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Eckoh PLC

15 June 2022

15 June 2022

Eckoh plc

("Eckoh" or the "Group")

Full year results

- Group and US ARR growing strongly

- Transformational Syntec acquisition progressing well

- Expectation of material growth in FY23

Eckoh plc (AIM: ECK), the global provider of Customer Engagement Security Solutions, is pleased to announce results for the twelve months to 31 March 2022.

 
 GBPm (IFRS unless otherwise stated)     FY22   FY21   Change 
-------------------------------------- 
 Revenue                                 31.8   30.5    +4% 
                                        -----  -----  ------- 
 Gross profit                            25.4   24.2    +5% 
                                        -----  -----  ------- 
 US Secure Payments ARR ($m) (1)         11.9   6.5     +82% 
                                        -----  -----  ------- 
 Total ARR(1)                            25.2   17.0    +48% 
                                        -----  -----  ------- 
 Adjusted EBITDA(2)                      6.8    6.4     +7% 
                                        -----  -----  ------- 
 Adjusted operating profit(3)            5.2    4.7     +10% 
                                        -----  -----  ------- 
 Profit before taxation                  2.3    3.5    (34%) 
                                        -----  -----  ------- 
 Adjusted earnings pence per share(4)    1.57   1.49    +5% 
                                        -----  -----  ------- 
 Adjusted diluted earnings pence 
  per share(4)                           1.34   1.45    (8%) 
                                        -----  -----  ------- 
 

1. ARR is the annual recurring revenue of all contracts billing at the end of the period. Included within Group ARR is all revenue that is contractually committed and an element of UK revenue that has proven to be repeatable, but not contractually committed.

2. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is the profit before tax adjusted for depreciation of owned and leased assets, amortisation of intangible assets, expenses relating to share option schemes, restructuring costs and transactional costs.

3. Adjusted operating profit is the profit before tax adjusted for amortisation of acquired intangible assets, expenses relating to share option schemes, restructuring and transactional costs

4. Adjusted earnings pence per share - the Group issued 36.2m new ordinary shares during the year in connection with the acquisition of Syntec which results in an increase in the weighted average shares in issue across the period.

Strategic highlights

-- Strong ARR(1) growth, especially in the US market, driven primarily by our clients' need to protect data and comply with increasing regulation without compromising customer experience

-- UK business returned to growth with strong second half revenues as most client activity recovered

-- Transformational Syntec acquisition performing in line with our expectations with integration on track

o Unification and enhancement of product offering on track for go-to-market launch in 2022

-- As part of our long-term strategic direction, multi-platform cloud-enablement of our offering is driving:

o Market leadership and competitive advantage

o Scalability into larger client opportunities on an international basis, characterised by recent contracts

o Significant cross-sell opportunities and faster deployments will drive increased client value

-- Realignment of sales capability and go-to-market proposition to drive top-line growth, and restructuring of cost base to create greater operational efficiency

Current trading and Outlook

   --      Current order levels already substantially exceed FY22's first quarter outcome 

-- Significant strengthening of Eckoh's new business pipeline in the first quarter, including major opportunities for large blue-chip organisations

o Progress reflects success with our strategy to pursue larger, higher quality opportunities through management action to improve sales function

o Renewals post-period end includes our largest contract scheduled for FY23, worth GBP2.1m

-- First client deployed and live on our new Azure cloud platform signed new 3-year contract worth $1.4m for voice security and a further contract worth $0.6m to secure live chat agents with digital payments

-- As previously stated, the Board expects FY23 revenue and profit to be significantly higher than FY22, driven by strong organic ARR growth, operational efficiencies and synergistic benefits of the Syntec integration

-- The Board is confident of further progress in the year ahead, supported by an encouraging pipeline, a model with high recurring revenues and a robust balance sheet.

Financial highlights

   --      Strong performance, as previously announced in Trading Update on 17 May 2022 
   --      Group ARR(1) up 48%, reflecting market opportunity and ongoing shift to cloud 

-- Adjusted operating profit(3) up 10% with successful pivot to higher quality earnings following the completed exit from US and UK Support, which contributed GBP2m to FY21 adjusted operating profit

   --      US Secure Payments performed strongly: 

o Revenue up 8%, underlying growth stronger

o US ARR(1) up 38% on an organic basis and 82% including Syntec

-- UK revenues returned to growth with transactional volumes largely returned to pre-pandemic levels

o Revenue up 9%, excluding third-party support or 3% total

o UK ARR(1) of GBP16.5m, up 8% on an organic basis and up 36% including Syntec

-- Profit before taxation includes GBP1.0m of transactional costs (in connection with the acquisition of Syntec) and GBP0.9m of one-off restructuring costs

-- Balance sheet remains strong following the Syntec acquisition with net cash of GBP2.8m (FY21: GBP11.7m)

-- Increased final proposed Dividend at 0.67p per share (FY21: 0.61p), demonstrating increasing confidence in the ongoing growth opportunity

Nik Philpot, Chief Executive Officer, said:

"Eckoh has made significant progress in the last 12 months. We have shown the resilience of our business model, with growth in revenue and operating profit and improved quality of earnings with the completed exit from our Support activity. Our momentum is underpinned by fast-growing recurring revenues, with an excellent performance in our US business and a return to growth in the UK.

We successfully completed the transformational acquisition of Syntec, which enhanced our position as the largest provider in our industry. The integration is progressing well and our unified product suite will extend our market-leading position in Customer Engagement Security Solutions. Our new multi-platform, cloud delivery has created differentiation within our industry by offering greater customer choice, enabling us to deliver our services efficiently and at scale, and address significantly larger and global mandates.

We have started the year strongly, and looking ahead the Board expects FY23 revenue and profits to be significantly higher than FY22, reflecting our ongoing organic growth, continued momentum in the US market, a sustained recovery in UK trading, and the integration of Syntec. In addition, we expect our progress to be supported by long-term structural growth drivers and increasing cloud adoption, coupled with the benefits of new products and operational gearing."

For more information, please contact:

 
 Eckoh plc                                     Tel: 01442 458 300 
  Nik Philpot, Chief Executive Officer 
  Chrissie Herbert, Chief Financial Officer 
  www.eckoh.com 
 FTI Consulting LLP                            Tel: 020 3727 1017 
  Ed Bridges / Jamie Ricketts / Tom Blundell 
  eckoh@fticonsulting.com 
 Singer Capital Markets (Nomad & Joint         Tel: 020 7496 3000 
  Broker) 
  Shaun Dobson / Tom Salvesen / Alex Bond 
  / Kailey Aliyar 
  www.singercm.com 
 Canaccord Genuity Limited (Joint Broker)      Tel: 020 7523 8000 
  Simon Bridges / Andrew Potts 
  www.canaccordgenuity.com 
 

About Eckoh plc

Eckoh is a global provider of Customer Engagement Security Solutions, supporting an international client base from its offices in the UK and US.

Our Customer Engagement Security Solutions enable enquiries and transactions to be performed on whatever device the customer chooses, allowing organisations to increase efficiency, lower operational costs and provide a true omnichannel experience.

We help our clients to take payments and transact securely with their customers through all customer engagement channels. The solutions, which are protected by multiple patents, remove sensitive personal and payment data from contact centres and IT environments and are delivered globally through our multiple cloud platforms or can be deployed on the client's site. They offer merchants a simple and effective way to reduce the risk of fraud, secure sensitive data and become compliant with the Payment Card Industry Data Security Standards ("PCI DSS") and wider data security regulations. Eckoh has been a PCI DSS Level One Accredited Service Provider since 2010, securing over GBP5 billion in payments annually.

Our large portfolio of clients come from a broad range of vertical markets and includes government departments, telecoms providers, retailers, utility providers and financial services organisations.

For more information go to www.eckoh.com or email MediaResponseUK@eckoh.com .

Introduction

Eckoh has had a successful year consolidating our position as leaders in the growing Customer Engagement Security market. Our new metric of Group ARR shows extremely strong progress and we delivered a robust level of adjusted operating profit, GBP5.2 million, an increase of 10% year on year (FY21: GBP4.7 million) and ahead of consensus market expectations. We acquired Syntec Holdings Limited in December 2021 and are pleased with the current performance. The acquisition, alongside our organic business growth, will further strengthen our market-leading position. In our trading and product update in April, we announced the significant enhancements to our customer engagement security portfolio, the majority of which are available globally.

Our performance shows the resilience of our model and the merit of our long-term strategy, given the remaining challenges presented by the pandemic, the uncertain macro-economic climate and the planned and completed exit from US and UK Support, which had contributed GBP2 million to the previous year's profit. As a result, the Board has increased the proposed dividend by 10% to 0.67 pence per share (FY21: 0.61 pence per share).

Our strong performance reflects ongoing progress in our US Secure Payments operation, which now accounts for nearly 90% of total US revenues (FY21: 80% of total US revenues) and with the enhanced global product offerings provides the platform for continued growth and additional cross-selling into our existing clients, a significant part of our strategy. During the year the UK division has continued to recover and the momentum we saw at the end of the first half has continued into the second half, with revenue up 9% year on year in the second half, demonstrating the resilience of our business model.

A year ago, we said we would introduce an ARR(1) metric, which we did for the US Secure Payments business in our interim results in November. At that time, we also committed to include an ARR metric for the entire Group with our full year results, and we are pleased to have been able to fulfil that commitment. Given the transactional nature of some UK revenues, we have slightly updated our definition of ARR since our trading update in May. Group ARR(1) was GBP25.1 million as at 31(st) March 2022, a 48% increase year-year (FY21: GBP17.0 million), a very strong outcome demonstrating the high level of visibility we have in our business model.

Total revenue for the year was GBP31.8 million, an increase year on year of 4% (FY21: GBP30.5 million) or 6% adjusting for constant exchange rates. Excluding the third-party Support business in FY22 and FY21, revenue was GBP31.2 million, an increase of 11%. Included within these results are three months of revenue from Syntec, which is performing in line with our expectations at acquisition.

Gross profit was GBP25.4 million, an increase year on year of 5% (FY21 GBP24.2 million), with gross profit margin 80%, (FY21: 79%). US gross profit was GBP8.5 million (FY21: GBP8.9 million), with gross profit margin increasing as expected to 74% (FY21: 71%). The growth in gross profit margin in the US, is aligned with our expectations as US clients successfully renew their contracts, most new client deployments are on the cloud platform and there is continued growth in the Secure Payments activity. UK gross profit was GBP15.6 million (FY21: GBP15.3 million), an increase of 2% with gross profit margin decreasing by 1% to 84%. Syntec gross profit was GBP1.4 million, with an 80% gross profit margin, in line with the Group's gross profit margin.

The prudent cost control we achieved in FY21 has continued into FY22. We made structural changes to the US Sales team in the second half of the year and increased our focus on 'vertical selling' (targeting sectors such as healthcare, which are well suited to our model). We have introduced a global Network Operations Centre (NOC) and also streamlined the US operational team, following the planned and completed exit from the third-party Support business.

Adjusted operating profit(2) was GBP5.2 million (FY21: GBP4.7 million), an increase of 10% year on year. After adjusting for the planned exit from third-party Support, FY22 adjusted operating profit was GBP4.8 million, a year-on-year improvement of 81% (FY21: adjusted operating profit excluding third party Support GBP2.7 million).

Total contracted business(3) for the financial year at the Group level was GBP22.5 million (FY21: GBP30.7 million), with 77% of all new business from Secure Payment solutions. The first half of the year was challenging for new business and particularly large enterprise contracts with the ongoing impact of the pandemic at the time. We started to see improvements as the second half started, but the usually strong final quarter of the year was then impacted unexpectedly by the global macro-economic challenges arising from the ongoing conflict in Ukraine. New business won in the year was GBP10.8 million (FY21: GBP15.7 million), an unsatisfactory outcome, but with the continued pandemic challenges in the first half and the macro-economic challenges in the last quarter, it was an understandable result. We are, however, very encouraged by trading in the first quarter of the new year, with order levels already significantly higher than last year, and with a much stronger pipeline.

Our balance sheet remains robust with a strong net cash position of GBP2.8 million (FY21: GBP11.7 million). In the first half of the financial year, we repaid the final instalment of the term loan with Barclays Bank and in December we utilised some of our cash reserves to part-fund the acquisition of Syntec. In addition, and as a result of the acquisition of Syntec, the Group entered into new banking arrangements with Barclays Bank for a GBP5.0 million Revolving Credit Facility (RCF) and a GBP5.0 million overdraft facility. As at 31(st) March there was no debt drawn under either facility. The RCF is secured against the Group's UK head office which is an asset we own outright.

A clear growth strategy

Our strategic objectives reflect our primary goal to become the global leader in our areas of expertise, and in particular, Customer Engagement data and payment security.

Our strategic objectives include:

   --      Being the market leader for Customer Engagement data and payment security 

-- Capitalise on the fast-growing global market for technology solutions that help protect customer data

-- Maximise client value and retention through cross-selling to generate higher levels of recurring income

-- Make cloud our primary platform and use cloud technologies to develop and enhance our proprietary solutions

-- Evaluate acquisition opportunities that can support our growth strategy in Customer Engagement security

Highly complementary products brought together into a new enhanced security-led proposition

Historically Eckoh's go-to-market proposition encompassed two highly complementary areas: Secure Payment products and Customer Engagement solutions.

-- The Group's patented Secure Payment products help organisations to reduce the risk of fraud; secure sensitive data; comply with the Payment Card Industry Data Security Standard ("PCI DSS") and wider security regulations such as the General Data Protection Regulation ("GDPR") or the US Consumer Privacy Acts. Eckoh prevents sensitive personal and payment data from entering IT and contact centre environments when customers make payments for goods and services.

-- The Group's Customer Engagement Solutions help organisations transform the way they engage with their customers. Eckoh's proposition, enables enquiries and transactions to be performed on whatever device the customer chooses, through any inbound communication channel and allows customers to self-serve or to engage with a customer service advisor. It enables our clients to increase efficiency, lower operational costs and increase customer satisfaction by providing a true Omnichannel experience.

The overlap between these two areas has always been significant and has led us to update and unify our proposition into a new go-to-market vision of Customer Engagement Security Solutions. Going forward all of our customer engagement offerings will be underpinned with security features and capabilities to assist our clients to address security concerns and increasing regulation, but to do so in a way that doesn't compromise the quality of their customer's experience. An example of this is our live chat offering which incorporates our patented and unique ChatGuard capability, that enables payment or personal information to be entered by a customer into a live chat session without any of that information traversing our client's environment or being shared with an advisor.

In the past our UK operations sold our entire product portfolio, but in the US - a territory that Eckoh entered six years ago - the focus has been on Secure Payments, where we had the greatest differentiation and the least competition. Going forward this distinction will no longer be the case, with our new product proposition being available to any client in any territory. Our solutions, which will enable our clients to 'Engage, Secure and Protect' their customers, will all be delivered through our multi-vendor and global cloud platforms, allowing us to better service international contracts. The procurement of security and payment solutions to be deployed across multiple territories is certainly increasing, and we will continue to invest in and extend our cloud platforms to support this growth. This trend will broaden our market further and inevitably lead to us having a blurring of our geographical target markets with Rest of World ('ROW') becoming a more important component of our future revenue streams.

The growing proportion of cloud deployments we have already seen occur in the US market, alongside the acquisition of Syntec, means our ability to sell and deliver additional services to clients is very much enhanced. With our product roadmap extending our security remit beyond payments and into a broader data security proposition we expect to be able to increase the lifetime value of our clients and continue to have very low levels of churn.

As part of the integration of Syntec we have formed a cross-company technical group who are working on the unification of the security product proposition, a project that we have named 'Syntegration'. This will lead us to have the ability to deliver all our Customer Engagement Security Solutions from a combined cloud native code base and have the flexibility of seamlessly adding new functionality or additional services as desired by the client, reducing the time to revenue considerably. The first instantiation of this new unified offering is expected to be available in this calendar year.

New growth drivers in a broadening global market

Our target market in the UK and US for our Secure Payments proposition has historically been any sizeable enterprise or organisation that either transacts or engages with its customers at scale and at volume. This activity will usually be supported either by an in-house or outsourced contact centre provider. The greater the volume of payment transactions or customer engagement activity that the organisation has, the more attractive they are to Eckoh, and the larger the contact centre operation supporting the organisation is likely to be.

However, with the advent of a unified go-to-market proposition of Customer Engagement Security Solutions, enhanced by the new products and delivered through our expanding cloud platforms, not only will this naturally extend our reach geographically but it will also increase the opportunity within every client account. With regulation tightening and the financial impact of data breaches and fraud growing, organisations are increasingly looking for ways to move beyond the requirement of merely being compliant to secure themselves more comprehensively, leading to broadening information security budgets and remits.

The contact centre industry in both the UK and US is extremely large, representing around 4% of the entire workforce in both markets. However, the pandemic and the current economic climate is fundamentally changing the way that the contact centre industry operates and the pressures it has to deal with.

-- The pandemic has forced contact centres to adopt hybrid working, increasing security concerns

-- Recruitment and churn are huge problems, making it very challenging to properly service clients' needs

-- The cost-of-living crisis will accelerate levels of fraud and increase collection issues

In the aftermath of the pandemic there is now a much greater reliance on contact centre agents working remotely, usually from their homes, and that is only going to accentuate security concerns and requirements. The trend of remote working for managing customer engagement is almost certainly a permanent feature, and t his can only benefit Eckoh as our security proposition enables companies to effectively further reduce or remove the risk of data breaches arising from one of the most challenging parts of their businesses.

Furthermore, the contact centre industry is now battling with a huge problem of churn and recruitment challenges as a consequence of the realignment of employees' career aspirations coming out of the pandemic. This is unlikely to be solved easily or quickly and organisations will be looking even more acutely at the utilisation of their human agents and turning increasingly to technology to maximise first contact resolution levels and the average handling time for each contact. Eckoh's new product portfolio will ensure that customers can be dealt with swiftly and effectively, without compromising their customer experience or the security of their data.

Lastly, the cost-of-living crisis will inevitably lead to an increase in fraud, both from internal employees and external organised criminals. Contact centres are a relatively low paid sector and it is this tier of employees who arguably will be most badly hit by the economic pressures, which may lead to a greater propensity for them to commit criminal acts, whether independently or on behalf of organised crime. The same economic challenges will also lead to greater numbers of consumers becoming either unwilling or unable to pay off charges for services. Managing those customers and trying to successfully and sensitively collect their payments will require more innovative and effective use of technology, and Eckoh's security proposition has proven success and a demonstrable return on investment in this area.

Operational review

US Division (39% of group revenues)

The US business, including the Syntec US activity, represented 39% of Group revenues in 2022 (FY21: 41%). In the US, the Group's focus has remained on the US Secure Payments opportunity, where we deliver a patented solution through the Eckoh CallGuard brand or Syntec CardEasy brand. The product enables enterprises to take card payments securely within their contact centre operations and the growth opportunity is underpinned by long-term structural drivers of tightening regulation, the need to mitigate the risk of data breaches (and fraud) within our clients' IT and contact centre operations and the migration to a greater level of remote working.

As the more extensive Customer Engagement Security offering delivered through our global cloud platforms is introduced to the US this year, there is a huge opportunity to cross-sell to our existing enterprise clients, many of which are the largest brands in the US market. This approach has proven to be highly successful with our UK clients and will drive continued growth.

In the US, Secure Payment revenue was $13.8 million an increase of 8.1% (FY21 $12.8 million) and 88% of total US revenue (FY21: 78%). The revenue growth has been tempered in this period by the three secure payment contracts that successfully renewed for the first time during the year, one of which was our largest contract to date, a $7.4 million 2-year contract that went live in 2019. At the point of renewal, the hardware fees and implementation fees are fully recognised and as we see more clients go through their first renewal, we will see the overall percentage of recurring revenue continue to increase. This is illustrated by the progress in recurring revenue, which was 65% (FY21: 52%), an improvement of 13%, demonstrating both the successful renewals achieved in the year and the increased number of clients who deploy on our global cloud platform. We expect the level of cloud deployments to continue at the current level, which will continue to improve the recurring revenue and the gross profit of the business.

The planned transition to Secure Payments and ultimate exit from the Support activity is now completed, with only $0.5m of revenue in this financial year coming from Support. Over the last five years Secure Payments has grown at a compound annual growth rate of 30% and the quality of earnings going forward will be enhanced by the exit from the shorter-term Support contracts. The growth of the US business is further demonstrated in the new ARR metric. The Eckoh US Secure payments ARR is $9.0m, an increase of 38% from the same time last year. When the Syntec US activity is included, the combined ARR is $11.9 million, an increase year on year of 82%.

Total contracted business was $10.6 million a decrease of 35% (FY21 $15.5 million). The level of new contracts was lower in the second half than expected, reflecting an unusually quiet fourth quarter due to macro-economic conditions and ramifications of the Ukraine situation. The Company remains focused on large enterprise contracts, and whilst deals were slow to close at the end of the year, the pipeline is stronger than a year ago and encouragingly we have seen much higher levels of activity and value of deals closing in Q1 of the new year compared to last.

We continue to see, as expected, the general acceleration towards cloud deployments and with our recently announced implementation of a new Microsoft Azure Cloud platform with a Fortune 100 US retailer now live, this makes Eckoh the only provider in our industry to offer alternative cloud providers. This particular client actively chose to deploy onto the Azure platform, illustrating that there are sensitivities and preferences that clients will have that will influence their choice of Cloud provider.

The ability to offer our clients a choice of cloud platform strengthens our position in the market and the expansion globally of our cloud platforms and capabilities remains one of our key strategic goals. One of the big advantages this brings is the speed and ease with which multiple parts of our secure engagement portfolio can be deployed. The client who is now live on our Azure platform has entered into two separate contracts with us. The first worth $1.4m over three years is for securing their voice agents, the second worth $0.6m is to allow them to securely take digital payments across other engagement channels, notably live chat. This is a good illustration of how we expect new and existing clients to take multiple parts of our portfolio and extend the reach of their overall solution over time.

While cloud deployment remains a key goal and advantage, we still expect that many of the largest enterprises will take many years to achieve that objective, so retaining the capability to deploy as required in a client's own data centres and environment continues to give us a tactical advantage over our competitors.

The launch of CallGuard Express in the second half, which is deliberately designed for smaller customers, will see smaller contracts being targeted and won for the first time. This product is extremely quick to deploy, with very limited operational overhead associated with it, so the conversion of a sale into revenue will be much faster than on our larger contacts, and the margin higher. We expect these contracts to be primarily won through partners and our sales channels continue to strengthen, so the share of pipeline and revenue from partners is expected to increase over time. Partner sales opportunities now represent 30% of our total pipeline.

The average length of new contracts for Secure Payments is three years which is comparable to the UK, however, it is more typical in the US for renewals to be annual, often on an auto-renew. During the year there were five contracts that successfully renewed, one of which was our largest contract signed to date ($7.4 million over 2 years). There was a significant level of one-off fees in this contract, which were fully recognised in the first half. In the second half of the year there were two contracts, which are both on an annual auto-renew as described above, they are now in their fourth and fifth year showing similar lifecycle values to our UK clients.

External factors, such as the impending change to version 4 of the Payment Card Industry Data Security Standard (PCI DSS), the implementation of new data laws such as US Consumer Privacy Acts and significant fines levied on US organisations through the GDPR legislation, are undoubtedly helping raise awareness of the risks of not protecting sensitive data properly. This will assist us in continuing to build our pipeline which is substantial and growing. Our focus on these larger contracts means that in future periods the timing of contract wins continues to be hard to predict given the typically longer sales cycle.

In the year Coral and Support had a combined revenue of $1.8 million (FY21: $3.5 million) and accounted for 12% of the revenues (FY21:22%). A proportion of the restructuring costs incurred in the US in the first half relate to the third-party Support area of the business and the last stage of the restructuring took place in October as we merged the UK and US Customer Support desks to a global Network Operations Centre (NOC).

Coral is a browser-based agent desktop that increases efficiency by bringing all the contact centre agent's communication tools into a single screen. It also enables organisations, particularly those who have grown by acquisition, to standardise their contact centre facilities, as Coral can be implemented in environments that operate on entirely different underlying technology. In the prior period, we secured additional licences and functionality of $1.0 million in the year. In FY22, there were no incremental licence fees, however as we have indicated previously, the timing of Coral orders remains hard to forecast and they will be lumpy in nature.

This will be the last time that the US is reviewed in the context of Secure Payments only. With the shift to a unified Customer Engagement Security Solutions proposition we will be commenting on our progress across this broader offering and will be able to assess progress in our ability to cross-sell new services into existing clients as well as on boarding new clients.

UK Division, including Syntec UK and Rest of World (61% of group revenues)

During the year the UK division has continued to recover and the momentum we saw at the end of the first half has continued into the second half, with revenue up 9% year on year in the second half, demonstrating the resilience of our business model. This provides us with continued confidence for the new year coupled with the strong contracted business already achieved in the first quarter to date.

Revenue in the year was GBP18.6 million (FY21 GBP18.0 million) an increase of 3%, this is particularly pleasing given the challenging beginning to the year, when the country remained impacted by the pandemic. When the third-party Support revenue is excluded in FY22 and FY21, the underlying growth was 9% from GBP16.8 million to GBP18.3 million. Recurring revenue has decreased to 80% from 84% in FY21 partly due to the planned exit from third-party Support.

UK clients are contracted through a range of commercial models that have evolved over time, unlike the newer US business (including Syntec US activity), which operates entirely on fixed fee contracts. Where the commercial model is transactional, which is common, it is usual for a client to commit to a high percentage of its expected volumes and in so doing achieve the most competitive buying rate. The portion of a client's revenue that is not committed is generally repeatable, even as we saw in the pandemic, where the UK activity levels were very significantly impacted but the revenue impact was only around 10%. In introducing the Group ARR metric, we have had to make an assumption on the revenue that is not contractually committed but is, and has been, repeatable. Based on this view UK ARR at the end of the period was GBP16.5m, a 36% increase including Syntec, 8% of which was organic.

Gross profit in the year was GBP15.6 million, an increase of 2% (FY21: GBP15.3 million) and gross margin in the UK decreased in the period by 1% to 84% (FY21: 85%).

Total contracted business was GBP13.3 million compared to GBP18.9 million in the prior year and new contracted business was GBP5.0 million compared to GBP5.9 million, a 14% decrease year on year. Total contracted business can be impacted by the timing of particularly large renewals, for example, in FY21 we completed a six-year contract renewal with Capita for the provision of services for the Congestion Charge to Transport for London, at a minimum contract value of GBP4 million. In FY22 we completed important renewals with amongst others Premier Inn, Rail Delivery Group, Thames Water and Boots, but these were comparatively smaller than the Capita agreement. There was only one significant client that was not renewed in the period, who were contracted through a partner, and migrated to a different solution, this was the first such non-renewal for many years. Since the financial year end, we have successfully renewed our largest contract scheduled for this financial year, a contract through Capita for a large public service organisation, which was GBP2.1 million over the term.

Looking at the segmentation of UK revenue, 28% came from Secure Payment services (FY21: 27%), 32% from Customer Engagement Solutions (FY21: 36%) and the remaining 40% from clients where we provide a combination of both solutions (FY21: 37%). The shift from Customer Engagement Solutions to clients with combined solutions is principally due to the improving volumes from our larger clients who take both the Secure Payments solution and the Customer Engagement Solution.

Our model of cross-selling to existing clients remains a key part of the Eckoh strategy, not just to generate incremental revenue but also to continue the trend of strong client retention and to further increase the lifetime value of the Group's customers. GBP3.6 million of the new business secured in the year (FY21: GBP3.5 million) was contracted with existing customers for delivery of new solutions or modifications. Our strong track record with existing clients has also continued to be demonstrated through the extremely high proportion of clients that are successfully renewed.

New business wins, consistent renewals of existing clients and the improved transactional volume from our long-standing clients give us high revenue visibility and our UK clients are underpinned by contractual fees or minimum transaction levels. We expect the improvement in transactional revenues seen in the second quarter to continue into the second half, subject to no further lockdowns being implemented.

Syntec contributed GBP1.7 million of revenue and GBP0.3 million of operating profit in the final quarter of the financial year. This was consistent with our expectations at the time of the transaction, and the integration of the businesses is proceeding on plan. Unification of the technology and product offering is making progress and we expect to deliver a unified and enhanced go-to-market proposition in 2022.

Product update

In April we announced significant enhancements to our Customer Engagement Security portfolio to assist organisations in protecting their customers' payment and personal data in more efficient and diverse ways.

The enhancements support Eckoh's strategic goals to capitalise on the structural developments in the global market and to use cloud technologies to develop and enhance our proprietary solutions while maintaining a market leading position for Customer Engagement data and payment security. These new enhancements included:

Secure Chat

Eckoh's Live Chat product is used by large enterprises that need the most versatile customisations and integrations plus the ability to scale to support the largest and most demanding requirements - something that off-the-shelf Chat products cannot provide. With a new redesigned interface based on extensive client feedback, agents and customers can now enjoy an even slicker and more convenient experience that is fully cloud-hosted, allowing for sudden and significant fluctuations in demand. With Eckoh's unique and patented product ChatGuard built-in as standard, organisations can take fast in-chat payments with the reassurance of full PCI DSS compliance. Eckoh's Secure Chat is the only service to offer this capability and this updated version is now available globally and is expected to add significant value to the security proposition.

Digital Payments

Blending digital security with live person interaction, Eckoh's Digital Payments can be extended to any customer engagement channel. Organisations can now provide their customers with a secure payment link triggered by the agent from an engagement on a chat or messaging session or via an email. The agent can monitor the progress of the payment process in a similar way to our voice security product, and without any exposure to any of the data. It also offers the consumer traditional card payment or popular alternative payment methods like PayPal, ApplePay or GooglePay. Digital Payments is now available globally through Eckoh's multi-cloud platforms, the latest addition to the broadening security product range that is facilitating greater opportunities for cross-selling into Eckoh's extensive client base.

CallGuard Express

CallGuard Express is designed to make compliance and security straightforward for any business. It offers companies of any size the same security functionality and credentials of CallGuard, but without the customisation and managed service that larger companies often require. This enables CallGuard Express to be quick to deploy, simple to use and with a lower-cost entry point. As well as standalone businesses, this new proposition is also available to resellers through a partner program, enabling them to switch on new clients within days with no integration required.

CallGuard On-Demand

In response to the increasingly rigorous Payment Card Industry Data Security Standards ("PCI DSS"), Eckoh has developed an on-demand option for organisations who may have low or variable volumes of payments but still require the reassurance of full compliance. This enhancement gives the contact centre agent the ability to invoke CallGuard only when a payment is taken, rather than all calls needing to traverse through the system.

Speech technology expansion

Eckoh has a long and successful history of speech-based applications and is leveraging that knowledge by enabling even more languages for the speech option in our security solutions. A new five-year contract, which was a significant cross-sell into a Syntec account, will see 18 different languages being implemented across the global estate of an international travel business.

Amazon Connect

During FY22 we have invested in progressing the delivery of Eckoh solutions that include Amazon Connect as the Cloud telephony layer. When combined with Eckoh's Customer Engagement Security Solutions this creates a compelling bundled solution that will enable Eckoh clients to have complex and feature-rich cloud customer engagement but delivered in a truly flexible, agile and, most importantly, secure way.

Syntegration - Creating a new cloud delivered Customer Engagement Security offering

'Syntegration' is an in-flight project to bring the best of Eckoh and Syntec's existing products and technologies together, and build a unified platform and roadmap for future new capability. Both company's core development teams have been working as one cohesive unit to take all the best elements of each product and bring them together into a truly world-class product suite. It will provide a seamless upgrade path for current clients to benefit from all the same capabilities as future clients.

Both Eckoh and Syntec already had well-established, successful products in the market, having benefitted from many man-years of initial development coupled with subsequent enhancements and fine tuning based on feedback from some of the world's largest brands. The combination of the two products not only enhances the core security aspects of the platform, but also extends capability to new features almost immediately and creates an extensive roadmap for future innovation.

With each solution having its own unique strengths, Eckoh has capitalised on these, bringing them together in a re-worked code base, plugging in additional capabilities and deployment models, and leveraging advances in Cloud technology that have emerged in the last five years. As Eckoh's CallGuard and CardEasy brands will now both benefit from the cross-pollination of features, many near-term roadmap items will be brought to fruition via this 'Syntegration' rather than net-new development. Further, our long-term roadmaps now culminate into a single vision where new features can be developed and released on an accelerated timeline with the larger and more integrated research and development team.

The benefits of Syntegration are wide ranging, not only strengthening Eckoh's product proposition and partner integrations, but also delivering a significant number of operational efficiencies and reduced cost of

ownership.     Some key benefits of the new offering will be: 
   --      Best of both product sets 
   --      Cloud agnostic 
   --      Increases automation and agent efficiency 
   --      Seamless upgrade path for all customers 
   --      Reduces the total cost of ownership by lowering the cloud footprint (less computing power) 
   --      Brings together an unrivalled stable of out-the-box integrations 
   --      Fits any deployment model we have encountered 
   --      Delivery through configuration rather than bespoke development 
   --      Provides the backbone for our Customer Engagement Security roadmap 
   --      Combines architectural and engineering expertise with a growing patent portfolio 

Outlook

The balance sheet remains strong with net cash of GBP2.8m (FY21: GBP11.7m), well ahead of expectations. The reduction from last year reflects the completed acquisition of Syntec in December 2021, which was part funded from our cash reserves.

The Board expects revenue and profit for FY23 to be significantly higher than FY22. This will be driven by synergistic benefits of the Syntec integration, ongoing momentum in the US market, and expected normal trading activity in the UK; supported by long-term structural growth drivers and cloud adoption. The Board is confident of further progress in the year ahead, with an encouraging pipeline, a model with high recurring revenues and a robust balance sheet , coupled with the benefits of new products and operational efficiencies. These expectations are subject to ongoing uncertainty in the macro-economic climate.

Financial Review

Eckoh has had a successful year and delivered a robust level of adjusted operating profit, GBP5.2 million, an increase of 10% year on year (FY21: GBP4.7 million) and ahead of consensus market expectations. We acquired Syntec Holdings Limited in December 2021 and their results for the three months to 31(st) March 2022 are included in the below review.

Revenue for the year increased by 4% to GBP31.8 million (FY21: GBP30.5 million) and at constant exchange(3) rates by 6%. Adjusted operating profit(1) was GBP5.2 million an increase of 10% year on year (FY21: GBP4.7 million). Profit after tax for the year was GBP1.6 million, compared to GBP2.8 million in FY21. In the current year profit after tax of GBP1.6 million, there are GBP1.0 million of transaction costs relating to the acquisition of Syntec and restructuring costs of GBP0.9 million. The restructuring costs include redundancy and contract termination costs following the acquisition of Syntec and redundancy costs in Eckoh US following the restructuring of the Sales team, the introduction of a global Network Operations Centre (NOC) and the completion of the exit of the third-party Support business.

Basic earnings per share for the year ended 31 March 2022 was 0.59 pence per share (FY21: 1.09 pence per share). Adjusted earnings per share for the year ended 31 March 2022 was 1.57 pence per share (FY21: 1.49 pence per share).

Divisional performance

Revenue in the UK, which represents 59% (FY21: 59%) of total group revenues, increased by 3.1% to GBP18.6 million (FY21: GBP18.0m). The US represented 36% (FY21: 41%) of total group revenues and revenues decreased in the period by 7.7% to GBP11.5 million (FY21: GBP12.4m). After excluding the exited third-party Support business in prior years, revenues increased by 4.9%. Syntec revenue was GBP1.7 million, or 5% of total group revenues, in line with expectation at acquisition. Revenues in local currency grew by 5.7% year on year.

Following the acquisition of Syntec, whose business is split across the US, UK and Rest of World (ROW), the increasing frequency of contracting on a global basis with clients and the increased global deployment of our products as we increase our product availability globally through our multi-cloud offering, we will review the most appropriate and meaningful approach to measure the success of our business. Including the Syntec US revenues with Eckoh's US division, means US revenues account for 39% of revenues, the UK and ROW 61%.

Further explanations of movements in revenue between the US and UK divisions, including Syntec have been addressed in the Operational Review above.

 
                     FY22       FY22         FY22       FY22      FY21      FY21      FY21 
                     (UK)       (US)     (Syntec)      Total      (UK)      (US)     Total 
                   GBP000     GBP000       GBP000     GBP000    GBP000    GBP000    GBP000 
--------------  ---------  ---------  -----------  ---------  --------  --------  -------- 
 Revenue           18,596     11,487        1,697     31,780    18,037    12,449    30,486 
 Gross Profit      15,593      8,473        1,357     25,423    15,299     8,896    24,195 
 Gross margin         84%        74%          80%        80%       85%       71%       79% 
--------------  ---------  ---------  -----------  ---------  --------  --------  -------- 
 

Gross profit

The Group's gross profit increased to GBP25.4 million (FY21: GBP24.2 million). Gross profit margin was 80% for the year, an increase of 1% year on year (FY21: 79%). The UK gross profit margin decreased by 1% to 84%. In the US, the full year margin increased from 71% to 74% as previously indicated, due to the continued increase in Secure Payments and particularly in the cloud environment, the planned transition away from the third-party Support business and the impact of one-off Coral licences in the prior year.

In the UK, as the service is hosted on an Eckoh platform, there is typically no hardware provided to clients and the gross profit margin is expected to remain at 84-85%. In the US, we would expect the gross profit margin to continue to increase from 74% to approx. 76% over the next two years. This is driven by the continued growth of the Secure Payments' activities for cloud solutions coupled with clients renewing their contracts without additional significant hardware. Syntec has a mixture of business delivered in the US, UK and ROW, with deployments typically through its hosted cloud platform for its UK and ROW business, with the US business having a mixture of on-site deployments and more lately cloud deployments, the gross profit margin is expected to remain at approx. 80%.

Administrative expenses

Total administrative expenses for the year were GBP23.0 million (FY21: GBP20.6 million). Adjusted administrative expenses(4) for the year were GBP20.2 million (FY21: GBP19.4 million). The prudent cost control achieved in FY21 has continued into FY22, we made structural changes to the US Sales team at the end of the first half and increased our focus on 'vertical selling' (targeting sectors such as healthcare, which are well suited to our model), we have introduced a global Network Operations Centre (NOC) and also streamlined the US operational team, following the planned and completed exit from the third-party Support business. Included in administrative expenses is a trading foreign currency loss of GBP0.1 million (FY21: GBP0.4million loss).

Profitability measures

Adjusted operating profit was GBP5.2 million, an increase of 10.1% year on year (FY21: GBP4.7 million). Included in the year was a foreign currency loss of GBP0.1 million (FY21: loss GBP0.4 million) and nil Coral licences (FY21 GBP0.3 million). Adjusted EBITDA(2) for the year was GBP6.8 million, an increase of 7.6% year on year (FY21: GBP6.4 million).

 
                                                   Year        Year 
                                                  ended       ended 
                                               31 March    31 March 
                                                   2022        2021 
                                                GBP'000     GBP'000 
-------------------------------------------  ----------  ---------- 
 Profit from operating activities                 2,386       3,550 
 Amortisation of acquired intangible 
  assets                                            751         663 
 Expenses relating to share option schemes          241         536 
 Restructuring costs                                866           - 
 Costs relating to business combinations            985           - 
 Adjusted operating profit(1)                     5,229       4,749 
                                             ----------  ---------- 
 Amortisation of other intangible assets            392         398 
 Depreciation of owned assets                       675         704 
 Depreciation of leased asset                       498         505 
-------------------------------------------  ----------  ---------- 
 Adjusted EBITDA(2)                               6,794       6,356 
-------------------------------------------  ----------  ---------- 
 

1. Adjusted operating profit is the operating profit before adjustments for expenses relating to share option schemes, amortisation of acquired intangibles assets, restructuring costs and costs relating to business combinations.

2. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is the profit from operating activities adjusted for depreciation, amortisation, expenses relating to share option schemes, restructuring costs and costs relating to business combinations.

3. At constant exchange rates (using last year exchange rates)

4. Adjusted administrative expenses are administrative expenses before adjustments for expenses relating to share option schemes, depreciation of owned and leased assets, amortisation of acquired intangible assets, restructuring costs and costs relating to business combinations

Statement of financial position

While Eckoh continues to innovate by developing new products and features such as those detailed in the product update, little of this is capitalised on the balance sheet with only GBP0.3 million (FY21: GBP0.4m) added in the year to the value of the intangible assets of the Company. While taking a prudent approach to capitalising salary cost, which reduces reported profit, management believes this approach gives an accurate reflection of the trading performance of the Company.

Finance charges

For the financial year ended 31 March 2022, the interest payable charge was GBP74k (FY21: GBP87k). The interest charge is made up of bank interest of GBP23k (FY21: GBP54k) and interest on leased assets of GBP51k (FY21: GBP33k).

Taxation

For the financial year ended 31 March 2022, there was a tax charge of GBP743k (FY21: GBP717k charge). The effective tax rate in the financial year ended 31 March 2022 was 43.8% (FY21: 20.4%). The current year tax rate is impacted by the non-deductible nature of the fees relating to the transaction of Syntec and the reversal of deferred tax on the share options for the Exec Directors which are unlikely to vest in July 2022.

Earnings per share

Basic earnings per share was 0.59 pence per share (FY21: 1.09 pence per share). Diluted earnings per share was 0.51 pence per share (FY21: 1.06 pence per share). Adjusted diluted earnings per share was 1.34 pence per share (FY21: 1.45 pence per share).

Client contracts

Client contracts are typically multi-year in length and have a high proportion of recurring revenues, usually underpinned by minimum commitments. With a greater proportion of contracts being delivered through the cloud the initial set up fees and hardware costs associated with larger customer premise deployments will be reducing, leading over time to an increase in operating margin.

Contract liabilities and contract assets

Contract liabilities and contract assets relating to IFRS 15 Revenue from Contracts with Customers have decreased in the current year, principally as new contracted business in the US has been predominantly for cloud-based solutions. Where clients contract for their services to be provided in the cloud or on our internal cloud platform, the level of hardware is significantly reduced and implementation fees are typically lower. This reduces the level of upfront cash received but drives a greater level of revenue visibility and earnings quality. Total contract liabilities were GBP12.5 million (FY21: GBP11.3 million), included in this balance are GBP9.5 million of contract liabilities relating to the Secure Payments' product, hosted platform product or Syntec's CardEasy Secure Payments product, a decrease from GBP1.8 million at the same time in the previous year. Contract assets as at 31 March 2022 were GBP3.8 million (FY21: GBP4.4 million).

Cashflow and liquidity

Gross cash at 31 March 2022 was GBP2.8 million (FY21: GBP12.7 million), as at 31 March 2022 there was no drawdown of debt (FY21: GBP1.0 million debt). In April and July 2021, the Company made the two final quarterly repayments of GBP1.0 million of the loans outstanding to Barclays Bank in accordance with the terms of the term loan. During the second half of the year and as a result of the acquisition of Syntec, we utilised our cash reserves to part-fund the acquisition, raised funds from Shareholders and the Group secured a new GBP10 million debt facility with Barclays Bank, which comprises a GBP5.0 million overdraft and a GBP5.0 million revolving credit facility. During the year, there has been a net cash outflow from working capital of GBP1.7 million (FY21: GBP2.3 million cash outflow) due to the timing of invoicing and cash receipts and as the deferred revenue for the US large on-site deployments has been recognised over the term of the contract, generally three years.

Dividends

Post year end the Directors are recommending that a final dividend for the year ended 31 March 2022 of 0.67 pence per ordinary share be paid to the Shareholders whose names appear on the register at the close of business on 23 September 2022, with payment on 21 October 2022. The ex-dividend date will be 22 September 2022. This recommendation will be put to the Shareholders at the Annual General Meeting. Based on the shares in issue at the year end, this payment would amount to GBP2.0m.

Consolidated statement of total comprehensive income

for the year ended 31 March 2022

 
                                                             2022       2021 
                                                 Notes    GBP'000    GBP'000 
----------------------------------------------  ------  ---------  --------- 
 Continuing operations 
 Revenue                                           2       31,780     30,486 
 Cost of sales                                            (6,357)    (6,291) 
----------------------------------------------  ------  ---------  --------- 
 Gross profit                                              25,423     24,195 
 Administrative expenses                                 (23,037)   (20,645) 
----------------------------------------------  ------  ---------  --------- 
 Operating profit                                           2,386      3,550 
----------------------------------------------  ------  ---------  --------- 
 Adjusted operating profit                                  5,229      4,749 
 Amortisation of acquired intangible 
  assets                                                    (751)      (663) 
 Expenses relating to share option schemes                  (241)      (536) 
 Exceptional restructuring costs                            (866)          - 
 Costs relating to acquisition                     5        (985)          - 
----------------------------------------------  ------  ---------  --------- 
 Profit from operating activities                           2,386      3,550 
----------------------------------------------  ------  ---------  --------- 
 
 Finance charges                                             (74)       (87) 
 Finance income                                                 6         48 
 Profit before taxation                                     2,318      3,511 
 Taxation                                                   (743)      (717) 
----------------------------------------------  ------  ---------  --------- 
 Profit for the financial year                              1,575      2,794 
==============================================  ======  =========  ========= 
 
 Other comprehensive income 
 Items that will be reclassified subsequently 
  to profit or loss: 
 Foreign currency translation differences 
  - foreign operations                                        139        134 
----------------------------------------------  ------  ---------  --------- 
 Other comprehensive income for the 
  year, net of income tax                                     139        134 
----------------------------------------------  ------  ---------  --------- 
 Total comprehensive income for the 
  year attributable to the equity holders 
  of the parent company                                     1,714      2,928 
==============================================  ======  =========  ========= 
 
                                                             2022       2021 
----------------------------------------------  ------  ---------  --------- 
 Profit per share                                           pence      Pence 
----------------------------------------------  ------  ---------  --------- 
 Basic earnings per 0.25p share                    3         0.59       1.09 
 Diluted earnings per 0.25p share                  3         0.51       1.06 
 

Consolidated statement of financial position

as at 31 March 2022

 
                                                   2022       2021 
                                     Notes      GBP'000    GBP'000 
----------------------------------  -------   ---------  --------- 
 Assets 
 Non-current assets 
 Intangible assets                               39,664      6,527 
 Property, plant and equipment                    4,189      4,307 
 Right-of-use leased assets                       1,516      1,310 
 Deferred tax assets                              1,789      3,211 
--------------------------------------------  ---------  --------- 
                                                 47,158     15,355 
  ------------------------------------------  ---------  --------- 
 
 Current assets 
 Inventories                                        268        174 
 Trade and other receivables                     12,283     13,277 
 Cash and cash equivalents                        2,840     12,706 
--------------------------------------------  ---------  --------- 
                                                 15,391     26,157 
  ------------------------------------------  ---------  --------- 
 
 Total assets                                    62,549     41,512 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                      (18,286)   (18,482) 
 Other interest-bearing loans and 
  borrowings                                          -      (975) 
 Lease liabilities                                (609)      (517) 
--------------------------------------------  ---------  --------- 
                                               (18,895)   (19,974) 
  ------------------------------------------  ---------  --------- 
 
 Non-current liabilities 
 Lease liabilities                                (928)      (825) 
 Deferred tax liabilities                       (2,983)      (296) 
--------------------------------------------  ---------  --------- 
                                                (3,911)    (1,121) 
  ------------------------------------------  ---------  --------- 
 Net assets                                      39,743     20,417 
--------------------------------------------  ---------  --------- 
 
 Shareholders' equity 
 Called up share capital                            732        638 
 Share premium account                           22,180      2,663 
 Capital redemption reserve                         198        198 
 Merger reserve                                   2,697      2,697 
 Currency reserve                                 1,121        982 
 Retained earnings                               12,815     13,239 
--------------------------------------------  ---------  --------- 
 Total shareholders' equity                      39,743     20,417 
--------------------------------------------  ---------  --------- 
 

Consolidated statement of changes in equity

for the year ended 31 March 2022

 
                                    Called 
                                        up      Share       Capital                                              Total 
                                     share    premium    redemption     Merger   Currency    Retained    shareholders' 
                                   capital    account       reserve    reserve    reserve    earnings           equity 
                                   GBP'000    GBP'000       GBP'000    GBP'000    GBP'000     GBP'000          GBP'000 
 
 Balance at 1 April 2021               638      2,663           198      2,697        982      13,239           20,417 
 Total comprehensive income 
  for the year 
 Profit for the financial year           -          -             -          -          -       1,575            1,575 
 Other comprehensive expense 
  for the period                         -          -             -          -        139           -              139 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Total comprehensive income 
  for the year                           -          -             -          -        139       1,575            1,714 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Dividends paid in the year              -          -             -          -          -     (1,559)          (1,559) 
 Shares transacted through 
  Employee Benefit Trust                 -          -             -          -          -        (75)             (75) 
 Purchase of own shares                  -          -             -          -          -       (126)            (126) 
 Shares purchased for share 
  ownership plan                         -          -             -          -          -       (111)            (111) 
 Shares issued under the share 
  option schemes                         3        226             -          -          -           -              229 
 Share based payment charge              -          -             -          -          -         464              464 
 Shares issued as part of 
  acquisition                           91     19,291             -          -          -           -           19,382 
 Deferred tax on share options           -          -             -          -          -       (592)            (592) 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Transactions with owners 
  recorded directly in equity           94     19,517             -          -          -     (1,999)           17,612 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Balance at 31 March 2022              732     22,180           198      2,697      1,121      12,815           39,743 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 
 
                                    Called 
                                        up                  Capital                                              Total 
                                     share      Share    redemption     Merger   Currency    Retained    shareholders' 
                                   capital    premium       reserve    Reserve    reserve    earnings           equity 
                                   GBP'000    GBP'000       GBP'000    GBP'000    GBP'000     GBP'000          GBP'000 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Balance at 1 April 2020               638      2,663           198      2,697        848      11,965           19,009 
 Total comprehensive income 
  for the year 
 Profit for the financial year           -          -             -          -          -       2,794            2,794 
 Other comprehensive expense 
  for the year                           -          -             -          -        134           -              134 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Total comprehensive income 
  for the year                           -          -             -          -        134       2,794            2,928 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Dividends paid in the year              -          -             -          -          -     (1,558)          (1,558) 
 Shares transacted through 
  Employee Benefit Trust                 -          -             -          -          -       (138)            (138) 
 Shares purchased for share 
  ownership plan                         -          -             -          -          -       (241)            (241) 
 Share based payment charge              -          -             -          -          -         303              303 
 Deferred tax on share options           -          -             -          -          -         114              114 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Transactions with owners 
  recorded directly in equity            -          -             -          -          -     (1,520)          (1,520) 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 Balance at 31 March 2021              638      2,663           198      2,697        982      13,239           20,417 
-------------------------------  ---------  ---------  ------------  ---------  ---------  ----------  --------------- 
 

Consolidated statement of cash flows

for the year ended 31 March 2022

 
                                                      2022      2021 
                                          Notes    GBP'000   GBP'000 
---------------------------------------  ------  ---------  -------- 
 Cash flows from operating activities 
 Cash generated from operations             4        3,362     4,385 
 Taxation received/ (paid)                              88      (10) 
 Interest paid                                        (23)      (54) 
 Interest paid on lease liability                     (51)      (33) 
---------------------------------------  ------  ---------  -------- 
 Net cash generated from operating 
  activities                                         3,376     4,288 
---------------------------------------  ------  ---------  -------- 
 
 Cash flows from investing activities 
 Purchase of property, plant and 
  equipment                                          (308)   (1,175) 
 Purchase of intangible assets                       (375)     (573) 
 Business acquisition                             (22,500)         - 
 Interest received                                       6        48 
 Net cash utilised in investing 
  activities                                      (23,177)   (1,700) 
---------------------------------------  ------  ---------  -------- 
 
 Cash flows from financing activities 
 Dividends paid                                    (1,559)   (1,558) 
 Repayment of borrowings                             (975)     (975) 
 Principal elements of lease payments                (500)     (461) 
 Purchase of own shares                              (126)         - 
 Shares purchased for share ownership 
  plan                                               (110)     (241) 
 Issue of shares net of issue costs                 13,311         - 
 Shares acquired/sold by Employee 
  Benefit Trust                                       (75)     (138) 
---------------------------------------  ------  ---------  -------- 
 Net cash generated from / (utilised 
  in) financing activities                           9,966   (3,373) 
---------------------------------------  ------  ---------  -------- 
 
 Decrease in cash and cash equivalents             (9,835)     (785) 
 Cash and cash equivalents at the 
  start of the period                               12,706    13,541 
 Effect of exchange rate fluctuations 
  on cash held                                        (31)      (50) 
---------------------------------------  ------  ---------  -------- 
 Cash and cash equivalents at the 
  end of the period                                  2,840    12,706 
---------------------------------------  ------  ---------  -------- 
 
   1.         Basis of preparation 

The preliminary results of Eckoh plc have been prepared in accordance with the recognition and measurement principles of UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and effective at 31 March 2022. These statements do not constitute the Company's statutory accounts within the meaning of section 435 of the Companies Act 2006 but have been derived from those accounts.

Statutory accounts for the year ended 31 March 2021 have been delivered to the Registrar of Companies but those for the year ended 31 March 2022 have not yet been delivered.

The auditors have reported on the accounts for the year ended 31 March 2022; their report was not qualified, did not include references to any matters to which the auditors drew attention to by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

Going concern

In determining the appropriate basis of preparation of the Financial Statements, the Directors are required to consider whether the Group and Company can continue in operational existence for the foreseeable future.

The Board has carried out a going concern review and concluded that the Group and Company have adequate cash to continue in operational existence for the foreseeable future.

The Directors have prepared cash flow forecasts for a period in excess of 12 months from the date of approving the Financial Statements. As at 31(st) March 2022, the GBP10 million of funding (GBP5 million RCF and GBP5 million overdraft) from Barclays Bank is undrawn. Bank covenants have been reviewed and are comfortably achieved for the year to 31(st) March 2022.

Our US operation is underpinned completely by fixed contractual fees. In the UK, clients have a variety of commercial models including fixed fees and transactional arrangements, with varying levels of commitment.

In addition to our key business indicator, total orders and new business orders, we have also introduced Annual Recurring Revenue (ARR) to measure the health of the business, which includes all clients that we are billing. In the US, we continue to see the majority of the Secure Payments contracts won and delivered through Eckoh's cloud platforms, as large enterprises have accelerated their move into the cloud. Following the pandemic, we do not anticipate this trend to reverse and whilst this reduces the upfront payments (and cash received) for implementations, it increases the proportion of recurring revenue and improves the operational gearing, earnings quality and visibility in the business. We anticipate the renewal rate for the UK and US businesses to remain unchanged during this period. When preparing the cash flow forecasts the Directors have reviewed a number of scenarios, including the severe yet plausible downside scenario which assumes no new business, with respect to levels of new business. In all scenarios the Directors were able to conclude that the Group has adequate cash to continue in operational existence for the foreseeable future.

   2.   Segment analysis 

Following the acquisition of Syntec Holdings Limited on 22(nd) December 2021, the key segments reviewed at Board level are the UK (including Eckoh Omni), US operations and Syntec. This will be reviewed over the current year as Eckoh progress with the integration of Syntec.

Information regarding the results of each operating segment is included below. Performance is measured on operating segments based on the information that internally is provided to the Executive Management team, considered to be the Chief Operating Decision Maker.

 
 
 Current period segment                  Eckoh     Eckoh                    Total      Total 
  analysis                                  UK        US     Syntec(1)       2022       2021 
                                       GBP'000   GBP'000       GBP'000    GBP'000    GBP'000 
 Segment Revenue                        18,596    11,487         1,697     31,780     30,486 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Gross profit                           15,593     8,473         1,357     25,423     24,195 
 Administrative expenses              (14,399)   (7,300)       (1,338)   (23,037)   (20,645) 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Operating profit                        1,194     1,173            19      2,386      3,550 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Adjusted operating profit               3,194     1,728           307      5,229      4,749 
 Other expenses(2)                     (2,000)     (555)         (289)    (2,844)    (1,199) 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Operating profit                        1,194     1,173            19      2,386      3,550 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Profit before taxation                  1,156     1,149            13      2,318      3,511 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 
   Segment assets 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Trade and other receivables             2,904     2,059           749      5,712      5,389 
 Prepayments and contract 
  assets                                 2,798       954         2,819      6,571      7,888 
 Deferred tax asset                      1,103       513           173      1,789      3,211 
 Segment liabilities 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Trade and other payables                1,364       607           367      2,336      3,364 
 Accruals and contract liabilities       6,216     4,191         5,543     15,950     15,118 
 Capital expenditure 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Purchase of tangible assets               187       120             1        308      1,066 
 Purchase of leases                          -       686             -        686      1,546 
 Purchase of intangible assets             375         -             -        375        573 
 Depreciation and amortisation 
-----------------------------------  ---------  --------  ------------  ---------  --------- 
 Depreciation of property, 
  plant & equipment                        525       130            25        680        704 
 Depreciation of leased assets             353       108            34        495        505 
 Amortisation                            1,143         -             -      1,143      1,061 
 
 
   1.                    Since date of acquisition of Syntec Holdings Limited on 22(nd) December 2021. 

2. Other expenses include expenses relating to share option schemes, amortisation of acquired intangible assets, exceptional restructuring costs and costs from business combinations

In 2021/22 there was no one customer that individually accounted for more than 10% of the total revenue of the continuing operations of the Group. In 2020/21 there was one customer that individually accounted for more than 10% of the total revenue of the continuing operations of the Group.

 
                               Eckoh     Eckoh 
                                  UK        US    Syntec   2022 Total   2021 Total 
 Revenue by geography        GBP'000   GBP'000   GBP'000      GBP'000      GBP'000 
--------------------------  --------  --------  --------  -----------  ----------- 
 UK                           18,117         -       739       18,856       17,804 
 United States of America        339    11,314       776       12,429       12,321 
 Rest of the World               140       173       182          495          361 
--------------------------  --------  --------  --------  -----------  ----------- 
 Total Revenue                18,596    11,487     1,697       31,780       30,486 
--------------------------  --------  --------  --------  -----------  ----------- 
 
 
                           Eckoh     Eckoh               Total 
                              UK        US    Syntec      2022   Total 2021 
 Timing of revenue 
  recognition            GBP'000   GBP'000   GBP'000   GBP'000      GBP'000 
----------------------  --------  --------  --------  --------  ----------- 
 Services transferred 
  at a point in time      15,193     8,076     1,472    24,741       23,240 
 Services transferred 
  over time                3,403     3,411       225     7,039        7,246 
----------------------  --------  --------  --------  --------  ----------- 
                          18,596    11,487     1,697    31,780       30,486 
----------------------  --------  --------  --------  --------  ----------- 
 

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

 
                                               2022       2021 
                                            GBP'000    GBP'000 
-----------------------------------------  --------  --------- 
 Receivables, which are included in, 
  'Trade and other receivables                4,860      4,551 
 Contract assets which are included 
  in 'Trade and other Receivables'            3,828      4,359 
 Contract liabilities which are included 
  in 'Trade and other liabilities'          (9,470)   (11,347) 
-----------------------------------------  --------  --------- 
                                              (782)    (2,437) 
-----------------------------------------  --------  --------- 
 

Payment terms and conditions in client contracts may vary. In some cases, clients pay in advance of the delivery of solutions or services; in other cases, payment is due as services are performed or in arrears following the delivery of the solutions or services. Differences in timing between revenue recognition and invoicing result in trade receivables, contract assets, or contract liabilities in the statement of financial position.

Contract assets result when costs directly attributable to the delivery of the hardware and the implementation fees are capitalised as contract assets and released over the contract term, thereby also deferring costs to later periods and revenue earnt not yet invoiced.

Contract liabilities result from client payments in advance of the satisfaction of the associated performance obligations and relates primarily to revenue for hardware and implementation fees. Contract liabilities are released as revenue is recognised.

Contract assets and contract liabilities are reported on a contract by contract basis at the end of each reporting period.

Significant changes in the contract assets and contract liabilities balances during the year are as follows:

 
                                                                31 March 2022 
                                                      Contract       Contract 
                                                        assets    liabilities 
                                                       GBP'000        GBP'000 
--------------------------------------------------  ----------  ------------- 
 Revenue recognised that was included in 
  the contract liability balance at the beginning 
  of the period                                              -          6,938 
 Current year billings recognised in contract 
  liabilities                                                -          4,108 
 Cost of sales recognised that was included 
  in the contract assets balance at the beginning 
  of the period                                          2,640              - 
 Costs deferred in current year and unbilled 
  revenue included in contract assets                    1,538              - 
--------------------------------------------------  ----------  ------------- 
 
 
                                 31 March   31 March 
 Contract costs                      2022       2021 
                                  GBP'000    GBP'000 
------------------------------  ---------  --------- 
 Deferred implementation fees       1,028      1,698 
 Deferred hardware costs              510        316 
------------------------------  ---------  --------- 
                                    1,538      2,014 
------------------------------  ---------  --------- 
 

Contract assets are capitalised as 'costs to fulfil a contract' and are amortised when the related revenues are recognised, which are spread evenly over the length of the contract, typically 3 years.

Transaction price allocated to the remaining performance obligations

The total amount of revenue held in contract liabilities and allocated to unsatisfied performance obligations is GBP9.5m (FY21: GBP11.3m). We expect to recognise approximately GBP3.9m (FY21: GBP5.4m) in the next 12 months, GBP5.5m (FY21: GBP5.9m) in 1-3 years and the remainder in 3 years or more in time.

The amount represents our best estimate of contractually committed revenues that are due to be recognised as we satisfy the contractual performance obligations in these contracts. A large proportion of the Group's revenue is transactional in nature or is invoiced monthly for support and maintenance and these are not included in the contract liabilities.

 
                                  Eckoh UK   Eckoh US   Total 2021 
 Prior period segment analysis     GBP'000    GBP'000      GBP'000 
 
 Segment revenue                    18,037     12,449       30,486 
-------------------------------  ---------  ---------  ----------- 
 Gross profit                       15,299      8,896       24,195 
 Administrative expenses          (13,022)    (7,623)     (20,645) 
-------------------------------  ---------  ---------  ----------- 
 Operating profit                    2,277      1,273        3,550 
-------------------------------  ---------  ---------  ----------- 
 Adjusted operating profit           3,069      1,680        4,749 
 Other expenses(1)                   (792)      (407)      (1,199) 
-------------------------------  ---------  ---------  ----------- 
 Operating profit                    2,277      1,273        3,550 
-------------------------------  ---------  ---------  ----------- 
 Profit before taxation              2,285      1,226        3,511 
-------------------------------  ---------  ---------  ----------- 
 
   Segment assets 
-------------------------------  ---------  ---------  ----------- 
 Trade and other receivables         2,648      1,903        4,551 
 Deferred tax asset                  2,699        512        3,211 
 Segment liabilities 
-------------------------------  ---------  ---------  ----------- 
 Trade and other payables            2,565        798        3,364 
 Capital expenditure 
-------------------------------  ---------  ---------  ----------- 
 Purchase of tangible assets           698        368        1,066 
 Purchase of leases                  1,138        408        1,546 
 Purchase of intangible assets         573          -          573 
 Depreciation and amortisation 
-------------------------------  ---------  ---------  ----------- 
 Depreciation of property, 
  plant & equipment                    542        162          704 
 Depreciation of leased assets         408         97          505 
 Amortisation                          665        396        1,061 
 

1. Other expenses include expenses relating to share option schemes and amortisation of acquired intangible assets.

 
                             Eckoh UK   Eckoh US      2021 
                              GBP'000    GBP'000   GBP'000 
--------------------------  ---------  ---------  -------- 
 Revenue by geography 
 UK                            17,804          -    17,804 
 United States of America           -     12,321    12,321 
 Rest of the World                233        128       361 
--------------------------  ---------  ---------  -------- 
 Total Revenue                 18,037     12,449    30,486 
--------------------------  ---------  ---------  -------- 
 
   3.   Earnings per share 

The basic and diluted earnings per share are calculated on the following profit and number of shares. Earnings for the calculation of earnings per share is the net profit attributable to equity holders of the parent.

 
                                                      2022      2021 
                                                   GBP'000   GBP'000 
------------------------------------------------  --------  -------- 
 Earnings for the purposes of basic and diluted 
  earnings per share                                 1,575     2,794 
------------------------------------------------  --------  -------- 
 Earnings for the purposes of adjusted basic 
  and diluted earnings per share                     4,181     3,814 
------------------------------------------------  --------  -------- 
 

Reconciliation of earnings for the purposes of adjusted basic and diluted earnings per share

 
                                                      2022      2021 
                                                   GBP'000   GBP'000 
------------------------------------------------  --------  -------- 
 Earnings for the purposes of basic and diluted 
  earnings per share                                 1,575     2,794 
 Taxation                                              743       717 
 Amortisation of acquired intangible assets            751       663 
 Expenses relating to share option schemes             241       536 
 Exceptional restructuring costs                       866         - 
 Costs relating to acquisition                         985         - 
------------------------------------------------  --------  -------- 
 Adjusted profit before tax                          5,161     4,710 
 Tax charge based on standard corporation tax 
  rate of 19% (2021: 19%)                            (980)     (895) 
------------------------------------------------  --------  -------- 
 Earnings for the purposes of adjusted basic 
  and diluted earnings per share                     4,181     3,815 
------------------------------------------------  --------  -------- 
 
 
                                                     2022      2021 
 Denominator                                         '000      '000 
-----------------------------------------------  --------  -------- 
 Weighted average number of shares in issue 
  in the period                                   265,968   255,351 
 Shares held by employee ownership plan           (2,028)   (1,862) 
 Shares held in Employee Benefit Trust                  -         - 
-----------------------------------------------  --------  -------- 
 Number of shares used in calculating basic 
  earnings per share                              263,940   253,489 
 Dilutive effect of share options                  20,558     9,426 
 Dilutive effect of shares for acquisition Dec 
  21                                                7,889         - 
 Dilutive effect of placing Dec 21                 18,494         - 
-----------------------------------------------  --------  -------- 
 Number of shares used in calculating diluted 
  earnings per share                              310,881   262,915 
-----------------------------------------------  --------  -------- 
 
 
                                               2022    2021 
 Profit per share                             pence   Pence 
-------------------------------------------  ------  ------ 
 Basic earnings per 0.25p share                0.59    1.09 
 Diluted earnings per 0.25p share              0.51    1.06 
 Adjusted earnings per 0.25p share             1.57    1.49 
 Adjusted diluted earnings per 0.25p share     1.34    1.45 
 
   4.   Cashflow from operating activities 
 
                                                     2022      2021 
                                                  GBP'000   GBP'000 
-----------------------------------------------  --------  -------- 
 Profit after taxation                              1,575     2,794 
 Interest income                                      (6)      (48) 
 Interest payable                                      74        87 
 Taxation                                             743       717 
 Depreciation of property, plant and equipment        680       704 
 Depreciation of leased assets                        495       505 
 Amortisation of intangible assets                  1,143     1,061 
 Exchange differences                                (95)       522 
 Share based payments                                 241       536 
-----------------------------------------------  --------  -------- 
 Operating profit before changes in working 
  capital and provisions                            4,850     6,878 
 (Increase) / decrease in inventories                 (5)       138 
 Decrease in trade and other receivables            2,423       217 
 Decrease in trade and other payables             (3,906)   (2,848) 
 Net cash generated in operating activities         3,362     4,385 
-----------------------------------------------  --------  -------- 
 
   5.   Business Combinations 

On 22 December 2021 the Group completed the acquisition of Syntec Holdings Limited for GBP31.0 million, through a combination of a cash consideration of GBP24.7 million with the balance of GBP6.3 million payable in new Eckoh shares. The deal was legally structured via the acquisition of 100% of the top holding company of Syntec Holdings Limited and its subsidiaries.

Syntec is an Ofcom-regulated UK network operator, based in the UK, with an extensive patent portfolio in the UK, US, EU and Australia. Syntec is a provider of secure payment solutions (under the brand CardEasy) with additional telecom and contact centre services provided predominantly in the UK.

Costs relating to the acquisition were GBP1.6 million, GBP0.6 million of costs relating to the issue of shares have been offset against funds raised in the share premium account, the remainder GBP1.0 million of costs have been expensed as incurred and treated as exceptional items.

Post-acquisition results of the acquired business for the year ended 31 March 2022 are included in the Group Consolidated Financial Statements. Revenue of GBP1.7 million and operating profit of GBP0.3 million relate to the acquired business. If the acquisition of Syntec Holdings Limited had been completed on the first day of the financial year, revenue included for the year would have been GBP5.8 million and operating profit included would have been GBP1.0 million.

The fair values of the identifiable asset and liabilities at the acquisition date are set out below:

 
 
                                                GBP000 
--------------------------------------------  -------- 
 Tangible assets                                   235 
 Intangible assets - Customer Relationships     12,367 
 Right-of-use leased assets                        686 
 Deferred tax asset                                 91 
 Stock                                              89 
 Debtors                                         1,430 
 Cash at bank and in hand                        2,197 
 Creditors due within one year                 (3,940) 
 Creditors due after one year                    (694) 
 Deferred tax liability                        (2,888) 
 Fair value of net assets acquired               9,575 
 Goodwill                                       21,422 
--------------------------------------------  -------- 
 Total consideration                            30,997 
--------------------------------------------  -------- 
 
   Satisfied by 
 Cash                                           24,697 
 Shares                                          6,300 
--------------------------------------------  -------- 
 Total Purchase consideration                   30,997 
--------------------------------------------  -------- 
 
 Net cash outflow arising on acquisition 
 Cash consideration                             24,697 
 Less: cash and cash equivalent 
  balance acquired                             (2,197) 
 Cash outflow from investing activities         22,500 
--------------------------------------------  -------- 
 

The goodwill of GBP21.4 million comprises primarily the estimated value of a combination of the cross-selling opportunities for Eckoh's products into Syntec's CardEasy clients and vice versa. These are not included in the Intangible Assets - Customer Relationships above. The goodwill also comprises the benefits that will be derived from the combined product as set out in the Operational Review, in the section setting out the approach to 'Syntegration', the aim of which is to bring the best of Eckoh and Syntec existing product and technologies together to build a unified platform and roadmap for future new capability. The goodwill will not be tax deductible for tax purposes.

   6.   Events after the Statement of Financial Position Date 

As at the date of these statements there were no such events to report.

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END

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June 15, 2022 02:00 ET (06:00 GMT)

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