TIDMECK
RNS Number : 6197C
Eckoh PLC
14 June 2023
14 June 2023
Eckoh plc
("Eckoh" or the "Group")
Full year audited results for year ended 31 March 2023
- Significant double-digit revenue and profit growth, with
profit and cash ahead of expectations
- Group and North America Security Solutions ARR growing
strongly
- Cloud proposition and transition driving growth in key North
American market
- Enhanced data security solutions portfolio has expanded
addressable market and customer value
- Increased revenue visibility and encouraging new business
pipeline supports confidence for FY24
Eckoh plc (AIM: ECK), the global provider of Customer Engagement
Data Security Solutions, is pleased to announce full year audited
results for the year ended 31 March 2023.
Nik Philpot, Chief Executive Officer, said: "Our full year
results clearly show our strategy is working. This performance is
underpinned by the strategic progress we've made in developing a
market-leading, cloud-first suite of solutions, and the successful
integration of Syntec across our processes, products, and teams. We
are particularly encouraged by the 34% organic ARR growth in North
America, which underlines the scale of the market opportunity we
see in that region.
At Eckoh we're on a mission to make customer data arising from
customer engagement more secure, and we believe that consumers
should be able to trust every brand and engage without risk. We've
already been chosen by some of the largest global brands to ensure
their customer data and payments are handled securely. Tightening
data regulations and the shift to home working has created new
security and performance challenges for enterprise contact centres,
which significantly expands the opportunity for us. With our new
go-to-market proposition, our commercial team now reorganised as a
single global team focused on the significant North American
market, scalable cloud platforms and an expanded software
portfolio, we are well placed to convert our pipeline of new
business opportunities and capitalise on Eckoh's already sizable
addressable market."
GBPm (IFRS unless otherwise stated) FY23 FY22 Change
---------------------------------------
Revenue 38.8 31.8 +22%
----- ----- -------
Gross profit 31.2 25.4 +23%
----- ----- -------
North America (NA) Security Solutions
ARR ($m)(1) 15.9 11.9 +34%
----- ----- -------
Total ARR(2) 30.4 25.8 +18%
----- ----- -------
Adjusted EBITDA(3) 9.4 6.8 +38%
----- ----- -------
Adjusted operating profit(4) 7.7 5.2 +48%
----- ----- -------
Profit before taxation 5.0 2.3 +117%
----- ----- -------
Basic earnings pence per share 1.58 0.59 +167%
----- ----- -------
Adjusted diluted earnings pence
per share(5) 2.09 1.34 +56%
----- ----- -------
Net cash 5.7 2.8 +102%
----- ----- -------
Proposed final dividend (pence) 0.74 0.67 +10%
----- ----- -------
Total contracted business(6) 34.5 22.5 +53%
----- ----- -------
New contracted business(7) 14.4 10.8 +33%
----- ----- -------
Financial Highlights
-- Revenue for the year increased by 22% to GBP38.8 million
(FY22: GBP31.8 million) and at constant exchange rates by 16%,
driven by organic growth and the full year impact from the
acquisition of Syntec in December 2021
-- Adjusted operating profit(4) up 48% to GBP7.7m, driven by
sales growth, increased cross selling, operational leverage, and a
GBP0.5m favourable impact from FX movements
-- Growth in adjusted diluted earnings per share demonstrates
good organic growth from the underlying business combined with the
impact of the earnings enhancing acquisition of Syntec in December
2021
-- Excellent performance from North American Data Security
Solutions, where we have the largest addressable market and a
significant opportunity for continued strong growth:
o North American Data Security Solutions ARR(1) up 34% and revenue up 25%
o Recurring revenue increased 54% driven by ongoing cloud
transition and successful contract renewals
-- Refreshed go-to-market strategy drove up new contracted
business principally through winning cloud deployed deals and
international mandates in North America, which accounted for 71% of
all new business
-- UK and Ireland (UK&I) and Rest of World showed a resilient performance with revenue up 10%
-- Balance sheet remains strong with net cash ahead of
expectations(8) at GBP5.7m (FY22: GBP2.8m)
-- Proposed final dividend of 0.74p per share (FY22: 0.67p),
demonstrating confidence in our product portfolio and the clear
opportunity to capitalise on the scale of the North American
opportunity
Strategic highlights
-- Strategic focus and cloud delivered solutions supports our scalable growth:
o By offering cloud platform choice and multiple SaaS solutions
without additional deployment effort, we deliver scalability into
larger client opportunities in North America and across
international mandates, with significant cross-sell opportunities
and faster new client deployments, increasing client lifetime
value
-- Our proprietary cloud Secure Call Recording product was
launched in April 2023, to an encouraging response:
o Expected to support the growth in cross selling and generate
new client contracts at a time when 24% of US contact centres are
looking to update their call recording solution in the next 12
months*
-- Global Commercial team now fully aligned to our strategic focus on the North American market:
o Embedded a unified proposition into our new go-to-market
vision of Customer Engagement Data Security Solutions, formally
launched in April 2023
o TAM in North America is currently estimated to be 20 times the
value of the UK market
-- Total contracted business showed strong growth through
securing new business wins and several successful renewals with key
clients in North America
-- Notable new client wins and successful renewals during the period included:
o A Fortune 100 retailer, purchasing two solutions; first client
to go-live on our new Azure cloud platform
o New two-year voice security contract across more than 20
territories with a leading, global hotel company
o New global reseller contract with a US based unified
communications company, 3 contracts delivered to date
Current trading and Outlook
-- Positive start to the year with total order value more than GBP7m in the first two months
-- The Board is confident of further progress in the year ahead,
supported by an encouraging new business pipeline, increased
revenue visibility through continued ARR growth and a robust
balance sheet and cash position
-- Eckoh is well placed to benefit from favourable industry
trends in its target markets including the shift to hybrid contact
centre working and increasing regulatory requirements around
personal data management
* Source: Contact Babel - US Contact Centers 2022-2026 the State
of the Industry
1. ARR is the annual recurring revenue of all contracts billing at the end of the period.
2. 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. FY22 Group ARR has been restated to
include NA Coral RR
3. 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, legal costs and settlement agreements and costs relating to
business combinations.
4. Adjusted operating profit is the profit before tax adjusted
for amortisation of acquired intangible assets, expenses relating
to share option schemes, restructuring costs, legal costs and
settlement agreements and costs relating to business
combinations.
5. Adjusted earnings per share and adjusted diluted earnings per
share uses the adjusted operating profit and applies a normalised
tax rate to both years of 19%.
6. Total contracted business includes new business from new
clients, new business from existing clients as well as renewals
with existing clients.
7. New contracted business includes new business from new
clients and new business from existing clients, including product
upsells and cross-sells.
8. Eckoh believes that consensus market expectations for the
year ending 31 March 2023 is revenue of GBP40.25 million, adjusted
operating profit of GBP7.45 million and cash of GBP5.2m
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 / Emma Hall / Tom Blundell /
Emily Bowen
eckoh@fticonsulting.com
Singer Capital Markets (Nomad & Joint Tel: 020 7496 3000
Broker)
Shaun Dobson / Tom Salvesen / Alex Bond
www.singercm.com
Investec Bank plc (Joint Broker) Tel: 020 7597 5970
Patrick Robb/ Nick Prowting / Shalin Bhamra
www.investec.com
About Eckoh plc
As a global provider of Customer Engagement Data Security
Solutions, Eckoh is all about making the world of data more
secure.
Our vision is that everyone should be able to trust every brand
and engage without risk to their personal information. We're on a
mission to set the standard for secure interactions between
consumers and the world's leading brands, and our innovative
products build trust and deliver value though exceptional
experiences.
We're trusted by many of the world's leading brands to help them
manage the personal data from customer enquiries and transactions
safely. Our solutions enable payment transactions to be performed
securely and help protect sensitive personal data across any
customer engagement channel and device the customer chooses.
Protected by multiple patents, our solutions remove sensitive
personal and payment data from contact centres and IT environments,
as the best way to secure data is not to collect it. This allows
organisations to be not just compliant but secure, increase
efficiency, lower operational costs, and provide an excellent
customer experience. This is our specialism.
Our solutions are delivered globally through 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, and our extensive portfolio of
typically large enterprise clients spans a broad range of vertical
markets including government departments, telecoms providers,
retailers, utility providers and financial services
organisations.
For more information go to www.eckoh.com or email
MediaResponseUK@eckoh.com .
Chief Executive Officer's statement
Introduction
I am pleased to report Eckoh performed strongly in the financial
year ended 31 March 2023 delivering organic growth alongside the
positive impact of our earnings enhancing acquisition of Syntec in
December 2021, and making significant progress with our overall
strategy. Adjusted operating profit and cash were both ahead of
market expectations, and ARR growth was strong, especially in our
key North American market.
In the 18 months following the acquisition we have completed the
integration of Syntec, also a provider of data security solutions,
which brought complementary technology, IP, clients, learnings, and
people into Eckoh. We are already seeing positive impacts in both
our strategic progress and financial performance and we have
started the new year positively with over GBP7m in total business
contracted in the first two months. As indicated at our interim
results in November 2022, following the integration of Syntec these
financial results have been presented on a territory basis for this
period.
A clear growth strategy
At Eckoh, we're on a mission t o set the standard for secure
interactions between consumers and the world's leading brands.
Companies today need to provide an exceptional customer experience
with a frictionless and secure payment or process journey. Every
interaction or transaction should be secure. We make sure that
happens through our innovative products which build trust and
deliver value through exceptional experiences.
We're trusted by well-known global brands, predominantly from
the retail, healthcare, telecoms, financial services, utilities,
and travel sectors, to help process customer enquiries and payments
safely, usually via their customer contact centres, which are
either operated in-house or outsourced. Given the sensitive nature
of the solutions we sell, it is unusual for these companies to be
willing to be publicly named, but they are often happy to provide
client references.
Our secure engagement solutions help protect sensitive customer
data and can be utilised over any common customer engagement
channel (voice, live chat, messaging, email, social channels, etc.)
and via any device the customer chooses. Our philosophy when it
comes to data security is that the best way to protect your data is
not to collect it. Many of the most sensitive engagement processes,
especially taking a payment itself, do not require the enterprise
to collect and store data, and if the process can be performed
without doing this, then this removes the risk of breach or fraud
for the customer. This is our specialism and an approach for which
we have a growing portfolio of patents.
Our strategy is driving strong growth in our key markets with
total revenue for the year increasing to GBP38.8 million, an
increase year-on-year of 22% (FY22: GBP31.8 million) or 16%
adjusting for constant exchange rates. Recurring revenue for the
period was 80% of Group revenue at GBP31.0 million, a year-on-year
increase of 29%. North America ARR(1) was $15.9 million, an
increase of 34% year-on-year, again demonstrating strong progress
and the high level of visibility we now have in our business
model.
To support our strategy to be the market leader in Customer
Engagement Data Security Solutions, we completed the acquisition of
Syntec in December 2021. Our "Syntegration" plan (our process of
integrating and unifying Syntec into Eckoh's operations), was split
into three phases and covered people, process, product, and
technology. Over the last financial year, we have combined the
underlying platform technology for delivering Eckoh's existing
voice security product, branded as CallGuard, and Syntec's
solution, branded CardEasy, to create a new unified platform
appliance we call our Secure Voice Appliance (SVA). The SVA is the
cornerstone of our new global Secure Voice Cloud platform, which
supports our Secure Engagement Suite of solutions that can be
bought either singly or in multiples by our enterprise clients and
delivered through the same platform.
Our delivery infrastructure for new clients and new products is
now fully integrated across the Secure Voice Cloud platform.
Aligned to this, we have integrated our operational teams and
processes through Eckoh's Global Network Operation Centre (NOC), to
provide a unified, cross-trained global support capability across
our client base.
Phases 1 & 2 are complete and during the third phase, we are
tasking the unified development team to develop new solutions for
the Secure Engagement Suite in key growth areas. I am pleased to
confirm that we launched our first new solution from the unified
team as planned at the beginning of the new financial year - our
new Secure Call Recording solution. We are only a few weeks into
showcasing and demonstrating the solution, but we are very
encouraged by the reaction of existing and new clients alike.
Progressing well against our strategic goals
We have made excellent progress during the year with our
strategic objectives, which reflect our ambition to be the global
leader in Customer Engagement Data Security Solutions. Our
strategic goals are outlined below:
Our overarching strategic goal is our mission. To set the
standard for secure interactions between consumers and the world's
leading brands. By delivering on our five strategic pillars this
will take us closer to achieving this overall goal.
1) Capitalise on external global market trends and regulation to
help protect customer data through continual innovation
Eckoh is well placed to capitalise on favourable industry trends
with a more focused commercial team
Eckoh has historically targeted organisations that either
transact or engage with its customers at scale, at volume and
utilise contact centres with more than 50 agent seats in either the
UK or US. This represented a target market of over 2,500 potential
customers in the UK and 12,000 in the US. During the last year and
spearheaded by our new Group Marketing Director we have invested in
and implemented new MarTech tools which have provided us with a
more granular way of assessing the global opportunity for our
solutions. By being more granular in our analysis we have
identified a total addressable market (TAM) of over 150,000
companies, with the North American market representing 48% of that
TAM making it nearly ten times larger than the UK & Ireland at
5%. However, when looking at the average value of a North American
contract compared to one in the UK that would increase the North
American TAM value to more than 20 times the UK & Ireland.
To better pursue this opportunity, at the end of the fourth
quarter we actively re-organised our commercial teams (comprising
our Sales, Marketing and Client Services teams) to service the
market and clients globally, and specifically to focus more of our
collective resources on the large North American market. Prior to
this the UK-based team, which was larger in size than the US one,
was focused predominantly on the UK market. Now our unified global
team is set up to sell globally, mobilised in an effective way with
no geographical boundaries to service the client need, anywhere in
the world.
A year ago, it would arguably have been too soon to make this
change, as we only had a single product line, that of voice
security, available to sell through a common cloud platform in the
US market. But with the advent of our cloud-based Secure Engagement
Suite we now have multiple complementary solutions that are
available to any client anywhere in the world and this means that
our existing North American client base are prime targets for cross
selling.
Across the Group we have around 200 clients, which range greatly
in both size and opportunity. Given this we have reorganised how we
support and service our client accounts globally to ensure the most
focus is given to the key accounts with the largest perceived
opportunity for growth. The sales team and account managers have
been assigned specific accounts to manage and develop across the
different tiers of client opportunity and have significant cross
selling and up selling targets as well as new business targets. In
the top key account tier, we have around 30 accounts all of which
are based in the North America region, reinforcing again the
rationale for the realignment of our precious resources.
With the launch of our unified go-to-market proposition of
Customer Engagement Data Security Solutions combined with our
global commercial team, we are better positioned to drive growth.
This is underpinned by our new Secure Engagement Suite of solutions
plus our expanding and scalable cloud platforms, which provide us
with the opportunity not only to extend our reach geographically,
but also increase the opportunity within every client account to
land and expand.
Increasing regulation and data security challenges drive
demand
With increasing regulation regarding the management of personal
data 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 securing their data more
comprehensively. This has made IT information security budgets one
of the most protected areas of spend within enterprises. Eckoh is
well placed to navigate these data security challenges, working
behind the scenes as a 'sales enabler', converting sales in a
secure way on behalf of an increasingly diversified and global
client base.
Our addressable target market is large and has fundamentally
changed post pandemic
The contact centre industry globally is extremely large,
representing around 4% of the entire workforce in both the UK and
US markets. The pandemic and the current economic climate have
fundamentally changed the way our industry operates and the added
pressures it has brought to navigating the new remote and hybrid
working environments. Looking at the largest market, the US, the
figures shown below, outlined in Contact Babel's 'US Contact
Centers 2022-2026' research document, are particularly
striking:
Percentage of US contact 2019 2020 2021 2022 (estimate)
centres with more than 50%
of agents working remotely
10% 87% 89% 77%
----- ----- ----- ----------------
Pre-pandemic only 10% of US contact centres had more than 50% of
their agents working remotely. A huge shift to using remote agents
peaked in 2021 with 89% of US contact centres having more than half
their agents working from home. Even those organisations who were
very reluctant to use remote working have been forced to adapt. In
2022 the estimate is that this figure is 77% and is expected to
remain at these levels for the foreseeable future.
Shift to home-based agents creates new data security challenges
, driving significant new opportunities
Post pandemic, contact centres have been under acute pressure to
adapt in order to retain agent staff as the convenience of working
from home is popular, enabling flexibility of working hours. This
flexibility is also a positive for the enterprises that employ such
agents as they can deploy agents to work short shifts to cope with
unexpected customer demand. This changed landscape does however
bring many and varied complications to the running of such remote
and hybrid contact centres and the companies now need to tackle the
challenge and inherent data security risks that comes from remote
working agents. A managed facility is far easier to control from a
data security point of view than many remote locations. It is
largely impossible to replicate such an environment, which presents
a significant challenge if the agent is handling customer data and
especially payment data.
Within Eckoh's new solutions suite, our real time transcription
solution will offer sentiment analysis and AI led agent assistance,
which ensures that all customers can be triaged and dealt with
swiftly and effectively, without compromising their customer
experience or the security of their personal data.
This trend provides a massive opportunity for Eckoh's solutions,
not just for data security but also agent performance and
efficiency. Our data security proposition enables companies to
reduce further, or remove, the risk of data breaches by ensuring
that sensitive data isn't just blocked but replaced with
placeholders that can be safely stored in the client's systems. Our
patented technology wraps around the client's infrastructure
seamlessly and means that from the client's point of view, they do
not actually collect any sensitive personal data.
2) Grow our leadership position in Customer Engagement Data
Security Solutions to increase shareholder value
Leverage our trusted supplier status to broaden the scope of our
offering to our clients
The acquisition and then integration of Syntec served as a
catalyst for us to refine how we go to market and how we want Eckoh
to be perceived in the market. We unified and clarified our
proposition into Customer Engagement Data Security Solutions which
is delivered to our clients through our Secure Engagement Suite.
Over the past 20 years we have delivered many different products
and services, but our differentiator and strength in the customer
engagement market, which has led to our success and growth, is our
ability to deliver great customer experience with a data security
focus. Eckoh prevents sensitive personal and payment data from
entering IT and contact centre environments when customers engage
with an enterprise and make payments for goods and services. With a
chief aim of not compromising the quality of the customer
experience, as a unified offering all our new customer engagement
offerings will be underpinned with security features and
capabilities to assist our clients to address data security
concerns and increasing regulation.
This clarity of approach has led us to rationalise and retire
several product offerings, especially those that require
significant levels of bespoke implementation and professional
services. Going forward our new Secure Engagement Suite will focus
on those offerings that deliver value to our enterprise clients
through that security layer and whilst we will retain flexibility
in delivery, the overall methodology will be SaaS.
In recent years Eckoh has been developing a highly relevant
suite of data security solutions, designed to protect without
compromising user experience, and delivered in the cloud (or on
premise if that is still required). For example, our live chat
offering incorporates our patented and unique ChatGuard capability.
This enables payment or personal information to be entered by a
customer into a live chat session without any of that information
traversing the clients' environment or being shared with an
advisor. The key difference now is that those solutions which we
consider to be part of our go-forward proposition have been
amalgamated in our Secure Engagement Suite and delivered from our
Secure Voice Cloud platforms, enabling clients to more easily
deploy and purchase them.
Our patented products already 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. We can grow our leadership
position most quickly by adding additional solutions that assist
our clients to protect wider forms of data and in different ways,
as well as broader security requirements such as identifying
fraudulent customers. The nature of the solution we have initially
sold the client has already established Eckoh as a trusted advisor,
and we can leverage that position to get access more readily to
potential buyers of other complementary solutions within the
organisation, such as the recently launched Secure Call
Recording.
3) Use cloud technologies to develop and enhance our proprietary
solutions to support scalable growth
The procurement of data security solutions to be deployed across
multiple territories is certainly increasing, and our focus is on
investing in our Customer Engagement Data Security Solutions to be
deployed on our scalable cloud platform to support the growth from
our largest territory and absolute strategic focus, North America.
Our market leadership lies in our ability to offer our clients a
choice of cloud platform and delivering multiple complementary SaaS
solutions without any additional deployment effort or complex
integrations.
Our unified team developed the new Secure Call Recording
solution using the cloud native methodology and technology that we
implemented some years ago. This approach has not only reduced the
time it takes us to launch new solutions, but it has simplified the
process of continual development and sped up the addition of new
features. It also enables us to automatically scale up or down the
size of our cloud platforms responding instantly to changes in
demand from our clients, leading to optimum operational performance
and cost to serve.
One of the largest contracts won in the year was for a Fortune
100 retailer who purchased two cloud-based solutions, voice
security and digital payments, and was the first client to go-live
on our new Azure cloud platform. The time to revenue for new
clients is significantly improved when they opt to use a cloud
deployed solution, and it enables their ability to access the other
offerings in our Secure Engagement Suite with little or no
additional implementation effort.
We are excited by the growing proportion of cloud deployments
secured in the North American market. The share of North America
ARR from cloud revenue is now 50%, rising from a 35% share a year
ago. Landing and expanding within our client base is a key focus
and has the benefit of increased visibility of revenue through
recurring revenues and improved margin. With our product roadmap
extending into a broader data security proposition, we expect to be
able to increase the lifetime value of our clients and continue to
have high renewal rates and very low levels of churn.
We're flexible to client needs, retaining the ability to deploy
locally
The proportion of cloud contracts won in North America remains
very high at over 80%, and whilst we still expect a small number of
on-premise deployments, these will reduce over time. While cloud
deployment is a key goal and advantage, many of the largest
enterprises, especially those in North America, may still take
several years to achieve that objective. Retaining the capability
to deploy as required in a client's own data centres and
environment and then migrate those accounts to a cloud solution at
some later point, continues to give us a tactical advantage over
our competitors. During the first half, we saw two clients migrate
from on-site deployments to our cloud platform and as part of the
renewal process, three more clients have now contracted to migrate
in FY24.
4) Maximise lifetime client value and aid retention by cross and
up-selling to increase recurring revenue
The significant enterprise deals we won during the period show
the merit of Eckoh's longstanding strategy to pursue larger
opportunities and reflects the continuing trend towards cloud
adoption and more international mandates in our target markets.
The Eckoh offering
Our suite of data security solutions called Eckoh's Secure
Engagement Suite, which has been developed and refined through the
Syntegration process, is displayed in the honeycomb visual below
and includes the following segments:
The first six are all now available, with the first release of
Secure Call Recording launched as planned in April this year and
delivered through our new Secure Voice Appliance and Secure Voice
Cloud.
Later this year we will add the seventh, which will be the real
time transcription solution that uses AI and machine learning to
assist advisors to provide the best possible assistance whether
they are experienced agents or not. It will also allow contact
centre managers and supervisors to identify problem calls instantly
through the sentiment analysis tool which will provide a heatmap
across all agent conversations in real time, highlighting where
issues may be occurring. With so many agents now working remotely,
this oversight task is critical to ensure performance is not
compromised because of hybrid working. Both this solution and
Secure Call Recording should have an even larger TAM than our other
solutions as neither necessitate the client to be taking payments
to make them attractive solutions. This gives us the opportunity to
target new companies that historically would not have featured in
our marketing efforts.
Our first solution in the Verification and Fraud area is on our
solution roadmap for the end of FY24. This will include
commercialising patents that we already have granted, notably our
reverse authentication patent. This enables a consumer to verify
the identity of an adviser contacting them regarding activity on
their account, conveniently and easily. We all know these inbound
customer calls are a common route for scamming and fraud and so for
the end customer to be able to verify that the call is genuine, we
believe will be a unique and valuable solution. This will
streamline the process for both parties, thereby improving
efficiency for our enterprise clients and increasing satisfaction
for the end customer.
Enterprise provides significant cross sell opportunity
Enterprise expands our total addressable market even further,
particularly with the expansion and enhancement of our security
suite and the global nature of our cloud platform. Given our
long-standing cross-selling experience in the UK market we believe
it is entirely credible that potential customer value could double
compared to what was achievable from just the sale of the core
voice security product.
It is encouraging that in the period the proportion of new
business in North America coming from existing clients was already
38%. What is uncertain at this point is how many additional
organisations will be appropriate targets for the call recording,
transcription, and verification products, which arguably have an
even wider applicability.
5) Evaluate acquisition opportunities that can support our
growth strategy in Customer Engagement Data Security
Syntec has been a strategically important acquisition in terms
of reinforcing Eckoh's position as the market leader in our field,
being the catalyst for expanding our security suite and
re-engineering our core cloud platform. We believe that through an
ongoing focus on both organic growth and selective M&A, we are
well placed to seize the opportunities we see in our sizeable
addressable market.
Operational review
In the following section all comparatives have been restated for
the new reporting territories.
North America (NA) Territory (45% of group revenues)
Following a thorough review of the opportunity and our
go-to-market strategy, we are delighted that North America
continues to power strong growth across all key KPIs, underlining
our strategic focus and the significant market opportunity we are
targeting in this territory.
This is best demonstrated through Data Security Solutions ARR(1)
, which grew 34% to $15.9 million (FY22: $11.9 million). Total
North American ARR(1) , which includes both our Data Security
Solutions and Coral (our agent desktop product) grew to $16.9
million (FY22: $12.6 million).
Revenue for the period was $21.3 million, an increase of 25%
(FY22: $17.1 million) and North America now accounts for a 45%
share of Group revenue (FY22: 40%). In FY24, we expect North
American revenue will at least be of equal size to revenue from the
UK and Ireland territory.
During the period, in the region we have seen twelve successful
renewals, an increase in the level of cloud deployments and cross
selling of additional licences and product, strengthening our
recurring revenue and gross profit.
Total and New Contracted Business
-- Increase in sales momentum as anticipated in H1, with new
contracted business wins of $12.6 million, an increase year on year
of 70% (FY22: $7.4 million)
-- Security Solutions new contracted business of $11.3 million
with 38% of this coming from existing clients
-- Combination of new contracted business and the increasing
number of contract renewals has grown the total contracted business
by 91% year on year to $20.9 million (FY22 $10.9 million)
Contract Renewals
-- Recurring revenue increased to 76% (FY22: 69%), because of
the ongoing cloud transition and six clients' initial contract
renewals. At the point of renewal, the hardware and setup fees from
the initial contract are fully recognised
-- Six further contracts renewed during the year, three of which
migrated from on premise solutions to the cloud
-- One client did not renew due to a sale of their business
Cross-selling
We continue to focus on winning new large enterprise contracts,
alongside cross-selling additional products introduced to the North
American territory in H1 with new and existing clients. Two large
enterprise deals contracted in the period illustrate that
cross-selling progress is already bearing fruit, as outlined
below:
New enterprise deal #1 - A Fortune New enterprise deal #2 - A leading,
100 retailer global hotel company
* Won a $1.3 million, 2-year contract.
* Secured purchase of two product lines.
-----------------------------------------------------------
* 3-year enterprise contract included a $1.4m fee for * Cloud deployment model to incorporate voice payment
voice security to secure their telephone agents and a security, digital payments, and advanced speech
$0.6m fee for digital payments to secure their live recognition.
chat agents.
-----------------------------------------------------------
* Multiproduct contract and first client to go-live on * Single cloud deployment that will cover more than 20
new Azure cloud platform. territories and an equivalent number of speech
recognition languages.
-----------------------------------------------------------
Coral
In the period, Coral had revenue of $2.0 million (FY22: $1.8
million Coral & third-party Support). Coral, a browser-based
agent desktop, aids the following:
-- to increase efficiency by bringing all the contact centre
agent's communication tools into a single screen;
-- to enable organisations, particularly those grown by
acquisition, to standardise their contact centre facilities;
and
-- to be implemented in environments that operate on entirely different underlying technology.
Coral contracts are small in number but high in value when they
occur, and they have a very long sales cycle (usually years) as the
decision has long term ramifications for the client. This makes the
timing of any new agreements both lumpy and hard to predict. There
is a proof of concept being planned with a large global financial
services company, however, there is no certainty at this stage if
this will lead to a contract.
UK & Ireland (UK&I) Territory, and Rest of World (ROW)
Territory (55% of group revenues)
-- Total revenue for the year was GBP21.3 million, an increase of 10% (FY: GBP19.3 million)
-- ARR(1) at the end of the year was GBP16.3 million (FY22:
GBP16.5 million), with growth hindered by the loss of a significant
(non-security) client in the first half
-- Gross profit in the period was GBP17.5 million, an increase
of 9% (FY22: GBP16.1 million) and gross margin was 82%, a decrease
year on year of 1% (FY22: 83%), due principally to the inclusion of
the Syntec UK & Ireland and ROW business
-- Total contracted business was GBP17.2 million compared to
GBP13.4 million in the prior year and new contracted business was
GBP4.2 million, a decrease of 9% year-on-year (FY22: GBP4.7
million)
-- The ROW territory is expected to grow quickly with the large
international contracts deployed, but for FY23 as this territory
accounts for only 2% of total revenue it has been reported together
with the UK&I
-- Because of the realignment of the global commercial team and
focus on North America, we think it is reasonable to expect UK
& Ireland growth to be modest at best. The effort involved in
growing this territory would be disproportionate to the value
generated compared to the more lucrative and larger market in North
America
New contracted business
-- Most global deals, which drive the revenue and growth in
Ireland and the ROW, have been contracted through the UK Sales
team. This will change with the new alignment of the global
commercial team
-- Contract for voice security won with the Irish division of
one of the world's largest insurance companies, worth $0.6 million.
This is one of the first clients to utilise the new enhanced cloud
platform developed through "Syntegration"
-- A further new UK contract also worth GBP0.6 million was won
with a financial services company to provide voice security for
their debt collection service
Contract renewals
-- Successfully renewed the year's largest contract; a 5-year
contract through Capita for a large public service organisation
worth GBP2.1 million
-- Contract through BT for the Ministry of Justice for taking
payments for fixed penalty notices and magistrates fine also
renewed, the second largest in the year
-- Other important renewals included Kingfisher, Target,
PowerNI, Transport for London and Allied Irish Bank
Outlook
The year's performance reflects the continued progress of
Eckoh's strategy to pursue large enterprise opportunities,
cross-sell from a broader product suite and continue the trend
towards cloud adoption and more international mandates. With a
refreshed go-to-market approach, coupled with an encouraging
pipeline, a resilient business model of high recurring revenues,
operational efficiencies, on-going cloud adoption and a robust
balance sheet, the Board remains confident in delivering its
expectations and achieving continued growth in FY24.
Financial Review
Eckoh has had a successful year, delivering a robust level of
adjusted operating profit of GBP7.7 million, an increase of 48%
year-on-year (FY22: GBP5.2 million) and ahead of consensus market
expectations. Adjusted operating profit margin was 19.9%, an
improvement from last year of 340 basis points (FY22: 16.5%). The
growth was driven by North America and the focus on large
enterprise clients, our cloud-based offering, the full year impact
of the acquisition of Syntec on 21(st) December 2021, integration
of Syntec ("Syntegration") and a GBP0.5 million EBITDA FX benefit
(FY22: loss GBP0.1 million and first half gain of GBP0.7 million)
arising from the strength of our North American activity.
Revenue for the year increased by 22% to GBP38.8 million (FY22:
GBP31.8 million) and at constant exchange(3) rates by 16%. This is
split GBP31.8 million recurring revenue (FY22: GBP24.1 million) and
GBP7.8 million one-off revenue (FY22: GBP7.1 million). Group
recurring revenue was therefore 80% (FY22: 76%), the increase being
driven from the North America territory. Adjusted operating
profit(1) was GBP7.7 million an increase of 48% year-on-year (FY22:
GBP5.2 million). Profit after tax for the year was GBP4.6 million,
compared to GBP1.6 million in FY22. The prior year profit after tax
of GBP1.6 million included GBP1.0 million of transaction costs
relating to the acquisition of Syntec and restructuring costs of
GBP0.9 million. In the current year there is an exceptional legal
cost and settlement agreement item of GBP0.2 million.
Group ARR(1) showed strong progress and demonstrates the high
level of visibility we have in our business model. As of 31 March
2023, Group ARR(1) was GBP30.4 million, an increase of 18%
year-on-year after restating last year's Group ARR(1) to include
the North American Coral business (FY22 restated: GBP25.8 million).
Group ARR(1) increased by 11% at constant exchange rates.
Total contracted business for the financial year at the Group
level was GBP34.5 million (FY22: GBP22.5 million), a year-on-year
increase of 55%. New contracted business increased by 33% to
GBP14.4 million (FY22: GBP10.8 million) and the momentum in the
first half continued into the second half.
Basic earnings per share for the year ended 31 March 2023 was
1.58 pence per share (FY22: 0.59 pence per share). Adjusted
earnings per share for the year ended 31 March 2023 was 2.14 pence
per share (FY22: 1.57 pence per share) demonstrating both the
strong organic growth and accretion following the acquisition of
Syntec in December 2021.
Territory performance - NA, UK&I, & ROW
Historically we have focused solely on the UK and US markets,
but with the integration of the Syntec business into Eckoh's
operations and an increasingly cloud-based security proposition
enabling increased activity to come from an expanding international
market, we have shifted to segmenting our activity into North
America (NA), UK and Ireland (UK&I) and Rest of World (ROW)
revenue streams.
Revenue in North America, which represents 45% of total group
revenues, increased to GBP17.5 million (FY22: GBP12.5m). UK&I
represented 53% of total group revenues at GBP20.6 million and ROW
represented 2% of group revenues.
Further explanations of movements in revenue between the NA,
UK&I and ROW territories have been addressed in the Operational
Review above.
Gross profit
The Group's gross profit increased to GBP31.2 million (FY22:
GBP25.4 million), an increase year-on-year of 23%. Gross profit
margin was 80% for the year, in line with last year (FY22: 80%).
The UK&I gross profit margin was 82%, a 1% decrease based on
the new territories or a 2% decrease from the UK division last
year. In North America, the full year margin was 79%, an increase
from last year's NA margin of 75% or 74% for last year's US
division. This increase in margin as previously indicated is a
result of the continued deployment of the new Customer Engagement
Data Security Solutions in the cloud environment together with the
successful renewals of the earlier contracted on-site solution
deployments, where the lower margin hardware component becomes
fully recognised at the point of renewal.
In the UK&I, 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 82-83%. In North America, we
would expect the gross profit margin to continue to marginally
increase from 79% to c.80%. This is driven by the continued growth
of the Secure Payments activities for cloud solutions coupled with
a small number of clients with on-site solutions, who in the coming
year are due to renew their initial contract, at which point the
hardware component will be fully recognised.
Administrative expenses
Total administrative expenses for the year were GBP26.2 million
(FY22: GBP23.0 million). Included in administrative expenses is the
GBP2.5 million of amortisation for the acquired intangible assets
from the acquisition of Syntec on 21 December 2021 (FY22: GBP0.8m)
and exceptional legal fees and settlement agreements of GBP0.2
million. Adjusted administrative expenses(4) for the year were
GBP23.5 million (FY22: GBP20.2 million).
Profitability measures
Adjusted operating profit was GBP7.7 million, an increase of 48%
year-on-year (FY22: GBP5.2 million). Included in the profit was a
foreign currency gain of GBP0.5 million (FY22: loss GBP0.1
million), which is unlikely to be repeated to the same extent in
the financial year to 31(st) March 2024. Adjusted EBITDA(2) for the
year was GBP9.4 million, an increase of 38% year-on-year (FY22:
GBP6.8 million).
Year Year
ended ended
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------- ---------- ----------
Profit from operating activities 5,020 2,386
Amortisation of acquired intangible
assets 2,473 751
Expenses relating to share option schemes 40 241
Restructuring costs - 866
Legal costs and settlement agreements 203 -
Costs relating to business combinations - 985
Adjusted operating profit(1) 7,736 5,229
---------- ----------
Amortisation of other intangible assets 398 392
Depreciation of owned assets 643 675
Depreciation of leased asset 618 498
------------------------------------------- ---------- ----------
Adjusted EBITDA(2) 9,394 6,794
------------------------------------------- ---------- ----------
1. Adjusted operating profit is the operating profit before
adjustments for expenses relating to share option schemes,
amortisation of acquired intangibles assets, restructuring costs,
legal costs and settlement agreements 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, exceptional items 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, exceptional items and costs
relating to business combinations.
5. Total contracted business includes new business from new
clients, new business from existing clients as well as renewals
with existing clients.
Finance charges
For the financial year ended 31 March 2023, the interest payable
charge was GBP53k (FY22: GBP74k). The interest charge is made up of
bank interest of GBPnil (FY22: GBP23k) and interest on leased
assets of GBP53k (FY22: GBP51k). The finance interest received was
GBP53k (FY22: GBP6k).
Taxation
For the financial year ended 31 March 2023, there was a tax
charge of GBP383k (FY22: GBP743k charge). The effective tax rate in
the financial year ended 31 March 2023 was 7.6% (FY22: 43.8%). The
current year tax rate is impacted by a prior year adjustment
relating to Syntec Holdings balance sheet as they adopted
International Accounting Standards.
Earnings per share
Adjusted diluted earnings per share was 2.09 pence per share
(FY22: 1.34 pence per share) a year-on-year increase of 56%, due to
the increase in adjusted profit before tax, a lower effective tax
rate and an essentially unchanged number of issued ordinary shares.
Basic earnings per share was 1.58 pence per share (FY22: 0.59 pence
per share). Diluted earnings per share was 1.55 pence per share
(FY22: 0.51 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.
Statement of financial position
Our balance sheet remains robust with a strong net cash position
of GBP5.7 million, an increase of GBP2.9 million year on year
(FY22: GBP2.8 million). The business has a Revolving Credit
Facility of GBP5 million, secured against the Group's UK head
office, which is an asset we own outright. As at 31 March 2023 our
revolving credit facility remains undrawn.
While Eckoh continues to innovate by developing new products and
features such as those detailed in the Chief Executive Officer's
review, there has been an increase in the amount capitalised to
intangible assets in the financial year to GBP0.6 million relating
to the Call-Recording product (FY22: GBP0.3m), which was launched
as expected in April 2023.
Contract liabilities and contract assets
Contract liabilities and contract assets relating to IFRS 15
Revenue from Contracts with Customers has continued, as expected,
to decrease in the current year, principally as new contracted
business in NA 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 GBP9.9 million (FY22: GBP12.5 million),
included in this balance are GBP6.3 million of contract liabilities
relating to the Secure Payments product, hosted platform product or
Syntec's CardEasy Secure Payments product, a decrease of GBP1.8
million at the same time in the previous year. Contract assets as
at 31 March 2023 were GBP2.4 million (FY22: GBP3.8 million).
Cashflow and Liquidity
Gross cash at 31 March 2022 was GBP5.7 million (FY22: GBP2.8
million), as at 31 March 2023 there was no drawdown of debt (FY22:
GBPnil million debt). As a result of the acquisition of Syntec in
the financial year to 31 March 2022, we secured a new GBP10 million
debt facility with Barclays Bank, which comprised a GBP5.0 million
overdraft and a GBP5.0 million revolving credit facility. In
November 2022, the overdraft facility was cancelled and the RCF
remains in place, but undrawn as at 31 March 2023.
During the year there has been a net cash outflow from working
capital of GBP1.6 million (FY22: GBP1.7 million cash outflow) due
to the timing of invoicing and cash receipts and as the deferred
revenue for the North American large on-site deployments has been
recognised over the term of the contract, generally three
years.
Dividends
The Board are proposing a final dividend for the year ended 31
March 2023 of 0.74 pence per Ordinary Share be paid to the
Shareholders whose names appear on the register at the close of
business on 22 September 2023, with a payment date of 20 October
2023. The ex-dividend date will be 21 September 2023. This proposal
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 GBP2.2m.
Consolidated statement of total comprehensive income
for the year ended 31 March 2023
2023 2022
Notes GBP'000 GBP'000
---------------------------------------------- ------ --------- ---------
Continuing operations
Revenue 2 38,821 31,780
Cost of sales (7,578) (6,357)
---------------------------------------------- ------ --------- ---------
Gross profit 31,243 25,423
Administrative expenses (26,223) (23,037)
---------------------------------------------- ------ --------- ---------
Operating profit 5,020 2,386
---------------------------------------------- ------ --------- ---------
Adjusted operating profit 7,736 5,229
Amortisation of acquired intangible
assets (2,473) (751)
Expenses relating to share option schemes (40) (241)
Exceptional restructuring costs - (866)
Exceptional legal fees and settlement
agreements 3 (203) -
Costs relating to acquisition 5 - (985)
---------------------------------------------- ------ --------- ---------
Profit from operating activities 5,020 2,386
---------------------------------------------- ------ --------- ---------
Finance charges (53) (74)
Finance income 53 6
Profit before taxation 5,020 2,318
Taxation (383) (743)
---------------------------------------------- ------ --------- ---------
Profit for the financial year 4,637 1,575
============================================== ====== ========= =========
Other comprehensive income
Items that will be reclassified subsequently
to profit or loss:
Foreign currency translation differences
- foreign operations (389) 139
---------------------------------------------- ------ --------- ---------
Other comprehensive income for the
year, net of income tax (389) 139
---------------------------------------------- ------ --------- ---------
Total comprehensive income for the
year attributable to the equity holders
of the parent company 4,248 1,714
============================================== ====== ========= =========
2023 2022
---------------------------------------------- ------ --------- ---------
Profit per share pence Pence
---------------------------------------------- ------ --------- ---------
Basic earnings per 0.25p share 4 1.58 0.59
Diluted earnings per 0.25p share 4 1.55 0.51
Consolidated statement of financial position
as at 31 March 2023
2022 2022
Notes GBP'000 GBP'000
------------------------------- ------- --------- ---------
Assets
Non-current assets
Intangible assets 37,500 39,664
Property, plant and equipment 4,181 4,189
Right-of-use leased assets 995 1,516
Deferred tax assets 129 1,789
----------------------------------------- --------- ---------
42,805 47,158
--------------------------------------- --------- ---------
Current assets
Inventories 254 268
Trade and other receivables 11,778 12,283
Cash and cash equivalents 5,740 2,840
----------------------------------------- --------- ---------
17,772 15,391
--------------------------------------- --------- ---------
Total assets 60,577 62,549
Liabilities
Current liabilities
Trade and other payables (16,190) (18,286)
Lease liabilities (482) (609)
----------------------------------------- --------- ---------
(16,672) (18,895)
--------------------------------------- --------- ---------
Non-current liabilities
Lease liabilities (569) (928)
Deferred tax liabilities (1,528) (2,983)
----------------------------------------- --------- ---------
(2,097) (3,911)
--------------------------------------- --------- ---------
Net assets 41,808 39,743
----------------------------------------- --------- ---------
Shareholders' equity
Called up share capital 732 732
Share premium account 22,180 22,180
Capital redemption reserve 198 198
Merger reserve 2,697 2,697
Currency reserve 732 1,121
Retained earnings 15,269 12,815
----------------------------------------- --------- ---------
Total shareholders' equity 41,808 39,743
----------------------------------------- --------- ---------
Consolidated statement of changes in equity
for the year ended 31 March 2023
Called Share Capital Total
up 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 2022 732 22,180 198 2,697 1,121 12,815 39,743
Total comprehensive income
for the year
Profit for the financial year - - - - - 4,637 4,637
Other comprehensive expense
for the period - - - - (389) - (389)
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Total comprehensive income
for the year - - - - (389) 4,637 4,248
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Dividends paid in the year - - - - - (1,959) (1,959)
Shares transacted through
Employee
Benefit Trust - - - - - (2) (2)
Shares purchased for share
ownership plan - - - - - (120) (120)
Share based payment charge - - - - - (102) (102)
Transactions with owners
recorded
directly in equity - - - - - (2,183) (2,183)
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Balance at 31 March 2023 732 22,180 198 2,697 732 15,269 41,808
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Called Capital Total
up 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 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 year - - - - 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
options 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
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Consolidated statement of cash flows
for the year ended 31 March 2023
2023 2022
Notes GBP'000 GBP'000
------------------------------------------- ------ -------- ---------
Cash flows from operating activities
Cash generated from operations 5 6,956 3,362
Taxation (paid) / received (178) 88
Interest paid - (23)
Interest paid on lease liability (53) (51)
------------------------------------------- ------ -------- ---------
Net cash generated from operating
activities 6,725 3,376
------------------------------------------- ------ -------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (613) (308)
Purchase of intangible assets (570) (375)
Business acquisition - (22,500)
Interest received 53 6
Net cash utilised in investing activities (1,130) (23,177)
------------------------------------------- ------ -------- ---------
Cash flows from financing activities
Dividends paid (1,959) (1,559)
Repayment of borrowings - (975)
Principal elements of lease payments (564) (500)
Purchase of own shares - (126)
Shares purchased for share ownership
plan (120) (110)
Issue of shares net of issue costs - 13,311
Shares acquired/sold by Employee Benefit
Trust - (75)
------------------------------------------- ------ -------- ---------
Net cash (utilised in)/ generated
from financing activities (2,643) 9,966
------------------------------------------- ------ -------- ---------
Increase / (decrease) in cash and
cash equivalents 2,952 (9,835)
Cash and cash equivalents at the start
of the period 2,840 12,706
Effect of exchange rate fluctuations
on cash held (52) (31)
------------------------------------------- ------ -------- ---------
Cash and cash equivalents at the
end of the period 5,740 2,840
------------------------------------------- ------ -------- ---------
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
2023. 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 2022 have been
delivered to the Registrar of Companies but those for the year
ended 31 March 2023 have not yet been delivered.
The auditors have reported on the accounts for the year ended 31
March 2023; 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 Company has
net current liabilities, as balances are owed to subsidiary
companies. The Board can confirm the subsidiary companies will not
request repayment within 12 months of approval of the financial
statements.
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 March 2023, the GBP5 million of Revolving
Credit Facility (RCF) from Barclays Bank is undrawn. Bank covenants
have been reviewed and are comfortably achieved for the year to 31
March 2023 and are forecast to continue to be so for at least 12
months from the date of approval of the financial statements.
Our key business indicators, total orders, new business orders
and Annual Recurring Revenue (ARR), which includes all clients that
we are billing, demonstrate strong visibility of future revenue. In
NA, we continue to see the majority of the Security Solution
contracts won and delivered through Eckoh's cloud platforms, as
large enterprises have accelerated their move into the cloud. The
proportion of recurring revenue is higher for contracts delivered
through the cloud, which also improves our operational gearing,
earnings quality and visibility in the business. We anticipate the
renewal rate for NA and the UK&I businesses to remain unchanged
during this period. When preparing the cash flow forecasts the
Directors have reviewed a number of scenarios including a severe
but plausible downside scenario which assumes no 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, and as part of the integration strategy of the
acquired business, we have during the financial year ended 31(st)
March 2023, revised our key segments. The key segments reviewed at
Board level are North America (NA), UK & Ireland (UK&I) and
Rest of World (ROW).
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 Total Total
analysis NA UK&I ROW 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment Revenue 17,513 20,573 735 38,821 31,780
------------------------------- -------- --------- -------- --------- ---------
Gross profit 13,752 16,780 711 31,243 25,423
Administrative expenses (9,350) (16,475) (398) (26,223) (23,037)
------------------------------- -------- --------- -------- --------- ---------
Operating profit 4,402 305 313 5,020 2,386
------------------------------- -------- --------- -------- --------- ---------
Adjusted operating profit 4,552 2,871 313 7,736 5,229
Other expenses(1) (150) (2,566) - (2,716) (2,844)
------------------------------- -------- --------- -------- --------- ---------
Operating profit 4,402 305 313 5,020 2,386
Profit before taxation 4,371 337 312 5,020 2,318
------------------------------- -------- --------- -------- --------- ---------
Segment assets
------------------------------- -------- --------- -------- --------- ---------
Trade and other receivables 2,864 2,784 173 5,821 5,712
Prepayments and contract
assets 2,503 3,259 195 5,957 6,571
Segment liabilities
------------------------------- -------- --------- -------- --------- ---------
Trade and other payables 344 2,147 8 2,499 2,336
Accruals and contract
liabilities 7,099 6,156 384 13,639 15,950
Capital expenditure
------------------------------- -------- --------- -------- --------- ---------
Purchase of tangible assets 519 94 - 613 308
Purchase of leases - 77 - 77 686
Purchase of intangible
assets - 570 - 570 375
Depreciation and amortisation
------------------------------- -------- --------- -------- --------- ---------
Depreciation of property,
plant & equipment 189 444 10 643 680
Depreciation of leased
assets 162 443 12 617 495
Amortisation - 2,871 - 2,871 1,143
1. Other expenses include expenses relating to share option
schemes, amortisation of acquired intangible assets, exceptional
restructuring costs, legal costs and settlement costs and costs
from business combinations.
In 2022/23 there was no one customer that individually accounted
for more than 10% of the total revenue of the continuing operations
of the Group. In 2021/22 there was one customer that individually
accounted for more than 10% of the total revenue of the continuing
operations of the Group.
NA UK & I ROW 2023 2022
Revenue by geography GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- -------- --------
United States of America
& Canada 17,513 - - 17,513 18,856
UK & Ireland - 20,573 - 20,573 12,429
Rest of the World - - 735 735 495
-------------------------- -------- -------- -------- -------- --------
Total Revenue 17,513 20,573 735 38,821 31,780
-------------------------- -------- -------- -------- -------- --------
Total
NA UK & I ROW 2023 Total 2022(1)
Timing of revenue recognition GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- -------- --------------
Services transferred at
a point in time 3,371 3,372 169 6,192 7,039
Services transferred over
time 14,142 17,201 566 31,909 24,741
------------------------------- -------- -------- -------- -------- --------------
17,513 20,573 735 38,821 31,780
------------------------------- -------- -------- -------- -------- --------------
2. The split between services transferred at a point in time and
overtime were incorrectly disclosed in the Annual Report 2022 and
have been corrected above.
The following table provides information about receivables,
contract assets and contract liabilities from contracts with
customers.
2023 2022
GBP'000 GBP'000
---------------------------------------------- -------- --------
Receivables, which are included in, 'Trade
and other receivables' 5,151 4,860
Contract assets which are included in 'Trade
and other receivables' 2,364 3,828
Contract liabilities which are included
in 'Trade and other payables' (9,909) (9,470)
---------------------------------------------- -------- --------
(2,394) (782)
---------------------------------------------- -------- --------
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 2023 31 March 2022
Contract Contract Contract Contract
assets liabilities assets liabilities
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- ------------- --------- -------------
Revenue recognised that
was included in the contract
liability balance at the
beginning of the period - 6,754 - 6,938
Current year billings recognised
in contract liabilities - 3,575 - 4,108
Cost of sales recognised
that was included in the
contract assets balance
at the beginning of the
period 2,600 - 2,640 -
Costs deferred in current
year and unbilled revenue
included in contract assets 1,115 - 1,538 -
---------------------------------- --------- ------------- --------- -------------
Contract costs 31 March 2023 31 March 2022
GBP'000 GBP'000
------------------------------- -------------- --------------
Deferred implementation costs 958 1,028
Deferred hardware costs 157 510
------------------------------- -------------- --------------
1,115 1,538
------------------------------- -------------- --------------
Contract costs 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.
The contract liabilities and contract assets has continued, as
expected, to decrease in the current year, principally as new
contracted business in North America 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.
Transaction price allocated to the remaining performance
obligations
The total amount of revenue allocated to unsatisfied performance
obligations is GBP9.9m (FY22: GBP9.5m). We expect to recognise
approximately GBP7.6m (FY22: GBP3.9m) in the next 12 months,
GBP1.7m (FY22: GBP5.5m) 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.
Prior period segment analysis Total
on new basis NA UK&I ROW 2022
GBP'000 GBP'000 GBP'000 GBP'000
Segment Revenue 12,454 18,961 365 31,780
----------------------------------- -------- --------- -------- -----------
Gross profit 9,344 15,727 352 25,423
Administrative expenses (7,916) (14,878) (243) (23,037)
----------------------------------- -------- --------- -------- -----------
Operating profit 1,428 849 109 2,386
----------------------------------- -------- --------- -------- -----------
Adjusted operating profit 1,983 3,137 109 5,229
Other expenses(2) (555) (2,289) - (2,844)
----------------------------------- -------- --------- -------- -----------
Operating profit 1,428 849 109 2,386
Profit before taxation 1,404 805 109 2,318
----------------------------------- -------- --------- -------- -----------
Segment assets
----------------------------------- -------- --------- -------- -----------
Trade and other receivables 2,379 3,295 38 5,712
Prepayments and contract assets 3,351 3,004 216 6,571
Deferred tax asset 513 1,276 - 1,789
Segment liabilities
Trade and other payables 809 1,516 11 2,336
Accruals and contract liabilities 8,000 7,342 608 15,950
Capital expenditure
----------------------------------- -------- --------- -------- -----------
Purchase of tangible assets 120 188 - 308
Purchase of leases - 686 - 686
Purchase of intangible assets - 375 - 375
Depreciation and amortisation
----------------------------------- -------- --------- -------- -----------
Depreciation of property, plant
& equipment 150 523 7 680
Depreciation of leased assets 130 360 5 495
Amortisation - 1,143 - 1,143
1. Since date of acquisition of Syntec Holdings Limited on 22
December 2021.
2. Other expenses comprise expenses relating to share option
schemes, amortisation of acquired intangible assets, exceptional
restructuring costs and costs from business combinations
Prior period segment analysis Eckoh Eckoh Total
on old basis UK US Syntec(1) 2022
GBP'000 GBP'000 GBP'000 GBP'000
Segment Revenue 18,596 11,487 1,697 31,780
----------------------------------- --------- -------- ------------ -----------
Gross profit 15,593 8,473 1,357 25,423
Administrative expenses (14,399) (7,300) (1,338) (23,037)
----------------------------------- --------- -------- ------------ -----------
Operating profit 1,194 1,173 19 2,386
----------------------------------- --------- -------- ------------ -----------
Adjusted operating profit 3,194 1,728 307 5,229
Other expenses(2) (2,000) (555) (289) (2,844)
----------------------------------- --------- -------- ------------ -----------
Operating profit 1,194 1,173 19 2,386
Profit before taxation 1,156 1,149 13 2,318
----------------------------------- --------- -------- ------------ -----------
Segment assets
----------------------------------- --------- -------- ------------ -----------
Trade and other receivables 2,904 2,059 749 5,712
Prepayments and contract assets 2,798 954 2,819 6,571
Deferred tax asset 1,103 513 173 1,789
Segment liabilities
Trade and other payables 1,364 607 367 2,336
Accruals and contract liabilities 6,216 4,191 5,543 15,950
Capital expenditure
----------------------------------- --------- -------- ------------ -----------
Purchase of tangible assets 187 120 1 308
Purchase of leases - 686 - 686
Purchase of intangible assets 375 - - 375
Depreciation and amortisation
----------------------------------- --------- -------- ------------ -----------
Depreciation of property, plant
& equipment 525 130 25 680
Depreciation of leased assets 353 108 34 495
Amortisation 1,143 - - 1,143
NA UK&I ROW 2022
Revenue by geography in new
segments GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- -------- --------
United Sates of America &
Canada 12,454 - - 12,454
UK & Ireland - 18,961 - 18,961
Rest of the World - - 365 365
----------------------------- -------- -------- -------- --------
Total Revenue 12,454 18,961 365 31,780
----------------------------- -------- -------- -------- --------
Eckoh UK Eckoh US Syntec 2022
Revenue by geography in old
segments GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- -------- --------
UK 18,117 - 739 18,856
United States of America 339 11,314 776 12,429
Rest of the World 140 173 182 495
----------------------------- --------- --------- -------- --------
Total Revenue 18,596 11,487 1,697 31,780
----------------------------- --------- --------- -------- --------
NA UK & I ROW Total 2022(1)
Timing of revenue recognition
in new segments GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- --------------
Services transferred at a
point in time 3,559 3,451 29 7,039
Services transferred over
time 8,895 15,510 336 24,741
------------------------------- -------- -------- -------- --------------
12,454 18,961 365 31,780
------------------------------- -------- -------- -------- --------------
Eckoh UK Eckoh US Syntec 2022(1)
Timing of revenue recognition
in old segments GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- -------- --------
Services transferred at a
point in time 3,403 3,411 225 7,039
Services transferred over
time 15,193 8,076 1,472 24,741
------------------------------- --------- --------- -------- --------
18,596 11,487 1,697 31,780
------------------------------- --------- --------- -------- --------
1. The split between services transferred at a point in time and
overtime were incorrectly disclosed in the Annual Report 2022 and
have been corrected.
3. Exceptional legal fees and settlement agreements
In the financial year ended 31 March 2023 legal fees and
settlement agreements of GBP0.2 million (settlement income of
GBP950k received has been netted off against legal fee expenses),
have been incurred regarding commercially sensitive matters which
are required to be kept confidential by agreements with third
parties or ongoing legal negotiations.
4. 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.
2023 2022
GBP'000 GBP'000
------------------------------------------------ -------- --------
Earnings for the purposes of basic and diluted
earnings per share 4,637 1,575
------------------------------------------------ -------- --------
Earnings for the purposes of adjusted basic
and diluted earnings per share 6,266 4,181
------------------------------------------------ -------- --------
Reconciliation of earnings for the purposes of adjusted basic
and diluted earnings per share
2023 2022
GBP'000 GBP'000
------------------------------------------------ -------- --------
Earnings for the purposes of basic and diluted
earnings per share 4,637 1,575
Taxation 383 743
Amortisation of acquired intangible assets 2,473 751
Expenses relating to share option schemes 40 241
Exceptional restructuring costs - 866
Legal fees and settlement costs 203 -
Costs relating to acquisition - 985
------------------------------------------------ -------- --------
Adjusted profit before tax 7,736 5,161
Tax charge based on standard corporation tax
rate of 19% (2021: 19%) (1,470) (980)
------------------------------------------------ -------- --------
Earnings for the purposes of adjusted basic
and diluted earnings per share 6,266 4,181
------------------------------------------------ -------- --------
2023 2022
Denominator '000 '000
----------------------------------------------- -------- --------
Weighted average number of shares in issue
in the period 292,893 265,968
Shares held by employee ownership plan (2,338) (2,028)
Shares held in Employee Benefit Trust - -
----------------------------------------------- -------- --------
Number of shares used in calculating basic
earnings per share 290,555 263,940
Dilutive effect of share options 9,210 20,558
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 299,765 310,881
----------------------------------------------- -------- --------
2023 2022
Profit per share Pence Pence
------------------------------------------- ------ ------
Basic earnings per 0.25p share 1.58 0.59
Diluted earnings per 0.25p share 1.55 0.51
Adjusted earnings per 0.25p share 2.14 1.57
Adjusted diluted earnings per 0.25p share 2.09 1.34
5. Cashflow from operating activities
2023 2022
GBP'000 GBP'000
----------------------------------------------- -------- --------
Profit for the financial year 4,637 1,575
Interest income (53) (6)
Interest payable 53 74
Taxation 383 743
Depreciation of property, plant and equipment 643 680
Depreciation of leased assets 617 495
Amortisation of intangible assets 2,871 1,143
Exchange differences (516) (95)
Share based payments 40 241
----------------------------------------------- -------- --------
Operating profit before changes in working
capital and provisions 8,675 4,850
Decrease / (increase) in inventories 14 (5)
Decrease in trade and other receivables 505 2,423
Decrease in trade and other payables (2,238) (3,906)
Cash generated from operations 6,956 3,362
----------------------------------------------- -------- --------
6. Events after the Statement of Financial Position Date
Prior to the 31 March 2023, the Group were in settlement
discussions with a third party. An agreement was reached post year
end with the third party and a settlement entered into in favour of
the Group. The income and costs are included in exceptional items
in Note 9.
, the news service of the London Stock Exchange. RNS is approved by
the Financial Conduct Authority to act as a Primary Information
Provider in the United Kingdom. Terms and conditions relating to
the use and distribution of this information may apply. For further
information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
FR NKNBDNBKBDAD
(END) Dow Jones Newswires
June 14, 2023 02:00 ET (06:00 GMT)
Eckoh (LSE:ECK)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
Eckoh (LSE:ECK)
Gráfica de Acción Histórica
De May 2023 a May 2024
