Falanx Group Limited
(“Falanx” or “the Company”)
INTERIM RESULTS AND UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS PERIOD ENDED 30 SEPTEMBER 2017
Falanx Group Limited (AIM: FLX), a cyber defence and intelligence service provider working with blue chip and government clients worldwide, is pleased to announce its interim results for the six months ended 30 September 2017.
The Board is pleased to announce robust growth and believes Falanx is on track to deliver against markets expectations of achieving profitability in the year.
Period Highlights
Financial
- Continued growth across all service lines with significant growth in revenue year on year
- Group Revenue +18% increase
- Cyber Revenues +40% increase
- Intelligence Revenues +9% increase
- Cash balance of over £1m on 30th Sept 2017 (Sept 2016: £0.8m)
- Balance sheet entirely equity financed and debt free
- Oversubscribed placing of £2m of equity in May 2017 used to undertake acquisitions, seed the development of MidGARD and augment growth
Operational
- Launch of MidGARD, our proprietary Advanced Threat Detection platform at the UK’s leading ethical hacking conference, resulting in highly positive industry feedback
- Acquisitions of Cloudified Ltd and AuditSec Ltd, increasing market reach and proprietary IP embedded in MidGARD
- Appointment of highly experienced Director of Intelligence division and an industry leading Chief Technology Officer of Cyber division, further strengthening the management team
Outlook and Strategy
Cyber
The MidGARD monitoring business model represents the latest innovation in advanced threat detection and security incident and event management. It brings together big data analytics and external intelligence aggregation, backed up with our own live Security Operations Centre based in the UK, manned by UK Security Cleared Staff. This generates predictable recurring revenues over multi-year customer contracts. These contracts have attractive margin and cash generation attributes. Our investment in this Cloud based platform allows a high level of operational leverage and scalability to support expected customer growth and high customer retention rates are expected.
The board believes therefore that such a platform can deliver strong cash generation against a demand fuelled by powerful market and regulatory drivers. As a result, our acquisition strategy so far has been to obtain complimentary cyber service businesses, such as Consulting and Assessment, which results in demand for Monitoring services being cross-sold into the MidGARD platform.
Intelligence
Falanx covers geo-political intelligence in 35 countries and regions, corporate business information and due diligence and has intelligence staff embedded within our clients’ own offices. It has delivered organic growth of 9% over the six months to September 2017. With the arrival of a new Managing Director in late July, together with an enhanced senior team, the capacity to drive the level of organic growth over the next year is greatly enhanced.
Client retention in the Assynt Report business and embedded analyst service remains very high with the addition of two additional high profile clients in the past six months, provides clear visibility of forward revenue. The Intelligence Consulting business continues to enjoy strong growth, generating additional revenues from individual assignments
Mike Read, Chairman and Acting CEO of Falanx, commented:
“The advent of the General Data Protection Requirement (GDPR) and the need for corporates to be compliant is further fuelling a growth Cyber market. Combined with rapidly increasing corporate migration to Cloud based applications, increasing costs of in-house IT and security solutions and a growing cyber ‘skills gap’ in the UK, we continue to view market conditions for our Cyber services as highly favourable for the foreseeable future.
“Our intelligence business under its product name Assynt has been extremely busy. This is driven by the continued unrest in the world and the need for our research team to brief our customers on all the activities in a timely manner. More multinational customers are now seeing the need for regular briefings to protect their people and operations worldwide.
“We believe our strategies have positioned the Company well, against highly attractive market opportunities and our business model will generate long-term, growing, cash flows to drive shareholder value.”
Enquiries:
| Falanx Group Limited Mike Read, Chairman and Acting CEO |
www.falanx.com |
| SPARK Advisory Partners Limited
Nominated Adviser |
+44 (0) 203 368 3551 |
| Turner Pope Investments Joint-Broker Ben Turner / James Pope |
+44 (0) 203 621 4120 |
| IFC Advisory Ltd Financial PR & IR Graham Herring Miles Nolan |
+44 (0) 203 053 8671 |
| About Falanx
Falanx Group Limited, is a global intelligence and cyber defence provider working with blue chip and government clients. The Group listed on AIM in June 2013 under ticker FLX For more information: www.falanxgroup.com MAR |
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FALANX GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS PERIOD ENDED 30 SEPTEMBER 2017
| 6 Months to | 6 Months to | Year to | ||||
| 30 Sep 2017 | 30 Sep 2016 | 31 Mar 2017 | ||||
| (Unaudited) | (Unaudited) | (Audited) | ||||
|
|
||||||
| £ | £ | £ | ||||
| Continuing operations | ||||||
| Revenue | 1,445,446 | 1,212,784 | 2,743,217 | |||
| Cost of sales | (1,061,735) | (1,224,181) | (2,194,564) | |||
| 383,711 | (11,397) | 548,653 | ||||
| Administrative expenses | (1,395,525) | (636,026) | (2,062,570) | |||
| Administrative expenses – Research | — | — | (64,517) | |||
| Operating Loss | (1,011,814) | (647,423) | (1,578,434) | |||
| Finance income | 256 | 163 | 196 | |||
| Finance expense | — | (82,500) | (110,000) | |||
| Net finance expense | 256 | (82,337) | (109,804) | |||
| Loss before income tax | (1,011,558) | (729,760) | (1,688,238) | |||
| Income tax expense | — | — | (12,416) | |||
| Loss for the period from continuing operations | (1,011,558) | (729,760) | (1,700,654) | |||
| Total comprehensive loss for the period | (1,011,558) | (729,760) | (1,700,654) | |||
| Earnings per share | ||||||
| Basic earnings per share – continuing and total operations | (0.67)p | (0.74)p | (1.52)p | |||
| Diluted earnings per share – continuing and total operations | (0.67)p | (0.74)p | (1.52)p | |||
FALANX GROUP LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2017
| 6 Months to | 6 Months to | Year to | |||
| 30 Sep 2017 | 30 Sep 2016 | 31 Mar 2017 | |||
| (Unaudited) | (Unaudited) | (Audited) | |||
| £ | £ | £ | |||
| Assets | |||||
| Non-current assets | |||||
| Property, plant & equipment | 148,715 | 110,717 | 131,441 | ||
| Intangible assets | 1,138,913 | 773,508 | 769,983 | ||
| Deferred tax | — | 2,887 | — | ||
| 1,287,628 | 887,112 | 901,439 | |||
| Current assets | |||||
| Inventory | 1,471 | 43,718 | 8,500 | ||
| Trade and other receivables | 584,242 | 791,387 | 633,101 | ||
| Cash and cash equivalents | 1,031,831 | 834,742 | 430,459 | ||
| 1,617,544 | 1,669,847 | 1,072,060 | |||
| Total assets | 2,905,172 | 2,556,959 | 1,973,499 | ||
| Equity | |||||
| Capital and reserves attributable to equity holders of the Company | |||||
| Share premium account | 9,498,445 | 6,647,257 | 7,410,507 | ||
| Translation reserve | (62,911) | (85,538) | (100,285) | ||
| Shares to be issued reserve | 196,606 | 174,851 | 196,606 | ||
| Retained earnings | (7,715,005) | (5,732,553) | (6,703,447) | ||
| Total equity | 1,917,135 | 1,004,017 | 803,381 | ||
| Liabilities | |||||
| Current liabilities | |||||
| Trade and other payables | 978,508 | 1,532,793 | 1,160,589 | ||
| Current tax liability | — | 20,149 | — | ||
| Deferred tax liability | 9,529 | — | 9,529 | ||
| Total liabilities | 988,037 | 1,552,942 | 1,170,118 | ||
| Total equity and liabilities | 2,905,172 | 2,556,959 | 1,973,499 | ||
FALANX GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Share premium | Retained earnings | Translation reserve | Shares to be issued reserve | Total | |
| £ | £ | £ | £ | £ | |
| Balance at 1 April 2016 | 5,309,031 | (5,002,793) | (42,162) | 174,851 | 438,927
|
| Loss for year | — | (1,700,654) | — | — | (1,700,654) |
| Transactions with owners: | |||||
| Issue of share capital | 2,175,021 |
— |
— | — | 2,175,021 |
| Cost of share capital issue | (73,545) |
— |
— | — | (73,545) |
| Translation of foreign subsidiary | — | — | (58,123) | — | (58,123) |
| Share options issued | — | — | — | 21,755 | 21,755 |
| Balance as at 31 March 2017 | 7,410,507 | (6,703,447) | (100,285) | 196,606 | 803,381
|
| Loss for the period |
— |
(1,011,558) | — | — | (1,011,558) |
| Transactions with owners: | |||||
| Issue of share capital | 2,170,938 |
— |
— | — | 2,170,938 |
| Costs of issue of share capital | (83,000) |
— |
— | — | (83,000) |
| Translation of foreign subsidiary | — | — | 37,374 | — | 37,374 |
| Balance as at 30 September 2017 | 9,498,445 | (7,715,005) | (62,911) | 196,606 | 1,917,135 |
FALANX GROUP LIMITED
CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 30 SEPTEMBER 2017
| 6 Months to | 6 Months to | Year to | ||
| 30 Sep 2017 | 30 Sep 2016 | 31 Mar 2017 | ||
| (Unaudited) | (Unaudited) | (Audited) | ||
| £ | £ | £ | ||
| Cash flows from operating activities | ||||
| Profit/(Loss) before tax | (1,011,558) | (729,760) | (1,688,238) | |
| Adjustments for: | ||||
| Depreciation | 32,474 | 15,908 | 43,874 | |
| Amortisation of intangibles | 89,793 | 156,452 | 312,943 | |
| Share based payment | – | 35,000 | 56,755 | |
| Loss/(Profit) on disposal of property, plant and equipment | 1,177 | 697 | 697 | |
| Net finance (income)/cost recognised in profit or loss | (256) | 82,337 | 109,804 | |
| (888,370) | (439,366) | (1,164,165) | ||
| Changes in working capital: | ||||
| Decrease/(increase) in inventories | 7,029 | (2,543) | 32,675 | |
| Decrease/(increase) in trade and other receivables | 48,860 | (169,674) | (11,388) | |
| (Decrease)/Increase in trade and other payables | (182,081) | 324,675 | (67,676) | |
| Cash used in operations | (1,014,562) | (286,908) | (1,210,554)
|
|
| Interest paid | — | (82,500) | (55,000) | |
| Net cash used in operating activities | (1,014,562) | (369,408) | (1,266,554) | |
| Cash flows from investing activities | ||||
| Interest received | 256 | 163 | 373 | |
| Acquisition of property, plant and equipment | (51,060) | (60,659) | (109,365) | |
| Disposal of property, plant and equipment | 150 | — | — | |
| Expenditure on capitalised development cost | (225,286) | — | (152,967) | |
| Acquisition of subsidiary net of cash acquired | (100,000) | (140,315) | (140,315) | |
| Net cash used in investing activities | (375,940) | (200,811) | (402,451) | |
| Cash flows from financing activities | ||||
| Net proceeds from loan notes | — | — | 495,000 | |
| Repayment of loan notes | — | — | (550,000) | |
| Net Proceeds from issue of shares | 1,954,500 | 1,018,205 | 1,781,455 | |
| Net cash generated from financing activities | 1,954,500 | 1,018,205 | 1,726,455 | |
| Increase/(decrease) in cash equivalents | 563,998 | 447,986 | 58,450 | |
| Cash and cash equivalents at beginning of the period | 430,459 | 430,132 | 430,132 | |
| Foreign exchange profit/(losses) on cash and cash equivalents | 37,374 | (43,376) | (58,123) | |
| Cash and cash equivalents at end of the period | 1,031,831 | 834,742 | 430,459
|
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FALANX GROUP LIMITED
NOTES TO INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 SEPTEMBER 2017
- General information
Falanx (the “Company”) and its subsidiaries (together the “Group”) operate in the security and intelligence markets.
The Company is a public limited company which is listed on AIM on the London Stock Exchange and is incorporated and domiciled in the British Virgin Islands. The address of its registered office is PO Box 173, Road Town, Tortola, British Virgin Islands. - Basis of preparation
These interim statements have been prepared on a basis consistent with International Financial Reporting Standards (IFRS). They do not contain all of the information required for full financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2017. These interim financial statements do not constitute statutory accounts within the meaning of the Companies Act.The interim financial information have not been reviewed nor audited by the auditors. The interim financial information was approved by the Board of Directors on 14 November 2017. The information for the year ended 31 March 2016 is extracted from the statutory financial statements for that year which have been reported on by the Group’s auditors and delivered to the Registrar of Companies. The audit report was unqualified.The accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended and as at 31 March 2017. The interim report is the responsibility of, and has been, approved by the Directors. The Directors are responsible for preparing the interim financial statements in accordance with the AIM rules for Companies. - Critical accounting estimates and judgements
The preparation of financial information in accordance with generally accepted accounting practice, in the case of the Group being IFRS as adopted by the European Union, requires the Directors to make estimates and judgements that affect the reported amount of assets, liabilities, income and expenditure and the disclosures made in the financial statements. Such estimates and judgements must be continually evaluated based on historical experience and other factors, including expectations of future events.The significant judgements made by management in applying the Group’s accounting policies were the same as those applied in the last annual financial statements for the year ended 31 March 2017. - Segmental reporting
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 business segments. The segmental analysis of the Group’s business was derived from its principal activities as set out below. 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 other segment below and overleaf is made up of the parent company’s administrative operation.
Reportable segments
The reportable segment results for the period ended 30 September 2017 are as follows:
| Intelligence | Cyber | Other segments | Total | |
| £ | £ | £ | £ | |
| Revenues from external customers | 959,249 | 469,197 | 17,000 | 1,445,446 |
| Total revenue | 959,249 | 469,197 | 17,000 | 1,445,446 |
| Operating expenses | (814,330) | (1,017,103) | (503,560) | (2,334,993) |
| Finance costs – net | — | 9 | 247 | 256 |
| Depreciation and amortisation | (5,808) | (115,732) | (727) | (122,267) |
| Segment profit/(loss) for the period | 139,111 | (663,629) | (487,040) | (1,011,558) |
The reportable segment results for the period ended 30 September 2016 are as follows:
| Intelligence | Cyber | Other Segments | Total | |
| £ | £ | £ | £ | |
| Revenues from external customers | 882,465 | 325,291 | 5,028 | 1,212,784 |
| Total revenue | 882,465 | 325,291 | 5,028 | 1,212,784 |
| Operating expenses | (733,739) | (627,414) | (326,695) | (1,687,848) |
| Finance costs – net | 45 | — | (82,382) | (82,337) |
| Depreciation and amortisation | (5,734) | (166,297) | (328) | (172,359) |
| Segment profit/(loss) for the period | 143,037 | (468,420) | (404,377) | (729,760) |
Segment assets and liabilities as at 30 September 2017 and capital expenditure for the period then ended are as follows:
| Intelligence | Cyber | Other segments | Total | |
| £ | £ | £ | £ | |
| Total assets | 404,087 | 887,510 | 1,613,575 | 2,905,172 |
| Liabilities | 429,029 | 306,260 | 252,748 | 988,037 |
| Capital expenditure | 5,428 | 35,857 | 9,775 | 51,060 |
Segment assets and liabilities as at 30 September 2016 and capital expenditure for the period then ended are as follows:
| Intelligence | Cyber | Other segments | Total | |
| £ | £ | £ | £ | |
| Total assets | 994,098 | 817,758 | 745,103 | 2,556,959 |
| Liabilities | 611,700 | 171,618 | 769,624 | 1,552,942 |
| Capital expenditure | 1,129 | 58,111 | 1,419 | 60,659 |
- Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
| 6 Months to | 6 Months to | Year to | |
| 30 Sep 2017 | 30 Sep 2016 | 31 Mar 2017 | |
| (Unaudited) | (Unaudited) | (Audited) | |
| Loss attributable to equity holders of the company (£) | (1,011,558) | (729,760) | (1,700,654) |
| Weighted average number of ordinary shares in issue | 150,694,902 | 99,123,798 | 112,169,330 |
| Basic (loss)/profit per share (pence per share) | (0.67) | (0.74) | (1.52) |
As at 30 September 2017, the potentially dilutive ordinary shares were anti-dilutive because the Group was loss-making.
