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 Assynt 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
Matt Davis / James Keeshan

+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
This announcement contains inside information for purposes of Article 7 of Regulation (EU) No 596/2014

 

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

 

 

 

FALANX GROUP LIMITED

 

NOTES TO INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 SEPTEMBER 2017

  1. 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. 
  2. 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.
  3. 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.
  4. 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

 

  1. 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.