TIDMNET
RNS Number : 5331N
Netcall PLC
25 September 2019
25 September 2019
NETCALL PLC
("Netcall", the "Company", or the "Group")
Final Results for the Year Ended 30 June 2019
Strong growth in Cloud services
Netcall plc (AIM: NET), a leading provider of Low-code and
customer engagement software, today announces its audited results
for the year ended 30 June 2019.
Financial Highlights
-- Revenue up 5% to GBP22.9m (2018: GBP21.9m)
-- Cloud and product bookings(1) increased by 62% year over year to GBP10.5m (2018: GBP6.5m)
-- Total annual contract value(2) ('ACV') at 30 June 2019 up 10%
year over year to GBP15.7m (30 June 2018: GBP14.2m)
-- Adjusted EBITDA(3) of GBP3.41m (2018: GBP5.42m) after
increased spending on growth investment
-- Profit before tax increased to GBP0.75m (2018: GBP0.05m)
-- Cash generated from operations of GBP6.84m (2018: GBP2.66m)
-- Group cash at 30 June 2019 was GBP7.77m more than offsetting debt of GBP6.63m
Operational Highlights
-- Low-code solution main driver of customer acquisition and
cross-selling with Cloud orders 260% higher at GBP5.8m
-- Strong growth in commercial, healthcare and government
sectors including two NYSE quoted professional service firms and
Network Rail
-- Unlocking the value of our customer base, with Low-code
cross-sales to date being three times higher ACV than the current
average
-- Strong momentum in transition to cloud, with cloud bookings
exceeding product bookings for the first annual period
Henrik Bang, CEO of Netcall, commented,
"Netcall continued the transition to a cloud business delivering
a strong performance in our key financial metrics of Cloud services
and product bookings and Annual Contract Value. This was led by
significant growth in Low-code order bookings and revenues, which
contributed GBP7.1m of Group revenues, increasing 35% in the
year.
"We have now reached an inflection point, with Cloud services
bookings exceeding product bookings for the first full annual
period. The strategy remains to invest in our Cloud offering
underpinned by a highly profitable, cash generative core
business.
"The Group enters the new year in a healthy financial position,
combining growing recurring revenues with a compelling proposition
in a significant growth market."
(1) Cloud services and product bookings are the total of all new
orders received classified as cloud subscription and support,
product and support contract revenues.
(2) ACV, as of a given date, is the total of the value of each
cloud and support contract divided by the total number of years of
the contract.
(3) Profit before interest, tax, depreciation and amortisation
adjusted to exclude the effects of share-based payments,
acquisition, impairment, contingent consideration and non-recurring
transaction costs.
For further enquiries, please contact:
Netcall plc Tel. +44 (0) 330
333 6100
Henrik Bang, CEO
Michael Jackson, Chairman
James Ormondroyd, Group Finance Director
finnCap Limited (Nominated Adviser and Broker) Tel. +44 (0) 20
7220 0500
Stuart Andrews / James Thompson, Corporate
Finance
Tim Redfern, Corporate Broking
Alma PR Tel. +44 (0) 20
3405 0212
Caroline Forde / Hilary Buchanan / Helena
Bogle
About Netcall plc
Netcall helps organisations transform their customer engagement
activities and enable digital transformation faster and more
efficiently, empowering them to improve customer experiences and
operational efficiencies.
We achieve this by delivering powerful and intuitive software
that addresses the core elements of best-in-class customer
experience and digital process automation. Our industry leading
Liberty platform is a suite of Low-code, customer engagement and
contact centre solutions which empowers business users and IT
developers to collaboratively develop products and systems that
create a leaner, more customer-centric organisation.
Netcall's customers span enterprise, healthcare and government
sectors. These include two-thirds of the NHS Acute Health Trusts,
major telecoms operators such as BT, and leading corporates
including Lloyds Banking Group, ITV and Nationwide Building
Society.
Prior to publication the information communicated in this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No 596/2014 ('MAR') With the publication of this announcement, this
information is now considered to be in the public domain.
Introduction
We continued the transition to a high growth digital cloud
operation, delivering a strong performance in our key financial
metrics of Cloud services bookings and Annual Contract Value
('ACV'). In particular Low-code cloud bookings performed strongly
and as a result we reached an inflection point with Cloud services
bookings exceeding product bookings for the first time on an annual
basis.
The addition of a Low-code offering has raised the profile of
Netcall and given us access to new substantial corporate
opportunities and added significant opportunity for cross-sales to
our existing customers. Overall, Group performance was driven by
the momentum in cloud sales and the transition to a recurring
revenue model. The growth in bookings and ACV came through a
combination of new customer wins and cross-sales of our expanded
product suite. Low-code cloud bookings were derived from a broad
range of orders, including two new cloud contracts worth a combined
GBP2.8m with a three and four year duration respectively. In the
year, our Low-code solutions represented GBP7.1m of Group revenues,
increasing 35% in the year (2018: GBP5.2m).
The business model is underpinned by our highly profitable and
cash generative premise-based business. In the year we continued to
see growth in our maintenance and support revenues despite a
decline in product sales as customers increasingly adopt recurring
models. The profits and cash generation provided us with the
ability to accelerate investment to benefit from the growing demand
we are experiencing and provide a more compelling and
differentiated proposition.
Current trading and outlook
We have entered the new financial year with a strong sales
pipeline, growing recurring revenue base and have secured
significant new customer wins. The Board continues to monitor the
potential impact of the political environment and business
confidence on the timing of larger enterprise and product sale
contracts. With a healthy financial position and continuing
investment in our business and people, the Board remains confident
in the prospects of the Group.
Business Review
The ongoing shifts in consumer demand and expectations when
interacting with organisations significantly changes the
requirements on how organisations are expected to engage with their
customers. At the same time technological advances enable an
unprecedented digitalisation of business operations. Together these
megatrends pose both great opportunities and risks for
businesses.
Many enterprises are struggling to address these changes. They
are challenged by inflexible legacy systems which are disruptive
and expensive to change; undocumented and shadow processes; and a
lack of resources. This leads to IT teams maintaining key existing
systems and not addressing the chronic problems of poor customer
experience or being able to capitalise on the improvements and
savings from digitalisation.
Our purpose is to help organisations transform their customer
engagement activities and enable digital transformation faster and
more efficiently, empowering them to improve customer experiences
and operational efficiencies.
We achieve this by delivering powerful and intuitive software
that addresses the core elements of best-in-class customer
experience and digital process automation. Our industry leading
Liberty platform is a suite of Low-code, customer engagement and
contact centre solutions, which empowers business users and IT
developers to collaboratively develop products and systems that
create a leaner, more customer-centric organisation.
The addressable market opportunity for these solutions is large
and growing rapidly.
The Group's organic growth strategy focuses on four pillars:
-- growth through a land and expand model;
-- expansion of our customer base;
-- continued innovation and enhancement of our platform; and,
-- growing our partner base.
During the year we invested approximately GBP2m across the
organisation to support our strategies. The strategic focus
resulted in substantial booking growth in commercial, healthcare
and government market sectors.
In addition to the Group's focused organic strategy, the Board
continues to look for selective acquisitions with complementary
proprietary software and/or additional customers in our target
markets.
Growth through a land and expand model
Many of our customers initially purchase an entry level solution
with the objective of rolling out further applications and
deploying the solutions more widely to support their future
customer engagement and digital transformation initiatives. This
combined with continuously enhancing our product portfolio,
provides significant cross- and up-sale opportunities in three
areas:
-- Low-code solutions represent the largest opportunity as our
existing customers digitise and modernise their operations enabling
them to further leverage their existing Liberty estate;
-- transition of our premise-based customers to cloud. This
opportunity is in its infancy where we see a small and growing
number of customers considering transitioning their Liberty estate
to a cloud model; and,
-- on-going upgrades and addition of modules to the Liberty
platform as customers expand the use of the platform and we release
new features and modules.
To facilitate cross-sales and accelerate implementations we are
also providing several pre-built applications and modules via our
AppShare which supplement the existing Liberty applications used by
our customers. This includes Citizen Hub which is a suite of local
government business processes and citizen portals that integrate
with our customer engagement solutions.
The average annual contract value of the initial Low-code
cross-sales has to date been approximately three times higher than
the historic average of the Netcall customer base. This gives an
early indication of the potential value of Low-code sales into the
existing customer base.
Cloud and product bookings from existing customers increased by
30% to GBP6.3m (2018: GBP4.8m) driven by cross-sales of Low-code
and Cloud contact centre solutions. Wins include orders worth
approximately GBP1.4m from healthcare and government customers for
our new cloud patient communication and Citizen Hub solutions.
Cumbria County Council - digital transformation programme
Cumbria County Council, a user of our contact centre solution,
is also using our Low-code based Citizen Hub framework to transform
services and deliver better outcomes for citizens. The council has
created a team of internal builders who are developing for the
council and have several live apps including Waste Permits, Blue
Badge and Skips & Scaffolding permits. The full end to end
Waste Permits application took four weeks to launch. The complete
Blue Badge application, including integrations, was launched after
fourteen weeks. The council is one of several customers who are
active in our Community and use AppShare to up- and download
content, achieving results faster and helping others.
Expansion of our customer base
We target organisations with large numbers of customers or
employees and, in many cases, subject to a high level of
regulations. This includes financial services, healthcare and
government sectors where we currently have a strong market
presence.
Cloud and product bookings from new customers increased by 157%
to GBP4.2m (2018: GBP1.6m) driven by sales of Low-code
solutions.
Network Rail: Accelerating change using Low-code
One of the new Low-code customers secured in the year was a
contract with Network Rail to help drive digital transformation
faster across the organisation. The key three business challenges
that Network Rail faced were scalability of people and skills,
business demand pressure, and poor experience versus the cost of
updating or replacing legacy IT. Key criteria for Network Rail were
proof that the IT could actually deliver results and that the
technology could stand up in such a safety critical organisation.
In just a few months, a number of business problems had been
automated and driven forward by the business users affected. Rather
than becoming a problem for IT to solve, they solved the problems
themselves, quickly, using Low-code.
Continued innovation and enhancement of our platform
We continue to invest in strengthening our Liberty platform. The
main focus is on expanding the functionality available to our
customers and enhancing integration of our solutions.
Our Liberty suite covers three integrated solution areas:
-- Low-code which enables the creation of apps that drives
workflows and business processes with integration to our
communication services as well as back-end systems.
-- Omnichannel contact center for customer engagement which also
includes solutions like speech bots, switchboard and auto
attendant.
-- Conversational messaging platform enabling customers to
extend their reach using digital channels like Facebook Messenger
and Twitter as well as benefit from bots and automation.
Digital business processes implemented on the Group's Low-code
platform can seamlessly drive customer journeys with integrated
customer interactions such as Facebook, Twitter, bots, chat, SMS or
contact centre. With the platform's rich API capabilities these
journeys can integrate with other systems, holding information
required to deliver a smooth experience for customers and thereby
retrieving or updating data critical for record management and
back-end systems.
Growing our partner base
During the year, we have increased our engagement with several
partners including global organisations that provide opportunity to
access to new markets and scale our business opportunity faster.
The objective is to develop an eco-system of partners who bring a
combination of industry specific subject matter expertise together
with service delivery and support capabilities. In addition to
supporting our delivery of customer projects, partners support new
customer acquisition by leveraging their capabilities and
relationships. This will scale our ability to deliver solutions and
generate additional license revenue as partners support customers.
Partners can also gain significant advantages by using the speed
and flexibility of our Low-code platform by rapidly building
solutions for their customers and thereby creating new revenues for
their businesses.
We have seen expansion of our partner network in the year, who
combined now employ more trained Low-code builders than we have
within our own organisation.
Partner development of regulated process application within
pharma industry
One example is an international life science consultancy which
is using a Low-code based business process solution to manage
regulatory submissions on behalf of its global customer. The
solution is being built by an India-based partner and will deliver
a specialised business process application integrated with the
healthcare provider's pharma CRM system. The solution, built in
less than twelve weeks, streamlines and automates a complex and
highly regulated business process providing higher visibility and
cost savings for both organisations. The partner believes the
application can be replicated for other opportunities within the
pharma sector.
Financial Review
Group revenue increased 5% to GBP22.9m (FY18: GBP21.9m) of which
Low-code solutions now represent GBP7.1m of Group revenues,
increasing 35% in the year.
The Group's revenue comprises the following components,
reflecting the movement of the business towards primarily a
provider of Cloud based software and services:
-- Cloud services: revenue subscription and usage fees of our cloud-based offerings.
-- Product support contracts: provision of software updates,
system monitoring and technical support services for our
products.
-- Communications services: fees for telephony and messaging services.
-- Product revenues: predominantly software license sales with supporting hardware.
-- Professional services: consultancy, implementation and training services.
As set out in this year's Interim Report, the Board has, for a
number of years, measured trading performance using indicators such
as: revenue, EBITDA, and operating cash flow. In addition, the
Group also reports Cloud and product bookings and ACV. These
metrics measure sales momentum and give a leading indicator on
future revenue.
Cloud and product bookings (the total of all new orders received
classified as cloud services subscription and support, product and
support contract revenues) increased by 62% year over year to
GBP10.5m, of which Low-code rose 272% to GBP6.0m.
As a result, revenue from Cloud services, which are a key
strategic focus, have grown strongly and increased by 34% to
GBP5.74m (FY18: GBP4.29m).
Total Low-code ACV as at 30 June 2019 increased by 36% year over
year to GBP4.5m (30 June 18: GBP3.3m). In the two years of
acquisition of the Low-code platform the Group has increased the
Low-code ACV by 59%.
Total ACV increased by 10% year over year to GBP15.7m (30 June
2018: GBP14.2m). ACV, as of a given date, is the total of the value
of each cloud and support contract divided by the total number of
years of the contract.
Product support contract revenue increased by 4% to GBP9.25m
(FY18: GBP8.93m) reflecting high contract retention combined with
the contribution of new product sales and price rises.
Communications services revenue was GBP1.81m (FY18: GBP2.27m)
due to lower usage of call-back services in the period by a
partner.
Product sales, whilst improved over the first half of the year,
were impacted by purchasing delays within the NHS coupled with
public sector customers ordering the Group's newly launched
Low-code cloud offerings. As a result, product revenue was lower at
GBP2.29m (FY18: GBP3.06m).
Professional services revenues increased 15% to GBP3.82m (FY18:
GBP3.33m) due to implementation services increasing in line with
new sales of cloud solutions.
Gross profit margin was maintained at 90% (FY18: 90%).
Administrative expenses, before depreciation, amortisation,
impairment, share-based payments and acquisition related items
increased to GBP17.1m (FY18: GBP14.3m) which is in line with
expectations following the previously announced investment
programme. Investments have mainly been made in expanding sales and
marketing and professional services teams to deliver implementation
services for the growing cloud solutions and our own digital
business operation to support a larger and growing
organisation.
Consequently, the Group adjusted EBITDA was GBP3.41m (FY18:
GBP5.42m), a margin of 15% of revenue (FY18: 25%).
Profit before tax increased to GBP0.75m (FY18: GBP0.05m) after
taking into account acquisition related items and interest on
borrowings taken out to fund the acquisition of MatsSoft in August
2017.
The Group tax charge of GBP0.14m (FY18: GBP0.09m credit)
represents an underlying effective rate of tax of 10% (FY18: 3%
credit) on adjusted profit before tax. The underlying effective
rate of tax is lower than the headline rate of corporation tax due
to deductions for R&D expenditure.
Diluted earnings per share increased by 355% to 0.41 pence
(FY18: 0.09 pence) and was 0.76 pence on an adjusted basis (FY18:
2.04 pence).
Cash generated from operations before non-recurring transaction
cost payments increased by 100% to GBP6.84m (FY18: GBP3.42m), a
conversion of 200% (FY18: 63%) of adjusted EBITDA. The increase is
primarily due to the timing of credit sales and significant
MatsSoft contract renewals falling in the period before acquisition
which created large receivables in the prior year paid in the
current year.
Spending on research and development, including capitalised
software development, was GBP3.21m (FY18: GBP3.66m) of which
capitalised software expenditure was GBP1.53m (FY18: GBP1.76m).
Total capital expenditure was GBP2.96m (FY18: GBP2.07m); the
balance after capitalised development, being GBP1.43m (FY18:
GBP0.31m) was mainly office fit out, IT equipment and software.
The Company acquired MatsSoft Limited in August 2017. The
purchase agreement provided for potential further cash and share to
be paid dependent on achieving specified performance targets over
various periods from completion of the acquisition. During the
period the Company paid GBP0.59m in cash under this arrangement. At
30 June 2019 the fair value of the remaining contingent
consideration was re-estimated at a lower amount of GBP1.68m
resulting in GBP0.87m being credited to the income statement as a
change in estimate.
To support the acquisition, the Company issued a GBP7m Loan
Note. Loan Note interest payments in the period totalled GBP0.59m
(FY18: GBP0.36m). See note 7 for further information.
As a result of these factors, net cash was GBP1.14m at 30 June
2019 (30 June 2018: GBP0.74m net debt).
Dividend policy
In line with the Company's dividend policy to pay-out 25% of
adjusted earnings per share, the Board intends to declare a final
dividend for this financial year of 0.20p.
Audited consolidated income statement for the year ended 30 June
2019
2019 2018
GBP000 GBP000
-------------------------------------------------- --------- ---------
Revenue 22,903 21,875
Cost of sales (2,329) (2,143)
Gross profit 20,574 19,732
Administrative expenses (19,058) (18,961)
Other income - 23
Other gains/(losses) - net (11) (12)
--------------------------------------------------- --------- ---------
Adjusted EBITDA 3,411 5,421
Depreciation (310) (252)
Net loss on disposal of property, plant
and equipment (2) -
Impairment charge on intangible assets
(see note 4) - (792)
Amortisation of acquired intangible
assets (512) (547)
Amortisation of other intangible assets (1,120) (1,119)
Non-recurring transaction costs (see
note 4) - (464)
Change in fair value of contingent consideration
(see note 4) 865 -
Post-completion services (see note 4) (244) (464)
Share-based payments (583) (1,001)
--------------------------------------------------- --------- ---------
Operating profit 1,505 782
Finance income 41 29
Finance costs (794) (766)
--------------------------------------------------- --------- ---------
Finance costs/ (income) - net (753) (737)
Profit before tax 752 45
Tax (charge)/ credit (142) 91
--------------------------------------------------- --------- ---------
Profit for the year 610 136
=================================================== ========= =========
Earnings per share - pence
Basic 0.43 0.10
Diluted 0.41 0.09
=================================================== ========= =========
All activities of the Group in the current and prior periods are
classed as continuing. All of the profit for the period is
attributable to the shareholders of Netcall plc.
Audited consolidated statement of comprehensive income for the
year ended 30 June 2019
2018
2019 Restated
GBP000 GBP000
----------------------------------------------------- ------- -----------
Profit for the year 610 136
Other comprehensive income
Items that may be reclassified to profit
or loss
Exchange differences arising on translation
of foreign operations (17) (5)
Items that will not be reclassified to
profit or loss
Changes in the fair value of equity investments
at fair value through other comprehensive
income - (216)
------------------------------------------------------ ------- -----------
Total other comprehensive income for the
year (17) (221)
------------------------------------------------------ ------- -----------
Total comprehensive income for the year 593 (85)
====================================================== ======= ===========
All of the comprehensive income for the year is attributable to
the shareholders of Netcall plc.
Audited consolidated balance sheet at 30 June 2019
2019 2018 2017
Restated Restated
GBP000 GBP000 GBP000
------------------------------------------ ------- ----------- -----------
Assets
Non-current assets
Property, plant and equipment 1,210 445 473
Intangible assets 29,188 28,938 11,444
Deferred tax asset 501 584 505
Financial assets at fair value through
other comprehensive income 72 72 288
Total non-current assets 30,971 30,039 12,710
------------------------------------------ ------- ----------- -----------
Current assets
Inventories 165 215 334
Other current assets 1,314 1,077 787
Contract assets 1,178 1,437 1,055
Trade receivables 3,864 6,078 2,561
Other financial assets at amortised cost 100 117 28
Current tax asset - - 11
Cash and cash equivalents 7,769 5,779 12,724
------------------------------------------ ------- ----------- -----------
Total current assets 14,390 14,703 17,500
------------------------------------------ ------- ----------- -----------
Total assets 45,361 44,742 44,958
------------------------------------------ ------- ----------- -----------
Liabilities
Non-current liabilities
Other payables - 925 -
Contract liabilities 207 488 114
Borrowings 6,632 6,518 -
Deferred tax liabilities 851 754 294
Provisions 77 44 112
------------------------------------------ ------- ----------- -----------
Total non-current liabilities 7,767 8,729 530
------------------------------------------ ------- ----------- -----------
Current liabilities
Trade and other payables 5,265 5,095 2,508
Contract liabilities 10,395 9,302 6,166
Provisions - 128 -
Total current liabilities 15,660 14,525 8,674
------------------------------------------ ------- ----------- -----------
Total liabilities 23,427 23,254 9,204
------------------------------------------ ------- ----------- -----------
Net assets 21,934 21,488 21,006
========================================== ======= =========== ===========
Equity attributable to owners of the
Parent Company
Share capital 7,259 7,242 7,054
Share premium 3,015 3,015 3,015
Other equity 4,832 4,832 2,697
Other reserves 4,440 3,917 2,854
Retained earnings 2,388 2,482 4,386
------------------------------------------ ------- ----------- -----------
Total equity 21,934 21,488 21,006
========================================== ======= =========== ===========
Audited consolidated statement of cash flows for the year ended
30 June 2019
2019 2018
GBP000 GBP000
----------------------------------------------- -------- ---------
Cash flows from operating activities
Profit before income tax 752 45
Adjustments for:
Depreciation and amortisation 1,942 1,918
Impairment of intangible assets - 792
Loss on disposal of property, plant
and equipment 2 -
Share-based payments 583 1,001
Net finance costs/ (income) - net 753 737
Changes in operating assets and liabilities,
net of effects from purchasing of subsidiary
undertaking:
Decrease in inventories 51 118
Decrease/ (increase) in trade receivables 2,216 (2,575)
Decrease/ (increase) in contract assets 252 (377)
Increase in other financial assets at
amortised cost 24 74
Increase in other current assets (257) (194)
Decrease in trade and other payables (242) (900)
Increase in contract liabilities 862 1,675
(Decrease)/ increase in provisions (95) 341
------------------------------------------------ -------- ---------
Cash flows from operations 6,843 2,655
------------------------------------------------ -------- ---------
Analysed as:
Cash generated from operations before
payment of non-recurring transaction
costs 6,843 3,420
Non-recurring transaction costs payment - (765)
------------------------------------------------ -------- ---------
Interest received 41 29
Interest paid (4) (7)
Income tax refunded - 11
Net cash inflow from operating activities 6,880 2,688
------------------------------------------------ -------- ---------
Cash flows from investing activities
Payment for acquisition of subsidiary,
net of cash acquired (591) (10,974)
Purchase of property, plant and equipment (1,078) (171)
Payment of software development costs (1,532) (1,764)
Purchase of other intangible assets (350) (137)
Proceeds from sale of property, plant
and equipment 1 -
Net cash (outflow) from investing activities (3,550) (13,046)
------------------------------------------------ -------- ---------
Cash flows from financing activities
Proceeds from issues of ordinary shares 16 9
Proceeds from borrowings - 7,000
Interest paid on Loan Notes (590) (471)
Dividends paid to Company's shareholders (758) (3,117)
------------------------------------------------ -------- ---------
Net cash (outflow)/ inflow from financing
activities (1,332) 3,421
------------------------------------------------ -------- ---------
Net increase/ (decrease) in cash and
cash equivalents 1,998 (6,937)
Cash and cash equivalents at beginning
of the period 5,779 12,724
Effects of exchange rate on cash and
cash equivalents (8) (8)
================================================ ======== =========
Cash and cash equivalents at end of
period 7,769 5,779
================================================ ======== =========
Audited consolidated statement of changes in equity at 30 June
2019
Share Share Other Other Retained
capital premium equity reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at
30 June 2017 7,054 3,015 2,697 2,854 5,386 21,006
----------------------------------- --------- --------- -------- ---------- ---------- --------
Issue of ordinary shares
as consideration for acquisition
of a business combination 175 - 2,135 - - 2,310
Proceeds from share issue 9 - - - - 9
Increase in equity reserve
in relation to options
issued - - - 1,364 - 1,364
Tax debit relating to
share options - - - 1 - 1
Reclassification following
exercise or lapse of options 4 - - (81) 77 -
Dividends to equity holders
of the Company - - - - (3,117) (3,117)
----------------------------------- --------- --------- -------- ---------- ---------- --------
Transactions with owners 188 - 2,135 1,284 (3,040) 567
----------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the year - - - - 136 136
Other comprehensive income
for the year - restated - - - (221) - (221)
----------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the year -
restated - - - (221) 136 (85)
----------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at
30 June 2018 - restated 7,242 3,015 4,832 3,917 2,482 21,488
----------------------------------- --------- --------- -------- ---------- ---------- --------
Proceeds from share issue 16 - - - - 16
Increase in equity reserve
in relation to options
issued - - - 633 - 633
Tax debit relating to
share options - - - (38) - (38)
Reclassification following
exercise or lapse of options 1 - - (55) 54 -
Dividends to equity holders
of the Company - - - - (758) (758)
----------------------------------- --------- --------- -------- ---------- ---------- --------
Transactions with owners 17 - - 540 (704) (147)
----------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the year - - - - 610 610
Other comprehensive income
for the year - - - (17) - (17)
----------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the year - - - (17) 610 593
----------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at
30 June 2019 7,259 3,015 4,832 4,440 2,388 21,934
----------------------------------- --------- --------- -------- ---------- ---------- --------
Notes to the financial information for the year ended 30 June
2019
1. General information
Netcall plc (AIM: "NET", "Netcall", or the "Company"), is a
leading provider of customer engagement software, is a limited
liability company and is quoted on AIM (a market of the London
Stock Exchange). The Company's registered address is 1st Floor,
Building 2, Peoplebuilding Estate, Maylands Avenue, Hemel
Hempstead, Hertfordshire, HP2 4NW and the Company's registered
number is 01812912.
2. Basis of preparation
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the 'Group').
The financial information set out in these preliminary results
has been prepared in accordance with International Financial
Reporting Standards ('IFRSs') as adopted by the European Union. The
accounting policies adopted in this results announcement have been
consistently applied to all the years presented and are consistent
with the policies used in the preparation of the statutory accounts
for the period ended 30 June 2019 as updated for new standards and
interpretations effective from 1 July 2018. The Group has applied
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers for the first time. Details on each are set out
below:
IFRS 9 Financial Instruments
The Group has adopted IFRS 9 Financial Instruments with a date
of initial application of 1 July 2018. IFRS 9 replaces IAS 39 and
impacts upon the classification and measurement of financial
instruments and requires certain additional disclosures. The only
change on adoption of IFRS 9 was to record a change in the fair
value of the Group's investment in Macranet through other
comprehensive income in 2018 as further described below. The
following areas were identified as the main items of interest to
the Group:
-- Credit losses: IFRS 9 replaced the existing incurred loss
model with a forward looking expected credit loss model. The
expected credit losses on these trade receivable and contract
assets are estimated using a single-loss rate based on the Group's
historical credit loss experience, adjusted for management
judgement concerning factors that are specific to the receivables,
general economic conditions and assessment of the current as well
as the forecast direction of conditions at the reporting date based
on reasonable and supportable information that is available,
without undue cost or effort to obtain. Due to the exemption in
IFRS 9, there is no requirement to restate comparative periods in
the year of initial application and as a consequence, any
adjustments to the carrying amounts of financial assets or
liabilities are to be recognised at 1 July 2018. The change from an
incurred loss model under IAS 39 to an expected loss model has not
had a material impact and no adjustment is required at 1 July
2018.
-- Available-for-sale financial assets: The classification of
financial assets as 'available-for-sale' no longer exists under
IFRS 9. In the prior financial year, the Group had designated
equity investments as available-for-sale where management intended
to hold them for the medium to long-term. The Group has irrevocably
elected to reclassify equity securities, which are not held for
trading, as financial assets at fair value through other
comprehensive income. The investment is in Macranet Ltd (a provider
of social media engagement solutions) which had a historic cost of
GBP0.29m. The fair value measurement is classified as level 3 in
the hierarchy as there is no observable market data. The Company is
a minority investor alongside Draper Esprit VCT plc a quoted
venture capital trust. They have established fair value using the
Private Equity and Venture Capital Guidelines. In line with this
valuation the Company has recognised a change in the fair value of
the investment of GBP0.22m in the prior year through other
comprehensive income.
IFRS 15 Revenue from Contracts with Customers
The Group has adopted IFRS 15 Revenue from Contracts with
Customers from 1 July 2018 on a retrospective basis. IFRS 15
replaced all existing revenue recognition requirements in IFRS and
sets out a comprehensive framework for determining whether, when
and how much revenue to recognise. The Group has completed its
assessment of IFRS 15 and has not identified any material
differences between the requirements of IFRS 15 and the Group's
previous revenue recognition policy. Accordingly no financial
restatement has been made. Revenue is only recognised when (or as)
control of goods or services passes to the customer, in accordance
with when distinct performance obligations are met, and at the
amount to which the Group expects to be entitled. The Group has
voluntarily changed the presentation of certain amounts in the
balance sheet to reflect the terminology of IFRS 15 including the
comparative amounts:
-- Contract assets were previously presented as part of trade
and other receivables (GBP1.44m as at 30 June 2018; GBP1.06m as at
1 July 2017).
-- Contract liabilities previously included in deferred income
(GBP9.79m as at 30 June 2018; GBP6.28m as at 1 July 2017).
The consolidated financial information is presented in sterling
(GBP), which is the company's functional and the Group's
presentation currency.
The financial information set out in these results does not
constitute the company's statutory accounts for 2019 or 2018.
Statutory accounts for the years ended 30 June 2019 and 30 June
2018 have been reported on by the Independent Auditors; their
report was (i) unqualified; (ii) did not draw attention to any
matters by way of emphasis; and (iii) did not contain a statement
under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 30 June 2018 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 30 June 2018 will be delivered to the Registrar in
due course. Copies of the Annual Report 2019 will be posted to
shareholders on or about 25 October 2019. Further copies of this
announcement can be downloaded from the website
www.netcall.com.
3. Segmental analysis
Management consider that there is one operating business segment
being the design, development, sale and support of software
products and services, which is consistent with the information
reviewed by the Board when making strategic decisions. Resources
are reviewed on the basis of the whole of the business
performance.
The key segmental measure is adjusted EBITDA which is profit
before interest, tax, depreciation, amortisation, share-based
payments, non-recurring transaction costs, which is set out on the
consolidated income statement.
4. Material profit or loss items
The Group identified a number of items which are material due to
the significance of their nature and/or their amount. These are
listed separately here to provide a better understanding of the
financial performance of the Group.
2019 2018
GBP000 GBP000
----------------------------------------------------- ------- --------
Impairment charge on intangible assets(1) - (792)
Non-recurring transaction costs(2) - (464)
Change in fair value of contingent consideration(3) 865 -
Post completion services expense(4) (244) (464)
621 (1,720)
----------------------------------------------------- ------- --------
(1) Following the acquisition of MatsSoft Limited in August 2017
management undertook a review of its enlarged product portfolio.
The review concluded that the Group would market Citizen Hub, built
on MatsSoft's Low-cloud platform instead of its CXM product. As a
result of this decision the carrying value of GBP0.79m of
internally generated software assets relating to CXM, included
within intangible assets, was written down to GBPnil in the prior
period. The impairment charge was included in 'administrative
expenses' in the income statement.
(2) In 2017 the Company incurred professional advisor fees
GBP0.46m in connection with the acquisition of MatsSoft Ltd. These
costs are included in 'administrative expenses'. The Company paid
GBP0.76m in 2018 in relation to these expenses and related amounts
included in trade and other payables on 1 July 2017.
(3) The purchase of MatsSoft Ltd included a contingent
consideration arrangement based on certain performance obligations.
These were initially recorded at fair value, which is the present
value of the expected payments. At the year-end the estimates of
achieving the performance obligations were reassessed. This
resulted in a reduction in the fair value of the contingent
consideration liability with a corresponding credit to the income
statement of GBP0.87m.
(4) A number of former owners of MatsSoft Ltd continued to work
in the business following its acquisition and in accordance with
IFRS 3 a proportion of the contingent consideration arrangement is
treated as remuneration and expensed in the income statement
5. Earnings per share
The basic earnings per share is calculated by dividing the net
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
year, excluding those held in treasury.
30 June 30 June
2019 2018
---------------------------------------------------- -------- --------
Net earnings attributable to ordinary shareholders
(GBP000) 610 136
Weighted average number of ordinary shares
in issue (thousands) 143,038 142,460
---------------------------------------------------- -------- --------
Basic earnings per share (pence) 0.43 0.10
---------------------------------------------------- -------- --------
The diluted earnings per share has been calculated by dividing
the net profit attributable to ordinary shareholders by the
weighted average number of shares in issue during the year,
adjusted for potentially dilutive shares that are not
anti-dilutive.
30 June 30 June
2019 2018
----------------------------------------------- -------- --------
Weighted average number of ordinary shares
in issue (thousands) 143,038 142,460
Adjustments for share options 6,085 4,901
Weighted average number of potential ordinary
shares in issue (thousands) 149,123 147,361
----------------------------------------------- -------- --------
Diluted earnings per share (pence) 0.41 0.09
----------------------------------------------- -------- --------
Adjusted earnings per share have been calculated to exclude the
effect of acquisition, contingent consideration and reorganisation
costs, share-based payment charges, amortisation of acquired
intangible assets and with a normalised rate of tax. The Board
believes this gives a better view of on-going maintainable
earnings. The table below sets out a reconciliation of the earnings
used for the calculation of earnings per share to that used in the
calculation of adjusted earnings per share:
GBP'000s 30 June 2019 30 June 2018
--------------------------------------------------------------- ------------- -------------
Profit used for calculation of basic and diluted EPS 610 136
Non-recurring transaction costs (see note 4) - 464
Change in fair value of contingent consideration (see note 4) (865) -
Share-based payments 583 1,001
Post completion services (see note 4) 244 464
Amortisation of acquired intangible assets 512 547
Impairment charge on intangible fixed assets (see note 4) - 792
Unwinding of discount - contingent consideration & borrowings 181 208
Tax effect of adjustments (125) (613)
Profit used for calculation of adjusted basic and diluted EPS 1,140 2,999
--------------------------------------------------------------- ------------- -------------
30 June 30 June
2019 2018
--------------------------------------------- -------- --------
Adjusted basic earnings per share (pence) 0.80 2.11
Adjusted diluted earnings per share (pence) 0.76 2.04
--------------------------------------------- -------- --------
6. Dividends
Statement of changes June 2019 balance
Cash flow statement in equity sheet
Year to June 2019 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
Final ordinary
dividend for the
year to June 2018 6/2/19 0.53p 758 758 -
758 758 -
------------------------------- ---------------- -------------------- --------------------- ---------------------
Statement of changes June 2018 balance
Cash flow statement in equity sheet
Year to June 2018 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
--------------------- --------- ---------------- -------------------- --------------------- ---------------------
Interim enhanced
dividend for year
to June 2017 27/7/17 1.05p 1,461 1,461 -
Final ordinary
dividend for the
year to June 2017 12/1/18 1.16p 1,656 1,656 -
3,117 3,117 -
------------------------------- ---------------- -------------------- --------------------- ---------------------
It is intended that this year's final ordinary dividend of 0.20
pence per share will be paid to shareholders on 5 February 2020.
Netcall plc shares will trade ex-dividend from 19 December 2019 and
the record date will be 20 December 2019. The estimated amount
payable is GBP0.29 million. The proposed final dividend is subject
to approval by shareholders at the Annual General Meeting and has
not been included as a liability in these financial statements.
7. Net funds/ (debt) reconciliation
30 June 30 June
2019 2018
------------------------------------------- -------- --------
Cash and cash equivalents 7,769 5,779
Borrowings - fixed interest and repayable
after one year (1) (6,632) (6,518)
------------------------------------------- -------- --------
Net funds/ (debt) 1,137 (739)
------------------------------------------- -------- --------
(1) To support the acquisition of MatsSoft Limited in August
2017, the Company issued a GBP7m Loan Note with options over 4.8m
new ordinary shares of 5p each priced at 58p. The Loan Note is
unsecured, has an annual interest rate of 8.5% payable quarterly in
arrears and is repayable in six instalments from 30 September 2022
to 31 March 2025. The Loan Note was initially allocated a fair
value of GBP6.42m and the share option a fair value of GBP0.58m.
The discount on the carrying value of the Loan Note is being
amortised via the profit and loss account over the expected option
life of five years.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LLFSRADISFIA
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September 25, 2019 02:00 ET (06:00 GMT)
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