Security firm reports slow down of growth after scale-up

Cyber security ECSC Group is expecting its full year revenues to be below market expectations after a period of change, including the scaling up of the business.

The Bradford firm this morning announced its six month interim results, in which CEO Ian Mann said the firm was experiencing delays in converting the sales pipeline to committed orders and revenues – despite an increase in staff headcount. 

ECSC put investment of IPO proceeds into scaling up the infrastructure and in the period reported an operating loss of £1.58m, compared to an operating profit of £0.29m for the same period in 2016. 

The firm saw an EBITDA loss of £1.47m (2016: EBITDA profit of £0.36m), which the company said was due to the enlarged cost base.

Mann added: “Since June 2017, sales conversion delays have continued to be evident and therefore, whilst our revenue is scaling, the rate of growth remains below our  revised expectations, such that full year revenue will be below market expectations.”

Mann added: “This investment programme has progressed to plan, having increased our headcount, broadened our UK operating infrastructure with low cost facilities in Leeds and London, and established a ‘follow-the-sun’ Security Operations Centre in Australia.”

The number of sales leads being generated by the enlarged team has begun to increase but delays are being experienced in converting sales.  

Mann added: “In light of the lower revenue levels currently being generated, the Board, whilst protecting key revenue generating resources, has reviewed the operational cost base of the Company and identified a number of savings which will be immediately implemented.

“Whilst these savings, together with the Company’s growing revenue levels, will materially reduce the monthly EBITDA loss, they will not be sufficient to fully offset the reduced revenue levels and therefore we also expect full year EBITDA to be below market expectations.

“Despite these revenue challenges, the Board remains confident that its organic growth strategy is appropriate given the long-term opportunity in the cyber security market.”