TIDMTOOP
RNS Number : 5489B
Toople PLC
31 January 2020
Strictly embargoed until: 07.00, 31 January 2020
Toople PLC
("Toople" or the "Company")
Final results for the year ended 30 September 2019
Toople PLC (LSE: TOOP), a provider of bespoke telecom services
to UK SMEs, today announces its final audited results for the year
ended 30 September 2019.
Highlights:
-- Revenue, showing significant growth year on year increasing by over 80% to GBP2,452,153
o Broadband revenue grew by over 220% to GBP1,331,699
o Hosted revenue grew by 80% to GBP114,892
o Mobile revenue grew by over 200% to GBP166,517
o Growth achieved despite sacrificing over GBP600,000 of revenue
due to termination of onerous partnership agreements signed prior
to IPO
-- Gross profit increased by 165.5% to GBP478,704 (FY18: GBP180,457)
o Overall gross margin improved by 6.2 percentage points to
19.5%
-- Increase in marketing and sales costs as business drives revenue for future returns
o New Head of Digital and Commercial Marketing appointed to
focus on driving growth, innovation and sales
o Growth in direct customer orders driving growth, validating
management decision to increase marketing spend
-- Strong monthly growth in new customer orders and new customer
wins continued throughout year
-- Year on year growth in customer orders up over 100% for year to date
-- New sales centre opened in Durban, South Africa performing well
o Significantly extended operating hours into the evening
o Helps maximise customer enquiries
o Cost attractive when compared to on-shore UK
o Reducing cost of customer acquisition
o Leads to reduction of sales cost of circa 50% per order
-- Customer acquisition costs decreasing and customers increasing the amount of services taken
-- Private placement successfully completed raising GBP662,231
-- Debt of circa GBP600,000 repaid in full for a payment of only GBP150,000
-- Acquisition strategy implemented
Commenting on current trading and outlook Mr Horsman added:
"We will today announce a transformational acquisition for the
Company. This coupled with the strong operational performance of
the business gives the Board significant confidence in the future
cash generative capabilities of the enlarged Group."
Andy Hollingworth, CEO at Toople commented:
"The Toople proposition is about offering our customers choice.
We provide them with the best solution for their individual needs.
The investments we have made this year have driven top line growth
with future returns in mind. We continue to demonstrate to our
customers that we are agnostic about carrier choice and focussed on
providing them with the best service at the best price; with
transparency and certainty of costs over the term of their
contract."
-ends-
For further information please visit www.toople.com or
contact:
Toople PLC Tel: 0800 0499 499
Andy Hollingworth, Chief Executive
Officer
Cairn Financial Advisers LLP Tel: 020 7213 0880
Sandy Jamieson / Ludovico Lazzaretti
Novum Securities Limited Tel: 020 7399 9400
Colin Rowbury
Turner Pope Investments Limited Tel: 020 3621 4120
Andy Thacker
Belvedere Communications Tel: 020 3687 2754
John West / Llew Angus
About Toople PLC
Toople Plc, a company incorporated in the UK provides a range of
telecoms services primarily targeted at the UK SME market. Services
offered by the Group include business broadband, fibre, EFM and
Ethernet data services, business mobile phones, cloud PBX and SIP
Trunking and Traditional Services (calls and lines) all of which
are delivered and managed through Merlin, the Group's proprietary
software platform.
The Group is differentiated by its focus on creating business
broadband solutions, with robust and reliable packages that will
enhance our customers company's business. In addition, our vision
is based on trust and transparency, with no hidden fees within our
pricing policy providing customers with a clear understanding of
cost.
Toople Plc has a strong and highly experienced Board and
management team who are focused on growing the business both
organically and by identifying earnings enhancing strategic
acquisition opportunities.
Chairman's Statement
A transformational year for Toople
This has been a transformational year for Toople, during which
the financial and operational foundations have been put in place to
enable future growth.
Overview
Toople provides a bespoke telecoms services for our target
market of UK SMEs with between 1 and 50 employees which is
immediately available to customers, at an attractive price that is
always fixed for the life of the contract. Our fixed price offering
is one of our unique selling points. Our services include the
provision of cloud based telephony services: broadband over copper,
fibre, EFM and Ethernet data services (with call bundles) and
mobile services. Our "Online first" business model is supported by
direct digital marketing campaigns and a sales centre based in
Durban, South Africa. We have multiple sales and marketing channels
and a proprietary delivery platform, Merlin, which ensures that
customers receive instant quotes based on the most competitive
prices available.
Growth in both revenue and customer numbers
Toople has enjoyed substantial growth during the financial year
both in terms of both customer numbers and revenue generated by
those customers. UK SMEs continue to switch to Toople and we have
seen record numbers of new customers signing up with us. Our
products are flexible and carrier agnostic. This, coupled with
excellent customer support, has resulted in impressive month by
month growth in new customer acquisition numbers when compared with
the previous financial year.
For customers who want certainty and ease of use, Toople is a
natural choice. Our fixed rate products satisfy all SME
telecommunications needs. Our pricing is transparent and we have
UK-based support desks offering premium quality customer service,
something that is valued by our customers.
Business Model and Performance
We target both the direct to customer (retail) and the wholesale
markets, where we offer white label services on behalf of other
telecoms companies, offering them access to our own Merlin
platform. During the year we took the strategic decision to
reassess legacy wholesale contracts that had historically delivered
low gross margins. We will now only sign partnership agreements
which are more profitable, as well as renegotiating or terminating
historic unattractive contracts as they come to an end. As a result
we have continued to sign a number of new agreements, but only
where we are satisfied that debtor risk is low and margins are
attractive. As expected, this strategy and the termination of
onerous partnership agreements, means that in the short term we saw
a decline in wholesale revenue, but the overall margin mix is
improved and this will result in improved gross margin for the
business.
Our digital marketing spend has increased in line with our
growth as we try to ensure that in excess of one million business
owners and decision makers see our propositions every month via
direct digital marketing, the use of social media channels and
internet search engines. Increases in customer numbers have
vindicated this spend. Customer conversion rates are improving as
we have engaged an additional dedicated resource in Durban, South
Africa.
Our growing customer base will result in a lower cost of
acquisition per customer and will boost our future outlook, as
operational automation further develops and we start to see average
revenue per user improve.
Placing
In June 2019 we were approached by our brokers who had received
demand from their clients to invest further in our business as they
are pleased with the substantial financial and operational progress
we had made in the previous months. Given the demand and the
opportunity to repay the Company's debt at a significant discount
to book value (GBP150,000 against circa GBP600,000 - see Note 11
for further explanation), the Board agreed to a Placing, which
raised GBP662,231.
The result of the Placing was to leave the Company debt free
and, importantly, in a position to invest further in its digital
marketing strategy to increase the rate of customer enquiries and
correspondingly to improve conversion rates. Given that these
customers are typically signing two year fixed contracts, we
believe that the Company can use this opportunity to accelerate its
timeframe to cash generation and profitability.
Summary and Outlook
The strength and growth of the business has continued into the
new financial year and, given the various operational improvements
we have made, strategic investment in our core business and our
excellent product offering and customer service will, we believe,
ultimately set us on the road to achieve our stated goal of long
term future profitability. This is likely to be significantly
accelerated by our M&A activity in the future.
I would like to once again take this opportunity to thank our
partners, customers, employees, Board and of course our
shareholders for their continued support.
Richard Horsman
Non-Executive Chairman
30 January 2020
Chief Executive Officer's Review
.Expect Growth and Expansion to Continue in the Future
I am very pleased to update our shareholders on another record
year of performance, as our reach across the small business market
continues to grow rapidly, firmly positioning Toople in the market
as the alternative telecommunications provider of choice to UK
SMEs.
Growth is being driven by a number of factors, not least a
noticeable switch by UK SMEs to superfast fibre broadband, ahead of
the eventual closure of existing legacy copper infrastructure in
2025. As businesses are forced to review their existing telecoms
services, many are seeking new solutions which provide enhanced
quality at an affordable fixed price. SMEs are increasingly
dissatisfied with a lack of price transparency, poor service
offerings and poor customer service from the traditional tier one
providers. Toople is taking advantage of these failings by its
bigger competitors and is fast becoming a major disruptor in our
segment of the market. The Company continues to make great
progress, as evidenced by sales figures over the normally quieter
summer period.
Importantly, the growth is reflected in the financial results
with revenue and margins increasing, illustrating that our strategy
is working.
Total revenues grew by over 80% to GBP2.5 million (FY 2018:
GBP1.36 million) with Broadband revenue growing by 221%, hosted
revenue by 80% and mobile revenue by 203%. Gross profit increased
by 165.3% to GBP478,704 (FY18: GBP180,457) and overall gross margin
improved by 6.2 percentage points to 19.5%.
As expected, our wholesale revenue decreased as we took the
strategic decision to exit legacy contracts which have historically
delivered low gross margins. Our strategy is now to only sign
partnership agreements which are more profitable, as well as
renegotiating or terminating historic unattractive contracts as
they come to an end. As a result we have continued to sign a number
of new agreements, but only where we are satisfied that debtor risk
is low and margins are attractive. This strategy and the
termination of onerous partnership agreements means that in the
short term we experienced a headline decline in revenues of around
GBP600,000 in this regard, this puts our overall revenue growth
into context and makes the underlying figure look even more
impressive.
Although EBITDA has declined when compared to last year, this is
as a result of the continued investment in marketing related
activities to grow the business. Our operating loss was GBP1.67m
(after the gain on settling the shareholder loan of GBP456,341)
compared with GBP1.4m. This performance is in line with our
expectations at this stage of the Company's development.
The digital marketing campaign, one of the central tenets of our
growth strategy, is generating an increasing level of enquiries
from potential customers and a growing conversion rate. This
campaign has been structured to generate the best possible returns
on capital employed, which, together with efficient operating
procedures, has further reduced the cost of new customer
acquisition and is generating new incremental business for the
Company. During the year we also added a new sales resource in
Durban, South Africa which is performing well. This is a
contractual arrangement with a respected agency with an excellent
reputation in telecoms and is based on the results which they
achieve. It is cost attractive when compared to onshore UK
alternatives and offers the added benefit of extending operating
hours, helping to maximise customer enquiries.
These investments were the principal reason for the increase in
cost of sales, which grew from GBP1.18 million to GBP1.97 million
during the year. The increase in costs are driving an increase in
lead conversion and sales. The majority of these new clients are on
two-year fixed contracts, giving us clear visibility of earnings.
The major contract win previously announced is performing in line
with expectations and the first batches of customers have been
transferred over to the Toople Merlin billing and provisioning
platform.
Despite stringent credit checks and strong processes being in
place, as customer numbers and orders increased exponentially, we
also experienced a sharp increase in bad debt provision during the
period. Although this is clearly unwelcome, it was not completely
unexpected given the micro-SME market within which we operate. The
Board has taken a prudent view and provided for around GBP424,000
of the current outstanding book of GBP850,000. Further details on
the underlying assumptions for this provision are contained in Note
3 to the financial statements. Importantly we have taken proactive
steps to arrest the rise in bad debts and to recuperate as much as
possible from the outstanding amounts. This includes making changes
to our billing platform to take daily payments and engaging an
outside credit control and debt collection agency. We expect bad
debt levels to normalise over the coming months.
As explained in Note 2(c) 'Accounting Policies - going concern'
to the financial statements, the Group does not currently have
sufficient funds to meet its working capital needs for the next 12
months and further funding will be required. The Directors are
confident that funding can and will be obtained at the appropriate
time.
Market opportunity
Our industry will see significant change over the next five
years, as industry leaders and the Government continue to agree a
timetable for switching off copper broadband services and to
implement full fibre broadband to replace existing copper networks
on a region-by-region basis by 2025. Businesses are likely to be
given two years in each area of the country to move to a full-fibre
provider.
In practice this means that some seven million PSTN lines and
around three million ISDN circuits are due to be retired by 2025.
All legacy phone systems need to change. This represents a
significant opportunity for Toople, as all our propositions are
built on next generation technology and future proofed to take
advantage of this imminent migration. We also expect to see a sharp
increase in demand for cloud-based technology solutions.
We continue to operate in a highly fragmented market that is
ripe for consolidation. With a strong management team and Board in
place with considerable sector and M&A experience, we are
ideally positioned to use our listing and take advantage of this to
accelerate our growth and utilise the inherent operational gearing
in the business.
Future strategy and outlook
We will continue to become the telecoms supplier of choice for
SMEs delivering instant, easy, communication solutions with a
transparent pricing model. This will mean further investment in
direct digital marketing to drive customer and profit growth, as
well as visibility and predictability of revenues over the medium
and longer term.
We continue to grow by adding new customers, selling add-ins to
existing customers and exploring synergistic acquisition
opportunities.
Toople is already a one-stop easy-to-use telecoms provider that
can tailor a package to a client's exact business needs. We are
operating in a large and growing target market with a rapidly
increasing customer base and clear demand for our offering. Our
direct digital marketing capability is delivering increased
predictable recurring revenues. With an experienced and proven
management team in place capable of scaling the company both
organically and via acquisitions, the future for Toople is very
bright.
Andrew Hollingworth
Chief Executive Officer
30 January 2020
A copy of the Annual Report will be posted on the Company's
website: www.toople.com.
An electronic version has been submitted to the National Storage
Mechanism which will shortly be available for inspection at
http://www.morningstar.co.uk/uk/NSM.
Notice of the Company's Annual General Meeting will be sent to
shareholders in due course.
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END
FR SDESMFESSELF
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January 31, 2020 02:00 ET (07:00 GMT)
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