TIDMREAT
RNS Number : 2892R
React Group PLC
29 June 2020
REACT Group plc
("REACT", the "Group" or the "Company")
Half Year Results FY 2020
REACT Group plc, (AIM:REAT.L) the leading specialist cleaning,
hygiene and decontamination company announces its unaudited results
for the six-month period ended 31 March 2020 ("Interim
Report").
Financial Highlights
for the six months ended 31 March 2020
Continuing operations HY 2020 HY 2019 Change
--------------------------- -------- -------- ---------
Revenue (GBP'000) 2,091 1,588 32%
Gross profit (GBP'000) 695 419 66%
Gross profit margin 33.2% 26.4% +683 bps
EBITDA (GBP'000) 85 (30) 379%
Net profit/(loss) for the
period (GBP'000) 50 (59) 184%
Earnings/(loss) per share
(basic) (pence) 0.01 (0.01) 184%
Earnings/(loss) per share
(adjusted) (pence) 0.02 (0.01) 379%
Net cash (GBP'000) 306 446 (31%)
-- Group revenue up 32% to GBP2,091,000
-- Gross profit up 66% to GBP695,000
-- Gross profit margins increased by 683 basis points to over 33%
-- Net profit of GBP50,000 and basic EPS of 0.01p, the Company's
first period of operating profit
-- Adjusted EPS of 0.02p (see Note 4 for details)
-- Net cash decreased in the period as we supported an
incremental large contract win with a Tier 1 customer in the rail
sector that started in January, with cash collection beginning only
in the final week of the half-year period
-- Cash balances have improved since the interim period as the
Group has continued to benefit from improved quality of business
and disciplined cash collection processes
-- Successful, over-subscribed placing to raise c.GBP1.25m completed 9 June 2020
-- Several post-period new contract wins announced
Commenting on the results Shaun Doak, CEO said:
"We are delighted to report the Company's first period of
operating profit, the culmination of work across the business to
redefine the business model, strengthen business processes and
engage with customers in a more consistent manner.
As a people-orientated business we have not been immune to the
challenges brought about by COVID-19, however the Company has
experienced an increase in demand for professional deep cleaning
and decontamination services as we strive to help organisations in
the UK reduce risk and return their properties to safe commercial
use.
The second half of the year has started well, with good trading
across key sectors, especially healthcare, rail and facilities
management. We remain confident of delivering a performance ahead
of management expectations for the year to 30 September 2020
including a full year maiden profit."
For more information:
REACT Group Plc.
Shaun Doak, Chief Executive Of cer Tel: +44 (0) 1283 550
Andrea Pankhurst, Chief Financial Officer 503
SPARK Advisory Partners Limited
(Nominated Adviser)
Neil Baldwin / Henry Todd Tel: +44 (0) 113 370
8974
Allenby Capital Limited
(Broker)
Amrit Nahal / Tony Quirke (Broking) Tel: +44 (0) 203 328
Nick Athanas / Liz Kirchner (Corporate 5656
Finance)
MB Associates
(Strategic Adviser)
Mark Braund Tel: +44 (0) 798 222
0001
RESULTS SUMMARY & STRATEGY
The REACT business performed strongly during the first half of
the year, increasing revenue and delivering further improvements to
gross margins and operational efficiencies to deliver the Group's
maiden operating profit.
Performance was especially strong in the healthcare, rail and
facilities management sectors, augmented by one month of COVID-19
related services.
The REACT Group is a specialist cleaning, hygiene and
decontamination company that tackles extreme cleaning challenges
that non-specialists are unqualified or inexperienced to resolve.
REACT operate across many industries in both the public and private
sector, where hygiene and safety are critical components. We
provide our services on both a regular maintenance and project
defined basis.
Growth and resilience in our markets is underpinned by
regulatory requirements and the associated enforcement burden,
alongside an increasing public and commercial expectation for
quality hygiene.
Nearly 75% of our revenue comes from contract agreements where
REACT is providing regular maintenance or is the first responder to
emergencies. The vast majority of the work we carry out is
non-discretionary to our Customers, providing REACT with increasing
visibility of future earnings.
Our activities are not capital intensive and, on an underlying
basis, are cash generative. When augmented by the recent GBP1.25
million fund-raise, REACT has a strong platform to fund continued
organic growth from internally generated cash in line with our
disciplined approach to cash management and capital allocation.
Our strategy is to grow business in specialist markets that
attract higher margins. We have a number of customers and prospects
from both the private and public sectors who value the quality of
service REACT Group provides; and they represent an opportunity for
greater volumes of business geographically and via the additional
services we provide.
We believe there is opportunity for material growth amongst a
number of both large and medium sized organisations, many of whom
are already customers. The sales and business development efforts
of REACT are now focused on these opportunities, whilst at the same
time we are continuing to improve operational quality and cost
control.
IMPACT OF COVID-19
As a people-orientated business we have not been immune to the
challenges brought about by COVID-19, however the Company has
experienced an increase in demand for professional deep cleaning
and decontamination services as we strive to help organisations in
the UK reduce risk and return their properties to safe commercial
use.
One month (March) of COVID-19 related activity is included in
these unaudited half year results.
PEOPLE
The continued dedication of people across the Group, including
our network of REACT-approved specialist sub-contractors has been
impressive. Our services are provided by people who are experts in
their field, supported by office-based staff who adapted rapidly
and effectively to the new working from home arrangements since
March. As we build our business we rely on these people and the
strength of our results reflects their contribution. On behalf of
the Board and shareholders, I wish to thank our entire team for
their hard work, resilience and dedication.
OUTLOOK
Through restructuring and strategic focus REACT has positioned
itself well for future development. With an experienced management
team in place and the funding necessary to properly address the
potential, our focus is to deliver growth, produce profits and
generate cash.
The second half of the year has started well and, taking into
account trading across each sector of our business, we are
confident of delivering both a 'maiden profit' and a full year
performance ahead of management expectations.
Shaun Doak
Chief Executive Officer
29 June 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2020
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 30 September
31 March 31 March 2019
2020 2019
Note GBP'000 GBP'000 GBP'000
Continuing Operations
Revenue 2,091 1,588 3,103
Cost of Sales (1,396) (1,169) (2,218)
---------- ---------- --------------
Gross Profit 695 419 885
Administrative expenses (632) (478) (1,068)
Exceptional (costs)/income
included in administrative
expenses - 107 (5)
---------------------------------- ----- ---------- ---------- --------------
Operating profit/(loss) 63 (59) (183)
Income tax credit - - -
Finance cost (13) - -
---------- ---------- --------------
Profit/(Loss) for the period 50 (59) (183)
Other comprehensive Income - - -
Profit /(Loss) for the financial
period attributable to equity
holders of the company 50 (59) (183)
========== ========== ==============
Basic and diluted profit/(loss)
per share 4
Basic earnings/(loss) per share 0.01p (0.01p) (0.04p)
========== ========== ==============
Diluted earnings/(loss) per
share 0.01p (0.01p) (0.04p)
========== ========== ==============
Adjusted basic earnings/(loss)
per share 0.02p (0.01p) (0.03p)
========== ========== ==============
Adjusted diluted earnings/(loss)
per share 0.02p (0.01p) (0.03p)
========== ========== ==============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2020
Unaudited Unaudited Audited
As at 31 As at 31 As at 30
March March 2019 September
2020 2019
Assets GBP'000 GBP'000 GBP'000
Non-current assets
Intangibles 174 174 174
Property, plant and equipment 71 80 81
Right-of-use assets 34 - -
---------- ------------ -----------
279 254 255
---------- ------------ -----------
Current assets
Trade and other receivables 1,112 994 718
Cash and cash equivalents 306 446 440
1,418 1,440 1,158
Total assets 1,697 1,694 1,413
========== ============ ===========
Equity
Shareholders' Equity
Called-up equity share capital 1,039 1,039 1,039
Share premium account 4,926 4,926 4,926
Reverse acquisition reserve (5,726) (5,726) (5,726)
Capital redemption reserve 3,337 3,337 3,337
Merger relief reserve 1,328 1,328 1,328
Share based payments 14 20 12
Accumulated losses (3,999) (3,922) (4,038)
Total Equity 919 1,002 878
---------- ------------ -----------
Liabilities
Current liabilities
Trade and other payables 730 692 535
Lease liabilities within one
year 11 - -
---------- ------------ -----------
741 692 535
---------- ------------ -----------
Non-current liabilities
Lease liabilities after one
year 37 - -
---------- ------------ -----------
37 - -
---------- ------------ -----------
Total liabilities 778 692 535
---------- ------------ -----------
Total Liabilities and Equity 1,697 1,694 1,413
========== ============ ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 March 2020
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Net cash (utilised)/generated
by operations (112) 14 34
Cash flows from financing activities - - -
Lease liability payments (15) - -
Net cash outflow from financing
activities (15) - -
---------- ---------- --------------
Net cash from investing activities
Disposal of fixed assets 2 - 8
Capital expenditure (9) 9 (25)
Net cash outflow from investing
activities (7) 9 (17)
---------- ---------- --------------
Net (decrease)/increase in
cash, cash
equivalents and overdrafts (134) 23 17
Cash, cash equivalents and
overdrafts at
beginning of period 440 423 423
Cash, cash equivalents and
overdrafts at end of period 306 446 440
========== ---------- --------------
Reconciliation of profit for the period to cash outflow from operations
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Profit/(loss) for the period 50 (59) (183)
(Increase)/decrease in receivables (394) 165 441
Increase/(decrease) in payables 195 (118) (275)
Depreciation and amortisation
charges 22 29 52
Finance costs 13 - -
Profit on disposal of fixed
assets - (3) (3)
Share based payment 2 - 2
---------- ---------- ------------------
Net cash (outflow)/inflow
from operations (112) 14 34
========== ========== ==================
Consolidated Statement of Changes in Equity
For the six months ended 31 March 2020
Share
Merger Capital Reverse Based
Share Share Relief Redemption Acquisition Payments Accumulated Total
Capital Premium Reserve Reserve Reserve Reserve Deficit Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 September
2018 1,039 4,926 1,328 3,337 (5,726) 20 (3,863) 1,061
--------- --------- --------- ----------- ------------ ---------- ------------ --------
Loss for the
period - - - - - - (59) (59)
At 31 March
2019 1,039 4,926 1,328 3,337 (5,726) 20 (3,922) 1,002
--------- --------- --------- ----------- ------------ ---------- ------------ --------
Share based
payments - - - - - 2 (2) -
On surrender of
warrants - - - - - (10) 10 -
Loss for the
period - - - - - - (124) (124)
At 30 September
2019 1,039 4,926 1,328 3,337 (5,726) 12 (4,038) 878
--------- --------- --------- ----------- ------------ ---------- ------------ --------
Share based
payments - - - - - 2 - 2
Effect of
adoption
of IFRS 16 - - - - - - (11) (11)
Profit for the
period - - - - - - 50 50
At 31 March
2020 1,039 4,926 1,328 3,337 (5,726) 14 (3,999) 919
--------- --------- --------- ----------- ------------ ---------- ------------ --------
Notes to the interim financial statements
1. Basis of preparation
These consolidated interim financial statements have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union and on a
historical basis, using the accounting policies which are
consistent with those set out in the Group's annual report and
accounts for the year ended 30 September 2019, with the exception
of the adoption of IFRS 16 Leases, which is effective for
accounting periods beginning on or after 1 January 2019. The
interim financial information for the six months ended 31 March
2020, which complies with IAS 34 'Interim Financial Reporting' were
approved by the Board of Directors on 29 June 2020.
The unaudited interim financial information for the six months
ended 31 March 2020 does not constitute statutory accounts within
the meaning of Section 435 of the Companies Act 2006. The
comparative figures for the year ended 30 September 2019 are
extracted from the statutory financial statements which have been
filed with the Registrar of Companies and contain an unqualified
audit report and did not contain statements under Section 498 to
502 of the Companies Act 2006.
2. Principal Accounting Policies
The principal accounting policies adopted are consistent with
those of the annual financial statements for the year ended 30
September 2019, with the exception of IFRS 16 Leases, which has
been adopted for the first time in these interim statements, and
are those expected to be applied for the year ending 30 September
2020.
-- IFRS 16 Leases
The Group has adopted IFRS 16 Leases using the modified
retrospective approach with recognition of transitional adjustments
on the date of initial application (1 October 2019), without
re-statement of comparative figures. As a lessee, the Group
previously classified leases as operating leases or finance leases.
Under IFRS 16, the Group recognises right-of-use assets and lease
liabilities for leases that meet the recognition criteria.
3. Segmental Reporting
In the opinion of the directors, the Group has one class of
business, being that of specialist cleaning and decontamination
services. The Group's primary reporting format is determined by the
geographical segment according to the location of its
establishments. There is currently only one geographic reporting
segment, which is the UK. All costs are derived from the single
segment.
4. Earnings/(Loss) per Share (basic and adjusted)
The calculations of earnings/(loss) per share (basic and
adjusted) are based on the net profit/(loss) and adjusted
profit/(loss) respectively and the ordinary shares in issue during
the period. The adjusted profit/(loss) represents the EBITDA for
the period.
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Net profit/(loss) for period 50 (59) (183)
============ ============ ==============
Adjustments:
Interest 13 - -
Depreciation 22 29 52
Adjusted profit/(loss) for
the period 85 (30) (131)
============ ============ ==============
Number Number Number
Weighted average shares in
issue for basic earnings/(loss)
per share 415,407,753 415,407,753 415,407,753
Weighted average dilutive
share options and warrants 65,065,130 * *
------------ ------------ --------------
Average number of shares
used for dilutive earnings/(loss)
per share 480,472,883 415,407,753 415,407,753
============ ============ ==============
pence pence pence
Basic earnings/(loss) per
share 0.01p (0.01p) (0.04p)
============ ============ ==============
Diluted earnings/(loss) per
share 0.01p (0.01p) (0.04p)
============ ============ ==============
Adjusted basic earnings/(loss)
per share 0.02p (0.01p) (0.03p)
============ ============ ==============
Adjusted diluted earnings/(loss)
per share 0.02p (0.01p) (0.03p)
============ ============ ==============
* Where a loss is incurred, the effect of outstanding share
options and warrants is considered anti-dilutive.
Copies of this Interim Report are available from the Company
Secretary, 115 Hearthcote Road, Swadlincote, Derbyshire DE11 9DU
and on the Company's website www.reactsc.co.uk/react-group-plc
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END
IR UBVURRWUNUAR
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