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Share Name Share Symbol Market Type Share ISIN Share Description
Toople Plc LSE:TOOP London Ordinary Share GB00BZ8TP087 ORD 0.0667P
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  0.0025 2.22% 0.115 0.11 0.12 0.12 0.1125 0.1125 235,609,908 14:44:54
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Mobile Telecommunications 2.5 -1.7 -0.2 - 7

Toople PLC Half-year Report

09/07/2020 7:00am

UK Regulatory (RNS & others)


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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-

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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