Pci-pal Regulatory News (PCIP)

IPPlus PLC

(the "Company" or the "Group")

Final Results for the Year Ended 30 June 2013

IPPlus PLC today announces its final audited results for the year ended 30 June 2013.

Financial highlights

· Group revenues increased by 20% to £8.1 million up from £6.8 million

· Underlying profit before taxation rose by 43% from £290,705 to £417,108 when non-recurring items are excluded (see below)

· Profit before taxation increased to £345,856 up from £330,665

· Profit after taxation increased to £472,856 from £408,096

· Closing cash balance of £559,574, giving a net balance of £530,407 after bank debt

· Capital expenditure during the year of £324,613

· Maiden dividend proposed at 0.3 pence per share (subject to shareholder approval)

Operational highlights

· Ansaback revenues increased by 17% to £5,759,218

· CallScripter revenues increased by 26% to £1,490,042

· IP3 Telecom awarded PCI DSS compliance (Payment Card Industry Data Security Standards) Level 1 compliance, the highest level of compliance issued by the governing body for global payment handling

· Ancora revenues rose 28% to £826,898

· Office space doubles to 15,500 square feet following the purchase of the office freehold on 1 July 2013

Extracts of the final results appear below and the full version of the Company's audited annual accounts will shortly be made available on the Company's website, www.ipplusplc.com.

Commenting on the Company's results, CEO, William Catchpole, said: "The Group has made significant progress during the financial year to 30 June 2013 and with the increased space now available, notwithstanding an extremely competitive and challenging business environment, the Board is optimistic about progress in the year ahead."

For further details, please contact:

CHAIRMAN'S STATEMENT

FINAL RESULTS FOR THE YEAR ENDED 30 JUNE 2013

Financial summary

The Board is pleased to report good progress and an increase in both turnover and profit for the year. The Group achieved a profit before taxation for the year ended 30 June 2013 of £345,856 (2012: £330,665), on turnover of £8,076,158 (2012: £6,748,159).

However underlying profit (after non-recurring items are excluded) improved from £290,705 to £417,108 as shown below.

Business summary

CallScripter increased its revenue by 26% in the year, whilst recurring revenue streams increased to £600,000. CallScripter also made its maiden divisional profit of £23,172, (before the allocation of central overheads to give a segmental loss), following a divisional loss of £37,776 in the previous year.

CallScripter has also made further progress in establishing new channels for its software in the year. The total number of licences worldwide is now in excess of 18,000, up from 15,700 at the end of the last financial year, which have been deployed in 40 countries.

Ansaback recorded excellent growth during the year with a 17% increase in revenues and this is the prime reason why the Group purchased its principal place of business as announced on 1 July 2013. The increased number of dedicated desks has also necessitated this move.

IP3 Telecom reported last year that it would invest in the development of its business offerings and whilst it has grown its business, it has spent considerable resources in launching its PCI compliant offering PCI-PAL. PCI-PAL achieved Level 1 PCI accreditation and is one of only four UK recognised compliant suppliers. PCI-PAL incurred non-recurring one-off costs of £71,252 during this exercise. The fruits of this have yet to be seen, but will continue to build in the next 12 months. Over £28 million of revenue has already passed through the secure processing portal. The majority of Ansaback clients now use IP3's network telephony platform to enhance services and provide primary disaster recovery functions.

Having had a disappointing previous year, the Board is pleased to report that Ancora Solutions ("Ancora") has now returned to divisional profitability (before the allocation of central overheads to give a segmental loss). The market in specialist removals remains fiercely competitive but despite this Ancora has been able to secure good contracts. New archiving contracts have been secured and all archive clients have been transferred to our new record storage and management software system which has resulted in a more streamlined service.

Building purchase

On 1 July 2013 the Group purchased the freehold of its principal place of business at 1-2 Melford Court, The Havens, Ransomes Europark, Ipswich IP3 9SJ for the sum of £1,550,000. This purchase has been funded by a mortgage of £1,192,500 from NatWest Bank PLC and existing cash resources. 

The Group has occupied the ground floor of this building since May 2000 and is now at a stage where more space is required. The purchase provides the upper floor of the office block for the Group's planned expansion.

Whilst annual overheads are expected to increase marginally reflecting increased rates on the enlarged property use, the Group's floor space has almost doubled to 15,500 square feet and the mortgage repayments for the entire building will be less than the current rent for the ground floor. 

In addition, and subsequent to the purchase of the freehold, the current sub-tenant of the upper floor has agreed to the early termination of its lease, in consideration of which it has paid the Group the sum of approximately £353,000. These funds have been utilised by the Group to assist the purchase of the freehold, making the transaction broadly cash neutral, and will be recorded as a profit in the results for the year ended 30 June 2014.

We expect to spend a further £100,000 during the current financial year on fitting out the additional space that we have acquired.

Dividend

Each year the Board decides whether to declare a dividend or return capital to shareholders or purchase shares in the market to be held as treasury stock. This decision is taken principally in the light of the: Group's present net cash balance; its future working capital requirements; investment plans for the future development of the Group; and, the banking climate, with particular regard to their willingness to support SME's.

Taking these factors into consideration the Board is pleased to announce that it will be proposing the payment of a maiden dividend of 0.3p per share (subject to shareholder approval). As this was proposed post year end no liability has been recognised in the accounts.

People

I would like to thank each of the employees and Directors for all of their efforts during the past year. Their commitment, loyalty and support are appreciated and are vital to achieving further positive progress.

Outlook

Notwithstanding an extremely competitive and challenging business environment, the Directors are confident about the future prospects for the Group and look forward to reporting further progress.

Philip Dayer

30 August 2013

BUSINESS REVIEW

FOR THE YEAR ENDED 30 JUNE 2013

Business summary

IPPlus PLC operates through two principal subsidiaries, CallScripter Limited and IPPlus (UK) Limited.

The Group trades under five trading styles namely CallScripter, Ansaback (including IP3 Telecom and PCI-PAL) and Ancora Solutions.

CallScripter is an enhanced customer interaction software suite specifically developed for contact centres, telesales and telemarketing operations. Our clients gain major benefits by introducing CallScripter's dynamic scripting environment and advanced reporting software into their organisations. The software facilitates the rapid set-up, handling and reporting of sophisticated inbound calls, outbound calls and e-mail campaigns.

Ansaback is a 24 hours a day, 7 days a week bureau telephony service providing overflow and out of hours call handling, emergency cover, dedicated phone resource, non-geographic, low call and Freephone telephone facilities as well as disaster recovery lines and other ancillary telecommunication services.

IP3 Telecom is a cutting edge provider of hosted "Cloud" telephony technology, providing bespoke automated Interactive Voice Response (" IVR") solutions to the banking and financial sectors, hosted contact centres infrastructure for new businesses, telephone numbers, campaign response, call recording, reporting and lone worker staff lines. The triple sited network ensures a robust infrastructure capable of handling high volumes and peaks in call traffic, within one of the most reliable intelligent telephony networks in the UK.

PCI-PAL offers a PCI DSS ("Payment Card Industry Data Security Standard") solution which allows call centres and telephone agents to take payments in a PCI compliant fashion with customer service unaffected and existing operational processes maintained. PCI-PAL makes contact centre payment collection easy and secure, de-scoping the operation from the requirements of PCI DSS.

Ancora Solutions provides secure document archiving, confidential shredding, library moves and specialist removals serving many leading blue chip companies within the legal, medical, property, and transportation sectors.

The market

Off shore and home workers have a role to play but the call centre that most end customers associate with continues to be evolving in the UK. The pressure for businesses to offer better services around the clock lends itself to our outsourced Ansaback model. We continue to win prestige accounts who seek a cost effective yet friendly UK customer facing solution. We have increased our dedicated fixed seats and we continue to prospect for larger clients who seek a mix of dedicated and bureau desks.

The IP3 Telecom market is principally in the UK, it does have some international clients. Whilst the market for advanced telephony services is large the specialist nature of complex IVR continues to provide us with excellent prospects for growth. 

The market for PCI compliant services is expected to increase dramatically in the next few years as more companies become increasingly concerned about complying with data security. The main risk to companies is losing their payment processing contracts and then being forced to pay large premiums/fines to become compliant by the main credit card processors. There have been some recent examples of high profile data losses which will push any business handling credit card data to review their process.

The market for our CallScripter software is not bounded by the UK and the percentage of our business now conducted abroad has exceeded 50% and is likely to grow further in the next few years with growth into new territories.

Ancora Solutions' archiving and secure destruction market is focused on the Eastern Region of the UK and London. With the implementation of a new web based archiving system this market area is also expected to expand as clients come to expect electronic delivery of files. 

Review of operations

We are pleased to announce continued growth in Group turnover and profitability. A summary of the operational highlights in the year to 30 June 2013 follows:

Ansaback

• Ansaback revenues increased by 17% to £5.8 million

• Fixed seat revenue from dedicated and outbound services increased by 35%

• Bureau sales have consequently decreased 12% as the business matures

A major utility client, to whom we currently supply telephony services, has increased their requirements and an area of the new office space will be brought into immediate use in servicing this client's business. Our traditional market sectors have held up well and we only lost one significant client in the final quarter of the year. This bad debt was minimised and new business has been signed up which will replace the loss. There are still some fluctuations in call volumes in the charity sector but our position in the Telecoms sector continues to be strong.

The move towards larger clients with a greater need for more dedicated agent seats is likely to continue. The recruitment of suitably experienced high calibre sales personnel will remain a focus for the division.

Ansaback Sales by Market Sector

Utility - 30%

Telecoms - 14%

Direct Response TV - 11%

Call Centre - 11%

R/etail - 8%

Service Industry - 7%

Charity - 7%

Accident Management - 4%

Insurance / Legal / Financial - 4%

Other - 4%

IP3 Telecom and PCI-PAL

This was a breakthrough year for the division with the first clients using the PCI-PAL compliant platform and over £28 million of credit card payments being transacted. The sales pipeline for new business is growing rapidly and we are looking forward to reporting continued growth. The hosted model has significant advantages in descoping the compliance for businesses in contrast to an in house solution with its associated costs. The time taken from enquiry to implementation is considerably longer than anticipated and this has been similarly reported by other vendors of PCI solutions. We think this delay in decision making is inevitable until the credit card companies start to tighten the compliance issue and make it compulsory to use a PCI accepted solution. At present PCI-PAL is one of only four UK organisations with a Level 1 PCI DSS certification, the highest level of compliance issued by the governing body for global payment handling. 

The existing IP3 business continues to grow and remains profitable. The refreshed IP3 website is now generating a steady flow of new enquiries, and the sales team has been expanded, contributing towards the growth of the IP3 direct client base.

CallScripter

CallScripter made excellent progress in the year and revenues increased by 26% to £1,490,042 with over 50% of its revenues derived from export markets.

In September 2012 CallScripter won an order for 335 agent licences, in conjunction with its longest standing worldwide OEM partner, for one of the largest outsourcers worldwide. 

CallScripter renewed its 7 year old worldwide OEM relationship with Interactive Intelligence, Inc., in August 2012, for the provision of the underlying software technology behind Interaction EasyScripter™, the enhanced call scripting solution for Interaction Dialer®

CallScripter has significantly expanded its commitment to the Avaya DevConnect international partner programme to increase the position of CallScripter as 'an advanced scripting product of choice' across Avaya's range of contact centre solutions

We have now established connections in the UK with CISCO who feature strongly in the Gartner Magic quadrant for Call Centre Infrastructure. This association has been helped by CallScripter already having a relationship with CISCO in the US via eLoyalty. This also strengthens the potential global channel.

We have also increased our web presence through a revised website and further search engine optimisation which has increased our lead generation.

Ancora Solutions

The Ancora business made significant progress in the financial year ended 30 June 2013, reversing the lower than expected result of the previous year. New archive customers have been won and the business was awarded two significant archive relocation jobs.

The O'Neil's software with bar coding scanners and an online web portal have been a benefit to the business in streamlining its processes and improving client satisfaction. Highlights from the Ancora Solutions business include:

• Archiving - two excellent new customers - a Hospital and a firm of Solicitors

• Removals - won two large contracts - a County Council's and a major insurance company's archive relocations

• Removals and crate hire sales increased by 60%

• Archiving and storage sales increased by 32%

Risks

Principal business risks and uncertainties

The principal risks facing the Group and discussed by the Board relate broadly to its acquisition strategy, intellectual property, the market place and competitive environment, dependence on key people and information technology:

Acquisitions: The Group's strategy includes seeking acquisitions of companies or businesses that are complementary to its businesses. As a consequence there is a risk that management's attention may be diverted and the Group's ongoing business may be disrupted or the Group may fail to retain key acquired personnel, or encounter difficulties in integrating acquired operations. The directors remain aware of this disruption and plan to ensure that the main business is not affected.

Intellectual property rights ("IPR"): The Group is reliant on IPR surrounding its internally generated and licensed-in software. Whilst it relies upon IPR protections including patents, copyrights, trademarks and contractual provisions it may be possible for third parties to obtain and use the Group's intellectual property without its authorisation. Third parties may also challenge the validity and/or enforceability of the Group's IPR, although the directors do not envisage this risk to be significant. In addition, the directors are aware of the supply risk of losing key software partners. As these are not a significant part of the core products, this would only have a short-term impact on the Group as it sought to identify and then train staff in alternative products.

Market place and competition: The sector in which the Group's CallScripter division operates in and/or routes to market may undergo rapid and unexpected changes or not develop at a pace in line with the directors' expectations. It is also possible that competitors will develop similar products; the Group's technology may become obsolete or less effective; or that consumers use alternative channels of communications, which may reduce demand for the Group's products and services. In addition, the Group's success depends upon its ability to develop new, and enhance existing products, on a timely and cost effective basis, that meet changing customer requirements and incorporate technological advancements. The directors review the market movements, client requirements and competitive suppliers to ensure that the current portfolio is as required. The Ansaback and Ancora markets are wide and diverse, and while other competitors may enter the arena, divisional success rests with the sales team. The directors ensure that the team are properly directed, trained and motivated to address this issue.

Key personnel: The Group depends on the services of its key technical, operations, sales and management personnel. The loss of the services of any one or more of these persons could have a material adverse effect on the Group's business. The Group maintains an active policy to identify, hire, train, motivate and retain highly skilled personnel in key functions.

Information technology: Data security and business continuity pose inherent risks for the Group. The Group invests in and keeps under review formal data security and business continuity policies which are independently audited.

The risks to the CallScripter division remain unchanged - principally the ability of our sales team and the partner resellers to achieve market penetration. The channels to market, be they via Original Equipment Manufacturer ("OEM") arrangements, or integrated with a dialler as part of a tailored call handling solution need constant attention to preserve existing market share.

Additional risks include the technology utilised in the contact centre and we have a modern telephone switch. This switch includes fail-over systems to further increase our business continuity/disaster recovery readiness whilst also enabling us to offer additional services to clients. It is also split across two locations to further reduce the risk of failure.

To reduce the operational risks we have a Disaster Recovery and Data Centre facility at an office 5 miles away from the main building. This office can accommodate up to 60 agents and has independent telephone lines, phone switch and computer data systems synchronised to the main building that can automatically fail-over in the event of a major incident. Looking at other contact centre risks we have a standby generator in case of power cuts to lower our susceptibility to power outages,, whilst our main computer systems have been upgraded to improve their resilience and minimise any down-time should a problem arise.

IP3 Telecom uses a network telephony platform with triple redundancy (sites in London, Birmingham and Manchester), but could be affected if there was a major carrier breakdown affecting the entire network.

PCI-PAL operates out of a state of the art data centre in the heart of London. This facility has an extremely high level security and 99.999% availability which is the level required by banks and emergency services. The risk of this being penetrated by hackers is limited as no data is stored - the risk would therefore only be disruptive to the processing of cards.

The risk to Ancora Solutions is mainly within the archiving component of the division. This risk is a combination of the impact of a loss of a significant customer and the inability to replace such a customer quickly. Digital storage solutions and document scanning are becoming more prevalent as a means of document storage and the division is currently developing its digital offering. Legislative changes affecting document record retention dates may affect the number of records held and the division needs to ensure that it complies with all relevant data protection requirements. Security of records, the pulping of these records and compliance with current legislation may force changes in working practice.

Financial risk management objectives and policies

The principal financial instruments used by the Group, from which financial risk arises, are trade receivables, cash at bank and trade and other payables. The Group has no significant net foreign currency monetary assets or liabilities nor any significant hedged transactions or positions. The Board has overall responsibility for the determination of the Group's financial risk management objectives and policies and, while retaining ultimate responsibility for them, it has delegated the authority for designing, operating and reporting thereof to the Group's finance function. The overall objective is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:

Credit risk: Credit risk is the risk of financial loss to the Group if a customer or a counter party to a financial instrument fails to meets it contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers before entering contracts and it has a frequent and proactive collections process. The concentration of credit risk is limited due to the large and unrelated customer base comprising mainly blue chip companies and public sector organisations. Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. At the year-end the Group's cash at bank was held with two major UK clearing banks.

The main risk within Ansaback is the exposure to the failure of a major client, as the top 20 clients represent 69 per cent of turnover. However, apart from the major utility client which has a unique contract and a significant credit rating, no individual client accounts for more than 8% of the divisional turnover. Continued vigilance is taken with credit control and new clients to minimise exposure.

Market risk: The directors consider that exposure to market risk, arising from the Group's use of interest-bearing and foreign currency financial instruments, is not significant. This is assessed in note 21 to these financial statements.

Liquidity risk: Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The directors review an annual 12 month cash flow projection as well as information regarding cash balances on a monthly basis. At the balance sheet date, liquidity risk was considered to be low given the fact the Group is cash generative and cash and cash equivalents are thought to be at acceptable levels.

Post Balance Sheet event - Building purchase

With the continued growth of the business, and in particular the amount of fixed seat business that we have won, the question of space, or rather the lack of it, in the existing building became a real concern. We actively started to consider this over 12 months ago and continued to review the options available including purchasing or renting new space.

The opportunity arose to acquire the building and IPPlus PLC announced that on 1 July 2013 the Group purchased its principal place of business at Melford Court, Ransomes Europark, Ipswich IP3 9SJ for the sum of £1,550,000. The purchase has been funded by a mortgage of £1,192,500 from the NatWest Bank PLC and existing cash resources.

The Group has occupied the 7,500 square feet of the ground floor of the building since May 2000 and the purchase provides the upper floor of the office block providing an additional 8,000 square feet of office space for planned expansion.

Whilst annual overheads are expected to increase marginally reflecting increased rates on the enlarged property use, the Group's floor space has doubled and the mortgage repayments for the entire building will be less than the current rent for the ground floor.

In addition, and subsequent to the purchase, the current sub-tenant of the upper floor agreed to the early termination of its lease in consideration of which it has paid the Group the sum of approximately £353,000. These funds have been utilised by the Group to fund the required deposit, making the transaction broadly cash neutral, and will be recorded as a one-off profit in the results for the year ended 30 June 2014.

Employee relations and social responsibilities

As previously reported the Group continues to advocate a healthy staff policy via its participation in Investors in People together with pursuing a Health and Well Being policy for encouraging healthy practices. Recently it has successfully been reassessed and retains its Investors in People standing. The IT team is actively engaged with Carbon Champions for its ecological and green initiatives regarding technology. We have introduced new policies including a Low Carbon and Environmental Purchasing Policy, whilst the Group encourages car sharing, bus usage and the cycle to work initiative.

The staff are encouraged to participate in corporate team sporting activities and last year we entered teams for three local half marathons and a canoe trip.

The second year of the internal apprentice scheme was carried out whereby call centre staff could work for up to a month for the various divisions. This gave management the chance to evaluate whether these employees had potential to progress to a full time role and similar to last year we have seen two apprentices take on full time roles. We foresee a continuity of this initiative based on its popularity and success.

The Group's employees support a designated charity every year and raised £1,594 for The Woolverstone Wish Fund.

Summary and outlook

The Group has made significant progress during the financial year to 30 June 2013 and with the increased space now available, notwithstanding an extremely competitive and challenging business environment, the Board is optimistic about progress in the year ahead.

William A Catchpole

30 August 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2013

All activities of the Group are classed as continuing.

The accompanying accounting policies and notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

The accompanying accounting policies and notes form an integral part of these financial statements.

The Board of Directors approved and authorised the issue of the financial statements on 30 August 2013.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2013

The accompanying accounting policies and notes form an integral part of these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

1. AUTHORISATION OF FINANCIAL STATEMENTS

The Group's consolidated financial statements (the "financial statements") of IPPlus PLC (the "Company") and its subsidiaries (together the "Group") for the year ended 30 June 2013 were authorised for issue by the Board of Directors on 30 August 2013 and the Chief Executive, William Catchpole, and the Chief Financial Officer, R. Stuart Gordon, signed the balance sheet.

2. NATURE OF OPERATIONS AND GENERAL INFORMATION

IPPlus PLC is the Group's ultimate parent company. It is a public limited company incorporated and domiciled in the United Kingdom. IPPlus PLC's shares are quoted and publicly traded on the AIM division of the London Stock Exchange. The address of IPPlus 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 a 24 hours a day, 7 days a week out of hours and overflow telephony service, the development and sale of call centre contact relationship management software and the provision of secure storage and destruction of documents.

3. STATEMENT OF COMPLIANCE WITH IFRS

These 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.

New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 July 2012 are:

· IFRS 10 Consolidated Financial Statements (effective 1 January 2014)

· IFRS 11 Joint Arrangements (effective 1 January 2014)

· IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014)

· IFRS 13 Fair Value Measurement (effective 1 January 2013)

· IAS 19 Employee Benefits (Revised June 2012) (effective 1 January 2013)

· IAS 27 (Revised) Separate Financial Statements (effective 1 January 2014)

· IAS 28 (Revised) Investments in Associates and Joint Ventures (effective 1 January 2014)

· Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2013)

· Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2013)

· Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 (effective 1 January 2013)

· Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014)

· Annual Improvements 2009-2012 Cycle (effective 1 January 2013)

The directors anticipate that the adoption of these standards and interpretations in future periods will have no material effect on the financial statements of the Group.