Toople (TOOP ) has unveiled to investors in an update that monthly orders continue to grow, with gross margins coming in as materially higher than during the pre-pandemic period.
It said this has enabled monthly cash burn to be reduced by 60% compared with 2020 and this trend is expected to be sustained, moving the Company towards positive cash flow.
Since the start of the year, the Group, which provides telecom services to UK SMEs, has announced a string of recent significant contracts with several new and existing customers.
Toople believes trading will continue to demonstrate significant progress as the current UK lockdown begins to ease and the economy moves towards the post-pandemic period.
Meanwhile, the Company also announced today that Juli Carter, wife of John Carter, the Managing Director of Toople's trading subsidiary Direct Market Services Limited ("DMSL"), has sold 1,050,000,000 ordinary shares at a price of 0.06 pence per share.
The majority of the proceeds from the disposal will be used to repay the £0.462m owed to DMSL at the time that DMSL was acquired by Toople back in February 2020, Toople noted. As a result of the disposal, Toople’s balance sheet has been ‘materially further enhanced’, which together with a lower cash burn, provides a significant working capital platform for the company to advance towards profitability.
With gross margins materially higher than in the pre-pandemic period, the group has reduced its monthly cash burn significantly, which if sustained, will clearly push the company into profitability. In addition, the proceeds from the share sale will materially strengthen its balance sheet and provide further funds for organic and acquisitive growth with no further dilution to shareholders.
In recent weeks, Toople has secured new contracts which CEO, Andy Hollingworth, said are “further evidence” of growing momentum. The group’s long-term outlook is expected to be largely underpinned by the UK Government’s commitment to roll out fibre telecommunication infrastructure to replace copper and upgrade the UK’s network to 5G.
Reasons to TOOP
The company completed its “transformational” acquisition of DMS Holdings (DMSL), a firm which provides unified communication services in the UK, back in February 2020. Toople believes DMSL will accelerate its own positive cash generation and drive profitability.
The macro drivers for TOOPLE indicate structural growth opportunities across the SME Telecom markets. Its contract wins, and renewals point towards several compelling value propositions from the Company across broadband, mobile, and fixed line services.
Market Opportunity
In a previous trading update, Toople said the macro drivers expected to precipitate substantial growth for the Group remain in place, particularly the UK government’s commitment to rolling out fibre telecommunication infrastructure to replace copper.
The macro drivers expected to precipitate substantial growth for the Group are said to remain in place, namely HM Government's commitment to the rolling out of fibre telecommunication infrastructure to replace the legacy copper infrastructure by 2025 and ‘the necessary and ultimately unavoidable upgrade’ of the UK’s network from 4G to 5G.
This forms part of the country’s efforts to upgrade its telecoms system to full fibre lines to deliver “gigabit speeds” following concerns that the UK has fallen behind other countries. The UK government aims for full-fibre networks to cover the entire country by 2033.
Openreach, which controls the UK’s telecoms infrastructure, is building full-fibre to over 4.5 million premises by the end of March 2021 and more than 20 million in the late 2020's.
Andy Hollingworth, CEO of Toople said this goal coupled with the impact of COVID-19 is driving the need for better remote connectivity and unified communications solutions.
“As full-fibre availability in the UK grows exponentially, our suite of services supports the transition to a full-fibre future and as the availability of fibre increases, so too will the number of new and expanded contracts for Toople,” he commented.
He highlighted the significance of this accessibility in a “new reality where employees can work from anywhere but must remain seamlessly connected to their colleagues and clients.” And said, “In light of societal changes to working practices, and technical upgrades to the UK's communications infrastructure, the long-term outlook for Toople is bright."
Strong Balance Sheet
Toople’s balance sheet is expected to provide it with greater flexibility to target additional organic growth opportunities across their target markets, which should lead to a positive outturn for FY20 and accelerate its path to profitability and positive cash flow in FY21.
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