TIDMCLCO
RNS Number : 3771Q
Cloudcoco Group PLC
28 June 2022
28 June 2022
CloudCoCo Group plc
("CloudCoCo", "the Group" or "the Company")
Interim Results
Record sales performance and significant strategic progress
CloudCoCo (AIM: CLCO), a leading UK provider of managed IT
services and communications solutions to private and public sector
organisations, announces its unaudited interim results for the six
months ended 31 March 2022.
Financial highlights
-- Revenue increased 183% to GBP11.6m (H1 2021: GBP4.1m), of
which 70% was generated from recurring contracts
-- Gross Profit increased by 119% to GBP3.5m (H1 2021: GBP
1.6m), a margin of 30%
-- Trading Group EBITDA(1) of GBP426k before expected transitional
losses from the acquired IDE Group Connect Limited of GBP124k
resulting in a net Trading Group EBITDA(1) of GBP302k (H1
2021: GBP364k)
-- Corrective measures implemented in IDE Group Connect Limited,
acquired in October 2021 with annual losses of GBP0.8m,
now performing at monthly breakeven by March 2022
-- Cash of GBP1.3m at 31 March 2022 (H1 2021: GBP0.6m) and
undrawn GBP0.5m working capital facility
(1) Profit or loss before net finance costs, tax, depreciation,
amortisation, plc costs, exceptional items and share-based
payments.
Operational highlights
-- Record sales performance for the Group delivered Total Contract
Value of GBP9.7m (H1 2021: GBP2.9m) largely as a result
of the enhanced service propositions, improvements in inbound
marketing leads and the wider sales and technical delivery
capabilities in the now more mature business
-- Increased multi-year new customer wins including Wall Street
Docs, Healthcare Quality Improvement Partnership and The
ID Register (Services) Limited
-- Successful integration of four newly acquired businesses
adding data centre locations, private managed network services
and e-commerce capabilities to the business
-- 'Get Well' actions in acquired businesses in H1 2022 expected
to deliver benefits in H2 2022
-- Appointment of Mike Chester as Group Operations Director
(a non-board position) in February 2022 to ensure high levels
of customer service across 900+ customers
-- Appointment of a Head of People (a non-board position) to
ensure the right people systems and practices are in place
to support growth and to promote our collaborative, inclusive
and high-performance culture.
Post-period highlights
-- Continued to sign significant multi-year contracts including
with St John Ambulance and Abbott Laboratories
-- MoreComputers rebranded to MoreCoCo and consumer and B2B
ecommerce website launched
-- CloudCoCo Sales Academy launched to cultivate homegrown
talent and support revenue growth
-- Ecommerce website for existing customers, using the MoreComputers
UX, due to launch in the second half
Mark Halpin, CEO of CloudCoCo, commented:
"To have made this level of strategic and commercial progress in
such a short space of time, including most notably the successful
correction of the acquired Connect business to monthly breakeven
ahead of schedule, is a significant achievement and testament to
the quality and teamwork of our people.
The integration and optimisation of our four acquisitions is now
largely complete, and with that we are moving through the second
half in a strong position, with all parts of the Group pulling in
the same direction and on an exciting trajectory. We are now a very
different proposition to a year ago, with an expanded customer
base; increased capability; significantly larger sales, support and
technical teams; a focus on cross-selling; and several
forward-thinking strategic initiatives that are already
delivering.
With the marked headway that has been made, we expect to see
additional growth in trading performance in the second half as our
pipeline of larger multi-year deals is continuing to grow. There is
still work to be done to enable the Group to reach its full
potential and the macro-economic environment remains unpredictable,
but with the hard work that has taken place in the first half to
lay the foundations for sustainable and profitable growth in the
future, we are confident of continued progress in the second half
and moving into FY23."
Contacts
CloudCoCo Group plc Via Alma PR
Mark Halpin (CEO)
Darron Giddens (CFO)
Allenby Capital Limited - (Nominated Tel: +44 (0)20 3328
Adviser & Broker) 5656
Jeremy Porter / Freddie Wooding -
Corporate Finance
Tony Quirke / Amrit Nahal - Sales
& Corporate Broking
Alma PR - (Financial PR Adviser)
David Ison
Josh Royston
Kieran Breheny
Pippa Crabtree
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 private and public sector organisations
to work smarter, faster and more securely by providing a single
point of purchase for their connectivity, telephony, cyber
security, cloud, IT hardware and support needs.
CloudCoCo has offices in Warrington, Leeds, Bournemouth and
Sheffield in the UK.
www.cloudcoco.co.uk
CHIEF EXECUTIVE'S REVIEW
Introduction
The first half of the year has been very encouraging from both a
strategic and a commercial perspective.
The Group is now a very different proposition to a year ago, in
terms of scale, customer base, capability and prospects, and we are
optimistic about what we can achieve. The original business is now
in excellent condition, there are encouraging signs that we are
successfully unlocking the value in the new additions, and we have
effectively doubled the size of our sales, support and technical
functions while bringing on board a new Group Operations Director
to ensure the Group works together as a cohesive unit, providing
exceptional service at every touchpoint.
All Group companies are now using a shared enterprise resource
planning platform ("ERP") incorporating ticket management; customer
relationship management ("CRM"); monitoring; and billing, making
cross-division collaboration straightforward and opening a range of
new revenue opportunities across our customer base. This has been a
significant undertaking and will leave us well-positioned for many
years to come.
We are now moving through the second half of the year as a
single, cohesive unit with firm foundations for future growth and a
solid multi-channel sales strategy. I am excited about our near and
longer-term prospects.
Results
Revenues for the first half only included a five-month
contribution from the acquired IDE Group Connect Limited
("Connect") and Nimoveri Limited ("Nimoveri") businesses, and yet
at GBP11.6 million and generating GBP3.6 million of gross profit
still comfortably surpassed the full year numbers for 2021.
Ecommerce sales in the first half were GBP0.9 million, a new
revenue stream for the Group stemming from the September 2021
acquisition of MoreComputers, rebranded to MoreCoCo
post-period.
Cash increased by GBP0.1 million in the first half to GBP1.3
million as at 31 March 2022, including GBP0.5 million acquired with
the Connect and Nimoveri businesses, funding GBP0.3 million of
exceptional costs in the period.
Debtor balances were higher at period end as a result of the
acquisitions and also because of some customers with multi-year
contracts paying invoices post-year end and several projects
awaiting settlement of milestone payments, but these are expected
to normalise through the second half.
Analysis of Revenues by operating segment
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------- ------------- ------------- -------------
By operating segment
Managed IT Services 8,582 2,738 2,910 5,648
Valued Added Resale 3,062 1,225 1,234 2,459
----------------------- ------------- ------------- ------------- -------------
Total revenue 11,644 3,963 4,144 8,107
----------------------- ------------- ------------- ------------- -------------
Recurring revenues included within the Managed IT Services
segment to March 2022 equate to GBP8.2 million (H1 2021: GBP2.5
million) reflecting the high percentage of recurring multi-year
contracted services in the organic growth and in the Connect
customer base. Growth in Value Added Resale has been boosted by the
September 2021 acquisition of Systems Assurance and the addition of
the e-commerce hardware platform in MoreCoCo.
Progress against strategy
We have a clear strategy to become a large Managed Services
provider with turnover a multiple of what it is today and growing
in a sustainable and profitable way. This is based on driving
organic growth, exploring opportunities to expand through
acquisition, and ensuring the entire Group works together in an
increasingly joined up and efficient way. All while constantly
striving to delight customers through delivering impeccable
service.
Since my appointment, the focus has been on turning around the
legacy business we inherited and building a platform that was ready
for and would benefit from expansion through M&A. In the six
months under review, we have been working hard to integrate and
optimise the acquisitions we have made, and having done so
successfully can now look ahead without any drags on the business
and a wealth of exciting opportunities to drive growth.
Acquisitions and integration
Having acquired four complementary businesses in the latter
months of 2021 to help us realise our growth ambitions, our teams
have been working hard to integrate them.
One of the key milestones in the half was getting CloudCoCo
Group Connect Limited ("the Connect business"), acquired as IDE
Group Connect Limited, to monthly breakeven from delivering GBP800k
of losses per annum through executing a plan known internally as
"Project 150", a strategy to generate GBP150k per month of
additional benefit from sales and cost savings. This was a
collaborative effort from everyone involved where all ideas were
welcome and I'm delighted with the outcome.
In addition to the recurring monthly savings generated from
Project 150, the painstaking task of matching supplier costs with
individual customer revenue streams also identified further benefit
to us, in the form of over GBP300k of one-off backdated supplier
credit notes relating to overcharges. In accordance with
International Accounting Standards, whilst pre-acquisition supplier
credit notes cannot be treated as trading income in the period,
they aid cashflow and reduce the acquired net liabilities in the
Connect business (see note 10). This level of detail and diligence
has helped us turn the Connect business around inside six months of
the acquisition.
Now, with the ship steadied ahead of schedule, we can focus on
selling more from across the Group into the substantial number of
high-quality customers that came across with the acquisition. We
are already seeing meaningful cross-selling success and expect this
trend to gather steam in the second half.
There is still important work to be done but to get Connect to
this stage after just a few months is a significant achievement and
we look forward to driving sustainable, increasingly profitable
growth in this part of the Group in the second half of the year and
beyond. It is testament to the quality of our teams that we were
able to see the potential Connect had and, taking a similar
approach to the one we took with the Adept business, successfully
completed the first phase of the turnaround.
Elsewhere, following the acquisition of value-added reseller
("VAR") MoreComputers in September 2021, the Group has been working
on a rebrand to MoreCoCo. MoreCoCo comprises a consumer-facing
website, boasting a wide range of consumer and personal
electronics, and a dedicated alternative website for businesses,
which were both launched post-period in June 2022.
As part of the process, we completed a significant overhaul and
optimisation of the original website, which included a new look and
feel. With the improvements to MoreCoCo's functionality and user
experience, and leveraging CloudCoCo's customer service and
marketing functions, the Group expects to see traffic gradually
increase, with the sites in time becoming an important revenue
stream for the Group and a key means of new customer acquisition,
expansion and upselling. Investors can visit the relaunched website
at https://www.morecoco.co.uk/.
Encouragingly, the 'Get Well' actions in the acquired businesses
undertaken in the first half are expected to deliver additional
benefits in the second half.
With the integration process of the four acquisitions now
largely complete, we move forward with a proven blueprint for
expanding the business through adding complementary businesses, and
continue to proactively appraise new opportunities to continue in
the same vein.
Accelerate sales
The decision to focus on building our pipeline of new business
while ramping up cross-selling into our significantly enlarged
customer base post-acquisition is now bearing fruit, with Revenues
of GBP11.6m, up 183% on the corresponding period last year (H1
2021: GBP4.1m). At GBP9.7m (H1 2021: GBP2.9m), total contract value
("TCV") in the period was at a record level, with demand for the
Group's services increasing with the normalisation of trading
conditions following Covid-19. TCV measures the total revenue that
we expect to generate from new customer contracts signed in the
year over their contractual term.
The increased capabilities and scale that the newly acquired
businesses provide are already enabling us to compete for and win
larger contracts, as evidenced by the new multi-year agreements
with Wall Street Docs, Healthcare Quality Improvement Partnership
and The ID Register (Services) Limited. At the same time, the Group
now has close to 1,000 active customers versus 450 at the half-year
point in FY 2021, and we have had encouraging early success in
selling them more products and services from across the Group's
divisions.
Development of a new website for existing CloudCoCo business
customers to purchase IT hardware is nearing completion, with the
launch expected later in the second half. This will enable
customers to choose to buy online rather than through an account
manager at the Group, ensuring a swift and straightforward
procurement process at their convenience. Its introduction is part
of the Group's strategy to deepen relationships with its customers
and is expected to be the catalyst for a gradual acceleration of
hardware purchases. With an exhaustive range of products available
to buy 24/7 in just a few clicks, the Group also anticipates a
greater number of its Managed Services customers choosing to
purchase hardware from its VAR division, rather than from several
third-party suppliers.
To support our sales efforts, we have invested in additional
marketing resource and introduced product and solution specialisms
through a new sales overlay programme. We are already seeing
evidence of successful cross-selling as a result, and expect to see
momentum to continue to build through the second half. We have also
implemented new technology and systems to ensure our teams have
everything they need to source and convert leads while tracking and
sharing their progress with the rest of the Group.
Post-period, in June, we established a sales academy at the
Group's head office in Leeds. Initially comprising five new hires,
the Academy will provide a structured environment for training and
developing homegrown talent, giving ambitious individuals the
skills and experience necessary to grow into important members of
the CloudCoCo sales team and make a meaningful contribution to the
Group's revenue growth.
With a growing number of new opportunities and the steps we have
taken to make it easier and more beneficial for existing customers
to buy a more diverse range of products and services from us, we
are confident in our ability to continue to accelerate sales.
Maintain excellent support levels
Delighting customers through best-in-class customer service is
our ultimate goal as a business and we continue to strive to
achieve excellence in this area, introducing several initiatives in
the first half including combining the service desks from Connect
and CloudCoCo to improve coverage in core hours and enhance our
24/7 support function, and establishing a new team in January 2022
to proactively review our customers' hardware estate and alert
patterns before recommending corrective actions if necessary.
Response times to support requests continued to improve in the
period, with customer satisfaction levels remaining high. More than
90% of support events were rated "good" or better, and we are
currently evaluating ways to further improve resolution times in
the second half.
Drive efficiencies and strengthen financial position
A priority in the first half was to review and renegotiate key
supplier contracts across the newly acquired businesses. We also
reviewed and consolidated colleague roles where possible across the
Group, identified synergies, and maintained our disciplined
approach to driving down cost of sales and overheads without
compromising quality of service. While there are still efficiencies
to be realised with the integration of the new businesses, we have
made rapid progress to date and anticipate further progress in the
second half.
Improving our financial strength and liquidity remains a key
area of focus the Group. We continue to explore ways to bolster our
position, including improving speed of invoicing by offering
discounts to customers with multi-year contracts for paying in
advance, and enhancing our due diligence in the credit control
process.
Our people
We now have 125 staff, an increase of 78 compared to the same
period last financial year. While this gives us much greater
capacity, the additional skills and talent that were brought into
the business via the acquisitions means we now have significantly
increased capability to deliver a much broader range of solutions
without having to undertake significant new hiring and training of
colleagues.
In November 2021 we appointed Mike Chester as Group Operations
Director. A newly created role, Mike is responsible for overseeing
the day-to-day operational functions of CloudCoCo and ensuring the
Group continues to provide the very highest standards of proactive
customer support as it looks to expand further.
Mike has a track record of positioning organisations for
operational success in a career spanning over 25 years, 18 of which
have been in the Managed Service Provider space, and he has made an
excellent start to life at CloudCoCo, having already played an
instrumental role in the integration of the newly acquired
businesses and ensuring the different parts of the Group are able
to collaborate as effectively and efficiently as possible.
We are looking at the best way to create a more modern working
environment for our colleagues, including the proposed location of
a new UK service management centre to complement our current
facilities in Warrington, Leeds, Bournemouth and Sheffield.
During the period, we also appointed a Head of People as part of
our ongoing CoCo-One initiative. Our collaborative, inclusive and
high-performance culture is vital to our success, and we are now of
a size where we will benefit from having someone responsible for
ensuring we have the right people systems and practices in place
across the Group to ensure it thrives.
As mentioned above, our new sales academy is now up and running,
and I look forward to seeing what our new recruits can achieve.
Current trading and outlook
Trading in the second half to date has been encouraging, largely
as a result of the significant strategic progress that has taken
place ahead of schedule. We continue to successfully sign large
multi-year agreements - much larger than we would have been able to
before we made the acquisitions - with St John Ambulance and Abbott
Laboratories already secured, and our pipeline of opportunities
continues to grow.
With the correction of the Connect business behind us, we enter
the second half of the year with a clean bill of health, a more
joined up organisational infrastructure and a common objective
across the Group to drive sustainable, increasingly profitable
growth. Growing our customer base further will be a key priority
going forwards but capturing increased value from our expanded
customer base post-acquisitions will be equally as important.
As a team we have taken decisive action in the first half to put
the Group on a sound footing, and expect to see the benefits to the
bottom line of the hard work done become evident in the second
half, and realised fully in the next financial year.
Our M&A strategy is showing early signs of success, we have
a blueprint for integration that is proven, and we continue to look
at further opportunities to expand the Group through acquisition.
That said, we will only move forwards where we believe the terms
are favourable and that the business is a good strategic fit.
While we have made material progress and have moved up the food
chain considerably, we are an ambitious organisation, and have no
intention of letting up in our pursuit of our growth ambitions. We
are monitoring the external environment, but demand trends remain
healthy, and with the improvements that have been made across the
Group to date to unlock its potential, we are confident of
continued progress in the second half and beyond.
Mark Halpin
CEO
28 June 2022
Consolidated income statement
for the six-month period ended 31 March 2022
Note Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months Year to
to to to 30 September
31 March 30 September 31 March 2021
2022 2021 2021 GBP'000
GBP'000 GBP'000 GBP'000
---------------------------------- ---- --------- ------------- --------- -------------
Continuing operations
Revenue 3 11,644 3,963 4,144 8,107
Cost of sales (8,123) (2,392) (2,499) (4,891)
---------------------------------- ---- --------- ------------- --------- -------------
Gross profit 3,521 1,571 1,645 3,216
Other income - 21 46 67
Administrative expenses (4,730) (2,713) (2,081) (4,794)
Trading Group EBITDA (1) - non
statutory measure 302 381 364 745
Amortisation of intangible assets 6 (654) (514) (495) (1,009)
Plc costs(2) (345) (270) (222) (492)
Depreciation (61) (50) (47) (97)
Exceptional items - other 4 (280) (400) (41) (441)
Share-based payments (171) (268) 51 (217)
---------------------------------- ---- --------- ------------- --------- -------------
Operating loss (1,209) (1,121) (390) (1,511)
Interest receivable - 1 - 1
Interest payable (323) (256) (279) (535)
---------------------------------- ---- --------- ------------- --------- -------------
Loss before taxation (1,532) (1,376) (669) (2,045)
Taxation 164 (177) 94 (83)
---------------------------------- ---- --------- ------------- --------- -------------
Loss and total comprehensive
loss for the year attributable
to owners of the parent (1,368) (1,553) (575) (2,128)
---------------------------------- ---- --------- ------------- --------- -------------
Loss per share
Basic and fully diluted 5 (0.19)p (0.30)p (0.12)p (0.42)p
---------------------------------- ---- --------- ------------- --------- -------------
(1) Profit or loss before net finance costs, tax, depreciation,
amortisation, plc costs, exceptional items and share-based payments
.
(2) Plc costs are non-trading costs relating to the Board of
Directors of the Parent Company, its listing on the AIM Market of
the London
Stock Exchange and its associated professional advisors.
Consolidated statement of financial position
as at 31 March 2022
Unaudited Unaudited Audited
31 March 31 March 30 September
2022 2021 2021
Note GBP'000 GBP'000 GBP'000
------------------------------- ---- --------- --------- -------------
Non-current assets
Intangible assets 6 12,492 9,864 10,393
Property, plant and equipment 154 159 149
------------------------------- ---- --------- --------- -------------
Total non-current assets 12,646 10,023 10,542
------------------------------- ---- --------- --------- -------------
Current assets
Inventories 223 75 86
Trade and other receivables 7 5,438 2,148 2,953
Cash and cash equivalents 1,312 575 1,183
------------------------------- ---- --------- --------- -------------
Total current assets 6,973 2,798 4,222
------------------------------- ---- --------- --------- -------------
Total assets 19,619 12,821 14,764
------------------------------- ---- --------- --------- -------------
Current liabilities
Trade and other payables 8 (6,863) (2,482) (2,872)
Contract liabilities (2,303) (969) (177)
Borrowings 9 (69) (109) (172)
Lease liability (109) (78) (86)
------------------------------- ---- --------- --------- -------------
Total current liabilities (9,344) (3,638) (3,307)
------------------------------- ---- --------- --------- -------------
Non-current liabilities
Contract liabilities (178) (235) (1,092)
Borrowings 9 (4,400) (3,719) (3,991)
Lease liability (194) (33) (11)
Deferred tax liability (1,525) (846) (1,188)
------------------------------- ---- --------- --------- -------------
Total non-current liabilities (6,297) (4,833) (6,282)
------------------------------- ---- --------- --------- -------------
Total liabilities (15,641) (8,471) (9,589)
------------------------------- ---- --------- --------- -------------
Net assets 3,978 4,350 5,175
------------------------------- ---- --------- --------- -------------
Equity
Share capital 7,062 4,952 7,062
Share premium account 17,630 17,630 17,630
Capital redemption reserve 6,489 6,489 6,489
Merger reserve 1,997 1,997 1,997
Other reserve 510 71 339
Retained earnings (29,710) (26,789) (28,342)
------------------------------- ---- --------- --------- -------------
Total equity 3,978 4,350 5,175
------------------------------- ---- --------- --------- -------------
Consolidated statement of changes in equity
for the six-month period ended 31 March 2022
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 2020 4,952 17.630 6,489 1,997 122 (26,214) 4,976
----------------------------- -------- -------- ----------- -------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - - (575) (575)
Share-based payments - - - - (51) - (51)
----------------------------- -------- -------- ----------- -------- -------- --------- --------
Total movements - - - - (51) (575) (626)
----------------------------- -------- -------- ----------- -------- -------- --------- --------
Equity at 31 March 2021 4,952 17,630 6,489 1,997 71 (26,789) 4,350
----------------------------- -------- -------- ----------- -------- -------- --------- --------
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 April 2021 4,952 17,630 6,489 1,997 71 (26,789) 4,350
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - - (1,553) (1,553)
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Transactions with owners in their capacity
of owners
Issue of 210,990,000 shares at
1p per share via a Placing. 2,110 - - - - - 2,110
Share-based payments - - - - 268 - 268
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Total transactions with owners 2,110 - - - 268 - 2,378
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Total movements 2,110 - - - 268 (1,553) 825
------------------------------- -------- -------- ----------- -------- -------- --------- --------
Equity at 30 September 2021 7,062 17,630 6,489 1,997 339 (28,342) 5,175
------------------------------- -------- -------- ----------- -------- -------- --------- --------
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 2021 7,062 17,630 6,489 1,997 339 (28,342) 5,175
----------------------------- -------- -------- ----------- -------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - - (1,368) (1,368)
Share-based payments - - - - 171 - 171
----------------------------- -------- -------- ----------- -------- -------- --------- --------
Total movements - - - - 171 (1,368) (1,197)
----------------------------- -------- -------- ----------- -------- -------- --------- --------
Equity at 31 March 2022 7,062 17,630 6,489 1,997 510 (29,710) 3,978
----------------------------- -------- -------- ----------- -------- -------- --------- --------
Consolidated statement of cash flows
for the six-month period ended 31 March 2022
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months Year to
to to to 30 September
31 March 30September 31 March 2021
2022 2021 2021 GBP'000
GBP'000 GBP'000 GBP'000
------------------------------------------ --------- ------------ --------- -------------
Cash flows from operating activities
Loss before taxation (1,532) (1,376) (669) (2,045)
Adjustments for:
Depreciation - owned assets 61 5 17 22
Depreciation - right of use assets - 45 30 75
Amortisation 654 514 495 1,009
Share-based payments 171 268 (51) 217
Net finance expense 323 255 279 534
Costs relating to acquisitions(1) 93 202 - 202
Costs relating to Placing of 210,990,000
shares - 171 - 171
Increase in trade and other receivables (1,020) (116) (292) (408)
(Increase) / decrease in inventories (137) 20 (44) (24)
Increase / (decrease) in trade payables,
accruals and contract liabilities 1,146 (375) 318 (57)
Net cash (outflow) / inflow from
operating activities before acquisition
costs (241) (387) 83 (304)
Costs relating to acquisitions(1) (93) (202) - (202)
------------------------------------------ --------- ------------ --------- -------------
Net cash (outflow) / inflow from
operating activities (334) (589) 83 (506)
------------------------------------------ --------- ------------ --------- -------------
Cash flows from investing activities
Purchase of property, plant and equipment (16) (14) (17) (31)
Acquisitions net of cash acquired(1) 498 (563) - (563)
Interest received - 1 - 1
------------------------------------------ --------- ------------ --------- -------------
Net cash inflow / (outflow) from
investing activities 482 (576) (17) (593)
------------------------------------------ --------- ------------ --------- -------------
Cash flows from financing activities
Proceeds from Placing of 210,990,000
shares - 2,110 - 2,110
Less transaction fees relating to
the Placing - (171) - (171)
Repayment of loan funds from MXCG - (100) - (100)
Payment of lease liabilities (18) (48) (72) (120)
Interest paid (1) (18) (7) (25)
------------------------------------------ --------- ------------ --------- -------------
Net cash (outflow) / inflow from
financing activities (19) 1,773 (79) 1,694
------------------------------------------ --------- ------------ --------- -------------
Net increase in cash 129 608 (13) 595
Cash at bank and in hand at beginning
of period 1,183 575 588 588
------------------------------------------ --------- ------------ --------- -------------
Cash at bank and in hand at end
of period 1,312 1,183 575 1,183
------------------------------------------ --------- ------------ --------- -------------
Comprising:
Cash at bank and in hand 1,312 1.183 575 1,183
------------------------------------------ --------- ------------ --------- -------------
(1) Six months to 30 September 2021 relates to the acquisition
of Systems Assurance Limited and More Computers Limited.
Six months to 31 March 2022 relates to the acquisition of
CloudCoCo Connect Limited (formerly IDE Group Connect Limited)
and
Nimoveri Limited.
Notes to the consolidated interim financial statements
1. General information
CloudCoCo Group plc (the "Group") is a public limited company
incorporated in England and Wales under the Companies Act 2006. The
address of the registered office is 5 Fleet Place, London, EC4M
7RD.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.
2. Basis of Preparation
2.1 Accounting Policies
The accounting policies used in the presentation of the
unaudited consolidated interim financial statements for the six
months ended 31 March 2022 are in accordance with applicable
International Financial Reporting Standards (IFRSs) as applied in
accordance with provisions of the Companies Act 2006. The principal
accounting policies of the Group have been consistently applied to
all periods presented unless otherwise stated.
2.2 Going concern
The Directors have prepared the financial statements on a going
concern basis which assumes that the Group will continue to meet
liabilities as they fall due.
The Directors have reviewed the forecast sales growth, budgets
and cash projections for the period to June 2023, including
sensitivity analysis on the key assumptions such as the potential
impact of reduced sales or slower cash receipts for the next twelve
months and the Directors have reasonable expectations that the
Group and the Company have adequate resources to continue
operations for the period of at least one year from the date of
approval of these unaudited interim 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 unaudited interim financial
statements.
3. Segment reporting
The executive directors of the Company and its subsidiaries
review the Group's internal reporting in order to assess
performance and to allocate resources. Profit performance is
principally assessed 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
Directors review the revenue streams and related gross profits of
two categories separately (Managed IT Services and Value added
resale), the operating costs and operating asset base used to
derive these revenue streams are the same for both categories and
are presented as such in the Group's internal reporting.
The segmental analysis below is shown at a revenue level in line
with the internal assessment based on the following reportable
operating categories:
Managed IT Services
* This category comprises the provision of recurring IT
services which either have an ongoing billing and
support element or utilise the technical expertise of
our people.
Value added resale
* This category comprises the resale of one-time
solutions (hardware and software) from our leading
technology partners, including revenues from the
MoreCoCo e-commerce platform.
------------------- -----------------------------------------------------------------
No customer accounts for more than 10% of external revenues in
any reported period.
3.1 Analysis of continuing results
All revenues from continuing operations are derived from
customers within the UK. In order to simplify our reporting of
revenue, we have taken the decision to condense our reporting
segments into two new categories - Managed IT Services and Value
Added Resale. This analysis is consistent with that used internally
by the CODM and, in the opinion of the Board, reflects the nature
of the revenue. Trading EBITDA is reported as a single segment.
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------- ------------- ------------- -------------
By operating segment
Managed IT Services 8,582 2,738 2,910 5,648
Valued Added Resale 3,062 1,225 1,234 2,459
----------------------- ------------- ------------- ------------- -------------
Total revenue 11,644 3,963 4,144 8,107
----------------------- ------------- ------------- ------------- -------------
4. Exceptional Items
Items which are material and non-routine in nature are presented
as exceptional items in the Consolidated Income Statement.
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------- ------------- ------------- -------------
Costs relating to acquisitions(1) (93) (202) - (202)
Costs relating to the Placing - (171) - (171)
Integration and restructure costs (187) (27) (41) (68)
------------------------------------ ------------- ------------- ------------- -------------
Exceptional items (280) (400) (41) (441)
------------------------------------ ------------- ------------- ------------- -------------
(1) Six months to 30 September 2021 relates to the acquisition
of Systems Assurance Limited and More Computers Limited.
Six months to 31 March 2022 relates to the acquisition of
CloudCoCo Connect Limited (formerly IDE Group Connect Limited)
and
Nimoveri Limited.
5. Loss per share
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- ------------ ------------ ------------ ------------
Loss attributable to ordinary shareholders ( 1,368) ( 1,553) (575) ( 2,128)
Number Number Number Number
Weighted average number of Ordinary Shares in issue, basic and
diluted 706,215,686 510,759,930 495,225,986 510,759,930
Basic and diluted loss per share (0.19)p (0.30)p (0.12)p (0.42)p
-------------------------------------------------------------- ------------ ------------ ------------ ------------
6. Intangible assets
Intangible assets are non-physical assets which have been
obtained as part of an acquisition or research and development
activities, such as innovations, introduction and improvement of
products and procedures to improve existing or new products. All
intangible assets have an identifiable future economic benefit to
the Group at the point the costs are incurred. The amortisation
expense is recorded in administrative expenses in the Consolidated
Income Statement
IT, billing and
website Customer
Goodwill systems Brand lists Total
Intangible assets GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------- -------- --------------- -------- -------- --------
Cost
At 1 October 2020 and 31 March 2021 9,835 182 1,657 9,280 20,954
Additions - acquisition of Systems Assurance Limited 253 179 470 141 1,043
At 30 September 2021 10,088 361 2,127 9,421 21,997
Additions - acquisition of CloudCoCo Connect Limited
(formerly IDE Group Connect Limited) 247 - 298 2,208 2,753
------------------------------------------------------------- -------- --------------- -------- -------- --------
At 31 March 2022 10,335 361 2,425 11,629 24,750
------------------------------------------------------------- -------- --------------- -------- -------- --------
Accumulated amortisation
At 1 October 2020 -(158) (978) (3,594) (4,730)
Charge for the period - (6) (25) (464) (495)
------------------------- ----- ------- ------- -------
At 31 March 2021 -(164) (1,003) (4,058) (5,225)
Charge for the period - (20) (29) (465) (514)
------------------------- ----- ------- ------- -------
At 30 September 2021 -(184) (1,032) (4,523) (5,739)
------------------------- ----- ------- ------- -------
Charge for the period - (9) (63) (582) (654)
------------------------- ----- ------- ------- -------
At 31 March 2022 -(193) (1,095) (5,105) (6,393)
------------------------- ----- ------- ------- -------
Impairment
At 1 October 2020 (4,447) -(225) (1,193) (5,865)
Charge for the period - - - - -
---------------------- ------- ----- ------- -------
At 31 March 2021 (4,447) -(225) (1,193) (5,865)
Charge for the period - - - - -
---------------------- ------- ----- ------- -------
At 30 September 2021 (4,447) -(225) (1,193) (5,865)
---------------------- ------- ----- ------- -------
Charge for the period - - - - -
---------------------- ------- ----- ------- -------
At 31 March 2022 (4,447) -(225) (1,193) (5,865)
---------------------- ------- ----- ------- -------
Carrying amount
At 31 March 2022 5,888 168 1,105 5,331 12,492
--------------------- ----- --- ----- ----- ------
At 30 September 2021 5,641 177 870 3,705 10,393
--------------------- ----- --- ----- ----- ------
At 31 March 2021 5,388 18 429 4,029 9,864
--------------------- ----- --- ----- ----- ------
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are independent cash flows (cash
generating units). Goodwill is allocated to those assets that are
expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at
which management monitors the related cash flows. The directors
concluded that at 31 March 2022, there were four CGUs being
CloudCoCo Limited, Systems Assurance Limited, More Computers
Limited and CloudCoCo Connect Limited (formerly IDE Group Connect
Limited).
Each year, management prepares the resulting cash flow
projections using a value in use approach to compare the
recoverable amount of the CGU to the carrying value of goodwill and
allocated assets and liabilities. Any material variance in this
calculation results in an impairment charge to the Consolidated
Income Statement.
The calculations used to compute cash flows for the CGU level
are based on the Group's budget, growth rates, WACC and other known
variables. The calculations are sensitive to movements in both WACC
and the revenue growth projections.
The impairment calculations were performed using post-tax cash
flows at post-tax WACC of 11.25%. The pre-tax discount rate
(weighted average cost of capital) was calculated at 15% per annum
(FY21:15%) and the revenue growth rate is 5% per annum (FY21: 5%)
for 5 years and a terminal growth rate of 2% (FY21: 2%) per
annum.
Sensitivities have been run on cash flow forecasts for the CGU.
Management is satisfied that the key assumptions of revenue growth
rates should be achievable and that reasonably possible changes to
those key assumptions would not lead to the carrying amount
exceeding the recoverable amount. Sensitivity analyses have been
performed and the table below summarises the effects of changing
certain key assumptions and the resultant excess (or shortfall) of
discounted cash flows against the aggregate of goodwill and
intangible assets.
Sensitivity analysis CloudCoCo Group plc
GBP'000
---------------------------------------------------------------- -------------------
Excess of recoverable amount over carrying value:
Base case - headroom GBP7,118
Discount rate increased by 1% - resulting headroom GBP6,450
Revenue growth rate reduced by 1% per annum - resulting headroom GBP4,030
---------------------------------------------------------------- -------------------
Base case calculations highlight that the impairment review is
sensitive to the discount rate and growth rate. Given the Group's
value proposition is centred around generating monthly recurring
fees for IT and communication solutions, the Directors are
satisfied that the Group's objectives are to maximise the cash
flows generated through the sales of Recurring Services.
In determining whether intangible assets including goodwill were
impaired, the Directors estimated the discounted future cash flows
associated with the intangible assets over a ten-year period, using
a discount rate equivalent to the WACC. The Directors also
considered the impact of the customer notices of termination
received and the improvement in Trading EBITDA during the period as
indicators that there is no impairment of intangible assets.
7. Trade and other receivables
Unaudited Unaudited
31 March 2022 31 March 2021 Audited 30 September 2021
GBP'000 GBP'000 GBP'000
---------------------------- -------------- -------------- -------------------------
Trade receivables 3,043 1,041 1,781
Other debtors 1 11 13 1 12
Contract assets 586 202 232
Prepayments 1,698 892 828
---------------------------- -------------- -------------- -------------------------
Trade and other receivables 5,438 2,148 2,953
---------------------------- -------------- -------------- -------------------------
The Group reviews the amount of expected credit loss associated
with its trade receivables and contract assets under IFRS 9 based
on forward looking estimates that take into account current and
forecast credit conditions as opposed to relying on past historical
default rates. In adopting IFRS 9 the Group applied the Simplified
Approach applying a provision matrix based on number of days past
due to measure lifetime expected credit losses and after taking
into account customers with different credit risk profiles and
current and forecast trading conditions.
8. Trade and other payables
Unaudited Unaudited
31 March 2022 31 March 2021 Audited 30 September 2021
GBP'000 GBP'000 GBP'000
-------------------------------------- -------------- -------------- -------------------------
Trade payables 4,492 1,551 2,008
Accruals 1,633 407 433
Other taxes and social security costs 738 524 4 31
-------------------------------------- -------------- -------------- -------------------------
Trade and other payables 6,863 2,482 2,872
-------------------------------------- -------------- -------------- -------------------------
9. Borrowings
9.1 Current
Unaudited Unaudited
31 March 2022 31 March 2021 Audited 30 September 2021
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- -------------- -------------- -------------------------
COVID-19 Bounce-back loan repayable - short-term element 19 9 17
Deferred consideration relating to the acquisition of
Systems Assurance Limited. - - 155
Deferred consideration relating to the acquisition of
CloudCoCo Connect Limited (formerly
IDE Group Connect Limited) - short term element at Fair
Value 50 - -
MXC Guernsey Limited working capital facility - 100 -
----------------------------------------------------------- -------------- -------------- -------------------------
69 109 172
----------------------------------------------------------- -------------- -------------- -------------------------
9.2 Non-current
Unaudited Unaudited
31 March 2022 31 March 2021 Audited 30 September 2021
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- -------------- -------------- -------------------------
Loan notes 3,698 3,229 3,412
Accrued interest on loan notes repayable in October 2024 526 449 496
----------------------------------------------------------- -------------- -------------- -------------------------
Loan notes 4,224 3,678 3 ,908
COVID-19 Business Bounce-back loan repayable - long-term
element 73 41 83
Deferred consideration relating to the acquisition of
CloudCoCo Connect Limited (formerly
IDE Group Connect Limited) - long term element at Fair
Value 103 - -
----------------------------------------------------------- -------------- -------------- -------------------------
4,400 3,719 3,991
----------------------------------------------------------- -------------- -------------- -------------------------
On 10 May 2020, the Company borrowed GBP50,000 from HSBC Bank UK
Plc, under the COVID-19 Business Bounce-back loan scheme. In
accordance with the UK Government's Business Interruption Payment
scheme, the interest on the loan for the first 12 months is covered
by the UK Government and the Company will repay the loan in 59
equal monthly instalments, commencing June 2021.
As part of the acquisition of More Computers Limited on 6
September 2021, the Company inherited a COVID-19 Business
Bounce-back loan of GBP50,000 between More Computers Limited and
NatWest Bank Plc. In accordance with the UK Government's Business
Interruption Payment scheme, the interest on the loan for the first
12 months is covered by the UK Government and the Company will
repay the loan in 59 equal monthly instalments, commencing March
2022.
9.3 Net debt - net debt comprises: Cash Other
2022 movements movements 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ---------- ---------- --------
Loan notes 4,224 - 316 3,908
COVID-19 Bounce-back loans 92 (4) - 100
Deferred consideration relating to the
acquisition of CloudCoCo Connect Limited
(formerly IDE Group Connect Limited) -
Fair Value 153 - 153 -
Lease liabilities 303 (18) 224 97
Cash and cash equivalents (1,312) (129) - (1,183)
Total 3,460 (155) 693 2,922
------------------------------------------ ----------- ---------- ---------- --------
10. Acquisition of CloudCoCo Connect Limited (formerly IDE Group
Connect Limited) and Nimoveri Limited
On 21 October 2021, the Group acquired the entire issued share
capital of CloudCoCo Connect Limited (formerly IDE Group Connect
Limited) and its wholly owned subsidiary Nimoveri Limited for a
total consideration of GBP0.2 million at fair value in accordance
with IFRS 3. The acquisition was acquired from IDE Group Plc
("IDE"), on a normalised net cash basis funded via a loan note from
IDE for GBP250,000 to be repaid over five years with an annual
interest rate of Bank of England base rate +3% with no payments due
in the first six months.
IDE also agreed to provide the Group with a working capital
facility of up to GBP500,000 on request, should it be required to
help fund the initial restructure of the Connect business. Amounts
drawn would be convertible into new ordinary shares in the Group at
1 pence per share, if not repaid in full by 19 October 2022. As at
28 June 2022, none of the working capital facility has been drawn
down.
The consideration terms reflected the financial state of the
Connect business at the date of the acquisition, the limited-scope
warranties offered by IDE and the small number of unprofitable
contracts contained within the business. Since acquisition, the
Group's management team have implemented a number of steps to help
improve the profitability of the Connect business, such that the
business is at monthly breakeven performance from March 2022.
The acquisition of Connect and Nimoveri was a related party
transaction pursuant to rule 13 of the AIM Rules for Companies, due
to MXC Guernsey Limited owning 10.6%. of the Company's issued share
capital and 34.8% of IDE's issued share capital.
The Directors of the Company (save for Jill Collighan who was
not deemed independent for this purpose) having consulted with the
Company's Nominated Adviser, agreed that the terms of the
transaction were fair and reasonable insofar as the Company's
shareholders were concerned.
Given the relatively short period of time since the acquisition,
the Group have prepared a provisional opening balance sheet and
have provisionally assessed the fair value of the acquisition of
CloudCoCo Connect Limited (formerly IDE Group Connect Limited) as
follows:
Book Fair Value
Cost Adjustment Fair Value
GBP'000 GBP'000 GBP'000
------------------------------------------- --------- --------------- -------------
Non-current assets
Intangible assets - customer lists 15 2,193 2,208
Intangible assets - brand - 298 298
Property, plant and equipment 76 (66) 10
Total non-current assets 91 2,425 2,516
------------------------------------------- --------- --------------- -------------
Current assets
Trade and other receivables 1,473 (33) 1,440
Cash at bank 498 - 498
------------------------------------------- --------- --------------- -------------
Total current assets 1,971 (33) 1,938
------------------------------------------- --------- --------------- -------------
Total assets 2,062 2,392 4,454
------------------------------------------- --------- --------------- -------------
Current liabilities
Trade and other payables (1,605) 298 (1,307)
Accruals (587) (205) (792)
Other taxes and social security costs (576) - (576)
Contract liabilities (1,063) - (1,063)
Lease liability (92) - (92)
------------------------------------------- --------- --------------- -------------
(3,923) 93 (3,830)
Non-current liabilities
Contract liabilities (15) - (15)
Accruals - (200) (200)
Lease liability (2) - (2)
Deferred tax liability - (501) (501)
------------------------------------------- --------- --------------- -------------
Total liabilities (3,940) (608) (4,548)
------------------------------------------- --------- --------------- -------------
Net Liabilities (1,878) 1,784 (94)
Consideration in cash -
Fair value of deferred consideration loan 153
Consideration in shares -
------------------------------------------- --------- --------------- -------------
Fair value of cost of acquisition 153
------------------------------------------- --------- --------------- -------------
Goodwill 247
------------------------------------------- --------- --------------- -------------
2022
GBP'000
---------------------------------------------- --------
Cash consideration paid -
Cash acquired 498
---------------------------------------------- --------
Acquisition of CloudCoCo Limited, net of cash 498
---------------------------------------------- --------
The goodwill arising on this acquisition was attributable to the
brand and the customer base. Direct acquisition costs amounting to
GBP93,000 were written off to the income statement within
exceptional items.
END
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