• Revenue: GBP12.1 million, up 14% year-over-year.

• Gross Profit: GBP3.9 million, a 35% increase from the prior period.

• Gross Margin: 32%, up 490 basis points from last year.

• EBITDA: GBP1.43 million, a 12% increase from the previous year.

• Free Cash Flow: GBP200,000 for the interim period.

• Administrative Expenses: GBP3,977,000, including non-cash IFRS charges.

• Aquaflow Revenue: GBP2.8 million for the period since acquisition.

• Aquaflow Gross Profit: GBP1.48 million.

• Aquaflow EBITDA: GBP870,000.

• Recurring Revenue: 85% of total revenue.

• Warning! GuruFocus has detected 4 Warning Signs with LSE:REAT.

Release Date: May 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• REACT Group PLC (LSE:REAT) reported a 14% increase in revenue to GBP12.1 million, with a significant portion being recurring revenue.

• Gross profit increased by 35% to GBP3.9 million, with a gross margin improvement of 490 basis points from the previous year.

• The acquisition of 24hr Aquaflow has been successful, contributing positively to revenue and margins.

• The company has a strong focus on customer retention and has successfully renewed several long-term contracts.

• Project Sparkle, aimed at digitalizing the LaddersFree business, is on track and expected to enhance scalability and customer satisfaction.

Negative Points

• The company faced economic headwinds, impacting some contracts and causing margin erosion.

• There was a slowdown in deal closures in Q4 of the previous year and Q1 of the current year.

• Administrative expenses were high, with significant non-cash costs related to amortization and share-based payments.

• The market conditions have been challenging, affecting the overall performance compared to an exceptionally strong prior year.

• The share price has dropped, raising concerns about market valuation and potential share buybacks.

Q & A Highlights

Q: How has REACT Group managed to pass on minimum wage increases to customers? A: Shaun Doak, CEO, explained that proactive conversations with customers have been key. Contracts include uplift clauses, and the team has educated customers that these increases are due to government legislation, not company policy. The company focuses on maintaining and improving margins through these discussions.

Q: What synergies have been realized from the integration of 24hr Aquaflow? A: Spencer Dredge, CFO, noted that the acquisition was not about cost synergies but about adding new services and customers. The integration has allowed for successful cross-selling and upselling, leveraging Aquaflow's excellent management and cultural fit with the group.