REG - Cloudcoco Group PLC - Interim Results
27/06/2024 07:00
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RNS Number : 0498U Cloudcoco Group PLC 27 June 2024
The information contained within this announcement is deemed by CloudCoCo to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended.
27 June 2024
CloudCoCo Group plc
("CloudCoCo", the "Company" or the "Group")
Interim Results
CloudCoCo (AIM: CLCO), a leading UK provider of Managed IT services and
communications solutions to private and public sector organisations, is
pleased announce its interim results for the six months ended 31 March 2024
("H1 2024").
Financial highlights:
· Revenue increased by 11% to £14.3 million (H1 2023: £12.9 million), of which
62% was generated from Managed Services (H1 2023: 70%)
· E-commerce revenues from MoreCoCo increased 125% to £3.6 million (H1 2023:
£1.6 million)
· Gross profit remained stable at £4.3 million (H1 2023: £4.3 million), a
reduced margin of 30% (H1 2023: 34%) as a result of the increase in e-commerce
and other one-time revenues which typically command a lower margin
· Continued focus on saving costs and increasing efficiency, with administrative
expenses reduced by 4% to £4.9 million (H1 2023 £5.1 million)
· Trading Group EBITDA(1) increased by 33% to £1.2 million (H1 2023: £0.9
million)
Operational highlights:
· 24 new "logo" customers added in the half (H1 2023: 27), reflecting the
continued investment into the Group's sales and marketing functions
· New multi-year customer wins including Support Warehouse, Allied Services
Limited and High Availability Hosting Limited
· Increase in Cyber Security revenues driven by real-time threat reporting and
management
· Strategic partnerships with Ingram Micro and Solace Global Cyber continue to
enhance the Group's capabilities and create new revenue opportunities
· Continued improvement in customer satisfaction levels currently sitting at
97.8% at June 2024
· ISO27001:2022 Accreditation extended across all Managed Services businesses
(1) profit or loss before net finance costs, tax, depreciation, amortisation,
plc costs, exceptional costs and share-based payments
Ian Smith, consultant to the Board and Interim CEO of the Group's trading
entities, commented:
"These interim results do not reflect the period of my tenure, but they do
highlight a number of the challenges that the business faces and which we will
work on resolving to ensure the Company can meet its liabilities and is able
to look to the future with confidence."
Contacts:
CloudCoCo Group plc Via Alma
Simon Duckworth (Non-Executive Chair)
Darron Giddens (CFO)
Allenby Capital Limited - (Nominated Adviser & Broker) Tel: +44 (0)20 3328 5656
Jeremy Porter/Daniel Dearden-Williams (Corporate Finance)
Tony Quirke/Amrit Nahal (Equity Sales)
Alma - (Financial PR) Tel: +44 (0)20 3405 0205
David Ison
cloudcoco@almastrategic.com
Kieran Breheny
About CloudCoCo
Supported by a team of industry experts and harnessing a diverse ecosystem of
partnerships with blue-chip technology vendors, CloudCoCo makes it easy for
private and public sector organisations to work smarter, faster and more
securely by providing a single point of purchase for their Connectivity,
Multi-Cloud, Collaboration, Cyber Security, IT Hardware, Licencing, Support
and Professional Services.
CloudCoCo has headquarters in Leeds and regional offices in Warrington,
Sheffield and Bournemouth.
www.cloudcoco.co.uk (http://www.cloudcoco.co.uk)
Chairman's Statement
I am pleased to report our interim results for the period ended 31 March 2024.
During the period under review we have continued to focus on three key
strategic objectives:
• to accelerate sales;
• to maintain excellent support levels; and
• to drive efficiencies and strengthen our financial
position.
Despite ongoing economic headwinds, we have remained focussed, delivering
growth in revenues and Trading Group EBITDA(1). Further details of trading
during the six months ended 31 March 2024 are set out in the Business Review
below.
As reported in the 2023 full year accounts, much of the first six months of
FY24 were spent exploring options to refinance the legacy loan notes, which
under the original terms were due for repayment in October 2024. This was
concluded on 29 April 2024 when we reached agreement with our existing loan
note holder, MXC Guernsey Limited ("MXC"), to extend the redemption date of
the loan notes to 31 August 2026.
At the same time, Mark Halpin stepped down from the Board and his position as
CEO and Ian Smith (CEO of MXC Capital Limited, the parent of MXC) joined
CloudCoCo, initially as a consultant to the Board, acting as Interim CEO of
the Group's trading entities.
Ian's initial remit is to carry out a full strategic review of the Group, in
order to advise the Board on where the value sits within the business and how
that value can be maximised to improve the Group's trading performance and
financial position. MXC remains supportive both as a shareholder and loan note
provider. However, it is clear that the loan notes will not be able to be
repaid within the required period via operating cash flows and so we continue
to work with MXC to find the best solution for the repayment of the loan
notes.
The Group is complex and it is taking time to analyse all of the data into the
four business units we believe best reflect the services provided, namely
Managed Services, Infrastructure Services, Telecoms and Product. This analysis
will help determine the core and non-core elements of the Group and will
underpin the value maximisation work referred to above. Going forward, we hope
to be able to provide further reporting in each of these units.
This work is ongoing and we will update shareholders as we progress. We
understand this has been a prolonged period of uncertainty and want to
reassure investors we are are committed to navigating it with determination
and transparency.
In our daily activities, we are continuing with a "business as usual"
approach, focussing on sales and pipeline generation across all of the Group's
revenue streams. Despite the challenging economic environment we continue to
operate in, which is impacting the purchasing decisions of certain of our
customers, we had some pleasing new business wins during the period and
continue to build a solid pipeline. Mindful of the broader economic
realities, and to improve our working capital position, we continue to reduce
costs within the business wherever possible to ensure we are as efficient as
we can be.
I would like to thank our staff for their continued commitment during this
transitional period and their hard work in retaining key clients and
delivering high customer satisfaction levels.
With the continued support of our staff, customers and suppliers, we look
forward to making continued steady progress in the second half of the
financial year.
Simon Duckworth
Chairman
BUSINESS REVIEW
Organic Growth
From a sales perspective, we are pleased to report that we secured 24 new logo
customers in the period (H1 2023: 27) with the majority of these taking
multi-year Managed Services contracts across the breadth of our offering.
We continue to see the effect of increases in cost of living, energy prices
and interest rates in the UK ripple through the economy. This has been
particularly prevalent in the IT industry, where we have seen unprecedented
vendor price increases. This has put pressure on customers and Managed Service
providers like CloudCoCo which has inevitably led to increased prices for some
services towards the end of H1 2024 and moving into H2 2024. Our recurring
contracts allow us to pass third party price increases on to customers which
has led to some cancellations during the period but we have managed to
increase revenues overall by leveraging our e-commerce platform.
Whilst demand for remote support, cyber security and cloud-based services
remains buoyant, customers are rationalising physical and on-premise services
where they can. As a result, we have seen a steady downturn in new
connectivity and data centre opportunities as the services most impacted by
supplier price increases. This is a clear area of focus for our ongoing
strategic review.
Delivering excellent support levels remains key to winning and retaining
customers. We are delighted to report consistently high customer satisfaction
scores for our services, which have been in excess of 95% during the period
and are currently sitting at 97.8% in June 2024.
In order to differentiate ourselves, we have been looking for ways to
introduce new technology and drive efficiencies into the services we provide
to our customers. We are also continuing to work with our strategic partners
to identify areas where AI can play an increasing role in improving the way
technology services are delivered.
People
Our decision to recruit experienced industry specialists during the first half
of the year delivered new services and successes to the Group in the
multi-cloud and cyber security sectors. We encourage our specialists to build
an expert practice within our business, and actively engage with our existing
customer base. This activity has led to a number of new multi-year recurring
contracts and an increased pipeline of orders.
We have made progress in simplifying the structure of the business and
aligning services to better support our customers and this activity will
continue for the remainder of the financial year.
Results
Revenue increased by 11% to £14.3 million (H1 2023: £12.9 million). Whilst
62% of revenues were generated from Managed Services (H1 2023: 70%), we
continue to see customers investing in new hardware and technology by
purchasing value-added resales services.
We are seeing an increasing number of these value-added resale sales being
transacted via our e-commerce platform (morecoco.co.uk), which has seen
revenue growth of 125% during this half-year to £3.6 million (H1 2023: £1.6
million). Whilst the gross margin on e-commerce sales is lower, this is offset
by a lower cost of operational delivery.
As a result, gross profit remained stable in this half year at £4.3 million
(H1 2023: £4.3 million), representing a gross margin of 30% of revenue (H1
2023: 34%). This reduction reflects the change in the mix of business
described above and the increased ratio of third-party suppliers (such as
Microsoft) in our solutions.
The internal focus on achieving cost savings and increasing efficiencies
within our operations saw administrative expenses reduce by 4% to £4.9
million in the period (H1 2023 £5.1 million), with Trading Group EBITDA(1),
increasing to £1.2 million for the half-year (H1 2023: £0.9 million).
In order to fix prices in some of our data centre locations, we entered into a
number of new term lease agreements with key providers such as Equinix,
Pulsant and Virtus. This allowed us to negotiate new terms and freeze prices
for a period instead of enduring variable prices as a result of power price
fluctuations. These new longer-term leases are reflected in an increase in the
Depreciation of IFRS16 data centre leases to £0.6 million in this half year
period (H1 2023: £0.4 million).
After accounting for these depreciation costs, together with plc costs of
£0.5 million (H1 2023: £0.4 million), exceptional items and share-based
payments of £0.2 million (H1 2023: £0.1 million), amortisation and other
depreciation of £0.6 million (H1 2023: £0.7 million) and accrued net
interest costs of £0.5 million (H1 2023: £0.4 million), the loss before
taxation for the period was £1.2 million (H1 2023: loss of £1.2 million).
The Group incurred a net cash outflow during the period of £0.2 million,
compared to the balance reported at 30 September 2023. The main components
being:
· Cash inflow generated from operating activities of £0.7 million (H1
2023 £0.3 million);
· Payments of lease liabilities including IFRS16 data centre leases of
£0.8 million (H1 2023: £0.5 million); and
· Cash outflow from investment in assets, interest payments and payment
of deferred consideration totalling £0.1 million (H1 2023: £0.1 million).
Outlook
We have made some headway in terms of accelerating sales and delivering
excellent customer support levels during the year and this work will continue.
In addition, we have identified a number of operational efficiencies and
savings that have been implemented that will help to drive down our costs and
will in turn improve cashflow to help strengthen our financial position. We
will continue our efforts to grow and improve the business by building on the
foundations we have created to date.
Darron Giddens
27 June 2024
(1) profit or loss before net finance costs, tax, depreciation, amortisation,
plc costs, exceptional items and share-based payments.
Consolidated income statement
for the six-month period ended 31 March 2024
Unaudited 6 months to 31 March Unaudited 6 months to 30 September Unaudited 6 months to 31 March Audited
Year to
30 September
Note 2024 2023 2023 2023
£'000 £'000 £'000 £'000
Continuing operations
Revenue 3 14,280 13,030 12,923 25,953
Cost of sales (9,966) (8,928) (8,580) (17,508)
Gross profit 4,314 4,102 4,343 8,445
GP% 30% 31% 34% 33%
Administrative expenses (5,014) (5,072) (5,130) (10,202)
Trading Group EBITDA(1) 1,226 1,014 901 1,915
Amortisation of intangible assets 6 (430) (642) (643) (1,285)
Plc costs(2) (455) (466) (397) (863)
Depreciation of IFRS16 data centre right of use assets (650) (479) (400) (879)
Depreciation of tangible assets and other right of use assets (156) (163) (86) (249)
Exceptional items 4 (159) (178) (99) (277)
Share-based payments (76) (56) (63) (119)
Operating loss (700) (970) (787) (1,757)
Interest receivable 5 3 1 4
Interest payable (493) (375) (438) (813)
Loss before taxation (1,188) (1,342) (1,224) (2,566)
Taxation 107 314 161 475
Loss and total comprehensive loss for the year attributable to owners of the
parent
(1,081) (1,028) (1,063) (2,091)
Loss per share
Basic and fully diluted 5 (0.15)p (0.15)p (0.15)p (0.30)p
( )
(1) Profit or loss before net finance costs, tax, depreciation, amortisation,
plc costs, exceptional items and share-based payments.
(2) Plc costs are non-trading costs relating to the Board of Directors of the
Parent Company, its listing on the AIM Market of the London
Stock Exchange and its associated professional advisors.
Consolidated statement of financial position
as at 31 March 2024
Unaudited Unaudited Audited
31 March 2024 31 March 30 September 2023
2023
Note £'000 £'000 £'000
Non-current assets
Intangible assets 6 10,865 11,937 11,295
Property, plant and equipment 259 189 312
Right of Use assets 1,429 1,147 1,530
Total non-current assets 12,553 13,273 13,137
Current assets
Inventories 153 100 76
Trade and other receivables 7 4,280 5,025 4,443
Contract assets 8 550 740 395
Cash and cash equivalents 606 1,275 794
Total current assets 5,589 7,140 5,708
Total assets 18,142 20,413 18,845
Current liabilities
Trade and other payables 9 (7,518) (7,406) (6,878)
Contract liabilities (1,434) (1,767) (1,820)
Provision for onerous contracts (130) (148) (148)
Borrowings 10 (69) (69) (69)
Lease liability (1,082) (676) (1,138)
Total current liabilities (10,233) (10,066) (10,053)
Non-current liabilities
Contract liabilities (310) (542) (311)
Provision for onerous contracts (686) (850) (684)
Borrowings 10 (5,629) (5,112) (5,335)
Lease liability (410) (570) (476)
Deferred tax liability (844) (1,266) (951)
Total non-current liabilities (7,879) (8,340) (7,757)
Total liabilities (18,112) (18,406) (17,810)
Net assets 30 2,007 1,035
Equity
Share capital 7,062 7,062 7,062
Share premium account 17,630 17,630 17,630
Capital redemption reserve 6,489 6,489 6,489
Merger reserve 1,997 1,997 1,997
Other reserve 446 521 370
Retained earnings (33,594) (31,692) (32,513)
Total equity 30 2,007 1,035
Consolidated statement of changes in equity
for the six-month period ended 31 March 2024
Share Share Capital redemption reserve Merger Other Retained Total
capital
premium
reserve
reserve
earnings
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 October 2022 7,062 17,630 6,489 1,997 458 (30,629) 3,007
Loss and total comprehensive loss for the period - - - - - (1,063) (1,063)
Share-based payments - - - - 63 - 63
Total movements - - - - 63 (1,063) (1,000)
Equity at 31 March 2023 7,062 17,630 6,489 1,997 521 (31,692) 2,007
Share Share Capital redemption reserve Merger Other Retained Total
capital
premium
reserve
reserve
earnings
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2023 7,062 17,630 6,489 1,997 521 (31,692) 2,007
Loss and total comprehensive loss for the period - - - - - (1,028) (1,028)
Share-based payments - - - - 56 - 56
Share options lapsed - - - - (207) 207 -
Total movements - - - - (151) (821) (972)
Equity at 30 September 2023 7,062 17,630 6,489 1,997 370 (32,513) 1,035
Share Share Capital redemption reserve Merger Other Retained Total
capital
premium
reserve
reserve
earnings
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 October 2023 7,062 17,630 6,489 1,997 370 (32,513) 1,035
Loss and total comprehensive loss for the period - - - - - (1,081) (1,081)
Share-based payments - - - - 76 - 76
Total movements - - - - 76 (1,081) (1,005)
Equity at 31 March 2024 7,062 17,630 6,489 1,997 446 (33,594) 30
Consolidated statement of cash flows
for the six-month period ended 31 March 2024
Unaudited Unaudited Unaudited Audited Year to 30 September 2023
6 months to 31 March 2024
6 months to 30 September 2023
6 months to 31 March 2023
£'000 £'000 £'000 £'000
Cash flows from operating activities
Loss before taxation (1,188) (1,342) (1,224) (2,566)
Adjustments for:
Depreciation - IFRS16 data centre right of use assets 650 479 400 879
Depreciation - other right of use assets 77 34 53 87
Depreciation - owned assets 79 129 33 162
Amortisation 430 642 643 1,285
Share-based payments 76 56 63 119
Net finance expense 488 372 437 809
Movements in provisions (135) (64) (76) (140)
Decrease / (increase) in trade and other receivables 163 855 (441) 414
(Increase) / decrease in inventories (77) 23 65 88
Increase / (decrease) in trade payables, accruals and contract liabilities 131 (671) 373 (298)
Net cash inflow from operating activities before acquisition costs 694 513 326 839
Costs relating to acquisitions - - - -
Net cash inflow from operating activities 694 513 326 839
Cash flows from investing activities
Purchase of property, plant and equipment (27) (252) (94) (346)
Payment of deferred consideration relating to acquisitions (25) (25) (25) (50)
Interest received 5 4 - 4
Net cash (outflow) / inflow from investing activities (47) (273) (119) (392)
Cash flows from financing activities
Repayment of COVID-19 bounce-back loan (10) (12) (10) (22)
Payment of lease liabilities (813) (700) (418) (1,118)
Interest paid (12) (9) (20) (29)
Net cash outflow from financing activities (835) (721) (448) (1,169)
Net (decrease) / increase in cash (188) (481) (241) (722)
Cash at bank and in hand at beginning of period 794 1,275 1,516 1,516
Cash at bank and in hand at end of period 606 794 1,275 794
Comprising:
Cash at bank and in hand 606 794 1,275 794
Notes to the consolidated interim financial statements
1. General information
CloudCoCo Group plc (the "Group") is a public limited company incorporated in
England and Wales under the Companies Act 2006. The address of the registered
office is 5 Fleet Place, London, EC4M 7RD. The principal activity of the Group
is the provision of IT Services to small and medium-sized enterprises in the
UK. The financial statements are presented in pounds sterling because that is
the currency of the primary economic environment in which each of the Group's
subsidiaries operates.
2. Basis of Preparation
2.1 Accounting Policies
The accounting policies used in the presentation of the unaudited consolidated
interim financial statements for the six months ended 31 March 2024 are in
accordance with applicable International Financial Reporting Standards (IFRSs)
as applied in accordance with provisions of the Companies Act 2006. The
principal accounting policies of the Group have been consistently applied to
all periods presented unless otherwise stated.
2.2 Going concern
The Directors have prepared the financial statements on a going concern basis
which assumes that the Group will continue to meet liabilities as they fall
due.
The Directors have reviewed the forecast sales growth, budgets and cash
projections for the period to 30 June 2025, including sensitivity analysis on
the key assumptions such as the potential impact of reduced sales or slower
cash receipts for the next twelve months and the Directors have reasonable
expectations that the Group and the Company have adequate resources to
continue operations for the period of at least one year from the date of
approval of these unaudited interim financial statements.
The Directors have not identified any material uncertainties that may cast
doubt over the ability of the Group and Company to continue as a going concern
and the Directors continue to adopt the going concern basis in preparing these
unaudited interim financial statements.
3. Segment reporting
The executive directors of the Company and its subsidiaries review the Group's
internal reporting in order to assess performance and to allocate resources.
Profit performance is principally assessed through adjusted profit measures
consistent with those disclosed in the Annual Report and Accounts. The Board
believes that the Group comprises a single reporting segment, being the
provision of IT managed services to customers. Whilst the Directors review the
revenue streams and related gross profits of two categories separately
(Managed IT Services and Value added resale), the operating costs and
operating asset base used to derive these revenue streams are the same for
both categories and are presented as such in the Group's internal reporting.
The segmental analysis below is shown at a revenue level in line with the
internal assessment based on the following reportable operating categories:
Managed IT Services - This category comprises the provision of recurring IT services
which either have an ongoing billing and support element or utilise the
technical expertise of our people.
Value added resale - This category comprises the resale of one-time solutions
(hardware and software) from our leading technology partners, including
revenues from the MoreCoCo
e-commerce platform.
No customer accounts for more than 10% of external revenues in any reported
period.
3.1 Analysis of continuing results
All revenues from continuing operations are derived from customers within the
UK. In order to simplify our reporting of revenue, we have taken the decision
to condense our reporting segments into two new categories - Managed IT
Services and Value Added Resale. This analysis is consistent with that used
internally by the CODM and, in the opinion of the Board, reflects the nature
of the revenue. Trading EBITDA is reported as a single segment.
3.1.1 Revenue
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2024
2023
2023
2023
£'000
£'000
£'000
£'000
By operating segment
Managed IT Services 8,819 8,900 9,077 17,977
Valued Added Resale 5,461 4,130 3,846 7,976
Total revenue 14,280 13,030 12,923 25,953
3.1.2 Revenue
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2024
2023
2023
2023
£'000
£'000
£'000
£'000
By revenue type
Recognised over time 7,836 7,892 8,778 16,670
Recognised at a point in time 6,444 5,138 4,145 9,283
Total revenue 14,280 13,030 12,923 25,953
4. Exceptional Items
Items which are material and non-routine in nature are presented as
exceptional items in the Consolidated Income Statement.
Unaudited Unaudited Unaudited Audited
6 months to 6 months to 6 months to Year to
31 March 30 September 31 March 30 September
2024 2023 2023 2023
£'000
£'000
£'000
£'000
Costs relating to re-finance of the loan notes (30) (28) - (28)
Run-off costs relating to discontinued data centre (92) (56) (36) (92)
services
Costs relating to onerous contracts settled in the year (27) (54) - (54)
Integration and restructure costs (10) (40) (63) (103)
Exceptional items (159) (178) (99) (277)
5. Loss per share
Unaudited Unaudited Unaudited Audited
6 months to
6 months to
6 months to
Year to
31 March 2024
30 September 2023
31 March
30 September 2023
2023
£'000 £'000 £'000 £'000
Loss attributable to ordinary shareholders (1,081) (1,028) (1,063) (2,091)
Number Number Number Number
Weighted average number of Ordinary Shares in 706,215,686 706,215,686 706,215,686 706,215,686
issue, basic and diluted
Basic and diluted loss per share (0.15)p (0.15)p (0.15)p (0.30)p
6. Intangible assets
Intangible assets are non-physical assets which have been obtained as part of
an acquisition or research and development activities, such as innovations,
introduction and improvement of products and procedures to improve existing or
new products. All intangible assets have an identifiable future economic
benefit to the Group at the point the costs are incurred. The amortisation
expense is recorded in administrative expenses in the Consolidated Income
Statement
Goodwill IT, billing and website systems Brand Customer lists Total
Intangible assets £'000 £'000 £'000 £'000 £'000
Cost
At 31 March 2023, 30 September 2023 and 11,281 361 2,383 11,445 25,470
31 March 2024
Accumulated amortisation
At 1 October 2022 - (202) (1,155) (5,668) (7,025)
Charge for the period - (9) (61) (573) (643)
At 31 March 2023 - (211) (1,216) (6,241) (7,668)
Charge for the period - (9) (61) (572) (642)
At 30 September 2023 - (220) (1,277) (6,813) (8,310)
Charge for the period - (9) (61) (360) (430)
At 31 March 2024 - (229) (1,338) (7,173) (8,740)
Impairment
At 31 March 2023, 30 September 2023 and (4,447) - (225) (1,193) (5,865)
31 March 2024
Carrying amount
At 31 March 2024 6,834 132 820 3,079 10,865
At 30 September 2023 6,834 141 881 3,439 11,295
At 31 March 2023 6,834 150 942 4,011 11,937
Average remaining amortisation period 7.3 years 6.7 years 4.3 years 4.7 years
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are independent cash inflows (cash generating units).
Goodwill is allocated to those assets that are expected to benefit from
synergies of the related business combination and represent the lowest level
within the Group at which management monitors the related cash inflows. The
directors concluded that at 31 March 2024, there were four CGUs being
CloudCoCo Limited, CloudCoCo Connect Limited (formerly IDE Group Connect
Limited), Systems Assurance Limited and More Computers Limited.
Each year, management prepares the resulting cash flow projections using a
value in use approach to compare the recoverable amount of the CGU to the
carrying value of goodwill and allocated assets and liabilities. Any material
variance in this calculation results in an impairment charge to the
Consolidated Income Statement.
The calculations used to compute cash flows for the CGU level are based on the
Group's Board approved budget for the next twelve months, and business plan,
growth rates for the next five years, weighted average cost of capital
("WACC") and other known variables. The calculations are sensitive to
movements in both WACC and the revenue growth projections. The impairment
calculations were performed using post-tax cash flows at post-tax WACC of
13.25% (H1 2023: 13.25%) for each CGU. The pre-tax discount rate (weighted
average cost of capital) was calculated at 18% per annum
(H1 2023:18%) and the revenue growth rate is 5% per annum (H1 2023: 5%) for
each CGU for 5 years and a terminal growth rate of 2% (H1 2023: 2%).
Sensitivities have been run on cash flow forecasts for the CGU. Revenue growth
rates are considered to be the most sensitive assumption in determining future
cash flows for each CGU. Management is satisfied that the key assumptions of
revenue growth rates should be achievable and that reasonably possible changes
to those key assumptions would not lead to the carrying amount exceeding the
recoverable amount. Sensitivity analyses have been performed and the table
below summarises the effects of changing certain other key assumptions and the
resultant excess (or shortfall) of discounted cash flows against the aggregate
of goodwill and intangible assets.
Sensitivity analysis CloudCoCo Systems More CloudCoCo
£'000
Limited
Assurance
Computers
Connect
Limited
Limited
Limited (1)
Excess of recoverable amount over carrying value:
Base case - headroom 723 444 269 5,112
Pre-tax discount rate increased by 1% - resulting headroom 482 407 270 4,879
Revenue growth rate reduced in years 2 to 5 by 1% per annum - resulting 124 410 237 4,784
headroom
Base case calculations highlight that the impairment review in respect of
CloudCoCo Limited is most sensitive to the discount rate and growth rate.
Headroom was also evident when applying a growth rate of 2% in years 2 to 5 in
each of the CGU's but would trigger an impairment of £500,000 in CloudCoCo
Limited.
7. Trade and other receivables
Unaudited Unaudited Audited 30 September 2023
31 March 2024 31 March 2023 £'000
£'000 £'000
Trade receivables 2,581 3,217 2,821
Other debtors 105 207 76
Prepayments 1,594 1,601 1,546
Trade and other receivables 4,280 5,025 4,443
The Group reviews the amount of expected credit loss associated with its trade
receivables and contract assets under IFRS 9 based on forward looking
estimates that take into account current and forecast credit conditions as
opposed to relying on past historical default rates. In adopting IFRS 9 the
Group applied the Simplified Approach applying a provision matrix based on
number of days past due to measure lifetime expected credit losses and after
taking into account customers with different credit risk profiles and current
and forecast trading conditions.
8. Contract assets
Unaudited Unaudited Audited 30 September 2023
31 March 2024 31 March 2023 £'000
£'000 £'000
Contract assets 550 740 395
Contract assets relate to the Group's right to consideration in respect of
goods or services that the Group has transferred to a customer. Contract
assets are linked to recurring Managed IT services revenues.
9. Trade and other payables
Unaudited Unaudited Audited 30 September 2023
31 March 2024 31 March 2023 £'000
£'000 £'000
Trade payables 6,047 5,325 5,655
Accruals 636 1,424 512
Other taxes and social security costs 835 657 711
Trade and other payables 7,518 7,406 6,878
10. Borrowings
10.1 Current
Unaudited Unaudited Audited 30 September 2023
31 March 2024 31 March 2023 £'000
£'000 £'000
COVID-19 Bounce-back loan repayable - short-term element 19 19 19
Deferred consideration relating to the acquisition of CloudCoCo Connect 50 50 50
Limited (formerly IDE Group Connect Limited) - short term element at Fair
Value
69 69 69
10.2 Non-current Unaudited Unaudited Audited 30 September 2023
31 March 2024 31 March 2023 £'000
£'000 £'000
Loan notes repayable in August 2026 5,498 4,932 5,242
COVID-19 Business Bounce-back loan repayable - long-term element 35 54 52
Deferred consideration relating to the acquisition of CloudCoCo Connect 96 126 41
Limited (formerly IDE Group Connect Limited) - long term element at Fair Value
5,629 5,112 5,335
On 29 April 2024, MXC Guernsey Limited ("MXCG") agreed to extend the
redemption date of the loan notes from
21 October 2024 to 31 August 2026. Interest will continue to accrue on the
loan notes at the current rate until redemption. All other terms of the loan
notes remain the same.
As consideration for the extension, effective from 22 October 2024, MXCG will
charge the Company a fee of £550,000 for providing the extension. Payment of
this fee will be deferred until the redemption of the loan notes and it will
accrue interest at the same rate as the loan notes. MXCG will also have the
right to appoint a consultant to, or an Executive Director of, the Company's
Board in addition to its current non-executive representative and will have
the right at any time to increase its loan security in the form of a full
debenture over all Group Companies.
On 10 May 2020, the Company borrowed £50,000 from HSBC Bank UK Plc, under the
COVID-19 Business Bounce-back loan scheme. In accordance with the UK
Government's Business Interruption Payment scheme, the interest on the loan
for the first 12 months is covered by the UK Government and the Company will
repay the loan in 59 equal monthly instalments, commencing June 2021.
As part of the acquisition of More Computers Limited on 6 September 2021, the
Company inherited a COVID-19 Business Bounce-back loan of £50,000 between
More Computers Limited and NatWest Bank Plc. In accordance with the UK
Government's Business Interruption Payment scheme, the interest on the loan
for the first 12 months is covered by the UK Government and the Company will
repay the loan in 59 equal monthly instalments, commencing March 2022.
10.3 Net debt - net debt comprises: 31 March Cash Other 31 March
2024
movements
movements
2023
£'000
£'000 £'000 £'000
Loan notes 5,498 - 566 4,932
COVID-19 Bounce-back loans 54 (19) - 73
Deferred consideration relating to the acquisition of CloudCoCo Connect 146 (50) 20 176
Limited (formerly IDE Group Connect Limited) - Fair Value
Lease liabilities 1,492 (1,513) 1,759 1,246
Cash and cash equivalents (606) 669 - (1,275)
Total 6,584 (913) 2,345 5,152
END
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