TIDMNET
RNS Number : 8935G
Netcall PLC
07 March 2018
7 March 2018
NETCALL PLC
("Netcall", the "Company", or the "Group")
Interim results for the six months ended 31 December 2017
Entry into the low-code market marks next phase of growth for
Netcall
Netcall plc (AIM: NET), a leading provider of low-code and
customer engagement software, today announces its unaudited interim
results for the six months ended 31 December 2017.
Operational Highlights
-- Entry into the high growth, low-code software market via the acquisition of MatsSoft, enhancing the Group's
product portfolio and increasing its addressable market
-- Significant growth in cloud business including new international customer wins
-- Continued high level of up-sales and customer retention, now enhanced with the initial low-code cross-sale
-- Significant low-code pipeline from new and existing customers
-- Continued product development including the release of:
-- Liberty 4, a powerful new version of our customer engagement platform; and
-- a significantly enhanced new version of our low-code platform
-- MatsSoft recognised as a leader by Forrester in its 2017 Low-Code Platforms for Business Developers report
Financial Highlights
-- Revenue increased 32% to GBP10.7m (H1 2017: GBP8.09m)
-- Recurring revenue strengthened to 71% (H1 FY17 69%)
-- Annualised recurring revenues(1) increased by 39% to GBP15.7m (H1 2017: GBP11.3m)
-- Adjusted EBITDA(2) increased by 22% to GBP2.69m (H1 FY17: GBP2.21m)
-- Adjusted diluted earnings per share increased by 5% to 1.03p (H1 FY17: 0.98p)
-- Profit before tax was GBP0.28m (H1 F17: GBP 0.92m) after acquisition related expenses
-- Diluted earnings per share was 0.12p (H1 FY17: 0.58p) after acquisition related expenses
-- Net debt of GBP0.8m (31 December 2016: cash GBP14.6m) after acquisition consideration and dividend payments
1) annualised revenue from cloud services and support contracts as at 31 December 2017
2) profit before interest, taxation, depreciation, amortisation,
non-recurring transaction expenses and share-based charges
Henrik Bang, CEO of Netcall, commented:
"Customers, who today expect new levels of service, are at the
forefront of businesses' technology priorities. Organisations
across industries are digitally transforming their operations,
leveraging software to enhance customer experiences, drive
competitive differentiation and automate processes.
"The combination of our powerful low-code and Liberty customer
engagement platforms creates a unique offering and significantly
increases our addressable market. Low-code is accelerating digital
transformation by putting the power of software creation into the
hands of business users so that they, without traditional coding,
can rapidly implement the business applications they need to
improve and automate their customer engagement activities.
"Our Liberty business continues its successful transition to the
cloud, delivering good growth in revenues and profits and we enter
the second half with a considerably increased sales pipeline and
much excitement for the accelerated growth opportunity
available."
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
Tim Redfern, Corporate Broking
Alma PR Tel. +44 (0)
20 8004 4218
Caroline Forde / Hilary Buchanan
/ Robyn Fisher
About Netcall plc
Netcall is a UK company quoted on the AIM market of the London
Stock Exchange. Netcall helps organisations transform their
customer engagement activities and enable digital transformation
faster and more efficiently, thereby improving customer experiences
and operational efficiencies. Netcall's software product portfolio
comprises Liberty, a customer engagement platform, incorporating
omnichannel contact centre and workforce optimisation, and a
leading low-code platform MATS.
Netcall has over 700 customers in both the private and public
sectors. These include two-thirds of the NHS Acute Health Trusts,
major telecoms operators such as BT and Vodafone, and leading
organisations including Interflora, Lloyds Banking Group, ITV and
Nationwide Building Society.
For further information, please consult the Netcall website:
www.netcall.com.
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation (EU) No
596/2014.
Introduction
We are delighted to report on one of the most exciting periods
in the evolution of Netcall. In August 2017 we successfully
completed the acquisition of MatsSoft, a cloud-based low-code
software provider, which has transformed the Netcall proposition
and expanded our addressable opportunity in a high growth
market.
Servicing customers is at the forefront of business priorities,
and technologies which enhance customer experiences, drive
competitive differentiation and automate operations is vital.
Organisations need to be able to create and implement new
applications in a matter of days and weeks, not months or years.
MatsSoft's powerful drag and drop low-code development platform
('MATS') brings the power of rapid software creation into the hands
of business users. This capability combined with our Liberty
customer engagement platform means that we are able to more fully
support businesses with their digital transformation
programmes.
We have developed our first new low-code solutions for the
public sector, Patient Hub and Citizen Hub, aimed at expanding the
uptake of the low-code platform within new and existing customers.
In addition to new customer acquisitions we have secured our first
cross-sales of MATS into our existing Liberty customer base and
have entered the second half of the year with an increased sales
pipeline.
The business has performed strongly, reporting Group revenue 32%
higher at GBP10.7m (H1 FY17: GBP8.09m), with underlying organic
revenue growth of 5%. Recurring revenue increased 35% to GBP7.57m
(H1 FY17: GBP5.60m) which equates to 71% (H1 FY17: 69%) of revenues
with strong growth in the cloud revenue stream. As at 31 December
2017, the annualised run rate of such revenues increased 39% to
GBP15.7m (H1 FY17: GBP11.3m) providing a strong foundation for
future growth.
Low-code software market
Digital transformation is creating an increasing gap between the
demand for software which is rising sharply and the supply of
people capable of making it which is relatively flat. Low-code
platforms can accelerate developer speed significantly which
enables organisations to close this gap and deliver new, modern
software to win, serve, and retain customers.
MATS, with its intuitive graphical drag and drop interface,
which does not require traditional coding, puts the power of
software development into the hands of the business users who deal
with the day to day operational challenges. This expansion of the
number of resources together with the speed of development can
deliver applications six to 20 times faster than traditional
methods. This also allows users with a detailed understanding of
the business needs to prototype and experiment rapidly without
relying on IT support.
Therefore, low-code is considered fundamental to digital
transformation and there is a rapidly growing market adoption of
this type of solution.
Strategy
Netcall's purpose is to help organisations transform their
customer engagement activities and enable digital transformation
faster and more efficiently, empowering them to get a return by
driving improved customer experiences and operational
efficiencies.
We achieve this by delivering intuitive software which is
powerful, easy to use and functional. Our customer engagement
capabilities are delivered via our Liberty platform and MATS, our
industry leading low-code platform.
The acquisition of MatsSoft will enhance organisations' ability
to benefit from Liberty solutions. By gaining access to the
powerful capabilities of the low-code platform, customers and
partners are able to develop enterprise business applications, with
ease and speed, which can integrate or supplement the Liberty
solutions. In addition, the low-code platform can be used as a
stand-alone solution throughout the organisation to support other
business functions, as is the case today, where it is used for a
wide range of applications including mortgage applications
processing, customer onboarding and customer notifications.
The Board's strategy is to incorporate Liberty functionality
into the low-code platform creating a low-code enabled customer
engagement suite. The first examples of this are the recently
launched Citizen Hub and Patient Hub. These applications together
with apps created by customers and partners can be made available
via new channels including the MatsSoft App-store, thereby
enhancing the distribution and breadth of the platform
capabilities.
The Group's key drivers for organic growth include taking
advantage of the cloud and low-code market opportunity. The
addition of low-code will enable the business to unlock the huge
potential from Netcall's large existing customer base with up- and
cross-sales.
Furthermore, the MatsSoft addition to the Group opens up the
opportunity for faster geographical expansion and international
customer acquisition. The MATS platform is a pure cloud-based
platform, and has already been implemented internationally via
Amazon Web Services.
In addition, the Board continues to look for selective
acquisitions with complementary proprietary software and/or
additional customers in our target markets.
Business Review
Customer wins
Netcall continues to experience strong demand for its product
suite both from existing and new customers including:
-- A new three-year contract with a global sales & marketing consultancy delivering a low-code SaaS solution to
support its digital transformation strategy, initially for 1,000 users located in the United States and India.
-- A new three-year contract for a low-code SaaS solution with an existing London Borough council customer of
Liberty.
-- A two-year low-code SaaS contract with a top-3 Spanish mobile operator via an IT-services partner, assisting more
than 700 users with order processing.
-- A five-year contract for three councils delivering an advanced automated speech recognition platform for several
thousand users.
Product development
During the period, the Group continued its investment in its
MATS low-code and Liberty platforms. This has resulted in continued
significant advancement of our capabilities over the period.
Liberty 4
We have released a powerful new version of Liberty which
includes modules such as Contact Management, to further enhance
visibility of previous customer contacts across all channels, and
Agent Evaluation, an integrated offering to our workforce
optimisation solution.
Patient and Citizen Hubs
We have used the MATS platform to develop two new offerings
designed to unlock the cross-sale potential from within our large
existing customer base; the Patient and Citizen Hubs.
Patient Hub is a self-service portal that transforms the way
patients and clinicians manage their appointments, whilst reducing
overheads for the NHS by automating and digitising letters, printed
correspondence and the delivery of questionnaires to patients.
Citizen Hub is a collection of low-code enabled applications and
modules that allow local government customers to manage their
citizens and processes as well as provide self-service portals and
mobile apps.
Version 10 of the MATS platform
Version 10 of the MATS platform has been launched, with a new,
responsive and slick user interface to make it even easier to
create effective business applications. This provides a new custom
code API that allows the platform to be extended and the initial
integration with Liberty 4 enabling customer service operators to
seamlessly use MATS low-code applications while operating the
Liberty 4 contact centre application.
Financial Review
Group revenue increased 32% to GBP10.7m (H1 FY17: GBP8.09m).
Organic revenue growth was 5%. MatsSoft contributed GBP2.20m of
revenue during the period following the acquisition in August
2017.
Revenue, which is considered to be recurring in nature, derived
from cloud and support contracts, increased 35% to GBP7.57m (H1
FY17: GBP5.60m) which equates to 71% (H1 FY17: 69%) of revenues
with strong growth in the cloud revenue stream. As at 31 December
2017, the annualised run rate of such revenues increased 39% to
GBP15.7m (H1 FY17: GBP11.3m).
Revenue from product and professional service sales increased
26% to GBP3.13m (H1 FY17: GBP2.49m) due to higher Liberty license
revenues and a first time contribution of MatsSoft professional
services.
The aggregate value, at 31 December 2017, of contracted minimum
income that is to be recognised as core revenue in future financial
periods increased by 7% to GBP17.3m (H1 FY17: GBP16.6m).
Gross profit margin was 90% (H1 FY17: 91%).
Administrative expenses, before depreciation, amortisation,
acquisition and contingent consideration expenses and share-based
charges, increased to GBP6.98m (H1 FY17: GBP5.19m) resulting from
the enlarged Group following the acquisition of MatsSoft.
Consequently, the Group adjusted EBITDA increased 22% to
GBP2.69m (H1 FY17: GBP2.21m), a margin of 25% of revenue (H1 FY17:
27%).
Profit before tax was GBP0.28m (H1 FY17: GBP0.92m) after taking
into account acquisition related expenses and interest on
borrowings taken out to fund the acquisition of MatsSoft.
The Group tax charge was GBP0.10m (H1 FY17: GBP0.09m) an
underlying effective rate of tax of 5% (H1 FY17: 5%) on adjusted
profit before tax. The underlying effective rate of tax benefited
from enhanced R&D relief and utilisation of previously
unrecognised losses brought forward.
Reported diluted earnings per share was 0.12 pence (H1 FY17:
0.58 pence). Adjusted diluted earnings per share was 1.03 pence (H1
FY17: 0.98 pence).
Cash generated from operations before non-recurring transaction
cost payments incurred in the last financial year was GBP0.30m (H1
FY17: GBP2.47m) as a result of the unwinding of positive working
capital timing differences reported at the last year-end together
with the expected result of the consolidation of the MatsSoft
business. Cash conversion of profits is expected to return to Group
norms in the second-half.
Spending on research and development, including capitalised
software development increased by 42% to GBP1.44m (H1 FY17:
GBP1.05m) of which capitalised software expenditure was GBP0.83m
(H1 FY17: GBP0.68m).
Total capital expenditure was GBP1.07m (H1 FY17: GBP0.77m); the
balance after capitalised development, being GBP0.24m (H1 FY17:
GBP0.09m) relating to IT equipment and software.
On 4 August 2017, the Company acquired 100% of the issued share
capital of MatsSoft for an initial consideration of GBP11.0m and
the issue of 3.5m new ordinary shares of 5p each. Potential further
amounts of up to GBP2.3m cash and 9.5m new ordinary shares are also
payable dependent on achieving specified performance targets
achieved over various periods from completion of the acquisition.
See note 6 for further details.
Immediately prior to the acquisition of MatsSoft, the Company
entered into an agreement with Business Growth Fund for a GBP7.0m
investment. The agreement comprises the issue of a GBP7.0m Loan
Note and the award of options over 4,827,586 new ordinary shares of
5p each at a price of 58p per share. See note 6 for further
details.
As a result of these factors, net debt was GBP0.81m at 31
December 2017 (30 June 2017: net cash GBP12.7m).
On 27 July 2017 the final enhanced dividend of 1.05 pence per
share, amounting to a total of GBP1.46m, was paid.
On 12 January 2018, post period end, the Company paid a final
ordinary dividend of 1.16 pence per share in respect of the year
ended 30 June 2017 amounting to a total of GBP1.66m.
Outlook
The first few months of the second half of the financial year
have started very well. We have experienced strong trading and have
received significant low-code orders from both new and existing
customers, alongside continued demand for our Liberty platform.
The acquisition of MatsSoft has significantly increased our
addressable market which, combined with a rapidly growing market
for cloud solutions, places Netcall in an advantageous
position.
Our underlying business continues its successful transition to
the cloud, delivering good growth in revenues and profits and we
enter the second half with a considerably increased sales pipeline
and much excitement for the accelerated growth opportunity
available. With high levels of revenue visibility, a robust balance
sheet combined with a healthy sales pipeline and expanded market
opportunity, the Board therefore remains confident in the ongoing
success of the business.
Unaudited consolidated income statement for the six months to 31
December 2017
Unaudited Unaudited Audited
Six months to Six months to 12 months to
GBP'000 31 December 2017 31 December 2016 30 June 2017
----------------------------------------------------- ------------------ ------------------ --------------
Revenue 10,712 8,093 16,151
Cost of sales (1,046) (701) (1,333)
------------------------------------------------------ ------------------ ------------------ --------------
Gross profit 9,666 7,392 14,818
Administrative expenses (9,093) (6,520) (13,209)
Other income 12 - -
Other gains/ (losses) - net (15) 9 8
------------------------------------------------------ ------------------ ------------------ --------------
Adjusted EBITDA 2,688 2,207 4,487
Non-recurring transaction costs (456) - (320)
Share-based payments (522) (660) (1,171)
Contingent consideration - post completion services (236) - -
Depreciation (127) (108) (212)
Amortisation of acquired intangible assets (323) (171) (319)
Amortisation of other intangible assets (454) (387) (848)
Operating profit 570 881 1,617
Finance income 12 43 74
Finance costs (304) (3) (5)
------------------------------------------------------ ------------------ ------------------ --------------
Finance (costs)/ income - net (292) 40 69
------------------------------------------------------ ------------------ ------------------ --------------
Profit before tax 278 921 1,686
Tax (97) (88) (211)
------------------------------------------------------ ------------------ ------------------ --------------
Profit for the period 181 833 1,475
====================================================== ================== ================== ==============
Earnings per share - pence
Basic 0.13 0.60 1.06
Diluted 0.12 0.58 1.03
====================================================== ================== ================== ==============
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.
Statement of comprehensive income for the six months to 31
December 2017
Unaudited Unaudited Audited
Six months to Six months to 12 months to
GBP'000 31 December 2017 31 December 2016 30 June 2017
Profit for the period 181 833 1,475
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations 5 - -
Total comprehensive income for the period 186 833 1,475
============================================================ ================== ================== ==============
Unaudited consolidated balance sheet at 31 December 2017
Unaudited Unaudited Audited
GBP'000 31 December 2017 31 December 2016 30 June 2017
------------------------------------------------- ------------------ ------------------ --------------
Assets
Non-current assets
Property, plant and equipment 453 509 473
Intangible assets 29,968 11,162 11,444
Investments 346 288 288
Deferred income tax asset 425 721 505
-------------------------------------------------- ------------------ ------------------ --------------
Total non-current assets 31,192 12,680 12,710
-------------------------------------------------- ------------------ ------------------ --------------
Current assets
Inventories 214 200 334
Trade and other receivables 6,235 3,623 4,431
Current income tax asset - 15 11
Cash and cash equivalents 5,650 14,569 12,724
-------------------------------------------------- ------------------ ------------------ --------------
Total current assets 12,099 18,407 17,500
-------------------------------------------------- ------------------ ------------------ --------------
Total assets 43,291 31,087 30,210
================================================== ================== ================== ==============
Equity and liabilities
Equity attributable to the owners of the parent
Share capital 7,229 7,054 7,054
Share premium 3,015 3,015 3,015
Other equity 4,413 2,278 2,278
Other reserves 4,211 2,820 3,273
Retained earnings 2,456 4,731 5,386
-------------------------------------------------- ------------------ ------------------ --------------
Total equity 21,324 19,898 21,006
-------------------------------------------------- ------------------ ------------------ --------------
Liabilities
Non-current liabilities
Borrowings 6,462 - -
Deferred income tax liabilities 1,177 392 294
Provisions 1,110 316 122
-------------------------------------------------- ------------------ ------------------ --------------
Total non-current liabilities 8,749 708 416
-------------------------------------------------- ------------------ ------------------ --------------
Current liabilities
Trade and other payables 2,422 2,508 2,508
Dividend payable 1,656 2,843 -
Current income tax liabilities - - -
Deferred income 7,355 5,130 6,280
Provisions 1,785 - -
Total current liabilities 13,218 10,481 8,788
-------------------------------------------------- ------------------ ------------------ --------------
Total liabilities 21,967 11,189 9,204
-------------------------------------------------- ------------------ ------------------ --------------
Total equity and liabilities 43,291 31,087 30,210
================================================== ================== ================== ==============
Unaudited consolidated statement of changes in equity at 31
December 2017
Share Share Other Other Retained Total
GBP'000 capital premium equity reserves earnings equity
-------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 1 July
2016 7,027 3,015 2,278 2,300 7,996 22,616
-------------------------- --------- --------- -------- ---------- ---------- --------
Proceeds from share
issue 27 - - - - 27
Increase in equity
in relation to
options issued - - - 581 581
Tax credit relating
to share options - - - 1 - 1
Reclassification
following exercise
or lapse of share
options - - - (62) 62 -
Dividends to equity
holders of the
company - - - - (4,160) (4,160)
Transactions with
owners 27 - - 520 (4,098) (3,551)
-------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total
comprehensive income
for the period - - - - 833 833
-------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 31 December
2016 7,054 3,015 2,278 2,820 4,731 19,898
-------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 1 January
2017 7,054 3,015 2,278 2,820 4,731 19,898
-------------------------- --------- --------- -------- ---------- ---------- --------
Increase in equity
reserve in relation
to options issued - - - 466 - 466
Reclassification
following exercise
or lapse of share
options - - - (13) 13 -
Transactions with
owners - - - 453 13 466
-------------------------- --------- --------- -------- ---------- ---------- --------
Profit and total
comprehensive income
for the period - - - - 642 642
-------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 30 June
2017 7,054 3,015 2,278 3,273 5,386 21,006
-------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 1 July
2017 7,054 3,015 2,278 3,273 5,386 21,006
-------------------------- --------- --------- -------- ---------- ---------- --------
Proceeds from share
issue - - - - - -
Issue of ordinary
shares as consideration
for acquisition
for a business
combination 175 - 2,135 - - 2,310
Increase in equity
in relation to
options issued - - - 975 - 975
Tax charge relating
to share options - - - (36) - (36)
Reclassification
following exercise
or lapse of share
options - - - (6) 6 -
Dividends to equity
holders of the
company - - - - (3,117) (3,117)
-------------------------- --------- --------- -------- ---------- ---------- --------
Transactions with
owners 175 - 2,135 933 (3,111) 132
-------------------------- --------- --------- -------- ---------- ---------- --------
Profit for the
period - - - - 181 181
Other comprehensive
income for the
period - - - 5 - 5
-------------------------- --------- --------- -------- ---------- ---------- --------
Total comprehensive
income for the
period - - - 5 181 186
-------------------------- --------- --------- -------- ---------- ---------- --------
Balance at 31 December
2017 7,229 3,015 4,413 4,211 2,456 21,324
-------------------------- --------- --------- -------- ---------- ---------- --------
Unaudited consolidated cash flow statement for the six months to
31 December 2017
Unaudited Unaudited Audited
Six months to Six months to 12 months to
GBP'000 31 December 2017 31 December 2016 30 June 2017
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from operating activities
Profit before income tax 278 921 1,686
Adjustments for:
Depreciation 127 108 212
Amortisation 776 558 1,167
Loss on disposal of intangible assets - - 8
Share-based payments 521 660 1,171
Net finance (costs)/ income 292 (40) (69)
Changes in working capital
Inventories 120 26 (108)
Trade and other receivables (591) 1,547 699
Trade and other payables (1,970) (1,313) (399)
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash (used)/ generated from operations (447) 2,467 4,367
Analysed as:
Cash generated from operations before payment of
non-recurring transaction costs 298 2,467 4,367
Non-recurring transaction cost payments (745) - -
-------------------------------------------------------------- ------------------ ------------------ --------------
Interest paid (207) (3) (5)
Income tax refund/ (paid) 11 (4) (4)
-------------------------------------------------------------- ------------------ ------------------ --------------
Net cash (used)/ generated from operating activities (643) 2,460 4,358
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from investing activities
Payment for acquisition of subsidiary, net of cash acquired (10,974) - -
Purchases of property, plant and equipment (54) (52) (121)
Development expenditure (830) (676) (1,331)
Purchases of other intangible assets (123) (38) (283)
Interest received 12 43 112
-------------------------------------------------------------- ------------------ ------------------ --------------
Net cash used in investing activities (11,969) (723) (1,623)
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash flows from financing activities
Proceeds from issue of ordinary shares - 27 27
Proceeds from borrowings 7,000 - -
Dividends paid to Company's shareholders (1,461) (1,317) (4,160)
-------------------------------------------------------------- ------------------ ------------------ --------------
Net cash used in financing activities 5,539 (1,290) (4,133)
-------------------------------------------------------------- ------------------ ------------------ --------------
Net (decrease)/ increase in cash and cash equivalents (7,073) 447 (1,398)
Cash and cash equivalents at beginning of period 12,724 14,122 14,122
Effects of exchange rate changes on cash and cash equivalents (1) - -
-------------------------------------------------------------- ------------------ ------------------ --------------
Cash and cash equivalents at end of period 5,650 14,569 12,724
============================================================== ================== ================== ==============
Notes to the financial information for the six months ended 31
December 2017
1. General information
Netcall plc (AIM: "NET", "Netcall", or the "Company") is a
leading provider of customer engagement software. It is a public
limited company which is quoted on AIM (a market of the London
Stock Exchange). The Company's registered address is 3(rd) Floor,
Hamilton House, 111 Marlowes, Hemel Hempstead, HP1 1BB and the
Company's registered number is 01812912.
2. Basis of preparation
The Group interim results consolidate those of the Company and
its subsidiaries (together referred to as the 'Group'). The
principal trading subsidiaries of Netcall are Netcall Telecom Ltd
and MatsSoft Ltd.
These consolidated interim financial statements (the 'results')
have been prepared in accordance with those IFRS standards and
IFRIC interpretations issued and effective or issued and early
adopted as at the time of preparing these statements (February
2017). This results announcement does not constitute statutory
accounts of the Group within the meaning of sections 434(3) and
435(3) of the Companies Act 2006 (the 'Act'). The balance sheet at
30 June 2017 has been derived from the full Group accounts
published in the Annual Report and Accounts 2016, which has been
delivered to the Registrar of Companies and on which the report of
the independent auditors was unqualified and did not contain a
statement under either section 498(2) or section 498(3) of the
Act.
The results have been prepared in accordance with the accounting
policies set out in the Group's 30 June 2017 statutory accounts,
which are based on the recognition and measurement principles of
IFRS in issue as adopted by the European Union ("EU"). No changes
to accounting policies are expected for the year ending 30 June
2018.
The results for the six months ended 31 December 2017 were
approved by the Board on 6 March 2018. A copy of these interim
results will be available on the Company's web site www.netcall.com
from 8 March 2018.
The principal risks and uncertainties faced by the Group have
not changed from those set out on page 7 of the annual report for
the year ended 30 June 2017.
3. Segmental analysis
The Board considers that there is one operating business segment
being the design, development, sale and support of software
products and services, which is consistent with the information
reviewed by the Board when making strategic decisions. Resources
are reviewed on the basis of the whole of the business
performance.
The key segmental measure is adjusted EBITDA which is profit
before interest, tax, depreciation, amortisation, acquisition and
reorganisation expenses and share-based payments, which is set out
on the consolidated income statement.
4. Earnings per share
The basic earnings per share is calculated by dividing the net
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year
excluding those held in treasury:
Six months to Six months to 12 months to
31 December 2017 31 December 2016 30 June 2017
-------------------------------------------------------------- ------------------ ------------------ --------------
Net earnings attributable to ordinary shareholders (GBP'000s) 181 833 1,475
Weighted average number of ordinary shares in issue (000s) 142,134 138,702 138,950
Basic earnings per share (pence) 0.13 0.60 1.06
============================================================== ================== ================== ==============
The diluted earnings per share has been calculated by dividing
the net profit attributable to ordinary shareholders by the
weighted average number of shares in issue during the year,
adjusted for potentially dilutive shares that are not
anti-dilutive.
Six months to Six months to 12 months to
31 December 2017 31 December 2016 30 June 2017
-------------------------------------------------------------- ------------------ ------------------ --------------
Weighted average number of ordinary shares in issue (000s) 142,134 138,702 138,950
Adjustments for share options (000s) 4,922 4,807 4,904
Weighted average number of potential ordinary shares in issue
(000s) 147,056 143,509 143,854
-------------------------------------------------------------- ------------------ ------------------ --------------
Diluted earnings per share (pence) 0.12 0.58 1.03
============================================================== ================== ================== ==============
Adjusted basic and diluted earnings per share has been
calculated to exclude the effect of acquisition, contingent
consideration and reorganisation costs, share-based payment
charges, amortisation of acquired intangible assets and utilisation
of historic tax losses. The Board believes this gives a better view
of ongoing maintainable earnings. The table below sets out a
reconciliation of the earnings used for the calculation of earnings
per share to that used in the calculation of adjusted earnings per
share:
Six months to Six months to 12 months to
GBP'000s 31 December 2017 31 December 2016 30 June 2017
-------------------------------------------------------------- ------------------ ------------------ --------------
Profit used for calculation of basic and diluted EPS 182 833 1,475
Non-recurring transaction costs 456 - 320
Share-based payments 521 660 1,171
Amortisation of acquired intangible assets 323 171 319
Contingent consideration - post-completion services 235 - -
Unwinding of discount - contingent consideration provisions 52 - -
Tax adjustment (258) (262) (479)
Profit used for calculation of adjusted basic and diluted EPS 1,511 1,402 2,806
============================================================== ================== ================== ==============
Six months to Six months to 12 months to
Pence 31 December 2017 31 December 2016 30 June 2017
------------------------------------- ------------------ ------------------ --------------
Adjusted basic earnings per share 1.06 1.01 2.02
Adjusted diluted earnings per share 1.03 0.98 1.95
===================================== ================== ================== ==============
5. Dividends
Dividends paid or declared during the period were as
follows:
Statement of December 2017
Six months to Cash flow statement changes in equity balance sheet
December 2017 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
--------------------- --------- ---------------- -------------------- --------------------- ---------------------
Interim enhanced
dividend for year
to June 2017 27/7/17 1.05p 1,461 1,461 -
Final ordinary
dividend for year
to June 2017 12/1/18 1.16p - 1,656 1,656
1,461 3,117 1,656
------------------------------- ---------------- -------------------- --------------------- ---------------------
Statement of December 2016
Six months to Cash flow statement changes in equity balance sheet
December 2016 Paid Pence per share (GBP'000) (GBP'000) (GBP'000)
--------------------- --------- ---------------- -------------------- --------------------- ---------------------
Interim enhanced
dividend for year
to June 2016 27/7/16 0.95p 1,317 1,317 -
Final ordinary
dividend for year
to June 2016 11/1/17 1.10p - 1,526 1,526
Enhanced dividend
for year to June
2016 11/1/17 0.95p - 1,317 1,317
--------------------- --------- ---------------- -------------------- --------------------- ---------------------
1,317 4,160 2,843
------------------------------- ---------------- -------------------- --------------------- ---------------------
An interim enhanced dividend of 1.05 pence per share, amounting
to a total of GBP1.46 million, was paid to shareholders whose names
appeared on the register at the close of business on 14 July 2017
on 27 July 2017.
A final ordinary dividend of 1.16 pence per share in respect of
the year ended 30 June 2017 amounting to a total of GBP1.66m was
approved at the Annual General Meeting held on 23 November 2017.
This dividend was paid on 12 January 2018.
6. Acquisitions & Financing
(a) Acquisition of MatsSoft Limited
On 4 August 2017 the Company acquired 100% of the issued share
capital of MatsSoft Limited ('MatsSoft'), a cloud-based low-code
software provider. The acquisition is expected to add to the
Group's cloud business and provided it with access to the
fast-growing low-code market.
The fair value of consideration is GBP15.4m comprising:
GBP'000
---------------------------------- --------
Cash consideration 10,974
Shares issued(1) 2,310
Contingent cash consideration(2) 1,489
Contingent share consideration
- share price target(3) 582
Contingent share consideration
- potential new contract(4) 73
----------------------------------- --------
15,428
---------------------------------- --------
(1) the Company issued 3,499,864 new ordinary shares of 5p each
at an issue price of 66p per share.
(2) the contingent cash consideration arrangement requires the
Company to pay the former owners of MatsSoft up to a maximum
undiscounted amount of GBP2.31m subject to MatsSoft achieving
certain financial hurdles post-acquisition to 4 August 2019. A
number of the former owners of MatsSoft continue to work in the
business and in accordance with IFRS 3 a proportion of the
contingent consideration is treated as remuneration and expensed in
the income statement. The fair value of the contingent cash
consideration arrangement of GBP1.49m has been estimated by
calculating the present value of the future expected cash flows.
The estimates are based on a discount rate of 9% and an allocation
of 35% of the contingent cash consideration to post-completion
service remuneration.
(3) the contingent share consideration - share price target
arrangement requires the Company to issue the former owners of
MatsSoft up to 5,599,783 new ordinary shares of 5p each subject to
the Company's share price reaching certain price hurdles up to
GBP1.20 per share by 4 August 2019. The fair value of this
contingent consideration of GBP0.89m has been determined using the
Monte Carlo valuation model. The significant inputs into the model
were the mid-market share price of 66.5p at the acquisition date,
volatility of 25%, dividend yield of 1.85%, an expected option life
of 4 years, an annual risk-free interest rate of 0.203%, and an
allocation of 35% of the contingent share consideration to
post-completion service remuneration.
(4) the contingent share consideration - potential new contract
arrangement requires the Company to issue the former owners of
MatsSoft up to 3,948,851 new ordinary shares of 5p each subject to
MatsSoft achieving certain new revenues from a potential new
contract post-acquisition to 31 December 2019. The fair value of
this contingent consideration arrangement of GBP0.07m has been
estimated by calculating the present value of the future expected
shares to be awarded. The estimates are based on a discount rate of
9%, a value per share of GBP0.66 and an allocation of 35% of the
contingent share consideration to post-completion service
remuneration.
The total contingent consideration expensed as post-completion
services remuneration in the period was GBP0.24m (H1-FY17
GBPnil).
The assets and liabilities recognised as a result of the
acquisition are as follows:
GBP'000
--------------------------------------- --------
Intangible assets: proprietary
software 2,662
Intangible assets: order backlog 14
Intangible assets: trade name 245
Property, plant & equipment 53
Deferred income tax asset 2
Trade & other receivables 1,108
Cash & cash equivalents -
Deferred income tax liabilities (832)
Trade & other payables (1,492)
Deferred income (1,817)
---------------------------------------- --------
Net identifiable liabilities acquired (57)
Add: goodwill 15,484
---------------------------------------- --------
Net assets acquired 15,428
---------------------------------------- --------
The goodwill is attributable to the workforce and the value
projected to be generated through future new business and the
expected benefits from integrating MatsSoft into Netcall.
The cash outflow as a result of the acquisition is as
follows:
GBP'000
------------------------------- --------
Cash consideration 10,974
Less: cash acquired -
Net cash out flow - investing
activities 10,974
-------------------------------- --------
(b) Acquisition related costs
The Company incurred professional advisor fees of GBP0.46m
(2017: GBP0.32) in connection with the acquisition of MatsSoft Ltd
and in the prior period an alternative potential acquisition which
was not progressed. These costs are included in 'other
expenses'.
(c) Loan Note
Immediately prior to the acquisition of MatsSoft on 4 August
2017 the Company entered into a subscription agreement with
Business Growth Fund ('BGF') for a GBP7.0m investment. The
investment comprises the issue of a GBP7.0m Loan Note and the award
of options over 4,827,586 new ordinary shares of 5p each at a price
of 58p per share. The Loan Note has an annual interest rate of 8.5%
payable quarterly in arrears and is repayable in six instalments
from 30 September 2022 to 31 March 2025.
The GBP7.0m investment has been allocated to the fair value of
the Loan Note, GBP6.42m, and the fair value of the share options
granted, GBP0.58m. The fair value of the share options was
determined using the Binomial valuation method. The significant
inputs into the model were the mid-market share price of 66.5p at
the grant date, volatility of 25%, dividend yield of 1.85%, an
expected option life of 5 years, and an annual risk-free interest
rate of 0.267%. The total expense relating to the fair value of the
share options is being charged to the income statement over the
5-year option life. The total share-based payment charge in the
period relating to these options is GBP0.05m (H1-FY17 GBPnil).
7. Net debt reconciliation
31 December 2017 31 December 2016 30 June 2017
--------------------------------------- ----------------- ----------------- -------------
Cash and cash equivalents 5,650 14,569 12,724
Borrowings - repayable after one year (6,462) - -
Net debt (812) 14,569 12,724
======================================= ================= ================= =============
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GMGGFNVNGRZM
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March 07, 2018 02:00 ET (07:00 GMT)
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