REG - Netcall PLC - Half-year Report
23/02/2022 07:00
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RNS Number : 4884C Netcall PLC 23 February 2022
23 February 2022
NETCALL PLC
("Netcall", the "Company", or the "Group")
Interim results for the six months ended 31 December 2021
Double-digit revenue and profit growth
Netcall plc (AIM: NET), the leading provider of intelligent automation and
customer engagement software, today announces its unaudited interim results
for the six months ended 31 December 2021.
Financial highlights
H1 FY22 H1 FY21
Revenue £14.7m £13.4m +10%
Cloud services revenue £4.93m £4.08m +21%
Total annual contract value((1)) ACV £19.8m £17.7m +12%
Cloud services 'ACV' £10.8m £8.4m +29%
Adjusted EBITDA((2)) £3.45m £2.95m +17%
Profit before tax £1.15m £0.96m +20%
Adjusted basic earnings per share 1.09p 0.90p +21%
Group cash at period end £10.7m £12.9m
Net funds at period end £6.5m £5.1m
Operational highlights
· Continued strong trading with main contribution from Cloud services
· Growing demand for both Intelligent Automation and Customer Engagement
solutions from all key market segments of financial services, healthcare and
government
· Annual revenue run-rate from Intelligent Automation is now £13m, representing
approximately 44% of Group revenue and generating a growing contribution to
Group profitability
· Continued cross- and up-sell into the Group's broad customer base, with 24% of
ACV coming from customers who have purchased both Intelligent Automation and
Customer Engagement solutions (H1 FY21: 21%)
· Acceleration in ACV growth to 12% for H1-FY22, up from 7% for H1-FY21
· Cloud net retention rate((3)) increased to 119% (H1 FY21: 115%)
· Released several new enhancements to the Liberty platform with a focus on
expanded automation capabilities, improved user experience and new product
functionality
Outlook
· Trading in the early part of the H2 remains comfortably in line with
expectations and the Board is confident of continued progress during the
second half.
Henrik Bang, Chief Executive, said:
"We are pleased with the strong performance in the first half of the year
delivering double digit organic growth and profitability combined with an
accelerated growth rate of our annualised contract value, pointing to
continued positive momentum.
"Our profitable and cash generative business model enables us to invest in our
offering to capture the significant market opportunity presented by helping
customers turn their digital strategies into successful journeys and build
smarter, leaner and more customer-centric organisations. With our sector
expertise, breadth of customer base and powerful offering, combined with a
healthy sales pipeline, we look to the future with confidence."
((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.
((3)) Cloud net retention rate is calculated by starting with the Cloud ACV
from all customers twelve months prior to the period end and comparing it to
the Cloud ACV from the same customers at the current period end. The current
period ACV includes any upsells and is net of contraction or churn over the
trailing twelve months but excludes ACV from new customers in the current
period. The Cloud net retention rate is the total current period ACV divided
by the total prior period ACV.
Enquiries:
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 Tel. +44 (0) 20 7523 8000
Broker)
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 digitally 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
including Legal and General, Lloyds Banking Group, Aon 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 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 traded comfortably in line with management expectations during the
period, delivering revenue growth of 10% to £14.7m and an increased adjusted
EBITDA by 17% to £3.4m. This is as a result of good performance across the
Group's key market segments, with healthy demand for both Intelligent
Automation and Customer Engagement solutions.
In line with the Group's strategy, Cloud services revenue was the primary
driver for the double-digit organic revenue and profitability growth with
Cloud services bookings contributing to more than 85% of new bookings in the
period. As a result, Cloud services ACV increased by 29% to £10.8m (H1 FY21:
25% and £8.4m). This represents a leading indicator of continued Cloud
revenue growth with total future contracted revenues having increased by 20%
to £35.9m (H1 FY21: £29.9m).
New customer acquisition was complemented by cross and up-selling into the
Group's broad customer base, with 24% of ACV coming from customers who have
purchased both Intelligent Automation and Customer Engagement solutions (H1
FY21: 21%). This supported Netcall's Cloud net retention rate which increased
to 119% (H1 FY21: 115%), as we continued to see wider adoption of the Liberty
platform and maintained low customer churn as a result of high and improving
customer satisfaction rates.
The Group's balance sheet is robust, with cash at period end of £10.7m (30
June 2021: £14.5m) after the payment of £4.9m for early redemption of loan
notes to BGF Nominees Limited (part of the BGF Group plc) and deferred VAT
due to Covid-19. This more than offsets borrowings of £3.4m (30 June 2021:
£6.9m). The strong financial position provides the flexibility and resources
to continue to invest in Netcall's growth strategies.
Current Trading and Outlook
Trading in the early part of H2 remains comfortably in line with expectations
with our cloud solutions continuing to perform strongly. The pipeline of
opportunities remains encouraging and includes our established customer base
which continues to increase their engagement with the platform.
In the Board's view the strong current trading warrants continued investment
into the business, at a similar rate as H2 last year. Considering the higher
future contract revenues and ACV providing forward revenue visibility combined
with a healthy sales pipeline the Board is confident in delivering continued
progress during the second half.
Business Review: Supporting customers' digital journeys
Across industries, organisations are embarking on digital transformation
journeys, where they adopt technology to radically advance their performance
and reach. This improves important business drivers such as topline growth,
cost efficiency, operational effectiveness, customer and employee
satisfaction, and makes them more customer centric, effective and competitive.
Through digital transformation employees find it easier to do their jobs and
customers find it easier to interact with organisations.
A recent survey((1)) highlights that more than 90% of organisations plan to
invest more in digital technology over the coming years than in the years
before the pandemic. Meanwhile, the limited availability of skilled staff to
implement digital initiatives remains a challenge and therefore organisations
increasingly look to new technologies to meet their requirements, including
Low-code platforms, which enable both professional and business developers to
implement new solutions faster. Others predicts that by 2025 70% of new
applications developed by organisations will use Low-code of No-code
technologies, up from less than 25% in 2020, to speed-up implementation of
digital strategies necessary to support growth and competitiveness.
Through the delivery of cloud-based technologies, Netcall helps organisations
to improve and automate processes, integrate communications, data and systems
to support digital transformation journeys. The Group's Liberty platform of
modular and integrated solutions offers Intelligent Automation and Customer
Engagement solutions, delivering a broad range of product capabilities,
comprising four main categories:
Intelligent Automation
· Liberty Create: Enables both professional and business developers to create
enterprise grade applications that drive and automate workflows and business
processes using a low-code software for faster development utilising an
intuitive drag-and-drop environment. This is combined with 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 which frees-up people from
mundane and cumbersome tasks, enabling them to be more productive.
Customer Engagement
· Liberty Converse: Seamless communication using our complete omni-channel
contact centre solution for customer engagement which also includes solutions
such as automated speech bots, workforce and quality management amongst
others.
· Liberty Connect: A cloud conversational messaging and chatbot platform that
enables organisations to reach and respond to customers over digital channels
like web chat, SMS, Facebook Messenger and Twitter. Queries can be handled
automatically using AI-powered virtual agents, or handed off to Liberty
Converse to reach the most appropriately skilled live agent.
Strategy: Execution across four strategic growth pillars
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.
We remain focused on our core segments of financial services, healthcare and
public sector, which comprise 87% of the Group's revenue, whilst the Liberty
platform also has applicability into other markets segments. Our 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 overall market remains fragmented with multiple suppliers across a number
of differing product offerings. The Group's comprehensive yet easy-to-use
Liberty platform, combined with our segment focus, continue to differentiate
Netcall.
The Group's progress in the period is the result of successful execution
against its four strategic growth pillars: new customer acquisition, growing
engagement across the customer base ('land-and-expand'), value enhancing
R&D, and growth through partnerships.
Supported by a strong balance sheet, the Board continues to assess the market
for M&A opportunities to complement its organic growth.
1. Customer base expansion
Our cloud solutions remain the main driver of new customer acquisition. During
the period we continued to add new customers across our core markets and in
new growing market segments such as transportation and utilities. New business
highlights from the period include:
· Continued wins within the healthcare sector for our appointment management
Patient Hub solution. We have also expanded the usage of Patient Hub across
more hospital departments resulting in a six-fold increase in volumes of
digital letters and notifications sent and, a more than four-fold increase in
patients accessing Patient Hub to manage their appointments compared to same
period last year.
· A global insurer has continued to increase the use of the platform. From
initially deploying an insurance management platform in continental Europe,
Liberty has now been deployed for other solutions such as a claims management
application in North America.
2. Land-and-expand
The Group's land-and-expand strategy is underpinned by high customer retention
and incremental value created through continuous product enhancements. The
Group achieves up- and cross-sales in three main areas:
· Customer Engagement customers purchasing Intelligent Automation to combine
into more powerful solutions, which on average drive a threefold increase in
the contract value. Approximately 24% of Group ACV is from customers who have
purchased both solutions, a share which continues to increase.
· Migrating on-premise Customer Engagement customers to the cloud environment,
which on average results in a 1.5x uplift in annual contract value.
· Incremental expansion of the platform through continuous product enhancements
and features. This is further stimulated through the Group's AppShare
community where several pre-built accelerators and modules are made available
to share.
An example of a land-and-expand progression during the period is an existing
on-premise customer which upgraded its Liberty environment to the latest
version and at the same time implemented Liberty Connect to use cloud based
digital messaging and intelligent bot functionality. Following implementation,
approximately 4 in 5 of all digital enquiries, previously handled by human
advisors, were resolved using virtual assistants built in Liberty
Connect, available 24x7. This substantial reduction in interactions requiring
human advisor help delivered efficiency savings and also enabled the
organisation to focus more on complex enquiries and as part of this re-skilled
employees to create a more varied and interesting workplace.
3. Innovation and product development
Netcall's investment in innovation and platform expansion continues to help
differentiate its offering, and further presents the Group as an innovative
provider of Customer Engagement and Intelligent Automation solutions providing
a compelling one-stop shop to our customer base.
The Group made a number of capability and feature updates to the Liberty
platform during the period, including:
· Liberty Create, our low-code development platform, was enhanced to include
geospatial features giving organisations new mapping capability in app
creation. A security checklist was also added to ensure customers follow best
practice and secure design principles during the creation of apps. Finally,
Monitor Studio was enhanced to expose performance metrics that highlight the
performance of applications and identifies areas to investigate.
· Liberty RPA was enhanced with improved computer vision algorithms, the release
of RPA Snap, an improvement to the way bots deal with failure, and
enhancements to the developer experience within RPA Studio.
· In Liberty Converse, its built-in workforce management module, has been
enhanced with omni-channel interaction forecasting to allow predictions of
future demand by channel. There have also been enhancements to support RPA
directly within the Contact Centre to allow agents to automate repetitive
tasks and lower interaction handling times.
· In our health solution, Patient Hub, we continue to help hospital trusts
automate how they manage the appointment process and have added further
functionality to digitise pre-operative surveys, automatically remove patients
from the waiting list who no longer require treatment, and have also included
easy migration so customers can smoothly transition from an existing
on-premise platform to Patient Hub in the cloud.
4. Growing the partner channel
The Group has an established and growing ecosystem of technology and solution
providers, giving access to new markets and additional opportunities to scale
the business faster. This represents an important growth pillar for the Group,
and during the period sales via the channel network accounted for
approximately 20% of the total sales mix.
An example win via the partner network included a European consultancy
deploying RPA alongside Liberty Create to automate the automatic gathering of
market intelligence and updating of an environmental management application.
((1)()) https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html
(https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html)
((2))
https://www.gartner.com/en/newsroom/press-releases/2021-11-10-gartner-says-cloud-will-be-the-centerpiece-of-new-digital-experiences
Financial Review
A key financial metric monitored by the Board is the growth in the ACV base
year-on-year (ACV, as at a given date, is the total of the value of each cloud
and product support contract divided by the total number of years of the
contract). This reflects the annual value of new business won, together with
upsell into the Group's existing customer base as it delivers against its
land-and-expand strategy, less any customer contraction or cancellation. It is
an important metric for the Group, as it is a leading indicator of future
revenue.
The Group continues its transition to a digital cloud business with Cloud ACV
29% higher at £10.8m (H1-FY21: £8.4m) with growth in both Customer
Engagement and Intelligent Automation solutions of approximately 30% and 26%
respectively compared to H1-FY21. The growth in Cloud ACV contributed to a 12%
growth in total ACV to £19.8m (H1-FY21: £17.7m).
The table below sets out ACV for the last three reporting periods:
£'m ACV H1-FY22 FY21 H1-FY21
Cloud services 10.8 9.4 8.4
Product support contracts 9.0 9.1 9.3
Total 19.8 18.5 17.7
Product support contract ACV includes £0.4m (H1-FY21: £0.7m) of maintenance
contracts for other solutions which declined in the second half of the last
financial year, primarily as a result of retirement from support of products
at end-of-life.
Group revenue for the period grew by 10% to £14.7m (H1-FY21: £13.4m). The
year-on-year increase was primarily driven by growth in both Intelligent
Automation solutions by 21% to £6.45m (H1-FY21: £5.35m), and Customer
Engagement solutions before Product support contracts by 13% to £3.83m
(H1-FY21: £3.40m). The Customer Engagement product line benefits from a
highly cash generative, resilient and diverse customer product support
contract base that underpins up- and cross-sale opportunities for cloud
Intelligent Automation and Customer Engagement solutions. Customer Engagement
product support contract revenues were £4.11m (H1-FY21: £4.16m) which
moderated total Customer Engagement solution revenue growth to 5% to £7.94m
(H1-FY21: £7.56m) as customers increasingly migrate to the cloud and
recurring revenue models.
The table below sets out revenue by component for the last three interim
periods:
£'m Revenue H1-FY22 H1-FY21 H1-FY20
Cloud services 4.9 4.1 3.2
Product support contracts 4.4 4.6 4.7
Total Cloud services & Product support contracts 9.4 8.7 7.9
Communication services 1.5 1.6 1.1
Product 1.1 1.0 1.2
Professional services 2.7 2.1 2.1
Total Revenue 14.7 13.4 12.3
Revenue from Cloud services (subscription and usage fees of our cloud-based
offerings) increased by 21% to £4.93m (H1-FY21: £4.08m) reflecting the
higher year over year Cloud ACV.
Product support contract revenue decreased by 2% to £4.44m (H1-FY21: £4.55m)
as expected, with 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 of £9.3m.
Recurring revenue from Cloud service and Product support contracts totalled
64% of revenue (H1-FY21: 65%).
Communication services revenue (fees for telephony and messaging services)
decreased by 3% to £1.54m (H1-FY21: £1.59m) due to lower revenues for
call-back services partially offset by higher demand for messaging services.
Product revenue (software license sales with supporting hardware) increased by
9% to £1.12m (H1-FY21: £1.03m) 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 for new or replacement
solutions.
Professional services revenue increased by 27% to £2.67m (H1-FY21: £2.10m)
due to delivery of more implementation services for Intelligent Automation
customers. The overall demand for our professional services is dependent on:
the mix of direct and indirect sales of our solutions, in the latter case the
Group's partners provide the related services directly for the end customer;
and whether a customer requires the support of a full application development
service or support to enable their own development teams.
Gross profit margin increased by 160 basis points to 91% (H1-FY21: 89%) mainly
due to improved professional service expense and realisation rates.
Operating expenses, before depreciation, amortisation, share-based payments
and acquisition related items, increased by 10% to £9.87m (H1-FY21: £8.98m)
due to higher staff-related expenditure from headcount and pay growth.
Consequently, the Group's adjusted EBITDA increased by 17% to £3.45m
(H1-FY21: £2.95m), a margin of 23% of revenue (H1-FY21: 22%).
The higher adjusted EBITDA led to a 34% increase in operating profit of
£1.81m (H1-FY21: £1.35m) 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 (past of BGF Group
plc). The interest cost of the early redemption was £0.30m and accordingly
total finance costs increased to £0.66m (H1-FY21: £0.39m). See note 6 for
further information.
As a result, profit before tax was 20% higher at £1.15m (H1-FY21: £0.96m).
The Group recorded a tax credit of £0.36m (H1-FY21: credit £0.35m)
benefiting from tax relief available from the exercise of share options and
additional deductions for R&D expenditure during the period together with
the recognition of a deferred tax asset for timing differences due to
share-based payment charges of £0.30m.
Basic earnings per share was 11% higher at 1.01 pence (H1-FY21: 0.91 pence)
and increased by 21% to 1.09 pence on an adjusted basis (H1-FY21: 0.90 pence).
Diluted earnings per share was 10% higher at 0.96 pence (H1-FY21: 0.87 pence)
and increased by 18% to 1.03 pence on an adjusted basis (H1-FY21: 0.87 pence).
Cash generated from operations was £1.23m (H1-FY21: £2.39m). 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 the VAT deferral and consideration paid to the
vendors of Oakwood Technologies BV (acquired in October 2018) accounted for as
post completion services, cash generated from operations increased by 5% to
£2.52m (H1-FY21: £2.39m) a conversion of 73% of adjusted EBITDA (H1-FY21:
81%). 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.
Spending on research and development, including capitalised software
development, increased by 6% £1.97m (H1-FY21: £1.85m) of which capitalised
software expenditure was £0.81m (H1-FY21: £0.80m).
Total capital expenditure was £0.98m (H1-FY21: £1.81m); the balance after
capitalised development, being £0.18m (H1-FY21: £0.02m) relating to deferred
consideration payments for the acquired proprietary software assets of Oakwood
Technologies BV (Automagica).
As a result of these factors, net funds were £6.47m at 31 December 2021 (30
June 2021: £6.82m).
A final dividend of 0.37 pence per share for the year ended 30 June 2021 was
approved by shareholders on 16 December 2021. The amount payable was £0.55m
and is included as a liability in the 31 December 2021 balance sheet and was
paid on 8 February 2022.
Unaudited consolidated income statement for the six months to 31 December 2021
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2021 31 December 2020 30 June 2021
Revenue 14,690 13,351 27,154
Cost of sales (1,376) (1,472) (2,625)
Gross profit 13,314 11,879 24,529
Administrative expenses (11,530) (10,434) (22,659)
Other losses - net 23 (98) (119)
Adjusted EBITDA 3,448 2,949 5,338
Depreciation (228) (305) (542)
Net loss on disposal of property, plant and equipment - (52) (52)
Amortisation of acquired intangible assets (261) (227) (488)
Amortisation of other intangible assets (619) (655) (1,391)
Post-completion services (33) (59) (285)
Share-based payments (500) (304) (829)
Operating profit 1,807 1,347 1,751
Finance income - 1 3
Finance costs (659) (385) (769)
Finance costs - net (659) (384) (766)
Profit before tax 1,148 963 985
Tax credit/ (charge) 362 350 (11)
Profit for the period 1,510 1,313 974
Earnings per share - pence
Basic 1.01 0.91 0.66
Diluted 0.96 0.87 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.
Unaudited statement of comprehensive income for the six months to 31 December
2021
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2021 31 December 2020 30 June 2021
Profit for the period 1,510 1,313 974
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations (5) 34 35
Total other comprehensive income for the year (5) 34 35
Total comprehensive income for the period 1,505 1,347 1,009
All of the comprehensive income for the period is attributable to the
shareholders of Netcall plc.
Unaudited consolidated balance sheet at 31 December 2021
£'000 Unaudited Unaudited Audited
31 December 2021 31 December 2020 30 June 2021
Assets
Non-current assets
Property, plant and equipment 535 739 608
Right-of-use assets 625 797 711
Intangible assets 29,998 30,208 30,070
Deferred tax asset 1,057 833 648
Financial assets at fair value through other comprehensive income 72 72 72
Total non-current assets 32,287 32,649 32,109
Current assets
Inventories 52 119 84
Other current assets 1,505 1,287 1,563
Contract assets 930 944 898
Trade receivables 4,722 3,159 2,635
Other financial assets at amortised cost 6 15 10
Cash and cash equivalents 10,670 12,903 14,520
Total current assets 17,885 18,427 19,710
Total assets 50,172 51,076 51,819
Liabilities
Non-current liabilities
Contract liabilities 140 42 22
Borrowings 2,832 6,802 6,858
Lease liabilities 610 759 672
Deferred tax liabilities 881 814 881
Total non-current liabilities 4,463 8,417 8,433
Current liabilities
Trade and other payables 6,006 7,553 6,918
Dividend payable 554 369 -
Contract liabilities 12,340 10,268 11,691
Current tax liabilities - 2 -
Borrowings 583 - -
Lease liabilities 174 194 171
Total current liabilities 19,657 18,386 18,780
Total liabilities 24,120 26,803 27,213
Net assets 26,052 24,273 24,606
Equity attributable to the owners of the parent
Share capital 7,579 7,483 7,534
Share premium 3,015 3,015 3,015
Other equity 4,900 4,900 4,900
Other reserves 4,090 3,381 3,840
Retained earnings 6,468 5,494 5,317
Total equity 26,052 24,273 24,606
Unaudited consolidated statement of changes in equity at 31 December 2021
£'000 Share capital Share premium Other equity Other reserves Retained earnings Total equity
Balance at 30 June 2020 7,312 3,015 4,900 3,996 3,654 22,877
Proceeds from share issue 171 - - - - 171
Increase in equity reserve in relation to options issued - - - 218 - 218
Reclassification following exercise or lapse of share options - - - (896) 896 -
Tax credit relating to share options - - - 29 - 29
Dividends declared - - - - (369) (369)
Transactions with owners 171 - - (649) 527 49
Profit for the period - - - - 1,313 1,313
Other comprehensive income for the period - - - 34 - 34
Profit and total comprehensive income for the period - - - 34 1,313 1,347
Balance at 31 December 2020 7,483 3,015 4,900 3,381 5,494 24,273
Proceeds from share issue 51 - - - - 51
Increase in equity reserve in relation to options issued - - - 511 - 511
Reclassification following exercise or lapse of share options - - - (162) 162 -
Tax credit relating to share options - - - 109 - 109
Transactions with owners 51 - - 458 162 671
Loss for the period - - - - (339) (339)
Other comprehensive income for the period - - - 1 - 1
Loss and total comprehensive income for the period - - - 1 (339) (338)
Balance at 30 June 2021 7,534 3,015 4,900 3,840 5,317 24,606
Proceeds from share issue 44 - - - - 44
Increase in equity reserve in relation to options issued - - - 404 - 404
Reclassification following exercise or lapse of share options 1 - - (196) 195 -
Tax credit relating to share options - - - 47 - 47
Dividends declared - - - - (554) (554)
Transactions with owners 45 - - 255 (359) (59)
Profit for the period - - - - 1,510 1,510
Other comprehensive income for the period - - - (5) - (5)
Profit and total comprehensive income for the period - - - (5) 1,510 1,505
Balance at 31 December 2021 7,579 3,015 4,900 4,090 6,468 26,052
Unaudited consolidated cash flow statement for the six months to 31 December
2021
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2021 31 December 2020 30 June 2021
Cash flows from operating activities
Profit before income tax 1,148 963 985
Adjustments for:
Depreciation and amortisation 1,108 1,187 2,421
Loss on disposal of property, plant and equipment - 52 52
Share-based payments 500 304 829
Net finance costs 659 384 766
Other non-cash expenses - 11 11
Changes in operating assets and liabilities, net of effects from acquisition
of subsidiaries:
Decrease in inventories 32 20 54
Decrease/ (increase) in trade receivables (2,085) 818 1,337
(Increase)/ decrease in contract assets (29) (362) (320)
(Increase)/ decrease in other financial assets at amortised cost 5 (10) (7)
Decrease/ (increase) in other current assets 29 97 (184)
Increase/ (decrease) in trade and other payables (902) 472 (114)
(Decrease)/ increase in contract liabilities 766 (1,548) (142)
Cash generated from operations 1,231 2,388 5,688
Analysed as:
Cash flows from operations before VAT deferral scheme and post completion 2,520 2,388 6,718
service consideration payments
Payment of VAT deferral scheme (1,206) - (805)
Payment of post completion service consideration (83) - (225)
Interest received - 2 3
Interest paid (4) (3) (10)
Income taxes paid - - (2)
Net cash inflow from operating activities 1,227 2,387 5,679
Cash flows from investing activities
Payment for property, plant and equipment (69) (15) (36)
Payment of software development costs (805) (802) (1,571)
Payment for proprietary software (101) (984) (1,049)
Payment for other intangible assets (5) (7) (97)
Proceeds from sale of property, plant and equipment - 1 1
Net cash outflow from investing activities (980) (1,807) (2,752)
Cash flows from financing activities
Proceeds from issue of ordinary shares 44 170 222
Interest paid on Loan Notes (561) (420) (717)
Repayment of borrowings (3,500) - -
Principal element of lease payments (71) (172) (294)
Dividends paid to Company's shareholders - - (369)
Net cash outflow from financing activities (4,088) (422) (1,158)
Net (decrease)/ increase in cash and cash equivalents (3,841) 158 1,769
Cash and cash equivalents at beginning of period 14,520 12,710 12,710
Effects of exchange rate changes on cash and cash equivalents (9) 35 41
Cash and cash equivalents at end of period 10,670 12,903 14,520
Notes to the financial information for the six months ended 31 December 2021
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 Suite 203, Bedford Heights, Brickhill Drive
Bedford, UK MK41 7PH 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.
These condensed half year financial statements for the half year ended 31
December 2021 have been prepared in accordance with the AIM Rules for
Companies and should be read in conjunction with the annual financial
statements for the year ended 30 June 2021, which have been prepared in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006
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 2020 has been
derived from the full Group accounts published in the Annual Report and
Accounts 2020, 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 2021 statutory accounts.
The results for the six months ended 31 December 2021 were approved by the
Board on 22 February 2022. A copy of these interim results will be available
on the Company's website www.netcall.com from 23 February 2022.
The principal risks and uncertainties faced by the Group have not changed from
those set out on page 11 of the annual report for the year ended 30 June 2021.
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 Six months to 12 months to
31 December 2021 31 December 2020 30 June 2021
Net earnings attributable to ordinary shareholders (£'000s) 1,510 1,313 974
Weighted average number of ordinary shares in issue (000s) 149,162 145,043 146,675
Basic earnings per share (pence) 1.01 0.91 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 period, adjusted for potentially dilutive shares that are
not anti-dilutive.
Six months to Six months to 12 months to
31 December 2021 31 December 2020 30 June 2021
Weighted average number of ordinary shares in issue (000s) 149,162 145,043 146,675
Adjustments for share options (000s) 8,480 5,753 6,416
Weighted average number of potential ordinary shares in issue (000s) 157,642 150,796 153,091
Diluted earnings per share (pence) 0.96 0.87 0.64
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
with a normalised rate of tax. 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 Six months to 12 months to
31 December 2021 31 December 2020 30 June 2021
Profit used for calculation of basic and diluted EPS 1,510 1,313 974
Amortisation of acquired intangible assets 261 227 488
Post-completion services 33 59 285
Share-based payments 500 304 829
Unwinding of discount - contingent consideration & borrowings 60 59 120
Tax adjustment (742) (656) (503)
Profit used for calculation of adjusted basic and diluted EPS 1,622 1,306 2,193
Pence Six months to Six months to 12 months to
31 December 2021 31 December 2020 30 June 2021
Adjusted basic earnings per share 1.09 0.90 1.49
Adjusted diluted earnings per share 1.03 0.87 1.43
5. Dividends
Dividends paid or declared during the period were as follows:
Six months to December 2021 Paid Pence per share Cash flow statement Statement of changes in equity December 2021 balance sheet
(£'000) (£'000) (£'000)
Final ordinary dividend for year to June 2021((1)) 8/2/22 0.37p - 554 554
- 554 554
Six months to December 2020 Paid Pence per share Cash flow statement Statement of changes in equity December 2020 balance sheet
(£'000) (£'000) (£'000)
Final ordinary dividend for year to June 2019 9/2/21 0.25p - 369 369
- 369 369
((1)) The final ordinary dividend for the year ended 30 June 2021 was approved
at the Annual General Meeting held on 16 December 2021.
6. Net funds/ (debt) reconciliation
£'000 31 December 2021 31 December 2020 30 June 2021
Cash and cash equivalents 10,670 12,903 14,520
Borrowings((1)) (3,415) (6,802) (6,858)
Lease liabilities (784) (953) (843)
Net funds/ (debt) 6,471 5,148 6,819
((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. In
November 2021, the Company issued an early redemption notice and redeemed
£3.5m of the Loan Note.
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