RNS Number:2269T
Eckoh Technologies PLC
15 December 2003
15th December 2003
Embargoed until 7am
Eckoh Technologies plc
Half-Year Results
* Acquisition of Intelliplus Group plc
* BT contract extension to 2006
* #6m of new Speech contracts over 3 years
6 months 6 months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 March
2003
#'000 #'000 #'000
Turnover 25,665 27,426 55,085
Continuing operations 21,788 20,981 42,332
Acquisitions 2,086 - -
Total continuing operations 23,874 20,981 42,332
Discontinued operations 1,791 6,445 12,753
Gross profit 7,359 9,374 18,165
Operating loss (1,031) (7,454) (7,472)
Net loss (1,323) (9,420) (9,083)
Cash and short-term investments 13,075 10,523 11,985
Half-year highlights:
* Turnover from continuing operations up 4% to #21.8m (H1 2002/3 - #21.0m)
* Net loss reduced to #1.3m (H1 2002/3 - #9.4m)
* Significant cash and short-term investment balances maintained
* Administrative expenses excluding goodwill amortisation reduced to #8.2m
(H1 2002/3 - #9.6m)
* Acquisition of Intelliplus Group plc ("Intelliplus") in September
* Mobile Wholesale closed
Current developments:
* Exclusive BT speech partnership extended to December 2006
* #6m of new speech business over 3 years won since 30 September
* IVR integration well under way - competitive market conditions
* Evaluating additional speech investment
Martin Turner, Chief Executive Officer, commented today:
"Over the last six months we have seen the market for speech solutions gain real
momentum, which is supported by over #6m of new contracted business over the
next three years since September. Sentiment has clearly moved in favour of our
hosted business model, a view shared by BT which last week led to the extension
of our exclusive partnership until December 2006. The future for our speech
activities looks very exciting.
We have also taken steps to strengthen our IVR and Network Services divisions
through the acquisition of Intelliplus in September 2003. Intelliplus brings us
a fully switched network environment, a growing IVR operation and a leading
supplier of web services to SMEs through Freecom. We are working hard to
integrate Intelliplus as quickly as possible, and expect to derive considerable
benefits from this acquisition in future periods despite an increasingly
competitive market."
For further enquiries, please contact
Eckoh Technologies plc
Martin Turner, Chief Executive Officer
Nik Philpot, Chief Operating Officer
Brian McArthur Muscroft, Group Finance Director
www.eckoh.com Tel: 01442 458 355
Buchanan Communications
Mark Edwards/Jeremy Garcia Tel: 020 7466 5000
Business Review
Turnover and Gross Margin
Speech Solutions
Our Speech Solutions division has made significant progress over the last six
months, most of which is not fully reflected in these half-year financial
results.
During June we completed the installation of our speech-enabled call processing
platform in BT's St Albans hosting facility, which signalled the effective
launch of the BT/Eckoh alliance. The Eckoh speech platform, which we believe to
be Europe's largest, is now capable of handling over 500,000 calls per hour, and
provides sufficient overflow capacity to meet expected demand from high volume
speech services. Last week we announced that the BT/Eckoh alliance had been
extended to December 2006, and reflects a partnership that is starting to gain
momentum and win business. This contract extension will also provide Eckoh with
a greater share of future client revenues and profits.
We can also report that our order pipeline for speech solutions is now growing,
in terms of both quantity and quality.
In September we delivered a share quote service for TD Waterhouse to give their
clients faster and more efficient access to share price information. This
service can be accessed by over 500,000 clients in the UK, and covers more than
1,000 UK-listed companies. We also announced an exclusive contract with Wire-e,
a leading developer of business software tools, to provide hosted telephony
services to Vodafone's Rapide corporate customers. The Rapide service, which
currently has over 300 Vodafone corporate customers, offers a suite of mobile
phone products, including personal contacts and number management, email, voice
messaging and voice broadcasting.
Today we announced significant contracts to deliver a speech-enabled ordering
solution in the leisure sector and to supply two speech-enabled ordering
services for the RNIB. Together with our October announcements, these contracts
represent a minimum of #6m of new business over the next three years. Further
contract wins are expected to be announced in due course. In the light of these
recent successes and the clear validation of the hosted model, we are currently
evaluating the investment required to meet the increasing demand for our speech
products.
Turnover from Speech Solutions in the first six months of F2004 grew 34% to
#1.4m compared to the same period last year (H1 2002/3 - #1.0m) and generated a
gross margin of 56% (H1 2002/3 - 52%).
Interactive Voice Response ("IVR")
Eckoh's IVR operation continues to generate significant cash flow for the group
as a whole, and in September we acquired Intelliplus Group plc. This
acquisition will give Eckoh significant competitive advantages through access to
a switched network infrastructure, and positions the combined business as a UK
market leader in IVR service provision for the following reasons:
* Long history of high-quality IVR service provision;
* Highly competitive cost structure;
* One of the largest IVR call-handling platforms in the UK (7,000 ports);
* Leading IVR player in the media sector, including TV and print;
* Innovator in product and service design;
* Complementary technologies - SMS, speech, web etc;
* 12 year history in promoting own products and services;
* Exclusive distribution channels, such as L!VE TV;
* Significant cost and margin efficiencies to come through.
During the year to 31 March 2003, Intelliplus' IVR operation generated revenues
of #16.5m, and Eckoh's IVR division #20.6m for the same period. Since
acquisition, we have been working hard to integrate and unify the two IVR
operations as quickly as possible under the Eckoh brand, streamline management
and create a business capable of achieving profitable growth in a competitive
market.
On 28 July 2003 we participated in the relaunch of L!VE TV on Sky digital
television. Eckoh controls all editorial and advertising space on this channel,
which we use to advertise our own IVR and SMS products and services. Surplus
advertising space is sold to third parties. L!VE TV was historically an
excellent advertising medium for many of our consumer IVR products and services.
We also provided all the telephony-based voting capabilities for BBC2's "
Restoration" series, which aired during August 2003 and was dedicated to saving
one of 30 historic and architecturally important buildings at risk across the
UK.
In November we began a new 18-month contract to supply IVR and SMS services to
39 publications within the Northcliffe Newspaper group.
Excluding Intelliplus, IVR turnover was #10.2m for the first half-year, a 2%
increase compared to the same period last year (H1 2002/3 - #9.9m), with gross
margin lower at 25% (H1 2002/3 - 28%), but an improvement over the preceding six
months (H2 2002/3 - 24%). Despite the recent margin improvement the market
remains highly competitive.
Network Services
Eckoh's Network Services division is one of the leading independent resellers of
telecommunications and data services to SMEs in the UK and Ireland, and now
includes both Symphony Telecom and Intelliplus' Freecom businesses. The
enlarged division is profitable and cash generative, and is continuing to look
for further consolidation and acquisition opportunities in order to grow its
customer base and increase average revenue per customer.
Following the Intelliplus acquisition, Network Services intends to sell a
broader product portfolio comprising fixed-line, mobile, broadband, web-design
and hosting, internet security, e-mail, e-commerce solutions and search engine
registration services and thereby increase average revenue per customer.
Historically, Symphony has not sold internet or data services to its customer
base of approximately 6,000 and, conversely, Freecom has not sold voice services
to its customer base of approximately 7,000. Cross-selling marketing campaigns
are already underway.
During the year to 31 March 2003, Symphony Telecom generated revenues of #19.7m,
and Freecom #2.6m for approximately 9 months to 31 March 2003.
During the first half-year Symphony continued to expand its fixed line and
mobile distribution channels by adding new dealers and distributors, forming a
new joint venture and the opening of a sales office in York during September.
In addition, an agreement was signed with Energis in May through which we took
ownership of a significant number of Energis customers, now billed under the
Symphony brand, as they sought to rationalise their distribution channel into
the business market.
As part of Network Services' cross selling initiative, two additional products
will be introduced in January 2004 - broadband access and wholesale line rental.
Both products are expected to generate additional revenue and contribution,
increase average revenue per customer and improve customer retention.
Network Services' turnover was #10.5m for the first half-year, an increase of 5%
from the same period last year (H1 2002/3 - #10.0m), and included #0.3m from
Freecom. It generated a gross margin of 29% for the half-year, much in line
with last year (H1 2002/3 - 30%) and the preceding six-month period (H2 2002/3 -
29%).
Mobile Wholesale
In May 2003, we stated that our Mobile Wholesale operation had entered a period
of volatility as the Mobile Network Operators adjusted their distribution
strategies. Despite a small improvement in conditions since then, we have since
decided to exit from this activity, closing our consumer mobile distribution and
support centre in Milton Keynes in September and focussing management time and
attention on the development of Eckoh's core businesses.
The results up until closure have been disclosed as discontinued operations with
the loss on closure disclosed as an exceptional item in the profit and loss
account. For the period up until closure in this half-year, Mobile Wholesale
made a loss of #0.2m (excluding closure costs) compared to a profit of #1.0m for
H1 2002/3.
Administrative expenses
Eckoh's administrative expenses reduced from #16.8m in the first half of last
year to #8.4m in this year. This includes a reduction of #7.1m of intangible
asset amortisation and impairment.
We have continued to cut operating costs and reduce overheads through focussed
cost-saving initiatives and this process is ongoing. For the first half-year,
administrative expenses before intangible asset amortisation and impairment and
exceptional items were #8.1m, which included #0.4m in relation to Intelliplus
and #0.9m (H1 2002/3 - #2.0m) in relation to Mobile Wholesale. Excluding
Intelliplus and Mobile Wholesale overheads, underlying Eckoh costs fell by 11%
compared to the same period last year. Moving forward, we expect to further
benefit from cost reductions During June we transferred to AIM which allows us
to reduce corporate costs, as well as maximise our ability and flexibility to
pursue strategic opportunities, such as the Intelliplus acquisition, as they
arise.
During the first half-year we also incurred #0.1m of restructure costs,
disclosed as an exceptional item, relating to the streamlining of the existing
IVR operation.
Operating Loss and Net Loss
Eckoh's operating loss of #1.0m for the first half-year is significantly less
than the same period last year (H1 2002/3 - #7.5m), mainly as a result of
reduced intangible asset amortisation and impairment.
Before intangible asset amortisation and impairment and exceptional items, Eckoh
recorded an operating loss of #0.5m from continuing operations in the first
half-year (H1 2002/3 - #1.0m), which includes #0.6m (H1 2002/3 - #0.6m) of fixed
asset depreciation. Excluding exceptional items, Eckoh generated EBITDA(1) of
#0.2m (H1 2002/3 - loss of #0.4m) from total continuing operations. The net
loss for the same period was #1.3m compared to #9.4m last year.
Cash and short term bank deposits
During the six months ended 30 September 2003 cash and short-term deposits
increased by #1.1m to #13.1m (31 March 2003 - #12.0m). This is mainly as a
result of positive cash generation by continuing operations and the effective
management of working capital.
Eckoh's cash reserves are expected to reduce during the second half of the year
as we settle costs associated with the Intelliplus acquisition and the Mobile
Wholesale closure and other restructuring costs as well as replacing expensive
financing arrangements inherited from Intelliplus.
Board changes
Following the acquisition of Intelliplus Mike Neville, Martin Smith and Peter
Reynolds have joined the Board, and Craig Niven, Nick Alexander and Neil
Macdonald have resigned.
Peter Reynolds has been appointed as chairman of the Remuneration Committee and
Martin Smith the chairman of the Audit Committee.
Share capital restructure and reorganisation
In August we undertook a share consolidation and subsequent share division.
This resulted in a significant reduction in Eckoh's shareholder base, which will
generate cost savings going forward.
In September we received court approval to cancel the balance on the share
premium account. This has resulted in a transfer of #72.5m to distributable
reserves.
Current Trading
Today we announced that, since September, we had concluded speech contracts with
a minimum of #6m of revenue over the next three years. A number of these
contracts are scheduled for delivery towards the end of this financial year and
we continue to be in discussions with other large corporations and
organisations, especially via our BT partnership.
We are working to integrate Intelliplus as quickly as possible, and in
particular realise the full financial benefit of switched network access over
the next twelve months as we bring the two IVR businesses together and migrate
suitable Eckoh IVR traffic onto the switch. Trading conditions within the IVR
business remain very competitive.
Management continues to focus on developing and expanding Eckoh's speech
activities, and is looking forward to significant progress over the next 12
months. This is supported by the new contract wins announced today, our BT
partnership extension to December 2006, announced last week, and a strengthening
order pipeline.
Consolidated profit and loss account
for the six months ended 30 September 2003
6 months 6 months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2003 2002 2003
unaudited unaudited audited
Note #'000 #'000 #'000
Turnover 25,665 27,426 55,085
Continuing operations 21,788 20,981 42,332
Acquisitions 2,086 - -
Total continuing operations 23,874 20,981 42,332
Discontinued operations 1,791 6,445 12,753
Cost of sales (18,306) (18,052) (36,920)
Gross profit 7,359 9,374 18,165
Administrative expenses before intangible asset amortisation and (8,067) (9,565) (18,324)
impairment and exceptional items
Amortisation of intangible assets (209) (1,607) (1,657)
Impairment of intangible assets - (5,656) (5,656)
Exceptional items (114) - -
Total administrative expenses (8,390) (16,828) (25,637)
Operating (loss)/profit before intangible asset amortisation and (708) (191) (159)
impairment and exceptional items
Continuing operations (415) (955) (1,885)
Acquisitions (65) - -
Total continuing operations (480) (955) (1,885)
Discontinued operations (228) 764 1,726
Operating (loss)/profit (1,031) (7,454) (7,472)
Continuing operations (579) (8,218) (9,198)
Acquisitions (224) - -
Total continuing operations (803) (8,218) (9,198)
Discontinued operations (228) 764 1,726
Loss on closure of subsidiary operation (424) - -
Provision against fixed asset investment - (2,000) (2,000)
Net interest receivable 161 177 390
Loss on ordinary activities before taxation (1,294) (9,277) (9,082)
Taxation 89 - (20)
Loss on ordinary activities after taxation (1,205) (9,277) (9,102)
Minority interests (118) (143) 19
Loss for the period (1,323) (9,420) (9,083)
Loss per ordinary share 3
Basic and diluted loss per share (0.6p) (4.6p) (4.4p)
Basic and diluted (loss)/profit per share before intangible asset (0.3p) (0.1p) 0.1p
amortisation and impairment and exceptional items
Statement of total recognised gains and losses
for the six months ended 30 September 2003
6 months 6 months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2003 2002 2003
unaudited unaudited audited
#'000 #'000 #'000
Loss for the period (1,323) (9,420) (9,083)
Exchange adjustments offset in reserves 21 - 75
Total recognised losses for the period (1,302) (9,420) (9,008)
Consolidated balance sheet
as at 30 September 2003
30 Sept 2003 30 Sept 31 Mar
2002 2003
unaudited unaudited audited
Note #'000 #'000 #'000
Fixed assets
Intangible fixed assets 9,462 - 100
Tangible fixed assets 2,358 2,053 1,980
Investment 1,099 - -
12,919 2,053 2,080
Current assets
Stock 172 1,295 687
Debtors 11,112 7,868 6,526
Bank - short term investments 10,210 7,500 9,510
Cash at bank and in hand 2,865 3,023 2,475
24,359 19,686 19,198
Creditors: amounts falling due within one year (18,187) (9,797) (9,333)
Net current assets 6,172 9,889 9,865
Total assets less current liabilities 19,091 11,942 11,945
Creditors: amounts falling due after more than one year (2,345) (44) (4)
Provisions for liabilities and charges (617) (617) (342)
Net assets 16,129 11,281 11,599
Capital and reserves 4
Called up share capital 646 518 519
Shares to be issued 268 - 38
Share premium account 11 72,432 72,461
Merger reserve 5,735 - -
Profit and loss account 9,827 (61,841) (61,429)
Total equity shareholders' funds 5 16,487 11,109 11,589
Minority interests (358) 172 10
Capital employed 16,129 11,281 11,599
Consolidated cash flow statement
for the six months ended 30 September 2003
6 months 6 months Year
ended ended ended
30 Sept 2003 30 Sept 31 Mar
2002 2003
unaudited unaudited audited
#'000 #'000 #'000
Note
Net cash inflow/(outflow) from operating activities 6 1,110 (2,910) (1,109)
Return on investments and servicing of finance
Net interest 161 177 411
Taxation 89 - 121
Capital expenditure and financial investment
Purchase of tangible fixed assets (288) (714) (1,350)
Proceeds for sale of tangible fixed assets - - 10
(288) (714) (1,340)
Acquisitions and disposals
Costs of purchase of subsidiary undertaking (126) - -
Net cash acquired with subsidiary undertaking 149 - -
Consideration paid in respect of prior period acquisitions - (100) (637)
Refund of consideration paid in respect of prior year - - 500
acquisitions
23 (100) (137)
Cash inflow/(outflow) before use of liquid resources and 1,095 (3,547) (2,054)
financing
Management of liquid resources
(Increase)/decrease in short-term investments (700) 3,000 990
Financing
Issue of shares 11 5 5
Share issue costs - - (7)
Capital element of finance lease payments (16) (35) (59)
(5) (30) (61)
Increase/(decrease) in cash in the period 390 (577) (1,125)
Notes to the half-year results
1. Basis of preparation
The financial statements for the six months ended 30 September 2003 have been
prepared using accounting policies consistent with those set out in the
Company's consolidated 2003 statutory accounts. These statements do not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985 and are unaudited.
Financial information for the six months ended 30 September 2002 has been
extracted from the accounting records of the Group.
The balances as at 31 March 2003 and the results for the year then ended have
been extracted from the statutory accounts, which have been filed with the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain any statement under section 237 of the Companies Act 1985.
The results for the six months ended 30 September 2003 were approved by the
Board on 12 December 2003 and will be posted on the Company's web site,
www.eckoh.com, on 15 December 2003.
2. Segmental analysis - for the six months ended 30 September 2003
The Company operates as a single integrated business. No segmental information
is thus presented. In addition, there are no material foreign entities and
segmental information by geographical area is therefore not presented.
3. Earnings/(loss) per ordinary share of 0.25p each
6 months 6 months Year
ended ended ended
30 Sept 30 Sept 31 March
2003 2002 2003
#'000 #'000 #'000
(Loss)/profit for the period before the following: (576) (157) 230
Intangible asset amortisation and impairment (209) (7,263) (7,313)
Exceptional items (114) - -
Loss on closure of subsidiary undertaking (424) - -
Provision against fixed asset investment - (2,000) (2,000)
Loss for the period (1,323) (9,420) (9,083)
Weighted average number of shares in the period:
Basic and diluted 209,279,809 206,952,297 207,188,362
Basic (loss)/earnings per share before intangible asset amortisation (0.3p) (0.1p) 0.1p
and impairment and exceptional items
Intangible asset amortisation and impairment (0.1p) (3.5p) (3.5p)
Exceptional items - - -
Loss on closure of subsidiary undertaking (0.2p) - -
Provision against fixed asset investment - (1.0p) (1.0p)
Basic and diluted loss per share (0.6p) (4.6p) (4.4p)
None of the share options in issue give rise to a dilution in the loss per
share.
4. Share capital and reserves
Ordinary Shares to Share Merger Profit
share be issued premium reserve and loss
capital account account
#'000 #'000 #'000 #'000 #'000
At 1 April 2003 519 38 72,461 - (61,429)
Loss for the period - - - - (1,323)
Exchange adjustments offset in reserves - - - - 21
Cancellation of share premium account - - (72,461) - 72,461
Shares issued in respect of share options - - 11 - -
exercised
Shares issued and to be issued in connection 127 268 - 5,832 -
with the acquisition of a subsidiary undertaking
Movement in fair value of contingent share - (38) - -
consideration for acquisitions in prior years
Realisation of merger reserve - - - (97) 97
At 30 September 2003 646 268 11 5,735 9,827
On 24 September 2003, following a successful court application, the balance on
the share premium account at 31 March 2003 was cancelled, resulting in a credit
to distributable reserves.
5. Reconciliation of movement in equity shareholders' funds
6 months 6 months Year
ended ended ended 31
30 Sept 30 Sept March
2003 2002 2003
#'000 #'000 #'000
Opening equity shareholders' funds 11,589 20,676 20,676
Loss for the period (1,323) (9,420) (9,083)
Share consideration for acquisition of subsidiary undcertaking 6,227 - -
Net movement in contingent share consideration for acquisition in a prior (38) (152) (77)
year
Employee share options exercised 11 5 5
Share issue costs - - (7)
Exchange adjustments offset in reserves 21 - 75
Closing equity shareholders' funds 16,487 11,109 11,589
6. Net cash inflow/(outflow) from operating activities
6 months 6 months Year
ended ended ended 31
30 Sept 30 Sept March
2003 2002 2003
#'000 #'000 #'000
Operating loss (1,031) (7,454) (7,472)
Depreciation and impairment of tangible fixed assets 723 623 1,327
Amortisation and impairment of intangible fixed assets 209 7,263 7,313
Decrease/(increase) in stock 515 (794) (186)
Decrease/(increase) in debtors 422 1,686 2,866
Increase/(decrease) in creditors/provisions 696 (4,234) (4,952)
Loss on disposal of tangible fixed assets - - (5)
Loss on closure of subsidiary operation (424) - -
1,110 (2,910) (1,109)
7. Acquisition of Intelliplus Group plc
Accounting
policy
Book alignment Provisional
value of fair value
net Revaluations
assets
#'000 #'000 #'000 #'000
Net liabilities acquired:
Intangible fixed assets 10,621 (10,621) - -
Tangible fixed assets 1,357 (544) - 813
Investments 1,099 - - 1,099
Debtors 5,134 - (126) 5,008
Cash at bank 149 - - 149
Creditors (9,891) - (442) (10,333)
Fair value of net liabilites 8,469 (11,165) (568) (3,264)
Add: minority interest in net liabilities 486
Fair value of net liabilities acquired (2,778)
Goodwill 9,572
Consideration 6,794
Consideration satisfied by:
Shares 6,227
Acquisition costs 567
6,794
On 3 September 2003, following the passing of resolutions at an Extraordinary
General Meeting approving the issue of shares in consideration of the
acquisition of Intelliplus Group plc ("Intellplus"), Eckoh had acquired more
than 50% acceptances to the Offer for Intelliplus. The directors consider that
3 September 2003 is therefore the date control was transferred to Eckoh for
consolidation purposes. The Offer was declared unconditional in all aspects on
10 September 2003.
From the date of acquisition Intelliplus contributed #2.1m to group turnover and
#0.1m of losses to group operating loss.
In its last financial year to 31 March 2003, Intellipus made a loss after tax of
#1.2m. For the period since that date to the date of acquisition, Intelliplus'
unaudited management accounts show it had generated #11.0m of turnover and
incurred a #0.9m loss after tax.
--------------------------
(1) Earnings before interest, taxation, depreciation and amortisation
This information is provided by RNS
The company news service from the London Stock Exchange
END
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