Netcall Regulatory News (NET)

19 Mar 2008 07:00

Netcall PLC19 March 2008 19 March 2008 NETCALL PLC ("Netcall" or "the Company") Interim Results Netcall plc (AIM:NET), a leading provider of callback, auto-messaging andcontact solutions, today announces interim results for the six months ended 31December 2007. Financial Highlights • Turnover £1.69 million (H1 FY2007: £2.0 million) • Gross profit margin 89% (H1 FY2007: 87%) • Profit before share based charges and tax £282,900 (H1 FY2007: £429,000) • Profit after tax up 80% to £675,700 (H1 FY2007: £375,100) • Cash position up 37% to £2.73 million (H1 FY2007: £2.0 million) • Recurring revenues £1.44 million (H1 FY2007: £1.39 million) Operational Highlights • Existing customers extended use of flagship product QueueBuster including Lloyds Bank and Aviva • Added new blue chip customers including Interflora and Reuters • Signing of a new strategic partnership with Cable & Wireless Ron Elder, Chairman of Netcall, commented, "The demand for our products remainsstrong and we continue to gain traction in the market. Netcall has anincreasingly substantial cash position and, given our robust cost management,strength of recurring revenues and our strong business prospects we look towardthe second half with confidence." For further enquiries, please contact: Netcall plc Tel. +44 (0) 1480 495300 Ron Elder, Chairman / Henrik Bang, CEO Evolution Securities Tel. +44 (0) 20 7071 4300 Tim Redfern ICIS Limited Tel. +44 (0) 20 7651 8688 Tom Moriarty / Caroline Evans-Jones Chairman's Statement During the first half of this financial year Netcall has continued to expand itscustomer base. Whilst difficult market conditions meant that performance in thefirst half did not deliver the financial results we had anticipated, the Boardbelieves the business fundamentals continue to be strong. We remain confidentthat, based on current business levels together with a strong pipeline andongoing robust cost management, the Company will achieve a satisfactory outcomefor the year. Financials Turnover for the six months ended 31st December 2007 declined by 16% to £1.69million compared to the same period in 2006. The result was affected by adecline in licence sales with a number of customers delaying purchasingdecisions. This included delays in projects via channel partners of whichQueueBuster was an element. Service revenue showed marginal growth, with thehosted services business continuing to see an increase in its customer base.However, the lower activity levels principally amongst our financial servicescustomers, has resulted in lower service revenues from a number of existingcustomers. The underlying performance of the Company continues to strengthen. A key elementof the Company's strategy is to develop a long term, predictable and recurringrevenue stream. This resulted in a 3.2% increase in recurring Maintenance &Support and Services revenues. We continued our focus on cost control deliveringan improved gross margin of 89% compared to 87% last year. Operating costs forthe period were reduced by 4.2% to £1.29m compared to the same period in 2006. The proportion of sales coming through our established sales channels wassimilar to that in the same period last year at 42%. New business won throughthese partners included contracts with Reuters and Prudential. It is also veryencouraging to see the first revenues being generated from our third partyhosted platform implemented in Cable & Wireless' environment which commencedoperations in November 2007 following the signing of a new strategic partnershipagreement. The decline in revenue has affected profitability with the Company reportingprofits before share based charges of £282,900 compared to £429,000 in the sameperiod last year. The Company has substantial trading tax losses which are available for offsetagainst future taxable profits. With the Company's continuing increase inrecurring revenues we have made an initial recognition of a deferred tax assetto reflect the recoverability of those trading tax losses in the foreseeablefuture. Under accounting convention this has resulted in a significant non-cashtax credit to the profit and loss account in this period. Post tax profits achieved were £675,700 being an increase of 80% over the sameperiod last year. The Company has fully adopted IFRS with effect from the commencement of thisfinancial year. Following this adoption there has been no material restatementof previously reported results. The Company's cash position has improved significantly and remains strong with acash balance at the half year-end of £2.7m, an increase of £0.8m compared to thesame period in 2006. The cash position continues to grow since the end of theperiod, emphasising the cash generative nature of the business. Operations During the year, the Company broadened its customer base with the addition ofseveral prestigious organisations including Interflora and Newcastle BuildingSociety. We received additional orders from a number of our existing customersincluding Lloyds Bank and Aviva. This demonstrates the continued demand for oursolution from major organisations that wish to enhance customer service whilstat the same time improve levels of efficiency within their call centreoperations. Additionally our products continue to show very strong performancemetrics, with customers continuing to endorse our solutions as shown in theincreasing number of case studies available from Netcall and our partners. We are pleased to report that across our market sectors the business pipeline ishealthy and given expected conversion rates, we are confident of a strong secondhalf. We continue to invest in our sales operation and, whilst this has led to anincrease in fixed costs we believe this is a necessary and strategicallyimportant investment for the future benefit of the business. Product development To support sales, the main focus of product development during the period hasbeen on making Netcall's product portfolio easier to use and integrate. We haveachieved full Avaya compliance status during the period which is important giventhe predominance of Avaya technology in the call centre market. Additionally ourplatform has been successfully integrated into complex IP infrastructuressupplied by CISCO and Alcatel-Lucent. Outlook The demand for our products remains strong and we continue to gain traction inthe market. Whilst we have seen a general broadening of the customer base,difficult macro-economic conditions have had a negative effect on businesslevels in the first half. It is possible that these conditions will also affectthe current trading period. Netcall has an increasingly substantial cash position and, given its robust costmanagement, strength of recurring revenues and its strong business prospects welook toward the second half with confidence. Accordingly, at this stage weexpect profits will be in line with market expectations, with the Companyremaining on track to achieve its goals and focused on the delivery ofshareholder value. Condensed Consolidated Interim Income Statement 6 months to 6 months to Year to 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Continuing operations Revenue 1,690.7 2,006.5 4,112.3Products 779.3 1,097.1 2,107.3Services 911.4 909.4 2,005.0 Cost of sales (185.7) (265.0) (535.2) ------------------ ------------------ ------------------Gross profit 1,505.0 1,741.5 3,577.1 ------------------ ------------------ ------------------ Administrative costs before share based payment (1,293.4) (1,350.1) (2,765.4)charges Share based payment charges (150.0) (53.9) (131.4) ------------------ ------------------ ------------------Total administrative expenses (1443.4) (1,404.0) (2,896.8) ------------------ ------------------ ------------------ 61.6 337.5 680.3 Profit before interest and taxFinance costs receivable 71.3 41.2 92.0Finance costs payable - (3.6) (5.3) ------------------ ------------------ ------------------Profit before tax 132.9 375.1 767.0 Income tax expense (note 5) 542.8 - - ------------------ ------------------ ------------------Profit for the period 675.7 375.1 767.0 ============ ============ ============Profit before share based charges, interest and tax 211.6 391.4 811.7Profit before share based charges and tax 282.9 429.0 898.4 Earnings per share total and continuing:Basic earnings per share 1.02 0.6 1.16 ============ ============ ============Diluted earnings per share 0.96 0.6 1.12 ============ ============ ============ Condensed Consolidated Interim Balance Sheet 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Fixed assetsProperty, plant and equipment 123.0 139.9 157.9Intangible assets 5.2 19.7 0.6Deferred tax asset 542.8 - - ------------------ ------------------ ------------------ 671.0 159.6 158.5 ------------------ ------------------ ------------------ Current assetsInventories 116.5 45.9 38.1Trade and other receivables 1,205.4 1,443.8 1,622.8Cash and cash equivalents 2,731.7 2,001.0 2,360.5 ------------------ ------------------ ------------------Total current assets 4,053.6 3,490.7 4,021.4 ------------------ ------------------ ----------------- Total assets 4,724.6 3,650.3 4,179.9 ============ ============ ============LIABILITIES Current liabilitiesTrade and other payables 1,221.0 1,346.9 1,502.0Current portion of long term borrowings - 30.0 - ------------------ ------------------ ------------------ 1,221.0 1,376.9 1,502.0Non-current liabilitiesLong-term borrowings - 42.5 - ------------------ ------------------ ------------------Total liabilities 1221.0 1,419.4 1,502.0 ------------------ ------------------ ------------------Net assets 3,503.6 2,230.9 2,677.9 ============ ============ ============ EQUITY Equity attributable to equity holders of the parentShare capital 3,302.5 3,299.9 3,302.5Share premium account 2.4 15,126.4 2.4Special and capital reserve - 245.1 -Employee share schemes reserve 440.9 213.4 290.9Profit and loss account (242.2) (16,653.9) (917.9) ------------------ ------------------ ------------------Total equity 3,503.6 2,230.9 2,677.9 ============ ============ ============ Condensed Consolidated Interim Cash Flow Statement 6 months to 6 months to 31 December 31 December Year to 30 2007 2006 June 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash generated from operations 304.9 197.7 642.3Interest paid - (3.6) (5.3) ------------------ ------------------- -------------------Net cash from operating activities 304.9 194.1 637.0 ------------------ ------------------ ------------------ Cash flows from investing activitiesPurchase of property, plant and equipment (3.3) (9.0) (48.3)Purchase of intangible assets (1.7) (33.8) (33.8)Interest received 71.3 41.2 92.0 ------------------ ------------------ ------------------Net cash used in investing activities 66.3 (1.6) 9.9 ------------------ ------------------ ------------------ Cash flows from financing activitiesProceeds from issue of share capital - 4.0 (18.4)Repayment of long-term borrowings - (15.0) (87.5) ------------------ ------------------ ------------------Net cash used in financing activities - (11.0) (105.9) ------------------ ------------------ ------------------ Net increase in cash and cash equivalents 371.2 181.5 541.0Cash and cash equivalents at beginning of period 2,360.5 1,819.5 1,819.5 ------------------ ------------------ ------------------Cash and cash equivalents at end of period 2,731.7 2,001.0 2,360.5 ============ ============ ============ Notes to the Condensed Consolidated Interim Financial Statements 1. Nature of operations and general information Netcall plc and subsidiaries' ('the Group') principal activities include thedesign, development and marketing of advanced technologies that enablebusinesses to integrate and manage telephony efficiently. Netcall plc is the Group's ultimate parent company. It is incorporated anddomiciled in Great Britain. The address of Netcall plc's registered office,which is also its principal place of business, is 10 Harding Way, St Ives,Cambridgeshire, United Kingdom, PE27 3WR. Netcall plc's shares are listed onthe Alternative Investment Market of the London Stock Exchange. These consolidated condensed interim financial statements have been approved forissue by the Board of Directors 19th March 2008. The financial information set out in this interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. TheGroup's statutory financial statements for the year ended 30 June 2007,prepared under UK GAAP, have been filed with the Registrar of Companies. Theauditor's report on those financial statements was unqualified and did notcontain a statement under s237(2) or s237(3) of the Companies Act 1985. 2. Dividend The Board has not declared an interim dividend to shareholders (2006: 0 penceper share). 3. Accounting policies Basis of preparation These interim condensed consolidated financial statements (the interim financialstatements) are for the six months ended 31 December 2007. They have beenprepared in accordance with the accounting policies set out below which arebased on the recognition and measurement principles of IFRS as adopted by theEuropean Union (EU) and are effective at 30 June 2008 or are expected to beadopted and effective at 30 June 2008, our first annual reporting date at whichwe are required to use IFRS adopted by the EU. These interim financial statements have been prepared under the historical costconvention. Netcall plc's consolidated financial statements were prepared in accordance withUnited Kingdom Accounting Standards (UK GAAP) until 30 June 2007. The date oftransition to IFRS was 1 July 2006. The comparative figures have beenreclassified as a result of adoption of IFRS. The disclosures required by IFRS1 concerning the transition from UK GAAP to IFRS are given in the reconciliationschedules, presented and explained in note 6. The accounting policies have been applied consistently throughout the Group forthe purposes of preparation of these interim financial statements. 4. Earnings per share The calculation of the basic earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the year. For the six months ended 31 December 2007 thiswas 66,050,937 (31 December 2006: 65,996,699 and 30 June 2007: 66,014,672). The calculation of diluted earnings per share is based on the basic earnings pershare, on the assumed conversion of all dilutive options and other dilutivepotential ordinary shares. This is based on a dilutive weighted average numberof shares of 70,719,528 at 31 December 2007 (31 December 2006: 68,482,553 and 30June 2007: 68,500,526). 5. Income tax expense 6 months to 6 months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000 Current tax charge - - - Deferred taxDeferred tax credit - initial recognition 560.0 - -Movement in period (17.2) - - ------------------ ------------------ ------------------Deferred tax credit 542.8 - - ---------------- ---------------- ----------------Total tax charge 542.8 - - =========== ========== =========== The tax charge on underlying business performance is calculated by reference tothe estimated effective tax rate for the full year. No tax liability or taxcharge is expected to arise due to trading losses brought forward which can beutilised in the period for which no deferred tax asset has previously beenrecognised. 1. Explanation of transition to IFRS As stated in the Basis of Preparation, these are the Group's first interimfinancial statements for part of the period covered by the first annualconsolidated financial statements prepared in accordance with IFRS. An explanation of how the transition from UK GAAP to IFRS has affected theGroup's financial position, financial performance and cash flows is set outbelow. The transition to IFRS has not resulted in any remeasurement adjustmentsand a reconciliation of profit and equity is therefore not included. Reclassification of intangible assets Under UK GAAP domain names and software costs were recognised within tangiblefixed assets. Under IFRS this asset category relates specifically to property,plant and equipment. The domain names and software costs have therefore beenreclassified in these IFRS interim financial statements and recognised withinnon current intangible assets. UK GAAP Reclassification IFRS £'000 £'000 £'000At 1 July 2006Non-current assetsProperty, plant and equipment 154.3 (9.4) 144.9Intangible assets - 9.4 9.4 At 31 December 2006Non-current assetsProperty, plant and equipment 159.6 (19.7) 139.9Intangible assets - 19.7 19.7 At 30 June 2007Non-current assetsProperty, plant and equipment 158.5 (0.6) 157.9Intangible assets - 0.6 0.6 Explanation of adjustments to the cash flow statement The definition of cash is narrower under UK GAAP than under IAS 7 "Cash FlowStatements". Under IFRS highly liquid investments, readily convertible to aknown amount of cash and with an insignificant risk of changes in value, areregarded as cash equivalents. The cash flow statement in the last UK GAAPfinancial statements reported movements in cash. The cash flow statement inthese IFRS interim financial statements report movements in cash and cashequivalents. Cash and cash equivalents under IFRS include some investments that were recordedas liquid investments under UK GAAP. Cash and cash equivalents includes£2,000,000 at 30 June 2007 which was accounted for as liquid resources under UKGAAP. This information is provided by RNS The company news service from the London Stock Exchange