Final Results, Analyst Briefing & Investor Presentation

Continuing Significant Sales Growth with Channel Partnerships Delivering

 PCI-PAL PLC (AIM: PCIP), the global provider of secure payment solutions, is pleased to announce full year results for the year ended 30 June 2020 (the "Period").

Financial Highlights

• Revenue increase of 56% to £4.40 million (2019: £2.82 million)
• Gross margin increased to 69.2% (2019: 60.2%) reflecting the continuing transition of our service delivery mix to the higher margin Amazon Web Services ("AWS") platform
• Significant increase in new sales bookings leading to signed recurring Annual Contract Value ("ACV") increasing by 37% to £2.62 million (2019: £1.91 million)
• Total contracted recurring ACV ("TACV¹") increased 66% and now stands at £6.75 million (2019: £4.06 million)
• Deferred income increased 85% to £4.53 million (2019: £2.45 million)
• Loss before Tax in line with expectations at £4.35 million (2019: £4.50 million) following continued investment in our growth plans
• Cash balances at year end of £4.30 million (2019: £1.49 million) with a further £1.25 million of debt facility available to draw
• New £2.75 million debt facility entered into in October 2019 and £5.00 million equity placing undertaken in March 2020 to provide additional working capital to support continued growth of the Group and the path to breakeven

 Operating Highlights

• Recurring revenue model proven with record full year on year revenue growth
• Signed 100 new sales contracts in the year
• 78% of new sales contracts for the Group generated from channel partners
• Continued to sign more enterprise customers, including signing the Group's second and third largest contracts in its history, with ACV of US$ 0.57 million signed in North America and £0.55 million ACV in the UK
• North American momentum continues to build, with year on year ACV sales increased 145%
• TACV for North American region increased 181% year on year to £1.66 million (2019: £0.59 million)
• Customers live across all six global regions including EMEA, North America, and ANZ
• Deployed our services with more than 70 new customers
• Time to go live of new contracts from the date of signature to deployment ("TTGL") improved to a 5.5 month average across all sales channels
• Announced new technology partnerships with Avaya and Cisco; as well as competitor displacements at three EMEA-based resellers
• Achieved customer retention of 95% by value in the year
• Simon Wilson, US-based, Chairman appointed with significant public company and international software growth experience

¹ TACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced

Current Trading & COVID-19 Update

• Strong start to the new fiscal year with ACV in line with management expectations.  Run rate revenue for the two months up to the end of August 2020 is up 41% compared to the same period last year
• Revenue visibility currently at more than 80% for the year against current market forecasts
• Sales highlights include:

o A significant new customer contract to provide both our Agent Assist and Digital secure payment solutions to a well-known, North American headquartered, global retailer with more than 1,500 agents in their North America based contact centre 

o An initial contract to provide our Agent Assist solution to one of the largest local councils in the UK, sold through our long standing partnership with Civica

• Launched Speech Recognition feature set for our Agent Assist and IVR solutions.
• Achieved record TTGL delivery of only 9 weeks for a contact centre of more than 500 seats, which went live in July, having been the largest deal signed in Q4 FY20
• Announced the formation of the Company's Advisory Committee, adding additional breadth of market and product perspectives as the Company navigates its future and capitalises on the opportunities available to it

COVID-19 Update:

PCI Pal's business model and technology have meant that we have so far not been materially impacted during the extremes of lockdown in both the UK and US and remain well positioned to minimise the potential negative impacts of the COVID-19 pandemic on the Group.  Since the start of the new fiscal year we have continued our growth momentum, which we attribute to:

• our strong relationships with financially stable, large cloud-based reseller partners through whom we sell the majority of our contracts by both value and volume; and
• our cloud platform, including our ability to implement and deliver services to customer entirely remotely.

The on-set of the pandemic has served to accelerate the market-wide transition from on-premise communications technology to cloud-based services.  We believe that this will benefit PCI Pal over the longer term as the leading cloud-only provider in the market.  PCI Pal's services are critical for home-workers wishing to handle sensitive customer data, particularly credit or debit card data. As a result, we believe that demand for our services may increase with time, despite the short-term general business impact the pandemic has had in delaying certain buying decisions at prospective customers.

The following provides an update to the COVID-19 overview provided in our full year trading update in July 2020:

• Project delivery timescales continue to shorten with high demand for services as a result of the increased numbers of contact centre agents working from home.  Our performance against our TTGL metric has been strong with 16 projects already delivered by the end of August 2020.
• New customer contracts sales timing remains less predictable than it was before the start of the pandemic.  We had reported that we had seen delays in contract signing during our Q4 FY20, and whilst these delays are no longer evident in newly created sales opportunities, we would note that not all those specific deals delayed in Q4 FY20 have as yet re-commenced engagement.  Demand through new pipeline generation is strong though, and in line with our expected requirements to deliver management's near-term sales forecasts.
• The Company has maintained market guidance given the above, and whilst we will monitor progress very carefully against market expectations, we believe we are well positioned to take another significant step forward this year in line with those expectations.

Commenting on results and prospects, James Barham, Chief Executive said:

"I am very pleased with the significant progress that we have made this year, particularly considering the entirety of our final quarter was during the heights of the initial impacts of COVID-19.  Despite this we have been able to continue our momentum, evidenced by the signing of 37 new customer logos in our Q4 alone. 

"We have taken another strong step forward in revenue growth year on year, which is a result of our continued success in growing our key sales metric of TACV.  This is testament to our business model as we have successfully on-boarded new channel partners who are generating an increased pipeline of opportunities, as well as our efforts in adding further improvements to our ability to enable and onboard new customers.

"Our early adoption of cloud technologies in our space, and our commitment to channel, is enabling us to service the entire contact centre market within our focus territories, and it is this differentiator that will see us continue our progress towards cash generation and profit breakeven under the current plan as we look forward to another year of substantial revenue growth."

Analyst Briefing: 9.30am on Monday 14 September 2020

An online briefing for Analysts will be hosted by James Barham, Chief Executive, and William Good, Chief Financial Officer, at 9.30am on Monday 14 September 2020 to review the results and prospects. Analysts wishing to attend should contact Walbrook PR on [email protected] or 020 7933 8780.

Investor Presentation: 10.00am on Thursday 17 September 2020

The Directors will hold an investor presentation to cover the results and prospects at 10.00am on Thursday 17 September 2020.

The presentation will be hosted through the digital platform Investor Meet Company. Investors can sign up to Investor Meet Company and add to meet PCI-PAL PLC via the following link https://www.investormeetcompany.com/pci-pal-plc/register-investor. For those investors who have already registered and added to meet the Company, they will automatically be invited. 

Questions can be submitted pre-event to [email protected] or in real time during the presentation via the "Ask a Question" function. 

For further information, please contact:

About PCI Pal:

PCI Pal is a provider of secure payment solutions for contact centres and businesses taking Cardholder Not Present (CNP) payments. PCI Pal's globally accessible cloud platform empowers organisations to take payments securely without bringing their environments into scope of PCI DSS and other card payment data security rules and regulations.

With its products served from PCI Pal's cloud environment, integrations with existing telephony, payment, and desktop environments are light-touch, ensuring no degradation of service while achieving security and compliance.

PCI Pal has offices in London, Ipswich (UK) and Charlotte NC (USA). For more information visit www.pcipal.com or follow the team on Twitter: https://twitter.com/PCIPAL

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 JUNE 2020

In my first year as Chairman and director of PCI Pal, I am very pleased to report on a major year of progress for the business.   This despite the, at times, daunting challenges and uncertainties caused by the COVID-19 pandemic and varying government responses around the world.

People

Without question, the pandemic has presented varying challenges on all businesses in every sector of the global economy, but at the personal and individual level the challenges have been unprecedented.  Almost overnight our people not only had to cope with working from home, but also with a myriad of concerns, fears and challenges relating to family health and daily routines, caring for extended family members, and concerns for financial security. I am extremely proud to say that our teams in both the U.K. and U.S. responded gallantly, and in fact drew closer together as a result. Management supported this rapid transition to a 'new normal' by implementing flexible work schedules, being sensitive and sympathetic to individuals who perhaps had more challenging home environments than others and continuing to provide and enhance remote-based IT support for collaboration with team-mates, partners and customers.

During the prior year of FY19, James Barham as the new CEO, expanded and strengthened the management team across the functions of Sales, Technology and Security. During FY20, against the backdrop of the pandemic but in the face of top line sales growth, the team's expansion continued to underpin the management teams' strengths in specific operational areas such as professional services, partner support, and both pre and post-sales technical expertise. By select hiring in the U.S., the Group has also further strengthened its ability to serve an increasingly global profile of both partners and end customers, in particular those headquartered in North America, which remains the Group's key target growth market.

The PCI Pal team has grown from 50 to 58 employees over the course of the year and I would like to personally thank all of our employees for their excitement, dedication, flexibility and hard work in growing PCI Pal and in pursuing our Mission: safeguarding the reputation and trust of our customers. The Board remains as committed as ever to supporting our people in terms of professional development, flexible work environments and competitive compensation and benefit packages. I have no doubt that they will all continue to build on their successes during the last twelve months, both as individuals and as globally focused teams, as we move forward through and beyond these globally challenging times.

Strategic Direction

During the year, the Company has made demonstrable progress in executing its Vision of becoming "the preferred solution provider that technology vendors globally turn to for achieving PCI compliance for payments by phone" and pursuing a Cloud strategy. 78% of sales were made through channel partners. Our Cloud platform hosted on AWS has grown to cover 6 points of presence around the globe and our Cloud solutions are being adopted by small, medium and large enterprises alike. The attractiveness of PCI Pal's strategy to focus on channel partners is matched by the demand from end customers. During FY20 the Company added 100 new end customer logos and deployed 72 new customer implementations. Behind this strategy, our innovation has continued with the launch of PCI Pal Digital, an omni-channel offering as well as Rapid Remote to help those customers rushing to deploy work-from-home solutions in the face of COVID-19.

Fund Raise

Adding to its £2.75 million debt facility secured in early FY20, the Company completed a £5.00 million equity fund raise in March 2020.   Its success has been reflected in the Company's share price performance since the date of the announcement and is evidence of the strong support that the Company enjoys from its shareholders. In addition to creating a stronger balance sheet, increasing working capital and providing for flexibility in the face of uncertainties relating to the pandemic, the fund raise was also designed to fund expansion. As we look forward to FY21 we are planning for additional sales and marketing resources, support to North American based channel partner relationships; and to expanding product management functions targeting long term improvements in time to go live ("TTGL") for new customers. These additional funds will also allow the Company to consider potential new expansion opportunities in the future. Full disclosure of the terms of this equity fund raise have been made in the notes to these accounts and within the Chief Financial Officer's Review.

Shareholder Communications

As a board, continuous improvement in shareholder communications remains a key objective. Building upon the actions taken in FY19 which included more detailed investor presentations, expanded analysis of results and underlying KPIs, a more frequent cadence of communications and the judicious use of RNS-Reach, and participation in investor-focused events such as 'tech demo days' and investor group conferences, we have taken further steps in FY20. These include myself as Chairman, offering one-on-one shareholder meetings around the time of the AGM each year, expanded efforts by the executive team to meet with retail shareholder groups, use of new communications technology aimed at shareholder needs such as the Investor Meet Company platform and plans for enhanced web site disclosures. We look forward to continuing and reinforcing these programmes and events as each year progresses, and I welcome your feedback and suggestions for further improvement.

Corporate Governance

During FY20 I have focused the expanded resources of the Board in a number of key areas of corporate governance and initiatives to set the Board on a path of continuous improvement over time. These areas included the Board's first evaluation of the effectiveness of the Board, its committees, and its individual directors. Other areas of initiative were a fresh review of the Company's risk profile, and our appetite for risk and steps necessary to mitigate known and anticipated risks, an update to the Board committees' terms of reference, and embarking on a 5-year refresh of our forward strategic plan to take effect from FY21 onwards.

The nature and results of these early initiatives are summarized in more detail in the Corporate Governance Report.

Changes in Accounting Rules

The Company implemented IFRS 16: Accounting for Leases effective from 1 July 2019. The Group has chosen not to restate the previous years' financial statements following the adoption and there has been no overall effect on the loss before tax. Full disclosure of the changes has been made in the notes to these accounts.

Advisory Committee

Following the year end, in August 2020 we announced the formation of the PCI Pal Advisory Committee (the "PAC").  The formation of the PAC is consistent with both enhancing the Board's ability to manage its risk profile, as well as to provide expert advice into the formation of its future corporate strategy.

Looking Forward

FY20 has been a year of both significant achievement as well as significant expansion of the risks and opportunities facing the Company and the markets in which it operates. The Board is cautiously optimistic about managing through the COVID-19 pandemic but remains vigilant of the potential for as yet unknown additional economic and business impacts. Nonetheless, we are a growth company operating in growth markets, and so are confident in our business model. I look forward to sharing further progress reports and news during the coming financial year, as we continue our journey to achieve profitability and positive operating cash flow.

Simon Wilson

Non-Executive Chairman

CHIEF EXECUTIVE'S STATEMENT

FOR THE YEAR ENDED 30 JUNE 2020

Introduction

Reporting on my first full financial year in the role of Group CEO, I am pleased to report that we have made significant progress against our key growth metrics.  Revenues grew 56% year on year to £4.40 million (2019:  £2.82 million).  This year on year increase further illustrates the benefits of our SaaS-based revenue model as revenue is recognised from TACV, our key sales metric which has continued to grow in the year by 66% to £6.75 million (2019: £4.06 million).   The start of the current financial year has started well, and we have strong revenue visibility which for the coming year is currently at over 80% of the market's revenue expectations for the year.

I am equally pleased to report that we have made extensive progress towards the Company's Vision: to be the preferred solution provider that technology vendors globally turn to for achieving PCI compliance for payments by phone. Having led the way in utilising cloud technology in our market, and launching our true-cloud environment back in October 2017, we now have the most advanced and mature cloud offering in our market with customers live on all 6 regional instances of the platform within AWS across EMEA, North America, and ANZ regions.  It is this technology focus that has enabled us to execute against our Vision. Many of our technology partners are cloud-native themselves and are a natural fit for PCI Pal helping them to provide secure payment solutions to their customers around the world.  I am pleased to confirm that we ended the year with all our major Contact Centre as a Service ("CCaaS") and Unified Communications as a Service ("UCaaS") partners live and on-boarded across all regions of our platform. 

It is these enabled partnerships that are critical to our continued growth and long-term profitable scale.  As of the end of the year, we are now resold by over 40% of North American and Western European Gartner Magic Quadrant CCaaS providers.  These same partners are a key reason why we achieved the milestone of signing more than 100 new customers in the year (2019: 77) with 78% of these customers generated through channel partners.  I am extremely encouraged by the accelerated number of new customers signed as the year progressed, reflected by the 37 new customers signed in Q4 alone.  This is a 76% increase compared to the customers signed in Q1 in spite of the COVID-19 outbreak and illustrates the effectiveness of our channel model in producing higher quantities of pipeline opportunities.  We are optimistic that opportunities will continue to increase as we on-board more partners, and as our partner relationships mature over time following full engagement with our partner programme and channel sales functions. 

In the year, the Group signed new contracts across all regions with a recurring Annual Contract Value ("ACV") of £2.62 million (2019: £1.91 million).  I was particularly pleased that despite the pandemic, we signed £0.80 million ACV in our Q4, so whilst we were impacted by delays in our sales cycles as a result of the onset of COVID-19, which ultimately reduced our final ACV number for the year, we were nonetheless able to continue our momentum.

This sales traction is bolstered by further progress in our ability to implement new customers, and our key project delivery metric of TTGL is now at an average of 5.5 months overall across all customers (which remains within the 4-7 months previously stated). We have made extensive improvements since we introduced the TTGL metric in January 2019, and customers signed more recently are being implemented much faster.  For instance, contracts signed in FY20 have an average TTGL across all deployments of just 4.4 months.  Additionally, this improvement is a natural positive result of having more integrated partners now fully on-boarded, live, and delivering new contract sales. Their repeatable technology stack integrations result in shorter implementations, and reduced project effort levels for us, and their end customers.

We have also achieved a number of large scale customer implementations during the year.  In H1 we announced our largest contract to date in the US (and the Company's second largest contract in its history), won through both a competitive tender process, and also a competitive Proof of Concept ("POC").  Our Professional Services team went head-to-head with one of our major competitors for this POC. We achieved highly positive reviews from the customer and ultimately won the new contract. Following a successful, collaborative implementation the customer is live on our platforms, following a deployment achieved within six months. 

The implementation skills of our Professional Services team across EMEA and North America are having a directly positive impact on our Net Promoter Score ("NPS"), the internationally recognised measure of customer satisfaction. I am proud to report that our NPS has increased to 87 against the NPS global benchmark of 43, which puts us comfortably in the top 25^th percentile of companies worldwide and 102% above the global benchmark. As a result, our ability to reference customers and produce case studies and testimonials has significantly increased putting us in an improved position of strength when competing for business of any size.  This is strong evidence of the effectiveness of the operational improvements we have made since January 2019, which has been one of our top Company-wide key initiatives.

Market Drivers & Market Positioning

PCI Pal's addressable market consists of any organisation taking payments by phone or within contact centre environments anywhere in the world, and in particular within our core focus geographic markets of the UK and North America.  PCI Pal gains access to these markets by leveraging a partner-first go-to-market sales model, which involves working primarily through resellers who themselves are involved in providing services for customer interactions for the sorts of organisations we are targeting.  Today these partners include CCaaS, UCaaS, Carrier (Telco), Value-Added Resellers ("VARs") of the major telephony platforms, Payment Service Providers, and consultancies.  When we sell directly to the end customer, this is typically for strategically important or large enterprise size accounts who have a preference to deal directly with their technology suppliers.

A key differentiator for us is our ability to serve any size organisation across our addressable market.  Our customers range from small contact centres up to the very largest with more than 5,000 agent seats.  We can serve these customers from anywhere in the world through our best-in-class truly-virtualised cloud platform, hosted within AWS.  PCI Pal was the first in this market to launch a true cloud environment and maintains the most advanced and mature platform globally. 

Contact centre markets in both the UK and US represent between 3-4% of the working populations of those countries, so in contact centres alone there is a sizeable market opportunity to address.  Our ability to serve any size of contact centre is essential when considering the make-up of this mass-employment pool across both countries.  In the US alone, 93% of contact centres (37,000) have less than 250 agent seats and employ 2.0 million agents making up more than 55% of the entire employed agent-base across the country.  As such, our ability to serve contact centres of any size is critical to maximising our market opportunity.

The market is underpinned and strengthen by two major global industry dynamics occurring today; the increase in regulation and governance surrounding data security worldwide; and secondly, the transition in the communications market of services served from on-premise equipment to services delivered from the cloud.

In recent years we have seen regulation and governance of data security increase both through well-publicised standards such as the General Data Protection Regulations ("GDPR") in the EU, as well as state level statutes in the US such as the California Consumer Privacy Act.  These are in addition to standards such as the Payment Card Industry Data Security Standard (PCI DSS) which specifically govern the activities of companies handling personal data, specifically credit and debit card data.  Regulatory and governance standards combine as one of the primary reasons for the change in organisational mindset towards the risks posed by cyber-crime today.  This change in mindset is creating a significant shift towards more responsible and thorough data security protocols across all industry sectors.  Specifically, from a payment security perspective, PCI Pal makes the job of complying with these standards, and securing data much easier for these companies who otherwise would be faced with significant challenges, and therefore costs, to achieve compliant and secure operations.  Additionally, PCI Pal secures the most sensitive of personal data, with payment data being the most easily monetised by cyber criminals should it fall into their hands.

With the cloud communications market expected to grow considerably, the high growth UCaaS and CCaaS sectors are evidence of the shift in technology adoption occurring across the communications industry today.  Organisations are moving from traditional on-premise telephony to cloud-based communications through the likes of Vonage, 8x8, and RingCentral.  This shift has been further accelerated by the on-set of the COVID-19 pandemic where the benefits of cloud-based services have been emphasised.  These benefits include flexible homeworking capabilities; robust disaster recovery and responsive business continuity capabilities; as well as the availability of scalable cost models. Given our technical approach and channel business model, we are well positioned to capitalise on this market trend as we work with our partners to increase our access to this expanding market opportunity.

PCI Pal Cloud

Having launched our cloud environment almost three years ago in October 2017 and having defined a key strategic objective to be the leader in cloud-based secure payments services in our market globally, we have gathered significant technical momentum. Our platform continues to evolve and is already the most mature in the market by some margin, with our competitors' primary offerings remaining hardware or privately-hosted technologies.  This momentum is underscored by the cloud-to-cloud partnerships that we have built in the last 24 months with the likes of Vonage, 8x8, Genesys, and Talkdesk, as well as our ability to engage with, sell to, and deliver enterprise size deployment projects with some of the largest contact centres in the UK and the US.

We utilise AWS for the virtualised hosting of our cloud platform, a hosting provider that we selected on the basis that they were, and still are, the market leader both in terms of capacity and geographic coverage.  Our true-cloud approach allows us to deliver services across the globe whilst maintaining data sovereignty and regional handling of payment traffic by leveraging the data regions we have created within the AWS global hosting environment.  This is both of appeal to smaller local customers who need their data to be handled within the territory in which they trade; but equally to larger multi-national organisations whose businesses may be geographically dispersed with complex data governance requirements.  Our customers can therefore use a single PCI Pal service, but choose to handle their customers' data locally wherever that customer is utilising the service.

Additionally, our technology strategy and focus on cloud has been purposefully made complementary to our partner-first go to market sales model.  AWS is the most commonly adopted hosting environment used by our cloud-served partners, creating natural integration and interoperability benefits for us when on-boarding those partners. 

PCI Pal's cloud platform has always used cloud native technologies, and today our platform continues to evolve, using more advanced ways of operating such as serverless technologies and micro-services. This approach is enabling us to be nimbler within our development cycles, more robust in our release processes, and allowing faster development cycles for new products and features.  It has been our first-mover advantage and early commitment to cloud that is ensuring we lead the way in this technological approach to our market.

Product Update

In the year we launched two new products; our PCI Pal Digital offering for omnichannel payments across channels such as WebChat, Social media, SMS, and email; and Rapid Remote our rapid deployment service, which was developed in response to the increased demand for ultra-high pace deployments in the face of the on-set of COVID-19 and increased security requirements for agents working from home.  

Since its launch in February, we have both sold and delivered our first PCI Pal Digital customer and we have continued to build momentum with this product with further sales since the year end.  Additionally, we have signed a number of Rapid Remote generated opportunities, several of whom have moved to full deployment models.   One of these being the largest customer that we signed in Q4 FY20, which went live with the full deployment in just 9 weeks.

In line with our plans following the fundraise in March 2020, we intend to increase our investment in product management as we look to evolve our product roadmap and capitalise on our existing channel partnerships, as well as putting a more strategic and targeted focus into winning more enterprise-size customers.  We have announced in this report the launch of our Speech Recognition feature-set for both our Agent Assist (live agent payments) and IVR (fully automated payments).  The speech recognition feature will combine with our existing capabilities to empower our customers to accept secure payments through either keypad entry (DTMF) or spoken voice.  Both with the same secure outcome, compliance upsides, and cost savings.

North America

We are pleased with our progress in North America.  In what is only our second full financial year in the territory, we have significantly increased our sales bookings with new contract recurring ACV increased 125% year on year to £1.08 million (2019: £0.48 million).  As we have stated previously, we have concentrated our efforts in establishing full enablement of the North American partners with whom we began working in the prior year, and I am very pleased to confirm that we have on-boarded all major partners announced to date.  It is these partners who will enable us to further grow our pipelines, and therefore sales bookings, in what is the most significant geographic territory opportunity for the business.

Contributing to the year-on-year growth in US sales bookings was the win of the Company's second largest contract to date, won through a competitive tender process. Announced in December 2019, the contract is for an initial term of three years with a recurring ACV of $566,000 (approximately £434,000).  This customer is now live, and is further evidence of our capability to sell to, win, and deliver enterprise customers.  Additionally, and as we have referenced previously, this contract was sold on a multi-year prepayment commercial model, and we can now confirm that following the year end, we have received payments for years two and three of their licenses (cash value $1.13 million).  We invoiced the first year licence and set up fees on signature of the contract and this invoice was paid in H2.

Other sales highlights include a contract to provide both our Agent Assist solution to more than 700 agents at the US contact centre operations of a well-known, financial services business which has an extensive European footprint; and a contract won through a competitive tender process with a Fortune 100 US insurance company.  This contract was for an initial phase of deployment, which is now live.

The TACV for the region at the end of the year was £1.66 million representing a 181% increase on the prior year (2019: £0.59 million).  Revenues for the region represented 11% of Group revenues at £0.50 million (2019: 3% £0.10 million), reflecting the SaaS-based revenue model as the growth in new contract sales TACV begins to feed through into recognised revenue.  We are continuing to see increases in key sales metrics that will cause the North American business to grow at faster rates than our more mature EMEA region, and eventually we expect the North American operation to surpass it.

From a new sales contracts perspective, and as noted in our Trading Update for FY20 in July, as a result of the COVID-19 pandemic, we did experience some delays in new business sales conversion for a number of more mature opportunities expected to close at the end of our Q3 or during Q4.  For the North American operation, this had an impact on H2 new sales which otherwise would have produced a stronger full year outcome but for these delays.  I am pleased to confirm that the decision-making delays we saw during the on-set of the pandemic have reduced.  We have made a strong start to FY21, with newly created opportunities progressing with sales velocity closer to pre-COVID-19 anticipated levels.

With the majority of our global partners being headquartered in the US, the North American partner landscape is not only important for the region, but for the Group worldwide.  Having fully on-boarded all key global partners in the region by the year end, I can report that those partners by majority contributed to the record 37 new customer contracts signed in Q4 across the Group.  This includes our new global arrangement signed with 8x8, an extension to our previous UK-only contract, and Talkdesk, both of which were announced in H2 FY19.  These partners add to our existing on-boarded global resellers headquartered in the region including Vonage, Worldpay B2B (previously named Paymetric), and Genesys.

In the year we added two key technical partnerships with two of the most prominent traditional telephony vendors in the world, both headquartered in the US; Avaya and Cisco. We have been selected by Avaya for membership as a Technology Partner to their DevConnect Program; and additionally, Cisco has selected us as a Preferred Solution Partner as well as granting us certification for compatibility with their various platforms. These technical partnerships are key in underlining our credibility within both organisations' reseller communities in the US and worldwide, as well as providing credibility for our own services' interoperability with their platforms for direct enterprise customers using their technology. 

We continue to see lower levels of competition in North America compared to the UK, with a small number of US-based competitors. Whilst we were not the first UK company in our market to launch in the US by a number of years, we believe that in our short time in the region we are now beginning to establish our brand as the strongest and most recognised.  This is being achieved by a two-pronged marketing strategy. First, the support of our partners through collaborative marketing efforts and leveraging their extensive market access capabilities. Second, continual stepped improvements in both our digital marketing capabilities and thought leadership activities driving relevant, interesting, and useful content into the market.  In addition to growing our brand exposure to the enterprise end of the market, our focus on easy-to-use cloud technologies and partner-first approach means we have an early-stage foothold on the mass-market small to mid-size contact centre segment.  Our brand momentum in the region is evidenced by our leading position as the brand receiving the highest Share of Voice ("SOV") in the market compared to our main competitors, with PCI Pal receiving a very significant 73% of media mentions in our market sector in the US across the full year. 

We continue to run our business in the ANZ region out of the US due to the beneficial time zone overlap of our employees based on the US west coast.  We are focused on supporting our partners who have businesses in ANZ, and as a result have grown our customer-base in the year.  Reference customers in ANZ include Queensland State Government and News Corp Australia, and we have also extended our reach through the signing of a new reseller in the region who is the second largest Genesys VAR in Australia.  This partner also has operations in the U.K. so as a by-product there is also early stage engagement in EMEA. 

EMEA

The EMEA business, served from the UK, is the more mature of the two core regions and as a result has a more established base of customers that are live and producing recurring revenue.  We took a major step forward in revenue from EMEA for the year, 43% ahead of the prior year at £3.89 million (2019: £2.72 million). 84% of this revenue is recurring licences or transactions. This is a direct result of the growth in new sales bookings that we have seen in the last 24 months, which are now producing recognised revenue as the customers are implemented. 

Revenues for the EMEA business are generated both from services on our first generation, privately-hosted platform and, since 2018, from our true-cloud AWS environment which enjoys much higher gross margins.  We have not sold services on our first-generation platform since early 2018, with all sales since then being on our AWS platform.  We finished the year with 46% of EMEA revenues generated from our AWS platform, (2019: 18%) an increase of 156%.  To date we have opportunistically transitioned a number of our customers on our first-generation platform to our AWS environment.  Plans have though now commenced to proactively transition these customers to our higher gross margin AWS environment over the next 24 months.

TACV in the region increased 46% year on year to £5.08 million (2019: £3.47 million) illustrating the outlook for recurring revenue from signed contracts as they are implemented and reach revenue recognition over the coming year.  Incorporated into these TACV numbers, is our new business ACV signed in the year.  Similar to North America, EMEA sales bookings were adversely impacted due to timing delays during the on-set of the pandemic in the final four months of the financial year.  We finished the year with new ACV sales bookings 8% greater than the prior year at £1.53 million (2019: £1.42 million).  I am pleased to report that the EMEA business has started the new financial year well and in line with management expectation.

Sales highlights in the year include the signing of another major enterprise-size government agency contact centre, with more than 4,000 agent seats.  The contract, to deliver our Agent Assist solution, has an ACV value of £0.55 million.  We will be invoicing the first years' license when agreed delivery milestones have been met, and we continue to expect this to occur in H1 FY21.  We have a particularly strong presence in U.K. public sector and this latest contract further underlines our position in this specific market vertical. 

Through our resellers, who focus on the public sector, such as Civica, we have now more than 40 local authorities using our services to secure payments for U.K. citizens.  PCI Pal is a Crown Commercial Services Certified Supplier, and our products are available to public sector organisations through the U.K. government G-Cloud framework.

Other sales highlights in the period include a number of further contracts through our reseller relationship with Capita Pay 360, one of which is to a well-known FTSE 250 retailer delivering our services into their contact centres in the UK and South Africa.  In H2 this customer went live with all services across both territories.  Additionally, we also won a contract with a global Nutritional Supplements firm, headquartered in Cambridge, UK to provide not only secure credit card payment services but also the facility to securely collect customer bank details for direct debit transactions and bank transfers. This company serves customers across Europe, including Germany, where direct bank transfers are more prevalent for orders taken by phone.  This customer was sold through our newly on-boarded integrated partnership with Puzzel, the Nordic based pan-European CCaaS vendor.

We have been particularly successful in EMEA in opening up partnerships with new resellers who have had historic relationships with our competitors.  As we have previously reported, a number of our closest competitors invested in the market earlier than us, and as a result they had been able to achieve working relationships with the sorts of organisations we would seek to partner with.  Nonetheless we have proactively targeted leading VARs with these historic competitor relationships in the region, and particularly those that focus on the resale and maintenance of the major telephony vendors with whom we are accredited (such as Genesys, Avaya, and Cisco).  I am very pleased with our progress on this initiative and can report that we completed the year having signed three new important VAR resellers. Two are leading Genesys VARs, one in Ireland (with whom we have sold and delivered our first customer) and the other in the UK. The third is a leading UK-based Avaya VAR.  Both of the UK-based resellers have their own hosted instances of Genesys and Avaya respectively, and so we are deploying repeatable integrations which can be used across all their customers using services on these platforms. 

The EMEA business today is very much focused on the U.K. market.  We continue to monitor opportunities, both through existing and new partners, to gain footholds in other countries in the territory as we assess our future long-term strategy and timing to expand across mainland Europe.  We remain cautious to balance the EMEA opportunities with the risk of management distraction and resource diversion away from our core focus opportunities in our stated target markets in the UK and North America.

Channel Partners

PCI Pal has a partner-first sales model which means that we have a company-wide focus on generating most of our sales through channel sales partners.  In the year 78% (2019: 84%) of new customer contracts were sold through channel partners, equating to 42% of the total ACV by value.  We anticipate channel to be the majority by value over time as our lead generation from channel increases as a result of our growing base of on-boarded partners.   

As we have referenced in the Market Drivers section of this report, the contact centre market is by majority made up of contact centres of 250 agent seats or less.  In the US 93% of all contact centres (37,000 in total) have less than 250 seats and employ 55% of all agents across the country.  This is clear evidence of the long-term scale opportunity for PCI Pal if we are able to profitably win and serve these smaller, higher quantities of contact centres who make up a majority of the addressable market.  Our channel approach is integral to this capability, particularly through our integrated partners such as 8x8, Vonage, and Talkdesk.  This growing capability is being substantiated by the accelerated increase we have seen across the year in the number of new customers we are signing quarter on quarter as more of our partners become fully enabled and relationships mature finishing the year with 37 new customers signed in Q4 alone, compared to 24 in Q1.

Channel not only gives us the ability to cost-effectively access a wider addressable market, but it also empowers us to efficiently deploy higher quantities of customers leveraging the highly repeatable nature of our Integrated Partner engagements.  Additionally, our partners provide first-line support to customers, so PCI Pal can be highly efficient in servicing these accounts, focusing instead primarily on the success of the partner.  This sales strategy plays a major part in establishing the significant operational gearing that this business is building towards. 

Having started the year with the announcement that we had been awarded EMEA Partner of the Year for Genesys AppFoundry, this award led to increased cooperation within Genesys. While commercial relationships with large partners such as this take time to nurture and develop, we are now seeing progress as a result of the time investment and commitment we have shown to them. This includes the signing of three new Genesys VAR resellers in the period across EMEA and APAC.  Our collaboration with partners has only increased during the on-set of the COVID-19 pandemic, and we have been particularly active across the final four months of the year creating extensive amounts of thought leadership content and collateral with these partners, naturally strengthening those relationships while at the same time growing awareness of our products with their customer bases.

We categorise our partners into four different groups:

• Integrated Partners - Such as CCaas, UCaaS or carrier partners with tight telephony, and sometimes desktop, integrations. Repeatable integrations facilitate shorter customer implementation times.

• Solution Providers - Typically VARs or Systems Integrators of the major telephony platforms such as Genesys, Cisco, and Avaya. Solution Providers also include payment service providers such as Paymetric and Civica.

• Referral Partners - Partners who introduce customers to us, to whom we then sell direct. These include Master Agents, consultants, as well as other organisations who may prefer to first introduce, prior to becoming a fully enabled reseller.

• Technology Partners - a recent addition to our partner landscape, and whilst expected to be less numerous, we have identified an important subset of technology vendors with whom we have sought technology accreditations that allow us to sell to both their own partner communities and also major enterprise customers. 

Whilst typically, the vendors we would see as Technology Partners have been the more traditional vendors such as Avaya and Cisco, we have also seen cloud vendors such as inContact (an existing referral partner) and Five9 adopt the same approach.  Whilst being part of these communities has some value, they do not produce the same level of volume or interaction that can be achieved through a fully on-boarded reseller partner. We are therefore careful to allocate resources judiciously, while being mindful that closer relationships can be built with these organisations' own VAR reseller communities.  We also carefully assess these technology partners' appetites for direct reseller relationships.

Operations

I am extremely pleased with the stepped improvements we have made across our engineering and professional services departments in the first full year since we re-structured both of them in H2 FY19. 

We have continued to invest in these critical functions by adding several new key resources and skills to the teams. These have been targeted at supporting larger volumes of telephony deployments both for integrated partners and direct customer deployments, as well as adding a Head of Development reporting to the CTO.  Some of these new people have been hired in the US to support increasing demand for our services and delivery there, even during the on-set of COVID-19 where we benefitted from our ability to deliver services entirely remotely.

In FY20 we delivered 71 new customer projects which is an increase of 154% on the prior year (FY2019: 28).  This significant increase not only reflects the accelerated increase in new customers, but it particularly highlights our improved capabilities in deploying new customers.  As we continue to expand the volume of new business enquiries generated through our channel partners, the foundations we have now put in place across engineering and professional services position us to achieve service delivery excellence and, importantly, efficiency in our processes as we scale this business.

Our key project delivery metric of TTGL, which is a measure of the time it takes us to get from a new signed contract to revenue recognition (typically go live), stood at an average of 5.5 months (2019: 6.4 months) across all channels and all contracts delivered by the year end irrespective of when the customer was signed.  We have also begun tracking TTGL measuring only contracts signed in the year.  I am pleased to report that we are seeing improvements in this measure of TTGL, for example achieving an average of 4.4 months TTGL for all projects signed and delivered in FY20.  These measures taken together are indicative of further expected improvements in our overall operational gearing of the Company as the mix of our business continues to shift towards partner driven and AWS cloud hosted new customers. It reflects both the result of the considerable positive changes we have implemented since we introduced the TTGL metric in January 2019, and also the growing number of customer projects that we are delivering through Integrated Partners, such as Talkdesk, 8x8, Vonage, and Puzzel.

Given these improvements, it is not surprising that we have experienced a significant increase in our Net Promoter Scores, the globally recognised measure of customer (and partner) experience.  We finished the year with an NPS score 102% above the global benchmark, which is a significant improvement on the prior financial year.  The knock on impact of this positive outcome is that we are well positioned to produce more case studies and testimonials from partners and customers once their services are live.

Our #1 stated value is "Security is job zero", and so data security is an intrinsic part of everything we do.  In the year we achieved certification for the third year running against the current version of the Payment Card Industry Data Security Standards (PCI DSS) for our AWS cloud platform; and for the eighth year running for our first-generation platform.  This certification testifies that PCI Pal is the highest level of security required under PCI DSS and, as a Service Provider, can therefore handle payment data for any size organisation across the globe.  Latterly in the year, we also incorporated our new PCI Pal Digital product into the scope of our PCI DSS compliance when this was launched across our platform globally in January 2020. 

In addition to PCI DSS, we continue to maintain certifications for a variety of globally-recognised standards, including ISO 27001 (Information Security Management Systems), ISO 22301 (Business Continuity), ISO 9001 (Quality Management Systems), and ISO 14001 (Environmental Management).  In totality our accreditations not only bolster our own processes but ensure that our partners and customer have points of reference to recognisable standards by which the Company operates.

People

As our vision states, it is our people, beyond our technology, that underpin this business.  Creating an environment within which our people can succeed, ensures the success of our partners who rely on us.  Talent acquisition, people development and employee retention are a critical part of my role as CEO.  As a business that has grown from 11 to 58 people in under 4 years, we have maintained considerable attention to our hiring strategies.  I am personally very proud that our employee retention remains high, at more than 95%, with only one employee leaving us in the financial year.  From recent Company-wide surveys we know that our employees believe that the COVID pandemic has brought them all even closer together as we have worked as a team to reach a new normal during what have been very busy times for the business.  Our people can be proud of what they have achieved during this time given they have been managing some of the most challenging circumstances they will ever meet personally away from work.

Cultural fit carries significant weight during our new hire assessment process, and it is often the differentiator between a number of strong candidates.  This personal fit to the Company has always been essential as a small business with global operations.  Cohesiveness of our teams and how they interact with each other is critical to both our internal cohesion but also our external facing success.  And they must also know how to have fun.  To that end, it is very common for senior management to receive positive feedback from partners and customers, both prospective and existing, commenting positively on our people, our professionalism, our approachability, and our personality.  All of these things are critical for maintaining high customer retention and Net Promoter Scores.

New this year we have introduced an array of new processes and activities to our people strategy and plans; including the launch of the Company's Wellbeing Portal introduced during the height of COVID-19 lockdown in the UK and US; twice annual all-company people surveys; the launch of our cloud-based HR system "Breathe", as well as introducing a kudos initiative allowing employees to give each other and internal teams kudos, encouraging positive internal interaction. 

These new initiatives, supplement our existing people engagement activities which include quarterly Company all hands meetings, all now entirely virtual and run with far greater frequency during COVID-19 lockdown, and OKRs ("Objectives and Key Results") which we use to align our high level corporate strategy with all individual employees objectives within the business.

I would like to personally take this opportunity to thank every member of the PCI Pal team for going over and above, and particularly during what have been trying times for everyone personally away from work. 

Funding

As a fast-growing company, it is always critical to have sufficient working capital available to deliver on our plans.   Early in the financial year we entered into a debt facility arrangement drawing down £1.50 million of a £2.75 million facility.

In March 2020, we announced an equity fundraising with gross proceeds of £5.00 million, with £4.25 million of this raised from VCT investors to fund continued growth in North America.  We were delighted with the support shown by both our existing investors, and new investors, which will enable us to capitalise on our current North American expansion, and enable us to further advance our product management and development capabilities in order to support our long term ambitions and growth opportunity.

The additional funding has also ensured that we have strengthened our balance sheet.  We finished the year with £4.30 million of cash and £1.25 million of further loan facility to draw giving us sufficient working capital to continue to grow the business as we work towards the point of cash generation and then profit both of which are anticipated during FY22. 

Outlook

After a year of significant progress against our stated objectives; North American expansion, excellence in our global cloud platform, and execution of our channel go to market strategy, and in a year that incorporated significant market disruption due to the on-set of the COVID-19 pandemic, PCI Pal is positioned well to continue its momentum as a result of its market position and business model. 

Following the fund raise in March 2020 we have the opportunity to continue this momentum from a position of greater strength with further, cautious investment in North America, the Company's largest growth opportunity, improved product management capabilities, and a more robust cash position.  We are confident of the business' prospects given these factors while companies worldwide give more focus than ever to the security of data handled by home workers, and the availability of robust, flexible cloud services to enable business continuity during challenging times. 

We fully anticipate the cloud transformation of the communications industry to continue to increase pace with changing market conditions, and we look forward to another year of strong performance against our key metrics and significant revenue growth as we work towards our first months of cash generation and profit in FY22.

James Barham

CEO

CHIEF FINANCIAL OFFICER'S REVIEW

FOR THE YEAR ENDED 30 JUNE 2020

Revenue and gross margin

Group revenue grew by 56% to £4.40 million (2019: £2.82 million) and gross margin improved to 69% (2019: 60%). This improvement continues to reflect the higher margin revenue generated by the PCI Pal platform hosted on AWS which has only a limited reliance on third party carriers to receive or deliver calls. Going forward, we expect the gross margin to continue to improve as more sales, delivered on the AWS platform, reach revenue recognition.

The Group's revenue reflects its SaaS business model. It delivers its services primarily through channel partner into contact centres who are charged primarily on a recurring licence basis. The terms of the sales contracts generally allow for automatic renewal of the licences for a further 12 month period at the end of their initial term. Renewal and retention rates are extremely high exceeding 95%.

The Company has been selling only services served from its AWS platform since early 2018.  As it continues to add and deliver more customers so its visibility of recurring revenue increases. At the year end, the Group finished with a TACV of £6.7 million and so has a very high visibility of the market's expected revenue for the next financial year.

Administrative expenses

Total administrative expenses were £7.22 million (2019: £6.37 million), an increase of 13%. Most of the £0.85 million increase was driven by the investment in additional headcount for the Engineering and Professional Services departments as detailed in the CEO's review.

Personnel costs charged to the Comprehensive Income Statement (including commission, bonuses and travel and subsistence expenses) were £5.54 million (2019: £4.47 million), and £1.00 million (2019: £0.49 million) was capitalised as Development costs. These personnel costs make up 77% (2019: 70%) of the administrative costs of the business.

Changes in accounting rules

The Company has implemented IFRS 16: Leases, effective from 1 July 2019.  The Group has chosen not to restate the previous years' financial statements following the adoption of IFRS 16 and there has been no overall effect on the loss before tax following the adoption.  Full disclosure of the changes has been made in the notes to these accounts.

Exceptional non-recurring costs

During the year the Group did not charge any item as an exceptional item to the Statement of Comprehensive Income (2019: £0.36 million).

Adjusted operating loss¹

Adjusted operating loss for the Group changed as follows for the year:

¹ Loss from Operating Activities before exceptional costs and share option charges

The EMEA region's Adjusted Operating Loss increased by £0.19 million in the year.   The region continued to deliver strong sales which grew by £1.17 million to £3.89 million resulting in an improvement of £0.99 million in Gross Profit at a margin of 67% (2019: 59%).   Administrative costs grew by £1.18 million (13%) primarily reflecting a further investment in personnel, especially in the Engineering and Professional Services departments.   Depreciation and amortisation costs were £0.55 million (2019: £0.27 million).  The operations within this region have been established longer than those in North America and include the majority of the Engineering, Information Security and Professional Services people and costs for the Group as a whole.  

Having opened our business in North America with primarily sales and marketing resources, we now have a number of people in Engineering and Professional Services to meet the growing demand for our services in the region.    The North American head office is in Charlotte, North Carolina.    Operating Loss in the region improved by £0.41 million primarily driven by a £0.36 million improvement in Gross Profit as new contract sales were deployed.  Overheads improved by £0.05 million reflecting the savings made by the move back to the UK of James Barham offset by additional operational hires.      

New contract sales in the period have been strong in the region, including the Group's second largest contract to date, and so as these sales and subsequent customer deployments in North America continue to grow, we expect Operating Losses in the future to decrease.

Costs for our Central operations relating to PLC activities increased in the year reflecting the cost of James Barham being fully charged in the year following his relocation back from the US and Simon Wilson joining the Board in the financial year.

We have now reached a stage where the future growth in employee numbers is starting to slow, having grown rapidly over the last three years.  We are now focusing our hiring policy on targeted improvements and so we are expecting that our continuing, rapid sales growth will now start to deliver positive operational gearing as we push towards achieving profitability.

Further segmental information is shown in Note 9.                          

Key financial performance indicators

The directors use several Key Financial Performance Indicators (KPIs) to monitor the performance of the Group, its subsidiaries and targets.   The principal KPIs are as follows:

¹ TACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced

² Cash balance plus undrawn debt facilities

Actual performance to budget is reviewed on a monthly basis and the results are used to continually update the Group's forecast as to expected performance and cash resources.

Capital expenditure

As required by IAS 38, we have capitalised a further £1.00 million (2019: £0.49 million) in development expenditure as we continue to invest in additional headcount in the Engineering department allowing us to continue our investment in our cloud platform and introduce new features and products at an increased pace.

Towards the end of the financial year, following the strong new contract sales and deployments, the Group invested £0.30 million in further perpetual SIP, RTP and SBC software licences (2019: £0.08 million).  Other capital expenditure relating to computer equipment was £0.03 million (2019: £0.03 million).

Deferred income

Deferred income increased 85% to £4.53 million (2019: £2.45 million) mostly reflecting the significant growth in new business sales and the consequent increase in invoices raised in advance.   

TACV

TACV at the end of the financial year increased 66% to £6.75 million (2019: £4.06 million). This metric is a key indicator of our ability to reach first cash flow and then profit break-even as customers go live with our services.  At the end of the financial year £4.04 million of the TACV total was live and delivering monthly recurring revenue.   A further £2.19 million was going through our installation processes and so are not yet delivering monthly recognised revenue, but should start within a few months, as the related customer projects go-live.   The final £0.52 million related to contracts that were classed as being on hold, normally due to a lack of resource with the customer and/or channel partner, or our solution is part of a larger project being delivered by our partner, which normally has to be deployed first before we can start the installation.  The on hold contracts will eventually start being deployed but can take up to six months before the deployment process starts, and so these projects will have a more significant delay prior to reaching recurring revenue recognition.  Growing levels of TACV produces increasing levels of future revenue visibility, an attractive aspect of the Group's business model.

Set-up and Professional Services Fees

During the financial year the Group generated £1.29 million (2019 £1.11 million) of set-up and professional services revenue.   Of this total £0.09 million (2019: £nil) was for a one off project for a major client and so was released directly to the Statement of Comprehensive Income.   The balance will be deferred over the length of the related contract in accordance with IFRS 15.

Trade receivables

Trade receivables grew to £1.263 million (2019: £1.057 million). The level of receivables reflects both debtors generated from new business sales outstanding at the end of the period as well as debtors relating to invoices raised on a monthly basis.  As at the 30 June 2020, £0.62 million of the outstanding debtors related to newly signed contracts. 

Despite the operating challenges presented by COVID to all businesses, we have nonetheless been able to improve our collection rates, ending the year with 89% of debtors less than 60 days old and a further 8% in the 60 to 90 day period, of which a significant proportion was collected in the first two weeks of the new financial year.

Taxation

During the year the UK entity received £0.22 million as a R & D tax credit from HMRC relating to the financial year ending 30 June 2018. An application was made for an additional credit of £0.15 million related to the financial year ending 30 June 2019, which was received post the year end, and so has not been recognised in the accounts.

Cashflow and liquidity

Net cash as at 30 June 2020 was £4.30 million (2019: £1.49 million).

In September 2019 the Group received £1.50 million in loan funding (£1.31 million after fees) from the facility detailed below and has a further £1.25 million to draw.  By the 30 June 2020, the Group has repaid £0.23 million of the £1.50 million loan and had paid interest of £0.13 million.

In March 2020 the Group placed 16.666 million shares at 30 pence per share to raise £5.00 million in new equity finance (£4.57 million net of expenses).

Excluding these additional sources of net cash, the Group cash outflow was £2.71 million against the comparable 2019 figure of £4.56 million.  The net cash outflow is far lower than the reported adjusted operating loss of £4.10 million reflecting the advance billing nature of the Group's SaaS business model.

With the existing cash balance of £4.30 million plus the additional £1.25 million of loan facility the Group had available cash resources of £5.55 million at 30 June 2020.  

Since the year end we have received $1.13 million of cash for years 2 and 3 of multi-year prepayment arrangement with largest customer in US (signed in FY20), increasing the cash resources of the Group further. 

Loan facility

In September 2019, the Group entered into a £2.75 million loan facility with Shawbrook Bank. The principal terms are as follows:

                Term                                  36 months with three month capital repayment holiday

                Interest rate                      9.3% over LIBOR paid monthly

                Arrangement Fee             1.4% of loan facility

                Non utilisation fee           0.6% of unutilised amount

                Exit fee                               cash amount calculated on the shares equivalent of 7.5% of the facility payable on                                                                      takeover  of Group or refinance of the loan

                Security                             Fixed and Floating debenture over the assets of the Group.

The loan balance can be drawn in two tranches with a minimum of £1.0 million within five business days of the signing of the agreement and the remaining balance within twelve months. The Company has drawn down £1.5 million of this new facility. The facility is being used to support the working capital requirements of the Group as it continues to grow - see Note 16 for full disclosure of terms.

COVID 19 and Going Concern considerations

The Board of Directors continue to monitor the potential impact of the COVID-19 pandemic closely. 

Since the pandemic outbreak there has not been a significant impact on the Group's financial performance.   The business was able to transition to home working with relative ease.  This was helped by the fact that it is a pure cloud driven business and the fact that before the pandemic some 60% of our employees already worked from home.  It was therefore relatively easy to migrate the other 40% to home working as we already provide all employees with laptops and mobile phones. All core documents and systems were already in the cloud and so were immediately available online.

New contract sales for the last quarter of the financial year were a robust £0.8 million, out of a total £2.62 million delivered in the year.  When the pandemic hit, despite experiencing delays on some existing pipeline opportunities, the Group saw a noticeable uplift in new sales enquiries and experienced some success with its rapid deployment solution, Rapid Remote, which led to immediate contracts being signed within a few weeks of the launch totalling US $0.2 million. The first quarter of the new financial year has started well.   All sales and contract discussions are undertaken via video conference, email, and telephone.

From a marketing point of view all trade conferences have been either cancelled or postponed for the rest of this year, most of which were scheduled to take place in the US   This has protected our employees from attending large gatherings and also reduced administration expenditure.  We have adjusted our marketing strategy accordingly increasing our digital marketing efforts and collaboration with channel partners.  We can report that since the start of the new financial year, we have not experienced the decision-making delays that we saw, and reported on, at the on-set of the COVID-19 pandemic.

Our deployment processes can all be achieved entirely remotely as there is no need for any of our professional services team to attend customer sites.  This has allowed us to maintain a strong deployment record with 23 contracts going live in the final quarter of the financial year and this momentum has been maintained into the new financial year.

As a result of the robust performance, the Company has not had to furlough any of its employees, and in fact it has continued to hire new staff to help cope with the additional demand for service delivery.   The Group has not taken out any government-backed loans, but it has taken advantage of some of the tax payment deferrals that are available, such as VAT deferment in the UK.

The move to working from home, the lack of trade related shows and the increased use of video conferencing has had the added benefit of dramatically reducing the Group travel and subsistence expenses.

With the Group year-end being 30 June, the Group normally prepares its next financial year budgets in the April to June period.   Historically, this has been undertaken face-to-face with all managers meeting in one location.   Due to the pandemic this too was moved to being remote sessions by video conference, where the management team presented their departmental forecast based on a COVID-considered market landscape.  

This year's budget has made certain cautious assumptions including that sales would be in some part adversely impacted compared to pre-COVID expectations.  The budget also assumes, conservatively, that our deployment TTGL would not improve significantly due to the potential for customer delays from having to work remotely.  We also took a conservative view of the growth in deferred income. 

The Board considered the budget presentation in June and the controls in place that will allow the Group to control its overhead expenditure but still maintain its momentum and deliver market forecasts.  Particular attention was paid to the impact of any adverse movement in sales and deployment on the Group's net cash position and the level of headroom achieved.

The Board considered sensitivity models of the budget considering the potential of a longer-term impact of COVID than originally envisaged, which therefore would result in further reduced sales and related cash generation.   The Board also considered actions that could be taken to help mitigate the resulting loss in sales. 

At all points the directors were satisfied in the robustness of the Group's financial position from the presented plans which, they believe, take a balanced view of the future growth prospects and potential impact of COVID-19, together with the contingencies that can be taken if the budget assumptions are too optimistic.   The directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, the directors continue to adopt the going concern basis in preparing the accounts.

Dividend

The Board is not recommending a dividend for the financial year (2019: £nil).

William Good

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

AS AT 30 JUNE 2020

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

FOR THE YEAR ENDED 30 JUNE 2020