Falanx Cyber Security Limited share price, company news, analysis and interviews
Falanx Cyber Security Limited (LON:FCS) protect, defend, and inform businesses in the face of growing political and cyber risks.
Partnering closely with clients, they use their intelligence, vigilance, tools and technology to provide targeted threat prevention to businesses like yours. Whether your need for cyber resilience is rooted in remaining compliant or mitigating risk, their experienced and friendly staff are here to help.
The Software and Computer services sector is very broad with over 120 companies listed on the London Stock Exchange. In 2022, the Statista research department calculated, the gross value added of companies in this sector exceeded ÂŁ50 billion. See table below. The continuous flow of technological innovations has made this sector one of the most varied, dynamic and exciting to invest in.
In this article, DirectorsTalk has selected six publicly listed UK companies in the Software and Computer services sector. They all have robust technology platforms and offer software and/or IT solutions that span the telecoms, aerospace, retail, media tech, defence and security sectors.
Cerillion plc (LON:CER) is a leading provider of billing, charging and customer management systems with more than 20 years’ experience delivering solutions across a broad range of industries including the telecommunications, finance, utilities and transportation sectors.
Pennant International Group plc (LON:PEN) operates worldwide providing solutions, services and support to the Defence, Aerospace and safety critical industries across the globe, offering a turn-key solution for any requirement.
Aferian plc (LON:AFRN) is a new breed of media tech business, focused on enabling operators to meet the challenge of the rapidly converging worlds of broadcast and next-generation streaming services
itim Group plc (LON:ITIM) is a SaaS-based technology company that enables store-based retailers to optimise their businesses to improve financial performance and effectively compete with online competitors.
Team Internet plc (LON:TIG) – formerly CentralNic Group, is a global internet platform that derives recurring revenue from operating a marketplace model for online presence and online marketing services.
Falanx Cyber Security Limited (LON:FCS) protect, defend, and inform businesses in the face of growing political and cyber risks.
Falanx Cyber Security Limited (LON:FCS), the global cyber security provider, has provided an update on trading for the year ended 31 March 2023 (“FY23”).Â
Total revenues for FY23 are expected to be c.ÂŁ3.8m (2022: c.ÂŁ3.5m) representing organic growth of c.9% year on year. The Group experienced steady growth on PenTest revenues of 5% and it also saw strong growth in SOC monitoring revenues which grew by c.21% when compared to FY22. Total SOC order values (New Logo, Renewals, Uplifts & extensions) were up by 58% on FY22, reflecting the continual achievement of service excellence (with a strong Net Promoter Score of 80%+). This resulted in a growing volume of SOC clients through high annual renewal levels as well as growth in the estate coverage of individual clients.
The business has a healthy pipeline of business and has significantly lowered its operating cost base recently and expects to improve its financial performance in the next few months against a backdrop of further sales order growth so far in the first quarter of this financial year.
Falanx Cyber Security will report its audited results prior to the end of September 2023.
Falanx Cyber Security Limited (LON:FCS), the global cyber security provider, has announced that the Company’s name has changed from Falanx Group Limited  to Falanx Cyber Security Limited and the tradeable instrument display mnemonic of the Company has changed from “FLX” will be changed to “FCS”.
In 2014, the Falanx Group formed Falanx Cyber Defence Ltd, solely to provide enterprise-class cyber security services and solutions. We deliver end-to-end cyber capabilities, either as specific engagements or as fully-managed services. Our capabilities comprise a full suite of cyber security services, all focussed on improving our clients’ cyber resilience, and ultimately enabling them to withstand, cyber-attacks.
Falanx Cyber Security Limited operates from the U.K. with our headquarters and Security Operations Centre based in Reading. As a provider of cyber security services, we are focussed on delivering those services to the highest standards of client satisfaction possible. We believe that by focussing on our core business our clients benefit from levels of agility, expertise, and quality.
Falanx Group Limited (LON:FLX), the AIM listed provider of cyber security services, has announced today its interim results for the six months ended 30 September 2022.
Financial Highlights for six months to 30 September 2022
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Orders for our core services were ÂŁ1.89m (2021: ÂŁ1.62m) representing growth of 17%.
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Core Service Revenues held at ÂŁ1.8m (2021: ÂŁ1.8m), despite the exit from an onerous non-core contract worth ÂŁ250k per annum
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Group adjusted EBITDA* loss ÂŁ1.12m (2021: ÂŁ0.39m) following investment in sales expansion
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Cash balances at 30 September 2022 ÂŁ1.96m (2021: ÂŁ0.51m), normal working capital position
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Loss per share 0.28p (2021: 0.14p) from continuing operations
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Shareholders’ funds ÂŁ2.87m (2021: ÂŁ2.0m)
Operational highlights
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Strong growth in pipeline combined with an increased proportion of MDR opportunities
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Growth in both order volume and customer count in the period
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Two new Tier 1 channel partners signed up and the revitalisation of existing partners
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Launch of two new entry-level defensive MRR services in R-IR and CVS already delivering revenue.
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Expansion of the EDR portfolio to include additional market-leading software vendors
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Ongoing development of f:CEL 2.0
Post Period Events
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Final ÂŁ345,000 of cash consideration from the sale of Assynt in October 2021 was received early October 2022
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Order growth of +44% for core orders in October and November 2022 compared to the same period in 2021
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Gross margin improved to 42% (H1 FY23 36% and FY22 40%)
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William Kilmer and Rick Flood joined the board as NED and Executive directors respectively
* Adjusted EBITDA is a non-IFRS headline measure used by management to measure the Group’s performance and is based on operating profit before the impact of financing costs, IFRS16, share based payment charges, depreciation, amortisation, impairment charges and highlighted items
Alex Hambro, (Non-executive Chairman) of Falanx, commented:
“In the nine weeks since I last wrote to you, I am pleased to announce further progress in sales with good order growth compared to last year. The drivers to spending on cyber security are ever increasing, and we look forward to growth in this year and next year. Our focus is to get to sustainable profitability within our existing resources and we are planning on achieving this by both recurring revenue growth and cost management. I am delighted to have welcomed William Kilmer to the Group who joined us as a NED in October and his wealth of experience in cyber security is already making an impact.”
Business Review
In the Period to September 2022, orders for our core services were ÂŁ1.89m (2021: ÂŁ1.62m), representing growth of 17%. The majority of this growth came from increased sales of our defensive services, all of which generate Monthly Recurring Revenues (“MRR”). As outlined previously, the growth of our MRR revenues is key to our strategy. Total orders for these MRR services grew by over 100% in the Period.
During the Period, we exited a legacy consulting contract (which had the potential to become onerous) at an agreed break point and the growth in MRR sales has more than offset this revenue reduction with higher quality revenues and better long-term margins. Overall, across our core services, we have transacted with a greater number of customers than in the previous year.
Our target market is primarily SMEs and we focus our MRR service offerings on organisations which employ between 50 and 1,000 staff. Cyber security threats are ever growing, and against an increasingly difficult social and economic backdrop, criminal activity is increasing. Cyber security insurance providers are now significantly increasing premiums as well as applying increased conditionality, which can include mandating use of cyber security services, as a condition of cover. The need to protect a business’ assets against cyber-attacks is even more imperative now than ever before.
Consequently, we have evolved our service offerings to best address our target market and protect those SMEs from cyber-attack, whatever their insured status may be. To best address this, we have progressively introduced additional defensive MRR services with lower entry price points in addition to our existing Managed Detection and Response (MDR) and Managed-Endpoint Detection and Response (M-EDR) services (both of which support multiple leading enterprise-grade security vendor solutions). Retained Incident Response (“R-IR”) and Continuous Vulnerability Scanning (“CVS”) were introduced in the summer of 2022, and we are seeing that customers are increasingly understanding the need for both services – a rapid response service in the case of a breach (R-IR) and continually scanning networks with CVS throughout the year as well as the Pen Tests run annually. Consequently, we have a growing pipeline of opportunities in these service lines since their launch and this has already translated into sales to six customers – most of which are existing Pen Test customers. As customers mature and evolve, full MDR will become more relevant to their organisation.
In addition, we have expanded our network of channel partners in the last few months. Some of these are starting to generate significant interest which has already translated into sales. We are focusing on a limited number of Tier 1 channel partners where we invest time and resources and are selecting them based on their experience, reputation, and their addressable market.
Post Period Update
Following on from the increase in MRR orders in the six months to 30 September 2022, combined with our rapidly growing pipeline of MRR opportunities, we have restructured our sales team to maximise our ability to achieve our MRR sales targets in the coming months. The sales team is now a single organisation split into two focused sales groups – PenTest (Attack) and MRR (Defend). They target new customers as well as cross selling into our base which is now has over 400 clients. This allows increased dedicated and experienced resources to focus on the more complex (and arguably more valuable) sales of MRR services, whilst allowing the penetration testing services team to focus on their own strong pipeline of business which typically has a shorter lead time. Early results are promising, with aggregate orders for core services across October and November 2022 growing by 44% compared to the same period in 2021.
Outside of our pipeline, we have several large-scale opportunities advancing with major global technology providers (both new and existing relationships) to partner as part of their Cyber go-to-market plans. As ever these opportunities could be transformational for Falanx, and we look forward to updating on these as they progress.
Financial Performance
Total revenues were ÂŁ1.8m (2021: ÂŁ1.8m). Within this, monthly recurring revenues from monitoring services increased by 29% to ÂŁ0.49m (2021: ÂŁ0.38m) offsetting a small reduction in professional services, the majority of which came from our exit from a non-core legacy contract referenced previously.
Gross margin decreased to 36% (2021: 40%) due to expansion costs and some price increases. Rectification actions were carried out, and in recent months gross margins have recovered back to ahead of FY22 levels. The Group expects to be able to manage these cost factors to protect gross margins going forward. Underlying operating costs were ÂŁ1.76m (2021: ÂŁ1.10m) with the increase arising from investment in sales and marketing expansion. Consequently, the adjusted EBITDA loss was ÂŁ1.1m (2021: ÂŁ0.39m).
Depreciation and amortisation charges were ÂŁ0.22m (2021: ÂŁ0.25m), with the vast majority being the routine amortisation (straight line basis over a 10 year period) of the customer base acquired in March 2018, as well as property lease costs related to IFRS16.
Interest payable was ÂŁ0.17m (2021: ÂŁ0.04m) and was mainly comprised of interest (including amortised costs) on the Boost loan of ÂŁ2.5m drawn down in October 2021 as the IFRS 16 element lease payments for the Reading office.
The loss from continuing operations was to ÂŁ1.48m (2021: ÂŁ0.71m). The loss per share (both on a basic and fully diluted basis) from continuing operations was 0.28p (2021: 0.13p).
Consolidated Statements of Financial Position & Cash Flow
Intangible assets were ÂŁ3.1m (2021: ÂŁ3.5m) and principally comprised of the acquired customers base and associated goodwill. The ÂŁ0.13m goodwill arising from the acquisition of Securestorm Limited was fully impaired in the year ended 31 March 2022.
Trade and other debtors stood at ÂŁ1.21m (2021: ÂŁ0.93m) with the increase being due to the final ÂŁ0.345m of the cash consideration from the disposal of Assynt in October 2021 (which was held in escrow for 12 months) until it was paid in early October 2022. Cash receipts were strong, with no incidence of bad debt being recorded, and debtor days stood at 40 (2021: 42). Trade and other payables reduced to ÂŁ0.62m (2021: ÂŁ1.29m) due to the repayment of HMRC COVID-19 backlog which took place in H2 FY22. Deferred incomes increased to ÂŁ0.53m (2021: ÂŁ0.39m) due to greater business volumes and overall, the Group had a normal working capital profile at 30 September 2022.
Net cash outflow from operations was ÂŁ1.30m (2021: ÂŁ0.88m) and included the final ÂŁ0.07m payment of the HMRC COVID-19 backlog. Cash balances as at 30 September 2022 were ÂŁ1.96m (2021: ÂŁ0.51m) and overall shareholders’ funds were ÂŁ2.87m (2021: ÂŁ2.0m).
Events after the reporting Period
On 7 October 2022 the final ÂŁ0.35 million of the Assynt disposal cash consideration held escrow account against was released to the Group.Â
Falanx Group Limited is a cyber security services provider, offering enterprise-class offensive and defensive security solutions to Small and Medium-sized Enterprises (SMEs).
Our strapline is Attack. Defend. Protect.
Attack
These are our Offensive Services and are primarily centred around Penetration Testing / ethical hacking (“PT”). Our comprehensive portfolio of PT services covers a wide range of skills and techniques which we use to emulate potential attackers looking for vulnerabilities in our client’s infrastructure.
Defend
Our Defensive (managed) services are provided by our Security Operations Centre (“SOC”) based in Reading. The SOC operates a 24/7/365 service, continually watching our customers’ IT estates, looking for unusual activity which may be a sign of a cyber-attack or data theft.
Protect
Through both our Offensive and Defensive services, we help our customers to protect themselves against cyber-attacks.
Falanx Group plc (LON:FLX) new independent Non-Executive Director William Kilmer joins DirectorsTalk Interviews to discuss his new role in the company.
William provides us with some details around his knowledge and extensive background in the sector, the importance and need for cybersecurity, how William sees the industry evolving in the coming years and how his knowledge and background in the sector will benefit Falanx Group.
Falanx Group protect, defend, and inform businesses in the face of growing political and cyber risks.
Falanx Group plc (LON:FLX) CFO Ian Selby joins DirectorsTalk Interviews to discuss the sale of its Assynt Strategic Intelligence Division for an estimated cash consideration of ÂŁ4.6 million to Cross Atlantic Solutions LLC. Ian talks us through the highlights, explains how becoming a pure play cyber security business will affect the business, the reasons behind selling the division, use of proceeds and what can Investors expect over the next 6-12months.
Falanx Group protect, defend, and inform businesses in the face of growing political and cyber risks.
Falanx Group Limited (LON:FLX), the AIM listed provider of cyber security and strategic intelligence services, has announced the launch of its new cyber security assessment tool, Falanx: Cyber Exposure Level (“f:CEL”).
This new service offering is expected to play an important role in Falanx’s reconnaissance stage of performing a cyber security risk assessment on businesses in order to assess their overall risk of being attacked or breached. f:CEL uses a multi-point reconnaissance approach to allow an external, non-invasive, light touch approach which requires minimal input from the user. The findings of this new assessment tool are displayed as a Falanx Cyber Exposure Level score. The f:CEL score is comprised of three elements:
· Digital Risk – assesses a company’s Web and Dark Web content, including its website security
· External IP Risk – assesses the security level of a company’s public-facing servers
·    Organisational Risk – assesses how effective a company’s operations are in minimising their risk of attack
The user submits an easy-to-complete, quick, multiple-choice, online questionnaire following which f:CEL runs its analytical and diagnostic tools before providing its findings and recommendations the next working day. Following the initial sign-up report, f:CEL update checks can be performed regularly so that a business can keep track of their security posture. Each report run provides incremental remedial recommendations for the business to action as well as visibility on how their security posture improves over time.
f:CEL is sold on a subscription basis and is consequently expected to generate high quality recurring revenues. Various large channel partners have already expressed their interest in deploying this into their customer bases. Consequently, the Board believes that there is potential for growth, not only from sales of f:CEL itself, but also through incremental follow-on sales of cyber security services such as monitoring and penetration testing.
Mike Read, Falanx Group CEO, commented:Â
“Falanx Cyber has developed a mass-market, technology that will perform an objective and repeatable cyber security risk assessment on businesses.  We believe this is an ongoing requirement for companies, of all sizes, in order to maintain a robust resilience against cyber threats“
“f:CEL is affordable and easily accessible for all sizes of business and can be deployed via larger partners. Initial deployments have already generated valuable insights to organisations, as well as discussions of sales of other Falanx services. f:CEL will allow executives to plan and budget to address weak areas and, perhaps more significantly, provide Board members with evidence on how they are looking after the business on behalf of all their stakeholders.”
Falanx Group plc (LON:FLX) CFO Ian Selby joins DirectorsTalk Interviews to discuss results for the year to 31st March 2021. Ian takes us through the highlights of the second half, talks more about revamping its service offerings in the Cyber Security division, the ÂŁ1.2m extension and expansion from an existing global technology, how Assynt has traded through the last 6 months and what Falanx is looking to achieve during the rest of the year.
Falanx Group protect, defend, and inform businesses in the face of growing political and cyber risks. They provide complete, proactive cyber defence, intelligence, technology and Risk forecasting and analysis to provide targeted threat prevention.
Falanx Group plc (LON:FLX) Independent Non-Executive Director William Kilmer caught up with DirectorsTalk to discuss his background, the importance of cybersecurity, how he sees the industry evolving and how his knowledge and background will benefit the company.
Q1: William, first off, congratulations on your new role at Falanx Group. Could you just give us a brief background to yourself?
A1: I’ve been characterised as both an investor and an operator so played on both sides of the table from the tech industry, which has really been where I’ve been my entire life. I’m currently with an investment platform called GALLOS which focus on investment and building companies in the cybersecurity space.
From the investment side, I also was a former Managing Partner at C5 Capital which was a London and Washington DC based investor in cybersecurity. My cybersecurity background really started at Intel Corporation, where I was previously the Managing Partner there, investing in a gamut of different technologies but it’s really where I started to notice the great need for cybersecurity, and it peaked my interest.
On the operating side, I’ve previously run several cybersecurity or data analytics companies that were start-ups that subsequently were acquired. Interestingly enough, I actually ran, as an interim CEO, a cybersecurity managed security services provider based in London called, ITC Secure.
So, most of my work has been in the US, UK and throughout Europe, and for the last 15 years, I’ve really focused on cybersecurity, it’s such a main sector for me.
Q2: You mentioned that you’ve been a founder and CEO of several cybersecurity and data analytics companies. How important is the need for cybersecurity?
A2: Cybersecurity’s always been important but I think it’s really never been more important than it is right now.
Most of us focus on technology as being a key element but I think we’re really transitioning right now to a critical phase in cybersecurity where we’ve now become less focused on technology and more thinking about the cyber posture of an organisation and taking a more holistic point of view. From my perspective, the cybersecurity viewpoint in the UK has really adopted that and maybe been at the forefront, thinking about cyber basics and how organisations really present themselves, protect themselves and that really goes down to the employees.
I think now we’re seeing even more management involvement, even at the Board level is critical for an organisation to be safe, and given the threats that we’ve seen in the market today, particularly from what we would look at as bad actors, outside of our normal sphere that are in more authoritarian regimes, that are enabled and even encouraged and incentivised to attack organizations today.
It’s just critical that every organisation think top to bottom on how they protect themselves.
Q3: How do you see the industry evolving over the coming years?
A3: I think this industry’s always evolving. We think we’ve gotten to the right level of protection with the right types of products that we’re providing but the fact of the matter is the cybersecurity industry is based on our technology industry overall, which is a constantly changing landscape.
So, what are we seeing right now?
Number one is that with technology evolving, there’s going to be more need in the market. We’re seeing a higher use of personal data in our transactions and the things that we’re doing when we think about what’s coming in the future, more personalised digitalisation, for example, the metaverse, we’ll see more issues around data being a key thing. Inside an enterprise, we’re seeing what we call their attack surface, the area that can be attacked by bad actors growing, whether it’s their social media presence, more digital assets that they’re using so those two things are not really helping us in terms of the industry being more protected.
The other thing that we’re seeing that is a real evolution in this market is just the need for good quality individuals. There’s a severe talent gap that’s out there today that is really driving the need for the cybersecurity industry to be innovative and so I think with that, we’re seeing maybe three really evolving themes over the near future:
One is how do you de-risk that human element? At the end of the day, organisations are run by people, people are fallible and what we see is that most of the attacks that are out there have some sort of human element of it. I think as an industry, we’ve got to be able to comprehend and figure out how to manage that.
Two is how do you really quantify the risk for particularly a business, but also for government organisations in a way that leaders can understand and know how to respond to? That’s an area that I think we’re continuing to see evolve, where we’re able to start talking more in a business language, what are the potential losses to an organisation, how would it impact a new product launch or their customers?
Third is really innovation around automation and using in particular AI to not just identify problems, but also to figure out how to solve them. I think we’re going to see more and more technology supplementing and improving the position of those talented people that are in the cybersecurity industry to help them make better decisions or maybe even take some of those decisions off of their plate.
So there’s a lot of really exciting things that are happening in the market today.
Q4: Now, we talked earlier about your knowledge and extensive background in the sector, but how will that benefit Falanx Group?
A4: I think it’ll help in several ways. Number one, I’ve sat in the seat of running a cybersecurity managed services provider in the past, so I know a little bit about the operations and how it should look, the types of products that they should be running and really being able to balance that operational element.
Two is I have pretty extensive technology and in particular product experience. So, one of the things I’m really excited about with Falanx is being able to help them think about some of the new services that they can provide, how they can take products and turn them into services that will help organisations that are missing that talent gap, how they can run those and help them to manage the risk.
Third is from my experience of being out there with the end users, the CSOs of organisations, the business leaders, I think I get a good perspective of what their limitations are and what their real needs are as organisational leaders on how to protect themselves.
So, I’m really looking forward to the opportunity to work with them, this is a critical gap in the market that they’re trying to fill, and I think really the managed security space in particular is we’re really going to see a high amount of growth over the next few years. So, I think it’s a bright future overall for the industry.
Falanx Group (LON:FLX) Chief Financial Officer Ian Selby caught up with DirectorsTalk for an exclusive interview to discuss the disposal of Assynt, becoming a pure play cyber security business, reasons for selling Assynt & what the proceeds will be used for and what investors can expect over the next 6-12 months.
Falanx Group protect, defend, and inform businesses in the face of growing political and cyber risks. This week the company announced that it’s entered into an agreement to dispose of its Assynt Strategic Intelligence division for an estimated cash consideration of £4.6 million to Cross Atlantic Solutions. Joining me today to discuss the news if CFO Ian Shelby.
Q1: Ian, you’ve announced that you’ve entered into an agreement to dispose of Assynt Strategic Intelligence division, could you just talk us through the highlights?
A1: What we’re doing is we’ve sold it for an enterprise value of £4.6 million and a cash to a buyer with US investors.
Assynt is very much a standalone business, before we were two separate businesses, we had our core Cyber division which is ongoing and then the Assynt Strategic Intelligence business and we had alluded to, in recent RNS’s of Cyber being the core. We’ve now consummated the change in our structure and our strategy to address this market.
So, last year, Assynt did revenues of about £2.1 million and did £100,000 positive of adjusted EBITDA so if you look at those, we sold it for over twice revenue at about 46 times historical EBITDA so they’re strong multiples.
Q2: Falanx has now become a pure play cyber security business, how will this impact the company?
A2: We see cyber security as a very high growth market, we’ve seen today about a FTSE250 company getting a vicious cyber attack on it this year. The threat is only ever-increasing and now we’re focussed on one sector where we’re really well positioned and of course, with a much stronger balance sheet and cash resources behind this, to address it.
You’ll have seen in our full year statement last week that the Cyber division, its profitability is much improved, it’s now profitable, last year it lost about £400,000 so it’s going in the right direction.
Furthermore, we’ve got service enhancement, we’ve got Triarii our monitoring service and launched, as of Monday this week, we have f:CEL, our entry point enterprise cyber security risk assessment tool. We’ve now got partners in line with this, we’ve got N-Able which is spun-out of Solar Winds in July of this year, that’s got 25,000 service providers and about 500,000 end user customers.
So, we can see that we’ve got a good market to go after that and we really believe this is a growth opportunity and having the net proceeds around means we can fuel and accelerate things.
Q3: Could you just summarise the reasons behind selling the division and what the company intends to do with the proceeds of the disposal?
A3: Before, the company was set into two separate divisions with very little crossover. You have the Cyber division which is largely SME’s and the Assynt division which is some of the largest corporates in the world and there’s very little crossover between the two and historically, there hasn’t been, completely different organisations. Therefore, you were never going to get synergies in essentially a £5 million business but it was split into two separate businesses, as it was in the previous financial year.
This will mean that all management focus is on one division and it’s well financed and in a good position to grow.
What we’re going to be doing with it, get investing in the channel, grow sales and marketing, all obviously very controlled, service enhancement, service delivery, focussing on that so we can really expand the business. That’ll clearly be in a very measured cost controlled way of doing it and making sure we get the right returns on it.
Also, we will look to do M&A within the sector and only stuff we know where we can make it earning-enhancing.
Q4: Mike Read mentioned that amongst the Falanx Group directors, there’s a confidence about the company’s future, what can investors expect over the next 6-12 months?
A4: We’ve all got skin the game, we’ve all bought shares in the company and we’re all absolute believers in it.
We are now focussed on a single business, that’s the difference so all the attention is now on Cyber. We are well financed, we can make some investments we need to further grow revenue and support revenues growth into the future.
We’ve got two new recurring revenue product/service streams on board with Triarii and now, of course, with f:CEL so we’re going to be looking grow our recurring revenue base further and obviously that generates revenue in a very predicable ongoing basis.
We will look at M&A opportunities but clearly, only things that can be earnings-enhancing.
Falanx Cyber Defence Ltd,part of the Falanx Group Ltd (LON:FLX) Managing Director Rick Flood caught up with DirectorsTalk for an exclusive interview to discuss joining the SolarWinds Technology Alliance Programme, what services they will be offering and what this means for the company.
Q1: Now we saw earlier that Falanx Cyber Defence has joined the SolarWinds Technology Alliance Programme. Rick, can you tell us a little bit more about who SolarWinds are?
A1: For anybody who doesn’t know who SolarWinds are, they are a US-based listed software company, they probably have a market, if you check today, probably in the region north of $6 billion so pretty significant.
They offer a range of technical programmes to enable people to manage their IT infrastructure predominantly, which of course, as we all know, has developed to be not just managing IT but also managing security over the recent sort of years.
Q2: What is the Technology Alliance Programme then?
A2: The Technology Alliance Programme, or TAP as they call it, is specific to one part of the business. When you look at SolarWinds, there are two elements to it, one that they call CORE, which offers software really to the enterprise end of the market, and then there’s the SolarWinds MSP business, which offers, through MSP’s or managed service providers, the ability to service their customers with all of these products I mentioned earlier.
The TAP programme, in itself, is a group of pre-approved partners by SolarWinds who offer services and products that complement their own portfolio and is specifically targeted at the MSP community, through TAP, to enable them to better serve their customers.
Q3: So, what services will you be rolling out to the network?
A3: Well, in fact, it’s pretty much everything that we offer.
So, depending on what people know, we offer a range of services from offensive to the defensive strategies, cyber security on the offensive side, it’s all very ethical as you would expect, but that could be emulating a criminal to try and attack somebody, through to the defensive strategies, which include our recently announced Triarii platform and support not only from that but also specific solutions currently in the SolarWinds portfolios. For example, they’ve got something called SentinalOne EDR, which is an endpoint protection service or solution, we can offer a sub-service behind that. So, everything that we offer will be going through the TAP programme.
The most significant elements or components of this is that this gives us direct access. We’ve been working with SolarWinds for the last couple of years on the security side of their offering, and what the TAP programme enables us to do is to now work directly with all of their community, wherever they are in the world. We’ve previously announced that they’re in the region of 22,000 MSP’s servicing many, many customers, more than that, globally.
Q4: What does all this mean for Falanx then?
A4: As far as we’re concerned, as I say, we’ve been working with SolarWinds for a couple of years and we’ve been using a product of theirs called Threat Monitor. Earlier this year, we decided that we would develop their own additional services, which we’ve previously announced called Triarii, which is an enhancement to the Threat Monitor service.
We’re delighted that SolarWinds have endorsed that by adding it to their portfolio through the TAP programme and in addition, what we should see is an acceleration of the pent up demand that we’ve created over the last two years.
We’ve run a number of events together where we’ve advocated security into the MSP community and, in doing so, we’ve created a lot of demand which we haven’t been able to fulfil from a variety of reasons. This announcement should start to unblock that and already in the last couple of weeks, we’ve seen a significant uptick in inbound interest from their MSP community so we’ve really excited about it.
Falanx Group Ltd (LON:FLX) Chief Executive Officer Mike Reid caught up with DirectorsTalk for an exclusive interview to discuss their annual results for the year-ended 31st March 2018.
Q1: Could you explain the background to the results today and what has driven the revenue growth?
A1: We’ve had a very solid year, we’ve undertaken three acquisitions, but the most important bit is we’ve had very strong organic revenue growth, the cyber revenue grew by 18% of which 96% of that is organic. The acquisition we did at the back end of the year, First Base, really, we only bought it in March and hence that’s had very little impact on our numbers.
The important bit since the year-end, our proforma revenue has grown from its £3 million that we announced today up to around £6 million and you’ll see the exciting bit, for me anyway, is that we hit EBITDA profitability in July.
So, it looks like the coming year is going to be very promising for us.
Q2: Now you’ve significantly increased your gross margin, how was this achieved?
A2: Well, the main impact on the gross margin, which moved from 20% to 31% to last year, is because we’ve got a better product mix. For those of your listeners that would’ve heard our presentations on things before, we’ve been introducing a monitoring product for our customers called MidGARD, that has got a recurring revenue line and also has got a significantly improved rate to margin around 60%-70%. So, the mix of our products has increased our gross margins significantly.
Q3: As we know, a key focus is to increase the recurring income, could you talk us through the progress being made here?
A3: I think, as a lot of people that know me, I just love recurring revenue, I view it as you earn money as you sleep and therefore I obviously enjoy that. Our recurring revenue is up from 55% to 62% and its main reason is really back to that revenue mix I identified just now. So, we’ve got a good amount of recurring revenue both from our cyber business and also our intelligence business so it’s all down to product mix.
Q4: With Falanx Group being an industry consolidator, what sort of companies are you targeting?
A4: Well, as I said earlier, we’ve successfully bought three in the year, two of those were technology, and I’ll talk a little bit about that later, and the third one was the one I just talked about also, First Base. We bought these companies really to either bolster up our technology side or increase our revenue and our product mix and we’ve also bought a fourth since year-end, Securestorm, which we announced only a few weeks ago.
We will continue to look for all value-enhancing acquisitions providing we can get them at appropriate prices that will complement our business lines or add to our technology. So, we will continue to look for acquisitions.
I think the other part that’s important really is that we are focussed in the coming months to our technology and whilst we bought two small companies, we will look to try and strengthen that as well as we go forward.
Q5: What would you say the outlook for the rest of the year and beyond looks like for Falanx Group Ltd?
A5: It’s very positive. First of all, we’ve got three new members that have come into the team to help us drive this forward, so we’ve announced, back in January, Ian Selby to be our Chief Financial Officer so he’s really focussed on getting us into the profitability that I talked about earlier. We’ve recruited Rick Flood who is our Chief Marketing Officer, he’s got a good sales and marketing background and we’ve also got Richard Morrell who is our CTO who understands more about technology than many people and is well known in the industry.
So, we’ve got a very solid foundation of people, we’ve got very good organic growth as you identified earlier and we’re in a very strong foundation. So, how do we grow our business?
We’re really looking to strengthen where we are with our partners, we sell a lot of our services through indirect customer bases, so this is called managed service providers. We have about 7 of those at the moment but we’re looking to really enhance that so that we can get to a far far greater customer base and outgrow the market so that’s the first area. The other area, which Dick Morrell is focussed on is on the technology side. We’ve got some exciting developments of MidGARD that are coming out soon which we hope our customers will enjoy and we know that they want them and it’s just down to us to deliver it.
So, our outlook is very positive, we’re looking forward to the coming year. There is a research note out about us from Progressive which I would encourage those that want to know a little bit more about us and want to see what they think the future is going to look like for us, that they read that they read that equity research note.
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