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REG - PCI-PAL PLC - Interim Results, Board Change & Presentations

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RNS Number : 5186E  PCI-PAL PLC  27 February 2024

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the company's obligations under Article 17 of
MAR.

 

27 February 2024

PCI-PAL PLC

("PCI Pal" or "the Group" or "the Company")

Interim Results for the six months to 31 December 2023

Board Change, Analyst Briefing & Investor Presentation

 

PCI-PAL PLC (AIM: PCIP), the global cloud provider of secure payment solutions
for business communications, is pleased to announce its unaudited interim
results for the six months to 31 December 2023.

Financial highlights for the period

 

                                             H1 FY24 ending 31 December 2023  H1 FY23 ending 31 December 2022

                                                                                                               Change

 Revenue                                     £8.74m                           £7.26m                           +20%
 Gross Margin %                              89%                              87%                              +200 bp
 % of revenues from recurring contracts      90%                              85%                              +500 bp
 Adjusted EBITDA(1) profit / (loss)          £0.25m                           (£0.57m)                         +147%
 Adjusted loss from operating activities(7)  (£0.42m)                         (£1.14m)                         +63%
 Statutory loss from operating activities    (£1.26m)                         (£1.88m)                         +33%

 ARR(4)                                      £14.69m                          £11.92m                          +23%
 TACV(3)                                     £17.46m                          £14.74m                          +18%
 New ACV(2) contract sales in period         £1.60m                           £1.47m                           +9%

 NRR(5)                                      102%                             106%                             -300bp
 Customer retention(6)                       96%                              95%                              +100bp

Operating highlights in the period

 

·      Positive Group Adjusted EBITDA underpinned by revenue growth of
20%.

·      Positive cash generation from operations in period and excellent
progress being made towards our near-term objective of delivering sustained
profitability.

·      Cash and cash equivalents at the period end was £0.8m and net
cash was £0.55m. As at today's date the Company's debt facility is currently
undrawn.

·      TACV increased 18% year on year to £17.4 million (2022: £14.7
million), contributed to by continued new business sales momentum, with £1.6
million ACV added in the period.

·      Strong growth of US operations with new business ACV in the
region up 35% on same period in prior year.

·      Exceptional service levels, including 100% global platform uptime
for the period, contributing to strong customer retention with gross revenue
retention at 96% for H1.

·      Good progress made in product development, with new products and
enhancements now coming to market with key partner roll out commencing in H2.

·      Comprehensive victory in UK trial in patent lawsuit.

 

Current trading

H2 has started positively with new business sales momentum continuing. ACV
year to date is now at £2.2m which is 25% ahead of the same period in the
prior year. We remain focused on the near-term profitability objectives that
we have set for the Company this year and look forward to the launch of our
new products and enhancements during the second half. We are also very much
focused on capitalising on the market opportunity before us and continue to
progress the strategic initiatives that we believe will enhance shareholder
value in the long term.

 

Board Change

PCI Pal today announces that William Good has informed the Board of his
intention to retire as Chief Financial Officer and Executive Director of the
Company to pursue his other existing business interests.  The Board has
initiated a process to appoint a successor and William will continue in his
role until that successor is in place, to ensure a smooth handover of
responsibilities.

( )

(1) Adjusted EBITDA is the loss on Statutory Operating Activities before
depreciation and amortisation, exchange movements charged to the profit and
loss, exceptional items and expenses relating to share option charges.

(2) ACV is the annual recurring revenue generated from a contract.

(3) 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.

(4) ARR is the Annual Recurring Revenue of all the deployed contracts.

(5) 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.

(6) Customer retention is calculated using the formula 1 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).
(7) Adjusted loss from operating activities is the loss on Statutory Operating Activities before exchange movements charged to the profit and loss, exceptional items and expenses relating to share option charges.

 

Commenting on the results for the period, James Barham, Chief Executive
Officer said:

"Firstly, I would like to take this opportunity to thank William Good who has
been a hugely valuable member of the team at PCI Pal since he joined the
Company in 2017.  We have worked very closely together, and he has provided
excellent and trusted support as we undertook a new strategy to capture the
market opportunity for our technology. William leaves PCI Pal in an excellent
place, with the business growing from strength to strength.

"I am delighted with the continued progress we have made in H1, and I believe
that we are well on our way to achieving the key financial objectives we set
for the year. Revenue growth momentum continues as a result of the
accumulation of new business and also exceptionally high customer retention
rates. Our cloud native partner-first strategy continues to deliver excellent
results.  Together with the strength of our technology and high service
levels we have an excellent platform for future growth.

"The continued progress of the business over the last two years is even more
pleasing given the management distraction and cash we have used on the patent
case. With the comprehensive victory in the UK trial, we believe the risk of
the case to the business is now substantially reduced and given the strength
of our trading position today we are looking positively further forward into
the future. We have a strong business behind us, with leading metrics in our
market, and a product roadmap that has the potential to enhance our global
market opportunity long term."

Analyst Briefing: 9.30am today, Tuesday 27 February 2024

 

An online briefing for Analysts will be hosted by James Barham, Chief
Executive, and William Good, Chief Financial Officer, at 9.30am today Tuesday
27 March 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: 3.00pm on Thursday 29 February 2024 (UK time)

 

The Directors will hold an investor presentation to cover the results and
prospects at 3.00pm on Thursday 29 February 2023 (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

 William Good - Chief Financial Officer
 Cavendish Capital Markets Limited (Nominated Adviser and Broker)  +44 (0) 20 7227 0500
 Marc Milmo/Simon Hicks (Corporate Finance)

 Sunila De Silva (Corporate Broking)
 Walbrook PR                                                       +44 (0) 20 7933 8780
 Tom Cooper/Nick Rome/Joe Walker                                   +44 (0) 797 122 1972
                                                                   PCIPAL@walbrookpr.com

 

 

About PCI Pal:

 

PCI Pal is a leading provider of Software-as-a-Service ("SaaS") solutions that
empower companies to take payments from their customers securely, adhere to
strict industry governance, and remove their business from the significant
risks posed by non-compliance and data loss. Our products secure payments and
data in any business communications environment including voice, chat, social,
email, and contact centre. We are integrated to, and resold by, some of the
worlds' leading business communications vendors, as well as major payment
service providers.

 

The entirety of our product-base is available from our global cloud platform
hosted in Amazon Web Services ("AWS"), with regional instances across EMEA,
North America, and ANZ.

 

For more information visit www.pcipal.com (http://www.pcipal.com) or follow
the team on Linkedin: https://www.linkedin.com/company/pci-pal/
(https://www.linkedin.com/company/pci-pal/)

 

Chief Executive Officer's Business Review

Overview

 

We continue to execute well against our core strategic pillars; to be the
market leader in true cloud capabilities in our space; to leverage our cloud
platform to access the breadth of the market opportunity in contact centres
globally; and to do so leveraging a partner-first sales model primarily
selling through resellers.

 

The business has taken another strong step forward in revenue growth in the
period which has increased 20% to £8.7 million (2022: £7.3 million), with
90% of revenues coming from recurring contracts (2022: 85%). Run rate ARR has
increased strongly as well, up 23% at the end of H1 to £14.7 million (2022:
£11.9 million). Gross profit margins continue to strengthen increasing to 89%
year on year (2022: 87%).

 

Further to the positive growth momentum, H1 was the Group's first reporting
period of positive adjusted EBITDA since we re-launched as PCI Pal in late
2016. As a result, and despite increased expenditure from investments made in
headcount in the prior year, we have seen a sizeable reduction in adjusted
losses which were in line with management expectations for the period with
adjusted losses before tax at £0.42 million (2022: £1.14 million).

 

New Business Sales

 

New business sales momentum continued in the period, reporting a 9% increase
YoY to £1.6 million ACV. The Group's indicator of future recurring revenue,
TACV, now stands at £17.4 million, an increase of 18% year on year (2022:
£14.7 million). Since the end of H1, YTD ACV have increased further to £2.2
million, which is 25% ahead of the same period in FY23.

 

At the end of the last financial year, we reported a strong uplift in new
business sold to new customers. This trend continued into FY24 with 87% of the
new business in the period, by value, sold to new customers of the Group. This
is an exciting trend given the continued high customer retention rates
achieved by the business. The combination of net new business, combined with
high retention rates, is creating a sizeable opportunity for the Group as its
investment in new product enhancements begin to come to fruition opening
long-term upsell opportunities across our partner eco-system and
customer-base. The Group's NRR for the period was in line with management
expectations at 102% (2022: 106%).

 

Newly signed customer highlights in H1 included:

 

§ Several new Fortune 500 customers in the US, including deals with leading
brands in the home improvements markets and a Fortune 50 pharmaceutical firm,
further adding to the Company's strength in this sector.

 

§ A new contract with a FTSE100 global provider of industrial and electronics
products initially, delivering services into the company's large US consumer
electronics business.

 

§ A number of competitor displacements in both the UK and US; including a
Fortune 500 industrial supply business; as well as an existing customer of the
Group in the US who in the UK had a historic relationship with a competitor
and has chosen to standardise with PCI Pal globally.

 

Partner Eco-system

 

With a partner-first sales model, we have been committed to building mutually
beneficial commercial relationships with our resellers for many years now. We
are proud of the strength of our partner eco-system today, which includes the
majority of the Gartner Magic Quadrant for CCaaS vendors and many sizeable
technology companies who sell our solutions as an add-on to their core
offerings.

 

The majority of our partners benefit from tight-knit, cloud-to-cloud
integrations, with PCI Pal services available to their customers on a global
basis. Our partners today include the likes of Genesys, Zoom, Talkdesk,
Worldpay, 8x8 and Vonage.

 

H1 was another strong period of trading for our channel business. In the
period we increased the value of new business signed through our partner
eco-system to 87% (£1.4 million) compared to 65% in the prior year. This is
the highest to date and is testament to the further investment we have made in
driving tighter product integrations, more sophisticated partner management,
and on-going high levels of service uptime.

 

At PCI Pal, we are highly targeted in our efforts to acquire new partners in
key technology sectors. During H1, I was particularly pleased to announce the
addition of Zoom to the PCI Pal partner eco-system. Zoom has an extensive
global business which was first born from their well-known video conferencing
services, and which accelerated particularly during the pandemic. Since that
time, Zoom has evolved into one of the largest business communications vendors
in the world, providing an entire communications suite to its customers
globally, including: video, phone (office), and contact centre. PCI Pal is an
inaugural partner, to be sold on Zoom paper, from their own partner
eco-system. We are in the late stages of product enablement with full launch
expected in several phases across our Q3 FY24. We are already beginning to see
pipeline generation from this new partner, and we expect that to accelerate as
the current financial year progresses and on into FY25.

 

Operations

 

Underpinning the revenue performance and progress towards near term
profitability are our core operations which continue to perform at
exceptionally high levels. H1 for the business was another period of 100%
uptime across the Company's global public cloud platform, highlighting the
maturity of the environment which is the market leader in terms of coverage
and customer numbers. The goal is 99.999% uptime, but to out-perform this is
testament to the early-move we made to public cloud in 2016 and the maturity
of the platform which handles calls and transactions from all verticals and
includes numerous high-volume customers across many thousands of contact
centre agents and customer interactions.

 

This performance, plus the excellent team and culture we have built at PCI
Pal, is driving top quartile customer retention levels with GRR at 96% in the
period (2022: 95%). It is not surprising therefore that our customer
satisfaction scores (CSATs) remain high at 87%.

 

Customer satisfaction starts at the very beginning of the sales cycle, through
deployment, and then into the lifetime of the contract. Our deployment
efficiency has improved in the period with a substantial increase in the
amount of ARR reaching revenue recognition in the period. In H1, £2.5 million
in new deployments reached ARR which was a 150% increase on the prior year
(2022: £1.0 million).

 

Product Update

 

We have made good progress with our product roadmap in the period, and as we
ready ourselves for full launch of a number of new product enhancements in H2.
We have already been successful in signing a number of initial customers to a
variety of these new products and features.

 

In late FY23, we announced that we were launching an enhanced speech
recognition capability and since then, in the period we have successfully sold
and deployed several customers to the new solution across both our Agent
Assist (live agent payments) and IVR (automated payments) solutions. This
speech advancement is exciting for the business, harnessing the capabilities
of AI within speech recognition engines today, available in over 100
languages, and achieving recognition success rates of more than 90%. This is
exceptionally high when compared to historic speech recognition services and
it is anticipated that it will further improve over time. We expect to see an
increase in customers opting for speech recognition as the primary data
collection method over keypad entry.

 

The Company's evolution from a pure-play security and compliance solution to a
broadened CX and revenue enhancement payments business is well underway. In
the period we moved the following roadmap items to minimum viable product
stage ("MVP") and now, with some customers live, we look ahead to H2 where we
intend to reach general availability ("GA") for these enhancements by making
them available to all customers (existing and new) and, initially, key
integrated partners as well:

 

§ A new version of our user interface ("UI") that both agents and consumers
use when taking payments with customers over the phone or across any number of
digital channels such as web chat or social media interactions.

§ Incorporated into that new UI are numerous digital payment capabilities
(available in our existing solutions today but enhanced significantly here)
which can be utilised by our customers across their customer engagement
environments, including Digital Wallets (such as ApplePay and GooglePay).

§ And with the launch of the new UI comes enhanced data analytics and
reporting capabilities that are available to partners and customers.

 

We have continued to make progress against our AI objectives as well where we
expect to launch a number of solutions in the next financial year that
leverage our own AI toolset.   These will drive more continuous improvements
to agent and customer experience, intuitively grow our customers revenues and
reduce their costs; and automate improvements to customer experience through
journey tracking and analytics during the payment process.

 

Patent Case Update

 

The Company has been involved in patent litigation with its competitor,
Sycurio Limited, for more than two and half years now in both the UK and US
courts. The UK case came to trial in June 2023, with PCI Pal achieving a
resounding ruling in its favour from the trial judge, as announced in October
2023. PCI Pal was not only successful in defending its own position on
infringement but was also successful in its counterclaims to invalidate
Sycurio's patent.

 

As expected, Sycurio requested permission to appeal the decision of the High
Court from the Court of Appeal, and this was granted, as announced by PCI Pal
on 26 January 2024. The appeal is to be heard in May 2024, and we look forward
to that hearing when we fully expect to be successful and to receive a
significant cost award, which as a minimum will include the current £1.1
million held on account from the initial trial being released to the Company.
The appeal hearing is potentially the final stage of proceedings in the UK.

 

The US case is now scheduled for trial in February 2025.  PCI Pal's position
is very similar to the UK case as PCI Pal has strong defenses of
non-infringement and invalidity. Furthermore, we note that even in the
worst-case scenario, the Board does not believe there would be a material
adverse impact on the long-term market opportunity and strategic aspirations
of the Group.

 

Outlook

 

FY24 is expected to be a milestone year for the business following an exciting
period of investment and growth that has seen PCI Pal establish itself as the
leading cloud provider in the secure payments for business communications
space. The business is in an excellent position with an extensive partner
eco-system, high customer retention rates and operations at cashflow
breakeven.

 

The unfounded patent case brought against us by a competitor has been an
unfortunate distraction for the business during these periods of high paced
growth. It is testament to our people and our technology that, notwithstanding
this distraction and the cash costs associated with defending our position in
the courts, we have been able to broadly continue on the path we laid out to
investors over five years ago, with market leading metrics year on year.

 

We are advancing well in our journey towards full Group profitability, and I
am pleased with the momentum we have shown coming into H2.

 

The outlook for PCI Pal is an exciting one. Long term, we intend to leverage
the market position we have built, driving more scale through deeper
relationships and broader product offerings across our partner eco-system and
growing customer-base. We intend to take advantage of the opportunity that our
mature global public cloud environment presents to us, allowing us to access
the breadth of our market across the world.

 

 

James Barham

Chief Executive Officer

27 February 2024

 

CFO's Financial Review

The Group has made solid financial progress in the six months to 31 December
2023 in the face of the ongoing pressures of the patent case and the
continuing tighter economic environment. The Company is delivering strong
growth and continues its journey towards sustained profitability and cash
generation.

 

Revenue and gross margin

 

The Group continues to deliver high-quality recurring revenues from its
growing customer base. Group revenue grew by 20% in the period to £8.74
million (2022: £7.26 million). This high-quality revenue, paired with the
operational efficiency of its true cloud platform hosted on AWS, has allowed
the Group to continue to improve Gross Margin to 89% in the period (2022:
87%). Of the revenue recorded in the period, 90% (2022: 85%) has come from
annually recurring licences or equivalent transactions.

 

TACV at the half year has grown to £17.46 million (2022: £14.74 million),
which provides the Group with a high visibility of revenue for the remainder
of the financial year and beyond. Run rate ARR of "live" contracts has
increased by 23% at period end to £14.69 million (2022: £11.92 million).
TACV and ARR are calculated using current exchange rates at the end of each
period.

 

Customer and Net Retention

 

In line with its expectations for the year, the Directors are pleased to
report that the Group has continued to up-sell more contracts to its existing
customer base and as a result Net Revenue Retention ("NRR") for its AWS
platform, remains positive at 102% (30 June 2023: 106%).

 

Contributing to the positive NRR, customer retention rates remain on target at
96% (30 June 2023: 95%), this means in the twelve months to 31 December 2023
£0.35 million (2022: £0.29 million) of annual licences were cancelled by
deployed customers.

 

The Board also monitors contracts that are cancelled before they reach full
deployment. In the last twelve months to 31 December 2023 £0.34 million
(2022: £0.11 million) of contracts were agreed to be cancelled so reducing
the Company TACV metric.

 

Administrative expenses

 

Total administrative expenses were £9.05 million (2022: £8.19 million), an
increase of 11%.

 

The Group has continued to hire new headcount to support its international
growth and product development plans with the number of employees increasing
to 121 (2022: 108) at the period end. Reflecting this growth in head count,
personnel costs charged to the Statement of Comprehensive Income (including
commission, bonuses and travel and subsistence expenses) grew to £6.27
million (2022: £5.85 million), of which £0.87 million (2022: £0.70 million)
were capitalised as Software Development costs. Personnel costs make up 76%
(2022: 79%) of the adjusted administrative costs (excluding exchange
movements, share option charges and exceptional items) of the business.

 

The expense of running our AWS global platform and associated software was
£0.53 million in the period (2022: £0.46 million).

 

Included in the administrative expenses is a charge for foreign exchange
movements of £0.07 million (2022: credit of £0.18 million) which has been
caused by the movement of the US dollar from $1.2627 (30 June 2023) to $1.2691
(31 December 2023).

 

Depreciation/amortisation of £0.66 million (2022: £0.57 million) has also
been charged as part of the administrative expenses.

 

Exceptional costs

 

The Group has continued to incur legal fees relating to the unfounded patent
case, in H1 FY24, the Group incurred £0.64 million (2022: £0.43 million) of
legal fees and costs relating to the claim, bringing the total expenditure to
£3.41 million since the claim was made in September 2021. These expenses have
been treated as an exceptional item in the Group's Statement of Comprehensive
Income.

 

As at 31 December 2023 the Group had paid, in aggregate, £2.97 million of the
£3.41 million exceptional costs incurred since the claim was first made, and
of the £2.97 million, £1.00 million was paid in H1 FY24.

 

Adjusted operating loss

 

The regional operating results and underlying performance analysis used within
the Group are shown in Notes 4 & 5 below. These adjusted figures are the
Company's preferred performance measures as it more accurately reflects the
underlying performance of the Group's operations.

 

Adjusted operating losses, excluding the charges resulting from the Group's
share option scheme, exceptional costs and any exchange gains and losses
charged to the Statement of Comprehensive Income, decreased by 63% to a loss
of £0.42 million (2022: loss of £1.14 million).

 

Adjusted EBITDA has now moved into profit as the Group continues to deliver on
its growth strategy and in the period Adjusted EBITDA was £0.25 million
(2022: loss of £0.57 million).

 

Key financial performance indicators

The Directors use several Key Financial Performance Indicators (KPIs) to
monitor the progress and performance of the Group, subsidiaries and targets.
All the core KPIs continue to show performance better than expectations.

 

The principal financial KPIs are as follows:

                                                        Six months to 31 Dec 2023  Change %  Six month to 30 Jun 2023  Change %  six months to 31 Dec 2022

 Revenue in the six month period                        £8.74m                     +14%      £7.69m                    +6%       £7.26m
 Gross Margin in the six month period                   89.2%                                88.3%                               86.9%
 Recurring Revenue(1) in the six month period           £7.82m                     +16%      £6.76m                    +10%      £6.17m
 Recurring Revenue as % of Revenue in six month period  90%                                  88%                                 85%

 Adjusted EBITDA(2) in six month period                 £0.25m                     +147%     (£0.55m)                  +4%       (£0.57m)

 Cash                                                   £0.80m                               £1.17m                              £1.88m
 Net Cash                                               £0.55m                               £1.17m                              £1.88m

 Deferred Income                                        £12.94                               £11.82m                             £11.53m

(1) Recurring Revenue is the revenue generated from the recurring elements of
the contracts held by the Group and recognised in the Statement of
Comprehensive Income

(2) 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

 

The principal operational KPIs are as follows:

                                                                           As at 31 Dec 2023  Change %  As at 30 Jun 2023  Change %  As at 31 Dec 2022
 Contracted TACV(1) deployed and live                                      £14.69m            +17%      £12.58m            +6%       £11.92m
 Contracted TACV in deployment                                             £2.06m             -33%      £3.08m             +59%      £1.94m
 Contracted TACV - projects on hold                                        £0.71m             -8%       £0.77m             -13%      £0.88m
 Total Contracted TACV                                                     £17.46m            +6%       £16.43m            +11%      £14.74m

 % of TACV derived from variable transactions deemed recurring             13%                          14%                          18%

 ARR(2)                                                                    £14.69m            +17%      £12.58m            +6%       £11.92m

 Signed ACV in six month period                                            £1.60m             -41%      £2.69m             +83%      £1.47m

 Rolling value of ACV of contracts cancelled before deployment in last 12  £0.34m                       £0.14m                       £0.11m
 months

 AWS Platform Gross Retention Rate(3)                                      96.2%                        95.4%                        94.9%
 AWS Platform Net Retention Rate(4)                                        102%                         103%                         106%

 Headcount at end of period (excluding non-executive directors)            121                          114                          108
 Ratio Personnel cost to normalised administrative expenses                76%                          78%                          79%

(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) ARR is the Annual Recurring Revenue of all the deployed contracts
including an assessment of variable transactions deemed recurring

(3)AWS platform Gross Retention Rate is calculated using the ACV of retained,
deployed contracts from twelve months ago divided by the opening total value
of deployed contracts at the start of the twelve month period

(4) AWS platform net retention rate is calculated using the opening total
value of deployed contracts at the start of the period less the ACV of lost
deployed contracts in the period plus the ACV of upsold contracts signed in
the period all divided by the opening total value of deployed contracts at the
start of the period

 

Cashflow and liquidity

Net Cash as at the period end was £0.55 million (30 June 2023: £1.17
million), therefore, £0.62 million of cash was used in the period. However,
as reported above, this includes the £1.00 million of invoices settled by the
Group relating to the patent case in the period. Adjusting for this payment,
means that the Group operations generated £0.38 million of cash flow in the
period.

 

The Group received in November £0.53 million in cash from its R & D tax
credit claim covering the FY21 and FY22 innovative research and development
undertaken by the UK company. This payment had been delayed by HMRC into the
new financial year, as reported in the FY23 annual report, as they had opened
an enquiry into the claims being made. HMRC closed their enquiry without
making any adjustment to the claims made.

 

In FY23 the Group put in place a £3m facility.  The availability of this facility to the Company can fluctuate on a month to month basis as it is subject to the level of assets and liabilities at the time of drawing.

 

The Directors receive monthly standard reports relating to cash forecasts and
generation to ensure that the Group's expansion plans can continue to be
financed accordingly. The Group is on track to continue to grow its positive
monthly cashflow from its operations and this cash flow is being used to
defend the Group from the patent infringement claims being made against it.

 

Capital expenditure

 

As required by IAS 38, we have capitalised a further £0.87 million (2022:
£0.70 million) in software development expenditure as we continue to invest
in our cloud platform and introduce new features and products. These costs
primarily relate to salary, bonus, and national insurance costs of employees.

 

Professional Services Fees

 

During the period the Group generated £0.84 million (2022: £0.73 million) of
set-up and professional services sales value, in conjunction with the new ACV
contracts reported above. Nearly all these contracts are invoiced on signature
and form part of the Group's cash generation. The contract amounts will be
deferred and released as recognised revenue to the Income Statement over time,
in accordance with IFRS 15.

 

Trade receivables

 

On 31 December 2023 trade receivables were £3.69 million (30 June 2023:
£4.65 million). Trade receivables primarily consist of invoices for new
contract commitments or annual payments due under the terms of our customer
contracts. Of the total £0.59 million was older than 60 days from the date of
invoice and £0.06 million was older than 90 days from the date of invoice.

 

Financial Outlook

 

The Board continues to balance its continued short-term revenue growth and
profitability plans against its long-term investment in the business.

 

The cash expenditure in defending the patent case over the last two and half
years has undoubtedly influenced the Board's approach to some of the Group's
investment plans.  Despite this, as well as the tightening economic
conditions seen recently, the Group has still manged to deliver compound
revenue growth of more than 40% since June 2018 when the Group launched its
leading full cloud solution in the UK and US.

 

The Group remains focused on continuing to deliver its strategic objectives of
expanding international growth, launching new complementary products to our
partners and customers, and moving the Group into sustainable profit and cash
generation.

 

 

William Good

Chief Financial Officer

27 February 2024

 

 

Consolidated statement of comprehensive income

for the six months ended 31 December 2023

 

                                                                             Six months ended  Six months ended  Twelve months ended 30 June

                                                                             31 December       31 December       2023

                                                                             2023              2022
                                                                             £'000             £'000              £'000
                                                                             (unaudited)       (unaudited)        (audited)
 Revenue                                                                     8,736             7,259             14,945
 Cost of sales                                                               (940)             (950)             (1,849)
 Gross profit                                                                7,796             6,309             13,096
 Administrative expenses                                                     (9,055)           (8,194)           (17,948)
 Loss from operating activities                                              (1,259)           (1,885)           (4,852)

 Adjusted operating loss                                                     (485)             (1,324)           (2,598)
 Expenses relating to share options                                          (139)             (128)             (272)
 Exceptional Items                                                           (635)             (433)             (1,982)
 Loss from operating activities                                              (1,259)           (1,885)           (4,852)

 Finance income                                                              10                2                 3
 Finance expenditure                                                         (59)              (20)              (42)
 Loss before taxation                                                        (1,308)           (1,903)           (4,891)
 Taxation                                                                    535               -                 (1)
 Total comprehensive loss for the period                                     (773)             (1,903)           (4,892)

 Other comprehensive expense: items that will be classified subsequently to
 profit and loss
 Foreign exchange translation differences                                    72                113               326
 Total comprehensive loss for the period                                     (701)             (1,790)           (4,566)

 Loss per share expressed in pence
 Basic and diluted                                                           (1.18)            (2.91)            (7.47)

 

Consolidated statement of financial position

as at 31 December 2023

 

                                               31 December 2023    31 December    30 June

                                                                  2022           2023
                                              £'000               £'000          £'000
                                              (unaudited)          (unaudited)    (audited)
 Assets
 Non-current assets
 Plant and equipment                          148                 213            185
 Intangible assets                            3,491               2,847          3,216
 Trade & other receivables                    1,269               999            1,567
  Non-current assets                          4,908               4,059          4,968

 Current assets
 Trade and other receivables                  5,159               6,023          5,376
 Cash and cash equivalents                    795                 1,876          1,169
  Current assets                              5,954               7,899          6,545

 Total assets                                 10,862              11,958         11,513
 Liabilities
 Current liabilities
 Trade and other payables                     (2,335)             (1,862)        (3,777)
 Deferred Income                              (11,076)            (9,249)        (8,045)
 Other interest-bearing loans and borrowings  (250)               -              -
  Current liabilities                         (13,661)            (11,111)       (11,822)

 Non-current liabilities
 Other payables                               -                   (46)           (23)
 Deferred Income                              (1,866)             (2,278)        (3,777)
 Long term borrowings                         -                   -              -
  Non-current liabilities                     (1,866)             (2,324)        (3,800)
  Total liabilities                           (15,527)            (13,435)       (15,622)
 Net assets/(liabilities)                     (4,665)             (1,477)        (4,109)

 Shareholders' equity
 Share capital                                656                 656            656
 Share premium                                14,287              14,281         14,281
 Other reserve                                1,061               778            922
 Currency reserve                             (222)               (507)          (294)
 Profit and loss account                      (20,447)            (16,685)       (19,674)
 Total shareholders' equity                   (4,665)             (1,477)        (4,109)

 

Deferred income has been disclosed separately in these interim unaudited
statements. This disclosure treatment differs from that in the audited
accounts for the year ending 30 June 2023.

Consolidated interim statement of changes in equity

as at 31 December 2023 (unaudited)

 

                                                                                                                                        Total shareholders' equity

                                           Share capital   Share premium   Other reserve   Profit and loss account   Currency reserve
                                           £'000           £'000           £'000           £'000                     £'000              £'000
 Balance at 1 July 2022                    656             14,281          650             (14,782)                  (620)              185
 Share based payment charge                -               -               128             -                         -                  128
 New shares issued net of costs            -               -               -               -                         -                  -
 Dividend paid                             -               -               -               -                         -                  -
 Transactions with owners                  -               -               128             -                         -                  128

 Foreign exchange translation differences  -               -               -               -                         113                113
 Loss for the period                       -               -               -               (1,903)                   -                  (1,903)
 Total comprehensive loss                  -               -               -               (1,903)                   113                (1,790)

 Balance at 31 December 2022               656             14,281          778             (16,685)                  (507)              (1,477)

 Balance as at 1 January 2023              656             14,281          778             (16,685)                  (507)              (1,477)
 Share based payment charge                -               -               144             -                         -                  144
 New shares issued net of costs            -               -               -               -                         -                  -
 Dividend paid                             -               -               -               -                         -                  -
 Transactions with owners                  -               -               144             -                         -                  144

 Foreign exchange translation differences  -               -               -               -                         213                213
 Loss for the period                       -               -               -               (2,989)                   -                  (2,989)
 Total comprehensive loss                  -               -               -               (2,989)                   213                (2,776)

 Balance at 30 June 2023                   656             14,281          922             (19,674)                  (294)              (4,109)

 Balance at 1 July 2023                    656             14,281          922             (19,674)                  (294)              (4,109)
 Share based payment charge                -               -               139             -                         -                  139
 New shares issued net of costs            -               6               -               -                         -                  6
 Dividend paid                             -               -               -               -                         -                  -
 Transactions with owners                  -               6               139             -                         -                  145

 Foreign exchange translation differences  -               -               -               -                         72                 72
 Loss for the period                       -               -               -               (773)                     -                  (773)
 Total comprehensive loss                  -               -               -               (773)                     72                 (701)

 Balance at 31 December 2023               656             14,287          1,061           (20,447)                  (222)              (4,665)

Consolidated statement of cash flows

for the six months ended 31 December 2023

 

                                                       Six months ended 31 December  Six months ended 31 December  Twelve months ended 30 June

                                                       2023                          2022                          2023
                                                       £'000                         £'000                         £'000
                                                       (unaudited)                    (unaudited)                   (audited)
 Cash flows from operating activities
 Loss after taxation                                   (773)                         (1,903)                       (4,892)
 Adjustments for:
 Depreciation of equipment and fixtures                57                            53                            110
 Amortisation of intangible assets                     609                           516                           1,046
 Loss on disposal of equipment and fixtures            -                             -                             -
 Interest income                                       (10)                          (2)                           (3)
 Interest expense                                      47                            3                             5
 Exchange differences                                  72                            148                           326
 Income taxes                                          (535)                         -                             1
 Share based payments                                  139                           128                           272
 Increase in trade & other receivables                 515                           (1,855)                       (1,776)
 Decrease in trade & other payables                    (323)                         687                           2,895
 Cash used in operating activities                     (202)                         (2,225)                       (2,016)
 Dividend paid                                         -                             -                             -
 Income taxes received                                 535                           -                             (1)
 Interest paid                                         (47)                          (3)                           (5)
 Net cash used in operating activities                 286                           (2,228)                       (2,022)

 Cash flows from investing activities
 Purchase of property, plant and equipment             (20)                          (29)                          (57)
 Purchase of intangible assets                         (10)                          (5)                           -
 Development expenditure capitalised                   (874)                         (732)                         (1,601)
 Interest received                                     10                            2                             3
 Net cash used in investing activities                 (894)                         (764)                         (1,655)

 Cash flows from financing activities
 Proceeds from borrowings                              1,000                         -                             -
 Repayment of borrowings                               (750)                         -                             -
 Principal element of lease payments                   (22)                          (20)                          (42)
 Issue of shares                                       6                             -                             -
 Net cash generated in financing activities            234                           (20)                          (42)
 Net (decrease)/increase in cash                       (374)                         (3,012)                       (3,719)

 Cash and cash equivalents at the start of the period  1,169                         4,888                         4,888
 Net (decrease)/increase in cash                       (374)                         (3,012)                       (3,719)
 Cash and cash equivalents at the end of the period    795                           1,876                         1,169

Notes to the interim financial statements for the six months ended 31 December 2023

 

1.    Nature of activities and general information

 

PCI-PAL PLC is the Group's ultimate parent company. It is a public limited
company incorporated and domiciled in England and Wales (registration number
3869545). The company's registered office is Unit 7, Gamma Terrace, Ransomes
Europark, Ipswich, Suffolk, IP3 9FF. The Company's ordinary shares are quoted
and publicly traded on the AIM division of the London Stock Exchange. The
Group's consolidated interim financial statements (the "interim financial
statements") for the period ended 31 December 2023 comprise the Company and
its subsidiaries (the "Group").

 

The Company operates principally as a holding company. The main subsidiaries
provide organisations globally with secure cloud payment and data protection
solutions for any business communications environment.

 

The interim financial statements are presented in pounds sterling (£000),
which is also the functional currency of the parent company.

 

2.    Basis of preparation

 

These consolidated interim financial statements have been prepared on a going
concern basis in conformity with the UK adopted international accounting
standards "IFRS's" and the requirements of the Companies Act 2006, using the
accounting policies which are consistent with those set out in the Group's
annual report and accounts for the year ended 30 June 2023.

 

The unaudited interim financial information for the period ended 31 December
2023 does not constitute statutory accounts within the meaning of Section 435
of the Companies Act 2006. The comparative figures for the year ended 30 June
2023 are extracted from the statutory financial statements which have been
filed with the Registrar of Companies and contain an unqualified audit report
and did not contain statements under Section 498 to 502 of the Companies Act
2006.

 

3.          Dividends

The directors do not propose to declare a dividend for the period.

 

4.          Analysis of results

 

The first half performance of the Group can be further analysed as follows:

 

                                              Six months to  Six months to  Six months to  Six months to  Six months to
                                              Dec 23         Dec 23         Dec 23         Dec 23         Dec 23
                                              EMEA           North America  ANZ            Central costs  Total
                                              £000s          £000s          £000s          £000s          £000s
 Revenue
 Revenue from recurring contract Fees         4,815          2,830          174            -              7,819
 Non recurring transaction fees               259            -              -              -              259
 Set up and Professional Services Fees ((1))  369            275            14             -              658
 Other Sales                                  -              -              -              -              -
 Total                                        5,443          3,105          188            -              8,736

 Gross Profit                                 4,544          3,065          187            -              7,796
 Margin %                                     83.5%          98.7%          99.5%          -              89.2%

 Administrative Expenses                      (4,801)        (2,732)        (301)          (586)          (8,420)
 Inter-company Royalty                        817            (770)          (47)           -              -
 Exceptional Items                            (12)           (133)          -              (490)          (635)

 Profit/(Loss) from Operating Activities      548            (570)          (161)          (1,076)        (1,259)

 Bank charges and Interest payable            (9)            (4)            -              (46)           (59)
 Finance Income                               10             -              -              -              10

 Profit/ (Loss) before Taxation               549            (574)          (161)          (1,122)        (1,308)

((1)) Set up and Professional Services Fees represents the amortisation of set
up fees and other professional services income deferred under IFRS 15

 

 

 

                                              Six months to  Six months to  Six months to  Six months to  Six months to
                                              Dec 22         Dec 22         Dec 22         Dec 22         Dec 22
                                              EMEA           North America  ANZ            Central costs  Total
                                              £000s          £000s          £000s          £000s          £000s
 Revenue
 Revenue from recurring contract Fees         4,115          1,970          87             -              6,172
 Non recurring transaction fees               355            -              -              -              355
 Set up and Professional Services Fees ((1))  433            281            14             -              728
 Other Sales                                  4              -              -              -              4
 Total                                        4,907          2,251          101            -              7,259

 Gross Profit                                 4,007          2,202          100            -              6,309
 Margin %                                     81.7%          97.8%          99.2%          -              86.9%

 Administrative Expenses                      (4,351)        (2,642)        (251)          (517)          (7,762)
 Inter-company Royalty                        562            (562)          -              -              -
 Exceptional Items                            -              (187)          -              (246)          (432)

 Profit/(Loss) from Operating Activities      218            (1,189)        (151)          (763)          (1,885)

 Bank charges and Interest payable            (14)           (6)            -              -              (20)
 Finance Income                               -              -              -              2              2

 Profit/ (Loss) before Taxation               204            (1,195)        (151)          (761)          (1,903)

((1)) Set up and Professional Services Fees represents the amortisation of set
up fees and other professional services income deferred under IFRS 15

 

5.          Underlying financial performance analysis

 

The Group uses the following internal metric to calculate Adjusted EBITDA:

 

                                                   Six months to  Six months to  Six months to  Six months to  Six months to
                                                   Dec 23         Dec 23         Dec 23         Dec 23         Dec 23
                                                   EMEA           North America  ANZ            Central        Total
                                                   £000s          £000s          £000s          £000s          £000s

 Profit/(Loss) before Taxation                     549            (574)          (161)          (1,076)        (1,308)
 ( )
 Adjust for:

 Expenses relating to share options                76             26             13             24             139
 Exceptional Items                                 12             133            -              490            635
 Exchange Loss/(Gain)                              25             54             (12)           -              67
 Bank charges and Interest Payable                 9              4              -              46             59
 Finance Income                                    (10)           -              -              -              (10)

 Adjusted Profit/(Loss) from Operating Activities  661            (357)          (160)          (562)          (418)

 Depreciation & Amortisation                       664            -              1              -              665

 Adjusted EBITDA                                   1,325          (357)          (159)          (562)          247

 

 

                                                   Six months to  Six months to  Six months to  Six months to  Six months to
                                                   Dec 22         Dec 22         Dec 22         Dec 22         Dec 22
                                                   EMEA           North America  ANZ            Central        Total
                                                   £000s          £000s          £000s          £000s          £000s

 Profit/(Loss) before Taxation                     204            (1,195)        (151)          (761)          (1,903)
 ( )
 Adjust for:

 Expenses relating to share options                79             22             5              22             128
 Exceptional Items                                 -              187            -              246            433
 Exchange Loss/(Gain)                              48             120            8              6              182
 Bank charges and Interest Payable                 14             6              -              -              20
 Finance Income                                    -              -              -              (2)            (2)

 Adjusted Profit/(Loss) from Operating Activities  345            (860)          (138)          (489)          (1,142)

 Depreciation & Amortisation                       567            -              1              -              568

 Adjusted EBITDA                                   912            (860)          (137)          (489)          (574)

 

6.          Earnings per share

The basic and diluted earnings per share are calculated on the following
profit and number of shares. Earnings for the calculation of earnings per
share is the net profit attributable to equity holders of the parent.

 

                                                                  Six months ended 31 December  Six months ended 31 December  Twelve months ended 30 June

                                                                  2023                          2022                          2023
                                                                  £000                          £000                          £000
 Earnings for the purposes of basic and diluted earnings per
 share
 Loss after taxation                                              (773)                         (1,903)                       (4,892)

 Denominator                                                      '000                          '000                          '000
 Weighted average number of shares in issue in the period         65,463                        65,453                        65,453

 Dilutive effect of potential shares and share options            8,627                         8,143                         8,342
 Number of shares used in calculating diluted earnings per share  74,090                        73,596                        73,795

 Basic and diluted earnings per share expressed in pence          (1.18)                        (2.91)                        (7.47)

 

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

 

7.          Subsequent events to 31 December 2023

On 22 January 2024 the Company issued 60,000 new shares in settlement of an
exercise of share options.

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