Acuity RM Group (LSE:ACRM) — 2025 Year End Trading Statement

0:00 Good morning, and welcome to the ACUITY RM GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today and publish responses what is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to chairman Angus Forrest.

0:32 Good morning to you, sir. Good morning, and welcome to the presentation. David Rajukovich, our chief executive, will give you much more detail and flavor on the company and its progress, which has been achieved in his first year as the chief executive. As you will have seen from the RMS, probably, it has been substantial. And it's also, I'm pleased to say, an introduction to our new finance director, Duncan Harper, who joined in November last year and has hit the floor running. And the reason for the presentation is really in line with ACUITY's desire to be open with investors.

1:20 It gives you, the investors, the opportunity to ask questions on the progress and the strategies employed. And with that, I would like to hand over to David.

1:32 Thank you very much, Angus. It's a pleasure to be speaking with our investors here today. We will be as open as we possibly can without making you all insiders. So I appreciate the the attention on the company, and I appreciate the questions that you have and will submit. Here's a brief agenda that we'll be running through. So first, I'll talk about some of the key events that happened in 2025. Duncan, our new finance director, will provide a financial update. I'll go into further detail about our sales and marketing efforts in 2025 and a bit of a sneak peek into the year ahead. And I'll be talking to you about some of the exciting new products that we have already developed and that we will be developing in 2026.

2:27 Finally, I'll provide a summary, then we'll go into a q and a, and I'll provide some closing comments to close out the the the show. First, let me go through some of the key events in 2025. And 2025 was a pivotal year in our company's history. We refocused the business on our core strength, is around cybersecurity GRC, so governance, risk, and compliance. We've instilled a discipline and a strategic focus. So good strategy involves saying no to to things as much as it involves saying yes. So we've very much narrowed down our focus, and we'll concentrate all of our resources and our power in the areas that we can best in in which we can best win.

3:24 2025, if I'm to to sum it up, it was a year of not only cost cutting, but streamlining the organization and improving the total talent level. So we one of our biggest achievements in in 2025 was the fact that we traded profit profitably in terms of operating profit in quarter four. That shows you the extent of the turnaround from last year when we lost a a quite a quite a substantial amount of money. So I think we've already seen some progress in that area. We've also improved the talent level in the organization. So we've we've brought on well, Duncan's a great example that you'll hear from.

4:13 He's he's come in and and done a great job. He's already streamlining some processes. He's he's providing very clear financial and very clear and timely financial information. We've also taken advantage of some fractional talent, and we've got access to, for instance, people with knowledge about and skills in in artificial intelligence. And these are the kind of skills that will allow us to step into this new era of software development. If you follow the software world or you follow AI in particular, you'll realize this is a great this is a time of great turnover, and there is there is huge potential for winners and losers to be determined this time. And what I can say is we've got access to talent now that will allow us to be winners in this space. Talent that we didn't we simply did not have in 2024 or even the beginning of of twenty twenty five.

5:21 We've also streamlined the organization. So we've we've we've lost some people, but we've also gained people. And the net effect is that we have a small dedicated core group that is ready to go out and provide a step change in how our customers do cyber GRC.

5:43 We are we've made inroads, and it this is still a work in progress, but we are rapidly becoming a and have developed a performance based culture. So we're very focused on our goals. We're very focused on providing shareholder returns. And it's it's more of a mindset than anything else. It has to do with the talent level. It also has to do with the mindset that we've instilled since late twenty twenty four and and early twenty twenty five. We've launched our vendor management hub and acquired our first customers. This largely comes off the back of our acquisition of Rizicon. This was our first foray into AI functionality.

6:31 So we've got some some some I would I would call it basic AI functionality, but one that has a very big impact. And that's really the only only the beginning because in 2026, we'll see a great we'll see a step change in terms of our ability to to become AI native. We've acquired our first customers in vendor management hub. It's a very simple and easy value proposition. So we feel like this is a potential area of growth. We began work on a proof of concept that could open a large lucrative defense related opportunity. Early returns are very good. Our customer is very happy.

7:17 And this is the this is a project that could potentially span across multiple nations and many different defense contractors. So that's an exciting development as well.

7:32 We made our first inroads into another large defense related contractor. So that and I'll mention them. So we've we've sold the vendor management hub to Leonardo, which was an important first step. There is a potential partnership to be had there as well as additional business in the future. At this point, I will hand it over to Duncan to talk about the financial highlights of 2025. Thank you very much, David. As Angus said, my name is Duncan. I joined the firm back in November. Delighted to have done so. Been working hard since then. The key things I wanted to highlight, three things around revenue, overheads, and and operating profits. If we start with with revenues, first of all, the revenue for the last financial year 2025 was stable at 2,100,000, same as 2024.

8:32 As I'm sure the existing shareholders are aware, the majority of our revenue comes from software subscriptions with a a a smaller amount from services, principally installation services or customizations. And then in terms of the forward contracted revenue at the end of December looking forward, we had 1,900,000 of forward contracted revenues from the existing what's left on existing one or multiyear deals. In terms of the overheads, David has been ruthlessly cutting the the overheads very significantly. As you can see on the slide, the overheads for the group, 3,000,000 in 2024, That came down to we're expecting 2,100,000 for 2025.

9:28 And if you look at quarter four for 2025 and annualize that up, we're down to an annualized rate of 1,800,000. And it it that's been achieved mainly through contracts where they're coming to an end, or we've taken positive action to reduce costs. We've either exited agreements. We've renegotiated with suppliers and cut costs across the board to try and make the business more sustainable. That's had a significant impact on operating losses. As you can see by halves, they've come they've come down significantly. And as David has already mentioned, we're very pleased that at a trading operating profit level for each month in the last quarter of quarter four, we were profitable.

10:18 So having done a brief highlight, I'll hand back to David. Great. Thank you for that, Duncan. What I'd like to do now is take you through some of the developments in sales and marketing with a focus on what we've accomplished in 2025 and with a bit of a peek into 2026. In quarter three and quarter four particularly, we've made some technical improvements on the website, which have laid the foundation for what's called AI engine optimization. And that allows the large language models or LLMs to index our site much more easily and suggest us as a key player in the space that we're in, which is actually just catching up to the reality of the fact that we are we are a key player, and we do have specialist knowledge that that people can benefit from.

11:16 This impact hasn't yet been seen, and we anticipate it being seen into 2026. We've also begun with a US led SDR, so sales development representative team, which has only recently started. And we believe that this team will help us to generate additional demand and and bring us a steady flow of leads starting essentially in the first quarter of of twenty twenty six. We had a big push on LinkedIn. We've the benefit of that is we have quite a bit of engagement and increased engagement from last year.

12:02 This will this is something that is a bit of a slow burn with social media. You need to establish a presence. You need to become a trusted authority. And the more that you do that, that we've laid that foundation, which we we will benefit from in 2026. We in terms of marketing, we've also had our vendor management hub approved to be on the and is now live on the AWS marketplace. They have actually they have granted us a credit to use to invest in optimizing our listing on the AWS marketplace. We will we're going through the budgeting process now. We've got a full marketing plan in place for 2026 to make sure that we're concentrating our resources in the areas that are going to be have the most impact.

12:55 You'll likely see me speaking at conferences in addition to some of the the the social media and the digital marketing that that we've already started to put in place. The in terms of the ability to bring in revenue or especially bring in cash and to to bring in additional revenue throughout the year, we've got vendor management hub and some of the new products that I'm gonna be talking about on the next slide that will offer a much improved time to value for our club for our clients. So this will allow us to get people up and running with very little manual onboarding from our side that'll reduce our costs, and it will further delight our customers because they'll be able to see value very quickly.

13:53 Just right alongside that, customers can start using it immediately. So one of the the biggest areas in software development is called activation, and that means getting customers to be able to see value almost immediately. That's something that is a key focus for the products that we've already launched in the form of vendor management hub and those that we will be launching in in the weeks and then months ahead. The improved ease of use of our product line, including vendor management hub and also including what we're what we're now gonna be calling StreamCloud. This these products are so easy to use that it is it is self explanatory.

14:42 And that will help not only our customers, but that's going to help facilitate our alliance partners bringing in more customers on their own because they'll completely understand the the value that it delivers as well as being able to onboard clients themselves without ACUITY needing needing to take on a great deal of additional resource. So that's the way that we can multiply our sales and multiply our revenue without dramatically increasing our cost base. That, in essence, will give us the operating leverage that we need to grow rapidly. SDRs so just to just to sum up a bit sales and marketing.

15:30 Our sales development representatives, those doing cold outreach, as well as our AI engine optimization, plus our reinvigoration of the of the partner base should lead to an improved pipeline in 2026. Some of you may ask, why didn't this happen in 2025? My response to that would be, we have better products that our alliance partners are and will be much more excited about going into 2026 than they were in 2025. We do already have some important prospects in the pipeline for quarter one of twenty twenty six. I won't go into to a great amount of detail, but we do have some significant wins that are in the pipeline and likely to close this quarter.

16:29 In terms of our products, I'll just provide a summary and a bit of a blurb about each of our products and where they fit in our overall product line.

16:41 So classic stream, that is a tried and tested system that the public sector is very happy with, and we are very sticker sticky there, especially when it comes to the the Ministry of Defense. We also have defense contractors that at the prodding of the Ministry of Defense have looked at us and have discovered that it it absolutely fits their needs.

17:11 Classic stream is a case of having a a very configurable and therefore heavyweight product that can be used to adapt to almost any process that our clients are are willing to undertake. This works very well where there are specific processes such as in the public sector and such as in in defense contractors. It doesn't work as well for some of our commercial clients and for our ability to expand into other commercial clients in in highly regulated industries such as finance and health care, for example. And that's where some of our other products come in, which which I'll come on to.

17:59 The vendor management hub, and these are going in in a chronological order. So Classic Stream has been has been our tried and tested product for for a number of years now. Vendor management hub will appeal to customers that

18:13 are just and there are many of them out there. There is a large segment of of potential customers that are doing very little in terms of third party risk management. And we've seen if you've seen in the in the news, so Marks and Spencer, Jaguar, Land Rover, many other companies have suffered breaches due to cyber attacks via third parties. This vendor management hub, while not the be all and end all of third party risk management, allows companies that are doing presently doing nothing to move to an organized way of sending out questionnaires, managing those questionnaires, and understanding where their most critical suppliers have the largest risks.

19:05 And if you can prioritize your critical suppliers and what risks they face, then you can manage it. Then you can stay on top of them to make sure they're actually implementing things like multifactor authentication and other methods of of reducing that that exposure. So that's where the vendor management hub comes in. This is a very simple tool to explain to to potential customers. Right now, they're using spreadsheets for not a huge amount of outlay in or investment. People can then move from spreadsheets, which have multiple problems. They're difficult to update, keep track of, and to a system that organizes those suppliers and and focuses you on the suppliers that have the biggest risk and what you need to do about that.

20:06 Stream cloud is coming imminently. So we've we've moved away from the terminology of of NextGen. We've now taken our successful Stream product, and we've we've enabled it in the cloud, this will give us this will give potential clients much easier access and access to easier updates in an ongoing way.

20:33 They will they'll benefit from so so much more much more ease of use than what classic stream can provide them. Give them better updates, give them the the potential to integrate other systems into StreamCloud, and this is going to appeal much more to commercial customers that are in highly regulated industries. Finally, and the most exciting part of our product line is a new product that is only started in development. So we we are not we're we're spending a great deal of time talking to customers, truly understanding their needs, and building a product that we can be relatively certain will fulfill those needs and will find a niche in the market.

21:30 So what we did not want to do was build another heavy cyber GRC product. So people like Archer and ServiceNow, they have very complex products that are difficult to onboard and implement and are not necessarily suited for the mid market. What the mid market wants is a very easy to use way

21:56 of understanding what their current posture is, providing evidence, and then being told all of this enabled by AI, and then being told exactly what steps they need to take to improve improve their security posture in the days, weeks, months ahead. And on top of being told exactly what will have the biggest impact, becoming ready to face scrutiny from their boards about what they're doing to improve their security posture and where we are in terms of cybersecurity. So what we're going to do is provide a a maturity scoring level that is backed by evidence, real evidence, and not simply just people's opinion, but real evidence, and then provide concrete steps for those clients to take action in in a prioritized way that will have the biggest impact on protecting them from cyber attacks.

23:07 On top of that, their boards will have not only things like audit trails of who made what decision, but they'll see what changed since the last board meeting, what are the decisions that are pending, and what are the top, say, 10 items that

23:22 that they need to be focused on and asking about the next time. They'll also see a an evidence based evidence based scoring system that will allow them to understand where their maturity level is and take real informed decisions about the risks that they face and what they need to do about it and where they need to invest.

23:54 Now we'll go on to the summary. So just to bring you back to to paint the picture of 2025, we've delivered fine transformational financial improvement. So this has not been a bit around the edges. This has been a complete overhaul in terms of the organization and and and our ability to deliver on our financial targets. We won't stop here. So what I would say is the mistake that many organizations make is to just simply do a bit of what they did last year. And and for instance, when they're doing the budget, add 10% and and and move on. What I'm committed and what the organization is committed to as a whole is to reallocate capital in a way that achieves the maximum impact.

24:49 The so I believe the vendor management hub and the StreamCloud will provide us a base of of growth. While classic Stream provides that base of revenue that is very sticky and is is very unlikely to change. Our very our rapid growth comes from the new AI native product that we'll be developing that will be different to any other product that is that is on the market and that that will deliver that step change in performance. We'll continue to deliver another step change in performance in 2026 just as it has in 2025. To summarize in terms of the talent level, there's there's more talent that we will bring in throughout 2026.

25:42 The culture will only continue to improve as Duncan, Angus, I relentlessly instill the mindset of finance being at the center of the business that we need to deliver returns to our shareholders and that we focus on the key elements that will that will drive our growth. We launched one new product in 2025. We've got a couple more to go, one of which is imminent, another which which will provide a step change in terms of how clients do GRC cyber GRC. And we've put ourselves in this position.

26:29 If we had carried on and extended what was happening in 2024, then I likely would not be talking to you here today. So we've delivered that step change. We've put ourselves in a position. We've got the talent level. We've got the culture now in place to to actually take a big step forward again in 2026. I will leave it there, and now we will be going on to the your q and a's. Okay. So we've got about 10 questions, some of which have been discussed or dealt with during the presentation.

27:15 But I think we'll run through the ones which are still available for answer. So first question, well done for reducing the administrative costs. Is the 1,800,000 per annum rate sustainable? I think Duncan, would you like to answer that? Sorry, Duncan. You have just frozen there. Let me just unmute. Are you there? Perfect. There you go. We can hear you now. Okay. The I think the answer to that is yes. A lot of the cost reductions that David's undertaken are are sustainable.

28:04 Obviously, as the company continues to grow, it requires more costs in certain areas. But I think the quick answer to the question is is is yes. Those those those cost reductions have been done in a sustainable way. Okay. So the next question also for Duncan, why did future contracted revenues fall so much? Okay. So I think this is about a the obviously, when we look at each of the contracts and the revenue from them, the amount of contracted forward contracted revenue from each contract obviously reduces over the term of the of the contract.

28:52 I think there's there has been a change, bit of a change in the length of time that the contracts are being taken out for. Some of the some of the contracts may be five years, some of them may be three years, some of them may be one year. Obviously, particularly as you work through five year contracts, the amount of forward contracted revenue starts to decrease as work through that five year contract. And I think there probably has been a trend towards customers committing for slightly shorter periods. That doesn't mean that they won't renew the contract. It just means that any one point in time, there's not as much forward contracted revenue.

29:41 Thank you, Duncan. How many new contracts were won in h two two thousand twenty five? David, would you like to give a reply? Sure. What I can say about that is we won one or two contracts per month. It wasn't at the level that I'm satisfied with. I do believe that we are poised to to do much better in in in 2026. So that's that's how I would answer that one. Okay. Who do you see as your competitors, and how do you beat them? You did refer to that during your talk, but maybe you might want to expand slightly on that.

30:30 Sure. Absolutely. So Archer and ServiceNow are our biggest competitors in terms of cyber GRC. We've heard from many of their clients, especially well, actually, both of them. I I wouldn't even say one or the other that they have very dissatisfied clients. And the reason is that they require a long onboarding period, and customers, in in some cases, don't see value for six months, a year, even more than a year in some cases. These are heavy GRC tools, which, while they can cater to your organization, they they don't necessarily get the job done. They certainly don't get it done quickly.

31:26 The other branch of competitors there are are those that help simply help you achieve compliance with a certain certification. So the likes of Vantage are it come to mind. And they again, while they while they have they help people efficiently achieve ISO 27,001 SOC two and other certifications, what we do is provide a truly risk management based approach. So we will actually reduce the risk of a cyber attack for an organization versus just simply achieving a certification. That's where I would draw this distinction between there. We will help you achieve certifications, but we will also provide you a prioritized list of concrete actions that you can take to reduce your risk of a cyber attack today. In terms of going back to Archer and ServiceNow, we can provide that same level of configurability and even more in some cases because, especially, ServiceNow is very much workflow orientated.

32:38 So you you must so a risk goes through this step one, step two. It gets approved, and then there's an action. What we provide is a more holistic, nonlinear approach to risk management. And that's why we're so successful in the public sector and those that actually know about what we do versus the the commercial world out there where Archer has larger marketing budgets and they can get the word out. Gradually, we're seeing that change, and we're we're seeing the dissatisfaction with the archers and the ServiceNows of the world. And we've we've we've now, with some of the new products that we have, made it even more accessible to a wider audience to be able to to take some of that market share in addition to the the green space that is still out there in this market.

33:33 Thank you. This question, I think, has been answered, but I think the question came in since you were presenting. Do you expect to announce significant contracts in this quarter? That's q one two thousand and twenty six, which I think probably means in the in the period up to April or May. We do expect to announce significant contracts. Yes. It's there's nothing that is final as we speak. We do expect to announce some significant contracts, and we expect the rate of growth to pick up. Thank you. The next question is, does the company need to raise more funds?

34:23 A few potential investors aware of this possibility. I think I might answer this question as follows. Companies raise funds for two reasons. One is for maintaining the business, and the company did do that in 2025. But you have heard that we have got new contracts coming on stream, which new contracts which we're winning or or expect to win. And assuming that that we do achieve that, I don't think we do need to raise more funds. However, there are always other reasons to raise more funds for for expansion, for improvements in various activities.

35:20 But the management team here is absolutely focused on creating more shareholder value, and that is going to be the way forward. We only want to raise funds for the company when it is going to create value for shareholders. And that's per share as it were. This one has been asked before. When will the updated version of Stream be launched? I think David said in in the next few weeks. So I think we might just pass that one. Are you expecting to be profitable month on month from this moment, January onwards, I think has been dealt with by by Duncan.

36:15 But unless you wanna add anything, Duncan? No. We as I think we might have explained, we're we're we're not really in a position to make a a forward profit forecast on the on the call, I'm I'm afraid, and that's that's what that would amount to. Okay. Question here. What are you doing to attract investors, HNWs? Share price is ridiculously low and needs to be marketed to attract buyers. I think I'll answer this as follows. We are now have we've made changes. We have a stable platform, and we are obviously at a very low share price. And if the business is sold, it was would be at a much higher than its current market rate.

37:16 We will this year, starting now, and this would be one of the first things we're doing, is produce more news. But you really can only produce news that is going to grow the share price based on firm foundations. It's it's easy to hype things, but that only comes back to bite you. So we we are working to increase the shareholder value. And we have, from what David said earlier, ambitious plans for 2026, and we think that the company will be rerated in the next few months.

38:10 So I think that that really is the is the answers and the questions. That's great. Thank you very much, Angus, David, and Duncan, for addressing those questions for investors today. And, of course, the company can view your questions submitted today, and we'll publish those responses on the investor me company platform. But, David, before I redirect investors to provide you with their feedback, which is particularly important to the company, could I please just ask you for a few closing comments? Sure. So what I wanna leave you with is a message of of optimism. The in general, I understand that ACUITY has not lived up to expectations in the past, and I I want everyone to understand that I do empathize with that position.

39:10 I completely empathize with it. As a matter of fact, if I were in your position as an investor and I find myself in that situation on occasion, then that is how I would be looking at it. What I would say is I I I wanna counter the view that this is the same old ACUITY. It is a very changed organization, and there is nothing business as usual that about this place. We we have changed the way we do things. We've we've transformed things financially in 2025. There'll be further improvements in 2026. And what I would say is the potential upside of this company is very significant.

40:03 I'll leave it at that. I don't wanna overhype it. I do wanna say that there is there is a a potentially very strong payoff if we all have a little bit of patience and and we make the right investments as we as we currently are. So what I would say is have some patience. Things cannot change completely in a in a short period of time, and things have been changing very rapidly. And I personally will not rest until this company achieves the potential that I know that it has. So with that, I will call it a presentation, and I look forward to hearing your feedback.

40:55 Thank you all again for joining us, and I really appreciate your interest in ACUITY. Fantastic. David, Angus, Duncan, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it be greatly valued by the company. On behalf of the management team of ACUITY RM GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.