TIDMECK
RNS Number : 2973U
Eckoh PLC
02 December 2021
2nd December 2021
Eckoh plc
Unaudited interim results for the six months ended 30 September
2021
Results in line with Board expectations
Growing global Secure Payments opportunity and UK recovery
underpin expectations for FY22 and FY23
Eckoh plc (AIM: ECK) ("Eckoh" or the "Group"), the global
provider of secure payment products and customer contact solutions,
is pleased to announce unaudited results for the six months to 30
September 2021.
GBPm (excluding exited third-party
Support) FY22 H1 FY21 H1 Change
-------------------------------------
Revenue 14.4 13.9 +3%
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Adjusted operating profit(1) 2.5 2.2 +18%
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Recurring Revenue (2) 10.5 9.8 +7%
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Total contracted business(3) 11.2 12.7 (12%)
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US Secure Payments ARR ($m)(4) 8.9 6.9 +29%
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GBPm (IFRS unless otherwise stated)
------------------------------------- -------- -------- -------
Revenue 14.7 15.7 (6%)
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Gross profit 11.9 12.8 (8%)
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Adjusted operating profit(1) 2.8 3.4 (19%)
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Profit after taxation 1.9 2.0 (6%)
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Diluted earnings pence per share 0.73 77p (5%)
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Net cash 12.7 12.9 (0.2m)
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Strategic highlights
-- Results in line with Board expectations
-- Resilient UK performance with September exit run-rate comparable with pre-pandemic volumes
-- Continued good progress in US Secure Payments which now represents 89% of US revenues
-- Future significant cost savings achieved (more than GBP1m per
annum from FY23) from the move to a global Network Operations
Centre (NOC), the planned and completed exit from third-party
Support and natural staff attrition
-- Cloud deals continue to drive most Secure Payments sales
activity and we won our largest global Cloud contract to date post
period, with a minimum value of $1.5m
-- CallGuard Express, the new SaaS product designed to be resold
through channel partners and typically targeting smaller customers
launched post period, expanding the Group's target market
-- Eckoh's patent portfolio strengthened with two further
grants, meaning a portfolio of 17 international patents now backs
Eckoh's strong IP and product proposition
Financial highlights (excluding exited third-party Support)
-- Profit improved by 18% to GBP2.5m (H1 FY21: GBP2.2m)
-- Revenue increased year on year by 3% to GBP14.4m (H1 FY21: GBP13.9m)
-- Recurring revenue(2) increased by 7% to GBP10.5m, 73% of
total revenues (H1 FY21: GBP9.8m; 71%), reflecting a transition
towards higher growth US Secure Payments
-- US Secure Payments progress continues:
o New KPI of annualised recurring revenue(4) (ARR) introduced,
increasing by 29% to $8.9m in the period
o Revenue increased to $6.8m (H1 FY21: $6.5m); including two
successful renewals and our largest contract, where hardware and
implementation fees do not reoccur
o Recurring revenue grew 26%, with new contracted business of
$3.3m (H1 FY21: $5.9m)
-- UK revenue moved back to growth, increasing 6% to GBP9.0m (H1 FY21: GBP8.5m)
-- Total contracted business(3) was GBP11.2m (H1 FY21 GBP12.7m),
reflecting fewer significant UK renewals in the period and ongoing
challenging conditions for new business due to the pandemic
-- Robust balance sheet with net cash of GBP12.7m (H1 FY21: GBP12.9m)
Outlook
-- With a highly relevant product portfolio, resilient business
model, high recurring revenues and a robust balance sheet, Eckoh is
well placed to continue strong progress in the coming years
-- The evidenced recovery of the UK business in the first half,
allied to the continuing growth of the US Secure Payments activity
and increasing global opportunity, coupled with the GBP1m of
annualised cost savings, gives the Board significant confidence for
the current financial year with double digit revenue and profit
growth expected to return in FY23, subject to no new COVID
developments
1. Adjusted operating profit is the profit before tax adjusted
for finance income, finance expense expenses relating to share
option schemes, acquired intangibles amortisation and restructuring
costs.
2. 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.
3. Total contracted business includes new business from new
clients, new business from existing clients as well as renewals
with existing clients.
4. Annualised Recurring Revenue of all signed contracts, whether
live or still to be deployed.
Nik Philpot, Chief Executive Officer, said: "The last 18 months
have highlighted the resilience of our business and we have used
this period as an opportunity to make structural and strategic
changes to our operations that will give us an even stronger
platform for future, profitable growth. We have successfully
concluded the planned exit from our third-party Support activity,
meaningfully reduced direct costs by further optimising our
operations, and continued to progress in enhancing our Secure
Payments offering and extending the reach of our SaaS Cloud
proposition.
With clear signs that our UK business is now very much in
recovery, set alongside the exciting US Secure Payments market
opportunity that is now expanding via the Cloud into a truly global
proposition, the future looks bright for Eckoh to return to
stronger growth next year and beyond, notwithstanding any further
COVID developments."
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 1000
Ed Bridges, Jamie Ricketts, Tom Blundell
eckoh@fticonsulting.com
Singer Capital Markets (Nomad & Joint
Broker)
Shaun Dobson, Tom Salvesen, Alex Bond Tel: +44(0) 20 7496
3000
www.singercm.com
Canaccord Genuity Limited (Joint Broker)
Simon Bridges, Andrew Potts 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 and Financial Highlights
Eckoh performed in line with Board expectations, in the first
half of the year, driven by the resilience of our business model, a
recovery underway in the underlying UK business and continued
momentum for the switch to Cloud in our US Secure Payments business
and into other territories, supporting confidence for the year as a
whole.
We have successfully managed our planned transition away from
the third-party Support business and this is now complete, with
revenue in the UK and US from third-party Support only GBP0.3
million in the first half (H1 FY21: GBP1.8 million). Our focus
remains, as previously stated, in becoming the leading provider of
Customer Engagement security solutions, which will provide greater
visibility of our revenues going forward and high recurring
revenues.
The underlying performance of the ongoing activities of the
Group (excluding the exited third-party Support) showed clear
progress, despite the lingering challenges from the impact of the
pandemic. Revenue on this basis improved 3% to GBP14.4 million (H1
FY21: GBP13.9 million) with adjusted profit increasing 18% to
GBP2.5 million from GBP2.2 million in the previous half year.
Recurring revenue increased by 7% to GBP10.5 million representing
73% of total revenues (H1 FY21: GBP9.8 million; 71%), reflecting a
transition towards the higher growth US Secure Payments. This was
also reflected in the new KPI we have introduced of Annualised
Recurring Revenue for Secure Payments in the US, which increased
29% to $8.9 million.
Gross profit excluding the exited third-party Support was
GBP11.6 million, an increase of 2.8% on the same period in the
prior year. (H1 FY21: GBP11.2 million). The US gross profit,
excluding the third-party Support business, was level at GBP4.0
million and 74% in both the first halves of FY21 and FY20. The UK
gross profit, excluding the third-party Support was GBP7.6 million,
increasing by 5.0% (H1 FY21: GBP7.2 million), gross profit margin
decreased marginally by 1% to 84%.
Total contracted business for the Group, excluding the exited
third-party Support, was GBP11.2 million in the period compared to
GBP12.7 million in the prior year. This decline was driven by
ongoing challenges in moving larger new business contracts forward,
particularly in the US, and fewer large renewals naturally arising
in the UK. New business in the first half was GBP4.9 million (H1
FY21: GBP7.9 million).
We have introduced a new metric in these results of Annualised
Recurring Revenue for US Secure Payments, and this was $8.9 million
at the end of the period, an increase of 29% on the previous year.
Payment contracts delivered through the Cloud are all priced on a
SaaS basis and so we would expect to be able to broaden the scope
of this KPI to include Global contracts in due course. UK
contracts, however, have evolved over the last decade and therefore
have a variety of pricing approaches and the fees often cover a
bundled solution, not just payments. We will therefore need to
evaluate how practical it is to include UK contracts in this
metric.
Cash remains strong with a net cash position of GBP12.7 million,
a decrease of GBP0.2 million on the previous year and level with 31
March 2021. The business is currently debt free, with the final
repayments of the loan, taken out in 2015 in part to purchase the
Group's UK head office being made in July 2021.
A Clear Growth Strategy
Our strategic objectives reflect our primary goal to become the
global leader in our areas of expertise, and in particular,
Customer Engagement data and payment security.
Our strategic objectives include:
-- Being the market leader for Customer Engagement data and payment security
-- Capitalise on the fast-growing global market for technology
solutions that help protect customer data
-- Maximise client value and retention through cross-selling to
generate higher levels of recurring income
-- Make Cloud our primary platform and use Cloud technologies to
develop and enhance our proprietary solutions
-- Evaluate acquisition opportunities that can support our
growth strategy in Customer Engagement security
A significant and largely untapped market opportunity
Our target market both in the UK and US for our Secure Payments
proposition has up to now been any sizeable enterprise or
organisation that either transacts or engages with its customers at
scale and at volume. This activity will usually be supported either
by an in-house or outsourced contact centre provider. The greater
the volume of payment transactions or customer engagement activity
that the organisation has, the more attractive they are to Eckoh,
and the larger the contact centre operation supporting the
organisation is likely to be.
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 have historically
targeted organisations that utilise contact centres with more than
50 agent seats, and this represents 2,510 in the UK and 12,050 in
the US.
The recent development of CallGuard Express, which is
specifically intended to be a solution that services smaller
clients and has almost no additional operational overhead on Eckoh,
will serve to broaden our target market beyond the larger
enterprise. There are a further 27,300 Contact Centres in the US
and 3,525 in the UK that have between 10-50 seats, extending the
market very considerably.
The procurement of security and payment solutions to be deployed
across multiple territories is certainly increasing, and these
solutions would all be delivered through our Cloud platforms that
we continue to invest in and extend. This trend will broaden our
market further and inevitably lead to us having the UK, US and ROW
as geographic revenue streams.
With regulation tightening and the financial impact of data
breaches and fraud growing, organisations are increasingly looking
for ways to move beyond the requirement of merely being compliant
to secure themselves more comprehensively, leading to broadening
information security budgets and remits. Moreover, the pandemic has
led to a much greater reliance on more contact centre agents
working remotely, that is likely to only 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.
Operational Review
US Division (38% of group revenues)
In the US, excluding third-party Support, revenue was $7.4
million an increase of 7.8% (H1 FY21 $6.9 million). Total
contracted business was $5.5 million a decrease of 13% (H1 FY21
$6.3 million) and new contracted business was $3.3 million (H1
FY21: $5.9 million). In the period, there were two secure payment
contracts that successfully renewed for the first time, at which
point the original hardware and implementation fees are fully
recognised.
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 impact of the Support
business that we have strategically exited, as well as the Coral
business.
-- Secure Payments revenue of $6.8 million, an increase of 5.7%
(H1 FY21: 6.5 million), and this now represents 89% of US revenue
(H1 FY21: 81%). In the second half we expect revenue to be at a
slightly higher level to the first half as new business goes live
with higher proportions of recurring revenue as they are typically
Cloud deals. The revenue increase will be somewhat tempered by the
sizeable hardware and implementation fees that have been fully
recognised following the renewal in July of our largest
contract.
-- Coral had revenues of $0.6 million in the period, compared to
$0.4 million in H1 FY21. In the first half, Coral accounted for 8%
of US revenue (H1 FY20: 6%). 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 $0.3 million, a
decrease of 75% (H1 FY21: $1.1 million) and now represents only 3%
of the US revenue. The managed transition away from Support is now
complete and after this financial year, we will not separately
disclose it. A proportion of the restructuring costs incurred in
the US in the first half relate to this area of the business and
the last stage of the restructuring has taken place in October as
we merge the UK and US Customer Support desks to a global Network
Operations Centre (NOC).
Secure Payments, where we deliver a patented solution that
enables enterprises to take card payments securely within their
Contact Centre operations, continued to grow in the first half,
albeit more slowly than the second half last year. It is a trend we
have seen over the last few years, where the first months of the
year are quieter, with more new business being contracted in the
later months.
Since 2015, when we launched our Secure Payments product in the
US, the total of new contracted business has grown significantly,
as shown below.
Financial FY16 FY17 FY18 FY19 FY20 FY21 H1 FY22
Year
New Contracted
Business $1.6m $8.3m $9.3m $13.7m $10.7m $11.6m $3.2m
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The Company remains focused on large enterprise contracts,
however, during the first half of the year we continued to see the
sales processes for the largest companies slow to commence or
resume. The impact of the pandemic diminished in the first half of
the year, but its effect on procurement processes and also internal
priority setting remains significant. Consequently, there continues
to be greater emphasis on contracts with medium-sized
organisations, which generally have a lower average contract value
than the $750k previously indicated.
We continue to see, as expected, the general acceleration
towards Cloud deployments and all the Secure Payment deals signed
in the first half have been of this type. However, we still believe
the largest enterprises are likely to take many years to achieve
that goal. Although we have started to see some of these large
organisations re-commence their sales processes, it still remains a
lengthy process and none of these have concluded in the first half.
Contracts secured in the period came from a number of sectors but
notably the increasingly important sector for us in Healthcare.
The launch of CallGuard Express since period end, which is
deliberately designed for smaller customers, will see smaller
contracts being targeted and won for the first time. This product
is extremely quick to deploy, with very limited operational
overhead associated with it, so the conversion of a sale into
revenue will be much faster than on our larger contacts, and margin
higher. We expect most of these deals to be won through partners
and more broadly our sales channels continue to strengthen, so the
share of pipeline and revenue from partners is expected to increase
over time. Partner sales opportunities now represent 30% of our
total pipeline.
The average length of new contracts for Secure Payments is three
years which is comparable to the UK, however, it is more typical in
the US for renewals to be annual, often on an auto-renew. In the
first half of the year there were two contracts that successfully
renewed, one of which was our largest contract signed to date ($7.4
million over 2 years). There was a significant level of one-off
fees in this contract, which have now been fully recognised at the
end of July. With the ongoing revenue stream from this contract
being much lower than previously (although entirely recurring),
this will have the short-term effect of dampening the growth
profile of the Secure Payments revenue stream. In the second half
of the year there is one contract due for renewal, which is on an
annual auto-renew as described above, this is now in its fifth year
showing a similar lifecycle value to our UK clients.
External factors, such as the impending change to version 4 of
the Payment Card Industry Data Security Standard (PCI DSS), the
implementation of new data laws such as US Consumer Privacy Acts
and significant fines levied on US organisations through the GDPR
legislation, are undoubtedly helping raise awareness of the risks
of not protecting sensitive data properly. This will assist us in
continuing to build our pipeline which is substantial and growing.
Our focus on these larger contracts means that in future periods
the timing of contract wins continues to be hard to predict given
the typically longer sales cycle.
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. As noted
previously, the timing of Coral orders remains hard to forecast and
they will be lumpy in nature.
In Support, as we stated last year, we are transitioning away
from this activity to focus on the high growth Secure Payments
opportunity. As the final phases of the transition away from the
third-party Support have been completed in the first half of the
financial year, we have also reviewed the operational structure for
the on-going Secure Payment clients and as a result have incurred
restructuring costs. The last stage of this has happened in October
after the half year end and we have combined our UK and US Network
Operations Centres into a single a global NOC.
Recurring revenues in the US were 63% in the period compared to
56% for the same period last year. Secure Payments recurring
revenue increased year on year by 26%. We would expect recurring
revenue to continue to increase over time as we successfully renew
the large enterprise clients where their initial hardware and
implementation fees have been fully recognised, 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. The US operation's
revenues are based on fixed contractual fees which has given us
continued resilience and visibility in the current situation.
UK Division (62% of group revenues)
The UK division has continued to deliver a resilient performance
in the first half, despite the challenging environment that
continued through the first quarter. We have seen a notably
stronger end to the second quarter and at the end of September our
existing like for like clients had a comparable run-rate to
pre-pandemic volumes. This provides us with confidence for the
second half performance, assuming there are no further lockdowns
instigated.
Excluding the discontinued third-party Support activity, revenue
in the period was GBP9.0 million (H1 FY21 GBP8.5 million) an
increase of 6%, showing clear signs of a recovery. Gross profit
increased 5% to GBP7.6 million (H1 FY21: GBP7.2 million) and total
contracted business was GBP7.3 million a 5% decrease on the prior
year (H1 FY21: GBP7.7 million). New contracted business was GBP2.5
million (H1 FY21: GBP3.2 million).
Gross margins in the UK decreased in the period by 1% to 84% (H1
FY21: 85%), and recurring revenue has decreased to 80% from 85% in
H1 FY21 due to the planned exit from third-party Support.
Whilst the UK business is recovering strongly, it did continue
to be impacted by the on-going pandemic, especially in the first
quarter. UK clients are contracted through a range of commercial
models that have evolved over time, unlike the newer US business
which operates entirely on fixed fee contracts. 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 most
longstanding clients, some of which are Eckoh's largest. During the
first half as the UK has gradually come out of lockdown, our
clients' transactional volumes have continued to improve, and the
September exit run-rate was at the same level as pre-pandemic.
Notable examples of this recovery in activity are Premier Inn, who
have been able to open their full hotel network, and Transport for
London who have not only extended the Congestion Charge zone but
seen overall volumes increase as more commuters have returned to
work.
Looking at the segmentation of UK revenue, 27% came from Secure
Payment services (H1 FY21: 28%), 34% from Customer Contact
Solutions (H1 FY21: 34%) and the remaining 39% from clients where
we provide a combination of both solutions (H1 FY21: 38%). The
small shift from Secure Payment services to clients with combined
solutions is principally due to the improving volumes from our
larger clients who take both the Secure Payments solution and the
Customer Engagement solution.
Our model of cross-selling to existing clients remains a key
part of the Eckoh strategy, not just to generate incremental
revenue but also to continue the trend of strong client retention
and to further increase the lifetime value of the Group's
customers. GBP2.2 million of the new business secured in the first
half (H1 FY21: GBP2.3 million) was contracted with existing
customers for delivery of new solutions or modifications. Our
strong track record with existing clients has also continued to be
demonstrated through the extremely high proportion of clients that
are successfully renewed. As an illustration, during the period, we
successfully renewed Premier Inn and Rail Delivery Group - who have
both been with Eckoh for well over a decade - on multi-year
renewals.
In the first half last year, we completed 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 contract
value of GBP4 million. As part of this contract, from October 2021
the Congestion Charge service was updated for the Ultra Low
Emission Zone (ULEZ), which was extended significantly, and as
anticipated this has brought a large uplift in transactional
volumes. There was only one significant client that was not renewed
in the period, who migrated to a Cloud solution because of the
pandemic, this was the first such non-renewal for many years.
New business wins, consistent renewals of existing clients and
the improved transactional volume from our long-standing clients
give us high revenue visibility and our UK clients are underpinned
by contractual fees or minimum transaction levels. We expect the
improvement in transactional revenues seen in the second quarter to
continue into the second half, subject to no further lockdowns
being implemented.
Cloud Update
Post period, Eckoh has won a significant contract with a leading
global food and drink company to provide Secure Payments services
from its Cloud platforms to the new client's global contact centre
operations.
The three-year contract was won following a successful
competitive tender process and is worth a minimum of $1.5m, but
there is an expectation that the deal will exceed this total value.
The Client's North American operation will deploy the solution
first, before rolling it out to up to 28 other countries over the
contract term. This contract will help support the forecast growth
in the next financial year and beyond.
This contract is Eckoh's largest-ever win for a Cloud solution
delivered into multiple territories. We expect to see more global
procurement contracts like this for Cloud delivery, as major
enterprises seek to uphold rigorous security standards consistently
across all their regions. Consequently, in FY23 we are likely to
implement a Rest of the World (ROW) revenue stream to cover the
activity being generated from outside the UK and US.
As previously highlighted, Eckoh continues to invest in its
global Cloud platforms to capitalise on the growing market
opportunity identified. This contract win underlines Eckoh's
strategic vision and technical expertise in developing a
market-leading solution to leverage that additional capability. The
solution is expected to go live early in the next financial year
and, in line with other Cloud contracts, will deliver higher levels
of recurring revenue and margin.
Product Update
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
are seeing the number of companies who are looking to migrate to
Cloud-based solutions accelerating. A key initiative in
development, to assist new and existing clients in responding to
these changes, is delivering 'stack solutions' incorporating Amazon
Connect, and Eckoh services (Omnichannel, Secure Payments and
advanced voice self-service). This will take the flexibility of
Amazon Connect but combine it with the depth and sophistication of
Eckoh's services, to provide an overall solution that is more
suited to the demands of larger enterprises and can be charged in a
more cost-effective manner.
Alongside this we are currently migrating our market-leading
omnichannel solution, including our web chat product that has the
largest single deployment of web chat in the UK, to a new Cloud
platform in Amazon Web Services. This will enable us to deploy
these services more easily and quickly across the globe and enable
cross-selling of the services to our Secure Payment customers
outside of the UK.
In October, we soft launched our new product CallGuard Express,
which is designed to target those customers that wish to protect
their operations and are happy to take a 'vanilla' version of
CallGuard with no bespoke alteration of the solution. These
customers are typically smaller than those that would have been
targeted by Eckoh previously, so to ensure that delivery of the
solution is operationally efficient we have designed the product to
be able to be deployed with almost no overhead and in a matter of
hours. The SaaS nature of the product lends itself to being sold
through channel partners, and it is anticipated that this will
largely be the sales model in both the UK and US.
Patent Update
During the period Eckoh's patent portfolio was further
strengthened with two more grants, meaning a portfolio of 17
international patents now backs Eckoh's strong IP and product
proposition, with the earliest expiry date in 2031.
The new patents granted are for Reverse Contact Centre
Authentication, which is now patented in the UK, Canada, and the
USA . This new technology dramatically improves security and
convenience for end customers when receiving unsolicited calls from
organisations, helping to prevent them from becoming fraud victims.
When a customer receives such a call, they cannot know whether the
call is legitimate or a scam. With Eckoh's newly patented solution,
the caller can verify the representative's identity instantly by
clicking on a link, either on the organisation's publicly available
website or their app. If the customer is already logged in or
chooses to do so, the page will immediately confirm that an agent
is on a call with them based on their registered contact details.
This confirmation also validates the customer to the agent and
provides a secure channel to share information.
These patents will complement the existing IP in these same
regions for inbound Contact Centre Authentication . This solution
comprises sending the customer a message to their mobile device
when they phone a contact centre. To save time and increase
security, the caller can confirm their identity before connecting
to an agent through an existing mainstream authentication method,
such as PayPal, Facebook, or Amazon. Once connected to an available
agent, the caller's relevant and verified information can be
immediately seen by the agent, usually without further security
checks, and they can greet the customer appropriately. Billing and
mailing addresses retained by these methods can prepopulate contact
centre CRM systems, saving the agent time and increasing data
accuracy. Because the caller has already authenticated themselves
the contact centre agent (and the organisation they represent) can
be sure that they are talking with the actual person the caller
claims to be.
Patents play a critical role in Eckoh's data and payment
security portfolio. The secure proxy patents underpin Eckoh's
unique approach to customer engagement security used in CallGuard,
our market-leading secure payment solution. CallGuard automatically
replaces payment data or other sensitive data such as Social
Security Numbers with 'placeholders' or 'tokens' before entering an
organisation's contact centre or IT environment.
The solution neutralises sensitive data and deploys over
existing IT infrastructure and payment systems without disruption.
Eckoh's ChatGuard product uses this same method to secure payments
within any Chat software conversation; and can also be applied to
Chatbot or messaging apps such as WhatsApp for secure compliant
payments.
Current Trading and Outlook
Eckoh performed in line with Board expectations for the first
half and is on track to deliver revenue and profit for the
financial year 2022 that is comparable to the financial year 2021,
with double digit year-on-year revenue and profit growth expected
in the financial year 2023. These expectations are subject to no
further lockdowns in the UK and US, and ongoing uncertainty in the
macro-economic climate because of the COVID-19 pandemic.
With a highly relevant product portfolio, resilient business
model and high levels of recurring revenues, Eckoh is well placed
to continue strong progress in the coming years. The future
significant cost savings that have been achieved (more than GBP1m
per annum), alongside long-term structural growth drivers, Cloud
adoption and Eckoh's strengthening partner offering support FY23
growth expectations.
The anticipated recovery of the UK business in the first half,
allied to the continuing growth of the US Secure Payments activity
and increasing global opportunity, supported by a robust balance
sheet gives the Board significant confidence for the future
performance of the Group.
Financial Review
Last year the results of the UK and US operations included the
planned exited third-party Support business. During the first half
of this year the managed transition exit from the third-party
Support business in both the UK and US business was completed. In
the below financial review performance has been covered both at a
total basis and excluding the third-party Support business in both
this year and last year to assist the understanding of the
go-forward Customer Engagement Secure Payments business.
Revenue
Revenue for the period decreased by 6.1% to GBP14.7 million (H1
FY21: GBP15.7 million) and at constant exchange rates by 2.9%, the
underlying performance for the continuing business, excluding the
third-party Support business, in the first half was an increase in
revenue of 3.4% to GBP14.4 million (H1 FY21: GBP13.9 million).
Revenue in the UK, which represents 62% (H1 FY21: 60%) of total
group revenues, decreased by 2.6% to GBP9.2 million (H1 FY21:
GBP9.4 million). UK Revenue, excluding the third-party Support
business, increased by 6.2% to GBP9.0 million (H1 FY21: GBP8.5
million).
The US revenue represented 38% (H1 FY21: 40%) of total group
revenues and revenues decreased in the period to GBP5.6 million (H1
FY21: GBP6.3 million), revenues in local currency fell by 3.3% year
on year and in sterling by 11.2%. US Revenue, excluding the
third-party Support business, increased by 7.8% to $7.4 million (H1
FY21: $6.9 million).
Further explanations of movements in revenue between the US and
UK divisions have been addressed in the Operational Review
above.
H1 FY22 H1 FY22 H1 FY22 H1 FY21 H1 FY21 H1 FY21
(UK) (US) Total (UK) (US) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- -------- -------- -------- -------- -------- --------
Revenue 9,154 5,576 14,730 9,401 6,281 15,682
Gross Profit 7,728 4,123 11,851 8,028 4,723 12,751
Gross margin 84% 74% 81% 85% 75% 81%
-------------- -------- -------- -------- -------- -------- --------
Gross profit margin was 81% for the first half of the financial
year 2022 and 2021. In the UK, the gross profit margin decreased by
1% to 84%. The Gross profit margin in the US business decreased by
1% to 74% in the first half of the financial year 2022, as new
Secure Payment clients continue to go-live. Previously we have
indicated the gross profit margin would decrease towards 70%, but
with the continued adoption of the Secure Payments solutions in the
Cloud, the gross profit margin is expected to be stronger than
previously indicated.
In the UK, as the service is hosted on an Eckoh platform there
is typically no hardware provided to clients and gross profit
margin is expected to remain level at 83% to 85%. In the US, due to
the impact of IFRS 15 and the growth in the Secure Payments
activities being deployed in the Cloud, we would expect gross
profit margin to gradually decrease to a range of approximately 72%
to 75%, (prior to the Cloud adoption seen towards the end of last
financial year this had been indicated as 70% to 75%). As new
Secure Payment business continues to be adopted in the Cloud and
the existing clients with on-site solutions renew their contracts
without significant hardware, the gross profit margin should
gradually start to increase.
Administrative expenses
Total administrative expenses were GBP9.4 million in the period,
compared to GBP10.2 million for the same period last year, an
improvement of 10%. Adjusted administrative expenses were GBP9.1
million compared to GBP9.3 million for the same period last year,
as a result of the restructuring measures taken in the first half
to adopt to the changing environment we operate in post the
pandemic. Restructuring costs incurred in the first half were
GBP233k (H1 FY21: GBPnil). Included in administrative expenses is a
trading foreign currency loss of GBP44k (H1 FY21: GBP55k loss).
Profitability Measures
Adjusted Operating profit for the period was GBP2.8 million a
decrease of 19.4% on a total basis (H1 FY21: GBP3.4 million).
Adjusted Operating Profit excluding the closed third-party Support
business was GBP2.5 million (H1 FY21: GBP2.2 million), a
year-on-year improvement of 18%. Included in the first half profit
for the current period was a foreign currency loss of GBP44k (H1
FY21: GBP55k loss).
Six months Year
ended Six months ended
30 Sept ended 31 March
2021 30 Sept 2020 2021
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- -------------- ----------
Profit from operating activities 2,405 2,538 3,550
Amortisation of acquired
intangible assets 73 486 663
Expenses relating to share
option schemes 42 392 536
Restructuring costs 233 - -
Adjusted operating profit(1) 2,753 3,416 4,749
----------- -------------- ----------
Amortisation of intangible
assets 184 164 398
Depreciation of owned assets 329 363 704
Depreciation of leased assets 230 254 505
---------------------------------- ----------- -------------- ----------
Adjusted EBITDA 3,496 4,197 6,356
---------------------------------- ----------- -------------- ----------
Finance charges
For the financial period ended 30 September 2021, the net
interest charge was GBP22k (H1 FY21: GBP10k).
Taxation
For the financial period ended 30 September 2021, there was a
tax charge of GBP461k (H1 FY21: GBP484k), an effective tax rate of
19% (H1 FY20: 20%).
Earnings per share
Basic earnings per share was 0.75 pence per share (H1 FY21: 0.80
pence per share). Diluted earnings per share was 0.73 pence per
share (H1 FY21: 0.77 pence per share).
Contract liabilities and assets
Contract liabilities and contract assets relating to IFRS 15
Revenue from Contracts with Customers are revenue and costs
relating to the implementation of our solutions which are deferred
onto the balance sheet until our solution is accepted by the client
and then they are released evenly over the initial term of the
contract. Total contract liabilities were GBP10.8 million a
decrease from the March 2021 contract liabilities of GBP12.5
million (H1 FY21: GBP14.0 million). Included in this balance are
contract liabilities relating to the Secure Payments product or
hosted platform product of GBP9.6 million compared to GBP11.1
million at March 2021 (H1 FY21: GBP12.7 million). Deferred assets
as at 30 September were GBP3.9 million compared to GBP4.4 million
at March 2021 (H1 FY21: GBP5.2 million). The amounts held on the
balance sheet have decreased from the year end due to the switch of
clients choosing Cloud solutions compared to on-premise solutions
and the timing of new business and their deployments.
Cashflow and liquidity
Net cash at 30 September 2021 was GBP12.7 million, a decrease of
GBP0.2 million to the previous year and level with the year end at
31 March 2021. There has been a net cash outflow for trade debtors,
trade creditors, inventory and tax of GBP1.8 million (H1 FY21: cash
inflow GBP1.7 million), in principle due to the unwinding of
deferred revenue on the large enterprise on-premise solutions.
Consolidated statement of comprehensive income
for the six months ended 30 September 2021
Six months Six months
ended 30 ended 30 Year ended
September September 31 March
2021 2020 2021
GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 14,730 15,682 30,486
Cost of sales (2,879) (2,931) (6,291)
----------------------------------------------- ----------- ----------- -----------
Gross profit 11,851 12,751 24,195
Administrative expenses (9,446) (10,213) (20,645)
----------------------------------------------- ----------- ----------- -----------
Operating profit 2,405 2,538 3,550
----------------------------------------------- ----------- ----------- -----------
Adjusted operating profit 2,752 3,416 4,749
Amortisation of acquired intangible
assets (72) (486) (663)
Expenses relating to share option
schemes (42) (392) (536)
Restructuring costs (233) - -
---------------------------------------------- ----------- ----------- -----------
Profit from operating activities 2,405 2,538 3,550
----------------------------------------------- ----------- ----------- -----------
Finance charges (87) (22) (87)
Finance income 65 12 48
----------------------------------------------- ----------- ----------- -----------
Profit before taxation 2,383 2,528 3,511
Taxation (461) (484) (717)
-----------
Profit for the period 1,922 2,044 2,794
=============================================== =========== =========== ===========
Other comprehensive income/(expense)
---------------------------------------------- ----------- ----------- -----------
Items that will be reclassified subsequently
to profit or loss:
Foreign currency translation differences
- foreign operations 56 (74) 134
----------------------------------------------- ----------- ----------- -----------
Other comprehensive income/ (expense)
for the period, net of income tax 56 (74) 134
----------------------------------------------- ----------- ----------- -----------
Total comprehensive income for the
period attributable to the equity
holders of the parent company 1,977 1,970 2,928
=============================================== =========== =========== ===========
Profit per share expressed in pence
---------------------------------------------- ----------- ----------- -----------
Basic earnings per 0.25p share 0.75 0.80 1.09
Diluted earnings per 0.25p share 0.73 0.77 1.06
----------------------------------------------- ----------- ----------- -----------
Consolidated statement of financial position
as at 30 September 2021
30 September 30 September 31 March
2021 2020 2021
GBP'000 GBP'000 GBP'000
------------------------------- ------------- ------------- ---------
Assets
Non-current assets
Intangible assets 6,508 6,709 6,527
Property, plant and equipment 4,074 3,774 4,307
Right -of-use leased assets 1,086 404 1,310
Deferred tax asset 2,761 3,786 3,211
-------------------------------- ------------- ------------- ---------
14,429 14,673 15,355
------------------------------- ------------- ------------- ---------
Current assets
Inventories 218 258 174
Trade and other receivables 11,909 12,333 13,277
Cash and cash equivalents 12,672 14,808 12,706
-------------------------------- ------------- ------------- ---------
24,799 27,399 26,157
------------------------------- ------------- ------------- ---------
Total assets 39,228 42,072 41,512
-------------------------------- ------------- ------------- ---------
Liabilities
Current liabilities
Trade and other payables (15,382) (18,502) (18,482)
Other interest-bearing loans
and borrowings - (975) (975)
Lease liabilities (516) (380) (517)
-------------------------------- ------------- ------------- ---------
(15,898) (19,857) (19,974)
------------------------------- ------------- ------------- ---------
Non-current liabilities
Other interest-bearing loans
and borrowings - (975) -
Lease liabilities (618) (17) (825)
Deferred tax liabilities (302) (281) (296)
-------------------------------- ------------- ------------- ---------
(920) (1,273) (1,121)
------------------------------- ------------- ------------- ---------
Net assets 22,410 20,942 20,417
-------------------------------- ------------- ------------- ---------
Shareholders' equity
Called up share capital 654 638 638
Share premium account 2,663 2,663 2,663
Capital redemption reserve 198 198 198
Merger reserve 2,697 2,697 2,697
Currency reserve 1,038 848 982
Retained earnings 15,160 13,898 13,239
-------------------------------- ------------- ------------- ---------
Total Shareholders' equity 22,410 20,942 20,417
-------------------------------- ------------- ------------- ---------
Consolidated interim statement of changes in equity
as at 30 September 2021
Called Capital
up share Share redemption Merger Currency Retained Total 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 period
Profit for the period - - - - - 1,922 1,922
Other comprehensive
expense for the period - - - - 56 - 56
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Contributions by and
distributions to owners 56 1,922 1,979
Shares transacted
through
Employee Benefit Trust - - - - - (126) (126)
Shares issued under
the share option scheme 16 - - - - - 16
Shares purchased for
share ownership plan - - - - - (72) (72)
Share based payment
charge - - - - - 197 197
Total contributions
by and distributions
to owners 16 - - - 56 - -
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Balance as at 30
September
2021 654 2,663 198 2,697 1,038 15,160 22,410
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Called Capital
up share Share redemption Merger Currency Retained Total Shareholders'
capital premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Balance at 1 April
2020 638 2,663 198 2,697 848 11,965 19,009
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Total comprehensive
income for the period
Profit for the period - - - - - 2,044 2,044
Other comprehensive
expense for the period - - - - - (74) (74)
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Contributions by and
distributions to owners - - - - - 1,970 1,970
Shares transacted
through
Employee Benefit Trust - - - - - (41) (41)
Shares issued under
the share option
schemes - - - - - (173) (173)
Share based payment
charge - - - - - 177 177
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Total contributions
by and distributions
to owners - - - - - (37) (37)
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Balance at 30 September
2020 638 2,663 198 2,697 848 13,898 20,942
------------------------- ---------- --------- ------------ --------- --------- ---------- --------------------
Consolidated statement of cash flows
for the six months ended 30 September 2021
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2020 2020 2021
GBP'000 GBP'000 GBP'000
----------------------------------------- -------------- -------------- -----------
Profit after taxation 1,921 2,044 2,794
Interest income (65) (12) (48)
Interest payable 87 22 87
Taxation 461 484 717
Depreciation of property, plant
and equipment 329 363 704
Depreciation of leased assets 230 254 505
Amortisation of intangible assets 256 650 1,061
Share based payments 197 177 522
Exchange differences 9 51 303
----------------------------------------- -------------- -------------- -----------
Operating profit before changes
in working capital and provisions 3,425 4,033 6,645
----------------------------------------- -------------- -------------- -----------
(Increase)/ Decrease in inventories (44) 54 138
Decrease in trade and other receivables 568 1,161 217
(Decrease) in trade and other payables (2,300) (2,592) (2,615)
----------------------------------------- -------------- -------------- -----------
Net cash generated from operating
activities 1,649 2,656 4,385
----------------------------------------- -------------- -------------- -----------
Taxation - (466) (10)
Interest paid (63) (16) (54)
Interest paid on lease liability (24) (6) (33)
----------------------------------------- -------------- -------------- -----------
Net cash from continuing operating
activities 1,562 2,168 4,288
----------------------------------------- -------------- -------------- -----------
Cash flows from investing activities
Purchase of property, plant and
equipment (89) (294) (1,175)
Purchase of intangible fixed assets (187) (157) (573)
Proceeds from sale of tangible
fixed assets - 3 -
Interest received 65 12 48
Net cash utilised in continuing
investing activities (210) (436) (1,700)
----------------------------------------- -------------- -------------- -----------
Cash flows from financing activities
Dividends paid - - (1,558)
Repayment of borrowings (975) - (975)
Principal elements of lease payments (209) (251) (461)
Shares purchased for share ownership
plan (72) (173) (241)
Issue of shares 16 - -
Shares acquired by Employee Benefit
Trust (126) (41) (138)
----------------------------------------- -------------- -------------- -----------
Net cash utilised in continuing
investing activities (1,366) (465) (3,373)
(Decrease) / increase in cash and
cash equivalents (14) 1,267 (785)
Cash and cash equivalents at the
start of the period 12,706 13,541 13,541
Effect of exchange rate fluctuations
on cash held (21) - (50)
----------------------------------------- -------------- -------------- -----------
Cash and cash equivalents at the
end of the period 12,671 14,808 12,706
----------------------------------------- -------------- -------------- -----------
Notes to the condensed consolidated interim financial
statements
For the six months ended 30 September 2021
GENERAL INFORMATION
Eckoh plc is a public limited company and is incorporated and
domiciled in the UK under the Companies Act 2006 (Company
Registration number 03435822). The address of the Company's
registered office is Telford House, Corner Hall, Hemel Hempstead,
HP3 9NH.
Eckoh plc is a global provider of Secure Payment products and
Customer Contact solutions.
These condensed consolidated interim financial statements for
the six months ended 30 September 2021 comprise the Company and its
subsidiaries (together the "Group").
1. Basis of preparation
These condensed consolidated interim financial statements for
the six months ended 30 September 2021 have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the European Union. This report does not include all of the
information required for full annual financial statements and
should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 31 March 2021,
which have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and
applicable law.
The unaudited condensed consolidated interim financial
information for the period ended 30 September 2021 does not
constitute statutory accounts as defined in Section 435 of the
Companies Act 2006. The comparative figures for the year ended 31
March 2021 are extracted from the statutory financial statements
which have been filed with the Registrar of Companies, on which the
auditor gave an unqualified report, which made no statement under
section 498(2) or (3) respectively of the Companies Act 2006 and
did not draw attention to any matters of emphasis.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 31
March 2021.
In reporting financial information, the Group presents
alternative performance measures ("APMs") which are not defined or
specified under the requirements of IFRS. The Directors consider
that disclosing alternative performance measures enhances
Shareholders' ability to evaluate and analyse the underlying
financial performance of the Group. They have identified adjusted
operating profit and adjusted EBITDA as measures that enable the
assessment of the performance of the Group and assists in
financial, operational and commercial decision-making. In adjusting
for these measures, the Directors have sought to eliminate those
items of income and expenditure that do not specifically relate to
the normal operational performance of the Group in a specific
year.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 1 December 2021.
The accounting policies adopted in these interim financial
statements are consistent with those of the previous financial year
and the corresponding interims period.
Going concern
The Directors have, at the time of approving the condensed
consolidated interim financial statements, a reasonable expectation
that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the financial statements.
New standards and interpretations not yet adopted
Amended standards and interpretations not yet effective are not
expected to have a significant impact on the Group's consolidated
financial statements.
2. Dividends
The proposed dividend of GBP1.6m for the year ended 31 March
2021 of 0.61p per share was paid on 22 October 2021.
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.
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
------------------------------------ -------------- -------------- ----------
Earnings for the purposes of basic
and diluted earnings per share 1,922 2,044 2,794
------------------------------------ -------------- -------------- ----------
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
Denominator '000 '000 '000
-------------------------------------- -------------- -------------- ----------
Weighted average number of shares
in issue in the period 255,500 255,852 255,351
Shares held by employee ownership
plan (1,908) (1,717) (1,862)
Number of shares used in calculating
basic earnings per share 253,592 254,135 253,489
Dilutive effect of share options 9,121 9,678 9,426
-------------------------------------- -------------- -------------- ----------
Number of shares used in calculating
diluted earnings per share (where
applicable) 262,713 263,813 262,915
-------------------------------------- -------------- -------------- ----------
4. Subsequent events to 30 September 2021
As at the date of these statements there were no such events to
report.
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END
IR BFLLBFLLFFBL
(END) Dow Jones Newswires
December 02, 2021 02:00 ET (07:00 GMT)
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