REG - Netcall PLC - Half-year Report
08/03/2023 07:15
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RNS Number : 2175S Netcall PLC 08 March 2023
8 March 2023
NETCALL PLC
("Netcall", the "Company", or the "Group")
Interim results for the six months ended 31 December 2022
Accelerating momentum
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 2022.
Financial highlights
H1 FY23 H1 FY22
Revenue £17.5m £14.7m +19%
Cloud services revenue £7.85m £4.93m +59%
Total annual contract value((1)) ACV £26.5m £19.8m +34%
Cloud services 'ACV' £17.1m £10.8m +58%
Adjusted EBITDA((2)) £4.43m £3.45m +29%
Profit before tax £2.41m £1.15m +109%
Adjusted basic earnings per share 1.86p 1.09p +71%
Group cash at period end £20.4m £10.7m +91%
Net funds at period end £19.9m £6.5m +206%
Operational highlights
· Strong demand for Intelligent Automation and Customer Engagement solutions,
with new customer acquisition particularly robust
· Cloud services continues to be the primary driver of growth, accounting for
more than 80% of new product bookings
· Intelligent Automation solutions now more than half of Group revenue with an
annual run rate of £18.0m (H1 FY22: 44%, £13.0m)
· Customer Engagement customers that have purchased Intelligent Automation
solutions increased by 3 percentage points to 16%, demonstrating cross-selling
success and ongoing potential
· Cloud net retention rate((3)) of 149% (H1 FY22: 119%) or 119% excluding the
effect of the significant contract win announced in June 2022, supported by
high customer satisfaction rates exceeding 98%
· Continued investment in product innovation and business infrastructure to
support business growth
· Positive momentum continues in beginning of second half, in line with
management expectations
Henrik Bang, Chief Executive, said:
"We are pleased with the trading performance during the first half with
continued double-digit revenue and profitability growth together with
accelerated progress in annual contract value, supporting strong forward
momentum.
"During the period, we have seen healthy demand for our Liberty platform,
particularly for cloud-based solutions, as organisations use automation
technologies to make their operations more efficient whilst improving their
customer and employee experiences.
"We enter the second half in a good position with a healthy pipeline and a
profitable and cash generative business, which combined with our strong
balance sheet, enables us to continue investing in our growth strategy. The
Board remains confident in the Group's continued success."
((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 (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 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 Joint Tel. +44 (0) 20 7523 8000
Broker)
Simon Bridges/ Andrew Potts
Singer 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 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 Santander.
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
Trading in the first half of the year has been positive and comfortably in
line with management expectations. Revenue for the first half increased 19% to
£17.5m whilst adjusted EBITDA grew 29% to £4.43m as a result of strong
demand for both the Group's Customer Engagement and Intelligent Automation
solutions.
Cloud subscriptions continue to be the main growth driver for the Group, with
revenue increasing 59% to £7.85m, as organisations look to improve
operational efficiencies and customer experience. The underlying growth in
cloud revenue, excluding the significant contract win announced on 10 June
2022 ('Contract Win'), was 27%.
New customer acquisition was particularly robust in the period supporting
continued sales momentum as reflected in the growth of Annual Contract Value
("ACV"), a leading indicator of future performance. During the period,
cloud-based solutions accounted for more than 80% of new product bookings
increasing cloud ACV by 58% to £17.1m (H1 FY22: 29% to £10.8m). This
contributed to total ACV growth of 34% to £26.5m (H1 FY22: 12% and £19.8m).
The Group's financial performance is underpinned by its land-and-expand
strategy as customers across industries increasingly use cloud-based
automation and customer engagement solutions. The strength of the Group's
differentiated product portfolio and people are reflected in its cloud net
retention rate of 149% and supported by excellent customer satisfaction rates
exceeding 98%.
The transition to a cloud business model continues to drive growth, enhanced
profitability and improved cash generation. In the period 35% of incremental
revenue was translated to adjusted EBITDA, of which more than 118% was
converted into operating cash flow. Netcall's high recurring revenues and cash
conversion enables continued investment in improving and growing the business.
The Group's net cash ("Cash less Borrowings") at period end was £20.4m (30
June 2022: £14.1m). Following the repayment of Loan Notes, announced on 7
October 2022, the Group has no debt.
Current Trading and Outlook
The Group's positive trading momentum has continued in the beginning of the
second half as Netcall continues to execute its growth strategy and is
supported by a healthy pipeline and good visibility from recurring revenue,
which together with our strong balance sheet, enables us to continue investing
in our growth strategy. Combined with secular growth drivers from
organisations' increased use of automation, the Board is confident in the
Group's continued success.
Business Review
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. From councils interacting with citizens, NHS
trusts helping patients, or banks 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 where there is increased focus on cost
efficiencies, automation of operations remains a key strategic priority for
organisations. This is highlighted in a recent survey(1) which shows that
almost eight in ten CFOs expect to see greater investment in digital
technology over the next three years as businesses aim to streamline
operations and improve margins. 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.
These challenges sit at the core of Netcall's Liberty platform, unifying
Intelligent Automation and Customer Engagement to provide a 'one-stop-shop'
Digital Transformation suite. The outcome is smoother, faster and more
transparent business processes which reduce costs and improve customer and
employee experiences. Globally, organisations are expecting to automate
approximately 25% of their processes and tasks within the next five years(2)
leaving considerable scope for ongoing cross - and upselling as well as new
customer acquisition opportunities.
The Liberty platform's blended solution set provides competitive
differentiation by unifying two solution categories with five main product
categories, as follows:
Intelligent Automation - automating processes to free-up people, increase
accuracy, quality and scalability as well as removing customer friction
· 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 built-in
integration to other parts of the Liberty platform, such as RPA and AI, as
well as to 3rd 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.
· 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 - connecting communication channels together to make
customer interaction smoother and faster
· 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.
· Liberty Connect: Digital interactions using our cloud messaging and bot
platform enabling customers to extend their reach using digital channels like
web chat, Facebook Messenger and Twitter as well as benefiting from bots and
automation.
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.mckinsey.com/capabilities/operations/our-insights/your-questions-about-automation-answered
(https://www.mckinsey.com/capabilities/operations/our-insights/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.
Netcall's key verticals of financial services, healthcare and public sector
represent 89% of total revenues for H1 2023, with the Liberty platform
offering 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 Group pursues its market opportunity through execution of a clear and
consistent organic growth strategy centred on four strategic pillars: new
customer acquisition, growth within the existing base, ongoing product
innovation and partner network expansion.
In addition, the Group continues to look for selective acquisitions with
complementary proprietary software and/or additional customers in the Group's
target markets where the Board believes that an acquired business can meet the
Group's target financial parameters after an integration period.
1. Customer base expansion
Netcall's new customer acquisition has been particularly strong during the
period across core markets as we build growing references. The Group's cloud
products continue to be the main source of new business opportunities,
accounting for all the new customer wins in the period.
New business highlights during the period include securing several new public
sector wins, where organisations such as Newcastle City Council have purchased
Netcall's Citizen Hub solution to improve services, quickly and
cost-effectively while also giving give their internal teams the power of
low-code development to develop and implement new services.
2. Land-and-expand
During the period, the Group's land and expand strategy has continued to
deliver growth and is underpinned by high customer satisfaction and
incremental value created by continuous product enhancements. Net retention
rate for the period is 149% or 119% excluding the effect of the contract win
announced in June 2022 and serves to highlight the value that customers place
in Netcall's solutions and the significant opportunity available to achieve
up- and cross-sales to our existing customers.
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 has resulted in a threefold increase in
the annual contract value. With 16% of Customer Engagement customers as at 31
December 2022 having now purchased Intelligent Automation solutions, there
continues to be significant potential within the base as customers look to
automate more processes. Secondly, the ongoing trend of on-premise contact
centre customers migrating to cloud environments to leverage greater
flexibility and lower operating costs, has resulted in an approximately 50%
uplift in annual contract values.
During the period a number of customers migrated their customer engagement
solutions from on-premise to cloud and are in the process also purchased
Liberty automation solutions.
3. Innovation and product development
Netcall has continued to invest in innovation and platform expansion to
provide customers with additional features and capabilities. This underpins
the Group's land-and-expand strategy, unlocking cross- and up-sell
opportunities through new product functionality. A number of the enhanced
features have been promoted through the Netcall Community, an environment for
Netcall Liberty users to learn and collaborate.
In addition, we are exploring how new technologies such as ChatGPT and other
generative AI models can help transform automation capabilities of the Liberty
Platform. Areas of interest include making chatbots better and more helpful
for customers - with the ultimate aim of automating more conversations and
increasing customer satisfaction - as well as using AI to improve the
productivity of employees such as contact centre agents by automating tasks
including suggesting responses and summarising past conversations.
Among the wide range of improvements made to the Liberty platform is a new
integration into Microsoft Teams. This gives users of the Liberty Create
low-code development platform the ability to manage Microsoft Teams meetings
and push notifications into Teams Channels to alert staff to workflow events.
In addition, the Liberty platform's integration with the NHS app was released
with several NHS Trusts now live, supporting the Government's digital health
and social care initiative to help drive improved outcomes and reduced burden
on the NHS.
4. Growing the partner channel
The Group's established partner network comprises large, global advisory firms
and niche technology specialists which expand the Group's market reach and
provide access to new opportunities. The period has seen Netcall's partner
network continue to expand and sales via the channel network accounted for
more than a quarter of order bookings The Board remains committed to its
strategic priority of expanding this network with a focus on improving
delivery capabilities for partners.
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
58% higher at £17.1m (H1-FY22: £10.8m). The growth in Cloud ACV contributed
to a 34% growth in total ACV to £26.5m (H1-FY22: £19.8m). The underlying
Cloud and Total ACV growth excluding the significant contract win announced on
10 June 2022 was 28% and 19% respectively.
The table below sets out ACV for the last three reporting periods:
£'m ACV H1-FY23 FY22 H1-FY22
Cloud services 17.1 15.0 10.8
Product support contracts 9.4 9.2 9.0
Total 26.5 24.2 19.8
Group revenue for the period grew by 19% to £17.5m (H1-FY22: £14.7m). The
year-on-year increase was primarily driven by growth in both Intelligent
Automation solutions by 39% to £8.98m (H1-FY22: £6.45m), and Customer
Engagement solutions by 4% to £8.27m (H1-FY22: £7.94m) of which Customer
Engagement Cloud service revenue grew by 17% to £1.74m (H1-FY22: £1.49m).
The table below sets out revenue by component for the last three interim
periods:
£'m Revenue H1-FY23 H1-FY22 H1-FY21
Cloud services 7.8 4.9 4.1
Product support contracts 4.6 4.4 4.6
Total Cloud services & Product support contracts 12.4 9.4 8.7
Communication services 1.3 1.5 1.6
Product 1.2 1.1 1.0
Professional services 2.6 2.7 2.1
Total Revenue 17.5 14.7 13.4
Reflecting the year over year growth in ACV, revenue from Cloud services
(subscription and usage fees of our cloud-based offerings) was 59% higher at
£7.85m (H1-FY22: £4.93m) and product support contracts grew by 4% to £4.61m
(H1-FY22: £4.44m). This increased recurring revenues from Cloud service and
Product support contracts, to 71% of total revenue (H1-FY22: 64%).
Communication services revenue (fees for telephony and messaging services)
decreased by 15% to £1.31m (H1-FY22: £1.54m) mainly due to fewer call-back
interactions in the period.
Product revenue (software license sales with supporting hardware) increased by
8% to £1.21m (H1-FY22: £1.12m) 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, toward cloud contracts for new or replacement solutions.
Professional services revenue decreased by 4% to £2.55m (H1-FY22: £2.67m) as
the provision of more scalable and lower cost online academy and community
services begins to replace traditional paid for classroom training. The
overall demand for our professional services is dependent on (i) 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 (ii)
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, increased 52% to £54.5m (compared to H1-FY22 of £35.8m)
demonstrating the material amount of revenue available to the Company to be
recognised in future periods. Within this, current RPO, being revenue due to
be recognised within the next 12-months, increased to £30.0m (H1-FY22:
£22.0m).
The Group's adjusted EBITDA increased by 29% to £4.43m (H1-FY22: £3.45m), a
margin of 25% of revenue (H1-FY22: 23%). The improved margin reflecting an
increased 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 35% increase in operating profit of
£2.45m (H1-FY22: £1.81m) 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
£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.
As a result, profit before tax was 109% higher at £2.41m (H1-FY22: £1.15m).
The Group recorded a tax credit of £15,000 (H1-FY22: credit £0.36m)
benefiting from tax relief available from the exercise of share options and
additional deductions for R&D expenditure during the period.
Basic earnings per share was 57% higher at 1.59 pence (H1-FY22: 1.01 pence)
and increased by 71% to 1.86 pence on an adjusted basis (H1-FY22: 1.09 pence).
Diluted earnings per share was 57% higher at 1.51 pence (H1-FY22: 0.96 pence)
and increased by 72% to 1.77 pence on an adjusted basis (H1-FY22: 1.03 pence).
Cash generated from operations was £5.21m (H1-FY22: £1.23m). 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 2020) accounted for as
post completion services, cash generated from operations increased by 103% to
£5.14m (H1-FY21: £2.52m) a conversion of 116% of adjusted EBITDA (H1-FY22:
73%).
Spending on research and development, including capitalised software
development, increased by 27% £2.50m (H1-FY22: £1.97m) of which capitalised
software expenditure was £1.14m (H1-FY22: £0.81m).
Total capital expenditure was £1.52m (H1-FY22: £0.98m); the balance after
capitalised development, being £0.38m (H1-FY22: £0.18m) relating to a
routine IT equipment refresh.
As a result of these factors, net funds were £19.9m at 31 December 2022 (30
June 2022: £13.4m).
A final dividend of 0.54 pence per share for the year ended 30 June 2022 was
approved by shareholders on 8 December 2022. The amount payable was £0.84m
and is included as a liability in the 31 December 2022 balance sheet and was
paid on 31 January 2023.
Unaudited consolidated income statement for the six months to 31 December 2022
£'000 Unaudited restated Audited
Unaudited
Six months to
12 months to
Six months to
31 December 2022
30 June 2022
31 December 2021
Revenue 17,532 14,690 30,458
Cost of sales (2,922) (2,366) (5,021)
Gross profit 14,610 12,324 25,437
Administrative expenses (12,257) (10,540) (22,363)
Other gains/(losses) - net 100 23 113
Adjusted EBITDA 4,433 3,448 6,405
Depreciation (189) (228) (437)
Net loss on disposal of property, plant and equipment - - -
Amortisation of acquired intangible assets (261) (261) (522)
Amortisation of other intangible assets (649) (619) (1,239)
Post-completion services (366) (33) (56)
Share-based payments (515) (500) (964)
Operating profit 2,453 1,807 3,187
Finance income 102 - 6
Finance costs (144) (659) (881)
Finance costs - net (42) (659) (875)
Profit before tax 2,411 1,148 2,312
Tax credit 15 362 88
Profit for the period 2,426 1,510 2,400
Earnings per share - pence
Basic 1.59 1.01 1.61
Diluted 1.51 0.96 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.
Unaudited statement of comprehensive income for the six months to 31 December
2022
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2022 31 December 2021 30 June 2022
Profit for the period 2,426 1,510 2,400
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations 1 (5) (14)
Total other comprehensive income for the period 1 (5) (14)
Total comprehensive income for the period 2,427 1,505 2,386
All of the comprehensive income for the period is attributable to the
shareholders of Netcall plc.
Unaudited consolidated balance sheet at 31 December 2022
£'000 Unaudited Unaudited Audited
31 December 2022 31 December 2021 30 June 2022
Assets
Non-current assets
Property, plant and equipment 727 535 477
Right-of-use assets 363 625 539
Intangible assets 30,224 29,998 29,976
Deferred tax asset 1,240 1,057 906
Financial assets at fair value through other comprehensive income 72 72 72
Total non-current assets 32,626 32,287 31,970
Current assets
Inventories 128 52 37
Other current assets 2,541 1,505 2,767
Contract assets 905 930 888
Trade receivables 3,663 4,722 3,704
Other financial assets at amortised cost 34 6 8
Cash and cash equivalents 20,419 10,670 17,605
Total current assets 27,690 17,885 25,009
Total assets 60,316 50,172 56,979
Liabilities
Non-current liabilities
Contract liabilities 675 140 525
Borrowings - 2,832 2,304
Lease liabilities 353 610 521
Deferred tax liabilities 1,079 881 899
Total non-current liabilities 2,107 4,463 4,249
Current liabilities
Trade and other payables 7,906 6,006 7,963
Dividend payable 839 554 -
Contract liabilities 16,843 12,340 16,005
Current tax liabilities - - -
Borrowings - 583 1,167
Lease liabilities 119 174 177
Total current liabilities 25,707 19,657 25,312
Total liabilities 27,814 24,120 29,561
Net assets 32,502 26,052 27,418
Equity attributable to the owners of Netcall plc
Share capital 7,993 7,579 7,587
Share premium 5,574 3,015 3,015
Other equity 4,900 4,900 4,900
Other reserves 3,827 4,090 4,462
Retained earnings 10,208 6,468 7,454
Total equity 32,502 26,052 27,418
Unaudited consolidated statement of changes in equity at 31 December 2022
£'000 Share capital Share premium Other equity Other reserves Retained earnings Total equity
Balance at 30 June 2021 7,534 3,015 4,900 3,840 5,317 24,606
Proceeds from share issue 45 - - - (1) 44
Increase in equity reserve in relation to options issued - - - 404 - 404
Reclassification following exercise or lapse of share options - - - (196) 196 -
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
Proceeds from share issue 8 - - - - 8
Increase in equity reserve in relation to options issued - - - 371 - 371
Reclassification following exercise or lapse of share options - - - (96) 96 -
Tax credit relating to share options - - - 106 - 106
Dividends declared - - - - - -
Transactions with owners 8 - - 381 96 485
Profit for the period - - - - 890 890
Other comprehensive income for the period - - - (9) - (9)
Profit and total comprehensive income for the period - - - (9) 890 881
Balance at 30 June 2022 7,587 3,015 4,900 4,462 7,454 27,418
Proceeds from share issue 406 2,559 - - - 2,965
Increase in equity reserve in relation to options issued - - - 392 - 392
Reclassification following exercise or lapse of share options - - - (1,167) 1,167 -
Tax credit relating to share options - - - 139 - 139
Dividends declared - - - - (839) (839)
Transactions with owners 406 2,559 - (636) 328 2,657
Profit for the period - - - - 2,426 2,426
Other comprehensive income for the period - - - 1 - 1
Profit and total comprehensive income for the period - - - 1 2,426 2,427
Balance at 31 December 2022 7,993 5,574 4,900 3,827 10,208 32,502
Unaudited consolidated cash flow statement for the six months to 31 December
2022
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2022 31 December 2021 30 June 2022
Cash flows from operating activities
Profit before income tax 2,411 1,148 2,312
Adjustments for:
Depreciation and amortisation 1,099 1,108 2,198
Loss on disposal of property, plant and equipment - - -
Share-based payments 515 500 964
Net finance costs 42 659 875
Other non-cash expenses 6 - -
Changes in operating assets and liabilities, net of effects from acquisition
of subsidiaries:
(Increase)/ decrease in inventories (91) 32 47
Decrease/ (increase) in trade receivables 41 (2,085) (1,064)
(Increase)/ decrease in contract assets (15) (29) 32
(Increase)/ decrease in other financial assets at amortised cost (27) 5 3
Decrease/ (increase) in other current assets 207 29 (1,237)
(Decrease)/ increase in trade and other payables (62) (902) 1,040
(Decrease)/ increase in contract liabilities 988 766 4,817
Cash generated from operations 5,114 1,231 9,987
Analysed as:
Cash flows from operations before VAT deferral scheme and post completion 5,137 2,520 11,500
service consideration payments
Payment of VAT deferral scheme - (1,206) (1,407)
Payment of post completion service consideration (23) (83) (106)
Interest received 102 - 6
Interest paid (4) (4) (7)
Income taxes paid - - (1)
Net cash inflow from operating activities 5,212 1,227 9,985
Cash flows from investing activities
Payment for property, plant and equipment (363) (69) (134)
Payment of software development costs (1,138) (805) (1,610)
Payment for proprietary software - (101) (136)
Payment for other intangible assets (19) (5) (57)
Proceeds from sale of property, plant and equipment - - -
Net cash outflow from investing activities (1,520) (980) (1,937)
Cash flows from financing activities
Proceeds from issue of ordinary shares 2,965 44 53
Interest paid on Loan Notes (202) (561) (759)
Repayment of borrowings (3,500) (3,500) (3,500)
Lease payments (140) (71) (169)
Dividends paid to Company's shareholders - - (554)
Net cash outflow from financing activities (877) (4,088) (4,929)
Net (decrease)/ increase in cash and cash equivalents 2,815 (3,841) 3,119
Cash and cash equivalents at beginning of period 17,605 14,520 14,520
Effects of exchange rate changes on cash and cash equivalents (1) (9) (34)
Cash and cash equivalents at end of period 20,419 10,670 17,605
Notes to the financial information for the six months ended 31 December 2022
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 2022 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 2022, which have been prepared in
accordance with UK-adopted international accounting
standards.
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 2022 has been
derived from the full Group accounts published in the Annual Report and
Accounts 2022, 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 2022 statutory accounts. As published in those
statutory accounts, due to increased demand for the Netcall's technical staff
to provide consulting services to support customer' intelligent automation
projects, the Group 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 period
consolidated income statement for the six months ended 31 December 2021 has
been restated for the reclassification of costs between cost of sales and
administrative expenses, resulting in an increase in cost of sales of £0.99m,
with a corresponding decrease in administrative expenses. The overall
operating profit for the Group remains unchanged.
The results for the six months ended 31 December 2022 were approved by the
Board on 7 March 2023. A copy of these interim results will be available on
the Company's web site www.netcall (http://www.netcall) .com from 8 March
2023.
The principal risks and uncertainties faced by the Group have not changed from
those set out on page 11 and 12 of the annual report for the year ended 30
June 2022.
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 2022 31 December 2021 30 June 2022
Net earnings attributable to ordinary shareholders (£'000s) 2,426 1,510 2,400
Weighted average number of ordinary shares in issue (000s) 152,869 149,162 149,462
Basic earnings per share (pence) 1.59 1.01 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 period, adjusted for potentially dilutive shares that are
not anti-dilutive.
Six months to Six months to 12 months to
31 December 2022 31 December 2021 30 June 2022
Weighted average number of ordinary shares in issue (000s) 152,869 149,162 149,462
Adjustments for share options (000s) 7,775 8,480 8,150
Weighted average number of potential ordinary shares in issue (000s) 160,644 157,642 157,612
Diluted earnings per share (pence) 1.51 0.96 1.52
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 2022 31 December 2021 30 June 2022
Profit used for calculation of basic and diluted EPS 2,426 1,510 2,400
Amortisation of acquired intangible assets 261 261 964
Post-completion services 366 33 56
Share-based payments 515 500 522
Unwinding of discount - contingent consideration & borrowings 29 60 116
Tax adjustment (749) (742) (842)
Profit used for calculation of adjusted basic and diluted EPS 2,848 1,622 3,216
Pence Six months to Six months to 12 months to
31 December 2022 31 December 2021 30 June 2022
Adjusted basic earnings per share 1.86 1.09 2.15
Adjusted diluted earnings per share 1.77 1.03 2.04
5. Dividends
Dividends paid or declared during the period were as follows:
Six months to December 2022 Paid Pence per share Cash flow statement Statement of changes in equity December 2022 balance sheet
(£'000) (£'000) (£'000)
Final ordinary dividend for year to June 2022((1)) 31/1/23 0.54p - 839 839
- 839 839
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 8/2/22 0.37p - 554 554
- 554 554
((1)) The final ordinary dividend for the year ended 30 June 2022 was approved
at the Annual General Meeting held on 8 December 2022.
6. Net funds/ (debt) reconciliation
£'000 31 December 2022 31 December 2021 30 June 2022
Cash and cash equivalents 20,419 10,670 17,605
Borrowings((1)) - (3,415) (3,471)
Lease liabilities (472) (784) (698)
Net funds/ (debt) 19,947 6,471 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 is being 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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