Stock Analysis & Valuation CloudCoCo Group plc (CLCO.L)

• Previous Close: £0.15
• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	29.98	19887
Intrinsic value (DCF)	0.11	-27
Graham-Dodd Method		n/a
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

CloudCoCo Group plc (LSE: CLCO) is a UK-based IT and communications services provider specializing in small and medium-sized enterprises (SMEs). The company operates through two core segments: Managed IT Services and Value Added Resale. Its Managed IT Services segment delivers recurring IT solutions with ongoing support, while the Value Added Resale segment focuses on hardware and software resale. CloudCoCo offers a comprehensive suite of services, including cybersecurity, cloud computing, connectivity, and unified communications. The company has rebranded from Adept4 Plc in 2019 to reflect its cloud-first strategy. With a strong emphasis on Microsoft services, VMware, and hybrid cloud solutions, CloudCoCo serves as a one-stop IT partner for UK SMEs. Despite operating in a competitive market, its diversified service portfolio and recurring revenue model position it as a niche player in the UK’s growing cloud and managed services sector.

Investment Summary

CloudCoCo Group presents a high-risk, high-reward opportunity in the UK’s SME-focused IT services market. The company’s recurring revenue model from managed services provides stability, but its negative net income (£3.15M loss in FY 2024) and high debt-to-equity ratio raise concerns. The lack of dividends and volatile beta (-0.604) suggest speculative appeal. However, positive operating cash flow (£1.87M) and a strong cash position (£1.04M) indicate liquidity. Investors should weigh its growth potential in cloud and cybersecurity against execution risks in a crowded market.

Competitive Analysis

CloudCoCo competes in the fragmented UK managed IT services market, where differentiation is key. Its competitive advantage lies in its integrated offering—combining cloud, cybersecurity, and communications—which reduces vendor complexity for SMEs. However, its small scale (market cap ~£1.2M) limits bargaining power against larger rivals. The company’s Microsoft and VMware partnerships provide credibility, but it lacks the global reach of multinational competitors. Its focus on UK SMEs is a double-edged sword: it allows localized service but exposes it to regional economic risks. While CloudCoCo’s hybrid cloud and cybersecurity services align with market trends, its profitability lags behind peers. The company must scale efficiently to justify its valuation in a sector dominated by well-capitalized players.

Major Competitors

• K3 Business Technology Group plc (KBT.L): K3 focuses on ERP and retail IT solutions, giving it deeper vertical expertise than CloudCoCo’s generalist approach. However, its reliance on legacy systems contrasts with CloudCoCo’s cloud-native services. K3’s larger scale provides stability but with slower growth.
• SysGroup plc (SYS.L): SysGroup offers similar managed IT and cloud services but with a stronger emphasis on public sector clients. Its profitability (unlike CloudCoCo) is a strength, but its narrower cybersecurity portfolio is a weakness relative to CloudCoCo’s comprehensive offering.
• RM plc (RM.L): RM dominates the education IT sector, a niche CloudCoCo avoids. Its recurring revenue model is comparable, but RM’s higher debt and recent restructuring pose risks. CloudCoCo’s SME focus provides diversification against RM’s reliance on government budgets.
• Computacenter plc (CCC.L): A giant in UK IT services, Computacenter’s enterprise focus and global reach overshadow CloudCoCo. Its financial strength and vendor relationships are unmatched, but its complexity makes CloudCoCo more agile for SME clients seeking personalized service.