TIDMTOOP
RNS Number : 4596S
Toople PLC
09 July 2020
Strictly embargoed until: 07.00, 9(th) July 2020
Toople PLC
("Toople" or the "Company" or the "Group")
Interim results for the six months ended 31 March 2020
Toople PLC (LSE: TOOP), a provider of bespoke telecom services
to UK SMEs, today announces interim results for the six months
ended 31 March 2020.
Commenting on the results, Richard Horsman, Non-Executive
Chairman, said:
"Our business is functioning well and the key operational and
financial milestones that we outlined at the time of the
acquisition of DMSL have been achieved. We are well placed to take
advantage of the financial and operational synergies afforded by
the acquisition of DMSL and our growth drivers, which will only
increase in relevance as the UK economy emerges from the COVID-19
crisis. Whether the lockdown eases swiftly, or becomes stricter,
Toople is the solution to stay connected."
Financial and Operational Highlights:
-- Successful placing to raise gross proceeds of GBP1.2 million
to fund the transformational acquisition of DMS Holding 2017
Limited ("DMSL"), completed on 19 February 2020
o Reported period contains only six weeks of ownership of
DMSL
o DMSL has a history of being cash generative, which should
considerably accelerate timeline to achieve profitability and
positive cash generation
-- Group revenue grew year on year by 39% to GBP1.5 million for the six month period
o Broadband revenue grew by 70%
o Mobile revenue grew by 100%
-- Gross profit increased by 61% to GBP334,839 (HY 2019: GBP207,494)
-- Gross margin improved by 3 percentage points to 22%
-- Cash at bank was over GBP1 million at period end
-- New contract wins for reported for the Group
-- Launch of a telecoms price comparison website and a service
offering company credit reference checking
and reports, complementing the Group's IT and telecoms services
-- Company on track to realise cost synergies of over GBP1
million per annum following acquisition
o GBP480,000 (annualised) already achieved to date, with a
further GBP120,000 already in progress to be delivered; and a
further GBP420,000 identified to be realised by end of financial
year
Commenting on summary and outlook, Andy Hollingworth, CEO at
Toople, added:
"Growth is being driven by a number of factors, not least a
noticeable switch by UK SMEs to superfast fibre broadband, ahead of
the phasing out of existing legacy copper infrastructure, due for
completion by 2025. This trend is coupled with a seismic shift in
UK working practices, whereby more workers are either electing or
being asked to work from home, driving further reliance on home
based telecoms, IT and broadband solutions.
"All our brand propositions are geared around offering choice
for our customers. We provide them with the best bespoke solution
for their individual needs. The investments we have made are
driving top line growth with future returns in mind. That said, the
financial and operating synergies already achieved are propelling
us more quickly towards positive cash generation. Clearly the major
caveat is the true impact of COVID-19 on the wider economy, but as
it stands today, we believe it presents opportunities for our
Group."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information please visit www.toople.com or
contact:
Toople PLC Tel: 0800 0499 499
Andy Hollingworth, Chief Executive
Officer
Kevin Lawrence, Chief Financial
Officer
Cairn Financial Advisers LLP Tel: 020 7213 0880
Sandy Jamieson / Ludovico Lazzaretti
Novum Securities Limited Tel: 020 7399 9400
David Coffman
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 small
business connectivity solutions, with robust and reliable packages
that will enhance our customer's companies. 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
Introduction
Firstly, I would like to take this opportunity to thank all our
staff and commercial partners for their effort and support in
continuing to deliver services to our customers over the lockdown
period. Their commitment has been outstanding, not least during the
current uncertainty and upheaval caused by the coronavirus pandemic
and we wish them and all our customers and shareholders well. I
would also like to thank Geoff Wilson, who had been a Director of
the Company since market entry and chose not to stand for
re-election at the last Annual General Meeting. Geoff's insight,
experience and advice has been invaluable to the Company and we
wish him well for the future. Toople has changed dramatically over
the course of the last six months and even more so since the
reported period ended.
Acquisition and Business Overview
In January 2020 we announced a successful placing to raise gross
proceeds of GBP1.2 million to fund the transformational acquisition
of DMS Holding 2017 Limited ("DMSL"). The total consideration for
the acquisition was GBP1.56 million, which was paid for by a cash
payment of GBP376,000, and the issue of new ordinary shares in
Toople.
DMSL provides unified communication services in the UK and has
over 15 years' experience of providing broadband connectivity,
mobile and fixed voice and cloud services. The commercial benefits
of the acquisition, completed on 19 February 2020, have already
become evident. The positive financial impact will become clearer
when we announce Final Results, as this reported period only
contains six weeks of ownership of DMSL, and few of the acquisition
benefits are reflected in these numbers.
We are very pleased to have completed this transformational
acquisition and would like to thank all the shareholders, old and
new, who have backed us, as well as our new debt finance partners
HomeSelect Finance. We believe that the combined business will now
accelerate Toople towards EBITDA profitability and cash
self-sufficiency, reducing previous reliance on the market to
provide funds for working capital.
The acquisition of DMSL also expanded the Group's reach into the
UK residential market, which is experiencing a period of rapid
change, as operational automation further develops and more people
choose to (or are forced to) work from home.
We have also recently launched a telecoms price comparison
website and a service offering company credit reference checking
and reports. These complement the Group's IT and telecoms
services.
Growth Drivers
All the Group brands seek to differentiate themselves by
offering IT, telecoms and broadband solutions, with robust and
reliable packages, that enhance a customer's business and are based
on trust and transparency, with no hidden fees within pricing
policies. This provides customers with a clear understanding of
cost and fixed prices for the duration of their contracts.
Growth is being driven by a number of factors, not least a
noticeable switch by UK SMEs to superfast fibre broadband and VoIP
telephony, ahead of the phasing out of existing legacy copper
infrastructure, due for completion by 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
larger competitors and is fast becoming a major disruptor in the
market.
This trend is coupled with a seismic shift in UK working
practices, whereby more workers are either electing or being asked
to work from home, driving further reliance on home based telecoms,
IT and broadband solutions.
COVID-19 impact
The trend towards working from home has been accelerated by the
onset of COVID-19 and the subsequent lockdown, which happened right
at the end of the reported period. The COVID-19 pandemic has
impacted all businesses to varying degrees and affected the lives
of all citizens in the UK. With the rapid development of COVID-19,
our priority was to help ensure the health and safety of our
employees, customers, partners, and communities and to ensure
business continuity for us and our customers.
Following the COVID-19 outbreak, we quickly deployed our own
unified communications platform across the entire workforce. Our
employees in the UK, South Africa and Poland have been able to work
remotely without disruption to any of the Company's key business
functions. As a result, sales, billing and customer support
functions have remained largely unaffected and the business has
continued to perform solidly, signing new customers and servicing
existing ones.
All businesses in the UK have undoubtedly been forced to make
unprecedented changes to the way in which they operate. To believe
that we are fully insulated from the global crisis would be unwise,
but the Company is optimistic about its business case since it
provides critical connectivity services and many businesses are
even more dependent on it now than previously.
Summary and Outlook
Our business is functioning solidly and the key operational and
financial milestones that we outlined at the time of the
acquisition of DMSL are being achieved. We are well placed to take
advantage of the financial and operational synergies afforded by
the acquisition of DMSL, and our growth drivers, which will only
increase in relevance as the UK economy emerges from the COVID-19
crisis. Whether the lockdown eases swiftly, or it becomes stricter,
Toople is the solution to stay connected.
The new Toople has a strong operational and financial base from
which to grow and is selling into a market which demands quality
products and services at an affordable fixed price: which is what
we offer. We look forward to the future with renewed confidence and
optimism.
Richard Horsman
Non-Executive Chairman
CEO's Review
Overview
This has been a period of substantial activity for the Group as
we completed the acquisition of DMSL; raised new funds;
restructured the business into four operating brands; and began to
realise the benefits that the operating and financial synergies of
a larger group bring.
The integration of DMSL is progressing to plan, and the
substantial cost savings identified at the time of the acquisition
are now being made, with further details given below. As part of
this, notice of termination was given on the Company's Slough
premises and the Company has now moved to operate from one
location; Bishop's Stortford.
Following the acquisition, Toople has extended its offering and
now trades under four main brands: www.toople.com ;
www.dmsluk.co.uk ; broadbandandphones.co.uk ; and
www.checkthatcompany.co.uk .
Toople.com continues to provide, as before, bespoke telecoms
services managed via the Group's proprietary software platform, for
its fast growing target market of UK SMEs with between one and 50
employees.
DMSL also provides unified communication services in the UK,
ranging from a single phone line to a multi-site unified comms VoIP
platform, delivered via a network of telecoms and IT carriers and
content providers across the UK including BT Business, BT Global
Services, Gamma, EE, Vonage, TalkTalk Business and O2. DMSL acts as
a BT Premier reseller for broadband connectivity, mobile and fixed
voice and cloud services and is responsible for over 250,000 BT
customers and over 400,000 Revenue Generating Units.
broadbandandphones.co.uk is a telecoms price comparison website
and www.checkthatcompany.co.uk is a service offering company credit
reference checking and reports. These complement the Group's IT and
telecoms services, and although in their infancy, early indications
are that they are growing well.
Financial Performance
The six month reported period contains only six weeks'
contribution from DMSL, which was completed on 19 February
2020.
Total revenues grew by over 39% to GBP1.5 million (HY 2019:
GBP1.08 million) with Broadband revenue growing by 70% and mobile
revenue by 100%. Gross profit increased by 61% to GBP334,839 (HY
2019: GBP207,494) and overall gross margin improved by 3 percentage
points to 22%.
In our wholesale business, we continued with our strategy to
only sign partnership agreements which are more profitable, as well
as renegotiating or terminating historic unattractive contracts. We
have made further progress in this regard during the reported
period.
Our operating loss was GBP1.06 million compared with a loss in
HY2019 of GBP843,579, but this includes exceptional one off
restructuring costs of GBP78,986. Marketing costs were also higher
when compared to HY2019, reflecting our strategy to invest in
digital marketing and to grow the business, driving a significant
increase in lead conversion and sales, which ultimately will result
in a lower cost of acquisition per customer.
Cash at bank was over GBP1 million at period end and total
assets increased substantially due to the acquisition, increasing
to GBP4.2 million (HY2019: GBP1.3 million). Loss per share was 0.06
compared to 0.09 in HY2019.
DMSL has multiple revenue streams including: upfront cash and
recurring revenue from BT activities; recurring revenues from
directly managed and contracted customers; and revenue share with
resellers. The combined Group is now of significantly larger scale,
which has opened up opportunities to benefit from operational
gearing and operating efficiencies.
DMSL has a history of being cash generative, which should
considerably accelerate our timeline to achieve profitability and
positive cash generation. We communicated at the time of the
acquisition that we were seeking to achieve cost savings of
GBP50,000 per month equating to GBP600,000 per annum. To date we
have already achieved over GBP40,000 per month (GBP480,000 on an
annual basis) with the remaining GBP20,000 (GBP120,000 annualised)
already in progress to be delivered.
In addition to this we have now identified a further annualised
total of GBP420,000 that can be realised, so we now expect to
achieve over GBP1 million of synergies over the course of the next
financial year, substantially more than originally identified.
We remain cautious about the overall impact that COVID will have
on our customers and the wider economy, but despite this, the
Company expects to be in a much stronger position from a cash
generation perspective as a result of the acquisition synergies
that we have identified and realised.
Operating Performance
DMSL continues to perform solidly and since acquisition has won
a number of notable new contracts in the retail, NGO and insurance
sectors. We were particularly pleased with the Carluccio's contract
win (following its acquisition by Boparan Restaurant Group) as it
showed the attractiveness of our service offering.
The Board remains acutely aware of the impact of COVID-19 on the
wider business environment; its true impact cannot be
underestimated by any business. However, we are confident that our
core offering of a cloud telephony platform will ensure business
continuity and can act as a solution for other businesses who are
increasingly seeing remote working environments as the norm.
The difficulties caused by the outbreak of COVID-19 and the
ensuing 'lockdown' means that small and medium sized businesses,
particularly in the food retail, leisure and hospitality
industries, will increasingly look for this type of reliable fixed
price communication and connectivity.
Furthermore the Government has earmarked GBP5 billion towards
rolling out gigabit broadband in the most difficult-to-reach 20 per
cent of the country. We welcome this move and consider it to be a
boost to Toople, and to consumers and businesses who will gain
access to higher speed and larger bandwidth connectivity over the
next five years. Toople is well placed to take advantage of these
market drivers.
Summary and Outlook
All our brand propositions are geared around offering our
customers choice. We provide them with the best bespoke solution
for their individual needs. The investments we have made are
driving top line growth with future returns in mind. That said, the
financial and operating synergies achieved are propelling us more
quickly towards positive cash generation. Clearly the major caveat
is the true impact of COVID-19 on the wider economy, but as it
stands today, we believe it presents opportunities for our
Group.
Despite the challenging trading conditions in the B2B
environment, both DMSL and Toople have been trading satisfactorily,
and in recent weeks we have seen a material change back to
pre-COVID-19 conditions. The board believe that, considering the
uncertain times and unprecedented period, the combined business is
well placed from a material lower operating base achieved through
the acquisition synergies to take advantage of post COVID-19
opportunities.
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. Particularly at this difficult
time, businesses and consumers have needed this from their telecoms
and IT suppliers. Our propositions continue to be disruptive and
competitive in the market. Whether business confidence grows or
shrinks, businesses need to remain connected, and we offer the best
telecommunications technology at a fixed price that will always
remain attractive against sluggish incumbents.
Andrew Hollingworth
Chief Executive Officer
Principal risks and uncertainties relating to the Company's
business strategy
The Group is subject to a number of risk factors. The Company's
prospectus published at the time of its Standard Listing and the
further prospectuses published in June 2017, September 2018 and
January 2020 included detailed assessments of the risks facing the
business. The Directors have remained cognisant of the following
key risks in the first six months of this financial year. Other
risk factors not presently known or currently deemed immaterial may
also apply.
-- The Company is dependent on the ability of the Directors to
implement the Company's strategy and significantly increase
customer numbers. There is no assurance that the Company's business
strategy will ultimately be successful;
-- The Group operates in a competitive market and may not be
able to sell multiple products to customers;
-- The loss of, or inability to attract, key personnel could adversely affect the Group;
-- The technology upon which the Group's products and services
are based may become obsolete; in
particular, the Group is reliant on the technical robustness of its software platform;
-- An increase in supplier costs could result in significantly reduced gross profit margins;
-- The Group is currently dependent on marketing spend to
generate customers. The Group may not be able to acquire customers
at a cost that will generate sufficient gross profit margins for
the Group, particularly if competition in the market increases;
-- The Company may not be able to secure capital to provide
working capital for the Group to drive the
growth of the business on terms acceptable to the Group, or at all
-- The ownership and use of intellectual property by the Group
may be challenged by third parties or otherwise disputed;
-- From time to time the Group may be subject to complaints or
claims in the normal course of business;
-- The Company is exposed to the risk that third parties that
owe the Group money, securities or other assets may not fulfil
their obligations. These parties may default on their obligations
due to bankruptcy, lack of liquidity, operational failure or other
reasons;
-- The Group's performance could be adversely affected by poor economic conditions;
-- The Group's infrastructure and systems could be targeted by cyber-attacks;
-- The pricing environment in the telecoms industry could become more difficult;
-- The UK telecoms market is subject to regulation by Ofcom and
subject to high incidence of fraud and bad debt risk;
-- New data protection legislation ("GDPR") became effective on
25 May 2018. The Group relies on
assurances from its data suppliers that such data is compliant.
-- COVID-19 - The Board is monitoring the global health crisis
and is considering the associated risks and impact on the position
of the Group from both an operational and financial perspective.
With the extreme restrictions in force as a result of COVID-19 and
is implications, means that there can be no assurance that the
Group will be able to perform its intended workflows, achieve its
stated aims or raise additional finance if required. The Board
continues to monitor the effect of COVID-19 on an on-going
basis.
The Directors seek to mitigate these risks by applying their
considerable experience of operating businesses in the sector and
by devising trading and operating strategies designed to seek out
and exploit profitable trading opportunities whilst seeking to
protect the business from downside risks.
Responsibility Statement
The Directors are responsible for preparing the Interim Report
in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority ('DTR') and with
International Accounting Standard 34 on Interim Financial Reporting
(IAS 34).
The Directors confirm that the interim financial statements have
been prepared in accordance with IAS 34 and that as required by DTR
4.2.7 and DTR 4.2.8, the Interim Report includes a fair review
of:
-- important events that have occurred during the first six months of the year;
-- the impact of those events on the financial statements;
-- a description of the principal risks and uncertainties for
the remaining six months of the financial year;
-- details of any related party transactions that have
materially affected the Company's financial position or performance
in the six months ended 31 March 2020; and
-- any changes in the related parties transactions described in
the last annual report that could have a material effect on the
financial position or performance of the enterprise in the first
six months of the current financial year.
The Directors who served during the period and up to the date of
signing the interim financial statements were:
Richard Horsman
Andrew Hollingworth
Kevin Lawrence
Company Secretary:
WKH Company Secretary Services
By Order of the Board
Andrew Hollingworth
Chief Executive Officer
9 July 2020
Condensed Consolidated Statement of Comprehensive Income
The condensed consolidated statement of comprehensive income of
the Group for the six month period from 1 October 2019 to 31 March
2020 is set out below.
NOTE
Period Ended Period Ended
31 Mar 2020 31 Mar 2019
GBP GBP
------------------------------ ----- --------------- ---------------
Continuing operations
Revenue 1,510,883 1,084,078
Cost of Sales (1,176,044) (876,584)
------------------------------ ----- --------------- ---------------
Gross Profit 334,839 207,494
Other Income 91,864 51,715
Administrative expenses (1,387,734) (1,077,698)
Exceptional restructuring (78,986) -
costs
------------------------------ ----- --------------- ---------------
Operating loss (1,040,017) (818,489)
Interest payable and similar
charges (17,672) (29,225)
Interest receivable 336 4,135
------------------------------ ----- --------------- ---------------
Loss before taxation (1,057,353) (843,579)
Taxation - -
------------------------------ ----- --------------- ---------------
Loss for the period (1,057,353) (843,579)
Other comprehensive loss for - -
the period
------------------------------ ----- --------------- ---------------
Total comprehensive loss for
the period attributable to
the equity owners (1,057,353) (843,579)
------------------------------ ----- --------------- ---------------
Earnings per share
Basic and diluted earnings
per share 5 (0.06) (0.09)
------------------------------ ----- --------------- ---------------
Condensed Consolidated Statement of Financial Position
The condensed consolidated statement of financial position as at
31 March 2020 is set out below:
31 Mar 2020 30 Sept 2019
NOTE GBP GBP
---------------------------------------- ------------ -------------
ASSETS
Non-current assets
Goodwill 9 665,957 -
Intangible and Tangible Assets 9 849,418 124,106
------------------------------------ ------------ -------------
1,515,375 124,106
------------------------------------ ------------ -------------
Current assets
Trade and other receivables 1,687,239 663,528
Cash and cash equivalents 1,000,420 497,400
------------------------------------ ------------ -------------
2,687,659 1,160,928
------------------------------------ ------------ -------------
Total assets 4,203,034 1,285,034
------------------------------------ ------------ -------------
EQUITY and LIABILITIES
Capital and reserves attributable
to equity shareholders
Share capital 6 2,347,874 762,774
Share premium 5,295,014 5,412,561
Merger reserve (25,813) (25,813)
Share-based payment reserve 899,986 255,099
Accumulated deficit (7,157,432) (6,100,080)
------------------------------------ ------------ -------------
Total equity 1,359,629 304,541
------------------------------------ ------------ -------------
Current liabilities
Trade and other payables 7 1,615,884 980,493
Non-current liabilities
Financial liabilities - borrowings 7 1,227,521 -
Total equity and liabilities 4,203,034 1,285,034
------------------------------------ ------------ -------------
Condensed Consolidated Statement of Changes in Equity
The unaudited condensed consolidated statement of changes in
equity of the Group for the period to 31 March 2020 is set out
below:
Share Share Merger Share Capital Accumulated Total
capital premium reserve Based contribution deficit
Payment Reserve
reserve
--------------------- ---------- ---------- --------- --------- -------------- ------------ ------------
CURRENT YEAR GBP GBP GBP GBP GBP GBP GBP
Brought forward
at 1 October
2019 762,774 5,412,561 (25,813) 255,099 - (6,100,079) 304,542
Loss for the
period - - - - - (1,057,353) (1,057,353)
--------------------- ---------- ---------- --------- --------- -------------- ------------ ------------
Total comprehensive
loss for the
period - - - - - (1,057,353) (1,057,353)
Transactions
with owners
Share-based
payment charge (643,109) 644,887 1,778
Issue of share
capital net
of issue costs 1,585,100 525,562 2,110,662
At 31 March
2020 2,347,874 5,295,014 (25,813) 899,986 - (7,157,432) 1,359,629
--------------------- ---------- ---------- --------- --------- -------------- ------------ ------------
Share Share Merger Share Capital Accumulated Total
capital premium reserve Based contribution deficit
Payment Reserve
reserve
--------------------- --------- ---------- --------- --------- -------------- ---------------- --------------
CURRENT YEAR GBP GBP GBP GBP GBP GBP GBP
Brought forward
at 1 October
2018 636,572 4,923,336 (25,813) 255,099 34,239 (4,461,133) 1,362,300
Loss for the
period - - - - - (843,579) (843,579)
--------------------- --------- ---------- --------- --------- -------------- ---------------- --------------
Total comprehensive
loss for the
period - - - - - (843,579) (843,579)
Transactions
with owners
Additional
share issue
costs - (2,191) - - - - (2,191)
Transfer of
interest accrued - - - - (29,225) 29,225 -
--------------------- --------- ---------- --------- --------- -------------- ---------------- --------------
At 31 March
2019 636,572 4,921,145 (25,813) 255,099 5,014 (5,275,487) 516,530
--------------------- --------- ---------- --------- --------- -------------- ---------------- --------------
Condensed Consolidated Statement of Cash Flows
The condensed consolidated cash flow statement of the Group from
1 October 2019 to 31 March 2020 is set out below:
Period ended Period ended
------------------------------------------- ----
31 Mar 2020 31 Mar 2019
------------------------------------------- --- ------------- -------------
GBP GBP
Cash flows from operating activities
Operating loss (1,040,017) (818,489)
Depreciation and amortisation 30,790 7,404
Share-based payment charge 1,778 -
Changes in working capital
(Increase) in receivables (128,444) (154,951)
Increase in payables 211,758 16,692
------------------------------------------------- ------------- -------------
Net cash outflow from operating
activities (924,135) (949,344)
------------------------------------------------- ------------- -------------
Cash flows from financing activities
Proceeds from issues of share
capital (net of issue costs) 934,200 (2,191)
Proceeds from loans 1,234,995 -
Finance costs from loans (65,795) -
Net cash from financing activities 2,103,400 (2,191)
------------------------------------------------- ------------- -------------
Cash flows from investing activities
Purchase of subsidiary undertaking (503,000) -
Net cash acquired with subsidiary -
undertaking (115,436)
Acquisition of intangible and
tangible assets (58,145) (49,300)
Interest received 336 4,135
Net cash from investing activities (676,245) (45,165)
------------------------------------------------- ------------- -------------
Net increase in cash and cash equivalents 503,020 (996,700)
Cash and cash equivalents at
start of period 497,400 2,144,209
------------------------------------------------- ------------- -------------
Cash and cash equivalents at
end of period 1,000,420 1,147,509
------------------------------------------------- ------------- -------------
Notes to the Condensed Consolidated Interim Report
1. General information
The Company was incorporated in England and Wales on 2 March
2016 as a public limited company. The Company's registered office
is located at PO Box 501, The Nexus Building, Broadway, Letchworth
Garden City, Hertfordshire, SG6 9BL.
The Group provides a range of telecoms services primarily
targeted at the UK SME market. Services offered by the Group
include business broadband, fibre, Ethernet First Mile 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.
On 15 April 2016, the Company entered into four share for share
exchange agreements with David Breith pursuant to which the Company
acquired the entire issued share capital of each of Toople.com
Limited, Toople Finance Limited, Toople Management Services Limited
and AskMerlin Limited (together the "Subsidiaries") in
consideration for the issue and allotment to David Breith of
39,000,000 ordinary shares in the Company.
The Directors consider the substance of the acquisition of the
Subsidiaries by the Company to have been a reverse asset
acquisition by the Subsidiaries and that the substance of the
Subsidiaries was that of a single business under common ownership
and control. Further, the Directors consider that the Company did
not meet the definition of a business set out in IFRS3 'Business
combinations'. As a consequence, the Directors consider that the
transaction which gave rise to the formation of the Group fell
outside the scope of IFRS3 and have applied the business
reorganisation principles of UK GAAP to account for the
combination. The consolidated financial statements therefore
present the combination as a continuation of the combined financial
information of the Subsidiaries with no goodwill arising on the
transaction.
2. BASIS OF PREPARATION
(a) The interim, condensed, unaudited financial statements for
the period ended 31 March 2020 have been prepared in accordance
with IAS 34 Interim Financial Reporting. They do not include all
the information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual consolidated financial statements
as at the year ended 30 September 2019. The results for the period
ended 31 March 2020 are unaudited.
The condensed unaudited consolidated financial statements for
the period ended 31 March 2020 have adopted accounting policies
consistent with those followed in the preparation of the Group's
annual consolidated financial statements for the year ended 30
September 2019 with the adoption of IFRS 16 during the period.
The Group is not subject to seasonal fluctuations in
operations.
(b) New and amended standards adopted by the Group
IFRS 16 became applicable during the current reporting period.
The Group reviewed all its leasing arrangements that were in
existence as at 1 October 2019. No contracts that were previously
classified as operating leases needed to be recognised as lease
liabilities in the 1 October 2019 balance sheet.
Following the acquisition of DMSL Holding 2017 Limited, one
contract has been identified as an operating lease which needed to
be identified as a lease liability. Consequently, during the period
the Group identified the following new accounting policies.
Leases
Leases are recognised as a right-of-use asset and a
corresponding lease liability at the date at which the asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments.
-- Fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- Variable lease payments that are based on an index or rate,
initially measured using the index or rate at the commencement
date;
-- Amounts expected to be payable by the Group under residual value guarantees;
-- The exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- Payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
the lessee's incremental borrowing rate is used, being the rate
that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to the Income Statement over the lease
period.
Right-of-use assets are measured at cost which comprises the
following:
-- The amount of the initial measurement of the lease liability;
-- Any lease payments made at or before the commencement date
less any lease incentives received;
-- Any initial direct costs; and
-- Restoration costs
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Payments associated with short-term leases (less than 12 months)
and all lease of low-value assets are recognised on a straight-line
basis as an expense in profit or loss. Low-value assets comprise
office equipment and furniture acquired as part of the acquisition
of DMS Holding 2017 Limited.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use of
accounting estimates which, by definition, will seldom equal the
actual results. Management also needs to exercise judgment in
applying the group's accounting policies.
This note provides an overview of the areas that involved a
higher degree of judgment or complexity, and of items which are
more likely to be materially adjusted due to estimates and
assumptions turning out to be wrong. Detailed information about
each of these estimates and judgments is included together with
information about the basis of calculation for each affected line
item in the financial statements.
The area involving significant estimates or judgments is:
-- Going concern
At 31 March 2020 the Group had GBP1,000,420 of cash and net
assets of GBP1,359,629.
The going concern basis of accounting has been applied based on
management's consideration of financial projections and business
plan for the business. These include a number of forward looking
assumptions about the future growth in the customer base.
Estimates and judgments are continually evaluated. They are
based on historical experience and other factors, including
expectation of future events that may have a financial impact on
the entity and that are believed to be reasonable under the
circumstances.
-- Estimated impairment of goodwill
The determination of fair values of assets acquired and
liabilities assumed in a business combination involves the use of
estimates and assumptions such as the discount rates used and
valuation models as well as goodwill allocation. Goodwill has a
carrying value of GBP665,957 as at 31 March 2020 (30 Sept 2019:
nil) following the acquisition of DMS Holding 2017 Limited. The
carrying value of this goodwill will be subject to an annual
impairment review .
-- Provision for bad and doubtful debts
Given the micro-SME market within which the Group operates, the
Group is susceptible to bad and doubtful debts, as noted in the
Group's Financial Statements to 30 September 2019. The Board has
taken a comprehensive review of the outstanding debts as at 31
March 2020 to assess the recoverability of the debt and any
provisions that may be required however judgement is needed in
making these assessments. In performing this review, the Board has
taken into account the following matters when performing this
estimate:
-- Any cash receipts from customers post year end
-- Age of debt
-- Segmentation of the customer base between B2B and B2C
customers to assess degree of recoverability and payment trends on
the two segments
-- Discussions with the Group's third party professional debt
collection agents to assess underlying reasons for non-payment,
contact rate with customers, payment plans made with customers,
their overall view on the recoverability of the debtor book and
over what time frame and the expected realisable value if the
debtor book were sold to a third party, given its segmentation and
ageing profile.
Taking into account the above factors, the impairment provisions
made range between 20-50% of the balance outstanding. The estimates
and assumptions used to determine the level of provision will
continue to be reviewed periodically and could lead to changes in
the impairment provision methodology which would impact the income
statement in future years.
4. Business Segments
For the purpose of IFRS 8 the chief operating decision maker
("CODM") is the Board of Directors. The Directors are of the
opinion that the business comprises a single economic activity,
being the provision of telephony services and that currently this
activity is undertaken solely in the United Kingdom. All of the
income and non-current assets are derived from the United Kingdom.
The Company has a single customer that, in the reporting period,
amounted to more than 5% (2019 10%) of the Company's revenue;
revenue generated from this customer amounted to GBP78,206 (2019
GBP277,309). At meetings of the Directors, income, expenditure,
cash flows, assets and liabilities are reviewed on a whole Group
basis. Based on the above considerations there is considered to be
one reportable segment only, namely telephony services.
Therefore, the financial information of the single segment is
the same as that set out in the consolidated statement of
comprehensive income, consolidated statement of financial position,
consolidated statement of changes to equity and the consolidated
statement of cash flows.
5. EARNINGS PER SHARE
The calculation of earnings per share is based on the following
loss and number of shares:
Period Ended Period Ended
31 Mar 2020 31 Mar 2019
GBP GBP
---------------------------------------------- -------------- -------------
Loss for the year from continuing operations (1,057,353) (843,579)
Weighted average number of shares in
issue 1,701,993,019 954,380,559
Basic and diluted earnings per share (0.06p) (0.09p)
---------------------------------------------- -------------- -------------
As detailed in note 1, the consolidated financial statements
present the combination as a continuation of the combined financial
information of the Subsidiaries with no goodwill arising on the
transaction. Basic loss per share is calculated by dividing the
loss for the period from continuing operations of the Company by
the number of ordinary shares in issue during at the period
end.
The Company has in issue 1,533,358,131 warrants at 31 March
2020. The inclusion of the warrants in the number of shares in
issue would be anti-dilutive and therefore they have not been
included.
6. SHARE CAPITAL
31 Mar 2020 30 Sept 2019
No. GBP No. GBP
---------------------------- -------------- -------------- -------------- --------------
Allotted and fully paid
Ordinary shares 3,520,051,135 2,347,874 954,380,559 636,572
---------------------------- -------------- -------------- -------------- --------------
Ordinary
shares Share Capital Share Premium
No. GBP GBP
---------------------------- -------------- -------------- -------------- --------------
Share capital
At 1 October 2019 1,143,589,455 762,774 5,412,561
Share issue 2,376,461,680 1,585,100 791,362
Share issue costs - - (265,800)
Share based payment
charge on warrants issued
charged to share premium (643,109)
---------------------------- -------------- -------------- -------------- --------------
At 31 March 2020 3,520,051,135 2,347,874 5,295,014
---------------------------- -------------- -------------- -------------- --------------
On 19 February 2020 the Company placed 1,200,000,000 ordinary
0.0667p shares at a subscription price of 0.1p per share.
Commissions of GBP79,205 were payable to the brokers at the time
and this has been recognised against share premium. At the same
time the Company issued 126,461,680 shares at the same subscription
price to the Directors of the Company to settle GBP126,462 of
unpaid fees owed to them and on the same date 1,050,000,000 shares
were issued at the same subscription price in relation to the
acquisition of DMS Holding 2017 Limited.
Warrants
On 19 February 2020 the Company issued warrants over
1,492,360,840 ordinary shares as follows:
-- 63,230,840 warrants to the two Non-Executive Directors and
one executive Director to subscribe for one new ordinary share at
GBP0.001 per share at any time during the period commencing on the
second anniversary of Admission ("Vesting Date") and at the second
anniversary of the Vesting Date, a vesting condition of the
warrants was that the holder is a Director of the Company on the
date of vesting;
-- 600,000,000 warrants to the subscribers to the placing to
subscribe for one new ordinary share at GBP0.001 per share at any
time during the period commencing on admission and expiring at
midnight on the second anniversary thereof save that in the event
that the closing price of the ordinary shares is equal to or in
excess of GBP0.001 pence for 10 consecutive trading days then the
Company may serve notice on the warrant holders requesting that
they exercise their warrants within 14 days in lieu of which they
shall lapse; and
-- 5,000,000 warrants to Cairn Financial Advisers to subscribe
for one new ordinary share at GBP0.001 per share at any time during
the period commencing on admission and expiring at midnight on the
second anniversary thereof; and
-- 74,130,000 warrants to the Company's brokers to subscribe for
one new ordinary share at GBP0.001 per share at any time during the
period commencing on admission and expiring at midnight on the
second anniversary thereof; and
-- 750,000,000 warrants to the Company's loan note providers to
subscribe for one new ordinary share at GBP0.001 per share at any
time during the period commencing on admission and expiring at
midnight on the second anniversary thereof.
The inputs to the Black-Scholes model were as follows:
Warrants granted 1,492,360,840
Stock price 0.1p
Exercise price 0.1p
Risk free rate 0.5%
Volatility 101%
Time to maturity 2 years
------------------ --------------
The fair value of the warrants issued to the subscribers to the
placing, to Cairn Financial Advisers, the Company's brokers and the
Company's loan note providers amounting to GBP643,109 has been
recognised in share premium on the basis they were issued for
services relating to the placing. The fair value of the warrants
issued to the Directors has been charged to the income statement
evenly over the vesting period resulting in a charge in the current
period of GBP1,778 .
7. TRADE AND OTHER PAYABLES
31 Mar 2020 30 Sept 19
GBP GBP
--------------------------------- ------------ -----------
Trade payables 831,490 516,348
Social Security and other taxes 169,169 123,510
Other payables 130,567 22,613
Lease liabilities 60,984 -
Accruals and deferred income 423,674 318,022
--------------------------------- ------------ -----------
1,615,884 980,493
--------------------------------- ------------ -----------
2020 2019
GBP GBP
Non - current liabilities
Lease liabilities 40,649
1,186,872 -
Borrowings
--------------------------------- ------------ -----------
1,227,521 -
--------------------------------- ------------ -----------
Financial liabilities, with the exception of the borrowings and
lease liabilities, are all considered to be repayable within 30
days.
On 19 February 2020 the Company issued a loan note instrument
constituting zero coupon secured loan notes for a face value of
GBP1,625,000 with a maturity date of 31 December 2022. The Loan
Note Instrument contains customary warranties, financial and other
covenants and events of default. The Loan Note Instrument also
contains information rights and board observer rights for the
noteholders. The loan notes constituted under the Loan Note
Instrument are repayable on the maturity date or in the event of
the occurrence of an event of default. The loan notes constituted
under the Loan Note Instrument are secured by a debenture over the
assets of the Group. Costs associated with the issue of the loan
note amounting to GBP 65,795 are being amortised over the life of
the loan note.
8. RELATED PARTY TRANSACTIONS
6 months 6 months to
to 31 Mar 19
31 Mar 20
GBP GBP
----------------------------------------- ----------- ------------
Goods/services purchased from Dotfusion
Limited 36,000 39,120
Goods/services purchased from Highlees
Consulting Limited 13,333 -
Goods/services purchased from KBL
Consulting Limited 28,252 16,450
77,585 55,570
----------------------------------------- ----------- ------------
Mr Piotr Kwiatkowski is the owner of Dotfusion and is a
shareholder in Toople Plc.
Mr Richard Horsman is the owner of Highlees Consulting Limited
and is a shareholder in Toople Plc and non-executive Chairman.
Mr Kevin Lawrence is the owner of KBL Consulting Limited and is
a shareholder in Toople Plc and Chief Financial Officer.
9. ACQUISITION OF DMS HOLDINGS 2017 LIMITED
In February 2020, the Company acquired 100 percent of the shares
in DMS Holding 2017 Limited. The consideration for the Acquisition
was GBP1.56 million, to be satisfied by a cash payment of
GBP376,000, the issue of 1,050,000,000 new Ordinary Shares in
Toople (the "Consideration Shares") at the Placing Price, and the
issue of Options to acquire up to 800,000,000 new Ordinary Shares
subject to the achievement of earn out considerations over the next
three years.
The following table summarises the recognised amounts of assets
and liabilities assumed at the date of acquisition. These amounts
are preliminary at this stage and may be subject to revision:
GBP
---------------------------------------- ----------
Intangible assets 561,000
Tangible assets 35,323
Deferred tax assets 53,906
Trade and other receivables 665,703
Prepayments and accrued income 175,658
Cash and cash equivalents 1,404
Trade and other payables (369,717)
Accruals and deferred income (119,394)
Short term borrowings and loans (116,840)
---------------------------------------- ----------
Total identifiable net assets acquired 887,043
Satisfied by:
Issue of shares 1,050,000
Cash 376,000
Costs of acquisition 127,000
---------------------------------------- ----------
1,553,000
Goodwill (665,957)
---------------------------------------- ----------
887,043
---------------------------------------- ----------
An adjustment has been made to reflect the initial accounting
for the acquisition of DMS Holding 2017 Limited, by the Company,
being the elimination of the investment in DMS Holding 2017 Limited
against the non-monetary assets acquired and recognition of
goodwill. The Company has made a preliminary assessment of the fair
value of net assets acquired pursuant to the acquisition of DMS
Holding 2017 Limited, via a Purchase Price Allocation ("PPA")
exercise. The PPA's determined a decrease of GBP561,000 of goodwill
in DMS Holding 2017 Limited with the corresponding movement to be
recognised as customer contracts and developed technology. The
amortisation period for customer contracts and developed technology
has been assessed as 6 years and 5 years respectively. Amortisation
of intangible assets is included in administrative expenses in the
Income Statement.
10. SUBSEQUENT EVENTS
The Board does not believe there are any subsequent events
requiring further disclosure or comment.
-ends-
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END
IR BRGDRRXGDGGI
(END) Dow Jones Newswires
July 09, 2020 02:00 ET (06:00 GMT)
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