TIDMPCIP
RNS Number : 8178Y
PCI-PAL PLC
14 September 2020
PCI-PAL PLC
("PCI Pal", the "Company" or the "Group")
RESULTS FOR THE YEARED 30 JUNE 2020
ANALYST BRIEFING & INVESTOR PRESENTATION
Continuing Significant Sales Growth with Channel Partnerships
Delivering
PCI-PAL PLC (AIM: PCIP), the global provider of secure payment
solutions, is pleased to announce full year results for the year
ended 30 June 2020 (the "Period").
Financial Highlights
-- Revenue increase of 56% to GBP4.40 million (2019: GBP2.82 million)
-- Gross margin increased to 69.2% (2019: 60.2%) reflecting the
continuing transition of our service delivery mix to the higher
margin Amazon Web Services ("AWS") platform
-- Significant increase in new sales bookings leading to signed
recurring Annual Contract Value ("ACV") increasing by 37% to
GBP2.62 million (2019: GBP1.91 million)
-- Total contracted recurring ACV ("TACV(1) ") increased 66% and
now stands at GBP6.75 million (2019: GBP4.06 million)
-- Deferred income increased 85% to GBP4.53 million (2019: GBP2.45 million)
-- Loss before Tax in line with expectations at GBP4.35 million
(2019: GBP4.50 million) following continued investment in our
growth plans
-- Cash balances at year end of GBP4.30 million (2019: GBP1.49
million) with a further GBP1.25 million of debt facility available
to draw
-- New GBP2.75 million debt facility entered into in October
2019 and GBP5.00 million equity placing undertaken in March 2020 to
provide additional working capital to support continued growth of
the Group and the path to breakeven
Operating Highlights
-- Recurring revenue model proven with record full year on year revenue growth
-- Signed 100 new sales contracts in the year
-- 78% of new sales contracts for the Group generated from channel partners
-- Continued to sign more enterprise customers, including
signing the Group's second and third largest contracts in its
history, with ACV of US$ 0.57 million signed in North America and
GBP0.55 million ACV in the UK
-- North American momentum continues to build, with year on year ACV sales increased 145%
-- TACV for North American region increased 181% year on year to
GBP1.66 million (2019: GBP0.59 million)
-- Customers live across all six global regions including EMEA, North America, and ANZ
-- Deployed our services with more than 70 new customers
-- Time to go live of new contracts from the date of signature
to deployment ("TTGL") improved to a 5.5 month average across all
sales channels
-- Announced new technology partnerships with Avaya and Cisco;
as well as competitor displacements at three EMEA-based
resellers
-- Achieved customer retention of 95% by value in the year
-- Simon Wilson, US-based, Chairman appointed with significant
public company and international software growth experience
(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
Current Trading & COVID-19 Update
-- Strong start to the new fiscal year with ACV in line with
management expectations. Run rate revenue for the two months up to
the end of August 2020 is up 41% compared to the same period last
year
-- Revenue visibility currently at more than 80% for the year against current market forecasts
-- Sales highlights include:
o A significant new customer contract to provide both our Agent
Assist and Digital secure payment solutions to a well-known, North
American headquartered, global retailer with more than 1,500 agents
in their North America based contact centre
o An initial contract to provide our Agent Assist solution to
one of the largest local councils in the UK, sold through our long
standing partnership with Civica
-- Launched Speech Recognition feature set for our Agent Assist and IVR solutions.
-- Achieved record TTGL delivery of only 9 weeks for a contact
centre of more than 500 seats, which went live in July, having been
the largest deal signed in Q4 FY20
-- Announced the formation of the Company's Advisory Committee,
adding additional breadth of market and product perspectives as the
Company navigates its future and capitalises on the opportunities
available to it
COVID-19 Update:
PCI Pal's business model and technology have meant that we have
so far not been materially impacted during the extremes of lockdown
in both the UK and US and remain well positioned to minimise the
potential negative impacts of the COVID-19 pandemic on the Group.
Since the start of the new fiscal year we have continued our growth
momentum, which we attribute to:
-- our strong relationships with financially stable, large
cloud-based reseller partners through whom we sell the majority of
our contracts by both value and volume; and
-- our cloud platform, including our ability to implement and
deliver services to customer entirely remotely.
The on-set of the pandemic has served to accelerate the
market-wide transition from on-premise communications technology to
cloud-based services. We believe that this will benefit PCI Pal
over the longer term as the leading cloud-only provider in the
market. PCI Pal's services are critical for home-workers wishing to
handle sensitive customer data, particularly credit or debit card
data. As a result, we believe that demand for our services may
increase with time, despite the short-term general business impact
the pandemic has had in delaying certain buying decisions at
prospective customers.
The following provides an update to the COVID-19 overview
provided in our full year trading update in July 2020:
-- Project delivery timescales continue to shorten with high
demand for services as a result of the increased numbers of contact
centre agents working from home. Our performance against our TTGL
metric has been strong with 16 projects already delivered by the
end of August 2020.
-- New customer contracts sales timing remains less predictable
than it was before the start of the pandemic. We had reported that
we had seen delays in contract signing during our Q4 FY20, and
whilst these delays are no longer evident in newly created sales
opportunities, we would note that not all those specific deals
delayed in Q4 FY20 have as yet re-commenced engagement. Demand
through new pipeline generation is strong though, and in line with
our expected requirements to deliver management's near-term sales
forecasts.
-- The Company has maintained market guidance given the above,
and whilst we will monitor progress very carefully against market
expectations, we believe we are well positioned to take another
significant step forward this year in line with those
expectations.
Commenting on results and prospects, James Barham, Chief
Executive said:
"I am very pleased with the significant progress that we have
made this year, particularly considering the entirety of our final
quarter was during the heights of the initial impacts of COVID-19.
Despite this we have been able to continue our momentum, evidenced
by the signing of 37 new customer logos in our Q4 alone.
"We have taken another strong step forward in revenue growth
year on year, which is a result of our continued success in growing
our key sales metric of TACV. This is testament to our business
model as we have successfully on-boarded new channel partners who
are generating an increased pipeline of opportunities, as well as
our efforts in adding further improvements to our ability to enable
and onboard new customers.
"Our early adoption of cloud technologies in our space, and our
commitment to channel, is enabling us to service the entire contact
centre market within our focus territories, and it is this
differentiator that will see us continue our progress towards cash
generation and profit breakeven under the current plan as we look
forward to another year of substantial revenue growth."
Analyst Briefing: 9.30am on Monday 14 September 2020
An online briefing for Analysts will be hosted by James Barham,
Chief Executive, and William Good, Chief Financial Officer, at
9.30am on Monday 14 September 2020 to review the results and
prospects. Analysts wishing to attend should contact Walbrook PR on
pcipal@walbrookpr.com or 020 7933 8780.
Investor Presentation: 10.00am on Thursday 17 September 2020
The Directors will hold an investor presentation to cover the
results and prospects at 10.00am on Thursday 17 September 2020.
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 .
For those investors who have already registered and added to meet
the Company, they will automatically be invited.
Questions can be submitted pre-event to pcipal@walbrookpr.com or
in real time during the presentation via the "Ask a Question"
function.
For further information, please contact:
PCI-PAL PLC Via Walbrook PR
James Barham - Chief Executive
Officer William Good - Chief Financial
Officer
finnCap (Nominated Adviser and
Broker) +44 (0) 20 7227 0500
Marc Milmo/Simon Hicks (Corporate
Finance) Richard Chambers (Corporate
Broking)
Walbrook PR +44 (0) 20 7933 8780
Tom Cooper/Paul Vann +44 (0) 797 122 1972
tom.cooper@walbrookpr.com
About PCI Pal:
PCI Pal is a provider of secure payment solutions for contact
centres and businesses taking Cardholder Not Present (CNP)
payments. PCI Pal's globally accessible cloud platform empowers
organisations to take payments securely without bringing their
environments into scope of PCI DSS and other card payment data
security rules and regulations.
With its products served from PCI Pal's cloud environment,
integrations with existing telephony, payment, and desktop
environments are light-touch, ensuring no degradation of service
while achieving security and compliance.
PCI Pal has offices in London, Ipswich (UK) and Charlotte NC
(USA). For more information visit www.pcipal.com or follow the team
on Twitter: https://twitter.com/PCIPAL
CHAIRMAN'S STATEMENT
FOR THE YEARED 30 JUNE 2020
In my first year as Chairman and director of PCI Pal, I am very
pleased to report on a major year of progress for the business.
This despite the, at times, daunting challenges and uncertainties
caused by the COVID-19 pandemic and varying government responses
around the world.
People
Without question, the pandemic has presented varying challenges
on all businesses in every sector of the global economy, but at the
personal and individual level the challenges have been
unprecedented. Almost overnight our people not only had to cope
with working from home, but also with a myriad of concerns, fears
and challenges relating to family health and daily routines, caring
for extended family members, and concerns for financial security. I
am extremely proud to say that our teams in both the U.K. and U.S.
responded gallantly, and in fact drew closer together as a result.
Management supported this rapid transition to a 'new normal' by
implementing flexible work schedules, being sensitive and
sympathetic to individuals who perhaps had more challenging home
environments than others and continuing to provide and enhance
remote-based IT support for collaboration with team-mates, partners
and customers.
During the prior year of FY19, James Barham as the new CEO,
expanded and strengthened the management team across the functions
of Sales, Technology and Security. During FY20, against the
backdrop of the pandemic but in the face of top line sales growth,
the team's expansion continued to underpin the management teams'
strengths in specific operational areas such as professional
services, partner support, and both pre and post-sales technical
expertise. By select hiring in the U.S., the Group has also further
strengthened its ability to serve an increasingly global profile of
both partners and end customers, in particular those headquartered
in North America, which remains the Group's key target growth
market.
The PCI Pal team has grown from 50 to 58 employees over the
course of the year and I would like to personally thank all of our
employees for their excitement, dedication, flexibility and hard
work in growing PCI Pal and in pursuing our Mission: safeguarding
the reputation and trust of our customers. The Board remains as
committed as ever to supporting our people in terms of professional
development, flexible work environments and competitive
compensation and benefit packages. I have no doubt that they will
all continue to build on their successes during the last twelve
months, both as individuals and as globally focused teams, as we
move forward through and beyond these globally challenging
times.
Strategic Direction
During the year, the Company has made demonstrable progress in
executing its Vision of becoming "the preferred solution provider
that technology vendors globally turn to for achieving PCI
compliance for payments by phone" and pursuing a Cloud strategy.
78% of sales were made through channel partners. Our Cloud platform
hosted on AWS has grown to cover 6 points of presence around the
globe and our Cloud solutions are being adopted by small, medium
and large enterprises alike. The attractiveness of PCI Pal's
strategy to focus on channel partners is matched by the demand from
end customers. During FY20 the Company added 100 new end customer
logos and deployed 72 new customer implementations. Behind this
strategy, our innovation has continued with the launch of PCI Pal
Digital, an omni-channel offering as well as Rapid Remote to help
those customers rushing to deploy work-from-home solutions in the
face of COVID-19.
Fund Raise
Adding to its GBP2.75 million debt facility secured in early
FY20, the Company completed a GBP5.00 million equity fund raise in
March 2020. Its success has been reflected in the Company's share
price performance since the date of the announcement and is
evidence of the strong support that the Company enjoys from its
shareholders. In addition to creating a stronger balance sheet,
increasing working capital and providing for flexibility in the
face of uncertainties relating to the pandemic, the fund raise was
also designed to fund expansion. As we look forward to FY21 we are
planning for additional sales and marketing resources, support to
North American based channel partner relationships; and to
expanding product management functions targeting long term
improvements in time to go live ("TTGL") for new customers. These
additional funds will also allow the Company to consider potential
new expansion opportunities in the future. Full disclosure of the
terms of this equity fund raise have been made in the notes to
these accounts and within the Chief Financial Officer's Review.
Shareholder Communications
As a board, continuous improvement in shareholder communications
remains a key objective. Building upon the actions taken in FY19
which included more detailed investor presentations, expanded
analysis of results and underlying KPIs, a more frequent cadence of
communications and the judicious use of RNS-Reach, and
participation in investor-focused events such as 'tech demo days'
and investor group conferences, we have taken further steps in
FY20. These include myself as Chairman, offering one-on-one
shareholder meetings around the time of the AGM each year, expanded
efforts by the executive team to meet with retail shareholder
groups, use of new communications technology aimed at shareholder
needs such as the Investor Meet Company platform and plans for
enhanced web site disclosures. We look forward to continuing and
reinforcing these programmes and events as each year progresses,
and I welcome your feedback and suggestions for further
improvement.
Corporate Governance
During FY20 I have focused the expanded resources of the Board
in a number of key areas of corporate governance and initiatives to
set the Board on a path of continuous improvement over time. These
areas included the Board's first evaluation of the effectiveness of
the Board, its committees, and its individual directors. Other
areas of initiative were a fresh review of the Company's risk
profile, and our appetite for risk and steps necessary to mitigate
known and anticipated risks, an update to the Board committees'
terms of reference, and embarking on a 5-year refresh of our
forward strategic plan to take effect from FY21 onwards.
The nature and results of these early initiatives are summarized
in more detail in the Corporate Governance Report.
Changes in Accounting Rules
The Company implemented IFRS 16: Accounting for Leases effective
from 1 July 2019. The Group has chosen not to restate the previous
years' financial statements following the adoption and there has
been no overall effect on the loss before tax . Full disclosure of
the changes has been made in the notes to these accounts.
Advisory Committee
Following the year end, in August 2020 we announced the
formation of the PCI Pal Advisory Committee (the "PAC"). The
formation of the PAC is consistent with both enhancing the Board's
ability to manage its risk profile, as well as to provide expert
advice into the formation of its future corporate strategy.
Looking Forward
FY20 has been a year of both significant achievement as well as
significant expansion of the risks and opportunities facing the
Company and the markets in which it operates. The Board is
cautiously optimistic about managing through the COVID-19 pandemic
but remains vigilant of the potential for as yet unknown additional
economic and business impacts. Nonetheless, we are a growth company
operating in growth markets, and so are confident in our business
model. I look forward to sharing further progress reports and news
during the coming financial year, as we continue our journey to
achieve profitability and positive operating cash flow.
Simon Wilson
Non-Executive Chairman
CHIEF EXECUTIVE'S STATEMENT
FOR THE YEARED 30 JUNE 2020
Introduction
Reporting on my first full financial year in the role of Group
CEO, I am pleased to report that we have made significant progress
against our key growth metrics. Revenues grew 56% year on year to
GBP4.40 million (2019: GBP2.82 million). This year on year increase
further illustrates the benefits of our SaaS-based revenue model as
revenue is recognised from TACV, our key sales metric which has
continued to grow in the year by 66% to GBP6.75 million (2019:
GBP4.06 million). The start of the current financial year has
started well, and we have strong revenue visibility which for the
coming year is currently at over 80% of the market's revenue
expectations for the year.
I am equally pleased to report that we have made extensive
progress towards the Company's Vision: to be the preferred solution
provider that technology vendors globally turn to for achieving PCI
compliance for payments by phone . Having led the way in utilising
cloud technology in our market, and launching our true-cloud
environment back in October 2017, we now have the most advanced and
mature cloud offering in our market with customers live on all 6
regional instances of the platform within AWS across EMEA, North
America, and ANZ regions. It is this technology focus that has
enabled us to execute against our Vision. Many of our technology
partners are cloud-native themselves and are a natural fit for PCI
Pal helping them to provide secure payment solutions to their
customers around the world. I am pleased to confirm that we ended
the year with all our major Contact Centre as a Service ("CCaaS")
and Unified Communications as a Service ("UCaaS") partners live and
on-boarded across all regions of our platform.
It is these enabled partnerships that are critical to our
continued growth and long-term profitable scale. As of the end of
the year, we are now resold by over 40% of North American and
Western European Gartner Magic Quadrant CCaaS providers. These same
partners are a key reason why we achieved the milestone of signing
more than 100 new customers in the year (2019: 77) with 78% of
these customers generated through channel partners. I am extremely
encouraged by the accelerated number of new customers signed as the
year progressed, reflected by the 37 new customers signed in Q4
alone. This is a 76% increase compared to the customers signed in
Q1 in spite of the COVID-19 outbreak and illustrates the
effectiveness of our channel model in producing higher quantities
of pipeline opportunities. We are optimistic that opportunities
will continue to increase as we on-board more partners, and as our
partner relationships mature over time following full engagement
with our partner programme and channel sales functions.
In the year, the Group signed new contracts across all regions
with a recurring Annual Contract Value ("ACV") of GBP2.62 million
(2019: GBP1.91 million). I was particularly pleased that despite
the pandemic, we signed GBP0.80 million ACV in our Q4, so whilst we
were impacted by delays in our sales cycles as a result of the
onset of COVID-19, which ultimately reduced our final ACV number
for the year, we were nonetheless able to continue our
momentum.
This sales traction is bolstered by further progress in our
ability to implement new customers, and our key project delivery
metric of TTGL is now at an average of 5.5 months overall across
all customers (which remains within the 4-7 months previously
stated). We have made extensive improvements since we introduced
the TTGL metric in January 2019, and customers signed more recently
are being implemented much faster. For instance, contracts signed
in FY20 have an average TTGL across all deployments of just 4.4
months. Additionally, this improvement is a natural positive result
of having more integrated partners now fully on-boarded, live, and
delivering new contract sales. Their repeatable technology stack
integrations result in shorter implementations, and reduced project
effort levels for us, and their end customers.
We have also achieved a number of large scale customer
implementations during the year. In H1 we announced our largest
contract to date in the US (and the Company's second largest
contract in its history), won through both a competitive tender
process, and also a competitive Proof of Concept ("POC"). Our
Professional Services team went head-to-head with one of our major
competitors for this POC. We achieved highly positive reviews from
the customer and ultimately won the new contract. Following a
successful, collaborative implementation the customer is live on
our platforms, following a deployment achieved within six
months.
The implementation skills of our Professional Services team
across EMEA and North America are having a directly positive impact
on our Net Promoter Score ("NPS"), the internationally recognised
measure of customer satisfaction. I am proud to report that our NPS
has increased to 87 against the NPS global benchmark of 43, which
puts us comfortably in the top 25(th) percentile of companies
worldwide and 102% above the global benchmark. As a result, our
ability to reference customers and produce case studies and
testimonials has significantly increased putting us in an improved
position of strength when competing for business of any size. This
is strong evidence of the effectiveness of the operational
improvements we have made since January 2019, which has been one of
our top Company-wide key initiatives.
Market Drivers & Market Positioning
PCI Pal's addressable market consists of any organisation taking
payments by phone or within contact centre environments anywhere in
the world, and in particular within our core focus geographic
markets of the UK and North America. PCI Pal gains access to these
markets by leveraging a partner-first go-to-market sales model,
which involves working primarily through resellers who themselves
are involved in providing services for customer interactions for
the sorts of organisations we are targeting. Today these partners
include CCaaS, UCaaS, Carrier (Telco), Value-Added Resellers
("VARs") of the major telephony platforms, Payment Service
Providers, and consultancies. When we sell directly to the end
customer, this is typically for strategically important or large
enterprise size accounts who have a preference to deal directly
with their technology suppliers.
A key differentiator for us is our ability to serve any size
organisation across our addressable market. Our customers range
from small contact centres up to the very largest with more than
5,000 agent seats. We can serve these customers from anywhere in
the world through our best-in-class truly-virtualised cloud
platform, hosted within AWS. PCI Pal was the first in this market
to launch a true cloud environment and maintains the most advanced
and mature platform globally.
Contact centre markets in both the UK and US represent between
3-4% of the working populations of those countries, so in contact
centres alone there is a sizeable market opportunity to address.
Our ability to serve any size of contact centre is essential when
considering the make-up of this mass-employment pool across both
countries. In the US alone, 93% of contact centres (37,000) have
less than 250 agent seats and employ 2.0 million agents making up
more than 55% of the entire employed agent-base across the country.
As such, our ability to serve contact centres of any size is
critical to maximising our market opportunity.
The market is underpinned and strengthen by two major global
industry dynamics occurring today; the increase in regulation and
governance surrounding data security worldwide; and secondly, the
transition in the communications market of services served from
on-premise equipment to services delivered from the cloud.
In recent years we have seen regulation and governance of data
security increase both through well-publicised standards such as
the General Data Protection Regulations ("GDPR") in the EU, as well
as state level statutes in the US such as the California Consumer
Privacy Act. These are in addition to standards such as the Payment
Card Industry Data Security Standard (PCI DSS) which specifically
govern the activities of companies handling personal data,
specifically credit and debit card data. Regulatory and governance
standards combine as one of the primary reasons for the change in
organisational mindset towards the risks posed by cyber-crime
today. This change in mindset is creating a significant shift
towards more responsible and thorough data security protocols
across all industry sectors. Specifically, from a payment security
perspective, PCI Pal makes the job of complying with these
standards, and securing data much easier for these companies who
otherwise would be faced with significant challenges, and therefore
costs, to achieve compliant and secure operations. Additionally,
PCI Pal secures the most sensitive of personal data, with payment
data being the most easily monetised by cyber criminals should it
fall into their hands.
With the cloud communications market expected to grow
considerably, the high growth UCaaS and CCaaS sectors are evidence
of the shift in technology adoption occurring across the
communications industry today. Organisations are moving from
traditional on-premise telephony to cloud-based communications
through the likes of Vonage, 8x8, and RingCentral. This shift has
been further accelerated by the on-set of the COVID-19 pandemic
where the benefits of cloud-based services have been emphasised.
These benefits include flexible homeworking capabilities; robust
disaster recovery and responsive business continuity capabilities;
as well as the availability of scalable cost models. Given our
technical approach and channel business model, we are well
positioned to capitalise on this market trend as we work with our
partners to increase our access to this expanding market
opportunity.
PCI Pal Cloud
Having launched our cloud environment almost three years ago in
October 2017 and having defined a key strategic objective to be the
leader in cloud-based secure payments services in our market
globally, we have gathered significant technical momentum. Our
platform continues to evolve and is already the most mature in the
market by some margin, with our competitors' primary offerings
remaining hardware or privately-hosted technologies. This momentum
is underscored by the cloud-to-cloud partnerships that we have
built in the last 24 months with the likes of Vonage, 8x8, Genesys,
and Talkdesk, as well as our ability to engage with, sell to, and
deliver enterprise size deployment projects with some of the
largest contact centres in the UK and the US.
We utilise AWS for the virtualised hosting of our cloud
platform, a hosting provider that we selected on the basis that
they were, and still are, the market leader both in terms of
capacity and geographic coverage. Our true-cloud approach allows us
to deliver services across the globe whilst maintaining data
sovereignty and regional handling of payment traffic by leveraging
the data regions we have created within the AWS global hosting
environment. This is both of appeal to smaller local customers who
need their data to be handled within the territory in which they
trade; but equally to larger multi-national organisations whose
businesses may be geographically dispersed with complex data
governance requirements. Our customers can therefore use a single
PCI Pal service, but choose to handle their customers' data locally
wherever that customer is utilising the service.
Additionally, our technology strategy and focus on cloud has
been purposefully made complementary to our partner-first go to
market sales model. AWS is the most commonly adopted hosting
environment used by our cloud-served partners, creating natural
integration and interoperability benefits for us when on-boarding
those partners.
PCI Pal's cloud platform has always used cloud native
technologies, and today our platform continues to evolve, using
more advanced ways of operating such as serverless technologies and
micro-services. This approach is enabling us to be nimbler within
our development cycles, more robust in our release processes, and
allowing faster development cycles for new products and features.
It has been our first-mover advantage and early commitment to cloud
that is ensuring we lead the way in this technological approach to
our market.
Product Update
In the year we launched two new products; our PCI Pal Digital
offering for omnichannel payments across channels such as WebChat,
Social media, SMS, and email; and Rapid Remote our rapid deployment
service, which was developed in response to the increased demand
for ultra-high pace deployments in the face of the on-set of
COVID-19 and increased security requirements for agents working
from home.
Since its launch in February, we have both sold and delivered
our first PCI Pal Digital customer and we have continued to build
momentum with this product with further sales since the year end.
Additionally, we have signed a number of Rapid Remote generated
opportunities, several of whom have moved to full deployment
models. One of these being the largest customer that we signed in
Q4 FY20, which went live with the full deployment in just 9
weeks.
In line with our plans following the fundraise in March 2020, we
intend to increase our investment in product management as we look
to evolve our product roadmap and capitalise on our existing
channel partnerships, as well as putting a more strategic and
targeted focus into winning more enterprise-size customers. We have
announced in this report the launch of our Speech Recognition
feature-set for both our Agent Assist (live agent payments) and IVR
(fully automated payments). The speech recognition feature will
combine with our existing capabilities to empower our customers to
accept secure payments through either keypad entry (DTMF) or spoken
voice. Both with the same secure outcome, compliance upsides, and
cost savings.
North America
We are pleased with our progress in North America. In what is
only our second full financial year in the territory, we have
significantly increased our sales bookings with new contract
recurring ACV increased 125% year on year to GBP1.08 million (2019:
GBP0.48 million). As we have stated previously, we have
concentrated our efforts in establishing full enablement of the
North American partners with whom we began working in the prior
year, and I am very pleased to confirm that we have on-boarded all
major partners announced to date. It is these partners who will
enable us to further grow our pipelines, and therefore sales
bookings, in what is the most significant geographic territory
opportunity for the business.
Contributing to the year-on-year growth in US sales bookings was
the win of the Company's second largest contract to date, won
through a competitive tender process. Announced in December 2019,
the contract is for an initial term of three years with a recurring
ACV of $566,000 (approximately GBP434,000). This customer is now
live, and is further evidence of our capability to sell to, win,
and deliver enterprise customers. Additionally, and as we have
referenced previously, this contract was sold on a multi-year
prepayment commercial model, and we can now confirm that following
the year end, we have received payments for years two and three of
their licenses (cash value $1.13 million). We invoiced the first
year licence and set up fees on signature of the contract and this
invoice was paid in H2.
Other sales highlights include a contract to provide both our
Agent Assist solution to more than 700 agents at the US contact
centre operations of a well-known, financial services business
which has an extensive European footprint; and a contract won
through a competitive tender process with a Fortune 100 US
insurance company. This contract was for an initial phase of
deployment, which is now live.
The TACV for the region at the end of the year was GBP1.66
million representing a 181% increase on the prior year (2019:
GBP0.59 million). Revenues for the region represented 11% of Group
revenues at GBP0.50 million (2019: 3% GBP0.10 million), reflecting
the SaaS-based revenue model as the growth in new contract sales
TACV begins to feed through into recognised revenue. We are
continuing to see increases in key sales metrics that will cause
the North American business to grow at faster rates than our more
mature EMEA region, and eventually we expect the North American
operation to surpass it.
From a new sales contracts perspective, and as noted in our
Trading Update for FY20 in July, as a result of the COVID-19
pandemic, we did experience some delays in new business sales
conversion for a number of more mature opportunities expected to
close at the end of our Q3 or during Q4. For the North American
operation, this had an impact on H2 new sales which otherwise would
have produced a stronger full year outcome but for these delays. I
am pleased to confirm that the decision-making delays we saw during
the on-set of the pandemic have reduced. We have made a strong
start to FY21, with newly created opportunities progressing with
sales velocity closer to pre-COVID-19 anticipated levels.
With the majority of our global partners being headquartered in
the US, the North American partner landscape is not only important
for the region, but for the Group worldwide. Having fully
on-boarded all key global partners in the region by the year end, I
can report that those partners by majority contributed to the
record 37 new customer contracts signed in Q4 across the Group.
This includes our new global arrangement signed with 8x8, an
extension to our previous UK-only contract, and Talkdesk, both of
which were announced in H2 FY19. These partners add to our existing
on-boarded global resellers headquartered in the region including
Vonage, Worldpay B2B (previously named Paymetric), and Genesys.
In the year we added two key technical partnerships with two of
the most prominent traditional telephony vendors in the world, both
headquartered in the US; Avaya and Cisco. We have been selected by
Avaya for membership as a Technology Partner to their DevConnect
Program; and additionally, Cisco has selected us as a Preferred
Solution Partner as well as granting us certification for
compatibility with their various platforms. These technical
partnerships are key in underlining our credibility within both
organisations' reseller communities in the US and worldwide, as
well as providing credibility for our own services'
interoperability with their platforms for direct enterprise
customers using their technology.
We continue to see lower levels of competition in North America
compared to the UK, with a small number of US-based competitors.
Whilst we were not the first UK company in our market to launch in
the US by a number of years, we believe that in our short time in
the region we are now beginning to establish our brand as the
strongest and most recognised. This is being achieved by a
two-pronged marketing strategy. First, the support of our partners
through collaborative marketing efforts and leveraging their
extensive market access capabilities. Second, continual stepped
improvements in both our digital marketing capabilities and thought
leadership activities driving relevant, interesting, and useful
content into the market. In addition to growing our brand exposure
to the enterprise end of the market, our focus on easy-to-use cloud
technologies and partner-first approach means we have an
early-stage foothold on the mass-market small to mid-size contact
centre segment. Our brand momentum in the region is evidenced by
our leading position as the brand receiving the highest Share of
Voice ("SOV") in the market compared to our main competitors, with
PCI Pal receiving a very significant 73% of media mentions in our
market sector in the US across the full year.
We continue to run our business in the ANZ region out of the US
due to the beneficial time zone overlap of our employees based on
the US west coast. We are focused on supporting our partners who
have businesses in ANZ, and as a result have grown our
customer-base in the year. Reference customers in ANZ include
Queensland State Government and News Corp Australia, and we have
also extended our reach through the signing of a new reseller in
the region who is the second largest Genesys VAR in Australia. This
partner also has operations in the U.K. so as a by-product there is
also early stage engagement in EMEA.
EMEA
The EMEA business, served from the UK, is the more mature of the
two core regions and as a result has a more established base of
customers that are live and producing recurring revenue. We took a
major step forward in revenue from EMEA for the year, 43% ahead of
the prior year at GBP3.89 million (2019: GBP2.72 million). 84% of
this revenue is recurring licences or transactions. This is a
direct result of the growth in new sales bookings that we have seen
in the last 24 months, which are now producing recognised revenue
as the customers are implemented.
Revenues for the EMEA business are generated both from services
on our first generation, privately-hosted platform and, since 2018,
from our true-cloud AWS environment which enjoys much higher gross
margins. We have not sold services on our first-generation platform
since early 2018, with all sales since then being on our AWS
platform. We finished the year with 46% of EMEA revenues generated
from our AWS platform, (2019: 18%) an increase of 156%. To date we
have opportunistically transitioned a number of our customers on
our first-generation platform to our AWS environment. Plans have
though now commenced to proactively transition these customers to
our higher gross margin AWS environment over the next 24
months.
TACV in the region increased 46% year on year to GBP5.08 million
(2019: GBP3.47 million) illustrating the outlook for recurring
revenue from signed contracts as they are implemented and reach
revenue recognition over the coming year. Incorporated into these
TACV numbers, is our new business ACV signed in the year. Similar
to North America, EMEA sales bookings were adversely impacted due
to timing delays during the on-set of the pandemic in the final
four months of the financial year. We finished the year with new
ACV sales bookings 8% greater than the prior year at GBP1.53
million (2019: GBP1.42 million). I am pleased to report that the
EMEA business has started the new financial year well and in line
with management expectation.
Sales highlights in the year include the signing of another
major enterprise-size government agency contact centre, with more
than 4,000 agent seats. The contract, to deliver our Agent Assist
solution, has an ACV value of GBP0.55 million. We will be invoicing
the first years' license when agreed delivery milestones have been
met, and we continue to expect this to occur in H1 FY21. We have a
particularly strong presence in U.K. public sector and this latest
contract further underlines our position in this specific market
vertical.
Through our resellers, who focus on the public sector, such as
Civica, we have now more than 40 local authorities using our
services to secure payments for U.K. citizens. PCI Pal is a Crown
Commercial Services Certified Supplier, and our products are
available to public sector organisations through the U.K.
government G-Cloud framework.
Other sales highlights in the period include a number of further
contracts through our reseller relationship with Capita Pay 360,
one of which is to a well-known FTSE 250 retailer delivering our
services into their contact centres in the UK and South Africa. In
H2 this customer went live with all services across both
territories. Additionally, we also won a contract with a global
Nutritional Supplements firm, headquartered in Cambridge, UK to
provide not only secure credit card payment services but also the
facility to securely collect customer bank details for direct debit
transactions and bank transfers. This company serves customers
across Europe, including Germany, where direct bank transfers are
more prevalent for orders taken by phone. This customer was sold
through our newly on-boarded integrated partnership with Puzzel,
the Nordic based pan-European CCaaS vendor.
We have been particularly successful in EMEA in opening up
partnerships with new resellers who have had historic relationships
with our competitors. As we have previously reported, a number of
our closest competitors invested in the market earlier than us, and
as a result they had been able to achieve working relationships
with the sorts of organisations we would seek to partner with.
Nonetheless we have proactively targeted leading VARs with these
historic competitor relationships in the region, and particularly
those that focus on the resale and maintenance of the major
telephony vendors with whom we are accredited (such as Genesys,
Avaya, and Cisco). I am very pleased with our progress on this
initiative and can report that we completed the year having signed
three new important VAR resellers. Two are leading Genesys VARs,
one in Ireland (with whom we have sold and delivered our first
customer) and the other in the UK. The third is a leading UK-based
Avaya VAR. Both of the UK-based resellers have their own hosted
instances of Genesys and Avaya respectively, and so we are
deploying repeatable integrations which can be used across all
their customers using services on these platforms.
The EMEA business today is very much focused on the U.K. market.
We continue to monitor opportunities, both through existing and new
partners, to gain footholds in other countries in the territory as
we assess our future long-term strategy and timing to expand across
mainland Europe. We remain cautious to balance the EMEA
opportunities with the risk of management distraction and resource
diversion away from our core focus opportunities in our stated
target markets in the UK and North America.
Channel Partners
PCI Pal has a partner-first sales model which means that we have
a company-wide focus on generating most of our sales through
channel sales partners. In the year 78% (2019: 84%) of new customer
contracts were sold through channel partners, equating to 42% of
the total ACV by value. We anticipate channel to be the majority by
value over time as our lead generation from channel increases as a
result of our growing base of on-boarded partners.
As we have referenced in the Market Drivers section of this
report, the contact centre market is by majority made up of contact
centres of 250 agent seats or less. In the US 93% of all contact
centres (37,000 in total) have less than 250 seats and employ 55%
of all agents across the country. This is clear evidence of the
long-term scale opportunity for PCI Pal if we are able to
profitably win and serve these smaller, higher quantities of
contact centres who make up a majority of the addressable market.
Our channel approach is integral to this capability, particularly
through our integrated partners such as 8x8, Vonage, and Talkdesk.
This growing capability is being substantiated by the accelerated
increase we have seen across the year in the number of new
customers we are signing quarter on quarter as more of our partners
become fully enabled and relationships mature finishing the year
with 37 new customers signed in Q4 alone, compared to 24 in Q1.
Channel not only gives us the ability to cost-effectively access
a wider addressable market, but it also empowers us to efficiently
deploy higher quantities of customers leveraging the highly
repeatable nature of our Integrated Partner engagements.
Additionally, our partners provide first-line support to customers,
so PCI Pal can be highly efficient in servicing these accounts,
focusing instead primarily on the success of the partner. This
sales strategy plays a major part in establishing the significant
operational gearing that this business is building towards.
Having started the year with the announcement that we had been
awarded EMEA Partner of the Year for Genesys AppFoundry, this award
led to increased cooperation within Genesys. While commercial
relationships with large partners such as this take time to nurture
and develop, we are now seeing progress as a result of the time
investment and commitment we have shown to them. This includes the
signing of three new Genesys VAR resellers in the period across
EMEA and APAC. Our collaboration with partners has only increased
during the on-set of the COVID-19 pandemic, and we have been
particularly active across the final four months of the year
creating extensive amounts of thought leadership content and
collateral with these partners, naturally strengthening those
relationships while at the same time growing awareness of our
products with their customer bases.
We categorise our partners into four different groups:
-- Integrated Partners - Such as CCaas, UCaaS or carrier
partners with tight telephony, and sometimes desktop, integrations.
Repeatable integrations facilitate shorter customer implementation
times.
-- Solution Providers - Typically VARs or Systems Integrators of
the major telephony platforms such as Genesys, Cisco, and Avaya.
Solution Providers also include payment service providers such as
Paymetric and Civica.
-- Referral Partners - Partners who introduce customers to us,
to whom we then sell direct. These include Master Agents,
consultants, as well as other organisations who may prefer to first
introduce, prior to becoming a fully enabled reseller.
-- Technology Partners - a recent addition to our partner
landscape, and whilst expected to be less numerous, we have
identified an important subset of technology vendors with whom we
have sought technology accreditations that allow us to sell to both
their own partner communities and also major enterprise
customers.
Whilst typically, the vendors we would see as Technology
Partners have been the more traditional vendors such as Avaya and
Cisco, we have also seen cloud vendors such as inContact (an
existing referral partner) and Five9 adopt the same approach.
Whilst being part of these communities has some value, they do not
produce the same level of volume or interaction that can be
achieved through a fully on-boarded reseller partner. We are
therefore careful to allocate resources judiciously, while being
mindful that closer relationships can be built with these
organisations' own VAR reseller communities. We also carefully
assess these technology partners' appetites for direct reseller
relationships.
Operations
I am extremely pleased with the stepped improvements we have
made across our engineering and professional services departments
in the first full year since we re-structured both of them in H2
FY19.
We have continued to invest in these critical functions by
adding several new key resources and skills to the teams. These
have been targeted at supporting larger volumes of telephony
deployments both for integrated partners and direct customer
deployments, as well as adding a Head of Development reporting to
the CTO. Some of these new people have been hired in the US to
support increasing demand for our services and delivery there, even
during the on-set of COVID-19 where we benefitted from our ability
to deliver services entirely remotely.
In FY20 we delivered 71 new customer projects which is an
increase of 154% on the prior year (FY2019: 28). This significant
increase not only reflects the accelerated increase in new
customers, but it particularly highlights our improved capabilities
in deploying new customers. As we continue to expand the volume of
new business enquiries generated through our channel partners, the
foundations we have now put in place across engineering and
professional services position us to achieve service delivery
excellence and, importantly, efficiency in our processes as we
scale this business.
Our key project delivery metric of TTGL, which is a measure of
the time it takes us to get from a new signed contract to revenue
recognition (typically go live), stood at an average of 5.5 months
(2019: 6.4 months) across all channels and all contracts delivered
by the year end irrespective of when the customer was signed. We
have also begun tracking TTGL measuring only contracts signed in
the year. I am pleased to report that we are seeing improvements in
this measure of TTGL, for example achieving an average of 4.4
months TTGL for all projects signed and delivered in FY20. These
measures taken together are indicative of further expected
improvements in our overall operational gearing of the Company as
the mix of our business continues to shift towards partner driven
and AWS cloud hosted new customers. It reflects both the result of
the considerable positive changes we have implemented since we
introduced the TTGL metric in January 2019, and also the growing
number of customer projects that we are delivering through
Integrated Partners, such as Talkdesk, 8x8, Vonage, and Puzzel.
Given these improvements, it is not surprising that we have
experienced a significant increase in our Net Promoter Scores, the
globally recognised measure of customer (and partner) experience.
We finished the year with an NPS score 102% above the global
benchmark, which is a significant improvement on the prior
financial year. The knock on impact of this positive outcome is
that we are well positioned to produce more case studies and
testimonials from partners and customers once their services are
live.
Our #1 stated value is "Security is job zero", and so data
security is an intrinsic part of everything we do. In the year we
achieved certification for the third year running against the
current version of the Payment Card Industry Data Security
Standards (PCI DSS) for our AWS cloud platform; and for the eighth
year running for our first-generation platform. This certification
testifies that PCI Pal is the highest level of security required
under PCI DSS and, as a Service Provider, can therefore handle
payment data for any size organisation across the globe. Latterly
in the year, we also incorporated our new PCI Pal Digital product
into the scope of our PCI DSS compliance when this was launched
across our platform globally in January 2020.
In addition to PCI DSS, we continue to maintain certifications
for a variety of globally-recognised standards, including ISO 27001
(Information Security Management Systems), ISO 22301 (Business
Continuity), ISO 9001 (Quality Management Systems), and ISO 14001
(Environmental Management). In totality our accreditations not only
bolster our own processes but ensure that our partners and customer
have points of reference to recognisable standards by which the
Company operates.
People
As our vision states, it is our people, beyond our technology,
that underpin this business. Creating an environment within which
our people can succeed, ensures the success of our partners who
rely on us. Talent acquisition, people development and employee
retention are a critical part of my role as CEO. As a business that
has grown from 11 to 58 people in under 4 years, we have maintained
considerable attention to our hiring strategies. I am personally
very proud that our employee retention remains high, at more than
95%, with only one employee leaving us in the financial year. From
recent Company-wide surveys we know that our employees believe that
the COVID pandemic has brought them all even closer together as we
have worked as a team to reach a new normal during what have been
very busy times for the business. Our people can be proud of what
they have achieved during this time given they have been managing
some of the most challenging circumstances they will ever meet
personally away from work.
Cultural fit carries significant weight during our new hire
assessment process, and it is often the differentiator between a
number of strong candidates. This personal fit to the Company has
always been essential as a small business with global operations.
Cohesiveness of our teams and how they interact with each other is
critical to both our internal cohesion but also our external facing
success. And they must also know how to have fun. To that end, it
is very common for senior management to receive positive feedback
from partners and customers, both prospective and existing,
commenting positively on our people, our professionalism, our
approachability, and our personality. All of these things are
critical for maintaining high customer retention and Net Promoter
Scores.
New this year we have introduced an array of new processes and
activities to our people strategy and plans; including the launch
of the Company's Wellbeing Portal introduced during the height of
COVID-19 lockdown in the UK and US; twice annual all-company people
surveys; the launch of our cloud-based HR system "Breathe", as well
as introducing a kudos initiative allowing employees to give each
other and internal teams kudos, encouraging positive internal
interaction.
These new initiatives, supplement our existing people engagement
activities which include quarterly Company all hands meetings, all
now entirely virtual and run with far greater frequency during
COVID-19 lockdown, and OKRs ("Objectives and Key Results") which we
use to align our high level corporate strategy with all individual
employees objectives within the business.
I would like to personally take this opportunity to thank every
member of the PCI Pal team for going over and above, and
particularly during what have been trying times for everyone
personally away from work.
Funding
As a fast-growing company, it is always critical to have
sufficient working capital available to deliver on our plans. Early
in the financial year we entered into a debt facility arrangement
drawing down GBP1.50 million of a GBP2.75 million facility.
In March 2020, we announced an equity fundraising with gross
proceeds of GBP5.00 million, with GBP4.25 million of this raised
from VCT investors to fund continued growth in North America. We
were delighted with the support shown by both our existing
investors, and new investors, which will enable us to capitalise on
our current North American expansion, and enable us to further
advance our product management and development capabilities in
order to support our long term ambitions and growth
opportunity.
The additional funding has also ensured that we have
strengthened our balance sheet. We finished the year with GBP4.30
million of cash and GBP1.25 million of further loan facility to
draw giving us sufficient working capital to continue to grow the
business as we work towards the point of cash generation and then
profit both of which are anticipated during FY22.
Outlook
After a year of significant progress against our stated
objectives; North American expansion, excellence in our global
cloud platform, and execution of our channel go to market strategy,
and in a year that incorporated significant market disruption due
to the on-set of the COVID-19 pandemic, PCI Pal is positioned well
to continue its momentum as a result of its market position and
business model.
Following the fund raise in March 2020 we have the opportunity
to continue this momentum from a position of greater strength with
further, cautious investment in North America, the Company's
largest growth opportunity, improved product management
capabilities, and a more robust cash position. We are confident of
the business' prospects given these factors while companies
worldwide give more focus than ever to the security of data handled
by home workers, and the availability of robust, flexible cloud
services to enable business continuity during challenging
times.
We fully anticipate the cloud transformation of the
communications industry to continue to increase pace with changing
market conditions, and we look forward to another year of strong
performance against our key metrics and significant revenue growth
as we work towards our first months of cash generation and profit
in FY22.
James Barham
CEO
CHIEF FINANCIAL OFFICER'S REVIEW
FOR THE YEARED 30 JUNE 2020
Revenue and gross margin
Group revenue grew by 56% to GBP4.40 million (2019: GBP2.82
million) and gross margin improved to 69% (2019: 60%). This
improvement continues to reflect the higher margin revenue
generated by the PCI Pal platform hosted on AWS which has only a
limited reliance on third party carriers to receive or deliver
calls. Going forward, we expect the gross margin to continue to
improve as more sales, delivered on the AWS platform, reach revenue
recognition.
The Group's revenue reflects its SaaS business model. It
delivers its services primarily through channel partner into
contact centres who are charged primarily on a recurring licence
basis. The terms of the sales contracts generally allow for
automatic renewal of the licences for a further 12 month period at
the end of their initial term. Renewal and retention rates are
extremely high exceeding 95%.
The Company has been selling only services served from its AWS
platform since early 2018. As it continues to add and deliver more
customers so its visibility of recurring revenue increases. At the
year end, the Group finished with a TACV of GBP6.7 million and so
has a very high visibility of the market's expected revenue for the
next financial year.
Administrative expenses
Total administrative expenses were GBP7.22 million (2019:
GBP6.37 million), an increase of 13%. Most of the GBP0.85 million
increase was driven by the investment in additional headcount for
the Engineering and Professional Services departments as detailed
in the CEO's review.
Personnel costs charged to the Comprehensive Income Statement
(including commission, bonuses and travel and subsistence expenses)
were GBP5.54 million (2019: GBP4.47 million), and GBP1.00 million
(2019: GBP0.49 million) was capitalised as Development costs. These
personnel costs make up 77% (2019: 70%) of the administrative costs
of the business.
Changes in accounting rules
The Company has implemented IFRS 16: Leases, effective from 1
July 2019. The Group has chosen not to restate the previous years'
financial statements following the adoption of IFRS 16 and there
has been no overall effect on the loss before tax following the
adoption. Full disclosure of the changes has been made in the notes
to these accounts.
Exceptional non-recurring costs
During the year the Group did not charge any item as an
exceptional item to the Statement of Comprehensive Income (2019:
GBP0.36 million).
Adjusted operating loss(1)
Adjusted operating loss for the Group changed as follows for the
year:
EMEA North America Central Total
GBP000s GBP000s GBP000s GBP000s
-------------- -------------------- -------------- --------------
2020 (1,330) (2,081) (692) (4,103)
-------------- -------------------- -------------- --------------
2019 (1,138) (2,489) (605) (4,232)
-------------- -------------------- -------------- --------------
Change in
year (192) 408 (87) 129
-------------- -------------------- -------------- --------------
(1) Loss from Operating Activities before exceptional costs and share option charges
The EMEA region's Adjusted Operating Loss increased by GBP0.19
million in the year. The region continued to deliver strong sales
which grew by GBP1.17 million to GBP3.89 million resulting in an
improvement of GBP0.99 million in Gross Profit at a margin of 67%
(2019: 59%). Administrative costs grew by GBP1.18 million (13%)
primarily reflecting a further investment in personnel, especially
in the Engineering and Professional Services departments.
Depreciation and amortisation costs were GBP0.55 million (2019:
GBP0.27 million). The operations within this region have been
established longer than those in North America and include the
majority of the Engineering, Information Security and Professional
Services people and costs for the Group as a whole.
Having opened our business in North America with primarily sales
and marketing resources, we now have a number of people in
Engineering and Professional Services to meet the growing demand
for our services in the region. The North American head office is
in Charlotte, North Carolina. Operating Loss in the region improved
by GBP0.41 million primarily driven by a GBP0.36 million
improvement in Gross Profit as new contract sales were deployed.
Overheads improved by GBP0.05 million reflecting the savings made
by the move back to the UK of James Barham offset by additional
operational hires.
New contract sales in the period have been strong in the region,
including the Group's second largest contract to date, and so as
these sales and subsequent customer deployments in North America
continue to grow, we expect Operating Losses in the future to
decrease.
Costs for our Central operations relating to PLC activities
increased in the year reflecting the cost of James Barham being
fully charged in the year following his relocation back from the US
and Simon Wilson joining the Board in the financial year.
We have now reached a stage where the future growth in employee
numbers is starting to slow, having grown rapidly over the last
three years. We are now focusing our hiring policy on targeted
improvements and so we are expecting that our continuing, rapid
sales growth will now start to deliver positive operational gearing
as we push towards achieving profitability.
Further segmental information is shown in Note 9.
Key financial performance indicators
The directors use several Key Financial Performance Indicators
(KPIs) to monitor the performance of the Group,
its subsidiaries and targets. The principal KPIs are as follows:
2020 2019
1. Revenue GBP4.40 million GBP2.82 million
---------------------- ----------------------
2. Gross Margin 69.2% 60.2%
---------------------- ----------------------
3. Signed ACV in financial period GBP2.62 million GBP1.91 million
---------------------- ----------------------
4. Contracted TACV(1) deployed and GBP4.04 million Not available
live
---------------------- ----------------------
5. Contracted TACV in deployment GBP2.19 million Not available
---------------------- ----------------------
6. Contracted TACV - projects on GBP0.52 million Not available
hold
---------------------- ----------------------
7. Total Contracted TACV GBP6.75 million GBP4.06 million
---------------------- ----------------------
8. Cash facilities available (2) GBP5.55 million GBP1.49 million
---------------------- ----------------------
9. Deferred Income GBP4.53 million GBP2.45 million
---------------------- ----------------------
10. Ratio Personnel cost to administrative
expenses 77% 70%
---------------------- ----------------------
11. Headcount (excluding non-executive
directors) 58 50
---------------------- ----------------------
(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) Cash balance plus undrawn debt facilities
Actual performance to budget is reviewed on a monthly basis and
the results are used to continually update the Group's forecast as
to expected performance and cash resources.
Capital expenditure
As required by IAS 38, we have capitalised a further GBP1.00
million (2019: GBP0.49 million) in development expenditure as we
continue to invest in additional headcount in the Engineering
department allowing us to continue our investment in our cloud
platform and introduce new features and products at an increased
pace.
Towards the end of the financial year, following the strong new
contract sales and deployments, the Group invested GBP0.30 million
in further perpetual SIP, RTP and SBC software licences (2019:
GBP0.08 million). Other capital expenditure relating to computer
equipment was GBP0.03 million (2019: GBP0.03 million).
Deferred income
Deferred income increased 85% to GBP4.53 million (2019: GBP2.45
million) mostly reflecting the significant growth in new business
sales and the consequent increase in invoices raised in
advance.
TACV
TACV at the end of the financial year increased 66% to GBP6.75
million (2019: GBP4.06 million). This metric is a key indicator of
our ability to reach first cash flow and then profit break-even as
customers go live with our services. At the end of the financial
year GBP4.04 million of the TACV total was live and delivering
monthly recurring revenue. A further GBP2.19 million was going
through our installation processes and so are not yet delivering
monthly recognised revenue, but should start within a few months,
as the related customer projects go-live. The final GBP0.52 million
related to contracts that were classed as being on hold, normally
due to a lack of resource with the customer and/or channel partner,
or our solution is part of a larger project being delivered by our
partner, which normally has to be deployed first before we can
start the installation. The on hold contracts will eventually start
being deployed but can take up to six months before the deployment
process starts, and so these projects will have a more significant
delay prior to reaching recurring revenue
recognition. Growing levels of TACV produces increasing levels
of future revenue visibility, an attractive aspect of the Group's
business model.
Set-up and Professional Services Fees
During the financial year the Group generated GBP1.29 million
(2019 GBP1.11 million) of set-up and professional services revenue.
Of this total GBP0.09 million (2019: GBPnil) was for a one off
project for a major client and so was released directly to the
Statement of Comprehensive Income. The balance will be deferred
over the length of the related contract in accordance with IFRS
15.
Trade receivables
Trade receivables grew to GBP1.263 million (2019: GBP1.057
million). The level of receivables reflects both debtors generated
from new business sales outstanding at the end of the period as
well as debtors relating to invoices raised on a monthly basis. As
at the 30 June 2020, GBP0.62 million of the outstanding debtors
related to newly signed contracts.
Despite the operating challenges presented by COVID to all
businesses, we have nonetheless been able to improve our collection
rates, ending the year with 89% of debtors less than 60 days old
and a further 8% in the 60 to 90 day period, of which a significant
proportion was collected in the first two weeks of the new
financial year.
Taxation
During the year the UK entity received GBP0.22 million as a R
& D tax credit from HMRC relating to the financial year ending
30 June 2018. An application was made for an additional credit of
GBP0.15 million related to the financial year ending 30 June 2019,
which was received post the year end, and so has not been
recognised in the accounts.
Cashflow and liquidity
Net cash as at 30 June 2020 was GBP4.30 million (2019: GBP1.49
million).
In September 2019 the Group received GBP1.50 million in loan
funding (GBP1.31 million after fees) from the facility detailed
below and has a further GBP1.25 million to draw. By the 30 June
2020, the Group has repaid GBP0.23 million of the GBP1.50 million
loan and had paid interest of GBP0.13 million.
In March 2020 the Group placed 16.666 million shares at 30 pence
per share to raise GBP5.00 million in new equity finance (GBP4.57
million net of expenses).
Excluding these additional sources of net cash, the Group cash
outflow was GBP2.71 million against the comparable 2019 figure of
GBP4.56 million. The net cash outflow is far lower than the
reported adjusted operating loss of GBP4.10 million reflecting the
advance billing nature of the Group's SaaS business model.
With the existing cash balance of GBP4.30 million plus the
additional GBP1.25 million of loan facility the Group had available
cash resources of GBP5.55 million at 30 June 2020.
Since the year end we have received $1.13 million of cash for
years 2 and 3 of multi-year prepayment arrangement with largest
customer in US (signed in FY20), increasing the cash resources of
the Group further.
Loan facility
In September 2019, the Group entered into a GBP2.75 million loan
facility with Shawbrook Bank. The principal terms are as
follows:
Term 36 months with three month capital repayment holiday
Interest rate 9.3% over LIBOR paid monthly
Arrangement Fee 1.4% of loan facility
Non utilisation fee 0.6% of unutilised amount
Exit fee cash amount calculated on the shares equivalent of 7.5%
of the facility payable on takeover of Group or refinance of the
loan
Security Fixed and Floating debenture over the assets of the Group.
The loan balance can be drawn in two tranches with a minimum of
GBP1.0 million within five business days of the signing of the
agreement and the remaining balance within twelve months. The
Company has drawn down GBP1.5 million of this new facility. The
facility is being used to support the working capital requirements
of the Group as it continues to grow - see Note 16 for full
disclosure of terms.
COVID 19 and Going Concern considerations
The Board of Directors continue to monitor the potential impact
of the COVID-19 pandemic closely.
Since the pandemic outbreak there has not been a significant
impact on the Group's financial performance. The business was able
to transition to home working with relative ease. This was helped
by the fact that it is a pure cloud driven business and the fact
that before the pandemic some 60% of our employees already worked
from home. It was therefore relatively easy to migrate the other
40% to home working as we already provide all employees with
laptops and mobile phones. All core documents and systems were
already in the cloud and so were immediately available online.
New contract sales for the last quarter of the financial year
were a robust GBP0.8 million, out of a total GBP2.62 million
delivered in the year. When the pandemic hit, despite experiencing
delays on some existing pipeline opportunities, the Group saw a
noticeable uplift in new sales enquiries and experienced some
success with its rapid deployment solution, Rapid Remote, which led
to immediate contracts being signed within a few weeks of the
launch totalling US $0.2 million. The first quarter of the new
financial year has started well. All sales and contract discussions
are undertaken via video conference, email, and telephone.
From a marketing point of view all trade conferences have been
either cancelled or postponed for the rest of this year, most of
which were scheduled to take place in the US This has protected our
employees from attending large gatherings and also reduced
administration expenditure. We have adjusted our marketing strategy
accordingly increasing our digital marketing efforts and
collaboration with channel partners. We can report that since the
start of the new financial year, we have not experienced the
decision-making delays that we saw, and reported on, at the on-set
of the COVID-19 pandemic.
Our deployment processes can all be achieved entirely remotely
as there is no need for any of our professional services team to
attend customer sites. This has allowed us to maintain a strong
deployment record with 23 contracts going live in the final quarter
of the financial year and this momentum has been maintained into
the new financial year.
As a result of the robust performance, the Company has not had
to furlough any of its employees, and in fact it has continued to
hire new staff to help cope with the additional demand for service
delivery. The Group has not taken out any government-backed loans,
but it has taken advantage of some of the tax payment deferrals
that are available, such as VAT deferment in the UK.
The move to working from home, the lack of trade related shows
and the increased use of video conferencing has had the added
benefit of dramatically reducing the Group travel and subsistence
expenses.
With the Group year-end being 30 June, the Group normally
prepares its next financial year budgets in the April to June
period. Historically, this has been undertaken face-to-face with
all managers meeting in one location.
Due to the pandemic this too was moved to being remote sessions
by video conference, where the management team presented their
departmental forecast based on a COVID-considered market
landscape.
This year's budget has made certain cautious assumptions
including that sales would be in some part adversely impacted
compared to pre-COVID expectations. The budget also assumes,
conservatively, that our deployment TTGL would not improve
significantly due to the potential for customer delays from having
to work remotely. We also took a conservative view of the growth in
deferred income.
The Board considered the budget presentation in June and the
controls in place that will allow the Group to control its overhead
expenditure but still maintain its momentum and deliver market
forecasts. Particular attention was paid to the impact of any
adverse movement in sales and deployment on the Group's net cash
position and the level of headroom achieved.
The Board considered sensitivity models of the budget
considering the potential of a longer-term impact of COVID than
originally envisaged, which therefore would result in further
reduced sales and related cash generation. The Board also
considered actions that could be taken to help mitigate the
resulting loss in sales.
At all points the directors were satisfied in the robustness of
the Group's financial position from the presented plans which, they
believe, take a balanced view of the future growth prospects and
potential impact of COVID-19, together with the contingencies that
can be taken if the budget assumptions are too optimistic. The
directors therefore have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future. For these reasons, the directors continue to
adopt the going concern basis in preparing the accounts.
Dividend
The Board is not recommending a dividend for the financial year
(2019: GBPnil).
William Good
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2020
Note 2020 2019
GBP000s GBP000s
Revenue 4,396 2,817
Cost of sales (1,353) (1,119)
------------------------------ -----------------------
Gross profit 3,043 1,698
Administrative expenses (7,254) (6,373)
------------------------------ -----------------------
Loss from Operating Activities (4,211) (4,675)
Adjusted Operating Loss (4,103) (4,232)
Exceptional costs - (361)
Expenses relating to Share
Options (108) (82)
------------------------------------------ ---- ------------------------------ -----------------------
Loss from Operating Activities (4,211) (4,675)
------------------------------------------ ---- ------------------------------ -----------------------
Finance income 6 1 181
Finance expenditure 7 (140) (8)
------------------------------ -----------------------
Loss before taxation 5 (4,350) (4,502)
Taxation 11 221 136
------------------------------ -----------------------
Loss for the year (4,129) (4,366)
Other comprehensive expense:
Items that will be reclassified
subsequently to profit or
loss
Foreign exchange translation
differences (49) (107)
Total other comprehensive
expense (49) (107)
------------------------------ -----------------------
Total comprehensive loss attributable
to equity holders for the
period (4,178) (4,473)
Basic and diluted earnings
per share 10 (8.84) p (10.30) p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Note 2020 2019
GBP000s GBP000s
ASSETS
Non-current assets
Plant and equipment 13 103 71
Intangible assets 12 2,139 1,300
Trade and other receivables 14 368 207
Deferred taxation 17 - -
Non-current assets 2,610 1,578
------------ -----------
Current assets
Trade and other receivables 14 2,343 1,792
Cash and cash equivalents 4,301 1,492
------------ -----------
Current assets 6,644 3,284
------------ -----------
Total assets 9,254 4,862
LIABILITIES
Current liabilities
Trade and other payables 15 (5,194) (2,781)
Current portion of long-term
borrowings 15 (545) -
------------ -----------
Current liabilities (5,739) (2,781)
------------ -----------
Non-current liabilities
Other payables 16 (875) (666)
Long term borrowings 16 (728) -
------------ -----------
Non-current liabilities (1,603) (666)
------------ -----------
Total liabilities (7,342) (3,447)
------------ -----------
Net assets 1,912 1,415
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)
AS AT 30 JUNE 2020
Note 2020 2019
GBP000s GBP000s
EQUITY
Share capital 19 594 427
Share premium 9,018 4,618
Other reserves 289 181
Currency reserves (187) (138)
Profit and loss account (7,802) (3,673)
---------- ------------
Total equity 1,912 1,415
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30
JUNE 2020
Profit and Currency
Share Share Other reserves loss account Reserves Total Equity
capital premium
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Balance as at
1 July
2018 427 4,618 99 694 (31) 5,807
Share Option
amortisation
charge - - 82 - - 82
Transactions
with
owners - - 82 - - 82
Foreign
exchange
translation
differences - - - - (107) (107)
Loss for the
year - - - (4,367) - (4,367)
Total
comprehensive
loss - - - (4,367) (107) (4,474)
----------------- ----------------- ----------------- -------------- ---------- --------------
Balance at 30
June
2019 427 4,618 181 (3,673) (138) 1,415
Share Option
amortisation
charge - - 108 - - 108
New shares
issued
net of costs 167 4,400 - - - 4,567
Transactions
with
owners 167 4,400 108 - - 4,675
Foreign
exchange
translation
differences - - - - (49) (49)
Loss for the
year - - - (4,129) - (4,129)
Total
comprehensive
loss - - - (4,129) (49) (4,178)
----------------- ----------------- ----------------- -------------- ---------- --------------
Balance at 30
June
2020 594 9,018 289 (7,802) (187) 1,912
----------------- ----------------- ----------------- -------------- ---------- --------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2020
2020 2019
GBP000s GBP000s
Cash flows from operating activities
Loss after taxation (4,129) (4,366)
Adjustments for:
Depreciation of equipment and fixtures 82 53
Amortisation of intangible assets 29 8
Amortisation of capitalised development 433 183
Interest income (1) (181)
Interest expense 126 -
Exchange differences (49) (107)
Income taxes (221) (136)
Share based payments 108 82
Increase in trade and other receivables (713) (1,154)
Increase in trade and other payables 2,575 1,605
--------------------- -----------------
Cash used in operating activities (1,760) (4,013)
Dividend paid - -
Income taxes received 221 136
Interest paid (126) -
--------------------- -----------------
Net cash used in operating activities (1,665) (3,877)
--------------------- -----------------
Cash flows from investing activities
Purchase of equipment and fixtures (33) (27)
Purchase of intangible assets (296) (83)
Proceeds from sale of assets - -
Development expenditure capitalised (1,004) (564)
Repayment of loan note receivable - 2,114
Interest received 1 181
--------------------- -----------------
Net cash (used) in /generated from investing
activities (1,332) 1,621
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
FOR THE YEARED 30 JUNE 2020
2020 2019
GBP000s GBP000s
Cash flows from financing activities
Issue of shares - net of cost of issue 4,568 -
Drawdown on loan facility 1,500 -
Repayment of loan facility (227) -
Principal element of lease payments (35) -
Net cash generated from financing activities 5,806 -
------------------------------- -------------------
Net increase/(decrease) in cash 2,809 (2,256)
Cash and cash equivalents at beginning
of year 1,492 3,748
Net increase/(decrease) in cash 2,809 (2,256)
------------------------------- -------------------
Cash and cash equivalents at end of
year 4,301 1,492
This financial information does not constitute full financial
statements and is presented as part of a Regulatory News Service
announcement of preliminary results of the Group. The information
in this announcement has been extracted directly from the audited
Financial Statements of the Group for the year ended 30 June 2020,
which were approved by the Board on 11 September 2020. The extract
should be used for information purposes only. Full copies of the
Financial Statements are available to download at
www.pcipal.com/en/investors/
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30
JUNE 2020
1. AUTHORISATION OF FINANCIAL STATEMENTS
The Group's consolidated financial statements (the "financial
statements") of PCI-PAL PLC (the "Company") and its subsidiaries
(together the "Group") for the year ended 30 June 2020 were
authorised for issue by the Board of Directors on 11 September 2020
and the Chief Executive, James Barham, and the Chief Financial
Officer, William Good, signed the balance sheet.
2. NATURE OF OPERATIONS AND GENERAL INFORMATION
PCI-PAL PLC is the Group's ultimate parent company. It is a
public limited company incorporated and domiciled in the United
Kingdom. PCI-PAL PLC's shares are quoted and publicly traded on the
AIM division of the London Stock Exchange. The address of PCI-PAL
PLC's registered office is also its principal place of
business.
The Company operates principally as a holding company. The main
subsidiaries are engaged in the provision of telephony services and
PCI Solutions.
3. STATEMENT OF COMPLIANCE WITH IFRS
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union.
The principal accounting policies adopted by the Group are set
out in note 4. The accounting policies have been applied
consistently throughout the Group for the purposes of preparation
of these financial statements.
Standards and interpretations in issue, not yet effective
The Consolidated Financial Statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU ("endorsed IFRS").
These Financial Statements have been prepared in accordance with
those IFRS standards and IFRIC interpretations issued and effective
or issued and early adopted as at 30 June 2020 as endorsed by the
EU.
The following adopted IFRSs have been issued but have not been
applied by the Group in these Financial Statements. Their adoption
is either not relevant to the Group or are not expected to have a
material effect on the Financial Statements unless otherwise
indicated:
Effective for the year ending 30 June 2020
-- IFRIC 23 Uncertainty over Income Tax Treatments
-- Amendments to IAS 19 Employee benefits
-- Amendments to IFRS 9 Financial instruments
-- Amendments to IAS 28 Investments in Associates and Joint
Ventures
Effective for the year ending 30 June 2022
-- IFRS 17 Insurance contracts
4. PRINCIPAL ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared on a going concern
basis in accordance with the accounting policies set out below.
These are based on the International Financial Reporting Standards
("IFRS") issued in accordance with the Companies Act 2006
applicable to those companies reporting under IFRS as adopted by
the European Union ("EU").
The financial statements are presented in pounds sterling (GBP),
which is also the functional currency of the parent company, and
under the historical cost convention.
b) Basis of consolidation
The Group financial statements consolidate those of the Company
and its subsidiary undertakings (see note 18) drawn up to 30 June
2020. A subsidiary is a company controlled directly by the Group
and all of the subsidiaries are 100% owned by the Group. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Unrealised gains on transactions between the Group and its
subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
The Group has utilised the exemption (within IFRS 1) not to
apply IFRS to pre-transition business combinations. All other
subsidiaries are accounted for using the acquisition method.
c) Going concern
The financial statements have been prepared on a going concern
basis, which the directors believe to be appropriate for the
following reasons:
The Group meets its day-to-day working capital requirements
through its cash balances and trading receipts. Cash balances for
the group were GBP4.30 million at the 30 June 2020. The Group also
has undrawn banking facilities of GBP1.25 million.
The directors have considered financial forecasts for the coming
year through to the end of September 2021. As part of these
considerations, the directors reviewed information provided by the
management team such as the new contract sales forecast, the Group
current sales pipeline and the likely demand for our services and
any likely impact from the COVID 19 pandemic. The Board also
reviewed other risks within the business that could impact the
group's performance, such as insufficient numbers of employees to
ensure the company can deliver on its contractual obligations or
growth opportunities, as it continues to grow.
The directors reviewed a range of reasonably possible
sensitivities in relation to the future business performance, as
detailed in the forecasts, and the resulting demands on the cash
and debt resources detailed above.
The Board also looked at some more severe possibilities, where
new sales are much lower than presented in the forecast models
following a prolonged down due to the COVID 19 pandemic. The
executive team detailed what actions and mitigations the business
could take in these circumstances to ensure the business could
continue to trade into the foreseeable future.
Based on these reviews, the directors have concluded that the
group will be able to meet its' obligations as they fall due for
the foreseeable future (and in any event for no less than 12 months
from the date of approval of these financial statements) and
accordingly have elected to prepare the financial statements on a
going concern basis.
The Directors recognise that during the forthcoming year the
Group is expected to remain loss making on a month-to-month basis,
albeit with an improving trend. The directors will review, on a
regular basis, the actual results achieved against the planned
forecasts. Some of the planned expenditure assumptions in the
current forecast remain discretionary and as a result the directors
can delay such expenditure to further ensure the Group is able to
meet its day-to- day financial working capital needs.
d) Revenue
Revenue represents the fair value of the sale of goods and
services and after eliminating sales within the Group and excluding
value added tax or overseas sales taxes. The following summarises
the method of recognising revenue for the solutions and products
delivered by the Group.
(i) PCI compliance solutions and hosted telephony services
Following the implementation of IFRS 15: Revenue from Contracts
with Customers with effect from 1 July 2018 the revenue recognition
is more complex and involves calculation schedules and can be
judgemental. Revenue relating to monthly licence fees or usage
generated in the period will be recognised in the month they relate
to once the economic benefit of the contract has passed to the
customer. The economic benefit is normally deemed to have passed
when the contract either goes live or where the customer takes over
the solution for user acceptance testing.
Revenue for set-up and cloud provision fees will be deferred and
will be recognised evenly over the estimated term of the contract,
having accounted for the automatic auto-renewal of our contracts,
up to a maximum of four years, starting the month following from
the date of signature of the underlying contract. The payment
profile for such contracts typically include payment for set-up
fees at the point of signature of the contract, but for revenue
recognition purposes, this is deemed to be an integral part of the
wider contract rather than a separate performance obligation.
Revenue for all other professional services and installation
fees will be deferred and will be recognised evenly over the
estimated term of the contract, having accounted for the automatic
auto-renewal of our contracts, up to a maximum of four years,
starting in the month following the hand over to the client for
user acceptance testing.
(ii) Third party equipment sales
Where the contract involves the sale of third-party equipment
that could be acquired and supplied by other parties to the client
the revenues and costs relating to this will continue to be
released in full to the Statement of Comprehensive Income at the
time the installation is complete.
e) Deferred Costs
Under IFRS 15 costs directly attributable to the delivery and
implementation of the revenue contracts, such as commissions and
third party costs, will be deferred and will be recognised in the
statement of comprehensive income over the length of the
contract.
Costs directly attributable to the delivery of the PCI
Compliance solutions and hosted telephony services will be
capitalised as 'costs to fulfil a contract' and released over the
estimated term of the contract, having accounted for the automatic
auto-renewal of our contracts, up to a maximum of four years,
starting the month following from the date of signature of the
underlying contract.
Costs relating to commission costs paid to employees for winning
the contract will be capitalised as 'direct costs to fulfil a
contract' at the date the commissions payments become due and will
be released in monthly increments over the estimated economic
length of the contract starting the month following the date the
cost is capitalised.
f) Intangible assets
Research and development
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred.
Development costs incurred are capitalised when all the
following conditions are satisfied:
-- completion of the intangible asset is technically feasible so
that it will be available for use or sale
-- the Group intends to complete the intangible asset
-- the Group is able to use or sell the intangible asset
-- the intangible asset will generate probable future economic
benefits. Among other things, this requires that there is a market
for the output from the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such
benefits
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset
-- the expenditure attributable to the intangible asset during
the development can be measured reliably
The cost of an internally generated intangible asset comprises
all directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended
by management. Directly attributable costs include development
engineer's salary and on-costs incurred on software development.
The cost of internally generated software developments are
recognised as intangible assets and are subsequently measured in
the same way as externally acquired software. However, until
completion of the development project, the assets are subject to
impairment testing only.
The Directors have reviewed the development costs relating to
the new AWS platform and are satisfied that the costs identified
meet the tests identified by IAS 38 detailed above. Specifically,
the initial platform was launched in October 2017 and has been
successfully sold in Europe, North America and Australia, with
further sales expected, as detailed in the Chief Executives'
statement. The directors expect that the AWS platform will continue
to be developed, as more functionality is added, and as a result
the it is expecting to continue to capitalise the development costs
(which are primarily labour costs) into the future.
Amortisation commences upon completion of the asset and is shown
within administrative expenses in the statement of comprehensive
income. Amortisation is calculated to write down the cost less
estimated residual value of all intangible assets by equal annual
instalments over their expected useful lives. The rates generally
applicable are:
-- Development costs 20% to 33%
Software licences
The cost of perpetual software licences acquired are stated at
cost, net of amortisation and any provision for impairment.
-- Software licences 20% to 30%
g) Land, building, plant and equipment
Land, buildings, plant and equipment are stated at cost, net of
depreciation and any provision for impairment.
Disposal of assets
The gain or loss arising on disposal of an asset is determined
as the difference between the disposal proceeds and the carrying
amount of the asset and is recognised in the statement of
comprehensive income.
Depreciation
Depreciation is calculated to write down the cost less estimated
residual value of all plant and equipment assets by equal annual
instalments over their expected useful lives. The rates generally
applicable are:
not depreciated
* Land
* Buildings 2%
* Fixtures and fittings 20% to 50%
Length of contract
* Right to use asset
* Plant 20% to 50%
* Computer equipment 33%
Material residual value estimates are updated as required, but
at least annually.
h) Leases
From 1 July 2019, each lease is recognised as a right-of-use
asset with a corresponding liability at the date at which the lease
asset is available for use by the Group. Interest expense is
charged to the consolidated income statement over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. The lease payments are
discounted using the interest rate implicit in the lease. If that
rate cannot be determined, the lessee's incremental borrowing rate
is used, being the rate that the lessee would have to pay to borrow
the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the amount
of the initial measurement of the lease liability, any lease
payments made at or before the commencement date less any lease
incentives received, any initial direct costs and restoration
costs. Where leases include an element of variable lease payment or
the option to extend the lease at the end of the initial term, each
lease is reviewed, and a decision is made on the likely term of the
lease.
Payments associated with short-term leases and leases of low
value assets are recognised on a straight-line basis as an expense
in the consolidated income statement.
i) Impairment testing of other intangible assets, plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows ("cash-generating units"). As a result, some assets are
tested individually for impairment and some are tested at
cash-generating unit level.
Intangible assets not yet available for use are tested for
impairment at least annually. All other individual assets or
cash-generating units are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less cost to sell, and value in
use based on an internal discounted cash flow evaluation. Any
impairment loss is first applied to write down goodwill to nil and
then is charged pro rata to the other assets in the cash-generating
unit. With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously
recognised no longer exists.
j) Equity-based and share-based payment transactions
The Company's share option schemes allow employees to acquire
shares in PCI-PAL PLC to be settled in equity. The fair value of
options granted is recognised as an employee expense with a
corresponding increase in equity in the Company accounts. The fair
value is measured at grant date and spread over the period during
which the employees will be entitled to the options. The fair value
of the options granted is measured using either the Black-Scholes
option valuation model or the Monte Carlo option pricing model,
whichever is appropriate for the type of options issued. The
valuations consider the terms and conditions upon which the options
were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that are expected to
vest.
k) Taxation
Current tax is the tax payable based on the loss for the year,
accounted for at the rates enacted at 30 June 2020.
Deferred income taxes are calculated using the liability method
on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor the initial recognition of an
asset or liability, unless the related transaction is a business
combination or affects tax or accounting profit. In addition, tax
losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are provided in full, accounted for at
the rates enacted at 30 June 2020, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that
the underlying deductible temporary differences will be able to be
offset against future taxable income. Current and deferred tax
assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the year
end.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the statement of comprehensive
income, except where they relate to items that are charged or
credited to other comprehensive income or directly to equity in
which case the related tax charge is also charged or credited
directly to other
comprehensive income or equity.
l) Dividends
Dividend distributions payable to equity shareholders are
included in "other short term financial liabilities" when the
dividends are approved in general meeting prior to the year end.
Interim dividends are recognised when paid.
m) Financial assets and liabilities
The Group's financial assets comprise cash and trade and other
receivables, which under IAS 39 are classed as "loans and
receivables". Financial assets are recognised on inception at fair
value plus transaction costs. Loans and receivables are
non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Loans and receivables are
measured subsequent to initial recognition at amortised cost using
the effective interest method, less provision for impairment. Any
change in their value through
impairment or reversal of impairment is recognised in in the year.
Trade receivables are reviewed at inception under an expected
credit loss model, and then subsequently for further indicators of
impairment, and a provision, if required, is determined as the
difference between the
assets' carrying amount and the present value of estimated future cash flows.
The Group has a number of financial liabilities including trade
and other payables and bank borrowings. These are classed as
"financial liabilities measured at amortised cost" in IAS 39. These
financial liabilities are carried on inception at fair value net of
transaction costs and are thereafter carried at amortised cost
under the effective interest method.
n) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term highly liquid investments
with maturities of three months or less from inception that are
readily convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value.
o) Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of equity
shares. The shares have attached to them voting, dividend and
capital distribution (including on winding up) rights; they do not
confer any rights of redemption.
-- "Share premium" represents the difference between the nominal
and issued share price after accounting for the costs of issuing
the shares
-- "Other reserves" represents the net amortisation charge for
the Company's share options
scheme
-- "Profit and loss account" represent retained profits or losses generated by the Group
-- "currency reserves" represents exchange differences arising
from the translation of assets and liabilities of foreign
operations
p) Contribution to defined contribution pension schemes
The pension costs charged against profits represent the amount
of the contributions payable to the schemes in respect of the
accounting period.
q) Foreign currencies
Transactions in foreign currencies are translated into Sterling
at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated into Sterling at the rates of exchange ruling at the
year end.
Any exchange differences arising on the settlement of monetary
items or on translating monetary items at rates different from
those at which they were initially recorded are recognised in the
statement of comprehensive income in the period in which they
arise.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated to the Group's presentational currency, Sterling, at
foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations are translated at the
exchange rate applicable at the date of the transactions. Exchange
differences arising from this translation of foreign operations are
reported as an item of other comprehensive income. Exchange
differences arising in respect of the retranslation of the opening
net investment in overseas subsidiaries are accumulated in the
currency reserve.
r) Significant judgements and estimates
Capitalised development expenditure
The Group makes estimates concerning the future in assessing the
carrying amounts of capitalised development costs. To substantiate
the carrying amount the directors have applied the criteria of IAS
38 and considered the future economic benefit likely as a result of
the investment.
Careful judgement by the directors is applied when deciding
whether the recognition requirements for development costs have
been met. Judgement factors include: the current sales of the new
AWS platform; future demand; and the resource necessary to finalise
the development over the next few years. This is necessary as the
economic success of any product development is uncertain and may be
subject to future technical problems at the time of recognition.
Judgements are based on the information available at each balance
sheet date. In addition, all internal activities related to the
research and development of new software products are continuously
monitored by the directors.
Contract revenue and direct costs
The Group has adopted IFRS 15. A key related judgement is
whether fees relating to the establishment of a contract constitute
a separate performance obligation (see Note 4d above). Having
determined that such fees are not a separate performance
obligation, a key estimate is the period over which such fees are
recognised as revenue. The directors have judged that such revenue
will be deferred into deferred revenue and held in the Statement of
Financial Position and will be released to the Statement of
Comprehensive Income over the estimated term of the contract.
That term is estimated as:
- for contracts with defined termination dates, revenue will be
recognised over the period to the termination date
- for rolling contracts with renewal clauses, revenue will be
recognised over the maximum of 4 years, representing the directors'
current best estimate of a minimum contract term.
Associated direct costs such as commission costs directly linked
to individual contracts will be assessed and will also be deferred
over the same period.
Deferred tax
The calculation of the deferred tax asset involved the
estimation of future taxable profits. In the year ended 30 June
2019, the directors assessed the carrying value of the deferred tax
asset and decided not to recognise the asset, as the utilisation of
the assets was unlikely in the near future. The directors have
reached the same conclusion for this accounting period and so no
asset has been recognised.
Leases & adoption of IFRS 16
The Group has adopted IFRS 16: Leases using the modified
retrospective approach from 1 July 2019 and has not restated the
comparatives for the reporting period to 30 June 2019 as allowed
under the transitional provisions in the standard.
The only operating lease within the Group relates to its
properties in Ipswich. These leases do not have an implied interest
rate and so the management have used a rate of 12% as the discount
rate to calculate the lease liabilities for each of the leases.
This rate was obtained using the underlying rate of interest
applied to our bank loan facilities.
Impairment of investments in subsidiaries (Company only)
The Company has intercompany receivables of GBP13.66 million.
The management have reviewed these intercompany loans and have
concluded that, given the strong growth and future prospects of the
relevant subsidiaries, there is no impairment required.
Share based payments
The fair value of share-based payments is estimated using the
methods detailed in note 19 and using certain assumptions. The key
assumptions around volatility, expected life and the risk free rate
of return are based on historic volatility over previous periods,
the managements judgement of the average expected period to
exercise, and the yield on the UK 5-year gilt at the date of
issuance.
5. LOSS BEFORE TAXATION
The loss on ordinary activities is stated after:
2020 2019
GBP000s GBP000s
Disclosure of the audit and non-audit fees
Fees payable to the Group's auditors for:
The audit of Company's accounts 27 20
The audit of the Company's subsidiaries pursuant
to legislation 15 12
Fees payable to the Group's auditors for other
services
Audit related assurance services - -
Tax - compliance services 6 6
Tax - advisory services 9 12
Depreciation and amortisation - charged in administrative
expenses
Right of use assets, equipment and fixtures 82 53
Intangible assets 462 191
Rents payable 64 148
Principal element of lease payments 35 -
Amortisation of share-based payments 108 82
Foreign exchange gain 15 89
6. FINANCE INCOME
2020 2019
GBP000s GBP000s
Unwind of loan note receivable discount - 181
Bank interest receivable 1 -
--------------- ------------
1 181
7. FINANCE EXPITURE
2020 2019
GBP000s GBP000s
Interest on bank borrowings 126 -
Other 14 8
--------------- ------------
140 8
8. DIRECTORS AND EMPLOYEES
Staff costs of the Group, including the directors who are
considered to be part of the key management personnel, paid during
the year were as follows.
2020 2019
GBP000s GBP000s
Wages and salaries 4,712 3,648
Social security costs 474 425
Other pension costs 82 74
5,268 4,147
2020 2019
Heads Heads
Average number of employees during the year 54 45
Remuneration in respect of directors was as follows:
2020 2019
GBP000s GBP000s
Emoluments 523 543
Bonus 103 24
Pension contributions to money purchase pension
schemes 27 29
Employer's National insurance and US Federal Taxes 84 65
---------- --------------
737 661
During the year 4 (2019: 4) directors participated in money
purchase pension schemes.
The Board consider the board of directors to be the key
management for the Group. The amounts set out above include
remuneration in respect of the highest paid director as
follows:
2020 2019
GBP000s GBP000s
Emoluments 140 157
Bonus/commission 49 24
Pension contributions to money purchase pension
schemes 13 14
======= =======
A detailed breakdown of the Directors' Emoluments, in line with
the AIM rules, appears in the Directors' Report.
9. SEGMENTAL INFORMATION
PCI-PAL PLC operates one business sector: the service of
providing data secure payment card authorisations for call centre
operations and this is delivered on a regional basis. The Group
manages its operations by reference to geographic segments, which
are reported on below:
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated assets comprise items such as cash
and cash equivalents, taxation and borrowings. All liabilities,
other than the bank loan, are unallocated. Segment capital
expenditure is the total cost incurred during the year to acquire
segment assets that are expected to be used for more than one
period.
2020
PCI Pal PCI Pal Central Total
EMEA North America GBP000s GBP000s
GBP000s GBP000s
Revenue 3,894 502 - 4,396
Cost of Sales (1,303) (50) - (1,353)
------------- ------------------- -------------- -------------
Gross Profit 2,591 452 - 3,043
67% 90% 69%
Administration Expenses (3,921) (2,533) (800) (7,254)
------------- ------------------- -------------- -------------
Loss from Operating Activities (1,330) (2,081) (800) (4,211)
Finance income - - 1 1
Finance costs (16) (8) (116) (140)
------------- ------------------- -------------- -------------
Loss before tax (1,346) (2,089) (915) (4,350)
============= =================== ============== =============
Segment assets 3,860 4,313 1,081 9,254
Segment liabilities (3,848) (2,127) (1,367) (7,342)
Other segment items:
Capital Expenditure
* Equipment, Fixtures & Licences 329 - - 329
Capital Expenditure
* Capitalised Development 826 178 - 1,004
Depreciation
* Equipment, Fixtures & Licences 111 - - 111
Depreciation
* Capitalised Development 417 16 - 433
2019
PCI Pal PCI Pal Central Total
EMEA North America GBP000s GBP000s
GBP000s GBP000s
Revenue 2,721 96 - 2,817
Cost of Sales (1,119) - - (1,119)
------------- ------------------- -------------- -------------
Gross Profit 1,602 96 - 1,698
59% 100% 60%
Administration Expenses (2,754) (2,680) (939) (6,373)
------------- ------------------- -------------- -------------
Loss from Operating Activities (1,152) (2,584) (939) (4,675)
Finance income - - 181 181
Finance costs (3) (5) - (8)
------------- ------------------- -------------- -------------
Loss before tax (1,155) (2,589) (758) (4,502)
============= =================== ============== =============
Segment assets 3,142 537 1,183 4,862
Segment liabilities (2,779) (566) (115) (3,447)
Other segment items:
Capital Expenditure
* Equipment, Fixtures & Licences 27 - - 27
Capital Expenditure
* Capitalised Development 647 - - 647
Depreciation
* Equipment, Fixtures & Licences 53 - - 53
Depreciation
* Capitalised Development 191 - - 191
Revenue can be split by location of customers as follows:
2020 2019
GBP000s GBP000s
PCI - PAL division
United Kingdom and European Union 3,764 2,610
North America 433 90
Asia Pacific 69 6
Middle East 130 111
---------- ----------
Continuing Operations 4,396 2,817
All non-current assets are located in the United Kingdom and the
largest customer accounted for 18% of the revenue of the Group
10. EARNINGS PER SHARE
The calculation of the earnings per share is based on the loss
after taxation added to reserves divided by the weighted average
number of ordinary shares in issue during the relevant period as
adjusted for treasury shares. Details of potential share options
are disclosed in note 19.
12 months 12 months ended ended
30 June 30 June
2020 2019
Loss after taxation added to reserves (GBP4,129,000) (GBP4,366,000)
Basic weighted average number of ordinary
shares in issue during the period 46,720,616 42,386,720
Diluted weighted average number of ordinary
shares in issue during the period 51,687,283 47,083,804
Basic and diluted earnings per share (8.84) p (10.30) p
There are no separate diluted earnings per share calculations
shown as it is considered to be anti-dilutive.
11. TAXATION
2020 2019
GBP000s GBP000s
Analysis of charge in the year
Current tax:
In respect of the year:
UK Corporation tax based on the results - -
for the year at 19% (2019: 19%)
R & D Tax credit received 220 136
---------------------- ---------------
Total current tax credited 220 136
---------------------- ---------------
Movement on recognition of tax losses - -
---------------------- ---------------
Total deferred tax charged - -
---------------------- ---------------
Credit 220 136
Factors affecting current tax charge
The tax assessed on the loss on ordinary activities for the year
was lower than the standard rate of corporation tax in the UK of
19% (2019: 19%) and in the United States of 21% (2019: 21%)
2020 2019
GBP000s GBP000s
Loss on ordinary activities before tax (4,350) (4,502)
Loss on ordinary activities multiplied
by standard rate of corporation tax in
the UK & US of 19.96% (2019: 20.14%) (868) (907)
Expenses not deductible for tax purposes 1 1
Depreciation (less than)/in excess of capital
allowances for the year 60 28
Utilisation of tax losses - -
Unrelieved tax losses 807 883
Other - (5)
Movement on deferred tax timing differences - -
R&D Tax Credit received 221 136
Prior year adjustment - -
---------------------- ---------------
Total tax credited for the year 221 136
The Group has unrecognised tax losses carried forward of
GBP13.69 million (2019: GBP9.42 million).
The R&D tax credit received in FY 2020 is in respect to the
trading in FY 2018. No credit has been recognised in relation to
the financial years 2019 or 2020 which are pending submission to
HMRC.
12. INTANGIBLE ASSETS
SIP, RTP
and SBC licences
2020 GBP000s Capitalised
Development Total
GBP000s GBP000s
Cost:
At 1 July 2019 83 1,515 1,598
Additions 297 1,004 1,301
Disposals - - -
At 30 June 2020 379 2,519 2,898
--------- ------------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2019 8 290 298
Charge for the year 29 433 462
Disposals - - -
At 30 June 2020 37 723 760
--------- ------------- -------
Net book amount at 30
June 2020 343 1,796 2,139
SIP, RTP
2019 and SBC Capitalised
Licences Development Total
GBP000s GBP000s GBP000s
At 1 July 2018 - 951 951
Additions 83 564 647
Disposals - - -
--------- ------------- -------
At 30 June 2019 83 1,515 1,598
Depreciation (included
within administrative
expenses):
At 1 July 2018 - 107 107
Charge for the year 8 183 191
Disposals - - -
--------- ------------- -------
At 30 June 2019 8 290 298
Net book amount at 30
June 2019 75 1,225 1,300
13. PLANT AND EQUIPMENT Right of
use Asset
GBP000s Fixtures
2020 and Fittings Computer
GBP000s Equipment Total
GBP000s GBP000s
Cost:
At 1 July 2019 - 22 226 248
On adoption of IFRS 16 82 - - 82
Additions - - 32 32
Disposals - - - -
-------
At 30 June 2020 82 22 258 362
------- --------- ----------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2019 - 10 167 177
Charge for the year 35 4 43 82
Disposals - - - -
-------
At 30 June 2020 35 14 210 259
------- --------- ----------- -------
Net book amount at 30
June 2020 47 8 48 103
Right Fixtures
2019 of use and Computer
Asset Fittings Equipment Total
GBP000s GBP000s GBP000s GBP000s
At 1 July 2018 - 22 199 221
Additions - - 27 27
Disposals - - - -
------- --------- ----------- -------
At 30 June 2019 - 22 226 248
Depreciation (included
within administrative
expenses):
At 1 July 2018 - 6 118 124
Charge for the year - 4 49 53
------- --------- ----------- -------
Disposals - - - -
------- --------- ----------- -------
At 30 June 2019 - 10 167 177
Net book amount at 30
June 2019 - 12 59 71
On the 1(st) July 2019 the Group adopted IFRS 16: Leases. At the
time of the adoption the Group only held one operating lease for
its office buildings in Ipswich.
Following the change in the accounting policy the following
items were created in the balance sheet.
- Right to use asset - increase by GBP82,000
- Lease liability - increase by GBP82,000
The net impact on retained earnings on 1 July 2019 was GBPnil,
and there were no other adjustments required on the balance
sheet.
The total cash outflow for leases in the year was GBP45,000,
made up of the principal lease payments of GBP35,000 and lease
interest payments of GBP10,000.
There were no additions to right-of-use assets acquired in the
year.
14. TRADE AND OTHER RECEIVABLES
Due within one year 2020 2019
GBP000s GBP000s
Trade receivables 1,263 1,057
Accrued income 60 35
Other receivables 468 398
Prepayments and accrued income 552 302
-------------------- --------------
Trade and other receivables due within
one year 2,343 1,792
-------------------- --------------
Due after more than one year 2020 2019
GBP000s GBP000s
Other receivables 368 207
-------------------- --------------
Trade and other receivables due after one
year 368 207
-------------------- --------------
All amounts are considered to be approximately equal to the
carrying value. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of receivables
mentioned above.
Trade receivables are reviewed at inception under an expected
credit loss model, and then subsequently for further indicators of
impairment, and a provision has been recorded as follows:
2020 2019
GBP000s GBP000s
Opening provision 8 8
Credited to income (7) -
------- -------
Closing provision at 30 June 1 8
All of the impaired trade receivables are past due at the
reporting dates. In addition, some of the non-impaired trade
receivables are past due at the reporting date:
2020 2019
GBP000s GBP000s
0-30 days past due 103 118
30-60 days past due 4 19
Over 60 days past due 36 140
------- -------
143 277
Amounts which are not impaired, whether past due or not, are
considered to be recoverable at their carrying value. Factors taken
into consideration are past experience of collecting debts from
those customers, plus evidence of post year end collection.
15. CURRENT LIABILITIES
2020 2019
GBP000s GBP000s
Trade payables 675 491
Social security and other taxes 242 97
Deferred Income 3,674 1,787
Right of use lease 32 -
Accruals 571 406
---------------------- -------------
Trade and other payables 5,194 2,781
Bank Loan (note 16) 545 -
---------------------- -------------
Total current liabilities due within one
year 5,739 2,781
---------------------- -------------
The deferred income figure above includes amounts relating to
contracts where the annual licence fee has been invoiced in advance
but have not reached a stage where the revenue is being recognised
and so is treated as all due in less than one year for reporting
purposes.
16. NON-CURRENT
LIABILITIES
2020 2019
GBP000s GBP000s
Deferred Income 859 666
Right of use lease 16 -
Bank loans 728 -
Total non-current liabilities due after
one year 1,603 666
------- -------
Borrowings
Bank loans are repayable as follows:
2020 2019
GBP000s GBP000s
Within one year 545 -
After one year and within two years 545 -
After two years and within five years 183 -
Over five years - -
------- -------
1,273 -
In October 2019 the Group entered into a GBP2.75 million loan
facility with Shawbrook Bank. The principal terms are as
follows:
Term 36 months with three month capital repayment holiday
Interest rate 9.3% over LIBOR paid monthly
Arrangement Fee 1.4% of loan facility
Non utilisation fee 0.6% of unutilised amount
Exit fee shares equivalent of 7.5% of the facility payable as
detailed below
Security Fixed and Floating debenture over the assets of the
Group.
The loan balance can be drawn in two tranches with a minimum of
GBP1.0 million within five business days of the signing of the
agreement and the remaining balance within twelve months. The
company initially drew down GBP1.5 million of this new facility.
The facility is being used to support the working capital
requirements of the Group as it continues to grow.
Shawbrook Bank will be entitled to receive a cash based exit
payment calculated on the value generated, over a 10 year period,
on the equivalent of GBP206,250 of phantom shares (being 7.5% of
the facility) if there is a takeover of the Group or a debt
refinancing of the Shawbrook debt.
The exit fee is a cash payment of a sum equal to P, where:
P = (A x B) - C
and where:
A = the Phantom Shares Number - the Phantom Shares Value divided
by the fair market value of one ordinary share, calculated using
the average of the closing share price in the previous five days
immediately prior to the date of the facility letter;
B = the fair market value of one ordinary share at the time of
the exit fee event; and
C = the Phantom Shares Value, which is GBP206,250.
An Exit Fee Event is where there is:
(a) a sale or other disposition of all or substantially all of
the assets in the Company in whatever form (whether in a single
transaction or multiple related transactions); or
(b) an acquisition of shares in the Company by a person (and any
persons acting in concert with that person) that results in that
person (together with any such persons acting in concert) acquiring
a controlling interest in the Company; or
(c) a reorganisation, consolidation or merger of the Company
(whether in a single transaction or multiple related transactions)
where shareholders before the transaction(s) directly or indirectly
beneficially own issued voting securities of the surviving entity
after the transaction(s) together carrying the right to cast 50% or
less of the votes capable of being cast at general meetings of the
surviving entity; or
(d) a distribution or other transfer of assets to the
shareholders of the Company in connection with the liquidation of
the Company; or
(e) a refinancing of the Facility with a bank or debt lender
(other than the Bank) within thirty six months of the date of the
Facility Agreement, provided that the outstanding balance of the
Facility prior to the date of such refinancing is equal to or
greater than GBP500,000
As at 30 June 2020 GBP1.25 million of the facility remains
undrawn.
17. DEFERRED TAXATION
Deferred taxation is calculated at a rate of 19% (2019: 17%) in
the UK and 21% (2019: 21%) in the US
Tax losses Total
GBP000s GBP000s
Opening balance at 1 July 2018 - -
(Charged)/credited through the statement of
comprehensive income in the year - -
------------- -----------
At 30 June 2019 - -
Charged through the statement of comprehensive
income in the year - -
------------- -----------
At 30 June 2020 - -
2020 2019
GBP000s GBP000s
Unprovided deferred tax assets
Accelerated capital allowances - -
Trading losses 2,600 1,602
------------- -----------
2,600 1,602
The unprovided deferred tax assets are calculated at an average
rate of 19.67% (2019: 17.0%).
18. GROUP UNDERTAKINGS
At 30 June 2020, the Group included the following subsidiary
undertakings, which are included in the consolidated accounts:
Name Country of Class of share Proportion Nature of business
Incorporation capital held held
PCI-PAL (U.K.) England Ordinary 100% Payment Card Industry
Limited software services
provider
---------------- ---------------- ------------ -----------------------
IP3 Telecom Limited England Ordinary 100% Dormant
---------------- ---------------- ------------ -----------------------
The Number Experts England Ordinary 100% Dormant
Limited
---------------- ---------------- ------------ -----------------------
PCI PAL (US) Inc United States Ordinary 100% Payment Card Industry
of America software services
provider
---------------- ---------------- ------------ -----------------------
PCI PAL (AUS) Australia Ordinary 100% Dormant
Pty Ltd
---------------- ---------------- ------------ -----------------------
19. SHARE CAPITAL
Group 2020 2020 2019 2019
Number GBP000s Number GBP000s
Authorised:
Ordinary shares of 1 pence
each 100,000,000 1,000 100,000,000 1,000
Allotted called up and fully
paid:
Ordinary shares of 1 pence
each 59,387,845 594 42,721,178 427
On 17 April 2020 the company placed 16,666,667 ordinary shares
of 1 pence with various institutional investors, priced at 30 pence
per share. The placing raised a gross amount of GBP5.00 million
before expenses. The new shares represent approximately 28.14% of
the Company's enlarged issued ordinary share capital (excluding
those held as treasury shares).
The Group owns 167,229 (2016: 167,229) shares and these are held
as Treasury Shares.
During the year, the share price fluctuated between 50.5 pence
and 26.0 pence and closed at 40.0 on 30 June 2020.
Share Option schemes
The Company operates an Employee Share Option Scheme. The share
options granted under the scheme are subject to performance
criteria and generally have a life of 10 years. The grant price is
normally taken with reference to the closing quotation price as
derived from the Daily Official List of the London Stock Exchange,
however, the remuneration will adjust the grant price if it deems
there are extraordinary circumstances to justify doing so.
The performance criteria are set by the remuneration committee.
The grants are individually assessed with regard to the location of
the employee and generally have one of the following performance
criteria:
1: 50% of the options will vest if the share price of the
Company as measured on the London Stock Exchange trades above the
share price at the date of grant, for a continuous 30 day period;
25% or the options will vest if the share price of the Company
trade 50% above the share price of the Company at the date of Grant
for a continuous 30 day period; and the remaining 25% will vest if
the share price of the Company trades 100% above the share price of
the Company at the date of Grant for a continuous 30 day period.
The options cannot be exercised for a three year period from the
date of Grant. or;
2: The number of options granted will vest equally over a four
year period in monthly tranches with the earliest exercise date
being 12 months from the date of issue of the option
All options will lapse after a maximum ten-year period if they
have not been exercised.
The following options grants have been made and are valued using
the Monte Carlo Pricing model with the following assumptions:
Date of 25-May-17 12-Nov-18 10-May-19 13-Jun-19 08-Jul-19 08-Jul-19 08-Jul-19 08-Jul-19 25-Jul-19 Total
Grant
Exercise 33.0 26.5 22.0 28.5 28.5 26.5 19.0 23.0 19.0
Price pence pence pence pence pence pence pence pence pence
Price at 44.0 26.5 22.0 28.5 30.0 30.0 30.0 30.0 33.0
date pence pence pence pence pence pence pence pence pence
of grant
Estimated 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years
time to
Maturity
Expected
Dividend
yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Risk Free
Rate 0.57% 1.00% 0.87% 0.62% 0.59% 0.59% 0.59% 0.59% 0.59%
No Steps
used
in
calculation 10 10 10 10 10 10 10 10 10
No of
simulations
used in
calculation 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Fair value 14.11 14.23 14.23 14.30 14.18 14.23 14.25 14.21 14.25
of Option pence pence pence pence pence pence pence pence pence
Weighted 1.91 4.25 4.75 4.83 4.92 4.92 4.92 4.92 4.92
average years years years years years years years years years
life in
years
# option
shares
issued at
grant 3,065,000 225,000 145,000 525,000 105,000 145,000 145,000 145,000 525,000 5,025,000
# option
shares
lapsed -780,000 -125,000 0 0 0 0 0 0 0 -905,000
# option
shares
outstanding
as at 30
June
2020 2,285,000 100,000 145,000 525,000 105,000 145,000 145,000 145,000 525,000 4,120,000
# option
shares
exercisable
as at 30
June
2020 1,142,500 0 0 0 0 0 0 0 0 1,142,500
Total charge GBP52,704 GBP2,856 GBP4,141 GBP15,064 GBP5,982 GBP3,212 GBP559 GBP2,928 GBP7,992 GBP95,438
for year
Total GBP199,822 GBP4,658 GBP4,729 GBP15,805 GBP11,897 GBP5,285 GBP841 GBP3,942 GBP12,211 GBP259,189
cumulative
charge as
at 30 June
2020
The fair value of these options has been calculated on an issue
by issue basis and GBP95,438 (2019: GBP68,635) has been charged to
the statement of comprehensive income account for this financial
year.
The following options have been valued using a Black Scholes
Pricing model with the following assumptions:
Date of 28-Jun-17 04-Oct-17 12-Jul-18 12-Jul-18 12-Nov-18 12-Nov-18 07-Jan-19 27-Feb-19 Total
Grant
Exercise 41.5 44.5 28.5 28.5 26.5 26.0 18.4 23.0
Price pence pence pence pence pence pence pence pence
Price at 41.5 44.5 28.5 28.5 26.5 26.0 18.4 23.0
date pence pence pence pence pence pence pence pence
of grant
Estimated 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years
time
to Maturity
Expected
Dividend
yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Risk Free
Rate 0.57% 0.57% 1.00% 1.00% 1.03% 1.03% 0.89% 0.96%
Volatility 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%
Fair value 7.8 8.4 5.6 5.6 5.0 5.2 3.6 4.5
of pence pence pence pence pence pence pence pence
Option
Weighted 2.0 2.26 3.03 3.03 3.36 3.36 3.52 3.66
average years years years years years years years years
life in
years
# option
shares
issued at
grant 150,000 150,000 415,000 641,667 150,000 60,000 15,000 100,000 1,681,667
# option
shares
lapsed 0 0 -25,000 -550,000 0 0 0 0 -575,000
# option
shares
outstanding
at 30 June
2020 150,000 150,000 390,000 91,667 150,000 60,000 15,000 100,000 1,106,667
# option
shares
exercisable
as at 30
June
2020 112,500 100,000 186,875 43,924 59,375 23,750 5,313 33,333 565,070
Total charge GBP2,114 GBP2,517 GBP4,415 GBP1,038 GBP1,491 GBP622 GBP108 GBP911 GBP13,215
for year
Total GBP7,051 GBP6,901 GBP8,686 GBP2,042 GBP2,432 GBP1,015 GBP160 GBP1,219 GBP29,505
cumulative
charge as
at
30 June
2020
The fair value of these options has been calculated on an issue
by issue basis and GBP13,215 (2019: GBP11,839) has been charged to
the statement of comprehensive income account for this financial
year.
The analysis of the Company's option activity for the financial
year is as follows:
2020 2019
Weighted Number of Weighted Number of
Average exercise Options Average Options
Price exercise
price
GBP GBP
Options outstanding at
start
of year 0.303 5,116,667 0.339 3,255,000
Options granted during the
year 0.234 755,000 0.266 3,266,667
Options exercised during - -
the
year
Options lapsed during the
year 0.254 (955,000) 0.300 (1,405,000)
Options outstanding at end
of year 0.302 4,916,667 0.303 5,116,667
Options exercisable at the
end of year 1,707,570 131,250
20. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Group uses various financial instruments including cash,
trade receivables, trade payables, other payables, loans and
leasing that arise directly from its operations. The main purpose
of these financial instruments is to maintain adequate finance for
the Group's operations. The existence of these financial
instruments exposes the Group to a number of financial risks, which
are described in detail below. The directors do not consider price
risk to be a significant risk. The directors review and agree
policies for managing each of these risks, as summarised below, and
these remain unchanged from previous years.
Capital Management
The capital structure of the Group consists of debt, cash, loans
and equity. The Group's objective when managing capital is to
maintain the cash position to protect the future on-going
profitable growth which will reflect in shareholder value.
At 30 June 2020, the Group had a closing cash balance of
GBP4,301,000 (2019: GBP1,492,000) and borrowings of GBP1,273,000,
with a further GBP1,250,000 available to draw on the loan
account.
Financial risk management and objectives
The Group seeks to manage financial risk to ensure sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. The directors achieve this by
regularly preparing and reviewing forecasts based on the trends
shown in the monthly management accounts.
In October 2019, the Group agreed a GBP2.75 million, 36 month
term loan facility with Shawbrook Bank secured over the assets of
the business to assist with the working capital requirements of the
Group. As at 30 June 2020 GBP1.25 million of the facility remains
available to draw.
In addition, in April 2020 the Group placed 16,666,667 Ordinary
shares of 1 pence each with investors raising GBP5.0 million
(GBP4.57 million net of fees) to provide further working capital
and investment funding.
Interest rate risk
The Group has arranged a bank loan with Shawbrook Bank, as
detailed in note 16. As at 30 June 2020 the outstanding balance was
GBP1.273 million. Interest is calculated at 9.3% over LIBOR and is
paid monthly. The Group does not consider the interest rate risk to
be material and so has not entered into any hedging
arrangements.
Credit risk
The Group's principal financial assets are cash and trade
receivables, with the principal credit risk arising from trade
receivables. In order to manage credit risks the Group conducts
third party credit reviews on all new clients, takes deposits or
advanced payments where this is deemed necessary and where possible
collects payment by direct debit, limiting the exposure to a
build-up of a large outstanding debt. Concentration of credit risk
with respect to trade receivables are limited due to the wide
nature of the Group's customer base: The largest customer accounted
for 18% of revenues in the financial year, but this is expected to
drop to around 10% in the next financial year. Historically, bad
debts within the Group are minimal due to the importance of our
service to the customer, and this situation is not expecting to
change in the future.
Liquidity risk
The Group aims to mitigate liquidity risk by closely monitoring
cash generation and expenditure. Cash is monitored daily and
forecasts are regularly prepared to ensure that the movements are
in line with the directors' strategy.
Foreign currencies and foreign currency risk
During the year exchange gains of GBP15,100 (2019: GBP89,400)
have arisen and as at the 30 June 2020 the Group held the following
foreign currency cash balances:
US Dollar: $350,503 Sterling equivalent: GBP279,508 (2019:
GBP77,111)
Canadian Dollar: $ 24,772 Sterling equivalent: GBP 14,575 (2019: GBP5)
Australian Dollar: $ 31,933 Sterling equivalent: GBP 17,608
(2019: GBP6,130)
Total Sterling equivalent: GBP311,691 (2019: GBP83,246)
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction and monetary
assets and liabilities in foreign currencies are translated at the
rates ruling at the year end. At present foreign exchange
translation is low and therefore hedging and risk management is not
deemed necessary as the company trades and spends in the various
currencies.
The Group's principal exposure to exchange rate fluctuations
arise on the translation of overseas net assets, profits and losses
into Sterling, for presentational purposes. The risk is managed by
taking the differences that arise on the retranslation of the net
overseas investments to the currency reserve. Foreign currency risk
on cash balances is monitored through regular forecasting and the
Group tries to maintain a minimum level of currency in the accounts
so as to meet the short term working capital requirements.
No sensitivity analysis is provided in respect of foreign
currency risks as the risk is considered to be moderate.
Financial assets
Current financial assets Note 2020 2019
GBP000s GBP000s
Cash at bank 4,301 1,492
Trade receivables - current 14 1,263 1,057
Accrued income 14 60 35
5,624 2,584
The fair values of the financial assets are considered to be
approximately equal to the carrying values.
Financial liabilities
Current financial liabilities Note 2020 2019
GBP000s GBP000s
Trade payables 15 675 491
Accruals 15 619 406
Bank debt 16 1,273 -
2,567 897
The fair values of the financial liabilities are considered to
be approximately equal to the carrying values.
21. CAPITAL COMMITMENTS
The Group has no capital commitments at 30 June 2020 or 30 June
2019.
22. CONTINGENT ASSETS
The Group has no contingent assets at 30 June 2020 or 30 June
2019.
23. CONTINGENT LIABILITIES
In September 2019 the Group entered into a loan agreement with
Shawbrook Bank for GBP2.75 million. As part of this agreement the
Group could become subject to an exit fee payment calculated on
GBP206,250 phantom shares. The details of how the exit fee is
calculated and the triggers for this payment is detailed in Note
16.
The Group had no contingent liabilities at 30 June 2019.
24. CHANGES IN ACCOUNTING POLICY
The Group has adopted IFRS 16: Leases from 1 July 2019, which
has resulted in the new accounting policies set out below
On adoption of the standard there was no adjustment to opening
equity and the comparative amounts presented in the Consolidated
Statement of Comprehensive Income and Consolidated Statement of
Financial Position have not been restated.
On adoption the Group recognised lease liabilities of GBP82,000
for leases previously classified as operating leases, measured at
the present value of the remaining lease payments using a discount
rate of 12%, which is the assumed incremental borrowing rate at the
date of adoption. At the same time the Group recognised a
right-to-use asset of GBP82,000. There is, therefore, no overall impact to loss before tax.
25. TRANSACTIONS WITH DIRECTORS
During the financial year, prior to becoming a director, Simon
Wilson was paid $83,333 in salary and received $6,860 in
benefits.
Apart from the director's standard remuneration there were no
other transactions with directors in the year to June 2020 or June
2019.
26. DIVIDENDS
The directors are not proposing a dividend for the financial
year (2019: nil pence per share).
27. SUBSEQUENT EVENTS
There are no subsequent events to report.
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END
FR GPURWBUPUGGP
(END) Dow Jones Newswires
September 14, 2020 02:00 ET (06:00 GMT)
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