Sovereign Cloud : FY 22 Half Year Audited Accounts

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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
AUDITOR'S REPORT	12
CORPORATE DIRECTORY	13

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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 and auditor's report thereon.

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').

Page 1

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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 the group in future financial periods.

6. Auditor's Independence Declaration

A copy of the auditor's independence declaration, as required under section307C of the Corporations Act 2001 is set out on page 3 and forms part of the Directors' Report for half-year ended 31 December 2021.

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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AUDITOR'S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF SOVEREIGN CLOUD HOLDINGS LIMITED

UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2021 there have been:

1. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and
2. no contraventions of any applicable code of professional conduct in relation to the review.

Bentleys Brisbane (Audit) Pty Ltd

Chartered Accountants

Stewart Douglas

Director

Brisbane

16 February 2022