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 ARR1,2
|
30.8
|
30.4
|
+1%
|
Adjusted EBITDA3
|
10.2
|
9.4
|
+8%
|
Adjusted operating profit4
|
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
share5
|
2.20
|
1.98
|
+11%
|
Net
cash
|
8.3
|
5.7
|
+2.6
|
Proposed final dividend (pence)
|
0.82
|
0.74
|
+11%
|
Total contracted business6
|
52.6
|
34.5
|
+52%
|
New
contracted business7
|
18.7
|
14.4
|
+29%
|
Financial Highlights
·
Record level of total contracted
business6 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 ARR1 £30.8 million, up 1%
year-on-year or 3% at constant currency
·
North America Security Solutions ARR1
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
profit4 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 revenue2 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
Nik Philpot, Chief Executive
Officer
Chrissie Herbert, Chief Financial
Officer
www.eckoh.com
|
Tel: 01442 458 300
|
FTI
Consulting LLP
Ed Bridges / Emma Hall / Valerija
Cymbal / Yasmin Prior
eckoh@fticonsulting.com
|
Tel: 020 3727 1017
|
Singer Capital Markets (Nomad & Joint
Broker)
Shaun Dobson / Tom Salvesen / Alex
Bond
www.singercm.com
|
Tel: 020 7496 3000
|
Investec Bank plc (Joint Broker)
Patrick Robb/ Nick Prowting / Shalin
Bhamra
www.investec.com
|
Tel: 020 7597 5970
|
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 or email 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
ARR1 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 ARR1 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
ARR1, 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%. ARR1 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
exchange3 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 profit1 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
business5 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 expenses4 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 EBITDA2 for the year
was £10.2 million, an increase of 8% year-on-year (FY23: £9.4
million).
|
Year
ended
31 March
2024
£'000
|
Year
ended
31
March
2023
£'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 profit1
|
8,327
|
7,736
|
Amortisation of other intangible
assets
|
516
|
398
|
Depreciation of owned
assets
|
636
|
643
|
Depreciation of leased
asset
|
681
|
618
|
Adjusted EBITDA2
|
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 the parent company
|
|
|
4,454
|
4,248
|
|
|
|
|
|
|
|
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
account
|
Capital
redemption reserve
|
Merger
reserve
|
Currency
reserve
|
Retained
earnings
|
Total
shareholders' equity
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
Balance at 1 April 2023
|
732
|
22,180
|
198
|
2,697
|
732
|
15,269
|
41,808
|
Total comprehensive income for the 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
reserve
|
Currency
reserve
|
Retained
earnings
|
Total
shareholders' equity
|
|
£'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
|
NA
|
UK&ROW
|
Total
2024
|
Total
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 expenses1
|
(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 beginning of the
period
|
-
|
4,734
|
-
|
6,754
|
Current year billings recognised in
contract liabilities
|
-
|
2,560
|
-
|
3,575
|
Cost of sales recognised that was
included in the contract assets balance at the beginning of the
period
|
1,664
|
-
|
2,600
|
-
|
Costs deferred in current year and
unbilled revenue included in contract assets
|
775
|
-
|
1,115
|
-
|
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 expenses1
|
(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
'000
|
2023
'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.