Drumz plc (LON:DRUM), which is focused on investment in the technology sector, has announced its interim results for the six months ended 30 June 2021.
Results and performance
The Group’s results for the six months ended 30 June 2021 showed revenue of £18,000 (2020: £Nil) and an operating loss of £115,000 (2020: loss of £36,000).
At 30 June 2021 the two principal assets of the Group were its holding in Acuity Risk Management Limited (“Acuity”), an award winning business specialising in risk management and cybersecurity and its legacy holding in KCR Residential REIT plc (“KCR”), a company listed on AIM, which owns rented property in the private rented residential sector, typically in blocks of studio, one and two bedroomed apartments which are rented to private tenants in the UK.
Acuity continues to perform well and in September 2021, Drumz exercised its option to acquire a further 5% of Acuity for a cash consideration of £125,000. As a result, Drumz now owns 25% of Acuity’s share capital. Acuity’s principal product is STREAM™, which is used by private and public sector clients to manage their cyber security and other enterprise risks. Acuity is in a sector where customer demand is exceptionally strong, as more businesses seek to protect their data for financial, reputational and regulatory reasons. Demand for Acuity’s proprietary software continues to grow and further details of the progress achieved by the company are set out in the Chief Executive’s Report.
The share price performance of KCR in the six months ended 30 June 2021 continued to be disappointing. The value of Drumz’s holding in KCR at 30 June 2021 was £427,000 (31 December 2020: £767,000) representing a further book loss on investments of £146,000 (2020: loss of £414,000). I am pleased to report that in recent weeks the KCR share price has improved and at the date of this announcement, the book loss suffered in the first half had been eliminated.
Principally as a result of the KCR book loss, the Group’s loss before and after taxation amounted to £261,000 (2020: £450,000). The basic and diluted loss per share amounted to £0.08p (2020: loss £0.36p). No dividend has been declared.
At 30 June 2021 the Group had cash resources of £380,000 (2020: £25,000) and shareholders’ funds of £1,276,000 (2020: £754,000).
Macroeconomic factors
The effects of the global COVID-19 pandemic continue to be felt on the world’s economy and it remains extremely difficult to quantify what effect the broader impact of this pandemic will have on business in the future.
Outlook
We continue to be extremely pleased with the progress at Acuity. The commercial infrastructure of Acuity has been overhauled and a number of significant new staff hires have been made. The improvement in the number and the quality of the sales leads Acuity is now generating is testament to the progress that has been made and bodes well for the future. We continue to look for new investment opportunities and I would like to take this opportunity to thank my colleagues for their continued support.
Simon Bennett
Chairman
27 September 2021
Chief Executive’s Report
Existing portfolio
Acuity Risk Management
The focus has been on working with the Acuity management team to put in solid foundations, which will enable Acuity to grow as quickly as possible in its market, risk management for cybersecurity. The main drivers of value of such companies which operate a Software as a Service (SaaS) business model, are scale and revenue growth rates. It takes time and effort to get this right and a lot of credit for the progress that has been made must go to the team at Acuity.
In the period, Acuity completed its financial year end and the progress made in commercialising its activities has begun to show through, with a 27% rise in SaaS revenues to £1.2m, a 97% rise in contracted future revenues to £2.2m. Recently, Acuity was identified by a Gartner survey, Hype Cycle for Cyber and IT Risk Management, 2021. I am also delighted to be able to report that the highly influential global research, Gartner’s peer insights™, https://www.gartner.com/reviews/market/it-risk-management-solutions/vendor/acuity-risk-management/product/stream-cyber-risk-platform recognises Acuity’s principal product STREAM™ as being in the top three products in IT risk management.
KCR
As referred to in the Chairman’s statement, the share price of our legacy investment in KCR has continued to be disappointing. However, it is an asset backed company, and KCR’s share price has been trading at a significant discount to its stated net asset value per share. I also note that there has been a significant improvement in the share price in recent weeks, as KCR moves towards positive monthly cashflows.
New investment activity
In order to achieve good rates of return for shareholders, the focus is on investing in and acquiring established software businesses with an enterprise product sold into the business-to-business market, where Drumz can use its expertise to transform the value. We continue to look actively for investment opportunities.
Outlook
We continue to be pleased with the progress being made at Acuity, where Drumz’s strategy for delivering value enhancement is starting to bear fruit. Our search for new investment opportunities continues and I look forward to being able to report on the progress made in the coming months.
Angus Forrest
Chief Executive
