REG - Netcall PLC - Final Results for the Year Ended 30 June 2023
11/10/2023 07:00
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RNS Number : 6987P Netcall PLC 11 October 2023
11 October 2023
NETCALL PLC
("Netcall", the "Company" or the "Group")
Final Results for the Year Ended 30 June 2023
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 2023.
Financial highlights
FY23 FY22
Total Revenue £36.0m £30.5m +18%
Cloud services revenue £16.6m £10.7m +55%
Total annual contract value((1)) ("ACV") £27.9m £24.2m +15%
Cloud services ACV £18.1m £15.0m +21%
Adjusted EBITDA((2)) £8.0m £6.4m +25%
Profit before tax £4.0m £2.3m +74%
Adjusted basic earnings per share 3.33p 2.15p +55%
Group cash at period end £24.8m £17.6m +41%
Net funds at period end £24.3m £13.4m +81%
Final ordinary dividend per share 0.83p 0.54p +54%
Operational highlights
· Continued good demand for Liberty solutions, with strong contribution from new
customer acquisition
· Total revenue increased by 18% driven by Cloud services which accounted for
more than 80% of new product bookings
· Intelligent Automation solutions now accounts for more than half of Group
revenue increasing by 34% to £18.5m (FY22: £13.8m)
· Customer Engagement customers that have purchased Intelligent Automation
solutions increased by 6 percentage points to 21%
· Cloud net retention rate((3)) of 113% (FY22: 152%) or 122% (FY22: 117%)
excluding the effect of the significant contract win announced in June 2022
and renewed in July 2023
· Current Remaining Performance Obligations, being contracted revenue expected
to be recognised within FY24, increased by 18% to £31.4m (FY23: £26.5m)
· Contract with S&P 500 firm using Liberty platform in more than 60
countries replaced with new five-year contract valued in total at $20m,
representing a $6m uplift to the remaining contract value
· Positive sales momentum continued to date in FY24
· With more than a third of Customer Engagement solutions now deployed as a
cloud service and the pipeline increasing, the Board has decided to invest
further in the Group's development and technology teams to capitalise on
growing demand and support future growth
Henrik Bang, Chief Executive, said:
"Netcall had a strong year of trading, delivering double digit organic revenue
and profit growth which was fueled by a strong demand for our cloud services
as we transition to a predominately cloud-based business.
"We have continued to see strong demand for our offering as customers
increasingly prioritise automation and improvements to customer experience,
which, in addition to solid cross and up-sales, also resulted in an increased
number of new customer wins.
"Based on the increased wins and growing pipeline in Customer Engagement cloud
sales with more than a third of such solutions now deployed in the cloud, the
Board has decided to increase investments into this offering to meet
anticipated future demand, gain operational efficiencies and deliver an
improved proposition.
"Sales momentum has remained strong into the start of the new financial year
and our significant order book alongside our increasing recurring revenues and
strong pipeline of new business opportunities, gives the Board 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 renewal announced on 20 July 2023 is included in FY23 ACV
at the new annual amount of $4m).
((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.
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
Singers Capital Markets (Joint Broker) Tel. +44 (0) 20 7496 3000
Harry Gooden / Asha Chotai
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 leaner, more customer-centric
organisations.
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
The Group delivered another year of growth, with solid sales momentum and
strong cash generation. Revenue grew 18% to £36.0m (FY22: £30.5m) and
adjusted EBITDA increased 25% to £8.0m (FY22: £6.4m).
As Netcall continues its transition to a predominantly cloud-based business
with 72% (FY22: 65%) of its revenue coming from recurring revenue contracts,
we achieved good progress against each of our four core strategic pillars. New
customer acquisition progressed particularly well during the year,
contributing to overall growth. We have also continued to work closely with
existing customers resulting in a strong cross and up-sales performance,
reflected in the Cloud net retention rate of 113% or 122% excluding the effect
of the significant contract win announced in June 2022 and renewed in July
2023. Netcall's partner base continued to expand throughout FY23 with bookings
increasing by approximately a quarter. These results were underpinned by
continuous product releases, including enhancements to Liberty AI, which was
originally released in April 2022.
The main growth driver in the period continued to be our cloud offerings where
revenues increased by 55% to £16.6m, as secular trends including the move to
cloud computing, increased use of automation and intensified focus on
improving customer experience continue to benefit the Group. Revenues from
Intelligent Automation solutions increased by 34% to £18.5m (FY22: £13.8m),
now representing over half of total revenues for the year. This has materially
contributed to Cloud revenues, which have grown 30% CAGR over the last 5
years.
The momentum towards cloud services also meant that other revenue streams
declined by 1% to £19.4m (FY22: £19.7m), with lower professional services as
enterprise accounts increasingly use accredited IT service providers for
application development and support together with fewer call-back and SMS
transactions in the year.
The ongoing sales momentum is also reflected in Cloud annual contract value
('ACV') which increased 21% to £18.1m (FY22: £15.0m), contributing to Total
ACV growth of 15% to £27.9m (FY22: £24.2m). Underlying cloud ACV, excluding
the significant contract announced in June 2022 and renewed in July 2023,
increased 33% and underlying Total ACV grew 20%.
As announced at the end of the year, the Group's landmark $19m three-year
cloud subscription contract with a S&P 500 financial services firm was
renegotiated at the end of the period, after the customer instigated an
internal review of its vendor landscape. As a result, we have now agreed a
replacement five-year contract valued at $20m in total (the "Contract
Renewal") representing a $6m uplift to the remaining contract value, with an
expected revenue contribution of $4m per annum over the extended term.
The Group's changing business model to cloud and recurring revenue streams has
translated into excellent cash flow and a significant increase in net funds
which at year end was £24.3m (30 June 2022: £13.4m).
Current Trading and Outlook
Sales momentum has remained strong into the start of the new financial year
with cloud solutions performing particularly well which, together with
visibility of £31.4m of contracted revenue expected to be recognised in FY24,
provides good forward momentum and revenue visibility.
In addition, the Company has a strong sales pipeline with the majority of
opportunities being for cloud solutions combined with an ongoing new product
pipeline which we expect will provide new sales opportunities.
Based on the increased wins in Customer Engagement cloud sales, with more than
a third of such solutions now deployed in the cloud, and a growing pipeline
the Board has decided to increase investments into this offering to meet
anticipated future demand, gain operational efficiencies and deliver an
improved proposition. The Group will make a step change investment of
approximately £1.0m pa in its development and technology teams, mainly
occurring in FY25. In addition, cloud computing expenses within cost of sales
will be approximately £0.5m higher, also largely expected in FY25 and which
in future periods will be volume dependent. The underlying operating margin is
expected to remain robust and over time benefit from the increased investment
in cloud solutions.
The Group's strong balance sheet and cash generation supports continued
investment in our growth strategies which are underpinned by supportive
macro-trends for both cloud computing, automation and customer experience.
Therefore, the Board remains confident in the Group's future success.
Business Review
Netcall unifies Intelligent Automation and Customer Engagement software,
providing organisations with an easy-to-use platform that enables rapid
process automation and improved customer engagement. From councils interacting
with citizens, NHS trusts helping patients, or financial services firms
servicing customers, there is increasing pressure on organisations to improve
operations to deliver successful outcomes for stakeholders. This is achieved
through the Liberty platform which enables organisations to improve
operational efficiencies as well as customer and employee experiences.
In the current economic environment which has increased the need for cost
efficiencies, business automation remains a key strategic priority for
organisations, creating a significant opportunity for improvements. In the
face of rising costs, skill shortages and evolving consumer expectations,
organisations are turning to solutions such as Low-code development, Robotic
Process Automation (RPA), AI and machine learning, as well as omni-channel
engagement as an interconnected toolkit for implementing automation programmes
more effectively.
Addressing these challenges sits at the core of Netcall's Liberty platform
which provide a 'one-stop-shop' Digital Transformation suite. The integration
of Intelligent Automation and Customer Engagement technologies on one easy to
use platform with the inclusion of industry specific implementations are key
differentiating factors that have contributed to increased demand during the
period.
The Liberty platform's main product categories are:
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
contact centre solution including conversational messaging, chatbots and
AI-powered virtual agents. Converse blends practical AI and automation with
agent-assisted technology to boost operational and agent productivity, reduce
costs and improve customer experience.
Strategy
Netcall helps customers turn their digital strategies into successful journeys
and build smarter, leaner and more customer-centric organisations making them
more effective, competitive and sustainable.
Our main market verticals are financial services, healthcare, and public
sector industries, which in the period accounted for 89% of total Group
revenues, with the Liberty platform also being implemented in other sectors
like utilities and transportation. The Group's target customers are typically
operating complex businesses with large numbers of customers, employees and
stakeholders, and in many cases are subject to a high level of regulation.
The flexibility of the platform and its cloud deployment enables customers to
rapidly scale the platform usage to support their expansion plans across the
world.
Netcall pursues its market opportunity through execution of its growth
strategy centred on four strategic pillars: new customer acquisition, growth
within the existing base, ongoing product innovation and partner network
expansion.
Customer base expansion
Despite the challenging economic environment, contribution from new customer
acquisition increased significantly during the year. Cloud solutions continues
to be the primary driver of new business opportunities, accounting for the
majority of the new customer wins in the period. Demand for the Group's
sector-tailored solutions, particularly CitizenHub for local councils, proved
in demand, demonstrating the strong referenceability the Group's has
established in this sector.
Land and expand
The opportunity available for the Group within its extensive customer base
remains significant and cross/upselling products has been a major contributor
to growth during the year, as customers increasingly deploy upgrades and new
Netcall solutions. The number of Customer Engagement customers who have also
purchased Intelligent Automation solutions increased in the year to 21% from
15% in FY22.
Netcall's Community continues to be a valuable resource connecting our
customer base by providing a forum for knowledge sharing, training, and
providing pre-built accelerators and modules to enrich customers' interaction
with the Liberty platform solutions. This community continues to grow, and
currently consists of more than 4,500 members including developers and
administrators. As part of the Community, Netcall launched its Academy, which
offers more than 150 eLearning courses on a range of Netcall solutions and in
its initial phase has seen more than 2,000 delegates enrolling to available
courses.
Growing the partner channel
Netcall's growing partner network includes large global advisory firms as well
as specialised technology experts, offering opportunities in existing markets
while also expanding the Group's reach into adjacent sectors and geographies.
Throughout the period, the partner network has shown steady growth, with order
bookings increasing by approximately a quarter, and it remains a priority to
further increase the contribution from our expanding partner network.
Innovation and product enhancement
Innovation and platform expansion continually provide customers with new
capabilities and features to enhance the value of the platform, generating new
opportunities for the business. During the year this included a wide range of
new features including Microsoft Teams integration which allows organisations
to embed video calling within their applications and AI Optical Character
Recognition processing of documents enabling the delivery of intelligent
document management capabilities together with enhancements to Liberty AI
offering customers new capabilities and pre-trained AI models.
Netcall was an early adopter of AI/ML type technologies such as speech
recognition, OCR and computer vision which are used by many customers today.
In April 2022, Netcall enhanced its AI footprint by launching Liberty AI,
building Artificial Intelligence capabilities into the Liberty platform
allowing customers to use custom or pre-trained private AI models in their
apps or interactions. Today a growing number of sales engagements are
exploring the use of Liberty AI capabilities.
Recent studies(1), show generative AI can unlock significant benefits within
both the software development delivery cycle, and customer and agent
experience within Intelligent Automation and Customer Engagement solutions.
Netcall believes that in order to most effectively capitalise on AI, it needs
to be fully integrated into a platform that offers a wide range of
capabilities, as well as the tools to deploy and govern them securely, to all
teams in the enterprise, not just specialist data scientists.
As a Group, Netcall is cognisant of the developments of AI and the increased
demand for adoption into a range of business systems. As part of its AI
strategy, Netcall's roadmap will enable customers to:
· Deploy further Private AI models tailored to customer needs, built on their
data, giving reliable and accurate results for bespoke use-cases.
· Connect to Public AI models, incorporating intelligence within workflows while
retaining control over the data the organisation is willing to share.
· And, embed Generative AI within the platform to enable features such as
natural language authoring, code generation and communication sentiment and
summarisation, to further increase the value customers can derive from
Liberty.
During the year, Netcall increased its investments in AI and is planning to
continue these investments as the market develops.
(1)McKinsey: July 2023, "The economic potential of generative AI"
Cloud first investments
Cloud contact centre market growth rates are forecast to accelerate((1)) as
decision makers implement solutions to modernise their customer service
operations, including supporting a broader mix of communications channels,
conversational AI and virtual assistant capabilities.
A third of Netcall's Customer Engagement solutions are now deployed in the
cloud and the related Cloud Services ACV grew by 37% year over year. This
momentum has continued into the beginning of the FY24, supported by a growing
Customer Engagement solution pipeline.
Therefore, the Board has decided to increase investments into this cloud
service offering to meet this growing market opportunity, gain operational
efficiencies and deliver an improved proposition by consolidating all cloud
computing activities on a single public cloud platform. The Group will make a
step change investment of approximately £1.0m pa in its development and
technology teams, mainly occurring in FY25. In addition, cloud computing
expenses within cost of sales will be approximately £0.5m higher, also
largely expected in FY25 and which in future periods will be volume dependent.
The underlying operating margin is expected to remain robust and over time
benefit from the increased investment in cloud solutions.
((1)) Gartner:
https://www.gartner.com/en/newsroom/press-releases/2023-07-31-gartner-says-conversational-ai-capabilities-will-help-drive-worldwide-contact-center-market-to-16-percent-growth-in-2023
ESG initiatives
The Group remains focused on managing its impact on the environment. During
the period, Netcall has continued to progress against its ambition to be
carbon neutral by the end of 2026. Netcall has measured and is voluntarily
reporting its total Scope 1 and Scope 2 emissions which have reduced by 48% to
32.2 tCO2e compared to the 2020 Baseline of 66.6 tCO2e. The Group has started
to measure and analyse Scope 3 emissions, which cover indirect emissions that
occur in a company's value chain and for the first time, Netcall is reporting
on a subset of Scope 3 emissions; business travel. Emissions for business
travel and accommodation were 78.5 tCO2e with employee commuting responsible
for 12.0 tCO2e.
Moreover, to track progress on its carbon reduction strategy, Netcall has
populated and utilised the Environmental Management System (EMS) built on the
Liberty Create Low-code Application Platform. The implementation of the EMS
supports management of key actions and improvements for environmental
performance. The EMS app is also available to Netcall customers through the
AppShare to support Netcall's customers' own objectives.
The Group is also pleased to report that is has seen a 9% improvement in
energy intensity ratio to 0.96 tCO2e per £1m revenue.
In addition, the Board recognises that Netcall's solutions have a wider reach
and impact on our customers and communities. More than 1 million patients have
logged into our NHS applications, whilst our technology supports 1 in 4 UK
councils, and 2 in 5 UK police forces. Netcall's solutions are designed to
enable organisations to become more efficient and effective in delivering
better services and thereby also enabling them to operate more sustainably.
Internally, the Group continues to evolve its employee value proposition. Our
employee engagement score puts us in the top quartile of more than a 1000 UK
and Global Technology businesses surveyed on Culture Amp, an employee
satisfaction-focused platform made up of 21 million answered questions.
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
21% higher at £18.1m (FY22: £15.0m). The growth in Cloud ACV contributed to
a 15% growth in total ACV to £27.9m (FY22: £24.2m). The underlying Cloud
and Total ACV growth excluding the effect of the significant contract
announced 20 July 2023 was 33% and 20% respectively.
The table below sets out ACV at the three financial year ends:
£'m ACV FY23 FY22 FY21
Cloud services 18.1 15.0 9.4
Product support contracts 9.8 9.2 9.1
Total ACV 27.9 24.2 18.5
Group revenue for the year grew by 18% to £36.0m (FY22: £30.5m). The
year-on-year increase was primarily driven by growth in both Intelligent
Automation solutions by 34% to £18.5m (FY22: £13.8m), and Customer
Engagement solutions by 6% to £17.0m (FY22: £16.0m) of which the Customer
Engagement Cloud services revenue stream grew by 20% to £3.6m (FY22: £3.0m).
The table below sets out revenue by component for the last three financial
year ends:
£'m Revenue FY23 FY22 FY21
Cloud services 16.6 10.7 8.3
Product support contracts 9.4 9.0 9.0
Total Cloud services & Product support contracts 26.0 19.7 17.3
Communication services 2.6 3.0 2.9
Product 2.2 2.2 2.7
Professional services 5.2 5.5 4.3
Total Revenue 36.0 30.5 27.2
Reflecting the year-over-year growth in ACV, Cloud services revenue
(subscription and usage fees of our cloud-based offerings) was 55% higher at
£16.6m (FY22: £10.7m) and product support contract revenue grew by 5% to
£9.40m (FY22: £8.97m). This increased recurring revenues from Cloud service
and Product support contracts to 72% of total revenue (FY22: 65%).
Communication services revenue were £2.56m (FY22: £3.00m) due to fewer
call-back and messaging transactions in the financial services segment.
Product revenue (software license sales with supporting hardware) was
maintained at £2.24m (FY22: £2.24m) due to continuing customer demand for
on-premise license expansions or upgrades. 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 was £5.21m (FY22: £5.51m) as a number of
enterprise accounts, signed up in previous years, onboard global IT service
providers to support further application development and support. 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.
Group Remaining Performance Obligations ("RPO"), being the total of future
contracted revenue with customers that have not yet been recognised, inclusive
of deferred income, at year end was £54.5m (FY22: £54.4m) demonstrating the
material amount of revenue available to the Group to be recognised in future
periods. Within this, current RPO, being revenue due to be recognised within
the next 12 months, increased by 18% to £31.4m (FY22: £26.5m).
The Group's adjusted EBITDA was 25% higher at £8.00m (FY22: £6.41m), at a
margin of 22% of revenue (FY22: 21%). The improved margin reflecting the
higher contribution from Cloud services in the sales mix partially offset by
continued investment in headcount and pay growth.
The higher adjusted EBITDA led to a 19% increase in operating profits to
£3.81m (FY22: £3.19m) with the final Oakwood Technologies BV contingent
consideration expense of £0.37m (FY22: £0.06m) and higher share-based
payment charges of £1.64m (FY22: £0.96m).
To support the acquisition of MatsSoft Limited in 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 was unsecured, had an annual interest rate of 8.5% payable
quarterly in arrears and was repayable in six instalments from 30 September
2022 to 31 March 2025. The Company made an initial repayment of £3.5m in
November 2021, a scheduled repayment of £0.6m in September 2022 and in
October 2022 redeemed the final £2.9m of the Loan Notes. Accordingly, total
finance costs reduced to £0.14m (H1-FY22: £0.66m). In September 2022, the
options were exercised and the Company received £2.8m in proceeds and issued
4.8m new ordinary shares of 5p each. with the amount in excess of nominal
value, £2.56m, credited to the share premium account.
As a result, profit before tax was 73% higher at £4.00m (FY22: £2.31m).
The Group recorded a tax credit of £0.21m (FY22: credit of £0.09m)
benefiting from tax relief available from the exercise of share options during
the period.
Basic earnings per share was 2.69 pence (FY22: 1.61 pence) and increased by
55% to 3.33 pence on an adjusted basis (FY22: 2.15 pence). Diluted earnings
per share was 2.52 pence (FY22: 1.52 pence) and increased by 53% to 3.12 pence
on an adjusted basis (FY22: 2.04 pence).
Cash generated from operations increased by 12% to £11.2m (FY22: £9.99m).
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 to
£11.6m (FY22: £11.5m) a conversion of 145% (FY22: 179%) of adjusted EBITDA.
Spending on research and development, including capitalised software
development, was 22% higher at £4.98m (FY22: £4.07m) of which capitalised
software expenditure was £2.27m (FY22: £1.61m).
Total capital expenditure was £2.74m (FY22: £1.94m); the balance after
capitalised development, being £0.48m (FY22: £0.33m) relating to IT
equipment and software.
As a result of these factors, net funds were £24.4m at 30 June 2023 (30 June
2022: £13.4m).
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
0.83p (FY22: 0.54p). If approved, the final dividend will be paid on 9
February 2024 to shareholders on the register at the close of business on 29
December 2023.
Audited consolidated income statement for the year ended 30 June 2023
2023 2022
£'000 £'000
Revenue 36,040 30,458
Cost of sales (5,768) (5,021)
Gross profit 30,272 25,437
Administrative expenses (26,522) (22,363)
Other gains/(losses) - net 62 113
Adjusted EBITDA 8,003 6,405
Depreciation (377) (437)
Amortisation of acquired intangible assets (522) (522)
Amortisation of other intangible assets (1,287) (1,239)
Post-completion services (see note 4) (365) (56)
Share-based payments (1,640) (964)
Operating profit 3,812 3,187
Finance income 344 6
Finance costs (155) (881)
Finance costs - net 189 (875)
Profit before tax 4,001 2,312
Tax credit 205 88
Profit for the year 4,206 2,400
Earnings per share - pence
Basic 2.69 1.61
Diluted 2.52 1.52
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 2023
2023 2022
£'000 £'000
Profit for the year 4,206 2,400
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations 8 (14)
Total other comprehensive income for the year 8 (14)
Total comprehensive income for the year 4,214 2,386
All of the comprehensive income for the year is attributable to the
shareholders of Netcall plc.
Audited consolidated balance sheet at 30 June 2023
2023 2022
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 699 477
Right-of-use assets 298 539
Intangible assets 30,453 29,976
Deferred tax assets 1,767 906
Financial assets at fair value through other comprehensive income 72 72
Total non-current assets 33,289 31,970
Current assets
Inventories 31 37
Other current assets 2,333 2,767
Contract assets 599 888
Trade receivables 4,468 3,704
Other financial assets at amortised cost 57 8
Cash and cash equivalents 24,753 17,605
Total current assets 32,241 25,009
Total assets 65,530 56,979
Liabilities
Non-current liabilities
Contract liabilities 787 525
Borrowings - 2,304
Lease liabilities 292 521
Deferred tax liabilities 1,151 899
Total non-current liabilities 2,230 4,249
Current liabilities
Trade and other payables 7,232 7,963
Contract liabilities 20,578 16,005
Borrowings - 1,167
Lease liabilities 113 177
Total current liabilities 27,923 25,312
Total liabilities 30,153 29,561
Net assets 35,377 27,418
Equity attributable to owners of Netcall plc
Share capital 8,108 7,587
Share premium 5,574 3,015
Other equity 4,900 4,900
Other reserves 3,056 4,462
Retained earnings 13,739 7,454
Total equity 35,377 27,418
Audited consolidated statement of cash flows for the year ended 30 June 2023
2023 2022
£'000 £'000
Cash flows from operating activities
Profit before income tax 4,001 2,312
Adjustments for:
Depreciation and amortisation 2,186 2,198
Share-based payments 1,640 964
Finance costs - net (189) 875
Other non-cash expenses 6 -
Changes in operating assets and liabilities, net of effects from purchasing of
subsidiary undertaking:
Decrease in inventories 7 47
Increase in trade receivables (765) (1,064)
Decrease in contract assets 281 32
(Increase)/ decrease in other financial assets at amortised cost (49) 3
Decrease/ (increase) in other current assets 416 (1,237)
(Decrease)/ increase in trade and other payables (1,148) 1,040
Increase in contract liabilities 4,835 4,817
Cash flows from operations 11,221 9,987
Analysed as:
Cash flows from operations before VAT deferral scheme and payment of post 11,597 11,500
completion service consideration
Net effect of VAT deferral scheme - (1,407)
Payment of post completion service consideration (376) (106)
Interest received 344 6
Interest paid (8) (7)
Income taxes paid - (1)
Net cash inflow from operating activities 11,557 9,985
Cash flows from investing activities
Payment for property, plant and equipment (458) (134)
Payment of software development costs (2,267) (1,610)
Payment for proprietary software - (136)
Payment for other intangible assets (19) (57)
Net cash outflow from investing activities (2,744) (1,937)
Cash flows from financing activities
Proceeds from issues of ordinary shares 3,079 53
Interest paid on Loan Notes (204) (759)
Repayment of borrowings (3,500) (3,500)
Lease payments (214) (169)
Dividends paid to Company's shareholders (839) (554)
Net cash outflow from financing activities (1,678) (4,929)
Net increase in cash and cash equivalents 7,135 3,119
Cash and cash equivalents at beginning of the financial year 17,605 14,520
Effects of exchange rate on cash and cash equivalents 13 (34)
Cash and cash equivalents at end of financial year 24,753 17,605
Audited consolidated statement of changes in equity at 30 June 2023
Share capital Share premium Other equity Other reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
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)
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
Proceeds from share issue 521 2,559 - - - 3,080
Increase in equity reserve in relation to options issued - - - 1,099 - 1,099
Tax credit relating to share options - - - 405 - 405
Reclassification following exercise or lapse of options - - - (2,918) 2,918 -
Dividends paid - - - - (839) (839)
Transactions with owners 521 2,559 - (1,414) 2,079 3,745
Profit for the year - - - - 4,206 4,206
Other comprehensive income for the year - - - 8 - 8
Total comprehensive income for the year - - - 8 4,206 4,214
Balance at 30 June 2023 8,108 5,574 4,900 3,056 13,739 35,377
Notes to the financial information for the year ended 30 June 2023
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 final results has been prepared in
accordance with UK-adopted 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 2023.
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 2023 or 2022. Statutory accounts for the
years ended 30 June 2023 and 30 June 2022 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 2022 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 30 June 2023
will be delivered to the Registrar in due course. Copies of the Annual Report
2023 will be posted to shareholders on or about 19 November 2023. 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.
2023 2022
£'000 £'000
Post completion services expense((1)) (365) (56)
(365) (56)
((1)) The former owners of Oakwood Technologies BV acquired in October 2020
continued to work in the business following its acquisition and in accordance
with IFRS 3 a proportion of the contingent consideration arrangement is
treated as remuneration and expensed in the income statement. The final
payment under this arrangement of £0.38m was made during the year.
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 2023 30 June 2022
Net earnings attributable to ordinary shareholders (£'000) 4,206 2,400
Weighted average number of ordinary shares in issue (thousands) 156,352 149,462
Basic earnings per share (pence) 2.69 1.61
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 2023 30 June 2022
Weighted average number of ordinary shares in issue (thousands) 156,352 149,462
Adjustments for share options (thousands) 10,630 8,150
Weighted average number of potential ordinary shares in issue (thousands) 166,982 157,612
Diluted earnings per share (pence) 2.52 1.52
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 2023 30 June 2022
Profit used for calculation of basic and diluted EPS 4,206 2,400
Share-based payments 1,640 964
Post-completion services (see note 4) 365 56
Amortisation of acquired intangible assets 522 522
Unwinding of discount - contingent consideration & borrowings 29 116
Tax effect of adjustments (1,548) (842)
Profit used for calculation of adjusted basic and diluted EPS 5,214 3,216
30 June 2023 30 June 2022
Adjusted basic earnings per share (pence) 3.33 2.15
Adjusted diluted earnings per share (pence) 3.12 2.04
6. Dividends
Year to June 2023 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 2022 31/1/23 0.54p 839 839 -
839 839 -
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 -
It is proposed that this year's final ordinary dividend of 0.83p pence per
share will be paid to shareholders on 9 February 2024. Netcall plc shares will
trade ex-dividend from 28 December 2023 and the record date will be 29
December 2023. The estimated amount payable is £1.33m. 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 2023 30 June 2022
Cash and cash equivalents 24,753 17,605
Borrowings - fixed interest and repayable within one year ((1)) - (1,167)
Borrowings - fixed interest and repayable after one year ((1)) - (2,304)
Lease liabilities (405) (698)
Net funds 24,348 13,436
((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 was unsecured, had an annual interest
rate of 8.5% payable quarterly in arrears and was 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 was amortised via the profit
and loss account over the expected option life of five years. The Company made
an initial repayment of £3.5m in November 2021, a scheduled repayment of
£0.6m in September 2022 and in October 2022 redeemed the final £2.9m of the
Loan Notes. In September 2022, options were exercised and the Company received
£2.8m in proceeds and issued 4.8m new ordinary shares of 5p each.
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