Shearwater Group revenue quadruples on the back of M&A

MSSP singles out BrookCourt Solutions acquisition for 'outperforming' expectations

AIM-listed Shearwater Group has seen its turnover rocket to £23.5m for its year ending 31 March 2019.

The managed security service provider's (MSSP) revenue jumped 280 per cent from £6.2m in its previous fiscal year. It attributed the growth to the success of its acquisitions.

Shearwater went on an M&A spree last year, snapping up Brookcourt Solutions, two-factor authentication vendor SecurEnvoy, and cybersecurity consultancies Xcina and GeoLang.

These were said to have added roughly £16m to its revenue.

The MSSP bought Brookcourt for £30.3m and praised it for "materially outperforming" expectations during the five and a half months of trading it did since the acquisition was completed.

"The acquisition of Brookcourt Solutions and its subsequent outperformance has materially transformed the group and provides an excellent foundation as we move forward," said David Williams, chairman of Shearwater.

"The market opportunity for our unique collection of technology and solutions companies remains compelling, and we are now starting to deliver on our strategy.

"We've made an excellent start to the new financial year, delivering a quarterly profit and materially improving our cash position. We are now set up for strong revenue growth and profitability as the complementary nature of our group companies is beginning to be realised."

However, in its statement to the stock exchange, Williams said that the group's financial performance was affected by costs that were incurred as part of initiatives which did not generate the expected return on capital, though the group has now removed these costs.

The firm reported an EBITDA loss of £1.4m due to a number of operating costs in its Xcina business, which have now been removed.

Its services business made up 83 per cent of its overall turnover, contributing £19.3m.

Shearwater shelled out £7.4m to acquire assets from testing firm Secarma in April, which it has since rebranded as Pentest.

"The acquisition significantly strengthened the group's existing cybersecurity testing services with world-leading 'red-teaming' capability and has provided for multiple cross-selling opportunities, which are already being realised," Williams reported.

Shearwater handed the CEO reins to Brookcourt co-founder and chief exec Phil Higgins in April, as well as welcoming new CFO Paul McFadden.

Martin Courtney, principal analyst at TechMarketView, expects the MSSP to make further acquisitions in its new financial year.

"The primary challenges for FY20 will be to fully integrate the Pentest acquisition with other parts of the group to maximise upselling opportunities, while simultaneously reducing EBITDA losses to lay a foundation for future profitability," he stated.

"Other acquisitions remain on the cards though, and we wouldn't be surprised to see Shearwater make strategic buys that extend its cybersecurity product/service portfolio and customer base even further in the near future."