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Netcall: acquisition strategy paying off

Proactive Investors caught up this week with Henrik Bang, CEO of Netcall – the AIM-quoted supplier of call handling technology to more than 600 private and public sector organisations.
Netcall: acquisition strategy paying off

Telecoms call handling technology company Netcall (LON:NET) has come a long way since it floated on London’s Alternative Investment Market in the mid-1990s. Back then it became one of the first companies to bring emerging Internet and telephony systems together with its service-based Web ‘callback’ solutions known today as CallMeBack.

Then in 2000 the firm made its first installation of its now flagship product – QueueBuster – that today is the leading callback and queue management system in the UK.

More recently, Netcall has embarked on a strategy of acquisition in order to boost its suite of products. Telephonetics VIP and Q-Max are now part of Netcall group, all supplying services that Netcall believes will help increase its attractiveness to customers.

Henrik Bang, who has been CEO at the firm for seven years, says that the management team recognised a few years ago that Netcall was operating in a very fragmented market that was ripe for consolidation. So, the firm decided that it would take an active role in leading this consolidation.

"We had a decent amount of cash given the companies size," he explains.

After buying Q-Max – a supplier of workforce management software for call centres – in October 2009, the firm bought Telephonetics via reverse takeover last summer.

Telephonetics supplies speech automation and data integration systems. The rationale behind the merging of the two businesses was to significantly increase their respective customer bases via cross selling, while also saving money by identifying cost saving opportunities.

The acquisition of Telephonetics brought a broad range of customers to the enlarged business so that today Netcall can boast an impressive list of customers – with more than 600 organisations using its technology across the private and public sectors.

These include 80 percent of the UK’s major multiplex cinemas, more than 60 percent of NHS Acute Health Trusts, local authorities and central government, major telecoms operators and leading commercial organisations across a variety of sectors.

The acquisitions of Telephonetics and Q-Max mean that Netcall now offers: intelligent call handling; callback; smart automation; workforce management; and data unification. This last technology is provided by the firm’s Eden product that combines many data sources to present a single view of calls that an organisation is handling so that it can better manage its contact with customers.

However, Netcall is not a “one stop shop” insists Bang.

There are some telecoms technologies that the firm is not so strong in, such as speech analytics. Meanwhile, Bang is actively against offering predictive dialling services. “It’s been absolutely abused,” he says, referring to the silent call problem that has been attacked by bodies like Ofcom – the telecoms regulator. “Because of the severe fines you get today people are shying away from it.”

Bang is not too concerned about competition from larger players in the telecoms technology sector. While there are some very big companies, such as Alcatel-Lucent, Cisco and Microsoft, operating in the sector they do not provide the breadth of services that Netcall offers, often supplying technology only to niche areas within the call handling sector.

Meanwhile, the acquisitions during the past couple of years mean that Netcall is gaining the economies of scale required in order to be able to see off competition from its smaller rivals. “In this mix, we are operating quite comfortably,” says Bang.

Recent interim results from the company appear to confirm this. For the six months to 31 December revenues increased to £6.4 million from £1.9 million in H1 2010, mainly as a result of the additional turnover that came from Telephonetics. Adjusted EBITDA was £1.2 million, compared with £354,000 in H1 2010.

The company – which is now a few weeks away from its 2011 financial year end – is currently in the phase of “bedding down” the Telephonetics acquisition, according to Bang. “The first cross selling orders are coming through,” he says.

Northland Capital Partners believes there is a “strong return on investment” argument at Netcall, which it believes has managed to integrate Telephonetics quickly and with limited disruption to the business. The broker added that the firm, which it estimates has net cash of around £4.8 million (or four pence per share), has good visibility of revenues with £4 million coming from the firm’s software-as-a-service offering, £6 million from maintenance and a further £4m from new licence income.

In early trading this morning, Netcall's shares were unchanged at 18.25 pence each.

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Netcall plc Timeline

November 26 2015

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