Crossword Cybersecurity plc
(“Crossword ” or the ”Company”)
Crossword Cybersecurity Plc (NEX: CCS), the technology commercialisation company focusing exclusively on the cyber security sector, today announces its Final Results for the year ended 31 December 2017.
Highlights for the period
Generated £737k of revenue in 2017 vs £345k in 2016, recording revenue growth of over 113%, as we continue to accelerate sales activity, whilst still investing significantly in product R&D
Launched Rizikon Assurance, a GDPR Software-as-a-Service (SaaS) solution based on a recurring revenue model, designed to enable medium and large companies to assess and monitor the cyber security risks of their large supplier base.
Launched a major initiative, CyberAI, applying leading edge Artificial Intelligence and Machine Learning techniques to real world cyber security challenges with academic researchers from MIT, Imperial College and Edinburgh University and four major companies: a global investment bank, a FTSE 100 retail bank, a multinational insurance company and a big four professional services firm.
CyberOwl, the spin out from Coventry University funded by Mercia Fund Management that Crossword created, is making strong progress and raised a further £750k from Mercia and Coventry University
Created a spin out company called ByzGen, based around blockchain research work with Warwick University and EPFL in Switzerland, attracting £500k of funding from RFS Ltd.
Appointed Rob Johnson as Chief Operating Officer from Mercia Technologies, the AIM listed tech transfer business, where he managed the software and internet investments
General Nick Houghton, Baron Houghton of Richmond, former Chief of Defence Staff of the British Armed Forces joined as a senior adviser bringing his considerable knowledge of global security issues to the company as we start to consider international expansion.
Raised £145k in May 2017 at a subscription price of £2.30
Post period end highlights
Appointed Ruth Anderson as a Non-Executive Director with over 15 years of experience in security, intelligence, cybercrime, and risk management. She is currently Head of IT and Cyber Risk at Lloyds Banking Group and was previously a director of Cyber in the Financial Service Department of KPMG
Raised £2.16m in two successful placings and subscriptions at a price of £2.70 in March 2018
Commenting on the results, Tom Ilube, CEO of Crossword Cybersecurity PLC, said “2017 was another excellent growth year for Crossword. We are starting to see our commercial activity yielding positive results, with Rizikon well positioned to capitalise on the introduction of GDPR. We have invested in our sales team and are looking for 2018 to be another strong year.”
– Ends –
Further information, please contact:
CEO, Crossword Cybersecurity
Tel: +44 (0) 20 8973 2350
NEX Corporate Advisor
Nick Michaels and Jon Isaacs, Alfred Henry Corporate Finance Limited
Tel: +44 (0)203 772 0021
NEX Corporate Broker
Claire Louise Noyce – CEO, Hybridan LLP
Tel: +44 (0)203 764 2341
About Crossword Cybersecurity
Crossword is a technology transfer company specialising in cyber security. Crossword works with universities who undertake advanced cyber security research in order to take their research through productisation to market.
2017 was the year when Crossword transitioned from an R&D focused company to unleashing our sales and marketing capability. We generated more revenue in the first half of 2017 than we did in the whole of 2016, and this momentum continued through the year. As reported in our trading update in February 2018, we ended the year having grown revenue by over 113%.
As we continue to develop Crossword’s technology commercialisation business focused exclusively on cybersecurity, there is no let-up in global cyber security incidents. 2017 saw several of the biggest and most alarming cyber security challenges to date. Equifax, the global credit reference agency, reported a data breach affecting over 145m consumers. Hackers accessed Uber’s servers containing the personal details of 57 million customers. Wannacry was described as the worst cyber-attack ever. This global cyber event impacted hundreds of thousands of computers worldwide, including crippling NHS hospitals on a large scale, once again thrusting cyber security into the national headlines. It was quickly followed by the Petya ransomware virus that leveraged some of the same techniques.
Crossword works with universities to commercialise technology based on their extensive cyber research. In 2017 we extended the group of universities that we are working with to include Imperial College, Edinburgh University, EPFL in Switzerland and MIT in the USA. This brings to a total of ten the number of universities that we are involved with: Bristol, Warwick, Coventry, Surrey, South Wales, City, Imperial, Edinburgh, EPFL and MIT.
In the middle of 2017, Crossword launched a major initiative, CyberAI, applying leading edge Artificial Intelligence and Machine Learning techniques to real world cyber security challenges. CyberAI brought together world leading academic researchers from MIT, Imperial College and Edinburgh University with four major companies: a global investment bank, a FTSE 100 retail bank, a multinational insurance company and a big four professional services firm. Led by Crossword, this powerful group has identified a specific AI-based, cybersecurity concept aimed at very large scale corporate customers. The next stage is to deliver a proof of concept and ultimately a commercial product.
CyberOwl, the spin out from Coventry University funded by Mercia Fund Management that Crossword created, is making strong progress, having been selected for and participated successfully in GCHQ’s new Cyber Accelerator. Mercia and Coventry University invested a further £750k into CyberOwl, bringing the total they have invested so far to £1.4m. CyberOwl has also secured over £100k in government grants and expects to launch its early warning cybersecurity product in early 2018.
In partnership with the University of Warwick, Crossword completed a Ministry of Defence funded proof of concept for blockchain-enabled smart documents. Based on the positive results of this proof of concept work, we engaged with the world renown blockchain team at EPFL, the federal university in Switzerland, to leverage their expertise. We then created a spin out company called ByzGen, and helped it raise £500k of funding from RFS Ltd.
With the imminent introduction of GDPR (General Data Protection Regulation) in 2018, our cyber risk product Rizikon Assurance, based on City, University of London research, is attracting considerable interest. Rizikon Assurance, a Software-as-a-Service (SaaS) solution based on a recurring revenue model, is designed to enable medium and large companies to assess and monitor the cyber security risks of their large supplier base.
We estimate that the UK market alone for Rizikon Assurance is worth £300m per annum.
Our specialist cyber security consulting subsidiary, Crossword Consulting Ltd, goes from strength to strength, building on its experienced team of ex-military, intelligence, and corporate cybersecurity professionals.
On the corporate front, Rob Johnson joined Crossword as Chief Operating Officer from Mercia Technologies, the AIM listed tech transfer business, where he managed the software and internet investments. Prior to his role with Mercia, Rob was a successful entrepreneur and has led five technology companies through successful exits. General Nick Houghton, Baron Houghton of Richmond, former Chief of Defence Staff of the British Armed Forces joined Crossword as a senior adviser bringing his considerable knowledge of global security issues to the company as we start to consider international expansion.
RESULTS AND FINANCIAL POSITION
Crossword generated revenue of £736,546 during the year ended 31 December 2017 (2016 – £344,736).
At the period end, Crossword had £490,090 in cash and cash equivalents, as part of total equity of £586,266.
While the group results show an increased loss of £1.24m against £953k in the prior year, this is as budgeted as the group is seeking to expand its presence in the market particularly with investment in staff capability in the areas discussed in the review of the year.
In May 2017, Crossword raised £145k in a placing and subscription at £2.30/share, a 20% premium to the then prevailing share price. Following the year end, in March 2018, Crossword further strengthened its balance sheet by raising £2.16m from existing and new shareholders at £2.70/share. This will strengthen the balance sheet position in order to provide sufficient cash flow for the business to develop in line with its objectives.
No dividends were paid or recommended to be paid during the year.
KEY PERFORMANCE INDICATORS
The Board monitors the activities and performance of the Group on a regular basis. The indicators set out below were used during 2017 and will continue to be used by the Board to assess performance over the coming year.
The number of active university relationships is a key performance indicator as it represents the pipeline of potential opportunities that may turn into commercial products in due course. We regularly review these relationships and the actions being taken to enhance existing relationships and establish new ones.
We monitor progress demonstrated in the development of our cybersecurity products that are in the development phase.
We monitor relationships with existing customers the pipeline of potential new clients, pipeline conversion and the rate of acquisition of new customers, for our products that have completed development and are in the commercial phase.
We monitor and review the development of a well-balanced management team and the recruitment, performance, and retention of suitably skills personnel.
The Board use financial indicators based on budget verses actual to assess the performance of the Group. The key aspects monitored is the Group’s working capital requirements, its current cash balance, monthly expenditure against forecast expenditure and quarterly revenue growth. These are as follows:
Working capital is defined as current assets minus current liabilities.
POST YEAR END
In February 2018, Ruth Anderson joined the Board as a Non-Executive Director. Ruth has over 15 years of experience in the field of security, intelligence, cybercrime, and risk management. She is currently Head of IT and Cyber Risk at Lloyds Banking Group and was previously a director of Cyber in the Financial Service Department of KPMG. Ruth previously held senior roles at the Child Exploitation and Online Protection Centre and served in intelligence and security in the British Army, following a degree in Arabic and Modern Middle Eastern Studies from Oxford University.
In March 2018, Crossword strengthened its balance sheet with an oversubscribed funding round, raising £2.16m from existing and new investors, including over £100,000 from the Chief Executive and other senior executives.
Crossword is seeing strong interest in Rizikon Assurance, our supplier risk assessment product. We are investing rapidly in our product sales team and are aiming to have in the region of a hundred meetings with potential commercial clients by the middle of 2018. We are very excited about the prospects for Rizikon Assurance as the General Data Protection Regulation (GDPR) comes into force in May 2018.
In addition to rolling out Rizikon, we aim to launch our second product, Nixer, into the market in 2018 and we are actively working on our third product that should emerge from our CyberAI initiative. Meanwhile, we expect to see continued strong revenue growth from our expert consulting team.
PRINCIPAL RISKS AND UNCERTAINTIES
The management of the business and the nature of the Group’s strategy are subject to a number of risks. The Directors have set out below the principal risks facing the business:
Intellectual property acquisition & development
Crossword acquires intellectual property (IP) rights from universities via licensing and IP transfer arrangements and then develops this IP into commercial products. Failure to secure good quality IP deals will make it difficult for us to generate new products. Crossword has in-house expertise on IP arrangements and makes use of external law firms where assistance is required.
As a cybersecurity company, Crossword is very conscious of its external reputation. If we are compromised as a result of a cyber incident it would impact our client’s confidence. Crossword has an experienced Chief Information Security Officer (CISO) and a strong technical team who actively mitigate threats.
Working capital management
Crossword needs to manage its working capital tightly to ensure that its funds are properly controlled. Failure to do so could cause problems with cash flow. Crossword has robust internal procedures to ensure that working capital is managed carefully on an ongoing basis.
CREATING COMMERCIALLY VIABLE PROPOSITIONS
The Group’s strategy is to convert interesting academic cybersecurity ideas into commercially viable products. Failure to develop appropriate commercial opportunities for its emerging products represents a major risk. The Group is managing this risk by conducting significant market research to position our emerging products and investing in a strong, professional sales, marketing, and product management team.
MAINTAINING UNIVERSITY PARTNERSHIPS
Crossword needs to establish and maintain relationships with leading cybersecurity universities. Failure to establish commercialisation partnerships with leading research universities will limit our ability to generate new products. Crossword has recruited a Chief Scientific Officer with a strong reputation and significant experience specifically to focus on university relationships. Over the past year we have been able to expand our set of relationships from six to ten leading universities.
COMPETITION FROM ESTABLISHED TECH TRANSFER BUSINESSES
The Group faces competition from existing IP transfer businesses seeking to engage in cybersecurity commercialisation activity. Crossword ensures that we know the main players in the UK technology transfer sector and we tend to cooperate with them rather than compete. We have deep cybersecurity sector knowledge and they have considerable financial resources to deploy, so the relationships are largely complimentary.
ATTRACTING AND RETAINING CYBERSECURITY TALENT
The market for experienced cyber security experts is highly competitive. Crossword relies on having real expertise in our teams. We go out of our way to create a positive working environment that is attractive to talented individuals and we adopt flexible working practices to fit in with individual’s lifestyles. In contrast to large corporates and consultancies, our team are treated as individuals. We also have incentives in place, such as share options for all staff.
At present the Directors are pleased with progress in these areas and consider these risks are sufficiently mitigated.
25 April 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017
|Year ended 31 December 2017
|Year ended 31 December 2016
|Cost of sales||(1,062,350)||(788,666)|
|Other operating income including research and development tax credits||97,716||78,354|
|Share based payments||(50,875)||–|
|Finance income – bank interest receivable||976||1,354|
|Finance costs – other interest payable||(1,402)||(73)|
|NET LOSS BEFORE TAXATION||(1,235,515)||(949,624)|
|LOSS FOR THE YEAR||(1,240,245)||(952,891)|
|OTHER COMPREHENSIVE INCOME
Items that will not be classified to profit or loss:
Foreign Exchange Translation Gain
|TOTAL COMPREHENSIVE LOSS||(1,235,980)||(946,686)|
|EARNINGS PER SHARE||(£0.39)||(£0.39)|
|DILUTED EARNINGS PER SHARE||(£0.38)||(£0.37)|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2017
|Property, plant and equipment||12,408||2,280|
|Investments in other unlisted investment and subsidiary||31||31|
|Total non-current assets||12,439||2,894|
|Trade and other receivables||175,813||178,154|
|Cash and cash equivalents||490,090||1,548,906|
|Total current assets||665,903||1,727,060|
|Attributable to the owners of the company|
|Share premium account||3,555,522||3,413,416|
|Translation of foreign operations||7,529||3,264|
|Trade and other payables||92,076||104,080|
|Total current liabilities||92,076||104,080|
|TOTAL EQUITY AND LIABILITIES||678,342||1,729,954|
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2017
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Cash generated from operations||(1,192,688)||(1,053,300)|
|NET CASH OUTFLOW FROM OPERATING ACTIVITIES||(1,192,688)||(1,053,300)|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Purchase of property, plant and equipment||(15,657)||(880)|
|Purchase of shares in other unlisted investment||–||(31)|
|NET CASH OUTFLOW FROM INVESTING ACTIVITIES||(15,657)||(911)|
|CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
|NET CASH INFLOW FROM INVESTING ACTIVITIES||145,264||1,369,431|
|NET INCREASE IN CASH AND CASH EQUIVALENTS||(1,063,081)||315,220|
|FOREIGN CURRENCY TRANSLATION DIFFERENCE||4,265||6,205|
|CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD||1,548,906||1,227,481|
|CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD||490,090||1,548,906|
NOTES TO PRELIMINARY RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2017
The financial information set out above does not constitute statutory accounts for the purpose of Section 434 of the Companies Act 2006. The financial information has been extracted from the statutory accounts of Crossword Cybersecurity Plc and is presented using the same accounting policies, which have not yet been filed with the Registrar of companies, but on which the auditors gave an unqualified report on 26 April 2018.
The preliminary announcement of the results for the year ended 31 December 2017 was approved by the board of directors on 25 April 2018.