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STRATEGIC REPORTOur stakeholdersOurstakeholdersCommunitiesand ers12Issues theyfacedHow we engagedImpact of board decisionsThe Group has looked to seehow it impacts localcommunities for each of itsbusinesses and has beenlistening and working with ourbusinesses to implement anumber of initiatives that willsupport local communities.The Board is fully supportive of therecent announcement of the Group’ssustainability program which launchedduring the past fiscal year.Customer demands evolveowing to the ever-increasingthreat landscape within themarket the Group operatesin. Our customers require apartner that can deliver in linewith their needs andexpectations.The Group look to foster longterm relationships with itscustomers, in order to achievethis we take time to work withcustomers to understand thechallenges they face. Thisallows us to develop effectivesolutions to fit our customersneeds.The Board understand and supportsthe Groups approach to invest time indeveloping long-term partnerships withits customers.Employees look for a happyworking environment wherethere are opportunitiesto gain experience thatwill support future careerdevelopment. It is importantthat employees feel thattheir contribution is valuedand that they are rewardedappropriately.The Group invests in our peopleproviding training opportunitiesto employees to develop whichwill enhance the individualsopportunities for careerprogression within the Group asopportunities arise. The Groupvalues its employees and hasrecently implementedadditional benefits includingprivate healthcare to allemployees.Our employees are key and the Boardhas played an active role in ensuringthat key positions are recruited and thecorrect organisation structure is put inplace. The Board actively promotesback filling of vacancies where existingemployees step up into roles where it ispossible.Our Chairman, CEO and CFOmaintain regular contact withour institutional investors andour AGM provides anopportunity to meet individualinvestors. The Group has anactive M&A pipeline and isactively looking for additionalstrategic acquisitions.The Board has worked closely with ourNOMAD Cenkos to ensure the viewof shareholders is represented in keydecisions taken by the Board. Duringthe year the Board proposed a shareconsolidation which was approved byshareholders at the AGM in order to tryand improve market liquidity and reducevolatility and spread in trading activity.Margin pressures from theend customer require us towork with suppliers to ensurethat we are able to sourceat competitive prices whilstmaintaining the Groupsposition on ethical sourcing.FINANCIAL STATEMENTSSocial responsibilityLocal people want to seetangible benefits fromShearwater Groups’presence in theircommunities.They want to see the Groupgrowing and enhancing ourfinancial position.GOVERNANCEThe Group actively looks tocreate long-term collaborativerelationships with key suppliers.Through our products and services we aim to help create a saferenvironment for our staff, our clients and their end users clients whenon line connected to the global economy. We will continuously developour offerings that help protect users from the adversaries who prey onthe vulnerable no matter their location and we with the very minimumenvironmental impact wherever possible. We are witnessing more of oursolutions becoming subscription or cloud based meaning we naturallysee a reduction in the importation of physical goods which contributesto a lesser carbon footprint helping us along the route in becoming abetter balanced business. With our new charity based initiatives comingon line we will be able to proactively look for ways where we can make adifference both nationally and locally from within our local communities.This activity will help strengthen our teams whilst benefitting thosein need. Supported by the executive board and to help keep theseprograms moving forward we have appointed a staff member to monitorand report on our achievements and for these to be highlighted on ourGroup company website.ValuesOur values are incorporated in all our operating procedures and defineour management approach and Group culture. We are also very awareof the changing social environment and fully supportive in having abetter, fairer, greener, more tolerant and kinder society. We will play ourpart in supporting new initiatives and look for improvement in the waywe manage our business and maintain the respect for our work andcolleagues. We will stay professional inside and outside the company,and the drive to achieve both excellence and integrity that are essentialto our continued success delivering increased value to customers,portfolio businesses and shareholders alike.Equality and DiversityAs part of the Groups aim to exploreopportunities to leverage the Groupsgrowing position the Board issupportive of managements’ currentreview of the Groups’ preferredsupplier list.Promoting and supporting diversity within the Group is an importantaspect of good people management. We believe it’s about valuingeveryone within the organisation as an individual, and in order to reapthe benefits of a diverse workforce it’s imperative to have an inclusiveenvironment where everyone feels able to participate and achieve theirfull potential. The Shearwater Group strives to build an enriched multicultural working community where everyone is encouraged to succeedin the information technology industry no matter their age, race, sex orbackground.The Group aligns it’s polices with UK legislation covering; age, disability,race, religion, gender and sexual orientation among others going beyondjust legal compliance but also seeking to add value to the Group as awhole. Shearwater has a modern and progressive ‘diversity and equalopportunities policy’ and will continue to develop this policy as the Groupgrows in line with the employment landscape of the 21st century.Ourresponsibility13

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSocial responsibilityEmployee wellbeing and mindfulnessCharityThe Group employees are our greatest asset; therefore, we continue our journey to work towards enhancing theworking environment across all our sites and help support them during times of trouble. We operate an EmployeeAssistance Programme (“EAP”) aimed at minimising workplace risks and improving our employees’ health andwellbeing. An EAP is an employee support system designed to help our organisation deal with issues that could beaffecting our employees’ home or work life, health and general wellbeing.Employee Volunteering and Charitable Giving Scheme - In the comingfinancial year, the Group have advanced plans to launch the ‘EmployeeVolunteering and Charitable Giving Scheme’. Group wide the scheme willprovide an opportunity for both employees and employer to be united ingiving back to the community and supporting charitable organisations.The Shearwater Group EAP provides a complete support network that offers expert advice and guidance 24/7.Confidential and compassionate support is available to employees and their immediate family. We feel that intoday’s fast paced digital society and the pressure it brings, we need to be able to help our greatest assetas best we can.Support may take the form of employees obtaining sponsorships oremployees volunteering to support or take part in events throughoutthe year. The Group employee’s will be asked to nominate local or lessknown charities of which they would like to be considered and havegreater impact. Every full-time employee will receive eight hoursof paid time off each year to volunteer with non-profit or communityorganisations. We will supplement employees’ personal donations tonon-profit organisations and charities with an additionalcompany donation.EnvironmentalZero Carbon Initiative - The Shearwater Group plc are committed to a sustainable future and to improving thesocial, economic and environmental wellbeing of the community. We encourage all parts of the business to look toreduce our impact on the environment and look to continually improve each year through the development of newenvironmentally friendly products and better processes that reduce our carbon footprint.In March 2020 Shearwater Group plc announced that its portfolio companies; GeoLang, Brookcourt Solutions,Pentest, SecurEnvoy, Xcina IS and Xcina Consulting have implemented a zero-carbon programme and the Groupwould now carry the ‘Make It Wild’ mark. The Shearwater Group plc companies are contributing in this initiativeby way of offsetting their carbon footprint through planting trees within the UK. The number of trees planted iscalculated through how many tons of carbon dioxide the Group’s activities generate annually and how many trees itwould take to offset those emissions.We will continue to look at new initiatives that we can deploy that positively contributes to the reduction in ourcarbon footprint and our impact on the planet.We are determined to be part of the solution that contributes to a prosperous low-carbon future, one that uses ITinnovations not just to protect its employees, clients, data and operational assets but solutions that also benefitssociety’s environmental footprint.OurEnvironmentalMission1415

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSChairman’s statementIntroductionWe are very pleased to have recorded our first fullyear’s underlying profit as a Group, following areorganisation of the business led by Phil Higgins in hisfirst full year as CEO. This reorganisation has resultedin a clearly defined growth strategy, a cohesive Groupstructure, increased cross-sale activity and a reducedcost base. We took the necessary time to ensure it wascompleted thoroughly and to a high standard, and as isclear to see from these results, early progress has beenencouraging. We are ready to progress our plans to seeShearwater become a stronger, scaled company withincreased capabilities and a broader reach within theorganisational resilience sector.“Looking ahead we are veryconfident in the future of thebusiness. It is in a sector which isgrowing, is generating good cashand we continue to see a strongpipeline of acquisition opportunities.We have set our sights on improvingthe marketability of your company bybuying businesses that fit ourstrict criteria.”Acquisitive growth strategyOur sector is one of constant innovation and thisprovides both opportunities and challenges, with awealth of potential acquisition opportunities to assess.In the past we have been successful in both smalleracquisitions, such as GeoLang which was pre-revenueat the point of purchase, but with an exciting softwareproduct and industry-renowned team, and those ofa larger scale, such as Brookcourt, an established,profitable business with an extensive customer base.Our focus moving forward will be on the larger scaleof opportunity, bringing additional customers, industryexpertise, revenue and profits into the Group. We willalso remain alert to opportunistic, bolt-on technologyacquisitions. Ideally these will be acquisitions where theexisting management wish to remain within the Group,thus strengthening our team, and where vendors takea significant portion of the consideration in shares,as was the case with our acquisition of Brookcourt,aligning management teams’ interest with those ofour shareholders. Target acquisitions will be earningsenhancing and increase our skill-sets and offerings.For example, earlier this year we held a networkingevent for all our subsidiary directors, non-executivedirectors and advisory team which proved to be highlysuccessful. Our non-executives and advisory team arevery active on our behalf and provide significant valueto us as a Group.Corporate GovernanceWe remain committed as a Board to the highest levelsof Corporate Governance and stakeholder engagement.More details of the latter are covered within the section172 statement in the annual report.Looking AheadLooking ahead we are very confident in the future of thebusiness. It is in a sector which is growing, is generatinggood cash and we continue to see a strong pipeline ofacquisition opportunities.Funds from our recent placing of new ordinary shares,coupled with our existing financial resources, give usfire power moving forward so that we are in a muchstronger position than at this time last year. Bothmyself and Phil Higgins purchased shares in the recentplacing, demonstrating confidence in our prospectsand I am optimistic that, despite the challenges ofCOVID-19, we are in great shape to see Shearwaterprosper and grow in the years ahead.David WilliamsChairman28 July 2020Our teamFor a company of our size we are fortunate to enjoythe support of a highly experienced board and advisoryteam. Not only do they have a great working knowledgeof our sector, but their contacts are second to none.This contact base not only provides us with interestingacquisition opportunities, it allows us to make importantintroductions for our Group businesses. This is akey benefit of being part of the Shearwater Group.1617

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSChief executives review“I am delighted to announce that bothdivisions (Software & Services) haveperformed exceptionally well during thefinancial year to 31 March 2020.”OverviewShared serviceWith my first year as Group CEO complete, my viewsregarding the exciting opportunity for Shearwater havenot changed. The technology markets are continuouslyevolving and cyber, security and advisory services aretaking an ever-more prominent position.Our shared services enable us to leverage negotiationswith suppliers and offer additional staff benefits centrally,as well as reducing our administrative overheads.This platform has delivered tangible synergy savingsGroup wide and, coupled with some office consolidationplus cost savings from the reorganisation, we wereable to realise annualised savings of over 3m. Movingforward the Shearwater Shared Services functionprovides a standard model that will allow us to quicklyand efficiently realise cost savings when onboardingnew acquisitions.Over the past year our focus has been on creating abalanced Group structure that can take advantageof this constantly expanding market whilst extractinggreater value from within our own business andproviding a platform for future acquisitions. As a resultof the changes we have made we have deliveredgreater staff benefits, stronger Group cohesion, betterclient offerings and, most importantly, enhanced ourcompetitive edge allowing us to win new business.Together this has led to the delivery of a 41% increasein revenue and our first annual Group underlying profit.I wish to thank the entire Shearwater Group team fortheir continued support, determination, and drive tosucceed, which has resulted in the FY20 performanceannounced today and in the Group being stronglypositioned for future growth. Introduction of Shearwater Shared Services Realisation of over 3m of annualised cost savingsBuilding upon this success we have devised incentiveprograms for the coming year that financially rewardfull-time equivalent staff for business introductions thatresult in new wins for any of the Group constituents.Initially this program will be made available to all fulltime staff excluding company directors, incentivisingstaff to drive further organic growth. Introduction of a cross-selling programme for GroupbusinessesReview of operationsSuccessful reorganisation of theGroup completeWe began the year with the implementation ofsignificant change, moving rapidly to implement arestructuring plan with the aim to bring the Groupinto profit.One key aspect of this was the immediate creationof Shearwater Shared Services (SSS), a functionsitting within the centre of our organisation providingcentralised shared services such as finance, legal, HR,marketing, compliance and core IT systems, assistedby Xcina IS. Where we had duplicate services, resultingfrom the acquisition of Brookcourt six months earlier,we chose the service that we felt was best equipped toevolve as the Group grows.18Alongside this a cross-selling program was introducedacross our service companies to extract untappedaccretive value from within the Group. This programprovides a mechanism for client introductions to bemade on behalf of other Group companies, reducingthe cost of sale and broadening the pool of potentialnew business leads. The program resulted in a materialnumber of additional opportunities in the first threemonths.Alongside the Group reorganisation, the Grouphas delivered significant operational achievementthroughout the year. This includes the completion of anacquisition, the launch of a number of innovative newsolutions, and the signing of a multitude of new logocontracts with blue-chip clients.Continuing our run of awards success, Shearwatercompanies were also presented with five industryawards across the year; Contribution to Cybersecurity,Cloud delivery, Security Provider, Security Reseller andSecurity Company of the year.SoftwareInnovative new solutions launched, providing entranceto new markets Innovation and the launch of newproducts is an integral part of the Shearwater Groupgrowth strategy, and we are very proud of our ninecurrent patents and the five we have pending. Over theyear we saw a number of new solutions launched,expanding our end-to-end organisational resiliencecapability and increasing the size of ouraddressable market.SecurEnvoy launched its Identity & AccessManagement (IAM) module, an important additionalcomponent adding to the SecureIdentity platform whichwas launched in 2019. This release continues to expandthe breadth of SecurEnvoy offering, moving from apure play Multi-Factor Authentication provider to offer afull Access Management solution suite. The expandedcapability provides access to a market which analystsforecast will grow to 24.12b by 2025 (reference fromGrand View Research).Our GeoLang team have further developed their DataLoss Prevention and Sensitive Data Discovery andExtraction platform. In addition, they innovated to createa new Atlassian Confluence platform connector tocapitalise on this opportunity, receiving the first order inthe year. Atlassian’s Confluence is a wiki most used bydevelopers and invariably contains an organisation’smost sensitive development and security data, fromcode to intellectual property to security policies. Withover 170,000 companies reportedly

For more information contact Shearwater Group plc t: 44 (0) 20 3985 8467 www.shearwatergroup.com Annual Report and Financial Statements 31 March 2020