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By | Paul Kunert 19th March 2014 17:26

Dragon's Den star's cloudy biz still losing MEEELLLLLIONS

Sales and recurring revenues up at Outsourcery - but it still can't break even

It was a year of frenzied activity for AIM-listed Outsourcery in 2013 but none of this translated into bottom line goodness as the cloud provider's losses again outstripped sales.

According to preliminary numbers reported today, the Manchester-based as-a-service firm reported a 44 per cent sales spike to £5.2m, including £4.1m of recurring revenues.

But the resulting £1.9m gross profit evaporated after £10.1m worth of administrative fees left management facing an operating loss of £8.8m, versus an operating loss of £8.76m in 2012.

The business, run by Dragon's Den newbie Piers Linney and co-CEO Simon Newton, said it made "good progress against strategic goals" - which is another way of saying that the profits are coming, just not yet.

Linney said in a statement that interest in cloud is "building across all sectors and all sizes of organisation" and the "focus, investment and progress" gave it a "clear and significant lead" against rivals.

"Outsourcery has a real first mover advantage in the markets that we serve," the firm said.

It sells hosted software applications, virtualised servers, next generation UC and collaboration, connectivity and a bunch of Professional Services.

Linney pointed out that since floating on AIM in May, raising £4.2m (before costs) in the process, Outsourcery scaled its channel relations by adding another 253 resellers to the 307 already on board. No doubt the agreement with distributor Ingram Micro helped in this respect.

The company decided, like many other local cloudy service providers, to build a channel to accelerate sales after slower than expected wins with a direct sales force.

In the year, Vodafone UK signed a deal to resell Outsourcery's Microsoft-based services including Enterprise Voice Lync Server, Exchange Server and professional services. The scope of this deal expanded to the group's global enterprise customers in January.

The firm has also moved to expand its horizons beyond the commercial space into the public sector, bagging a place on the G-Cloud framework.

And the Microsoft Gold Partner is currently building an IL3 accredited platform allowing it to deploy government accredited services. Dell is helping design, produce and deploy the infrastructure and Outsourcery is shouldering half of the costs.

"While it is early days, the long term opportunity in the UK public sector is significant. First of all, as many UK government workloads are already run on Microsoft technology our offering is well aligned.

"Second, many significant UK government IT contracts are due for renewal over the course of the next three years," it added.

These contracts are valued at £3.7bn but if the Cabinet Ofice is to be believed it wants to reduce reliance on large software vendors.

Given the losses and the current revenues, Kaye Hanaghan, research director at TechMarketView, said Outsourcery needs to "deliver the 'new buds' of scale in the business and prove the model works.

"2014 is an important year in this regard, but we suspect it could be 2015 before we can really make a judgement on the numbers," she wrote today in a blog post. ®

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