• 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 expenses like amortization and share-based payments.

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

• 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 29, 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, with a churn rate of less than 2.5%, which is lower than industry averages.

• 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 a slowdown in sales pipeline deal age.

• There has been a reduction in service frequency in sectors like retail and hospitality, affecting revenue.

• Administrative expenses were reported at GBP4 million, including non-cash IFRS charges and exceptional costs related to acquisitions.

• The market conditions have led to a depressed share price, not reflective of the company's operational performance.

• The company is not currently pursuing new M&A opportunities, focusing instead on integrating recent acquisitions and navigating market challenges.

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 were key. Contracts have built-in uplifts, and the company has educated customers that these changes are due to government legislation, not company policy. The company is not a minimum wage payer, which helps maintain low employee churn.

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, benefiting from Aquaflow's excellent management team and cultural fit with REACT.