TIDMNET
RNS Number : 2657E
Netcall PLC
27 February 2020
27 February 2020
NETCALL PLC
("Netcall", the "Company", or the "Group")
Interim results for the six months ended 31 December 2019
Low-code solutions driving growth
Netcall plc (AIM: NET), the leading provider of Low-code and
customer engagement software, today announces its unaudited interim
results for the six months ended 31 December 2019.
Financial highlights
-- Revenue up 8% to GBP12.3m (H1-FY19: GBP11.4m)
-- Total annual contract value(1) ('ACV') at 31 December 2019 up
10% to GBP16.6m (H1-FY19: GBP15.1m) - Low-code ACV of GBP5.1m up
21% year over year
-- Adjusted EBITDA(2) up 5% to GBP2.12m (H1-FY19: GBP2.02m)
-- Profit before tax of GBP0.14m (H1-FY19: GBP0.42m)
-- Cash generated from operations of GBP1.57m (H1-FY19: GBP1.85m)
-- Group cash at 31 December 2019 was GBP6.50m offsetting debt of GBP6.69m
Operational highlights
-- Low-code business increased 22% and now represents 33% of
Group revenues as a result of continued new customer acquisition
and cross-sales into the existing customer base
-- Recurring revenue from Low-code cross-sales generally three
times higher than the current average support contract
-- Launched Liberty Connect conversational messaging and bot
platform providing new cloud revenue opportunities with first
orders received
-- Increased professional service and product revenue
-- High levels of customer renewals contributing to growing support revenue
-- New releases of our Low-code and contact centre platforms
Henrik Bang, Chief Executive, said:
"The first half of Netcall's financial year showed strong growth
in Low-code solutions and ACV contributing to the increase in
revenue and adjusted EBITDA. Low-code ACV increased 21% to GBP5.1m
which underpinned 42% growth in Low-code cloud revenues. We
continued to benefit from our transition to a recurring revenue
model with total revenue increasing by 8% to GBP12.3m supported by
ACV growth of 10% to GBP16.6m.
"Our market leading Low-code solution and customer engagement
offerings address a rapidly growing market, as organisations face
pressure to implement digital solutions to modernise their
operations. We expect that the technology macro drivers will
support future growth as we bring innovative solutions to market,
expanding our digital cloud business.
"Trading in the first half was in line with the Board's
expectations. The high level of recurring revenue and a healthy
sales pipeline, combined with our comprehensive product offering,
reinforces the Board's confidence in the prospects of Netcall."
(1) ACV, as at a given date, is the total of the value of each
cloud and support contract divided by the total number of years of
the contract.
(2) Profit before interest, tax, depreciation and amortisation
adjusted to exclude the effects of acquisition, impairment,
contingent consideration, share-based payments and non-recurring
transaction costs.
Enquiries:
Netcall plc Tel. +44 (0) 330 333 6100
Henrik Bang, CEO
Michael Jackson, Chairman
James Ormondroyd, Group Finance Director
finnCap Limited (Nominated Adviser and Broker) Tel. +44 (0) 20 7220 0500
Stuart Andrews / James Thompson, Corporate Finance
Tim Redfern, Corporate Broking
Alma PR Tel. +44 (0) 20 3405 0205
Caroline Forde / Josh Royston / Helena Bogle
About Netcall:
Netcall helps organisations transform their customer engagement
activities and enable digital transformation faster and more
efficiently, empowering them to improve customer experiences and
operational efficiencies.
We achieve this by delivering powerful and intuitive software
that addresses the core elements of best-in-class customer
experience and digital process automation. Our industry leading
Liberty platform is a suite of Low-code, customer engagement and
contact centre solutions which empowers business users and IT
developers to collaboratively develop products and systems that
create a leaner, more customer-centric organisation.
Netcall's customers span enterprise, healthcare and government
sectors. These include two-thirds of the NHS Acute Health Trusts,
major telecoms operators such as BT, and leading corporates
including Lloyds Banking Group, ITV and Nationwide Building
Society.
For further information, please go to www.netcall.com.
Prior to publication the information communicated in this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No 596/2014 ('MAR'). With the publication of this announcement,
this information is now considered to be in the public domain.
Strategic overview
Netcall delivered a good trading performance, with continued
growth in our key metrics and progress against each of our four
strategic pillars.
Our investments are facilitating the transition towards a
digital cloud business, resulting in improved quality of earnings,
a differentiated product offering and an expanding market
opportunity in a rapidly growing market.
Total ACV grew 10% in the period to GBP16.6m, with Low-code ACV
up 21% year on year. The growth in ACV came through new customer
wins and cross-sales of our expanded product suite, combined with
high customer retention and renewal rates. Low-code cloud bookings
continued to drive sales, and we also saw positive trading
performances from product sales and professional services.
As a result, recognised revenues increased by 8% to GBP12.3m
which lifted the Group's adjusted EBITDA by 5% to GBP2.12m. The
comparable prior period included a one-off termination fee of
GBP0.5m. The underlying growth rate of the business excluding this
was 13% in revenue and 14% in adjusted EBITDA. Revenue from
Low-code solutions grew 22% in the period and now represent 33% of
Group revenues corresponding to GBP4.14m (H1-FY19: GBP3.38m).
The business model is underpinned by our highly profitable and
cash generative product and support revenue streams, which also
both grew in the period. The profits and cash generated from this
business sector provides the means to invest in our Low-code and
cloud operations, as we look to capitalise on the rapidly expanding
Low-code market opportunity.
Current trading and outlook
The Group has traded in line with the Board's expectations for
the year to date and the forward visibility of revenue continues to
grow. The Board noted an increase in business confidence towards
the end of the period and it continues to monitor the trading
environment with regards to the timing of sales contracts. We have
entered the second half of the year with a healthy sales pipeline,
which combined with our financial position and continuing
investment in our business and people, provide the Board with
confidence in the prospects of the Group.
Business Review
Netcall helps organisations transform their customer engagement
activities and enables digital transformation faster and more
efficiently, empowering them to improve customer experiences and
operational efficiencies. We achieve this by delivering a
market-leading software platform that addresses best-in-class
customer experience and digital process automation.
Our industry leading Liberty platform is an integrated customer
experience suite of solutions. The platform includes three core
solutions; a cloud based Low-code platform for digital process
automation, a cloud based conversational messaging and chatbot
platform and a complete contact centre suite.
The platform empowers business users and IT developers, at
organisations such as Hampshire Trust Bank and Dreams, as described
below, to collaboratively deliver solutions that support leaner and
more customer-centric organisations .
The addressable market opportunity is large and industry
analysts expect it to grow rapidly.
The Group's organic growth strategy focuses on four pillars:
-- growth through a land and expand model;
-- expansion of our customer base;
-- continued innovation and enhancement of our platform; and
-- growing our partner base.
In addition to the Group's focused organic strategy, the Board
continues to look for selective acquisitions with complementary
proprietary software and/or additional customers in our target
markets.
Growth through a land and expand model
Many of our customers initially purchase an entry level solution
with the objective of rolling out further applications over time
and deploying the solutions more widely to support their future
customer engagement and digital transformation initiatives. This
combined with continuous enhancements to our product portfolio,
provides substantial cross- and up-sale opportunities in three
areas:
-- Low-code solutions which represent the largest opportunity as
our existing customers digitise and modernise their operations
enabling them to further leverage their existing Liberty
estate;
-- evolution of our premise-based customers to cloud. This
opportunity is in its infancy where we see a small and growing
number of customers considering transitioning their Liberty estate
to a cloud model; and
-- on-going upgrades and addition of modules to the Liberty
platform as customers expand the use of the platform and we release
new features and modules.
An example of customer upsell in the period was Hampshire Trust
Bank, an existing Low-code customer who upgraded from an entry
level licence to an enterprise licence, having delivered a project
four months earlier than planned at less than a third of the
anticipated cost, through the use of Liberty Create.
To stimulate cross-sales and accelerate implementations we are
also providing several pre-built applications and modules via our
AppShare which supplement the existing Liberty applications used by
our customers.
This includes Citizen Hub, for local authorities, which is a
suite of pre-built business processes and citizen portals that can
be downloaded for Liberty Create and integrated with our customer
engagement solutions. We have a number of live customers for
Citizen Hub and have secured several new sales at the start of the
second half of the year.
From launch in September 2019, there are today more than 500
registered users of the community, developers and business users
benefiting from apps, best practise sharing and previews of new
functionality among other things.
Expansion of our customer base
We primarily target organisations with large numbers of
customers or employees and, in many cases, subject to a high level
of regulation. This includes financial services, retail, healthcare
and government sectors where we currently have a significant market
presence.
New customers secured in the period included Dreams, who
purchased all three Liberty solutions, replacing its siloed
customer engagement solutions with a single integrated solution to
deliver a seamless experience to customers across all its service
channels. Our all-in-one customer experience platform will enable
the retailer to make transformational changes quickly and improve
agent performance by weaving all channels into a single customer
conversation. Liberty Create will be used to improve processes and
build better customer journeys. Liberty Converse and Connect will
deliver voice, email and web chat capabilities to improve agent
performance in the contact centre.
Continued innovation
We continue to invest in innovation to strengthen our Liberty
platform with a focus on creating new solutions for our customers
that will drive revenue growth.
Our Liberty suite covers three integrated solution areas:
-- Liberty Create: A low-code software solution which enables
the creation of apps that drives workflows and business processes
with integration to our communication services as well as back-end
systems.
-- Liberty Converse: A complete omnichannel contact centre
solution for customer engagement which also includes solutions such
as speech bots, switchboard and auto attendant.
-- Liberty Connect: A cloud messaging and bot platform enabling
customers to extend their reach using digital channels like
Facebook Messenger and Twitter as well as benefit from bots and
automation, launched in September.
In addition to the strong sales of Liberty Create, the period
saw the launch and initial sales of Liberty Connect and higher
sales of Liberty Converse.
In the period we also released new versions of both Create and
Converse with substantial new enhancements and functionality and
further releases are scheduled for the beginning of 2020.
For example, Liberty Create was enhanced to include an industry
first integrated Test Studio for recording and automation of app
testing. This can replace third party testing tools which are
costly and complicated to integrate and it enables citizen
developers quickly to automate app-testing rather than having to
rely on scarce Quality Assurance resources.
Releases planned for the second half of the year include AI
integrations and the introduction of bots, including a series of
pre-built bot solutions and an easy to use bot-designer that will
enable users to build automated bot work-flows that will work
across all Connect communication channels.
Growing our partner base
Partners are an important additional route to market, providing
the opportunity to access new markets and scale our business
opportunity faster. The aim is to grow revenue via partners
significantly by assisting them in creating new offerings and
revenue streams from their customers. We are building an eco-system
of partners with industry knowledge and delivery and support
capabilities, focusing on large organisations with global
footprints. An example of this is Panasonic, which recently
announced that its range of SIP Communication Solutions are now
fully integrated with Liberty Converse.
The period saw the launch of a new Managed Service Partner
programme, building on the initial success of our partner programme
last year. We now offer various packages, each including a mix of
sales enablement, marketing support and technical training. The
first partners have now signed up to the programme and initial
customer wins have been secured.
Financial Review
The Group's revenue comprises the following components:
-- Cloud services: subscription and usage fees of our cloud-based offerings.
-- Product support contracts: provision of software updates,
system monitoring and technical support services for our
products.
-- Communications services: fees for telephony and messaging services.
-- Product revenues: software license sales with supporting hardware.
-- Professional services: consultancy, implementation and training services.
The Group continues its transition to a digital cloud business,
having reached an inflection point last year, with new Cloud
services bookings continuing to exceed new Product and Product
support contract sales.
Group revenue increased 8% to GBP12.3m of which Low-code
solutions now represent GBP4.14m (H1-FY19: GBP3.38m) of Group
revenues, increasing 22% in the period.
As a result of the change in sales mix towards recurring revenue
models, total ACV at 31 December 2019 increased by 10% year over
year to GBP16.6m, with Low-code ACV up 21% year over year to
GBP5.1m. ACV, as at a given date, is the total of the value of each
cloud and support contract divided by the total number of years of
the contract. The table below sets out ACV at the last three
interim periods:
GBP'm ACV H1-FY20 H1-FY19 H1-FY18
------------------ -------- -------- --------
Low-code 5.1 4.2 3.0
Liberty cloud 1.6 1.3 1.3
------------------ -------- -------- --------
Total cloud 6.7 5.5 4.3
Support contract 9.9 9.6 9.5
Total 16.6 15.1 13.8
================== ======== ======== ========
The table below sets out revenue by component for the last three
interim periods:
GBP'm Revenue H1-FY20 H1-FY19 H1-FY18
-------------------------------------------------- -------- -------- --------
Cloud services 3.2 3.0 2.0
Product support contracts 4.7 4.6 4.4
-------------------------------------------------- -------- -------- --------
Total Cloud services & Product support contracts 7.9 7.6 6.5
Communication services 1.1 0.9 1.1
Product 1.2 1.0 1.8
Professional services 2.1 1.8 1.3
Total 12.3 11.4 10.7
================================================== ======== ======== ========
Revenue from Cloud services increased by 5% to GBP3.16m
(H1-FY19: GBP3.01m) reflecting the higher year over year Cloud
service ACV. The comparative period figure included a one-off
termination fee of GBP0.5m which excluding this gives an underlying
growth rate of 26%.
Product support contract revenue increased by 2% to GBP4.72m
(H1-FY19: GBP4.63m) as a result of high contract retention combined
with the contribution of new product sales and price rises.
Communication services revenue increased by 18% to GBP1.11m
(H1-FY19: GBP0.94m) due to higher application driven messaging
volumes and call-back usage.
Product revenue increased by 21% to GBP1.19m (H1-FY19: GBP0.98m)
due to higher sales to NHS and Public Sector organisations.
Professional services revenue increased 16% to GBP2.08m
(H1-FY19: GBP1.80m) due to demand for implementation services for
Cloud service and Product solutions. The overall demand for our
professional services is dependent on:
-- the mix of direct and indirect sales of our solutions, in the
latter case our partners provide the related services directly for
the end customer; and
-- whether a customer requires the support of a full application
development service or support to enable their own development
teams.
Gross profit margin was 88% (H1-FY19: 90%) mainly due to an
increase in outsourced and insourced consultants from partners to
supplement our in-house teams in delivering professional
services.
Administrative expenses, before depreciation, amortisation,
share-based payments and acquisition related items, increased to
GBP8.61m (H1-FY19: GBP8.23m) reflecting an underling increase of
5%, a result of the previously announced investment programme into
our organisation, offset by a reduction of GBP0.14m in operating
lease payments following the Group's adoption of IFRS 16 'Leases'
(see note 7 for further information).
Consequently, the Group's adjusted EBITDA was GBP2.12m (H1-FY19:
GBP2.02m), a margin of 17% of revenue (H1-FY19: 18%).
Profit before tax was GBP0.14m (H1-FY19: GBP0.42m) after
accounting for acquisition related items and interest on borrowings
taken out to fund the acquisition of MatsSoft in August 2017 and
higher depreciation and amortisation of capitalised
development.
The Group tax charge of GBP0.10m (H1 FY19: GBP0.12m) represents
an underlying effective rate of tax of 13% (H1 FY19: 13%) on
adjusted profit before tax. The underlying effective rate of tax
benefited from additional deductions for R&D expenditure and
utilisation of previously unrecognised losses brought forward.
Basic earnings per share was 0.03 pence (H1-FY19: 0.20 pence)
and 0.48 pence on an adjusted basis (H1-FY19: 0.61 pence). Diluted
earnings per share was 0.02 pence (H1-FY19: 0.20 pence) and 0.46
pence on an adjusted basis (H1-FY19: 0.60 pence).
Cash generated from operations was GBP1.57m (H1-FY19: GBP1.85m)
a conversion of 74% (H1-FY19: 92%) of adjusted EBITDA. Cash
conversion is typically weighted to the second half of the
financial year due to the timing of Cloud service and support
contract annual billings. In addition, the comparative period
included the benefit of a positive unwinding of a timing difference
from 2017.
Spending on research and development, including capitalised
software development, increased to GBP1.67m (H1-FY19: GBP1.45m) of
which capitalised software expenditure was GBP0.74m (H1-FY19:
GBP0.71m).
Total capital expenditure was GBP0.81m (H1-FY19: GBP1.07m); the
balance after capitalised development, being GBP0.07m (H1-FY19:
GBP0.36m) relating to IT and office assets.
The Company acquired MatsSoft Limited in August 2017. The
purchase agreement provided for potential further cash and shares
to be paid dependent on achieving specified performance targets
over various periods from completion of the acquisition. In October
2019, the fair value of the remaining contingent consideration was
re-estimated at GBP1.76m resulting in GBP0.04m being debited to the
income statement as a change in estimate of fair value. During the
period the Company paid GBP1.76m comprising GBP1.68m in cash and
GBP0.08m in shares under this arrangement, bringing the total
consideration paid to GBP15.6m. No further payments are due under
this agreement.
To support the acquisition in 2017, the Company issued a GBP7m
Loan Note (see note 6). Loan Note interest payments in the period
totalled GBP0.30m (H1-FY19: GBP0.29m).
As a result of these factors, net debt was GBP0.19m at 31
December 2019 (31 December 2018: GBP0.77m).
Unaudited consolidated income statement for the six months to 31
December 2019
Audited
Unaudited Unaudited 12 months to
Six months to Six months to 30 June
GBP'000 31 December 2019 31 December 2018 2019
------------------------------------------------------- ------------------ ------------------ --------------
Revenue 12,267 11,354 22,903
Cost of sales (1,510) (1,121) (2,329)
-------------------------------------------------------- ------------------ ------------------ --------------
Gross profit 10,757 10,233 20,574
Administrative expenses (10,218) (9,450) (19,058)
Other gains/ (losses) - net (35) 15 (11)
-------------------------------------------------------- ------------------ ------------------ --------------
Adjusted EBITDA 2,115 2,015 3,411
Depreciation (332) (143) (310)
Net loss on disposal of property, plant and equipment (1) - (2)
Amortisation of acquired intangible assets (248) (259) (512)
Amortisation of other intangible assets (633) (509) (1,120)
Change in fair value of contingent consideration (37) 121 865
Post-completion services (33) (147) (244)
Share-based payments (327) (280) (583)
Operating profit 504 798 1,505
Finance income 23 20 41
Finance costs (391) (403) (794)
-------------------------------------------------------- ------------------ ------------------ --------------
Finance costs - net (368) (383) (753)
-------------------------------------------------------- ------------------ ------------------ --------------
Profit before tax 136 415 752
Tax charge (99) (124) (142)
-------------------------------------------------------- ------------------ ------------------ --------------
Profit for the period 37 291 610
======================================================== ================== ================== ==============
Earnings per share - pence
Basic 0.03 0.20 0.43
Diluted 0.02 0.20 0.41
======================================================== ================== ================== ==============
All activities of the Group in the current and prior periods are
classed as continuing. All of the profit for the period is
attributable to the shareholders of Netcall plc.
Unaudited statement of comprehensive income for the six months
to 31 December 2019
Audited
Unaudited Unaudited 12 months to
Six months to Six months to 30 June
GBP'000 31 December 2019 31 December 2018 2019
Profit for the period 37 291 610
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign
operations 11 (19) (17)
Items that will not be reclassified to profit or loss
Changes in the fair value of equity investments at
fair value through other comprehensive
income - - -
Total comprehensive income for the period 48 272 593
============================================================ ================== ================== ==============
All of the comprehensive income for the period is attributable
to the shareholders of Netcall plc.
Unaudited consolidated balance sheet at 31 December 2019
Unaudited Unaudited Audited
GBP'000 31 December 2019 31 December 2018 30 June 2019
----------------------------------------------------------- ------------------ ------------------ --------------
Assets
Non-current assets
Property, plant and equipment 1,071 627 1,210
Right-of-use assets 690 - -
Intangible assets 29,054 28,913 29,188
Deferred tax asset 423 473 501
Financial assets at fair value through other comprehensive
income 72 72 72
Total non-current assets 31,311 30,085 30,971
------------------------------------------------------------ ------------------ ------------------ --------------
Current assets
Inventories 63 186 165
Other current assets 1,232 1,186 1,314
Contract assets 1,232 1,765 1,178
Trade receivables 3,311 5,028 3,864
Other financial assets at amortised cost 145 176 100
Cash and cash equivalents 6,502 5,808 7,769
------------------------------------------------------------ ------------------ ------------------ --------------
Total current assets 12,485 14,149 14,390
------------------------------------------------------------ ------------------ ------------------ --------------
Total assets 43,796 44,234 45,361
------------------------------------------------------------ ------------------ ------------------ --------------
Liabilities
Non-current liabilities
Other payables - - -
Contract liabilities 171 271 207
Borrowings 6,689 6,576 6,632
Lease liabilities 635 - -
Deferred tax liabilities 869 786 851
Provisions - 57 77
------------------------------------------------------------ ------------------ ------------------ --------------
Total non-current liabilities 8,364 7,690 7,767
------------------------------------------------------------ ------------------ ------------------ --------------
Current liabilities
Trade and other payables 3,527 5,512 5,265
Dividend payable 287 758 -
Contract liabilities 9,316 8,788 10,395
Current tax liabilities - 18 -
Lease liabilities 198 - -
Provisions - 128 -
Total current liabilities 13,328 15,204 15,660
------------------------------------------------------------ ------------------ ------------------ --------------
Total liabilities 21,692 22,894 23,427
------------------------------------------------------------ ------------------ ------------------ --------------
Net assets 22,104 21,340 21,934
============================================================ ================== ================== ==============
Equity attributable to the owners of the parent
Share capital 7,275 7,242 7,259
Share premium 3,015 3,015 3,015
Other equity 4,900 4,832 4,832
Other reserves 3,900 4,231 4,440
Retained earnings 3,014 2,020 2,388
------------------------------------------------------------ ------------------ ------------------ --------------
Total equity 22,104 21,340 21,934
============================================================ ================== ================== ==============
Unaudited consolidated statement of changes in equity at 31
December 2019
Share Share Other Other Retained Total
GBP'000 capital premium equity reserves earnings equity
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 1 July 2018 7,242 3,015 4,832 3,917 2,482 21,488
-------------------------------- --------- --------- -------- ---------- ---------- --------
Share-based payments - - - 376 - 376
Reclassification following
exercise or lapse of
share options - - - (5) 5 -
Tax debit relating to
share options - - - (38) - (38)
Dividends to equity holders
of the company - - - - (758) (758)
Transactions with owners - - - 333 (753) (420)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the period - - - - 291 291
Other comprehensive income
for the period - - - (19) - (19)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the period - - - (19) 291 272
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 31 December
2018 7,242 3,015 4,832 4,231 2,020 21,340
-------------------------------- --------- --------- -------- ---------- ---------- --------
Proceeds from share issue 16 - - - - 16
Share-based payments - - - 257 - 257
Reclassification following
exercise or lapse of
share options 1 - - (50) 49 -
Transactions with owners - - - 207 49 273
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the period - - - - 319 319
Other comprehensive income
for the period - - - 2 - 2
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the period - - - 2 319 321
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 30 June 2019
as originally presented 7,259 3,015 4,832 4,440 2,388 21,934
-------------------------------- --------- --------- -------- ---------- ---------- --------
Change in accounting
policy (note 7) - - - - 17 17
Restated balance at 30
June 2019 7,259 3,015 4,832 4,440 2,405 21,951
Issue of ordinary shares
as consideration for
acquisition in a business
combination 14 - 68 - - 82
Proceeds from share issue 2 - - - - 2
Share-based payments - - - 307 - 307
Reclassification following
exercise or lapse of
share options - - - (859) 859 -
Tax debit relating to
share options - - - 1 - 1
Dividends to equity holders
of the company - - - - (287) (287)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Transactions with owners 16 - 68 (551) 572 105
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the period - - - - 37 37
Other comprehensive income
for the period - - - 11 - 11
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the period - - - 11 37 48
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 31 December
2019 7,275 3,015 4,900 3,900 3,014 22,104
-------------------------------- --------- --------- -------- ---------- ---------- --------
Unaudited consolidated cash flow statement for the six months to
31 December 2019
Audited
Unaudited Unaudited 12 months to
Six months to Six months to 30 June
GBP'000 31 December 2019 31 December 2018 2019
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from operating activities
Profit before tax 137 414 752
Adjustments for:
Depreciation and amortisation 1,213 911 1,942
Loss on disposal of fixed assets 1 4 2
Share-based payments 327 280 583
Net finance costs 368 383 753
Changes in working capital:
Decrease in inventories 102 30 51
Decrease/ (increase) in trade receivables 550 1,052 2,216
Decrease/ (increase) in contract assets (81) (330) 252
(Increase)/ decrease in other financial assets at amortised
cost (16) (57) 24
Decrease/ (increase) in other current assets 59 (124) (257)
Decrease in trade and other payables (20) (49) (242)
(Decrease)/ increase in contract liabilities (1,066) (679) 862
Increase/ (decrease) in provisions - 12 (95)
Cash generated from operations 1,574 1,847 6,843
Interest received 23 20 41
Interest paid (2) (2) (4)
Net cash inflow from operating activities 1,595 1,865 6,880
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from investing activities
Payment for acquisition of subsidiary, net of cash acquired (1,679) (462) (591)
Purchases of property, plant and equipment (64) (327) (1,078)
Payment of software development costs (737) (709) (1,532)
Purchases of other intangible assets (9) (34) (350)
Proceeds from sale of property, plant and equipment - - 1
Net cash outflow from investing activities (2,489) (1,532) (3,550)
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from financing activities
Proceeds from issue of ordinary shares 3 - 16
Interest paid on Loan Notes (298) (292) (590)
Principal element of lease payments (86) - -
Dividends paid to Company's shareholders - - (758)
-------------------------------------------------------------- ------------------ ------------------ --------------
Net cash outflow from financing activities (381) (292) (1,332)
-------------------------------------------------------------- ------------------ ------------------ --------------
Net (decrease)/ increase in cash and cash equivalents (1,275) 41 1,998
Cash and cash equivalents at beginning of period 7,769 5,779 5,779
Effects of exchange rate changes on cash and cash equivalents 8 (12) (8)
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash and cash equivalents at end of period 6,502 5,808 7,769
============================================================== ================== ================== ==============
Notes to the financial information for the six months ended 31
December 2019
1. General information
Netcall plc (AIM: "NET", "Netcall", "Group" or the "Company") is
a leading provider of Low-code and customer engagement software. It
is a public limited company which is quoted on AIM (a market of the
London Stock Exchange). The Company's registered address is 1st
Floor, Building 2, Peoplebuilding Estate, Maylands Avenue, Hemel
Hempstead, Hertfordshire, HP2 4NW and the Company's registered
number is 01812912.
2. Basis of preparation
The Group interim results consolidate those of the Company and
its subsidiaries (together referred to as the 'Group'). The
principal trading subsidiaries of Netcall are Netcall Technology
Limited and Netcall Systems Limited (formerly Netcall Telecom
Limited and MatsSoft Limited respectively).
These condensed half year financial statements for the half year
ended 31 December 2019 have been prepared in accordance with the
AIM Rules for Companies, comply with IAS 34 Interim Financial
Reporting as adopted by the European Union and should be read in
conjunction with the annual financial statements for the year ended
30 June 2019, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union.
This results announcement is unaudited and does not constitute
statutory accounts of the Group within the meaning of sections
434(3) and 435(3) of the Companies Act 2006 (the 'Act'). The
balance sheet at 30 June 2019 has been derived from the full Group
accounts published in the Annual Report and Accounts 2019, which
has been delivered to the Registrar of Companies and on which the
report of the independent auditors was unqualified and did not
contain a statement under either section 498(2) or section 498(3)
of the Act.
The results have been prepared in accordance with the accounting
policies set out in the Group's 30 June 2019 statutory accounts.
The Group has adopted IFRS 16 'Leases' from 1 July 2019, replacing
IAS 17 'Leases', see note 7 for details. No other significant
changes to accounting policies are expected for the year ending 30
June 2020.
The results for the six months ended 31 December 2019 were
approved by the Board on 26 February 2020. A copy of these interim
results will be available on the Company's web site www.netcall
.com from 27 February 2020.
The principal risks and uncertainties faced by the Group have
not changed from those set out on page 9 of the annual report for
the year ended 30 June 2019. The Group continues to monitor the
impact of the UK leaving the European Union in January 2020 and the
succeeding transition period on the ability of the Group's clients
to do business.
3. Segmental analysis
The Board considers that there is one operating business segment
being the design, development, sale and support of software
products and services, which is consistent with the information
reviewed by the Board when making strategic decisions. Resources
are reviewed on the basis of the whole of the business
performance.
The key segmental measure is adjusted EBITDA which is profit
before interest, tax, depreciation, amortisation, acquisition and
reorganisation expenses and share-based payments, a reconciliation
of which is set out on the consolidated income statement.
4. Earnings per share
The basic earnings per share is calculated by dividing the net
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year
excluding those held in treasury:
12 months to
Six months to Six months to 30 June
31 December 2019 31 December 2018 2019
--------------------------------------------------------------- ------------------ ------------------ -------------
Net earnings attributable to ordinary shareholders (GBP'000s) 37 291 610
Weighted average number of ordinary shares in issue (000s) 143,455 142,978 143,038
Basic earnings per share (pence) 0.03 0.20 0.43
=============================================================== ================== ================== =============
The diluted earnings per share has been calculated by dividing
the net profit attributable to ordinary shareholders by the
weighted average number of shares in issue during the period,
adjusted for potentially dilutive shares that are not
anti-dilutive.
12 months to
Six months to Six months to 30 June
31 December 2019 31 December 2018 2019
--------------------------------------------------------------- ------------------ ------------------ -------------
Weighted average number of ordinary shares in issue (000s) 143,455 142,978 143,038
Adjustments for share options (000s) 5,666 2,561 6,085
Weighted average number of potential ordinary shares in issue
(000s) 149,121 145,539 149,123
--------------------------------------------------------------- ------------------ ------------------ -------------
Diluted earnings per share (pence) 0.02 0.20 0.41
=============================================================== ================== ================== =============
Adjusted basic and diluted earnings per share have been
calculated to exclude the effect of acquisition, contingent
consideration and reorganisation costs, share-based payment
charges, amortisation of acquired intangible assets and utilisation
of historic tax losses. The Board believes this gives a better view
of ongoing maintainable earnings. The table below sets out a
reconciliation of the earnings used for the calculation of earnings
per share to that used in the calculation of adjusted earnings per
share:
12 months to
Six months to Six months to 30 June
GBP'000s 31 December 2019 31 December 2018 2019
--------------------------------------------------------------- ------------------ ------------------ -------------
Profit used for calculation of basic and diluted EPS 37 291 610
Amortisation of acquired intangible assets 248 259 512
Change in fair value of contingent consideration 37 (121) (865)
Post-completion services 33 147 244
Share-based payments 327 280 583
Unwinding of discount - contingent consideration & borrowings 67 95 181
Tax adjustment (58) (81) (125)
Profit used for calculation of adjusted basic and diluted EPS 691 870 1,140
=============================================================== ================== ================== =============
12 months to
Six months to Six months to 30 June
Pence 31 December 2019 31 December 2018 2019
------------------------------------- ------------------ ------------------ -------------
Adjusted basic earnings per share 0.48 0.61 0.80
Adjusted diluted earnings per share 0.46 0.60 0.76
===================================== ================== ================== =============
5. Dividends
Dividends paid or declared during the period were as
follows:
Statement of changes December 2019
Six months to Cash flow statement in equity balance sheet
December 2019 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
Final ordinary
dividend for year to
June 2019(1) 5/2/20 0.20p - 287 287
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
- 287 287
------------------------------- ---------------- -------------------- --------------------- ---------------------
Statement of changes December 2018
Six months to Cash flow statement in equity balance sheet
December 2018 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
Final ordinary
dividend for year to
June 2018 6/2/19 0.53p - 758 758
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
- 758 758
------------------------------- ---------------- -------------------- --------------------- ---------------------
(1) The final ordinary dividend for the year ended 30 June 2019
was approved at the Annual General Meeting held on 21 November
2019.
6. Net debt reconciliation
30 June
GBP'000 31 December 2019 31 December 2018 2019
------------------------------------------ ----------------- ----------------- --------
Cash and cash equivalents 6,502 5,808 7,769
Borrowings - repayable after one year(1) (6,689) (6,576) (6,632)
Net debt/ (funds) (187) (768) 1,137
========================================== ================= ================= ========
(1) To support the acquisition of MatsSoft Limited in August
2017, the Company issued a GBP7m Loan Note with options over 4.8m
new ordinary shares of 5p each priced at 58p. The Loan Note is
unsecured, has an annual interest rate of 8.5% payable quarterly in
arrears and is repayable in six instalments from 30 September 2022
to 31 March 2025. The Loan Note was initially allocated a fair
value of GBP6.42m and the share option a fair value of GBP0.58m.
The discount on the carrying value of the Loan Note is being
amortised via the profit and loss account over the expected option
life of five years.
7. IFRS 16 'Leases'
The Group has adopted IFRS 16 'Lease's retrospectively from 1
July 2019, but has not restated comparatives for the 30 June 2019
reporting period, as permitted under the specific transition
provisions in the standard. The reclassifications and the
adjustments arising from the new leasing rules are therefore not
recognised in the opening balance sheet on 1 July 2019.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using an incremental borrowing rate as
of 1 July 2019. The weighted average incremental borrowing rate
applied to the lease liabilities on 1 July 2019 was 3.25%.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- applying a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- relying on previous assessments on whether leases are onerous
as an alternative to performing an impairment review - there were
no onerous contracts as at 1 July 2019;
-- excluding initial direct costs for the measurement of the
right-of-use asset at the date of initial application; and,
-- using hindsight in determining the lease where the contract
contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying IAS 17 and
Interpretation 4 Determining whether an Arrangement contains a
Lease.
Measurement of lease liabilities
GBP'000
------------------------------------------------------------------- -----
Operating lease commitments at 30 June 2019 770
Add property lease dilapidations 227
Discounted using the incremental cost of borrowing at 1 July 2019 (93)
Lease liability recognised at 1 July 2019 904
------------------------------------------------------------------- -----
Of which are:
Current lease liabilities 179
Non-current lease liabilities 725
------------------------------------------------------------------- -----
904
------------------------------------------------------------------- -----
Measurement of right-of-use assets
The associated right-of-use assets were measured at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the
balance sheet as at 30 June 2019.
Adjustments recognised in the balance sheet on 1 July 2019
The change in accounting policy affected the following items in
the balance sheet on 1 July 2019.
GBP'000
------------------------------------------- ------
Right-of-use assets 819
Deferred tax assets 3
Prepayments (15)
Accruals 37
Lease liabilities (904)
Provisions - property lease dilapidations 77
Net impact on retained earnings 17
------------------------------------------- ------
Impact of change on income statement
Under IFRS 16, the Group now recognises depreciation and
interest costs, instead of an operating lease expense as set out in
the table below.
30 June
GBP'000 31 December 2019 31 December 2018 2019
------------------------- ----------------- ----------------- --------
Operating lease expense - 138 297
Depreciation 129 - -
Interest 14 - -
Total 143 138 297
========================= ================= ================= ========
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END
IR ZZGZZRVDGGZM
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