FY26 Results

Shearwater Group plc, the cybersecurity, advisory and managed security services group, announces its results for the year to 30 June 2026 ("FY26").

Financial Highlights

• Revenue of £42.3m, representing annualised growth of 34% (FY25: £39.5m for the 15-month period), driven by major contract wins within Services business
• Adjusted EBITDA of £2.6m, an annualised increase of 44% (FY25: £2.2m for the 15-month period), reflecting revenue growth and continued cost discipline
• Adjusted profit before tax of £1.4m, up 186% on an annualised basis (FY25: £0.6m for the 15-month period)
• Statutory loss before tax reduced to £0.3m, down 97% (FY25: £13.4m)
• Cash of £5.6m, a year-on-year increase of 10% (FY25: £5.1m), with no borrowings

Operational Highlights

• Strong Services growth, underpinned by sustained strength in the Telecoms and Financial Services sectors
• Secured and delivered significant contracts including:
• c.£25m renewal and expansion with a major UK-based global telco provider (£12.5m of revenue in FY26);
• c.£9m three-year contract renewal and expansion with a leading Global Financial Organisation (£2.7m in FY26); and
• £7.3m contract extension with a leading UK mobile network operator (all delivered with FY26)
• Expanded public sector presence on G-Cloud 15, increasing Brookcourt approved technologies by 77%, from 31 to 55
• Continued investment in proprietary software products, alongside operational enhancements designed to position the division for growth in FY27 and beyond

Strategic and Board updates

• Robin Southwell appointed as Chair in February 2026, with Jon Entract appointed as a Non-Executive Director following the period end
• Commenced capital reduction process, to enhanced capital flexibility and support future dividends or share buybacks

Outlook

• Positive trading environment, driven by growth in frequency and complexity of cyber threats, resulting in robust pipeline
• FY27 YTD trading in line with expectations with new contract wins including:
• £1.2m new client win with one of Japan's largest financial groups to provide core email protection technology;
• £1.7m two-year contract renewal and expansion to provide advanced threat intelligence platform to a Central Government department
• Strong financial foundation, combined with a growing customer base, a well-established reputation and the increasing imperative for organisations to invest in cybersecurity, positions Shearwater well to deliver FY27 results in line with market expectations.

Phil Higgins, Group CEO commented: "I am delighted to report a second consecutive year of strong growth in revenue and underlying profitability. Our Services business has continued to perform strongly, supported by major multi-year contract renewals and expansions and the quality of our specialist cybersecurity offering.

"We have entered FY27 from a position of strength, with a growing blue-chip customer base, continued momentum across Services and no debt. Combined with the actions taken to improve performance in Software, this gives us confidence that we can continue to deliver profitable growth and long-term value for shareholders."

Investor Presentation

Shearwater Group's CEO, Phil Higgins and CFO, Jonathan Hall, will host an investor presentation via the Investor Meet Company platform at 10:00am today (27 October 2026).

A video interview with Phil Higgins, CEO, and Jonathan Hall, CFO, is available to view here: http://www.voxmarkets.com/articles/interview-with-shearwater-group-803fa1e

Chairman's statement

I am delighted to present my first statement as Chairman of Shearwater Group. Having been involved with the business for a number of years, I am particularly proud to take on this role and confident in the direction we are heading. This report outlines a second consecutive year of strong growth in both revenue and underlying profitability. This excellent performance reflects the success of our strategy, the quality of our people, and the increasing demand for our services in a rapidly evolving cybersecurity landscape.

Cybersecurity: a strategic imperative and opportunity

Cybersecurity remains a hugely important strategic issue for organisations across both public and private sectors. The threat environment is becoming ever more complex, with escalating risks and increasingly visible consequences of failure. This reinforces the critical importance of cyber resilience as a Board-level priority and, importantly, it helps create significant opportunity for Shearwater Group.

Our portfolio of award-winning businesses continues to be trusted by some of the most recognisable brands in both the UK and across the globe. This trust is a testament to our reputation, the calibre of our solutions, and the expertise of our team. We are proud to partner with these leading organisations.

Performance and progress

The Group has delivered strong organic growth, demonstrating the benefits of our strategic positioning and commitment to long-term value creation for all stakeholders. We continue to invest strategically in innovation, broadening the scope of our services to proactively address emerging threats and navigate complex regulatory environments.

Our people and stakeholders

This success wouldn't be possible without the dedication of our exceptional team. I extend my sincere thanks to our executive team and colleagues throughout the business, whose professionalism and deep expertise are central to everything we do and also to our Non-executive Directors and Advisory Panel for their invaluable input. In particular, I would like to note the contribution of David Williams and Giles Willits, who both stepped down as directors during the year after a combined tenure of more than 20 years. While we were sorry to lose them, I was delighted immediately following the end of the period to welcome Jon Entract to the Board. Jon's skillset excellently complements the existing Board and his experience in investment management and supporting growth companies will prove highly valuable for the next stage of Shearwater Group's growth.

Looking ahead

Cybersecurity will remain a defining challenge for organisations globally and with that comes opportunity. Shearwater Group enjoys a strong reputation and trusted client relationships, based on a track record of delivery across many years. We also benefit from a strong balance sheet with significant net cash. This provides us with a great platform to continue to deliver sustainable growth. It also opens up further opportunities for us to deliver value for shareholders. On that front, I was delighted that on 13th October 2026, we received overwhelming support from shareholders for the first stage of a proposed capital reduction programme, which will open the door to Shearwater Group being able to declare a dividend and/ or buy-back its own shares at a point in the future.

On behalf of the Board, we look forward to building on our positive momentum in the year ahead and thank you for your continued support.

Robin Southwell

Chairman

Chief Executive's review

The year to 30 June 2026 was one of strong progress for Shearwater Group, building on the growth we delivered in FY25, as we further cemented our position as the UK provider of choice for premium, next-generation cyber technology, professional advisory and advanced cybersecurity services.

I am delighted to report revenue of £42.3 million for the year, representing annualised growth of 34% (FY25: £39.5 million for the 15-month period) driven by continued growth in the Services segment of the business. Adjusted EBITDA for the same period reached £2.6 million, an annualised increase of 44% (FY25: £2.2 million for the 15-month period).

Operationally we continued to build momentum in our Services business through major contract renewals and expansion opportunities, increased our participation in public sector procurement frameworks, whilst also implementing a series of actions to position the Software division for a return to growth in FY27.

Our positive trading performance enabled us to further strengthen our balance sheet. We finished the year with cash of £5.6 million (FY25: £5.1 million) and no bank borrowings. This robust financial position creates opportunities for us. As a Board we continue to review how best to deploy that cash, whether that be through investment to accelerate growth, or through other routes to deliver value to shareholders.

In that context, in June 2026 we announced the commencement of a capital reduction process, which will help create the opportunity to either declare a dividend or to undertake a share buy-back programme should Directors believe this is the best way to deliver value in the future. I was delighted that in October 2026, the first step in this process received overwhelming support from shareholders at a General Meeting of the Company.

Our strong financial foundation, combined with a growing customer base, a well-established reputation, and the increasing imperative for organisations to invest in cybersecurity, positions Shearwater well to continue its profitable growth into FY27.

Group operational review

The Group operates through two divisions:

Services - which delivers cybersecurity solutions through third-party software and hardware, engineering services, advisory capabilities and penetration testing; and

Software - focused on our proprietary identity verification and access management solutions.

As in FY25, these two divisions experienced differing fortunes during the period. Our Services division, which now accounts for 96% of Group revenue (up from 94% in FY25) and 90% of gross profit (up from 83% in FY25), delivered significant growth. In contrast, trading conditions were more challenging within our Software division, where revenue declined by 17% in the period, to represent 4% of total Group revenue (down from 6% in FY25) and 10% of gross profit (down from 17% in FY25). As outlined in more detail within the Software section, we implemented a number of changes within this segment of the business, which we believe will result in stronger financial performance in FY27 and beyond.

Services

FY26 was a year of strong growth for the Services segment of the business, with revenue reaching £40.6 million, representing a 37% increase on an annualised basis compared to FY25.

We continue to deliver high-calibre, specialist cybersecurity solutions for clients across a broad range of industries in both the public and private sectors; once again, however, our revenues were underpinned by our sustained strength in the telecoms and financial services sectors.

Key programmes during the year included:

• A c.£25 million contract renewal and expansion to deliver a packet monitoring, forensic analysis and service assurance solution to a major UK-based global telecoms provider, with approximately £12.5 million of revenue recognised in FY26.
• A c.£9 million three-year contract renewal and expansion, with £2.7 million impacting FY26, for a leading global financial organisation for the provision of the customer's Advanced Email Gateway, insider threat management arrangements, and Secure Email Gateway.
• A £7.3 million contract extension, with £3.5 million impacting FY26, for a leading UK mobile network operator, for the provision of a solution to provide unified visibility, control and automation to protect sensitive data, prevent breaches and simplify compliance, including managed service support of the product across the three-year term.

As a result of the structure of some of these major programmes, which included the deployment of a significant proportion of third-party software, the gross margin for the Services segment of the business dropped slightly to 18.7%, however, overall gross profit increased on an annualised basis by 18% to £7.6 million (FY25: £8.0 million for the 15-month period).

Alongside our work with blue-chip businesses in the private sector, we continue to see a significant opportunity in the public sector. This is something we expect to accelerate following publication of the UK Government's defence spending plans, reflecting the growing recognition that resilient digital infrastructure and cyber defence are critical components of national security. We have made good progress in FY26 to capitalise on this, including:

• The extension and expansion of the existing contract with a central government department for the provision of threat intelligence services supporting its internal security operations, with a total contract value of £1 million over a three-year term.
• Delivery of the first year of a major three-year penetration testing programme across a government department.
• Securing an expanded presence on the latest government procurement framework, G-Cloud 15, with the number of approved Brookcourt technologies increasing by 77% from 31 on G-Cloud 14 to 55 on G-Cloud 15, and Pentest Limited also securing an independent presence across a range of specialist cybersecurity services, including cloud support service, security strategy, audit quality assurance and red teaming.

Our ability to respond to these opportunities and other complex tenders has been enhanced in the period through continued investment in our own proprietary AI tool, which enables us to digest and respond to opportunities in a much more efficient manner. This has been an important component in our ability to drive the revenue growth of 37% in the Services segment while retaining tight control over our administrative expenses. In the year to 30 June 2026, overheads for the Services segment remained relatively constant in real terms at £3.9 million (FY25: £4.7 million for the 15-month period, £3.7 million on an annualised basis).

• Adjusted EBITDA above is prior to Group costs as set out in note 3.

Software

Shearwater's Software division consists of two product sets:

• two related multi-factor authentication/access management tools: enabling organisations to control who can access their platforms and what permissions they have once that initial access has been granted. Flexible, highly customisable and quick and easy to deploy, these tools can be delivered either via the cloud, or can be installed and hosted on-premise by the client, and are currently deployed in more than 400 organisations spanning 32 countries across the globe; and
• a data discovery tool, filling an important legal and compliance gap for organisations, enabling them to identify and manage sensitive and confidential information from across their platforms, wherever it may reside.

During FY26, we continued to invest in the capability and feature set of each of these products, ensuring each possesses areas of distinct competitive advantage in comparison to competitor products, something we believe will position the products well for success going forward.

Nonetheless, trading through the period remained challenging. To date, revenues have almost exclusively related to the multi-factor authentication/access management product, which has been impacted by competitor products, notably Microsoft's Authenticator, sometimes being made available as part of wider software packages at no additional charge. As a result, revenue of £1.7 million in FY26 represented an annualised reduction of 17.4% (FY25: £2.6 million for the 15-month period), while the adjusted EBITDA profit from the Software business reduced to £0.2 million (FY25: £0.6 million for the 15-month period).

Following the reduced revenue in the period, in June 2026 the Directors implemented a number of changes to position the business for success in FY27 and beyond. These changes included:

• restructuring the sales operation, to better leverage Shearwater Group capability and relationships;
• removal of a distribution layer in key markets, to deliver an estimated 20% uplift in the average value per transaction to Shearwater in those markets; and
• a reduction of annualised expenditure by £0.8 million (£0.5 million capital expenditure and £0.3 million operating expenditure).

The combined impact of these changes, aligned to the investment made to improve the quality of the products, is expected to result in an improved financial performance in FY27.

• Adjusted EBITDA above is prior to Group costs as set out in note 3.

Growth strategy

Becoming a cybersecurity leader

Our vision is clear: to drive growth and shareholder value by becoming the UK provider of choice, delivering premium, next-generation cyber technology, professional advisory and advanced cybersecurity services.

Strengthening organic growth: fuelling our momentum

Over recent years, market conditions have necessitated a focus on delivering organic growth in revenue and underlying profitability. In the near term, we will continue to seek to build on the strong foundations we have created to increase revenue and profits in our existing Group businesses. M&A remains a strategic pillar however, and where opportunities exist to bring complementary businesses into the Group at valuations that represent good value for our shareholders then we will look to do so.

A differentiated offering

Our Services division carries preferred partner status for a client base comprising blue-chip organisations, for all things security, offering comprehensive managed solutions, penetration testing and insightful advisory services. We provide a seamless, end-to-end experience that empowers our clients and we're trusted to advise and deliver solutions to combat the latest and most challenging cybersecurity threats that they may face.

Our Software division delivers two complementary, next-generation security solutions that help organisations reduce risk, protect critical assets and maintain control in an increasingly complex digital world.

Our zero-trust access management platform secures access to systems, applications and data across corporate environments, while our advanced data discovery solution identifies and protects sensitive information wherever it resides.

Together, they empower organisations to strengthen their security posture, improve visibility, support regulatory compliance and safeguard the identities and information that underpin their business.

Delivering sustainable growth

Our medium-term strategy prioritises achieving consistent, sustainable revenue and profit growth. With a deep commitment to innovation and an unwavering focus on customer success, we are confident in delivering value for our stakeholders in the years to come.

Market opportunity

During the year to 30 June 2026, the cyber threat environment continued to evolve at pace, presenting organisations with an increasingly complex and dynamic set of risks. Cyber resilience has consequently become a strategic imperative across both the public and private sectors, with organisations required to defend against adversaries ranging from individuals operating independently to highly sophisticated, state-sponsored groups seeking to disrupt critical infrastructure.

The impact of new technology, in particular artificial intelligence, is only adding to this complexity: increasing the scale and effectiveness of potential attacks while also providing organisations with an expanding range of more powerful tools to identify, prevent and respond to them. Recent high-profile incidents have further demonstrated that the financial, operational and reputational consequences of inadequate cyber resilience can be immediate and substantial.

The pace of change shows little sign of slowing. The World Economic Forum's Global Cybersecurity Outlook 2026 highlighted artificial intelligence, geopolitical fragmentation and increasingly complex supply chains as key factors reshaping the threat landscape. Its survey found that 87% of respondents regarded AI-related vulnerabilities as the fastest-growing cyber risk during 2025.[1]

These structural drivers continue to support strong growth in demand for cybersecurity products and services. Fortune Business Insights valued the global cybersecurity market at approximately US$219 billion in 2025 and forecasts it to increase from US$248 billion in 2026 to US$699 billion by 2034, representing a compound annual growth rate of 13.8%.[2]

Within the UK, Mordor Intelligence estimates that the cybersecurity market will grow from US$18.36 billion in 2026 to US$30.19 billion by 2031, representing a compound annual growth rate of 10.46%.[3]

This backdrop creates opportunity for Shearwater Group. The Group's differentiated, full-service cybersecurity offering is well positioned to help organisations adopt a proactive and integrated approach to protecting their systems, data and operations. Supported by favourable long-term market dynamics, a clear growth strategy, a strengthened financial position, a prestigious customer base, strong industry recognition and an experienced team, the Board believes that Shearwater is well placed to capitalise on this opportunity and deliver sustainable value for shareholders.

Board update

In January 2026, we announced that David Williams was to step down from his role as Chairman, following more than a decade with the Shearwater Group, with Robin Southwell, an existing Non-executive Director, agreeing to take his place. Robin joined Shearwater in October 2016 as a Non-executive Director and has 40 years' experience in the aerospace and defence industry, where his roles have included Chief Executive Officer of Airbus UK and Airtanker Ltd, as well as senior positions at BAE Systems. Robin was a DTI Business Ambassador for the UK Government and received his OBE in 1997.

Giles Willits also stepped down from the Board during the period, following nine years with the Group. In July 2026, shortly following the period end, we announced the appointment of Jonathan ('Jon') Entract as a Non-executive Director. Previously a Partner at InfraRed Capital Partners, Jon is an ACA-qualified Chartered Accountant who brings over 25 years' experience in M&A, across both buy-side and sell-side transactions, evaluating investment opportunities, and serving on the boards of multiple portfolio companies to support their strategic development and growth ambitions. Jon will also assume the role that Giles had previously filled as Chair of the Audit Committee.

The Board would like to reiterate its thanks to both David and Giles for their many years of service and to welcome Jon to the Board and Robin to his new role.

Current trading and outlook

In the early months of FY27 Shearwater has traded in line with expectations. The level of interest in services of all companies within the Shearwater Group has remained high, as the frequency and complexity of threats that organisations are faced with increases. We are encouraged by the level of customer engagement that we are seeing and while we are cognisant that we continue to operate in a competitive marketplace, we are confident that the calibre of our team and our products, our proven track record and our strong network of client relationships, place us at a competitive advantage. We therefore look forward to the remainder of FY27 and beyond with optimism.

Philip Higgins

Chief Executive Officer

Chief Financial Officer's review

I am pleased to report on a second consecutive period of strong growth for Shearwater Group, driven by the performance of our Services business. In the year to 30 June 2026, revenue reached £42.3 million, representing annualised year-on-year growth of 34% (FY25: £39.5 million for the 15-month period), while adjusted EBITDA rose 44% on an annualised basis to £2.6 million (FY25: £2.2 million for the 15-month period).

Adjusted profit before tax of £1.4 million represented an annualised improvement of 186% (FY25: £0.6 million for the 15-month period). The statutory loss before tax, including the impact of amortisation of acquired intangibles, exceptional items and the share-based payments charge for the Group, reduced to £0.3 million, down 97% (FY25: £13.4 million).

This positive trading performance helped us further strengthen the balance sheet, closing the period with £5.6 million in cash, a year-on-year increase of 11% (FY25: £5.1 million) and no bank borrowings.

A summary of the Group's financial performance for the year is set out below:

• Administrative expenses (underlying) excludes items that are not included within adjusted EBITDA, such as finance charges, depreciation, amortisation, impairment, share-based payment charges and exceptional items.

Alternative performance measures

The Group uses alternative performance measures alongside statutory measures to manage the performance of the business. In the opinion of the Directors, alternative performance measures can provide additional relevant information on past and future performance to the reader in assessing the underlying performance of the business. The table within note 2 of the consolidated financial statements details definitions of adjusted EBITDA and adjusted (loss)/profit before tax measures. Note 8 details the definition of adjusted EPS.

Revenue and gross profit

Revenue for the year to 30 June 2026 of £42.3 million represented growth of 34% on the previous period on an annualised basis (FY25: £39.5 million for the 15-month period).

The table below provides a breakdown of revenues for the current year:

The Services division delivered strong growth in the period, principally driven by an increase in the volume of cutting-edge cybersecurity solutions and related warranty and support contracts delivered for Brookcourt's network of blue-chip clients, who are seeking to address an ever more complex cyber threat environment.

Trading conditions, however, were more challenging in the Software business, where revenue dropped 17% on an annualised basis to £1.7 million (FY25: £2.6 million for the 15-month period). Investments made to enhance the quality of the proprietary software products, aligned to a restructuring implemented in June 2026, give the Directors confidence that the Software division will show an improved performance from FY27 onwards.

The impact of this change in the revenue mix is outlined in the table below:

Within the Services business, an increased proportion of major solution sales encompassing a significant value of third-party software costs reduced the gross margin, which fell from 21.6% in FY25 to 18.7% in FY26. In absolute terms, however, gross profit still rose £1.2 million (18.4%) on an annualised basis to £7.6 million in the year to June 2026.

In the Software business, there was a shift between cost of sales and administrative expenses from FY25 to FY26, with administrative expenses reducing by £0.2 million and cost of sales increasing by the same amount, with the overall cost base of the Software business remaining relatively constant year on year. Nonetheless, as a result of the increased cost of sales, coupled with a reduction in revenue of £0.3 million, gross profit declined by £0.5 million to £0.8 million - a gross margin of 49.6%.

This revised profile of revenue and cost of sales resulted in an overall reduction in the gross margin to 19.8% in FY26; however, the total level of gross profit earned in the period increased 10% on an annualised basis to £8.4 million.

Administrative expenses

Underlying administrative expenses of £5.8 million represented an annualised year-on-year reduction of 1% (FY25: £7.4 million for the 15-month period) as the Group continues to tightly manage its fixed cost base. This represents a second consecutive small year-on-year reduction, achieved despite the Group growing top-line revenue by 74% across the same period.

Adjusted EBITDA

The net impact of the factors outlined above was that the Group delivered a 44% annualised improvement in adjusted EBITDA to £2.6 million for FY26 (FY25: £2.2 million for the 15-month period).

The table below provides a breakdown of the Group's adjusted EBITDA:

Finance charges

The Group earned net finance income of £0.1 million in the period (FY25: £0.1 million for the 15-month period). Having retained a healthy cash position through the period, the Group used short-term deposits to earn interest on cash balances, while retaining the flexibility to appropriately manage its working capital requirements.

Depreciation

Depreciation of £0.2 million (2025: £0.2 million for the 15-month period) was in line with the level in the prior period and mainly comprises depreciation of right-of-use assets.

Amortisation of intangible assets

Amortisation of computer software of £1.0 million (FY25: £1.5 million for the 15-month period) relates to the amortisation of development expenditure incurred since acquisition on the Group's proprietary software solutions. This declined slightly year on year as a result of the impairment charge applied in FY25, which reduced the opening balance to be amortised in the year.

Adjusted profit before tax

The Group made an adjusted profit before tax of £1.4 million (FY25: £0.6 million for the 15-month period), reflecting the growth achieved in revenue and gross profit, aligned to ongoing tight control of underlying administrative expenses.

Amortisation of acquired intangible assets

Amortisation of acquired intangible assets was £1.5 million (FY25: £2.6 million for the 15-month period), an annualised reduction of 31% reflecting the reduced carrying value at the start of the period following the exceptional impairment charge applied at the end of FY25. This relates to amortisation applied to intangible assets identified at the time of acquisition, as opposed to the amortisation of development expenditure incurred by the Group.

Share-based payments

Share-based payment charges were £0.1 million (£55k) in the period (FY25: £0.0 million (£22k) for the 15-month period). This reflected a full year of charge applied to the grant in January 2025, coupled with the impact of a further grant in July 2025. Full details on the calculation of the Group's share-based payment charge are included within note 17.

Exceptional items

Exceptional items of £0.3 million (FY25: £11.3 million for the 15-month period) included:

• Restructuring costs: £0.2 million (FY25: £0.1 million) relating to restructuring costs to right-size the cost base, principally within SecurEnvoy Ltd.
• Other costs: £0.1 million (FY25: £0.2 million) including costs related to the closure of dormant Group entities no longer required.

The prior period was also impacted by an impairment charge of £11.1 million applied to goodwill and intangible assets, primarily relating to a reduction in the carrying value of goodwill and acquired intangible items from the acquisitions of SecurEnvoy Limited and Pentest Limited.

Reported loss before tax

The reported loss before tax of £0.3 million (2025: £13.4 million for the 15-month period) reflected the improved underlying operating performance of the business, offset by the continued amortisation of acquired intangibles.

Taxation

The income tax charge for the year of £0.1 million (FY25: credit of £1.4 million) was primarily the result of a reduction in the Group's deferred tax asset, in respect of brought-forward losses, following the utilisation of losses in the period, which slightly exceeded the value of a reduction in the deferred tax liability following the amortisation of intangible assets.

The Group has submitted a claim for R&D tax credits in respect of FY24, which if successful would result in a cash repayment of £0.2 million. No asset is shown in respect of this value as approval of the claim is still to be provided. No benefit from R&D claims has been assumed in respect of FY25 or FY26.

Statement of financial position

Intangible assets

Intangible assets decreased in the year by £1.4 million to £27.5 million at 30 June 2026 (2025: £28.9 million). This movement incorporates £1.1 million of investment into continued development of the Group's software assets (2025: £1.3 million for the 15-month period), less amortisation of £2.5 million, of which £1.5 million relates to acquired intangibles and £1.0 million to internally developed computer software.

Property, plant and equipment

Property, plant and equipment decreased in the year from slightly above to slightly below £0.3 million, reflecting depreciation in the year exceeding the value of new fixed asset additions.

Trade and other receivables

Trade and other receivables greater than one year totalled £9.2 million at 30 June 2026 (FY25: £0.2 million). This represents a significant increase on the prior year, almost exclusively as a result of accrued income on multi-year cybersecurity solutions contracts, where an on-premise solution has been delivered, resulting in revenue being recognised at the point of delivery, but where payment from the customer is being phased over the period over which the customer will have the right to use the software.

Trade and other receivables due in less than one year also increased in the period to £23.2 million (FY25: £17.6 million). This change principally reflected increases in:

• trade debtors, which increased to £7.0 million from £5.0 million in FY25, primarily as a result of a major solutions contract delivered and invoiced on the final day of the financial year;
• prepayments and other receivables, which increased to £10.1 million (FY25: £7.8 million), principally reflecting payments made to vendor partners at the start of each contract year, on cloud-hosted software and support contracts where the cost of sale is recognised across the duration of the contract, increasing broadly in line with the overall increase in activity seen in the period; and
• accrued income relating to the next twelve months, which is all unconditional, increased from £4.9 million to £6.1 million, again reflecting the increased volume of business contracted in FY26.

The Group continues to work primarily with a blue-chip client base and has no material issues with bad debts.

Trade and other payables (falling due within one year)

Trade and other payables increased from £15.8 million at the end of FY25 to £22.4 million at the end of FY26. The largest components of the increase were deferred income, which rose to £12.1 million from £7.3 million in FY25, and accruals, which rose to £5.6 million from £3.7 million. Trade creditors falling due within one year fell to £2.0 million at 30 June 2026 from £2.9 million at the end of FY25.

Deferred income principally relates to cloud-hosted software solutions and support services, which are typically billed annually at the start of each contract year, but for which the revenue is spread across the contract period. Accruals principally relate to the cost of multi-year contracts for on-premise software solutions, where revenue and cost of sales are recognised on delivery, but the billing may be spread over the period the customer retains access to the software. The year-on-year increase is a product of both the increased volumes seen during FY26 and the mix of solutions sold in the period.

Creditors: amounts falling due after more than one year

Creditors due after more than one year increased from £3.7 million at the end of FY25 to £10.4 million at the end of FY26. This was principally driven by an increase in accruals and other payables from £1.7 million to £9.1 million, which in turn reflected the major multi-year contract for an on-premise software solution, delivered at the end of FY26, with revenue and cost of sales recognised at that point, but on which the invoicing for the software component of the cost of sale will take place over multiple years.

Statement of cash flows

The Group generated cash inflows in the year of £0.5 million (2025: £0.1 million). This increase reflected net cash generated from operating activities of £1.8 million, slightly below the adjusted EBITDA value of £2.6 million due to the timing of payments on certain material contracts, in particular the fact that at 30 June 2026, none of the cash in respect of a major contract delivered on the final day of the financial year had yet been collected.

The Group continued to invest in its Software division during the period, with £1.1 million invested directly into the enhancement of its portfolio of proprietary software. Having completed an intense development phase to bring upgraded versions of both the access management and data discovery products to market, this level of investment is expected to drop to c.£0.6 million p.a. from FY27 onwards.

The Group continued to collect cash effectively, with minimal bad debt.

The table below provides a summary of cash flows in the year:

The above cash flow is extracted from the statutory presentation and adjusted to show exceptional items on a like-for-like basis, as this is the basis reviewed by the Directors.

Capital expenditure

Capital expenditure of £1.1 million (2025: £1.4 million) in the year primarily includes capitalisation of external and internal software costs for developing the Software business's product sets. On an annualised basis, this level of expenditure remains consistent year on year. Expenditure on property, plant and machinery remains minimal. It is, however, expected to reduce from FY27 onwards, as an intense phase of development to bring upgraded versions of the Group's proprietary software to market has now been largely completed.

Financing activities

Expenditure on lease liabilities of £0.2 million remained in line with the prior year (2025: £0.2 million).

The Group earned net finance income of £0.1 million in the period (FY25: £0.1 million) through the use of short-term deposits to earn interest on cash balances.

Key performance indicators

The Board believes that revenue, adjusted EBITDA and adjusted profit before tax are key metrics to monitor the performance of the Group, as they provide a good basis to judge underlying performance and are recognised by the Group's shareholders.

Jonathan Hall

Chief Financial Officer

Consolidated statement of comprehensive income

for the year ended 30 June 2026

Earnings/(loss) per ordinary share attributable to the owners of the parent

Adjusted EBITDA and adjusted basic and diluted earnings/(loss) per share are non-GAAP Group-specific measures which are considered to be key performance indicators of the Group's financial performance. See note 2 for the definition of adjusted EBITDA and note 8 for the definition of adjusted basic and diluted earnings/(loss) per share.

The results above are derived from continuing operations.

Consolidated statement of financial position

as at 30 June 2026

The financial statements were approved and authorised for issue by the Board and signed on their behalf on 26 October 2026.

Philip Higgins

Chief Executive Officer

Registered number: 05059457

Consolidated statement of changes in equity

for the year ended 30 June 2026

Notes to the consolidated financial statements

for the year ended 30 June 2026

General information

The Group is a public limited company incorporated and domiciled in the UK. The address of its registered office is 1 Chancery Lane, London WC2A 1LF.

The Parent Company is listed on the AIM market of the London Stock Exchange. The Group provides cybersecurity, managed security and professional advisory solutions to help create a safer online environment for organisations and their end users.

Statement of accounting policies

The material accounting policies applied in preparing the financial statements are outlined below. These policies have been consistently applied for all the years presented, unless otherwise stated.

Basis of preparation

The consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards (IFRS) and with those parts of the Companies Act 2006 applicable to companies reported under IFRS.

The consolidated financial statements have been prepared under the historic cost convention. The consolidated financial statements are presented in sterling, the functional currency of Shearwater Group plc, the Parent Company. All values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.

Change of accounting period end date

During FY25 the Directors elected to change the date of the Group's financial year end from 31 March to 30 June, to better align the Group's financial year with its customer procurement cycle. Historically, material contracts have frequently been concluded immediately prior to, or very shortly following, the previous year-end date of 31 March. This created volatility in performance and presented challenges in providing accurate and timely guidance to investors. The Board believes the revised year end will enable greater clarity and consistency in the Group's reporting.

As a result, data contained with the financial statements is not directly comparable. Where comparative analysis, including year-on-year variances, has been presented within the strategic report, data in respect of FY25 has been annualised, by multiplying the result for the 15-month period to June 2025 by 12/15.

Going concern

Having made enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of signing these financial statements. Accordingly, they continue to adopt the going concern basis in preparing these consolidated financial statements.

The Group consists of a portfolio of brands, each highly regarded within its own specific segment of the cybersecurity industry. This industry as a whole is growing rapidly, as organisations seek to navigate an increasingly complex threat environment, with the costs of failure ever more apparent. The Group has delivered strong growth across the past two accounting periods, with an adjusted EBITDA profit for the year to 30 June 2026 of £2.6 million. At 30 June 2026, the Group was well capitalised, with £5.6 million of cash and no bank borrowings.

The Directors have reviewed detailed budget cash flow forecasts for the period to 30 June 2028 and have challenged the assumptions used to create these budgets. The budget figures are carefully monitored against actual outcomes each month and variances are highlighted and discussed at Board level on a quarterly basis as a minimum.

The Board is pleased to report that trading in the current year has started solidly and for the first quarter ended 30 September 2026 is broadly in line with management's expectations.

The Directors have reviewed and challenged a reverse stress test scenario on the Group up to June 2028. The purpose of the reverse stress test for the Group is to test the impact on the Group's cash if the assumptions in the budget are altered. The reverse stress test assumes a reduction of up to 15% across all revenue lines. Under this scenario, cost of sales related to the sale of cybersecurity solutions were assumed to scale down proportionally with the reduction in revenue. All other costs were unchanged. This scenario showed that under this adverse revenue scenario, even without applying the mitigating actions to manage the cost base, something that management would implement in such a circumstance, the Group still retained positive cash reserves to meet its liabilities throughout the review period.

Overall, the Directors consider that the positive trading performance over recent periods, the strong balance sheet position at 30 June 2026 and the outcome of the sensitised cash flow projections all support their belief that the Group will be able to pay its debts as they fall due for a period of at least twelve months from the date of signing the accounts and therefore they do not believe there are any material uncertainties to disclose regarding going concern. The Directors are therefore satisfied that the financial statements should be prepared on the going concern basis.

Material accounting judgements, estimates and assumptions

Revenue recognition of material contracts

Management make judgements, estimates and assumptions in determining the revenue recognition of material contracts sold by the Group's Services division. The Group works with large enterprise clients, providing services and solutions to support the clients' needs. In many cases, a third party's products or services will be provided as part of a solution. Management consider the implications around timing of recognition, with factors such as determining the nature of the solution provided, the point control passes to the client and the subsequent fulfilment of the Group's performance obligations. In addition to this, management consider if it is acting as agent or principal. Further details of how the Group determines revenue recognition and if it is acting as agent or principal can be found within the relevant notes within this section.

Impairment of goodwill, intangible assets and investment in subsidiaries

The Group tests goodwill and intangible assets for impairment at least annually or more frequently if there are indicators that their carrying value may not be recoverable. The assessment requires management to estimate the value-in-use of each cash-generating unit (CGU), which involves preparing forecasts of future revenues, costs and cash flows for each CGU based on the Group's business plans and market expectations. These forecasts are then discounted using an appropriate pre-tax discount rate, which reflects the time value of money and the specific risks associated with each CGU. Management also make an assessment of an appropriate terminal growth rate to apply beyond the forecast period. Because these calculations are sensitive to changes in assumptions, management perform sensitivity analyses to assess the potential impact of reasonably possible changes in key variables such as revenue growth, operating margins, discount rates and terminal growth rates. Any reduction in the estimated recoverable amount could result in an impairment charge being recognised in the income statement.

Further information on the variables applied in judgements made can be found in note 9.

Capitalisation of internally generated software

In applying the Group's accounting policy for the capitalisation of intangible assets in accordance with IAS 38: Intangible Assets, management is required to exercise significant judgement in determining which costs meet the criteria for recognition as an asset. This includes assessing whether expenditure relates to the development of a discrete product or project, as opposed to ongoing maintenance or enhancement of existing assets. In making this assessment, the Directors consider the nature of the activities undertaken, the stage of completion of each project, and the extent to which internal staff time and external spend are directly attributable to the creation of identifiable and separable intangible assets. Capitalisation is only undertaken where management has a reasonable belief, at the time the expenditure is incurred, that the development will generate probable future economic benefits through future cash inflows to the Group.

Deferred tax asset recognition

The recognition of deferred tax assets in respect of carried-forward tax losses and other temporary differences requires management to exercise judgement as to whether it is probable that future taxable profits will be available against which the losses or temporary differences can be utilised. In forming this view, the Directors consider the Group's latest business plans and forecasts, the nature and timing of future taxable income, the expiry dates of any tax losses, and the availability of tax planning opportunities. The assessment inherently involves estimates regarding the Group's future profitability, which are subject to risks and uncertainties, including market conditions and changes in tax legislation.

Share-based payments

The Group measures the fair value of share options granted to employees and Directors at the grant date using the Black-Scholes option pricing model. The use of this model involves several key assumptions which require judgement, including the risk-free interest rate, the expected volatility of the Group's share price, the proportion of options expected to vest, and the average period until vesting. The risk-free rate is based on the rate of interest for ten-year UK Gilts. Expected volatility is based on the historical share price of the Company. The estimate of the number of options likely to vest is updated at each reporting date based on current expectations of employee retention and performance.

Basis of consolidation

The Group's consolidated financial statements incorporate the results and net assets of Shearwater Group plc and all its subsidiary undertakings made up to the end of each accounting period. Subsidiaries are all entities over which the Group has control (see note 2 of the Company financial statements). The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All inter-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method under IFRS 3. This involves recognising identifiable assets (including previously unrecognised intangible assets) and liabilities of the acquired business at fair value. Any excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets and liabilities is recognised in the consolidated statement of financial position as goodwill and is not amortised. To the extent that the net fair value of the acquired entity's identifiable assets and liabilities is greater than the cost of the investment, a gain is recognised immediately in the consolidated statement of comprehensive income.

After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired. Goodwill assets considered significant in comparison to the Group's total carrying amount of such assets have been allocated to cash-generating units or groups of cash-generating units. Where the recoverable amount of the cash-generating unit is less than its carrying amount including goodwill, an impairment loss is recognised in the consolidated statement of comprehensive income.

Acquisition costs are recognised in the consolidated statement of comprehensive income as incurred.

Revenue

The Group recognises revenue in accordance with IFRS 15: Revenue from Contracts with Customers. Revenue with customers is evaluated based on the five-step model under IFRS 15: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognise revenues when (or as) each performance obligation is satisfied.

Revenue recognised in the statement of comprehensive income but not yet invoiced is held on the statement of financial position within accrued income. Revenue invoiced but not yet recognised in the statement of comprehensive income is held on the statement of financial position within deferred revenue. Revenue is measured at the fair value of the consideration received or receivable, excluding value-added tax and rebates. Where there is a significant difference between the date of revenue recognition and the expected date of cash receipt, the total value to be received is discounted using a cost of debt appropriate to the customer in order to determine the fair value.

The Group's revenues are comprised of a number of different products and services across our two divisions; details of how revenue recognition is now applied in respect of these are provided below. It is noted that in the case of revenue from cloud-based software and third-party support/warranties, this had historically been recognised at a point in time when the respective solution was delivered to the client.

Services

Sales of integrated cybersecurity solutions, which could include some or all of: third-party hardware, third-party software, third-party support/warranties and internal support/engineering, are split into their respective performance obligations:

• Revenue relating to the provision of third-party hardware, or on-premise software, is recognised in full at a point in time upon delivery of the product to the end client. This delivery will either be in the form of the physical delivery of a product or the emailing of access codes to the client for them to download third ‑ party software.
• Revenue in respect of cloud-based software solutions and third-party support/warranties, where these are separately identifiable from the main software licence, are spread over the duration of the contract.
• Revenue in respect of Shearwater Group's services is spread over time, as the respective performance obligations are discharged. As this relates to engineering services, this will typically be spread evenly across the duration of a contract, unless the contract stipulates specific services to be performed at a particular point during the contract, in which case recognition will take place once those services have been performed. Where this relates to the value-add service that Shearwater Group provides to identify, procure and integrate a solution and to ensure delivery from the respective partners, this will be calculated by applying a 1.5% mark-up to the cost of sales relating to the cost of third-party support or cloud-hosted software, reflective of a margin that would be expected for a simple reseller agreement. The balance of any contract price is considered to reflect the value-add service provided by Brookcourt. 90% of this value-add component will be recognised on delivery of the solution, reflecting the fact that this is where the significant majority of Brookcourt's work is undertaken, including the design, procurement, integration and implementation of a solution. The balancing 10% is spread on a straight-line basis over the contract term.
• Where revenue recognition is not aligned with invoicing to customers, this can result in the creation of accrued or deferred income.

Sales of consultancy services are usually based on a number of consultancy days that make up the contracted consideration. Consultancy days generally comprise field work and (where required) report writing and delivery which are considered to be of equal value to the client. Revenue is recognised over time based on the number of consultancy days provided within the period compared to the total in the contract.

Software

• Software licences whereby the customer buys software that it sets up and maintains on its premises is recognised fully at the point the licence key/access has been granted to the client. The Group sells the majority of its services through channels and distributors who are responsible for providing first and second line support to the client.
• Software licences for the new 'Authentication as a Service' product, whereby the customer accesses the product via a cloud environment maintained by the Company, is recognised in two parts, whereby part of the subscription is recognised at the point that the licence key is provided to the customer, with the remaining part recognised evenly over the length of the contract. This deferred proportion represents the obligation to maintain and support the platform that the software runs on.

Principal versus agent considerations

In instances where the Group is involving another party in providing goods or services to a customer, the Group considers whether the nature of its promise is a performance obligation to provide the specified goods or services itself or to arrange for those goods or services to be provided by the other party to determine whether it is a principal or an agent. The business will firstly identify the specific goods and/or services to be supplied to the customer.

In determining whether the business is acting as agent or principal, the business assesses whether it controls each specified good or service before that good is transferred to the customer. It will consider:

• Who is responsible for fulfilling the promise to provide the specific product or service.
• If the business is carrying a liability risk for the specific good or service prior to it being supplied to the customer.
• If the business has discretion over pricing.

In addition to the points noted above, the business also considers the following unique selling points:

Pre-sales process:

In some cases, the business invests heavily in working with the customer to understand their requirements, before designing/recommending a solution that integrates various third-party products or services to meet the customer's requirements.

Levels of ongoing services:

In some cases, whilst not always contracted, the business will continue to support the customer as needed to ensure that their solution is working. This may include co-ordination of the maintenance and support with third parties and provision of engineers to remove and send back faulty products.

Where the Group is a principal, revenues are recognised on a gross basis in the statement of comprehensive income. Where the Group is an agent, revenues are recognised on a net basis in the statement of comprehensive income. The Directors believe that the standard structure of Shearwater Group's contract and the nature of the services provided mean that it is typically considered a principal.

Segmental reporting

For internal reporting and management purposes, the Group is organised into two reportable segments based on the types of products and services from which each segment derives its revenue - Services and Software. The Group's operating segments are identified on the basis of internal reports that are regularly reviewed by senior management in order to allocate resources to the segment and to assess its performance.

Current and deferred income tax

The charge for taxation is based on the profit or loss for the year and takes into account deferred tax. Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax based in the computation of taxable profit or loss and is accounted for using the balance sheet method.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group's subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations where applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax assets and liabilities are measured at the rates that are expected to apply when the related asset is realised, or liability settled, based on tax rates and laws enacted or substantively enacted at the reporting date.

Intangible assets

Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired as part of a business combination are recognised outside goodwill if the assets are separable or arise from contractual or other legal rights and their fair value can be measured reliably. Material expenditure on internally developed intangible assets is taken to the consolidated statement of financial position if it satisfies the six‑step criteria required under IAS 38. Development expenditure is capitalised when the Group can demonstrate technical feasibility of completing the intangible asset, its intention and ability to complete and use or sell the asset, and that the asset will generate probable future economic benefits.

Intangible assets with a finite life have no residual value and are amortised over their expected useful lives as follows:

Computer software (including in-house developed software) 2-5 years straight-line basis

Customer relationships 1-15 years straight-line basis

Software 10 years straight-line basis

Trade names 10 years straight-line basis

The amortisation expense on intangible assets with finite lives is recognised in the statement of comprehensive income within administrative expenses. The amortisation period and the amortisation method for intangible assets with finite useful lives are reviewed at least annually.

Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation. Cost includes the original purchase price of the asset plus any costs of bringing the asset to its working condition for its intended use. Depreciation is provided at the annual rates set out below, on a straight-line basis, in order to write down each asset to its residual value over its estimated useful life. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Office equipment 25% - 33% per annum

Right-of-use assets Shorter of useful life of the asset or lease term

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised, as adjusted items if significant, within the statement of comprehensive income.

Financial instruments

Shearwater's financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

Trade and other receivables are measured at amortised cost less a provision for doubtful debts, determined as set out below in 'impairment of financial assets'. Any write‑down of these assets is expensed to the statement of comprehensive income.

The Group uses derivatives where there is a material surplus or deficit of non-sterling receipts and payments. Forward contracts are measured at each balance sheet date based on the prevailing closing exchange rates with exchange gains/(losses) recognised in the statement of comprehensive income.

Impairment of financial assets

The impairment model under IFRS 9 reflects expected credit losses, as opposed to only incurred credit losses under IAS 39. Under the impairment approach in IFRS 9, it is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the Group always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date.

The impairment model only applies to the Group's financial assets that are debt instruments measured at amortised cost or FVTOCI as well as the Group's contract assets and issued financial guarantee contracts. The Group has applied the simplified approach to recognise lifetime expected credit losses for its trade receivables and contract assets as required or permitted by IFRS 9.

Expected credit losses are calculated with reference to average loss rates incurred in the three most recent reporting periods then adjusted taking into account forward-looking information that may either increase or decrease the current rate. The Group's average combined loss rate is 0.05% (2025: 0.16%). This percentage rate is then applied to current receivable balances using a probability risk spread as follows:

• 80% of debt not yet due (i.e. the Group's average combined loss rate of 0.05% is discounted by 20%, meaning a 0.04% provision would be made to debt not yet due);
• 85% of debt that is <30 days overdue;
• 90% of debt that is 30-60 days overdue;
• 95% of debt that is 60-90 days overdue; and
• 100% of debt that is >90 days overdue.

Management have performed the calculation to ascertain the expected credit loss provision, which works out to £4k (2025: £7k). The movement has been recognised in the statement of comprehensive income. There are no non-current receivable balance credit losses. To date, the Group has a record of minimal bad debts, with less than £5,000 being written off in the past three years.

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in the statement of comprehensive income.

Financial liabilities

Trade and other payables

Financial liabilities within trade and other payables are initially recognised at fair value, which is usually the invoiced amount. They are subsequently carried at amortised cost using the effective interest method (if the time value of money is significant).

Loans are initially recognised at fair value, which is the amount stated in the loan agreement. Subsequently, loan balances are restated to include any interest that has become payable.

Lease liabilities have been recognised at fair value in line with the requirements of IFRS 16. Details of lease disclosures are included in note 15.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in the statement of comprehensive income.

Forward contracts

Foreign exchange risk arises when individual Group operations enter into transactions denominated in a currency other than their functional currency. Where the risk to the Group is considered to be significant, the Group has a policy to enter into forward foreign exchange contracts. Further details can be found in note 18.

Leases

Leases are accounted for under IFRS 16, which sets out the principles for recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on‑balance sheet model.

Right-of-use assets

In determining if a lease exists, management considers if a contract conveys the right to control the use of an identified asset for a period of time in return for a consideration. When assessing whether a contract states a right to control the use of an identified asset, management considers:

• if a contract involves the use of an identified asset, this could be specified explicitly or implicitly and should be physically distinct;
• if the Group has obtained the right to gain substantially all of the economic benefit from the use of the asset throughout the period of use; and
• if the Group has the right to direct the use of the asset.

Identified 'right-of-use assets' are valued at the commencement date of the lease (this is usually the date the underlying asset is available for use).

Right-of-use assets are depreciated on a straight-line basis from the commencement date to the earlier of the end of useful life of the right-of-use asset or the end of the lease term. The right-of-use asset may be subject to impairment following certain remeasurement of lease liabilities. Details of the Group's right-of-use assets are contained in note 10 of the consolidated financial statements.

Lease liability

At the commencement date of a lease, the Group recognises lease liabilities, measuring them at the present value of lease payments at commencement of the lease discounted at the determined incremental borrowing rate.

The lease liability is measured at the amortised cost using the effective interest method. Should there be a change in expected future lease payments arising from a lease modification or if the Group changes its assessment of whether it will exercise an extension or termination option, the lease liability would be remeasured.

Remeasurement of a lease liability will give rise to a corresponding adjustment being made to the carrying value of the right-of-use asset.

Lease liabilities are detailed in notes 12, 13 and 15 of the consolidated financial statements.

Practical expedients

IFRS 16 provides for certain optional practical expedients. The Group applies the following practical expedients when applying IFRS 16 to leases previously classified as operating leasing under IAS 17:

• applied a single discount rate to all leases with similar characteristics;
• applied the exemption not to recognise right-of-use assets and liabilities for leases with less than twelve months of the lease term remaining as at the date of initial application; and
• applied the exemption for low-value assets whereby leases with a value under £5,000 (usually IT equipment) have been classed as short-term leases and not recognised on the statement of financial position even if the initial term of the lease from the lease commencement date may be more than twelve months.

Incremental borrowing rate

IFRS 16 states that all components of a lease liability are required to be discounted to reflect the present value of the payments. Where a lease (or group of leases) does not state an implicit rate, an incremental borrowing rate should be used.

The incremental borrowing rate should represent what the lessee would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment.

The Group has applied an incremental borrowing rate which it uses to discount all identified leases across the Group. The Group has one type of right-of-use assets, all of which are located in the United Kingdom.

Share-based payments

In order to calculate the charge for share-based payments as required by IFRS 2, the Group makes estimates principally relating to assumptions used in its option-pricing model as set out in note 17.

The cost of equity-settled transactions with employees where fair value cannot be estimated reliably, is measured with reference to the fair value of the equity instrument. The fair value of equity‑settled instruments is determined at the date of grant, taking into account market-based vesting conditions. The fair value is determined using an option pricing model.

At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will likely vest, or in the case of an instrument subject to market condition, be treated as vesting as described above. The movement in cumulative expense since the previous reporting date is recognised in the statement of comprehensive income, with the corresponding entry in equity.

Pensions

The Group operates a defined contribution personal pension scheme. The assets of this scheme are held separately from those of the Company in an independently administered fund. The pension charge represents contributions payable by the Company to the fund.

Uncertainty over income tax treatments

The Group applies the guidance in IFRIC 23 on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation requires:

• the Group to determine whether uncertain tax treatments should be considered separately, or together as a Group, based on which approach provides better predictions of the resolution;
• the Group to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and
• if it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations.

New standards and interpretations applied

The Group has applied all new and amended UK-adopted international accounting standards that are relevant to its operations and effective for accounting periods beginning on or after 1 July 2025. The following amendment became effective for the first time during the year:

• Lack of Exchangeability (Amendments to IAS 21: The Effects of Changes in Foreign Exchange Rates).

This amendment specifies how an entity should assess whether a currency is exchangeable into another currency and how it should determine the appropriate spot exchange rate when exchangeability is lacking. The amendment also introduces additional disclosure requirements.

The adoption of this amendment did not have a material impact on the Group's consolidated financial statements.

Standards issued but not yet effective

At the date of authorisation of these financial statements, the following relevant standards and amendments had been issued but were not yet effective for the Group. The Group has not adopted any of these standards or amendments early.

• Annual Improvements to IFRS Accounting Standards - Volume 11, comprising amendments to IFRS 1, IFRS 7, IFRS 9, IFRS 10 and IAS 7; and
• Contracts Referencing Nature-dependent Electricity (Amendments to IFRS 9 and IFRS 7).

The following standards and amendments are effective for annual reporting periods beginning on or after 1 January 2027:

• IFRS 18: Presentation and Disclosure in Financial Statements;
• IFRS 19: Subsidiaries without Public Accountability: Disclosures; and
• Amendments to IFRS 19: Subsidiaries without Public Accountability: Disclosures.

IFRS 18 will replace IAS 1: Presentation of Financial Statements and introduces new requirements affecting the presentation of the statement of profit or loss, including defined categories and subtotals. It also introduces disclosure requirements for management-defined performance measures and enhanced requirements relating to the aggregation and disaggregation of information. IFRS 18 is not expected to affect the recognition or measurement of items in the Group's financial statements but is expected to affect their presentation and disclosure. The Group is continuing to assess the impact of the standard, including its application to the Group's alternative performance measures.

IFRS 19 permits eligible subsidiaries without public accountability to apply reduced disclosure requirements while continuing to apply the recognition, measurement and presentation requirements of other IFRS accounting standards. As the Company is publicly accountable, it is not eligible to apply IFRS 19 in its own financial statements. The Group is assessing whether the standard may be relevant to the individual financial statements of any subsidiaries.

The Group is assessing the impact of the remaining standards and amendments. Based on its assessment to date, they are not expected to have a material impact on the recognition or measurement of amounts reported in the Group's consolidated financial statements.

Measure of profit/(loss)

To provide shareholders with a better understanding of the trading performance of the Group, additional alternative performance measures (APMs) are included; adjusted EBITDA and adjusted loss before tax have been calculated as profit/loss before tax after adding back the following items, which can distort the underlying performance of the Group:

Adjusted profit/(loss) before tax

• Amortisation of acquired intangible assets.
• Share-based payments.
• Impairment of intangible assets.
• Exceptional items.

Adjusted EBITDA

In addition to the adjusting items highlighted above in the adjusted profit/loss before tax:

• Finance costs.
• Finance income.
• Depreciation (including amortisation of right-of-use assets).
• Amortisation of other intangible assets - computer software (including in-house software development).

Adjusted EBITDA and adjusted loss before tax reconciles to loss before tax as follows:

Segmental information

In accordance with IFRS 8, the Group's operating segments are based on the operating results reviewed by the Board, which represents the chief operating decision maker.

The Group is organised into two reportable segments based on the types of products and services from which each segment derives its revenue - Services and Software.

Segmental information for the year ended 30 June 2026 is presented below. The Group's assets and liabilities are not presented by segment as the Directors do not review assets and liabilities on a segmental basis.

• Figures disclosed in the profit column for Services and Software profitability is adjusted EBITDA.

Segmental information by geography

All of the Group's non-current assets are held within the United Kingdom.

In the year to 30 June 2026, three customers within the Group made up more than 10% of the Group's revenue (FY25: three). These customers contributed £30.3 million to the Group's Services division (FY25: £21.7 million).

Expenses and auditor's remuneration

Operating loss is stated after charging/(crediting):

• Other one-off costs in FY25 included completion of a one-off strategic project from FY24 and foreign exchange losses and legal costs from one foreign exchange provider breaching the terms of an agreed forward contract.
• Staff costs

Total staff costs within the Group comprise of all Directors' and employee costs for the financial year.

The weighted average monthly number of employees, including Directors, employed by the Group during the year was:

Other interest payments in the year reflect an early payment discount accessed from a customer.

Taxation

Earnings per share

Basic loss per share is calculated by dividing the loss attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted loss per share is the same as basic loss per share as the potential dilutive shares are anti-dilutive for the year ended 30 June 2026 and the 15 months ended 30 June 2025. Please see notes 16 and 17 of the consolidated financial statements for more details.

Adjusted earnings per share has been calculated using adjusted earnings calculated as loss after taxation but before:

• Amortisation of acquired intangibles after tax.
• Exceptional items after tax.
• Share-based payments.

The calculation of the basic and diluted profit/loss per ordinary share from total operations attributable to shareholders is based on the following data:

The Group tests goodwill and intangible assets annually for impairment. The recoverable amount of goodwill and intangible assets is determined as the higher of the value-in-use calculation or fair value less cost of disposal for each cash‑generating unit (CGU). The value-in-use calculations use pre-tax cash flow projections based on financial budgets and forecasts approved by the Board covering a five-year period. These pre-tax cash flows beyond the five-year period are extrapolated using estimated long-term growth rates.

The Group has three separate CGUs (FY25: three CGUs). For all three CGUs a weighted average cost of capital of 13.5% (FY25: 13.8%) and a terminal value, based on a long-term growth rate of 2% (FY25: 2%) calculated on year five cash flow, have been used.

The following key assumptions around revenue growth are summarised in the table below.

In respect of the Software business, growth is expected to be stimulated by the bringing back to market of the Group's upgraded Data Discovery product, which has not contributed to revenue in FY26, but which has now undergone a successful proof of concept and is now being actively promoted to clients.

In respect of the Group's Services business, which includes Brookcourt and Pentest, the FY27 budgets reflect an expected change in mix towards higher-margin revenues to still deliver an increased year-on-year gross profit across the Group. The revenue growth from FY28 onwards of 10% is set to be slightly below the forecast industry growth rate of 11% to 12%.

Sensitivity analysis has been performed on each of the Group's CGUs which incorporates changes in assumed revenue growth rates in addition to terminal value revenue growth rate and weighted average cost of capital (WACC). Outcomes of this sensitivity analysis in respect of each of the CGUs are outlined below:

Brookcourt Solutions - NBV of goodwill and intangible assets at 30 June 2026: £23.5 million:

• Reducing the terminal value from 2% to 1%: No impact on the conclusion in respect of the need for impairment.
• Increasing the weighted average cost of capital by 1%, from 13.5% to 14.5%: No impact on the conclusion in respect of the need for impairment.
• Retaining the revenue and cost assumptions for FY27 in line with the detailed Board-approved budget but reducing the anticipated revenue growth rate thereafter by 5% p.a., with administrative cost growth reduced by 2.5%: No impact on the conclusion in respect of the need for impairment. Under this scenario, revenue growth in each year would need to drop 5% p.a. below the baseline scenario level before any impairment would be required.

Pentest - NBV of goodwill and intangible assets at 30 June 2026: £1.7 million:

• Reducing the terminal value from 2% to 1%: No impact on the conclusion in respect of the need for impairment.
• Increasing the weighted average cost of capital by 1%, from 13.5% to 14.5%: No impact on the conclusion in respect of the need for impairment.
• Retaining the revenue and cost assumptions for FY27 in line with the detailed Board-approved budget but reducing the anticipated revenue growth rate thereafter by 5% p.a., with administrative cost growth reduced by 2.5%, would result in an impairment of £0.6 million.
• Under the baseline scenario, which aligns to management's best expectation of likely future cash flow, the value-in-use exceeds the carrying value by £0.8m. Without mitigating action in respect of the cost base, a reduction of 1.6% in the annual revenue growth assumption would result in these two values becoming equal.

Software - NBV of goodwill and intangible assets at 30 June 2026: £2.3 million:

• Reducing the terminal value from 2% to 1%: No impact on the conclusion in respect of the need for impairment.
• Increasing the weighted average cost of capital by 1%, from 13.5% to 14.5%: No impact on the conclusion in respect of the need for impairment.
• Retaining the revenue and cost assumptions for FY27 in line with the detailed Board-approved budget but reducing the anticipated revenue growth rate thereafter by 5% p.a., with administrative cost growth reduced by 2.5%, would result in an impairment of £1.4 million.
• Under the baseline scenario, the value-in-use exceeds the carrying value by £0.6m. Without mitigating action in respect of the cost base, a reduction of 1.2% in the annual revenue growth assumption would result in these two values becoming equal.

The Directors acknowledge the sensitivity of their conclusion in respect of impairment to changes in the revenue growth assumptions. In particular, in respect of the Software business, it is acknowledged that a significant factor supporting the conclusion that an impairment is not required is the Directors' belief that the enhanced Data Discovery product will contribute material revenues from FY27 onwards. Nonetheless, the Directors believe that the assumptions used in the baseline scenarios reflect their best estimation of the likely future performance of the respective CGUs and on that basis do not believe that an impairment charge is required as at 30 June 2026. The Directors will continue to closely monitor the appropriateness of this judgement.

Property, plant and equipment

Depreciation of property, plant and equipment is charged to depreciation and amortisation expenses within the statement of comprehensive income.

Trade and other receivables

The movement for the provision in expected credit losses is stated below:

Creditors: amounts falling due after more than one year

Deferred tax balance at 30 June 2026 includes a £1.2 million (2025: £1.7 million) deferred tax liability for acquired intangible assets including software and trademarks. The remainder represents timing differences arising on the difference between the net book value and tax written down value of internally generated software and office equipment.

The Directors consider that the Group has usable tax losses of £1.8 million (2025: £4.4 million) across its Parent Company Shearwater Group plc and four subsidiaries that are available for offset against future taxable profits of the entity. A deferred tax asset has been recognised in respect of these tax losses which will be used to offset future taxable profits.

Lease liabilities

Lease liabilities at 30 June 2026, which include the extension of some existing office leases, are detailed below:

There are no leases with a term of more than five years.

3,333 ordinary shares were allotted in the period (FY25: nil) on the exercise of options by an employee under the Group's EMI options scheme.

Directors had previously stated that deferred shares were, for all practical purposes, valueless and that it was the Board's intention to repurchase, cancel or seek to surrender these deferred shares using lawful means in the future. On 25th September 2026 a circular was sent to shareholders including special resolutions proposing to cancel deferred shares for zero consideration, together with the Company's share premium account, as part of a capital reduction programme, with the amounts being credited to the Company's P&L reserve. These resolutions were overwhelmingly approved at a General Meeting of the Company on 13th October 2026. Directors now intend to apply to the High Court to complete the capital reduction.

Other reserves included:

Share premium

This comprises of the amount subscribed for share capital in excess of the nominal value less any transaction costs incurred in raising equity.

Other reserves

These comprise of amounts expensed in relation to the share options, share incentive scheme (see note 17) and merger relief from shares issued as consideration to acquisitions and equity placings (net of costs).

Movements in the year ended 30 June 2026 include a share-based payments charge for the period of £55,000 (FY25: £22,000), as outlined in note 17.

Accumulated loss reserve

Accumulated loss reserves for the Group are made up of cumulative profits and losses net of dividends and other adjustments.

Share-based payments

Share options - (CSOP)

There were no options in issue under the Group's CSOP scheme at any point during FY26.

The following options were in issue in the year to 30 June 2025:

The following illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options during the year.

The share-based payment charge for options granted to employees and Directors has been calculated using the Black‑Scholes model and using the following parameters:

The calculation includes an estimated leaver provision of 55% (2025: 55%).

Volatility was determined with reference to the average monthly volatility in the Group's share price over the 24 months immediately prior to the date of grant. No options remained outstanding under the CSOP scheme at either the end of the period or the prior period.

Share options - (ESOP)

The following options over ordinary shares remained outstanding at 30 June 2026:

The following options over ordinary shares remained outstanding at 30 June 2025:

The following illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options during the year.

The share-based payment charge for options granted to employees and Directors has been calculated using the Black‑Scholes model. For options issued during the period, the following parameters were used:

For options issued during the prior period, the following parameters were used:

The calculation includes an estimated leaver provision of 0% (2025: 0%).

The weighted average remaining contractual life of options outstanding at the end of the year was 8 years 8 months (2025: 9 years 7 months).

Financial instruments

The Group uses financial instruments, other than derivatives, comprising cash at bank and various items such as trade and other receivables and trade and other payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations.

The Group's financial assets and liabilities at 30 June 2026, as defined under IFRS 9, are as follows. The fair values of financial assets and liabilities recorded at amortised cost are considered to approximate their book value.

Amortised cost (loans and receivables)

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's Finance function. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.

The Group is exposed to financial risks in respect of:

• capital risk;
• foreign currency;
• interest rates;
• credit risk; and
• liquidity risk.

A description of each risk, together with the policy for managing risk, is given below.

Capital risk

The Group manages its capital to ensure that the Group and its subsidiaries will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of equity and debt balances.

The capital structure of the Group consists of cash and cash equivalents and equity. Equity comprises issued capital, reserves and accumulated losses as disclosed in the consolidated statement of changes in equity on page 57.

The Board of Directors reviews the capital structure on a regular basis. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital, against the purpose for which it is intended.

The Group previously held a revolving credit facility with Barclays Bank plc, which expired in FY24. The Directors elected not to renew this facility, on account of the strong balance sheet position and with no expectation of utilising it in the near term. This requirement is continually reviewed and the Directors remain in discussions with Barclays should the need arise to put in place a similar facility in the future.

Market risk

Market risk arises from the Group's use of interest‑bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates (currency risk), interest rates (interest rate risk), or other market factors (other price risk).

Foreign currency risk

The Group is exposed to foreign currency risk on sales and purchases which are denominated in a currency other than sterling. Exposures to exchange rates are predominantly denominated in US dollars and euros. The Group seeks to reduce foreign exchange exposures arising from transactions in various currencies through a policy of matching, as far as possible, receipts and payments across the Group in each individual currency. The Group uses derivatives where there is a material surplus or deficit of non-sterling receipts and payments.

The following forward contracts were entered into in order to mitigate the risk of fluctuations in the value of sterling against US dollar.

The above derivatives are remeasured at fair value at each reporting date. This gives rise to a gain or loss, the entire amount of which is recognised in the statement of comprehensive income within administrative expenses. The amounts hedged include known future contract liabilities in respect of contracts where the cost of sale has not yet been recognised, nor invoiced to Shearwater Group, hence they exceed the value of trade and other payables at 30 June as disclosed in the table below.

As of 30 June, the Group's net exposure to foreign exchange risk was as follows:

The effect of a 10% strengthening of the US dollar against sterling at the reporting date on the US dollar-denominated trade and other receivables, trade and other payables, forward contracts and cash and cash equivalents carried at that date would, all other variables held constant, have resulted in a decrease of the pre-tax loss in the year and an increase in net assets of £0.8 million. A 10% weakening in the exchange rate would, on the same basis, have increased the pre-tax loss in the year and decreased net assets by £0.7 million.

The effect of a 10% strengthening of the euro against sterling at the reporting date on the euro-denominated trade receivables, payables and cash and cash equivalents carried at that date would, all other variables held constant, have resulted in a decrease of the pre-tax loss in the year and an increase in net assets of £0.01 million. A 10% weakening in the exchange rate would, on the same basis, have increased the pre-tax loss in the year and decreased net assets by £0.01 million.

Interest rate risk

The Group has minimal cash flow interest rate risk as it has no external borrowings at variable interest rates.

Liquidity risk

The Group manages liquidity risk by maintaining adequate cash reserves and credit facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities wherever possible.

There has been no change to the Group's exposure to liquidity risks or the manner in which these risks are managed and measured during the year. Further details are provided in the strategic report.

The liquidity risk of each Group entity is managed centrally by the Group's Finance function. Each entity has a predefined facility based on the budget which is set and approved by the Board in advance, which provides detail of each entity's cash requirements. Any material additional expenditure over budget requires sign-off by the Board. A quarterly reforecast which includes a cash flow forecast is reviewed by management and approved by the Board.

The Group has just over £0.1 million of credit available on corporate credit cards which is settled in full on a monthly basis.

The maturity profile of the financial assets and liabilities is summarised below. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay and as such the amounts may vary from the Trade and Other Receivables and Trade and Other Payables notes, which are shown at fair value.

Credit risk

The Group's principal financial assets are trade receivables and bank balances. The Group is consequently exposed to the risk that its customers cannot meet their obligations as they fall due. The Group assesses the creditworthiness and financial strength of customers at inception and on an ongoing basis using credit agencies and publicly available financial information together with trade knowledge and experience. The Board considers the overall exposure to credit risk to be low given these processes, the long-standing trading relationship the Group has with a high proportion of these entities and the blue-chip nature of the Group's client base. This is borne out by a historically very low level of bad debts.

The Group also reviews the credit rating of its banks and financial institutions and believes exposure to credit risk in this area to be limited due to the use of counterparties with strong credit ratings.

Further detail is provided within note 1 and note 11.

Related party transactions

The Directors of the Group and their immediate relatives have an interest of 12% (2025: 19%) of the voting shares of the Group. The shareholdings of Directors and changes during the year are shown in the Directors' report on page 46.

During the period, the Company received a dividend from Brookcourt Solutions Ltd of £19.6 million (FY25: £nil).

There were no other related party transactions for the Group during the period.

Bank loans

The Group previously held a revolving credit facility with Barclays that it elected not to renew in FY24, as given the strong cash position and positive trading performance, there was no likelihood in the short term that such a facility would be required. As a consequence, no facility was in place throughout the period or the prior period. The Directors do not currently believe that such a facility is required. They remain, however, in ongoing communications with Barclays and a charge held by Barclays remains registered on Shearwater Group plc as this will simplify the process for putting in place a replacement facility should the Directors decide that this is desirable.

Notes to support cash flow

Cash and cash equivalents, which are available on demand, comprise:

Cash and cash equivalents are held in the following currencies:

Events after the reporting period

On 25th September 2026 a circular was sent to shareholders including special resolutions proposing to cancel the Company's deferred shares and share premium accounts, with the resulting amounts being credited to the Company's P&L reserve as part of a capital reduction programme. These resolutions were overwhelmingly approved at a General Meeting of the Company on 13th October 2026. Directors now intend to apply to the High Court to complete the capital reduction, which will create distributable reserves, providing the Company with the flexibility to either declare a dividend, or buy back its own shares should Directors opt to do so in the future.

[1]. Source: World Economic Forum, Global Cybersecurity Outlook 2026.

[2]. Source: Fortune Business Insights, Cybersecurity Industry Outlook Analysis, 2026-2034.

[3]. Source: Mordor Intelligence, UK Cybersecurity Market Size & Share Analysis - Growth Trends and Forecasts to 2031.