Strictly embargoed until: 07.00, 28 February 2022
Toople PLC
("Toople" or the "Company" or the "Group")
Final results for the year ended 30 September 2021
Toople PLC (LSE: TOOP), a provider of bespoke telecom services to UK SMEs and a reseller of BT's products and services, today announces its final audited results for the year ended 30 September 2021.
Commenting on the results, Richard Horsman, Non-executive Chairman, said:
"FY21 saw another year of financial and operational improvement for Toople. During the reported period we completed the integration of DMSL, added well established, new customers in an extremely wide variety of industries, and took the opportunity to raise funds via a placing.
"We ended our financial year on a high note; with September 2021 proving to be one of the highest order intake months in FY21. This has translated into an increased customer base for the Company, to which we continue to deliver high quality bandwidth and high-speed internet access taking advantage of the opportunities created for our business by hybrid working and an acceleration towards online services from SMEs, our core target market."
Financial and Operational Highlights
· Adjusted EBITDA* improvement of 32%, from (£1,305k) to (£881k) driven by lower distribution costs and overheads and virtual elimination of bad debt costs (64% improvement year on year when including impact of bad debt charges)
· Gross profit increased by 22% to £1.06 million
· Bad debt almost eliminated to just £55,000, decline from £1.1m in FY20
· Healthy year on year increase in Gross Margin increased from 25% to 35%
o Active cost management and control
· administrative costs down by £360,000 year on year
o Overall decline in headline revenues by 12% from £3.44m to £3.01m, as a result of:
o proactive management of non-paying customers and elimination of bad debt problem; and
· emphasis on DMSL business due to impact of Covid-19 on traditional Toople customer base
· Number of new contract wins with wider array of SMEs, and expanded out to other organisations such a local city council
· Successful placing to raise £774,000 with substantial amount from largest investor
Outlook and Current Trading
· Improved financial performance and outlook inQ1 FY21 when compared to Q4 FY20:
o Revenues increased by 9%
o EBITDA improved by 19%
o Gross Profit increased by 17%
Andy Hollingworth, CEO of Toople, added:
"We continue to see business momentum as the UK learns to live with Covid-19, with sales leads and conversion rates ramping up. Hybrid working is now the new normal and the duplication of telecom services in various places, hot desking, mobile working, 24/7 availability, hub offices and the general increase in digital or online service offerings across the economy, as opposed to in-person contact, are all factors which collude to create the perfect wave for us to ride."
Commenting on current trading and outlook, he added:
"If we look as a comparative at our trading at the end of the last financial year versus our first quarter trading of this financial year, we are seeing sales approaching a 9% increase, increasing gross profit of over 17%, and an improving EBITDA of 19%. This gives the Board a lot of confidence as we see the UK returning to more normal economic and working conditions.
"The removal of our unprofitable customers and customers that represented risk, means that we have now successfully completed the removal of historical bad debt which substantially improves the quality of our earnings and firmly sets us on the path towards profitability."
*Adjusted EBITDA is defined as operating profit, after adjusting for depreciation, amortisation, impairment and exceptional items (i.e. expenses or credits that are deemed unusual by nature and/or scale and significance.)
This announcement contains information which, prior to its disclosure, was inside information as stipulated under Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310 (as amended).
For further information:
| Toople PLC Andy Hollingworth, Chief Executive Officer Paul White, Chief Financial Officer | Tel: 0800 0499 499 |
| Novum Securities Limited David Coffman Colin Rowbury | Tel: 020 7399 9400 |
| Belvedere Communications John West / Llew Angus
| Tel: 020 3687 2754 |
Toople PLC is incorporated in the UK and listed on the main market of the London Stock Exchange. The business currently trades under four main brands: toople.com; dmsluk.co.uk; broadbandandphones.co.uk; checkthatcompany.co.uk.
Toople.com provides bespoke telecoms services for its fast growing target market of UK SMEs with between one and 500 employees. 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 via the Group's proprietary software platform. The Group's wholly owned subsidiary DMS Holding (DMSL) provides unified communication services in the UK ranging from a single phone line to a multi-site unified comms VoIP platform, delivered via a network of telecoms and IT carriers and content providers across the UK including BT Business, BT Global Services, Gamma, EE, Vonage, TalkTalk Business and O2. DMSL acts as a BT Premier re-seller for broadband connectivity, mobile and fixed voice and cloud services and is responsible for over 250,000 BT customers and over 400,000 Revenue Generating Units. The Company also owns a telecoms price comparison website and a service offering company credit reference checking and reports. These complement the Group's IT and telecoms services.
Chairman's Statement
Introduction
FY21 saw another year of financial and operational improvement for Toople. During the reported period we completed the integration of DMSL, added well established, new customers in an extremely wide variety of industries, and took the opportunity to raise funds via a placing. The reorganisation of our four main brands has also paid off and has greatly simplified our business propositions to our customers and increased efficiencies and opportunities for cross selling. We also continue to benefit from the cost savings achieved through the reorganisation. This, together with lower cash burn, is providing us with the working capital platform to enable Toople to progress towards profitability.
We ended our financial year on a high note; with September 2021 proving to be one of the highest order intake months in FY21. This has translated into an increased customer base for the Company, to which we continue to deliver high quality bandwidth and high-speed internet access taking advantage of the opportunities created for our business by hybrid working and an acceleration towards online services from SMEs, our core target market.
Near constant business change
We are further bolstered by the fact that we improve communications and lower the cost for every business we add as a customer. Today, when businesses are more reliant on superfast communications, our service offering is business critical for the vast majority of industries across the economy. In the last two years, the UK economy has seen massive shutdowns, reluctant re-openings, and various continuously changing phases of lockdowns, working from home directives, and other directives affecting the economy. SMEs are getting used to this. They are aware of the need to continue growing their businesses no matter the current reality, and our wide range of partnerships help them to deliver their communications in a world where change is the only constant.
The transparency of price on our contracts remain one of our unique selling points and is coveted by our customers. Our emergence now from the scare caused by the Omicron variant is causing jubilation from bosses and employees alike. We are prepared for that and are proud to offer SMEs solutions that allow them to continue running their businesses as well as possible despite uncertain future variants, or any other unwelcome events.
DMSL
The integration of the acquisition we had made in the prior financial year, DMSL, is contributing very positively to the group. There has been a greater contribution from DMSL to our business, which has a higher gross margin than the traditional Toople business. This is due to the effect of Covid-19, which has boosted DMSL and has made its offering even more popular.
This brand is working excellently alongside its customers to understand their businesses and to deliver the best and most appropriate communications solutions. DMSL can deliver comprehensive communications designs which offer flexibility and scalability and can ensure that a customer's various sites are connected to cloud based infrastructure, with telephony at each site, and high speed, high bandwidth data connectivity that allows the customer to service their own customers more efficiently. Our strong relationship with BT continues to massively benefit DMSL, having a material impact on order volumes.
New business
We continue to win notable new contracts, and contract extensions, carrying previous momentum forward. Successful and dynamic customers continue to sign up with the Group, and each is an endorsement of our brand and service offering. These well-established, well-known UK brands are turning their backs on old communications providers to sign up with us. This impetus continues to bolster our activities, and companies with strong credit profiles continue to recognise the strength of our service offering and our competitively priced solutions. In turn this improves the overall quality of our earnings.
Growth drivers
The main driver of our growth continues to be that seamless communications are now business critical for most SMEs. On top of that, the UK Government continues to roll out fibre infrastructure, to replace copper and to support the switch from 4G to 5G. All our brands offer communications solutions to help our customers to grow their businesses.
Placing
Right at the start of our new financial year, in October 2020, our brokers approached us with an opportunity to raise funds for the Company by way of a placing. Given the economic uncertainty caused by Covid-19 at the time, we decided to take the opportunity. As a result, The Group successfully raised £774,000 (before expenses). The placing was significantly oversubscribed and utilised all of the share issuance capability of the Company at that time.
Conclusion
With more economic certainty due to the normalisation of Covid-19, we look optimistically to Toople's future. Post year end we have had a successful capital raise, opened a second contact centre which will greatly enhance our sales efforts, and we expect trading to continue to progress well. We will also continue to review potential opportunities to grow the group through the acquisition of complementary businesses.
We look forward to the future of the Group and we wish all our staff, customers, shareholders, and suppliers good health and prosperity in 2022.
Richard Horsman
Non-Executive Chairman
25 February 2022
Chief Executive Officer's Review
Introduction
The emergence of new Covid-19 variants and lockdowns have now so often been repeated that their occurrences are normalising, and it is very much the case that SMEs are aware of the general need to be seamlessly connected, being increasingly unperturbed by transitory curveballs thrown up by Covid-19.
We continue to see business momentum as the UK learns to live with Covid-19, with sales leads and conversion rates ramping up. Hybrid working is now the new normal and the duplication of telecom services in various places, hot desking, mobile working, 24/7 availability, hub offices and the general increase in digital or online service offerings across the economy, as opposed to in-person contact, are all factors which collude to create the perfect wave for us to ride.
Operational Review
In this year we have truly demonstrated our offering's incredible versatility, with the sheer number and variety of different new customers which have added to our business. During the financial year we announced that among many others we had won new contracts with notable brands such as Carluccio's and the largest national UK supplier of poultry. We continue to expand our service offering to Carluccio's, who have recently added more mobile contracts and we were delighted to have been chosen to provide telecoms services to a new joint venture between Sainsbury's and Carluccio's for a new coffee shop format they are rolling out.
Another notable contract win was a five year contract with a specialist engineering firm in the printing, coating, and converting industries with subsidiaries in Europe and North America. We provide critical high speed secure data connectivity to the firm as it supplies equipment for use on many of the world's most advanced printing machines. Further contracts were signed with a building merchant with various locations across England. Others include, inter alia, a specialist motor car business, a publisher, a hair and beauty chain, a computer services provider, a city council, a credit union, a firm of solicitors, a leading UK property company, and a global oil and gas procurement business. This collection of customers illustrate that Toople can offer solutions to absolutely any type of SME or similarly sized organisation.
The integration of DMSL has developed excellently, with more emphasis placed on DMSL in the year as a result of the impact of Covid-19 on the traditional Toople base. We also continue to reap the benefits of our reorganisation that has substantial cost savings. Our telecoms price comparison website and service offering company credit reference checking and reports continues to complement the Group's IT and telecoms services.
As more and more businesses have to offer their services virtually and can no longer rely only on in person service offerings, telecoms networks are more critical than ever. Keeping businesses connected with super-fast broadband is what we do, and we are proud to offer a business that eliminates any communications stress or difficulty for our clients to allow them to concentrate on their own businesses. We also do so at an affordable cost. SMEs, in particular, are increasingly dissatisfied with a lack of price transparency, poor service offerings and poor customer service from the traditional tier one providers. These are all reasons why existing customers are increasingly extending contracts with us and we continue to win new customers across a very broad range of sectors.
Our own operational infrastructure continues to serve us very well, with our unified communications platform enabling remote working for all our employees.
Financial performance
In the latter part of the financial year, trading had continued to demonstrate significant progress as the lockdown measures at the time had begun to ease, and the economy moved towards a new post-pandemic period. Our trading since then has also reflected the fact that our target market, SMEs, are increasingly becoming used to the emergence of new variants and the practical changes each new wave of infections entails.
This is our first annual results which includes a full 12 month contribution from DMSL, which has proven to be a great acquisition for the Group.
Losses before tax reduced by 53% from £2,711k to £1,281k driven by much lower distribution costs and overheads. We did see a decline in overall revenues by 12%, but this was due to a bigger emphasis placed on our DMSL business in the year, as a result of the impact of Covid-19 on the traditional Toople base. Proactive management of the Toople base and the elimination of non-paying customers also contributed to this, with the result that the historic bad debt problem has been all but been eliminated, delivering a solid base to develop for going forward. The quality of our earnings has improved substantially.
Despite the decline in revenue, gross profit has increased by 22%. Overall gross margins have increased from 25% to 35%, with a greater contribution DMSL, which has a higher gross margin than the traditional Toople business, and also the 12 months of contribution from DMSL to this year's results as opposed to last year's 7.5 months when we acquired that business. Also contributing to the increase in gross profit is our active cost control and management combined with successful renegotiations of the carrier cost base. The growth in gross profit is also thanks to the cessation of low margin consumer business, with a re-focus only on B2B business.
As mentioned above, our bad debt charge has almost been eliminated, falling from £1.1m last year to £55,000 this year. Our administrative costs are also down by £360,000 year on year, even though DMSL costs for last year were for 7.5 months. Contributing to this; benefits achieved from the Furlough Scheme were realised, staff has been further rationalised, and there was a significant reduction in marketing costs, given the bigger focus on DMSL in the year.
Post balance sheet events
In December 2021, new ordinary shares were placed to raise £380,000. The placing was supported by many of the Company's existing shareholders, including its two largest shareholders, as well as key members of the Board. The placing was oversubscribed and utilised all of the existing share issue capability of the Company. The net proceeds were used to provide further working capital to support the Company's growth and enhance the Company's service offerings. We are grateful to existing shareholders for the support they have shown to the Company and welcome new shareholders to the register.
The perfect opportunity also presented itself for us to increase our sales initiative, with a focus on providing ultrafast, live, and cloud based solutions from BT to new and existing customers. In January 2022, we announced that we had opened a second contact centre in South Cheshire. This new facility is supported by BT who is providing assistance, training, and onboarding for staff supporting customers around BT's product portfolio. This contact centre is solely focused on new customer acquisitions for the SME segment within BT's Enterprise business and is complementary to Toople's existing centre located in Durban, South Africa, which manages over 200,000 existing customers for Toople and for DMSL. We are very excited about the further growth potential this facility will bring to us.
Current trading and Outlook
If we look as a comparative at our trading at the end of the last financial year versus our first quarter trading of this financial year, we are seeing sales approaching a 9% increase, increasing gross profit of 17%, and an improving EBITDA of 19%, giving the Board confidence as we see the UK returning to more normal conditions. The removal of our unprofitable customers and customers that represented risk, means that we have successfully completed the removal of historical bad debt, substantially improving the quality of our earnings which firmly sets us on the path towards profitability.
The Company has made substantial operational and financial progress in recent months and we look forward to executing on our growth strategy.
Andrew Hollingworth
Chief Executive Officer
25 February 2022
A copy of the Annual Report will be posted on the Company's website: www.toopleplc.co.uk
An electronic version will shortly be available for inspection at the National Storage Mechanism: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Notice of the Company's Annual General Meeting will be sent to shareholders in due course.
Consolidated statement of comprehensive income
|
| NOTE | 2021 | 2020 (Restated) |
|
|
| £ | £ |
| Continuing operations |
|
|
|
|
|
|
|
|
| Revenue |
| 3,012,936 | 3,438,284 |
| Costs of Sales |
| (1,958,149) | (2,574,822) |
| Gross Profit |
| 1,054,787 | 863,463 |
|
|
|
|
|
| Other Income |
| - | 127,985 |
| Administrative expenses | 4 | (1,936,318) | (2,295,989) |
| Depreciation and amortisation | 4 | (207,957) | (146,655) |
| Exceptional items | 4 | - | (1,162,930) |
| Operating loss |
| (1,089,489) | (2,614,126) |
| Interest payable and similar charges |
| (191,774) | (97,910) |
| Interest receivable |
| 313 | 508 |
| Loss before taxation | 4 | (1,280,950) | (2,711,528) |
|
|
|
|
|
| Taxation | 5 | 62,938 | 49,710 |
| Loss for the year |
| (1,218,012) | (2,661,818) |
|
|
|
|
|
| Other comprehensive negative income for the year |
| - | - |
| Total comprehensive negative income for the year attributable to the equity owners |
| (1,218,012) | (2,661,818) |
|
|
|
|
|
| Earnings per share |
|
|
|
| Basic and diluted earnings per share | 6 | (0.03) | (0.10) |
The notes to the consolidated financial statements form an integral part of these financial statements.
Consolidated statement of financial position
|
|
| 2021 | 2020 (Restated) |
| NOTE | £ | £ | |
| ASSETS |
|
|
|
| Non-current assets |
|
|
|
| Intangible Assets | 7 | 1,302,638 | 1,324,867 |
| Property, plant and equipment | 8 | 32,339 | 37,380 |
| Right of use assets | 21 | 138,521 | 64,173 |
| Total Non-current assets |
| 1,473,498 | 1,426,420 |
| Current assets |
|
|
|
| Trade and other receivables | 9 | 337,159 | 855,941 |
| Cash and cash equivalents | 10 | 281,592 | 568,533 |
| Total Current assets |
| 618,751 | 1,424,474 |
|
|
|
|
|
| Total assets |
| 2,092,249 | 2,850,894 |
|
|
|
|
|
| EQUITY and LIABILITIES |
|
|
|
| Capital and reserves attributable to equity shareholders |
|
|
|
| Share capital | 11 | 2,822,451 | 2,347,874 |
| Share premium | 11 | 6,266,040 | 6,027,272 |
| Merger reserve |
| (25,813) | (25,813) |
| Share-based payment reserve |
| 116,177 | 49,843 |
| Accumulated deficit |
| (9,856,690) | (8,638,677) |
| Total equity |
| (677,833) | (239,501) |
|
|
|
|
|
| Current liabilities |
|
|
|
| Trade and other payables | 12 | 932,808 | 1,474,903 |
| Lease liabilities | 21 | 39,818 | 52,517 |
| Total current liabilities |
| 972,626 | 1,527,420 |
|
|
|
|
|
| Non-current liabilities |
|
|
|
| Financial liabilities - borrowings | 12 | 1,688,935 | 1,549,316 |
| Lease liabilities | 21 | 108,521 | 13,659 |
| Total non-current liabilities |
| 1,797,456 | 1,562,975 |
|
|
|
|
|
| Total equity and liabilities |
| 2,092,249 | 2,850,894 |
The notes to the consolidated financial statements form an integral part of these financial statements.
Consolidated statement of changes in equity
|
| Share capital | Share premium | Merger reserve | Share Based Payment reserve | Accumulated deficit | Total |
| CURRENT YEAR | £ | £ | £ | £ | £ | £ |
| Brought forward at 1 October 2020 as previously reported | 2,347,874 | 6,027,272 | (25,813) | 49,843 | (8,400,239) | (1,063) |
| Impact of correction of errors | - | - | - | - | (238,439) | (238,439) |
| Restated balance at 1 October 2020 | 2,347,874 | 6,027,272 | (25,813) | 49,843 | (8,638,678) | (239,502) |
| Loss for the year |
|
|
|
| (1,218,012) | (1,218,012) |
| Total comprehensive |
|
|
|
|
|
|
| loss for the year | - | - | - |
| (1,218,012) | (1,218,012) |
|
Transactions with owners |
|
|
|
|
|
|
| Issue of share capital net of share costs | 474,577 | 261,188 | - | - | - | 735,766 |
| Share-based payment charge credited to equity | - | (22,420) | - | 66,334 | - | 43,914 |
| At 30 September 2021 | 2,822,451 | 6,266,040 | (25,813) | 116,177 | (9,856,690) | (677,834) |
|
| Share capital | Share premium | Merger reserve | Share Based Payment reserve | Accumulated deficit | Total |
| PRIOR PERIOD | £ | £ | £ | £ | £ | £ |
| Brought forward at 1 October 2019 | 762,774 | 5,412,561 | (25,813) | 255,099 | (6,100,080) | 304,541 |
| Loss for the year (Restated) | - | - | - | - | (2,661,818) | (2,661,818) |
| Total comprehensive negative loss for the year |
|
|
|
| (2,661,818) | (2,661,818) |
| - | - | - | - | |||
|
Transactions with owners |
|
|
|
|
|
|
| Issue of share capital net of share costs | 1,585,100 | 525,562 | - | - | - | 2,110,662 |
| Share-based payment charge credited to equity | - | (42,730) | - | 49,843 | - | 7,113 |
| Share-based payment adjustment in respect of lapsed warrants | - | 131,879 | - | (255,099) | 123,220 | - |
| At 30 September 2020 | 2,347,874 | 6,027,272 | (25,813) | 49,843 | (8,637,677) | (239,502) |
Share capital comprises the ordinary share capital of the Company.
Share premium represents the aggregated excess of the fair value of consideration received for shares issued over par value in respect of shares issued by the Company net of attributable share issue costs and other permitted reductions.
The merger reserve arose on the share for share exchange and is described in Note 2b.
Share-based payments reserve represents the cumulative value of share-based payments recognised through equity.
Accumulated deficit represents the aggregate retained deficit of the Group.
The notes to the consolidated financial statements form an integral part of these financial statements.
Consolidated statement of cash flows
|
| NOTE | Year ended | Year ended |
| 30 Sep 2021 | 30 Sep 2020 (restated) | ||
|
|
| £ | £ |
| Cash flows from operating activities |
|
|
|
| Operating loss |
| (1,089,489) | (2,614,126) |
| Depreciation and amortisation |
| 207,958 | 146,655 |
| Share-based payment charge |
| 43,914 | 7,113 |
| R&D tax credit |
| 62,938 | 49,710 |
| Interest paid |
| (37,808) | (7,794) |
| Interest received |
| 313 | 508 |
| Changes in working capital |
|
|
|
| Decrease in stock |
| - | 2,030 |
| Decrease / (increase) in receivables |
| 518,781 | 762,197 |
| (Decrease)/ increase in payables |
| (542,096) | 79,472 |
| Net cash outflow from operating activities |
| (835,487) | ((1,574,235) |
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
| Proceeds from issues of share capital (net of issue costs, see Note 11)* |
| 735,766 | 934,200 |
| Proceeds from loans |
| - | 1,524,995 |
| Loan repayments |
| (14,347) | - |
| Lease payments |
| (48,127) | (39,898) |
| Loan issue costs |
| - | (65,795) |
| Net cash from financing activities |
| 673,292 | 2,353,502 |
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
| Acquisition of office equipment |
| (4,108) | (10,075) |
| Acquisition of intangible assets |
| (120,845) | (108,405) |
| Proceeds on sale of fixed assets |
| 207 | - |
| Acquisition of subsidiary undertakings |
| - | (467,848) |
| Net cash acquired with subsidiary undertaking |
| - | (121,806) |
| Net cash from investing activities |
| (124,746) | (708,134) |
|
|
|
|
|
| Net increase in cash and cash equivalents |
| (286,941) | 71,133 |
| Cash and cash equivalents at start of year |
| 568,533 | 497,400 |
| Cash and cash equivalents at end of year | 10 | 281,592 | 568,533 |
The notes) to the consolidated financial statements form an integral part of these financial statements.
Notes to the consolidated financial statements
1. General Information
a) Nature of operations
The Company is a public limited company listed on the London Stock Exchange main market, which was incorporated in England and Wales on 2 March 2016 and is domiciled in England and Wales. The Company's registered office is located at PO Box 501, The Nexus Building, Broadway, Letchworth Garden City, Hertfordshire, SG6 9BL.
The Group provides a range of telecoms services primarily targeted at the UK SME market. Services offered by the Group include business broadband, fibre, Ethernet First Mile and Ethernet data services, business mobile phones, cloud PBX and SIP Trunking and traditional services (calls and lines). Through the DMSL business the Group also resells BT's Services and propositions and where relevant across the SME market.
b) Component undertakings
The undertakings included in the financial statements are as follows (see also note 5 to the Company financial statements):
| Group Company | Registered Office |
| Toople.com Limited | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| DMS Holding 2017 Limited | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| Direct Market Services Limited (DMSL) | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| checkthatcompany.co.uk Limited | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| Broadbandandphones Limited | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| Ask Merlin Limited | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| Toople Finance Limited | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| Toople Management Services Limited | Woodside 2, Dunmow Road, Birchanger, Bishop's Stortford, CM23 5RG |
| Ask Merlin Poland SP Zoo* | Kobylanka, ZACHODNIOPOMORSKIE, 73-108 Poland |
*Owned by Ask Merlin Limited
2. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated:
a) Basis of Preparation
The Consolidated Financial statements have been prepared in accordance with International Accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union "as adopted for use by the European Union, and effective, or issued and early adopted, as at the date of these statements. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities at fair value through profit or loss.
The preparation of Consolidated Financial statements in conformity with International Financial Reporting Standards ("IFRS") requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
b) Basis of Consolidation
On 15 April 2016, the Company entered into four share for share exchange agreements with David Breith pursuant to which the Company acquired the entire issued share capital of each of Toople.com Limited, Toople Finance Limited, Toople Management Services Limited and AskMerlin Limited (together the "Subsidiaries") in consideration for the issue and allotment to David Breith of 39,000,000 ordinary shares in the Company. The merger reserve arose as a result of this share for share exchange.
The Directors consider the substance of the acquisition of the Subsidiaries noted above by the Company to have been a reverse asset acquisition by the Subsidiaries and that the substance of the Subsidiaries was that of a single business under common ownership and control. Further, the Directors consider that the Company did not meet the definition of a business set out in IFRS3 'Business combinations'. As a consequence, the Directors consider that the transaction which gave rise to the formation of the Group fell outside the scope of IFRS 3 and have applied the business reorganisation principles of UK GAAP to account for the combination. The consolidated financial statements therefore present the combination as a continuation of the combined financial information of the Subsidiaries with no goodwill arising on the transaction.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Subsequent to the initial establishment of the Group the acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform to the Group's accounting policies.
c) Going Concern
The Group's business activities and financial position, together with the factors likely to affect its future development, performance and position are set out in the Governance Report in the front end of the financial statements.
The Directors have carried out a detailed assessment of going concern as part of the financial reporting process, taking into consideration a number of matters including forecast cash flows for a period of at least 12 months from the date of approval of the Financial Statements, medium and long term business plans and expectations.
At 30 September 2021 the Group had £281k of cash and net liabilities of £677k. The Group made a loss in the year of £1,218k (2020: £2,662k loss), and had net current liabilities at the year-end of £354k (2020: £103k net liabilities), In addition, subsequent to the year end a further Placing of shares took place on 22nd October 2021 raising a further £377k (before expenses). The Directors, having given due and careful consideration, are of the opinion that although the Company will need to raise further funds over the 12 months following approval of the financial statements in order to execute its strategy and for working capital, it has the ability to access additional financing, if required, over the next 12 months. The Directors, therefore, have made an informed judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. As a result, the Directors have continued to adopt the going concern basis of accounting in preparing the annual financial statements in accordance with Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009.
The going concern basis of accounting has been applied based on management's consideration of financial projections and business plan for the business, these include a number of forward looking assumptions about the future growth in the customer base and a reduction in costs following the successful website development, digital marketing, and Merlin integration with its associated consultants and agencies. As such management consider the going concern basis to be appropriate.
The auditors have made reference to going concern by way of a material uncertainty within their audit report.
d) Leases
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
o Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
o Variable lease payments that are based on an index or rate, initially measured using the index or rate at the commencement date;
o Amounts expected to be payable by the Group under residual value guarantees;
o The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
o Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the Income Statement over the lease period.
Right-of-use assets are measured at cost which comprises the following:
o The amount of the initial measurement of the lease liability;
o Any lease payments made at or before the commencement date less any lease incentives received;
o Any initial direct costs; and
o Restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.
Payments associated with short-term leases (less than 12 months) and all lease of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Low-value assets comprise office equipment and furniture acquired as part of the acquisition of DMS Holding 2017 Limited.
e) New Standards and Interpretations
At the date of authorisation of these Financial Statements, the Group and Company have not applied the following new and revised IFRSs that have been issued but are not yet effective and (in some cases) have not yet been endorsed by the UK. The Group and Company intend to adopt these standards, if applicable, when they become effective.
| Standard / Interpretation | Title |
|
|
|
| IAS 1 | Presentation of liabilities as current or non-current |
| IAS 1 | Disclosure of accounting policies |
| IAS 8 | Definition of accounting estimates |
The Group and Company are evaluating the impact of the new and amended standards above.
The Directors do not anticipate that the adoption of these standards, amendments and interpretations will have a material impact on the Group's financial statements in the periods of initial application.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
f) Financial Instruments
Financial assets and liabilities are recognised in the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument. The Company currently does not use derivative financial instruments to manage or hedge financial exposures or liabilities.
Financial Assets
The financial assets currently held by the Group and Company are classified as financial assets held at amortised cost. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment under the expected credit loss model
The expected credit loss is calculated as a function of the probability of default (PD), the exposure at default (EAD) and the loss given default (LGD).
The amount of the expected credit loss is measured as the difference between all contractual cash flows that are due in accordance with the contract and all the cash flows that are expected to be received (i.e. all cash shortfalls), discounted at the original effective interest rate (EIR).
The carrying amount of the asset is reduced through use of allowance account and recognition of the loss in the Statement of Comprehensive Income. Allowances for credit losses on financial assets are assessed collectively. Collectively assessed impairment allowances cover credit losses inherent in portfolios of financial assets with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired financial assets, but the individual impaired items cannot yet be identified.
In assessing collective impairment, the Group uses information including historical trends in the probability of default (although this is limited given the relatively short trading history of the Group), timing of recoveries and the amount of expected loss, adjusted for management's judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical evidence. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate.
IFRS 9 suggests the use of reasonable forward-looking information to enhance ECL models. The Group incorporates relevant forward-looking information into the loss provisioning model.
Financial assets at amortised cost comprise trade and other receivables and cash and cash equivalents in the statement of financial position
Cash and cash equivalents include cash in hand and amounts held on short term deposit. Any interest earned is accrued monthly and classified as finance income. Short term deposits comprise deposits made for varying periods of between one day and three months.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Derecognition of Financial Assets
The Group and Company derecognise a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the asset and substantially all the risk and rewards of ownership of the asset to another entity.
Financial Liabilities
The Group and Company classify their financial liabilities into one category, being other financial liabilities measured at amortised cost.
The Group's accounting policy for the other financial liabilities category is as follows:
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. All interest and other borrowing costs incurred in connection with the above are expensed as incurred and reported as part of financing costs in profit or loss. The Group and Company derecognise financial liabilities when, and only when, the obligations are discharged, cancelled or they expire.
g) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the income statement.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
h) Property, plant and equipment
Property, plant and equipment are shown at historical cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is provided at rates calculated to write off the cost of each asset, on a straight-line basis, over its expected useful life to its residual value, as follows:
Leasehold improvements 10 years
Office equipment 4 years
Furniture and fittings 4 years
Computer equipment 4 years
i) Other Intangibles
Other intangibles include customer contracts, developed technology and developments costs. Customer contracts and developed technology acquired as part of a business combination are recognised initially at fair value determined in accordance with appropriate valuation methodologies and subjected to amortisation and annual impairment reviews. Developments costs are recognised are initially recognised at their cash cost and subjected to amortisation and annual impairment reviews:
a. Customer contracts
Customer contracts, acquired as part of a business combination, are capitalised at their fair value as at the date of acquisition. They are carried at their fair value less accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the fair value of customer relationships over their estimated useful life of six years. Customer contracts have been valued according to discounted incremental operating profit expected to be generated from them over their useful lives.
b. Developed technology
Developed technology, acquired as part of a business combination, is capitalised at its fair value as at the date of acquisition. It is carried at its fair value less accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the fair value of developed technology over its estimated useful life of five years. Developed technology has been valued using the Relief from Royalty Method.
c. Development costs
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.
Development costs incurred are capitalised only when all the following conditions are satisfied:
· completion of the intangible asset is technically feasible;
· the Group intends to complete the intangible asset and use or sell it;
· the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
· there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
· the expenditure attributable to the intangible asset during its development can be measured reliably.
Directly attributable costs that are capitalised as part of the Merlin and BTOps platforms development include the software development employee or contractor cost. Attributable overheads are not capitalised. Development costs not meeting the criteria for capitalisation are expensed as incurred.
Amortisation is provided on development costs so as to write off the cost, less any estimated residual value, over the expected useful life which has been estimated as being 5 years. Amortisation commences upon completion of the asset, and is shown separately on the face of the Statement of Comprehensive Income as part of the Depreciation and Amortisation charge for the year. Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors.
j) Cash and cash equivalents
In the consolidated Statement of Cash Flows, cash and cash equivalents comprise cash in hand and deposits held at call with banks.
k) Trade and Other Receivables
Trade and other receivables are stated after impairment under the expected credit loss model as described in Note 2f).
l) Trade Payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.
m) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method.
n) Taxation
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date.
Deferred tax
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:
· deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.
o) Earnings per share
Basic loss per share is calculated by dividing the profit attributable to owners of the company, (excluding any costs of servicing equity other than ordinary shares), by the weighted average number of ordinary shares outstanding during the financial year.
For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares that have satisfied the appropriate vesting or performance criteria as at the end of the financial year
p) Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.
q) Segmental reporting
For the purpose of IFRS 8 the chief operating decision maker ("CODM") is the Board of Directors. The Directors are of the opinion that the business comprises a single economic activity, being the provision of telephony services and that currently this activity is undertaken solely in the United Kingdom. All of the income and non-current assets are derived from the United Kingdom. At meetings of the Directors, income, expenditure, cash flows, assets and liabilities are reviewed on a whole Group basis. Based on the above considerations there is considered to be one reportable segment only namely telephony services.
Therefore, the financial information of the single segment is the same as that set out in the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes to equity and the consolidated statement of cash flows.
r) Revenue recognition
The process of revenue recognition described by IFRS 15 is based on the core principle "that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." Each promise or performance obligation is accounted for separately.
Revenue is recognised in accordance with that core principle and applying the following 5 step process:
1. Identify the contract(s) with a customer;
2. Identify the performance obligations in the contract - includes an assessment of whether a contract includes multiple promises for goods and services (performance obligations) that are distinct and separately identifiable;
3. Determine the transaction price - based on the consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer;
4. Allocate the transaction price to the performance obligations in the contract - either based on the observed or estimated stand-alone selling price for each performance obligation; and
5. Recognise revenue when (or as) the entity satisfies a performance obligation - this may be determined as being satisfied at a point in time or satisfied over time.
Contracts with customers are structured to ensure clarity of the definitions, timing and amounts relating to the delivery of performance obligations. Within the Toople Group, the Group earns revenue from the sale of telecommunication services to customers. This revenue is recognised in the accounting period when the services are rendered at an amount that reflects the consideration to which the entity expects to be entitled in exchange for fulfilling its performance obligations to customers. Where the Group is acting as a reseller on behalf of another telecommunications provider, the Group earns commissions based on the total sales order value of the contract sold to the end customer. This revenue is recognised in the accounting period in which the underlying customer contract is accepted by the telecommunications provider. The following types of income are typically derived and recognised on the following basis:
| Revenue Type | Revenue Description | Recognition Basis |
| A. Telecommunication Services | The Group provides multiple services including the provision of broadband, telephony calls and minutes and wholesale services. For these services, a fixed monthly fee is charged for the duration of the customer contract period. The monthly transaction price is fixed at the outset of the contract period for all bundled services and this is deemed to be the transaction price.
Calls to certain destinations can be bought by customers under fixed price bundles which are recognised as monthly fees.
Where calls are made outside these bundles, they are treated as a variable revenue stream based on a number of minutes multiplied by unit price, billed to the customer on a monthly basis and recognised at the point of usage. These charges are not part of the fixed monthly fee and are based on the customer's actual usage.
Where the Group is acting as a reseller on behalf of another telecommunications provider, revenue is recognised at the point the underlying customer contract is accepted by the telecommunications provider | Point in Time - Recognised as the services are performed and consumed by the customer on a monthly basis. When acting as a reseller, at the point the contract is accepted by the provider. |
| B. Connection fees | Connection fees are chargeable to customers for certain services and revenues are recognised at the time of installation and go-live. | Point in time - Recognised at point of installation |
s) Furlough scheme
Toople PLC has accounted for government furlough grant receivables under IAS 20 and recognised a credit to match employee costs as and when they are received. Under IAS 20, it is permissible to present the grant and the expenses on either a gross or net basis. However, any related balance sheet items (i.e a grant receivable and amounts payable to employees) cannot be netted off. Any decision to top up the furlough payments to employees (eg. by choosing to pay more than the government guaranteed 80% of salary up to a maximum of 2,500 per month) is a voluntary decision and should not be provided for in advance. This is because there is no obligation to make these additional payments and to do so would constitute providing for future costs. At year end all furlough payments have been received and no staff are on furlough
t) Share-based payments
The cost of equity settled transactions is recognised, together with any corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date when the individuals become fully entitled to the award ('vesting period'). The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date has expired represents the Group's best estimate of the number of equity instruments and the value which will ultimately vest. The statement of comprehensive income charge for the period represents the movement in the cumulative expense recognised at the end of that period.
The fair value of share-based remuneration is determined at the date of grant and recognised as an expense in the statement of comprehensive income on a straight line basis over the vesting period taking into account the estimated number of shares that will vest. Unless otherwise stated the value is determined by use of a Black-Scholes model.
u) Financial risk management objectives and policies
The Group does not enter into any forward exchange rate contracts.
The main financial risks arising from the Group's activities are cash flow interest rate risk, liquidity risk, price risk (fair value) and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised as:
Cash flow interest rate risk - the Group's exposure to the risk of changes in market interest rates relates primarily to the Group's overdraft accounts with major banking institutions and on loans from shareholders
Liquidity risk - the Company raises funds as required on the basis of budgeted expenditure and inflows. When funds are sought, the Company balances the costs and benefits of equity and debt financing. When funds are received they are deposited with banks of high standing in order to obtain market interest rates.
Credit risk - with respect to credit risk arising from other financial assets of the Group, which comprise cash deposits and accounts receivable, the Group's exposure to credit risk arises from default of the counterparty, with a minimum exposure equal to the carrying amount of these instruments. The credit risk on cash is limited as cash is placed with substantial financial institutions.
v) Equity
Equity instruments issued by the Company are recorded at the value of net proceeds after direct issue costs.
3. Significant accounting judgements, estimates and assumptions
Management consider the significant accounting judgements, estimates and assumptions used within the financial statements to be:
Valuation and asset lives of separately identifiable intangible assets
In order to determine the value of the separately identifiable intangible assets on a business combination, management are required to make estimates when utilising the Group's valuation methodologies. These methodologies include the use of discounted cash flows, revenue and gross profit multiples. The carrying value of identified assets at 30 September 2021 was £302,000. Asset lives are estimated based on the nature of the intangible asset acquired and range between 5 and 6 years.
Valuation of acquired assets at fair value
Management have made a number of assumptions with regards to the models used to value acquired assets at their fair value at the date of acquisition. Valuation techniques commonly used by market practitioners are applied.
Impairment of goodwill and other intangible assets
There are a number of assumptions management have considered in performing impairment reviews of goodwill and intangible assets, as determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at 30 September was £751,399, and of other intangibles was £551,239 (see Note 7).
Capitalisation of development costs
Included within Intangible Assets are costs capitalised in connection with the Group's Merlin platform. These costs are based on management's view of the development team's time spent on the projects and considering the requirements of IAS 38 "Intangible Assets". Development costs are amortised over the life of the project once it has been released to the commercial environment. Management base a project's commerciality on when revenues can be generated from the platform's internally generated software. The projected useful lives of intangible assets are based on management estimates of the period that the asset will be able to generate revenue. The carrying value is tested for impairment when there is an indication that the value of the assets might be impaired. Impairment tests are based upon future cash flow forecasts and involve management's judgement in relation to the software. Future events could cause the assumptions to change and therefore could impact the future results of the Group.
The key estimates involved are surrounding the total man hours per development project, the standard cost per hour calculated, the projected revenues and profitability expected to arise as a result of the developments to the platform resulting in economic benefit, and the useful lives of the add-ons (see Note 7).
Provision for bad and doubtful debts
During the course of last year and the early part of this year, despite stringent credit checks and approval processes being in place, as customer numbers and orders increased exponentially, we also experienced a sharp increase in non-paying customers during the period. This was not completely unexpected given the micro-SME market within which the Group operates. The Board has taken a comprehensive review of the outstanding debts as at 30 September 2021 to assess the recoverability of the debt and any provisions that may be required however judgement is needed in making these assessments. In performing this review, the Board has taken into account the following matters when performing this estimate:
· Any cash receipts from customers post year end
· Age of debt
· Segmentation of the customer base between B2B and B2C customers to assess degree of recoverability and payment trends on the two segments
· Discussions with the Group's third-party professional debt collection agents to assess underlying reasons for non-payment, contact rate with customers, payment plans made with customers, their overall view on the recoverability of the debtor book and over what time frame and the expected realisable value if the debtor book were sold to a third party, given its segmentation and ageing profile.
Taking into account the above factors, the impairment provisions made cover balances outstanding longer than 60 days (after adjusting for recoverable VAT and known recoverable amounts). The estimates and assumptions used to determine the level of provision will continue to be reviewed periodically and could lead to changes in the impairment provision methodology which would impact the income statement in future years (see Note 9).
4. Loss before taxation
The loss before taxation is stated after charging/ (crediting):
|
| 2021 | 2020 |
|
| £ | £ |
|
|
|
|
| Depreciation of tangible assets | 9,107 | 8,018 |
| Depreciation of Right of Use assets | 55,883 | 47,593 |
| Amortisation of intangible assets | 142,969 | 91,043 |
| Impairment of trade receivables | 55,462 | - |
| Exceptional items |
|
|
| Impairment of trade receivable | - | 1,054,870 |
| Restructuring costs* | - | 108,060 |
| Fees payable to the Company's auditor for the audit of the Company's annual accounts | 30,000 | 28,000 |
| Share-based payment charges | 43,914 | 7,113 |
* Restructuring costs relate to the closure of the Burnham head office on the consolidation of operations in Bishops Stortford following the acquisition of DMSL
Administrative expenses include:
| Marketing costs | 210,276 | 429,277 |
| Wages (including Directors)* | 788,393 | 789,905 |
| Social Security (including Directors) | 98,631 | 94,040 |
*Excludes consulting fees payable to certain Directors of £57,700 (2020: £115,097).
In addition to the above in the year ended 30 September 2021 transaction costs totalling £33,646 (2020: £265,800) were payable to the Company's brokers and professional advisers at the time following the Placing of new shares to the Official List in October 2020 and this has been recognised against the share premium account.
5. Taxation
Analysis of charge in the year
|
| 2021 | 2020 (Restated) |
|
| £ | £ |
| Current tax |
|
|
| UK corporation tax credit | 62,938 | 49,710 |
|
|
|
|
| Loss on ordinary activities before tax | (1,280,951) | (2,711,528) |
|
|
|
|
| Analysis of charge in the year |
|
|
| Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2019: 19%) | (243,381) | (515,190) |
|
|
|
|
| Tax effects of: |
|
|
| Non-deductible expenses | 8,793 | 32,631 |
| R&D tax credits | 62,938 | 49,710 |
| Trading losses carried forward | 234,588 | 482,559 |
| Tax credit for the year | 62,938 | 49,710 |
The Group has accumulated tax losses arising in the UK of approximately £9,715,139 (2020: £8,480,467) that are available, under current legislation, to be carried forward against future profits.
No deferred tax asset has been recognised in respect to these losses due to the uncertainty of future trading profits.
6. Earnings per share
The calculation of earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year:
|
| 2021 | 2020 (Restated) |
|
| £ | £ |
| Loss for the year from continuing operations | (1,218,012) | (2,661,817) |
|
|
|
|
| Weighted average number of shares in issue | 4,173,912,687 | 2,608,531,587 |
|
|
|
|
| Basic and diluted loss per share | (0.03p) | (0.10p) |
The Company has in issue warrants and share options at 30 September 2021, these are detailed in note 11. The inclusion of the warrants in the weighted average number of shares in issue would be anti-dilutive and therefore they have not been included.
7. Intangible assets
|
| Goodwill | Developed technology | Development costs | Website Development costs | Customer Contracts | Total |
|
| £ | £ | £ | £ | £ | £ |
| Cost |
|
|
|
|
|
|
| At 1 October 2020 | 751,399 | 240,000 | 254.850 | 17,905 | 192,000 | 1,456,154 |
| Additions | - | - | 120,845 | - | - | 120,845 |
| Disposals | - | - | - | (105) | - | (105) |
| At 30 September 2021 | 751,399 | 240,000 | 375,695 | 17,800 | 192,000 | 1,576,894 |
| Amortisation and impairment |
|
|
|
|
|
|
| At 1 October 2020 | - | 30,000 | 63,487 | 17,800 | 20,000 | 131,287 |
| Charge for period | - | 48,000 | 62,969 | - | 32,000 | 142,969 |
| At 30 September 2021 | - | 78,000 | 126,456 | 17,800 | 52,000 | 274,256 |
| Net book amount |
|
|
|
|
|
|
| At 30 September 2021 | 751,399 | 162,000 | 249,239 | - | 140,000 | 1,302,638 |
|
|
|
|
|
|
|
|
| At 30 September 2020 | 751,399 | 210,000 | 191,363 | 105 | 172,000 | 1,324,867 |
The goodwill has been allocated to the Cash Generating Unit ("CGU") of DMSL that was acquired by the Company in February 2020, as follows:
| Group | DMSL |
|
| £ |
| At 30 September 2021 | 751,399 |
| At 30 September 2020 | 751,399 |
Impairment test for goodwill
Management reviews the business performance of DMSL. Budgeted revenue as based on expected levels of activity given results to date, together with expected economic and market conditions, taking into account the easing of Covid restrictions and management's assessment of how this would affect future performance of the business. Budgeted operating profit was calculated based upon management's expectation of operating costs appropriate to the business as reflected in the business plan.
The 30 September 2021 forecasts are based on a detailed 2 year plan to 30 September 2023 and cash flows beyond this date are extrapolated using an estimated 2% year on year growth rate. The cash flows were discounted using a pre-tax discount rate of 18.45% which management believes equates to the weighted average cost of capital for the Group which management believes is appropriate. For the DMSL CGU, the recoverable amount based on value in use exceeded the carrying value by £322,000.
8. Tangible assets
|
| Leasehold Improvements | Office Equipment | Furniture and Fittings | Computer Equipment | Total |
|
| £ | £ | £ | £ | £ |
| Cost or valuation |
|
|
|
|
|
| At 1 October 2020 | 29,839 | 11,977 | 5,138 | 17,904 | 64,858 |
| Additions | - | 918 | 3,249 | - | 4,167 |
| Disposals | - | (399) | - | (104) | (503) |
| At 30 September 2021 | 29,839 | 12,496 | 8,387 | 17,800 | 68,522 |
| Depreciation |
|
|
|
|
|
| At 1 October 2020 | 6,520 | 2,729 | 427 | 17,802 | 27,478 |
| Disposals | - | (399) | - | (2) | (401) |
| Charge for year | 3,128 | 4,809 | 1,169 | - | 9,106 |
| At 30 September 2021 | 9,648 | 7,139 | 1,596 | 17,800 | 36,183 |
| Net book value |
|
|
|
|
|
| At 30 September 2021 | 20,191 | 5,358 | 6,790 | - | 32,339 |
| At 30 September 2020 | 23,319 | 9,248 | 4,711 | 102 | 37,380 |
9. Trade and other receivables
|
| 2021 | 2020 |
|
| £ | £ |
| Current |
|
|
| Trade receivables | 26,853 | 111,091 |
| Other receivables including taxes and social security costs | 80,816 | 588,292 |
| Prepayments and accrued income | 229,490 | 156,558 |
|
| 337,159 | 855,941 |
At 30 September 2021 management reviewed the trade receivables balance and have recognised a provision of £29,013 (2020: £109,124) against receivables where there is uncertainty over recoverability. The Group's exposure to credit and market risks, including impairments and allowances for credit losses, relating to trade and other receivables is disclosed in note 3 to the financial statements.
There are no material differences between the fair value of trade and other receivables and their carrying value at the year end.
The Group's trade receivables are all denominated in UK Sterling and the ageing of gross trade receivables is as follows:
|
| 2021 | 2020 |
|
| £ | £ |
|
|
|
|
| 0-2 months | 21,180 | 101,933 |
| 2-3 months | 3,037 | 22,737 |
| Over 3 months | 31,650 | 95,545 |
|
| 55,867 | 220,215 |
The ageing of the expected credit losses of trade receivables is as follows:
|
| 2021 | 2020 |
|
| £ | £ |
|
|
|
|
| 0-2 months | - | - |
| 2-3 months | 2,530 | 20,977 |
| Over 3 months | 26,483 | 88,147 |
|
| 29,013 | 109,124 |
10. Cash and cash equivalents
|
| 2021 | 2020 |
|
| £ | £ |
| Bank current accounts (HSBC and Barclays)* | 281,592 | 568,533 |
* HSBC has a credit rating of Aa3 and Barclays has a credit rating of A1(Moody's)
11. Share capital and warrants
|
| 2021 | 2020 | ||
|
| No. | £ | No. | £ |
| Authorised, allotted and fully paid |
|
|
|
|
| Ordinary shares of 0.0667p each | 4,231,561,361 | 2,822,451 | 3,520,051,135 | 2,347,874 |
|
|
|
|
|
|
|
|
| Ordinary shares | Share Capital | Share Premium |
|
|
| No. | £ | £ |
| Share capital |
|
|
|
|
|
|
|
|
|
|
| At 1 October 2020 |
| 3,520,051,135 | 2,347,874 | 6,027,272 |
| Proceeds from share issues |
| 711,510,226 | 474,577 | 307,334 |
| Issue costs |
| - | - | (68,566) |
| At 30 September 2021 |
| 4,231,561,361 | 2,822,451 | 6,266,040 |
\* Transaction costs accounted for as a deduction from equity of £46,146 (2020: £265,800).
On 26th October 2020 the Company placed 704,010,226 ordinary 0.0667p shares at a subscription price of 0.11p per share. Commissions of £38,721 were payable to the brokers at the time and this has been recognised against share premium.
Warrants
On 18 February 2020 the Company issued warrants over 1,492,360,840 ordinary shares as follows:
· 63,230,840 warrants to the two Non-Executive Directors and one executive Director to subscribe for one new ordinary share at £0.001 per share at any time during the period commencing on 18 February 2020 and expiring at midnight on the third anniversary thereof; and
· 600,000,000 warrants to the subscribers to the placing to subscribe for one new ordinary share at £0.001 per share at any time during the period commencing on 18 February 2020 and expiring at midnight on the third anniversary; and
· 5,000,000 warrants to Cairn Financial Advisers to subscribe for one new ordinary share at £0.001 per share at any time during the period commencing on 18 February 2020 and expiring at midnight on the third anniversary thereof; and
· 74,130,000 warrants to the Company's brokers to subscribe for one new ordinary share at £0.001 per share at any time during the period commencing on 18 February 2020 and expiring at midnight on the third anniversary thereof; and
· 750,000,000 warrants to the Company's loan note providers to subscribe for one new ordinary share at £0.001 per share at any time during the period commencing on 18 February 2020 and expiring at midnight on the third anniversary thereof.
The inputs to the Black-Scholes model were as follows:
| Warrants granted | 1,492,360,840 |
| Stock price | 0.1p |
| Exercise price | 0.1p |
| Risk free rate | 0.5% |
| Volatility | 101% |
| Time to maturity | 3 years |
Assumptions on expected volatility have been made on the basis of historical data, wherever available, corresponding with the vesting of the warrant. The fair value of the warrants issued to Cairn Financial Advisers, the Company's brokers and the Company's loan note providers amounting to £42,730 was recognised in share premium in the prior year on the basis they were issued for services relating to the placing. The fair value of the services received cannot be accurately measured and therefore the warrants issued in relation to these services are recoded at the estimated fair value of the warrants. The fair value of the warrants issued to the Directors has been charged to the income statement evenly over the vesting period resulting in a charge in the current period of £11,382 (2020: £7,113).
On 26th October 2020 the Company issued warrants over 35,200,511 ordinary shares to the Company's brokers to subscribe for one new ordinary share at 0.11p per share at any time during the period commencing 26 October 2020 and expiring at midnight on the third anniversary thereof.
The inputs to the Black-Scholes model were as follows:
| Warrants granted | 35,200,511 |
| Stock price | 0.12p |
| Exercise price | 0.11p |
| Risk free rate | (0.07%) |
| Volatility | 79.72% |
| Time to maturity | 3 years |
Assumptions on expected volatility have been made on the basis of historical data, wherever available, corresponding with the vesting of the warrant. The fair value of the warrants issued to the Company's brokers amounting to £22,420 has been recognised in share premium on the basis they were issued for services relating to the placing.
At 30 September 2021, warrants for 1,520,061,351 new Ordinary Shares in the Company were in issue as follows:
|
| 2021 | 2020 | ||
|
| No. of warrants | Weighted average exercise price (p) | No. of warrants | Weighted average exercise price(p) |
| As at 1 October | 1,492,360,840 | 0.1 | 40,997,291 | 0.4 |
| Granted during the year | 35,200,511 | 0.11 | 1,492,360,840 | 0.1 |
| Exercised in the year | (7,500,000) | (0.1) | - |
|
| Lapsed during the year | - |
| (40,997,291) | (0.4) |
| At 30 September | 1,520,061,351 | 0.1 | 1,492,360,840 | 0.1 |
The outstanding warrants are exercisable as follows:
| Warrants Issued | No. of warrants | Exercise price (p) | Exercisable |
| 18 February 2020 | 1,492,360,840 | 0.1p | Exercisable from 18 February 2020 and expiring on 17 February 2023 |
| 26 October 2020 | 35,200,511 | 0.11p | Exercisable from 26 October 2020 and expiring on 25 October 2023 |
| At 30 September 2020 | 1,520, 061,351 |
|
|
The warrants outstanding at 30 September 2021 had a weighted average remaining contractual life of 1 year and 146 days (2020: 2 years, 141 days).
Share options
On 13th May 2021 the Company introduced a new Long Term Incentive Plan ("LTIP") designed to incentivise the Group's Executive Directors, Non-executive Directors and key employees. The LTIP is comprised of an Approved EMI Share Option scheme for the benefit of the Executive Directors and key employees and an Unapproved Share Option Scheme for the benefit of the Non-Executive Directors. On this date, options over 338,000,000 ordinary shares of 0.0667p were granted under the EMI Share Option Scheme and options over 126,000,000 ordinary shares of 0.0667p were granted under the Unapproved Share Option Scheme. All options granted under the LTIP have an exercise price of 0.07p per share, being the market value at the time the options were granted. The vesting period for options under the LTIP is three years with an exercise period of 10 years, starting from the date of grant.
The inputs to the Black-Scholes model were as follows:
| Warrants granted | 464,000,000 |
| Stock price | 0.07p |
| Exercise price | 0.07p |
| Risk free rate | 0.86% |
| Volatility | 79.72% |
| Time to maturity | 3 years |
Assumptions on expected volatility have been made on the basis of historical data, wherever available, corresponding with the vesting of the option. The fair value of the options granted to the Directors and Key Employees has been charged to the income statement evenly over the life of the option resulting in a charge to the current period of £32,533.
At 30 September 2021, Share options for 464,000,000 new Ordinary Shares in the Company were in issue as follows:
|
| 2021 | 2020 | ||
|
| No. of options | Weighted average exercise price (p) | No. of options | Weighted average exercise price(p) |
| As at 1 October | - | - | - | - |
| Granted during the year | 464,000,000 | 0.07 | - | - |
| At 30 September | 464,000,000 | 0.07 | - |
|
The outstanding options are exercisable as follows:
| Options | No. of warrants | Exercise price (p) | Exercisable |
| 13 May 2021 | 464,000,000 | 0.07p | Exercisable from 13 May 2022 and expiring on 12 May 2031 with 3 year vesting period commencing 13 May 2021 |
The options outstanding at 30 September 2021 had a weighted average remaining contractual life of 9 years and 226 days (2020: nil).
12. Trade and other payables
|
| 2021 | 2020 (Restated) |
|
| £ | £ |
| Trade payables | 515,286 | 851,003 |
| Social Security and other taxes | 155,034 | 149,165 |
| Other payables | 20,607 | 72,273 |
| Accruals and deferred income | 241,882 | 402,462 |
| Lease liabilities | 39,818 | 52,517 |
|
| 972,626 | 1,527,420 |
|
|
|
|
|
| 2021 | 2020 |
|
| £ | £ |
| Non - current liabilities |
|
|
| Lease liabilities | 108,521 | 13,659 |
| Borrowings | 1,688,935 | 1,549,316 |
|
| 1,797,456 | 1,562,975 |
Financial liabilities, with the exception of the shareholder loan included within trade and other payables are all considered to be repayable within 30 days.
On 18 February 2020 the Company issued a loan note instrument constituting zero coupon secured loan notes for a face value of £1,625,000 with a maturity date of 31 December 2022. The Loan Note Instrument contains customary warranties, financial and other covenants and events of default. The Loan Note Instrument also contains information rights and board observer rights for the noteholders. The loan notes constituted under the Loan Note Instrument are repayable on the maturity date or in the event of the occurrence of an event of default. The loan notes constituted under the Loan Note Instrument are secured by a debenture over the assets of the Group. Costs associated with the issue of the loan note amounting to £65,795 are being amortised over the life of the loan note.
In July 2020, the Group took out a Coronovirus Business Interruption Loan for £240,000 at an interest rate of 3.39%. There are no repayments in the first 12 months of the loan following which 60 monthly capital repayments of £4,000 will be made.
13. Acquisition of DMS Holdings 2017 Limited
On 18th February 2020, the Company acquired 100 percent of the shares in DMS Holding 2017 Limited. DMS Holding 2017 Limited is a holding company for Direct Market Services Limited which is a telecoms provider to the business market.
The consideration for the Acquisition was £1.5 million, satisfied by cash, the issue of 1,050,000,000 new Ordinary Shares in Toople (the "Consideration Shares") at the Placing Price, and the issue of Options to acquire up to 800,000,000 new Ordinary Shares subject to the achievement of earn out considerations over the next three years. The primary reason for the purchase was to improve cash flows due to DMSL's previous profitability, and to lead the group toward profitability sooner.
The table below summarises the recognised amounts of assets and liabilities assumed at the date of acquisition.:
|
| £ |
|
| Intangible assets | 432,000 | |
| Tangible assets | 147,094 | |
| Deferred tax assets | 53,906 | |
| Trade and other receivables | 713,799 | |
| Prepayments and accrued income | 188,929 | |
| Cash and cash equivalents | 1,404 | |
| Trade and other payables | (368,164) | |
| Accruals and deferred income | (173,236) | |
| Lease liabilities | (106,074) | |
| Short term borrowings and loans | (123,210) | |
| Total identifiable net assets acquired | 766,448 | |
|
|
| |
| Consideration: |
| |
| Issue of shares | 1,050,000 | |
| Cash | 427,847 | |
|
| 1,517,847 | |
| Goodwill | (751,399) | |
|
| 766,448 | |
An adjustment has been made to reflect the initial accounting for the acquisition of DMS Holding 2017 Limited, by the Company, being the elimination of the investment in DMS Holding 2017 Limited against the non-monetary assets acquired and recognition of goodwill. The Company has made a preliminary assessment of the fair value of net assets acquired pursuant to the acquisition of DMS Holding 2017 Limited, via a Purchase Price Allocation ("PPA") exercise. The PPA's determined a decrease of £432,000 of goodwill in DMS Holding 2017 Limited with the corresponding movement to be recognised as customer contracts and developed technology. The amortisation period for customer contracts and developed technology has been assessed as 6 years and 5 years respectively. Amortisation of intangible assets is included in administrative expenses in the Income Statement.
The revenue included in the Group Statement of Comprehensive Income for the prior period from 18 February 2020 to 30 September 2020 contributed by DMS Holding 2017 Limited was £1,207,392. DMS Holding 2017 Limited also contributed a loss of £232,675 over the same period in the prior year.
Had DMS Holding 2017 Limited been consolidated from 1 October 2019, the Group Statement of Comprehensive Income would show revenue of £2,225,186 and a loss of £414,421 in the prior year.
14. Related party disclosures
|
| 2021 | 2020 |
|
| £ | £ |
| Goods/services purchased from Dotfusion Limited | 40,500 | 72,000 |
| Goods/services purchased from High Lees Consulting | 32,004 | 57,004 |
| Goods/services purchased from KBL Consulting Limited | 25,200 | 95,525 |
| Goods/services supplied to High Lees Consulting | 2,601 | 1,853 |
|
| 100,305 | 226,382 |
Mr Piotr Kwiatkowski is the owner of Dotfusion and is a shareholder in Toople Plc. There was no balance outstanding at 30 September 2021.
Mr Richard Horsman is the owner of High Lees Consulting and is a shareholder in Toople Plc and non-executive Chairman. There was a balance of £5,332 (2020: £nil) owing to High Lees Consulting at the end of the period.
Mr Kevin Lawrence is the owner of KBL Consulting Limited and is a shareholder in Toople Plc and a Non- Executive Director. There was a balance owing at the end of the period of £51,230 (2020 £72,670).
During the year to 30 September 2021 Toople Plc recharged certain administrative expenses to its subsidiaries through a management fee. The total amount charged was £773,479 (2020: £518,103). At 30 September 2021 Toople Plc was owed £8,870,948 (2020: £7,752,182) from its subsidiaries.
15. Directors, key management and employees
Details of the Directors and key management personnel are set out on pages 14 to 15. Key management personnel are considered to be the Directors. Relevant related party transactions are disclosed in Note 14.
Details of Directors' remuneration are set out in the Remuneration Committee Report on page 31 to 37.
The total remuneration of the directors and key management personnel is £344,010 (2020: £317,546), as set out below in aggregate for each of the categories specified in IAS 24:
| Directors | 2021 | 2020 |
|
| £ | £ |
| Short term benefits - Salaries and fees | 309,000 | 312,329 |
| Long Term Benefits | - | - |
| Share-based payments | 35,010 | 5,217 |
| Total | 344,010 | 317,546 |
The average number of persons employed by the Group (excluding Directors) during the year was 20 (2020: 17), analysed by category as follows:
|
| 2021 No. | 2020 No. |
| Management and Finance | 3 | 3 |
| Sales and Marketing | 13 | 9 |
| Operations & IT | 4 | 5 |
| Total | 20 | 17 |
Staff costs during the year (including Directors salaries and fees) were as follows:
|
| 2021 No. | 2020 No. |
| Wages and salaries (including Directors salaries and fees) | 1,029,421 | 905,002 |
| Furlough scheme | (183,331) | - |
| Social security costs | 98,631 | 94,040 |
| Pension costs | 20,350 | 14,783 |
| Total | 965,071 | 1,013,825 |
16. Financial instruments
The Group's principal financial instruments comprise cash balances, accounts payable and accounts receivable arising in the normal course of its operations.
The financial instruments of the Group at year-end were:
|
| 2021 | 2020 |
|
| £ | £ |
| Financial Assets at amortised cost |
|
|
| Cash and cash equivalents | 281,592 | 568,533 |
| Trade and other receivables | 282,877 | 782,258 |
|
|
|
|
| Financial liabilities at amortised cost |
|
|
| Trade and other payables | 777,775 | 1,325,738 |
| Borrowings | 1,688,935 | 1,549,316 |
a) Interest rate risk
The Group has floating rate financial assets in the form of deposit accounts with major banking institutions; however, it is not currently subjected to any other interest rate risk.
Based on cash balances at the statement of financial position date, a rise in interest rates of 1% would not have a material impact on the profit and loss of the Group.
b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities.
The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. All current liabilities are considered to be repayable on demand.
c) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers. The allowance account for trade receivables is used to record impairment losses unless the Group has no reasonable expectations of recovery; at that point the amounts considered irrecoverable are written off against the trade receivables directly. The Group provides for impairment losses based on expected credit losses. For trade receivables, the Group applies the IFRS 9 simplified approach, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group had trade receivables of £26,854 at 30 September 2021 (2020: £111,091), net of bad debt provisions. The methodology adopted for determining the bad debt provision is detailed in Note 3 to the financial statements.
d) Capital risk management
The Group defines capital as the total equity of the Company and its subsidiaries. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders of the Company and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
e) Fair value of financial assets and liabilities
There are no material differences between the fair value of the Group's financial assets and liabilities and their carrying values in the financial information.
17. Pension Commitments
The Group had no pension commitments outstanding at the year end.
18. Dividends
No dividends have been proposed or paid for either the current or previous reporting periods.
19. Ultimate Controlling Party
The Directors have determined that there is no controlling party as no individual shareholder is considered to hold a controlling interest in the Company.
20. Subsequent events
On 20 December 2021 the Company completed a reorganisation, where each existing ordinary share of 0.0667 pence was subdivided into one new ordinary share of 0.01 pence ("New Ordinary Share") and one deferred share of 0.0567 pence per share. In addition, a placing of 838,812,272 new ordinary shares in the Company (the "Placing Shares") with institutional and other investors at 0.045p per share (the "Placing Price") to raise £0.38m was completed with admission to trading for these new shares taking place on 22 December 2021. The net proceeds of the Placing will be used to provide further working capital to support the Company's growth and enhance the Company's service offerings.
21. Right of Use assets
The Group has adopted IFRS 16 using the modified retrospective approach with the effect of applying this standard at the date of initial recognition of 18 February 2020, being the date DMSL was acquired into the group, resulting in the only lease within the group being applicable under IFRS 16.
The Group recognises a right-of-use asset and corresponding liability at the date at which a lease asset is made available for use by the Group, except short term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets. Lease liabilities are initially measured at the present value of lease payments that are due over the lease term, discounted using the groups incremental borrowing rate of 10%. This is the rate the Group are likely to have to pay for a loan of a similar term and with similar security to obtain an asset of similar value.
In the year to 30 September 2020, the Group recognised the right-of-use asset and associated lease liability for the remaining period of the lease for the offices of DMSL. During the current year, the lease was renegotiated for a longer term and a reduced quarterly rental
|
| Property | Total |
|
| £ | £ |
| Cost or valuation |
|
|
| At 1 October 2020 | 111,766 | 111,766 |
| Additions | 130,231 | 130,231 |
| At 30 September 2021 | 241,997 | 241,997 |
| Depreciation |
|
|
| At 1 October 2020 | 47,593 | 47,593 |
| Charge for year | 55,883 | 55,883 |
| At 30 September 2021 | 103,476 | 103,476 |
| Net book value |
|
|
| At 30 September 2021 | 138,521 | 138,521 |
| At 30 September 2020 | 64,173 | 64,173 |
The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position are as follows:
|
| Prepayments
£ | Lease liability £ | Property
£ | Income statement £ |
| Balance on transition | 5,692 | - | - | - |
|
|
|
|
|
|
| Recognised on adoption of IFRS 16* | (5,692) | (106,074) | 111,766 | - |
| Depreciation | - | - | (47,593) | (47,593) |
| Interest | - | (7,794) | - | (7, 794) |
| Lease payments | - | 47,692 | - | - |
| Carrying value at 30 September 2020 | - | (66,176) | 64,173 | (55,387) |
| Recognised on recognition of renegotiated lease contract | - | (130,231) | 130,231 | - |
| Depreciation | - | - | (55,883) | (55,883) |
| Interest | - | (7,873) | - | (7,873) |
| Lease payments | - | 55,941 | - | - |
| Carrying value at 30 September 2021 | - | (148,339) | 138,521 | (63,756) |
* As at 18 February 2020 the lease liability recognised £106,074 relating to the leasehold buildings used by DMS Holding 2017 Limited.
Under such arrangements, the licence terminates immediately at any time should the licensor cease to be in occupation of the premises.
The maturity analysis of the lease liability is as follows:
|
| 2021 | 2020 |
|
| £ | £ |
| Lease liability less than one year | 23,144 | 52,517 |
| Lease liability greater than one year and less than 5 years | 98,861 | 13,659 |
| Lease liability greater than 5 years | 26,334 | - |
| Total liability | 148,339 | 66,176 |
Maturity analysis of contracted undiscounted cashflows is as follows:
|
| 2021 | 2020 |
|
| £ | £ |
| Lease liability less than one year | 35,000 | 56,000 |
| Lease liability greater than one year and less than 5 years | 112,000 | 14,000 |
| Lease liability greater than 5 years | 63,000 | - |
| Total liability | 210,000 | 70,000 |
| Finance charges included above | (61,661) | (3,824) |
|
| 148,339 | 66,176 |
22. Prior period adjustments
The effect on Earnings per share at 30 September 2020 was a reduction from (0.09p) to (0.10p)
Consolidated statement of financial position (restated)
|
|
| 2020 | Restatement | 2020 |
|
| As previously reported £ |
£ | Restated £ | |
| ASSETS |
|
|
|
|
| Non-current assets |
|
|
|
|
| Intangible Assets |
| 1,324,867 | - | 1,324,867 |
| Tangible assets |
| 37,380 | - | 37,380 |
| Right of use assets |
| 64,173 | - | 64,173 |
| Total Non-current assets |
| 1,426,420 | - | 1,426,420 |
| Current assets |
|
|
|
|
| Trade and other receivables |
| 855,941 | - | 855,941 |
| Cash and cash equivalents |
| 568,533 | - | 568,533 |
| Total Current assets |
| 1,424,474 | - | 1,424,474 |
|
|
|
|
|
|
| Total assets |
| 2,850,894 | - | 2,850,894 |
|
|
|
|
|
|
| EQUITY and LIABILITIES |
|
|
|
|
| Capital and reserves attributable to equity shareholders |
|
|
|
|
| Share capital |
| 2,347,874 | - | 2,347,874 |
| Share premium |
| 6,027,272 | - | 6,027,272 |
| Merger reserve |
| (25,813) | - | (25,813) |
| Share-based payment reserve |
| 49,843 | - | 49,843 |
| Accumulated deficit |
| (8,400,239) | (238,439) | (8,638,678) |
| Total equity |
| (1,063) | (238.439) | (239,502) |
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
| Trade and other payables |
| 1,236,465 | 238,439 | 1,474,904 |
| Lease liabilities |
| 52,517 | - | 52,517 |
| Total current liabilities |
| 1,288,982 | 238,439 | 1,527,421 |
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
| Financial liabilities - borrowings |
| 1,549,316 | - | 1,549,316 |
| Lease liabilities |
| 13,659 | - | 13,659 |
| Total non-current liabilities |
| 1,562,975 | - | 1,562,975 |
|
|
|
|
|
|
| Total equity and liabilities |
| 2,850,894 | - | 2,850,894 |
The company balance sheet at 30 September 2020 was not restated.
The prior year adjustment relates to the correction of an error in relation to the calculation of reseller commissions payable as at the end of the financial year resulting in the year end accrual balance being under accrued.
23. Copies of the Annual Report
Copies of the annual report will be available on the Company's website at www.toople.com and from the Company's registered office.
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