TIDMCLCO
RNS Number : 8372Q
Cloudcoco Group PLC
02 March 2021
2 March 2021
CloudCoCo Group plc
("CloudCoCo", "the Group" or "the Company")
Final Results
CloudCoCo (AIM: CLCO), a UK provider of IT and communications
solutions to businesses and public sector organisations, announces
its final results for the year ended 30 September 2020.
Financial highlights
-- Revenue up 10% to GBP8.0m (2019: GBP7.3m)
-- Total contract value ("TCV") signed up 97% to GBP5.2m (2019:
GBP2.7m), reflecting early successes in prioritising multi-year
deals across both new and existing customers
-- Trading Group EBITDA (1) grew GBP496k to GBP261k (2019: loss of GBP235k)
-- After plc and exceptional costs, together with amortisation
and interest charges, reduced pre-tax loss of GBP3.0m (2019: loss
of GBP5.6m)
-- Cash at bank of GBP0.6m at 30 September 2020 (2019: GBP0.3m)
-- Net assets of GBP5.0m at 30 September 2020 (2019: net liabilities GBP1.1m)
(1) earnings before net finance costs, tax, depreciation,
amortisation, plc costs, exceptional costs and share-based
payments
Operational highlights
-- Appointment of new CEO, Mark Halpin, and CFO, Michael Lacey
-- Several new multi-year contracts signed in line with the Group's refreshed focus
-- Successful completion of the Group's 'get well' phase
-- Resilient performance despite COVID-19 headwinds, with
progress made against all elements of the Group's strategy
Post-period highlights
-- Continued progress, with a strong start to FY21 at a sales
and Trading Group EBITDA level - management accounts for the first
4 months of FY21 show Trading Group EBITDA already ahead of the
GBP261k achieved in the full 12 months of FY20
-- Secured multi-year contract extensions with Vantage Motor
Group and Baywater Healthcare, two of CloudCoCo's largest clients
by revenue
-- All qualifying colleagues granted performance-based share
options under 'CoCo-One' initiative to align colleagues
incentivisation with shareholders' interests
-- New website launched
Simon Duckworth, Non-Executive Chairman of CloudCoCo,
commented:
"I am delighted with what the team have been able to achieve, in
what was a year of significant upheaval and change for everyone at
CloudCoCo under particularly challenging circumstances.
Through careful planning, consistent hard work, determined
execution, and by fostering a positive and collaborative working
environment, we have made some significant progress in turning the
business around in a remarkably short space of time.
We are still in the early stages of our long-term plan, but
there are green shoots clearly emerging. With a focussed strategy
in place to continue making progress, we are confident we are now
on the right path to unlocking the immense potential in this
business."
Mark Halpin, CEO of CloudCoCo, commented:
"Thanks to the team of incredibly talented, committed,
hard-working and resilient people that I am fortunate enough to
work with, the reset and recovery phase of the strategy - 'get
well' - is now complete.
Our priority since we became CloudCoCo Group plc was to
re-position the business for an exciting future of sustainable,
long-term growth, and in just over the 11 months together
represented by these results, we have gone a long way to achieving
that. There is important work still to be done but, looking ahead,
we move into the 'get fit' phase of the strategy - where there is a
greater emphasis on business development - in a position of
strength.
The wider trading environment continues to be characterised by
uncertainty, but with the right foundations now in place and guided
by a simple focus on world-class customer support, technology
choice and responsiveness, the future is bright for CloudCoCo and I
am excited about what we can achieve together."
Contacts
CloudCoCo via Alma PR
Mark Halpin, CEO
Michael Lacey, CFO
N+1 Singer (nominated adviser & broker) +44 (0)20 7496 3000
Peter Steel
Alma PR (financial PR adviser) +44 (0)20 3405 0205
David Ison cloudcoco@almapr.co.uk
Josh Royston
Kieran Breheny
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
About CloudCoCo
Supported by a team of industry experts and harnessing a diverse
ecosystem of partnerships with blue-chip technology vendors,
CloudCoCo makes it easy for businesses and public sector
organisations to work smarter, faster and more securely by
providing a single point of purchase for their cloud, cyber
security, connectivity, collaboration and IT hardware support
needs.
CloudCoCo has offices in Warrington and Leeds in the UK.
www.cloudcoco.co.uk
Chairman's statement
Following the acquisition of CloudCoCo Limited and re-brand as
CloudCoCo Group plc ("CloudCoCo", the "Group" or the "Company"
together with its subsidiaries) towards the end of 2019, the new
management team implemented a plan to address key areas for
improvement and, despite the majority of the financial year taking
place against a backdrop of persistent disruption and uncertainty
caused by COVID-19, they have made significant progress on all
fronts.
While the headline numbers remain modest, the swing from a
negative to a positive Group Trading EBITDA (1) is indicative of
the direction of travel. I am very encouraged by the performance,
which is a direct result of the good work that has taken place
behind the scenes - both operationally and culturally - and sets
the tone for the future of the business. Ultimately, the success of
the turnaround will be judged on CloudCoCo's ability to deliver on
a consistent basis over time, but the progress made in year one is
cause for optimism.
Strategic progress
This time last year I outlined four key objectives for the
financial year under review. These were: increase sales, reduce
customer churn, reduce costs, and return to net cash generation. I
am pleased with the significant progress against all these
objectives, which is detailed further in the chief executive
officer's review.
Financing
Alongside the acquisition of CloudCoCo Limited, we put measures
in place to improve the Group's financing facilities. As part of
this, our loan note debt was reduced from GBP5.0 million to GBP3.5
million, with interest being rolled up rather than paid. We also
received a GBP0.5 million working capital facility, on which
interest is payable on drawn down amounts.
People
On 31 March 2020, Mark Halpin was appointed as Chief Executive
Officer. Mark, who founded CloudCoCo Limited in 2018 and had been
responsible for the Group's business development activities
post-acquisition, replaced Andy Mills, with Andy remaining on the
board as a non-executive director. This followed the appointment of
Michael Lacey on 21 January 2020 as Chief Financial Officer.
Michael replaced Jill Collighan, who had previously fulfilled the
role on a part-time basis. Jill remains on the board as a
non-executive director.
More widely, the fresh perspectives and approaches brought about
by our new joiners from CloudCoCo Limited have breathed new life
into the firm. Equally as impressive is the way our existing teams
have embraced the change in mentality and new ways of working.
Colleagues old and new across the business are now operating as one
cohesive unit with shared values and ambitions, something Mark has
actively promoted since his arrival, culminating in the
introduction of 'CoCo-One', our colleague share options and
continual improvements programme post-period.
Finally, we remind shareholders of our intention to appoint an
additional Independent Non-executive Director as and when we find a
suitable candidate.
Looking ahead
We recognise the pandemic brings a balance of risks and
opportunities but, despite ongoing uncertainty, remain confident of
the opportunities available to us , as well as in our ability to
capitalise on them. With a combination of exceptional leadership,
dedicated staff delivering a first-class service, and a clear
growth strategy, we have made a strong start to the new financial
year and are excited for what lies ahead.
Simon Duckworth
Non-Executive Chairman
1 March 2021
1 earnings before net finance costs, tax, depreciation,
amortisation, plc costs, exceptional items and share
based-payments
Chief executive officer's review
Overview
CloudCoCo provides IT and communications solutions to UK
businesses. Our skilled team of Microsoft, cloud, cyber security,
connectivity, collaboration, and IT hardware experts work to
deliver solutions that underpin and support our customers'
activities. In doing so, we collaborate extensively with a range of
partners, service providers, distributors and vendors. Our services
enable business optimisation and transformation, team-working, cost
savings, and streamlined workflows through a commitment to
continued innovation.
Our target market spans mid-to-large organisations in both the
commercial and public sectors, united by their desire to work
smarter, innovate and be more efficient. Our transformative
technology solutions provide customers with the necessary
foundations to participate in a modern, resilient and secure
digital-based economy.
CloudCoCo's mission has always been straightforward - we want to
attract, engage and delight our customers by providing a highly
responsive, talented team to solve business problems with
technology. Our business can only move forward if we create
long-lasting and meaningful relationships with our stakeholders -
colleagues, customers and ecosystem partners.
Introduction
The focus since my appointment has been to address legacy issues
in the former Adept4 business through a disciplined 'back to
basics' approach, while positioning the business for long-term,
sustainable growth. We are still only scratching the surface in
terms of uncovering the opportunities available to us, and it will
take time for us to realise our ambitions, but nonetheless I am
proud of what we have been able to achieve together to date.
This time last year, the Chairman outlined four key objectives
for the financial year under review. These were: increase sales,
reduce customer churn, reduce costs, and return to net cash
generation. As noted at the time, these were simple objectives, but
it was clear that a return to basics was necessary to correct the
course of the business and lay the foundations for future
growth.
The progress we have made is all the more encouraging as 2020
was a period defined by significant uncertainty and disruption as a
result of the pandemic. I am particularly pleased with the GBP0.5
million swing in Group Trading EBITDA, the increase in multi-year
contracts and, most of all, the significant improvements to
customer satisfaction and immediate call answer times.
Progress against FY20 objectives
Increasing sales
The business saw sales growth across its recurring services (5%
increase) and product (31% increase) reporting segments, with
moderate growth in professional services despite COVID-19 related
disruption.
Revenue 12 months to 12 months to
30 September 30 September
2020 2019
GBP'000 GBP'000
----------------------- ------------------------------------ ----------------------------
By operating segment
Recurring services 5,412 5,153
Product 1,839 1,405
Professional services 719 699
------------------------ ------------------------------------ ----------------------------
Total revenue 7,970 7,257
------------------------ ------------------------------------ ----------------------------
Total contract value ("TCV") is an important performance
indicator for the Group, and I am pleased to report it grew 97% to
GBP5.2 million (FY19 at GBP2.7 million), with several new deals
being signed on 36 to 60 month contracts. Improving the average
length of our contracts from a base position of 12 months is
crucial to realising our long-term growth ambitions. Doing so
provides us with the additional security of contracted and
committed revenues, as well as the scope to develop genuine
partnerships with customers that should prove fruitful over time.
In FY20 our average contract value length increased to 1.19 years
(FY19: 1.06 years), with our forward pipeline closer to two
years.
The solid performance of recurring services is a product of the
hard work of our teams in addressing the customer satisfaction
levels that had been diminishing under the Adept4 business. We are
seeing particularly promising traction in our telephony business,
both in terms of signing new customers and meeting growing demand
from major systems integrators.
Our product segment also held up well, with a steady stream of
monthly hardware orders driven in part by the transition to home
working beginning in March. We also saw larger orders from boohoo
and a major operator of franchised car dealerships as part of their
three and five-year managed cyber security services contracts
respectively.
Professional services saw the most pressure as a result of the
national lockdown and associated restrictions on travel and social
distancing. These measures made it difficult to either deliver or
sign new work in certain periods. That we have achieved modest
growth in our revenues across this segment despite these pressures
is testament to the hard work, adaptability and resilience of our
team.
In September, we announced the launch of our Secure Global
Learning Access ("SGLA") solution for UK education institutions and
their students. In partnership with Fortinet, a global leader in
broad, integrated and automated cyber security solutions, we
developed a scalable solution allowing students studying abroad to
remotely access learning resources without compromising internet
speed, security or contravening internet restriction laws.
Post-period, we signed our first education client for the solution,
which is now helping Chinese students learn remotely.
Towards the end of the period, we built the new plan to
accelerate sales into the 'get fit' stage of the strategy. With the
deep operational reset of the business now largely complete, we can
focus more of our efforts on business development - signing new
customers and deepening our relationships with existing ones. The
sales function itself is now a much more robust and optimised
operation. The new team has rapidly improved its organisation,
reporting, discipline and accuracy, while ensuring resources are
directed into the right places to win high-quality business.
Reducing customer churn
Delighting customers is a key component of CloudCoCo's mission
and I am pleased to report the comprehensive review of our support
function and the subsequent measures we have taken to improve it
have largely been successful.
As is the case with all businesses of our nature, the pandemic
impacted some of our customers more than others and some have been
forced to reduce the services they take from us but the trend of
year on year reduction in customer churn is clear. Overall
satisfaction is now at a high level, reflected in the fact the
majority of our largest customers have renewed with us, a key
priority in the period.
Reducing costs
The comprehensive spending review undertaken across the Group's
sites to reduce and optimise costs is now largely complete,
resulting in a material reduction for the financial year and
significant annualised savings that will continue to benefit the
business going forwards. The process is ongoing as we look to make
the business as efficient as possible and ultimately sustainable on
the strength of its recurring margins.
Returning to net cash generation
The return to net cash generation continues to be on course,
with the Group now profitable at a Group Trading EBITDA level.
During the period, cash increased to GBP0.6 million (FY19: GBP0.3
million). Some of this increase is new debt, comprised of GBP0.1
million of MXC's working capital facility and a COVID-19 Bounce
Back Loan of GBP50,000.
COVID-19
Our priority from the onset of the pandemic has always been the
health and safety of our colleagues and stakeholders. In March
2020, we moved to home working, prior to the national lockdown
announcement. Given the extraordinary set of circumstances prompted
by the virus, we made sure to provide all staff with whatever they
needed, including mental health support.
As lockdown eased, our offices were made safe and those that
needed to work from them could do so. While the 'work from
anywhere' mentality had already existed in parts of our mobile
workforce, our staff are now fully equipped to work to their best
abilities wherever they are.
The impact of the COVID-19 pandemic on the business has been
mixed. Initially, as home working became commonplace across the
country, we saw increased orders for our hardware and support to
facilitate the transition. As the economic impact of the pandemic
became clear, we began to experience industry-wide headwinds
through delays in orders, including much of our pipeline of larger
opportunities across all three of our service lines - including
those linked to planned office moves which were unable to go ahead
in line with original time scales but have shifted to FY21.
To ensure the long-term stability for the Group, we have taken
steps to reduce our overheads and safeguard cash. During the
period, we made use of the Government's furlough scheme and VAT
deferral, as well as the previously mentioned COVID-19 Bounce Back
Loan.
Market
CloudCoCo is a sector agnostic business, working across a range
of industries and sectors to deliver digital transformation to our
customers.
Within this, our expertise lies within four main areas of
technology - cloud, collaboration, connectivity and cyber security,
the business values of which have been amplified by the pandemic,
with organisations rapidly pivoting to remote working practices to
ensure business continuity.
Cloud
Hardware-based on-premise solutions continue to make up the
majority of IT spend. Despite this, market research indicates
cloud-based solutions are growing rapidly as a result of the
business agility, transformation, scalability and innovation they
enable. This trend towards cloud-based solutions predates COVID,
but the widespread move to remote working necessitated by the
pandemic has had a significant, positive impact on the rate of
adoption.
As a Tier 1 Microsoft Cloud Solution Provider (CSP) with Gold
Cloud Platform Competency, CloudCoCo is able to support
organisations throughout their journey of cloud adoption - through
strategy, planning, readiness, migration, management and
governance.
Collaboration
With a dramatic increase in the monthly user base of Microsoft's
Teams collaboration platform and with remote working set to endure
for the foreseeable future, there is a significant opportunity for
managed services providers like CloudCoCo to lead the way in
enabling organisations to swiftly adopt, actively use and fully
realise the user experience and business productivity outcomes
offered by cloud-based unified communications and collaboration
solutions.
Connectivity
Organisations now need to connect a more distributed community
of users with a more dispersed mix of corporate data centre
applications, public cloud environments, SaaS services and data
storage resources. CloudCoCo can support organisations with hybrid
IT and multi-cloud environments across many hundreds of locations
and thousands of users, delivering various forms of modern
connectivity such as high speed internet, WiFi and piping.
Cyber security
Cyber security has been propelled to the top of board agendas in
recent years and as the world becomes more digitised, perpetrators
become more sophisticated in their approaches, and high-profile
attacks make headline news. As organisations move more of their
information assets online, the incentive for criminals to access
them increases, as does the financial and reputational cost of a
breach.
The acceleration of the shift to remote working following the
outbreak of COVID-19 has exponentially increased the cyber threat
faced by organisations. Devices and data have been moved outside of
the relative safety of an organisation's networks, making them more
vulnerable to unauthorised access and theft. To counter this new
threat environment, we expect an uptick in the adoption of new and
innovative security solutions.
While CloudCoCo is well-positioned to benefit from these
long-term trends in those four areas, looking ahead to 2021, market
conditions will continue to be affected by COVID-19 uncertainty,
with some companies reluctant to commit to the longer-term.
That said, the technology sector has been exceptionally
resilient, and our pipeline remains healthy. The past year has
demonstrated there remains a strong appetite among a wide range of
organisations to seek to enhance their competitive advantage
through the application of technology.
Partnership ecosystem
Relationships with our world-class vendors and innovative
technology partners have developed over the past year, fortifying
an already key competitive advantage for the Group.
We have rationalised our partners within our four main areas of
technology while deepening relationships with firms such as
Microsoft, Gamma, Zen, City Fibre, Lenovo, Fortinet and Mitel. In
the coming year, we will look to continue in a similar vein,
focusing on areas such as cloud-based business-class communications
through Mitel and dynamic cloud security through Fortinet.
Post-period, Lenovo awarded us 'Gold' status in its national
partner programme, and we are now one of the first partners to be
listed on the AWS marketplace for our Fortinet cloud security
capability, demonstrating the growing recognition and appreciation
of the work we do.
FY21 objectives
With tangible progress against all the objectives laid out by
the Chairman a year ago, the Group now enters what is referred to
internally as the 'get fit' stage of its recovery strategy, with a
focus on landing new contracts and improving the quality of our
revenues while maintaining the highest standards of service. With
this in mind, our core objectives evolve into the following:
1. Accelerate sales
With much of the operational heavy-lifting complete and the
sales function now fully re-calibrated and re-energised, the next
step is to ramp up business development and keep the top line
moving along its current trajectory.
2. Maintain excellent support levels
Customer support has improved dramatically in the past year
following a comprehensive review of working practices,
reorganisation and the introduction of a strict set of new
performance metrics. With multi-year contracts a key strategic
focus for the business, maintaining leading levels of customer
satisfaction is critical to our continued success.
3. Maintain cost vigilance
In the 'get well' phase, management left no stone unturned in
scrutinising every cost to ensure there is no unnecessary
expenditure throughout the business. This is an ongoing process -
as we continue to grow, we will continue to monitor every penny
spent to ensure the business is running as efficiently as
possible.
4. Improve cash position
It follows that if we are able to deliver against the first
three objectives, our cash position will continue to steadily
improve.
Taking a longer-term view, I am excited to further develop the
Group, improving our offering for our existing customers and
winning new ones, while bringing our talented colleagues - now
share option holders - even closer together.
I am immensely grateful to all our colleagues for their efforts
and continued support, and to our customers who have supported us
and shown patience as we have transitioned to CloudCoCo Group plc.
The willingness of both our new joiners from CloudCoCo Limited and
existing teams to collaborate and drive us forward has been
fantastic to see, and there is a real sense o ur colleagues are now
operating together as one team with a set of shared values and
ambitions. We look forward this year to making CloudCoCo an even
better place to work. I would also like to express my gratitude to
our partners, who have backed my vision from the start and continue
to stand shoulder to shoulder with us on a daily basis.
Current trading and outlook
We have made a strong start to FY21 at a sales and Trading Group
EBITDA level. Management accounts for the first 4 months of FY21
show Trading Group EBITDA already ahead of the GBP261k achieved in
the full 12 months of FY20. The early signs of success in the 'get
fit' phase of our recovery are clear, with several multi-year
contracts having been signed post-period with both new and renewing
customers.
Key among these were renewals with some of our largest accounts,
including Baywater Healthcare on an 18-month term, a major
university on a 24-month term. and Vantage Motor Group on a
36-month term.
New business wins of note include contracts to help a leading
law firm, and a major English council successfully transition to
home working through the delivery of our IT hardware and telephony
solutions.
We are also seeing the benefits of cost reductions starting to
filter through, despite the impact of further lockdowns.
The key is now for us to continue to attract and engage with the
considerable number of organisations looking to digitally transform
their operations. I am confident our ability to produce uniquely
collaborative offerings through our ecosystem of partners and solve
complex problems for our customers will continue to differentiate
us as we move forwards.
Mark Halpin
Chief Executive Officer
1 March 2021
Financial review
Acquisition of CloudCoCo Limited and Refinancing
On 21 October 2019, the Group acquired the entire share capital
of CloudCoCo Limited ("Acquisition"). The consideration for the
acquisition was satisfied through the issue of 218,160,586 ordinary
shares in the Company which represented approximately 49.0% of the
enlarged share capital. The shares were issued at the mid-market
closing price of 3.3 pence, representing a total value of GBP7.2
million at completion.
On completion of the acquisition, a number of actions were taken
to refinance the Group ("Refinancing")
-- GBP1.5 million of the GBP5.0m loan notes held by the Business
Growth Fund ("BGF") were waived and cancelled by BGF, reducing the
Company's liability to GBP3.5 million.
-- BGF's 50 million options were repriced to 0.35 pence. BGF
exercised all of its options in October 2019.
-- MXC Guernsey Limited ("MXCG"), a wholly owned subsidiary of
MXC Capital Limited ("MXC"), which now holds 15.2% of the shares in
the Company, purchased the remaining GBP3.5 million loan notes from
BGF.
-- The terms of the loan notes were restructured and the loan
notes now carry a coupon of 12%, compounded per annum, rolled up
and payable only at the end of the term.
-- The term of the loan notes has been extended to October 2024
with no repayment due until that date unless the Company chooses to
repay early.
-- At the same time, MXCG extended a GBP0.5 million, 2 year,
working capital facility to the Company with interest charged at a
rate of 12% per annum on amounts drawn down.
-- MXC cancelled the warrants it held over 5% of the then issued
and to be issued share capital of the Company.
On 29 November 2019, the Company's name was changed from Adept4
plc to CloudCoCo Group plc.
Revenue and gross margin
Group revenue for the year to 30 September 2020 grew by 10% to
GBP8.0 million (FY19 GBP7.3 million) with increased sales in each
of the three revenue streams of recurring services, product and
professional services.
This produced a gross profit of GBP3.4 million (FY19: GBP3.7
million) representing a gross margin of 42.9% (FY19: 51.4%). The
reduction in margin predominantly relates to the recurring services
segment, as explained below.
The analysis of revenue from each of our operating segments is
shown in Note 3 and is detailed below.
Recurring services
Recurring services relate to the provision of continuing IT
services which have an ongoing billing and support element.
Revenues from recurring services were GBP5.4 million (FY19:
GBP5.2 million), generating a gross profit of GBP2.5 million (FY19:
GBP2.9 million) and a gross margin of 47% (FY19: 56%). The
reduction in the gross margin is due to a different mix of services
provided between in house and third party resources.
The proportion of our total revenue derived from recurring
services continued to be high at 68% (FY19: 71%).
Product sales
Product sales are the resale of solutions (hardware and
software) from leading technology vendors.
Revenues from product sales were higher than those in FY19 at
GBP1.8 million (FY9: GBP1.4 million) due to hardware sales in
advance of multi-year support contracts and assisting customers who
were transitioning to home working. Product sales generated a gross
profit of GBP0.4 million (FY19: GBP0.3 million) and gross margin of
23% (FY19: 20%).
Professional services
Professional services comprises the provision of highly skilled
resource to consult, design, install, configure and integrate IT
technologies.
Revenues from professional services were GBP0.7 million (FY19:
GBP0.7 million) generating a gross profit of GBP0.5 million (FY19:
GBP0.6 million) as permanent employee costs are included in
overheads. In the year to 30 September 2020 a greater proportion of
projects used third party contractors, resulting in a fall in
margin to 65% (FY19: 79%).
Operating performance, costs and EBITDA
Aside from revenue, gross profit and cash balances, one of our
main financial key performance indicators is our Trading Group
EBITDA - our operational trading performance before plc costs. This
measure best equates to the cash profitability of the Group before
exceptional items and net finance expenses.
Excluding plc costs of GBP0.5 million (FY19: GBP0.4 million)
,our trading overheads during the year fell by 18% to GBP3.3
million (FY19: GBP4.0 million), of which staff costs comprised 81%
(FY19: 84%). Following the COVID-19 epidemic, various measures were
taken in the second half of FY20 to protect the business including
temporary pay cuts and use of the Government furlough scheme. In
addition some early successes from the "get well" initiatives
improved trading performance. During the year the Group returned to
modest levels of monthly Trading Group EBITDA profit and resulted
in a Trading Group EBITDA of GBP0.3million (FY19: loss of GBP0.2
million).
The adoption of IFRS 16 Leases has resulted in an increase to
Trading Group EBITDA of GBP68,000. Further details can be found in
note 1.2.
Exceptional Items
During the year we incurred certain costs which were not
directly related to the generation of revenue and trading profits.
Given their size and nature, they have been classified as
exceptional items within the Consolidated Income Statement. These
items totalled GBP0.5 million of which GBP0.4 million relates to
CloudCoCo Limited acquisition costs and GBP0.1 million relates to
integration and reorganisation costs. In the year to 30 September
2019, exceptional items were GBP3.2 million of which GBP3.0 million
related to the impairment of goodwill and other intangible assets
on previous acquisitions and GBP0.2 million related to integration
and reorganisation costs.
Net finance expenses, depreciation, amortisation and financial
results for the full year
During the year the Group incurred net finance costs of GBP0.5
million (FY19: GBP0.6 million). GBP0.4 million of this was interest
on loan notes that was rolled up and not paid as a cash cost. The
Group incurred non-cash costs including total amortisation and
depreciation charges of GBP1.8 million (FY19: GBP1.0 million).
After accounting for a deferred tax credit of GBP0.3 million (2019:
GBP0.4 million) the reported loss for the year after tax was GBP2.7
million compared to a loss after tax for the year to 30 September
2019 of GBP5.2 million after recording an impairment charge of
GBP3.0 million.
Statement of Financial Position and cash
At 30 September 2019, following the GBP3.0 million impairment
charge in respect of its goodwill and intangible assets, the Group
had net liabilities of GBP1.1 million.
In October 2019 there was a Refinancing of the business and
further details are set out above. As a result of this Refinancing,
together with the Acquisition, the Group has now returned to a
positive net asset position of GBP5.0 million. Cash balances at 30
September 2020 were GBP0.6 million (FY19: GBP0.3 million) whilst
net debt was GBP3.0 million (FY19: GBP4.0 million). Net debt
comprises cash balances of GBP0.6 million less the loan notes and
rolled up interest of GBP3.4 million together with GBP0.2 million
of lease liabilities, GBP0.1 million of the MXCG working capital
facility and a COVID-19 Bounce Back Loan of some GBP50,000.
The Group had a net cash inflow during the year of GBP0.3
million (FY19 cash outflow of GBP1.1 million). The main components
of the cash inflow in the year were as follows:
-- cash generated from operating activities excluding costs of
CloudCoCo Limited acquisition of GBP0.5 million
-- costs of GBP0.4 million acquiring CloudCoCo Limited
-- monies received for the issue of shares to BGF of GBP0.2 million and;
-- draw down of MXCG working capital facility of GBP0.1 million
Further details on the financial position of the Group are
contained in note 1.1.
Consolidated income statement
for the year ended 30 September 2020
Note 2020 2019
GBP'000 GBP'000
------------------------------------------------- ---- -------------- --------
Continuing operations
Revenue 3 7,970 7,257
Cost of sales (4,554) (3,530)
------------------------------------------------- ---- -------------- --------
Gross profit 3,416 3,727
Other income 97 -
Administrative expenses (5,963) (8,716)
--------
Trading Group EBITDA (1) - non statutory measure 261 (235)
Amortisation of intangible assets (1,623) (907)
Plc costs (461) (421)
Depreciation (113) (100)
Exceptional item - impairment of goodwill and
intangible assets 4 - (3,021)
Exceptional items - other 4 (540) (234)
Share-based payments 26 (71)
------------------------------------------------- ---- -------------- --------
Operating loss 5 (2,450) (4,989)
Interest receivable 6 1 3
Interest payable 6 (518) (602)
------------------------------------------------- ---- -------------- --------
Net finance expense (517) (599)
Loss before taxation (2,967) (5,588)
Taxation 7 288 438
------------------------------------------------- ---- -------------- --------
Loss and total comprehensive loss for the year
attributable to owners of the parent (2,679) (5,150)
------------------------------------------------- ---- -------------- --------
Loss per share
Basic and fully diluted 8 (0.56)p (2.27)p
------------------------------------------------- ---- -------------- --------
(1) earnings before net finance costs, tax, depreciation,
amortisation, plc costs, exceptional items and share-based
payments
Consolidated statement of financial position
as at 30 September 2020
30 September 30 September
2020 2019
GBP'000 GBP'000
------------------------------ ------------ ------------
Non-current assets
Intangible assets 10,359 4,394
Property, plant and equipment 221 62
------------------------------- ------------ ------------
Total non-current assets 10,580 4,456
------------------------------- ------------ ------------
Current assets
Inventories 31 32
Trade and other receivables 1,856 1,489
Cash and cash equivalents 588 311
------------------------------- ------------ ------------
Total current assets 2,475 1,832
------------------------------- ------------ ------------
Total assets 13,055 6,288
------------------------------- ------------ ------------
Current liabilities
Trade and other payables (2,465) (1,664)
Contract liabilities (565) (513)
Borrowings (104) -
Lease liability (122) (32)
------------------------------- ------------ ------------
Total current liabilities (3,256) (2,209)
------------------------------- ------------ ------------
Non-current liabilities
Contract liabilities (364) (94)
Borrowings (3,458) (4,270)
Lease liability (61) (16)
Deferred tax liability (940) (810)
------------------------------- ------------ ------------
Total non-current liabilities (4,823) (5,190)
------------------------------- ------------ ------------
Total liabilities (8,079) (7,399)
------------------------------- ------------ ------------
Net assets / (liabilities) 4,976 (1,111)
------------------------------- ------------ ------------
Equity
Share capital 4,952 2,271
Share premium account 17,630 11,337
Capital redemption reserve 6,489 6,489
Merger reserve 1,997 1,997
Other reserve 122 1,720
Retained earnings (26,214) (24,925)
------------------------------- ------------ ------------
Total equity 4,976 (1,111)
------------------------------- ------------ ------------
Consolidated statement of changes in equity
for the year ended 30 September 2020
Capital
Share Share redemption Merger Other Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- ----------- -------- -------- --------- --------
At 1 October 2018 2,271 11,337 6,489 1,997 1,649 (19,775) 3,968
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - - (5,150) (5,150)
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Transactions with owners
Share-based payments - - - - 71 - 71
Total transactions with owners - - - - 71 - 71
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Total movements - - - - 71 (5,150) (5,079)
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Equity at 30 September 2019 2,271 11,337 6,489 1,997 1,720 (24,925) (1,111)
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Capital
Share Share redemption Merger Other Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- ----------- -------- -------- --------- --------
At 1 October 2019 2,271 11,337 6,489 1,997 1,720 (24,925) (1,111)
--------------------------------- -------- -------- ----------- -------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - - (2,679) (2,679)
--------------------------------- -------- -------- ----------- -------- -------- --------- --------
Transactions with owners
Extinguishment of BGF Loan Notes
in consideration for issue of
50,000,000 shares at 0.35p per
share (note 9) 500 1,275 - - (1,330) 1,148 1,593
Issue of 218,160,586 shares to
CloudCoCo vendors at 3.3p per
share (note 10) 2,181 5,018 - - - - 7,199
Cancellation of 11,353,255 share
warrants held by MXC Guernsey
on acquisition of CloudCoCo Ltd - - - - (242) 242 -
Share-based payments - - - - (26) - (26)
--------------------------------- -------- -------- ----------- -------- -------- --------- --------
Total transactions with owners 2,681 6,293 - - (1,598) 1,390 8,766
--------------------------------- -------- -------- ----------- -------- -------- --------- --------
Total movements 2,681 6,293 - - (1,598) (1,289) 6,087
--------------------------------- -------- -------- ----------- -------- -------- --------- --------
Equity at 30 September 2020 4,952 17,630 6,489 1,997 122 (26,214) 4,976
--------------------------------- -------- -------- ----------- -------- -------- --------- --------
Consolidated statement of cash flows
for the year ended 30 September 2020
2020 2019
GBP'000 GBP'000
------------------------------------------------------- ------------------ --------
Cash flows from operating activities
Loss before taxation (2,967) (5,588)
Adjustments for:
Depreciation - owned assets 36 100
Depreciation - right of use assets 77 -
Amortisation 1,623 907
Share-based payments (26) 71
Net finance expense 517 599
Costs relating to acquisition of CloudCoCo Limited 435 -
Settlement of warranty claim - 600
Impairment of goodwill - 3,021
(Increase) / decrease in trade and other receivables (65) 811
Decrease/ (increase) in inventories 1 (6)
Increase / (decrease) in trade payables, accruals
and deferred income 866 (1,145)
Cash flows from taxation - -
------------------------------------------------------- ------------------ --------
Net cash from / (used in) operating activities before
acquisition costs 497 (630)
Costs relating to acquisition of CloudCoCo Limited (435) -
------------------------------------------------------- ------------------ --------
Net cash from (used in) operating activities 62 (630)
------------------------------------------------------- ------------------ --------
Cash flows from investing activities
Purchase of property, plant and equipment (37) (16)
Acquisition of CloudCoCo Limited, net of cash acquired 157 -
Purchase of intangible assets - (40)
Interest received 1 3
------------------------------------------------------- ------------------ --------
Net cash from / (used in) investing activities 121 (53)
------------------------------------------------------- ------------------ --------
Cash flows from financing activities
Proceeds from exercise of BGF share options 175 -
Receipt of loan funds from MXCG 100 -
Receipt of loan funds from COVID-19 Bounce Back Loan 50 -
Payment of lease liabilities (183) (30)
Interest paid (48) (403)
Net cash from / (used in) financing activities 94 (433)
------------------------------------------------------- ------------------ --------
Net increase / (decrease) in cash 277 (1,116)
Cash at bank and in hand at beginning of period 311 1,427
------------------------------------------------------- ------------------ --------
Cash at bank and in hand at end of period 588 311
------------------------------------------------------- ------------------ --------
Comprising:
Cash at bank and in hand 588 311
------------------------------------------------------- ------------------ --------
Notes to the consolidated financial statements
1. General information
CloudCoCo Group plc is a public limited company incorporated in
England and Wales under the Companies Act 2006. The Board of
Directors approved this preliminary announcement on 1 March 2021.
Whilst the financial information included in the preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ("IFRS") as endorsed by the European Union, this
announcement does not itself contain sufficient information to
comply with all the disclosure requirements of IFRS and does not
constitute statutory accounts of the Company for the years ended 30
September 2020 and 2019.
The financial information for the period ended 30 September 2019
is derived from the statutory accounts for that year which have
been delivered to the Registrar of Companies. The statutory
accounts for the year ended 30 September 2020 will be delivered to
the Registrar of Companies as soon as practicable following
approval. The auditors have reported on those accounts; their
reports were unqualified and did not contain a statement under
s498(2) or s498(3) of the Companies Act 2006.
The principal activity of the Group is the provision of IT
Services to small and medium-sized enterprises in the UK. The
financial statements are presented in pounds sterling because that
is the currency of the primary economic environment in which each
of the Group's subsidiaries operates.
1.1 Basis of preparation
The consolidated financial statements have been prepared in
accordance with applicable International Financial Reporting
Standards (IFRSs) as applied in accordance with provisions of the
Companies Act 2006. The measurement bases and principal accounting
policies of the Group are set out below. These policies have been
consistently applied to all years presented unless otherwise
stated.
Going concern
The Group had positive net assets at 30 September 2020 totalling
GBP5.0 million compared to net liabilities at the end of FY19 of
GBP1.1 million. The acquisition of CloudCoCo Limited during FY20
and the Refinancing referred to in the Financial Review have
returned the Group to a positive net assets position due to the
issue of share capital of GBP7.2 million at completion and a
refinancing of the loan notes of GBP1.3 million. The Group had an
undrawn working capital facility at 30 September 2020 of GBP0.4m
which formally matures in October 2021 but which the lender has
confirmed that it will extend to March 2022.
The Group's progress towards its key objectives of increasing
sales, reducing customer churn, reducing costs, and returning to
net cash generation is described in the Chief Executive Officer's
review. Despite significant uncertainty and disruption as a result
of the pandemic, the Group reported an improvement in underlying
profitability as measured by Group Trading EBITDA (2020: GBP0.3m;
2019: GBP(0.2)m) and generated cash from operating activities,
excluding costs of acquiring CloudCoCo Limited, of GBP0.4m.
The key operational risk the Group faces is the general economic
outlook including the continuing uncertainty caused by the
pandemic. Although COVID-19 has not a material impact on the
Group's ability to operate, it has resulted in delays in sales
cycles for certain services and delays in project delivery as
customers assess the impact of COVID-19 on their own businesses.
The Group responded by taking action to conserve cash including
temporary pay cuts, use of the Government's furlough and VAT
deferral schemes and a COVID-19 Bounce Back Loan.
The Directors have reviewed the forecast sales growth, budgets
and cash projections for the period to March 2022. The Directors
have performed sensitivity analysis which reflects uncertainty in
assumptions regarding growth in services and customer projects and
considered that the Group expects to have sufficient cash resources
provided that the MXCG working capital facility is made available
beyond October 2021. At the request of the Directors, MXC has
provided confirmation that it will provide continuing financial
support including the extension of the existing facility until
March 2022.
After reviewing the forecast sales growth, budgets and cash
projections, including sensitivity analysis on the key assumptions
such as the potential impact of COVID-19 on sales, for the next
twelve months and beyond and after taking into account the
assurance of ongoing support from a significant shareholder, which
the Directors reasonably believe has sufficient resources to
provide such support, the Directors have reasonable expectations
that the Group and the Company have adequate resources to continue
operations for the foreseeable future, being a period of at least
one year from the date of approval of these financial statements.
The Directors have not identified any material uncertainties that
may cast doubt over the ability of the Group and Company to
continue as a going concern and the Directors continue to adopt the
going concern basis in preparing these financial statements.
1.2 New standards and interpretations of existing standards that
have been adopted by the Group for the first time
During the year ended 30 September 2020 the Group adopted the
following new financial reporting standards for the first time:
-- Annual Improvements to IFRS Standards 2015-17
-- Cycle amendments to IFRS 3 Business Combinations
-- IAS 12 Income Taxes
-- IAS 23 Borrowing Costs
-- IFRS 11 Joint Arrangements
-- IFRS 16 Leases
With the exception of IFRS 16 Leases, none of the new standards
had a material impact on the Group.
IFRS 16 Leases has replaced IAS 17 Leases and the new standard
became effective for periods commencing after 1 January 2019. The
Group has adopted IFRS 16 Leases using the modified retrospective
basis with recognition of a transitional adjustment as described
below on the date of initial application being 1 October 2019 and
therefore comparatives have not been restated.
IFRS 16 Leases introduces a single lessee accounting model where
the Group now recognises a lease liability and a right of use asset
for all leases, except for those with short lives. On adoption of
IFRS 16 Leases the Group recognised a right of use asset in respect
of the lease of office space at 7750 Daresbury Business Park,
Warrington. As permitted under the practical expedients contained
in the standard, no adjustment was made in respect of leases with a
remaining term of less than 12 months. The right of use asset is
then depreciated over the remaining term of the lease.
On adoption of IFRS16 the Group recognised a lease liability in
relation to that office lease which had previously been classified
as an operating lease under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments discounted using the Group's average incremental
borrowing rate.
On the transfer to IFRS 16 adjustments were made to create a
right of use asset of GBP148,000 and a lease liability of
GBP148,000.
The adoption of IFRS 16 in the year to 30 September 2020
resulted in a reduction in operating expenses excluding
depreciation of GBP68,000, and an increase in depreciation costs of
GBP58,000 and an increase in interest in interest costs of
GBP28,000.
There is no overall impact of cash flows or retained earnings
from implementing IFRS 16, however trading EBITDA has improved by
GBP68,000.
2. Principal accounting policies
a) Basis of consolidation
The Group financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) prepared to 30 September each year. Control is
achieved where the Company is exposed to, or has the rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The Group obtains and exercises control through voting rights.
Unrealised gains on transactions between the Group and its
subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with using the
acquisition method. The acquisition method involves the recognition
at fair value of all identifiable assets and liabilities, including
contingent liabilities of the subsidiary, at the acquisition date,
regardless of whether or not they were recorded in the financial
statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are
included in the Consolidated Statement of Financial Position at
their fair values, which are also used as the cost bases for
subsequent measurement in accordance with the Group accounting
policies.
Goodwill is stated after separating out identifiable intangible
assets. Goodwill represents the excess of acquisition costs over
the fair value of the Group's share of the identifiable net assets
of the acquired subsidiary at the date of acquisition.
b) Goodwill
Goodwill representing the excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets
acquired is capitalised and reviewed annually for impairment.
Goodwill is carried at cost less accumulated impairment losses.
c) Revenue and revenue recognition
Revenue arises from the sale of goods and the rendering of
services as it is performed and the performance obligations
fulfilled. It is measured by reference to the fair value of
consideration received or receivable, excluding valued added tax,
rebates, trade discounts and other sales-related taxes.
The Group enters into sales transactions involving a range of
the Group's products and services; for example, for the delivery of
hardware, software, support services, managed services and
professional services. At the inception of each contract the Group
assesses the goods or services that have been promised to the
customer. Goods or services can be classified as either i) distinct
or ii) substantially the same, having the same pattern of transfer
to the customer as part of a series. Using this analysis, the
Company identifies the separately identifiable performance
obligations over the term of the contract. A contract liability is
recognised when billing occurs ahead of revenue recognition. A
contract asset is recognised when the revenue recognition criteria
were met but in accordance with the underlying contract the sales
invoice had not been issued.
Goods and services are classified as distinct if the customer
can benefit from the good or services on their own or in
conjunction with other readily available resources. A series of
goods or services, such as Recurring Services, would be an example
of a performance obligation that is transferred to the customer
consecutively over time. The Group applies the revenue recognition
criteria set out below to each separately identifiable performance
obligation of the sale transaction. The consideration received from
multiple-component transactions is allocated to each separately
identifiable performance obligation in proportion to its relative
fair value.
Sale of goods (hardware and software)
Sale of goods is recognised when the Group has transferred the
significant risks and rewards of ownership to the buyer, generally
when the customer has taken undisputed delivery of the goods.
Revenue from the sale of software with no significant service
obligation is recognised on delivery.
Rendering of services
The Group generates revenues from managed services, support
services, maintenance, resale of telecommunications ("Recurring
Services") and professional services. Consideration received for
these services is initially deferred (when invoiced in advance),
included in accruals and deferred income and recognised as revenue
in the period when the service is performed and the performance
obligation fulfilled, measured by reference to hourly rates.
In recognising Recurring Services revenues, the Group recognises
revenue equally over the duration of the contractual term.
Third-party costs (where relevant) relating to these services are,
likewise, spread equally over the duration of the contractual
term
d) Financial assets
All financial assets are initially recognised at fair value,
plus transaction costs and subsequently measured at amortised
cost.
Trade receivables are held in order to collect the contractual
cash flows and are initially measured at the transaction price as
defined in IFRS 15, as the contracts of the Group do not contain
significant financing components. Impairment losses are recognised
based on lifetime expected credit losses in profit or loss.
The Group reviews the amount of credit loss associated with its
trade receivables based on forward looking estimates, taking into
account current and forecast credit conditions
Other receivables are held in order to collect the contractual
cash flows and accordingly are measured at initial recognition at
fair value, which ordinarily equates to cost and are subsequently
measured at cost less impairment due to their short-term nature. A
provision for impairment is established based on 12-month expected
credit losses unless there has been a significant increase in
credit risk when lifetime expected credit losses are recognised.
The amount of any provision is recognised in profit or loss.
All financial assets are recognised when the Group becomes a
party to the contractual provisions of the instrument.
Derecognition of financial assets occurs when the rights to receive
cash flows from the instruments expire or are transferred and
substantially all of the risks and rewards of ownership have been
transferred. An assessment for impairment is undertaken, at least,
at each reporting date.
Interest and other cash flows resulting from holding financial
assets are recognised in the Consolidated Income Statement when
receivable.
e) Financial liabilities
Financial liabilities are obligations to pay cash or other
financial instruments and are recognised when the Group becomes a
party to the contractual provisions of the instrument. All
interest-related charges are recognised as an expense in "finance
costs" in the Consolidated Income Statement. Loan notes are raised
for support of long-term funding of the Group's operations. The
financial liability arising on the loan notes is carried at
amortised cost. In the financial statements at 30 September 2019,
loan notes were treated as a compound instrument as if the options
granted to the lender represented an option to convert loan notes
into equity.
Finance charges, including premiums payable on settlement or
redemption, and direct issue costs are charged to the Consolidated
Income Statement on an accruals basis using the effective interest
method and are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which they
arise.
Modification of the terms of a liability is accounted for as an
extinguishment of the original liability and recognition of a new
liability when the modification is substantial. A modification is
deemed to be substantial if the net present value of the cash flows
under the modified terms, including any fees paid or received, is
at least 10 per cent different from the net present value of the
remaining cash flows of the liability prior to the modification,
both discounted at the original effective interest rate of the
liability prior to the modification
3. Segment reporting
The Chief Operating Decision Maker ("CODM") has been identified
as the executive directors of the Company and its subsidiaries, who
review the Group's internal reporting in order to assess
performance and to allocate resources.
The CODM assess profit performance principally through adjusted
profit measures consistent with those disclosed in the Annual
Report and Accounts. The Board believes that the Group comprises a
single reporting segment, being the provision of IT managed
services to customers. Whilst the CODM reviews the revenue streams
and related gross profits of three categories separately (Recurring
Services, Product and Professional Services), the operating costs
and operating asset base used to derive these revenue streams are
the same for all three categories and are presented as such in the
Group's internal reporting. Accordingly, the segmental analysis
below is therefore shown at a revenue and gross profit level in
line with the CODM's internal assessment based on the following
reportable operating segments:
Recurring Services
* This segment comprises the provision of continuing IT
services which have an ongoing billing and support
element.
Product
* This segment comprises the resale of solutions
(hardware and software) from leading technology
vendors.
Professional Services
* This segment comprises the provision of highly
skilled resource to consult, design, install,
configure and integrate IT technologies.
--------------------- -----------------------------------------------------------------
All revenues are derived from customers within the UK and no
customer accounts for more than 10% of external revenues.
Inter-segment transactions are accounted for using an arm's
length commercial basis.
3.1 Analysis of continuing results
All revenues from continuing operations are derived from
customers within the UK. This analysis is consistent with that used
internally by the CODM and, in the opinion of the Board, reflects
the nature of the revenue.
3.1.1 Revenue
2020 2019
GBP'000 GBP'000
---------------------- --------- ---------
Recurring Services 5,412 5,153
Product 1,839 1,405
Professional Services 719 699
Total Revenue 7,970 7,257
---------------------- --------- ---------
3.1.2 Revenue
2020 2019
GBP'000 GBP'000
------------------------------ --------- ---------
Recognised at a point in time 2,558 2,104
Recognised over time 5,412 5,153
Total Revenue 7,970 7,257
------------------------------ --------- ---------
4. Exceptional Items
Items which are material and non-routine in nature are presented
as exceptional items in the Consolidated Income Statement.
2020 2019
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Costs relating to the acquisition of CloudCoCo Limited (435) -
Impairment of goodwill and intangible assets - (3,021)
Integration and restructure costs (105) (226)
Foreign exchange rate variances - (8)
------------------------------------------------------- -------- --------
Exceptional items (540) (3,255)
------------------------------------------------------- -------- --------
The Board has assessed the carrying value of the Group's
goodwill and intangible assets and following an assessment of
current budgets and forecasts for the Group, no impairment charge
(FY19: GBP3.0m) has been made.
5. Operating loss
2020 2019
GBP'000 GBP'000
----------------------------------------- ------------------- --------
Operating loss is stated after charging:
Depreciation of owned assets 36 100
Depreciation of right of use assets 77 -
Short life lease expense 50 -
Operating lease rentals
- Buildings - 106
Amortisation of intangibles 1,623 907
Auditor's remuneration:
- Audit of parent company 20 -
- Audit of subsidiary companies 50 -
Predecessor auditor's remuneration
- Audit of parent company - 22
- Audit of subsidiary companies - 42
- Audit costs of relating to prior year 25 20
- Other audit-related assurance services 6 7
- Tax compliance services 17 10
----------------------------------------- ------------------- --------
6. Finance income and finance costs
Finance cost includes all interest-related income and expenses.
The following amounts have been included in the Consolidated Income
Statement line for the reporting periods presented:
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Interest income resulting from short-term bank deposits 1 3
-------------------------------------------------------- -------- --------
Finance income 1 3
-------------------------------------------------------- -------- --------
Interest expense resulting from:
Lease liabilities 27 3
MXC rolling working capital facility 9 -
Loan note interest 420 400
Effective interest on liability element of the loan
notes 62 199
-------------------------------------------------------- -------- --------
Finance costs 518 602
-------------------------------------------------------- -------- --------
Loan note interest includes GBP398,000 (FY19: GBPnil) which is
accrued and is only payable when the loan notes are repaid in 2024
or earlier if the Group chooses.
7. Income tax
2020 2019
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Current tax
UK corporation tax for the period at 19% (2019: 19%) - -
----------------------------------------------------- -------- --------
Deferred tax
Deferred tax credit on intangible assets (288) (438)
----------------------------------------------------- -------- --------
Total tax credit for the year (288) (438)
----------------------------------------------------- -------- --------
The relationship between expected tax expense based on the
standard rate of tax in the UK of 19% (2019: 19%) and the tax
expense actually recognised in the Consolidated Income Statement
can be reconciled as follows:
2020 2019
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Loss for the year before tax: (2,967) (5,588)
------------------------------------------------------- -------- --------
Tax rate 19% 19%
------------------------------------------------------- -------- --------
Expected tax credit (564) (1,062)
Adjusted for:
Credits not chargeable to tax - -
Non-deductible expenses 91 641
Movement in unprovided deferred tax relating to losses 191 287
Change in tax rates - (13)
Short-term timing differences (6) (291)
------------------------------------------------------- -------- --------
(288) (438)
------------------------------------------------------- -------- --------
The Group has unrecognised deferred tax assets in respect of tax
losses carried forward totalling GBP 1,522,000 (2019:
GBP1,290,000).
8. Loss per share
2020 2019
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Loss attributable to ordinary shareholders (2,679) (5,150)
Number Number
----------------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares in issue,
basic and diluted 478,427,400 227,065,100
Basic and diluted loss per share (0.56)p (2.27)p
----------------------------------------------------- ----------- -----------
9. Financial instrument
On 26 May 2016, the Company issued GBP5m unsecured loan notes
("Loan Notes") to the Business Growth Fund ("BGF") with a
seven-year term (although redemption was permissible from the third
anniversary) with repayment between the fifth and seventh
anniversaries in equal semi-annual repayments that carry interest
at 8% per annum ("Coupon"). On the same date, the Company also
agreed to grant the BGF an option to subscribe for 50,000,000
Ordinary Shares of 1p at a subscription price of 6p any time before
26 May 2031. As the Loan Notes were unsecured, no collateral was
offered to the BGF as security. The Loan Notes were not exposed to
market interest rate increases over the term.
In the opinion of the directors, the Loan Notes and share option
elements were linked and were therefore treated as a single
financial instrument. In accordance with IAS 32, the Loan Notes
were recorded at a fair value of GBP3.6m which was measured using a
discounted cash flow model over the seven-year term of the
instrument and an effective interest rate of 15%.
The difference to the consideration received represented the
element attributable to the options, which was credited to equity.
The Loan Notes were subsequently measured at amortised cost whereby
the difference between the face value of the Loan Notes and their
fair value on initial recognition is recognised as an effective
interest charge over the term of the instrument.
On 21 October 2019, the Company and BGF agreed to modify the
exercise price of the share options and the options were
immediately exercised. The directors consider this to be in
consideration for the extinguishment of Loan Notes with a principal
amount of GBP1.5m and accrued interest of GBP0.1m. In accordance
with IAS 32, the carrying value of the Loan Notes that were
extinguished, GBP1.3m, has been derecognised and recorded in
equity; no gain or loss has been recognised in the Consolidated
Income Statement.
On the same date, the remaining loan notes with a principal
amount of GBP3.5m were acquired by a MXC Guernsey Limited, a
subsidiary of MXC Capital Limited. The terms of the loan notes were
revised by increasing the coupon to 12% per annum compound, rolled
up and payable at maturity, and extending the term to October 2024.
When measured using the loan notes' original effective interest
rate, the present value of the cash flows of the revised instrument
were not significantly different to that of the instrument prior to
the modification. As a result, the Loan Notes were not treated as a
new instrument and continue to be measured at amortised cost.
10. Acquisition of CloudCoCo Limited
On 21 October 2019, the Group acquired the entire issued share
capital of CloudCoCo Limited for a total consideration of GBP7.2
million at fair value in accordance with IFRS 3. The consideration
was satisfied in full by the issue of 218,160,586 new Ordinary
Shares at 3.3p per share (being the mid-market price on the date of
the acquisition). The Group has assessed the fair value of The
acquisition of CloudCoCo Limited as follows:
Book Fair Value
Cost Adjustment Fair Value
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ------------ -----------
Non-current assets
Intangible assets - brand - 500 500
Intangible assets - customer lists - 1,700 1,700
Right of use assets 51 - 51
Property, plant and equipment 3 - 3
Total non-current assets 54 2,200 2,254
--------------------------------------- --------- ------------ -----------
Current assets
Trade and other receivables 302 - 302
Cash at bank 157 - 157
--------------------------------------- --------- ------------ -----------
Total current assets 459 - 459
--------------------------------------- --------- ------------ -----------
Total assets 513 2,200 2,713
--------------------------------------- --------- ------------ -----------
Current liabilities
Lease liability (63) - (63)
Trade and other payables (133) - (133)
Other taxes and social security costs (24) - (24)
Deferred Income and accruals (213) - (213)
--------------------------------------- --------- ------------ -----------
(433) - (433)
Non-current liabilities
Lease liability (51) - (51)
Deferred tax liability - (418) (418)
--------------------------------------- --------- ------------ -----------
Total liabilities (484) (418) (902)
--------------------------------------- --------- ------------ -----------
Net Assets 29 1,782 1,811
Consideration in cash -
Consideration in shares 7,199
--------------------------------------- --------- ------------ -----------
Fair value of cost of acquisition 7,199
--------------------------------------- --------- ------------ -----------
Goodwill 5,388
--------------------------------------- --------- ------------ -----------
2020
GBP'000
---------------------------------------------- --------
Cash consideration paid -
Cash acquired 157
---------------------------------------------- --------
Acquisition of CloudCoCo Limited, net of cash 157
---------------------------------------------- --------
The goodwill arising on this acquisition is attributable to the
management team and the sales and marketing systems and methods
operated by CloudCoCo Limited, which will benefit the Group. Direct
acquisition costs amounting to GBP435,000 have been written off to
the income statement within exceptional items.
Subsidiary trading
It is not feasible to separate the performance of CloudCoCo
Limited during the year. The business was subsumed into the Group's
activities and its results are not separately reported. The results
of the Group would not be materially different had the acquisition
occurred on 1 October 2019.
These numbers exclude the amortisation charge associated with
the intangible assets identified at acquisition.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR DKBBKOBKKKNK
(END) Dow Jones Newswires
March 02, 2021 02:04 ET (07:04 GMT)
Adept4 (LSE:AD4)
Historical Stock Chart
From Mar 2024 to Apr 2024
Adept4 (LSE:AD4)
Historical Stock Chart
From Apr 2023 to Apr 2024
