TIDMOUT
RNS Number : 4711A
Outsourcery PLC
29 September 2015
29 September 2015
Outsourcery plc
("Outsourcery" or the "Group")
Interim Results for the six months ended 30 June 2015
Outsourcery plc (AIM: OUT), a leading Cloud Service Provider
("CSP") focused on the provision of unified communications
solutions, based on Microsoft Skype for Business, and
Infrastructure-as-a-Service for commercial and public sector
organisations, announces its interim results for the six months
ended 30 June 2015.
Financial Metrics
30 June 30 June
2015 2014
--------------------------------- ---------- ----------
Group Revenue GBP4.1m GBP3.4m
- Monthly recurring revenue GBP0.7m GBP0.6m
--------------------------------- ---------- ----------
Adjusted EBITDA * GBP(2.1m) GBP(2.8m)
Adjusted (loss) from operations
** GBP(2.9m) GBP(3.6m)
Adjusted (loss) per share
*** (7.05)p (10.33)p
Gross Cash GBP0.3m GBP1.3m
*Adjusted EBITDA is defined as earnings before finance costs,
tax, depreciation and amortisation, restructuring costs, employee
share based payment costs and listing fees and is considered by the
Directors to be a key measure of financial performance.
**Adjusted (loss) from continuing operations is defined as
earnings before restructuring costs, employee share based payment
costs and listing fees.
***Adjusted (loss) per share has been disclosed to give a clear
understanding of the Group's underlying trading performance. It has
been calculated using the underlying earnings figures above and the
weighted average number of ordinary shares in issue.
Operational Highlights
-- Business focus centred on clear, accessible growth opportunities
Ø Outsourcery continues to secure a strong market position as a
fully converged provider of cloud solutions with high profile
partners and reference end-customers
Ø Recurring revenue is increasing, and the Company is delivering
against a large addressable market.
Ø Gross margin has increased steadily, now at 49% (1H 2014:
43%)
Ø Stepped up development of direct sales and marketing
capability, taking greater control of pipeline and potential
Ø Focus on selected partners that have demonstrated a commitment
to the sale of cloud services
-- Refreshed and focused product strategy
Ø Established position as UK's leading provider of cloud-based
Skype for Business (formerly branded as 'Lync') for mid-market,
enterprise and public sector end-customers
Ø Defined infrastructure-as-a-Service ("IaaS") offering for
commercial and public sectors including increasing automation
Ø Public sector Skype for Business and IaaS pipeline is
developing with early wins secured
-- Reviewed and clearly defined go-to-market strategy
Ø Focus on mid-market and enterprise end-customers requiring
more complex enterprise and carrier-grade hybrid solutions not
available from hyperscale IaaS and SaaS service providers
Ø Extending the network of partners committed to cloud
transition with a pipeline of large partners
Ø Commenced development of a direct sales pipeline in commercial
and public sectors
Ø Proven ability to add value, win and deploy solutions for
mid-market and large enterprise
-- Cost base controlled
Ø Administrative expenses of GBP4.7 million were in line with
budget
-- Steady progress on strategic partner pipeline development as
demand rises for Skype for Business
Ø Vodafone pipeline growing and strategic alignment enhanced by
Vodafone's financial support for Outsourcery (see Financial
Review)
Ø Virgin Media Business pipeline in mid-market and public sector
taking shape
Ken Olisa OBE, Non-Executive Chairman commented:
"It is pleasing to see revenue growing and losses narrowing.
This has been achieved by a renewed focus of our go to market
activities and a programme of cost reductions.
Our principal route to market - the third party channel - has
continued to increase its effectiveness, albeit at a slower than
ideal rate. As a result we have initiated some targeted direct
sales activities which are showing early signs of bearing fruit.
This ability to pivot our activities as circumstances demand is a
testament to the entrepreneurial leadership of our Co-CEOS who,
with the support of the Board, are committed to tackling the
challenges of being a small and growing business one at a
time."
Enquiries
Outsourcery +44 (0)330 313 0077
Piers Linney, Co-CEO
Simon Newton, Co-CEO
Investec +44 (0)20 7597 5100
Andrew Pinder / Patrick
Robb
Dominic Emery / Carlton
Nelson
FTI Consulting, LLP
Matt Dixon / Dwight Burden
/ Rob Mindell +44 (0)20 3727 1000
About Outsourcery
Outsourcery is a leading Cloud Service Provider ("CSP") based in
the UK focused on the delivery of cloud-based applications,
infrastructure and unified communications solutions to business of
all sizes via its partner and as direct customers in the
mid-market. The Group focuses on Microsoft technologies due to the
significant installed base and disruptive entry into new markets
such as unified communications. Cloud computing represents a
systemic evolution in the way that IT platforms, applications and
communications ("ICT") solutions are provided in a more cost
effective and efficient way. The ICT model is rapidly shifting from
a physical technology purchase to the consumption of services with
a specified uptime service level on a monthly subscription basis.
Outsourcery has invested in its platform and capabilities to apply
economies of scale to provide highly resilient and secure services
to a range of end-customers from shared platforms in its UK
datacentres.
Further, detailed information on the Group is available in the
Investor Centre on the Outsourcery website:
(www.outsourcery.co.uk/investors)
Strategy Update
A sharper focus
Outsourcery continues to establish a market-leading position for
the provision of cloud services based on Microsoft technologies for
mid-market, enterprise and public sector end-customers seeking
added value and hybrid solutions that large public cloud providers
are unable to deliver.
Sharpening the Company's focus on Skype for Business and IaaS,
and prioritising the market segments in which Outsourcery has a
clear competitive advantage, has enabled the Company to maintain a
stable cost base. Administrative expenses were under budget in the
period, while sales and marketing expenses were directed towards
the pipeline opportunities with greatest likelihood to convert.
Skype for Business
Skype for Business is Microsoft's next generation and
enterprise-grade unified communications and collaboration service.
Skype for Business is the latest version of the product formerly
branded as 'Lync'. Skype for Business from Outsourcery combines
instant messaging, presence and conferencing, collaboration with
full enterprise voice and carrier-grade SLAs to replace PBX
telephony, in one interface. It also allows users to communicate
with the 300 million users of the consumer Skype product.
During the first half of the year, Outsourcery has focused its
service offering on its core strengths of 'Skype for Business' with
full enterprise and carrier-grade voice and
Infrastructure-as-a-Service, which are also the largest market
opportunities, to maximise growth potential. The Group continues to
improve the automation of its IaaS offering to provide customers
and partners with self-serve capabilities. Furthermore, the launch
of the next version of Microsoft Lync Server, which has been
rebranded as Skype for Business, has been an important development,
which is driving demand for Microsoft unified communications and
collaboration software. Outsourcery is establishing a
market-leading position in the provision of cloud-based Skype for
Business in terms of capability and referenceability and already
counts two FTSE-100 companies as end-customers as well as a growing
number of large enterprises and public sector organisations as
direct customers.
Go-to-market strategy
The Company has also reshaped its go-to-market strategy during
the period to reflect the current capability of the existing IT and
communications channels by focusing resources on its large
strategic partners and committed partners of all sizes. At the same
time during the period, the Company had built out a direct sales
organisation and commenced the development of a direct sales
pipeline.
Outlook
Despite a slower than anticipated revenue build, the Group is
well-positioned to benefit from the growing demand for cloud
services and especially from mid-market, enterprise and public
sector organisations that require services and support that the
large public cloud providers are unable to provide. The Group is
also creating a clear leadership position in the rapidly evolving
market for the delivery of Skype for Business.
The first half of 2015 has been an important period for the
Company to assess the opportunity and focus products and
go-to-market strategies. The second half of the year will include
further implementation of the changes made and the continued
development of a direct sales pipeline. These measures should drive
further growth in 2016 and beyond.
On 3 July, following the period end, Outsourcery entered into a
debt facility with a key strategic partner, Vodafone. That facility
has both given additional assurances to our pipeline customers, and
underscored the Company's confidence in the second half. In
addition, other partners are now experiencing growing demand and
new partners that are committed to transitioning their businesses
to the cloud are being on-boarded.
(MORE TO FOLLOW) Dow Jones Newswires
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As such, the Board expects a run-rate to evolve during the
second half to provide a steady baseline of growth alongside the
closure of direct opportunities, including public sector
end-customers.
Financial Review
In the first half of the year, the Group recorded revenue of
GBP4.1 million (1H 2014: GBP3.4 million) and a gross margin of 49%
(1H 2014: 43%).
Administrative expenses (excluding restructuring costs, employee
share based payment costs and listing fees) of GBP4.7 million (1H
2014: GBP4.8 million) were in line with budget. Adjusted EBITDA
showed a loss of GBP2.1 million (1H 2014: loss of GBP2.8
million).
The Group's underlying pre-tax loss was GBP3.3 million (1H 2014:
loss of GBP3.8 million) and loss per share for the half year was
7.05p (1H 2014: loss of 10.33p).
Gross cash as at 30 June 2015 was GBP0.3 million (1H 2014:
GBP1.3 million).
On 3 July the Group announced it had entered into an amortising
term loan with Vodafone Group Services Limited ("Vodafone"). Under
this agreement, Outsourcery was provided with a GBP4.0 million term
loan for the 48 months ending June 2019. Interest will be charged
monthly at an interest rate of 7.5% per annum and principal loan
repayments will be spread equally over the 12 quarterly periods
from year 2 onwards. As part of the facility, Vodafone have been
granted a warrant over 3,000,000 new ordinary shares at 30p per
share (a 25% premium to the previous day's closing price)
exercisable between 42 and 54 months after drawdown of the facility
and in certain other exceptional circumstances. The new term loan
replaces Outsourcery's existing GBP1.4 million loan facility due to
expire on 1 April 2017, and a GBP0.3 million mortgage facility
provided by Barclays Bank. The remaining GBP2.3 million of the new
facility can be used for general working capital purposes.
Additionally, Outsourcery has also agreed amended terms with
Etive Capital Limited on its outstanding GBP1 million loan,
extending the repayment from 22 May 2016 to 31 December 2017. The
GBP1 million note (currently non-interest bearing) will attract
interest after 22 May 2016 at 10% per annum payable quarterly in
arrears.
As a result of these new debt facilities, Outsourcery will
benefit from:
-- a reduced weighted average cost of capital;
-- additional working capital to support the Group's requirements; and
-- further alignment with a major strategic partner, Vodafone.
Consolidated income statement
For the six months ended 30 June 2015
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
Notes 2015 2014 2014
GBP'000 GBP'000 GBP'000
Revenue 4,122 3,447 7,384
Cost of sales (2,092) (1,975) (4,049)
---------- ---------- ------------
Gross profit 2,030 1,472 3,335
---------- ---------- ------------
Administrative expenses (5,100) (5,056) (10,363)
---------- ---------- ------------
Operating loss (3,070) (3,584) (7,028)
EBITDA* (2,057) (2,781) (4,569)
Amortisation and depreciation (610) (560) (1,178)
Exceptional restructuring
costs (18) (168) (293)
Fees associated with listing - (3) -
Employee Share based payment (385) (72) (988)
---------- ---------- ------------
Operating loss (3,070) (3,584) (7,028)
---------------------------------------- ---------- ---------- ------------
Interest received 1 4 5
Finance costs (266) (235) (589)
---------- ---------- ------------
Loss before tax (3,335) (3,815) (7,612)
Taxation - - -
Loss for period and total
comprehensive income (all
attributable to equity
holders of the parent) (3,335) (3,815) (7,612)
========== ========== ============
Underlying loss per share 5 Pence Pence Pence
Basic loss per share (7.05) (10.33) (19.72)
*EBITDA is defined as earnings before finance costs, tax,
depreciation and amortisation, reorganisation costs, employee share
based payment costs and fees associated with listing and is
considered by the Directors to be a key measure of financial
performance
Consolidated statement of comprehensive income
For the six months ended 30 June 2015
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
Notes 2015 2014 2014
GBP'000 GBP'000 GBP'000
Loss and other comprehensive
income for the period (3,335) (3,815) (7,612)
Comprehensive loss attributable
to:
Equity holder of the parent (3,335) (3,815) (7,612)
========== ========== ============
Consolidated statement of changes in equity
For the six months ended 30 June 2015
Merger
Share Share Retained Accounting Total
Capital Premium Losses Reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2014 346 17,673 (21,759) 7,745 4,005
Employee share-based
payment options - - 72 - 72
-------- -------- --------- ----------- --------
Transactions with owners - - 72 - 72
Loss for the period - - (3,815) - (3,815)
Balance at 30 June 2014 346 17,673 (25,503) 7,745 261
======== ======== ========= =========== ========
Issue of share capital 127 2,410 - - 2,537
Share issue expenses - (63) - - (63)
Employee share-based
payment options - - 916 - 916
Transactions with owners 127 2,347 916 - 3,390
Loss for the period - - (3,797) - (3,797)
Balance at 31 December
2014 473 20,020 (28,383) 7,745 (146)
==== ======= ========= ====== ========
Employee share-based
payment options - - 385 - 385
---- ------- --------- ------ --------
Transactions with owners - - 385 - 385
Loss for the period - - (3,335) - (3,335)
Balance at 30 June 2015 473 20,020 (31,332) 7,745 (3,095)
==== ======= ========= ====== ========
Consolidated statement of financial position
As at 30 June 2015
Unaudited Unaudited Audited
As at As at As at
30 June 30 June 31 December
Notes 2015 2014 2014
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 3,093 2,848 3,453
Intangible assets 838 - 855
---------- ---------- ------------
Total non-current assets 3,931 2,848 4,339
---------- ---------- ------------
Current assets
Trade and other receivables 2,288 2,680 2,278
Cash and cash equivalents 291 1,323 2,526
---------- ---------- ------------
Total current assets 2,580 4,003 4,804
---------- ---------- ------------
Total assets 6,511 6,851 9,143
========== ========== ============
Equity and liabilities
Share capital 4 473 346 473
Share premium 20,020 17,673 20,020
Merger accounting reserve 7,745 7,745 7,745
(MORE TO FOLLOW) Dow Jones Newswires
September 29, 2015 02:02 ET (06:02 GMT)
Retained losses (31,332) (25,503) (28,383)
---------- ---------- ------------
Equity attributable to
owners of the parent and
total equity (3,094) 261 (146)
========== ========== ============
Liabilities
Non-current liabilities
Borrowings 6 2,733 2,797 3,556
---------- ---------- ------------
Total non-current liabilities 2,733 2,797 3,556
---------- ---------- ------------
Current liabilities
Trade and other payables 4,921 1,934 4,100
Borrowings 6 1,951 1,859 1,633
---------- ---------- ------------
Total current liabilities 6,873 3,793 5,733
---------- ---------- ------------
Total liabilities 9,605 6,590 9,289
========== ========== ============
Total equity and liabilities 6,511 6,851 9,143
========== ========== ============
Consolidated statement of cash flows
For the six months ended 30 June 2015
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP'000 GBP'000 GBP'000
Operating activities
Loss for the period (3,335) (3,815) (7,612)
Finance costs 265 165 587
Listing fees - 3 -
Depreciation and amortisation 609 560 1,178
Employee share based payment
costs 385 72 988
Net changes in working
capital 810 (906) 1,618
---------- ---------- ------------
Net cash used in operating
activities (1,266) (3,921) (3,240)
---------- ---------- ------------
Investing activities
Purchase of property, plant
and equipment (202) (42) (289)
Purchase of intangible
assets - - (468)
Net cash flow from investing
activities (202) (42) (757)
---------- ---------- ------------
Financing activities
Finance lease capital repayments (382) (389) (697)
Proceeds from issue of
share capital - - 2,474
Proceeds from other borrowings (19) (19) -
Repayments of other borrowings (168) (469) (1,177)
Listing fees - (3) -
Interest and finance lease
charges paid (198) (165) (408)
---------- ---------- ------------
Net cash flow from financing
activities (767) (1,045) 192
---------- ---------- ------------
Net (decrease)/increase
in cash and cash equivalents
in the period (2,235) (5,008) (3,805)
Cash and cash equivalents
at start of period 2,526 6,331 6,331
---------- ---------- ------------
Cash and cash equivalents
at end of period 291 1,323 2,526
========== ========== ============
Notes to the interim report
1. General information
Outsourcery plc (AIM: OUT; "Outsourcery"; the "Company";
together with its subsidiary undertakings, the "Group"), is a
leading provider of cloud-based IT and unified communications
services. Outsourcery plc is the Group's ultimate parent company.
The Company is incorporated in England and Wales and domiciled
within the United Kingdom. The address of the Company's registered
office is 10 Whitfield Street, London W1T 2RE. The address of the
Group's head office is 1 The Avenue, Spinningfields, Manchester M3
3AP. The Company's shares are listed on the Alternative Investment
Market of the London Stock Exchange.
Outsoucery's consolidated financial statements are presented in
Pounds Sterling (GBP), which is also the functional currency of the
parent company.
These consolidated interim financial statements were approved
for issue by the Board of Directors on 24 September 2015.
2. Basis of preparation
The Group's interim consolidated unaudited financial statements
are for the six months ended 30 June 2015 and have been prepared in
accordance with the recognition and measurement principles of
International Financial Reporting Standards ("IFRS"). They have not
been prepared in accordance with IA34 'Interim Financial
Reporting'. These statements have not been reviewed or audited by
the Group's auditors.
The figures for 31 December 2014 are an abridged version of the
Group's full financial statements (subject to first time adoption
of International Financial Reporting Standards) and together with
other financial information contained in this interim report which
is unaudited, do not constitute statutory financial statements of
the Group as defined in Section 434 of the Companies Act 2006.
Statutory financial statements for the year ended 31 December 2014
have been filed with the Registrar of Companies for England and
Wales and have been reported on by the Group's auditors. The report
of the auditors was unqualified and did not contain a statement
under section 498 (2) or Section 498 (3) of the Companies Act
2006.
These interim consolidated unaudited financial statements have
been prepared in accordance with the accounting policies set out in
the Group's full audited financial statements for the year ended 31
December 2014. The accounting policies have been applied
consistently throughout the Group.
Going concern
The Directors believe that the Group is well placed to manage
its business risks successfully. The Directors have also prepared
cash flow forecasts for the period until December 2016. As part of
the preparation of these forecasts, the Directors have estimated
the likely conversion of potential future business. Based on these
forecasts, the Directors have confirmed that there are sufficient
cash reserves to fund the business for the period under review.
After reviewing these forecasts, consideration of the Group's cash
resources and other appropriate enquiries, the Directors have a
reasonable expectation that the Company and Group have adequate
resources to continue in operational existence for the foreseeable
future. For this reason they continue to adopt the going concern
basis in preparing the interim statements.
3. Business segments
The Group's Executive Board is considered to be the Chief
Operating Decision Maker ("CODM").
For management purposes, the Group's Executive Board focuses on
the following operating segments and financial information provided
to CODM is under the same measurement basis as the Group financial
statements.
Cloud
This operating segment is managed separately by the Group's CODM
and operating decisions are made on the basis of the operating
results.
Revenue for each of the periods shown is all derived in the
United Kingdom. Any administrative staff expense costs incurred in
the consulting and mobile operations would be negligible. All
consultancy staff related costs are included in the segment cost of
sales charges for the six months ended 30 June 2015, six months
ended 30 June 2014 and twelve months ended 31 December 2014.
Operating segment information for each of the periods above is
as follows:
6 months ended 30 June 2015
Cloud Total
GBP'000 GBP'000
Revenue
From external customers 4,122 4,122
-------- --------
Segment revenue 4,122 4,122
-------- --------
Cost of sales
From external customers (2,092) (2,092)
-------- --------
Segment cost of sales (2,092) (2,092)
-------- --------
Gross profit
From external customers 2,030 2,030
-------- --------
Segment profit 2,030 2,030
-------- --------
Administrative expenses
Staff (3,002) (3,002)
Depreciation and amortisation (609) (609)
Other (1,489) (1,489)
-------- --------
Segment administrative
expenses (5,100) (5,100)
EBITDA (2,057) (2,057)
--------------------------------- -------- --------
Operating loss (3,070) (3,070)
-------- --------
Net interest (265) (265)
(MORE TO FOLLOW) Dow Jones Newswires
September 29, 2015 02:02 ET (06:02 GMT)
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