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Toople PLC (TOOP)

Toople PLC

Final Results
RNS Number : 5489B
Toople PLC
31 January 2020
 

Strictly embargoed until: 07.00, 31 January 2020

 

Toople PLC

("Toople" or the "Company")

Final results for the year ended 30 September 2019

 

Toople PLC (LSE: TOOP), a provider of bespoke telecom services to UK SMEs, today announces its final audited results for the year ended 30 September 2019.

 

Highlights:

 

·      Revenue, showing significant growth year on year increasing by over 80% to £2,452,153

Broadband revenue grew by over 220% to £1,331,699

Hosted revenue grew by 80% to £114,892

Mobile revenue grew by over 200% to £166,517

Growth achieved despite sacrificing over £600,000 of revenue due to termination of onerous partnership agreements signed prior to IPO

·      Gross profit increased by 165.5% to £478,704 (FY18: £180,457)

Overall gross margin improved by 6.2 percentage points to 19.5%

·      Increase in marketing and sales costs as business drives revenue for future returns

New Head of Digital and Commercial Marketing appointed to focus on driving growth, innovation and sales

Growth in direct customer orders driving growth, validating management decision to increase marketing spend

·      Strong monthly growth in new customer orders and new customer wins continued throughout year

·      Year on year growth in customer orders up over 100% for year to date

·      New sales centre opened in Durban, South Africa performing well

Significantly extended operating hours into the evening

Helps maximise customer enquiries

Cost attractive when compared to on-shore UK

Reducing cost of customer acquisition

Leads to reduction of sales cost of circa 50% per order

·      Customer acquisition costs decreasing and customers increasing the amount of services taken

·      Private placement successfully completed raising £662,231

·      Debt of circa £600,000 repaid in full for a payment of only £150,000

·      Acquisition strategy implemented

 

Commenting on current trading and outlook Mr Horsman added:

"We will today announce a transformational acquisition for the Company. This coupled with the strong operational performance of the business gives the Board significant confidence in the future cash generative capabilities of the enlarged Group."

 

Andy Hollingworth, CEO at Toople commented:

"The Toople proposition is about offering our customers choice. We provide them with the best solution for their individual needs. The investments we have made this year have driven top line growth with future returns in mind. We continue to demonstrate to our customers that we are agnostic about carrier choice and focussed on providing them with the best service at the best price; with transparency and certainty of costs over the term of their contract."

 

-ends-

 

For further information please visit www.toople.com or contact:

Toople PLC

Andy Hollingworth, Chief Executive Officer

 

Tel: 0800 0499 499

Cairn Financial Advisers LLP

Sandy Jamieson / Ludovico Lazzaretti 

 

Tel: 020 7213 0880

Novum Securities Limited

Colin Rowbury

 

Tel: 020 7399 9400

Turner Pope Investments Limited

Andy Thacker

 

Tel: 020 3621 4120

Belvedere Communications

John West / Llew Angus

 

Tel: 020 3687 2754

About Toople PLC

Toople Plc, a company incorporated in the UK provides a range of telecoms services primarily targeted at the UK SME market. Services offered by the Group include business broadband, fibre, EFM and Ethernet data services, business mobile phones, cloud PBX and SIP Trunking and Traditional Services (calls and lines) all of which are delivered and managed through Merlin, the Group's proprietary software platform.

The Group is differentiated by its focus on creating business broadband solutions, with robust and reliable packages that will enhance our customers company's business. In addition, our vision is based on trust and transparency, with no hidden fees within our pricing policy providing customers with a clear understanding of cost.

Toople Plc has a strong and highly experienced Board and management team who are focused on growing the business both organically and by identifying earnings enhancing strategic acquisition opportunities.

 

Chairman's Statement

A transformational year for Toople

 

This has been a transformational year for Toople, during which the financial and operational foundations have been put in place to enable future growth.

 

Overview

 

Toople provides a bespoke telecoms services for our target market of UK SMEs with between 1 and 50 employees which is immediately available to customers, at an attractive price that is always fixed for the life of the contract.  Our fixed price offering is one of our unique selling points.  Our services include the provision of cloud based telephony services: broadband over copper, fibre, EFM and Ethernet data services (with call bundles) and mobile services.  Our "Online first" business model is supported by direct digital marketing campaigns and a sales centre based in Durban, South Africa.  We have multiple sales and marketing channels and a proprietary delivery platform, Merlin, which ensures that customers receive instant quotes based on the most competitive prices available.

 

Growth in both revenue and customer numbers

 

Toople has enjoyed substantial growth during the financial year both in terms of both customer numbers and revenue generated by those customers.  UK SMEs continue to switch to Toople and we have seen record numbers of new customers signing up with us.  Our products are flexible and carrier agnostic. This, coupled with excellent customer support, has resulted in impressive month by month growth in new customer acquisition numbers when compared with the previous financial year.

 

For customers who want certainty and ease of use, Toople is a natural choice. Our fixed rate products satisfy all SME telecommunications needs.  Our pricing is transparent and we have UK-based support desks offering premium quality customer service, something that is valued by our customers.

 

Business Model and Performance

 

We target both the direct to customer (retail) and the wholesale markets, where we offer white label services on behalf of other telecoms companies, offering them access to our own Merlin platform.  During the year we took the strategic decision to reassess legacy wholesale contracts that had historically delivered low gross margins.  We will now only sign partnership agreements which are more profitable, as well as renegotiating or terminating historic unattractive contracts as they come to an end.  As a result we have continued to sign a number of new agreements, but only where we are satisfied that debtor risk is low and margins are attractive. As expected, this strategy and the termination of onerous partnership agreements, means that in the short term we saw a decline in wholesale revenue, but the overall margin mix is improved and this will result in improved gross margin for the business.

 

Our digital marketing spend has increased in line with our growth as we try to ensure that in excess of one million business owners and decision makers see our propositions every month via direct digital marketing, the use of social media channels and internet search engines.  Increases in customer numbers have vindicated this spend. Customer conversion rates are improving as we have engaged an additional dedicated resource in Durban, South Africa. 

 

Our growing customer base will result in a lower cost of acquisition per customer and will boost our future outlook, as operational automation further develops and we start to see average revenue per user improve.

 

 

 

Placing

 

In June 2019 we were approached by our brokers who had received demand from their clients to invest further in our business as they are pleased with the substantial financial and operational progress we had made in the previous months.  Given the demand and the opportunity to repay the Company's debt at a significant discount to book value (£150,000 against circa £600,000 - see Note 11 for further explanation), the Board agreed to a Placing, which raised £662,231.

 

The result of the Placing was to leave the Company debt free and, importantly, in a position to invest further in its digital marketing strategy to increase the rate of customer enquiries and correspondingly to improve conversion rates.  Given that these customers are typically signing two year fixed contracts, we believe that the Company can use this opportunity to accelerate its timeframe to cash generation and profitability.

 

Summary and Outlook

 

The strength and growth of the business has continued into the new financial year and, given the various operational improvements we have made, strategic investment in our core business and our excellent product offering and customer service will, we believe, ultimately set us on the road to achieve our stated goal of long term future profitability. This is likely to be significantly accelerated by our M&A activity in the future.

 

I would like to once again take this opportunity to thank our partners, customers, employees, Board and of course our shareholders for their continued support.

 

 

 

Richard Horsman

Non-Executive Chairman

30 January 2020
 

Chief Executive Officer's Review

.Expect Growth and Expansion to Continue in the Future

 

I am very pleased to update our shareholders on another record year of performance, as our reach across the small business market continues to grow rapidly, firmly positioning Toople in the market as the alternative telecommunications provider of choice to UK SMEs.

 

Growth is being driven by a number of factors, not least a noticeable switch by UK SMEs to superfast fibre broadband, ahead of the eventual closure of existing legacy copper infrastructure in 2025.  As businesses are forced to review their existing telecoms services, many are seeking new solutions which provide enhanced quality at an affordable fixed price.  SMEs are increasingly dissatisfied with a lack of price transparency, poor service offerings and poor customer service from the traditional tier one providers.  Toople is taking advantage of these failings by its bigger competitors and is fast becoming a major disruptor in our segment of the market.  The Company continues to make great progress, as evidenced by sales figures over the normally quieter summer period.

 

Importantly, the growth is reflected in the financial results with revenue and margins increasing, illustrating that our strategy is working.

 

Total revenues grew by over 80% to £2.5 million (FY 2018: £1.36 million) with Broadband revenue growing by 221%, hosted revenue by 80% and mobile revenue by 203%.  Gross profit increased by 165.3% to £478,704 (FY18: £180,457) and overall gross margin improved by 6.2 percentage points to 19.5%.  

 

As expected, our wholesale revenue decreased as we took the strategic decision to exit legacy contracts which have historically delivered low gross margins.  Our strategy is now to only sign partnership agreements which are more profitable, as well as renegotiating or terminating historic unattractive contracts as they come to an end.  As a result we have continued to sign a number of new agreements, but only where we are satisfied that debtor risk is low and margins are attractive. This strategy and the termination of onerous partnership agreements means that in the short term we experienced a headline decline in revenues of around £600,000 in this regard, this puts our overall revenue growth into context and makes the underlying figure look even more impressive.

 

Although EBITDA has declined when compared to last year, this is as a result of the continued investment in marketing related activities to grow the business.  Our operating loss was £1.67m (after the gain on settling the shareholder loan of £456,341) compared with £1.4m. This performance is in line with our expectations at this stage of the Company's development.

 

The digital marketing campaign, one of the central tenets of our growth strategy, is generating an increasing level of enquiries from potential customers and a growing conversion rate. This campaign has been structured to generate the best possible returns on capital employed, which, together with efficient operating procedures, has further reduced the cost of new customer acquisition and is generating new incremental business for the Company.  During the year we also added a new sales resource in Durban, South Africa which is performing well.  This is a contractual arrangement with a respected agency with an excellent reputation in telecoms and is based on the results which they achieve. It is cost attractive when compared to onshore UK alternatives and offers the added benefit of extending operating hours, helping to maximise customer enquiries.

 

These investments were the principal reason for the increase in cost of sales, which grew from £1.18 million to £1.97 million during the year.  The increase in costs are driving an increase in lead conversion and sales.  The majority of these new clients are on two-year fixed contracts, giving us clear visibility of earnings.  The major contract win previously announced is performing in line with expectations and the first batches of customers have been transferred over to the Toople Merlin billing and provisioning platform.

 

Despite stringent credit checks and strong processes being in place, as customer numbers and orders increased exponentially, we also experienced a sharp increase in bad debt provision during the period.  Although this is clearly unwelcome, it was not completely unexpected given the micro-SME market within which we operate.  The Board has taken a prudent view and provided for around £424,000 of the current outstanding book of £850,000. Further details on the underlying assumptions for this provision are contained in Note 3 to the financial statements.  Importantly we have taken proactive steps to arrest the rise in bad debts and to recuperate as much as possible from the outstanding amounts.  This includes making changes to our billing platform to take daily payments and engaging an outside credit control and debt collection agency.  We expect bad debt levels to normalise over the coming months.

 

As explained in Note 2(c) 'Accounting Policies - going concern' to the financial statements, the Group does not currently have sufficient funds to meet its working capital needs for the next 12 months and further funding will be required. The Directors are confident that funding can and will be obtained at the appropriate time.

 

Market opportunity

 

Our industry will see significant change over the next five years, as industry leaders and the Government continue to agree a timetable for switching off copper broadband services and to implement full fibre broadband to replace existing copper networks on a region-by-region basis by 2025.  Businesses are likely to be given two years in each area of the country to move to a full-fibre provider.

 

In practice this means that some seven million PSTN lines and around three million ISDN circuits are due to be retired by 2025. All legacy phone systems need to change.  This represents a significant opportunity for Toople, as all our propositions are built on next generation technology and future proofed to take advantage of this imminent migration.  We also expect to see a sharp increase in demand for cloud-based technology solutions.

 

We continue to operate in a highly fragmented market that is ripe for consolidation. With a strong management team and Board in place with considerable sector and M&A experience, we are ideally positioned to use our listing and take advantage of this to accelerate our growth and utilise the inherent operational gearing in the business.

 

Future strategy and outlook

 

We will continue to become the telecoms supplier of choice for SMEs delivering instant, easy, communication solutions with a transparent pricing model.  This will mean further investment in direct digital marketing to drive customer and profit growth, as well as visibility and predictability of revenues over the medium and longer term.

 

We continue to grow by adding new customers, selling add-ins to existing customers and exploring synergistic acquisition opportunities.

 

Toople is already a one-stop easy-to-use telecoms provider that can tailor a package to a client's exact business needs.  We are operating in a large and growing target market with a rapidly increasing customer base and clear demand for our offering.  Our direct digital marketing capability is delivering increased predictable recurring revenues.  With an experienced and proven management team in place capable of scaling the company both organically and via acquisitions, the future for Toople is very bright.

 

 

Andrew Hollingworth  

Chief Executive Officer

30 January 2020


A copy of the Annual Report will be posted on the Company's website: www.toople.com.

An electronic version has been submitted to the National Storage Mechanism which will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.

 

Notice of the Company's Annual General Meeting will be sent to shareholders in due course.


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