REG - PCI-PAL PLC - Final Results

PCI- PALAnnouncement

09/10/2019 07:05

RNS Number : 2072P
PCI-PAL PLC
09 October 2019
 


 
PCI-PAL PLC
('PCI Pal', 'the Company' or 'the Group')
Final Results
 
Significant Sales Growth and Channel Partnerships Delivering
 
PCI-PAL PLC (AIM: PCIP), the customer engagement specialist that secures and protects payment card data for companies handling payments by phone, is pleased to announce full year results for the year ended 30 June 2019 (the "Period").
 
Financial Highlights
·     Revenue increase of 40% to £2.82 million (2018: £2.01 million)
·     Gross margin increased to 60.2% (2018: 42.6%) reflecting the transition of our service delivery to AWS
·     Substantial increase in sales leading to:
o  Signed Annual Contract Value ("ACV") increasing by 290% to £1.91 million (2018: £0.49 million); and
o  Total Contract Value ("TCV") increasing by 223% to £5.66 million (2018: £1.75 million)
·     Total contracted recurring ACV1 now stands at £4.06 million (2018: £2.17 million)
·     Deferred income increased 117% to £2.45 million (2018: £1.13 million) as a result of new business sales growth
·     Loss before Tax in line with expectations at £4.50 million (2018: £3.78 million) following significant investment in the North American operations
·     Cash balances at year end of £1.49 million (2018: £3.75 million)
·     New £2.75 million debt facility entered into in October 2019 to provide additional working capital to support continued growth
 
Strategic Highlights
·     Strong performance against all key metrics across EMEA and North America businesses
·     Established as the only partner-first, pureplay organisation operating in the PCI phone payment space with a truly cloud delivery model with availability zones across multiple continents
·     Partner-first strategy proven with 84%2 of all new business sold via partners (2018: 40%)
·     Signed and delivered largest contract in Company's history in UK
·     Signed second largest contract in Company's history in North America
·     Established global, integrated reseller partnerships with two more global leading CCaaS vendors
·     Established reseller partnership and delivered first customer with largest telco in Canada
·     Services and customers live across five Amazon Web Services ("AWS") regions of the PCI Pal cloud platform globally
·     Maintained customer retention at over 95%
 
Current Trading
·     Successful start to FY 2020 with new business sales levels tracking to management expectations
·     New business sold through channel partners has continued at a high rate of >85%
·     Announced as EMEA Partner of the Year for the Genesys Partner Community, "AppFoundry"
·     Total Contracted ACV as at 30 June 2019 providing over 80% revenue visibility against management expectations for FY 2020
·     Appointment of US-based software executive, Simon Wilson, to the board in the role of Non-Executive Director, effective from 1st November 2019
 
1 Contracted ACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced
2 Percentage of new business by signed ACV

 
 
Commenting on results and prospects, James Barham, Chief Executive Officer said:
"I am pleased to report that we have continued our momentum from the first half of FY 2019, showing continued strong growth in all our key metrics, in particular signed new business ACV. 
 
"As the only partner-first, globally available cloud provider in our space, we continue to see increases in sales opportunities as we successfully on-board and enable these partner relationships.  As a result the business is developing strong revenue visibility, and I can report that the new financial year has started well and in line with management expectations."
 
 
PUBLICATION OF ANNUAL REPORT AND ACCOUNTS & NOTICE OF AGM
Copies of the annual report and accounts and notice of AGM will be posted to shareholders prior to 24th October 2019 and electronic copies can be downloaded from the Company's website (https://www.pcipal.com/).
 
This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.
 
For further information, please contact:
 




PCI-PAL PLC


Via Walbrook PR




James Barham - Chief Executive Officer
William Good - Chief Financial Officer
 
 


 




finnCap (Nominated Adviser and Broker)


+44 (0) 20 7227 0500




Marc Milmo/Simon Hicks (Corporate Finance)
Richard Chambers (Corporate Broking)
 
 


 




Walbrook PR


+44 (0) 20 7933 8780




Tom Cooper/Paul Vann


+44 (0) 797 122 1972




 


tom.cooper@walbrookpr.com




 
About PCI Pal:
 
PCI Pal is a specialist provider of secure payment solutions for contact centres and businesses taking Cardholder Not Present (CNP) payments.   PCI Pal's globally accessible cloud platform empowers organisations to take payments securely without bringing their environments into scope of PCI DSS and other card payment data security rules and regulations.
 
With the entire product portfolio served from PCI Pal's cloud environment, integrations with existing telephony, payment, and desktop environments are light-touch, ensuring no degradation of service while achieving security and compliance.
 
PCI Pal has offices in London, Ipswich (UK) and Charlotte NC (USA). For more information visit www.pcipal.com or follow the team on Twitter:  https://twitter.com/PCIPAL
 
 
 
 
 
 
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2019
 
During the last twelve months, PCI Pal has made significant progress against both its strategic and operational goals, while at the same time bringing further clarity and specificity to its operating plans. Our business now has a clearly stated Vision: To be the preferred solution provider that technology vendors globally turn to for achieving PCI compliance for payments by phone. We are determined to achieve that Vision through a channel-first approach.
 
Early and rapid channel success is already becoming evident. For example, 84% of this year's new business bookings were generated through partners and we have created tight-knit, integrated product partnerships with several of the world's leading Cloud Contact Centre-as-a-Service (CCaaS) vendors and other leading technology companies.
 
The advantages of a channel-first approach and our Cloud-based solutions go beyond just winning new business. Having varying degrees of pre-integration with our contact centre, telephony, and payment gateway partners is now enabling us to deploy and take our customers live in shorter periods of time. The ease of Cloud deployments (compared to on-premise) is also reducing customer delivery challenges that are frequently encountered in our industry. We believe that this is becoming a major source of competitive differentiation for PCI Pal, as well as improving the capital and people efficiency of our business model. We will continue to focus on further improvements in deployment efficiencies going forward, thereby ensuring higher levels of success for both our partners and their customers, as well as our own direct customers.
 
People
The appointment of James Barham as CEO in October 2018 and his work in building the North American team and operation has marked an acceleration of our plan to expand the operational capability of our business to handle sales and delivery growth in a capital efficient and cost-effective manner, in order to scale the business. Key aspects of the plan include establishing global rather than regional functions to avoid localised-based thinking, duplication and inefficiencies; the creation of a Chief Information Security Officer function to underpin the reliability and safety of our customer services; and the recruitment and development of first class talent.
 
The ranks of our management team have been expanded to include a new CTO based in the U.K. and a new CRO based in the U.S. Our ability to attract such technically talented and wonderful people in both North America and the U.K. is a testament to both the attractiveness of the market opportunity ahead for PCI Pal as well as the management team's dedication to people development.
 
In addition, I am very pleased with the appointment of Simon Wilson to the Group board as a non-executive director.  Simon's background includes thirty years in international business to business software.  He has been a resident of the United States for over twenty five years and past positions include CEO, CFO and corporate development roles as well as independent board director in a range of US and UK companies including SurfControl plc, Endace plc and M86 Security.
 
The PCI Pal team has grown from 34 to 50 employees over the course of the year and I would like to personally thank all of our employees for their excitement, dedication and hard work in growing PCI Pal and in pursuing our Mission: safeguarding the reputation and trust of our customers. I have no doubt that they will all continue to build on their successes during the last twelve months, both as individuals and as globally focused teams.
 
New debt facility
On 8 October 2019 the Company entered into a new £2.75 million debt facility. In common with many Cloud companies operating a SaaS business model, we have chosen to utilize a layer of debt on top of equity funds raised so as to optimise the growth in shareholder value.  The additional capital available under the facility, of which £1.5 million will be drawn immediately, provides the Company with additional working capital as it continues to grow and expand thereby enabling it to continue to capitalise on the Company's excellent growth opportunities. Full disclosure of the terms of the facility has been made in the notes to these accounts and within the Chief Financial Officer's Review.
 
Shareholder Communications
As a board we set out this year to expand and improve our communications with current and prospective shareholders as we sought to increase transparency and understanding of the global PCI market opportunity ahead for the Group. Examples have included more detailed investor presentations, expanded analysis of results and underlying KPIs, more frequent communications and the judicious use of RNS-Reach, and participation in investor-focused events such as 'tech demo days' and investor group conferences. We look forward to continuing and reinforcing these programmes and events as each year progresses, and I welcome your feedback and suggestions for further improvement.
 
Corporate Governance
We continue to monitor the business in line with the latest Corporate Governance Code published by the Quoted Company Alliance. In the Corporate Governance section of our Annual Accounts, we outline how we have complied with the Code and where our policies depart from the recommendations made by the Code, and the reasons for doing so, which reflect the current size and scale of our business.
 
Looking Forward
We are clearly seeing an expansion of the market drivers causing businesses to properly adopt solutions that provide adherence to PCI compliance standards. In addition to the enforcement of the industry standards themselves, the advent of actual legislation such as GDPR and the clear and measurable business risks of reputational damage in the event of customer data loss, are all increasing the logic and value of adopting solutions like PCI Pal's. Increasing demands from consumers for data protection, as well as the rapid adoption of Cloud-technologies, are also accelerating the rate of adoption.
 
With a clear strategy; experienced management; an attractive business model; a growing global market opportunity and good corporate governance, PCI Pal is well positioned to build on this year's success. As we take our next steps towards achieving additional key milestones on the journey to building shareholder value and profitable growth, I look forward to sharing further progress reports and news during the coming financial year.
 
Chris Fielding
Non-Executive Chairman
 
 
 
 
 
 
CHIEF EXECUTIVE'S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2019
 
PCI Pal Overview
With this being my first annual report as Chief Executive, I am pleased to report that we have continued our momentum from the half year by showing continued strong growth in all our key metrics. In particular, new business Annual Contract Value ("ACV") increased 290% year on year to £1.91 million (2018: £0.49 million); with new business Total Contract Value ("TCV") increasing 223% year on year to £5.66 million (2018: £1.75 million).
 
Revenues grew 40% year on year to £2.82 million (2018: £2.01 million), with Contracted ACV1 at the year-end now standing at £4.06 million (2018: £2.17 million), illustrating the build-up in future revenue visibility that our SaaS licensing model produces as new sales are achieved and revenue eventually recognised. This progress is firmly establishing the building blocks towards future sustainable cash generation and profitability.
 
We have delivered against our stated strategies for the year: focusing on the accessibility of our virtualised cloud offering hosted on AWS; penetrating the North American market through channel relationships; and growing our capability to attract major global technology partners through our easy-to-integrate, cloud technology. As a result, we have established ourselves as the only channel-first, pureplay organisation operating in the PCI phone payment space with a truly global cloud delivery model with availability zones across multiple continents.
 
The increase in our North American ACV from £0.10 million to £0.44 million is evidence of this year's success in North America which is substantially the result of our achievements in building channel relationships with 70% of sales for the year coming from channel partners.
 
We have made substantial progress in our focus of being channel-first by adding reseller partnerships with several leading global technology vendors including 8x8, Talkdesk, and Genesys, as well as partnerships with some of those companies' leading resellers including maintaining our partnership with the largest carrier in Canada. These new partners have chosen to work with PCI Pal because of our pureplay, cloud business model which is in contrast to that of our competitors whose solutions are typically legacy hardware offerings, or privately-hosted cloud solutions.
 
Through our vision to be the chosen payment security provider to technology vendors globally, we are opening up an area of the market previously untapped. Our easy-to-use, light touch integrations allow our partners to sell our services to not only enterprise, large organisations, but also cost-effectively to the higher volume of small to medium size enterprises. Additionally, we have proven our ability to service all size contact centres from the cloud having this year won, and successfully delivered within six months of signing, the contract to supply one of the largest contact centres in Europe, with over 4,000 agents active on our platform each day for this customer alone.
 
During the course of the year, we have made significant steps forward as we establish ourselves as a global business engaged with enterprise partners yet still retaining the benefits of being small and agile. We have introduced a clear mission and vision for the business, as well as identifying the core values which represent our business. We have brought our international businesses closer together, ensuring that we maximise our global sales opportunities and partnerships. This has been particularly evident in sales where we created the position of Chief Revenue Officer, responsible for sales globally, bringing the global sales function together to maximise the benefits of all sales activity across all territories. We have also strengthened our Engineering and Professional Services teams, ensuring we can deliver our solutions on-time wherever they are required. All of these actions have helped us win new customers across multiple continents.
 
1 Contracted ACV is the total annual recurring revenue of all signed contracts (excludes professional services and setup fees), whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced
 
Market Drivers
 
As thought leaders in our growing marketplace, we have taken the lead in research in the market carrying out consumer research campaigns across the UK, U.S., Australia, and Canada in our "This is" series. In these market research reports, we have seen strong similarities between these four developed contact centre and payment markets, with consumers becoming increasingly aware of the security of companies from whom they buy products and services. Across our reports more than 33% of consumers in all regions surveyed claim to have been victims of security theft. Additionally, and more specific to our market, we found that between 40% - 55% of consumers were uncomfortable to share their credit and debit card information over the phone.
 
The market for PCI Pal is any organisation taking payments by phone or within contact centre environments globally, and particularly in our core markets across EMEA and North America. Contact centre markets in both the UK and US represent between 3-4% of the working populations of those countries, so in contact centres alone there is a sizeable market to address.
 
We access our market through a channel go-to-market sales model, working primarily with technology vendors who are involved in customer interactions for those companies. By majority today these include CCaaS, UCaaS, Carrier, VARs, Payment Service Providers, and consultancies advising these organisations. These partner organisations work with PCI Pal to provide cloud-based, globally accessible payment security solutions to their customers who use their broader customer experience, call handling, and payment solutions. PCI Pal's position as the only true-cloud, pureplay vendor in the PCI space for contact centres positions us with strength in being selected by these companies as their partner for secure payments.
 
The UK market is the most advanced globally in terms of adoption of compliance standards, such as PCI compliance, related to payment security. It is our belief that the North American region and mainland Europe are beginning to adopt improved security practices and working towards achievement of PCI compliance across their businesses and as a result we have seen increases in enquiries across these territories. We are seeing organisations worldwide move towards the use of technology to solve complex compliance and security challenges through the use of secure technology like PCI Pal's. This evolution toward secure operations is not only being driven by the major risks to companies that lose data (including loss of reputation, loss of customers, and reductions in share price or company value) but more recently by regulations being introduced across all territories within which we operate. Chiefly this is led by the General Data Protection Regulations (GDPR) which is law that governs companies handling EU citizen's data, but also more regional data regulations such as the California Consumer Privacy Act in the U.S. Recent well-publicised data breaches include market leaders in a variety of sectors from airlines, to financial services, to technology.
 
In terms of the contact centre market itself, there is a significant shift from traditional on-premise technology to cloud environments offering improved customer experience through a growing number of additional digital customer engagement channels, with research forecasting CAGRs of nearly 25% between 2019 - 2024. We believe that this trend will naturally suit our true-cloud, pureplay offering as we can fully integrate our solution seamlessly into our cloud partners offerings in a light-touch fashion that does not interrupt that partners ability to provide their core service offerings.
 
Cloud
PCI Pal has continued to develop its position as the only true-cloud, globally available, partner-first provider of secure payment solutions to contact centres worldwide. We have extended the accessibility of our platform with availability zones within AWS in the UK, Ireland, Germany, United States, Canada, and Australia with customers live across all regions.
 
We have proven our ability to move at pace when scaling the platform, activating new availability zones in Germany and Australia to meet partner and customer demand within 2 weeks each. Our ability to react quickly to provide partners who operate globally with service availability anywhere in the world is a significant competitive advantage. In addition, these partners' customers benefit from localised data sovereignty across our multi-region, cloud platform environment.
 
In addition to the ability to scale geographically, our AWS-based platform also allows us to scale automatically to meet the demands of customer growth. The ability to scale for greater volume handling is an essential part of the capital efficiency of our model which in turn allows us to offer more competitive pricing to our partners. In addition, we are able to manage our entire global cloud platform from our Network Operations Centre (NOC), located at our UK headquarters.
 
Channel Partners
Having outlined our commitment to making PCI Pal a channel-first business, I am pleased to report that we finished the period with 84% of sales generated from channel partners, a 110% increase on the prior year (2018: 40%). The channel strategy is essential to maximising our long-term sales growth potential by being able to address all sizes of organisations, to utilise PCI Pal solutions, as well as giving us the ability to scale the business internationally. This strategy is significantly supported by our capabilities in light-touch, easy-to-integrate methodologies that suit the leading cloud technology vendors with whom we work. Channel partners are driving sales pipelines to record levels across both EMEA and North America.
 
We have three categories of partners:
 
Integrated Partners - Telephony pre-integration with the PCI Pal environment from CCaaS and UCaaS platforms and Carrier networks creates opportunities for both us and our partners to shorten sales cycles and enable more efficient and faster project delivery. Adding to the integrated partners we worked with going into the year, we were successful in winning global agreements with two well-known global vendors, 8x8 and Talkdesk (both headquartered in the United States), as well as pan-European vendor, Puzzel. In addition, we secured and delivered our first customer through our reseller partnership with the leading carrier in Canada.
 
Solutions Providers - Reseller relationships in this category are typically Value-added Resellers (VARs) and Systems Integrators focused on selling licences and services around the traditional on-premise contact centre platforms, for example Genesys, Cisco, Mitel and Avaya. Solutions Providers also include payment service providers and payment gateways who resell PCI Pal services to complement their existing portfolio of payment solutions, such as Civica, Paymetric, and Capita Pay 360. Such relationships provide access to the wide installed customer bases of these vendors. In the period we have signed three of the largest North American VARs serving the Genesys contact centre marketplace, some of whom are also focused on newer offerings from the CCaaS providers.
 
Referral Partners - Our strategy in this category is two-fold. Firstly, we utilise referral arrangements with some major technology vendors with whom reseller arrangements are not immediately available as a first step in working with them towards becoming an Integrated Partner. Secondly, we have targeted relationships with Master Agents in order to capitalise on the rising trend and success in the software marketing world of agent networks, particularly for CCaaS and UCaaS vendors in the United States. Master Agents are highly organised networks of agents specialising in all segments of enterprise class cloud software applications. During the year we signed a global referral agreement with Telarus, the largest Master Agent in North America for contact centre technology.
 
All of these partners benefit from the PCI Pal partner program which was fully launched during the year. The Partner Program not only oversees the on-boarding of partners from a technical stand-point but ensures that we are engaged at the appropriate level in all relevant areas of the partner's organisation; with sales enablement, marketing support and collaboration, and co-ordinated service delivery. Our significant focus on speed of partner enablement is illustrated by a number of successful "Fast Start" campaigns with new partners, supporting them in creating real value from reselling our services early in the relationship, and generating early stage pipeline for PCI Pal.
 
North America
We launched our PCI Pal solution in the US in February 2018 and following a successful first full financial year in North America, we can report TCV sales bookings for the region increased by 328% to £1.50 million (2018: £0.35 million) of which recurring ACV is £0.44 million.
 
As well as gaining sales momentum, we made progress in our strategy of winning partnerships with major technology vendors in the territory, particularly in the CCaaS, Carrier and Payment markets. These types of partners underpin our ability to sell our solutions in volume and at scale to any size organisation within that partner's customer ecosystem. Whilst this is a globally consistent strategy for us, it is particularly important in the United States where the addressable market is more than five times the size of the UK. I am pleased to report we have made strong progress against this strategy, winning a number of partnerships with well-known technology vendors, one of which resulted in a global contract with a US headquartered, home appliance manufacturer. This was the second largest contract in the Company's history.
 
We secured global reseller agreements as the sole provider to leading CCaaS and UCaaS vendors 8x8 and Talkdesk. Additionally, we extended our relationship with NewVoiceMedia, following their acquisition by Vonage, into their wider global group which incorporates NewVoiceMedia (CCaaS), Vonage (UCaaS), and Nexmo, (CPaaS - Communications-Platform-as-a-Service). Additionally, we have secured a number of customers through our referral arrangement with NICE inContact and have been recognised with an award for our thought-leadership efforts into their partner programme.
 
In the carrier space, we signed and delivered our first order through our reseller agreement with the largest carrier in Canada, who is also a major regional distributor of several other contact centre technology partners with whom we have relationships globally. Our cross-pollination of these relationships within our ecosystem is a good example of how we are able to benefit from the progress we have made in being the only channel-focused, pureplay vendor with a growing number of market leading technology partnerships.
 
As noted above, of the traditional platform providers, we focused the majority of our efforts into our Genesys relationship and have signed three of their major US-based VARs. In addition, since the end of the year we were awarded EMEA AppFoundry Partner of the Year with Genesys (AppFoundry being their technology and partner marketplace). We achieved this award as a result of our work on key customer projects where PCI Pal played a specialist and important role in wider Genesys deals.
 
Having spent the majority of the year working in the U.S. establishing our business in the region, I am pleased to report that we have put together an excellent team of experienced professionals, the majority of whom have extensive knowledge of the contact centre and unified communications space having worked at successful channel focused businesses. We now have a team spread across all time zones in the United States, with sales, marketing, engineering and delivery resources in country.
 
With low levels of competition in the North American market, limited primarily to UK-domiciled competitors who deploy a direct sales approach, we believe we are in a strong position from which to expand our pipeline and gain market share through our channel-first approach, as well as our positioning as the go-to provider to the CCaaS / UCaaS market.
 
During the year our partners have introduced us to a number of customers in the Australia/New Zealand region (ANZ). Due to the time zone overlap, we have been running our early activities from our US-based team, supported by our Engineering and Professional Services teams in the UK.
 
The majority of our global partners have businesses in Australia covering the ANZ region, and naturally due to the repeatable nature of our integrations, we have felt a pull from these partners towards the territory. We have demonstrated our commitment to these partners by the activation of our Sydney AWS instance, upon which we have a number of live customers. The Australian market is culturally and technologically similar to the UK and US so, as such, we see this as important strategic activity for the future.
 
EMEA
We have seen a significant step forward for the UK-based EMEA business, with excellent growth across all key metrics including a 180% increase in TCV sales bookings for the year at £3.92m (2018: £1.40m) which incorporated ACV value of £1.41 million (2018: £0.38 million), with 90% of ACV sales coming from channel. Included in channel generated business was the signing and delivery of the Company's largest contract to date, as announced in December 2018, through a major new partner in the payment processing space. In June, we also won a milestone contract with a FTSE 100 company, via our reseller partnership with Genesys. These results confirm the long term value of our channel strategy.
 
Our business is more mature in the UK, in a market more advanced in its adoption of security solutions for payments. As such we have been focusing on our relationships with existing channel partners in the region to drive new customer acquisition. These partners include Civica, Capita Pay 360, 8x8, and Vonage.
 
Outside of the UK, the EMEA market has lower levels of adoption for PCI solutions and, like North America, less competition. As a result, we believe there is an early-stage opportunity to capitalise on what is collectively a large and under-penetrated contact centre market. During the year we have taken initial steps towards finding suitable partners such as our partnership with a French telecoms company, and a Norwegian-based pan-European CCaaS vendor. Additionally, we have signed end-user customers in the Nordics, France, Germany and Spain. Many of our global partners see a similar market opportunity and are hiring extensively in the wider region as contact centres across Europe begin to adopt cloud technologies. In a similar way to what we have seen in ANZ, we are optimistic that our partners will pull us into customer opportunities in the territory over time. Our partnerships, and more importantly technical integrations with these partners, are repeatable globally across their platforms and we are leveraging their business expansion to achieve our own strategic objectives in this regard. As a result of this positive momentum we opened the Frankfurt (Germany) instance of our platform earlier in the year to ensure EU customer data can retain appropriate sovereignty requirements post-Brexit.
 
Operations
The focus of the business in the previous two years has been to build a team and foundation from which we can scale, in order to benefit from the operational gearing of a true-cloud operation. During the year we have taken further steps to scale the business by focusing increasingly on people, process, and technology to underpin this foundation, namely engineering and operations. As part of this we restructured these departments into three teams: engineering; compliance and IT; and professional services. We created the role of Chief Information Security Officer (CISO) which was taken up by the Group's long standing Chief Technology Officer (CTO), Geoff Forsyth.
 
Additionally, we hired a new CTO who joined the business in January 2019. Hugh James brought with him a wealth of experience specific to DevOps, telecommunications, and SaaS environments, as well as specific experience of the PCI marketplace. Hugh spent a number of years working in a senior role at one of our key partners, NewVoiceMedia (now Vonage) during their global expansion. Along with this hire, we have added resources into engineering during the year in order to meet the growing demand from our new technology partners. As part of the operational restructuring, we have created a global professional services function that focuses entirely on assisting partner and customer solutions delivery, incorporating both implementation and project management. We have reduced the dependency of professional services on engineering as we continually drive for repeatability in our technical solutions for our partners and customers. We have added resource in the core area of SIP telephony to aid a growing number of implementations and to contribute to further reductions in Time-To-Go-Live (TTGL). In addition, we have enabled more natural collaboration between sales and professional services by assigning global responsibility to the heads of sales, presales, and professional services.
 
Throughout the year we have achieved solid improvements in project delivery times as a result of changes that have been made with projects now being delivered in 4-7 months compared to our higher historical average of 6-9 months. The changes we are making with people, process, and technology are expected to continue to improve deployment efficiencies that will in turn further reduce TTGL.
 
The business is now better positioned with a stable operational function upon which to maximise the opportunities presented by our partners as well as strategically important enterprise customers anywhere in the world. This stable foundation will enable PCI Pal to benefit from the advantages of operational gearing as we grow our revenues at a faster rate than our costs.
 
People
As we state in our Vision, it is our people, beyond the technology, that underpin our business. Creating an environment within which our employees can succeed ensures the success of the partners that rely on us. We have built a small, dynamic, and committed team who are experts in their chosen fields, and together they are driving this business forward at pace.
 
During the year we have placed significant emphasis in developing the business' focus and application of personal development planning and support for all our staff and managers. We created the role of People and Development Manager, which reports directly to me, illustrating the Company's commitment to an improved focus in this key area. Examples of that focus include the implementation of personal and professional development reviews; increasing the availability of both internal and external training courses for key skills; and proactively building a benefits and talent development strategy across the business.
 
For the forthcoming year we have introduced OKRs (Objectives and Key Results) for every employee in the Company. OKRs create a framework for defining and tracking objectives and their outcomes, providing a top-down view of what is required from individuals within the business in order for them to contribute to the Company's achievement against its corporate goals, mission, and vision.
 
As a business that has grown from 11 to 50 people in under 3 years, we have given considerable attention to our approach to hiring, and I am proud to report that our employee retention remains very high. We are passionate about hiring and bringing great talent into this business, not just in terms of market, technical, human or managerial skills but also in terms of international and cultural understanding, language skills and a desire to have fun. We focus on this in every aspect of our recruitment processes. Technology is a globally competitive market so we have made improvements to our employee benefits packages to continue to attract the best people. These benefits support the broader appeal of working for our dynamic growing business, and are designed to be strongly competitive for the geographic markets in which we hire.
 
New this year we have introduced quarterly company "all-hands" meetings where the CEO and other contributors from across the business speak to the whole Company simultaneously across all time zones. These sessions provide a company-wide update, including progress against key or high-profile OKRs. These meetings ensure that employees of all levels regularly receive a wider-view of business progress and therefore can better understand the part they play in that journey. Between the quarterly all-hands meetings, we run regular cross departmental social events and encourage departmental team building.
 
I view talent acquisition, development and retention as one my most important responsibilities as CEO, and I am very pleased with the accelerated progress the Company has made in this area during the year.
 
New Debt Facility
In September 2016, the Group began a five year journey to fully develop the payment security opportunity offered by the PCI Pal business. We are now three years into the original journey, and I am very pleased with the strong position we have built. We have made significant progress in establishing major partnerships and transitioned our business to a channel-first organisation. We have established our core service offerings across the globe and have built an excellent team upon which we can scale. As a result of this momentum, we are seeing more opportunities from organisations of all sizes, including large enterprise partners and customers.
 
As we look to continue to grow and capitalise on the excellent market opportunity before us, we have taken the opportunity to strengthen our balance sheet and on 8 October 2019 entered into a £2.75 million debt facility with Shawbrook Bank. We have drawn down £1.5 million of this facility and the balance remains available to be drawn down in the next twelve months. This facility will underpin the Group's working capital requirements for the foreseeable future.
 
Current Trading and Outlook 
Following the strong growth and improvement in the business' key metrics in FY 2019, I can report that the new financial year has started well and in line with management expectations.  Our strength as the only partner-first, globally available cloud provider in our space has been underpinned by PCI Pal being awarded "Partner of the Year EMEA" by Genesys, one of our key technology partners, and their partner community, the "AppFoundry".  To date in FY 2020 our continued partner-focus has resulted in the proportion of new business sales coming from channel partners being higher than that of the full prior financial year.  Additionally, the nature of our SaaS revenue model provides for greater than 80% revenue visibility against management expectations for FY 2020. 
 
I am also very pleased to announce the appointment of Simon Wilson to the Board as Non-Executive Director effective 1st November 2019.  Simon has provided valuable consultancy to the Board in helping us create, plan and execute our North American market entry plans. His extensive board-level and international corporate strategy experience is a strong addition to the team. 
 
James Barham
Chief Executive Officer
 
 
 
CHIEF FINANCIAL OFFICER'S REVIEW
FOR THE YEAR ENDED 30 JUNE 2019
 
Changes in accounting rules
The Company has implemented IFRS 15: Revenue from Contracts with Customers, effective from 1 July 2018, on a fully retrospective basis, with the financial statements being presented against restated financial statements for the year ended 30 June 2018. Full disclosure of the changes has been made in the notes to these accounts.
 
The retrospective impact of adopting IFRS 15 has been limited. PCI Pal's SaaS contracted revenue model is made up of monthly and annual license fees which, both before and following the adoption of IFRS 15, are recognised monthly across the term of the contract. The forward impact for PCI Pal of IFRS 15 is therefore mostly limited to the impact of also spreading implementation professional service fees over the contract periods.
 
Revenue and gross margin
Group revenue grew by 40% to £2.82 million (2018: £2.01 million) and gross margin improved to 60% (2018: 43%). This shift reflects the higher margin revenue generated by the PCI Pal platform hosted on AWS which has only a limited reliance on third party carriers to receive or deliver calls. Going forward, we expect the gross margin to continue to improve as all new business will be delivered on this platform.
 
The Group's revenue reflects its SaaS business model. It delivers its services through the partnership channel to contact centres who are charged primarily on a recurring licence basis. The terms of the sales contracts generally allow for automatic renewal of the licences for a further 12 month period at the end of their initial term. Renewal and retention rates are therefore extremely high exceeding 95%. As the business sells and delivers more contracts the visibility of recurring revenue increases. At the year end, the Group had visibility of more than 80% of management's expected revenue for the next financial year.
 
Administrative expenses
Total administrative expenses were £6.37 million (2018: £4.65 million), an increase of 37%. Of the £1.72 million increase, £1.67 million was driven by the establishment and expansion of our North American operations, following the successful fundraising in January 2018.
 
Personnel costs charged to the Comprehensive Income Statement (including travel and subsistence expenses) were £4.47 million (2018: £3.30 million), of which £0.56 million (2018: £0.46 million) was capitalised as Development costs. These personnel costs make up 70% (2018: 71%) of the administrative costs of the business.
 
Following the adoption of IFRS 15, commissions of £0.30 million (2018: £0.14 million) payable to the sales team members and directly attributable to new contracts was deferred and will be released over the length of the contract to which they apply.
 
Exceptional costs
During the year the Group charged an exceptional cost of £0.36 million to the Statement of Comprehensive Income. This cost wholly related to the costs of termination of the employment contract with William Catchpole, the former CEO and board director.
 
Adjusted operating loss1
Adjusted operating loss for the Group changed as follows for the year:




 


EMEA


North America


Central


Total




 


£000s


£000s


£000s


£000s




2019


(1,138)


(2,489)


(605)


(4,232)




2018


(1,953)


(955)


(790)


(3,698)




Change in year


815


(1,534)


185


(534)




1 Loss from Operating Activities before exceptional costs and share option charges
 
The EMEA region's Adjusted Operating Loss improved by £0.82 million in the year.   The operations within this region have been established longer than those in North America and include the majority of the Engineering, Information Security and Professional Services people and costs for the Group as a whole.   EMEA's Adjusted Operating Loss has started to improve during the period because the rate of expansion of headcount and operating costs is slowing at the same time as revenues and gross margin are increasing.  
 
Following the fundraising in January 2018 PCI Pal fully launched its cloud services in North America.   James Barham, originally in his capacity as COO prior to becoming group CEO, was seconded to the region and was living and working there for most of the period. During this time, we fully established the North American office in Charlotte, NC, the operational team and our channel-centric route-to-market strategy.   As of the year end the team had 10 employees. The Operating Losses incurred in the region therefore reflect the build out of the team in the region.    As sales and subsequent customer deployments in North America continue to grow, we expect Operating Losses in the future to start to decrease when the rate of revenue growth exceeds the rate of growth in operating costs.
 
Costs for our Central operations relating to PLC activities decreased in the period as for a portion of the year, the costs of the CEO were charged to the North American operations.
 
Further divisional information is shown in Note 9.
 
Key financial performance indicators
The directors use several Key Financial Performance Indicators (KPIs) to monitor the performance of the Group, its subsidiaries and targets.   The principal KPIs are as follows:
 




 


2019


2018




1.    Revenue


£2.82 million


£2.01 million




2.    Gross Margin


60.2%


42.6%




3.   Signed ACV in financial period


£1.91 million


£0.49 million




4.    Contracted ACV


£4.06 million


£2.17 million




5.    Cash facilities available*


£1.49 million


£6.05 million




6.    Deferred Income


£2.45 million


£1.13 million




7.    Ratio Personnel cost to administrative expenses


70%


71%




*  Cash balance plus Loan notes receivable plus undrawn debt facilities
 
Actual performance to budget is reviewed on a monthly basis and the results are used to continually update the Groups forecasts as to expected performance and cash resources.
 
Capital expenditure
As required by IAS 38, we have capitalised a further £0.56 million (2018: £0.46 million) in development expenditure as we continue to invest in the AWS platform.
 
As a business we are not hindered by having to commit significant amounts upfront in capital to deploy new instances of our AWS platform globally, nor to extend its load-capacity handling. Our AWS platform is paid for on a monthly basis and charged as an administrative expense. In total we spent £0.03 million on new computer equipment in the year.
 
Deferred income
Deferred income increased to £2.45 million (2018: £1.13 million) mostly reflecting the significant growth in new business sales and the consequent increase in invoices raised in advance, per our contract terms and revenue model.
 
Contracted ACV
Total Contracted ACV2 at the end of the financial year was £4.06 million (2018: £2.17 million). This is a new metric that we have started tracking in the period and is a key indicator of our ability to reach first cash flow and then profit break-even.  Growing levels of Contracted ACV2 produces increasing levels of future revenue visibility, an attractive aspect of the Group's business model.
 
Trade receivables
Trade receivables grew to £1.057 million (2018: £0.475 million). The level of receivables reflects both significant growth in new business sales overall during the period, as well as the typical year end boost in sales levels. This balance should be converted into cash in the first half of FY 2020.
 
Taxation
During the year the UK entity received £0.14 million as a R & D tax credit from HMRC relating to the financial year ending 30 June 2017. An application has been made for an additional credit of £0.22 million related to the financial year ending 30 June 2018, which has been received post the year end, but has not been recognised in the accounts.
 
Cashflow and liquidity
Net cash as at 30 June 2019 was £1.49 million (2018: £3.75 million), net cash decreased by £2.26 million in the year. During the year we received the final loan repayment from the sale of the contact centre business of £2.30 million. Adjusting for this loan repayment the Group invested £4.56 million in cash in the period reflecting the expansion of operations and the consequent loss made for the financial year.
 
Post the close of the financial year, the Group has entered into a £2.75 million loan facility with Shawbrook Bank. The principal terms are as follows:
 
                Term                                   36 months with three month capital repayment holiday
                Interest rate                      9.3% over LIBOR paid monthly
                Arrangement Fee             1.4% of loan facility
                Non utilisation fee           0.6% of unutilised amount
 Exit fee                          cash amount calculated on the shares equivalent of 7.5% of the facility payable on takeover of Group or refinance of the loan
                Security                              Fixed and Floating debenture over the assets of the Group.
 
The loan balance can be drawn in two tranches with a minimum of £1.0 million within five business days of the signing of the agreement and the remaining balance within twelve months. The Company will initially be drawing down £1.5 million of this new facility. The facility is being used to support the working capital requirements of the Group as it continues to grow - see Note 28 for full disclosure of terms.
 
This debt facility will support our working capital needs created by rapid growth and the expansion of our Sterling-exposure to multiple currencies. In common with many Cloud companies operating a SaaS business model, we have chosen to utilise this layer of debt on top of equity funds raised to fund the journey to becoming a cash generative business. This mixed financing structure is intended to optimise the growth in shareholder value over time.
 
Dividend
The Board is not recommending a dividend for the financial year (2018: £nil).
 
William Good
Chief Financial Officer
 
2 Contracted ACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
 




 


Note


2019
£000s


2018
£000s




 


 


 


Restated




Revenue


 


2,817


2,007




Cost of sales


 


(1,119)


(1,151)




Gross profit


 


1,698


856




Administrative expenses


 


(6,373)


(4,649)




Loss from Operating Activities


 


(4,675)


(3,793)




 


 


 


 




Adjusted Operating Loss


 


(4,232)


(3,698)




Exceptional costs


 


(361)


-




Expenses relating to Share Options


 


(82)


(95)




Loss from Operating Activities


 


(4,675)


(3,793)




Finance income


6


181


28




Finance expenditure


7


(8)


(10)




 
Loss before taxation


 
5


 
(4,502)


 
(3,775)




Taxation


11


136


-




Loss for the year


 


(4,366)


(3,775)
 




Other comprehensive expense:            Items that will be reclassified subsequently to profit or loss


 


 


 




Foreign exchange translation differences


 


(107)


(31)




Total other comprehensive expense


 


(107)


(31)




Total comprehensive loss attributable to equity holders for the period


 


 
(4,473)


 
(3,806)




 


 


 


 




Basic and diluted earnings per share


10


(10.30) p


(10.45) p




 
The accompanying accounting policies and notes form an integral part of these financial statements.
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
 
 




 


Note


2019
£000s


2018
£000s


2017
£000s




 


 


 


Restated


Restated




ASSETS


 


 


 


 




Non-current assets


 


 


 


 




Plant and equipment


13


71


97


99




Intangible assets


12


1,300


844


495




Deferred taxation


17


-


-


-




Loan note receivable


14


-


1,206


2,202




Non-current assets


 


1,371


2,147


2,796




Current assets


 


 


 


 




Trade and other receivables


14


1,999


846


648




Loan note receivable


14


-


908


945




Cash and cash equivalents


 


1,492


3,748


1,958




Current assets


 


3,491


5,502


3,551




Total assets


 


4,862


7,649


6,347




 
LIABILITIES


 


 


 


 




Current liabilities


 


 


 


 




Trade and other payables


15


(3,447)


(1,842)


(1,468)




Current portion of long-term borrowings


15


-


-


-




Current liabilities


 


(3,447)


(1,842)


(1,468)




Non-current liabilities


 


 


 


 




Long term borrowings


16


-


-


-




Non-current liabilities


 


-


-


-




Total liabilities


 


(3,447)


(1,842)


(1,468)




Net assets


 


1,415


5,807


4,879




 
 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)
AS AT 30 JUNE 2019
 
 




 


Note


2019
£000s


2018
£000s


2017
£000s




 


 


 


Restated


Restated




EQUITY


 


 


 


 




 


Equity attributable to equity holders of the parent




Share capital


19


427


427


317




Share premium


 


4,618


4,618


89




Other reserves


 


181


99


4




Currency reserves


 


(138)


(31)


-




Profit and loss account


 


(3,673)


694


4,469




Total equity


 


1,415


5,807


4,879



 
 
 
 
 
 



 
The accompanying accounting policies and notes form an integral part of these financial statements.
The Board of Directors approved and authorised the issue of the financial statements on 8 October 2019.
 
J Barham                                                                                                                         Director
 
 
T W Good                                                                                                                        Director
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019
 
 




 


 
Share capital


 
Share premium


 
Other reserves


 
Profit and loss account


 
Currency Reserves


 
Total Equity




 


£000s


£000s


£000s


£000s


£000s


£000s




Balance at 1 July 2017


317


89


4


5,014


 
-


5,424




Adjustments from the adoption of IFRS 15


-


-


-


(545)


 
-


(545)




Adjusted Balance as at 1 July 2017


317


89


4


4.469


 
-


4,879




Share Option amortisation charge


 
                -


 
-


 
95


 
-


 
-


 
95




New shares issued net of costs


 
110


 
4,529


 
-


 
-


 
-


 
4,639




Dividend paid


-


-


-


-


-


-




Transactions with owners


110


4,529


95


-


 
-


4,734




Retranslation of currency reserve


 
-


 
-


 
-


 
-


 
(31)


 
(31)




Loss for the year


 
-


 
-


 
-


 
(3,775)


 
-


 
(3,775)




Total comprehensive loss


 
-


 
-


 
-


 
(3,775)


 
(31)


 
(3,806)




Balance at 30 June 2018


427


4,618


99


694


(31)


5,807




Share Option amortisation charge


 
-


 
-


 
82


 
-


 
-


 
82




Dividend paid


 
-


 
-


 
-


 
-


 
-


 
                -




Transactions with owners


 
-


 
-


 
82


 
-


 
-


 
            82




Retranslation of currency reserve


 
-


 
-


 
-


 
-


 
(107)


 
(107)




Loss for the year


 
-


 
-


 
-


 
(4,367)


 
-


 
(4,367)




Total comprehensive loss


 
-


 
-


 
-


 
(4,367)


 
(107)


 
(4,474)




Balance at 30 June 2019


427


4,618


181


(3,673)


(138)


1,415




 
The accompanying accounting policies and notes form an integral part of these financial statements.
 
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
 




 


2018
£000s


2017
£000s




 


 


Restated




Cash flows from operating activities


 


 




Loss after taxation


(4,366)


(3,775)




Adjustments for:


 


 




Depreciation


53


44




Amortisation of capitalised development


191


107




Interest income


(181)


(28)




Interest expense


-


-




Exchange differences


(107)


(31)




Income taxes


(136)


-




Deferred tax write off


-


-




Share based payments


82


95




Increase in trade and other receivables


(1,154)


(197)




Increase in trade and other payables


1,605


375




Cash used in operating activities


(4,013)


(3,410)




Dividend paid


-


-




Income taxes received


136


-




Interest element of finance leases


-


-




Interest paid


-


-




Net cash used in operating activities


(3,877)


(3,410)




Cash flows from investing activities


 


 




Purchase of land, buildings, plant and
Equipment


 
(110)


 
(43)




Proceeds from sale of assets


-


1




Development expenditure capitalised


(564)


(456)




Repayment of loan note receivable


2,114


1,032




Interest received


181


28




Net cash generated in investing activities


 
1,621


 
562




 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
FOR THE YEAR ENDED 30 JUNE 2019
 




 


2019
£000s


2018
£000s




 


 


Restated




Cash flows from financing activities


 


 




Issue of shares - net of cost of issue


-


4,638




Repayment of borrowings


-


-




Capital element of finance lease rentals


-


-




 
Net cash used in financing activities


 
-


 
4,638




Net (decrease)/increase in cash


(2,256)


1,790




 
 
 
Cash and cash equivalents at beginning of year


 
 
 
3,748


 
 
 
1,958




 
Net (decrease)/increase in cash


 
(2,256)


 
1,790




Cash and cash equivalents at end of year


1,492


3,748




 
 
 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019
1.                                         AUTHORISATION OF FINANCIAL STATEMENTS
 
The Group's consolidated financial statements (the "financial statements") of PCI-PAL PLC (the "Company") and its subsidiaries (together the "Group") for the year ended 30 June 2019 were authorised for issue by the Board of Directors on 8 October 2019 and the Chief Executive, James Barham, and the Chief Financial Officer, William Good, signed the balance sheet.
 
2.                               NATURE OF OPERATIONS AND GENERAL INFORMATION
 
PCI-PAL PLC is the Group's ultimate parent company. It is a public limited company incorporated and domiciled in the United Kingdom. PCI-PAL PLC's shares are quoted and publicly traded on the AIM division of the London Stock Exchange. The address of PCI-PAL PLC's registered office is also its principal place of business.
 
The Company operates principally as a holding company. The main subsidiaries are engaged in the provision of telephony services and PCI Solutions.
 
3.                               STATEMENT OF COMPLIANCE WITH IFRS
 
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
 
The principal accounting policies adopted by the Group are set out in note 4. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these financial statements.
 
Standards and interpretations in issue, not yet effective
The Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU ("endorsed IFRS").
These Financial Statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at 30 June 2019 as endorsed by the EU.
The following adopted IFRSs have been issued but have not been applied by the Group in these Financial Statements. Their adoption is not expected to have a material effect on the Financial Statements unless otherwise indicated:
 
Effective for the year ending 30 June 2020
• IFRS 16 Leases: the impact of adopting this IFRS is detailed below
• IFRIC 23 Uncertainty over Income Tax Treatments
• Amendments to IFRS 9 Financial instruments
• Amendments to IAS 28 Investments in Associates and Joint Ventures
 
Effective for the year ending 30 June 2022
• IFRS 17 Insurance contracts
 
IFRS 16: Leases - effect for the year ending 30 June 2020
 
The Directors review newly issued standards and interpretations in order to assess the impact (if any) on the Financial Statements of the Group in future periods. IFRS 16 "Leases" was issued in January 2016. It requires the lessee to recognise most leases on the balance sheet as the distinction between operating leases and finance leases is removed. Currently operating leases are not recognised on the balance sheet. The only exceptions are for short term leases and leases of low value.
 
 
As at 30 June 2019 the Group has one non-cancellable lease relating to its premises in Ipswich with a lease commitment of £68,000 (Note 25: Operating Leases). As at 1 July 2019 for the remaining lease commitment the Group expects to recognise £52,000 as a right-to-use asset and lease liabilities of £52,000. It is expected after adoption in 2019 that the operating loss of the company will improve by £9,000 but there will be no overall effect to the loss before tax figure.
 
The Group will adopt IFRS 16 on the 1 July 2019.
 
4.                     PRINCIPAL ACCOUNTING POLICIES
 
a)    Basis of preparation
 
The financial statements have been prepared on a going concern basis in accordance with the accounting policies set out below. These are based on the International Financial Reporting Standards ("IFRS") issued in accordance with the Companies Act 2006 applicable to those companies reporting under IFRS as adopted by the European Union ("EU").
 
The financial statements are presented in pounds sterling (£), which is also the functional currency of the parent company, and under the historical cost convention.
 
b)    Basis of consolidation
 
The Group financial statements consolidate those of the Company and its subsidiary undertakings (see note 18) drawn up to 30 June 2019. A subsidiary is a company controlled directly by the Group and all of the subsidiaries are 100% owned by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
 
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
 
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
 
The Group has utilised the exemption (within IFRS 1) not to apply IFRS to pre-transition business combinations. All other subsidiaries are accounted for using the acquisition method.
 
c)     Going concern
 
The financial statements have been prepared on a going concern basis, which the directors believe to be appropriate for the following reasons:
 
The Group meets its day-to-day working capital requirements through its cash balances and trading receipts. Cash balances for the group were £1.492 million at the 30 June 2019. Post the financial year end the Group has arranged a £2.75 million, 36 month term loan with Shawbrook Bank to assist with the working capital requirements of the Group.
 
The directors have prepared and reviewed cash flow forecasts to December 2020. These forecasts make several assumptions relating to predicted revenues and cash receipts, new contracts signed; investment in new territories and new employees. The working cash flow forecast shows that the Group will be able to operate within its existing resources throughout the period up this period and beyond.
 
The Directors recognise that during the forthcoming year the Group is expected to remain loss making on a month-to-month basis, albeit with an improving trend. The directors will review, on a regular basis, the actual results achieved against the planned forecasts. Some of the planned expenditure assumptions in the current forecast remain discretionary and as a result the directors can delay such expenditure to further ensure the Group is able to meet its day-to- day financial working capital needs.
 
d)    Revenue
 
Revenue represents the fair value of the sale of goods and services and after eliminating sales within the Group and excluding value added tax or overseas sales taxes. The following summarises the method of recognising revenue for the solutions and products delivered by the Group.
 
(i) PCI compliance solutions and hosted telephony services
Revenue for set-up and cloud provision fee will be deferred and will be recognised evenly over the estimated term of the contract, having accounted for the automatic auto-renewal of our contracts, up to a maximum of four years, starting the month following from the date of signature of the underlying contract.
 
The payment profile for such contracts typically include payment for set-up fees at the point of signature of the contract, but for revenue recognition purposes, this is deemed to be an integral part of the wider contract rather than a separate performance obligation.
 
Revenue for all other professional services and installation fees will be deferred and will be recognised evenly over the estimated term of the contract, having accounted for the automatic auto-renewal of our contracts, up to a maximum of four years, starting in the month following the hand over to the client for user acceptance testing.
 
 (ii) Third party equipment sales
Where the contract involves the sale of third-party equipment that could be acquired and supplied by other parties to the client the revenues and costs relating to this will continue to be released in full to the Statement of Comprehensive Income at the time the installation is complete.
 
e)    Deferred Costs
 
Under IFRS 15 costs directly attributable to the delivery and implementation of the revenue contracts, such as commissions and third party costs, will be deferred and will be recognised in the statement of comprehensive income over the length of the contract.
 
Costs directly attributable to the delivery of the PCI Compliance solutions and hosted telephony services will be capitalised as 'costs to fulfil a contract' and released over the estimated term of the contract, having accounted for the automatic auto-renewal of our contracts, up to a maximum of four years, starting the month following from the date of signature of the underlying contract.
 
Costs relating to commission costs paid to employees for winning the contract will be capitalised as 'direct costs to fulfil a contract' at the date the commissions payments become due and will be released in monthly increments over the minimum contract term starting the month following the date the cost is capitalised.
 
f)     Intangible assets
 
Research and development
 
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.
 
Development costs incurred are capitalised when all the following conditions are satisfied:
 
·    completion of the intangible asset is technically feasible so that it will be available for use or sale
·   the Group intends to complete the intangible asset
·   the Group is able to use or sell the intangible asset
·   the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits
·   there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset
·   the expenditure attributable to the intangible asset during the development can be measured reliably
 
The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include development engineer's salary and on-costs incurred on software development. The cost of internally generated software developments are recognised as intangible assets and are subsequently measured in the same way as externally acquired software. However, until completion of the development project, the assets are subject to impairment testing only.
 
The Directors have reviewed the development costs relating to the new AWS platform and are satisfied that the costs identified meet the tests identified by IAS 38 detailed above. Specifically, the initial platform was launched in October 2017 and has been successfully sold in Europe, North America and Australia, with further sales expected, as detailed in the Chief Executives' statement.   The directors expect that the AWS platform will continue to be developed, as more functionality is added, and as a result the it is expecting to continue to capitalise the development costs (which are primarily labour costs) into the future.
 
Amortisation commences upon completion of the asset and is shown within administrative expenses in the statement of comprehensive income. Amortisation is calculated to write down the cost less estimated residual value of all intangible assets by equal annual instalments over their expected useful lives. The rates generally applicable are:
 
·   Development costs                                   20% to 33%
 
Software licences
The cost of perpetual software licences acquired are stated at cost, net of amortisation and any provision for impairment.
 
·   Software licences                                     20% to 30%
g)    Land, building, plant and equipment
 
Land, buildings, plant and equipment are stated at cost, net of depreciation and any provision for impairment.
 
Disposal of assets
 
The gain or loss arising on disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.
 
Depreciation
 
Depreciation is calculated to write down the cost less estimated residual value of all plant and equipment assets by equal annual instalments over their expected useful lives. The rates generally applicable are:
 




·      Land


not depreciated




·      Buildings


2%


 




·      Fixtures and fittings


20% to


50%




·      Plant


20% to


50%




·      Computer equipment


33%


 




 
Material residual value estimates are updated as required, but at least annually.
h)    Impairment testing of other intangible assets, plant and equipment
 
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows ("cash-generating units"). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.
 
Intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
 
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less cost to sell, and value in use based on an internal discounted cash flow evaluation. Any impairment loss is first applied to write down goodwill to nil and then is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised no longer exists.
 
i)      Equity-based and share-based payment transactions
 
The Company's share option schemes allow employees to acquire shares in PCI-PAL PLC to be settled in equity. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity in the Company accounts. The fair value is measured at grant date and spread over the period during which the employees will be entitled to the options. The fair value of the options granted is measured using either the Black-Scholes option valuation model or the Monte Carlo option pricing model, whichever is appropriate for the type of options issued. The valuations consider the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that are expected to vest.
 
j)     Taxation
 
Current tax is the tax payable based on the profit for the year, accounted for at the rates enacted at 30 June 2019.
 
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
 
Deferred tax liabilities are provided in full, accounted for at the rates enacted at 30 June 2019, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the year end.
 
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income, except where they relate to items that are charged or credited to other comprehensive income or directly to equity in which case the related tax charge is also charged or credited directly to other comprehensive income or equity.
 
k)    Dividends
 
Dividend distributions payable to equity shareholders are included in "other short term financial liabilities" when the dividends are approved in general meeting prior to the year end. Interim dividends are recognised when paid.
 
l)      Financial assets and liabilities
 
The Group's financial assets comprise cash and trade and other receivables, which under IAS 39 are classed as "loans and receivables". Financial assets are recognised on inception at fair value plus transaction costs. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in in the year.
 
Trade receivables are reviewed at inception under an expected credit loss model, and then subsequently for further indicators of impairment, and a provision, if required, is determined as the difference between the assets' carrying amount and the present value of estimated future cash flows.
The Group has a number of financial liabilities including trade and other payables and bank borrowings. These are classed as "financial liabilities measured at amortised cost" in IAS 39. These financial liabilities are carried on inception at fair value net of transaction costs and are thereafter carried at amortised cost under the effective interest method.
 
m)   Cash and cash equivalents
 
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term highly liquid investments with maturities of three months or less from inception that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
 
n)    Equity
 
Equity comprises the following:
·  "Share capital" represents the nominal value of equity shares. The shares have attached to them voting, dividend and capital distribution (including on winding up) rights; they do not confer any rights of redemption.
·  "Share premium" represents the difference between the nominal and issued share price after accounting for the costs of issuing the shares
·  "Other reserves" represents the net amortisation charge for the Company's share options
scheme
·   "Profit and loss account" represents retained profits or losses
·   "currency reserves" represents exchange differences arising from the translation of assets and liabilities of foreign operations
 
o)    Contribution to defined contribution pension schemes
 
The pension costs charged against profits represent the amount of the contributions payable to the schemes in respect of the accounting period.
 
p)    Foreign currencies
 
Transactions in foreign currencies are translated in to Sterling at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into Sterling at the rates of exchange ruling at the year end.
 
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the statement of comprehensive income in the period in which they arise.
 
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group's presentational currency, Sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income and accumulated in the currency reserve.
 
q)    Significant judgements and estimates
 
The Group makes estimates concerning the future in assessing the carrying amounts of capitalised development costs. To substantiate the carrying amount the directors have applied the criteria of IAS 38 and considered the future economic benefit likely as a result of the investment.
 
Careful judgement by the directors is applied when deciding whether the recognition requirements for development costs have been met.  Judgement factors include: current sales of the new AWS platform; future demand; and the resource necessary to finalise the development over the next few years. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the directors.
 
The Group has adopted IFRS 15.  A key related judgement is whether fees relating to the establishment of a contract constitute a separate performance obligation (see Note 4d above). Having determined that such fees are not a separate performance obligation, a key estimate is the period over which such fees are recognised as revenue. The directors have judged that such revenue will be deferred into deferred revenue and held in the Statement of Financial Position and will be released to the Statement of Comprehensive Income over the estimated term of the contract.
 
That term is estimated as:
- for contracts with defined termination dates, revenue will be recognised over the period to the termination date
- for rolling contracts with renewal clauses, revenue will be recognised over the maximum of 4 years, representing the directors' current best estimate of a minimum contract term. 
 
Associated direct costs will be assessed and will also be deferred over the same period.   Commission costs directly attributable to the sale will be deferred but over the minimum contract length of the contract it relates to.
 
The calculation of the deferred tax asset involved the estimation of future taxable profits. In the year ended 30 June 2018, the directors assessed the carrying value of the deferred tax asset and decided not to recognise the asset, as the utilisation of the assets was unlikely in the near future. The directors have reached the same conclusion for this accounting period and so no asset has been recognised.
 
 




5.         LOSS BEFORE TAXATION
 
The loss on ordinary activities is stated after:


 


 




 


2019
£000s


2018
£000s




Disclosure of the audit and non-audit fees


 


 




Fees payable to the Group's auditors for:
The audit of Company's accounts


 
20


 
15




The audit of the Company's subsidiaries pursuant to legislation


12


17




Fees payable to the Group's auditors for other services


 


 




Audit related assurance services


-


-




Tax - compliance services


6


6




Tax - advisory services


12


24




Depreciation and amortisation - charged in administrative expenses


 


 




Plant and equipment


53


44




Intangible assets


191


107




Rents payable


148


133




Amortisation of share-based payments


82


95




Foreign exchange gain


89


22




 
6. FINANCE INCOME


 


 




 


2019


2018




 


£000s


£000s




 


 


 




Unwind of loan note receivable discount


181


25




Bank interest receivable


0


3




 


181


28




 
7. FINANCE EXPENDITURE


 


 




 


2019


2018




 


£000s


£000s




Interest on bank borrowings


-


-




Other


8


10




 


8


10




 
8. DIRECTORS AND EMPLOYEES
 
Staff costs of the Group, including the directors who are considered to be part of the key management personnel, during the year were as follows.
 




 


2019
£000s


2018
£000s




Wages and salaries


3,381


2,401




Social security costs


425


302




Other pension costs


74


55




 


3,880


2,758




 


2019


2018




 


Heads


Heads




Average number of employees during the year


45


37




 
Remuneration in respect of directors was as follows:


 


 




 


2019


2018




 


£000s


£000s




Emoluments


543


592




Bonus


24


90




Pension contributions to money purchase pension schemes


29


23




Employer's National insurance and US Federal Taxes


65


92




 


661


797




During the year 4 (2017: 5) directors participated in money purchase pension schemes.
 
The Board consider the Board of directors to be the key management for the Group.
In October 2018 the Group terminated the employment of its Chief Executive. The Group reached a settlement with him and paid him the following amounts as a termination payment:




 


£000s




Payment in Lieu of Notice


161




Bonus


-




Compensation for loss of office


100




Settlement of pension obligations


11




Settlement of benefit obligations


8




 


280




Employer's National insurance


22




 


302




 
The amounts set out above include remuneration in respect of the highest paid director as follows:




 


2019


2018




 


£000s


£000s




Emoluments


157


183




Bonus


24


28




Pension contributions to money purchase pension schemes


14


-




 
A detailed breakdown of the Directors' Emoluments, in line with the AIM rules, appears in the Directors' Report.
 
9.  SEGMENTAL INFORMATION
 
PCI-PAL PLC operates one business sector: the service of providing data secure payment card authorisations for call centre operations and this is delivered on a regional basis.   The Group manages its operations by reference to geographic segments, which are reported on below:
 
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated assets comprise items such as cash and cash equivalents, taxation and borrowings. All liabilities, other than the bank loan, are unallocated. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one period.
 




 
 
 
 
2019


 
PCI Pal
EMEA
£000s


 
PCI Pal
North America
£000s


 
Central
£000s


 
Total
£000s




Revenue


2,721


96


-


2,817




Cost of Sales


(1,119)


-


-


(1,119)




Gross Profit


1,602


96


-


1,698




 


59%


100%


 


60%




 


 


 


 


 




Administration Expenses


(2,754)


(2,680)


(939)


(6,373)




Loss from Operating Activities


(1,152)


(2,584)


(939)


(4,675)




 


 


 


 


 




Finance income


-


-


181


181




Finance costs


(3)


(5)


-


(8)




Loss before tax


(1,155)


(2,589)


(758)


(4,502)




 
Segment assets


 
3,142


 
537


 
1,183


 
4,862




 
Segment liabilities


(2,779)


(566)


(115)


(3,447)




Other segment items:


 


 


 


 




Capital Expenditure
- Equipment, Fixtures & Licences


 
27


 
-


 
-


 
27




Capital Expenditure
- Capitalised Development


 
647


 
-


 
-


 
647




Depreciation
 - Equipment, Fixtures & Licences


 
53


 
-


 
-


 
53




Depreciation
- Capitalised Development


 
191


 
-


 
-


 
191




 
9.    SEGMENTAL INFORMATION (continued)
 




 
 
 
 
2018 Restated


 
PCI Pal
EMEA
£000s


 
PCI Pal
North America
£000s


 
Central
£000s


 
Total
£000s




Revenue


2,007


-


-


2,007




Cost of Sales


(1,151)


-


-


(1,151)




Gross Profit


856


-


-


856




 


43%


-%


 


43%




 


 


 


 


 




Administration Expenses


(2,809)


(955)


(885)


(4,649)




Loss from Operating Activities


(1,953)


(955)


(885)


(3,793)




 


 


 


 


 




Finance income


-


-


28


28




Finance costs


(6)


(3)


(1)


(10)




Loss before tax


(1,959)


(958)


(858)


(3,775)




 
Segment assets


 
1,889


 
1,252


 
4,508


 
7,649




 
Segment liabilities


(1,697)


(102)


(43)


(1,842)




Other segment items:


 


 


 


 




Capital Expenditure
- Equipment, Fixtures & Licences


 
43


 
-


 
-


 
43




Capital Expenditure
- Capitalised Development


 
456


 
-


 
-


 
456




Depreciation
 - Equipment, Fixtures & Licences


 
45


 
-


 
-


 
45




Depreciation
- Capitalised Development


 
107


 
-


 
-


 
107




 
Revenue can be split by location of customers as follows:
 




 


2019
£000s


2018
£000s




Continuing activities


 


Restated




PCI - PAL division


 


 




United Kingdom and European Union


2,610


1,907




North America


90


-




Asia Pacific


6


-




Middle East


111


100




Continuing Operations


2,817


2,007




 
All non-current assets are located in the United Kingdom and no customer accounted for more than 10% of the revenue of the Group
 
10.       EARNINGS PER SHARE
 
The calculation of the earnings per share is based on the profit after taxation added to reserves divided by the weighted average number of ordinary shares in issue during the relevant period as adjusted for treasury shares. Details of potential share options are disclosed in note 19.
 
       
 




 


12 months
ended
30 June
2019


12 months
ended
30 June
2018
Restated




(Loss)/profit after taxation added to reserves


(£4,366,000)


(£3,775,000)




Basic weighted average number of ordinary shares in issue during the period


 
42,386,720


 
36,137,282




Diluted weighted average number of ordinary shares in issue during the period


 
47,083,804


 
39,355,616




Basic and diluted earnings per share


(10.30) p


(10.45) p




 
There are no separate diluted earnings per share calculations shown as it is considered to be anti-dilutive.
 
11.       TAXATION
 




 


2019
£000s


2018
£000s




Analysis of charge in the year


 


 




Current tax:


 


 




In respect of the year:


 


 




UK Corporation tax based on the results for the year at 19% (2018: 19%)


-


-




R & D Tax credit received


136


-




Total current tax (charged)/credited


136


-




Movement on recognition of tax losses


-


-




Total deferred tax charged


-


-




(Charge)/credit


136


-




 
11.  TAXATION (continued)
 
Factors affecting current tax charge
 
The tax assessed on the loss on ordinary activities for the year was lower than the standard rate of corporation tax in the UK of 19% (2018: 19%) and in the United States of 21% (2018: 21%)
 




 


2019
£000s


2018
£000s
Restated




Loss on ordinary activities before tax


(4,502)


(3,775)




Loss on ordinary activities multiplied by standard rate of corporation tax in the UK & US of 20.14% (2017: 20%)


 
(907)


 
(717)




Expenses not deductible for tax purposes


1


1




Depreciation (less than)/in excess of capital allowances for the year


 
28


 
11




Utilisation of tax losses


-


-




Unrelieved tax losses


883


717




Other


(5)


(12)




Movement on deferred tax timing differences


-


-




R&D Tax Credit received


136


 




Prior year adjustment


-


-




Total tax credited for the year


136


-




 
The Group has unrecognised tax losses carried forward of £9.42 million (2018: £5.23 million).
 
 




12.       INTANGIBLE ASSETS
 
 
2019


 
 
SIP, RTP and SBC licences
£000s


 
 
 
Capitalised Development
£000s


 
 
 
 
Total
£000s




Cost:
 




At 1 July 2018


-


951


951




Additions


83


564


647




Disposals


-


-


-




At 30 June 2019


83


1,515


1,598




Depreciation (included within administrative expenses):


 


 
 


 




At 1 July 2018


-


107


107




Charge for the year


8


183


191




Disposals


-


-


-




At 30 June 2019


8


290


298




Net book amount at 30 June 2019


 
75


 
1,225


 
1,300




 


 
SIP, RTP


 


 




2018


and SBC


Capitalised


 




 


licences


Development


Total




 


£000s


£000s


£000s




At 1 July 2017


-


495


495




Additions


-


456


456




Disposals


-


-


-




At 30 June 2018


-


951


951




Depreciation (included within administrative expenses):


 


 


 




At 1 July 2017


-


-


-




Charge for the year


-


107


107




Disposals


-


-


-




At 30 June 2018


-


107


107




Net book amount at 30 June 2018


 
-


 
844


 
844




 
 




13.       PLANT AND EQUIPMENT
 
 
2019


 
 
Fixtures
and Fittings
£000s


 
 
 
Computer Equipment
£000s


 
 
 
 
Total
£000s




 
Cost:
 




At 1 July 2018


22


199


221




Additions


-


27


27




Disposals


-


-


-




At 30 June 2019


22


226


248




Depreciation (included within administrative expenses):


 


 


 




At 1 July 2018


6


118


124




Charge for the year


4


49


53




Disposals


-


-


-




At 30 June 2019


10


167


177




Net book amount at 30 June 2019


 
12


 
59


 
71




 


 
Fixtures


 


 




2018


and


Computer


 




 


Fittings


Equipment


Total




 


£000s


£000s


£000s




At 1 July 2017


20


159


179




Additions


3


40


43




Disposals


(1)


-


(1)




At 30 June 2018


22


199


221




Depreciation (included within administrative expenses):


 


 


 




At 1 July 2017


3


77


80




Charge for the year


3


41


44




Disposals


-


-


-




At 30 June 2018


6


118


124




Net book amount at 30 June 2018


 
16


 
81


 
97




 
There are no assets held as finance leases.
 




14.     TRADE AND OTHER

RECEIVABLES


 


 




 


2019
£000s


2018
£000s
Restated




Trade receivables


1,057


475




Accrued income


35


-




Other receivables


605


155




Loan notes receivable within one year


-


908




Prepayments and accrued income


302


216




Trade and other receivables due within one year


1,999


1,754




 
Loan notes receivable in more than one year


 
-


 
1,206




Trade and other receivables


1,999


2,960




 
All amounts are considered to be approximately equal to the carrying value. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above.
 
Trade receivables are reviewed at inception under an expected credit loss model, and then subsequently for further indicators of impairment, and a provision has been recorded as follows:
 




 


2019


2018




 


£000s


£000s




Opening provision


8


15




Charged to income


-


(7)




Closing provision at 30 June


8


8




 
All of the impaired trade receivables are past due at the reporting dates. In addition, some of the non-impaired trade receivables are past due at the reporting date:
 




 


2019


2018




 


£000s


£000s




0-30 days past due


118


61




30-60 days past due


19


6




Over 60 days past due


140


52




 


277


119




 
Amounts which are not impaired, whether past due or not, are considered to be recoverable at their carrying value. Factors taken into consideration are past experience of collecting debts from those customers, plus evidence of post year end collection.
 
Loan notes receivable
The loan notes receivable outstanding as at 30 June 2018 were fully repaid in the period.


 




15.       CURRENT

LIABILITIES


 


 




 


2019
£000s


2018
£000s
Restated




Trade payables


491


447




Social security and other taxes


97


111




Deferred Income


2,453


1,131




Accruals


406


153




 
Trade and other payables


 
3,447


 
1,842




 
 
Bank loans (note 16)


 
 
-


 
 
-




Amounts due under finance leases (note 16)


-


-




Current portion of long-term borrowings


-


-




 


3,447


1,842




 
 
Amounts due under finance leases are secured on the related assets.
 




16.       NON-CURRENT

LIABILITIES


 


 




 


2019


2018




 


£000s


£000s




Bank loans


-


-




Amounts due under finance leases


-


-




Long term borrowings


-


-




Borrowings


 


 




Bank loans are repayable as follows:


 


 




 


2019


2018




 


£000s


£000s




Within one year


-


-




After one year and within two years


-


-




After two years and within five years


-


-




Over five years


-


-




 


-


-




 
17.       DEFERRED TAXATION
Deferred taxation is calculated at a rate of 19% (2018: 19%) in the UK and 21% (2018: 19%) in the US
 




 


Tax losses
£000s


Total
£000s
Restated




Opening balance at 1 July 2017


-


-




(Charged)/credited through the statement of comprehensive income in the year


 
-


 
-




At 30 June 2018


-


-




Charged through the statement of comprehensive income in the year


 
-


 
-




At 30 June 2019


-


-




 


 
 
2019


 
 
2018




 


£000s


£000s
Restated




Unprovided deferred tax assets


 


 




Accelerated capital allowances


-


-




Trading losses


1,602


1,060




 


1,602


1,060




 
The unprovided deferred tax assets are calculated at a rate of 17% (2018: 17%).
 
18.           GROUP UNDERTAKINGS
 
At 30 June 2019, the Group included the following subsidiary undertakings, which are included in the consolidated accounts:
 




 
Name


 
Country of Incorporation


 
Class of share capital held


 
Proportion held


 
Nature of business




 
PCI-PAL (U.K.) Limited


 
England


 
Ordinary


 
100%


 
Payment Card Industry software services provider




 
IP3 Telecom Limited


 
England


 
Ordinary


 
100%


 
Dormant




 
The Number Experts Limited


 
England


 
Ordinary


 
100%


 
Dormant




 
PCI PAL (US) Inc


 
United States of America


 
Ordinary


 
100%


 
Payment Card Industry software services provider




 
 
 




19.          SHARE

CAPITAL


 


 


 


 




Group


2019


2019


2018


2018




 


Number


£000s


Number


£000s




Authorised:


 


 


 


 




Ordinary shares of 1p each


100,000,000


1,000


100,000,000


1,000




Allotted called up and fully paid:


 


 


 


 




Ordinary shares of 1p each


42,721,178


427


42,721,178


427




 
On 30 January 2018 the company placed 11,000,000 ordinary shares of 1 pence with various institutional investors, priced at 45 pence per share. The placing raised a gross amount of £4.95 million before expenses. The new shares represent approximately 25.8% of the Company's enlarged issued ordinary share capital (excluding those held as treasury shares).
 
The Group owns 167,229 (2016: 167,229) shares and these are held as Treasury Shares.
 
During the year, the share price fluctuated between 39.5 pence and 17.5 pence and closed at 30.98 pence on 30 June 2019.
 
Share Option schemes
The Company operates an Employee Share Option Scheme. The share options granted under the scheme are subject to performance criteria and generally have a life of 10 years. The grant price is taken with reference to the closing quotation price as derived from the Daily Official List of the London Stock Exchange.
 
The performance criteria are set by the remuneration committee. The grants are individually assessed with regard to the location of the employee and generally have one of the following performance criteria:
 
1: 50% of the options will vest if the share price of the Company as measured on the London Stock Exchange trades above the share price at the date of grant, for a continuous 30 day period; 25% or the options will vest if the share price of the Company trade 50% above the share price of the Company at the date of Grant for a continuous 30 day period; and the remaining 25% will vest if the share price of the Company trades 100% above the share price of the Company at the date of Grant for a continuous 30 day period. The options cannot be exercised for a three year period from the date of Grant. or;
 
2: The number of options granted will vest equally over a four year period in monthly tranches with the earliest exercise date being 12 months from the date of issue of the option
 
All options will lapse after a ten-year period if they have not been exercised.
 
The following options grants have been made and are valued using the Monte Carlo Pricing model with the following assumptions:
 




Date of Grant


25 May 17


12 July 18


12 Nov 18


02 Jan 19


27 Feb 19


10 May 19


13 Jun 19


Total




Exercise Price


33.0 pence


28.5 pence


26.5 pence


19.0 pence


23.0 pence


22.0 pence


28.5 pence


N/A




Price at date of grant


44.0 pence


28.5 pence


26.5 pence


19.0 pence


23.0 pence


22.0 pence


28.5 pence


N/A




Estimated time to Maturity


5 years


5 years


5 years


5 years


5 years


5 years


5 years


N/A




Expected Dividend yield


0.0%


0.0%


0.0%


0.0%


0.0%


0.0%


0.0%


N/A




Risk Free Rate


0.57%


0.996%


0.996%


0.839%


0.961%


0.870%


0.622%


N/A




No Steps used in calculation


10


10


10


10


10


10


10


N/A




No of simulations used in calculation


100,000


100,000


100,000


100,000


100,000


100,000


100,000


N/A




Fair value of Option


14.11 pence


14.18 pence


14.23 pence


14.25 pence


14.21 pence


14.23 pence


14.30 pence


N/A




Weighted average life in years


2.90 years


4.03 years


4.36 years


4.50 years


4.66 years


4.85 years


4.95 years


 




 


 


 


 


 


 


 


 


 




# option shares issued at grant


3,065,000


565,000


225,000


320,000


105,000


145,000


525,000


4,950,000




# option shares lapsed


(580,000)


(350,000)


(10,000)


0


0


0


0


(940,000)




# option shares outstanding as at 30 June 2019


2,485,000


215,000


215,000


320,000


105,000


145,000


525,000


4,010,000




# option shares exercisable as at 30 June 2019


0


0


0


0


0


0


0


0




 


 


 


 


 


 


 


 


 




Total charge for year


£52,002


£5,915


£3,875


£4,500


£1,014


£588


£741


£68,635




Total cumulative charge as at 30 June 2019


£147,118


£5,915


£3,875


£4,500


£1,014


£588


£741


£163,751




The fair value of these options has been calculated on an issue by issue basis and £68,635 (2018: £91,116) has been charged to the statement of comprehensive income account for this financial year.
 
The following options have been valued using a Black Scholes Pricing model with the following assumptions:
 




Date of Grant


28 Jun 17


04 Oct 17


12 Jul 18


12 Jul 18


12 Nov 18


12 Nov 18


07 Jan 19


27 Feb 19


Total




Exercise Price


41.5 pence


44.5 pence


28.5 pence


28.5 pence


26.5 pence


26.0 pence


18.4 pence


23.0 pence


 




Price at date of grant


41.5 pence


44.5 pence


28.5 pence


28.5 pence


26.0 pence


26.0 pence


18.4 pence


23.0 pence
 


 




Estimated time to Maturity


5 years


5 years


5 years


5 years


5 years


5 years


5 years


5 years


 




Expected Dividend yield


0.0%


0.0%


0.0%


0.0%


0.0%


0.0%


0.0%


0.0%


 




Risk Free Rate


0.57%


0.57%


0.996%


0.996%


1.03%


1.03%


0.89%


0.96%


 




Volatility


20.0%


20.0%


20.0%


20.0%


20.0%


20.0%


20.0%


20.0%


 




Fair value of Option


7.8 pence


8.4 pence


5.6 pence


5.6 pence


5.0 pence


5.2 pence


3.6 pence


4.5 pence


 




Weighted average life in years


3.0 years


3.26 years


4.03 years


4.03 years


4.36 years


4.36 years


4.52 years


4.66 years


 




 


 


 


 


 


 


 


 


 


 




# option shares issued at grant


150,000


150,000


415,000


641,667


150,000


60,000


15,000


100,000


1,681,667




# option shares lapsed


0


0


(25,000)


(550,000)


0


0


0


0


(575,000)




# option shares outstanding at 30 June 2019


150,000


150,000


390,000


91,667


150,000


60,000


15,000


100,000


1,106,667




# option shares exercisable as at 30 June 2019


71,875


59,375


0


0


0


0


0


0


131,250




 


 


 


 


 


 


 


 


 


 




Total charge for year


£2,346


£2,524


£4,271


£1,004


£941


£393


£52


£308


£11,839




Total cumulative charge as at 30 June 2019


£4,937


£4,384


£4,271


£1,004


£941


£393


£52


£308


£16,290




 
 The fair value of these options has been calculated on an issue by issue basis and £11,839 (2018: £2,401) has been charged to the statement of comprehensive income account for this financial year.
 
The analysis of the Company's option activity for the financial year is as follows:




 


2019


 


2018


 




 


Weighted
Average exercise
Price


Number of
Options


Weighted
Average exercise
price


Number of
Options




 


£


 


£


 




Options outstanding at start of year


0.339


3,255,000


0.330


3,215,000




Options granted during the year


0.266


3,266,667


0.445


150,000




Options exercised during the year


 


-


 


-




Options lapsed during the year


0.300


(1,405,000)


0.330


(110,000)




Options outstanding at end of year


0.303


5,116,667


0.339


3,255,000




Options exercisable at the end of year


 


131,250


 


-




 
 
20.            FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Group uses various financial instruments including cash, trade receivables, trade payables, other payables, loans and leasing that arise directly from its operations. The main purpose of these financial instruments is to maintain adequate finance for the Group's operations. The existence of these financial instruments exposes the Group to a number of financial risks, which are described in detail below. The directors do not consider price risk to be a significant risk. The directors review and agree policies for managing each of these risks, as summarised below, and these remain unchanged from previous years.
 
Capital Management
 
The capital structure of the Group consists of debt, cash, loans and equity. The Group's objective when managing capital is to maintain the cash position to protect the future on-going profitable growth which will reflect in shareholder value.
 
At 30 June 2018, the Group had a closing cash balance of £1,492,000 (2018: £3,748,000) and no borrowings.
 
Financial risk management and objectives
 
The Group seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The directors achieve this by regularly preparing and reviewing forecasts based on the trends shown in the monthly management accounts.
 
In October 2019, after the close of the financial year, the Group agreed a £2.75 million, 36 month term loan facility with Shawbrook Bank secured over the assets of the business to assist with the working capital requirements of the Group
 
Interest rate risk
 
The Group does not use loan or lease finance and so there is no interest rate risk.
 
Post the balance sheet date the Group has entered a term loan agreement with Shawbrook Bank, details of which are disclosed in Note 28: Subsequent Events
 
Credit risk
 
The Group's principal financial assets are cash and trade receivables, with the principal credit risk arising from trade receivables. In order to manage credit risks the Group conducts third party credit reviews on all new clients, takes deposits where this is deemed necessary and collects payment by direct debit, limiting the exposure to a build-up of a large outstanding debt.  Concentration of credit risk with respect to trade receivables are limited due to the wide nature of the Group's customer base:  no one customer accounts for more than 10% of revenues.  In some cases, licences fees are paid for annually in advance.
 
Liquidity risk
 
The Group aims to mitigate liquidity risk by closely monitoring cash generation and expenditure. Cash is monitored daily and forecasts are regularly prepared to ensure that the movements are in line with the directors' strategy.
 
Foreign currencies and foreign currency risk
 
During the year exchange gains of £89,400 (2018: £21,600) have arisen and at the year-end. As at the 30 June 2019 the Group held the following foreign currency cash balances:
 
 
 
US Dollar:                   $97,406       Sterling equivalent: £77,111       (2018: £83,246)
Canadian Dollar:                 $8       Sterling equivalent: £5                  (2018: £nil)
Australian Dollar:      $11,273       Sterling equivalent: £6,130         (2018: £nil)
Total                                                  Sterling equivalent: £83,246       (2018: £83,246)
 
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction and monetary assets and liabilities in foreign currencies are translated at the rates ruling at the year end. At present foreign exchange is minimal and hedging and risk management is not deemed necessary as the company trades and spends in the various currencies.
 
The Group's principal exposure to exchange rate fluctuations arise on the translation of overseas net assets, profits and losses into Sterling, for presentational purposes.   The risk is managed by taking the differences that arise on the retranslation of the net overseas investments to the currency reserve.   Foreign currency risk on cash balances is monitored through regular forecasting and the Group tries to maintain a minimum level of currency in the accounts so as to meet the short term working capital requirements.
 
No sensitivity analysis is provided in respect of foreign currency risks as the risk is considered to be moderate.
 
Financial assets
 




 
Current financial assets


Note


2019


2018




 


 


£000s


£000s




Cash at bank


 


1,492


3,748




Trade receivables - current


14


1,057


475




Accrued income


14


35


-




Loan notes receivable


14


-


2,114




 


 


2,584


6,337




 
The fair values of the financial assets are considered to be approximately equal to the carrying values.
 
Financial liabilities
 




 
Current financial liabilities


Note


2019


2018




 


 


£000s


£000s




Trade payables


15


491


447




Accruals


15


406


153




 


 


 


 




 


 


897


600




 
The fair values of the financial liabilities are considered to be approximately equal to the carrying values.
 
21.           CAPITAL COMMITMENTS
 
The Group has no capital commitments at 30 June 2019 or 30 June 2018.
 
22.           CONTINGENT ASSETS
 
The Group has no contingent assets at 30 June 2019 or 30 June 2018.
 
23.           CONTINGENT LIABILITIES
 
The Group has no contingent liabilities at 30 June 2019 or 30 June 2018.
 
24. CHANGES IN ACCOUNTING POLICIES
 
Impact on the financial statements
As a result of the changes in the entity's accounting policies, prior year financial statements had to be restated.
 
IFRS 9 Financial Instruments was implemented without restating comparative information, on the grounds of materiality.
 
IFRS 15 Revenue from Contracts with Customers was adopted and the prior year financial statements have been restated. The tables below show the adjustments recognised for each individual line item for the period ending 30 June 2018.
 
The adjustments for the twelve months to 30 June 2018 are as follows:
 




Consolidated statement of comprehensive income for the twelve months to 30 June 2018
 


As originally presented


Adjustment IFRS 15
 


Restated twelve months ended 30 June 2018




£'000


£'000


£'000




 


 


 




 
Continuing operations


 


 


 




Revenue


2,136


(129)


2,007




Cost of sales


(1,151)


-


(1,151)




Gross profit


985


(129)


856




Administrative expenses


(4,747)


98


(4,649)




Loss from operating activities


(3,762)


(31)


(3,793)




Interest payable


(10)


-


(10)




Finance income


28


-


28




Interest receivable


-


-


-




Loss before taxation


(3,744)


(31)


(3,775)




Taxation


-


-


-




Loss for period from continuing activities


(3,744)


(31)


(3,775)




Profit for period from discontinued activities


-


-


-




Total comprehensive (loss)/income for the period


(3,744)


(31)


(3,775)




 
 
Profit / (loss) per share expressed in pence


 


 


 




Basic and diluted


(10.36)


(0.09)


(10.45)




 
 




Consolidated statement of financial position as at 30 June 2017
 


As originally presented


Adjustment IFRS 15
 


Restated twelve months ended 30 June 2017




 


£'000


£'000


£'000




 


 


 


 




Assets


 


 


 




Non-current assets


 


 


 




Plant & Equipment


99


-


99




Intangible assets


495


-


495




Loan note receivable


2,202


-


2,202




 Non-current assets


2,796


-


2,796




 
Current assets


 


 


 




Trade and other receivables


608


40


648




Loan note receivable


945


-


945




Cash and cash equivalents


1,958


-


1,958




 Current assets


3,511


40


3,551




Total assets


6,307


40


6,347




Liabilities


 


 


 




Current liabilities


 


 


 




Trade and other payables


(883)


(585)


(1,468)




Other interest-bearing loans and borrowings


-


-


-




 Current liabilities


(883)


(585)


(1,468)




 
Non-current liabilities


 


 


 




Long term borrowings


-


-


-




Non-current liabilities


-


-


-




 Total liabilities


(883)


(585)


(1,468)




Net assets


5,424


(545)


4,879




 
Shareholders' equity


 


 


 




Share capital


317


-


317




Share premium


89


-


89




Other reserve


4


-


4




Currency reserve


-


-


-




Profit & loss account


5,014


(545)


4,469




Total shareholders' equity


5,424


(545)


4,879




 
 
 




Consolidated statement of financial position as at 30 June 2018
 


As originally presented


Adjustment IFRS 15
 


Restated twelve months ended 30 June 2018




 


£'000


£'000


£'000




 


 


 


 




Assets


 


 


 




Non-current assets


 


 


 




Plant & Equipment


97


-


97




Intangible assets


844


-


844




Loan note receivable


1,206


-


1,206




 Non-current assets


2,147


-


2,147




 
Current assets


 


 


 




Trade and other receivables


708


138


846




Loan note receivable


908


-


908




Cash and cash equivalents


3,748


-


3,748




 Current assets


5,364


138


5,502




Total assets


7,511


138


7,649




Liabilities


 


 


 




Current liabilities


 


 


 




Trade and other payables


(1,128)


(714)


(1,842)




Other interest-bearing loans and borrowings


-


-


-




 Current liabilities


(1,128)


(714)


(1,842)




 
Non-current liabilities


 


 


 




Long term borrowings


-


-


-




Non-current liabilities


-


-


-




 Total liabilities


(1,128)


(714)


(1,842)




Net assets


6,383


(576)


5,807




 
Shareholders' equity


 


 


 




Share capital


427


-


427




Share premium


4,618


-


4,618




Other reserve


99


-


99




Currency reserve


(31)


-


(31)




Profit & loss account


1,270


(576)


694




Total shareholders' equity


6,383


(576)


5,807




 
Reconciliation of contract revenue balances under IFRS 15




 


2019


2018




 


£000s


£000s




b/fwd deferred revenue 


(714)


(585)




Amounts invoiced and deferred in year


(821)


(379)




Amounts released as revenue in year


398


250




c/fwd deferred revenue


(1,137)


(714)




 
 
 
Reconciliation of contract cost balances under IFRS 15




 


2019


2018




 


£000s


£000s




b/fwd deferred cost balance 


138


40




Amounts of costs deferred in year


605


138




Amounts of costs released in year


(138)


(40)




c/fwd deferred cost balance


605


138




 
IFRS 15 - Revenue from Contracts with Customers - Impact of adoption
 
The Group has adopted IFRS 15 from 1 July 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in IFRS 15, the group has adopted the new rules retrospectively and has restated comparatives both for the 2018 financial year and the opening balance sheet at 1 July 2017. In summary, the following adjustments were made to the amounts recognised in the balance sheet at the date of initial application (1 July 2018).
 
(i) Revenue
 
From 1 July 2017 all set-up, professional service and installation fees for our PCI compliance solutions and our hosted telephony services previously recognised in revenue during the implementation phase of the client projects have been restated under IFRS 15. These fees will now be deferred into deferred revenue and held in the balance sheet and will be released to the statement of comprehensive income over the estimated term of the contract up to a maximum of four years.
 
In addition, the opening balance sheet at 1 July 2017 has been restated for contracts where fees have been recognised in revenue prior to 1 July 2017.
 
The net impact of this restatement is a reduction in previously reported revenue of £0.129 million for the 12 month period to 30 June 2018.
 
The total deferred liability restated at 30 June 2018 is £0.714 million.
 
There have been no adjustments made to revenue for the sale of third-party equipment.
 
(ii) Commission costs (administrative expenses)
 
Commission paid to members of the sale team for the signing of specific contracts is deferred onto the balance sheet and held in other current assets and is matched to the revenue over the minimum period of the contract term.
 
In addition, the opening balance sheet at 1 July 2017 has been restated for contracts where commission has been charged as an administrative expense prior to 1 July 2017.
 
Net commission costs of £0.089 million for the 12 month period to 30 June 2018 have been capitalised into other current assets.
 
IFRS 15 - Revenue from Contracts with Customers - Accounting policies
 
IFRS 15 provides a single, principles-based five-step model to be applied to all sales contracts, based on the transfer of control of goods and services to customers. Revenue represents the fair value of the sale of goods and services and after eliminating sales within the Group and excluding value added tax or overseas sales taxes. The following summarises the method of recognising revenue for the solutions and products delivered by the Group.
 
(i) PCI compliance solutions and hosted telephony services
Revenue for set-up and cloud provision fee will be deferred and will be recognised evenly over the estimated term of the contract, having accounted for the automatic auto-renewal of our contracts, up to a maximum of four years, starting the month following from the date of signature of the underlying contract.
 
The payment profile for such contracts typically include payment for set-up fees at the point of signature of the contract, but for revenue recognition purposes, this is deemed to be an integral part of the wider contract rather than a separate performance obligation.
 
Revenue for all other professional services and installation fees will be deferred and will be recognised evenly over the estimated term of the contract, having accounted for the automatic auto-renewal of our contracts, up to a maximum of four years, starting in the month following the hand over to the client for user acceptance testing. 
 
Costs directly attributable to the delivery of the PCI Compliance solutions and hosted telephony services are capitalised as 'costs to fulfil a contract' and released over the estimated term of the contract, having accounted for the automatic auto-renewal of our contracts, up to a maximum of four years, starting the month following from the date of signature of the underlying contract.
 
Costs relating to commission costs paid to employees for winning the contract will be capitalised as 'costs to fulfil a contract' at the date the commissions payments become due and will be released in monthly increments over the minimum contract term starting the month following the date the cost is capitalised.
 
 (ii) Third party equipment sales
Where the contract involves the sale of third-party equipment that could be acquired and supplied by other parties to the client the revenues and costs relating to this will continue to be released in full to the Statement of Comprehensive Income at the time the installation is complete.
 
IFRS 9 - Financial Instruments - Accounting policies
 
The Group does not enter into forward contracts to hedge forecast transactions and so there is no requirement to restate the previous financial statements. 
 




25.       OPERATING LEASE

COMMITMENTS


 


 




 


2019


2018




 


£000s


£000s




Total future lease payments:


 


 




Less than one year


45


109




After one and within two years


23


45




After two and within five years


-


68




 


68


222




 
Operating lease commitments relate to the following buildings:
 
Ipswich Nos 5,6 & 7 Gamma Terrace expires December 2021, with optional break clause for September 2019
 
London                                                                      The Company operates from a serviced office facility at 30 Moorgate London that is cancellable at short notice.                    
Charlotte                                                                 
The Company operates from a serviced office facility at 101 N Tryon St, Charlotte that is cancellable at short notice.
 
26.         TRANSACTIONS WITH DIRECTORS
 
There were no transactions with directors in the year to June 2019 or June 2018.
 
27.         DIVIDENDS
 
The directors have proposed a dividend of nil pence per share (2018: nil pence per share) post year end (subject to shareholder approval).
 
28.        SUBSEQUENT EVENTS
 
Post the close of the financial year the Group has entered into a £2.75 million loan facility with Shawbrook Bank. The principal terms are as follows:
 
   Term                                      36 months with three month capital repayment holiday
   Interest rate                         9.3% over LIBOR paid monthly
   Arrangement Fee                1.4% of loan facility
   Non utilisation fee               0.6% of unutilised amount
   Exit fee                                  shares equivalent of 7.5% of the facility payable as detailed below
   Security                                 Fixed and Floating debenture over the assets of the Group.
 
The loan balance can be drawn in two tranches with a minimum of £1.0 million within five business days of the signing of the agreement and the remaining balance within twelve months. The company will initially be drawing down £1.5 million of this new facility. The facility is being used to support the working capital requirements of the Group as it continues to grow.
 
Shawbrook Bank will be entitled to receive a cash based exit payment calculated on the value generated, over a 10 year period, on the equivalent of £206,250 of phantom shares (being 7.5% of the facility) if there is a takeover of the Group or a debt refinancing of the Shawbrook debt. 
 
The exit fee is a cash payment of a sum equal to P, where:
P = (A  x  B) - C
and where:
A = the Phantom Shares Number - the Phantom Shares Value divided by the fair market value of one ordinary share, calculated using the average of the closing share price in the previous five days immediately prior to the date of the facility letter;
B = the fair market value of one ordinary share at the time of the exit fee event; and
C = the Phantom Shares Value, which is £206,250.
An Exit Fee Event is where there is:
(a)            a sale or other disposition of all or substantially all of the assets in the Company in whatever form (whether in a single transaction or multiple related transactions); or
(b)            an acquisition of shares in the Company by a person (and any persons acting in concert with that person) that results in that person (together with any such persons acting in concert) acquiring a controlling interest in the Company; or
(c)            a reorganisation, consolidation or merger of the Company (whether in a single transaction or multiple related transactions) where shareholders before the transaction(s) directly or indirectly beneficially own issued voting securities of the surviving entity after the transaction(s) together carrying the right to cast 50% or less of the votes capable of being cast at general meetings of the surviving entity; or
(d)            a distribution or other transfer of assets to the shareholders of the Company in connection with the liquidation of the Company; or
(e)            a refinancing of the Facility with a bank or debt lender (other than the Bank) within thirty six months of the date of the Facility Agreement, provided that the outstanding balance of the Facility prior to the date of such refinancing is equal to or greater than £500,000                                              
 
 




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END
 
 
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