UKCloud and parent enter compulsory liquidation

UKCloud and parent enter compulsory liquidation

UKCloud and its parent company Virtual Infrastructure Group have been forced into liquidation, which could bring an end to the troubled business.

As a UK public IT provider, UKCloud had central and local government, the police, the Ministry of Defence, the NHS, Genomics England, the University of Manchester and more as customers.

A statement from the UK government’s insolvency office on Tuesday said that “winding up orders were made against” both UKCloud and its parent, and that a court had appointed the official receiver, Gareth Jonathan Allen, as liquidator.

Liquidation orders are issued by courts, at the request of one or more creditors, when it becomes clear that an organization cannot pay its debts and may need to be demolished and sold to repay the money owed.

Allen has asked that Alan Hudson and Joanne Robinson of Ernst & Young LLP be brought in as special managers to oversee the next steps.

“The official receiver will wind up the affairs of Virtual Infrastructure Group Limited and UKCloud Limited in an orderly manner in accordance with statutory obligations,” the government’s notice said. “The Official Receiver also has a duty to investigate the cause of the companies’ insolvency and the conduct of current and former directors.”

The official receiver also has a duty to investigate the cause of the company’s insolvency and the conduct of current and former directors

Allen is said to be “maintaining the business while the liquidation strategy is developed. The strategy will consider the provision of services, transition of contracts and whether a sale is viable.”

UKCloud, formerly known as Skyscape, posted a similar message on its own website.

It had three trading brands: UKCloud Health, aimed at central health organisations; UKCloudX, focused on defense and national security customers; and UKCloud for local and central government, as well as private organisations.

Services included data center modernization, professional services and a range of cloud services including Microsoft Azure, OpenStack, Red Hat OpenShift, VMware, disaster recovery as a service, security services and private cloud for Oracle.

Signs that all was not well with UKCloud were evident in January when the loss-making business was bought by chairman Jeff Thomas, with further investment from BGF Group and Digital Alpha.

At the time, Thomas said funding would be provided to create a “strong foundation to build a portfolio of innovative companies that promote the ethical and sustainable use of data to drive positive change in our communities and economy.”

“Organisations and governments increasingly share a belief in these decisive results and I am delighted to reveal more information about our growth plans and new directions in the very near future,” he added.

The purchase was said to mark a change in direction for the company towards working with global cloud providers, in addition to making investments in its own platforms and services. The British government approved the takeover.

Founded in 2011, UKCloud was one of the first SMEs to benefit from the UK’s efforts to bring its public sector into the cloud. The business withered in recent years as the biggest hyperscalers — most notably Amazon and Microsoft — scooped up government contracts.

Reg readers may recall that UKCloud filed its most recent profit and loss accounts for the year ending 31 March 2020 last September. They showed a business that had swung to a loss of £17.4m on revenue of £37.1m after spending increases in sales, marketing, development and platforms, along with a reduction in cloud use by some customers.

UKCloud sought inward investment of around £30m in 2021 to “generate sufficient cash from trading to offset capital expenditure and debt servicing costs” as well as provide working capital.

The fact that the business fell on hard times during the pandemic, when cloud providers and distributed services came under the spotlight, perhaps tells its own story about UKCloud. This latest reversal indicates that economic development did not pick up for the remainder of 2021.

We’ve asked UKCloud CEO Simon Hansford for comment and will update this story if we receive a concrete response.

UKCloud was the only local provider to sign a memorandum of understanding with the UK government to provide agreed discounts to public sector buyers. The others included Google, Amazon, Microsoft, IBM and HPE.

That’s what a spokesperson for the government office says The registry last night: “We regularly monitor the health of key suppliers and we have contingency plans in place to ensure the continuity of public services.

“The vast majority of departments that used UKCloud have already moved to alternative systems.

“Those remaining on UKCloud will find alternative arrangements as soon as possible, while continuing to operate. We do not expect any disruption to everyday public services.”

The Insolvency Service sent us a statement: “The companies are in liquidation following the winding-up petitions of the directors. The official receiver will investigate the cause of the companies’ insolvency in accordance with his obligations.”

It had nothing more to say at this point. ®

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