TIDMSWG
RNS Number : 7162Z
Shearwater Group PLC
19 December 2017
19 December 2017
SHEARWATER GROUP PLC
("Shearwater" or the "Company" and, together with its
subsidiaries, the "Group")
Interim Results for the six months ended 30 September 2017
Shearwater Group plc (AIM: SWG), the digital resilience group,
is pleased to announce its unaudited interim results for the six
months ended 30 September 2017.
The unaudited interim results of the Group reflect approximately
4.7 months of trading from SecurEnvoy (acquired in May 2017) and
2.2 months of trading from Newable Consulting (acquired in July
2017 and rebranded Xcina Consulting). Trading in both businesses
continues to be in line with the Board's expectations and since
acquisition have generated in aggregate GBP2.1 million of revenue
and contributed GBP0.9 million of underlying EBITDA to the Group in
the period.
Strategic and operational highlights
-- Completed the acquisitions of SecurEnvoy in May 2017 and
Newable Consulting in July 2017, subsequently rebranded Xcina
Consulting
-- Launched Xcina, the Group's new information security and
assurance business
-- First B-2-C multifactor authentication ("MFA") contract won
by SecurEnvoy under its expanded growth strategy
-- 13 new corporate customers won by Xcina Consulting since
acquisition
-- Development and rollout of SecurEnvoy's Version 9 update to
their industry leading MFA solution, SecurAccess
Financial highlights
-- Group revenue of GBP2.1 million (2016: GBPnil)
-- Cash balance of GBP3.7 million (2016: GBP0.3 million)
David Williams, Chairman of Shearwater Group commented: "These
are our first set of results since welcoming SecurEnvoy and Newable
Consulting to the Group. Trading in both businesses continues to be
in line with our expectations and we are investing in these
portfolio businesses to make the most of the considerable
opportunities we are seeing within their respective markets.
"Much has been achieved during the period under review, but we
have barely scratched the surface. The digital resilience sector
offers considerable growth potential and we are fortunate to have
an industry leading team in place to capitalise on this
potential.
"It is my firm belief that 2018 will be a particularly exciting
one for us and that our loyal shareholders will be rewarded as our
ambitious plans evolve and further deals in line with our growth
strategy are secured."
Enquires:
Shearwater Group plc www.theshearwatergroup.co.uk
David Williams +44 (0) 797 014 8016
Michael (Mo) Stevens +44 (0) 780 171 2582
Cenkos Securities plc - NOMAD
and Broker
Bobbie Hilliam - NOMAD
Julian Morse / Alex Aylen - Sales +44 (0) 20 7397 8900
WH Ireland Limited - Financial www.whirelandcb.com
Advisor +44 (0) 117 945 3470
Mike Coe
Ed Allsopp
Powerscourt - Financial PR shearwater@powerscourt-group.com
Ben Griffiths, Andy Jones +44 (0) 20 7250 1446
+44 (0) 77 5346 4637
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
Notes for Editors
A copy of this announcement has been posted on the Company's
website at www.theshearwatergroup.co.uk.
This announcement includes "forward-looking statements" which
include all statements other than statements of historical facts,
including, without limitation, those regarding the Group's
financial position, business strategy, plans and objectives of
management for future operations, and any statements preceded by,
followed by or that include forward-looking terminology such as the
words "targets", "believes", "estimates", "expects", "aims",
"intends", "will", "can", "may", "anticipates", "would", "should",
"could" or similar expressions or the negative thereof. Such
forward-looking statements involve known and unknown risks,
uncertainties and other important factors beyond the Group's
control that could cause the actual results, performance or
achievements of the Group to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements are
based on numerous assumptions regarding the Group's present and
future business strategies and the environment in which the Group
will operate in the future. These forward-looking statements speak
only as at the date of this announcement. The Group expressly
disclaims any obligation or undertaking to disseminate any updates
or revisions to any forward-looking statements contained in this
announcement to reflect any change in the Group's expectations with
regard thereto or any change in events, conditions or circumstances
on which any such statements are based. As a result of these
factors, readers are cautioned not to rely on any forward-looking
statement.
Group Chief Executive Officer's Review
Strategic and operational review
Since the start of the new financial year, the Group has made
excellent progress identifying and securing two acquisitions, and
launching a new Shearwater portfolio company under our long term
strategy of building a leading UK based digital resilience
group.
Through the acquisition of SecurEnvoy in May 2017, the Group has
established its position within the Identity and Access Management
("IAM") sector, from which we are supporting the growth of the
business through investing in new sales capability and expanding
the service offering from MFA into wider IAM solutions. The
establishment of our European and US offices has enabled us to
attract key talent in the region, and will provide an ideal
platform to support our international growth plans for the
business.
Since acquisition, SecurEnvoy has also successfully broadened
its existing MFA offering into the B-2-C market, winning its
inaugural B-2-C contract in the post period end. This contract
award has demonstrated the universal application of the business'
MFA software and further emphasises how the criticality of
authenticating a user is moving beyond the enterprise to mainstream
consumer applications.
In July 2017, the Group acquired the business and assets of
Newable Consulting (rebranded Xcina Consulting). Through this
acquisition, the Group has been able to accelerate the development
of its newly launched information security and assurance company,
Xcina. During the period and post period end, Xcina Consulting has
benefited from Group investment to support the growth of its
consultant base by 29% and has won 13 new clients, reflecting the
increasing demand for its assurance and advisory services. In
October 2017, Xcina also launched its City of London based Security
Operations Centre ("SOC") managed service offering.
Through a combination of acquisition and organic growth, Xcina
as a business now has a full-service information security solutions
capability covering risk, technology assurance and advisory
services alongside SOC services, data analytics, threat
intelligence and incident response. We believe it is well
positioned to capture market opportunities as companies prepare
themselves for the increasing legislative and regulatory demands on
how data is held and processed, and the ongoing monitoring,
analysis, detection and response to cyber threats.
Over the second half of the year, we will build on the good
momentum across the Group by continuing to invest in our portfolio
companies in order to meet customer demand, and organically develop
capabilities where it is appropriate to do so, and where it can
provide an enhanced return for our shareholders.
Alongside this, we will continue to seek out those acquisition
opportunities where we believe we can add value through active
management and capital investment, and that once secured, will
provide the Group with additional scale and / or incremental
capability, helping to broaden the Group's portfolio of digital
resilience solutions and offering to our customers.
As the first interim results since the launch of our new digital
resilience strategy, we are pleased with how our portfolio
companies have performed since acquisition. Whilst we are yet to
see a full six months of trading from either business reflected in
our financial results, both SecurEnvoy and Xcina Consulting are
progressing well, and we look forward to seeing the benefits of our
continued investment over the coming reporting periods.
Cash management and cost control continue to be key priorities
across the Group and over the period, in addition to considered
investments into our portfolio companies to support growth, we have
also invested in key talent and established an appropriate
Group-wide infrastructure to underpin the expected advancement of
the business.
Market review
The outlook for the information security and cyber security
sectors continues to be positive with considerable growth being
driven by a number of trends which show no signs of abating. The
rapidly growing interconnectivity of enterprises, functions, people
and devices, mean organisations are facing unprecedented pressure
to evolve their business models so that they can digitally engage
with all stakeholders, whilst managing and protecting their
critical data and information assets. All of this at a time when
attack vectors are increasing, and the sophistication of threats
continues to challenge the capability and capacity to respond.
The constant evolution of cybercrime and the mainstream
awareness of high profile data breaches has helped drive a change
in the regulatory environment. This is set to further substantially
alter with the implementation of the General Data Protection
Regulation on 25 May 2018, which will compel organisations of all
sizes to rethink how they process and handle personal and sensitive
data, or risk substantial fines for non-compliance.
Through the Group's portfolio companies, we believe we are well
positioned to address the digital resilience issues faced by our
current and prospective customers. The information security and
cyber security sectors are however complex and dynamic
environments, which often require flexible and adaptable solutions
in order to protect an organisation as opposed to a "one size fits
all" approach.
For Shearwater, our strategy of building a broad portfolio of
select information security and cyber security assets means we can
meet the ever-increasing digital resilience demands from our
customers, whilst providing our investors with exposure to a large
and rapidly growing sector through a portfolio approach, which aims
to balance risk and return in a highly dynamic and unpredictable
operating environment.
Current trading and outlook
Since 30 September 2017, trading has continued in line with the
Board's expectations, and we are encouraged by the progress both
businesses are making as part of the Group.
As a result of this, and combined with the investment in the
Group infrastructure made in the period, the Board believes the
outlook for the Group for the second half of the financial year is
positive as focus turns to securing further acquisition
opportunities in line with our stated strategy of building a
leading UK based digital resilience group.
Financial Review
Revenue
Group revenue generated in the period of GBP2.1 million (2016:
GBPnil) reflecting 4.7 months of trading from SecurEnvoy and 2.2
months of trading from Newable Consulting (rebranded Xcina
Consulting) since acquisition respectively. Of the GBP2.1 million
of Group revenue, 74.8% (2016: GBPnil) was generated through
licencing of the Group's owned software products and 25.2% (2016:
GBPnil) through the provision of services.
Underlying EBITDA and Operating Loss
Portfolio companies contributed GBP0.9 million of underlying
EBITDA during the period (2016: GBPnil).
The Group generated an underlying EBITDA loss of GBP0.1 million
for the period (2016: underlying EBITDA loss of GBP0.1 million),
reflecting the cost of the Group's overhead, investments made in
establishing the Group's infrastructure and the launch of
Xcina.
After exceptional costs of GBP0.9 million (2016: GBPnil),
amortisation of acquired intangible assets, depreciation and
share-based payments charge, the Group made an operating loss of
GBP1.5 million (2016: operating loss of GBP0.1 million). Of the
GBP0.9 million of exceptional items, GBP0.7 million related to the
acquisition of SecurEnvoy, GBP0.1 million related to the
acquisition of the business and assets of Newable Consulting, with
the remaining GBP0.1 million of costs incurred as a result of other
potential acquisition opportunities.
Financial position
At the period end, Group cash was GBP3.7 million (2016: GBP0.3
million) reflecting strong cash generation at SecurEnvoy and the
residual net proceeds from the equity issuances made during the
period offsetting Group administrative costs, investments made in
portfolio company growth initiatives, and the costs incurred as a
result of the creation and development of Xcina.
Cash management continues to be a priority for the Group and
actual expenditure compared to budget is monitored closely to
ensure that the Group maintains adequate liquidity to meet
financial commitments as they arise.
Michael (Mo) Stevens
Group Chief Executive Officer
Consolidated statement of comprehensive income
Six month period Year ended
ended 30 September 31 March
2017 2016 2017
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
Revenue 5 2,068 - -
Cost of sales (620) - -
Gross profit 1,448 - -
Administrative expenses (2,957) (96) (1,585)
Operating loss (1,509) (96) (1,585)
Finance income 53 - 1
Finance costs (1) - -
---------- ------------ -----------
Loss before tax (1,457) (96) (1,584)
Income tax (106) - -
---------- ------------ -----------
Loss for the period (1,563) (96) (1,584)
Attributable to equity holders of
the Company (1,563) (96) (1,584)
---------- ------------ -----------
Operating loss analysed as:
Underlying EBITDA (112) (96) (1,076)
Amortisation of acquired intangibles 10 (322) - -
Depreciation (4) - (1)
Share-based payments (180) - (79)
Exceptional items 6 (891) - (429)
Operating loss (1,509) (96) (1,585)
---------------------------------------------- ----- ---------- ------------ -----------
Other comprehensive income
Items that may be reclassified to
profit or loss:
Change in fair value of available-for-sale
assets (38) 34 76
---------- ------------ -----------
Total comprehensive loss for the
year (1,601) (62) (1,508)
========== ============ ===========
Attributable to equity holders of
the Company (1,601) (62) (1,508)
Loss per share
Basic and diluted (pence per share) 7 (0.18) (0.06) (0.54)
========== ============ ===========
Consolidated statement of financial position
30 September 31 March
2017 2016 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Assets Note
Non-current assets
Intangible assets 10 21,619 936 935
Property, plant and equipment 52 - 1
Available for sale financial assets 80 76 118
--------- ------------ ----------
Total non-current assets 21,751 1,012 1,054
--------- ------------ ----------
Current assets
Trade and other receivables 1,175 19 86
Cash and cash equivalents 3,708 289 7,073
--------- ------------ ----------
Total current assets 4,883 308 7,159
--------- ------------ ----------
Total assets 26,634 1,320 8,213
========= ============ ==========
Liabilities
Current liabilities
Trade and other payables 1,476 55 737
Convertible loan - 150 -
--------- ------------ ----------
Total current liabilities 1,476 205 737
--------- ------------ ----------
Non-current liabilities
Deferred tax 1,846 - -
--------- ------------ ----------
Total non-current liabilities 1,846 - -
--------- ------------ ----------
Total liabilities 3,322 205 737
========= ============ ==========
Net assets 23,312 1,115 7,476
Capital and reserves
Share capital 9,649 1,744 5,353
Shares to be issued - 245 -
Share premium 28,918 11,593 15,957
Available for sale reserve 65 61 103
Other reserves 219 - 39
Retained deficit (15,539) (12,528) (13,976)
--------- ------------ ----------
Equity attributable to owners of
the Company 23,312 1,115 7,476
Total equity and liabilities 26,634 1,320 8,213
========= ============ ==========
Consolidated statement of changes in equity
Share Shares Share premium Available Share Retained Total
capital to be for sale based deficit
issued reserve payment
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2017 5,353 - 15,957 103 39 (13,976) 7,476
-------- ------- ------------- --------- -------- -------- -------
Loss for the
year - - - - (1,563) (1,563)
Other comprehensive
loss for the
period - - - (38) - - (38)
-------- ------- ------------- --------- -------- -------- -------
Total comprehensive
loss for the
period - - - (38) - - (1,601)
-------- ------- ------------- --------- -------- -------- -------
Transactions with owners of the Company:
Issue of shares
net of issue
costs 4,296 - 12,961 - - - 17,257
Share based
payments - - - - 180 - 180
-------- ------- ------------- --------- -------- -------- -------
At 30 September
2017 9,649 - 28,918 65 219 (15,539) 23,312
======== ======= ============= ========= ======== ======== =======
At 1 April 2016 1,719 - 11,593 27 - (12,432) 907
-------- ------- ------------- --------- -------- -------- -------
Loss for the
year (96) (96)
Other comprehensive
income for the
period - - - 34 - - 34
Total comprehensive
income for the
period - - - 34 - (96) (62)
-------- ------- ------------- --------- -------- -------- -------
Transactions with owners
of the Company:
Issue of shares
net of issue
costs 25 - - - - - 25
Shares to be
issued - 245 - - - - 245
-------- ------- ------------- --------- -------- -------- -------
At 30 September
2016 1,744 245 11,593 61 - (12,528) 1,115
======== ======= ============= ========= ======== ======== =======
Consolidated statement of cash flows
Six month period Year ended
ended 30 September 31 March
2017 2016 2017
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
Cash flows from operating activities
Loss for the period (1,563) (96) (1,584)
Adjustments for:
Depreciation of property, plant
and equipment 4 - 1
Amortisation of acquired intangibles 10 322 - -
Finance income - - (1)
Finance expense 1 - -
Share based payments charge 180 - 79
Income tax 106
Cash flow from operating activities
before changes in working capital (950) (96) (1,505)
(Increase) in trade and other receivables (638) (8) (75)
(Decrease)/increase in trade and
other payables (370) (12) 670
----------- ------------ -----------
Cash used in operations (1,958) (116) (910)
Net foreign exchange movements (7) - -
Net cash used in operating activities (1,965) (116) (910)
----------- ------------ -----------
Investing activities
Acquisition of subsidiaries, net (9,839) - -
of cash acquired
Purchases of property, plant and
equipment (39) - (2)
Interest received - - 1
Gold exploration payments (17) (10) (9)
----------- ------------ -----------
Net cash used in investing activities (9,895) (10) (10)
----------- ------------ -----------
Financing activities
Proceeds from issue of share capital 9,020 25 8,084
Expenses paid in connection with
share issues (530) - (236)
Proceeds in respect of shares to - 245 -
be issued
Proceeds from convertible loan - 100 100
Net cash generated by financing
activities 8,490 370 7,948
----------- ------------ -----------
Net (decrease)/increase in cash
and cash equivalents (3,370) 244 7,028
----------- ------------ -----------
Foreign exchange movement on cash and 5 - -
cash equivalents
Cash and cash equivalents at the
beginning of the period 7,073 45 45
----------- ------------ -----------
Cash and cash equivalents at the
end of the period 3,708 289 7,073
=========== ============ ===========
Notes
1. General information
The interim consolidated financial information was authorised by
the board of directors for issue on 19 December 2017. The
information for the six month period ended 30 September 2017 has
not been audited and does not constitute statutory accounts as
defined in section 434 of the Companies Act 2006, and should
therefore be read in conjunction with the audited financial
statements of the Company and its subsidiaries for the year ended
31 March 2017, which have been prepared in accordance with EU
Adopted International Financial Reporting Standards. The interim
consolidated financial information does not comply with IAS 34
Interim Financial Reporting, as permissible under the rules of
AIM.
2. Basis of accounting
Basis of preparation
These interim consolidated financial statements have been
prepared under the historical cost convention and in accordance
with the recognition and measurement principles of European Union
Adopted International Financial Reporting Standards (IFRSs).
The accounting policies adopted in the preparation of the
interim consolidated financial statements are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 31 March 2017. Incremental accounting
policies that relate specifically to subsidiaries acquired during
the six month period ended 30 September 2017 not previously
disclosed have been outlined below.
There have been no significant changes to estimates of amounts
reported in prior financial years.
Reporting currency
The consolidated financial statements are presented in pounds
sterling (GBP). This is the Group's functional currency, and is the
currency of the primary economic environment in which it operates.
All values are rounded to the nearest thousand pounds (GBP'000)
unless otherwise stated.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing these interim consolidated financial statements.
3. Significant accounting policies
Basis of consolidation
The interim consolidated financial statements consolidate those
of the parent Company and all of its subsidiaries at 30 September
2017.
All transactions and balances between Group companies are
eliminated on consolidation. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to
ensure consistency with the accounting policies adopted by the
Group.
Profit or loss and other comprehensive income of subsidiaries
acquired or disposed of during the period are recognised from the
effective date of acquisition, or up to the effective date of
disposal, as applicable.
Use of additional performance measures
The Group presents underlying EBITDA information which is used
by the directors for internal performance analysis and may not be
comparable with similarly titled measures reported by other
companies. The term "underlying EBITDA" refers to operating profit
or loss excluding amortisation of intangibles, depreciation and
impairment, share-based payments charge, exceptional items, income
tax expense, finance income and finance expenses.
Exceptional items
Exceptional items are those that in the judgement of the
directors need to be disclosed by virtue of their size, nature or
incidence, in order to draw the attention of the reader and to show
the underlying business performance of the Group more accurately.
Such items are included within the income statement caption to
which they relate, and are separately disclosed either in the notes
to the interim consolidated financial statements or on the face of
the consolidated income statement.
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable from the licensing of software and for the provision
of services to customers in the ordinary course of the Group's
activities. Revenue is shown exclusive of VAT, discounts and after
eliminating intra-group sales.
Revenue from software licences
The Group recognises revenue from the licencing of software when
all the following conditions are satisfied:
-- all licencing obligations have been performed;
-- the rights to use the software has been assigned in exchange
for a fixed fee;
-- the Group retains no continuing managerial rights to use the
software; and
-- the contract is non-cancellable.
Revenue from after-sales support services related to the
licencing of software is recognised rateably over the term of the
contract on a straight-line basis.
Revenue for the provision of services
The Group recognises revenue from the provision of services when
all the following conditions are satisfied:
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
transaction will flow to the entity;
-- the stage of completion of the transaction at the end of the
reporting period can be measured reliably; and
-- the costs incurred for the transaction and the costs to
complete the transaction can be measured reliably.
Revenue recognised in the income statement but not yet invoiced
is held on the statement of financial position sheet within accrued
income. Revenue invoiced but not yet recognised in the income
statement is held on the statement of financial position within
deferred revenue.
Foreign currencies
At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
For the purpose of presenting the Group's interim financial
information, income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rates
at the date of transactions are used. Exchange differences arising,
if any, are recognised in other comprehensive income and
accumulated in equity (attributed to non-controlling interests as
appropriate).
Business combinations and goodwill
Business combinations are accounted for using the acquisition
accounting method. This involves recognising identifiable assets
(including previously unrecognised intangible assets) and
liabilities of the acquired business at fair value. Any excess of
the cost of the business combination over the Group's interest in
the net fair value of the identifiable assets and liabilities is
recognised in the consolidated statement of financial position as
goodwill and is not amortised. To the extent that the net fair
value of the acquired entity's identifiable assets and liabilities
is greater than the cost of the investment, a gain is recognised
immediately in the consolidated statement of profit or loss.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment at least annually and whenever events or
changes in circumstances indicate that the carrying value may be
impaired. Goodwill assets considered significant in comparison to
the Company's total carrying amount of such assets have been
allocated to cash-generating units or groups of cash-generating
units. Where the recoverable amount of the cash-generating unit is
less than its carrying amount including goodwill, an impairment
loss is recognised in the consolidated statement of profit or
loss.
Intangible assets
Intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets
acquired as part of a business combination are recognised outside
goodwill if the assets are separable or arises from contractual or
other legal rights and their fair value can be measured reliably.
Expenditure on internally developed intangible assets is taken to
the consolidated income statement in the period in which it is
incurred to the extent that the expenditure does not qualify for
capitalisation under research and development costs.
Intangible assets with a finite life have no residual value and
are amortised over their expected useful lives as follows:
Customer relationships 1-15 years straight line basis
Software 10 years straight line basis
The amortisation expense on intangible assets with finite lives
is recognised in the interim consolidated income statement within
administrative expenses. The amortisation period and the
amortisation method for intangible assets with finite useful lives
are reviewed at least annually.
The carrying value of intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and accumulated impairment losses. Cost comprises the
aggregate amount paid and the fair value of any other consideration
given to acquire the asset and includes costs directly attributable
to making the asset capable of operating as intended. The Group has
held no land and buildings during the reporting period.
Depreciation is provided to write off the cost less the
estimated residual values of all property, plant and equipment over
their estimated useful life as follows:
Plant and machinery 33 per cent. reducing balance
Office equipment 25 per cent. straight line basis
The carrying values of property, plant and equipment are
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable and are written
down immediately to their recoverable amount.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
de-recognition of the asset is included in the consolidated income
statement in the period of de-recognition.
The residual values, useful lives and methods of depreciation of
the assets are reviewed, and adjusted if appropriate, at each
financial year end.
4. Critical accounting judgements and key sources of estimation uncertainty
The preparation of historical financial information requires the
directors to make estimates and assumptions that affect the amounts
reported for assets and liabilities as at the reporting date and
the amounts reported for revenues and expenses during the period.
The nature of estimation means that actual outcomes could differ
from those estimates.
In preparing these interim financial statements, the significant
judgements and key sources of estimation uncertainty were the same
as those applied to the consolidated financial statements for the
year ended 31 March 2017 with the addition of the items noted
below.
Revenue recognition
In making this judgement, the directors considered the detailed
criteria for the recognition of revenue set out in IAS 18 Revenue.
In particular, a judgement is made as to the extent of deferred
revenue which relates to after-sales support services.
Classification of exceptional items and presentation of
additional performance measures
The directors exercise their judgement in the classification of
certain items as exceptional and outside of the Group's underlying
results. The determination of whether an item should be separately
disclosed as an exceptional item or other adjustment requires
judgement on its materiality, nature and incidence, as well as
whether it provides clarity on the Group's underlying trading
performance. In exercising this judgement, directors take
appropriate regard of IAS 1 Presentation of Financial Statements'
as well as guidance issued by the Financial Reporting Council and
the European Securities and Market Authority on the reporting of
exceptional items and alternative performance measures. The overall
goal of the directors is to present the Group's underlying
performance without distortion from one-off or nontrading events
regardless of whether they be favourable or unfavourable to the
underlying result. Further details of the exceptional items are set
out in note 6.
Business combinations
Directors are required to make an assessment of the intangible
assets to be recognised as a result of business combinations.
Furthermore, directors are required to make an assessment as to
whether the intangible assets are separable and their fair values
as at the time of acquisition. This is based on certain assumptions
including the expected future cash flows arising from use of the
intangibles, discount rates and estimated economic lives of the
intangibles.
5. Segment information
Operating segments
For internal reporting and management purposes, the Group is
organised into two reportable segments based on the types of
products and services from which each segment derives its revenue -
software and services. The Group's operating segments are
identified on the basis of internal reports that are regularly
reviewed by the chief operating decision maker in order to allocate
resources to the segment and to assess its performance. The Group
Chief Executive Officer has been identified as the chief operating
decision maker.
Segment information for the six months ended 30 September 2017
is presented below and excludes intersegment revenue as they are
not material, and assets as the directors do not review assets and
liabilities on a segmental basis.
Unaudited Software Services Total
GBP'000 GBP'000 GBP'000
Revenue 1,546 522 2,068
Segment underlying EBITDA 976 (114) 862
Group costs (974)
Underlying EBITDA (112)
Amortisation of acquired intangibles (322)
Depreciation (4)
Share-based payments (180)
Exceptional items (891)
Operating loss (1,509)
6. Exceptional items
Exceptional items are those that in the judgment of the
directors need to be disclosed by virtue of their size, nature or
incidence, in order to draw the attention of the reader and to show
the underlying business performance of the Group more accurately.
Such items are included within the income statement caption to
which they relate and are separately disclosed on the face of the
consolidated income statement within administration expenses.
During the six months to 30 September 2017, GBP699,000 relating
to the acquisition of SecurEnvoy and GBP124,000 relating to the
acquisition of the business and assets of Newable Consulting were
charged to the interim consolidated income statement. Further, the
Company incurred costs of GBP68,000 relating to diligence on other
potential acquisition opportunities. This resulted in total
exceptional items of GBP891,000.
7. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to the ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
For diluted loss per share, the weighted average number of
shares in issue is adjusted to assume conversion of all the
potential dilutive ordinary shares. The potential dilutive shares
are anti-dilutive for the six months ended 30 September 2017 and
the six months ended 30 September 2016 as the Group is loss
making.
At the reporting date, there were 11,828,882 (2016: zero)
potentially dilutive ordinary shares. Dilutive potential ordinary
shares relate to share options.
The calculation of the basic and diluted earnings per share from
total operations attributable to shareholders is based on the
following data:
Six month period Year ended
ended 30 September 31 March
2017 2016 2017
unaudited unaudited audited
Net loss from total operations GBP'000 GBP'000 GBP'000
Earnings for the purposes of basic
and diluted earnings per share being
net loss attributable to shareholders (1,563) (96) (1,584)
=========== =========== ===========
Number of shares No No No
Weighted average number of ordinary shares
for the purposes of basic and diluted earnings
per share 871,346,679 172,770,616 291,850,286
=========== =========== ===========
Earnings per share Pence Pence Pence
Basic and diluted (0.18) (0.06) (0.54)
=========== =========== ===========
8. Share capital of the Company
Allotted, issued Six month period Year ended
and fully paid ordinary ended 30 September 31 March
shares
2017 2017 2016 2016 2017 2017
Number GBP'000 Number GBP'000 Number GBP'000
Ordinary shares of
GBP0.01 each 964,359,200 9,644 293,850,286 2,939 535,250,286 5,353
=========== ======= =========== ======= =========== =======
Share capital
The following issues of shares were undertaken in the six month
period ended 30 September 2017:
On 9 May 2017, 200,000,000 new ordinary shares of 1p were issued
to new and existing investors at a placing price of GBP0.04 per
share raising gross cash proceeds of GBP8.0 million. In addition, a
further 25,488,108 new ordinary shares of 1p were issued to
existing shareholders by way of an open offer at a price of GBP0.04
per share raising gross cash proceeds of GBP1.0 million. The GBP9.0
million aggregated gross cash proceeds were used to part satisfy
the GBP9.4 million of net cash consideration paid to the
shareholders of SecurEnvoy, which was acquired by the Group on 9
May 2017.
On the same day, a further 200,000,000 new ordinary shares of 1p
were issued to the shareholders of SecurEnvoy at a price of GBP0.05
per share to satisfy the share consideration as part of the
acquisition.
On 26 July 2017, 3,620,806 new ordinary shares of 1p were issued
to Newable Consulting Limited at a placing price of GBP0.04143 per
share. The ordinary shares were subscribed for to satisfy the share
consideration paid to Newable Consulting for the acquisition of its
business and assets by the Group.
9. Business combinations
SecurEnvoy
On 9 May 2017, the Group acquired 100% of the issued share
capital of SecurEnvoy Limited ("SecurEnvoy") for a total
consideration of GBP19.6 million (after customary adjustments),
comprising GBP11.0 million gross cash consideration and GBP8.6
million share consideration. For accounting purposes, the fair
value of the ordinary shares issued in the Company was based on
200,000,000 ordinary shares at the closing share price on the date
of completion. This purchase was accounted for as an
acquisition.
SecurEnvoy is a leading MFA software company headquartered in
the UK with operations in the US, Europe and Australia, and
established the Company's presence within the large and growing IAM
sector.
The following table summarises the fair values of the assets
acquired, the liabilities assumed and the total consideration
transferred as part of this acquisition:
Unaudited Fair value
GBP'000
Goodwill 10,695
Other intangible assets 9,592
Property, plant and equipment 16
Trade and other receivables 452
Cash and cash equivalents 1,627
Trade and other payables (941)
Deferred tax liabilities (1,825)
----------
Net assets acquired 19,616
==========
Satisfied by:
Cash 11,016
Shares in Shearwater Group plc 8,600
----------
Total consideration transferred 19,616
==========
The net cash outflow arising from the acquisition was GBP9.4
million in the six months ended 30 September 2017, comprising cash
consideration of GBP11.0 million less cash and cash equivalents
acquired of GBP1.6 million.
Acquisition related costs amounted to GBP1.2 million; of this
GBP0.5 million related to the issuance of new equity and has been
charged to the share premium account, and GBP0.7 million has been
charged to the interim consolidated income statement for the six
month period to 30 September 2017 within exceptional items.
SecurEnvoy contributed GBP1.5 million to the Group's revenue and
underlying EBITDA of GBP1.0 million for the period from the date of
the acquisition to 30 September 2017.
Newable Consulting
On 26 July 2017, the Group acquired the business and assets of
Newable Consulting ("Newable Consulting") for an initial
consideration of GBP0.6 million. As part of the transaction,
Newable Consulting agreed to subscribe for 3,620,806 new ordinary
shares at GBP0.04143 per share. Subject to the future financial
performance of Newable Consulting, a further payment of up to
GBP0.1 million will be made to Newable Consulting, which if made,
will be settled through the issuance of new ordinary shares. On
acquisition, Newable Consulting was rebranded Xcina Consulting and
formed a core component of the Company's new information and
assurance company, Xcina.
Unaudited Fair value
GBP'000
Goodwill 590
Other intangible assets 111
Deferred tax liabilities (21)
----------
Net assets acquired 680
==========
Satisfied by:
Cash 450
Shares in Shearwater Group plc 163
Contingent consideration 67
----------
Total consideration transferred 680
==========
The net cash outflow arising from the acquisition was GBP0.4
million in the six months ended 30 September 2017, comprising cash
consideration of GBP0.6 million less cash received for the
subscription of shares of GBP0.2 million.
Acquisition related costs amounted to GBP0.1 million which have
been charged to the interim consolidated income statement for the
six month period to 30 September 2017 within exceptional items.
Xcina Consulting contributed GBP0.5 million to the Group's
revenue and GBP0.1 million of underlying EBITDA loss for the period
from the date of the acquisition to 30 September 2017.
10. Intangible assets
Goodwill Customer Software Gold exploration Total
relations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2016 - - - 926 926
Additions - - - 10 10
--------- ----------- --------- ----------------- --------
At 30 September
2016 - - - 936 936
--------- ----------- --------- ----------------- --------
At 1 April 2017 - - - 936 936
Recognised upon
acquisition 11,285 6,101 3,602 - 20,988
Additions - - - 17 17
--------- ----------- --------- ----------------- --------
At 30 September
2017 11,285 6,101 3,602 953 21,941
--------- ----------- --------- ----------------- --------
Accumulated amortisation and
impairment losses
At 1 April 2016 - - - - -
Charge for the period - - - - -
--------- ----------- --------- ----------------- --------
At 30 September - - - - -
2016
--------- ----------- --------- ----------------- --------
At 1 April 2017 - - - - -
Charge for the period - 179 143 - 322
--------- ----------- --------- ----------------- --------
At 30 September
2017 - 179 143 - 322
--------- ----------- --------- ----------------- --------
Carrying amount
At 30 September
2017 11,285 5,922 3,459 953 21,619
========= =========== ========= ================= ========
At 30 September
2016 - - - 936 936
========= =========== ========= ================= ========
11. Related party transactions
On 9 May 2017, David Williams, Michael (Mo) Stevens, Robin
Southwell, Stephen Ball and Giles Willits subscribed for new
ordinary shares of 1p at a placing price of GBP0.04 as part of the
placing through which gross proceeds were raised to part satisfy
the cash consideration paid to the shareholders of SecurEnvoy.
David Williams subscribed for ordinary shares at a value of GBP0.5
million and the other directors (excluding Chris Eadie) subscribed
for ordinary shares at a total value of GBP1 million in aggregate.
This constituted a related party transaction under the AIM Rules
for Companies. Chris Eadie, who was an independent director for
those purposes at the time of the transaction, considered, having
consulted with WH Ireland, that the terms of the directors
subscription were fair and reasonable insofar as the shareholders
of the Company are concerned.
There were no other related party transactions for the Company
during the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BCBDDIDBBGRI
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December 19, 2017 02:00 ET (07:00 GMT)
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