TIDMNET
RNS Number : 8129R
Netcall PLC
05 March 2019
5 March 2019
NETCALL PLC
("Netcall", the "Company", or the "Group")
Interim results for the six months ended 31 December 2018
Approaching inflection point as Cloud services growth
accelerates
Netcall plc (AIM: NET), the leading provider of Low-code and
customer engagement software, today announces its unaudited interim
results for the six months ended 31 December 2018.
Financial highlights
-- Revenue up 6% to GBP11.4m (H1-FY18: GBP10.7m)
-- Cloud services and product bookings(1) increased by 96% to GBP5.22m (H1-FY18: GBP2.67m)
-- Total annual contract value(2) ('ACV') at 31 Dec 2018 up 10%
to GBP15.1m (H1-FY18: GBP13.7m) - Low-code ACV up 40% year over
year
-- Adjusted EBITDA(3) GBP2.02m (H1-FY18: GBP2.69m) after
approximately GBP0.75m spend of the growth investment programme
-- Profit before tax increased 49% to GBP0.42m (H1-FY18: GBP0.28m)
-- Cash generated from operations of GBP1.85m (H1-FY18: GBP0.30m)
Operational highlights
-- Substantial growth in cloud business with a number of notable multi-year contracts
-- Cloud service bookings exceeding product sales for the first time
-- New Low-code customer wins and cross sales
-- High levels of customer renewals
-- Significant new Low-code and Liberty cloud product releases
Henrik Bang, CEO at Netcall, commented:
"We are now approaching a clear inflexion point in our
transition from a traditional software business to a high growth
digital cloud operation, with our Cloud service bookings exceeding
product sales.
"The increase in our total ACV and Low-code ACV provides a clear
demonstration of the growing forward visibility of our revenue
streams.
"Trading is in line with our expectations for the year so far.
We expect revenues for the year to be more weighted toward the
second half given the move to a recurring revenue model and the
timing of product sales. Our strong sales momentum has continued
into the second half with order inflow significantly ahead compared
with the same period last year."
(1) Cloud services and product bookings is the total of all new
orders received classified as cloud subscription and support,
product and first year 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, depreciations and amortisation
adjusted to exclude the effects of acquisition, impairment,
contingent consideration and non-recurring transaction costs. The
forecast is based on unaudited management accounts for the 6 months
ended 31 December 2018.
Enquiries:
Netcall plc Tel. +44 (0) 330
333 6100
Henrik Bang, CEO
Michael Jackson, Chairman
James Ormondroyd, Group Finance Director
finnCap Limited (Nominated Adviser and Broker) Tel. +44 (0) 20
7220 0500
Stuart Andrews / James Thompson, Corporate
Finance
Tim Redfern, Corporate Broking
Alma PR Tel. +44 (0) 20
3405 0212
Caroline Forde / Hilary Buchanan / Helena
Bogle
About Netcall:
Netcall develops and markets platforms for customer engagement
and digital process automation using its market leading Low-code
technology. This provides a compelling proposition to improve
customer experience as well as deliver operational excellence.
Netcall's Low-code platform uses drag and drop technology that
enables organisations to scale and rapidly develop, test and deploy
digital enterprise applications. This empowers business users and
IT developers to collaboratively develop products and systems that
create a leaner, more customer-centric organisation.
The Group is transitioning from a stable traditional software
business to become a high growth cloud-led digital operation.
Netcall has a growing international presence and is recognised by
both Forrester and Gartner as a leading provider of Low-code in its
industry.
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.
Netcall is a UK company quoted on the AIM market of the London
Stock Exchange.
Prior to publication the information communicated in this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No 596/2014 ('MAR') With the publication of this announcement, this
information is now considered to be in the public domain.
Strategic overview
The Group is transitioning from a traditional software business
to a high growth digital cloud operation, blending its Liberty
platform with its recently acquired Low-code cloud operation. The
aim is that the cloud business becomes the majority of the Group's
revenue by 2021.
The Group is now well positioned to capitalise on the fast
growing Low-code market and is accelerating its investment in the
business. The cash generative Liberty business, which has a strong
position in healthcare and public sector markets, is providing the
resource to support substantial new growth opportunities.
The combination of Netcall's products provides organisations
with a unique proposition for their customer engagement and digital
process automation requirements. It enables significant customer
experience improvements and delivery of operational excellence with
efficiency savings.
Netcall has seen a notable rise in interest and new customer
wins for its solutions, as a growing number of organisations
evaluate and adopt these capabilities across their enterprises. The
Group has also seen an increase in cross selling of Low-code
solutions into existing customers as they digitise and modernise
their operations.
The average annual contract value of these initial Low-code
cross-sales is three times higher than the average of the Netcall
customer base. This gives an early indication of the potential
value of Low-code sales into the existing customer base.
Netcall is also developing its partner strategy and activity in
this area is growing. Partners using the Group's Low-code platform
can gain significant advantages including using the speed and
flexibility of its software to disrupt their market place, being
able to scale with customer demand and create profitable recurring
revenue streams.
Netcall's software is highly operationally geared, scalable and
easy to deploy and use for enterprises. The Low-code market is
worth more than an estimated $6 billion and is expected to grow
rapidly in the coming years(1) .
In addition to the Group's focussed organic growth strategy, the
Board continues to look for selective acquisitions with
complementary proprietary software and/or additional customers in
its target markets.
1 Source:
https://go.forrester.com/blogs/why-you-need-to-know-about-low-code-even-if-youre-not-responsible-for-software-delivery/
Current trading and outlook
Netcall is now approaching a clear inflexion point with Cloud
service bookings exceeding product sales for the first time in a
six-month reporting period and the Group's forward visibility of
revenue continues to grow strongly.
The Group has traded in line with the Board's expectations for
the year to date. As previously stated, Netcall expects revenues
for the year to be more weighted toward the second half given the
transition to a recurring revenue model and the timing of product
sales. The Group experienced strong sales momentum in the first
half which has continued into the second half with order inflow
significantly ahead of the comparable period last year.
Operational review
Markets and opportunities
Enterprises of all sizes are undertaking digital transition
projects as they modernise their legacy customer engagement and
business systems. According to Forrester, "Corporate's principal
focus on process improvement is on improving customer experience
and accelerate digital business transformation."(2) However, many
enterprises lack resources and capabilities to deliver the
projects.
Netcall's offerings empowers businesses to rapidly implement
digital transformation projects. The ease of use and flexibility of
the platforms is accelerating the speed and widening the range of
applications organisations can implement to significantly improve
their customer experience while reducing the cost base.
Combining the Low-code capability with the Liberty customer
engagement platform enables Netcall to provide compelling
solutions. Digital business processes on the Group's Low-code
platform can seamlessly drive customer journeys with integrated
customer interactions carried out using Liberty capabilities such
as chat, SMS, messaging or contact centre. With its 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.
Netcall is also assisting its customers to build and develop
tailored applications using the Low-code technology across their
own external communities, such as public sector bodies. At the same
time partner firms are using Low-code to develop solutions as part
of their consultancy services to provide broader offerings and
create new revenue and growth opportunities.
The Group has continued to win business across a range of
vertical markets, including:
-- A minimum four-year agreement worth more than GBP1.4m with an international business process outsourcer for a
Low-code and Liberty solution;
-- A three-year agreement worth a minimum of GBP1.5m with an infrastructure business for a Low-code platform to be
used for a broad range of applications to modernise their systems; and,
-- Cross-sales of Low-code solutions into our existing markets including local authorities, government agencies,
housing associations and NHS trusts.
In addition, we have seen significant projects go-live
including:
-- Lloyd's Market Association, which provides services to members of the Lloyds of London insurance market, launched
a claims expert management hub, Gemini, built on the Group's Low-code platform. The platform helps the Lloyds
markets managing agents to contract and manage spend on claims experts exceeding an estimated GBP500m per year.
-- Hampshire Trust Bank selected the Low-code platform to enable "digital innovation, process and customer
experience improvements" and has launched its first solutions to support mortgage applications.
Products
A new version of the Group's Low-code platform has been released
addressing the growing demand from IT professionals for Low-code
capabilities to help them benefit further from the platform's speed
and flexibility. The release included the ability for developers to
create custom code and embedded integrations with other
applications. The interface has also been updated with new
performance reporting giving IT increased control and governance
over the applications delivered on the platform.
In January 2019, the Group launched a new Low-code community,
where customers can engage with other Low-code users to find,
collaborate and contribute to creating better solutions. The launch
included an Appshare allowing users to download and share free to
use apps, adaptors, plugins, themes and widgets. In addition, the
release included a Training Academy for eLearning and a Forum which
includes app building advice, suggestions and feedback.
The Group also expanded its customer engagement platform,
Liberty, with support for a new cloud based conversational
messaging service. Built on Microsoft Azure cloud infrastructure,
this new service provides support for channels such as Facebook,
Twitter and various SMS providers and it will be used by both
Liberty and Low-code solutions to ensure that the Group can rapidly
add further messaging channels across its product portfolio. The
release of this service is a further example of the continued
expansion of the Liberty platform from a premise-based solution to
the cloud.
2 Source: Forrester - Q1 2018 Digital Business Automation
Survey
Financial Review
Group revenue increased 6% to GBP11.4m (H1-FY18: GBP10.7m).
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: 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.
The Board has, for a number of years, measured financial
performance using the following KPIs: revenue, EBITDA, and
operating cash flow. In addition, the Group will now also report
Cloud and product bookings and ACV. These metrics measure sales
momentum and give a lead indicator on future revenue.
Cloud and product bookings (the total of all new orders received
classified as cloud subscription and support, product and first
year support contract revenues) in the period increased by 96% year
over year to GBP5.2m, of which Low-code rose seven-fold to
GBP3.9m.
As a result, revenue from Cloud services, which are a key
strategic focus, have grown strongly and increased by 48% to
GBP3.01m (H1-FY18: GBP2.04m).
Total Low-code ACV as at 31 December 2018 increased by 40% year
over year to GBP4.2m (H1-FY18: GBP3.0m). In the seventeen months of
acquisition of the Low-code platform the Group has increased the
Low-code ACV by 48%.
Total ACV increased by 10% year over year to GBP15.1m (H1-FY18:
GBP13.7m). 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 5% to GBP4.63m
(H1-FY18: GBP4.42m) reflecting very high contract retention
combined with the contribution of new product sales and price
rises.
Communications services revenue was GBP0.94m (H1-FY18: GBP1.11m)
due to lower usage of call-back services in the period by a
partner.
Product revenue was disappointing at GBP0.98m (H1-FY18:
GBP1.81m) as a higher proportion of the sales pipeline was carried
forward into the second half than normal, due to purchasing delays
by some public sector organisations. As set out above the weaker
performance in this area in the first half along with the
transition to recurring revenues has led to an expectation that
revenue will be more weighted to the second half than historically
and will require a higher level of conversion of the existing
pipeline than in the first half.
Professional services revenues increased 36% to GBP1.80m
(H1-FY18: GBP1.32m) due to implementation services increasing in
line with new sales of cloud solutions.
Gross profit margin was maintained at 90% (H1-FY18: 90%).
Administrative expenses, before depreciation, amortisation,
impairment, share-based payments and acquisition related items
increased to GBP8.23m (H1-FY18: GBP6.98m) which is in line with
expectations following the previously announced investment
programme. Investments have mainly been made in expanding sales and
marketing, 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 GBP2.02m (H1-FY18:
GBP2.68m), a margin of 18% of revenue (H1-FY18: 25%).
Profit before tax increased 49% to GBP0.42m (H1-FY18: GBP0.28m)
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 GBP0.12m (H1 FY18: GBP0.10m) represents
an underlying effective rate of tax of 14% (H1 FY18: 5%) on
adjusted profit before tax. The underlying effective rate of tax
benefited from additional deductions for R&D expenditure and
utilisation of previously unrecognised losses brought forward.
Diluted earnings per share increased by 67% to 0.20 pence
(H1-FY18: 0.12 pence) and was 0.60 pence on an adjusted basis
(H1-FY18: 1.03 pence).
Cash generated from operations before non-recurring transaction
cost payments was GBP1.85m (H1-FY18: GBP0.30m), as previously
announced returning to a normal level of conversion of 92%
(H1-FY18: 11%) of adjusted EBITDA following last year's one-off
impact from the MatsSoft acquisition.
Spending on research and development, including capitalised
software development, was maintained at GBP1.45m (H1-FY18:
GBP1.45m) of which capitalised software expenditure was GBP0.71m
(H1-FY18: GBP0.83m).
Total capital expenditure was GBP1.07m (H1-FY18: GBP1.01m); the
balance after capitalised development, being GBP0.36m (H1-FY18:
GBP0.18m) relating to IT equipment, software and office fit
out.
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 GBP0.46m in cash under this arrangement. At
31 December 2018 the fair value of the remaining contingent
consideration was re-estimated at a lower amount of GBP2.42m
resulting in GBP0.12m being credited to the income statement as a
change in estimate.
To support the acquisition, the Company issued a GBP7m Loan Note
(see note 7). Loan Note interest payments in the period totalled
GBP0.30m (H1-FY18: GBP0.20m).
As a result of these factors, net debt was GBP0.77m at 31
December 2018 (31 December 2017: GBP0.81m).
Unaudited consolidated income statement for the six months to 31
December 2018
Unaudited Unaudited Audited
Six months to Six months to 12 months to
GBP'000 31 December 2018 31 December 2017 30 June 2018
-------------------------------------------------- ------------------ ------------------ --------------
Revenue 11,354 10,712 21,875
Cost of sales (1,121) (1,046) (2,143)
--------------------------------------------------- ------------------ ------------------ --------------
Gross profit 10,233 9,666 19,732
Administrative expenses (9,450) (9,093) (18,961)
Other income - 12 23
Other gains/ (losses) - net 15 (15) 12
--------------------------------------------------- ------------------ ------------------ --------------
Adjusted EBITDA 2,015 2,688 5,421
Depreciation (143) (127) (252)
Impairment charge on intangible assets - - (792)
Amortisation of acquired intangible assets (259) (323) (547)
Amortisation of other intangible assets (509) (454) (1,119)
Non-recurring transaction costs - (236) (464)
Change in fair value of contingent consideration 121 - -
Post-completion services (147) (456) (464)
Share-based payments (280) (522) (1,001)
Operating profit 798 570 782
Finance income 20 12 29
Finance costs (403) (304) (766)
--------------------------------------------------- ------------------ ------------------ --------------
Finance costs - net (383) (292) (737)
--------------------------------------------------- ------------------ ------------------ --------------
Profit before tax 415 278 45
Tax (charge)/ credit (124) (97) 91
--------------------------------------------------- ------------------ ------------------ --------------
Profit for the period 291 181 136
=================================================== ================== ================== ==============
Earnings per share - pence
Basic 0.20 0.13 0.10
Diluted 0.20 0.12 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.
Statement of comprehensive income for the six months to 31
December 2018
Unaudited Unaudited Audited
Six months to Six months to 12 months to
GBP'000 31 December 2018 31 December 2017 30 June 2018
Profit for the period 291 181 136
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations (19) 5 (5)
Total comprehensive income for the period 272 186 131
============================================================ ================== ================== ==============
All of the comprehensive income for the period is attributable
to the shareholders of Netcall plc.
Unaudited consolidated balance sheet at 31 December 2018
Unaudited Unaudited Audited
GBP'000 31 December 2018 31 December 2017 30 June 2018
------------------------------------------------- ------------------ ------------------ --------------
Assets
Non-current assets
Property, plant and equipment 627 453 445
Intangible assets 28,913 30,026 28,938
Deferred tax asset 473 425 584
Other investments 288 288 288
Total non-current assets 30,301 31,192 30,255
-------------------------------------------------- ------------------ ------------------ --------------
Current assets
Inventories 186 214 215
Other current assets 1,186 904 1,077
Trade receivables 5,028 3,916 6,078
Other financial assets at amortised cost 1,941 1,415 1,554
Current tax asset - - -
Cash and cash equivalents 5,808 5,650 5,779
-------------------------------------------------- ------------------ ------------------ --------------
Total current assets 14,149 12,099 14,703
-------------------------------------------------- ------------------ ------------------ --------------
Total assets 44,450 43,291 44,958
-------------------------------------------------- ------------------ ------------------ --------------
Liabilities
Non-current liabilities
Other payables - 978 925
Borrowings 6,576 6,462 6,518
Deferred tax liabilities 786 1,177 754
Provisions 57 132 44
-------------------------------------------------- ------------------ ------------------ --------------
Total non-current liabilities 7,419 8,749 8,241
-------------------------------------------------- ------------------ ------------------ --------------
Current liabilities
Trade and other payables 5,512 4,207 5,095
Dividend payable 758 1,656 -
Current tax liabilities 18 - -
Deferred income 9,059 7,355 9,790
Provisions 128 - 128
Total current liabilities 15,475 13,218 15,013
-------------------------------------------------- ------------------ ------------------ --------------
Total liabilities 22,894 21,967 23,254
-------------------------------------------------- ------------------ ------------------ --------------
Net assets 21,556 21,324 21,704
================================================== ================== ================== ==============
Equity attributable to the owners of the parent
Share capital 7,242 7,229 7,242
Share premium 3,015 3,015 3,015
Other equity 4,832 4,832 4,832
Other reserves 4,447 3,792 4,133
Retained earnings 2,020 2,456 2,482
-------------------------------------------------- ------------------ ------------------ --------------
Total equity 21,556 21,324 21,704
================================================== ================== ================== ==============
Unaudited consolidated statement of changes in equity at 31
December 2018
Share Share Other Other Retained Total
GBP'000 capital premium equity reserves earnings equity
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 1 July 2017 7,054 3,015 2,697 2,854 5,386 21,006
-------------------------------- --------- --------- -------- ---------- ---------- --------
Proceeds from share issue - - - - - -
Issue of ordinary shares
as consideration for
acquisition for a business
combination 175 - 2,135 - - 2,310
Increase in equity in
relation to options issued - - - 975 - 975
Tax debit relating to
share options - - - (36) - (36)
Reclassification following
exercise or lapse of
share options - - - (6) 6 -
Dividends to equity holders
of the company - - - - (3,117) (3,117)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Transactions with owners 175 - 2,135 933 (3,111) 132
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the period - - - - 181 181
Other comprehensive income
for the period - - - 5 - 5
-------------------------------- --------- --------- -------- ---------- ---------- --------
Total comprehensive income
for the period - - - 5 181 186
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 31 December
2017 7,229 3,015 4,832 3,792 2,456 21,324
Balance at 1 January
2018 7,229 3,015 4,832 3,792 2,456 21,324
-------------------------------- --------- --------- -------- ---------- ---------- --------
Proceeds from share issue 9 - - - - 9
Increase in equity in
relation to options issued - - - 389 - 389
Tax credit relating to
share options - - - 37 - 37
Reclassification following
exercise or lapse of
share options 4 - - (75) 71 -
Transactions with owners 4 - - 351 71 435
-------------------------------- --------- --------- -------- ---------- ---------- --------
Loss for the period - - - - (45) (45)
Other comprehensive income
for the period - - - (10) - (10)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Total comprehensive income
for the period - - - (10) (45) (55)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 30 June 2018 7,242 3,015 4,832 4,133 2,482 21,704
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 1 July 2018 7,242 3,015 4,832 4,133 2,482 21,704
-------------------------------- --------- --------- -------- ---------- ---------- --------
Increase in equity reserve
in relation to options
issued - - - 376 - 376
Reclassification following
exercise or lapse of
share options - - - (5) 5 -
Tax debit relating to
share options - - - (38) - (38)
Dividends to equity holders
of the company - - - - (758) (758)
Transactions with owners - - - 333 (753) (420)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the period - - - - 291 291
Other comprehensive income
for the period - - - (19) - (10)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the period - - - (19) 291 272
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 31 December
2018 7,242 3,015 4,832 4,447 2,020 21,556
================================ ========= ========= ======== ========== ========== ========
Unaudited consolidated cash flow statement for the six months to
31 December 2018
Unaudited Unaudited Audited
Six months to Six months to 12 months to
GBP'000 31 December 2018 31 December 2017 30 June 2018
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from operating activities
Profit before tax 414 278 45
Adjustments for:
Depreciation and amortisation 911 903 1,918
Impairment - - 792
Loss on disposal of fixed assets 4 - -
Share-based payments 280 521 1,103
Net finance costs 383 292 635
Changes in working capital
Decrease in inventories 30 120 118
Decrease/ (increase) in trade receivables 1,052 (509) (2,575)
(Increase)/ decrease in other financial assets at amortised
cost (387) (163) (194)
(Increase)/ decrease in other current assets (124) 81 (303)
Decrease in trade and other payables (49) (1,222) (900)
Increase/ (decrease) in deferred income (679) (739) 1,675
Increase/ (decrease) in provisions 12 9 341
Cash inflow/ (outflow) from operations 1,847 (447) 2,655
Analysed as:
Cash flows from operations before payment of non-recurring
transaction costs 1,847 298 3,420
Non-recurring transaction cost payments - (745) (765)
-------------------------------------------------------------- ------------------ ------------------ --------------
Interest received 20 12 29
Interest paid (294) (207) (478)
Income tax refund - 11 11
-------------------------------------------------------------- ------------------ ------------------ --------------
Net cash inflow/ (outflow) from operating activities 1,573 (643) 2,217
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from investing activities
Payment for acquisition of subsidiary, net of cash acquired (462) (10,974) (10,974)
Purchases of property, plant and equipment (327) (54) (171)
Payment of software development costs (709) (830) (1,764)
Purchases of other intangible assets (34) (123) (137)
Net cash outflow in investing activities (1,532) (11,969) (13,046)
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from financing activities
Proceeds from issue of ordinary shares - - 9
Proceeds from borrowings - 7,000 7,000
Dividends paid to Company's shareholders - (1,461) (3,117)
-------------------------------------------------------------- ------------------ ------------------ --------------
Net cash inflow in financing activities - 5,539 3,892
-------------------------------------------------------------- ------------------ ------------------ --------------
Net increase/ (decrease) in cash and cash equivalents 41 (7,073) (6,937)
Cash and cash equivalents at beginning of period 5,779 12,724 12,724
Effects of exchange rate changes on cash and cash equivalents (12) (1) (8)
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash and cash equivalents at end of period 5,808 5,650 5,779
============================================================== ================== ================== ==============
Notes to the financial information for the six months ended 31
December 2018
1. General information
Netcall plc (AIM: "NET", "Netcall", or the "Company") is a
leading provider of customer engagement software. It is a public
limited company which is quoted on AIM (a market of the London
Stock Exchange). The Company's registered address is 1st Floor,
Building 2, Peoplebuilding Estate, Maylands Avenue, Hemel
Hempstead, Hertfordshire, HP2 4NW and the Company's registered
number is 01812912.
2. Basis of preparation
The Group interim results consolidate those of the Company and
its subsidiaries (together referred to as the 'Group'). The
principal trading subsidiaries of Netcall are Netcall Telecom Ltd
and MatsSoft Ltd.
These consolidated interim financial statements (the 'results')
have been prepared in accordance with those IFRS standards and
IFRIC interpretations issued and effective or issued and early
adopted as at the time of preparing these statements (February
2019). This results announcement are unaudited and does not
constitute statutory accounts of the Group within the meaning of
sections 434(3) and 435(3) of the Companies Act 2006 (the 'Act').
The balance sheet at 30 June 2018 has been derived from the full
Group accounts published in the Annual Report and Accounts 2018,
which has been delivered to the Registrar of Companies and on which
the report of the independent auditors was unqualified and did not
contain a statement under either section 498(2) or section 498(3)
of the Act.
The results have been prepared in accordance with the accounting
policies set out in the Group's 30 June 2018 statutory accounts,
which are based on the recognition and measurement principles of
IFRS in issue as adopted by the European Union ("EU").
The Group has adopted IFRS 9 'Financial Instruments' and IFRS 15
'Revenue from Contracts from customers' which have become effective
for this financial year.
IFRS 9 replaces IAS 39, the previous Standard dealing with the
recognition and measurement of financial instruments. The adoption
of IFRS 9 has impacted the classification and measurement of the
Group's financial assets. The Company holds most financial assets
to collect the associated cash flows and those will continue to be
initially recognised at fair value and subsequently carried at
amortised cost. However, the Company's equity investment in
Macranet Limited which was previously classified as an
available-for-sale financial asset is now measured at fair value
through other comprehensive income.
IFRS 15 establishes a principles-based approach for revenue
recognition and is based on the concept of recognising revenue for
obligations only when they are satisfied and the control of goods
or services is transferred. It applies to all contracts with
customers, except those in the scope of other standards. It
replaces separate models for goods, services and construction
contracts under the current accounting standards. The adoption of
IFRS 15 did not have a significant impact on the timing or amount
of revenue recognised by the Group in any year.
No other significant changes to accounting policies are expected
for the year ending 30 June 2019.
The results for the six months ended 31 December 2018 were
approved by the Board on 4 March 2019. A copy of these interim
results will be available on the Company's web site www.netcall.com
from 5 March 2019.
The principal risks and uncertainties faced by the Group have
not changed from those set out on page 9 of the annual report for
the year ended 30 June 2018.
3. Segmental analysis
The Board considers that there is one operating business segment
being the design, development, sale and support of software
products and services, which is consistent with the information
reviewed by the Board when making strategic decisions. Resources
are reviewed on the basis of the whole of the business
performance.
The key segmental measure is adjusted EBITDA which is profit
before interest, tax, depreciation, amortisation, acquisition and
reorganisation expenses and share-based payments, which is set out
on the consolidated income statement.
4. Earnings per share
The basic earnings per share is calculated by dividing the net
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year
excluding those held in treasury:
Six months to Six months to 12 months to
31 December 2018 31 December 2017 30 June 2018
-------------------------------------------------------------- ------------------ ------------------ --------------
Net earnings attributable to ordinary shareholders (GBP'000s) 291 181 136
Weighted average number of ordinary shares in issue (000s) 142,978 142,134 142,460
Basic earnings per share (pence) 0.20 0.13 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 period,
adjusted for potentially dilutive shares that are not
anti-dilutive.
Six months to Six months to 12 months to
31 December 2018 31 December 2017 30 June 2018
-------------------------------------------------------------- ------------------ ------------------ --------------
Weighted average number of ordinary shares in issue (000s) 142,978 142,134 142,460
Adjustments for share options (000s) 2,561 4,922 4,901
Weighted average number of potential ordinary shares in issue
(000s) 145,539 147,056 147,361
-------------------------------------------------------------- ------------------ ------------------ --------------
Diluted earnings per share (pence) 0.20 0.12 0.09
============================================================== ================== ================== ==============
Adjusted basic and diluted earnings per share have been
calculated to exclude the effect of acquisition, contingent
consideration and reorganisation costs, share-based payment
charges, amortisation of acquired intangible assets and utilisation
of historic tax losses. The Board believes this gives a better view
of ongoing maintainable earnings. The table below sets out a
reconciliation of the earnings used for the calculation of earnings
per share to that used in the calculation of adjusted earnings per
share:
Six months to Six months to 12 months to
GBP'000s 31 December 2018 31 December 2017 30 June 2018
-------------------------------------------------------------- ------------------ ------------------ --------------
Profit used for calculation of basic and diluted EPS 291 181 136
Impairment charge on intangible assets - - 792
Amortisation of acquired intangible assets 259 323 547
Non-recurring transaction costs - 456 464
Change in fair value of contingent consideration (121) - -
Post-completion services 147 235 464
Share-based payments 280 521 1,001
Unwinding of discount - contingent consideration & borrowings 95 52 208
Tax adjustment (81) (257) (613)
Profit used for calculation of adjusted basic and diluted EPS 870 1,511 2,999
============================================================== ================== ================== ==============
Six months to Six months to 12 months to
Pence 31 December 2018 31 December 2017 30 June 2018
------------------------------------- ------------------ ------------------ --------------
Adjusted basic earnings per share 0.61 1.06 2.02
Adjusted diluted earnings per share 0.60 1.03 1.95
===================================== ================== ================== ==============
5. Dividends
Dividends paid or declared during the period were as
follows:
Statement of December 2018
Six months to Cash flow statement changes in equity balance sheet
December 2018 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
--------------------- --------- ---------------- -------------------- --------------------- ---------------------
Final ordinary
dividend for year
to June 2018(1) 6/2/19 0.53p - 758 758
--------------------- --------- ---------------- -------------------- --------------------- ---------------------
- 758 758
------------------------------- ---------------- -------------------- --------------------- ---------------------
Statement of December 2017
Six months to Cash flow statement changes in equity balance sheet
December 2017 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 year
to June 2017 12/1/18 1.16p - 1,656 1,656
1,461 3,117 1,656
------------------------------- ---------------- -------------------- --------------------- ---------------------
(1) The final ordinary dividend for the year ended 30 June 2018
was approved at the Annual General Meeting held on 12 December
2018.
6. Net debt reconciliation
31 December 2018 31 December 2017 30 June 2018
------------------------------------------ ----------------- ----------------- -------------
Cash and cash equivalents 5,808 5,650 5,779
Borrowings - repayable after one year(1) (6,576) (6,462) (6,518)
Net debt (768) (812) (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
IR KMGGFMDMGLZZ
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