ECSC GROU 23 March 2022
ECSC Group plc
('ECSC' or the 'Company' or the 'Group')
Final Results for the Year Ended 31 December 2021
Strong revenue growth delivering positive Adjusted EBITDA
ECSC Group plc (AIM: ECSC) a leading provider of cyber security services, announces its audited final results for the year ended 31 December 2021.
Financial Highlights
- Organic revenue up 8% to £6.14m (2020: £5.66m)
- Managed Detection and Response ("MDR") division recurring revenue growth of 7% to £2.59m (2020: £2.42m)
- Assurance division repeat revenue increased to 81% (2020: 73%)
- Adjusted EBITDA* profit £0.17m (2020: £0.38m)
- Agreed a new £1.0m loan to support Group's organic growth plans
- Cash at the period end was £1.17m, including new £1.0m loan and £0.02m of Covid-19 related government support (31 December 2020: £1.12m, including £0.42m of Covid-19 related government support).
* Adjusted EBITDA excludes one-off charges and share based charges (see note 13)
Operational Highlights
- Continued development of partner programme, partner revenue proportion increased to 11% (2020: 4%)
- Continued development of proprietary Artificial Intelligence (AI) software, 15% of revenue (2020: 14%)
Ian Mann, Chief Executive Officer of ECSC, commented:
"The Group made good progress during the 2021 financial year, and we are pleased to report a return to growth in both divisions, and continued to be Adjusted EBITDA positive."
"Responding to the Covid-19 pandemic, the Group re-engineered its sales and delivery processes to reflect and cater for the new working patterns of our clients, with a renewed focus on our core strengths and expertise. As a result, we have been able to deliver increased value to our clients in preventing, detecting, and responding to cyber security breaches, with a marked increase in sales across both divisions."
"Market demand remains strong as businesses continue to recognise the value of sound cyber security solutions to avoid costly breaches and disruptive down time, especially with the return to office working."
"Momentum has continued into Q1 2022, and we look forward to keeping the market updated on our progress."
Enquiries: | ||
ECSC Group plc | +44 (0) 1274 736 223 | |
David Mathewson (Non-Executive Chairman) | ||
Ian Mann (Chief Executive Officer) | ||
Allenby Capital (Nominated Adviser and Broker) | +44 (0) 203 3285 656 | |
David Hart / Piers Shimwell (Corporate Finance) | ||
Tony Quirke (Equity Sales and Corporate Broking) | ||
Yellow Jersey (PR and IR) | +44 (0) 203 0049 512 | |
Sarah Hollins | ||
Annabel Atkins |
For more information please visit the following: https://investor.ecsc.co.uk/
Notes to Editors:
Founded in 2000, ECSC Group plc (AIM: ECSC) is the UK's longest running full-service cyber security service provider. With an extensive range of in-house developed proprietary technologies, including advanced Artificial Intelligence (AI) systems, ECSC provides expert security breach prevention and advisory support to organisations across all sectors.
ECSC operates from two Security Operations Centres (SOCs): one in Yorkshire, UK, and the other in Brisbane, Australia. ECSC offers flexible 24/7/365 cyber security monitoring, detection, and response support to its clients, either as a fully managed service or to enhance an organisation's existing cyber security systems. In addition, ECSC's Assurance division provides guidance, certification to industry standards, and extensive testing services to allow organisations to assess their cyber security protection.
The Company's broad client base ranges from e-commercestart-ups to global blue-chip organisations, including 10% of the FTSE 100.
For more information please visit the following: https://investor.ecsc.co.uk/
Chairman's Statement
These results show a clear return to growth across the Group, both within Managed Detection and Response ("MDR") and Assurance divisions. It is also pleasing to see that the percentage of Group revenue from MDR recurring revenue has now grown to nearly half from being about a quarter at the IPO. This confirms the ongoing requirements for all organisations to maintain their cyber security defences and breach detection capability. We continue to emerge from the challenges of the Covid-19 pandemic in a stronger position.
Despite some ongoing impact caused by the pandemic and the economic risks associated with Brexit, the Group has continued to demonstrate resilience and financial progress based on quality of delivery and unrivalled client reputation and retention. I am proud of the way the team has adapted and innovated as business practices continue to change, affecting both sales and delivery processes.
The ongoing risk of ransomware and its potentially catastrophic impact, combined with the multi-million-pound fines related to the UK General Data Protection Regulation (UK-GDPR), substantiate that all organisations must build resilience into their cyber security protection, detection and response capabilities. ECSC remains a trusted partner to help organisations of all sizes achieve this.
The continued growth in 24/7/365 detection services, delivered through the Security Operations Centres (SOCs) in the UK and Australia, supported by the ECSC Kepler Artificial Intelligence (AI), shows the importance of early breach detection to contain an incident and limit damaging consequences such as ransomware. For all but the largest global organisations, the outsourcing of this critical function continues to be the logical choice, and ECSC has the technology, people, and certified processes to deliver.
The Group's successful agreement of a £1.0m new growth loan demonstrates additional confidence in our operations and results.
On behalf of the board, I would like to thank all of our clients, partners, team, advisors, and investors for their continued support throughout a challenging year for us all.
ECSC continues to be well-positioned in the growing cyber security marketplace, and we are now firmly back on our organic growth strategy and related recruitment activities.
David Mathewson
Non-Executive Chairman
22 March 2022
Chief Executive Officer's Review
The Group made good progress during the 2021 financial year, and we are pleased to report a return to growth in both divisions, and continued to be Adjusted EBITDA positive.
The Assurance division has also seen a significant increase in repeat revenue from existing clients, confirming the exceptional service quality and value perceived by clients in their breach prevention and certification activities.
Post Covid-19 Challenges and Opportunities
The Covid-19 pandemic has demanded changes to both our sales and delivery processes, presented the opportunity to challenge existing beliefs and, in the process, re-engineer operations to reflect new realities.
A good example of this is our sales process that, pre-pandemic, relied extensively on multiple face-to-face meetings. The necessities of our Covid-19 response meant that we had to rapidly change this approach and embrace remote, video-based, sales and scoping processes. As a result, we have completely re-engineered the sales operation and supporting functions, reflecting the new working patterns of our clients and reducing the direct sales headcount, whilst increasing sales in the process.
We have then extended a wider strategic review of our core strengths and associated target clients to facilitate a better fit with more profitable services lines and client relationships.
Inflationary Pressures
2021 saw significant inflationary pressures and wage expectations of skilled and experienced cyber security professionals. As a result, we have instigated a formal annual pricing review. This resulted in increases in daily consulting rates averaging 10% in August 2021. We anticipate this price pressure to continue with the current global uncertainties and resulting UK and global inflation. ECSC's committed staff policy is to pay in the top 20% of market rates for each role, combined with industry leading career development.
Current Ukraine Conflict
Many clients are concerned about the potential for an increase in cyber attacks originating from Russia. These concerns may be well-placed, and confirm the importance of achieving and maintaining an appropriate level of cyber security protection and breach detection for all organisations.
Growth Strategy
We are confident that the organic growth strategy of ECSC remains appropriate. Despite the continued challenges of 2021, we are seeing the results of process re-engineering and a focus on our core expertise and delivering value to our clients in preventing, detecting, and responding to, cyber security breaches.
Key Performance Indicators
The Key Performance Indicators below were established in 2018 to enable meaningful measurement of the Group's performance.
Performance | Rationale | 2021 | 2020 | 2019 | Management Comment |
Indicator | |||||
Measurement of the | The Group saw an increase in | ||||
Revenue Growth | success of the organic | 8% | (4%) | 10% | Assurance and MDR revenue due to |
growth strategy | further investment in the organic | ||||
growth strategy and recovery from | |||||
Covid | |||||
MDR Recurring | Visibility of the success of | ||||
Revenue Growth | increasing the percentage | 7% | 22% | 27% | Continued growth due to new |
of revenue from long-term | contract wins and contract | ||||
recurring revenues | expansions | ||||
MDR Recurring | Visibility of the success of | ||||
Revenue | increasing the percentage | 42% | 43% | 34% | In line with the strategy to increase |
Proportion | of revenue from long-term | this proportion | |||
recurring revenues | |||||
Combined measurement of | |||||
MDR Order Book | new client contracts | £2.2m | £2.6m | £2.6m | The management team's favoured |
together with renewals of | overall measure of progress in | ||||
existing client contracts | managed services | ||||
MDR Gross | Delivery efficiency | 61% | 73% | 68% | Increased investment in this |
Margin | measurement | division | |||
Assurance | Quasi-recurring from | Indicative of strong client retention | |||
Repeat Revenue | longer- term consulting | 81% | 73% | 73% | and continued trust in ECSC quality |
clients | |||||
Assurance Gross | Delivery efficiency | A reflection on capacity required for | |||
Margin | measurement | 63% | 58% | 54% | growth and management of |
consultant workload | |||||
Research and | Continued investment in | Increased investment in | |||
Development | technology and intellectual | 15% | 14% | 13% | technologies for the future |
(% of revenue) | property development | ||||
Ian Mann
Chief Executive Officer
22 March 2022
Financial Review
Principal Activities
The principal activity of the Group during the year continued to be the provision of professional cyber security services, including Assurance, MDR and the sale of Vendor Products.
Comparative Financial Information
Year ended | Year ended | |
31 December | 31 December | |
2021 | 2020 | |
£'000 | £'000 | |
Revenue | ||
Assurance | 3,123 | 2,724 |
MDR | 2,886 | 2,732 |
Vendor Products | 93 | 125 |
Other | 42 | 82 |
6,144 | 5,663 | |
Gross Profit | ||
Assurance | 1,965 | 1,576 |
MDR | 1,757 | 1,994 |
Vendor Products | 15 | 25 |
Other | (63) | (47) |
3,674 | 3,548 | |
Adjusted EBITDA* | ||
Other Income | 282 | 297 |
Sales & Marketing Costs | (2,018) | (1,713) |
Administration Expenses | (1,773) | (1,757) |
165 | 375 | |
EBITDA** | ||
Share Based Payments | (100) | (101) |
Exceptional Items | (145) | (65) |
(80) | 209 | |
Depreciation and Amortisation | (400) | (480) |
Adjusted Operating Loss* | (235) | (105) |
Operating Loss | (480) | (271) |
- Adjusted Operating Loss and Adjusted EBITDA excludes exceptional charges and share based charges.
- * EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation
(As defined in note 13 in the Financial Statement).
Revenue & Organic Growth
In the year ended 31 December 2021, total revenue increased by 8% to £6.14m (2020: £5.66m). Within this, our
Assurance division saw strong sales with revenue growing by 15% to £3.12m (2020: £2.72m).
The MDR division also saw a growth in revenue of 6% in the year to £2.89m (2020: £2.73m). This includes recurring
revenue which rose to £2.59m (2020: £2.42m), workshop and event revenue of £0.02m (2020: nil) and Incident
Response revenue which fell to £0.28m (2020: £0.31m).
Vendor Products revenue in the year fell by 26% to £0.09m (2020: £0.13m).
Margin Generation
Gross Profit for the year was £3.67m, yielding a 60% margin (2020: £3.55m, yielding a 63% margin). This small
margin decrease was a consequence of a fall in the margin in the MDR division to 61% (2020: 73%) due to significant investment and significant wage inflation in that area of the business. The Board expects the MDR margin to increase in the future.
The Assurance margin rose to 63% in the year (2020: 58%). This was due to cost controls over the period. The Board expects the Assurance margin to continue at a similar level in the future.
EBITDA & Operating Loss
Adjusted EBITDA for the year, which excludes one-off charges and share based charges, was £0.17m (2020: £0.38m).
EBITDA for the year was a loss of £0.08m (2020: profit of £0.21m). During 2020 the Group benefited from
Government grants of £0.3m (2021: £nil).
Adjusted Operating Loss for the year, which excludes one-off charges and share based charges, was £0.23m (2020: loss of £0.11m). The Operating Loss in the year was £0.48m (2020: loss of £0.27m).
Cash Flow
Cash and cash equivalents increased by £0.05m (2020: £0.77m) to £1.17m (2020: £1.12m) as at 31 December 2021 primarily due to increase margin across the Assurance division and the proceeds from the £1.0m loan taken on during the year. During the year £0.40m was repaid of Covid-19 related government support received in 2020, £0.02m of government support remains outstanding as at 31 December 2021. The Group continued to invest in Research and Development during the year, receiving a refund of £0.21m (2020: £0.29m) from HMRC in respect of a surrender of R&D Tax Credits from earlier periods.
Intangible Asset
Intangible asset costs have increased to £1.47m (2020: £1.28m). This is offset by accumulated amortisation of
£0.99m (2020: £0.82m). The Group's development cost for the year was £0.19m. The Net Book Value of Intangible
Assets as at 31 December 2021 was therefore £0.48m (2020: £0.46m).
Tangible Asset
Property, plant and equipment (PPE) cost have increased to £0.98m (2020: £0.95m). This is offset by accumulated
depreciation of £0.89m (2020: £0.81m). The Group's capital expenditure for the year was £0.03m. The Net Book
Value of Tangible Assets as at 31 December 2021 was £0.09m (2020: £0.15m). The Group plans to increase investment in tangible assets in the future.
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ECSC Group plc published this content on 23 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 March 2022 14:36:04 UTC.
