2020 Annual Report and Accounts

27 April 2021 – London, UK - Crossword Cybersecurity Plc (AIM:CCS, “Crossword”, the “Company” or the “Group”), the technology commercialisation company focused on cyber security and risk management, is pleased to announce its final results for the year ended 31 December 2020. The Notice of its Annual General meeting (“AGM”) and a Form of Proxy will be posted to Shareholders shortly.

A copy of the Annual Report and Accounts and the notice of AGM are available on the Company’s website at www.crosswordcybersecurity.com.

AGM and Investor Meeting

The AGM will be held on Tuesday 25 May 2021 at 3.00pm at the Company’s offices, Capital Tower, 91 Waterloo Road, London SE1 8RT, United Kingdom. The health and safety of our Shareholders and colleagues is always our utmost priority. Due to the UK Government’s restrictions on public gatherings, Shareholders will not be permitted to attend the venue in person and instead are being asked to participate in the meeting by submitting their proxy electronically. Additionally, the Company will be hosting an update on the Investor Meet Company platform on Wednesday 26 May at 10.00am. Click here to register for this event.

Share sub-division (“Sub-division”) and other resolutions

The Directors believe that liquidity and marketability of the Company’s shares may be improved as a result of a share sub-division. In addition, they believe it would bring the market value of the Company’s ordinary shares of 5 pence each (“Existing Ordinary Share”) in line with the Company’s current market capitalisation. Accordingly, Shareholders are being asked to approve the sub-division of each Existing Ordinary Share into 10 new ordinary shares of 0.5p each (“New Ordinary Shares”).

The timetable for the Sub-division is as follows:

Record Date of the Sub-division

25 May 2021

Results of AGM announced through RNS

25 May 2021

Commencement of Dealing of the New Ordinary Shares on AIM

26 May 2021

CREST accounts credited with the New Ordinary Shares

26 May 2021

Anticipated date of dispatch of definitive share certificates in respect of New Ordinary Shares

On or around 10 June 2021

Should Shareholders approve the Sub-division, it is anticipated that the Company’s share capital with effect from 26 May 2021 will comprise 57,618,900 New Ordinary Shares.

The Company will be seeking authority to issue ordinary shares representing one third of the New Ordinary Shares in issue following the AGM. In addition, the Directors are proposing to increase the Company’s ability to raise cash through placings of shares. Although there are no current intentions to undertake an equity fundraising in the near term, the Directors are seeking the flexibility to take advantage of opportunities that arise should the current favourable market conditions continue and are therefore proposing to increase the authority to disapply pre-emption rights from 20% to one third of the New Ordnary Shares in issue following the AGM.


Board Changes

The Company’s Articles of Association require that a director of the Company who held office at the time of the two preceding annual general meetings and who did not retire at either of them must offer themselves for re-appointment at the next AGM. Gordon Matthew and David Stupples both retire in accordance with Article 90.2 and have chosen not to offer themselves for re-election. Therefore both Gordon Matthew and David Stupples will retire from the Board at the conclusion of the AGM. The other Directors would like to thank both Gordon Matthew and David Stupples for their service to the Company.

The Company anticipates appointing a new Director following the AGM and a further announcement will be made at that time.


2020 Financial Highlights

· Delivered 25% revenue growth to £1.6m, despite the toughest economy in recent memory.

· Revenues from product and consulting expanded by 39%.

· Consulting 2020 recurring revenue 2.5 times 2019 recurring revenue.

· Equity fund raise £1.0m in April 2020.

· £0.2m cost increases due to expansion of Executive team and interest on convertible loan notes.

· Loss of £2.3m and £1.0m closing cash.


2020 Operational Highlights

· Rizikon Pro for SMEs was launched in July 2020; transforming the sales model with a much shorter sales cycle and impressively high conversion from trials to commitments.

· Agreement signed in March 2020 with Satisnet, a leading IT Security reseller, expanding partner program alongside Leonardo, the global defence contractor and NCC, the leading cyber security provider.

· IASME, the National Cyber Security Centre’s sole Cyber Essential Partner, delivering IoT device security certification using Rizikon.

· Crossword working with Verifiable Credentials Ltd on its Innovate UK funded project to allow NHS laboratories to issue Covid-19 immunity certificates.


Post Period Highlights

· £1.6m equity fundraise completed February 2021.

· Multiple sign ups of Chartered Institute of Information Security (CIISec) 10,000 members to free access to Rizikon Pro, following MOU agreement, with an easy upgrade to full functionality.

· Supporting University of Glasgow with its PRC (Privacy Risk and Compliance) Project, in creating a new software product aimed at Privacy Governance.

· IASME, the National Cyber Security Centre’s sole Cyber Essential Partner, delivering Counter Fraud Fundamentals certification using Rizikon.

· InnovateUK funded project to investigate Manufacturing Supply Chain Risk with Liverpool John Moores University commenced.


Outlook

· Expect rate of growth in revenue to more than double in 2021.

· Rapid roll out of Rizikon Pro, on the back of partnerships and membership deals.

· Growth organically and by acquisition.

· Expect to add one additional product to our cyber security product portfolio, through acquisition in the short term.

· Progressing plans to establish an overseas subsidiary in Oman and anticipate starting to roll out our products and services in the region in H2 2021.

· Actively exploring the possibility of acquiring a cyber security consulting company, to bring in additional clients and capability.

· Growing client interest in Nixer and Nixer functionality being used to enhance Rizikon.



Tom Ilube, CEO of Crossword Cybersecurity plc, commented: “Crossword emerged from a challenging 2020 in great shape, meeting market expectations of 25% revenue growth. Q4 2020 was Crossword’s largest revenue quarter to date, taking us into 2021 with strong momentum. We are excited about delivering on opportunities in 2021, from the Manufacturing Supply Chain Risk project which has the potential to change the supply chain risk landscape, to working with our partners and membership bodies to supply Rizikon. 2021 will see us expand our product portfolio, our consulting services offering and our geographical reach. We were delighted to welcome new institutional investors in our February 2021 fund raise, as well as appreciative of the ongoing support of our Shareholders. Crossword employees continue to embody our culture and values, while applying their skills and hard work to deliver on our objectives.”

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.






Contacts

Crossword Cybersecurity plc – Tel: +44 (0) 20 3953 8460

Email: info@crosswordcybersecurity.com

Tom Ilube, Chief Executive Officer

Mary Dowd, Chief Financial Officer


Grant Thornton (Nominated Adviser) – Tel: +44 (0) 20 7383 5100

Colin Aaronson / Lukas Girzadas


Hybridan LLP (Broker) – Tel: +44 (0)203 764 2341

Claire Louise Noyce


For media enquiries contact:

Duncan Gurney, GingerPR

duncan@gingerpr.co.uk - Tel: +44 (0)1932 485 300


About Crossword Cybersecurity plc

Crossword Cybersecurity plc focuses on the development and commercialisation of university research-based cyber security and risk management related software and cyber security consulting. The Group’s specialist cyber security product development and software engineering teams work with its university partners to develop the research concept into a fully-fledged commercial product that it will then take to market. The Group’s aim is to build up a portfolio of revenue generating, intellectual property based, cyber security products. Rizikon Assurance, Crossword’s leading product, is a SaaS platform that enables medium to large companies to assess and manage all risks from their suppliers. Nixer CyberML, Crossword’s most recently launched product, is a new tool for businesses that want to solve advanced security and cybercrime problems, such as detecting and dealing with compromised accounts, fraud, and in-application denial of service attacks. Crossword’s team of expert cyber security consultants leverages years of experience in national security, defence and commercial cyber intelligence and operations to provide bespoke advice tailored to its clients’ business needs.



Chairman’s Statement


Our strategy stands up to a turbulent year


Through a turbulent year, Crossword held fast to its strategy of building a significant intellectual property based, AIM quoted cyber security business. Crossword is a technology commercialisation business focusing on cyber security. We develop and commercialise university research based cyber security related software and provide cyber security consulting services.


Crossword ended 2020 having achieved our best quarter to date as a company. We entered 2021 with momentum across all fronts. Rizikon has achieved the sales breakthrough that we have been working towards and our rapidly growing specialist cyber security consulting team continues to build relationships with major clients.


The Board congratulates Management on successfully navigating an incredibly challenging year whilst achieving 25% revenue growth. We look forward to continuing to build value for shareholders in the year ahead.


Robust Financial Management response to COVID


The first half of 2020 tested the financial controls and procedures that CFO, Mary Dowd, had put in place and proved that they were up to the challenge. Management had accurate information at their fingertips and were able to respond immediately to the sharp downturn caused by COVID-19.


As well as cutting costs quickly, we also took steps to strengthen the Group Balance Sheet by completing a £1m equity fundraise. We appreciate the ongoing support of our existing and new shareholders through this period.


Mature Governance


The Board is committed to maintaining an effective corporate governance regime. We maintain a robust framework of controls and high standards which has proved its worth through 2020, enabling the company to adapt quickly but also securely and in a way that safeguards our stakeholders longer term interests. We believe this is essential to enable Crossword to deliver its strategy and generate sustainable value for shareholders. As such, the Board continues to adhere to the Quoted Companies Alliance (“QCA”) Corporate Governance Code (the “QCA Code”) in line with the London Stock Exchange’s requirement for all AIM listed companies to adopt a recognised corporate governance code. I refer you to the Chairman’s Corporate Governance Statement on page 24 of this report for further details.


Remarkable growth in the context of COVID-19


The last year has been challenging on many levels. Staff, clients and all stakeholders, along with the population at large has been impacted and our thoughts are with all who have lost loved ones through this unprecedented period. As a business, Crossword has weathered the worst of the storm and we are emerging in good shape. The cyber security sector continues to grow and the need to ensure that organisations of all shape and size are secure remains a top priority. This bodes well for Crossword in the years ahead.


I would like to pay tribute to our talented, diverse team of employees. This has been a very tough year on all but they have risen to the challenge magnificently. Crossword takes its core values of responsibility, openness, flexibility and learning very seriously and we are confident that our company will continue to flourish in the coming years.



Sir Richard Dearlove KCMG OBE

26 April 2021


Chief Executive Officer’s Statement


As Chief Executive Officer, it is my pleasure to present the annual report and audited accounts for Crossword Cybersecurity Plc (“Crossword” or the “Company” or the “Group”) for the financial year ended 31 December 2020.


2020 was year like no other. Who could have predicted the pandemic or its devastating impact on all our lives and the economy? However, despite the challenges, Crossword emerged from the turbulence of 2020 in surprisingly good shape. The company took cost action early, adjusted quickly to working remotely and successfully grew the business overall by 25%.


Crossword continued to build out its recurring product and consulting revenue. In the period under review, Group revenue grew by 25% compared with 2019, with product and consulting revenue growing by 39% over the comparative period with planned reduction in revenues from software development.


2020 once again illustrated the resilience of the cyber security sector. Organisations continued to experience a wide range of cyber security incidents, driving demand for Crossword’s products and services. In the face of the economic downturn, many organisations were forced to cut expenditure very rapidly across the board. However, after a pause in the middle of the year, they returned to investing in non-discretionary areas of cyber security. The UK is the largest cyber security market in Europe with spend of £8.3bn (2019), over £2bn exports and is number one in Europe for Cyber R&D, Cyber Incubators and Accelerators. UK Public Sector cyber procurement quadrupled in five years.


As a Group we had to move quickly to respond to the pandemic. Mary Dowd, Chief Financial Officer, took the lead on this. We put the health and safety of our team at the forefront and enabled remote working immediately. Crossword has operated remotely for a year now and I am pleased to say that it has not impacted productivity in any noticeable way. We took advantage of the Government’s furlough scheme to try to avoid redundancies. At one point, nearly a quarter of our team was furloughed. We were able to bring a number back as business picked up, although unfortunately some positions were made redundant. Towards the end of the year, business picked up again quite sharply and we ended the year with real momentum. The final quarter of 2020 was Crossword’s biggest revenue quarter to date and December 2020, normally a slow month, turned out to be our biggest single month to date.


On the product side, we achieved an important breakthrough with the launch of Rizikon Pro in July 2020. Rizikon Pro is an out-of-the-box, online SaaS solution, offered on a pay-as-you-go basis, giving smaller and medium sized organisations access to a set of core easy-to-use supplier assurance platform features, at a lower cost. Modules can be chosen according to need, meaning customers only pay for the features they use, and can be expanded as required. With a significant reduction in the sales cycle Crossword saw an immediate uplift in the number of engagements with clients and prospects. By the end of 2020 we had doubled the number of Rizikon clients compared to the end of 2019.


Sean Arrowsmith, Crossword’s new Group Sales Director, devised a new approach to rolling out Rizikon Pro by working with large scale membership bodies. We secured a relationship with the Chartered Institute of Information Security (CIISec), the UK’s leading cyber security membership body with over 10,000 members. In January 2021, CIISec offered a version of Rizikon Pro to its members and as a result we grew Rizikon’s user base significantly. It now stands at over 160 organisations and, at current activity levels, we are confident of significantly increasing Rizikon’s user base by the end of 2021.


Jake Holloway, Chief Product Officer, continued to enhance our second product, Nixer, with Imperial College London, with a focus on identifying attack tools such as credential stuffing using machine learning techniques. We introduced the new, machine learning version of Nixer, hosting a series of Webinars on credential stuffing attacks to prospective clients which are being very well received.


Under Stuart Jubb’s strong leadership, Crossword’s Consulting division continues to build a strong franchise across multiple sectors and in insurance, legal and financial services sectors in particular. As well as securing major projects with several FTSE and S&P 500 companies, it has secured contracts, which will deliver recurring revenue through to 2022 and beyond. vCISO is a virtual/remote CISO (Chief Information Security Officer) service, provided by Crossword Consulting cyber security experts at a fraction of the cost of an in-house CISO. In March 2020, a plan was in put in place for Stuart, designed to incentivise him commensurate with the achievement of growth in the enterprise value of that company. Stuart purchased 10% of shares in Consulting for £15,400, which may not be sold or transferred without the consent of the Company save that they will be compulsorily transferred back to the Company if his employment ends, following which he may as a good leaver retain an entitlement to 10% of the sales proceeds if Consulting is sold, or 10% of the valuation of Consulting on a change of control of the Company.

Dr Robert Coles took on the role of Chair of Crossword’s Consulting division in addition to chairing Crossword’s Advisory Board. Robert was lead partner for KPMG’s Information Security consulting business prior to becoming CISO of GlaxoSmithKline and we look forward to seeing him become more actively involved in Crossword over time.


In 2020 Crossword started exploring opportunities outside of the UK. In particular we started a number of conversations in the Gulf region, specifically Oman and Dubai. Crossword completed its first consulting project in Oman, for Sultan Qaboos University and the UK-Oman Digital Hub and we have a number of very interesting and potentially large-scale opportunities in the country. We are exploring the possibility of establishing an Oman subsidiary, in partnership with a significant Omani Group with extensive interests across the Gulf region.


On the corporate front, the Company completed a £1m equity fundraise in May 2020 through a placing and subscription of Crossword ordinary shares at a price of 230 pence per share. In February 2021, we also completed a successful and heavily oversubscribed £1.6m placing at 260 pence per share. I am very pleased to have the support of our shareholders through this period and am delighted to welcome new shareholders, including the Helium Rising Stars Fund, led by David Newton and several other major institutional investors.


I am incredibly proud of Crossword’s team through this unprecedented period. They have shown remarkable resilience and we have sought to support them as much as possible. We take well -being very serious at Crossword and have hosted all-staff sessions in this area. Crossword’s culture is quite distinct and rests on the four pillars of Responsibility, Openness, Flexibility and Learning. The last few months have shown us the value of embedding these values into our culture and I believe we have emerged stronger as a team as a result. I wish to thank everyone for helping Crossword navigate an incredible year and we are excited about the growth that we will achieve in 2021 and beyond.


Tom Ilube CBE

Chief Executive Officer

26 April 2021


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