TIDMCCS
RNS Number : 9081N
Crossword Cybersecurity PLC
28 September 2023
Crossword Cybersecurity Plc
Interim Results & Notice of Investor Presentation
28 September 2023 - London, UK - Crossword Cybersecurity Plc
(AIM:CCS, "Crossword", the "Company" or the "Group"), the
cybersecurity solutions company focused on cyber strategy and risk,
today announces its unaudited interim results for the 6 months
ended 30 June 2023 .
In the first half of 2023, Crossword shifted its focus from one
of acquiring new products and building out the team towards
establishing a clear path to profitability with its current suite
of products and dedicated staff. Profitability will be underpinned
by continuing strong revenue growth, margin improvement and cost
containment.
Financial Highlights
-- Revenue of GBP1.9m for the 6 months ended 30 June 2023, an
increase of 27% from the same period in the previous year.
-- ARR at the end of H1 2023 was GBP2.7m, growth of 35% compared
to the same period in the prior year.
-- Strong revenue growth was experienced across all revenue lines.
-- In H1 2023, overall gross margin increased to 20% compared to 16% in H1 2022.
-- Consulting margin continues to improve as revenue scales to achieve critical mass.
-- 80% growth in the higher margin product revenues helped to drive margin improvement.
-- Administrative expenses have stabilised in 2023. Excluding
one-off professional fees in H1 2023, administrative expenses have
increased by less than 2% over the same period in the prior year.
With increasing revenue, this represents a reduction of 20% in
administrative expenses as a percentage of revenue in H1 2023.
-- Investment in Managed Services' platform and operations, to
support future revenue growth. This had a short-term adverse impact
on Managed Services' margin which was reflected in margin for the
period.
Operational Highlights
-- Software Engineering services revenue in H1 2023 helped to
strengthen ties with a key partner and provided a valuable
development opportunity for staff.
-- Crossword has leveraged its 100+ client base to cross sell
and has increased emphasis on targeting its larger clients that can
make full use of Crossword's range of products and services.
Post Period Highlights
-- Following the General Meeting in July 2023, the company has
authority to issue GBP2.5m additional debt.
-- On 31 August the Company announced that it had entered into
agreements for a five-year, unsecured, convertible loan up to the
value of GBP2,015,000. The funds raised will be used to support
sales and marketing, product and services development and to
provide general working capital.
Outlook
-- Crossword has a strong sales pipeline the continued
conversion of which will drive revenue to achieve market
expectations for the full year to 31 December 2023.
-- Crossword's diversified product and services offering will drive scale while managing risk.
-- Crossword is targeting a drop by half in administrative
expenses as a percentage of revenue in 2024 compared to 2022.
-- Focus on margin improvement will ensure that there is a
clear, carefully managed route to achieving profitability in the
medium term.
-- The Company is projecting the revenue growth rate for 2024 to
be circa 30%, to achieve total revenue of circa GBP8m in 2024.
-- Crossword is aiming to deliver EBITDA and cash breakeven on a
monthly basis during the second half of 2024.
Tom Ilube CBE, CEO at Crossword Cybersecurity Plc, said:
"As the economic landscape continues to be challenging for many,
Crossword is fortunate to be operating in the cyber security sector
where client spend has held up well in the first half of the year.
I am pleased to present the interim accounts of Crossword
Cybersecurity plc for the 6 month period to 30 June 2023. During
this period, we have made significant progress on our path to
profitability and continue in our mission to reduce cyber risks for
our clients by providing a portfolio of innovative products and
services.
In an environment of increasing number and complexity of
cyber-attacks, Crossword's business model centred around specialist
cyber security products and services with distinct USPs and a
strongly growing Consulting division, saw continued strong revenue
growth in the first half of 2023.
We are grateful for the continued support of our shareholders.
The investment round earlier this month is intended to take
Crossword to EBITDA and cash breakeven in the second half of 2024.
We are also grateful for our dedicated employees, and valued
customers for their ongoing support. Together, we will navigate the
challenges and opportunities that lie ahead to deliver results for
our shareholders, and a lower risk cyber environment for our
clients and partners to operate in.
I am excited about the opportunities with AI and LLMs (Large
Language Models). We are exploring initiatives with industry
partners and leading academics to investigate the application of
Generative AI to cyber security. It is extremely challenging for
any single company to keep track of and evaluate the many
applications that are emerging, so Crossword is looking to bring
together its major clients to engage with this exciting area.
2023 is shaping up to be another year of strong growth for
Crossword with a pipeline of opportunities to drive revenue in the
second half of 2023. Our challenge is to convert this strong
pipeline into signed contracts, and this will depend on our
clients' and prospects' spend holding up during H2. We are
forecasting continued growth into 2024, with revenue growth of 30%
to circa GBP8m."
Investor Call
Members of the Executive Team will provide a live presentation
relating to the Interim Results via the Investor Meet Company
platform on Monday 2nd Oct 2022 at 12:00pm BST.
The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via your
Investor Meet Company dashboard up until 9:00am the day before the
meeting or at any time during the live presentation. Investors can
sign up to Investor Meet Company for free and add to meet CROSSWORD
CYBERSECURITY PLC via:
https://www.investormeetcompany.com/crossword-cybersecurity-plc/register-investor
Investors who already follow Crossword on the Investor Meet
Company platform will automatically be invited.
- Ends -
Contacts
Crossword Cybersecurity plc - Tel: +44 (0) 333 090 2587
Email: info@crosswordcybersecurity.com
Tom Ilube, Chief Executive Officer
Mary Dowd, Chief Financial Officer
Grant Thornton (Nominated Adviser) - Tel: +44 (0) 20 7383
5100
Colin Aaronson / Jamie Barklem / Ciara Donnelly
Hybridan LLP (Broker) - Tel: +44 (0)203 764 2341
Claire Louise Noyce
For media enquiries contact:
Duncan Gurney, GingerPR
duncan@gingerpr.co.uk - Tel: +44 (0)1932 485 300
About Crossword Cybersecurity plc
Crossword offers a range of cyber security solutions to help
companies understand and reduce cyber security risk. We do this
through a combination of people and technology, in the form of SaaS
and software products, consulting, and managed services.
Crossword's areas of emphasis are cyber security strategy and risk,
supply chain cyber, threat detection and response, and digital
identity and the aim is to build up a portfolio of cyber security
products and services with recurring revenue models in these four
areas. We work closely with UK universities and our products and
services are often powered by academic research-driven insights. In
the area of cybersecurity strategy and risk our consulting services
include cyber maturity assessments, industry certifications, and
virtual chief information security officer (vCISO) managed
services.
Crossword's end-to-end supply chain cyber standard operating
model (SCC SOM) is supported by our best-selling SaaS platform,
Rizikon Assurance, along with cost-effective cyber audits, security
testing services and complete managed services for supply chain
cyber risk management. Threat detection and response services
include our Nightingale AI-based network monitoring, our Trillion
and Arc breached credentials tracking platforms, and incident
response. Crossword's work in digital identity is based on the
World Wide Web Consortium W3C verifiable credentials standard and
our current solution, Identiproof, enables secure digital
verification of individuals to prevent fraud.
Crossword serves medium and large clients including FTSE 100,
FTSE 250 and S&P listed companies in various sectors, such as
defence, insurance, investment and retail banks, private equity,
education, technology and manufacturing and has offices in the UK,
Poland and Oman. Crossword is traded on the AIM market of the
London Stock Exchange.
Visit Crossword at https://www.crosswordcybersecurity.com/
CHIEF EXECUTIVE OFFICER ' S REVIEW
I am pleased to present the interim accounts of Crossword
Cybersecurity plc for the 6 month period to 30 June 2023. During
this period, we have made significant progress on our path to
profitability and continue in our mission to reduce cyber risks for
our clients by providing a portfolio of innovative products and
services.
Financial Performance : Our financial performance during this
period has been strong. R evenue of GBP1.9m for the 6 months ended
30 June 2023, was an increase of 27% over the same period in the
previous year. We have not seen a slow-down in cyber security spend
amongst our core regulated and critical national infrastructure
clients. Strong revenue growth was experienced across all revenue
lines and ARR at the end of H1 2023 was GBP2.7m, which is growth of
35% compared to the same period in the prior year. Software
Engineering services revenue in H1 2023 helped to strengthen ties
with a key partner and provided a valuable development opportunity
for staff. Crossword continued to leverage its 100+ client base to
cross sell. We have i ncreased emphasis on targeting our larger
clients that can make full use of Crossword's range of products and
services to drive scale while managing risk .
In H1 2023, overall gross margin increased to 20% compared to
16% in H1 2022. The consulting margin continues to improve as
revenue scales to achieve critical mass. The Company invested in
Managed Services' platform and operations, to support future
revenue growth. This had a short-term adverse impact on Managed
Services margin. 80% growth in the higher margin product revenues
helped to drive margin improvement.
Administrative expenses have stabilised in 2023, with a strong
foundation now in place to drive the revenue growth and path to
profitability. Excluding one-off professional fees in H1 2023,
administrative expenses have increased by less than 2% over the
same period in the prior year. With increasing revenue, this
represents a reduction of 20% in administrative expenses as a
percentage of revenue in H1 2023. Crossword is targeting a drop by
half in administrative expenses as a percentage of revenue in 2024
compared to 2022. During H1 2023 we reduced headcount by c12% and
have a strong cost control drive.
The momentum from 2022 placed Crossword in a strong position to
achieve revenue growth to circa GBP6m in 2023 and focus on margin
improvement will ensure that there is a clear, carefully managed
route to achieving profitability in the medium term. Furthermore,
the Company is projecting the revenue growth rate for 2024 to be
circa 30%, to achieve total revenue of circa GBP8m in 2024.
Crossword is aiming to deliver EBITDA and cash breakeven on a
monthly basis during the second half of 2024.
Operational Highlights: In addition to our financial
achievements, we have made significant strides operationally. In
April 2023 we announced completion of GBP375,000 convertible loan
notes, GBP250,000 of which I subscribed for. Additionally, i n late
August 2023 Crossword entered into agreements for a five year,
unsecured convertible loan to the value of GBP2,015,000. Following
issue of these new Convertible Loan Notes, the Company will have
GBP485,000 capacity for further debt. The funds raised will be used
to support sales and marketing, product and services development
and to provide general working capital.
An example of how Crossword is supporting clients to reduce
cyber risks, and to cross sell, is the contract awarded in June
2023 with a FTSE 250 engineering company to provide forward looking
Dark Web Threat Intelligence services. The service will be
delivered via Crossword's Trillion platform using its market
leading credential leak and online discussion monitoring services.
The technical solution will be backed up by expert human analysis
to deliver the service.
The FTSE 250 engineering company is already a Consulting client.
The close relationship between the consulting team and the product
team at Crossword helped identify the benefits the client will
derive from the Dark Web Threat Intelligence services.
Our commitment to innovation and excellence has resulted in our
inclusion in the CYBERTECH100 in May 2023. This is an annual list
of 100 of the world's most innovative CyberTech companies selected
by a panel of industry experts and analysts. Companies were
selected for inclusion in the fourth annual CyberTech100 based on
their innovative use of technology to solve a significant industry
problem or generate cost savings or efficiency improvements across
the security value chain. CYBERTECH100 considers that these are the
companies every financial institution needs to know about as they
consider and develop their information security and financial crime
fighting strategies.
During the first half of 2023, our product development teams
made great strides including in the development of Rizikon modules
for use in our Supply Chain Cyber practice, which we offer in
response to client demand and the substantial increase in supply
chain cyber threat levels. The integrated practice provides a set
of controls, processes, and tools, along with a range of managed
services, advice and training to massively reduce the risk of
direct cyber-attacks as well as threats via third parties across a
company's supply chain. Our Trillion development team also
progressed new features and modules.
The whole company is focused on our path to profitability,
aiming to achieve EBITDA and cash breakeven on a monthly basis
during the second half of 2024.
Cybersecurity Landscape: The cybersecurity landscape continues
to evolve rapidly, presenting both challenges and opportunities. We
remain vigilant in adapting to emerging threats and technologies,
ensuring that our solutions are at the forefront of the industry.
Our dedication to staying ahead of the curve positions us well for
future success.
I am excited about the opportunities with AI and LLMs (Large
Language Models). We are exploring initiatives with industry
partners and leading academics to investigate the application of
Generative AI to cyber security. It is extremely challenging for
any single company to keep track of and evaluate the many
applications that are emerging, so Crossword is looking to bring
together its major clients to engage with in this exciting
area.
The increase in ransomware attacks drove the launch of our
Ransomware Readiness Assessment service during H1 2023. Ransomware
is a malware designed to deny a user or organisation access to
files on their computer. Ransomware affected 66% of organizations
in 2021, an increase of 78% over 2020, according to Sophos's "The
State of Ransomware 2022" report . The cost of these attacks can
extend far beyond recovering systems and the ransom, if paid.
Successful ransomware attacks almost always result in a significant
portion of an organisation's data being stolen, with associated
costs including reputational damage, the loss of customers, a
long-term loss of productivity during systems recovery, rising
insurance premiums and an estimated 80% chance of a repeat
attack.
Our Ransomware Readiness Assessment helps organisations reduce
their exposure to ransomware attacks, provides detailed assessments
on areas requiring protection and recommends how they should
respond to attacks.
Outlook: Looking ahead, we remain optimistic about the future
and are projecting the revenue growth rate for 2024 to be circa
30%, to achieve total revenue of circa GBP8m in 2024. While the
cybersecurity industry remains dynamic and competitive, our team's
expertise and our commitment to innovation will continue to drive
our success.
In conclusion, I would like to express my gratitude to our
dedicated employees, loyal shareholders, and valued customers for
their ongoing support. Together, we will navigate the challenges
and opportunities that lie ahead to deliver results for our
shareholders, and a lower risk cyber environment for our clients
and partners to operate in.
Condensed
Consolidated
Statement Audited Unaudited
of Unaudited 12 Months to 6 Months
Comprehensive 6 Months to 31 December to
Income 30 June 2023 2022 30 June 2022*
GBP GBP GBP
Revenue 1,941,995 3,648,000 1,525,234
Cost of Sales (1,560,960) (2,755,662) (1,282,216)
Other income - 39,814 -
Gross Profit 381,035 932,152 243,018
Administrative
expenses (2,523,263) (4,967,499) (2,223,880)
Other operating
expense (200,521) (304,457) (135,636)
Finance
costs-other
interest
expense (183,574) (395,762) (155,365)
Foreign exchange (20,382) (1,569) (1,123)
Gain on
remeasurement of
financial
assets and
liabilities - 170,283 -
Loss for the year
before taxation (2,546,705) (4,566,852) (2,272,986)
Tax credit /
(expense) (3,429) 1,144,302 393,810
Loss for the
Period (2,550,134) (3,422,550) (1,879,176)
Other
Comprehensive
Income
Items that may be
reclassified
to profit or loss:
Foreign exchange
translation
Gain / (Loss) 1,448 1,782 (146)
------------------------------ --------------------------------- --------------------------
Total Other
Comprehensive
Income 1,448 1,782 (146)
Total
Comprehensive
Loss (2,548,686) (3,420,768) (1,879,322)
============================== ================================= ==========================
Loss for the
period
attributable
to:
Owners of the
parent (2,530,551) (3,408,149) (1,861,609)
Non-controlling
interests (19,583) (14,401) (17,567)
Total Loss for the
Period (2,550,134) (3,422,550) (1,879,176)
------------------------------ --------------------------------- --------------------------
Total
comprehensive loss
for
the period
attributable to:
Owners of the
parent (2,529,103) (3,406,367) (1,861,755)
Non-controlling
interests (19,583) (14,401) (17,567)
Total
Comprehensive
Loss (2,548,686) (3,420,768) (1,879,322)
------------------------------ --------------------------------- --------------------------
Loss Per Share
(basic) (0.03) (0.04) (0.02)
Loss Per Share
(diluted) (0.03) (0.04) (0.02)
All results are
derived from
continuing
operations
* Restated as per
2022 Annual
Report note 1.2
Condensed Consolidated
Statement
of
Financial Position as
at Unaudited Audited Unaudited
30 June 2023 Group Group Group
31 December
30 June 2023 2022 30 June 2022
GBP
Non-Current Assets
Intangible assets 2,698,879 2,708,423 2,761,202
Tangible assets 34,770 45,039 21,146
Goodwill 875,277 875,277 875,277
Unlisted investment 456,834 456,834 456,834
Total non-current
assets 4,065,760 4,085,573 4,114,459
----------------------------- ------------------------------- -------------------------
Current Assets
Trade and other
receivables 1,198,658 2,078,050 1,570,310
Current tax receivable 398,511 398,511 -
Cash and cash
equivalents 424,498 2,077,771 579,444
Total current assets 2,021,667 4,554,332 2,149,754
----------------------------- ------------------------------- -------------------------
Total Assets 6,087,427 8,639,905 6,264,213
============================= =============================== =========================
EQUITY
Attributable to the
owners
of the Company
Share Capital 468,589 462,019 377,325
Share premium account 18,749,829 18,534,372 15,118,699
Convertible debt
reserve 214,742 195,685 -
Equity reserve 439,329 370,762 313,262
Retained earnings (17,736,187) (15,235,500) (13,688,960)
Translation of foreign
operations (11,762) (13,210) (15,138)
Attributable to owners
of
the parent 2,124,540 4,314,128 2,105,188
----------------------------- ------------------------------- -------------------------
Non-controlling
interests (173,110) (153,527) (156,695)
Total equity 1,951,430 4,160,601 1,948,493
----------------------------- ------------------------------- -------------------------
LIABILITIES
Current Liabilities
Trade and other
payables 2,258,183 2,456,783 2,282,918
Other current
liabilities 17,000 17,000 1,381,594
Total current
liabilities 2,275,183 2,473,783 3,664,512
----------------------------- ------------------------------- -------------------------
Long Term Liabilities
Convertible loan notes 1,685,621 1,329,678 -
Bank loans 42,500 51,000 59,500
Other non-current
liabilities 132,693 624,843 591,708
Total long term
liabilities 1,860,814 2,005,521 651,208
----------------------------- ------------------------------- -------------------------
Total Liabilities 4,135,997 4,479,304 4,315,720
----------------------------- ------------------------------- -------------------------
Total Equity &
Liabilities 6,087,427 8,639,905 6,264,213
============================= =============================== =========================
Condensed
Consolidated
Statement
of
Changes in
Equity
Unaudited - Attributable
six months to owners
ended Share Share Convertible Equity Retained Translation of the Non-controlling
30 June 2023 Capital Premium Debt Reserve Reserve Earnings Reserve parent interests Total
GBP
At 1st January 462,019 18,534,372 195,685 370,762 (15,235,500) (13,210) 4,314,128 (153,527) 4,160,601
Issue of
shares 6,570 215,457 - - - - 222,027 - 222,027
Issue of
convertible
debt - - 48,921 - - - 48,921 - 48,921
Transfer of
convertible
debt
reserve to
retained
earnings - - (29,864) - 29,864 - - - -
Employee share
schemes -
value
of employee
services - - - 68,567 - - 68,567 - 68,567
Loss for the
period - - - - (2,530,551) - (2,530,551) (19,583) (2,550,134)
Other
comprehensive
loss for
the period - - - - - 1,448 1,448 - 1,448
At 30 June 468,589 18,749,829 214,742 439,329 (17,736,187) (11,762) 2,124,540 (173,110) 1,951,430
----------------- ------------------ ------------------------------- -------------- -------------------- -------------- ------------- ---------------- ------------
Audited - year
ended 31
December
2022
At 1st January 374,786 14,971,221 - 240,310 (11,827,351) (14,992) 3,743,974 (139,126) 3,604,848
Issue of
shares 87,233 3,750,012 - - - - 3,837,245 - 3,837,245
Transaction
costs - (186,861) - - - (186,861) - (186,861)
Issue of
convertible
debt - - 195,685 - - - 195,685 - 195,685
Employee share
schemes -
value
of employee
services - - - 130,452 - - 130,452 - 130,452
Loss for the
period - - - - (3,408,149) - (3,408,149) (14,401) (3,422,550)
Other
comprehensive
loss for
the period - - - - - 1,782 1,782 - 1,782
At 31 December 462,019 18,534,372 195,685 370,762 (15,235,500) (13,210) 4,314,128 (153,527) 4,160,601
----------------- ------------------ ------------------------------- -------------- -------------------- -------------- ------------- ---------------- ------------
Unaudited -
six months
ended
30 June 2022
At 1st January 374,786 14,971,221 - 240,310 (11,827,351) (14,992) 3,743,974 (139,126) 3,604,847
Issue of
shares 2,539 147,478 - - - - 150,017 - 150,017
Employee share
schemes -
value
of employee
services - - - 72,952 - - 72,952 - 72,952
Loss for the
period - - - - (1,861,609) - (1,861,609) (17,567) (1,879,177)
Other
comprehensive
loss for
the period - - - - - (146) (146) - (146)
At 30 June 377,325 15,118,699 - 313,262 (13,688,960) (15,138) 2,105,188 (156,693) 1,948,493
----------------- ------------------ ------------------------------- -------------- -------------------- -------------- ------------- ---------------- ------------
Condensed Audited Unaudited
Consolidated Unaudited 12 Months to 6 Months
Statement 6 Months to 31 December to
of Cashflows 30 June 2023 2022 30 June 2022
Cashflows From
Operating
Activities GBP GBP GBP
Loss for the period (2,550,134) (3,422,550) (1,879,176)
Movement in trade and
other
receivables 879,392 (786,642) (279,314)
Movement in trade and
other
payables (530,200) 381,130 217,315
Depreciation 10,372 11,287 2,581
Amortisation 190,148 293,170 133,055
Finance costs 183,574 395,762 156,487
Gain on remeasurement
of financial
assets and
liabilities - (170,283) -
Employee share
schemes 68,567 130,452 72,952
Tax (credit) /
expense 3,429 (1,144,302) (393,810)
Tax received / (paid) (3,429) 348,662 (2,907)
Net Cashflow from
Operating
Activities (1,748,281) (3,963,314) (1,972,817)
----------------------------- ------------------------------- --------------------------
Cashflow From
Investing Activities
Investment in
intangible assets (180,605) (203,627) (96,291)
Purchase of tangible
assets - (48,971) (17,061)
Acquisition of
subsidiaries,
net of cash acquired - (625,408) (625,408)
Net Cashflow from
Investing
Activities (180,605) (878,006) (738,760)
----------------------------- ------------------------------- --------------------------
Cashflows From
Financing
Activities
Proceeds from issue
of ordinary
shares - 3,837,245 -
Share issuance costs - (186,861) -
Proceeds from issue
of convertible
loan notes 375,000 800,000 -
Repayment of
convertible loan
notes - (700,000) -
Interest paid on
convertible
loan notes (98,230) (189,640) (81,896)
Other interest paid (2,606) (16,495) -
Net Cash Inflow from
Financing
Activities 274,164 3,544,249 (81,896)
----------------------------- ------------------------------- --------------------------
Net Increase in Cash
& Cash
Equivalents (1,654,722) (1,297,071) (2,793,473)
Foreign Currency
Translation
Difference 1,449 1,780 (145)
Cash and Cash
Equivalent at
the beginning of the
period 2,077,771 3,373,062 3,373,062
Cash and Cash
Equivalent at
the end of the
period 424,498 2,077,771 579,444
----------------------------- ------------------------------- --------------------------
Notes to the Financial Information
1. Accounting policies
1.1 The group and its operations
Crossword Cybersecurity plc (the "Company") is a company
incorporated on 6 March 2014 in the United Kingdom under the
Companies Act 2006. The Company is the parent company of the
Crossword group of Companies focusing on the cybersecurity sector.
The principal activities are the development and commercialisation
of university research-based cyber security related software and
cybersecurity consulting.
The financial information includes the results of the Company
and its subsidiaries (together referred to as the "Group" and
individually as "Group entities".
1.2 Basis of preparation of financial information
The financial information has been prepared in accordance with
the requirements of the London Stock Exchange plc AIM Rules for
Companies ("AIM Rules") and in accordance with UK adopted
International Financial Reporting Standards ("IFRS") in conformity
with the requirements of the Companies Act 2006 applicable to
companies reporting under IFRS. As permitted, this Half Yearly
Financial Report has been prepared in accordance with the AIM Rules
and not in accordance with IAS 34 'Interim Financial Reporting'.
The financial information has been prepared on the historical cost
basis, except for accounting for business combinations and certain
financial assets and liabilities. The preparation of financial
information 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. Changes in assumptions may have a significant
impact on the financial information in the year the assumptions
changed. Management believes that the underlying assumptions are
appropriate.
The financial information does not comprise statutory accounts
within the meaning of section 435 of the Companies Act 2006. The
financial information together with the comparative information for
the six months ended 30 June 2022 are unaudited with the audited
information included for the 12 month period ended 31 December
2022. The audited information received an audit report which was
unmodified and did not include a statement under section 498(2) or
section 498(3) of the Companies Act 2006. The audit report for the
12 month period ended 31 December 2022 included an emphasis of
matter relating to going concern.
The financial information was approved by the Board of Directors
on 27 September 2023 and authorised for issue on 28 September
2023.
The accounting policies used in the preparation of the financial
information for the six months ended 30 June 2023 are in accordance
with the recognition and measurement criteria of the International
Financial Reporting Standards in conformity with the requirements
of the Companies Act 2006 and are consistent with those which will
be adopted in the annual financial statements for year ending 31
December 2023.
These Interim Financial Statements have been prepared in
accordance with the accounting policies, methods of computation and
presentation adopted in the financial statements for the year ended
31 December 2022.
1.3 Going concern
The financial information has been prepared on a going concern
basis. The Group's business model has been enhanced following the
three acquisitions in 2021 and early 2022. The Group's operations
have incurred a loss in the financial period whilst the Group's
products and services continue to be enhanced, developed and
brought to market. The Directors forecast for the full year 2023
show a trading loss with net cash outflows as the business
continues to develop and enhance its products and services and
grows revenue. The Groups operations in 2023 have been largely
supported by cash inflows from customers, funds from fundraises in
2021 and issuance of new loan notes in 2022 and 2023.
The Directors have considered the Group's forecast business and
cash requirements. On 31 August 2023 the company entered into
agreements for a five year, unsecured, convertible loan of
GBP2.015m to provide liquidity to the group. The Directors have
assessed the group business model and the required levels of
investment in its growth plans. The liquidity raised is at a level
to support the group to achieve EBITDA and cash breakeven in the
second half of 2024.
The Directors have concluded that the current position could
give rise to a material uncertainty arising from events or
conditions that may cast significant doubt on the entity's ability
to continue as a going concern if cash flows varied significantly
from those expected to be generated by the approved business model.
However, based on the business model, the Directors are confident
that they can continue to adopt the going concern basis in
preparing the financial statements.
1.4 Basis of consolidation
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. Control exists when the Group
has:
- the power over the investee;
- exposure, or rights, to variable returns from its involvement
with the investee; and
- the ability to use its power over the investee to affect the
amount of the investor's returns.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation. Uniform accounting policies are
applied by the Group entities to ensure consistency.
1.5 Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured as the
aggregate of the 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 acquiree. Acquisition related costs are recognised in the
income statement as incurred.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in the
consolidated income statement. Contingent consideration that is
classified as equity is not remeasured, and its subsequent
settlement is accounted for within equity.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the
acquisition date, allocated to the cash generating unit ("CGU")
that is expected to benefit from the synergies of the combination.
CGU to which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. Any impairment loss is recognised directly in
the income statement.
1.6 Revenue
Revenue comprises the fair value of consideration received or
receivable for licence income and the rendering of services in the
ordinary course of the Group's activities. Revenue is shown net of
value added tax and trade discounts. Income is reported as
follows:
(a) Licence income
Technology and product licensing revenue represents amounts
earned for licences granted under licensing agreements and
recognized over time. Revenues relating to up-front payments are
recognised when the obligations related to the revenues have been
completed. Revenues for maintenance and support services are
recognised in the accounting periods in which the services are
rendered.
(b) Rendering of Services
Services relate to implementation and deployment fees for the
technology and products licensed to customers. Revenue is
recognised in the accounting periods in which the services are
rendered.
(c) Consulting
Consulting revenue is recognised when the performance obligation
is met, primarily at a point of time. Contracts are structured to
support the revenue recognition process by stating what the
objectives and deliverables are for each part of the project, and
the revenue attributable to each deliverable.
2. Revenue and segmental information
An analysis of the Group's revenue for each period for its
continuing operations, is as follows:
Unaudited Audited Unaudited
6 Months 12 Months ended 6 Months
to 31 December to
GBP 30 June 2023 2022 30 June 2022
Revenue from the sale of
goods/licences 348,388 479,849 179,679
Revenue from the rendering
of services - 64,667 7,719
Revenue from consulting services 1,439,208 3,013,884 1,337,835
Software engineering revenue 154,400 89,600 -
Total Revenue 1,941,995 3,648,000 1,525,234
-------------- ----------------- --------------
The IFRS 8 Operating segments requires the Group to determine
its operating segments based on information which is provided
internally. Based on the internal reporting information and
management structures within the Group, it has been determined that
there are two operating segments established in accordance to
differences between products and services - Software products and
Cybersecurity services.
These operating segments are based on the internal reports that
are reviewed and used by the Board of Directors (who are identified
as the Chief Operating Decision Makers ('CODM')) in assessing
performance and in determining the allocation of resources. There
is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax,
depreciation and amortisation). The accounting policies adopted for
internal reporting to the CODM are consistent with those adopted in
the financial statements. The information regarding the Group's
reportable segments is presented below:
Software Consulting Eliminations Total
product and Managed
Unaudited - six months and Services Services
ended and Engineeing
30 June 2023 Services
GBP GBP GBP GBP
Revenue 502,788 1,473,489 (34,282) 1,941,995
Cost of Sales (256,850) (1,322,673) 18,563 (1,560,960)
Gross Profit 245,938 150,816 (15,719) 381,035
Administrative expenses (2,259,412) (286,812) 22,961 (2,523,263)
Other operating expense (160,032) (40,488) - (200,521)
Financial income and
expenses (93,565) (103,150) (7,242) (203,956)
Loss for the period
before
taxation (2,267,071) (279,634) - (2,546,705)
Tax credit / (expense) (3,429) - - (3,429)
Loss for the Period (2,270,500) (279,634) - (2,550,134)
Total Comprehensive Loss (2,269,052) (279,634) - (2,548,686)
Segment assets 10,237,468 1,738,105 (5,888,146) 6,087,427
Segment liabilities 4,052,078 3,240,974 (3,157,055) 4,135,997
EBITDA (1,816,723) (325,505) - (2,142,228)
Software Consulting Eliminations Total
product and Managed
and Services Services
Audited - year ended and Engineeing
31 December 2022 Services
GBP GBP GBP GBP
Revenue 634,116 3,131,103 (117,219) 3,648,000
Cost of Sales (136,287) (2,619,375) - (2,755,662)
Other income 39,814 - - 39,814
Gross Profit 537,643 511,728 (117,219) 932,152
Administrative expenses (4,561,425) (523,292) 117,218 (4,967,499)
Other operating income (226,447) (78,010) - (304,457)
Financial income and
expenses (29,958) (197,090) - (227,048)
Loss for the year before
taxation (4,280,186) (286,666) - (4,566,852)
Tax credit / (expense) 1,144,302 - - 1,144,302
Loss for the Year (3,135,884) (286,666) - (3,422,550)
Total Comprehensive Loss (3,134,102) (286,666) - (3,420,768)
Segment assets 10,413,274 1,594,370 (3,367,738) 8,639,905
Segment liabilities 4,234,893 2,649,280 (2,404,869) 4,479,304
EBITDA (4,023,782) (11,565) - (4,035,347)
Software Consulting Eliminations Total
product and Managed
and Services Services
Unaudited - six months ended and Engineeing
30 June 2022 * Services
GBP GBP GBP GBP
Revenue 187,399 1,407,320 (69,485) 1,525,234
Cost of Sales (60,785) (1,221,432) - (1,282,216)
Gross Profit 126,614 185,888 (69,485) 243,017
Administrative expenses (2,051,278) (242,087) 69,485 (2,223,880)
Other operating expense (84,714) (50,922) - (135,636)
Financial income and expenses (67,134) (89,353) - (156,487)
Loss for the period before
taxation (2,076,512) (196,474) - (2,272,986)
Tax credit / (expense) 393,810 - - 393,810
Loss for the Period (1,682,703) (196,474) - (1,879,176)
Total Comprehensive Loss (1,682,849) (196,474) - (1,879,322)
Segment assets 7,630,989 1,113,659 (2,480,434) 6,264,214
Segment liabilities 3,970,879 2,107,083 (1,762,242) 4,315,719
EBITDA (1,870,851) (111,135) - (1,981,985)
* Restated as per 2022 Annual
Report note 1.2
3. Share Options
775,270 of share options were issued by Crossword Cybersecurity
plc in the period up to 30 June 2023, with total options issued
amounted to 2,943,923. The fair value of these share options is
calculated by the Company using the binomial model and Monte Carlo
simulation model. The expense, where material, is recognised on a
straight-line basis over the period from the date of award to the
date of vesting, based on the Company's best estimate of the number
of shares that will eventually vest.
4. Loss per Share
Earnings per share is calculated by dividing the loss for the
period attributable to ordinary equity shareholders of the parent
by the weighted average number of ordinary shares outstanding
during the year. During the period the calculation was based on the
loss for the period attributable to owners of the parent of
GBP2,530,551 (full year 2022: GBP3,408,149) divided by the weighted
average number of ordinary shares of 93,212,166 (full year 2022:
80,022,937).
5. Subsequent events
On 31 August 2023 the Company announced that it has entered into
agreements for a five year, unsecured, convertible loan to the
value of GBP2.015m. The funds raised will be used to support sales
and marketing, product and services development and to provide
general working capital. The interest rate is fixed at 12% and is
payable at the end of the term.
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END
IR PPUPPBUPWGRM
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
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