Final Results
14/06/2023 07:00
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RNS Number : 6197C Eckoh PLC 14 June 2023
14 June 2023
Eckoh plc
("Eckoh" or the "Group")
Full year audited results for year ended 31 March 2023
- Significant double-digit revenue and profit growth, with profit and cash
ahead of expectations
- Group and North America Security Solutions ARR growing strongly
- Cloud proposition and transition driving growth in key North American market
- Enhanced data security solutions portfolio has expanded addressable market
and customer value
- Increased revenue visibility and encouraging new business pipeline supports
confidence for FY24
Eckoh plc (AIM: ECK), the global provider of Customer Engagement Data Security
Solutions, is pleased to announce full year audited results for the year ended
31 March 2023.
Nik Philpot, Chief Executive Officer, said: "Our full year results clearly
show our strategy is working. This performance is underpinned by the strategic
progress we've made in developing a market-leading, cloud-first suite of
solutions, and the successful integration of Syntec across our processes,
products, and teams. We are particularly encouraged by the 34% organic ARR
growth in North America, which underlines the scale of the market opportunity
we see in that region.
At Eckoh we're on a mission to make customer data arising from customer
engagement more secure, and we believe that consumers should be able to trust
every brand and engage without risk. We've already been chosen by some of the
largest global brands to ensure their customer data and payments are handled
securely. Tightening data regulations and the shift to home working has
created new security and performance challenges for enterprise contact
centres, which significantly expands the opportunity for us. With our new
go-to-market proposition, our commercial team now reorganised as a single
global team focused on the significant North American market, scalable cloud
platforms and an expanded software portfolio, we are well placed to convert
our pipeline of new business opportunities and capitalise on Eckoh's already
sizable addressable market."
£m (IFRS unless otherwise stated) FY23 FY22 Change
Revenue 38.8 31.8 +22%
Gross profit 31.2 25.4 +23%
North America (NA) Security Solutions ARR ($m)(1) 15.9 11.9 +34%
Total ARR(2) 30.4 25.8 +18%
Adjusted EBITDA(3) 9.4 6.8 +38%
Adjusted operating profit(4) 7.7 5.2 +48%
Profit before taxation 5.0 2.3 +117%
Basic earnings pence per share 1.58 0.59 +167%
Adjusted diluted earnings pence per share(5) 2.09 1.34 +56%
Net cash 5.7 2.8 +102%
Proposed final dividend (pence) 0.74 0.67 +10%
Total contracted business(6) 34.5 22.5 +53%
New contracted business(7) 14.4 10.8 +33%
Financial Highlights
· Revenue for the year increased by 22% to £38.8 million (FY22: £31.8
million) and at constant exchange rates by 16%, driven by organic growth and
the full year impact from the acquisition of Syntec in December 2021
· Adjusted operating profit(4) up 48% to £7.7m, driven by sales
growth, increased cross selling, operational leverage, and a £0.5m favourable
impact from FX movements
· Growth in adjusted diluted earnings per share demonstrates good
organic growth from the underlying business combined with the impact of the
earnings enhancing acquisition of Syntec in December 2021
· Excellent performance from North American Data Security Solutions,
where we have the largest addressable market and a significant opportunity for
continued strong growth:
o North American Data Security Solutions ARR(1) up 34% and revenue up 25%
o Recurring revenue increased 54% driven by ongoing cloud transition and
successful contract renewals
· Refreshed go-to-market strategy drove up new contracted business
principally through winning cloud deployed deals and international mandates in
North America, which accounted for 71% of all new business
· UK and Ireland (UK&I) and Rest of World showed a resilient
performance with revenue up 10%
· Balance sheet remains strong with net cash ahead of expectations(8)
at £5.7m (FY22: £2.8m)
· Proposed final dividend of 0.74p per share (FY22: 0.67p),
demonstrating confidence in our product portfolio and the clear opportunity to
capitalise on the scale of the North American opportunity
Strategic highlights
· Strategic focus and cloud delivered solutions supports our scalable
growth:
o By offering cloud platform choice and multiple SaaS solutions without
additional deployment effort, we deliver scalability into larger client
opportunities in North America and across international mandates, with
significant cross-sell opportunities and faster new client deployments,
increasing client lifetime value
· Our proprietary cloud Secure Call Recording product was launched in
April 2023, to an encouraging response:
o Expected to support the growth in cross selling and generate new client
contracts at a time when 24% of US contact centres are looking to update their
call recording solution in the next 12 months*
· Global Commercial team now fully aligned to our strategic focus on
the North American market:
o Embedded a unified proposition into our new go-to-market vision of Customer
Engagement Data Security Solutions, formally launched in April 2023
o TAM in North America is currently estimated to be 20 times the value of the
UK market
· Total contracted business showed strong growth through securing new
business wins and several successful renewals with key clients in North
America
· Notable new client wins and successful renewals during the period
included:
o A Fortune 100 retailer, purchasing two solutions; first client to go-live on
our new Azure cloud platform
o New two-year voice security contract across more than 20 territories with a
leading, global hotel company
o New global reseller contract with a US based unified communications company,
3 contracts delivered to date
Current trading and Outlook
· Positive start to the year with total order value more than £7m in
the first two months
· The Board is confident of further progress in the year ahead,
supported by an encouraging new business pipeline, increased revenue
visibility through continued ARR growth and a robust balance sheet and cash
position
· Eckoh is well placed to benefit from favourable industry trends in
its target markets including the shift to hybrid contact centre working and
increasing regulatory requirements around personal data management
* Source: Contact Babel - US Contact Centers 2022-2026 the State of the
Industry
1. ARR is the annual recurring revenue of all contracts billing
at the end of the period.
2. Group ARR is all revenue that is
contractually committed and an element of UK revenue that has proven to be
repeatable, but not contractually committed. FY22 Group ARR has been restated
to include NA Coral RR
3. Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) is the profit before tax adjusted for depreciation of
owned and leased assets, amortisation of intangible assets, expenses relating
to share option schemes, restructuring costs, legal costs and settlement
agreements and costs relating to business combinations.
4. Adjusted operating profit is the profit before tax adjusted
for amortisation of acquired intangible assets, expenses relating to share
option schemes, restructuring costs, legal costs and settlement agreements and
costs relating to business combinations.
5. Adjusted earnings per share and adjusted diluted earnings per
share uses the adjusted operating profit and applies a normalised tax rate to
both years of 19%.
6. Total contracted business includes new business from new
clients, new business from existing clients as well as renewals with existing
clients.
7. New contracted business includes new business from new
clients and new business from existing clients, including product upsells and
cross-sells.
8. Eckoh believes that consensus market expectations for the
year ending 31 March 2023 is revenue of £40.25 million, adjusted operating
profit of £7.45 million and cash of £5.2m
For more information, please contact:
Eckoh plc Tel: 01442 458 300
Nik Philpot, Chief Executive Officer
Chrissie Herbert, Chief Financial Officer
www.eckoh.com (http://www.eckoh.com)
FTI Consulting LLP Tel: 020 3727 1017
Ed Bridges / Emma Hall / Tom Blundell / Emily Bowen
eckoh@fticonsulting.com (mailto:eckoh@fticonsulting.com)
Singer Capital Markets (Nomad & Joint Broker) Tel: 020 7496 3000
Shaun Dobson / Tom Salvesen / Alex Bond
www.singercm.com (http://www.n1singer.com)
Investec Bank plc (Joint Broker) Tel: 020 7597 5970
Patrick Robb/ Nick Prowting / Shalin Bhamra
www.investec.com (http://www.investec.com)
About Eckoh plc
As a global provider of Customer Engagement Data Security Solutions, Eckoh is
all about making the world of data more secure.
Our vision is that everyone should be able to trust every brand and engage
without risk to their personal information. We're on a mission to set the
standard for secure interactions between consumers and the world's leading
brands, and our innovative products build trust and deliver value though
exceptional experiences.
We're trusted by many of the world's leading brands to help them manage the
personal data from customer enquiries and transactions safely. Our solutions
enable payment transactions to be performed securely and help protect
sensitive personal data across any customer engagement channel and device the
customer chooses.
Protected by multiple patents, our solutions remove sensitive personal and
payment data from contact centres and IT environments, as the best way to
secure data is not to collect it. This allows organisations to be not just
compliant but secure, increase efficiency, lower operational costs, and
provide an excellent customer experience. This is our specialism.
Our solutions are delivered globally through multiple cloud platforms or can
be deployed on the client's site. They offer merchants a simple and effective
way to reduce the risk of fraud, secure sensitive data and become compliant
with the Payment Card Industry Data Security Standards ("PCI DSS") and wider
data security regulations. Eckoh has been a PCI DSS Level One Accredited
Service Provider since 2010, and our extensive portfolio of typically large
enterprise clients spans a broad range of vertical markets including
government departments, telecoms providers, retailers, utility providers and
financial services organisations.
For more information go to www.eckoh.com (http://www.eckoh.com) or email
MediaResponseUK@eckoh.com (mailto:MediaResponseUK@eckoh.com) .
Chief Executive Officer's statement
Introduction
I am pleased to report Eckoh performed strongly in the financial year ended 31
March 2023 delivering organic growth alongside the positive impact of our
earnings enhancing acquisition of Syntec in December 2021, and making
significant progress with our overall strategy. Adjusted operating profit and
cash were both ahead of market expectations, and ARR growth was strong,
especially in our key North American market.
In the 18 months following the acquisition we have completed the integration
of Syntec, also a provider of data security solutions, which brought
complementary technology, IP, clients, learnings, and people into Eckoh. We
are already seeing positive impacts in both our strategic progress and
financial performance and we have started the new year positively with over
£7m in total business contracted in the first two months. As indicated at our
interim results in November 2022, following the integration of Syntec these
financial results have been presented on a territory basis for this period.
A clear growth strategy
At Eckoh, we're on a mission to set the standard for secure interactions
between consumers and the world's leading brands. Companies today need to
provide an exceptional customer experience with a frictionless and secure
payment or process journey. Every interaction or transaction should be secure.
We make sure that happens through our innovative products which build trust
and deliver value through exceptional experiences.
We're trusted by well-known global brands, predominantly from the retail,
healthcare, telecoms, financial services, utilities, and travel sectors, to
help process customer enquiries and payments safely, usually via their
customer contact centres, which are either operated in-house or outsourced.
Given the sensitive nature of the solutions we sell, it is unusual for these
companies to be willing to be publicly named, but they are often happy to
provide client references.
Our secure engagement solutions help protect sensitive customer data and can
be utilised over any common customer engagement channel (voice, live chat,
messaging, email, social channels, etc.) and via any device the customer
chooses. Our philosophy when it comes to data security is that the best way to
protect your data is not to collect it. Many of the most sensitive engagement
processes, especially taking a payment itself, do not require the enterprise
to collect and store data, and if the process can be performed without doing
this, then this removes the risk of breach or fraud for the customer. This is
our specialism and an approach for which we have a growing portfolio of
patents.
Our strategy is driving strong growth in our key markets with total revenue
for the year increasing to £38.8 million, an increase year-on-year of 22%
(FY22: £31.8 million) or 16% adjusting for constant exchange rates. Recurring
revenue for the period was 80% of Group revenue at £31.0 million, a
year-on-year increase of 29%. North America ARR(1) was $15.9 million, an
increase of 34% year-on-year, again demonstrating strong progress and the high
level of visibility we now have in our business model.
To support our strategy to be the market leader in Customer Engagement Data
Security Solutions, we completed the acquisition of Syntec in December 2021.
Our "Syntegration" plan (our process of integrating and unifying Syntec into
Eckoh's operations), was split into three phases and covered people, process,
product, and technology. Over the last financial year, we have combined the
underlying platform technology for delivering Eckoh's existing voice security
product, branded as CallGuard, and Syntec's solution, branded CardEasy, to
create a new unified platform appliance we call our Secure Voice Appliance
(SVA). The SVA is the cornerstone of our new global Secure Voice Cloud
platform, which supports our Secure Engagement Suite of solutions that can be
bought either singly or in multiples by our enterprise clients and delivered
through the same platform.
Our delivery infrastructure for new clients and new products is now fully
integrated across the Secure Voice Cloud platform. Aligned to this, we have
integrated our operational teams and processes through Eckoh's Global Network
Operation Centre (NOC), to provide a unified, cross-trained global support
capability across our client base.
Phases 1 & 2 are complete and during the third phase, we are tasking the
unified development team to develop new solutions for the Secure Engagement
Suite in key growth areas. I am pleased to confirm that we launched our first
new solution from the unified team as planned at the beginning of the new
financial year - our new Secure Call Recording solution. We are only a few
weeks into showcasing and demonstrating the solution, but we are very
encouraged by the reaction of existing and new clients alike.
Progressing well against our strategic goals
We have made excellent progress during the year with our strategic objectives,
which reflect our ambition to be the global leader in Customer Engagement Data
Security Solutions. Our strategic goals are outlined below:
Our overarching strategic goal is our mission. To set the standard for secure
interactions between consumers and the world's leading brands. By delivering
on our five strategic pillars this will take us closer to achieving this
overall goal.
1) Capitalise on external global market trends and regulation to help
protect customer data through continual innovation
Eckoh is well placed to capitalise on favourable industry trends with a more
focused commercial team
Eckoh has historically targeted organisations that either transact or engage
with its customers at scale, at volume and utilise contact centres with more
than 50 agent seats in either the UK or US. This represented a target market
of over 2,500 potential customers in the UK and 12,000 in the US. During the
last year and spearheaded by our new Group Marketing Director we have invested
in and implemented new MarTech tools which have provided us with a more
granular way of assessing the global opportunity for our solutions. By being
more granular in our analysis we have identified a total addressable market
(TAM) of over 150,000 companies, with the North American market representing
48% of that TAM making it nearly ten times larger than the UK & Ireland at
5%. However, when looking at the average value of a North American contract
compared to one in the UK that would increase the North American TAM value to
more than 20 times the UK & Ireland.
To better pursue this opportunity, at the end of the fourth quarter we
actively re-organised our commercial teams (comprising our Sales, Marketing
and Client Services teams) to service the market and clients globally, and
specifically to focus more of our collective resources on the large North
American market. Prior to this the UK-based team, which was larger in size
than the US one, was focused predominantly on the UK market. Now our unified
global team is set up to sell globally, mobilised in an effective way with no
geographical boundaries to service the client need, anywhere in the world.
A year ago, it would arguably have been too soon to make this change, as we
only had a single product line, that of voice security, available to sell
through a common cloud platform in the US market. But with the advent of our
cloud-based Secure Engagement Suite we now have multiple complementary
solutions that are available to any client anywhere in the world and this
means that our existing North American client base are prime targets for cross
selling.
Across the Group we have around 200 clients, which range greatly in both size
and opportunity. Given this we have reorganised how we support and service our
client accounts globally to ensure the most focus is given to the key accounts
with the largest perceived opportunity for growth. The sales team and account
managers have been assigned specific accounts to manage and develop across the
different tiers of client opportunity and have significant cross selling and
up selling targets as well as new business targets. In the top key account
tier, we have around 30 accounts all of which are based in the North America
region, reinforcing again the rationale for the realignment of our precious
resources.
With the launch of our unified go-to-market proposition of Customer Engagement
Data Security Solutions combined with our global commercial team, we are
better positioned to drive growth. This is underpinned by our new Secure
Engagement Suite of solutions plus our expanding and scalable cloud platforms,
which provide us with the opportunity not only to extend our reach
geographically, but also increase the opportunity within every client account
to land and expand.
Increasing regulation and data security challenges drive demand
With increasing regulation regarding the management of personal data and the
financial impact of data breaches and fraud growing, organisations are
increasingly looking for ways to move beyond the requirement of merely being
compliant to securing their data more comprehensively. This has made IT
information security budgets one of the most protected areas of spend within
enterprises. Eckoh is well placed to navigate these data security challenges,
working behind the scenes as a 'sales enabler', converting sales in a secure
way on behalf of an increasingly diversified and global client base.
Our addressable target market is large and has fundamentally changed post
pandemic
The contact centre industry globally is extremely large, representing around
4% of the entire workforce in both the UK and US markets. The pandemic and the
current economic climate have fundamentally changed the way our industry
operates and the added pressures it has brought to navigating the new remote
and hybrid working environments. Looking at the largest market, the US, the
figures shown below, outlined in Contact Babel's 'US Contact Centers
2022-2026' research document, are particularly striking:
Percentage of US contact centres with more than 50% of agents working remotely 2019 2020 2021 2022 (estimate)
10% 87% 89% 77%
Pre-pandemic only 10% of US contact centres had more than 50% of their agents
working remotely. A huge shift to using remote agents peaked in 2021 with 89%
of US contact centres having more than half their agents working from home.
Even those organisations who were very reluctant to use remote working have
been forced to adapt. In 2022 the estimate is that this figure is 77% and is
expected to remain at these levels for the foreseeable future.
Shift to home-based agents creates new data security challenges, driving
significant new opportunities
Post pandemic, contact centres have been under acute pressure to adapt in
order to retain agent staff as the convenience of working from home is
popular, enabling flexibility of working hours. This flexibility is also a
positive for the enterprises that employ such agents as they can deploy agents
to work short shifts to cope with unexpected customer demand. This changed
landscape does however bring many and varied complications to the running of
such remote and hybrid contact centres and the companies now need to tackle
the challenge and inherent data security risks that comes from remote working
agents. A managed facility is far easier to control from a data security point
of view than many remote locations. It is largely impossible to replicate such
an environment, which presents a significant challenge if the agent is
handling customer data and especially payment data.
Within Eckoh's new solutions suite, our real time transcription solution will
offer sentiment analysis and AI led agent assistance, which ensures that all
customers can be triaged and dealt with swiftly and effectively, without
compromising their customer experience or the security of their personal data.
This trend provides a massive opportunity for Eckoh's solutions, not just for
data security but also agent performance and efficiency. Our data security
proposition enables companies to reduce further, or remove, the risk of data
breaches by ensuring that sensitive data isn't just blocked but replaced with
placeholders that can be safely stored in the client's systems. Our patented
technology wraps around the client's infrastructure seamlessly and means that
from the client's point of view, they do not actually collect any sensitive
personal data.
2) Grow our leadership position in Customer Engagement Data Security
Solutions to increase shareholder value
Leverage our trusted supplier status to broaden the scope of our offering to
our clients
The acquisition and then integration of Syntec served as a catalyst for us to
refine how we go to market and how we want Eckoh to be perceived in the
market. We unified and clarified our proposition into Customer Engagement Data
Security Solutions which is delivered to our clients through our Secure
Engagement Suite. Over the past 20 years we have delivered many different
products and services, but our differentiator and strength in the customer
engagement market, which has led to our success and growth, is our ability to
deliver great customer experience with a data security focus. Eckoh prevents
sensitive personal and payment data from entering IT and contact centre
environments when customers engage with an enterprise and make payments for
goods and services. With a chief aim of not compromising the quality of the
customer experience, as a unified offering all our new customer engagement
offerings will be underpinned with security features and capabilities to
assist our clients to address data security concerns and increasing
regulation.
This clarity of approach has led us to rationalise and retire several product
offerings, especially those that require significant levels of bespoke
implementation and professional services. Going forward our new Secure
Engagement Suite will focus on those offerings that deliver value to our
enterprise clients through that security layer and whilst we will retain
flexibility in delivery, the overall methodology will be SaaS.
In recent years Eckoh has been developing a highly relevant suite of data
security solutions, designed to protect without compromising user experience,
and delivered in the cloud (or on premise if that is still required). For
example, our live chat offering incorporates our patented and unique ChatGuard
capability. This enables payment or personal information to be entered by a
customer into a live chat session without any of that information traversing
the clients' environment or being shared with an advisor. The key difference
now is that those solutions which we consider to be part of our go-forward
proposition have been amalgamated in our Secure Engagement Suite and delivered
from our Secure Voice Cloud platforms, enabling clients to more easily deploy
and purchase them.
Our patented products already help organisations to reduce the risk of fraud;
secure sensitive data; comply with the Payment Card Industry Data Security
Standard ("PCI DSS") and wider security regulations such as the General Data
Protection Regulation ("GDPR") or the US Consumer Privacy Acts. We can grow
our leadership position most quickly by adding additional solutions that
assist our clients to protect wider forms of data and in different ways, as
well as broader security requirements such as identifying fraudulent
customers. The nature of the solution we have initially sold the client has
already established Eckoh as a trusted advisor, and we can leverage that
position to get access more readily to potential buyers of other complementary
solutions within the organisation, such as the recently launched Secure Call
Recording.
3) Use cloud technologies to develop and enhance our proprietary
solutions to support scalable growth
The procurement of data security solutions to be deployed across multiple
territories is certainly increasing, and our focus is on investing in our
Customer Engagement Data Security Solutions to be deployed on our scalable
cloud platform to support the growth from our largest territory and absolute
strategic focus, North America. Our market leadership lies in our ability to
offer our clients a choice of cloud platform and delivering multiple
complementary SaaS solutions without any additional deployment effort or
complex integrations.
Our unified team developed the new Secure Call Recording solution using the
cloud native methodology and technology that we implemented some years ago.
This approach has not only reduced the time it takes us to launch new
solutions, but it has simplified the process of continual development and sped
up the addition of new features. It also enables us to automatically scale up
or down the size of our cloud platforms responding instantly to changes in
demand from our clients, leading to optimum operational performance and cost
to serve.
One of the largest contracts won in the year was for a Fortune 100 retailer
who purchased two cloud-based solutions, voice security and digital payments,
and was the first client to go-live on our new Azure cloud platform. The time
to revenue for new clients is significantly improved when they opt to use a
cloud deployed solution, and it enables their ability to access the other
offerings in our Secure Engagement Suite with little or no additional
implementation effort.
We are excited by the growing proportion of cloud deployments secured in the
North American market. The share of North America ARR from cloud revenue is
now 50%, rising from a 35% share a year ago. Landing and expanding within our
client base is a key focus and has the benefit of increased visibility of
revenue through recurring revenues and improved margin. With our product
roadmap extending into a broader data security proposition, we expect to be
able to increase the lifetime value of our clients and continue to have high
renewal rates and very low levels of churn.
We're flexible to client needs, retaining the ability to deploy locally
The proportion of cloud contracts won in North America remains very high at
over 80%, and whilst we still expect a small number of on-premise deployments,
these will reduce over time. While cloud deployment is a key goal and
advantage, many of the largest enterprises, especially those in North America,
may still take several years to achieve that objective. Retaining the
capability to deploy as required in a client's own data centres and
environment and then migrate those accounts to a cloud solution at some later
point, continues to give us a tactical advantage over our competitors. During
the first half, we saw two clients migrate from on-site deployments to our
cloud platform and as part of the renewal process, three more clients have now
contracted to migrate in FY24.
4) Maximise lifetime client value and aid retention by cross and
up-selling to increase recurring revenue
The significant enterprise deals we won during the period show the merit of
Eckoh's longstanding strategy to pursue larger opportunities and reflects the
continuing trend towards cloud adoption and more international mandates in our
target markets.
The Eckoh offering
Our suite of data security solutions called Eckoh's Secure Engagement Suite,
which has been developed and refined through the Syntegration process, is
displayed in the honeycomb visual below and includes the following segments:
The first six are all now available, with the first release of Secure Call
Recording launched as planned in April this year and delivered through our new
Secure Voice Appliance and Secure Voice Cloud.
Later this year we will add the seventh, which will be the real time
transcription solution that uses AI and machine learning to assist advisors to
provide the best possible assistance whether they are experienced agents or
not. It will also allow contact centre managers and supervisors to identify
problem calls instantly through the sentiment analysis tool which will provide
a heatmap across all agent conversations in real time, highlighting where
issues may be occurring. With so many agents now working remotely, this
oversight task is critical to ensure performance is not compromised because of
hybrid working. Both this solution and Secure Call Recording should have an
even larger TAM than our other solutions as neither necessitate the client to
be taking payments to make them attractive solutions. This gives us the
opportunity to target new companies that historically would not have featured
in our marketing efforts.
Our first solution in the Verification and Fraud area is on our solution
roadmap for the end of FY24. This will include commercialising patents that we
already have granted, notably our reverse authentication patent. This enables
a consumer to verify the identity of an adviser contacting them regarding
activity on their account, conveniently and easily. We all know these inbound
customer calls are a common route for scamming and fraud and so for the end
customer to be able to verify that the call is genuine, we believe will be a
unique and valuable solution. This will streamline the process for both
parties, thereby improving efficiency for our enterprise clients and
increasing satisfaction for the end customer.
Enterprise provides significant cross sell opportunity
Enterprise expands our total addressable market even further, particularly
with the expansion and enhancement of our security suite and the global nature
of our cloud platform. Given our long-standing cross-selling experience in the
UK market we believe it is entirely credible that potential customer value
could double compared to what was achievable from just the sale of the core
voice security product.
It is encouraging that in the period the proportion of new business in North
America coming from existing clients was already 38%. What is uncertain at
this point is how many additional organisations will be appropriate targets
for the call recording, transcription, and verification products, which
arguably have an even wider applicability.
5) Evaluate acquisition opportunities that can support our growth
strategy in Customer Engagement Data Security
Syntec has been a strategically important acquisition in terms of reinforcing
Eckoh's position as the market leader in our field, being the catalyst for
expanding our security suite and re-engineering our core cloud platform. We
believe that through an ongoing focus on both organic growth and selective
M&A, we are well placed to seize the opportunities we see in our sizeable
addressable market.
Operational review
In the following section all comparatives have been restated for the new
reporting territories.
North America (NA) Territory (45% of group revenues)
Following a thorough review of the opportunity and our go-to-market strategy,
we are delighted that North America continues to power strong growth across
all key KPIs, underlining our strategic focus and the significant market
opportunity we are targeting in this territory.
This is best demonstrated through Data Security Solutions ARR(1), which grew
34% to $15.9 million (FY22: $11.9 million). Total North American ARR(1), which
includes both our Data Security Solutions and Coral (our agent desktop
product) grew to $16.9 million (FY22: $12.6 million).
Revenue for the period was $21.3 million, an increase of 25% (FY22: $17.1
million) and North America now accounts for a 45% share of Group revenue
(FY22: 40%). In FY24, we expect North American revenue will at least be of
equal size to revenue from the UK and Ireland territory.
During the period, in the region we have seen twelve successful renewals, an
increase in the level of cloud deployments and cross selling of additional
licences and product, strengthening our recurring revenue and gross profit.
Total and New Contracted Business
· Increase in sales momentum as anticipated in H1, with new
contracted business wins of $12.6 million, an increase year on year of 70%
(FY22: $7.4 million)
· Security Solutions new contracted business of $11.3 million with
38% of this coming from existing clients
· Combination of new contracted business and the increasing number
of contract renewals has grown the total contracted business by 91% year on
year to $20.9 million (FY22 $10.9 million)
Contract Renewals
· Recurring revenue increased to 76% (FY22: 69%), because of the
ongoing cloud transition and six clients' initial contract renewals. At the
point of renewal, the hardware and setup fees from the initial contract are
fully recognised
· Six further contracts renewed during the year, three of which
migrated from on premise solutions to the cloud
· One client did not renew due to a sale of their business
Cross-selling
We continue to focus on winning new large enterprise contracts, alongside
cross-selling additional products introduced to the North American territory
in H1 with new and existing clients. Two large enterprise deals contracted in
the period illustrate that cross-selling progress is already bearing fruit, as
outlined below:
New enterprise deal #1 - A Fortune 100 retailer New enterprise deal #2 - A leading, global hotel company
· Secured purchase of two product lines. · Won a $1.3 million, 2-year contract.
· 3-year enterprise contract included a $1.4m fee for voice · Cloud deployment model to incorporate voice payment security,
security to secure their telephone agents and a $0.6m fee for digital payments digital payments, and advanced speech recognition.
to secure their live chat agents.
· Multiproduct contract and first client to go-live on new Azure · Single cloud deployment that will cover more than 20 territories
cloud platform. and an equivalent number of speech recognition languages.
Coral
In the period, Coral had revenue of $2.0 million (FY22: $1.8 million Coral
& third-party Support). Coral, a browser-based agent desktop, aids the
following:
· to increase efficiency by bringing all the contact centre agent's
communication tools into a single screen;
· to enable organisations, particularly those grown by acquisition,
to standardise their contact centre facilities; and
· to be implemented in environments that operate on entirely
different underlying technology.
Coral contracts are small in number but high in value when they occur, and
they have a very long sales cycle (usually years) as the decision has long
term ramifications for the client. This makes the timing of any new agreements
both lumpy and hard to predict. There is a proof of concept being planned with
a large global financial services company, however, there is no certainty at
this stage if this will lead to a contract.
UK & Ireland (UK&I) Territory, and Rest of World (ROW) Territory (55%
of group revenues)
· Total revenue for the year was £21.3 million, an increase of 10%
(FY: £19.3 million)
· ARR(1) at the end of the year was £16.3 million (FY22: £16.5
million), with growth hindered by the loss of a significant (non-security)
client in the first half
· Gross profit in the period was £17.5 million, an increase of 9%
(FY22: £16.1 million) and gross margin was 82%, a decrease year on year of 1%
(FY22: 83%), due principally to the inclusion of the Syntec UK & Ireland
and ROW business
· Total contracted business was £17.2 million compared to £13.4
million in the prior year and new contracted business was £4.2 million, a
decrease of 9% year-on-year (FY22: £4.7 million)
· The ROW territory is expected to grow quickly with the large
international contracts deployed, but for FY23 as this territory accounts for
only 2% of total revenue it has been reported together with the UK&I
· Because of the realignment of the global commercial team and focus on
North America, we think it is reasonable to expect UK & Ireland growth to
be modest at best. The effort involved in growing this territory would be
disproportionate to the value generated compared to the more lucrative and
larger market in North America
New contracted business
· Most global deals, which drive the revenue and growth in Ireland and
the ROW, have been contracted through the UK Sales team. This will change with
the new alignment of the global commercial team
· Contract for voice security won with the Irish division of one of the
world's largest insurance companies, worth $0.6 million. This is one of the
first clients to utilise the new enhanced cloud platform developed through
"Syntegration"
· A further new UK contract also worth £0.6 million was won with a
financial services company to provide voice security for their debt collection
service
Contract renewals
· Successfully renewed the year's largest contract; a 5-year contract
through Capita for a large public service organisation worth £2.1 million
· Contract through BT for the Ministry of Justice for taking payments
for fixed penalty notices and magistrates fine also renewed, the second
largest in the year
· Other important renewals included Kingfisher, Target, PowerNI,
Transport for London and Allied Irish Bank
Outlook
The year's performance reflects the continued progress of Eckoh's strategy to
pursue large enterprise opportunities, cross-sell from a broader product suite
and continue the trend towards cloud adoption and more international mandates.
With a refreshed go-to-market approach, coupled with an encouraging pipeline,
a resilient business model of high recurring revenues, operational
efficiencies, on-going cloud adoption and a robust balance sheet, the Board
remains confident in delivering its expectations and achieving continued
growth in FY24.
Financial Review
Eckoh has had a successful year, delivering a robust level of adjusted
operating profit of £7.7 million, an increase of 48% year-on-year (FY22:
£5.2 million) and ahead of consensus market expectations. Adjusted operating
profit margin was 19.9%, an improvement from last year of 340 basis points
(FY22: 16.5%). The growth was driven by North America and the focus on large
enterprise clients, our cloud-based offering, the full year impact of the
acquisition of Syntec on 21(st) December 2021, integration of Syntec
("Syntegration") and a £0.5 million EBITDA FX benefit (FY22: loss £0.1
million and first half gain of £0.7 million) arising from the strength of our
North American activity.
Revenue for the year increased by 22% to £38.8 million (FY22: £31.8 million)
and at constant exchange(3) rates by 16%. This is split £31.8 million
recurring revenue (FY22: £24.1 million) and £7.8 million one-off revenue
(FY22: £7.1 million). Group recurring revenue was therefore 80% (FY22: 76%),
the increase being driven from the North America territory. Adjusted operating
profit(1) was £7.7 million an increase of 48% year-on-year (FY22: £5.2
million). Profit after tax for the year was £4.6 million, compared to £1.6
million in FY22. The prior year profit after tax of £1.6 million included
£1.0 million of transaction costs relating to the acquisition of Syntec and
restructuring costs of £0.9 million. In the current year there is an
exceptional legal cost and settlement agreement item of £0.2 million.
Group ARR(1) showed strong progress and demonstrates the high level of
visibility we have in our business model. As of 31 March 2023, Group ARR(1)
was £30.4 million, an increase of 18% year-on-year after restating last
year's Group ARR(1) to include the North American Coral business (FY22
restated: £25.8 million). Group ARR(1) increased by 11% at constant exchange
rates.
Total contracted business for the financial year at the Group level was £34.5
million (FY22: £22.5 million), a year-on-year increase of 55%. New contracted
business increased by 33% to £14.4 million (FY22: £10.8 million) and the
momentum in the first half continued into the second half.
Basic earnings per share for the year ended 31 March 2023 was 1.58 pence per
share (FY22: 0.59 pence per share). Adjusted earnings per share for the year
ended 31 March 2023 was 2.14 pence per share (FY22: 1.57 pence per share)
demonstrating both the strong organic growth and accretion following the
acquisition of Syntec in December 2021.
Territory performance - NA, UK&I, & ROW
Historically we have focused solely on the UK and US markets, but with the
integration of the Syntec business into Eckoh's operations and an increasingly
cloud-based security proposition enabling increased activity to come from an
expanding international market, we have shifted to segmenting our activity
into North America (NA), UK and Ireland (UK&I) and Rest of World (ROW)
revenue streams.
Revenue in North America, which represents 45% of total group revenues,
increased to £17.5 million (FY22: £12.5m). UK&I represented 53% of
total group revenues at £20.6 million and ROW represented 2% of group
revenues.
Further explanations of movements in revenue between the NA, UK&I and ROW
territories have been addressed in the Operational Review above.
Gross profit
The Group's gross profit increased to £31.2 million (FY22: £25.4 million),
an increase year-on-year of 23%. Gross profit margin was 80% for the year, in
line with last year (FY22: 80%). The UK&I gross profit margin was 82%, a
1% decrease based on the new territories or a 2% decrease from the UK division
last year. In North America, the full year margin was 79%, an increase from
last year's NA margin of 75% or 74% for last year's US division. This increase
in margin as previously indicated is a result of the continued deployment of
the new Customer Engagement Data Security Solutions in the cloud environment
together with the successful renewals of the earlier contracted on-site
solution deployments, where the lower margin hardware component becomes fully
recognised at the point of renewal.
In the UK&I, as the service is hosted on an Eckoh platform, there is
typically no hardware provided to clients and the gross profit margin is
expected to remain at 82-83%. In North America, we would expect the gross
profit margin to continue to marginally increase from 79% to c.80%. This is
driven by the continued growth of the Secure Payments activities for cloud
solutions coupled with a small number of clients with on-site solutions, who
in the coming year are due to renew their initial contract, at which point the
hardware component will be fully recognised.
Administrative expenses
Total administrative expenses for the year were £26.2 million (FY22: £23.0
million). Included in administrative expenses is the £2.5 million of
amortisation for the acquired intangible assets from the acquisition of Syntec
on 21 December 2021 (FY22: £0.8m) and exceptional legal fees and settlement
agreements of £0.2 million. Adjusted administrative expenses(4) for the year
were £23.5 million (FY22: £20.2 million).
Profitability measures
Adjusted operating profit was £7.7 million, an increase of 48% year-on-year
(FY22: £5.2 million). Included in the profit was a foreign currency gain of
£0.5 million (FY22: loss £0.1 million), which is unlikely to be repeated to
the same extent in the financial year to 31(st) March 2024. Adjusted EBITDA(2)
for the year was £9.4 million, an increase of 38% year-on-year (FY22: £6.8
million).
Year Year
ended ended
31 March 31 March
2023 2022
£'000 £'000
Profit from operating activities 5,020 2,386
Amortisation of acquired intangible assets 2,473 751
Expenses relating to share option schemes 40 241
Restructuring costs - 866
Legal costs and settlement agreements 203 -
Costs relating to business combinations - 985
Adjusted operating profit(1) 7,736 5,229
Amortisation of other intangible assets 398 392
Depreciation of owned assets 643 675
Depreciation of leased asset 618 498
Adjusted EBITDA(2) 9,394 6,794
1. Adjusted operating profit is the operating profit before
adjustments for expenses relating to share option schemes, amortisation of
acquired intangibles assets, restructuring costs, legal costs and settlement
agreements and costs relating to business combinations.
2. Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) is the profit from operating activities adjusted for
depreciation, amortisation, expenses relating to share option schemes,
restructuring costs, exceptional items and costs relating to business
combinations.
3. At constant exchange rates (using last year exchange rates)
4. Adjusted administrative expenses are administrative
expenses before adjustments for expenses relating to share option schemes,
depreciation of owned and leased assets, amortisation of acquired intangible
assets, restructuring costs, exceptional items and costs relating to business
combinations.
5. Total contracted business includes new business from new
clients, new business from existing clients as well as renewals with existing
clients.
Finance charges
For the financial year ended 31 March 2023, the interest payable charge was
£53k (FY22: £74k). The interest charge is made up of bank interest of £nil
(FY22: £23k) and interest on leased assets of £53k (FY22: £51k). The
finance interest received was £53k (FY22: £6k).
Taxation
For the financial year ended 31 March 2023, there was a tax charge of £383k
(FY22: £743k charge). The effective tax rate in the financial year ended 31
March 2023 was 7.6% (FY22: 43.8%). The current year tax rate is impacted by a
prior year adjustment relating to Syntec Holdings balance sheet as they
adopted International Accounting Standards.
Earnings per share
Adjusted diluted earnings per share was 2.09 pence per share (FY22: 1.34 pence
per share) a year-on-year increase of 56%, due to the increase in adjusted
profit before tax, a lower effective tax rate and an essentially unchanged
number of issued ordinary shares. Basic earnings per share was 1.58 pence per
share (FY22: 0.59 pence per share). Diluted earnings per share was 1.55 pence
per share (FY22: 0.51 pence per share).
Client contracts
Client contracts are typically multi-year in length and have a high proportion
of recurring revenues, usually underpinned by minimum commitments. With a
greater proportion of contracts being delivered through the cloud the initial
set up fees and hardware costs associated with larger customer premise
deployments will be reducing, leading over time to an increase in operating
margin.
Statement of financial position
Our balance sheet remains robust with a strong net cash position of £5.7
million, an increase of £2.9 million year on year (FY22: £2.8 million). The
business has a Revolving Credit Facility of £5 million, secured against the
Group's UK head office, which is an asset we own outright. As at 31 March 2023
our revolving credit facility remains undrawn.
While Eckoh continues to innovate by developing new products and features such
as those detailed in the Chief Executive Officer's review, there has been an
increase in the amount capitalised to intangible assets in the financial year
to £0.6 million relating to the Call-Recording product (FY22: £0.3m), which
was launched as expected in April 2023.
Contract liabilities and contract assets
Contract liabilities and contract assets relating to IFRS 15 Revenue from
Contracts with Customers has continued, as expected, to decrease in the
current year, principally as new contracted business in NA has been
predominantly for cloud-based solutions. Where clients contract for their
services to be provided in the cloud or on our internal cloud platform, the
level of hardware is significantly reduced, and implementation fees are
typically lower. This reduces the level of upfront cash received but drives a
greater level of revenue visibility and earnings quality. Total contract
liabilities were £9.9 million (FY22: £12.5 million), included in this
balance are £6.3 million of contract liabilities relating to the Secure
Payments product, hosted platform product or Syntec's CardEasy Secure Payments
product, a decrease of £1.8 million at the same time in the previous year.
Contract assets as at 31 March 2023 were £2.4 million (FY22: £3.8 million).
Cashflow and Liquidity
Gross cash at 31 March 2022 was £5.7 million (FY22: £2.8 million), as at 31
March 2023 there was no drawdown of debt (FY22: £nil million debt). As a
result of the acquisition of Syntec in the financial year to 31 March 2022, we
secured a new £10 million debt facility with Barclays Bank, which comprised a
£5.0 million overdraft and a £5.0 million revolving credit facility. In
November 2022, the overdraft facility was cancelled and the RCF remains in
place, but undrawn as at 31 March 2023.
During the year there has been a net cash outflow from working capital of
£1.6 million (FY22: £1.7 million cash outflow) due to the timing of
invoicing and cash receipts and as the deferred revenue for the North American
large on-site deployments has been recognised over the term of the contract,
generally three years.
Dividends
The Board are proposing a final dividend for the year ended 31 March 2023 of
0.74 pence per Ordinary Share be paid to the Shareholders whose names appear
on the register at the close of business on 22 September 2023, with a payment
date of 20 October 2023. The ex-dividend date will be 21 September 2023. This
proposal will be put to the Shareholders at the Annual General Meeting. Based
on the shares in issue at the year end, this payment would amount to £2.2m.
Consolidated statement of total comprehensive income
for the year ended 31 March 2023
2023 2022
Notes £'000 £'000
Continuing operations
Revenue 2 38,821 31,780
Cost of sales (7,578) (6,357)
Gross profit 31,243 25,423
Administrative expenses (26,223) (23,037)
Operating profit 5,020 2,386
Adjusted operating profit 7,736 5,229
Amortisation of acquired intangible assets (2,473) (751)
Expenses relating to share option schemes (40) (241)
Exceptional restructuring costs - (866)
Exceptional legal fees and settlement agreements 3 (203) -
Costs relating to acquisition 5 - (985)
Profit from operating activities 5,020 2,386
Finance charges (53) (74)
Finance income 53 6
Profit before taxation 5,020 2,318
Taxation (383) (743)
Profit for the financial year 4,637 1,575
Other comprehensive income
Items that will be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations (389) 139
Other comprehensive income for the year, net of income tax (389) 139
Total comprehensive income for the year attributable to the equity holders of 4,248 1,714
the parent company
2023 2022
Profit per share pence Pence
Basic earnings per 0.25p share 4 1.58 0.59
Diluted earnings per 0.25p share 4 1.55 0.51
Consolidated statement of financial position
as at 31 March 2023
2022 2022
Notes £'000 £'000
Assets
Non-current assets
Intangible assets 37,500 39,664
Property, plant and equipment 4,181 4,189
Right-of-use leased assets 995 1,516
Deferred tax assets 129 1,789
42,805 47,158
Current assets
Inventories 254 268
Trade and other receivables 11,778 12,283
Cash and cash equivalents 5,740 2,840
17,772 15,391
Total assets 60,577 62,549
Liabilities
Current liabilities
Trade and other payables (16,190) (18,286)
Lease liabilities (482) (609)
(16,672) (18,895)
Non-current liabilities
Lease liabilities (569) (928)
Deferred tax liabilities (1,528) (2,983)
(2,097) (3,911)
Net assets 41,808 39,743
Shareholders' equity
Called up share capital 732 732
Share premium account 22,180 22,180
Capital redemption reserve 198 198
Merger reserve 2,697 2,697
Currency reserve 732 1,121
Retained earnings 15,269 12,815
Total shareholders' equity 41,808 39,743
Consolidated statement of changes in equity
for the year ended 31 March 2023
Called up share capital Share premium Capital redemption reserve Merger Currency reserve Retained earnings Total shareholders' equity
account reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2022 732 22,180 198 2,697 1,121 12,815 39,743
Total comprehensive income for the year
Profit for the financial year - - - - - 4,637 4,637
Other comprehensive expense for the period - - - - (389) - (389)
Total comprehensive income for the year - - - - (389) 4,637 4,248
Dividends paid in the year - - - - - (1,959) (1,959)
Shares transacted through Employee Benefit Trust - - - - - (2) (2)
Shares purchased for share ownership plan - - - - - (120) (120)
Share based payment charge - - - - - (102) (102)
Transactions with owners recorded directly in equity - - - - - (2,183) (2,183)
Balance at 31 March 2023 732 22,180 198 2,697 732 15,269 41,808
Called up share capital Share premium Capital redemption reserve Merger Currency reserve Retained earnings Total shareholders' equity
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2021 638 2,663 198 2,697 982 13,239 20,417
Total comprehensive income for the year
Profit for the financial year - - - - - 1,575 1,575
Other comprehensive expense for the year - - - - 139 - 139
Total comprehensive income for the year - - - - 139 1,575 1,714
Dividends paid in the year - - - - - (1,559) (1,559)
Shares transacted through Employee Benefit Trust - - - - - (75) (75)
Purchase of own shares - - - - - (126) (126)
Shares purchased for share ownership plan - - - - - (111) (111)
Shares issued under the share options schemes 3 226 - - - - 229
Share based payment charge - - - - - 464 464
Shares issued as part of acquisition 91 19,291 - - - - 19,382
Deferred tax on share options - - - - - (592) (592)
Transactions with owners recorded directly in equity 94 19,517 - - - (1,999) 17,612
Balance at 31 March 2022 732 22,180 198 2,697 1,121 12,815 39,743
Consolidated statement of cash flows
for the year ended 31 March 2023
2023 2022
Notes £'000 £'000
Cash flows from operating activities
Cash generated from operations 5 6,956 3,362
Taxation (paid) / received (178) 88
Interest paid - (23)
Interest paid on lease liability (53) (51)
Net cash generated from operating activities 6,725 3,376
Cash flows from investing activities
Purchase of property, plant and equipment (613) (308)
Purchase of intangible assets (570) (375)
Business acquisition - (22,500)
Interest received 53 6
Net cash utilised in investing activities (1,130) (23,177)
Cash flows from financing activities
Dividends paid (1,959) (1,559)
Repayment of borrowings - (975)
Principal elements of lease payments (564) (500)
Purchase of own shares - (126)
Shares purchased for share ownership plan (120) (110)
Issue of shares net of issue costs - 13,311
Shares acquired/sold by Employee Benefit Trust - (75)
Net cash (utilised in)/ generated from financing activities (2,643) 9,966
Increase / (decrease) in cash and cash equivalents 2,952 (9,835)
Cash and cash equivalents at the start of the period 2,840 12,706
Effect of exchange rate fluctuations on cash held (52) (31)
Cash and cash equivalents at the end of the period 5,740 2,840
1. Basis of preparation
The preliminary results of Eckoh plc have been prepared in accordance with the
recognition and measurement principles of UK adopted international accounting
standards in conformity with the requirements of the Companies Act 2006 and
effective at 31 March 2023. These statements do not constitute the Company's
statutory accounts within the meaning of section 435 of the Companies Act 2006
but have been derived from those accounts.
Statutory accounts for the year ended 31 March 2022 have been delivered to the
Registrar of Companies but those for the year ended 31 March 2023 have not yet
been delivered.
The auditors have reported on the accounts for the year ended 31 March 2023;
their report was not qualified, did not include references to any matters to
which the auditors drew attention to by way of emphasis without qualifying
their report and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
Going concern
In determining the appropriate basis of preparation of the financial
statements, the Directors are required to consider whether the Group and
Company can continue in operational existence for the foreseeable future.
The Board has carried out a going concern review and concluded that the Group
and Company have adequate cash to continue in operational existence for the
foreseeable future. The Company has net current liabilities, as balances are
owed to subsidiary companies. The Board can confirm the subsidiary companies
will not request repayment within 12 months of approval of the financial
statements.
The Directors have prepared cash flow forecasts for a period in excess of 12
months from the date of approving the financial statements. As at 31 March
2023, the £5 million of Revolving Credit Facility (RCF) from Barclays Bank is
undrawn. Bank covenants have been reviewed and are comfortably achieved for
the year to 31 March 2023 and are forecast to continue to be so for at least
12 months from the date of approval of the financial statements.
Our key business indicators, total orders, new business orders and Annual
Recurring Revenue (ARR), which includes all clients that we are billing,
demonstrate strong visibility of future revenue. In NA, we continue to see the
majority of the Security Solution contracts won and delivered through Eckoh's
cloud platforms, as large enterprises have accelerated their move into the
cloud. The proportion of recurring revenue is higher for contracts delivered
through the cloud, which also improves our operational gearing, earnings
quality and visibility in the business. We anticipate the renewal rate for NA
and the UK&I businesses to remain unchanged during this period. When
preparing the cash flow forecasts the Directors have reviewed a number of
scenarios including a severe but plausible downside scenario which assumes no
new business. In all scenarios the Directors were able to conclude that the
Group has adequate cash to continue in operational existence for the
foreseeable future.
2. Segment analysis
Following the acquisition of Syntec Holdings Limited on 22(nd) December 2021,
and as part of the integration strategy of the acquired business, we have
during the financial year ended 31(st) March 2023, revised our key segments.
The key segments reviewed at Board level are North America (NA), UK &
Ireland (UK&I) and Rest of World (ROW).
Information regarding the results of each operating segment is included below.
Performance is measured on operating segments based on the information that
internally is provided to the Executive Management team, considered to be the
Chief Operating Decision Maker.
Current period segment analysis Total Total
NA UK&I ROW 2023 2022
£'000 £'000 £'000 £'000 £'000
Segment Revenue 17,513 20,573 735 38,821 31,780
Gross profit 13,752 16,780 711 31,243 25,423
Administrative expenses (9,350) (16,475) (398) (26,223) (23,037)
Operating profit 4,402 305 313 5,020 2,386
Adjusted operating profit 4,552 2,871 313 7,736 5,229
Other expenses(1) (150) (2,566) - (2,716) (2,844)
Operating profit 4,402 305 313 5,020 2,386
Profit before taxation 4,371 337 312 5,020 2,318
Segment assets
Trade and other receivables 2,864 2,784 173 5,821 5,712
Prepayments and contract assets 2,503 3,259 195 5,957 6,571
Segment liabilities
Trade and other payables 344 2,147 8 2,499 2,336
Accruals and contract liabilities 7,099 6,156 384 13,639 15,950
Capital expenditure
Purchase of tangible assets 519 94 - 613 308
Purchase of leases - 77 - 77 686
Purchase of intangible assets - 570 - 570 375
Depreciation and amortisation
Depreciation of property, plant & equipment 189 444 10 643 680
Depreciation of leased assets 162 443 12 617 495
Amortisation - 2,871 - 2,871 1,143
1. Other expenses include expenses relating to share option
schemes, amortisation of acquired intangible assets, exceptional restructuring
costs, legal costs and settlement costs and costs from business combinations.
In 2022/23 there was no one customer that individually accounted for more than
10% of the total revenue of the continuing operations of the Group. In 2021/22
there was one customer that individually accounted for more than 10% of the
total revenue of the continuing operations of the Group.
NA UK & I ROW 2023 2022
Revenue by geography £'000 £'000 £'000 £'000 £'000
United States of America & Canada 17,513 - - 17,513 18,856
UK & Ireland - 20,573 - 20,573 12,429
Rest of the World - - 735 735 495
Total Revenue 17,513 20,573 735 38,821 31,780
NA UK & I ROW Total 2023 Total 2022(1)
Timing of revenue recognition £'000 £'000 £'000 £'000 £'000
Services transferred at a point in time 3,371 3,372 169 6,192 7,039
Services transferred over time 14,142 17,201 566 31,909 24,741
17,513 20,573 735 38,821 31,780
2. The split between services transferred at a point in time
and overtime were incorrectly disclosed in the Annual Report 2022 and have
been corrected above.
The following table provides information about receivables, contract assets
and contract liabilities from contracts with customers.
2023 2022
£'000 £'000
Receivables, which are included in, 'Trade and other receivables' 5,151 4,860
Contract assets which are included in 'Trade and other receivables' 2,364 3,828
Contract liabilities which are included in 'Trade and other payables' (9,909) (9,470)
(2,394) (782)
Payment terms and conditions in client contracts may vary. In some cases,
clients pay in advance of the delivery of solutions or services; in other
cases, payment is due as services are performed or in arrears following the
delivery of the solutions or services. Differences in timing between revenue
recognition and invoicing result in trade receivables, contract assets, or
contract liabilities in the statement of financial position.
Contract assets result when costs directly attributable to the delivery of the
hardware and the implementation fees are capitalised as contract assets and
released over the contract term, thereby also deferring costs to later periods
and revenue earnt not yet invoiced.
Contract liabilities result from client payments in advance of the
satisfaction of the associated performance obligations and relates primarily
to revenue for hardware and implementation fees. Contract liabilities are
released as revenue is recognised.
Contract assets and contract liabilities are reported on a
contract-by-contract basis at the end of each reporting period.
Significant changes in the contract assets and contract liabilities balances
during the year are as follows:
31 March 2023 31 March 2022
Contract assets Contract liabilities Contract assets Contract liabilities
£'000 £'000 £'000 £'000
Revenue recognised that was included in the contract liability balance at the - 6,754 - 6,938
beginning of the period
Current year billings recognised in contract liabilities - 3,575 - 4,108
Cost of sales recognised that was included in the contract assets balance at 2,600 - 2,640 -
the beginning of the period
Costs deferred in current year and unbilled revenue included in contract 1,115 - 1,538 -
assets
Contract costs 31 March 2023 31 March 2022
£'000 £'000
Deferred implementation costs 958 1,028
Deferred hardware costs 157 510
1,115 1,538
Contract costs are capitalised as 'costs to fulfil a contract' and are
amortised when the related revenues are recognised, which are spread evenly
over the length of the contract, typically 3 years.
The contract liabilities and contract assets has continued, as expected, to
decrease in the current year, principally as new contracted business in North
America has been predominantly for cloud-based solutions. Where clients
contract for their services to be provided in the cloud or on our internal
cloud platform, the level of hardware is significantly reduced, and
implementation fees are typically lower.
Transaction price allocated to the remaining performance obligations
The total amount of revenue allocated to unsatisfied performance obligations
is £9.9m (FY22: £9.5m). We expect to recognise approximately £7.6m (FY22:
£3.9m) in the next 12 months, £1.7m (FY22: £5.5m) in 1-3 years and the
remainder in 3 years or more in time.
The amount represents our best estimate of contractually committed revenues
that are due to be recognised as we satisfy the contractual performance
obligations in these contracts. A large proportion of the Group's revenue is
transactional in nature or is invoiced monthly for support and maintenance and
these are not included in the contract liabilities.
Prior period segment analysis on new basis Total
NA UK&I ROW 2022
£'000 £'000 £'000 £'000
Segment Revenue 12,454 18,961 365 31,780
Gross profit 9,344 15,727 352 25,423
Administrative expenses (7,916) (14,878) (243) (23,037)
Operating profit 1,428 849 109 2,386
Adjusted operating profit 1,983 3,137 109 5,229
Other expenses(2) (555) (2,289) - (2,844)
Operating profit 1,428 849 109 2,386
Profit before taxation 1,404 805 109 2,318
Segment assets
Trade and other receivables 2,379 3,295 38 5,712
Prepayments and contract assets 3,351 3,004 216 6,571
Deferred tax asset 513 1,276 - 1,789
Segment liabilities
Trade and other payables 809 1,516 11 2,336
Accruals and contract liabilities 8,000 7,342 608 15,950
Capital expenditure
Purchase of tangible assets 120 188 - 308
Purchase of leases - 686 - 686
Purchase of intangible assets - 375 - 375
Depreciation and amortisation
Depreciation of property, plant & equipment 150 523 7 680
Depreciation of leased assets 130 360 5 495
Amortisation - 1,143 - 1,143
1. Since date of acquisition of Syntec Holdings Limited on 22 December 2021.
2. Other expenses comprise expenses relating to share option schemes,
amortisation of acquired intangible assets, exceptional restructuring costs
and costs from business combinations
Prior period segment analysis on old basis Total
Eckoh UK Eckoh US Syntec(1) 2022
£'000 £'000 £'000 £'000
Segment Revenue 18,596 11,487 1,697 31,780
Gross profit 15,593 8,473 1,357 25,423
Administrative expenses (14,399) (7,300) (1,338) (23,037)
Operating profit 1,194 1,173 19 2,386
Adjusted operating profit 3,194 1,728 307 5,229
Other expenses(2) (2,000) (555) (289) (2,844)
Operating profit 1,194 1,173 19 2,386
Profit before taxation 1,156 1,149 13 2,318
Segment assets
Trade and other receivables 2,904 2,059 749 5,712
Prepayments and contract assets 2,798 954 2,819 6,571
Deferred tax asset 1,103 513 173 1,789
Segment liabilities
Trade and other payables 1,364 607 367 2,336
Accruals and contract liabilities 6,216 4,191 5,543 15,950
Capital expenditure
Purchase of tangible assets 187 120 1 308
Purchase of leases - 686 - 686
Purchase of intangible assets 375 - - 375
Depreciation and amortisation
Depreciation of property, plant & equipment 525 130 25 680
Depreciation of leased assets 353 108 34 495
Amortisation 1,143 - - 1,143
NA UK&I ROW 2022
Revenue by geography in new segments £'000 £'000 £'000 £'000
United Sates of America & Canada 12,454 - - 12,454
UK & Ireland - 18,961 - 18,961
Rest of the World - - 365 365
Total Revenue 12,454 18,961 365 31,780
Eckoh UK Eckoh US Syntec 2022
Revenue by geography in old segments £'000 £'000 £'000 £'000
UK 18,117 - 739 18,856
United States of America 339 11,314 776 12,429
Rest of the World 140 173 182 495
Total Revenue 18,596 11,487 1,697 31,780
NA UK & I ROW Total 2022(1)
Timing of revenue recognition in new segments £'000 £'000 £'000 £'000
Services transferred at a point in time 3,559 3,451 29 7,039
Services transferred over time 8,895 15,510 336 24,741
12,454 18,961 365 31,780
Eckoh UK Eckoh US Syntec 2022(1)
Timing of revenue recognition in old segments £'000 £'000 £'000 £'000
Services transferred at a point in time 3,403 3,411 225 7,039
Services transferred over time 15,193 8,076 1,472 24,741
18,596 11,487 1,697 31,780
1. The split between services transferred at a point in time
and overtime were incorrectly disclosed in the Annual Report 2022 and have
been corrected.
3. Exceptional legal fees and settlement agreements
In the financial year ended 31 March 2023 legal fees and settlement agreements
of £0.2 million (settlement income of £950k received has been netted off
against legal fee expenses), have been incurred regarding commercially
sensitive matters which are required to be kept confidential by agreements
with third parties or ongoing legal negotiations.
4. Earnings per share
The basic and diluted earnings per share are calculated on the following
profit and number of shares. Earnings for the calculation of earnings per
share is the net profit attributable to equity holders of the parent.
2023 2022
£'000 £'000
Earnings for the purposes of basic and diluted earnings per share 4,637 1,575
Earnings for the purposes of adjusted basic and diluted earnings per share 6,266 4,181
Reconciliation of earnings for the purposes of adjusted basic and diluted
earnings per share
2023 2022
£'000 £'000
Earnings for the purposes of basic and diluted earnings per share 4,637 1,575
Taxation 383 743
Amortisation of acquired intangible assets 2,473 751
Expenses relating to share option schemes 40 241
Exceptional restructuring costs - 866
Legal fees and settlement costs 203 -
Costs relating to acquisition - 985
Adjusted profit before tax 7,736 5,161
Tax charge based on standard corporation tax rate of 19% (2021: 19%) (1,470) (980)
Earnings for the purposes of adjusted basic and diluted earnings per share 6,266 4,181
Denominator 2023 2022
'000 '000
Weighted average number of shares in issue in the period 292,893 265,968
Shares held by employee ownership plan (2,338) (2,028)
Shares held in Employee Benefit Trust - -
Number of shares used in calculating basic earnings per share 290,555 263,940
Dilutive effect of share options 9,210 20,558
Dilutive effect of shares for acquisition Dec 21 - 7,889
Dilutive effect of placing Dec 21 - 18,494
Number of shares used in calculating diluted earnings per share 299,765 310,881
2023 2022
Profit per share Pence Pence
Basic earnings per 0.25p share 1.58 0.59
Diluted earnings per 0.25p share 1.55 0.51
Adjusted earnings per 0.25p share 2.14 1.57
Adjusted diluted earnings per 0.25p share 2.09 1.34
5. Cashflow from operating activities
2023 2022
£'000 £'000
Profit for the financial year 4,637 1,575
Interest income (53) (6)
Interest payable 53 74
Taxation 383 743
Depreciation of property, plant and equipment 643 680
Depreciation of leased assets 617 495
Amortisation of intangible assets 2,871 1,143
Exchange differences (516) (95)
Share based payments 40 241
Operating profit before changes in working capital and provisions 8,675 4,850
Decrease / (increase) in inventories 14 (5)
Decrease in trade and other receivables 505 2,423
Decrease in trade and other payables (2,238) (3,906)
Cash generated from operations 6,956 3,362
6. Events after the Statement of Financial Position Date
Prior to the 31 March 2023, the Group were in settlement discussions with a
third party. An agreement was reached post year end with the third party and a
settlement entered into in favour of the Group. The income and costs are
included in exceptional items in Note 9.
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