REACT : Annual Report – SEPT 2021

Report of the Directors and

Financial Statements for the year ended 30 September 2021

For

REACT Group PLC

Company Number: 05454010

CONTENTS & FINANCIAL HIGHLIGHTS

Page

FINANCIAL HIGHLIGHTS

Introduction 2 Executive Chairman's Statement 3 Chief Executive Officer's Report & Strategic 4 Review Chief Financial Officer's Report 8 Corporate Governance Statement 10 Directors' Report 16 Report of the Independent Auditors 19 Consolidated Statement of Comprehensive Income 25 26 27 Consolidated Statement of Cash Flows 28 29 30 31 32 Notes to the Company Statement of Cash Flows 33 Notes to the Financial Statements Company Information 34 57

Statutory Results FY21 FY20 £'000 £'000 Operating profit Profit after tax 114 211 389 188 Basic EPS Adjusted EPS 0.08p 0.04p 0.08p 0.06p

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.

Introduction

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

Our primary objective is to rapidly maintain and/or 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 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'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.

Executive Chairman's Statement

For the year ended 30 September 2021

I am delighted to report strong progress in the year to 30th September 2021, the third trading year successfully reported by this management team, the second full year since the business was restructured and the first year in which it made its maiden acquisition, that of Fidelis Contract Services Ltd (Fidelis).

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

The acquisition of Fidelis in March 2021 has created a step-change in the make-up of the Group's business, augmenting the unique strengths of REACT's emergency cleaning and decontamination services with greater capability in contract cleaning and facilities management, especially in resilient markets such as education and healthcare. As a result, the Group has materially strengthened its financial operating model through the addition of a 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 2021 (FY 21), Adjusted EBITDA1 on a consistent accounting basis was £795,000, up +205% on the prior year, (2020: £261,000), on sales revenue of £7.70 million, up +77% on the prior year (2019: £4.36 million).

The Group performance represents strong like-for-like organic growth enhanced by the acquisition of Fidelis in March 2021, which contributed to the second half of the financial year.

COVID-19 impacted the business throughout the period providing both opportunities and challenges for the management team. The Group delivered a high quality, rapid response to customer demands, whilst at the same time redeployed resources from sectors where activity levels declined due to the changing nature of the economy and the government restrictions put in place. COVID-19 specific business generated a relatively small proportion of the revenue in the period and replaced some of the revenue lost due to the decline in some of our customers' requirements.

The Group's response to customer requirements as a result of COVID-19 has helped accelerate the sales engagement process with new customer prospects, and enhanced the Group's reputation with many in the existing customer base. This resulted in incremental new business opportunities for other of the Group's services, some of which were delivered during the period with others flowing into the new financial year.

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

31 January 2022

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.

Chief Executive Officer's Report and Strategic Review

I am pleased to report excellent progress in FY21, the third year of turnaround for the business and the second year in which it has been a privilege to be the CEO.

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

Having successfully rebuilt and established the emergency response business within REACT to deliver in-demand services, growth and profit, we have set out to improve the quality and resilience of the Group's financial model.

We have made good progress in the reported period; alongside the award of new recurring revenue contracts the acquisition of Fidelis has added a number of long-term contracted business. Furthermore, we have successfully integrated two businesses servicing similar markets with different models and customers who often have a need for the services provided by both these businesses. As a result, the REACT Group provides a unique offering; one that combines the professional maintenance of cleaning and hygiene standards in important sectors of our economy with one that can rapidly respond to often distressing and hazardous situations that require an emergency response, anywhere in mainland Great Britain.

COVID-19 has brought both opportunities and challenges to the REACT Group. REACT has continued to be well placed to advise and respond to customer requirements to decontaminate their property from SARS-CoV-2, the virus that causes COVID-19.

Whilst at times, especially in the first half of the financial year, COVID-19 decontaminations surged, some of our other call-out work shrank as facilities in some sectors were quieter than normal as a result of disruption caused by lockdowns and other COVID-19 restrictions. Much of the work we carry out in the judiciary and policing sector; cleaning cells and transport vehicles, was suspended during periods over the course of the year, as too was much of our work with housing associations.

Although the Group responded well to the call for help in dealing with COVID-19, we also worked hard to not allow it to distract us from our strategic goals.

At the same time as developing and deploying a rapid response to customer demand for COVID-19 decontaminations we also grew other parts of our business. During the year, the Group won a small number of material contracts, all of which were announced via RNS. We also expanded our services with existing customers, winning a number of smaller projects, none of which alone were material enough to formally announce, however all contributed to this period of success.

We were pleased to announce, on 26 April 2021, the award of a 3-year contract with one of the world's leading FM firms, which was already an existing customer, to supply a full range of reactive cleaning and decontamination services. We noted that it would take time for this contract to reach maturity as local and regional suppliers would need to transition from their current suppliers to REACT as 'core vendor'. This transition has taken some time but we've been pleased to see a commitment from senior personnel at the FM firm to supporting the migration from local suppliers to REACT and we have gained traction in this regard. Due to the reactive nature of the work under this contract it is difficult to predict with any certainty the levels and timing of revenues but we have seen some increases in revenues since commencing providing services under this agreement, albeit with some impact from the disruption caused by the Omicron variant of COVID-19 and the seasonal slow-down over the Christmas and New Year period.

It has also been pleasing to see the Group announcing a number of contract wins post period end the most significant of which was a material new long-term contract with The ExtraCare Charitable Trust, a leading not-for-profit developer and operator of housing for the over 55s and an existing customer of the business. Through the Fidelis division of REACT, the Group will provide a range of facility management services across multiple sites, including contract cleaning, grounds maintenance, window cleaning and pest control.

We have established a number of strong customer case studies across our most important sectors, which continue to help verify the quality of our work and provide reassurance to new customers who place trust in our capability.