Sovereign Cloud : FY22 Half Year Report and Accounts

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APPENDIX 4D

SOVEREIGN CLOUD HOLDINGS LIMITED

ABN 80 622 728 189

FOR THE HALF-YEAR ENDED 31 DECEMBER 2021

The information contained in this report is for the half -year ended 31 December 2021 and the previous corresponding period ended 31 December 2020 for Sovereign Cloud Holdings Limited, the 'Company' and its controlled entity.

This report is presented in Australian dollars.

Sovereign Cloud Holdings Limited and its controlled entity, financial report for the half-year ended 31 December 2021 remains subject to the finalisation of auditor review and sign off. The Company will immediately make a further ASX announcement to the market if there are any material, differences between its unreviewed accounts and its final audit reviewed accounts. It is likely the Independent Audit Report will be lodged by 21 February 2022.

Results for announcement to the market
	H1 FY22	H1 FY21	Movement
	$	$	%
Revenues from ordinary activities	2,509,473	1,451,026	+72.9%
Loss from ordinary activities after tax	(6,290,876)	(5,364,459)	-17.3%
Loss for the period	(6,290,876)	(5,364,459)	-17.3%
Dividend information
	Amount per Share	Franked Amount	Conduit Foreign
	(cents)	per Share (cents)	Income Amount
			per Share
Interim dividend	-	-	-
Brief explanation to figures reported above
Refer to review of operations on page 2.
		31 Dec 2021	31 Dec 2020
		$	$
Net tangible assets per security (cents)		27.7	25.3

Details of entities which control has been gained or lost during the period.

None

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Sovereign Cloud Holdings Limited

ACN: 80 622 728 189

HALF YEAR FINANCIAL REPORT

FOR THE HALF YEAR ENDED 31 DECEMBER 2021

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SOVEREIGN CLOUD HOLDINGS LIMITED AND CONTROLLED ENTITY

TABLE OF CONTENTS

Director's Report	1 - 2
Auditor's Independence Declaration	3
Consolidated Statement Of Profit Or Loss And Other Comprehensive Income	4
Consolidated Statement of Financial Position	5
Consolidated Statement Of Changes In Equity	6
Consolidated Statement Of Cash Flows	7
Notes To Financial Statements	8 - 10
Director's Declaration	11
Independent Auditor's Report	12-13
Corporate Directory	19

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SOVEREIGN CLOUD HOLDINGS LIMITED AND CONTROLLED ENTITY

DIRECTOR'S REPORT

The Directors present their report together with the interim financial report of Sovereign Cloud Holdings Limited, the 'Company' and its controlled entity, for the half-year ended 31 December 2021.

1. Directors' names

The names of the directors in office at any time during or since the end of the financial period year are:

	Cathie Reid	(Chair)
	Philip Dawson	(Managing Director)
	Ross Walker	(Non-Executive Director)
	Allan Brackin	(Non-Executive Director)
	Craig Scroggie	(Non-Executive Director), appointed on 24 December 2021

The directors have been in office since the start of the half year to the date of this report unless otherwise stated.

2. Principal activities

The group's principal activity is to deliver sovereign cloud services to Australian Governments and critical national industries. Since formation the Group has built a cloud based platform, which is accredited to by Government standards to PROTECTED controls or higher. The platform is available to rent computation cycles and data storage to customers on a pay-as-you-go basis, referred to as Infrastructure as a Service (IaaS).

3. Operating Metrics

Summarised below are the operating metrics adopted by management for measuring the progress of business:

• Total Contract Value (TCV) is the total value of expected revenue from estimated consumption of Infrastructure-as-a-Service (IaaS), services secured through non-enforceable customer contracts (eg purchase orders, statement of works). Invoices are raised typically on a monthly basis against these contracts based on actual customer usage. Such contracts generally form part of a larger contractual scope that is less defined but provides overarching commercial terms (eg Master Services Agreements, Channel Partner Agreements, Teaming Agreements). As such, TCV provides an estimated of the total IaaS consumption expected by a customer over a defined time period, typically 12 months.
• TCV Closed in any period is the aggregated revenue associated with all signed commercial contracts in that period.
• TCV Outstanding is the remaining aggregated balance of all signed contracts at a point in time, net of any consumption utilised to date recognised against the respective contracts.
• IaaS Consumption is the revenue recognised based on the aggregated consumption of IaaS services, including contractual implementation, consulting and setup charges. In the Company's experience it is reasonable to expect IaaS Consumption to be repeated in subsequent periods.

4. Review and Results of Operations

Group Financial Results

The Group recorded a net loss for the half-year ended 31 December 2021 ('H1 FY22') a net loss of $6.3 million (HY1 FY21: loss of $5.4 million).

Revenue

For the half-year ended 31 December 2021 ('H1 FY22') revenue was $2.1 million compared to $1.1 million over the previous corresponding six-month period to 31 December 2020 ('H1 FY21').

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SOVEREIGN CLOUD HOLDINGS LIMITED AND CONTROLLED ENTITY

Overall the Group secured $3.4 million in TCV during HY1 FY22. As at 31 December, TCV outstanding was approximately $6.61 million as shown below.

			HY1 FY21		HY2 FY21		HY1 FY22
	Summary of TCV Metrics
			$'m		$'m		$'m
	Opening TCV Outstanding	0.80	2.07	5.96
	Add: Closed TCV	2.35	5.35	3.39
	Less: Cancelled Contracts	-	-	(0.61)
	Less: Revenue recognised	(1.08)	(1.46)	(2.13)
	Closing TCV Outstanding	2.07		5.96		6.61

Expenses

Total expenses in H1 FY22 were $8.8 million (H1 FY20: $6.8 million) an increase of $2.0 million. The increase in expenses was mainly due to additional employee headcount, increase in depreciation and costs associated with being ASX listed (which occurred in December 2020).

Financial Position

The Company's net asset position increased in HY1 FY22 by $28 million to $47 million at 31 December 2021, due to the capital raising in November/December 2021 of $35 million which included a placement to NEXTDC and a non- renounceable share entitlement offer.

5. After balance date events

No matters or circumstances have arisen since the end of the half year ended 31 December 2021 which significantly affected or may significantly affect the operations of the group, the results of those operations, or the state of affairs of thegroup in future financial periods.

Signed in accordance with a resolution of the Board of Directors of Sovereign Cloud Holdings Limited.

Cathie Reid

Chair

Dated: 16 February 2022

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