Outsourcery bags another £1m investment as losses start shrinking

FYI, cloud biz still lost £2.1m in six months of this calendar year

Outsourcery has unearthed yet another personal investor willing to throw some cash into the commercial coal furnace; one Lawrence Jones, MBE, who doubles up as the boss of hosting biz UKFast.

Confirmation of Jones agreeing to invest £1m into the Manchester-based cash burning seller of clouds comes as the business revealed it is no longer losing more than it turns over.

The move means the UKFast CEO now owns more than 5.5 million shares in Outsourcery, equating to a 10.52 per cent stake in the Infrastructure-as-a-service and Lync Skype for Business playa.

Jones is to pay 18 pence per new Ordinary Share, a 12.5 per cent premium to the closing price of 16 pence at the close of business yesterday.

Outsourcery floated on AIM in May 2013 and the shares started trading at 110 pence each.

An application for the new placement to be traded on AIM has been made to the London Stock Exchange, and dealing is estimated to start on 5 October.

UKFast sells internet hosting but does not compete directly with Outsourcery, the cloudy business started by Piers Linney, a former member of Dragon’s Den and co-CEO Simon Newton.

Jones told us he views Outsourcery as a “business with huge potential” and has “multiple upsides”. Well, clearly.

The so-called born-in-the-cloud company was forced to slash £4.5m in costs last year after it realised financial results were coming in below expectations – Linney and Newton gave up their annual salary as part of the effort, saving £500,000 in the process.

Outsourcery restructured its debts and received £1m from a private equity firm in October.

In other related news today, the company revealed that in the six months ended 30 June, sales grew £700k on a year ago to £4.1m. Monthly recurring revenues were up to £700k, from £600k.

Adjusted losses from operations shrank to £2.1m from £2.8m in H1 2014, but this does not include restructuring costs, employee share-based payment costs or listing fees. Admin expenses were in line with the budget at £4.7m, the business said.

Getting a cloud business to critical mass isn’t easy, and requires a lot of cash to keep the wheels moving forward while those annuity revenues build.

With this is mind, Outsourcery said it has stepped up direct sales and marketing to take “great control of pipeline and potential”. This may serve to alienate existing partners trade customers that are bringing in the bucks, and will require careful management.

Outsourcery said it plans to “focus on selected partners that have demonstrated a commitment to the sale of cloud services”.

Non-exe chairman Ken Olisa, said: “It is pleasing to see revenue growing and losses narrowing. This has been achieved by a renewed focus of our go-to-market activities and a programme of cost reductions”.

He said the third-party channel had sharpened its effectiveness, “albeit at a slower than ideal rate”. The direct sales activities are “showing early signs of bearing fruit”. ®

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