Netcall Regulatory News (NET)

27 February 2012

NETCALL PLC

("Netcall", the "Company", or the "Group")

Interim Results

Netcall plc (AIM: NET), a leading provider of customer engagement software, today announces its unaudited interim results for the six months ended 31 December 2011.

Financial Highlights

·; Revenue increased 14% to £7.31m (H1 FY11: £6.41m)

·; Adjusted EBITDA(1) increased by 41% to £1.63m (H1 FY11: £1.16m) a margin of 22% of revenue (H1 FY11: 18%)

·; Adjusted earnings per share(2) increased by 42% to 0.95p (H1 FY11: 0.67p)

·; Cash generated from operations before acquisition and reorganisation payments increased by 316% to £1.83m (H1 FY11: £0.44m)

·; Revenue of a recurring nature increased 11% to £5.07m (H1 FY11: £4.57m) being 69% of total revenue

·; Profit before tax of £0.92m (H1 FY11: £0.01m)

·; Earnings per share 0.64p (H1 FY11: 0.12p)

·; Strong balance sheet with cash of £7.18m (H1 FY11: £4.80m) and no debt

·; Maiden dividend of 0.4p paid post period end

1) profit before interest, taxation, depreciation, amortisation, acquisition and reorganisation expenses and share-based charges.

2) earnings per share before amortisation of acquired intangible assets, acquisition and reorganisation expenses, share-based charges, adjusted to a standard rate of corporation tax

Operational Highlights

·; Significant increase in new orders received compared to same period last year

·; Expanded customer base across NHS, Public Sector and Contact Centre markets

·; Substantial increase in cross-selling

·; Increased investment in sales and product development whilst improving margin

Henrik Bang, CEO of Netcall, commented,

"We have continued to build on the progress achieved last year and are pleased to deliver another period of growth for the business. Trading was in line with expectations aided by substantial increases in cross-selling and a broadened portfolio of solutions.

"We have started the second half well, with order inflow significantly ahead of last year. Our product suite is gaining traction across all key segments and we have the financial strength to invest for future growth. Therefore, whilst the Board remains mindful of the prevailing economic climate we are increasingly confident in achieving a successful outcome to the year.''

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About Netcall PLC

Netcall is a UK company quoted on the AIM market of the London Stock Exchange. Netcall's software product suite provides compelling business process solutions for end-to-end customer engagement, incorporating call handling, callback, smart automation, workforce management, data unification and business process management. Our target markets comprise organisations of all sizes, including many blue-chip companies with global contact centre operations. The Netcall software platform helps organisations meet the growing demands of their customers and prospects whilst improving internal efficiencies, thereby increasing profitability and customer satisfaction.

Netcall's customer base contains over 600 organisations in both the private and public sectors. These include over 65% of the NHS Acute Health Trusts, major telecoms operators such as BT and Cable & Wireless and leading organisations including Interflora, Lloyds TSB, Cineworld, Interserve, Orange, Prudential, British Sugar, and npower.

Introduction

Netcall continues to expand its customer base providing customer engagement solutions for the NHS, Public Sector and Contact Centre markets. In the first six months of the current financial year we have made good progress against our strategic goals whilst posting revenue growth of 14% and adjusted earnings per share growth of 42%. We have increased investment in sales and product development, building a platform for continued growth, and at the same time improving our profit margin to 22%.

We further increased the Group's financial strength, delivering over £1.8m in operating cash flows for the period, bringing net cash balances to £7.2m at the period end.

The Group recorded a significant increase in new orders during the period with growth across all of its main market segments. Cross-selling of the Group's enlarged product portfolio has continued to build following the successful integration of the Telephonetics business and has contributed to this growth.

Netcall continues to maintain strong customer relationships and this is reflected in the strength of the recurring revenue base which increased by 11% to £5.07m (H1 FY11: £4.57m) and now accounts for 69% of total revenue providing good visibility.

We have broadened and cross-fertilised our product suite including the launch of Appointment Management Cycle, for which several orders have been received including University Hospital Southampton NHS Foundation Trust and Hillingdon Hospitals NHS Foundation Trust.

Both public and private sector organisations continue to seek efficiency gains and cost reduction through investment in new technology. The Board believes these drivers will continue to offer good growth opportunities for the Group's solutions. To capitalise further on this opportunity we are planning to increase our investment in product development to enhance our customer engagement platform to include multi-channel customer interaction (web, mobile, data and voice); business process automation and workforce optimisation.

The Company paid a maiden dividend of 0.4 pence per share on 4 January 2012.

Financial Review

Group revenue for the period increased 14% to £7.31m (H1 FY11: £6.41m), comprising an increase in:

·; product and professional services revenues to £2.24m (H1 FY11: £1.84m);

·; maintenance and support contract revenues to £3.20m (H1 FY11: £2.71m); and

·; SaaS (Software as a Service) to £1.87m (H1 FY11 £1.85m) including MovieLine which continues to generate cash for the Group.

Gross profit margin was 87% (H1 FY11: 86%).

Administrative expenses before depreciation, amortisation, acquisition and reorganisation expenses and share-based charges increased to £4.72m (H1 FY11: £4.38m). The costs in the period include the full effect of last year's acquisition of Telephonetics and cost saving programme, offset by a 6% increase in underlying investment in sales and product development expenses in the period.

Consequently, the Group recorded a 41% increase in adjusted EBITDA to £1.63m (H1 FY11: £1.16m) a margin of 22% of revenue (H1 FY11: 18%).

This adjusted EBITDA, after taking into account amortisation of acquired intangible assets of £0.48m and share-based payment charges of £0.16m, resulted in a profit before tax figure of £0.89m for the period (H1 FY11: £0.01m).

The Group benefited from the utilisation of tax losses brought forward and recorded a tax charge of £0.14m (H1 FY11: credit £0.13m).

Adjusted earnings per share increased 42% to 0.95p (H1 FY11: 0.67p). Reported earnings per share increased to 0.64p (H1 FY11: 0.12p).

Expenditure on research and development including capitalised expenditure increased by 10% to £0.64m (H1 FY11: £0.58m) due to higher spending on product development. As a result capitalised software development expenditure was 63% higher at £0.13m (H1 FY11: £0.08m).

Total capital expenditure was £0.29m (H1 FY11: £0.12m); the balance after software development being £0.16m (H1 FY11: £0.04m) was spent principally on new office facilities in connection with the rationalisation programme announced last year.

Cash generated from operations before acquisition and reorganisation payments increased by 316% to £1.83m (H1 FY11: £0.44m) a conversion of 112% of adjusted EBITDA (H1 FY11: 38%). This better than expected result, was due to a higher than anticipated conversion of accrued income and trade receivables into cash.

A share buyback programme was commenced by the Company during the period. By 31 December 2011, 0.98m shares had been purchased in the market, resulting in a cash outflow of £0.17m.

As a result of these factors, cash increased by £1.29m (H1 FY11: £2.35m) to £7.18m at 31 December 2011 (30 June 2011: £5.89m). The Group continues to maintain a debt-free balance sheet.

On 4 January 2012, post period end, a maiden dividend of 0.4 pence per share was paid to shareholders totalling £0.49m.

Business Review

The Board believes that organisations in the current economic climate are prioritising investment in 'spend to save' solutions that improve business processes and deliver efficiency and customer service improvements. Our aim is to continue the broadening of our product suite, expand our customer base in targeted markets and increase the number of solutions used by our customers.

Customer wins

We have been pleased with the number of new customers signed during the first six months of the financial year, securing contracts with blue chip private sector organisations such as South West Water while adding 13 Local Authorities, Police Forces and NHS Trust clients.

Netcall continues to be recognised within the public sector as a leading provider of customer engagement solutions, as reflected by the number of new contracts signed in the period including our second regional Police framework agreement and recently being listed as an approved supplier for the UK government's G-Cloud for our SaaS solutions.

Our 600 strong customer base offers substantial opportunities for additional cross-selling with a significant proportion of clients engaged in a sales dialogue for one or more additional solutions from our enlarged product portfolio.

Product development

The Netcall roadmap focuses on expanding the capabilities of our customer engagement platform to include web, mobile, data and voice customer interaction and embed our business process automation and workforce optimisation technologies.

The Board believes the capabilities of Eden, our business process automation platform, provides a significant differentiator moving forward. The next step will be to embed the latest version of Eden into our core customer engagement platform. This will make Eden easily available to the Group's customer base as part of their existing infrastructure for example delivering unified agent desktops, single view of the customer experience and history, and strong BPM and integration capabilities for the customer service function which increase efficiencies, reduce costs and improve customer service. Customers currently benefiting from the Eden solution include Interserve, Kier and Bournemouth & West Hampshire Water.

We will also extend our QMax workforce management product to include: multi-channel forecasting and scheduling; and, integrating our other platform capabilities such as call recording, performance monitoring and customer feedback.

The first version of the enhanced platform is scheduled to be launched by April 2012 and the initial customer order has been received.

Moreover, we continue to add solution capabilities to our cloud based SaaS offering addressing the growing demand for hosted and blended solutions which has also been reflected in our order inflow for the period.

An early example of new innovative solutions includes a proof of concept with a leading global retail brand where Netcall is delivering a cloud based BPM solution encompassing IVR, web and mobile smartphone interfaces to more than 500 retail point-of sales positions.

Cost management

We remain focused on operational cost management and in addition to the £1.8m cost savings implemented last year, as reflected in the improved margins, we expect further efficiency savings.

Acquisitions

Acquisitions remain an important component of Netcall's growth strategy, and the Board continues to evaluate opportunities for further consolidation in the marketplace.

Outlook

Trading was in line with expectations during the first six months of the financial year and we have started the second half well, with order inflow significantly ahead of last year. Our product suite is gaining traction across all key segments and we have the financial strength to invest for future growth. Therefore, whilst the Board remains mindful of the prevailing economic climate we are increasingly confident in achieving a successful outcome to the year.

Unaudited consolidated income statement for the six months to 31 December 2011

All activities of the Group in the current and prior periods are classed as continuing. All of the profit for the period is attributable to the shareholders of Netcall plc.

Statement of comprehensive income for the six months to 31 December 2011

Unaudited consolidated balance sheet at 31 December 2011

 Consolidated statement of changes in equity at 31 December 2011

Unaudited consolidated cash flow statement for the six months to 31 December 2011

Notes to the financial information for the six months ended 31 December 2011

1. General information

Netcall plc (AIM: "NET", "Netcall", or the "Company") is a leading provider of customer engagement software. It is a public limited company which is quoted on AIM (a market of the London Stock Exchange). The Company's registered address is 3rd Floor, Hamilton House, 111 Marlowes, Hemel Hempstead, HP1 1BB and the Company's registered number is 1812912.

2. Basis of preparation

The Group interim results consolidate those of the Company and its subsidiaries (together referred to as the 'Group'). The principal trading subsidiary of Netcall is Netcall Telecom Ltd.

These consolidated interim financial statements (the 'results') have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (February 2012). This results announcement does not constitute statutory accounts of the Group within the meaning of sections 434(3) and 435(3) of the Companies Act 2006. The balance sheet at 30 June 2011 has been derived from the full Group accounts published in the Annual Report and Accounts 2011, which has been delivered to the Registrar of Companies and on which the report of the independent auditors was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

The results have been prepared in accordance with the accounting policies set out in the Group's 30 June 2011 statutory accounts, which are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union ("EU"). No changes to accounting policies are expected for the year ending 30 June 2012.

The results for the six months ended 31 December 2011 were approved by the Board on 24 February 2012. A copy of these interim results will be available on the Company's web site www.netcall.com from 28 February 2012.

The principal risks and uncertainties faced by the Group have not changed from those set out on page 7 of the annual report for the year ended 30 June 2011.

3. Segmental analysis

Management consider that there is one operating business segment being the design, development, sale and support of software products and services, which is consistent with the information reviewed by the Board of Directors when making strategic decisions. Resources are reviewed on the basis of the whole of the business performance.

The key segmental measure is adjusted EBITDA which is profit before interest, tax, depreciation, amortisation, acquisition and reorganisation expenses and share-based payments, which is set out on the consolidated income statement.

4. Acquisition and reorganisation costs

(1)Acquisition costs are principally professional advisor fees.

5. Earnings per share

The basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding those held in treasury:

The diluted earnings per share has been calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of shares in issue during the year, adjusted for potentially dilutive shares that are not anti-dilutive.

Adjusted basic and diluted earnings per share has been calculated to exclude the effect of acquisition and reorganisation costs, share-based payment charges, amortisation of acquired intangible assets and utilisation of historic tax losses. The Board believes this gives a better view of ongoing maintainable earnings. The table below sets out a reconciliation of the earnings used for the calculation of earnings per share to that used in the calculation of adjusted earnings per share:

6. Dividends

No dividends were paid in 2011 or 2010. A dividend in respect of the year ended 30 June 2011 of 0.4 pence per share, amounting to a total dividend of £485,000 was approved at the Annual General Meeting held on 24 November 2011. This dividend was paid on 4 January 2012.