TIDMCLCO
RNS Number : 4566R
Cloudcoco Group PLC
30 June 2020
30 June 2020
CloudCoCo Group plc
("CloudCoCo", "the Group" or "the Company")
Interim Results
CloudCoCo (AIM: CLCO), a UK provider of IT and communications
solutions to businesses and public sector organisations, announces
its unaudited interim results for the six months ended 31 March
2020.
Financial highlights
The six months prior to the period under review have been
included for comparison to help investors gauge the initial
progress the business has made since the completion of the
acquisition of CloudCoCo Limited on 21 October 2019 and the
introduction of a new management team.
-- Revenue of GBP4.43m, up 44% against the previous six-month
period (H2 2019: GBP3.08m, H1 2019: GBP4.18m)
-- Recurring revenue of GBP2.79m, up 31% on the previous
six-month period (H2 2019: GBP2.13m, H1 2019: GBP3.02m),
a key focus for the Group in becoming a sustainable growth
business
-- Total contract value ("TCV") signed of GBP3.33m, up 158%
against the previous six-month period (H2 2019: GBP1.29m,
H1 2019: GBP1.37m), reflecting early successes in prioritising
multi-year over single-year deals
-- Positive Trading Group EBITDA1 of GBP68k from a loss of
GBP250k in the previous six-month period (H2 2019: loss
of GBP250k, H1 2019: profit of GBP15k)
-- Pre-tax loss reduced to GBP1.57m from a loss of GBP5.59m
in FY2019 (H1 2019: loss of GBP1.21m)
-- Cash at bank of GBP0.27m at 31 March 2020 (H2 2019: GBP0.31m,
H1 2019: GBP0.84m) and GBP0.4m undrawn working capital
facility
-- Net assets of GBP5.69m at 31 March 2020 (H2 2019 negative
GBP1.11m, H1 2019 GBP2.92m)
(1) earnings before net finance costs, tax, depreciation,
amortisation, plc costs, separately identifiable items and
share-based
income and payments
Operational highlights
-- Acquisition of CloudCoCo Limited on 21 October 2019
-- Rebrand and change of name to CloudCoCo Group plc on 29
November 2019
-- Refinancing of the Group's debt reducing loan note debt
from GBP5m to GBP3.5m and extension of new GBP0.5m working
capital facility
-- Appointment of new CEO, Mark Halpin, and CFO, Michael
Lacey
-- Encouraging early progress made against new strategy both
operationally and commercially
-- 5-year cyber security management deal with a major operator
of franchised car dealerships
-- Voted Zen Internet New Partner of the Year
Post-period highlights
-- Move to new Leeds office completed in June
-- 3-year cyber security management deal with major online
fashion retailer, boohoo
-- Resilient trading during pandemic but experiencing industry-wide
headwinds
-- Growing recurring revenue and margin, together with cost
reduction measures means the business is well-positioned
to withstand the current situation
Simon Duckworth, non-executive chairman of CloudCoCo,
commented:
"The new management team has made a promising start,
implementing positive changes across the business and making
progress against all four of the objectives outlined at the full
year despite the significant operational and wider economic
challenges posed by the outbreak of the pandemic. There will be
more obstacles to overcome as CloudCoCo continues through its
recovery phase, but there is renewed optimism in the business, and
a sense that after a prolonged period of instability the business
is now on the right track."
Mark Halpin, CEO of CloudCoCo, commented:
"We expect demand for our products and services to evolve as
organisations seek to adapt to the 'new normal'. IT and
communications infrastructure is increasingly extending beyond
physical premises and with that comes fresh challenges,
particularly around cyber security and collaborative working
practices. We believe that through our expert skillset and deep
partner relationships with industry-leading providers, we are
well-positioned to help organisations meet these challenges.
"While we should not lose sight of the fact we are still in the
early stages of our turnaround story and recognise we are operating
against a backdrop of unprecedented uncertainty, we have a talented
team in place and are already seeing benefits from the hard work
done thus far, which gives us confidence that our strategy is the
right one."
Contacts
CloudCoCo via Alma PR
Mark Halpin, CEO
Michael Lacey, CFO
N+1 Singer (nominated adviser & broker) +44 (0)20 7496 3000
Peter Steel
Ben Farrow
Alma PR (financial PR adviser) +44 (0)20 3405 0205
David Ison cloudcoco@almapr.co.uk
Josh Royston
Kieran Breheny
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 connectivity,
telephony, cyber security, cloud, IT hardware and support
needs.
CloudCoCo has offices in Warrington and Leeds in the UK.
www.cloudcoco.co.uk
CHIEF EXECUTIVE'S REVIEW
H1 2020 results
The financial results for the six months to 31 March 2020 should
be viewed in the context of a period of significant change in the
Group, with the completion of the acquisition of CloudCoCo Limited
taking place on 21 October 2019 followed by the introduction of a
new management team.
The focus for the period under review has been to address legacy
issues and create a sustainable foundation for future growth.
Progress against objectives
At the final results for the last financial year released in
February 2020, the chairman outlined four key objectives for the
current financial year. These were:
1. Increase sales
2. Reduce customer churn
3. Reduce costs
4. Return to net cash generation
As noted at the time, while simple objectives, it was clear the
business needed to return to basics and shore up its fundamentals
before it could drive improved performance. Progress against each
objective in the first half of the current financial year is
summarised below:
Increasing sales
The business saw sales growth across all three of its reporting
segments during the period as shown below:
6 months to 6 months to 6 months to
31 March 30 September 31 March
2020 2019 2019
GBP'000 GBP'000 GBP'000
----------------------- ------------ ------------- ------------
By operating segment
Recurring services 2,785 2,131 3,022
Product 1,208 612 793
Professional services 437 333 366
------------------------ ------------ ------------- ------------
Total revenue 4,430 3,076 4,181
------------------------ ------------ ------------- ------------
Total contract value signed, an important performance indicator,
grew to GBP3.33m, an increase of 158% against the previous
six-month period.
Product sales increased primarily due to hardware sales
delivered in advance of multi-year support contracts.
One of the key benefits of the acquisition of CloudCoCo was the
strong and experienced sales and business development team it
brought to the Group. On appointment, the new management team
identified a number of ways in which existing methods could be
improved upon. While the changes made were substantial and will
take time to yield sustained, positive results, the sales function
is now a more professional and optimised operation with a clear
plan. Reporting and accountability has improved, and there is a
greater emphasis on liaising with the support team to better
understand demand.
One of the most significant strategic objectives for the Company
- and perhaps the biggest change in mindset from the way the legacy
business tended to work - is a shift towards prioritising
multi-year over single-year deals. This provides greater revenue
visibility and reduces the need to re-negotiate contracts annually.
Leveraging our partnership with Fortinet, in the first half we were
able to secure a five-year cyber security management deal with a
major operator of franchised car dealerships, a contract that
exemplifies the kind of business we would like to take on going
forwards. In what was a competitive pitch against several major
managed service providers, we were selected because the customer
was looking for a partner rather than a supplier, that showed a
deep understanding of its business and held strong accreditations,
relationships and expertise with the Fortinet security fabric
technologies. Post-period, we were able to sign a similar
three-year deal with a major online fashion retailer, boohoo.
Both names are among the biggest in their respective industries.
Being trusted by organisations of this calibre is a valuable
endorsement of CloudCoCo's cyber security capabilities, and
indicative of our desire to move up a weight division in terms of
customer and contract size.
The first half also saw our first sales of Nyotron's end point
protection platform, Paranoid, which is a strong USP for CloudCoCo
as the solution's exclusive UK supplier. We also secured a
three-year WiFi and wide area network deal with one of the UK's
leading charities, and saw encouraging traction in our telephony
business, both in terms of signing new customers and meeting
growing demand from major systems integrators looking to leverage
the expertise we have in areas such as integrating older PBX
systems with newer technologies like Microsoft Teams.
In March, we launched five new campaigns geared towards our
preferred type of business, targeted at both new and existing
customers:
1. Microsoft and modern working collaboration - leveraging
our accreditations and deep-level skills in Azure, Microsoft
Teams, Office 365 and Windows Virtual Desktop
2. Cyber security - through our partnerships with American
corporations Fortinet and Nyotron, a key growth area
3. Telephony and unified communications - including traditional
PBX (telephony systems) maintenance, modern cloud-hosted
telephony, contact centres and our rare ability to integrate
legacy PBX with more modern collaboration technology,
such as Microsoft Teams, helping organisations have the
best of both worlds while reducing spend
4. "Risk Mitigation as a Service" - an audit and analysis
of an organisation's IT environment to highlight risk
in areas such as end of life Microsoft software, server
& PC hardware, anti-virus protection, patch management,
data back-up and Microsoft SharePoint & Teams access
5. Network - connecting business premises and enabling home
working in the UK and EMEA with bandwidth from 10Mbps
to 10Gbps
Despite the disruption caused by the pandemic, these campaigns
have been well-received and continue to generate promising leads.
This is particularly the case in Microsoft working collaboration
and cyber security, driven by the change in enterprise IT created
by the shift to remote working environments.
At this stage, while our primary focus remains optimising the
sales function and making sure we do the basics right, we have
already had some success in signing larger and longer-term deals,
our pipeline of opportunities is growing, and notwithstanding
external factors beyond our control, we expect to be in a position
to accelerate this as we move into the next financial year.
Reducing customer churn
The initial steps we have taken to re-organise and re-energise
our support teams and reduce response and ticket resolution times
have yielded some early results, with positive feedback and a
moderate reduction in churn rates. While we are still in the first
months after the transaction and continue to navigate the effects
of a global pandemic, we have made good progress to date in
improving customer satisfaction and are optimistic about our
ability to continue to improve retention levels.
Reducing costs
In the weeks immediately following Adept4's acquisition of
CloudCoCo, we undertook a comprehensive spending review across both
sites aimed at reducing and optimising costs. This exercise will
not only result in a material cost reduction for the current
financial year and significant annualised savings, but gave
management the opportunity to introduce better and more efficient
ways of working.
Cost optimisation remains a key objective. Management is partway
through a further spending review and expects to be able to report
on additional savings in more detail at the full year.
Returning to net cash generation
The business is making steady progress in returning to being
cash generative. In the six months to 31 March 2020, the net
decrease in cash was GBP37k which was a significant improvement on
the six months to September 2019 where the net cash decrease was
GBP530k. Returning the business to profitability at a Trading Group
EBITDA level, and not having to pay interest on loan notes for much
of the period following the restructure of the Group's debt
facilities (see note 8), were key contributory factors.
Our people
We firmly believe our people are our most important asset in
building CloudCoCo into a sustainable growth business. We also
believe that high levels of morale lead to high levels of
performance, so making the Company a great place to work has been
an important priority.
In December, as part of the rebranding exercise, we asked
colleagues to submit suggestions for how we can improve the working
environment - the response was excellent and, while lockdown has
slowed the implementation of some initiatives, we are incorporating
them where we can.
Given the core of colleagues that came over from the legacy
Adept4 business have been through a prolonged period of upheaval
and uncertainty, their dedication, commitment, and openness to a
different way of thinking has been exemplary.
Across the business, all of our colleagues have made a huge
contribution to the Company since the acquisition and the energy
and passion they have shown in coming together and producing
results even in a few short months, has been remarkable.
On behalf of management I would like to take this opportunity to
wholeheartedly thank our colleagues from across the business for
the way they have applied themselves and risen to the challenges of
the past months. Building a culture and getting everyone to buy
into a set of values takes time, but we are proud of the way the
team has responded and the progress we are making.
Partnership ecosystem
A key competitive advantage of CloudCoCo is its diverse
ecosystem of partnerships with blue-chip technology vendors.
Microsoft collaborative working and Fortinet cyber security are
two key growth areas in which we now have a powerful combination of
in-house expertise and are continuing to widen and deepen our
accreditations. We have seen significant commercial traction with
both providers since the acquisition, and expect demand for their
solutions to continue to be healthy through and as we begin to
emerge from lockdown.
Similarly, our relationship with Nyotron continues to develop as
evidenced by the Paranoid deals we have signed and the number of
joint engagements and marketing ventures we continue to work
on.
During the period, Zen Internet, a Which? and PC Pro
multi-award-winning internet service provider, invited CloudCoCo to
be one of ten companies on its partner advisory strategy board and
voted it New Partner of the Year.
We are constantly looking at ways we can grow our relationships
with our partners while enhancing our credentials and look forward
to updating shareholders on further positive developments in our
partnership ecosystem in the coming months.
Office move
In June, despite the obvious operational challenges posed by
lockdown, we were able to complete the move to our new premises in
Leeds. Finding the right location to fit our business plans while
providing high quality facilities to support our teams has been
high on the management team's agenda since the acquisition, and we
are confident we have secured a space that will be an ideal
platform from which to service our customers.
Management changes
The Company's management team has continued to strengthen this
calendar year.
In March, Mark Halpin, who founded CloudCoCo Limited in 2018 and
had been responsible for the Group's business development
activities post-acquisition, replaced Andy Mills as CEO with Andy
remaining on the board as a non-executive director.
In January, the Group appointed Michael Lacey as CFO replacing
Jill Collighan who had previously fulfilled the role on a part-time
basis. Jill remains on the board as a non-executive director.
COVID-19 response
Our priority from the outset has been the health and safety of
our colleagues, partners, and customers. We transitioned to home
working earlier than most businesses in the UK and we have seen
minimal impact, with customer support, engineers and sales and
marketing teams continuing to function.
The Company has taken a number of precautionary actions to
ensure the business remains on a sound long-term financial footing
including temporary voluntary pay reductions at all levels except
those in the lowest earning bracket and the furloughing of some
colleagues. These measures are being kept under review.
Business planning has been made more challenging by the current
situation but by growing recurring revenue and margin and by taking
steps to reduce overheads, we believe we are well-positioned to
withstand the current situation.
Cash flow and debt remain in line with management's expectations
and to date have not been materially affected by the pandemic. We
have a separate working capital facility of which GBP0.4m remains
unused.
Current trading and outlook
Initially, at the outbreak of the pandemic, we saw an uptick in
trading as businesses and public sector organisations turned to us
for additional support and hardware as they transitioned towards
remote working. In the months since, while trading has remained
generally resilient and we are tracking against budget to the end
of June, we are experiencing some industry-wide headwinds as
organisations delay and defer IT and communications-related
decisions.
The impact of a prolonged COVID-19 lockdown on our customers is
difficult to forecast, and in turn it is hard for us to be precise
about our sales expectations for the rest of the year. However,
while it is still only a short while since the acquisition
completed - much of which has been spent in lockdown - we are
cautiously optimistic and have made an encouraging amount of
progress in steadying the ship and laying the foundations for
future growth. We will remain focused on our strategic objectives
in the second half.
We expect demand for our products and services to evolve as
organisations seek to adapt to the 'new normal'. IT and
communications infrastructure is increasingly extending beyond
physical premises and with that comes fresh challenges,
particularly around cyber security and collaborative working
practices. We believe that through our expert skillset and deep
partner relationships with industry-leading providers, we are
well-positioned to help organisations meet these challenges.
While we should not lose sight of the fact we are still in the
early stages of our turnaround story and recognise we are operating
against a backdrop of unprecedented uncertainty, we have a talented
team in place and are already seeing benefits from the hard work
done thus far which gives us confidence that our strategy is the
right one.
Note to shareholders
Since the acquisition, the new management team has been focused
on the operations of the business but recognises this has come at
the expense of clear and regular communications with shareholders.
We are grateful to our investors for their continued support, value
their feedback and have appointed external advisors to help us
address this.
CONSOLIDATED INCOME STATEMENT
for the six-month period ended 31 March 2020
6 months 6 months 6 months Year to
to 31 March to 30 September to 31 March 30 September
2020 2019 2019 2019
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------- ----------------- ------------- --------------
Continuing operations
Revenue 3 4,430 3,076 4,181 7,257
Cost of sales (2,513) (1,490) (2,040) (3,530)
------------------------------- ----- ------------- ----------------- ------------- --------------
Gross profit 3 1,917 1,586 2,141 3,727
------------------------------- ----- ------------- ----------------- ------------- --------------
Administrative expenses (2,083) (2,065) (2,318) (4,383)
Amortisation of intangible
assets 7 (799) (453) (454) (907)
Depreciation (28) (42) (58) (100)
Separately identifiable
costs 4 (381) (3,112) (143) (3,255)
Share-based income/(payments) 26 10 (81) (71)
------------------------------- ----- ------------- ----------------- ------------- --------------
Operating loss (1,348) (4,076) (913) (4,989)
------------------------------- ----- ------------- ----------------- ------------- --------------
Interest receivable 1 1 2 3
Interest payable (227) (299) (303) (602)
------------------------------- ----- ------------- ----------------- ------------- --------------
Net finance expense (226) (298) (301) (599)
------------------------------- ----- ------------- ----------------- ------------- --------------
Loss before taxation (1,574) (4,374) (1,214) (5,588)
------------------------------- ----- ------------- ----------------- ------------- --------------
Taxation 5 150 354 84 438
------------------------------- ----- ------------- ----------------- ------------- --------------
Loss and total comprehensive
loss for the period attributable
to owners of the parent (1,424) (4,020) (1,130) (5,150)
-------------------------------------- ------------- ----------------- ------------- --------------
Loss per share
Basic and fully diluted 6 (0.31)p (1.77)p (0.50)p (2.27)p
------------------------------- ----- ------------- ----------------- ------------- --------------
Non-statutory measure:
Trading Group EBITDA(1)
Operating loss (1,348) (4,076) (913) (4,989)
Plc costs 234 229 192 421
Amortisation of intangible
assets 7 799 453 454 907
Depreciation 28 42 58 100
Separately identifiable
costs 4 381 3,112 143 3,255
Share-based (income)/payments (26) (10) 81 71
------------------------------- ----- ------------- ----------------- ------------- --------------
Trading Group EBITDA(1) 68 (250) 15 (235)
------------------------------- ----- ------------- ----------------- ------------- --------------
(1) earnings before net finance costs, tax, depreciation,
amortisation, plc costs, separately identifiable items and
share-based
income and payments
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2020
At 30
At 31 At 31 March September
March
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
--------------------------------- ----- --------- ------------ ----------
Non-current assets
Intangible assets 7 11,540 7,849 4,394
Property, plant and equipment 52 103 62
Total non-current assets 11,592 7,952 4,456
--------------------------------- ----- --------- ------------ ----------
Current assets
Inventories 52 86 32
Trade and other receivables 2,454 2,443 1,489
Cash and cash equivalents 274 841 311
--------------------------------- ----- ------------ ----------
Total current assets 2,780 3,370 1,832
--------------------------------- ----- --------- ------------ ----------
Total assets 14,372 11,322 6,288
--------------------------------- ----- --------- ------------ ----------
Liabilities
Short-term borrowings 8 (95) (32) (32)
Trade and other payables (1,541) (1,421) (876)
Other taxes and social security
costs (388) (373) (302)
Accruals and deferred income (1,372) (1,208) (1,093)
--------------------------------- ----- --------- ------------ ----------
Total current liabilities (3,396) (3,034) (2,303)
--------------------------------- ----- --------- ------------ ----------
Non-current liabilities
Long-term borrowings 8 (3,925) (4,205) (4,286)
Deferred tax liability 9 (1,357) (1,164) (810)
--------------------------------- ----- --------- ------------ ----------
(5,282) (5,369) (5,096)
--------------------------------- ----- --------- ------------ ----------
Total liabilities (8,678) (8,403) (7,399)
--------------------------------- ----- --------- ------------ ----------
Net assets 5,694 2,919 (1,111)
--------------------------------- ----- --------- ------------ ----------
Equity
Share capital 4,952 2,271 2,271
Share premium account 16,355 11,337 11,337
Capital redemption reserve 6,489 6,489 6,489
Merger reserve 1,997 1,997 1,997
Other reserve 2,008 1,730 1,720
Retained earnings (26,107) (20,905) (24,925)
--------------------------------- ----- --------- ------------ ----------
Total equity 5,694 2,919 (1,111)
--------------------------------- ----- --------- ------------ ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six-month period ended 31 March 2020
Capital Total
Share Share redemption Merger Other Retained GBP'000
capital premium reserve reserve reserve earnings
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 - - - - - (1,130) (1,130)
---------------------- --------- --------- ------------ --------- --------- ---------- ----------
Transactions
with owners
Share-based payments - - - - 81 - 81
Total transactions
with owners - - - - 81 - 81
---------------------- --------- --------- ------------ --------- --------- ---------- ----------
Total movements - - - - 81 (1,130) (1,048)
---------------------- --------- --------- ------------ --------- --------- ---------- ----------
Equity at 31 March
2019 2,271 11,337 6,489 1,997 1,730 (20,905) 2,919
---------------------- --------- --------- ------------ --------- --------- ---------- ----------
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 2019 2,271 11,337 6,489 1,997 1,730 (20,905) 2,919
Loss and total
comprehensive
loss for the
period - - - - - (4,020) (4,020)
------------------- --------- --------- ------------ --------- --------- ---------- ---------
Transactions with
owners
Share-based
payments - - - - (10) - (10)
Total transactions
with owners - - - - (10) - (10)
------------------- --------- --------- ------------ --------- --------- ---------- ---------
Total movements - - - - (10) (4,020) (4,030)
------------------- --------- --------- ------------ --------- --------- ---------- ---------
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 - - - - - (1,424) (1,424)
------------------ --------- --------- ------------ --------- --------- ---------- -----------
Transactions with
owners
Issue of
50,000,000
shares to BGF
at 0.35p per
share
and exceptional
gain on
write-off
of BGF Loan
Notes
at fair value. 500 - - - 556 - 1,056
Issue of
218,160,586
shares to
CloudCoCo
vendors at 3.3p
per share 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
income - - - - (26) - (26)
Total
transactions
with owners 2,681 5,018 - - (268) 242 8,229
------------------ --------- --------- ------------ --------- --------- ---------- -----------
Total movements 2,681 5,018 - - (268) (1,182) 6,805
------------------ --------- --------- ------------ --------- --------- ---------- -----------
Equity at 31
March
2020 4,952 16,355 6,489 1,997 2,008 (26,107) 5,694
------------------ --------- --------- ------------ --------- --------- ---------- -----------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six-month period ended 31 March 2020
6 months 6 months 6 months Year to
to 31 to 30 September to 31 30 September
March 2019 March 2019
2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ----------------- --------- --------------
Cash flows from operating activities
Loss before taxation (1,574) (4,374) (1,214) (5,588)
Adjustments for:
Depreciation 28 42 58 100
Amortisation 799 453 454 907
Share-based (income)/payments (26) (10) 81 71
Net finance expense 226 298 301 599
Costs relating to acquisition 346 - - -
of CloudCoCo Limited
Settlement of Warranty Claim - 600 - 600
Impairment of goodwill - 3,021 - 3,021
(Increase)/decrease in trade
and other receivables (567) 354 457 811
(Increase)/decrease in inventories (20) 54 (60) (6)
Increase/(decrease) in trade
payables, accruals and deferred
income 756 (711) (334) (1,045)
--------------------------------------- --------- ----------------- --------- --------------
Net cash used in operating activities (32) (273) (257) (530)
--------------------------------------- --------- ----------------- --------- --------------
Cash flows from investing activities
Purchase of property, plant
and equipment (15) (1) (15) (16)
Costs relating to acquisition (346) - - -
of CloudCoCo Limited
Acquisition of CloudCoCo Limited, 157 - - -
net of cash acquired
Purchase of Intangible assets - (40) - (40)
Interest received 1 1 2 3
--------------------------------------- --------- ----------------- --------- --------------
Net cash used in investing activities (203) (40) (13) (53)
--------------------------------------- --------- ----------------- --------- --------------
Cash flows from financing activities
Issue of shares under BGF share 175 - - -
option scheme
Receipt of loan funds from MXC 100 - - -
Capital
Payment of finance lease liabilities (49) (18) (12) (30)
Interest paid (28) (199) (204) (403)
Net cash used in financing activities 198 (217) (216) (433)
--------------------------------------- --------- ----------------- --------- --------------
Cash flows from discontinued
operations
Settlement of dispute regarding
Pinnacle CDT Limited - - (100) (100)
--------------------------------------- --------- ----------------- --------- --------------
Net cash used in discontinued
operations - - (100) (100)
--------------------------------------- --------- ----------------- --------- --------------
Net decrease in cash (37) (530) (586) (1,116)
Cash at bank and in hand at
beginning of period 311 841 1,427 1,427
--------------------------------------- --------- ----------------- --------- --------------
Cash at bank and in hand at
end of period 274 311 841 311
--------------------------------------- --------- ----------------- --------- --------------
Comprising:
Cash at bank and in hand 274 311 841 311
--------------------------------------- --------- ----------------- --------- --------------
NOTES TO THE FINANCIAL INFORMATION
for the six-month period ended 31 March 2020
1. General Information
CloudCoCo Group plc is a company incorporated in the United
Kingdom under the Companies Act 2006. The principal activity of the
group is the provision of IT as a Service ("ITaaS") to small and
medium sized businesses in the United Kingdom. The interim
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.
The address of its registered office is 5 Fleet Place, London,
EC4M 7RD and its principal places of business are Leeds and
Warrington. The company is quoted on AIM, the market of that name
operated by the London Stock Exchange, under ticker symbol
CLCO.L
These interim financial statements contain inside
information.
2. Basis of preparation
The annual financial statements of the Group are prepared in
accordance with applicable International Financial Reporting
Standards (IFRSs) as adopted by the EU and in accordance with the
Companies Act 2006. The interim financial information in this
report has been prepared using accounting standards consistent with
IFRS as adopted by the European Union. IFRS is subject to amendment
and interpretation by the International Accounting Standards Board
(IASB) and the IFRS Interpretations Committee and there is an
ongoing process of review and endorsement by the European
Commission. The financial information has been prepared on the
basis of IFRS that the Directors expect to be adopted by the
European Union and applicable at 30 September 2020.
Financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 ("the Act"). The statutory accounts for the
year ended 30 September 2019 have been filed with the Registrar of
Companies. The report of the auditors on those statutory accounts
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Act. The financial information for the six months ended
31 March 2020 and 31 March 2019 is unaudited.
The accounting standards applied by the Group in these interim
financial statements are the same as those applied by the Group in
the consolidated financial statements for the year ended 30
September 2019 with the exception of IFRS 16 Leases (effective for
accounting periods commencing on or after 1 January 2019).
Using the modified retrospective method, we assessed the impact
of IFRS 16 and confirm that no material changes were required to
the Group's financial results.
Under IFRS 16 there is a standard accounting model for lessees.
As lessees we are obliged to recognise assets and liabilities for
all leases over twelve months unless the underlying asset has a low
value. Under IFRS 16 we recognise an asset reflecting our right to
use the underlying leased object, in addition to the lease
liability, reflecting our obligation to make the lease payments.
The main impact of IFRS 16 is around property leases, of which the
Group currently has two.
Business planning has been made more challenging by the current
Covid-19 situation but by growing recurring revenue and margin
together with taking steps to reduce overheads, we believe we are
well-positioned to withstand the current situation. After reviewing
budgets, forecasts and cash projections for the next twelve months
and beyond, the Directors have a reasonable expectation that the
Group has adequate resources to continue operations for the
foreseeable future and for this reason they have adopted a going
concern basis in preparing the interim financial statements.
The interim financial statements were approved by the Board of
Directors on 29 June 2020.
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 assesses 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.
Inter-segment transactions are accounted for using an arm's length
commercial basis.
3.1 Analysis of 6 months 6 months 6 months Y ear to
revenue to to to
31 March 30 September 31 March 30 September
2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- ------------- --------- -------------
By operating segment
Recurring services 2,785 2,131 3,022 5,153
Product 1,208 612 793 1,405
Professional services 437 333 366 699
------------------------ --------- ------------- --------- -------------
Total revenue 4,430 3,076 4,181 7,257
------------------------ --------- ------------- --------- -------------
3.2 Analysis of 6 months 6 months 6 months Y ear to
gross profit to to to
31 March 30 September 31 March 30 September
2020 2020 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- ------------- --------- -------------
By operating segment
Recurring services 1,343 1,229 1,667 2,896
Product 259 111 167 278
Professional services 315 246 307 553
---------
Total gross profit 1,917 1,586 2,141 3,727
------------------------ --------- ------------- --------- -------------
4. Separately identifiable costs
During the period, the Group incurred the following separately
identifiable costs which are material by their size or
incidence:
6 months 6 months 6 months Year to
to to to 30 September
31 March 30 September 31 March 2019
2020 2019 2019 GBP'000
GBP'000 GBP'000 GBP'000
----------------------------- ---------- -------------- ---------- --------------
Costs in relation to M&A
activities (346) - - -
Impairment of goodwill
and intangible assets - (3,021) - (3,021)
Foreign exchange rate
variances - (8) - (8)
Integration and restructure
costs (35) (83) (143) (226)
----------------------------- ---------- -------------- ---------- --------------
Separately identifiable
costs (381) (3,112) (143) (3,255)
----------------------------- ---------- -------------- ---------- --------------
5. Taxation
6 months to 6 months 6 months Y ear to
to to
31 March 30 September 31 March 30 September
2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------- --------- -------------
Current tax
UK corporation tax - - - -
for the period on
continuing operations
Deferred tax credit
Deferred tax credit
on intangible assets
from continuing operations 150 354 84 438
Total taxation credit
for the period 150 354 84 438
----------------------------- ------------ ------------- --------- -------------
6. Loss per share
6 months 6 months 6 months Y ear to
to to to
6. Loss per share
31 March 30 September 31 March 30 September
2020 2019 2019 2019
p/share p/share p/share p/share
-------------------------- ------------ ------------- ------------ -------------
Basic and fully diluted
- continuing operations (0.31) (1.77) (0.50) (2.27)
-------------------------- ------------ ------------- ------------ -------------
GBP000 GBP000 GBP000 GBP000
-------------------------- ------------ ------------- ------------ -------------
Loss on continuing
operations (1,424) (4,020) (1,130) (5,150)
-------------------------- ------------ ------------- ------------ -------------
Weighted average number
of shares in issue:
Basic and fully diluted 461,720,917 227,065,100 227,065,100 227,065,100
-------------------------- ------------ ------------- ------------ -------------
The weighted average number of ordinary shares for the purpose
of calculating the basic and diluted measures is the same. This is
because the outstanding share incentives would have the effect of
reducing the loss per ordinary share and therefore would be
anti-dilutive under the terms of IAS 33.
7. Intangible assets IT, billing
and
website Customer
Goodwill systems Brand lists Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------------- -------------- -------- --------- --------
Cost
At 1 October 2018 4,447 142 1,157 7,580 13,326
Additions - 21 - - 21
At 31 March 2019 4,447 163 1,157 7,580 13,347
Additions - 19 - - 19
----------------------- -------------- -------------- -------- --------- --------
At 30 September 2019 4,447 182 1,157 7,580 13,366
Additions 3,845 - 700 3,400 7,945
At 31 March 2020 8,292 182 1,857 10,980 21,311
----------------------- -------------- -------------- -------- --------- --------
Amortisation
At 1 October 2018 (2,844) (27) (265) (1,908) (5,044)
Charge for the period - (15) (57) (382) (454)
At 31 March 2019 (2,844) (42) (322) (2,290) (5,498)
Impairment charge (1,603) - (225) (1,193) (3,021)
Charge for the period - (5) (58) (390) (453)
At 30 September 2019 (4,447) (47) (605) (3,873) (8,972)
Charge for the period (249) (9) (81) (460) (799)
At 31 March 2020 (4,696) (56) (686) (4,333) (9,771)
----------------------- -------------- -------------- -------- --------- --------
Net Book Value
At 31 March 2019 1,603 121 835 5,290 7,849
At 30 September 2019 - 135 552 3,707 4,394
At 31 March 2020 3,596 126 1,171 6,647 11,540
----------------------- -------------- -------------- -------- --------- --------
7.1 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 provisional fair value
of the acquisition of CloudCoCo Limited as follows:
Provisional
Book Fair Value Provisional
Cost Adjustment Fair Value
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------------- ------------------
Non-current assets
Intangible assets - 4,100 4,100
Property, plant and equipment 3 - 3
Total non-current assets 3 4,100 4,100
--------------------------------------- --------- --------------- ------------
Current assets
Trade and other receivables 383 - 383
Cash at bank 157 - 157
--------------------------------------- --------- --------------- ------------
Total current assets 540 - 540
--------------------------------------- --------- --------------- ------------
Total assets 543 4,100 4,643
--------------------------------------- --------- --------------- ------------
Current liabilities
Short-term borrowings (63) - (63)
Trade and other payables (159) - (158)
Other taxes and social security costs (24) - (24)
Deferred Income and accruals (205) - (205)
--------------------------------------- --------- --------------- ------------
Total current liabilities (451) - (451)
--------------------------------------- --------- --------------- ------------
Total non-current liabilities
Long term borrowings (141) - (141)
Deferred Tax Liability - (697) (961)
--------------------------------------- --------- --------------- ------------
Total liabilities (592) (697) (1,553)
--------------------------------------- --------- --------------- ------------
Net (Liabilities) / Assets (49) 3,403 3,354
Consideration in cash -
Consideration in shares 7,199
--------------------------------------- --------- --------------- ------------
Fair value of cost of acquisition 7,199
--------------------------------------- --------- --------------- ------------
Goodwill 3,845
--------------------------------------- --------- --------------- ------------
8. Borrowings
At At 31 March At
31 March 2019 30 September
2020 GBP'000 2019
GBP'000 GBP'000
Short-term borrowings
Finance lease liability - short term
element 95 32 32
Total short-term borrowings 95 32 32
---------------------------------------- ---------- ------------ --------------
Long-term borrowings
Finance lease liability - long term
element 137 34 16
BGF loan notes repayable to BGF - 5,000 5,000
MXCG loan notes repayable 2024 3,500 - -
Interest accrued on MXCG loan notes 188 - -
at 12% per annum
MXCG 24 month Working capital facility 100 - -
at 12% per annum
---------------------------------------- ---------- ------------ --------------
Warrant adjustment relating to BGF
loan notes - (829) (730)
---------------------------------------- ---------- ------------ --------------
Total long-term borrowings 3,925 4,205 4,286
---------------------------------------- ---------- ------------ --------------
On 21 October 2019, pursuant to the debt refinancing agreement
entered into as part of the acquisition of CloudCoCo Limited,
GBP1.5 million of the BGF loan notes were cancelled, thereby
reducing the liability to the Group. The remaining GBP3.5 million
of loan notes were purchased by MXC Guernsey Limited (MXCG) and
were amended to a term of five years, with a coupon of 12% per
annum, which is to be rolled up, compounded annually and payable at
the end of the term.
In addition, MXCG agreed to provide an additional unsecured
working capital facility to the Group of up to GBP0.5 million, with
a term of 24 months and interest charged at a rate of 12% per annum
on amounts drawn down, payable monthly.
9. Deferred tax
At At At 30 September
31 March 31 March 2019
2020 2019
GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- ----------------
Provision brought forward 810 1,248 1,248
Additions relating to acquisition 697 - -
of subsidiary
Credits to income statement -
on intangibles (150) (84) (438)
Provision carried forward 1,357 1,164 810
------------------------------------ ---------- ---------- ----------------
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.
END
IR FIFIIRVIIVII
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June 30, 2020 02:00 ET (06:00 GMT)
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