Netcall (LSE:NET) — Netcall plc - Interim Results FY21

0:02 Good morning, ladies and gentlemen, and welcome to the NETCOL PLC Interim Results Investor Presentation. Situated on the right hand corner of your screen. Just type in your question and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard, and we will send you an email to notify you when they're ready for you to review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And if you could give that to your attention, we'd be most grateful.

0:47 I'd now like to hand over to Henrik Bang, CEO, and James Ormandroid, CFO of NETCALL PLC. Good morning to you both.

0:57 Good morning, and thank you very much for joining. We are obviously a software business and we help organisations implement digital first solutions using our Liberty platform, which enables these organisations to create leaner and more customer centric businesses. With digital first, we mean how businesses solve processes, interactions by using automations and only involve humans if required, and if required for the most valuable part of interactions. So our software, as you can see on the left hand side of the slide, automates processes and interactions. And it improves customer experience, helps customers transition to the cloud. And as, of course, customers transition to the cloud, so do we, which we'll cover a little bit later in the presentation.

1:49 Our Liberty platform is a one stop shop for process automation and customer engagements, unified low code RPA, chat bots, digital messaging and contact center solutions, and I will present the platform in a minute. We employ about two thirty people. We have around 600 customers who typically have large and complex ecosystems. And as you can see from the donut at the bottom of the slide, the left hand donut, 85% of our revenue comes from three segments: financial services, healthcare and government, which are characterised by typically having large and complex ecosystems. We market our products directly and also have a network of tech and solution partners. So if you move to the right hand side of the slide, the growth opportunity in these markets is huge is growing.

2:42 And we see a lot of white space where people have only started or have not started at all on their automation efforts. Intelligent automation and customer engagement solutions growing at double digit rates. And today, if you ask Gartner or Forrester, these markets are estimated to be more than $20,000,000,000 globally. As we move through and out of the pandemic, these markets are estimated to continue to grow rapidly and maybe more rapidly than before. And that naturally represents a significant opportunity for us. In addition, we have a large customer base with a significant cross sell opportunity. And as our customers increasingly adopt digital solutions and increasingly move to the cloud, it enhances our opportunity.

3:32 So our business model has a high level of operational gearing, which James will cover later on in the presentation. And as you will see also, the business is very profitable and cash generative. Going a little bit to the business model, how we make our income, you can look at the two right hand donuts at the bottom of the slide. We are moving rapidly towards the cloud and growing our recurring revenue. 65% and growing of our revenue is recurring as of today. And of this, the cloud is growing rapidly and now represents close to 50%. You can see that on the right hand side of the donut. So with our cloud contracts having strong momentum, we expect cloud recurring revenue will become our biggest revenue stream in the next few months, having grown from a very low level just three, four years ago.

4:27 If we move to the next slide, with regards to customers, we think we are in a very good company. Fundamental drivers across our customer base are the same, a desire to improve automation, improve efficiency, improve customer experience and customer engagement. But the individual use cases vary a lot and shows the flexibility of the platform. Here we are taking a section of our customer base who have implemented the software for different use cases. On the left hand side, we have mission critical applications like those used by the Coast Guard, police forces where we have around 50% of UK police forces using some of our systems, and we also see very mission critical applications within the NSS, for instance.

5:12 Others, like Nationwide, have implemented a wide range of applications to modernise and improve efficiency and to be able to scale. This includes the mortgage platform. Legal and general have used the Liberty platform to create a new claims management platform. And particularly our customer, our council customer base, we see the power of the community where organisations co develop and share applications supported by our online community and AppShare, as well as our citizen hub framework, which specifically targets for local authorities.

5:48 Organisations like Compreher, on the slide here, today have more than 15 different live applications running. This range from scaffolding management and inspections, which is a mobile app, to management of COVID-nineteen track and trace. And their track and trace app got a lot of national attention because of the success rates that were significantly above the national average at the time they launched it. Other solutions around integrating and modernizing older systems was a complex, risky and costly to replace. UK power networks, which supplies electricity to the South And East Of England, modernised the customer engagement process, building a modern app around their existing SAP system.

6:34 This has saved them, they estimate, at least 10 full time employees in the first months and about one thousand hours a month in just processing quotes, raising and scheduling jobs. We are also via partners being large parts of large multimillion pound bits. You see that on the right hand side. In the case of the Department of Education, which is won via a partner, the solution includes both our customer engagement and intelligent automation. The LMA is providing services to the Lloyds market and that is all an we won via an insurance specialist partner that we have. What is our products? Our Liberty platform unifies customer engagement and automation on one easy to use platform.

7:25 So, one supplier, one contract, one SLA, and one stop shop. And if a customer doesn't want the whole platform, they can buy the solution they prefer and expand from there. So together, Liberty acts as a comprehensive digital transformation toolkit for organisations to use and benefit from. Firstly, we develop our own software and own our own IP. This is designed in such a way that can integrate with our technologies via broad range of APIs. In other words, the Liberty platform is a quite open platform.

8:02 And in most implementations we do with customers involve integration to third party systems. So we start on the left hand side. With intelligent automation, we mean low code combined with our use of RPA exposed to AI technologies. That can be handwriting recognition, it can be OCR and other technologies. Within intelligent automation, we have solutions that we design for specific markets like our citizen hubs, which is a framework for government sector. We also have patient hub, which is solutions for the healthcare sector. All this is available as cloud solutions. On the right hand side, customer engagement is all about how you interact with your customers, your suppliers, employees and other stakeholders.

8:51 The solutions include an omni channel contact centre, which has built in workforce management and quality management modules amongst a series of other capabilities. Digital messaging is about providing live chats, Facebook, Twitter messaging, and together with AI and natural language powered chatbots, it allows organisations to engage with their customers or digital channels. In addition, we also have speech automation as part of our customer engagement solutions. If you look at the box at the bottom, all our solutions are supported by community, an App Store where organisations can share elements and complete apps. Our community has more than 1,000 active members, and particularly when we talk about power of community from the previous slides, we see for instance in the public sector there's a significant amount of sharing, codeveloping, etc.

9:45 It's all available in the cloud and include a broad range of integrations to other systems as well as exposure to AI technologies, as I mentioned earlier. So on this slide it's important to see why are we doing it this way. We believe that automation and customer engagement is closely aligned. Most customer engagements can be improved with automation or will be completely automated over time. And likewise, most processes in business involve communications with stakeholders, which also will increasingly be automated. So let's take call centres, for instance, where we have hundreds of customers today. Call centres used to be a large group of lower skilled, lower paid staff answering phone calls often about rather basic questions.

10:32 Today, more and more of their work is automated and call centers increasingly deal with more complex and sensitive tasks where personal interactions are required. So their work shifts from simple tasks to more complex tasks. This also means that these call centers today are being staffed by higher skilled and higher paid professionals. So, for instance, today my bank manager works in a call center. I used to go and see him in the branch. Now they close the branch. Then he would come and see me every six months or something like that. It doesn't do that anymore either. But I can talk to him on the internet and have a video call with Likewise, a doctor works in a call center. You can get legal advice from call centers and so on. So the traditional call centers change shape and change the task that it's doing.

11:24 So in these call centers, the use of automation such as chatbots, automated workflows, RPA will also rapidly expand to improve speed, quality and efficiency. So if you think it forward, contact centers will be spending less time on finding answers and updating systems. This will increasingly be done by automations, for instance, RPA robots and natural language processing technology. That means it enables agents to focus on the customer, on the interaction and the empathy side of the interactions, rather than figuring out where to find answers and which systems to update. The trivial and repetitive work is increasingly done by automation. So therefore, our automation capabilities increasingly support customer engagement. In other words, we unify customer engagement and intelligent automation, as it says on the top of the slide.

12:25 If we move on to the next slide, I would like to give an example, bringing this down to a single what does this really mean? Because a lot of this is happening in day to day processes that we are all more or less familiar with. In this case, we have chosen a business loan customer journey. This could be an insurance claim. It could be an outpatient appointment. It could be a lot of processes that are going on thousands of times every day. If you imagine a small business loan application process, it starts with visiting the bank's website where a chatbot will help you to find the right section of the website. Here the applicant starts filling in the loan application form, which is online, it's not pen and paper anymore, it's an online application, which increasingly will happen with the support of an automated chatbot as well.

13:16 And that part of the process is using our digital messaging and chatbot, but called Liberty Connect. There may also be human intervention in the chat, and in this case, at some point, the applicant needs to speak to an advisor to get some questions clarified. The chat is transferred to the agent and the dialogue follows the call so the advisor knows where the applicant is in the process and, therefore, can help faster with the application. This conversation with the advisor is happening using our contact center solution, Liberty Converse. After the conversation, the applicant goes on to complete the application using our local platform with its automation and its workflow capabilities. And once completed, the internal processing of the loan application starts using our local platform again, and again using its automated workflows.

14:08 Part of the loan approval process is checks performed against external systems. Historically, this was done manually. Now it's done by RPA robots and the information the robot collects can be transferred into the loan application as part of the application checks and controls. As the application progresses, the applicant will keep up to date with status. In this case, SMS, they are sent automatically at various stages in the loan approval process. This is a theme that has come up repeatedly with a different type of customers that we have, that when they make applications or claims, for instance, that they feel that their claim or their application kind of disappears into a black hole and they don't know what's going on. So here, with built in automatic triggers, they can be informed about how it's progressing.

15:01 And at the final stage, there may be a mandatory requirement for an onboarding call that takes place with the applicant who is being done with a contact centre agent and that will involve our local platform and it could also be involved in the RPA robot for doing wrap up, etcetera. So this is an example that shows how Octane X2PIC technology helps both reduce organisational costs as well as improve the experience for an applicant going through a process with many stages and that is also requiring a lot of checks and sign offs. It also shows how the process can be speeded up substantially by increasing automation, reducing human interaction, as well as eliminating pen and paper. If you could take another business area insurance claims, for instance, Legal and General reported that they had claims that previously took them days to process and after the implementation of an automated system and that reduced human interventions to the most critical parts of the interactions, they reduced it to less than an hour.

16:05 The savings are significant, not just from our customer experience. McKinsey estimates that by automating this type of processes, costs can be reduced by 30 to 60% while you increase the delivery quality. And therefore, we believe these marks are going to grow rapidly. There is a lot of white space, a lot of processes that are manual. There is a long way to go and therefore we think that we have a growing long term opportunity in front of us. So what are the business results from all this? And what are some of the KPIs?

16:39 And before we get into the financials, I will talk a little bit about some of the things that we see. So what we reported in the results is continued sales momentum. We see higher profitability and we believe the result for the full year will be ahead of the previous expectations. Some of the milestones we have achieved is, for instance, within the intelligent automation area, our revenue is right now running at a rate of 10,000,000 per annum and therefore is 40% of our revenues. Now that is a significant step up from just three, four years ago when we started this journey and has more than doubled in that period. We also start seeing tangible metrics of cross selling and cross selling successfully.

17:28 So 20% of our annual contract value, so that is the recurring element of our value, comes from customers who buy both intelligent automation and customer engagement. And as you are aware, most of our customers come from the customer engagement side. That is kind of the heritage of NETCORE. And when we sell our automation into this existing customer base, on average, the recurring revenue uplift is 3x or three times up. So if we have a customer that is paying us £25,000 an annual recurring revenue maintenance contract typically, once we add automation to that, it increases to 75,000.

18:19 Cloud growth is up by 25% in recurring revenue value. And as I said earlier on, we are right now very close to paying 50% of our recurring revenue and we expect it to be the largest part of our revenue streams in the next few months. So, with that, I will hand over to James, who will take us through the financials. Thank you, Henrik, and welcome everybody. In summary, the group delivered a good set of numbers for the first half of the financial year, with good growth in all key metrics. I've set out on slide six of the KPIs, and there's further information on further slides as we go through.

19:05 But the good growth in cloud subscriptions underpinned a 9% growth in revenue to 13,400,000.

19:14 That growth came through in cloud ACV. Now, just to help you maybe understand our definition of ACV, it's a key metric for us, and the growth in that metric year over year is something we focus on. Annual contract value is the total value of a contract divided by the number of years. So, example, a three year £300,000 contract would be £100,000 of ACV. The importance is that change reflects the ability of the business to add new business, upsell, and grow

19:49 into existing customers, obviously less any cancellations. So, what it's really showing is a lead indicator of annual revenues for future periods. So, good progress in cloud ACV, up 25%. We saw just under 40% increase in adjusted profit, to £2,900,000 and with relatively flat amortization and financial interest charges period over period, a faster rate of growth in adjusted earnings per share, up 88% to 0.9p. We converted £1,400,000 of free cash flow, which is up 50% year over year. We're second half weighted business in cash flows, and I'll come back to that in a slide shortly.

20:35 We increased net funds by 6% to £5,100,000 after a capital investment of £1,000,000 in some RPA technology. Moving to the next slide, I'll take you through the income statement, which is set out on the left. And in particular, I'll take you through the increase in profits, where we can see in the bridge there's just under 40% growth from 2,100,000 to 2,900,000. £1,000,000 of that has come from the increase in revenue, which is largely cloud driven revenues. Those cloud subscriptions are at a higher margin than the overall gross margin, so there's a 1% improvement in gross margin to 89%.

21:23 That added a further 200,000 into EBITDA. And our operating expenses increased by £300,000 or 3% in the period, and therefore we can bridge across the two. We benefited by saving probably 200 or £300,000 in travel and entertaining during lockdown in the period, and that's unlikely to reverse in the second

21:47 half, and in all honesty, we're not sure how much of that will reverse in future fiscal years. But what we've seen over the last number of periods is an expanding EBITDA margin. In the last financial year, we improved the margin by three percentage points, in this half by five percentage points, and we hope to be able to continue to expand margins. Behind that is the operating model we're working toward is that for every one pound of new revenue, we are planning on delivering between 3040% in profit contribution. So, as the new revenues come into play, we should see margin expansion in future periods.

22:35 Now, I'll just now take you through a couple of revenue slides. Our fastest growing revenue segment is Liberty Cloud, which Henrik mentioned earlier, and there are two charts which I find quite interesting on this slide. On the left hand side is the development of our annual contract value for the last four halves, and on the right hand side is trailing twelve month cloud revenues for the same four halves. We've seen very good growth in cloud ACV over the period, and you can see in the chart there, 26% year over year to 8,400,000. And both kind of solution sets are growing quite rapidly. Customer engagement from a lower base by about 50% year over year to 2,300,000, and intelligent automation by about 20% year over year to 6,100,000.

23:26 So, good growth in ACV, and that flows through into revenue growth, and we saw £7,200,000 in the trailing twelve months. Now, one of the interesting things and why ACV is a good indicator for us is that if you sort of compare H220 ACV, which is 7,300,000, and you'll see that's very close to H120 one trailing twelve month revenue of 7,200,000, and that correlation kind of is consistent in the other periods. What that means is that the H221 revenue should be broadly the same as H1 twenty one exit ACV. So, there's increasing revenue visibility coming through from the business.

24:13 If we now look at our total contracted revenues, and this is the same two charts on the left hand side, the total contract value, and on the right hand side, the trailing twelve month revenue. This time around, there's slightly different bars. So, in navy blue, can see Liberty Cloud. In pink, you can see our more traditional software maintenance business, and in gold, a small amount of other solutions. So, good growth in total ACV. Cloud cloud as a percentage is now almost half of the business over the last year. And I just wanted to focus a little bit on the pink H1 21 Liberty Maintenance, 8,600,000.

25:01 For us as a business, that is a significant market opportunity. What we've, I think what Henrik mentioned earlier, what we're seeing is that base is largely customer engagement solutions, and if we can cross sell intelligent automation solutions into that base with a three times uplift, that gives us a market opportunity of about £17,000,000 per annum of revenue. In addition, when we take customers from on premise contact centers to cloud contact centers, so if you like, from pink to blue, we're also seeing about a 50% uplift in annual value, so a further £4,000,000 opportunity there. So, the cross selling market opportunity is about £20,000,000 per annum of revenue, and then of course, we can add in new products and also expand the usage of our solutions across an organisation. So, a very good market opportunity. Now, we won't necessarily win all of those over time, and of course, will purchase within their own capital cycles, but a fantastic opportunity for us. And again, you can see the lead indicator effect in that the exit ACV 17,700,000, which is ahead of trading twelve month revenue of 16,800,000.

26:20 So future revenue is kind of bucked into the contract buck. On slide 12, this is now reported revenues for the six month period compared to the prior year. In the table, there's two analysis of that, one by the solution area and one by the nature of revenue itself. And what we can see is the Liberty Suite has increased by 12% period over period, with very good growth in intelligent automation, up 17% to 5,400,000. Customer engagement, good growth, 9% to 7,600,000. And if you look at the bottom half of the table, you can see that's very much underpinned by the growth in cloud revenues, which are up 28% to 4,100,000, which lead to a total recurring revenue growth of 10% to 8,700,000.

27:10 In the other categories of revenue, communication services are transactional fees for telephony or messaging driven by the usage of our products or services, and we saw strong additional revenues in the financial service sector in the half. Product revenues are software licenses for our on premise customers. We have more than 70 product upsell license expansions in the period. What we're seeing is as customers either do a refresh of their technology or introduce a new service they're looking to put cloud first. So, what we're seeing is a slight decline in product sales, but more than offset by a growth in the cloud revenues moving forward.

27:56 And our consulting service was level period over period at 2,100,000. A very healthy balance sheet. We had at exit December 21, pounds 12,900,000 of gross cash. We deferred £2,200,000 of VAT under the COVID relief in March to June 2020. That's repayable from this March, but stripping that out, we have £10,700,000 of cash. We have a £7,000,000 unsecured loan note on the debt side, that's repayable from September 22 in six instalments to March 25, so mid term debt, and we have the ability to pay down early with a redemption fee from September 21.

28:43 We have a very good cash generative model. We typically charge customers annually in advance for our cloud or support contract services. So, you'll see in the balance sheet there's a high deferred income, a high deferred income balance of 10,000,000. Customer base itself is diverse, well known brands, blue chip, public sector organisations, so there's very little delinquency in the debtors. And on top of that, have a very high customer satisfaction survey. In the last surveys I saw, I think we were at 98%. So, a combination of high customer satisfaction and a diverse blue chip base is giving us good collectability. Take you through to cash flow.

29:30 Now, our operating cash flow conversion in half one was 81% of adjusted profit, and that is consistent with half one twenty twenty, which was seventy four percent, and half one nineteen, which was 92%. The reason for the slight working capital drawdown on H1 is about 60% to 66% of our contract renewals occur in the second half of the year. As Henrik, I think, said on one of the donut charts right at the beginning, about 60% of our customer base is public sector, government or healthcare, and those organisations tend to align their renewal cycle with the March public sector year end. So we should see an improvement in free cash flow in the second half. And the line chart on the left, you can see that we converted over a full year, 160% in the last financial year, and 200% in the previous financial year.

30:22 Against that, we have about a million pounds per half of capital spend, 800,000 on R and D, and some rental payments in the balance, hence a free cash flow of 1,400,000. And against that we have the loan note interest and we spent a million pounds on RPA provider in period. So, that is a run through the financials and I'm happy to pick up any questions at the end of the presentation, but I'll hand back to Henrik. Thank you very much. And I will cover market strategies in the next section and then we'll go to Q and A. So as I said already, big markets, the solid growth rates underpinned by automation, megatrends as organisations increasingly adopt automation across all industries.

31:19 Last opportunity in key markets for us: financial services, healthcare and public sector. So we execute into this opportunity using four key growth pillars: as new customer acquisitions, it's land and expand, so cross selling into our existing customer base, and it's about growing the partner base, and of course it is about continuously innovating new technology, new solutions that we can sell to our customers. So if you take these ones individually and start looking at new customer acquisitions. So the key driver when we acquire customers is the digital automation. That is where we get the most interest. That is where most new customers come on board.

32:06 And the targets we have, of course, have, as I mentioned earlier, have large ecosystems, lot of customers, a lot of suppliers, a lot of staff. They are often subject to high level of regulation and therefore have a high level of requirement around audibility, etc. In the period, we won businesses across insurance, housing associations, NHS and local authorities. And we also had new sales and opportunities via partners. The case study on the right is Tesco underwriting that went live with the claims platform. And there is a case study on the website where you can study that more if you are interested. Again, are huge efficiency gains from Tesco when they went live with the new platform. If you move to land and expand or cross selling, as today, I mentioned, 20% of our recurring revenue comes from customers who have bought both our intelligent automation and customer engagement solutions.

33:08 And what we also see is a growing cloud migration, including people using our Connect, our digital messaging platform, where we have 28 sales. That is very often why we see people start the cloud migration by blending the environment. So they might have it premise based, they might have the software installed in their own data centers, in their comms rooms, and they gradually move to the cloud with new solutions. So a growing number of the solutions that we offer, including Liberty Connect, is only available in the cloud. Our automation solutions are only available in the cloud and so on. So while this cloud migration is going on, we still have product sales. We had about more than 70 cross and up sales from customers in period.

33:58 And the whole land and expand model is being underpinned by our community, our AppShare that is also integrated with our documentation platform and so on. So we have built up this community over a little bit over a year, year and a half, and there is now more than 1,000 members. I mentioned the Cambria app earlier and you can see some of the data there. There is more on the website as well if you are interested. Third strategy is growing our partner base. Our order inflow from partners doubled to 25% of the total sales mix in the period.

34:46 So we have had good momentum in partner sales in the period. The objective is to build an ecosystem of partners that has industry knowledge and who have the ability and capability to deliver and support our software. And some partners work on their own. We work in partnership with others of them. So the model in terms of how go to market varies. In the period, we invested in the partner team. Got more people there, and is because course water continued to grow that part of the revenue stream. Similarly, our partners moved very fast when the pandemic broke out and developed Covid related apps for their customers. We did the same, some of the customers did it on their own, some did it together with partners etc.

35:41 Today we have about twenty five Covid related apps available on the App Store for organisations to use if they so desire. The case study on the right hand side, EKI, is North American, US based partner that we are working with and we are talking to a number of organisations internationally that has the opportunity to broaden the platform use out wider than The UK. Just a platform innovation. We just had a major release that included upgrades to all our main product areas. The most notable one was launch of Liberty RPA, which we also announced on the February 15, so you can look forward on that. Substantial improvements across the platform, and there's more coming out in the next set of releases scheduled around April, where we, amongst other things, will further upgrade to the RPA solution.

36:52 So that is kind of how we are executing into the market with the strategy. And to sum it up, so what we have talked about this morning, we have a rapid, large market with significant cross sell opportunity. We have good trading and full year EBITDA expected to be ahead of previous expectations. We have a recent release that broadens our market offering, not only with the RPA solution, and improve our position as a one stop shop for digital transformations. We have a healthy financial position, high recurring revenues. And while we are mindful of the economic disruption and the current climate, we are confident about the public for the business.

37:38 So with that, I will hand over to you. That's brilliant. Thank you very much indeed to both Henrik and to James. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the company take a few moments to review those investor questions submitted already during the meeting today, I'd like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your Investor Meet company dashboard, and you will be notified by email when that is ready for you to review. I'd also like to remind you that your feedback is important to the company, and immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations.

38:25 And I'm sure that'd be greatly appreciated by the company. James, Henrik, obviously, I could address or ask you to select the Q and A tab, you'll see a number of questions, that have come in during the event itself. And obviously, there are a couple of, pre submitted questions. But perhaps I could hand back to you both, if you could read out the questions and give a response where it's appropriate to do so, that would be great. Thank you so much. Yes, we've got some questions. This is Henrik. I've got some questions here. Last one related to Automatic acquisition. The reason I'm excited about the acquisition of Automatica, what success is NEXTCOP having conveyed these users to paying customers. So let's talk broadly about the RPA and give you a bit more detail than what was in presentation.

39:14 So lost, as I just said, the Liberty RPA, so our version of the RPA solution, just a couple of weeks ago and made the announcement on the February 15 on RNS REACH. That is more detail again on the website. That also meant we discontinued the open source model that Automatica had adopted. That means that future use of our RPA is licensed by a Liberty platform. Platform. So what we've done is we carried customers with us from Automatica and plan to move them to the new version of Liberty. And the opportunities coming from the Automatica users has been forwarded into the NETGORPipeline, and are progressing through that. They are progressing through that and being qualified in, qualified out, etcetera.

40:06 So the new release offer a number of additional benefits compared to its predecessor. The new features and a re architecture as well. This includes, of course, integration with our local platform, which is quite unique. Very few of our competitors have that. So it basically means you can run your RPA robots using the same screens, the same interface as you use for your local applications. That means you also can integrate them very tightly if you so desire. We also have re architected RPA, so that's much more local processing taking place, for instance, AI modules. And that improves both performance and data privacy.

40:53 We have added new AI capabilities like natural language processing that lets robots read text, interpret it, action it, and we use various types of machine learning libraries. We included handwriting recognition as well in it. So right now, are about two weeks after the launch. We are training staff and partners in the new products. We have about 30 organisations working with it right now, including customers from the NSS, local government, private sector customers and partners. And we are developing a series of bot flows with customers and partners. For instance, we are doing an asset management application using barcode scanning.

41:41 There are various activities going on within healthcare. And you can also see some instrument case studies that are available on the website, if you are interested. So I hope that answers the question. And if I move on to the next one: With regards to M and A, are you actively looking for additional acquisitions? What type of deals are you looking for? Yes, we are looking at acquisitions. We are looking at acquisitions all the time. As you can see on our history, we are not serial acquirers. We are happy to wait and we do it when it is appropriate. And so, since 2017, we have done two acquisitions. We have done Matt Software acquisition in August 2017 and then we did the RPA acquisition last year.

42:33 But we look at it all the time and then the question is what are we looking for? Well, we look for things that could expand our technology base we might find interesting. We can also look at how to acquire customers, where we can more cross Any acquisition of customers is going to fit with our platform. We don't want acquisitions where we've built on something that we can't really integrate with what we have, it doesn't really fit with what we have. And the third way we're looking at it, of course, is geographical Are there opportunities that give us access to new geographical, not just industry verticals, but also new geographical markets? So that's the type of things we are looking for. Therefore, we also like to have a very healthy balance sheet. When you are engaged in conversations with potential targets, the fact that you have cash on your balance sheet significantly improves your chances of actually being selected.

43:39 Because, of course, one of the first things they ask you is, Well, thank you for your interest and your ability to execute this. If we move on, I hope that answered the question. If we move forward to the next question, we have a question about confidence in growth rates continuing at the current levels, and is there a long term trend or reaction in the current market environment? Think the whole automation is a mega trend. Actually think that when we look back at this in a few years' time, COVID in this specific regard is a bit of a sideshow. I think, if anything, the pandemic has accelerated organisations' awareness around the necessity to do something. A lot of people have the way they operate fundamentally changed.

44:36 Home working, etc. Things that used to be depending on pen and paper moving around the office. So I think there has been a rapidly growing awareness and we can also see that people's habits are changing. We've seen for some of our customers where, for instance, social media activity within the financial services sector. Some customers reported tripling in social media activities immediately after the pandemic broke out. And we have also seen reports from The States where plus 65 year olds are the fastest growing element on users of online shopping. They are not just grocers, they are buying everything online now.

45:25 And it is growing very rapidly. And of course you think about what does that mean? Because that rapidly changes their buying behaviour, the way they act in this period. And is that going to have an effect in Europe? Or is it going have an effect in The UK? So that's the type of thing. So we think that the market growth, the automation mega trend, is going to continue and the market growth rate remains strong for a long time. Then there is a question related to the opportunity if you cross sell an answer to the entire customer base. I think James already answered that question, so I will skip on to the next one. Do you expect further margin improvements, and where do you think margins can get to? And James, will take that one?

46:15 Yeah, of course. We were sort of trying to manage the organic growth rate with new revenues contributing 30 sort of 35%. So what we've seen in the last eighteen months is continuing margin growth. So in financial '20, we added, I think it was 37% of new revenues contributed to profits. In the first half of this year, if we sort of strip out some of the COVID related savings, 45% of revenue growth came through to profits. And that's because when we kind of look at our operating expenditure, about a third of it is sort of fixed in nature, software maintenance, general admin.

47:05 About two thirds of it is kind of revenue generating in nature, so sales, marketing, customer service. Therefore, there's good operating leverage as we increase revenue. So, just for sake as an argument, if we were to be able to double our revenues and if we were able to bring in that additional revenue at that kind of 37% margin, then of course the addition of that with our existing business would increase our margins to nearer 30%, which would be the blend. So it's a good opportunity to expand margin as we grow the revenue base. Thank you very much, James.

47:51 If we move on to the questions, there is a question regarding market sectors. Outside the key sectors, what other sectors are you looking to expand into? Yes, are looking at different sectors. I mentioned citizen hub and patient hub earlier. We are having activities within the water industry. There is also stuff about that on website. Don't know whether all of us have picked that up in the news. And that is really about us having an entry level, getting a foothold into some of these sectors. We developed something called Launchpads, which is easy to adopt solutions that customers can buy into and get started in these new industry segments.

48:45 We we tailor solutions to these specific environments. There we in particular use our local platform and benefit from its rapid speed development and the agility that you use in developing apps. So we have done that together with prospective customers in areas like water, an industry that is highly regulated, a lot of customers. We are also looking at the housing sector where we have had a number of wins and we expect to be launching a housing hub in the not too distant future. So that is tailored to that specific market segment. And there are a number of other segments as well that we are looking at where we can build more tailored solutions. Having said that, opportunity alone in financial services, healthcare and government authorities, etc, is massive in our view, and there's a long way to go. But we'll continue to move ahead of that.

49:49 So, I have a question about who are your main competitors and will be pitched for those blue chip clients once you are USP. But if you go back to one of the earlier slides, and I assume that the slides are still visible, let us trust you. This is our product set. If you look at the customer engagement site, which is, as I mentioned earlier, the heritage of NETCALL, of course we have contact centre and digital messaging bot competitors. The traditional competitors there would be Avaya, Cisco or their resellers. We also have newer organisations like 8x8 and Five9 coming in. And of course, within digital messaging, you have companies like Intercom, etc.

50:46 So that's some of the people we will be pitching against in this specific area. One of the key things on a macro level, without getting into any features or any details, the macro level is that this organisation does not have an intelligent automation platform. So, of course, what we pitch is the vision. So you might only be needing a digital messaging platform, you might only be needing a contact centre, but we pitch the vision. We pitch the whole thing. But you can also get the low code, you can get the RPA. And as I explained earlier, we explain to customers how we see it hanging together. So there's a clear differentiation there. Our customer engagement competitors do not have that capability.

51:35 Likewise, if we move to the left hand, to the intelligent automation, we see people like OutSystems, Appian, Pega, to mention some. And again there, with the exception of Pega, they do not have customer engagement solutions. Pega has customer engagement capabilities, but they do not have a contact centre and they do not have the comprehensive suite of solutions that we do. So again, there we can pitch it. And again, many of the local providers do not have RPA. Some of them do, Pekka has it, Appian have it, but most of the others do not have RPA solutions that are built into their platform. So again, there we can differentiate.

52:21 So if you keep it at a very high level, there is plenty of differentiators. It is really about setting the scene when we see new customers and when we see blue chip customers about what is actually the potential within the platform as a whole. So I hope that answers this question and there is more about competitive environment. I think I covered channel strategy. If not, you are welcome to ask more questions More questions about the competitive landscape. I think I will answer the questions around Automatica. Then there is a question from Mike. What is your future dividend policy? James, is that something you want to address?

53:10 Yes, of course. Hi Mike. Dividend programme that the board announced is that we look to pay out 25% of adjusted earnings per share. So, we've just recently paid out the last financial year. We'll obviously, all being well, declare a dividend based on that policy for the full year sometime around September. I hope that answers the question. James Hemric, thank you very much indeed. I think just looking at the Q and A tab, you've probably addressed most of the questions that investors have submitted today, and thank you to those that have. Obviously, anything that we have missed, we'll make available to you for you to review at a later point. Perhaps, Henrik, if I could just hand back to you just for a few closing remarks.

53:57 And I know investor feedback is important to you. And what I'll do is I will then close the session and redirect investors to provide feedback. Yeah, well, be relatively short. And thank you very much for participating today. We look forward to really receiving your feedback. Of course you're welcome to ask questions if you have any further questions you'd like to discuss with us and you can always write to infonetcorp dot com and we will get the questions. In the meantime, thank you very much for joining and wish you a nice day. Thank you. Thank you very much indeed both to Henrik and to James. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback directly to the company.

54:42 If you access this meeting from our website, then the feedback page will appear. But if you access this meeting via the link sent to you by email, you'll just simply be asked to log back in to submit your feedback, and it is incredibly valuable to the company. On behalf of the management team of NET Core, I'd like to thank you all for attending today's presentation. That now concludes today's session. Good afternoon to you all, and thank you for attending.