Final Results for the Year Ended 30 June 2015

IPPlus PLC today announces its audited results for the year ended 30 June 2015.

Financial Highlights

• Successful sale of Ancora Solutions division in December 2014  for £500,000
• Ansaback divisional revenues reduced to £5,441,094 (2014: £7,292,026)
• Ansaback divisional revenues (excluding the terminated major utility client) grew by 8.5% to £4,668,472 (2014: £4,301,171)
• Ansaback divisional operating profit of £424,508 (2014: £1,262,185)
• CallScripter revenues slightly down to £1,045,847 (2014: £1,099,867), but operating loss reduced by over 95% to £31,466 (2014: £678,653)
• Group loss before taxation on continuing activities of £258,244 (2014: profit of £297,189)
• Deferred tax asset of £280,000 written off as the utilisation of the asset unlikely in the near future due to R&D tax credits
• Group loss after taxation on continuing activities of £538,022 (2014: profit of £301,890)
• Closing cash and cash equivalents balance of £1,040,822 (2014: £459,693)
• Dividend proposed of 0.15 pence per share for the year ended 30 June 2015 (subject to shareholder approval)

Operational Highlights

• Long term clients and recurring revenues increased to 74% (2014: 51%) of total continuing turnover
• New Chairman and non-executive Director
• PCI-PAL wins two prestigious international contracts post year end
• Significant new Ansaback contract won from major UK retailer post year end

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CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 JUNE 2015

Financial Summary

The Board is disappointed to report that the Group has not been successful in attracting sufficient new revenue to compensate for the utility contract which substantially concluded last year. As a result, the Group generated a loss on continuing activities before tax of £258,244 (2014: profit of £297,189) on continuing revenue of £6,486,941 (2014: £8,391,893).

The Board appreciates the importance of an established business delivering a profit and has therefore been pleased to announce in recent weeks that, since the year end, PCI-PAL, our compliant credit card solution, has won two prestigious international contracts within the Jewellery and Logistics sectors. In addition, the Ansaback call centre has also secured a significant contract with one of London's most prestigious department stores. Revenue from this contract is expected to be substantial in the coming year.

An increase in revenues from recurring and long-term clients from 51% to 74% in the year, combined with these new business wins and an attractive pipeline of further opportunities gives the Board confidence that the Group will again generate a positive return to shareholders in the coming year.  

Disposal

As stated in the 2014 Annual Report and Accounts, the Board had been actively reviewing the Ancora Solutions division and concluded that it was non-core to the Group's business operations and that, as it was relatively small in scale, an owner with a stronger presence in its sector could potentially derive more value from the business. On 31 December 2014 Restore PLC purchased the entire fixed assets, payroll and existing contracts of Ancora Solutions for a cash consideration of £500,000.

In the 6 months to 31 December 2014, Ancora Solutions reported revenues of £362,803 and a loss on discontinued activities of £53,856. This loss comprised a trading loss of £36,387, reorganisation costs of £100,166, onerous lease provisions (estimated outstanding lease costs on warehouse rentals) of £121,000 and a profit on disposal of £203,697. The net book value of the assets disposed of at 31 December 2014 was £286,313.

Group overview

Subsequent to the disposal of Ancora Solutions the Group operates through two divisional segments, namely Ansaback (which includes IP3 Telecom, PCI-PAL and Suffolk Disaster Recovery) and CallScripter.

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, as well as disaster recovery lines and facilities, and other ancillary telecommunication services.

IP3 Telecom provides a range of network level interactive call services including non-geographic and Freephone telephone facilities. 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. PCI-PAL is a hosted telephony Level 1 compliant credit card solution designed to prevent card fraud by eliminating credit card data being handled or stored at a clients' premises.

Suffolk Disaster Recovery is the Group's disaster recovery unit, access to which is also sold to clients and third parties. Its capacity increased from 60 seats to 90 seats during the year.

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 as the software facilitates the rapid set-up, handling and reporting of sophisticated inbound, outbound and e-mail campaigns.

Review of Operations

Ansaback division

Ansaback call centre

The Ansaback call centre had an extremely testing year and suffered some difficulties with the adjustments required after its largest client substantially ended its contract in August 2014. This contract ending created more upheaval than originally envisaged, which was compounded by tough economic concerns forcing another client to take nearly half of its business back in-house. A team of 350 temporary call handlers was stood down and managers were made redundant or redeployed elsewhere within the business.

IP3 Telecom (including PCI-PAL)

IP3 Telecom had a strong year winning some excellent new clients and expanding its various Payment Card Industry ("PCI") services, and the Directors believe that the potential of this business continues to be exciting on both a domestic and international basis. Our existing PCI-PAL client portfolio primarily comprises blue chip household names that have chosen our package after evaluating various competing solutions. These clients, for the most part, are happy to be reference sites and provide testimonials to our new prospective clients. The number of transactions and the values passing through our secure network is now growing dramatically.

Although new PCI-PAL competitors are emerging, the Directors believe that the Group has a degree of first mover advantage and an excellent brand which is easily understood by the target market. As a result, we continue to be particularly excited by the prospects for PCI-PAL.

CallScripter division

CallScripter, despite significantly reducing its segmental loss by 95% at the end of the financial year, fell slightly short of reaching divisional profitability by £31,466, on a similar turnover to the prior year. The new 4.6 version release of its software is anticipated at the Call Centre Expo in September 2015.

Dividend

Each year the Board decides whether to declare a dividend, 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 and future expected performance; its net cash balance; and its future working capital requirements taking into account its investment plans for the future development of the Group.

Taking these factors into consideration, although the Group had a disappointing year, Ancora Solutions was successfully disposed of providing an uplift in cash, and with the positive expectations for the coming year on the back of the recently announced new business, the Board is proposing to maintain the payment of a dividend of 0.15 pence per share in respect of the year ended 30 June 2015.

Board Changes

On 1 January 2015 I took over the role of Chairman from Philip Dayer, who stepped down from the Board on 31 December 2014,  and, on 1 January 2015, the Group appointed Jason Starr as a non-executive Director, replacing Bernard Waldron who stepped down from the Board on 30 September 2014. Jason is Chief Executive Officer of Dillistone Group plc, the AIM quoted International supplier of software and services for the recruitment sector.

The Board wishes to thank both Philip and Bernard for their wise counsel and significant contribution to the Group.

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 in what transpired to be a testing year.

Outlook

The Group has worked hard during the year to compensate for the loss of the utility contract. However new business was not sufficient to deliver a profit. The Board recognises the fundamental importance of profit in an established business and is encouraged by the new business won since the year end. It is also pleased to report that the Group has, since the year end traded at broadly breakeven, whereas at this point last year it was in loss, therefore providing tangible evidence of the fruits of its efforts coming to bear.

The Board therefore looks forward to producing much better results in the first half of the coming year.

Chris Fielding

Non-Executive Chairman

26 August 2015

STRATEGIC REVIEW

Business Summary

Subsequent to the disposal of Ancora Solutions the IPPlus PLC Group operates two divisions, namely Ansaback (which also includes IP3 Telecom, PCI-PAL and Suffolk Disaster Recovery) and CallScripter.

Ansaback division

The Ansaback call centre 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.

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 continues to win prestige accounts which seek a cost effective yet friendly UK customer facing solution.  We have increased our dedicated fixed seats and we continue to prospect for larger clients who seek a mix of dedicated and bureau desks. New clients seek ever greater services as the rise in new media channels for customers increase.

We have seen significant movement in the market as clients search for increasingly complex services to ensure customer satisfaction across coordinated new media channels is achieved. Ansaback is investing to meet Omni Channel demand and has signed several notable new clients, reaching 400 clients for the first time in the year.

The Omni Channel is the name used to describe multiple channels of communication where people engage via e-mail, web chat, instant messaging and posting on social media. The challenge facing Ansaback is for our call centre agents to open or monitor each of these communiqués, read them, decipher them, and then process them in a prescriptive fashion demanded by the client. We can envisage that in a few years time this will become a key part of a revised outsource contact centre offering, including smart mobile devices which assist the client's customer to participate in this multi channel engagement from wherever and whatever time of day they care to choose. 

The Ansaback call centre saw its underlying sales (excluding the fixed term utility contract) and minutes increase year on year by 4.8% and 7.1% respectively. Outbound revenues have started to rise, reflecting the recent investment in this area, whilst Professional Services are now being more aggressively charged for which should result in increased Professional Services revenues in the future.

In addition, post year end, the Ansaback call centre secured a significant contract with one of London's most prestigious department stores. Revenue from this contract is expected to be substantial in the coming year.

Excluding the major utility contract, our sales mix is predominately unchanged, providing a degree of stability.

We have recruited new sales and senior sales personnel to focus on our core sectors for both bureau and fixed seat business as well as an outbound manager to assist in pushing this potentially more rapid growth business sector forwards.

The call centre is well positioned for staff transportation and we have two 4 x 4 vehicles for use during extreme adverse weather conditions.

The Ansaback website has been updated and re-launched with the aim of appealing to corporate business prospects, whilst retaining interest for smaller, potential bureau clients.

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

IP3 Telecom (including PCI-PAL)

The IP3 Telecom business has experienced significant growth in the period, with sales increasing by 48% year on year.  The business has been successful in increasing existing account revenues, as well as significant new accounts wins through both our Cloud Contact Centre and payment services. 

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

The PCI market is starting to emerge as a new area for many businesses driven by compliance facing a risk of being fined heavily for a data breach. 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 lead companies handling credit card data to review their payment processes.

Having completed our third full year of Level 1 accreditation to the Payment Card Industry Data Security Standard (PCI DSS), which helps prevent credit card fraud, PCI-PAL has grown strongly with transaction volumes increasing by 204% year on year. 

The PCI-PAL client base includes a growing number of international, blue chip organisations for whom we are providing payment services not only in the UK, but also from users across the globe.  The PCI-PAL brand remains one of the strongest in the space due to our longevity of involvement and in-house expertise around the relevant security standards.  We are committed to the contact centre payments space, and invest significant efforts to differentiate ourselves by offering truly cloud, on-demand solutions to the PCI challenge faced by many contact centres globally. The PCI-PAL network comprises multi-redundant telephony systems housed in secure cloud data centres. Utilising multiple telephony and data feeds, the network infrastructure is designed to handle many multiples of the present call volume traffic enabling the handling of hundreds of thousands of payments per day.

PCI-PAL enters the new financial year with a strong developed pipeline of large corporate and blue chip business opportunities as organisations feel greater pressure to become compliant with the PCI DSS due to the increased coverage of data loss in the media, growing public knowledge of data risk, and increased pressure from third party stakeholders.

Additionally, since the year end, PCI-PAL has won two prestigious international contracts within the Jewellery and Logistics sectors. The Directors believe that these contract wins demonstrate the strong and growing demand for our PCI DSS compliant payment solutions. The new contracts are expected to generate revenue in the 2015/16 financial year, supporting growth within this trading division and helping to elevate our prominence in this sector

It is worth noting that, whilst our solution is tried and tested and does not require significant capital expenditure, the time taken from decision to activation for a large business or enterprise remains significant.

Our growing network of business partners across the payments, applications, and telecommunication space, will support our goals to continue to grow the PCI-PAL business stream, maintaining footholds in the UK and newly developing global contact centre payments markets.

Suffolk Disaster Recovery

Suffolk Disaster Recovery, the final business within the Ansaback division, 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. The Ipswich region is poorly served with Disaster Recovery providers and with our call centre and telephony knowledge we are well placed to assist those companies that need to have a backup facility in place. This facility has 90 seats and with the new space in the main building provides a total of 150 seats ready and available. A significant new client has been signed to this service in July with a go live date of September 2015.

Overall the Ansaback division made a segmental profit of £424,508 (2014: £1,262,185), being adversely affected by the substantial conclusion of the utility contract. Whilst agent heads have been reduced, new business could not be won in time to replace such a large reduction. However the prospects going into the new year are encouraging.

CallScripter division

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.

The CallScripter market is not limited to the UK, with 62% of our business now conducted abroad, mainly in the United States.

In the latter stages of the year ended June 2014, CallScripter dramatically reduced costs without reducing capacity.  Revenues in the year were £1,045,847 (2014: £1,099,867). This is, in part, as a result of our OEM (Original Equipment Manufacturer) partnership with Interactive Intelligence Inc. which has extended our relationship to allow CallScripter to be offered within their Communications as a Service platform ("CaaS"). This provides CallScripter with increased opportunities within their growing hosted customer base, whilst building an ongoing monthly revenue stream via a subscription pricing model. 

As a result of the 2014 restructuring, the division was able to reduce its segmental loss to £31,466 (2014: loss of £678,653 including £322,974 of intangible asset impairment).

The division also underwent a successful rebrand in advance of the imminent release of a new and improved CallScripter solution. The new version has been specifically redeveloped to deliver functionality and scalability improvements to enable us to better support new and existing Channel partners. We believe this will enable us to continue to be one of the leading agent scripting tools and increase our sales teams' ability to secure new business in the coming financial year.

Risks

Principal business risks and uncertainties

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

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

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.

Market place and competition: The sectors in which the Group 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 directors ensure that the team are properly directed, trained and motivated to address this issue.

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

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.

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 interest-bearing and foreign currency financial instruments, is not significant. This is assessed in note 21 to these financial statements.

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

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 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.

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
• Call 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 continues to encourage car sharing, bus usage and the cycle to work initiative.

The Group's employees support a designated charity each year and raised £2,711.

NVQ Qualification and apprentices

After 17 of our employees successfully completed NVQ qualifications last year it was an easy decision to repeat this offering again.  We have 12 employees studying for level 3 customer services NVQ, which has been designed around our Call Centre.  This supports our commitment to our employees to ensure that they are equipped with the relevant skills required to make them confident within their job roles.  We are working in partnership with Catch 22 a national charity which works with young people who find themselves in difficult situations, helping them to stay healthy, find opportunities to learn, earn a living, and find a safe place to live and to give something back to their community.

Summary and Outlook

The Group has worked hard during the year to compensate for the loss of the utility contract. However new business was not sufficient to deliver a profit. The Board recognises the fundamental importance of profit in an established business and is encouraged by the new business won since the year end. It is also pleased to report that the Group has, since the year end, traded at broadly breakeven, whereas at this point last year it was in loss, providing tangible evidence of the fruits of our efforts coming to bear.

The Board therefore looks forward to producing much better results in the first half of the coming year.

William A Catchpole

26 August 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2015

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2015

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 26 August 2015.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2015

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