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RNS Number : 7143F Netcall PLC 06 March 2024
6 March 2024
NETCALL PLC
("Netcall", the "Company", or the "Group")
Interim results for the six months ended 31 December 2023
Cloud momentum driving 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 2023.
Financial highlights
H1 FY24 H1 FY23
Revenue £18.9m £17.5m +8%
Cloud services revenue £9.28m £7.85m +18%
Total annual contract value((1)) (ACV) £30.1m £26.5m +14%
Cloud services ACV £20.3m £17.1m +19%
Underlying Cloud Net Retention Rate((2)) 119% 119%
Adjusted EBITDA((3)) £4.83m £4.43m +9%
Profit before tax £3.87m £2.41m +61%
Adjusted basic earnings per share 2.08p 1.86p +12%
Group cash at period end £28.6m £20.4m +40%
Operational highlights
· Cloud subscriptions remain the primary driver of growth, with cloud services
revenue growing by 18% to £9.28m and accounting for 88% of new bookings.
· New customers drove strong demand, representing 33% of new cloud bookings, an
increase of 11 percentage points from the prior period.
· With cloud subscriptions growing, the proportion of Group revenues that are
recurring has increased by 4 percentage points to 75%, leading to strong cash
flow generation.
· Strong demand for cloud contact centre solutions which accelerated growth in
Customer Engagement revenue.
· Continued expansion of revenues within the existing base, reflected in the
cloud net retention rate of 111% or 119% excluding the effect of the
significant contract win announced in June 2022 and renewed in July 2023.
· Growing number of customers and partners deploying Liberty AI capabilities.
· Board succession and executive leadership changes as previously announced are
now complete, ensuring continuing, effective leadership of the Company.
· Acquisition of Skore Labs Limited ("Skore"), completed after the period,
enhancing the Group's product offering and increasing both the market
opportunity and cross-sell potential.
· The Board is confident in delivering on its expectations and completing
another successful year.
James Ormondroyd, Chief Executive, said:
"These results reflect a good start to the year, with strong uptake of our
Cloud offering from new and existing customers. This growing base of cloud
subscriptions is providing increased visibility and cash flows, supporting
continued investment into our business.
"We are pleased to have acquired Skore post period end, bringing a highly
complementary bolt-on solution and enhancing our offering as a one-stop-shop
digital transformation toolkit. We are seeing good early interest for our
combined offering across our joint customer bases.
"We enter the second half with continued positive trading momentum, a higher
base of recurring revenues and a healthy pipeline of opportunities. This,
combined with a programme of continued product enhancements to unlock new
growth opportunities, gives us confidence 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 renewal announced on 20 July 2023 was included in FY23 ACV
at the annual amount of $4m).
((2)) 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. The underlying cloud net retention rate is
calculated excluding the impact of the significant contract win announced in
June 2022 and renewed in July 2023 (see note 8 for additional information).
(.)
((3)) Profit before interest, tax, depreciation and amortisation adjusted to
exclude the effects of share-based payments, acquisition related costs,
impairment, profit or loss on disposals, contingent consideration and
non-recurring transaction costs.
( )
Enquiries:
Netcall plc Tel. +44 (0) 330 333 6100
James Ormondroyd, CEO
Henrik Bang, Chair
Richard Hughes, CFO
Canaccord Genuity Limited (Nominated Adviser and Joint Broker) Tel. +44 (0) 20 7523 8000
Simon Bridges/ Andrew Potts
Singer Capital Markets (Joint Broker)
Harry Gooden / Asha Chotai Tel. +44 (0) 20 7496 3000
Alma Strategic Communications Tel. +44 (0) 20 3405 0205
Caroline Forde / Hilary Buchanan / Robyn Fisher
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.
Overview
The Group delivered a good performance for the six months to 31 December 2023,
in line with management expectations. Revenue for the first half increased 8%
to £18.9m (H1-FY23: £17.5m) delivering adjusted EBITDA growth of 9% to
£4.8m (H1-FY23: £4.4m).
Netcall's cloud offerings, which help businesses to modernise their
operations, reduce costs and enhance customer experience, continued to drive
growth in the first half of the financial year. Cloud services revenue rose by
18% to £9.28m and cloud subscriptions accounted for 88% of new bookings in
the period.
This resulted in an increase in Cloud ACV and Total ACV by 19% and 14%
respectively to £20.3m and £30.1m, providing visibility of future revenue
performance. On an underlying basis, these growth rates were 28% and 19%,
excluding the significant contract announced in June 2022 and renewed in July
2023.
Customer acquisition was robust in the period, with 33% of new cloud bookings
from new customers (H1-FY23: 22%). The Group also continues to expand its
revenues within the existing base, reflected in the cloud net retention rate
of 111% or 119% on an underlying basis (H1-FY23: 149% and 119% respectively).
Almost one quarter of Customer Engagement customers are now integrating both
Customer Engagement and Intelligent Automation solutions, highlighting both
the stickiness of the Group's existing client base and the significant
potential for further cross-selling opportunities as customers choose to
further embed Netcall's solutions into their platforms.
Investment in the Group's established growth strategies is ongoing, including
a regular pace of product enhancements which continue to unlock new growth
opportunities. The previously announced investment programme into the
cloud-based Customer Engagement solutions to address the growing demand has
commenced. As planned, the costs of this programme will be weighted toward the
second half of FY24 and should position the Group to enjoy further growth
thereafter.
The Group's platform roadmap has been accelerated by the acquisition of Skore,
a highly complementary technology that enhances the Liberty offering. This
acquisition has strengthened Netcall's position as a one-stop-shop digital
transformation toolkit, providing increased cross-selling potential and an
expanded market opportunity. The Skore offering has now been launched to the
existing Netcall customer base and technology integration into the Liberty
platform is progressing as planned.
With Cloud accounting for a larger proportion of the overall business, the
Group's recurring revenues are rising strongly, leading to improved cash flow
generation. The Group's cash position increased to £28.6m at the end of the
period (30 June 2023: £24.8m), with no debt on its balance sheet.
Current Trading and Outlook
The Group has maintained its positive momentum in the beginning of the second
half. The acquisition of Skore, after the period end, enhanced the Group's
product offering and opens up new business opportunities. With its organic
investment strategies and a programme of continued product enhancements to
unlock new growth opportunities, Netcall is well-positioned to seize the
growing market opportunity. The sustained momentum for Cloud is driving growth
of predictable recurring revenue, with the contracted base of revenue yet to
be recognised increasing to £58m.
Netcall continues to benefit from favourable market drivers, including the
rapid acceleration of cloud and AI technologies. This, coupled with a robust
balance sheet, a higher base of recurring revenues and a healthy order book,
provides the Board with confidence in the Group's ongoing success.
Business Review
Netcall helps customers implement their digital strategies successfully,
creating more intelligent, efficient, and customer-centric organisations. This
enhances their overall effectiveness, competitiveness, and sustainability
across industries, from councils and hospitals to financial institutions, as
they all strive to deliver better outcomes for their stakeholders.
Netcall's Liberty platform addresses these demands by combining Intelligent
Automation and Customer Engagement software in a one-stop-shop digital
transformation toolkit. It integrates process mapping and analysis, low-code,
RPA, contact centre and AI solutions to enable rapid process automation,
operational efficiencies, and improved customer experience.
The Liberty platform's distinctive feature is unifying complementary solution
categories which work together to support the implementation of successful
automation programmes. The availability of Intelligent Automation and Customer
Engagement technologies on one, easy-to-use platform with the inclusion of
industry specific implementations continues to provide competitive
differentiation in the market.
Through the acquisition of Skore post period end, Netcall added process
mapping and analysis to the Liberty platform toolkit, a key foundation
component of business process automation. This enables users to rapidly map
processes, identify problems and opportunities for optimisation, and drive
operational improvements. By integrating process mapping with Liberty's
existing low-code application capabilities, customers can map and then
automate processes faster and easier, increasing Liberty's addressable market
and providing significant cross-selling potential across Netcall's existing
customer base.
Strategy
Netcall actively pursues market opportunities through a four-pillar growth
strategy: acquire new customers, expand within the existing customer base,
innovate products continuously, and expand the partner network.
The Group focuses primarily on financial services, healthcare, and public
sector industries, which contributed 89% of the Group's total revenues during
the period. Netcall principally targets customers with complex operations,
large customer and employee bases, and many stakeholders, often facing an
extensive regulatory landscape.
The Liberty platform's adaptability and its seamless integration with cloud
services enable customers to increase their platform usage, supporting their
expansion objectives.
Netcall continues to maintain high customer satisfaction and employee
engagement levels in the period, providing a strong foundation for future
growth of the business.
Customer base expansion
New customer acquisition was robust in the period as more organisations across
sectors chose to partner with Netcall on their digital transformation
journeys. Orders for Cloud services drove the new wins, especially sales of
the Group's cloud contact centre solution. The growing customer base lays the
foundations from which to grow long-term and valuable relationships.
The Group saw particularly good demand in healthcare in the period through its
Patient Hub solution, with several new customer wins. An example is a recent
contract with NHS Devon where Netcall is providing a waiting list solution
across the customer's care area with a population of 1.3 million people.
The Group also continues to see momentum in additional industry segments. A
highlight in the period is Transport for London (TfL), who partnered with
Netcall to deploy a product acceptance solution, which manages certification
for TfL of equipment and vehicles used on the underground network. This app is
already in use by Network Rail, who shared it with TfL to speed up their
deployment.
Land and expand
The Group's land-and-expand strategy has remained a central focus and
cross/upselling products continues to be a source of value, as customers
increasingly deploy upgrades and new Netcall solutions. This is reflected in
the consistently high cloud net retention rate of 111% or 119% on an
underlying basis.
The proportion of Customer Engagement customers who have also purchased
Intelligent Automation solutions continues its progression, up 2 percentage
points to 23%, with the average increase in contract value of a customer
taking both solutions being on average 3x that of a standalone Customer
Engagement contract.
In addition, on-premise contact centre customers migrating to Netcall's cloud
environment in order to leverage greater flexibility and lower operating costs
is a growing trend, resulting in an approximately 60% uplift in annual
contract values. This trend is reflected in the strong growth now coming
through the reported financials in Customer Engagement revenue, up 9% in the
period, driven in part by a 43% increase in cloud contact centre revenue.
Growing the partner channel
Netcall has established a partner network that includes large global advisory
firms and niche technology specialists. This network enables the Group to
access new markets and opportunities in the UK and overseas. Throughout the
period, Netcall's partner network has continued to grow, and sales via
indirect channels accounted for 20% of order bookings. The Group signed up six
new partners in the period, bringing the total number of signed partners to
more than 40. The Board remains committed to its strategic priority of
expanding this network with a focus on improving delivery capabilities for
partners.
Innovation and product development
Underpinning the Group's broadening and deepening customer base is a
continuous pace of innovative product development and platform expansion to
offer customers enhanced features and capabilities. This supports the Group's
land-and-expand strategy, unlocking opportunities for new customer acquisition
as well as cross- and up-selling through new product functionalities.
Customers using the Netcall Liberty platform benefit from this strategy. They
receive regular updates and new features that improve their platform
experience. The enhancements also included customer requests, upvoted by peers
in the Netcall Community Ideas Portal, in releases within the period. This
supports the Group's mission of being a partner to its customers on their
digital transformation journey.
Netcall's Liberty AI is an innovative artificial intelligence solution that
enables customers to easily integrate custom or pre-trained AI models in their
applications or interactions. A growing number of customers and partners are
deploying Liberty AI capabilities, together with an increasing level of sales
engagements exploring how AI can unlock value for customers. Liberty AI is set
to include generative AI features that will allow customers to enrich their
engagement and automation apps with chat summarisation, topic extraction, and
sentiment analysis. These features are expected to launch in Q2 / Q3 2024,
followed by more functionality throughout the year.
The Group regularly updates its industry-tailored offerings built on the
Liberty platform, or 'hubs', to meet the evolving needs of its customers. The
Group's hubs include Citizen Hub and Tenant Hub, which are full-stack,
low-code case management, workflow and process automation solutions for
councils and housing providers; and Patient Hub, a patient engagement portal
that offers appointment notifications, waiting list validation, patient
initiated follow up and NHS App integration.
New applications for these hubs are planned for the second half of the year,
which are expected to generate additional revenue streams. These include
Diagnostic Booking, which automates appointment booking for scans; and
Rent-IQ, which assists housing providers to proactively manage rent arrears.
Skore's process discovery and mapping solution is currently being integrated
into the Liberty platform and is expected to be available by April 2024. The
product development roadmap includes introducing industry-specific process
templates, as well as using AI within Liberty to make process mapping and
automation efficient and smarter.
Financial Review
Year-on-year growth in ACV is a key financial metric monitored by the Board.
This reflects the annual value of new business won, together with upsell and
cross-sell into the Group's existing customer base, less any customer
contraction or cancellation. ACV is a key 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
19% higher at £20.3m (H1-FY23: £17.1m). Cloud ACV growth, driven by the
Group's successful land-and-expand strategy, contributed to a 14% year-on-year
increase in Total ACV to £30.1m (H1-FY23: £26.5m). This marks a milestone
for the Group, as it surpasses the £30m threshold for the first time.
Underlying Cloud and Total ACV growth, excluding the significant contract
renewal announced in July 2023, was 28% and 19% respectively (see note 8 for
further information).
The table below sets out ACV for the last three reporting periods:
£'m ACV H1-FY24 FY23 H1-FY23
Cloud services 20.3 18.1 17.1
Product support contracts 9.8 9.8 9.4
Total 30.1 27.9 26.5
Group revenue rose by 8% to £18.9m (H1-FY23: £17.5m). On an underlying
basis, revenue growth increased by 3 percentage points from 8% in H1-FY23 to
11% in the current period. Intelligent Automation solutions' revenue grew by
7% to £9.64m, or 14% on an underlying basis. Customer Engagement solutions'
revenue increased by 9% to £9.05m, up from 4% in H1-FY23, underpinned by
significant growth in cloud contact centre subscription revenue of 43% to
£2.50m (H1-FY23: 17% to £1.74m).
The table below sets out revenue by component for the last three interim
periods:
£'m Revenue H1-FY24 H1-FY23 H1-FY22
Cloud services 9.3 7.8 4.9
Product support contracts 4.9 4.6 4.4
Total Cloud services & Product support contracts 14.2 12.4 9.4
Communication services 1.3 1.3 1.5
Product 1.0 1.2 1.1
Professional services 2.4 2.6 2.7
Total Revenue 18.9 17.5 14.7
Revenue from Cloud services (subscription and usage fees of our cloud-based
offerings) was 18% higher at £9.28m (H1-FY23: £7.85m). Product support
contracts also grew by 7% to £4.93m (H1-FY23: £4.61m). As a result,
recurring revenues from these services accounted for 75% of total revenue, up
from 71% in the first half of the last financial year.
Communication services revenue, which consists of fees for telephony and
messaging services, was £1.32m (H1-FY23: £1.31m).
Product revenue for software license sales and supporting hardware decreased
as expected by 20% to £0.97m (H1-FY23: £1.21m) as more customers opted for
cloud solutions over on-premises ones. We anticipate this trend to persist in
the future.
Professional services revenue was £2.42m (H1-FY23: £2.55m). This revenue
stream varies depending on the ratio of direct and indirect sales, and whether
the customer demand is for full application development or support for their
own development teams. Additionally, our partners have the option to provide
professional services to customers, whether they sell our products directly or
indirectly.
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 6% to £58.0m (H1-FY23: £54.5m) 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 by 6% to £31.8m (H1-FY23: £30.0m) or
14% on an underlying basis.
The Group's adjusted EBITDA increased by 9% to £4.83m (H1-FY23: £4.43m), a
margin of 26% of revenue (H1-FY23: 25%). The higher margin reflecting an
increased contribution from Cloud services in the period, before an expected
short-term margin reduction in future periods from the Group's investment
programme into its cloud Customer Engagement offering.
The higher adjusted EBITDA led to a 42% increase in operating profit to
£3.47m (H1-FY23: £2.45m) with charges for depreciation and amortisation
being broadly level compared to the previous period. The share-based payment
charge for the period was £0.31m, which was £0.21m lower than the prior
period (H1-FY23: £0.52m). The Group did not incur any charges for post
completion services in the period (H1-FY23: £0.37m).
As a result, profit before tax was 61% higher at £3.87m (H1-FY23: £2.41m).
The Group recorded a tax charge of £0.30m (H1-FY23: credit £15,000). The
effective rate of tax is lower than the headline rate of corporation tax as
the Group utilised tax losses that were previously unrecognised as deferred
tax assets. The Group also benefited from tax relief from the exercise of
share options during the period.
Basic earnings per share was 40% higher at 2.23 pence (H1-FY23: 1.59 pence)
and increased by 12% to 2.08 pence on an adjusted basis (H1-FY23: 1.86 pence).
Diluted earnings per share was 42% higher at 2.14 pence (H1-FY23: 1.51 pence)
and increased by 12% to 1.99 pence on an adjusted basis (H1-FY23: 1.77 pence).
Cash generated from operating activities was £5.13m (H1-FY23: £5.21m), being
a conversion of 106% of adjusted EBITDA (H1-FY23: 118%).
Spending on research and development, including capitalised software
development, increased by 7% to £2.67m (H1-FY23: £2.50m) of which
capitalised software expenditure was £1.15m (H1-FY23: £1.14m).
Total capital expenditure was £1.24m (H1-FY23: £1.52m); the balance after
capitalised development, being £0.09m (H1-FY23: £0.38m) relating to routine
IT equipment purchases.
Group cash at the end of the period was £28.6m (30 June 2023: £24.8m),
representing a 15% increase on the year-end position. Net funds, stated after
including lease liabilities, were £28.1m at 31 December 2023 (30 June 2023:
£24.3m). The Company has no debt on its balance sheet.
A final dividend of 0.83 pence per share for the year ended 30 June 2023 was
approved by shareholders at the AGM on 19 December 2023. The amount payable,
which was £1.34m, is included as a liability in the 31 December 2023 balance
sheet and was paid on 9 February 2024.
Unaudited consolidated income statement for the six months to 31 December 2023
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2023 31 December 2022 30 June 2023
Revenue 18,914 17,532 36,040
Cost of sales (2,518) (2,922) (5,768)
Gross profit 16,396 14,610 30,272
Administrative expenses (12,949) (12,257) (26,522)
Other gains/(losses) - net 18 100 62
Adjusted EBITDA 4,828 4,433 8,003
Depreciation (188) (189) (377)
Amortisation of acquired intangible assets (261) (261) (522)
Amortisation of other intangible assets (603) (649) (1,287)
Post-completion services - (366) (365)
Share-based payments (311) (515) (1,640)
Operating profit 3,465 2,453 3,812
Finance income 422 102 344
Finance costs (13) (144) (155)
Finance income/(costs) - net 409 (42) 189
Profit before tax 3,874 2,411 4,001
Tax (charge)/ credit (295) 15 205
Profit for the period 3,579 2,426 4,206
Earnings per share - pence
Basic 2.23 1.59 2.69
Diluted 2.14 1.51 2.52
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
2023
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2023 31 December 2022 30 June 2023
Profit for the period 3,579 2,426 4,206
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations - 1 8
Total other comprehensive income for the period - 1 8
Total comprehensive income for the period 3,579 2,427 4,214
All of the comprehensive income for the period is attributable to the
shareholders of Netcall plc.
Unaudited consolidated balance sheet at 31 December 2023
£'000 Unaudited Unaudited Audited
31 December 2023 31 December 2022 30 June 2023
Assets
Non-current assets
Property, plant and equipment 668 727 699
Right-of-use assets 422 363 298
Intangible assets 30,737 30,224 30,453
Deferred tax asset 1,456 1,240 1,767
Financial assets at fair value through other comprehensive income 72 72 72
Total non-current assets 33,355 32,626 33,289
Current assets
Inventories 13 128 31
Other current assets 2,515 2,541 2,333
Contract assets 292 905 599
Trade receivables 3,577 3,663 4,468
Other financial assets at amortised cost 95 34 57
Cash and cash equivalents 28,618 20,419 24,753
Total current assets 35,110 27,690 32,241
Total assets 68,465 60,316 65,530
Liabilities
Non-current liabilities
Contract liabilities 691 675 787
Lease liabilities 416 353 292
Deferred tax liabilities 1,272 1,079 1,151
Total non-current liabilities 2,379 2,107 2,230
Current liabilities
Trade and other payables 6,995 7,906 7,232
Dividend payable 1,338 839 -
Contract liabilities 19,826 16,843 20,578
Lease liabilities 108 119 113
Total current liabilities 28,267 25,707 27,923
Total liabilities 30,646 27,814 30,153
Net assets 37,819 32,502 35,377
Equity attributable to the owners of Netcall plc
Share capital 8,157 7,993 8,108
Share premium 5,574 5,574 5,574
Other equity 4,900 4,900 4,900
Other reserves 3,040 3,827 3,056
Retained earnings 16,148 10,208 13,739
Total equity 37,819 32,502 35,377
Unaudited consolidated statement of changes in equity at 31 December 2023
£'000 Share capital Share premium Other equity Other reserves Retained earnings Total equity
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
Proceeds from share issue 115 - - - - 115
Increase in equity reserve in relation to options issued - - - 707 - 707
Reclassification following exercise or lapse of share options - - - (1,751) 1,751 -
Tax credit relating to share options - - - 266 - 266
Transactions with owners 115 - - (778) 1,751 1,088
Profit for the period - - - - 1,780 1,780
Other comprehensive income for the period - - - 7 - 7
Profit and total comprehensive income for the period - - - 7 1,780 1,787
Balance at 30 June 2023 8,108 5,574 4,900 3,056 13,739 35,377
Proceeds from share issue 49 - - - - 49
Increase in equity reserve in relation to options issued - - - 288 - 288
Reclassification following exercise or lapse of share options - - - (168) 168 -
Tax charge relating to share options - - - (136) - (136)
Dividends declared - - - - (1,338) (1,338)
Transactions with owners 49 - - (16) (1,170) (1,137)
Profit for the period - - - - 3,579 3,579
Other comprehensive income for the period - - - - - -
Profit and total comprehensive income for the period - - - - 3,579 3,579
Balance at 31 December 2023 8,157 5,574 4,900 3,040 16,148 37,819
Unaudited consolidated cash flow statement for the six months to 31 December
2023
£'000 Unaudited Unaudited Audited
Six months to Six months to 12 months to
31 December 2023 31 December 2022 30 June 2023
Cash flows from operating activities
Profit before income tax 3,874 2,411 4,001
Adjustments for:
Depreciation and amortisation 1,052 1,099 2,186
Share-based payments 311 515 1,640
Finance (income)/costs - net (409) 42 (189)
Other non-cash expenses - 6 6
Changes in operating assets and liabilities, net of effects from acquisition
of subsidiaries:
Decrease/ (increase) in inventories 18 (91) 7
Decrease/ (increase) in trade receivables 890 41 (765)
Decrease/ (increase) in contract assets 307 (15) 281
Increase in other financial assets at amortised cost (39) (27) (49)
(Increase)/ decrease in other current assets (179) 207 416
Decrease in trade and other payables (264) (62) (1,148)
(Decrease)/ increase in contract liabilities (847) 988 4,835
Cash generated from operations 4,714 5,114 11,221
Analysed as:
Cash flows from operations before post completion service consideration 4,714 5,137 11,597
payments
Payment of post completion service consideration - (23) (376)
Interest received 422 102 344
Interest paid (4) (4) (8)
Income taxes paid - - -
Net cash inflow from operating activities 5,132 5,212 11,557
Cash flows from investing activities
Payment for property, plant and equipment (92) (363) (458)
Payment of software development costs (1,147) (1,138) (2,267)
Payment for other intangible assets - (19) (19)
Net cash outflow from investing activities (1,239) (1,520) (2,744)
Cash flows from financing activities
Proceeds from issue of ordinary shares 49 2,965 3,079
Interest paid on Loan Notes - (202) (204)
Repayment of borrowings - (3,500) (3,500)
Lease payments (78) (140) (214)
Dividends paid to Company's shareholders - - (839)
Net cash outflow from financing activities (29) (877) (1,678)
Net increase in cash and cash equivalents 3,864 2,815 7,135
Cash and cash equivalents at beginning of period 24,753 17,605 17,605
Effects of exchange rate changes on cash and cash equivalents 1 (1) 13
Cash and cash equivalents at end of period 28,618 20,419 24,753
Notes to the financial information for the six months ended 31 December 2023
1. General information
Netcall plc (AIM: "NET", "Netcall", "Group" or the "Company") is a leading
provider of intelligent automation 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 six months ended 31
December 2023 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 2023, which has 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 2023 has been
derived from the full Group accounts published in the Annual Report and
Accounts 2023, 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 2023 statutory accounts.
The results for the six months ended 31 December 2023 were approved by the
Board on 5 March 2024. A copy of these interim results will be available on
the Company's web site www.netcall (http://www.netcall) .com from 6 March
2024.
The principal risks and uncertainties faced by the Group have not changed from
those set out on pages 11 and 12 of the annual report for the year ended 30
June 2023.
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 2023 31 December 2022 30 June 2023
Net earnings attributable to ordinary shareholders (£'000s) 3,579 2,426 4,206
Weighted average number of ordinary shares in issue (000s) 160,545 152,869 156,352
Basic earnings per share (pence) 2.23 1.59 2.69
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 2023 31 December 2022 30 June 2023
Weighted average number of ordinary shares in issue (000s) 160,545 152,869 156,352
Adjustments for share options (000s) 6,818 7,775 10,630
Weighted average number of potential ordinary shares in issue (000s) 167,363 160,644 166,982
Diluted earnings per share (pence) 2.14 1.51 2.52
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 2023 31 December 2022 30 June 2023
Profit used for calculation of basic and diluted EPS 3,579 2,426 4,206
Share based payments 311 515 1,640
Post-completion services - 366 365
Amortisation of acquired intangibles 261 261 522
Unwinding of discount - contingent consideration & borrowings - 29 29
Tax adjustment (817) (749) (1,548)
Profit used for calculation of adjusted basic and diluted EPS 3,334 2,848 5,214
Pence Six months to Six months to 12 months to
31 December 2023 31 December 2022 30 June 2023
Adjusted basic earnings per share 2.08 1.86 3.33
Adjusted diluted earnings per share 1.99 1.77 3.12
5. Dividends
Dividends paid or declared during the period were as follows:
Six months to December 2023 Paid Pence per share Cash flow statement Statement of changes in equity December 2023 balance sheet
(£'000) (£'000) (£'000)
Final ordinary dividend for year to June 2023((1)) 09/2/24 0.83p - 1,338 1,338
- 1,338 1,338
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 31/1/23 0.54p - 839 839
- 839 839
((1)) The final ordinary dividend for the year ended 30 June 2023 was approved
at the Annual General Meeting held on 19 December 2023.
6. Net funds reconciliation
£'000 31 December 2023 31 December 2022 30 June 2023
Cash and cash equivalents 28,618 20,419 24,753
Lease liabilities (524) (472) (405)
Net funds 28,094 19,947 24,348
7. Post period-end acquisition
Following the end of the period, on 23 January 2024, Netcall acquired Skore
Labs Limited ("Skore"), a cloud-based business process discovery software
provider.
For the year ended 31 December 2023, Skore's revenues grew 96% to £449k
(2022: £229k) with an adjusted EBITDA loss of £55k (2022: loss of £159k)
(figures from unaudited managements accounts). Annual recurring revenue (ARR)
from cloud subscriptions increased by 179% to £651k (2022: £233k).
The value of initial consideration is £2.0m comprising:
£'000
Initial cash consideration 1,800
Hold back cash consideration 200
2,000
The hold back element of initial consideration is payable 12-months from the
date of acquisition.
The contingent consideration of up to £4.0 million and is payable subject to
Skore achieving contracted annualised value of software subscriptions
("Annualised Subscription Value") growth from £0.6 million to £2.0 million
within three years of acquisition. The payment will be pro-rata, measured
annually, and paid 50% in cash and 50% in Netcall shares with elements of both
deferred until the end of the earnout period. Any Netcall shares issued will
be subject to a 12-month lock-in for the management shareholders of Skore. The
balance of the earnout contingent consideration is payable in cash and is
dependent on achieving a minimum level of Annualised Subscription Value in the
earnout period.
8. Additional information
Management also presents underlying measures of both Total and Cloud ACV which
excludes the impact of the contract win and renewal announced on 10 June 2022
and 20 July 2023.
£'m 31 December 2023 31 December 2022 30 June 2023
Total ACV 30.1 26.5 27.9
Effect of contract win and renewal (2.6) (3.3) (2.6)
Total underlying ACV 27.5 23.2 25.3
£'m 31 December 2023 31 December 2022 30 June 2023
Cloud ACV 20.3 17.1 18.1
Effect of contract win and renewal (2.6) (3.3) (2.6)
Cloud underlying ACV 17.7 13.8 15.5
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