TIDMTOOP
RNS Number : 6241L
Toople PLC
14 January 2021
Strictly embargoed until: 07.00, 14(th) January 2021
Toople PLC
("Toople" or the "Company" or the "Group")
Final results for the year ended 30 September 2020
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 2020.
Commenting on the results, Richard Horsman, Non-Executive
Chairman, said:
"As we look back over the financial year, we can truly say that
it was a transformative period for our Company. During the reported
period we have acquired a highly complementary business, DMSL,
raised funds to bolster our balance sheet, restructured into four
distinct operating brands, further simplifying our business
propositions for our customers and have more than delivered on
financial and operational synergies promised at the time of the
acquisition."
Financial and Operational Highlights:
-- Successful placing to raise gross proceeds of GBP1.2 million
to fund the acquisition of DMS Holding 2017 Limited ("DMSL"),
completed on 18 February 2020
-- Reorganisation of business into four main trading brands
-- Successful integration of DMSL, with annual cost synergies of
over GBP1.6 million now being realised compared with initial
guidance of GBP50,000 per month
-- Group revenue grew year on year by 40% to GBP3.4 million with
a seven months' contribution from DMSL
-- Gross profit increased by 130% to GBP1.1 million (FY 2019: GBP479k)
-- Increase in overall gross margin from 20% to 32% - a
significant improvement following acquisition of DMSL which
delivered a gross margin of 44% for the period
-- Improved performance in the Toople.com business achieved by
reducing carrier costs and ceasing services to poor paying or bad
debt customers
-- Active cost control and management
-- 23% reduction in marketing costs reflecting change in
strategy, with more focus on DMSL business and
recognizing COVID-19 impact
-- Administrative expenses only increased by 8%, despite 40% increase in revenues
-- New contract wins and contract extensions reported for the Group
-- Launch of a telecoms price comparison website and a credit
reference checking and report company, complementing the Group's IT
and telecoms services
-- Cash at bank at 30th September 2020 was over GBP568,000
-- Proactive approach to bad debts has resulted in a charge of
GBP1.1m providing for legacy bad debt issues; the impacts of
Covid-19; any potential adverse effects of Brexit; and reducing the
group's risk for out of term customers as a part of our strategy
towards future risk created by the pandemic.
-- New client onboarding measures in place including credit
checking and digital document signature requirement
Commenting on summary and outlook, Andy Hollingworth, CEO at
Toople, added:
"The news about a vaccine roll-out in the UK has given everyone
a boost, but given the general economic uncertainty in the UK with
the full economic impact of COVID 19 not yet fully clear; and the
UK once again facing a national lockdown with further lockdown
restrictions likely to continue well into 2021, we must remain
vigilant on costs.
"That said, trading has progressed well in the first few months
of FY20/21, with notable contract wins and contract extensions
announced to the market. Additionally, we are beginning to see a
number of acquisition opportunities which, with a strengthened
balance sheet and the ability to offer listed shares as part of the
consideration mix, we are well-placed to take advantage of.
"Overall we remain cautiously optimistic about the future
prospects for Toople, particularly given HM Government's commitment
to the rolling out of fibre telecommunication infrastructure to
replace copper and the necessary and ultimately unavoidable upgrade
of the country's network from 4G to 5G and the opportunities that
will present the Group."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
-Ends-
For further information :
Toople PLC Tel: 0800 0499 499
Andy Hollingworth, Chief Executive
Officer
Paul White, Chief Financial
Officer
Novum Securities Limited Tel: 020 7399 9400
David Coffman
Colin Rowbury
Belvedere Communications Tel: 020 3687 2754
John West / Llew Angus
About Toople PLC
Toople PLC is incorporated in the UK and listed on the main
market of the London Stock Exchange. The business currently trades
under four main brands: toople.com ; dmsluk.co.uk ;
broadbandandphones.co.uk ; checkthatcompany.co.uk .
Toople.com provides bespoke telecoms services for its fast
growing target market of UK SMEs with between one and 500
employees. 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 via the Group's
proprietary software platform.
In February 2020, Toople completed the acquisition of DMS
Holding (DMSL) . DMSL commenced trading in 2002 and 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
re-seller 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.
The acquisition of DMSL was transformational for Toople, as it
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.
The Company also owns a telecoms price comparison website and a
service offering company credit reference checking and reports.
These complement the Group's IT and telecoms services.
All the Group brands seek to differentiate themselves by
offering IT, telecoms and broadband solutions, with robust and
reliable packages, that enhance a customers' 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.
Chairman's Statement
Introduction
2020 has been a remarkable year, and we are fortunate enough to
say that it was a transformative period for our Company. During the
reported period we acquired DMSL, raised funds to bolster our
balance sheet, restructured into four distinct operating brands and
have exceeded the financial and operational synergies anticipated
at the time of the acquisition. The integration of DMSL is complete
and its service offering continues to resonate with both existing
customers, who have extended and augmented contracts, as well as
with new ones who see the value of our proposition that provides
bespoke telecoms services for our target market of UK SMEs with
between 1 and 50 employees.
COVID-19
The COVID-19 pandemic has seen good quality and reliable
connectivity become an absolute necessity, further validating our
service offering and highlighting the attractiveness of our fixed
pricing structure. Overall, the telecommunications sector has not
felt the most severe effects of the COVID-19 pandemic, but we will
not be completely immune from the longer lasting macroeconomic
impacts of the virus. Clearly, the wellbeing and safety of our
workforce continues to be a key focus for the management team and
thankfully, they have been able to work safely work from home
ensuring business continuity for Toople and its customers.
Following the COVID-19 outbreak, we quickly deployed our own
unified communications platform across the entire workforce,
enabling our people in the UK, South Africa and Poland to work
remotely and without disruption to any of the Company's key
business functions. As a result, our 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.
As I write this, extended lockdown measures are now in place
which will undoubtedly lead to subsequent economic challenges, and
may lead to an element of negative bad debt recoverability. We will
continue to focus on this area closely, whilst continuing to manage
our cost base prudently. This cost management and the fact that we
have over delivered on the promised acquisition synergies, should
go a long way towards offsetting any bad debt and accelerate the
Company's position to achieve cash profitability.
Acquisition and Fundraisings
In January 2020 we announced a successful placing to raise gross
proceeds of GBP1.2 million and the issue of GBP1.625 million loan
notes to fund the 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. The commercial benefits of the
acquisition have already become evident.
We are very pleased to have completed this 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 assist Toople towards
EBITDA profitability and cash self-sufficiency, reducing previous
reliance on the market to provide funds for working capital.
Following the acquisition of DMSL we undertook a review of the
entire business and implemented a plan to restructure and
reorganise the Group into four main brands: www.toople.com ;
www.dmsluk.co.uk ; broadbandandphones.co.uk ; and
www.checkthatcompany.co.uk , further simplifying our business
propositions for our customers. As part of this review, a number of
initiatives were put in place, which have delivered substantial
cost savings and synergies of GBP600,000 per annum. I am pleased to
say that these have now been achieved, and overall the Company is
now achieving GBP1.6m of annualised synergies and savings.
Growth Drivers
The macro drivers which are expected to precipitate substantial
growth for the Group also remain in place, namely HM Government's
commitment to the rolling out of fibre telecommunication
infrastructure to replace the legacy copper infrastructure by 2025
and the necessary and ultimately unavoidable upgrade of the
country's network from 4G to 5G. The Board remains positive about
the Company's future prospects driven by a number of factors, not
least a noticeable switch by UK SMEs to superfast fibre broadband
and VoIP telephony.
All the Group brands differentiate themselves in the market 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.
The Company continues to focus on margin enhancing customers,
which as previously advised, will lead to a decline in headline
revenues in the short term.
Post Balance sheet Events and Board Change
In October 2020, just after the reported period end, our brokers
informed us of the opportunity to raise additional funds for the
Company by way of an equity Placing. Accordingly, given the wider
economic uncertainty caused by COVID-19, the Board we felt it
prudent to pursue this. As a result we successfully raised
GBP774,000 (before expenses). The Placing was significantly
oversubscribed and utilised all of the existing share issue
capability of the Company. We are grateful to existing shareholders
for the support they have shown to the Company and welcome new
shareholders to the register.
The Company has made substantial operational and financial
progress in recent months and securing this injection of capital
has positioned the business with a healthier balance sheet. We are
well capitalised and look forward to executing on our growth
strategy.
The Company also announced that Kevin Lawrence, who had been CFO
since June 2018, would become a Non-Executive Director of the
Company effective from 1 October 2020 and chair the audit and
remuneration committees. Paul White, who joined the Company as
Financial Controller in June 2020 was appointed CFO from 1 October
2020. Paul worked closely with Kevin since joining the Company
developing an excellent knowledge of the Group's operating
subsidiaries, financial processes and systems and we welcome him to
his new role.
Summary
The news about a vaccine roll-out in the UK has given everyone a
boost, but given the general economic uncertainty in the UK with
the full economic impact of COVID 19 not yet fully clear, and the
UK once again facing a national lockdown with further lockdown
restrictions likely to continue well into 2021, we must remain
vigilant on costs.
That said, trading has progressed well in the first few months
of FY20/21, with notable contract wins and contract extensions
announced to the market. Additionally, we are beginning to see a
number of acquisition opportunities which, with a strengthened
balance sheet and the ability to offer listed shares as part of the
consideration mix, we are well-placed to take advantage of.
In summary, we had a dynamic financial year and we remain very
optimistic about the long-term prospects for the Company. We wish
all our staff, customers, shareholders and suppliers good health
and financial prosperity in 2021.
Richard Horsman
Non-Executive Chairman
13 January 2021
Chief Executive Officer's Review
Operational Review
We have achieved much during the reported period, and into the
first quarter of the current financial year, making substantial
progress despite general gloom in economy in the face of the
pandemic. We successfully acquired DMSL, integrated the business,
implemented a reorganisation and delivered on substantial cost
savings, whilst continuing to win new contracts and upgrade
existing ones. We also launched a telecoms price comparison website
and a service offering company credit reference checking and
reports, complementing the Group's IT and telecoms services. In
addition, in October 2020, we raised additional funds via a
successful Placing to bolster our balance sheet and give us a
financial buffer in anticipation of a period of impending financial
uncertainty. All of this was achieved against the backdrop of the
hiatus caused by COVID-19.
What has become clear throughout this global crisis has been the
accelerated elevation of the internet to an essential utility, with
broadband and telecoms networks being classified as critical
national infrastructure, keeping the nation connected in these
extraordinary times. Good quality, reliable connectivity is an
absolute necessity. With many small businesses across the UK under
significant pressure, we are acutely aware of providing them with
essential services at an affordable cost. SMEs, now more than ever,
need a clear understanding of costs and fixed prices for the
duration of their contracts with no hidden fees within pricing
policies.
Undoubtedly, the global pandemic has forced businesses to review
their existing telecoms services, corporate connectivity and
working practices. Connectivity, particularly at the moment, should
be affordable for all businesses, with minimum outage and
disruption to ensure business continuity. This is why existing
customers are increasingly extending contracts with us and we
continue to win new customers across a broad range of sectors, as
evidenced by the contract wins announced towards the end of 2020.
SMEs, in particular, 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
establishing itself as a disruptor in the market.
For our own part, we coped extremely well with the challenges
that COVID-19 presented. Following the initial outbreak, we quickly
deployed our own unified communications platform across the
workforce to enable remote working and this continues with a new
national lockdown recently commenced.
As the pandemic has unfolded, COVID-19 has adversely impacted
our business in some areas. The main operational impact has been in
how we serve our customers and approach new ones. Our customer
experience teams are now making three times as many calls as
previously in order to maintain the same levels of customer
contact, especially as we are a B2B focused operation and many of
our customers are being forced to work remotely or substantially
change their working practices.. We anticipate that these issues
are being experienced industry wide.
On the marketing front, the mix of new business orders has
shifted to more upgrades and recontracts, so customers can drive
better connectivity speeds, whilst retaining continuity of service.
This has led to a slight softening of the new customer intakes. As
a result, we have, like others, reduced our overall marketing
spend. Despite this, the business has maintained a solid trading
base and we look forward with confidence as the vaccine roll-out
positively impacts life and businesses return to normal during the
course of 2021. The Board believe this will deliver further growth
and a sales mix change where new orders contribute more, wherein
higher gross profit can be achieved. We are now starting to invest
in marketing again, and are seeing new customer numbers start to
pick up. SMEs up and down the country have been profoundly impacted
by the lockdown measures and we have been focused on informing,
reassuring and supporting them.
Sadly, not all businesses will survive COVID-19, but we are
doing all that we can to help our B2B clients, from dialling up or
down bandwidth requirements for those businesses whose needs have
evolved in the wake of COVID-19, to assisting with payment terms
where possible.
Financial Performance
The reported period contains only seven months' contribution
from DMSL, which was completed on 18 February 2020.
Total revenues grew by over 40% to GBP3.4 million (FY 2019:
GBP2.5 million). Gross profit increased by 130% to GBP1.1 million
(FY 2019: GBP479,000) and overall gross margin improved by 12
percentage points to 32%. Improvement was driven in part by
reducing carrier costs in Toople.com and continuing our strategy of
ceasing services to poor paying or bad debt customers.
We have adopted a proactive approach to bad debt, which has
resulted in a charge of GBP1.1m. However, this provides for legacy
bad debt issues; the impacts of Covid-19; any potential adverse
effects of Brexit; and reducing the group's risk for out of term
customers as a part of our strategy towards future risk created by
the pandemic.
Following the integration of DMSL we have now introduced new
procedures to ensure a reduction in future bad exposure which
include ensuring all new customer onboarding is done via online
document signature and each customer has successfully passed our
credit checking process. We have also stopped accepting verbal and
voice recorded contracts.
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 year.
As a result, our operating loss was GBP2.4 million compared with
a loss in FY2020 of GBP1.6 million, but this includes the bad debt
costs of GBP1.1 million. Active cost controls led to a 23%
reduction in marketing costs, reflecting our change in strategy,
with more focus on DMSL business and recognising the COVID-19
impact, discussed above. Consequently, administrative expenses only
increased by 8%, despite a 40% increase in revenues.
Cash at bank was over GBP568,000 at period end and total assets
increased substantially due to the DMSL acquisition, increasing to
GBP2.8 million (FY2019: GBP1.3 million). Our balance sheet was
further bolstered post the year end in October 2020, when we raised
a further GBP774,000 (before expenses) via a Placing. This leaves
the business with a healthy cash position and a substantially
improved balance sheet to navigate any potential economic
uncertainty in 2021. The loss per share was 0.09p matching our half
year results of 0.09 in 2020.
Having acquired DMSL in February 2020, we quickly integrated the
business and identified substantial cost savings and synergies. We
initially guided that we expected savings in the region of
GBP50,000 per month, but I am delighted to report that these are
now running in excess of GBP130,000 per month, saving the combined
business GBP1,600,000 on an annualised basis. This coupled with new
contract wins and extensions announced during the course of the
year and into the start of FY2021, gives the Board renewed
confidence that the Company will be profitable in a shorter
timeline than previously anticipated. That said, we do remain
extremely cautious about the overall impact that COVID-19 and
Brexit will have on our customers and the wider economy and are
mindful that not all businesses will survive. We will manage our
costs accordingly and look forward to the new opportunities which
periods of rapid change inevitably bring.
Outlook
The economic impact of the COVID-19 pandemic is likely to be
significant and we will not be immune to upcoming challenges,
particularly as the UK faces a new national lockdown. However, we
entered FY21 in a more robust operational and financial position,
and we do not expect a significant deviation from our previous
objectives of growing our core revenue, replacing unprofitable
contracts and moving towards cash profitability at the operating
level. Our strategy remains the same, and we enter 2021 a bigger,
better, stronger and more focussed business with an improved
balance sheet.
The Group and its various brands continue to perform well.
Trading in the first part of this financial year has started to
return to more normal conditions in the B2B market as more
businesses emerged from the initial lockdown and reviewed critical
expenditure such as for IT and telecoms. Trading within the DMSL
business demonstrated growth on orders on a like for like basis
against 2019 and we have also seen growth in order volumes compared
with last year.
We continue to set our sights on the societal importance of
telecoms and connectivity as present and future drivers of growth
for the Group. These are reflected in the Government's commitment
to rolling out of fibre infrastructure to replace copper and the
upgrade of the country's network to 5G. The Board remains
optimistic about the Company's future prospects whilst recognising
the challenges that lie ahead in the near term due to the pandemic
and the post-Brexit environment.
Andrew Hollingworth
Chief Executive Officer
13 January 2021
A copy of the Annual Report will be posted on the Company's
website: www.toopleplc.co.uk
An electronic version will shortly be available for inspection
at the National Storage Mechanism:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Notice of the Company's Annual General Meeting will be sent to
shareholders in due course.
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END
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