TIDMECSC
RNS Number : 3363A
ECSC Group PLC
11 September 2018
11 September 2018
ECSC Group plc
("ECSC" or the "Company" or the "Group")
Unaudited results for the six months ended 30 June 2018
Strong cyber security organic growth delivered,
including in key area of managed services
ECSC Group plc (AIM: ECSC), the provider of cyber security
services, announces its interim results for the 6 months ended 30
June 2018.
Highlights
-- Organic revenue growth of 43% (2018: GBP2.65m, 2017: GBP1.85m)
-- Managed Services recurring revenue growth of 52% (2018: GBP0.77m, 2017: GBP0.51m)
-- Consulting Services growth of 36% (2018: GBP1.56m, 2017: GBP1.14m)
-- EBITDA loss of GBP0.5m in period (2017: loss of GBP1.5m)
-- Cash of GBP1m
Operational Highlights
-- New managed service wins valued at GBP0.9m
-- Addition of 50 new consulting clients
-- Introduction of new Artificial Intelligence (AI) technology
into the global Security Operations Centres.
Ian Mann, CEO of ECSC, commented:
"We are pleased to report our revenue growth, with particular
emphasis on our Managed Services recurring revenue. New client
acquisitions, and conversion to recurring revenues is a powerful
combination to deliver growth and exploit the post-GDPR regulatory
environment."
Enquiries:
ECSC Group plc
David Mathewson (Non-Executive Chairman
and CFO) +44 (0) 1274 736
Ian Mann (Chief Executive Officer) 223
Allenby Capital (NOMAD and Broker) +44 (0) 20 3328 5656
David Hart
Nicholas Chambers
Alma PR (Financial PR)
Joshua Royston
Rebecca Sanders-Hewett +44 (0) 20 8004 4217
For more information please visit the following:
www.ecsc.co.uk
Chairman's Statement
I am pleased to present the interim results to our shareholders
for the first six months of 2018. These results show significant
progress within the company, particularly the strong revenue
growth, tighter cost controls and cash management, and a more
focussed and motivated management team.
The organic revenue growth reported is a result of the
significant investment in the development of new operational
facilities and services, recruitment of key personnel, and the
introduction of a new management structure.
We are also delighted to have welcomed Elizabeth Gooch MBE to
our board, bringing a wealth of relevant experience in high-growth
IT service businesses.
The company has critically examined all costs with a view to
improving efficiency whilst maintaining client service, quality of
delivery and growth capability. This has resulted in a move towards
break even post period end.
ECSC's vision and strategy is to build significantly upon the
organic growth to date and expand its blue-chip client base with
particular emphasis on Managed Services recurring revenue.
The Board believes that there is an opportunity to increase the
scale of ECSC's business to meet current demand and expected market
growth. This is particularly the case following the introduction of
the General Data Protection Regulation (GDPR) across Europe, and
within the UK as part of the new Data Protection Act 2018 in May
this year. This legislation makes the reporting of a breach of
personal data mandatory, with potential fines of up to 2% of global
turnover or Euro10m (whichever is the greater) for cases of serious
non-compliance.
The market for cyber security services remains largely
fragmented. Many of our competitors still only provide a small
portion of the services required to meet clients' needs whilst, in
contrast, ECSC provides a full suite of cyber and information
security solutions, offering a compelling client partnership
proposition. The introduction of our new Artificial Intelligence
(AI) technology within our global Security Operations Centres is
another significant development in our capability.
With continued strong organic revenue growth, ECSC is well
positioned to increase its share of the UK cyber security services
market and leverage the capacity within the delivery team.
David Mathewson
Chairman
11 September 2018
Chief Executive's Review
I am pleased to report strong organic growth during the half
year. The post-IPO operational investments we have made are
enabling ECSC to increase its market share in the growing cyber
security market.
Significant client wins include over 50 new consulting clients
in the period, and new three-year managed services contract wins
contributing over GBP900k to our long-term order book.
We continue to expand the range of services delivered to each
client, with the strategic aim of delivering
long-term recurring managed service revenues and leveraging our
delivery capacity. Consulting services continue to be an effective
way of developing a trusted relationship with clients and help us
expand our services to each client.
Our continued investment in our own technology IP provides key
strategic advantages, as reflected this year, with the introduction
of our Kepler Artificial Intelligence (AI) technology across a
range of managed services. When combined with our staff expertise
within our global Managed Services Security Operations Centres,
AI will bring significant operational efficiencies and
facilitate the processing of vast quantities of cyber security
related data. This facilitates faster, and more effective incident
response, essential to meet the requirements of GDPR
legislation.
Recruitment and retention of the best talent in the industry
remains a key priority. Our reputation for quality delivery, and a
focus on individual development, continues to attract and keep the
right people.
We continue to see many growth opportunities, whilst leveraging
delivery capacity, particularly within managed services recurring
revenue.
Key Performance Indicators (KPI)
The board has agreed, and introduced, the following KPIs to
monitor performance moving forwards:
-- Total revenue growth - 43%
-- Managed Service recurring revenue growth - 52%
-- Managed Service recurring revenue - 29% of total revenue
-- Managed Service order book - GBP2.4m
-- Consulting repeat revenue - 78% of consulting sales
-- Deferred income - GBP0.9m
-- Consulting gross margin - 57%
-- Managed service gross margin - 41%
Ian Mann
Chief Executive Officer
11 September 2018
Financial Review
Revenue Growth
Total revenue growth in the interim period was 43% (2018:
GBP2.65m, 2017: GBP1.85m) compared to the prior year with gross
profit growth of 34%.
Reported on an IFRS15 basis, Managed Services recurring revenue
has grown by 52% (2018: GBP0.77m, 2017: GBP0.51m) with Consulting
Services growing by 36% (2018: GBP1.56m, 2017: GBP1.14m).
Vendor Products revenue in the period grew by over 200% (2018:
GBP0.16m, 2017: GBP0.05m), but remains small contributing only 6%
of revenues.
Margin Generation
Consulting gross margins have remained stable in the period at
57% (prior year interim period 56%). The underlying pricing of
Consulting days has remained constant in the interim period
reported.
Managed Services gross margins have also fallen in the period to
41% (prior year interim period 45%), but this is a reflection on
our investment in our 24/7/365 service offering.
As a result, total gross margin has fallen slightly to 46%
(prior year interim period 48%) reflecting the
scale-up of Managed Services operational capacity.
EBITDA
The planned cost reduction programme was completed on-time,
delivering the intended savings whilst maintaining appropriate
growth capacity.
EBITDA loss, before exceptional items of GBP0.10m, in the
interim period was GBP0.54m (EBITDA loss of GBP1.55m in the 6
months to June 2017). Importantly, before exceptionals, the EBITDA
loss in the second quarter was materially below that in the first
quarter.
Cash Flow
During the interim period, the cash balance has fallen due to
the EBITDA loss, and one-off payments relating to the management
restructuring during the period.
The cash balance at 30 June 2018 was GBP1m. The Board considers
the cash balance to be sufficient to fund the ongoing growth and
development of the Company.
Dividend
The Board has not declared a dividend for the interim
period.
David Mathewson
Chief Financial Officer
11 September 2018
ECSC Group plc
Statement of Comprehensive Income
For the 6 months ended 30 June 2018
*
6 months 6 months
ended ended
30 June 30 June
2018 2017
Note GBP'000 GBP'000
Revenue 6 2,649 1,853
Cost of Sales (1,429) (960)
--------- ----------
Gross Profit 6 1,220 893
Other Income 7 79 45
Sales & Marketing Costs (909) (1,310)
Administrative Expenses (1,207) (1,285)
Operating (Loss)/Profit before
Exceptional Items (718) (1,657)
Exceptional Items 17 (99) -
----- ---------
Operating Loss 8 (817) (1,657)
Finance Income - -
(Loss)/Profit before Taxation 9 (817) (1,657)
Taxation Credit 10 22 44
--------- ----------
(Loss)/Profit for the Period (795) (1,613)
Other Comprehensive Income - -
Total Comprehensive Income for
the Period (795) (1,613)
--------- ----------
Attributable to Equity Holders
of the Company (795) (1,613)
--------- ----------
(Loss)/Earnings per Share (pence) 11
Basic (loss)/earnings per share (8.7) (17.9)
Diluted (loss)/earnings per share (8.4) (17.6)
* The Comparative figures have been restated in accordance with
Note 3.
ECSC Group plc
Consolidated Statement of Financial Position
As at 30 June 2018
*
As at As at
30 June 30 June
2018 2017
Note GBP'000 GBP'000
ASSETS
Non-current Assets
Intangible Assets 12 407 388
Property, Plant and
Equipment 469 500
Total non-current assets 876 888
---------- ----------
Current Assets
Inventory 28 69
Trade and Other Receivables 13 1,144 994
Corporation Tax Recoverable 7 201 225
Cash and Cash Equivalents 14 1,000 3,128
Total Current Assets 2,373 4,416
---------- ----------
TOTAL ASSETS 3,249 5,304
LIABILITIES
Current Liabilities
Trade and Other Payables 15 (1,800) (1,216)
Finance Leases 16 (20) -
---------- ----------
Total Current Liabilities (1,820) (1,216)
---------- ----------
Non-current Liabilities
Deferred Tax 10 7 -
Finance Leases 16 (31) -
Total Non-current Liabilities (24) -
---------- ----------
TOTAL LIABILITIES (1,844) (1,216)
---------- ----------
NET ASSETS 1,405 4,088
========== ==========
EQUITY
Equity attributable
to owners
of the Parent:
Share Capital 91 91
Share Premium Account 5,661 5,661
Share Option Reserve 147 -
Retained Earnings (4,494) (1,664)
TOTAL EQUITY 1,405 4,088
========== ==========
* The Comparative figures have been restated in accordance with
Note 3.
ECSC Group plc
Company Statement of Financial Position
As at 30 June 2018
*
As at As at
30 June 30 June
2018 2017
Note GBP'000 GBP'000
ASSETS
Non-current Assets
Intangible Assets 12 407 388
Property, Plant and
Equipment 430 500
Total non-current assets 837 888
---------- ----------
Current Assets
Inventory 28 69
Trade and Other Receivables 13 1,213 994
Corporation Tax Recoverable 7 201 225
Cash and Cash Equivalents 14 999 3,128
Total Current Assets 2,441 4,416
---------- ----------
TOTAL ASSETS 3,278 5,304
LIABILITIES
Current Liabilities
Trade and Other Payables 15 (1,831) (1,216)
Finance Leases 16 (20) -
---------- ----------
Total Current Liabilities (1,851) (1,216)
---------- ----------
Non-current Liabilities
Deferred Tax 10 7 -
Finance Leases 16 (31) -
Total Non-current Liabilities (24) -
---------- ----------
TOTAL LIABILITIES (1,875) (1,216)
---------- ----------
NET ASSETS 1,403 4,088
========== ==========
EQUITY
Equity attributable
to owners
of the Parent:
Share Capital 91 91
Share Premium Account 5,661 5,661
Share Option Reserve 147 -
Retained Earnings (4,496) (1,664)
TOTAL EQUITY 1,403 4,088
========== ==========
* The Comparative figures have been restated in accordance with
Note 3.
ECSC Group plc
Consolidated Cash Flow Statement
For the 6 months ended 30 June 2018
*
6 months 6 months
ended ended
30 June 30 June
2018 2017
Note GBP'000 GBP'000
Cash Flow from Operating Activities:
(Loss)/Profit before Taxation (817) (1,657)
Grant Income Adjustment 7 (79) (45)
Adjustment for:
Amortisation of Intangibles 12 73 50
Depreciation of Property,
Plant and Equipment 103 62
Share Based Payment 54 -
Cash from Operating Activities
before changes in Working
Capital (666) (1,590)
Change in Inventory 25 (69)
Change in Trade and Other
Receivables 13 (15) 112
Change in Trade and Other
Payables 15 185 (123)
----------- -----------
Cash generated from Operating
Activities (471) (1,670)
Corporation Tax received - -
Net Cash Flow from Operations (471) (1,670)
----------- -----------
Acquisition of Property, Plant
and Equipment (46) (264)
Development Costs capitalised (80) (75)
Net Cash Flow used in Investing
Activities (126) (339)
----------- -----------
Dividends Paid - -
Proceeds from Issuance of
Shares - 150
Exceptional Items - IPO costs - -
Net Cash used in Financing
Activities - 150
----------- -----------
Net (decrease)/ increase in
Cash & Cash Equivalents (597) (1,859)
Cash & Cash Equivalents at
beginning of period 1,597 4,987
Cash & Cash Equivalents at
end of period 1,000 3,128
----------- -----------
* The Comparative figures have been restated in accordance with
Note 3.
ECSC Group plc
Company Cash Flow Statement
For the 6 months ended 30 June 2018
*
6 months 6 months
ended ended
30 June 30 June
2018 2017
Note GBP'000 GBP'000
Cash Flow from Operating Activities:
(Loss)/Profit before Taxation (818) (1,657)
Grant Income Adjustment 7 (79) (45)
Adjustment for:
Amortisation of Intangibles 12 73 50
Depreciation of Property,
Plant and Equipment 94 62
Share Based Payment 54 -
----------- ----------
Cash from Operating Activities
before changes in Working
Capital (676) (1,590)
Change in Inventory 25 (69)
Change in Trade and Other
Receivables 13 (10) 112
Change in Trade and Other
Payables 15 192 (123)
----------- ----------
Cash generated from Operating
Activities (469) (1,670)
Corporation Tax received - -
Net Cash Flow from Operations (469) (1,670)
----------- ----------
Acquisition of Property, Plant
and Equipment (44) (264)
Development Costs capitalised (80) (75)
Net Cash Flow used in Investing
Activities (124) (339)
----------- ----------
Dividends Paid - -
Proceeds from Issuance of
Shares - 150
Exceptional Items - IPO costs - -
Net Cash used in Financing
Activities - 150
----------- ----------
Net (decrease)/ increase in
Cash & Cash Equivalents (593) (1,859)
Cash & Cash Equivalents at
beginning of period 1,592 4,987
Cash & Cash Equivalents at
end of period 999 3,128
----------- ----------
* The Comparative figures have been restated in accordance with
Note 3.
ECSC Group plc
Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2018
Share Premium Share Option Retained
Share Capital Account Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 September
2015 22 75 602 699
Profit and Total Comprehensive
Income for the Period - - (399) (399)
Transaction with owners:
Dividends - - (254) (254)
Issue of Shares 2 83 - 85
Bonus Issue 26 (26) - -
Issue of Shares at
IPO 30 4,970 - 5,000
Exercise of Share Options 10 723 - 733
Share Issue Costs - (313) - (313)
Balance at 31 December
2016 90 5,512 (51) 5,551
Profit and Total Comprehensive
Income for the Period - - - (3,409) (3,409)
Exercise of Equity
Warrant 1 149 - - 150
Grant of Share Options - 93 - 93
Balance at 31 December
2017 91 5,661 93 (3,460) 2,385
Effect of change in accounting standard for IFRS 15: Revenue from
contracts with customers (see note 3)
Adjusted Opening balance* 91 5,661 93 (3,699) 2,146
Profit and Total Comprehensive
Income for the Period - - - (795) (795)
Grant of Share Options - - 54 - 54
Balance at 30 June
2018 91 5,661 147 (4,494) 1,405
============= ============= ============ ========= ========
* Adjusted Retained Earnings accordance with Note 3.
ECSC Group plc
Company Statement of Changes in Equity
For the 6 months ended 30 June 2018
Share Premium Share Option Retained
Share Capital Account Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 September
2015 22 75 602 699
Profit and Total Comprehensive
Income for the Period - - (399) (399)
Transaction with owners:
Dividends - - (254) (254)
Issue of Shares 2 83 - 85
Bonus Issue 26 (26) - -
Issue of Shares at IPO 30 4,970 - 5,000
Exercise of Share Options 10 723 - 733
Share Issue Costs - (313) - (313)
Balance at 31 December
2016 90 5,512 (51) 5,551
Profit and Total Comprehensive
Income for the Period - - - (3,411) (3,411)
Exercise of Equity Warrant 1 149 - - 150
Grant of Share Options - 93 - 93
Balance at 31 December
2017 91 5,661 93 (3,462) 2,383
Effect of change in accounting standard for IFRS 15: Revenue from
contracts with customers (see note 3)
Adjusted Opening balance* 91 5,661 93 (3,700) 2,145
Profit and Total Comprehensive
Income for the Period - - - (796) (796)
Grant of Share Options - - 54 - 54
Balance at 30 June 2018 91 5,661 147 (4,496) 1,403
============= ============= ============ ========= ========
* Adjusted Retained Earnings accordance with Note 3.
ECSC Group plc
Notes to the Group Condensed Consolidated Interim Financial
Statements
For the 6 months ended 30 June 2018
1. Corporate Information
ECSC Group plc is incorporated in England and Wales and quoted
on the London Stock Exchange's Alternative Investment Market (AIM:
ECSC). Further copies of these financial statements will be
available at the Company's registered office: 28 Campus Road,
Listerhills Science Park, Bradford, West Yorkshire, BD7 1HR. These
financial statements for the year ended 30 June 2018 were approved
by the Board of Directors on 10 September 2018
2. General Information
These financial statements may contain certain statements about
the future outlook of ECSC Group plc. Although the Directors
believe their expectations are based on reasonable assumptions, any
statements about future outlook may be influenced by factors that
could cause actual outcomes and results to be materially
different.
3. Basis of Preparation
These financial statements for the period ended 30 June 2018,
which are unaudited, have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively 'IFRS')
issued by the International Accounting Standards Board ('IASB') as
adopted by the European Union ('adopted IFRS').
The financial statements for the period ended 30 June 2018 (and
comparative) have been prepared on a consolidated basis. The
consolidated financial statements present the results of the
Company and its subsidiaries ('the Group') as if they formed a
single entity. The financial statements of the Group and Company
are both prepared in accordance with IFRS.
The financial statements have been presented in thousands of
Pounds Sterling (GBP'000, GBP) as this is the currency of the
primary economic environment that the Company operates in.
The 30 June 2017 comparative figures have been restated to adopt
IFRS 15. Revenue in Statement of Profit and Loss (SPL) has been
reduced by GBP73k to reflect Managed Services revenue under IFRS 15
in the period 30 June 2017
The Statement of Financial Position (SFP) has also been restated
under the Trade and Other Payables to reflect the adjustment in
deferred income of GBP73k.
On the Statement of Changes in Equity a GBP238k adjustment has
been made to the opening balance at
January 2018 in Retained Earning as follows to reflect changed
in deferred income under IFRS 15:
Group: GBP3,460k adjusted to GBP3,699k under IFRS 15
Company: GBP3,462k adjusted to GBP3,700k under IFRS 15
4. Accounting Policies
The principal accounting policies applied in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all periods presented, unless
otherwise stated.
4.1 Basis of Accounting
The financial statements have been prepared on the historical
cost basis except as stated.
The Directors have adopted application of IFRS 15 "Revenue from
contracts with customers" from 1 January 2018, applying the fully
retrospective method of transition. The core principle is that
revenue should only be recognised as the client receives the
benefit of the goods or services provided under a commercial
contract, in an amount that reflects the consideration to which the
provider expects to be entitled for the transfer of the goods or
services.
The adoption of IFRS 15 will impact the timing of the
recognition of set-up revenues at the commencement of a new Managed
Service contract. Under IAS 18, the set-up element of a Managed
Service contract was recognised as revenue in full on delivery of
the respective products and services, with the Managed Service
element deferred and released to revenue over the term of the
contract. Under IFRS 15, the set-up element also has to be deferred
and recognised as revenue over the term of the contract.
4.2 Going Concern
The Directors have reviewed whether the Group has adequate
resources to continue in operational existence for the foreseeable
future. In conducting this review, the Directors have considered a
range of factors, including the market prospects for cyber security
services, client relationships and dependency, supplier
relationships and dependency, actual or potential litigation, staff
retention and reliance, relationships with HMRC and regulators,
financing arrangements, historic trading and cash flow performance,
current trading and cash flow performance, and future trading and
cash flow expectations.
Based on this review, the Directors have concluded that the
Group has adequate resources to meet its liabilities as they fall
due and continue in operational existence for the foreseeable
future, which is considered to be at least the next 12 months.
Consequently, the Directors have adopted the going concern basis in
preparing the financial statements.
4.3 Revenue Recognition
Revenue comprises the sales value of goods and services supplied
during the year, exclusive of Value Added Tax and trade discounts.
Revenue from the provision of Consulting services is recognised as
services are rendered, based on the contracted daily billing rate
and the number of days delivered during the period.
Revenue from Prepaid Support contracts are deferred in the
balance sheet and recognised on utilisation of services by the
client. Remote Support revenue is included within Consulting in
note 6.
Revenue from Managed Services contracts are deferred and
recognised on a straight line basis over the term of the
contract.
Revenue from the sale of products is recognised when the
significant risks and rewards of ownership have been transferred,
which is considered to occur when the software or hardware product
has been delivered to the client.
4.4 Finance Income
Finance income is accrued on an annual basis, by reference to
the principal outstanding at the applicable effective credit
interest rate.
4.5 Government Grant Income
Government Grant Income is recognised in the Statement of
Comprehensive Income over the period in which the Company
recognises expenses for the related costs for which the grants are
intended to compensate.
Government tax credits available on eligible Research and
Development expenditure ('R&D Tax Credits') and not reclaimable
through other means are recognised as Other Income and treated as a
government grant. Government Grant Income also includes other
grants received from government agencies (see note 7).
4.6 Operating Profit
Operating Profit is stated after all expenses, including those
considered to be exceptional, but before finance income or
expenses. Exceptional items are items of income or expense which,
because of their nature or size, require separate presentation to
allow shareholders to better understand the financial performance
of the period and allow comparison with prior years.
4.7 Foreign Currencies
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange prevailing at the balance sheet
date. Transactions in foreign currencies are translated into
sterling at the rate of exchange prevailing at the date of the
transaction. Exchange differences are recognised in Operating
Profit.
On consolidation, the results of overseas operations are
translated into Sterling at rates approximating those prevailing
when the transactions took place. All assets and liabilities of
overseas entities are translated at the rate prevailing at the
reporting date. Exchange differences arising on translating the
opening net assets at opening rate and the results of overseas
operations at actual rate are recognised in Other Comprehensive
Income and accumulated in the foreign exchange reserve.
4.8 Employee Benefits
Short-Term Benefits
Wages, salaries, paid annual leave and sick leave, bonuses and
non-monetary benefits are accrued in the period in which the
associated services are rendered by employees of the Company.
Defined Contribution Pension Scheme
The Company operates a defined contribution pension scheme for
employees. The assets of the scheme are held separately from those
of the Company. The annual contributions are charged to the
Statement of Comprehensive Income. The Company also contributes to
the personal pension plans of the Directors in accordance with
their Service Contracts.
Employee Share Based Payments
Where equity settled share options are granted to employees
(including Directors), the fair value of the options at the date of
grant is charged to the Consolidated Statement of Comprehensive
Income, as a Share Based Payment Charge, over the vesting period of
the options, with a corresponding movement in the Share Option
Reserve.
Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-market vesting conditions and
market vesting conditions are factored into the fair value of the
options granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after modification, is also charged to the
Consolidated Statement of Comprehensive Income over the remaining
vesting period.
4.9 Operating Lease Agreements
Rentals applicable to operating leases where substantially all
of the risks and rewards of ownership remain with the lessor are
charged to the Statement of Comprehensive Income on a straight line
basis over the full period of the lease. Any lease incentives are
spread on a straight line basis over the full period of the
lease.
4.10 Property, Plant and Equipment
All additions are initially recorded at historic cost.
Depreciation is calculated so as to write-off the cost of an asset,
less its estimated residual value, over the useful economic life of
that asset as follows:
-- Leasehold Property 20% reducing balance
-- Office Furniture and Equipment 20% reducing balance
-- Computer Equipment 33% straight line
-- Motor Vehicles 20% straight line
4.11 Finance Lease Agreements
Where substantially all of the risks and rewards of ownership of
a leased asset are transferred to the Group ('Finance Lease'), the
asset is treated as if it had been transferred outright. The amount
initially recognised as an asset is the lower of the fair value of
the leased asset and the present value of the minimum lease
payments payable over the term of the lease. The corresponding
lease commitment is shown as a liability.
Lease payments are analysed between capital and interest. The
interest element is charged to the Statement of Comprehensive
Income over the period of the lease and is calculated to represent
a constant proportion of the lease liability. The capital element
reduces the liability owed to the lessor.
4.12 Research and Development Expenditure
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
Expenditure on development activities generating an intangible
asset is capitalised if all of the criteria set out in IAS 38 are
met. Capitalised assets are amortised over their useful economic
life, which is considered to be five years.
If the criteria set out in IAS 38 are not met, expenditure on
development activities is recognised as an expense in the period in
which it is incurred.
4.13 Inventories
Inventories are carried at the lower of cost or net realisable
value. Net realisable value is calculated based on the expected
revenue from sale in the normal course of business less any costs
to sell. Due allowance is made for obsolete and slow moving
items.
4.14 Financial Instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial Assets
The Group and Company's Financial Assets include Cash and Cash
Equivalents, Trade Receivables and Other Receivables.
-- Initial Recognition and Measurement
Financial Assets are classified, at initial recognition, as
Loans and Receivables.
-- Subsequent Measurement
Loans and Receivables are measured at amortised cost, using the
effective interest method, less impairment. Interest is recognised
by applying the effective interest method, except for short-term
receivables when the recognition of interest would be
immaterial.
-- Derecognition of Financial Assets
The Company derecognises a Financial Asset only when the
contractual rights to the cash flows from the asset expire, or it
transfers the Financial Asset and substantially all the risks and
rewards of ownership of the asset to another entity.
Financial Liabilities and Equity Instruments
The Group and Company's Financial Liabilities include Trade
Payables, Accruals, Other Payables and Finance Leases. Financial
Liabilities are classified as Financial Liabilities measured at
amortised cost.
-- Classification as Debt or Equity
Financial Liabilities and Equity Instruments issued by the
Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a
Financial Liability and an Equity Instrument.
-- Equity Instruments
An Equity Instrument is any contract that evidences a residual
interest in the assets of the Company after deducting all of its
liabilities. Equity Instruments are recorded at the proceeds
received, net of direct issue costs.
-- Trade Payables, Other Payables and Accruals
Trade Payables, Accruals and Other Payables are initially
measured at fair value, net of transaction costs, and are
subsequently measured at amortised cost, where applicable, using
the effective interest method, with interest expense recognised on
an effective yield basis.
4.14 Financial Instruments (continued)
-- Finance Leases
Finance Leases are treated as Financial Liabilities measured at
amortised cost.
-- Derecognition of Financial Liabilities
The Company derecognises financial liabilities when the
Company's obligations are discharged, cancelled or expire.
Offsetting of Financial Instruments
Financial Assets and Financial Liabilities are offset, and the
net amount reported in the Statement of Financial Position if there
is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, or to
realise the assets and settle the liabilities simultaneously.
4.15 Cash and Cash Equivalents
Cash and Cash Equivalents comprise cash on hand and demand
deposits, and other short-term highly liquid investments which are
readily convertible to known amounts of cash and are subject to
insignificant risk of changes in value.
4.16 Impairment of Assets
Financial Assets
A Financial Asset is assessed at each reporting date to
determine whether there is any objective evidence that it is
impaired. A Financial Asset is considered to be impaired if
objective evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that
asset.
An impairment loss in respect of a Financial Asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the original effective interest rate. An impairment
loss in respect of an available-for-sale Financial Asset is
calculated by reference to its fair value.
Individually significant Financial Assets are tested for
impairment on an individual basis. The remaining Financial Assets
are assessed collectively in groups that share similar credit risk
characteristics.
An impairment loss is recognised in profit and loss. Any
cumulative loss in respect of an available-for-sale Financial Asset
recognised previously in equity is transferred to the Statement of
Comprehensive Income.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was
recognised. For Financial Assets measured at amortised cost and
available-for-sale Financial Assets that are debt securities, the
reversal is recognised in profit and loss. For available-for-sale
Financial Assets that are equity securities, the reversal is
recognised directly in equity.
Non-Financial Assets
The carrying amounts of the Company's Non-Financial Assets,
other than Deferred Tax Assets, are reviewed at each reporting date
to determine whether there is any indication of impairment. If any
such indication exists, then the asset's recoverable amount is
estimated.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and risk specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups
of assets.
An impairment loss is recognised if the carrying amount of an
asset or its cash generating unit exceeds its estimated recoverable
amount. Impairment losses are recognised in profit and loss.
Impairment losses recognised in prior periods are assessed at
each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has
been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
4.17 Corporation Tax
Corporation Tax expense represents the sum of the tax currently
payable and Deferred Tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are not taxable or tax
deductible.
The Company's liability for current tax is calculated using tax
rates (and tax laws) that have been enacted or substantively
enacted by the end of the financial period.
Government tax credits available on eligible Research and
Development expenditure and not reclaimable through other means are
recognised as Other Income and treated as a government grant. This
applies when there are no taxable profits against which to offset
the tax credit. The amount receivable by the Group and Company is
shown on the face of the balance sheet within Corporation Tax
Recoverable.
4.18 Deferred Tax
Deferred Tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that will
result in an obligation to pay more, or a right to pay less or to
receive more tax.
Deferred Tax Assets are recognised only to the extent that the
Directors consider that it is more likely than not that there will
be suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted.
Deferred Tax is measured on an undiscounted basis at the tax
rates that are expected to apply in the periods in which timing
differences reverse, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
4.19 Contingent Liabilities and Contingent Assets
A Contingent Liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the Company. It can also be a
present obligation arising from past events that is not recognised
because it is not probable that outflow of economic resources will
be required or the amount of obligation cannot be measured
reliably.
A Contingent Liability is not recognised but is disclosed in the
Notes to the Accounts. When a change in the probability of an
outflow occurs so that the outflow is probable, it will then be
recognised as a provision.
A Contingent Asset is a possible asset that arises from past
events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain events not wholly within
the control of the Company. Contingent Assets are not recognised
but are disclosed in the Notes to the Accounts when an inflow of
economic benefits is probable. When inflow is virtually certain, an
asset is recognised.
4.20 Share Capital
Ordinary Share Capital is recorded at nominal value and proceeds
received in excess of nominal value of shares issued, if any, is
accounted for in the Share Premium Account. Both Ordinary Share
Capital and Share Premium Account are classified as equity. Costs
incurred directly to the issue of shares are accounted for as a
deduction from Share Premium Account; otherwise such costs are
charged to the Statement of Comprehensive Income.
4.21 Operating Segments
An operating segment is a component of the Company that engages
in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Company's other components.
An operating segment's operating results are reviewed regularly
by Directors of the Company to assess performance and make
decisions about resource allocation.
The Board considers that the Company's activity constitutes
three operating and three reporting segments as defined under IFRS
8.
4.22 Related Parties
Parties are considered to be related if one party has the
ability (directly or indirectly) to control the other party or
exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered
related if they are subject to common control or common significant
influence. Related parties may be individuals or corporate
entities.
5. Critical Accounting Judgements, Estimates and Sources of Estimation Uncertainty
In applying the accounting policies, the Directors may at times
be required to make critical accounting judgements and estimates
about the carrying amount of assets and liabilities. These
estimates and assumptions, when made, are based on historical
experience and other factors that the Directors consider are
relevant.
The key estimates and assumptions concerning the future and
other key sources of estimation uncertainty at the end of the
financial year, that have significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year, are stated below.
Going Concern
Management apply their judgement in reviewing whether the Group
has adequate resources to continue in operational existence for the
foreseeable future, which is considered to be at least the next 12
months. The basis for this judgement is detailed in note 4.2.
Revenue Recognition
Management consider the nature of the Company's contracts with
clients and recognise revenue on an appropriate basis in accordance
with IFRS 15. This process involves the use of judgements and
estimates.
Development Costs Capitalised & Amortised
Management apply their judgement in determining whether an
identified intangible software asset meets the criteria for
capitalisation under IAS 38.
Development Costs capitalised into Intangible Assets are
amortised over management's estimate of the useful economic life of
the asset recognised.
Research and Development ('R&D') Tax Claim
The R&D Tax Claim is based on management's estimate of the
amount of development staff time expended on projects judged to be
dedicated to overcoming technological uncertainties in the cyber
security field.
6. Revenue and Segment Information
The Group's principal revenue is derived from the provision of
cyber security professional services.
During this period, the Directors received information on
financial performance on a divisional basis. The Directors consider
that there are three reportable operating segments: Consulting
(including Remote Support services), Managed Services, and Vendor
Products. There were a small number of other transactions recorded
during each period which are not considered to be part of either of
the three reportable operating segments. These are presented below
within the 'Other' caption and are not significant.
The Directors do not receive any information on the financial
position of each segment, including information on assets and
liabilities. Accordingly, such information has not been
presented.
The Group is not reliant on any single client, with no single
client accounting for 10% or more of revenue. All revenue
recognised is derived from external clients.
The Group's revenue and gross profit by operating segment for
the year ended 30 June 2018 were as follows:
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
Revenue
Consulting 1,557 1,144
Managed Services 765 505
Vendor Products 161 53
Re-chargeable Items 166 151
2,649 1,853
----------- -----------
Gross Profit
Consulting 886 642
Managed Services 314 225
Vendor Products 31 13
Re-chargeable Items (11) 13
1,220 893
----------- -----------
7. Other Income
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
Grant Income 79 45
----------- -----------
A credit has been recognised within Other Income as a result of
R&D Tax Credit surrenders. For the period ended 30 June 2018,
the surrender resulted in a credit of GBP79k, included within
Corporation Tax Recoverable.
8. Adjusted EBITDA
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
Adjusted Operating (Loss)/Profit (718) (1,657)
Depreciation 103 62
Amortisation 73 50
----------- -----------
Adjusted EBITDA (542) (1,545)
Exceptional Items (99) -
EBITDA (641) (1,545)
----------- -----------
9. Adjusted (Loss)/Profit before Taxation
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
(Loss)/Profit before Taxation (817) (1,657)
Exceptional Items 99 -
----------- -----------
Adjusted Profit before Taxation (718) (1,657)
----------- -----------
10. Taxation
Recognised in the Statement of Comprehensive Income
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
UK Corporation Tax - Prior Period
Adjustment - -
UK Corporation Tax - Current Tax
on Profit for the period - 5
Corporate Tax Charge/(Credit) - -
Deferred Tax Credit (22) (49)
----------- -----------
(22) (44)
----------- -----------
Reconciliation of Effective Tax Rate
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
Profit/(Loss) before Tax (817) (1,657)
----------- -----------
Tax at the UK Corporation Tax rate
of 19.5% / 19.0% (155) (309)
Expenses not deductible for tax
purposes 1 1
Income not taxable for tax purposes - (9)
Exercise of Share Options - -
Difference between current and
deferred tax rates - -
Over/under provision in prior period
- Corporation Tax - 5
Over/under provision in prior period
- Deferred Tax (22) (49)
Tax losses on which deferred tax
not recognised 154 317
(22) (44)
----------- -----------
Deferred Tax Assets & Liabilities
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
Deferred Tax Assets 134 105
Deferred Tax Liabilities (127) (105)
Deferred Tax - Net Liability 7 -
----------- -----------
Deferred Tax Assets of GBP134k are recognised in respect of
unutilised trading losses, Share Based
Payments and short-term timing differences. Deferred Tax
Liabilities of GBP127k arise on timing
differences in the carrying value of certain of the Company's
assets for financial reporting
purposes and for corporation tax purposes. These will reverse as
the fair value of the related
assets are depreciated over time. Deferred Tax balances have
been calculated at the rate of 17%,
being the rate of Corporation Tax rate expected to be in force
when the timing differences reverse.
10. Taxation (continued)
Unutilised Trading Losses
The Company continues to carry forward unutilised trading losses
of GBP4,324k (unutilised trading losses were
GBP3,831k as at 31 December 2017).
A Deferred Tax Asset of GBP102k has been recognised as at 30
June 2018
in respect of the unutilised trading losses. No further Deferred
Tax Asset has been recognised because the
Board envisages that a significant period of time will be
required to generate sufficient profits to utilise the
trading losses carried forward.
11. Earnings per Share
Basic Earnings per Share is calculated by dividing the Profit
for the period Attributable to Equity Holders of the Company by the
weighted average number of Ordinary Shares outstanding during the
period ('Basic Number of Ordinary Shares').
Diluted Earnings per Share is calculated by dividing the Profit
for the period attributable to Equity Holders of the Company by the
weighted average number of Ordinary Shares outstanding during the
period plus the weighted average number of Ordinary Shares that
would be issued on conversion of all the potential dilutive
Ordinary Shares ('Diluted Number of Ordinary Shares'), subject to
the effect of anti-dilutive potential shares being ignored in
accordance with IAS 33.
Adjusted Earnings per Share is calculated by dividing Adjusted
Profit (after adding-back exceptional costs incurred in the period;
see note 17) by Diluted Number of Ordinary Shares.
The calculation of Basic, Diluted and Adjusted Earnings per
Share is as follows
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
Net Profit attributable to Equity
Holders of the Company (795) (1,613)
Add back Exceptional Items - IPO
Costs 99 -
Adjusted Profit (696) (1,613)
----------- -----------
Number of Ordinary Shares ('000):
Initial weighted average 8,994 8,994
----------- -----------
Bonus Issue
Exercise of Share Options 14 -
Equity Warrant 90 -
Basic number of Ordinary Shares 9,098 8,994
Weighted average of dilutive shares
in period 328 156
----------- -----------
Diluted Number of Ordinary Shares 9,426 9,150
----------- -----------
Basic earnings per share (8.7) (17.9)
Diluted earnings per share* (8.4)* (17.6)*
Adjusted earnings per share (7.4) (17.6)
----------- -----------
* In accordance with IAS 33, the effect of anti-dilutive
potential shares has been ignored
On 28 October 2016, the Company passed a resolution to
consolidate the A and B Ordinary Shares of GBP1 each in issue into
a single class of shares. A resolution was then passed to split
each existing Ordinary Share of GBP1 each in issue into 100
Ordinary Shares with a nominal value of 1 pence each. The Company
then passed a resolution to issue 110 Ordinary Shares of 1 pence
each by way of a Bonus Issue pro rata to existing shareholders. In
accordance with IFRS this has been reflected in weighted average
number of Ordinary Shares above.
11. Earnings per Share (continued)
During the period ending 30 June 2018, Ordinary Shares were
issued as follows:
-- On 27 April 2018, David Mathewson, Non-Executive Chairman
exercised options over 6,411 Ordinary Shares in the Company at nil
cost per share.
-- On 02 May 2018, a former director exercised options of 8,041
Ordinary Shares in the Company at nil cost per share.
These issues were taken into account in calculating the Basic
Number of Ordinary Shares.
During the period ended 30 June 2018, the following dilutive
event occurred:
-- On 18 April 2018, the Company granted options over 200,000
Ordinary Shares to the Non-Executive Directors.
12. Intangible Assets
GROUP & COMPANY
Development Cost
GBP'000
Cost
As at 1 January 2017 567
Additions 75
As at 30 June 2017 642
----------
As at 1 July 2017 642
Additions 62
As at 31 December 2017 704
----------
As at 1 January 2018 704
Additions 80
----------
As at 30 June 2018 784
----------
Amortisation
As at 1 January 2017 204
Amortisation Charge for the
6 months 50
As at 30 June 2017 254
----------
As at 1 July 2017 254
Amortisation Charge for the
6 months 50
As at 31 December 2017 304
----------
As at 1 January 2018 304
Amortisation Charge for the
6 months 73
----------
As at 30 June 2018 377
----------
Net Book Value
----------
As at 30 June 2017 388
==========
As at 31 December 2017 400
==========
As at 30 June 2018 407
==========
13. Trade Receivables and Other Receivables
GROUP GROUP COMPANY COMPANY
as at as at as at as at
30 June 30 June 30 June 30 June
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Trade Receivables 946 885 946 885
Other Receivables 8 8 8 8
Intercompany Receivables - - 98 -
Prepayments and Accrued Income 190 101 161 101
1,144 994 1,213 994
---------- ---------- ---------- ----------
The carrying amount of Trade Receivables and Other receivables
approximates to their fair value.
Intercompany Receivables represent loans provided by ECSC Group
plc to ECSC Australia Pty Ltd. The loans are repayable on
demand.
14. Cash & Cash Equivalents
GROUP GROUP COMPANY COMPANY
as at as at as at as at
30 June 30 June 30 June 30 June
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Cash & Cash Equivalents 1,000 3,128 999 3,128
---------- ---------- ---------- ----------
15. Trade Payables and Other Payables
GROUP GROUP COMPANY COMPANY
As at As at As at As at
30 June 30 June 30 June 30 June
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Trade Payables 276 204 272 204
Other Taxation and Social Security 348 256 346 256
Accruals 242 238 242 238
Deferred Income 894 502 894 502
Intercompany Payables - - 41 -
Other Payables 40 16 36 16
1,800 1,216 1,831 1,216
--------- --------- --------- ---------
The carrying amount of trade and other payables approximates to
their fair value due to their short term nature.
16. Finance Leases
The Group entered into a Finance Lease in November 2017 to fund
investment in IT equipment. Capital repayments under the Finance
Lease are as follows:
GROUP GROUP COMPANY COMPANY
As at As at As at As at
30 June 30 June 30 June 30 June
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Payable in one year or less 20 - 20 -
Payable between one and two
years 20 - 20 -
Payable between two and five
years 11 - 11 -
Payable in five years or more - - - -
Finance Lease Balance 51 - 51 -
--------- --------- --------- ---------
Group & Company
Capital Interest Total
Payable in one year or less 20 1 21
Payable between one and two years 20 1 21
Payable between two and five years 11 - 11
Payable in five years or more - - -
Finance Lease Balance 51 2 53
-------- --------- ------
There have been no cash flows arising from changes in
liabilities from financing activities
17. Exceptional Costs
During the period ended 30 June 2018, the Company undertook a
restructuring exercise to reduce its operating costs and mitigate
its monthly operating losses. Cost savings were achieved by
reducing headcount in a number of departments and by reducing
overhead costs.
Exceptional Costs are analysed as follows:
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
Staff Related Costs 88 -
Car Termination Costs 11 -
Exceptional Costs 99 -
----------- -----------
18. Subsidiary Undertakings
ECSC Group plc currently has the following wholly-owned
subsidiaries, which are incorporated and registered in England and
Wales:
Name of Subsidiary Registered Office Date of Incorporation Principal Activity
ECSC Services 28 Campus Road 18 April 2017 Dormant
Limited Listerhills Science
Park
Bradford
BD7 1HR
ECSC Labs Limited 28 Campus Road 18 April 2017 Dormant
Listerhills Science
Park
Bradford
BD7 1HR
ECSC Australia 28 Campus Road 29 September 2016 Intermediary holding
Limited Listerhills Science company
Park
Bradford
BD7 1HR
ECSC Australia Limited currently has the following wholly-owned
subsidiary, which is incorporated and registered in Australia:
Name of Subsidiary Registered Office Date of Incorporation Principal Activity
ECSC Australia Governor Phillip 20 March 2017 Provision of professional
Pty Limited Tower Level 36 cyber security
1 Farrer Place services
Sydney
NSW 2000
The share capital of each Group entity is as follows:
Entity Ordinary Shares Nominal Value Investment at
in Issue Cost
ECSC Services 1 share GBP1 GBP1
Limited
ECSC Labs Limited 1 share GBP1 GBP1
ECSC Australia 1 share GBP1 GBP1
Limited
ECSC Australia 100 shares AUD 1 AUD 100
Pty Limited
Total GBP60
* AUD = Australian dollars
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 URSWRWRAKAAR
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