RNS Number : 3042E
React Group PLC
29 June 2023
 

29 June 2023

REACT Group plc

("REACT", the "Group" or the "Company")

 

Half Year Results FY 2023

 

REACT Group plc (AIM:REAT.L), the leading specialist cleaning, hygiene and decontamination company announces its unaudited results for the six-month period ended 31 March 2023.

 

Financial Summary

 

 

 

HY 2023

 

Revenue (£'000)

9,320


5,125

Gross profit (£'000)

2,484


1,156

Gross profit margin

26.7%

 

22.6%

Adjusted EBITDA (£'000)*

927


162

Adjusted profit before amortisation of acquired intangible assets and exceptional items (£'000)*

773


88

Net loss for the period (£'000)

(86)


(92)

Adjusted earnings per share (basic) (pence)

0.07


0.02

Adjusted earnings per share (diluted) (pence)

0.07


0.01

Net debt (excluding lease liabilities) (£'000)

257


43

 

\* These measures are explained and reconciled in the Alternative Performance Measures section in Note 5 below.

 

Highlights (including post period highlights):

·    Revenue increased by 82% to £9,320k (2022: £5,125k)

 

·    Adjusted EBITDA up materially to £927k (2022: £162k)

 

·    Gross margins up at 27% from 23% in H1 2022

 

·    £800k multi-year contract win to provide services, through a coordinated programme from all three segments of the business to a large fast-service restaurant chain across c. 350 sites in the UK

 

·    £500k 18-month contract with a sizeable Midlands-based school alongside numerous contract renewals which include another school worth around £540k over three years and an annual contract with an NHS Trust worth almost £200k

 

·    Improved mix of recurring revenue as well as higher margins provides the business with greater visibility and a more dependable revenue stream

 

 



 

Commenting on the results Shaun Doak, Chief Executive Officer of REACT, said:

"We are delighted to report a strong trading performance for the business with revenue and profit at record levels. All three divisions have traded well in the period and this momentum has continued into the second half.

"The Group has benefitted from notable customer wins including an £800k contract to provide services, through a coordinated programme from all three segments of the business to a large fast-service food chain across all its sites in the UK. This major contract win illustrates how strategic acquisitions provide significant cross-selling opportunities for the Group once successfully integrated.

"The enhanced mix of recurring revenue and increased margins provides the business with greater visibility and a more dependable revenue stream. This combined with the strength of our pipeline for the remainder of the year provides the Board with cautious optimism and reinforces its confidence in achieving full-year results in line with market expectations.

"On behalf of the Board, I would once again like to thank all my colleagues for their ongoing support, commitment, tenacity and quality of work."

 

For more information:

REACT Group Plc


Shaun Doak, Chief Executive Ofcer

Andrea Pankhurst, Chief Financial Officer

Mark Braund, Chairman

Tel: +44 (0) 1283 550 503

Singer Capital Markets

(Nominated Adviser / Broker)

 

Phil Davies / James Moat (Corporate Finance)

 

Tel: +44 (0) 207 496 3000

IFC Advisory

(Financial PR / IR)


Graham Herring / Zach Cohen

 

Tel: +44 (0) 20 3934 6630

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"). Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

 



 

RESULTS SUMMARY & STRATEGY

Strategy

The REACT business performed strongly during the six months to 31 March 2023, trading in the period has been robust and the positive contract win momentum has continued with good sales growth across all three divisions of the business.

The Group achieved record revenue and profit growth during the six-month period. The combination of growing recurring revenue as well as higher margins provides the business with greater visibility and a more dependable revenue stream. Recurring revenue is key to our strategy and the contract maintenance segment of the business typically allows customers to purchase our services over a contracted period of several years. Within these contracts, price increases are implemented at certain points to mitigate wage-inflation pressures. The Group has benefitted from its ability to cross sell other business services into existing and new customers. Evidence of this is the recent contract win, with an estimated value of £800k in the current financial year, to provide services, through a coordinated programme from all three segments of the business to a large fast-service food restaurant across all its sites in the UK. This positive contract win momentum has continued, with good sales growth in all three divisions of the business across the six-month period.

In May last year, the Group acquired LaddersFree, one of the largest commercial window cleaning businesses in the UK. The business has been integrated well and its revenues have grown by over 25% in its first year as part of the Group. This has been achieved despite the gloom on the UK high street resulting in customer site closures and economic pressures over the last year. The Board is looking to scale the business whilst professionalising its operating systems. LaddersFree continues to be awarded contracts to provide services for retailers, restaurants, hotels and car dealerships amongst others. The division continues to attract higher margin contracts helping to deliver a considerable contribution to Group profits.

 

It has now been over two years (March 2021) since the Group acquired Fidelis Contract Services ("Fidelis"), a contract cleaning and facilities maintenance business. Fidelis had a slightly slower start to H1, this then improved greatly reporting record revenues over the latter stages of the six-month period. Fidelis has been awarded a £500k 18-month contract with a sizeable Midlands-based school and alongside this, numerous contract renewals which include another school worth around £540k over three years and an annual contract with an NHS Trust worth almost £200k.

 

The Fidelis business is now generating twice as much revenue as it was in the 12-months prior to acquisition, demonstrating not only its strategic value to the Group but also the manner in which the Company has been able to integrate and grow the business, adding a more scalable management team and more sophisticated systems to support its continuing growth ambitions. 

 

The REACT business, which primarily provides a solution to emergency and specialist cleaning situations, both through long-term framework agreements and on an ad-hoc basis, has had a buoyant period of business as its bespoke services remain in demand. Margins remain a focus of this division as these continue to rise as a result of a changing mix of business.

 

People

The Group performs bespoke training and development projects and, as a consequence, has been able to develop the roles of a number of important personnel and promote internally. As an aspiring expanding Group, it continues to take efforts to invest in its people to promote greater performance and job satisfaction of all employees.

Due to the nature of REACT's service delivery department, this is undertaken by people who are considered experts in their field, supported by a dedicated customer-centric team, who have now fully adapted to working conditions since all COVID restrictions have been lifted. The strong financials reported in H1 are bolstered by the efforts of the entire team and each individual has played a crucial role in our collective achievements.

I would like to take this opportunity to extend our gratitude and appreciation to our esteemed colleagues for their unwavering dedication and hard work. It is through their collective efforts and commitment that we have achieved our targets during this period and reached new heights.

 

Outlook

Trading in the second half of the year has continued well building on the momentum of the first half. The enhanced mix of recurring revenue and increased margins provides the business with greater visibility and a more dependable revenue stream. This combined with the strength of our pipeline for the remainder of the year provides the Board with cautious optimism and reinforces its confidence in achieving full-year results in line with market expectations.

 

 

 

Shaun Doak

Chief Executive Officer

29 June 2023

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 March 2023

 

 

 

 

Unaudited

 6 months ended 31 March 2023


Unaudited

6 months ended 31 March 2022


Audited

Year ended

30 September 2022


Note

£'000

 

£'000

 

£'000








Continuing Operations







Revenue


9,320


5,125


13,671








Cost of Sales


(6,836)


(3,969)


(10,414)








Gross Profit


2,484


1,156


3,257








Administrative expenses


(2,499)


(1,241)


(3,768)

 

 




 


Adjusted operating profit before amortisation of acquired intangible assets and exceptional items

 

844

 

91

 

775

Amortisation of acquired intangible assets

 

(821)

 

(147)

 

(743)

Exceptional costs

 

(38)

 

(29)

 

(543)

 

 




 


Operating loss

 

(15)


(85)

 

(511)








Finance cost

 

(71)


(3)


(56)

Corporation tax charge


-


(4)


(134)

Loss for the period


(86)


(92)


(701)








Other comprehensive Income


-


-


-








Loss for the financial period attributable to equity holders of the company


(86)


(92)

 

(701)

 


 

 

 


 

Basic and diluted profit per share

4

 

 

 


 

Basic loss per share

 

(0.01)p


(0.02)p

 

(0.09)p

Diluted loss per share

 

(0.01)p


(0.02)p

 

(0.09)p

Adjusted basic earnings per share

 

0.07p


0.02p

 

0.08p

Adjusted diluted earnings per share

 

0.07p


0.01p

 

0.07p

 



 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2023


 

Unaudited

As at 31

March

2023

 

Unaudited

As at 31 March 2022

 

Audited

As at 30

September 2022

Assets

Note

£'000

 

£'000

 

£'000

Non-current assets







Intangibles - Goodwill

 

4,209


1,854


4,209

Intangibles - Other

 

4,859


881

 

5,680

Property, plant and equipment

 

185


168

 

203

Right-of-use assets

 

73


68

 

100

Deferred tax asset

 

244


240

 

244


 

9,570


3,211

 

10,436

Current assets

 






Stock

 

11


10

 

11

Trade and other receivables

 

4,301


2,305

 

4,254

Cash and cash equivalents

 

650


(43)

 

979


 

4,962


2,272

 

5,244


 






Total assets

 

14,532


5,483

 

15,680


 






Equity







Shareholders' Equity







Called-up equity share capital

 

2,644


1,270

 

2,624

Share premium account


10,910


6,028

 

10,905

Reverse acquisition reserve


(5,726)


(5,726)

 

(5,726)

Capital redemption reserve


3,337


3,337

 

3,337

Merger relief reserve


1,328


1,328

 

1,328

Share based payments


68


33

 

44

Accumulated losses


(4,259)


(3,564)

 

(4,173)








Total Equity


8,302


2,706

 

8,339

 

 






Liabilities

 






Current liabilities

 






Trade and other payables

 

4,176


2,309

 

4,230

Loans and other borrowings

 

161


-


161

Lease liabilities within one year

 

50


46


57

Corporation tax

 

195


-

 

271


 

4,582


2,355

 

4,719

Non-current liabilities

 






Loans and other borrowings


746


-


808

Lease liabilities after one year


34


30


53

Other creditors


868


392

 

1,761

 


1,648


422

 

2,622

 





 


Total liabilities


6,230


2,777

 

7,341

 





 


Total Liabilities and Equity


14,532


5,483

 

15,680








 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 31 March 2023


 

Unaudited

6 months ended

31 March 2023

 

Unaudited

6 months ended

31 March 2022

 

Audited

Year

ended

30 September 2022



£'000

 

£'000

 

£'000








Net cash inflow/(outflow) from operations

 

829


7

 

(773)


 






Cash flows from financing activities

 






Proceeds of share issue

 

25


-


6,500

Expenses of share issue

 

-


-


(269)

Lease liability payments

 

(37)


(27)


(80)

Bank Loans

 

(62)


(50)


902

Interest paid

 

(71)


-


(56)

 

 






Net cash (outflow)/inflow from financing

activities

 

(145)


(77)


6,997

 

 






Net cash from investing activities

Disposal of fixed assets

 

-


-


20

Capital expenditure

 

(37)


(64)


(115)

Acquisition of subsidiary

 

(938)


(525)


(7,776)

Exceptional costs paid

 

(38)


(17)


(543)


 






Net cash outflow from investing activities

 

(1,013)


(606)


(8,414)

 

 




 


Net decrease in cash, cash

equivalents and overdrafts

 

(329)


(676)

 

(2,190)

 

 






Cash, cash equivalents and overdrafts at

beginning of period

 

979


633

 

633

Cash on acquisition of subsidiaries

 

-


-


2,536

 

 






Cash, cash equivalents and overdrafts at end of period

 

650


(43)

 

979

 

 




 


 

 

Analysis of cash, cash equivalents and overdrafts:

 

 






Cash at bank and in hand


1,379 


214 


1,529

Overdrafts


(729)


(257)


(550)

 

 

650


(43)

 

979

 



 

 

Reconciliation of profit for the period to cash outflow from operations

 

 

 

 

Unaudited

6 months

ended

31 March

2023

 

Unaudited

6 months ended

31 March 2022

 

Audited

Year

ended 

30 September 2022



£'000


£'000


£'000








Loss for the period

 

(86)


(92)


(701)

Decrease/(increase) in stocks

 

-


2


1

(Increase)/decrease in receivables

 

(47)


(206)


(2,155)

Increase in payables

 

1


38


374

Depreciation and amortisation charges

 

904


219


921

Impairment charge

 

-


-


567

Finance costs

 

71


3


56

Tax charge/(credit)

 

-


4


134

Acquisition assets acquired (excluding cash)

 

-


-


119

Exceptional acquisition costs

 

38


29


(24)

Profit on disposal of fixed assets

 

-


-


(6)

Share based payment

 

24


10


21

Tax paid

 

(76)


-

 

(80)

Net cash inflow from operations

 

829


7

 

(773)

Consolidated Statement of Changes in Equity

For the six months ended 31 March 2023

 

 


Share Capital

Share

Premium

Merger Relief

Reserve

Capital

Redemption

Reserve

Reverse

Acquisition

Reserve

Share Based Payments

Reserve

Accumulated Deficit

Total Equity


 

 

 

 

 

 

 

 


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 30 September 2021

1,270

6,028

1,328

3,337

(5,726)

23

(3,472)

2,788









Share based payments

-

-

-

-

-

10

-

10

Loss for the period

-

-

-

-

-

-

(92)

(92)










At 31 March 2022

1,270

6,028

1,328

3,337

(5,726)

33

(3,564)

2,706










Issue of shares

1,354

4,877

-

-

-

-

-

6,231

Share based payments

-

-

-

-

-

11

-

11

Loss for the period

-

-

-

-

-

-

(609)

(609)










At 30 September 2022

2,624

10,905

1,328

3,337

(5,726)

44

(4,173)

8,339










Issue of shares

20

5

-

-

-

-

-

25

Share based payments

-

-

-

-

-

24

-

24

Loss for the period

-

-

-

-

-

-

(86)

(86)










At 31 March 2023

2,644

10,910

1,328

3,337

(5,726)

68

(4,259)

8,302










 

 

Notes to the interim financial statements

 

1.            Basis of preparation 

 

These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and on a historical basis, using the accounting policies which are consistent with those set out in the Group's annual report and accounts for the year ended 30 September 2022. The interim financial information for the six months ended 31 March 2023, which complies with IAS 34 'Interim Financial Reporting' were approved by the Board of Directors on 29 June 2023.

 

The unaudited interim financial information for the six months ended 31 March 2023 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the year ended 30 September 2022 are extracted from the statutory financial statements which have been filed with the Registrar of Companies and contain an unqualified audit report and did not contain statements under Section 498 to 502 of the Companies Act 2006.

 

2.            Principal Accounting Policies

 

The principal accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2022.

 

 

3.            Segmental Reporting

 

In the opinion of the Directors, the Group has one class of business, being that of specialist cleaning and decontamination services. Although the Group operates in only one geographic segment, which is the UK, it has also analysed the sources of its business into the segments of Contract Maintenance, Contract Reactive or Ad Hoc work. 

 


Unaudited 6 months ended

31 March 2023

 

Unaudited 6 months ended

31 March 2022


Contract

Maintenance

Work

Contract

Reactive

Work

Ad Hoc

Work

Total

 

Contract

Maintenance

Work

Contract

Reactive

Work

Ad Hoc

Work

Total


£'000

£'000

£'000

£'000

 

£'000

£'000

£'000

£'000

Revenue

6,807

1,181

1,332

9,320


3,268

933

924

5,125

Gross profit

1,883

296

305

2,484


520

281

355

1,156

Profit before

amortisation and

exceptional items

689

36

48

773


38

20

26

84

Total Assets

13,213

450

869

14,532


2,466

1,334

1,683

5,483

Total Liabilities

(5,665)

(193)

(372)

(6,230)


(1,249)

(675)

(853)

(2,777)











 

 



 

4.            Earnings per Share (basic and adjusted)

 

The calculations of earnings per share (basic and adjusted) are based on the net loss and adjusted profit before amortisation of acquired intangible assets and exceptional items* respectively and the ordinary shares in issue during the period.

 

 

 

Unaudited

6 months

ended

31 March

2023

 

Unaudited

6 months ended

31 March 2022

 

Audited

Year

ended 

30 September 2022



£'000


£'000


£'000








Net Loss for period

 

(86)


(88)


(701)

Adjustments:

 






Amortisation on acquired intangible assets

 

821


147


743

Exceptionals

 

38


29


543

Adjusted profit before amortisation of

acquired intangible assets and exceptional items

 

773


88


585


 







 

Number

 

Number

 

Number

Weighted average shares in issue for basic earnings per share

 

1,055,369,702


508,006,026


718,622,464

Weighted average dilutive share options and warrants

 

91,750,707


62,247,272


62,247,272

Average number of shares used for dilutive earnings per share

 

1,147,120,409


570,253,298


780,869,736


 







 

pence


pence


pence

Basic loss per share

 

(0.01)p


(0.02)p


(0.09)p

Diluted loss per share

 

(0.01)p


(0.02)p


(0.09)p

Adjusted basic earnings per share

 

0.07p


0.02p


0.08p

Adjusted diluted earnings per share

 

0.07p


0.02p


0.07p

 

\* These measures are explained and reconciled in the Alternative Performance Measures section in Note 5 below.

 



 

5.            Alternative Performance Measures

 

The Board monitors performance principally through adjusted comparative performance measures.  Adjusted profit and earnings per share measures exclude certain items including amortisation of acquired intangible assets and exceptional items.  The Board believes that these alternative measures provide a clearer understanding of the Group's underlying trading performance, as they exclude one-off and non-cash items.

 

They key measures used as APMs are reconciled below:

 

 

 

HY 2023

£'000

 

 

HY 2022

£'000

 

Loss before tax as per Statement of Comprehensive Income

(86)


(88)

Amortisation of acquired intangible assets

821


147

Exceptional items

38

 

29

Adjusted profit before amortisation of acquired intangible assets and exceptional items

773


88

Interest

71


2

Depreciation

83


72

Adjusted EBITDA

927

 

162

 

 

 

Copies of this Interim Report are available from the Company Secretary, Holly House, Shady Lane, Birmingham B44 9ER  and on the Company's website www.reactsc.co.uk/react-group-plc

 

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