REG - Eckoh PLC - Final Results
11/06/2024 07:00
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RNS Number : 8782R Eckoh PLC 11 June 2024
11 June 2024
Eckoh plc
("Eckoh" or the "Group")
Full year audited results for year ended 31 March 2024
- Record new contracted business in North America, up 44% year-on-year to
$16.8m
- Record year of total contracted business at £52.6m driven by high
renewals and strong H2 new business wins
- Strong progress with cloud transition and new cloud contracts, driving ARR,
cost efficiency and margin enhancement
- New regulatory standards, hybrid working and new commercial strategy driving
record sales pipeline
Eckoh plc (AIM: ECK), the global provider of Customer Engagement Data Security
Solutions, is pleased to announce its full year audited results for the year
ended 31 March 2024.
Nik Philpot, Chief Executive Officer, said: "This was in many ways a milestone
year for Eckoh, with record levels of contracts won, a record level of new
business secured in North America and a record level of client renewals. It
was also the first year when all new contracts won were for cloud deployments,
illustrating the pace at which our cloud transition is proceeding, and whilst
this has tempered our headline revenue growth it continues to improve our
revenue visibility and margin. It's testament to the quality, performance and
hard work of our team that this strategic progress has been made.
The first half of the year was all about excellent contract renewals, but the
second half was all about new business wins, and we have built a strong sales
pipeline of exciting new business opportunities, supported by the impact that
the new PCI standard is having as well as the significant risk of operating
work from home agents without security measures.
The strategic decision at the beginning of the year to create a single
commercial team focused on North America has delivered early success, with the
record level of new business and the number of long multi-year contract
renewals, which gives us excellent revenue visibility and improves our ability
to further increase our strong cross-sell and upsell pipeline. We expect
further progress with this strategy in FY25, as we continue to implement the
plans to unlock the value in our largest accounts and as we leverage our cloud
platforms and enhanced product set.
We are excited by the positive trends in the business and we are confident
that Eckoh will continue to strengthen our market-leading position by
assisting enterprises with the growing challenges that they are facing
globally to maintain regulatory compliance and keep their customers' data and
engagements secure."
£m (IFRS unless otherwise stated) FY24 FY23 Change
Revenue 37.2 38.8 -4%
Gross profit 31.0 31.2 -1%
North America (NA) Security Solutions ARR ($m)(1) 16.8 15.9 +6%
Total ARR(1),(2) 30.8 30.4 +1%
Adjusted EBITDA(3) 10.2 9.4 +8%
Adjusted operating profit(4) 8.3 7.7 +8%
Profit after taxation 4.5 4.6 -2%
Basic earnings pence per share 1.56 1.58 -1%
Adjusted earnings pence per share(5) 2.20 1.98 +11%
Net cash 8.3 5.7 +2.6
Proposed final dividend (pence) 0.82 0.74 +11%
Total contracted business(6) 52.6 34.5 +52%
New contracted business(7) 18.7 14.4 +29%
Financial Highlights
· Record level of total contracted business(6) at £52.6m, up 52%
(FY23: £34.5m), driven by strong multi-year renewals and strong new
contracted business in H2. New contracted business increased by 29% to £18.7m
(FY23: £14.4m)
· Record new business contracted in North America for Security
Solutions, up 44% to $16.8m (FY23: $11.3m)
· Group ARR(1) £30.8 million, up 1% year-on-year or 3% at
constant currency
· North America Security Solutions ARR(1) up 6% to $16.8m (FY23:
$15.9m), which represents a CAGR of 27% since FY21, and with the new business
contracted in H2 but not yet live this represents a further 14% of growth
· Group revenue £37.2m (FY23: £38.8m), down 4% largely because
of the timing of the new business wins and the ongoing transition of clients
to the cloud, which removes one-off hardware fees and reduces set up costs
· Gross profit margin 83% (FY23: 80%), an increase of 290bp
· Adjusted operating profit(4) up 8% to £8.3m (FY23: £7.7m),
this includes a £0.1m FX loss versus a FX gain of £0.5m in FY23, so a 17%
increase year-on-year pre-forex
· Continued improvement of adjusted operating profit margin
driven by the cloud transition and operational efficiency, increasing by 250
bp to 22.4% (FY23: 19.9%)
· Group recurring revenue(2) increased to 84% (FY23: 80%),
reflecting strong renewals and the cloud transition
· Recurring revenue in North America increased to 82% (FY23: 76%)
and to 86% (FY23: 83%) for UK & ROW
· Strong cash generation with net cash position ahead of market
expectations at £8.3m (FY23: £5.7m), up £2.6m
· Eckoh's balance sheet remains robust, with no debt or drawdown
on credit facilities
· Proposed final dividend of 0.82p per share (FY23: 0.74p),
demonstrating the Board's confidence in the significant growth opportunity
Strategic highlights
· Our drive to transition clients to a cloud-based SaaS solution
model continues successfully:
o Delivering cost efficiencies, improving operating margins and quality of
earnings
o Group ARR now represents 83% of Group revenue, a 5% increase on the prior
year (FY23: 78%)
o 100% of all new client wins were for cloud deployment (first ever cloud
deal was in FY20)
o Positive reception from new and existing clients to the expanded Secure
Engagement Suite, with new clients contracting for multi-products alongside
successful upsells and cross-sells to our existing clients
· New global commercial strategy focusing on the North American
addressable market is delivering clear benefits:
o Record North American new business up 44%, with several key deals closed
in H2
o Record North America pipeline includes several contracts where Eckoh is
selected vendor, but longer than expected sales and contracting cycles are
delaying completion and therefore revenue
o Record level of client renewals include a majority of multi-year renewals,
enabling future expansion
· Notable new business wins include:
o 5-year contract with a US travel technology company that has multiple
global online brands
o 5-year healthcare contract with a leading US homecare business
o 3-year contract with a Fortune 500 office supplies retailer
o 3-year contract with a UK-based media and telecoms company deploying into
Amazon Connect
· The new PCI DSS v4.0 regulation, which was effective from April
2024, has increased complexity and cost of compliance for merchants and we are
already seeing tangible signs of the impact the standard is having
Current trading and Outlook
· The Board is confident of progress in the year ahead and the
following underpins the expected growth in FY25:
o Eckoh is optimally positioned as market leader for an increased
outsourcing trend driven by ongoing regulatory change (PCI DSS v4.0), hybrid
working and growing security challenges for companies
o We expect new business coming from our existing clients to grow
significantly with the enhanced product set and the increasing interest in AI
bots for contact centres provides a further opportunity for growth
o The business continues to benefit from the transition to a SaaS business
model and cloud deployment with further operating efficiencies and profit
margin improvements expected
· Overall, a positive start to the year with £8m+ of total contracted
business signed year to date
1. ARR is the annual recurring revenue of all contracts billing
and contractually committed at the end of the period.
2. Included within ARR is all revenue that is contractually
committed and an element of UK&ROW revenue that has proven to be
repeatable, but not contractually committed.
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 items.
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 25%.
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 2024 is revenue of £38.9 million, adjusted operating profit
of £8.2 million and cash of £8.2m.
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 / Valerija Cymbal / Yasmin Prior
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 through
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 another significant and positive year for Eckoh, with
our strategy to become a cloud-first SaaS solutions provider continuing to
make good progress. Our first half was all about excellent multi-year contract
renewals, while the second half was about new business wins resulting in a
record level of total contracted business at the year-end of £52.6m, up 52%
(FY23: £34.5m). We also generated record levels of new business in North
America, validating our decision to focus on that key market.
This year was notable for being the first time that 100% of our new client
contracts were for cloud delivery. It has taken since FY20 to move from an
entirely on-premise client base to one which is now largely cloud. The ongoing
transition will continue to deliver benefits and enhance our business model,
further enhancing levels of recurring revenue and our revenue visibility,
improving our gross profit margin and enhancing our operational efficiency as
demonstrated by our operating profit margin improving 250 basis points to
22.4% for the year.
Momentum is building in our key North American market. The new business
contracted in North America in H2 demonstrated the strong pipeline we had, and
continue to have, in this key market and underpins the expected growth of the
business as we move into the new financial year.
Background to our proposition
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 and secure the customer enquiries and payments that occur through
their contact centres. Our secure engagement solutions 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.
The pandemic was a catalyst for the rapid evolution of the contact centre
industry to a predominantly remote or hybrid-located workforce. This has
brought new levels of flexibility to the delivery of these services for
businesses, but also major security challenges, which has in turn created a
further compelling growth driver for Eckoh.
More recently there has been much debate about the role that AI and in
particular 'conversational bots' will play in the evolution of the contact
centre industry and the way that customers will engage in the future. We see
this as an opportunity rather than a threat, as our technology works just as
effectively with a bot as it does with a human providing the necessary
security that will still be required to manage sensitive data shared with this
technology.
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 the data. If the process can be performed without doing
this, then this removes the risk of breach for our client or fraud for the
customer. This is our specialism and an approach for which we have a portfolio
of patents.
A clear growth strategy
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.
New commercial strategy the right move and successful launch of Secure
Engagement Suite
A year ago, we combined our commercial teams based in the UK and US to focus
almost entirely on the North American territory, where we have the largest
addressable market and a significant opportunity for continued strong growth.
Our estimates are that the addressable market in North America is around 15
times that of the UK and given the average contract value is significantly
higher this makes the differential even greater. It therefore seemed sensible
to pool our resources to address the largest opportunity in the most effective
manner.
We introduced multiple products into the North American market for the first
time in FY24, with the launch of our Secure Engagement Suite, which is
delivered through our cloud platforms. This new go-to-market approach is still
in the early stages but is already delivering tangible results, as
demonstrated with the record levels of new business and the success in
procuring multi-year renewals with some of our largest clients.
Given the H2 timing of a large proportion of the new business in the year, the
revenue from this new contracted business is not yet visible in the reported
revenue, but it can be seen in our Annual Recurring Revenue. North America
ARR(1) as at 31 March 2024 was $16.8 million (FY23: $15.9 million), a
year-on-year increase of 6%. However, if the new business contracted in H2 is
included (as it is scheduled to go live in H1 FY25), it represents a further
14% of growth with ARR expected to increase to $19.2 million.
· Cloud-first - the share of ARR in the North American (NA) market
coming from cloud deployments grew to 55% in the year and by the half year in
September 2024 we expect this to reach 60%. 100% of all new client deals won
in FY24 were for cloud deployment.
· Expanding existing clients - the new commercial strategy is showing
encouraging signs with increasing levels of cross-selling and upselling to
existing clients and the highest level of multi-year renewals ever achieved.
This provides a strong platform to develop client relationships over time,
expand into other parts of their business and bring new products to the table.
· North America focus - the strategic decision to focus our commercial
resources on the North American market is validated by the 27% CAGR in ARR
achieved from FY21 to FY24. With ARR expected to reach $19.2m by H1 FY25
(based on contracts already signed) and a record sales pipeline.
· Scalable growth - the cost and efficiency benefits from our ongoing
move to cloud and SaaS solutions is driving improved adjusted operating profit
margins with an underlying improvement of 250 basis points to 22.4%.
Eckoh is on a mission to set the standard for secure interactions between
consumers and the world's leading brands. We have made clear progress this
year on our strategic pillars outlined below, taking us closer to achieving
this overall goal.
Use cloud technologies to develop and enhance our proprietary solutions to
support scalable growth
The procurement of data security solutions globally will only increase, and
our focus is to continue investing in our Secure Engagement Suite and cloud
platforms to support the growth from our largest territory and strategic
focus, North America. Our market leadership lies in our ability to offer our
clients a choice of cloud platform and to deliver multiple complementary SaaS
solutions without additional deployment effort or complex integrations.
Continued innovation and expansion of our platforms and product offering
During the year we expanded our Secure Voice Cloud platform globally to
support our international clients, launching our first dedicated Asia-Pacific
Secure Voice Cloud platform in Sydney.
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.
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 55%, and by the end of H1 it is expected to reach 60%.
The graph illustrates the difference between a contract where the solution is
deployed on-premise versus the cloud. Whilst the total revenue is lower for a
cloud deployment, the recurring revenue, gross profit margin and operating
margin are all higher and it is more operationally efficient to deploy.
During the financial year, 100% of contracts won in North America were for
cloud deployments. In addition, for the clients whose contracts were renewed
during the financial year, five of them renewed to move to the cloud as part
of the renewal and a number requested an option to migrate to the cloud during
the new multi-year renewal term. 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 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.
Capitalise on global market trends and regulations to help protect customer
data through continual innovation
The implications of the new Payment Card Industry Data Security Standard v4.0
One of the key drivers for the adoption of our solutions is the Payment Card
Industry Data Security Standard ('PCI DSS'), which all merchants need to
comply with to help protect their customer's payment data, to avoid higher
payment processing charges and to reduce the risk of substantial fines. Eckoh
has maintained continual PCI DSS compliance as a Service Provider at level 1,
the highest level, since 2010.
The PCI DSS has evolved over time to try and address the ever-increasing
threat of fraud and hacking. The most meaningful change to the standard since
2016 came into force from April 2024, when v4.0 became applicable. From this
date, any organisation that is audited for compliance with the Standard (this
security audit has to occur every year) will be expected to comply with the
new regulations that were first published in March 2022. Further additional
changes will come into force in 2025.
In the graphic opposite, it is clear how significant the level of change is,
with the number of pages in the Standard rising from 139 to 360. There are 60
new requirements that have been added, and 71 that have been changed in v4.0.
The implication for merchants is that this increase in complexity will drive
up compliance costs and increase the resources required to complete 'business
as usual' processes. It is also probable that a percentage of companies will
fail their audits due to the scale and challenge of the changes. With PCI DSS
still being the regulation that drives most sales conversations for Eckoh, it
is anticipated that the challenges (and increased risk) associated with
implementing v4.0 by merchants will lead to an increase in sales opportunities
for Eckoh's solutions.
Shift to home-based agents creates new data security challenges, driving
significant new opportunities
The global contact centre industry remains extremely large, representing
around 4% of the entire workforce in both the UK and US markets. Despite the
introduction of new technology and customer contact channels over the past 20
years and an increasing drive by companies to try and move interactions to
digital channels away from voice, the size of the industry has changed
relatively little.
In the key US market, Contact Babel estimates that the number of agent
positions will only decrease 1% by 2027, representing only 35,000 agents.
(Source: "US Contact Centers: 2024-2028").
Voice remains resolutely the dominant channel of choice for customers,
especially in the US, where in 2023 it represented 63.7% of all interactions.
This is forecast to only fall by 1.6% in the coming 4 years, even with the
prospect of increasing use of conversational bots.
The fastest emerging channel is webchat which is forecast to grow to 10.6% of
all interactions by 2027, largely at the expense of email which suffers from
being a less immediate channel for assistance. Our ChatGuard product
facilitates the ability to take payments securely within this channel of
choice in the same way that CallGuard does in the voice channel, and we see
this as being a naturally complementary product for any client who operates
the chat channel. What is interesting is how few organisations initially
approach chat as a sales channel, focusing primarily on it as an assistance
tool for the customer. The advent of ChatGuard unlocks the sales value
providing a safe and secure environment for the agent and customer to transact
successfully.
What has fundamentally changed in the way the contact centre industry operates
in recent years, as a direct consequence of the pandemic, is the massive shift
to remote and hybrid working. Looking at Eckoh's largest market North America,
the figures outlined in Contact Babel's 'US Contact Centers 2024-2028'
research document regarding the percentage of remote agents in the industry,
are particularly striking:
Mean % of US contact centre agents that are hybrid or fully remote
industry-wide
2018 2019 2020 2021 2022 2023
13% 13% 66% 82% 79% 72%
While the proportion of remote or hybrid agents has decreased somewhat from
the pandemic peak, it's clear the overall change is both seismic and
permanent. Post-pandemic, contact centres have been under acute pressure to
adapt 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.
The graph opposite shows how the split of agent work locations is expected to
vary across different sizes of contact centre by the end of 2024. Notably, it
is the largest contact centres that have the highest proportion of fully
remote or hybrid agents with 88%, and it is this group that is Eckoh's primary
target market.
This changed landscape brings many and varied complications to the running of
such remote and hybrid contact centres and companies now need to tackle the
challenge and inherent data security risks that come from remote working
agents. A managed facility is far easier to control from a data security point
of view than multiple home locations and it is largely impossible to replicate
such an environment. This presents a significant challenge if the agent is
handling customer data and especially payment data.
The remote working trend provides a massive opportunity for Eckoh's solutions,
not just for data security but also for agent performance and efficiency. Our
data security proposition enables companies to remove the risk of fraud or
data breaches in remote environments by ensuring that sensitive data isn't
just blocked but replaced with valueless 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.
Within Eckoh's new products 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 ability to assist a less-experienced agent to engage like an experienced
one, will help to improve agent churn as well as driving significant
operational efficiency and cost reduction for our clients.
Maximise lifetime client value and aid retention by cross and upselling to
increase recurring revenue
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.
Across the Group we have around 230 clients, which range greatly in both size
and opportunity. As part of our change in commercial strategy to create a
single global team, we reorganised how we support and service our client
accounts 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 cross-selling and upselling
targets as well as new business targets. In the top key account tier, we have
around 25 accounts of which only two are in the UK&I region, reinforcing
again the rationale for the realignment of our valuable 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 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.
Eckoh's Secure Engagement Suite comprises complementary data security products
that can be delivered to a client either individually or as a solution set and
that are sold in a conventional SaaS licensing model usually on multi-year
contracts. After acquiring Syntec in December 2021 we redesigned our platform
and products into this new suite that is delivered to the clients through a
common cloud platform we call our Secure Voice Cloud.
The Suite was formally launched in early 2023 and over time it is expected
that more new clients will take multiple products as part of their initial
contract and that existing clients will add further products because of our
cross-selling initiatives. This is already beginning to bear fruit in the
results we have seen in the period and the pipeline that is building.
The diagram above shows the evolution of the products over time together with
a representative value or importance of the opportunity they offer. The first
seven are all now available and are delivered through our Secure Voice Cloud,
which is deployed in AWS and Azure, but with the vast majority of clients
using our AWS platforms.
As we continue to evolve our Secure Engagement Suite, some of the highlights
this year have been:
Launching our new Secure Call Recording product
· Our new product automatically secures sensitive customer data and
incorporates the ability to transcribe calls into text at a highly accurate
level, unlocking the business intelligence and insight that these
conversations contain
· Reception to the product has been excellent and we already have
clients deployed and live
· An increasing number are expected to take the service over time as
their existing call recording contracts come up for renewal, or as they move
to the cloud.
Addition of Secure Screen Recording
· An important requirement for certain clients is the addition of
screen recording, which is available imminently
· This feature records visually whatever activity the agent is doing on
their desktop and what applications they have open. It also allows the audio
from the call recording to be played back synchronously while reviewing the
visuals
· This is helpful for training purposes as well as providing a further
level of security
· We do not expect this capability to be sold on a standalone basis but
alongside Secure Call Recording, and those clients who take it will incur an
additional monthly per agent fee.
Updated our Secure Digital Payments product
During the year, we launched a significant update to our Secure Digital
Payments product, offering enhanced digital payment choice and convenience
within contact centres
· Customers now have the freedom to combine their preferred contact
channel with their favourite payment method: Apple Pay over WhatsApp, Pay by
Bank via live chat, pay-later apps over the phone, or other combinations
· It enables contact centres to:
o better serve customer needs
o extend their services to social media and third-party channels
o increase payment volumes and speed
o provide greater choice with pay-now or pay-later options and,
o provide stronger authenticated security through methods such as
fingerprint or facial recognition
· This will be followed with an upgrade to ChatGuard to add alternative
payment methods, which will be available to clients in the second quarter of
this new financial year.
Roadmap - real-time insight and transcription solution
· On the roadmap for launch this year is our real-time insight and
transcription solution that uses AI and machine learning to assist advisors in
providing the best possible assistance, whether they are experienced agents or
not
· The first phase will see the release of the insight tool which will
allow our client real-time visibility of their agent activity across their
contact centre facilities and agent's home locations
· Monitoring the performance of a hybrid agent workforce is
challenging, and security concerns are heightened, so this tool, which can be
used in combination with the Voice Security, Secure Call Recording or the
Real-time Transcription & AI products will be a valuable addition to our
client's ability to drive both service quality and security
· Phase two will deliver real-time transcription and sentiment analysis
to enable managers or supervisors to view active conversations between agents
and customers to aid or assess performance
· The AI engine will be able to guide the agent to the next best
action, based on its knowledge of previous historic outcomes, enabling less
experienced agents to perform at a higher standard thus increasing both
customer and agent satisfaction.
The impact of AI on Eckoh's market
Recently there has been significant interest and discussion regarding the
impact that AI and the use of 'conversational bots' will have on the contact
centre industry. Automation is nothing new in customer engagement and
increased self-service from AI bots will not remove the need for, or the
benefits that clients derive from Eckoh's security solutions. While over time
the proportion of interactions successfully handled by bots will increase,
human agents will continue for the foreseeable future to be the dominant
provider of customer engagement for enterprises.
Sensitive data will still need to be kept out of the client environment to
simplify PCI DSS compliance and to minimise security risks from cyber-attacks.
Bots will frequently need to 'hand off' the interaction to a human agent when
they are unable to successfully complete the task. This means that sensitive
data will still need to be protected and excluded from every session.
Eckoh's Universal License allows organisations to utilise our software on any
customer channel and interchangeably between human agents and bots. It
provides complete future-proofing for our clients who know their customer
engagement strategy will evolve, but are unsure (as most are) exactly how this
will manifest itself.
Conversational AI Bots undoubtedly deliver a compelling opportunity for
Eckoh's clients to reduce overhead on their human agents and to reduce the
cost to serve. AI Bots for large enterprises will, however, require
significant 'domain-specific' design to deliver a level of performance that
will be sufficiently good enough to be both suitable and worthwhile for
well-known brands. Eckoh has 20 years' experience in designing and delivering
domain-specific natural language speech applications, so we understand through
experience what is required to achieve success. As a provider that is already
in a position of trust with our client, is in the customer contact path and
has presence at the agent desktop, we are uniquely placed to cross-sell
Conversational Bots to existing clients or include them in solutions for new
clients.
Operational review
North America (NA) Territory (48% of group revenues)
The decision was taken just 18 months ago to focus our sales efforts on the
North American market and to unify our commercial team to achieve that goal.
Up to that point, we had only been actively selling the Voice Security product
- either CallGuard or CardEasy - to clients in the North American market, with
only the occasional client taking other products.
The advent of our new cloud-delivered set of products that secure all
engagement channels - our Secure Engagement Suite - and our ability to provide
other relevant capability with security at its core, opened up a huge
opportunity to grow the North American market and other international markets
faster. We expect to see the value and scope of initial new client contracts
increase as we deliver multiple products from the outset, and we expect to see
existing client values grow over time as we successfully upsell them with
additional products and licenses.
A good example of this is a new client contract won at the end of the year
with a US-based travel technology company that operates several online global
travel brands. They ran a formal process to procure a solution from an
organisation that had proven experience in successfully supporting the largest
companies under severe load over many years, with the highest level of
availability and technical performance. We could demonstrate that we have
supported some of the largest US brands through successive Black Friday
weekends since 2018, when volumes can rise several times overnight, with no
negative impact. They also wished to secure all their customer channels where
they may take a payment, and to ensure that process was 'frictionless' for
their customers, so they chose to purchase Eckoh licenses which cover voice,
chat and digital channels. This contract, which will start billing at the end
of the first half of the year, is the largest cloud contract won to date for
multiple products, but we expect it to be the first of many such agreements.
The base of North American clients we have already contracted (around 100 in
total) are typically huge organisations that are likely to have additional
divisions or other standalone businesses that may be suitable targets to
upsell our products to. In addition, the Secure Engagement Suite contains
complementary products (that will only increase in number over time) that
provide ample opportunity to cross-sell into these accounts. We expect that
the new business we can win from existing clients will in time be at least as
large as the value from net new clients, and this is the clear rationale for
the change in commercial approach.
Retaining client contracts is as important to us as winning new ones, and
multi-year renewals are highly significant and important for Eckoh's future
growth. It is more common in North America for companies to default to an
annual renewal cycle for technology services to ensure flexibility around
future changes in their business or market. In contrast, Eckoh's Account
Management and Client Success teams have successfully made multi-year renewals
the preferred choice for our clients. During the year our most common contract
renewal was for three years, but we also had five-year renewals with clients
who previously had signed shorter contracts. This illustrates not just the
satisfaction that our clients have with our products and the strength of our
relationship, but crucially the perception they have of the ongoing importance
and longevity of the products to their security strategy.
The North American territory continues to deliver the highest growth and the
Data Security Solutions ARR(1) at the end of the year was $16.8 million, a
year-on-year increase of 6% (FY23: $15.9 million). This represents a CAGR of
27% since FY21. The delay in signing new business in H1, due to the extended
sales and contracting process, temporarily slowed the ARR growth in this
region. However, when considering the contracts signed in H2 that are either
expected or contracted to commence billing in the first half of FY25, that
growth rises a further 14% and will lead to a meaningful positive impact on
the revenue in the second half of FY25.
Total North American ARR(1), which includes both Data Security Solutions and
Coral (our agent desktop product) grew to $17.9 million (FY23: $16.9 million).
The Group's ARR now represents 83% of Group revenue, a 5% increase on the
prior year (FY23: 78%).
Revenue for the year was $22.6 million. At a total revenue level this is an
increase year-on-year of 6% (FY23: $21.3 million), however, recurring revenue
has increased by 11% year-on-year and is now 82% of revenue (FY23: 76%). 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.
During the year several clients with large enterprise deals have renewed their
contracts for the first time. 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 year
has seen a 24% decline in this one-off revenue year-on-year. The majority of
this year-on-year decline is due to the hardware revenue component.
Despite this shift in revenue the North American territory has continued to
grow and increase its share of Group revenue and now accounts for a 48% share
(FY23: 45%). With the contracts signed in H2 in North America, North American
revenue will be greater than the UK and ROW in FY25 for the first time.
Total and New Contracted Business
· A combination of new contracted business and the increasing number
of contract renewals has grown the total contracted business by 69%
year-on-year to $35.3 million (FY23: $20.9 million)
· Increase in sales momentum as anticipated in H1, with new contracted
business wins of $17.5 million, an increase year-on-year of 39% (FY23: $12.6
million)
· Security Solutions new contracted business of $16.3 million with 80%
of this coming from new clients, with multi-product contracts and 100% of new
client deals contracted to deploy in the cloud.
Contract Renewals
· Within total contracted business are renewals of $17.8 million, more
than double the previous year
· During the year eleven renewals were successfully completed, where at
the point of renewal, the hardware and setup fees from the initial contract
are fully recognised. In addition, we have had several clients, whose initial
contract was on-premise and at renewal they have contracted to migrate to the
cloud in their next contract term
· Two clients did not renew due to a sale of their business, one
through a partner.
As clients' contracts are increasingly being deployed in the cloud, in
addition to higher recurring revenue, the gross profit margin of the North
American business continues to improve. Gross profit margin was 81%, an
improvement year-on-year of 250 basis points.
The majority of our new business continues to be contracted directly and this
remains our preferred sales model as it enables us to develop deep
relationships and pursue our cross-sell and upsell strategy. The % of revenue
from partnership deals remains at 8% (FY23: 8%). We are intent on entering
into strategic partnerships where we can win business that is largely outside
our normal target market. The recently announced relationship with RingCentral
is a good illustration of that approach.
Coral
In the period, Coral had revenue of $2.4 million (FY23: $2.0 million Coral
& third-party Support). Coral, a browser-based agent desktop, aids the
following:
· increases efficiency by bringing all the contact centre agent's
communication tools into a single screen;
· enables organisations, particularly those grown by acquisition,
to standardise their contact centre facilities; and
· can be implemented in environments that operate on entirely
different underlying technology.
Coral contracts are small in number but high in value when they occur. 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. It is the only product we sell that is not our own
proprietary technology; the relationship coming from a historic acquisition.
This leads to a lower gross profit than the rest of our offering.
UK & Rest of World (UK & ROW) Territory (52% of group revenues)
Total revenue for the year was £19.2 million, a decrease of 9.9% (FY23:
£21.3 million). The year-on-year decrease was impacted by £1.4 million from
the loss of two clients in H1 FY23 as previously reported, one of which went
into administration. In addition, there have been a few smaller self-service
clients that have terminated during the year, reducing revenue by a further
£1.1 million.
All the UK clients are either deployed on our own private cloud, or on the
combined Secure Voice Cloud, our integrated product. As a result, the UK &
ROW business has high recurring revenue at 86% (FY23: 83%) and a strong gross
profit margin at 86% (FY23: 82%), an improvement of 360 basis points
year-on-year.
We continue to see those clients who take security solutions as part of their
overall solution set to be much less likely to churn, and the proportion of
revenue now generated from clients who take no security solution from us is
only 10%. ARR(1) at the end of the year was £16.6 million, an increase of
1.4% (FY23: £16.3 million).
As we did in North America we saw extremely high levels of contract renewals
with multi-year agreements. What was also notable was the number of early
renewals, which has reduced the number and value of contracts that are
scheduled for renewal in this new financial year.
Total and New contracted business
· Total contracted business was £24.4 million, 42% higher than the
previous year (FY23: £17.2 million)
· New contracted business was £4.8 million (FY23: £4.2 million)
· The largest new contract win was for a three-year contract with a
large UK-based media and telecommunications provider for voice and chat
security worth £2.3m (of which £0.8m is a renewal of an existing service
that has migrated to the cloud).
Contract Renewals
· Within total contracted business are renewals of £19.6 million
(FY:23 £13.0 million), an increase of 51%
· In H1 we had a very strong level of renewals that all contained
our Data Security Solutions and were all multi-year. This was driven by our
four largest renewals for Capita O2, Tenpin, Premier Inn and Vanquis (through
Maintel). In the second half, there were further large multi-year renewals for
Allpay, PowerNI as well as VMO2, which has now contracted directly with Eckoh.
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 as illustrated by the
substantial new three-year contract with a UK-based media and telecoms company
to deploy our security solution into their new Amazon Connect solution.
Outlook
The strategic decision to create a single commercial team focused on North
America has delivered early success, with the record level of new business and
the number of multi-year contract renewals, which gives Eckoh excellent
revenue visibility and improves our ability to further increase our strong
cross-sell and upsell pipeline. We expect further progress with this strategy
in FY25, as we continue to unlock the value in our largest accounts and
leverage our cloud platforms and enhanced product set.
The Board is confident of progress in the year ahead, which has started well
with over £8m of total contracted business already signed. Furthermore,
momentum is building in our key market with a record North American sales
pipeline and the large contracts signed in the second half of FY24 expected to
commence billing in the first half of FY25.
Our expected growth in FY25 is further underpinned by the fact that Eckoh is
optimally positioned as market leader for an increased outsourcing trend
driven by ongoing regulatory change (PCI DSS v4.0), the shift to hybrid
working in contact centres and growing security challenges for companies. We
expect new business from our existing clients to grow significantly with the
new commercial strategy and enhanced product set, while the increasing
interest in AI bots for contact centres provides a future opportunity for
growth. Our transition to a SaaS business model and cloud deployment continues
to benefit the business with further operating efficiencies and profit margin
improvements expected.
We are confident that Eckoh will continue to strengthen our market-leading
position by assisting enterprises with the growing challenges that they are
facing globally, to maintain regulatory compliance and keep their customers'
data and engagements secure.
Financial Review
Eckoh has delivered a strong level of adjusted operating profit of £8.3
million ahead of consensus market expectations. Adjusted operating profit
increased by 8%, (FY23: £7.7 million). Adjusted operating profit margin was
22.4%, an improvement from last year of 250 basis points (FY23: 19.9%). The
growth of the business continues to be driven by North America and the focus
on large enterprise clients and our cloud-based offering. After adjusting for
the foreign exchange loss this year of £0.1m and the foreign currency benefit
in FY23 of £0.5 million the year-on-year growth was 17%.
Revenue for the year was £37.2 million, a decrease of 4% (FY23: £38.8
million) and at constant exchange(3) rates a decrease of 3%. This is split
£31.3 million recurring revenue (FY23: £31.0 million) and £5.9 million
one-off revenue (FY23: £7.8 million). Group recurring revenue was 84% (FY22:
80%), an increase of 360 basis points year-on-year and the increase being
driven from the North American territory. Adjusted operating profit(1) was
£8.3 million, an increase of 8% year-on-year (FY23: £7.7 million). Profit
after tax for the year was £4.5 million (FY23: £4.6 million). The prior year
profit after tax of £4.6 million included exceptional legal fees and
settlement agreement item of £0.2m. In the current year there are
restructuring costs of £0.5 million and an exceptional legal cost and
settlement agreement of £1.3 million.
Group ARR showed strong progress and demonstrates the high level of visibility
we have in our business model. As of 31 March 2024, Group ARR was £30.8
million, an increase of 1% year-on-year and at constant exchange rates an
increase year-on-year of 3%.
Total contracted business(5) for the financial year at the Group level was
£52.6 million (FY23: £34.5 million), a year-on-year increase of 52%. New
contracted business increased 29% to £18.7 million (FY23: £14.4 million).
Basic earnings per share for the year ended 31 March 2024 was 1.56 pence per
share (FY23: 1.58 pence per share). Adjusted earnings per share for the year
ended 31 March 2024 was 2.20 pence per share (FY23: 1.98 pence per share
restated for 25% tax rate) an increase year-on-year of 11%, demonstrating the
strong operational performance delivered in the year.
Territory performance - NA, UK & ROW
Revenue in North America, which represents 48% of total group revenues,
increased to £18.0 million (FY23: £17.5 million). UK&I represented 50%
of total group revenues at £19.2 million and ROW represented 2% of group
revenues.
Further explanations of movements in revenue between the NA, UK and ROW
territories have been addressed in the Operational Review above.
Gross profit
The Group's gross profit increased to £31.0 million (FY23: £31.2 million).
Gross profit margin was 83% for the year, an increase of 290 basis points on
last year (FY23: 80%). The UK & ROW gross profit margin was 86%, an
increase of 360 basis points (FY23: 82%). In North America, the full year
margin was 81%, an increase of 190 basis points (FY23: 79%). This increase in
margin, as previously indicated, 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.
In the UK & ROW, the service is hosted on either an Eckoh platform or on
the Group's cloud platform. In both deployment solutions, there is typically
no hardware provided to clients. The gross profit margin has improved during
the year as a number of large clients in the UK & ROW have renewed their
contracts, at this point any implementation fees have become fully recognised.
Implementation fees tend to have a lower gross profit margin than the
recurring revenue fees. In North America, we would expect the gross profit
margin to continue to marginally increase from 81% to c. 82%. This is driven
by the continued growth of the Secure Payments activities for cloud
solutions.
Administrative expenses
Total administrative expenses for the year were £27.8 million (FY23: £26.2
million). Included in administrative expenses, is the £2.5 million of
amortisation for the acquired intangible assets from the acquisition of Syntec
Holdings Limited on 21 December 2021 (FY23: £2.5 million) and exceptional
legal fees of £1.3 million (FY23: £0.2 million credit) and exceptional
restructuring costs of £0.5 million (FY23: £nil million). Adjusted
administrative expenses(4) for the year were £22.7 million (FY23: £23.5
million), a decrease yearon-year of 3%. Costs continue to be well controlled,
and with the continued deployment of new business to the cloud, the
operational efficiency of the group is leveraged to deliver operating profit
margin improvement.
Profitability measures
Adjusted operating profit was £8.3 million, an increase of 7.6% year-on-year
(FY23: £7.7 million). Included in the profit was a foreign currency loss of
£0.1 million (FY23: gain £0.5 million). Adjusted EBITDA(2) for the year was
£10.2 million, an increase of 8% year-on-year (FY23: £9.4 million).
Year Year
ended ended
31 March 31 March
2024 2023
£'000 £'000
Profit from operating activities 3,246 5,020
Amortisation of acquired intangible assets 2,479 2,473
Expenses relating to share option schemes 771 40
Restructuring costs 531 -
Legal costs and settlement agreements 1,300 203
Adjusted operating profit(1) 8,327 7,736
Amortisation of other intangible assets 516 398
Depreciation of owned assets 636 643
Depreciation of leased asset 681 618
Adjusted EBITDA(2) 10,160 9,394
1. Adjusted operating profit is the profit before adjustments
for expenses relating to share option schemes, amortisation of acquired
intangible assets and exceptional costs.
2. Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) is the profit from operating activities adjusted for
depreciation of owned and leased assets, amortisation, expenses relating to
share option schemes and exceptional items.
3. At constant exchange rates (using last year exchange rates).
4. Adjusted administrative expenses are administrative expenses
excluding expenses relating to share option schemes, depreciation of owned and
leased assets, amortisation of acquired intangible assets and exceptional
items.
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 2024, the interest payable charge was
£45k (FY23: £53k). The interest charge is made up of bank interest of £nil
(FY23: £nil) and interest on leased assets of £45k (FY23: £53k). The
finance interest received was £234k (FY23: £53k).
Taxation
For the financial year ended 31 March 2024, there was a tax credit of £1,109k
(FY23: £383k charge). The tax credit predominantly relates to the recognition
of tax losses from Syntec Limited. When Syntec was acquired, it was uncertain
as to whether these losses would be able to be utilised in the short to medium
term. This has now been established and they have been recognised in FY24.
Earnings per share
Adjusted earnings per share was 2.20 pence per share (FY23: 1.98 pence per
share restated for 25% tax rate) a year-on-year increase of 11%. Basic
earnings per share was 1.56 pence per share (FY23: 1.58 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 reduced, 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 £8.3
million, an increase of £2.6 million year-on-year (FY23: £5.7 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 2024
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 £0.8 million (FY23: £0.6 million).
Contract liabilities and contract assets
Contract liabilities and contract assets relating to IFRS 15 Revenue from
Contracts with Customers have continued, as expected, to decrease in the
current year, principally as new contracted business in NA has been wholly for
cloud-based solutions. Where clients contract for their services to be
provided in the cloud or on our internal cloud platform, there is no hardware
component and the level of implementation fees is 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 £8.5
million (FY23: £9.9 million). Included in this balance are £3.9 million of
contract liabilities relating to the Secure Payments product, hosted platform
product or Syntec's CardEasy Secure Payments product, a decrease of £2.9
million at the same time in the previous year. Contract assets as at 31 March
2024 were £1.3 million (FY23: £2.4 million).
Cashflow and liquidity
Gross cash at 31 March 2024 was £8.3 million (FY23: £5.7 million). As at 31
March 2024 there was no drawdown of the £5 million RCF debt facility (FY23:
£nil million debt).
During the year there has been a net cash outflow from working capital of
£1.2 million (FY23: £1.6 million cash outflow) due to the timing of
invoicing and cash receipts and as the deferred revenue for the NA large
on-site deployments has been recognised over the term of the contract,
generally three years.
Dividends
Post year end the Board are proposing a final dividend for the year ended 31
March 2024 of 0.82 pence per Ordinary Share be paid to the Shareholders whose
names appear on the register at the close of business on 19 September 2024,
with payment on 18 October 2024. The ex-dividend date will be 20 September
2024. This recommendation will be put to the Shareholders at the Annual
General Meeting. Based on the shares in issue at the year end, this payment
would amount to £2.4 million.
Consolidated statement of total comprehensive income
for the year ended 31 March 2024
2024 2023
Notes £'000 £'000
Continuing operations
Revenue 2 37,204 38,821
Cost of sales (6,168) (7,578)
Gross profit 31,036 31,243
Administrative expenses (27,790) (26,223)
Operating profit 3,246 5,020
Adjusted operating profit 8,327 7,736
Amortisation of acquired intangible assets (2,479) (2,473)
Expenses relating to share option schemes (771) (40)
Exceptional restructuring costs 3 (531) -
Exceptional legal fees and settlement agreements 4 (1,300) (203)
Profit from operating activities 3,246 5,020
Finance charges (45) (53)
Finance income 234 53
Profit before taxation 3,435 5,020
Taxation 1,109 (383)
Profit for the financial year 4,544 4,637
Other comprehensive income
Items that will be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations (90) (389)
Other comprehensive income for the year, net of income tax (90) (389)
Total comprehensive income for the year attributable to the equity holders of 4,454 4,248
the parent company
2024 2023
Profit per share pence pence
Basic earnings per 0.25p share 5 1.56 1.58
Diluted earnings per 0.25p share 5 1.50 1.55
Consolidated statement of financial position
as at 31 March 2024
2024 2023
Notes £'000 £'000
Assets
Non-current assets
Intangible assets 35,334 37,500
Property, plant and equipment 4,222 4,181
Right-of-use leased assets 788 995
Deferred tax assets 570 129
40,914 42,805
Current assets
Inventories 216 254
Trade and other receivables 12,599 11,778
Cash and cash equivalents 8,309 5,740
21,124 17,772
Total assets 62,038 60,577
Liabilities
Current liabilities
Trade and other payables (14,356) (16,190)
Lease liabilities (485) (482)
Provisions for liabilities (1,365) -
(16,206) (16,672)
Non-current liabilities
Lease liabilities (344) (569)
Deferred tax liabilities (218) (1,528)
(562) (2,097)
Net assets 45,270 41,808
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 642 732
Retained earnings 18,821 15,269
Total shareholders' equity 45,270 41,808
Consolidated statement of changes in equity
for the year ended 31 March 2024
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 2023 732 22,180 198 2,697 732 15,269 41,808
Total comprehensive income for the year
Profit for the financial year - - - - - 4,544 4,544
Other comprehensive expense for the period - - - - (90) - (90)
Total comprehensive income for the year - - - - (90) 4,544 4,454
Dividends paid in the year - - - - - (2,164) (2,164)
Shares transacted through Employee Benefit Trust - - - - - (11) (11)
Shares purchased for share ownership plan - - - - - (174) (174)
Share based payment charge - - - - - 776 776
Deferred tax on share options - - - - - 581 581
Transactions with owners recorded directly in equity - - - - - (992) (992)
Balance at 31 March 2024 732 22,180 198 2,697 642 18,821 45,270
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 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 year - - - - (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
Consolidated statement of cash flows
for the year ended 31 March 2024
2024 2023
Notes £'000 £'000
Cash flows from operating activities
Cash generated from operations 6 7,113 6,956
Taxation paid (49) (178)
Interest paid on lease liability (45) (53)
Net cash generated from operating activities 7,019 6,725
Cash flows from investing activities
Purchase of property, plant and equipment (690) (613)
Additions of intangible assets (869) (570)
Interest received 234 53
Net cash utilised in investing activities (1,325) (1,130)
Cash flows from financing activities
Dividends paid (2,164) (1,959)
Principal elements of lease payments (700) (564)
Shares purchased for share ownership plan (174) (120)
Cash outflow from acquiring shares from the Employee Benefit Trust (11) -
Net cash utilised in from financing activities (3,049) (2,643)
Increase in cash and cash equivalents 2,645 2,952
Cash and cash equivalents at the start of the period 5,740 2,840
Effect of exchange rate fluctuations on cash held (76) (52)
Cash and cash equivalents at the end of the period 8,309 5,740
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 2024. 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 2023 have been delivered to the
Registrar of Companies but those for the year ended 31 March 2024 have not yet
been delivered.
The auditors have reported on the accounts for the year ended 31 March 2024;
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 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
2024, 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 2024 and are forecast to continue to be so for at least
12 months from the date of approval of the financial statements. With the cash
position at the end of March 2024 at £8.3 million and the cash flow forecasts
prepared, which show continuing cash generation, the RCF facility will not be
required after December 2024, when the facility expires.
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 Secure Payments contracts won and delivered through Eckoh's
cloud platforms, as large enterprises have accelerated their move to 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 the
UK & ROW and NA 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 a
reduction in new business assumed of 25%. In all scenarios the Directors were
able to conclude that the Group has adequate cash to continue in operational
existence for the foreseeable future.
2. Segment analysis
The key segments reviewed at Board level are North America (NA) and UK &
Rest of World (UK & 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&ROW 2024 2023
£'000 £'000 £'000 £'000
Segment Revenue 18,000 19,204 37,204 38,821
Gross profit 14,582 16,454 31,036 31,243
Administrative expenses (9,535) (18,255) (27,790) (26,223)
Operating profit 5,047 (1,801) 3,246 5,020
Adjusted operating profit 5,440 2,887 8,327 7,736
Other expenses(1) (393) (4,688) (5,081) (2,716)
Operating profit 5,047 (1,801) 3,246 5,020
Profit before taxation 5,032 (1,597) 3,435 5,020
Segment assets
Trade and other receivables 3,636 5,289 8,925 5,821
Prepayments and contract assets 1,647 2,027 3,674 5,957
Segment liabilities
Trade and other payables 452 2,660 3,112 2,499
Accruals and contract liabilities 6,667 4,577 11,244 13,639
Capital expenditure
Purchase of tangible assets 21 669 690 613
Purchase of leases - 478 478 77
Additions of intangible assets - 869 869 570
Depreciation and amortisation
Depreciation of property, plant & equipment 234 402 636 643
Depreciation of leased assets 86 595 681 617
Amortisation 166 2,829 2,995 2,871
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 2024 there was no one customer that individually accounted for more than
10% of the total revenue of the continuing operations of the Group. In 2023
there was one customer that individually accounted for more than 10% of the
total revenue of the continuing operations of the Group.
NA UK & ROW 2024 2023
Revenue by geography £'000 £'000 £'000 £'000
United States of America & Canada 18,000 - 18,000 17,513
UK & ROW - 19,204 19,204 21,308
Total Revenue 18,000 19,204 37,204 38,821
NA UK & ROW Total 2024 Total 2023
Timing of revenue recognition £'000 £'000 £'000 £'000
Services transferred over time 14,742 16,578 31,320 31,909
Services transferred at a point in time 3,258 2,626 5,884 6,192
18,000 19,204 37,204 38,821
The following table provides information about receivables, contract assets
and contract liabilities from contracts with customers.
2024 2023
£'000 £'000
Receivables, which are included in, 'Trade and other receivables' 6,636 5,151
Contract assets which are included in 'Trade and other receivables' 1,340 2,364
Contract liabilities which are included in 'Trade and other payables' (8,482) (9,909)
(506) (2,394)
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 2024 31 March 2023
Contract assets Contract liabilities Contract assets Contract liabilities
£'000 £'000 £'000 £'000
Revenue recognised that was included in the contract liability balance at the - 4,734 - 6,754
beginning of the period
Current year billings recognised in contract liabilities - 2,560 - 3,575
Cost of sales recognised that was included in the contract assets balance at 1,664 - 2,600 -
the beginning of the period
Costs deferred in current year and unbilled revenue included in contract 775 - 1,115 -
assets
Contract costs 31 March 2024 31 March 2023
£'000 £'000
Deferred implementation costs 636 958
Deferred hardware costs 139 157
775 1,115
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 have 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 £8.5m (FY23: £9.9m). We expect to recognise approximately £6.8m (FY23:
£7.6m) in the next 12 months, £1.5m (FY23: £1.7m) in 1-3 years and the
remainder in 3 years or more in time.
The amount represents our best estimate of contractually committed revenues
that are due to be recognised as we satisfy the contractual performance
obligations in these contracts. A large proportion of the Group's revenue is
transactional in nature or is invoiced monthly for support and maintenance and
these are not included in the contract liabilities.
Prior period segment analysis NA UK & ROW Total
2023
£'000 £'000 £'000
Segment Revenue 17,513 21,308 38,821
Gross profit 13,752 17,491 31,243
Administrative expenses (9,350) (16,873) (26,223)
Operating profit 4,402 618 5,020
Adjusted operating profit 4,552 3,184 7,736
Other expenses(1) (150) (2,566) (2,716)
Operating profit 4,402 618 5,020
Profit before taxation 4,371 649 5,020
Segment assets
Trade and other receivables 2,864 2,957 5,821
Prepayments and contract assets 2,503 3,454 5,957
Segment liabilities
Trade and other payables 344 2,155 2,499
Accruals and contract liabilities 7,099 6,540 13,639
Capital expenditure
Purchase of tangible assets 519 94 613
Purchase of leases - 77 77
Additions of intangible assets - 570 570
Depreciation and amortisation
Depreciation of property, plant & equipment 189 454 643
Depreciation of leased assets 162 455 617
Amortisation - 2,871 2,871
1. Other expenses comprise expenses relating to share option schemes,
amortisation of acquired intangible assets and exceptional restructuring
costs.
NA UK & ROW 2023
Revenue by geography in new segments £'000 £'000 £'000
United States of America & Canada 17,513 - 17,513
UK & ROW - 21,308 21,308
Total Revenue 17,513 21,308 38,821
NA UK & ROW Total 2023
Timing of revenue recognition in new segments £'000 £'000 £'000
Services transferred at a point in time 3,371 3,541 6,912
Services transferred over time 14,142 17,767 31,909
17,513 21,308 38,821
3. Exceptional restructuring costs
The exceptional restructuring costs are presented separately as irregular
costs unlikely to reoccur in the near future. The exceptional restructuring
costs incurred in the financial year ended 31 March 2024 of £531k have been
incurred predominantly in Eckoh UK (£405k), with £127k incurred in Eckoh US.
The restructuring costs relate to employees who previously delivered the large
bespoke self-service projects as the business continues to focus on its
SaaS-style cloud deployed products. In addition, there were a number of the UK
Sales team who were made redundant, with the shift in focus to the US market
and operating as a global team. There were no exceptional restructuring costs
incurred in the financial year ended 31 March 2023.
4. Exceptional legal fees and settlement agreements
In the financial year ended 31 March 2024 legal fees and settlement agreements
of £1,300k (FY23: £203k - settlement income of £950k received was 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.
5. 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.
2024 2023
£'000 £'000
Earnings for the purposes of basic and diluted earnings per share 4,544 4,637
Earnings for the purposes of adjusted basic and diluted earnings per share 6,387 5,802
Reconciliation of earnings for the purposes of adjusted basic and diluted
earnings per share
2024 2023
£'000 £'000
Earnings for the purposes of basic and diluted earnings per share 4,544 4,637
Taxation (1,109) 383
Amortisation of acquired intangible assets 2,479 2,473
Expenses relating to share option schemes 771 40
Exceptional restructuring costs 531 -
Legal fees and settlement costs 1,300 203
Adjusted profit before tax 8,516 7,736
Tax charge based on standard corporation tax rate of 25%(1) (2023: 25%) (2,129) (1,934)
Earnings for the purposes of adjusted basic and diluted earnings per share 6,387 5,802
1. Majority of Group taxable profit is taxed at 25% whether in
the UK or in the US with a combination of Federal tax and State tax.
Denominator 2024 2023
'000 '000
Weighted average number of shares in issue in the period 292,921 292,893
Shares held by employee ownership plan (2,587) (2,338)
Shares held in Employee Benefit Trust - -
Number of shares used in calculating basic earnings per share 290,334 290,555
Dilutive effect of share options 13,459 9,210
Number of shares used in calculating diluted earnings per share 303,793 299,765
2024 2023
Profit per share Pence Pence
Basic earnings per 0.25p share 1.56 1.58
Diluted earnings per 0.25p share 1.50 1.55
Adjusted earnings per 0.25p share 2.20 1.98
Adjusted diluted earnings per 0.25p share 2.10 1.94
6. Cashflow from operating activities
2024 2023
£'000 £'000
Profit for the financial year 4,544 4,637
Interest income (234) (53)
Interest payable 45 53
Taxation (1,109) 383
Depreciation of property, plant and equipment 636 643
Depreciation of leased assets 681 617
Amortisation of intangible assets 2,995 2,871
Exchange differences 36 (516)
Share based payments 771 40
Operating profit before changes in working capital and provisions 8,365 8,675
Decrease in inventories 38 14
(Increase) / Decrease in trade and other receivables (821) 505
Decrease in trade and other payables (1,834) (2,238)
Increase in provisions 1,365 -
Cash generated from operations 7,113 6,956
7. Events after the Statement of Financial Position Date
As at the date of these statements there were no such events to report.
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