Cloudcall Group plc
Annual Report and Financial Statements
2019
Group Overview
Contents
Highlights ................................................................................................................................................................ 1
Group overview ...................................................................................................................................................... 2
Strategic Report ..................................................................................................................................................... 5
Chairman’s Statement ................................................................................................................................. 5
Chief Executive’s review ............................................................................................................................ 8
Key performance indicators ..................................................................................................................... 14
Financial review ......................................................................................................................................... 16
Principal risks and uncertainties ............................................................................................................... 20
Governance Report .............................................................................................................................................. 26
Corporate governance statement ............................................................................................................ 26
Corporate social responsibility ................................................................................................................. 30
The Board ................................................................................................................................................... 31
Audit committee report ............................................................................................................................ 37
Remuneration committee report ............................................................................................................. 39
Directors’ report ................................................................................................................................................... 42
Statement of Directors’ Responsibilities ................................................................................................. 45
Independent Auditor’s Report to the members of Cloudcall Group plc ........................................................... 47
Consolidated Statement of Comprehensive Income .......................................................................................... 52
Consolidated and Company Statements of Financial Position ........................................................................... 53
Consolidated and Company Statements of Changes in Equity .......................................................................... 54
Consolidated and Company Cash Flow Statements ........................................................................................... 57
Notes to the Financial Statements ..................................................................................................................... 60
1
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Group Overview
Highlights
• Recurring revenues up 33% compared to 2018
• Total revenues up 30% to £11.4m (2018: £8.8m)
• Annualised revenue run-rate surpasses £13m
• Gross margin 79% (2018: 78%)
• EBITDA loss (excl. share-based payments and exceptional items) reduces to £2.2 m
(2018: £2.5m)
• £13.1 m available cash (including debt facilities) at year-end (2018: £0.9m)
• Net cash absorbed by operating activities down by 8% year on year to £1.9m
• £11.3 m (net) successful equity fundraise completed in October 2019
• 42,348 users as at 31 December 2019 - up 35% (2018: 31,343)
• 902 average net new monthly users added in 2H 2019 (of which Q3 = 643 and Q4 =
1,161), 25% higher than 2H 2018
• Average customer size increased by 22% to 33 users
•
Increased investment takes year end headcount up to 160 from 147 last year
• Record breaking Q4 2019 sales performance assisted by 2 significant enterprise
deals expected to go live in 2020
• Greater collaboration with key partners
is improving large and enterprise
opportunity pipeline
• 4 new CRM integrations added in 2019, significantly expanding the number of
companies able to benefit from CloudCall’s deeply integrated communications
• Broadcast and template SMS capabilities rolled out to our key CRM integrations
• First CRM integration delivered using CloudCall’s new rapid integration toolkit
1
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Group Overview
Group overview
Cloudcall Group plc (“CloudCall” or the “Company”) is a UK registered company, quoted on the AIM market
of the London Stock Exchange (LSE: CALL). The principal activity of the Company is to act as the holding
company.
CloudCall and its subsidiaries (the “Group”) operate as a software and integrated communications business
that has developed and provides a suite of cloud-based integrated software and communications products
and services under the name “CloudCall”. The Group’s principal activity is to provide products and services
designed to improve business performance by enabling multi-channel client communications to be driven
from a single user interface by the data held within Customer Relationship Management (“CRM”) software.
The CloudCall product suite allows companies to fully integrate their business communications tools into
their existing CRM software, enabling all customer communications, to be made, recorded, logged and
categorised from within the CRM system from which detailed activity reports, analysis and follow-up actions
can be easily generated.
The Group’s software and integrated communications platform is currently enabling over 42,300 users
across nearly 1,300 customers to drive more effective communications directly from the intelligence that
exists within their CRM system.
The Group has approximately 160 staff situated in Leicester (UK), London (UK), Boston (US), Minsk (Belarus)
and Sydney (Australia).
The Group’s Head Office and Registered Office address is 1 Colton Square, Leicester, LE1 1QH, UK.
Further information can be found on our website www.cloudcall.com.
Our business model
is a software company that designs, develops and operates
CloudCall
integrated multi-channel
communications services for CRM systems. Due to the unique way that the CloudCall system is built with its
own Application Programming Interface (“API”), it has the capability to readily integrate with multiple CRM
systems.
CloudCall software, working seamlessly with its core telephony and messaging platforms, delivers data-
driven, intelligent, cost effective communications services directly to customers via an intuitive user
interface that deeply integrates with their CRM system.
CloudCall is a full-service communications provider licensed to operate in multiple countries. CloudCall
provides a robust and effective service built on its own cloud-based technology stack.
2
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Group Overview
CloudCall works closely with key CRM partners through which it reaches most of its end customers and their
users. CloudCall’s current geographic reach extends from North America, through the UK and mainland
Europe to Australia and parts of the Asia Pacific (APAC) region. CloudCall contracts directly with the CRM’s
end-customers, with a small percentage of recurring revenues being paid to the relevant CRM partner for as
long as their customer remains a CloudCall customer.
CloudCall services are invoiced monthly in arrears on a per user, per month basis. CloudCall software,
telephony and SMS messaging services are either billed as all-inclusive packages, separate bundles of calls
or messages for pre-defined usage levels, or on a software plus ‘pay as you go’ (PAYG) per minute / message
basis. 89% of the Group’s revenues are recurring (monthly subscriptions) or repeating (PAYG) in nature.
Professional services are delivered as part of the service delivery processes and include, testing customers
networks, account and user configuration, project management and training fees. These service fees
facilitate effective on-boarding, which in turn leads to higher levels of user adoption, lower churn and a
demonstrably faster return on investment for customers.
All new customers are regularly contacted throughout the on-boarding process to ensure they remain
satisfied and engaged. Following delivery, they are also routinely contacted for post-implementation
feedback, looking to identify and resolve any ongoing issues. Existing customers are treated and followed
up in a similar way by specialist Key Account and Relationship Management teams. CloudCall provides strong
and effective customer support, working to resolve and reduce issues which may cause customers to churn.
CloudCall prides itself on its strong and personal customer support capabilities, and very much views this as
a key differentiator in its marketplace.
CloudCall’s product management, software development and engineering functions are mostly located in
Leicester (UK), although it also operates an offshore software development centre in Minsk (Belarus).
Our market
The overall market size for CRM software is estimated to be more than $4obn per annum. It is estimated that
the market for CTI (Computer Telephony Integration) software is as much as 40-50% of the overall CRM
market in terms of its potential size. There are thousands of individual CRM platforms, serving a wide variety
of industry sectors.
CloudCall operates directly in North America through its office in Boston, MA, in Europe through its UK
offices in Leicester and London, and in APAC through its Australian office in Sydney. The Group primarily
focuses its products and services on its core CRM partners. Following the launch of its “Easy-integrator”
solution, during 2019, CloudCall added 4 new CRM integrations to its product portfolio, and it anticipates
adding more in 2020 and beyond.
In addition to focusing on the three core existing integration partners identified above and working with its
new and proposed integration partners, CloudCall also considers its products and services to be extremely
relevant for companies within the staffing and recruitment sector, and consequently has existing
partnerships with several smaller staffing and recruitment CRMs that it continues to maintain and develop.
3
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Group Overview
Our strategy
CloudCall’s strategy is built around its belief that communications are significantly more effective when
linked to the data a business holds about its customers and prospects. This data is typically held within a CRM
system. CloudCall has built a cloud-based integrated communications platform which integrates deeply into
CRM systems and which can manage multiple communications channels via a single, intuitive user interface.
An integrated multi-channel communications system such as CloudCall can utilise data stored in the CRM to
improve communications workflows, as well as providing powerful reporting and analytics capabilities to
generate powerful insights for improving performance. CloudCall is architected in a way that enables it to
achieve scale easily through the addition of new communications channels, new features and tools, and new
CRM integrations that can expand its addressable customer base and ultimately lead it into new markets.
The partner and customer-centric growth strategy remains unchanged. The Group grows revenues by
expanding market presence and brand awareness through an increasing number of CRM partner
relationships and building strong commercial relationships with larger customer by serving those customers
with a feature-rich and relevant product that sits at the heart of their business communications needs. This
enables the Group to confidently approach its objectives in order that commercial risks can be contained and
that it has the bandwidth and resources to execute on its plans.
The Group’s core objectives are to deliver strong top-line revenue growth, to continue to drive the business
toward EBITDA break-even, to deliver a high-quality product and customer experience and to encourage a
strong and ethical corporate culture. To achieve these objectives, it focuses its resources as follows:
• Deep focus and stronger relationships with its core CRM partners and where present, their own
partner ecosystems
•
•
•
•
•
Establishing and building strong and mutually beneficial relationships with other CRM partners by
building new integrations that will serve our customers’ needs and marketing those effectively
Focus on larger mid-market customers to drive up average revenues per customer, and to reduce
average customer costs by continuing to improve onboarding processes, lowering ongoing costs of
support per customer and reducing churn rates without compromising on the quality of its service
Focus on strengthening relationships and growing revenues from existing and future enterprise
level customers by expanding CloudCall penetration across their organisations
Focus on developing deep understanding and expertise within its chosen industry verticals, to
ensure CloudCall products and services not only meet, but exceed the needs of those markets
Focus on providing the highest standards of customer service and support to increase customer
satisfaction levels, referenceabilty and brand reputation whilst also reducing churn
• Continuing to develop CloudCall into a market-leading, feature-rich integrated communications
service for CRMs, delivering an exceptional value-adding customer experience, with high availability
and reliability aligned with best-in-class security
•
Fostering a positive corporate culture, investing in staff and building relationships with local
charities and the community in general.
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Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Chairman’s statement
In more normal circumstances I would be pleased to report on another year of solid progress for the business
which saw strong performance across the essential KPIs set by the board and financial results for the year
ended 31 December 2019 which show excellent progress towards the focussed strategic objectives agreed
in the five year plan.
Obviously, the world situation has changed due to the Covid-19 pandemic and as a business our immediate
thoughts are focused on the safety and welfare of our staff, partners and clients. The Board has reacted
swiftly to ensure all our staff are able to work remotely to continue to provide an uninterrupted service to
our clients and partners.
Financial highlights
Total revenues up by 30% to £11.4m compared to £8.8m in FY 2018
•
• Monthly recurring revenues up by 33% compared to FY 2018
•
• Annualised revenue run rate through £13m based on Q4 2019 revenues
•
Total users increased by 35% since 31 December 2018
Strong SaaS metrics
Four Pillars of Growth
During 2019 the business continued to focus its objectives around four key growth pillars:
•
•
•
•
To continue developing relevant new products, services and features for our customers
To deepen relationships with existing partners, while integrating with more recruitment CRMs and
become the “go-to” integrated communications provider for the sector
To expand both our geographic and sector reach
To engage with larger enterprise customers
Good progress was made against each of these growth objectives during the year and will continue to be
the focus as we progress through 2020.
Product Development, Scalability and Customer Retention
The key to long term success in an annuity revenue business is maintaining a high Lifetime Value: Customer
Acquisition Cost ratio, which clearly requires effective sales and marketing, client satisfaction and ongoing
client revenue growth in order to be achieved and maintained. Our own figure of just over 6, together with
our high net renewal rates demonstrates that we are successfully delivering high value, adding new clients
at an effective cost of customer acquisition.
I am pleased to report that the relationship with our key strategic partners has deepened globally during
2019 and is now providing a much higher quality of qualified lead flow. Focus on client satisfaction and client
retention has seen improving metrics in this area and the introduction of new messaging functionality should
provide even more opportunities for enhancing average revenues per user as we move forward. Significant
progress has been made in encouraging key strategic Account Managers and Sales Executives to identify
potential leads from their existing and new clients.
5
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
2019 also saw a more collaborative approach with our leading partners starting to proactively build
opportunities from their own customer base as confidence in the partnership and the platform builds.
In 2019 the board identified that the strategy of expanding globally, working with key strategic partners and
moving the target customer towards the enterprise level would bring the business to an important strategic
crossroads. Following intensive discussions with advisers and shareholders the decision was taken to raise
significant additional equity capital by way of a placing. This placing raised £11.3m net of fees and was
completed in October 2019. This new equity meant the business finished the year with a significantly
stronger balance sheet with cash of £11.1m and an ongoing credit facility of £3.0m.
People
2019 saw few changes at senior management or board level however the planning exercise that preceded
the equity fund raising identified a number of gaps in the management structure and part of the use of funds
from the placing was utilised to make some key hires to strengthen the executive team to provide the
capacity and experience to drive the next level of growth.
Early in 2020 a number of key hires have been announced including a new Chief Technology Officer, a new
Chief People Officer and a new US based Chief Revenue Officer to drive our US revenues and customer
service offering.
I would like to take this opportunity to thank all our staff for their drive and commitment throughout the
year.
Outlook
With a significantly stronger balance sheet and a focussed and demonstrably effective growth strategy, the
business ended 2019 in very good shape and the board is confident that the business is well placed to deliver
long term shareholder value. At the time of writing the Global Coronavirus is spreading rapidly across the
world forcing governments and business to take unprecedented action to contain the spread of infection.
This is resulting in curtailing of international travel, cancellation of trade shows, conferences and large
customer events. The full impact of these measures on new business leads and the subsequent wider impact,
particularly on the recruitment sector if companies slow or freeze hiring of staff are not yet possible to
quantify.
Although the business benefits from strong recurring revenues, high levels of user satisfaction and providing
a product that supports remote working and working from home, it is inevitable that there will be some as
yet unquantifiable impacts as the Coronavirus contagion spreads across the globe.
6
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Through recent reviews of investment plans and operating costs, the Board is confident that the business is
comparatively well placed, supported by the successful recent fund raise, to get back on track when the
current uncertain market conditions abate.
Peter Simmonds
Non-executive Chairman
CloudCall Group plc
7
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Chief Executive’s review
I wrote in my review last year, that 2018 was a year of significant investment in new product and expanding
our sales and marketing capabilities to lay strong foundations for growth in 2019 and beyond, and I plan to
use this opportunity to present the 2019 results which show the results of that investment coming through.
I also wish to discuss how we are planning to use the proceeds of our October 2019 fund raise to capitalise
on the exciting opportunities opening before us.
Covid-19
However, before I do, I should like to comment on the current Covid-19 pandemic and its likely effect on the
Group.
During the first two months of 2020, trading was in-line with expectations, but with the escalation of the
Covid-19 crisis in March and particularly since countries have been going into lockdown, we’ve started to see
some new sales opportunities postponing decisions. This has been partially offset by a flurry of orders from
existing customers preparing for their staff to work from home, but we expect this to be relatively short
lived.
In comparison to many companies CloudCall is well placed to weather this pandemic. Our products and
services are extremely relevant in the current climate, particularly as they allow customers’ staff to work
remotely with full access to systems that they would use in their normal place of work.
Furthermore, as a SaaS company, a significant proportion our revenue is contracted, recurring or repeatable
in nature, thereby providing us with strong forward revenue visibility. SaaS businesses incur the cost of
development and acquisition upfront, but income is spread over the customers’ lifetime. There is therefore
a balance between investing for further customer acquisition, investment in the product, and managing cash
generation or burn.
So, whilst income is relatively predictable, costs, are more flexible. Investment for growth can be slowed or
accelerated relatively quickly as market conditions dictate. This can serve to reduce cash burn as needed and
could be used to push a company to break-even ahead of forecasts. All options, of course, would have an
impact on future growth rates.
In the current medical crisis and with our strong balance sheet, the Board is keen to stand by our excellent
staff as much as possible, but we have already taken numerous measures to reduce both current and
planned cash burn and will continue to monitor the situation closely.
CloudCall is well capitalised and has the ability to flex its cash burn. As the length of the current crisis is
unknown, it’s impossible to accurately predict what our 2020 and 2021 revenues will be, but the Board is
confident that CloudCall has sufficient cash to enable it to trade its way through this period of global
uncertainty.
8
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Performance overview and financial highlights
The performance of the Group in 2019 demonstrates that our “4 pillars of growth” strategy to become the
leading provider of ‘integrated communications’ by continuing to enhance our product, integrate with more
CRMs, expand our geographic reach and engage with ever larger customers is beginning to deliver success
as evidenced by further strong revenue growth.
In numerical terms, growth continues strongly with an overall 30% increase in revenue compared to the prior
year. Behind this headline growth, our core recurring revenue streams grew by 33%, and our US operation
performed strongly, contributing a 50%+ increase in revenue. North America now contributes around 40% of
our overall revenues.
The Company is also pleased to report that our net renewal rate from existing customers remains over 100%,
and this continues to be demonstrably higher where those customers are from the recruitment and staffing
sector, which remains one of several key strategic focus area for CloudCall’s products and services.
The average recurring revenue per user (ARPU) remained constant during the period at approximately £28
per user per month, as discounts on larger customer wins were offset by cross selling additional chargeable
products or services.
The Group also completed an equity fundraise in October 2019, raising net proceeds of £11.3m. As at 31
December 2019, the Group held available cash reserves of £11.1m with a further £2.0m of headroom on its
debt facility still available to be drawn.
Strong growth metrics
As discussed in previous reports, two of the key metrics that we monitor closely are ‘Total Users’ and ‘Net
New User Growth’ which is the number of new users signed-up, less any lost or ‘churned’ users within that
same period. We believe these metrics give a more appropriate basis for calculating future growth and
revenues than simply using an extrapolation of historical income, which can give a distorted view due to
timings.
The total number of users grew 35% to just over 42,300, representing an average net new user growth of 917
per month over the year, a 41% increase over 2018. During H2, an average of 902 monthly net new users were
added compared to 932 in H1. The slightly lower number in H2 was due to no enterprise deals closing in Q3.
However, Q4 recovered strongly and was a record quarter in terms of new orders received and average
monthly net new user growth of 1,162.
It is pleasing to see the further acceleration in Net New User Growth over the course of 2019 and I firmly
believe that this level of acceleration clearly validates our strategy and demonstrates that the investments
we have been making are starting to bear fruit.
9
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
However, the investments being made are targeted to impact growth not just in 2019, but for the years
ahead, and notwithstanding current market uncertainty, I hope to see further acceleration in net user
growth being driven from the four key pillars of our growth strategy set out below.
Total users
Monthly average net user growth
2018
2018
2019
2019
2019
H1
580
H2
724
H1
932
Q3
Q4
643
1,162
Total users at end of period
27,000
31,343
36,936
38,864
42,348
Our ongoing growth strategy
1. Developing relevant new products, features and services for our customers
I previously highlighted the growing importance of messaging within the communications mix and how it
was essential that we developed a messaging service to maintain our competitive advantage. Following the
2018 launch of our Version 1 internal messaging (IM) and SMS services, I was delighted that our product and
development teams were able to exceed expectations by quickly following that with the launch of our 2nd
generation messaging services. This significantly improved user experience by adding new functionality
including the capability for customers to use message templates and to simultaneously send SMS messages
to multiple end users from targeted contact lists built within our partner CRMs and for all messages to
synchronise with CloudCall Go! - our mobile app.
By the end of the period, our messaging services had achieved penetration of just under 8% of our customer
base. Within this, we have seen mixed results by geography with UK uptake lower than expected at 6.6%
due to a general move away from SMS towards other social media channels such as Facebook and
WhatsApp. US uptake on the other hand has exceeded expectations with over 10% uptake by the end of
2019.
In 2020 or early 2021 we plan to significantly strengthen our messaging services with the addition of a number
of social media channels to complement the existing IM and SMS capabilities for true omni-channel
messaging capability. It is anticipated that this will boost penetration, particularly in the UK.
We are also now in the early stages of research and design around work-flow automation, that would allow
customers to build automated massaging and call flows based on triggers and actions from within their CRM.
2. Deepening relationships with existing partners and adding more CRM integrations
In H2 2019, the Company announced several new integrations with other recruitment and staffing CRMs and
is now pleased to see lead-flow and new customer acquisitions from these new partners contributing
towards Q4’s excellent new business bookings. These new CRM partnerships are still in a relatively early
stage and Board expects they will have a greater contribution in 2020 as the relationships develop. Further
10
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
CRM integrations and partnerships continue to be actively worked on, and in February 2020, we were
delighted to announce a new integration partnership with Vincere, a recruitment CRM with more than 1,000
customers from 50+ countries, including a significant presence in the APAC region.
3. Expanding geographic and sector reach
Following the October 2019 fundraise, the Company has invested in the extension of its platform into the
APAC region, further enhancement of its products and services and significant additional sales and
marketing capabilities from which it expects to deliver considerable revenue growth in the years ahead.
We are delighted to report that since the year end, thanks to the excellent work of our engineering teams
enabling our services to be delivered in Australia. Since the year end, our Sydney office is now open for
business and we are pleased to confirm that CloudCall Australia signed its first customer within weeks of
opening. We are really excited by the opportunity that Australia and, in due course, the wider-APAC region
presents and look forward to giving further updates in the future.
4. Engaging with and serving larger enterprise customers
2019 saw a tangible increase in interest in CloudCall’s products and services from large enterprise level
customers with potential user bases ranging from 250 users to multiple thousands. This has been primarily
driven by our growing reputation in the recruitment sector, and our ongoing relationship with our key
partners.
Our decision to open an office in Sydney was in part due to the requirement from some of these enterprise
prospects to have a global solution. There are also a number of our existing large customers that have
openly expressed a desire to expand their CloudCall user base once we are able to serve their global
requirements.
During H1 2019, we were delighted to announce our first major 1,000 users plus win with ACS (American
Cyber Systems). Their 1,850-user deal is now well into the roll-out phase having commenced a little later than
initially planned and is expected to make a significant contribution to revenues in the coming year.
Furthermore, as they have been working through deployment, the opportunity has grown to potentially add
a significant number of additional users and services.
In February 2020, we announced a second major win with Vaco, a global talent & solutions firm with annual
revenues of more than $750 million. The three-year contract will see CloudCall providing its integrated
telephony service to Vaco’s thousand plus employees in quarterly tranches over the coming 18 months. The
extended implementation period for this contract means that the resulting revenues will be spread
throughout 2020 and into 2021.
Engaging with and serving Enterprise level prospects and customers brings with it many challenges and
requires time and patience to build. It is crucially important to approach this opportunity appropriately
resourced to execute effectively and provide appropriate levels of technical and service support. This is one
of the reasons that we raised further funds in October 2019, and we are delighted to be able to continue
investing in building our capabilities whilst already making strong progress.
11
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Our culture
CloudCall’s core values place our staff, customers and local community at the heart of what we do. We
strongly believe that looking after and supporting our staff and the communities that we work in, creates a
strong platform from which to delight our customers. Our strategy is based around a desire to help
customers get more from their commercial data by providing easy to use and powerful communications
tools that are deeply integrated into their CRM systems. To that end, we work hard to ensure that we take
the time to understand our customers’ businesses and pride ourselves on being able to react quickly and
effectively to all their needs. Despite being a technology company, CloudCall prides itself on being a caring,
customer-focused services company first and foremost, and our staff are encouraged and trained to act
accordingly.
Like all businesses, CloudCall operates in an environment that is not free from risks or uncertainties. The
nature and complexity of the services it provides can present technical challenges that carry a certain
element of commercial risk, and the company is naturally exposed to external market, geo-political and
compliance related risks that are not necessarily within its control. CloudCall works diligently to identify,
monitor and mitigate all risks and uncertainties and there is more information about how this is achieved
within the Director’s risk report contained within the Report and Accounts.
The Board is committed to promoting a healthy corporate culture that ensures its staff are motivated,
challenged and happy working together for the mutual benefit of all the Company’s stakeholders. Staff
engagement and ongoing satisfaction levels are routinely monitored through a series of regular one-to-one
meetings and regular company meetings held on a quarterly basis to help to ensure inclusivity and awareness
of company-wide strategy and objectives and our ongoing progress.
Over the year, staff numbers increased from 147 to 160, reflective of the investment we are making in our
product and sales and marketing capabilities and ensuring our back-office processes are improved to
support the business as it scales up. As mentioned above, we continue to focus on creating a caring and
inclusive culture and improvements we have made, and continue to make, in staff mentoring, training and
ongoing support mechanisms are contributory to improved skill levels, higher staff satisfaction levels and
good staff retention. Our charity and community initiatives continue to be highly valued and well supported
by our staff and we remain keen to ensure all staff have equal opportunity to participate in these worthwhile
activities.
As the global climate emergency continues to develop, in 2019, the Group set itself the target of being carbon
neutral within 2 years. Whilst this project is in its infancy, we have already appointed an internal project
manager and identified several staff that are keen to help take this initiative forward. A study of our current
carbon footprint and ways in which this can be improved towards eventual carbon neutrality has been
commissioned and the management team is keen to commit to adopting its recommendations going
forward.
We remain focused on our objective to ensure CloudCall remains a responsible employer, partner and
supplier, creating valuable and skilled jobs and being a caring neighbour and considerate user of resources
wherever it is represented around the world. We continue to believe that success in this area generates
significant benefits for employees, customers, partners and members of our local communities alike.
12
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Outlook
The Group began 2020 well, with key elements of its strategic initiatives making a very positive impact,
resulting in additional lead generation, a strengthening sales pipeline and important investment being made
to strengthen CloudCall’s senior management team.
The Covid-19 pandemic is expected to slow new orders received and inevitably some of our customers will
cease to trade. However, CloudCall’s product is fundamentally suited to the current requirement for home
working and, as a SaaS business with recurring revenues and the ability to flex costs, the Board is confident
that The Group’s strong balance sheet is sufficient to weather this storm.
Simon Cleaver
Chief Executive Officer
Cloudcall Group plc
13
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Key performance indicators
The following Key Performance Indicators (KPIs) are used by the Group to measure progress towards our
core strategic and financial objectives. Where appropriate, employee incentives are directly connected to
these KPIs.
Key Performance Indicators (KPIs)
KPI
Link to strategic goals
Revenue
Growth in revenues, and particularly recurring revenues,
demonstrates effective and targeted new customer
acquisition and greater upsell and retention from existing
customers. Quality and focus within key account and
relationship management, service delivery and customer
support, drives more efficient implementation, reduces
churn and improves customer satisfaction, all of which
contribute to revenue growth.
Gross Margin High gross margins within the Group’s operating units are
indicative of sales of higher value implementation services,
an effective mix of pre-paid vs pay-as-you-go telephony and
messaging services, effective partner management and
effective procurement from upstream telecoms partners.
EBITDA Loss
(excl. Share
Based
Payments
and
Exceptional
Items)
Net Loss
after Tax
For a SaaS business that is investing in new product, sales
and marketing infrastructure, and other improvements to
enable it to scale up, periods of investment in the business
will take operating expenses higher from the point which
that investment takes place until revenue returns begin to
come through. The narrowing losses reported for 2019 are
reflective of revenue growth beginning to come through
from previous investments.
Losses and ultimately profits are reflective of policies
focused on revenue growth, cost of sales efficiencies and
operating expenditure containment or expansion
depending on whether the Company is investing for growth
or managing itself towards profitability. Depreciation,
amortisation, financing costs, taxation and other one-time
non-operating costs will also impact bottom-line
profitability.
31 Dec
2019
Growth in
2019
31 Dec
2018
(restated
for IFRS
16)
£8.75m
£11.40m
30%
78.4%
78.9%
0.5%
(£2.49m)
(£2.16m)
(13.2%)
(£3.12m)
(£2.95m)
(5.7%)
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Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
KPIs (continued)
KPI
Link to strategic goals
Net Cash
absorbed by
Operating
Activities
Cash absorbed by operating activities typically reduces as
revenues outgrow operating costs. Although it should be
noted, that periods of investment to facilitate further
growth will temporarily increase cash burn until revenue
growth catches up.
Cash and
Cash
Equivalents
No of End
Users
Monthly
Recurring
Revenue Per
User (RRPU)
The Group needs to ensure that it has enough cash reserves
to support its operations through to break-even at which
point it becomes cash generative and self-funding. Cash
balances need to be considered in the context of any debt
that may mature during the fiscal period.
User counts are taken at the point an order is signed, and
growth is indicative of both strong sales activity into larger
new clients, as well as successful customer account
management driving uplifts from the current customer
base.
Strength in new product / feature development and
successful upselling from within the existing customer base
and to new customers will drive growth in RRPU over time,
however, this will be naturally diluted as larger customers
negotiate better pricing arrangements, and ongoing
geographic expansion into the US will also dilute as VOIP
costs per user are typically lower in that more mature
market.
31 Dec
2019
Growth in
2019
31 Dec
2018
(restated
for IFRS
16)
(£2.07m)
(£1.91m)
(7.8%)
£0.93m
£11.10m
£10.17m
31,343
42,348
35%
£28.00
£28.00
0%
Avg. Net New
Users per
Month
Improving monthly net new user growth provides a good
indication of improving sales performance from both new
business and existing customer accounts, plus reduced user
losses through better retention and churn management.
652
917
H1 932
H2 902
41%
Avg. Users
Per Customer
Strong average users per customer growth shows clearly
the impact of the strategy to drive the growth of the
customer base towards larger and enterprise customers.
27.0
33.0
22%
Key Performance Indicators - Note
The Board considers the key performance indicators (KPIs) identified above as key to understanding the
performance of the business and reports these KPIs externally as part of its half yearly updates.
15
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Financial review
Revenue
Revenues grew by 30% from £8.8m to £11.4m in
2019
The Group derives all its revenues from the
provision of
integrated communications
software and services to customers in the UK,
mainland Europe and North America. In 2019,
the Group’s North American operation
delivered strong growth with revenues up 56%
to £4.5m (from £2.9m in 2018). The UK and
mainland Europe operation grew by 18% to
£6.9m (from £5.9m in 2018). The Group’s
recently announced new operations in APAC
will begin to contribute revenues in 2020.
Recurring revenue from subscription-based
software services grew by 33%
in 2019
compared to the prior year. Based on an
extrapolation of Q4 revenues, the annualised
revenue run rate is now around £13m.
During 2019, the Group was able to grow recurring revenues from its existing customer base by 19%, which
when offset by customer cancellations and user reductions yielded a net renewal rate of 102%. Strong
recurring revenue growth from new customers during 2019, underpinned by this net revenue growth from
the existing customer base supports the Board’s ongoing view that its strategy to focus on several key CRM
partnerships, as well as investing for growth from both its US new business sales operations, large and
enterprise customers and the ongoing focus on its existing customer base continues to deliver positive
results.
Further analysis regarding revenues can be found in Note 5 to the financial statements.
Gross margin
Gross margin increased from 78.4% in 2018 to 78.9%
Gross margin increased slightly year on year driven by three key factors. Firstly, customer set-up fees, one-
off fees and professional services, which are effectively reported at 100% gross margin, increased year on
year in absolute terms and are the main contributing factors for the overall gross margin increase. Secondly,
hardware sales margins reduced slightly in the year as they continue to be undertaken on an “at cost” basis.
CloudCall is not a pure-play hardware vendor, and for the most part simply looks to use its buying power to
source and supply cost effective hardware on behalf of its customers. Although customers that require
hardware are increasingly able to source that equipment at competitive prices elsewhere, purchasing their
hardware from CloudCall enables it to be configured correctly by CloudCall engineers on installation, and
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Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
returned in the event of any issues. Finally, partner commissions are slightly higher as an overall percentage
of recurring revenues compared to last year as we continue to grow business from our core partner,
Bullhorn, and as the new referral partner program began to establish itself in the latter part of 2018.
Operating costs excluding depreciation, amortisation, share based payments and
exceptional items
Operating costs grew from £9.3m to £11.1m in
2019
Growth in operating expenditure of 19% year-
on-year in the context of a 30% growth in
revenues for the same period is the result of
continued investment in infrastructure and
resources deployed to generate accelerated
revenue growth
in the future. From the
successful fundraise in late 2019, it was clearly
signalled that fresh investment would lead to
greater operating expenditure and operating
losses in the short-term, as the investment
increased
took time to flow through to
revenue.
Reported operating costs should be read in
the context of a further £1.4m (2018: £1.1m) of
costs incurred in the development of new products and services and capitalised to the balance sheet under
IAS 38. The adjusted operating cost including this expenditure would have been £12.6m (2018: £10.5m), an
increase of 20% against the IAS 38 adjusted operating spend in 2018. The increased IAS 38 qualifying
expenditure is reflective of ongoing investment being made in new product development.
Loss from operating activities before depreciation, amortisation, share based payment charges and
exceptional items was £2.2m, down by 13% from £2.5m in 2018.
Research and development costs
Development costs capitalised £1.43m (2018: £1.12m)
Investment in the development of new and improved products, features and applications and the integral
intellectual property of such development work is considered key to the preservation of CloudCall’s
competitive position.
To that end, the Group continues to invest in product development and continued to adopt the accounting
treatment set out in IAS 38 (Intangible Assets) for the ongoing capitalisation of research and development
costs through 2018.
The Group confirms that, as a result of new products coming into service since the policy was implemented,
IAS 38 related amortisation charged in 2019 was £338k (2018: £241k).
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Registered number: 05509873
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Annual Report and Financial Statements
2019
Strategic Report
Further details can be found in Note 11 on intangibles.
Debt and financing expenses
The Group has outstanding debt of £2.4m (2018: £1.6m) and a financing expense of £274k (2018: £227k).
Included in the debt position, is the recognition of a capitalised lease liability worth £1.4m.
During September 2019, the Group replaced its previous revolving credit facility with Barclays with a term
credit facility (the “Facility) with Shawbrook Bank which provides borrowing facilities of up to £3 million for
a 3.5-year term set to expire in March 2023. Interest is set out below as the aggregate of
the margin of 9% plus
•
• higher of LIBOR or 0.5% per annum.
Funds can be drawn in pre-defined tranches as set out by the agreement with interest payable monthly in
arrears. The facility is secured over the assets of the Group.
As at 31 December 2019 the Group utilised £1million of the £3million Facility.
The Board remains committed to maintaining its borrowing facilities going forward and will review the
existing arrangements with a view to renewal or replacement at an appropriate point before the expiry of
the current facility.
As a result of the change in the debt position during 2019 due to the drawing against the Facility and the
effects of IFRS 16, the Group’s net financing expense increased to £274k compared to £227k in 2018. See
Notes 3 & 19 on IFRS 16.
Cash and working capital
The Group had £11.1m net cash at the end of the year (2018: £0.9m).
Available cash, including the Shawbrook Bank facility, was £13.1m on 31 December 2019.
The Group’s balance sheet also includes an R&D tax credit receivable of £0.76m. As has been the case in
recent years, this is expected to be received in cash in June or July 2020.
Net cash absorbed by operating activities was £1.9m, down from £2.1m in 2018. This decrease in cash
absorption is attributed to the slight reduction in Operating Loss during the year.
During 2019, the Group incurred £573k of capital expenditure other than intangibles, down from £880k in
2018. With the adoption of IFRS 16, £124k (2018: £460k) of additions are associated with ‘Right of Use’ assets.
Whilst the Group continues to leverage a greater proportion of web-based service providers such as AWS to
host some of its core technology services, planned capital expenditure was elevated during 2018 due to the
fit-out costs for a new larger office in Minsk, Belarus, and successful hardware refreshes carried out to both
our UK and US technology platforms.
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Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
In February 2019, the Company successfully raised £2.4million in new capital, fulfilled by the issue of
2,400,000 new ordinary shares in the Company, at a price of 100.0 pence per share.
In October 2019, the Company successfully raised £12.1million of additional new capital (before fees and
expenses), fulfilled by the issue of 12,081,685 new ordinary shares in the Company at a price of 100.0 pence
per share.
Share capital
Total issued share capital at the year-end comprised 38,755,839 ordinary shares of 20 pence each.
During the year, the Company received £68k gross proceeds from exercised share options.
In February 2019, the Company successfully raised £2.4million in new capital, fulfilled by the issue of
2,400,000 new ordinary share in the Company, at a price of 100.00 pence per share.
In October 2019, the Company successfully raised £12.1 million of additional new capital (before fees and
expenses), fulfilled by the issue of 12,081,685 new ordinary shares in the Company at a price of 100.00 pence
per share. The fundraise is required to best position the company to exploit and deliver on future revenue
growth through the enhancement of platforms, products & services and greater sales & marketing
capabilities.
Further details can be found in Note 21.
Loss per share and dividends
Loss per share for the year was 10.3 pence (2018: 12.9 pence).
As the business continues to be in a pre-profit, high-growth, investment phase, the Board does not
recommend the payment of a dividend (2018: nil).
Going concern
The Directors confirm that, as disclosed in Note 1 on page 60, they have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable future. For this
reason, they continue to adopt the going concern basis in preparing the financial statements.
19
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Principal risks and uncertainties
The Group is exposed to several potential risks which may have a material effect on its reputation, financial
or operational performance.
The Board is responsible for reviewing risks to ensure that the business is not exposed to unnecessary or
poorly managed risks. The Board continually reviews the risks facing the Group, the suitability and operation
of controls in place to mitigate any potential adverse impacts and satisfies itself that the controls are working
effectively. Whilst review of the risk register is a quarterly scheduled item for the Board’s agenda, the Board’s
consideration of risk matters is not limited to those occasions. Risks and opportunities are factors which are
continually considered when the Board is making decisions about the business and strategy. The executive
management team assists the Board in this process by routinely reviewing the risk register, and the Audit
Committee adds further support by reviewing the effectiveness of internal controls, including financial
controls.
The Board recognises that the nature and scope of risks can change, and it is not possible to identify or
anticipate every risk that may affect the Group, or the materiality of that risk, however, the principal risks
and uncertainties faced by the Group are set out below.
Operational risks
Key areas for on-going operational risk management are:
• Revenues - The business remains in a high growth phase but is still loss-making as it continues to
invest resources to grow to a scale that generates an optimum balance of revenue, cash and
shareholder returns. The prospects for the Group continue to be dependent upon the development
of the revenue model, although this dependency reduces as monthly recurring and repeating
revenues grow to a sustainable level which is above the minimum level of operating costs necessary
to deliver and maintain an effective service. Creating a cash generative business at any point before
the natural break-even point is possible by removing costs prematurely, but to the extent that costs
are curtailed to the detriment of being able to grow sales and revenues, the opportunity cost is a
Company with growth prospects lower than the Board’s more ambitious plans. Through the Group’s
performance dashboards and internal reporting and review systems, the management team
monitors incoming orders and customer account provisioning daily, while net recurring revenue
growth is tracked and analysed regularly throughout each month. The Group keeps its pricing and
sales commission models under constant review, and discounts and requests for credit notes and
account cancellations are monitored and approved on a case by case basis. The Group operates an
effective “At-risk” process for individual customers that may be experiencing issues and will devote
extensive resources to ensuring those customers remain satisfied and on board.
• Business continuity – The Group is dependent on the efficient functioning of its internal systems,
website and customer portals as well as accessibility to the wider internet infrastructure, key
technology partner systems and assets on which they depend. Business disruption contingency
plans are prepared and reviewed, and work continues to improve the resilience of our systems and
core platform. In the event that the Group is unable to gain access to its business premises, then it
has the capability for all staff to be able to work from home, or other remote locations as required,
20
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
and at short notice. Full business operations can be provided by staff working remotely, and systems
and protocols are in place to test these facilities. Whilst the Group insures itself against potential
significant business interruption, it would undoubtedly suffer significant reputational damage and
lose a material number of customers should an event come to pass which caused disruption to its
core services.
•
Staff retention and recruitment – given the importance of know-how, no individual has sole
responsibility for any critical element of the Group’s business, albeit it is recognised that the loss of
certain key personnel would clearly be disruptive to the business. The Group actively works to cross-
skill resources wherever it identifies a single point of failure and continues to make progress in this
regard. Staff retention is encouraged by providing challenging work and projects, enhanced by an
attractive range of staff benefits including competitive salaries, variable pay schemes, share based
incentive plans, health care, pensions, death in service benefits and excellent office locations,
facilities and social events. Staff performance is regularly reviewed, and training, mentoring,
support and career development provided wherever necessary and appropriate.
• Commercial partners (vendors) – the Group has partnerships and agreements with several third
parties. Whilst these partnerships are secured by contracts and in most cases alternative partners
could be found in the short to medium term, a loss of support or disruption of service from any key
partner could have a short-term detrimental impact on CloudCall’s reputation and business. The
Group’s policy is to ensure it only works with recognised industry leading technology partners with
the appropriate resources to provide strong and resilient services with exceptional customer
support. The Group continues to actively monitor its commercial partners, and works with them to
ensure commercial, operational and geo-political risks are minimised.
• Commercial partners (sales) – the Group has partnerships and agreements with several third-party
CRM vendors. Whilst these partnerships are secured by mutually beneficial agreements,
underpinned by appropriate commission and joint marketing arrangements, there remains the risk
that partner relationships could be terminated if alternative unified communications vendors secure
exclusive arrangements with those CRM vendors, or if those CRM vendors elect to develop and
provide their own integrated telephony solution. The Group also recognises the financial risks that
exist should key partners chose to unilaterally change commercial terms on renewal of their
contractual arrangements. The Group continues to actively monitor and strengthen its relationships
with its commercial CRM partners, and works hard to ensure that those relationships are managed
appropriately, are mutually beneficial and that customer expectations are met and exceeded
wherever possible.
Political risks
The Group recognises that it is also at risk of financial, market or personnel losses because of political
decisions or geo-political events. Continuing economic and diplomatic tensions between China and the US,
the ongoing UK Brexit exit terms negotiations with the EU (see Brexit section below) and the yet unknown
impact of Covid-19 to the global economy all present not inconsiderable operational risks. Whilst the Group
cannot necessarily quantify and negate these risks at this point in time, it is fully engaged in active
21
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
conversations with all its stakeholders to ensure minimal disruption to business operations and staff welfare.
To date, the Group’s commercial activities are unaffected by the Brexit issue barring the impact to the value
of sterling as discussed in the currency risk section below. The implications of government policy to protect
citizens from coronavirus by implementing travel bans, work from home requirements and social distancing
have become commonplace and significant as businesses adapt (see Coronavirus section below).
Brexit
Following the UK’s official exit from the EU ("Brexit") on 31 January 2020, the Board has considered whether
this continues to present additional risks to the Group. The impact of Brexit depends on the terms of a future
relationship yet to be negotiated between the UK and EU with final agreement on terms possibly to extend
beyond the expiry of the 31 December 2020 transition period.
While the UK’s exit is now certain, there is still speculation about its exit terms and whether these may have
a negative effect on the UK economy. In the short term the risks associated with the 11-month transition
period are relatively low as the UK continues to follow EU membership rules and in the long-term it is
perceived UK-EU trade talks should reach a favourable outcome. While the Covid-19 epidemic may prolong
the negotiating process, the Board does not foresee Brexit presenting any material risks specifically to the
Group.
With agreed exit terms to follow in December 2020, the post-Brexit legislation between the UK & EU, may
ultimately result in new regulatory, operational, and cost challenges to our UK and global operations. Areas
of business likely to change will be tax, tariffs, import/export requirements and the legal basis of data
transfers between the UK and EU. Brexit is also likely to lead to some short-term volatility in exchange rates.
Considering the size and nature of our trade with EU businesses, we do not envisage Brexit related changes
and volatility having a material negative impact on the Group. As a diligent and prudent Board, we have taken
the following measures to prepare for the potential impacts of Brexit:
• Our legal department (and external lawyers) have carried out a review of Brexit related risks to the
Group and have recommended adjustments that may be needed to make to our corporate
structure, policies and procedures, data transfers to and from the EU, and contractual instruments
to mitigate the impact of these risks; and
•
To mitigate the potential impact on the Group from Brexit related volatility in exchange rates, we
will continue to follow prudent and proactive currency management practices, in the best interests
of the Group.
The Group acknowledges it has a resilient business model, with a large percentage of recurring revenue
providing certainty over our performance in the medium term. As the majority of the Group’s sales are within
the USA and the UK and likely to grow further in these areas, sales will not be significantly impacted by any
Brexit related legislative or regulatory changes referenced above.
In summary, we have considered the potential effects of Brexit on the future performance of the Group and
have not identified any material/specific risks to the Group. If Brexit causes an economic downturn, the
22
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Group has a resilient business model, with our product/services very likely to remain in high demand by our
customers and should enable us to continue our future growth journey.
The Board will continue to monitor the Brexit situation very closely and will take the necessary actions once
the final EU exit arrangements have been confirmed.
Coronavirus.
The impact of the coronavirus (Covid-19) outbreak and the speed of transmission around the globe is causing
extensive disruption to businesses of all nationalities. Whilst, at the time of writing, the outcome and impact
of the coronavirus pandemic is relatively unknown, the Group does acknowledge it carries significant
financial and operational risks over the short to medium term. Risks are perceived to exist in the Group’s
dealings with various stakeholders, but primarily its’ employees and customers and mitigating actions being
taken by the Group are as follows:
• Proactively implementing proportionate plans to minimise the risk of an outbreak at our office
locations, keeping employees and customers safe. At the same time, continuing to support our
customers by working hard to minimise any disruption to service and to ensure they are getting the
full benefits of CloudCall’s integrated communications services for remote working where
applicable.
• Marketing trade show events being cancelled or postponed. Our operations are remaining close to
the guidance provided by local event organisers and respective guidance from local authorities.
•
•
•
Sales and support access to client premises and larger enterprise client and prospect meetings being
replaced by tele-based delivery.
Employees to avoid non-essential travel and restricting travel entirely to or from the most affected
areas. Regular communications are issued by management with correct protocol to follow with
updates on high and medium risk affected countries.
Ensuring all staff have the capability to work from home and are given appropriate support, training
and equipment to facilitate this.
• Reviewing investment decisions, discretional costs and taking the necessary steps to ensure that
the Group has sufficient cash reserves to withstand a potential drop in sales in the short to medium
term, (see Note 1 on page 60).
• Reviewing credit control protocols to ensure customers suffering from temporary financial hardship
can continue to receive CloudCall services and that customer indebtedness is managed proactively
and sympathetically.
The Group is monitoring the development of the coronavirus very carefully, its impact to global markets and
is committed to taking appropriate contingency actions by location and country according to guidelines
issued by the WHO and local governments.
23
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Financial risks
The major financial risks faced by the Group are liquidity risk, market risk, currency risk, credit risk and
interest rate risk. The Board regularly reviews these risks and approves policies covering overall risk limits
and the use of financial instruments where appropriate to manage financial risk.
Liquidity risk
The key liquidity risk facing the Group continues to be the sufficiency of working capital to continue with its
investment plans until cash break-even is reached. The Board has detailed approved budgets, investment
plans and rolling business forecasts, including cash flow projections, which it keeps under regular review, at
least monthly, to ensure the adequacy of working capital at all times. Furthermore, in mitigation, the Board
recognises that growth-related expenditure can be turned off sufficiently quickly without necessarily
impacting revenues in the short term, thereby reducing cash burn quickly and potentially returning the
Group to cash positive operating relatively quickly.
During 2019, the Group replaced its previous revolving credit facility with Barclays with a £3.0m term credit
facility (the “Facility”) with Shawbrook Bank. Interest on any funds drawn down from the Facility, which is
for a 3.5year term expiring in March 2023, is set at 9.0% plus the higher of either LIBOR or 0.5% per annum.
At 31 December 2019, the Group has utilised just under £1 million of the £3 million Facility. The Facility is
secured over the assets of the Group.
Market risks
The market sector the Group operates in is competitive. The impact of competitors having more features,
increased financial backing, better brand recognition and better global coverage increases the risk to the
Group’s business model.
The Group continues to grow revenues year-on year and is investing to deliver new product features,
industry sector expertise, best-in-class customer support and service offerings, enhanced brand recognition,
best in class employee benefits, improved service delivery and global expansion to attract new customers
and to protect its key employees from competitor approaches.
Currency risk
The greater part of the Group’s revenues and costs are denominated in sterling; however, the Group is
exposed to foreign exchange risk, principally through balance sheet translation and cash flows incurred in
US dollars by the Group’s US subsidiary as it continues to grow. The foreign exchange risk is partly
addressed by matching income and costs denominated in US dollars monthly, although as the value of the
inter-company payable between Cloudcall, Inc. and its parent Cloudcall Limited continues to grow, it
becomes ever more sensitive to FX movements between USD and GBP on translation. Management closely
monitors exchange rate fluctuations and will use forward contracts when considered appropriate to reduce
this risk.
24
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Strategic Report
Credit risk
The Group’s billing cycle ensures minimal credit risks as the clear majority of customers pay monthly via direct
debit or recurring credit card authority which minimises the amount of credit outstanding. As our customers
increase in size, there is more tendency for them to require monthly billing to account, which increases the
risk of delayed payments and subsequent credit control activity. Each customer account has an individually
assigned credit limit which, if breached, results in suspension of service until the account is paid or revised
credit agreed. There were no balances representing over 10% of the total trade receivables at the year end.
As at 31 December 2019, the Group’s funds were held at Barclays Bank (“A”- rated).
Interest rate risk
Under the new term credit facility agreement with Shawbrook Bank, the Group is exposed to interest rate
risk such that a change in the UK base rate of interest will directly increase or decrease the interest payable
on any funds drawn down under the terms of the Facility, although the Board notes that this impact is not
expected to be material.
By order of the board
Simon Cleaver
Chief Executive Officer
Paul Williams
Chief Financial Officer
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Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Governance Report
Corporate Governance Statement
This statement has been written by the Chairman of the Board of Directors of CloudCall Group plc.
CloudCall Group plc’s adherence to the QCA Code supports its long-term success:
The Company’s shares are listed on the AIM market of the London Stock Exchange. The Company is subject
to the AIM Rules and consequently is required to comply with an appropriate corporate governance code.
The Board confirms that CloudCall Group plc adheres to the Quoted Companies Alliance Corporate
Governance Code (“QCA Code”) by complying with the QCA Code’s ten corporate governance principles.
Such adherence to the QCA Code ensures that the Board properly and efficiently manage, steer, govern and
make key decisions in respect of the operations and strategy of CloudCall Group plc. This supports CloudCall
Group plc’s medium and long-term success and also ensures that it produces long term benefits for its
shareholders. Such adherence to the QCA Code also supports CloudCall Group plc’s long-term success by
reducing risk and adding value to the business.
Deviations from the QCA Code:
CloudCall Group plc adheres to the QCA Code by complying with the QCA Code’s ten corporate governance
principles. CloudCall Group plc does not deviate from the QCA Code.
The roles/responsibilities of the Chairman and the Chief Executive Officer in respect of
Corporate Governance:
The Chairman’s role is to lead the Board of Directors. He is not responsible for executive matters regarding
CloudCall Group plc’s business. The Chief Executive Officer is the only executive who reports to the
Chairman.
The Chief Executive Officer is responsible for all executive management matters affecting CloudCall Group
plc and senior members of the executive management team report to him.
Principal responsibilities:
The Chairman’s principal responsibility is the effective running of the Board and overall stewardship of the
business. He ensures the Board plays an effective and constructive part in the development of CloudCall
Group plc’s strategy and objectives.
The Chief Executive Officer’s principal responsibility is the running of CloudCall Group plc’s business and
leading the implementation of its strategy. He is responsible for:
• developing CloudCall Group plc’s strategy and overall commercial objectives for recommendation
to the Board; and
•
implementing the decisions of the Board and its Committees
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Annual Report and Financial Statements
2019
Governance Report
Other responsibilities of the Chairman include:
• Running the Board and setting Board agendas, ensuring that the important issues facing CloudCall
Group plc and the concerns of all Board members are considered
•
•
•
•
Ensuring informal meetings of the Directors take place, including meetings of the Non-Executive
Directors without Executive Directors present, as required to ensure that sufficient time and
consideration is given to complex, contentious or sensitive issues
Succession planning for Board appointments to retain and build an effective and diverse Board and
proposing the membership of each Board Committee
Identifying any development needs of individual Directors and of the Board as a whole
Ensuring that the performance of the Board as a whole, its Committees, and individual Directors is
evaluated at least once a year.
• Undertaking the performance appraisal of the Chief Executive Officer
• Providing input to the Board evaluation process
• Promoting high standards of integrity, probity and corporate governance throughout CloudCall
Group plc and particularly at Board level
Other responsibilities of the Chief Executive Officer include:
• Making proposals for the Board agendas and maintaining a dialogue with the Chairman on
important strategic issues facing CloudCall Group plc
•
Ensuring that the Board receives accurate, timely and clear information on:
o CloudCall Group plc’s performance;
o
o matters reserved to the Board for decision
issues, challenges and opportunities facing CloudCall Group plc; and
•
•
•
•
•
•
•
Ensuring that the executive team gives appropriate priority to providing reports to the Board which
contain accurate, timely and clear information
Ensuring that the Chairman is alerted to emerging complex, contentious or sensitive issues affecting
CloudCall Group plc of which he might not otherwise be aware
Supporting the Chairman in relation to succession planning particularly in respect of Executive
Directors
Ensuring members of the Board develop an understanding of the views of the major investors in
CloudCall Group plc
Leading the communication programme with shareholders
Supporting an appropriate induction programme for new directors, facilitated by the Company
Secretary
Ensuring appropriate management time is made available for the induction process
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•
Ensuring that the development needs of the Executive Directors and other senior management
members are identified and met
• Promoting, and conducting the affairs of CloudCall Group plc with high standards of integrity,
probity and corporate governance
Key governance matters of CloudCall Group plc during 2019:
The key governance matters that have occurred in respect of CloudCall Group plc during 2019 are:
• Cloudcall Group plc appointed Canaccord Genuity Limited as its new Nominated Adviser and Broker
in 2019.
• CloudCall Group plc appointed an in-house commercial lawyer during 2018 within the Group. During
2018 Cloudcall Group plc also appointed this lawyer as data protection officer within the Group.
Among many other duties and areas, this lawyer has continued throughout 2019 to help, advise and
support CloudCall Group plc in respect of its compliance with the QCA Code and corporate
governance rules generally. External professional advisors have, at CloudCall Group plc’s expense,
continued throughout 2019 to assist this lawyer in doing this. This lawyer also advises the Board and
CloudCall Group plc more generally in the following areas: contracts with third parties (customers,
suppliers, partners etc.), commercial/corporate law, intellectual property law, employment law,
dispute resolution, and compliance with applicable regulations and laws (e.g. data protection). This
lawyer’s role as an employee within the Group assists the Board to more accurately, quickly and cost
effectively identify, assess and reduce legal and commercial risks to the Group’s long-term success.
Part of this approach involves this lawyer’s legal scrutiny of and commercial input into the business’
short, medium and long-term commercial plans that are put before him from time to time.
s.172 Companies Act 2006 statement:
Throughout this annual report and the corporate governance web page on our website, we provide
examples of how we:
Take into account the likely consequences of decisions in the long term;
•
• Have regard to the interests of the Company's employees;
• Understand the need to foster the Company's business relationships with suppliers, customers and
others;
• Understand our impact on our local community and the environment;
•
Take into account the desirability of the Company maintaining a reputation for high standards of
business conduct; and
• Have regard to the need to act fairly.
This statement should be read in accordance with the strategic report (see pages 5 to 25), this governance
section and the corporate governance web page on our website. Section 172 of the Companies Act 2006
requires Directors to consider the interests of stakeholders as part of their decision-making process. The
Directors continue to consider the interests of its employees and stakeholders as part of their decision-
making process, including the impact of its decisions on the community, the environment and the reputation
of the Company. The Directors assess and take into account what is most likely to promote the success of
the Company for its members in the long term. This assessment is carried out in good faith and fairly.
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The Directors continue to promote the success of the Company in accordance with section 172 of the
Companies Act 2006. The Directors are fully aware of their responsibility to promote the success of the
Company in this manner.
The Board often reviews and reflects on how the Company engages with its stakeholders. The views of the
stakeholders are regularly communicated to the Board by Company management and via direct engagement
with stakeholders. Within this Governance section, under Relations with shareholders and within the
corporate social responsibility section, we set out our principal stakeholders, how we engage with such
stakeholders, and the purposes and benefits of doing so. Our stakeholders are also identified on our website
www.cloudcall.com/investor/governance.
The Board continues to strive for improvements in its engagement with Company staff. In 2019 the Board
procured the advice of a specialist HR consultant regarding the Company’s HR systems and processes
(including employee engagement). Based on this advice (and other factors), the Board decided that the
Company would search for, recruit and appoint a Chief People Officer (who will form part of the Group’s
Executive Management Team) and other additional HR/Recruitment staff to strengthen the Company’s HR
systems and processes (including employee engagement). This is an important strengthening of the
Company’s HR function which is intended to provide robust, scalable and appropriate internal systems and
processes necessary to properly support the Company’s growth and long-term success from a workforce
perspective.
The Company’s in-house commercial lawyer inserts a written reminder of the section 172 duty within relevant
materials relating to Board meeting agendas. This helps to remind and encourage the Board to consider
stakeholder views and interests as part of the decision-making process. The Company’s in-house commercial
lawyer shall continue to be on hand to offer advice and guidance to the Board to help ensure that sufficient
consideration is given to stakeholder issues in accordance with section 172 requirements.
Internal control
The Board has overall responsibility for the Group’s system of internal control and for reviewing its
effectiveness. The processes to identify and manage the key risks of the Group are an integral part of the
internal control environment. Such processes, which are regularly reviewed and improved as necessary,
include strategic planning, review and approval of annual budgets, regular monitoring of performance
against budget (including full investigation of significant variances), control of capital expenditure, ensuring
that proper accounting records are maintained, the appointment of senior management and the setting of
high standards for health, safety and environmental performance.
The effectiveness of the internal control system and procedures is monitored regularly by management, the
results of which are reported to and considered by the Audit Committee. The system of internal control
comprises those controls established to provide assurance that the assets of the Group are safeguarded
against unauthorised use or disposal and to ensure the maintenance of proper accounting records and the
reliability of financial information used within the business or for publication. Any system of internal control
can only provide reasonable, but not absolute, assurance against material misstatement or loss, as it is
designed to manage rather than eliminate the risk of failing to achieve the business objectives of the Group.
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Relations with regulatory bodies
The Group sets out to ensure that it is aware of, and take steps to comply with, relevant laws, policies, and
regulations at all times. Where this is necessarily complex, such as in the field of telecoms compliance or
international taxation, the Group will employ the services of specialist advisors to support it.
Relations with shareholders
The Company encourages two-way communications with all its shareholders and responds quickly to all
requests or queries received. Communication is primarily through the Company’s website and the Annual
General Meeting which shareholders are encouraged to attend and where participation is encouraged so
that the Board may answer questions. All shareholders have at least twenty-one clear days’ notice of the
Annual General Meeting. All shareholders will receive a copy of the Annual Report (electronic or hard copy
depending on shareholder preference) and an interim report at the half year will be available on the
Company’s website.
In addition, the Company delivers its Annual and Interim results via a webinar which is open to all
shareholders.
A copy of the Company’s latest investor presentation can be located on the Rule 26 page which can be found
in the Investor Relations section of the Company’s website www.cloudcall.com/investor/rule26/.
Corporate social responsibility
The Group strives to ensure that its business activities positively benefit all stakeholders by committing to
conduct its business in a fair and responsible manner, to treat its employees fairly, supporting personal
growth and development, and to have a positive impact in its local community.
Customers
The Group strongly values its customers and seeks to deliver a world-class product backed by class-leading
customer service and support. The Group routinely seeks customer feedback and performance appraisal
inputs and takes active steps to remedy any instances of customer dissatisfaction.
Key customers are also routinely invited to provide product improvement inputs, and in some cases to test
key features or functionality prior to general release.
The Group commits to provide a fair and transparent pricing structure so that customers can be confident
that the Group’s core software and telephony services are providing cost effective
integrated
communications.
Employees
The Group is an Equal Opportunity Employer and its policy is to ensure that all employees and job applicants
will be given equal opportunities in all aspects of employment and training irrespective of their gender,
ethnic origin, disability, age, marital status, sexual orientation or religious affiliation (and/or any other
protected characteristics under relevant legislation). Cloudcall encourages, where possible, the employment
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of disabled people and the retention of those who become disabled during their employment with the
Group.
The Group recognises the benefit of involving employees in target setting and keeping employees informed
of progress. Due to the size of the Group, regular consultations with senior management take place. The
views of employees are considered when making decisions which are likely to affect their interests. CloudCall
Group plc ensures that it communicates clear and appropriate policies to employees setting out data
protection rules, anti-bribery rules, anti-bullying/harassment rules and anti-discrimination rules and codes of
conduct. CloudCall Group plc are currently in the process of updating and issuing more formal and
comprehensive versions of such policies. The Board regularly reviews, considers and updates the salaries,
benefits and support offered to the Group’s employees. This aim of this is to ensure that the staff with the
appropriate experience and skill to add value to the business and drive its long term success are attracted to
the business and then retained. In addition, this approach by the Board aims to ensure that staff are provided
with the appropriate environment and rewards to remain motivated and enabled to produce the best
possible output and add the maximum possible value to CloudCall Group plc.
Communities
The Group participates in various charitable activities in the communities in which it operates. Whilst it is not
Group policy to make direct financial contributions to charities, Group employees are actively encouraged to
annually take two additional paid leave days each and donate them for the support of charitable projects in
the community. The Group partners with charities local to the various Group office locations, who act as
facilitators for these activities.
Environmental
Towards the end of 2019, the Board approved and initiated a project for the Group to become carbon neutral
and has designated a member of staff responsible for leading this long-term project to a successful
conclusion. This project will involve an in-depth review, analysis and evaluation of the carbon emissions of
the Group, followed by the implementation of appropriate changes in policies, procedures and systems to
enable the Group to strive towards its aim of obtaining and maintaining a carbon neutral status. The Group’s
current approach to the business/work related travel activities of its staff is likely to be the main area
targeted by this project, along with the way in which such activities are recorded and reported. This project
demonstrates the Board’s awareness of and regard for the Group’s impact on the environment and the
Board’s intention to ensure that the Group reduces, as much as is reasonably possible, any negative impact
of the Group’s operations upon the environment.
The Board
The Company’s Board of Directors is comprised of 2 Executive and 3 Non-executive Directors. All Directors
recognise the need to commit sufficient time to fulfil the role. This requirement is included in their letters of
appointment. The Board is satisfied that the Chairman and Non-executive Directors are able to devote
sufficient time to the Group’s business.
The Board reviews its AIM obligations with its Nominated Advisor annually, and endeavours to keep up with
best practice governance via seminars, conferences and training material.
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The role of the Board
The Board of Directors is responsible for formulating, reviewing and approving the Group’s strategies,
budgets and corporate actions.
The Board has overall responsibility for risk management and internal controls and is supported by the Audit
Committee.
The Board meets regularly, and seventeen Board Meetings were held in 2019. The Board has a formal
schedule of matters referred to it for decision; these include:
• Approval of the Company’s overall commercial strategy and a review of progress to date;
•
Financial matters including the approval of budget and financial plans, changes to the Group’s
capital structure, major investments such as capital expenditures, acquisitions and disposals;
•
Stock Exchange related issues including the approval of communications to the Stock Exchange;
• Meeting Companies Act requirements including the approval of financial statements, dividends and
changes in accounting practices and policies;
• Other policy matters including health and safety, declarations of interest and operational controls.
Each member of the Board of Directors was in attendance for all Board meetings held in 2019.
Operational control is delegated by the Board to the Executive Directors. Non-Executive Directors are in
regular communication with the Executive Directors.
All the Directors have direct access to the advice and services of the Company Secretary and can take
independent advice if necessary, at the Company’s expense.
The Company maintains liability insurance for the Directors and officers of all Group companies.
Board Advice
Except for the advice from the Group’s external auditors detailed throughout this report and the advice from
the Group’s external Company Secretary taken from time to time, the Board and its committees sought
external advice on the following matters (both significant and non-significant) during 2019:
Investor relations matters
• Debt structuring
•
• US telecoms regulatory landscape and ongoing compliance
•
• Brexit
•
•
Employee share schemes
Expansion of Group operations into Australia; and
Improving and strengthening the Company’s HR systems and processes (including employee
engagement).
The Board benefits from internal advice and support from the following individuals:
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•
•
•
The Group’s Chief Technology Officer advises and supports the Board in respect of data protection
and information security (among other technology and systems related matters).
The Group’s Non-Executive Directors (as identified in the “Director profiles” section of this report)
advise and support the Board from their independent points of view in respect of various relevant
matters.
The Group’s Head of Legal (who is a practising Solicitor) advises and supports the Board in respect
of various legal issues, including: commercial, contract, corporate, employment, data protection,
regulatory, compliance, intellectual property and dispute resolution. The Head of Legal also acts as
the Group’s Data Protection Officer.
Board Performance
The Board evaluates its own performance annually via the following process:
The Chairman issues a questionnaire to each Board member for them to complete and return to the
Chairman. The results of this questionnaire are then issued by the Chairman to an external and independent
third party. Such third party then analyses the questionnaire results and produces a summary of the results
to the Board, including that third party’s recommendations as to what actions the Board should take in light
of the results. This questionnaire sets out questions for each Board member (including the Chairman) to
answer which are relevant to the Board’s performance in a particular period. In response to each question
each Board member inserts a rating (1 to 5) and, where they feel appropriate, any comments/measures which
relate to what the business/Board are doing in respect of that question. The “1 to 5” rating for each question
works as follows:
5 = fully satisfactory / very good;
4 = generally satisfactory / good;
3 = satisfactory more often than not / average;
2 = occasionally satisfactory / below average; and
1 = very rarely satisfactory / poor.
The criteria against which the Board evaluates itself, as covered in the said questionnaire, can be summarised
as follows:
(1) the Board’s supporting and setting of CloudCall Group plc’s strategy;
(2) the quality and robustness of the Board’s discussions;
(3) the Board’s ability to make objective decisions collaboratively;
(4) the Board’s effective communication with stakeholders of CloudCall Group plc;
(5) each Board member’s understanding of (and ability to carry out) their role;
(6) the effective decision making, teamwork and constructive debate through the Chairman’s
leadership;
(7) whether the Board work well as a team and whether their skills complement each other;
(8) whether all Board members attend and actively contribute to Board meetings;
(9) whether the Board is the right size and contains the right mix of skills to optimise its
performance;
(10) whether the Board’s committees fully and properly perform their roles;
(11) whether the Board meets regularly enough to ensure relevant issues are appropriately covered;
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(12) the effectiveness of the Board’s use of the annual general meeting;
(13) each Board member’s individual commitment, contribution, and performance;
(14) the succession planning in place for the Board members; and
(15) whether the contribution of the non-executive directors and the executive directors is effective.
The results and recommendations arising from the Board’s evaluation of itself during 2019 are as follows:
• All Board members completed the questionnaire as requested;
•
The average score given by the Board members in response to each question showed an overall
positive self-assessment of the Board’s performance; and
• Recommended areas of improvement for the Board were provided by the independent third-party
analyser of the questionnaire results. These recommendations were predominantly focused on
succession planning, improving the Board’s own internal performance evaluation and target setting
improving
process, making more use of CloudCall Group plc’s Annual General Meeting,
communications with internal stakeholders, and improving the Board’s own meeting materials and
meeting management. The 2019 evaluation indicates that there has been improvement in most of
these areas in comparison to 2018, although the Board continues to plan and strive to implement
further improvements in these areas. Additionally, the 2019 evaluation indicated that, although the
Board’s approach to risk is viewed as appropriate, the Board recognise that further formalisation of
risk management processes may be beneficial and plan to implement measures to further improve
this area.
The succession planning for appointments to the Board (and the processes to determine appointments to
the Board) is carried out in the following way:
•
•
•
The Board carry out ongoing assessments as to the succession needs and planning of the Board.
Such assessments include reviewing the structure, size and composition (including the skills,
knowledge and experience) required of the Board compared to its current position;
Such succession planning involves identification and nomination of candidates to fill Board
vacancies as and when they arise; and
Following such assessments and planning, Board members are then appointed and/or removed in
accordance with CloudCall Group plc’s articles of association.
The Board of Directors
The experience/skills/capabilities of each of the Directors is summarised below within the “Director Profiles”
section of this report. The “Director Profiles” section of this report demonstrates that the Board contains
Directors who have the necessary experience/skills/capabilities to deliver the strategy outlined throughout
this report for the benefit of the shareholders.
The Board of Directors currently consists of two Executive and three Non-Executive Directors. The Directors
believe the Board provides an appropriate balance of skills and that it uses them effectively to provide
leadership to the Group.
The Directors who held office during the year were as follows:
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Appointed / Re-elected
Resigned
Peter Simmonds
Simon Cleaver
Paul Williams
Andrew Jones
Sophie Tomkins
Gary Browning
25 November 2019
Gary Browning, retiring by rotation, will offer himself for re-election at the forthcoming AGM.
Director profiles
CloudCall Group plc currently has two Executive Directors. These are: Simon Cleaver (Chief Executive Officer)
and Paul Williams, (Chief Financial Officer). Operational control of CloudCall Group plc is delegated by the
Board to these Executive Directors.
CloudCall Group plc currently has three Non-Executive Directors who are all considered to be independent
of CloudCall Group plc. These are: Peter Simmonds (Non-Executive Director and Chairman), Sophie Tomkins
(Non-Executive Director and Chair of the Audit Committee), and Gary Browning (Non-Executive Director and
Chair of the Remuneration Committee). These Non-Executive Directors are in regular communication with
the Executive Directors.
Executive Directors are subject to the Group’s performance review process through which their
performance against predetermined objectives
is reviewed and their personal and professional
development needs considered. It is intended that an annual performance appraisal of Non-executive
Directors will be undertaken by the Chairman as part of the Board evaluation process, at which time any
training or development needs will be addressed.
Peter Simmonds, 61
Non-Executive Chairman
Peter is a Chartered Certified Accountant, who retired from the role of CEO of dotdigital Group plc in June
2015 after 8 years. He has 35 years of experience at senior management and board level, principally in the
areas of banking, insurance, finance, information technology and outsourcing. He has considerable business
entrepreneurial experience having been involved at start-up or early stage of several companies in various
industry sectors including consultancy services, vehicle leasing, computer software and internet solutions
sectors. He is currently Chairman of D4T4 plc, and on the board of the Quoted Companies Alliance.
Simon Cleaver, 59
Chief Executive Officer
Simon is a highly experienced and passionate tech-focused entrepreneur with a history of successfully
building and developing companies in both the private and public arenas. As CEO, Simon has led CloudCall
to continued year on year turnover growth, with run-rate revenue now reaching £13m p.a. Employing more
than 160 people in four countries, CloudCall is now a business recognised as one of the fastest growing tech
companies in the UK.
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Paul Williams, 50
Chief Financial Officer
Paul Williams is a Chartered Management Accountant with over 25 years’ experience in the technology
services sector, having worked previously for IBM, ECsoft Group plc and Ciber as Group Financial Controller
and Interim International CFO. Paul has significant start-up, M&A, business operations, IT BPO, controlled
audit and successful corporate ERP system implementation experience. During his tenure at Cloudcall, Paul
has been instrumental in driving scalable investment, routines and governance to facilitate rapid growth
with financial control.
Sophie Tomkins, 50
Non-Executive Director
Sophie is a qualified Chartered Accountant, with nearly two decades as a stockbroker, starting at Cazenove
& then at the more entrepreneurial Collins Stewart, and Fairfax, where she ran a highly profitable operating
division. Sophie sits on the Board of several AIM listed companies. She is Non-Executive Director and Audit
Committee Chair of both Hotel Chocolat Group PLC (retail and manufacturing) and System1 Group PLC
(market research & advertising). Sophie is also Chair of the Remuneration Committee and Senior
Independent Director at Proactis Holdings PLC (Spend management and B2B e-commerce software).
Gary Browning, 59
Non-Executive Director
After a career leading, building, and acquiring companies, Gary, who is experienced in both corporate
transformation work and M&A, is now advising both public and private companies on that journey.
Gary has extensive experience working at board level within Plcs. After joining Penna Consulting Plc in 2002
he was appointed to the board as Chief Executive in 2005. Gary stepped down as Chief Executive in August
2016 after successfully negotiating the sale of the company to Adecco. His earlier career included 12 years
with the WPP Group where, from 1997 to 2002, he was Group Managing Director of BDG McColl Ltd, a brand
communications consultancy employing 200 people.
Gary has run HR consultancy and recruitment businesses and personally consults on a wide range of talent
management issues. Gary is a member of the Institute of Chartered Accountants in England and Wales, has
sat on the Investors in People UK Human Capital Management standards group board, and qualified with
KPMG having studied for his degree at Warwick University.
Board committees
The Board operates 2 committees in order to conduct its stewardship of financial performance and reporting
and Director remuneration. The Audit Committee and Remuneration Committee Reports for the year ended
31 December 2019 can be found below.
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Audit Committee Report
The Audit Committee is responsible for ensuring that the financial performance of the Group is properly
reported and reviewed. Its role includes monitoring the integrity of the financial statements (including
annual and interim accounts and results announcements), reviewing internal control and risk management
systems, reviewing any changes to accounting policies, reviewing and monitoring the extent of the non-
audit services undertaken by external auditors and advising on the appointment of external auditors. The
Audit Committee is monitoring the significant changes coming into effect in 2020 with regard to provision
of non-audit services and will implement accordingly.
Members of the Audit Committee
The Committee consists of three independent Non-executive Directors: Sophie Tomkins (as Chair), Gary
Browning and Peter Simmonds. All three are independent Non-Executive Directors. Paul Williams, Chief
Financial Officer routinely attends the Audit Committee meetings by invitation, but other Executive Directors
or members of the management team may also be invited to attend meetings as required. The Non-
Executive Directors are provided an opportunity at the Audit Committee meetings to discuss matters with
the Auditors without the presence of the Executive Directors. The Board is satisfied that the Chair of the
Committee has recent and relevant financial experience. The Committee meets at least twice a year and
more frequently if required and has unrestricted access to the Group’s auditor. During 2019, two meetings
were held, and each member of the Committee was in attendance for both meetings.
Sophie is a Chartered Accountant and is also Chair of the Audit Committee at both Hotel Chocolat plc and
System1 Group plc. Sophie will report the Committee’s deliberations at the next Board.
Duties
The main duties of the Audit Committee are set out in its terms of reference, which are available on the
Group’s website (www.cloudcall.com/investor/governance/).
The work carried out by the Audit Committee during 2019 comprised the following;
Ensuring the financial performance of the Company is being properly measured and reported on;
•
• Review of the FY19 audit plan and audit engagement letter;
• Consideration of key audit matters and how they are addressed;
• Review of suitability of the external auditor;
• Review of the financial statements and Annual Report;
• Consideration of the external audit report and management representation letter;
• Going concern review;
• Review of the risk management and internal control systems;
• Meeting with the external auditor without management present;
• Review of antibribery policy and arrangements.
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Role of the External Auditor
The Audit Committee monitors the relationship with the external auditor, RSM UK Audit LLP, to ensure that
auditor independence and objectivity are maintained. Noting the tenure of RSM UK Audit LLP, the
Committee will keep under review the need for external tender. As part of its review the Committee
monitors the provision of non-audit services by the external auditor and also advises the Board on their fees.
The breakdown of fees between audit and non-audit services is provided in Note 6 of the Group’s financial
statements. The non-audit fees primarily relate to tax advice for the Group, preparation of financial
statements and specific advice relating to new accounting policies to be adopted. The Audit Committee also
assesses the auditor’s performance. Having reviewed the auditor’s independence and performance, the
Audit Committee recommends that RSM UK Audit LLP be reappointed as the Group’s auditor at the next
AGM.
Audit Process
The auditor prepares an audit plan for the review of the full period financial statements. The audit plan sets
out the scope of the audit, areas to be targeted and audit timetable. This plan is reviewed and agreed in
advance by the Audit Committee. Following the audit, the auditor presented its findings to the Audit
Committee for discussion. No major areas of concern were highlighted by the auditor during the period,
however areas of significant risk, such as Covid-19, and other matters of audit relevance are regularly
communicated.
Internal Audit
At present the Group does not have an internal audit function and the Committee believes that management
is able to derive assurance as to the adequacy and effectiveness of internal controls and risk management
procedures without one.
Risk Management and Internal Controls
As described throughout the Annual Report and the Corporate Governance section of the Group’s website
(www.cloudcall.com/investor/governance/), the Group has established a framework of risk management
and internal control systems, policies and procedures. The Audit Committee is responsible for reviewing the
risk management and internal control framework and ensuring that it operates effectively. During the
period, the Committee has reviewed the framework and the Committee is satisfied that the internal control
systems in place are currently operating effectively.
Anti-bribery & Whistleblowing
The Group has in place an anti-bribery and anti-corruption policy which sets out its zero-tolerance position
and provides information and guidance to those working for the Group on how to recognise and deal with
bribery and corruption issues. The Committee is comfortable that the current policy is operating effectively.
The Group also has in place a whistleblowing policy which sets out its zero-tolerance position and provides
employees with an avenue to raise concerns internally and receive feedback on any action taken. It allows
employees to pursue the matter further if they are dissatisfied with management’s response and provides
reassurance that employees will be protected from harassment from co-workers for raising concerns.
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Remuneration Committee Report
Composition and Role
The Remuneration Committee is made up of Gary Browning (as Chair), Sophie Tomkins and Peter Simmonds.
During 2019, one formal meeting was held, and each member of the Committee was in attendance for this
meeting. The work carried out by the Remuneration Committee during 2019 included the following:
• Review of the performance of the Executive Directors and senior management,
• A formal review of the scale and structure of their remuneration,
• Reviewing the basis of their service agreements and,
• Reviewing incentive plans and other employment related benefits with due regard to the interests
of the shareholders.
Executive Directors and other members of the management team may be invited to attend meetings. The
Remuneration Committee will also make recommendations to the Directors concerning the allocation of
share options to Directors and employees. No Director is permitted to participate in discussions concerning
their own remuneration. The remuneration and terms of appointment of Non-Executive Directors are set by
the Board as a whole.
Remuneration Policy
The objective of the Group’s remuneration policy is to attract, motivate and retain high quality individuals
who will contribute fully to the success of the Group. To achieve this objective, the Group provides
competitive salaries and benefits to all employees. Executive Directors’ remuneration is set to create an
appropriate balance between both fixed and performance-related elements. Remuneration is reviewed each
year in light of the Group’s business objectives. It is the Remuneration Committee’s intention that
remuneration should reward achievement of objectives and that these are aligned with shareholders’
interests over the medium-term. Remuneration consists of the following elements:
• Basic salary;
• Performance-related annual bonus;
•
Long-Term Incentive Plan; and
• Pension contribution.
Executive Directors’ Service Contracts
The Executive Directors service contracts with the Group are not of fixed duration and terminable by either
party giving six months’ written notice.
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Non-executive Directors
The Non-executive Directors signed letters of appointment with the Group for the provision of Non-
executive Directors’ services, which may be terminated by either party giving three months’ written notice.
The Non-executive Directors’ fees are determined by the Board.
Directors remuneration
Details of Key Management’s remuneration (including employer’s NICs) are set out in Note 7; full details of
directors' remuneration, shareholdings and share options and service contracts are set out below.
(1) Andrew Jones is included until 25 November 2019 when he resigned as Chief Revenue Officer. Included
within Salaries and Other are exceptional costs of £145k in relation to compensation of loss of office.
Peter Simmonds receives his agreed fees and expenses through the Company payroll.
Sophie Tomkins receives her agreed fees and expenses through the Company payroll.
Gary Browning provides his services through Vikaas Talent Ltd., pursuant to an agreement dated 14 October
2016 under which Vikaas Talent Ltd is paid £25,000 per annum (plus expenses).
Management incentive plan
The Company currently operates a Long-Term Incentive Plan (LTIP) (the “Plan”) for the Executive Directors,
that clearly aligns the interests and resulting remuneration of the executive management team with the
creation of shareholder value. The Plan was effective from 31 August 2017 for a period of 4 years.
The Plan provides for awards of a new class of shares in Cloudcall Limited to eligible executives. The value of
those shares is based on performance of Company share price and number of end-user targets. The Company
may buy back the new Plan shares using Cloudcall Group Plc shares or with cash. If targets are satisfied on a
sliding scale from the lower to upper thresholds, the maximum potential Company shares available are set
out below.
40
Cloudcall Group plc
Registered number: 05509873
2018£000£000£000£000£000£000Simon Cleaver204 20 - 2 226 194 Paul Williams157 20 - 2 179 153 Andrew Jones(1)292 19 6 2 319 149 Peter Simmonds40 - - - 40 40 Sophie Tomkins25 - - - 25 25 Gary Browning25 - - - 25 25 Total743 59 6 6 814 586 TotalYear ended 31 December 2019Salaries and otherBonusPensionOther benefitsTotal
Cloudcall Group plc
Annual Report and Financial Statements
2019
Governance Report
Target
Company Share Price
Number of
End-users
Maximum
available Company
Shares
(million)
Percentage of
fully diluted Company
share capital*
£2.50
£5.00
40,000
60,000
0.20
2.25
1.0%
9.7%
* Assuming consideration satisfied in full by Cloudcall Group Plc shares.
The operation of the Plan is supervised by the Remuneration Committee. Further details on the plan are set
out in Note 20 to the financial statements.
Directors’ rights to subscribe for shares
According to the register of Directors’ interests, there were no rights to subscribe for shares in, or
debentures of, Group companies granted to any Directors during the financial year ended 31 December 2019.
None of the Directors or their immediate families exercised any such rights during the financial year.
Directors’ rights to subscribe for shares in the Company pursuant to the Cloudcall Group plc 2011 Share
Option Plan are indicated below:
At 31
December
2018
Granted
Surrendered
At 31
December
2019
Number
Number
Number
Number
Weighted
average
exercise
price
Pence
Simon Cleaver
Paul Williams
Andrew Jones
Total
50,000
10,000
40,000
100,000
-
-
-
-
-
-
-
-
50,000
10,000
40,000
100,000
292
150
139
217
There were no options granted during the year. Further details on the plan are set out in Note 20 to the
financial statements.
By order of the board
Simon Cleaver
Chief Executive Officer
Paul Williams
Chief Financial Officer
41
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Directors’ Report
Directors’ report
The Directors present their annual report and the audited financial statements for the year ended 31
December 2019.
Principal Activity
The Company’s and Group’s principal activities are disclosed in the group overview on page 2.
Directors who held office
The Directors who held office during the year are disclosed in the governance report on page 35.
Results for the year and dividends
The results for the year are disclosed on page 52 and are discussed in the strategic report on pages 5 to 25.
The Directors do not recommend the payment of a dividend (2018: nil).
Directors’ interests
Directors of the Company and their immediate relatives control 3.50% per cent of the voting shares of the
Company as at 28 February 2020.
The Directors who held office during the financial year had the following interests in the ordinary shares of
CloudCall Group plc per the register of Directors’ interests at 28 February 2020:
Simon Cleaver
Paul Williams
Peter Simmonds
Sophie Tomkins
Gary Browning
2019
Number
839,344
130,947
266,875
52,987
65,000
2018
Number
839,061
130,947
258,055
52,984
65,000
Directors’ insurance
The company maintains directors' and officers' liability insurance.
Share capital
The number of ordinary shares in issue on 1 January 2019 was 24,181,062.
On 5 February 2019 the Board approved the issue of 2,400,000 new ordinary shares in the Company pursuant
to a firm placing at 100.0 pence (the "Placing") to raise a total of £2.4m before fees and expenses.
42
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Directors’ Report
On 22 October 2019 the Board approved the issue of 12,081,685 new ordinary shares in the Company
pursuant to a firm placing at 100.0 pence (the "Placing") to raise a total of £12.1m before fees and expenses.
During 2019, the Board approved the issue of 93,092 new ordinary shares for total gross consideration
amounting to approximately £68k in respect of various small exercises of share options under the Company’s
2011 Share Option Plan.
As a result, the number of shares in issue on 31 December 2019 was 38,755,839.
Substantial shareholders
So far as is known to the Company, the only persons (excluding Directors) who, directly or indirectly, were
interested in three per cent or more of the Company’s share capital as at 28 February 2020 were as follows:
Gresham House Asset Management Limited
Kinderhook Partners L.P.
Long Path Partners
Herald Investment Management Limited
Canaccord Genuity Wealth Management
Goudy Park Capital LP
Chelverton Asset Management Limited
Hargreaves Lansdown AM Limited
Lightsail Capital Management LLC
Shares
% of Issued
Share Capital
5,120,019
4,690,474
3,835,000
3,405,986
3,100,248
2,063,048
1,750,000
1,721,085
1,620,000
13.21%
12.10%
9.89%
8.79%
8.00%
5.32%
4.51%
4.44%
4.18%
27,305,860
70.45%
Information in the strategic report
The company has chosen, in accordance with the Companies Act 2006 s414C(11), to set out in the strategic
report and governance report, certain information required by the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 Sch. 7 to be contained in the directors’ report.
Future developments
Future developments are discussed in the strategic report on pages 5 to 25.
Events after the reporting period
Since the year end, the spread of the Covid-19 virus has escalated and has had an impact on the group as
countries have moved into lockdown. The impact and resulting actions taken by the group have been
commented upon in the Strategic Report on pages 5-25 and the going concern note on pages 60 and 61.
43
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Directors’ Report
Auditors
RSM UK Audit LLP acted as auditors during the year. In accordance with Section 489 of the Companies Act
2006, a resolution for the re-appointment of RSM UK Audit LLP as auditors of the Group is to be proposed
at the forthcoming Annual General Meeting.
Disclosure of information to auditors
The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are
each aware, there is no relevant audit information of which the Group’s auditors are unaware; and each
Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any
relevant audit information and to establish that the Group’s auditors are aware of that information.
Annual General Meeting
These accounts will be tabled for approval at the forthcoming Annual General Meeting of the Group. Details
of the date, location and time of the AGM, together with instructions on how to attend, vote and participate
in any Q&A will be announced in advance.
44
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Directors’ Report
Statement of Directors’ Responsibilities
The directors are responsible for preparing the strategic report, the governance report, the director’s report
and the Group and Parent Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial statements for each
financial year. As required by the AIM rules of the London Stock Exchange they are required to prepare the
Group financial statements in accordance with IFRSs as adopted by the EU and have elected under company
law to prepare the Parent Company financial statements on the same basis.
The financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial
position of the Group and the Company and the financial performance of the Group. The Companies Act
2006 provides in relation to such financial statements that references in the relevant part of that Act to
financial statements giving a true and fair view are references to their achieving a fair presentation.
Under company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or
loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors
are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
• prepare the financial statements on the going concern basis unless it is inappropriate to presume
state whether they have been prepared in accordance with IFRSs as adopted by the EU: and
that the Group and the Parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group and Company's transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure that its financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
45
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Directors’ Report
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company's website. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
By order of the board
Simon Cleaver
Chief Executive Officer
Date: 7 April 2020
1 Colton Square
Leicester
LE1 1QH
46
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Independent Auditor’s Report to the Members of Cloudcall Group plc
Opinion
We have audited the financial statements of Cloudcall Group plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 December 2019 which comprise the consolidated statement of
comprehensive income, consolidated and parent company statement of financial position, consolidated and
parent company statement of changes in equity, consolidated and parent company statement of cash flows,
consolidated and parent company movements in net cash/(debt) and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 31 December 2019 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in accordance with the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
group and parent company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the group’s or the parent company’s ability to continue to adopt
the going concern basis of accounting for a period of at least twelve months from the date when
the financial statements are authorised for issue.
47
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the group and parent company financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the group and parent company financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Group key audit matters
Revenue recognition – We focused on the recognition of revenue as the timing of revenue recognition and
its presentation in the statement of comprehensive income is subject to inherent complexities in the
software industry. We performed cut-off testing and substantive testing procedures to validate the
recognition of revenue throughout the year. We also substantively tested the accounting for set-up costs
to ensure a suitable deferral of revenue over the life of the contract in line with the requirements of IFRS 15.
The adequacy of the group’s revenue recognition accounting policy as disclosed in note 1 has also been
considered.
Development costs - We focused on the capitalisation of development costs due to its impact on reported
earnings and the judgements involved in assessing whether the IAS 38 criteria for capitalisation have been
suitably met. We reconfirmed our understanding of management’s basis for capitalising development costs
and reviewed whether the costs had been appropriately capitalised in accordance with IAS 38. Our
procedures included an assessment over the appropriateness of any management judgements including the
future expected economic benefit of capitalised projects and substantive testing of the costs capitalised. We
also assessed the reasonableness of the amortisation policies in place and potential impairment. We also
considered the adequacy of the group’s research and development accounting policy as disclosed in note 1.
Capitalised development costs are disclosed in note 11.
Impairment – We critically assessed the impairment review performed by management over the carrying
value of goodwill as this assessment incorporates a significant level of management judgement. Our work
included a review of the client’s board approved forecasts and discounted cashflow calculations to assess
whether the assumptions appeared reasonable. We also evaluated management’s sensitivity analysis
around the key assumptions to ascertain the extent of change in those assumptions that individually or
collectively would be required to lead to an impairment.
Covid-19 - the growth in revenue is expected to be adversely affected by the growing impact of the Covid-19
(Coronavirus) outbreak. The impact of this on the going concern status of the group has been considered
by the directors including modelling of the group’s ability to continue to operate in a number of different
scenarios and they concluded the adoption of a going concern basis of accounting was appropriate. We
considered the reasonableness of these projections, the level of current cash, available financing, measures
for managing costs and available government support. We also considered the adequacy of the disclosures
on the potential impact of Covid-19 on the group.
48
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Parent company key audit matters
Impairment – We critically assessed the impairment review performed by management over the carrying
value of investments and group debtor balances as this assessment incorporates a significant level of
management judgement. Our work included a review of the client’s assessment of the potential for
impairment including a review of board approved forecasts and discounted cashflow calculations to assess
whether the assumptions appeared reasonable. We also considered the adequacy of the disclosures on the
booked impairment given in note 15.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the
nature, timing and extent of our audit procedures. When evaluating whether the effects of misstatements,
both individually and on the financial statements as a whole, could reasonably influence the economic
decisions of the users we take into account the qualitative nature and the size of the misstatements. During
planning materiality for the group financial statements as a whole was calculated as £206,000, which was
not significantly changed during the course of our audit. Materiality for the parent company financial
statements as a whole was calculated as £65,000, which was not significantly changed during the course of
our audit. We agreed with the Audit Committee that we would report to them all unadjusted differences in
excess of £10,000, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
Our group audit approach focused on the parent company and the two key trading subsidiaries, one based
in the UK and one in the US. The UK entities are subject to a local statutory audit completed to the group
reporting timetable. The US entity is not subject to local statutory audit and has been subject to full scope
audit to group materiality. The US entity audit was undertaken by the same team as the UK statutory audits.
These audits covered 100% of group revenue, 99% of group loss before tax and 99% of group total assets.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
49
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their
environment obtained in the course of the audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 45, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the group or
the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
50
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Neil Stephenson (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Suite A, 7th Floor, City Gate East, Tollhouse Hill, Nottingham, NG1 5FS
7 April 2020
51
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Consolidated Statement of Comprehensive Income
For year ended 31 December 2019
Notes
5
6
6
20
6
8
9
Revenue
Cost of sales
Gross profit
Operating costs
Loss from operating activities before
depreciation, amortisation, share-based
payment charges and exceptional items
Depreciation and amortisation
Share based payment charges
Exceptional items
Operating loss
Finance expense
Loss before tax
Taxation
Loss for the year attributable to owners of the
parent
Other comprehensive income
Exchange differences on translation of foreign
operations
Other comprehensive income
Total comprehensive income for the year
attributable to owners of the parent
Loss per share
Basic and fully diluted loss per share
22
Group
2019
£000
11,396
(2,406)
8,990
(11,146)
(2,156)
(930)
(171)
(145)
(3,402)
(274)
(3,676)
731
(2,945)
65
65
Group
2018
(restated)
£000
8,751
(1,889)
6,862
(9,347)
(2,485)
(816)
(224)
-
(3,525)
(227)
(3,752)
630
(3,122)
(50)
(50)
(2,880)
(3,172)
Pence
(10.3)
Pence
(12.9)
The notes on pages 60 to 98 are an integral part of these consolidated financial statements.
52
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Consolidated and Company Statements of Financial Position
At 31 December 2019
Notes
10
11
11
12
15
16
18
17
18
21
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investment in subsidiaries
Current assets
Trade and other receivables
Research and development tax
credit receivable
Cash and cash equivalents
Total assets
Current liabilities
Borrowings
Trade and other payables
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity attributable to shareholders
Share capital
Share premium account
Translation reserve
Warrant reserve
Retained earnings
Group
2019
£000
1,854
339
2,992
-
5,185
2,760
760
11,101
14,621
19,806
(517)
(2,162)
(2,679)
Group
2018
(restated)
£000
1,897
339
1,897
-
4,133
1,857
640
927
3,424
7,557
(265)
(1,602)
(1,867)
Company
2019
£000
792
-
-
2,971
3,763
24,235
-
10,164
34,399
38,162
(272)
(712)
(984)
(1,862)
(1,332)
(1,588)
Company
2018
(restated)
£000
699
-
-
2,848
3,547
21,352
-
122
21,474
25,021
(32)
(427)
(459)
(788)
(4,541)
15,265
(3,199)
4,358
(2,572)
35,590
(1,247)
23,774
7,751
77,085
38
29
(69,638)
4,836
66,384
(27)
29
(66,864)
7,751
77,085
-
29
(49,275)
4,836
66,384
-
29
(47,475)
Total equity attributable to shareholders
15,265
4,358
35,590
23,774
The Company is taking advantage of the exemption in S408 of the Companies Act 2006 not to present its
individual statement of comprehensive income and related notes. The Company incurred a loss of £1,971,000
for the year (2018: £327,000 as restated).
The notes on pages 60 to 98 are an integral part of these consolidated financial statements.
These financial statements were approved by the Board on 7 April 2020 and were signed on its behalf by:
Simon Cleaver
Chief Executive Officer
53
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Consolidated and Company Statements of Changes in Equity
For year ended 31 December 2019
Group
Balance at 1 January 2018
Restatement – IFRS 16
Balance at 1 January 2018 (as restated)
Loss for the year (as restated)
Other comprehensive income:
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners recognised in equity:
Equity settled share based payments
20
Issue of equity shares
Issue costs of equity shares
Total transactions with owners recognised in equity
Share
capital
Share
premium
account
Translation
reserve
Warrant
reserve
Retained
earnings
Total equity
attributable to
shareholders
Notes
£'000
£'000
£'000
£'000
£'000
£'000
2
4,814
-
4,814
66,329
-
66,329
-
-
-
-
22
-
22
-
-
-
-
69
(14)
55
23
-
23
-
(50)
(50)
-
-
-
-
29
-
29
-
-
-
-
-
-
-
(63,939)
(27)
(63,966)
(3,122)
-
(3,122)
224
-
-
224
7,256
(27)
7,229
(3,122)
(50)
(3,172)
224
91
(14)
301
Balance at 31 December 2018 (as restated)
4,836
66,384
(27)
29
(66,864)
4,358
54
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Share
capital
Share
premium
account
Translation
reserve
Warrant
reserve
Retained
earnings
Total equity
attributable to
shareholders
Notes
£'000
£'000
£'000
£'000
£'000
£'000
4,836
66,384
-
-
-
-
-
-
-
-
2,915
-
2,915
11,635
(934)
10,701
(27)
-
65
65
-
-
-
-
29
(66,864)
-
-
-
-
-
-
-
(2,945)
-
(2,945)
171
-
-
171
4,358
(2,945)
65
(2,880)
171
14,550
(934)
13,787
Group
Balance at 1 January 2019
Loss for the year
Other comprehensive income:
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners recognised in equity:
Equity settled share based payments
Issue of equity shares
Issue costs
Total transactions with owners recognised in equity
20
21
Balance at 31 December 2019
7,751
77,085
38
29
(69,638)
15,265
Share capital represents the nominal value of shares issued and paid up.
The share premium account represents the excess of consideration received over the nominal value of shares issued, net of directly attributable issue costs.
The warrant reserve represents the cumulative charge in respect of warrants issued over the Company’s shares.
Retained earnings represents the cumulative retained earnings / (losses) of the Group and Company.
55
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Company
Balance at 1 January 2018
Restatement – IFRS 16
Balance at 1 January 2018 (as restated)
Loss for the year (as restated)
Transactions with owners recognised in equity:
Equity settled share based payments
Issue of equity shares
Issue costs
Total transactions with owners recognised in equity
Balance at 31 December 2018 (as restated)
Loss for the year
Transactions with owners recognised in equity:
Equity settled share based payments
Issue of equity shares
Issue costs
Total transactions with owners recognised in equity
Share
capital
Share
premium
account
Warrant
reserve
Retained
earnings
Total equity
attributable to
shareholders
Notes
£'000
£'000
£'000
£'000
£'000
2
20
20
21
4,814
-
4,814
-
-
22
-
22
66,329
-
66,329
-
-
69
(14)
55
29
-
29
-
-
-
-
-
(47,357)
(15)
(47,372)
(327)
224
-
-
224
4,836
66,384
29
(47,475)
-
-
2,915
-
2,915
-
-
11,635
(934)
10,701
-
-
-
-
-
(1,971)
171
-
-
171
23,815
(15)
23,800
(327)
224
91
(14)
301
23,774
(1,971)
171
14,550
(934)
13,787
Balance at 31 December 2019
7,751
77,085
29
(49,275)
35,590
The notes on pages 60 to 98 are an integral part of these consolidated financial statements.
56
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Consolidated and Company Cash Flow Statements
For year ended 31 December 2019
Group
2019
£000
Group
2018
(restated)
£000
Company
2019
£000
Company
2018
(restated)
£000
Notes
Cash flows from operating activities
Loss for the year after tax
Adjustments for:
Depreciation and amortisation
Foreign exchange (gains)/losses on operating
activities
Financial expenses
Equity settled share-based payment expenses
Taxation
Operating loss before changes in working
capital
Increase in trade and other receivables
Increase in trade and other payables
Cash absorbed by operations
Tax received
8
20
9
(2,945)
(3,122)
(1,971)
(327)
930
92
274
171
(731)
(2,209)
(903)
591
(2,521)
611
816
(67)
227
224
(630)
(2,552)
(393)
302
(2,643)
570
101
-
217
49
-
(1,604)
(2,883)
284
(4,203)
-
86
-
152
98
-
9
(4,169)
72
(4,088)
-
Net cash absorbed by operating activities
(1,910)
(2,073)
(4,203)
(4,088)
Cash flows from investing activities
Acquisition of property, plant and equipment
Development expenditure capitalised
Net cash absorbed by investing activities
Cash flows from financing activities
Repayment of lease liability
Net interest paid
Net proceeds from the issue of share capital
Proceeds from new loan
Repayment of new loan
Net cash from/(absorbed by) financing
activities
10
11
19
18
18
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at start of the year
Effect of exchange rate fluctuations on cash held
(449)
(1,433)
(450)
(1,118)
(1,882)
(1,568)
(439)
(150)
13,616
1,500
(527)
14,000
10,208
927
(34)
(310)
(88)
77
-
-
(321)
(3,962)
4,872
17
(70)
-
(70)
(128)
(146)
13,616
1,500
(527)
14,315
10,042
122
-
(18)
-
(18)
(31)
(83)
77
-
-
(37)
(4,143)
4,265
-
Cash and cash equivalents at end of period
16
11,101
927
10,164
122
The notes on pages 60 to 98 are an integral part of these consolidated financial statements.
57
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Consolidated and Company Movements in Net Cash/ (Debt)
For year ended 31 December 2019
Group
At 1
January
2019
£’000
Cash flow
£’000
Interest
on lease
liabilities
£’000
Lease
liabilities
taken out
£’000
Exchange
and other
non-cash
movements
£’000
At 31
December
2019
£’000
Cash and cash equivalents
927
10,208
-
(973)
-
-
-
-
(1,597)
439
(124)
(124)
Bank loan
Lease liabilities
(34)
11,101
-
-
(973)
(1,406)
Net cash/(debt) at end of year
(670)
9,674
(124)
(124)
(34)
8,722
Group
At 1
January
2018
£’000
Cash flow
£’000
Interest
on lease
liabilities
£’000
Lease
liabilities
taken out
£’000
Exchange
and other
non-cash
movements
£’000
At 31
December
2018
£’000
Cash and cash equivalents
4,872
(3,962)
-
-
-
-
-
-
(1,308)
310
(139)
(460)
Bank loan
Lease liabilities
17
927
-
-
-
(1,597)
Net cash/(debt) at end of year
3,564
(3,652)
(139)
(460)
17
(670)
58
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Company
At 1
January
2019
£’000
Cash flow
£’000
Interest
on lease
liabilities
£’000
Lease
liabilities
taken out
£’000
Exchange
and other
non-cash
movements
£’000
At 31
December
2019
£’000
Cash and cash equivalents
122
10,042
-
(973)
-
-
-
-
(820)
128
(71)
(124)
Bank loan
Lease liabilities
Net cash/(debt) at end of year
(698)
9,197
(71)
(124)
-
-
-
-
10,164
(973)
(887)
8,304
Company
At 1
January
2018
£’000
Cash flow
£’000
Interest
on lease
liabilities
£’000
Lease
liabilities
taken out
£’000
Exchange
and other
non-cash
movements
£’000
At 31
December
2018
£’000
Cash and cash equivalents
4,265
(4,143)
Bank loan
Lease liabilities
-
(782)
-
31
-
-
(69)
Net cash/(debt) at end of year
3,483
(4,112)
(69)
-
-
-
-
-
-
-
-
122
-
(820)
(698)
The notes on pages 60 to 98 are an integral part of these consolidated financial statements.
59
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Notes to the Financial Statements
1. Accounting policies
Accounting convention and basis of preparation
Cloudcall Group plc (the ‘Company’) is a public limited company incorporated and domiciled in England &
Wales. The address of the registered office is 1 Colton Square, Colton Street, Leicester LE1 1QH. The Company
and its subsidiaries are referred to as ‘the Group’. The Group’s principal activity is to provide products and
services designed to enable organisations to use their communications more effectively. The ordinary shares
of the Company are traded on the AIM market of the London Stock Exchange.
The consolidated financial statements consolidate those of the Group. The Company financial statements
present information about the Company as a separate entity and not about the Group.
These financial statements have been prepared in accordance with all International Financial Reporting
Standards (“IFRS”), as adopted by the European Union, and IFRIC interpretations applicable as at 31
December 2019 and with those parts of the Companies Act 2006 applicable to those companies reporting
under IFRS.
The financial statements are prepared on the historical cost basis. The results are presented in round
thousands of Pounds Sterling unless otherwise noted.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods
presented in these consolidated financial statements.
Judgements made by the Directors in the application of these accounting policies that have a significant
effect on the financial statements and estimates with a significant risk of material adjustment in the next
year, are discussed in Note 3.
Going concern
The accounts have been prepared on a going concern basis.
The Group made a loss of £2,945k (2018: £3,122k restated) in the year ended 31 December 2019. As at 31
December 2019 the Group had cash reserves of £11,101k (2018: £927k). The Group has seen a significant cash
injection within the year from successful share placings of £13.6m after issue costs.
The Directors have prepared detailed cashflow projections covering the period up to December 2022. Such
forward looking projections are inevitably subjective and sensitive to changes in the underlying assumptions
and the Directors have sensitised these projections accordingly, in particular to factor in a delay in the growth
of revenue. These projections, as sensitised, indicate that, based on the assumptions underlying the
projections, sufficient resources will be available to settle liabilities as they fall due for a period of at least 12
months from the date of approving these accounts.
As noted under risks and uncertainties on page 23, the effects of the coronavirus pandemic are being felt on
a global scale with governments facing unprecedented challenges and taking the necessary counter
measures to combat the spread of infection. The Group is monitoring the development of the coronavirus
very carefully and is taking appropriate contingency actions by location and country according to local in-
country guidelines.
60
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Since the scale of the pandemic became clear, the Group has taken a number of cost reduction actions which
it is currently executing. These relate to both staff and non-staff costs. The combined effect of these will be
to significantly reduce the Group's current monthly operating cash outflows and extend the life of the
existing cash resources whilst still allowing the Group to maintain those investments that will enable it to
resume its' strategic growth plans once the impact of the pandemic subsides.
Despite Covid-19, the Directors remain confident in their assertion that the current trajectory of the Group’s
recurring revenue streams, the nature of our product portfolio being conducive to home based working and
strong cash position of £11.1m following the successful October 2019 fundraise, together with a series of a
short term cost reductions, are key factors in demonstrating that the Group has the necessary means to
execute its strategy and meet its financial commitments. In addition, the Group can also utilise the remaining
£2.0m credit facility with Shawbrook Bank, should it be required.
For these reasons, the Directors have adopted the going concern basis in preparing the annual financial
statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its
subsidiary undertakings. The results of subsidiaries are included in the consolidated financial statements
from the date that the Group obtains control until the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The
consideration transferred in a business combination is measured as the fair value of the assets given, equity
instruments issued, contingent consideration and liabilities incurred or assumed at the date of exchange. Costs
directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition
date.
Revenue
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be
entitled in exchange for transferring services or goods to a customer. For each contract with a customer, the
Group: identifies the contract with a customer; identifies the performance obligations in the contract;
determines the transaction price; allocates the transaction price to the separate performance obligations on
the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and
recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer
to the customer of the services or goods promised.
Revenues from monthly call charges and subscriptions are billed at the end of each month and are
recognised on an accruals basis.
Revenue from training and network discovery services is recognised in full as those services are provided,
based on the contracted price.
Revenue from set up fees is treated as part of the ongoing performance obligation in the sales contract,
therefore the revenues associated with these fees are recognised over the life of the sales contracts with
customers.
61
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Revenue from the sale of goods is recognised in profit or loss at the point in time when the customer obtains
control of the goods, which is generally at the time of delivery. Delivery occurs when the goods have been
shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer,
and either the customer has accepted the goods in accordance with the sales contract, any acceptance
provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been
satisfied. No element of financing is deemed present as the sales are made with a credit term of 30 days,
which is consistent with market practice.
Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at
the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated at the rate at the reporting date. Foreign
exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate at the date of the transaction.
The functional currency of the Group is Sterling. Exchange differences arising from the translation of foreign
operations are recognised in other comprehensive income and accumulated in a foreign currency translation
reserve within equity.
Exchange differences arising from a monetary item receivable from or payable to a foreign operation, the
settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a
net investment in a foreign operation and are recognised directly in equity in the translation reserve.
Investments
Investments in subsidiaries are recorded at cost less any impairment provisions in the Statement of Financial
Position. They are tested for impairment when there is objective evidence of impairment. Any impairment
losses are recognised in profit or loss in the period they occur.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Depreciation is charged to profit or loss to write off the cost, less any estimated residual values, on a straight-
line basis over the estimated useful lives of the assets concerned. The estimated useful lives are as follows:
Technical plant and equipment
Office and business equipment
2 - 10 years
2 - 10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Right of use assets are measured at cost to include the lease liability, direct and restoration cost and are
generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Payments associated with short term leases of equipment and vehicles and all leases of low value assets are
recognised on a straight-line basis as an expense in the profit and loss.
62
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Intangible assets and goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents the
difference between the cost of the acquisition and the fair value of the identifiable net assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating
units and is not amortised but is tested annually for impairment.
The Group assesses the fair value of intangible assets arising on acquisitions. These include intellectual
property arising from software development. An intangible asset will be recognised if the asset is identifiable
and its fair value can be measured reliably. An intangible asset is identifiable if it is separable or if it was
obtained through contractual or legal rights. Amortisation is provided on the fair value of the asset and is
calculated on a straight-line basis over its useful life. All intangible assets except goodwill are amortised.
Research costs are expensed as incurred. Expenditure on development activities is capitalised if, and only if,
the product or process is technically and commercially feasible and the Group intends to complete the
intangible to use or sell, it is probable the intangible asset will generate future economic benefit, the
expenditure attributable to the intangible asset during its development can be measured reliably and the
Group has the technical ability and sufficient resources to complete development. Development activities
involve a plan or design to produce new or substantially improved products or processes. The expenditure
capitalised includes the cost of materials, direct labour and an appropriate proportion of direct overheads.
Other development expenditure is recognised in profit or loss as an expense as incurred. Capitalised
development expenditure is stated at cost less accumulated amortisation and impairment losses.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and
impairment losses.
Amortisation is charged to operating expenses on a straight-line basis over the estimated useful lives of
intangible assets from the date they are available for use.
The estimated useful lives are as follows:
Acquired IPR
Capitalised development costs
Software
5 years
5 years
3 years
Impairment of non-financial assets
The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there
is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated
using a discounted cash flow model.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit
exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in
the unit on a pro rata basis. A cash generating unit is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from other assets or groups of
assets.
63
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Reversals of impairment
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed when there is an indication that the impairment
loss may no longer exist and there has been a change in the estimates used to determine the recoverable
amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised. Such a reversal is recognised in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average
principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the
following two conditions:
•
they include no contractual obligations upon the Company (or Group as the case may be) to deliver
cash or other financial assets or to exchange financial assets or financial liabilities with another party
under conditions that are potentially unfavourable to the Company (or Group); and
• where the instrument will or may be settled in the Company’s own equity instruments, it is either a
non-derivative that includes no obligation to deliver a variable number of the Company’s own equity
instruments or is a derivative that will be settled by the Company’s exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where
the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in
these financial statements for called up share capital and share premium account exclude amounts in
relation to those shares.
Where a financial instrument that contains both equity and financial liability components exists these
components are separated and accounted for individually under the above policy.
Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance
payments associated with financial instruments that are classified in equity are dividends and are recorded
directly in equity.
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans
and borrowings, and trade and other payables.
64
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. The Group does not have bank overdraft
facilities.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently at amortised cost using
the effective interest method less any allowance for expected credit losses. Trade receivables are generally
due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based
on days overdue.
Deferred contract costs
Customer fulfilment costs are capitalised as an asset when all the following are met: (i) the costs relate
directly to the contact or specifically identifiable proposed contract; (ii) the costs generate or enhance
resources of the Group that will be used to satisfy future performance obligations; and (iii) the costs are
expected to be recovered. Customer fulfilment costs and other incremental costs of obtaining a contract are
amortised on a straight-line basis over the term of the contract.
Trade and other payables
Trade and other payables are recognised initially at fair value. After initial recognition, they are measured at
amortised cost using the effective interest method.
Contract liabilities
Contract liabilities represent the Group’s obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its
unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or
services to the customer.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either
measured at amortised cost or fair value through other comprehensive income. The measurement of the
loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the
financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit
losses that is attributable to a default event that is possible within the next 12 months. Where a financial
asset has become credit impaired or where it is determined that credit risk has increased significantly, the
loss allowance is based on the asset's lifetime expected credit losses. The amounts of unexpected credit loss
65
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls
over the life of the instrument discounted at the original effective interest rate.
Employee benefits
Share-based payment transactions
The cost of equity settled transactions with employees is measured by reference to the fair value on the date
they are granted. Where there are no market conditions attaching to the exercise of the options, the fair
value is determined using a range of inputs into the Black-Scholes pricing model. Where there are market
conditions attaching to the exercise of the options a Monte Carlo option pricing model is used to determine
fair value based on a range of inputs. The fair value of equity-settled transactions is charged to the Statement
of Comprehensive Income over the period in which the service conditions are fulfilled with a corresponding
credit to a share-based payments reserve in equity.
At the end of each reporting period, the Group revises its estimates of the number of options that are
expected to vest based on the non-market vesting conditions and service conditions. It recognises the
impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to
equity.
On the exercise of share options, an amount equal to the fair value of the option at the date it was granted
is transferred from the share-based payments reserve into retained earnings.
Where the Company grants options over its own shares to the employees of its subsidiaries it recognises, in
its individual financial statements, an increase in the cost of investment in its subsidiaries equivalent to the
equity-settled share-based payment charge recognised in its consolidated financial statements with the
corresponding credit being recognised directly in equity.
Retirement benefits
The Group operates a defined contribution pension scheme for certain employees. The assets of the scheme
are held separately from those of the Group in independently administered funds. Contributions are charged
in the Statement of Comprehensive Income as they become payable.
Net financing costs
Net financing costs comprise interest payable and interest receivable on funds invested. Interest income and
interest payable is recognised in profit or loss as it accrues, using the effective interest method.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in profit or loss
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in
equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
periods. Tax credits for research and development expenditure are recognised in the year to which they arise
as the Group has established a pattern of claims.
66
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The following temporary differences
are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a business combination, and differences relating to
investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
value of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised.
2. Changes to accounting policies and disclosures
The accounting policies are the same as those applied in the Group’s consolidated financial statements as at
and for the year ended 31 December 2019 with the exception of one new accounting policy in respect of IFRS
16 Leases, which was adopted on 1 January 2019. The effect of initially applying this standard is noted below.
The comparative figures for the financial year ended 31 December 2018 are the Group’s statutory accounts
for that financial year as restated for the application of IFRS 16.
IFRS 16 Leases
IFRS 16 replaces IAS 17 Leases. The group previously split leases between ‘finance leases’ that transferred
substantially all the risks and rewards incidental to ownership of the asset to the group, and ‘operating
leases’.
As a result of the adoption of IFRS 16 the Group has adopted consequential changes to IAS 1 Presentation of
Financial Statements.
The main change on application of IFRS 16 is the accounting for ‘operating leases’ where rentals payable (as
adjusted for lease incentives) were previously expensed under IAS 17 on a straight-line basis over the lease
term.
Under IFRS 16 a right-of-use asset and a lease liability are recognised for all leases except ‘low-value’ and
‘short’ term leases where lease payments are recognised on a straight-line basis over the lease term.
The accounting for leases previously accounted for as finance leases under IAS 17 has not changed
substantially, except that residual value guarantees are recognised under IFRS 16 at amounts expected to
be payable rather than the maximum amount guaranteed, as required by IAS 17.
A liability corresponding to the capitalised lease has been recognised, adjusted for lease prepayments, lease
incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition has also been replaced with a
depreciation charge for the leased asset (included in operating costs) and an interest expense on the
recognised lease liability (included in finance expense).
In the earlier periods of the lease, the expenses associated with the lease under IFRS 16 will be higher when
compared to lease expenses under IAS 17. However, results from operating activities before depreciation,
amortisation and share-based payment charges have been improved as the operating expense is replaced
67
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
by interest expense and depreciation in profit or loss under IFRS 16. For classification within the statement
of cash flows, the lease payments will be separated into both a principal (financing activities) and interest
(either operating or financing activities) component.
The group has elected to apply IFRS 16 retrospectively to all leases, subject to the transition provision set
out below.
•
For all contracts that existed prior to 1 January 2019, the group has not applied IFRS 16 to reassess
whether each contract is, or contains, a lease.
The financial impact of applying IFRS 16 on the year-ended 31 December 2018 and as at 1 January 2019 is set
out below:
Group
Impact on the consolidated statement of financial position as at 31 December 2018
Non-current assets
Property, plant and equipment
Current liabilities
Borrowings
Trade and other payables
Non-current liabilities
Borrowings
2018
Reported
£000
Adjustments
£000
2018
Restated
£000
482
1,415
1,897
-
(1,697)
(265)
95
(265)
(1,602)
-
(1,332)
(1,332)
Equity attributable to shareholders
Retained earnings
(66,777)
(87)
(66,864)
Impact on the consolidated statement of comprehensive income for the year ended 31 December 2018
As
reported
£000
(9,752)
(490)
(88)
Adjustments
£000
405
(326)
(139)
2018
Restated
£000
(9,347)
(816)
(227)
1 January
2018
£000
31 December
2018
£000
7,256
(27)
7,229
4,445
(87)
4,358
Operating costs
Depreciation and amortisation
Financing expense
Reconciliation of equity
Equity as previously reported
IFRS 16 adjustment
Equity as reported
68
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Reconciliation of loss and basic and fully diluted loss per share for the financial period
Loss for the year as previously reported
IFRS 16 adjustment
Loss for the period as reported
Basic and fully diluted loss per share as
previously reported
IFRS 16 adjustment
Basic and fully diluted loss per share as
reported
Year ended 31
December
2018
£000
(3,062)
(60)
(3,122)
(12.7)p
(0.2)p
(12.9)p
69
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Company
Impact on the statement of financial position as at 31 December 2018
Non-current assets
Property, plant and equipment
Current liabilities
Borrowings
Trade and other payables
Non-current liabilities
Borrowings
Equity attributable to shareholders
Retained earnings
Reconciliation of equity
Equity as previously reported
IFRS 16 adjustment
Equity as reported
IFRSs issued but not yet effective
2018
Reported
£000
Adjustments
£000
2018
Restated
£000
13
686
-
(522)
(32)
95
-
(788)
699
(32)
(427)
(788)
(47,436)
(39)
(47,475)
1 January
2018
£000
31 December
2018
£000
23,815
23,813
(15)
(39)
23,800
23,774
For the purpose of the preparation of these consolidated financial statements, the Group has applied all
standards and interpretations that are effective for accounting periods beginning on or after 1 January 2019.
No new standards, amendments or interpretations to existing standards that have been published and that
are mandatory for the Group’s accounting periods beginning on or after 1 January 2020, or later periods,
have been adopted early.
The new standards and interpretations are not expected to have any significant impact on the financial
statements when applied.
70
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
3. Critical accounting estimates and judgements
The following accounting judgements and estimates have been made by the Directors in interpreting
treatment of amounts included in these financial statements in accordance with IFRSs.
Development costs
Management judgement is required in assessing the fair value of development costs capitalised including
the future economic benefit expected to be generated by the assets and in calculating the attributable costs.
Management judgement is also required in assessing the useful economic lives of these assets for the
purposes of amortisation. The carrying value of development costs at the Statement of Financial Position
date was £2,992,000.
Impairment
The requirement for the Directors to ensure that the Group and Company’s non-current assets are not
carried at more than their recoverable amount (i.e. the higher of fair value less costs of disposal and value in
use) is covered by IAS 36 Impairment of Assets. The fair values in respect of the valuation of the Group and
Company’s assets in relation to the future value of the returns those assets are predicted to generate have
been estimated using a discounted cash flow model. The assumptions used as inputs to the model are by
their nature areas of judgement (see Note 11). Based on the historic sales performance of the business and
actions being taken to grow the business further, the directors do not currently assess any of these assets
as impaired. The carrying value of intangible assets and property, plant and equipment at the Statement of
Financial Position date was £3,331,000 and £1,854,000 respectively.
Share based payments
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. Judgement is required in determining the most
appropriate valuation model and the most appropriate inputs into the model including the level of volatility
and the expected life of the option. Judgement is also required in estimating the number of options that are
expected to vest based on the non-market conditions. Further information is given in Note 20.
Recoverability of receivables
The loss allowance on all financial assets is measured by considering the probability of default. Receivables
are considered to be in default on an individual basis based on various indicators, such as significant
financial difficulty or expected bankruptcy.
The Board of CloudCall Group plc has considered the provisions around impairment of inter-company
indebtedness contained within IFRS 9 “Financial Instruments” and concluded that the chance of default is
low in light of future growth projections, capital restructuring options open to it, and the high level of
control exerted over its’ subsidiary operations. However, as this balance is expected to be repaid over the
long-term, a provision of £1.5 million has been recognised in line with the requirements of IFRS 9.
71
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
4. Financial Risk Management
The major financial risks faced by the Group are liquidity risk, currency risk, credit risk and interest rate risk.
Further information about the Group’s approach to the management of these risks can be found in the
Strategic Report Risk Management section on pages 24-25.
Capital management
The Company will raise additional funds as and when required subject to market conditions and availability
and having due regard to the prevailing equity price and dilution effect when considering any equity placing.
Typically, where available, debt will be used for shorter term financing requirements with equity favoured
for the longer-term financing needs of the Group.
The Board is keen that employees are interested in the Company’s growth and as such they are encouraged
to hold shares in the Company through participation in the Cloudcall Group plc 2011 Share Option Plan. The
number of Ordinary Shares which may be utilised within any 10-year period under the Share Option Plan and
under any other discretionary/executive share option plans established by the Company shall not normally
exceed 10% of the issued Ordinary Share Capital of the Company from time to time.
During September 2019, the Group replaced its previous revolving credit facility with Barclays with a new
£3.0m term credit facility (the “Facility”) with Shawbrook Bank. Interest on any funds drawn down from the
Facility, which is for a 3.5 year term expiring in March 2023, is set at 9.0% plus the higher of either LIBOR or
0.5% per annum. At 31 December 2019, the Group has utilised £1million of the £3million Facility. The Facility is
secured over the assets of the Group.
The Group has no plans to make dividend payments.
72
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
5. Revenue
The directors consider that the Group has a single business segment, being the provision of hosted telecom
solutions. The operations of the Group are managed and reported centrally with group-wide functions
covering sales and marketing, development, professional services, customer support and finance and
administration. An analysis of revenue by type is given below.
Revenue by location of customer
UK
USA
Rest of Europe
Total revenues
Revenue by type
Recurring subscriptions
Pay As You Go Telephony
Non-recurring services and hardware
Total revenues
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Total revenues
Revenue by product
Group
2019
£'000
5,961
4,453
982
11,396
Group
2019
£'000
9,146
977
1,273
11,396
Group
2019
£'000
347
11,049
11,396
Group
2018
£'000
5,211
2,860
680
8,751
Group
2018
£'000
6,888
880
983
8,751
Group
2018
£'000
421
8,330
8,751
All revenue is attributable to the Group’s main activity, the provision of hosted telecoms solutions. All
revenues recognised in the year are generated from contracts with customers.
Information about major customers
The Group had no customers for continuing operations which represented more than 10% of sales in the year
to 31 December 2019.
73
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
6. Expenses and auditor’s remuneration
Breakdown of operating costs by function
Sales & marketing expenses
Administrative expenses
Research & development expenses
Expenses before non-recurring items and share based payments
Wages and salaries (Note 7) (*)
Foreign exchange losses/(gains)
Expected credit losses
Other operating costs
Group
2019
£'000
2,865
7,296
985
11,146
Group
2019
£'000
7,208
92
131
3,715
11,146
Group
2018
(restated)
£'000
2,644
5,898
805
9,347
Group
2018
(restated)
£'000
6,565
(67)
115
2,734
9,347
(*) included in wages and salaries above is £956k (2018: £830k) relating to research and development costs
expensed.
Exceptional costs of £145k relate to Andrew Jones who resigned as Chief Revenue Officer on 25 November
2019.
Depreciation and amortisation
Amortisation of intangible assets
Depreciation of property, plant and equipment
Group
2019
£'000
338
592
930
Group
2018
(restated)
£'000
241
575
816
74
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Auditor's remuneration
Amounts receivable by auditors and their associates in respect of:-
Audit of these financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Other assurance services
Other services relating to taxation - compliance services
Tax advisory services
Accounting services
Other services
Group
2019
£'000
Group
2018
£'000
27
23
10
26
14
12
-
26
21
9
18
10
11
13
112
108
7. Directors and employees
The average number of persons employed by the Group (including Directors) during the year, analysed by
category, was as follows:
Number of employees
Group
2019
Group
2018
Company
2019
Company
2018
Engineering
Development
Customer support
Sales and marketing
Product
Admin and finance
Total
16
49
31
41
5
18
160
15
46
36
23
7
20
147
-
-
-
-
-
6
6
-
-
-
-
-
6
6
75
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The aggregate payroll costs, including employers NICs of these persons were as follows:
Group
2019
Group
2018
Company
Company
2019
2018
£'000
£'000
£'000
£'000
Aggregate payroll costs (all
employees)
Wages and salaries
Social security costs
Share based payments (note 20)
Other pension costs
Sub-total
7,563
649
171
210
8,593
6,528
705
224
179
7,636
Capitalised wages and salaries
(1,385)
(1,071)
Total
7,208
6,565
657
83
49
6
795
-
795
524
73
98
6
701
-
701
The Group operates a defined contribution pension scheme for all qualified employees. The assets of the
scheme are held separately from those of the Group in an independently administered fund. Costs totalling
£210k (2018: £179k) were charged during the year and an amount of £55k (2018: £33k) is payable into the fund
at the year end and is included in non-trade payables and accrued expenses.
The table below includes the aggregate payroll costs including employers NICs of those employees, including
directors, considered to comprise the key management in the year as follows:
Aggregate payroll costs (key management employees)
Wages and salaries
Share based payments
Other pension costs
Sub-total
Social security costs
Total
2019
£'000
1,945
83
68
2,096
202
2,298
2018
£'000
1,742
95
65
1,902
163
2,065
76
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The total remuneration of the directors (including fees) for the year was as follows
Directors remuneration
Directors’ remuneration
Directors’ pension contributions
Total
Number of directors accruing benefits under defined contribution
schemes
2019
£'000
808
6
814
1
2018
£'000
580
6
586
1
Included in emoluments are £319k (2018: £194k) in respect of the highest paid director.
Further details of Directors’ emoluments and share interests is shown on pages 39 to 41.
8. Finance expense
Finance expenses
Loan interest and arrangement fees
Interest on lease liabilities
Total finance expense
Group
2019
£'000
150
124
274
Group
2018
(restated)
£'000
88
139
227
77
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
9. Taxation
Recognised in the Consolidated Statement of Comprehensive Income
Current income tax
Overseas income tax charge for the current year
UK research and development tax credit
Adjustments in respect of prior year
Deferred tax for the current year
Total tax credit recognised in the current year
Reconciliation of effective tax rate
Loss before tax
Tax credit using the Group's effective tax rate of 19%
(2018: 19%)
Tax losses not recognised
Non-deductible (expenses)/non-taxable income
Deferred tax not recognised
Effect of R&D tax credits
Amortisation
Adjustments in respect of prior years
Total tax
Group
2019
£000
Group
2018
(restated)
£000
(10)
760
(19)
731
-
731
(8)
640
(2)
630
-
630
(3,676)
(3,752)
698
(430)
(95)
292
349
(64)
(19)
731
713
(522)
4
208
275
(46)
(2)
630
78
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
10. Property, plant and equipment
Group
Cost
Balance at 1 January 2018
(restated)
Additions
Disposals
Exchange rate translation
difference
Balance as at 31
December 2018 (restated)
Additions
Exchange rate translation
difference
Balance as at 31
December 2019
Depreciation
Balance at 1 January 2018
(restated)
Depreciation charge for
the year
Eliminated in respect of
disposals
Exchange rate translation
difference
Balance as at 31
December 2018 (restated)
Depreciation charge for
the year
Exchange rate translation
difference
Balance as at 31
December 2019
Net Book Value
At 31 December 2018
At 31 December 2019
Technical plant
and equipment
£'000
Office and
business
£'000
Right-of-use
assets
£’000
Total
£'000
773
257
(10)
-
1,020
239
-
1,259
(618)
(154)
10
-
469
193
-
-
662
210
-
872
(343)
(95)
-
-
1,397
2,639
460
-
30
910
(10)
30
1,887
3,569
124
(48)
573
(48)
1,963
4,094
(148)
(314)
-
(10)
(1,109)
(563)
10
(10)
(762)
(438)
(472)
(1,672)
(125)
-
(887)
258
372
(131)
-
(569)
224
303
(336)
24
(784)
(592)
24
(2,240)
1,415
1,897
1,179
1,854
79
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Company
Cost
Balance at 1 January 2018 (restated)
Additions
Balance as at 31 December 2018
(restated)
Additions
Balance as at 31 December 2019
Depreciation
Balance at 1 January 2018 (restated)
Depreciation charge for the year
Balance as at 31 December 2018
(restated)
Depreciation charge for the year
Balance as at 31 December 2019
Net Book Value
At 31 December 2018
At 31 December 2019
Financial Statements
Office and
business
£'000
Right-of-use
assets
£’000
-
18
18
70
88
-
(5)
(5)
(6)
(11)
13
77
846
-
846
124
970
(79)
(81)
(160)
(95)
(255)
686
715
Total
£'000
846
18
864
194
1,058
(79)
(86)
(165)
(101)
(266)
699
792
80
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Goodwill
Patents &
trademarks
Acquired
IPR
£'000
£'000
£'000
Software
development
costs
£'000
11.
Intangible assets
Group
Cost
Balance at 1 January 2018
Internally developed
Balance at 31 December
2018
Internally developed
Balance as at 31
December 2019
Amortisation
Balance at 1 January 2018
Amortisation for the year
Balance at 31 December
2018
Amortisation for the year
Balance as at 31
December 2019
Net Book Value
At 31 December 2018
At 31 December 2019
339
-
339
-
339
-
-
-
-
-
339
339
Total
£'000
2,889
1,118
4,007
1,448
-
1,448
1,090
1,118
2,208
-
1,433
1,433
1,448
3,641
5,440
(1,448)
-
(1,448)
(70)
(241)
(311)
(1,530)
(241)
(1,771)
-
(338)
(338)
12
-
12
-
12
(12)
-
(12)
-
(12)
(1,448)
(649)
(2,109)
-
-
-
-
1,897
2,236
2,992
3,331
The acquired IPR arose on the acquisition of Cloudcall Limited and represents the fair value of the proprietary
software developed within Cloudcall.
The carrying amount of ongoing development projects on which amortisation has not yet commenced was
£1,480k (2018: £639k). The weighted average remaining amortisation period for software is 4.4 years (2018:
4.4 years).
The Company has no intangible assets.
81
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Goodwill
Goodwill arose on the acquisition of Cloudcall Limited and represents the excess of the initial and contingent
consideration over the fair value of the net assets acquired.
The goodwill was tested for impairment at 31 December 2019 by comparing the carrying value of the cash-
generating unit with the recoverable amount. The recoverable amount was determined using a value in use
methodology based on discounted cash flow projections. The key assumptions used in the value in use
calculations were as follows:
(i) The operating cash flows for the business for the five years to 31 December 2024 were taken from
the budget approved by the Board which is closely linked with recent historical performance and
current sales opportunities. The operating cash flow budget is most sensitive to the level of new
business sales which are projected to grow at rates of between 25% - 42% over the 5 year budget
period.
(ii) Growth in operating cash flows of 1.50% has been assumed for the remainder of the value in use
calculation period;
(iii) A pre-tax discount rate of 15% has been used;
(iv) The use of cash flow projections over longer than a 5-year period is considered appropriate as the
business has been operating for over 5 years, has a strong recurring revenue base and continues to
invest in the development of products.
On the basis of the above assumptions and using projection periods of 10 years, 15 years and in perpetuity,
the recoverable amount, based on a value in use methodology, is estimated to exceed the carrying amount
by the amounts shown in the table below. Future annual operating cash inflows, which are most sensitive to
the level of new business sales, would need to be consistently lower than the growth assumptions used in
the value in use calculation by the percentages shown in the table below to reduce the recoverable amount
to below the carrying amount. Based on the historic sales performance of the business and investment made
to support the growth, the directors do not expect this reduced level of future annual operating cash flows
to occur.
Projection period in value in use calculations
15 years
In perpetuity
10 years
Amount by which recoverable amount, based on value in
use, exceeds the carrying amount (£’000)
47,309
31,902
18,804
Reduction in annual revenue growth below the growth
assumptions used in value in use calculation required to
reduce the recoverable amount below the carrying
amount.
30%
23%
14%
As Covid-19 is considered to be a non-adjusting post balance sheet, in line with FRC guidance, the above
impairment review was performed without considering the impact of the virus on the group’s trading which
is commented upon further in note 25.
82
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
12.
Investment in subsidiaries
The Company has the following investments in subsidiaries:
Country of
Class of share held
2019
2018
Incorporation
Ownership
Cloudcall Limited
Cloudcall BY. LLC
Cloudcall, Inc. *
England and Wales Ordinary
Belarus
USA
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
* Cloudcall, Inc. is indirectly owned, being a 100% subsidiary of Cloudcall Limited.
Each of the subsidiary companies is engaged in the Group’s principal activity to provide products and services
designed to enable organisations to use their communications more effectively.
There are no significant restrictions on the entities ability to access or use assets, and settle liabilities, of the
subsidiaries in the Group.
The registered office for each subsidiary is:
Cloudcall Limited
Cloudcall BY LLC
Cloudcall, Inc.
1 Colton Square, Colton Street, Leicester, LE1 1QH, UK
Minsk, 220036, Dzerzinskogo av., 5-711, Belarus
320 Congress Street, Boston, Massachusetts, 02110, USA
Movement on cost and net book value of investments in subsidiaries:
Balance at 1 January 2018
Capital contributions to subsidiary companies
Balance at 31 December 2018
Capital contributions to subsidiary companies
Balance at 31 December 2019
13. Deferred tax assets and liabilities
Shares in
subsidiaries
£'000
2,722
126
2,848
123
2,971
No net deferred tax asset or liability has been recognised in the Company or the Group in relation to
unrelieved trading losses or temporary differences on share based payments, accelerated capital allowances
and intangible assets. Other than to the extent that they offset any potential deferred tax liability, no
deferred tax asset has been recognised on trading losses as, in accordance with IAS 12, there is at present
insufficient evidence that sufficient taxable profits will be available in the near future to recover the assets.
This is due to the early stage of commercialisation of products and the position will be reviewed each year.
83
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The Group did not recognise deferred tax in respect of:
Accelerated capital allowances
Share based payments
Intangible assets
Trading losses
14. Non-current assets by location
UK
USA
Rest of Europe
Total non-current assets
15. Trade and other receivables
Trade receivables
Other receivables and prepayments
Amounts receivable due from group
undertakings
Group
2019
£'000
(71)
101
(509)
3,045
2,566
Group
2019
£'000
4,562
298
325
5,185
Group
2018
£'000
(42)
54
(323)
2,675
2,364
Group
2018
(restated)
£'000
3,222
445
466
4,133
Group
2019
£000
1,607
1,153
-
Group
2018
£000
1,105
752
-
Company
Company
2019
£000
-
303
2018
£000
-
262
23,932
21,090
2,760
1,857
24,235
21,352
All trade and other receivables are expected to be recovered in less than 12 months except for the amounts
due from group undertakings.
The Group has recognised a loss of £131,000 (2018: £115,000) in profit or loss in respect of the expected credit
losses for the year ended 31 December 2019 in relation to trade receivables.
All trade receivables recognised in the year are generated from contracts with customers.
84
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The Board of CloudCall Group plc has considered the provisions around impairment of inter-company
indebtedness contained within IFRS 9 “Financial Instruments” and concluded that the chance of default is
low in light of future growth projections, capital restructuring options open to it, and the high level of control
exerted over its’ subsidiary operations. However, as this balance is expected to be repaid over the long-
term, a provision of £1.5 million has been recognised in line with the requirements of IFRS 9.
16. Cash and cash equivalents
Group
2019
£000
Group
2018
Company
2019
Company
2018
£000
£000
£000
Bank - current account
Bank - deposit account
3,601
7,500
927
-
2,664
7,500
11,101
927
10,164
122
-
122
17. Trade and other payables
Trade payables
Non-trade payables and accrued expenses
Other taxes and social security
Group
2019
£000
432
1,285
445
Group
Company
Company
2018
(restated)
£000
2019
£000
2018
(restated)
£000
334
847
421
25
430
257
712
68
130
229
427
All trade and other payables are payable in less than 12 months.
2,162
1,602
85
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied
at the end of the reporting period was £252,000 as at 31 December 2019 (£234,000 as at 31 December 2018)
and is expected to be recognised as revenue in future periods as follows:
Within 6 months
6 to 12 months
12 to 18 months
18 to 24 months
Over 24 months
18. Borrowings
Current borrowings
Bank loan
Lease liabilities (note 19)
Non-current borrowings
Bank loan
Lease liabilities (note 19)
2019
£000
2018
£000
137
51
21
17
26
252
142
61
17
8
6
234
Group
2019
£000
Group
2018
(restated)
£000
Company
2019
£000
Company
2018
(restated)
£000
160
357
517
-
265
265
813
1,049
-
1,332
160
112
272
813
775
1,862
1,332
1,588
-
32
32
-
788
788
On 11 July 2017, the Company agreed a revolving credit facility with Barclays Bank for an amount of £1.85m.
Interest was set at 7.45% above base rate and the non-utilisation fee was set at 2.98%.
During September 2019, the Group replaced its previous revolving credit facility with Barclays with a new
£3.0m term credit facility (the “Facility”) with Shawbrook Bank. Interest on any funds drawn down from the
Facility, which is for a 3.5 year term expiring in March 2023, is set at 9.0% plus the higher of either LIBOR or
0.5% per annum. At 31 December 2019, the Group has utilised £1million of the £3million Facility. The Facility is
secured over the assets of the Group.
86
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
19. Lease liabilities
The group has engaged in the following leasing activities:
•
•
•
•
The group leased office premises in Leicester for 10 years from the 24 March 2017 to the 23 March
2027.
The group leased office premises in Boston for 4 years from the 1 June 2017 to the 31 May 2021.
The group leased office premises in Belarus for 5 years from the 1 January 2018 to the 31 December
2022.
The group leased motor vehicles for periods of 3-4 years from the 1 April 2019.
An incremental borrowing rate of 8.35% was used to calculate the present value of lease liabilities.
Group
Cost
At 1 January 2018 – as previously reported
Additional ‘right-of-use’ assets on transition to
IFRS 16
At 1 January 2018 – as restated
Additions
Exchange rate translation difference
At 31 December 2018
Additions
Exchange rate translation difference
At 31 December 2019
Depreciation and impairment
At 1 January 2018 – as previously reported
Additional ‘right-of-use’ assets on transition to
IFRS 16
At 1 January 2018 – as restated
Depreciation charge
Exchange rate translation difference
At 31 December 2018
Depreciation charge
Exchange rate translation difference
At 31 December 2019
Net carrying amount
At 1 January 2018
At 31 December 2018
At 31 December 2019
Land and
buildings
Vehicle leases
Total
£’000
£’000
£’000
-
1,397
1,397
460
30
1,887
-
(48)
1,839
-
(148)
(148)
(314)
(10)
(472)
(321)
24
(769)
1,249
1,415
1,070
-
-
-
-
-
-
124
-
124
-
-
-
-
-
-
(15)
-
(15)
-
-
109
-
1,397
1,397
460
30
1,887
124
(48)
1,963
-
(148)
(148)
(314)
(10)
(472)
(336)
24
(784)
1,249
1,415
1,179
87
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Group Group Company Company
2018
£’000
2018
£’000
2019
£’000
2019
£’000
Carrying amount of right-of-use assets included within:
- Land and buildings
- Vehicles
Total carrying amount presented within ‘property, plant and
equipment’
1,070
109
1,179
1,415
-
1,415
606
109
715
686
-
686
Group Group Company Company
2018
£’000
2018
£’000
2019
£’000
2019
£’000
Effect of leases on financial performance:
Depreciation charge for the year included in ‘administrative
expenses’ for right-of-use assets:
- Land and buildings
- Vehicles
Total depreciation charge on leased assets
Interest expense for the year on lease liabilities recognised in
‘finance costs’
Effect of leases on cash flows:
321
15
336
124
314
-
314
139
80
15
95
71
81
-
81
69
Total cash outflow for leases in the year
439
310
128
31
Maturity analysis of future cash
outflows
Within 6
months
6 months -
1 year
1 to 5
years
Over 5
years
Property leases
Vehicle leases
£’000
213
13
226
£’000
214
13
227
£’000
889
83
972
£’000
299
-
299
Maturity analysis of future cash
outflows
Within 6
months
6 months - 1
year
1 to 5
years
Over 5
years
Property leases
£’000
181
£’000
207
£’000
1,197
£’000
449
Total
At 31
December
2019
£’000
1,615
109
1,724
Total
At 31
December
2018
£’000
2,034
88
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
20. Equity settled share based payments
The employee option scheme shares in existence in the year resulted in a total share based payment charge
of £171k (2018: £224k) for the Group in the year and a charge of £49k (2018: £98k) for the Company in the
year.
Cloudcall Group plc Long Term Incentive Plan
On 31 August 2017, the Group set up a Long Term Incentive Plan to which four senior employees were issued
with 36 B shares in the capital of Cloudcall Limited, representing 1.2% of the Company’s share capital. Holders
of the B shares are entitled to participate in any return of capital if certain targets are met by the Group. A
capital return to B shareholders is possible in the event of a sale of shares, liquidation or reduction of capital,
share buyback, dissolution or winding up.
The B shares can be “put” to the Group after the end of a vesting period which runs for four years after 31
August 2017 if certain targets are met. The minimum target is for the average mid-market closing price of the
20p ordinary share of the Company for the 90 days prior to 31 August 2021 to equal or exceed £2.50 and
during the month prior to 31 August 2021, the number of active users must equal or exceed 40,000. The
return to the B shareholders is calculated on a pro-rata basis based on the terms included in the Articles of
Association of Cloudcall Limited. The B shares can also be “put” to the Group if an offer has been made to
acquire a controlling interest in the Group. If the put option is exercised, a B shareholder obliges the Group
to buy the B shares in return for cash or shares in the Group. The form of consideration is at the discretion
of the Group. All B shares will convert automatically to Deferred shares on the fifth anniversary of the issue.
The Deferred shares will carry no voting rights or dividend rights and have no economic value.
Set out below is the number of shares which each of the senior employs received on the Award Date:
Name
Simon Cleaver
Paul Williams
Andrew Jones
Jason Kendall
Number
12
9
9
6
36
The fair value of the B shares issued was calculated using the Monte Carlo model with the following
assumptions:
Date of grant – 31 August 2017
Share price at grant - £1.135
Date of put option exercise – 31 August 2021
Expected volatility – 49.3%
Expected dividend yield – 0.0%
Risk free interest rate – 0.3%
Percentage employees expected to stay over the life of the plan – 100% (updated to 75% in the year
to 31 December 2019)
Estimated number of active users at exercise date – 50,000
The expected volatility is based upon the historic volatility of the Company’s share price over the 4 year
period to 31 August 2017.
89
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The expected dividend yield is based upon the Company historically not paying a dividend.
The risk free rate is based on a zero-coupon UK government bond as at 31 August 2017.
This resulted in a charge of £38k (2018: £92k) for the Company and the Group in the year.
Cloudcall Group plc 2011 Share Option Plan
The Company operates the Cloudcall Group plc 2011 Share Option Plan. The number of Ordinary Shares which
may be utilised within any 10-year period under the Share Option Plan and under any other
discretionary/executive share option plans established by the Company shall not normally exceed 10% of the
issued Ordinary Share Capital of the Company from time to time. The principal terms are summarised below:
Options to subscribe for Ordinary Shares of the Company may be granted (at the discretion of the Board or
the Remuneration Committee of the Board) to selected employees or Directors of or consultants to the
Group.
The options granted in June 2011 vest 1/3 on the expiry of 12 months from the date of grant. Thereafter, an
equal percentage of the options vest each month until the expiry of three years from the date of grant when
100 per cent of the options will have vested.
All other options will vest 25 per cent on the expiry of 12 months from the date of grant. Thereafter, an equal
percentage of the options will vest each month until the expiry of three years from the date of grant when
100 per cent of the options will have vested.
All options are equity settled by physical delivery of shares. Options lapse 3 months after leaving
employment if not exercised.
90
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The following options were issued in the year:
Effective date of award
28 February 2019
28 February 2019
28 February 2019
31 May 2019
31 May 2019
31 May 2019
31 August 2019
31 August 2019
31 August 2019
30 November 2019
30 November 2019
30 November 2019
No. of
instruments
5,000
7,500
7,500
10,000
15,000
15,000
16,250
24,375
24,375
35,349
53,023
53,025
266,397
Life
1 year
2 years
3 years
1 year
2 years
3 years
1 year
2 years
3 years
1 year
2 years
3 years
The number and weighted average exercise prices of share options for the Group are as follows:
Year ended 31 December 2019
Outstanding at the beginning of the period
Granted during the period
Exercised during the period
Surrendered during period
Outstanding at the end of the period
Exercisable at the end of the period
No. of
instruments
1,045,196
266,397
(93,000)
(190,691)
1,027,902
469,729
Weighted
average
exercise price
Pence
122
102
(73)
(111)
120
138
The options outstanding at the year-end have an exercise price in the range of 60 to 300 pence and a
weighted average contractual life of 6.5 years.
The fair value of options granted was measured using a Black-Scholes share option valuation model and
using the following assumptions as inputs:
Expected options life – 5 years
Expected dividend rate - nil
Risk free interest rate – 2.5%
Expected volatility – 94% - 97%
%-age employees expected to stay over the life of the plan – 70%
The expected volatility is based on the historic volatility up to the date of grant, adjusted for any expected
changes to future volatility due to publicly available information.
There are no market conditions associated with the share option grants.
91
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Warrants
Year ended 31 December
2019
Outstanding at the beginning
of the period
Granted during the period
Exercised during the period
Outstanding at the end of the
period
Exercisable at the end of the
period
Group
Company
No. of
instruments
Weighted
average
exercise price
Pence
No. of
instruments
Weighted
average
exercise price
Pence
33,500
-
-
33,500
33,500
132
132
132
33,500
-
-
33,500
33,500
132
132
132
There were no new warrant awards granted during 2019.
21. Share capital
The issued, called up and fully paid share capital of the Company at 31 December was as follows:
Number of shares
2019
(000)
2018
(000)
2019
£'000
2018
£'000
Allotted, called up and fully paid Ordinary
shares of £0.20 each
38,756
24,181
7,751
4,836
The movement in the issued share capital in the year was as follows:
Number of shares
Ordinary
shares
(000)
In issue at 31 December 2018 - fully paid
24,181
Issued in consideration for additional shares placed on 5 February 2019
Issued in consideration for additional shares placed on 23 October 2019
Issued in respect of warrants and options
In issue at 31 December 2019 - fully paid
2,400
12,082
93
38,756
92
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled
to one vote per share at meetings of the Company.
On 23 January 2019, 313 ordinary shares were issued in respect of share options exercised.
On 5 February 2019, 2,400,000 ordinary shares were issued in respect of shares placed.
On 15 February 2019, 1,781 ordinary shares were issued in respect of share options exercised.
On 3 April 2019, 7,774 ordinary shares were issued in respect of share options exercised.
On 10 April 2019, 1,968 ordinary shares were issued in respect of share options exercised.
On 24 April 2019, 10,770 ordinary shares were issued in respect of share options exercised.
On 20 May 2019, 8,250 ordinary shares were issued in respect of share options exercised.
On 23 May 2019, 10,940 ordinary shares were issued in respect of share options exercised.
On 30 May 2019, 2,062 ordinary shares were issued in respect of share options exercised.
On 13 June 2019, 2,305 ordinary shares were issued in respect of share options exercised.
On 26 June 2019, 1,904 ordinary shares were issued in respect of share options exercised.
On 3 July 2019, 840 ordinary shares were issued in respect of share options exercised.
On 8 July 2019, 4,875 ordinary shares were issued in respect of share options exercised.
On 30 July 2019, 3,168 ordinary shares were issued in respect of share options exercised.
On 10 October 2019, 21,970 ordinary shares were issued in respect of share options exercised.
On 23 October 2019, 12,081,685 ordinary shares were issued in respect of shares placed.
On 13 November 2019, 2,343 ordinary shares were issued in respect of share options exercised.
On 26 November 2019, 414 ordinary shares were issued in respect of share options exercised.
On 19 December 2019, 11,415 ordinary shares were issued in respect of share options exercised.
The total share issue costs during the year ended 31 December 2019 of £934k (2018: £14k) have been deducted
from the share premium account.
93
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
22. Loss per share
Basic loss per share
The calculation of basic loss per share for the year ended 31 December 2019 of 10.3 pence (2018: 12.9 pence
restated) was based on the loss for the year attributable to owners of the parent of £2,945k (2018: £3,122k
restated) and a weighted average number of Ordinary Shares outstanding during the period of 28,632,000
(2018: 24,131,000), calculated as follows:
(Thousands of shares)
Issued ordinary shares at start of year
Issued for cash on 5 February 2019
Issued for cash on 23 October 2019
Issued in respect of warrants and options
2019
(000)
24,181
2,163
2,280
8
2018
(000)
24,069
-
-
62
Weighted average number of ordinary shares
28,632
24,131
Diluted loss per share
The weighted average number of shares and the loss for the year for the purposes of calculating diluted loss
per share are the same as for the basic loss per share calculation. This is because the outstanding share
options would have the effect of reducing the loss per share and would not, therefore, be dilutive under the
terms of IAS 33.
23. Financial instruments
Exposure to currency and credit risk arises in the normal course of business.
Qualitative disclosures in respect of the nature and extent of the Group’s and Company’s exposure to risks
arising from financial instruments along with the methods used to measure the risks and the objectives,
policies and processes employed for managing the exposure are described in Note 4Error! Reference source
not found..
Credit risk
The carrying value of financial assets at the reporting date represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting date was:
94
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
Cash and cash equivalents
Group
2019
£000
Group
2018
Company
2019
Company
2018
£000
£000
£000
Bank - current account
Bank - deposit account
3,601
7,500
927
-
2,664
7,500
11,101
927
10,164
122
-
122
Trade and other receivables
Trade receivables
Other receivables and prepayments
Amounts receivable due from group
undertakings
Group
2019
£000
1,607
181
-
Group
2018
£000
1,105
181
-
Company
Company
2019
£000
-
114
2018
£000
-
113
23,932
21,090
1,788
1,286
24,046
21,203
No collateral or security is held in relation to amounts shown within trade and other receivables. There is
little significant concentration of credit risk by customer and geography and the Group considers the
possibility of significant loss in the event of non-performance by a commercial counterparty to be unlikely.
95
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
An analysis of trade receivables ageing based on due date and allowance for expected credit losses provided
for are set out below:
Not yet overdue
1 – 30 days overdue
30 – 60 days overdue
60+ days overdue
Allowance for expected credit losses
Carrying amount
2019
£000
1,326
114
29
194
1,663
(56)
1,607
2018
£000
816
208
6
154
1,184
(79)
1,105
The majority of the trade receivables not yet overdue and 1 – 30 days overdue are covered by direct debit
arrangements and therefore the loss allowance under the 12-month expected credit losses is minimal. The
loss allowance for the remaining trade receivables is measured at an amount equal to lifetime expected
credit losses and totals £56,000 (2018: £79,000).
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Liquidity risk
Group
2019
£000
79
131
(154)
56
Group
2018
£000
15
115
(51)
79
The contractual maturity of financial liabilities at year end approximates to carrying value.
Interest rate risk
The Group’s and Company’s interest-bearing financial instruments at the year-end were:
Group
2019
£000
Group
Company
Company
2018
£000
2019
£000
2018
£000
Variable rate instruments
Cash and cash equivalents
Bank loan
11,101
927
973
-
10,164
973
122
-
96
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
The Group and Company invest surplus cash in short term money market or deposit accounts to achieve the
highest possible interest rates but having regard to the credit rating of the banking institutions and the
currencies required by the Group. The Group has in place a revolving credit arrangement with Shawbrook,
details of which can be found within note 18, with interest linked to LIBOR and given the low level of
borrowings the interest rate risk is low.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity
and profit or loss by an amount which is deemed to be immaterial.
Foreign currency risk
The Group undertakes operations using £ sterling and US dollars. Exchange differences arising on the
settlement of invoices are taken to profit or loss as incurred. Exchange gains or losses on the retranslation
of monetary items at the reporting date are also taken to profit or loss.
Most of the Group’s inter-company debt is denominated in Sterling (between Cloudcall Group plc and
Cloudcall Limited), however, there exists an inter-company debt of £6,870k (2018: £6,108k) payable by
Cloudcall, Inc. to Cloudcall Limited. Over the course of the year, the movement of GBP to USD FX rates has
resulted in a debit to the operating statement of £92k (2018: £67k credit) and a debit to other comprehensive
income of £155k (2018: £234k credit).
Fair values
Due to the short-term nature of the assets and liabilities it is considered that the carrying amount equals fair
value.
24. Related parties
Cloudcall Group plc is the parent company of the Group. There is no overall control of Cloudcall Group plc.
During the year, the Company charged management fees to Cloudcall Limited of £1,446k (2018: £1,194k).
The balances due to the Company at the year end are as follows:
Cloudcall Limited
Cloudcall, Inc.
2019
£000
25,395
37
25,432
2018
£000
21,053
37
21,090
During the year, the Group incurred costs of £25k (2019: £25k) in respect of services provided by Vikaas Talent
Limited, a company in which G Browning is a director.
97
Cloudcall Group plc
Registered number: 05509873
Cloudcall Group plc
Annual Report and Financial Statements
2019
Financial Statements
25. Events after the reporting period
Since the year end, the spread of the Covid-19 virus has escalated and has had an impact on the group as
countries have moved into lockdown. The impact and resulting actions taken by the group have been
commented upon in the Strategic Report on pages 5-25 and the going concern note on pages 60 and 61.
98
Cloudcall Group plc
Registered number: 05509873