2017 Final Results

PCI-PAL PLC, the customer engagement specialist focussed on secure payment solutions, is pleased to announce its Final Results for the 12 months ended 30 June 2017.

The period being reported on includes the strategic sale of the call centre operations of the Group which completed on 30 September 2016 (the "Disposal").  As such, the results being reported reflect both discontinued and continuing operations.  Since the Disposal, PCI-PAL has focussed exclusively on its suite of secure payment solutions. 

Financial Highlights

• Call centre operations⁽¹⁾ disposed of for total consideration of £7.123 million payable as follows:
  • Cash of £3.35 million received on completion
  • Loan notes with a face value of £3.35 million of interest free loan notes repayable in annual payments starting October 2017
  • £0.423 million in excess working capital received in December 2016
• Total Group profitability £4,398,000 (2016: £157,000) including £5,443,000 of profit generated from the Disposal
• 70% increase in revenue from continuing operations to £1,879,000 (2016: £1,103,000)
• Recurring revenues increased to £1.228m representing 65% of total turnover (2016: £0.790m, 72%)
• Continuing activities loss of £1,699,000 (2016: £859,000), reflecting scale-up investment in operating expenditure to grow the secure payment solutions business
• Closing cash and cash equivalents balance at 30 June 2017 of £1,958,000 (2016: £895,000)

Operational highlights for continuing operations only:

Since the Disposal the Group has:

• Invested significantly in developing its AWS (Amazon Web Services) cloud platform to enhance support for global clients
• Expanded its sales and marketing and customer service operations
• Fully relocated to new offices nearby in Ipswich, maintaining the sales suite at 1 Cornhill, London
• Concluded major wins including a regional public sector authority, a global utility company, a global heater company, the world's largest logistics firm, a world leader in the automotive repair space and Her Majesty's Immigration Office
• Revealed refreshed corporate branding and a new website at www.pcipal.com, reflecting the new focus and strategy
• Grown employee numbers from 12 at the time of the Disposal to 29 at the year end, with further expansion planned in 2017
• Formed its North American division
• Increased transaction values through PCI-PAL solutions by 81% compared to the previous financial year, reflecting buoyant client activity
• Signed contracts with total estimated contract value of £3.9m over the minimum life of the contract
• Continued strong customer commitment with 100% client retention to date and excellent referrals from the existing client base

⁽¹⁾ The call centre operations consisted of IPPlus (UK) Ltd and CallScripter Ltd and their associated subsidiaries

Current Trading Highlights:

• Strong start to the new financial year, with recurring revenue up 38% compared to July 2016
• Post period end new business secured with a global food business and a leading UK stockbroker
• New office opened in Charlotte, North Carolina, with first employees hired
• "PCIPAL" is now a registered trademark as we start to build a recognised international brand within our industry
• New AWS cloud-based platform currently going through final PCI Industry compliance testing ready for its launch.   The new platform will provide the business with a scalable, flexible infrastructure from which it can deliver its international expansion plans

William Catchpole, Chief Executive Officer of PCI-PAL, commented:

"We are delighted to report a year of double digit revenue growth for PCI-PAL, with exciting new contract wins and pipeline growth, and imminent migration to a fully cloud-based platform on which to further expand our business globally.

"We are experiencing very high customer retention. One existing client has accelerated its plans and has contracted to roll out to 15 new countries using this platform. The implementation of PCI-PAL solutions is, in most cases, the first time that a client has deployed a PCI DSS Level 1 solution, reflecting the nascent market opportunity and the opportunity for a broad spectrum of PCI-PAL clients to de-risk their operations by adopting proven market leading technology from the outset.

"The Board believes PCI-PAL is well positioned for further significant growth over the coming years, as consumers become more focussed on the security of their data, in particular payment data.   Along with new regulations, this is driving companies to utilise PCI-PAL's technology to secure payments across all channels."

PUBLICATION OF ANNUAL REPORT AND ACCOUNTS

Copies of the annual report and accounts will be posted to shareholders prior to 26 September 2017 and electronic copies can be downloaded from the Company's website (https://www.pcipal.com/).

For further details, please contact:

Notes to Editors:

PCI-PAL is a Payment Card Industry-Data Security Standard Level 1 certified supplier of contact centre payment solutions and services enabling organisations to take customer payments securely, to store customer data safely, in particular credit card data, and to de-risk their business from the threat of data loss and cybercrime. 

PCI-PAL solutions are currently used in more than 60 organisations, many of which are global businesses in the retail, services, and utilities sectors, utilising PCI-PAL technology to ensure they meet industry rules and regulations governing customer data protection.

In May 2018, the new General Data Protection Regulations come into force across the EU. Material data breaches can now lead to fines of up to 4% of an offending organisation's worldwide turnover.   This, together with the PCI regulations, means that all organisations who take contact centre payments need to carefully monitor and control their PCI and data compliance.

The shares of PCI-PAL PLC and its predecessor have been admitted to trading on the AIM market of the London Stock Exchange since September 2000.

CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT

PCI-PAL PLC has made considerable progress in the transformational year ended 30 June 2017 with substantial growth delivered in the UK.

Our cloud based service removes sensitive personal and payment data from IT environments and contact centres. This helps organisations to reduce the risk of fraud, secure sensitive data and become compliant with the Payment Card Industry Data Security Standards ("PCI DSS") and wider security regulations such as the forthcoming General Data Protection Regulation ("GDPR"). 

Contracts are typically multi-year in length and have a high proportion of recurring charges, usually underpinned by minimum commitments.

Strategy

Our strategic objectives for this year and going forward underpin our desire to become a multi-national leader in cloud PCI compliance solutions.  They are:

• Expanding our UK and EU footprint to capitalise on our recent successes
• Broadening our channel partnerships
• Continuing to invest in our platform to provide unparalleled resilience and availability, including the launch of a completely cloud based solution via AWS (Amazon Web Services)
• Maximising client value and retention at 100%
• Continuing to evaluate opportunities to expand our business overseas

We have seen significant interest in our services from new international markets. Two of our UK competitors have already opened North American operations and we have embarked post the year end on opening our own office to penetrate this new territory. The US market is estimated to be five times larger than the UK with over 40,000 contact centres and over 3.5 million agent seats, employing 6 million people.

With regulation tightening and the financial impact of data breaches and fraud growing, organisations around the world are increasingly looking for ways to secure themselves and we see that trend only continuing. Information security budgets and remits are broadening and this can only benefit PCI-PAL with our payments proposition enabling companies to remove effectively the risk of data breach from some of the most challenging parts of their businesses.

Operational Review

In the UK, revenue for the continuing business has increased by 70% to £1,879,000 (2016: £1,103,000). We have signed 19 large contracts during the year which should underpin the future growth prospects of the Group.

Partnership channels remain an important route to market for the business and we remain vendor agnostic.  

Our new PCI-PAL Cloud environment is currently undergoing final compliance tests and is scheduled to be publicly available later this year.  The platform will initially service the EU customers via the AWS hosting infrastructure in London and will service the US customers from the AWS hosting infrastructure on the east coast USA.  One of the benefits of the upgraded cloud infrastructure is the ability to rapidly deploy globally into APAC, EMEA, Western United States & Latin America. The new infrastructure is designed to flex as traffic increases, with load balancing across systems, such that the platform capacity can automatically grow with demand.

On the 1 April 2017, we were very pleased to welcome William Good to the role of Chief Financial Officer. William joined PCI-PAL having previously been the Chief Financial Officer of Card Clear plc, Retail Decisions plc, Revenue Assurance Services plc and Managed Support Services plc and in addition to the relevant industry experience has nearly 20 years' total experience of Main Market listed and AIM quoted companies. He joined PCI-PAL from Beck Optronic Solutions Ltd, where he had been Finance Director since 2014.

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 considering its investment plans for the future development of the Group.

Taking these factors into consideration the Board is not proposing the payment of a dividend in respect of the year ended 30 June 2017.

Following receipt of the initial consideration in respect of the Disposal, an interim dividend of 3.16 pence per share totaling £1.0m was declared on 9th November 2016 and paid on the 7 December 2016.

People

I would like to thank each of the Directors and employees for all their efforts during the past year. Their commitment, loyalty and support are appreciated in what was a dramatic and transformational year.

Current Trading and Outlook

The strong period of trading seen in the second half of the financial year has continued into the start of the new financial year, with monthly recurring revenues from the existing client base building nicely.  This excludes 28 contracts which have been signed before year-end, but have yet to go-live.  These contracts will add approximately £70,000 per month in recurring revenues once they are operationally live.

We have an excellent sales pipeline, high revenue visibility from the recurring and other contracted commitments of our client base and, with the trend of high client retention rates, the prospects of the Group remain excellent. 

Whilst we expect the strengthening revenue base of UK customers to lead to good organic growth in the year ahead, we also expect to see the US business grow strongly. The US Contact Centre market is several times larger than that of the UK but the implementation of PCI compliant secure payment technologies remains substantially behind that in the UK and Europe.

We have strengthened our operations team which is now more capable than ever of delivering projects successfully. Improved delivery is, in turn, expected to shorten the elapsed time between contract signature and commencement of recurring and service usage revenues from the point of service 'go-live'.

Our focus on PCI-PAL reflects our ambitious expansion plans for this business. We are targeting substantial growth in both gross revenue and new customer wins, both this year and next, with the objective that the UK operation will deliver an inaugural monthly profit in this coming financial year.

The Board is pleased with the progress to date and is confident that the Group's longer term strategy is appropriate.  We believe that PCI-PAL's positioning within the 'Fintech' (Financial Technology) space provides exciting growth prospects.

We look forward to reporting further progress in developing this business.

Chris Fielding                                                                                                William Catchpole

Non-Executive Chairman                                                                               Chief Executive

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2017

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)
AS AT 30 JUNE 2017

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 8 September 2017.

W A Catchpole                                                                                                             Director

T W Good                                                                                                                       Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2017