Interim results for the six months ended 31 December 2016

PCI-PAL PLC (AIM: 'PCIP'), the provider of products and services that enable organisations to take customer payments securely, de-risking their business from the threat of data loss and cybercrime, announces its unaudited interim results for the six months ended 31 December 2016.  

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 products.

Financial Highlights

Basic and diluted earnings per share (EPS)

• Closing cash and cash equivalents as at 31 December 2016: £2.9m - following the proceeds from the Disposal, and the sale of the Ipswich office at Melford Court (31 December 2015: £0.8m; 30 June 2016: £0.9m).
• £3.35m of the £6.70m consideration receivable by the Group from the Disposal was satisfied by the issue of secured loan notes by the buyer to the Group, which are redeemable within the 42-month period from completion.
• Following the Disposal, £1.0m was returned to shareholders by way of an interim dividend paid on 9 December 2016.
• Development costs associated with the cloud platform expensed -  circa £100k in the period.

Operational highlights for continuing operations:

• Transaction volumes through PCI-PAL services have increased 58% compared to July-December 2015, reflecting buoyant client activity.
• Contracts signed with total initial value of £1.8m (2015: £0.5m), of which £0.4m recognised in the period (2015: £0.1m).
• PCI-PAL revenue increased by £414k to £975k (+74%) (2015: £561k).
• Recurring revenues increased to £595k representing 61% of total turnover (2015: £353k, 63%).
• Continued strong customer commitment with complete client retention and excellent referrals from our existing blue chip client base.
• Significant investment in expanding our cloud platform to enhance support for global clients.
• In December 2016, the Group revealed its refreshed corporate branding and new website, reflecting the new focus and strategy, www.pcipal.com.
• Following the Disposal and the sale of the Melford Court Ipswich office, the team relocated to new offices nearby at The Masterlord Estate, Ipswich, and maintains the sales suite at 1 Cornhill, London. 

Post period events for continuing operations:

• Since 31 December 2016, the Company has secured an international order for the supply of its services to the world's largest electrical heating business.
• Recruitment of several key professional voice and software engineers.

Commenting on the results and prospects, William Catchpole, Chief Executive Officer, said:  

"We are delighted with the trading performance of the new streamlined business with significant increases year-on-year in signed contract numbers and recurring revenue. 

"Most of these deals were won against our main competitors. As these new contracts come on-line they will deliver revenue and enhanced customer value over the longer term.      

"We continue to invest in the security of our services and the development of our global cloud platform to support multi-national brands.  We remain confident in our new strategy for the Group and in its delivery against ambitious growth plans over the next few years."

For further information, please contact:  

Notes to Editors:

PCI-PAL provides products and services enabling organisations to take customer payments securely, processing credit card data securely, and thereby de-risking 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 multi-national businesses in the retail, services, utilities and public sectors, utilising PCI-PAL technology to ensure they meet payment card industry rules and regulations governing customer data protection.

PCI-PAL floated under the name of CountyWeb.com PLC on the AIM market of the London Stock Exchange in September 2000. The PCI-PAL product suite was launched in 2011 and since the disposal of its contact centre operations in September 2016, the Group has been solely focused on its PCI-PAL business.

JOINT REPORT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER

In the reported period we completed the £6.70m disposal of the Ansaback call centre business and the CallScripter software business (the 'Disposal'), to focus all our efforts on our rapidly developing PCI-PAL secure payment business; PCI being the recognised market acronym for Payment Card Industry.

As part of the Disposal, the freehold Ipswich office was sold and leased back and then transferred to the new acquirer, generating further cash of £0.8m for the Group. The PCI-PAL business relocated to a new office in Ipswich which is also the new registered office.

Reflecting this change, we renamed the holding company PCI-PAL PLC on 3 October 2016.

Following the Disposal, James Barham joined the PLC Board as Commercial Director and Sadie Ahier was appointed Operational Director for the PCI-PAL (UK) Ltd operating company.  Andy Francombe, having supported the Company through the Disposal and its initial transition to a secure payment solutions provider, is stepping down from the Board.  The search for his successor is well under way. The existing PCI-PAL technical team were relocated from the freehold offices at Melford Court, Ipswich, to a modern 1,500 square feet office on the Masterlord Business Park less than quarter of a mile away. The Sales and Marketing suite at Cornhill, London was retained. 

Strategy

The Board continues to execute on its growth strategy, at the core of which is a solid commercial, operational and financial platform.   The initial steps were taken several years ago to create a stable platform which could support a large number of simultaneous transactions and had sufficient redundancy and back-up to give clients unparalleled transactional uptime.

 The Group's growth strategy is as follows:  

• Attraction and retention of new clients through the delivery of best-in-class, secure payment solutions;
• Retention and broadening of relationships with existing and new customers through high levels of support and service offerings and a proactive approach to upselling the PCI-PAL range of solutions;
• Recruitment and retention of a high calibre, highly skilled workforce; and
• Targeted investment in the technology platform and product suite.

As an example of the security challenges facing those in business, the most recently publicised data loss concerned the Royal & Sun Alliance Insurance PLC, following the loss of the personal information of nearly 60,000 customers.  Such breaches create a significant opportunity for PCI-PAL.

The planned implementation of the General Data Protection Regulation (GDPR) in May 2018 and the higher potential financial penalties for non-compliance that the regulation entails will increase the focus businesses place on data security, making PCI-PAL products even more attractive to potential customers.

The Board is not proposing an interim dividend for the period, prioritising investment in the growth of the business.

Performance overview

PCI-PAL had an excellent six months, securing new contracts across a range of industry verticals including retail, services, leisure, public and the charity sector.  Transaction volumes through PCI-PAL services for the period July-December 2016 were 58% higher compared to 2015, with a valuable stream of referrals from our existing client base providing quality leads in addition to our own sales initiatives.   The continued evolution of the PCI-PAL product suite to provide a wide range of payment security solutions has allowed us to broaden and extend the value proposition to both existing clients and new business prospects. 

Investment in expansion of the cloud platform continues to ensure that PCI-PAL's clients can be confident of best in class products and services.

Recurring revenues have grown 69% year-on-year, with an additional healthy pipeline of contracted business yet to go live.  The increase in administration expenses reflects the additional personnel costs of building the team required to execute the growth strategy, in addition to the central PLC costs which include the Board and AIM costs. 

Platform availability remains the cornerstone of our product suite. Uptime and availability is continually monitored and has remained exceptional.

Outlook

Cybersecurity and data protection remain high on boardroom agendas and, with the market fuelled by well publicised data breaches across multiple vertical industries, more and more companies are looking to find cost effective, outsourced technical solutions to protect customer data and de-risk their businesses from the threat of data loss.  We anticipate this focus will continue for years to come, and we are well placed to capitalise on the growth opportunity, with a broad and scalable product set which meets clients' needs and a strong, growing base of reference clients.

Whilst the volume and value of new business are good indicators of market traction and performance, the continuation of licences sold in prior years is of critical importance to the Group's strategy.  It is therefore very encouraging that all customers who have used the PCI-PAL platform remain users.

Following the disposal of non-core businesses, the Group remains in a strong financial position with a gross cash balance of £2.9m and £3.35m of deferred loan notes at the period end, which will enable us to invest in support of our growth plans.

PCI-PAL continues to perform well against its ambitious organic growth strategy.  The recurring revenue base continues to grow and the contracted forward order book has also increased substantially.  

The Board is confident in its strategy and believes that PCI-PAL continues to have exciting growth prospects over the next few years.

Chris Fielding                                                   William Catchpole

Chairman                                                          Chief Executive Officer

22 February 2017

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