REACT : Annual Report – SEPT 2022

Report of the Directors and

Financial Statements for the year ended 30 September 2022

For

REACT Group PLC

Company Number: 05454010

REACT Group PLC

CONTENTS & FINANCIAL HIGHLIGHTS

Introduction

Executive Chairman's

Statement

Chief Executive Officer's

Report & Strategic Review

Chief Financial Officer's

Report

Corporate Governance Statement

Directors' Report

Report of the Independent Auditors

Consolidated Statement ofComprehensive Income

Consolidated Statement ofFinancial Position

Consolidated Statement ofChanges in Equity

Consolidated Statement ofCash Flows

Notes to the Consolidated Statement of Cash Flows

Company Statement of Financial Position

Company Statement of Changes in Equity

Company Statement of Cash Flows

Notes to the Company Statement of Cash Flows

Notes to the Financial Statements

Company Information

Page FINANCIAL HIGHLIGHTS

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1.- Adjusted EBITDA represents earnings before separately disclosed acquisition and other restructuring costs (as well as before interest, tax, depreciation and amortisation). This is a non-IFRS measure.

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REACT Group PLC

Introduction

REACT Group is a leader in the specialist cleaning, decontamination, and hygiene sector, including both contracted commercial cleaning and specialist emergency decontamination work.

The Group carries out specialist contract cleaning across the UK focused on markets with non-discretionary requirements, complex demands and/or nationwide fulfilment. The business operates through three distinct divisions in commercial windows & cladding, hygiene & maintenance and, emergency & decontamination. Our primary objective is to maintain and/or rapidly return our customers' property to safe, clean, operational use and do this through regular specialist cleaning and/or emergency response to potentially harmful incidents.

The core business includes one of the largest nationwide commercial window cleaning businesses providing an essential service for an array of blue chip customers; regular cleaning regimes in the health service, the education sector, on parts of the rail network and the highways; emergency call-out work to respond to trauma, anti-social behaviour, and other hazardous incidents across a range of sectors including working for some of the industry's largest facilities management ("FM") firms; and specialist ad hoc work such as dealing with void clearances, fly tipping, pigeon guano clearance, and graffiti.

As a genuine specialist, REACT operates across a fragmented market where quality, geographical reach and range of service is often a challenge.

REACT has recently added a unique nationwide commercial window cleaning business which provides a competitive national ecosystem of more than 300 'local' service partners. Each operator is trained, audited and certified to a high standard with rigorous safety standards.

REACT's emergency call out business is one of the very few specialists with full coverage of mainland Great Britain operating to a call-out time of less than 4 hours; essential for our larger customers that rely on a consistently high-quality standard and an urgent response to provide their own customers with minimum interruption of service.

The work our specialists undertake has tangible value; the cost of not being able to operate a train, open a hospital ward or school classroom, occupy any form of commercial or socially important property is material, hence the work REACT does is valued and operates at higher margins than regular cleaning.

Customers value quality and speed of response; they recognise REACT as one of the very few specialists to deliver such strength and diverse capability across the whole of Great Britain.

Our strategy is to continuously improve the value of our portfolio of services to our customers and thereby further strengthen the financial model of our business by maintaining strong margins and improving the long- term recurring nature of our income.

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REACT Group PLC

Executive Chairman's Statement

For the year ended 30 September 2022

The Board of the REACT Group is pleased to report the Group continues to deliver significant growth in the period under review, both organically and as a result of the acquisition of LaddersFree, thereby continuing to deliver material improvements in operational performance and profit contribution.

The acquisition of LaddersFree in May 2022 creates yet another step-change in the make-up of the Group's business, augmenting the unique strengths of REACT's emergency cleaning services, Fidelis's contract cleaning and facilities management services with LaddersFree, one of the largest commercial window cleaning businesses in the UK. As a result, the Group has strengthened its capability across a number of important specialist cleaning disciplines and has materially improved its financial operating model through the addition of a high-margin, working capital-light, rich seam of long-term contracted recurring revenues.

Details of the Group's performance is set out in reviews by the Chief Executive and the Chief Financial Officer. For the year ended 30 September 2022 (FY 22), Adjusted EBITDA1 on a consistent accounting basis was £953,000, up +20% on the prior year, (2021: £795,000), on sales revenue of £13.70 million, up +78% on the prior year (2021: £7.70 million).

The Group performance represents strong like-for-like organic growth of c.17% enhanced by the acquisition of LaddersFree in May 2022, which contributed to the second half of the financial year.

Each segment of the business provides opportunities and challenges, yet together they provide a unique value proposition; that of a unique business providing a broad spectrum of specialist cleaning services, to a consistently high standard across all locations in the UK. This creates potential for upsell and cross-sell, providing customers that require a quality solution delivered across multiple locations at a cost-effective price with a solution that is difficult to otherwise solve. An example of this demonstrated by the recent contract win announcement of c.£800k per year to provide services from all three segments of the business through a coordinated programme to a large fast-service food chain across all its sites in the UK.

The financial model of the REACT Group has evolved from one of a predominantly project orientated business with high margin but inconsistent revenue flows to one that now has greater than 80% of its revenues contracted and recurring alongside a balanced margin that remains above market average. To this we add a consistent ability to generate organic growth and with it, scale.

Our strategy for growth is clear; we will continue to build a leading position across our business through fast- paced organic growth and if the right opportunities present themselves, via strategic acquisitions, to support our goal of becoming the country's most trusted name in the provision of specialist cleaning, decontamination, and hygiene services.

Mark Braund

Chairman

7 February 2023

1.- Adjusted EBITDA represents earnings before separately disclosed acquisition and other restructuring costs (as well as before interest, tax, depreciation and amortisation). This is a non-IFRS measure.

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REACT Group PLC

Chief Executive Officer's Report and Strategic Review

I am pleased to report excellent progress in FY22.

REACT Group has delivered significant growth, both organically and as a result of the acquisition of LaddersFree, whilst continuing to deliver improvements in operational performance and profit contribution.

We have materially improved our value proposition and our go to market strategy.

We have made good progress in the reported period. Since the acquisition of Fidelis in FY21, we have succeeded in growing the business organically and have been awarded a number of new contracts both large and small.

Organic growth for the Group during the period on a like-for-like basis was 17%. As we have grown we have added additional sales resource, specifically two senior sales people, one of whom, Sam Haywood, has been recently promoted to Group Sales Director.

The acquisition of LaddersFree has provided a step-change in performance; a profitable, working capital-light business, with an impressive client base, with almost all of its revenue being contracted and recurring. With LaddersFree we see a material opportunity to improve our go to market model, leveraging the channels it sells and delivers through to provide additional value add services to Customers.

A great example of this is the post period announcement of a multi-year contract awarded to the Group worth £800k per year to provide a twice yearly deep cleaning service to all the UK sites of a well know fast service food outlet, announced on 5th January 2023.

Like many others in this business environment, and despite the strong performance, the business has witnessed certain headwinds, which are being addressed. The reactive business slowed down coming out of the prior year, FY21, which continued through to the beginning of H2 22. We believe it to have been a post Covid issue, a combination of two factors; opportunistic competition that had temporarily entered the market to deal with demand for decontaminations and, customer budget-fatigue where budgets had been spent and in many cases over-spent during the worst period of the pandemic. We are pleased to report that much of this disruption has disappeared, demand has risen again as we returned to more normal levels of reactive business towards the end of the year.

Importantly we continue to refine and improve the financial model of our business, focusing sales and acquisitions on the growth of profitable long term recurring revenue contracts.

The business model has advanced significantly form of 3-4 years ago, which was predominantly reactive, less profitable and with little in the way of recurring revenue contracts, to a business where our recurring revenues in FY22 were c83% of total Group revenue.

With a full year of contribution from LaddersFree included in the new financial year we anticipate this to improve further to greater than 86%.

As we develop our unique proposition, we continue to build a number of compelling customer case studies in our most important market sectors. These help verify the quality of our work and provide reassurance to new customers who place trust in our capability.

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