REG - PCI-PAL PLC - Final Results, Analyst Briefing & Investor Pres
06/09/2022 07:00
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RNS Number : 3474Y PCI-PAL PLC 06 September 2022
6 September 2022
PCI-PAL PLC
("PCI Pal", the "Company" or the "Group")
Final Results
Analyst Briefing & Investor Presentation
Continued strong new business momentum
PCI-PAL PLC (AIM: PCIP), the global provider of secure payment solutions for
business communications, is pleased to announce full year results for the year
ended 30 June 2022 (the "period").
Financial Highlights
· Revenue increased 62% to £11.94 million (2021: £7.36 million)
· Gross margin increased to 84% (2021: 75%) reflecting the majority of revenues delivered through our cloud based Amazon Web Services ("AWS") platform
· Significant increase in Total Annual Contract Value ("TACV(1)") at 30 June 2022 by 40% to £13.36 million (2021: £9.51 million), with an 11% increase in ACV signed in the period to £3.46 million (2021: £3.11 million).
· Deferred income increased by 31% to £10.62 million (2021: £8.09 million)
· Strong performance delivered adjusted operating loss(2) better than expectations at £2.02 million (2021: £3.85 million)
· Loss before tax at £3.11 million (2021: £4.19 million) which includes a £0.80 million (£2021: £nil) charge in relation to legal fees for defending the ongoing patent claim
· Cash balances at year end of £4.89 million (2021: £7.52 million) and the Group is debt free
Operating and Other Highlights
· North American momentum continues to build, with revenue up 83% and a year-on-year increase in ACV signed of 7%. North America now accounts for 28% of the Group revenue (2021: 25%)
· Opened offices in Australia and Canada expanding the global reach of the Group
· Recurring revenue model continues to build, with recurring revenues accounting for 89% of total revenue (2021: 88%)
· Signed 217 new sales contracts in the year (2021: 195)
· A further 164 new contracts live with our services in the period (2021: 121)
· Time to go live ("TTGL(3)") of new contracts signed in the last 18 months marginally ahead of management expectations at below 5 months
· 85% of new sales contracts for the Group generated from channel partners (2021: 78%)
· Added two new members to the PCI Pal Advisory Committee, both
US-based, experienced product and engineering executive, Jayesh Patel who was
formerly Chief Product Officer at Vonage Inc, and Emilia D'Anzica, a customer
success executive and consultant
(1) TACV 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) Loss from Operating Activities before exchange
losses/gains recorded in the profit and loss exceptional items and share
option charges
(2) Loss from operating activities before exceptional items and share option
charges
(3) TTGL is the average time it takes a contract to be deployed measured from
the date of signature
Current trading
· Strong start to new financial year with key metrics in line with
management expectations.
· Sales highlights since year end:
o Signed large well-known US-focused retailer with over 1,500 stores
nationwide
o New contract signed through a top performing partner in the UK with a
well-known international food and drink company with an international
footprint
· New integrated reseller partnership signed with a B2B telco in
Canada. This new partner has more than 100,000 customers and has a fast
growing business in the Canadian contact centre market
Commenting on results and prospects, James Barham, Chief Executive said:
"FY22 is a year we can be proud of at PCI Pal. Having taken the steps to
expand our addressable market following the fundraise in April 2021, we have
executed against our ambitious plans in the year. We have driven organic
revenue growth to market leading levels, whilst at the same time managing the
processes of an unfounded patent case against us as well as meeting the
challenge of a highly competitive jobs market.
"We have taken another step up in the last 12 months, reaching several
financial milestones including £10 million ARR from our true-cloud, SaaS
subscription services. This continued progress against our plans is now
creating further opportunity as we build more momentum in our expanded product
vision, as we look to add further value layers to our existing compliance and
secure payment solution suite.
"With our market leading partner eco-system, mature cloud technology, and our
ability to serve customers on a truly global scale, we are very well
positioned to further capitalise on the broadening opportunities in front of
us. I continue to look forward with confidence to another year of strong
growth in FY23."
( )
Analyst Briefing: 9.30am on Tuesday 6 September 2022
An online briefing for Analysts will be hosted by James Barham, Chief
Executive, and William Good, Chief Financial Officer, at 9.30am on Tuesday 6
September 2021 to review the results and prospects. Analysts wishing to attend
should contact Walbrook PR on pcipal@walbrookpr.com or 020 7933 8780.
Investor Presentation: 3.00pm on Thursday 8 September 2022
The Directors will hold an investor presentation to cover the results and
prospects at 3.00pm (UK time) on Thursday 8 September 2022.
The presentation will be hosted through the digital platform Investor Meet
Company. Investors can sign up to Investor Meet Company and add to meet
PCI-PAL PLC via the following link
https://www.investormeetcompany.com/pci-pal-plc/register-investor
(https://urldefense.proofpoint.com/v2/url?u=https-3A__www.investormeetcompany.com_pci-2Dpal-2Dplc_register-2Dinvestor&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=05PHl3GHdShYuaCii2fBRpoqaNr9B1d97X09daeosu0&m=2cbaZ6I4laLZbM7rmMgwZbEMeL2NX7hkjIpg7mqgo34&s=pwrBTMxZzny86eeBmluEYAAy3krXblozKaNUaPXNO7s&e=)
. For those investors who have already registered and added to meet the
Company, they will automatically be invited.
Questions can be submitted pre-event to pcipal@walbrookpr.com or in real time
during the presentation via the "Ask a Question" function.
Annual Report & Accounts
The Annual Report & Accounts and Notice of Annual General Meeting will be
posted to the Company's website (www.pcipal.com (http://www.pcipal.com) ) and
posted to shareholders in due course.
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the company's obligations under Article 17 of
MAR.
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/Nick Rome +44 (0) 797 122 1972
PCIPAL@walbrookpr.com
About PCI Pal:
PCI Pal is a leading provider of Software-as-a-Service ("SaaS") solutions that
empower companies to take payments from their customers securely, adhere to
strict industry governance, and remove their business from the significant
risks posed by non-compliance and data loss. Our products secure payments and
data in any business communications environment including voice, chat, social,
email, and contact centre. We are integrated to, and resold by, some of the
worlds' leading business communications vendors, as well as major payment
service providers.
The entirety of our product-base is available from our global cloud platform
hosted in Amazon Web Services ("AWS"), with regional instances across EMEA,
North America, and ANZ.
For more information visit www.pcipal.com (http://www.pcipal.com) or follow
the team on Linkedin: https://www.linkedin.com/company/pci-pal/
(https://www.linkedin.com/company/pci-pal/)
CHAIR'S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2022
I am very pleased to report on another year of significant progress for the
business on its path towards profitability while continuing to achieve upper
quartile top line SaaS company growth and retention rates.
Notable achievements in the year include the strengthening of TACV, our
leading forward indicator of growth, by 40% to £13.36 million and growth in
deferred revenue of 31% to £10.62 million, once again growing our
forward-looking revenue visibility. Recognised revenue also grew strongly by
62% to £11.94 million and gross margins continued to improve to 84%. These
top line financial metrics are all hallmarks of a strong and growing cloud
company and SaaS business model.
Patent Infringement Claims
For most of this fiscal year the management team has been vigorously defending
the Group in both the UK and US against what the Board believes to be an
unfounded patent infringement claim by Sycurio Limited. The Group has adopted
a pro-active, multi-faceted defence strategy of proving non-infringement,
despite the onus being on Sycurio to prove the infringement, and also to
disprove PCI Pal's counterclaims of invalidity.
The Board intends to continue to use all routes available to it to bring this
matter to a close and we are confident in our position on both the defence of
the claims made, as well as on the counterclaims that we are making.
People
The commitment of our people is truly outstanding. They have delivered these
exceptional results.
The Group has put a great deal of effort into supporting our people and
continuing to build an enduring culture of respect, positivity, and
resilience. This corporate foundation is directly reflected in low employee
turnover and an ability to attract first class technical talent despite the
enormous impact of the Great Migration being felt across not just the
technology sector but all areas of the global economy. More importantly, our
customers and partners really enjoy working with our teams. This competitive
differentiator should not be under-estimated and can be seen in our excellent
NPS rankings, continued strengthening of our leadership position in channel
partnerships, and impressive customer retention and account expansion metrics.
Overall, the PCI Pal team has grown from 71 to 103 employees over the course
of the year, and I would personally like to thank each and every one of them
for their contributions towards meeting the Group's mission.
Strategic Direction
Several years ago, the Group adopted a disruptive strategy for our sector of
being channel-first and delivering our solutions exclusively through the
Cloud. FY22 again delivered tangible evidence of the ongoing success of this
strategy. Most of our business by volume of sales continues to come through
channel partnerships, further validating our strategic decision to be a
channel-first organisation.
Building on this strategic success to date, the Board continues to evolve and
expand its rolling five-year strategic plan to enter new geographic markets,
such as Canada and Australia, and to broaden our offering to include new
secure payments services on its global Cloud platform. In FY22 the first
example of these new services was a 'pay-by-bank' option via a technology
partnership with TrueLayer. Further new secure payment services are planned
for launch during FY23, providing new revenue opportunities for our partners
and enhancing the overall value proposition for our end customers.
Corporate Governance
In FY22 the Board has continued to focus on building our governance
capabilities and ability to exercise independent judgement as the Group
becomes larger, more internationally complex, serving a broader range of
global partners and customers, and developing an even more culturally diverse
team of people in different countries. I am therefore very pleased to have
welcomed Carolyn Rand to the Board as Audit Committee Chair and member of the
Remuneration Committee. Carolyn is a financial expert with a broad SaaS and
international technology background, most recently with Bango Plc, and
therefore also brings payment industry experience to the Board. I would like
to thank Chris Fielding for his long service and contributions to the Group,
both as past Chair of the Board and Audit Committee Chair, as the Group
transformed itself into the fast-growing Cloud business it is today.
It has been two years since the formation of the PCI Pal Advisory Committee
(the "PAC"), and the CEO and senior management team has continued to benefit
from the expert outside functional advice that the committee provides. The
Board has also enhanced its ability to meet its governance responsibility to
manage its risk profile by having access to expert and more diverse, global
outside viewpoints that are strongly correlated to the key elements of our
evolving 5-year strategic plan.
For the second year, the Board has produced an ESG report, which sets out our
commitment to understanding, measuring and, over time, improving our 'ESG
footprint' as well as our focus and commitment to diversity and inclusion.
This year we have updated our initial assessment of the key ESG metrics that
we believe are most applicable to the Group, as well as our goals for
achieving measurable improvement for each metric over time. The Board is fully
committed to supporting management to achieve these improvement goals and is
leading by example in the context of the make-up of the both the Board and the
Advisory Committee. Although PCI Pal is a small software company relative to
the large-scale global challenges around corporate governance and ESG, the
Board nonetheless takes its ESG responsibilities seriously and has begun its
own journey of self-directed improvement.
Stakeholder Communications
As a board, we remain focused on clear and regular communications to all
investors, both retail and institutional, and expanding disclosures in line
with the growth in complexity of the business. We continue to utilise
telephone updates as well as video briefings using the Investor Meet Company
portal, to reach shareholders of all sizes. As the impact of the pandemic has
receded, the CEO and CFO are once again also offering in-person meetings. As
Chair, I am available as a direct line of communication to all shareholders in
case other questions arise that need to be answered independently, as well as
offering meetings with institutional shareholders around the time of the AGM.
In continuing recognition of the Company's wider communication responsibility
to all stakeholders, this year the Company has again expanded its media plan
of publishing articles and content on social media, on the Company's website
and utilising the RNS Reach service to help provide a deeper understanding of
the Group's products and markets.
Looking Forward
Given the achievements to date and our commanding partner position in the
ecosystem of the business communications marketplace, I am greatly encouraged
by the progress that has been made by the Group in FY22, and the Board is
confident in the outlook and prospects for the Group in FY23 and beyond.
We have started the current financial year in line with management's
expectations and I look forward to sharing further progress reports and news
during the coming financial year, as we continue our strategic growth journey
towards profitability and further scale.
Simon Wilson
Non-Executive Chair
CHIEF EXECUTIVE'S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2022
Overview
I am extremely proud of the year we have just delivered.
Following the fundraise in April 2021, we set out expanded growth objectives
for FY22 which included growing our addressable market through expansion into
new territories including Canada and Australia; as well as increased
investment into product, engineering, and customer success functions. The
investment across these areas by majority involved an increase in headcount
which has grown in the year by 45% to 103 people group-wide across UK, US,
Canada, and Australia.
We have made this substantial progress against our hiring objectives despite
the impact that the "war for talent" has had on fast growing technology
companies such as ours. Furthermore, we are especially pleased that during
this expansion we have achieved excellent employee retention of 94%.
It is particularly pleasing that while undertaking this significant expansion,
with the inconvenience of the unfounded patent claim being made against us in
the background, we have grown revenue by 62% year on year to £11.9 million,
with a closing ARR run rate of £11.1 million (2021: £7.7 million). This
organic growth performance is the strongest in our market and is a result of
the successful execution against our stated objectives, which include:
providing the most mature cloud platform to customers in our space; to be a
truly partner-first business, creating the leading partner eco-system in the
market; and for our services to be available to any size contact centre
anywhere in the world.
Along with our market-leading revenue growth performance we have also managed
our customer churn rates to top quartile levels, at just 3%. The Group has
delivered several large extensions to key accounts in the period which has
contributed to a strong NRR result of 118% across the year which is testament
to the relationships we build with partners and customers alike. In
addition, our new contract sales momentum has continued driving our key growth
metric of TACV, which in turn is a key indicator of future recurring revenues,
to £13.4 million, a year-on-year increase of 40%.
Given the momentum being seen by the Company, we are making excellent progress
towards achieving break even in the near term. The progress is not only
supported by our sales momentum, but also the continued increase in gross
margins which is now at 84% (2021: 75%). Our ability to drive both new
business and upsells to revenue recognition is testament to the foundations we
established in prior years having built a strong operational core to the
business. Our strong trading, along with our SaaS revenue model, has
delivered excellent cash performance as well, with cash of £4.9 million at
the year-end being substantially ahead of original expectations.
A consistent strategy to meet the opportunity
At PCI Pal, our vision is to be "the preferred solution provider that
organisations turn to globally for achieving payment security and PCI
compliance in customer engagement environments". To date, having now
completed the first full 5 years of our original plan, we have focused
primarily on securing consumer payment card data in contact centre markets in
the UK and US, with very recent expansion this year into Canada and
Australia.
Our plan set out three pillars of growth: to be the leader in cloud in a space
hindered by legacy hardware solutions; to leverage cloud innovation to create
opportunities to sell to the breadth of the contact centre market globally;
and to gain access to that global market through the creation of a market
leading partner eco-system. We have been highly successful in executing
against all three pillars and our revenue growth is testament to that as
well. Today we estimate our market opportunity to be in the region of £300
million worldwide based on there being over 10 million agent positions in
contact centres across the globe. This addressable market will grow as we
start adding more of our planned product enhancements to our existing
solutions.
Bolstering the tactical advantages we have over our competitors, and as the
first to launch globally available, true-cloud solutions in our space, we have
further expanded our patent portfolio with the grant of a key patent covering
the novel and unique way that we leverage cloud telephony technologies to
integrate our Agent Assist solution to third party environments "Processing
Sensitive Information Over VoIP" (US 11,310,291). The patent is now granted
in the US and approved for grant in Australia, with further territories
expected in the coming months, including the UK. Of note, the US grant was
made following an extensive review by the US Patents and Trademark Office of
existing patents in our space, reiterating the innovative and novel nature of
PCI Pal's approach. The patent specifically covers the way that PCI Pal is
able to manipulate the signalling and voice stream of phone calls, allowing
PCI Pal to take a non-invasive approach to its handling of data during a call
within its Agent Assist and IVR solutions. This latest patent is important in
illustrating the novel ways by which we have been able to capture such a
strong partner eco-system and also provides potential protection against those
competitors who may wish to transition to cloud and follow similar operating
models as PCI Pal.
People
Since early in our journey, we have set corporate level objectives to drive a
focus on our people. This starts with a company-wide objective to maintain a
culture that people want to be part of and a workplace that feels engaging and
inclusive for all.
People are absolutely critical to this business. As a fast growing, high
margin, SaaS business, people are what this business invests in the most. At
PCI Pal we give equal focus to developing and supporting our existing
employees, as we do to the passion and thorough approach we take to hiring new
team members. We recognise that as a business of our size, even at now over
100 people, that it is our people that make the difference. It is therefore
pleasing for myself and the management team that in a year where jobs markets
have been turned upside down that we have achieved top quartile employee
retention. This performance was evidenced during the year when we were
recognised by WorkL, in partnership with The Telegraph newspaper, as one of
the most engaging employers in the country ranked 221 out of over 23,000
organisations assessed.
During the year we have expanded our headcount by 45% to support our escalated
strategic objectives defined at the fundraise in April 2021. I must thank
the entire team at PCI Pal who have been involved in this process from the
hiring managers to those who have supported them during our multi-stage
interview processes. We have a rule at PCI Pal to only bring people into the
business we feel excited about, and this has stood us in good stead with the
excellent team and culture that we have built.
Further expanding our keen people focus, in the year we commenced an
initiative to bring more focus to diversity and inclusion at PCI Pal. Whilst
we believe we have a diverse and inclusive workplace today, we recognise that
as a growing company it is important that we have visibility of data,
understanding, and processes in place to ensure this important area is catered
for as our growth continues. We have now completed our initial stages of
gathering data, something our teams have embraced and given supportive
feedback to. We will now continue that journey to allow the data to better
inform management as we build processes to further drive this initiative.
Unfounded claims of patent infringement
In September 2021, the Group announced that Semafone Limited (now renamed
Sycurio Limited), one of our competitors, had filed lawsuits in both the UK
and the US relating to alleged patent infringement by PCI Pal. We believe that
the claim was brought against us by Sycurio, shortly after they were acquired
by a US-based Private Equity fund, primarily to try to disrupt the delivery of
our growth plans.
The Directors continue to strongly refute the claims being made. The Group has
formed a robust defence to the allegations of infringement and is confident in
the strength of its counterclaims, which, if successful, would invalidate
Sycurio's entire patent portfolio. We have formed our strong position on
counterclaims challenging the validity of their patents following an extensive
investigation into Sycurio's patents and the previous court challenges in the
UK to their validity by other parties. The Group has therefore adopted a
pro-active, multi-faceted defence strategy of proving non-infringement,
despite the onus being on Sycurio to prove the infringement, and also to
disprove PCI Pal's counterclaims of invalidity.
The litigation relates to PCI Pal's Agent Assist product and the way that card
data is captured when entered by a consumer using their telephone keypad.
PCI Pal has a number of other products which do not rely on this process, and
indeed none of the new anticipated products in PCI Pal's development pipeline
have a requirement for keypad entry and instead are focused on digital and
form capture more similar with e-commerce and modern digital payment
solutions.
As you would expect, not only are we defending the case strongly, but we have
also made additional plans that, in the unlikely scenario that proceedings go
against us, will provide a fallback position for the Agent Assist product to
ensure non-infringement going forward. We expect to file confidential
documents with the Court outlining the fallback position as is normal in
patent claim cases.
The Board are prepared to fight this case all the way through the courts but,
as stated previously, we will continue to explore all options that are in the
best interest of the business to bring this matter to a satisfactory
conclusion.
Strategy and market
PCI Pal's addressable market today is any size organisation taking payments
within business communications environments anywhere in the world. We work
with our partners and customers to allow them to secure payments whilst
adhering to strict information security rules around credit and debit card
data, namely PCI Compliance. In particular our solutions are utilised within
call or contact centre environments all of which utilise business
communications platforms to engage with their customers.
Contact centre markets in both the UK and US represent between 2-3% of the
working populations of those countries, and the trends are similar in the new
territories we have expanded into in FY22. Our ability to serve a contact
centre of any size is essential when considering the make-up of this large
employment pool across our market. In the US alone 94% of all contact
centres (37,000 contact centres) have between 10 and 250 agent seats,
employing 2.04 million agents which makes up more than 55% of the entire
employed agent population in the country.
By using PCI Pal services, companies not only secure the most sensitive of
customer payment data, but they do so in such a way that will allow them to
comply with the ever-changing information security and data governance
standards related to how they handle this data. Additionally, by using PCI
Pal services, customers will make significant progress towards broader
regional data protection regulation such as GDPR in the European Union and the
California Consumer Privacy Act in the US.
It is therefore a key differentiator for us to be able to serve organisations
across our entire market. Our customers range from small contact centres up
to the very largest with more than 5,000 agent seats, but by far the majority
are in the small to mid-size range with our average annual contract values of
between £15,000 and £20,000. This more numerous end of the market is a
substantial risk reducer for churn in the business, given our revenues are
spread across a higher number of customers.
We also target the less numerous, larger enterprise-size businesses and
contact centres (that we defined as being contracts with an annually
recognised revenue value for the Group in excess of £100,000 per annum) which
currently represent 43% (2021: 43%) of our revenues. As there are relatively
far fewer of these larger contracts, the enterprise deals are less predictable
and more challenging to forecast.
Our addressable market is underpinned and strengthened by two major global
industry dynamics occurring today: the increase in regulation and governance
surrounding data security worldwide; and the transition in the communications
market of services served from on-premise equipment moving to services
delivered from the cloud. With the combination of these dynamics, PCI Pal is
acting as an enabler for both security but also the payment itself, seamlessly
integrated into our customer's customer engagement tools. Additionally, as
the first in our space to bring a true-cloud offering to market, and the only
global player with a sole focus on cloud, PCI Pal is in a strong position to
capitalise on the digital transformation occurring across the business
communications, security, and payments markets.
Having executed against our first 5-year strategic plan, and firmly
established the three key pillars of growth we defined, we have driven
significant partner and customer adoption of our products and services leading
to us being recognised as the 56(th) fastest growing company in the UK by The
Growth Index when compared to 32,000 similar companies. This strong and
growing partner eco-system and customer-base now paves the way for the
evolution of the PCI Pal product-set.
Cloud Technology
With approaching 500 customers worldwide, PCI Pal's AWS-hosted cloud platform
is the most mature cloud environment in its market. We launched this cloud
offering in 2017 when the majority of the market was selling only hardware or
privately hosted solutions and as a result have benefitted from this
first-mover advantage. Today PCI Pal's cloud services are resold by two
thirds of the Gartner Magic Quadrant for CCaaS vendors as well as 35% of the
world's top 20 call centre business process outsourcers.
Amazon Web Services is our chosen provider of virtualised cloud services where
we host our platform today. Our strategy to manage a single platform ensures
operational efficiency while we deliver our product innovations and rapidly
expand worldwide, allowing us to sell to high quantities of customers,
maximising the market opportunity. Validating this technology strategy, AWS
is the most commonly used cloud hosting provider across all our partners.
Evolution of PCI Pal product set
As stated at the fundraise in April 2021, the Group continues to drive
investment into product and engineering as we seek to expand the addressable
market opportunity, capitalising on the partner eco-system we have created.
I am pleased to say we have made excellent progress here.
Towards the end of FY21, we hired a new CTO who is a very experienced,
product-focused engineering leader with a SaaS, communications, and payments
background. In his short tenure he has begun to take our product management
and engineering functions to another level, as well as further improving the
pace and robustness of our delivery cycles and change management, and
continued service uptime excellence.
As well as strengthening the Group's existing core products for securing
payment data, the product team are starting to bring our long-term product
vision to life. Having seen interactions into contact centres increase
during the pandemic, along with the emergence of digital transformation which
is driving a great mix of communications channel adoption in those
environments, such as chat, social, and email, we are seeing an increase in
demand to commercialise those interactions with consumers.
Contact centres to date have been unable to access more modern digital payment
methods that websites benefit from, such as open banking, e-wallets,
buy-now-pay-later (such as Klarna and Affirm), and many others. Realising
our product vision will allow PCI Pal to provide our partners and customers
with these types of services for their contact centres, giving them the
opportunity to drive revenue, reduce payment processing charges, and increase
customer experience through its payment solutions. Our existing compliance
and security solutions, often fully integrated to our partners' own technology
stacks, are a natural foundation of these value-add services.
As an example, in March 2022 we announced our partnership with TrueLayer, one
of the leading international providers of open banking solutions. Open
banking payment options allow merchants to receive payments from consumers
direct to bank giving significant cost savings to traditional credit card
methods, and provide an additional layer of fraud reduction mechanism.
Consumers benefit as they are even more protected from payment scams and have
an instant record of payment. Our open banking solution will be formally
launched in September.
Continued Sales Growth
In summary, an exceptional year of growth for the business, with revenue
increased 62% year on year to £11.9 million. With a closing year end ARR
run rate of £11.1 million, a 44% increase on the prior year, we are seeing
the benefits of our SaaS subscription model as the revenue from our key sales
growth indicator of TACV begins to hit recognition. TACV increased 40% year
on year to £13.4 million (2021: £9.5 million). TACV includes all contracts
that the company has whether they are at go-live and revenue recognition or
not and is a key indicator of PCI Pal's next 12-month recurring revenues.
Contributing to the increase in TACV, the Company delivered £3.5 million in
new business ACV, an 11% increase year on year. In addition, and outside of
ACV, the company was successful in securing additional transactional business
from a number of customers. Where this transactional revenue is deemed of
a recurring nature, the Board estimate the likely recurring level and include
this in the Group's ARR and TACV numbers. Transactional revenues make up
approximately 22% (2021: 24%) of the TACV.
Supporting the Group's revenue growth is a strong performance against our
customer success objectives. With customer churn rates of just 3%, this is
testament to our ability to deliver customer satisfaction. Our Net Promoter
Scores ("NPS") across the year were excellent compared to the global
benchmarks at 65. More pleasing is our ability to continue to sell to
existing customers, our NRR grew to 118% (2021: 111%) as we renewed and grew
our agreements with two of our largest customers, as well as increased our
licences to numerous other smaller customers. It is these success
metrics combined with our people and products that have allowed us to expand
some of our largest accounts during the year in both the UK and US. This
capability is particularly important as the business grows and adds new
products, especially in such a changeable economic environment in the world
today.
Having only launched the Canadian and Australian businesses mid-way through
the year, the vast majority of new business sales have been delivered by the
US and EMEA teams, with 85% of new business contracts in the period generated
through resellers, highlighting the strength of our partner business. The
EMEA business had an excellent year, with new business sales delivering 58% of
the Group's new business ACV at £2.0 million. The EMEA business benefitted
from a more mature customer-base where upsell opportunities have been more
numerous. Conversely, the US business delivered more net new logo business
than the EMEA team which is what we expected considering the size of the
market opportunity in the United States.
In the US, we increased TACV by 53% to £4.2 million (2021: £2.8 million)
which included an additional £1.4 million in ACV sales, the remainder of the
increase being transactional recurring fees from new business. The US market
is still a number of years behind the UK in terms of payment security solution
adoption, and therefore as planned, we only grew the US sales team during the
year by one person while we expanded into new territories of Canada and
Australia. The US remains the largest opportunity for the business long
term, and we believe we have taken the right approach in balancing our push
there with a global view in mind. The Group continues to benefit across all
territories as a result of our efforts with major partners in the US as the
majority of these US-headquartered business are large global enterprises.
Market leading partner eco-system continues to expand
One of the key strategic pillars is to leverage channel partners to scale our
business. Over the last five years we have successfully built the most
extensive partner eco-system in our market. With 85% of new business sales
in the period coming through partners, PCI Pal is a truly partner-first
business. Today our partners include some of the most recognisable names in
the business communications, BPO (Business Process Outsourcers), and payments
markets including Genesys, Worldpay, Amazon Connect, Capita, NICE, and
Webhelp.
We continue to work hard to deepen relationships with our existing partner
base, and during the year we expanded our relationships with a number of our
key partners including Genesys, 8x8, Sitel, and Talkdesk. These deeper
relationships have allowed us to work closer with these partners' own sales
and product teams allowing us to align our solution better with their sales
objectives.
In addition, we are still signing new partnerships that, once signed, go
through our rigorous on-boarding process to ensure both us and the partner can
begin to quickly mutually benefit from the relationship. New partners in the
period include Teleperformance, who will leverage our full portfolio of
payment security solutions seamlessly integrated to support their customers
globally; and Amazon Connect, where using our AWS hosted, light-touch cloud
capabilities we have created the first global integration of its kind
available to their Amazon Connect contact centre customers available to be
procured through the AWS Marketplace.
At PCI Pal, we categorise our partners into four different groups:
· Integrated Partners - Such as CCaaS, UCaaS or carrier partners
with tight telephony, and sometimes desktop, integrations. Repeatable
integrations facilitate shorter customer implementation times
· Solution Providers - Typically Value-Added Resellers ("VARs") and
Systems Integrators of the major traditional telephony platforms such as
Genesys, Cisco, and Avaya. Solution Providers also includes Payment Service
Providers such as Worldpay B2B, Capita Pay 360, and Civica. We also include
our BPO partners in this category of partners
· Referral Partners - Partners who introduce customers to us, to
whom we then sell direct. These include Master Agents, consultants, as well as
other organisations who may prefer to first introduce, prior to becoming a
fully enabled reseller
· Technology Partners - typically these are major technology
vendors, such as Oracle, with whom we have sought technology accreditations
that allow us to sell to both their own partner communities and also major
enterprise customers
Our global partners tend to be large organisations with minimum 1,000
employees, some much larger. As such, our journey with many of our partners
still has some way to go and we are focussing our efforts into continuous
enablement aligned with our increased investment into partner success and
relationship management. We are very cautious to balance new partner
acquisition efforts with the efforts required to maintain and grow our
existing large partner relationships.
Current Trading & Outlook
As a result of the strong financial performance of the Group, we continue to
be on track with our current plans to hit cashflow breakeven in the coming
year, with monthly profitability following shortly after that point. The
early signs of this were shown in FY22, with the EMEA business reaching
Adjusted PBT profitability as the accumulation of sales through TACV reaches
revenue recognition. Whilst we remain conscious of the rapidly evolving
wider macro-economic environments affecting our key markets today in the UK
and US, we are very confident in the prospects of this fast growing business .
We go into the new financial year excited by the anticipated further expansion
of our existing partner and customer relationships, as well as increasing the
value proposition of our services for new customers as a result of the
expected realisation of our evolved product vision. We believe we are well
positioned to continue the planned growth trajectory balanced with high
retention rates, as we continue building this strong business.
James Barham
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
FOR THE YEAR ENDED 30 JUNE 2022
Key financial performance indicators
The Directors use several Key Financial Performance Indicators (KPIs) to monitor the progress and performance of the Group. All the core KPIs are showing strong performance against expectations.
The principal financial KPIs are as follows:
2022 Change % 2021 Change % 2020
Revenue £11.94m +62% £7.36m +67% £4.40m
Gross Margin 84% 75% 69%
Recurring Revenue(1) £10.57m +63% £6.48m +75% £3.70m
Recurring Revenue as % of Revenue 89% 88% 84%
Revenue generated from Non-UK deployments £3.74m +82% £2.06m +280% £0.76m
Percentage of Revenue from non-UK deployments 31% 28% 17%
Adjusted EBITDA(2) (£1.88m) +27% (£2.56m) +28% (£3.57m)
Cash facilities available(3) £4.89m £7.52m £5.55m
Deferred Income £10.62m £8.09m £4.53m
(1) Recurring Revenue is the revenue generated from the recurring elements of the contracts held by the Group and recognised in the Statement of Comprehensive Income in the period
(2) Adjusted EBITDA is the loss on operating activities before exceptional items, depreciation and amortisation, exchange movements charged to the profit and loss and expenses relating to share option charges
(3) Cash balance plus undrawn debt facilities
The principal operational KPIs are as follows:
2022 Change % 2021 Change % 2020
Contracted TACV(1) deployed and live £11.05m +44% £7.69m +90% £4.04m
Contracted TACV in deployment £1.12m 0% £1.12m -49% £2.19m
Contracted TACV - projects on hold £1.19m +70% £0.70m +34% £0.52m
Total Contracted TACV £13.36m +40% £9.51m +41% £6.75m
% of TACV derived from variable transactions deemed recurring
22% 24% 31%
ACV of contracts cancelled before deployment £0.18m £0.20m Not Calculated
Signed ACV in financial period £3.46m +11% £3.11m +19% £2.62m
AWS Platform Churn(2) 3.1% 6.7% Not Calculated
AWS Platform Net Retention Rate(3) 117.7% 111.1% Not Calculated
Headcount at end of year (excluding non-executive directors) 103 71 58
Ratio Personnel cost to administrative expenses 74% 71% 77%
(1)TACV 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) AWS platform churn is calculated using the ACV of lost deployed contracts in the period divided by the opening total value of deployed contracts at the start of the period
(3) AWS platform net retention rate ("NRR") is calculated using the opening total value of deployed contracts at the start of the period less the ACV of lost deployed contracts in the period plus the ACV of upsold contracts signed in the period all divided by the opening total value of deployed contracts at the start of the period
Revenue and gross margin
Overall Group revenue grew by 62% to £11.94 million (2021: £7.36 million) and gross margin improved to 84% (2021: 75%) with the majority of revenue generated from products hosted in our AWS environment. The first-generation privately hosted platform, which we have not proactively sold since 2019, now accounts for 12% of revenues (2021: 24%). We have nearly completed the transition of payment customers from this platform to our AWS environment.
The EMEA business, the most mature business and based in the UK, had a strong year growing revenues to £8.46 million, a 55% increase on the prior year, while the international operations grew revenues to £3.48 million, an 83% increase on the prior year. Revenues from our non-UK customers now make up 31% (2021: 28%) of the overall Group revenues. The revenues generated from our international operations are expected to continue to grow strongly as we strengthen our position in the United States and continue our expansion into Canada, Australia and mainland Europe.
The Group's revenue reflects its SaaS business model. It delivers its services primarily through channel partners into contact centres who are predominantly charged 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. 91% (2021: 88%) of revenues recognised in the period have come from annually recurring licences and transactions. Our strong recurring revenue gives the Group high future revenue visibility.
ACV growth
Annual Contract Value ("ACV") growth is a key leading growth metric of the Group. Contracts signed in the financial year begin to filter through on a monthly basis into recognised revenue after an average of 24 weeks (2021: 26 weeks) following deployment. ACV grew by 11% in the year to £3.46 million (2021: £3.11 million) positively reflecting the further development of the Group and its strong partner eco-system.
TACV
TACV at the end of the financial year increased 40% to £13.36 million (2021: £9.51 million). This metric is a key indicator of the near term expectation for the business to reach future cash flow and then profit break-even as customers go live with our services and revenue is recognised. Growing levels of TACV produces increasing levels of future revenue visibility, an attractive aspect of the Group's business model. 22% (2021: 24%) of the TACV is from transactional revenues (including the Gen1 platform) which the directors deem are recurring in nature.
This £13.36 million of TACV is analysed as follows:
2022 2021
£11.05 million £7.69 million Live and delivering monthly revenue
£1.12 million £1.12 million Mid-deployment and therefore expected to deliver revenues in the next few months
£1.19 million £0.70 million Classed as on hold
The value of annual recurring revenue from contracts that are live and deployed ("ARR") as at the end of the financial year was £11.05 million.
Contracts are typically on hold as a result of a lack of resource with the customer and/or channel partner, or where our solution is part of a larger project being delivered by our partner or the customer, which may mean there is a delay in reaching the PCI Pal aspect of the project. Such on-hold contracts therefore take longer to start delivering recurring recognised revenues.
As with any internationally expanding business, exchange rates can disproportionately affect the reporting of Group numbers as assets and sales are translated into pounds sterling for reporting purposes. During the financial year we saw the US dollar exchange rate decrease from $1.40 to $1.23 which had the effect of increasing the sterling value of the US denominated contracts for TACV purposes by approximately £0.25m from the original internal expectations set using the $1.40 original exchange rate. The change also led to the exchange gain recorded in the Statement of Comprehensive Income., which more than reversed the charge from the previous year.
Churn and Net Retention
As the number of sales contracts grow and are deployed, we are seeing requests for additional licences as our customers grow or introduce us to other parts of their own groups, or purchase new products from us, such as PCI Pal Digital or Speech. These upsell contracts are now an important part of the Group's ACV sales and in year represented £1.12 million (2021: £0.54 million) of the £3.46 million (2021: £3.11 million) total. The upsells in the financial year were particularly strong as a number of large customers renewed and increased the business they do with us at the same time. As a result, the Group's net revenue retention rate ("NRR") grew to an excellent 117.7% (2021: 111.1%).
During the year we agreed to terminate £0.18 million (2021: £0.20 million) of contracts prior to them going live due to changes in circumstances from the original expectations. Overall churn on the AWS platform in the year from contracts that had gone live was 3.1% (2021: 6.7%).
Internal adjusted operating loss(1) metric
The Board uses an internal metric for calculating the adjusted operating loss for the Group to get a better comparative measure of performance by removing the non-cash changes caused from revaluing the Groups' intercompany loans. The internal adjusted operating loss for the Group has changed as follows for the year:
EMEA North America Australia Central Total
£000s £000s £000s £000s £000s
2022
Profit/(Loss) from Operating Activities before adjusting items 240 (1,337) (188) (1,779) (3,064)
Exchange rate movements 93 (932) 7 - (832)
Exceptional items relating to patent case legal fees 37 182 - 578 797
Expenses relating to Share Options - - - 246 246
Internal adjusted operating profit/(loss) 370 (2,087) (181) (955) (2,853)
2021
Profit/ (loss) from Operating Activities before adjusting items (866) (1,990) 13 (1,118) (3,961)
Exchange rate movements (12) 563 (1) - 550
Expenses relating to Share Options - - - 115 115
Internal adjusted operating profit/(loss) (878) (1,427) 12 (1,003) (3,296)
Change in year 1,248 (660) (193) 48 443
(1) Loss from operating activities before exchange losses/gains recorded in the profit and loss exceptional items and share option charges used for internal reporting comparisons
Adjusted EBITDA
EMEA North America Australia Central Total
£000s £000s £000s £000s £000s
2022
Internal adjusted operating profit/(loss) (from above) 370 (2,087) (181) (955) (2,853)
Depreciation and amortisation 897 76 - - 973
Adjusted EBITDA 1,267 (2,011) (181) (955) (1,880)
2021
Internal adjusted operating profit/(loss) (from above) (878) (1,427) 12 (1,003) (3,296)
Depreciation and amortisation 692 48 - - 740
Adjusted EBITDA (186) (1,379) 12 (1,003) (2,556)
Change in year 1,453 (632) (192) 46 675
EMEA
The EMEA region reported its first Adjusted Operating Profit of £0.37 million (2021: loss of £0.88 million). The region continued to deliver strong revenue which grew by 55% to £8.46 million (2021: £5.46 million) resulting in an improvement of £2.87 million in Gross Profit at a margin of 79% (2021: 70%).
Administrative costs, before exchange movements and exceptional items, grew by £1.62 million to £6.31 million primarily reflecting a further investment in personnel, especially in the Product, Engineering and Customer Success departments following the successful fundraising in April 2021.
Depreciation and amortisation costs were £0.90 million (2021: £0.69 million) meaning that the EMEA operation recorded an adjusted EBITDA profit of £1.27 million (2021: loss of £0.19 million).
North America
The North America region's Adjusted Operating Loss (which includes the new Canadian operation) increased by £0.66 million in the year to £2.09 million (2021: £1.43 million).
The region continued to deliver strong revenues which grew by 83% to £3.31 million resulting in an improvement of £1.50 million in Gross Profit at a margin of 96% (2021: 91%).
Administrative costs before exchange movements and exceptional items grew by £2.17 million to £5.25 million. During the year the Group opened its Canadian office and hired its first employees. Additional sales and marketing employees were also hired in the US operation. Included in the administration costs, the North American operation paid an intercompany royalty to the UK operation of £0.83 million (2021: £0.45 million).
Depreciation and amortisation costs were £0.08 million (2021: £0.05 million) meaning that the North American operation recorded an adjusted EBITDA loss of £2.01 million (2021: £1.38 million).
Australia
The Group in the year opened an office in Sydney, Australia, having previously sold to the region via the US team remotely. The first employees were hired in the third quarter of the year.
Revenue for the region almost doubled to £0.17 million (2021: £0.09 million) reflecting the full effect of contracts sold in the prior financial year.
As a result of the investment the region swung into an Adjusted Operating Loss of £0.18 million (2021: profit of £0.01 million)
Central
Costs for the Central operation relate to the PLC activities of being a listed company only, including the majority of the employment costs of James Barham (CEO) and myself, as well as the non-executive directors.
Further segmental information is shown in Note 10.
Administrative expenses
Total administrative expenses were £13.08 million (2021: £9.52 million), an increase of 37%. Of the £3.56 million increase, £0.80 million were classified as exceptional relating to the cost in the year of defending the unfounded patent claim being made against us by Sycurio Limited, a credit of £0.83 million related to the positive movement in exchange rates and £0.25 million to the movement in share option charges.
The underlying increase was therefore £3.34 million, of which £3.24 million was from the overall increase in personnel costs as the Group moved from 71 employees to 103 employees at the end of the financial year. The cost to run the AWS platform (including the development and staging systems) in the year was £0.89 million (2021: £0.87 million) highlighting the scalability of the AWS platform. Depreciation and amortisation increased by £0.23 million to £0.97 million.
Personnel costs charged to the Statement of Comprehensive Income (including commission, bonuses, recruitment and travel and subsistence expenses) were £9.55 million (2021: £6.30 million), and £1.05 million (2021: £0.79 million) of the personnel costs were capitalised as Development costs. These personnel costs make up 74% (2021: 71%) of the administrative costs of the business. Travel expenditure increased back to £0.34 million (2021: £0.03 million) following the lifting of restrictions for travel during the pandemic.
Patent case defence costs
During the financial year the Group incurred legal and professional fees
relating to the defence of the patent case totalling £0.80 million.
A significant amount of work has been undertaken in preparing both the US and
UK defence to date. The UK court case is currently scheduled for June 2023 and
the US court case scheduled for the summer/autumn of 2024. As at the end
of June 2022, the directors estimated that there were a further £2.9 million
of legal fees to be paid if both claims against us went to court. It is
currently estimated that the legal costs to be incurred in FY23 by the Group
will be £1.96 million.
The patent costs per entity are estimated as follows:
Incurred in year To be incurred in future Estimated total cost of defence
£000s £000s £000
PCI-Pal PLC 578 1,194 1,772
PCI-Pal (U.K.) Ltd 37 - 37
PCI Pal (U.S.) Inc 182 1,706 1,888
797 2,900 3,697
The legal costs relating to the claim incurred to date have been disclosed as
an exceptional item in the Consolidated Statement of Comprehensive Income.
Changes in accounting policies
There are no changes in our accounting policies for FY22.
Capital expenditure
As required by IAS 38, the Group capitalised a further £1.10 million (2021: £0.92 million) in development expenditure as we continue to invest in the AWS cloud platform and introduce new features and products.
The Group also capitalised £0.05 million (2021: £0.13 million) of external contractor work relating to the Group's new website and management reporting systems.
The business renewed its leases at its head offices resulting in a right-of-use asset addition of £0.13 million.
Other capital expenditure was £0.13 million (2021: £0.04 million). Most of this expenditure related to new laptops for the new and existing employees.
Set-up and Professional Services Fees
During the financial year, the Group generated from new contracts £1.41 million (2021: £1.63 million) of set-up and professional services fees. These fees are initially held in the balance sheet as deferred income and then released to revenue over the economic length of the contract as governed by the IFRS 15 accounting standard.
Deferred income
Deferred income increased 31% to £10.62 million (2021: £8.09 million), mostly reflecting the significant growth in new business sales and the consequent increase in licence fees invoiced in advance, as well as the continued build-up of set up and professional services fees which are invoiced on signature of a contract then released over the length of the contract, as required by IFRS 15.
Trade receivables
Trade receivables grew to £2.96 million (2021: £2.15 million) as the business expanded its contract base. The level of receivables reflects both debtors generated from new business sales as well as existing contract renewals outstanding at the end of the period. As at the 30 June 2022, £0.67 million (2021: £0.61 million) of the outstanding debtors related to newly signed contracts.
Our debtor collection rates remain good ending the year with 78% (2021: 91%) of debtors less than 60 days old. The comparative 2021 collection rate was exceptional and benefitted from some one-off contractual circumstances. The Board does not believe that any of the debts over 60 days old will require to be written off.
Taxation
During the year the UK entity received £0.16 million (2021: £0.15 million) as an R & D tax credit from HMRC relating to the financial year ended 30 June 2020. An application will be made relating to the financial years ended 30 June 2021 and 30 June 2022, the amount of which is currently unknown.
Cashflow and liquidity
Cash as at 30 June 2022 was £4.89 million (2021: £7.52 million).
In FY22 the Group used £1.52 million (2021: generated £0.25 million) of cash from its operating activities. The cash used in FY22 includes £0.80 million (2021: £nil million) of cash spent on the legal fees relating to the patent case. The adjusted net cash spend is therefore £0.83 million which is substantially better than the reported £2.85 million Adjusted Operating Loss. The strong cash generation relative to the current losses is primarily driven by our SaaS business model that typically invoices in advance for the solutions sold.
Going Concern considerations
The Board continues to monitor the Group's trading performance carefully against its original plans, global economic pressures, such as inflation, and other factors affecting our core markets and products. It also reviews the potential impact of the COVID-19 pandemic. However, the challenges the business faced from the pandemic in FY22 have continued to diminish as the year progressed and a greater understanding of the risks were developed. The pandemic has not had a significant impact on the Group's financial performance.
During the year the Group continued to win new contracts, recording new ACV sales of £3.46 million, as well as substantial growth in its transactional revenues.
The group deployed new customer contracts with an annual recurring revenue value of £3.36m. At the end of the financial year the group had £11.05 million of deployed, live contracts contributing to revenue recognition which helps underpin our expectations for revenue growth in FY23.
With the Group year-end being 30 June, the Group prepared its next financial year budgets in the April to June period. The budget for FY23 was prepared, along with an extended forecast into FY24, following detailed face-to-face meetings with all managers with a focus on building on the FY22 excellent performance and on the product plans and roadmap established in FY22. The budget includes an assumption of a more modest expansion of headcount as compared to FY22.
The Group finished the year with a cash balance of £4.89 million and no debt.
The Board considered the budget presentation in June and the controls in place that are designed to allow the Group to control its overhead expenditure while still maintaining its momentum and delivering market forecasts. Particular attention was paid to the potential sensitivity impacts that any adverse movement in sales and customer deployments might have on the Group's net cash position and the level of headroom achieved.
The Board considered the likely timing and impact of the legal fees relating to the patent claim being made against it on the cash flow of the Group over the next 24 to 36 months. The sensitivity scenarios around the budget models indicate that the Group would continue to have sufficient resources to meet its expansion plans in FY24 whilst at the same time meeting the cost requirements of defending the patent case.
The Board also considered actions that could be taken to help mitigate the actual results if the assumptions made in the original forecast proved to be overly optimistic. At all points the Directors were satisfied in the robustness of the Group's financial position from the presented plans which, they believe, take a balanced view of the future growth prospects, together with the contingencies that can be taken if the budget assumptions prove to be materially inaccurate.
The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Directors continue to adopt the going concern basis in preparing the accounts.
Dividend
The Board is not recommending a dividend for the financial year.
William Good
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
Note 2022 2021
£000s £000s
Revenue 11,937 7,362
Cost of sales (1,924) (1,805)
Gross profit 10,013 5,557
Administrative expenses (13,077) (9,518)
Loss from operating activities (3,064) (3,961)
Adjusted Operating Loss (2,021) (3,846)
Expenses relating to share options (246) (115)
Exceptional items 6 (797) -
Loss from operating activities (3,064) (3,961)
Finance income 7 1 -
Finance expenditure 8 (44) (230)
Loss before taxation 5 (3,107) (4,191)
Taxation 12 164 154
Loss for the year (2,943) (4,037)
Other comprehensive expense: Items that will be
reclassified subsequently to profit or loss
Foreign exchange translation differences (1,086) 653
Total other comprehensive (expense) / income (1,086) 653
Total comprehensive loss attributable to equity holders for the period
(4,029) (3,384)
Basic and diluted loss per share 11 (4.50) p (6.64) p
The accompanying accounting policies and notes form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Note 2022 2021
£000s £000s
ASSETS
Non-current assets
Plant and equipment 14 238 74
Intangible assets 13 2,661 2,366
Trade and other receivables 15 964 801
Deferred taxation 18 - -
Non-current assets 3,863 3,241
Current assets
Trade and other receivables 15 4,203 2,928
Cash and cash equivalents 4,888 7,518
Current assets 9,091 10,446
Total assets 12,954 13,687
LIABILITIES
Current liabilities
Trade and other payables 16 (11,372) (7,817)
Current liabilities (11,372) (7,817)
Non-current liabilities
Other payables 17 (1,397) (1,941)
Non-current liabilities (1,397) (1,941)
Total liabilities (12,769) (9,758)
Net assets 185 3,929
EQUITY
Share capital 20 656 655
Share premium 14,281 14,243
Other reserves 650 404
Currency reserves (620) 466
Profit and loss account (14,782) (11,839)
Total equity 185 3,929
J Barham Director
T W
Good
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022
Share capital Share premium Other reserves Profit and loss account Currency Reserves Total Equity
£000s £000s £000s £000s £000s £000s
Balance as at 1 July 2020 594 9,018 289 (7,802) (187) 1,912
Share option charge
- - 115 - - 115
New shares issued net of costs
61 5,225 - - - 5,286
Transactions with owners
61 5,225 115 - - 5,401
Foreign exchange translation differences
- - - - 653 653
Loss for the year
- - - (4,037) - (4,037)
Total comprehensive loss
- - - (4,037) 653 (3,384)
Balance at 30 June 2021 655 14,243 404 (11,839) 466 3,929
Share option charge
- - 246 - - 246
New shares issued net of costs
1 38 - - - 39
Transactions with owners
1 38 246 - - 285
Foreign exchange translation differences
- - - - (1,086) (1,086)
Loss for the year
- - - (2,943) - (2,943)
Total comprehensive loss
- - - (2,943) (1,086) (4,029)
Balance at 30 June 2022 656 14,281 650 (14,782) (620) (185)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
2022 2021
£000s £000s
Cash flows from operating activities
Loss after taxation (2,943) (4,037)
Adjustments for:
Depreciation of equipment and fixtures 85 69
Amortisation of intangible assets 85 76
Amortisation of capitalised development 803 595
Loss on disposal of equipment and fixtures 3 -
Interest income (1) -
Interest expense 11 206
Exchange differences (1,124) 676
Income taxes (164) (154)
Share based payments 246 115
Increase in trade and other receivables (1,438) (1,017)
Increase in trade and other payables 2,918 3,721
Cash (used in) / generated from operating activities (1,519) 250
Income taxes received 164 154
Interest paid (11) (206)
Net cash (used in) / generated from operating activities (1,366) 198
Cash flows from investing activities
Purchase of equipment and fixtures (124) (40)
Purchase of intangible assets (48) -
Development expenditure capitalised (1,098) (920)
Interest received 1 -
Net cash used in investing activities
(1,269) (960)
Cash flows from financing activities
Issue of shares 39 5,608
Expenses related to issue of shares - (323)
Drawdown on loan facility - 1,250
Repayment of loan facility - (2,523)
Principal element of lease payments (34) (33)
Net cash generated from financing activities 5 3,979
Net (decrease) / increase in cash (2,630) 3,217
Cash and cash equivalents at beginning of year 7,518 4,301
Net (decrease) / increase in cash (2,630) 3,217
Cash and cash equivalents at end of year 4,888 7,518
NOTES TO THE RESULTS FOR THE YEAR ENDED 30 JUNE 2022
1. AUTHORISATION OF FINANCIAL STATEMENTS
In accordance with section 435 of the Companies Act 2006, the Directors advise
that the financial
information set out in this announcement does not constitute the Group's
statutory financial
statements for the year ended 30 June 2022 or 2021, but is derived from these
financial statements.
The financial statements for the year ended 30 June 2021 have been audited and
filed with the
Registrar of Companies. The financial statements for the year ended 30 June
2022 have been prepared in accordance with the UK adopted international
accounting standards and the requirements of the Companies Act 2006. The
financial statements for the year ended 30 June 2022 have been audited and
will be filed with the Registrar of Companies following the Company's Annual
General Meeting. The Independent Auditors Report on the Group's statutory
financial statements for the years ended 30 June 2022 and 2021 were
unqualified and did not draw attention to any matters by way of emphasis and
did not contain statements under Section 498 (2) or (3) of the Companies Act
2006.
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
provide organisations globally with secure cloud payment and data protection
solutions for any business communication environment.
3. STATEMENT OF COMPLIANCE WITH IFRS
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 but not yet effective
At the date of authorisation of these financial statements, there are several new amendments and interpretations to IFRS in issue that are not yet effective or are effective but are not relevant or material to the Group.
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, and under the
historical cost convention. These are in conformity with the UK adopted
international accounting standards and the requirements of the Companies Act
2006.
The financial statements are presented in pounds sterling (£) rounded to the
nearest £1,000, which is also the functional currency of the parent company.
b) Basis of consolidation
The Group financial statements consolidate those of the Company and its
subsidiary undertakings (see Note 19) drawn up to 30 June 2022. 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 within the Group are eliminated on
consolidation.
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 £4.89 million at 30 June 2022.
The Board continues to monitor the Group's trading performance carefully against its original plans, global economic pressures, such as inflation, and other factors affecting our core markets and products. It also reviews the potential impact of the COVID-19 pandemic. However, the challenges the business faced from the pandemic in FY22 have continued to diminish as the year progressed and a greater understanding of the risks were developed. The pandemic has not had a significant impact on the Group's financial performance.
During the year the Group continued to win new contracts, recording new ACV sales of £3.46 million, as well as substantial growth in its transactional revenues.
The Group deployed new customer contracts with an annual recurring revenue value of £3.36m. At the end of the financial year the group had £11.05 million of deployed, live contracts contributing to revenue recognition which helps underpin our expectations for revenue growth in FY23.
With the Group year-end being 30 June, the Group prepared its next financial year budgets in the April to June period. The budget for FY23 was prepared, along with an extended forecast into FY24, following detailed face-to-face meetings with all managers with a focus on building on the FY22 excellent performance and on the product plans and roadmap established in FY22. The budget includes an assumption of a more modest expansion of headcount as compared to FY22.
The Board considered the budget presentation in June and the controls in place that are designed to allow the Group to control its overhead expenditure while still maintaining its momentum and delivering market forecasts. Particular attention was paid to the potential sensitivity impacts that any adverse movement in sales and customer deployments might have on the Group's net cash position and the level of headroom achieved.
The Board considered the likely timing and impact of the legal fees relating to the patent claim being made against it on the cash flow of the Group over the next 24 to 36 months. The sensitivity scenarios around the budget models indicate that the Group would continue to have sufficient resources to meet its expansion plans in FY24 whilst at the same time meeting the cost requirements of defending the patent case.
The Board also considered actions that would help to mitigate the actual results if the assumptions made in the original forecast proved to be overly optimistic, such as lower commission and bonus payments, slower investment and timings of new hires. At all points the Directors were satisfied in the robustness of the Group's financial position from the presented plans which, they believe, take a balanced view of the future growth prospects, together with the contingencies that can be taken if the budget assumptions prove to be materially inaccurate.
Based on these reviews, the Directors have concluded that the group will be
able to meet its' obligations as they fall due for the foreseeable future (and
in any event for at least 12 months from the date of approval of these
financial statements) and accordingly have elected to prepare the financial
statements on a going concern basis.
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.
The Group sells long-term secure payment and data protection contracts that
charge annual licence or monthly usage fees. The payment profile for such
contracts also typically includes payment for one-off set up, professional
services and installation fees made at the point of signature of the
contract. For revenue recognition purposes, these one-off charges are deemed
to be an integral part of the wider contract rather than a separate
performance obligation.
(i) Revenue recognition of licence and usage fees
Revenue relating to the monthly element of the licence fee or the monthly
usage fees generated in the period will be recognised monthly from the point
the contract goes live or when the customer takes over the solution for user
acceptance testing.
(ii) Revenue recognition of the one-off set up fees
Revenue for the one-off set up, professional services and installation fees
will be deferred and will be recognised evenly over the estimated term of the
contract, having accounted for the auto-renewal of our contracts. The
estimated term of a contract is typically four years, and will start being
recognised as revenue starting in the month following when the contract either
goes live or when the customer takes over the solution for user acceptance
testing. The Board has estimated that the four year period is appropriate as a
typical contract normally has a minimum term of between 12 months and 36
months, but due to the automatic renewal clause it is estimated to have a four
year life as these contracts will normally roll for a certain period.
There are two exceptions to the four year life estimation:
· If the contract does not have an automatic renewal clause then the
deferral will be over the minimum term of that contract; and
· If the minimum term of the contract is greater than four years, that
minimum term period will be used as the estimated length of the contract.
e) Deferred Costs
Under IFRS 15 costs directly attributable to the delivery and implementation
of the revenue contracts, such as 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.
If the minimum term of the contract is greater than four years, the minimum
term period will be used as the estimated length of the contract.
Costs relating to commission costs earned by employees for winning the
contract will be capitalised as 'direct costs to obtain a contract' at the
date the commissions payments become due and will be released to
administrative expenses in monthly increments over the estimated economic
length of the contract, as defined in 4d above, 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, for example, development engineer's salary and
on-costs, such as pension payments, employer's national insurance &
bonuses, 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. Where the internally generated asset relates to on-going
development of the platform, the costs are capitalised and start to be
amortised in the month following. Where the costs relate to a longer term
project the costs will be capitalised and held as an intangible asset until
the project is launched. At that point the asset will start to be amortised
starting the month following the completion of the project. Until
completion of the development project, the assets are subject to impairment
testing only.
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%
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 it is expecting to continue to
capitalise the development costs (which are primarily labour costs) into the
future.
Software licences
The cost of perpetual software licences acquired are stated at cost, net of
amortisation and any provision for impairment.
· Software licences
33%
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 equipment assets by equal annual instalments over their expected
useful lives. The rates generally applicable are:
· Fixtures and fittings 20%
· Right to use asset Length of contract
· Computer equipment 33%
Material residual value estimates are updated as required, but at least
annually.
h) Leases
From 1 July 2019, each lease is recognised as a right-of-use asset with a
corresponding liability at the date at which the lease asset is available for
use by the Group. Interest expense is charged to the consolidated income
statement over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the lease term on
a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a
present value basis. The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the lessee's
incremental borrowing rate is used, being the rate that the lessee would have
to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the amount of the initial
measurement of the lease liability, any lease payments made at or before the
commencement date less any lease incentives received, plus any initial direct
costs and restoration costs. Where leases include an element of variable
lease payment or the option to extend the lease at the end of the initial
term, each lease is reviewed, and a decision is made on the likely term of the
lease.
Payments associated with short-term leases and leases of low value assets are
recognised on a straight-line basis as an expense in the consolidated income
statement.
i) 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.
j) 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.
k) Taxation
Current tax is the tax payable based on the loss for the year, accounted for
at the rates substantively enacted at 30 June 2022.
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
substantively enacted at 30 June 2022, 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. 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.
l) 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.
m) Financial assets and liabilities
The Group classifies its financial assets under the definitions provided in
International Financial Reporting Standard 9 (IFRS 9), depending on the
purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial
recognition. Management considers that the Group's financial assets fall under
the amortised cost category. These are non-derivative financial assets with
fixed or determined payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months after
the statement of financial position date, which are classified as non-current
assets. The Group's financial assets held at amortised cost arise principally
through the provision of goods and services to customers (e.g. trade
receivables), but also incorporate other types of contractual monetary asset.
As such they comprise trade receivables, other receivables and cash and cash
equivalents. Financial assets do not comprise prepayments.
The Group's financial assets are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition or
issue. The exception are trade and receivables balances, which are recorded at
their transaction price as they do not contain a significant financing
component. The Group's financial assets are subsequently measured at amortised
cost using the effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables, being loss allowances for
'expected credit losses' (ECLs) per IFRS 9, are measured on a lifetime basis
using the simplified approach set out in that financial reporting standard.
The Group's method in measuring ECLs reflects:
· unbiased and probability-weighted amounts, determined using a range
of possible outcomes;
· the time value of money; and
· reasonable and supportable information that is available without
undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.
The Group has applied the practical expedient in IFRS 9 of using a provision
matrix to calculate ECLs. This requires the use of historical credit loss
experience, as revealed for groupings of similar trade receivable assets, to
estimate the relevant ECLs. As such, the Group has employed the following
process in calculating ECLs:
· Default definition - amounts not collected are defined in accordance
with the credit risk management of the Group and include qualitative factors,
broadly encompassing scenarios where the customer is either unable or
unwilling to pay;
· Customer contract position, whether the underlying contract has been
deployed live or not;
· Collection profiles and loss rates - the collection time periods
(e.g. within 30 days, 30 - 60 days, etc.) for sales made in the preceding
12-month period are gathered, amounts not collected assessed and loss rates
based on ageing inferred;
· Historical periods - historic losses are reviewed over a 3-year time
horizon;
· Forward-looking assessment - the Group considers relevant future
economic factors affecting each group of trade receivables, giving an expected
probability of default for the portfolio.
The resultant expected loss rates are applied to the ageing profile of grouped
trade receivables at the balance sheet date to give the lifetime ECLs for
each. This produces the loss allowances to be booked as an impairment
adjustment to the carrying value of trade receivables.
Trade receivables are reported net of the resultant loss allowances. The loss
is recognised within administrative expenses in the consolidated statement of
comprehensive income. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the
associated provision. Impairment provisions for other receivables are
recognised based on the general impairment model within IFRS 9.
The Group classifies its financial liabilities under the definitions provided
in IFRS 9. All financial liabilities are recorded initially at fair value plus
or minus directly attributable transaction costs. Except where noted, such
liabilities are then measured at amortised cost using the effective interest
method.
Financial liabilities measured at amortised cost include trade payables, bank
loans and accruals. All financial liabilities are recognised in the statement
of financial position when the Group becomes a party to the contractual
provision of the instrument. Financial liabilities do not comprise deferred
income.
Unless otherwise indicated, the carrying values of the Group's financial
liabilities measured at amortised cost represents a reasonable approximation
of their fair values.
n) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on demand deposits.
o) 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 cumulative charge for the Company's share
options
scheme
· "Profit and loss account" represent retained cumulative profits or
losses generated by the Group
· "Currency reserves" represents exchange differences arising from the
translation of assets and liabilities of foreign operations
p) 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 and
are recognised in the Statement of Comprehensive Income.
q) Foreign currencies
Transactions in foreign currencies are translated into a Company's functional
currency 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 the exchange rate applicable at the date of the transactions.
Exchange differences arising from this translation of foreign operations are
reported as an item of other comprehensive income. Exchange differences
arising in respect of the retranslation of the opening net investment in
overseas subsidiaries are accumulated in the currency reserve.
r) Exceptional items
The Group has elected to classify certain items as exceptional and present
them separately on the face of the Statement of Comprehensive Income to aid
the understanding of users of the financial statements. Exceptional items are
classified as those which are separately identified by virtue of their size,
nature or expected frequency, to allow a better understanding of the
underlying performance in the year.
s) Significant estimates
In the application of the Group's accounting policies the Directors are
required to make estimates and assumptions about the carrying amounts of
assets and liabilities. The estimates and associated assumptions are based on
historical experience and other commercial and market factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis, and
at least annually. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision
affects both current and future periods. The key areas are summarised below:
Amortisation of capitalised development expenditure
Amortisation rates are based on estimates of the useful economic lives and
residual values of the assets involved. The assessment of these useful
economic lives is made by projecting the economic life cycle of the asset
which is subject to alteration as a result of product development and
innovation. Amortisation rates are changed where economic lives are
re-assessed and technically obsolete items written off where necessary.
The remaining net book value of the capitalised development is shown in Note
13
· Alternative accounting estimates that could have been applied - not
capitalising internally generated development costs.
· Effect of that alternative accounting estimate - reduction of
£2,432,000 of assets' carrying value.
Contract revenue and direct costs
The Group has adopted IFRS 15. A key estimate is the term used to recognise
deferred contract revenue and costs. Having reviewed the terms and
conditions of the Group's contracts it has estimated that:
· for contracts with defined termination dates, revenue will be
recognised over the period to the termination date
· for rolling contracts with automatic renewal clauses, revenue will be
recognised over 4 years, representing the Directors' current best estimate of
a minimum contract term. The Board has estimated that the four-year period
is appropriate as a typical contract normally has a minimum term of between 12
months and 36 months, but due to the automatic renewal clause it is estimated
to have a 48-month life as these contracts will normally roll for a certain
period.
· If the minimum term of the contract is greater than four years, the
minimum term period will be used as the estimated length of the contract.
Associated direct costs such as commission costs directly linked to individual
contracts will be assessed and will also be deferred over 48 months.
· Alternative accounting estimates that could have been applied - this
could be the contractual period without taking into account the automatic
renewal clause
· Effect of that alternative accounting estimate - increase in the
revenue figure reported by an immaterial amount and an equal decrease in
deferred income.
· Second alternative accounting estimates that could have been applied
- this could be a longer period other than the four years, with reference to
low churn rates.
· Effect of that alternative accounting estimate - decrease in the
revenue figure reported by an immaterial amount and an equal increase in
deferred income.
Deferred tax
The calculation of the deferred tax asset involved the estimation of future
taxable profits. In the year, 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.
· Alternative accounting estimate that could have been applied -
recognition of the asset
· Effect of that alternative accounting estimate - creation of a
deferred tax asset of £4,911,000 and corresponding change in the tax charge
reported.
Leases & adoption of IFRS 16
The Group has adopted IFRS 16: Leases. The Directors have determined the
only two operating leases within the Group relates to its commercial offices
in Ipswich, which renewed in the period. These leases do not have an
implied interest rate and so the management have estimated using an
incremental borrowing rate of 6% to be used as the discount rate to calculate
the lease liabilities for each of the leases. This rate was obtained using
the expected underlying rate of interest to be applied to the new Silicon
Valley Bank rolling credit facility.
· Alternative accounting estimate that could have been applied - use of
a lower or higher discount rate
· Effect of that alternative accounting estimate - corresponding
immaterial change in the interest charged in the period and amortisation of
the right to use asset.
Share based payments
The fair value of share-based payments is calculated using the methods
detailed in Note 20 and using certain assumptions. The key assumptions
around volatility, expected life and the risk free rate of return are based on
historic volatility over previous periods, the management's judgement of the
average expected period to exercise, and the yield on the UK 5-year gilt at
the date of issuance.
· Alternative accounting estimate that could have been applied - change
the expected time to maturity of the option
· Effect of that alternative accounting judgement - the change would
result in a lower or higher option valuation, changing the charge made in the
Statement of Comprehensive Income and an equal change to the share option
reserve held in the Statement of Financial Position.
t) Significant judgements
In the process of applying the Group's accounting policies, the Directors
makes various judgements that can significantly affect the amounts recognised
in the financial statements. The critical judgements are considered to be the
following:
Capitalised development expenditure
The Group exercises judgement 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: the current sales of the AWS platform; future demand; type of
additional features being added; and the resource necessary to finalise the
development roadmap 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.
Contract revenue and direct costs
The Group has adopted IFRS 15. A key related judgement is whether the
contract and direct costs has to be deferred and held in the Statement of
Financial Position and recognised over the estimated economic period of the
contract or alternatively released straight to the Statement of Comprehensive
Income over the estimated term of the contract.
Valuation of separately identifiable intangible assets
Separately identifiable intangible assets are identified and amortised over a
defined period. The Directors use certain judgements and assumptions to
ascertain the appropriate value of the intangible asset and the period of
amortisation to be used for the asset.
Patent case
The Directors have reviewed the potential requirement for a provision in
relation to the ongoing patent case in accordance with IAS 37. From the advice
given by the Group's legal advisors in both the UK and the US, the directors
have used their judgement and consider that it is only possible, but not
probable, that an obligation will arise from this claim. For this reason, no
provision has been made in the financial statements for either the potential
damages being sought by Sycurio Limited, or the incremental future legal costs
expected to be incurred in defending the case. For further details, see Note
24.
5. LOSS BEFORE TAXATION
The loss on ordinary activities is stated after:
2022 2021
£000s £000s
Disclosure of the audit and non-audit fees
Fees payable to the Group's auditors for:
The audit of Company's accounts 37 22
The audit of the Company's subsidiaries pursuant to legislation 42 26
There were no fees payable to the Group's auditors for other services in
either the current or prior year.
Depreciation and amortisation - charged in administrative expenses
Right of use assets, equipment and fixtures 85 69
Intangible assets 85 76
Capitalised development 803 595
973 740
Loss on disposal of equipment and fixtures 3 -
Rents payable on flexible office space 53 44
Share based payments charge 246 115
Foreign exchange loss/(gain) in period (832) 550
6. EXCEPTIONAL ITEMS
The exceptional items referred to in the income statement can be categorised
as follows:
2022 2021
£000s £000s
Legal fees in respect of patent case 797 -
797 -
The exceptional item relates to non-recurring legal fees in respect of
defending the unfounded patent claim against the Group and are presented
separately in the Statement of Comprehensive Income to aid the understanding
of users of the financial statements.
For further details, see Note 24.
Alternative accounting that could have been applied would be to treat the
costs as non-exceptional and not present them separately on the face of the
Statement of Comprehensive Income.
7. FINANCE INCOME
2022 2021
£000s £000s
Bank interest receivable 1 -
1 -
8. FINANCE EXPENDITURE
2022 2021
£000s £000s
Interest on bank borrowings - 194
Other 44 36
44 230
9. DIRECTORS AND EMPLOYEES
Staff costs of the Group, including the directors who are considered to be
part of the key management personnel, paid during the year were as follows.
2022 2021
£000s £000s
As restated
Wages and salaries 7,910 5,726
Social security costs 799 572
Other pension costs 136 75
8,845 6,373
During the year, the above disclosure was reviewed and additional costs
relating to healthcare expenditure in the US and commissions payable of
£561,000 were identified to be included for 2021 and as such the figures for
2021 have been restated. This does not affect the costs recognised in the
Statement of Comprehensive Income for the prior year.
As part of this review, the disclosure treatment of sales commissions has been
adjusted. Previously, the amount recognised in the Statement of Comprehensive
Income was disclosed, this has been changed to disclose the total amount paid
or payable to employees during the year.
Therefore, included in the above figures is £850,000 (2021: £717,000) of
sales commissions paid, recognised as an asset under IFRS 15 and deferred and
released over the estimated life of the related contract. Similarly, the
release of sales commissions under IFRS 15 of £452,000 (2021: £313,000) has
been excluded from the above disclosure.
2022 2021
Average number of employees during the year:
Heads Heads
Sales and marketing 27 21
Engineering and professional services 52 35
Administration and management 14 12
93 68
Remuneration in respect of directors was as follows: 2022 2021
£000s £000s
Emoluments 610 627
Bonus 159 192
Pension contributions to money purchase pension schemes 27 35
Employer's national insurance and US federal taxes 100 98
896 952
During the year 5 (2021: 4) directors participated in money purchase pension
schemes.
The Board consider the board of directors to be the key management for the
Group. The amounts set out above include remuneration in respect of the
highest paid director as follows:
2022 2021
£000s £000s
Emoluments 212 187
Bonus 94 108
Pension contributions to money purchase pension schemes 21 20
A detailed breakdown of the Directors' Emoluments, in line with the AIM rules,
appears in the Directors' Report.
10. 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 regions, 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. 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.
PCI Pal
PCI Pal North America PCI Pal
EMEA £000s ANZ Central Total
2022 £000s £000s £000s £000s
Revenue 8,457 3,309 171 - 11,937
Cost of sales (1,779) (144) (1) - (1,924)
Gross profit 6,678 3,165 170 - 10,013
79% 96% 99% 84%
Administration expenses (6,401) (4,320) (358) (1,201) (12,280)
Exceptional items (37) (182) - (578) (797)
Profit / (loss) from operating activities 240 (1,337) (188) (1,779) (3,064)
Finance income - - - 1 1
Finance costs (36) (8) - - (44)
Profit / (loss) before tax 204 (1,345) (188) (1,778) (3,107)
Segment assets 7,420 2,808 151 2,575 12,954
(7,269) (4,990) (172) (338) (12,769)
Segment liabilities
Other segment items:
Capital Expenditure
- Equipment, Fixtures & Licences 170 - 2 - 172
Capital Expenditure
- Capitalised Development 1,014 84 - - 1,098
Depreciation
- Equipment, Fixtures & Licences 135 - - - 135
Depreciation
- Capitalised Development 727 76 - - 803
PCI Pal
PCI Pal North America
2021 EMEA £000s PCI Pal Central Total
£000s ANZ £000s £000s
£000s
Revenue 5,457 1,813 92 - 7,362
Cost of sales (1,646) (155) (4) - (1,805)
Gross profit 3,811 1,658 88 - 5,557
70% 91% 96% 75%
Administration expenses (4,677) (3,648) (75) (1,118) (9,518)
Loss from operating activities (866) (1,990) 13 (1,118) (3,961)
Finance income - - - - -
Finance costs (30) (6) - (194) (230)
Loss before tax (896) (1,986) 13 (1,312) (4,191)
Segment assets 5,357 3,790 204 4,336 13,687
(5,847) (3,499) (157) (255) (9,758)
Segment liabilities
Other segment items:
Capital Expenditure
- Equipment, Fixtures & Licences 40 - - - 40
Capital Expenditure
- Capitalised Development 761 159 - - 920
Depreciation
- Equipment, Fixtures & Licences 145 - - - 145
Depreciation
- Capitalised Development 547 48 - - 595
Note that the ANZ division was reported within the North American division in
the previous year.
Revenue can be split by location of customers as follows:
2022 2021
Customer location £000s £000s
United Kingdom 8,202 5,298
United States of America 2,872 1,440
Canada 418 329
Rest of Europe 250 195
Asia Pacific 195 93
Middle East - 7
Total 11,937 7,362
98% (2021: 100%) of all non-current assets are located in the United Kingdom
and the largest customer accounted for 16% (2021: 10%) of the revenue of the
Group.
11. LOSS PER SHARE
The calculation of the loss per share is based on the loss 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 20.
12 months 12 months ended ended
30 June 30 June
2022 2021
Loss after taxation added to reserves (£2,943,000) (£4,038,000)
Basic weighted average number of ordinary shares in issue during the period
65,369,256 60,829,234
Diluted weighted average number of ordinary shares in issue during the period
72,247,589 66,418,818
Basic and diluted loss per share (4.50) p (6.64) p
There are no separate diluted loss per share calculations shown as it is
considered to be anti-dilutive.
12. TAXATION
2022 2021
£000s £000s
Analysis of charge in the year
Current tax:
In respect of the year:
Corporation tax based on the results for the year - -
Adjustment in respect for prior periods (R & D Tax credit received) 165 154
Foreign corporate taxes paid (1) -
Total current tax credited 164 154
Deferred tax:
Origination and reversal of timing differences - -
Total deferred tax charged - -
Tax on profit on ordinary activities credited 164 154
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% (2021: 19%)
2022 2021
£000s £000s
Loss on ordinary activities before tax (3,107) (4,191)
Tax on loss on ordinary activities at standard UK rate of taxation
(590) (796)
Effects of:
Overseas tax rates (110) (77)
Expenses not deductible for tax purposes 61 26
Adjustments in respect of prior periods 165 154
R & D tax credit received
Fixed asset differences (11) -
Other permanent differences (10) -
Minimum US state taxes paid in year (1) -
Origination and reversal of timing differences on unrecognised deferred tax 550 1,419
losses
Effect of change in tax rate 110 (572)
Total tax credited for the year 164 154
The Group has unrecognised tax losses carried forward of £20.6 million (2021:
£18.1 million).
The R&D tax credit received in FY 2022 is in respect to the trading in FY
2020. No credit has been recognised in relation to the financial years 2021 or
2022 which are pending submission to HMRC.
13. INTANGIBLE ASSETS
SIP, RTP and SBC licences
2022 £000s Capitalised Development
£000s Total
£000s
Cost:
At 1 July 2021 379 3,415 3,794
Additions 48 1,098 1,146
Foreign exchange movement - 51 51
At 30 June 2022 427 4,564 4,991
Amortisation (included within administrative expenses):
At 1 July 2021 113 1,315 1,428
Charge for the year 85 803 888
Foreign exchange movement - 14 14
At 30 June 2022 198 2,132 2,330
Net book amount at 30 June 2022
229 2,432 2,661
SIP, RTP
2021 and SBC Capitalised
Licences Development Total
Cost: £000s £000s £000s
At 1 July 2020 379 2,519 2,899
Additions - 920 920
Foreign exchange movement - (24) (24)
At 30 June 2021 379 3,415 3,794
Amortisation (included within administrative expenses):
At 1 July 2020 37 723 298
Charge for the year 76 595 671
Foreign exchange movement - (3) (3)
At 30 June 2021 113 1,315 1,428
Net book amount at 30 June 2021
266 2,100 2,366
14. PLANT AND EQUIPMENT
Right of use Asset Fixtures
2022 £000s and Fittings Computer Equipment
£000s £000s Total
£000s
Cost:
At 1 July 2021 82 22 297 401
Additions 128 12 112 252
Disposals (82) - (214) (296)
At 30 June 2022 128 34 195 357
Depreciation (included within administrative expenses):
At 1 July 2021 68 18 241 327
Charge for the year 35 5 45 85
Disposals (82) - (211) (293)
At 30 June 2022 21 23 75 119
Net book amount at 30 June 2022
107 11 120 238
Right Fixtures
2021 of use and Computer
Asset Fittings Equipment Total
Cost: £000s £000s £000s £000s
At 1 July 2020 82 22 258 362
Additions - - 40 40
Disposals - - (1) (1)
At 30 June 2021 82 22 297 401
Depreciation (included within administrative expenses):
At 1 July 2020 35 14 210 259
Charge for the year 33 4 32 69
Disposals - - (1) (1)
At 30 June 2021 68 18 241 327
Net book amount at 30 June 2021
14 4 56 74
15. TRADE AND OTHER RECEIVABLES
Due within one year 2022 2021
£000s £000s
Trade receivables 2,962 2,146
Accrued income 45 45
Deferred costs 572 333
Other prepayments 613 404
Other debtors 11 -
Trade and other receivables due within one year 4,203 2,928
Due after more than one year 2022 2021
£000s £000s
Deferred costs 964 801
Trade and other receivables due after one year 964 801
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 at each period end for further indicators of
impairment, and a provision has been recorded as follows:
2022 2021
£000s £000s
Opening provision at 1 July 1 1
Credited to income - -
Closing provision at 30 June 1 1
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:
2022 2021
£000s £000s
0-30 days past due 242 177
30-60 days past due 67 16
Over 60 days past due 165 -
474 193
The carrying value of trade receivables is considered a reasonable
approximation of fair value. All of the receivables have been reviewed for
indicators of impairment. The movement in the expected credit losses (ECLs)
provision is shown above. Trade receivables are recorded and measured in
accordance with Note 4 (m) above. The Group applies the IFRS 9 simplified
approach to measuring ECLs using a lifetime expected credit loss provision for
trade receivables. The expected loss rates are based on the Group's historical
credit losses experienced over the three-year period prior to the period end,
the future economic conditions of the country relating to the overdue debtor
and the contract position of each overdue debtor.
16. CURRENT LIABILITIES
2022 2021
£000s £000s
Trade payables 693 557
Social security and other taxes 519 368
Deferred Income 9,286 6,153
Right of use lease liability 42 15
Accruals 832 724
Total current liabilities due within one year 11,372 7,817
The deferred income figure above includes amounts relating to contracts where
the annual licence fee has been invoiced in advance and deferred set-up and
professional fees that have not reached a stage where the revenue is being
recognised and so is treated as all due in less than one year for reporting
purposes.
17. NON-CURRENT LIABILITIES
2022 2021
£000s £000s
Deferred Income 1,330 1,941
Right of use lease liability 67 -
Total non-current liabilities due after one year 1,397 1,941
The deferred income figure above includes amounts relating to contracts where
the annual licence fee has been invoiced multi years in advance, and deferred
set up and professional services fees that have not reached a stage where the
revenue is being recognised and so is treated as all due in less than one year
for reporting purposes.
18. DEFERRED TAXATION
2022 2021
£000s £000s
Balance at 30 June - -
Unprovided deferred tax assets
Accelerated capital allowances - -
Trading losses 4,911 4,143
4,911 4,143
The unprovided deferred tax assets are calculated at an average rate for each
country as follows:
UK 25.0% (2021:
25.0%)
USA 23.0% (2021: 23.0%)
Australia 25.0% (2021: not applicable)
Canada 26.5% (2021: not applicable)
19. GROUP UNDERTAKINGS
At 30 June 2022, 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(1) England Ordinary 100% Payment Card Industry software services provider
IP3 Telecom Limited(1) England Ordinary 100% Dormant
The Number Experts Limited(1) England Ordinary 100% Dormant
PCI Pal (US) Inc(2) United States of America Ordinary 100% Payment Card Industry software services provider
PCI Pal (AUS) Pty Ltd(3) Australia Ordinary 100% Payment Card Industry software
PCI Pal (Canada) Inc(4) Canada Ordinary 100% Payment Card Industry software
(1) Registered at 7 Gamma Terrace, Ransomes
Europark, Ipswich, Suffolk IP3 9FF
(2) Registered at 2215B Renaissance Drive, Las
Vegas, Nevada USA 89119
(3) Registered at 62 Burwood Road, Burwood, NSW
2134 Australia
(4) Registered at 199 Bay Street, Suite 4000,
Toronto, Ontario, Canada M5L 1A9
20. SHARE CAPITAL
Group 2022 2022 2021 2021
Number £000s Number £000s
Authorised:
Ordinary shares of 1 pence each 100,000,000 1,000 100,000,000 1,000
Allotted called up and fully paid:
Ordinary shares of 1 pence each 65,619,818 656 65,479,818 655
On 10 December 2021 the Company issued 50,000 ordinary shares of 1 pence in
settlement of an exercise of options at 33 pence per share. On the same day,
the Company issued 40,000 ordinary shares of 1 pence in settlement of an
exercise of options at 26.5 pence per share.
On 30 June 2022 the Company issued 40,000 ordinary shares of 1 pence in
settlement of an exercise of options at 22 pence per share. On the same day,
the Company issued 10,000 ordinary shares of 1 pence in settlement of an
exercise of options at 26.5 pence per share.
The Group owns 167,229 (2021: 167,229) shares and these are held as Treasury
Shares.
During the year, the share price fluctuated between 95.0 pence and 53.5 pence
and closed at 58.0 pence on 30 June 2022.
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 normally taken with reference to
the closing quotation price as derived from the Daily Official List of the
London Stock Exchange, however, the Remuneration Committee will adjust the
grant price if it deems there are extraordinary circumstances to justify doing
so.
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 maximum 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:
The fair value of these options has been calculated on an issue by issue basis
and £211,747 (2021: £83,668) 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:
The fair value of these options has been calculated on an issue by issue basis
and £35,104 (2021: £31,013) 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:
2022 2021
Weighted Number of Weighted Number of
Average exercise Options Average exercise Options
Price price
£ £
Options outstanding at start of year 0.397 5,911,667 0.302 4,916,667
Options granted during the year 0.613 2,480,000 0.566 2,090,000
Options exercised during the year 0.275 (140,000) 0.356 (302,500)
Options lapsed during the year 0.574 (105,000) 0.269 (792,500)
Options outstanding at end of year 0.463 8,146,667 0.397 5,911,667
Options exercisable at the end of year 3,886,942 2,653,242
21. 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 2022, the Group had a closing cash balance of £4,888,000 (2021:
£7,518,000) and borrowings of £nil (2021: £nil).
At the year-end. The Group does not have any debt facilities available.
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.
On 30 April 2021 the Company placed 5,864,473 ordinary shares of 1 pence with
various institutional investors, priced at 95 pence per share. The placing
raised a gross amount of £5.50 million before expenses.
Interest rate risk
In June 2021 the Company repaid its outstanding debt facility with Shawbrook
Bank and so does not have any interest rate risk.
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 new clients and
takes deposits or advanced payments where this is deemed necessary.
Where possible the Group 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: The largest customer accounted for 16% of
revenues in the financial year, but this is expected to continue to drop in
the next financial year as we add more and more customers. Historically, bad
debts within the Group are minimal due to the importance of our service to the
customer as well as the level of payments in advance we receive. This
situation is not expected to change in the future.
Liquidity risk
The Group aims to mitigate liquidity risk by closely monitoring cash
generation and expenditure. Cash is monitored weekly and forecasts are
prepared monthly to ensure that the movements are in line with the Directors'
strategy.
Foreign currencies and foreign currency risk
During the year exchange gains of £832,000 (2021: loss of £550,000) have
arisen, which are mostly unrealised exchange movements. As at the 30 June 2022
the Group held the following foreign currency cash balances:
US Dollar $589,226 Sterling equivalent: £478,695 (2021: £754,233)
Canadian Dollar $405,330 Sterling equivalent: £254,493 (2021: £155,211)
Australian Dollar $35,571 Sterling equivalent: £20,065 (2021: £105,127)
Euro €387,639 Sterling equivalent: £333,711 (2021: £126,263)
Total Sterling equivalent: £1,086,964 (2021: £1,140,834)
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 translation is low and therefore 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 exchange rate fluctuations are reported 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.
22. CAPITAL COMMITMENTS
The Group has no capital commitments at 30 June 2022 or 30 June 2021.
23. CONTINGENT ASSETS
The Group has no contingent assets at 30 June 2022 or 30 June 2021.
24. CONTINGENT LIABILITIES
In October 2019 the Group entered into a £2.75 million loan facility with Shawbrook Bank. As part of the loan agreement Shawbrook Bank will be entitled to receive a cash based payment calculated on the value generated, over a 10 year period up to October 2029, 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
The debt facility was repaid from cashflow in June 2021 and so no exit fee was
triggered. However, there still remains a contingent liability if the
Company is taken over.
Patent case
In September 2021, Semafone Limited (now renamed Sycurio Limited), a
competitor of the Group, lodged claims at the UK Patent Court against both
PCI-Pal PLC and PCI-Pal (U.K.) Ltd and at the US Patent Court against PCI Pal
(U.S.) Inc for breach of Semafone patents. The Group strongly refutes the
claims that are being made against it and so instructed its lawyers to prepare
a robust defence and counterclaims to be heard by the Courts in the UK and US.
A court hearing has been scheduled for June 2023 in the UK with the court
proceedings expected to commence in the US in the summer/autumn of 2024.
The Group has formed a robust defence on non-infringement, despite the onus
being on Sycurio to prove infringement, and has advanced strong counterclaims
of invalidity of Sycurio's patents, such as prior-art. Following an extensive
investigation into Sycurio's patents and the previous court challenges in the
UK to their validity by other parties, the Group has formed a strong position
on counterclaims challenging the validity of the patents. Both defence and
counterclaims form the basis of our multi-faceted position in the UK and US
cases.
The Group's legal advisors have advised the directors about the strength of
the defence, the potential for recovery of costs incurred in defending the
case and the processes involved in the Court hearings. Based on the legal
advisors' advice, the directors consider that it is only possible, but not
probable, that an obligation to Sycurio will arise from this claim. It is not
practical to state an amount or timing of financial impact of this obligation,
if any, as it depends upon the future outcome of the Court hearings, which are
at an early stage, or any mediation or settlement negotiations with Sycurio.
As the Directors do not believe that the Group has infringed the Sycurio
patents they have concluded that there is no past obligating event in relation
to the Claim, therefore no provision for anticipated future legal costs has
been made in the financial statements. The total value of the legal costs
incurred to date and the estimate of the contingent liability for future legal
fees at the year-end is as follow:
Incurred in year To be incurred in future Total estimated cost
£000s £000s £000
PCI-Pal PLC 578 1,194 1,772
PCI-Pal (U.K.) Ltd 37 - 37
PCI Pal (U.S.) Inc 182 1,706 1,888
797 2,900 3,697
Note that the defence and costs of the UK claim are being managed and funded
by PCI-Pal PLC, who was included in the Claim.
25. CHANGES IN ACCOUNTING POLICY
There were no changes in accounting policies during the financial year.
26. TRANSACTIONS WITH DIRECTORS
Apart from the director's standard remuneration there were no other
transactions with directors in the year to June 2022 or June 2021.
27. DIVIDENDS
The Directors are not proposing a dividend for the financial year (2021: nil
pence per share).
28. SUBSEQUENT EVENTS
There are no subsequent events to report.
29. ALTERNATIVE PERFORMANCE MEASURES
The Group reports certain alternative performance measures ('APMs') that are
not required under IFRS. The Group believes that these APMs, when viewed in
conjunction with its IFRS financial information, provide valuable and more
meaningful information regarding the underlying financial and operating
performance of the Group to its stakeholders.
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