REG - Netcall PLC - Final Results for the Year Ended 30 June 2022
05/10/2022 09:33
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RNS Number : 7836B Netcall PLC 05 October 2022
5 October 2022
NETCALL PLC
("Netcall", the "Company" or the "Group")
Final Results for the Year Ended 30 June 2022
Accelerating organic growth and higher 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 2022.
Financial highlights
FY22 FY21
Revenue £30.5m £27.2m +12%
Cloud services revenue £10.7m £8.3m +30%
Total annual contract value ("ACV") ((1)) £24.2m £18.5m +31%
Cloud services ACV £15.0m £9.4m +60%
Adjusted EBITDA((2)) £6.4m £5.3m +20%
Profit before tax £2.3m £1.0m +130%
Adjusted basic earnings per share 2.15p 1.49p +44%
Group cash at period end £17.6m £14.5m +21%
Net funds at period end £13.4m £6.8m +97%
Final ordinary dividend per share 0.54p 0.37p +46%
Operational highlights
· Continued strong trading throughout the year with significant Cloud services
momentum
· Growth in ACV to £24.2m (FY21: £18.5m), driven by Cloud subscription
contracts
· Cloud services is now the Group's largest revenue stream and comprising
approximately 90% of new product bookings
· Landmark $19m initial three-year Cloud subscription contract with a S&P
500 international financial services firm, of which £0.3m revenue was
recognised in FY22
· Annual revenue run-rate from Intelligent Automation solutions is now £13.8m
(FY21: £10.8m), representing approximately 45% (FY21: 35%) of Group revenue
· Continuing cross-sales with 15% of Customer Engagement customers now having
purchased Intelligent Automation solutions (FY21: 12%)
· Cloud net retention rate((3)) up to 152% (FY21: 116%) or 117% excluding the
effect of the landmark contract win, supported by high customer satisfaction
rates of 99%
· Ongoing platform enhancements, including launch of Liberty AI adding machine
learning functionality to the Liberty platform
· Greenhouse Gas emissions reduced by 30% over the year for Scope 1 and Scope 2
emissions((4)), and commenced measurement of Scope 3 emissions with ambition
to be carbon neutral by end of 2026
· The Group's trading momentum, particularly for Cloud solutions, has continued
at the start of the new financial year
Henrik Bang, Chief Executive, said:
“We are pleased with the strong performance achieving double digit organic
growth in revenue and profitability combined with an accelerated growth rate
of our annualised contract value, pointing to continued positive momentum."
"Netcall has a significant and growing market opportunity as organisations
increasingly implement digital strategies and business models. The market
relevance and potential of our solutions are illustrated by the increasing
growth rates and was further demonstrated by the important $19m global
contract win announced in June 2022 which resulted in a material upgrade to
the Company's FY23 expectations.
"We continue to invest in our business to ensure it remains well positioned to
take advantage of the market opportunity. The Group's trading momentum, which
has continued at the start of the new financial year, coupled with a growing
order book and higher recurring revenues provide the Board with confidence in
the Group's continued success."
( )
((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 (save
that the contract win announced on 10 June 2022 is included in FY22 ACV as its
first-year contribution).
((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 cross- or up-sales 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 Adviser and Broker) Tel. +44 (0) 20 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, Santander and Aon.
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 had an excellent trading year with robust demand. The Group delivered
12% revenue growth to £30.5m and an adjusted EBITDA increase of 20% to
£6.4m, ahead of previously upgraded market expectations((1)). This follows a
strong performance across the Group's key market segments, with healthy demand
for both Intelligent Automation and Customer Engagement solutions.
The engine of growth continues to be the Group's Cloud offering with Cloud
solutions now representing the largest revenue stream, growing 30% to £10.7m.
Furthermore, the Group secured a landmark three-year $19m Cloud subscription
contract in June 2022 ("Contract Win"), contributing £0.3m of revenue in the
current year with the remaining value to be recognised in future periods.
The significant sales momentum from new and existing customers is reflected in
the Annual Contract Value ("ACV"), a leading indicator of future performance.
Total ACV and Cloud ACV grew 31% to £24m and 60% to £15m respectively, with
underlying Cloud ACV growth of 26% (excluding the Contract Win) as customers
increasingly adopt cloud solutions. Cloud ACV is now 62% of total ACV, with
cloud deployments representing approximately 90% of all new product bookings,
and demonstrating the Group's continued transition to a Cloud business model.
The Group's growth is underpinned by its land-and-expand strategy, as more
customers deploy and increase the use of automation technologies such as
Low-code platforms, robotic process automation ("RPA") and artificial
intelligence ("AI") to automate business processes as well as adopting
chatbots and cloud contact centres. The share of Customer Engagement customers
who have also purchased Intelligent Automation solutions is now approximately
15% of the customer base (FY21: 12%). Along with growing adoption of the
Liberty platform, the value customers attribute to Netcall's solutions is
reflected in the high and improving customer satisfaction levels, with 99% of
customers surveyed in the financial year stating that they would recommend
Netcall to a peer or colleague.
The Group's accelerating transition to Cloud is driving improved profitability
and cash generation. Following an inflection point reached in FY19 with cloud
bookings exceeding product bookings for the first time, the momentum of Cloud
ACV and EBITDA margin expansion has driven a 97% increase in net funds over
the year to £13.4m (30 June 2021: £6.8m). Cash at year end was £17.6m (30
June 2021: £14.5m) after payment of £5.2m for early redemption of loan
notes held by BGF Nominees Limited (part of BGF Group Plc) and the remaining
deferred VAT due to Covid-19 and excludes any contribution from the Contract
Win.
((1)) Netcall believes that market expectations for the year ending 30 June
2022 were Adjusted EBITDA of £6.0m prior to 20 July 2022
ESG initiatives
The Group continues to progress against its ESG initiatives to ensure
Netcall's evolution is founded on responsible and sustainable principles to
the benefit of all stakeholders, including reducing its environmental impact
and enhancing its environmental policy and management systems. During the
year, the Group measured and is voluntarily reporting its Scope 1 and Scope 2
emissions, which have reduced by 30%. The Group also commenced measurement of
Scope 3 emissions in line with the ambition to be carbon neutral by end of
2026. To support these initiatives, Netcall has developed an Environmental
Management System through the Liberty Create platform, in conjunction with a
partner, to manage key actions and improvements against the Group's long-term
environmental assessment programme. The application has also been made
available to customers via the AppShare Community to support Netcall's
customers' own objectives.
Current Trading and Outlook
The Group's trading momentum has continued in the beginning of the new
financial year, particularly for Cloud solutions. The pipeline is robust and
the order book has materially increased to £54m as of 30 June 2022, up from
£33m a year ago which underpins the Group's growing recurring revenues.
Combined with the Liberty platform being well positioned to support the
Group's attractive and growing target markets, the Board is confident in the
Group's continued success.
Business Review
Netcall's differentiated proposition, blending Intelligent Automation with
Customer Engagement, plays at the intersection of rapid macro growth drivers:
increasing automation and a focus on customer and employee experience.
Technology investment remains a priority for business leaders and adoption
continues to be a priority post the Covid-pandemic as organisations seek to
improve cost efficiencies and operational effectiveness while delivering
better experiences for customers and employees. In the face of rising costs,
skill shortages and evolving consumer expectations, solutions such as
Low-code, RPA, machine learning and omni-channel engagement are increasingly
seen as an interconnected toolkit for implementing automation programmes more
effectively.
Successful automation projects are more likely to include customer or employee
experience than not, according to recent research(1). The results show that
those organisations that have realised successful automation efforts have done
so by making it a strategic priority to improve customer and employee
experiences.
This sits at the core of Netcall's offering focusing on unifying automation
and customer engagement, and explains the efficacy to which the Liberty
platform can deliver successful digital strategies. The Liberty platform
comprises a blend of Intelligent Automation and Customer Engagement solutions
offering a 'one-stop-shop' Digital Transformation toolkit. The outcome is
smoother, faster and more transparent business processes which improve
customer and employee experiences and ultimately delivers operational
efficiencies. The platform's five main product categories which provide
substantial competitive differentiation include:
Intelligent Automation
· Liberty Create: Enables both professional and non-professional developers to
create enterprise grade applications that drive automated workflows and
business processes using Low-code software. Liberty Create uses an intuitive
drag-and-drop environment for faster development, and combines easy
integration to other parts of the Liberty platform, as well as third party
solutions such as SAP and Salesforce.
· Liberty RPA: AI-powered robotic process automation frees up people from
mundane and repetitive tasks, enabling them to be more productive. RPA speeds
up processing times, reduces errors and improves overall efficiency.
· Liberty AI: Offers richer insights to data, predicts outcomes and improves
business decision making. Through machine learning Liberty AI scales, delivers
and enhances customer experiences across the entire enterprise.
Customer Engagement
· Liberty Converse: Seamless customer engagement using our complete omni-channel
cloud contact centre solution. Converse blends practical AI and automation
with agent-assisted technology to boost operational and agent productivity,
reduce costs and improve customer experience.
· Liberty Connect: A cloud conversational messaging and chatbot solution that
enables organisations to engage customers over web chat, SMS, and social media
channels. Queries can be handled automatically using AI-powered virtual
agents, or routed to the most appropriately skilled live agent through Liberty
Converse.
Underlying the platform is the Group's AppShare community which connects
Netcall's customer base by providing a forum for knowledge sharing and a
valuable resource of pre-built accelerators and modules to enrich customers'
interaction with the Liberty platform solutions. The community continues to
grow, now with 2,000 members who have completed more than 4,000 downloads to
collaborate and build upon existing content. During the year, the Group
launched Netcall Community Academy, built on Liberty Create, providing
customers with a learning curriculum of over 100 courses to hone skills in all
aspects of the Liberty platform capabilities.
(1) McKinsey: July 2022, "Your questions about automation, answered"
Strategy
Netcall helps customers turn their digital strategies into successful journeys
and build smarter, leaner
and more customer-centric organisations making them more effective and
competitive.
The Group's core focus verticals of Healthcare, Government and Financial
Services represent 88% of Group revenue. Customers across these industries are
typically characterised by large ecosystems with complex networks of
consumers, employees and stakeholders. In addition to opportunities in
tangential verticals, these core industries remain at the early stages of
their digital transformation journeys, and offer significant growth potential
where the Group has a substantial number of references.
The ongoing evolution of the Group is supported by four core growth pillars:
new customer acquisition; growth within the existing base; ongoing product
innovation and partner network expansion.
This is underpinned by the Group's financial position which enables continued
investment in the business and provides the opportunity to look for selective
acquisitions with complementary proprietary software and/or additional
customers in the Group's target markets.
Customer base expansion:
The Group's Cloud solutions continue to be the main driver of new customer
acquisition, with a number of new customers secured in the year across its
three core sectors. In addition, the Group has seen increasing momentum in the
utility and transport sectors.
This progression comes as organisations increasingly rely on digital
transformation to improve internal operational efficiencies and become leaner,
more customer-centric organisations.
New customer implementations include:
· A landmark $19m deal with a S&P 500 international financial services firm
for Liberty Create and Liberty RPA to build and deploy powerful business
applications across its global operations spanning 120 countries, with a view
to delivering better outcomes for customers and other stakeholders. The scale
of this contract win demonstrates the Group's ability to support the world's
largest companies in their digital transformation efforts.
· A number of public sector bodies including Cheshire East Council, Cheltenham
Borough Council and Stroud Borough Council have taken up Netcall's Citizen Hub
offering, comprising both Low-code and customer engagement offerings in order
to deliver operational efficiencies and usability of their platforms.
Land and expand:
The Group's large and diversified customer base continues to present
significant opportunity, with customers increasingly implementing both
Intelligent Automation and Customer Engagement solutions, together with Cloud
technologies, to maximise the efficiency and usability of their services. This
broadening engagement with the Liberty platform along with consistently high
customer satisfaction levels and low customer churn, continues to drive higher
cloud net retention rates, which year-over-year increased to 152%, or 117%
excluding the effect of the Contract Win (FY21: 116%).
Key value opportunities within the existing base include the increasing
adoption of Intelligent Automation solutions by the Group's Customer
Engagement customers, which on average drives a threefold increase in the
contract value. With 15% of Customer Engagement customers having now purchased
Intelligent Automation solutions, there is significant potential within this
base alone as customers look to automate more processes. Secondly, the ongoing
trend of on-premise contract centre customers migrating to cloud environments
to leverage greater flexibility and lower IT support costs has resulted in an
approximately 50% uplift in annual contract values.
Examples of existing customers expanding their uptake of Liberty solutions,
include:
· A number of NHS Foundation Trusts who are existing customers of the Group's
Patient Hub solution, implementing additional modules to extend their use
across Netcall's full portfolio.
· More Liberty Converse customers migrated their contact centre solutions to
cloud solutions whilst also adding additional services such as Liberty
Connect.
Innovation and product enhancement:
Netcall's investment in innovation and platform expansion continues to help
differentiate its offering. The Group provides organisations with a
comprehensive Customer Engagement and Intelligent Automation solution that
offers a one-stop shop helping organisations turn digital strategies into
successful journeys. Specific developments during the year include:
· Netcall launched Liberty AI, a new machine learning solution, to help
organisations tackle more complex problems through automation and predictive
analysis. The Group has developed AI to work across the Liberty suite of
products to improve decision making and customer experiences as well as
deliver efficiencies by removing manual processes and reducing errors.
· Liberty Create, Netcall's Low-code development platform, was enhanced to
include a new GIS ("Geographic Information System"), spatial mapping
capability to create, manage and analyse geographical data easily. This, for
instance, enables visual pinpointing of items, such as street lamps, on a map
linked to information on-click which offers a more efficient and friendly way
of working with data. Other changes include additional validation tools for
performance and security audit reporting and enhanced resource management
features.
· Liberty RPA, the Group's robotic process automation product, has improved
computer vision algorithms, enabling bots to perform more comprehensive
automations such as tasks including image recognition.
· Liberty Converse, Netcall's contact centre solution, has enhanced forecasting
to allow improved predictions of future demand by channel. In addition, a new
payments module has been introduced that enables agents or self-service IVR to
handle payments securely over the phone. Other changes include support for
encrypted SIP telephony to enhance security and an improved agent app which is
significantly faster and easier for agents to navigate so they can address
customer queries quicker.
· Liberty Connect, Netcall's conversational messaging and chatbot platform,
introduced support for Instagram and Google Business Messages, as well a
collection of enhancements to the bot designer to make it easier for users to
design, test and publish chatbots to their end customers.
Partner base:
The Group's partner network comprises a wide range of organisations within the
ecosystem, including large, global advisory firms and niche technology
specialists. A total of 10 additional revenue generating partnerships have
been secured in the period. A strategic priority remains expanding this
network with a focus on improving delivery capabilities for partners.
Examples of business won or delivered via the partner network in the period
include:
· A digital consultancy partner has sold RPA to a renewable energy company,
supplementing their existing Liberty Create solution.
· A new Financial Services/Wealth Management customer win in collaboration with
a new partner.
Financial Review
A key financial metric monitored by the Board is the growth in the ACV base
year-on-year. 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
60% higher at £15.0m (FY21: £9.4m) with growth in both Intelligent
Automation and Customer Engagement solutions of approximately 74% and 7%
respectively compared to FY21. For Customer Engagement, Cloud ACV increased by
28% and Product support contract ACV by 1% The growth in Cloud ACV
contributed to a 31% growth in total ACV to £24.2m (FY21: £18.5m).
Excluding the Contract Win, cloud and total ACV showed continued momentum
with 26% and 14% growth respectively.
The table below sets out ACV at the three financial year ends:
£'m ACV FY22 FY21 FY20
Cloud services 15.0 9.4 7.5
Product support contracts 9.2 9.1 9.3
Total 24.2 18.5 16.8
Group revenue for the period grew by 12% to £30.5m (FY21: £27.2m). The
year-on-year increase was primarily driven by growth in both Intelligent
Automation solutions by 28% to £13.8m (FY21: £10.8m), and Customer
Engagement solutions by 3% to £16.0m (FY21: £15.6m) of which Customer
Engagement Cloud services revenue stream grew by 28% to £3.0m.
The table below sets out revenue by component for the last three financial
year-ends:
£'m Revenue FY22 FY21 FY20
Cloud services 10.7 8.3 6.6
Product support contracts 9.0 9.0 9.6
Total Cloud services & Product support contracts 19.7 17.3 16.1
Communication services 3.0 2.9 1.9
Product 2.2 2.7 3.1
Professional services 5.5 4.3 4.0
Total Revenue 30.5 27.2 25.1
Revenue from Cloud services (subscription and usage fees of our cloud-based
offerings) increased by 30% to £10.7m (FY21: £8.25m) reflecting the higher
year-on-year Cloud ACV.
Product support contract revenue decreased by 1% to £8.97m (FY21: £9.06m) in
line with the Group's strategy to transition to a cloud business model,
resulting from lower product and support contract ACV at the start of the new
financial year of £9.1m, compared with the start of the prior financial year
£9.3m.
Recurring revenue from Cloud service and Product support contracts totalled
65% of revenue (FY21: 64%).
Communication services revenue (fees for telephony and messaging services)
increased by 3% to £3.00m (FY21: £2.90m) due to higher revenues for
call-back and messaging services.
Product revenue (software license sales with supporting hardware) decreased by
16% to £2.24m (FY21: £2.66m). 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 29% to £5.51m (FY21: £4.28m). 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.
The Group's adjusted EBITDA was 20% higher at £6.41m (FY21: £5.34m), at a
margin of 21% of revenue (FY21: 20%). The higher margin reflecting
efficiencies in the business, such as continued improvements to our processes
and utilisation of our own technology.
The higher adjusted EBITDA led to an increase in operating profits to £3.19m
(FY21: £1.75m) with combined charges for share-based payments, depreciation
and amortisation charges being broadly level period over period.
To support the acquisition of MatsSoft Limited in 2017, the Company issued a
Loan Note totalling £7m. The Loan Note is unsecured, has an interest rate of
8.5%, and is repayable in six instalments from 30 September 2022 to 31 March
2025. On 9 November 2021, the Company issued an early redemption notice and
redeemed £3.5m of the Loan Note with BGF Nominees Ltd (part of BGF Group
plc). The interest cost of the early redemption was £0.30m and accordingly
total finance costs were £0.88m (FY21: £0.77m). On 28 September 2022, the
options granted to the Loan Note holder were exercised and the Company issued
and allotted 4,827,586 new ordinary shares and received proceeds of £2.8m
which are intended to be used to part repay the outstanding £3.5m of the Loan
Note.
As a result, profit before tax was 133% higher at £2.31m (FY21: £0.99m).
The Group recorded a tax credit of £88,000 (FY21: charge of £11,000)
benefiting from tax relief available from the exercise of share options during
the period and additional deductions for R&D expenditure together with the
recognition of a deferred tax asset for timing differences due to share-based
payment charges.
Basic earnings per share was 1.61 pence (FY21: 0.66 pence) and increased by
44% to 2.15 pence on an adjusted basis (FY21: 1.49 pence). Diluted earnings
per share was 1.52 pence (FY21: 0.64 pence) and increased by 43% to 2.04 pence
on an adjusted basis (FY21: 1.43 pence).
Cash generated from operations was £9.99m (FY21: £5.69m). The Group deferred
£2.21m 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 VAT deferral and consideration paid to the vendors of
Oakwood Technologies BV (acquired in October 2020) accounted for as post
completion services, cash generated from operations increased by 71% to
£11.5m (FY21: £6.72m) a conversion of 179% (FY21: 126%) of adjusted EBITDA.
Spending on research and development, including capitalised software
development, was 7% higher at £4.07m (FY21: £3.79m) of which capitalised
software expenditure was £1.61m (FY21: £1.57m).
Total capital expenditure was £1.94m (FY21: £2.75m); the balance after
capitalised development, being £0.33m (FY21: £1.18m) relating to IT
equipment and software.
As a result of these factors, net funds were £13.4m at 30 June 2022 (30 June
2021: £6.82m).
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
0.54p (FY21: 0.37p). If approved, the final dividend will be paid on 31
January 2023 to shareholders on the register at the close of business on 16
December 2022.
Audited consolidated income statement for the year ended 30 June 2022
2022 restated
2021
£'000 £'000
Revenue 30,458 27,154
Cost of sales (5,021) (4,452)
Gross profit 25,437 22,702
Administrative expenses (22,363) (20,832)
Other gains/(losses) - net 113 (119)
Adjusted EBITDA 6,405 5,338
Depreciation (437) (542)
Net loss on disposal of property, plant and equipment - (52)
Amortisation of acquired intangible assets (522) (488)
Amortisation of other intangible assets (1,239) (1,391)
Post-completion services (see note 4) (56) (285)
Share-based payments (964) (829)
Operating profit 3,187 1,751
Finance income 6 3
Finance costs (881) (769)
Finance costs - net (875) (766)
Profit before tax 2,314 985
Tax credit/ (charge) 88 (11)
Profit for the year 2,400 974
Earnings per share - pence
Basic 1.61 0.66
Diluted 1.52 0.64
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 2022
2022 2021
£'000 £'000
Profit for the year 2,400 974
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations (14) 35
Total other comprehensive income for the year (14) 35
Total comprehensive income for the year 2,386 1,009
All of the comprehensive income for the year is attributable to the
shareholders of Netcall plc.
Audited consolidated balance sheet at 30 June 2022
2022 2021
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 477 608
Right-of-use assets 539 711
Intangible assets 29,976 30,070
Deferred tax asset 906 648
Financial assets at fair value through other comprehensive income 72 72
Total non-current assets 31,970 32,109
Current assets
Inventories 37 84
Other current assets 2,767 1,563
Contract assets 888 898
Trade receivables 3,704 2,635
Other financial assets at amortised cost 8 10
Cash and cash equivalents 17,605 14,520
Total current assets 25,009 19,710
Total assets 56,979 51,819
Liabilities
Non-current liabilities
Contract liabilities 525 22
Borrowings 2,304 6,858
Lease liabilities 521 672
Deferred tax liabilities 899 881
Total non-current liabilities 4,249 8,433
Current liabilities
Trade and other payables 7,963 6,918
Contract liabilities 16,005 11,691
Borrowings 1,167 -
Lease liabilities 177 171
Total current liabilities 25,312 18,780
Total liabilities 29,561 27,213
Net assets 27,418 24,606
Equity attributable to owners of Netcall plc
Share capital 7,587 7,534
Share premium 3,015 3,015
Other equity 4,900 4,900
Other reserves 4,462 3,840
Retained earnings 7,454 5,317
Total equity 27,418 24,606
Audited consolidated statement of cash flows for the year ended 30 June 2022
2022 2021
£'000 £'000
Cash flows from operating activities
Profit before income tax 2,312 985
Adjustments for:
Depreciation and amortisation 2,198 2,421
Loss on disposal of property, plant and equipment - 52
Share-based payments 964 829
Finance costs - net 875 766
Other non-cash expenses - 11
Changes in operating assets and liabilities, net of effects from purchasing of
subsidiary undertaking:
Decrease in inventories 47 54
(Increase)/ decrease in trade receivables (1,064) 1,337
Decrease/ (increase) in contract assets 32 (320)
Decrease/ (increase) in other financial assets at amortised cost 3 (7)
Increase in other current assets (1,237) (184)
Increase/ (decrease) in trade and other payables 1,040 (114)
Increase/ (decrease) in contract liabilities 4,817 (142)
Cash flows from operations 9,987 5,688
Analysed as:
Cash flows from operations before VAT deferral scheme and payment of post 11,500 6,718
completion service consideration
Net effect of VAT deferral scheme (1,407) (805)
Payment of post completion service consideration (106) (225)
Interest received 6 3
Interest paid (7) (10)
Income taxes paid (1) (2)
Net cash inflow from operating activities 9,985 5,679
Cash flows from investing activities
Payment for property, plant and equipment (134) (36)
Payment of software development costs (1,610) (1,571)
Payment for proprietary software (136) (1,049)
Payment for other intangible assets (57) (97)
Proceeds from sale of property, plant and equipment - 1
Net cash outflow from investing activities (1,937) (2,752)
Cash flows from financing activities
Proceeds from issues of ordinary shares 53 222
Interest paid on Loan Notes (759) (717)
Repayment of borrowings (3,500) -
Principal element of lease payments (169) (294)
Dividends paid to Company's shareholders (554) (369)
Net cash outflow from financing activities (4,929) (1,158)
Net increase in cash and cash equivalents 3,119 1,769
Cash and cash equivalents at beginning of the financial year 14,520 12,710
Effects of exchange rate on cash and cash equivalents (34) 41
Cash and cash equivalents at end of financial year 17,605 14,520
Audited consolidated statement of changes in equity at 30 June 2022
Share capital Share premium Other equity Other reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
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
Proceeds from share issue 53 - - - (1) 52
Increase in equity reserve in relation to options issued - - - 775 - 775
Tax credit relating to share options - - - 153 - 153
Reclassification following exercise or lapse of options - - - (292) 292 -
Dividends paid - - - - (554) (554)
Transactions with owners 53 - - 636 (263) 320
Profit for the year - - - - 2,400 2,400
Other comprehensive income for the year - - - (14) - (14)
Profit and total comprehensive income for the year - - - (14) 2,400 2,386
Balance at 30 June 2022 7,587 3,015 4,900 4,462 7,454 27,418
Notes to the financial information for the year ended 30 June 2022
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 2022.
During the year there was increased demand for the Group's technical staff to
provide consulting services to support customers' intelligent automation
projects. The Group has therefore reconsidered its accounting policy for the
presentation of expenses in the income statement to include the proportion of
staff costs relating to the delivery of services within cost of sales. The
prior year consolidated income statement has been restated for the
reclassification of costs between cost of sales and administrative expenses.
As a result, 2021 reflects an increase in cost of sales of £1.83m, with a
corresponding decrease in administrative expenses. The overall operating
profit for the year for the Group remains unchanged.
The consolidated financial information is presented in sterling (£), 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 2022 or 2021. Statutory accounts for the
years ended 30 June 2022 and 30 June 2021 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 2021 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 30 June 2022
will be delivered to the Registrar in due course. Copies of the Annual Report
2022 will be posted to shareholders on or about 10 November 2022. Further
copies of this announcement can be downloaded from the website www.netcall.com
(http://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 Board when making strategic
decisions. Resources are reviewed on the basis of the whole of the business
performance.
The key segmental measure is adjusted EBITDA which is profit before interest,
tax, depreciation, amortisation, , acquisition and reorganisation expenses and
share-based payments, which is set out on the consolidated income statement.
4. Material profit or loss items
The Group identified the following item in the prior year which was material
due to the significance of its nature and/or its amount. It is listed
separately here to provide a better understanding of the financial performance
of the Group in this and the prior year.
2022 2021
£'000 £'000
Post completion services expense((1)) (56) (285)
(56) (285)
((1)) A number of former owners of Oakwood Technologies BV continued to work
in the business following its acquisition in October 2020 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 2022 30 June 2021
Net earnings attributable to ordinary shareholders (£'000) 2,400 974
Weighted average number of ordinary shares in issue (thousands) 149,462 146,675
Basic earnings per share (pence) 1.61 0.66
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 2022 30 June 2021
Weighted average number of ordinary shares in issue (thousands) 149,462 146,675
Adjustments for share options (thousands) 8,150 6,416
Weighted average number of potential ordinary shares in issue (thousands) 157,612 153,091
Diluted earnings per share (pence) 1.52 0.64
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:
£'000 30 June 2022 30 June 2021
Profit used for calculation of basic and diluted EPS 2,400 974
Share-based payments 964 829
Post-completion services (see note 4) 56 285
Amortisation of acquired intangible assets 522 488
Unwinding of discount - contingent consideration & borrowings 116 120
Tax effect of adjustments (842) (503)
Profit used for calculation of adjusted basic and diluted EPS 3,216 2,193
30 June 2022 30 June 2021
Adjusted basic earnings per share (pence) 2.15 1.49
Adjusted diluted earnings per share (pence) 2.04 1.43
6. Dividends
Year to June 2022 Paid Pence per share Cash flow statement Statement of changes in equity June 2022 balance sheet
(£'000) (£'000) (£'000)
Final ordinary dividend for the year to June 2021 8/2/22 0.37p 554 554 -
554 554 -
Paid Pence per share Cash flow statement Statement of changes in equity June 2021 balance sheet
Year to June 2021 (£'000) (£'000) (£'000)
Final ordinary dividend for the year to June 2020 9/2/21 0.25p 369 369 -
369 369 -
It is proposed that this year's final ordinary dividend of 0.54p pence per
share will be paid to shareholders on 31 January 2023. Netcall plc shares will
trade ex-dividend from 15 December 2022 and the record date will be 16
December 2022. The estimated amount payable is £0.84m. 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
£'000 30 June 2022 30 June 2021
Cash and cash equivalents 17,605 14,520
Borrowings - fixed interest and repayable within one year ((1)) (1,167) -
Borrowings - fixed interest and repayable after one year ((1)) (2,304) (6,858)
Lease liabilities (698) (843)
Net funds 13,436 6,819
((1)) To support the acquisition of MatsSoft Limited in August 2017, the
Company issued a £7m Loan Note with options over 4,827,586 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. In November 2021, the Company issued an early redemption notice
and redeemed £3.5m of the Loan Note. On 28 September 2022, the options
granted to the Loan Note holder were exercised and the Company issued and
allotted 4,827,586 new ordinary shares and the proceeds from the exercise of
the options totalled £2.8m which is intended to be used to part repay the
outstanding £3.5m of the Loan Note.
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