Q&A with Toople PLC: Great solid progress (LON:TOOP)

Toople Plc

Toople plc (LON:TOOP) Chief Executive Officer Andrew Hollingworth caught up with DirectorsTalk for an exclusive interview to discuss their interim results and what the future holds for the company.

Q1: Interims out today, are you pleased with the numbers?

A1: Absolutely, yes. I’m really pleased with the numbers, I think they’re a real solid set of numbers and I think from a financial and operational perspective we’ve exceed or performed at least in line with our KPI’s.

To summarise the headline numbers, if you look at the overall group revenue, that grew by an impressive 57% to £1.08 million and if you then look at our direct small business revenue line, which is our key in strategic focus for us growing that small business market, that grew by 169%. That justifies the decision that we’re making in the investment of our digital marketing and our in-house sales team.

If we then look at the three core propositions that make up really the company proposition so that small business market then the broadband revenue grew by 159%, the mobile revenue grew by 124% and the cloud-based telephony revenue grew by 82%. 

That is all underpinned by, obviously, material growth in the orders and Revenue Generating Units (RGUs) from the small business market. This has resulted in a leap of 150% of the gross profit over the period and gross margins have also improved by 7 percentage points over the same period last year.

So, given the strategic investments that we’re making and we indicated we would make which, absolutely it’s a really good solid material set of growth results.

Q2: I did notice that your numbers show a decrease in wholesale revenue, is this something that investors should be concerned about?

A2: No, not at all. That’s been an intended result of our strategy to move away from a few legacy wholesale contracts that we had prior to floatation which typically deliver low margin in terms of the revenue side of things but also obviously presents a higher debtor risk when you’re working on really really low margins.

As I say, all of those contracts were in place prior to the company coming to market 3 years ago, it’s always been our strategy to exit ourselves from those agreements. Our strategy going forward with our partnership agreements is to be extremely selective about the agreements we enter into. They’ve got to deliver the right gross margins for the business.

So, no, to be expected and completely comfortable it is a result of our strategic intent.

Q3: As you mentioned earlier and in summary, you state that you are comfortable with Toople’s cash position and the investments you have made in people and digital marketing and that they’re paying off.  Could you please expand on that statement for us a little?

A3: Our cash position at the end of the 31st March 2019 stood at a healthy £1.15 million, that is exactly in line with our expectations and the Board believes that the current position is more than sufficient to allow the business to continue and pursue the growth strategy that you’re seeing and what we indicated to the market at the time of our placing back in September 2018.

That investment is underpinned by the results that I’ve previously talked to you about on this call and demonstrating the gross profit increase of 150%. So, comfortable and sufficient to continue the material growth story.

I think we really really spend our cash really wisely and our investment is in it totality to accelerate the sign up of new customers. Bear in mind that the difference with this business is that every customer that we bring on board typically signs a 24-month contract so it is absolutely fixed, recurring, transparent revenue over 24-month period.

As I say, we spend it wisely and what we can see is a significant increase in our lead conversion and our sales being achieved and that leads to a lower cost of acquisition. Critically, we can also identify that there are real efficiencies in our marketing spend and, in our sales performance, where we can drive further growth without the need to increase our marketing spend that you’ve seen to date.

So, I think that’s absolutely pertinent and correct as we drive towards profitability and relates to the cash position, it’s worth commenting on that.

Q4: Just looking at the industry more generally, what did you make of the recent KCom deal where it was taken over by a pension fund?

A4: It certainly shows that there is significant interest and there’s always been consolidation in our market.

Looking at that deal, it’s going to value KCom over £500 million and the thing that interest me is that KCom have about 5% of our core market in terms of the small business market so I think it’s a good benchmark in terms of the industry still shows consolidation.

That’s great for us, great for where we’re driving in our market share gains in the small business market and I think over time actually, we will have a team role and an interest in the M&A activity that exists within the market.

Q5: You also note that a major tier one UK carrier has started to benchmark itself against yourselves.  What does this tell us about your place in the marketplace?

A5: We can go through all of this solid set of growth and material sets of growth, this is the bit that really really excites me because we must remember that 3 years ago, nobody had heard of the company, it was an unknown brand. Now we’re sitting here today with the biggest legacy carrier in the UK market starting to benchmark its pricing against us as their number 1 comparator.

That just does demonstrate what we’ve achieved over the last 3 years since we created Toople, we’re disruptive, we’re disruptive in the small business market, we’re on the radar of the big legacy provider in the UK market.

It’s a great place to be and we are fulfilling and achieving all the objectives we set out to be, that’s got to be exciting for us.

Q6: What does the future hold for Toople PLC do you think?

A6: I think the company’s future is really bright. If you look at the growth story and the April numbers, post-period, we received over 900 orders from over 600 small businesses placing orders with us for the first ever time. That’s 600 brand new businesses placing orders with us, that’s not a ‘one hit wonder’, we can see from our activity that that is consistent, we also believe we can grow from that so I think it’s great.

Also, what you’ve got to remember is, we are significantly growing the customer base, that’s what our investment was lined up to do. Let’s never miss the opportunity that whilst 600 small business customers are going to be joining every single month, once we’ve demonstrated the great customer experience, the transparency and pricing and they’ve got their confidence in the company, that sets us up to cross-sell and upsell and sell more products into the same customers, that has obviously got no cost of acquisition to it, it’s not like bringing a new customer in.

I think there are opportunities as well as the continued growth of taking market share in the small business market so in summary, I would say that we’re making great solid progress towards our goal and the road to profitability.

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