Shares in Netcall (NET), a small-cap business offering software to make telephone call-handling more efficient, hit a 12-year high following yet another impressive set of results that were also boosted by the use of previously unrecognised pre-2005 losses so keeping the tax charge low.
Netcall’s first and best known product is Queuebuster which was launched in 2003 and offers a free telephone call-back service. But the big growth in revenues is now coming from cloud-based offsite computer services where, for example, call-backs come in and out of Netcall’s hosted platforms in data centres. They account for 25 per cent of income already and that percentage is set to rise. Cloud computing also helps Netcall diversify its charging structures. So as well as a rolling licence agreement on some products, cloud-based revenues include a mix of rental, charge per user and charge per call. In the half year recurring revenues accounted for two-thirds of turnover and again covered operating expenses.
Following modest upgardes, broker finnCap expects full-year revenues to rise from £14.6m to £16.7m and adjusted pre-tax profits to increase from £3.3m to £3.9m. A mere 11 per cent tax rate produces EPS of 2.3p, up from 1.9p.
| NETCALL (NET) | ||||
|---|---|---|---|---|
| ORD PRICE: | 37.5p | MARKET VALUE: | £45.2m | |
| TOUCH: | 36.5-38.5p | 12-MONTH HIGH: | 38p | LOW: 22p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 13p* | NET CASH: | £8.2m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 7.31 | 0.92 | 0.64 | nil |
| 2012 | 8.16 | 1.34 | 0.92 | nil |
| % change | +12 | +46 | +44 | – |
| Sector: Aim Software | ||||
*Including intangibles of £13.1m, or 11p a share
IC VIEW:
Two years ago Simon Thompson highlighted the potential of Netcall’s shares at 13p (Queuebusters, 17 January 2011) and last reiterated his buy advice at 31p (Jumping the gun: take two, 15 January 2013). On a forward PE ratio of 13 (net of cash worth 7p a share), they continue to rate a buy.
