TIDMPCIP
RNS Number : 3474Y
PCI-PAL PLC
06 September 2022
6 September 2022
PCI-PAL PLC
("PCI Pal", the "Company" or the "Group")
Final Results
Analyst Briefing & Investor Presentation
Continued strong new business momentum
PCI-PAL PLC (AIM: PCIP), the global provider of secure payment
solutions for business communications, is pleased to announce full
year results for the year ended 30 June 2022 (the "period").
Financial Highlights
-- Revenue increased 62% to GBP11.94 million (2021: GBP7.36 million)
-- Gross margin increased to 84% (2021: 75%) reflecting the
majority of revenues delivered through our cloud based Amazon Web
Services ("AWS") platform
-- Significant increase in Total Annual Contract Value ("TACV(1)
") at 30 June 2022 by 40% to GBP13.36 million (2021: GBP9.51
million), with an 11% increase in ACV signed in the period to
GBP3.46 million (2021: GBP3.11 million).
-- Deferred income increased by 31% to GBP10.62 million (2021: GBP8.09 million)
-- Strong performance delivered adjusted operating loss(2)
better than expectations at GBP2.02 million (2021: GBP3.85
million)
-- Loss before tax at GBP3.11 million (2021: GBP4.19 million)
which includes a GBP0.80 million (GBP2021: GBPnil) charge in
relation to legal fees for defending the ongoing patent claim
-- Cash balances at year end of GBP4.89 million (2021: GBP7.52
million) and the Group is debt free
Operating and Other Highlights
-- North American momentum continues to build, with revenue up
83% and a year-on-year increase in ACV signed of 7%. North America
now accounts for 28% of the Group revenue (2021: 25%)
-- Opened offices in Australia and Canada expanding the global reach of the Group
-- Recurring revenue model continues to build, with recurring
revenues accounting for 89% of total revenue (2021: 88%)
-- Signed 217 new sales contracts in the year (2021: 195)
-- A further 164 new contracts live with our services in the period (2021: 121)
-- Time to go live ("TTGL(3) ") of new contracts signed in the
last 18 months marginally ahead of management expectations at below
5 months
-- 85% of new sales contracts for the Group generated from channel partners (2021: 78%)
-- Added two new members to the PCI Pal Advisory Committee, both
US-based, experienced product and engineering executive, Jayesh
Patel who was formerly Chief Product Officer at Vonage Inc, and
Emilia D'Anzica, a customer success executive and consultant
(1) TACV is the total annual recurring revenue of all signed
contracts, whether invoiced and included in deferred revenue or
still to be deployed and/or not yet invoiced (2) Loss from
Operating Activities before exchange losses/gains recorded in the
profit and loss exceptional items and share option charges
(2) Loss from operating activities before exceptional items and
share option charges
(3) TTGL is the average time it takes a contract to be deployed
measured from the date of signature
Current trading
-- Strong start to new financial year with key metrics in line with management expectations.
-- Sales highlights since year end:
o Signed large well-known US-focused retailer with over 1,500
stores nationwide
o New contract signed through a top performing partner in the UK
with a well-known international food and drink company with an
international footprint
-- New integrated reseller partnership signed with a B2B telco
in Canada. This new partner has more than 100,000 customers and has
a fast growing business in the Canadian contact centre market
Commenting on results and prospects, James Barham, Chief
Executive said:
"FY22 is a year we can be proud of at PCI Pal. Having taken the
steps to expand our addressable market following the fundraise in
April 2021, we have executed against our ambitious plans in the
year. We have driven organic revenue growth to market leading
levels, whilst at the same time managing the processes of an
unfounded patent case against us as well as meeting the challenge
of a highly competitive jobs market.
"We have taken another step up in the last 12 months, reaching
several financial milestones including GBP10 million ARR from our
true-cloud, SaaS subscription services. This continued progress
against our plans is now creating further opportunity as we build
more momentum in our expanded product vision, as we look to add
further value layers to our existing compliance and secure payment
solution suite.
"With our market leading partner eco-system, mature cloud
technology, and our ability to serve customers on a truly global
scale, we are very well positioned to further capitalise on the
broadening opportunities in front of us. I continue to look forward
with confidence to another year of strong growth in FY23."
Analyst Briefing: 9.30am on Tuesday 6 September 2022
An online briefing for Analysts will be hosted by James Barham,
Chief Executive, and William Good, Chief Financial Officer, at
9.30am on Tuesday 6 September 2021 to review the results and
prospects. Analysts wishing to attend should contact Walbrook PR on
pcipal@walbrookpr.com or 020 7933 8780.
Investor Presentation: 3.00pm on Thursday 8 September 2022
The Directors will hold an investor presentation to cover the
results and prospects at 3.00pm (UK time) on Thursday 8 September
2022.
The presentation will be hosted through the digital platform
Investor Meet Company. Investors can sign up to Investor Meet
Company and add to meet PCI-PAL PLC via the following link
https://www.investormeetcompany.com/pci-pal-plc/register-investor .
For those investors who have already registered and added to meet
the Company, they will automatically be invited.
Questions can be submitted pre-event to pcipal@walbrookpr.com or
in real time during the presentation via the "Ask a Question"
function.
Annual Report & Accounts
The Annual Report & Accounts and Notice of Annual General
Meeting will be posted to the Company's website ( www.pcipal.com )
and posted to shareholders in due course.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of MAR.
For further information, please contact:
PCI-PAL PLC Via Walbrook PR
James Barham - Chief Executive
Officer
William Good - Chief Financial
Officer
finnCap (Nominated Adviser and
Broker) +44 (0) 20 7227 0500
Marc Milmo/Simon Hicks (Corporate
Finance)
Richard Chambers (Corporate Broking)
Walbrook PR +44 (0) 20 7933 8780
Tom Cooper/Nick Rome +44 (0) 797 122 1972
P CIPAL@walbrookpr.com
About PCI Pal:
PCI Pal is a leading provider of Software-as-a-Service ("SaaS")
solutions that empower companies to take payments from their
customers securely, adhere to strict industry governance, and
remove their business from the significant risks posed by
non-compliance and data loss. Our products secure payments and data
in any business communications environment including voice, chat,
social, email, and contact centre. We are integrated to, and resold
by, some of the worlds' leading business communications vendors, as
well as major payment service providers.
The entirety of our product-base is available from our global
cloud platform hosted in Amazon Web Services ("AWS"), with regional
instances across EMEA, North America, and ANZ.
For more information visit www.pcipal.com or follow the team on
Linkedin: https://www.linkedin.com/company/pci-pal/
CHAIR'S STATEMENT
FOR THE YEARED 30 JUNE 2022
I am very pleased to report on another year of significant
progress for the business on its path towards profitability while
continuing to achieve upper quartile top line SaaS company growth
and retention rates.
Notable achievements in the year include the strengthening of
TACV, our leading forward indicator of growth, by 40% to GBP13.36
million and growth in deferred revenue of 31% to GBP10.62 million,
once again growing our forward-looking revenue visibility.
Recognised revenue also grew strongly by 62% to GBP11.94 million
and gross margins continued to improve to 84%. These top line
financial metrics are all hallmarks of a strong and growing cloud
company and SaaS business model.
Patent Infringement Claims
For most of this fiscal year the management team has been
vigorously defending the Group in both the UK and US against what
the Board believes to be an unfounded patent infringement claim by
Sycurio Limited. The Group has adopted a pro-active, multi-faceted
defence strategy of proving non-infringement, despite the onus
being on Sycurio to prove the infringement, and also to disprove
PCI Pal's counterclaims of invalidity.
The Board intends to continue to use all routes available to it
to bring this matter to a close and we are confident in our
position on both the defence of the claims made, as well as on the
counterclaims that we are making.
People
The commitment of our people is truly outstanding. They have
delivered these exceptional results.
The Group has put a great deal of effort into supporting our
people and continuing to build an enduring culture of respect,
positivity, and resilience. This corporate foundation is directly
reflected in low employee turnover and an ability to attract first
class technical talent despite the enormous impact of the Great
Migration being felt across not just the technology sector but all
areas of the global economy. More importantly, our customers and
partners really enjoy working with our teams. This competitive
differentiator should not be under-estimated and can be seen in our
excellent NPS rankings, continued strengthening of our leadership
position in channel partnerships, and impressive customer retention
and account expansion metrics.
Overall, the PCI Pal team has grown from 71 to 103 employees
over the course of the year, and I would personally like to thank
each and every one of them for their contributions towards meeting
the Group's mission.
Strategic Direction
Several years ago, the Group adopted a disruptive strategy for
our sector of being channel-first and delivering our solutions
exclusively through the Cloud. FY22 again delivered tangible
evidence of the ongoing success of this strategy. Most of our
business by volume of sales continues to come through channel
partnerships, further validating our strategic decision to be a
channel-first organisation.
Building on this strategic success to date, the Board continues
to evolve and expand its rolling five-year strategic plan to enter
new geographic markets, such as Canada and Australia, and to
broaden our offering to include new secure payments services on its
global Cloud platform. In FY22 the first example of these new
services was a 'pay-by-bank' option via a technology partnership
with TrueLayer. Further new secure payment services are planned for
launch during FY23, providing new revenue opportunities for our
partners and enhancing the overall value proposition for our end
customers.
Corporate Governance
In FY22 the Board has continued to focus on building our
governance capabilities and ability to exercise independent
judgement as the Group becomes larger, more internationally
complex, serving a broader range of global partners and customers,
and developing an even more culturally diverse team of people in
different countries. I am therefore very pleased to have welcomed
Carolyn Rand to the Board as Audit Committee Chair and member of
the Remuneration Committee. Carolyn is a financial expert with a
broad SaaS and international technology background, most recently
with Bango Plc, and therefore also brings payment industry
experience to the Board. I would like to thank Chris Fielding for
his long service and contributions to the Group, both as past Chair
of the Board and Audit Committee Chair, as the Group transformed
itself into the fast-growing Cloud business it is today.
It has been two years since the formation of the PCI Pal
Advisory Committee (the "PAC"), and the CEO and senior management
team has continued to benefit from the expert outside functional
advice that the committee provides. The Board has also enhanced its
ability to meet its governance responsibility to manage its risk
profile by having access to expert and more diverse, global outside
viewpoints that are strongly correlated to the key elements of our
evolving 5-year strategic plan.
For the second year, the Board has produced an ESG report, which
sets out our commitment to understanding, measuring and, over time,
improving our 'ESG footprint' as well as our focus and commitment
to diversity and inclusion. This year we have updated our initial
assessment of the key ESG metrics that we believe are most
applicable to the Group, as well as our goals for achieving
measurable improvement for each metric over time. The Board is
fully committed to supporting management to achieve these
improvement goals and is leading by example in the context of the
make-up of the both the Board and the Advisory Committee. Although
PCI Pal is a small software company relative to the large-scale
global challenges around corporate governance and ESG, the Board
nonetheless takes its ESG responsibilities seriously and has begun
its own journey of self-directed improvement.
Stakeholder Communications
As a board, we remain focused on clear and regular
communications to all investors, both retail and institutional, and
expanding disclosures in line with the growth in complexity of the
business. We continue to utilise telephone updates as well as video
briefings using the Investor Meet Company portal, to reach
shareholders of all sizes. As the impact of the pandemic has
receded, the CEO and CFO are once again also offering in-person
meetings. A s Chair, I am available as a direct line of
communication to all shareholders in case other questions arise
that need to be answered independently, as well as offering
meetings with institutional shareholders around the time of the
AGM.
In continuing recognition of the Company's wider communication
responsibility to all stakeholders, this year the Company has again
expanded its media plan of publishing articles and content on
social media, on the Company's website and utilising the RNS Reach
service to help provide a deeper understanding of the Group's
products and markets.
Looking Forward
Given the achievements to date and our commanding partner
position in the ecosystem of the business communications
marketplace, I am greatly encouraged by the progress that has been
made by the Group in FY22, and the Board is confident in the
outlook and prospects for the Group in FY23 and beyond.
We have started the current financial year in line with
management's expectations and I look forward to sharing further
progress reports and news during the coming financial year, as we
continue our strategic growth journey towards profitability and
further scale.
Simon Wilson
Non-Executive Chair
CHIEF EXECUTIVE'S STATEMENT
FOR THE YEARED 30 JUNE 2022
Overview
I am extremely proud of the year we have just delivered.
Following the fundraise in April 2021, we set out expanded
growth objectives for FY22 which included growing our addressable
market through expansion into new territories including Canada and
Australia; as well as increased investment into product,
engineering, and customer success functions. The investment across
these areas by majority involved an increase in headcount which has
grown in the year by 45% to 103 people group-wide across UK, US,
Canada, and Australia.
We have made this substantial progress against our hiring
objectives despite the impact that the "war for talent" has had on
fast growing technology companies such as ours. Furthermore, we are
especially pleased that during this expansion we have achieved
excellent employee retention of 94%.
It is particularly pleasing that while undertaking this
significant expansion, with the inconvenience of the unfounded
patent claim being made against us in the background, we have grown
revenue by 62% year on year to GBP11.9 million, with a closing ARR
run rate of GBP11.1 million (2021: GBP7.7 million). This organic
growth performance is the strongest in our market and is a result
of the successful execution against our stated objectives, which
include: providing the most mature cloud platform to customers in
our space; to be a truly partner-first business, creating the
leading partner eco-system in the market; and for our services to
be available to any size contact centre anywhere in the world.
Along with our market-leading revenue growth performance we have
also managed our customer churn rates to top quartile levels, at
just 3%. The Group has delivered several large extensions to key
accounts in the period which has contributed to a strong NRR result
of 118% across the year which is testament to the relationships we
build with partners and customers alike. In addition, our new
contract sales momentum has continued driving our key growth metric
of TACV, which in turn is a key indicator of future recurring
revenues, to GBP13.4 million, a year-on-year increase of 40%.
Given the momentum being seen by the Company, we are making
excellent progress towards achieving break even in the near term.
The progress is not only supported by our sales momentum, but also
the continued increase in gross margins which is now at 84% (2021:
75%). Our ability to drive both new business and upsells to revenue
recognition is testament to the foundations we established in prior
years having built a strong operational core to the business. Our
strong trading, along with our SaaS revenue model, has delivered
excellent cash performance as well, with cash of GBP4.9 million at
the year-end being substantially ahead of original
expectations.
A consistent strategy to meet the opportunity
At PCI Pal, our vision is to be "the preferred solution provider
that organisations turn to globally for achieving payment security
and PCI compliance in customer engagement environments". To date,
having now completed the first full 5 years of our original plan,
we have focused primarily on securing consumer payment card data in
contact centre markets in the UK and US, with very recent expansion
this year into Canada and Australia.
Our plan set out three pillars of growth: to be the leader in
cloud in a space hindered by legacy hardware solutions; to leverage
cloud innovation to create opportunities to sell to the breadth of
the contact centre market globally; and to gain access to that
global market through the creation of a market leading partner
eco-system. We have been highly successful in executing against all
three pillars and our revenue growth is testament to that as well.
Today we estimate our market opportunity to be in the region of
GBP300 million worldwide based on there being over 10 million agent
positions in contact centres across the globe. This addressable
market will grow as we start adding more of our planned product
enhancements to our existing solutions.
Bolstering the tactical advantages we have over our competitors,
and as the first to launch globally available, true-cloud solutions
in our space, we have further expanded our patent portfolio with
the grant of a key patent covering the novel and unique way that we
leverage cloud telephony technologies to integrate our Agent Assist
solution to third party environments "Processing Sensitive
Information Over VoIP" (US 11,310,291) . The patent is now granted
in the US and approved for grant in Australia, with further
territories expected in the coming months, including the UK. Of
note, the US grant was made following an extensive review by the US
Patents and Trademark Office of existing patents in our space,
reiterating the innovative and novel nature of PCI Pal's approach.
The patent specifically covers the way that PCI Pal is able to
manipulate the signalling and voice stream of phone calls, allowing
PCI Pal to take a non-invasive approach to its handling of data
during a call within its Agent Assist and IVR solutions. This
latest patent is important in illustrating the novel ways by which
we have been able to capture such a strong partner eco-system and
also provides potential protection against those competitors who
may wish to transition to cloud and follow similar operating models
as PCI Pal.
People
Since early in our journey, we have set corporate level
objectives to drive a focus on our people. This starts with a
company-wide objective to maintain a culture that people want to be
part of and a workplace that feels engaging and inclusive for
all.
People are absolutely critical to this business. As a fast
growing, high margin, SaaS business, people are what this business
invests in the most. At PCI Pal we give equal focus to developing
and supporting our existing employees, as we do to the passion and
thorough approach we take to hiring new team members. We recognise
that as a business of our size, even at now over 100 people, that
it is our people that make the difference. It is therefore pleasing
for myself and the management team that in a year where jobs
markets have been turned upside down that we have achieved top
quartile employee retention. This performance was evidenced during
the year when we were recognised by WorkL, in partnership with The
Telegraph newspaper, as one of the most engaging employers in the
country ranked 221 out of over 23,000 organisations assessed.
During the year we have expanded our headcount by 45% to support
our escalated strategic objectives defined at the fundraise in
April 2021. I must thank the entire team at PCI Pal who have been
involved in this process from the hiring managers to those who have
supported them during our multi-stage interview processes. We have
a rule at PCI Pal to only bring people into the business we feel
excited about, and this has stood us in good stead with the
excellent team and culture that we have built.
Further expanding our keen people focus, in the year we
commenced an initiative to bring more focus to diversity and
inclusion at PCI Pal. Whilst we believe we have a diverse and
inclusive workplace today, we recognise that as a growing company
it is important that we have visibility of data, understanding, and
processes in place to ensure this important area is catered for as
our growth continues. We have now completed our initial stages of
gathering data, something our teams have embraced and given
supportive feedback to. We will now continue that journey to allow
the data to better inform management as we build processes to
further drive this initiative.
Unfounded claims of patent infringement
In September 2021, the Group announced that Semafone Limited
(now renamed Sycurio Limited), one of our competitors, had filed
lawsuits in both the UK and the US relating to alleged patent
infringement by PCI Pal. We believe that the claim was brought
against us by Sycurio, shortly after they were acquired by a
US-based Private Equity fund, primarily to try to disrupt the
delivery of our growth plans.
The Directors continue to strongly refute the claims being made.
The Group has formed a robust defence to the allegations of
infringement and is confident in the strength of its counterclaims,
which, if successful, would invalidate Sycurio's entire patent
portfolio. We have formed our strong position on counterclaims
challenging the validity of their patents following an extensive
investigation into Sycurio's patents and the previous court
challenges in the UK to their validity by other parties. The Group
has therefore adopted a pro-active, multi-faceted defence strategy
of proving non-infringement, despite the onus being on Sycurio to
prove the infringement, and also to disprove PCI Pal's
counterclaims of invalidity.
The litigation relates to PCI Pal's Agent Assist product and the
way that card data is captured when entered by a consumer using
their telephone keypad. PCI Pal has a number of other products
which do not rely on this process, and indeed none of the new
anticipated products in PCI Pal's development pipeline have a
requirement for keypad entry and instead are focused on digital and
form capture more similar with e-commerce and modern digital
payment solutions.
As you would expect, not only are we defending the case
strongly, but we have also made additional plans that, in the
unlikely scenario that proceedings go against us, will provide a
fallback position for the Agent Assist product to ensure
non-infringement going forward. We expect to file confidential
documents with the Court outlining the fallback position as is
normal in patent claim cases.
The Board are prepared to fight this case all the way through
the courts but, as stated previously, we will continue to explore
all options that are in the best interest of the business to bring
this matter to a satisfactory conclusion.
Strategy and market
PCI Pal's addressable market today is any size organisation
taking payments within business communications environments
anywhere in the world. We work with our partners and customers to
allow them to secure payments whilst adhering to strict information
security rules around credit and debit card data, namely PCI
Compliance. In particular our solutions are utilised within call or
contact centre environments all of which utilise business
communications platforms to engage with their customers.
Contact centre markets in both the UK and US represent between
2-3% of the working populations of those countries, and the trends
are similar in the new territories we have expanded into in FY22.
Our ability to serve a contact centre of any size is essential when
considering the make-up of this large employment pool across our
market. In the US alone 94% of all contact centres (37,000 contact
centres) have between 10 and 250 agent seats, employing 2.04
million agents which makes up more than 55% of the entire employed
agent population in the country.
By using PCI Pal services, companies not only secure the most
sensitive of customer payment data, but they do so in such a way
that will allow them to comply with the ever-changing information
security and data governance standards related to how they handle
this data. Additionally, by using PCI Pal services, customers will
make significant progress towards broader regional data protection
regulation such as GDPR in the European Union and the California
Consumer Privacy Act in the US.
It is therefore a key differentiator for us to be able to serve
organisations across our entire market. Our customers range from
small contact centres up to the very largest with more than 5,000
agent seats, but by far the majority are in the small to mid-size
range with our average annual contract values of between GBP15,000
and GBP20,000. This more numerous end of the market is a
substantial risk reducer for churn in the business, given our
revenues are spread across a higher number of customers.
We also target the less numerous, larger enterprise-size
businesses and contact centres (that we defined as being contracts
with an annually recognised revenue value for the Group in excess
of GBP100,000 per annum) which currently represent 43% (2021: 43%)
of our revenues. As there are relatively far fewer of these larger
contracts, the enterprise deals are less predictable and more
challenging to forecast.
Our addressable market is underpinned and strengthened by two
major global industry dynamics occurring today: the increase in
regulation and governance surrounding data security worldwide; and
the transition in the communications market of services served from
on-premise equipment moving to services delivered from the cloud.
With the combination of these dynamics, PCI Pal is acting as an
enabler for both security but also the payment itself, seamlessly
integrated into our customer's customer engagement tools.
Additionally, as the first in our space to bring a true-cloud
offering to market, and the only global player with a sole focus on
cloud, PCI Pal is in a strong position to capitalise on the digital
transformation occurring across the business communications,
security, and payments markets.
Having executed against our first 5-year strategic plan, and
firmly established the three key pillars of growth we defined, we
have driven significant partner and customer adoption of our
products and services leading to us being recognised as the 56(th)
fastest growing company in the UK by The Growth Index when compared
to 32,000 similar companies. This strong and growing partner
eco-system and customer-base now paves the way for the evolution of
the PCI Pal product-set.
Cloud Technology
With approaching 500 customers worldwide, PCI Pal's AWS-hosted
cloud platform is the most mature cloud environment in its market.
We launched this cloud offering in 2017 when the majority of the
market was selling only hardware or privately hosted solutions and
as a result have benefitted from this first-mover advantage. Today
PCI Pal's cloud services are resold by two thirds of the Gartner
Magic Quadrant for CCaaS vendors as well as 35% of the world's top
20 call centre business process outsourcers.
Amazon Web Services is our chosen provider of virtualised cloud
services where we host our platform today. Our strategy to manage a
single platform ensures operational efficiency while we deliver our
product innovations and rapidly expand worldwide, allowing us to
sell to high quantities of customers, maximising the market
opportunity. Validating this technology strategy, AWS is the most
commonly used cloud hosting provider across all our partners.
Evolution of PCI Pal product set
As stated at the fundraise in April 2021, the Group continues to
drive investment into product and engineering as we seek to expand
the addressable market opportunity, capitalising on the partner
eco-system we have created. I am pleased to say we have made
excellent progress here.
Towards the end of FY21, we hired a new CTO who is a very
experienced, product-focused engineering leader with a SaaS,
communications, and payments background. In his short tenure he has
begun to take our product management and engineering functions to
another level, as well as further improving the pace and robustness
of our delivery cycles and change management, and continued service
uptime excellence.
As well as strengthening the Group's existing core products for
securing payment data, the product team are starting to bring our
long-term product vision to life. Having seen interactions into
contact centres increase during the pandemic, along with the
emergence of digital transformation which is driving a great mix of
communications channel adoption in those environments, such as
chat, social, and email, we are seeing an increase in demand to
commercialise those interactions with consumers.
Contact centres to date have been unable to access more modern
digital payment methods that websites benefit from, such as open
banking, e-wallets, buy-now-pay-later (such as Klarna and Affirm),
and many others. Realising our product vision will allow PCI Pal to
provide our partners and customers with these types of services for
their contact centres, giving them the opportunity to drive
revenue, reduce payment processing charges, and increase customer
experience through its payment solutions. Our existing compliance
and security solutions, often fully integrated to our partners' own
technology stacks, are a natural foundation of these value-add
services.
As an example, in March 2022 we announced our partnership with
TrueLayer, one of the leading international providers of open
banking solutions. Open banking payment options allow merchants to
receive payments from consumers direct to bank giving significant
cost savings to traditional credit card methods, and provide an
additional layer of fraud reduction mechanism. Consumers benefit as
they are even more protected from payment scams and have an instant
record of payment. Our open banking solution will be formally
launched in September.
Continued Sales Growth
In summary, an exceptional year of growth for the business, with
revenue increased 62% year on year to GBP11.9 million. With a
closing year end ARR run rate of GBP11.1 million, a 44% increase on
the prior year, we are seeing the benefits of our SaaS subscription
model as the revenue from our key sales growth indicator of TACV
begins to hit recognition. TACV increased 40% year on year to
GBP13.4 million (2021: GBP9.5 million). TACV includes all contracts
that the company has whether they are at go-live and revenue
recognition or not and is a key indicator of PCI Pal's next
12-month recurring revenues.
Contributing to the increase in TACV, the Company delivered
GBP3.5 million in new business ACV, an 11% increase year on year.
In addition, and outside of ACV, the company was successful in
securing additional transactional business from a number of
customers. Where this transactional revenue is deemed of a
recurring nature, the Board estimate the likely recurring level and
include this in the Group's ARR and TACV numbers. Transactional
revenues make up approximately 22% (2021: 24%) of the TACV.
Supporting the Group's revenue growth is a strong performance
against our customer success objectives. With customer churn rates
of just 3%, this is testament to our ability to deliver customer
satisfaction. Our Net Promoter Scores ("NPS") across the year were
excellent compared to the global benchmarks at 65. More pleasing is
our ability to continue to sell to existing customers, our NRR grew
to 118% (2021: 111%) as we renewed and grew our agreements with two
of our largest customers, as well as increased our licences to
numerous other smaller customers. It is these success metrics
combined with our people and products that have allowed us to
expand some of our largest accounts during the year in both the UK
and US. This capability is particularly important as the business
grows and adds new products, especially in such a changeable
economic environment in the world today.
Having only launched the Canadian and Australian businesses
mid-way through the year, the vast majority of new business sales
have been delivered by the US and EMEA teams, with 85% of new
business contracts in the period generated through resellers,
highlighting the strength of our partner business. The EMEA
business had an excellent year, with new business sales delivering
58% of the Group's new business ACV at GBP2.0 million. The EMEA
business benefitted from a more mature customer-base where upsell
opportunities have been more numerous. Conversely, the US business
delivered more net new logo business than the EMEA team which is
what we expected considering the size of the market opportunity in
the United States.
In the US, we increased TACV by 53% to GBP4.2 million (2021:
GBP2.8 million) which included an additional GBP1.4 million in ACV
sales, the remainder of the increase being transactional recurring
fees from new business. The US market is still a number of years
behind the UK in terms of payment security solution adoption, and
therefore as planned, we only grew the US sales team during the
year by one person while we expanded into new territories of Canada
and Australia. The US remains the largest opportunity for the
business long term, and we believe we have taken the right approach
in balancing our push there with a global view in mind. The Group
continues to benefit across all territories as a result of our
efforts with major partners in the US as the majority of these
US-headquartered business are large global enterprises.
Market leading partner eco-system continues to expand
One of the key strategic pillars is to leverage channel partners
to scale our business. Over the last five years we have
successfully built the most extensive partner eco-system in our
market. With 85% of new business sales in the period coming through
partners, PCI Pal is a truly partner-first business. Today our
partners include some of the most recognisable names in the
business communications, BPO (Business Process Outsourcers), and
payments markets including Genesys, Worldpay, Amazon Connect,
Capita, NICE, and Webhelp.
We continue to work hard to deepen relationships with our
existing partner base, and during the year we expanded our
relationships with a number of our key partners including Genesys,
8x8, Sitel, and Talkdesk. These deeper relationships have allowed
us to work closer with these partners' own sales and product teams
allowing us to align our solution better with their sales
objectives.
In addition, we are still signing new partnerships that, once
signed, go through our rigorous on-boarding process to ensure both
us and the partner can begin to quickly mutually benefit from the
relationship. New partners in the period include Teleperformance,
who will leverage our full portfolio of payment security solutions
seamlessly integrated to support their customers globally; and
Amazon Connect, where using our AWS hosted, light-touch cloud
capabilities we have created the first global integration of its
kind available to their Amazon Connect contact centre customers
available to be procured through the AWS Marketplace.
At PCI Pal, we categorise our partners into four different
groups:
-- Integrated Partners - Such as CCaaS, UCaaS or carrier
partners with tight telephony, and sometimes desktop, integrations.
Repeatable integrations facilitate shorter customer implementation
times
-- Solution Providers - Typically Value-Added Resellers ("VARs")
and Systems Integrators of the major traditional telephony
platforms such as Genesys, Cisco, and Avaya. Solution Providers
also includes Payment Service Providers such as Worldpay B2B,
Capita Pay 360, and Civica. We also include our BPO partners in
this category of partners
-- Referral Partners - Partners who introduce customers to us,
to whom we then sell direct. These include Master Agents,
consultants, as well as other organisations who may prefer to first
introduce, prior to becoming a fully enabled reseller
-- Technology Partners - typically these are major technology
vendors, such as Oracle, with whom we have sought technology
accreditations that allow us to sell to both their own partner
communities and also major enterprise customers
Our global partners tend to be large organisations with minimum
1,000 employees, some much larger. As such, our journey with many
of our partners still has some way to go and we are focussing our
efforts into continuous enablement aligned with our increased
investment into partner success and relationship management. We are
very cautious to balance new partner acquisition efforts with the
efforts required to maintain and grow our existing large partner
relationships.
Current Trading & Outlook
As a result of the strong financial performance of the Group, we
continue to be on track with our current plans to hit cashflow
breakeven in the coming year, with monthly profitability following
shortly after that point. The early signs of this were shown in
FY22, with the EMEA business reaching Adjusted PBT profitability as
the accumulation of sales through TACV reaches revenue recognition.
Whilst we remain conscious of the rapidly evolving wider
macro-economic environments affecting our key markets today in the
UK and US, we are very confident in the prospects of this fast
growing business .
We go into the new financial year excited by the anticipated
further expansion of our existing partner and customer
relationships, as well as increasing the value proposition of our
services for new customers as a result of the expected realisation
of our evolved product vision. We believe we are well positioned to
continue the planned growth trajectory balanced with high retention
rates, as we continue building this strong business.
James Barham
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
FOR THE YEARED 30 JUNE 2022
Key financial performance indicators
The Directors use several Key Financial Performance Indicators
(KPIs) to monitor the progress and performance of the Group. All
the core KPIs are showing strong performance against
expectations.
The principal financial KPIs are as follows:
2022 Change 2021 Change 2020
% %
Revenue GBP11.94m +62% GBP7.36m +67% GBP4.40m
----------------- ------------- ----------------- ------------- -----------------
Gross Margin 84% 75% 69%
----------------- ------------- ----------------- ------------- -----------------
Recurring Revenue GBP10.
(1) 57 m +63% GBP6.48m +75% GBP3.70m
----------------- ------------- ----------------- ------------- -----------------
Recurring Revenue
as % of Revenue 89% 88% 84%
----------------- ------------- ----------------- ------------- -----------------
Revenue generated
from Non-UK deployments GBP3.74m +82% GBP2.06m +280% GBP0.76m
----------------- ------------- ----------------- ------------- -----------------
Percentage of Revenue
from non-UK deployments 31% 28% 17%
----------------- ------------- ----------------- ------------- -----------------
Adjusted EBITDA(2) (GBP1.88m) +27% (GBP2.56m) +28% (GBP3.57m)
----------------- ------------- ----------------- ------------- -----------------
Cash facilities GBP4.89m GBP7.52m GBP5.55m
available(3)
----------------- ------------- ----------------- ------------- -----------------
Deferred Income GBP10.62m GBP8.09m GBP4.53m
----------------- ------------- ----------------- ------------- -----------------
(1) Recurring Revenue is the revenue generated from the
recurring elements of the contracts held by the Group and
recognised in the Statement of Comprehensive Income in the
period
(2) Adjusted EBITDA is the loss on operating activities before
exceptional items, depreciation and amortisation, exchange
movements charged to the profit and loss and expenses relating to
share option charges
(3) Cash balance plus undrawn debt facilities
The principal operational KPIs are as follows:
2022 Change 2021 Change 2020
% %
Contracted TACV(1)
deployed and live GBP11.05m +44% GBP7.69m +90% GBP4.04m
---------------- ------------- --------------- ------------- ---------------------
Contracted TACV
in deployment GBP1.12m 0% GBP1.12m -49% GBP2.19m
---------------- ------------- --------------- ------------- ---------------------
Contracted TACV
- projects on
hold GBP1.19m +70% GBP0.70m +34% GBP0.52m
---------------- ------------- --------------- ------------- ---------------------
Total Contracted
TACV GBP13.36m +40% GBP9.51m +41% GBP6.75m
---------------- ------------- --------------- ------------- ---------------------
% of TACV derived
from variable
transactions deemed
recurring 22% 24% 31%
---------------- ------------- --------------- ------------- ---------------------
ACV of contracts GBP0.18m GBP0.20m Not Calculated
cancelled before
deployment
---------------- ------------- --------------- ------------- ---------------------
Signed ACV in
financial period GBP3.46m +11% GBP3.11m +19% GBP2.62m
---------------- ------------- --------------- ------------- ---------------------
AWS Platform Churn(2) 3.1% 6.7% Not Calculated
---------------- ------------- --------------- ------------- ---------------------
AWS Platform Net
Retention Rate(3) 117.7% 111.1% Not Calculated
---------------- ------------- --------------- ------------- ---------------------
Headcount at end
of year (excluding
non-executive
directors) 103 71 58
---------------- ------------- --------------- ------------- ---------------------
Ratio Personnel
cost to administrative
expenses 74% 71% 77%
---------------- ------------- --------------- ------------- ---------------------
(1) TACV is the total annual recurring revenue of all signed
contracts, whether invoiced and included in deferred revenue or
still to be deployed and/or not yet invoiced
(2) AWS platform churn is calculated using the ACV of lost
deployed contracts in the period divided by the opening total value
of deployed contracts at the start of the period
(3) AWS platform net retention rate ("NRR") is calculated using
the opening total value of deployed contracts at the start of the
period less the ACV of lost deployed contracts in the period plus
the ACV of upsold contracts signed in the period all divided by the
opening total value of deployed contracts at the start of the
period
Revenue and gross margin
Overall Group revenue grew by 62% to GBP11.94 million (2021:
GBP7.36 million) and gross margin improved to 84% (2021: 75%) with
the majority of revenue generated from products hosted in our AWS
environment. The first-generation privately hosted platform, which
we have not proactively sold since 2019, now accounts for 12% of
revenues (2021: 24%). We have nearly completed the transition of
payment customers from this platform to our AWS environment.
The EMEA business, the most mature business and based in the UK,
had a strong year growing revenues to GBP8.46 million, a 55%
increase on the prior year, while the international operations grew
revenues to GBP3.48 million, an 83% increase on the prior year.
Revenues from our non-UK customers now make up 31% (2021: 28%) of
the overall Group revenues. The revenues generated from our
international operations are expected to continue to grow strongly
as we strengthen our position in the United States and continue our
expansion into Canada, Australia and mainland Europe.
The Group's revenue reflects its SaaS business model. It
delivers its services primarily through channel partners into
contact centres who are predominantly charged on a recurring
licence basis. The terms of the sales contracts generally allow for
automatic renewal of the licences for a further 12-month period at
the end of their initial term. 91% (2021: 88%) of revenues
recognised in the period have come from annually recurring licences
and transactions. Our strong recurring revenue gives the Group high
future revenue visibility.
ACV growth
Annual Contract Value ("ACV") growth is a key leading growth
metric of the Group. Contracts signed in the financial year begin
to filter through on a monthly basis into recognised revenue after
an average of 24 weeks (2021: 26 weeks) following deployment. ACV
grew by 11% in the year to GBP3.46 million (2021: GBP3.11 million)
positively reflecting the further development of the Group and its
strong partner eco-system.
TACV
TACV at the end of the financial year increased 40% to GBP13.36
million (2021: GBP9.51 million). This metric is a key indicator of
the near term expectation for the business to reach future cash
flow and then profit break-even as customers go live with our
services and revenue is recognised. Growing levels of TACV produces
increasing levels of future revenue visibility, an attractive
aspect of the Group's business model. 22% (2021: 24%) of the TACV
is from transactional revenues (including the Gen1 platform) which
the directors deem are recurring in nature.
This GBP13.36 million of TACV is analysed as follows:
2022 2021
GBP11.05 GBP7.69 million Live and delivering monthly revenue
million
---------------------- --------------------------------------------
GBP1.12 million GBP1.12 million Mid-deployment and therefore expected
to deliver revenues in the next
few months
---------------------- --------------------------------------------
GBP1.19 million GBP0.70 million Classed as on hold
---------------------- --------------------------------------------
The value of annual recurring revenue from contracts that are
live and deployed ("ARR") as at the end of the financial year was
GBP11.05 million.
Contracts are typically on hold as a result of a lack of
resource with the customer and/or channel partner, or where our
solution is part of a larger project being delivered by our partner
or the customer, which may mean there is a delay in reaching the
PCI Pal aspect of the project. Such on-hold contracts therefore
take longer to start delivering recurring recognised revenues.
As with any internationally expanding business, exchange rates
can disproportionately affect the reporting of Group numbers as
assets and sales are translated into pounds sterling for reporting
purposes. During the financial year we saw the US dollar exchange
rate decrease from $1.40 to $1.23 which had the effect of
increasing the sterling value of the US denominated contracts for
TACV purposes by approximately GBP0.25m from the original internal
expectations set using the $1.40 original exchange rate. The change
also led to the exchange gain recorded in the Statement of
Comprehensive Income., which more than reversed the charge from the
previous year.
Churn and Net Retention
As the number of sales contracts grow and are deployed, we are
seeing requests for additional licences as our customers grow or
introduce us to other parts of their own groups, or purchase new
products from us, such as PCI Pal Digital or Speech. These upsell
contracts are now an important part of the Group's ACV sales and in
year represented GBP1.12 million (2021: GBP0.54 million) of the
GBP3.46 million (2021: GBP3.11 million) total. The upsells in the
financial year were particularly strong as a number of large
customers renewed and increased the business they do with us at the
same time. As a result, the Group's net revenue retention rate
("NRR") grew to an excellent 117.7% (2021: 111.1%).
During the year we agreed to terminate GBP0.18 million (2021:
GBP0.20 million) of contracts prior to them going live due to
changes in circumstances from the original expectations. Overall
churn on the AWS platform in the year from contracts that had gone
live was 3.1% (2021: 6.7%).
Internal adjusted operating loss(1) metric
The Board uses an internal metric for calculating the adjusted
operating loss for the Group to get a better comparative measure of
performance by removing the non-cash changes caused from revaluing
the Groups' intercompany loans. The internal adjusted operating
loss for the Group has changed as follows for the year:
EMEA North America Australia Central Total
GBP000s GBP000s GBP000s GBP000s GBP000s
-------------- -------------------- ---------------- -------------- --------------
2022
-------------- -------------------- ---------------- -------------- --------------
Profit/(Loss) from
Operating
Activities before
adjusting
items 240 (1,337) (188) (1,779) (3,064)
-------------- -------------------- ---------------- -------------- --------------
Exchange rate movements 93 (932) 7 - (832)
-------------- -------------------- ---------------- -------------- --------------
Exceptional items
relating
to patent case legal
fees 37 182 - 578 797
-------------- -------------------- ---------------- -------------- --------------
Expenses relating to
Share Options - - - 246 246
-------------- -------------------- ---------------- -------------- --------------
Internal adjusted
operating
profit/(loss) 370 (2,087) (181) (955) (2,853)
-------------- -------------------- ---------------- -------------- --------------
2021
Profit/ (loss) from Operating
Activities before adjusting
items (866) (1,990) 13 (1,118) (3,961)
------------ -------------- ------------ -------------- --------------
Exchange rate movements (12) 563 (1) - 550
------------ -------------- ------------ -------------- --------------
Expenses relating to
Share Options - - - 115 115
------------ -------------- ------------ -------------- --------------
Internal adjusted operating
profit/(loss) (878) (1,427) 12 (1,003) (3,296)
------------ -------------- ------------ -------------- --------------
Change in year 1,248 (660) (193) 48 443
------------ -------------- ------------ -------------- --------------
(1) Loss from operating activities before exchange losses/gains
recorded in the profit and loss exceptional items and share option
charges used for internal reporting comparisons
Adjusted EBITDA
EMEA North America Australia Central Total
GBP000s GBP000s GBP000s GBP000s GBP000s
-------------- -------------------- ---------------- -------------- --------------
2022
-------------- -------------------- ---------------- -------------- --------------
Internal adjusted
operating
profit/(loss) (from
above) 370 (2,087) (181) (955) (2,853)
-------------- -------------------- ---------------- -------------- --------------
Depreciation and
amortisation 897 76 - - 973
-------------- -------------------- ---------------- -------------- --------------
Adjusted EBITDA 1,267 (2,011) (181) (955) (1,880)
-------------- -------------------- ---------------- -------------- --------------
2021
-------------- -------------------- ---------------- -------------- --------------
Internal adjusted
operating
profit/(loss) (from
above) (878) (1,427) 12 (1,003) (3,296)
-------------- -------------------- ---------------- -------------- --------------
Depreciation and
amortisation 692 48 - - 740
-------------- -------------------- ---------------- -------------- --------------
Adjusted EBITDA (186) (1,379) 12 (1,003) (2,556)
-------------- -------------------- ---------------- -------------- --------------
Change in year 1,453 (632) (192) 46 675
-------------- -------------------- ---------------- -------------- --------------
EMEA
The EMEA region reported its first Adjusted Operating Profit of
GBP0.37 million (2021: loss of GBP0.88 million).
The region continued to deliver strong revenue which grew by 55%
to GBP8.46 million (2021: GBP5.46 million) resulting in an
improvement of GBP2.87 million in Gross Profit at a margin of 79%
(2021: 70%).
Administrative costs, before exchange movements and exceptional
items, grew by GBP1.62 million to GBP6.31 million primarily
reflecting a further investment in personnel, especially in the
Product, Engineering and Customer Success departments following the
successful fundraising in April 2021.
Depreciation and amortisation costs were GBP0.90 million (2021:
GBP0.69 million) meaning that the EMEA operation recorded an
adjusted EBITDA profit of GBP1.27 million (2021: loss of GBP0.19
million).
North America
The North America region's Adjusted Operating Loss (which
includes the new Canadian operation) increased by GBP0.66 million
in the year to GBP2.09 million (2021: GBP1.43 million).
The region continued to deliver strong revenues which grew by
83% to GBP3.31 million resulting in an improvement of GBP1.50
million in Gross Profit at a margin of 96% (2021: 91%).
Administrative costs before exchange movements and exceptional
items grew by GBP2.17 million to GBP5.25 million. During the year
the Group opened its Canadian office and hired its first employees.
Additional sales and marketing employees were also hired in the US
operation. Included in the administration costs, the North American
operation paid an intercompany royalty to the UK operation of
GBP0.83 million (2021: GBP0.45 million).
Depreciation and amortisation costs were GBP0.08 million (2021:
GBP0.05 million) meaning that the North American operation recorded
an adjusted EBITDA loss of GBP2.01 million (2021: GBP1.38
million).
Australia
The Group in the year opened an office in Sydney, Australia,
having previously sold to the region via the US team remotely. The
first employees were hired in the third quarter of the year.
Revenue for the region almost doubled to GBP0.17 million (2021:
GBP0.09 million) reflecting the full effect of contracts sold in
the prior financial year.
As a result of the investment the region swung into an Adjusted
Operating Loss of GBP0.18 million (2021: profit of GBP0.01
million)
Central
Costs for the Central operation relate to the PLC activities of
being a listed company only, including the majority of the
employment costs of James Barham (CEO) and myself, as well as the
non-executive directors.
Further segmental information is shown in Note 10.
Administrative expenses
Total administrative expenses were GBP13.08 million (2021:
GBP9.52 million), an increase of 37%. Of the GBP3.56 million
increase, GBP0.80 million were classified as exceptional relating
to the cost in the year of defending the unfounded patent claim
being made against us by Sycurio Limited, a credit of GBP0.83
million related to the positive movement in exchange rates and
GBP0.25 million to the movement in share option charges.
The underlying increase was therefore GBP3.34 million, of which
GBP3.24 million was from the overall increase in personnel costs as
the Group moved from 71 employees to 103 employees at the end of
the financial year. The cost to run the AWS platform (including the
development and staging systems) in the year was GBP0.89 million
(2021: GBP0.87 million) highlighting the scalability of the AWS
platform. Depreciation and amortisation increased by GBP0.23
million to GBP0.97 million.
Personnel costs charged to the Statement of Comprehensive Income
(including commission, bonuses, recruitment and travel and
subsistence expenses) were GBP9.55 million (2021: GBP6.30 million),
and GBP1.05 million (2021: GBP0.79 million) of the personnel costs
were capitalised as Development costs. These personnel costs make
up 74% (2021: 71%) of the administrative costs of the business.
Travel expenditure increased back to GBP0.34 million (2021: GBP0.03
million) following the lifting of restrictions for travel during
the pandemic.
Patent case defence costs
During the financial year the Group incurred legal and
professional fees relating to the defence of the patent case
totalling GBP0.80 million.
A significant amount of work has been undertaken in preparing
both the US and UK defence to date. The UK court case is currently
scheduled for June 2023 and the US court case scheduled for the
summer/autumn of 2024. As at the end of June 2022, the directors
estimated that there were a further GBP2.9 million of legal fees to
be paid if both claims against us went to court. It is currently
estimated that the legal costs to be incurred in FY23 by the Group
will be GBP1.96 million.
The patent costs per entity are estimated as follows:
Incurred To be incurred Estimated
in year in future total cost
GBP000s GBP000s of defence
GBP000
PCI-Pal PLC 578 1,194 1,772
PCI-Pal (U.K.) Ltd 37 - 37
PCI Pal (U.S.) Inc 182 1,706 1,888
--------- --------------- ------------
797 2,900 3,697
The legal costs relating to the claim incurred to date have been
disclosed as an exceptional item in the Consolidated Statement of
Comprehensive Income.
Changes in accounting policies
There are no changes in our accounting policies for FY22.
Capital expenditure
As required by IAS 38, the Group capitalised a further GBP1.10
million (2021: GBP0.92 million) in development expenditure as we
continue to invest in the AWS cloud platform and introduce new
features and products.
The Group also capitalised GBP0.05 million (2021: GBP0.13
million) of external contractor work relating to the Group's new
website and management reporting systems.
The business renewed its leases at its head offices resulting in
a right-of-use asset addition of GBP0.13 million.
Other capital expenditure was GBP0.13 million (2021: GBP0.04
million). Most of this expenditure related to new laptops for the
new and existing employees.
Set-up and Professional Services Fees
During the financial year, the Group generated from new
contracts GBP1.41 million (2021: GBP1.63 million) of set-up and
professional services fees. These fees are initially held in the
balance sheet as deferred income and then released to revenue over
the economic length of the contract as governed by the IFRS 15
accounting standard.
Deferred income
Deferred income increased 31% to GBP10.62 million (2021: GBP8.09
million), mostly reflecting the significant growth in new business
sales and the consequent increase in licence fees invoiced in
advance, as well as the continued build-up of set up and
professional services fees which are invoiced on signature of a
contract then released over the length of the contract, as required
by IFRS 15.
Trade receivables
Trade receivables grew to GBP2.96 million (2021: GBP2.15
million) as the business expanded its contract base. The level of
receivables reflects both debtors generated from new business sales
as well as existing contract renewals outstanding at the end of the
period. As at the 30 June 2022, GBP0.67 million (2021: GBP0.61
million) of the outstanding debtors related to newly signed
contracts.
Our debtor collection rates remain good ending the year with 78%
(2021: 91%) of debtors less than 60 days old. The comparative 2021
collection rate was exceptional and benefitted from some one-off
contractual circumstances. The Board does not believe that any of
the debts over 60 days old will require to be written off.
Taxation
During the year the UK entity received GBP0.16 million (2021:
GBP0.15 million) as an R & D tax credit from HMRC relating to
the financial year ended 30 June 2020. An application will be made
relating to the financial years ended 30 June 2021 and 30 June
2022, the amount of which is currently unknown.
Cashflow and liquidity
Cash as at 30 June 2022 was GBP4.89 million (2021: GBP7.52
million).
In FY22 the Group used GBP1.52 million (2021: generated GBP0.25
million) of cash from its operating activities. The cash used in
FY22 includes GBP0.80 million (2021: GBPnil million) of cash spent
on the legal fees relating to the patent case. The adjusted net
cash spend is therefore GBP0.83 million which is substantially
better than the reported GBP2.85 million Adjusted Operating Loss.
The strong cash generation relative to the current losses is
primarily driven by our SaaS business model that typically invoices
in advance for the solutions sold.
Going Concern considerations
The Board continues to monitor the Group's trading performance
carefully against its original plans, global economic pressures,
such as inflation, and other factors affecting our core markets and
products. It also reviews the potential impact of the COVID-19
pandemic. However, the challenges the business faced from the
pandemic in FY22 have continued to diminish as the year progressed
and a greater understanding of the risks were
developed. The pandemic has not had a significant impact on the Group's financial performance.
During the year the Group continued to win new contracts,
recording new ACV sales of GBP3.46 million, as well as substantial
growth in its transactional revenues.
The group deployed new customer contracts with an annual
recurring revenue value of GBP3.36m. At the end of the financial
year the group had GBP11.05 million of deployed, live contracts
contributing to revenue recognition which helps underpin our
expectations for revenue growth in FY23.
With the Group year-end being 30 June, the Group prepared its
next financial year budgets in the April to June period. The budget
for FY23 was prepared, along with an extended forecast into FY24,
following detailed face-to-face meetings with all managers with a
focus on building on the FY22 excellent performance and on the
product plans and roadmap established in FY22. The budget includes
an assumption of a more modest expansion of headcount as compared
to FY22.
The Group finished the year with a cash balance of GBP4.89
million and no debt.
The Board considered the budget presentation in June and the
controls in place that are designed to allow the Group to control
its overhead expenditure while still maintaining its momentum and
delivering market forecasts. Particular attention was paid to the
potential sensitivity impacts that any adverse movement in sales
and customer deployments might have on the Group's net cash
position and the level of headroom achieved.
The Board considered the likely timing and impact of the legal
fees relating to the patent claim being made against it on the cash
flow of the Group over the next 24 to 36 months. The sensitivity
scenarios around the budget models indicate that the Group would
continue to have sufficient resources to meet its expansion plans
in FY24 whilst at the same time meeting the cost requirements of
defending the patent case.
The Board also considered actions that could be taken to help
mitigate the actual results if the assumptions made in the original
forecast proved to be overly optimistic. At all points the
Directors were satisfied in the robustness of the Group's financial
position from the presented plans which, they believe, take a
balanced view of the future growth prospects, together with the
contingencies that can be taken if the budget assumptions prove to
be materially inaccurate.
The Directors therefore have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. For these reasons, the Directors
continue to adopt the going concern basis in preparing the
accounts.
Dividend
The Board is not recommending a dividend for the financial
year.
William Good
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2022
Note 2022 2021
GBP000s GBP000s
Revenue 11,937 7,362
Cost of sales (1,924) (1,805)
------------------------------ -----------------------
Gross profit 10,013 5,557
Administrative expenses (13,077) (9,518)
------------------------------ -----------------------
Loss from operating activities (3,064) (3,961)
Adjusted Operating Loss (2,021) (3,846)
Expenses relating to share
options (246) (115)
Exceptional items 6 (797) -
------------------------------------- ----- ------------------------------ -----------------------
Loss from operating activities (3,064) (3,961)
------------------------------------- ----- ------------------------------ -----------------------
Finance income 7 1 -
Finance expenditure 8 (44) (230)
------------------------------ -----------------------
Loss before taxation 5 (3,107) (4,191)
Taxation 12 164 154
------------------------------ -----------------------
Loss for the year (2,943) (4,037)
Other comprehensive expense:
Items that will be reclassified
subsequently to profit or
loss
Foreign exchange translation
differences (1,086) 653
------------------------------ -----------------------
Total other comprehensive
(expense) / income (1,086) 653
------------------------------ -----------------------
Total comprehensive loss
attributable to equity holders
for the period (4,029) (3,384)
Basic and diluted loss per
share 11 (4.50) p (6.64) p
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Note 2022 2021
GBP000s GBP000s
ASSETS
Non-current assets
Plant and equipment 14 238 74
Intangible assets 13 2,661 2,366
Trade and other receivables 15 964 801
Deferred taxation 18 - -
Non-current assets 3,863 3,241
------------ -----------
Current assets
Trade and other receivables 15 4,203 2,928
Cash and cash equivalents 4,888 7,518
------------ -----------
Current assets 9,091 10,446
------------ -----------
Total assets 12,954 13,687
LIABILITIES
Current liabilities
Trade and other payables 16 (11,372) (7,817)
Current liabilities (11,372) (7,817)
------------ -----------
Non-current liabilities
Other payables 17 (1,397) (1,941)
Non-current liabilities (1,397) (1,941)
------------ -----------
Total liabilities (12,769) (9,758)
------------ -----------
Net assets 185 3,929
EQUITY
Share capital 20 656 655
Share premium 14,281 14,243
Other reserves 650 404
Currency reserves (620) 466
Profit and loss account (14,782) (11,839)
------------ -----------
Total equity 185 3,929
J Barham Director
T W Good Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30
JUNE 2022
Share capital Share premium Other Profit Currency Total
reserves and loss Reserves Equity
account
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Balance as at 1
July 2020 594 9,018 289 (7,802) (187) 1,912
Share option charge - - 115 - - 115
New shares issued
net of costs 61 5,225 - - - 5,286
Transactions with
owners 61 5,225 115 - - 5,401
Foreign exchange
translation differences - - - - 653 653
Loss for the year - - - (4,037) - (4,037)
-------------------- ------------------- ----------- ---------- ---------- ---------
Total comprehensive
loss - - - (4,037) 653 (3,384)
-------------------- ------------------- ----------- ---------- ---------- ---------
Balance at 30 June
2021 655 14,243 404 (11,839) 466 3,929
Share option charge - - 246 - - 246
New shares issued
net of costs 1 38 - - - 39
Transactions with
owners 1 38 246 - - 285
Foreign exchange
translation differences - - - - (1,086) (1,086)
Loss for the year - - - (2,943) - (2,943)
-------------------- ------------------- ----------- ---------- ---------- ---------
Total comprehensive
loss - - - (2,943) (1,086) (4,029)
-------------------- ------------------- ----------- ---------- ---------- ---------
Balance at 30 June
2022 656 14,281 650 (14,782) (620) (185)
-------------------- ------------------- ----------- ---------- ---------- ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2022
2022 2021
GBP000s GBP000s
Cash flows from operating activities
Loss after taxation (2,943) (4,037)
Adjustments for:
Depreciation of equipment and fixtures 85 69
Amortisation of intangible assets 85 76
Amortisation of capitalised development 803 595
Loss on disposal of equipment and fixtures 3 -
Interest income (1) -
Interest expense 11 206
Exchange differences (1,124) 676
Income taxes (164) (154)
Share based payments 246 115
Increase in trade and other receivables (1,438) (1,017)
Increase in trade and other payables 2,918 3,721
--------------------- --------
Cash (used in) / generated from operating
activities (1,519) 250
Income taxes received 164 154
Interest paid (11) (206)
--------------------- --------
Net cash (used in) / generated from
operating activities (1,366) 198
--------------------- --------
Cash flows from investing activities
Purchase of equipment and fixtures (124) (40)
Purchase of intangible assets (48) -
Development expenditure capitalised (1,098) (920)
Interest received 1 -
--------------------- --------
Net cash used in investing activities (1,269) (960)
Cash flows from financing activities
Issue of shares 39 5,608
Expenses related to issue of shares - (323)
Drawdown on loan facility - 1,250
Repayment of loan facility - (2,523)
Principal element of lease payments (34) (33)
Net cash generated from financing activities 5 3,979
--------- -------
Net (decrease) / increase in cash (2,630) 3,217
Cash and cash equivalents at beginning
of year 7,518 4,301
Net (decrease) / increase in cash (2,630) 3,217
--------- -------
Cash and cash equivalents at end of
year 4,888 7,518
NOTES TO THE RESULTS FOR THE YEARED 30 JUNE 2022
1. AUTHORISATION OF FINANCIAL STATEMENTS
In accordance with section 435 of the Companies Act 2006, the
Directors advise that the financial
information set out in this announcement does not constitute the
Group's statutory financial
statements for the year ended 30 June 2022 or 2021, but is
derived from these financial statements.
The financial statements for the year ended 30 June 2021 have
been audited and filed with the
Registrar of Companies. The financial statements for the year
ended 30 June 2022 have been prepared in accordance with the UK
adopted international accounting standards and the requirements of
the Companies Act 2006. The financial statements for the year ended
30 June 2022 have been audited and will be filed with the Registrar
of Companies following the Company's Annual General Meeting. The
Independent Auditors Report on the Group's statutory financial
statements for the years ended 30 June 2022 and 2021 were
unqualified and did not draw attention to any matters by way of
emphasis and did not contain statements under Section 498 (2) or
(3) of the Companies Act 2006.
2. NATURE OF OPERATIONS AND GENERAL INFORMATION
PCI-PAL PLC is the Group's ultimate parent company. It is a
public limited company incorporated and domiciled in the United
Kingdom. PCI-PAL PLC's shares are quoted and publicly traded on the
AIM division of the London Stock Exchange. The address of PCI-PAL
PLC's registered office is also its principal place of
business.
The Company operates principally as a holding company. The main
subsidiaries provide organisations globally with secure cloud
payment and data protection solutions for any business
communication environment.
3. STATEMENT OF COMPLIANCE WITH IFRS
The principal accounting policies adopted by the Group are set
out in Note 4. The accounting policies have been applied
consistently throughout the Group for the purposes of preparation
of these financial statements.
Standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements,
there are several new amendments and interpretations to IFRS in
issue that are not yet effective or are effective but are not
relevant or material to the Group.
4. PRINCIPAL ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared on a going concern
basis in accordance with the accounting policies set out below, and
under the historical cost convention. These are in conformity with
the UK adopted international accounting standards and the
requirements of the Companies Act 2006.
The financial statements are presented in pounds sterling (GBP)
rounded to the nearest GBP1,000, which is also the functional
currency of the parent company.
b) Basis of consolidation
The Group financial statements consolidate those of the Company
and its subsidiary undertakings (see Note 19) drawn up to 30 June
2022. A subsidiary is a company controlled directly by the Group
and all of the subsidiaries are 100% owned by the Group. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Unrealised gains on transactions within the Group are eliminated
on consolidation.
Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
Amounts reported in the financial statements of subsidiaries have
been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
The Group has utilised the exemption (within IFRS 1) not to
apply IFRS to pre-transition business combinations. All other
subsidiaries are accounted for using the acquisition method.
c) Going concern
The financial statements have been prepared on a going concern
basis, which the Directors believe to be appropriate for the
following reasons:
The Group meets its day-to-day working capital requirements
through its cash balances and trading receipts. Cash balances for
the Group were GBP4.89 million at 30 June 2022.
The Board continues to monitor the Group's trading performance
carefully against its original plans, global economic pressures,
such as inflation, and other factors affecting our core markets and
products. It also reviews the potential impact of the COVID-19
pandemic. However, the challenges the business faced from the
pandemic in FY22 have continued to diminish as the year progressed
and a greater understanding of the risks were
developed. The pandemic has not had a significant impact on the Group's financial performance.
During the year the Group continued to win new contracts,
recording new ACV sales of GBP3.46 million, as well as substantial
growth in its transactional revenues.
The Group deployed new customer contracts with an annual
recurring revenue value of GBP3.36m. At the end of the financial
year the group had GBP11.05 million of deployed, live contracts
contributing to revenue recognition which helps underpin our
expectations for revenue growth in FY23.
With the Group year-end being 30 June, the Group prepared its
next financial year budgets in the April to June period. The budget
for FY23 was prepared, along with an extended forecast into FY24,
following detailed face-to-face meetings with all managers with a
focus on building on the FY22 excellent performance and on the
product plans and roadmap established in FY22. The budget includes
an assumption of a more modest expansion of headcount as compared
to FY22.
The Board considered the budget presentation in June and the
controls in place that are designed to allow the Group to control
its overhead expenditure while still maintaining its momentum and
delivering market forecasts. Particular attention was paid to the
potential sensitivity impacts that any adverse movement in sales
and customer deployments might have on the Group's net cash
position and the level of headroom achieved.
The Board considered the likely timing and impact of the legal
fees relating to the patent claim being made against it on the cash
flow of the Group over the next 24 to 36 months. The sensitivity
scenarios around the budget models indicate that the Group would
continue to have sufficient resources to meet its expansion plans
in FY24 whilst at the same time meeting the cost requirements of
defending the patent case.
The Board also considered actions that would help to mitigate
the actual results if the assumptions made in the original forecast
proved to be overly optimistic, such as lower commission and bonus
payments, slower investment and timings of new hires. At all points
the Directors were satisfied in the robustness of the Group's
financial position from the presented plans which, they believe,
take a balanced view of the future growth prospects, together with
the contingencies that can be taken if the budget assumptions prove
to be materially inaccurate.
Based on these reviews, the Directors have concluded that the
group will be able to meet its' obligations as they fall due for
the foreseeable future (and in any event for at least 12 months
from the date of approval of these financial statements) and
accordingly have elected to prepare the financial statements on a
going concern basis.
The Directors recognise that during the forthcoming year the
Group is expected to remain loss making on a month-to-month basis,
albeit with an improving trend. The Directors will review, on a
regular basis, the actual results achieved against the planned
forecasts. Some of the planned expenditure assumptions in the
current forecast remain discretionary and as a result the Directors
can delay such expenditure to further ensure the Group is able to
meet its day-to- day financial working capital needs.
d) Revenue
Revenue represents the fair value of the sale of goods and
services and after eliminating sales within the Group and excluding
value added tax or overseas sales taxes. The following summarises
the method of recognising revenue for the solutions and products
delivered by the Group.
The Group sells long-term secure payment and data protection
contracts that charge annual licence or monthly usage fees. The
payment profile for such contracts also typically includes payment
for one-off set up, professional services and installation fees
made at the point of signature of the contract. For revenue
recognition purposes, these one-off charges are deemed to be an
integral part of the wider contract rather than a separate
performance obligation.
(i) Revenue recognition of licence and usage fees
Revenue relating to the monthly element of the licence fee or
the monthly usage fees generated in the period will be recognised
monthly from the point the contract goes live or when the customer
takes over the solution for user acceptance testing.
(ii) Revenue recognition of the one-off set up fees
Revenue for the one-off set up, professional services and
installation fees will be deferred and will be recognised evenly
over the estimated term of the contract, having accounted for the
auto-renewal of our contracts. The estimated term of a contract is
typically four years, and will start being recognised as revenue
starting in the month following when the contract either goes live
or when the customer takes over the solution for user acceptance
testing. The Board has estimated that the four year period is
appropriate as a typical contract normally has a minimum term of
between 12 months and 36 months, but due to the automatic renewal
clause it is estimated to have a four year life as these contracts
will normally roll for a certain period.
There are two exceptions to the four year life estimation:
-- If the contract does not have an automatic renewal clause
then the deferral will be over the minimum term of that contract;
and
-- If the minimum term of the contract is greater than four
years, that minimum term period will be used as the estimated
length of the contract.
e) Deferred Costs
Under IFRS 15 costs directly attributable to the delivery and
implementation of the revenue contracts, such as third-party costs,
will be deferred and will be recognised in the statement of
comprehensive income over the length of the contract.
Costs directly attributable to the delivery of the PCI
Compliance solutions and hosted telephony services will be
capitalised as 'costs to fulfil a contract' and released over the
estimated term of the contract, having accounted for the automatic
auto-renewal of our contracts, up to a maximum of four years,
starting the month following from the date of signature of the
underlying contract.
If the minimum term of the contract is greater than four years,
the minimum term period will be used as the estimated length of the
contract.
Costs relating to commission costs earned by employees for
winning the contract will be capitalised as 'direct costs to obtain
a contract' at the date the commissions payments become due and
will be released to administrative expenses in monthly increments
over the estimated economic length of the contract, as defined in
4d above, starting the month following the date the cost is
capitalised.
f) Intangible assets
Research and development
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred.
Development costs incurred are capitalised when all the
following conditions are satisfied:
-- completion of the intangible asset is technically feasible so
that it will be available for use or sale
-- the Group intends to complete the intangible asset
-- the Group is able to use or sell the intangible asset
-- the intangible asset will generate probable future economic
benefits. Among other things, this requires that there is a market
for the output from the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such
benefits
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset
-- the expenditure attributable to the intangible asset during
the development can be measured reliably
The cost of an internally generated intangible asset comprises
all directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended
by management. Directly attributable costs include, for example,
development engineer's salary and on-costs, such as pension
payments, employer's national insurance & bonuses, incurred on
software development.
The cost of internally generated software developments are
recognised as intangible assets and are subsequently measured in
the same way as externally acquired software. Where the internally
generated asset relates to on-going development of the platform,
the costs are capitalised and start to be amortised in the month
following. Where the costs relate to a longer term project the
costs will be capitalised and held as an intangible asset until the
project is launched. At that point the asset will start to be
amortised starting the month following the completion of the
project. Until completion of the development project, the assets
are subject to impairment testing only.
Amortisation commences upon completion of the asset and is shown
within administrative expenses in the statement of comprehensive
income. Amortisation is calculated to write down the cost less
estimated residual value of all intangible assets by equal annual
instalments over their expected useful lives. The rates generally
applicable are:
-- Development costs 20%
The Directors have reviewed the development costs relating to
the new AWS platform and are satisfied that the costs identified
meet the tests identified by IAS 38 detailed above. Specifically,
the initial platform was launched in October 2017 and has been
successfully sold in Europe, North America and Australia, with
further sales expected, as detailed in the Chief Executives'
statement.
The Directors expect that the AWS platform will continue to be
developed, as more functionality is added, and as a result it is
expecting to continue to capitalise the development costs (which
are primarily labour costs) into the future.
Software licences
The cost of perpetual software licences acquired are stated at
cost, net of amortisation and any provision for impairment.
-- Software licences 33%
g) Land, building, plant and equipment
Land, buildings, plant and equipment are stated at cost, net of
depreciation and any provision for impairment.
Disposal of assets
The gain or loss arising on disposal of an asset is determined
as the difference between the disposal proceeds and the carrying
amount of the asset and is recognised in the statement of
comprehensive income.
Depreciation
Depreciation is calculated to write down the cost less estimated
residual value of all equipment assets by equal annual instalments
over their expected useful lives. The rates generally applicable
are:
* Fixtures and fittings 20%
Length of contract
* Right to use asset
* Computer equipment 33%
Material residual value estimates are updated as required, but
at least annually.
h) Leases
From 1 July 2019, each lease is recognised as a right-of-use
asset with a corresponding liability at the date at which the lease
asset is available for use by the Group. Interest expense is
charged to the consolidated income statement over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. The lease payments are
discounted using the interest rate implicit in the lease. If that
rate cannot be determined, the lessee's incremental borrowing rate
is used, being the rate that the lessee would have to pay to borrow
the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the amount
of the initial measurement of the lease liability, any lease
payments made at or before the commencement date less any lease
incentives received, plus any initial direct costs and restoration
costs. Where leases include an element of variable lease payment or
the option to extend the lease at the end of the initial term, each
lease is reviewed, and a decision is made on the likely term of the
lease.
Payments associated with short-term leases and leases of low
value assets are recognised on a straight-line basis as an expense
in the consolidated income statement.
i) Impairment testing of other intangible assets, plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows ("cash-generating units"). As a result, some assets are
tested individually for impairment and some are tested at
cash-generating unit level.
Intangible assets not yet available for use are tested for
impairment at least annually. All other individual assets or
cash-generating units are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less cost to sell, and value in
use based on an internal discounted cash flow evaluation. Any
impairment loss is first applied to write down goodwill to nil and
then is charged pro rata to the other assets in the cash-generating
unit. With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously
recognised no longer exists.
j) Equity-based and share-based payment transactions
The Company's share option schemes allow employees to acquire
shares in PCI-PAL PLC to be settled in equity. The fair value of
options granted is recognised as an employee expense with a
corresponding increase in equity in the Company accounts. The fair
value is measured at grant date and spread over the period during
which the employees will be entitled to the options. The fair value
of the options granted is measured using either the Black-Scholes
option valuation model or the Monte Carlo option pricing model,
whichever is appropriate for the type of options issued. The
valuations consider the terms and conditions upon which the options
were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that are expected to
vest.
k) Taxation
Current tax is the tax payable based on the loss for the year,
accounted for at the rates substantively enacted at 30 June
2022.
Deferred income taxes are calculated using the liability method
on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor the initial recognition of an
asset or liability, unless the related transaction is a business
combination or affects tax or accounting profit. In addition, tax
losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are provided in full, accounted for at
the rates substantively enacted at 30 June 2022, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Deferred
tax assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the year
end.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the statement of comprehensive
income, except where they relate to items that are charged or
credited to other comprehensive income or directly to equity in
which case the related tax charge is also charged or credited
directly to other comprehensive income or equity.
l) Dividends
Dividend distributions payable to equity shareholders are
included in "other short term financial liabilities" when the
dividends are approved in general meeting prior to the year end.
Interim dividends are recognised when paid.
m) Financial assets and liabilities
The Group classifies its financial assets under the definitions
provided in International Financial Reporting Standard 9 (IFRS 9),
depending on the purpose for which the financial assets were
acquired.
Management determines the classification of its financial assets
at initial recognition. Management considers that the Group's
financial assets fall under the amortised cost category. These are
non-derivative financial assets with fixed or determined payments
that are not quoted in an active market. They are included in
current assets, except for maturities greater than 12 months after
the statement of financial position date, which are classified as
non-current assets. The Group's financial assets held at amortised
cost arise principally through the provision of goods and services
to customers (e.g. trade receivables), but also incorporate other
types of contractual monetary asset. As such they comprise trade
receivables, other receivables and cash and cash equivalents.
Financial assets do not comprise prepayments.
The Group's financial assets are initially recognised at fair
value plus transaction costs that are directly attributable to
their acquisition or issue. The exception are trade and receivables
balances, which are recorded at their transaction price as they do
not contain a significant financing component. The Group's
financial assets are subsequently measured at amortised cost using
the effective interest rate method, less provision for
impairment.
Impairment provisions for trade receivables, being loss
allowances for 'expected credit losses' (ECLs) per IFRS 9, are
measured on a lifetime basis using the simplified approach set out
in that financial reporting standard. The Group's method in
measuring ECLs reflects:
-- unbiased and probability-weighted amounts, determined using a range of possible outcomes;
-- the time value of money; and
-- reasonable and supportable information that is available
without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic
conditions.
The Group has applied the practical expedient in IFRS 9 of using
a provision matrix to calculate ECLs. This requires the use of
historical credit loss experience, as revealed for groupings of
similar trade receivable assets, to estimate the relevant ECLs. As
such, the Group has employed the following process in calculating
ECLs:
-- Default definition - amounts not collected are defined in
accordance with the credit risk management of the Group and include
qualitative factors, broadly encompassing scenarios where the
customer is either unable or unwilling to pay;
-- Customer contract position, whether the underlying contract has been deployed live or not;
-- Collection profiles and loss rates - the collection time
periods (e.g. within 30 days, 30 - 60 days, etc.) for sales made in
the preceding 12-month period are gathered, amounts not collected
assessed and loss rates based on ageing inferred;
-- Historical periods - historic losses are reviewed over a 3-year time horizon;
-- Forward-looking assessment - the Group considers relevant
future economic factors affecting each group of trade receivables,
giving an expected probability of default for the portfolio.
The resultant expected loss rates are applied to the ageing
profile of grouped trade receivables at the balance sheet date to
give the lifetime ECLs for each. This produces the loss allowances
to be booked as an impairment adjustment to the carrying value of
trade receivables.
Trade receivables are reported net of the resultant loss
allowances. The loss is recognised within administrative expenses
in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the
associated provision. Impairment provisions for other receivables
are recognised based on the general impairment model within IFRS
9.
The Group classifies its financial liabilities under the
definitions provided in IFRS 9. All financial liabilities are
recorded initially at fair value plus or minus directly
attributable transaction costs. Except where noted, such
liabilities are then measured at amortised cost using the effective
interest method.
Financial liabilities measured at amortised cost include trade
payables, bank loans and accruals. All financial liabilities are
recognised in the statement of financial position when the Group
becomes a party to the contractual provision of the instrument.
Financial liabilities do not comprise deferred income.
Unless otherwise indicated, the carrying values of the Group's
financial liabilities measured at amortised cost represents a
reasonable approximation of their fair values.
n) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on demand
deposits.
o) Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of equity
shares. The shares have attached to them voting, dividend and
capital distribution (including on winding up) rights; they do not
confer any rights of redemption.
-- "Share premium" represents the difference between the nominal
and issued share price after accounting for the costs of issuing
the shares
-- "Other reserves" represents the cumulative charge for the
Company's share options
scheme
-- "Profit and loss account" represent retained cumulative
profits or losses generated by the Group
-- "Currency reserves" represents exchange differences arising
from the translation of assets and liabilities of foreign
operations
p) Contribution to defined contribution pension schemes
The pension costs charged against profits represent the amount
of the contributions payable to the schemes in respect of the
accounting period and are recognised in the Statement of
Comprehensive Income.
q) Foreign currencies
Transactions in foreign currencies are translated into a
Company's functional currency at the exchange rate ruling at the
date of the transaction. Monetary assets and liabilities in foreign
currencies are translated into Sterling at the rates of exchange
ruling at the year end.
Any exchange differences arising on the settlement of monetary
items or on translating monetary items at rates different from
those at which they were initially recorded are recognised in the
statement of comprehensive income in the period in which they
arise.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated to the Group's presentational currency, Sterling, at
foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations are translated at the
exchange rate applicable at the date of the transactions. Exchange
differences arising from this translation of foreign operations are
reported as an item of other comprehensive income. Exchange
differences arising in respect of the retranslation of the opening
net investment in overseas subsidiaries are accumulated in the
currency reserve.
r) Exceptional items
The Group has elected to classify certain items as exceptional
and present them separately on the face of the Statement of
Comprehensive Income to aid the understanding of users of the
financial statements. Exceptional items are classified as those
which are separately identified by virtue of their size, nature or
expected frequency, to allow a better understanding of the
underlying performance in the year.
s) Significant estimates
In the application of the Group's accounting policies the
Directors are required to make estimates and assumptions about the
carrying amounts of assets and liabilities. The estimates and
associated assumptions are based on historical experience and other
commercial and market factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis, and at least annually. Revisions to accounting
estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both
current and future periods. The key areas are summarised below:
Amortisation of capitalised development expenditure
Amortisation rates are based on estimates of the useful economic
lives and residual values of the assets involved. The assessment of
these useful economic lives is made by projecting the economic life
cycle of the asset which is subject to alteration as a result of
product development and innovation. Amortisation rates are changed
where economic lives are re-assessed and technically obsolete items
written off where necessary.
The remaining net book value of the capitalised development is
shown in Note 13
-- Alternative accounting estimates that could have been applied
- not capitalising internally generated development costs.
-- Effect of that alternative accounting estimate - reduction of
GBP2,432,000 of assets' carrying value.
Contract revenue and direct costs
The Group has adopted IFRS 15. A key estimate is the term used
to recognise deferred contract revenue and costs. Having reviewed
the terms and conditions of the Group's contracts it has estimated
that:
-- for contracts with defined termination dates, revenue will be
recognised over the period to the termination date
-- for rolling contracts with automatic renewal clauses, revenue
will be recognised over 4 years, representing the Directors'
current best estimate of a minimum contract term. The Board has
estimated that the four-year period is appropriate as a typical
contract normally has a minimum term of between 12 months and 36
months, but due to the automatic renewal clause it is estimated to
have a 48-month life as these contracts will normally roll for a
certain period.
-- If the minimum term of the contract is greater than four
years, the minimum term period will be used as the estimated length
of the contract.
Associated direct costs such as commission costs directly linked
to individual contracts will be assessed and will also be deferred
over 48 months.
-- Alternative accounting estimates that could have been applied
- this could be the contractual period without taking into account
the automatic renewal clause
-- Effect of that alternative accounting estimate - increase in
the revenue figure reported by an immaterial amount and an equal
decrease in deferred income.
-- Second alternative accounting estimates that could have been
applied - this could be a longer period other than the four years,
with reference to low churn rates.
-- Effect of that alternative accounting estimate - decrease in
the revenue figure reported by an immaterial amount and an equal
increase in deferred income.
Deferred tax
The calculation of the deferred tax asset involved the
estimation of future taxable profits. In the year, the Directors
assessed the carrying value of the deferred tax asset and decided
not to recognise the asset, as the utilisation of the assets was
unlikely in the near future. The Directors have reached the same
conclusion for this accounting period and so no asset has been
recognised.
-- Alternative accounting estimate that could have been applied - recognition of the asset
-- Effect of that alternative accounting estimate - creation of
a deferred tax asset of GBP4,911,000 and corresponding change in
the tax charge reported.
Leases & adoption of IFRS 16
The Group has adopted IFRS 16: Leases. The Directors have
determined the only two operating leases within the Group relates
to its commercial offices in Ipswich, which renewed in the period.
These leases do not have an implied interest rate and so the
management have estimated using an incremental borrowing rate of 6%
to be used as the discount rate to calculate the lease liabilities
for each of the leases. This rate was obtained using the expected
underlying rate of interest to be applied to the new Silicon Valley
Bank rolling credit facility.
-- Alternative accounting estimate that could have been applied
- use of a lower or higher discount rate
-- Effect of that alternative accounting estimate -
corresponding immaterial change in the interest charged in the
period and amortisation of the right to use asset.
Share based payments
The fair value of share-based payments is calculated using the
methods detailed in Note 20 and using certain assumptions. The key
assumptions around volatility, expected life and the risk free rate
of return are based on historic volatility over previous periods,
the management's judgement of the average expected period to
exercise, and the yield on the UK 5-year gilt at the date of
issuance.
-- Alternative accounting estimate that could have been applied
- change the expected time to maturity of the option
-- Effect of that alternative accounting judgement - the change
would result in a lower or higher option valuation, changing the
charge made in the Statement of Comprehensive Income and an equal
change to the share option reserve held in the Statement of
Financial Position.
t) Significant judgements
In the process of applying the Group's accounting policies, the
Directors makes various judgements that can significantly affect
the amounts recognised in the financial statements. The critical
judgements are considered to be the following:
Capitalised development expenditure
The Group exercises judgement concerning the future in assessing
the carrying amounts of capitalised development costs. To
substantiate the carrying amount the Directors have applied the
criteria of IAS 38 and considered the future economic benefit
likely as a result of the investment.
Careful judgement by the Directors is applied when deciding
whether the recognition requirements for development costs have
been met. Judgement factors include: the current sales of the AWS
platform; future demand; type of additional features being added;
and the resource necessary to finalise the development roadmap over
the next few years. This is necessary as the economic success of
any product development is uncertain and may be subject to future
technical problems at the time of recognition. Judgements are based
on the information available at each balance sheet date. In
addition, all internal activities related to the research and
development of new software products are continuously monitored by
the Directors.
Contract revenue and direct costs
The Group has adopted IFRS 15. A key related judgement is
whether the contract and direct costs has to be deferred and held
in the Statement of Financial Position and recognised over the
estimated economic period of the contract or alternatively released
straight to the Statement of Comprehensive Income over the
estimated term of the contract.
Valuation of separately identifiable intangible assets
Separately identifiable intangible assets are identified and
amortised over a defined period. The Directors use certain
judgements and assumptions to ascertain the appropriate value of
the intangible asset and the period of amortisation to be used for
the asset.
Patent case
The Directors have reviewed the potential requirement for a
provision in relation to the ongoing patent case in accordance with
IAS 37. From the advice given by the Group's legal advisors in both
the UK and the US, the directors have used their judgement and
consider that it is only possible, but not probable, that an
obligation will arise from this claim. For this reason, no
provision has been made in the financial statements for either the
potential damages being sought by Sycurio Limited, or the
incremental future legal costs expected to be incurred in defending
the case. For further details, see Note 24.
5. LOSS BEFORE TAXATION
The loss on ordinary activities is stated after:
2022 2021
GBP000s GBP000s
Disclosure of the audit and non-audit fees
Fees payable to the Group's auditors for:
The audit of Company's accounts 37 22
The audit of the Company's subsidiaries pursuant
to legislation 42 26
There were no fees payable to the Group's auditors
for other services in either the current or prior
year.
Depreciation and amortisation - charged in administrative
expenses
Right of use assets, equipment and fixtures 85 69
Intangible assets 85 76
Capitalised development 803 595
--------------- ------------
973 740
Loss on disposal of equipment and fixtures 3 -
Rents payable on flexible office space 53 44
Share based payments charge 246 115
Foreign exchange loss/(gain) in period (832) 550
6. EXCEPTIONAL ITEMS
The exceptional items referred to in the income
statement can be categorised as follows:
2022 2021
GBP000s GBP000s
Legal fees in respect of patent case 797 -
----------------- --------------
797 -
The exceptional item relates to non-recurring legal fees in
respect of defending the unfounded patent claim against the Group
and are presented separately in the Statement of Comprehensive
Income to aid the understanding of users of the financial
statements.
For further details, see Note 24.
Alternative accounting that could have been applied would be to
treat the costs as non-exceptional and not present them separately
on the face of the Statement of Comprehensive Income.
7. FINANCE INCOME
2022 2021
GBP000s GBP000s
Bank interest receivable 1 -
------- -------
1 -
8. FINANCE EXPITURE
2022 2021
GBP000s GBP000s
Interest on bank borrowings - 194
Other 44 36
------- -------
44 230
9. DIRECTORS AND EMPLOYEES
Staff costs of the Group, including the directors who are
considered to be part of the key management personnel, paid during
the year were as follows.
2022 2021
GBP000s GBP000s
As restated
Wages and salaries 7,910 5,726
Social security costs 799 572
Other pension costs 136 75
8,845 6,373
During the year, the above disclosure was reviewed and additional
costs relating to healthcare expenditure in the US and commissions
payable of GBP561,000 were identified to be included for 2021
and as such the figures for 2021 have been restated. This does
not affect the costs recognised in the Statement of Comprehensive
Income for the prior year.
As part of this review, the disclosure treatment of sales commissions
has been adjusted. Previously, the amount recognised in the Statement
of Comprehensive Income was disclosed, this has been changed to
disclose the total amount paid or payable to employees during
the year.
Therefore, included in the above figures is GBP850,000 (2021:
GBP717,000) of sales commissions paid, recognised as an asset
under IFRS 15 and deferred and released over the estimated life
of the related contract. Similarly, the release of sales commissions
under IFRS 15 of GBP452,000 (2021: GBP313,000) has been excluded
from the above disclosure.
Average number of employees during the year: 2022 2021
Heads Heads
Sales and marketing 27 21
Engineering and professional services 52 35
Administration and management 14 12
---------- ------------------
93 68
Remuneration in respect of directors was as follows: 2022 2021
GBP000s GBP000s
Emoluments 610 627
Bonus 159 192
Pension contributions to money purchase pension
schemes 27 35
Employer's national insurance and US federal taxes 100 98
---------- ------------------
896 952
During the year 5 (2021: 4) directors participated in money
purchase pension schemes.
The Board consider the board of directors to be the key
management for the Group. The amounts set out above include
remuneration in respect of the highest paid director as
follows:
2022 2021
GBP000s GBP000s
Emoluments 212 187
Bonus 94 108
Pension contributions to money purchase pension
schemes 21 20
======= =======
A detailed breakdown of the Directors' Emoluments, in line with
the AIM rules, appears in the Directors' Report.
10. SEGMENTAL INFORMATION
PCI-PAL PLC operates one business sector: the service of
providing data secure payment card authorisations for call centre
operations and this is delivered on a regional basis. The Group
manages its operations by reference to geographic regions, which
are reported on below. Segment results, assets and liabilities
include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis. Segment capital
expenditure is the total cost incurred during the year to acquire
segment assets that are expected to be used for more than one
period.
PCI Pal
PCI Pal North America PCI Pal
EMEA GBP000s ANZ Central Total
2022 GBP000s GBP000s GBP000s GBP000s
Revenue 8,457 3,309 171 - 11,937
Cost of sales (1,779) (144) (1) - (1,924)
------------- ------------------ ------------- ------------ -------------
Gross profit 6,678 3,165 170 - 10,013
79% 96% 99% 84%
Administration expenses (6,401) (4,320) (358) (1,201) (12,280)
Exceptional items (37) (182) - (578) (797)
------------- ------------------ ------------- ------------ -------------
Profit / (loss) from
operating activities 240 (1,337) (188) (1,779) (3,064)
Finance income - - - 1 1
Finance costs (36) (8) - - (44)
------------- ------------------ ------------- ------------ -------------
Profit / (loss) before
tax 204 (1,345) (188) (1,778) (3,107)
------------- ------------------ ------------- ------------ -------------
Segment assets 7,420 2,808 151 2,575 12,954
Segment liabilities (7,269) (4,990) (172) (338) (12,769)
Other segment items:
Capital Expenditure
* Equipment, Fixtures & Licence
s 170 - 2 - 172
Capital Expenditure
* Capitalised Development 1,014 84 - - 1,098
Depreciation
- Equipment, Fixtures
& Licences 135 - - - 135
Depreciation
* Capitalised Development 727 76 - - 803
PCI Pal
PCI Pal North America
2021 EMEA GBP000s PCI Pal Central Total
GBP000s ANZ GBP000s GBP000s
GBP000s
Revenue 5,457 1,813 92 - 7,362
Cost of sales (1,646) (155) (4) - (1,805)
------------- ------------------ ------------ -------------- -------------
Gross profit 3,811 1,658 88 - 5,557
70% 91% 96% 75%
Administration expenses (4,677) (3,648) (75) (1,118) (9,518)
------------- ------------------ ------------ -------------- -------------
Loss from operating activities (866) (1,990) 13 (1,118) (3,961)
Finance income - - - - -
Finance costs (30) (6) - (194) (230)
------------- ------------------ ------------ -------------- -------------
Loss before tax (896) (1,986) 13 (1,312) (4,191)
------------- ------------------ ------------ -------------- -------------
Segment assets 5,357 3,790 204 4,336 13,687
Segment liabilities (5,847) (3,499) (157) (255) (9,758)
Other segment items:
Capital Expenditure
* Equipment, Fixtures & Licenc
es 40 - - - 40
Capital Expenditure
* Capitalised Development 761 159 - - 920
Depreciation
- Equipment, Fixtures
& Licences 145 - - - 145
Depreciation
* Capitalised Development 547 48 - - 595
Note that the ANZ division was reported within the North
American division in the previous year.
Revenue can be split by location of customers as follows:
2022 2021
Customer location GBP000s GBP000s
United Kingdom 8,202 5,298
United States of America 2,872 1,440
Canada 418 329
Rest of Europe 250 195
Asia Pacific 195 93
Middle East - 7
---------- ----------
Total 11,937 7,362
98% (2021: 100%) of all non-current assets are located in the
United Kingdom and the largest customer accounted for 16% (2021:
10%) of the revenue of the Group.
11. LOSS PER SHARE
The calculation of the loss per share is based on the loss after
taxation added to reserves divided by the weighted average number
of ordinary shares in issue during the relevant period as adjusted
for treasury shares. Details of potential share options are
disclosed in Note 20.
12 months 12 months ended ended
30 June 30 June
2022 2021
Loss after taxation added to reserves (GBP2,943,000) (GBP4,038,000)
Basic weighted average number of ordinary
shares in issue during the period 65,369,256 60,829,234
Diluted weighted average number of ordinary
shares in issue during the period 72,247,589 66,418,818
Basic and diluted loss per share (4.50) p (6.64) p
There are no separate diluted loss per share calculations shown
as it is considered to be anti-dilutive.
12. TAXATION
2022 2021
GBP000s GBP000s
Analysis of charge in the year
Current tax:
In respect of the year:
Corporation tax based on the results for - -
the year
Adjustment in respect for prior periods
(R & D Tax credit received) 165 154
Foreign corporate taxes paid (1) -
---------------------- ---------------
Total current tax credited 164 154
---------------------- ---------------
Deferred tax:
Origination and reversal of timing differences - -
---------------------- ---------------
Total deferred tax charged - -
---------------------- ---------------
Tax on profit on ordinary activities credited 164 154
---------------------- ---------------
Factors affecting current tax charge
The tax assessed on the loss on ordinary activities for the year
was lower than the standard rate of corporation tax in the UK of
19% (2021: 19%)
2022 2021
GBP000s GBP000s
Loss on ordinary activities before tax (3,107) (4,191)
Tax on loss on ordinary activities at standard
UK rate of taxation (590) (796)
Effects of:
Overseas tax rates (110) (77)
Expenses not deductible for tax purposes 61 26
Adjustments in respect of prior periods
R & D tax credit received 165 154
Fixed asset differences (11) -
Other permanent differences (10) -
Minimum US state taxes paid in year (1) -
Origination and reversal of timing differences
on unrecognised deferred tax losses 550 1,419
Effect of change in tax rate 110 (572)
Total tax credited for the year 164 154
---------------------- ---------------
The Group has unrecognised tax losses carried forward of GBP20.6
million (2021: GBP18.1 million).
The R&D tax credit received in FY 2022 is in respect to the
trading in FY 2020. No credit has been recognised in relation to
the financial years 2021 or 2022 which are pending submission to
HMRC.
13. INTANGIBLE ASSETS
SIP, RTP
2022 and SBC licences Capitalised
GBP000s Development Total
GBP000s GBP000s
Cost:
At 1 July 2021 379 3,415 3,794
Additions 48 1,098 1,146
Foreign exchange movement - 51 51
At 30 June 2022 427 4,564 4,991
---------- ------------- -------
Amortisation (included
within administrative
expenses):
At 1 July 2021 113 1,315 1,428
Charge for the year 85 803 888
Foreign exchange movement - 14 14
At 30 June 2022 198 2,132 2,330
---------- ------------- -------
Net book amount at 30
June 2022 229 2,432 2,661
SIP, RTP
2021 and SBC Capitalised
Licences Development Total
Cost: GBP000s GBP000s GBP000s
At 1 July 2020 379 2,519 2,899
Additions - 920 920
Foreign exchange movement - (24) (24)
At 30 June 2021 379 3,415 3,794
---------- ------------- -------
Amortisation (included
within administrative
expenses):
At 1 July 2020 37 723 298
Charge for the year 76 595 671
Foreign exchange movement - (3) (3)
At 30 June 2021 113 1,315 1,428
---------- ------------- -------
Net book amount at 30
June 2021 266 2,100 2,366
14. PLANT AND EQUIPMENT
Right of Fixtures
2022 use Asset and Fittings Computer
GBP000s GBP000s Equipment Total
GBP000s GBP000s
Cost:
At 1 July 2021 82 22 297 401
Additions 128 12 112 252
Disposals (82) - (214) (296)
-------
At 30 June 2022 128 34 195 357
------- ---------- ----------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2021 68 18 241 327
Charge for the year 35 5 45 85
Disposals (82) - (211) (293)
-------
At 30 June 2022 21 23 75 119
------- ---------- ----------- -------
Net book amount at 30
June 2022 107 11 120 238
Right Fixtures
2021 of use and Computer
Asset Fittings Equipment Total
Cost: GBP000s GBP000s GBP000s GBP000s
At 1 July 2020 82 22 258 362
Additions - - 40 40
Disposals - - (1) (1)
------- ---------- ----------- -------
At 30 June 2021 82 22 297 401
------- ---------- ----------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2020 35 14 210 259
Charge for the year 33 4 32 69
Disposals - - (1) (1)
------- ---------- ----------- -------
At 30 June 2021 68 18 241 327
------- ---------- ----------- -------
Net book amount at 30
June 2021 14 4 56 74
15. TRADE AND OTHER RECEIVABLES
Due within one year 2022 2021
GBP000s GBP000s
Trade receivables 2,962 2,146
Accrued income 45 45
Deferred costs 572 333
Other prepayments 613 404
Other debtors 11 -
-------------------- --------------
Trade and other receivables due within
one year 4,203 2,928
-------------------- --------------
Due after more than one year 2022 2021
GBP000s GBP000s
Deferred costs 964 801
-------------------- --------------
Trade and other receivables due after one
year 964 801
-------------------- --------------
All amounts are considered to be approximately equal to the
carrying value. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of receivables
mentioned above.
Trade receivables are reviewed at inception under an expected
credit loss model, and then subsequently at each period end for
further indicators of impairment, and a provision has been recorded
as follows:
2022 2021
GBP000s GBP000s
Opening provision at 1 July 1 1
Credited to income - -
------- -------
Closing provision at 30 June 1 1
------- -------
All of the impaired trade receivables are past due at the
reporting dates. In addition, some of the non-impaired trade
receivables are past due at the reporting date:
2022 2021
GBP000s GBP000s
0-30 days past due 242 177
30-60 days past due 67 16
Over 60 days past due 165 -
------- -------
474 193
------- -------
The carrying value of trade receivables is considered a
reasonable approximation of fair value. All of the receivables have
been reviewed for indicators of impairment. The movement in the
expected credit losses (ECLs) provision is shown above. Trade
receivables are recorded and measured in accordance with Note 4 (m)
above. The Group applies the IFRS 9 simplified approach to
measuring ECLs using a lifetime expected credit loss provision for
trade receivables. The expected loss rates are based on the Group's
historical credit losses experienced over the three-year period
prior to the period end, the future economic conditions of the
country relating to the overdue debtor and the contract position of
each overdue debtor.
16. CURRENT LIABILITIES
2022 2021
GBP000s GBP000s
Trade payables 693 557
Social security and other taxes 519 368
Deferred Income 9,286 6,153
Right of use lease liability 42 15
Accruals 832 724
---------------------- -------------
Total current liabilities due within one
year 11,372 7,817
---------------------- -------------
The deferred income figure above includes amounts relating to
contracts where the annual licence fee has been invoiced in advance
and deferred set-up and professional fees that have not reached a
stage where the revenue is being recognised and so is treated as
all due in less than one year for reporting purposes.
17. NON-CURRENT LIABILITIES
2022 2021
GBP000s GBP000s
Deferred Income 1,330 1,941
Right of use lease liability 67 -
Total non-current liabilities due after
one year 1,397 1,941
------- -------
The deferred income figure above includes amounts relating to
contracts where the annual licence fee has been invoiced multi
years in advance, and deferred set up and professional services
fees that have not reached a stage where the revenue is being
recognised and so is treated as all due in less than one year for
reporting purposes.
18. DEFERRED TAXATION
2022 2021
GBP000s GBP000s
Balance at 30 June - -
Unprovided deferred tax assets
Accelerated capital allowances - -
Trading losses 4,911 4,143
----------- -----------
4,911 4,143
----------- -----------
The unprovided deferred tax assets are calculated at an average
rate for each country as follows:
UK 25.0% (2021: 25.0%)
USA 23.0% (2021: 23.0%)
Australia 25.0% (2021: not applicable)
Canada 26.5% (2021: not applicable)
19. GROUP UNDERTAKINGS
At 30 June 2022, the Group included the following subsidiary
undertakings, which are included in the consolidated accounts:
Name Country of Class of Proportion Nature of business
Incorporation share capital held
held
PCI-Pal (U.K.) England Ordinary 100% Payment Card Industry
Limited(1) software services
provider
---------------- ---------------- ------------- ------------------------
IP3 Telecom Limited(1) England Ordinary 100% Dormant
---------------- ---------------- ------------- ------------------------
The Number Experts England Ordinary 100% Dormant
Limited(1)
---------------- ---------------- ------------- ------------------------
PCI Pal (US) Inc(2) United States Ordinary 100% Payment Card Industry
of America software services
provider
---------------- ---------------- ------------- ------------------------
PCI Pal (AUS) Australia Ordinary 100% Payment Card Industry
Pty Ltd(3) software
---------------- ---------------- ------------- ------------------------
PCI Pal (Canada) Canada Ordinary 100% Payment Card Industry
Inc(4) software
---------------- ---------------- ------------- ------------------------
(1) Registered at 7 Gamma Terrace, Ransomes Europark, Ipswich,
Suffolk IP3 9FF
(2) Registered at 2215B Renaissance Drive, Las Vegas, Nevada USA
89119
(3) Registered at 62 Burwood Road, Burwood, NSW 2134
Australia
(4) Registered at 199 Bay Street, Suite 4000, Toronto, Ontario,
Canada M5L 1A9
20. SHARE CAPITAL
Group 2022 2022 2021 2021
Number GBP000s Number GBP000s
Authorised:
Ordinary shares of 1 pence
each 100,000,000 1,000 100,000,000 1,000
Allotted called up and fully
paid:
Ordinary shares of 1 pence
each 65,619,818 656 65,479,818 655
On 10 December 2021 the Company issued 50,000 ordinary shares of
1 pence in settlement of an exercise of options at 33 pence per
share. On the same day, the Company issued 40,000 ordinary shares
of 1 pence in settlement of an exercise of options at 26.5 pence
per share.
On 30 June 2022 the Company issued 40,000 ordinary shares of 1
pence in settlement of an exercise of options at 22 pence per
share. On the same day, the Company issued 10,000 ordinary shares
of 1 pence in settlement of an exercise of options at 26.5 pence
per share.
The Group owns 167,229 (2021: 167,229) shares and these are held
as Treasury Shares.
During the year, the share price fluctuated between 95.0 pence
and 53.5 pence and closed at 58.0 pence on 30 June 2022.
Share Option schemes
The Company operates an Employee Share Option Scheme. The share
options granted under the scheme are subject to performance
criteria and generally have a life of 10 years. The grant price is
normally taken with reference to the closing quotation price as
derived from the Daily Official List of the London Stock Exchange,
however, the Remuneration Committee will adjust the grant price if
it deems there are extraordinary circumstances to justify doing
so.
The performance criteria are set by the remuneration committee.
The grants are individually assessed with regard to the location of
the employee and generally have one of the following performance
criteria:
1: 50% of the options will vest if the share price of the
Company as measured on the London Stock Exchange trades above the
share price at the date of grant, for a continuous 30 day period;
25% or the options will vest if the share price of the Company
trade 50% above the share price of the Company at the date of Grant
for a continuous 30 day period; and the remaining 25% will vest if
the share price of the Company trades 100% above the share price of
the Company at the date of Grant for a continuous 30 day period.
The options cannot be exercised for a three year period from the
date of Grant, or;
2: The number of options granted will vest equally over a four
year period in monthly tranches with the earliest exercise date
being 12 months from the date of issue of the option
All options will lapse after a maximum ten-year period if they
have not been exercised.
The following options grants have been made and are valued using
the Monte Carlo Pricing model with the following assumptions:
The fair value of these options has been calculated on an issue
by issue basis and GBP211,747 (2021: GBP83,668) has been charged to
the statement of comprehensive income account for this financial
year.
The following options have been valued using a Black Scholes
Pricing model with the following assumptions:
The fair value of these options has been calculated on an issue
by issue basis and GBP35,104 (2021: GBP31,013) has been charged to
the statement of comprehensive income account for this financial
year.
The analysis of the Company's option activity for the financial
year is as follows:
2022 2021
Weighted Number of Weighted Number of
Average exercise Options Average Options
Price exercise
price
GBP GBP
Options outstanding at
start
of year 0.397 5,911,667 0.302 4,916,667
Options granted during the
year 0.613 2,480,000 0.566 2,090,000
Options exercised during
the
year 0.275 (140,000) 0.356 (302,500)
Options lapsed during the
year 0.574 (105,000) 0.269 (792,500)
Options outstanding at end
of year 0.463 8,146,667 0.397 5,911,667
--------------- ---------------
Options exercisable at the
end of year 3,886,942 2,653,242
21. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Group uses various financial instruments including cash,
trade receivables, trade payables, other payables, loans and
leasing that arise directly from its operations. The main purpose
of these financial instruments is to maintain adequate finance for
the Group's operations. The existence of these financial
instruments exposes the Group to a number of financial risks, which
are described in detail below. The Directors do not consider price
risk to be a significant risk. The Directors review and agree
policies for managing each of these risks, as summarised below, and
these remain unchanged from previous years.
Capital Management
The capital structure of the Group consists of debt, cash, loans
and equity. The Group's objective when managing capital is to
maintain the cash position to protect the future on-going
profitable growth which will reflect in shareholder value.
At 30 June 2022, the Group had a closing cash balance of
GBP4,888,000 (2021: GBP7,518,000) and borrowings of GBPnil (2021:
GBPnil).
At the year-end. The Group does not have any debt facilities
available.
Financial risk management and objectives
The Group seeks to manage financial risk to ensure sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. The Directors achieve this by
regularly preparing and reviewing forecasts based on the trends
shown in the monthly management accounts.
On 30 April 2021 the Company placed 5,864,473 ordinary shares of
1 pence with various institutional investors, priced at 95 pence
per share. The placing raised a gross amount of GBP5.50 million
before expenses.
Interest rate risk
In June 2021 the Company repaid its outstanding debt facility
with Shawbrook Bank and so does not have any interest rate
risk.
Credit risk
The Group's principal financial assets are cash and trade
receivables, with the principal credit risk arising from trade
receivables. In order to manage credit risks the Group conducts
third party credit reviews on new clients and takes deposits or
advanced payments where this is deemed necessary.
Where possible the Group collects payment by direct debit,
limiting the exposure to a build-up of a large outstanding debt.
Concentration of credit risk with respect to trade receivables are
limited due to the wide nature of the Group's customer base: The
largest customer accounted for 16% of revenues in the financial
year, but this is expected to continue to drop in the next
financial year as we add more and more customers. Historically, bad
debts within the Group are minimal due to the importance of our
service to the customer as well as the level of payments in advance
we receive. This situation is not expected to change in the
future.
Liquidity risk
The Group aims to mitigate liquidity risk by closely monitoring
cash generation and expenditure. Cash is monitored weekly and
forecasts are prepared monthly to ensure that the movements are in
line with the Directors' strategy.
Foreign currencies and foreign currency risk
During the year exchange gains of GBP832,000 (2021: loss of
GBP550,000) have arisen, which are mostly unrealised exchange
movements. As at the 30 June 2022 the Group held the following
foreign currency cash balances:
US Dollar $589,226 Sterling equivalent: (2021: GBP754,233)
GBP478,695
Canadian Dollar $405,330 Sterling equivalent: (2021: GBP155,211)
GBP254,493
Australian $35,571 Sterling equivalent: (2021: GBP105,127)
Dollar GBP20,065
Euro EUR387,639 Sterling equivalent: (2021: GBP126,263)
GBP333,711
Total Sterling equivalent: (2021: GBP1,140,834)
GBP1,086,964
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction and monetary
assets and liabilities in foreign currencies are translated at the
rates ruling at the year end. At present foreign exchange
translation is low and therefore hedging and risk management is not
deemed necessary as the company trades and spends in the various
currencies.
The Group's principal exposure to exchange rate fluctuations
arise on the translation of overseas net assets, profits and losses
into Sterling, for presentational purposes. The exchange rate
fluctuations are reported by taking the differences that arise on
the retranslation of the net overseas investments to the currency
reserve.
Foreign currency risk on cash balances is monitored through
regular forecasting and the Group tries to maintain a minimum level
of currency in the accounts so as to meet the short term working
capital requirements.
No sensitivity analysis is provided in respect of foreign
currency risks as the risk is considered to be moderate.
22. CAPITAL COMMITMENTS
The Group has no capital commitments at 30 June 2022 or 30 June
2021.
23. CONTINGENT ASSETS
The Group has no contingent assets at 30 June 2022 or 30 June
2021.
24. CONTINGENT LIABILITIES
In October 2019 the Group entered into a GBP2.75 million loan
facility with Shawbrook Bank. As part of the loan agreement
Shawbrook Bank will be entitled to receive a cash based payment
calculated on the value generated, over a 10 year period up to
October 2029, on the equivalent of GBP206,250 of phantom shares
(being 7.5% of the facility) if there is a takeover of the Group or
a debt refinancing of the Shawbrook debt.
The exit fee is a cash payment of a sum equal to P, where:
P = (A x B) - C
and where:
A = the Phantom Shares Number - the Phantom Shares Value divided
by the fair market value of one ordinary share, calculated using
the average of the closing share price in the previous five days
immediately prior to the date of the facility letter;
B = the fair market value of one ordinary share at the time of
the exit fee event; and
C = the Phantom Shares Value, which is GBP206,250.
An Exit Fee Event is where there is:
(a) a sale or other disposition of all or substantially all of
the assets in the Company in whatever form (whether in a single
transaction or multiple related transactions); or
(b) an acquisition of shares in the Company by a person (and any
persons acting in concert with that person) that results in that
person (together with any such persons acting in concert) acquiring
a controlling interest in the Company; or
(c) a reorganisation, consolidation or merger of the Company
(whether in a single transaction or multiple related transactions)
where shareholders before the transaction(s) directly or indirectly
beneficially own issued voting securities of the surviving entity
after the transaction(s) together carrying the right to cast 50% or
less of the votes capable of being cast at general meetings of the
surviving entity; or
(d) a distribution or other transfer of assets to the
shareholders of the Company in connection with the liquidation of
the Company; or
(e) a refinancing of the Facility with a bank or debt lender
(other than the Bank) within thirty six months of the date of the
Facility Agreement, provided that the outstanding balance of the
Facility prior to the date of such refinancing is equal to or
greater than GBP500,000
The debt facility was repaid from cashflow in June 2021 and so
no exit fee was triggered. However, there still remains a
contingent liability if the Company is taken over.
Patent case
In September 2021, Semafone Limited (now renamed Sycurio
Limited), a competitor of the Group, lodged claims at the UK Patent
Court against both PCI-Pal PLC and PCI-Pal (U.K.) Ltd and at the US
Patent Court against PCI Pal (U.S.) Inc for breach of Semafone
patents. The Group strongly refutes the claims that are being made
against it and so instructed its lawyers to prepare a robust
defence and counterclaims to be heard by the Courts in the UK and
US.
A court hearing has been scheduled for June 2023 in the UK with
the court proceedings expected to commence in the US in the
summer/autumn of 2024.
The Group has formed a robust defence on non-infringement,
despite the onus being on Sycurio to prove infringement, and has
advanced strong counterclaims of invalidity of Sycurio's patents,
such as prior-art. Following an extensive investigation into
Sycurio's patents and the previous court challenges in the UK to
their validity by other parties, the Group has formed a strong
position on counterclaims challenging the validity of the patents.
Both defence and counterclaims form the basis of our multi-faceted
position in the UK and US cases.
The Group's legal advisors have advised the directors about the
strength of the defence, the potential for recovery of costs
incurred in defending the case and the processes involved in the
Court hearings. Based on the legal advisors' advice, the directors
consider that it is only possible, but not probable, that an
obligation to Sycurio will arise from this claim. It is not
practical to state an amount or timing of financial impact of this
obligation, if any, as it depends upon the future outcome of the
Court hearings, which are at an early stage, or any mediation or
settlement negotiations with Sycurio.
As the Directors do not believe that the Group has infringed the
Sycurio patents they have concluded that there is no past
obligating event in relation to the Claim, therefore no provision
for anticipated future legal costs has been made in the financial
statements. The total value of the legal costs incurred to date and
the estimate of the contingent liability for future legal fees at
the year-end is as follow:
Incurred To be incurred Total estimated
in year in future cost
GBP000s GBP000s GBP000
PCI-Pal PLC 578 1,194 1,772
PCI-Pal (U.K.) Ltd 37 - 37
PCI Pal (U.S.) Inc 182 1,706 1,888
--------- --------------- ----------------
797 2,900 3,697
Note that the defence and costs of the UK claim are being
managed and funded by PCI-Pal PLC, who was included in the
Claim.
25. CHANGES IN ACCOUNTING POLICY
There were no changes in accounting policies during the
financial year.
26. TRANSACTIONS WITH DIRECTORS
Apart from the director's standard remuneration there were no
other transactions with directors in the year to June 2022 or June
2021.
27. DIVIDENDS
The Directors are not proposing a dividend for the financial
year (2021: nil pence per share).
28. SUBSEQUENT EVENTS
There are no subsequent events to report.
29. ALTERNATIVE PERFORMANCE MEASURES
The Group reports certain alternative performance measures
('APMs') that are not required under IFRS. The Group believes that
these APMs, when viewed in conjunction with its IFRS financial
information, provide valuable and more meaningful information
regarding the underlying financial and operating performance of the
Group to its stakeholders.
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END
FR UPUCPBUPPGBA
(END) Dow Jones Newswires
September 06, 2022 02:00 ET (06:00 GMT)
Pci-pal (LSE:PCIP)
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