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Outsourcery PLC Half Year Results

Outsourcery PLC Half Year Results
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Outsourcery PLC

25 September 2013

25 September 2013

Outsourcery plc

Half year results

Outsourcery plc (AIM: OUT, "Outsourcery", or the "Group"), a world-leading Cloud Service Provider ("CSP") has published its half year results for the six months ended 30 June 2013.

Highlights

--        Admitted to AIM in May 2013 
   --        Revenue up 23.5% to GBP2.1 million (2012: GBP1.7 million): 
   -     recurring revenue of GBP1.5 million 
   -     non-recurring revenue of GBP0.6 million

-- Monthly recurring revenue ("MRR") at 30 June 2013 of GBP0.3 million, giving annualised recurring revenue ("ARR") of GBP3.3 million

--        MRR grown to over GBP0.4 million at 31 August 2013, giving ARR of GBP5.1 million 
   --        Adjusted EBITDA showed a loss of GBP3.2 million (2012: loss of GBP3.9 million) 
   --        Gross cash at 30 June 2013 of GBP7.3 million (2012: GBP1.1 million)

-- Monthly recurring revenue growth expectations on track for December 2013, underpinning the year end exit run rate, with increasing pipeline visibility for 2014

--        Partner network more than doubled since IPO, now exceeds 370 signed partners

-- New strategic partnership signed with Ingram Micro, the world's largest technology distributor

--        Virgin Media Business unified communications offering launched in September 2013

-- Partnership agreement with Microsoft Corporation signed in September 2013 to deploy first IL3 accredited secure cloud platform for UK public sector

--        Now a pure-play Cloud business following disposal of mobile distribution business

Piers Linney, Co-CEO said:

"This has been a period of significant development and progress for us as we consolidate our first mover advantage and broaden and deepen our reseller partner relationships. Our IPO has had a materially positive impact on our growth potential in a rapidly evolving market as we establish ourselves as the 'go to' Cloud Service Provider.

"The fund raising at the IPO has provided us with further resources to build the business and consolidate our market position as a pure-play Cloud Service Provider. Recently we have seen a number of exciting revenue growth related developments amongst our existing business pipeline as well as new growth opportunities. This includes an agreement with Microsoft Corporation to deploy a highly secure IL3 platform to provide our full range of services to the UK central Government. We remain focused on enabling our partners of all sizes to drive revenue growth as well as engaging with new partners.

"A number of our large strategic partners will commence revenue generation during the last quarter and we remain on track to achieve our revenue growth target for the full year whilst being highly confident about our growth prospects for 2014."

Enquiries:

Outsourcery (www.outsourcery.co.uk)     +44 (0) 330 313 0077 
 Piers Linney, Co-CEO 
 Simon Newton, Co-CEO 
 
 Investec                                +44 (0) 20 7597 5100 
 Andrew Pinder / Patrick Robb 
 
 College Hill                            +44 (0) 20 7457 2020 
 Adrian Duffield / Rozi Morris

About Outsourcery

Outsourcery is a world-leading Cloud Service Provider ("CSP") based in the UK. Cloud computing represents a systemic evolution in the way that IT platforms, applications and communications ("ICT") solutions are provided in a more cost effective and efficient way to enterprises of all sizes. The ICT model is rapidly shifting from a physical technology purchase to the consumption of services with a specified uptime service level on a monthly subscription basis. Outsourcery has invested in its platform and capabilities to apply economies of scale to provide highly resilient and secure services to a range of end-customers from shared platforms in its UK datacentres.

The Group sells to businesses via third party channel partners for whom Cloud services provide an increasingly important revenue stream and its partners range from local ICT suppliers to global telecommunication companies, IT distributors and systems integrators. The ultimate users of the Group's services are the employees of organisations ranging from start-ups to FTSE 100 companies.

The Group's revenues are derived from two sources:

--        Monthly Recurring Revenue ("MRR") which are monthly recurring subscription fees;

-- One Off Revenues ("OOR") which are professional service fees earned for solution design, customisation of, integration with and migration to a cloud-based computing environment.

Outsourcery is a Microsoft Certified Gold Partner with a total of six competencies of which three are gold and three are silver. Outsourcery has one of the broadest offerings of cloud-based services utilising Microsoft technology in the world that includes:

--        Lync Server: Next generation communications and collaboration, including voice breakout; 
   --        Exchange Server: Integrated email, calendars and messaging; 
   --        Hosted Video Conferencing: Integrated Polycom, Lync and Skype conferencing; 
   --        Microsoft Dynamics CRM: Hosting and customisation to automate business processes; 
   --        Microsoft SharePoint: Workflow automation and document management; 
   --        Microsoft Office 365: Microsoft's cloud-based productivity offering;

-- Infrastructure-as-a-Service: Virtual servers and datacentre virtualisation based on Hyper-V Cloud and Windows Server;

--        Backup and storage: Data storage, management and disaster recovery.

Outsourcery was named both Microsoft's worldwide 'Hosting Solutions Partner of the Year' and Microsoft's worldwide 'Dynamics Hosting Partner of the Year' in 2010. The Group was also one of three finalists for the Microsoft worldwide 'Server Platform Partner of the Year' award in 2013 and the only finalist from Europe. Outsourcery and Microsoft are working together to deploy a highly secure 'IL3' accredited cloud platform to provide services to UK central Government and sensitive commercial sector organisations.

Employing 120 staff based in three UK offices and operating facilities in two UK datacentres, Outsourcery plays a leading role in the UK CSP industry. The Group was a founder member of the UK Cloud Industry Forum ("CIF") and has the following accreditations:

--        ISO 27001 (Information Security); 
   --        ISO 9001 (Quality Management); 
   --        ISO 14001 (Environmental Management); 
   --        CIF certification; 
   --        CESG IL2 compliance for public sector solutions.

Outsourcery was the UK's first CSP to be certified as carbon neutral.

The Company's ordinary shares were admitted to trading on AIM on 24 May 2013 ("Admission"). Further, detailed information on the Group is set out in the Admission Document dated 22 May 2013 ("Admission Document") which is available in the Investor Centre on the Outsourcery website (www.outsourcery.co.uk/investors).

Strategic overview

Outsourcery is positioned to take advantage of the systemic market shift in the provisioning of IT and communications from an "on-premise" or "managed service" deployment model to a cloud-based model. The adoption of the cloud is being driven by a wide range of factors including a reduction in the total cost of ownership, operational agility, productivity and scalability.

The Group provides a wide range of cloud-based services via its growing network of partners to both larger enterprises and SMEs. These services are deployed on its proprietary O-Cloud platform, a combination of software, hardware and networking which is housed in a third-party enterprise grade datacentre. The Group has established itself as the leading independent CSP in the UK, demonstrated in part, by its recognition as Microsoft's global Hosting Partner of the year 2010 and a Finalist for Microsoft's Server Platform Partner of the Year Award 2013, acting as a UK launch partner for Microsoft Lync and Windows Server 2012 and by the commercial relationships it has with companies such as Virgin Media Business, Ingram Micro and Atos.

Outsourcery enables its partners to resell its broad offering of cloud services and thereby satisfy their end-customer requirements. One of the key differentiation factors contributing to the success of Outsourcery is its blend of know-how and skills from the different industry domains of IT and telecommunications that enables it to provide cloud-based, fully converged unified communications services. Unlike many IT and telecommunications market participants, Outsourcery is not hindered by the constraints of a legacy business model and systems.

Whilst the Group has experienced significant growth to date through the cloud delivery of Microsoft applications, its O-Cloud platform can also be used by customers for the deployment of a broader range of software applications which, whilst running on a Windows operating system, do not need to be limited to Microsoft. As a result, the combination of the Group's platform, application and unified communications services enables it to deliver a wide range, if not all, of an organisation's ICT requirements.

Outsourcery's business model is predicated on securing subscription-based customer contracts in order to provide a growing base of recurring revenues and to leverage what is a stable overhead cost base and a low ongoing requirement for capital expenditure. Outsourcery's strategy is to leverage the significant investment made in the Group's platform, processes, accreditations, people and partner network to monetise the growing and dynamic cloud opportunity by further developing its partner network and activating partners to drive revenue and achieve scale. The Group's inherent high operational gearing, means this should lead to high margins and profitability.

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Outsourcery has won a number of UK-wide and international tenders for cloud services, from both large partners and end-customers. Unique know-how is being created as it deploys complex and hybrid solutions that integrate cloud-based services with existing on-premise solutions. The Group is also focused on business process automation and self-service for its partners to maximise scalability and minimise support costs.

Operational update

Since Outsourcery's IPO and following the end of the financial period under review, a number of significant strategic business developments have been announced that will further enhance the Group's service offering, consolidate its market position and materially increase revenue potential.

Strategic partnership with Ingram Micro, the world's largest technology wholesaler

On 16 September 2013, Outsourcery agreed a strategic partnership with Ingram Micro UK, a division of Ingram Micro Inc., the largest global wholesaler of technology products and supply chain management services.

Outsourcery's services will be made available to thousands of companies in Ingram Micro's UK partner network. The Group will directly enter into contracts with Ingram Micro's partners who will then be able to sell Outsourcery's hosted version of Microsoft Lync and related messaging services such as email giving them access to enterprise-grade 'voice' and unified communications functionality delivered from the cloud. This strategic partnership further broadens Outsourcery's IT channel relationships alongside its communications channel reach for the delivery of converged solutions to businesses of all sizes.

Sale of legacy mobile distribution business

As stated as the intention in the Admission Document, in September 2013, the Group completed the sale of its legacy mobile distribution business to a UK mobile services operator. This mobile business was the remainder of the Group's legacy mobile operations, the majority of which was divested during 2011.

Revenues for the mobile distribution business had been separately accounted for by the Group. The sale will have no material impact on working capital.

UK central Government cloud opportunity and Microsoft partnership

The public sector opportunity for CSPs such as Outsourcery is significant as UK local and central Government transitions to cloud-based services instead of large and complex on-site managed services. This shift is disrupting the traditional ICT supply-chain.

As a result of the ongoing austerity drive and the long term and often inflexible ICT contracts, the UK Government has implemented a strategy to reduce the cost and complexity of its ICT procurement and the solutions consumed. Cloud-based services are the natural solution as UK Government departments can consume the latest technologies combined with the flexibility, standardisation and subscription billing models offered by CSPs. The UK Government is a large Microsoft customer and the new partnership between Outsourcery and Microsoft will enable it to transition to cloud-based services based on next generation Microsoft solutions hosted on Outsourcery platforms.

The UK Government has introduced a Public Cloud First Policy mandate, meaning that departments are now mandated to consider public Cloud first in any IT procurement as well as more flexible contracts and the involvement of UK SMEs in the delivery of services. Microsoft's global platforms such as Azure or Office365 are now IL2 accredited, but are not hosted in the UK so are not capable of IL3 accreditation. UK Government departments often require solutions that are accredited to the more stringent 'IL3' security level, which requires additional security elements to the provision and the solution must be hosted within UK borders.

On 20 September 2013, Outsourcery entered into an agreement with Microsoft Corporation (NASDAQ: MSFT) to take part in Microsoft Corporation's initiative to accelerate the offering of IL3 compliant cloud services through its cloud operating systems network. Outsourcery will deploy and manage a new platform to provide secure cloud-based services to UK Government and commercial sector organisations with similar security requirements. Microsoft will offer direct technology design and implementation support for this new state of the art platform. This is the first initiative of its kind in the UK market.

Microsoft is pursuing a global initiative by working with partners to provide services to the public sector in a range of local markets. Outsourcery has been selected as the first such partner for the UK and has agreed with Microsoft Corporation to deploy the IL3 accredited platform based on next generation Microsoft technology which will be hosted in the UK. The platform would be wholly-owned and managed by Outsourcery.

The UK Government's aggregate hosting bills are estimated to be almost GBP2 billion per annum (source: Cabinet Office, August 2013) and there are approximately three million UK Government end-users requiring IL3 security level hosting services in the UK.

Unique to the UK market, this IL3 platform will be a physically separate version of Outsourcery's existing O-Cloud platform and will provide infrastructure-as-a-service, applications including Exchange Server, SharePoint and Dynamics CRM and Lync Server based unified communications with full voice capability.

The second phase of the proposed offering will also include data storage, archiving and backup followed by services for Big Data analytics. As the leading UK CSP, Outsourcery is particularly well-placed to provide the UK's central Government with a complete cloud-based ICT offering and expects to commence pipeline building towards the end of 2013, with deployment of customers on the platform in Q3 2014.

Outsourcery will be working closely with its existing and new reseller partners, many of which are well-established suppliers to the UK Government, on its go to market strategy. Outsourcery is already working on responses to UK central Government tenders with its larger partners that will require IL3 compliance.

Outsourcery is a recognised supplier to the UK Government Procurement Service, an executive agency of the Cabinet Office, through the G-Cloud Framework, alongside a number of its reseller partners, which provides access to 30,000 public sector organisations. Outsourcery is ISO 27001 (Information Security) accredited, CIF certified and is capable of deploying 'IL2' accredited solutions, which are typically suitable for UK local Government.

Financial review

Group revenues were up 23.5% to GBP2.1 million (2012: GBP1.7 million) with a gross margin of 37% (2012: 41%). Group revenues comprised GBP1.5 million of recurring revenue and GBP0.6 million of non-recurring or professional services revenue. The MRR at 30 June 2013 was GBP0.3 million, giving annualised recurring revenue ("ARR") on an exit run rate basis of GBP3.3 million. Since the period end the MRR had grown to GBP0.4 million at 31 August 2013, giving an ARR of GBP5.1 million.

Revenue growth expectations remain on track for December 2013 exit run-rate despite an elongated integration project with Vodafone and some other strategic partners,. Margins will improve over time as revenues scale against a tightly controlled cost base.

Administrative expenses (excluding fees associated with listing) were tightly controlled at GBP4.5 million (2012: GBP5.2 million). Cost control is expected to be maintained for the remainder of the year.

Adjusted EBITDA showed a loss GBP3.2 million (2012: GBP3.9 million). Adjusted EBITDA is calculated as reported profit from continuing operations, adjusted for exceptional costs and employee share-based payment options, before finance costs, taxation, depreciation and amortisation and is considered by the Directors to be a key measure of financial performance.

The Group's loss before and after taxation from continuing operations was GBP4.7 million (2012: GBP4.7 million) and basic loss per share for the half year was 22.8 pence (2012: loss of 27.0 pence).

The Group's adjusted loss before and after taxation from continuing operations was GBP4.1 million (2012: GBP4.7 million) and adjusted loss per share for the half year was 19.7 pence (2012: loss of 27.0 pence).

The Group had gross cash at 30 June 2013 of GBP7.3 million (2012: GBP1.1 million).

Current trading and outlook

Outsourcery has recently seen a number of strong opportunities for the growth and development of the business, including the agreement with Microsoft Corporation and new strategic partnership with Ingram Micro. Several existing strategic partners will also begin to contribute revenues during the second half of this year and the Group is well positioned to continue to exploit the market demand for Cloud Services.

Outsourcery remains on track to achieve its revenue growth target for the full year and is confident about its growth prospects for 2014.

Consolidated statement of comprehensive income

For the sixmonths ended 30 June 2013

Unaudited   Unaudited     Unaudited 
                                                                   6 months    6 months          Year 
                                                                      ended       ended         ended 
                                                                    30 June     30 June   31 December 
                                                         Notes         2013        2012          2012 
                                                                    GBP'000     GBP'000       GBP'000 
 
 Revenue                                                              2,092       1,718         3,639 
 Cost of sales                                                      (1,318)     (1,008)       (2,328) 
                                                                 ----------  ----------  ------------ 
 
 Gross profit                                                           774         710         1,311

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Administrative expenses                                            (5,112)     (5,237)      (10,077) 
                                                                 ----------  ----------  ------------ 
 
 Operating loss                                                     (4,338)     (4,527)       (8,766) 
 Finance costs                                                        (349)       (216)       (1,246) 
 
 Loss for period before and after 
  taxation from continuing operations                               (4,687)     (4,743)      (10,012) 
 Profit for the period from discontinued 
  operations                                                             98          63           168 
 
 Loss for period and total comprehensive 
  income (all attributable to equity 
  holders of the parent)                                            (4,589)     (4,680)       (9,844) 
                                                                 ==========  ==========  ============ 
 
 Adjusted loss 
 
 Loss for period before and after 
  taxation from continuing operations                               (4,687)     (4,743)      (10,012) 
 Fees associated with listing                                           626           -             - 
 Employee share-based payment options                                     -           -             2 
 
 Adjusted loss for period before 
  and after taxation from continuing 
  operations                                                        (4,061)     (4,743)      (10,010) 
                                                                 ==========  ==========  ============ 
 
 Adjusted EBITDA*                                                   (3,239)     (3,876)       (7,626) 
---------------------------------------------------------------  ----------  ----------  ------------ 
 
 Basic and diluted (loss) / earnings                       4          Pence       Pence         Pence 
  per share 
 
 
        *    Loss from continuing operations                        (23.31)     (27.36)       (57.76) 
 
        *    Earnings from discontinued operations                     0.49        0.36          0.97 
                                                                 ----------  ----------  ------------ 
 
        *    Total                                                  (22.82)     (27.00)       (56.79) 
                                                                 ==========  ==========  ============ 
 
 
 Adjusted (loss) / earnings per                            4          Pence       Pence         Pence 
  share 
 
 
        *    Adjusted loss from continuing operations               (20.19)     (27.36)       (57.74) 
 
        *    Earnings from discontinued operations                     0.49        0.36          0.97 
                                                                 ----------  ----------  ------------ 
 
        *    Total                                                  (19.70)     (27.00)       (56.77) 
                                                                 ==========  ==========  ============

*Adjusted EBITDA is calculated as adjusted loss (GBP4,061,000), before finance costs (GBP349,000), taxation (GBPNil), depreciation and amortisation (GBP473,000) and is considered by the Directors to be a key measure of financial performance.

Consolidated statement of changes in equity

For the sixmonths ended 30 June 2013

Share     Share   Retained   *Merger     Total 
                                 Capital   Premium     Losses   Reserve    Equity 
                                 GBP'000   GBP'000    GBP'000   GBP'000   GBP'000 
 
 Balance at 1 January 2012           173         -    (2,817)     1,905     (739) 
 
 Merger accounting adjustment          -         -          -       109       109 
                                --------  --------  ---------  --------  -------- 
 Transactions with owners              -         -          -       109       109 
 
 Loss for the period                   -         -    (4,680)         -   (4,680) 
 
 Balance at 30 June 2012             173         -    (7,497)     2,014   (5,310) 
                                ========  ========  =========  ========  ======== 
 
 Employee share-based payment 
  options                              -         -          2         -         2 
 Merger accounting adjustment          -         -          -     2,754     2,754 
                                --------  --------  ---------  --------  -------- 
 Transactions with owners              -         -          2     2,754     2,756 
 
 Loss for the period                   -         -    (5,164)         -   (5,164) 
 
 Balance at 31 December 2012         173         -   (12,659)     4,768   (7,718) 
                                ========  ========  =========  ========  ======== 
 
 Issue of share capital              135    14,307          -         -    14,442 
 Share issue expenses                  -     (561)          -         -     (561) 
 Merger accounting adjustment          -         -          -     2,976     2,976 
                                --------  --------  ---------  --------  -------- 
 Transactions with owners            135    13,746          -     2,976    16,857 
 
 Loss for the period                   -         -    (4,589)         -   (4,589) 
 
 Balance at 30 June 2013             308    13,746   (17,248)     7,744     4,550 
                                ========  ========  =========  ========  ========

*The Merger Reserve relates to the share for share exchange between Outsourcery plc and Outsourcery Group Limited on 10 May 2013.

Consolidated statement of financial position

As at 30 June 2013

Unaudited   Unaudited     Unaudited 
                                                   As at       As at         As at 
                                                 30 June     30 June   31 December 
                                       Notes        2013        2012          2012 
                                                 GBP'000     GBP'000       GBP'000 
 
 Assets 
 Non-current assets 
 Property, plant and equipment                     1,600       2,283         1,906 
                                              ----------  ----------  ------------ 
 
 Total non-current assets                          1,600       2,283         1,906 
                                              ----------  ----------  ------------ 
 
 Current assets 
 Trade and other receivables                       1,553       1,607         1,122 
 Cash and cash equivalents                         7,282       1,063           240 
                                              ----------  ----------  ------------ 
 
 Total current assets                              8,835       2,670         1,362 
                                              ----------  ----------  ------------ 
 
 Assets included in disposal group 
  classified as held for sale                        186           -           167 
                                              ----------  ----------  ------------ 
 
 Total assets                                     10,621       4,953         3,435 
                                              ==========  ==========  ============ 
 
 Equity and liabilities 
 Share capital                           3           308         173           173 
 Share premium                                    13,746           -             - 
 Merger reserve                                    7,744       2,014         4,768 
 Retained losses                                (17,248)     (7,497)      (12,659) 
                                              ----------  ----------  ------------ 
 
 Equity attributable to owners of 
  the parent and total equity                      4,550     (5,310)       (7,718) 
                                              ==========  ==========  ============ 
 
 Liabilities 
 Non-current liabilities 
 Borrowings                              5         2,822       6,698         3,653 
                                              ----------  ----------  ------------ 
 
 Total non-current liabilities                     2,822       6,698         3,653 
                                              ----------  ----------  ------------ 
 
 Current liabilities 
 Trade and other payables                          1,912       2,101         3,412 
 Borrowings                              5         1,213       1,464         3,998 
                                              ----------  ----------  ------------ 
 
 Total current liabilities                         3,125       3,565         7,410 
                                              ----------  ----------  ------------ 
 
 Liabilities included in disposal 
  group classified as held for sale                  124           -            90 
                                              ----------  ----------  ------------ 
 
 Total liabilities                                 6,071      10,263        11,153 
                                              ==========  ==========  ============ 
 
 Total equity and liabilities                     10,621       4,953         3,435 
                                              ==========  ==========  ============

Consolidated statement of cash flows

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For the sixmonths ended 30 June 2013

Unaudited   Unaudited     Unaudited 
                                                 6 months    6 months          Year 
                                                    ended       ended         ended 
                                                  30 June     30 June   31 December 
                                                     2013        2012          2012 
                                                  GBP'000     GBP'000       GBP'000 
 
 Operating activities from continuing 
  operations 
 Loss for the period                              (4,687)     (4,743)      (10,012) 
 Finance costs                                        218         216         1,246 
 Depreciation and amortisation                        473         651         1,140 
 Employee share based payment costs                     6         108             2 
 Net changes in working capital                   (1,498)     (1,583)       (1,190) 
                                               ----------  ----------  ------------ 
 
 Net cash flow used in continuing operations      (5,488)     (5,351)       (8,814) 
 Net cash from / (used in) discontinued 
  operations                                          113       (110)         1,579 
                                               ----------  ----------  ------------ 
 
 Net cash used in operating activities            (5,375)     (5,461)       (7,235) 
                                               ----------  ----------  ------------ 
 
 Investing activities 
 Purchase of property, plant and equipment          (167)       (129)         (240) 
 Proceeds from sale of business, net 
  of cash disposed                                      -       1,498         1,498 
                                               ----------  ----------  ------------ 
 
 Net cash flow from investing activities            (167)       1,369         1,258 
                                               ----------  ----------  ------------ 
 
 Financing activities 
 Finance lease capital repayments                   (105)       (220)         (472) 
 Proceeds from issue of share capita 
  (net of issue costs)l                            13,752         829         2,863 
 Proceeds from other borrowings                         -       4,646         4,778 
 Repayment of other borrowings                      (875)           -             - 
 Interest and finance lease charges 
  paid                                              (188)       (177)       (1,029) 
                                               ----------  ----------  ------------ 
 
 Net cash flow from financing activities           12,584       5,078         6,140 
                                               ----------  ----------  ------------ 
 
 Net increase in cash and cash equivalents 
  in the period                                     7,042         986           163 
 
 Cash and cash equivalents at start 
  of period                                           240          77            77 
                                               ----------  ----------  ------------ 
 Cash and cash equivalents at end of 
  period                                            7,282       1,063           240 
                                               ==========  ==========  ============

Notes to the interim report

1.         General information

Outsourcery plc (AIM: OUT; "Outsourcery"; the "Company"; together with its subsidiary undertakings, the "Group"), is a world-leading provider of cloud-based IT and unified communications services. Outsourcery plc is the Group's ultimate parent company. The Company is incorporated in England and Wales and domiciled within the United Kingdom. The address of the Company's registered office is 10 Whitfield Street, London W1T 2RE. The address of the Group's head office is 1 The Avenue, Spinningfields, Manchester M3 3AP. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange.

Outsoucery's consolidated financial statements are presented in Pounds Sterling (GBP), which is also the functional currency of the parent company.

These consolidated interim financial statements were approved for issue by the Board of Directors on 24 September 2013.

2.         Basis of preparation

The Group's interim consolidated unaudited financial statements are for the six months ended 30 June 2013 and have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted in the European Union ("IFRS"). They have not been prepared in accordance with IA34 'Interim Financial Reporting'. These statements have not been reviewed or audited by the Group's auditors.

The figures for 31 December 2012 are an abridged version of the Group's full financial statements (subject to first time adoption of International Financial Reporting Standards) and together with other financial information contained in this interim report, do not constitute statutory financial statements of the Group as defined in Section 434 of the Companies Act 2006.

Statutory financial statements for Outsourcery Group Limited (refer to basis of consolidation below) for the year ended 31 December 2012 have been filed with the Registrar of Companies for England and Wales and have been reported on by the Group's auditors. The report of the auditors was unqualified and did not contain a statement under section 498 (2) or Section 498 (3) of the Companies Act 2006.

These interim consolidated unaudited financial statements have been prepared in accordance with the accounting policies set out in Section B of the Company's Admission Document, except as detailed below. The accounting policies have been applied consistently throughout the Group.

First time adoption of International Financial Reporting Standards

During the period, the Group has adopted for the first time International Financial Reporting Standards ("IFRS") as adopted by the European Union. The Group financial statements have been prepared under the measurement and recognition criteria of IFRS as adopted by the European Union. The date of transition to IFRS was 1 January 2012. The disclosures concerning the transition from UK GAAP to IFRS are detailed in note 7.

Basis of consolidation

On 21 January 2013, the Company was incorporated under the name Outsourcery Holdings Limited. On 10 May 2013, Outsourcery Holdings Limited acquired the entire issued share capital of Outsourcery Group Limited (the then ultimate holding company of the trading entities Outsourcery Hosting Limited and Outsourcery Mobile Limited) via a share for share exchange with the shareholders of Outsourcery Group Limited. On 17 May 2013, Outsourcery Holdings Limited changed its name to Outsourcery Limited and subsequently was re-registered as a public limited company with the name Outsourcery plc. Following the share for share exchange referred to above, Outsourcery plc became the ultimate legal parent of the Group.

The directors consider the share for share exchange transaction to be a group reconstruction rather than a business combination in the context of IFRS3 (revised), 'Business Combinations', which has been accounted for using merger accounting principles. Therefore, although the share for share exchange did not occur until 10 May 2013, the consolidated financial statements of Outsourcery plc are presented as if the Outsourcery group of companies had always been part of the same Group. Accordingly, the results of the Group for the entire period ended 30 June 2013 are shown in the consolidated statement of comprehensive income and the comparative figures for the period ended 30 June 2012 and the year ended 31 December 2012 are also prepared on this basis.

Accordingly, the following accounting treatment has been applied in respect of the share for share exchange:

-- The assets and liabilities of Outsourcery Group Limited and its subsidiaries are recognised in the interim consolidated unaudited financial statements at the pre-combination carrying amounts, without restatement to fair value;

-- The retained losses and other equity balances recognised in the interim consolidated unaudited financial statements for the period ended 30 June 2013 reflect the retained losses and other equity balances of Outsourcery Group Limited and its subsidiaries recorded before the share for share exchange. However the equity structure (share capital and share premium balances) shown in the interim consolidated unaudited financial statements reflects the equity structure of the legal parent (Outsourcery plc), including the equity instruments issued under the share for share exchange. The resulting difference between the parent's capital and the acquired group's capital has been recognised as a component of equity being the 'merger reserve';

--      Comparative figures have been restated on the same basis as above.

The Company had no significant assets, liabilities or contingent liabilities of its own at the time of the share for share exchange and no such consideration was paid.

Admission and share issue costs

Transaction costs of equity transactions relating to the issue of the Company's shares are shown as a deduction from equity. Listing and Admission costs are charged to profit or loss as an administration expense.

The Directors have reviewed the expenditure related to the Admission and, where appropriate, made judgments as to how much of the expenditure related to the Admission process and how much related to the issue of new equity and should therefore be charged against the share premium account.

Going concern

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September 25, 2013 02:00 ET (06:00 GMT)

Following the Company's placing and Admission, the Group has considerable financial resources available to it. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors have also prepared cash flow forecasts for the period until December 2014. As part of the preparation of these forecasts, the Directors have estimated the likely conversion of potential future business. Based on these forecasts, the Directors have confirmed that there are sufficient cash reserves to fund the business for the period under review. After reviewing these forecasts, consideration of the Group's cash resources and other appropriate enquiries, the Directors have a reasonable expectation that the Company and Group have 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 interim statements.

Profit or loss from discontinued operations

A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and:

--      Represents a separate major line of business or geographical area of operations;

-- Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or

--      Is a subsidiary acquired exclusively with a view to resale.

Profit or loss from discontinued operations, including prior year components of profit or loss, is presented in a single amount in the income statement. This amount comprises the post-tax profit or loss of discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of assets classified as held for sale.

3.         Share capital 
 
  6 months ended 30 June 2013 
 
  Ordinary shares of GBP0.01 each 
                                                             Number        GBP 
  At 1 January 2013                                               -          - 
  Shares issued pursuant to share for share exchange 
   to acquire Outsourcery Group Limited                  17,334,900    173,349 
  Shares issued upon exercise of options                    599,300      5,993 
  Shares issued pursuant to anti-dilution rights             79,800        798 
  Shares issued pursuant to conversion of borrowings 
   (note 6)                                               2,817,458     28,175 
  Share issue upon Admission                             10,000,000    100,000 
                                                       ------------  --------- 
 
  At 30 June 2013                                        30,831,458    308,315 
                                                       ============  ========= 
 
  6 months ended 30 June 2012 
 
  Ordinary shares of GBP0.01 each 
                                                             Number        GBP 
 
  At 30 June 2012*                                       17,334,900    173,349 
                                                       ============  ========= 
 
  Year ended 31 December 2012 
 
  Ordinary shares of GBP0.01 each 
                                                             Number        GBP 
 
  At 31 December 2012*                                   17,334,900    173,349 
                                                       ============  =========

* The number of shares in issue for each of the comparable periods represents the shares issued by Outsourcery plc in the share for share exchange transaction that made the Company the legal parent of the Group, adjusted for the subsequent 100 for 1 subdivision.

4.         (Loss) / earnings per share 
 
                                                       Unaudited    Unaudited     Unaudited 
                                                        6 months     6 months          Year 
                                                           ended        ended         ended 
                                                         30 June      30 June   31 December 
                                                            2013         2012          2012 
                                                         GBP'000      GBP'000       GBP'000 
 
 Continuing operations 
 Loss for the period attributable to equity 
  holders of the parent                                  (4,687)      (4,743)      (10,012) 
 
 Discontinued operations 
 Loss for the period attributable to equity 
  holders of the parent                                       98           63           168 
 
 Total operations 
 Loss for the period attributable to equity 
  holders of the parent                                  (4,589)      (4,680)       (9,844) 
 
 Adjusted profit 
 
 Continuing operations 
 Loss for the period attributable to equity 
  holders of the parent                                  (4,687)      (4,743)      (10,012) 
 Fees associated with listing                                626            -             - 
 Employee share-based payment options                          -            -             2 
 
 Adjusted loss for the period attributable 
  to equity holders of the parent                        (4,061)      (4,743)      (10,010) 
 
 Discontinued operations 
 Loss for the period attributable to equity 
  holders of the parent                                       98           63           168 
 
 Total operations 
 Loss for the period attributable to equity 
  holders of the parent                                  (3,963)      (4,680)       (9,844) 
                                                     ===========  ===========  ============ 
 
                                                          Number       Number        Number 
 
 Weighted average number of shares used 
  in basic earnings per share                         20,109,192   17,334,900    17,334,900 
 Shares deemed to be issued for no consideration               -            -             - 
  in respect of share-based payments 
                                                     -----------  -----------  ------------ 
 
 Weighted average number of shares used 
  in diluted earnings per share                       20,109,192   17,334,900    17,334,900 
                                                     ===========  ===========  ============ 
 
                                                           Pence        Pence         Pence 
 
 Basic and diluted (loss)/earnings 
  per share 
 
        *    Loss from continuing operations             (23.31)      (27.36)       (57.76) 
 
        *    Earnings from discontinued operations          0.49         0.36          0.97 
                                                     -----------  -----------  ------------ 
 
 
        *    Total                                       (22.82)      (27.00)       (56.79) 
                                                     ===========  ===========  ============ 
 
 
 
 Adjusted (loss) / earnings per 
  share* 
 
        *    Loss from continuing operations          (20.19)   (27.36)   (57.76) 
 
        *    Earnings from discontinued operations       0.49      0.36      0.97 
                                                     --------  --------  -------- 
 
 
        *    Total                                    (19.70)   (27.00)   (56.79) 
                                                     ========  ========  ========

*Adjusted loss per share has been disclosed to give a clear understanding of the Group's underlying trading performance. It has been calculated using the adjusted earnings figures above and the weighted average number of ordinary shares above.

5.         Analysis of borrowings 
 
                              Unaudited   Unaudited     Unaudited 
                                  As at       As at         As at 
                                30 June     30 June   31 December 
                      Notes        2013        2012          2012 
                                GBP'000     GBP'000       GBP'000 
 
 Current 
 Shareholder debt       1             -         204           463 
 Boost loan stock       2           971         394         3,139 
 Property mortgage      3            37         350            37 
 Finance leases                     205         516           359 
                                  1,213       1,464         3,998 
 
 Non-current 
 Shareholder debt       1             -       1,780         1,780 
 Boost loan stock       2         1,918       2,769             - 
 Property mortgage      3           299           -           318 
 Etive loan stock       4           501       1,999         1,500 
 Finance leases                     104         150            55 
                             ----------  ----------  ------------ 
                                  2,822       6,698         3,653 
 
 
 Total borrowings                 4,035       8,162         7,651 
                             ==========  ==========  ============

Notes to the analysis of borrowings

1. The majority of the shareholder debt was converted to 1,909,276 ordinary shares upon Admission at the IPO price.

2. The Boost loan stock bore interest at 12.5% from 1 January 2013. Interest charged during 2012 was at 14%. This loan is expected to be repaid in full in March 2016. Due to a breach of covenant at 31 December 2012, this loan stock was classi ed as a current liability. The breach was rectified in the six months ended 30 June 2013.

3. The property mortgage bears interest at 10% and is expected to be repaid in full in July 2015. As at 30 June 2012, the property mortgage was repayable on demand. The repayment profile was subsequently amended following the introduction of a new lender.

4. GBP999,000 of the cash value of the Etive loan stock was converted to 908,182 ordinary shares upon Admission at the IPO price. The remainder of the GBP1.0 million Etive loan stock bears no interest and is shown at its present value. This loan stock is expected to be repaid in full in May 2016.

6.         Explanation of transition to IFRS

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September 25, 2013 02:00 ET (06:00 GMT)

This is the first time that the Group has presented its consolidated financial information under IFRS. The accounting policies detailed in note 2 have been applied in preparing the financial information for the 6 months ended 30 June 2013, the comparative information presented in this financial information for the year ended 31 December 2012 and the preparation of the opening IFRS statement of financial position at 1 January 2012.

An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position, financial performance and cash flows since the transition are set out in the following tables and notes.

Reconciliation of equity at 1 January 
  2012 
                                                                          Effect 
                                                                              of 
                                                             Merger   transition 
                                          Notes   UK GAAP   Reserve      to IFRS      IFRS 
                                                  GBP'000   GBP'000      GBP'000   GBP'000 
 
 Assets 
 Non-current assets 
 Property, plant and equipment                      2,806         -            -     2,806 
                                                 --------  --------  -----------  -------- 
 
 Total non-current assets                           2,806         -            -     2,806 
                                                 --------  --------  -----------  -------- 
 
 Current assets 
 Trade and other receivables                        3,139         -            -     3,139 
 Cash and cash equivalents                             77         -            -        77 
                                                 --------  --------  -----------  -------- 
 
 Total current assets                               3,216         -            -     3,216 
                                                 --------  --------  -----------  -------- 
 
 Total assets                                       6,022         -            -     6,022 
                                                 ========  ========  ===========  ======== 
 
 Equity and liabilities 
 Share capital                              3           1       172            -       173 
 Share premium                              3       2,077   (2,077)            -         - 
 Merger reserve                                         -     1,905            -     1,905 
 Retained losses                            2     (2,733)         -         (84)   (2,817) 
                                                 --------  --------  -----------  -------- 
 
 Equity attributable to owners of 
  the parent and total equity                       (655)         -         (84)     (739) 
                                                 ========  ========  ===========  ======== 
 
 Liabilities 
 Non-current liabilities 
 Trade and other payables                             391         -            -       391 
 Borrowings                                         1,780         -            -     1,780 
                                                 --------  --------  -----------  -------- 
 
 Total non-current liabilities                      2,171         -            -     2,171 
                                                 --------  --------  -----------  -------- 
 
 Current liabilities 
 Trade and other payables                   1       3,713         -           84     3,797 
 Borrowings                                           793         -            -       793 
                                                 --------  --------  -----------  -------- 
 
 Total current liabilities                          4,506         -           84     4,590 
                                                 --------  --------  -----------  -------- 
 
 Total liabilities                                  6,677         -           84     6,761 
                                                 ========  ========  ===========  ======== 
 
 Total equity and liabilities                       6,022         -            -     6,022 
                                                 ========  ========  ===========  ========

Notes to the reconciliation of equity at 1 January 2012

1. On converting to IFRS, the treatment of rental expense for the Manchester and London offices has resulted in an increase of GBP84,000 in the annual charge to the consolidated income statement and the resultant adjustment required to trade and other payables as a result of spreading the lease incentives received over the full term of the lease. An additional increase of GBP85,000 was recorded in the year ended 31 December 2012.

2. The charges to retained losses are as a result of the adjustments to profit as shown in the reconciliation of total comprehensive income and related notes detailed below.

3.   Recognition of merger reserve. 
 
 Reconciliation of equity at 31 
  December 2012 
                                                                        Effect 
                                                                            of 
                                                           Merger   transition 
                                       Notes    UK GAAP   Reserve      to IFRS       IFRS 
                                                GBP'000   GBP'000      GBP'000    GBP'000 
 
 Assets 
 Non-current assets 
 Property, plant and equipment                    1,906         -            -      1,906 
                                              ---------  --------  -----------  --------- 
 
 Total non-current assets                         1,906         -            -      1,906 
                                              ---------  --------  -----------  --------- 
 
 Current assets 
 Trade and other receivables                      1,122         -            -      1,122 
 Cash and cash equivalents                          240         -            -        240 
                                              ---------  --------  -----------  --------- 
 
 Total current assets                             1,362         -            -      1,362 
                                              ---------  --------  -----------  --------- 
 
 Assets included in disposal group 
  classified as held for sale                       167         -            -        167 
                                              ---------  --------  -----------  --------- 
 
 Total assets                                     3,435         -            -      3,435 
                                              =========  ========  ===========  ========= 
 
 Equity and liabilities 
 Share capital                           3            1       172            -        173 
 Share premium                           3        4,940   (4,940)            -          - 
 Merger reserve                                       -     4,768            -      4,768 
 Retained losses                         2     (12,490)         -        (169)   (12,659) 
                                              ---------  --------  -----------  --------- 
 
 Equity attributable to owners of 
  the parent and total equity                   (7,549)         -        (169)    (7,718) 
                                              =========  ========  ===========  ========= 
 
 Liabilities 
 Non-current liabilities 
 Borrowings                                       3,653         -            -      3,653 
                                              ---------  --------  -----------  --------- 
 
 Total non-current liabilities                    3,653         -            -      3,653 
                                              ---------  --------  -----------  --------- 
 
 Current liabilities 
 Trade and other payables                1        3,243         -          169      3,412 
 Borrowings                                       3,998         -            -      3,998 
                                              ---------  --------  -----------  --------- 
 
 Total current liabilities                        7,241         -          169      7,410 
                                              ---------  --------  -----------  --------- 
 
 Liabilities included in disposal 
  group classified as held for sale                  90         -            -         90 
                                              ---------  --------  -----------  --------- 
 
 Total liabilities                               10,984         -          169     11,153 
                                              =========  ========  ===========  ========= 
 
 Total equity and liabilities                     3,435         -            -      3,435 
                                              =========  ========  ===========  ========= 
 
 
 Reconciliation of total comprehensive income for the year ended 31 December 
  2012 
 
                                                                 Effect of 
                                                                transition 
                                              Notes   UK GAAP      to IFRS       IFRS 
                                                      GBP'000      GBP'000    GBP'000 
 
 Revenue                                                3,639            -      3,639 
 Cost of sales                                        (2,328)            -    (2,328) 
                                                     --------  -----------  --------- 
 
 Gross profit                                           1,311            -      1,311 
 Administrative expenses                      1       (9,992)         (85)   (10,077) 
                                                     --------  -----------  --------- 
 
 Operating loss                                       (8,681)         (85)    (8,766) 
 Finance costs                                        (1,246)            -    (1,246) 
                                                     --------  -----------  ---------

(MORE TO FOLLOW) Dow Jones Newswires

September 25, 2013 02:00 ET (06:00 GMT)

Loss before tax                                      (9,927)         (85)   (10,012) 
 Taxation                                                   -            -          - 
                                                     --------  -----------  --------- 
 
 Loss for period from continuing 
  operations                                          (9,927)         (85)   (10,012) 
 Profit for the period from discontinued 
  operations                                              168            -        168 
 
 Loss for period and total comprehensive 
  income (all attributable to equity 
  holders of the parent)                              (9,759)         (85)    (9,844) 
                                                     ========  ===========  =========

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR NKQDBOBKDBCB

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September 25, 2013 02:00 ET (06:00 GMT)

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