Half Year Accounts – December 2009

INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2009

Highlights

• A return to profitability with a profit before taxation of £85,490 despite a challenging market
• Turnover increased by £343,188 (18%) compared with the corresponding prior period
• Closing cash of £368,369
• Maintained sales at CallScripter
• Record December billable minutes at Ansaback
• IP3 Telecom increases clients using platform

Further enquiries:

William Catchpole            Managing Director

Stuart Gordon                  Financial Director

Telephone                         01473 321800

Chairman's statement

Financial Summary

Even though some of the more cautious commentators suggest that the recession is over, the country is still heavily in debt and the overall fear remains that this is a fragile recovery which could be undermined by a new banking or monetary crisis. In addition, the prospect of an imminent change of government, leading to what is anticipated will be a period of extreme austerity, makes business ever more difficult to predict. Our increase in turnover and profitability are therefore both welcome and satisfying and, as we advance into the new decade, extreme care will be needed in all management disciplines across our divisions to ensure this is built on in the correct way.

Overall the Group has continued its forward momentum and generated a profit before taxation for the six months to December 2009 of £85,490 (December 2008: £64,936 loss). This was achieved on an increased turnover of £2,279,027 (December 2008: £1,935,839).

We remain increasingly vigilant for client insolvency and bad debts. The analysts suggest that when the recovery does eventually arrive then this is the time of increased credit risks, but our main strength is that the diversity of our customer portfolio provides a solid base in this recessionary phase. Our portfolio is further safeguarded by our largest single client, a call centre partner, who similarly has a diversity of clients and we therefore perceive their risk to be comparable to ours. We continue to use a national credit checking agency to validate client credentials, which remains at the forefront of our approach to credit management and this, along with bank direct debit collections, provides early warning of any potential credit problems.   

The Group cash position has improved in the twelve months and we have no major capital expenditure planned in the coming year. Further the Group does not have any loans or finance agreements outstanding.

The Company invested £40 for a 40% shareholding in Commercial Finance Brokers (UK) Limited, an organisation set up to provide commercial finance broking services to networks of independent financial advisors. The Group will derive income for call centre and directorial services as well as any dividends that are declared.

Since our demerger from KDM International in 1999, the company has utilised Equiniti Limited as its shareholder registrar (formerly Lloyds-TSB Registrars). Due to significant proposed charges by Equiniti, the Group approached Capita Registrars who provided a very competitive quote. As such the Board decided to transfer the registrar's function to Capita with the consequent cost savings. This is expected to be active around June 2010. No shareholder action is required and any CountyWeb.com PLC or County Contact Centres PLC share certificates remain valid. This has no effect on our Stock Exchange listing.

Business Summary

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

The Group trades under three main trading styles namely CallScripter, Ansaback and IP3 Telecom.

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

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

IP3 Telecom is the telephony services arm of the business providing a range of network level interactive call services.  With options for self-sufficiency or fully managed services, the platform gives the user the ability to run a professional call handling operation without the necessity for expensive hardware, installation, and on-going maintenance costs.  Clients can route their required services through our web portal, allowing them to monitor their call traffic in real time or have reports sent periodically by email, fax or text.

Review of Operations

CallScripter

After a successful 2007/8, where software sales increased by 41%, shareholders were advised of our intention to push ahead with a strategy to expand the CallScripter division and we set about recruiting the necessary sales and marketing personnel to achieve this accelerated growth. Sadly the drive was short lived and by November 2008 that plan had halted as the credit crunch bit with no one knowing exactly how long it would last or how deep it was going to be. Measures were immediately taken to reduce costs and it was only in September 2009 that we felt that conditions had moderated sufficiently to allow the resurrection of this growth plan and its required recruitment. A combination of this plus other marketing initiatives are designed to regain the software sales momentum.

The team has now been strengthened to develop and tackle various channels to market and, encouragingly, we have secured a further Original Equipment Manufacturer European partner. Although still in its infancy this should lead to sales opportunities for which we would not have otherwise been considered. Our attention to the Public Sector is also bearing fruit but with glacially slow progress as numerous consultations and trials frustrate the originator's eager desire for implementation. However we are optimistic that we will build on this progress and our patience will ultimately be rewarded. This toe-hold is vital, as many public sector contracts require three existing contracts as evidence of prior public consideration.

The Call Centre Expo can be a bellwether to gauge market sentiment and whilst the 2009 show was neither tombstone quiet nor a wild frenzy of buying there were serious enquirers looking to explore the latest offerings and options. Whilst these enquiries were marginally down on previous years, we expect these to provide new business in this fiscal year.  The first trial at a Kenyan call centre in Nairobi is already underway and several demonstrations to large financial institutions in the UK have taken place. Whilst the software can show savings and improve an organisation's efficiencies, the process of persuading IT and Financial Directors to sanction expenditure is increasingly protracted.

Although the overall software sales are similar to the previous period, with just a 2% variance, the margins were eroded by an increase in sales of 3^rd party licensed software. These 3^rd party licenses are bundled with CallScripter when a client requires postcode software or dialler licences which run hand in glove with our system. The margin achieved on these items is lower than CallScripter and as such increases in these sales erodes the overall margin. A CallScripter sale contracted in June 2009 created an increase in subsequent ongoing 3rd party licenses in the 6 months to December 2009, altering the previous ratio and balance. A careful eye will be kept on 3rd party revenue streams to ensure that core margins are maintained.

The good news is that recurring revenues are building and the number of agent seats, both UK and worldwide, are growing. These include one of the world's largest call centre operators who continue to increase their seats, over multiple call centres, on a concurrent monthly basis.

As some businesses need our software but are short of resources, be they technical or financial, CallScripter offers a hosted model sometimes referred to as SaaS (Software as a Service). This provides a pay-as-you-go option and effectively increases our channel to market. CallScripter currently offers its SaaS solution from a secure data centre based in East London. The users of this service have remained static on a like for like basis. 

In November 2009 we hosted our 4^th Annual Awards lunch in London which provides an opportunity to get closer to our clients. As previously the awards covered two categories - Best Script Builder and Most Innovative Use of CallScripter. Both of these recognise the creative and pioneering ways in which CallScripter's clients utilise the application in their own environments. The event brings a number of benefits including learning about the inventive ways that clients use our software which helps when marketing solutions to other prospects. This year the Most Innovative Award was for a call centre who had a blind operator, whereby the script was read into one ear whilst the caller talked simultaneously in his other ear - a particularly pleasing winner which certainly captured the hearts and minds of those attending. 

Ansaback

Last year the 6 month period from July to December was extraordinarily bleak with our seasonal Christmas spike of calls failing to materialise as the credit crunch took hold. As we reported in the annual accounts, June and July showed encouraging overall call volume increases, although some call centre partners' overflow levels remained low as they opted to answer calls themselves. However this year the shopping channels and charity sector have been much more active in the run up to Christmas and the resulting call volumes followed previous trends. December 2009 was a record month for minutes of calls handled, a pleasing result given the number of business days lost to statutory holidays in the month. This high level of call volumes has continued in early January and has been further improved by adverse weather conditions boosting breakdown callout and recovery activity.

Call volumes have risen significantly due to increases from existing clients and new business gains. Billable minutes, our main Key Performance Indicator, were 27% higher in the six months to December, when compared with the previous year's corresponding period. The TV shopping channels have picked up as consumer confidence returns, with the continued low interest rates keeping mortgage payments down thereby boosting free cash. The steady business rise has meant cautious expansion of the staffing whilst monitoring the grade of service offered to our clients. Care must be taken in this as some of the newly acquired charity work can cause significant spikes in demand which can affect the overall call centre. Whilst we still have capacity for agent positions within the office, the prospect of "homeworkers" logging on to assist when known advertising spikes arrive will be piloted in the new year. Remote call handlers are not a new phenomenon and have become an increasing reality due to the huge improvement in internet band width to homes. The benefit to home workers is their ability to select hours that they wish to cover thereby instantly allowing part-timers flexibility on shifts which work for them whilst being equally beneficial to the business.

We continue to tender for a variety of outsourced projects. Many of these are referrals from existing customers and are a testament to the value placed on our client services team who often go the extra mile in providing what they want - and a bit more.

IP3 Telecom

The conversion of the Ansaback customer base has progressed well, with 95 clients now routing calls through our hosted telephone numbers. As well as providing earning revenue, this also adds another layer of resilience to the client's and Ansaback's disaster recovery plans.

In addition, the most exciting development of recent months has been the IP3/CallScripter hosted contact centre solution, combining hosted telephony and hosted scripting into one easy-to-use, low-cost contact centre package.  We sold our first IP3/CallScripter integrated solution in December 2009, and are now creating a strategy to take this out to market in 2010.

Risks

The principal risk to the CallScripter division continuesto be the ability of our sales team and the partner resellers to achieve market penetration. Channels to market are a fierce battleground for all suppliers keen that their offering is seen as pre-eminent in the line up of products bundled within consolidator's call handling solutions.

The main risk within Ansaback is the exposure to the failure of a major client. Care is taken within the credit control function to minimise this threat.

Additional risks include the technology utilised in the call centre and as such we have installed a modern telephone switch. This new switch includes fail-over systems to further increase our business continuity / disaster recovery readiness whilst also enabling us to offer additional services to clients. Looking at other risks, to lower our susceptibility to power outages, we have a standby generator in case of power cuts, whilst our main computer systems have been upgraded to improve their resilience and minimise any down-time should a problem arise.

IP3 Telecom would be affected if there was a major carrier breakdown affecting the entire network.

Dividend

The Company will not be declaring an interim dividend.

Outlook

Each of our divisions continues to encounter demanding conditions but the Board is confident that the Group will successfully meet these challenges.

Philip Dayer

Chairman

12 February 2010

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY