REG - PCI-PAL PLC - Final Results, Analyst Briefing & Investor Pres
22/10/2024 07:00
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RNS Number : 0985J PCI-PAL PLC 22 October 2024
22 October 2024
PCI-PAL PLC
("PCI Pal", the "Company" or the "Group")
Final Results
Analyst Briefing & Investor Presentation
Strong Revenue Growth and Positive Adjusted EBITDA
PCI-PAL PLC (AIM: PCIP), the global provider of secure payment solutions for
business communications, is pleased to announce its full year results for the
year ended 30 June 2024 (the "Period").
Financial Highlights:
FY24 FY23
30 June 2024 30 June 2023 Change
Revenue £17.96m £14.95m +20%
Gross Margin % 89% 88%
% of revenues from recurring contracts 89% 86%
Adjusted EBITDA(1) £0.87m (£1.11m) +178%
Adjusted PBT(2) loss (£0.57m) (£2.31m) +75%
Loss before Tax (£1.71m) (£4.89m) +65%
New ACV(3) contract sales in Period £3.76m £4.16m -10%
Total Contracted TACV(4) £19.21m £16.43m +17%
Exit Run Rate ARR(5) £15.45m £12.58m +23%
Net Retention Rate NRR(6) 102% 103%
Customer Retention(7) 97% 95%
Cash at Period end £4.33m £1.17m
Operating and Other Highlights:
· Positive adjusted EBITDA underpinned by revenue growth of 20% YoY.
· ARR increased 23% year on year to £15.5 million.
· Strong balance sheet, with positive cash generation facilitating
further near term growth-investment in the business.
· Company's key leading indicator of future recurring revenue, TACV,
increased by 17% YoY to £19.2 million.
· Continued exceptional customer retention of 97% for the year, a 2bps
increase over prior year (2023: 95%) with a net retention rate of over 100% at
102% (2023:103%).
· Strength of cloud platform evidenced by >99.999% uptime globally
in year, including three straight quarters at 100%.
· Strong underlying volume of new business contracts signed, with new
logos increased by 10% to 240 signed in the Period.
· 80% new business contracts sourced through the Company's partner
eco-system.
· Expansion of our market leading partner eco-system, including the
highlight signing of a global reseller agreement with Zoom, with first
customers already signed and live in the Period.
· Comprehensive U.K. court victory and subsequent settlement of all
remaining litigation patent lawsuit matters with competitor
(1) Adjusted EBITDA is the loss on Operating Activities before depreciation
and amortisation, exchange movements charged to the profit and loss,
exceptional items and expenses relating to share option charges
(2) Adjusted PBT is the Loss before Tax before exchange movements charged to
the profit and loss, exceptional items and expenses relating to share option
charges
(3)ACV is the annual recurring revenue generated from a contract.
(4) 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.
(5) ARR is Annual Recurring Revenue of all the deployed contracts at the
Period end expressed in GBP.
(6) NRR is the net retention rate of the contracts that are live on the AWS
platform rate and is calculated using the opening total value of deployed
contracts 12 months ago less the ACV of lost deployed contracts in the last 12
months plus the ACV of upsold contracts signed in the last 12 months all
divided by the opening total value of deployed contracts at the start of the
12 month period.
(7)Customer retention is calculated using the formula: 100% minus (the ACV of
lost deployed contracts on the AWS platform in the last 12 months divided by
the opening total value of deployed contracts 12 months ago expressed as a
percentage).
Current Trading:
· Strong start to the new financial year with new business sales for Q1
in line with management expectations and ahead of the prior year.
· As announced in the Company's update of 28 August 2024, the Group has
signed a major new global reseller which has immediately resulted in the first
customer being signed through this new partner in Q1.
· Voice integration across this partner's global UCaaS and CCaaS
platform is expected to be complete in the coming weeks, with full product
launch expected by end H1.
· New business sales highlights since the year end include:
o A new contract with a major US head-quartered BPO who will be using PCI
Pal's services initially across a number of its customers in the region. The
BPO has operations globally.
o A sizeable expansionary upsell to one of its largest customers to be
utilised across various countries internationally. A testament to the Group's
strong customer relations.
o An initial contract signed via the Company's EMEA operation with a "Big
Four" accounting and consulting firm. The contract which is to initially
provide in-house services regionally has been designed with future global and
cross-department expansion in mind given the extensive operations of this new
hybrid customer / partner.
Commenting, James Barham, Chief Executive Officer, said:
"Overall we have made strong progress across FY24, continuing to deliver
against our stated objectives to lead our market in true cloud solutions, and
delivering to customers globally across our extensive partner eco-system.
"The unfounded patent litigation brought against us, was a management
distraction and cash drain for most of the last three fiscal years, and we are
therefore clearly pleased that this litigation is now fully resolved following
our success in the UK courts. What has been very encouraging is that
throughout this Period, we have continued to grow revenues at market leading
rates whilst also maintaining exceptional customer retention. This, together
with the improving operational performance of the underlying business, has
created a strong platform for future profitable growth.
"We have started FY25 well with new business sales both ahead of last year and
in line with management expectations. We are therefore now executing against
our near-term plans to make additional and considered investments in the
business that will underpin the longer term future growth prospects of the
Group. With adjusted EBITDA profit achieved in FY24, positive operating
cashflow and a strengthened strong balance sheet, we are excited by the
breadth of the opportunity ahead of the Group as we continue building deeper
and wider channel partnerships, progress our product roadmap, and further
scale the business into new territories."
Analyst Briefing: 9.30am today, Tuesday 22 October 2024
An online briefing for Analysts will be hosted by James Barham, Chief
Executive Officer, and Ryan Murray, Chief Financial Officer, at 9.30am on
Tuesday 22 October 2024 to review the results and prospects. Analysts wishing
to attend should contact Walbrook PR on pcipal@walbrookpr.com
(mailto:pcipal@walbrookpr.com) or 020 7933 8780.
Investor Presentation: 11.00am on Friday 25 October 2024 (UK time)
The Directors will hold an investor presentation to cover the results and
prospects at 11.00am on Friday 25 October 2024 (UK time).
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
(mailto:pcipal@walbrookpr.com) or in real time during the presentation via the
"Ask a Question" function.
For further information, please contact:
PCI-PAL PLC Via Walbrook PR
James Barham - Chief Executive Officer
Ryan Murray - Chief Financial Officer
Cavendish Capital Market Limited (Nominated Adviser and Broker) +44 (0) 20 7227 0500
Marc Milmo/Fergus Sullivan (Corporate Finance)
Sunila De Silva (Corporate Broking)
Walbrook PR +44 (0) 20 7933 8780
Tom Cooper/Nick Rome +44 (0) 797 122 1972
tom.cooper@walbrookpr.com (mailto:tom.cooper@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 2024
FY24 has been a real turning point for the Company, and I am exceedingly proud
of the leadership and staff for their determination to deliver positive
results in the face of tightened corporate technology spending, general
economic headwinds caused by inflation and high interest rates, and of course
the significant distraction from the now resolved unfounded patent litigation
brought by our competitor Sycurio.
Business Developments
Over five years ago, as an early-stage SaaS B2B company, we set out on a
journey to prove our value as a Cloud company serving the global secure
payments market through a cloud centric technology proposition with dedicated
focus on targeting the market opportunity through partnership channels.
Throughout that journey we have delivered consistent top line growth while
being thoughtful and careful about the investment and funding required to grow
the business. While I am disappointed that the Company was not able to
report our expected full year of pre-tax profitability, due to the timing of
revenue recognition relating to a specific customer, this does not detract
from the successful operating outcome that the team has achieved this year,
and the consequent substantial swing from negative to positive adjusted free
cash flow(1)
FY24 was a real turning point for the Company as we delivered our first full
year of adjusted(2) EBITDA profit as well as positive operating cash flow, and
in so doing highlighted the long-term operational gearing opportunity of the
Company's high margin SaaS subscription revenue model. I would like to
personally thank all our investors for their support to date on this journey.
Notable areas of positive progress include continued strong revenue growth;
consistently top industry percentile customer retention rates, and expansion
of our partner network with global names such as Zoom. Our employee retention
remains high, and our culture stronger than ever. I would personally like to
thank each and every one of our team members for their contributions towards
reaching the milestone of profitability and for continuing to drive towards
the Group's mission.
Board Changes
On behalf of the Board, I would like to welcome Ryan Murray who was appointed
to the Board as Chief Financial Officer and Company Secretary on 14 October
2024. Ryan is a Chartered Accountant with extensive commercial, finance, tax
and corporate finance experience, in the international technology sector. Ryan
joins from AIM quoted FD Technologies plc where he was Group Financial
Controller.
As announced on 27 February 2024, William Good, the Company's previous CFO,
informed the Board of his intention to retire as CFO and Executive Director of
the Company to pursue his other existing business interests. On behalf of the
Board, I would like to thank William for his contribution to the growth of the
Group and I would also like to welcome Ryan onto the Board.
Patent Infringement Claim
As previously announced the Company was not only successful in the High Court
of England and Wales ("High Court") in both defeating the claims of patent
infringement made by our competitor, Sycurio, but we were also successful in
our own counterclaims to invalidate Sycurio's parent UK patent. This outcome
was notably reinforced by the Court of Appeal of England & Wales ("Court
of Appeal"). Subsequently, the Company entered into a confidential
settlement with Sycurio that resolved all remaining aspects of the litigation
in the UK and US as announced in June 2024. The settlement enables
management to move beyond the distraction created by this litigation over the
last two and a half years, putting an end to what was viewed as an unwarranted
and wasteful use of management time and cash resources.
Corporate Governance
The Quoted Companies Alliance (QCA) recently announced an update to their
corporate governance guidelines, and it is our intention to follow their
expanded recommendations starting in FY25 when they become effective. I am
mindful of the fact that as part of a fast-growing international organisation
I must ensure that our organisational structure and corporate processes are
both adaptive and robust so we can continue to deliver for all stakeholders,
while not diminishing our entrepreneurial culture. In that regard the Group
is supported by an experienced Board of Directors, and led by a management
team that has proven it can deliver. We take outside professional and business
advice where needed and have access to an Advisory Committee consisting of
executives and consultants with deep operational experience in select
functional areas.
Our strategic aims are clear, our employee culture excellent, and our
commitment to our partners and customers remains unshakeable. I believe we
have a balanced business and risk management structure that will allow us to
continue to grow within acceptable levels of risk tolerance.
Stakeholder Communications
As a board, we remain focused on clear and regular communications with all
investors, both retail and institutional, and expanding disclosures in line
with the growth in complexity of the business. We continue to utilise the
Investor Meet Company portal, to reach shareholders of all types. During the
year, the CEO and CFO held regular 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 holding
meetings with institutional shareholders around the time of the AGM.
Forward Momentum
With the patent litigation now behind us, we can again fully focus on the
growth opportunity in front of the Company; the further expansion of our
global partner eco-system; and on our strategic product roadmap development
aimed at expanding our addressable market over the longer term. Management is
now 100 per cent focused on capitalising on the undoubted market opportunity
before us as we look to deliver against our strategy of continued profitable
growth, both organic and inorganic.
I continue to be excited and encouraged by the progress that has been made by
the Group in FY24 and in the early part of FY25, and the Board is confident in
the outlook and prospects in FY25 and beyond. I look forward to sharing
further progress reports and news during the coming year, as we continue to
execute against our ambitious plans.
Simon Wilson
Non-Executive Chair
(1) Net increase in cash before exceptional items and excluding the net
proceeds from the issue of shares
(2) Adjusted EBITDA profit is the loss on operating activities before
depreciation and amortisation, exchange movements charged to the profit and
loss account, exceptional items and expenses related to share options
CHIEF EXECUTIVE'S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
Overview
I am pleased to report another strong year of growth for PCI Pal as we
continue to execute successfully against our stated objectives to lead our
market in services delivered from the public cloud; whilst maintaining the
most extensive and advanced partner eco-system in our market.
Year on year revenue is up 20% to £17.96 million (2023: £14.95 million) with
an exit ARR run rate for FY24 of £15.45 million, a 23% year on year increase
(2023: £12.58 million). TACV, the key leading indicator of the Company's
future recurring revenue, increased 17% to £19.21 million (2023: £16.43
million). Revenue numbers have been supported by top percentile industry
customer retention with GRR at 97% for the year (2023: 95%) which reflects the
value of our products, the high quality of services we provide, our focus on
customer service and our global cloud platform. I am especially pleased that
underlying these healthy growth numbers is a stable core to the business
manifested by exceptionally high service levels and cloud platform uptime
exceeding five nines including three straight quarters at 100%.
Gross margins have increased further to 89% (2023: 88%) which reflects the
margin-rich nature of our subscription based licence model with services
provided from PCI Pal's mature, global, public cloud platform hosted in AWS.
The continued increase is a result of the high proportion of revenue achieved
through licence sales and the proportionately reducing amount of sales from
lower margin services such as professional services and charges from
connection minutes. This trend was expected and is a result of PCI Pal's own
innovation and patented IP that allows us to provide professional services
more efficiently, and our ability to provide connectivity to contact centres
without carrying call traffic.
The foundations of this business are its culture and people. We have bred a
culture within PCI Pal that not only drives employee satisfaction, with high
people retention(1) of 93% (2023: 96%), but also encourages high performance,
entrepreneurialism, and ambition from all those that work within this growth
business. PCI Pal's culture and our focus on our people is what has driven
our success to date and will continue to do so as we scale the business
further.
New business sales
Year on year new business sales were 10% lower than the record level achieved
in FY23 at £3.8 million (2023: £4.1 million). In FY23, we reported the
signing of a large new customer in the US with over 10,000 agents, which was a
strong contributor to the Group's exceptional new business sales number in
that year. In FY24, the Company had more success in winning a volume of run
rate contracts with small to mid-market contact centres, which makes up the
majority of the contact centre markets in the UK and US. Within FY24, achieved
the Company's second, third, and fourth highest sales quarters in its
history. This was illustrated in the record number of new contracts signed,
increasing 12% year on year to 271 (2023: 241). This consistency of volume
is encouraging for me as ultimately it is the foundation of our sustainable
success from our channel and cloud model.
As well as the strong run rate, the Company signed a number of enterprise size
customers. Highlights of these included:
§ A sizeable initial contract through a key reseller with a Fortune
500 US healthcare insurer. The customer has numerous businesses across the
US and so we have the opportunity to expand with this customer.
§ A competitive displacement sold directly to a FTSE-250 financial
services company in the UK. PCI Pal is delivering its secure payment
solutions across all communication channels in the customer's contact centre
covering phone (keypad entry), voice (speech recognition), and digital
(payment link).
§ Further adding to PCI Pal's strength with US pharmaceutical firms,
we added another Fortune 50 customer from this sector, resold through one of
our top performing partners in the year.
Partner eco-system
With typically between 75-85% of new business contracts sourced from the
Company's partner eco-system, the continued success of these relationships, as
well as the addition of carefully chosen new partners, are key contributors to
PCI Pal's continued growth momentum, high retention rates, and sustainable
profitability.
We continue to develop and expand the relationships we have with our existing
resellers, the vast majority of whom are large, multi-national organisations
with US headquarters including Genesys, Amazon, Talkdesk, Vonage and 8x8.
With the majority of our integrated partners PCI Pal is either the preferred
or sole secure payments vendor that the partner works with in a resell
capacity and we have achieved this by putting our partners first. Evidencing
the close relationships we build with partners we were pleased to be awarded
global technology partner of the year with 8x8, a longstanding partner of the
Company.
In the year, we continued to invest in our partner programme and channel team
resources to continue to drive further deepened relationships with these
mostly large international organisations. Reflecting this, 80% of new business
contracts for the Company were sourced from partners (2023: 83%), and
contributed 70% of the new business value signed (2023: 77%). On an
underlying trend basis, the value of contracts signed through partners is
substantially more than any prior year except for FY23 where the Company
signed a large one-off deal through one of its resellers. This trend shows
the increasing run-rate we are generating through partners, by volume and
value, with many of whom we now have multi-year relationships with.
Of the total contracts sold in the Period, more than three quarters were
contracted through Integrated Partners. Integrated Partners are typically
CCaaS ("Contact Centre as a Service") or UCaaS ("Unified Communications as a
Service") providers where PCI Pal has a single repeatable integration to their
own public cloud platforms which is then leveraged by the partner to deliver
all sales they make to their customers. It is common that these integrations
leverage PCI Pal's patented integration methods, which we have developed over
a number of years having been the first to market with a true public cloud
offering. PCI Pal products are then available to those Integrated Partners'
customers across their entire platform, which commonly would be on a global
basis.
In the year, we expanded our partner eco-system with numerous additional
partners. The highlight in terms of global coverage and scale has been the
addition of Zoom which we announced in November 2023. PCI Pal was selected
following an extensive evaluation process by Zoom, to be a launch partner for
their new ISV exchange programme integrated to both their Zoom Contact Centre
and Zoom Phone services. I'm pleased to report the successful integration
was completed by the year end with both products live and at general
availability. We were also successful in signing a number of initial
customers which are currently going through the new fast-track deployment
process with Zoom. We're very excited by the truly global coverage and scale
of Zoom and in their momentum into the contact centre space.
Since the year end, as announced in our trading update of 28 August 2024, we
have signed a further global strategic integrated partner who despite historic
relationships with our competitors is taking PCI Pal forward as its preferred
vendor for secure payments. We are now going through our enhanced partner
integration and deployment process where the partner will have access to all
new version and features of our product suite. The new partnership has also
immediately resulted in the signing of our first customer from the
relationship.
In summary, the growth of our channel partner ecosystem, and its importance to
our end customers, represents a valuable competitive moat.
Operations
PCI Pal has consistently achieved exceptional customer and partner
retention. The reliability of our platform from which we deliver our
services is a foundation of this key metric performance. As the first to
launch a true public cloud platform in our market we have the most mature
cloud platform offering in the space and as a result we have continued to
deliver top percentile service uptime statistics. Across FY24 we achieved in
excess of 99.999% availability across our global cloud platform, with three
straight quarters at 100% uptime. This sort of exceptional performance is
testament to PCI Pal's product and engineering teams that we increased
investment in from FY22 onwards.
In the year we rolled out a new support portal for customers to interact with
us through a single, easy-to-use support environment that is optimised to
minimise response times. The results of the launch were that we have reduced
response times by nearly a third, and in the year, we have consistently
achieved better than our own SLA targets. Reflecting these improvements
customer satisfaction has increased further to 90% (FY23: 85%).
Further operational gains were delivered in the Company's new customer
deployment capabilities which we have historically measured using a time to go
live ("TTGL") metric. Across FY24 whilst TTGL was relatively flat year on
year overall, we in fact improved TTGL for higher value (projects those in
excess of £25k ACV in value) by more than 10%(6).
To see these improvements coming from the same level of professional services
resource year on year speaks to our improving efficiency. In FY24 we delivered
20% more projects than FY23, with the revenue value of those projects also
increasing by the same amount (20%) year on year. These statistics support
our confidence levels that the operating core we have built for this business
is suited to further scale and to do so cost effectively. We expect to see
further improvements in TTGL across the coming 12 months as our product
enhancements empower reduced deployment times across all customer types and
sizes, with professional services and custom work being allowed to focus more
on larger customer projects.
Market Overview
Overview
Today PCI Pal sells its products primarily into the contact centre markets in
its regional focus areas which are North America, UK, and ANZ. Outside of
these focus regions, the Company leverages its global cloud platform and
partner eco-system to reach into other territories including mainland Europe,
APAC, and LATAM. These three regions represent further growth opportunities
for PCI Pal as the business continues to scale.
The US and UK are the two largest contact centre markets in the world. In
both countries, workforces in contact centres are substantial with between
2-4% of national working populations estimated to be working in those
environments(2). This scale is similar across ANZ and Europe as well. We
estimate that between 60-70% of these environments handle sensitive payment
data, which has been our key addressable market today.
Contact centres have long since evolved from lower service level cost centres
to, today, where they represent the front line for many customer experience
touchpoints for organisations across the globe. Recent research(3) shows
that customer experience within contact centres in B2C environments is
perceived to be on par with quality of product or service being provided as
the most important success factor for customer interactions. These being ahead
of, for example, the price of those services. Customer experience is therefore
key.
The need for secure customer interactions
Security requirements for contact centres became more challenging with the
on-set of the pandemic which accelerated the work-from-home trend that many
businesses operate in today's post-pandemic world. Today, more than 75% of
agents working in contact centres in the US and UK either work from home or
have hybrid working locations between home and office. Home-working of any
kind presents an increased challenge for data security, particularly around
payments which is the most sensitive personal data from a data theft
perspective. PCI Pal's solutions remove sensitive data from the agent's
environment entirely, so whether the agent is in an office or contact centre,
or working from home, they are not exposed to sensitive customer data.
Digital transformation in contact centres
Digital transformation has positively impacted a contact centre's ability to
provide a broader set of options to facilitate customer interactions and a
positive customer experience. Contact centres today handle any contact
touch-points with customers outside of in-store interactions including
telephone (live voice interactions), email, web chat, telephone (automated
IVR), and any number of other digital interactions such as SMS and social
media. We are seeing companies embrace the choice to suit each individual
customer's contact preference, however, the shift to digital is happening
relatively slowly still today. For example, over 70% of customer interactions
are still carried out by telephone (voice) in the United States. Of the
growing digital channels, email and web chat make up over 25% of
interactions(4). PCI Pal has solutions that cover the breadth of this
omnichannel customer engagement mix.
The adoption of Artificial Intelligence ("AI") is growing in the contact
centre market(5). To date its main use across customer interactions has been
within web chat where "chatbots" are used to interact on basic tasks with
customers rather than live agents. These chatbots have historically used
rule-based configurations, however, with the advancement of technology in the
space we are beginning to see conversational AI vendors providing both chatbot
and voicebot solutions to the market which are driven by natural language
processing, which in essence is more what we would typically expect of
AI-capability.
PCI Pal has partnered with a number of conversational AI vendors, including
Converse360 and Poly AI where we have integrated our secure payment solutions
to their products to remove sensitive cardholder data from their environments
and also support their own customers to achieve de-risking goals and
compliance objectives. Whether we are securing a bot or an agent, PCI Pal's
solutions are very similar and delivered in a relatively similar fashion.
AI is here to stay and will evolve within the contact centre market. At PCI
Pal we see opportunity from AI in our market, opening up new partner potential
for the Group whilst making customer interactions more sophisticated which is
consistent with our product roadmap direction. That said we do not expect to
see a pivot from live agents to AI voice or chatbots, rather we expect to see
an evolutionary shift, similar to the digital transformation contact centres
have gone through in the last 10 years. More complex and high value
interactions are going to be funnelled to highly skilled agents, with more
basic and mid-level tasks carried out optionally by AI solutions as they
advance in capability.
Product Update
In FY22, the Company increased investment into its engineering and product
functions in order to enhance the core product suite and grow its addressable
market. We did this by introducing new products and features driving on-going
strong customer retention, as well as creating additional upsell and
cross-sell opportunities to drive future NRR.
I'm pleased to say that FY24 has been another year of real progress in these
plans. Across the year we have delivered a number of key roadmap objectives
including:
§ The introduction and full launch of a new user interface that drives
an enhanced user experience, both for the agent / business user and consumer
across all voice and digital channels. The new interface incorporates all of
the additional payment methods available in PCI Pal today, such as digital
wallets, open banking, and buy now pay later services.
§ Improved data analytics capabilities that are providing insights and
data to our customer success team around adoption and usage of our products
and services. This is the first of a number of enhancements expected as a
result of continued strengthening of the Company's data backbone.
§ A significant enhancement to our payment services architecture
which includes a new standardised integration method for all payment services
with which PCI Pal integrates. This enhancement is expected to substantially
reduce the work-effort for PCI Pal when integrating to third parties which is
in-turn expected to drive down time to revenue across customer deployments.
This functionality is a key stepping stone towards true self-provisioning for
small to mid-market customers.
§ A fast start payment processing option for small to mid-market
customers leveraging partnerships with well-known international payment
providers, including Stripe, that is creating the opportunity for PCI Pal to
act as the payment provider. This functionality will open up the opportunity
for a new revenue stream for the business, as well as also presenting a
further opportunity for the Company to drive down its time to revenue.
§ A new partner on-boarding integration process which will culminate
in new integrated partners going live faster, with tighter integrations, and
higher levels of integrated productisation with the partner's own product
suite. This methodology has been utilised on the new Zoom integrations, and
we are expecting to see long term deployment efficiencies as a result.
Having focused our earlier stage engineering efforts on the innovation around
third party (partner) integrations and the reliability of our global cloud
platform, we are now enhancing the core cloud platform. Long term this will
add to the Company's addressable market opportunity by broadening PCI Pal's
value proposition, as well as enhancing the core business model today.
Settlement and full resolution to unfounded patent law suit
In the year we were very pleased to announce a full resolution to the
unfounded patent lawsuits that were brought against us by a competitor,
Sycurio. Sycurio filed the litigations in 2021, not long after it was
acquired by the US arm of the private equity firm Livingbridge. For almost
three years the Directors defended the Company from the unfounded claims being
made which culminated in a resounding victory for the Company in the High
Court of England and Wales which also included successfully invalidating
Sycurio's UK parent patent.
The Company was pleased to announce that following its resounding victory in
both the High Court and Court of Appeal, it had reached a confidential
settlement with Sycurio that resolved both the UK and US litigation in full.
In defending against these lawsuits, the last two and a half years have been a
distraction to management as well as a substantial drain on cash resources,
with over £4.3 million gross (£3.3 million net of a High Court award) in
legal fees and associated costs being incurred. This has inevitably had some
impact on the capital available to the Company to accelerate its growth
momentum but, the Company is now very well positioned with a strong balance
sheet to re-accelerate momentum and push forward with its stated objectives
having now settled the case.
PCI Pal Intellectual Property
Invalidating our competitor's parent patent in the UK, further demonstrates
PCI Pal's leading position as the company that disrupted a primarily
hardware-based market, bringing the first true cloud solutions to the space.
We have continued to evolve our cloud environment at pace, which has included
true innovation that has now been patented by the Company. In particular,
the Company's patents cover unique technology that better enables it to
integrate with our partners and other third parties. Such integration
naturally carries material real value to the business given our model and the
importance of working with partners to contact centre technology markets.
Our patents also protect our partners and the investment they make of their
own to work in close partnership with PCI Pal. We are proactively monitoring
the marketplace and will defend our IP if required.
Outlook
Following our success in the patent litigation that has constrained our
investment into the business for the last three years, I am immensely proud of
the position we have put ourselves in today in what promises to be another
exciting year for the business. Having achieved continued revenue growth
momentum and for the first time positive operating cash flow, we look ahead to
delivering further growth in FY25 during which we will return to our plans to
invest further in the business to maintain the long term growth opportunity
and further build recurring revenues.
FY25 is also expected to be a progressive year for the evolution of our
product-set that will see us enhance our relationships with partners and
customers; generate increased operational efficiencies; and create new longer
term addressable market enhancement opportunities. At the same time we are now
able to fully consider all the strategic growth options available to this
healthy and innovative growth business.
James Barham
Chief Executive Officer
( )
(1)Percentage of employees at start of year still employed at end of the year
(excluding planned leavers)
(2) Source: OMDIA -Global Contact CenterMarket Forecast:
( )(3)Source: Contact Babel the US CX Decision makers guide 2023-24 page 19
(4) Source: Contact Babel the US CX Decision makers guide 2023-24 Page 24
(5)Source: Contact Babel - The Inner Circle Guide to Chatbots etc 2024 -
various points
(6) The reduction in time between a customer signing a contract and the
contract going live
CHIEF FINANCIAL OFFICER'S REVIEW
FOR THE YEAR ENDED 30 JUNE 2024
Overview
FY24 has been an important year for the Group. We delivered another year of
strong revenue growth and also achieved the Group's first full year of
adjusted(3) earnings before interest, tax, depreciation and amortisation
('EBITDA') profit and positive operating cash flow.
During the year we also secured a resounding victory in the unfounded patent
case with a full and final settlement of all legal proceedings, resolving a
long-running cash drain and a distraction for the business.
Our focus in FY24 has been to achieve a significant swing from adjusted
EBITDA(3) loss to profit and from negative to positive operating cash flow. We
have achieved this through a combination of revenue growth, efficient
operational delivery and careful control of costs. For FY25, from an
underlying profitable base, we are looking to conservatively increase
investment in sales and marketing capability in order to increase the rate of
revenue growth in FY26 and beyond, and in so doing driving greater penetration
in the key North American and EMEA markets.
Key Performance Indicators
The Directors monitor the performance and progress of the Group using a number
of Key Performance Indicators ('KPIs). The primary KPIs used in 2024 were as
follows:
The principal financial KPIs used by the Board to assess the Group's performance are as follows:
FY 2024 % Change FY 2023
Revenue £17.96m 20% £14.95m
Gross Margin % 89% +1pt 88%
Recurring Revenue(1) £16.06m +24% £12.93m
Recurring Revenue % 89% +3pts 86%
Exit Run rate ARR(2) £15.45m +23% £12.58m
Adjusted EBITDA(3) £0.87m +178% (£1.11m)
( )
Adjusted Loss before Tax(4) (£0.57m) +75% (£2.31m)
Statutory Loss for the year (£1.71m) +65% (£4.89m)
Adjusted cash inflow from operations/(used in) in operations(5)
£2.53m 442% (£0.74m)
Cashflow from/(used in) operations £1.32m 165% (£2.02m)
Net cash £4.33m £1.17m
( )
Deferred Income(6) £14.34m £12.23m
( )
(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) Exit run rate ARR is Annual Recurring Revenue of all of the deployed contracts at the year end expressed in GBP
( 3) Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) 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
(4) Adjusted loss before tax is loss before tax before exceptional items, , exchange movements charged to the profit and loss and expenses relating to share option charges
(5) Adjusted cash inflow from operations is cash from operating activities before exceptional items
(6)As restated
The principal operational KPIs used by the Board to assess the Group's performance are as follows:
FY 2024 % Change FY 2023
Total Contracted TACV(1) £19.21m +17% £16.43m
New ACV contract sales in the Period(2) £3.76m -10% £4.16m
Net Retention Rates(3) 102% -1pts 103%
Customer Retention(4) 97% +2pts 95%
Ratio of adjusted administration expenses to revenue(5) 92% -11pts 103%
(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) ACV is the annual recurring revenue generated from a contract
(3) NRR is the net retention rate of the contracts that are live on the AWS
platform rate and is calculated using the opening total value of deployed
contracts 12 months ago less the ACV of lost deployed contracts in the last 12
months plus the ACV of upsold contracts signed in the last 12 months all
divided by the opening total value of deployed contracts at the start of the
12 month period
(4) Customer retention is calculated using the formula: 100% minus (the ACV of lost deployed contracts on the AWS platform in the last 12 months divided by the opening total value of deployed contracts 12 months ago expressed as a percentage)
(5) Administration expenses (before exchange movements charged to the profit and loss, exceptional items and expenses relating to share option charges) as a proportion of revenue
Revenue and gross margin
The Group delivered another year of strong revenue growth of 20% (2023: 25%),
increasing revenue to £17.96 million from £14.95 million in FY23.
£000's FY 2024 FY 2023
Licence and usage fees 16,055 12,930
Other - -
Recurring revenue 16,055 12,930
Transaction fees 318 614
Set up and professional fees 1,587 1,406
Non-recurring revenue 1,905 2,020
Total revenue 17,960 14,950
Recurring revenues increased to 89% of total revenue (2024: £16.05 million)
from 86% (2023: £12.93 million) in FY23. Recurring revenue is predominantly
generated from licences as a result of the Group's subscription-based SaaS
revenue model. Licences typically have an initial 12-month term and include an
automatic renewal clause for further 12-month periods thereafter. Average
initial contract lengths are currently 22 months; however, PCI Pal has
exceptional customer retention rates (97%) so the vast majority of contracts
simply auto-renew at the end of the initial term.
Non-recurring revenue arises from set-up, installation and professional
services fees charged by the Group at the inception of the contract. The
set-up, installation and professional services fees are paid up-front by the
customer and initially recorded as deferred income on the balance sheet. The
income is released from deferred income and recognised as revenue in the
consolidated statement of comprehensive income over the estimated term of the
contract, in line with the recognition of the revenue from underlying licence
and usage fees. Also included in non-recurring revenue are transaction fees
from short-term contracts, not included in TACV.
The US is the largest contact centre market in the world and therefore a key
focus for the Group's growth plans. During the year, the North America region
achieved another strong performance with growth in revenue of 32% to £6.29
million (2023: £4.75 million). The EMEA region (which for PCI Pal today is
predominantly the UK market) achieved robust growth in revenue of 13% to
£11.26 million (2023: £9.96 million). In ANZ the Group managed growth in
revenue of 83% to £0.42 million (2023: £0.23 million).
In FY24, the Group added new sales with an Annual Contract Value ('ACV') of
£3.76 million (2023: £4.16 million), with 70% sourced from the Group's
partner ecosystem. The lower headline ACV growth rate achieved in FY24
reflects the timing of signing one of the Company's largest new contracts
towards the end of FY23. The underlying new business trend in the year is
strong on a quarter to quarter basis
Total Annual Recurring Revenue ('ARR'), defined as annual recurring revenue of
all deployed contracts as measured at the end of the financial year, and TACV
are key forward-looking indicators of underlying recurring revenue growth in
the business. During FY24, the Group delivered a 23% increase (2023: 14%) in
ARR from £12.58 million in FY23 to £15.45 million in FY24. This demonstrates
the success of the Group's partner eco-system in driving sales growth and
growing its market share.
Total Annual Contract Value ('TACV'), defined as the total annual recurring
revenue of all signed contracts, whether invoiced and included in deferred
income or still to be deployed and/or not yet invoiced, is a measure of the
Group's total contracted recurring revenue pipeline of signed contracts. TACV
removes the impact of the time between signing a contract and the point in
time the delivery of the contract is complete and when the revenue can then
begin to be recognised in the consolidated statement of comprehensive income.
This timing difference in recognising the revenue can be impacted by the
availability of resources of the end customer, technical work required from
the channel partner that is independent of our product, and the efficiency of
our professional services team in progressing the customer deployment
processes. The most common cause for time delays between signing and revenue
recognition is from the customer or partner side over which PCI Pal has less
influence. For instance, it is common for PCI Pal to be part of a wider
project that our partner is responsible for delivering. Where this occurs,
the PCI Pal project might be considered by the Company to be "on-hold" until
the PCI Pal phase is capable of being delivered. During FY24, TACV grew 17%
to £19.21 million, including £3.18 million (2023: £3.08 million) in
deployment and £0.58 million (2023: £0.77 million) currently on hold.
The Group has achieved excellent customer retention in the year with GRR
improving to 97% (2023: 95%).
Gross margin increased again to 89% (2023: 88%) reflecting the high
concentration of customers billed primarily with high margin, recurring
licence fees.
Alternative Performance Measures
The Group's preferred measures of the underlying financial performance of the
business are adjusted EBITDA, adjusted operating profit and adjusted operating
cashflow which exclude items that could distort the understanding of the
performance for the year and the comparability between periods. The Directors
believe these Alternative Performance Measures reflect the underlying
performance of the business and provide a meaningful comparison of how the
business is performing.
A reconciliation of the underlying financial measures to statutory measures is
shown below:
FY 2024 FY 2023
£000's Adjusted Adjustments Statutory Adjusted Adjustments Statutory
EBITDA(1) 868 (1,148) (280) (1,112) (2,584) (3,696)
Operating loss (567) (1,095) (1,662) (2,598) (2,254) (4,852)
Loss after taxation (84) (1,095) (1,179) (2,638) (2,254) (4,892)
Cashflow from/(used in) operations 2,528 (1,212) 1,316 (737) (1,279) (2,016)
Free cashflow(2) 965 (1,212) (247) (2,440) (1,279) (3,719)
(1) Loss on operating activities before depreciation and amortisation
(2) Net increase/(decrease) in cash excluding net proceeds from issue of
shares
The adjustments comprise:
FY 2024 FY 2023
£000's Profit impact Cashflow Profit impact Cashflow
Impact Impact
Exceptional patent case costs (net of costs awarded) 497 1,084 1,982 1,279
Exceptional restructuring costs 297 128 - -
Share based payments 301 - 272 -
1,095 1,212 2,254 1,279
Exchange losses 53 - 330 -
( ) 1,148 1,212 2,584 1,279
During FY24, the Group delivered a very pleasing combination of strong revenue
growth, adjusted EBITDA profitability and positive cash flow. The growth in
revenue reflects the investments made in sales and marketing and product
development over the last few years and the Company's high GRR. The growth in
revenue continues to be a key driver of the growth in adjusted EBITDA
profitability of the business going forward.
Administrative expenses
Underlying administration expenses (excluding exceptional costs, share based
payments and exchange gains/losses) have increased by just 8% to £16.53
million (2023: £15.36 million). This compares to a 19% increase from FY22
to FY23 and signifies the operational efficiencies available to the business
as it scales further.
The underlying administration expenses can be analysed as follows:
£000's FY 2024 FY 2023
Total administration expenses 17,683 17,948
Less exceptional costs (see above) (1,148) (2,584)
Underlying administration expenses 16,535 15,364
Analysed as follows:
Personnel costs 12,845 12,040
Platform costs 1,094 950
Depreciation/amortization costs 1,382 1,156
Capitalised development costs (1,825) (1,550)
Other 3,039 2,768
16,535 15,364
( )
Personnel costs (including commission, bonuses, recruitment, training,
contractors and travel & subsistence expenses) increased 7% during the
year and represents 78% of total underlying administration expenses (2023:
78%). Total headcount (excluding non-executive directors) increased from 114
employees in 2023 to 119 at the end of the financial year, primarily relating
to engineering and professional services.
Of the total personnel costs incurred by the Group and charged to the
consolidated statement of comprehensive income, £1.83 million (2023: £1.55
million) was capitalised under IAS 38 as internal development expenditure of
the AWS cloud platform. Amortisation of previously capitalised development
spend was £1.19 million in the year (2023: £0.96 million). Platform
operating costs, the majority of which relates to the AWS cloud platform, were
£1.09 million (2023: £0.95 million), up 15% year-on-year, reflecting the
increased level of activity in the year and the scalability of the AWS
platform. Other administration expenses including insurance, office costs,
marketing costs, compliance and plc costs, increased by 12% during the year to
£3.11 million (2023: £2.77 million). We note that insurance accounts for
the majority of that uplift with premiums for technology companies in the
payment space increasing substantially.
Underlying administration expenses as a proportion of reported revenue has
fallen from 103% in FY23 to 92% in FY24, demonstrating the tight control on
costs during the year and the operational leverage that is achievable with our
SaaS business model.
Exceptional costs
During FY24 the Group secured a full and final settlement in the unfounded
patent litigation it had been involved in since September 2021.
The impact on the Group of this unfounded litigation is summarised as follow:
£000's Incurred Recovered Net Cost Paid To Pay
FY 2022 797 - 797 (693) 104
FY 2023 1,982 - 1,982 (1,279) 703
FY 2024 1,564 (1,067) 497 (1,084) (587)
( ) 4,343 (1,067) 3,276 (3,056) 220
The Group incurred £1.56 million of legal and other costs relating to the
unfounded patent case during FY24 (and an aggregate total of £4.34 million
since the litigation commenced in 2021). Following the successful Court of
Appeal hearing in May 2024, which upheld the original ruling of the High Court
in favour of the Group and dismissed all claims against the Group, the £1.1
million award made by the High Court on 19 December 2023 was released from
escrow and paid to the Company.
The cost of the litigation incurred in FY24 (net of the High Court award) and
charged to the consolidated statement of comprehensive income as an
exceptional item was £0.50 million (2023: £1.98 million). The amount paid by
the Group during the year, net of the monies received from the award, was
£1.08 million (£1.28 million), leaving £0.22 million (£0.59 million) that
was paid post Period end. This brings an to end the litigation.
During the year the Group also incurred exceptional costs of £0.12 million
relating to a re-organisation of the Group's Marketing team and regional sales
teams and £0.17 million (being £0.14 million plus employer taxes and legal
costs) relating to the departure of the Group's former CFO.
Adjusted EBITDA
The reconciliation of adjusted EBITDA to the statutory reported loss before
taxation is provided below:
£000's FY 2024 FY 2023
Adjusted EBITDA Profit (loss) 868 (1,112)
Adjustments for:
Depreciation of equipment & fixtures (116) (110)
Amortisation of intangible assets (1,266) (1,046)
Exchange losses (53) (330)
Adjusted operating loss (567) (2,598)
Net financing costs (52) (39)
Adjusted loss before taxation (619) (2,637)
Adjustments for:
Exceptional patent case costs (net) (497) (1,982)
Exceptional restructuring costs (297) -
Share based payments (301) (272)
( )
Reported loss before taxation (1,714) (4,891)
The Group achieved an adjusted EBITDA profit in FY24 of £0.87 million,
representing a £1.98 million swing from an adjusted EBITDA loss of £1.12
million in FY23. This has been achieved through a combination of strong growth
in recurring revenue and tight control of administrative expenses. After
deducting amortisation of intangible assets of £1.27 million (2023: £1.05
million) and depreciation of equipment and fixtures of £0.12 million (2023:
£0.11 million) and exchange losses, the Group made an adjusted operating loss
of £0.57 million (2023: loss £2.60 million). Including the impact of
exceptional costs of £0.79 million (2023: £1.98 million) and share based
payments of £0.30 million (2023: £0.27 million), the statutory operating
loss was £1.66 million compared to a loss of £4.85 million in FY23.
The analysis of the Group's adjusted EBITDA profit/(loss), adjusted operating
profit/(loss) and statutory operating profit/(loss) in FY24 and FY23 by region
is shown below:
North America
£000's EMEA ANZ Central Total
FY24
Revenue 11,257 6,286 417 - 17,960
Gross Profit 9,391 6,215 415 - 16,021
Adjusted administrative expense (7,810) (6,923) (665) (1,137) (16,535)
Adjusted EBITDA 2,961 (708) (248) (1.137) 868
Adjusted operating profit/(loss)* 1,581 (708) (250) (1,137) (514)
Statutory operating profit/(loss) 1,312 (1,573) (266) (1,135) (1,662)
FY23
Revenue 9,964 4,752 229 - 14,945
Gross Profit 8,182 4,687 227 - 13,096
Adjusted administrative expense (7,613) (6,246) (506) (999) (15,364)
Adjusted EBITDA 1,723 (1,559) (277) (999) (1,112)
Adjusted operating profit/(loss)* 569 (1,559) (279) (999) (2,268)
Statutory operating profit/(loss) 524 (2,510) (304) (2,562) (4,852)
( )
*Including exchange losses
The EMEA region delivered a 13% increase in reported revenues of £1.30
million to £11.26 million (2023: £9.96 million), with a gross profit up by
£0.58 million in FY24. Adjusted administrative expenses (before exchange rate
movements and exceptional costs) were ~3% higher than FY23, resulting in the
region achieving a £1.01 million improvement in adjusted operating profit.
Adjusted administration costs are shown net of royalty income of £1.56
million (2023: £1.19 million) received from the North America region for
operational and other services received. Adjusted operating profit margin
increased to ~14% in FY24 from ~6% in FY23. Statutory operating profit
increased to £1.32 million from £0.52 million in FY23.
The North America region delivered an increase in reported revenue in FY24 of
£1.53 million to £6.29 million (2023: £4.8 million), at a gross margin of
99% (2023: 99%). Underlying operating losses were substantially reduced by
more than £0.85 million, demonstrating the high operating leverage of the
Group's partner-driven recurring revenue model, bringing the region close to a
breakeven position. The statutory operating loss narrowed to £1.57 million
from a loss of £2.5 million in FY23).
ANZ region (with operations starting in FY22) grew revenues by 82% to £0.42
million (2023: £0.23 million). Underlying administrative expenses increased
by £0.15 million (including royalties paid to EMEA of £0.1 million), giving
an adjusted operating loss of £0.25 million, broadly in line with FY23.
The Central region primarily comprises the central administrative costs
including the regulatory and other activities required for an AIM-quoted
company. The statutory operating loss reduced by 56% to a loss of £1.13
million from £2.56 million in FY23.
Further detailed segmental information is shown in note 10.
Loss after tax
Group adjusted loss before tax of £0.62 million (2023: loss of £2.64
million) is after charging net interest expense of £0.05 million (2023:
expense £0.04 million). Including the impact of exceptional costs of £1.10
million (2023: £2.25 million) the Group recorded a statutory loss for the
year of £1.18 million (2023: £4.89 million).
During the year, the Group received £0.53 million in cash relating to the
R&D tax credit claim covering FY21 and FY22. This claim had been delayed
by HMRC to conduct an enquiry into the claims being made. HMRC has now closed
their enquiry without making any adjustment to the claim submitted by the
Company.
The adjusted loss after tax for the year was £0.01 million (2023: loss of
£2.64 million), compared to a statutory loss after tax for the year
(including the impact of exceptional costs) of £1.18 million (2023: loss
£4.89 million).
Assets
The Group had total assets of £15.52 million (2023: £11.51 million).
Non-current assets increased by £0.76 million to £5.73 million (2023: £4.97
million), primarily due to the capitalisation of a further £1.83 million
(2023: £1.60 million) of internal development costs, as required by IAS 38,
less amortisation of £1.13 million (2023: £0.90 million) for the year. Other
receivables due after more than one year, being mainly deferred commission
costs earned by employees for winning new contracts, remained largely
unchanged at £1.51 million.
Current assets were £9.79 million (2023: £6.54 million), including cash and
cash equivalents of £4.33 million (2023: £1.17 million). Trade receivables
due within one year were £3.55 million, in line with FY23. Debtor collection
rates improved again during the year, with overdue debtors reducing from 27%
in FY23 to 16% in FY24 and debtors more than one month overdue decreasing from
19% to 4% during the FY24. Deferred costs due within one year, mainly
relating to the commission earned by employees for securing new contracts, and
which are capitalised on the balance sheet under IFRS 15 and released to
administrative expenses over the estimated economic life of the related
contract, increased to £0.94 million (2023: £0.74 million). Current and
non-current deferred costs increased by £0.20 million during the year to
£2.40 million. Other prepayments of £0.94 million were in line with FY23.
Liabilities
A prior period adjustment was identified during the audit relating to the
historical timing of revenue recognition. The total impact of the adjustment
is an increase in deferred income and net liabilities of £0.41 million in
FY22 and FY23. Please see note 27 of the financial statements for further
detail.
Current liabilities were £15.69 million (2023: £12.14 million). Deferred
income, which includes annual licence fees invoiced in advance and set-up and
professional fees which have not reached a stage where the revenue is
recognised and is due in less than one year, increased to £12.62 million
(2023: £8.36 million) during the year. The increase in the year reflects the
Group's growing ARR base, and the reduction in deferred income previously
shown in non-current liabilities. Trade payables decreased during the year by
£1.03 million to £0.74 million (2023: £1.77 million), primarily due to the
patent case liabilities which were substantially settled during the year.
Other current liabilities, including social security and taxes, right of use
lease liabilities and accruals increased by £0.32 million over FY23, the
majority of which relates to social security and other taxes.
Non-current liabilities, consisting of deferred income and rights of use lease
liability, were £1.80 million (2023: £3.89 million). The £2.10 million
reduction in deferred income in FY24 arises from contracts where customers
have paid in advance for multiple years' licences, brought forward from 30
June 2023, and which are now classified in current liabilities, based on the
remaining time left on the contracts. The aggregate level of deferred income
included in current and non-current liabilities was £14.34 million (2023:
£12.23 million), consistent with the growth in new ACV contract sales.
Net liabilities
Net liabilities reduced to £1.97 million from £4.52 million in FY23. The
factors driving the reduction liabilities during the year are described in the
previous paragraphs, of which the £3.16 million increase in cash held at the
year-end is a significant element.
Cashflow and liquidity
For the first time PCI Pal generated cash from operations of £1.32 million
(2023: outflow £2.02 million). After adjusting for exceptional items, the
Group delivered positive adjusted cashflow from operations of £2.53 million
(2023: cash outflow of (£0.74) million). This very significant £3.27 million
swing has been delivered through the combination of strong revenue growth,
improved operational delivery and tight control of costs. It also demonstrates
the capability for strong underlying cash conversion inherent in our
subscription-based, partner-first business model.
Cash outflows from investing activities during the year were £2.00 million
(2023: £1.66 million), including the capitalisation of £1.83 million (2023:
£1.60 million) of internal development expenditure in the AWS cloud platform
and new products and £0.16 million (2023: £nil) of external licences and
software. A further £0.05 million (2023: £0.06 million) related to capital
expenditure on tangible assets such as computer equipment for employees.
Net cash inflows from financing activities were £3.37 million (2023: outflow
£0.04 million). The FY24 cash inflow arose from a fundraise on 12 March 2024,
where the Group raised net cash proceeds of £3.26 million (2023: £Nil)
through the issue of 6,250,000 ordinary shares at a price of 56 pence per
share, representing approximately 9.5 per cent. of the Company's then issued
share capital (excluding shares held in treasury). The placing was
significantly oversubscribed, and the issue price was equivalent to the
closing mid-market price per ordinary share on 11 March 2024. During the year,
the Group also generated £0.15 million (2023: £Nil) cash inflow from the
exercise of employee share options.
Adjusted free cash inflow (net increase in cash in the year excluding the net
proceeds from the issue of equity and adjusting for the exceptional costs
discussed above) was £0.97 million (2023: outflow of (£2.44) million). This
is the first time PCI Pal has generated positive adjusted free cash flow,
another significant milestone for the Group and a substantial year to year
positive swing. After including the net cash proceeds from the issue of shares
and deducting the cash outflow in the year from exceptional costs, the net
increase in cash in the year was £3.16 million (2023: decrease £3.72
million).
Gross cash as at 30 June 2024 was £4.33 million (2023: £1.17 million). This
represents a significant strengthening of the balance sheet, leaving the Group
well placed to make some additional near term investment for profitable growth
and to take advantage of any upcoming, longer term strategic opportunities.
The Group has a £3 million, multicurrency, revolving facility with HSBC, with
availability based on the level of assets and liabilities at the time of
drawing. The facility was undrawn at the end of the financial year and matures
on 31 July 2026. Further details on the loan can be found in Note 21.
Going concern
The Group has reported a statutory loss after tax for the year ended 30 June
2024 of £1.18 million (2023: £4.89 million) and a net increase in cash of
£3.16 million (2023: decrease of £3.72 million). Importantly, as reported
above, the Group generated positive adjusted cashflow from operations and
positive adjusted free cashflow in the year. At 30 June 2024, the Group held
cash and cash equivalents of £4.33 million (2023: £1.17 million) and access
to the undrawn revolving credit facility of up to £3 million (based on the
level of assets and liabilities at the time of drawing). This represents a
significant improvement in liquidity from FY23.
The Group has completed a detailed budget for FY25 and a detailed cash
projection out to 31 December 2025. The budget and related cash flow
projection has been stress tested under a number of different scenarios
including a reduction in new ACV sales and increase in customer churn. In all
of the scenarios, the Group had sufficient financial resources to be able to
continue to operate for the foreseeable future. The Directors therefore have a
reasonable expectation that the Group will have adequate financial resources
to continue to operate for at least twelve months from the date of signing the
financial statements and consider it appropriate to adopt the going concern
basis in preparing the financial statements.
Dividend
The Board is not recommending a dividend payment for the financial year (2023:
Nil).
Ryan Murray
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2024
Note 2024 2023
£000s £000s
Revenue 10 17,960 14,945
Cost of sales 10 (1,939) (1,849)
Gross profit 16,021 13,096
Administrative expenses (17,683) (17,948)
Loss from operating activities (1,662) (4,852)
Adjusted Operating Loss (567) (2,598)
Expenses relating to share options (301) (272)
Other operating income 6 1,067 -
Exceptional expenses 6 (1,861) (1,982)
Loss from operating activities (1,662) (4,852)
Finance income 7 32 3
Finance expenditure 8 (84) (42)
Loss before taxation 5 (1,714) (4,891)
Taxation credit / (charge) 12 535 (1)
Loss for the year (1,179) (4,892)
Other comprehensive income: Items that will be
reclassified subsequently to profit or loss
Foreign exchange translation differences 20 326
Total other comprehensive income 20 326
Total comprehensive loss attributable to equity holders for the period
(1,159) (4,566)
Basic and diluted loss per share 11 (1.74) p (7.47) p
The accompanying accounting policies and notes form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
Note As Restated* As Restated*
2024 2023 2022
£000s £000s £000s
ASSETS
Non-current assets
Intangible assets 13 4,097 3,216 2,661
Plant and equipment 14 118 185 238
Trade and other receivables 15 1,513 1,567 964
Deferred taxation 18 - - -
Non-current assets 5,728 4,968 3,863
Current assets
Trade and other receivables 15 5,456 5,376 4,203
Cash and cash equivalents 4,332 1,169 4,888
Current assets 9,788 6,545 9,091
Total assets 15,516 11,513 12,954
LIABILITIES
Current liabilities
Trade and other payables 16 (15,687) (12,141) (11,691)
Current liabilities (15,687) (12,141) (11,691)
Non-current liabilities
Other payables 17 (1,799) (3,894) (1,491)
Non-current liabilities (1,799) (3,894) (1,491)
Total liabilities (17,486) (16,035) (13,182)
Net liabilities (1,970) (4,522) (228)
EQUITY
Share capital 20 723 656 656
Share premium 17,624 14,281 14,281
Other reserves 1,223 922 650
Currency reserves (274) (294) (620)
Profit and loss account (21,266) (20,087) (15,195)
Total deficit (1,970) (4,522) (228)
*As restated, relating to other payables and profit and loss account only -
see note 27 to the financial statements
The Board of Directors approved and authorised the issue of the financial
statements on 22 October 2024.
J Barham Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
Total Equity / (deficit)
Share capital Share premium Other reserves Profit and loss account Currency Reserves
£000s £000s £000s £000s £000s £000s
Balance as at 1 July 2022 656 14,281 650 (14,782) (620) 185
Impact of change - - - (413) - (413)
Balance as at 1 July 2022 (as restated*) 656 14,281 650 (15,195) (620) (228)
Share option charge (note 20)
- - 272 - - 272
Transactions with owners
- - 272 - - 272
Foreign exchange translation differences
- - - - 326 326
Loss for the year
- - - (4,892) - (4,892)
Total comprehensive loss
- - - (4,892) 326 (4,566)
Balance at 30 June 2023 (as restated*) 656 14,281 922 (20,087) (294) (4,522)
Share option charge (note 20)
- - 301 - - 301
New shares issued net of costs
67 3,343 - - - 3,410
Transactions with owners
67 3,343 301 - - 3,711
Foreign exchange translation differences
- - - - 20 20
Loss for the year
- - - (1,179) - (1,179)
Total comprehensive loss
- - - (1,179) 20 (1,159)
Balance at 30 June 2024 723 17,624 1,223 (21,266) (274) (1,970)
*As restated, relating to other payables and profit and
loss account only - see note 27 to the financial statements
The accompanying accounting policies and notes form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2024
2024 2023
£000s £000s
Cash flows from operating activities
Loss after taxation (1,179) (4,892)
Adjustments for:
Depreciation of equipment and fixtures 116 110
Amortisation of intangible assets 1,266 1,046
Loss on disposal of equipment and fixtures - -
Interest income (32) (3)
Interest expense 58 5
Exchange differences 20 326
Income taxes (535) 1
Share based payments 301 272
Increase in trade and other receivables (27) (1,776)
Increase in trade and other payables 1,329 2,895
Cash generated by / (used in) operating activities 1,317 (2,016)
Income taxes received 535 (1)
Interest paid (58) (5)
Net cash generated by / (used in) operating activities 1,794 (2,022)
Cash flows from investing activities
Purchase of equipment and fixtures (49) (57)
Purchase of intangible assets (155) -
Development expenditure capitalised (1,825) (1,601)
Interest received 32 3
Net cash generated by /(used in) investing activities (1,997) (1,655)
Cash flows from financing activities
Proceeds from Issue of shares, 3,647 -
Costs relating to issue of shares (237) -
Drawdown on loan facility 1,000 -
Repayment of loan facility (1,000) -
Principal element of lease payments (44) (42)
Net cash generated by / (used in) financing activities 3,366 (42)
Net increase/ (decrease) in cash 3,163 (3,719)
Cash and cash equivalents at beginning of year 1,169 4,888
Net increase / (decrease) in cash 3,163 (3,719)
Cash and cash equivalents at end of year 4,332 1,169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
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 2024 or 2023, but is derived from these financial statements. The
financial statements for the year ended 30 June 2023 have been audited and
filed with the Registrar of Companies. The financial statements for the year
ended 30 June 2023 have been prepared in accordance with UK adopted
international accounting standards and the requirements of the Companies Act
2006. The financial statements for the year ended 30 June 2024 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 2024 and
2023 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.
The Group's consolidated financial statements (the "financial statements") of
PCI-PAL PLC (the "Company") and its subsidiaries (together the "Group") for
the year ended 30 June 2024 were authorised for issue by the Board of
Directors on 22 October 2024 and the Chief Executive, James Barham signed the
balance sheet.
2. NATURE OF OPERATIONS AND GENERAL INFORMATION
PCI-PAL PLC is the Group's ultimate parent company. It is a public limited
company incorporated and domiciled in the United Kingdom. PCI-PAL PLC's shares
are quoted and publicly traded on the AIM division of the London Stock
Exchange. The address of PCI-PAL PLC's registered office is also its principal
place of business.
The parent 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.
Changes in accounting policies
There were no changes in accounting policies during the financial year.
The following amendments are effective for the period beginning 1 January
2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 Presentation
of Financial Statements and IFRS Practice Statement 2 Making Materiality
Judgements).
· Definition of Accounting Estimates (Amendments to IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors);
These amendments to various IFRS Accounting Standards are mandatorily
effective for reporting periods beginning on or after 1 January 2023. IFRS
16 Leases has bee removed as a critical accounting estimate.
The preparation of the financial statements requires the use of certain
critical accounting estimates and assumptions and also requires management to
exercise judgement in the process of applying the Group's accounting policies.
The Directors have identified the critical accounting estimates and
assumptions in note 4 s) and the critical accounting judgements in note 4 t)
used in the preparation of these financial statements and summarised the
material accounting policy information, as set out in note 4 below.
Standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements, there are a number of other amendments and clarifications to IFRS effective in future years, which are not expected to significantly impact the Group's consolidated results or financial position.
4. MATERIAL ACCOUNTING POLICY INFORMATION
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 UK adopted
international accounting standards "IFRS's" 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 2024. 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 Group's activities and an outline of the developments taking place in
relation to its products, services and markets are considered in the Chief
Executive's statement. The principal risks and uncertainties and mitigations
are included in the Strategic Report.
Note 21 to the consolidated financial statements sets out the Company's
financial risks and the management of capital risks.
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 and a revolving credit facility with a maximum
borrowing of up to £3 million (subject to covenant tests continuing to be
met). Cash balances for the Group were £4.33 million at 30 June 2024. The
Group has net current liabilities of £5.90 million, including £12.6 million
in relation to deferred income that has been paid by customers in advance and
these sums are not ordinarily recoverable by the customers.
The Board continues to monitor the Group's trading performance carefully
against its original plans, global economic pressures, such as inflation,
global events and other factors affecting our core markets and products. In
all circumstances the Board is satisfied mitigations can be taken to react to
unforeseen adverse trends and circumstances to ensure the continues trading of
the Group.
During the year the Group continued to win new contracts, recording new ACV
sales of £3.76 million, as well as substantial growth in its transactional
revenues. Customer retention remains high.
The Group's SaaS-based business model involves a high level of annual
recurring revenue and operational leverage, which provides the Directors with
a high degree of visibility of future revenues and cashflows. During the year
the Group achieved positive adjusted EBITDA of £0.87 million (the loss on
operating activities before depreciation and amortisation, exchange rate
movements charged to the profit and loss, exceptional items and expenses
relating to share option charges) and positive adjusted free cashflow of
£0.97 million(net increase in cash excluding net proceeds from issue of
shares), in both cases reflecting the high cash conversion rate of the Group's
business model.
An operating budget and cashflow was prepared, along with an extended forecast
to December 25, following detailed face-to-face meetings with all managers
with a focus on building on the existing strong performance and on the product
plans and roadmap.
The Board considered the prepared budgets 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. During the year the Group reached
a confidential settlement of all claims relating to the patent case
litigation, thereby removing a potential risk relating to the Group's future
cash flow forecast. The sensitivity scenarios around the budget models
indicate that the Group would continue to have sufficient resources to meet
its expansion plans in FY25 and continue to meet its liabilities as they fall
due.
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, together with the
contingencies that can be taken if the budget assumptions prove to be
materially inaccurate. The Board is therefore satisfied in the Group's ability
to meets its liabilities as they fall due.
The Directors therefore have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future (and in any event for at least 12 months from the date of approval of
these financial statements). For these reasons, the Directors continue to
adopt the going concern basis in preparing the accounts, and so, the financial
statements do not include the adjustments that would be required if the Group
and Company were unable to continue operate as a going concern.
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. These one-off services 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 when the
performance obligations have been met, generally from the earlier of the point
the contract goes live or when the customer takes over the solution. Revenue
from telephony services is recognised as revenue at a point in time as the
services are used by the customer.
(ii) Revenue recognition of the one-off set up fees
Revenue for the one-off set up, professional services and installation fees is
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 deemed to be 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 determined 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 which is supported by historical evidence of renewal rates and
periods.
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
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:
· Capitalised Development
20%
Costs relating to any remediation and testing thereof are expensed.
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. Costs that have been fully amortised over their useful economic lives
will be disposed of 12 months from that date, unless there is specific
evidence that the asset is still available for use.
Other intangible assets
The cost of licences, company website and computer software acquired are
stated at cost, net of amortisation and any provision for impairment.
· Licences
20%
· Website and Computer Software 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 under 12 months and leases of low
value assets (less than £5,000) 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 Parent 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.
At the date of each statement of financial position, the parent company
revises its estimate of the number of equity instruments that are expected to
become exercisable. It recognises the impact of the revision of original
estimates, if any, in the income statement, and a corresponding adjustment is
made to equity over the remaining vesting period. The fair value of the awards
and ultimate expense are not adjusted on a change in market vesting conditions
during the vesting period.
The value of share-based payment is taken directly to reserves and the charge
for the period is recorded in the income statement. The company's scheme,
which awards shares in the parent entity, includes recipients who are
employees in all subsidiaries. In the consolidated financial statements, the
transaction is treated as an equity-settled share-based payment, as the
PCI-PAL has received services in consideration for equity instruments. An
expense is recognised in the Group income statement for the fair value of
share-based payment over the vesting year, with a credit recognised in equity.
In the parent company's and subsidiaries' financial statements, the awards, in
proportion to the recipients who are employees in said subsidiary, are treated
as an equity-settled share-based payment, as the subsidiaries do not have an
obligation to settle the award. An expense for the grant date fair value of
the award is recognised over the vesting year, with a credit recognised in
equity on the subsidiary's accounts. This credit is treated as a capital
contribution. In the parent company's financial statements, there is no
share-based payment charge where the recipients are employed by a subsidiary,
with the parent company recognising an increase in the investment in its
subsidiaries reflecting a capital contribution from the parent company.
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 2024.
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 2024, 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.
Companies within the Group may be entitled to claim special tax allowances in
relation to qualifying research and development expenditure (e.g. R & D
tax credits). The Group accounts for such allowances as tax credits which
means they are recognised when it is probable that the benefit will flow to
the Group and that the benefit can be reliably measured. R&D tax credits
reduce current tax expense and, to the extent the amounts are due in respect
of them and not settled by the balance sheet date, reduce current tax payable.
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
option 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) Critical accounting estimates and assumptions
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 critical accounting estimates and
assumptions 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.
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; and
· 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.
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 £6,353,000 and corresponding change in the tax charge
reported.
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) Critical accounting judgements
In the process of applying the Group's accounting policies, the Directors make
various accounting judgements that can significantly affect the amounts
recognised in the financial statements. The critical accounting 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
Intangible assets are separately identified where they are capable of being
separated or divided from the entity and sold, transferred, licensed, rented
or exchanged. Each separately identified intangible asset is amortised over a
defined period. The Directors use certain judgements and assumptions to
ascertain the period of amortisation to be used for the intangible asset.
5. LOSS FROM OPERATING ACTIVITIES
The loss on ordinary activities is stated after:
2024 2023
£000s £000s
Disclosure of the audit and non-audit fees
Fees payable to the Group's auditors for the current year:
The audit of Company's accounts 57 55
The audit of the Company's subsidiaries pursuant to legislation 80 52
Additional fees payable to the Group's auditors for the prior year:
The audit of Company's accounts 11 -
The audit of the Company's subsidiaries pursuant to legislation 32 5
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 116 110
Intangible assets 1,266 1,046
1,382 1,156
Rents payable on flexible office space 118 116
Share based payments charge 301 272
Foreign exchange loss in period 53 330
6. EXCEPTIONAL ITEMS
The exceptional items referred to in the income statement can be categorised
as follows:
2024 2023
£000s £000s
Cost award received in respect of patent case 1,067 -
Exceptional income 1,067 -
Direct costs in respect of patent case 1,564 1,982
Direct costs in respect of internal re-organisation 297 -
Exceptional expenses 1,861 1,982
Exceptional items relate to the following:
· Costs awarded by the High Court of England and Wales received in
relation to the successful outcome of the unfounded patent claim in the UK.
For further details, see Note 24.
· Non-recurring legal fees and other direct costs in respect of
defending the unfounded patent claim against the Group. For further details,
see Note 24.
· One-off internal restructuring costs, which includes redundancy
and termination payments, associated social security costs and legal fees.
Included in the above, is an amount of £169,000 which was accrued at the
balance sheet date and paid following the year end.
Exceptional items are presented separately in the Statement of Comprehensive
Income to aid the understanding of users of the financial statements.
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
2024 2023
£000s £000s
Bank interest receivable 32 3
32 3
8. FINANCE EXPENDITURE
2024 2023
£000s £000s
Interest on bank borrowings 58 5
Other bank charges 26 37
84 42
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.
2024 2023
£000s £000s
Wages and salaries 10,950 10,034
Social security costs 1,045 965
Other pension costs 196 176
12,191 11,175
Included in the above figures is £1,257,000 (2023: £992,000) of sales
commissions paid in the year, 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 £971,000 (2023:
£698,000) has been excluded from the above disclosure.
2024 2023
Average number of employees during the year:
Heads Heads
Sales and marketing 33 33
Engineering and professional services 71 62
Administration and management 17 18
121 113
Remuneration in respect of directors was as follows: 2024 2023
£000s £000s
Emoluments 665 613
Bonus 179 160
Payment in lieu of notice 140 -
Pension contributions to money purchase pension schemes 32 26
Employer's national insurance and US federal taxes 123 102
1,139 901
During the year, 3 (2023: 3) 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:
2024 2023
£000s £000s
Emoluments 273 247
Bonus 154 88
Pension contributions to money purchase pension schemes 29 24
456 359
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 segment: 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
2024 £000s £000s £000s £000s
Revenue 11,257 6,286 417 - 17,960
Cost of sales (1,866) (71) (2) - (1,939)
Gross profit 9,391 6,215 415 - 16,021
83% 99% 99% 89%
Administration expenses (9,679) (5,450) (566) (1,193) (16,888)
Inter-company royalty 1,660 (1,556) (104) - -
Exceptional items (58) (784) (11) 58 (795)
Profit / (loss) from operating activities 1,314 (1,575) (266) (1,135) (1,662)
Finance income 13 - - 19 32
Finance costs (21) (7) - (56) (84)
Profit / (loss) before tax 1,306 (1,582) (266) (1,172) (1,714)
PCI Pal
PCI Pal North America PCI Pal
EMEA £000s ANZ Central Total
2024 £000s £000s £000s £000s
Segment assets 9,064 4,065 122 2,265 15,516
(8,684) (7,898) (346) (558) (17,486)
Segment liabilities
Other segment items:
Capital Expenditure
- Equipment, Fixtures & Licences 296 2 1 - 299
Capital Expenditure
- Capitalised Development 1,825 - - - 1,825
Depreciation
- Equipment, Fixtures & Licences 191 1 1 - 193
Amortisation- Capitalised Development
1,189 - - - 1,189
PCI Pal
PCI Pal North America PCI Pal
2023 EMEA £000s ANZ Central Total
£000s £000s £000s £000s
Revenue 9,964 4,752 229 - 14,945
Cost of sales (1,782) (65) (2) - (1,849)
Gross profit 8,182 4,687 227 - 13,096
82% 99% 99% 88%
Administration expenses (8,846) (5,313) (531) (1,276) (15,966)
Inter-company royalty 1,188 (1,188) - - -
Exceptional items - (696) - (1,286) (1,982)
Profit / (loss) from operating activities 524 (2,510) (304) (2,562) (4,852)
Finance income - - - 3 3
Finance costs (32) (9) - (1) (42)
Profit / (loss) before tax 492 (2,519) (304) (2,560) (4,891)
PCI Pal
PCI Pal North America PCI Pal
2023 (as restated*) EMEA £000s ANZ Central Total
£000s £000s £000s £000s
Segment assets 8,042 3,091 170 210 11,513
(7,983) (6,837) (297) (918) (16,035)
Segment liabilities
Other segment items:
Capital Expenditure
- Equipment, Fixtures & Licences 53 2 2 - 57
Capital Expenditure
- Capitalised Development 1,550 - - - 1,550
Depreciation
- Equipment, Fixtures & Licences 151 - 1 - 152
Amortisation
- Capitalised Development 900 - - - 900
Revenue can be split by location of customers as follows:
2024 2023
Customer location £000s £000s
United Kingdom 11,063 9,487
United States of America 5,841 4,304
Canada 417 394
Rest of Europe 180 496
Asia Pacific 459 264
Total 17,960 14,945
100% (2023: 100%) of all non-current assets are located in the United Kingdom
and the largest customer accounted for 14% (2023: 16%) of the revenue of the
Group.
11. LOSS PER SHARE
The calculation of the loss per share is based on the loss after taxation
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
2024 2023
Loss after taxation added to reserves (£1,179,000) (£4,892,000)
Basic weighted average number of ordinary shares in issue during the period
67,645,922 65,452,589
Diluted weighted average number of ordinary shares in issue during the period
76,418,839 73,794,673
Basic and diluted loss per share (1.74) p (7.47) p
There are no separate diluted loss per share calculations shown as it is
considered to be anti-dilutive.
12. TAXATION
2024 2023
£000s £000s
Analysis of charge in the year
Current tax:
In respect of the year:
Corporation tax based on the results for the year - -
R & D Tax credit received 536 -
Foreign corporate taxes paid (1) (1)
Total current tax credit / (charge) 535 (1)
Deferred tax:
Origination and reversal of timing differences - -
Total deferred tax charged - -
Tax on profit on ordinary activities (charged) / credited 535 (1)
Factors affecting current tax charge
The tax assessed on the loss on ordinary activities for the year was higher
(2023: higher) than the standard rate of corporation tax in the UK of 25%
(2023: 25%).
2024 2023
£000s £000s
Loss on ordinary activities before tax (1,714) (4,891)
Tax on loss on ordinary activities at standard UK rate of taxation of 25%
(2023: 25%)
(428) (1,223)
Effects of:
Overseas tax rates 64 28
Expenses not deductible for tax purposes 69 78
536 -
R & D tax credit received
Fixed asset differences - (4)
Share based payments (17) (1)
Minimum US state taxes paid in year (1) (1)
Origination and reversal of timing differences on unrecognised deferred tax 376 1,150
losses
Effect of different tax rates applied in overseas jurisidctions (64) (28)
Total tax credited / (charged) for the year 535 (1)
The Group has unrecognised tax losses carried forward of £24.6 million (2023:
£23.1 million).
Approximately 4% (2023: 6%) of the total carried forward tax losses will
expire in 2038 if no taxable profits are generated to offset the loss carry
forwards. These tax losses are held in the Group's US
subsidiary with the remaining US trading losses being available indefinitely
but only to offset up to 80% of the taxable profits in any given year.
The R&D tax credit received in FY 2024 is in relation to financial years
2021 and 2022.
13. INTANGIBLE ASSETS
Website and Computer Software
2024 Capitalised Development £000s
Licences £000s Total
£000s £000s
Cost:
At 1 July 2023 427 5,939 226 6,592
Additions 250 1,825 72 2,147
Disposals - (951) (64) (1,015)
At 30 June 2024 677 6,813 234 7,724
Amortisation (included within administrative expenses):
At 1 July 2023 283 2,962 131 3,376
Charge for the year 77 1,126 63 1,266
Disposals - (951) (64) (1,015)
At 30 June 2024 360 3,137 130 3,627
Net book amount at 30 June 2024
317 3,676 104 4,097
Website and
2023 Capitalised Computer
Licences Development Software Total
Cost: £000s £000s £000s £000s
At 1 July 2022 427 4,389 175 4,991
Additions - 1,550 51 1,601
At 30 June 2023 427 5,939 226 6,592
Amortisation (included within administrative expenses):
At 1 July 2022 198 2,062 70 2,330
Charge for the year 85 900 61 1,046
At 30 June 2023 283 2,962 131 3,376
Net book amount at 30 June 2023
144 2,977 95 3,216
14. PLANT AND EQUIPMENT
Right of use Asset Fixtures
2024 £000s and Fittings Computer Equipment
£000s £000s Total
£000s
Cost:
At 1 July 2023 128 27 240 395
Additions - - 49 49
Disposals - (15) (35) (50)
At 30 June 2024 128 12 254 394
Depreciation (included within administrative expenses):
At 1 July 2023 64 18 128 210
Charge for the year 43 2 71 116
Disposals - (15) (35) (50)
At 30 June 2024 107 5 164 276
Net book amount at 30 June 2024
21 7 90 118
Right Fixtures
2023 of use and Computer
Asset Fittings Equipment Total
Cost: £000s £000s £000s £000s
At 1 July 2022 128 34 195 357
Additions - - 57 57
Disposals - (7) (12) (19)
At 30 June 2023 128 27 240 395
Depreciation (included within administrative expenses):
At 1 July 2022 21 23 75 119
Charge for the year 43 2 65 110
Disposals - (7) (12) (19)
At 30 June 2023 64 18 128 210
Net book amount at 30 June 2023
64 9 112 185
15. TRADE AND OTHER RECEIVABLES
Due within one year 2024 2023
£000s £000s
Trade receivables 3,551 3,508
Accrued income 27 149
Deferred costs 938 739
Other prepayments 940 974
Other debtors - 6
Trade and other receivables due within one year 5,456 5,376
Due after more than one year 2024 2023
£000s £000s
Deferred costs 1,466 1,464
Other prepayments 47 103
Trade and other receivables due after one year 1,513 1,567
The fair value of all amounts are considered to be approximately equal to
their carrying value. The maximum exposure to credit risk at the reporting
date is the carrying value of the trade receivables balance. 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:
2024 2023
£000s £000s
Opening provision at 1 July - 1
Credited to income - (1)
Closing provision at 30 June - -
There are no impaired trade receivables at the reporting dates. In addition,
there are non-impaired trade receivables that are past due at the reporting
date:
2024 2023
£000s £000s
0-1 month past due 436 279
1-2 months days past due 36 322
Over 2 months past due 106 332
578 933
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 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
As restated*
2024 2023
£000s £000s
Trade payables 738 1,766
Social security and other taxes 563 350
Deferred Income 12,620 8,364
Right of use lease liability 23 44
Accruals and other creditors 1,743 1,617
Total current liabilities due within one year 15,687 12,141
17. NON-CURRENT LIABILITIES
As restated*
2024 2023
£000s £000s
Deferred Income 1,716 3,871
Right of use lease liability - 23
Accruals and other creditors 83 -
Total non-current liabilities due after one year 1,799 3,894
The deferred income figures in Notes 16 and 17 above include 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
2024 2023
£000s £000s
Balance at 30 June - -
Unprovided deferred tax assets 2024 2023
£000s £000s
TIming differences on intangible assets and plant and equipment (245) (370)
Short term timing differences relating to deferred income 371 506
Equity-settled share options 380 246
Trading losses 5,847 5,541
6,353 5,923
The unprovided deferred tax assets are calculated at an average rate for each
country as follows:
UK 25.0% (2023:
25.0%)
USA 24.0% (2023: 24.0%)
Australia 25.0% (2023: 25.0%)
Canada 26.5% (2023: 26.5%)
The deferred tax asset is not recognised as there is insufficient evidence of
future taxable profits against which the asset will be available for offset.
19. GROUP UNDERTAKINGS
At 30 June 2024, 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 2024 2024 2023 2023
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 72,259,818 723 65,619,818 656
On 10 October 2023, the Company issued 10,000 ordinary shares of 1 pence in
settlement of an exercise of options at 40 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 23 pence per share.
On 22 January 2024, the Company issued 60,000 ordinary shares of 1 pence in
settlement of an exercise of options at 44.5 pence per share.
On 18 March 2024, the Company placed 6,250,000 ordinary shares of 1 pence with
various institutional investors, priced at 56 pence per share. The placing
raised a gross amount of £3.50 million before expenses of £0.24 million
which were deducted from share premium. The new shares represent approximately
8.7% of the Company's issued ordinary share capital (excluding those held as
treasury shares) immediately following the placing.
On 04 April 2024, the Company issued 200,000 ordinary shares of 1 pence in
settlement of an exercise of options at 40 pence per share.
On 11 April 2024, the Company issued 25,000 ordinary shares of 1 pence in
settlement of an exercise of options at 26.5 pence per share.
On 15 April 2024, the Company issued 10,000 ordinary shares of 1 pence in
settlement of an exercise of options at 28.5 pence per share.
On 11 June 2024, the Company issued 75,000 ordinary shares of 1 pence in
settlement of an exercise of options at 33 pence per share.
The Group owns 167,229 (2023: 167,229) shares and these are held as Treasury
Shares.
During the year, the share price fluctuated between 39.5 pence and 66.0 pence
and closed at 62.5 pence on 30 June 2024.
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% of 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 data
of issue of the option, and are accounted using the graded vesting model
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 £240,690 (2023: £225,262) has been charged to the statement of
comprehensive income 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 £60,359 (2023: £46,610) has been charged to the statement of
comprehensive income for this financial year.
The analysis of the Company's option activity for the financial year is as
follows:
2024 2023
Weighted Number of Weighted Number of
Average exercise Options Average exercise Options
Price price
£ £
Options outstanding at start of year 0.469 8,581,667 0.463 8,146,667
Options granted during the year 0.528 1,065,000 0.541 755,000
Options exercised during the year 0.372 (390,000) - -
Options forfeited during the year 0.479 (195,000) 0.490 (320,000)
Options outstanding at end of year 0.480 9,061,667 0.469 8,581,667
Options exercisable at the end of year 5,062,517 4,040,805
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 2024, the Group had a closing cash balance of £4,332,000 (2023:
£1,169,000) and borrowings of £nil (2023: £nil).
During the previous year, the Group entered into a multi-currency revolving
loan facility, secured on the assets of the Group by fixed and floating
debentures with appropriate cross guarantees, with HSBC Innovation Bank
(formerly Silicon Valley Bank UK) with a maximum facility of £3 million. The
available facility level is calculated on a monthly basis subject to the
limits of the covenant tests detailed below. The principal terms are as
follows:
Term
36 months
Interest rates GBP - 4% over
the Bank of England base rate
USD - 0.5% over The Wall Street Journal prime rate
EUR - 5.75% over the European Central Bank's base rate
All interest rates are subject to a minimum rate of 4.5% and are
paid monthly
Arrangement Fee 1.5% of loan facility
Non utilisation fee 1.8% of unutilised amount
paid quarterly
Security
Fixed and Floating debenture over the assets of the Group.
Loan advances can be made at any time at the request of the Group and drawn
down in minimum amounts of £250,000, $250,000 or €250,000. The facility
will be used to support the working capital requirements of the Group as it
continues to grow.
On 31 July 2024, an amendment letter to the HSBC facility was signed, and the
facility term was extended to 31 July 2026.
A summary of which are as follows:
1. Liquidity covenant
The Liquidity Cover Ratio is the ratio of Liquid Assets (Cash and 60% of
Billed debtors) to outstanding borrowings under the facility and must be no
less than 1.75 : 1.00.
2. EBITDA covenant
The 12 months trailing adjusted EBITDA of the Group, before exceptional items
and after deducting capitalised development costs, shall be no worse than an
end of quarter target that increases over time as the Group moves from loss to
profit.
3. Advance rate multiplier.
The amounts advanced under the Loan Agreement shall be no more than A x (B -
C), where: A = 3.5; B = 1; C = the Churn Rate, times by the Monthly Recurring
Revenue.
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.
Interest rate risk
The Group has arranged a bank loan with HSBC, as detailed above. As at 30
June 2024 the loan was undrawn. Interest is calculated at current rates
between and 9.0% and 10.0%, depending on the currency drawn and is paid
monthly.
Given the rising interest rates over the last 12 months, there is an increased
interest rate risk but the current cash flow forecast does not rely on debt
borrowing in the next financial year. For this reason, the Group does not
consider the interest rate risk to be material and so has not entered into any
hedging arrangements.
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.
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 14% (2023: 16%) of revenues in the financial year, but this is
expected 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 seeks to manage financial risk, to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably. The Group's policy through the period has been to ensure
continuity of funding by equity backed up by access to a maximum £3.0 million
multi-currency revolving loan facility, as detailed above.
The table below summarises the maturity profile of the Group's financial
liabilities at the year-end based on contractual undiscounted payments,
specifically noting that the lease liability total is determined as the
undiscounted lease payments including interest payable.
At 30 June 2024:
Group On demand Less than 3 to 12 months 1 to 5 > 5 years Total
3 months years
£000 £000 £000 £000 £000 £000
Trade and other payables - 1,301 - - - 1,301
Lease liability - 12 11 - - 23
- 1,313 11 - - 1,324
At 30 June 2023:
Group On demand Less than 3 to 12 months 1 to 5 > 5 years Total
3 months years
£000 £000 £000 £000 £000 £000
Trade and other payables - 2,116 - - - 2,116
Lease liability - 11 33 23 - 67
- 2,127 33 23 - 2,183
Foreign currencies and foreign currency risk
During the year, the Group received revenue in GBP, USD, CAD, EURO and AUD,
whilst the majority of its cost base is in GBP and USD. These currency
receipts tend to be used first to cover costs in the same currency before
conversion to other relevant currencies, and so currency risk impacting cash
balances is deemed to be appropriately managed.
Intercompany loans from PCI-PAL PLC to fund the US operations is denominated
in the US entity in USD and so is translated to GBP each period end,
potentially resulting in significant debits or credits to the Company's profit
and loss but with no cash or other impact on the Group as the loan is
eliminated on consolidation. Management notes that such foreign exchange
movements are non-cash items. No forward foreign exchange contracts were
entered into during the period (2023: nil).
As at the 30 June 2024 the Group held the following foreign currency cash
balances:
US Dollar $1,802,216 Sterling equivalent: £1,425,015 (2023: £347,160)
Canadian Dollar $123,560 Sterling equivalent: £71,414 (2023: £50,608)
Australian Dollar $27,212 Sterling equivalent: £14,349 (2023: £34,335)
Euro €5,157 Sterling equivalent: £4,370 (2023: £24,755)
Total Sterling equivalent: £1,515,148 (2023: £456,858)
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, although management will keep the need
for sensitivity analysis under regular review going forward.
22. CAPITAL COMMITMENTS
The Group has no capital commitments at 30 June 2024 or 30 June 2023.
23. CONTINGENT ASSETS
The Group has no contingent assets at 30 June 2024 or 30 June 2023.
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
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, the Group announced that Semafone Limited (now renamed
Sycurio Limited), one of PCI Pal's direct competitors, had filed lawsuits in
both the UK and the US relating to alleged patent infringement by PCI Pal
concerning one aspect of its Agent Assist product.
As announced on 25 September 2023, PCI Pal was successful in comprehensively
defeating the unfounded patent infringement suit being brought in the UK by
Sycurio. The High Court judgement was resoundingly in PCI Pal's favour,
with the judge ruling that Sycurio's patent was invalid due to obviousness
from two sources of prior art. Furthermore, the judge decided that even if the
patent had been valid, PCI Pal's Agent Assist solution did not infringe the
patent and Sycurio also accepted that the variants submitted by PCI Pal, which
were changes it could make to its solution, would also not have infringed.
On 22 May 2024, the Court of Appeal upheld the original ruling of the High
Court in favour of the PCI Pal, and dismissed all claims being brought by
Sycurio.
As announced on 27 June 2024, PCI Pal reached a confidential settlement with
Sycurio that resolved both the UK and US litigation in full. Therefore, as at
the balance sheet date the Directors do not believe there to be a contingent
liability in respect to the patent case.
25. TRANSACTIONS WITH DIRECTORS
Apart from the directors' standard remuneration there were no other
transactions with directors in the year to 30 June 2024 or 30 June 2023.
26. DIVIDENDS
The Directors are not proposing a dividend for the financial year (2023: nil
pence per share).
27. PRIOR PERIOD RESTATEMENT
The Directors have identified a prior period adjustment relating to revenue
recognition in prior periods. FY22 has been restated to correct the historical
timing of revenue recognition in respect of certain customer contracts and to
appropriately adjust the resulting deferred income balances carried forward.
At 30 June 2022 and 30 June 2023, the result of these adjustments on the
consolidated statement of financial position was to increase current deferred
income by £0.32 million and non-current deferred income by £0.09 million,
with a corresponding increase in net liabilities of £0.41 million. There was
no impact on the consolidated statement of comprehensive income and no impact
on the consolidated statement of cashflows.
The effect of the correction of the prior period error on the Statement of
Financial Position as at 30 June 2022, as shown below
Reconciliation of equity as at 30 June 2022
As originally stated Prior period restatement As restated
£000s £000s £000s
Deferred income due within 1 year (9,286) (319) (9,605)
Total current Liabilities (11,372) (319) (11,691)
Deferred income due after 1 year (1,330) (94) (1,424)
Total non-current liabilities (1,397) (94) (1,491)
Total liabilities (12.769) (413) (13,182)
Net assets /(liabilities) 185 (413) (228)
Share capital 656 - 656
Share premium 14,281 - 14,281
Other reserves 650 - 650
Currency reserves (620) - (620)
Profit and loss account (14,782) (413) (15,195)
Total equity (Shareholders' deficit) 185 (413) (228)
Reconciliation of equity as at 30 June 2023
As originally stated Prior period restatement As restated
£000s £000s £000s
Deferred income due within 1 year (8,045) (319) (8,364)
Total current Liabilities (11,822) (319) (12,141)
Deferred income due after 1 year (3,777) (94) (3,871)
Total non-current liabilities (3,800) (94) (3,894)
Total liabilities (15,622) (413) (16,035)
Net assets /(liabilities) (4,109) (413) (4,522)
Share capital 656 - 656
Share premium 14,281 - 14,281
Other reserves 922 - 922
Currency reserves (294) - (294)
Profit and loss account (19,674) (413) (20,087)
Total equity (Shareholders' deficit) (4,109) (413) (4,522)
28. SUBSEQUENT EVENTS
An amendment letter to the Revolving Credit facility with HSBC was signed on
31 July 2024, extending the facility term to 31 July 2026.
On 5 July 2024 the Company issued 25,000 new shares in settlement of an
exercise of share options.
On 8 July 2024 the Company issued 300,000 new shares in settlement of an
exercise of share options.
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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