TIDMNET
RNS Number : 3115T
Netcall PLC
27 September 2010
27 September 2010
NETCALL PLC
Unaudited preliminary results for the year ended 30 June 2010
Netcall plc ("Netcall", "the Company", or "the Group"), a leading provider of
customer engagement software, today announces its unaudited preliminary results
for the year ended 30 June 2010.
Financial Highlights
· Revenue increased by 5% to GBP4.13m (2009: GBP3.93m)
· Revenues of a recurring nature increased by 10% to GBP3.42m (2009:
GBP3.10m)
· Gross profit margin increased 1% to 91%
· Gross profit from revenues of a recurring nature exceeded operating costs
· Adjusted operating profit(1) increased by 23% to GBP1.02m (2009:
GBP0.83m)
· Adjusted operating profit margin increased by 4% to 25%
· Earnings per share 0.04p (2009:1.18p) after one off impact of acquisition
costs of GBP0.92m
· Debt-free balance sheet with net cash funds of GBP2.45m at 30 June 2010.
Post-acquisition of Telephonetics, the Group had net cash funds of GBP4m
Acquisitions
· Q-Max Systems Limited ("Q-Max") acquisition has now been successfully
integrated
· Placing of GBP4.25m (before expenses) at 19 pence per share post year end
· Acquisition of Telephonetics Limited ("Telephonetics") completed post
year end and integration commenced which is expected to deliver significant
synergies
· Broader product portfolio with improved offerings and delivery
capabilities to customers
· Increased installed base to more than 600 customers enhancing cross
selling opportunities and security of recurring revenues
Henrik Bang, CEO of Netcall, commented,
"This has been a transformational year for Netcall with the acquisitions of
Q-Max and Telephonetics, the latter successfully completed following our
financial year end, supporting our growth strategy and providing a significantly
larger customer base and broader product portfolio. The Company will continue to
pursue carefully selected acquisitions that enhance long term shareholder value.
"Netcall's start to the current financial year has been promising, with the
first months of this period showing early sales and healthy profit levels.
Whilst market conditions remain uncertain, the Board's outlook remains
confident."
For further enquiries, please contact:
+------------------------------------------------+-----------------+
| Netcall plc | Tel. +44 (0) |
| | 1480 495300 |
+------------------------------------------------+-----------------+
| Henrik Bang, CEO | |
| Michael Jackson, Chairman | |
| James Ormondroyd, Group Finance Director | |
+------------------------------------------------+-----------------+
| | |
+------------------------------------------------+-----------------+
| Evolution Securities Limited | Tel. +44 (0) 20 |
| (nominated adviser and broker) | 7071 4300 |
+------------------------------------------------+-----------------+
| Barry Saint / Esther Lee - Corporate Finance | |
+------------------------------------------------+-----------------+
| Tim Redfern - Corporate Broking | |
+------------------------------------------------+-----------------+
| | |
+------------------------------------------------+-----------------+
| Threadneedle Communications | Tel. +44 (0) 20 |
| | 7653 9850 |
+------------------------------------------------+-----------------+
| Tom Moriarty / Caroline Evans-Jones / Hilary | |
| Millar | |
+------------------------------------------------+-----------------+
(1) before share-based charges, amortisation of acquired intangible assets and
acquisition costs.
About Netcall
Netcall is a UK company quoted on the AIM market of the London Stock Exchange.
Netcall's software product suite provides compelling solutions for end-to-end
customer engagement, incorporating call handling, callback, smart automation,
workforce management and data unification. 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 80% of the major UK multiplex cinemas, over 60% of
the NHS Acute Health Trusts, major telecoms operators such as BT and Cable &
Wireless and leading organisations including First Direct, McAfee, Interflora,
Lloyds TSB, Oracle, Orange, Prudential, RBS and Standard Life.
Chairman's and Chief Executive's Statement
This has been a transformational year for Netcall, incorporating key
acquisitions supporting our growth strategy. Since this time last year we have
increased our market presence, significantly grown our customer base to over 600
customers and substantially increased the Group's revenues of a recurring nature
which the Board believes provides a solid foundation for delivering long term
shareholder value.
The Group continues to enjoy a strong financial position underpinned by a
business with high revenue visibility which will continue to support our growth
strategy.
Acquisitions
Within a 12 month period Netcall undertook two acquisitions:
Q-Max
In October 2009, Netcall acquired Q-Max, a leading UK-based provider of
workforce management software to contact centres. As well as adding more than
100 new customers to Netcall's existing customer base, this has also opened up a
new market for the Company. Q-Max's integration was completed to plan and the
business has performed well during the year, in line with management's
expectations.
Telephonetics
On 2 June 2010, the Company announced the recommended proposed acquisition of
Telephonetics, a UK-based provider of speech automation and data integration
solutions, along with a placing of new Netcall shares at 19p per share to raise
GBP4.25m before expenses. The acquisition was made by way of a scheme of
arrangement and constituted a reverse takeover pursuant to the AIM Rules. It was
successfully completed on 30 July 2010, after Netcall's financial year end.
Integration work has begun and is proceeding according to plan, with a number of
cost saving and synergistic opportunities having been identified. These
opportunities include cross-selling to the significantly increased customer base
and reseller channels. The removal of duplicate head office costs will also
benefit the Group through cost synergies and efficiency gains.
Telephonetics last published set of audited accounts were for the year to 30
November 2009, in those accounts it reported revenue of GBP10.5 million and
profit before tax of GBP0.4 million.
Financials
Group revenue for the 2010 financial year was GBP4.13m, representing an increase
of 5% over the prior financial year (2009: GBP3.93m). This improved performance
included the first time contribution from newly acquired Q-Max of GBP1.19m which
compensated for a reduction in QueueBuster revenues.
Revenue of a recurring nature, from our hosted platforms and maintenance and
support agreements, continues to provide good visibility of future earnings and
increased 10% to GBP3.42m (2009: GBP3.10m) which represents 83% (2009: 78%) of
Group revenues.
Gross profit margin increased by 1% to 91% (2009: 90%) including the effect from
Q-Max.
The integration of Q-Max into the Group increased the percentage of direct sales
as a proportion of Group revenues to 58% (2009: 53%).
Costs were monitored closely during the year with operating costs increasing
marginally by 2%, including the effect from Q-Max, to GBP2.75m (2009: GBP2.69m),
before share-based payments, acquisition costs and amortisation of acquired
intangible assets. At this level gross profit achieved from revenues of a
recurring nature continue to exceed operating costs and provide the Group with a
sound financial platform.
As a result, the Group recorded a 23% increase in adjusted operating profits to
GBP1.02m (2009: GBP0.83m), a profit margin of 25% (2009: 21%).
This adjusted operating profit taking into account (i) share-based payment
charges of GBP0.2m, (ii) amortisation charges on acquired intangible assets
relating to Q-Max of GBP0.15m; (iii) acquisition costs in respect of Q-Max and
Telephonetics of GBP0.92m; and (iii) lower interest income of GBP0.13m on a
lower cash balance following the part-cash acquisition of Q-Max, resulted in a
loss before tax of GBP0.23m (2009: profit of GBP0.75m).
The Group continues to benefit from the utilisation of tax losses brought
forward and therefore has no income tax expense. In light of trading in the
period, the Board considers that a higher proportion of losses are likely to be
utilised in the future and therefore a deferred tax credit of GBP0.26m has been
recorded in the income statement.
Net cash generated from operating activities was GBP0.37m (2009: GBP1.58m) which
was lower than last year due to cost of acquisition and timing differences. This
combined with GBP2.00m of cash paid to acquire Q-Max resulted in a cash outflow
for the year of GBP1.71m (2009: inflow of GBP1.25m).
The Group has a debt-free balance sheet and net cash funds of GBP2.45m at 30
June 2010. This position was strengthened further post-year end following a
placing on 29 July 2010, raising a total of GBP4.25m (before expenses) through
the issue of 22,368,420 shares at 19 pence per share. The funds have been used
to part finance the Telephonetics acquisition and for general working capital
purposes.
Market and strategy
Netcall aims to build a focused software portfolio of technologies and
applications that provide a seamless solution for end-to-end customer
engagement, enabling our customers to deliver flexibility and excellent customer
experience, whilst at the same time achieving internal efficiencies.
The recent acquisitions of Q-Max and Telephonetics have added products and
customer base that significantly broaden our presence and offerings in this
space. Our product portfolio now includes inbound and outbound call handling,
callback, smart automation, workforce management and data unification.
These products can be introduced into an organisation in phases, to provide
step-by-step improvements, or as a complete end-to-end solution from day one.
Additional flexibility is provided via a combination of hosted or premises-based
implementation.
The financial position of the Group continues to be robust with significant cash
resources post-acquisition of Telephonetics of GBP4m and a strong operating
model. This position of strength, with focus on maintaining financial security
underpins the Group's ability to confidently invest in its technology, staff and
customers. Therefore, Netcall will continue to pursue both an organic and
acquisitive growth strategy in its fragmented market to achieve greater presence
and efficiency and deliver long term shareholder value.
Changes to the Board
Netcall is pleased to welcome James Ormondroyd, Michael Neville and Mark Brooks
to the Board of Netcall following completion of the acquisition of Telephonetics
on 30 July 2010. James Ormondroyd joined the Netcall Board as Group Finance
Director from Telephonetics where he had been Finance Director since 2005.
Michael Neville, previously Telephonetics' Non-executive Chairman and Mark
Brooks, previously a Non-executive Director of Telephonetics, both joined as
Non-executive Directors.
The Board would also like to take this opportunity to welcome all new Q-Max and
Telephonetics employees and shareholders to the enlarged Group and thank all of
our staff for their commitment and dedication to the Company and its customers.
Outlook
The start to the current financial year has been promising, with the first
months of this period showing early sales and healthy profit levels. Whilst
market conditions remain uncertain, the Board's outlook remains confident.
Consolidated Income Statement
+------------------------------------------+-----------+-----------+
| | 2010 | 2009 |
+------------------------------------------+-----------+-----------+
| | GBP'000 | GBP'000 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Revenue | 4,130.8 | 3,931.1 |
+------------------------------------------+-----------+-----------+
| Cost of sales | (359.6) | (405.2) |
+------------------------------------------+-----------+-----------+
| Gross profit | 3,771.2 | 3,525.9 |
+------------------------------------------+-----------+-----------+
| Administrative charges before separately | | (2,693.4) |
| identifiable charges | (2,748.3) | |
+------------------------------------------+-----------+-----------+
| Share based payments | (204.6) | (221.0) |
+------------------------------------------+-----------+-----------+
| Amortisation of acquired intangible | (150.0) | - |
| assets | | |
+------------------------------------------+-----------+-----------+
| Acquisition costs | (916.0) | - |
+------------------------------------------+-----------+-----------+
| Total separately identifiable charges | (1,270.6) | (221.0) |
+------------------------------------------+-----------+-----------+
| Total administrative expenses | (4,018.9) | (2,914.4) |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Profit before separately identifiable | 1,022.9 | 832.5 |
| charges | | |
+------------------------------------------+-----------+-----------+
| Separately identifiable charges | (1,270.6) | (221.0) |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Operating (loss)/ profit | (247.7) | 611.5 |
+------------------------------------------+-----------+-----------+
| Finance income | 13.1 | 143.2 |
+------------------------------------------+-----------+-----------+
| (Loss)/ profit before tax | (234.6) | 754.7 |
+------------------------------------------+-----------+-----------+
| Tax | 260.5 | - |
+------------------------------------------+-----------+-----------+
| Profit for year | 25.9 | 754.7 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Attributable to shareholders of Netcall | 25.9 | 754.7 |
| plc | | |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Earnings per share - pence | | |
+------------------------------------------+-----------+-----------+
| Basic | 0.04 | 1.18 |
+------------------------------------------+-----------+-----------+
| Diluted | 0.04 | 1.17 |
+------------------------------------------+-----------+-----------+
All activities of the Group in the current and prior year are classed as
continuing.
Statement of comprehensive income
+----------------------------------+------+-----------+------------+
| | | 2010 | 2009 |
+----------------------------------+------+-----------+------------+
| | | GBP'000 | GBP'000 |
+----------------------------------+------+-----------+------------+
| | | | |
+----------------------------------+------+-----------+------------+
| Profit for the year | | 25.9 | 754.7 |
+----------------------------------+------+-----------+------------+
| Total comprehensive income for | | 25.9 | 754.7 |
| the year | | | |
+----------------------------------+------+-----------+------------+
All of the comprehensive income for the year is attributable to the shareholders
of Netcall plc.
Consolidated Balance Sheet
+------------------------------------------+-----------+-----------+
| | 2010 | 2009 |
+------------------------------------------+-----------+-----------+
| | GBP'000 | GBP'000 |
+------------------------------------------+-----------+-----------+
| Assets | | |
+------------------------------------------+-----------+-----------+
| Non-current assets | | |
+------------------------------------------+-----------+-----------+
| Intangible assets | 2,883.4 | 33.2 |
+------------------------------------------+-----------+-----------+
| Property, plant and equipment | 81.6 | 62.6 |
+------------------------------------------+-----------+-----------+
| Deferred tax asset | 810.0 | 560.0 |
+------------------------------------------+-----------+-----------+
| | 3,775.0 | 655.8 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Current assets | | |
+------------------------------------------+-----------+-----------+
| Inventories | 30.7 | 28.8 |
+------------------------------------------+-----------+-----------+
| Trade and other receivables | 1,164.5 | 1,056.5 |
+------------------------------------------+-----------+-----------+
| Cash and cash equivalents | 2,448.6 | 4,162.8 |
+------------------------------------------+-----------+-----------+
| | 3,643.8 | 5,248.1 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Total assets | 7,418.8 | 5,903.9 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Equity | | |
+------------------------------------------+-----------+-----------+
| Share capital | 3,209.8 | 3,130.0 |
+------------------------------------------+-----------+-----------+
| Share premium account | 2.4 | 2.4 |
+------------------------------------------+-----------+-----------+
| Merger reserve | 220.2 | - |
+------------------------------------------+-----------+-----------+
| Capital reserve | 187.5 | 187.5 |
+------------------------------------------+-----------+-----------+
| Employee share schemes reserve | 263.2 | 227.0 |
+------------------------------------------+-----------+-----------+
| Profit and loss account | 1,136.7 | 942.4 |
+------------------------------------------+-----------+-----------+
| Total Equity | 5,019.8 | 4,489.3 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Non-current liabilities | | |
+------------------------------------------+-----------+-----------+
| Deferred tax liabilities | 129.5 | - |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Current liabilities | | |
+------------------------------------------+-----------+-----------+
| Trade and other payables | 2,269.5 | 1,414.6 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Total equity and liabilities | 7,418.8 | 5,903.9 |
+------------------------------------------+-----------+-----------+
Consolidated Statement of Changes in Equity
+------------------+---------+---------+---------+------------+----------+---------+---------+
| | | | | | Employee | | |
| | | Share | | Capital | share | Profit | |
| | Share | premium | Merger | redemption | schemes | and | Total |
| | capital | account | reserve | reserve | reserve | loss | |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | account | Equity |
| | | | | | | GBP'000 | GBP'000 |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Balance at 1 | 3,302.5 | 2.4 | - | - | 441.0 | 201.4 | 3,947.3 |
| July 2008 | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Allotment of | 15.0 | - | - | - | - | | 15.0 |
| shares | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Purchase of | | | | | | | |
| and | (187.5) | - | - | 187.5 | - | (448.7) | (448.7) |
| cancellation | | | | | | | |
| of shares | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Increase in | | | | | | | |
| equity reserve | - | - | - | - | 221.0 | - | 221.0 |
| in relation to | | | | | | | |
| options issued | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Reclassification | | | | | | | |
| following | | | | | | | |
| exercise and | - | - | - | - | (435.0) | 435.0 | - |
| cancellation of | | | | | | | |
| options | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Transaction | (172.5) | - | - | 187.5 | (214.0) | (13.7) | (212.7) |
| with owners | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Profit and | | | | | | | |
| total | | | | | | | |
| comprehensive | - | - | - | - | - | 754.7 | 754.7 |
| income for the | | | | | | | |
| year | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Balance at 30 | 3,130.0 | 2.4 | - | 187.5 | 227.0 | 942.4 | 4,489.3 |
| June 2009 | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Allotment of | 79.8 | - | 220.2 | - | - | - | 300.0 |
| shares | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Increase in | - | - | - | - | 204.6 | - | 204.6 |
| equity reserve | | | | | | | |
| in relation to | | | | | | | |
| options issued | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Reclassification | - | - | - | - | (168.4) | 168.4 | - |
| following | | | | | | | |
| exercise and | | | | | | | |
| cancellation of | | | | | | | |
| options | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Transactions | 79.8 | - | 220.2 | - | 36.2 | 168.4 | 504.6 |
| with owners | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Profit and | - | - | - | - | - | 25.9 | 25.9 |
| total | | | | | | | |
| comprehensive | | | | | | | |
| income for the | | | | | | | |
| year | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
| Balance at 30 | 3,209.8 | 2.4 | 220.2 | 187.5 | 263.2 | 1,136.7 | 5,019.8 |
| June 2010 | | | | | | | |
+------------------+---------+---------+---------+------------+----------+---------+---------+
Consolidated Cash Flow Statement
+------------------------------------------+-----------+-----------+
| | 2010 | 2009 |
+------------------------------------------+-----------+-----------+
| | GBP'000 | GBP'000 |
+------------------------------------------+-----------+-----------+
| Net cash generated from operations | 369.3 | 1,578.7 |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Cash flows from investing activities | | |
+------------------------------------------+-----------+-----------+
| Additions to property, plant and | (49.1) | (25.0) |
| equipment | | |
+------------------------------------------+-----------+-----------+
| Purchase of intangible assets | (45.1) | (15.9) |
+------------------------------------------+-----------+-----------+
| Acquisition of Q-Max net of cash | (2,002.4) | - |
+------------------------------------------+-----------+-----------+
| Proceeds from disposal of tangible | - | 0.2 |
| assets | | |
+------------------------------------------+-----------+-----------+
| Interest received | 13.1 | 143.2 |
+------------------------------------------+-----------+-----------+
| Cash (outflow)/ inflow from investing | (2,083.5) | 102.5 |
| activities | | |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Cash flows from financing activities | | |
+------------------------------------------+-----------+-----------+
| Proceeds from share issues | - | 15.0 |
+------------------------------------------+-----------+-----------+
| Purchase of own shares | - | (448.7) |
+------------------------------------------+-----------+-----------+
| Cash outflow from financing activities | - | (433.7) |
+------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------+-----------+-----------+
| Net changes in cash and cash equivalents | (1,714.2) | 1,247.5 |
+------------------------------------------+-----------+-----------+
| Cash and cash equivalents, beginning of | 4,162.8 | 2,915.3 |
| year | | |
+------------------------------------------+-----------+-----------+
| Cash and cash equivalents, end of year | 2,448.6 | 4,162.8 |
+------------------------------------------+-----------+-----------+
Cash generated from operating activities
+-------------------------------------------+------------+------------+
| | 2010 | 2009 |
+-------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------+------------+------------+
| | | |
+-------------------------------------------+------------+------------+
| Profit after taxation | 25.9 | 754.7 |
+-------------------------------------------+------------+------------+
| Adjustments for: | | |
+-------------------------------------------+------------+------------+
| Deferred tax | (260.5) | - |
+-------------------------------------------+------------+------------+
| Depreciation | 30.1 | 52.5 |
+-------------------------------------------+------------+------------+
| Amortisation | 169.7 | - |
+-------------------------------------------+------------+------------+
| Share based payment charge | 204.6 | 221.0 |
+-------------------------------------------+------------+------------+
| Interest received | (13.1) | (143.2) |
+-------------------------------------------+------------+------------+
| Decrease in trade and other | 46.0 | 477.6 |
| receivables | | |
+-------------------------------------------+------------+------------+
| (Decrease) /increase in inventories | (1.9) | 48.8 |
+-------------------------------------------+------------+------------+
| Increase in trade and other payables | 168.5 | 167.3 |
+-------------------------------------------+------------+------------+
| Cash generated from operating activities | 369.3 | 1,578.7 |
+-------------------------------------------+------------+------------+
Notes to the condensed consolidated interim financial statements
1. General information and basis of preparation
Netcall plc is a company incorporated in the United Kingdom. The address of the
registered office is 10 Harding Way, St. Ives, Cambridgeshire, PE27 3WR. The
Financial Statements will be made available from the above address or the
investor section of the Company's website at www.netcall.com no later than 22
October 2010.
The financial statements have been prepared under the historical cost convention
and, as required by EU Law, the Group's Financial Statements have been prepared
and approved by the Directors in accordance with International Financial
Reporting Standards as adopted by the EU ("IFRS").
The preliminary results for the year ended 30 June 2010 do not constitute
statutory accounts within the meaning of section 434(3) of the Companies Act
2006. Statutory accounts for the year ended 30 June 2010 have not been filed
with the Registrar of Companies and will be delivered in due course. Statutory
accounts for the year ended 30 June 2009 were prepared under IFRS and have been
delivered to the Registrar of Companies. The audit report on these statutory
accounts was unqualified, did not include references to any matters to which the
auditor drew attention by way of emphasis without qualifying their reports and
did not contain a statement either under section 498(2) or 498(3) of the
Companies Act 2006.
The accounting policies used in the preliminary results are consistent with
those set out in the statutory accounts for the year ended 30 June 2010 except
for the adoption of IAS 1 Presentation of Financial Statements (Revised 2007),
IFRS 3 Business Combinations (Revised 2008) and IFRS 8 Operating Segments.
IAS 1 Presentation of Financial Statements (Revised 2007) does not affect the
financial position or profits of the Group, but gives rise to additional
disclosures. The measurement and recognition of the Group's assets, liabilities,
income and expenses is unchanged, however some items that were recognised
directly in equity are now recognised in other comprehensive income, for
example, revaluation of property, plant and equipment. It affects the
presentation of owner changes in equity and introduces a 'Statement of
comprehensive income' and it requires presentation of a comparative balance
sheet as at the beginning of the first comparative period, in some
circumstances. Management considers that this is not necessary this year
because the 2008 balance sheet is the same as that previously published.
IFRS 3 Business Combinations (Revised 2008) has meant that professional fees and
similar incremental costs are no longer capitalised as part of the cost of an
acquisition but are written off as incurred. It requires that contingent
consideration is measured at fair value at the acquisition date. Any subsequent
changes in contingent consideration are recorded in the income statement.
IFRS 8 Operating Segments has introduced the "management approach" to segment
reporting. This requires the disclosure of segmental information based on the
internal reports regularly reviewed by the Chief Operating Decision Maker, which
is deemed to be the Board of Directors, in order to assess each segment's
performance and allocate resources to them. This standard amends the
requirements for disclosure of segmental performance and does not have any
effect on the Group's overall reported results. IFRS 8 requires the Group to
provide an explanation of the basis on which the segment information is prepared
and a reconciliation to the amount recognised in the Group's consolidated
financial statement.
The consolidated financial information is presented in sterling (GBP), which is
the company's functional and the Group's presentation currency.
2. 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
business performance.
The key segmental measure is adjusted operating profit which is profit before
separately identifiable charges, interest and tax as set out in the consolidated
income statement.
A breakdown of revenue by category and geographical destination is as follows:
+---------------------------------------------+---------+---------+
| | 2010 | 2009 |
+---------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+---------------------------------------------+---------+---------+
| Analysis of revenues by category | | |
+---------------------------------------------+---------+---------+
| Sale of goods | 712.5 | 830.5 |
+---------------------------------------------+---------+---------+
| Rendering of services | 3,418.3 | 3,100.6 |
+---------------------------------------------+---------+---------+
| | 4,130.8 | 3,931.1 |
+---------------------------------------------+---------+---------+
| | | |
+---------------------------------------------+---------+---------+
| Analysis of revenue by geographical | | |
| destination | | |
+---------------------------------------------+---------+---------+
| United Kingdom | 3,633.1 | 3,426.5 |
+---------------------------------------------+---------+---------+
| Rest of the World | 497.7 | 504.6 |
+---------------------------------------------+---------+---------+
| | 4,130.8 | 3,931.1 |
+---------------------------------------------+---------+---------+
3. Earnings per share
The calculation of the basic earnings per share is based on the profits
attributable to the shareholders of Netcall plc divided by the weighted average
number of shares in issue during the year. All earnings per share calculations
relate to continuing operations of the Group.
+-------------------+---------------+-------------+----------+
| | Profits | Weighted | Basic |
| | attributable | average | earnings |
| | to | number of | per |
| | shareholders | shares | share |
| | GBP'000 | | amount |
| | | | in pence |
+-------------------+---------------+-------------+----------+
| | | | |
+-------------------+---------------+-------------+----------+
| Year ended 30 | 25.9 | 63,795,168 | 0.04 |
| June 2010 | | | |
+-------------------+---------------+-------------+----------+
| Year ended 30 | 754.7 | 63,924,700 | 1.18 |
| June 2009 | | | |
+-------------------+---------------+-------------+----------+
The calculation of the diluted earnings per share takes into account the
potentially dilutive effect of share options, this is based on a diluted
weighted average of 64,846,786 (2009: 64,410,811) shares.
4. Acquisition
On 6 October 2009 the Group acquired the entire issued share capital of Q-Max
Systems Limited (a company incorporated in England & Wales) and the software IP
rights owned through partnerships by the shareholders of Q-Max Systems Limited
("Q-Max").
Q-Max provides workforce management software predominately to UK contact
centres. The acquired business contributed revenues of GBP1.19m and net profit
of GBP0.47m (after related amortisation charges of GBP0.15m) to the Group for
the period 6 October 2009 to 30 June 2010. If the acquisition had occurred on 1
July 2009, Group revenue would have been GBP1.59m and profit before allocations
would have been GBP0.63m (including amortisation of GBP0.2m). These amounts have
been calculated using the Group's accounting policies and by adjusting the
results of the subsidiary to reflect the additional amortisation that would have
been charged assuming the fair value adjustments to intangible assets had
applied from 1 July 2009, together with the consequential tax effects.
The net assets and liabilities acquired were as follows:
+-------------------------------+----+----+----+---------------+-------------+
| | Book | Fair value | Fair |
| | value | adjustments | value |
| | | at | on |
| | | acquisition | acquisition |
+------------------------------------+---------+---------------+-------------+
| | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+---------+---------------+-------------+
| Property, plant and equipment | 1.6 | (1.6) | - |
+------------------------------------+---------+---------------+-------------+
| Intangible assets | - | 2,723.0 | 2,723.0 |
+------------------------------------+---------+---------------+-------------+
| Trade and other receivables | 124.9 | 29.1 | 154.0 |
+------------------------------------+---------+---------------+-------------+
| Cash and cash equivalents | 224.0 | - | 224.0 |
+------------------------------------+---------+---------------+-------------+
| Trade and other payables | (201.8) | - | (201.8) |
+------------------------------------+---------+---------------+-------------+
| Deferred revenues | (93.7) | (390.9) | (484.6) |
+------------------------------------+---------+---------------+-------------+
| Deferred tax liability | - | (140.0) | (140.0) |
+------------------------------------+---------+---------------+-------------+
| Net assets acquired | 55.0 | 2,219.6 | 2,274.6 |
+------------------------------------+---------+---------------+-------------+
| Goodwill | | | 251.8 |
+------------------------------------+---------+---------------+-------------+
| Consideration paid | | | 2,526.4 |
+------------------------------------+---------+---------------+-------------+
| Satisfied by | | | |
+------------------------------------+---------+---------------+-------------+
| Initial cash consideration | | | 2,223.0 |
+------------------------------------+---------+---------------+-------------+
| Cash repayment of surplus working | | | 3.4 |
| capital | | | |
+------------------------------------+---------+---------------+-------------+
| Issue of 1,596,958 Netcall plc shares at 18.8p each | 300.0 |
+--------------------------------------------------------------+-------------+
| Total purchase consideration | | | 2,526.4 |
+-------------------------------+---------+--------------------+-------------+
| | | | |
+-------------------------------+---------+--------------------+-------------+
| Purchase consideration | | | 2,226.4 |
| settled in cash | | | |
+-------------------------------+---------+--------------------+-------------+
| Cash and cash equivalents acquired in subsidiary | (224.0) |
+--------------------------------------------------------------+-------------+
| Cash outflow on acquisition | 2,002.4 |
+--------------------------------------------------------------+-------------+
| | | | | | |
+-------------------------------+----+----+----+---------------+-------------+
The fair value of the Netcall plc shares issued was based on the published share
price at 6 October 2009.
Fair value adjustments
The fair value adjustments have been made to align Q-Max's revenue and cost
recognition policies with those of the Group.
The Group has separable recognised intangible assets totalling GBP2.72m which
are customer contracts and software, both of which are being amortised over
their estimated economic lives of 10 and 15 years respectively. The customer
contracts have been valued at GBP0.50m and the software has been valued
GBP2.22m.
Goodwill of GBP0.25m represents the excess of the purchase price over the fair
value of the net assets acquired. The goodwill arising on the acquisition is
largely attributable to synergies anticipated to be associated with being part
of the group.
As part of the consideration of Q-Max, the Group agreed to pay additional
consideration against surplus working capital above an agreed threshold (on the
basis of Q-Max's accounting policies) that was retained in the business at
completion. Following a completion accounts review process an amount of GBP3,400
was repaid to the vendors of Q-Max in relation to surplus working capital.
The costs incurred in the acquisition of Q-Max of GBP0.09m have been charged
against the profit and loss for the period.
5. Events after the Balance Sheet Date
On 26July and 27 July 2010 the company raised in total GBP4.25m (gross of
expenses) through a placing of 22,368,420 new ordinary shares of 5 pence each at
19 pence per share. The proceeds of the placing were utilised to part finance
the acquisition of Telephonetics and for general working capital purposes.
On 30 July 2010 the Group completed the acquisition of the entire issued share
capital of Telephonetics Ltd ("Telephonetics") a UK-based provider of speech
automation and data integration solutions, by way of a scheme of arrangement.
The consideration for the acquisition was GBP9.9m comprising GBP5.8m cash and
GBP4.1m shares (35,256,187 (including those issued on 10 August and 10 September
2010) new ordinary shares issued of 5 pence each at 11.5 pence). See note 6 for
further information.
On 10 August 2010, the Company issued 586,095 new ordinary shares of 5 pence
each following the exercise of options pursuant to Telephonetics option schemes.
The options were exercised in accordance with the written proposal made by
Telephonetics to the option holders on 14 June 2010 as part of the acquisition
of Telephonetics by the Company.
On 10 September 2010 the Company issued 425,530 new ordinary shares of 5 pence
each following the release of vendor earn out provisions assumed by
Telephonetics on the acquisition of Datadialogs Limited.
6. Acquisition of Telephonetics
Telephonetics provides solutions which focus on streamlining customer
interaction to enhance service levels, increase efficiency and reduce operating
costs. Its solutions blend speech recognition, voice automation and data
integration and have been deployed over 500 hundred times notably in the health,
local government, corporate and cinema industries.
The net assets and liabilities acquired were as follows:
+------------------------------+--------+-------------+-------------+
| | Book | Fair | Fair |
| | value | value | value |
| | | adjustments | on |
| | | at | acquisition |
| | | acquisition | |
+------------------------------+--------+-------------+-------------+
| | GBP'm | GBP'm | GBP'm |
+------------------------------+--------+-------------+-------------+
| Property, plant and | 0.2 | - | 0.2 |
| equipment | | | |
+------------------------------+--------+-------------+-------------+
| Intangible assets | 12.5 | (8.2) | 4.3 |
+------------------------------+--------+-------------+-------------+
| Inventory | 0.3 | - | 0.3 |
+------------------------------+--------+-------------+-------------+
| Trade and other receivables | 1.9 | - | 1.9 |
+------------------------------+--------+-------------+-------------+
| Cash and cash equivalents | 4.7 | - | 4.7 |
+------------------------------+--------+-------------+-------------+
| Trade and other payables | (5.1) | - | (5.1) |
+------------------------------+--------+-------------+-------------+
| Provisions | (0.3) | - | (0.3) |
+------------------------------+--------+-------------+-------------+
| Deferred tax liability | (0.1) | (0.9) | (1.0) |
+------------------------------+--------+-------------+-------------+
| Net assets acquired | 14.1 | (9.1) | 5.0 |
+------------------------------+--------+-------------+-------------+
| Goodwill | | | 4.9 |
+------------------------------+--------+-------------+-------------+
| Consideration paid | | | 9.9 |
+------------------------------+--------+-------------+-------------+
| Satisfied by | | | |
+------------------------------+--------+-------------+-------------+
| Cash consideration | | | 5.8 |
+------------------------------+--------+-------------+-------------+
| Issue of Netcall plc shares | 4.1 |
+-----------------------------------------------------+-------------+
| Total purchase consideration | | | 9.9 |
+------------------------------+--------+-------------+-------------+
| | | | |
+------------------------------+--------+-------------+-------------+
| Purchase consideration | | | 5.8 |
| settled in cash | | | |
+------------------------------+--------+-------------+-------------+
| Cash and cash equivalents in | | | 4.7 |
| subsidiary | | | |
+------------------------------+--------+-------------+-------------+
| Cash outflow on acquisition | | | 1.1 |
+------------------------------+--------+-------------+-------------+
The fair value of shares issued was based on the published share price at 29
July 2010.
On acquisition of Telephonetics, all assets were fair valued and appropriate
intangible assets recognised following the principals of IFRS 3 (Business
Combinations). A deferred tax liability relating to these intangible assets was
also recognised.
The Group has separable recognised intangible assets totalling GBP4.25m which
are customer relationships, software and brand value. The customer relationships
have been valued at GBP3.33m, the software has been valued at GBP0.87m and the
brand at GBP0.05m.
Goodwill of GBP4.9m represents the excess of the purchase price over the fair
value of the net tangible assets acquired. The goodwill arising on the
acquisition is largely attributable to synergies anticipated to be associated
with being part of the group.
The costs incurred in the acquisition of Telephonetics of GBP0.83m have been
charged against the 2010 income statement as incurred.
Impact of acquisition on the results of the Group
Telephonetics last published set of audited accounts were for the year to 30
November 2009, in those accounts it reported revenue of GBP10.5 million and
profit before tax of GBP0.4 million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Netcall (LSE:NET)
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