TIDMREAT
RNS Number : 6915Q
React Group PLC
30 June 2022
30 June 2022
REACT Group plc
("REACT", the "Group" or the "Company")
Half Year Results FY 2022
Investor Presentation
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 2022.
Financial Summary
HY 2022 HY 2021
--------------------------------------- -------- --------
Revenue (GBP'000) 5,125 2,509
Gross profit (GBP'000) 1,156 1,018
Gross profit margin 22.6% 40.6%
EBITDA (GBP'000) 133 100
Adjusted EBITDA (GBP'000)* 162 369
Net (loss)/profit for the period
(GBP'000) (92) 74
(Loss)/earnings per share (basic)
(pence) (0.02) 0.01
Earnings per share (adjusted) (pence) 0.03 0.07
Net cash (GBP'000) (43) 771
* Adjusted EBITDA represents earnings before separately
disclosed acquisition costs ( as well as before interest, tax,
depreciation and amortisation).
Highlights (including post period highlights):
-- Revenue increased by 104% to GBP5,125 (2021: GBP2,509)
-- As anticipated, lower margins to focus on more dependable
long-term visibility of recurring revenues and profits, in strong
and resilient markets and increased overheads following the
acquisition of Fidelis
-- Multiple contract wins in the education, hospital,
manufacturing and housing sectors, including the GBP1m per year,
5-year contract in the health sector, announced on 13 January
2022
-- Continued growth in the contract maintenance part of the
business, which represents 63.8% of H1 revenue
-- Reactive work gradually returning to normal following removal
of lock down restrictions, particularly in the healthcare
sector
-- Appointment of two senior sales and marketing professionals
-- Placing to raise GBP5.5m to strengthen the balance sheet and
support the Company's stated acquisition growth strategy and
general working capital purposes
-- Acquisition of LaddersFree Ltd., an established nationwide
commercial window, gutter and cladding cleaning business, for a
total consideration of up to GBP8.5 million on a debt-free and
cash-free basis
-- Agreed a 5 year GBP1.0 million loan to further strengthen the
Company's balance sheet and assist with normal business cashflow
fluctuations
Investor Presentation
REACT GROUP PLC is pleased to announce that Mark Braund, Shaun
Doak and Andrea Pankhurst will provide a live presentation relating
to Interim results via the Investor Meet Company platform on 12
July 2022 at 1:30pm BST.
The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via your
Investor Meet Company dashboard up until 9am the day before the
meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet REACT GROUP PLC via:
https://www.investormeetcompany.com/react-group-plc/register-investor
Investors who already follow REACT GROUP PLC on the Investor
Meet Company platform will automatically be invited.
Commenting on the results Shaun Doak, Chief Executive Officer of
REACT, said:
"A strong period of growth specifically in the strategically
important contract maintenance segment of our business. Once a
small part of our business, contract maintenance now dominates the
landscape. Whilst margins are more modest than in the reactive
component of our business, it provides long-term visibility of
recurring revenues and profits, in strong and resilient
markets.
The reactive segments of our business were relatively static as
the country moved out of lock down during H1, although we are
beginning to see signs of these segments returning to pre-pandemic
levels during H2.
I am delighted to welcome two new senior sales and marketing
professionals to the team; both have already made a positive impact
winning incremental new contracts and building a pipeline of sales
opportunities stronger than we have seen before.
Whilst mindful of the economic outlook, H2 has had a strong
start with the acquisition of LaddersFree, announced on 16 May
2022. The acquisition is of significant strategic importance, and
following successful integration, LaddersFree is performing in line
with management expectations. LaddersFree's revenues during the
months of May and June (post completion of the acquisition) have
been strong and they look set for a record period of
performance.
Combining all these aspects, the outlook remains positive.
On behalf of the Board, I would once again like to thank all my
colleagues for their ongoing support, commitment, tenacity and
quality of work."
For more information:
REACT Group Plc
Shaun Doak, Chief Executive Of cer Tel: +44 (0) 1283 550
Andrea Pankhurst, Chief Financial Officer 503
Mark Braund, Chairman
Singer Capital Markets
(Nominated Adviser / Broker)
Will Goode / Amanda Gray (Corporate Finance) Tel: +44 (0) 207 496
Rachel Hayes (Corporate Broking) 3000
IFC Advisory
( Financial PR / IR)
Graham Herring / Zach Cohen Tel: +44 (0) 20 3934
6630
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"). Upon the publication of this
announcement via the Regulatory Information Service, this inside
information is now considered to be in the public domain.
RESULTS SUMMARY & STRATEGY
Strategy
During the six months to 31 March 2022, REACT has continued to
grow, especially in the strategically important contract
maintenance segment of the business.
The drive towards higher levels of recurring revenues, secured
by inflation-linked multi-year contracts in some of the most
resilient segments of the market including healthcare, education
and rail, began a little over a year ago.
The contract maintenance business represents long-term recurring
revenue where customers typically commit to buy our services for a
period of between 3 and 7 years, with price increases written into
each contract to cover typical wage-inflation pressures.
In addition to multiple new contract wins, the successful
acquisition of Fidelis Contract Services ("Fidelis"), a contract
cleaning and facilities maintenance business, in March 2021, has
helped to drive revenues strongly during the period.
H1 has been a strong period of winning new contracts, including
the GBP1m per year, 5-year contract in the healthcare sector, as
announced on 13 January 2022. Several of these contracts are set to
start in H2 after a period of mobilisation during H1, therefore
margins have been temporarily impacted whilst cost preceded
revenue.
Contract maintenance
While the contract maintenance segment of our business once
generated a small proportion of revenue, it has grown by more than
four-times since 31 March 2021, from GBP764k to GBP3,268k, and is
forecast to increase further.
Contract reactive
Reactive work is broken down into two segments:
-- Contract reactive, where REACT is the contracted 'on-call'
provider dealing with incidents requiring specialist and/or
emergency cleaning; and
-- Ad hoc (or one-off projects)
During H1, the Group's higher margin reactive work was less
predictable, although since lockdown measures began to lift, we
have seen signs of normality returning to this part of the market
and we expect this to continue going forward. This part of the
business benefited from an increase in work in the healthcare
sector however, this was offset by a reduction in work coming from
other sectors, including the judiciary (cells, transportation
vehicles, court rooms, etc.). Certain changes to working practices
introduced during lockdown (e.g. digital virtual hearings) may
continue and may therefore reduce demand for some of these services
going forwards.
Ad hoc
By its very nature, the ad hoc or one-off project sector of our
business is less predictable. Although the Group's presence
continues to grow in this space, revenues remained at a similar
level to the prior year. Customers, perhaps weary of the high cost
of Covid, became more price-sensitive with some choosing to
postpone work in the more discretionary areas of operation, e.g.
graffiti removal and void clearances. The combination of these;
price sensitivity and postponed demand, placed pressure on margins,
although we expect this to be temporary.
People
As an ambitious growing business, we continue to take steps to
invest; we have strengthened our sales and marketing capability
with two new senior hires during the period. Sam Haywood joined as
Head of Group Business Development, overseeing group sales, and
Chris Ryan joined as Sales Manager of Fidelis.
Whilst this has increased cost during H1, the contribution of
these individuals is already beginning to have an impact, with both
recruits achieving success in building a pipeline of over 40
opportunities currently marked as live as well as new contract wins
where the Group would previously not have had the capacity to
source the opportunity and convert into business.
In addition, the Group operates highly personalised training and
development initiatives and, as a result, has been able to evolve
the roles of a number of key individuals and promote from
within.
REACT's service delivery is provided by people who are
considered experts in their field, supported by a dedicated
customer-centric team, who have continually adapted to the daily
challenges of both lock-down and post-lock down periods. The
strength of the H1 results is underpinned by the efforts of the
entire team and is testament to the superb culture everyone has
contributed to cultivating.
On behalf of the Board, I would once again like to thank all of
our colleagues for their commitment, resilience, and quality of
work.
Post period end
On 14 April 2022, REACT raised gross proceeds of approximately
GBP5.5 million (the "Placing") in order to strengthen the Group's
balance sheet to support the stated acquisition growth strategy and
general working capital purposes. The related resolutions were
passed by shareholders at the General Meeting on 5 May 2022.
Following the Placing, on 12 May 2022, REACT announced that it
had completed the acquisition of LaddersFree Ltd. ("LaddersFree"),
an established nationwide commercial window, gutter and cladding
cleaning business, for a total consideration of up to GBP8.5
million. LaddersFree, the Group's second acquisition, operates a
highly attractive business model and represents an important step
in REACT's growth strategy.
Post period end, REACT entered into a 5-year GBP1.0 million loan
with Arbuthnot Latham to further strengthen the Company's balance
sheet and assist with normal business cashflow fluctuations. The
loan is secured over the Company's assets and attracts interest at
5.25% above Base Rate per annum.
Summary and outlook
I am delighted to report that H2 has started well, with the
contract maintenance segment of our business continuing to report
record trading months. The long-term contracts won and mobilised
during H1 are beginning to deliver revenue in H2 as expected. In
addition, the following opportunities have been secured post period
end:
-- three contract wins in the education sector across four sites
with a total value of approximately GBP798k. Of these, 2 contracts
have 3 year terms with a combined total value of c. GBP760k and the
third contract is for a total value of c. GBP38k over 1 year;
-- c.GBP185k of Commercial Office contract maintenance work
across two sites, both issued as three year agreements;
-- c.GBP300k of Ad-Hoc (opportunities larger than GBP45k each)
across the Education and Hospitality sectors; and
-- c.GBP310k of Healthcare contract maintenance work across two
sites, one issued over three years and the larger over two with the
option of an additional year.
In addition, the Company has seen an increase in the level of
reactive work during H2 2022 and following an increase in sales and
marketing activity, the opportunity pipeline is steadily
growing.
The acquisition of LaddersFree is expected to make a material
contribution to the Group's performance in H2 and beyond. The
integration with the Group has been efficient, and the values and
work culture of LaddersFree are aligned to those of REACT Group.
Therefore, activity across the LaddersFree business has been
largely uninterrupted and revenues during the months of May and
June have been exceptionally strong.
Combining all of the above, we are trading in line with
management expectations and are pleased to report a solid outlook
for the remainder of the year.
Shaun Doak
Chief Executive Officer
30 June 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2022
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 30 September
31 March 31 March 2021
2022 2021
Note GBP'000 GBP'000 GBP'000
Continuing Operations
Revenue 5,125 2,509 7,701
Cost of Sales (3,969) (1,491) (5,332)
---------- ---------- --------------
Gross Profit 1,156 1,018 2,369
Other operating income - 2 19
Administrative expenses (1,241) (971) (2,274)
Acquisition and restructuring
costs included in administrative
expenses 5 (29) (269) (417)
----------------------------------- ----- ---------- ---------- --------------
Operating (loss)/profit (85) 49 114
Finance (cost)/income (3) - 16
Corporation tax (charge)/credit (4) 25 259
---------- ---------- --------------
(Loss)/profit for the period (92) 74 389
Other comprehensive Income - - -
(Loss)/profit for the financial
period attributable to equity
holders of the company (92) 74 389
========== ========== ==============
Basic and diluted profit per
share 6
Basic (loss)/earnings per share (0.02)p 0.01p 0.08p
========== ========== ==============
Diluted (loss)/earnings per
share (0.02)p 0.01p 0.07p
========== ========== ==============
Adjusted basic earnings per
share 0.03p 0.07p 0.08p
========== ========== ==============
Adjusted diluted earnings per
share 0.03p 0.07p 0.07p
========== ========== ==============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2022
Unaudited Unaudited Audited
As at 31 As at As at 30
March 31 March September
2022 2021 2021
Assets Note GBP'000 GBP'000 GBP'000
Non-current assets
Intangibles - Goodwill 4 1,854 2,050 1,940
Intangibles - Other 4 881 1,756 1,028
Property, plant and equipment 168 180 176
Right-of-use assets 68 118 95
Deferred tax asset 240 - 244
---------- ---------- -----------
3,211 4,104 3,483
---------- ---------- -----------
Current assets
Stock 10 9 12
Trade and other receivables 2,305 1,781 2,099
Cash and cash equivalents (43) 771 633
2,272 2,561 2,744
Total assets 5,483 6,665 6,227
========== ========== ===========
Equity
Shareholders' Equity
Called-up equity share capital 1,270 1,270 1,270
Share premium account 6,028 6,028 6,028
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 33 12 23
Accumulated losses (3,564) (3,787) (3,472)
Total Equity 2,706 2,462 2,788
---------- ---------- -----------
Liabilities
Current liabilities
Trade and other payables 2,309 2,342 2,598
Lease liabilities within one
year 46 64 54
Corporation tax - 63 80
---------- ---------- -----------
2,355 2,469 2,732
---------- ---------- -----------
Non-current liabilities
Lease liabilities after one
year 30 61 49
Other creditors 392 1,673 658
---------- ---------- -----------
422 1,734 707
---------- ---------- -----------
Total liabilities 2,777 4,203 3,439
---------- ---------- -----------
Total Liabilities and Equity 5,483 6,665 6,227
========== ========== ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 March 2022
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Net cash inflow from operations 7 408 432
Cash flows from financing
activities
Proceeds of share issue - - 200
Expenses of share issue - - -
Lease liability payments (27) (15) (39)
CBIL Loan (50) - 67
Net cash (outflow)/inflow
from financing
activities (77) (15) 228
---------- ---------- --------------
Net cash from investing activities
Disposal of fixed assets - - 6
Capital expenditure (64) (33) (71)
Acquisition of subsidiary (525) (1,345) (1,930)
Exceptional acquisition costs
paid (17) (27) (200)
Net cash outflow from investing
activities (606) (1,405) (2,195)
---------- ---------- --------------
Net decrease in cash, cash
equivalents and overdrafts (676) (1,012) (1,535)
Cash, cash equivalents and
overdrafts at
beginning of period 633 1,783 1,783
Cash on acquisition of subsidiaries - - 385
Cash, cash equivalents and
overdrafts at end of period (43) 771 633
========== ---------- --------------
Analysis of cash, cash equivalents and overdrafts:
Cash at bank and in hand 214 771 633
Overdrafts (257) - -
----- -----
(43) 771 633
======== ===== =====
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
2022 2021 2021
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period (92) 74 389
Decrease/(increase) in stocks 2 - (12)
Decrease/(increase) in receivables (206) 301 (1,010)
(Decrease)/increase in payables 38 (167) 655
Depreciation and amortisation
charges 219 51 264
Finance costs/(income) 3 (25) (16)
Tax charge/(credit) 4 - (259)
Acquisition assets acquired
(excluding cash) - - 95
Exceptional acquisition costs 29 177 323
Profit on disposal of fixed
assets - - (5)
Share based payment 10 (3) 8
---------- ---------- --------------------
Net cash inflow from operations 7 408 432
========== ========== ====================
Consolidated Statement of Changes in Equity
For the six months ended 31 March 2022
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
2020 1,246 5,852 1,328 3,337 (5,726) 15 (3,861) 2,191
--------- --------- --------- ------------ ------------ ---------- ------------ --------
Issue of
shares 24 176 - - - - - 200
Share based
payments - - - - - (3) - (3)
Profit for the
period - - - - - - 74 74
At 31 March
2021 1,270 6,028 1,328 3,337 (5,726) 12 (3,787) 2,462
--------- --------- --------- ------------ ------------ ---------- ------------ --------
Issue of
shares - - - - - - - -
Share based
payments - - - - - 11 - 11
Profit for the
period - - - - - - 315 315
At 30
September
2021 1,270 6,028 1,328 3,337 (5,726) 23 (3,472) 2,788
--------- --------- --------- ------------ ------------ ---------- ------------ --------
Issue of
shares - - - - - - - -
Share based
payments - - - - - 10 - 10
(Loss) for the
period - - - - - - (92) (92)
At 31 March
2022 1,270 6,028 1,328 3,337 (5,726) 33 (3,564) 2,706
--------- --------- --------- ------------ ------------ ---------- ------------ --------
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 2021. The interim
financial information for the six months ended 31 March 2022, which
complies with IAS 34 'Interim Financial Reporting' were approved by
the Board of Directors on 30 June 2022.
The unaudited interim financial information for the six months
ended 31 March 2022 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 2021 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 2021.
3. Segmental Reporting
In the opinion of the Directors, the Group has one class of
business, being that of specialist cleaning and decontamination
services. Although the Group operates in only one geographic
segment, which is the UK, it has also analysed the sources of its
business into the segments of Contract Maintenance, Contract
Reactive or Ad Hoc work. The assets and liabilities which have
generated the revenues and profits for the prior period are those
of the Group excluding Fidelis, therefore the comparative assets
and liabilities reported within the segmental analysis differ from
those reported in the Consolidated Statement of Financial
Position.
2021/2022 2020/2021
Contract Contract Ad Total Contract Contract Ad Total
Maintenance Reactive Hoc Maintenance Reactive Hoc
Work Work Work Work Work Work
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3,268 933 924 5,125 764 802 943 2,509
Cost of Sales (2,748) (652) (569) (3,969) (492) (530) (469) (1,491)
Gross Profit 520 281 355 1,156 272 272 474 1,018
Administrative
Expenses (558) (302) (381) (1,241) (259) (259) (451) (969)
Operating
Loss/(profit)
for the year (38) (21) (26) (85) 13 13 23 49
============= ========== ======== ======== ============= ========== ======== ========
Total Assets 2,466 1,334 1,683 5,483 872 873 1,520 3,265
------------- ---------- -------- -------- ------------- ---------- -------- --------
Total Liabilities (1,249) (675) (853) (2,777) (214) (215) (374) (803)
------------- ---------- -------- -------- ------------- ---------- -------- --------
4. Business combinations impact
On 26 March 2021, the Group acquired 100% of the issued share
capital and voting rights of Fidelis Contract Services Ltd
('Fidelis'), a successful commercial cleaning, hygiene and facility
support services company headquartered in Birmingham providing
services to customers across England and Wales. The acquisition is
expected to increase the group's market share and reduce costs
through economies of scale.
Fidelis was acquired for an initial consideration of GBP1.7m,
payable as GBP1.5m cash and GBP0.2m through the issue of new
ordinary shares, with contingent consideration of up to GBP3.05m
payable subject to Fidelis fulfilling certain profit criteria.
The fair value of the acquired customer list and customer
contracts was estimated at 31 March 2021 and at 30 September 2021.
The goodwill arising on the combination can be attributed to the
synergies expected to be derived from the combination and the value
of the workforce of Fidelis which cannot be recognised as an
intangible asset. As at 31 March 2022, the fair value of the
contingent consideration arrangement has been recalculated based on
the performance of Fidelis since the date of acquisition and the
present value of the future expected cash flows.
As a result of the above, costs payable in connection with the
acquisition of Fidelis are expected to be GBP5,000 lower than
originally estimated. This reduction in costs has been credited to
administrative expenses as shown in note 5.
The reassessment of the fair value of the final deferred
consideration payable has resulted in changes in the total
Consideration and Goodwill valuations.
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Fair value of identifiable
net assets acquired 480 483 480
Separately identifiable intangible
assets
arising on business combination 1,175 1,756 1,175
Goodwill 1,680 1,876 1,766
Total Value of Acquisition 3,335 4,115 3,421
---------- ---------- --------------
Initial consideration 2,014 2,013 2,014
Deferred Consideration 1,321 2,102 1,407
Total Consideration 3,335 4,115 3,421
---------- ---------- --------------
5. Acquisition and restructuring costs included in administrative expenses
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Acquisition (income)/costs
- Fidelis (5) 177 323
Acquisition costs - other 34 - -
Management restructure costs - 92 94
29 269 417
========== ========== ==============
6. Earnings per Share (basic and adjusted)
The calculations of earnings per share (basic and adjusted) are
based on the net profit and adjusted profit respectively and the
ordinary shares in issue during the period. The adjusted profit
represents the EBITDA for the period.
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Net (loss)/profit for period (92) 74 389
============ ============ ==============
Adjustments:
Interest 3 (25) (16)
Depreciation and amortisation 219 51 264
Tax 4 - (259)
Adjusted profit for the period 134 100 378
============ ============ ==============
Number Number Number
Weighted average shares in
issue for basic earnings per
share 508,006,026 498,665,889 503,348,752
Weighted average dilutive
share options and warrants 62,247,272 62,247,272 62,247,272
------------ ------------ --------------
Average number of shares used
for dilutive earnings per
share 570,253,298 560,913,161 565,596,024
============ ============ ==============
pence pence pence
Basic earnings per share (0.02)p 0.01p 0.08p
============ ============ ==============
Diluted earnings per share (0.02)p 0.01p 0.07p
============ ============ ==============
Adjusted basic earnings per
share 0.03p 0.02p 0.08p
============ ============ ==============
Adjusted diluted earnings
per share 0.02p 0.02p 0.07p
============ ============ ==============
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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