06.03.2025
Yesterday morning’s Interim Results from the leading provider of intelligent automation and customer engagement software, Netcall (LON:NET) reported boosted Cloud subscriptions, increasing recurring revenues up another 4% to 79% of total revenue.
The primary growth driver remained the group's expanding suite of Liberty Cloud solutions, which accounted for 94% of new bookings.
This British software company already supports two-thirds of NHS trusts in the UK.
Its automation and customer engagement technology is helping tackle outdated systems, cut patient waiting times, and boost workforce efficiency — aligning with the Government’s recent push for greater productivity in healthcare and local government.
Whether it is a hospital appointment reminder or local council issue reporting, everyone is likely to have interacted with Netcall's technology at some point — and the new AI technology that Netcall is introducing should have a positive impact on daily life.
The £190m capitalised group’s shares, which have risen 14% in the last few months, are ready to move even higher still.
The Business
Netcall is a UK-based provider of intelligent automation and customer engagement software, that is engaged in design, development, sale and support of software products and services.
Its Liberty software platform with intelligent automation and customer engagement solutions helps organisations digitally transform their businesses faster and more efficiently, empowering them to create a leaner, more customer-centric organisation.
Its solutions include Liberty Create, Liberty RPA, Liberty AI and Liberty Converse.
Liberty RPA is an artificial intelligence (AI)-powered robotic process automation that frees up people from mundane and repetitive tasks, enabling them to be more productive.
Liberty Converse is an omnichannel contact centre.
Liberty AI is its machine learning solution.
Liberty Create enables both professional and non-professional developers to create enterprise-grade applications. It also provides process improvement software.
Netcall's customers span enterprise, healthcare and government sectors, including include two-thirds of the NHS Acute Health Trusts and leading corporates including Legal and General, Lloyds Banking Group, Aon and Santander.
Its systems help customers implement digital strategies, transforming them into more intelligent, efficient, and customer-centric organisations.
The group’s software solutions accelerate the achievement of businesses' digitalisation objectives through an intuitive platform that enables rapid process automation and enhanced customer engagement, resulting in better outcomes for service-users, such as reduced waiting times for NHS patients, quicker delivery of council services for citizens, improved banking experiences for customers, and increased staff retention and satisfaction for employers.
The Interim Results
Yesterday the group reported that its revenues for the six months to end-December 2024 were 22% better at £23.0m (£18.9m), of which its Cloud services revenue was 44% better at £13.4m (£9.28m).
The group’s annual contract value was an impressive 31% better at £39.4m (£30.1m), of which its Cloud services accounted for £29.9m (£20.3m), showing an increase of 47%.
Despite the above improvements, the group’s Interim pre-tax profits were 5% lower at £3.69m (£3.87m), but its adjusted earnings were 7% better at 2.22p (2.08p) per share.
The group’s net cash fell from £28.6m to £22.0m by the period end.
It predicts positive sales momentum into H2, with the Board confident in delivering on its expectations and completing another successful year.
Management Comment
CEO James Ormondroyd stated that:
"We are delighted to report another strong trading period, marked by double-digit organic growth and increased profitability.
The expansion of our Liberty platform continues to drive success, and we are particularly pleased with the results of our cloud investment programme, which has seen 41% growth in cloud contact centre subscription revenues and the addition of further generative AI features across the platform.
The integration of our recent acquisitions, Govtech and Parble, is progressing well, enhancing our capabilities and creating cross-sale opportunities.
Positive trading momentum has continued into the second half and we continue to benefit from strong market tailwinds.
The rapid acceleration of cloud and AI adoption remains a long-term driver of sustainable growth for our business.
Our focus on organic growth initiatives and commitment to product innovation positions us well to capitalise on this expanding market opportunity.
This is underpinned by a growing base of recurring revenue, with over £71m in contracted revenue yet to be recognised.
With a solid financial position, increasing recurring revenues, and a strong pipeline, the Board remains confident in Netcall's continued success."
The Equity
There are some 167m shares in issue.
The larger holders include Investec Wealth & Investment (9.99%), Liontrust Investment Partners (9.94%), BGF Investment Management (8.03%), Gresham House Asset Management (6.56%), Henrik Bang (2.70%), Michael Jackson (0.84%), Avellemy (0.67%), Canaccord Genuity Wealth (0.39%) and Amati Global Investors (0.36%).
Broker’s Views
Harold Evans and James Musker, analysts at Singer Capital Markets, rate the group’s shares as a Buy, looking for 140p.
Their estimates for the current year to end-June are for revenues of £47.4m (£39.1m), with adjusted pre-tax profits of £7.7m (£7.7m), lifting earnings to 3.7p (3.4p) and paying a higher dividend of 0.96p (0.89p) per share.
For the 2026 year, they go for £53.5m revenue, £9.6m of profits, 4.2p earnings and 1.09p in dividend per share.
The analysts see a strong investment case in view of Netcall’s improving fundamentals and undemanding valuation.
They state that:
“In a highly uncertain environment, we think Netcall offers investors an enticing combination of predictable and compounding annual returns.”
After yesterday’s Interims, analysts Hayley Palmer, Kai Korschelt and Tom Like, at Canaccord Genuity Capital Markets, maintained their Buy for the group’s shares, with a Price Objective of 130p.
Their estimates for the current year are for £47.5m sales, £8.0m profits, 3.7p earnings and a 1.0p per share dividend.
The 2026 year to end-June estimates are £53.5m sales, £9.4m profits, 4.2p earnings and paying a 1.0p per share dividend.
My View
This cash-rich group is a steady generator as it continues to push its Cloud services while also expanding its product portfolio.
Its positive sales momentum has continued in this financial year, with the group’s Cloud services continuing to receive growing demand from new and existing customers, driving increased revenue visibility and strong cash flow.
With its shares now at 114p, I am setting a Target Price at 138p.
(Profile 06.03.2025 @ 114p setting a Target Price of 138p)
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