Netcall provides call centre software, primarily to the financial services sector. So it's no surprise that the group is suffering in the credit crunch, with disappointing first-half revenues. The shares slipped 10 per cent in response. However, Netcall looks like it should be better protected than most UK software companies, with 85 per cent recurring revenues, covering operating costs, and a subscription-based hosted offering, which doesn't require big upfront investment.
"Where we do believe there is a longer-term freeze on capital expenditure, we try to encourage [licence] customers over to hosting," says Netcall's chief executive Henrik Bang. "That switch [from licence sales] has taken place in some cases." But Mr Bang admits that only two-thirds of the £1.44m in recurring revenues are contracted. The remainder is dependent on call centre usage; predictable, perhaps, but already proven to be vulnerable in areas such as mortgage lending. That's offset by a rise in distressed loans calls, so with plenty of potential customers close to completing deals, Mr Bang is insistent that delayed licence sales will come through in the second half.
House broker Evolution Securities raised its 2008 EPS forecast to 2.4p, thanks to a tax credit and good cost controls (1.3p in 2007).
Netcall (NET) | ||||
|---|---|---|---|---|
| ORD PRICE: | 16p | MARKET VALUE: | £11m | |
| TOUCH: | 16-17p | 12-MONTH HIGH: | 31p | LOW: 16p |
| DIVIDEND YIELD: | nil | PE RATIO: | 10 | |
| NET ASSET VALUE: | 5p | NET CASH: | £2.7m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 2.01 | 375 | 0.60 | nil |
| 2007 | 1.69 | 133 | 1.02 | nil |
| % change | -16 | -65 | +70 | - |
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