Toople PLC Interim Results (1571C)

TIDMTOOP

RNS Number : 1571C

Toople PLC

17 June 2021

Strictly embargoed until: 07.00, 17(th) June 2021

Toople PLC

("Toople" or the "Company" or the "Group")

Interim results for the six months ended 31 March 2021

Toople PLC (LSE: TOOP), a provider of bespoke telecom services to UK SMEs, today announces interim results for the six months ended 31 March 2021.

Commenting on the results, Richard Horsman, Non-Executive Chairman, said:

"COVID-19 has caused great uncertainty for businesses and for the market in general, but on the whole we have traded satisfactorily through it, winning new business and reducing costs. We continued to strengthen our balance sheet and have seen an increase in both gross profit and gross margin, whilst delivering much improved performance at the EBITDA level. We adopted a proactive approach to bad debt and pleasingly levels have substantially improved following the implementation of a number of new measures last year. As a result, we are reporting no material bad debt with only a GBP43,000 charge, compared to GBP309,000 for the same period last year and over GBP1.1m for the full year 2020."

Financial and Operational Highlights:

-- Substantial improvement in EBITDA loss : GBP595,000 compared to EBITDA loss GBP1.04 million for same period last year; an improvement of 43% year on year

   --      Gross profit increased by 40% to GBP470,000 (HY 2020: GBP335,000) 
   --      Gross margin improved by 9 percentage points to 31% 

-- Group revenue was flat year on year at GBP1.5m million for the six month period (HY2020: GBP1.5 million)

   --      Cash at bank was over GBP990,000 at period end 

-- Substantial reduction in bad debt charge: HY21 only GBP43,000 compared to HY20: GBP309,000 and GBP1.1m for the full year 2020

   --      Number of new contract wins with well-known UK business brands reported for the Group 
   --      Substantial reduction in fixed overheads 
   --      Cost synergies realised 
   --      Successful placing to raise gross proceeds of GBP774,000 to provide: 

o further working capital to support the Company's growth;

o investment in targeted marketing initiatives;

o shortening of the Company's anticipated timeline to profitability and positive cashflow; and

o enhancement of the Company's service offerings.

Commenting on summary and outlook, Andy Hollingworth, CEO at Toople, added:

"Since early March 2021, trading has returned to more normalised levels and we are now beginning to see growth return to our sales leads and conversion rates. We expect this trend to continue and have increased our sales force head count by over 30% in recent weeks, as confidence slowly returns to the UK SME market which has been boosted by the vaccine roll-out and the easing of COVID-19 restrictions. This increased sales effort has been implemented without any increase in our fixed costs as part of the flexible agreement we have in place with our outsourced sales operation in Durban. This team are experiencing increased interest and opportunities for sales leads and conversions.

"We enjoy a strong relationship with the large carriers and operators. BT, in particular, is targeting the SME market heavily with an above the line TV and press campaign. We believe this will benefit DMSL and will have a material impact on our order volumes over the summer months."

This announcement contains information which, prior to its disclosure, was inside information as stipulated under Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310 (as amended).

-Ends-

For further information :

 
 Toople PLC                            Tel: [phone] 
  Andy Hollingworth, Chief Executive 
  Officer 
  Paul White, Chief Financial 
  Officer 
 Novum Securities Limited              Tel: [phone] 
  David Coffman 
  Colin Rowbury 
 Belvedere Communications              Tel: [phone] 
  John West / Llew Angus 
 

About Toople PLC

Toople PLC is incorporated in the UK and listed on the main market of the London Stock Exchange. The business currently trades under four main brands: toople.com ; dmsluk.co.uk ; broadbandandphones.co.uk ; checkthatcompany.co.uk .

Toople.com provides bespoke telecoms services for its fast growing target market of UK SMEs with between one and 500 employees. Services offered by the Group include business broadband, fibre, EFM and Ethernet data services, business mobile phones, cloud PBX and SIP Trunking and Traditional Services (calls and lines) all of which are delivered and managed via the Group's proprietary software platform.

In February 2020, Toople completed the acquisition of DMS Holding (DMSL) . DMSL commenced trading in 2002 and provides unified communication services in the UK, ranging from a single phone line to a multi-site unified comms VoIP platform, delivered via a network of telecoms and IT carriers and content providers across the UK including BT Business, BT Global Services, Gamma, EE, Vonage, TalkTalk Business and O2. DMSL acts as a BT Premier re-seller for broadband connectivity, mobile and fixed voice and cloud services and is responsible for over 250,000 BT customers and over 400,000 Revenue Generating Units.

The acquisition of DMSL has been transformational for Toople, as it also expanded the Group's reach into the UK residential market, which is experiencing a period of rapid change, as operational automation further develops and more people choose to (or are forced to) work from home.

The Company also owns a telecoms price comparison website and a service offering company credit reference checking and reports. These complement the Group's IT and telecoms services.

All the Group brands seek to differentiate themselves by offering IT, telecoms and broadband solutions, with robust and reliable packages, that enhance a customers' business and are based on trust and transparency, with no hidden fees within pricing policies. This provides customers with a clear understanding of cost and fixed prices for the duration of their contracts.

Chairman's Statement

COVID-19 has caused great uncertainty for businesses and for the market in general, but on the whole we have traded satisfactorily through it, winning new business and reducing costs.

We continued to strengthen our balance sheet and have seen an increase in both gross profit and gross margin, whilst delivering a much improved performance at the EBITDA level. We have adopted a proactive approach to bad debt implementing a number of new measures last year. As a result, we are reporting no material bad debts, with only a GBP43,000 charge in the period compared to GBP309,000 for the same period last year and over GBP1.1m for the full year 2020.

Connectivity is business critical for small and medium enterprises who may have only peripherally relied on telecoms before the pandemic struck. Think, for example, of a bakery that may have sold mostly to passing customers, but now operates mainly on click-and-collect or home delivery models - its need for seamless reliable connectivity has never been greater.

The news about a vaccine roll-out in the UK and a roadmap out of lockdown has given everyone a boost but given the general economic uncertainty in the UK and with the full economic impact of COVID 19 not yet fully clear, we must remain vigilant on costs.

That said, trading has progressed well in the months since March 2021 and we have won new contracts and contract extensions. Additionally, we are beginning to see a number of acquisition opportunities which, with a strengthened balance sheet and the ability to offer listed shares as part of the consideration mix, we are well-placed to take advantage of.

Toople aims to become the telecoms supplier of choice for its target markets in the UK, by delivering instant, easy, communication solutions with a transparent pricing model. This will involve further expansion in our direct digital marketing to drive customer growth, as well as visibility and predictability of revenues.

The sector we operate in benefits greatly from the priority HM Government is giving to telecommunications as critical infrastructure. From a macro point of view, we are in a key growth sector. The Government remains absolutely committed to the continuing roll out of fibre infrastructure to replace copper, which is more good news for Toople. The necessary and ultimately unavoidable upgrade of the country's network from 4G to 5G creates further opportunities. Most recently the regulator has relaxed certain regulation on Openreach, which allows it to invest further and faster in Fibre to premise rollout, as well as retaining and extending access to alternative providers to the Openreach network.

Further to recently announced significant contract wins, monthly orders are continuing to grow and gross margins are materially higher than in the pre-pandemic period. This has enabled monthly cash burn to be reduced when compared with 2020 and this trend is expected to be sustained, moving the Company towards positive cash flow. The Directors believe that trading will continue to demonstrate significant progress as the UK is no longer strictly locked down and the economy readies itself for the post-, or late-pandemic period, where companies cannot survive without connectivity.

In summary, we remain optimistic about the future for Toople, particularly given HM Government's commitment to telecommunication infrastructure.

Richard Horsman

Non-Executive Chairman

CEO's Review

Overview

Toople entered the current financial year in a robust operational and financial position and does not expect a significant deviation from its previous objectives of growing core revenue, replacing unprofitable contracts and accelerating towards cash profitability at the operating level. We remain focussed on securing growth, as well as building market share, and continue to make meaningful progress on both fronts.

The integration of DMSL is now complete and the substantial cost savings identified at the time of the acquisition are now being realised. We trade 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 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

Total revenues remained flat at GBP1.5 million (HY 2020: GBP1.5 million). This includes a full six months of contribution from DMSL against only six weeks in FY20. However, it does also reflect a deliberate and targeted policy of reducing the number of Toople customers to mitigate against bad debt exposure and to replace them with better quality business to business revenues through DMSL.

During the reported period many of our customers were adversely affected by COVID restrictions, with many forced to either close or furlough staff and many fighting for survival. We took the decision to support as many businesses as we could with some given 'service holidays'. Although this has impacted revenue growth now, we believe that it will prove to be the right policy over the longer term and we are already seeing business levels increase substantially again.

Our sales pipeline for the period was also flat, but it held up well over the last three months of the period and again we are now starting to see an upturn in the level of business as lockdown eases, with the number of enquiries once again increasing.

Despite revenues largely remaining the same, we experienced an increase in gross profit by 40% to GBP470,000 (HY 2020: GBP335,000) and an overall gross margin improved by 9 percentage points to 31%. Again, this was principally due to a shift in our business mix to better performing clients with stronger debtor profiles.

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 made further progress in this regard during the reported period.

Admin costs reduced by 24%, mainly reflecting the synergies generated following the integration of DMSL. Marketing spend also reduced by 16%, commensurate with the market conditions in the reporting period.

Our operating loss was GBP695,000 compared with a loss in HY2020 of GBP1.04 million, but this includes exceptional one off restructuring costs of GBP79,000.

Following the integration of DMSL we introduced new procedures to ensure a reduction in future bad exposure which include ensuring all new customer onboarding is done via online document signature and each customer has successfully passed our credit checking process. We have also ceased verbal and voice recorded contracts. As a result of these measures, the position is substantially improved and out of term customers are within provisions. As a result of these measures, the position is substantially improved and out of term customers are within provisions, with only a nominal bad debt charge of GBP43,000 against a charge of GBP309,000 for the same period last year and over GBP1.1m for the full year 2020.

In October 2020, we took advantage of an opportunity to raise additional funds for the Company by way of an equity Placing. We successfully raised GBP774,000 (before expenses). The Placing was significantly oversubscribed and we are grateful to existing shareholders for the support they have shown, and welcome new shareholders to the register. The Company now has a healthier balance sheet and is well capitalised to pursue its growth strategy. At the end of the period the outstanding loan with Cloud Telephones, acquired through the acquisition, was recovered in full (GBP470,000).

Cash at bank was over GBP990,000 at period end and total assets were GBP2.8 million (HY2020: Cash at bank was over GBP568,000 and total assets were GBP2.9 million). Earnings per share was a loss 0.02 pence compared to an earnings per share loss of 0.06 pence in HY2020.

Operating Performance

More and more businesses are being forced to review their existing telecoms services and many are seeking new solutions which provide enhanced quality at an affordable price.

We continue to add new business across a variety of sectors and are increasingly being selected by well-known and respected brands to roll out cloud telephony, as well disaster 4G backup recovery systems, across multiple locations. These ensure that clients continue to have exceptional internet connectivity and full access to their business critical systems in the event of any outage.

We are also seeing a pattern develop where well-established and well-known UK based brands and businesses, who are also market leaders and/or specialists in their own sectors, are turning their backs on their old communications providers, and looking to partner with Toople. Our brand and our service offerings are resonating among blue chip organisations with strong credit profiles, who appreciate the strength of our services as well as our price competitivity.

DMSL continues to perform solidly and since acquisition has won a number of notable new contracts in the retail, NGO and local government sectors. We were particularly pleased with the recent Sainsbury's and Carluccio's contract trial win.

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.

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 speeds 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 towards offering our customers choice. We provide them with the best bespoke solutions for their individual needs. We continue to demonstrate to our customers that we are carrier -agnostic and focussed on providing them with the best service at the best price and with transparency and certainty of costs over the term of their contract. At this particularly difficult time, businesses and consumers have welcomed this. 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 industry disruptive telecommunications technology and services at a fixed price that will always remain attractive against sluggish incumbents.

Since early March 2021, trading has returned to more normalised levels and we are now beginning to see growth return to our sales leads and conversion rates. We expect this trend to continue and have increased our sales force head count by over 30% in recent weeks, as confidence slowly returns to the UK SME market, boosted by the vaccine roll-out and the easing of COVID-19 restrictions. This increased sales effort has been implemented without any increase in our fixed costs as part of the flexible agreement we have in place with our outsourced sales operation in Durban. This team are experiencing increased interest and opportunities for sales leads and conversions. We enjoy a strong relationship with the large carriers and operators and BT, in particular, is targeting the SME market heavily with an above the line TV and press campaign. We believe this will benefit DMSL and will have a material impact on our order volumes over the summer months.

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

Paul White

Company Secretary:

WKH Company Secretary Services

By Order of the Board

Andrew Hollingworth

Chief Executive Officer

17 June 2021

Condensed Consolidated Statement of Comprehensive Income

The condensed consolidated statement of comprehensive income of the Group for the six month period from 1 October 2020 to 31 March 2021 is set out below.

 
                                  NOTE 
                                           Period Ended     Period Ended 
                                            31 Mar 2021      31 Mar 2020 
                                                    GBP        GBP 
-------------------------------  -----  ---------------  --------------- 
 Continuing operations 
 
 Revenue                                   1,518,352        1,510,883 
 Cost of Sales                            (1,048,600)      (1,176,044) 
-------------------------------  -----  ---------------  --------------- 
 Gross Profit                               469,752          334,839 
 
 Other Income                                  -              91,864 
 Administrative expenses                  (1,065,287)      (1,369,861) 
 Depreciation and amortisation              (99,523)            (17,873) 
 Exceptional restructuring 
  costs                                        -                (78,986) 
-------------------------------  -----  ---------------  --------------- 
 Operating loss                            (695,058)       (1,040,017) 
 Interest payable and similar 
  charges                                   (78,531)         (17,672) 
 Interest receivable                          157              336 
-------------------------------  -----  ---------------  --------------- 
 Loss before taxation                      (773,432)       (1,057,353) 
 
 Taxation                                    62,938             - 
-------------------------------  -----  ---------------  --------------- 
 Loss for the period                       (710,494)       (1,057,353) 
 
 Other comprehensive loss for                  -                - 
  the period 
-------------------------------  -----  ---------------  --------------- 
 Total comprehensive loss for 
  the period attributable to 
  the equity owners                        (710,494)       (1,057,353) 
-------------------------------  -----  ---------------  --------------- 
 
 Earnings per share 
 Basic and diluted earnings 
  per share                          5       (0.02)           (0.06) 
-------------------------------  -----  ---------------  --------------- 
 

Condensed Consolidated Statement of Financial Position

The condensed consolidated statement of financial position as at 31 March 2021 is set out below:

 
                                           31 Mar 2021   30 Sept 2020 
                                    NOTE       GBP           GBP 
----------------------------------------  ------------  ------------- 
 ASSETS 
 
 Non-current assets 
 Intangible Assets                          1,281,727     1,324,867 
 Tangible Assets                             36,899         37,380 
 Right of use assets                         36,232         64,173 
------------------------------------      ------------  ------------- 
 Total Non-current assets                   1,354,858     1,426,420 
------------------------------------      ------------  ------------- 
 Current assets 
 Trade and other receivables                 401,040       855,941 
 Cash and cash equivalents                   990,298       568,533 
------------------------------------      ------------  ------------- 
  Total Current assets                      1,391,338     1,424,474 
------------------------------------      ------------  ------------- 
 
 Total assets                               2,746,196     2,850,894 
------------------------------------      ------------  ------------- 
 
 EQUITY and LIABILITIES 
 Capital and reserves attributable 
  to equity shareholders 
 Share capital                         6    2,822,452     2,347,874 
 Share premium                              6,288,460     6,027,272 
 Merger reserve                             (25,813)       (25,813) 
 Share-based payment reserve                 55,534         49,843 
 Accumulated deficit                       (9,110,733)   (8,400,239) 
------------------------------------      ------------  ------------- 
 Total equity                                29,900        (1,063) 
------------------------------------      ------------  ------------- 
 
 Current liabilities 
 Trade and other payables              7    1,050,439     1,236,465 
 Lease liabilities                           41,119         52,517 
------------------------------------      ------------  ------------- 
 Total Current liabilities                  1,091,558     1,288,982 
------------------------------------      ------------  ------------- 
 
 Non-current liabilities 
 Financial liabilities - borrowings    7    1,624,738     1,549,316 
 Lease liabilities                              -           13,659 
------------------------------------      ------------  ------------- 
 Total non-current liabilities              1,624,738     1,562,975 
------------------------------------      ------------  ------------- 
 
 Total equity and liabilities               2,746,196     2,850,894 
------------------------------------      ------------  ------------- 
 

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 2021 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 
  2020                  2,347,874   6,027,272   (25,813)     49,843               -   (8,400,239)     (1,063) 
 Loss for the 
  period                        -           -          -          -               -     (710,494)   (710,494) 
---------------------  ----------  ----------  ---------  ---------  --------------  ------------  ---------- 
 
 Total comprehensive 
  loss for the 
  period                        -           -          -          -               -     (710,494)   (710,494) 
 Transactions 
  with owners 
 Share-based 
  payment charge                -           -          -      5,691                             -       5,691 
 Issue of share 
  capital net 
  of issue costs          474,577     261,188          -                                        -     735,766 
 At 31 March 
  2020                  2,822,451   6,288,460   (25,813)     55,534               -   (9,110,733)      29,900 
---------------------  ----------  ----------  ---------  ---------  --------------  ------------  ---------- 
 
 
                            Share       Share     Merger      Share         Capital   Accumulated         Total 
                          capital     premium    reserve      Based    contribution       deficit 
                                                            Payment         Reserve 
                                                            reserve 
---------------------  ----------  ----------  ---------  ---------  --------------  ------------  ------------ 
 PRIOR PERIOD                 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 
---------------------  ----------  ----------  ---------  ---------  --------------  ------------  ------------ 
 

Condensed Consolidated Statement of Cash Flows

The condensed consolidated cash flow statement of the Group from 1 October 2020 to 31 March 2021 is set out below:

 
                                                    Period ended   Period ended 
-------------------------------------------  ---- 
                                                    31 Mar 2021    31 Mar 2020 
-------------------------------------------   ---  -------------  ------------- 
                                                        GBP            GBP 
 Cash flows from operating activities 
 Operating loss                                      (695,058)     (1,040,017) 
 Depreciation and amortisation                         95,459         30,790 
 Share-based payment charge                            5,691          1,778 
 
 Changes in working capital 
  (Increase) in receivables                           (16,759)      (128,444) 
   (Decrease) / Increase in payables                 (184,367)       211,758 
-------------------------------------------------  -------------  ------------- 
 Net cash outflow from operating 
  activities                                         (795,034)      (924,135) 
-------------------------------------------------  -------------  ------------- 
 
 Cash flows from financing activities 
 Proceeds from issues of share 
  capital (net of issue costs)                        735,766        934,200 
 Proceeds from loans                                           -    1,234,995 
 Finance costs from loans                                -           (65,795) 
 Lease payments                                       (25,057)          - 
-------------------------------------------  ----  -------------  ------------- 
 Net cash from financing activities                   710,709       2,103,400 
-------------------------------------------------  -------------  ------------- 
 
 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                                     (23,895)       (58,145) 
 Interest received                                      157            336 
 Interest paid                                        (3,110)           - 
 R&D tax credits                                       62,938           - 
 Loans repaid                                         470,000           - 
 Net cash from investing activities                   506,090       (676,245) 
-------------------------------------------------  -------------  ------------- 
 
 
 Net increase in cash and cash equivalents            421,765        503,020 
 Cash and cash equivalents at 
  start of period                                     568,533        497,400 
-------------------------------------------------  -------------  ------------- 
 Cash and cash equivalents at 
  end of period                                       990,298       1,000,420 
-------------------------------------------------  -------------  ------------- 
 

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.

Subsequent to the initial establishment of the Group the acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

   2.         BASIS OF PREPARATION 

The interim, condensed, unaudited financial statements for the period ended 31 March 2021 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 2020. The results for the period ended 31 March 2021 are unaudited.

The condensed unaudited consolidated financial statements for the period ended 31 March 2021 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 2020.

The Group is not subject to seasonal fluctuations in operations.

   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.

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 was included in the annual report for the year ended 30(th) September 2020. There has been no change in these critical accounting estimates and judgements .

   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. 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 
                                                   Period Ended      Ended 31 
                                                    31 Mar 2021      Mar 2020 
                                                       GBP             GBP 
  ----------------------------------------------  -------------  -------------- 
 Loss for the year from continuing operations       (710,494)      (1,057,353) 
 
 Weighted average number of shares in issue         4,075,666     1,701,993,019 
 
 Basic and diluted earnings per share                (0.02p)         (0.06p) 
------------------------------------------------  -------------  -------------- 
 

As detailed in note 1, the consolidated financial statements present the combination as a continuation of the combined financial information of the Subsidiaries. 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 2,333,358,131 warrants at 31 March 2021. No warrants were issued in the period. 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 2021                    30 Sept 2020 
                                    No.             GBP             No.             GBP 
----------------------------  --------------  --------------  --------------  -------------- 
 Allotted and fully paid 
 Ordinary shares               4,231,561,361     2,822,451     3,520,051,135     2,347,874 
----------------------------  --------------  --------------  --------------  -------------- 
 
                                                  Ordinary 
                                                   shares      Share Capital   Share Premium 
                                                    No.             GBP             GBP 
----------------------------  --------------  --------------  --------------  -------------- 
 Share capital 
 
 At 1 October 2020                             3,520,051,135     2,347,874       6,027,272 
 Share issue                                    711,510,226       474,577         307,334 
 Share issue costs                                   -               -           (46,146) 
 Share based payment 
  charge on warrants issued 
  charged to share premium 
----------------------------  --------------  --------------  --------------  -------------- 
 At 31 March 2021                              4,231,561,361       2,822,451       6,288,460 
----------------------------  --------------  --------------  --------------  -------------- 
 

On 9 November 2020 the Company placed 704,010,226 ordinary 0.0667p shares at a subscription price of 0.11p per share. Commissions of GBP38,721 were payable to the brokers at the time and this has been recognised against share premium in addition to other share issue related costs amounting to GBP7.425.

On 21 January 2021 7,500,000 warrants were exercised at a price of 0.11p per share resulting in the issue of 7,500,000 new ordinary 0.0667p shares on the same date.

   7.         TRADE AND OTHER PAYABLES 
 
                                    31 Mar 2021   30 Sept 20 
                                            GBP          GBP 
---------------------------------  ------------  ----------- 
 Trade payables                         720,775      851,003 
 Social Security and other taxes        198,419      149,165 
 Other payables                          15,126       72,273 
 Accruals and deferred income           116,119      164,024 
 Right of use lease liabilities          41,119       52,517 
---------------------------------  ------------  ----------- 
                                      1,091,558    1,288,982 
---------------------------------  ------------  ----------- 
 
                                           2021         2020 
                                            GBP          GBP 
 Non - current liabilities 
 Lease liabilities                            -       13,659 
 
   Borrowings                         1,624,738    1,549,316 
---------------------------------  ------------  ----------- 
                                      1,624,738    1,562,975 
---------------------------------  ------------  ----------- 
 

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 GBP65,795 are being amortised over the life of the loan note.

   8.          RELATED PARTY TRANSACTIONS 
 
                                              6 months   6 months to 
                                                    to     31 Mar 20 
                                             31 Mar 21 
                                                   GBP           GBP 
-----------------------------------------  -----------  ------------ 
 Goods/services purchased from Dotfusion 
  Limited                                       24,000        36,000 
 Goods/services purchased from Highlees 
  Consulting Limited                            16,000        13,333 
 Goods/services purchased from KBL 
  Consulting Limited                            12,600        28,252 
 Goods/services supplied to Richard 
  Horsman                                        1,853           603 
 Goods/services supplied to Andrew 
  Hollingworth                                     511           283 
                                                54,964        78,471 
-----------------------------------------  -----------  ------------ 
 

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 a non-executive Director.

   9.          DIVIDENDS 

No dividends were declared in the period.

   10.        SUBSEQUENT EVENTS 

The Board does not believe there are any subsequent events requiring further disclosure or comment.

-ends-

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(END) Dow Jones Newswires

June 17, 2021 02:00 ET (06:00 GMT)