TIDMECSC
RNS Number : 5248M
ECSC Group PLC
22 September 2021
22 September 2021
ECSC Group plc
('ECSC' or the 'Company' or the 'Group')
Unaudited interim results for the six months ended 30 June
2021
Strong growth across MDR and Assurance divisions
ECSC Group plc (AIM: ECSC), the provider of cyber security
services, announces its unaudited interim results for the six
months ended 30 June 2021.
Financial Highlights
-- Group revenue up 15% to GBP3.01m (H1 2020: GBP2.61m)
-- Managed Detection and Response ("MDR") division revenue
(managed services and incident response) up 17% to GBP1.45m (H1
2020: GBP1.24m)
-- Assurance division (testing, standards and certification
services) revenue up 20% to GBP1.49m (H1 2020: GBP1.24m)
-- Gross Profit up 24% to GBP1.82m (H1 2020: GBP1.46m)
-- Adjusted* EBITDA** profit of GBP19k (H1 2020: GBP52k)
-- Cash of GBP0.59m at period end, including GBP0.14m of
COVID-19 related medium-term government support (30 June 2020:
GBP1.26m, including GBP0.77m of COVID-19 related medium-term
government support). The Group's bank facility of GBP0.5m remains
unutilised.
*Adjusted EBITDA excludes one-off charges and share based
charges
**EBITDA is defined as Earnings before Interest, Tax,
Depreciation and Amortisation
Ian Mann, Chief Executive Officer of ECSC, commented:
"We are pleased to report strong growth across both our MDR and
Assurance divisions, driven in part by a rise in cyber security
incidents. Contributing to this is the number of organisations
opting for remote and cloud working during the COVID-19
pandemic.
"Cyber security remains a key priority for all organisations,
particularly as many employees begin to shift to a hybrid of remote
and office working, calling for increased focus on cyber security.
Ransomware attacks also continue to pose a significant threat to
organisations, with a high number of companies suffering
substantial disruption.
"We look forward to keeping the market informed on our progress
in due course."
Enquiries:
ECSC Group plc
David Mathewson (Non-Executive
Chairman)
Ian Mann (Chief Executive Officer) +44 (0) 1274 736 223
Allenby Capital (NOMAD and Broker)
David Hart
Piers Shimwell +44 (0) 203 3285 656
Yellow Jersey (PR and IR)
Sarah Hollins
Annabel Atkins
Matthew McHale +44 (0) 203 004 9512
Notes to Editors:
Founded in 2000, ECSC Group plc (AIM: ECSC) is the UK's longest
running full-service cyber security service provider. With an
extensive range of in-house developed proprietary technologies,
including advanced Artificial Intelligence (AI) systems, ECSC
provides expert security breach prevention and advisory support to
organisations across all sectors.
ECSC operates from two Security Operations Centres (SOCs): one
in Yorkshire, UK, and the other in Brisbane, Australia. ECSC offers
flexible 24/7/365 cyber security monitoring, detection, and
response support to its clients, either as a fully managed service
or to enhance an organisation's existing cyber security systems. In
addition, ECSC's Assurance division provides guidance,
certification to industry standards, and extensive testing services
to allow organisations to assess their cyber security
protection.
ECSC is led by a highly experienced senior management team with
over 80 years' combined experience within the company and has
delivered consecutive organic growth for the last 20 years.
The Company's broad client base ranges from e-commerce start-ups
to global blue-chip organisations, including 10% of the FTSE
100.
For more information please visit the following:
https://investor.ecsc.co.uk/
Chairman's Statement
The Group has managed its way through COVID-19 with excellent
remote working practices, reflecting well on the capable and
experienced management team who are now focussed on the many
opportunities arising in the market.
Strong growth across each of the divisions has driven an
improved financial performance across the business.
Cyber security remains a key priority for all Boards, with
breaches continuing to attract media attention and an increasing
regulatory framework, particularly with the impact of GDPR.
Clients increasingly recognise that 24/7/365 cyber security
breach detection and expert incident response is vital to the
protection of personal information and maintenance of critical IT
systems. For all but the largest global organisations, the
outsourcing of these critical functions is the logical choice, and
ECSC has the technology, expertise and processes to deliver.
ECSC is well positioned in a growing market, and we look forward
with confidence to continuing to deliver improved operating
results.
On behalf of the Board, I would like to thank all of our
clients, staff, channel partners and advisors for their continued
support.
David Mathewson
Non-Executive Chairman
22 September 2021
Chief Executive Officer's Statement
Ongoing Strategy
Our strategy of delivering sustained, and profitable, organic
growth remains our primary focus.
The Assurance division, comprising testing, standards, and
certifications, remains key for new client acquisition and is
delivering an increasing proportion of repeat revenue. This is
testament to the quality of delivery ECSC provides as well as
excellent client relationships.
The MDR division now accounts for 48% of revenue, compared with
29% at the Company's IPO at the end of 2016.
We have continued to invest in ECSC proprietary technologies,
including continuing development of our MDR Artificial Intelligence
("AI"), which is embedded within many of our managed services. We
see new opportunities to augment the vital people skills within the
operation with both machine learning and neural networks.
Outlook
The UK cyber security market remains an attractive segment of
the wider IT sector. Against this backdrop, we are confident that
the organic growth strategy of ECSC remains appropriate.
The disruption caused by the global pandemic and the associated
re-engineering of our operations has led the management team to
re-examine all areas of our client acquisition strategy and
operations. This widespread review is an ongoing process, and we
will make any necessary changes to ensure ECSC remains ideally
placed to deliver for its clients.
Key Performance Indicators
The following Key Performance Indicators were established in
mid-2018, and expanded in 2019, to enable meaningful performance
measurement:
Jun Dec Jun
Performance Rationale 2021 2020 2020
Indicator (interim) (full (interim)
year)
Measurement of the success
Revenue Growth of the organic growth strategy 15% (4%) (1%)
------------------------- ------------------------------------ ---------- -------
Visibility of the success of
Managed Detection increasing the percentage of
and Response Recurring revenue from long-term recurring
Revenue Growth revenues 12% 22% 25%
------------------------- ------------------------------------ ---------- -------
Visibility of the success of
Managed Detection increasing the percentage of
and Response Recurring revenue from long-term recurring
Revenue Proportion revenues 44% 43% 45%
------------------------- ------------------------------------ ---------- -------
Managed Detection Combined measurement of new GBP2.7m GBP2.6m GBP2.9m
and Response Order client contracts together with
Book renewals of existing client
contracts
------------------------- ------------------------------------ ---------- -------
Managed Detection
and Response Gross
Margin Delivery efficiency measurement 64% 73% 67%
------------------------- ------------------------------------ ---------- -------
Assurance Repeat Quasi-recurring from longer-term
Revenue consulting clients 83% 73% 69%
------------------------- ------------------------------------ ---------- -------
Assurance Gross
Margin Delivery efficiency measurement 61% 58% 51%
------------------------- ------------------------------------ ---------- -------
Investment in future cyber
Research and Development technologies, service enhancements
(of revenue) and intellectual property 16% 14% 14%
------------------------- ------------------------------------ ---------- -------
Ian Mann
Chief Executive Officer
22 September 2021
Financial Review
Principal Activities
The principal activity of the Group during the period continued
to be the provision of professional cyber security services,
including Assurance, Managed Detection and Response Services and
the sale of Vendor Products.
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Revenue
Assurance 1,489 1,241 2,724
Managed Detection and
Response 1,450 1,239 2,732
Vendor Products 49 70 125
Other 19 58 82
3,007 2,608 5,663
------------------------------ --------- --------- -----------
Gross Profit
Assurance 905 633 1,576
Managed Detection and
Response 932 834 1,994
Vendor Products 8 14 25
Other (29) (19) (47)
1,816 1,462 3,548
------------------------------ --------- --------- -----------
Adjusted EBITDA*
Other Income 117 211 297
Sales & Marketing Costs (1,025) (844) (1,713)
Administration Expenses (889) (777) (1,757)
19 52 375
------------------------------ --------- --------- -----------
EBITDA**
Share Based Payments (69) (57) (101)
Exceptional Items (26) (54) (65)
(76) (59) 209
------------------------------ --------- --------- -----------
Depreciation and Amortisation (206) (260) (480)
Adjusted Operating Loss* (187) (208) (105)
------------------------------ --------- --------- -----------
Operating Loss (282) (319) (271)
------------------------------ --------- --------- -----------
* Adjusted Operating Loss and Adjusted EBITDA excludes one-off
charges and share based charges
** EBITDA is defined as Earnings before Interest, Tax,
Depreciation and Amortisation
Revenue & Organic Growth
Total revenue in the period ended 30 June 2021 was GBP3.01m, up
15% on the comparable prior period (revenue in the six months ended
30 June 2020 was GBP2.61m). Within this, Assurance revenue was up
by 20% to GBP1.49m (June 2020: GBP1.24m).
Managed Detection and Response division revenue increased by 17%
to GBP1.45m (June 2020: GBP1.24m). Within this division, Incident
Response revenues increased to GBP0.14m (June 2020: GBP0.07m)
during the period.
Vendor Products revenue in the period fell by 30% to GBP0.05m,
(June 2020: GBP0.07m), and remains a small part of ECSC's business,
contributing only 2% of revenues.
Margin Generation
Gross Profit in the period was GBP1.82m representing a 60% gross
margin (prior year interim period: GBP1.46m representing a 56%
gross margin). This was due to improved margins in the Assurance
division.
Assurance margin rose to 61% in the period (prior year interim
period: 51%). This was due to the 20% increase in Assurance revenue
over the prior period and improvements in utilisation.
Managed Detection and Response margin fell to 64% (prior year
interim period: 67%) due to an increase in investment in the MDR
division during the period.
EBITDA & Operating Loss
Adjusted EBITDA for the period, which excludes one-off charges
and share based charges, was GBP0.02m (June 2020: Adjusted EBITDA
of GBP0.05m). EBITDA in the period was a loss of GBP0.08m (June
2020: EBITDA loss of GBP0.06m).
Adjusted Operating loss in the period was GBP0.19m (June 2020:
Adjusted Operating loss of GBP0.21m). Operating loss in the period
was GBP0.28m (June 2020: operating loss of GBP0.32m).
Cash Flow
Cash and cash equivalents decreased by GBP0.67m to GBP0.59m as
at 30 June 2021, primarily due to an increase in investment across
the business and reducing the COVID-19 related medium-term
government support to GBP0.14m from GBP0.77m as at 30 June
2020.
The Board has also renewed ECSC's GBP0.5m invoice discounting
facility with Barclays Bank following annual review in July 2021.
As at 30 June 2021 this was unutilised.
The Group will continue to prioritise cash management and
closely monitor this to ensure that the Group has adequate
liquidity to meet all of its financial commitments as they
arise.
Capital reduction
Subsequent on 26 August 2021, the Company completed a reduction
of its share capital, whereby the entire amount of GBP6.1 million
standing to the credit of the Company's share premium account was
cancelled thereby creating distributable reserves, which will allow
the Company to pay dividends or make distributions to its
shareholders and/or undertake a buyback of its ordinary shares in
due course, should it be appropriate or desirable to do so.
The Capital Reduction will have no effect on the overall net
asset position of the Company and will be reflected in the full
year report.
Gemma Basharan
Chief Financial Officer
22 September 2021
Consolidated Statement of Comprehensive Income
For the 6 months ended 30 June 2021
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Note GBP'000 GBP'000 GBP'000
Revenue 5 3,007 2,608 5,663
Cost of Sales (1,191) (1,146) (2,115)
Gross Profit 5 1,816 1,462 3,548
Other Income 6 117 211 297
Sales & Marketing Costs (1,025) (844) (1,713)
Administration Expenses (1,190) (1,148) (2,403)
Operating Loss before Exceptional
Items (187) (208) (105)
Share Based Payments 69 57 101
Exceptional Items 26 54 65
---------------------------------- ---- --------- --------- -----------
Operating Loss (282) (319) (271)
Finance Income - - -
Finance Cost (20) (21) (48)
Loss before Taxation (302) (340) (319)
Taxation (Charge)/ Credit 7 (21) 23 50
Loss for the Period (323) (317) (269)
---------------------------------- ---- --------- --------- -----------
Other Comprehensive Income - - -
Total Comprehensive Loss for the
Period (323) (317) (269)
---------------------------------- ---- --------- --------- -----------
Attributed to Equity Holders of
the Company
Loss Earnings per Share 8 pence pence pence
Basic Loss per Share (3.2) (3.2) (2.7)
Diluted Loss per Share (3.2) (3.2) (2.7)
Consolidated Statement of Financial Position
As at 30 June 2021
Unaudited Unaudited* Audited
6 months ended 6 months ended 6 months ended
30 June 2021 30 June 2020 31 December
2020
Note GBP'000 GBP'000 GBP'000
ASSETS
Non-current Assets
Intangible Assets 9 489 446 455
Property, Plant and Equipment 103 212 148
Right of use Assets 677 825 746
Deferred Tax Asset 7 139 86 118
Total Non-current Assets 1,408 1,569 1,467
------------------------------ ---- -------------- -------------- --------------
Current Assets
Inventory 9 10 9
Trade and Other Receivables 719 751 811
Corporation Tax Recoverable 333 472 216
Cash and Cash Equivalents 10 591 1,258 1,122
Total Current Assets 1,652 2,491 2,158
------------------------------ ---- -------------- -------------- --------------
TOTAL ASSETS 3,060 4,060 3,625
------------------------------ ---- -------------- -------------- --------------
LIABILITIES
Current Liabilities
Trade and Other Payables (1,799) (2,535) (2,085)
Lease Liabilities (119) (153) (143)
Total Current Liabilities (1,918) (2,688) (2,228)
------------------------------ ---- -------------- -------------- --------------
Non-current Liabilities
Deferred Tax Liability 7 (132) (85) (90)
Lease Liabilities (616) (730) (659)
Total Non-current Liabilities (748) (815) (749)
------------------------------ ---- -------------- -------------- --------------
TOTAL LIABILITIES (2,666) (3,503) (2,977)
------------------------------ ---- -------------- -------------- --------------
NET ASSETS 394 557 648
------------------------------ ---- -------------- -------------- --------------
EQUITY
Equity attributable to Owners
of the Parent:
Share Capital 100 100 100
Share Premium Account 6,098 6,098 6,098
Share Option Reserve 461 349 392
Retained Earnings (6,265) (5,990) (5,942)
TOTAL EQUITY 394 557 648
------------------------------ ---- -------------- -------------- --------------
* A prior year restatement of GBP376k is accounted for to remove
trade receivables and contract liabilities in relation to amounts
invoiced but not due as at 30 June 2020 where the performance
obligation had not commenced at that date. Trade receivables and
contract liabilities are stated net in respect of advance billing
in line with the requirements of IFRS 15.
Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2021
Share Share
Share Premium Option Retained
Capital Account Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 31 December 2019 91 5,661 291 (5,673) 370
--------------------------------- ------- ------- ------- -------- -------
Loss and Total Comprehensive:
Total comprehensive loss for the
year - - - (269) (269)
Transactions with shareholders
Issue of Shares 9 437 - - 446
Share Based Payments - - 101 - 101
Balance as at 31 December 2020 100 6,098 392 (5,942) 648
--------------------------------- ------- ------- ------- -------- -------
Loss and Total Comprehensive:
Total comprehensive loss for the
year - - - (323) (323)
Transactions with shareholders
Share Based Payments - - 69 - 69
Balance as at 30 June 2021 100 6,098 461 (6,265) 394
--------------------------------- ------- ------- ------- -------- -------
Consolidated Cash Flow Statement
For the 6 months ended 30 June 2021
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Note GBP'000 GBP'000 GBP'000
Cash Flow from Operating Activities
Loss before Taxation (302) (340) (319)
Adjustment for:
Amortisation of Intangibles 9 79 89 168
Depreciation of right-of use asset 80 69 175
Depreciation of Property, Plant
and Equipment 47 102 137
Loss/ (gain) on Disposal of Asset 4 (4) (4)
Finance Costs 20 21 48
Share Based Payment 69 57 101
Cash (used in) / generated from
Operating Activities
Before changes in Working Capital (3) (6) 306
Change in Inventory - 16 17
Change in Trade and Other Receivables (25) (124) (214)
Change in Trade and Other Payables (286) 774 268
Cash (used in)/ generated from
Operating Activities (314) 660 377
Corporation Tax received - - 343
Net Cash Flow (used in)/ generated
from Cash flow from investing
activities (314) 660 720
-------------------------------------- ---- --------- --------- -----------
Acquisition of Property, Plant
and Equipment (5) (2) (5)
Disposal Proceeds - 6 6
Development Costs Capitalised 9 (113) (106) (194)
Net Cash Flow used in Investing
Activities (118) (102) (193)
-------------------------------------- ---- --------- --------- -----------
Cash flow from financing activities
Principal paid on lease liabilities (97) (98) (195)
Interest paid on loans and borrowings (2) - (7)
Proceeds from issue of shares - 500 500
Costs of share issuance - (54) (54)
Net Cash (used in) / generated
from Financing Activities (99) 348 244
Net increase / (decrease) in Cash
& Cash Equivalents (531) 906 771
-------------------------------------- ---- --------- --------- -----------
Cash & Cash Equivalents at beginning
of period 1,122 351 351
Cash & Cash Equivalents at end
of period 591 1,257 1,122
-------------------------------------- ---- --------- --------- -----------
Notes to the Financial Statements
For the 6 months ended 30 June 2021
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
condensed consolidated interim financial statements as at and for
the six months ended 30 June 2021 were approved by the Board of
Directors on 22 September 2021.
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 interim financial statements for the period ended 30 June
2021 have been prepared in accordance with International Financial
Reporting Standards, International Accounting Standards and
Interpretations (collectively 'IFRS') in conformity with the
requirements of the Companies Act 2006.
The financial statements for the period ended 30 June 2021 (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. They do not include all
of the information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of changes in the Group's financial position and
performance since the last annual statements.
Alternative performance measures (APM)
In the reporting of financial information, the Directors have
adopted the APM 'Adjusted EBITDA' (APMs were previously termed
'Non-GAAP measures'), which is not defined or specified under
International Financial Reporting Standards (IFRS).
This measure is not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those in
the Group's industry. APMs should be considered in addition to, and
are not intended to be a substitute for, or superior to, IFRS
measurements.
Purpose
The Directors believe that this APM assists in providing
additional useful information on the underlying trends, performance
and position of the Group. This APM is also used to enhance the
comparability of information between reporting periods and business
units, by adjusting for non-recurring or uncontrollable factors
which affect IFRS measures, to aid the user in understanding the
Group's performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive setting
purposes and this remains consistent with the prior year. Adjusted
APMs are used by the Group in order to understand underlying
performance and exclude items which distort compatibility, as well
as being consistent with public broker forecasts and measures (see
note 13).
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.
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.
New IFRS standards, amendments to and interpretations not
applied to published standards
The following new standards, amendments to standards and
interpretations will be mandatory for the first time in future
financial years:
Issued date IASB mandatory UK Adoption status
effective date (EU pre 31 December
(UK mandatory 2020)
effective date)
New Standards
--------------------------- --------------- ----------------
IFRS 17 Insurance 18-May-2017 and 01-Jan-2023 TBC
contracts 25-June 2020
--------------------------- --------------- ----------------
Amendments to existing
standards
--------------------------- --------------- ----------------
Amendments to References 29-May-2018 01-Jan-2020 Endorsed
to the Conceptual
Framework in IFRS
Standards
--------------------------- --------------- ----------------
Amendments to IFRS 22-Oct-2018 01-Jan-2020 Endorsed
3 Business Combinations
- Definition of a
Business
--------------------------- --------------- ----------------
Amendments to IAS 31-Oct-2018 01-Jan-2020 Endorsed
1 and IAS 8: Definition
of Material
--------------------------- --------------- ----------------
Amendments to IFRS 26-Sept-2019 01-Jan-2020 Endorsed
9, IAS 39 and IFRS
7: Interest Rate
Benchmark Reform
--------------------------- --------------- ----------------
Amendments to IAS 23-Jan-2020 01-Jan-2022 TBC
1: Classification
of Liabilities as
Current or Non-current
--------------------------- --------------- ----------------
Amendments to: IFRS 14-May-2020 01-Jan-2022 TBC
3 Business Combinations;
IAS 16 Property,
Plant and Equipment;
IAS 37 Provisions,
Contingent Liabilities
and Contingent Assets
--------------------------- --------------- ----------------
Annual Improvements 14-May-2020 01-Jan-2022 TBC
to IFRSs (2018-2020
Cycle): IFRS 1, IFRS
9, Illustrative Examples
accompanying IDRS
16, IAS 41
--------------------------- --------------- ----------------
Amendments to IFRS 14-May-2020 01-Jun-2020 Endorsed
16 Leases COVID 19-Related
Rent Concessions
--------------------------- --------------- ----------------
Amendments to IFRS 25-June-2020 01-Jun-2021 Adopted by UKEB
4 Insurance Contracts
- deferral of IFRS
9
--------------------------- --------------- ----------------
Amendments to IFRS 27-Aug-2020 01-Jun-2021 Adopted by UKEB
9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16
Interest Rate Benchmark
Reform - Phase 2
--------------------------- --------------- ----------------
The application of these standards and interpretations is not
expected to have a material impact on the Group's reporting
financial performance or position.
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.
The budget figures are closely monitored against actuals on a
monthly basis. Variances that may arise are discussed a Board level
on a monthly basis during a review of the monthly numbers. In the
event that this revenue and cost performance is not achieved, the
Directors have also considered a sensitivity analysis based on
lower revenue growth and have formulated contingency plans for this
scenario, which enable the Group to preserve its financial
resources.
During 2020, the Group took advantage of published time to pay
plans on VAT. As at 30 June 2021, GBP0.1m remained outstanding in
this regard.
As at 30 June 2021, the Group had cash and cash equivalents of
GBP0.59m (2020: GBP1.26m) and achieved an Adjusted EBITDA profit of
GBP0.02m (2020: GBP0.05m), reducing the operating loss to GBP0.28m
(2020: GBP0.32m).
The Board has also renewed the GBP0.5m invoice discounting
facility with Barclays Bank following the annual review in July
2021. As at the 30 June 2021 this was unutilised.
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 interim financial statements.
4.3 Revenue Recognition
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.
Performance obligations and timing of 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 Pre-paid contracts are deferred in the balance
sheet and recognised on utilisation of service by the client.
Pre-paid revenue is included within Assurance in note 5. Revenue
from MDR contracts includes:
Hardware - hardware revenue is recognised on delivery and is
included within other revenue as set out in note 5. This is when
control of hardware passes to the customer.
Device build - Device build revenue is deferred and recognised
on a straight line basis over the term of the contract.
Licensing - deferred and recognised on a straight line basis
over the invoice period, due to the performance obligation not
being considered distinct from management and monitoring
performance obligation.
Management and monitoring - deferred and recognised on a
straight line basis over the invoice period.
Performance obligations and timing of revenue recognition
Management and monitoring - deferred and recognised on a
straight line basis over the invoice period.
Revenue from the sale of products (vendor) is recognised when
control passes to the customer, which is considered to occur when
the software or hardware product has been delivered to the
client.
Determining the transaction price
The Group's revenue is derived from fixed price contracts and
therefore the amount of revenues to be earned from each contract is
determined by reference to those fixed prices.
Costs of obtaining long-term contracts and costs of fulfilling
contracts
Commissions paid to sales staff for work in obtaining Managed
Service contracts are prepaid and amortised over the terms of the
contract on a straight line basis.
Commissions paid to sales staff for work in obtaining the
Prepaid Consultancy contracts are recognised in the month of
invoice.
These costs are recognised in the Consolidated Statement of
Comprehensive Income within Sales & Marketing costs.
Contract Balances
Contract Contract Contract Contract
Assets Assets Liabilities Liabilities
30 June 31 December 30 June 31 December
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 34 43 (878) (866)
Commission expensed during
the period (50) (62) - -
Commissions paid in advanced
of contract completion 60 53 - -
Recognised as revenue during
the period - - 1,637 3,390
Invoiced in advanced of performance
during - - (1,712) (3,402)
period
44 34 (953) (878)
------------------------------------ -------- ----------- ----------- -----------
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
A government grant is recognised only when there is reasonable
assurance that (a) the entity will comply with any conditions
attached to the grant; and (b) the grant will be received.
The grant is recognised as income over the period necessary to
match them with the related costs, for which they are intended to
compensate, on a systematic basis.
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. Grants relating to income are deducted from
the related expense.
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.
5. 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: Assurance
(including Remote Support services), Managed Detection and
Response, 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 period ended 30 June 2021 and comparative periods is as
follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Revenue
Assurance 1,489 1,241 2,724
MDR 1,450 1,239 2,732
Vendor Products 49 70 125
Other 19 58 82
Total Revenue 3,007 2,608 5,663
---------------------- --------- --------- -----------
Gross Profit
Assurance 905 633 1,576
MDR 932 834 1,994
Vendor Products 8 14 25
Other (29) (19) (47)
Gross Profit 1,816 1,462 3,548
---------------------- --------- --------- -----------
Operating Loss (282) (319) (271)
---------------------- --------- --------- -----------
Finance Cost (20) (21) (48)
Loss before Taxation (302) (340) (319)
---------------------- --------- --------- -----------
6. Other Income
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Gain on sale of Asset - 4 4
R&D Tax Credits 117 207 293
Total 117 211 297
--------- --------- -----------
7. Taxation
Recognised in the Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Corporation Tax Charge/(Credit) - - -
Deferred Tax Charge/(Credit) 21 (23) (50)
Total Tax Charge/ (Credit) 21 (23) (50)
--------------------------------- --------- --------- -----------
Reconciliation of Total Tax Charge Credit
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Loss before Tax (302) (340) (319)
--------- --------- -----------
UK Corporation at rate of 19% (57) (65) (61)
Expenses not deductible for tax
purposes 1 2 2
Over/under provision in prior
period - Deferred Tax 21 (23) (50)
Tax losses on which Deferred Tax
not recognised 56 63 59
Total Tax Charge/ (Credit) 21 (23) (50)
---------------------------------- --------- --------- -----------
Deferred Tax Assets & Liabilities
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Deferred Tax Assets 139 86 118
Deferred Tax Liabilities (132) (85) (90)
Deferred Tax - Net Liabilities 7 1 28
-------------------------------- --------- --------- -----------
Deferred Tax Assets of GBP139k is recognised in respect of
unutilised trading losses, Share Based Payments and short-term
timing differences. Deferred Tax Liabilities of GBP132k 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 25%, being the rate of
Corporation Tax rate expected to be in force when the timing
differences reverse.
Unutilised Trading Losses
The Company continues to carry forward unutilised trading losses
of GBP5.06m (June 2020: GBP5.71m). A Deferred Tax Asset of GBP46k
has been recognised as at 30 June 2021 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.
8. 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 by Diluted Number of Ordinary Shares.
The calculation of Basic, Diluted and Adjusted Earnings per
Share is as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Net Loss attributable to Equity
Holders of the Company (323) (317) (269)
Add back: Exceptional Costs 26 54 65
Add back: Share Based Payments 69 57 101
Adjusted Loss (228) (206) (103)
----------------------------------- --------- --------- -----------
Number of Ordinary Shares ('000)
Initial Weighted Average 10,007 9,098 9,098
Shares issued in April 2020 - 909 909
----------------------------------- --------- --------- -----------
Basic Number of Ordinary Shares 10,007 10,007 10,007
Weighted Average Dilutive Shares
in Period 1,107 769 906
Diluted Number of Ordinary Shares 11,114 10,776 10,913
----------------------------------- --------- --------- -----------
Earnings per Share (pence):
Basic Loss per Share (3.2) (3.2) (2.7)
Diluted Loss per Share** (3.2) (3.2) (2.7)
Adjusted Loss per Share (2.3) (2.1) (1.0)
** In accordance with IAS 33, the effect of anti-dilutive
potential shares has been ignored
9. Intangible Assets
GROUP & COMPANY
Development Costs
Costs GBP'000
As at 1 January 2020 1,085
Additions 194
As at 31 December
2020 1,279
----------------------- -------
As at 1 January 2021 1,279
Additions 113
As at 30 June 2021 1,392
----------------------- -------
Amortisation
As at 1 January 2020 656
Charges for the year 168
As at 31 December
2020 824
----------------------- -------
As at 1 January 2021 824
Charges for the period 79
As at 30 June 2021 903
----------------------- -------
Net Book Value
As at 31 December
2020 455
----------------------- -------
As at 30 June 2021 489
----------------------- -------
10. Cash & Cash Equivalents
Unaudited Unaudited Audited
GROUP GROUP Year
As at As at ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Cash & Cash Equivalents 591 1,258 1,122
--------- --------- -----------
11. Secured Facilities
The Group has been provided with payments facilities by Barclays
Bank, including a BACS payment facility and a credit card
facility.
Barclays Bank also provides an invoice discounting facility of
GBP500,000.
These payment facilities are secured by a debenture in favour of
Barclays Bank that creates fixed and floating charges over the
assets of the Company.
12. Controlling Party
ECSC Group plc does not have an ultimate controlling party.
13. Adjusted (Loss) before Taxation and Adjusted EBITDA
Adjusted (Loss) before Taxation
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Loss before Taxation (302) (340) (319)
----------------------- --------- --------- -----------
Share Based Payments 69 57 101
Exceptional Items 26 54 65
Adjusted (Loss) before
Taxation (207) (229) (153)
----------------------- --------- --------- -----------
Adjusted EBITDA:
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Operating Loss (282) (319) (271)
------------------------------ --------- --------- -----------
Depreciation and Amortisation 206 260 480
EBITDA** (76) (59) 209
------------------------------ --------- --------- -----------
Share Based Payments 69 57 101
Exceptional Items 26 54 65
Adjusted EBITDA* 19 52 375
------------------------------ --------- --------- -----------
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Operating Loss (282) (319) (271)
------------------------------ --------- --------- -----------
Share Based Payments 69 57 101
Exceptional Items 26 54 65
Adjusted Operating Loss* (187) (208) (105)
------------------------------ --------- --------- -----------
* Adjusted Operating Loss and EBITDA excludes one-off charges
and share based charges.
* * EBITDA is defined as Earnings before Interest, Tax,
Depreciation and Amortisation.
14. 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
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END
IR EANNFADFFEFA
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