TIDMSWG
RNS Number : 0797K
Shearwater Group PLC
11 December 2018
11 December 2018
SHEARWATER GROUP PLC
Interim Results for the six months ended 30 September 2018
Shearwater Group plc (AIM: SWG, "Shearwater", the "Group"), the
digital resilience group, announces its unaudited results for the
six months ended 30 September 2018.
Financial highlights
-- Group revenue up 118% at GBP4.5 million (2017: GBP2.1
million), reflecting six months of trading from SecurEnvoy, Xcina,
and GeoLang.
-- Group underlying EBITDA loss(1) GBP1.6 million (2017: loss
GBP0.1 million) reflecting continued investment across the
portfolio.
-- Loss per share of 0.32p (2017: Loss per share 0.18p).
Events
-- Post period end: transformational GBP30.3 million acquisition
of Brookcourt - moving Group to cashflow positive position and
establishing fourth platform company.
-- Expanded SecurEnvoy's US channel partnerships network.
-- Acquired GeoLang and Crystal IT - rebranded Xcina Information
Services.
-- Inaugural contract wins for GeoLang - transitioned business
to revenue generating position.
Outlook
-- Solid organic growth coupled with strong performance in
Brookcourt anticipated to deliver Group performance in line with
full year expectations.
Board appointments
-- Phil Higgins, co-founder and Brookcourt CEO appointed
Executive Director on 11 December 2018 - see separate
announcement.
-- Paul McFadden appointed Finance Director on 17 October
2018.
[1] Underlying EBITDA is defined as profit before tax, before
one off exceptional items, share based payment charges, finance
charges, depreciation and amortisation
David Williams, Chairman of Shearwater, said:
"We have continued to make good progress against our strategic
aim of building a leading UK based digital resilience group.
"Our portfolio companies have shown good organic revenue growth,
which we expect to continue into the second half and beyond.
"Brookcourt's acquisition has significantly increased our
presence in our sector - this should lead to a number of benefits
for the whole Group including scaling and cross selling
opportunities."
Enquiries:
Shearwater Group plc www.theshearwatergroup.co.uk
David Williams c/o Instinctif Partners
Michael (Mo) Stevens
Cenkos Securities plc - NOMAD
and Broker
Max Hartley - NOMAD
Julian Morse / Michael Johnson
- Sales +44 (0) 20 7397 8900
Instinctif Partners shearwater@instinctif.com
Adrian Duffield / Chantal Woolcock +44 (0) 20 7457 2815
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
A copy of this announcement has been posted on the Company's
website at www.theshearwatergroup.co.uk.
Strategic overview
During the first half of the year, the Group continued to make
good progress against its strategic aim of building a leading
UK-based group, providing digital resilience solutions and
services.
Through the application of its "buy, focus, grow" strategy, the
Group continues to identify investment and acquisition
opportunities where the target company has a leading product,
solution, service or consulting capability, whose potential can be
unlocked through active management and capital investment.
The Group is building a broad portfolio of information security,
governance, risk and compliance, cyber and cyber security
platforms, which aim to meet the ever-increasing digital resilience
demands from its customers. This will provide Shearwater with
exposure to a large and rapidly growing sector through a portfolio
approach, which aims to balance risk and return in a highly dynamic
and often unpredictable operating environment.
Acquisitions
In April 2018, the Group completed the acquisition of GeoLang,
an award-winning provider of Data Loss Protection ("DLP")
enterprise software. The acquisition has established the Group's
position within a US$1 billion market which is growing at over 22%
per annum.
Also in April 2018, the Group acquired the business and assets
of Crystal IT, the Cardiff-based provider of cyber security and
business information technology solutions. Crystal IT was rebranded
Xcina Information Services on acquisition.
Post period end, the Group completed its most substantial
transaction to date with the transformational acquisition of
Brookcourt Solutions for GBP30.3 million.
This acquisition has transitioned the Group to a cash flow
positive position, substantially broadened the Group's cyber
security solutions and services capability, providing access to a
complementary client base aligned to larger enterprises, and has
created a strong platform of scale to effect consolidation at the
portfolio company level.
Brookcourt has established the Group's fourth platform alongside
SecurEnvoy, GeoLang, and Xcina.
Operational review
Product, service and solution development remain core priorities
for the Group. The Group invested in R&D across its software
businesses, helping to develop GeoLang's new Data Discovery
product, whilst also continuing to invest in the establishment of
SecurEnvoy's cloud service offering. On the services and solutions
side, Xcina's proposition has grown to include the business' new
Xcina Academy. Xcina's online cyber resilience, awareness and GDPR
training solution.
As part of its thought leadership strategy the Group published a
Digital Resilience white paper in association with University
College London's Institute for Strategy, Resilience &
Security.
In the Group's software business segment, SecurEnvoy benefited
from the US infrastructure established during the financial year
ended 2018. It expanded its network of US distribution and
value-added reseller partners, bringing the total in region to 14.
The business was also appointed by Citrix (NASDAQ: CTXS) as one of
its first Premier Citrix Ready Partners for the fast-growing
Identity and Access Management sector. SecurEnvoy also developed
and launched a cloud service proposition.
Since joining the Group, GeoLang has won a number of customer
contracts and is now revenue generating. The business has also
launched a new Data Discovery solution which enables customers to
address data topics such as GDPR Subject Access Requests.
In the Group's services and solution business segment, Xcina
Consulting continued to deliver substantial double-digit organic
growth. This has been driven by 17 new customer wins since the
start of the new financial year as the demand for its technology
risk assurance and advisory services continues to grow
strongly.
The Xcina Academy, Xcina's online cyber resilience, awareness
and GDPR training solution, was also established.
For the Group's full year results, the recently acquired
Brookcourt will be reported within the services and solutions
segment with Xcina, with SecurEnvoy and GeoLang constituting the
Software segment.
Current trading and outlook
Shearwater continues to review its substantial pipeline of
acquisition opportunities in line with its stated strategy, which
could lead to the creation of a new platform within the Group or
provide incremental scale to existing platforms already
established.
In line with the historical trading seasonality within
Brookcourt and substantial second half weighting in sales activity,
Brookcourt's trading performance since it joined the Group has
continued strongly including a solid pipeline of contracted work
for the remaining months of the financial year.
The integration of Brookcourt into the Group continues to
progress well, with a number of collaborative revenue and technical
synergy opportunities identified as part of the transaction process
already in process.
Since 30 September 2018, trading across all the other portfolio
companies has stepped up and focus remains on driving through
operational performance. While the Group still has much to do for
the remaining months of the financial year given the second half
weighting in performance, the Board remains confident of achieving
full year expectations.
Finance review
Reported revenue in the six months ended 30 September 2018 of
GBP4.5 million (2017: GBP2.1 million) increased 118% reflecting a
full six months trading from SecurEnvoy and Xcina Consulting
(Newable Consulting) plus 5.9 months trading from GeoLang and 5.1
months trading from Xcina IS (Crystal IT).
SecurEnvoy and Xcina Consulting (Newable) were acquired in the
first half of the prior year and therefore prior year revenues only
include 4.7 months trading from SecurEnvoy and 2.2 months trading
from Xcina Consulting (Newable).
On a like for like basis revenue is 52% ahead year on year with
both software and services revenue segments delivering good
double-digit revenue growth.
Portfolio companies generated a segment underlying EBITDA loss
of GBP0.7 million (2017: profit GBP0.9 million) owing to
significant investment in the new regions and product development
within SecurEnvoy and GeoLang, coupled with further investment
within the Xcina portfolio. These position the Group appropriately
for future growth.
At the Group level, the underlying EBITDA loss was GBP1.6
million (2017: underlying EBITDA loss GBP0.1 million).
Loss before tax of GBP3.2 million (2017: loss GBP1.5 million)
reflects a GBP1.5 million movement in year on year underlying
EBITDA loss plus an additional GBP0.1 million of amortisation
reflecting a full six months charge for SecurEnvoy plus the
addition of Geolang and GBP0.1 million of additional exceptional
items.
The Group recorded a loss per share of 0.32p (2017: 0.18p). On
this basis a dividend for this financial year will not be
declared.
A summary of Brookcourt's revenue, underlying EBITDA(1) and
operating profit for the six months ended 30 September 2018 prior
to the acquisition in October 2018 is shown below. Interim
comparatives are not available.
Six months ended 30
September 2018
GBP'000
Revenue 9,473
---------------------
Gross profit 1,769
---------------------
Underlying EBITDA 647
---------------------
Depreciation 27
---------------------
Operating profit 620
---------------------
At the period end, excluding Brookcourt, Group cash was GBP0.5
million (2017: GBP3.7 million) reflecting continued investment in
portfolio companies being partially offset by the cash generation
of SecurEnvoy.
Cash management continues to be a priority for the Group and
actual expenditure compared to budget is monitored closely to
ensure that the Shearwater maintains adequate liquidity to meet
financial commitments as they arise.
Post the period end the Group received GBP1.6m cash on 19
October 2018 following the placing and open offer to fund the
Brookcourt acquisition.
Consolidated statement of comprehensive income
Six- month period Year ended
ended 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Note GBP (000) GBP (000) GBP (000)
--------------------------------------- ------ ------------- ------------- ------------
Revenue 4,506 2,068 6,240
Cost of sales (2,905) (620) (2,604)
---------------------------------------- ------ ------------- ------------- ------------
Gross profit 1,601 1,448 3,636
Administrative expenses (4,763) (2,957) (6,520)
---------------------------------------- ------ ------------- ------------- ------------
Operating loss (3,162) (1,509) (2,884)
Finance income - 53 2
Finance costs - (1) -
---------------------------------------- ------ ------------- ------------- ------------
Loss before tax (3,162) (1,457) (2,882)
Income tax charge - (106) (3)
Loss for the period (3,162) (1,563) (2,885)
---------------------------------------- ------ ------------- ------------- ------------
Attributable to equity holders of
the Company (3,162) (1,563) (2,885)
-------------------------------------------------- ------------- ------------- ------------
Operating loss analysed as:
Adjusted underlying EBITDA (1,586) (112) (837)
Amortisation of acquired
intangibles (422) (322) (647)
Depreciation (15) (4) (14)
Share-based payments (141) (180) (366)
Exceptional items (998) (891) (1,020)
Finance income - 53 2
Finance costs - (1) -
Loss before tax (3,162) (1,457) (2,882)
---------------------------------------- ------ ------------- ------------- ------------
Other comprehensive income
Items that may be reclassified to
profit and loss:
Change in fair value of available-for-sale
assets (25) (38) (67)
Currency translation difference (11) - -
Total comprehensive loss for
the period (3,198) (1,601) (2,952)
---------------------------------------- ------ ------------- ------------- ------------
Loss per share
Basic and diluted (pence
per share) 5 (0.32) (0.18) (0.31)
----------------------------------------- ------ ------------- ------------- ------------
Consolidated statement of financial position
Six-month period Year ended
ended 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Note GBP (000) GBP (000) GBP (000)
-------------------------------- ------ ------------- ------------- ------------
Assets
Non-current assets
Goodwill 13,474 11,285 12,956
Other intangible assets 9,089 10,334 8,220
Available for sale assets 26 80 51
Property, plant and equipment 96 52 76
Total non-current assets 22,685 21,751 21,303
-------------------------------- ------ ------------- ------------- ------------
Current Assets
Trade and other receivables 1,970 1,175 1,949
Cash and cash equivalents 507 3,708 2,493
Total current assets 2,477 4,883 4,442
-------------------------------- ------ ------------- ------------- ------------
Total assets 25,162 26,634 25,745
-------------------------------- ------ ------------- ------------- ------------
Liabilities
Current liabilities
Trade and other payables 2,870 1,476 1,755
Total current liabilities 2,870 1,476 1,755
-------------------------------- ------ ------------- ------------- ------------
Non-current liabilities
Deferred tax 2,054 1,846 1,847
Contingent consideration 343 - -
Total non-current liabilities 2,397 1,846 1,847
-------------------------------- ------ ------------- ------------- ------------
Total liabilities 5,267 3,322 3,602
-------------------------------- ------ ------------- ------------- ------------
Net assets 19,895 23,312 22,143
-------------------------------- ------ ------------- ------------- ------------
Capital and reserves
Share capital 7 9,954 9,649 9,644
Share premium 7 29,422 28,918 28,923
Available for sale reserve 11 65 36
Other reserves 531 219 401
Retained deficit (20,023) (15,539) (16,861)
Equity attributable to owners of
the Company 19,895 23,312 22,143
---------------------------------------- ------------- ------------- ------------
Total equity and liabilities 25,162 26,634 25,745
-------------------------------- ------ ------------- ------------- ------------
Consolidated statement of changes in equity
Available
Share Share for sale Other Retained Total
capital premium reserve reserve deficit Equity
GBP (000) GBP (000) GBP (000) GBP (000) GBP (000) GBP (000)
----------------------------- ----------- ----------- ----------- ----------- ----------- -----------
At 31 March 2017 (audited) 5,353 15,957 103 39 (13,976) 7,476
Loss for the period - - - - (1,563) (1,563)
Other comprehensive loss
for the period - - (38) - - (38)
Total comprehensive loss
for the period - - (38) - (1,563) (1,601)
Contributions by and distributions
to owners
Issue of share capital 4,296 13,491 - - - 17,787
Share issue costs - (530) - - - (530)
Share based payments - - - 180 - 180
At 30 September 2017
(unaudited) 9,649 28,918 65 219 (15,539) 23,312
----------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Loss for the period - - - - (1,322) (1,322)
Other comprehensive loss
for the period - - (29) - - (29)
Total comprehensive loss
for the period - - (29) - (1,322) (1,351)
Contributions by and distributions
to owners
Issue of share capital (5) 5 - - - -
Share based payments - - - 182 - 182
At 31 March 2018 (audited) 9,644 28,923 36 401 (16,861) 22,143
----------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Loss for the period - - - - (3,162) (3,162)
Other comprehensive loss
for the period - - (25) (11) - (36)
Total comprehensive loss
for the period - - (25) (11) (3,162) (3,198)
Contributions by and distributions
to owners
Issue of share capital 302 499 - - - 801
Exercise of share options 8 - - - - 8
Share based payments - - - 141 - 141
At 30 September 2018
(unaudited) 9,954 29,422 11 531 (20,023) 19,895
----------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Consolidated Cash Flow Statement
Six-month period Year ended
ended 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Note GBP (000) GBP (000) GBP (000)
---------------------------------------- ------- ------------- ------------- ------------
Cash flows from operating activities
Loss for the period (3,162) (1,563) (2,885)
Adjustments for:
Depreciation of property, plant
and machinery 15 4 14
Amortisation of acquired intangible
assets 422 322 647
Finance income - - (2)
Finance expense - 1 -
Share-based payment charge 141 180 366
Income tax - 106 3
Cash flow from operating activities
before changes in working capital (2,584) (950) (1,857)
Decrease/(increase) in trade
and other receivables 81 (638) (1,412)
Increase/(decrease) in trade
and other payables 1,101 (370) 457
Cash used in operations (1,402) (1,958) (2,812)
----------------------------------------- ------- ------------- ------------- ------------
Net foreign exchange movements (7) (7) (19)
Tax paid - - (280)
----------------------------------------- ------- ------------- ------------
Net cash used in operating activities (1,409) (1,965) (3,111)
----------------------------------------- ------- ------------- ------------- ------------
Investing activities
Acquisition of subsidiaries,
net of cash acquired (477) (9,839) (9,839)
Purchase of property, plant
and machinery (36) (39) (72)
Purchase of software (76) - (19)
Interest received - - 2
Gold exploration payments - (17) (50)
Net cash used in investing activities (589) (9,895) (9,978)
----------------------------------------- ------- ------------- ------------- ------------
Financing activities
Proceeds from issue of share
capital 8 9,020 9,020
Expenses paid in connection
with share issues - (530) (530)
Net cash generated by financing
activities 8 8,490 8,490
----------------------------------------- ------- ------------- ------------- ------------
Net (decrease)/increase in cash and
cash equivalents (1,990) (3,370) (4,599)
-------------------------------------------------- ------------- ------------- ------------
Cash and cash equivalents at the
beginning of the period 2,493 7,073 7,073
Foreign exchange movement on cash
and cash equivalents 4 5 19
Cash and cash equivalents at
the end of the period 507 3,708 2,493
----------------------------------------- ------- ------------- ------------- ------------
Notes
1. General information
The interim consolidated financial information was authorised by
the board of directors for issue on 11 December 2018. The
information for the six-month period ended 30 September 2018 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 2018, which have been prepared in accordance with EU
Adopted International Financial Reporting Standards. 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') as adopted in the EU.
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.
The accounting policies are consistent with those followed in
the preparation of the Group's annual financial statements for the
year ended 31 March 2018.
b) Going concern
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing these consolidated financial statements. The Group is
forecast to become profitable in fiscal year March 2020.
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.
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. Further information can be
found in note 6.
Share based payments
Management make judgements, estimates and assumptions in
determining the fair value of share-based payments costs. The
judgement applied relates to the consideration of the incentive
scheme and how it is settled. There is judgement in the inputs to
the fair value model which is calculated using Black Scholes
methodology.
Exploration assets
Management make judgements, estimates and assumptions in
assessing the fair value of exploration assets. The Group holds
some legacy exploration assets that are no longer required
following the Groups change in strategy away from exploration. The
company assesses at each reporting date whether there is any
indication that there may be facts or circumstances relating to
these assets which may be impaired. If such indication exists, the
Group estimates recoverable amount of the asset. The recoverable
amount is assessed by reference to the fair value less cost to sell
based on the assumption that the exploration rights will be renewed
enabling a sale. No impairment has been booked in either this
period or the prior period.
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
Revenue comprises the fair value of the consideration received
or receivable from the licensing of software and for the provision
of services to customers in the ordinary course of the Group's
activities. Revenue is shown net of sales tax, discounts and after
eliminating intra-group sales.
Revenue from software licences
The Group recognises revenue from the licencing of software when
all the following conditions are satisfied:
-- all licencing obligations have been performed;
-- the rights to use the software has been assigned in exchange
for a fixed fee;
-- the Group retains no continuing managerial rights to use the
software; and
-- the contract is non-cancellable.
Revenue for the provision of services
The Group recognises revenue from the provision of services when
all the following conditions are satisfied:
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
transaction will flow to the entity;
-- the stage of completion of the transaction at the end of the
reporting period can be measured reliably; and
-- the costs incurred for the transaction and the costs to
complete the transaction can be measured reliably.
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 underlying 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 "underlying 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 and finance expenses.
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.
i) Exceptional items
The Group's statement of comprehensive income separately
identifies exceptional items. Such items are those that in the
Directors' judgement are one-off in nature and need to be disclosed
separately by virtue of their size and incidence. In determining
whether an item or transaction should be classified as an
exceptional item, the Directors' consider quantitative as well as
qualitative factors such as the frequency, predictability of
occurrence and significance. This is consistent with the way that
financial performance is measured by management and reported to the
Board. Exceptional items may not be comparable to similarly titled
measures used by other companies. Disclosing adjusted items
separately provides additional understanding of the performance of
the Group.
j) 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.
Expenditure on internally developed intangible assets is taken to
the consolidated statement of comprehensive income in the period in
which it is incurred.
Intangible assets with a finite life have no residual value and
are amortised over their expected useful lives as follows:
Computer software 3-5 years straight line basis
Customer relationships 1-15 years straight line basis
Software 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.
k) 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
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.
l) Share based payments
In order to calculate the charge for share-based payments as
required by IFRS 2, the Group makes estimates principally relating
to assumptions used in its option-pricing model.
The cost of equity-settled transactions with employees, and
transactions with suppliers where fair value cannot be estimated
reliably, is measured with reference to the fair value of the
equity instrument. The fair value of equity-settled instrument is
determined at the date of grant, taking into account market-based
vesting conditions. The fair value is determined using an option
pricing model.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance conditions are satisfied.
At each reporting date before vesting, the cumulative expense is
calculated, representing the extent to which the vesting period has
expired and management's best estimate of the achievement or
otherwise of non-market conditions, the number of equity
instruments that will likely vest, or in the case of an instrument
subject to market condition, be treated as vesting as described
above. The movement in cumulative expense since the previous
reporting date is recognised in the statement of comprehensive
income, with the corresponding entry in equity.
m) Impact of IFRS 15 "Revenue from contracts with customers"
IFRS 15 Revenue from contracts with customers replaces IAS 18
Revenue and related interpretations, introducing a new single,
principles-based approach to recognition and measurement of revenue
from all contracts with customers. The new approach requires
identification of performance obligations in a contract and revenue
to be recognised when or as those performance obligations are
satisfied, as well as additional disclosure. The Group has adopted
IFRS 15 from 1 April 2018. In advance of this date the Group had
reviewed the potential impact of the new standard and the directors
believe that this will not have a material impact on reported
revenues and therefore no adjustment on prior year revenues has
been processed.
With respect to IFRS 15 implementation Shearwater Group plc
generates income from its customers from the following income
streams:
-- Software licences ("SaaS"); whereby the customer pays an
annual fee for a secure key to access two factor authentication
software. Revenue is recognised in full when the secure key is
provided which is unchanged under IFRS 15.
-- Provision of other services; which constitutes consultancy
services on a range of topics including data protection. project
management, governance and compliance. Customer contracts stipulate
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 we consider
to be of equal value to the client. Revenue is then recognised over
the number of consultancy days provided within the period. This
remains unchanged under IFRS 15.
-- Provision of online e-learning training on a range of
subjects around cyber awareness is recognised when joining
instructions are issued to the customer. The Group have no
obligation to maintain the e-learning platform as this is the
responsibility of a third party therefore revenue recognition
remains unchanged under IFRS15.
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 2018 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 Year ended
ended 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP (000) GBP (000) GBP (000)
--------------------------- ------------- ------------- ------------
Revenue
Software 1,928 1,546 3,372
Services 2,578 522 2,868
------------- ------------- ------------
Total revenue 4,506 2,068 6,240
------------- ------------- ------------
Underlying EBITDA
Software (22) 976 1,668
Services (655) (114) (575)
------------- ------------- ------------
Total segment
underlying EBITDA (677) 862 1,093
Group costs (909) (974) (1,930)
Underlying EBITDA (1,586) (112) (837)
Amortisation of acquired
intangibles (422) (322) (647)
Depreciation (15) (4) (14)
Share-based payments (141) (180) (366)
Exceptional items (998) (891) (1,020)
Finance income - 53 2
Finance costs - (1) -
Loss before tax (3,162) (1,457) (2,882)
------------------------------- ------------- ------------- ------------
4. Exceptional items
Exceptional items are those that in the judgment of the
directors need to be disclosed by virtue of their size, nature or
incidence, in order to draw the attention of the reader and to show
the underlying business performance of the Group more accurately.
Such items are included within the income statement caption to
which they relate and are separately disclosed on the face of the
consolidated income statement within administration expenses.
During the six months to 30 September 2018, GBP183,013 relating
to the acquisition of GeoLang Holdings Limited and GBP814,524
relating to the acquisition of Brookcourt Solutions Limited (which
completed after the reporting date) were charged to the interim
consolidated income statement. This resulted in total exceptional
items of GBP997,537.
5. 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 2018 and
the six months ended 30 September 2017 as the Group is loss
making.
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 Year ended
ended 30 September 31 March
2018 2017 2018
GBP (000) GBP (000)
-------------------------------------- ------------- ------------- -------------
Net loss from total operations
Earnings for the purposes of basic
and diluted earnings per share
being net loss attributable to
shareholders (3,162) (1,563) (2,885)
Number of shares No No No
Weighted average number of ordinary
shares for the purpose of basic
and diluted earnings per share 995,319,548 871,346,679 917,725,525
Earnings per share Pence Pence Pence
Basic and diluted (0.32) (0.18) (0.31)
---------------------------------------- ------------- ------------- -------------
6. Business combinations
GeoLang Holdings Limited
On 4 April 2018, the Group acquired 100% of the issued share
capital of GeoLang Holdings Limited, an award-winning pre-revenue
DLP enterprise software company for a total consideration of GBP1.6
million (after customary adjustments), comprising GBP1.1 million
share consideration and GBP0.5 million to repay indebtedness in the
company. For accounting purposes, the fair value of the ordinary
shares issued in the Company was based on 43,165,750 ordinary
shares at the closing share price on the date of completion. This
purchase was accounted for as an acquisition.
The following table summarises the fair values of the assets
acquired, the liabilities assumed and the total consideration
transferred as part of this acquisition:
Fair value
(unaudited) GBP (000)
---------------------------------- -------------
Goodwill 483
Other intangible assets 1,220
Trade and other receivables 115
Cash and cash equivalents 325
Trade and other payables (335)
Deferred tax liabilities (207)
Net assets acquired 1,601
------------------------------------ -------------
Satisfied by:
Repayment of indebtedness 457
Shares in Shearwater Group plc 1,144
Total consideration transferred 1,601
------------------------------------ -------------
The net cash outflow arising from the acquisition was GBP0.2
million in the six months ended 30 September 2018, comprising cash
consideration to repay indebtedness of GBP0.5 million less cash and
cash equivalents acquired of GBP0.3 million which includes GBP0.3m
of cash paid into the business to repay indebtedness.
Crystal IT
On 26 April 2018, the Group acquired the business and assets of
Crystal IT Services Limited, a Cardiff based provider of cyber
security and business information technology solutions. On joining
the Group, Crystal IT was rebranded Xcina IS. The total
consideration for the acquisition was GBP35,000, which has been
settled in cash.
The following table summarises the fair values of the assets
acquired, the liabilities assumed and the total consideration
transferred as part of this acquisition:
Fair value
(unaudited) GBP (000)
---------------------------------- ------------
Goodwill 35
Trade and other receivables 10
Cash and cash equivalents 2
Trade and other payables (12)
Net assets acquired 35
------------------------------------ ------------
Satisfied by:
Cash consideration 35
Total consideration transferred 35
------------------------------------ ------------
7. Share capital
Number of
ordinary Ordinary
shares of shares Share Premium Total
1p each GBP(000) GBP(000) GBP(000)
--------------------------------- ------------- ----------- --------------- -----------
Issued and fully paid ordinary
shares
At 31 March 2017 535,250,286 5,353 15,962 21,315
Shares issued 429,108,914 4,291 12,961 17,252
--------------------------------- ------------- ----------- --------------- -----------
At 30 September 2017 and
31 March 2018 964,359,200 9,644 28,923 38,567
--------------------------------- ------------- ----------- --------------- -----------
Shares issued 31,013,024 310 499 809
--------------------------------- ------------- ----------- --------------- -----------
At 30 September 2018 995,372,224 9,954 29,422 39,376
--------------------------------- ------------- ----------- --------------- -----------
The following issues of shares were undertaken in the six-month
period ended 30 September 2018:
On 4 April 2018, 30,205,571 new ordinary shares of 1p were
issued as part of the consideration for the acquisition of GeoLang
Holdings Limited.
On 10 April 2018 285,714 options were exercised by an advisor to
the Group following which the Company issues an allotted 285,714
new ordinary shares of 1p.
On 18 June 2018 Giles Willits exercised 521,739 options
following which the Company issued an allotted 521,739 new ordinary
shares of 1p to him.
8. Events after the reporting date
On 17 October 2018, the Company acquired the entire issued share
capital of Brookcourt Solutions Limited, a leading independent
UK-based cyber security company. The total consideration for the
acquisition was GBP30.3 million, which was settled through the
payment of GBP15.15 million in cash and the issuance of 420,833,333
ordinary shares of the Group at an issue price of 3.6 pence per
ordinary share to the Brookcourt shareholders.
In order to fund the cash consideration component of the
acquisition, the Group at the same time completed a placing of new
shares to new and existing investors which raised gross proceeds of
GBP16.7 million through the issuance of 463,000,000 ordinary shares
at an issue price of 3.6 pence per ordinary share. Included within
this amount are the subscriptions for David Williams, Michael (Mo)
Stevens and Stephen Ball, Directors of the Company, who subscribed
for in aggregate ordinary shares at a value of GBP0.35 million. At
the same time, the Group also completed an open offer, under which
existing non-institutional shareholders of the Company subscribed
for an additional 23,861,564 new shares at an issue price of 3.6
pence per ordinary shares, raising gross cash proceeds of GBP0.9
million.
The process of fair valuing the assets and liabilities of
Brookcourt has not been completed at the date of these financial
statements.
As the acquisition constitute a reverse takeover under rule 14
of the AIM Rules for Companies, the acquisition required the
approval of the Company's shareholders and the readmission of the
enlarged share capital to trading on AIM. This approval was
received at a General Meeting of the Company's shareholders held on
16 October 2018. The admission to AIM and completion of the
acquisition took place on 17 October 2018.
On the 13 of December 2018, the Group settled the final earn out
payment owing to Newable Consulting Limited ("Newable") following
the Company's acquisition of the business and assets of Newable
(rebranded Xcina Consulting), which completed on 26 July 2017. As a
result of the performance hurdles met during the earn out period, a
total of 612,017 ordinary shares of the Company were issued and
allotted to Newable on 13 of December 2018 in accordance with the
terms of the asset purchase agreement.
9. 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.
END
IR GLBDDIXBBGIB
(END) Dow Jones Newswires
December 11, 2018 02:01 ET (07:01 GMT)
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