# REACT Group delivers 14% revenue growth post-acquisition

- Link: https://www.directorstalkinterviews.com/react-group-delivers-14-revenue-growth-post-acquisition/4121198505
- Published: 2025-05-27T07:09:41+01:00
- Author: Amilia Stone

**REACT Group plc **(AIM: REAT), the leading specialist support services provider
to the FM industry, has announced its unaudited interim results for the six-month
period ended 31 March 2025.

The Company’s acquisition of 24h Aquaflow Services in October 2024 has generated
a positive contribution to both revenue and EBITDA in the first five months following
consolidation and, as a result, the Group has expanded in the first half of FY 2025.

**Financial highlights**

·    Revenue increased by 14% to £12.1m (H1 2024: £10.6m) driven by the recent acquisition
of 24hr Aquaflow Services.

o  First time five months’ revenue contribution from 24hr Aquaflow Services of £
2.8m.

·    Repeat or recurring revenue greater than 85% (H1 2024: >85%).

·    Gross profit increased by 35% to £3.9m (H1 2024: £2.9m).

·    Gross profit margin strengthened by 490 basis points to 32.0% (H1 2024: 27.1%)
as the Group benefitted from higher gross margins in 24hr Aquaflow Services.

·    Adjusted EBITDA* increased by 12% to £1.43m (H1 2024: £1.28m).

o  First time five months’ Adjusted EBITDA contribution from 24hr Aquaflow Services
of £827k.

·    Free cash flow of £204k (H1 2024: £923k), after exceptional items mainly relating
to the acquisition of 24hr Aquaflow Services and corporation tax.

·    Cash and cash equivalents as at 31 March 2025 of £2.8m (H1 2024: £1.5m).

o  Net debt of £1.9m as at 31 March 2025 includes £3.2m from the £3.5m new term 
loan drawn in the period to fund the acquisition of 24hr Aquaflow Services

·    Basic (loss)/earnings per share of (1.18p) (H1 2024: 0.41p), reflecting an 
incremental increase in amortisation and depreciation as a direct result of the 
acquisition of 24hr Aquaflow Services.

·    Adjusted EBITDA earnings per share of 6.07p (H1 2024: 6.02p).

**Operational & strategic highlights**

·      Robust financial performance despite headwinds – first-half Group revenue
grew 14% to £12.1m, with gross profit up 35% to £3.9m and Adjusted EBITDA increasing
12% to £1.4m and reflecting the contribution from 24hr Aquaflow Services acquired
in late October 2024.

·      Resilient revenue mix – >85% of revenue is recurring or repeat, providing
stability while shifting toward higher-margin services to support long-term profitability.

·      Strategic expansion – the integration of 24hr Aquaflow Services has strengthened
cross-selling opportunities and unlocked new revenue streams, including a 12-month
commercial drainage contract with a major FM-sector client in London.

·      Driving operational efficiencies – the rollout of Project Sparkle, the Group’s
digital platform for commercial window cleaning, is underway. This initiative will
streamline processes, enhance customer interaction, and create new cross-selling
opportunities, ultimately improving operational efficiency and driving scalable 
revenue growth.

·      Navigating market headwinds – rising employer national insurance and living
wage costs are pressuring customers, affecting demand for specialist cleaning services.
While the Group can pass on statutory cost increases, it has taken a collaborative
approach, ensuring fair pricing and maintaining strong customer partnerships with
minimal churn. Meanwhile, 24hr Aquaflow Services’ strong performance has helped 
mitigate some of these pressures.

·      Effective customer engagement strategy – REACT has proactively worked with
customers to implement fair cost adjustments while ensuring service continuity. 
This flexible approach has helped preserve customer relationships but has had some
impact on revenue and profitability.

·      Balance sheet strength – £2.8m in cash and cash equivalents, providing financial
stability and ample working capital headroom.

**Current trading & outlook**

·      Despite market challenges, REACT remains focused on mid-market opportunities,
where shorter decision cycles continue to drive cross-selling and upselling, reinforcing
customer retention and long-term value creation.

·      Deals that experienced delays in H1 2025 are now progressing, supporting 
re-emerging revenue growth which may benefit the second half of the current financial
year.

·      While challenges remain in specialist cleaning and soft FM services, 24hr
Aquaflow Service’ performance has helped offset some of these pressures, reinforcing
our ability to adapt.

·      In light of prevailing sector specific and global economic pressures extending
business decision cycles, particularly for higher value contracts, the Board is 
adopting a cautious approach to conversion of new business in the second half of
FY 2025 and results are now expected to be below market expectations.

·      24hr Aquaflow Services maintains strong momentum, with a steady flow of new
opportunities.

*Adjusted EBITDA represents earnings before separately disclosed acquisition, impairment
of intangibles, share-based payments and other restructuring costs (as well as before
interest, tax, depreciation and amortisation).  This is a non-IFRS measure.

> **Commenting on the results Shaun Doak, Chief Executive Officer of REACT Group,
> said:**
> “REACT has delivered a robust first-half performance, despite market headwinds
> impacting organic growth. Following the acquisition of 24hr Aquaflow Services,
> revenue increased 14% to £12.1m, with Adjusted EBITDA up 12%, reflecting the strength
> of our recurring revenue base and proactive cost management, while also enhancing
> our financial and operational infrastructure to support the business’ continued
> scaling.
> While economic pressures have materially affected some areas, the successful integration
> of 24hr Aquaflow Services has been a key growth driver, helping to offset some
> of the challenges in specialist cleaning. Looking ahead, we remain focused on 
> strengthening pipeline momentum and capitalising on mid-market opportunities, 
> where shorter decision cycles are supporting new business wins. Investments in
> Project Sparkle, customer engagement, and service optimisation continue to enhance
> efficiency, positioning REACT well for long-term, sustainable growth despite broader
> market challenges. The Board is taking a more cautious approach with respect to
> the expected outturn for the current financial year but firmly believes that REACT
> is well positioned to capitalise on an improvement in the economy.”

**Strategic overview**

REACT has delivered a robust first-half performance, navigating a challenging market
with focus and adaptability. Aided by the acquisition of 24hr Aquaflow Services 
in October 2024, Group revenue increased 14% to £12.1m, with gross profit rising
35% to £3.9m and Adjusted EBITDA up 12% to £1.4m, driven by disciplined execution
and the strength of our recurring revenue base, which now accounts for >85% of total
revenues.

Macroeconomic pressures and a record comparative period in H1 2024 have influenced
organic growth, but the successful integration of 24hr Aquaflow Services has unlocked
new revenue streams and expanded cross-selling opportunities. This includes specialist
cleaning projects supporting the drainage division and a 12-month commercial drainage
contract with a major FM-sector client in London, servicing a landmark location.
While challenges remain in specialist cleaning and soft FM services, 24hr Aquaflow
Services’ performance has helped offset some of these pressures, reinforcing the
Group’s ability to adapt.

At the same time, sales efforts across the Group have continued with encouraging
success, despite longer decision cycles, particularly for high-value deals. Each
division has achieved notable wins and strengthened customer relationships.

Alongside operational execution, the Group has continued investing in financial 
and infrastructure improvements to support long-term growth. Key priorities include
strengthening the Finance team, advancing Project Sparkle, and enhancing customer
engagement and service delivery.

Additionally, as outlined in our FY 2024 Annual Report & Accounts, the Group made
a strategic decision to exit the periodic deep clean business in the rail sector
following a shift in service expectations. During and immediately after COVID-19,
heightened hygiene requirements drove high-value contracts, but as standards eased,
pricing and margins declined to unsustainable levels. This exit from this division
removed approximately £1.1m in revenue, which was included in H1 2024 but is now
fully absent in H1 2025, impacting year-on-year comparisons. While this affects 
short-term results, it strengthens the Group’s focus on sustainable, high-margin
opportunities, ensuring resources are deployed where they drive long-term value.

**Sales performance & market dynamics**

Despite a slower market and extended decision cycles, particularly for higher-value
deals, sales efforts have continued across all divisions, yielding solid results.

Soft FM services at Fidelis secured several upsell and cross-sell opportunities,
including two large deals worth approximately £300k annually. Additionally, Fidelis
closed four mid-sized contracts with new customers totalling around £100k annually
and established breakthrough relationships with two new FM firms focused on void
cleaning work in the housing association sector. The division also successfully 
navigated multiple long-term contract renewals, including three material agreements
worth approximately £800k annually.

LaddersFree, the Group’s nationwide commercial window cleaning business, has faced
challenges due to market headwinds but has successfully retained customers impacted
by cost pressures by adjusting service specifications and cleaning frequencies. 
Sales momentum remains solid, with 45 new customer acquisitions, predominantly in
the SME segment, alongside two national contracts with well-known brands and 68 
incremental new sites onboarded for existing customers.

REACT’s specialist cleaning division experienced a slight slowdown in project work
volumes, though this was offset by 18 new customer acquisitions during the period.
These customers represent a mix of contracted and ad hoc work, contributing approximately
£500k in annualised revenue.

Meanwhile, 24hr Aquaflow Services secured three new FM-sector clients, each presenting
opportunities for significant revenue expansion. One of these customers has already
signed a contract to service 167 sites for ‘first-call’ services, expected to generate
approximately £100k per year based on historical trends. Additionally, 24hr Aquaflow
Services recently secured a 12-month commercial drainage contract with a major FM-
sector client, servicing a landmark London location. This contract reinforces REACT’s
ability to integrate and scale specialist services across its divisions.

The waterfall graph below provides a breakdown of gross profit contribution between
H1 2024 and H1 2025, highlighting the key factors driving changes over the period.

![a2f57aae c225 4a40 add6 87127175434f (REAT)](https://dw6uz0omxro53.cloudfront.
net/3400180/a2f57aae-c225-4a40-add6-87127175434f.jpg "REACT Group delivers 14% revenue
growth post-acquisition (REAT)")

**Operational & strategic execution**

Cross-selling and upselling remain central to the Group’s strategy, strengthening
customer relationships and driving additional value across all divisions.

The acquisition of 24hr Aquaflow Services in October 2024 has been a standout success
in this regard, demonstrating REACT’s ability to integrate niche facilities management
operators while unlocking new revenue streams.

Beyond integration efforts, the Group has made targeted investments in financial
and operational infrastructure to support continued growth. Strengthening the Finance
team, improving customer engagement, and enhancing service delivery remain key priorities.

Meanwhile, Project Sparkle, the Group’s digital platform for commercial window cleaning,
is actively rolling out. Designed to enhance scalability, operational efficiency,
and customer engagement, the platform will streamline operations and unlock new 
service opportunities. Once fully deployed, it will strengthen revenue growth across
the business while improving long-term service capabilities.

**Navigating market challenges**

Many of the Group’s customers continue to face economic pressures, including higher
retail business rates, increased labour costs, and statutory changes like higher
employer national insurance contributions and an increased living wage. These factors
have created financial constraints, particularly in soft FM services, affecting 
demand and profitability.

In response, the Company has worked proactively with customers to establish fair
agreements, allowing it to responsibly pass on statutory cost increases while maintaining
service continuity. This approach helps customers balance their budgets effectively
while ensuring essential operations continue, reinforcing REACT’s role as a trusted
partner.

To support customers through these challenges, the Group has adjusted service levels,
including reducing cleaning frequencies where appropriate and, in some cases, temporarily
pausing services to help customers manage costs without compromising standards. 
This reduction in activity levels inevitably impacted the revenues generated from
these areas of the Group during the period and is expected to continue through the
second half of the year, and into FY’26. The strong performance of 24hr Aquaflow
Services has helped counteract some of these pressures, showing resilience in drainage
and plumbing operations despite broader market challenges.

**Cash flow, balance sheet & capital allocation**

Cash generated from continuing operations totalled £0.7m, after settling £0.4m in
corporation tax, £0.2m in exceptional items (primarily related to the 24hr Aquaflow
Services acquisition), and adjusting for non-cash items, depreciation, and amortisation
of £1.3m.

Cash flows from financing activities reached £4.1m, which includes drawing a new
4-year £3.5m bank loan and raising £1.1m from a share placing, offset by loan repayments
of £0.3m and interest and lease liability payments of £0.1m each.

At period-end, cash and cash equivalents stood at £2.8m, reinforcing the Group’s
strong liquidity position. Free cash flow for the period was £0.2m, after settling
£0.2m in exceptional items, £0.4m in corporation taxes, and £0.3m in capital investments.

At period-end, net debt £1.9m is made up of bank debt £3.9m, finance leases £0.8m
and cash and cash equivalents £2.8m.  Bank debt includes £3.2m from the £3.5m new
term loan drawn in the period to fund the acquisition of 24hr Aquaflow Services.

**People & talent strategy**

Investing in our people, technology, and operational foundations remains central
to our long-term growth strategy. Strengthened financial and management reporting
has improved decision-making, while tailored training programs continue to develop
internal talent and enhance performance.

The Group has also expanded its sales and marketing capabilities, making targeted
investments in business development that will drive future growth.

The Board extends its sincere appreciation to all employees for their dedication,
professionalism, and contributions to REACT’s success.

**Outlook & strategic direction**

The Board is mindful of the difficult operating environment with rising costs, inflationary
pressures, and evolving regulations affecting businesses across the FM sector. Despite
these challenges, REACT has demonstrated resilience, underpinned by strong recurring
revenues and a customer-centric approach that fosters long-term partnerships.

Encouragingly, demand for integrated service solutions is growing, with mid-market
opportunities offering shorter decision cycles and driving new contract wins, particularly
through cross-selling and upselling strategies.

The successful integration of 24hr Aquaflow Services has strengthened the Group’s
capabilities, unlocking new revenue streams and reinforcing its position as a trusted
provider.

Looking ahead, the Board remains confident in its ability to navigate market challenges.
Strategic investments in operational efficiencies, digital transformation, and customer
engagement including the rollout of Project Sparkle will enhance service delivery
and support future growth. As conditions improve, REACT is well-positioned to accelerate
growth, leveraging our expanded capabilities to deliver sustainable, long-term value
for customers and shareholders alike.

The Board is taking a more cautious approach with respect to the expected outturn
for the current financial year but firmly believes that REACT is well positioned
to capitalise on an improvement in the economy.

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