TIDMPCIP
RNS Number : 8613S
PCI-PAL PLC
09 November 2023
09 November 2023
PCI-PAL PLC
("PCI Pal", the "Company" or the "Group")
RESULTS
FOR THE YEARED 30 JUNE 2023
Strong Growth with Record New Business
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 2023 (the "period").
Financial Highlights:
FY23 FY22
30 June 30 June Change
2023 2022
Revenue GBP14.95m GBP11.94m +25%
----------------------- ----------------------- -----------------------
Gross Margin % 88% 84%
----------------------- ----------------------- -----------------------
% of revenues from
recurring
contracts 86% 89%
----------------------- ----------------------- -----------------------
Adjusted EBITDA(1) loss (GBP1.11m) (GBP1.88m) +41%
----------------------- ----------------------- -----------------------
Adjusted PBT(2) loss (GBP2.31m) (GBP2.90m) +20%
----------------------- ----------------------- -----------------------
Loss before Tax (GBP4.89m) (GBP3.11m)
* 57%
----------------------- ----------------------- -----------------------
New ACV(3) contract
sales
in period GBP4.16m GBP3.46m +20%
----------------------- ----------------------- -----------------------
TACV(4) GBP16.43m GBP13.36m +23%
----------------------- ----------------------- -----------------------
ARR(5) GBP12.58m GBP11.05m +14%
----------------------- ----------------------- -----------------------
NRR(6) 103.0% 117.7%
----------------------- ----------------------- -----------------------
Customer retention(7) 95.4% 96.9%
----------------------- ----------------------- -----------------------
Cash and available GBP4.17m GBP4.89m
resources
(incl maximum debt
headroom)(8)
----------------------- ----------------------- -----------------------
Operating and Other Highlights:
-- Continued strong momentum in key US market, with GBP2.5m new
business ACV won in the year representing 61% of new business for
the Group.
-- New business momentum emphasised by 48% year on year increase in net new logo sales.
-- Strength of partner eco-system illustrated by further
increase in contract value signed through resellers, now making up
77% of ACV signed (2022: 62%).
-- 241 new sales contracts signed in the period (2022: 217),
average ARR value increased 14% to GBP17,000. (2022: GBP15,000)
reflecting PCI Pal's increasing strength in the mid-market and
enterprise space.
-- High partner and customer satisfaction rates with 95% Gross
Revenue Retention ("GRR") across the year.
(1) Adjusted EBITDA is the loss on Operating Activities before
depreciation and amortisation, exchange movements charged to the
profit and loss, exceptional items and expenses relating to share
option charges
(2) Adjusted PBT is the Loss before Tax before exchange
movements charged to the profit and loss, exceptional items and
expenses relating to share option charges
(3) ACV is the annual recurring revenue generated from a
contract.
(4) TACV is the total annual recurring revenue of all signed
contracts, whether invoiced and included in deferred revenue or s
till to be deployed and/or not yet invoiced.
(5) ARR is Annual Recurring Revenue of all the deployed
contracts at the period end expressed in GBP.
(6) NRR is the net retention rate of the contracts that are live
on the AWS platform rate and is calculated using the opening total
value of deployed contracts 12 months ago less the ACV of lost
deployed contracts in the last 12 months plus the ACV of upsold
contracts signed in the last 12 months all divided by the opening
total value of deployed contracts at the start of the 12 month
period.
(7) Customer retention is calculated using the formula: 100%
minus (the ACV of lost deployed contracts on the AWS platform in
the last 12 months divided by the opening total value of deployed
contracts 12 months ago expressed as a percentage).
(8) Cash balance plus maximum debt facilities available (subject
to covenant tests being met)
Current Trading:
-- PCI Pal is well-positioned to deliver the key financial
milestones expected this year whilst driving continued growth
momentum and new product development.
-- As announced on 25 September 2023, in the UK the Company
comprehensively defeated the unfounded patent infringement law suit
brought by one of its competitors, with the judge ruling
resoundingly in PCI Pal's favour on all counts. PCI Pal now seeking
maximum cost recovery.
-- Sales highlights since year end:
o A number of new enterprise customers signed in key US market,
including a Fortune 50 home goods retailer; and a FTSE100
electrical goods company signed via their US subsidiary.
o An exciting new partnership with a major telco in New Zealand
which has immediately produced the relationship's first customer, a
central government agency in the region.
o New business ACV to date is 11% ahead of the same period in
prior year with strong near term sales pipeline which includes a
number of major new customer and partnership opportunities.
Commenting, James Barham, Chief Executive Officer, said:
"We've delivered another strong year. Revenues have grown
strongly, we have accelerated new business sales, particularly in
our key US region, and overall losses matched expectations. During
the year we have proven that our global, cloud based SaaS platform
appeals to the entire breadth of our addressable market, from the
very smallest companies, to large enterprise, and this capability
has been a key component to our growth trajectory. To have achieved
this while challenged by a number of headwinds is thanks to our
people and the team we have built.
"Since we set out on this current phase of our plans, FY24 has
always been slated as the first year of full Group profitability.
No doubt the headwinds have made this a more challenging ambition,
and with anticipated revenue growth rates of 28-30% in the coming
year, we believe the business is well positioned to achieve our
profitability milestone. We will continue to build on the
foundations we have established in the last five years to take this
business to the next level.
"It's an exciting time at PCI Pal. With a strong near-term sales
pipeline, regular planned new product releases on the horizon, and
supported by the strongest partner eco-system in our market, we can
look forward to driving further growth in FY24."
Analyst Briefing: 9:30am today, Thursday 09 November 2023
An online briefing for Analysts will be hosted by James Barham,
Chief Executive Officer, and William Good, Chief Financial Officer,
at 9.30am on today, Thursday 09 November 2023 to review the results
and prospects. Analysts wishing to attend should contact Walbrook
PR on pcipal@walbrookpr.com or 020 7933 8780.
Investor Presentation: 12:00pm on Tuesday 14 November 2023 (UK
time)
The Directors will hold an investor presentation to cover the
results and prospects at 12.00pm on Tuesday 14 November 2023 (UK
time).
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.
For further information, please contact:
PCI-PAL PLC Via Walbrook PR
James Barham - Chief Executive
Officer
William Good - Chief Financial
Officer
Cavendish Securities plc (Nominated
Adviser and Broker) +44 (0) 20 7227 0500
Marc Milmo/Simon Hicks (Corporate
Finance)
Sunila De Silva (Corporate Broking)
Walbrook PR +44 (0) 20 7933 8780
Tom Cooper/Nick Rome/Joe Walker +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 2023
I am exceedingly proud of the Company's achievements this year.
Notable areas of positive progress among many to choose from
include: the continued strong revenue growth; the reduction in
underlying losses as we push towards delivering our first profits
and sustainable cash generation; and strong retention and
meaningful upsell of new product features and licences to our
customer base. We continue to make great progress with our
partners, welcoming new global names to our well established
eco-system and in turn these partners continue to deliver
significant new logo sales opportunities for us. Given the
multi-faceted challenging backdrop of the unfounded patent
infringement case, rapidly rising interest rates and general
business softness in the face of economic uncertainty, these
achievements are particularly impressive.
For many of our people this is the first time that they have
faced these types of challenges. Our management team and employees
around the world have nonetheless responded robustly and
intelligently to these wide-ranging events. For them to not only
have appropriately dealt with these challenges, but also achieved
great results despite them, is wonderful to see.
The PCI Pal team continues to grow and today we have
representation in the UK, the United States, Canada and Australia.
Our staff turnover remains low, and our culture even stronger. I
would personally like to thank each and every one of them for their
contributions towards meeting the Group's mission.
Strategic Direction
The Board is extremely pleased with how our strategic direction
is developing. With the recent focus on new products, our
addressable market is growing. Equally, with our investments into
customer and partner success, and new geographies, we are seeing
our sales pipeline increase, especially in the United States. These
continued positive outcomes from our annual rolling strategic
planning are collectively increasing our confidence for FY24 and
beyond.
Corporate Governance
I am mindful of the fact that as part of a fast-growing
international organisation I have to ensure that our organisational
structure and corporate processes remain robust so we can continue
to deliver for all stakeholders, while not diminishing our
entrepreneurial culture. The Group is supported by an experienced
Board of Directors, who in turn are supported by an organisation
that has proven it can deliver. We take outside professional and
business advice where needed. Our strategic aims are clear, our
employee culture excellent, and our commitment to our partners and
customers is unshakeable. I believe we have a balanced business
that can continue to grow within acceptable levels of risk
tolerance.
Patent Infringement Claim
As announced by the Company on 25 September 2023, in the UK the
Company was successful in the High Court of England and Wales
("High Court") in both defeating the claims of patent infringement
made by our competitor, Sycurio, but further was successful in its
own counterclaims to invalidate the patent as well. This is a
comprehensive win for PCI Pal and substantiates the position of the
Board since the day this unfounded action was launched. No matter
what happens next, I believe this judgement significantly reduces
the downside risk for investors, and validates the Board's position
that it has taken for the last two years.
Management have been extremely thorough in their handling of
this situation, and I believe combined with this victory in the UK,
that the business has mitigated risks from any outstanding
activity. It continues to be the Company's belief that this action
was brought by a competitor who is trying to disrupt PCI Pal's
momentum and to make commercial gain.
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 phone and video briefings as well
as utilising the Investor Meet Company portal, to reach
shareholders of all types. The CEO and CFO offer regular 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.
Looking Forward
I continue to be both excited and encouraged by the progress
that has been made by the Group in FY23, and the Board is confident
in the outlook and prospects in FY24 and beyond. Given the momentum
in the business I look forward to sharing further progress reports
and news during the coming year, as we continue our strategic
growth journey towards profitability and further scale.
Simon Wilson
Non-Executive Chair
8 November 2023
CHIEF EXECUTIVE'S STATEMENT
FOR THE YEARED 30 JUNE 2023
Overview
We have delivered another strong year of growth at PCI Pal which
has included our strongest ever performance for new business sales,
as well as significant progress against our long-term product
development goals as we continue to broaden our product set.
Our execution against our stated objective to be the leader in
cloud solutions in our market continues to deliver strong results.
Year on year revenue increased organically by 25% to GBP14.9
million (2022: GBP11.9 million), with gross margins increasing
further to 88% (2022: 87%) reflecting the high margin nature of our
mature public cloud platform from which all our products are
served.
New business sales
I am particularly pleased with PCI Pal's strong sales
performance, with GBP4.2 million new business ACV signed in the
year, a 20% increase year on year. It is encouraging to see the
significant increase in new logo contracts signed in the period
which increased 48% year on year to GBP3.5 million ACV value.
PCI Pal has always set out the objective to develop products and
services that can service the breadth of the contact centre market
globally. Through our partnerships with many of the world's leading
CCaaS ("Contact Centre as a Service") vendors, we have built up
strong run-rate order levels for small to mid-market customer
deals, and this is highlighted by the 241 contracts won in the year
(2022: 217). With more than 90% of the contact centre market in the
US alone being SMBs (contact centres with less than 250 agent
seats), this is an important aspect of our sales execution allowing
us to access the entirety of our addressable market. Further, PCI
Pal's enterprise-level sales and marketing capabilities have
matured significantly in the last five years, and we are now
consistently adding enterprise customers to our SMB business.
PCI Pal's enterprise customers make up a broad spectrum of
well-known brands across many verticals including retail,
insurance, healthcare, and government. In the year we were very
successful in adding further enterprise customers, many with a
global footprint. Highlights included:
-- A major contract with a Fortune 50 healthcare provider in the
US where our solutions are being deployed across a contact centre
estate that exceeds 10,000 agent seats. This contract was won
through a partner, following a successful POC with the
customer.
-- A large contract with one of the largest clothing retail
brands in the world, a Fortune 500 company. This opportunity was
sourced through our eco-system, but was eventually fulfilled
directly by us to suit the customer's own requirements. The
customer is now live in the US across more than 2,500 seats.
-- Our largest contract to date in Australia, with one of the
largest insurers in the world who has significant operations across
ANZ, APAC, and Europe. This customer is currently going through
deployment in Australia and again was secured through our partner
eco-system.
-- A sizeable contract with a FTSE 100 listed retail and
financial services business in the UK where our solutions are being
deployed into the customer's financial services business.
Operations:
The PCI Pal platform is entirely cloud-based and has been scaled
globally to support our fast-growing customer-base. The platform
regularly achieves 99.999% uptime or better, with Q4 at 100% uptime
across all aspects of the platform and connectivity. These high
levels of performance are the direct result of our early investment
in cloud capabilities, a mature cloud environment, and tight knit
integrations to the majority of our partners.
We have now introduced CSAT (Customer Satisfaction) scores to
our performance metrics and I am pleased to report that they are
ahead of industry benchmarks at 85%. Our NPS (Net Promoter Score)
for our service delivery continues to increase and now stands at
75% (2022: 65%), which is in the "excellent" category for industry
benchmarks. These metrics are critical to underpinning our strong
retention with GRR at 95% for the year. NRR was 103%, an expected
decrease from the prior year (2022: 118%) which included a number
of one-off large expansionary upsells to existing customers that we
didn't expect to repeat in FY23.
Adding to our strong operational foundations, we have built up
significant product development momentum across the year and we
anticipate launching several new products and features throughout
FY24. This is the direct result of the product investment we began
making following our fundraise at the end of FY21 and it is driving
increased levels of engagement with our partners, and in the longer
term will further enhance the Group's addressable market
opportunity.
Partner Eco-system:
Having defined a goal to build a partner-first sales model,
we're proud of the strength of our partner eco-system. Today we
have over 50 partners actively contributing to our sales pipelines.
Many of these partners are major global organisations with whom we
have now built strong, long-standing relationships.
With 85% of new contracts in FY23 won through resellers; which
made up 77% (2022: 62%) of ACV value won by the Group in the
period, our continued commitment to our partners is showing real
value. We work closely with our partners to ensure our products
meet the needs of their customers. This was evidenced by an
increase of more than 100% in new business ACV generated from our
top five partners when compared to the prior year.
Furthermore, we continue to grow our partner eco-system. We
specifically target partners that match our target markets and, in
the year, new partner highlights included two major systems
integrators who resell a number of the CCaaS platforms we integrate
to. The first is one of the largest Value Added Resellers ("VAR")
in the United States through whom we have signed our first joint
customer who is going through deployment using an integration to
the Cisco Webex CCaaS solution; the second is an APAC headquartered
IT services business, with extensive global operations and an
international enterprise customer base.
Market and Product Strategy
Market:
Contact centre markets in the UK and US represent between 2-3%
of the working populations of those countries. This trend is
similar across ANZ and Europe as well. PCI Pal's ability to serve
contact centres 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.
Whilst contact centres of greater than 250 seats are less
numerous, they do make up a sizeable portion of the addressable
market. Therefore, PCI Pal has positioned itself to capitalise on
this element of the market as well, and has built up a strong track
record of successfully selling into these larger organisations. In
terms of scale, it's common that PCI Pal solutions are used by
contact centres whose agent count exceeds 1,000, and indeed, we
have a growing number of customers with more than 5,000 agent seats
across both the UK and US.
Product Strategy
In 2016 when we started on this journey, we defined a five-year
strategy to be the market leading cloud provider of secure payments
for the business communications space. We laid out three key
strategic pillars to this objective:
1. To develop and maintain the class-leading global public cloud
platform that provides easy-to-integrate cloud-to-cloud
capabilities;
2. To use our technology to empower access to the breadth of the
contact centre market globally; from the very smallest contract
centres, who make up the majority of the market; to the very
largest, global enterprises; and
3. To build and maintain the most extensive and effective
partner eco-system to allow us to achieve the two goals above in a
cost effective and customer-oriented way.
I believe we have been highly successful in achieving these
goals and that success has now set us up for the next phase of our
ambitions. In 2021, we informed investors that we would be growing
our addressable market through, initially, further geographic
expansion pushing into Australia, Canada, and mainland Europe. This
plan is well underway, with Australia and Canada now completing
their first full years since launch. We have a growing customer
base in mainland Europe which we serve today using multi-lingual
resources based in the UK, leveraging our extensive partner
eco-system in the territory. We expect to build on our European
customer-base with a presence in mainland Europe in FY25.
Furthermore, in FY22 we began to increase investment into our
product and engineering capabilities to both strengthen our current
core product suites; and to additionally evolve the product-set
with enhancements and new features that would allow PCI Pal to
better capitalise on its market position, expanding customer-base,
and integrated partner eco-system. In particular, we are adding
more payment products and capabilities to our product set in
recognition of the digital transformation occurring in the contact
centre market today.
In September 2022, the launch of our Open Banking capability,
through our partnership with TrueLayer, was the first evidence of
the output of those increased product development efforts. We have
now reached a point where across FY24 we expect to be releasing
several other new products and enhancements that will be adding a
variety of digital payment capabilities to our offerings, which
include:
-- A new user experience for all agent, consumers, and bot-led interactions
-- An enhanced multi-service digital wallet offering (including ApplePay and GooglePay)
-- Embedded integrations to the leading Buy Now Pay Later (BNPL)
vendors available globally, including Klarna, Affirm, and
Afterpay.
-- A fast start payment processing option for SMB customers
Furthermore, we have been investing in our data backbone to
empower new features and intelligence in our core products, as well
as developing our own AI (artificial intelligence) aimed at driving
more continuous improvements to agent and customer experience (CX).
These include:
Ø Improved data analytics related to customer interactions and
payments;
Ø Improved insights to empower customers to grow revenue and
reduce costs; and
Ø Customer journey tracking to automate improvements to both
agent and customer experience (CX) during payment interactions.
These new developments will also incorporate an enhanced
go-to-market model that differentiates between customer type and
size, empowering operational efficiencies at PCI Pal which long
term will reduce our Time To Value (historically reported as TTGL
or Time-to-go-live). This advancement will open the door for
partners and customers to self-provision our services, which
equally will provide more value to them.
We look forward to updating investors on these developments as
FY24 progresses and products reach launch phase.
Update on the unfounded claims of patent infringement
In September 2021, the Group announced that Semafone Limited
(now renamed Sycurio Limited), one of PCI Pal's direct competitors,
had filed lawsuits in both the UK and the US relating to alleged
patent infringement by PCI Pal concerning one aspect of its Agent
Assist product.
As announced on 25 September 2023, PCI Pal was successful in
comprehensively defeating the unfounded patent infringement suit
being brought in the UK by Sycurio. The High Court judgement was
resoundingly in PCI Pal's favour, with the judge ruling that
Sycurio's patent was invalid due to obviousness from two sources of
prior art. Furthermore, the judge decided that even if the patent
had been valid, PCI Pal's Agent Assist solution did not infringe
the patent and Sycurio also accepted that the variants submitted by
PCI Pal, which were changes it could make to its solution, would
also not have infringed. The ruling from Mrs Justice Bacon is
available at
https://caselaw.nationalarchives.gov.uk/ewhc/pat/2023/2361 .
The Board believe that this outcome validates the position it
has taken across the last two years since the unfounded litigation
was launched. PCI Pal has always taken a thorough and prudent
approach to its own product development processes, and from the
very early years of the business took advice on core developments
to ensure third party IP was not infringed, as well as making
efforts to patent its own innovation. The Board believes this
comprehensive ruling also evidences its strong belief that Sycurio
brought these claims to disrupt PCI Pal's business and to gain
commercially.
Breach of confidentiality by Sycurio Limited:
PCI Pal notes its announcement of 7 June 2023 disclosing that in
April 2022, Sycurio breached the terms of confidentiality
agreements that had been put in place between PCI Pal and Sycurio
to protect information provided as part of the unfounded, ongoing
patent litigation ("Confidentiality Agreements"). In its disclosure
to PCI Pal, Sycurio confirmed that it had illegitimately shared
confidential information with Sycurio personnel who were not
covered by the Confidentiality Agreements. PCI Pal remains
unsatisfied by the remedial measures that have been offered to date
and continues to consider its options with regards to this
unsavoury situation.
Looking ahead:
As noted in the announcement of 3 October 2023, the Company
understands that following the victory in the UK case, a Form of
Order hearing will be heard in December, where a number of
administrative and outstanding matters will be resolved by the
Judge. Given the extent of PCI Pal's victory, the Company will be
seeking the maximum recovery of costs possible following its
resounding win.
Appeals in patent cases are common, no matter the nature of the
ruling, and therefore PCI Pal is fully prepared for an appeal
should it be filed. Given how comprehensive the ruling in the UK
was in PCI Pal's favour, the Company remains confident in the
judge's judgment that Sycurio's patent is invalid due to prior art
and that, even if the patent were valid, PCI Pal's solutions would
not infringe.
US proceedings:
The UK ruling has been submitted to the US court. The patents in
the US are substantially similar to the UK patent which preceded
those in the US. Therefore, the defence arguments and counter
claims from PCI Pal are substantially similar to those in the UK.
In addition, the Company notes that there is additional prior art
that can be used in the US case that could not be used in the UK
case.
PCI Pal's confidence in its position in the US case has grown
further following the comprehensive UK ruling. The Company expects
to win on all counts, proving it does not infringe the US patents
and that the US patents are invalid. As a risk mitigation measure,
the Company has already taken prudent steps so that even in a
worst-case scenario, which the Directors believe is highly
unlikely, changes can be made to the specific aspect of PCI Pal's
Agent Assist solution in order to continue business as usual if
needed. Furthermore, PCI Pal's new features and products detailed
since the last fundraise are firmly out of the scope of any of the
patents involved, and therefore the Company believes that even an
adverse outcome in the US would not be materially disruptive to PCI
Pal's long term business momentum.
PCI Pal Intellectual Property:
As the first mover in its market to a public cloud solution, the
Company continues to protect its innovative ideas by securing
patents for its technology. These patents include protection for
its key deployment models of the Agent Assist solution and provide
coverage across the key international regions the Group operates in
today. PCI Pal's partners and customers benefit from these
innovative methods, and as such the Company actively monitors its
marketplace and will defend its IP fully if required.
Outlook
This is an exciting time for PCI Pal. Undoubtedly the patent
case has been a distraction for management over the last two years,
but with much of the deeper preparation work complete, and with
such a strong outcome to the UK proceedings behind us, that
distraction is now minimised with full focus continuing towards the
Company's profitable growth ambitions in FY24.
We have always known that the business could generate strong
operating profit growth as we scaled and FY24 is the first year we
expect to see an adjusted pre-tax profit. The Board remain focussed
on delivering its expected 28-30% revenue growth in FY24.
Meanwhile, and as a result of the additional investment made in
engineering and product in FY23, we look ahead with confidence as
we plan to bring a number of new products and enhancements to
market throughout the new year. These new product initiatives will
further complement the business we have built today, allowing us to
increase the value we provide to our partners and customers; allow
us to maintain high gross revenue retention rates; and increase
up-sell and cross-sell opportunities whilst expanding our
addressable market.
I look forward to updating investors on what we expected to be
another strong year of progress at PCI Pal.
James Barham
Chief Executive Officer
8 November 2023
CHIEF FINANCIAL OFFICER'S REVIEW
FOR THE YEARED 30 JUNE 2023
Key financial performance indicators
The Directors use a number of Key Financial Performance
Indicators (KPIs) to monitor the progress and performance of the
Group. Our core KPIs are showing strong performance against
expectations.
The principal financial KPIs used by the Board to assess the
Group's performance are as follows:
2023 Change 2022 Change 2021
% %
Revenue GBP14.95m +25% GBP11.94m +62% GBP7.36m
----------------- ------------- ----------------- ------------- -----------------
Gross Margin 88% 84% 75%
----------------- ------------- ----------------- ------------- -----------------
Recurring Revenue GBP10.
(1) GBP12.93m +22% 57 m +63% GBP6.48m
----------------- ------------- ----------------- ------------- -----------------
Recurring Revenue
as % of Revenue 86% 89% 88%
----------------- ------------- ----------------- ------------- -----------------
Revenue generated
from Non-UK deployments GBP5.23m +40% GBP3.74m +82% GBP2.06m
----------------- ------------- ----------------- ------------- -----------------
Percentage of Revenue
from non-UK deployments 35% 31% 28%
----------------- ------------- ----------------- ------------- -----------------
Adjusted EBITDA(2) (GBP1.11m) +41% (GBP1.88m) +27% (GBP2.56m)
----------------- ------------- ----------------- ------------- -----------------
Cash facilities GBP4.17m GBP4.89m GBP7.52m
available(3)
----------------- ------------- ----------------- ------------- -----------------
Deferred Income GBP11.82m GBP10.62m GBP8.09m
----------------- ------------- ----------------- ------------- -----------------
(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 maximum debt facilities available (subject
to covenant tests being met)
The principal operational KPIs used by the Board to assess the
Group's performance are as follows:
2023 Change 2022 Change 2021
% %
Contracted TACV(1)
deployed and live GBP12.58m +14% GBP11.05m +44% GBP7.69m
---------------- ------------- ---------------- ------------- ---------------
Contracted TACV
in deployment GBP3.08m +175% GBP1.12m 0% GBP1.12m
---------------- ------------- ---------------- ------------- ---------------
Contracted TACV
- projects on
hold GBP0.77m -35% GBP1.19m +70% GBP0.70m
---------------- ------------- ---------------- ------------- ---------------
Total Contracted
TACV GBP16.43m +23% GBP13.36m +40% GBP9.51m
---------------- ------------- ---------------- ------------- ---------------
% of TACV derived
from variable
transactions deemed
recurring 14% 22% 24%
---------------- ------------- ---------------- ------------- ---------------
ACV of contracts GBP0.14m GBP0.18m GBP0.20m
cancelled before
deployment
---------------- ------------- ---------------- ------------- ---------------
Signed ACV in
financial period GBP4.16m +20% GBP3.46m +11% GBP3.11m
---------------- ------------- ---------------- ------------- ---------------
AWS Platform Churn(2) 4.6% 3.1% 6.7%
---------------- ------------- ---------------- ------------- ---------------
AWS Platform Net
Retention Rate(3) 103% 117.7% 111.1%
---------------- ------------- ---------------- ------------- ---------------
Headcount at end
of year (excluding
non-executive
directors) 114 103 71
---------------- ------------- ---------------- ------------- ---------------
Ratio Personnel
cost to administrative
expenses 78% 74% 71%
---------------- ------------- ---------------- ------------- ---------------
(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
I am pleased to report that FY23 was another strong year for PCI
Pal, allowing us to deliver on our growth plans which we laid out
back in April 2021. We have managed this performance against the
slowdown in the economic climate, aggressive inflation and the
distraction of the unfounded patent infringement claims being made
against us. This performance clearly demonstrates the financial
robustness of our channel first business model backed up by our
innovative, patented pure cloud solutions.
Revenue and gross margin
Overall Group revenue grew by 25% to GBP14.95 million (2022:
GBP11.94 million) and gross margin improved to 88% (2022: 84%).
The majority of the revenues are generated from products hosted
in our AWS global cloud platform. The first-generation privately
hosted platform, which we have not proactively marketed since 2019,
now accounts for only 6% of revenues (2022: 12%) having completed
the migration of customers using this platform for payments to our
AWS platform. This has allowed us to eliminate the need for our PCI
DSS compliance certificate on the old platform and to close our
London private data centre. The remaining customers on this
platform only use the service for telephony services which is
hosted by a third-party partner. Overall, in the year we have seen
an approximate GBP0.5m drop in revenue from closing this platform
for payments but have maintained the overall profit contribution
from the new licences and cost savings.
The EMEA business, the most mature business and based in the UK,
grew revenues to GBP9.96 million, an 18% increase on the prior
year, while the international operations grew revenues 43% year on
year to GBP4.98 million. Revenues from our non-UK customers now
make up 37% (2022: 31%) of the overall Group revenues. We expect
the revenues generated from our international operations to
continue to grow strongly as we further strengthen our position in
the United States and continue our expansion into the ANZ region
and Canada.
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. 86% (2022: 89%) 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 growth is a key leading growth indicator
metric of the Group. Contracts signed in the financial year begin
to be released on a monthly basis into recognised revenue after an
average of 26 weeks (2022: 24 weeks) following contract signature.
Following a strong H2, ACV increased year on year by 20% to GBP4.16
million (2022: GBP3.46 million) positively reflecting the further
development of the Group and its strong partner eco-system, which
made up 77% (2022: 62%) of the value sold in the year.
TACV
TACV is a key indicator of future recurring revenues as it shows
the total value of all customers whether their services have
reached revenue recognition or not. Therefore, TACV provides strong
future revenue visibility which is an attractive aspect of the
Group's business model. TACV at the end of the financial year
increased 23% to GBP16.43 million (2022: GBP13.36 million). Of the
TACV only 14% (2022:22%) is derived from transactional revenues
which is deemed to be recurring in nature. The year on year change
is a result of the majority of sales being recurring in nature,
predominantly license sales, and also a drop in transactional based
revenue from our Gen 1 platform which we have decommissioned, as
discussed above.
This GBP16.43 million of TACV is analysed as follows:
2023 2022
GBP12.58 GBP11.05 Live and delivering monthly revenue
million million
---------------------- --------------------------------------------
GBP3.08 million GBP1.12 million Mid-deployment and therefore expected
to deliver revenues within a few
months
---------------------- --------------------------------------------
GBP0.77 million GBP1.19 million Projects 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
GBP12.58 million.
The jump in mid-deployment contracts to GBP3.08m reflects the
strong new sales performance achieved in H2 of the financial year,
and these contracts are now going through the deployment process,
with revenue expected to be recognised in the current financial
year.
We have seen a GBP0.42 million reduction in the amount of
projects classed as being "on hold". This is testament to our
continuous improvement around project delivery, our increasingly
tight working relationships with our partners, and improvements to
our product suite. Contracts typically go "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 on average to start delivering recurring
recognised revenues.
As with any internationally expanding business, exchange rates
will affect the reporting of Group numbers as assets and sales are
translated into sterling for reporting purposes. During the
financial year, and especially in H2, we saw the US dollar exchange
rate increase from $1.20 to $1.26 which had the effect of
decreasing the sterling value of the US denominated contracts for
TACV purposes by approximately GBP0.3 million. The change also led
to the exchange loss recorded in the Statement of Comprehensive
Income.
Churn and Net Retention
We continue to achieve low levels of customer churn so our gross
retention rate remains strong at 95.4% (2022: 96.9%). In addition,
during the year we agreed to terminate GBP0.14 million (2022:
GBP0.18 million) of contracts prior to them going live due to
changes in circumstances from the original expectations.
In the year we achieved upsells to customers that represented
15% (GBP0.64 million) of the total ACV won. The majority of these
upsells are expansionary upsells where the customer is adding
additional licenses of their current solution, or adding an
additional product to their service, such as PCI Pal Digital.
Upsells are lower year on year, but are within management's
expectations, as in FY22 we benefitted from a number of large
expansionary upsells to several of our largest customers, that were
not likely to be repeated in FY23. As a result the Group's net
revenue retention rate ("NRR") was positive but lower at 103.0%
(2022: 117.7%).
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. 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
-------------- -------------------- ---------------- -------------- --------------
2023
-------------- -------------------- ---------------- -------------- --------------
Profit/(Loss) from
Operating
Activities before
adjusting
items 524 (2,510) (304) (2,562) (4,852)
-------------- -------------------- ---------------- -------------- --------------
Unrealised foreign
exchange
gains/(losses) on
intercompany
trading balances 45 255 25 5 330
-------------- -------------------- ---------------- -------------- --------------
Exceptional items
relating
to patent case costs - 696 - 1286 1,982
-------------- -------------------- ---------------- -------------- --------------
Expenses relating to
Share Options - - - 272 272
-------------- -------------------- ---------------- -------------- --------------
Internal adjusted
operating
profit/(loss) 569 (1,559) (279) (999) (2,268)
-------------- -------------------- ---------------- -------------- --------------
2022
-------------- -------------------- ---------------- -------------- --------------
Profit/(Loss) from
Operating
Activities before
adjusting
items 240 (1,337) (188) (1,779) (3,064)
-------------- -------------------- ---------------- -------------- --------------
Unrealised foreign
exchange
gains/(losses) on
intercompany
trading balances 93 (932) 7 - (832)
-------------- -------------------- ---------------- -------------- --------------
Exceptional items
relating
to patent case costs 37 182 - 578 797
-------------- -------------------- ---------------- -------------- --------------
Expenses relating to
Share Options - - - 246 246
-------------- -------------------- ---------------- -------------- --------------
Internal adjusted
operating
profit/(loss) 370 (2,087) (181) (955) (2,853)
-------------- -------------------- ---------------- -------------- --------------
Change in year 199 527 (98) (43) 585
-------------- -------------------- ---------------- -------------- --------------
(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
-------------- -------------------- ---------------- -------------- --------------
2023
-------------- -------------------- ---------------- -------------- --------------
Internal adjusted
operating
profit/(loss) (from
above) 569 (1,559) (279) (999) (2,268)
-------------- -------------------- ---------------- -------------- --------------
Depreciation and
amortisation 1,154 - 1 - 1,155
-------------- -------------------- ---------------- -------------- --------------
Adjusted EBITDA 1,723 (1,559) (278) (999) (1,113)
-------------- -------------------- ---------------- -------------- --------------
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)
-------------- -------------------- ---------------- -------------- --------------
Change in year 456 451 (97) (43) 767
-------------- -------------------- ---------------- -------------- --------------
EMEA
The EMEA region reported an Adjusted Operating Profit of GBP0.57
million (2022: GBP0.37 million). The region continued to deliver
strong revenue growth of 18% growing to GBP9.96 million (2022:
GBP8.46 million) resulting in an improvement of GBP1.50 million in
Gross Profit at a margin of 82% (2022: 79%).
Administrative costs, before exchange movements and exceptional
items, grew by GBP1.29 million to GBP7.61 million primarily
reflecting a further investment in personnel as we continue to
expand the business and invest in new products.
Depreciation and amortisation costs were GBP1.15 million (2022:
GBP0.90 million) meaning that the EMEA operation recorded an
adjusted EBITDA of GBP1.72 million (2022: profit of GBP1.27
million).
International
North America
The North America region's Adjusted Operating Loss (which
includes the new Canadian operation) decreased by GBP0.53 million
in the year to GBP1.56 million (2022: GBP2.09 million).
Revenue in the region increased by a pleasing 44% to GBP4.75
million resulting in an improvement of GBP1.52 million in Gross
Profit at a margin of 99% (2022: 96%).
Administrative costs, before exchange movements and exceptional
items, grew by GBP1.0 million to GBP6.25 million. The North
American administrative costs primarily consist of salary costs for
the sales, marketing and mostly customer facing employees. The
operational activities for the North America business are provided
by the EMEA business in return for an ongoing royalty payment which
was GBP1.19 million (2022: GBP0.83 million) in the financial
year.
Depreciation and amortisation costs were GBPnil million (2022:
GBP0.08 million) meaning that the North American operation recorded
an adjusted EBITDA loss of GBP1.56 million (2022: GBP2.01
million).
Australia
The Group continued to invest in its operations in Australia,
having opened in the region in the previous financial year and
hired its first employees.
Revenue for the region increased by 65% to GBP0.28 million
(2022: GBP0.17million) reflecting increased business momentum of
the region. However, as the result of the further investment the
region the Adjusted Operating Loss increased to GBP0.28 million
(2022: GBP0.18 million).
Central
Costs for the Central operation primarily relate to the PLC
activities of being a listed company, including the majority of the
employment costs of the Board. The PLC has also funded the costs of
the patent case in the UK.
Further segmental information is shown in Note 10.
Administrative expenses
Total administrative expenses were GBP17.95 million (2022:
GBP13.08 million), an increase of 37%.
The underlying administrative costs can be analysed as
follows:
2023 2022 % Change
GBP000s GBP000s
-------------- -------------- ---------------
Total administrative expenses 17,948 13,077 37%
-------------- -------------- ---------------
Adjust for:
-------------- -------------- ---------------
Exceptional costs incurred
in year relating to the patent
case (1,982) (797)
-------------- -------------- ---------------
Unrealised foreign exchange
gains/(losses) on intercompany
trading balances (330) 832
-------------- -------------- ---------------
Share Option Expense (272) (246)
-------------- -------------- ---------------
Underlying administrative expenses 15,364 12,866 19%
-------------- -------------- ---------------
The underlying increase was therefore GBP2.50 million, of which
GBP2.49 million was from the overall increase in personnel costs in
the Group reflecting the full year costs of those hired in FY22 and
the move from 103 employees to 114 employees at the end of the
financial year.
The cost to run the AWS platform worldwide (including the
development, testing and staging systems) in the year was GBP0.95
million (2022: GBP0.89 million). The cost of the platform
represented only 6.4% (2022: 7.5%) of the revenue recognised in the
year, highlighting the scalability of the AWS platform and the
operational gearing it
can deliver. Depreciation and amortisation increased by GBP0.18 million to GBP1.16 million.
Personnel costs charged to the Statement of Comprehensive Income
(including commission, bonuses, recruitment and travel and
subsistence expenses) were GBP12.04 million (2022: GBP9.55
million), and GBP1.55 million (2022: GBP1.05 million) of the
personnel costs were capitalised as Development costs. These
personnel costs make up 78% (2022: 74%) of the administrative costs
of the business. Travel expenditure increased back to GBP0.54
million (2022: GBP0.34 million) reflecting the increasing scale and
international growth of the business.
The Board has been cognisant of changes in the economic
environment over the last 18 months. There has been noticeable
inflationary pressure on our cost base, for example, on some
underlying software products used as well as additional wage
inflation pressure, over and above that originally expected.
Insurance rates for our industry have increased significantly alone
resulting in an additional GBP0.2m charges per annum. With its
strong revenue growth, the business has been able to absorb many of
these costs to date and still deliver on its expectations of
profitability, but underlying inflationary cost pressures
continue.
Patent case defence costs
On 25 September 2023 the Company announced that it had secured
victory in the High Court against the unfounded patent infringement
claims being made against it. This is an important step in the
overall defence against the claims being made against the
Company.
During the financial year the Group incurred legal and
professional fees and other direct costs relating to the defence of
the patent case totalling an additional GBP1.98 million, of which
GBP1.28m was paid in the financial year.
The US case is continuing and is expected to be heard in the
summer/autumn of 2024.
The patent costs per entity incurred to date and future
estimated are as follows:
Incurred Incurred Total incurred To be incurred Estimated
in prior in current to June in future total cost
year year 2023 of defence
GBP000s GBP000s
GBP000s GBP000s GBP000
PCI-Pal PLC 578 1,286 1,864 150 2,014
PCI-Pal (U.K.)
Ltd 37 - 37 - 37
PCI Pal (U.S.)
Inc 182 696 878 968 1,846
---------- ------------ --------------- --------------- ------------
797 1,982 2,779 1,118 3,897
---------- ------------ --------------- --------------- ------------
Amounts paid
in period 693 1,279 1,972
The direct costs relating to the claim incurred to date have
been disclosed as an exceptional item in the Consolidated Statement
of Comprehensive Income. The estimated GBP1.118 million of future
patent case costs relate to the current estimate to bring the US
claim to court and the finalisation of the UK ruling. The estimate
does not include any costs to be incurred in defending any appeals
nor does it assume that any damages or claimant legal costs will be
paid as we believe the claims are unfounded.
In the UK the Company will be looking to recover the maximum
possible amount of costs possible that we have incurred in
defending the patent claims from the claimant, Sycurio Ltd. The
quantum and timing of such a payment is currently unknown and so
has neither been accrued into these accounts, nor estimated for
disclosure.
Changes in accounting policies
There are no changes in our accounting policies for FY23.
Capital expenditure
As required by IAS 38, the Group capitalised a further GBP1.55
million (2022: GBP1.10 million) of internal 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 (2022: GBP0.05
million) of external contractor work relating to the Group's
internal systems.
Other capital expenditure was GBP0.05 million (2022: GBP0.13
million). Most of this expenditure related to new laptops for the
new and existing employees. As a cloud driven organisation the
Group has no need to invest in hardware for customer
deployments.
Set-up and Professional Services Fees
During the financial year, the Group generated from new
contracts GBP1.41 million (2022: GBP1.41 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 11% to GBP11.82 million (2022:
GBP10.62 million), mostly reflecting the timing of growth in new
business sales and the consequent increase in licence fees invoiced
in advance, and to a lesser extent the continued build-up of
unrecognised set up and professional services fees.
Trade receivables
Trade receivables grew to GBP3.51 million (2022: GBP2.96
million) as the business expanded its customer and 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 2023, GBP0.89 million
(2022: GBP0.67 million) of the outstanding debtors related to newly
signed contracts.
Our debtor collection rates remain within expected average
ranges ending the year with 74% (2022: 78%) of debtors less than 60
days old. The Board does not believe that any of the debts over 60
days old will require to be written off.
Taxation
As at 30 June 2023 the UK entity had not yet received payment
for its R & D tax credit claim for the financial years 2021 and
2022 (2022: GBP0.16 million for financial year 2020). The delay in
settlement of the claims was due to an open enquiry by HMRC. In
October 2023, we received notification from HMRC that they had
approved our claim and we are expecting to receive GBP0.54 million
in due course. The Group will not recognise the tax credit claim in
its accounts until the claim has been received from HMRC. No claim
has yet been made for the financial year ended 30 June 2023.
Cashflow and liquidity
Cash as at 30 June 2023 was GBP1.17 million (2022: GBP4.89
million). The Group therefore used GBP3.72 million (2022: used
GBP2.63 million) of cash.
In the period cash payments of GBP1.28 million net of VAT (2021:
GBP0.69 million) for the legal fees and other direct costs relating
to the patent case were paid. The adjusted net cash spend in the
core business is therefore GBP2.44 million.
I am pleased to report that in the second half of FY23 we
reported positive cash generation of GBP0.22 million, once the
GBP0.93 million spent on the patent case in the half is
excluded.
Cash was boosted in the year by the agreement of one of our US
customers to pay for three years of licence fees in advance.
Banking facility
During the year the Group arranged a GBP3m, multicurrency,
revolving facility with Silicon Valley Bank ("SVB") secured by
legal charges over the assets of the Group. The GBP3m facility
availability to the Company can fluctuate on a month to month basis
as it is subject to the level of assets and liabilities at the time
of drawing. Following the insolvency of SVB the facility has now
been transferred to HSBC. The facility was undrawn at the end of
the financial year. Further details on the loan facility can be
found in Note 21.
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 a resurgence of
the COVID-19 pandemic.
During the year the Group continued to win new contracts,
recording new ACV sales of GBP4.16 million, as well as
substantial growth in its transactional revenues. Customer retention remains high.
The group deployed new customer contracts with an annual
recurring revenue value of GBP2.74 million. At the end of the
financial year the group had GBP12.58 million of deployed, live
contracts contributing to revenue recognition. It also has a
further GBP3.08 million of contracts in current deployment with a
majority that are expected to go live with the next few months
which helps underpin our expectations for revenue growth in FY24.
These recurring contracts provide annual recurring cashflow that
underpins the future of the Group.
With the Group year-end being 30 June, the Group prepared its
next financial year budgets in the April to June 2023 period. The
budget for FY24 was prepared, along with an extended forecast into
FY25, following detailed face-to-face meetings with all managers
with a focus on building on the existing strong performance and on
the product plans and roadmap. The budget includes an assumption of
a more modest rate of expansion of headcount as compared to FY23
and includes the launch of a number of new products.
The Group finished the year with a cash balance of GBP1.17
million and had an undrawn revolving credit facility of up to
GBP3.0m available to assist cashflows as and when required.
The Board considered the prepared budget 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. 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, together with the contingencies that
can be taken if the budget assumptions prove to be materially
inaccurate. The Board is therefore satisfied in the Group's ability
to meets its liabilities as they fall due.
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
8 November 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2023
Note 2023 2022
GBP000s GBP000s
Revenue 14,945 11,937
Cost of sales (1,849) (1,924)
------------------------------ -----------------------
Gross profit 13,096 10,013
Administrative expenses (17,948) (13,077)
------------------------------ -----------------------
Loss from operating activities (4,852) (3,064)
Adjusted Operating Loss (2,598) (2,021)
Expenses relating to share
options (272) (246)
Exceptional items 6 (1,982) (797)
------------------------------------- ----- ------------------------------ -----------------------
Loss from operating activities (4,852) (3,064)
------------------------------------- ----- ------------------------------ -----------------------
Finance income 7 3 1
Finance expenditure 8 (42) (44)
------------------------------ -----------------------
Loss before taxation 5 (4,891) (3,107)
Taxation 12 (1) 164
------------------------------ -----------------------
Loss for the year (4,892) (2,943)
Other comprehensive expense:
Items that will be reclassified
subsequently to profit or
loss
Foreign exchange translation
differences 326 (1,086)
------------------------------ -----------------------
Total other comprehensive
(expense) / income 326 (1,086)
------------------------------ -----------------------
Total comprehensive loss
attributable to equity holders
for the period (4,566) (4,029)
Basic and diluted loss per
share 11 (7.47) p (4.50) p
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Note 2023 2022
GBP000s GBP000s
ASSETS
Non-current assets
Plant and equipment 14 185 238
Intangible assets 13 3,216 2,661
Trade and other receivables 15 1,567 964
Deferred taxation 18 - -
Non-current assets 4,968 3,863
------------ ------------
Current assets
Trade and other receivables 15 5,376 4,203
Cash and cash equivalents 1,169 4,888
------------ ------------
Current assets 6,545 9,091
------------ ------------
Total assets 11,513 12,954
LIABILITIES
Current liabilities
Trade and other payables 16 (11,822) (11,372)
Current liabilities (11,822) (11,372)
------------ ------------
Non-current liabilities
Other payables 17 (3,800) (1,397)
Non-current liabilities (3,800) (1,397)
------------ ------------
Total liabilities (15,622) (12,769)
------------ ------------
Net (liabilities) / assets (4,109) 185
Note 2023 2022
GBP000s GBP000s
EQUITY
Share capital 20 656 656
Share premium 14,281 14,281
Other reserves 922 650
Currency reserves (294) (620)
Profit and loss account (19,674) (14,782)
----------------- ------------
Total (deficit) / equity (4,109) 185
The Board of Directors approved and authorised the issue of the
financial statements on 8 November 2023.
J Barham Director
T W Good Director
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2023
Total
Share capital Share premium Other Profit Currency Equity
reserves and loss Reserves / (deficit)
account
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Balance as at 1
July 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
-------------------- ------------------- ----------- ---------- ---------- ------------
Share option charge - - 272 - - 272
New shares issued
net of costs - - - - - -
Transactions with
owners - - 272 - - 272
Foreign exchange
translation
differences - - - - 326 326
Loss for the year - - - (4,892) - (4,892)
-------------------- ------------------- ----------- ---------- ---------- ------------
Total comprehensive
loss - - - (4,892) 326 (4,566)
-------------------- ------------------- ----------- ---------- ---------- ------------
Balance at 30 June
2023 656 14,281 922 (19,674) (294) (4,109)
-------------------- ------------------- ----------- ---------- ---------- ------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2023
2023 2022
GBP000s GBP000s
Cash flows from operating activities
Loss after taxation (4,892) (2,943)
Adjustments for:
Depreciation of equipment and fixtures 110 85
Amortisation of intangible assets 1,046 888
Loss on disposal of equipment and fixtures - 3
Interest income (3) (1)
Interest expense 5 11
Exchange differences 326 (1,124)
Income taxes 1 (164)
Share based payments 272 246
Increase in trade and other receivables (1,776) (1,438)
Increase in trade and other payables 2,895 2,918
--------------------- ---------
Cash used in operating activities (2,016) (1,519)
Income taxes received (1) 164
Interest paid (5) (11)
--------------------- ---------
Net cash used in operating activities (2,022) (1,366)
--------------------- ---------
Cash flows from investing activities
Purchase of equipment and fixtures (57) (124)
Purchase of intangible assets - (48)
Development expenditure capitalised (1,601) (1,098)
Interest received 3 1
--------------------- ---------
Net cash used in investing activities (1,655) (1,269)
Cash flows from financing activities
Issue of shares - 39
Drawdown on loan facility - -
Repayment of loan facility - -
Principal element of lease payments (42) (34)
Net cash (used in) / generated from
financing activities (42) 5
--------- ---------
Net decrease in cash (3,719) (2,630)
Cash and cash equivalents at beginning
of year 4,888 7,518
Net decrease in cash (3,719) (2,630)
--------- ---------
Cash and cash equivalents at end of
year 1,169 4,888
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2023
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 2023 or 2022, but is derived
from these financial statements. The financial statements for the
year ended 30 June 2022 have been audited and filed with the
Registrar of Companies. The financial statements for the year ended
30 June 2023 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 2023 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 2023 and 2022 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.
The Group's consolidated financial statements (the "financial
statements") of PCI-PAL PLC (the "Company") and its subsidiaries
(together the "Group") for the year ended 30 June 2023 were
authorised for issue by the Board of Directors on 8 November 2023
and the Chief Executive, James Barham, and the Chief Financial
Officer, William Good, signed the balance sheet.
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 parent 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 a number of other amendments and clarifications to IFRS
effective in future years, which are not expected to significantly
impact the Group's consolidated results or financial position.
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 "IFRS's" 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
2023. 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 and a revolving
credit facility with a maximum borrowing of GBP3 million. Cash
balances for the Group were GBP1.17 million at 30 June 2023,
leaving it with GBP4.17 million of available cash finance. The
Group has net current liabilities but GBP11.8 million relate to
deferred income that has been paid by customers in advance and
these sums are not ordinarily recoverable by the customers.
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 global events,
such as the war in Ukraine. In all circumstances the Board are
satisfied mitigations can be taken to react to likely adverse
trends and circumstances to ensure the continues trading of the
Group.
During the year the Group continued to win new contracts,
recording new ACV sales of GBP4.16 million, as well as
substantial growth in its transactional revenues. Customer retention remains high.
The group deployed new customer contracts with an annual
recurring revenue value of GBP2.74 million. At the end of the
financial year the group had GBP12.58 million of deployed, live
contracts contributing to revenue recognition. It also has a
further GBP3.08 million of contracts in current deployment with a
majority that are expected to go live with the next few months
which helps underpin our expectations for revenue growth in FY24.
These recurring contracts provide annual recurring cashflow that
underpins the future of the Group.
An operating budget and cashflow was prepared, along with an
extended forecast to December 24, following detailed face-to-face
meetings with all managers with a focus on building on the existing
strong performance and on the product plans and roadmap. The budget
includes an assumption of a more modest expansion of headcount as
compared to FY23 and the launch of some new products.
The Board considered the prepared budgets 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 to the end of December 2024. 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, together with the contingencies that
can be taken if the budget assumptions prove to be materially
inaccurate. The Board is therefore satisfied in the Group's ability
to meets its liabilities as they fall due.
The Directors therefore have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future (and in any event for at least 12 months
from the date of approval of these financial statements). For these
reasons, the Directors continue to adopt the going concern basis in
preparing the accounts, and so, the financial statements do not
include the adjustments that would be required if the Group and
Company were unable to continue operate as a going concern.
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. These one-off
services 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 earlier of the point the contract goes live or
when the customer takes over the solution for user acceptance
testing, at which point the delivery of the contract is
substantially complete.
(ii) Revenue recognition of the one-off set up fees
Revenue for the one-off set up, professional services and
installation fees is 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
deemed to be 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 determined 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 which is supported
by historical evidence of renewal rates and periods.
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
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 - 33%
Costs relating to any remediation and testing thereof are
expensed.
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 20%
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 under 12 months and
leases of low value assets (less than GBP5,000) are recognised on a
straight-line basis as an expense in the consolidated income
statement.
On 28 May 2020, the IASB issued final amendments to IFRS 16
related to Covid-19 rent concessions for lessees. The amendments
modify the requirements of IFRS 16 to permit lessees to not apply
modification accounting to certain leases where the contractual
terms have been affected due to Covid-19 (e.g. rent holidays or
other rent concessions). The amendments are effective for periods
beginning on or after 1 June 2020, with earlier application
permitted. The Group did not adopt this standard as no such
concessions were applicable.
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.
At the date of each statement of financial position, the parent
company revises its estimate of the number of equity instruments
that are expected to become exercisable. It recognises the impact
of the revision of original estimates, if any, in the income
statement, and a corresponding adjustment is made to equity over
the remaining vesting period. The fair value of the awards and
ultimate expense are not adjusted on a change in market vesting
conditions during the vesting period.
The value of share-based payment is taken directly to reserves
and the charge for the period is recorded in the income statement.
The company's scheme, which awards shares in the parent entity,
includes recipients who are employees in all subsidiaries. In the
consolidated financial statements, the transaction is treated as an
equity-settled share-based payment, as the PCI-PAL has received
services in consideration for equity instruments. An expense is
recognised in the Group income statement for the fair value of
share-based payment over the vesting year, with a credit recognised
in equity.
In the parent company's and subsidiaries' financial statements,
the awards, in proportion to the recipients who are employees in
said subsidiary, are treated as an equity-settled share-based
payment, as the subsidiaries do not have an obligation to settle
the award. An expense for the grant date fair value of the award is
recognised over the vesting year, with a credit recognised in
equity on the subsidiary's accounts. This credit is treated as a
capital contribution. In the parent company's financial statements,
there is no share-based payment charge where the recipients are
employed by a subsidiary, with the parent company recognising an
increase in the investment in its subsidiaries reflecting a capital
contribution from the parent company.
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
2023.
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 2023, 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.
Companies within the Group may be entitled to claim special tax
allowances in relation to qualifying research and development
expenditure (e.g. R & D tax credits). The Group accounts for
such allowances as tax credits which means they are recognised when
it is probable that the benefit will flow to the Group and that the
benefit can be reliably measured. R&D tax credits reduce
current tax expense and, to the extent the amounts are due in
respect of them and not settled by the balance sheet date, reduce
current tax payable.
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 option 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
GBP3,072,000 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.
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 GBP5,677,000 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 HSBC 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 make 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
Intangible assets are separately identified where they are
capable of being separated or divided from the entity and sold,
transferred, licensed, rented or exchanged. Each separately
identified intangible asset is 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. Following the High Court judgement of 25 September 2023 and
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:
2023 2022
GBP000s GBP000s
Disclosure of the audit and non-audit fees
Fees payable to the Group's auditors for:
The audit of Company's accounts 55 37
The audit of the Company's subsidiaries pursuant
to legislation 57 42
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 110 85
Intangible assets 85 85
Capitalised development 961 803
----------------- --------------
1,156 973
Loss on disposal of equipment and fixtures - 3
Rents payable on flexible office space 116 53
Share based payments charge 272 246
Foreign exchange loss/(gain) in period 330 (832)
6. EXCEPTIONAL ITEMS
The exceptional items referred to in the income
statement can be categorised as follows:
2023 2022
GBP000s GBP000s
Direct costs in respect of patent case 1,982 797
----------------- --------------
1,982 797
The exceptional item relates to non-recurring legal fees and
other direct costs 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
2023 2022
GBP000s GBP000s
Bank interest receivable 3 1
------- -------
3 1
8. FINANCE EXPITURE
2023 2022
GBP000s GBP000s
Interest on bank borrowings 5 11
Other bank charges 37 33
------- -------
42 44
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.
2023 2022
GBP000s GBP000s
Wages and salaries 10,034 7,910
Social security costs 965 799
Other pension costs 176 136
---------- ---------
11,175 8,845
Included in the above figures is GBP992,000 (2022: GBP850,000)
of sales commissions earned in the year, 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 GBP698,000 (2022: GBP452,000) has been excluded
from the above disclosure.
Average number of employees during the year: 2023 2022
Heads Heads
Sales and marketing 33 27
Engineering and professional services 62 52
Administration and management 18 14
---------- ---------
113 93
Remuneration in respect of directors was as follows: 2023 2022
GBP000s GBP000s
Emoluments 613 610
Bonus 160 159
Pension contributions to money purchase pension
schemes 26 27
Employer's national insurance and US federal taxes 102 100
---------- ---------
901 896
During the year, 3 (2022: 5) 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:
2023 2022
GBP000s GBP000s
Emoluments 247 212
Bonus 88 94
Pension contributions to money purchase pension
schemes 24 21
------- -------
359 327
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
2023 GBP000s GBP000s GBP000s GBP000s
Revenue 9,964 4,752 229 - 14,945
Cost of sales (1,782) (65) (2) - (1,849)
------------- ------------------ ------------- ------------ -------------
Gross profit 8,182 4,687 227 - 13,096
82% 99% 99% 88%
Administration expenses (8,846) (5,313) (531) (1,276) (15,966)
Inter-company royalty 1,188 (1,188) - - -
Exceptional items - (696) - (1,286) (1,982)
------------- ------------------ ------------- ------------ -------------
Profit / (loss) from
operating activities 524 (2,510) (304) (2,562) (4,852)
Finance income - - - 3 3
Finance costs (32) (9) - (1) (42)
------------- ------------------ ------------- ------------ -------------
Profit / (loss) before
tax 492 (2,519) (304) (2,560) (4,891)
------------- ------------------ ------------- ------------ -------------
Segment assets 8,042 3,091 170 210 11,513
Segment liabilities (7,763) (6,644) (297) (918) (15,622)
Other segment items:
Capital Expenditure
* Equipment, Fixtures & Licence
s 53 2 2 - 57
Capital Expenditure
* Capitalised Development 1,601 - - - 1,601
Depreciation
- Equipment, Fixtures
& Licences 151 - 1 - 152
Depreciation
* Capitalised Development 961 - - - 961
PCI Pal
PCI Pal North America
2022 EMEA GBP000s PCI Pal Central Total
GBP000s ANZ 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 (7,235) (3,486) (358) (1,201) (12,280)
Inter-company royalty 834 (834) - - -
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 & Licen
ces 170 - 2 - 172
Capital Expenditure
* Capitalised Development 1,014 84 - - 1,098
Depreciation
- Equipment, Fixtures
& Licences 135 - - - 135
Depreciation
- Capitalised Development 727 76 - - 803
Revenue can be split by location of customers as follows:
2023 2022
Customer location GBP000s GBP000s
United Kingdom 9,487 8,202
United States of America 4,304 2,872
Canada 394 418
Rest of Europe 496 250
Asia Pacific 264 195
Total 14,945 11,937
100% (2022: 98%) of all non-current assets are located in the
United Kingdom and the largest customer accounted for 16% (2022:
16%) of the revenue of the Group.
11. LOSS PER SHARE
The calculation of the loss per share is based on the loss after
taxation 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
2023 2022
Loss after taxation added to reserves (GBP4,892,000) (GBP2,943,000)
Basic weighted average number of ordinary
shares in issue during the period 65,452,589 65,369,256
Diluted weighted average number of ordinary
shares in issue during the period 73,794,673 72,247,589
Basic and diluted loss per share (7.47) p (4.50) p
There are no separate diluted loss per share calculations shown
as it is considered to be anti-dilutive.
12. TAXATION
2023 2022
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
Foreign corporate taxes paid (1) (1)
---------------------- ---------------
Total current tax (charge) / credit (1) 164
---------------------- ---------------
Deferred tax:
Origination and reversal of timing differences - -
---------------------- ---------------
Total deferred tax charged - -
---------------------- ---------------
Tax on profit on ordinary activities (charged)
/ credited (1) 164
---------------------- ---------------
Factors affecting current tax charge
The tax assessed on the loss on ordinary activities for the year
was higher than the standard rate of corporation tax in the UK of
25% (2022: 19%)
2023 2022
GBP000s GBP000s
Loss on ordinary activities before tax (4,891) (3,107)
Tax on loss on ordinary activities at standard
UK rate of taxation (1,223) (590)
Effects of:
Overseas tax rates 28 (110)
Expenses not deductible for tax purposes 78 61
Adjustments in respect of prior periods
R & D tax credit received - 165
Fixed asset differences (4) (11)
Other permanent differences (1) (10)
Minimum US state taxes paid in year (1) (1)
Origination and reversal of timing differences
on unrecognised deferred tax losses 1,150 550
Effect of change in tax rate (28) 110
Total tax credited for the year (1) 164
---------------------- ---------------
The Group has unrecognised tax losses carried forward of GBP23.1
million (2022: GBP20.6 million).
Approximately 6% of the operating losses related to the Group's
US subsidiary will expire in 2038 if no profits are generated to
offset the loss carry forwards. The remaining losses in the US can
be held indefinitely but can only offset up to 80% of the taxable
profits in any given year.
The R&D tax credit received in 2022 is in respect to the
trading in 2020. No credit has been recognised in relation to
financial years 2021 or 2022 which have now been agreed by HMRC in
the new financial year.
13. INTANGIBLE ASSETS
SIP, RTP
2023 and SBC licences Capitalised
GBP000s Development Total
GBP000s GBP000s
Cost:
At 1 July 2022 427 4,564 4,991
Additions - 1,601 1,601
Foreign exchange movement - - -
At 30 June 2023 427 6,165 6,592
---------- ------------- -------
Amortisation (included
within administrative
expenses):
At 1 July 2022 198 2,132 2,330
Charge for the year 85 961 1,046
Foreign exchange movement - - -
At 30 June 2023 283 3,093 3,376
---------- ------------- -------
Net book amount at 30
June 2023 144 3,072 3,216
SIP, RTP
2022 and SBC Capitalised
Licences Development Total
Cost: GBP000s GBP000s GBP000s
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
14. PLANT AND EQUIPMENT
Right of Fixtures
2023 use Asset and Fittings Computer
GBP000s GBP000s Equipment Total
GBP000s GBP000s
Cost:
At 1 July 2022 128 34 195 357
Additions - - 57 57
Disposals - (7) (12) (19)
-------
At 30 June 2023 128 27 240 395
------- ---------- ----------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2022 21 23 75 119
Charge for the year 43 2 65 110
Disposals - (7) (12) (19)
-------
At 30 June 2023 64 18 128 210
------- ---------- ----------- -------
Net book amount at 30
June 2023 64 9 112 185
Right Fixtures
2022 of use and Computer
Asset Fittings Equipment Total
Cost: GBP000s GBP000s GBP000s GBP000s
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
15. TRADE AND OTHER RECEIVABLES
Due within one year 2023 2022
GBP000s GBP000s
Trade receivables 3,508 2,962
Accrued income 149 45
Deferred costs 739 572
Other prepayments 974 613
Other debtors 6 11
-------------------- --------------
Trade and other receivables due within
one year 5,376 4,203
-------------------- --------------
Due after more than one year 2023 2022
GBP000s GBP000s
Deferred costs 1,464 964
Other prepayments 103 -
-------------------- --------------
Trade and other receivables due after one
year 1,567 964
-------------------- --------------
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:
2023 2022
GBP000s GBP000s
Opening provision at 1 July 1 1
Credited to income (1) -
------- -------
Closing provision at 30 June - 1
------- -------
There are no impaired trade receivables at the reporting dates.
In addition, there are non-impaired trade receivables that are past
due at the reporting date:
2023 2022
GBP000s GBP000s
0-1 month past due 279 242
1-2 months days past due 322 67
Over 2 months past due 332 165
------- -------
933 474
------- -------
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
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
2023 2022
GBP000s GBP000s
Trade payables 1,766 693
Social security and other taxes 350 519
Deferred Income 8,045 9,286
Right of use lease liability 44 42
Accruals 1,617 832
---------------------- -------------
Total current liabilities due within one
year 11,822 11,372
---------------------- -------------
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
2023 2022
GBP000s GBP000s
Deferred Income 3,777 1,330
Right of use lease liability 23 67
Total non-current liabilities due after
one year 3,800 1,397
------- -------
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
2023 2022
GBP000s GBP000s
Balance at 30 June - -
Unprovided deferred tax assets
Non-current assets (370) -
Other short term timing differences 506 -
Equity-settled share options 246 308
Trading losses 5,541 4,911
----------- -----------
5,923 5,219
----------- -----------
The unprovided deferred tax assets are calculated at an average
rate for each country as follows:
UK 25.0% (2022: 25.0%)
USA 24.0% (2022: 23.0%)
Australia 25.0% (2022: 25.0%)
Canada 26.5% (2022: 26.5%)
The deferred tax asset is not recognised as there is
insufficient evidence of future taxable profits against which the
asset will be available for offset.
19. GROUP UNDERTAKINGS
At 30 June 2023, 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 2023 2023 2022 2022
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 65,619,818 656
The Group owns 167,229 (2022: 167,229) shares and these are held
as Treasury Shares.
During the year, the share price fluctuated between 46.0 pence
and 62.5 pence and closed at 53.5 pence on 30 June 2023.
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% of 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 data of issue of the option, and are
accounted using the graded vesting model
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 GBP225,262 (2022: GBP211,747) has been charged
to the statement of comprehensive income 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 GBP46,610 (2021: GBP35,104) has been charged to
the statement of comprehensive income for this financial year.
The analysis of the Company's option activity for the financial
year is as follows:
2023 2022
Weighted Number of Weighted Number of
Average exercise Options Average Options
Price exercise
price
GBP GBP
Options outstanding at
start
of year 0.463 8,146,667 0.397 5,911,667
Options granted during the
year 0.541 755,000 0.613 2,480,000
Options exercised during
the
year - - 0.275 (140,000)
Options forfeited during
the
year 0.490 (320,000) 0.574 (105,000)
Options outstanding at end
of year 0.469 8,581,667 0.463 8,146,667
---------------
Options exercisable at the
end of year 4,040,805 3,886,942
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 2023, the Group had a closing cash balance of
GBP1,169,000 (2021: GBP4,888,000) and borrowings of GBPnil (2022:
GBPnil).
During the year, the Group entered into a multi-currency
revolving loan facility, secured on the assets of the Group by
fixed and floating debentures with appropriate cross guarantees,
with HSBC Innovation Bank (formerly Silicon Valley Bank UK) with a
maximum facility of GBP3 million. The available facility level is
calculated on a monthly basis subject to the limits of the covenant
tests detailed below. The principal terms are as follows:
Term 36 months
Interest rates GBP - 4% over the Bank of England base rate
USD - 0.5% over The Wall Street Journal prime rate
EUR - 5.75% over the European Central Bank's base rate
All interest rates are subject to a minimum rate of 4.5% and are
paid monthly
Arrangement Fee 1.5% of loan facility
Non utilisation fee 1.8% of unutilised amount paid quarterly
Security Fixed and Floating debenture over the assets of the
Group.
Loan advances can be made at any time at the request of the
Group and drawn down in minimum amounts of GBP250,000, $250,000 or
EUR250,000. The facility will be used to support the working
capital requirements of the Group as it continues to grow.
The HSBC facility is subject to three covenant tests, the
summary of which are as follows:
1. AQR covenant
The Adjusted Quick Ratio is the ratio of Quick Assets (Cash and
Billed debtors) to Current Liabilities minus the aggregate of the
current portion of Deferred Revenue plus all amounts outstanding
under the Loan Documents must be greater than 1.40x, except for the
period of Oct 23 to Feb 24 where it must be greater than 1.10x and
the facility is limited to a maximum GBP1 million.
2. EBITDA covenant
The 12 months trailing EBITDA of the Group, before exceptional
items, shall be no worse than an end of quarter target that
increases over time as the Group moves from losses to profit.
3. Advance rate multiplier.
The amounts advanced under the Loan Agreement shall be no more
than A x (B - C), where: A = 3.5; B = 1; C = the Churn Rate, times
by the Monthly Recurring Revenue.
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.
Interest rate risk
The Group has arranged a bank loan with HSBC, as detailed above.
As at 30 June 2023 the loan was undrawn. Interest is calculated at
current rates between and 9.0% and 10.0%, depending on the currency
drawn and is paid monthly. Given the rising interest rates over the
last 12 months, there is an increased interest rate risk but the
current cash flow forecast does not rely heavily on debt borrowing
in the next financial year. For this reason, the Group does not
consider the interest rate risk to be material and so has not
entered into any hedging arrangements.
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.
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% (2022: 16%) of revenues in
the financial year, but this is expected 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 seeks to manage financial risk, to ensure sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. The Group's policy through the period
has been to ensure continuity of funding by equity backed up by
access to a maximum GBP3.0 million multi-currency revolving loan
facility, as detailed above.
The table below summarises the maturity profile of the Group's
financial liabilities at the year-end based on contractual
undiscounted payments, specifically noting that the lease liability
total is determined as the undiscounted lease payments including
interest payable.
At 30 June 2023:
Less than 3 to 12 1 to 5
Group On demand 3 months months years > 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables - 2,116 - - - 2,116
Lease liability - 11 33 23 - 67
- 2,127 33 23 - 2,183
At 30 June 2022:
Less than 3 to 12 1 to 5
Group On demand 3 months months years > 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables - 1,212 - - - 1,212
Lease liability - 11 31 67 - 109
- 1,223 31 67 - 1,321
Foreign currencies and foreign currency risk
During the year, the Group received revenue in GBP, USD, CAD,
EURO and AUD, whilst the majority of its cost base is in GBP and
USD. These currency receipts tend to be used first to cover costs
in the same currency before conversion to other relevant
currencies, and so currency risk impacting cash balances is deemed
to be appropriately managed.
Intercompany loans from PCI-PAL PLC to fund the US operations is
denominated in the US entity in USD and so is translated to GBP
each period end, potentially resulting in significant debits or
credits to the Company's profit and loss but with no cash or other
impact on the Group as the loan is eliminated on consolidation.
Management notes that such foreign exchange movements are non-cash
items. No forward foreign exchange contracts were entered into
during the period (2022: nil).
As at the 30 June 2023 the Group held the following foreign
currency cash balances:
US Dollar $438,359 Sterling equivalent: (2022: GBP478,695)
GBP347,160
Canadian Dollar $84,738 Sterling equivalent: (2022: GBP254,493)
GBP50,608
Australian $65,518 Sterling equivalent: (2022: GBP20,065)
Dollar GBP34,335
Euro EUR28,696 Sterling equivalent: (2022: GBP333,711)
GBP24,755
Total Sterling equivalent: (2022: GBP1,086,964)
GBP456,858
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, although
management will keep the need for sensitivity analysis under
regular review going forward.
22. CAPITAL COMMITMENTS
The Group has no capital commitments at 30 June 2023 or 30 June
2022.
23. CONTINGENT ASSETS
The Group has no contingent assets at 30 June 2023 or 30 June
2022.
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, the Group announced that Semafone Limited
(now renamed Sycurio Limited), one of PCI Pal's direct competitors,
had filed lawsuits in both the UK and the US relating to alleged
patent infringement by PCI Pal concerning one aspect of its Agent
Assist product.
As announced on 25 September 2023, PCI Pal was successful in
comprehensively defeating the unfounded patent infringement suit
being brought in the UK by Sycurio. The High Court judgement was
resoundingly in PCI Pal's favour, with the judge ruling that
Sycurio's patent was invalid due to obviousness from two sources of
prior art. Furthermore, the judge decided that even if the patent
had been valid, PCI Pal's Agent Assist solution did not infringe
the patent and Sycurio also accepted that the variants submitted by
PCI Pal, which were changes it could make to its solution, would
also not have infringed.
Appeals in patent cases are common, no matter the nature of the
ruling, and therefore PCI Pal is ready for an appeal should it be
filed. Given how comprehensive the ruling was in PCI Pal's favour,
the Company remains confident in the High Court Judge's judgment
that Sycurio's patent is invalid due to prior art and that, even if
the patent were valid, PCI Pal's solutions would not infringe.
Given the court outcome, and previous legal advisors' advice,
the directors consider that it is very unlikely, but not
impossible, that an obligation to Sycurio will arise from this
claim. 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 paid,
together with an estimate of the contingent liability for future
legal fees at the year-end is as follows:
Incurred Incurred Total incurred To be incurred Estimated
in prior in current to June in future total cost
year year 2023 GBP000s of defence
GBP000s
GBP000s GBP000s GBP000
PCI-Pal PLC 578 1,286 1,864 150 2,014
PCI-Pal (U.K.)
Ltd 37 - 37 - 37
PCI Pal (U.S.)
Inc 182 696 878 968 1,846
---------- --------------- ------------
797 1,982 2,779 1,118 3,897
---------- --------------- ------------
Amounts paid
in period 693 1,279 1,972
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 directors' standard remuneration there were no
other transactions with directors in the year to June 2023 or June
2022.
27. DIVIDS
The Directors are not proposing a dividend for the financial
year (2022: nil pence per share).
28. SUBSEQUENT EVENTS
The Revolving Credit facility with HSBC has been drawn upon
since the year end.
On 25 September 2023 it was announced that PCI Pal was
successful in comprehensively defeating the unfounded patent
infringement suit being brought in the UK by Sycurio. Further
details can be found in Note 24.
On 10 October 2023 the Company issued 20,000 new shares in
settlement of an exercise of share options.
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 UPGUPGUPWPUR
(END) Dow Jones Newswires
November 09, 2023 02:00 ET (07:00 GMT)
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