TIDMREAT
RNS Number : 3042E
React Group PLC
29 June 2023
29 June 2023
REACT Group plc
("REACT", the "Group" or the "Company")
Half Year Results FY 2023
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 2023.
Financial Summary
HY 2023 HY 2022
---------------------------------------- -------- --------
Revenue (GBP'000) 9,320 5,125
Gross profit (GBP'000) 2,484 1,156
Gross profit margin 26.7% 22.6%
Adjusted EBITDA (GBP'000)* 927 162
Adjusted profit before amortisation
of acquired intangible assets and
exceptional items (GBP'000) * 773 88
Net loss for the period (GBP'000) (86) (92)
Adjusted earnings per share (basic)
(pence) 0.07 0.02
Adjusted earnings per share (diluted)
(pence) 0.07 0.01
Net debt (excluding lease liabilities)
(GBP'000) 257 43
*These measures are explained and reconciled in the Alternative
Performance Measures section in Note 5 below.
Highlights (including post period highlights):
-- Revenue increased by 82% to GBP9,320k (2022: GBP5,125k)
-- Adjusted EBITDA up materially to GBP927k (2022: GBP162k)
-- Gross margins up at 27% from 23% in H1 2022
-- GBP800k multi-year contract win to provide services, through
a coordinated programme from all three segments of the business to
a large fast-service restaurant chain across c. 350 sites in the
UK
-- GBP500k 18-month contract with a sizeable Midlands-based
school alongside numerous contract renewals which include another
school worth around GBP540k over three years and an annual contract
with an NHS Trust worth almost GBP200k
-- Improved mix of recurring revenue as well as higher margins
provides the business with greater visibility and a more dependable
revenue stream
Commenting on the results Shaun Doak, Chief Executive Officer of
REACT, said:
"We are delighted to report a strong trading performance for the
business with revenue and profit at record levels. All three
divisions have traded well in the period and this momentum has
continued into the second half.
"The Group has benefitted from notable customer wins including
an GBP800k contract to provide services, through a coordinated
programme from all three segments of the business to a large
fast-service food chain across all its sites in the UK. This major
contract win illustrates how strategic acquisitions provide
significant cross-selling opportunities for the Group once
successfully integrated.
"The enhanced mix of recurring revenue and increased margins
provides the business with greater visibility and a more dependable
revenue stream. This combined with the strength of our pipeline for
the remainder of the year provides the Board with cautious optimism
and reinforces its confidence in achieving full-year results in
line with market expectations.
"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)
Phil Davies / James Moat (Corporate Finance) Tel: +44 (0) 207 496
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
The REACT business performed strongly during the six months to
31 March 2023, trading in the period has been robust and the
positive contract win momentum has continued with good sales growth
across all three divisions of the business.
The Group achieved record revenue and profit growth during the
six-month period. The combination of growing recurring revenue as
well as higher margins provides the business with greater
visibility and a more dependable revenue stream. Recurring revenue
is key to our strategy and the contract maintenance segment of the
business typically allows customers to purchase our services over a
contracted period of several years. Within these contracts, price
increases are implemented at certain points to mitigate
wage-inflation pressures. The Group has benefitted from its ability
to cross sell other business services into existing and new
customers. Evidence of this is the recent contract win, with an
estimated value of GBP800k in the current financial year, to
provide services, through a coordinated programme from all three
segments of the business to a large fast-service food restaurant
across all its sites in the UK. This positive contract win momentum
has continued, with good sales growth in all three divisions of the
business across the six-month period.
In May last year, the Group acquired LaddersFree, one of the
largest commercial window cleaning businesses in the UK. The
business has been integrated well and its revenues have grown by
over 25% in its first year as part of the Group. This has been
achieved despite the gloom on the UK high street resulting in
customer site closures and economic pressures over the last year.
The Board is looking to scale the business whilst professionalising
its operating systems. LaddersFree continues to be awarded
contracts to provide services for retailers, restaurants, hotels
and car dealerships amongst others. The division continues to
attract higher margin contracts helping to deliver a considerable
contribution to Group profits.
It has now been over two years (March 2021) since the Group
acquired Fidelis Contract Services ("Fidelis"), a contract cleaning
and facilities maintenance business. Fidelis had a slightly slower
start to H1, this then improved greatly reporting record revenues
over the latter stages of the six-month period. Fidelis has been
awarded a GBP500k 18-month contract with a sizeable Midlands-based
school and alongside this, numerous contract renewals which include
another school worth around GBP540k over three years and an annual
contract with an NHS Trust worth almost GBP200k.
The Fidelis business is now generating twice as much revenue as
it was in the 12-months prior to acquisition, demonstrating not
only its strategic value to the Group but also the manner in which
the Company has been able to integrate and grow the business,
adding a more scalable management team and more sophisticated
systems to support its continuing growth ambitions.
The REACT business, which primarily provides a solution to
emergency and specialist cleaning situations, both through
long-term framework agreements and on an ad-hoc basis, has had a
buoyant period of business as its bespoke services remain in
demand. Margins remain a focus of this division as these continue
to rise as a result of a changing mix of business.
People
The Group performs bespoke training and development projects
and, as a consequence, has been able to develop the roles of a
number of important personnel and promote internally. As an
aspiring expanding Group, it continues to take efforts to invest in
its people to promote greater performance and job satisfaction of
all employees.
Due to the nature of REACT's service delivery department, this
is undertaken by people who are considered experts in their field,
supported by a dedicated customer-centric team, who have now fully
adapted to working conditions since all COVID restrictions have
been lifted. The strong financials reported in H1 are bolstered by
the efforts of the entire team and each individual has played a
crucial role in our collective achievements.
I would like to take this opportunity to extend our gratitude
and appreciation to our esteemed colleagues for their unwavering
dedication and hard work. It is through their collective efforts
and commitment that we have achieved our targets during this period
and reached new heights.
Outlook
Trading in the second half of the year has continued well
building on the momentum of the first half. The enhanced mix of
recurring revenue and increased margins provides the business with
greater visibility and a more dependable revenue stream. This
combined with the strength of our pipeline for the remainder of the
year provides the Board with cautious optimism and reinforces its
confidence in achieving full-year results in line with market
expectations.
Shaun Doak
Chief Executive Officer
29 June 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2023
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 30 September
31 March 31 March 2022
2023 2022
Note GBP'000 GBP'000 GBP'000
Continuing Operations
Revenue 9,320 5,125 13,671
Cost of Sales (6,836) (3,969) (10,414)
---------- ---------- --------------
Gross Profit 2,484 1,156 3,257
Administrative expenses (2,499) (1,241) (3,768)
Adjusted operating profit
before amortisation of acquired
intangible assets and exceptional
items 844 91 775
Amortisation of acquired intangible
assets (821) (147) (743)
Exceptional costs (38) (29) (543)
------------------------------------- ----- ---------- ---------- --------------
Operating loss (15) (85) (511)
Finance cost (71) (3) (56)
Corporation tax charge - (4) (134)
---------- ---------- --------------
Loss for the period (86) (92) (701)
Other comprehensive Income - - -
Loss for the financial period
attributable to equity holders
of the company (86) (92) (701)
========== ========== ==============
Basic and diluted profit per
share 4
Basic loss per share (0.01)p (0.02)p (0.09)p
========== ========== ==============
Diluted loss per share (0.01)p (0.02)p (0.09)p
========== ========== ==============
Adjusted basic earnings per
share 0.07p 0.02p 0.08p
========== ========== ==============
Adjusted diluted earnings per
share 0.07p 0.01p 0.07p
========== ========== ==============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2023
Unaudited Unaudited Audited
As at 31 As at As at 30
March 31 March September
2023 2022 2022
Assets Note GBP'000 GBP'000 GBP'000
Non-current assets
Intangibles - Goodwill 4,209 1,854 4,209
Intangibles - Other 4,859 881 5,680
Property, plant and equipment 185 168 203
Right-of-use assets 73 68 100
Deferred tax asset 244 240 244
---------- ---------- -----------
9,570 3,211 10,436
Current assets
Stock 11 10 11
Trade and other receivables 4,301 2,305 4,254
Cash and cash equivalents 650 (43) 979
4,962 2,272 5,244
Total assets 14,532 5,483 15,680
========== ========== ===========
Equity
Shareholders' Equity
Called-up equity share capital 2,644 1,270 2,624
Share premium account 10,910 6,028 10,905
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 68 33 44
Accumulated losses (4,259) (3,564) (4,173)
Total Equity 8,302 2,706 8,339
---------- ---------- -----------
Liabilities
Current liabilities
Trade and other payables 4,176 2,309 4,230
Loans and other borrowings 161 - 161
Lease liabilities within one
year 50 46 57
Corporation tax 195 - 271
---------- ---------- -----------
4,582 2,355 4,719
Non-current liabilities
Loans and other borrowings 746 - 808
Lease liabilities after one
year 34 30 53
Other creditors 868 392 1,761
---------- ---------- -----------
1,648 422 2,622
Total liabilities 6,230 2,777 7,341
---------- ---------- -----------
Total Liabilities and Equity 14,532 5,483 15,680
========== ========== ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 March 2023
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
Net cash inflow/(outflow)
from operations 829 7 (773)
Cash flows from financing
activities
Proceeds of share issue 25 - 6,500
Expenses of share issue - - (269)
Lease liability payments (37) (27) (80)
Bank Loans (62) (50) 902
Interest paid (71) - (56)
Net cash (outflow)/inflow
from financing
activities (145) (77) 6,997
---------- ---------- --------------
Net cash from investing activities
Disposal of fixed assets - - 20
Capital expenditure (37) (64) (115)
Acquisition of subsidiary (938) (525) (7,776)
Exceptional costs paid (38) (17) (543)
Net cash outflow from investing
activities (1,013) (606) (8,414)
---------- ---------- --------------
Net decrease in cash, cash
equivalents and overdrafts (329) (676) (2,190)
Cash, cash equivalents and
overdrafts at
beginning of period 979 633 633
Cash on acquisition of subsidiaries - - 2,536
Cash, cash equivalents and
overdrafts at end of period 650 (43) 979
========== ========== --------------
Analysis of cash, cash equivalents and overdrafts:
Cash at bank and in hand 1,379 214 1,529
Overdrafts (729) (257) (550)
-------
650 (43) 979
======= ======= =======
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
2023 2022 2022
GBP'000 GBP'000 GBP'000
Loss for the period (86) (92) (701)
Decrease/(increase) in stocks - 2 1
(Increase)/decrease in receivables (47) (206) (2,155)
Increase in payables 1 38 374
Depreciation and amortisation
charges 904 219 921
Impairment charge - - 567
Finance costs 71 3 56
Tax charge/(credit) - 4 134
Acquisition assets acquired (excluding
cash) - - 119
Exceptional acquisition costs 38 29 (24)
Profit on disposal of fixed assets - - (6)
Share based payment 24 10 21
Tax paid (76) - (80)
------------ ---------- -----------------
Net cash inflow from operations 829 7 (773)
============ ========== =================
Consolidated Statement of Changes in Equity
For the six months ended 31 March 2023
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
2021 1,270 6,028 1,328 3,337 (5,726) 23 (3,472) 2,788
--------- --------- --------- ------------ ------------ ---------- ------------ --------
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
--------- --------- --------- ------------ ------------ ---------- ------------ --------
Issue of
shares 1,354 4,877 - - - - - 6,231
Share based
payments - - - - - 11 - 11
Loss for the
period - - - - - - (609) (609)
At 30
September
2022 2,624 10,905 1,328 3,337 (5,726) 44 (4,173) 8,339
--------- --------- --------- ------------ ------------ ---------- ------------ --------
Issue of
shares 20 5 - - - - - 25
Share based
payments - - - - - 24 - 24
Loss for the
period - - - - - - (86) (86)
At 31 March
2023 2,644 10,910 1,328 3,337 (5,726) 68 (4,259) 8,302
--------- --------- --------- ------------ ------------ ---------- ------------ --------
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 2022. The interim
financial information for the six months ended 31 March 2023, which
complies with IAS 34 'Interim Financial Reporting' were approved by
the Board of Directors on 29 June 2023.
The unaudited interim financial information for the six months
ended 31 March 2023 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 2022 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 2022.
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.
Unaudited 6 months ended Unaudited 6 months ended
31 March 2023 31 March 2022
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 6,807 1,181 1,332 9,320 3,268 933 924 5,125
Gross profit 1,883 296 305 2,484 520 281 355 1,156
Profit before
amortisation
and
exceptional
items 689 36 48 773 38 20 26 84
Total Assets 13,213 450 869 14,532 2,466 1,334 1,683 5,483
------------- ---------- -------- -------- ------------- ---------- -------- --------
Total Liabilities (5,665) (193) (372) (6,230) (1,249) (675) (853) (2,777)
------------- ---------- -------- -------- ------------- ---------- -------- --------
4. Earnings per Share (basic and adjusted)
The calculations of earnings per share (basic and adjusted) are
based on the net loss and a djusted profit before amortisation of
acquired intangible assets and exceptional items* respectively and
the ordinary shares in issue during the period.
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
Net Loss for period (86) (88) (701)
============== ============ ==============
Adjustments:
Amortisation on acquired intangible
assets 821 147 743
Exceptionals 38 29 543
Adjusted profit before amortisation
of
acquired intangible assets
and exceptional items 773 88 585
============== ============ ==============
Number Number Number
Weighted average shares in
issue for basic earnings per
share 1,055,369,702 508,006,026 718,622,464
Weighted average dilutive
share options and warrants 91,750,707 62,247,272 62,247,272
-------------- ------------ --------------
Average number of shares used
for dilutive earnings per
share 1,147,120,409 570,253,298 780,869,736
============== ============ ==============
pence pence pence
Basic loss per share (0.01)p (0.02)p (0.09)p
============== ============ ==============
Diluted loss per share (0.01)p (0.02)p (0.09)p
============== ============ ==============
Adjusted basic earnings per
share 0.07p 0.02p 0.08p
============== ============ ==============
Adjusted diluted earnings
per share 0.07p 0.02p 0.07p
============== ============ ==============
*These measures are explained and reconciled in the Alternative
Performance Measures section in Note 5 below.
5. Alternative Performance Measures
The Board monitors performance principally through adjusted
comparative performance measures. Adjusted profit and earnings per
share measures exclude certain items including amortisation of
acquired intangible assets and exceptional items. The Board
believes that these alternative measures provide a clearer
understanding of the Group's underlying trading performance, as
they exclude one-off and non-cash items.
They key measures used as APMs are reconciled below:
HY 2023 HY 2022
GBP'000 GBP'000
--------------------------------------------------- --------- ---------
Loss before tax as per Statement of Comprehensive
Income (86) (88)
Amortisation of acquired intangible assets 821 147
Exceptional items 38 29
--------- ---------
Adjusted profit before amortisation of acquired
intangible assets and exceptional items 773 88
Interest 71 2
Depreciation 83 72
Adjusted EBITDA 927 162
========= =========
Copies of this Interim Report are available from the Company
Secretary, Holly House, Shady Lane, Birmingham B44 9ER and on the
Company's website www.reactsc.co.uk/react-group-plc
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