REG - Cloudcoco Group PLC - Interim Results
29/06/2023 07:00
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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 £12.9 million (H1 2022: £11.6 million), of which
70% was generated from recurring contracts (H1 2022: 70%)
· Gross profit increased by 13% to £4.3 million (H1 2022: £3.8 million(1)), a
margin of 34% (2022: 33%)
· Trading Group EBITDA(2) increased by 70% to £0.9 million (H1 2022: £0.53
million(1))
· E-commerce revenues from MoreCoCo increased 78% to £1.6 million (H1 2022:
£0.9 million)
· Cash at bank of £1.28 million at 31 March 2023 (H1 2022: £1.31 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 Adviser & Broker) Tel: +44 (0)20 3328 5656
Jeremy Porter / Daniel Dearden-Williams - Corporate Finance
Tony Quirke / Amrit Nahal - Equity Sales
Alma PR - (Financial PR) Tel: +44 (0)20 3405 0205
David Ison cloudcoco@almapr.co.uk
Kieran Breheny
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 (http://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 £12.9 million
(H1 2022: £11.6 million), with gross profit up 13% to £4.3 million (H1 2022:
£3.8 million). Trading Group EBITDA(1) increased by 70% to £901k (H1 2022:
£531k). New sales orders generated by our sales team for H1 2023 amounted
to total contract value ("TCV") of £6.4 million, which despite being down
against the record value of £9.7 million recorded in H1 2022, were up 7%
against the H2 2022 value of £6.0 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
£'000
£'000
£'000
£'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 £0.2 million to £1.3 million
at 31 March 2023 (September 2022: £1.5 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 £0.9 million in H1 2022
to £1.6 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 to 6 months to 6 months to Year to
31 March 30 Sept 31 March 30 Sept
Note 2023 2022 2022 2022
£'000 £'000 £'000 £'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 (1,063) (919) (1,368) (2,287)
parent
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 £'000 £'000 £'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 £'000
£'000 £'000 reserve £'000 £'000 £'000
£'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 £'000
£'000 £'000 reserve £'000 £'000 £'000
£'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 £'000
£'000 £'000 reserve £'000 £'000 £'000
£'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 to 6 months 6 months Year
to
to
to
31 March 30 Sept 31 March 30 Sept
2023 2022 2022 2022
£'000 £'000 £'000 £'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
£'000
£'000
£'000
£'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
£'000
£'000
£'000
£'000
Costs relating to acquisitions(1) - - (58) (58)
Dilapidations costs (13) (46) - (46)
Run-off costs relating to discontinued data centre (36) (69) (69) (138)
services
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
£'000 £'000 £'000 £'000
Loss attributable to ordinary shareholders (1,063) (919) (1,368) (2,287)
Number Number Number Number
Weighted average number of Ordinary Shares in 706,215,686 706,215,686 706,215,686 706,215,686
issue, basic and diluted
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
Intangible assets Goodwill IT, billing and website systems Brand Customer lists Total
£'000
£'000
£'000
£'000
£'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 11,281 361 2,383 11,445 25,470
31 March 2023
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 (4,447) - (225) (1,193) (5,865)
31 March 2023
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 period 8.3 years 7.7 years 3.5 years 4.0 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 CloudCoCo Systems More CloudCoCo
£'000
Limited
Assurance
Computers
Connect
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 1,316 264 443 2,716
headroom
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 £354,000 in CloudCoCo
Limited.
7. Trade and other receivables
Unaudited Unaudited Audited 30 September 2022
31 March 2023 31 March 2022 £'000
£'000 £'000
Trade receivables 3,217 3,043 2,936
Other debtors 207 111 244
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 Audited 30 September 2022
31 March 2023 31 March 2022 £'000
£'000 £'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 Audited 30 September 2022
31 March 2023 31 March 2022 £'000
£'000 £'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 Audited 30 September 2022
31 March 2023 31 March 2022 £'000
£'000 £'000
COVID-19 Bounce-back loan repayable - short-term element 19 19 19
Deferred consideration relating to the acquisition of CloudCoCo Connect 50 50 50
Limited (formerly IDE Group Connect Limited) - short term element at Fair
Value
69 69 69
10.2 Non-current
Unaudited Unaudited Audited 30 September 2022
31 March 2023 31 March 2022 £'000
£'000 £'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 126 103 102
Limited (formerly IDE Group Connect Limited) - long term element at Fair Value
5,112 4,400 4,723
On 10 May 2020, the Company borrowed £50,000 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 £50,000 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
£'000
£'000 £'000 £'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 176 (50) 73 153
Limited (formerly IDE Group Connect Limited) - Fair Value
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
END
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