TIDMECK
RNS Number : 8674B
Eckoh PLC
15 June 2021
15 June 2021
Eckoh plc
("Eckoh" or the "Group")
Full year results
Strong revenue and order momentum in US Secure Payments;
resilient performance in the UK
Trading in-line with market expectations - material growth in
FY23,
after FY22 comparable to current year due to the pandemic
Eckoh plc (AIM: ECK), the global provider of secure payment
products and customer contact solutions, is pleased to announce its
final results for the twelve months to 31 March 2021.
GBPm unless otherwise stated FY21 FY20 Change
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Revenue 30.5 33.2 (8%)
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Gross profit 24.2 26.3 (8%)
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Adjusted EBITDA(1) 6.4 6.4 -
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Adjusted operating profit(2) 4.7 4.7 -
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Profit before taxation 3.5 3.3 +6%
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Diluted earnings per share 1.06 1.20p (12%)
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Net cash 11.7 11.6m +0.1m
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Proposed Full Year Dividend
per share 0.61 0.61 -
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Total contracted business(3) 30.7 35.9 (14%)
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New contracted business(4) 15.7 18.6 (15%)
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Strategic highlights
-- US Secure Payments revenue grew strongly by 57% and now represents 79% of total US revenues
o New Secure Payments contracted business of $11.6m exceeded
(FY20: $10.7m)
o Cloud contracts accounted for over half the contract value and
more than 80% of the number of contracts, compared to 20% in the
prior year
o Record number of contracts won in a year since Eckoh entered
the US market
-- Total contracted business(3) GBP30.7m (FY20 GBP35.9m),
excluding Coral contract down 9% (FY20: GBP32.9m)
-- New contracted business(4) GBP15.7m (FY20: GBP18.6m),
excluding Coral contract down 4% (FY20: GBP16.3m)
-- UK total business, GBP18.9m (FY20: GBP20.1m) with 59% of new
business coming from existing clients
o Strong renewals including TfL, Tenpin, Yodel, 1st Central,
Welsh Water and Ministry of Justice
-- Major CallGuard release in January 2021, consolidating market leading position
Financial highlights
-- Results in-line with market expectations
-- Revenue down 8% overall due to the pandemic, 7% at constant currency(5)
-- Adjusted operating profit in-line with prior year at GBP4.7m
despite the pandemic, the planned exit from US Support and currency
headwinds, and 13% higher excluding the FY20 Coral contract
-- Profit before taxation increased by 6% to GBP3.5m (FY20 GBP3.3m)
-- US Secure Payments' revenue increased significantly by 57% to $12.8m (FY20: $8.1m)
-- UK revenue down 12%, with multiple lockdowns impacting some
repeatable transactional revenues
-- Recurring revenue(6) 71% (FY20: 75%), impacted by the decline in UK transactional revenue
-- Proposed final Dividend is maintained at 0.61p per share (FY20: 0.61p)
-- Continued strong cash position and robust balance sheet: net cash GBP11.7m (FY20: GBP11.6m)
Outlook
-- Shift to remote working driving opportunities and demand for Eckoh's products and model
-- The Board expects revenue and profit for FY22 to be
comparable to FY21, and material year-on-year revenue and profit
growth in FY23. These expectations are subject to no further
lockdowns in the UK or US, and ongoing uncertainty in the
macro-economic climate because of the COVID-19 pandemic.
Nik Philpot, Chief Executive Officer, said:
"In a challenging year, we are pleased that our highly relevant
products and resilient business model have enabled us to deliver
results in-line with expectations and profits comparable to the
previous year. Whilst new business was impacted across the Group,
especially in the first half, new strategic opportunities have been
created as many organisations seek a more permanent shift to remote
working, which plays to Eckoh's strengths.
The momentum in the US Secure Payments business returned
strongly in the second half, buoyed by the switch to the Cloud, a
trend that has been accelerated by current market conditions, and
we look forward to overall growth returning as the pandemic
restrictions are lifted. Our Secure Payments business continues to
benefit from ever increasing regulation and the need to mitigate
the financial risk of data breaches and fraud, as organisations
look for ways to secure themselves more comprehensively, beyond
just the needs of compliance.
I'd like to thank my Eckoh colleagues for working so hard and
effectively throughout the past year, without their efforts we
could not have delivered such a resilient outcome."
1. Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) is the profit before tax adjusted for
depreciation of owned assets and leased assets, amortisation of
acquired intangible assets and expenses relating to share option
schemes.
2. Adjusted operating profit is the profit before tax adjusted
for amortisation of acquired intangible assets and expenses
relating to share option schemes.
3. Total contracted business includes new business from new
clients, new business from existing clients as well as renewals
with existing clients.
4. New contracted business excluding renewals with existing customers.
5. Constant currency (using last year exchange rates).
6. Recurring revenue is defined as on-going revenue on a
transactional basis, rather than revenue derived from the set-up
and delivery of a new service or hardware.
For more information, please contact:
Eckoh plc
Nik Philpot, Chief Executive Officer Tel: +44 (0) 1442
458 300
Chrissie Herbert, Chief Financial Officer
www.eckoh.com
FTI Consulting LLP Tel: +44 (0) 203
727 1017
Ed Bridges, Jamie Ricketts, Darius Alexander,
Tom Blundell
eckoh@fticonsulting.com
N+1 Singer (Nomad & Joint Broker)
Shaun Dobson, Tom Salvesen, Justin McKeegan Tel: +44(0) 20 7496
3000
www.n1singer.com
Canaccord Genuity Limited (Joint Broker)
Simon Bridges, Emma Gabriel Tel: +44(0) 20 7523
8000
www.canaccordgenuity.com
About Eckoh plc
Eckoh is a global provider of Secure Payment products and
Customer Contact solutions, supporting an international client base
from its offices in the UK and US.
Our Secure Payments products help our clients take payments
securely from their customers through all engagement channels. The
products, which include the patented CallGuard and ChatGuard, can
be hosted in the Cloud or deployed on the client's site and remove
sensitive personal and payment data from contact centres and IT
environments. 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.
Eckoh's Customer Contact 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
also assist organisations in transforming the way that they engage
with their customers by providing support and transition services
as they implement our innovative customer contact solutions.
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 delivered a resilient performance in the 2021 financial
year, in line with market expectations, with a robust level of
adjusted operating profit(2) , GBP4.7 million, level with the prior
year. The Board views this as a very creditable performance, given
the impact of our planned exit from US Support (as previously
indicated), a significant negative currency movement, a tough
comparator due to the material Coral contract in the prior year,
and the challenges of the COVID-19 pandemic.
This outcome reflects particularly strong growth in our US
Secure Payments operation, which grew by 57% and now accounts for
approximately 80% of US revenues, as well as a resilient UK
performance, despite the trading conditions continuing to be
impacted by the ongoing lockdown.
Total contracted business(3) for the financial year at the Group
level was GBP30.7 million compared to the record total contracted
business in the prior year of GBP35.9 million. New business won in
the year was GBP15.7 million (FY20: GBP18.6 million), an excellent
outcome given the continued disruption and uncertainty in market
conditions, which were particularly acute in the first half of the
financial year.
Total revenue for the year was GBP30.5 million, a decrease year
on year of 8% (FY20: GBP33.2 million) or 7% adjusting for constant
exchange rates. Excluding the Coral licence orders in FY21 and
FY20, revenue in FY21 was GBP29.8 million, a decrease of only
5%.
Gross profit was GBP24.2 million (FY20 GBP26.3 million) with
gross profit margin 79%, level year on year. US gross profit was
GBP8.9 million (FY20: GBP9.3 million), with gross profit margin
decreasing as expected to 71% (FY20: 73%) due to the growth in the
Secure Payments activity. UK gross profit was GBP15.3 million
(FY20: GBP17.1 million), a decrease of 11% and gross profit margin
increased by 200 basis points to 85%.
From March 2020 and then throughout the year there has been
prudent cost control, which included a freeze on new hires where
appropriate, postponing salary increases and limiting discretionary
spend.
Adjusted operating profit(2) was GBP4.7 million (FY20: GBP4.7
million) a credible result given the continued disruption and
uncertainty in market conditions, which were particularly acute in
the first half of the financial year.
Our balance sheet remains robust with a strong net cash position
of GBP11.7 million (FY20: GBP11.6 million), which comprises a cash
balance of GBP12.7 million, less an outstanding loan of GBP1.0
million, taken out in 2015 in part to purchase the Group's UK head
office.
A clear growth strategy
Our strategic objectives reflect our primary goal to become the
global leader in our areas of expertise, and in particular, Contact
Centre payment security.
Our strategic objectives include:
-- Being the market leader for Contact Centre payment security
-- Capitalise on the fast-growing US market for Secure Payments
-- Maximise client value and retention through cross-selling to
generate higher levels of recurring income
-- Continue to enable faster and more flexible delivery of our
solutions in the UK and then export to the US tactically
-- 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 Contact Centre security and customer
engagement
A significant and largely untapped market opportunity
Our target market both in the UK and US is 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.
The contact centre industry in both the UK and US is extremely
large, representing around 4% of the entire workforce in both
markets, and the industry continues to grow. We target
organisations that utilise contact centres with more than 50 agent
seats and this represents over 2,510 in the UK and 12,050 in the
US. With so little of our large target market currently addressed,
patented technology and with limited competition to our offering,
this represents a huge opportunity for Eckoh in the coming
years.
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
in order to secure themselves more comprehensively, leading to
broadening information security budgets and remits. Moreover, the
current crisis and the consequent reliance on more contact centre
agents working remotely are only likely to accentuate these
security requirements. We see the trend of remote working becoming
a permanent feature, and this can only benefit Eckoh as our
payments 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.
Highly complementary products and attractive proposition
Eckoh's go-to-market proposition encompasses two highly
complementary areas: Secure Payment products and Customer Contact
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 Standards ("PCI
DSS") and wider security regulations such as the General Data
Protection Regulations ("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. Eckoh can secure all engagement channels
including payments made over the phone through a live agent or an
automated IVR system ('CallGuard'), on the web or a mobile
('DataGuard'), or through a web chat or chatbot ('ChatGuard'). Our
Secure Payments products are straightforward to deploy as they
require no change to our client's existing processes or systems;
enjoy extremely high renewal rates and provide an excellent
platform from which to cross-sell other Eckoh solutions to our
customer base.
-- The Group's Customer Contact solutions help organisations
transform the way they engage with their customers. Eckoh's
proposition, which is delivered through the Eckoh Experience Portal
("EXP"), 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.
Our UK operations sell the entire product portfolio, but in the
US - a territory that Eckoh entered six years ago - the focus has
been on Secure Payments, where we have the greatest differentiation
and the least competition. At the beginning of FY20, we introduced
Web Chat and ChatGuard into the US market and this was the first
step in opening up our Customer Contact proposition, focusing on
the newer customer engagement channels. Consistent with our
longstanding goal to focus on Secure Payments, we have continued
our planned transition away from third-party Support contracts.
This approach, which will improve revenue quality and visibility in
the future, has seen the mix of Support revenues decline, as
previously indicated, from 27% of total US revenues in FY20 to 9%
in FY21. There were also a small number of Support contracts in the
UK that were largely operated from the US, which have also been
discontinued in line with our strategy.
Contracts for both Secure Payments and Customer Contact
propositions are typically multi-year in length and have a high
proportion of recurring revenues, usually underpinned by minimum
commitments. In the UK, almost all solutions are currently
delivered from Eckoh's hosted managed service platform. In the US,
one positive consequence of the pandemic has been the rapid
increase in the number of Secure Payment contracts won and
delivered through Eckoh's Cloud platforms, as larger enterprises
have accelerated their move to the Cloud.
Operational Review
US Division (41% of group revenues)
The US division continues to account for an increasing
proportion of Group revenues, in line with our stated strategy of
the US becoming the largest part of the business in the medium
term. The US Division represented 41% of Group revenues in 2021, an
increase of 300 basis points compared to the prior year (FY20:
38%). Revenue in the period was $16.4 million, an increase of 2%
(FY20: $16.1 million). Secure Payments grew significantly by 57% to
$12.8 million and was offset by the planned transition away from
Support and an expected decline in Coral. If the large Coral order
in FY20 is excluded, revenue grew by 14% in the US, despite the
planned decline in the Support business.
Total contracted business was $15.5 million (FY20 $19.9 million)
of which 83% ($12.9 million) was new business, highlighting that
Secure Payment contract renewals are still at an early stage. In
the year, newly contracted Secure Payments' business was $11.6
million, an increase of 9% despite the challenges of the pandemic
(FY20: $10.7 million).
In the US, the Group's focus remains on the US Secure Payments
opportunity, where it has the greatest differentiation and the
least competition. The performance of the Secure Payments' business
is summarised below, together with the Support business that we are
strategically exiting, as well as the Coral business.
-- Secure Payments' revenue grew 57% to $12.8 million (FY20:
$8.1 million), and now represents 79% of US revenue. This will
continue to grow, however in FY22 this will be at a slower rate,
due to the low value of new orders in the first 5 months of FY21
because of the pandemic. Also, our largest contract signed to date
($7.4 million) is due for renewal in September, from which point
the revenues from the hardware and implementation fee will have
been fully recognised.
-- Coral had revenues of $2.0 million in the year (FY20: $3.5
million), included is the $1.0m of one-off Coral licences (FY20:
$2.1 million). Coral accounted for 12% of US revenue (FY20: 22%).
As noted previously, the timing of Coral orders remains hard to
forecast and they will be lumpy in nature.
-- Support revenue declined as expected to $1.5 million, a
decrease of 65% (FY20: $4.4 million) and represents 9% of the US
revenue (FY20: 27%). It is expected to continue to fall in the
current financial year in line with the strategic decision taken
last year to focus our staff and resources on the high growth
opportunity of Secure Payments and manage a transition away from
Support. This will be the last year that we break out Support
revenues separately, as in FY22 it will be considered a de minimis
percentage.
Secure Payments, where we deliver a patented solution that
enables enterprises to take card payments securely within their
Contact Centre operations, continued to generate excellent
financial momentum. Compound Annual Growth Rate (CAGR) over the
last four years has been 36%. The pandemic made it extremely
difficult to close new contracts in the first quarter, as many
sales processes were put on hold by customers while they dealt with
the disruption to their businesses. In the second quarter, momentum
started to build, and from September 2020 we secured $9.3 million
of the $11.6 million new contracted Secure Payments business that
we won in the year. The number of individual contracts won in the
year was also the highest since Eckoh entered the US market.
Since 2015, when we launched Secure Payments in the US, the
total of new contracted business is shown below.
Financial Year FY15 FY16 FY17 FY18 FY19 FY20 FY21
New contracted
US Secure Payments
business $0.3m $1.6m $8.3m $9.3m $13.7m $10.7m $11.6m
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The Company is focused on large enterprise contracts. However,
during the first half of the year many of the sales processes for
the largest companies were temporarily suspended and there was a
greater emphasis on contracts with medium-sized organisations,
which generally have a lower average contract value than the $750k
previously indicated. A larger proportion of contracts won in the
year will be delivered through Eckoh's Cloud platforms. Where
possible, organisations have fast-tracked their plans to deploy in
the Cloud, a trend accelerated by the circumstances of the
pandemic. More than half the contract value Eckoh has won, and more
than 80% of the number of contracts, have been for Cloud delivery,
this compares to only 20% of contracts in FY20.
We do anticipate that a lasting impact of the pandemic will be a
general acceleration in Cloud deployments, although very large
enterprises are still likely to take many years to achieve that
goal. We have recently started to see some of these large
organisations re-commence their technology adoption and acquisition
processes and depending on when these are concluded we should see
the average contract values rising again. Contracts secured in the
period came from a range of sectors including healthcare, business
process outsourcing, insurance, utilities, retail, and financial
services.
Our sales channels, which we have been developing over the past
year, are now starting to bear real fruit. The largest contract won
in the second half, with a very significant Healthcare provider,
was brought to us by a new partner in the Healthcare sector.
Partner sales opportunities now represent 25% of our total
pipeline, and this share is expected to grow this year.
The average length of contracts for Secure Payments is three
years, so it is only this year that the first meaningful contracts
have been due for renewal. The two larger contracts that were due
for renewal in the second half of the year renewed successfully,
mirroring the trend of the UK.
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.
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 a contract extension with a Fortune 100
telecommunications company for the Coral product. The contract was
worth a minimum of $3.8 million and of this, $2.1 million relating
to the purchase of licences was recognised in the prior first half
revenue. As we indicated at the time, we did not expect a further
deal of additional licences of this size in FY21, however we did
secure additional licences and functionality of $1.0m in the
year.
In Support, as we stated last year, we are transitioning away
from this activity to focus on the high growth Secure Payments'
opportunity. The majority of the employees servicing the Support
channel have been switched to service the more substantial and
higher growth Secure Payments opportunities, and this will
continue.
Recurring revenues in the US were 57% in the period compared to
61% for the same period last year after adjusting for the one-off
Coral licences of $1.0m million and $2.1 million in FY21 and FY20
respectively. Recurring revenue for the Secure Payments' activity
was 49% compared to 44% in the prior year. We would expect
recurring revenue to continue to increase over time as we continue
to deploy new clients live, but also as more clients' solutions are
delivered in the Cloud, where there is a much lower level of
one-off revenue initially. Recurring revenue for Secure Payments is
lower than the UK operation due to the hardware component and in
particular the disproportionately large value of non-recurring
revenue relating to hardware and set-up fees from our largest
Secure Payment contract that went live in 2019 and is due for
renewal in the summer of 2021. The US operation's revenues are
based on fixed contractual fees giving us continued resilience and
visibility in the current situation.
UK Division (59% of group revenues)
The UK division has delivered a resilient performance despite
the challenging environment presented by the pandemic and the
impact of numerous lockdowns. Notwithstanding that backdrop, we
continued to see high levels of demand and new business wins coming
particularly from our existing clients, evidencing the strength of
our relationships.
Total contracted business was GBP18.9 million, a decrease of 6%
compared to the prior year of GBP20.2 million, which was a record
level. New contracted business was GBP5.9 million (FY20: 6.6
million), an excellent outcome given the abnormal conditions
relating to the pandemic. Renewals in the period were GBP13.1
million, slightly lower than last year's renewals of GBP13.6
million, but due to the timing of when renewals fall due.
Revenue in the period was GBP18.0 million, a decrease on last
year of 12% (FY20: GBP20.5 million), and gross profit decreased 11%
to GBP15.3 million (FY20: GBP17.1 million). The revenue decline was
directly due to the impact that the pandemic had on our clients'
activity, particularly some of our largest clients in the travel,
retail and leisure sectors such as Premier Inn, Tenpin and
Transport for London. Because our UK business has been operating
for many years, there are a range of commercial models that have
evolved over time, unlike the US business which has only been
operating since 2015. Where the commercial model is transactional,
which remains the most common model, 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. However, this is not the
case for a few of our longstanding clients, some of which are
Eckoh's largest. At the peak of the pandemic's impact,
transactional volumes were significantly reduced, but because of
the blend of our contracts the aggregated impact on revenue across
our client base was much less than this figure.
Gross margins in the UK increased in the period by 200 basis
points to 85% (FY20: 83%) and recurring revenue decreased as
expected, to 84% (FY20: 88%). With the level of new business from
existing clients over the last two years, we would expect recurring
revenue to be in the range of 82% - 84%.
Looking at the segmentation of UK revenue, 27% came from Secure
Payment services (FY20: 23%), 36% from Customer Contact Solutions
(FY20: 38%) and the remaining 37% from clients where we provide a
combination of both solutions (FY20: 39%). The increase in the
Secure Payments only services offset a decrease in the clients with
combined solutions, which is largely the clients that have been
most impacted during the pandemic.
As organisations adapt their customer engagement strategy to
reflect the increase in remote working that is now set to become a
permanent feature, we have seen improved interest in and sales for
our CallGuard Remote product, which facilitates the taking of
payments securely in remote working environments. Furthermore, we
expect an even faster adoption of emerging engagement technologies
such as conversational bots working in tandem with human agents,
and the number of companies who are accelerating their shift to
Cloud-based solutions. Eckoh will be able to assist new and
existing clients in responding to these changes, with deployment
through the Eckoh Experience Portal ("EXP"). This portal enables
organisations to buy and deploy our Customer Contact and Secure
Payment solutions in a modular fashion.
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 increasing the lifetime value of the Group's customers. Of the
new business secured in the year of GBP5.9 million, GBP3.5 million
(FY20: GBP3.9 million) was contracted with existing customers for
delivery of new solutions or modifications. At 59% (FY20: 60%),
this continues to be a much higher proportion of our new business
coming from existing clients than we would normally see, and points
to organisations being more willing to invest in the uncertain
business climate with existing suppliers than seek new ones.
During the year, our strong track record with existing clients
has continued to be demonstrated through the levels of renewal
business contracted, which were GBP13.1 million in the period.
There were a number of larger clients who renewed their contracts,
in August 2020, we secured a six-year renewal of our contract with
Capita for the provision of services for the Congestion Charge to
Transport for London, at a minimum total contract value of GBP4
million. In the second half of our financial year, we successfully
renewed contracts with Tenpin, Ministry of Justice, Target, Welsh
Water, Yodel and 1(st) Central Insurance.
The new business and consistent renewals of existing clients
gives us, in normal circumstances, high revenue visibility and our
UK clients are underpinned by contractual fees or minimum
transaction levels. The continued uncertain business climate in the
UK and the on-going impact from the pandemic on the transactional
volumes of our larger clients, will continue into the current
financial year until such time as restrictions are lifted and
volumes can return to pre-pandemic levels.
Product Update
In January we made a significant new release of our core Secure
Payments product CallGuard to ensure we maintain our market leading
position. We are the only company operating in our relatively small
competitive landscape that uses a fundamentally different and
patented technical approach, where we replace the sensitive
information with a placeholder or token as it enters the client's
environment, that can then be safely stored as it is not payment
data. All other companies simply block the information.
Our approach provides us with significant advantages in the
elegance of our implementations, and requires no low-level
integration, again a feature of many competitors. Our clients can
make changes to their systems, processes or third-party suppliers
(such as their Payment Service Provider) without us needing to make
any changes to our solution. This is a unique feature of the Eckoh
solution. The new CallGuard release builds on our award-winning
product with three significant new enhancements:
-- Agent Control Panel - a more intuitive interface for the
Contact Centre Agent to take the payment securely and help reduce
the average handling time of that process. In an industry where the
reduction or addition of a few seconds on every agent's call can
have a very meaningful cost impact, it is essential that the tools
they use are as 'frictionless' as possible.
-- CallGuard Reporting Dashboard - an enhanced reporting
package, with powerful visual elements, that leverages the
market-leading information product Domo. This will be provided in
either a standard format, or the client can opt at their cost to
have more detailed bespoke reports based on their own needs.
-- CallGuard Speech Capture - enhanced speech recognition option
with multiple languages (primarily for the US market). We have seen
a much higher level of interest in the US for taking the payment
securely using speech rather than the keypad. Whilst this means the
call must be muted temporarily from the agent whilst the card
information is provided, the process is otherwise the same.
The reaction from both existing and new clients has been
extremely positive to the new release. Furthermore, we intend to
make another release later this year which will provide an even
more flexible delivery method, as well as a version of the product
tailored for much smaller clients, who we typically do not target,
that will enable our sales partners to effectively syndicate to
these organisations and manage the deployment process
themselves.
Cloud Native
Eckoh continues its Cloud Native journey focusing on both
transition and net-new products and services. Cloud Native
harnesses the Cloud's most powerful advantages - flexible,
on-demand infrastructure and powerful managed services - and pairs
them with Cloud-optimised practices and technologies. It allows
drastically faster and better building, testing, and deploying of
software, features and functionality-more easily, securely and
rapidly, whilst minimising disruption of services.
As part of these initiatives, this past year we have expanded
our delivery pipeline to Cloud platforms across both the UK and US
in multi-regions and high availability zones. Aligning with our
payment products portfolio and PCI DSS, they have been included in
our annual PCI DSS assessment and resultant Attestation of
Compliance (AOC). Also, in line with Eckoh's security first
practices, we have embraced a DevSecOps culture focused on all
stages of the software supply chain. This allows Eckoh and its
product and service offerings to maintain a high and alert security
posture in the face of emerging security threats. We are pleased
with the progress we have made overall and can state that Cloud
Native designed and delivered applications are running across these
geo locations supporting some of our largest customers today.
When companies build and operate applications in a Cloud Native
fashion, they bring new ideas to market faster and respond sooner
to client demands. This is at the core of Eckoh's client-focused
delivery model and exemplified in our January CallGuard release
which greatly enhanced the product suite. These technologies and
mythologies aim to keep us ahead of our competitors across the
technical landscape, enhance our product portfolio even faster, at
higher margins, and with a focus on security and assured quality,
and win the ongoing talent war for attracting and retaining high
quality developers.
Amazon Connect
A strategic initiative for FY22 is increased investment and
resource in progressing the delivery of Eckoh 'stack solutions'
that include Amazon Connect as the Cloud telephony layer. When
combined with Eckoh's Secure Payments, Omnichannel and advanced
voice capability as well as the Coral agent desktop, 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 and agile way.
Outlook
The Board expects revenue and profit for the financial year 2022
to be comparable to the financial year 2021, and material
year-on-year revenue and profit growth in the financial year 2023.
These expectations are subject to no further lockdowns in the UK or
US, and ongoing uncertainty in the macro-economic climate because
of the COVID-19 pandemic.
In the financial year 2022, we expect two important dynamics to
affect our business. Eckoh's market leadership in US Secure
Payments, high levels of recurring revenue and strong order book is
expected to drive continued growth in this geography. This is
offset, in the short term particularly in the UK, by the impact of
the pandemic on new business activity, delayed incremental
recurring revenue and lower transactional volumes at a time when we
will be increasing investment in our Cloud-based Secure Payments
offering to capture the market opportunity and deliver sustained
high levels of future revenue growth.
In the financial year 2023, our expectation of material growth
reflects an anticipated return to normal UK trading activity;
returns being generated from the investment in Cloud-based Secure
Payments offering; and ongoing momentum in US Secure Payments
supported by long-term structural growth drivers, Cloud adoption
and Eckoh's strengthening partner offering. This revenue momentum
is expected to combine with the benefits of operational gearing to
drive material growth in profitability.
Financial Review
Eckoh's business model and market position, with high levels of
recurring revenue, a solid order book, enterprise clients and a
strong balance sheet, combined with prudent cost control, have
enabled Eckoh to manage the impact of the global pandemic
effectively and deliver a robust performance for the year.
Revenue for the year decreased by 8.1% to GBP30.5 million (FY20:
GBP33.2 million) and at constant exchange(3) rates by 6.7%.
Adjusted operating profit(1) was GBP4.7 million, level with last
year. Profit after tax for the year was GBP2.8 million (FY20:
GBP3.1 million).
Basic earnings per share for the year ended 31 March 2021 was
1.09 pence per share (FY20: 1.23 pence per share).
Divisional performance
Revenue in the UK, which represents 59% (FY20: 62%) of total
group revenues, decreased by 11.9% to GBP18.0 million (FY20:
GBP20.5m). The US represented 41% (FY20: 38%) of total group
revenues and revenues decreased in the period by 2.0% to GBP12.4
million (FY20: GBP12.7m), revenues in local currency grew by 1.8%
year on year. Further explanations of movements in revenue between
the US and UK divisions have been addressed in the Operational
Review above.
FY21 FY21 FY21 FY20 FY20 FY20
(UK) (US) Total (UK) (US) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- -------- -------- -------- -------- -------- --------
Revenue 18,037 12,449 30,486 20,468 12,710 33,178
Gross Profit 15,299 8,896 24,195 17,074 9,250 26,324
Gross margin 85% 71% 79% 83% 73% 79%
-------------- -------- -------- -------- -------- -------- --------
The Group's gross profit decreased to GBP24.2 million (FY20:
GBP26.3 million). Gross profit margin was 79% for the year level
with last year. The UK gross profit margin increased by 200 basis
points to 85% and is expected to remain at this level. In the US,
the full year margin decreased from 73% to 71%, a reduction of 200
basis points, due to the continued increase in Secure Payments, the
planned transition away from the third-party Support business and
the impact of one-off Coral licences. Excluding the Coral licences,
gross profit margin was 73% (FY20: 76%).
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 gradually start to increase from 71% to
approx. 75% over the next two years. This is driven by the
acceleration in growth of Secure Payments' activities for Cloud
solutions coupled with clients renewing their contracts without
additional significant hardware.
Administrative expenses
Total administrative expenses for the year were GBP20.6m (FY20:
GBP23.0m). Adjusted administrative expenses(4) for the year were
GBP19.4m (FY20: GBP21.6m). From March 2020 and then throughout the
year there has been prudent cost control, which included a freeze
on new hires where appropriate, postponing salary increases and
limiting discretionary spend.
For our Contact Centre agents on zero-hour contracts we utilised
the Government furlough scheme and received GBP0.3 million. These
staff members were severely impacted during the pandemic, as the
hours we were able to offer them were significantly reduced in line
with our clients who were also heavily impacted during this period.
By utilising the Government furlough scheme we were able to pay
these agents their historic average hours during the period.
In the second half of the year, we identified a number of key
hires that we needed to recruit to sustain our high service levels
and ensure we are well-placed for a recovery in demand. Having
frozen salaries throughout 2020, employees were awarded a salary
increase from 1(st) January 2021 of on average 2.5%, which will
last until the next formal salary review in April 2022. Included in
administrative expenses is a trading foreign currency loss of
GBP0.4 million (FY20: GBP0.3m gain).
Profitability measures
Adjusted operating profit was GBP4.7 million (FY20: GBP4.7
million), level year on year. Included in the year were Coral
licences of GBP0.3 million (FY20 GBP0.8 million) and a foreign
currency loss of GBP0.4 million (FY20: gain GBP0.3 million).
Adjusted EBITDA(2) for the year was GBP6.4 million, in line with
the prior year (FY20: GBP6.4 million).
Year Year
ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------------- ---------- ----------
Profit from operating activities 3,550 3,286
Amortisation of acquired intangible
assets 663 979
Expenses relating to share option schemes 536 468
Adjusted operating profit(1) 4,749 4,733
---------- ----------
Amortisation of intangible assets 398 314
Depreciation of owned assets 704 848
Depreciation of leased asset 505 491
------------------------------------------- ---------- ----------
Adjusted EBITDA(2) 6,356 6,386
------------------------------------------- ---------- ----------
1. Adjusted operating profit is the operating profit before
adjustments for expenses relating to share option schemes and
amortisation of acquired intangibles assets.
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 acquired
intangible assets and expenses relating to share option
schemes.
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
and amortisation of acquired intangible assets.
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 GBP0.4 million
(FY20: 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 2021, the interest payable
charge was GBP87k (FY20: GBP68k). The interest charge is made up of
bank interest of GBP54k (FY20: GBP50k) and interest on leased
assets of GBP33k (FY20: GBP18k).
Taxation
For the financial year ended 31 March 2021, there was a tax
charge of GBP717k (FY20: GBP166k charge). The effective tax rate in
the financial year ended 31 March 2021 was 20.4% (FY20: 5.0%). The
prior year tax rate was impacted as a result of a change in tax
rate in the UK and the subsequent impact on the deferred tax
balances.
Earnings per share
Basic earnings per share was 1.09 pence per share (FY20: 1.23
pence per share). Diluted earnings per share was 1.06 pence per
share (FY20: 1.20 pence per share).
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 (FY20: GBP14.4 million), included in this balance
are GBP11.3 million of contract liabilities relating to the Secure
Payments' product or hosted platform product, a decrease from
GBP1.8 million at the same time in the previous year. Contract
assets as at 31 March 2021 were GBP4.4 million (FY20: GBP5.6
million).
Cashflow and liquidity
Gross cash at 31 March 2021 was GBP12.7 million, this is offset
by a loan to Barclays bank of GBP1.0 million, giving net cash at 31
March 2021 of GBP11.7 million, an improvement of GBP0.1 million
from net cash of GBP11.6 million as at 31 March 2020. In the period
the Company has repaid GBP1.0 million of the loans outstanding to
Barclays Bank in accordance with the terms of the loan. There are
two further quarterly loan repayments to make and following these
repayments scheduled for April 2021 and July 2021 the business will
be debt free. During the year, there has been a net cash outflow
from working capital of GBP2.3 million (FY20: GBP1.1 million cash
inflow). In addition, a Special Dividend payment of GBP1.6 million
was made in October 2020.
Dividends
Post year end the Directors are recommending that a final
dividend for the year ended 31 March 2021 of 0.61 pence per
ordinary share be paid to the Shareholders whose names appear on
the register at the close of business on 24 September 2021, with
payment on 22 October 2021. The ex-dividend date will be 23
September 2021. 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 GBP1.6m.
Consolidated statement of total comprehensive income
for the year ended 31 March 2021
2021 2020
Notes GBP'000 GBP'000
---------------------------------------------- ------ --------- ---------
Continuing operations
Revenue 2 30,486 33,178
Cost of sales (6,291) (6,854)
---------------------------------------------- ------ --------- ---------
Gross profit 24,195 26,324
Administrative expenses (20,645) (23,038)
---------------------------------------------- ------ --------- ---------
Operating profit 3,550 3,286
---------------------------------------------- ------ --------- ---------
Adjusted operating profit 4,749 4,733
Amortisation of acquired intangible
assets (663) (979)
Expenses relating to share option schemes (536) (468)
---------------------------------------------- ------ --------- ---------
Profit from operating activities 3,550 3,286
---------------------------------------------- ------ --------- ---------
Finance charges (87) (68)
Finance income 48 84
Profit before taxation 3,511 3,302
Taxation (717) (166)
---------------------------------------------- ------ --------- ---------
Profit for the financial year 2,794 3,136
============================================== ====== ========= =========
Other comprehensive income / (expense)
Items that will be reclassified subsequently
to profit or loss:
Foreign currency translation differences
- foreign operations 134 (48)
---------------------------------------------- ------ --------- ---------
Other comprehensive income / (expense)
for the year, net of income tax 134 (48)
---------------------------------------------- ------ --------- ---------
Total comprehensive income for the
year attributable to the equity holders
of the parent company 2,928 3,088
============================================== ====== ========= =========
2021 2020
---------------------------------------------- ------ --------- ---------
Profit per share pence pence
---------------------------------------------- ------ --------- ---------
Basic earnings per 0.25p share 3 1.09 1.23
Diluted earnings per 0.25p share 3 1.06 1.20
Consolidated statement of financial position
as at 31 March 2021
2021 2020
Notes GBP'000 GBP'000
--------------------------------------------- ------- --------- ---------
Assets
Non-current assets
Intangible assets 6,527 7,313
Tangible assets 4,307 3,851
Right-of-use leased assets 1,310 277
Deferred tax assets 3,211 3,805
------------------------------------------------------- --------- ---------
15,355 15,246
----------------------------------------------------- --------- ---------
Current assets
Inventories 174 312
Trade and other receivables 13,277 13,494
Cash and cash equivalents 12,706 13,541
------------------------------------------------------- --------- ---------
26,157 27,347
----------------------------------------------------- --------- ---------
Total assets 41,512 42,593
Liabilities
Current liabilities
Trade and other payables (18,482) (21,078)
Other interest-bearing loans and borrowings (975) (975)
Lease liabilities (517) (233)
------------------------------------------------------- --------- ---------
(19,974) (22,286)
----------------------------------------------------- --------- ---------
Non-current liabilities
Other interest-bearing loans and borrowings - (975)
Lease liabilities (825) (33)
Deferred tax liabilities (296) (290)
------------------------------------------------------- --------- ---------
(1,121) (1,298)
----------------------------------------------------- --------- ---------
Net assets 20,417 19,009
------------------------------------------------------- --------- ---------
Shareholders' equity
Called up share capital 638 638
Share premium account 2,663 2,663
Capital redemption reserve 198 198
Merger reserve 2,697 2,697
Currency reserve 982 848
Retained earnings 13,239 11,965
------------------------------------------------------- --------- ---------
Total shareholders' equity 20,417 19,009
------------------------------------------------------- --------- ---------
Consolidated statement of changes in equity
for the year ended 31 March 2021
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 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 period - - - - 134 - 134
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Total comprehensive income
for the year - - - - 134 2,794 2,928
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Dividends paid and received
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
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Total contributions by and
distributions to owners - - - - - (1,520) (1,520)
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Balance at 31 March 2021 638 2,663 198 2,697 982 13,239 20,417
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
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 2019 635 2,659 198 2,697 896 10,099 17,184
Total comprehensive income
for the year
Profit for the financial year - - - - - 3,136 3,136
Other comprehensive expense
for the year - - - - (48) - (48)
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Total comprehensive income
for the year - - - - (48) 3,136 3,088
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Dividends paid in the year - - - - - (1,558) (1,558)
Shares transacted through
Employee Benefit Trust - - - - - (187) (187)
Shares purchased for share
ownership plan - - - - - (146) (146)
Shares issued under the share
option schemes 3 4 - - - - 7
Share based payment charge - - - - - 407 407
Deferred tax on share options - - - - - 214 214
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Total contributions by and
distributions to owners 3 4 - - - (1,270) (1,263)
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Balance at 31 March 2020 638 2,663 198 2,697 848 11,965 19,009
------------------------------ ---------- --------- ------------ --------- --------- ---------- ---------------
Consolidated statement of cash flows
for the year ended 31 March 2021
2021 2020
Notes GBP'000 GBP'000
--------------------------------------- ------ -------- --------
Cash flows from operating activities
Cash generated from operations 4 4,385 7,240
Taxation (10) (88)
Interest paid (54) (50)
Interest paid on lease liability (33) (18)
--------------------------------------- ------ -------- --------
Net cash generated from operating
activities 4,288 7,084
--------------------------------------- ------ -------- --------
Cash flows from investing activities
Purchase of property, plant and
equipment (1,175) (571)
Purchase of intangible assets (573) (951)
Interest received 48 84
Net cash utilised in investing
activities (1,700) (1,438)
--------------------------------------- ------ -------- --------
Cash flows from financing activities
Dividends paid (1,558) (1,558)
Repayment of borrowings (975) (1,300)
Principal elements of lease payments (461) (503)
Shares purchased for share ownership
plan (241) (187)
Issue of shares - 7
Shares acquired/sold by Employee
Benefit Trust (138) (146)
--------------------------------------- ------ -------- --------
Net cash generated in financing
activities (3,373) (3,687)
--------------------------------------- ------ -------- --------
Increase in cash and cash equivalents (785) 1,959
Cash and cash equivalents at the
start of the period 13,541 11,582
Effect of exchange rate fluctuations
on cash held (50) -
--------------------------------------- ------ -------- --------
Cash and cash equivalents at the
end of the period 12,706 13,541
--------------------------------------- ------ -------- --------
1. Basis of preparation
The preliminary results of Eckoh plc have been prepared in
accordance with the recognition and measurement principles of
International accounting standards in conformity with the
requirements of the Companies Act 2006 and effective at 31 March
2021. 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 2020 have been
delivered to the Registrar of Companies but those for the year
ended 31 March 2021 have not yet been delivered.
The auditors have reported on the accounts for the year ended 31
March 2021; 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 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.
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. The UK operation continued to operate in an
uncertain business climate and the ongoing lockdown inevitably
resulted in further delays to projects and purchasing decisions.
Some of our largest clients in the travel, retail and leisure
sectors have had their transactional activity severely reduced
during the financial year ended 31 March 2021, which continued to
impact our UK revenue, but this was not reflected proportionately
in revenue. This will continue into the current financial year
until such time as restrictions are lifted and volumes can return
to pre-pandemic levels. We are continually monitoring our clients'
ability to pay invoices and for the year ended 31 March 2021 we
have not had to provide for any debts.
A key business indicator is our total orders and new business
orders. In the US, one positive consequence of the pandemic has
been the rapid increase in the number of Secure Payments contracts
won and delivered through Eckoh's Cloud platforms, as large
enterprises have accelerated their move into the Cloud. 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, 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
The segmentation is based on analysing Eckoh UK (including Eckoh
Omni) and Eckoh US.
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.
Total Total
Current period segment analysis Eckoh UK Eckoh US 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Segment Revenue 18,037 12,449 30,486 33,178
--------------------------------- ----------- ----------- --------- ---------
Gross profit 15,299 8,896 24,195 26,324
Administrative expenses (13,022) (7,623) (20,645) (23,038)
--------------------------------- ----------- ----------- --------- ---------
Operating profit 2,277 1,273 3,550 3,286
--------------------------------- ----------- ----------- --------- ---------
Adjusted operating profit 3,069 1,680 4,749 4,733
Other expenses(1) (792) (407) (1,199) (1,447)
--------------------------------- ----------- ----------- --------- ---------
Operating profit 2,277 1,273 3,550 3,286
--------------------------------- ----------- ----------- --------- ---------
Profit before taxation 2,285 1,226 3,511 3,302
--------------------------------- ----------- ----------- --------- ---------
Segment assets
--------------------------------- ----------- ----------- --------- ---------
Trade receivables 2,648 1,903 4,551 4,464
Deferred tax asset 3,335 422 3,757 3,805
Segment liabilities
--------------------------------- ----------- ----------- --------- ---------
Trade and other payables 3,581 1,562 5,143 4,816
Capital expenditure
--------------------------------- ----------- ----------- --------- ---------
Purchase of tangible assets 698 368 1,066 569
Purchase of leases 1,138 408 1,546 769
Purchase of intangible assets 573 - 573 951
Depreciation and amortisation
--------------------------------- ----------- ----------- --------- ---------
Depreciation of property, plant
& equipment 542 162 704 848
Depreciation of leased assets 408 97 505 491
Amortisation 665 396 1,061 1,293
1. Other expenses include expenses relating to share option
schemes and amortisation of acquired intangible assets.
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. In 2019/20 there was no one customer that
individually accounted for more than 10% of the total revenue of
the continuing operations of the Group.
The key segments reviewed at Board level are the UK (including
Eckoh Omni) and US operations.
Eckoh UK Eckoh US 2021 Total 2020 Total
Revenue by geography GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------------- --------------- ----------------- -----------------
UK 17,804 - 17,804 20,275
United States of America - 12,321 12,321 12,504
Rest of the World 233 128 361 399
-------------------------- --------------- --------------- ----------------- -----------------
Total Revenue 18,037 12,449 30,486 33,178
-------------------------- --------------- --------------- ----------------- -----------------
Eckoh UK Eckoh US Total 2021 Total 2020
Timing of revenue recognition GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- ----------- -----------
Services transferred
at a point in time 15,462 7,778 23,240 27,215
Services transferred
over time 2,575 4,671 7,246 5,963
------------------------------- --------- --------- ----------- -----------
18,037 12,449 30,486 33,178
------------------------------- --------- --------- ----------- -----------
The following table provides information about receivables,
contract assets and contract liabilities from contracts with
customers.
2021 2020
GBP'000 GBP'000
----------------------------------------- --------- -----------
Receivables, which are included in,
'Trade and other receivables 4,551 4,464
Contract assets which are included
in 'Trade and other Receivables' 4,359 5,587
Contract liabilities which are included
in 'Trade and other liabilities' (11,347) (13,194)
----------------------------------------- --------- -----------
(2,437) (3,143)
----------------------------------------- --------- -----------
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 2021
Contract Contract
assets liabilities
GBP'000 GBP'000
-------------------------------------------- ---------- -------------
Revenue recognised that was included
in the contract liability balance at
the beginning of the period - 7,092
Current year billings recognised in
contract liabilities - 5,971
Cost of sales recognised that was included
in the contract assets balance at the
beginning of the period 2,846 -
Costs deferred in current year and
unbilled revenue included in contract
assets 2,014 -
-------------------------------------------- ---------- -------------
31 March 31 March
Contract costs 2021 2020
GBP'000 GBP'000
------------------------------ --------------- ---------------
Deferred implementation fees 1,698 2,209
Deferred hardware costs 316 1,167
------------------------------ --------------- ---------------
2,014 3,376
------------------------------ --------------- ---------------
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 GBP11.3m (FY20:
GBP13.2m. We expect to recognise approximately GBP5.4m (FY20:
GBP6.3m) in the next 12 months, GBP5.9m (FY20: GBP6.7m) 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 Eckoh Total
UK US 2020
Prior period segment analysis GBP'000 GBP'000 GBP'000
Segment revenue 20,468 12,710 33,178
------------------------------- --------------- --------------- ---------------
Gross profit 17,074 9,250 26,324
Administrative expenses (13,962) (9,076) (23,038)
------------------------------- --------------- --------------- ---------------
Operating profit 3,112 174 3,286
------------------------------- --------------- --------------- ---------------
Adjusted operating profit 3,662 1,071 4,733
Other expenses(1) (550) (897) (1,447)
------------------------------- --------------- --------------- ---------------
Operating profit 3,112 174 3,286
------------------------------- --------------- --------------- ---------------
Profit before taxation 3,139 163 3,302
------------------------------- --------------- --------------- ---------------
Segment assets
------------------------------- --------------- --------------- ---------------
Trade receivables 2,900 1,564 4,464
Deferred tax asset 3,335 470 3,805
Segment liabilities
------------------------------- --------------- --------------- ---------------
Trade and other payables 2,604 2,212 4,816
Capital expenditure
------------------------------- --------------- --------------- ---------------
Purchase of tangible assets 502 67 569
Purchase of intangible assets 951 - 951
Depreciation and amortisation
------------------------------- --------------- --------------- ---------------
Depreciation of property,
plant & equipment 660 188 848
Depreciation of leased assets 394 97 491
Amortisation 624 669 1,293
1. Other expenses include expenses relating to share option
schemes and amortisation of acquired intangible assets.
Eckoh UK Eckoh US 2020
GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- --------
Revenue by geography
UK 20,275 - 20,275
United States of America - 12,504 12,504
Rest of the World 193 206 399
-------------------------- --------- --------- --------
Total Revenue 20,468 12,710 33,178
-------------------------- --------- --------- --------
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.
2021 2020
GBP'000 GBP'000
---------------------------------------- -------- --------
Earnings for the purposes of basic and
diluted earnings per share 2,794 3,136
---------------------------------------- -------- --------
2021 2020
Denominator '000 '000
---------------------------------------- -------- --------
Weighted average number of shares in
issue in the period 255,351 255,085
Shares held by employee ownership plan (1,862) (1,630)
Shares held in Employee Benefit Trust - -
---------------------------------------- -------- --------
Number of shares used in calculating
basic earnings per share 253,489 253,455
Dilutive effect of share options 9,426 8,782
---------------------------------------- -------- --------
Number of shares used in calculating
diluted earnings per share 262,915 262,237
---------------------------------------- -------- --------
4. Cashflow from operating activities
2021 2020
GBP'000 GBP'000
-------------------------------------------- -------- --------
Profit after taxation 2,794 3,136
Interest income (48) (84)
Interest payable 87 68
Taxation 717 166
Depreciation of property, plant and
equipment 704 848
Depreciation of leased assets 505 491
Amortisation of intangible assets 1,061 1,293
Exchange differences 522 (264)
Share based payments 303 468
-------------------------------------------- -------- --------
Operating profit before changes in
working capital and provisions 6,645 6,122
Decrease in inventories 138 146
(Increase) in trade and other receivables 217 (285)
Increase in trade and other payables (2,615) 1,258
Net cash generated in operating activities 4,385 7,240
-------------------------------------------- -------- --------
5. 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
FR DKQBDDBKBDAD
(END) Dow Jones Newswires
June 15, 2021 02:00 ET (06:00 GMT)
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