TIDMFLX
RNS Number : 0705B
Falanx Group Limited
29 September 2022
This announcement contains inside information for the purposes
of Article 7 of the UK version of Regulation (EU) No 596/2014 which
is part of UK law by virtue of the European Union (Withdrawal) Act
2018, as amended ("MAR"). Upon the publication of this announcement
via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
Falanx Group Limited
("Falanx", "Group" or "the Company")
Final Results
Falanx Group Limited (AIM: FLX), the AIM listed provider of
cyber security services , is pleased to announce its audited
results for the year-ended 31 March 2022.
Financial highlights
-- Revenues GBP3.54m (2021: GBP3.12m), an increase of 14%
-- Closing Monthly Recurring Revenues ("MRR") 25% greater than
prior year
-- Gross margin increased to 41% (2021: 33%) following the
rationalisation of cyber security monitoring technology
platform and much improved professional services utilisation
-- Reduction in adjusted EBITDA* loss to GBP1.27m (2021: GBP1.35m)
-- Loss per share from continuing operations 0.37p (2021: 0.75p)
-- Overall profit of GBP1.48m (2021: loss GBP3.55m) following
the disposal of the Assynt Strategic Intelligence division
("Assynt") in October 2021
-- GBP2.5m of debt raised from BOOST&Co
-- Cash balances at 31 March 2022 GBP3.5m (2021: GBP0.55m),
the vast majority of HMRC COVID-19 backlog paid down in
the year
-- Shareholders' funds GBP4.35m (2021: GBP2.73m)
Operational Highlights
-- Strategic focus on the high growth cyber security market
including expansion of sales and marketing capabilities,
product development and automation capabilities
-- Restructured sales function with the creation of dedicated
team focussed on winning new clients, channel growth and
creation of further recurring revenue streams
-- Initial launch of mass market Cyber Security Assessment
tool - f:CEL (Cyber Exposure Level)
Post Period Highlights
-- Strong growth in sales pipeline (**) to GBP6.0m as at 22
September 2022 (1 April 2022: GBP4.1m), including MRR pipeline
increasing in the same period from GBP1.7m to GBP4.0m
-- 18% growth in sales orders for core offensive and defensive
services in the first five months of FY23 compared to FY22
-- Ongoing investment in focussed and controlled sales growth
-- Launch of new Retained Incident Response ("R-IR") and Continuous
Vulnerability Scanning ("CVS") services
Mike Read, Chief Executive, said:
"We are delighted that the demand for our cyber security
services continues to grow. In addition to the recent high profile
cyber security concerns, we are seeing even more attacks on Small
to Medium size Enterprises ("SMEs"). These SMEs often receive
initial support via their trusted IT providers (who are not Cyber
Security specialists) and hence these are the channel for our cyber
services. Therefore, we have added some key new partners to our
existing base to expand our reach into these IT providers. This,
together with strengthened marketing, increased PR and hard work
from the sales and marketing team, has resulted in a significant
increase in our pipeline and today it is in excess of GBP6.0m -
2/3rds of which is for our MDR Services.
"Within the Company, it has been a challenging backdrop as we
came through the pandemic, sold our Assynt strategic intelligence
business and raised our first significant round of debt. This has
allowed us to focus on the cyber business and reposition
accordingly. The Falanx team is very focused on growth in a buoyant
market and, whilst H1 of FY23 revenues are expected to be similar
to the same period in FY22, orders for our core services are
already up by over 18% and we are expecting further growth in
orders for the second half of FY23, and with ongoing significant
growth thereafter.
"We are well financed and expect our existing financial
resources to be sufficient to see us through to profitability
."
(*) Adjusted EBITDA is a non-IFRS headline measure used by
management to measure the Group's and divisional performance and is
based on operating profit before the impact of financing costs,
IFRS16, share based payment charges, depreciation, amortisation,
impairment charges and highlighted items. IFRS16 is excluded so
that the underlying rental costs of the premises are reflected in
this metric.
(**) Pipeline is the total contract value of all current sales
prospects with a potential to close in the current financial
year.
The Company will post its report and accounts onto its website (
www.falanx.com ) for the financial year ended 31 March 2022
together with its notice of AGM shortly and these will be available
to download in accordance with AIM Rule 20.
Enquiries:
Falanx Group Limited Via IFC
Alex Hambro Chairman
Mike Read CEO
Ian Selby CFO
WH Ireland Limited
Mike Coe/ Sarah Mather (Nomad)
Joanna Hunt (Corporate Broking) + 44 (0) 207 220 1666
IFC Advisory Ltd
Financial PR & IR
Graham Herring / Zach Cohen +44 (0) 203 934 663
About Falanx
Falanx Group Limited, is a cyber defence provider providing
enterprise class defensive and offensive security
solutions to SME. For further information: http://www.falanx.com/
Chairman's Statement
I am pleased to present your Company's Annual Report &
Accounts for the year ended 31 March 2022 ("FY22").
I am delighted to report that the high growth cyber sector
market became Falanx's sole focus through the successful disposal
for cash of our non-core Assynt business intelligence division in
October 2021 for an enterprise value of GBP4.6m. I am also pleased
to report that our cyber revenues have resumed their growth trend
in the period under review, along with improved gross margins. We
are also now well financed with the cash resources needed to fund
our organic growth plans.
In last year's annual report, I highlighted the enormous
opportunity for Falanx in cyber security, with its powerful social,
technological, economic and regulatory drivers, especially with the
growing threat of ransomware attacks and data thefts. Cyber
security attacks have increased by over 30% in the last year and
are showing no signs of receding. These factors, combined with
recessionary pressures, create an environment where cyber-attacks
and cybercrime will become even more prevalent, and organisations
must step up their defences or suffer the potentially devastating
financial and reputational consequences. Whilst inevitably exposed
to the issues of the wider UK economy, we expect that this growing
threat will require organisations to further invest in cyber
security services and technologies.
Falanx is very much a service, as opposed to a technology
development, company. Our focus is therefore on delivering client
solutions as opposed to investing in the development of new
technologies.
Falanx has become a trusted cyber security corporate advisor.
This has been achieved by providing incisive and objective
assessments of an organisations' cyber resilience position. In
turn, this often results in us providing clients with monitoring
services on a recurring basis under long term contracts thereby
increasing the Company's contractual monthly recurring
revenues.
The successful disposal of the Assynt division has provided us
with the capital to fulfil our expansion plans for our cyber
security business, specifically investing in our sales and
marketing capabilities, product development and infrastructure to
support this high growth opportunity. Our cash position has been
further strengthened by the GBP2.5m loan received from BOOST&Co
in October 2021, and all of this has been achieved without
shareholder dilution.
Whilst our underlying cyber business is fundamentally solid, the
significant investments we have been making and will continue to
make, as outlined above, are already making a difference in terms
of additional sales, creating a wider and more effective partner
base as well as innovative service developments. We are optimistic
that this investment will generate significant growth in the next
year as sales momentum builds.
Approved by the Board on 28 September 2022 and signed on its
behalf by
A Hambro
Chairman
Chief Executive Officer's Report
Falanx is a provider of Offensive and Defensive cyber security
services, which protect around 400 customers worldwide. Customers
include Managed Service Providers ("MSPs"), IT providers, public
sector organisations, large multinationals and SMEs.
Attack
These are our Offensive Services and are primarily centred
around Penetration Testing / ethical hacking ("PT"). Our
comprehensive portfolio of PT services covers a wide range of
skills and techniques which we use to emulate potential attackers
looking for vulnerabilities in our client's infrastructure. These
services are provided under a traditional professional services
business model with a mix of day rate and fixed price contracts.
This service benefits from a high level of repeat business, long
term relationships and has negligible churn. We have provided these
services to nearly 400 customers over the last four years, many on
an annual repeat basis.
Defend
Our Defensive managed services are provided by our Security
Operations Centre ("SOC") based in Reading. The SOC operates a
24/7/365 service, continually watching our customers' IT estates,
looking for unusual items which may be a sign of a cyber-attack or
data theft. To achieve this, we monitor billions of client's log
events, such as a user logon, each week and distil this down, via
AI and our assembled skills, to the few actionable items which must
be alerted to the client. Our growing client base, and the move to
the online world has grown the number of log events by over 150%
compared to previous years. This service is supplied on a monthly
recurring basis and has a largely fixed cost base of people and
infrastructure with some licence fees as a function of client
volumes.
Protect
Through both our Offensive and Defensive services, we help our
customers to protect themselves against cyber-attacks. Through the
use of either or a combination of both Attack and Defend, we inform
our customers as to their strengths and weaknesses, so that they
can be better protected against hostile threats. To help SMEs
understand their exposure to these threats, we introduced our Cyber
Security posture scoring, f:CEL (the falanx Cyber Exposure Level).
Through this self-service evaluation tool, customers can understand
their weaknesses and see recommendations as to what they can do to
improve their posture, all in a matter of minutes.
Sales performance
Our sales performance in FY22 was achieved with a smaller team
than in previous years, and despite this, sales orders were broadly
similar at GBP3.3m (2021: GBP3.4m). Individual sales productivity
increased by over 15%, and average spend per customer grew by 5%.
In total, the Company received 369 (2021: 384) individual sales
orders from 205 customers (2021: 225) out of a wider active client
base of around 400. This includes 45 new clients won in the year.
We have increased the number of clients who have been using both
Offensive and Defensive services, and this remains an opportunity
for significant further contract wins for monthly recurring revenue
("MRR") generation. The team was expanded towards the end of the
financial year, and this is discussed below in the sales execution
strategy.
Operational performance
Following the development of our XDR / MDR service ("Triarii")
last year, we migrated our client base to it from previous
platforms during the first half of FY22. This, combined with a
stronger sales performance and much improved utilisation levels,
enabled our cyber security business to record an adjusted EBITDA
profit in the first half of FY22 following a loss in FY21. Since
then (and as a result of the proven baseline profitability model
for cyber) we are carrying out our planned investment in the cyber
business.
The SOC experienced some managed churn during the year,
typically from older contracts which required on-premises solutions
as opposed to our cloud-based strategy. This technology
consolidation enabled both a much more efficient service and a
greatly enhanced client experience. We have now moved to a
predominantly cloud-first environment, and we continue to develop
our offering as the market evolves. We are now both well aligned
with the market and able to push ahead with our high growth
plans.
Cyber security growth strategy
The solid base that we have built for future growth is fully
supported by the financial resources generated from the disposal of
Assynt in October 2021 and the facility provided by BOOST&Co.
This has allowed us to invest in the high growth phase, with
significant additional resources across the business, but
particularly in sales and marketing. Our goal is to more than
double the size of our business organically, and we have adopted
the strategies set out below to achieve this goal.
Sales execution strategy
We have operated two functional sales areas - the pre-existing
team as Business as Usual ("BAU"), which is predominantly direct
business, and a new team assembled under the Net New Names ("NNN")
designation. This team is dedicated to winning new clients via both
channel and direct models and their key task is to grow our
Defensive SOC services leading to enhanced MRR. Nicola Hartland, an
established cyber security entrepreneur, joined us towards the end
of the financial year, to lead the NNN team and they have been
solidly building an incremental pipeline of opportunities.
Our Partner Engagement Model has been restructured with the
objective of generating regular deal flow across the mix of our
Tier 1 and Tier 2 partners. Tier 1 partners generally require a
higher level of attention, and our aim is to target GBP1m business
per annum from each such client, limited to six overall. Tier 2
partners provide us with similar sales opportunities, but these are
likely to be smaller in volume. We are actively trialling the use
of co-funded resources within partners to demonstrate their
commitment to expanding Falanx, thereby creating a larger and more
diverse sales team dedicated to selling Falanx services. Through
this restructured partnering model, we are no longer dependent on a
single channel opportunity to drive our growth, instead spreading
that opportunity across a broader network.
NNN's focus on partners is specifically to grow MRR from SOC and
associated services with an approximate 75% / 25% emphasis on
Defensive (SOC & MRR) versus Offensive (i.e., Penetration
Testing) services - almost the exact opposite (and therefore
complementary) to our BAU team.
The use of f:CEL as an on-ramp tool, as well as a revenue
opportunity in itself, is being well received for its completeness,
ease of use and digestible output and recommendations. We have
begun development of f:CEL '2.0', in which we will bring together
all customer feedback from engagements so far. This will create an
even more complete product and compelling use-case across a variety
of industry sectors, including insurance and IT services and the
sale of our cyber security offerings through channel partners.
As we focus in on our core offerings (SOC and PT), we have
chosen to exit from any low-margin, non-core legacy consulting
contracts and we expect to replace their margins from further SOC
sales.
Service Innovation Strategy
As a service business, we focus on service innovation and
delivery excellence and not on the development of proprietary
technology. This allows us to use the most appropriate technology
to deliver for our clients, whilst not carrying the development
overhead. This means that we can invest in client delivery as
opposed to developing solutions which are already provided by
(often much larger) technology companies. We will develop
functionality in certain niche areas (for example f:CEL), although
this is built on standard technologies. As we are technology
agnostic, we can explore additional managed services with new,
strategic partnerships as well as opportunities to generate
significant returns.
We are further expanding our services portfolio based on
customer demand and feedback to drive incremental revenues. This
includes the previously announced Continuous Vulnerability Scanning
("CVS") service and the Retained Incident Response ("R-IR")
services. These complement our ad-hoc IR service and provide SLAs
and guarantee our availability to support our customers when an
incident occurs.
Our targeted MRR growth is planned to move the SOC to being cash
generative on a stand-alone basis, and this will improve our
overall margins. Our SOC currently has the necessary infrastructure
(typically with a fixed cost), and therefore significant
operational leverage, and we expect incremental sales to further
improve performance. We are looking to make further automation
investments aimed at improved client delivery and margin
improvement.
As a knowledge-based business, we continue to attract and retain
experienced and expert resources across all functions of the
business. All attracted by the attractive growth opportunities in
front of us as well as our excellent culture which offers support,
training and career progression opportunities to people with much
sought-after skills.
Post Period update
The NNN team is now established and consequently the overall
cyber sales pipeline is now building on a weekly basis, and it is
already at a record value of GBP6.0m (GBP4.1m on 1 April 2022).
This also represents growth of 46% in the current financial year,
and very significantly the pipeline is now 66% MRR compared to 40%
in April 2022 (and 17% in April 2021). Our team has a high energy
level and a strong execution focus and as well as building new
partnerships, our existing relationships have been revitalised and
expanded. Sales orders for our core services in the first five
months of FY23 were 18% ahead of the same period in FY22. This
includes five new MDR deals which we sold, with a total minimum
contract value of over GBP0.2m, with the potential for significant
expansion and extension beyond this. Three of these MDR deals were
signed in August 2022 when we also signed up two new Tier 1
partners. Furthermore, we have also won our first four clients for
CVS and also sold more than 1000 f:CEL licenses.
Outlook
Our previous investment in Triarii has transformed our customer
delivery in the SOC. We have a highly relevant set of services
which are well aligned to client needs in a growing market. Our
focus is now on growing market share, and we are achieving this
through indirect and direct routes. Since Falanx became a pure play
cyber business in October 2021, we have invested in an expanded
sales and marketing capability, and this is now starting to deliver
results. We have new partners on board and they are already
generating sales from a strong pipeline of potential business. Our
penetration testing business remains strong, and we have a growing
customer base of around 400 organisations, which provides us with a
good basis for cross selling of MRR generating services. With the
conversion of this pipeline, which is now underway, and the planned
cessation of certain spends incurred in the first half of FY23, we
expect an improving financial performance in the second half of
FY23.
Falanx is now firmly in growth mode, and our objective, which we
are confident we will achieve, is to generate very significant,
organic growth over the coming months and year s. We are well
financed and expect our existing financial resources to be
sufficient to see us through to profitability .
Approved by the Board on 28 September 2022 and signed on its
behalf by
M D Read
Chief Executive Officer
Chief Financial Officer's Report
Financial Review Continuing Operations
Revenue
Group revenues increased by 14% to GBP3.54m (2021: GBP3.12m).
This was partly due to the recovery from the COVID-19 period and
the consequential significant increase in professional services
revenues which benefitted from much stronger utilisation levels.
Recurring revenues from monitoring contracts were consistent with
the prior year at GBP0.86m. Contract wins for monitoring business
increased towards the end of FY22, with monthly recurring revenues
growing by approximately 25% across FY22. This was despite a
deliberate move away from legacy 'on premises' contracts serviced
under the previous monitoring platforms to an all-cloud delivery on
Triarii.
The pipeline of potential sales increased from GBP2.8m in August
2021, to GBP4.1m at the start of April 2022 and is now
approximately GBP6.0m. The pipeline is the total contract value of
all current sales prospects with a potential to close in the
current financial year.
Cost of sales
This comprises of both people cost related to the delivery of
customer services related to penetration testing, SOC monitoring
and consultancy, as well as external software licencing and data
services related to their delivery.
Gross margins
These strongly recovered in the year to 41% from 33% in FY21.
This reflected much improved professional services utilisation
following the end of COVID-19, and the benefits of moving to a
single monitoring platform with lower external licence fees.
Operating costs
GBP'000 31 March 2022 31 March
2021
Gross margin 1,443 1,017
-------------- ---------
Underlying operating costs* (2,715) (2,367)
-------------- ---------
Adjusted EBITDA loss (1,272) (1,350)
-------------- ---------
*Analysed as
-------------- ---------
Sales and distribution 1,706 1,463
-------------- ---------
Corporate 1,009 904
-------------- ---------
2,715 2,367
-------------- ---------
Underlying operating costs, were GBP2.71m (2021: GBP2.37m). The
prior year benefitted by approximately GBP0.2m from COVID-19
related cost reductions (including salary sacrifice schemes and
furlough), and the balance of the increase arose from investment in
sales expansion post the disposal of Assynt in October 2021.
Average headcount was 51 (2021: 55).
Share option charges
Share option charges were GBP0.02m (2021: GBP0.18m) with the
comparative period reflecting the issue of share options under the
COVID-19 salary sacrifice scheme.
Adjusting income items
As in previous years, highlighted items to credit adjustment on
rental costs to exclude the impact of IFRS 16 on the Reading lease
of GBP108,000 (2021: GBP108,000), with the prior year reflecting
some restructuring which was mainly as a result of COVID-19.
Adjusted EBITDA
Adjusted EBITDA loss for the year was GBP1.27m (2021: GBP1.35m)
after adjusting for the items highlighted above. Overall reported
EBITDA loss (excluding share option charges) was GBP1.16m (2021:
GBP1.34m) after adjusting for highlighted income.
Depreciation, amortisation, and impairment
This charge was GBP0.6m (2021: GBP1.9m). Customer intangible
amortisation was slightly reduced to GBP0.25m (2021: GBP0.29m)
following the completion of the amortisation of Securestorm. The
impairment of goodwill (GBP0.13m) related to that acquisition of
Securestorm being impaired in full, and the prior period reflected
the GBP1.44m impairment of the investment in Furnace Technologies
which was spun out of Falanx in December 2019. The amortisation of
the right of use asset represents IFRS16 charges arising from the
Reading office lease and was GBP108,000 in each year.
Operating loss
The operating loss reduced to GBP1.78m (2021: GBP3.45m) with
GBP1.44m of the reduction arising from the impairment of Furnace
which was reflected in the previous year.
Financing costs
Net financing costs were GBP0.2m (2021: GBP0.03m) of which
GBP0.17m represented interest payments (including amortised costs)
on the GBP2.5m loan drawn down between August and October 2021,
with the remainder representing financing costs associated with
IFRS 16: Leases.
Discontinued operations
On 6 October 2021 the Group disposed of the Assynt strategic
intelligence division to focus on growing the cyber security
division. The division recorded revenues of approximately GBP1.03m
during the period (2021: GBP2.12m) and an adjusted EBTIDA loss of
approximately GBP0.05m (2021: profit GBP0.10m). The purchaser was
an organisation backed by US private equity investors. The terms of
the transaction were an enterprise value of GBP4.6m payable in
cash, adjusted for approximately GBP0.5m of working capital (mainly
related to deferred incomes). Of this GBP0.35m is held in escrow
until October 2022, and as of the date of this report the board is
not expecting any claim against this. Overall, following advisory
transaction costs including contingent success related items based
on value achieved, the transaction produced a profit of
GBP3.46m.
Result for the year
The overall result for the year was a profit of GBP1.48m (2021:
loss GBP3.55m) due to the gain on the disposal of Assynt. Earnings
per share were 0.28p (2021: loss 0.77p). The loss per share from
continuing operations was 0.37p (2021: 0.75p).
Statement of Financial Position
Non-current assets
Goodwill arising on the acquisitions of Falanx Cyber Defence,
First Base and Securestorm was GBP1.72m (2021: GBP1.85m) with the
difference relating to the impairment of the entire balance of
GBP0.13m related to Securestorm due to its small customer base and
non-core nature of consultancy services.
Customer relationships from First Base were carried at a total
of GBP1.42m (2021: GBP1.68m) with the reduction mainly arising from
the 10-year straight line amortisation of this asset. The Group's
non-current assets also include the future value of the five-year
lease (commenced July 2019) of the Reading premises of GBP0.25m
(2021: GBP0.35m). A creditor of GBP0.15m (2021: GBP0.25m) is
carried to reflect future liabilities and GBP0.10m (2021: GBP0.09m)
are included in current liabilities. Fixed assets which include
furniture, plant and equipment were GBP0.10m (2021: GBP0.16m).
Working capital
Trade receivables fell from GBP0.68m to GBP0.52m with the prior
period reflecting Assynt balances. Cash collections were strong,
and average debtor days for that division were 31 vs 47, and no bad
debts were experienced in the year.
Other debtors (including prepayments) increased to GBP0.67m
(2021: GBP0.39m) due to the GBP0.35m held in escrow till October
2022 relating to the disposal of Assynt.
Trade and other payables fell to GBP0.80m (2021: GBP1.59m)
mainly due to the repayment of GBP0.62m HMRC deferred payments from
the prior year in response to COVID-19 as well as the impact of the
disposal of Assynt. HMRC is fully in terms on all liabilities, both
current and agreed deferred payment plans, with only trivial
amounts remaining outstanding on the latter.
Contract liabilities (deferred incomes) fell from GBP1.11m to
GBP0.53m due to the disposal of the Assynt, which had a high level
of advance payments from larger customers which were received
before the year ended 31 March 2021. Contract liabilities in the
ongoing cyber security business increased from GBP0.46m to GBP0.53m
reflecting the growth in business volumes.
Non-current liabilities
Between August 2021 and October 2021, the Group drew down a loan
of GBP2.5m from BOOST&Co. The principal terms of the loan
are:
-- 11% interest rate, secured over Group's assets fixed and floating charge
-- Amortisation commencing over 4 years from October 2022
-- No covenants or equity components
It is recorded at amortised cost under IFRS, and this increased
the overall non-current liabilities from GBP0.31m to GBP2.25m.
Capital structure
During the year approximately 0.5m employee share options were
exercised and consequently there were approximately 526m shares in
issue at 31 March 2022. No other equity issues took place during
the year.
Following the general meeting held in February 2021 and the
reduction in the share premium account, a special non distributable
reserve (the "2022 Liabilities Reserve") was credited with GBP1.0m.
This is expected to be released back into retained losses in
December 2022.
Overall, on 31 March 2022 the Company had approximately 76.7m
(2021: 83.9m) employee share options and warrants outstanding
representing approximately 14% of the issued capital.
The Group continues to rationalise legal entity structure to
best align it with the current opportunity as well as to reduce
costs and streamline tax management. The Group's incorporation
status as a BVI entity is a legacy of its pre 2013 IPO business
plan and the Board will review moving it to a UK status at an
appropriate time, considering the significant professional fees
which would be associated with such a change. The Group's
memorandum and articles of association were revised in March 2019
to align with UK incorporated entities more closely. The Group is
fully resident and registered in the UK from a tax perspective.
Since the disposal of Assynt, the Group only operates through two
main legal entitles as opposed to seven before, including four
overseas companies.
Total equity
The profit on the disposal of Assynt enabled the total equity
position to increase to GBP4.35m (2021: GBP2.73m).
Statement of cash flows
Cash balances were significantly strengthened to GBP3.48m (2021:
GBP0.55m) by the disposal of Assynt for cash and the drawdown of
the loan from BOOST&Co referenced above. This enabled a return
to a normalised working capital position following the COVID-19
period and the repayment of HMRC liabilities. Overall cash
performance remains closely correlated to operational EBITDA.
Post Balance Sheet Events
On 22 June 2022, the Company signed a deed of variation for the
lease for the premises in Reading. The lease was varied to delete
the break option and reduce the principal rent by 50% for the
period from 1 August 2022 to 31 July 2023.
I R Selby
Chief Financial Officer
Key Performance Indicators for continuing operations
Performance
Indicator Description Why measured 2022 2021 Comment
Group revenue Changes in total Revenue growth GBP3.54 GBP3.12 Recovery in
- GBP'm revenue compared gives a quantified professional
to prior year indication of services revenues
the rate at since Covid 19
which the Group's
business activity
is expanding
over time
Provides an
indication of
sales profitability Stronger professional
Percentage of total and proportion services utilisation
revenue retained of revenue available and single cyber
by the Group after to cover other security monitoring
Gross margin direct costs deduction running costs 40.7% 32.6% platform
Adjusted A management measure Underlying performance GBP(1.27) GBP(1.35) Investment in sales
EBITDA - of profits adjusted of business expansion in the
GBP'm for non-underlying operations year offset by greater
items such as revenues
restructuring,
and acquisition
related and excluding
the impact of IFRS
16
Measures the
ability of the
Group to convert
profit into Move to a normal
cash and correlation working capital
Operational cash between EBITDA profile since the
Cash conversion flow / EBITDA and cash performance 81% 29% end of Covid 19
Shows visibility Growth in professional
Recurring of recurring services revenues
revenue Recurring revenue revenue growth in year lowered
% lines / total revenue rate 31% 35% mix
Monthly Revenue from the Shows predictable GBP0.08 GBP0.06 Contract wins
recurring provision of monthly metrics
revenue monitoring to track progress
("MRR") and similar services against objective
- GBP'm on a recurring basis of becoming
in the final month profitable solely
of each financial on recurring
year. revenue
Measure of customer
Number Number of customers concentration Total live client
of customers invoiced over the (includes acquired base of approximately
ordering preceding 12 months customer base) 205 225 400 ordering customers
Shows average
Average headcount number of employees
Headcount during the year in the year 51 55
Contract Contracted and invoiced Shows visibility GBP0.53 GBP0.46 Growth in business
liabilities revenue yet to be into invoiced and deal timing.
(deferred recognised (deferred amounts to be
income) income) recognised in
- GBP'm future periods
----------------- ------------------------ ------------------------ ---------- ---------- -----------------------
Consolidated income statement
for the year ended 31 March 2022
2022 2021
Note GBP GBP
--------------------------------------------------- ----- ------------ ------------
Revenue 4 3,542,308 3,119,724
Cost of sales (2,099,732) (2,102,787)
--------------------------------------------------- ----- ------------ ------------
Gross profit 1,442,576 1,016,937
Administrative expenses (3,220,878) (4,472,095)
--------------------------------------------------- ----- ------------ ------------
Operating loss 6 (1,778,302) (3,455,158)
Analysis of operating loss
Operating loss (1,778,302) (3,455,158)
Share option expense 17,839 173,636
Depreciation and amortisation 465,417 503,895
Impairment of goodwill 130,347 -
Impairment of Furnace equity and debt investments - 1,440,000
Highlighted income 5.1 (107,285) (12,893)
Adjusted EBITDA loss 5.2 (1,271,984) (1,350,520)
--------------------------------------------------- ----- ------------ ------------
Finance income 104 4
Finance expense (201,568) (32,574)
--------------------------------------------------- ----- ------------ ------------
Finance expense - net (201,464) (32,570)
Loss before income tax (1,979,766) (3,487,728)
Income tax credit 7 8,479 -
--------------------------------------------------- ----- ------------ ------------
Loss for the year from continuing operations (1,971,287) (3,487,728)
Discontinued operations
Profit / (Loss) for the year from discontinued
operations 8 3,455,869 (64,212)
Profit / (Loss) for the year 1,484,582 (3,551,940)
Loss per share from continuing operations
(0.37)
Basic loss per share 9 p (0.75) p
(0.37)
Diluted loss per share 9 p (0.75) p
--------------------------------------------------- ----- ------------ ------------
Consolidated statement of comprehensive income
for the year ended 31 March 2022
2022 2021
GBP GBP
------------------------------------------------------- ---------- ------------
Profit / (Loss) for the year 1,484,582 (3,551,940)
Other comprehensive income:
Re-translation of foreign subsidiaries - 5,403
Exchange differences recycled to the income statement 109,030 -
on disposal of business
------------------------------------------------------- ---------- ------------
Other comprehensive income for the year, net of
tax 109,030 5,403
-------------------------------------------------------- ---------- ------------
Total comprehensive income for the year 1,593,612 (3,546,537)
-------------------------------------------------------- ---------- ------------
Attributable to:
Owners of the parent 1,593,612 (3,546,537)
Total comprehensive income for the year 1,593,612 (3,546,537)
-------------------------------------------------------- ---------- ------------
Items in the statement above are disclosed net of tax. The
income tax relating to each component of other comprehensive income
is disclosed in note 7.
Consolidated statement of financial position
as at 31 March 2022
2022 2021
Note GBP GBP
--------------------------------------------- ----- ------------ ------------
Assets
Non-current assets
Property, plant and equipment 104,352 155,831
Intangible assets 3,262,662 3,702,840
Right of use asset 254,290 363,271
3,621,304 4,221,942
--------------------------------------------- ----- ------------ ------------
Current assets
Trade and other receivables 1,192,220 1,076,216
Cash and cash equivalents 3,483,063 545,321
--------------------------------------------- ----- ------------ ------------
4,675,283 1,621,537
--------------------------------------------- ----- ------------ ------------
Total assets 8,296,587 5,843,479
--------------------------------------------- ----- ------------ ------------
Equity
Capital and reserves attributable to equity
holders of the Company
Share capital 4,043,194 4,033,161
Translation reserve - (107,777)
Shares based payment reserve 703,151 747,243
2022 liabilities reserve 1,000,000 1,000,000
Accumulated losses (1,397,476) (2,943,989)
--------------------------------------------- ----- ------------ ------------
Total equity 4,348,869 2,728,638
--------------------------------------------- ----- ------------ ------------
Liabilities
Non-current liabilities
Deferred tax liability - 9,529
--------------------------------------------- ----- ------------ ------------
Lease liability 149,691 252,874
--------------------------------------------- ----- ------------ ------------
Borrowings 10 2,094,739 42,129
--------------------------------------------- ----- ------------ ------------
Other payables - 5,409
--------------------------------------------- ----- ------------ ------------
2,244,430 309,941
--------------------------------------------- ----- ------------ ------------
Current liabilities
Trade and other payables 804,908 1,592,715
Contract liabilities 4 529,496 1,108,317
--------------------------------------------- ----- ------------ ------------
Lease liability 103,182 95,997
--------------------------------------------- ----- ------------ ------------
Borrowings 10 265,702 7,871
--------------------------------------------- ----- ------------ ------------
1,703,288 2,804,900
--------------------------------------------- ----- ------------ ------------
Total liabilities 3,947,718 3,114,841
--------------------------------------------- ----- ------------ ------------
Total equity and liabilities 8,296,587 5,843,479
--------------------------------------------- ----- ------------ ------------
Consolidated statement of changes in equity
for the year ended 31 March 2022
Share Accumulated Translation Share based 2022
Note capital losses Reserve payment Liabilities Total
reserve reserve
GBP GBP GBP GBP GBP
------------------------ ------ ------------- ------------- ------------ ------------ ------------ ------------
Balance at 1 April
2020 17,903,427 (13,408,080) (113,180) 587,325 - 4,969,492
Loss for the year - (3,551,940) - - - (3,551,940)
Re-translation of
foreign subsidiaries - - 5,403 - - 5,403
Transactions with
owners:
Capital reconstruction (15,000,000) 14,000,000 - - 1,000,000 -
Issue of share capital 1,247,600 - - - - 1,247,600
Costs of issue of
share capital (117,866) - - - - (117,866)
Share based payment
charge - - - 175,949 - 175,949
Forfeited share options
reversed through reserves - 16,031 - (16,031) - -
Balance at 31 March
2021 4,033,161 (2,943,989) (107,777) 747,243 1,000,000 2,728,638
-------------------------------- ------------- ------------- ------------ ------------ ------------ ------------
Profit for the year - 1,484,582 - - - 1,484,582
Re-translation of
foreign subsidiaries - - (1,253) - - (1,253)
Exchange differences
recycled to the income
statement on disposal
of business - - 109,030 - - 109,030
Transactions with
owners:
Issue of share capital 10,033 - - - - 10,033
Share based payment
charge - - - 17,839 - 17,839
Forfeited share options
reversed through reserves - 61,931 - (61,931) - -
Balance as at 31
March 2022 4,043,194 (1,397,476) - 703,151 1,000,000 4,348,869
-------------------------------- ------------- ------------- ------------ ------------ ------------ ------------
The share capital account represents the amount subscribed for
share capital, net of share issue expenses. Share issue expenses
comprise the costs in respect of the issue by the Company of new
shares.
Retained earnings represents the cumulative earnings of the
Group attributable to the owners of the parent.
The translation reserve represents the cumulative movement in
the translation of foreign subsidiaries into the presentation
currency.
The share option and warrant reserve represents the cumulative
share option and warrant charges.
Consolidated cash flow statement
for the year ended 31 March 2022
2022 2021
Note GBP GBP
------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Profit / (loss) before tax 1,475,052 (3,551,940)
Adjustments for:
Depreciation 64,275 75,753
Amortisation and impairment of intangibles 305,538 348,748
Amortisation of right of use assets 108,982 108,981
Impairment of goodwill 130,347 -
Impairment of investment and receivable in
Furnace - 1,440,000
Share based payment 17,839 175,949
Gain on disposal of subsidiaries 8 (3,498,102) -
Amortisation of borrowing costs 23,659 -
Net finance expense recognised in profit
or loss 178,081 32,569
(1,194,329) (1,369,940)
------------------------------------------------- ----- ------------ ------------
Changes in working capital:
(Increase) / Decrease in trade and other
receivables (290,025) 1,093,419
Decrease in trade, contract liabilities and
other payables (749,745) (126,756)
------------------------------------------------- ----- ------------ ------------
Cash used in operations (2,234,099) (403,277)
------------------------------------------------- ----- ------------ ------------
Interest paid (9,745) (3,774)
Net cash used in continued operating activities (2,243,844) (407,051)
------------------------------------------------- ----- ------------ ------------
Cash flows from investing activities
Interest received 104 4
Acquisition of property, plant and equipment (13,315) (36,161)
Expenditure on development cost - (157,779)
Proceeds on disposal of subsidiaries, net 3,163,674 -
of cash disposed
Net cash generated from / (used in) investing
activities 3,150,463 (193,936)
------------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Repayment of lease liabilities (95,998) (89,313)
Interest on lease interest (22,114) (28,799)
Proceeds from borrowings 2,500,000 50,000
Repayment of borrowings (7,906) -
Loan transaction costs (205,347) -
Interest paid on borrowings (146,291) -
Proceeds from issue of shares 10,033 1,247,600
Costs of share issuance - (117,866)
Net cash generated from financing activities 2,032,377 1,061,623
------------------------------------------------- ----- ------------ ------------
Net increase in cash equivalents 2,938,996 460,636
Cash and cash equivalents at beginning of
year 545,321 79,282
Foreign exchange (losses)/gains on cash and
cash equivalents (1,254) 5,403
------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at end of year 3,483,063 545,321
------------------------------------------------- ----- ------------ ------------
Notes to the consolidated financial statements
for the year ended 31 March 2022
1. General information
Falanx Group Limited (the "Company" or "Falanx") and its
subsidiaries (together the "Group") operate in the cyber security
market.
The Company is a public limited company which is listed on the
AIM Market of the London Stock Exchange and is incorporated and
domiciled in the British Virgin Islands. The address of its
registered office is PO Box 173, Kingston Chambers, Road Town,
Tortola, British Virgin Islands. The UK registered office The
Blade, Abbey Square, Reading, RG1 3BE.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been applied consistently to all the years presented
unless otherwise stated.
2.1 Basis of preparation
These consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standards . The
functional and presentational currency for the financial statements
is Sterling. The financial statements have been prepared under the
historical cost convention, as modified by financial assets and
financial liabilities at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 3.
2.1.1 Going concern
The Financial Statements have been prepared on a going concern
basis which the Directors consider to be appropriate for the
following reasons.
The Group made a loss from continuing operations in the year
ended 31 March 2022 of GBP1.98m (2021: GBP3.45m) in the year of
which GBP1.27m (2021: GBP1.35m) relates to the Adjusted EBITDA
performance of the business, which most closely correlates to its
underlying cash performance. Cash balances as at 31 March 2022
stood at GBP3.5m and these were seen by the Board as sufficient to
achieve break even and cash generation on its organic plans. The
Group's significant investment in sales and marketing expansion
from the start of 2022 has built a strong pipeline of business, and
these have now recently begun to deliver significant contract wins,
particularly for recurring monitoring revenues. This provides the
board with further confidence in its projections. During the year
ended 31 March 2022, approximately GBP0.62m of HMRC legacy COVID-19
related liabilities were paid down, and the small remaining balance
of circa GBP70,000 was fully repaid under the agreed payment plan
by August 2022. HMRC are fully in terms. The Group expects to
receive the final GBP0.345m of cash consideration, which has been
held in escrow, from the disposal of Assynt in October 2021 in
October 2022. GBP1.5m of the cash balance was reserved for use on
acquisitions, but this can be used for reasonable non acquisitive
purposes, with BOOST&Co's consent, such consent not to be
unreasonably withheld or delayed. The Group's base case scenario
does not require the use of this cash. The Group's current
strategy, reflecting recent low equity valuations, is for organic
growth to be a priority as the Group believes that it can generate
greater shareholder returns than potentially dilutive acquisitions,
and therefore the Board expects that, should it be required, then
this consent will be forthcoming. The monthly repayment of the
BOOST&Co GBP2.5m loan commences in October 2022 and is
reflected in detailed forecasts which demonstrate that this
repayment obligation will be met in full and on schedule.
Should the Group not achieve its revenue and growth targets, the
Board routinely prepares alternative stress test scenarios to deal
with lower performance and any ensuing shortfall in working
capital. This model assumes that cost reductions mainly around
overheads and discretionary expansion spend would be curtailed as
well as certain investment spends. Other measures could involve the
disposal of assets. Furthermore, the Group could seek, as in
previous years, the support of investors (debt or equity). Based
upon the above the Directors have a reasonable expectation that the
Group has adequate working capital for the twelve months following
the date of signing these accounts. For this reason, they continue
to adopt the going concern basis in preparing the financial
statements.
2.1.2 New and Revised Standards
Standards in effect in 2022 and 2023
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the group has decided
not to adopt early.
The following amendments are effective for the period beginning
1 January 2022:
- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
- Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
- References to Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for periods beginning on
or after 1 January 2023:
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
- Definition of Accounting Estimates (Amendments to IAS 8); and
- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
The Group does not expect any of the amendments issued by the
IASB, but not yet effective, to have a material impact on the
Group.
2.1.3 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 is a key
metric which the Board uses to assess the performance of the Group
and its divisions as it reflects the costs. Rental costs are
charged against this measure as they are largely under the control
of the division and correlate closely with cash performance.
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. Furthermore, the use of EBITDA means a closer
correlation with the cash performance of the business.
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.
The key APM that the Group has focused on is as follows:
Adjusted EBITDA: This is the headline measure used by management
to measure the Group's performance and is based on operating profit
before the impact of financing costs, IFRS16, share based payment
charges, depreciation, amortisation, impairment charges and other
highlighted items. Highlighted items (note 5.1) relate to certain
costs that derive from events or transactions that fall within the
normal activities of the Group but which, individually or, if of a
similar type, in aggregate, are excluded by virtue of their size
and nature in order to reflect management's view of the performance
of the Group.
2.2 Consolidation
Subsidiaries
Subsidiary undertakings are entities that are controlled by the
Company. The definition of control involves three elements: power
over the investee; exposure or rights to variable returns and the
ability to use the power over the investee to affect the amount of
the investor's returns. The Group generally obtains power through
voting rights. Subsidiaries are consolidated from the date at which
the Group obtains the relevant level of control and are treated as
disposed of, and so de-consolidated from the date at which that
control ceases.
The acquisition method of accounting is used for all business
combinations. On acquisition, the cost is measured at the aggregate
of their fair values at the date of exchange, of assets given,
liabilities incurred or assumed, and equity instruments issued by
the Group in exchange for control of the acquire. Any costs
directly attributable to the business combination are expensed as
incurred. The acquiree's identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition
under IFRS 3 (Revised), "Business Combinations" are recognised at
fair values at the acquisition date.
Goodwill represents the excess of the consideration transferred,
the amount of any non-controlling interest in the acquiree and the
acquisition date fair value of any previous equity interest in the
acquiree over the fair value of the Group's share of the
identifiable net assets acquired is recorded as goodwill. If, after
reassessment, the Group's interest in the net fair value of the
acquiree's identifiable assets, liabilities and contingent
liabilities exceeds the cost of the business combination, the
difference is recognised directly in profit or loss. Any subsequent
adjustment to reflect changes in consideration arising from
contingent consideration amendments are recognised in profit or
loss.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries
have been adjusted where necessary to ensure consistency with the
policies adopted by the Group. All subsidiaries are wholly owned by
the Group.
2.3 Segmental reporting
In accordance with IFRS 8, segmental information is presented
based on the way in which financial information is reported
internally to the chief operating decision maker. The Group's
internal financial reporting is organised along product and service
lines and therefore segmental information has been presented about
business segments. A business segment is a group of assets and
operations engaged in providing products and services that are
subject to risks and returns which are different from those of
other business segments.
2.4 Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods and services in the ordinary
course of the Group's activities. Revenue is shown net of
value-added tax, returns, rebates and discounts and after
eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits
will flow to the entity and when specific criteria have been met
for each of the Group's activities.
Revenue is recognised on the following bases:
Class of revenue Recognition criteria
Subscription fees straight line basis over the life of the contract
Managed services straight line basis over the life of the contract
Consultancy on delivery of service to customers
Vulnerability assessment on delivery of service to customers
Revenue is recognised as the client receives the benefit of the
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 from the provision of professional services such as
penetration testing, consultancy and strategic intelligence
assignments are 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 statement of financial position and recognised on utilisation
of service by the client.
Revenue from cyber monitoring contracts (including
installation), intelligence embedded analyst and report
subscriptions includes advance payments made by the customer is
deferred (as a contract liability) and is then subsequently
recognised on a straight-line basis over the term of the contract.
Where they are billed periodically in a monthly in arrears basis,
revenues are recognised at that point.
Contracts values are typically fixed price and the pricing level
is based on management experience of pricing adequate mark up of
prime cost. Where additional services need to be delivered outside
of the contract a time and materials basis based on day rates is
used.
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 associated sales commissions are
prepaid and amortised over the terms of the contract on a
straight-line basis. Commissions paid to sale staff for work in
obtaining the Prepaid Consultancy are recognised in the month of
invoice. The timing and any conditionality for the payment of
commissions is governed under the then applicable sales incentive
plan.
Revenues are exclusive of applicable sales taxes and are net of
any trade discounts. There are no financing components in any of
our revenue streams.
Contract Assets (accrued incomes) balance were GBP27,100 (2021:
GBP63,692) and is included in notes and the change compared to the
previous year was due to short term timing differences. Contract
Liabilities (deferred incomes) balance of GBP529,496 (2021:
GBP1,108,317). Included in the Contract Liabilities at the 31 March
2022 were approximately GBP29,981 (2021: GBP121,327) residual
balance from prior year. All Contract Assets at the 2022-year end
arose towards the end of the period. All contract assets have short
cash conversion periods and all assets at the year-end have since
been monetised.
The Board considers that the information in note 4 adequately
depicts how the nature, amount, timing and uncertainty of revenue
and cash flow are affected by economic factors.
2.5 Taxation
The tax expense for the year represents the total of current
taxation and deferred taxation. The charge in respect of current
taxation is based on the estimated taxable profit for the year.
Taxable profit for the year is based on the profit as shown in the
income statement, as adjusted for items of income or expenditure
which are not deductible or chargeable for tax purposes. The
current tax liability for the year is calculated using tax rates
which have either been enacted or substantively enacted at the
reporting date.
Deferred tax is provided in full, using the liability method on
temporary differences arising between the tax base of assets and
liabilities and their carrying values in the financial statements.
Deferred tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a
business combination that, at the time of the transaction, affects
neither accounting nor taxable profit or loss. Deferred tax is
determined using tax rates which have been enacted or substantively
enacted at the reporting date and are expected to apply when the
related deferred tax asset is realised, or the deferred income tax
liability is settled.
Deferred tax assets are recognised for all deductible temporary
differences, carry forward of tax assets and unutilised tax losses,
to the extent that it is probable that taxable profits will be
available against which the deductible temporary differences, and
the carrying forward of tax assets and unutilised tax losses can be
utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and adjusted to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the deferred tax assets to be utilised. Conversely,
previously unrecognised deferred tax assets are recognised to the
extent that it is probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates and tax
laws that have been enacted or substantively enacted at the
statement of financial position date.
2.6 Foreign Currency
The Company has determined Sterling as its functional currency,
as this is the currency of the economic environment in which the
Company predominantly operates.
Transactions in currencies other than Sterling are recorded at
the rates of exchange prevailing on the dates of the transactions.
At each reporting date, the monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates
prevailing on the reporting date. Non-monetary assets and
liabilities are 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. Gains and losses arising
on exchange are included in profit or loss.
Foreign currency differences arising on retranslation are
recognised in profit or loss.
In the case of foreign entities, the financial statements of the
Group's overseas operations are translated as follows on
consolidation: assets and liabilities, at exchange rates ruling on
reporting date, income and expense items at the average rate of
exchange for the period and equity at exchange rates ruling on the
dates of the transactions. Exchange differences arising are
classified as equity and transferred to a separate translation
reserve. Such translation differences are recognised in profit or
loss in the period in which the operation is disposed of. Foreign
exchange gains and losses arising from monetary item receivable
from or payable to a foreign operation, the settlement of which is
neither planned nor likely within the foreseeable future, are
considered to form part of net investment in a foreign operation
and are recognised directly in equity.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Foreign currency gains and losses are reported on a net
basis.
2.7 Property, plant and equipment
All property, plant and equipment are stated at historical cost
less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
All assets are depreciated in order to write off the costs, less
anticipated residual values of the assets over their useful
economic lives on a straight-line basis as follows:
-- Fixtures and fittings: 5 years
-- Computer equipment: 3 years
-- Leasehold: 5 years
2.8 Intangible assets
Acquired intangible assets are shown at historical cost.
Acquired intangible assets have a finite useful life and are
carried at cost, less accumulated amortisation over the finite
useful life. All charges in the year are shown in the income
statement in administrative expenses.
Goodwill
Goodwill arising on acquisition is stated at cost. Goodwill is
not amortised, but subject to an annual test for impairment.
Impairment testing is performed by the Directors. Where impairment
is identified, it is charged to the income statement in that
period.
Software and brand licences
Acquired software and brand licences are shown at historical
cost. Software and brand licences have a finite useful life and are
carried at cost less accumulated amortisation. Amortisation is
calculated using the straight-line method to allocate the cost of
software and brand licences over the period of the licence. The
brand and software licences have been fully amortised in previous
accounting periods.
Research and development
Research expenditure is charged to the income statement in the
year incurred.
Development costs that are directly attributable to the design
and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets when the following
criteria are met:
-- it is technically feasible to complete the software so that
it will be available for use;
-- management intends to complete the software product and use or sell it;
-- it can be demonstrated how the software product will generate
probable future economic benefits;
-- adequate technical, financial and other resources to complete
the development and to use or sell the software product are
available; and
-- the expenditure attributable to the software product during
its development can be reliably measured.
Other development expenditures that do not meet these criteria
are charged to the income statement in the year incurred.
Development costs recognised as assets are amortised over their
estimated useful life, which does not exceed 5 years.
Government tax credits available on eligible Research and
Development expenditure ('R&D Tax Credits') and not reclaimable
through other means are recognised in income and treated as a
government grant.
Customer relationships
Customer relationships are amortised over the period expected to
benefit as follows:
-- First Base: 10 years
-- Securestorm: 3 years (fully amortised in the year ended 31 March 2022)
2.9 Impairment of non-financial assets
Assets that are subject to depreciation or amortisation are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. A review
for indicators of impairment is performed annually. An impairment
loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset's fair value less costs to sell and value in
use. Any impairment charge is recognised in the income statement in
the year in which it occurs. When an impairment loss, other than an
impairment loss on goodwill, subsequently reverses due to a change
in the original estimate, the carrying amount of the asset is
increased to the revised estimate of its recoverable amount, up to
the carrying amount that would have resulted, net of depreciation,
had no impairment loss been recognised for the asset in prior
years.
2.10 Financial instruments
The Group applies a simplified method of the expected credit
loss model when calculating impairment losses on its financial
assets which are measured at amortised cost such as trade
receivables, other debtors and prepayments. This resulted in
greater judgement due to the need to factor in forward-looking
information when estimating the appropriate amount to
provisions
(a) Financial Assets
The Group's Financial Assets include Cash and Cash Equivalents,
Trade Receivables and Other Receivables.
-- Initial Recognition and Measurement : Financial Assets are
classified as amortised cost and initially measured at fair
value.
-- Subsequent Measurement : Financial assets are subsequently
measured at amortised cost, using the effective interest method,
less impairment. Interest is recognised by applying the effective
interest method, except for short-term receivables when the
recognition of interest would be immaterial. The company only
offers short periods of credit to its customers and recorded
average debtor days of 31 at 31 March 2022 (2021: 47)
-- Derecognition of Financial Assets: The Company derecognises a
Financial Asset only when the contractual rights to the cash flows
from the asset expire, or it transfers the Financial Asset and
substantially all the risks and rewards of ownership of the asset
to another entity.
(b) Financial Liabilities and Equity Instruments
The Group's Financial Liabilities include Trade Payables,
Accruals and Other Payables. Financial Liabilities are classified
at amortised cost.
(c) Investments
Investments not in subsidiary undertakings are carried at fair
value through profit and loss.
Classification as Debt or Equity. Financial Liabilities and
Equity Instruments issued by the Company are classified according
to the substance of the contractual arrangements entered into and
the definitions of a Financial Liability and an Equity
Instrument.
2.11 Share capital
Ordinary shares (of nil par value) in the Company are classified
as equity. By definition all amounts arising from the issue of
these shares are attributable to Share Capital as are any directly
attributable (including any warrants issued as commissions) to
issue of new shares are shown in equity as a deduction to the share
capital account. The Company does not maintain a separate share
premium account.
2.12 Reserves
The consolidated financial statements include the following
reserves: translation reserve, share option reserve, 2022
Liabilities reserve and accumulated losses. Premiums paid on the
issue of share capital, less any costs relating to these, are
posted to the share capital account as referenced above.
2.13 Trade payables
Trade payables are obligations to pay for goods and services
that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and are
subsequently measured at amortised cost using the effective
interest method. As the payment period of trade payables is short,
future cash payments are not discounted as the effect is not
material.
2.14 Leases
When entering into a contract the Group assesses whether or not
a lease exists. A lease exists if a contract conveys a right to
control the use of an identified asset under a period of time in
exchange for consideration. Leases of low value items and
short-term leases (leases of less than 12 months at the
commencement date) are charged to the profit or loss on a
straight-line basis over the lease term in administrative
expenses.
The Group recognises right-of-use assets at cost and lease
liabilities on the statement of financial position at the lease
commencement date based on the present value of future lease
payments. The right-of-use assets are amortised on a straight-line
basis over the length of the lease term. The lease liabilities are
recognised at amortised cost using the effective interest rate
method. Discount rates used reflect the incremental borrowing rate
specific to the lease.
2.15 Pensions
The Company operates a defined contribution pension scheme under
which fixed contributions are payable. Pension costs charged to the
income statement represent amounts payable to the scheme during the
year.
2.16 Share-based payments
The cost of share-based payment arrangements, which occur when
employees receive shares or share options, is recognised in the
income statement over the period over which the shares or share
options vest.
The expense is calculated based on the value of the awards made,
as required by IFRS 2, 'Share-based payment'. The fair value of the
awards is calculated by using the Black-Scholes and Monte Carlo
option pricing models taking into account the expected life of the
awards, the expected volatility of the return on the underlying
share price, vesting criteria, the market value of the shares, the
strike price of the awards and the risk-free rate of return. The
charge to the income statement is adjusted for the effect of
service conditions and non-market performance conditions such that
it is based on the number of awards expected to vest. Where vesting
is dependent on market-based performance conditions, the likelihood
of the conditions being achieved is adjusted for in the initial
valuation and the charge to the income statement is not, therefore,
adjusted so long as all other conditions are met.
Where an award is granted with no vesting conditions, the full
value of the award is recognised immediately in the income
statement.
2.17 Provisions
Provisions are recognised in the statement of financial position
where there is a legal or constructive obligation to transfer
economic benefits as a result of a past event. Provisions are
discounted using a rate which reflects the effect of the time value
of money and the risks specific to the obligation, where the effect
of discounting is material.
Provisions are measured at the present value of expenditures
expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time, value of
money and the risks specific to the obligation. The increase in
provision due to the passage of time is recognised as interest
expense.
3. Critical accounting estimates and judgements
The preparation of the Group financial statements in conformity
with IFRSs as applied in accordance with the provisions of the
Companies Act 2006 requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in
the process of applying the Group's accounting policies. Estimates
and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the present
circumstances. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the Group financial statements are disclosed
below.
Judgements:
Investment in Furnace Technologies Limited
The investment agreement in Furnace Technologies Limited has
allocated Falanx Group Limited 20% of its equity. It is considered
a financial as opposed to an operational investment as Falanx does
not have the right to appoint a board member and plays no part in
its operations or policymaking. There is no ongoing obligation to
provide further investment to Furnace and Furnace has no part in
the business plans of Falanx. There is no interchange of management
personnel and any transactions between the companies are small and
are on an arm's length basis. Consequently, it has not been treated
as an associated company. The investment balance was impaired in
full in the year ended 31 March 2021 on the following basis;
-- Furnace had not yet generated material revenues
-- Furnace had not received external funding at the date of the
2021 report which would allow an objective measure of the equity
value which would validate the capital structure and its carrying
value.
-- Since then, there has been no further development in Furnace
which justify a change in treatment.
Estimates:
Management do not consider there to be significant accounting
estimates in respect of the year ended 31 March 2022.
Impairment of intangible assets
Management have assessed indicators of impairment and conducted
an impairment review of intangible assets. They have made
judgements as to the likelihood of them generating future cash
flows, the period over which those cash flows will be received and
the costs which are attributable against them. The recoverable
amount is determined using the value in use calculation. The use of
this method requires the estimation of future cash flows and the
selection of a suitable discount rate in order to calculate the
present value of these cash flows. "
In support of the assumptions, management use a variety of
sources. In addition, management have undertaken scenario analyses,
including a reduction in sales forecasts, which would not result in
the value in use being less than the carrying value of the
cash-generating unit. However, if the business model is not
successful, the carrying value of the intangible assets may be
impaired and may require writing down.
4. Segmental reporting
As described in note 2, the Directors consider that the Group's
internal financial reporting is organised along product and service
lines and , therefore, segmental information has been presented
about the remaining Cyber Security division business segment only
following the disposal of the strategic intelligence division in
October 2021. The information below also comprises the disclosures
required by IFRS 8 in respect of products and services as the
Directors consider that the products and services sold by the
disclosed segments are essentially similar and therefore no
additional disclosure in respect of products and services is
required.
The results for the business operating segment for the years
ended 31 March 2022 and 31 March 2021 are as follows:
2022 2022 2022 2021 2021 2021
GBP GBP GBP GBP GBP GBP
Continuing Discontinued Total Continuing Discontinued Total
Professional
services 2,683,204 21,102 2,704,306 2,272,951 108,375 2,381,326
Monitoring managed
services 859,104 - 859,104 876,773 - 876,773
Assynt report &
embedded analysts - 1,005,191 1,005,191 - 2,016,062 2,016,062
Revenues from
external
customers 3,542,308 1,026,293 4,568,601 3,119,724 2,124,437 5,244,161
-------------------- ------------ ------------- --------------- ---------------- ---------- --------------
Gross Margin 1,442,576 224,270 1,666,846 1,016,937 559,048 1,575,985
Cyber operating
expenses (1,598,143) - (1,598,143) (1,435,957) - (1,435,957)
Corporate operating
expenses (1,009,132) - (1,009,132) (918,607) - (918,607)
Segment Reported
EBITDA (1,164,699) (29,664) (1,194,363) (1,337,627) (32,312) (1,369,939)
Highlighted costs
(Note 5) (107,285) - (107,285) (12,893) 123,247 110,354
Segment Adjusted
EBITDA (1,271,984) (29,664) (1,301,648) (1,350,520) 90,935 (1,259,585)
-------------------- ------------ ------------- --------------- ---------------- ---------- --------------
Finance expense-net (201,464) (241) (201,705) (32,570) - (32,570)
Depreciation and
amortisation (465,417) (13,378) (478,795) (503,895) (29,587) (533,482)
Impairment of
goodwill (130,347) - (130,347) - - -
Impairment of
Furnace
equity and loan
investment - - - (1,440,000) - (1,440,000)
Share option
expense (17,839) - (17,839) (173,636) (2,313) (175,949)
Profit on sale of
discontinued
operations - 3,498,102 3,498,102 - - -
Segment loss before
tax for the year (1,979,766) 3,454,819 1,475,053 (3,487,728) (64,212) (3,551,940)
-------------------- ------------ ------------- --------------- ---------------- ---------- --------------
Segment assets consist primarily of property, plant and
equipment, intangible assets, trade and other receivables and cash
and cash equivalents. Unallocated assets comprise deferred tax
assets, financial assets held at fair value through profit or loss
and derivatives. Segment liabilities comprise operating
liabilities; liabilities such as deferred taxation, borrowings and
derivatives are not allocated to individual business segments.
Segment assets, liabilities and capital expenditure for the year
then ended are as follows:
2022 2021 2021 2021
Continuing Continuing Discontinued Total
GBP GBP GBP GBP
---------------------------------------- ----------- ----------- ------------- ----------
Contract assets 27,100 62,141 1,551 63,692
Other assets 8,296,487 5,267,711 374,615 5,642,326
Contract liabilities (deferred income) 529,496 465,000 643,317 1,108,317
Other liabilities 3,418,222 1,617,349 318,175 2,006,524
Capital expenditure - Tangible 13,315 36,161 - 36,161
Capital expenditure - Intangible - 157,780 - 157,780
---------------------------------------- ----------- ----------- ------------- ----------
Geographical information
The Group's business segments operate in five geographical
areas, although all are managed on a worldwide basis from the
Group's head office in the United Kingdom. All non-current assets
are in the United Kingdom.
A geographical analysis of revenue and non-current assets is
given below. Revenue is allocated based on location of customer;
non-current assets are based in the United Kingdom.
Revenue by geographical location
2022 2022 2022 2021 2021 2021
Continuing Discontinued Total Continuing Discontinued Total
GBP GBP GBP GBP GBP GBP
------------------------ ----------- ------------- ---------- ----------- ------------- ----------
United Kingdom 2,948,696 572,575 3,521,271 2,788,215 1,129,441 3,917,656
Europe 181,808 112,051 293,859 189,005 338,898 527,903
The Americas 376,539 150,678 527,217 114,104 341,307 455,411
Australasia 35,265 64,029 99,294 28,100 157,800 185,900
Middle East and Africa - 126,960 126,960 - 157,291 157,291
3,542,308 1,026,293 4,568,601 3,119,424 2,124,737 5,244,161
------------------------ ----------- ------------- ---------- ----------- ------------- ----------
Non-current assets 2022 2021 2021 2021
Continuing Continuing Discontinued Total
GBP GBP GBP GBP
-------------------- ----------- ----------- ------------- ----------
United Kingdom 3,621,304 4,203,752 18,190 4,221,942
3,621,304 4,203,752 18,190 4,221,942
-------------------- ----------- ----------- ------------- ----------
Major customers
No customer contributed 10% or more to the Group's revenue in
2022 (2021: nil). The highest individual customer contributed c9%
of revenues.
Contract Assets (accrued incomes) balances were GBP27,100 (2021:
GBP63,992). Included in the Contract Liabilities (deferred incomes)
at the 31 March 2022 were approximately GBP29,981 (2021:
GBP121,327) residual balance from prior year. All Contract Assets
at the 2022-year end arose towards the end of the period and were
billed and collected in the normal course of business in the next
financial year.
Contract Contract Contract Contract
Assets Assets Liabilities Liabilities
2022 2021 2022 2021
GBP GBP GBP GBP
------------------------------------------- --------- --------- ------------ ------------
At 1 April 63,992 27,747 (1,108,317) (1,237,347)
Transfers in the year from contract
assets to trade receivables (63,992) (27,747) - -
Transfers from contract liabilities
to revenue in the year - - 842,732 1,116,019
Disposal in the year - - 235,604 -
Amount recognised as revenue in the
year not yet invoiced 27,100 63,992 - -
Amount invoiced in advance not recognised
as revenue in the year - - (499,515) (986,989)
------------------------------------------- --------- --------- ------------ ------------
At 31 March 27,100 63,992 (529,496) (1,108,317)
------------------------------------------- --------- --------- ------------ ------------
5. Highlighted costs and Adjusted EBITDA
Operating loss includes the following items which the Directors
consider to be one-off in nature, non-cash expenses or necessary
elements of expenditure to derive future benefits for the Group
which have not been capitalised on the consolidated statement of
financial position.
5.1 Highlighted costs / (income)
2022 2021
GBP GBP
------------------------------- ---- ---------- ----------
Restructuring and other costs a) - (40,738)
Infrastructure upgrade b) - 66,887
Rent c) (107,285) (107,285)
Closed premises d) - 68,243
(107,285) (12,893)
------------------------------------ ---------- ----------
a) Restructuring costs
Cost of corporate development and professional services
associated with the restructuring. This did not include any impact
of COVID-19.
b) Infrastructure upgrade
Cost of technology, infrastructure, and upgrade of applications
for internal use and customer delivery.
c) Rent
Re-instatement of accounting charge in respect of rental
payments on the Reading lease not reflected under IFRS 16. The
group uses Adjusted EBITDA as a metric for business unit assessment
and this reflects the actual rental payments, adjusted for rent
free periods.
d) Closed premises
Costs including unused rental periods and lease dilapidations
related to London and Sussex premises closed during summer
2020.
5.2 Adjusted EBITDA - continuing
2022 2021
GBP GBP
-------------------------------------------------- ------------ ------------
Operating loss (1,778,302) (3,455,158)
Depreciation and amortisation 465,417 503,895
Impairment of goodwill 130,347 -
Impairment of Furnace equity investment and loan - 1,440,000
Share option expense 17,839 173,636
-------------------------------------------------- ------------ ------------
EBITDA (1,164,699) (1,337,627)
Highlighted costs (note 5.1) (107,285) (12,893)
-------------------------------------------------- ------------ ------------
Adjusted EBITDA (1,271,984) (1,350,520)
-------------------------------------------------- ------------ ------------
6. Operating loss - continuing
Operating loss for the year is stated after charging the
following:
2022 2021
GBP GBP
----------------------------------------------------- -------- ----------
Depreciation of owned property, plant and equipment 63,732 71,585
Amortisation of right of use asset 108,981 108,981
Amortisation and impairment of intangible fixed
assets 292,703 323,329
Impairment of goodwill 130,347 -
Impairment of Furnace equity investment and loan - 1,440,000
Operating lease rentals - Land & Buildings 10,865 20,300
Share based payment expense 17,839 173,636
Foreign exchange loss 4,483 2,959
R&D tax credit - (19,894)
----------------------------------------------------- -------- ----------
7. Income tax expense
2022 2021
GBP GBP
Current tax
Current tax on loss for the year - -
Over provision in prior year - -
------------------------------------------- -------- -----
Total current tax - -
------------------------------------------- -------- -----
Deferred tax
Deferred tax (credit)/expense for the year (9,529) -
------------------------------------------- -------- -----
Total deferred tax (9,529) -
------------------------------------------- -------- -----
Income tax expense - -
------------------------------------------- -------- -----
The parent Company is resident in the UK for tax purposes
together with all of its subsidiaries. Other subsidiaries which
were resident in foreign tax jurisdictions were disposed of on the
sale of Assynt in October 2021
Potential deferred tax asset
The extent to which deferred tax assets can be recognised is
based on an assessment of the probability of the Group's future
taxable income against which the deferred tax assets can be
utilised. This is based on projected forecasts and budgets which
are reviewed by the Directors and judgement is made as to whether
the deferred tax asset can be recognised. At 31 March 2022, a
deferred tax asset has not been recognised (2021: GBPnil).
Accumulated tax losses (subject to HMRC) agreement stood at
approximately GBP11m (2021: GBP13.9m). No asset in respect of these
losses has been recognised.
The tax charge for the year is different from the standard rate
of corporation tax in the United Kingdom of 19% (2021: 19%). The
difference can be reconciled as follows:
2022 2022 2022 2021 2021 2021
Continuing Discontinued Total Continuing Discontinued Total
GBP GBP GBP GBP GBP GBP
--------------------------- ------------ ------------- ---------- ------------ ------------- ------------
Profit / (Loss)
before tax (1,979,766) 3,454,818 1,475,052 (3,487,728) (64,212 (3,551,940)
Tax calculated
at the applicable
rate based on
the loss for
the year 19%
(2021: 19%) (376,155) 656,415 280,260 (662,669) (12,200) (674,869)
Tax effects of:
Expenses not
deductible for
tax purposes 3,552 72 3,624 306,591 439 307,030
Chargeable gain
not taxed - (664,639) (664,639) - - -
Non taxable income (11,043) - (11,043)
Deferred tax
not recognised 364,124 7,102 371,226 367,121 11,761 378,882
Current tax on
loss for the
year (8,479) (1,050) (9,529) - - -
--------------------------- ------------ ------------- ---------- ------------ ------------- ------------
8. Discontinued operations
On 06 October 2021, Falanx announced that it had entered into a
formal sale agreement to dispose of Assynt Strategic Intelligence
Division ("Assynt") for cash consideration of GBP4.6 million to
Cross Atlantic LLC. Assynt, which represented the entirety of the
Assynt operating segment, was classified as a discontinued
operation at that date. Consequently, Assynt has not been presented
as an operating segment in the segment note.
The results of the discontinued operation and the effect of the
disposal on the financial position of the Group were as
follows:
Financial performance and cash flow information
Results of the discontinued operations
for the period to disposal
2022 2021
Income statement GBP GBP
--------------------------------------------- ------------ ------------
Revenue 1,026,294 2,124,437
Administrative expenses (1,069,336) (2,188,649)
---------------------------------------------- ------------ ------------
Operating loss (43,042) (64,212)
Finance costs (241) -
--------------------------------------------- ------------ ------------
Loss before income tax (43,283) (64,212)
Income tax credit 1,050 -
--------------------------------------------- ------------ ------------
Loss from discontinued operations before
gain on sale (42,233) (64,212)
---------------------------------------------- ------------ ------------
Profit on sale of discounted operations 3,498,102 -
--------------------------------------------- ------------ ------------
Profit / (loss) from discontinued operation 3,455,869 (64,212)
---------------------------------------------- ------------ ------------
2022 2021
Cash flows from/(used in) discontinued GBP GBP
operation
---------------------------------------------- ---------- ----------
Net cash flows from operating activities (388,485) (759,283)
Net cash flows from investing activities - -
Net cash flows from financing activities - -
Net cash flows for the year (388,485) (759,283)
Intra-Group funding and transactions 323,031 841,580
----------------------------------------------- ---------- ----------
Net cash flows from discontinued operations,
net of intercompany (65,454) 82,297
----------------------------------------------- ---------- ----------
Effect of disposal on the financial position of the Group
2022
Net assets disposed of and the gain on disposal GBP
---------------------------------------------------------- ---------
Assets of the disposal group
Property, plant & equipment 442
Intangible assets 4,293
Trade and other receivables 174,021
Total assets 178,756
---------------------------------------------------------- ---------
Liabilities of the disposal group
Deferred tax liability
Trade and other payables 201,928
Contract liabilities 420,286
Total liabilities 622,214
---------------------------------------------------------- ---------
Net assets of the disposal group (443,458)
---------------------------------------------------------- ---------
Consideration received in cash and cash equivalents,
net of transactions costs 3,163,674
---------------------------------------------------------- ---------
Gain on sale before income tax and reclassifications
of FX translation reserve 3,607,132
---------------------------------------------------------- ---------
Exchange differences received to the income statement (109,030)
---------------------------------------------------------- ---------
Gain on sale of discontinued operation 3,498,102
---------------------------------------------------------- ---------
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents,
net of transaction costs 3,163,674
Less cash and cash equivalents disposed of -
---------------------------------------------------------- ---------
3,163,674
------------------------------------------------------ ---------
9. Basic and diluted earnings per share
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year. There
are no dilutive share options at present as these would currently
increase the loss per share.
Continuing operations
2022 2021
GBP GBP
----------------------------------------------------- ------------ ------------
Profit / (Loss) for the year attributable to equity
holders of the Company 1,484,582 (3,551,940)
----------------------------------------------------- ------------ ------------
Less profit / (loss) from discontinued operations 3,455,869 (64,212)
----------------------------------------------------- ------------ ------------
Loss from continuing operations (1,971,287) (3,487,728)
----------------------------------------------------- ------------ ------------
Total basic and diluted loss per share (pence
per share) (0.37) (0.75)
----------------------------------------------------- ------------ ------------
Continuing and discontinued operations
2022 2021
GBP GBP
--------------------------------------------------- ---------- ------------
Profit / (Loss) for the year attributable to
equity holders of the Company 1,484,582 (3,551,940)
Total basic and diluted profit / (loss) per share
(pence per share) 0.28 (0.77)
--------------------------------------------------- ---------- ------------
Weighted average number of shares used as the denominator
2022 2021
------------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares used
as the denominator in the calculating basic earnings
per share 526,181,678 462,675,158
------------------------------------------------------- ------------ ------------
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue to assume the
conversion of all dilutive potential ordinary shares. The Company's
dilutive potential ordinary shares arise from warrants and share
options. In respect of the warrants, a calculation is performed to
determine the number of shares that could have been acquired at
fair value, based upon the monetary value of the subscription
rights attached to the outstanding warrants. The number of shares
calculated as above is compared with the number of shares that
would have been issued assuming the exercise of the warrants.
At 31 March 2022, the potentially dilutive ordinary shares were
anti-dilutive because the Group was loss-making. The basic and
diluted earnings per share as presented on the face of the income
statement are therefore identical. All earnings per share figures
presented above arise from continuing and total operations and,
therefore, no earnings per share for discontinued operations is
presented.
10. Borrowings
Falanx Cyber Defence Ltd, a wholly owned subsidiary took out a
GBP50,000 Coronavirus Business Interruption Loan (CBIL) with HSBC.
The loan is repayable in 5 years from June 2021. The loans attract
an interest rate of 2.5%. No arrangement fees were applied by the
lender.
On 18 August 2021, the Company announced a 5-year growth loan
facility from BOOST&Co taken via Falanx Cyber Defence Limited
(a wholly owned subsidiary). The full GBP2.5m was drawn down in 2
tranches, the first of GBP1m on 18 August 2021 and the second of
GBP1.5m on 13 October 2021. Annual interest is 11%, and
straight-line amortisation of the loan commencing after 12 months.
The loan carries a 3% early prepayment fee on the then amount
outstanding.
2022 2021
GBP GBP
------------------------------ ---------- -------
Non-current
Bank loan 32,414 42,129
Term loan 2,062,324 -
------------------------------ ---------- -------
2,094,738 42,129
------------------------------ ---------- -------
Current
Bank loan 9,715 7,871
Term loan 255,987 -
------------------------------ ---------- -------
265,702 7,871
------------------------------ ---------- -------
Total Loan liability 2,360,440 50,000
---------------------------------- ---------- -------
Analysis of loan liability
At 1 April 50,000 -
Loan repayment (7,871) -
Additions 2,500,000 50,000
Loan costs (205,347) -
Amortised transaction cost 23,658 -
At 31 March 2,360,440 50,000
---------------------------------- ---------- -------
Analysis of gross value
of bank loan
------------------------------ ---------- -------
Maturity of the bank loan 2022 2021
is analysed as follows:
GBP GBP
------------------------------ ---------- -------
Within 1 year 265,702 7,871
---------------------------------- ---------- -------
Later than 1 year and less
than 5 years 2,094,738 42,129
---------------------------------- ---------- -------
At 31 March 2,360,440 50,000
---------------------------------- ---------- -------
11. Related party transactions
Falanx Group Limited provided head office and management
services to subsidiary companies and supported them with working
capital during the year ended 31 March 2022.
On 18 August 2021, the Company announced a new loan facility
from BOOST&Co, and the facility was arranged by Welbeck
Ventures Limited who received 2% of the loan on completion in
respect of advisory fees. Alex Hambro (Non-Executive Chairman) is
also a director of Welbeck Ventures Limited.
12. Events after the reporting period
On 22 June 2022, the Company signed a deed of variation for the
lease for the premises in Reading. The lease was varied to delete
the break option and reduce the principal rent by 50% for the
period from 1 August 2022 to 31 July 2023.
The statutory accounts for the year ended 31 March 2022 have not
yet been delivered to the Registrar of Companies. The auditors have
reported on them and their report was unqualified and did not
contain a statement, which had the Company been UK incorporated,
would have been required under either Section 498 (2) or Section
498 (3) of the Companies Act 2006 and did not include references to
any matters to which the auditor drew attention by way of emphasis.
This final results announcement does not constitute statutory
accounts under Section 435 of the companies Act 2006
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END
FR SELFWAEESEFU
(END) Dow Jones Newswires
September 29, 2022 02:00 ET (06:00 GMT)
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