Toople Tops Expectations
half-year results for the six month period to 31 March 2020 showed almost 40% revenue growth, gross margin expansion to 22% with the first six weeks contribution from the transformational acquisition of DMS Holding 2017 Limited (“DMSL”), which was completed on 19 February 2020.
Total 1H20 revenues increased by over 39% to £1.5 million (1H19: £1.08 million) with Broadband revenue growing by 70% and mobile revenue by 100%.
However, marketing costs were higher when compared to 1H19, which Toople said was a reflection of its strategy to invest in digital marketing and to grow the business during FY20 and beyond.
It anticipates that the strategy will drive a significant increase in lead conversion and sales, which ultimately will result in a lower cost of acquisition per customer, which is a key financial metric for any Telco Company.
The group therefore reported an 1H20 operating loss of £1.06m, including an exceptional restructuring costs of £0.08m, compared with a loss in 1H19 of £0.84m. Loss per share was reduced to 0.09p per share to 0.06p.
Cash at the bank was over £1.0m as at 31 March 2020, with the group’s total assets having increased substantially to £4.1 million (1H2019: £1.3m), largely due to the acquisition of DMSL.
The provider of telecom services to UK SMEs said in its half-year results that the business “is functioning well” and that ‘it is well placed to take advantage of new opportunities’.
“Our business is functioning well and the key operational and financial milestones that we outlined at the time of the acquisition of DMSL have been achieved,” said Non-Executive Chairman, Richard Horsman.
Outlook
Post period end the Group highlighted that DMSL was continuing its growth trajectory and has won a number of notable new contracts across the retail, NGO and insurance sectors since its acquisition.
DMSL has a history of being cash generative and at the time of acquisition, the Company originally identified that it was seeking to achieve cost savings of £0.60m per annum.
To date the Company revealed it has already achieved over £0.48m cost synergies on an annualised basis) with the remaining £0.12m already in progress to be delivered.
In addition, the Company stated it has ‘now identified a further annualised total of £0.42m cost savings that can be realised’ which means it could now expect to achieve over £1.0m of cost synergies over the course of the coming financial year, substantially more than originally identified and certainly accelerating its path to profitability and positive cashflow.
Andy Hollingworth, CEO of Toople, said, “The financial and operating synergies already achieved are propelling us more quickly towards positive cash generation.”
The group maintains confidence that its core offering as a cloud telephone platform will ensure business continuity as it offers solutions to businesses looking to work from home.
Shares in Toople closed at 0.09p on Wednesday morning.
“Growth is being driven by a number of factors, not least a noticeable switch by UK SMEs to superfast fibre broadband, ahead of the phasing out of existing legacy copper infrastructure, due for completion by 2025.
This trend is coupled with a seismic shift in UK working practices, whereby more workers are either electing to or being asked to work from home, driving further reliance on home based telecoms, IT and broadband solutions,” said Hollingworth.
Clearly the major caveat is the true impact of COVID-19 on the wider economy, but as it stands today, we believe it presents opportunities for our Group.”
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