17.12.2024
After this morning’s AGM Trading Update, market observers are anticipating that the shares of Netcall (LON:NET) will enjoy a progressive 2025.
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.
AGM Trading Update
Ahead of today’s AGM for the year to end-June 2024, the group issued an Update stating that:
"We are pleased to confirm that the first half of FY25 has started well, with trading in line with management expectations. We continue to see strong interest in Liberty Cloud solutions, including robust demand from new customers, driving double-digit organic growth in Annual Contract Value ("ACV") and a growing base of recurring revenue.
Our product roadmap is tracking well, underpinned by growing customer interest in increased digitisation and AI capabilities. The continued strong uptake of our Liberty cloud contact centre, Converse CX, is supporting customers' ambitions to leverage leading automation and generative-AI technology, with two in three Converse CX customers also opting for AI products as they broaden their engagement across the Liberty platform.
Our recent acquisitions of GovTech in August and Parble in September 2024 are progressing well, and have been, as anticipated, immediately accretive to revenue and profit. Govtech is seeing strong momentum in new public sector customer wins, whilst the first sale of Parble's Intelligent Document Processing into the Group's existing customer base has been achieved with the pipeline of cross-sale opportunities growing.
Supported by a healthy balance sheet, recurring revenues, and an exciting pipeline of opportunities, we look forward to the rest of FY25 with confidence."
The Equity
There are some 167m shares in issue.
The larger holders include Liontrust Investment Partners (10.59%), Investec Wealth & Investment (9.99%), Gresham House Asset Management (8.24%), BGF Investment Management (8.03%), Henrik Bang (3.74%), Michael Jackson (1.13%), Avellemy (0.96%), Amati Global Investors (0.36%) and Canaccord Genuity Wealth (0.35%).
Analyst Views
After this morning’s AGM Update analysts Hayley Palmer and Kai Korschelt at Canaccord Genuity Capital Markets have maintained their Buy note out on the group’s shares, with a Price Objective of 130p.
Their figures 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.
Harold Evans, at Singer Capital Markets, rates the shares as a Buy, looking for 140p.
His 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, he goes for £53.5m revenue, £9.5m of profits, 4.2p earnings and 1.09p in dividend per share.
Evans continues to see a strong investment case in view of Netcall’s improving fundamentals and undemanding valuation.
“All told, we believe NET is very strong position and indeed our forecasts reflect this too, as we see revs and profit accelerating over the forecast horizon.
We believe these trends are starting to be reflected in the share price, though the stock still trades on a 6% FYJun26 (EV) FCF yield and hence still offers upside to our 140p target.”
In My View
This group is a steady generator as it continues to push its Cloud services and expands its product portfolio.
Its positive sales momentum has continued in this financial year, with the group’s Cloud services continue to receive growing demand from new and existing customers, driving increased revenue visibility and strong cash flow.
It has a robust pipeline and product roadmap, together with a growing base of recurring revenue and is also a cash grower – with current year-end cash expected to be around £27.0m, then up to £31.0m cash by end-June 2026.
Its shares, which have been as high as 106p this year, are currently trading at around the 102p level, offering an attractive upside toward the brokers estimates of 130p/140p.
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