TIDMCLCO
RNS Number : 3076E
Cloudcoco Group PLC
29 June 2023
The information contained within this announcement is deemed by
CloudCoCo to constitute inside information pursuant to Article 7 of
EU Regulation 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 as amended.
29 June 2023
CloudCoCo Group plc
("CloudCoCo", the "Company" or the "Group")
Interim Results
Solid trading performance and strong operational delivery
CloudCoCo (AIM: CLCO), a leading UK provider of Managed IT
services and communications solutions to private and public sector
organisations, is pleased announce its interim results for the six
months ended 31 March 2023 ("H1 2023").
Financial highlights:
-- Revenue increased by 11% to GBP 12.9 million (H1 2022:
GBP11.6 million), of which 70% was generated from recurring
contracts (H1 2022: 70%)
-- Gross profit increased by 13% to GBP4.3 million (H1 2022:
GBP3.8 million(1) ), a margin of 34% (2022: 3 3 %)
-- Trading Group EBITDA(2) increased by 70% to GBP0.9 million
(H1 2022: GBP0.53 million(1) )
-- E-commerce revenues from MoreCoCo increased 78% to GBP1.6
million (H1 2022: GBP0.9 million)
-- Cash at bank of GBP1.28 million at 31 March 2023 (H1
2022: GBP1.31 million)
Operational highlights:
-- Increased investment into the Group's sales and marketing
functions
-- 27 new "logo" customers added in the half (H1 2022: 21),
representing 70% of the number signed in the whole of
FY 2022, and growing pipeline
-- New multi-year customer wins including Gepp Solicitors,
Jensten Group and Marylebone Cricket Club
-- Launch of Multi-Cloud offering, enabling the Group to
attract larger, more complex organisations
-- Key senior leadership appointments across the Group including
new Head of Multi-Cloud
-- New strategic partnerships signed post-period with Abstract
Tech and Ingram Micro to enhance the Group's capabilities
and create new revenue opportunities
-- Continued focus on saving costs and increasing efficiency,
with considerable progress achieved in rationalising
the Group's suppliers
-- Improved customer satisfaction levels, aided by the unification
of our customer support operations across the Group into
a single team
(1) subsequent to the publication of the unaudited H1 2022
interim results, the accounting treatment for our onerous contracts
and data centre leases was assessed against the detailed criteria
of IFRS 16. This resulted in a reclassification of certain expense
items previously shown as costs of sales in the unaudited interim
results for H1 2022 as depreciation. The impact of the
reclassification on Trading Group EBITDA(2) for H1 2022 is shown on
the face of the Income Statement.
(2) profit or loss before net finance costs, tax, depreciation,
amortisation, plc costs, exceptional costs and share-based
payments
Mark Halpin, CEO of CloudCoCo, commented:
"We have delivered a solid H1 performance, winning new logo
customers and building our new business pipeline at a healthy rate
despite the challenges posed to organisations across the UK by the
economic backdrop. Our confidence in reaching our long-term growth
ambitions is underlined by the operational headway achieved during
the period. We have invested in expanding and optimising our teams,
including a significant elevation of talent across the Group
through a number of important hires in key strategic areas.
While conscious of the prevailing economic headwinds and the
impact on some of our customers, we are well placed to continue to
navigate them and are confident of making continued steady
strategic and commercial progress in the second half, ready to
accelerate when conditions permit. Alongside this, we continue to
actively explore opportunities to complement organic growth through
selective acquisitions. We are assessing our options to fund such
acquisitions and also to refinance our existing debt."
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 / Daniel Dearden-Williams
- Corporate Finance
Tony Quirke / Amrit Nahal - Equity
Sales
Alma PR - (Financial PR) Tel: +44 (0)20 3405
David Ison 0205
Kieran Breheny cloudcoco@almapr.co.uk
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, Multi-Cloud,
Collaboration, Cyber Security, IT Hardware, Licencing, Support and
Professional Services.
CloudCoCo has headquarters in Leeds and regional offices in
Warrington, Sheffield and Bournemouth.
www.cloudcoco.co.uk
CHIEF EXECUTIVE'S REVIEW
Overview
Trading during the first half has been resilient, with growth
across both Managed IT Services and Value Added Resale (VAR). While
a handful of our customers responded to the increased cost of power
and ongoing economic headwinds by scaling back business with us,
this was more than offset by several lucrative new agreements made
possible by the enhanced breadth of our offering.
Now that the acquisitions in the prior year have been fully
integrated, we have established a solid platform to drive organic
growth. A key focus in the current financial year has been to
bolster our sales functions and reorganise our teams to ensure a
cohesive, unified approach across the Group. To this end we made
several key appointments across the four pillars of our strategy
(Connect, Multi-Cloud, Cyber and Collaboration) and are excited
about the value they will bring.
As previously announced, we are actively exploring strategic
partnerships to help us reach our growth ambitions faster.
Post-period, we signed agreements with Ingram Micro, the world's
largest global business-to-business wholesale provider of
technology products and supply chain management services, and
digital transformation services provider Abstract Tech. These
low-cost, mutually beneficial partnerships allow us to punch above
our weight in Multi-Cloud (the utilisation of Azure, AWS and Google
Cloud platforms) , an increasingly important requirement when
pursuing larger and more complex Managed Services contracts. These
partnerships open up a range of potential new revenue
opportunities.
Alongside our commercial efforts, we have maintained our focus
on removing unwanted costs and increasing efficiencies. To date, we
have successfully reduced the number of suppliers across the Group
in a meaningful way, leading to significant annualised savings, and
expect to make further progress in the second half.
Looking ahead, whilst the challenging economic backdrop is
likely to persist, we remain on course to deliver a year of solid
progress characterised by healthy commercial and operational
delivery. As conditions improve, the steps we are taking now to
enhance and optimise the Group will leave us well-positioned to
accelerate organic growth. M&A activity remains a focus and we
will continue to appraise potential acquisitions, only proceeding
with those we feel are a good strategic fit and available at the
right price.
Results
Revenues for H1 2023 represent an 11% increase on H1 2022 at
GBP12.9 million (H1 2022: GBP11.6 million), with gross profit up
13% to GBP4.3 million (H1 2022: GBP3.8 million). Trading Group
EBITDA(1) increased by 70% to GBP901k (H1 2022: GBP531k). New sales
orders generated by our sales team for H1 2023 amounted to total
contract value ("TCV") of GBP6.4 million, which despite being down
against the record value of GBP9.7 million recorded in H1 2022,
were up 7% against the H2 2022 value of GBP6.0 million reflecting
the improvement in the underlying sales performance. TCV measures
the total revenue that we expect to generate from new customer
contracts signed in the period over their contractual term.
The Group continues to prioritise larger, multi-year agreements.
Key recurring contracts signed in the period include contracts with
Tquila Automation Limited and Amedeo Services (UK) Limited enhanced
by our Multi-Cloud capability.
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2023 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------- ------------- ------------- -------------
By operating segment
Managed IT Services 9,077 8,474 8,582 17,056
Valued Added Resale 3,846 4,075 3,062 7,137
----------------------- ------------- ------------- ------------- -------------
Total revenue 12,923 12,549 11,644 24,193
----------------------- ------------- ------------- ------------- -------------
Reflecting the process of reducing the liabilities inherited
from the acquisitions made in 2021, our cash reduced by GBP0.2
million to GBP1.3 million at 31 March 2023 (September 2022: GBP1.5
million).
Review of the period
The Group made significant operational strides in the first half
and post-period, with a view to accelerating organic growth
prospects, ensuring excellent levels of customer service and
reducing costs.
Solid commercial progress against a challenging backdrop
Despite the economic challenges facing the UK business
community, we are winning new logo customers at a healthy rate. In
H1 2023 we signed 27 new logo customers compared to 39 in the whole
of FY 2022, many of which we expect to continue to support revenue
growth for years to come. New logo customer wins in H1 2023 include
Gepp Solicitors, Jensten Group and Marylebone Cricket Club.
A key factor in this performance has been the investments into
and the reorganisation of our sales and marketing arms during
latter part of FY 2022. Programmes such as Project IGNITE have
assisted, and we continue to benefit from the increased scale and
capabilities derived from the acquisitions. The activity of our
telemarketing teams has increased substantially in H1 2023, and we
expect recent initiatives to deliver further commercial benefits
over time.
Our sales academy, launched in July 2022, continues to provide
the Group with a promising pool of talent. Members of the academy
have already made significant contributions to new business and,
now with a proven blueprint for how to onboard new colleagues and
nurture them to a high standard, we have plans to expand the
academy further in the next financial year.
We are observing a number of green shoot opportunities for
cross-selling across the customers of our acquired businesses,
particularly in selling Managed IT Services to customers who have
traditionally purchased data centre services and connectivity from
us. With our customers currently utilising only two of our 12 key
product areas on average, there is a scope to expand the range of
products we deliver to our existing customers alongside capturing
new business.
Following the launch of the new MoreCoCo website in FY 2022 as
our e-commerce business, we have seen an increase in sales from B2B
customers as well as consumers, enabled by the implementation of
several measures both to bring more visitors to the site and
increase conversion ratios. As a result, we have seen e-commerce
revenues from MoreCoCo increase from GBP0.9 million in H1 2022 to
GBP1.6 million in H1 2023.
Our post-period partnership with a global leader in the
purchase, restoration and sale of refurbished IT hardware,
announced in April 2023, will further support the growth of this
business line through the supply of more than 15,000 products,
while also improving our sustainability credentials.
Advances made in creating a leaner and more efficient Group
As reported at our FY 2022 results, following the acquisition,
integration and turnaround of the Group's Connect business, we have
embarked on a line-by-line process of reviewing customer
profitability at a granular level. This has resulted in us exiting
certain low-margin contracts and rationalising our spend with
suppliers with a view to achieving substantial cost savings. We
have continued this process during the period with excellent
results and expect to see the benefits filter through in H2 2023
and beyond.
We have also made progress with respect to the previously
reported onerous contract inherited from our acquisition of
CloudCoCo Connect, having strengthened our relationship with the
supplier involved.
Beyond Connect, we remain focused on driving efficiencies across
the Group to strengthen our financial position and improve
liquidity.
Growing momentum in Multi-Cloud
The launch of a dedicated Multi-Cloud practice is an important
step for the business. One of the pre-eminent trends in IT, it
enables the Group to attract a range of larger, more complex
organisations. To support our expansion in Multi-Cloud, in April
2023, we announced the appointment of Lee Thatcher to head up the
division, bringing a deep experience of Cloud to CloudCoCo
developed over nearly 20 years in technology positions.
In April 2023, we announced a partnership with Abstract Tech, a
Leeds-based consultancy which specialises in the delivery of large
scale, digital transformation projects. This partnership provides
CloudCoCo with the talent and expertise of Abstract's 150
technicians, enabling the Group to take on a broader range of
Multi-Cloud projects. Alongside this, the Group also announced the
signing of a partnership post-period with Ingram Micro, the world's
largest global business-to-business wholesale provider of
technology products and supply chain management services, for the
supply of Microsoft Azure and other cloud services. Through this
partnership, CloudCoCo's Multi-Cloud practice will leverage
Ingram's hundreds of in-built Cloud providers through a simplified
single portal.
Enhancements to customer support producing good results
We remain focused on making every interaction our customers have
with us a delight and, reflecting this, our current customer
satisfaction levels are exceptional. These have been enhanced by a
change to our customer service structure in H1 2023, which unified
our technical support operations, as well as investments into new
talent. As a result, we are pleased to report customer satisfaction
levels in excess of 97.5% for June 2023.
To further improve the experience of customers, the Group is
exploring ways to use artificial intelligence in our business
operations. Enabled by our partnership with Abstract Tech, these
capabilities will aid our customer support teams as well as
customers who approach us through our website.
Acquisition of senior talent to drive the business forwards
During the period we have added more skills and experience as
well as focusing on the development of our existing talent.
Alongside the key hire of Lee Thatcher in our Multi-Cloud division,
we have also made key hires across areas of the business including
cybersecurity, sales, new business, and technical support. These
hires complement the existing talent across our teams and will help
shape the direction of the Group as we continue to grow.
Expectation of continued, steady progress in the second half
The Group's trading in H2 2023 to date has been encouraging.
While wider economic headwinds persist and will continue to be a
factor in the decisions of customers, we will continue to navigate
them and our pipeline continues to grow.
As the second half develops, we expect to see the benefits of
our investments into sales and marketing begin to increase. We are
maintaining our focus on driving cost savings and efficiencies and
expect to see the results of the hard work carried out in the first
half have a positive impact on the bottom line at the full year. To
help us reach our goals faster, we are continuing to assess
opportunities to acquire complementary businesses we feel are a
good strategic fit. We are assessing our options to fund such
acquisitions and also to refinance our existing debt.
Despite the challenging current trading environment, with
favourable long-term market trends continuing, we are confident in
our ability to meet our long-term growth ambitions. Supported by
the solid foundations laid in previous years, the recent work done
to make the structure of the organisation leaner and more
efficient, the assembly of a team of incredibly talented and driven
individuals and the addition of valuable strategic partners, the
Board believes CloudCoCo is in a strong position to capitalise on
its opportunities.
Mark Halpin
CEO
29 June 2023
Consolidated income statement
for the six-month period ended 31 March 2023
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months
to to to Year to
31 March 30 Sept 31 March 30 Sept
Note 2023 2022 2022 2022
-------------------------------- ------
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ ---------- ------------ ------------ ------------
Continuing operations
Revenue 3 12,923 12,549 11,644 24,193
Cost of sales (8,580) (8,424) (7,822) (16,246)
-------------------------------- ------ ---------- ------------ ------------ ------------
Gross profit 4,343 4,125 3,822 7,947
GP% 34% 33% 33% 33%
Administrative expenses (5,130) (4,769) (5,015) (9,784)
-------------------------------- ------ ---------- ------------ ------------ ------------
Trading Group EBITDA(1) 901 1,063 531 1,594
Depreciation of IFRS16 data
centre right of use assets (400) (301) (229) (530)
-------------------------------- ------ ---------- ------------ ------------ ------------
Adjusted Trading Group EBITDA 501 762 302 1,064
Amortisation of intangible
assets 6 (643) (632) (654) (1,286)
Plc costs(2) (397) (425) (345) (770)
Depreciation of tangible
assets and other right of
use assets (86) (119) (45) (164)
Exceptional items 4 (99) (282) (280) (562)
Share-based payments (63) 52 (171) (119)
-------------------------------- ------ ---------- ------------ ------------ ------------
Operating loss (787) (644) (1,193) (1,837)
Interest receivable 1 1 - 1
Interest payable (438) (433) (339) (772)
================================ ====== ========== ============ ============ ============
Loss before taxation (1,224) (1,076) (1,532) (2,608)
Taxation 161 157 164 321
================================ ====== ========== ============ ============ ============
Loss and total comprehensive loss
for the year attributable to owners
of the parent (1,063) (919) (1,368) (2,287)
======================================== ============== ============ ============ =========
Loss per share
Basic and fully diluted 5 (0.15)p (0.13)p (0.19)p (0.32)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.
Subsequent to the publication of the unaudited H1 2022 interim
results, the accounting treatment for our onerous contracts and
data centre leases was assessed against the detailed criteria of
IFRS 16. This resulted in a reclassification of certain expense
items previously shown as costs of sales in the unaudited interim
results for H1 2022 as depreciation. The impact of the
reclassification on Trading Group EBITDA(1) for H1 2022 is shown on
the face of the Income Statement.
Consolidated statement of financial position
as at 31 March 2023
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2023 2022 2022
Note GBP'000 GBP'000 GBP'000
================================= ===== ---------- ========== =========
Non-current assets
Intangible assets 6 11,937 13,212 12,580
Property, plant and equipment 189 56 128
Right of Use assets 1,147 648 814
================================= ===== ========== ========== =========
Total non-current assets 13,273 13,916 13,522
================================= ===== ========== ========== =========
Current assets
Inventories 100 223 165
Trade and other receivables 7 5,025 4,852 4,766
Contract assets 8 740 586 558
Cash and cash equivalents 1,275 1,312 1,516
================================= ===== ========== ========== =========
Total current assets 7,140 6,973 7,005
================================= ===== ========== ========== =========
Total assets 20,413 20,889 20,527
================================= ===== ========== ========== =========
Current liabilities
Trade and other payables 9 (7,406) (6,440) (6,890)
Contract liabilities (1,767) (2,303) (1,891)
Provision for onerous contracts (148) (154) (148)
Borrowings 10 (69) (69) (69)
Lease liability (676) (601) (733)
Total current liabilities (10,066) (9,567) (9,731)
================================= ===== ========== ========== =========
Non-current liabilities
Contract liabilities (542) (178) (601)
Provision for onerous contracts (850) (989) (927)
Borrowings 10 (5,112) (4,400) (4,723)
Lease liability (570) (252) (112)
Deferred tax liability (1,266) (1,525) (1,426)
================================= ===== ========== ========== =========
Total non-current liabilities (8,340) (7,344) (7,789)
================================= ===== ========== ========== =========
Total liabilities (18,406) (16,911) (17,520)
================================= ===== ========== ========== =========
Net assets 2,007 3,978 3,007
================================= ===== ========== ========== =========
Equity
Share capital 7,062 7,062 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 521 510 458
Retained earnings (31,692) (29,710) (30,629)
================================= ===== ========== ========== =========
Total equity 2,007 3,978 3,007
================================= ===== ========== ========== =========
Consolidated statement of changes in equity
for the six-month period ended 31 March 2023
Share Share Capital Merger Other Retained Total
capital premium redemption reserve reserve earnings GBP'000
GBP'000 GBP'000 reserve 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
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Share Share Capital Merger Other Retained Total
capital premium redemption reserve reserve earnings GBP'000
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000
------------------------------ -------- -------- ----------- -------- -------- --------- --------
At 1 April 2022 7,062 17,630 6,489 1,997 510 (29,710) 3,978
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - - (919) (919)
Share-based payments - - - - (52) - (52)
Total movements - - - - (52) (919) (971)
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Equity at 30 September 2022 7,062 17,630 6,489 1,997 458 (30,629) 3,007
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Share Share Capital Merger Other Retained Total
capital premium redemption reserve reserve earnings GBP'000
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000
------------------------------ -------- -------- ----------- -------- -------- --------- --------
At 1 October 2022 7,062 17,630 6,489 1,997 458 (30,629) 3,007
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - - (1,063) (1,063)
Share-based payments - - - - 63 - 63
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Total movements - - - - 63 (1,063) (1,000)
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Equity at 31 March 2023 7,062 17,630 6,489 1,997 521 (31,692) 2,007
------------------------------ -------- -------- ----------- -------- -------- --------- --------
Consolidated statement of cash flows
for the six-month period ended 31 March 2023
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months Year
to to to to
31 March 30 Sept 31 March 30 Sept
2023 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ---------- ---------- ---------- --------
Cash flows from operating activities
Loss before taxation (1,224) (1,076) (1,532) (2,608)
Adjustments for:
Depreciation - IFRS16 data centre
right of use assets 400 301 229 530
Depreciation - owned assets 33 21 29 50
Depreciation - right of use assets 53 98 16 114
Amortisation 643 632 654 1,286
Share-based payments 63 (52) 171 119
Net finance expense 437 432 339 771
Costs relating to acquisitions(1) - - 58 58
Movements in provisions (76) (153) - (153)
Increase in trade and other receivables (441) (44) (1,020) (1,064)
Decrease / (increase) in inventories 65 58 (137) (79)
Increase in trade payables, accruals
and contract liabilities 373 703 1,311 2,014
Net cash inflow from operating
activities before acquisition
costs 326 920 118 1,038
Costs relating to acquisitions(1) - - (58) (58)
----------------------------------------- ---------- ---------- ---------- --------
Net cash inflow from operating
activities 326 920 60 980
----------------------------------------- ---------- ---------- ---------- --------
Cash flows from investing activities
Purchase of property, plant and
equipment (94) (99) (16) (115)
Acquisitions net of cash acquired(1) - - 497 497
Payment of deferred consideration
relating to acquisitions (25) (25) (155) (180)
Interest received - - - -
----------------------------------------- ---------- ---------- ---------- --------
Net cash (outflow) / inflow from
investing activities (119) (124) 326 202
----------------------------------------- ---------- ---------- ---------- --------
Cash flows from financing activities
Repayment of COVID-19 bounce-back
loan (10) (9) (9) (18)
Payment of lease liabilities (418) (566) (247) (813)
Interest paid (20) (17) (1) (18)
----------------------------------------- ---------- ---------- ---------- --------
Net cash outflow from financing
activities (448) (592) (257) (849)
----------------------------------------- ---------- ---------- ---------- --------
Net (decrease) / increase in
cash (241) 204 129 333
Cash at bank and in hand at beginning
of period 1,516 1,312 1,183 1,183
----------------------------------------- ---------- ---------- ---------- --------
Cash at bank and in hand at
end of period 1,275 1,516 1,312 1,516
----------------------------------------- ---------- ---------- ---------- --------
Comprising:
Cash at bank and in hand 1,275 1,516 1,312 1,516
----------------------------------------- ---------- ---------- ---------- --------
(1) Relates to the acquisition of CloudCoCo Connect Limited
(formerly IDE Group Connect Limited) and Nimoveri Limited in
October 2021.
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 2023 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 30 June 2024, 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
2023 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------- ------------- ------------- -------------
By operating segment
Managed IT Services 9,077 8,474 8,582 17,056
Valued Added Resale 3,846 4,075 3,062 7,137
----------------------- ------------- ------------- ------------- -------------
Total revenue 12,923 12,549 11,644 24,193
----------------------- ------------- ------------- ------------- -------------
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
2023 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ------------- ------------- ------------- -------------
Costs relating to acquisitions(1) - - (58) (58)
Dilapidations costs (13) (46) - (46)
Run-off costs relating to discontinued data centre
services (36) (69) (69) (138)
Integration and restructure costs (50) (167) (153) (320)
----------------------------------------------------- ------------- ------------- ------------- -------------
Exceptional items (99) (282) (280) (562)
----------------------------------------------------- ------------- ------------- ------------- -------------
(1) Relates to the acquisition of CloudCoCo Connect Limited
(formerly IDE Group Connect Limited) and Nimoveri Limited in
October 2021.
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
2023 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- ------------ ------------ ------------ ------------
Loss attributable to ordinary shareholders (1,063) (919) (1,368) (2,287)
Number Number Number Number
Weighted average number of Ordinary Shares in issue, basic and
diluted 706,215,686 706,215,686 706,215,686 706,215,686
Basic and diluted loss per share (0.15)p (0.13)p (0.19)p (0.32)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
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 2021 10,088 361 2,127 9,421 21,997
Additions - acquisition of
CloudCoCo Connect Limited
in October 2021 1,193 - 256 2,024 3,473
--------------------------------- --------- ------------- --------- --------- ---------
At 31 March 2022, 30 September
2022 and
31 March 2023 11,281 361 2,383 11,445 25,470
--------------------------------- --------- ------------- --------- --------- ---------
Accumulated amortisation
-------------------------------- --------- ------------- --------- --------- ---------
At 1 October 2021 - (184) (1,032) (4,523) (5,739)
Charge for the year - (9) (63) (582) (654)
--------------------------------- --------- ------------- --------- --------- ---------
At 31 March 2022 - (193) (1,095) (5,105) (6,393)
--------------------------------- --------- ------------- --------- --------- ---------
Charge for the year - (9) (60) (563) (632)
--------------------------------- --------- ------------- --------- --------- ---------
At 30 September 2022 - (202) (1,155) (5,668) (7,025)
--------------------------------- --------- ------------- --------- --------- ---------
Charge for the year - (9) (61) (573) (643)
--------------------------------- --------- ------------- --------- --------- ---------
At 31 March 2023 - (211) (1,216) (6,241) (7,668)
--------------------------------- --------- ------------- --------- --------- ---------
Impairment
-------------------------------- --------- ------------- --------- --------- ---------
At 31 March 2022, 30 September
2022 and
31 March 2023 (4,447) - (225) (1,193) (5,865)
--------------------------------- --------- ------------- --------- --------- ---------
Carrying amount
At 31 March 2023 6,834 150 942 4,011 11,937
--------------------------------- --------- ------------- --------- --------- ---------
At 30 September 2022 6,834 159 1,003 4,584 12,580
--------------------------------- --------- ------------- --------- --------- ---------
At 31 March 2022 6,834 168 1,063 5,147 13,212
--------------------------------- --------- ------------- --------- --------- ---------
Average remaining amortisation 8.3 7.7 3.5 4.0
period years years years years
--------------------------------- --------- ------------- --------- --------- ---------
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are independent cash inflows
(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 inflows. The directors
concluded that at 31 March 2023, there were four CGUs being
CloudCoCo Limited, CloudCoCo Connect Limited (formerly IDE Group
Connect Limited), Systems Assurance Limited and More Computers
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 Board approved budget for the next twelve
months, and business plan, growth rates for the next five years,
weighted average cost of capital ("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 13.25%
(H1 2022: 11.25%) for each CGU. The pre-tax discount rate (weighted
average cost of capital) was calculated at 18% per annum
(H1 2022:15%) and the revenue growth rate is 5% per annum (H1
2022: 5%) for each CGU for 5 years and a terminal growth rate of 2%
(H1 2022: 2%).
Sensitivities have been run on cash flow forecasts for the CGU.
Revenue growth rates are considered to be the most sensitive
assumption in determining future cash flows for each 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 other key assumptions and the resultant excess (or
shortfall) of discounted cash flows against the aggregate of
goodwill and intangible assets.
Sensitivity analysis Systems More CloudCoCo
GBP'000 CloudCoCo Assurance Computers Connect
Limited Limited Limited Limited
(1)
------------------------------------- ---------- ---------- ---------- ---------
Excess of recoverable amount over
carrying value:
Base case - headroom 2,010 315 476 3,676
Pre-tax discount rate increased
by 1% - resulting headroom 1,588 286 448 3,440
Revenue growth rate reduced in years
2 to 5 by 1% per annum - resulting
headroom 1,316 264 443 2,716
------------------------------------- ---------- ---------- ---------- ---------
Base case calculations highlight that the impairment review in
respect of CloudCoCo Limited is most sensitive to the discount rate
and growth rate. Headroom was also evident when applying a growth
rate of 2% in years 2 to 5 in each of the CGU's but would trigger
an impairment of GBP354,000 in CloudCoCo Limited.
7. Trade and other receivables
Unaudited Unaudited
31 March 2023 31 March 2022 Audited 30 September 2022
GBP'000 GBP'000 GBP'000
---------------------------- -------------- -------------- -------------------------
Trade receivables 3,217 3,043 2,936
Other debtors 2 07 1 11 244
Prepayments 1,601 1,698 1,586
---------------------------- -------------- -------------- -------------------------
Trade and other receivables 5,025 4,852 4,766
---------------------------- -------------- -------------- -------------------------
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. Contract assets
Unaudited Unaudited
31 March 2023 31 March 2022 Audited 30 September 2022
GBP'000 GBP'000 GBP'000
---------------- -------------- -------------- -------------------------
Contract assets 740 586 558
---------------- -------------- -------------- -------------------------
Contract assets relate to the Group's right to consideration in
respect of goods or services that the Group has transferred to a
customer. Contract assets are linked to recurring Managed IT
services revenues, which have increased as a result of an increase
in usage based services billed in arrears.
9. Trade and other payables
Unaudited Unaudited
31 March 2023 31 March 2022 Audited 30 September 2022
GBP'000 GBP'000 GBP'000
-------------------------------------- -------------- -------------- -------------------------
Trade payables 5,325 4,492 4,717
Accruals 1,424 1,210 1,448
Other taxes and social security costs 657 738 725
-------------------------------------- -------------- -------------- -------------------------
Trade and other payables 7,406 6,440 6,890
-------------------------------------- -------------- -------------- -------------------------
10. Borrowings
10.1 Current
Unaudited Unaudited
31 March 2023 31 March 2022 Audited 30 September 2022
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- -------------- -------------- -------------------------
COVID-19 Bounce-back loan repayable - short-term element 19 19 19
Deferred consideration relating to the acquisition of
CloudCoCo Connect Limited (formerly
IDE Group Connect Limited) - short term element at Fair
Value 50 50 50
69 69 69
----------------------------------------------------------- -------------- -------------- -------------------------
10.2 Non-current
Unaudited Unaudited
31 March 2023 31 March 2022 Audited 30 September 2022
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- -------------- -------------- -------------------------
Loan notes repayable in October 2024 4,932 4,224 4 ,558
COVID-19 Business Bounce-back loan repayable - long-term
element 54 73 63
Deferred consideration relating to the acquisition of
CloudCoCo Connect Limited (formerly
IDE Group Connect Limited) - long term element at Fair
Value 126 103 102
----------------------------------------------------------- -------------- -------------- -------------------------
5,112 4,400 4,723
----------------------------------------------------------- -------------- -------------- -------------------------
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.
10.3 Net debt - net debt comprises: 31 March Cash Other 31 March
2023 movements movements 2022
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ---------- ---------- --------
Loan notes 4,932 - 708 4,224
COVID-19 Bounce-back loans 73 (19) - 92
Deferred consideration relating to
the acquisition of CloudCoCo Connect
Limited (formerly IDE Group Connect
Limited) - Fair Value 176 (50) 73 153
Lease liabilities 1,246 (984) 1,377 853
Cash and cash equivalents (1,275) 37 - (1,312)
Total 5,152 (1,016) 2,158 4,010
-------------------------------------- ----------- ---------- ---------- --------
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END
IR FFFIVRFITFIV
(END) Dow Jones Newswires
June 29, 2023 02:00 ET (06:00 GMT)
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