TIDMNET
RNS Number : 1258O
Netcall PLC
06 October 2021
6 October 2021
NETCALL PLC
("Netcall", the "Company" or the "Group")
Final Results for the Year Ended 30 June 2021
Cloud business driving revenue growth and enhanced
profitability
Netcall plc (AIM: NET), a leading provider of intelligent
automation and customer engagement software, today announces its
audited results for the year ended 30 June 2021.
Financial Highlights
-- Revenue up 8% to GBP27.2m (FY20: GBP25.1m)
-- Cloud business revenue growth of 26% to GBP8.3m (FY20:
GBP6.6m)
-- Total annual contract value(1) ('ACV') at 30 June
2021 up 10% year over year to GBP18.5m (30 June 2020:
GBP16.8m)
-- Cloud services ACV at 30 June 2021 up 25% year over
year to GBP9.4m (30 June 2020: GBP7.5m)
-- Adjusted EBITDA(2) up 21% to GBP5.34m (FY20: GBP4.41m).
-- Profit before tax up 98% to GBP0.99m (FY20: GBP0.50m)
-- Group cash at 30 June 2021 was GBP14.5m (FY20: GBP12.7m)
more than offsetting borrowings of GBP6.86m (FY20:
GBP6.75m)
-- Final ordinary dividend of 0.37p proposed, an increase
of 48% (FY20: 0.25p)
Operational Highlights
-- Significant cloud business growth, with cloud contracts
now contributing over half of total ACV providing
improved visibility of future revenues
-- New customer wins from various verticals including
Financial Services, Utilities, Healthcare and Public
Sectors
-- Cloud net retention rate(3) increased to 116% (FY20:
113%)
-- Continued cross-selling success with 22% total ACV
from customers who have purchased both Intelligent
Automation and Customer Engagement solutions
-- Increased momentum in existing customer migrations
from on-premise to cloud solutions
-- Annual revenue run-rate from Intelligent Automation
now exceeds GBP10.8m, representing 40% of Group revenue
-- Ongoing platform innovation with new products launched,
including AI-powered robotic process automation,
providing customers with increasingly powerful automation
capabilities
-- Greenhouse Gas emissions(4) reduced by 31% over the
year and on track to be carbon neutral for Scope
1 and 2 emissions by end of 2022 and Scope 3 net
zero by end of 2026
Henrik Bang, Chief Executive, said:
"We are pleased with the solid performance for the year driven
by demand for our cloud-based Liberty offering, resulting in 26%
growth in cloud business revenue and a significant increase in
profitability as Netcall continues the transition to a cloud
business model. In addition to new customer momentum, we see a
greater number of customers expanding their engagement with the
enlarged Liberty platform, contributing to growth in average
contract values and recurring revenue.
"Trading conditions in the new financial year has remained
positive, with a healthy pipeline of new business combined with a
growing cloud business revenue stream underpinned by the increase
in annual contract value.
"The Group's target markets represent a substantial and growing
opportunity with our Liberty platform being well positioned to
support customers' digital transformation strategies. Our growing
cloud business is delivering enhanced profitability and revenue
visibility which, combined with our product innovation, produces
new growth opportunities. This, combined with a robust foundation
of recurring revenues and a cash generative business model,
provides the Board with confidence in the Group's growth
prospects."
(1) 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.
(2) Profit before interest, tax, depreciation and amortisation
adjusted to exclude the effects of share-based payments,
acquisition, impairment, profit or loss on disposals, contingent
consideration and non-recurring transaction costs.
(3) Cloud net retention rate is calculated by starting with the
Cloud ACV from all customers twelve months prior to the period end
and comparing it to the Cloud ACV from the same customers at the
current period end. The current period ACV includes any upsells and
is net of contraction or churn over the trailing twelve months but
excludes ACV from new customers in the current period. The Cloud
net retention rate is the total current period ACV divided by the
total prior period ACV.
(4) Based on Scope 1 emissions (direct emissions from owned or
controlled sources) and Scope 2 emissions (indirect emissions from
the generation of purchased electricity, steam, heating and cooling
consumed by the Company) following the UK Government GHG Conversion
Factors for Company Reporting, 2020.
For further enquiries, please contact:
Netcall plc Tel. +44 (0) 330
333 6100
Henrik Bang, CEO
Michael Jackson, Chairman
James Ormondroyd, Group Finance Director
Canaccord Genuity Limited (Nominated Tel. +44 (0) 20
Adviser and Broker) 7523 8000
Simon Bridges / Andrew Potts
Alma PR Tel. +44 (0) 20
3405 0205
Caroline Forde / Hilary Buchanan / Matthew
Young
About Netcall
Netcall's Liberty software platform with Intelligent Automation
and Customer Engagement solutions helps organisations transform
their businesses faster and more efficiently, empowering them to
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
and leading corporates such as Legal and General, 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 for the purposes of article 7 of the Market Abuse
Regulations (EU) No 596/2014 as amended by regulation 11 of the
Market Abuse (Amendment) (EU Exit) Regulations No 2019/310 ('MAR').
With the publication of this announcement, this information is now
considered to be in the public domain.
Overview
Netcall delivered a strong trading performance during the year
with revenue growing 8% to GBP27.2m and adjusted EBITDA increasing
by 21% to GBP5.34m. This overall performance was driven by
significant cloud business revenue growth of 26% to GBP8.3m (FY20:
GBP6.6m).
The ongoing transition to a cloud business model has continued
to accelerate with bookings for cloud solutions contributing to
more than 75% of total bookings. As a result, Cloud services ACV
increased by 25% to GBP9.4m (FY20: GBP7.5m) underpinning continued
revenue cloud growth momentum into the new financial year. The
growth in Cloud services ACV is due to both new customer wins and
upsell into the existing customer base, and now represents more
than half of the Group's total ACV which grew by 10% to GBP18.5m
(FY20: GBP16.8m). The continued demand for Liberty solutions,
especially cloud, increased future contracted revenues by 27% to
GBP33.4m (FY20: GBP 26.4 m).
The Board is grateful to the Netcall team who made this
performance possible by responding positively during the Covid
pandemic and showing tremendous flexibility, resilience and
creativity . The Group's trading performance and robust financial
footing meant that no pay-cuts, furlough or redundancies were
required and w ith a move to flexible working, Netcall took the
decision to permanently close two office locations, whilst
retaining two offices and moving the Group's registered office to
Bedford.
Netcall's markets represent a substantial and growing
opportunity and the Liberty platform's unique combination of
Customer Engagement and Intelligent Automation solutions continues
to gain market traction as we support our customers' Digital
Transformation strategies. Today, 22% of total ACV is from
customers who have purchased both Intelligent Automation and
Customer Engagement solutions, up from zero in 2018. This has
contributed to growth in average contract values and a significant
increase in recurring revenue from those customers, demonstrating
the value of our existing customer base.
We continued to innovate and expand the power of our platform,
both through internal R&D and M&A activity. The Group's
Intelligent Automation capabilities were enhanced during the year
through the acquisition of Oakwood Technologies BV (trading as
'Automagica'), a Robotic Process Automation ('RPA') software
company, in October 2020 which resulted in the release of our first
version of Liberty RPA in February 2021.
We also made good strides towards achieving our sustainability
objectives and reducing the Group's impact on the environment. This
was the first year we initiated voluntary environmental impact
reporting in recognition that sustainable business practices will
play an increasingly important part in the Group's long-term
objectives. Over the year we lowered the Group's direct carbon
emissions by 31% and are well on track to reach our target of being
carbon neutral for Scope 1 and 2 emissions by end of 2022 and Scope
3 net zero by end of 2026 .
The Group's fast-growing cloud business together with a highly
cash generative business model, providing the funds to invest in
the expansion of our offering to support customers and capture new
business opportunities. Throughout the year, the Group maintained a
robust balance sheet supported by strong cash generation with the
cash position at 30 June 2021 increasing to GBP14.5m (FY20:
GBP12.7m). The normalised cash position was GBP13.1m (FY20:
GBP10.5m), excluding deferred VAT of GBP1.4m (FY20: GBP2.2m) which
will be repaid by December 2021.
As we look forward, the journey towards digitalising
communications and embracing automation to create leaner and more
customer centric organisations continues to represent a growing
opportunity. The advancements that Netcall has made during the year
have left the Group in a stronger position to push forward in its
mission to help organisations harness the power of technology to
make meaningful, valuable and more effective connections with their
stakeholders.
Current Trading and Outlook
Trading conditions in the new financial year has remained
positive, with a healthy pipeline of new business combined with a
growing cloud business revenue stream underpinned by an increase in
annual contract value.
The Group's target markets represent a substantial and growing
opportunity with its Liberty platform being well positioned to
support customers' digital transformation strategies. Our
significant and growing cloud business is delivering enhanced
profitability and revenue visibility which, combined with our
product innovation, produces new growth opportunities. This,
combined with a robust foundation of recurring revenues and a cash
generative business model, provides the Board with confidence in
the Group's growth prospects.
Business Review
Creating meaningful connections through powerful technology
Today rapid technological advances across all industries has
resulted in more data, 24/7 'always on' availability, increased
automation and growing channels of communication. Organisations
must change to succeed in this 'Age of the Customer' with
expectations of fast, personal and flexible engagements.
Netcall's Liberty platform provides a comprehensive and
easy-to-use digital transformation tool kit that helps customers
manage this complexity and build leaner, more customer-centric
organisations. Through the provision of automation and
communication technologies, Netcall's solutions enable
organisations to connect data silos, improve and automate
processes, create better solutions and do it faster to deliver
better outcomes.
The platform is built around two complementary and integrated
solution areas unifying intelligent automation and customer
engagement delivering a broad range of product capabilities:
Intelligent Automation:
-- Liberty Create: A low-code software solution for
faster development of applications utilising an intuitive
drag-and-drop environment enabling both professional
and business developers to create enterprise grade
applications that drive and automate workflows and
business processes. This is combined with easy integration
to other parts of the Liberty platform as well as
3(rd) party solutions such as SAP and Salesforce.
-- Liberty RPA: An AI-powered robotic process automation
solution, acquired through Automagica, which frees-up
people from mundane and cumbersome tasks, enabling
them to be more productive. Liberty RPA is available
in both an unattended and attended version, where
it can function as a personal assistant to knowledge
workers such as contact centre agents and take over
repetitive tasks and updating of records.
Customer engagement:
-- Liberty Converse: A complete omni-channel contact
centre solution for customer engagement which also
includes solutions such as automated speech bots,
workforce and quality management, switchboard and
auto attendant.
-- Liberty Connect: A cloud messaging and bot platform
enabling customers to extend their reach using digital
channels like web chat, Facebook Messenger and Twitter
as well as benefiting from bots and automation.
Strategy
Netcall's powerful technologies and services support customers
with their digital transformation strategies so that they can
create more valuable and effective connections with their
stakeholders.
Our focus is primarily on sectors characterised by large,
complex ecosystems of customers, suppliers or staff and are often
subject to high level of regulation, including healthcare, public
sector and financial services. These three core market segments
continue to see significant new demand and today represent 85% of
Group revenues.
The Group's growth strategy remains centred on the execution of
four strategic growth pillars: new customer acquisition, both
through direct and partner channels; expanded uptake within the
existing customer base; supported by an innovative R&D
programme.
In addition to supporting the organic growth strategies, the
Group's financial position provides the opportunity to assess the
market for selective acquisitions with complementary proprietary
software and/or additional customers in the Group's target
markets.
Four strategic pillars
Customer base expansion:
The Group's cloud solutions are the main driver of new business
acquisition as more organisations recognise the necessity to pursue
digital transformation initiatives , particularly through
automation. We successfully added new customers across a range of
market verticals, including from the Group's three core segments of
healthcare, public sector and financial services.
During the year we also made further progress in the utility
market following a targeted sales and marketing programme combined
with the release of a dedicated LaunchPad initiative comprising
solutions developed specifically for this market segment.
Additionally, we launched Tenant Hub, a dedicated suite of
solutions for the Housing Sector, where new wins were secured
during the year.
New customer implementations include:
-- A utility company used the Liberty Create low-code
platform to develop a tailor-made customer portal
to allow 24/7 payment support for customers, including
communications options to resolve payment plans entirely
online. This is an example of our Low-code technology
being used to quickly create a departmental solution
solving a specific problem which can then be scaled
across the business.
-- A leading insurance firm purchased the Liberty Create
low-code platform to build a digital-first insurance
claims management platform. This is an example of
a direct license win for our technology and implemented
through our partner channel.
-- A Fortune 500 financial services firm spanning 120
countries signed a global framework agreement to
utilise the Liberty platform to build and deploy
business applications at scale.
Land and expand:
The Group's land and expand strategy continues to represent a
significant opportunity for the business. Positively, the Group's
cloud net retention rate increased to 116% from 113% a year ago as
customers increased purchases of new solutions and upgrades. This
reflects Netcall's high customer retention rate combined with
continuous enhancements to our product portfolio and tighter
integration between the various solutions which provides
substantial opportunities in three areas:
-- The ongoing migration of on-premise Customer Engagement
base to cloud solutions where sales to date shows
that these migrations deliver more than a 50% increase
in ACV.
-- Further cross-selling as the Group continues to roll-out
new product capabilities.
-- Considerable progress in cross-selling Intelligent
Automation solutions to Customer Engagement customers,
where sales to date shows that these cross-sales
on average triple the customer ACV, which illustrates
the growth potential within the customer base alone.
The Group's AppShare community continues to be a valuable
resource to customers offering pre-built accelerators and modules
to enrich customers' interaction with the Liberty platform
solutions. The community now consists of 1,400 members who can
collaborate and build upon existing applications, with over 230
pieces of content shared to date.
Examples of existing customers expanding their uptake of Liberty
solutions, include:
-- A pan-European retailer and service provider who
is an existing customer expanded their use of the
platform by adopting Liberty RPA to automate a specific
manual data entry process to free up internal capacity,
enable volume growth and de-risk data entry accuracy.
The customer is currently expanding the usage of
Liberty RPA with additional processes being automated.
-- A number of public sector customers currently engaged
with Netcall for Customer Engagement solutions have
subsequently taken up our Tenant Hub and Citizen
Hub offerings, comprising both low-code and customer
engagement offerings and tailored to the sector focus.
-- A number of existing NHS Foundation Trusts which
were existing on-premise Customer Engagement customers
undertook transformation projects to migrate to Netcall's
Liberty Converse cloud solution.
Innovation and product enhancement:
Investment in innovative new products continues at pace and
underpins the Group's go-to-market model, positioning the Liberty
platform as a one stop shop toolkit for digital transformation.
During the year, the Group acquired RPA provider Automagica and
the RPA solution has been integrated onto the Liberty platform,
strengthening Netcall's product offering. The new product, Liberty
RPA, offers customers an AI-powered robotic process automation
solution capable of deploying Attended, Unattended, and Hybrid
Automations, incorporating optical character recognition and
handwriting digital recognition, that allows organisations to
realise multiple deployment models. New features post acquisition
includes RPA Trace, a desktop analytic tool that reports on user
activity to determine suitable processes for automation available
for export into Process Mining tools.
The Liberty platform was enhanced with a new Monitoring Studio,
a feature providing on-demand analytics and historical data to
analyse application performance. A new native Mobile App was
developed and published to Apple & Android delivering enhanced
offline capabilities, push notifications and geo-location tracking.
A further focus for investment was on continued expansion of the
platform's ecosystem and tighter integration with third party
platforms, including Amazon Chime, Microsoft Teams and Microsoft
Dynamics.
We have also enhanced our Quality Management module with new
customer survey and screen recording functionality to monitor and
improve the quality of service offered to customers, as well as
adding shift management, rotas and forecasting to the integrated
Workforce Management module to ensure the right level of resources
are available in order to meet performance targets.
Powered by the Liberty platform, the Group launched a number of
capabilities targeted at core sectors, including Tenant Hub which
is a suite of solutions tailored to address the specific needs of
the housing sector which helps to streamline operations and improve
increasingly complex customer interactions. The result for tenants
is improved online access to vital services, including rent
statements and repair services, as well as more choice when it
comes to engaging - including via Twitter and Facebook
Messenger.
The functionality of both Citizen Hub and Patient Hub were also
enhanced in the period with new capabilities to help councils
effectively manage tasks and book resources. For hospitals, Patient
Hub was expanded to deliver test results, including Covid results,
and the ability added to allow patients to report their arrival to
hospital using an app without having to report to reception, which
all deliver additional value to both organisations and
customers.
Partner base:
The Group's network of technology and solution partners with
industry knowledge and support capabilities continues to grow with
new business delivered via indirect channels having increased to
24% of total new sales bookings. The Group has invested in
strengthening the partnership team during the year to support this
important route to market.
The focus of the partner network on large organisations with
global footprints has also yielded opportunities in new geographies
outside of the UK, including winning new business in the Benelux
region.
Examples of business won or delivered via the partner network in
the period include:
-- An insurance technology partner is building a new underwriting
SaaS solution on Liberty Create for sale to its customer
base.
-- A digital consultancy is developing a carbon offset management
application for an environmental asset management company.
-- A multinational telecommunication partner developed and
sold an emergency notification application for a utility
company.
Financial Review
A key financial metric monitored by the Board is the growth in
the ACV base year-on-year (ACV, as at a given date, is the total of
the value of each cloud and product support contract divided by the
total number of years of the contract). This reflects the annual
value of new business won, together with upsell into the Group's
existing customer base as it delivers against its land and expand
strategy, less any customer contraction or cancellation. It is an
important metric for the Group, as it is a leading indicator of
future revenue.
The Group continues its transition to a digital cloud business
with Cloud ACV 25% higher at GBP9.4m (FY20: GBP7.5m) with growth in
both Customer Engagement and Intelligent Automation solutions of
approximately 30% and 26% respectively compared to FY20. The growth
in Cloud ACV contributed to a 10% growth in total ACV to GBP18.5m
(FY20: GBP16.8m).
The table below sets out ACV at the three financial year
ends:
GBP'm ACV FY21 FY20 FY19
--------------------------- ----- ----- -----
Cloud services 9.4 7.5 6.0
Product support contracts 9.1 9.3 9.7
Total 18.5 16.8 15.7
=========================== ===== ===== =====
Group revenue for the period grew by 8% to GBP27.2m (FY20:
GBP25.1m). The year-on-year increase was primarily driven by growth
in both Intelligent Automation solutions by 20% to GBP10.8m (FY20:
GBP9.0m), and Customer Engagement solutions by 5% to GBP15.6m
(FY20: GBP14.9m).
The table below sets out revenue by component for the last three
financial year-ends:
GBP'm Revenue FY21 FY20 FY19
-------------------------------------------------- ----- ----- -----
Cloud services 8.3 6.6 5.7
Product support contracts 9.0 9.6 9.3
-------------------------------------------------- ----- ----- -----
Total Cloud services & Product support contracts 17.3 16.1 15.0
Communication services 2.9 1.9 1.8
Product 2.7 3.1 2.3
Professional services 4.3 4.0 3.8
Total Revenue 27.2 25.1 22.9
-------------------------------------------------- ----- ----- -----
Revenue from Cloud services (subscription and usage fees of our
cloud-based offerings) increased by 26% to GBP8.25m (FY20:
GBP6.55m) reflecting the higher year over year Cloud ACV.
Product support contract revenue decreased by 5% to GBP9.06m
(FY20: GBP9.56m) in line with the Group's strategy to transition to
a cloud business model, resulting in lower product and support
contract ACV at the start of the new financial year of GBP9.3m,
compared with the start of the prior financial year GBP9.7m.
Recurring revenue from Cloud service and Product support
contracts totalled 64% of revenue (FY20: 64%).
Communication services revenue (fees for telephony and messaging
services) increased by 50% to GBP2.90m (FY20: GBP1.93m) due to
higher revenues for call-back and messaging services.
Product revenue (software license sales with supporting
hardware) decreased by 13% to GBP2.66m (FY20: GBP3.07m). As
previously communicated, this revenue stream continues to change
within periods subject to customers' preferences for buying
on-premise or cloud contracts. The trend is, as expected,
accelerating toward cloud contracts.
Professional services revenue increased by 7% to GBP4.28m (FY20:
GBP4.01m). The overall demand for our professional services is
dependent on: the mix of direct and indirect sales of our
solutions, in the latter case the Group's partners provide the
related services directly for the end customer; and whether a
customer requires the support of a full application development
service or support to enable their own development teams.
Gross profit margin improved by 2% to 90% (FY20: 88%) mainly due
to higher margin media channels driving revenues within
Communication services.
Administrative expenses, before depreciation, amortisation,
share-based payments and acquisition related items, increased by 7%
to GBP19.1m (FY20: GBP17.8m) due to higher staff-related
expenditure partially offset by changed working practises resulting
in lower travel and expense spending.
Consequently, the Group's adjusted EBITDA increased by 21% to
GBP5.34m (FY20: GBP4.41m), a margin of 20% of revenue (FY20:
18%).
The higher adjusted EBITDA led to increased profit before tax of
GBP0.99m (FY20: GBP0.50m) with charges for interest on borrowings,
share-based payments, depreciation and amortisation charges being
broadly level period over period.
The Group recorded a tax charge of GBP11,000 (FY20: GBP10,000)
benefiting from tax relief available from the exercise of share
options during the period and additional deductions for R&D
expenditure.
Basic earnings per share was 0.66 pence (FY20: 0.34 pence) and
increased by 48% to 1.49 pence on an adjusted basis (FY20: 1.01
pence). Diluted earnings per share was 0.64 pence (FY20: 0.33
pence) and increased by 47% to 1.43 pence on an adjusted basis
(FY20: 0.97 pence).
Cash generated from operations was GBP5.69m (FY20: GBP9.39m).
The Group deferred GBP2.21m of VAT payments during March and June
2020 due to Covid-19, which was repayable in monthly instalments
from March 2021 to January 2022. Adjusting for the effect of the
VAT deferral scheme cash generated from operations and Oakwood post
completion service consideration was GBP6.72m (FY20: GBP7.18m) a
conversion of 126% (FY20: 163%) of adjusted EBITDA.
Spending on research and development, including capitalised
software development, increased in line with revenues to GBP3.79m
(FY20: GBP3.59m) of which capitalised software expenditure was
GBP1.57m (FY20: GBP1.71m).
Total capital expenditure was GBP1.71m (FY20: GBP1.86m); the
balance after capitalised development, being GBP0.13m (FY20:
GBP0.16m) relating to license-in intangible assets.
The Company acquired 100% of the issued share capital of Oakwood
Technologies BV in October 2020 for an initial cash consideration
of EUR1.2 million (of which EUR0.12m is deferred for a year) and a
potential further payment of EUR0.9 million in cash and up to
EUR0.9 million in Netcall shares. The potential further payments
are dependent on achieving specified performance targets during the
two-year period from completion of the acquisition. In the period
the total cash outflow from the Company in relation to the
transaction was GBP1.27m. See note 8 for further information.
To support the acquisition of MatsSoft Limited in 2017, the
Company issued a Loan Note totalling GBP7m. Loan Note interest
payments in the period totalled GBP0.72m (FY20: GBP0.48m). The Loan
Note is unsecured and is repayable in six instalments from 30
September 2022 to 31 March 2025. See note 7 for further
information.
As a result of these factors, net funds were GBP6.82m at 30 June
2021 (30 June 2020: GBP4.82m). The Group deferred GBP2.21m of VAT
payments during March and June 2020 due to Covid-19, which was
repayable in monthly instalments from March 2021 to January 2022,
resulting in a normalised gross cash position at 30 June 2021 of
GBP13.1m (30 June 2020: GBP10.5m).
Dividend
In line with the Company's dividend policy to pay-out 25% of
adjusted earnings per share, the Board is proposing a final
dividend for this financial year of 0.37p (FY20: 0.25p). If
approved, the final dividend will be paid on 8 February 2022 to
shareholders on the register at the close of business on 24
December 2021.
Audited consolidated income statement for the year ended 30 June
2021
2021 2020
GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Revenue 27,154 25,114
Cost of sales (2,625) (2,930)
Gross profit 24,529 22,184
Administrative expenses (22,659) (20,926)
Other losses (119) (24)
--------------------------------------------------- --------- ---------
Adjusted EBITDA 5,338 4,413
Depreciation (542) (657)
Net loss on disposal of property, plant
and equipment (52) -
Amortisation of acquired intangible
assets (488) (483)
Amortisation of other intangible assets (1,391) (1,344)
Change in fair value of contingent consideration
(see note 4) - (37)
Post-completion services (see note 4) (285) (33)
Share-based payments (829) (625)
--------------------------------------------------- --------- ---------
Operating profit 1,751 1,234
Finance income 3 38
Finance costs (769) (775)
--------------------------------------------------- --------- ---------
Finance costs - net (766) (737)
Profit before tax 985 497
Tax charge (11) (10)
--------------------------------------------------- --------- ---------
Profit for the year 974 487
=================================================== ========= =========
Earnings per share - pence
Basic 0.66 0.34
Diluted 0.64 0.33
=================================================== ========= =========
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 2021
2021 2020
GBP'000 GBP'000
------------------------------------------------- -------- --------
Profit for the year 974 487
Other comprehensive income
Items that may be reclassified to profit
or loss
Exchange differences arising on translation
of foreign operations 35 (14)
Total other comprehensive income for the
year 35 (14)
-------------------------------------------------- -------- --------
Total comprehensive income for the year 1,009 473
================================================== ======== ========
All of the comprehensive income for the year is attributable to
the shareholders of Netcall plc.
Audited consolidated balance sheet at 30 June 2021
2021 2020
GBP'000 GBP'000
------------------------------------------- --- -------- --------
Assets
Non-current assets
Property, plant and equipment 608 960
Right-of-use assets 711 970
Intangible assets 30,070 29,078
Deferred tax asset 648 482
Financial assets at fair value through
other comprehensive income 72 72
Total non-current assets 32,109 31,562
------------------------------------------- --- -------- --------
Current assets
Inventories 84 139
Other current assets 1,563 1,392
Contract assets 898 585
Trade receivables 2,635 3,957
Other financial assets at amortised cost 10 4
Cash and cash equivalents 14,520 12,710
------------------------------------------- --- -------- --------
Total current assets 19,710 18,787
------------------------------------------- --- -------- --------
Total assets 51,819 50,349
------------------------------------------- --- -------- --------
Liabilities
Non-current liabilities
Contract liabilities 22 104
Borrowings 6,858 6,745
Lease liabilities 672 902
Deferred tax liabilities 881 842
Total non-current liabilities 8,433 8,593
------------------------------------------- --- -------- --------
Current liabilities
Trade and other payables 6,918 6,907
Contract liabilities 11,691 11,724
Lease liabilities 171 248
Total current liabilities 18,780 18,879
------------------------------------------------ -------- --------
Total liabilities 27,213 27,472
------------------------------------------------ -------- --------
Net assets 24,606 22,877
=========================================== === ======== ========
Equity attributable to owners of Netcall
plc
Share capital 7,534 7,312
Share premium 3,015 3,015
Other equity 4,900 4,900
Other reserves 3,840 3,996
Retained earnings 5,317 3,654
------------------------------------------- --- -------- --------
Total equity 24,606 22,877
=========================================== === ======== ========
Audited consolidated statement of cash flows for the year ended
30 June 2021
2021 2020
GBP'000 GBP'000
------------------------------------------------ -------- --------
Cash flows from operating activities
Profit before income tax 985 497
Adjustments for:
Depreciation and amortisation 2,421 2,484
Loss on disposal of property, plant
and equipment 52 -
Share-based payments 829 625
Finance costs - net 766 737
Other non-cash expenses 11 1
Changes in operating assets and liabilities,
net of effects from purchasing of subsidiary
undertaking:
Decrease in inventories 54 26
Decrease/ (increase) in trade receivables 1,337 (92)
(Increase)/ decrease in contract assets (320) 589
(Increase)/ decrease in other financial
assets at amortised cost (7) 100
Increase in other current assets (184) (107)
Increase in trade and other payables (114) 3,334
(Decrease)/ increase in contract liabilities (142) 1,223
Decrease in provisions - (29)
------------------------------------------------- -------- --------
Cash flows from operations 5,688 9,388
------------------------------------------------- -------- --------
Analysed as:
Cash flows from operations before VAT
deferral scheme and payment of post
completion service consideration 6,718 7,176
Net effect of VAT deferral scheme (805) 2,212
Payment of post completion service
consideration (see note 8) (225) -
------------------------------------------------- -------- --------
Interest received 3 38
Interest paid (10) (6)
Income taxes paid (2) -
Net cash inflow from operating activities 5,679 9,420
------------------------------------------------- -------- --------
Cash flows from investing activities
Payment for acquisition of subsidiary,
net of cash acquired - (1,679)
Payment for property, plant and equipment (36) (146)
Payment of software development costs (1,571) (1,708)
Payment for proprietary software (see
note 8) (1,049) -
Payment for other intangible assets (97) (9)
Proceeds from sale of property, plant
and equipment 1 -
Net cash outflow from investing activities (2,752) (3,542)
------------------------------------------------- -------- --------
Cash flows from financing activities
Proceeds from issues of ordinary shares 222 39
Interest paid on Loan Notes (717) (478)
Lease payments (294) (199)
Dividends paid to Company's shareholders (369) (287)
------------------------------------------------- -------- --------
Net cash outflow from financing activities (1,158) (925)
------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 1,769 4,953
Cash and cash equivalents at beginning
of the financial year 12,710 7,769
Effects of exchange rate on cash and
cash equivalents 41 (12)
================================================= ======== ========
Cash and cash equivalents at end of
financial year 14,520 12,710
================================================= ======== ========
Audited consolidated statement of changes in equity at 30 June
2021
Share Share Other Other Retained
capital premium equity reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 30 June 2019 7,259 3,015 4,832 4,440 2,402 21,948
Issue of ordinary shares
as consideration for an
acquisition in a business
combination 14 - 68 - - 82
Proceeds from share issue 39 - - - - 39
Increase in equity reserve
in relation to options
issued - - - 622 - 622
Reclassification following
exercise or lapse of options - - - (1,052) 1,052 -
Dividends paid - - - - (287) (287)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Transactions with owners 53 - 68 (430) 765 456
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the year - - - - 487 487
Other comprehensive income
for the year - - - (14) - (14)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the year - - - (14) 487 473
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at
30 June 2020 7,312 3,015 4,900 3,996 3,654 22,877
-------------------------------- --------- --------- -------- ---------- ---------- --------
Proceeds from share issue 222 - - - - 222
Increase in equity reserve
in relation to options
issued - - - 729 - 729
Tax credit relating to
share options - - - 138 - 138
Reclassification following
exercise or lapse of options - - - (1,058) 1,058 -
Dividends paid - - - - (369) (369)
-------------------------------- --------- --------- -------- ---------- ---------- --------
Transactions with owners 222 - - (191) 689 720
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the year - - - - 974 974
Other comprehensive income
for the year - - - 35 - 35
-------------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total comprehensive
income for the year - - - 35 974 1,009
-------------------------------- --------- --------- -------- ---------- ---------- --------
Balance at
30 June 2021 7,534 3,015 4,900 3,840 5,317 24,606
-------------------------------- --------- --------- -------- ---------- ---------- --------
Notes to the financial information for the year ended 30 June
2021
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 Suite 203,
Bedford Heights, Brickhill Drive, Bedford, UK MK41 7PH 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 accounting
standards in conformity with the requirements of the Companies Act
2006. 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 2021.
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 2021 or 2020.
Statutory accounts for the years ended 30 June 2021 and 30 June
2020 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 2020 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 30 June 2021 will be delivered to the Registrar in
due course. Copies of the Annual Report 2021 will be posted to
shareholders on or about 19 November 2021. Further copies of this
announcement can be downloaded from the website www.netcall.com
.
As a result of the level of cash generated from operating
activities the Group has maintained a healthy liquidity position as
shown on the consolidated balance sheet. The Board has carried out
a going concern review and
concluded that the Group has adequate cash to continue in
operational existence for the foreseeable future. To support this
the Directors have prepared cash flow forecasts for a period in
excess of 12 months from the date of approving the financial
statements. When preparing the cash flow forecasts the Directors
have reviewed a number of scenarios, including the severe yet
plausible downside scenario, with respect to levels of new business
and client retention. In all scenarios the Directors were able to
conclude that the Group has adequate cash to continue in
operational existence for the foreseeable future.
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 Executive 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.
2021 2020
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Change in fair value of contingent consideration(1) - (37)
Post completion services expense(2) (285) (33)
(285) (70)
----------------------------------------------------- -------- --------
(1) The purchase agreement of MatsSoft Ltd provided for
potential further cash and shares to be paid dependent on achieving
specified performance targets over various periods from completion
of the acquisition. In the year ended 30 June 2020 the final
amounts earned were determined resulting in GBP0.04m being debited
to the income statement as a change in estimate of fair value.
(2) A number of former owners of Oakwood Technologies BV in the
current year and MatsSoft Ltd in the prior year continued to work
in the business following their acquisitions 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
2021 2020
---------------------------------------------------- -------- --------
Net earnings attributable to ordinary shareholders
(GBP'000) 974 487
Weighted average number of ordinary shares
in issue (thousands) 146,675 143,588
---------------------------------------------------- -------- --------
Basic earnings per share (pence) 0.66 0.34
---------------------------------------------------- -------- --------
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
2021 2020
----------------------------------------------- -------- --------
Weighted average number of ordinary shares
in issue (thousands) 146,675 143,588
Adjustments for share options (thousands) 6,416 5,839
Weighted average number of potential ordinary
shares in issue (thousands) 153,091 149,427
----------------------------------------------- -------- --------
Diluted earnings per share (pence) 0.64 0.33
----------------------------------------------- -------- --------
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'000 30 June 2021 30 June 2020
--------------------------------------------------------------- ------------- -------------
Profit used for calculation of basic and diluted EPS 974 487
Change in fair value of contingent consideration (see note 4) - 37
Share-based payments 829 625
Post-completion services (see note 4) 285 33
Amortisation of acquired intangible assets 488 483
Unwinding of discount - contingent consideration & borrowings 120 123
Tax effect of adjustments (503) (332)
Profit used for calculation of adjusted basic and diluted EPS 2,193 1,456
--------------------------------------------------------------- ------------- -------------
30 June 30 June
2021 2020
--------------------------------------------- -------- --------
Adjusted basic earnings per share (pence) 1.49 1.01
Adjusted diluted earnings per share (pence) 1.43 0.97
--------------------------------------------- -------- --------
6. Dividends
Statement of changes June 2021 balance
Cash flow statement in equity sheet
Year to June 2021 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
Final ordinary
dividend for the
year to June 2020 9/2/21 0.25p 369 369 -
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
369 369 -
------------------------------- ---------------- -------------------- --------------------- ---------------------
Statement of changes June 2020 balance
Cash flow statement in equity sheet
Year to June 2020 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
---------------------- -------- ---------------- -------------------- --------------------- ---------------------
Final ordinary
dividend for the
year to June 2019 5/2/20 0.20p 287 287 -
287 287 -
------------------------------- ---------------- -------------------- --------------------- ---------------------
It is proposed that this year's final ordinary dividend of 0.37
pence per share will be paid to shareholders on 8 February 2022.
Netcall plc shares will trade ex-dividend from 23 December 2021 and
the record date will be 24 December 2021. The estimated amount
payable is GBP0.55m. 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 reconciliation
30 June 30 June
GBP'000 2021 2020
------------------------------------------- -------- --------
Cash and cash equivalents 14,520 12,710
Borrowings - fixed interest and repayable
after one year (1) (6,858) (6,745)
Lease liabilities (843) (1,150)
------------------------------------------- -------- --------
Net funds 6,819 4,815
------------------------------------------- -------- --------
(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.
8. Acquisition of Oakwood Technologies BV's software
On 12 October 2020 the Company acquired 100% of the issued share
capital of Oakwood Technologies BV (trading as 'Automagica'), an AI
powered Robotic Process Automation software provider.
The Company assessed that substantially all of the fair value of
gross assets acquired was concentrated in Automagica's software. It
therefore elected to account for the transaction as an acquisition
of assets under the amendments to IFRS 3 'Business Combinations'
issued by IASB in October 2018. As such the consideration together
with the direct acquisition-related expenses (less any tangible or
financial assets assumed) has been attributed to the acquired
software.
The fair value of consideration was GBP1.20m comprising:
GBP'000
-------------------------------------- --------
Cash consideration - initial payment 987
Deferred cash consideration 99
Acquisition-related expenses 111
1,197
====================================== ========
The consideration for the transaction comprised:
-- cash consideration of EUR1.08m paid on completion in October 2020;
-- deferred cash consideration of an undiscounted amount of
EUR0.12m payable in October 2021; and
-- contingent consideration of up to EUR0.90m in cash and up to
EUR0.90m in Netcall shares payable dependent on specified
performance targets during the 2-year period from completion of the
acquisition. As the contingent payments are reliant on the on-going
provision of services to the business by the previous shareholders
then: the cash amounts earned will be expensed in the income
statement as rendered; and, the share element will be charged to
the income statement based on the fair value of shares that are
ultimately expected to vest, in line with the requirements of IFRS
2 'Share-based payments'.
The total contingent consideration expensed as post-completion
services in the period was GBP285,000.
The assets and liabilities recognised as a result of the
acquisition are as follows:
GBP'000
----------------------------------------- --------
Intangible assets: proprietary software 1,203
Trade receivables 24
Other current assets 1
Cash & cash equivalents 13
Trade & other payables (10)
Contract liabilities (32)
Current tax liabilities (2)
Net assets acquired 1,197
=========================================== ========
The cash outflow as a result of the transaction is as
follows:
GBP'000
----------------------------------------------- --------
Cash consideration - initial payment 987
Less: cash acquired (13)
Acquisition-related expenses 75
Net cash outflow - investing activities 1,049
------------------------------------------------- --------
Cash consideration - contingent consideration 225
------------------------------------------------- --------
Net cash outflow - operating activities 225
------------------------------------------------- --------
Total cash outflow 1,274
================================================= ========
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END
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