Final Results for the Year Ended 30 June 2014

IPPlus PLC today announces its audited results for the year ended 30 June 2014.

Financial Highlights

• Group revenues increased by 13 per cent. to £9,123,387 (2013: £8,076,158)
• Profit before taxation of £212,483 (2013: £345,856)
• Profit on lease surrender of £352,367
• Impairment of CallScripter intangible assets of £322,974
• Underlying operating profit of £348,882 (2013: £429,796) when lease surrender profit, CallScripter impairment and CallScripter reorganisation costs are excluded (see below)
• Closing cash and cash equivalents balance of £459,693 (2013: £559,574)
• A maiden dividend of 0.3 pence per share was paid in November 2013
• Dividend proposed of 0.15 pence per share for the year ended 30 June 2014 (subject to shareholder approval)

Operational Highlights

• Ansaback revenues increased by 27 per cent. to £7,292,026 (2013:  £5,759,218)
• IP3 Telecom and PCI-PAL win prestigious business contracts 
• CallScripter reported revenues of £1,099,867 (2013: 1,490,042)
• CallScripter divisional re-organisational costs incurred of £120,510
• Ancora reported revenues of £731,494 (2013: £826,898)

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

Commenting on the results, CEO, William Catchpole, said: "The Group has had a mercurial year which has seen the significant increase in call centre traffic being adversely affected by the poor performance of the software division. Management changes have been implemented, and whilst the year ahead is likely to be a significant challenge, we have confidence that our experienced team will recover the forward momentum."

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CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 JUNE 2014

Financial Summary

The individual performance of the Group's businesses has been mixed. Whilst revenue grew to £9,123,387, operating profit declined to £257,765 for the full year (2013: £8,076,158 and £358,544 respectively).  The 2014 results do, however, include a one-off profit on lease surrender of £352,367 arising from the purchase of the Group's main office in Ipswich, an impairment charge on the CallScripter intangible assets of £322,974 and non-recurring CallScripter reorganisation costs of £120,510. This gives an underlying operating profit of £348,882 (2013: £429,796) (see below).

The overall result reflects: a reasonably strong performance of the Group's contact centre division (Ansaback incorporating IP3 Telecom), which continued to perform in line with the Board's expectations (with growth in both revenue and new contracts wins); a weaker than expected performance for CallScripter, the Group's software division; and a loss for Ancora, the Group's archiving and removals division. 

CallScripter sales show a reduction of £390,175. This sales shortfall, as well as additional software division staffing and restructuring costs of £120,510, contributed to the overall decline in Group profitability.

Cash and cash equivalents at 30 June 2014 of £459,693 (2013: £559,574) remained healthy.

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

The Group has occupied the ground floor of this building since May 2000 and was at the stage where more space was required.

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

In addition, and subsequent to the purchase of the freehold, the sub-tenant of the upper floor agreed to the early termination of its lease in consideration of which it paid the Group the sum of £352,367. This early termination payment is recorded as a profit in the results for the year ended 30 June 2014. These funds were utilised by the Group to assist in the purchase of the freehold.

Impairment of Intangible Assets

Despite the poor performance of CallScripter in the year, the Board still has confidence in the prospects of the division, as indicated by the reorganisation and recruitment expenditure mentioned below. However the division has continued not to fulfil its potential and as the division was cash negative in the year the Board did not feel that the carrying value reflected the future cashflows from the asset. As such the Board decided to write the CallScripter intangible asset down to nil.

In the year ended 30 June 2014, £322,974 was charged to the income statement as impairment. This charge, whilst non-cash affecting, is a corollary of the lower than expected performance from CallScripter.

Business Summary

Ansaback

Ansaback recorded excellent growth during the year with a 27% increase in revenue and commensurate profit. A major element of this came from successfully securing a short term fixed seat contract with a major utility company which saw good use of the new upper floor in the year. A major part of this contract comes to an end in August 2014. The additional space provides capacity to grow the contact centre business and the opportunity to take on additional disaster recovery clients.

IP3 Telecom reported last year that it spent considerable resources in launching its PCI compliant offering PCI-PAL and that it achieved Level 1 PCI accreditation. The pipeline for our PCI solutions is growing daily and we are seeing a steady stream of orders being placed by blue chip clients eager to achieve compliance using our cloud based solution.

CallScripter

CallScripter had a testing 12 months and revenue fell by 26% in the year. The division has required some re-organising and leadership and new staff have been appointed. This incurred a reorganisation cost of £120,510.

The Original Equipment Manufacturer (OEM) agreement with Interactive Intelligence Inc. (ININ) has been revised and their client base now has the ability to buy the full CallScripter software rather than a reduced EasyScripter version. This revision provides a better solution for the client and it is expected to increase revenues for the division.

Ancora Solutions

Ancora Solutions' archiving and secure destruction market is focused on the Eastern Region and London. Overall year-on-year Ancora sales were 12% lower, which adversely affected divisional profitability. The Board continues to review Ancora's operations.

Dividend

Subsequent to shareholder approval at the 2013 Annual General Meeting, a maiden dividend of 0.3 pence per share was paid in November 2013.

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

Taking these factors into consideration against the background of the result in the year, the Board will be proposing the payment of a dividend of 0.15 pence per share in respect of the year ended 30 June 2014, which if approved at the 2014 Annual General Meeting, will be paid on 5 November 2014 to those shareholders on the register on 10 October 2014.

Board changes

I am pleased to report that Chris Fielding, has joined the Group as a Non-Executive Director. Chris is currently Head of Corporate Finance at W H Ireland and brings with him over 30 years' experience of corporate and financial skills.

Previous to this role Chris worked at Arden Partners and, prior to that, spent eleven years at Hoare Govett as director of Corporate Finance. He qualified as a chartered accountant with Price Waterhouse and then held appointments at Thomas Cook, Cadbury Schweppes and Barclays de Zoete Wedd.

I have also advised the board of my intention to stand down at the end of 2014, having served the company for 9 years, and it is expected that Chris will take over the Chairman's role on my departure.

After nearly four year's service Bernard Waldron has stated his intention to stand down from the Board on 30 September 2014. The Board wishes to express its gratitude to Bernie for his service to the Company and extends its best wishes to him in his future endeavours.

People

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

Outlook

The Group faces a number of challenges in the coming year as: Ansaback adjusts to the expiry of the utility contract with a commensurate decrease in turnover and margin; the new CallScripter team gains momentum; and the Board continues its active review of the Ancora division. Accordingly, the current year will be a tough one for the Group.

Ansaback, however, is a resilient business with significant growth opportunities, particularly with PCI-PAL as data security and compliance is recognised as a major risk to organisations. Our capacity for growth and strong balance sheet means that we are well placed to meet these challenges.

Philip Dayer

29 August 2014

STRATEGIC REPORT

FOR THE YEAR ENDED 30 JUNE 2014

Business Summary

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

The Group trades under six trading styles namely Ansaback, IP3 Telecom, PCI-PAL, CallScripter, Ancora Solutions and Suffolk Disaster Recovery. For management purposes these are administered as three operating divisions.

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

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

PCI-PAL, part of IP3 Telecom, offers a PCI (Payment Card Industry) solution which allows contact centres and telephone agents to take payments in a PCI compliant fashion with customer service unaffected and existing operational processes maintained.  PCI-PAL makes contact centre payment collection easy and secure, de-scoping the operation from the requirements of PCI DSS.

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

Suffolk Disaster Recovery provides physical workstations to a number of businesses in the Ipswich area from its two locations. The facilities have their own generators and are available on a 24 hour basis, 7 days a week.

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

The Market

The necessity for businesses to offer better services around the clock seven days a week lends itself to an outsourced model such as Ansaback. Ansaback was successful in securing a short term fixed seat contract with a major utility company which saw good use of the new upper floor in the year. A large part of this contract comes to an end in August 2014. Ansaback continues to win prestige accounts who seek a cost effective UK customer facing solution.  We have increased our dedicated fixed seats and we continue to prospect for larger clients who seek a mix of dedicated and bureau desks.

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

The PCI market is emerging as a new area for many businesses driven by compliance, a risk of being fined heavily for a data breach with the attendant increase in their card processing charges. The operational risk is that companies lose their payment processing contracts and are then forced to pay large premiums to become compliant by the main credit card processors. There are some recent examples of high profile data losses which all push companies handling credit card data to review their payment processes.

The market for our CallScripter software is not bounded by the UK with 56% of our business now conducted abroad, mainly in the United States. Further strategic recruitment to specifically develop the channel partnerships is now in place.

Ancora Solutions' archiving and secure destruction market is focused on the Eastern Region and London.

The Ipswich region is poorly served with disaster recovery providers and with our contact centre and telephony knowledge we are well placed to assist those companies that need to have a backup facility in place.

Review of Operations

A summary of the operational highlights in the year to June 2014 follows:

Ansaback

The past year was particularly industrious for Ansaback with sales increasing by 27%, from £5,759,218 to £7,292,026. The majority of this rise came from fixed seat revenue which grew by 55% from £2,142,000 to £3,325,000, whilst the bureau grew by 8% from £3,862,000 to £4,114,000

We were successful in securing a short term fixed seat contract with a major utility company which saw good use of the new upper floor in the year. A major part of this contract comes to an end in August 2014.

Call minutes into the main bureau increased by 3% in the year and we have recruited new sales and senior sales personnel to focus on our core sectors for both bureau and fixed seat business.

There have been no significant bad debts in the year and we will continue to vet new clients and exercise continued vigilance. The Ansaback website has been updated and re-launched with the aim of appealing to corporate business prospects but retaining interest for smaller potential bureau clients.

Suffolk Disaster Recovery is a part of the Ansaback division which utilises our capacity of agent's seats and re-sells the facility to other local businesses which have a need to provide agent positions at extremely short notice. The dark facility at Martlesham has 60 seats and with the new space upstairs the Ransomes site has over 100 seats ready and available.

A new generator, which is large enough to power the entire building, and significant new wiring of the 1^st floor of the building has provided additional resilience and capacity to the services we provide.

As demonstrated in the table below, our traditional market sectors have held up well. Apart from the major utility contract, our mix is predominately unchanged, providing a degree of stability, whilst certain fluctuations do occur when there is a major sporting event such as the world cup or the St Jude storms.

Utilities - 44%

Call Centre Partners - 11%

Telecoms - 10%

Direct Response TV - 8%

Other 6%

R/etail - 6%

Charity - 5%

Service Industry - 4%

Financial Services - 3%

Accident Management - 3%

 IP3 Telecom & PCI-PAL

Our PCI solution is one of only a few services in the market place to be fully compliant. It is currently processing millions of pounds worth of transactions with volumes accelerating as new clients come on stream.

The hosted PCI solution has significant advantages in descoping the compliance for businesses in contrast to an in house solution with its associated costs. However the time lapse from enquiry to order and subsequent implementation is considerably longer than anticipated. This has been similarly reported by other PCI solution vendors. This delay in decision making is inevitable until the credit card companies tighten the compliance issue and make it compulsory to use a PCI accepted solution.

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

CallScripter

CallScripter had a testing second half of the year culminating in a substantial reorganisation with the associated costs of termination and recruitment. After three successive years of growth in turnover, sales fell from £1,490,042 in the year to June 2013 to £1,099,867 in the year ended June 2014. We do however believe that the forward momentum that the division was enjoying in the past 3 years will recover in the current year following the reorganisation and the sales pipeline is encouraging. Similarly to the previous year approximately 56% of revenue is now from the international market.

The refreshed integration with our OEM partner, Interactive Intelligence Inc., has taken longer than expected but this is a major step forwards in providing the full CallScripter suite to a wider audience with a commensurate increase in the list price. The prospect of winning larger international deals through this channel is most encouraging. 

In the same vein, securing certification of the Avaya Proactive Contact Integration solution has enabled us to secure a prestigious 450 agent seat sale for a major US insurer and phase 1 for an International Cruise business which comprises 100 agent seats out of a potential 500 agent requirement.

We have continued to enhance the product and the next release of the software will include new features keeping us at the forefront of agent scripting tools.

Ancora Solutions

Overall year-on-year Ancora sales were 12% lower, which adversely affected divisional profitability. This is mainly due to a reduction in successful removals tenders, particularly in the first half of the year. Second half revenue was up by 21%, compared to the previous year, and with warehouse occupancy starting to peak, we have taken on additional warehouse space, as well as extending terms on existing premises.

On a positive note, Ancora has won two major Public Sector Framework agreements contracts, having been approved for the Eastern Shires Purchasing Organisation (ESPO) framework. Ancora is also now a preferred supplier with a major Strategic Outsourcing Company. We look forward to extending these relationships during the next year.

Risks

Principal business risks and uncertainties

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

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

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

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

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

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

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

The main risk within Ansaback is the exposure to the failure of a major client, as the top 20 clients represent 75% of turnover. However, apart from the Utility client which has a unique contract and an extremely strong credit limit, no individual client accounts for more than 8% of the total Ansaback turnover. Continued vigilance is taken with credit control and new clients to minimise exposure.

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

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

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

PCI-PAL is hosted within our UK based telephone network. High level security and 5 nines availability which is the same level as the banks and emergency services. The security is vetted by QSA officers to ensure we meet the highest level of compliance. The risk of this being penetrated by hackers is limited as no data is stored - the risk would be disruptive to the processing of cards.

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

Financial risk management objectives and policies

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

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

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

Interest Rate Risk: Interest rate risk arises from the Group's mortgage facility which has a fixed margin above LIBOR for the remaining four years.

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

Key performance indicators

The Group monitors a number of key performance indicators, using both financial and non-financial metrics, on a daily and monthly basis. The most important of these are as follows:

• Cash on a daily basis
• Contact centre billable minutes on a daily basis
• Dedicated desk margins on a daily basis
• Divisional sales and results against budget on a monthly basis
• Divisional sales pipeline on a monthly basis

Employee Relations and Social Responsibilities

The Group continues to advocate a healthy staff policy via its participation in Investors in People together with pursuing a Health and Well-being policy for encouraging healthy practices. The IT team is actively engaged with Carbon Champions for its ecological and green initiatives regarding technology and we have policies including a Low Carbon and Environmental Purchasing Policy, while the Group encourages car sharing, bus usage and the cycle to work initiative. 

The Group's employees support a designated charity each year and raised £1,475 for The Ipswich Soup Kitchen.

NVQ Qualification and apprentices

17 staff are currently involved in non-vocational qualification (NVQ) study and an additional two IT technicians are undertaking apprenticeships. In recognition of this the contact centre director and a manager recently attended an NVQ/apprenticeship day and spoke at length to Princess Anne, patron of Catch 22, a national charity. Catch 22 works with young people who find themselves in difficult situations, helping them to stay healthy, find opportunities to learn, earn a living, find a safe place to live and to give something back to their community.

Summary and Outlook

The Group has had a disappointing end to the year, particularly in CallScripter where a change of leadership and reorganisation has now been carried out. The Company has a sound business base and now needs to rebuild the performance of each division. Ansaback is a resilient business but will require a commitment and focus to replace the lost utility business, whilst the outlook for our PCI product offers exciting growth prospects. The Directors believe that the Group is well placed to meet these challenges in the year ahead.

BY ORDER OF THE BOARD

William A Catchpole

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2014

All activities of the Group are classed as continuing.

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

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

The Board of Directors approved and authorised the issue of the financial statements on 29 August 2014.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2014

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