TIDMFLX
RNS Number : 9585I
Falanx Group Limited
18 August 2021
18 August 2021
FALANX GROUP LIMITED
("Falanx", the "Group" or the "Company")
Trading Update & New Loan Facility
Falanx Group Limited (FLX.L), the AIM listed provider of cyber
security and strategic intelligence services, is pleased to
announce a trading update for the year ended 31 March 2021 and a
new loan facility to support further investment.
-- Revenues of cGBP5.2m for the year ended 31 March 2021 (2020:
GBP5.8m), slight decline due to previously reported COVID-19 delays
in the first half of the period
-- Anticipated reduced loss at an adjusted EBITDA level for the
year ended 31 March 2021 due to tight cost control
-- Post-period, a new loan facility to support organic
investment and potential earnings enhancing acquisition
opportunities
-- Cyber Security division traded strongly in the second half of
the period and this encouraging sales performance has continued
into the first four months of the current financial year
-- Contract wins and increased industry recognition in the
Assynt strategic intelligence division
Results for the year ended 31 March 2021
The Group recorded revenues of cGBP5.2m (2020: GBP5.8m), with
the decline resulting from the impact of COVID-19 related delays
(mainly in the Cyber Security division) which affected the first
half of the financial year as highlighted in its interim results.
In the second half of the financial year, the Cyber division
experienced a greater intake of customer orders which were ahead of
the pre-COVID-19 period. The utilisation of the Cyber Security
professional services team significantly increased which supported
an improvement in gross margin. A tight grip was maintained on
operating costs, which helped the Group achieve a reduced loss at
an adjusted EBITDA level compared with the year ended 31 March
2020.
Cash balances at 31 March 2021 were GBP0.55m (2020: GBP0.07m)
and the Group had a normal working capital position with strong
customer receipts.
The audit with BDO LLP is currently underway and Falanx will
report its results in September 2021.
New Loan Facility to Support Investment
The Group is also pleased to announce a five-year Growth Loan
facility with BOOST&Co.
The key terms are:
-- Initial GBP1m loan secured over the Group's assets, expected
to increase to GBP2.5m to fund acquisitions & investment
programmes
-- Annual interest of 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
As stated in February 2021, the proceeds of the Loan will enable
the Group to make earnings enhancing acquisitions to strengthen its
core Cyber division, as well as supporting the Group's overall
organic growth plans. This loan was arranged by Welbeck Ventures
Limited who received a fee of 2% of the loan on completion in
respect of advisory fees. Alex Hambro, the non-executive chairman
of Falanx, is also director of Welbeck.
Joanna Scott, Managing Director at BOOST&Co, said: "We are
delighted to be working with Falanx on its continuing growth
journey and supporting UK businesses during this uncertain time.
Falanx's innovative services, solid customer relationships, growing
order book and market alignment combined with a strong management
team put the business in a positive position to capitalise on its
growth opportunities in the near future."
Trading for the year to 31 March 2022
Trading for the first four months of the current financial year
has been encouraging and is in line with management's
expectations.
-- Order inflow has been good, and this trend is expected to continue
-- Gross margins are improving in the Cyber division due to the
increased order flow and high staff utilisation levels. Further
improvement is expected in the near term as the move to a single
Triarii cyber security monitoring platform completes
-- This has noticeably improved the financial performance in the
Cyber division, which is now profitable at an adjusted EBITDA
level, compared with a loss of cGBP0.52m for the year to 31 March
2021
Overall, the Group's current run rate of losses at an adjusted
EBITDA level is lower than in 2021 and it continues to focus on
becoming sustainably profitable.
Cyber Security Division
The Company continues to gain new customers for its Triarii
cyber security monitoring services and has a strong pipeline of
business across several vertical markets. As well as providing an
enhanced protective and monitoring service to clients, Triarii is a
more efficient and capable platform for operating our Security
Operating Centre ("SOC"), leading to greater synergies by operating
across a single technology platform.
New customers have also benefitted from the inclusion of the
Group's new standalone Managed EDR (Endpoint Detection and
Response) as an enhanced entry-level protection against ransomware.
This allows customers to adopt the much wider capabilities of the
Group's Triarii MDR (Managed Detection and Response) service and
its "Detection in Depth" approach.
The spinout of N-able (formerly SolarWinds MSP) into a
separately traded public company, N-able, Inc ("N-able"), completed
last month. A key strategy of N-able is to empower and protect its
25,000 MSP customers (and over 500,000 end users) with
cybersecurity products and services, and the Company believes that
it is very well positioned to address this market. Falanx has
already been working closely with N-able to provide Triarii
services to its customers and is a member of its Technology
Alliance Program. Management is closely engaging with N-able and
expects this spinout to benefit Falanx in the second half of 2021
by accelerating sales of its security products and services into
their MSP customers and to widen the routes available for increased
engagement.
The division's sales performance has improved, not only with the
initial post COVID-19 rebound, but also from the sale of multi-year
contracts. On average the division has received total orders
GBP0.34m per month since 1 July 2020 compared with an average of
GBP0.19m per month in the first six months of 2020. Falanx received
its largest ever sales order in April 2021 with a GBP1m multi-year
contract for penetration testing, only the first year of this is
reflected in the average order value referred to above. This order
was from an existing client, a leading and globally recognised
financial services organisation, and management believes that there
is a further opportunity for expansion on this account.
The pipeline of business continues to strengthen for both
assessment and Triarii services, both in terms of quality and
quantum. The recent record order intake and healthy orderbook is
converting into revenue, driven through optimum utilisation of the
highly motivated and expert team.
Assynt Strategic Intelligence Division
The Assynt business has continued to perform solidly and has
achieved strong customer renewals. A GBP1.2m three-year contract
with one of the world's largest technology companies has been
further expanded with a requirement for embedded analysts in EU
territories. This will be serviced from the Group's newly formed
subsidiary in Ireland and is expected to generate revenues of
cGBP1.0m over the next three years. Contracted (adjusted for
undelivered contracts and known churn) monthly recurring revenues
are currently circa GBP190,000, marking an increase of 19% since
March 2021.
Falanx Assynt was recognised by Chambers & Partners in their
2021 rankings, listed as one of five firms in their tier of global
Geopolitical Risk providers. Charles Hollis, the Managing Director
of Assynt, was also rated among the top five individual
practitioners globally.
Mike Read, CEO, commented: " Our much-improved trading,
particularly in our core Cyber Security division combined with the
new Boost loan puts us in strong position to exploit the major
opportunities ahead, either by organic investment or by earnings
enhancing acquisitions. I am optimistic about the opportunity with
N-Able and its large customer base following the completion of
their spin out later this month. This progress in Cyber, and the
growing expanding contract base in our Assynt division underpin our
plans for growing equity value."
Enquiries:
Falanx Group Limited Via IFC
Alex Hambro Chairman
Mike Read CEO
Ian Selby CFO
Stifel Nicolaus Europe Limited, Nomad and
Joint Broker
Alex Price / Fred Walsh + 44 (0) 207 710 7600
IFC Advisory Ltd, Financial PR & IR
Graham Herring / Zach Cohen +44 (0) 203 934 663
About Falanx
Falanx Group Limited, is a global intelligence and cyber defence
provider working with blue chip and government clients. For more
information: https://www.falanx.com/
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