TIDMNET
RNS Number : 4682A
Netcall PLC
29 September 2015
29 September 2015
NETCALL PLC
("Netcall", the "Company", or the "Group")
Final Results
For the Year Ended 30 June 2015
"Strong demand for solution suite delivering record turnover and
EBITDA for the year"
Netcall plc (AIM: NET), a leading customer engagement software
provider, today announces its audited results for the year ended 30
June 2015.
Financial Highlights
-- Revenue of GBP17.2m (2014: GBP16.9m)
-- Revenue of a recurring nature(1) GBP10.6m corresponding to 62% of total revenue
-- Adjusted EBITDA(2) increased by 5% to GBP5.16m (2014: GBP4.93m)
-- Profit before tax increased by 24% to GBP2.35m (2014: GBP1.89m)
-- Basic earnings per share increased 10% to 1.94p (2014: 1.76p)
-- Debt-free balance sheet with net cash funds of GBP13.7m (2014: GBP11.4m)
-- Enhanced dividend programme announced for the next three
years. Dividend of 2.2p per share proposed (2014: 0.9p per
share)
1) revenue from support and maintenance and hosted service contracts
2) profit before interest, taxation, depreciation, amortisation,
acquisition and non-recurring transaction expenses and share-based
charges
Operational Highlights
-- Strong demand from our existing customer base while also
winning new customers across both the private and public
sectors
-- Liberty platform gaining further traction with recent client wins including:
o five-year SaaS contract for a Liberty multi-channel contact
centre and unified communications solutions
o two universities acquired Liberty solutions to assist them in
their clearing process implementing the same solutions in the cloud
and on-premise respectively
-- Expanded product suite with new multi-media capabilities and deeper platform integration
-- Accelerated investment in cloud platform planned
-- Post period end inclusion for the first time on the Crown
Commercial Service Network Services agreement for Inbound Telephony
Services
Henrik Bang, CEO of Netcall, commented,
"Netcall has achieved record turnover and EBITDA for the year.
Our investment to date in the Liberty platform has been successful
and we will accelerate our investment in its cloud capabilities to
take full advantage of a market segment which is forecast to grow
at double digit rates in the coming years.
"Cash generation remains strong and we are therefore pleased to
propose an enhanced dividend programme whilst maintaining
sufficient cash on the balance sheet to support the Group's
acquisition strategy."
For further enquiries, please contact:
Netcall plc Tel. +44 (0)
330 333 6100
Henrik Bang, CEO
Michael Jackson, Chairman
James Ormondroyd, Group Finance
Director
finnCap Limited (Nominated Adviser Tel. +44 (0)
and Broker) 20 7220 0500
Stuart Andrews / James Thompson,
Corporate Finance
Simon Johnson, Corporate Broking
Alma PR Tel. +44 (0)
20 7796 9085
Josh Royston / Hilary Buchanan
About Netcall plc
Netcall is a UK company quoted on the AIM market of the London
Stock Exchange. Netcall's software product suite provides
end-to-end customer engagement solutions, incorporating
multi-channel contact centre, workforce optimisation, business
process management and case management. The Netcall software
platform helps organisations meet the growing demands of their
customers and prospects whilst improving internal efficiencies,
thereby increasing profitability and customer satisfaction.
Netcall's customer base contains over 700 organisations in both
the private and public sectors. These include two thirds of the NHS
Acute Health Trusts, major telecoms operators such as BT and
leading organisations including Interflora, Lloyds Banking Group,
Cineworld, Axa, and British Sugar.
For further information, please consult the Netcall website:
www.netcall.com.
Introduction
We are pleased to report record turnover and adjusted EBITDA for
the year to 30 June 2015 as a result of the continued demand for
the Liberty solution suite.
Revenue of a recurring nature accounted for 62% of total revenue
and continues to underpin the Group's cash generation and
profitability while providing visibility for the new financial
year. The cash position was GBP13.7m at the period end and with a
debt free balance sheet this provides excellent opportunity to both
invest in the market opportunity and also return cash to
shareholders.
We have continued to see growing demand from our existing
customer base while also winning new customers across both the
private and public sectors including AXA Insurance and Flogas.
During the year there has been a noticeable change in the sales mix
towards the more attractive SaaS recurring revenue models and this
trend has continued into the new financial year. This development
is in line with market estimates that the SaaS contact centre
market, a key component of customer engagement solutions, is
gaining market share and is expected to grow at double digit rates
in the coming years, doubling in size over the next 3-5 years
representing an estimated 20-25% of the UK contact centre
market.
The success to date of the Liberty platform, and the market's
continuing move towards the SaaS model, underpin the Board's
decision to increase further investment in the Group's SaaS
delivery capabilities. Having previously explored a number of
acquisition opportunities to accelerate this offering, the Board
believes that further internal development is the best way forward
to meet customer demand. As such, we shall increase capital
expenditure in both development and operational headcount to take
advantage of this market opportunity while also continuing to look
for suitable acquisitions.
The Board is also proposing an 11% increase in the ordinary
dividend to 1.0 pence per share and an additional 1.2 pence per
share as part of a new three year enhanced dividend policy, further
details of which are set out below.
The new financial year has started well with a good order inflow
of which a significant share is based on the recurring SaaS model
which will benefit future periods. Combined with a healthy pipeline
and a strong balance sheet Netcall is well positioned for the
future.
Strategy
Netcall's objective remains consistent: to provide a
comprehensive platform of customer engagement software solutions
which help both private and public sector organisations transform
their customer engagement activities by improving customer
experience while reducing costs.
The Company's aim is to build a strong business organically and
through acquisition by both developing its end to end customer
engagement Liberty platform and by acquiring businesses with
complementary proprietary and/or additional customers in our target
markets.
The Group's key drivers for organic growth include the expansion
of the product suite, continuing to unlock the huge potential from
our existing 700 customers with up- and cross-sales, which
accounted for the majority of new business in the last period, and
growing via engaging with new customers.
Business Review
Market
Netcall sees a significant market opportunity with organisations
accelerating the digitalisation across their businesses and
investing in solutions which improve the way they interact with
their customers, citizens or patients. The implementation of new
technologies, such as mobile, social media and cloud computing,
merged with changing business models creates substantial
opportunities in assisting organisations transform their customer
engagement strategies.
The key driver is that increasingly well informed consumers
across all sectors expect organisations to provide multiple
interaction channels, intuitive interfaces, around-the-clock
availability, personalised treatment, first contact resolution and
real-time fulfilment. As a result organisations are required to
change their customer interaction focus from 'isolated
transactions' to long term relationships with a 360 degree
end-to-end view of customers in order to meet the changing demand.
This requires, in addition to a great user experience, a radical
overhaul of business processes and integrated front and back-office
systems which, where successful, delivers improved customer
retention and acquisition.
The Liberty platform, which is available in the cloud or on
premise, delivers this comprehensive functionality and can be
acquired as a suite or on a modular basis. This provides a flexible
entry point and upgrade path for organisations, thereby giving them
the level and quality of customer interaction they need as well as
additional competitive advantages such as lower costs, improved
operational controls and less risk. As a result, it continues to
gain foothold amongst new customers and its adoption is also
broadening within our existing client base.
Our ability to deliver cloud solutions to the public sector has
also been enhanced with Netcall's inclusion for the first time on
the Crown Commercial Service Network Services agreement for Inbound
Telephony Services which creates a more flexible and streamlined
procurement process for public sector buyers to acquire Liberty
solutions.
Customer wins
Examples of organisations investing in Netcall's Liberty
platform and roadmap for the future includes:
-- A private sector client signed a five-year SaaS contract for
a Liberty multi-channel contact centre and a unified communications
solutions. The service includes provision of a range of inbound and
outbound voice, email and chat applications that utilise Liberty's
business process management capabilities for workflow automation
and data integration with legacy systems. This will enable the
client to deliver a consistent, personalised customer experience
and achieve efficiencies.
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-- Two Universities bought the Liberty contact centre solution
to assist them in their clearing process. One University purchased
a license for deployment of the solution on their private cloud;
the other signed a three-year SaaS contract. Both clients achieved
a significantly improved student admission process.
-- A local authority upgrading their existing Netcall contact
centre solution to include email, social and web chat multi-channel
functionality as well as our patented call-back application.
Product development
In the last three years Netcall has increased its investment in
product development by more than 40% focusing on adding
functionality to the Liberty platform via a combination of new
features and deeper integration between the platform's various
modules. Most recently there has been an increased focus on
providing modern responsive interfaces to various modules and
enabling these to be more easily deployed in a cloud
infrastructure.
Following the initial very positive customer response to the new
versions of Liberty, the Board is planning to accelerate the
Group's development programme with particular focus on cloud
deployment of the Liberty platform. As a result Netcall will
significantly increase its development and delivery capabilities,
enabling the Group to launch and roll-out a series of Liberty cloud
products in the coming periods.
Financial Review
Group revenue for the year increased 2% to GBP17.2m (2014:
GBP16.9m) comprising underlying core growth of 4% offset by an
ongoing reduction in the MovieLine service as anticipated, which
continues to generate positive cash flow for the Group. The
underlying rate of growth was moderated in the period by reduced
transaction volumes from two legacy hosted contracts and increased
demand for SaaS solutions which have a different revenue profile.
Absent these factors the Board believes underlying core revenue
growth would have been 9%.
Revenue which is considered to be recurring in nature, derived
from support, maintenance, hosting and managed service contracts,
was GBP10.6m (2014: GBP10.7m) being 62% (2014: 64%) of total Group
revenue and continues to exceed the Group's fixed operating costs.
The small reduction reflects the ongoing reduction in
MovieLine.
The Group's gross profit margin was maintained at 91%.
Administrative expenses, before depreciation, amortisation,
acquisition and non-recurring transaction costs and share-based
charges, were GBP10.4m (2014: GBP10.4m), representing an
improvement in the expense-to-revenue ratio from 62% to 61% as a
result of the continuing focus on operational efficiencies.
Consequently, the Group recorded a 5% increase in adjusted
EBITDA to GBP5.16m (2014: GBP4.93m), a margin of 30% of revenue
(2014: 29%). This movement comprises a 14% increase in underlying
EBITDA to GBP4.69m (2014: GBP4.13m) offset by a reduced MovieLine
contribution of GBP0.47m (2014: GBP0.80m).
Profit before tax increased by 24% to GBP2.35m (2014: GBP1.89m)
after non-recurring transaction costs relating to the proposed
acquisition of the Company earlier in the year.
The Group reported a tax credit for the year of GBP0.30m (2014:
credit GBP0.33m) principally as a result of tax relief available
from the exercise of share options in the prior period and a
related adjustment to previous periods tax computations. The
underlying effective rate excluding these adjustments is 22% (2014:
19%).
Reported earnings per share increased 10% to 1.94p (2014:
1.76p).
Adjusted earnings per share was 2.71p (2014: 2.81p). The
movement comprises a 0.5p increase in underlying earnings per share
offset by the impact of the issue of shares under share option
schemes and a reduction in the contribution from MovieLine from
0.62p to 0.33p.
Cash generated from operations before national insurance on
share options payments, was GBP4.37m (2014: GBP4.34m), representing
85% of adjusted EBITDA (2014: 88%).
Expenditure on research and development including capitalised
expenditure increased by 2% to GBP1.79m (2014: GBP1.76m),
capitalised software development expenditure was 6% higher at
GBP0.70m (2014: GBP0.66m) due to a higher proportion of development
resources working on new product development in the year.
Total capital expenditure was GBP0.88m (2014: GBP0.89m); the
balance after capitalised development, being GBP0.18m (2014:
GBP0.23m) relating primarily to computer hardware and office
equipment.
During the period Netcall completed a further GBP100,000
investment in Macranet Ltd (trading as "Sentiment"), a cloud
provider of social media engagement solutions.
As a result of these factors, cash increased to GBP13.7m at 30
June 2015 (30 June 2014: GBP11.4m). The Group continues to maintain
a debt-free balance sheet.
Dividend
At 30 June 2015 the Group had cash balances of GBP13.7 million
and generated net cash flow before financing activities of GBP3.58
million during the year. The Directors continue to evaluate
acquisition opportunities and believe that the Group should retain
sufficient cash on its balance sheet to maintain its credibility as
a buyer and also to be able to acquire businesses in an expedient
manner. The Board believes it can achieve this objective whilst
also being able to institute a partial return of cash to
shareholders through an enhanced dividend policy. In addition to
recommending the payment of a final dividend of 1.0 pence per share
(2014: 0.9 pence per share) which represents an increase of 11% on
prior year, the Directors are recommending the payment of an
additional dividend of 1.2 pence per share for the year ended 30
June 2015. This will give a total dividend for the year of 2.2
pence per share. It is the intention of the Directors that for each
of the next three years an enhanced dividend will be paid half
yearly such that by 2018 the retained cash balance is approximately
GBP10 million. Payment of the enhanced dividend will remain subject
to the Group's on-going cash generation, it not having found an
appropriate acquisition opportunity and not having returned cash
through another manner, including on market share buy backs for
which the Directors intend to seek a renewed authority at the
Annual General Meeting.
Acquisitions
The Board adheres to a rigorous set of criteria to analyse
acquisition opportunities, including quality of earnings and
product offering. During the year the Board started due diligence
on a number of possible acquisition opportunities and a proposed
merger. The key rationale for looking at these opportunities was to
enhance the Group's product offering, particularly, SaaS, obtain
new customers and broaden the geographic spread of the business.
For a variety of reasons no transactions have been consummated and
this has led the Board to conclude that the Company's needs are
best met, in part, by increasing investment in the SaaS platform.
The fragmented nature of the markets means there remain many
opportunities for earnings or strategic enhancing acquisitions and
the Board continues to assess these opportunities to complement the
Group's organic growth strategy.
Outlook
During the year there was a noticeable change in the sales mix
towards the more attractive SaaS recurring revenue models, and this
trend has continued into the beginning of the new financial year.
Our observations are supported by market estimates which show that
the SaaS contact centre market, a key component of customer
engagement solutions, is gaining market share and is expected to
grow at double digit rates in the coming years. Accordingly, the
Board has decided to accelerate investment in the Liberty platform
and its SaaS delivery capabilities to take full advantage of this
market opportunity.
The new financial year has started well with continued strong
demand from across the private and public sectors. A healthy
pipeline of new business, combined with favourable market
opportunities and a strong balance sheet, leaves the Board
confident in the future success of the business.
Audited consolidated income statement for the year ended 30 June
2015
GBP'000 30 June 2015 30 June 2014
-------------------------------------------- ------------- ---------------
Revenue 17,151 16,866
Cost of sales (1,564) (1,513)
---------------------------------------------- ------------- ---------------
Gross profit 15,587 15,353
Administrative costs (13,349) (13,541)
Other gains/ (losses) - net 4 -
-------------------------------------------- ------------- ---------------
Adjusted EBITDA 5,161 4,928
Acquisition credit - 50
Non-recurring transaction costs (290) -
Share-based payments (1,127) (1,689)
Depreciation (147) (127)
Amortisation of acquired intangible assets (918) (1,054)
Amortisation of other intangible assets (437) (296)
Operating profit 2,242 1,812
Finance income 114 85
Finance expense (5) (11)
---------------------------------------------- ------------- ---------------
Finance income - net 109 74
Profit before tax 2,351 1,886
Tax 304 327
---------------------------------------------- ------------- ---------------
Profit for the year 2,655 2,213
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============================================== ============= ===============
Earnings per share - pence
Basic 1.94 1.76
Diluted 1.85 1.72
============================================== ============= ===============
All activities of the Group in the current and prior periods are
classed as continuing. All of the profit for the period is
attributable to the shareholders of Netcall plc.
Audited consolidated statement of comprehensive income for the
year ended 30 June 2015
GBP'000 30 June 2015 30 June 2014
Profit for the period 2,655 2,213
--------------------------------------------- ------------- -------------
Total comprehensive income for the period 2,655 2,213
============================================= ============= =============
Audited consolidated balance sheet at 30 June 2015
GBP'000 30 June 2015 30 June 2014
-------------------------------- ------------- -------------
Non-current assets
Property, plant and equipment 323 307
Intangible assets 11,164 11,804
Investments 288 188
Deferred tax 919 867
---------------------------------- ------------- -------------
Total non-current assets 12,694 13,166
---------------------------------- ------------- -------------
Current assets
Inventories 229 168
Trade and other receivables 6,043 5,237
Current income tax asset 267 66
Cash and cash equivalents 13,726 11,377
---------------------------------- ------------- -------------
Total current assets 20,265 16,848
---------------------------------- ------------- -------------
Total assets 32,959 30,014
================================== ============= =============
Equity
Share capital 6,945 6,940
Share premium 3,015 3,015
Merger reserve 2,509 2,509
Capital reserve 188 188
Treasury shares (419) (419)
Employee share schemes reserve 1,420 394
Profit and loss account 9,024 7,560
---------------------------------- ------------- -------------
Total equity 22,682 20,187
---------------------------------- ------------- -------------
Non-current liabilities
Deferred tax 520 594
Other payables - 24
Provisions 100 84
---------------------------------- ------------- -------------
Total non-current liabilities 620 702
---------------------------------- ------------- -------------
Current liabilities
Trade and other payables 3,443 3,353
Current income tax liabilities 84 -
Deferred income 6,130 5,772
Total current liabilities 9,657 9,125
---------------------------------- ------------- -------------
Total liabilities 10,277 9,827
---------------------------------- ------------- -------------
Total equity and liabilities 32,959 30,014
================================== ============= =============
Audited consolidated statement of cash flows for the year ended
30 June 2015
GBP'000 30 June 2015 30 June 2014
--------------------------------------------------------------------------- ------------- --------------
Cash flows from operating activities
Profit before income tax 2,351 1,886
Adjustments for:
Depreciation 147 127
Amortisation 1,355 1,350
Share-based payments 1,127 989
Net finance income (109) (74)
Changes in working capital (excluding the effects of acquisitions)
Inventories (61) 110
Trade and other receivables (806) (724)
Trade and other payables 366 (264)
---------------------------------------------------------------------------- ------------- --------------
Cash generated from operations 4,370 3,400
Analysed as:
Cash generated from operations before national insurance on share options 4,370 4,341
National insurance on share options paid - (941)
---------------------------------------------------------------------------- ------------- --------------
Interest paid (5) (11)
Income tax paid 76 (160)
---------------------------------------------------------------------------- ------------- --------------
Net cash generated from operating activities 4,441 3,229
---------------------------------------------------------------------------- ------------- --------------
Cash flows from investing activities
Investment in Macranet (100) (188)
Purchases of property, plant and equipment (163) (168)
Proceeds from disposal of property, plant and equipment - 7
Development expenditure capitalised (697) (657)
Purchases of other intangible assets (18) (69)
Interest received 114 77
---------------------------------------------------------------------------- ------------- --------------
Net cash used in investing activities (864) (998)
---------------------------------------------------------------------------- ------------- --------------
Cash flows from financing activities
Proceeds from issue of ordinary shares 5 823
Dividends paid to Company shareholders (1,233) (864)
---------------------------------------------------------------------------- ------------- --------------
Net cash used in financing activities (1,228) (41)
---------------------------------------------------------------------------- ------------- --------------
Net increase in cash and cash equivalents 2,349 2,190
Cash and cash equivalents at beginning of period 11,377 9,187
---------------------------------------------------------------------------- ------------- --------------
Cash and cash equivalents at end of period 13,726 11,377
============================================================================ ============= ==============
Audited consolidated statement of changes in equity at 30 June
2015
Employ-ee
share
Share Share Merger Capital Treasury scheme Retained
GBP'000 capital premium reserve reserve shares reserve earnings Total
Balance
at
30 June
2013 6,117 3,015 2,509 188 (419) 872 4,603 16,885
Increase
in equity
reserve
in relation
to options
issued - - - - - 989 - 989
Tax credit
relating
to share
options - - - - - 141 - 141
Reclassification
following
exercise
and lapse
of options - - - - - (1,608) 1,608 -
Proceeds
from share
issue 823 - - - - - - 823
Dividends
to equity
holders
of the
company - - - - - - (864) (864)
------------------ ---------- ---------- ---------- ---------- --------- ---------- ----------- --------
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