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Toople Plc

Toople plc experience accelerated growth in customers – Turner Pope

Over the last six months, Toople plc (LON: TOOP) has experienced accelerated growth in customer acquisition numbers. We expect this to translate into increased sales over H2 and an improvement in margins as a function of increased orders for superfast fibre broadband in the product mix.

In the months of April, May and June 2019, Toople received over 900, 1,000 and 1,100 orders respectively. In particular, order numbers for May 2019 were three and half times the level achieved only 12 months previously. This momentum has continued in Q2 with strong growth in the traditionally seasonally affected period of July and August 2019 and Toople added a further 1,300 and 1,000 new customer orders respectively in these months.

In revenue terms, the contract value of the new customers signed in May 2019 is expected to deliver sales of £500,000 over a 24 month period and Toople expects that the new customer orders won between June and August will deliver revenues over and above this amount.

On the corporate side of the business, Toople has invested in an in-house sales and marketing channel, which in tandem with the company’s digital marketing strategy is delivering increased numbers of customer enquiries.

Toople also notes that its new sales facility established in Durban, South Africa, which went live in July, is making a positive impact. This facility enhances Toople’s sales capability and extends working hours beyond 8pm GMT on weekdays and also on weekends which are both peak times for SME enquiries.

The company states that early customer conversion rates from the Durban facility are good and comparable to those achieved by the UK team and the commercial impact is an overall lower cost of acquisition per customer and revenue generating unit. The company is confident that this will deliver margin improvements over the medium term.

At the end of March 2019, Toople’s balance sheet had cash of almost £1.15m. This cash was topped up by a private placing at the end of May 2019 whereby Toople issued 189.2 million new shares at 0.35p per share to raise gross proceeds of £0.662m.

In the interim statement, the balance sheet showed an outstanding shareholder loan with a present value of approximately £0.6m. This interest free loan originated from former director, Mr David Breith, who made loans totalling £0.75m to the company prior to admission to the Standard List in May 2016.

The present value of the loan was not repayable for three years after admission and only in the event that the company was profitable. Given that the conditions of the loan were not met, Mr Breith accepted a payment of £150,000 in full and final settlement of the loan and Toople is also now debt free. With the loan repaid at a significant discount to its book value, Toople now has additional funds available to invest in its digital marketing strategy and accelerate sales leads and customer conversion rates.

Toople has strengthened the balance sheet in Q3 providing additional working capital for the business. With the establishment of a sales centre in South Africa to extend Toople’s sales hours, we believe that the company will focus on converting increased numbers of leads at an accelerated pace to deliver sales growth and lower unit costs for customer acquisition over H2 2019 and into the next financial period.

Attention is drawn to the disclaimers and risk warnings at the end of this document.

This is a non-independent marketing communication. The analyst who has prepared this report is aware that TPI has a relationship with the company covered in this report. Accordingly, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

TPI acts as joint broker to Toople plc.

Retail clients (as defined by the rules of the FCA) must not rely on this document.

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