Half-year Report
19/12/2024 07:00
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RNS Number : 6658Q Eckoh PLC 19 December 2024
19 December 2024
Eckoh plc
("Eckoh", the "Group", or the "Company")
Unaudited interim results for the six months ended 30 September 2024
- Cloud transition driving higher margins and quality of earnings
- North America territory 51% of revenue share
Eckoh plc (AIM: ECK) the global provider of Customer Engagement Data Security
Solutions, is pleased to announce its unaudited results for the six months to
30 September 2024.
Period ended 30 September H1 FY25 H1 FY24 Change
£m (unless otherwise stated)
Revenue 16.8 18.8 -10%
Gross profit 14.5 15.5 -7%
Group ARR(1) 30.2 30.6 -1%
North America Data Security Solutions ARR(1) ($m) 18.5 16.8 +10%
Adjusted EBITDA(3) 4.5 4.9 -8%
Adjusted operating profit(4) 3.6 4.0 -10%
Adjusted profit before taxation(4) 3.8 4.1 -7%
Profit before taxation 0.8 1.5 -46%
Basic earnings per share (pence per share) 0.09 0.43 -91%
Adjusted diluted earnings (pence per share)(5) 0.95 1.01 -7%
Net cash 10.4 7.3 +3.2
Total contracted business(6) 14.9 24.6 -39%
New contracted business 5.5 5.7 -4%
1. ARR is the annual recurring revenue of all contracts billing at
the end of the period. Included within Group ARR is all revenue that is
contractually committed and an element of UK revenue that has proven to be
repeatable, but not contractually committed.
2. Recurring revenue is defined as on-going revenue, rather than
revenue derived from the set-up and delivery of a new service or hardware.
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 and exceptional costs.
4. Adjusted operating profit and adjusted profit before tax are
adjusted for amortisation of acquired intangible assets, expenses relating to
share option schemes and exceptional costs.
5. Adjusted earnings pence per share - calculated using an effective
tax rate of 25% in both years.
6. Total contracted business includes new business from new clients
and from existing clients as well as renewals with existing clients.
Strategic highlights
· Our drive to transition clients to a cloud-based SaaS solution model
continued successfully, 100% of all new client wins during the period were for
cloud deployment and North American revenue is now 68% cloud
· Global commercial strategy is progressing well - North America now
accounts for more than half of Group revenue validating our approach on
focussing on this big geographic market opportunity
· Good progress with the cross-sell and expansion strategy of existing
client accounts, with new business from our existing clients growing by 24%
· The pipeline for new products from our expanded cloud Secure
Engagement Suite, has grown substantially
· Increasing interest in AI bots for contact centres, which provides a
further opportunity for growth
· North America pipeline remains very strong, but the elongated
sales and contracting cycles continue to delay contract completion and
therefore revenue
· Increased regulation from the new PCI DSS v4.0 standard, effective
from April 2024, has increased complexity and cost of compliance for merchants
and we are seeing tangible signs of the impact the standard is having
· Optimally positioned as market leader for the increased outsourcing
trend driven by regulatory change (PCI DSS v4.0), hybrid working and growing
security challenges for companies
· The business continues to benefit from the transition to a SaaS
business model and cloud deployment with further improvements expected for
recurring revenue, operating margins and quality of earnings
· Post-period in October, we secured more than $3m of new client
contract value in North America and with the strength of the pipeline we
expect the second half to be stronger for new business wins, in common with
the prior year
Financial highlights
· Total contracted business(6) at £14.9m (H1 FY24 £24.6m), was as
anticipated lower year-on-year due to the number of large multi-year North
American renewals in the prior period
· New business contracted in North America for Security Solutions, up
67% to $5.3 million (H1 FY24 $3.2 million)
· Group ARR(1) £30.2 million, level at constant currency and down 1%
year-on-year
· North America performing strongly with Security Solutions ARR(1) up
$1.7m or 10% to $18.5m (H1 FY24: $16.8m)
· Group revenue £16.8m, (H1 FY24: £18.8m), down £2 million
year-on-year
o The ongoing reduction of one-off revenue year-on-year from the transition to
cloud delivery continues to temper revenue growth with the removal of hardware
fees and reduction set up costs being recognised.
· Group recurring revenue(2) increased to 91% (H1 FY24: 83%),
reflecting the continued shift to the cloud and strong renewals
· Improved Gross profit margin at 86% (H1 FY24: 83%), an increase of
350bps
· Adjusted operating profit(4) £3.6m (H1 FY24: £4.0m), includes
£0.1m FX loss in both years
· Adjusted operating profit margin improving marginally to 21.6% (H1
FY24: 21.4%)
· Strong cash generation with net cash of £10.4m at period end, up
£2.1m from £8.3m at year end (H1 2024: £7.3m)
· Working capital cash outflow reduced as expected to £0.8 million (H1
FY24 £1.6 million), in line with the full year expectation of working capital
cashflow being neutral
· Eckoh's balance sheet remains robust, with no debt or drawdown on
credit facilities
Nik Philpot, Chief Executive Officer, said: "Our global commercial strategy to
focus on North America where we see the greatest opportunity for growth, is
progressing well. North America now accounts for over half of Group revenue
and the pipeline remains strong, but the backdrop remains challenging as
larger enterprise opportunities continue to have more complex and longer sales
cycles that are harder to predict from a timing perspective.
Good progress has been made with our other strategic objectives as we have
strongly grown the value that we cross-sell into our existing clients from our
expanded Secure Engagement Suite and continued our migration to a SaaS cloud
business with 68% of our North American revenue now cloud delivered and 100%
of all new client wins were for cloud deployment.
I would like to take the opportunity to thank our employees for their
continued dedication to our business as we work towards our mission to make
the world more secure and to set the standard for secure interactions between
consumers and the world's leading brands."
Details of the recommended cash offer for Eckoh by Eagle UK Bidco Limited
("Bidco"), an indirect, wholly-owned subsidiary of certain funds managed by
Bridgepoint Advisers II Limited
On 30 October 2024, the boards of Bidco and Eckoh announced that they had
reached agreement on the terms and conditions of a recommended cash
acquisition by Bidco of the entire issued and to be issued share capital of
Eckoh (the "Acquisition"). The Acquisition is intended to be implemented by
way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies
Act (the "Scheme"). On 4 December 2024, Eckoh announced that it had
published a circular in relation to the Acquisition (the "Scheme Document").
Notices convening the Court Meeting and the General Meeting for 11.00 a.m. and
11.15 a.m. respectively on 6 January 2025 (or, in respect of the General
Meeting, as soon thereafter as the Court Meeting is concluded or adjourned),
each to be held at Telford House, Corner Hall, Hemel Hempstead, Hertfordshire
HP3 9HN, are set out in the Scheme Document. The Acquisition remains subject
to the satisfaction or (where capable of being waived) waiver of certain
Conditions set out in the Scheme Document, including (but not limited to) (i)
approval of the Scheme by Scheme Shareholders, (ii) the passing of the
Resolutions necessary to implement the Scheme by the requisite majorities at
the General Meeting, (iii) sanction of the Scheme by the Court at the Sanction
Hearing, and (iv) delivery of a copy of the Court Order to the Registrar of
Companies.
The Eckoh Independent Directors, who have been so advised by Stifel and Singer
Capital Markets as to the financial terms of the Acquisition, consider the
terms of the Acquisition to be fair and reasonable. In providing advice to the
Eckoh Independent Directors, Stifel and Singer Capital Markets have taken into
account the commercial assessments of the Eckoh Independent Directors. Stifel
and Singer Capital Markets are providing independent financial advice to the
Eckoh Independent Directors for the purposes of Rule 3 of the Code.
Accordingly, the Eckoh Independent Directors recommend unanimously that Scheme
Shareholders vote in favour of the Scheme at the Court Meeting and that Eckoh
Shareholders vote in favour of the Special Resolution and Eckoh Independent
Shareholders vote in favour of the Rule 16.2 Resolution, both at the General
Meeting, as the Eckoh Independent Director who holds Eckoh Shares has
irrevocably undertaken to do in respect of his own beneficial holdings of
Eckoh Shares.
The expected timetable of principal events is set out on page 10 of the Scheme
Document. Capitalised terms used in this section shall, unless otherwise
defined, have the meanings set out in Part IX (Definitions) of the Scheme
Document.
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/ Valerija Cymbal / Yasmin Prior
eckoh@fticonsulting.com (mailto:eckoh@fticonsulting.com)
Singer Capital Markets (Nomad & Broker) Tel: 020 7496 3000
Shaun Dobson / Tom Salvesen / Alex Bond
www.singercm.com (http://www.n1singer.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) .
Publication on a website and availability of hard copies
This announcement and the documents required to be published pursuant to Rule
26 of the City Code on Takeovers and Mergers will be available, subject to
certain restrictions relating to persons resident in Restricted Jurisdictions
(as defined in the Scheme Document), on Bidco's website at
www.bridgepoint.eu/offer-for-eckoh (http://www.bridgepoint.eu/offer-for-eckoh)
and on Eckoh's website at www.eckoh.com/investors
(http://www.eckoh.com/investors) by no later than 12 noon (London time) on
the Business Day (as defined in the Scheme Document) following the publication
of this announcement. Neither the content of the websites referred to in this
announcement nor the content of any website accessible from hyperlinks in this
announcement is incorporated into, or forms part of, this announcement.
Eckoh Shareholders (as defined in the Scheme Document) may, subject to
applicable securities laws, request a hard copy of this announcement (and any
information incorporated into it by reference to another source) by contacting
Eckoh's registrar, Link Group, on 0371 664 0321. Lines are open from 9.00 a.m.
to 5.30 p.m. (London time) Monday to Friday (except English and Welsh public
holidays) or by submitting a request in writing to PXS 1, Central Square, 29
Wellington Street, Leeds, LS1 4DL, United Kingdom, with an address to which
the hard copy may be sent. Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United Kingdom will be charged at
the applicable international rate. For persons who receive a copy of this
announcement in electronic form or via a website notification, a hard copy of
this announcement will not be sent unless so requested. Eckoh Shareholders
may, subject to applicable securities laws, also request that all future
documents, announcements and information to be sent in relation to the
Acquisition (as defined in the Scheme Document) should be in hard copy form.
Chief Executive Officer's statement
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.
Our strategy to become a cloud first SaaS solutions provider, is continuing to
make good progress. Once again 100% of our new client contracts in the period
were for cloud delivery, with several on-premise clients also upgrading to a
cloud solution. The progress here is best measured through the split of the
North American ARR between cloud delivery and on-premise. At the end of the
first half more than two-thirds (68%) of North American ARR is for clients
deployed on the cloud, this is up from 52% at the same time last year. We
would expect the proportion of cloud deployment to continue rising and it is a
key goal and advantage, however, 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 centre
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.
The evolving regulatory change, with the update to the PCI DSS, is increasing
compliance complexity and creating new security challenges for businesses. In
addition, the evolution of the contact centre industry to a predominantly
remote or hybrid-located workforce means Eckoh is optimally positioned to
capitalise from enterprises with contact centre operations who are looking to
permanently address these challenges.
At the end of the period Group Annualised Recurring Revenue (ARR) was £30.2
million, (H1 FY24: £30.6 million), a decrease of 1% year-on-year, or level
year-on-year at constant currency. North America Data Security Solutions ARR
grew to $18.5 million, a 10% increase year-on-year from $16.8 million, offset
by a decrease in the UK of a similar level due to the imminent loss of the
largest remaining self-service client in H2 FY25. This client does continue to
utilise Eckoh's security solutions in a separate and new contract that
commenced earlier in the year.
Total revenue for the first half was £16.8 million (H1 FY24: £18.8 million),
the decrease of £2.0 million year-on-year is as previously indicated and is
predominantly due to the decrease in one-off revenue year-on-year. The one-off
revenue has decreased due to the on-going transition to cloud-based delivery
of our solutions in North America and the successful renewals during FY24 of
several large North American clients.
The North America contracts that renewed last year were for solutions
originally deployed on-premise, where the hardware revenue and implementation
fees typically represent 25-35% of contract value and are fully recognised at
the point of the initial renewal. This transition to cloud-based solutions has
the effect of tempering revenue growth in the short term but is increasing the
quality and visibility of future earnings. For more than 2 years all new
client contracts have been for cloud delivery and the element of non-recurring
charges in this model drops to only 10-15%. As a result Group recurring
revenue in the first half increased to 91% (H1 FY24: 82%).
The on-going shift of our new business and existing clients to the data
security solutions that comprise our cloud-based Secure Engagement Suite
continues to improve the strength of our business model, with improving
recurring revenue margins in the North America Territory and on a Group basis
an improving operating profit margin. Adjusted operating profit was £3.6
million (H1 FY23: £4.2 million). As most new business is now expected to be
deployed in the cloud on a SaaS basis, these key performance indicators will
continue to improve.
Operational Review
North America (NA) Territory (51% of group revenues)
The North America territory has continued to increase its share of Group
revenue and for the first time is larger than the combined UK&I and Rest
of World territory and now accounts for a 51% share (H1 FY24: 47%). We expect
the North America territory to continue to increase its share of Group revenue
with the Group's commercial focus on the large North America addressable
market.
The North American territory continues to deliver growth and the Data Security
Solutions ARR(1) at the end of the first half was $18.5 million, a
year-on-year increase of 10% (H1 FY24 $16.8 million). This is lower than the
expected ARR of $19.2 million, due to the loss of a North America client at
renewal due to them being acquired.
Total North American ARR(1), which includes both Data Security Solutions and
Coral (our agent desktop product) grew to $19.8 million (H1 FY24: $16.9
million), a 11% increase year-on-year.
Revenue for the period was $10.9 million. At a total revenue level this is a
decrease year-on-year of 2% (H1 FY24: $11.2 million), however, recurring
revenue has increased by 2% year-on-year and is now 87% of revenue (H1 FY24
82%). This increase is as expected and comes from new contracts being
delivered through the cloud with a higher recurring revenue percentage than
for an on-premise solution.
As we indicated at the full year results in June, as several clients with
large enterprise deals renewed their contracts for the first time in the
financial year ended 31 March 2024, there would be a reduction year-on-year of
one-off revenue. At the point of renewal, the hardware fees and implementation
fees from the initial term of the contract are fully recognised. This
combination of new cloud deals and large renewals in the first half has seen a
33% decline in this one-off revenue year-on-year.
The total contracted orders for the first half is $12.2 million (H1 FY24:
$14.7 million), a decrease year-on-year of $1.5 million. Data Security
Solutions new contracted business of $5.3 million (H1 FY24: $3.2 million), an
increase year in year of 67%. The majority of the first half new business came
from existing clients, who continue to increase the number of products they
deploy or increase the number of licences they require, illustrating the
success of the cross-sell strategy. New business from new client wins is
expected to be much stronger in the second half than the first, in line with
last year.
In the period, the contract value for renewals was $6.4 million (H1 FY24:
$10.5 million), a decrease year-on-year due to the timing of renewals. As we
have indicated previously, there were many enterprise client contracts which
we successfully renewed for the first time in the year to 31 March 2024, and
those contracts were all renewed for multiple years. This trend has continued
with those contracts renewed in the first half, there was only one large
enterprise client who didn't renew due to it being acquired.
Coral
In the period, Coral had revenue of $0.8 million (H1 FY24: $1.1 million Coral
& third-party Support). Total contracted business for Coral was $1.2
million (H1 FY24: $1.0 million), of which $0.5 million was new contracted
business (H1 FY24: $0.9 million). Coral is a browser-based agent desktop for
contact centres, that aids the following:
· to increase efficiency by bringing all the contact centre agent's
communication tools onto 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 few but high in value when they occur, and they have a
very long sales cycle (usually years) as the decision has long term
implications for the client. This makes the timing of any new agreements both
lumpy and hard to predict.
UK & Ireland (UK & I) Territory, and Rest of World (ROW) Territory
(49% of group revenues)
The UK & Ireland and Rest of World territories are reported on a combined
basis due to the small proportion of ROW revenue at this stage.
ARR at the end of the period was £14.9 million (H1 FY24: £16.4 million), a
decrease year-on-year of £1.5 million, because of the loss of the largest
remaining self-service client in H2 FY25. The business continues to transition
to a Data Security Solutions only proposition, with 92% of revenue (FY24: 90%)
now coming from clients who take these solutions as part of their overall
proposition. We continue to see churn levels in this base of clients to be
extremely low.
Total revenue for the period was £8.3 million, a decrease of 16% (H1 FY24:
£9.9 million), recurring revenue was £7.9 million, (H1 FY24: £8.2 million),
a decrease of 4% which is the full year impact of the self-service clients
that terminated during FY24 as disclosed in the full year results in June
2024.
All the UK clients are either deployed on our own private cloud platform, or
on the newer Secure Voice Cloud platform, which is hosted in Amazon Web
Services (AWS). As a result, the UK&I & ROW business has high
recurring revenue at 95% (H1 FY24: 83%). At the full year results we explained
that with the renewal in H1 FY24 of a client with a 10-year contract, a
significant amount of one-off revenue would be expected to reduce
year-on-year. This has been the case with one-off revenue in the period of
£0.4 million (H1 FY24: £1.7 million).
As we have previously explained, we would expect the UK & I territory's
revenue to stabilise in FY25 with modest growth expected from FY26 and beyond,
with the global commercial team's focus on the more lucrative and larger North
America market. We will, however, continue to look to grow and expand in our
existing client base and compete for the largest new enterprise contracts in
the region and have some large new opportunities in the pipeline.
Gross profit in the period was £6.7 million, (H1 FY24: £8.4 million). Gross
margin was 91%, an increase of 6% from the first half last year, with Security
Solutions and lower one-off revenue driving a higher margin.
Total contracted business was £5.3 million down on last year's £12.8 million
in the prior year, largely due to the timing of large renewals in the prior
year comparatives. New contracted business was £0.9 million (H1 FY24: £2.4
million). Renewals in the period were £4.4 million (H1 FY24: £10.4 million),
with only one large contract due for renewal, Transport for London, which was
renewed successfully for a multi-year period.
Our strategic decision to prioritise the North American region does inevitably
mean we are likely to sacrifice possible modest growth in UK&I for much
more lucrative gains in North America. Nevertheless, we will continue to
pursue meaningful opportunities in the region.
Financial Review
Overall the Group continues to progress with its cloud-based SaaS transition
and the progress made, particularly in the North America Territory, can be
seen in the improvements in annualised recurring revenue, recurring revenue %
and for the Group in the Operating profit margin.
Revenue for the period was £16.8 million (H1 FY24: £18.8 million), a
decrease year-on-year of 10% or at constant exchange rates a 9% decrease
year-on-year. Group recurring revenue was £15.3 million, a decrease of 1%
year-on-year, with recurring revenue strengthening to 91%, an increase
year-on-year of 860 basis points, the increase being driven by the reduction
in one-off revenue as expected and set out in the full year results in June
24. The reduction in one-off revenue is two-fold, in the North America
territory, all new contracts continue to be deployed in the cloud and as the
majority of the on-premise clients, have renewed their initial contract term,
there is limited hardware revenue being recognised in one-off revenue.
Secondly in the UK, in FY24, a large 10-year contract was successfully
renewed, there was significant one-off revenue being spread, under IFRS 15
over the period of the contract, at renewal this was fully recognised.
Adjusted operating profit was £3.6 million (H1 FY24: £4.2 million), both
years include a foreign currency loss in the period of £0.1m. The operating
profit margin for the period was 21.6%, marginally ahead of the same period
last year. In the period there is an exceptional cost of £1.0 million for
legal fees, further information relating to this is set out in note 4.
Group ARR was £30.2 million, a decrease of 1% on prior year or at constant
exchange rates level year-on-year (H1 FY24 £30.6 million).
Total contracted business for the period at the Group level was £14.9
million, (H1 FY24: £24.6 million), a year-on-year decrease of 39%. New
contracted business was £5.5 million (H1 FY24: £5.7 million), with the
year-on-year shortfall driven predominantly from the timing of renewals.
Basic earnings per share for the period was 0.09 pence per share (H1 FY23:
0.43 pence per share). Adjusted earnings per share for the period was 0.98
pence per share (H1 FY24 1.05 pence per share).
Territory performance - NA, UK&I, & ROW
North America revenue represented 51% (H1 FY24: 47%) of total group revenues
and this is the first reporting period, where North America revenue has been
greater than the UK&I and ROW. North America revenue was £8.5 million, a
4% decrease to last year, but due to the year-on-year decline in one-off
revenue as previously mentioned, recurring revenue % increased by 5 percentage
points to 87% in the period (H1 FY24: 82%). UK&I and ROW represented 49%
of total group revenues at £8.3 million, a decrease year-on-year of 16% and
recurring revenue of 95% (H1 FY24: 83%).
Further explanations of movements in revenue between the North America, UK
& Ireland and ROW territories have been addressed in the Operational
Review above.
Gross profit
The Group's gross profit was £14.5 million, a decrease year-on-year of 7%,
but due to the change in mix of revenue from one-off revenue to recurring
revenue, gross profit margin increased by 350 basis points to 86% (H1 FY24:
83%). The UK & Ireland and ROW gross profit margin increased to 91%
year-on-year (H1 FY24: 85%) due to the increase in recurring revenue, which
has a higher gross profit margin than one-off revenue. In the North America
territory, the margin in the period increased to 82% (H1 FY24: 80%). This
increase in North America margin, is as previously indicated and is as 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-premise solution deployments, where the
lower margin hardware component becomes fully recognised at the point of
renewal.
Administrative expenses
Total administrative expenses for the period were £13.8 million (H1 FY24:
£14.0 million). Adjusted administrative expenses for the period were £10.8
million, an improvement year-on-year of 6% (H1 FY24: £11.5 million).
Exceptional costs in the period were £1.0 million (H1 FY24 £0.9 million).
Included in administrative expenses is a trading FX loss of £0.1 million (H1
FY24: £0.1 million loss).
Profitability Measures
Adjusted Operating profit(4) for the period was £3.6 million (H1 FY24: £4.0
million). Adjusted EBITDA(3) for the period was £4.5 million (H1 FY24: £4.9
million).
Six months Six months Year
ended ended ended
30 Sept 2024 30 Sept 2023 31 March 2024
£'000 £'000 £'000
Profit from operating activities 658 1,455 3,246
Amortisation of acquired intangible assets 1,298 1,237 2,479
Expenses relating to share option schemes 686 412 771
Exceptional restructuring costs - 144 531
Exceptional legal fees and settlement agreements 982 772 1,300
Adjusted operating profit(4) 3,624 4,020 8,327
Amortisation of intangible assets 256 220 516
Depreciation of owned assets 278 316 636
Depreciation of leased assets 352 326 681
Adjusted EBITDA(3) 4,510 4,882 10,160
Adjusted profit before tax was £3.8 million (H1 FY24: £4.1m) and is after
including in the adjusted operating profit, the net interest income of £182k
(H1 FY24: £93k).
Finance charges
For the financial period ended 30 September 2024, the net interest income was
£182k (H1 FY23: £93k income). The interest income is made up of bank
interest receivable of £197k (H1 FY24: £111k), offset by interest on leased
assets of £15k (H1 FY24: £18k).
Taxation
For the financial period ended 30 September 2024, there was a tax charge of
£0.6 million (H1 FY24: £0.3 million).
Earnings per share
Basic earnings per share was 0.09 pence per share (H1 FY24: 0.43 pence per
share). Diluted earnings per share was 0.09 pence per share (H1 FY24: 0.42
pence per share). Adjusted diluted earnings per share was 0.95 pence per share
(H1 FY24: 1.01 pence per share).
Client contracts
Client contracts are typically multi-year in length and have a high proportion
of fixed recurring revenues from the software licences for our products. There
are a smaller and declining number of UK contracts that are underpinned by
transactional minimum commitments. In the NA territory we now have a greater
proportion of contracts being delivered through the cloud, so the initial set
up fees and hardware costs associated with larger customer premise deployments
have reduced. This has led to total revenue growth being lower than
recurring revenue growth. Recurring revenue as a percentage of regional
revenue in the NA territory has increased from 52% in FY21 to 87% in the first
half and gross profit margin has increased in the same period from 71% to 82%.
This trend is also driving the continued improved Operating profit margin we
are seeing at a Group level. This has resulted in a reduction in contract
liabilities held on the Group's balance sheet and a net cash outflow for
working capital, this is expected to normalise in the current year and onwards
into FY25.
Contract liabilities and contract assets
Contract liabilities and contract assets relating to IFRS 15 Revenue from
Contracts with Customers continue to decrease, 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 platforms, 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 £7.1 million (H1 FY24: £8.4
million) included in this balance are £3.0 million of IFRS 15 contract
liabilities relating to the Secure Payments product, hosted platform product
or Syntec's CardEasy Secure Payments product, a decrease of £0.9 million from
March 2024. Contract assets as at 30 September 2024 were £1.1 million
compared to £1.3 million at March 2024 (H1 FY24: £1.7 million).
Cashflow and liquidity
Net cash at 30 September 2024 was £10.4 million, an increase of £2.1 million
from the year end at 31 March 2024 and an increase of £3.2 million to the
previous year. The £2.1 million cash inflow from 31 March 2024 includes a
net cash outflow for trade debtors, trade creditors, inventory and tax of
£0.8 million (H1 FY24: cash outflow £1.6 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 2024
Six months ended 30 September Six months ended 30 September Year ended
2024 2023 31 March
2024
£'000 £'000 £'000
Continuing operations
Revenue 16,803 18,772 37,204
Cost of sales (2,341) (3,268) (6,168)
Gross profit 14,462 15,504 31,036
Administrative expenses (13,804) (14,049) (27,790)
Operating profit 658 1,455 3,246
Adjusted operating profit 3,624 4,019 8,327
Amortisation of acquired intangible assets (1,298) (1,237) (2,479)
Expenses relating to share option schemes (686) (411) (771)
Exceptional restructuring costs - (531)
Exceptional legal fees and settlement agreements (982) (916) (1,300)
Profit from operating activities 658 1,455 3,426
Finance charges (15) (18) (45)
Finance income 197 111 234
Profit before taxation 840 1,548 3,435
Taxation (580) (274) 1,109
Profit for the period 260 1,274 4,544
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations (144) 83 (90)
Other comprehensive (expense)/ income for the period, net of income tax (144) 83 (90)
Total comprehensive income for the period attributable to the equity holders 116 1,357 4,454
of the Company
Profit per share expressed in pence
Basic earnings per 0.25p share 0.09 0.43 1.56
Diluted earnings per 0.25p share 0.09 0.42 1.50
Consolidated statement of financial position
as at 30 September 2024
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets 33,966 36,497 35,334
Property, plant and equipment 3,928 3,945 4,222
Right -of-use leased assets 427 668 788
Deferred tax asset 516 156 570
38,837 41,266 40,914
Current assets
Inventories 205 223 216
Trade and other receivables 9,233 10,238 12,599
Cash and cash equivalents 10.433 7,278 8,309
19,871 17,739 21,124
Total assets 58,708 59,005 62,038
Liabilities
Current liabilities
Trade and other payables (12,292) (13,294) (14,356)
Lease liabilities (453) (482) (485)
Provisions for liabilities - (1,365)
(12,745) (13,776) (16,206)
Non-current liabilities
Lease liabilities - (231) (344)
Deferred tax liabilities (186) (1,535) (218)
(186) (1,766) (562)
Net assets 45,777 43,463 45,270
Shareholders' equity
Called up share capital 732 732 732
Share premium account 22,180 22,180 22,180
Capital redemption reserve 198 198 198
Merger reserve 2,697 2,697 2,697
Currency reserve 498 815 642
Retained earnings 19,472 16,841 18,821
Total equity 45,777 43,463 45,270
Consolidated interim statement of changes in equity
as at 30 September 2024
Called up share capital Share premium Capital redemption reserve Merger reserve Currency reserve Retained earnings Total Shareholders' equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2024 732 22,180 198 2,697 642 18,821 45,270
Total comprehensive income for the period
Loss for the period - - - - - 260 260
Other comprehensive expense for the period - - - - (144) - (144)
Contributions by and distributions to owners - - - - (144) 260 116
Shares transacted through Employee Benefit Trust - - - - - - -
Shares issued under the share option scheme - - - - - - -
Shares purchased for share ownership plan - - - - - (97) (97)
Share based payment charge - - - - - 489 489
Transactions with owners recorded directly in equity - - - - - 391 391
Balance as at 30 September 2024 732 22,180 198 2,697 498 19,472 45,777
Called up share capital Share premium Capital redemption reserve Merger reserve Currency reserve Retained earnings Total Shareholders' equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2023 732 22,180 198 2,697 732 15,269 41,808
Total comprehensive income for the period
Profit for the period - - - - - 1,274 1,274
Other comprehensive expense for the period - - - - 83 - 83
Contributions by and distributions to owners - - - - 83 1,274 1,357
Shares transacted through Employee Benefit Trust - - - - - - -
Shares issued under the share option schemes - - - - - - -
Shares purchased for share ownership plan - - - - - (104) (104)
Share based payment charge - - - - - 402 402
Transactions with owners recorded directly in equity - - - - - 298 298
Balance at 30 September 2023 732 22,180 198 2,697 815 16,841 43,463
Consolidated statement of cash flows
for the six months ended 30 September 2024
Six months Six months Year ended
ended ended 31 March
30 September 2024 30 September 2023 2024
£'000 £'000 £'000
Profit after taxation 260 1,274 4,544
Interest income (197) (111) (234)
Interest payable 15 18 45
Taxation 580 274 (1,109)
Depreciation of property, plant and equipment 278 316 636
Depreciation of leased assets 349 326 681
Amortisation of intangible assets 1,555 1,457 2,995
Share based payments 686 412 36
Exchange differences 100 67 771
Operating profit before changes in working capital and provisions 3,626 4,033 8,365
Decrease in inventories 11 31 38
Decrease/ (Increase) in trade and other receivables 3,365 1,540 (821)
Decrease in trade and other payables (2,637) (2,908) (1,834)
(Decrease) / Increase in provisions (1,365) - 1,365
Net cash generated from operating activities 3,000 2,696 7,113
Taxation paid (183) (292) (49)
Interest paid on lease liability (15) (18) (45)
Net cash from continuing operating activities 2,802 2,386 7,019
Cash flows from investing activities
Purchase of property, plant and equipment (12) (76) (690)
Purchase of intangible fixed assets (351) (408) (869)
Interest received 197 111 234
Net cash utilised in continuing investing activities (166) (373) (1,325)
Cash flows from financing activities
Dividends paid - - (2,164)
Principal elements of lease payments (376) (338) (700)
Shares purchased for share ownership plan (97) (103) (174)
Cash outflow from acquiring shares from the Employee Benefit Trust - - (11)
Net cash utilised in continuing investing activities (473) (441) (3,049)
Increase in cash and cash equivalents 2,163 1,572 2,645
Cash and cash equivalents at the start of the period 8,309 5,740 5,740
Effect of exchange rate fluctuations on cash held (39) (34) (76)
Cash and cash equivalents at the end of the period 10,433 7,278 8,309
Notes to the condensed consolidated interim financial statements
For the six months ended 30 September 2023
GENERAL INFORMATION
Eckoh plc is a public Company limited by shares and is incorporated in the
United Kingdom and registered in England 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 Customer Engagement Data Security Solutions.
These condensed consolidated interim financial statements for the six months
ended 30 September 2024 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 2024 have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted for use in the UK. 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 2024, which have been prepared
in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure
Framework" and applicable law).
The unaudited condensed consolidated interim financial information for the
period ended 30 September 2024 does not constitute statutory accounts as
defined in Section 435 of the Companies Act 2006. The comparative figures
for the year ended 31 March 2024 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 2024.
In reporting financial information, the Group presents alternative performance
measures ("APMs"). 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 underlying operational performance of
the Group in a specific year.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 18 December 2024.
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. The Directors have considered the impact of the
acquisition as detailed in Note 4 for the going concern assessment and our
conclusion remains unchanged. 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 £2.4m for the year ended 31 March 2024 of 0.82p per
share was paid on 18 October 2024.
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
2024 2023 2024
£'000 £'000 £'000
Earnings for the purposes of basic and diluted earnings per share 260 1,274 4,544
Earnings for the purposes of adjusted basic and diluted earnings per share(1) 2,855 3,084 6,387
1. Calculated using tax rate of 25% in all years
Reconciliation of earnings for the purposes of adjusted basic and diluted
earnings per share
H1 FY25 H1 FY24 FY24
£'000 £'000 £'000
Earnings for the purposes of basic and diluted earnings per share 260 1,274 4,544
Taxation 580 274 (1,109)
Amortisation of acquired intangible assets 1,298 1,237 2,479
Expenses relating to share option schemes 686 412 771
Exceptional restructuring costs - 144 531
Exceptional legal fees and settlement agreements 982 772 1,300
Adjusted profit before tax 3,806 4,112 8,516
Tax charge based on standard corporation tax rate of 25% (2024: 25%) (951) (1,028) (2,129)
Earnings for the purposes of adjusted basic and diluted earnings per share 2,855 3,084 6,387
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2024 2023 2024
Denominator '000 '000 '000
Weighted average number of shares in issue in the period 292,949 292,909 292,921
Shares held by employee ownership plan (2,764) (2,608) (2,587)
Number of shares used in calculating basic earnings per share 290,185 290,302 290,334
Dilutive effect of share options 11,393 13,819 13,459
Number of shares used in calculating diluted earnings per share 301,578 304,121 303,793
H1 FY25 H1 FY24 FY24
Profit per share pence pence Pence
Basic earnings per 0.25p share 0.09 0.43 1.56
Diluted earnings per 0.25p share 0.09 0.42 1.50
Adjusted earnings per 0.25p share 0.98 1.05 2.20
Adjusted diluted earnings per 0.25p share 0.95 1.01 2.10
4. Subsequent events to 30 September 2024
On 7 October 2024 Eckoh confirmed that after a protracted legal and subsequent
arbitration process relating to a historical patent dispute brought by a
competitor, Eckoh was pleased to confirm that the process had been
successfully concluded to Eckoh's benefit and under a Settlement Agreement
Eckoh has been paid a sum of £2.25m, which represents the substantial
majority of costs (accounted for as exceptional items) it has incurred over
the past two and half years.
The Agreement also provides legal certainty that there can be no future
litigation brought by the competitor against Eckoh relating to the patent
family in question.
On 30 October 2024, the boards of Eagle UK Bidco Limited ("Bidco"), an
indirect, wholly-owned subsidiary of certain funds managed by Bridgepoint
Advisers II Limited, and Eckoh announced that they had reached agreement on
the terms and conditions of a recommended cash acquisition by Bidco of the
entire issued and to be issued share capital of Eckoh (the "Acquisition").
The Acquisition is intended to be implemented by way of a Court-sanctioned
scheme of arrangement under Part 26 of the Companies Act (the "Scheme"). On
4 December 2024, Eckoh announced that it had published a circular in relation
to the Acquisition (the "Scheme Document"). The Acquisition remains subject to
the satisfaction or (where capable of being waived) waiver of certain
Conditions set out in the Scheme Document, including (but not limited to) (i)
approval of the Scheme by Scheme Shareholders, (ii) the passing of the
Resolutions necessary to implement the Scheme by the requisite majorities at
the General Meeting, (iii) sanction of the Scheme by the Court at the Sanction
Hearing, and (iv) delivery of a copy of the Court Order to the Registrar of
Companies. The expected timetable of principal events is set out on page 10
of the Scheme Document. Capitalised terms used in this paragraph shall,
unless otherwise defined, have the meanings set out in Part IX (Definitions)
of the Scheme Document.
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