line basis
Software 10 years straight line basis
Tradenames 10 years straight line basis
The amortisation expense on intangible assets with finite lives
is recognised in the statement of comprehensive income within
administrative expenses. The amortisation period and the
amortisation method for intangible assets with finite useful lives
are reviewed at least annually.
The carrying value of intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable.
j) Property, plant and machinery
Property, plant and equipment is stated at historical cost less
accumulated depreciation. Cost includes the original purchase price
of the asset plus any costs of bringing the asset to its working
condition for its intended use. Depreciation is provided at the
following annual rates, on a straight-line basis, in order to write
down each asset to its residual value over its estimated useful
life.
The assets residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
Plant and machinery 20-33 per cent per annum
Office equipment 25 per cent per annum
Shorter of useful life of the
Right of use assets asset or Lease term
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised, as adjusted
items if significant, within the statement of comprehensive
income.
3. Segmental information
In accordance with IFRS 8, the Group's operating segments are
based on the operating results reviewed by the Board, which
represents the chief operating decision maker. The Group reports
its results in two segments as this accurately reflects the way the
Group is managed.
The Group is organised into two reportable segments based on the
types of products and services from which each segment derives its
revenue - software and services.
Segment information for the 6 months ended 30 September 2021 is
presented below and excludes intersegment revenue as they are not
material, and assets as the Directors do not review assets and
liabilities on a segmental basis.
Six-month period ended 30 September
2021 2021 2020 2020
Revenue Profit Revenue Profit
(unaudited) (unaudited) (unaudited) (unaudited)
GBP (000) GBP (000) GBP (000) GBP (000)
------------------------------ ------------- ------------- ------------- -------------
Services 8,689 905 9,312 769
Software 1,887 910 1,861 759
------------------------------ ------------- ------------- ------------- -------------
Group total 10,576 1,815 11,173 1,528
Group costs (554) (466)
------------------------------ ------------- ------------- ------------- -------------
Adjusted EBITDA 1,261 1,062
Amortisation of intangibles (1,576) (1,429)
Depreciation (136) (178)
Share-based payments (31) (132)
Other income 20 -
Fair value adjustment to
deferred consideration - 37
Finance income - 2
Finance cost (56) (142)
Loss before tax (518) (780)
------------------------------ ------------- ------------- ------------- -------------
The Group is domiciled in the United Kingdom and currently the
majority of its revenues come from external customers that are
transacted in the United Kingdom. A number of transactions which
are transacted from the United Kingdom represent global framework
agreements, meaning our services, whilst transacted in the United
Kingdom, are delivered globally. The geographical analysis of
revenue detailed below is on the basis of country of origin in
which the master agreement is held with the customer (where the
sale is transacted).
Six-month period ended
30 September
2021 2020
(unaudited) (unaudited)
GBP (000) GBP (000)
-------------------- ------------- -------------
United Kingdom 7,698 7,166
Europe (excluding
the UK) 1,964 3,192
North America 550 672
Rest of the world 364 143
10,576 11,173
-------------------- ------------- -------------
4. Finance expenses
Six-month period ended
30 September
2021 2020
(unaudited) (unaudited)
GBP (000) GBP (000)
---------------------------------------- ------------- -------------
Interest payable on loan balances 15 119
Interest payable on bank revolving
credit facility 35 13
Interest payable on lease liabilities 6 10
56 142
---------------------------------------- ------------- -------------
5. Income Tax
The tax expense recognised reflects managements' estimates of
the tax charge for the period and has been calculated using the
estimated average tax rate of UK corporation tax for the financial
period of 19%.
6. Earnings/(loss) per share
Basic loss per share is calculated by dividing the loss
attributable to the ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
For diluted loss per share, the weighted average number of
shares in issue is adjusted to assume conversion of all the
potential dilutive ordinary shares. The potential dilutive shares
are anti-dilutive for the six months ended 30 September 2021 and
the six months ended 30 September 2020 as the Group is loss
making.
Adjusted earnings per share has been calculated using adjusted
earnings calculated as profit after taxation but before
amortisation of acquired intangibles after tax, share based
payments, impairment of intangible assets, exceptional items after
tax, fair value adjustment to deferred consideration and contingent
consideration.
Adjusted earnings per share is potentially dilutive in the six
months to 30 September 2021, six months to 30 September 2020 and
for the 12 months to 31 March 2021.
The calculation of the basic and diluted earnings per share from
total operations attributable to shareholders is based on the
following data:
Six-month period ended
30 September
2021 2020
(unaudited) (unaudited)
GBP (000) GBP (000)
-------------------------------------------------- ------------- -------------
Net profit / loss from total
operations
Earnings for the purposes of basic and
diluted earnings / loss per share being
net loss attributable to shareholders (380) (702)
Add/(remove)
Amortisation of acquired intangibles 939 939
Share based payments 31 132
Other income (20) -
Fair value adjustment to deferred consideration - (37)
Adjusted earnings for the purpose of adjusted
earnings per share 570 332
---------------------------------------------------- ------------- -------------
Number of shares No No
-------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares
for the purpose of basic and diluted and
adjusted basic earnings per share 23,809,739 23,424,168
Weighted average number of ordinary shares
for the purpose of adjusted diluted earnings
per share 23,954,771 23,583,080
---------------------------------------------------- ------------- -------------
Earnings per share GBP GBP
Basic and diluted loss per
share (0.02) (0.03)
Adjusted Basic and diluted earnings
per share 0.02 0.01
--------------------------------------------------- ------------- -------------
7. Trade and other receivables
Period ended 30 September
2020 2020
(unaudited) (unaudited)
GBP (000) GBP (000)
------------------------------------ -------------- --------------
Trade receivables 4,798 5,541
Prepayments and other receivables 410 2,337
Accrued income 372 458
5,580 8,336
------------------------------------ -------------- --------------
8. Trade and other payables Period ended 30 September
2021 2020
(unaudited) (unaudited)
GBP (000) GBP (000)
------------------------------------- -------------- -------------
Trade payables 2,027 6,145
Accruals and other payables 1,480 1,299
Other taxation and social security 637 843
Loans 520 10
Deferred income 295 186
Lease liabilities 158 216
Corporation tax 36 12
5,153 8,711
------------------------------------- -------------- -------------
9. Creditors: amounts falling due after more than one year
Period ended 30 September
2021 2020
(unaudited) (unaudited)
GBP (000) GBP (000)
-------------------- -------------- -------------
Deferred tax 2,927 3,243
Loans - 742
Lease liabilities 25 167
2,952 4,152
-------------------- -------------- -------------
10. Share capital
The table below details movements in share capital during the
year:
Six-month period ended
30 September
In thousands of shares 2021 2020
--------------------------------------------------- ------------ ------------
In issue at 31 March 23,810 22,109
Options exercised during the period - -
Share issue as part of acquisition consideration - -
Share issue for deferred consideration - 129
Share placing - 1,563
In issue at 30 September 23,810 23,801
--------------------------------------------------- ------------ ------------
2021 2020
GBP (000) GBP (000)
Allotted, called up and fully paid
Ordinary shares of GBP0.10 each 2,381 2,380
Deferred shares of GBP0.90 each 19,896 19,896
------------------------------------- ----------- -----------
22,277 22,276
------------------------------------- ----------- -----------
The Company did not issue any shares in the six-month period
ended 30 September 2021.
11. Related party transaction
The Directors of the Group and their immediate relatives have an
interest of 17% ( H1 FY20 : 17%) of the voting shares of the
Group.
12. Events after the reporting date
On 15 October 2021, the Group settled the remaining loan balance
held with Secarma Limited early (contracted repayment date was 9
April 2022) securing an early repayment discount of GBP50,000 plus
any future interest.
At 30 September 2021 Secarma Limited held a 12.3% stake in the
Group.
13. Cautionary statement
This Interim Report has been prepared solely to provide
additional information to shareholders to assess the Company's
strategies and the potential for these strategies to succeed. The
Interim Report should not be relied on by any other party or for
any purpose. The Interim Report contains certain forward-looking
statements with respect to the financial condition, results of
operations and businesses of the Company. These statements are made
in good faith based on the information available to them up to the
time of their approval of this report. However, such statements
should be treated with caution as they involve risk and uncertainty
because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied by these forward-looking statements. The
continuing uncertainty in global economic outlook inevitably
increases the economic and business risks to which the Company is
exposed. Nothing in this announcement should be construed as a
profit forecast.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR BIBTTMTTTTFB
(END) Dow Jones Newswires
November 25, 2021 02:00 ET (07:00 GMT)
Shearwater (LSE:SWG)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Shearwater (LSE:SWG)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
