TIDMTOOP
RNS Number : 5198E
Toople PLC
09 May 2017
9 May 2017
Toople Plc
("Toople" or the "Company" or the "Group")
"PLEASED WITH PROGRESS IN FIRST YEAR"
Interim Results
Toople Plc (LSE: TOOP), a provider of bespoke telecom services
to UK SMEs, is pleased to announce its unaudited interim results
for the six months ended 31 March 2017.
Financial Highlights:
-- 63% increase in revenue to GBP654,721 (H1 2016: GBP402,609);
and 18% up versus the second half of 2016 (GBP555,140)
-- 89% increase in gross profit to GBP82,034 versus second half
of 2016 (GBP43,420). Gross margin is 12.5% (Full year 2016:
8.1%),
-- 49% improvement in losses before taxation of GBP603,763 on
second half of 2016 (GBP1,193,876)
-- Cash position at 31 March 2017 of GBP191,584
Operational Highlights (including post-period end
highlights):
-- 81% increase in orders in March and April compared to the
previous two months following the launch of Toople digital direct
marketing activity at the end of February
-- 28% of orders in March and April have been for our hosted
cloud based telephony services -this supports the strategic
decision to focus on these higher-margin products
-- Approaching 800 customers (exc. wholesale) signed up to
Toople products, resulting in over 1200 revenue generating
units
-- 36 month contracts being signed by hosted cloud based
telephony customers; increasing average customer contract length
and providing stronger revenue visibility.
-- 8.7 out of 10 average customer satisfaction score via
Trustpilot shows that our "right first time" customer service
strategy continues to deliver. Score is higher than other
established players - Virgin Media Business and BT Business
Direct.
Andy Hollingworth, CEO, Toople Plc, said: "With the Toople brand
celebrating its first anniversary, we are pleased with our progress
so far. We have launched a completely new brand and demonstrated
that there is clear demand for a new entrant into the UK SME
business communications market. Customers are responding positively
to our fresh approach including transparent and fixed pricing,
high-quality customer service and a comprehensive range of
products, particularly our cloud based hosted telephony services.
The launch of the hosted products in January has helped grow our
customer base to almost 800 SMEs with increasing numbers taking
multiple services from us. The launch of our first direct digital
marketing campaign at the end of February 2017 saw orders increase
81% by the end of April 2017 with almost 30% of all orders in March
and April for our new cloud based telephony services. Over the next
six months, subject to funding, we plan to continue to invest in
direct digital marketing to drive further growth in customer
numbers and RGUs across all our propositions, while keeping the
cost of customer acquisition as low as possible.
"Over the next six months, our focus is on: adding more SME
customers; increasing the number of our products they take;
building on the positive customer experience scores achieved
through our "right first time" UK based customer service; while
also maintaining our low cost of customer acquisition.
"It is still very early days in Toople's development but our
ambition remains to become one of the UK's leading providers of
bespoke telecom services to UK SMEs. This is a target market of
five million customers with a significant proportion served by
vendors that lag behind us in terms of customer satisfaction.
Through our distinctive offer and approach, we believe there is a
real opportunity for Toople to profitably establish itself as a
significant player in the SME market. This prospect has been
enhanced by Ofcom's recent decision to legally separate Openreach
from BT which should allow even greater competition and higher
levels of network investment."
The unaudited interim statements are available on the Company's
website at https://www.toople.com/investors/ . An electronic
version of the half-year report has been submitted to the National
Storage Mechanism, which will shortly be available for inspection
at http://www.morningstar.co.uk/uk/NSM.
This announcement contains insider information.
For further information:
Toople Plc 0800 0499 499
Andy Hollingworth, Chief Executive Officer
Cairn Financial Advisers LLP 020 7 213 0880
Emma Earl, Financial Adviser
Hybridan 020 3 764 2341
Broker
Claire Noyce
Redleaf Communications 020 7382 4730
Rebecca Sanders-Hewett toople@redleafpr.com
Sam Modlin
Financial and Corporate Overview
Chairman's Statement
Summary
The last six months has seen Toople make significant progress in
establishing itself as a new brand in the competitive UK small
business communications market. The Board believes that Toople is
increasingly being recognised by SMEs as a trusted, reliable and
transparent provider of business communications solutions. We also
believe we have the potential to achieve our ambition to become one
of the leading providers of bespoke telecom services to UK SMEs.
This is based on the response so far to Toople's range of telecoms
products and customer service. As a Board, our focus is on
supporting management to capture the opportunity we see in the five
million-strong UK SME market and delivering long-term value to our
shareholders.
Update on financing
Our cash position as at 31 March 2017 was GBP191,584. However,
in order to continue growing our customer base, further investment
is required. To ensure the Company has the resources to take
advantage of the market opportunity, as noted in our March 2017
trading update, the Board is reviewing funding options to provide
additional working capital to drive accelerated sales growth in the
higher margin, retail business and cloud based telephony services
through targeted marketing and advertising campaigns. Funds will
also be used for general working capital purposes to support the
needs of the business. The Directors are seeking shareholder
authorities to provide the Company with the flexibility to raise
these further funds in the future. A Notice of General Meeting was
published and sent to shareholders on 4 May 2017 and the Company
will be holding the meeting at the offices of Gowling WLG, 4 More
London Riverside, London, SE1 2AU on 24th May 2017 at 10:00
a.m.
Board and Senior Management Update
In April, we announced Neil Taylor is stepping down from his
role as Chief Financial Officer and from the Board of Directors
following the publication of these results. Neil has been a
director of Toople on a part-time basis since March 2016 and has
established our financial operations, supported the Company through
the IPO process and helped establish the Toople brand. This change
is in line with the expectations set out in our IPO prospectus. We
are in the process of recruiting a permanent replacement and in the
meantime Geoffrey Wilson, Non-Executive Director will assume the
role of part-time CFO. Geoff has considerable experience in the
telecoms industry, having held a number of senior roles including
Finance Director of TalkTalk Business. To ensure a smooth
transition, Neil will remain as a consultant until the recruitment
process is completed. I would like to take this opportunity on
behalf of the Board to thank Neil for his hard work and dedication.
Furthermore, I would also like to thank our all our employees for
their hard work and commitment and shareholders for their continued
support.
Richard Horsman
Chairman
Chief Executive Officer's Review
Summary
Over the last six months, we have made significant progress
against key objectives. Our SME customer base is growing, our
direct digital marketing has started well, our cloud based
telephony services have proved popular and we see opportunities to
increase the number of Toople products purchased by our
customers.
The growth in customer numbers and revenue generating units
("RGUs) since launch of the Toople brand in H2 2016 has resulted in
revenue of GBP654,721 during the period, being a 63% increase since
H1 2016 (GBP402,609). The launch of our first direct digital
marketing campaign at the end of February saw customer numbers
accelerate to almost 800 at the end of April (excluding wholesale),
representing over 1200 RGUs. The campaign helped orders grow by 81%
to the end of April 2017 from the campaign launch compared to the
number of orders in January and February.
As we said in January 2017, due to the increased competition in
the SME broadband market, we are focusing on driving our cloud
based business telephony services - Toople.com Classic and
Toople.com Premium - which offer higher margins and customers
taking longer contracts. Despite this, we have still seen broadband
orders increase, though we have declined to fight for market share
by getting involved in high cost promotional activity.
As a result of the focus on higher margin direct propositions,
gross margins have increased from 8.1% in full year 2016, to 12.5%,
and at GBP82,034, gross profit is 89% higher than the second half
of 2016. This helped the operating loss before taxation improve 49%
versus the second half of 2016 to GBP603,763 where the loss had
grown to GBP1,193,876 million, albeit that the H2 2016 loss
included one-off IPO related costs. We expect to see margins
continuing to improve as we focus on direct orders as opposed to
wholesale growth.
Finally, as previously noted our cash position as at 31 March
2017 is GBP191,584.
Strategy and business overview
Our ambition is to become the one of the leading providers of
bespoke telecom services to UK SMEs. We have developed a range of
telecoms products to meet the communications needs of this market
based around connectivity, mobility and business telephony. These
products are:
-- Cloud-based business phones services (including integration
into IoS and Android apps for true mobility) as well as traditional
services (calls and lines), Business broadband including superfast
fibre
-- Data services (Ethernet First Mile and Ethernet)
-- Business mobile and sim only propositions
Since launch in January 2017 we have seen strong interest in our
cloud-based telephony services which the Board identified as a key
driver for new customer acquisitions. The services, Toople.com
Classic and Toople Premium, which allow the service to be used on
any Android or IoS device as well as the customer's default
hardware, have proved popular. Both propositions provide an
efficient way for small businesses to have a reliable, maintenance
free phone system that requires minimum capital expenditure and no
advance payment. For Toople, it has the additional benefit that all
Toople.com Classic and Toople Premium customers are signing 36
month agreements compared to 12 or 24 months for Broadband and
Mobile. Furthermore, all of the customers have paid for Toople's
unlimited calls package and over 70% of these customers also order
Toople broadband for their connectivity.
The broadband business market remains competitive. However, we
continue to grow our orders without committing to taking market
share at all costs. Our fixed, transparent pricing based on great
customer service still remains attractive to customers. More
customers are also taking up our business mobile phone offering as
we have improved our proposition. We are benefiting from the
addition last May of O2 4G and Vodafone 4G to our existing EE 3G
services. This was five months ahead of schedule allowing us to
market our highly competitive mobile propositions earlier than
planned. Early in 2017, we also enhanced the packages by adding
2,000 EU roaming minutes and 2,000 EU roaming texts to existing
deals and 500mb of EU data roaming with no increase in cost for the
customer.
All Toople products are delivered and managed through Merlin,
the Group's proprietary software platform. Merlin provides an
end-to-end automated process that allows customers to place orders
easily, and enables the business to grow its customer base, without
the need to scale expensive resources. This helps support one of
our key differentiators - quality of customer service.
A number of other telecoms companies buy services from Toople,
white label the propositions and resell to their own customers.
Furthermore, the Merlin software platform gives access to
wholesalers who want to interconnect with carriers for provisioning
and billing services for their own customers, where a monthly
licence fee is applicable to access Merlin. Over time, the
proportion of revenues we achieve from wholesale will reduce as we
focus on the higher margin retail business. Wholesale is not a
strategic priority for the Company.
Customer acquisition and service
As discussed, we have already started to grow our SME customer
base through direct digital marketing and we anticipate building on
this growth through further investment in the future. Toople's
approach to customer acquisition is to deploy a marketing and
advertising strategy aimed at delivering high-levels of online
market penetration either directly or via comparison sites to
increase brand awareness. The focus is on attracting customers
through the quality and transparency of Toople's products and
keeping them through their service experience once they are signed
up. This means opportunities for us to grow the number of Toople
products they have.
Since our launch, Toople has been steadily increasing our SME
customers with a step up of 81% in orders following the start of
the digital marketing campaign at the end of February to 30 April
2017. The campaign used cost effective digital communication
channels including social media to allow potential customers to
experience Toople's services through Toople.com. The website allows
customers to design their services package in accordance with the
needs of their business which greatly influences their decision to
buy.
Senior management intend to focus on increasing the average
monthly order rate during 2017 as we seek to grow our customer
base. Over time, we aim to increase the customers acquired directly
through online marketing driven by our proprietary CRM system -
Merlin - or through greater brand recognition, with customers
increasingly searching directly for Toople. This will achieve lower
customer acquisition costs overall. All online marketing activity
is closely monitored by Toople's management on a daily and even
hourly basis to assess the impact and effectiveness of the
marketing campaigns and make changes as required.
The current cost of customer acquisition ranges between GBP40
and GBP91 per customer with the aim of achieving a 30% margin over
the contract life of a typical customer.
In the near term, brand recognition is primarily being driven by
Toople's presence on comparison sites. Toople has been accredited
by more than 30 of the UKs biggest business-to-business cashback
and comparison sites, with the most notable listings on; uSwitch,
Quidco, Topcashback, Money Supermarket and Broadband Genie. Orders
continue to be placed online or through our agents as a result of
our presence on these sites. Brand presence on these sites will
also help drive overall brand recognition for the Company resulting
in more organic brand search which means overtime, lower customer
acquisition costs.
Once signed, customer experience is critical to delivering best
in class retention rates: and as customer contracts mature, it
provides us with the best opportunity to sell more than one product
to re-contracting customers. This is central to Toople's strategy
and we aim to attract and retain customers by delivering "right
first time" UK based customer service. Our average customer
satisfaction score of 8.7 out of 10 via Trustpilot is higher than
the average scores achieved by the more established companies
operating in the sector including BT Business and Virgin Media
Business.
It means that as Toople grows, growing absolute customer numbers
will become less relevant to our success as we increase the number
of customers taking more than one product. Therefore, we also
report on RGUs, which represent the number of individual services
that result in recurring billable revenue and margin. This can
encompass telephone lines; broadband lines, data lines, sim cards
and hosted seats. Since launch of the Toople brand, RGUs (excluding
wholesale) have increased to over 1200.
Regulation and Political Overview
We believe recent developments in the political environment and
in the regulation of the UK telecoms sector following the 2016
Strategic Review of Digital Communications by Ofcom will support
the successful long term delivery of Toople's strategy.
First, the legal separation of Openreach from BT is a welcome
step which should improve the competitive landscape, reducing the
advantage enjoyed by BT Business while allowing better access to
the network assets by alternative infrastructure companies to
release more investment.
Second, the UK political establishment has recognised the need
to improve the nation's historically low rates of the productivity.
UK SMEs are the backbone of the economy and improving their
productivity is vital. We believe this means SME's need access to
better digital infrastructure that is in line with the very best in
the world. It is vital that the next Government ensures that the
UK's digital infrastructure is a key priority and has a plan that
ensures even greater role out of FTTP.
Third, while the uncertainty around the political environment
and Britain's decision to leave the European Union may have a
negative impact on business and consumer confidence this means SMEs
will be more focused on operational costs. We believe Toople's
transparent and competitively priced offer is well-placed to
benefit.
Outlook
The first six months has seen solid progress as Toople
establishes itself in the UK SME communications market. Since the
launch of the brand a year ago, we have proved that there is a real
appetite for a new entrant in the SME business communications
market. We are still very early in our development and our primary
focus is on growing our customer base and building greater
recognition of the Toople brand and its products. We are beginning
to see the rewards from our investment. The launch of our first
direct digital marketing campaign at the end of February 2017 saw
orders increase 81% by the end of April 2017 with almost 30% of all
orders in March and April for our new cloud based telephony
services.
Over the next six months, subject to funding, we plan to
continue to invest in direct digital marketing to drive further
growth in customer numbers and RGUs across all our propositions,
while keeping the cost of customer acquisition as low as
possible.
Like any business, our outlook is impacted by external factors.
The economic outlook for UK following the Brexit vote may result in
a period of uncertainty for businesses. However, we believe our
fixed, transparent pricing policy will position Toople as an even
more attractive proposition for UK SMEs. Toople propositions
require no upfront capital expenditure and can help reduce the
operational costs of small businesses, which is valuable in such
times.
Our experience over the last year confirms our view that Toople
enjoys significant advantages over our competitors. We are already
recognised as a more trusted, reliable and transparent provider of
business communications solutions than many traditional, larger
providers with the flexibility to move more quickly to address
changing customer demand. We are confident that our ambition to
become one of the UK's leading providers of bespoke telecom
services to SMEs is achievable.
I would like to thank the shareholders, the Board, the Toople
team and most importantly our customers who have all contributed to
the progress of Toople over the last 12 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 included a
detailed assessment of the risks facing the business. The Directors
have identified the following key risks in the second 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 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;
-- As the Group has a limited trading history, actual
performance may differ materially from expectations and the Group
may generate sustained losses;
-- The Group operates in a competitive market and may not be
able to sell multiple products to customers;
-- 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 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 ownership and use of intellectual property by the Group
may be challenged by third parties or otherwise disputed;
-- The loss of one of more wholesale customers or licence income
could have a significant impact on revenue and absolute gross
profit of the Group;
-- The Group's business may be materially affected in the event
that the Group's out-sourced customer service team fails to deliver
or terminates its contract with the Group;
-- 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;
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 2017; 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
Geoffrey Wilson
Andrew Hollingworth
Neil Taylor
Company Secretary:
WKH Company Secretary Services
By Order of the Board
Andrew Hollingworth
Chief Executive Officer
8 May 2017
Condensed Consolidated Statement of Comprehensive Income
The condensed consolidated statement of comprehensive income of
the Group for the six month period from 1 October 2016 to 31 March
2017 is set out below.
NOTE Period Period
ended ended
31 Mar 31 Mar
17 16
----------------------------------- ----- -------------------------------------- ----------
Continuing operations GBP GBP
Revenue 654,721 402,609
Cost of Sales (572,687) (368,388)
Gross Profit 82,034 34,221
Administrative expenses (661,983) (573,459)
Operating loss (579,949) (539,238)
Interest payable and
similar charges (23,947) (464)
Interest receivable 133
-------------------------------------- ----------
Loss before taxation (603,763) (539,702)
-------------------------------------- ----------
Taxation -
--------------------------------------
Loss for the period (603,763) (539,702)
-------------------------------------- ----------
Other comprehensive loss
for the period (603,763) (539,702)
-------------------------------------- ----------
Total comprehensive loss
for the period attributable
to the equity owners (603,763) (539,702)
Loss per share
Basic and diluted earnings/(loss)
per share 5 (0.60) (0.72)
Condensed Consolidated Statement of Financial Position
The condensed consolidated statement of financial position as at
31 March 2017 is set out below:
As at As at
NOTE 31 Mar 17 30 Sep 16
(Unaudited) (Audited)
GBP GBP
---------------------------------- ------------ -----------------------
ASSETS
Non-current assets
Intangible assets 10,096 14,546
10,096 14,546
------------ -----------------------
Current assets
Trade and other receivables 191,920 223,674
Cash and cash equivalents 191,584 743,824
------------ -----------------------
383,504 967,498
------------ -----------------------
Total assets 393,600 982,044
------------ -----------------------
EQUITY and LIABILITIES
Share capital 6 66,700 66,700
Share premium 1,900,245 1,900,245
Merger reserve (25,813) (25,813)
Share based payment reserve 55,705 24,130
Capital contribution reserve 113,669 137,616
Retained earnings (2,555,180) (1,975,364)
------------ -----------------------
Total equity (444,674) 127,514
------------ -----------------------
Current liabilities
Trade and other payables 7 345,602 385,390
345,602 385,390
------------ -----------------------
Non-current liabilities
Financial liabilities
- borrowings 7 492,672 469,140
------------ -----------------------
492,672 469,140
------------ -----------------------
Total equity and liabilities 393,600 982,044
------------ -----------------------
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 2017 is set out
below:
NOTE Share Share Merger Share Capital Accumulated Total
capital premium reserve Based contribution deficit
Payment Reserve
reserve
PRIOR GBP GBP GBP GBP GBP GBP GBP
PERIOD
---------------- --------- --------- --------- --------- -------------- ------------ ----------
Brought
forward
at 01
October
2015 26,013 0 (25,813) 0 0 (260,851) (260,651)
Loss for
the period (539,702) (539,702)
--------- --------- --------- --------- -------------- ------------ ----------
Total
comprehensive
loss for
the period (539,702) (539,702)
At 31
Mar 2016 26,013 0 (25,813) 0 0 (800,553) (800,353)
--------- --------- --------- --------- -------------- ------------ ----------
NOTE Share Share Merger Share Capital Accumulated Total
capital premium reserve Based contribution deficit
Payment Reserve
reserve
CURRENT GBP GBP GBP GBP GBP GBP GBP
YEAR
--------------- -------- ---------- --------- ------------------- ------------- ------------ -------------------
Brought
forward
at 1 October
2016 66,700 1,900,245 (25,813) 24,130 137,616 (1,975,364) 127,514
Loss for
the period (603,763) (603,763)
-------- ---------- --------- ------------------- ------------- ------------ -------------------
Total
comprehensive
loss for
the year (603,763) (603,763)
Transactions
with owners
Share based
payment
charge
credited
to equity 31,575 31,575
Equity -
component
of interest
free loan
Transfer
of interest
accrued (23,947) 23,947 0
-------- ---------- --------- ------------------- ------------- ------------ -------------------
At 31 March
2017 66,700 1,900,245 (25,813) 55,705 113,669 (2,555,180) (444,674)
-------- ---------- --------- ------------------- ------------- ------------ -------------------
Condensed Consolidated Statement of Cash Flows
The condensed consolidated cash flow statement of the Group from
1 October 2016 to 31 March 2017 is set out below:
Period ended Period ended
31 Mar 17 31 Mar 16
GBP GBP
------------------------------------ ------------- -------------
Cash flows from operating
activities
Operating loss (579,949) (539,238)
Depreciation and amortisation 4,450 -
Share based payment charge 31,575 -
Changes in working capital
Decrease in receivables 31,753 838
(Decrease)/Increase in
payables (40,201) 170,259
Taxation - -
Net cash outflow from
operating activities (552,372) (368,141)
------------- -------------
Cash flows from financing
activities
Finance costs - 464
Proceeds from Director
Loan - 150,078
Net cash from financing
activities - 149,614
------------- -------------
Cash flows from investing
activities
Finance income 132 0
Net cash from investing
activities 132 0
------------- -------------
Net increase/(decrease) in
cash and cash equivalents (552,240) (218,527)
Cash and cash equivalents
at start of year 743,824 130,853
------------- -------------
Cash and cash equivalents
at end of year 191,584 (87,674)
------------- -------------
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. The financial information prior to the date of the
combination on 15 April 2016 is pro forma.
2. BASIS OF PREPARATION
The interim condensed unaudited financial statements for the
period ended 31 March 2017 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 2016. The results for the period
ended 31 March 2017 are unaudited.
The condensed unaudited consolidated financial statements for
the period ended 31 March 2017 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 2016
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 judgement in
applying the group's accounting policies.
This note provides an overview of the areas that involved a
higher degree of judgement 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 judgements is included together with
information about the basis of calculation for each affected line
item in the financial statements.
The areas involving significant estimates or judgements are:
-- Going concern
At 31 March 2017, the Group had GBP191,584 of cash and net
assets of GBP47,998 excluding the non-current liability owed to a
shareholder that (at the option of the company) is not payable
until 2019, and then only at the Boards discretion with reference
to liquidity of the business.
In order to continue growing our customer base, further
investment is required. To ensure the Company has the resources to
take advantage of the market opportunity the Board is reviewing
funding options to provide additional working capital. The
Directors are therefore seeking shareholder authorities to provide
the Company with the flexibility to raise these further funds in
the future and are confident that the necessary further investment
will be forthcoming. There can, however, be no assurance that this
will be the case.
Should the company be unable to continue trading, adjustments
would have to be made to reduce the value of the assets to their
reasonable amounts, to provide for further liabilities which might
arise, and to classify fixed assets as current.
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 and a
reduction in costs following the successful website development,
digital marketing, and Merlin integration with its associated
consultants and agencies.
Estimates and judgements 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.
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 10% of the Company revenue, revenue generated
from this customer amounted to GBP326,161. 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. LOSS PER SHARE
The calculation of loss per share is based on the following loss
and number of shares:
Period ended Period
ended
31 Mar 17 31 Mar
16
------------- -----------
Loss for the year
from continuing
operations (603,763) (539,702)
------------- -----------
Weighted average shares in
issue
Basic and diluted
number of shares 100,000,000 75,000,000
Basic and diluted
earnings/loss
per share (pence) (0.60) (0.72)
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 year from continuing operations of the Company by the
weighted average number of ordinary shares in issue during the
year.
The denominator for loss per share for the period ended 31 March
2016 reflects the shares issued on incorporation of the Company and
to acquire the Subsidiaries on 15 April 2016 and is therefore pro
forma.
The Company has in issue 8,100,000 warrants at 31 March 2017.
The inclusion of the warrants in the weighted average number of
shares in issue would be anti-dilutive and therefore they have not
been included.
6. SHARE CAPITAL
Ordinary shares of 0.0667 No Nominal
pence per share value GBP
On incorporation 36,000,000 24,012
Shares issued on acquisition
of Subsidiaries 39,000,000 26,013
Share placing 25,000,000 16,675
Share capital at 30 September
2016 and 31 March 2017 100,000,000 66,700
-------------- ----------------------
On incorporation, the Company had an unlimited authorised share
capital and an issued share capital of 36,000,000 ordinary shares
of par value 0.0667 pence each.
On 15 April 2016, 39,000,000 ordinary shares were issued and
allotted to David Breith in accordance with the terms of the share
exchange agreements in relation to the acquisition of the
subsidiaries
On 10 May 2016 following the Company's listing on the London
Stock Exchange, 25,000,000 ordinary shares of par value 0.0667
pence each were issued, fully paid at GBP0.08 per share. A
commission of GBP80,000 was payable to the brokers and this has
been recognised against the share premium account.
Also on 10 May 2016 following the Company's listing on the
London Stock Exchange, the Company issued warrants over 8,100,000
ordinary shares as follows:
-- 3,000,000 warrants to the Non-Executive Directors to
subscribe for one new ordinary share at GBP0.08 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 is that the
holder is a director of the Company on the date of vesting;
-- 5,000,000 warrants to the subscribers to the placing to
subscribe for one new ordinary share at GBP0.16 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 GBP0.24 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
-- 100,000 warrants to Cairn Financial Advisers to subscribe for
one new ordinary share at GBP0.08 per share at any time during the
period commencing on admission and expiring at midnight on the
second anniversary thereof
The ordinary shares have attached to them full voting, dividend
and capital distribution rights (including on a winding up). The
ordinary shares do not confer any rights of redemption.
The fair value of the 3,000,000 warrants issued to the
Non-Executive Directors and of the 100,000 warrants issued to Cairn
Financial Advisers have been determined using the Black-Scholes
option pricing model. The fair value at the date of grant per
warrant was GBP0.04 for the 3,000,000 tranche and GBP0.03 for the
100,000 tranche. The fair value of the warrants issued to the
Non-Executive Directors has been charged to the income statement
evenly over the vesting period resulting in a charge in the current
period of GBP31,575. The fair value of the warrants issued to Cairn
Financial Advisers of GBP3,080 has been included in the costs of
the Company's and placing and therefore debited to share premium in
the year ended 30 September 2016.
The inputs to the Black-Scholes model were as follows:
Warrants granted 3,100,000
------------------ ----------------
Stock price 8p
------------------ ----------------
Exercise price 8p
------------------ ----------------
Risk free rate 1%
------------------ ----------------
Volatility 70%
------------------ ----------------
Time to maturity 4 years/2 years
------------------ ----------------
The Company has recently listed on the main market of the London
Stock Exchange. It is difficult to calculate the expected
volatility of its share price at the year end. Management have
therefore considered volatility of listed entities in similar
operating environments to calculate the expected volatility.
The fair value of the 5,000,000 warrants issued to subscribers
to the placing is considered to comprise a component of the fair
value of the ordinary shares issued in the placing. The Directors
do not consider the fair value of the warrants to be a material
component of the fair value of the shares issued in the
placing.
7. TRADE AND OTHER PAYABLES
As at As at
31 Mar 30 Sep 16
17
-------- ----------
GBP GBP
Trade payables 104,048 187,087
Social Security and other taxes 39,638 56,606
Other payables 22,271 10,271
Accruals and deferred income 179,645 131,426
-------- ----------
345,602 385,390
-------- ----------
As at As at
31 Mar 30 Sep 16
17
Non - current liabilities
-------- ----------
Shareholder loan account 492,672 469,140
-------- ----------
Financial liabilities, with the exception of the shareholder
loan included within trade and other payables are all considered to
be repayable within 30 days.
On 3 May 2016, the Company put in place formal documentation
relating to the balance owed to David Breith, the majority
shareholder. The balance cannot be recalled by the shareholder
until the third anniversary of the agreement and after this
anniversary only repayable if the board consider the Company in a
position to service the debt. Therefore, the balance has been
classified as non-current in the financial statements but is shown
as current in the comparative.
The loan is interest free and has a cash value of GBP606,756,
the Directors consider the market rate of interest that they may be
able to obtain for a similar borrowing from a 3rd party to be 10%.
The present value of the loan is GBP492,672 and the present value
adjustment has been recognised as a capital contribution within
equity. The value of the interest that has been recognised in the
statement of comprehensive income at 31 March 2017 is
GBP23,947.
8. RELATED PARTY TRANSACTIONS
6 months 6 months
to to
31 Mar 17 31 Mar
16
---------- ----------------------------------
GBP GBP
Goods/services purchased from
Vitrx Limited 4,599 2,797
Goods/services purchased from
Blabbermouth Marketing Limited 0 2,000
Goods/services purchased from 8,368 -
Diffrenet Limited
Goods/services purchased from
Dotfusion Limited 30,780 7,000
Goods/services supplied to
Vitrx Limited 9,489
Goods/services supplied to 240 -
Diffrenet Limited
53,476 11,797
---------- ----------------------------------
The above companies are disclosed as related parties due to the
nature of the business relationship with Mr David Breith, a major
shareholder of Toople PLC. Mr David Breith is a Director or
co-owner of the above companies, excluding Dotfusion.
Mr Piotr Kwiatowski is the owner of Dotfusion and is a
shareholder in Toople PLC.
9. SUBSEQUENT EVENTS
The Board does not believe there are any subsequent events
requiring further disclosure or comment.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QVLFBDEFZBBZ
(END) Dow Jones Newswires
May 09, 2017 02:00 ET (06:00 GMT)
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