Preliminary Results

19 March 2014

Outsourcery plc

("Outsourcery", the "Company" or the "Group")

Preliminary Results for the Year Ended 31 December 2013

- Year-on-year doubling of Monthly Recurring Revenue and strong strategic progress -

Outsourcery (AIM: OUT), a leading Cloud Service Provider ("CSP") that helps organisations of any size to save money, increase productivity and work better reports preliminary results for the financial year ended 31 December 2013.

These results conclude a year in which the Group has made good progress against each of its strategic goals, demonstrated by an increase in the size and quality of the Group's partner base, completion of strategic partner integration programmes and cornerstone contract wins. These achievements have enabled the Group to consolidate its first-mover advantage, drive consistent growth in monthly recurring revenue and invest in ways to capitalise on the emerging appetite for cloud services in the UK public sector. Outsourcery operates a highly disruptive business model as cloud-services increasingly remove the need for organisations of all sizes to consume co-location, managed services or small, purpose built private clouds. Outsourcery is leading the market in the transition of the enormous installed base of Microsoft software to the cloud and displacing the traditional providers of the underlying infrastructure and support services by turning what was a complex and expensive technology purchase into a subscription service delivery model. At the same time new, powerful and fully converged Microsoft unified communications and collaboration solutions are disrupting the traditional telephony systems market and driving adoption.

Financial Metrics

Notes

* Adjusted EBITDA is calculated as reported loss from continuing operations, before employee share based payment charge and fees associated with listing, before finance costs, taxation, depreciation and amortisation and is considered by the Directors to be a key measure of financial performance.

** Adjusted (loss) from continuing operations is calculated as as reported loss from continuing operations, before employee share based payment charge and fees associated with listing and is considered by the Directors to be a key measure of financial performance.

*** Adjusted (loss) per share is calculated using the adjusted loss from continuing operationsabove and the weighted average number of ordinary shares in issue in each of the relevant periods. This has been disclosed to give a clear understanding of the Group's underlying trading performance.

Operational Highlights

· Successfully admitted to trading on AIM

· Validated the Outsourcery model through partner agreements and customer wins

o Key business partnerships secured with large strategic partners such as Vodafone, Virgin Media Business, Atos, Ingram Micro and progress made to secure a number of other similar partners

o Vodafone partnership extended to cover its full global enterprise base

o Small and mid-market business partner network increased by 82% since IPO to stand at over 560 with focus on identifying partners committed to growth in cloud services

o London Business School joins Pearson and the BBC as Outsourcery's third large-scale direct customer

· Securing first-mover leadership position and locking in future growth potential

· Strategy to take advantage of the UK Government's cloud and SME procurement drives

o Outsourcery selected as a supplier to the UK Government's 'G-Cloud' framework

o Agreed partnerships with Dell and Microsoft to develop a Microsoft-validated secure IL3 cloud platform for central Government

o Raised £4.2 million before expenses in an equity placing to fund deployment of this platform and market launch

· Delivered early stage improvements in key financial metrics

o Group Revenue increased by 44% year-on-year and MRR base has grown by 100% to £0.6 million

o Adjusted EBITDA losses stable, costs managed and balance sheet strengthened

· Pure-play focus following divestment of non-core activities

o Sale of last remaining legacy mobile distribution operations secured in September 2013

Commenting on the results Piers Linney, Co-Chief Executive Officer of Outsourcery said:

"Outsourcery enters 2014 in a very strong position. Interest in the cloud is building across all sectors and all sizes of organisation. Our focus, investment and progress this year has put Outsourcery in a strong position to capitalise on this trend, with a clear and significant lead now emerging between us and our nearest competitors. We are also establishing key partnerships across the IT and communications sectors securing access to significant end-customer opportunities that are very difficult to replicate.

When we joined AIM in May last year we promised to expand our partner network; to deepen and activate relationships with existing partners; and to explore new avenues for growth outside of the purely private sector. Some of the biggest names in technology, systems integration and telecommunications are fully engaged and working with us to jointly target end customers and generate revenue. Thanks to last December's successful equity placing and our collaboration with Microsoft and Dell, we are moving quickly ahead with our plans to target new routes to growth in the enormous opportunity presented within the UK public sector as Government policy drives cloud adoption.

All of this adds up to a significant first-mover advantage for us, validating our model and our opportunity for significant growth given our capabilities, the market reach of our partners and Microsoft's absolute commitment to cloud. Whilst there is always more work to be done, based on the progress we have made this year and on the pipeline ahead of us, particularly with our largest partners, the Board is confident in its ability to deliver on market expectations for the year ahead."

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About Outsourcery

Outsourcery operates a disruptive business model that will over time displace traditional hosting solutions providers that remain focused on selling hardware, software, data centre space, networking and support to build discrete solutions for individual organisations of all sizes. The exponential growth in demand for computing power and data storage as well as shortening technology refresh cycles, the convergence of IT and communications technology and more complex applications are driving rapid adoption of cloud-based services and technology is increasingly consumed 'as-a-service' and paid for by way of flexible monthly subscriptions. Organisations are increasingly considering how best to implement and use cloud services and although large enterprises are rapidly embracing cloud services, smaller organisations are catching up their understanding of the cloud's potential and how to consume cloud-based services.

Outsourcery helps organisations of any size to consume cloud services and importantly helps its partners transition from a legacy technology delivery model to a service consumption model for subscription revenues. Outsourcery is helping organisations make sense of the cloud to save them money, increase productivity and reduce the need for capital expenditure. The traditional approaches of hosting ICT infrastructure in a third party data centre (co-location), or paying a third party to manage corporate ICT solutions (managed services) or even paying a third party to build a discrete virtualised platform for a single organisation (private cloud) are inefficient and lack scale. Large scale CSPs offering solutions to many end-customers from shared cloud platforms are the future of ICT solution delivery on a subscription basis as opposed to the traditional capital expenditure model.

Outsourcery wholly owns all of its infrastructure and networks and is also OFCOM regulated to enable it to provide end-to-end unified communications solutions that include carrier-grade voice. As well as a two to three year time advantage, Outsourcery has developed a substantial amount of intellectual property around the delivery of cloud services, hybrid cloud integration and go-to-market strategies as well as unique and growing network of partners of all sizes. Some of the largest telecommunications companies and systems integrators in the UK (and the world in some cases) are increasingly reliant on Outsourcery to deliver all or part of their cloud service offerings as they experience growing customer demand.

Outsourcery's services remove the need for organisations to own and manage expensive in-house, on premise servers and IT solutions, unified communications, video conferencing services and ICT infrastructure, including traditional voice-only telephony systems. The Company has particular expertise in the delivery of complex hybrid cloud solutions to enable seamless integration with legacy on-premise or managed service solutions. Channelled through an extensive network of trusted partners of all sizes, Outsourcery's end-customers range from ambitious start-ups to global solutions for FTSE-100 companies.

Outsourcery has one of the broadest Microsoft-based cloud service offerings available in the world today and is focused on the transition of Microsoft's enormous installed base of on-premise or managed service software licences to its platform, displacing and disrupting traditional ICT solution providers. The global addressable market is measured in billions and Outsourcery captures software licence, infrastructure and support revenues. Outsourcery covers hosted software applications (software-as-a-service), virtualised servers (infrastructure-as-a-service), next generation unified communications and collaboration solutions as well as connectivity and professional services that help to customise and integrate solutions for partners and customers alike.

Although almost any application can be hosted on Outsourcery's platform, Outsourcery is a world-leading provider of Microsoft cloud services. Outsourcery was named Microsoft's worldwide 'Hosting Solutions Partner of the Year 2010' and worldwide 'Dynamics Partner of the Year 2010'. Outsourcery's 'O-Cloud' platform was one of three finalists for the worldwide 'Server Platform of the Year 2013' award and the only one in EMEA. Outsourcery is a Microsoft Certified Gold Partner with a total of eight competencies, of which three are gold and five are silver.

Outsourcery was a founding member of the Cloud Industry Forum (CIF), which sets standards for quality and transparency within the fast-growing cloud industry, and is CIF accredited. The Group also adheres to other rigorous quality practices, holding ISO 27001 (Information Security), ISO 9001 (Quality) and ISO 14001 (Environmental) accreditations, ensuring the highest levels of service, environmental standards and information security. Outsourcery is able to deliver CESG IL2 accredited solutions and is currently working in partnership with Microsoft and Dell to develop a CESG IL3 platform, giving Outsourcery the ability to deploy government-accredited solutions, enabling the public sector to benefit from the cloud. Outsourcery employs 120 staff based in three UK offices, operates two UK data centres and was the UK's first certified carbon neutral CSP.

www.outsourcery.co.uk/investors 

Chairman's Statement

I would like to start this first Chairman's Statement with an expression of thanks.

In this, our first full year as a public company, a great many things have been achieved. We have brought new services to market, which this time last year were just plans on paper. We have secured new partners, many of whom one year ago had not yet heard about our offering or our ambitions. Our longer standing partners are now actively engaging the market alongside us, whereas in May 2013 we were still learning - together - about the opportunity ahead and how best to capture it. The list goes on. Each one of these achievements owes itself to the energy and dedication of our Outsourcery team. On behalf of the entire Board of Directors, I thank each member of that team for their efforts.

At the time of our Admission to AIM in May of last year, I and the rest of the Board felt confident that a real opportunity lay ahead for Outsourcery if we were able to build out a clear leadership position for our disruptive services and for our brand. Interest in the use of cloud services had already been apparent in the commercial sector for some time and the appetite among firms to test out those services was showing early signs of growth. In spite of that trend, few other firms had begun to seriously exploit this opportunity and none could claim to have the breadth of knowledge, the reference customers and the deep industry relationships that our team had worked hard over many years to secure.

Building out that leadership position has therefore been the driving goal for all of us in 2013. We can look back on those efforts with a degree of success. Our partner network is now many times larger than last year and the level of engagement and shared purpose within it is high. Our largest partners are closer to us than they have ever been. Partners of all sizes are choosing to work with Outsourcery due to its leadership position and unique capabilities.

At the same time, the Board and I have placed significant focus since IPO on ensuring that the right people and structures are in place to guide the Group through this early and important growth phase. At a time when opportunities are broad but our company is young, it is important to ensure that management energy and shareholder resources are directed only toward the most critical goals and challenges.

To that end, a dedicated Operational Risk Management Committee has been established to provide operational and risk management oversight as well as focus on how best to scale our business. This committee, comprised of three non-Executive Directors, regularly considers and monitors our scalability strategy, analysing business decisions and plans for growth to ensure that our growth targets are met in the most effective manner. In addition, I am delighted to have the skills and counsel of my non-executive colleagues to call upon: both of whom have significant experience of the technology industry and of building profitable firms in public markets.

These do remain early days for Outsourcery. We have a significant opportunity ahead of us, but we also have much to prove and to learn. The economics of the cloud are compelling and we remain of the view that the potential exists to drive serious volume over the long term. In the near term, our ability to access those volumes depends on how fast our partners also take hold of the opportunity. Much of our energy in the year ahead will therefore be devoted to working with those partners to ensure that we chase opportunities forward, together. The platform we are building, the strong leadership position we have carved out and the continued positive interest in the benefits of the cloud from multiple sectors give us confidence that we are on the right path. Our focus as a Board rests on making sure we stay on this path and continue to deliver to our strategy in the year ahead.

Ken Olisa, OBE

Non-Executive Chairman

Strategic and Financial Review

Our opportunity

The pace of change toward the cloud is fast and growing faster: five times the rate of growth in on-premise solutions. Within the next two years, 90% of UK businesses are expected to have adopted cloud services of some kind. In addition, 76% of UK companies already using cloud services of some form are expected to increase their cloud expenditure in the next twelve months.

Outsourcery is well positioned to take advantage of this trend. The Group's services remove the need for organisations to own and manage expensive in-house systems. Instead, by working with one or a number of Outsourcery's trusted partners, organisations can purchase the IT and communication services they need as a subscription service delivered through the cloud. There are many benefits to taking this route, including areduction in the total cost of ownership, more agile and responsive systems, enhanced productivity and more scalable infrastructure.

Outsourcery is particularly focused on becoming the leading provider of cloud-based Microsoft services as the enormous Microsoft installed base (95% of desktops and 74% of new server shipments) is transitioned to a cloud and subscription delivery model. The end-of-life of operating systems such as Windows Server 2003 is expected to accelerate cloud adoption.

As our Chairman has made clear in his opening statement, this year we have invested our energies in activities that strengthen our platform, scalability, processes and our market position to extend our expanding lead over the limited competition that exists.

2013: extending our lead

Outsourcery has a real first mover advantage in the markets that we serve and we have worked hard this year to build on that advantage to the fullest. As a result of Outsourcery's leading position and unique capabilities, we have secured a number of strategic partnerships and continue to attract partners from across the spectrum of ICT solution delivery as demand for cloud services continues to grow. We have also developed unique intellectual property and processes whilst integrating with such large partners that will expedite future engagements with new partners. As a consequence, we exit 2013 with a broader range of opportunities for growth; a larger, more engaged channel to help capture those opportunities; and the early signs that our financial model is scalable and sustainable over the long term.

Strengthening and invigorating the channel

Our go-to-market strategy is predominantly channel based in order to achieve significant scale. We rely upon strong relationships with partners to sell our services to both SMBs and large-scale enterprises. At the time of our IPO in May, our partner network numbered 307 organisations. Today, it has increased to more than 560: significantly increasing our market reach and our lead although we are focused on identifying those partners that are committing resources to the cloud opportunity in order to generate revenue. The relationships of trust we have built with our channel partners, particularly when combined with our technical know-how and experience of implementing multiple cloud-based solutions gives us a clear edge over others in the marketplace. To replicate our progress would take any competitors years and significant resource to achieve.

Scaling our channel is one area of focus. Increasing the already high level of quality and engagement within that channel is another. With that in mind, we were delighted in September to announce a new strategic partnership with Ingram Micro UK: a division of Ingram Micro, the largest global wholesaler of technology products and supply chain management services. Ingram Micro has relationships with many thousands of partner companies, each of whom are now able to access and sell key elements of Outsourcery's offering. This opens up the opportunity for these partners to access enterprise-grade 'voice' and unified communications services from the cloud: something they were previously unable to offer.

Our channel has continued to evolve post period-end. Over the course of the past year, Vodafone has evaluated our offering, our service levels and our capabilities in great detail. The company has rigorously tested our ability to deliver, conscious that their own reputation in a channel model is in part reflected in the service that partner offers. With that process successfully complete, in January Vodafone formally entered in to a strategic partnership agreement with Outsourcery. When our two firms first started to discuss the cloud opportunity, the scope of our arrangement extended only within the UK market. Following the evaluation process, the scope has been increased to include Vodafone's entire global enterprise customer base, which is a significant revenue opportunity. This serves as the clearest indication yet of our credentials and of the opportunity open to us.

Proving our capabilities

During the period we have also demonstrated good progress in proving our product offering. We have won a number of accolades for our work and strengthened the trust of our customers and partners along the way.

In June 2013, our Unified Lync product was recognised at the Comms Business Awards where it won the 'Most Innovative Channel Product of the Year' and the 'Overall Channel Product of the Year' categories. The solution was selected out of five finalists and serves as a significant endorsement for our enterprise class, carrier grade offering.

In some circumstances where we are approached to respond to a tender or if our partners do not have the requisite professional services capability, we will close business directly with customers. In October, we signed an agreement with London Business School to provide integrated cloud communication solutions to be used by all of its several thousand staff and students. The solution, one of the first in the world to integrate voice-enabled Microsoft Lync 2013 with Office 365 and an on-premise user management system will replace London Business School's legacy PBX telephony systems and add rich unified communications, video and collaboration capabilities. We also provide a growing range of services to the BBC directly and in association with partners.

In December we strengthened our long-standing relationship with Microsoft by becoming a member of their Cloud OS Network. The network is a highly selective worldwide consortium of 25 global cloud service providers (four in the UK) committed to building solutions on the Microsoft Cloud Platform and brings significant advantages in handling local market requirements, technical and performance improvements to services and cost savings - with the ability to pass these benefits on to Outsourcery's partners and customers to create significant service differentiation.

Building an early lead in the public sector

At the time of our IPO, much of our focus for growth rested on the commercial sector. It was in this sector where we had built out our partnership network, secured our early revenue streams and tested our offering and its appeal. It was clear that the benefits of the cloud could also be applied to organisations in the public sector, but a defined route to targeting this opportunity was not yet clear.

During the course of this financial year, that situation has evolved at a rapid pace. UK Government policy has propelled the cloud to the top of the list of considerations for all UK Government procurement departments. The Government's 'cloud first' policy has not only pushed cloud up the procurement agenda, but has also been joined by a preference for SMB suppliers over the large-scale, traditional system integrators typically entrusted with public sector mandates. We have moved quickly to capitalise on these important developments.

Our first important milestone was passed in June when Outsourcery was selected as a supplier to the Government's 'G Cloud' framework: the mechanism through which public sector organisations can procure approved cloud-based services. This accreditation marked an important opening up of the market to us, as well as a strong affirmation of our capabilities and our security credentials.

In a public sector context, security is a particularly critical consideration. Solutions must comply to stringent IL3 standards: even more rigorous than the high security levels of our existing O-Cloud commercial offering. Government systems must also be 'air-locked', physically separated from other platforms and supported by distinct, security cleared engineering and service teams. Given the size of public sector ICT needs, solutions must also be highly scalable: capable of supporting many millions of end-users and hundreds of thousands of virtual servers.

Given the need to create a new platform capable of fulfilling these stringent requirements, we were delighted to announce our second public sector milestone in November in the shape of an agreement with Microsoft. Keen to capitalise on the public sector opportunity, Microsoft is pursuing a global initiative to target this sector via partners in key markets. Outsourcery is proud to have been selected as the first such Microsoft-validated partner in the UK. With them, we have agreed to deploy an IL3 accredited platform based on next generation Microsoft technology, hosted in the UK and wholly owned and operated by us.

Deployment of this platform naturally requires its construction. To that end, in November 2013 we announced a new strategic partnership with Dell to design, build and deploy the infrastructure that will support these services. To support Outsourcery's share of the costs, we completed a successful equity placing in December 2013. The £4.2 million (before expenses) raised through this Placing has enabled construction to commence and we expect the platform to be ready for deployment, as planned, in the second half of 2014 pending accreditation prior to market launch. However, we will be commencing marketing in Q2 2014 and are already involved in a number of tender responses with partners.

Whilst it is still 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-based 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. Taken together, at current value these contracts add up to an annual contract value of £3.7 billion. In addition to this clear economic case, Outsourcery is well positioned to act as a trusted partner to many of those larger system integrators that now find themselves disadvantaged against SME providers in the procurement process. We will continue to update the market as our development efforts in this emerging segment progress.

Refining our focus

In our IPO Admission Document we stated our intention to complete the divestment of certain businesses that we no longer considered core to our strategy. This would mean the continuation of a programme put in place long before our Admission to AIM, with the majority of our legacy mobile business divested during 2011.

In line with this intention, in September of last year we completed the sale of our legacy mobile distribution business to a UK mobile services operator. Revenues for the mobile distribution business had been separately accounted for by the Group and, as a consequence, the sale will have no material impact on working capital. Our focus as a team now rests solely on the significant opportunities for our cloud-based services.

Building a sustainable financial model

We are still in the early phases of our development and, as a consequence, much of our effort this year has been ploughed in to building our capabilities, securing partners and activating their sales capability, investing in growth, scaling our reach and extending our market lead.

Our business model is predicated on securing subscription-based customer contracts that generate a base of recurring revenues. As these recurring revenues build, we will seek to leverage our stable overhead cost base and low ongoing requirement for additional investment to generate high margins and high levels of profitability once our business reaches scale. Whilst many of the activities undertaken this year reflect the fact that we are still scaling our operations, we are doing so with the goal of developing a strong, sustainable financial model capable of delivering excellent returns over the long term.

The Board acknowledges there are a number of risks associated with the Group's business, key amongst them being the dependence on partners' ability to sell the Group's cloud-based services; the Group's relationship with Microsoft; the resilience of the Group's physical infrastructure and the security of its systems; andthe dependence on key officers, managers and technical personnel. The Board and management actively pursues a strategy to mitigate the impact of these key risks and is satisfied that their potential impact remains at an acceptable level. More detailed information regarding the risk profile of the Group will be set out in the Annual Report which will be published on the Company's website.

2014 focus and outlook

Outsourcery enters 2014 in a strong position. Interest in the cloud is building, both in traditional markets and in new ones and our differentiation is better understood as our partners go to market and win business against traditional delivery models. The work we have done this year to build out our offering and our channel has positioned Outsourcery well to capitalise on this trend. Our time advantage, our investments and our expertise in creating, selling and supporting cloud based solutions is, we believe, creating a clear lead between us and our nearest competitors.

Our attentions for 2014 will be focused on a number of key goals although the primary goal is now to generate material recurring revenue. Activating our existing strategic partners is our key objective to generate revenue, especially as Vodafone and Virgin Media Business go-to-market. We are also focused on securing new strategic partners to secure growth for 2015 and beyond.

At the same time we are growing our mid-market and small business partner network and developing our automated and self-service systems to minimise the overhead. We expect revenue from such partners to continue steady growth, which will eventually become material as smaller organisations adopt cloud and their trusted advisers transition to the sale of cloud-based services.

Deploying the IL3 platform and achieving accreditation will be an important milestone during 2014 and we are already working on pipeline development to maximise the revenue opportunity.

Whilst there is always more work to be done, based on the progress we have made this year and on the pipeline ahead of us, particularly with our largest partners, the Board is confident in its ability to deliver on market expectations for the year ahead.

Financial review

This year's results show strong revenue growth and a substantially improved balance sheet, with a robust year end cash position.

Income Statement

Total revenue has grown this year by 44% to £5.2 million: an encouraging sign that the market for our services is beginning to open up. In addition to this overall growth, one of the key metrics by which we measure our progress is Monthly Recurring Revenue ("MRR"). Over the course of this financial year MRR has risen from £0.3 million at 31 December 2012 to £0.6 million at 31 December 2013. This represents growth of 100% and, at the current exit run rate would lead to annualised recurring revenue of £7.0 million. Whilst servicing this strong growth, and against the backdrop of our continued investment in product and platform, our gross margin has remained constant year-on-year at 36%, but this is expected to improve as the business scales.

Total revenue in the period was £5.2 million (2012: £3.6 million) and comprised £4.1 million (2012: £2.9 million) of recurring revenue and £1.1 million (2012: £0.7 million) of non-recurring or professional services revenue.

Administrative expenses (excluding fees associated with listing) were tightly controlled at £10.1 million (2012: £10.1 million). Cost control remains a key focus across the Group.

Adjusted EBITDA showed a loss of £7.2 million (2012: £7.6 million). Adjusted EBITDA is calculated as reported profit from continuing operations, adjusted for exceptional costs and employee share-based payment charge, 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 £9.3 million (2012: £10.0 million) and basic loss per share from continuing operations for the year was 36.1 pence (2012: loss of 57.8 pence).

The Group's adjusted loss before and after taxation from continuing operations was £8.8 million (2012: £10.0 million) and adjusted loss per share from continuing operations for the year was 34.1 pence (2012: loss of 57.7 pence).

Cash Flow

The Group had gross cash at 31 December 2013 of £6.3 million (2012: £0.2 million). During the course of 2013 the Group raised total equity funds of £17.7 million (net of expenses). These funds continue to be deployed to scale the business.

Consolidated Statement of Financial Position

Property, plant and equipment at 31 December 2013 had a net book value of £2.0 million (2012: £1.9 million).

Trade and other receivables at 31 December 2013 were £2.2 million (2012: £1.1 million), consisting of £1.0 million (2012: £0.4 million) of trade receivables and £1.2 million (2012: £0.7 million) of other receivables and prepayments. There were no trade and other receivables due after more than one year.

Trade and other payables at 31 December 2013 were £2.3 million (2012: £3.4 million), consisting of £0.7 million (2012: £0.6 million) of trade payables and £1.6 million (2012: £2.8 million) of other payables and accruals.

Total borrowings at 31 December 2013 were £4.2 million (2012: £7.7 million), consisting of interest bearing term debt of £2.6 million (2012: £5.7 million), non-interest bearing term debt of £0.7 million (2012: £1.5 million) and finance leases of £0.9 million (2012: £0.4 million).

The Group has accumulated tax losses of £18.4 million (2012: £11.1 million) which are available to carry forward and relieve against future profits. The deferred tax asset value of these losses is not currently reflected in the consolidated statement of financial position.

Average headcount of the Group for the year was 117 (2012: 127).

On behalf of the board

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES TO THE PRELIMINARY RESULTS

1. General information

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

These consolidated financial statements were approved and authorised for issue by the Board of Directors on 19 March 2014.

2. Basis of preparation

The Financial Information set out in this announcement does not constitute the statutory accounts of the Group for the year ended 31 December 2013. The auditors reported on those accounts, their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2013 will be delivered to the registrar of companies following the Annual General Meeting.

Whilst the Financial Information included in this announcement has been computed in accordance with International Financial Reporting Standards ("IFRS"), this announcement in itself does not contain sufficient information to comply with IFRS. Details of the accounting policies applied are those 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.

The Group's consolidated financial statements for the year ended 31 December 2013 have been prepared in accordance with International Financial Reporting Standards as adopted in the European Union ("IFRS") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

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', as this is outside the scope of IFRS 3, therefore 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 year ended 31 December 2013 are shown in the consolidated statement of comprehensive income and the comparative figures for 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 financial statements at the pre-combination carrying amounts, without restatement to fair value;

· The retained losses and other equity balances recognised in the financial statements for the year ended 31 December 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 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.

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 Consolidated Statement of Comprehensive Income. This amount, which 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.

Going concern

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 2015. 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 financial statements.

3. Segment information

The Group focuses its internal management reporting on the following segments:

Cloud

Mobile (discontinued operations)

Each of these operating segments is managed separately by the Group's chief operating decision maker and strategic decisions are made on the basis of the operating results.

As operations are carried out entirely within the UK there is no further consideration of information on geographical areas in determining the group's operating segments.

Any administrative staff expense costs incurred in the mobile operations were negligible.

Operating segment information for the periods ended 31 December 2013 and 2012 is as follows:

Interest and finance costs are not segment specific and have not been separated on this basis.

Revenue for the periods ended 31 December 2013 and 2012 is all derived in the UK.

4. Loss per share

* Adjusted loss from continuing operations is calculated as as reported loss from continuing operations, before employee share based payment options and fees associated with listing and is considered by the Directors to be a key measure of financial performance.

** Adjusted (loss)/earnings per share is calculated using the adjusted loss from continuing operationsabove and the weighted average number of ordinary shares in issue in each of the relevant periods. This has been disclosed to give a clear understanding of the Group's underlying trading performance.

5. Borrowings

Notes to the analysis of borrowings

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

(ii) 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 classified as a current liability. The breach was rectified in the six months ended 30 June 2013.

(iii) The property mortgage bears interest at 10% and is expected to be repaid in full in July 2015.

(iv) £999,000 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 £1.0 million Etive loan stock bears no interest and is shown at its present value. This loan stock is expected to be repaid in full on 24 May 2016.

6. Explanation of transition to IFRS

This is the first time that the Group has presented its consolidated financial information under IFRS. The accounting policies set out above have been applied in preparing the financial information for the year ended 31 December 2013, the comparative information presented in this financial information for the year ended 31 December 2012 and in 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.

Notes to the reconciliation of equity at 1 January 2012

(i) On converting to IFRS, the treatment of rental expense for the Manchester and London offices has resulted in an increase of £84,000 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 £85,000 was recorded in the year ended 31 December 2012. In addition assets and liabilities meeting the definition as held for sale under IFRS 5 have been reclassified.

(ii) 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.

(iii) Recognition of merger reserve, as explained further in the basis of consolidation.