Source - LSE Regulatory
RNS Number : 2391B
Cloudcoco Group PLC
09 June 2021
 

9 June 2021

 

CloudCoCo Group plc

 

("CloudCoCo", "the Group" or "the Company")

 

Interim Results

 

CloudCoCo (AIM: CLCO), a UK provider of IT and communications solutions to businesses and public sector organisations, announces its unaudited interim results for the six months ended 31 March 2021.

 

Financial highlights

 

·

Revenue of £4.14m (H1 2020: £4.43m, H2 2020: £3.54m)

 

 

·   

Trading Group EBITDA1 increased 435% to £364k (H1 2020: £68k, H2 2020: £193k)

 

 

·

Pre-tax loss of £0.67m (H1 2020: loss of £1.57m, H2 2020: loss of £1.39m)

 

 

·

Cash at bank of £0.57m at 31 March 2021 (H1 2020: £0.27m) and £0.4m undrawn working capital facility

 

 

1 earnings before net finance costs, tax, depreciation, amortisation, plc costs, separately identifiable items and share-based
  income and payments

 

Operational highlights

 

·

Resilient response to the impact of Covid with some colleagues choosing to continue to work remotely

 

 

·   

Secured multi-year contract extensions with Vantage Motor Group and Baywater Healthcare, two of CloudCoCo's largest clients by revenue

 

 

·

Maturation of cost actions linked to 'get well' phase now delivering annual savings

 

 

·

'CoCo-One' people initiative progressing well with introduction of performance-based share options scheme and the alignment of technical teams in Warrington and Leeds offices

 

 

Post-period highlights

 

·

Continued demand for the Group's services and growing pipeline

 

 

·   

Appointment of Nigel Redwood, former CEO of AIM-listed Nasstar PLC, as Strategic Consultant (a non-board position) in line with the Board's decision to begin reviewing options to scale the business

 

Board changes

 

·

As announced earlier today, Darron Giddens, Group Finance Director, replaces Mike Lacey as Chief Financial Officer and member of the Board

 

Mark Halpin, CEO of CloudCoCo, commented:

 

"I am proud to report another period of significant progress for the Group, with execution against all of our company objectives and continued growth in our profitability, with Trading EBITDA in the first half up 435% year on year on the prior period. We have delivered a resilient performance in the period, with notable revenue and total contract value increases on the second half of 2020, despite the continued impact of Covid on the trading environment.

 

"The business is in good health, both operationally and in the pipeline of opportunities ahead of us. There will continue to be challenges to overcome, but we will meet them head on and remain confident of making further progress in the second half and beyond.

 

"Progress through the next phase in our development will be bolstered by the post-period hire of Nigel Redwood as Strategic Consultant. Nigel has a track record of accelerating growth - particularly in the listed IT managed services space - and recognises the importance of fostering a strong company ethos and culture. I have no doubt his counsel will prove invaluable as we deliver our organic growth initiatives and begin to explore the possibility of M&A."

 

 

Contacts

 

 

 

CloudCoCo

via Alma PR

Mark Halpin, CEO

 

Darron Giddens, CFO

 

 

 

N+1 Singer (nominated adviser & broker)

+44 (0)20 7496 3000

Peter Steel

 

 

 

Alma PR (financial PR adviser)

+44 (0)20 3405 0205

David Ison

cloudcoco@almapr.co.uk

Josh Royston

 

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 businesses and public sector organisations to work smarter, faster and more securely by providing a single point of purchase for their connectivity, telephony, cyber security, cloud, IT hardware and support needs.

 

CloudCoCo has offices in Warrington and Leeds in the UK.

 

www.cloudcoco.co.uk

 

 

CHIEF EXECUTIVE'S REVIEW

 

Introduction

 

The first half of FY21 was another period of continued profit growth, with the Group delivering further incremental operational improvements and a strong financial performance particularly considering H1 2020 comparators substantially pre-date the onset of the Covid pandemic. Trading EBITDA increased 435% to £364k (H1 2020: £68k, H2 2020: £193k), with Group revenues and total contract value growing versus the second half of 2020 despite the continued effects of the pandemic on our end markets.

 

Now, with our platform and the right foundations in place for future growth, we move forward with a focus on further optimisation and new business development.

 

Progress against strategy

 

At the end of FY20, we outlined the proposed evolution of our strategy for FY21, with a focus on landing new contracts and improving the quality of our revenues while maintaining the highest standards of service.

 

With this in mind, our core objectives for the current financial year are to:

 

1.    Accelerate sales 

2.    Maintain excellent support levels

3.    Maintain cost vigilance

4.    Improve cash position

 

In order to simplify our reporting, we have taken the decision to condense our reporting segments into two new categories - Managed IT Services and Value Added Resale.

 

 

 

 

6 months to

6 months to

6 months to

Year to

 

 

31

March

30

September

31

March

30 September

 

 

2021

2020

2020

2020

 

 

£'000

£'000

£'000

£'000

By operating segment

 

 

 

 

 

Managed IT Services

 

2,910

2,909

3,222

6,131

Valued Added Resale

 

1,234

631

1,208

1,839

Total revenue

 

4,144

3,540

4,430

7,970

 

We continued to see prospective customers exercise caution in committing to long-term investments in the period, but nonetheless secured a number of important long-term contracts and our pipeline remains healthy.

 

In Managed IT Services, Vantage Motor Group and Baywater Healthcare, two of our largest customers by deal value, renewed their contracts with us on a multi-year basis. We also re-signed a UK university on a long-term deal and, testament to our leading capability in Microsoft and telephony, secured a large professional services order with a major UK educational institution to migrate 70,000 users from Skype to Teams while integrating the customer's existing PBX telephone system.

 

In Value Added Resale, demand for our collaboration and cyber security solutions remained strong, in line with the rise in remote working and the need to do so safely and securely. Contract wins of note include helping a leading law firm and a major English council successfully transition to home working through the delivery of our IT hardware and telephony solutions. boohoo, who we won as a new customer in FY20, continued to grow the breadth and depth of the services they take from us.

 

We launched our new website at the start of the current financial year and have continued to enrich it with informative content and regular tech-tip videos while ramping up our social media output. Pleasingly, traffic to the website in March 2021 was up 42% versus October 2020 and LinkedIn followers grew 11% in the same period.

 

During the period, we continued to strengthen our relationships and accreditations within our diverse ecosystem of blue-chip technology vendor partners, a key competitive advantage for the Group. In January 2021, Lenovo awarded us 'Gold' status in its national partner programme.

 

To improve efficiency, knowledge sharing and ultimately deliver faster and better projects across the Group, we combined our technical teams in our Warrington and Leeds offices. We continued to deliver excellent levels of customer services in the period, reflected in our consistently high customer satisfaction scores. 

 

We are pleased to report material overhead savings versus the first half of the previous financial year. Through these reductions, these costs are now more closely aligned with the size of the business.  Management continues to take steps to make the business as efficient as possible from a cost perspective.

 

The Group continues to improve its cash position. As at 31 March 2021, the Group's cash at bank had increased £0.30m year-on-year to £0.57m (H1 2020: £0.27m), maintaining an £0.4m undrawn working capital facility.

 

Our people

 

We recognise that our people are the foundation of our success, and we are continually looking at new and innovative ways we can reward good performance and make CloudCoCo a great place to work. Our colleagues have again demonstrated exceptional dedication and resolve in testing circumstances and I would like to personally thank them all for their contribution.

 

In November, we introduced CoCo-One, a comprehensive initiative comprising a number of projects designed to empower our colleagues, bring them closer together and generally enhance their experience as CloudCoCo team members. As part of this initiative, all qualifying colleagues were granted performance-based share options designed to enable them to share in the success of the business and align their incentivisation with the interests of shareholders. Through CoCo-One, we now have processes in place to ensure the development, implementation and evaluation of our people strategy continues in a structured and organised way.

 

Post-period, we appointed Nigel Redwood as Strategic Consultant, a non-board position. Nigel has over 20 years' experience working with private equity-backed and public businesses, including six years as CEO of AIM-listed IT managed services company Nasstar plc. At Nasstar, Nigel took the business from being loss making on turnover of £2.5m to making an EBITDA profit of £6.4m on turnover of £26.1m, driven by the acquisition of four businesses and a focus on instilling strong and consistent team values through the integration process. Working alongside senior management, Nigel will help support CloudCoCo's growth through regular consultation across the Group's organic growth initiatives and people strategies, as well as in the appraisal of possible acquisitions targets.

 

 

As per the Board Changes announcement released earlier today, Darron Giddens will replace Mike Lacey as CFO and member of the Board with immediate effect.

 

Finally, we remind shareholders of our intention to appoint an additional Independent Non-executive Director as and when we find a suitable candidate.

 

Current trading and outlook

 

Post-period, we continue to see demand for our services and further progress in developing our partnership ecosystem, with CloudCoCo becoming one of the few UK partners to be listed on the AWS (Amazon Web Services) Marketplace for Dynamic Cloud Security solutions; Mitel awarding the Group 'Gold' partner status; and THG Hosting, The Hut Group's web hosting business, announcing CloudCoCo as a UK partner.

 

With an increasing pipeline of opportunities despite the ongoing impact of Covid, we remain confident in our prospects for the second half, facilitated by the easing of restrictions. I am pleased to report that the Board is currently looking at ways to scale the business. While our strategy is predicated on growing the business organically, we are also giving consideration to growing by acquisition.

 

Since the completion of the acquisition of CloudCoCo Limited in October 2019, we have made advances in positioning the business for sustainable and profitable growth, and I look forward to progressing in a similar vein in the months and years ahead as we strive to deliver long-term value for shareholders.

 

 

 

 

 

 

 

Consolidated income statement

for the six-month period ended 31 March 2021
 

 

 

 

Unaudited

6 months to  31

March

2021

Unaudited

6 months to

 30

September

2020

Unaudited

6 Months to

     31

March

2020

Audited

Year to

            30 September

2020

 

 

Note

 £'000

 £'000

 £'000

£'000

 

Continuing operations

 

 

 

 

 

 

Revenue

3

4,144

3,540

4,430

7,970

 

Cost of sales

 

(2,499)

(2,041)

(2,513)

(4,554)

 

Gross profit

 

1,645

1,499

1,917

3,416

 

Other income

 

46

97

-

97

 

Administrative expenses

 

(2,081)

(2,698)

(3,265)

(5,963)

 

Trading Group EBITDA 1 - non statutory measure

 

364

193

68

261

 

Amortisation of intangible assets

 

(495)

(824)

(799)

(1,623)

 

Plc costs

 

(222)

(227)

(234)

(461)

 

Depreciation

 

(47)

(85)

(28)

(113)

 

Exceptional items

4

(41)

(159)

(381)

(540)

 

Share-based payments

 

51

-

26

26

 

Operating loss

 

(390)

(1,102)

(1,348)

(2,450)

 

Interest receivable

 

-

-

1

1

 

Interest payable

 

(279)

(291)

(227)

(518)

 

Net finance expense

 

(279)

(291)

(226)

(517)

 

Loss before taxation

 

(669)

(1,393)

(1,574)

(2,967)

 

Taxation

 

94

138

150

            288

 

Loss and total comprehensive loss for the period attributable to owners of the parent

 

(575)

(1,255)

(1,424)

(2,679)

 

Loss per share

 

 

 

 

 

 

Basic and fully diluted

5

(0.12)p

(0.25)p

(0.31)p

(0.56)p

 

 

1earnings before net finance costs, tax, depreciation, amortisation, plc costs, exceptional items and share-based payments

  

 

 

Consolidated statement of financial position

as at 31 March 2021          
 

 

 

Note

Unaudited

31 March

2021

£'000

Unaudited

31 March

2020

£'000

Audited

30 September

2020

£'000

Non-current assets

 

 

 

 

Intangible assets

6

9,864

11,540

10,359

Property, plant and equipment

 

159

52

221

Total non-current assets

 

10,023

11,592

10,580

Current assets

 

 

 

 

Inventories

75

52

31

Trade and other receivables

2,148

2,454

1,856

Cash and cash equivalents

 

575

274

588

Total current assets

 

2,798

2,780

2,475

Total assets

 

12,821

14,372

13,055

Current liabilities

 

 

 

 

Trade and other payables

(2,482)

(2,262)

(2,465)

Contract liabilities

(969)

(707)

(565)

Borrowings

(109)

-

(104)

Lease liability

 

(78)

(95)

(122)

Total current liabilities

 

(3,638)

(3,064)

(3,256)

Non-current liabilities

 

 

 

 

Contract liabilities

(235)

(332)

(364)

Borrowings

(3,719)

(3,251)

(3,458)

Lease liability

(33)

(137)

(61)

Deferred tax liability

 

(846)

(1,357)

(940)

Total non-current liabilities

 

(4,833)

(5,077)

(4,823)

Total liabilities

 

(8,471)

(8,141)

(8,079)

Net assets

 

4,350

6,231

4,976

Equity

 

 

 

 

Share capital

4,952

4,952

4,952

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

71

122

122

Retained earnings

 

(26,789)

(24,959)

(26,214)

Total equity

 

4,350

6,231

4,976

 

 

 

 

 

 

 

Consolidated statement of changes in equity

for the six-month period ended 31 March 2021           
 

 

Share

capital

£'000

Share

premium

£'000

Capital

redemption

reserve

£'000

Merger

reserve

£'000

Other

reserve

£'000

Retained

earnings

£'000

Total

£'000

At 1 October 2019

2,271

11,337

6,489

1,997

1,720

(24,925)

(1,111)

Loss and total comprehensive loss for the period

-

-

-

-

-

(1,424)

(1,424)

Transactions with owners

 

 

 

 

 

 

 

 

Extinguishment of BGF Loan Notes in consideration for issue of 50,000,000 shares at 0.35p per share

 

500

1,275

-

-

(1,330)

1,148

1,593

Issue of 218,160,586 shares to CloudCoCo vendors at 3.3p per share

 

2,181

5,018

-

-

-

-

7,199

Cancellation of 11,353,255 share warrants held by MXC Guernsey on acquisition of CloudCoCo Ltd

-

-

-

-

(242)

242

-

Share-based payments

-

-

-

-

(26)

-

(26)

Total transactions with owners

2,681

6,293

-

-

(1,598)

1,390

8,766

Total movements

2,681

6,293

-

-

(1,598)

(34)

7,342

Equity at 31 March 2020

4,952

17,630

6,489

1,997

122

(24,959)

6,231

 

 

 

Share

capital

£'000

Share

premium

£'000

Capital

redemption

reserve

£'000

Merger

reserve

£'000

Other

reserve

£'000

Retained

earnings

£'000

Total

£'000

At 1 April 2020

4,952

17,630

6,489

1,997

122

(24,959)

6,231

Loss and total comprehensive loss for the period

-

-

-

-

-

(1,255)

(1,255)

Equity at 30 September 2020

4,952

17,630

6,489

1,997

122

(26,214)

4,976

 

 

Share

capital

£'000

Share

premium

£'000

Capital

redemption

reserve

£'000

Merger

reserve

£'000

Other

reserve

£'000

Retained

earnings

£'000

Total

£'000

At 1 October 2020

4,952

17,630

6,489

1,997

122

(26,214)

4,976

Loss and total comprehensive loss for the period

-

-

-

-

-

(575)

(575)

Share-based payments

-

-

-

-

(51)

-

(51)

Total movements

-

-

-

-

(51)

(575)

(626)

Equity at 31 March 2021

4,952

17,630

6,489

1,997

71

(26,789)

4,350

 

 

 

 

Consolidated statement of cash flows

for the six month period ended 31 March 2021

 

 

Unaudited

6 months to 

31 March

2021

£'000

Unaudited

6 months to

30 September

2020

£'000

           Unaudited 6 months to 

31 March

2020

£'000

Audited

Year to

30 September

2020

£'000

Cash flows from operating activities

 

 

 

 

Loss before taxation

(669)

(1,393)

(1,574)

(2,967)

Adjustments for:

 

 

 

 

Depreciation - owned assets

17

8

28

36

Depreciation - right of use assets

30

77

-

77

Amortisation

495

824

799

1,623

Share-based payments

(51)

-

(26)

(26)

Net finance expense

279

291

226

517

Costs relating to acquisition of CloudCoCo Limited

-

89

346

435

(Increase) / decrease in trade and other receivables

(292)

502

(567)

(65)

(Increase) / decrease in inventories

(44)

21

(20)

1

Increase in trade payables, accruals and deferred income

318

110

756

866

Net cash from / (used in) operating activities before acquisition costs

83

529

(32)

497

Costs relating to acquisition of CloudCoCo Limited

-

(89)

(346)

(435)

Net cash from / (used in) operating activities

83

440

(378)

62

Cash flows from investing activities

 

 

 

 

Purchase of property, plant and equipment

(17)

(22)

(15)

(37)

Acquisition of CloudCoCo Limited, net of cash acquired

-

-

157

157

Interest received

-

-

1

1

Net (used in) / from investing activities

(17)

(22)

143

121

Cash flows from financing activities

 

 

 

 

Proceeds from exercise of BGF share options

-

-

175

175

Receipt of loan funds from MXCG

-

-

100

100

Receipt of loan funds from COVID-19 Bounce Back Loan

-

50

-

50

Payment of lease liabilities

(72)

(134)

(49)

(183)

Interest paid

(7)

(20)

(28)

(48)

Net cash (used in)/ from financing activities

(79)

(104)

198

94

Net (decrease) / increase in cash

(13)

314

(37)

277

Cash at bank and in hand at beginning of period

588

274

311

311

Cash at bank and in hand at end of period

575

588

274

588

Comprising:

 

 

 

 

Cash at bank and in hand

575

588

274

588

 

 

 

 

 

 

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 2021 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 June 2022. The Directors have performed sensitivity analysis which reflects uncertainty in assumptions regarding growth in services and customer projects and considered that the Group expects to have sufficient cash resources provided that the MXC Guernsey Limited ("MXCG"), a subsidiary of MXC Capital Limited ("MXC"), working capital facility is made available beyond October 2021. At the request of the Directors, MXC has provided confirmation that it will provide continuing financial support including the extension of the existing facility until March 2022. In addition, the Directors have reasonable expectations that working capital could be raised from other sources including invoice finance arrangements should it be required.

After reviewing the forecast sales growth, budgets and cash projections, including sensitivity analysis on the key assumptions such as the potential impact of COVID-19 on sales, for the next twelve months and beyond and after taking into account the assurance of ongoing support from a significant shareholder, which the Directors reasonably believe has sufficient resources to provide such support, the Directors have reasonable expectations that the Group has adequate resources to continue operations for the foreseeable future, being a 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 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 Chief Operating Decision Maker ("CODM") has been identified as the executive directors of the Company and its subsidiaries, who review the Group's internal reporting in order to assess performance and to allocate resources.

In order to simplify our reporting, the CODM has taken the decision to condense our reporting segments into two new categories - Managed IT Services and Value Added Resale.

·      Managed IT Services - this segment provides all forms of managed services to customers and includes professional services.

·      Value Added Resale - this segment provides all forms of product and licence sales procured from supplier partners.

All segments are continuing operations and there are no transactions between segments.

 

 

 

 

 

 

 

 

 

Unaudited

6 months

to

Unaudited

6 months

to

Unaudited

6 months to

Audited

Year

to

 

 

31 March
2021
£'000

30 September
2020
£'000

31 March
2020
£'000

30 September
2020
£'000

By operating segment

 

 

 

 

 

Managed IT Services

 

2,910

2,909

3,222

6,131

Valued Added Resale

 

1,234

631

1,208

1,839

Total revenue

 

4,144

3,540

4,430

7,970

 

4. Exceptional Items

Items which are material and non-routine in nature are presented as exceptional items in the Consolidated Income Statement.

 

 

Unaudited

6 months

to

Unaudited

6 months

to

Unaudited

6 months to

Audited

Year

to

 

 

31 March

30 September

31 March

30 September

 

 

2021
£'000

2020
£'000

2020
£'000

2020
£'000

Costs relating to the acquisition

 of CloudCoCo Limited

 

-

 (89)

(346)

(435)

Integration and restructure costs

 

(41)

(70)

(35)

(105)

Exceptional items

 

(41)

(159)

(381)

(540)

 

5. Loss per share

 

Unaudited

6 months to

Unaudited

6 months to

Unaudited

6 months to

Audited

Year to

 

31 March

30 September

31 March

30 September

 

2021

2020

2020

2020

 

£'000

£'000

£'000

£'000

Loss attributable to ordinary shareholders

(575)

(1,255)

(1,424)

(2,679)

 

 

 

 

Number

 

 

Number

 

 

Number

 

 

Number

Weighted average number of Ordinary Shares               in issue, basic and diluted

495,225,986

495,225,986

461,720,917)

478,427,400

Basic and diluted loss per share

(0.12)p

(0.25)p

(0.31)p

(0.56)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

 

Intangible assets

 

Goodwill

£'000

IT, billing and

website

systems

£'000

Brand

£'000

Customer

lists

£'000

Total

£'000

Cost

 

 

 

 

 

 

At 1 October 2019

 

4,447

182

1,157

7,580

13,366

Additions - acquisition of CloudCoCo Limited

 

3,845

-

700

3,400

7,945

At 31 March 2020

 

8,292

182

1,857

10,980

21,311

Additions - acquisition of CloudCoCo Limited

 

1,543

-

(200)

(1,700)

(357)

At 30 September 2020

 

9,835

182

1,657

9,280

20,954

Additions

 

-

-

-

-

-

At 31 March 2021

 

9,835

182

1,657

9,280

20,954

 

Accumulated amortisation

 

 

 

 

 

 

At 1 October 2019

 

-

(47)

(380)

(2,680)

(3,107)

Charge for the period

 

(249)

(9)

(81)

(460)

(799)

At 31 March 2020

 

(249)

(56)

(461)

(3,140)

(3,906)

Charge for the period

 

249

(102)

(517)

(454)

(824)

At 30 September 2020

 

-

(158)

(978)

(3,594)

(4,730)

Charge for the period

 

-

(6)

(25)

(464)

(495)

At 31 March 2021

 

-

(164)

(1,003)

(4,058)

(5,225)

 

Impairment

 

 

 

 

 

 

At 1 October 2019

 

(4,447)

-

(225)

(1,193)

(5,865)

Charge for the period

 

-

-

-

-

-

At 31 March 2020

 

(4,447)

-

(225)

(1,193)

(5,865)

Charge for the period

 

-

-

-

-

-

At 30 September 2020

 

(4,447)

-

(225)

(1,193)

(5,865)

Charge for the period

 

-

-

-

-

-

At 31 March 2021

 

(4,447)

-

(225)

(1,193)

(5,865)

 

 

 

 

 

 

 

At 31 March 2021

 

5,388

18

429

4,029

9,864

At 30 September 2020

 

5,388

24

454

4,493

10,359

At 31 March 2020

 

3,596

126

1,171

6,647

11,540

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows - cash generating units ("CGU"). The Group operates as a single business and there is a single CGU. For each reporting period , management compares the resulting cash flow projections using a value in use approach to assess the recoverable amount of the CGU to the carrying value of goodwill. 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 budget, growth rates, 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 current effective unsecured pre-tax borrowing rate is calculated at 12% per annum (FY20:12%) and the revenue growth rate is 5% per annum (FY20: 5%) for 5 years and a terminal growth rate of 2% (FY20: 2%) per annum. Sensitivities have been run on cash flow forecasts for the CGU. Management is satisfied that the key assumptions of revenue and EBITDA 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 key assumptions and the resultant excess (or shortfall) of discounted cash flows against the aggregate of goodwill and intangible assets.

 

Sensitivity analysis

 

 

CloudCoCo Group plc     

£'000

 

 

Excess of recoverable amount over carrying value:

 

 

 

Base case - headroom

 

 

  4,169

Discount rate increased by 1%  - resulting headroom

 

 

1,156

Revenues growth rate reduced by 1% per annum - resulting headroom

 

 

1,166

 

Base case calculations highlight that the impairment review is sensitive to the discount rate and growth rate. Given the Group's value proposition is centred around generating monthly recurring fees for IT and communication solutions, the Directors are satisfied that the Group's objectives are to maximise the cash flows generated through the sales of Recurring Services.

In determining whether intangible assets including goodwill were impaired, the Directors estimated the discounted future cash flows associated with the intangible assets over a ten-year period, using a discount rate equivalent to the WACC. The Directors also considered the impact of the customer notices of termination received and the improvement in Trading EBITDA during the year as indicators that there is no impairment of intangible assets. 

 

7. Trade and other receivables

 

 

Unaudited 31

March

 2021

£'000

Unaudited

      31

March

2020

£'000

Audited

30

September 2020

£'000

Trade receivables

1,041

1,339

985

Other Debtors

13

13

6

Contract assets

202

269

101

Prepayments 

892

833

764

Trade and other receivables

2,148

2,454

1,856

 

8. Trade and other payables

 

Unaudited

    31 March

2021

£'000

Unaudited

        31 March

 2020

£'000

Audited

30

September 2020

£'000

Trade payables

1,551

1,541

1,388

Accruals 

407

333

460

Other taxes and social security costs

524

388

617

 

2,482

2,262

2,465

                                  

                                                                                                                                                                                                              9. Borrowings

9.1 Current

 

Unaudited

    31 March

2021

£'000

Unaudited

        31 March

2020

£'000

Audited

30

September 2020

£'000

COVID-19 Bounce-back loan repayable - short-term element

9

-

4

MXC Guernsey Limited working capital facility

100

-

100

 

109

-

104

 

MXCG provide a £0.5 million working capital facility of which £0.1 million had been drawn down at 31 March 2021. There are no set repayment terms but interest is payable at 12% per annum on drawn down amounts. This facility is set to expire in October 2021 but MXCG has confirmed it will extend to March 2022.       

 

 

 

 

                                                                                                           

9.2 Non-current

 

Unaudited

       31 March

2021

£'000

Unaudited

      31 March

2020

£'000

Audited

30 September 2020

£'000

Loan notes

3,045

2,983

3,014

Accrued interest on loan notes repayable in October 2024

633

268

398

Loan notes

3,678

3,251

3,412

COVID-19 Business Bounce-back loan repayable - long-term element

41

-

46

 

3,719

3,251

3,458

 

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. 

 

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