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Netcall PLC (NET)

  Print          Annual reports

Thursday 27 February, 2020

Netcall PLC

Half-year Report

RNS Number : 2657E
Netcall PLC
27 February 2020
 

27 February 2020

 

NETCALL PLC

("Netcall", the "Company", or the "Group")

 

Interim results for the six months ended 31 December 2019

Low-code solutions driving growth  

 

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 2019.

 

Financial highlights

· Revenue up 8% to £12.3m (H1-FY19: £11.4m)

 

· Total annual contract value(1) ('ACV') at 31 December 2019 up 10% to £16.6m (H1-FY19: £15.1m) -  Low-code ACV of £5.1m up 21% year over year

 

· Adjusted EBITDA(2) up 5% to £2.12m (H1-FY19: £2.02m)  

 

· Profit before tax of £0.14m (H1-FY19: £0.42m)

 

· Cash generated from operations of £1.57m (H1-FY19: £1.85m)

 

· Group cash at 31 December 2019 was £6.50m offsetting debt of £6.69m

 

Operational highlights

· Low-code business increased 22% and now represents 33% of Group revenues as a result of continued new customer acquisition and cross-sales into the existing customer base

 

· Recurring revenue from Low-code cross-sales generally three times higher than the current average support contract

 

· Launched Liberty Connect conversational messaging and bot platform providing new cloud revenue opportunities with first orders received

 

· Increased professional service and product revenue

 

· High levels of customer renewals contributing to growing support revenue

 

· New releases of our Low-code and contact centre platforms

Henrik Bang, Chief Executive, said:

"The first half of Netcall's financial year showed strong growth in Low-code solutions and ACV contributing to the increase in revenue and adjusted EBITDA. Low-code ACV increased 21% to £5.1m which underpinned 42% growth in Low-code cloud revenues. We continued to benefit from our transition to a recurring revenue model with total revenue increasing by 8% to £12.3m supported by ACV growth of 10% to £16.6m.

"Our market leading Low-code solution and customer engagement offerings address a rapidly growing market, as organisations face pressure to implement digital solutions to modernise their operations. We expect that the technology macro drivers will support future growth as we bring innovative solutions to market, expanding our digital cloud business.

"Trading in the first half was in line with the Board's expectations. The high level of recurring revenue and a healthy sales pipeline, combined with our comprehensive product offering, reinforces the Board's confidence in the prospects of Netcall."

 

 

(1) ACV, as at 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 acquisition, impairment, contingent consideration, share-based payments and non-recurring transaction costs.

 

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 0205

Caroline Forde / Josh Royston / Helena Bogle 

 

 

About Netcall:


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.

 

For further information, please go to www.netcall.com.

 

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

 

Netcall delivered a good trading performance, with continued growth in our key metrics and progress against each of our four strategic pillars.

 

Our investments are facilitating the transition towards a digital cloud business, resulting in improved quality of earnings, a differentiated product offering and an expanding market opportunity in a rapidly growing market.

 

Total ACV grew 10% in the period to £16.6m, with Low-code ACV up 21% year on year. The growth in ACV came through new customer wins and cross-sales of our expanded product suite, combined with high customer retention and renewal rates. Low-code cloud bookings continued to drive sales, and we also saw positive trading performances from product sales and professional services.

 

As a result, recognised revenues increased by 8% to £12.3m which lifted the Group's adjusted EBITDA by 5% to £2.12m. The comparable prior period included a one-off termination fee of £0.5m. The underlying growth rate of the business excluding this was 13% in revenue and 14% in adjusted EBITDA. Revenue from Low-code solutions grew 22% in the period and now represent 33% of Group revenues corresponding to £4.14m (H1-FY19: £3.38m).

 

The business model is underpinned by our highly profitable and cash generative product and support revenue streams, which also both grew in the period. The profits and cash generated from this business sector provides the means to invest in our Low-code and cloud operations, as we look to capitalise on the rapidly expanding Low-code market opportunity.

 

Current trading and outlook

 

The Group has traded in line with the Board's expectations for the year to date and the forward visibility of revenue continues to grow. The Board noted an increase in business confidence towards the end of the period and it continues to monitor the trading environment with regards to the timing of sales contracts. We have entered the second half of the year with a healthy sales pipeline, which combined with our financial position and continuing investment in our business and people, provide the Board with confidence in the prospects of the Group.

 

Business Review

 

Netcall helps organisations transform their customer engagement activities and enables digital transformation faster and more efficiently, empowering them to improve customer experiences and operational efficiencies.  We achieve this by delivering a market-leading software platform that addresses best-in-class customer experience and digital process automation.

 

Our industry leading Liberty platform is an integrated customer experience suite of solutions. The platform includes three core solutions; a cloud based Low-code platform for digital process automation, a cloud based conversational messaging and chatbot platform and a complete contact centre suite. 

 

The platform empowers business users and IT developers, at organisations such as Hampshire Trust Bank and Dreams, as described below, to collaboratively deliver solutions that support leaner and more customer-centric organisations.

 

The addressable market opportunity is large and industry analysts expect it to grow 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.

 

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 over time and deploying the solutions more widely to support their future customer engagement and digital transformation initiatives. This combined with continuous enhancements to our product portfolio, provides substantial cross- and up-sale opportunities in three areas:

 

·   Low-code solutions which represent the largest opportunity as our existing customers digitise and modernise their operations enabling them to further leverage their existing Liberty estate;

 

·   evolution 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.

 

An example of customer upsell in the period was Hampshire Trust Bank, an existing Low-code customer who upgraded from an entry level licence to an enterprise licence, having delivered a project four months earlier than planned at less than a third of the anticipated cost, through the use of Liberty Create.

 

To stimulate 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, for local authorities, which is a suite of pre-built business processes and citizen portals that can be downloaded for Liberty Create and integrated with our customer engagement solutions. We have a number of live customers for Citizen Hub and have secured several new sales at the start of the second half of the year.

 

From launch in September 2019, there are today more than 500 registered users of the community, developers and business users benefiting from apps, best practise sharing and previews of new functionality among other things. 

 

Expansion of our customer base

 

We primarily target organisations with large numbers of customers or employees and, in many cases, subject to a high level of regulation. This includes financial services, retail, healthcare and government sectors where we currently have a significant market presence.

 

New customers secured in the period included Dreams, who purchased all three Liberty solutions, replacing its siloed customer engagement solutions with a single integrated solution to deliver a seamless experience to customers across all its service channels. Our all-in-one customer experience platform will enable the retailer to make transformational changes quickly and improve agent performance by weaving all channels into a single customer conversation. Liberty Create will be used to improve processes and build better customer journeys. Liberty Converse and Connect will deliver voice, email and web chat capabilities to improve agent performance in the contact centre.  

 

Continued innovation

 

We continue to invest in innovation to strengthen our Liberty platform with a focus on creating new solutions for our customers that will drive revenue growth.

 

Our Liberty suite covers three integrated solution areas:

 

· Liberty Create: A low-code software solution which enables the creation of apps that drives workflows and business processes with integration to our communication services as well as back-end systems.

· Liberty Converse: A complete omnichannel contact centre solution for customer engagement which also includes solutions such as speech bots, switchboard and auto attendant. 

·     Liberty Connect: A cloud messaging and bot platform enabling customers to extend their reach using digital channels like Facebook Messenger and Twitter as well as benefit from bots and automation, launched in September. 

In addition to the strong sales of Liberty Create, the period saw the launch and initial sales of Liberty Connect and higher sales of Liberty Converse.

In the period we also released new versions of both Create and Converse with substantial new enhancements and functionality and further releases are scheduled for the beginning of 2020.

For example, Liberty Create was enhanced to include an industry first integrated Test Studio for recording and automation of app testing. This can replace third party testing tools which are costly and complicated to integrate and it enables citizen developers quickly to automate app-testing rather than having to rely on scarce Quality Assurance resources.

Releases planned for the second half of the year include AI integrations and the introduction of bots, including a series of pre-built bot solutions and an easy to use bot-designer that will enable users to build automated bot work-flows that will work across all Connect communication channels. 

 

Growing our partner base

Partners are an important additional route to market, providing the opportunity to access new markets and scale our business opportunity faster. The aim is to grow revenue via partners significantly by assisting them in creating new offerings and revenue streams from their customers. We are building an eco-system of partners with industry knowledge and delivery and support capabilities, focusing on large organisations with global footprints. An example of this is Panasonic, which recently announced that its range of SIP Communication Solutions are now fully integrated with Liberty Converse.

 

The period saw the launch of a new Managed Service Partner programme, building on the initial success of our partner programme last year. We now offer various packages, each including a mix of sales enablement, marketing support and technical training. The first partners have now signed up to the programme and initial customer wins have been secured.

 

Financial Review

The Group's revenue comprises the following components:

· 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: software license sales with supporting hardware.

· Professional services: consultancy, implementation and training services.

 

The Group continues its transition to a digital cloud business, having reached an inflection point last year, with new Cloud services bookings continuing to exceed new Product and Product support contract sales.

 

Group revenue increased 8% to £12.3m of which Low-code solutions now represent £4.14m (H1-FY19: £3.38m) of Group revenues, increasing 22% in the period.

 

As a result of the change in sales mix towards recurring revenue models, total ACV at 31 December 2019 increased by 10% year over year to £16.6m, with Low-code ACV up 21% year over year to £5.1m. ACV, as at 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. The table below sets out ACV at the last three interim periods:

 

£'m ACV

H1-FY20

H1-FY19

H1-FY18

Low-code

5.1

4.2

3.0

Liberty cloud

1.6

1.3

1.3

Total cloud

6.7

5.5

4.3

Support contract

9.9

9.6

9.5

Total

16.6

15.1

13.8

 

The table below sets out revenue by component for the last three interim periods:

 

£'m Revenue

H1-FY20

H1-FY19

H1-FY18

Cloud services

3.2

3.0

2.0

Product support contracts

4.7

4.6

4.4

Total Cloud services & Product support contracts

7.9

7.6

6.5

Communication services

1.1

0.9

1.1

Product

1.2

1.0

1.8

Professional services

2.1

1.8

1.3

Total

12.3

11.4

10.7

 

Revenue from Cloud services increased by 5% to £3.16m (H1-FY19: £3.01m) reflecting the higher year over year Cloud service ACV. The comparative period figure included a one-off termination fee of £0.5m which excluding this gives an underlying growth rate of 26%. 

 

Product support contract revenue increased by 2% to £4.72m (H1-FY19: £4.63m) as a result of high contract retention combined with the contribution of new product sales and price rises.

 

Communication services revenue increased by 18% to £1.11m (H1-FY19: £0.94m) due to higher application driven messaging volumes and call-back usage.

 

Product revenue increased by 21% to £1.19m (H1-FY19: £0.98m) due to higher  sales to NHS and Public Sector organisations.

 

Professional services revenue increased 16% to £2.08m (H1-FY19: £1.80m) due to demand for implementation services for Cloud service and Product solutions. The overall demand for our professional services is dependent on:

 

·       the mix of direct and indirect sales of our solutions, in the latter case our 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 was 88% (H1-FY19: 90%) mainly due to an increase in outsourced and insourced consultants from partners to supplement our in-house teams in delivering professional services.  

 

Administrative expenses, before depreciation, amortisation, share-based payments and acquisition related items, increased to £8.61m (H1-FY19: £8.23m) reflecting an underling increase of 5%, a result of the previously announced investment programme into our organisation, offset by a reduction of £0.14m in operating lease payments following the Group's adoption of IFRS 16 'Leases' (see note 7 for further information).

 

Consequently, the Group's adjusted EBITDA was £2.12m (H1-FY19: £2.02m), a margin of 17% of revenue (H1-FY19: 18%).

 

Profit before tax was £0.14m (H1-FY19: £0.42m) after accounting for acquisition related items and interest on borrowings taken out to fund the acquisition of MatsSoft in August 2017 and higher depreciation and amortisation of capitalised development.

 

The Group tax charge of £0.10m (H1 FY19: £0.12m) represents an underlying effective rate of tax of 13% (H1 FY19: 13%) 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.

 

Basic earnings per share was 0.03 pence (H1-FY19: 0.20 pence) and 0.48 pence on an adjusted basis (H1-FY19: 0.61 pence). Diluted earnings per share was 0.02 pence (H1-FY19: 0.20 pence) and 0.46 pence on an adjusted basis (H1-FY19: 0.60 pence).

 

Cash generated from operations was £1.57m (H1-FY19: £1.85m) a conversion of 74% (H1-FY19: 92%) of adjusted EBITDA. Cash conversion is typically weighted to the second half of the financial year due to the timing of Cloud service and support contract annual billings. In addition, the comparative period included the benefit of a positive unwinding of a timing difference from 2017.

 

Spending on research and development, including capitalised software development, increased to £1.67m (H1-FY19: £1.45m) of which capitalised software expenditure was £0.74m (H1-FY19: £0.71m).

 

Total capital expenditure was £0.81m (H1-FY19: £1.07m); the balance after capitalised development, being £0.07m (H1-FY19: £0.36m) relating to IT and office assets.

 

The Company acquired MatsSoft Limited in August 2017. The purchase agreement 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 October 2019, the fair value of the remaining contingent consideration was re-estimated at £1.76m resulting in £0.04m being debited to the income statement as a change in estimate of fair value. During the period the Company paid £1.76m comprising £1.68m in cash and £0.08m in shares under this arrangement, bringing the total consideration paid to £15.6m. No further payments are due under this agreement.

 

To support the acquisition in 2017, the Company issued a £7m Loan Note (see note 6). Loan Note interest payments in the period totalled £0.30m (H1-FY19: £0.29m).

 

As a result of these factors, net debt was £0.19m at 31 December 2019 (31 December 2018: £0.77m). 

 

 

Unaudited consolidated income statement for the six months to 31 December 2019

 

£'000

 

Unaudited

Six months to

31 December 2019

Unaudited

Six months to

 31 December 2018

Audited

12 months to

 30 June

2019

Revenue

 

12,267

11,354

22,903

Cost of sales

 

(1,510)

(1,121)

(2,329)

Gross profit

 

10,757

10,233

20,574

 

 

 

 

 

Administrative expenses

 

(10,218)

(9,450)

(19,058)

Other gains/ (losses) - net

 

(35)

15

(11)

 

 

 

 

 

Adjusted EBITDA

 

2,115

2,015

3,411

Depreciation

 

(332)

(143)

(310)

Net loss on disposal of property, plant and equipment

 

(1)

-

(2)

Amortisation of acquired intangible assets

 

(248)

(259)

(512)

Amortisation of other intangible assets

 

(633)

(509)

(1,120)

Change in fair value of contingent consideration

 

(37)

121

865

Post-completion services

 

(33)

(147)

(244)

Share-based payments

 

(327)

(280)

(583)

 

 

 

 

 

Operating profit

 

504

798

1,505

 

 

 

 

 

Finance income

 

23

20

41

Finance costs

 

(391)

(403)

(794)

Finance costs - net

 

(368)

(383)

(753)

 

 

 

 

 

Profit before tax

 

136

415

752

 

 

 

 

 

Tax charge

 

(99)

(124)

(142)

Profit for the period

 

37

291

610

 

 

 

 

 

Earnings per share - pence

 

 

 

 

Basic

 

0.03

0.20

0.43

Diluted

 

0.02

0.20

0.41

 

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.

 

Unaudited statement of comprehensive income for the six months to 31 December 2019

 

£'000

 

Unaudited

Six months to

31 December 2019

Unaudited

Six months to

31 December 2018

Audited

12 months to

 30 June

2019

 

 

 

 

 

Profit for the period

 

37

291

610

 

 

 

 

 

Other comprehensive income

 

 

 

 

Items that may be reclassified to profit or loss

 

 

 

 

Exchange differences arising on translation of foreign operations

 

11

(19)

(17)

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

 

-

-

-

 

 

 

 

 

Total comprehensive income for the period

 

48

272

593

 

All of the comprehensive income for the period is attributable to the shareholders of Netcall plc.

 

Unaudited consolidated balance sheet at 31 December 2019

 

£'000

 

Unaudited

31 December 2019

Unaudited

31 December 2018

Audited

30 June 2019

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

1,071

627

1,210

Right-of-use assets

 

690

-

-

Intangible assets

 

29,054

28,913

29,188

Deferred tax asset

 

423

473

501

Financial assets at fair value through other comprehensive income

 

72

72

72

Total non-current assets

 

31,311

30,085

30,971

Current assets

 

 

 

 

Inventories

 

63

186

165

Other current assets

 

1,232

1,186

1,314

Contract assets

 

1,232

1,765

1,178

Trade receivables

 

3,311

5,028

3,864

Other financial assets at amortised cost

 

145

176

100

Cash and cash equivalents

 

6,502

5,808

7,769

Total current assets

 

12,485

14,149

14,390

Total assets

 

43,796

44,234

45,361

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Other payables

 

-

-

-

Contract liabilities

 

171

271

207

Borrowings

 

6,689

6,576

6,632

Lease liabilities

 

635

-

-

Deferred tax liabilities

 

869

786

851

Provisions

 

-

57

77

Total non-current liabilities

 

8,364

7,690

7,767

Current liabilities

 

 

 

 

Trade and other payables

 

3,527

5,512

5,265

Dividend payable

 

287

758

-

Contract liabilities

 

9,316

8,788

10,395

Current tax liabilities

 

-

18

-

Lease liabilities

 

198

-

-

Provisions

 

-

128

-

Total current liabilities

 

13,328

15,204

15,660

Total liabilities

 

21,692

22,894

23,427

Net assets

 

22,104

21,340

21,934

 

 

 

 

 

Equity attributable to the owners of the parent

 

 

 

 

Share capital

 

7,275

7,242

7,259

Share premium

 

3,015

3,015

3,015

Other equity

 

4,900

4,832

4,832

Other reserves

 

3,900

4,231

4,440

Retained earnings

 

3,014

2,020

2,388

Total equity

 

22,104

21,340

21,934

 

 

Unaudited consolidated statement of changes in equity at 31 December 2019

 

£'000

Share capital

Share premium

Other equity

Other reserves

Retained earnings

Total equity

Balance at 1 July 2018

7,242

3,015

4,832

3,917

2,482

21,488

Share-based payments

-

-

-

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)

-

(19)

Profit and total comprehensive income for the period

-

-

-

(19)

291

272

Balance at 31 December 2018

7,242

3,015

4,832

4,231

2,020

21,340

Proceeds from share issue

16

-

-

-

-

16

Share-based payments

-

-

-

257

-

257

Reclassification following exercise or lapse of share options

1

-

-

(50)

49

-

Transactions with owners

-

-

-

207

49

273

Profit for the period

-

-

-

-

319

319

Other comprehensive income for the period

-

-

-

2

-

2

Profit and total comprehensive income for the period

-

-

-

2

319

321

Balance at 30 June 2019 as originally presented

7,259

3,015

4,832

4,440

2,388

21,934

Change in accounting policy (note 7)

-

-

-

-

17

17

Restated balance at 30 June 2019

7,259

3,015

4,832

4,440

2,405

21,951

Issue of ordinary shares as consideration for acquisition in a business combination

14

-

68

-

-

82

Proceeds from share issue

2

-

-

-

-

2

Share-based payments

-

-

-

307

-

307

Reclassification following exercise or lapse of share options

-

-

-

(859)

859

-

Tax debit relating to share options

-

-

-

1

-

1

Dividends to equity holders of the company

-

-

-

-

(287)

(287)

Transactions with owners

16

-

68

(551)

572

105

Profit for the period

-

-

-

-

37

37

Other comprehensive income for the period

-

-

-

11

-

11

Profit and total comprehensive income for the period

-

-

-

11

37

48

Balance at 31 December 2019

7,275

3,015

4,900

3,900

3,014

22,104

 

 

Unaudited consolidated cash flow statement for the six months to 31 December 2019

 

£'000

Unaudited

Six months to

31 December 2019

Unaudited

Six months to

 31 December 2018

Audited

12 months to

 30 June

2019

Cash flows from operating activities

 

 

 

Profit before tax

137

414

752

Adjustments for:

 

 

 

  Depreciation and amortisation

1,213

911

1,942

  Loss on disposal of fixed assets

1

4

2

  Share-based payments

327

280

583

  Net finance costs

368

383

753

Changes in working capital:

 

 

 

  Decrease in inventories

102

30

51

  Decrease/ (increase) in trade receivables

550

1,052

2,216

  Decrease/ (increase) in contract assets

(81)

(330)

252

  (Increase)/ decrease in other financial assets at amortised cost

(16)

(57)

24

  Decrease/ (increase) in other current assets

59

(124)

(257)

  Decrease in trade and other payables

(20)

(49)

(242)

  (Decrease)/ increase in contract liabilities

(1,066)

(679)

862

  Increase/ (decrease) in provisions

-

12

(95)

Cash generated from operations

1,574

1,847

6,843

Interest received

23

20

41

Interest paid

(2)

(2)

(4)

Net cash inflow from operating activities

1,595

1,865

6,880

 

 

 

 

Cash flows from investing activities

 

 

 

Payment for acquisition of subsidiary, net of cash acquired

(1,679)

(462)

(591)

Purchases of property, plant and equipment

(64)

(327)

(1,078)

Payment of software development costs

(737)

(709)

(1,532)

Purchases of other intangible assets

(9)

(34)

(350)

Proceeds from sale of property, plant and equipment

-

-

1

Net cash outflow from investing activities

(2,489)

(1,532)

(3,550)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of ordinary shares

3

-

16

Interest paid on Loan Notes

(298)

(292)

(590)

Principal element of lease payments

(86)

-

-

Dividends paid to Company's shareholders

-

-

(758)

Net cash outflow from financing activities

(381)

(292)

(1,332)

 

 

 

 

Net (decrease)/ increase in cash and cash equivalents

(1,275)

41

1,998

Cash and cash equivalents at beginning of period

7,769

5,779

5,779

Effects of exchange rate changes on cash and cash equivalents

8

(12)

(8)

Cash and cash equivalents at end of period

6,502

5,808

7,769

 

 

Notes to the financial information for the six months ended 31 December 2019

 

1. General information

Netcall plc (AIM: "NET", "Netcall", "Group" or the "Company") is a leading provider of Low-code and 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 Technology Limited and Netcall Systems Limited (formerly Netcall Telecom Limited and MatsSoft Limited respectively).

 

These condensed half year financial statements for the half year ended 31 December 2019 have been prepared in accordance with the AIM Rules for Companies, comply with IAS 34 Interim Financial Reporting as adopted by the European Union and should be read in conjunction with the annual financial statements for the year ended 30 June 2019, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

 

This results announcement is 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 2019 has been derived from the full Group accounts published in the Annual Report and Accounts 2019, 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 2019 statutory accounts. The Group has adopted IFRS 16 'Leases' from 1 July 2019, replacing IAS 17 'Leases', see note 7 for details. No other significant changes to accounting policies are expected for the year ending 30 June 2020.

 

The results for the six months ended 31 December 2019 were approved by the Board on 26 February 2020.  A copy of these interim results will be available on the Company's web site www.netcall.com from 27 February 2020.

 

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 2019. The Group continues to monitor the impact of the UK leaving the European Union in January 2020 and the succeeding transition period on the ability of the Group's clients to do business. 

 

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, a reconciliation of 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

31 December 2019

Six months to

 31 December 2018

12 months to

 30 June

2019

Net earnings attributable to ordinary shareholders (£'000s)

37

291

610

Weighted average number of ordinary shares in issue (000s)

143,455

142,978

143,038

Basic earnings per share (pence)

0.03

0.20

0.43

 

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

31 December 2019

Six months to

 31 December 2018

12 months to

 30 June

2019

Weighted average number of ordinary shares in issue (000s)

143,455

142,978

143,038

Adjustments for share options (000s)

5,666

2,561

6,085

Weighted average number of potential ordinary shares in issue (000s)

149,121

145,539

149,123

Diluted earnings per share (pence)

0.02

0.20

0.41

 

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:

£'000s

Six months to

31 December 2019

Six months to

 31 December 2018

12 months to

 30 June

2019

Profit used for calculation of basic and diluted EPS

37

291

610

Amortisation of acquired intangible assets

248

259

512

Change in fair value of contingent consideration

37

(121)

(865)

Post-completion services

33

147

244

Share-based payments

327

280

583

Unwinding of discount - contingent consideration & borrowings

67

95

181

Tax adjustment

(58)

(81)

(125)

Profit used for calculation of adjusted basic and diluted EPS

691

870

1,140

 

Pence

Six months to

31 December 2019

Six months to

 31 December 2018

12 months to

 30 June

2019

Adjusted basic earnings per share

0.48

0.61

0.80

Adjusted diluted earnings per share

0.46

0.60

0.76

 

5. Dividends

 

Dividends paid or declared during the period were as follows:

 

Six months to December 2019

Paid

Pence per share

Cash flow statement

(£'000)

Statement of changes in equity

(£'000)

December 2019 balance sheet

(£'000)

 

 

 

 

 

 

Final ordinary dividend for year to June 2019(1)

5/2/20

0.20p

-

287

287

 

 

 

-

287

287

 

Six months to December 2018

Paid

Pence per share

Cash flow statement

(£'000)

Statement of changes in equity

(£'000)

December 2018 balance sheet

(£'000)

 

 

 

 

 

 

Final ordinary dividend for year to June 2018

6/2/19

0.53p

-

758

758

 

 

 

-

758

758

 

(1) The final ordinary dividend for the year ended 30 June 2019 was approved at the Annual General Meeting held on 21 November 2019.

 

6. Net debt reconciliation

 

£'000

31 December 2019

31 December 2018

30 June

2019

Cash and cash equivalents

6,502

5,808

7,769

Borrowings - repayable after one year(1)

(6,689)

(6,576)

(6,632)

Net debt/ (funds)

(187)

(768)

1,137

 

(1) To support the acquisition of MatsSoft Limited in August 2017, the Company issued a £7m 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 £6.42m and the share option a fair value of £0.58m.  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.

 

7. IFRS 16 'Leases'

 

The Group has adopted IFRS 16 'Lease's retrospectively from 1 July 2019, but has not restated comparatives for the 30 June 2019 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore not recognised in the opening balance sheet on 1 July 2019.

 

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using an incremental borrowing rate as of 1 July 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 3.25%.

 

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

 

· applying a single discount rate to a portfolio of leases with reasonably similar characteristics;

· relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review - there were no onerous contracts as at 1 July 2019;

· excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application; and,

· using hindsight in determining the lease where the contract contains options to extend or terminate the lease.

 

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.

 

Measurement of lease liabilities

 

£'000

 

Operating lease commitments at 30 June 2019

770

Add property lease dilapidations

227

Discounted using the incremental cost of borrowing at 1 July 2019

(93)

Lease liability recognised at 1 July 2019

904

Of which are:

 

  Current lease liabilities

179

  Non-current lease liabilities

725

 

904

 

Measurement of right-of-use assets

The associated right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 30 June 2019.

 

Adjustments recognised in the balance sheet on 1 July 2019

The change in accounting policy affected the following items in the balance sheet on 1 July 2019.

 

£'000

 

Right-of-use assets

819

Deferred tax assets

3

Prepayments

(15)

Accruals

37

Lease liabilities

(904)

Provisions - property lease dilapidations

77

Net impact on retained earnings

17

 

Impact of change on income statement

Under IFRS 16, the Group now recognises depreciation and interest costs, instead of an operating lease expense as set out in the table below.

£'000

31 December 2019

31 December 2018

30 June

2019

Operating lease expense

-

138

297

Depreciation

129

-

-

Interest

14

-

-

Total

143

138

297

 


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 [email protected] or visit www.rns.com.
 
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