Toople Delivers £1.6m cost synergies
(LSE: TOOP ), has announced an operating update and appoints Paul White, current financial controller, as CFO from 1 October.
Trading Update
Following the acquisition of DMSL earlier this year, the Company reported it has now restructured the group along four operating brands:
Revenue Growth
Whilst the Company reported the wider trading environment remains somewhat subdued due to COVID-19, trading within the DMSL business demonstrated 14% order growth against August 2019 with further order growth seen in September.
The other operating brands also saw trading patterns in the B2B market return to more normalised levels in August, as more businesses emerged from lockdown and critical capex expenditure for IT and telecoms recommenced.
Cost Synergies
Initially the Company estimated the reorganisation would deliver cost synergies in excess of £0.60m per annum, which was subsequently updated to over £0.96m savings per annum.
The Company was therefore pleased to report investors should now expect the reorganisation exercise to deliver an upgraded £1.6m of annualised cost savings from 1 October 2020.
Whilst investors should expect a decline in headline revenues as the Company moves towards lower volume / higher margin customers, the Group expects the margin expansion and reduced operating overheads will accelerate its path to profitability and transform its cash position over the course of the coming twelve months.
Andy Hollingworth, CEO commented: "Our initial guidance was that the acquisition of DMSL would deliver £50,000 a month of synergy and cost savings as a combined group, we are therefore delighted with the results of the integration and other initiatives delivering over £130,000 per month.
Board Change
The Company has also announced Kevin Lawrence, who has been acting as interim part time CFO, will now become a Non-Executive Director of the Company from 1st October 2020. Kevin will chair the audit and remuneration committees.
Paul White, Toople's Financial Controller who has been with the Company since June 2020, will take over as Company CFO and will commence the new role on 1st October 2020. Paul, has been shadowing Kevin for the last three months and has an excellent knowledge of the Group's operating subsidiaries, financial processes and systems.
Commenting on the appointment of Paul White as Group CFO, Richard Horsman, Chairman said: "Kevin has played an instrumental role in implementing our plan to develop new revenue streams, both organically and acquisitively, and we are extremely grateful for his continued contributions. Kevin has a wealth of skills and practical knowledge relevant to scaling businesses. He has proven these skills in his role as CFO of Toople and we look forward to his continued guidance and advice in his new role as Non-Executive Director of the Company. His excellent execution capability in acquisitions and understanding of the plc environment will continue to prove invaluable.
"It is very important that we appoint a new full time CFO that has complementary skills, market knowledge and proven experience in our line of work and our strategy. Our current Financial Controller, Paul White, is that person and it is a major advantage that he already knows the business intimately. We are extremely pleased to announce that he will be the next CFO of Toople as he knows and shares our vision and ambition."
Shares in TOOP have recovered strongly from lows of 0.05p over the past thre months. The shares opened at 0.08p following publication of the update and have advanced further to 0.09p in early morning trading.
Outlook
The Company reminded investors that the positive macro drivers for the Group, namely the UK Government's commitment to the rolling out of fibre telecommunication infrastructure to replace copper, the unavoidable infrastructure upgrade from 4G to 5G and the seismic move to home working for many employees, all remain in place.
Commenting on the outlook, Andy added “The business is steadily moving forward and remains excellently placed for rapid expansion as the UK's telecommunication infrastructure is upgraded. Another key driver for Toople is the move towards at home working by small businesses and their employees.
Despite the outbreak of Covid-19 and the resultant decrease in economic activity, the conditions in which Toople is set to thrive remains unaffected - and in some ways the outlook is even more positive as many people make a more permanent switch to working from home and need reliable telecommunications infrastructure.
Indeed, even now the Government is tightening restrictions regarding Covid-19 and whilst this remains a challenging time for our country and many the wider business community, working from home is a key strategy that all our products and propositions support.”
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