Netcall revenue growth accelerated from 4.7% in FY2019 to 9.7% in FY2020

13 Oct 2020 • About Netcall ($NET) • By InTwits

Netcall reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:

Netcall has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's in pair with industry average of 2.1%
CAPEX is quite volatile: £0m in FY2020, £1m in FY2019, £0m in FY2018, £0m in FY2017, £0m in FY2016
The company has potentially unprofitable business model: ROIC is 4.1%

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue increased on 9.7%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 13.0 pp from -25.2% to -12.2% in FY2020.

Gross Margin decreased slightly on 1.5 pp from 89.8% to 88.3% in FY2020. Gross Margin stuck to a declining trend at -0.77 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 1.3 pp from 74.7% to 73.4% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue topped in FY2018 at 77.9% and was declining since that time.

Net Income margin decreased slightly on 0.72 pp from 2.7% to 1.9% in FY2020.

Investments (CAPEX, working capital and M&A)

In FY2020 the company had CAPEX/Revenue of 0.58%. The company's CAPEX/Revenue showed almost no change from FY2017 to FY2020. For the last three years the average CAPEX/Revenue was 2.0%.

Return on investment

The company operates at low ROIC (4.1%) and ROE (2.2%). ROIC decreased slightly on 1.0 pp from 5.1% to 4.1% in FY2020. ROE decreased slightly on 0.62 pp from 2.8% to 2.2% in FY2020.

Leverage (Debt)

Debt level is -1.3x Net Debt / EBITDA and 2.1x Debt / EBITDA. Debt jumped on 19.0% while cash surged on 63.6%.

Netcall has no short term refinancing risk: cash is higher than short term debt (5,125.0%).

Valuation and dividends

The company's trades at EV/EBITDA 18.5x and P/E 150.8x.

Financial and operational results

FY ended 30 Jun 2020

Netcall ($NET) key annual financial indicators

mln. £	2016	2017	2018	2019	2020	2020/2019
P&L
Revenue	16.627	16.151	21.875	22.903	25.114	9.7%
Gross Profit	15.164	14.818	19.732	20.574	22.184	7.8%
SG&A	11.912	11.830	17.043	17.116	18.442	7.7%
EBITDA	3.252	2.988	2.700	3.447	3.718	7.9%
Net Income	1.886	1.475	0.136	0.610	0.487	-20.2%
Balance Sheet
Cash	14.122	12.724	5.779	7.769	12.710	63.6%
Short Term Debt	0.000	0.000	0.000	0.000	0.248
Long Term Debt	0.000	0.000	6.518	6.632	7.647	15.3%
Cash flow
Capex	0.444	0.121	0.171	1.078	0.146	-86.5%
Ratios
Revenue growth	-3.1%	-2.9%	35.4%	4.7%	9.7%
EBITDA growth	-19.4%	-8.1%	-9.6%	27.7%	7.9%

Gross Margin	91.2%	91.7%	90.2%	89.8%	88.3%	-1.5%
EBITDA Margin	19.6%	18.5%	12.3%	15.1%	14.8%	-0.2%
SG&A, % of revenue	71.6%	73.2%	77.9%	74.7%	73.4%	-1.3%
Net Income Margin	11.3%	9.1%	0.6%	2.7%	1.9%	-0.7%
CAPEX, % of revenue	2.7%	0.7%	0.8%	4.7%	0.6%	-4.1%

ROIC	7.1%	7.5%	3.2%	5.1%	4.1%	-1.0%
ROE	8.3%	6.8%	0.6%	2.8%	2.2%	-0.6%
Net Debt/EBITDA	-4.3x	-4.3x	0.3x	-0.3x	-1.3x	-1.0x

Peers in Software & Computer Services

Below we provide Netcall benchmarking against other companies in Software & Computer Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Actual Experience ($ACT)	2.3%	-49.1%	195.1%	79.7%	-
Ideagen ($IDEA)	-	23.6%	33.2%	29.2%	21.2%
Eagle Eye Solutions Ltd ($EYE)	-	71.2%	24.6%	22.8%	20.6%
Arcontech Group ($ARC)	-	7.8%	9.2%	12.8%	4.0%
Oxford Metrics ($OMG)	14.6%	-1.1%	8.6%	11.7%	-
Median (15 companies)	12.5%	15.9%	17.5%	6.5%	3.0%
Netcall ($NET)	-	-2.9%	35.4%	4.7%	9.7%

Top companies by Gross margin, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Craneware ($CRW)	94.0%	93.8%	94.9%	93.8%	93.7%
Eagle Eye Solutions Ltd ($EYE)	78.8%	88.3%	89.3%	93.1%	93.5%
Ideagen ($IDEA)	88.0%	89.5%	91.2%	91.6%	-
Dotdigital Group ($DOTD)	87.4%	86.1%	78.9%	89.7%	-
Proactis Holdings ($PHD)	82.4%	86.0%	88.6%	87.7%	-
Median (14 companies)	61.1%	58.2%	46.4%	73.8%	66.5%
Netcall ($NET)	91.2%	91.7%	90.2%	89.8%	88.3%

Top companies by EBITDA margin, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Dotdigital Group ($DOTD)	30.4%	31.7%	26.9%	34.9%	-
Arcontech Group ($ARC)	14.5%	16.7%	23.0%	32.4%	40.4%
Micro Focus International ($MCRO)	40.9%	38.9%	27.5%	30.3%	-
Craneware ($CRW)	32.3%	30.4%	31.1%	30.3%	33.4%
Ideagen ($IDEA)	23.9%	21.8%	23.8%	23.5%	-
Median (15 companies)	10.5%	10.9%	13.6%	15.4%	16.7%
Netcall ($NET)	19.6%	18.5%	12.3%	15.1%	14.8%

Top companies by CAPEX/Revenue, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
International Bus Mach Corp ($IBM)	4.5%	4.1%	4.3%	3.1%	4.1%
Unisys Corp ($USY)	3.0%	4.1%	3.8%	2.9%	2.9%
Micro Focus International ($MCRO)	0.8%	0.9%	0.8%	1.7%	-
Ideagen ($IDEA)	1.6%	1.1%	1.4%	1.5%	-
Oxford Metrics ($OMG)	1.8%	5.8%	3.9%	1.3%	-
Median (15 companies)	1.1%	1.2%	0.9%	1.1%	0.4%
Netcall ($NET)	2.7%	0.7%	0.8%	4.7%	0.6%

Top companies by ROIC, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Craneware ($CRW)	27.9%	30.0%	34.9%	33.4%	29.8%
Rm ($RM.)	254.7%	73.8%	39.0%	31.6%	-
Dotdigital Group ($DOTD)	28.9%	29.3%	26.6%	25.9%	-
Arcontech Group ($ARC)	14.5%	14.5%	17.8%	22.9%	20.4%
Oxford Metrics ($OMG)	16.3%	12.7%	16.4%	14.7%	-
Median (16 companies)	7.0%	4.7%	5.6%	2.0%	6.4%
Netcall ($NET)	7.1%	7.5%	3.2%	5.1%	4.1%

Top companies by Net Debt / EBITDA


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Micro Focus International ($MCRO)	2.1x	6.6x	4.2x	4.3x	-
International Bus Mach Corp ($IBM)	1.7x	1.8x	1.7x	3.8x	4.1x
Rm ($RM.)	-2.2x	0.7x	0.2x	0.5x	-
Ncc Group ($NCC)	0.5x	-	0.8x	0.5x	1.0x
Unisys Corp ($USY)	-0.3x	-0.6x	0.1x	0.4x	-0.6x
Median (10 companies)	-0.9x	-0.5x	-0.4x	0.3x	-0.6x
Netcall ($NET)	-4.3x	-4.3x	0.3x	-0.3x	-1.3x

Netcall stock price chart

Netcall financials

mln.	FY2010	FY2011	FY2012

Revenue	4.131	13.616	14.589
EBITDA	1.030	2.623	3.165
Net income	0.026	0.687	1.810
CAPEX	0.049	0.030	0.181
Debt	0.000	0.000	0.000
Cash	2.449	5.885	8.431

About Netcall

Netcall plc designs, develops, sells, and markets communications, workforce management, and business process management software and services to the healthcare, public, and private sectors in the United Kingdom and internationally. It offers Liberty, a technology platform that manages contacts, content, and data; and business process management solutions, such as proactive business information, agile integration hub, smart applications, and SingleView Touch Point/Unified Agent Desktop solutions. The company provides enterprise content management solutions consisting of business process management, CRM, electronic enterprise content management, mobile, and Web self-service. It also offers CallMeBack solution that enables Website visitors to make a callback request; ContactCentre 59R, a point of contact service for voice, Web chat, email, or social media channels; and ContactPortal, a speech recognition solution that routes calls to the required contact. In addition, the company provides intelligent IVR and ASR solutions, which gather information of the caller and transfers to the appropriate department; Messenger+, a message handling solution that notifies users about any missed calls or voice messages; QueueBuster, which automatically calls back the telephone customers who accept the choice to be called back at the availability of an agent; mass notification services; and self service automation tools. Additionally, the company provides workforce optimization solutions, such as QMax that allows calculating the number of staff required to respond to customer demand in advance; Agent Adherence tool, which allows monitoring resources accurately; data access toolkit for extraction of data from the QMax database; call recording service; and Customer Survey that provides survey information gathering application. It also provides professional, deployment, and support services. Netcall plc was incorporated in 1984 and is headquartered in Hemel Hempstead, the United Kingdom.