This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

Full Year Results

For the Year ended 30 June 2021 
Analyst Briefing & Investor Presentation

Substantial increase in revenues and continued strong new business momentum

PCI-PAL PLC (AIM: PCIP), the global provider of secure payment solutions, is pleased to announce full year results for the year ended 30 June 2021 (the "Period").

Financial Highlights

  • Revenue increased by 67% to £7.36 million (2020: £4.40 million)
  • Gross margin increased to 76% (2020: 69%) reflecting the continuing transition of our service delivery mix to the higher margin, cloud based Amazon Web Services (“AWS”) platform
  • Significant increase in new sales bookings leading to signed recurring Annual Contract Value (“ACV”) increasing by 19% to £3.11 million (2020: £2.62 million)
  • Total contracted recurring ACV (“TACV1”) increased 41% to £9.51 million at 30 June 2021 (2020: £6.75 million)
  • Deferred income increased 79% to £8.09 million (2020: £4.53 million)
  • Loss before Tax in line with expectations at £4.19 million (2020: £4.35 million) following continued investment in our growth plans and a £0.55 million foreign exchange loss in the period (2020: Foreign exchange gain of £0.02 million)
  • Raised £5.18 million net of expenses to fund further expansion into Canada, Australia and mainland Europe in April 2021 to grow the Group’s addressable market by 40%
  • Cash balances at year end of £7.52 million (2020: £4.30 million) and the Group is debt free having repaid its debt facility prior to the period end (2020: drawn down debt of £1.27 million)

Operating and Other Highlights

  • North American momentum continues to build, with revenue up 279% and new ACV sales up 29%.  North America now accounts for 26% of the Group revenue (2020: 10%)
  • Recurring revenue model proven with record full year on year revenue growth, recurring revenues now stand at 88% of all revenue (2020: 84%)
  • Signed 195 new sales contracts in the year (2020: 109)
  • A further 121 new contracts live with our services in the period
  • Time to go live of new contracts signed in the last 18 months from the date of signature to deployment (“TTGL”) was consistent with the prior year at around 5 months average across all sales channels
  • 78% of new sales contracts for the Group generated from channel partners (2020: 78%)
  • Formed the PCI Pal Advisory Committee (“PAC”) which included the committee’s first member, payments and cyber-security specialist, Neira Jones.
  • Completed planned hiring of new Chief Technology Officer (“CTO”) with cloud and payments technology leader, Mufti Monim, joining the business in April 2021.

1 TACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced

Current Trading

  • Strong start to new financial year with new ACV in line with management expectations. 
  • Sales highlights since year end:
    • Two sizeable contracts won through resellers in the US:
      • the first providing our Agent Assist services to a well-known NASDAQ-listed hosting provider covering contact centres in US and UK;
      • the second through a new reseller, at whom we displaced one of our main competitors as their PCI solution of choice, to win our first deal with a major LATAM-focused energy provider leveraging our services through our recently announced improved product offering with Genesys.
      • Continuing to build on our government sector strength in the UK, with a further large council based in Wales.
  • Signed a new reseller partnership with a multi-national German headquartered technology provider and BPO which has included the partnership’s first new customer.
  • Added two new members to the PCI Pal Advisory Committee, both US-based, experienced product and engineering executive, Jayesh Patel who was formerly Chief Product Office at Vonage Inc, and Emilia D’Anzica, a customer success executive and consultant.

Board Change

  • PCI Pal today announces that after 24 years with PCI Pal and its former businesses, Geoff Forsyth, Chief Information Security Officer (CISO) and current executive director, has informed the Board of his intention to step down from the Board at the Company’s upcoming AGM.  He will continue in his role as CISO for the Company, serving on the Company’s management team, as he works towards retirement which is expected to be in the next 24 months.

Commenting on results and prospects, James Barham, Chief Executive said:

“We have taken another sizeable step forward in FY21. Our advanced cloud capabilities have allowed us to continue to grow our customer reach through our expanding partner eco-system, serving customers not only in our primary geographic focus areas, but across the world. 

“With our key sales metric of TACV having grown by a further 41% year-on-year, I have been particularly pleased to see a real cohesion in the business this year, as despite a near doubling in new contracts won, we have maintained a strong deployment performance of customers going live in the year. 

“I am delighted by the continued growth being shown by the business as we deliver against our strategy.  We have therefore continued to make positive, progressive changes internally as we further refine our operations to best support our pace of growth.  As well as the further geographic expansion planned in FY22, we are hugely excited by the additional foundational strength we are putting in place across Customer Success, Engineering, and Product Management. 

“I am looking forward with confidence as we look to deliver another strong year of performance from the Group in FY22 as we further cement our relationships with our current and future partners, and drive customer go-lives of our class-leading cloud solutions with organisations across the world.”

Analyst Briefing: 9.30am on Monday 6 September 2021 

An online briefing for Analysts will be hosted by James Barham, Chief Executive, and William Good, Chief Financial Officer, at 9.30am today, Monday 6 September 2021, to review the results and prospects. Analysts wishing to attend should contact Walbrook PR on [email protected] or 020 7933 8780.

Investor Presentation: 4.00pm on Wednesday 8 September 2021

The Directors will hold an investor presentation to cover the results and prospects at 4.00pm (UK time) on Wednesday 8 September 2021.

The presentation will be hosted through the digital platform Investor Meet Company. Investors can sign up to Investor Meet Company and add to meet PCI-PAL PLC via the following link https://www.investormeetcompany.com/pci-pal-plc/register-investor. For those investors who have already registered and added to meet the Company, they will automatically be invited. 

Questions can be submitted pre-event to [email protected] or in real time during the presentation via the "Ask a Question" function. 

 

Chairman's Statement
For the year Ended 30 June 2021

 

I am very pleased to report on another year of significant progress for the business.  In a year overshadowed by the impacts of the COVID-19 pandemic, the PCI Pal team has nonetheless forged ahead to achieve impressive top line growth. As a result, our leading forward indicator of growth, TACV, grew by 41% to £9.5 million in the year and deferred revenue grew 79% to £8.1 million, helping to grow our forward recognized revenue visibility. Recognised revenue also grew strongly by 67% to £7.4 million and gross margins continued to improve to 75%. These financial metrics are all hallmarks of a strong and growing cloud company and SaaS business model.

Not only did the Group not need to furlough or layoff any staff as a result of the COVID-19 pandemic, we continued to hire in order to support that strong growth. At the same time, the team have continued to build the Group’s infrastructure through investment in process, systems, and importantly, our incredibly talented people. We are grateful for the support of our people in these challenging personal times, as well as other key stakeholders, including our new and existing shareholders in supporting of the equity funding in April 2021, and our channel partners with whom we continue to drive our growth.

People

The COVID-19 pandemic is lasting longer than most of us expected, but our people have proved to be incredibly resilient and have adapted well to the new circumstances, and I personally thank them for that. The Company has put a great deal of effort in to supporting our people; not just by accommodating work-from-home requirements and providing collaborative technologies, but by being understanding, respectful, flexible, and most importantly listening to people’s needs and concerns. From this enhanced culture, communication and teamwork, new opportunities for individuals and the business are emerging.  We have also taken advantage of the opportunity to invest in new or deeper skills, most notably in engineering, customer success, and senior management with the recruitment of a new CTO to lead our technology and product plans for the next phase of our strategic growth plan.

Overall, the PCI Pal team has grown from 58 to 71 employees over the course of the year, and we plan additional expansion in FY22.  As the world tentatively emerges from lockdown and uncertainty is reduced, the market for talent has become more competitive, willingness to move jobs has increased, and the supply of technical Cloud-experienced people has tightened. The Board remains as committed as ever to supporting our people in terms of professional development, flexible hybrid work environments and competitive compensation and benefit packages. I am therefore confident of our ability to not only retain our people, but also attract new talent necessary to support our ambitious growth goals.

Board Change

Geoff Forsyth, CISO and current executive director, has notified the Board of his intention to step down from the Board with effect from the Company’s upcoming AGM.  Geoff will continue his important management role as CISO for the Company, leading our Information Security and Compliance team, until his intended retirement in the next two years.  Geoff is one of the founders of the PCI Pal business and has played a critical role in building the security, technology, and compliance foundations of this fast-growing business.  On behalf of the Board and everyone at PCI Pal, I would like to thank Geoff for his significant contribution, and we look forward to his continued valuable input as he works towards retirement.

Strategic Direction

Several years ago, the Group adopted a disruptive strategy for our sector of being channel-first and delivering our solutions exclusively through the Cloud. FY21 again delivered tangible evidence of the ongoing success of that strategy, and not just in the achievement of impressive top line growth. The Group continues to derive most of its growth and new customer acquisitions from its partner relationships and has expanded its partner ecosystem by adding world leading organisations.  Accelerating rates of Cloud adoption and digital transformation initiatives at end customers around the world matches well with our pure Cloud approach, further differentiating ourselves from our competition in the eyes of partners, customers, and industry analysts alike. In FY21 the Group added 195 new customers contracts, almost double the 109 achieved in the prior year.

Building on this strategic success to date, the Board undertook a detailed refresh of a five-year strategic plan early in the current year.  The Board concluded that further success was achievable through, geographic expansion, customer success and gains in net retention, and the professionalisation of our product management function to assess opportunities for additional features and/or products in the arena of secure payment solutions. The Board is optimistic about what can be achieved in the future.

Fund Raising and Debt Repayment

To support the necessary investment and execution of our refreshed strategic plan, the Company raised an additional £5.18 million (net of expenses) through an equity placing at £0.95 pence per share in April 2021. The placing was well received by existing shareholders and attracted further new institutional investors both in the UK and North America.

The strong trading and cash flow performance in FY21 enable the Board to take the economic decision to fully repay in June 2021 its outstanding debt facility, ahead of schedule. It should also be noted that the Board chose not to benefit from direct government support relating to the COVID-19 pandemic in any of the territories in which it operates.

Full disclosure of the terms of the equity raise, and the early repayment of debt, has been made in the notes to these accounts and within the Chief Financial Officer’s Review 

Corporate Governance

Last year I outlined several key areas of corporate governance and related initiatives aimed at setting the Board on a path of continuous improvement over time. These areas included formal and structured board effectiveness evaluations, a fresh approach to the assessment of the Company’s risk profile, expansion of the work undertaken by the board committees’, and embarking on a five-year refresh of our forward strategic plan to take effect from FY21 onwards. This year the Board has continued to seek improvements in these areas and has taken advantage of remote board meetings to increase the frequency of board meetings while seeking to reduce the length of these meetings. This has allowed the Board to address more matters than in the past, and to improve our ability to challenge and question the executive management as they continue to drive the business forward as we deliver against the undoubted market opportunity, thereby helping our independent judgement. The new Environmental, Social and Governance (“ESG”) report and commitment to improving our ESG footprint over time is another example of improvement steps taken this year.

One consequential element of refreshing our five-year strategic plan is assessing the future governance needs of the Board as the Company becomes larger, more internationally complex, serving a broader range of global partners and customers, and building an even more culturally diverse team of people in different countries. To that end the Board has actively discussed succession planning of non-executive directors who will reach term limits in the near term to ensure that we continue to have the necessary range of expertise, skills, and diversity on the Board to support the achievement of the refreshed five-year strategic plan. 

Earlier this year we announced the formation of the PCI Pal Advisory Committee (the “PAC”).  The formation of the PAC is intended to assist the CEO and senior management with expert outside functional advice most relevant to the execution of its refreshed strategic plan.  It is also intended to enhance the Board’s ability to meet its governance responsibility to manage its risk profile by having access to expert and more diverse, global outside viewpoints. I am therefore very pleased that following the year end, we have expanded the PAC to now include a total of three members with a range of backgrounds and expertise for business communications in the Cloud including payments, product management and customer success.  All of which are key areas of our refreshed strategic plan. The profiles of the PAC members can be found on in the biography section below, with the two newest members Jay Patel and Emilia D’Anzica both being US-based.

Environmental, Social and Governance

This year, the Board has produced its first ESG report, which sets out our commitment to understanding, measuring, and over time improving our ‘ESG footprint’. This report also sets out our initial assessment of the key ESG metrics which we believe are most applicable to the Group, as well as our goals for achieving measurable improvement for each metric over time. Closely linked to ESG, and to the success of our people and our business, is a culture that is supportive of promoting diversity and inclusion. The Company is committed to achieving a balance of diversity across its teams, for example in gender and ethnicity, and is putting in place several initiatives to better understand its data related to these aspects of our team make-up. This data will in turn allow us to better refine our processes to ensure that we are working towards a working environment that promotes diversity and inclusion.  The Board is fully committed to supporting management to be successful in these goals and has itself made early progress in this area through the membership of the newly formed Advisory Committee. The Board fully intends to continue this progress as we plan for the succession of retiring directors in the future.

Although PCI Pal is a small software company relative to the grand scale of global challenges around corporations and ESG, the Board nonetheless takes its ESG responsibilities seriously and has begun its own journey of self-directed improvement. The ESG report can be found as part of our governance reporting below.

Changes in Auditors

During the year, the Audit Committee took the decision to rotate its external auditors from Grant Thornton who had served as the Company’s auditors for many years. This governance best practice step led to the appointment of BDO who has now completed their first year’s audit of the Group.

Stakeholder Communications

As a board, continuous improvement in shareholder communications remains a constant objective. With the equity placings over recent years, the mix of our shareholders has shifted to a greater proportion of institutional investors. Nonetheless we remain focused on clear communications to all investors, both retail and institutional. This year the CEO and CFO have provided further depth in key metric disclosures and have hosted several video briefings using the Investor Meet Company portal, which provides retail shareholders, as well as analysts, the opportunity to listen to, and question, the CEO and CFO. As Chairman, I am available as a direct line of communication to all shareholders in case other questions arise that need to be answered independently, as well as offering meetings with institutional shareholders around the time of the AGM. Also, in recognition of the Company’s wider communication responsibility to all stakeholders, this year the Company has expanded its media plan of publishing articles and content on social media and through the Company website to help provide a deeper understanding of the Group’s products and markets.

Finally, I am pleased to note that for the first time, the Board has provided disclosures under S.172 of the Companies Act 2006. These disclosures are intended to explain how the Directors undertake to promote the success of the Company for the benefit of all its stakeholders as a whole.

Looking Forward

PCI Pal is well placed to benefit from the continuing trends of Cloud adoption, digital transformation in the business communications space, and the evolution of payment technology and social purchasing preferences.  These trends have only accelerated since the onset of the pandemic and are creating a net positive environment for our business model of providing pure Cloud services. Our successes in FY21 have further strengthened our confidence in our business model and the timing of our additional investments to expand more internationally through our global partner channels.

I look forward to sharing further progress reports and news during the coming financial year, as we continue our strategic growth journey.


Simon Wilson
Non-Executive Chairman

 

CHIEF EXECUTIVE’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2021

 

Introduction

PCI Pal has had an excellent year, proving both the strength of our market opportunity, as well as the robustness of our product strategy and SaaS business model in the face of the COVID-19 pandemic.  I am particularly pleased with the continued revenue growth momentum since the half year, ending the period ahead of market expectations with revenue increased a substantial 67% year on year to £7.4 million (2020: £4.4 million). 

At PCI Pal, our vision is to be ‘the preferred solution provider that organisations turn to globally for achieving payment security and PCI compliance in customer engagement environments’.  To meet this vision we set ourselves three key strategic pillars for growth; firstly, to be the leader for true cloud solutions in our space; for these solutions to be available to customers globally; and to leverage a sales model that by majority sells through channel partners.  This strategy has driven a significant increase in customer adoption of our products, with customer numbers substantially increased year on year.  Subsequently, this continued momentum is further driving sustained strong revenue growth in line with our plans.

As a result of our successful execution against sales plans, we have increased our key growth metric and indicator of future revenues of TACV by 41% year on year to £9.5 million (2020: £6.7 million).  It is the sustained accumulation of this metric that is driving our continued revenue growth.

Behind this strong growth in momentum in TACV, is the annual value of contracts signed which increased 19% year on year.  It is particularly pleasing to see the progress of our volume-based sales strategy working which minimises the risk of significant customer concentration. As a result, we achieved a substantial uplift in the quantity of new customer contracts signed in the year which increased 79% to 195 (2020: 109). 

Delivering our growth strategy

The increase in new customer contracts won is further evidence of the opportunity with the small to mid-size volume end of the contact centre market globally, where the vast majority of contact centres are 250 agent seats or less.  In the US alone there are 37,000 contact centres with between 10 and 250 agent seats, representing 94% of all contact centres.  Our strategy to be able to serve the breadth of this market both in size and geography has enabled us to continue to grow new business sales even in a year when many businesses were re-prioritising their own internal projects to defend against the impacts of the pandemic. 

As well as the higher quantities of small to mid-size contact centres, we have continued the trend set in the prior year of winning business with enterprise-size organisations.  Highlights include a competitive contract win with a well-known global sports-fashion retailer headquartered in North America, a service that is now live across more than 1,500 agents; a FTSE-listed Pan-European UK airline, and a Fortune 500 supply chain management firm.  These enterprise wins continue to be the result of both our channel partner strategy as well as our direct account-based marketing efforts driving enterprise lead generation.

It is testament to the strength of the core markets across which we operate, namely the business communications space, payments market, and cybersecurity industries, that demand continues to increase for our cloud-based secure payment services.  This is particularly true considering the increased numbers of homeworkers and the sustained requirement for flexible working, as companies look to leverage cloud services to provide their teams with secure solutions that allow them to continue their business operations no matter where they are working.  Additionally, as the communications mix continues to grow through increasing touch-points with digital customer engagement, our solutions not only secure, but act as an enabler in our partner’s omni-channel customer experience environments.

Equity placing

Having made significant progress in refreshing the Group’s five-year strategic plan through the first three quarters of the financial year, the business took the decision to undertake an equity placing in April 2021, raising gross proceeds of £5.5 million (£5.18 million net of expenses) to allow it to invest in further expansion into the new global territories of Canada, Australia, and mainland Europe.  These are some of the largest contact centre markets in the world and will grow PCI Pal’s addressable market by over 40% as we begin to expand our proactive sales and marketing efforts into these regions.  To succeed in these new regions we will be looking to hire talented people and to work with our existing, and growing, network of global partners, many of whom already have operations in these territories.

The majority of the execution of those plans commence in FY22, but naturally we have not wasted any time in maintaining the pace as we roll out these calculated but ambitious next steps as we head into the new financial year.

PCI Pal Advisory Committee (“PAC”)

Having established the Company’s Advisory Committee in September 2020, we set out our plans to leverage the collective professional and industry experience of advisors whom we intended to add to the committee over the coming years.  During the year we were very pleased to welcome the highly experienced payments expert Neira Jones to the PAC. As anticipated, the PAC has been an excellent resource for myself and the Board as we undertook a refresh of the Company’s five year strategic plan during the year. 

Since the year end, we have added two further members to the PAC, Jay Patel and Emilia D’Anzica, covering key strategic areas for the business including product development and management of global cloud voice and digital environments, and customer success to minimise churn and drive upsell over the long term as we continue to scale this business. The PAC will continue to add value as we build on our rolling strategic plan and product vision in the years to come.

COVID-19

As previously reported, PCI Pal was well positioned to deal with the implications of the onset of the COVID-19 pandemic.  Supporting our view that the contact centre market was likely to grow, Contact Babel has confirmed in its recent market reporting that both the US and UK contact centre markets have expanded by 2% and 4% respectively across 2020, the largest single increase in both regions for more than five years.

Our early investment in cloud technology has been a key component of our capability to deal with the operational changes that occurred during the pandemic. Today, as the market settles we are now at the forefront of flexible cloud solutions for secure working for contact centre workers.  Homeworking, and the knock-on challenges posed to businesses who have employees working remotely, is something that all businesses are incorporating into their business communications requirements.  PCI Pal is working closely with our partners to ensure our payment products are closely aligned with their solution offerings so, as the digital shift gathers even more pace, we are at the forefront of this opportunity.

Finally, the Group is currently undertaking a ‘Return to Work’ assessment for its employees in the UK and US head offices.  We are continuing to monitor the situation and anticipate having more clarity on our plans by the end of H1 FY2022, depending on local government guidance.  We have remained in contact with our people either through company-wide surveys or through 1:1 manager engagement.  As such we have begun to plan for what the Return to Work may look like for PCI Pal but believe it sensible to let the current situation stabilise further before making a final decision.  Before the pandemic more than 60% of the Group’s employees were already home-based and so PCI Pal has faced little disruption with all team members moving to working from home.

Our People

Focus on people is a critical aspect to PCI Pal’s business strategy.  We have maintained a corporate objective throughout the last two years to create a culture that people want to be part of.  I have been with the PCI Pal business from day one, and I am extremely proud to see the business evolve and grow from the small team that started it, to the 71 employees that we had at the year end, with more expected to join over the coming year as we continue to execute against our plans, and achieve our vision.    

Our people are the backbone of the business and to see them achieve their own goals, working together whilst also ‘Enjoying the Journey’, which is one of our key values, gives me real confidence for the future of this growing business.  Many businesses have been hindered operationally by the recent COVID-19 pandemic, but our team was able to take it all in their stride and we were brought closer together and more cohesive as a result.   

Strategy and Market

PCI Pal’s mission is ‘to provide organisations globally with secure cloud payment and data protection solutions for any business communications environment including voice (phone), chat, social, and email, all of which are commonly incorporated into the contact centre customer engagement mix’.

PCI Pal’s vision is to be ‘the preferred solutions provider that organisations turn to globally for securing payments across all business communications through easy to integrate and simple to deploy cloud technology’.

Our addressable market is any size organisation taking payments within business communications environments, anywhere in the world.  We work with our partners and customers to allow them to secure payments whilst adhering to strict information security rules around credit and debit card data, namely PCI Compliance.  In particular our solutions are utilised within call or contact centre environments.

PCI Pal has customers across the globe today as a result of our cloud capabilities.  We have had a particular focus on the UK market where the business was established, and the US where we launched in 2018.  Following our most recent fund raise in April 2021, we are now planning to start to proactively expand the business into three new core territories; Canada, Australia, and mainland Europe.  These three new territories represent some of the largest contact centre markets in the world and as such we expect that over time this will grow our addressable market by at least 40% as we begin to execute on those plans.

With more than 75% of our new business generated from channel partners, and with many of our partners being large, globally-dispersed organisations themselves, we are well-positioned to leverage these routes to market to support our further global expansion.  We will continue to strategically target new partners, both those with a global footprint as well as regional sector specialists. 

Our addressable market is underpinned and strengthened by two major global industry dynamics occurring today; the increase in regulation and governance surrounding data security worldwide; and secondly, the transition in the communications market of services served from on-premise equipment moving to services delivered from the cloud. With the combination of these dynamics, PCI Pal is acting as an enabler for both security but also the payment itself, seamlessly integrated into our customer’s customer engagement tools.  Additionally, as the first in our space to bring a true-cloud offering to market, and the only global player with a sole focus on cloud, PCI Pal is in a strong position to capitalise on the digital transformation occurring across the business communications, security, and payments markets.

Further to this, contact centres are the modern day shop-front of many organisations, and customers today expect not only an exceptional customer experience but also to feel secure at the same time, especially when sharing their most sensitive personal data, such as payment data.  PCI Pal solutions solve both the security and compliance challenge for any business taking payments from these customers, and we do it to benefit the wider customer experience, working seamlessly with organisations’ omni-channel customer engagement tools. 

By using PCI Pal services, companies not only secure the most sensitive of customer data, payment data, but they do so in such a way that will allow them to comply with the ever-changing information security and data governance standards related to how they handle this data.  Additionally, by using PCI Pal services, customers will make significant progress towards broader regional data protection regulation such as GDPR in the European Union and the California Consumer Privacy Act in the US.

Contact centre markets in both the UK and US represent between 2-3% of the working populations of those countries, and the trends are similar in the new territories we are expanding into in FY22.  Our ability to serve any size contact centre is essential when considering the make-up of this large employment pool across our market.  In the US alone 94% of all contact centres (37,000 contact centres) have between 10 and 250 agent seats, employing 2.04 million agents which makes up more than 55% of the entire employed agent population in the country. 

It is therefore a key differentiator for us to be able to serve organisations across our entire market.  Our customers range from small contact centres up to the very largest with more than 5,000 agent seats, but by far the majority are in the small to mid-size with our average annual contract values of between £15,000 and £20,000.  This more numerous end of the market is a substantial risk reducer for churn in the business, given our revenues are spread across a higher number of customers.  We also target the less numerous, larger enterprise-size businesses and contact centres (defined as being contracts with an annually recognised revenue value for the Group in excess of £100,000 p.a.) which currently represent 43% of our revenues. As there are relatively far fewer of these larger contracts, the enterprise deals are less predictable and more challenging to forecast.

PCI Pal Cloud

Having launched our cloud environment in October 2017, and having defined a key strategic objective to be the leader in cloud-based secure payments services in our market globally, we have gathered significant technical momentum.  Our platform continues to evolve as the most mature in the space with the majority of competitive solutions available still leveraging on-premise customer hardware or privately hosted hybrid-cloud environments.

We have focused much of our earlier stage product development efforts on our capability to integrate cloud-to-cloud with major technology vendors with whom we partner.  These include some of the best-known names in both the business communications and payments space including Genesys, Worldpay, Vonage, 8x8, and Talkdesk.  Furthermore, we have pioneered the availability of viable secure payment cloud solutions for some of the largest contact centres in our target markets, supporting more and more enterprise business moving to the Cloud, providing our services to enterprise-level customers with contact centres exceeding 5,000 agents.

Amazon Web Services is our chosen provider of virtualised cloud services where we host our platform today.  Validating our technology strategy, AWS is the most commonly used cloud hosting provider across all our partners and is consistently growing in utilisation by organisations around the world undertaking digital transformation to the Cloud.  Additionally, utilising AWS has enabled us to produce highly flexible services and integration methods which allows us to be agnostic to the communications environment to which we are integrating.

Our true-cloud approach allows us to deliver services across the globe whilst maintaining data sovereignty and regional handling of payment traffic as we are able to leverage the data regions we have created within the AWS global hosting environment.  This is both of appeal to smaller local customers who need their data to be handled in the territory within which they trade; but equally to larger multi-national organisations whose businesses may be geographically dispersed with complex data governance requirements.  Our customers can therefore use a single PCI Pal service, but choose to handle their customers’ data locally wherever that customer is utilising the service.

PCI Pal’s cloud platform has been developed from the outset using cloud native technologies, and today our platform continues to evolve.  We leverage both a micro release strategy enabling us to be more nimble with development cycles and DevSecOps, automatically baking-in security which reinforces our ability to develop secure software at speed.  This strategy, along with our agile product development teams, ensures we continue at pace to test and learn for new products and features. Our investment in our cloud platform places us in a position of strength from which we can forge ahead as we invest further in new product and features to further capitalise on the breadth of the market opportunity globally.

Product Update

Our core products today cover the entire spectrum of business communications; Agent Assist, our live agent secure payment tool; IVR, our fully automated service for auto-attendant environments where no agent is involved; and Digital, our offering to facilitate businesses to handle secure payments through any number of digital channels such as chat, social, SMS, email and more. 

In the year we launched our speech recognition offering for both our Agent Assist and IVR services.  This offering is most popular where a customer may have difficulty entering their card details using their telephone keypad, so instead can speak them.  We have successfully sold our new speech service in the year, with a number of customers now live using these services.

Since taking over as CEO in late 2018, I have driven further investment into our engineering resources and worked towards implementing product management functions within the business.  Afterall, it is the relevance of our products to our partners and customers that is a critical component of our ability to retain and grow our business.  FY21 was always planned to be a year of further positive development for PCI Pal from an engineering and product standpoint. 

I was pleased to announce our new CTO’s arrival to the business after an extensive search where we sought to find the right mix of cloud, payments, and communications experience.  Mufti Monim is a high energy technology and product leader with extensive experience across the cloud payment space, as well as having experience working in the mobile communications industry.  His previous roles include CTO at Deko, a leading, high-growth, retail finance cloud technology provider, and Head of Technology for financial and online at Lebara, the well-known, multi-national telecommunications and international money transfer business. 

With the new CTO’s input and experience, alongside that of our existing management team, plus the advice and experience we are gathering from our advisory committee, we are well placed to further evolve our product offerings over the coming years.  Following the equity fund raise in April 2021, we will continue to accelerate our investment in product development and product management, and I look forward to updating investors throughout the year on that progress.

North America

Having completed our third full financial year in the US since launch in 2018, we have seen sales and revenue momentum continue to build as well as further success in securing new partnerships with additional US-headquartered global businesses. 

Our sales progress is particularly evident in the increased quantities of customer contracts that we have signed as a result of our success in the last two years of acquiring and on-boarding new partners, as well as our direct marketing efforts.  In the year, we increased the number of customer contracts won by 68% to 62 contracts (2020: 37), with 76% of these coming from channel partners. These new contracts allowed us to increase our key growth metric of TACV by 66% year on year to £2.76 million (2020: £1.66 million), an good indicator of future revenues. 

Contributing to the TACV uplift we completed the year with £1.34 million of new ACV contract value, an increase of 26% on the prior year’s achievement which included the Company’s second largest contract in history.  Excluding this one-off deal in FY20, the average ACV contract values are £21,500 in FY21 against £17,400 in FY20, which illustrates the significant increase in underlying velocity and quantity of deals that the US business has produced.

Further to this increase in volume sales, we have continued to be successful in signing additional enterprise-size businesses, including several Fortune 500 companies, and one of the best known sports fashion retailers in North America.  

As a result of growing sales success since our launch in the US, revenues for the region are now beginning to build to more notable levels, increasing to £1.8 million (2020: £0.5m).  Our US-based deployment team have been very successful in the year.   We finished the year with £2.06 million of live annual ACV contracts from North America (2020: £0.59 million).  The highlight deployment was one of the region’s largest deals which went live across more than 1,500 agents in less than 2 months from date of signing.

We have continued to expand our channel partner eco-system in the region in line with our plans, this has also included notable extensions to existing relationships with major players in both the CCaaS and Business Process Outsourcer (“BPO”) sectors respectively.  In Q4 we announced the expansion of our existing relationship with Genesys, one of the largest technology suppliers to the contact centre market worldwide.  PCI Pal products are now available natively within Genesys Cloud products as a premium partner on the Genesys AppFoundry globally.  Adding to our growing strength in the BPO sector, we expanded one of our existing regional channel relationships with one of the market leaders to a global arrangement, which during the year resulted in a number of new contracts across both the US and Europe.  Further to that, we signed another major BPO with global operations as a channel partner during the period, signing our first US deal with that partner in H2.

The US sales effort with new partners continues to benefit the business Group-wide, with many of our global partners having headquarters in the US, but with global operations spread across our key markets.  We have seen a direct corelation between our partner activities in the US through to increased sales pipeline in other regions.  PCI Pal remains tactical in how we both seek out new partners, and how we then enable the full potential of those relationships over time.  This is only possible through the quality of the people we have brought into this business, particularly across sales and marketing, and the increasing data analytics capabilities of our sales and delivery efforts that allow us to better understand how best to invest time and effort.

In the final month of the financial year we hired a new sales leader who will be running our US sales team, reporting to our US-based group Chief Revenue Officer.  This was a newly created role to add a layer of regional sales management focus and to free up our CRO as we begin to expand into new territories.  The US is our most important market and we will continue to invest into the country to maintain our strong growth.

EMEA

The EMEA business had an excellent year and, as the more mature region in the Group, saw another year of substantial revenue growth with a year-on-year increase of 41% to £5.5 million (2020:  £3.9 million).  This growth continues to be driven by the accelerated sales bookings from the back end of the prior year and across FY21, as customers signed reach ‘go-live’, and we begin to release revenue in line with our revenue recognition policies.   

Revenues in EMEA are generated both from services on our first generation, privately-hosted platform and, since 2018, from our margin-rich, true-cloud AWS environment.  We ceased selling new services on the first-generation platform in 2018 and have an active transition programme to move customers from this platform over to our AWS platform over the next 18 months to allow us to de-commission that environment.

EMEA new sales momentum in the year has been strong throughout with our key future indicator of revenue, TACV, increasing 34% to £6.7 million (2020: £5.0 million).  Illustrating the strength of our channel strategy, we sold a further 126 customer contracts in the year, a 64% increase on the prior year, with 79% coming from channel partners.  The ACV value of these contracts increased 12% year on year to £1.7 million against a relatively strong prior year comparator (2020: £1.5 million).

Our partners continue to perform well for us in the region.  Many of the top performing resellers are US-headquartered multi-national organisations with whom the EMEA team are benefitting from our North American partner relationship expansion work.  Additionally, we have long standing partnerships with key regional players such as Civica and Capita, for whom we are the solution of choice for their payments businesses.

Sales highlights in the year include a contract, which is now live, with one of the best-known pan-European airlines in the UK, a FTSE100 energy provider, and more than 25 further contracts with government agencies, the majority of which are local authorities across the UK.  Already working with two of the largest central government agencies across more than 7,000 agent seats, during the year we increase our total of UK government customers to over 60, further strengthening our position in this important and stable sector.

The EMEA business has to date been primarily focused on the UK market.  However, we have also successfully sold and deployed solutions across other countries in Europe.   As a result of our fund raise in April 2021 we are beginning to execute on our plans to establish a formal footprint in mainland Europe and aim to make our first dedicated European hires later in the financial year to June 2022.  We see an extensive opportunity for the business in mainland Europe which, similar to North America, is a relatively untapped market.

Channel Partners

Our channel sales model has been one of our three pillars of strategic focus since we set out the current plan over four years ago. Our partners include some of the best-known names in the high-growth business communications markets (CCaaS and UCaaS) such as Genesys, 8x8, Talkdesk, and Vonage; as well as partners from a variety of markets including payment service providers, BPOs, and systems integrators.  In the year, 78% of all new contracts were generated from partners (2020: 78%), which contributed 72% in ACV value for the year (2020: 42%).   

We categorise our partners into four different groups:

  • Integrated Partners - Such as CCaaS, UCaaS or carrier partners with tight telephony, and sometimes desktop, integrations. Repeatable integrations facilitate shorter customer implementation times.
  • Solution Providers - Typically Value-Added Resellers (“VARs”) and Systems Integrators of the major traditional telephony platforms such as Genesys, Cisco, and Avaya. Solution Providers also includes Payment Service Providers such as Worldpay B2B, Capita Pay 360, and Civica.  We also include our BPO partners in this category of partners.
  • Referral Partners - Partners who introduce customers to us, to whom we then sell direct. These include Master Agents, consultants, as well as other organisations who may prefer to first introduce, prior to becoming a fully enabled reseller.
  • Technology Partners – typically these are major technology vendors, such as Oracle, with whom we have sought technology accreditations that allow us to sell to both their own partner communities and also major enterprise customers. 

The business has balanced its investment and time-focus across two initiatives with our partners in the year. Firstly, focused effort to capitalise on the true depth of relationships with partners, many of whom are multi-national large organisations; and secondly, to strategically target new partners with whom we seek to work with and whose customers include organisations that takes payments across business communications environments.

The year has seen good progress against both of those initiatives.  We have signed a number of new target partners in the period, including a major vendor in the government IT services sector in the US, a European headquartered global leader in the enterprise technology in the travel space, and numerous regional Solution Provider vendors.  Additionally, we have been successful in expanding and further deepening our relationships with a number of existing global partners.  We continue to both progress and build our pipeline of new partner accounts as we enter the new financial year.

We work in a highly collaborative way with our partners with our marketing efforts closely aligned to our sales goals.  A channel marketing highlight of the year was the establishment and launch of our first virtual conference “Payments:  The Future of Security and CX”.  The event was the first of its kind in our space, where we had the majority of our global partners not only in attendance but many taking speaking slots to discuss the relationship between security and CX, and the challenges that companies face in achieving both to a high standard whilst still commercialising their activities.  In attendance at the event were Worldpay, Verizon, PayPal, Calabrio, Talkdesk, 8x8, Capita, Civica, NICE inContact, and Oracle, as well as a keynote from our Advisory Committee representative, payments expert, Neira Jones.  We look forward to the FY 2022 event.

Operations

PCI Pal is growing strongly with more and more customers choosing our solutions to secure their payments and data.  Operationally we have already made many changes to grow with this demand.  Notably, this year we took the decision to further evolve how we engage with our partners and customers to give us the framework to continue to maintain low churn rates and drive positive net retention rates.  Therefore we have created Customer Success as a department within the business, incorporating the three key functions of Professional Services, Service Excellent (or Service Desk), and Relationship Management: 

Professional Services

The Professional Services team is responsible for the deployment of our solutions once signed.   It was another excellent year of progress and the team has worked fantastically in spite of the restrictions placed on our partners and customers due to the pandemic.  In the last two years, we have invested extensive time in understanding, controlling, and improving our key delivery metric of time-to-go-live (“TTGL”).  In the year we signed nearly twice the number of new customers as the prior year, yet due to our substantial operational improvements since we introduced the TTGL metric, we were able to maintain it at the same highly improved level as last year at 5 months on average.  These new customers accounted for £3.6 million in annual recurring revenue showing the value we have built in our professional services capabilities.

At PCI Pal, we are hugely passionate about hiring and we see every new vacancy as an opportunity to add value to this business.  We have expanded both UK and US professional services teams in line with our plans and we have been successful in on-boarding these people to their new roles and ensuring they are up to our required level of service excellence to engage with our customers.  In addition to our strong performance against TTGL, our Net Promoter Scores for our project engagement activities remain high at 58% above global benchmarks illustrating the customer satisfaction following their go live with of our services.

Service Excellence

Since the launch of the AWS platform in late 2017 the Group has expanded its customer base significantly.  I am proud of what we have achieved to date and how our professional services team delivers our solutions.  However, as a business we need to drive more focus into supporting these deployed customers and their technical requirements.   Previously, our support team had been part of the professional services department, however we have recently brought support into its own centre of excellence, headed by a VP.  That VP’s task is to structure our support function for the future allowing us to provide worldwide support.  We will be separately measuring their performance via customer satisfaction (CSAT) surveys, as well as expanded NPS scoring to ensure that they meet our high expectations of service as we increase our focus on churn and retention metrics.

Relationship Management

The Professional Services and Service Excellence teams are the foundations to establishing partner and customer relationships in the right way, leading to achieving the long-term adoption of our solutions and customer loyalty.  The third leg of the changes being introduced is the creation of a dedicated account management function with the planned hiring of regional Success Managers.  These Success Managers will work closely with our partners and customers to ensure they are successful in using our products and services.   

Over time, our increased focus and investment in the Customer Success function will help us protect our low churn rates and drive positive net retention.  Already PCI Pal achieves positive net customer retention, with a net retention rate in the year of 111.1%.  We are using this opportunity to disclose our retention metric for this last financial year for the first time as well as installing it as a key metric for the business to focus on going into FY22. 

Completing the changes and additions, since the year end, we announced that we had added two new members to the PCI Pal Advisory Committee.  Emilia D’Anzica has more than twenty years’ experience in Customer Success, which today includes being founder of her own West Coast US-based consultancy, and in the past has included senior roles at a number of high-growth SaaS companies in the United States, including WalkMe the Forbes Cloud 100 unicorn.  So, the addition of Emilia to our resources on the PAC is the final piece in the business’ current plan to create the starting foundations to on-going excellence in customer success.

Infosec

Paramount, and an intrinsic part of everything we do, is the security of our services and cloud platform.  We achieved certification for the fourth year running against the current version of the Payment Card Industry Data Security Standards (PCI DSS) for our AWS cloud platform since its full launch; and for the nineth year running for our first-generation platform.  This certification testifies that PCI Pal is the highest level of security required under PCI DSS and, as a Service Provider, can therefore handle payment data for any size organisation across the globe. 

In addition to PCI DSS, we continue to maintain a variety of globally-recognised standards, including ISO27001 (Information Security Management Systems), ISO22301 (Business Continuity), ISO9001 (Quality Management Systems), and ISO14001 (Environmental Management).  In totality our accreditations not only bolster our own processes but ensure that our partners and customers have points of reference to recognisable standards by which the Company operates when they are procuring our services.

Outlook

After a strong year I believe that the business is set to take another sizeable step forward in the next financial year.  Whilst we do continue to be mindful of the pandemic, we believe that the momentum we have built, together with our ability to deliver new customer deployments, and our near-term sales pipelines means we are well-positioned to have another year of substantial progress.

Since the year end, we have already concluded a number of notable new sales, including: a competitive enterprise win to provide our Agent Assist services to a NASDAQ-listed hosting provider covering customer’s contact centres in both the UK and US; and a competitor displacement at a new partner, which has resulted in the new partnership’s first customer contract.  This new partner is a Genesys VAR in the US. and the customer is using our recently announced improved combined product offering with the Genesys Cloud.

Operationally, following the fund raise, we have started to implement the new geographic expansion and other strategic plans set out to investors at the time of the raise.  Our people remain key to helping us deliver on these enhanced plans and, so far in the new financial year, we have already found and hired several key, talented people to help us achieve this.  I am therefore confident in the long-term future of the business as we continue driving sustained revenue growth capitalising on the foundations we have built.  I look forward to updating investors further on progress throughout FY22.

 

James Barham
Chief Executive Officer

 

CHIEF FINANCIAL OFFICER’S REVIEW
FOR THE YEAR ENDED 30 JUNE 2021

 

Key financial performance indicators

The Directors use several Key Financial Performance Indicators (KPIs) to monitor the progress and performance of the Group, its subsidiaries and targets.  All the core KPIs are showing top quartile performance against expectations.

The principal financial KPIs are as follows:

 2021Change %2020Change %2019
Revenue£7.36m+67%£4.40m+56%£2.82m
Gross Margin76%+9%69%+15%60%
Annual Recurring Revenue1£6.48m+75%£3.70m+56%£2.37m
Annual recurring revenue as % of Revenue88% 84% 84%
Revenue generated from Non-UK deployments£2.06m+280%£0.76m+400%£0.31m
Percentage of Revenue from non-UK deployments28% 17% 11%
      
Adjusted EBITDA2(£2.56m)+28%(£3.57m)+20%(£4.44m)
      
Cash facilities available3£7.52m £5.55m £1.49m
Deferred Income£8.09m £4.53m £2.45m

1 Annual Recurring Revenue is the revenue generated from the recurring elements of the contracts held by the Group and recognised in the Statement of Comprehensive Income
2 Adjusted EBITDA is the loss on Operating Activities before depreciation and amortisation, exchange movements charged to the profit and loss and expenses relating to share option charges
3 Cash balance plus undrawn debt facilities

 

The principal operational KPIs are as follows:

 2021 Change % 2020 Change % 2019
Contracted TACV1 deployed and live£7.69m+90%£4.04m Not Calculated
Contracted TACV in deployment£1.12m-49%£2.19m Not Calculated
Contracted TACV – projects on hold£0.70m +34%£0.52 Not Calculated
Total Contracted TACV£9.51m+41%£6.75m+66%£4.06m
ACV of contracts cancelled before deployment£0.2m Not Calculated Not Calculated
Signed ACV in financial period£3.11m+19%£2.62m+37%£1.91m
AWS Platform Churn26.7% Not Calculated Not Calculated
AWS Platform Net Retention Rate3111.1% Not Calculated Not Calculated
Headcount at end of year (excluding non-executive directors)71 58 50
Ratio Personnel cost to administrative expenses 71% 77% 70%

 

1TACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced
2 AWS platform churn is calculated using the ACV of lost deployed contracts in the period divided by the opening total value of deployed contracts at the start of the period
3 AWS platform net retention rate is calculated using the opening total value of deployed contracts at the start of the period less the ACV of lost deployed contracts in the period plus the ACV of upsold contracts signed in the period all divided by the opening total value of deployed contracts at the start of the period

Revenue and gross margin

Overall Group revenue grew by 67% to £7.36 million (2020: £4.40 million) and gross margin improved to 75% (2020: 69%) as more revenue continued to be generated from the AWS platform.  The first-generation platform, which we have not proactively sold since 2019, now accounts for 24% of revenues (2020: 48%).

The Group launched its first international operation in February 2018 in North America, and I am pleased to say that revenues are growing strongly in this region.  Since then, we have also generated revenue in Australia, which is progressing well in preparation for our planned increased investment in that territory later in FY 2022.  Revenues from our non-UK customers now make up 28% (2020: 11%) of the overall Group revenues.  Over the next few years, the revenues generated from our international operations are expected to continue to grow strongly as we strengthen our position in the United States and invest in expanding our services more into Canada, Australia and into mainland Europe.   

The Group’s revenue reflects its SaaS business model. It delivers its services primarily through channel partners into contact centres who are predominantly charged on a recurring licence basis. The terms of the sales contracts generally allow for automatic renewal of the licences for a further 12-month period at the end of their initial term. 88% (2020: 84%) of revenues come from annually recurring licences and transactions giving the Group high future revenue visibility.

ACV growth

Annual Contract Value (“ACV”) growth is a key leading growth metric of the Group.   Contracts signed in the financial year begin to filter through on a monthly basis into recognised revenue currently after an average of 26 weeks.  ACV grew by 19% in the year to £3.11 million (2020: £2.62 million) positively reflecting the successful evolution the sales and marketing operations had to undertake to reflect the changing working environments driven by the COVID 19 pandemic.

TACV

TACV at the end of the financial year increased 41% to £9.51 million (2020: £6.75 million). This metric is a key indicator of our accumulating ability to reach future cash flow and then profit break-even as customers go live with our services.  Growing levels of TACV produces increasing levels of future revenue visibility, an attractive aspect of the Group’s business model.

This £9.51 million of TACV is analysed as follows:

20212020 
£7.69 million£4.04 millionLive and delivering monthly revenue
£1.12 million£2.19 millionMid-deployment and therefore expected to deliver revenues in the next few months
£0.70 million£0.52 millionClassed as on hold

 

Contracts are typically on hold as a result of a lack of resource with the customer and/or channel partner, or where our solution is part of a larger project being delivered by our partner or the customer, which may mean there is a delay in reaching the PCI Pal aspect of the project.  Such on-hold contracts therefore take longer to start delivering recurring recognised revenues. 

As with any internationally expanding business, exchange rates can disproportionally affect the reporting of Group numbers as assets and sales are translated into pounds sterling for reporting purposes. During the financial year we saw the US dollar exchange rate increase from $1.25 to $1.40 which had the effect of reducing the sterling value of the US denominated contracts for TACV purposes by approximately £0.26m from the original internal expectations set using the $1.25 original exchange rate. 

Churn and Net Retention

On the launch of the AWS platform in October 2017, the Group initially focused its resources on signing new contracts with new logo customers.  However, as the number of contracts grow and are deployed, we are seeing requests for additional licences, as our customers grow or introduce us to other parts of their own groups, or purchase new products from us, such as PCI Pal Digital or Speech.  These upsell contracts are now an important part of the Group’s ACV sales and in FY21 represented £0.54 million of the £3.11 million total.

For the AWS platform, upsells in the financial year to customers that have gone live were far greater than contract losses leading to a positive net retention of 111.1%.

The pandemic naturally put pressure on some of our customers, for example those in the travel and hospitality sector.  During the year we agreed to terminate £0.20 million of contracts prior to them going live due to changes in circumstances from the original expectations. Overall churn on the AWS platform in the year from contracts that had gone live was 6.7%.  

Adjusted operating loss1

Adjusted operating loss for the Group changed as follows for the year:

 EMEA North America Central Total
£000s£000s£000s£000s
2021
Loss from Operating Activities(866)(1,977)(1,118)(3,961)
Exchange rate movements(12)562-550
Expenses relating to Share Options--115115
Adjusted operating loss(878)(1,415)(1,003)(3,296)
2020
Loss from Operating Activities(1,330)(2,081)(800)(4,211)
Exchange rate movements18(35)2(15)
Expenses relating to Share Options--108108
Adjusted operating loss(1,312)(2,116)(690)(4,118)
Change in year434701(313)822

 

Adjusted EBITDA

 EMEANorth AmericaCentralTotal
 £000s £000s £000s £000s
2021     
Adjusted operating loss (from above) (878) (1,415) (1,003) (3,296)
Depreciation and amortization 692 48 0 740
Adjusted EBITDA (186) (1,367) (1,003) (2,556)
     
2020     
Adjusted operating loss (from above) (1,312) (2,116) (690) (4,118)
Depreciation and amortization 528 16 0 544
Adjusted EBITDA (784) (2,100) (690) (3,574)
Change in year598733(313)1,018

 

EMEA

The EMEA region’s Adjusted Operating Loss decreased by £0.43 million in the year to £0.88 million (2020: £1.31 million).   The region continued to deliver strong revenue which grew by 40% to £5.46 million (2020: £3.89 million) resulting in an improvement of £1.22 million in Gross Profit at a margin of 70% (2020: 67%).

Administrative costs, before exchange movements, grew by £0.79 million to £4.69 million primarily reflecting a further investment in personnel, especially in the Engineering and Professional Services departments.  

Depreciation and amortisation costs were £0.69 million (2020: £0.53 million) meaning that the EMEA operation recoded an adjusted EBITDA loss of £0.19 million (2020: £0.78 million). 

North America

The North America region’s Adjusted Operating Loss (which includes the Australia trading results) decreased by £0.70 million in the year to £1.42 million (2020: £2.12 million).   The region continued to deliver strong revenues which grew by £1.40 million to £1.91 million resulting in an improvement of £1.29 million in Gross Profit at a margin of 92% (2020: 90%).

Administrative costs before exchange movements grew by £0.59 million to £3.16 million primarily reflecting a further investment in personnel especially in marketing and professional services. 

Depreciation and amortisation costs were £0.04 million (2020: £0.02 million) meaning that the North American operation recoded an adjusted EBITDA loss of £1.37 million (2020: £2.10 million). 

Central

Costs for the Central operation relate to the PLC activities of being a listed company only, including the majority of the employment costs of James Barham (CEO) and myself, as well as the three non-executive directors.

Further segmental information is shown in Note 9.                            

Administrative expenses

Total statutory administrative expenses were £9.52 million (2020: £7.25 million), an increase of 31%.  Of the £2.27 million increase, £0.56 million related to the movement in exchange rates and £0.01 million to the movement in share option charges.   The underlying increase was therefore £1.7 million, of which £0.76 million was from the overall increase in personnel costs as the Group moved from 58 employees to 71 employees at the end of the financial year. The cost to run the AWS platform (including the development and staging systems) in the year was £0.9 million, an increase of £0.4 million over the prior year.  Depreciation and amortisation increased by £0.2m to £0.74 million.   

Personnel costs charged to the Comprehensive Income Statement (including commission, bonuses and travel and subsistence expenses) were £6.30 million (2020: £5.54 million), and £0.79 million (2020: £1.00 million) of the personnel costs were capitalised as Development costs. These personnel costs make up 71% (2020: 77%) of the administrative costs of the business.  Travel expenditure fell to £0.03 million (2020: £0.26 million) due to the restrictions enforced during the pandemic.

Administrative expenses in FY22

Following the successful equity placing in April 2021, the Group raised a net £5.18 million to fund its expansion into Canada, Australia and mainland Europe as well as strengthen the product engineering teams and launch the customer success initiatives.   As a result, it is planned that headcount will increase in the coming year and so administrative expenses will also increase proportionately.   This investment is expected to lay the foundations for the Group’s future growth in FY23 and beyond.

 

Changes in accounting policies

During FY21 our accounting policy relating to the treatment of initial set up fees relating to contracts signed was amended.  We deemed this change immaterial to the financial results.   There are no changes in our accounting policies anticipated for FY22.

Capital expenditure

As required by IAS 38, the Group capitalised a further £0.79 million (2020: £1.00 million) in development expenditure as we continue to invest in the AWS cloud platform and introduce new features and products. The Group also capitalised £0.13 million (2020: £nil) of external contractor work relating to the Group’s new website and management reporting systems.

Other capital expenditure relating to computer equipment was £0.04 million (2020: £0.03 million).  Most of this expenditure related to new laptops for the new staff who joined in the year.

Set-up and Professional Services Fees

During the financial year, the Group generated £1.63 million (2020: £1.29 million) of set-up and professional services fees.   These fees are initially held in the balance sheet as deferred income and then released to revenue over the economic length of the contract as governed by the IFRS 15 accounting standard.

Deferred income

Deferred income increased 79% to £8.09 million (2020: £4.53 million), mostly reflecting the significant growth in new business sales and the consequent increase in licence fees invoiced in advance, as well as the continued build-up of set up and professional services fees which are invoiced on signature of a contract then released over the length of the contract, as required by IFRS15.

Trade receivables

Trade receivables grew to £2.14 million (2020: £1.26 million) as the business expanded its contract base. The level of receivables reflects both debtors generated from new business sales as well as existing contract renewals outstanding at the end of the period.  As at the 30 June 2021, £0.61 million of the outstanding debtors related to newly signed contracts.  

Our debtor collection rates remain high ending the year with 91% (2020: 89%) of debtors less than 60 days old.  There were no debtors outstanding more than 120 days at the year end.

Taxation

During the year the UK entity received £0.15 million (2020: £0.22 million) as an R & D tax credit from HMRC relating to the financial year ended 30 June 2019. An application is being made relating to the financial year ended 30 June 2020, the amount of which is currently unknown.  

Cashflow and liquidity

Cash as at 30 June 2021 was £7.52 million (2020: £4.30 million).

In April 2021 the Group conducted an equity placing of 5.789 million shares at 95 pence per share to raise £5.50 million (£5.18 million net of expenses).  During the year, the Group also received £0.10 million from the exercise of share options.

In FY21 the Group generated £0.25 million (2020: used £1.76 million) of cash from its operating activities in spite of recording a statutory pre-tax loss of £4.07 million (2020: £4.13 million).  The strong cash generation is primarily driven by our SaaS business model that typically invoices in advance for the solutions sold.

The Group’s strong cash generation allowed it to repay in full its outstanding loan that was taken out in September 2019, without penalty.

 

Going Concern considerations

The Board of Directors continue to monitor the Groups trading performance carefully.   It also reviews the potential impact of the COVID-19 pandemic, however, the challenges the business faced from the pandemic in FY21 have diminished as the year progressed and greater understanding of the risks were developed.

Since the start of the outbreak, the pandemic has not had a significant impact on the Group’s financial performance.   The business was able to transition to home working with relative ease.  Before the pandemic, some 60% of our employees already worked from home and it was therefore relatively easy to migrate the other 40% to home working as we already provide employees with laptops and cloud access to all core systems and documents. More importantly, our solutions are purely delivered through the Cloud and deployed remotely. Not having to visit our customers premises to install or maintain our solutions has been a significant advantage to both ourselves, our partners and customers in the pandemic.

During the year the Group continued to win new contracts recording new ACV sales of £3.11 million, while also deploying new customers with annual recurring revenue value of £3.65m, all achieved with our teams working fully from home.  At the end of the financial year we had £7.69 million of deployed live contracts which help underpin our expectations for growth in FY22.

The Group has clearly had to adapt how it works as a business, with greater usage of video conferencing, which has reduced the travel expenditure year on year by 80%.  We adjusted our marketing strategy increasing our digital marketing efforts and virtual collaboration with channel partners, which has contributed substantially to our continued strong growth.

As a result of the actions taken, and the robust trading performance in FY21, the Company has not had to furlough any of its employees, and in fact it has continued to hire, growing resources to help cope with the additional demand for our solutions.  The Group has not taken out any government-backed loans, but it did take advantage of some of the tax payment deferrals that are available, such as VAT deferment in the UK.  All these deferments had been fully caught up prior to the financial year end.

With the Group year-end being 30 June, the Group normally prepares its next financial year budgets in the April to June period.   Historically, this has been undertaken face-to-face with all managers meeting in one location.  In FY21, due to the pandemic, the budget sessions were moved to video conference, where the management team presented and discussed their departmental plans remotely from across the UK and US, where they are located.  The Budget process for FY22 was undertaken in a similar remote manner.

Following the equity placing, the Group finished the year with a cash balance of £7.52 million and no debt. The new funds raised are to be used to further expand the Group internationally and to underpin its product management and customer success capabilities.  Therefore, for this year’s budget, the focus has been to build on the FY21 robust performance and to build in the plans for international expansion.  The budget has, therefore, made certain assumptions based on the performance in FY21 as well as a controlled expansion of headcount, which will significantly increase in FY22. 

The Board considered the budget presentation in June and the controls in place that are designed to allow the Group to control its overhead expenditure while still maintaining its momentum and delivering market forecasts.  Particular attention was paid to the potential sensitivity impacts of any adverse movement in sales and customer deployments might have on the Group’s net cash position and the level of headroom achieved.

The Board also considered actions that could be taken to help mitigate the resulting loss in sales.  At all points the Directors were satisfied in the robustness of the Group’s financial position from the presented plans which, they believe, take a balanced view of the future growth prospects, together with the contingencies that can be taken if the budget assumptions prove to be materially inaccurate.  

The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Directors continue to adopt the going concern basis in preparing the accounts.

Dividend

The Board is not recommending a dividend for the financial year (2020: £nil).

 

William Good
Chief Financial Officer 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2021

 Note 2021
£000s
2020
£000s
Revenue  7,362 4,396
Cost of sales  (1,805) (1,353)
Gross profit  5,557 3,043
 
Administrative expenses
  
(9,518)
 
(7,254)
Loss from Operating Activities  (3,961) (4,211)
    
Adjusted Operating Loss  (3,846) (4,103)
Expenses relating to Share Options  (115) (108)
Loss from Operating Activities  (3,961) (4,211)
Finance income 6 - 1
Finance expenditure 7 (230) (140)
 
Loss before taxation
 
5
 
(4,191)
 
(4,350)
Taxation 11 154 221
Loss for the year  (4,037) (4,129)
Other comprehensive expense:
Items that will be reclassified subsequently to profit or loss
   
Foreign exchange translation differences  653 (49)
Total other comprehensive income/(expense) 653 (49)
Total comprehensive loss attributable to equity holders for the period  
(3,384)
 
(4,178)
    
Basic and diluted earnings per share 10 (6.64) p(8.84) p

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2021

 Note 2021
£000s
2020
£000s
ASSETS    
Non-current assets    
Plant and equipment 13 74 103
Intangible assets 12 2,366 2,139
Trade and other receivables 14 801 368
Deferred taxation 17 - -
Non-current assets  3,241 2,610
Current assets    
Trade and other receivables 14 2,928 2,343
Cash and cash equivalents  7,518 4,301
Current assets  10,446 6,644
Total assets  13,687 9,254
 
LIABILITIES
   
Current liabilities    
Trade and other payables 15 (7,817) (5,194)
Current portion of long-term borrowings 15 - (545)
Current liabilities  (7,817) (5,739)
Non-current liabilities    
Other payables 16 (1,941) (875)
Long term borrowings 16 - (728)
Non-current liabilities  (1,941) (1,603)
Total liabilities  (9,758) (7,342)
Net assets  3,929 1,912

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)
AS AT 30 JUNE 2021

 Note 2021
£000s
2020
£000s
EQUITY    
 
Share capital 19 655 594
Share premium  14,243 9,018
Other reserves  404 289
Currency reserves  466 (187)
Profit and loss account  (11,839) (7,802)
Total equity  3,929 1,912

The Board of Directors approved and authorised the issue of the financial statements on 3 September 2021.

J Barham                 Director

T W Good                 Director

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2021

  
Share capital
 
Share premium
 
Other reserves
 
Profit and loss account
 
Currency Reserves
 
Total Equity
 £000s £000s £000s £000s £000s £000s
Balance as at 1 July 2019 427 4,618 181 (3,673) (138) 1,415
Share Option amortisation charge  
-
 
-
 
108
 
-
 
-
 
108
New shares issued net of costs  
167
 
4,400
 
-
 
-
 
-
 
4,567
Transactions with owners  
167
 
4,400
 
108
 
-
 
-
 
        4,675
Foreign exchange translation differences  
-
 
-
 
-
 
-
 
(49)
 
(49)
Loss for the year  
-
 
-
 
-
 
(4,129)
 
-
 
(4,129)
Total comprehensive loss  
-
 
-
 
-
 
(4,129)
 
(49)
 
(4,178)
Balance at 30 June 2020 594 9,018 289 (7,802) (187) 1,912
Share Option amortisation charge  
-
 
-
 
115
 
-
 
-
 
115
New shares issued net of costs  
61
 
5,225
 
-
 
-
 
-
 
5,286
Transactions with owners  
61
 
5,225
 
115
 
-
 
-
 
        5,401
Foreign exchange translation differences  
-
 
-
 
-
 
-
 
653
 
653
Loss for the year  
-
 
-
 
-
 
(4,037)
 
-
 
(4,037)
Total comprehensive loss  
-
 
-
 
-
 
(4,037)
 
653
 
(3,384)
Balance at 30 June 2021 655 14,243 404 (11,839) 466 3,929

 

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2021

 2021
£000s
2020
£000s
Cash flows from operating activities   
Loss after taxation (4,037) (4,129)
Adjustments for:   
Depreciation of equipment and fixtures 69 82
Amortisation of intangible assets 76 29
Amortisation of capitalised development 595 433
Interest income - (1)
Interest expense 206 126
Exchange differences 676 (49)
Income taxes (154) (221)
Share based payments 115 108
Increase in trade and other receivables (1,017) (713)
Increase in trade and other payables 3,721 2,575
Cash generated/(used) in operating activities 250 (1,760)
Dividend paid - -
Income taxes received 154 221
Interest paid (206) (126)
Net cash generated/(used) in operating activities 198 (1,665)
Cash flows from investing activities   
Purchase of equipment and fixtures (40) (33)
Purchase of intangible assets - (296)
Development expenditure capitalised (920) (1,004)
Interest received - 1
Net cash used in from investing activities  
(960)
 
(1,332)
Cash flows from financing activities   
Issue of shares 5,608 5,000
Expenses related to issue of shares (323) (432)
Drawdown on loan facility 1,250 1,500
Repayment of loan facility (2,523) (227)
Principal element of lease payments (33) (35)
 
Net cash generated from financing activities
 
3,979
 
5,806
Net increase in cash 3,217 2,809
Cash and cash equivalents at beginning of year 4,301 1,492
 
Net increase in cash
 
3,217
 
2,809
Cash and cash equivalents at end of year 7,518 4,301