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Every second of every day people make contact through Eckoh
www.eckoh.com
September 2005: Eckoh in the financial
services sector
TD Waterhouse extends contract with BT and Eckoh
for speech-enabled stock quotation service until 2007
In September 2005, Eckoh and BT announced a
two-year contract extension to supply TD Waterhouse
with an automated stock quotation service, using
advanced speech recognition technology.
Under the new two-year contract, the service will allow
investors to access real-time share price information on
more than 1,500 UK-listed companies, popular indices
and registrar information quickly and easily, using
automated speech recognition technology.
1 Highlights of the year
3 Chairman’s Statement
4
The Business Review
9
Board of Directors
11 Directors’ Report
16 Corporate Governance
21 Statement of Directors’
Responsibilities
23 Independent Auditors’ Report
24 Group Profit and Loss Account
25 Group Statement of Total
Recognised Gains and Losses
25 Reconciliation of Movements in
Group Shareholders’ Funds
26 Balance Sheets
27 Group Cash Flow Statement
28 Notes to the Financial Statements
48 Shareholder Information
"Since its introduction, the service has
provided our customers with more than
2 million quotes and has had a positive
impact on the number of customers
progressing to an agent to complete a
trade. We are delighted with the results
and are now turning our attention
to look at the future potential for
self-service, working closely with our
partners BT and Eckoh."
Darren Hepworth, Vice President of
Customer Contact at TD Waterhouse
June 2006: Eckoh in the
logistics sector
Eckoh win three-year contract to
supply ground-breaking parcel
tracking service to Parcelforce
Worldwide
In June 2006, Eckoh in association with
strategic business partner BT, announced a
new three-year contract with Parcelforce
Worldwide, the UK's leading express
carrier.
The contract, which marks Eckoh's
entry into the £23 billion European
express logistics market, is to supply
Parcelforce Worldwide with a new
automated information service that
allows customers to track parcels and
make re-delivery arrangements over the
phone on a 24-hour, no queue basis.
The service, which will go live this
summer, will be one of the first in the
UK's express logistics industry to give
customers personalised information.
"We believe Eckoh and BT's hosted
solution not only provides us with the
flexibility we need to cater for the
variable peaks in our business but most
importantly delivers a quality of service
and convenience that will impress our
customers and enhance our business
relationship with them."
Emma Bailey, Customer Services Policy
Manager at Parcelforce Worldwide
Highlights of the Year
Eckoh is a leading European provider of outsourced automated solutions.
Eckoh, always inspiring
Eckoh sets the standard for outsourced automated solutions across Europe, specialising in
advanced speech recognition and interactive services. We enable our clients to communicate
more effectively and to enhance their profitability, whilst making life better for people who
use their services.
6 months ended
31 March 2006
£'000
6 months ended
30 Sept 2005
£'000
Year ended
31 March 2006
£'000
Year ended
31 March 2005
£'000
Group turnover increased by 59% to £127.1m
(2005 - £79.7m)
Turnover
Adjusted profit before taxation*
Profit/(loss) before taxation
Retained profit/(loss)
72,077
1,204
(81)
306
55,007
127,084
79,720
1089
1,226
969
2,293
1,145
1,275
841
(9,411)
(9,440)
13,296
Cash and short-term investments
12,737
13,296
12,737
Adjusted profit before taxation* increased to
£2.3m from £0.8m
(Profit before taxation £1.1m (2005 - loss
£9.4m))
Retained Profit of £1.3m (2005 - loss £9.4m)
Cash and short-term investment balances total
£12.7m (2005 - £13.3m)
* Profit before taxation, intangible asset
amortisation and impairment, exceptional items
and discontinued operations (note 29).
1
February 2006: Eckoh in the
media sector
Eckoh provides IPC, the UK’s leading
consumer magazine publisher, with an
extensive range of premium rate
interactive services using a combination
of IVR, mobile and on-line technologies.
Eckoh provides hundreds of premium
content services to over 50 IPC
magazine publications; leading titles
include: TV Times, What’s On TV, Chat,
Now, Woman’s Own, Marie Claire, Ideal
Home and Woman & Home.
By consistently refreshing popular
content on existing services as well as
proactively developing a steady stream
of innovative new services, Eckoh help
IPC not just to interact with their
readers, but to market to them more
effectively.
“Eckoh’s proven ability and expertise
in operating hundreds of interactive
services simultaneously combined with
their proactive and innovative
approach made them the ideal partner
for IPC’s Telemedia activity.”
Amanda Chester, Direct Marketing
Director IPC
Chairman’s Statement
I am very pleased to report a year of significant strategic progress, and strong
operating performance in all areas of activity.
Group turnover increased by 59% to £127.1m for the year, generating pre-tax profits of £2.3m
before intangible asset amortisation, restructuring charges and discontinued operations. The
profit before taxation was £1.1m and group cash balances were £12.7m at year end.
Peter Reynolds
Chairman
At the start of the financial year the Board
agreed a strategic plan for our Symphony
Telecom subsidiary designed to enhance the
business, and ultimately realise value for Eckoh
shareholders. Central to this plan was the April
2005 acquisition of Anglia Telecom Centres
Limited for cash consideration of £9.7m and the
subsequent listing of the enlarged Symphony
Group on AIM in September, which raised a net
£3.5m of cash through a placing of new shares.
Although we felt the AIM market's initial
valuation of Symphony was disappointing
compared to other listed peers, we remained
confident that the quality of the underlying
business was strong, and that Eckoh's 64.64%
shareholding in Symphony could ultimately be
realised at an appropriate valuation.
Together with the Symphony Board, Eckoh
believes that the recommended cash offer for
Symphony by Redstone plc of 54.5p per share
does represent an appropriate and fair offer for
the company, and we will therefore vote our
20,099,999 ordinary shares in favour of the offer
- which represents a 32.9% premium to the
placing price of the new shares issued last
September.
The sale of our stake in Symphony at 54.5p per
share will realise gross cash proceeds of
approximately £11.0m. In addition, a further
£4.7m of cash will be received from the
repayment of the Eckoh subordinated loan by
Symphony over a 4 year period.
During the year we have also reorganised our
remaining Eckoh businesses into two
independent businesses with dedicated
management teams and operating structures.
Firstly, our successful Speech Solutions business
has now merged with IVR Client Services under
the "Eckoh" brand. This operation generated
combined revenues in excess of £50m last year.
However, following the renewal of the ITV and
BT contracts, and recent launch of a number of
new and exciting "participation TV" channels -
including ITV Play - we expect revenues to be
significantly higher next year.
Secondly, we have rebranded our Advertised
Services division as "Connection Makers", which
now operates as a stand-alone entity within the
Group under the direction of a newly formed
and experienced management team.
Connection Makers continued to operate
profitably during the year, and is now looking to
expand its range of consumer entertainment
services over the next twelve months.
We continue to believe that Eckoh's share price
does not fully reflect the value of the Group's
constituent businesses and assets, and the Board
remains committed to pursue a strategy to
unlock value for Eckoh shareholders. We are
evaluating a number of new strategic options
aimed to achieve this goal, and will make further
announcements in due course to keep
shareholders advised of our progress.
Finally I would like to thank our staff for their
continuing loyalty, dedication and hard work
over the past twelve months.
3
The Business Review
Overview
The Group has seen another year of strong growth, generating a profit before taxation
(excluding intangible asset amortisation and impairment, exceptional items and discontinued
operations) of £2.3m (2005 - £0.8m). The profit before tax for the year was £1.1m (2005 - loss
£9.4m). Turnover increased by 59% to £127.1m (2005 - £79.7m).
On 22 June 2006 the board of Symphony
Telecom Holdings plc ('Symphony') and the Board
of Redstone plc ('Redstone') reached agreement
on the terms of a recommended offer for the
entire issued share capital of Symphony. The offer
was made on the basis of 54.5p in cash for each
Symphony ordinary share at a premium of 32.9%
compared to last September's placing price of
41p per ordinary share. Since the admission of
Symphony on AIM on 15 September 2005,
Eckoh has held 20,099,999 shares representing
64.64% of the issued ordinary share capital of
Symphony. The Eckoh Board has undertaken to
accept the Redstone offer, which will realise a
cash inflow of approximately £11.0 million for
the Eckoh Group.
A recent internal review has led to the
reorganisation of the Group's remaining
businesses into two independent divisions, each
within separate legal entities. Speech Solutions
and IVR Client Services have now merged and
operate under the 'Eckoh' brand, while the
Group's IVR Advertised Services operation has
been re-branded as 'Connection Makers'.
Key reasons for these changes include:
• Creation of two separately accountable,
stand-alone operations
• The merging of complementary activities -
including technical and product development
teams
• Appointment of dedicated management
teams
• Improvements in operating performance and
efficiency
4
• Enhancement of strategic options available
The Directors are continuing to evaluate a
number of strategic options, and will make
further announcements in due course.
Operating Review
1.Eckoh
Speech Solutions
Eckoh is a European market leader in self-service
call centre solutions using advanced speech
recognition and related technologies. The Group
has an exclusive partnership with BT to provide
its top corporate customers with hosted speech
recognition services. To date this alliance has
supplied speech solutions services to 20 clients
and created over 30 applications, generating
over 40 million minutes of self-service speech
transactions. The BT alliance was extended in
July 2005 until 2010, which will enable BT to
fulfil the increasing requirement from customers
for long term, multi-year contracts for Eckoh's
hosted speech recognition services.
Turnover for the year grew 6% to £5.3m (2005
- £5.0m), and gross margin increased to 56%
(2005 - 53%). Direct operating expenses were
£2.4m (2005 - £2.2m) resulting in an increased
contribution to £0.6m (2005 - £0.5m) of which
£0.5m was in the second half. Turnover for H2
was £3.0m, an increase of 28% on H1 and
28% on H2 2005. Eckoh management intends
to deliver high growth rates in this area of
operation, and has increased its sales and
marketing investment as part of the strategy to
achieve this. The results of this investment are
bearing fruit with recent contract wins with
Parcelforce Worldwide, National Rail Enquiries,
Empire Cinemas, Her Majesty's Court Services
(HMCS), Government Department for
Environment, Food and Rural Affairs (DEFRA),
ScottishPower and Hitachi Capital.
A change in the revenue model away from large
initial build fees to transactional based charges
has enabled clients to fully evaluate the benefit
of a speech recognition solution. This has
enabled the Group to sign significant clients to
long term contracts, with revenue recognised
over the term of the contract rather than as
significant, one-off fees. The benefit of this
approach became visible in the second half of
the year.
There have also been key contract renewals
with William Hill and TD Waterhouse indicating
that Eckoh's proposition remains competitive
and is delivering appropriate value to clients. In
addition, 'Journey Finder', a speech-based
product developed by Eckoh and BT and utilised
in the successful TrainTrackerTM service for
National Rail Enquiries, was voted 'Product of
the Year 2005' at last year's European Call
Centre Awards.
The speech recognition market is still in its
infancy, with future growth rates uncertain.
However, recent positive news flow and interest
in the product has reaffirmed the Directors
confidence that there is potential for significant
growth in the UK and European hosted speech
markets. Eckoh Speech Solutions has some clear
differentiators from its competitors including
one of the largest call processing platforms in
Europe, highly experienced management and
Martin Turner Chief Executive Officer
Nik Philpot Chief Operating Officer
Adam Moloney Group Finance Director
technical teams, an exclusive alliance with BT and
a flexible pricing model benefiting from Eckoh's
group traffic volumes. These factors have placed
Eckoh in a prime position to cement its position
as the European Market leader in speech
solutions.
Client IVR
Eckoh is one of the UK's largest providers of IVR
and mobile interactive services, and works with a
number of prominent media owners such as ITV,
Trinity Mirror, Channel 4, IPC Magazines, EMAP
and Northcliffe Newspapers. Eckoh delivers an
end-to-end interactive solution including
creation, design, development, implementation,
deployment, hosting and reporting.
Client IVR is able to secure and retain the largest
contracts by hosting its services on one of the
largest call processing platforms in the UK, by
offering very competitive rates and providing top
quality customer support. These contracts
generate an extremely large aggregated call
volume which allows Eckoh to negotiate the best
commercial contracts from carriers such as BT
and C&W as well as through Eckoh's own
network. Although margins are low from its
direct activity, the division complements both
Speech Solutions and Connection Makers who
benefit from accessing the same rate structure,
as well as cross-selling their higher margin
services.
Eckoh management has focused efforts on its
most significant customers which has enabled
overheads to be reduced without compromising
quality. This strategy has been rewarded with
contracts with:
• The UK's largest commercial broadcasting
company, ITV, who have renewed their
contract to run until at least September 2007
• The UK's largest newspaper publishing group,
Trinity Mirror, who have renewed their
contract to run until at least December 2006
• The UK's leading consumer magazine group,
IPC Magazines, who agreed a three year
contract from June 2005
Eckoh has been the interactive telephony partner
of ITV in a highly competitive market since March
2004 and it was announced recently that this
agreement has once again been renewed for a
minimum of 18 months. In addition, this most
recent negotiation was of particular significance
due to the inclusion of a new contract to supply
services to ITV Play, a new 'participation TV'
channel which launched in April 2006 on digital
terrestrial television and is due to launch on digital
satellite television platforms. The new formats
commissioned by ITV Play are also being shown
across ITV's family of channels, and these have
resulted in a quantum jump in the revenues
delivered by ITV, which are expected to continue
throughout the whole of the coming financial year.
Turnover for the year from Client IVR increased
by 22% to £47.5m (2004 - £39.0m), with gross
profit decreasing to £3.1m (2005 - £3.4m) due
to the proportion of traffic generated by the
broadcast clients increasing substantially.
However, the refocus of the business on to the
largest clients has enabled the division to reduce
its cost base with direct operating expenses
reducing to £2.4m (2005 - £3.1m) thus
increasing the divisional contribution to £0.7m
(2005 - £0.2m). The associated risk is that the
loss of any key clients would have a significant
impact. To mitigate the risk, Eckoh's strategy
revolves around providing a level of service and
support that our competitors cannot match,
whilst being fiercely price competitive. This
strategy has seen key renewals and contract wins
to date.
2.Connection Makers
Connection Makers is the new brand for Eckoh's
IVR Advertised Services. This division has
operated profitably for many years and
specialises in dating and chat services which it
provides to clients on a revenue share basis or
advertising directly in newspapers, magazines
and on television. Gross margins from individual
campaigns fluctuate with advertising efficiency,
which is influenced by price, seasonality, TV
programming and availability.
During the year the contract with Trinity Mirror
to supply dating services to its large range of
national and regional newspapers was renewed
until December 2006 and a number of IPC
magazines launched editorial dating services for
the first time.
5
July 2005: Eckoh's speech alliance
with BT extended until 2010
In July 2005, Eckoh announced the
extension of their speech alliance
contract to provide BT customers with
hosted speech recognition services up
to 2010. The five-year extension will
enable BT to fulfil the increasing
requirement from customers for long
term, multi-year contracts for Eckoh's
hosted speech recognition services.
The speech alliance was created to
meet the growing demand from
businesses for advanced speech
recognition technology and since
January 2004, over 30 speech
applications have been successfully
deployed for 20 BT customers
generating over 40 million minutes of
self-service speech transactions.
“Over the past three years, Eckoh has
consistently demonstrated client service
excellence through their leading market
expertise, speed of customer response
and through their state of the art
deployment of sophisticated client
handling solutions and broader self-
service options to our customers."
Chris Pike, General Manager, CRM
solutions at BT
The Business Review continued
Eckoh intends to consolidate its share of the
chat and dating market by establishing a market
leading telephone and mobile speed dating
brand in the UK. This new and ground breaking
service will enable participants to speed date
over the phone or on their mobile with local
users from the comfort of their homes. The
launch will require a sizeable marketing
investment in the coming year and the new
service will also be offered to existing and
prospective clients.
In February 2006 changes to the Sky Electronic
Programming Guide (EPG) on the digital satellite
television platform, resulted in Eckoh's L!VE TV
channel being moved to a different channel
number and a new index category. The format
of the channel has had to change significantly
because of this move and has resulted in some
uncertainty as to whether the good performance
in the second half of the year can be
maintained.
Turnover from Connection Makers increased to
£12.1m (2005 - £11.6m) with gross profit of
£5.5m (2005 - £5.0m). Direct operating
expenses were £3.0m (2005 - £2.3m).
The introduction of a dedicated management
team to the division is designed to facilitate
growth in both turnover and profitability
through increased focus and the introduction of
new services.
3.Symphony Telecom
On 30 April 2005, Symphony acquired Anglia
Telecom Centres Limited ('Anglia') from TTG
Europe plc for cash consideration of £9.7m and
on 15 September 2005 the enlarged Symphony
group floated on AIM, at the same time placing
35.36% of shares with new investors. Since
then, Symphony has operated as a 64.64%
subsidiary of Eckoh and its financial results have
been fully consolidated into Eckoh's financial
statements (including Anglia since the date of
acquisition).
Turnover increased to £61.3m (2005 - £21.0m),
largely due to the acquisitions during the year
which contributed £39.6m. Operating profit,
before exceptional items of £0.4m (2005 - Nil)
and intangible asset amortisation of £2.0m
(2005 - Nil) amounted to £2.1m (2005 - £1.3m).
The exceptional items relate to restructuring,
integration and other one-off costs. The
operating loss for the year was £0.3m (2005 -
profit: £1.3m)
After non-operating exceptional items and net
interest payable of £0.6m (2005 - Nil) the loss
before tax was £0.9m (2005 - £1.3m profit) and
the loss per share 4.0p (2005 - 6.2p earnings per
share). No dividend has been proposed.(2005 - Nil)
On 22 June 2006 the board of Symphony and
the Board of Redstone reached agreement on
the terms of a recommended offer for the entire
issued share capital of Symphony. The offer was
made on the basis of 54.5p in cash for each
Symphony ordinary share at a premium of
32.9% compared to last September's placing
price of 41p per ordinary share. The Eckoh Board
has undertaken to accept the Redstone offer,
which will realise a cash inflow of approximately
£11.0 million for the Eckoh Group.
Depreciation on tangible fixed assets has
reduced to £1.0m (2005 - £1.3m).
Exceptional Items
During the year, there were three exceptional
gains. A gain of £1.5m arose from the 35%
disposal as a result of the flotation of Symphony,
£0.1m was received following the disposal of
the hardware services operation in a prior year
and £0.3m was generated from the disposal of
investment shares held in Felix Group plc.
The amortisation charge of £2.2m
predominantly relates to the amortisation of the
goodwill arising on the acquisition of Anglia. In
addition, there were restructuring costs of
£0.4m, largely consisting of integration costs
relating to the acquisition of Anglia, and costs of
£0.08m were incurred during the group
restructure to establish the Symphony Telecom
Holdings Group.
Discontinued Operations
Following the sale of Freecom.net Limited, a loss
on disposal of £0.2m has been recognised.
Balance Sheet & Cash Flow
Statement
Eckoh generated £3.2m (2005 - £4.5m) of cash
from operating activities during the year. Cash
balances reduced from £13.3m to £12.7m
principally due to outflows in connection with
the acquisition of Anglia. At 31 March 2006,
cash residing in the Symphony Group amounted
to £4.5m, which is offset by an inter-company
loan balance, due to be repaid to Eckoh, of
£4.7m. As a result, the Eckoh Group, post the
Symphony disposal has cash of £12.9m, as well
as the cash inflow of £11.0m from the disposal
proceeds of the 64.64% holding in Symphony.
Eckoh disposed of Freecom.net Limited, its
internet services company, to eDirectory.co.uk
plc ('eDirectory') on 29 July 2005. The
consideration comprises 4,155,844 eDirectory
ordinary shares. Further to this, and subject to
certain conditions, a further £1.6 million of
deferred consideration is receivable in eDirectory
ordinary shares or a cash equivalent. eDirectory
shares are currently traded on Ofex. The business
has been included within discontinued
operations in Eckoh's financial statements and a
loss on disposal of £0.2m has been recognised.
Central Costs
Central costs are not allocated to the business
divisions of the Group, are largely fixed in
nature, and include indirect operating costs
(finance, IT, property etc.) and corporate costs
(directors, audit, insurance, professional advisors
etc.). These costs have reduced to £2.5m (2005 -
£3.2m) due to a continued effort to reduce
costs. A charge is made to Symphony for a
proportion of these costs, this charge is disclosed
within the operating expenses of Symphony.
7
June 2006: Eckoh in the
travel sector
Eckoh & BT secure five-year deal
with National Rail Enquiries to
deliver UK’s most ambitious speech
solution designed for the mass
market
In June 2006, Eckoh announced an
extended five-year deal worth a
minimum of £3 million with National
Rail Enquiries to deliver a ground
breaking automated train information
service which is expected to launch in
July 2006.
The new speech-enabled travel
information solution will supersede and
enhance the already highly successful
TrainTracker™ service (0871 200 4950),
designed to give travellers up to the
minute times for direct train services
across all 2,500 mainland stations.
"Eckoh and BT's experience for
providing best of breed self-service
technology, combined with their
proactive partnership approach and
proven track record of serving high
and volatile call volumes for the
successful TrainTracker™ service, led
me to extend the existing deal. The
advanced intelligence of the new
TrainTracker™ service will provide an
even more sophisticated, flexible and
complete service."
Chris Scoggins, CEO, National
Rail Enquiries
Board of Directors
Board Committees
* Member of the Audit Committee
† Member of the Remuneration Committee
ß Member of the Nomination Committee
# Senior Independent Director
Peter Reynolds (68)
Non-executive Director *ß †
Chairman of the Board
Chairman of Remuneration Committee
Joined the Board in September 2003. Currently also Executive Chairman of Swallow Ventures
Limited, a company specialising in CRM software and of Sterling Designs, a highly profitable kitchen
manufacturing company. In May 2004, Peter was appointed as a Non-executive Director of SR
Pharma plc, who's principal activity is research and development of pharmaceutical products.
Martin Turner (48)
Chief Executive Officer ß
Joined the Board in February 1999 as Group Finance Director and was appointed CEO in September
2001. He was co-founder of Symphony Telecom and formerly worked for Price Waterhouse in North
America and Arthur Andersen & Co in London. He qualified as a chartered accountant in 1983.
Nik Philpot (42)
Chief Operating Officer
Deputy Chief Executive Officer
Joined the Board in February 1999 and was appointed COO and Deputy CEO in September 2001.
He was a co-founder of Symphony Telecom and formerly worked for British Telecom and Legion. He
has 20 years experience in the voice services industry.
Adam Moloney (36)
Group Finance Director
Joined the Company in May 2003 as Group Accountant, taking on the role of Acting Group Finance
Director in July 2004, following the departure of the previous Group Finance Director and appointed
Group Finance Director with effect from August 2005. He qualified as a CIMA accountant in 1997.
Prior to joining Eckoh, he was Manager of Finance & Operations for the UK arm of New York based
computer hardware reseller, Resilien Inc.
Martin Smith (51)
Non-executive Director †#*ß
Chairman of Audit Committee
Chairman of the Nomination Committee
Joined the Board in September 2003. Has over 25 years experience in the mobile telecommunications
sector. Formed Mobile Telecom plc in 1986 and held the position of Chairman and Chief Executive
until May 2001 when he sold his majority shareholding to Vodafone plc. Appointed as Non-executive
Director and Chairman of Symphony Telecom Holdings plc on 16 June 2005.
Sam Driver
Company Secretary
Appointed as Company Secretary in July 2004. Graduate of the Institute of Chartered Secretaries
and Administrators ("ICSA") in February 2003 and elected as Associate of ICSA in February 2004.
Worked in South Africa in the banking, auditing, insurance and risk management and
communication sectors; joined Eckoh in August 2001 as Company Secretarial Manager.
9
9
November 2005: Eckoh in the
utilities sector
ScottishPower prepares for winter
with speech recognition technology
from Eckoh
In November 2005 Eckoh, in association
with TFCC, announced a service to
provide ScottishPower customers with a
power outage reporting solution
allowing callers to get updates in their
local area and to receive call-back
capability.
Eckoh has a strategic partnership with
Twenty First Century Communications
Inc. of the USA to host the company’s
High Volume Call Answering (HVCA®)
service in the UK market. TFCC
currently work with over 70 US electric
utility clients in the North American
marketplace.
“We are extremely pleased to partner
with Eckoh in the UK marketplace and
are delighted at the partnership’s
success in winning this significant
contract with ScottishPower. The
HVCA® solution selected by
ScottishPower combines TFCC’s
market-leading proven performance in
North America with Eckoh’s UK
market leadership in the provision of
high volume automated call handling
solutions. Together with Eckoh, we
look forward to replicating our success
in the UK with ScottishPower and
other utility clients.”
Thomas Calabro, Senior Vice President
for TFCC
Directors’ Report
The Directors of Eckoh Technologies plc present their annual report, together
with the audited financial statements of the Company and the Group for the
year ended 31 March 2006.
11.00 am on Monday 30 October 2006. Details
of the business to be proposed at the Annual
General Meeting are contained within the Notice
of Meeting, which accompanies this Report.
Directors The current Directors of the Company
are shown on page 9.
Adam Moloney was appointed Group Finance
Director on 1 August 2005 and was re-elected
at the Annual General Meeting held on 21
September 2005. All other Directors served
throughout the year.
The articles of association require that at the
Annual General Meeting one third, or as near as
possible, of the Directors will retire by rotation.
All Directors must be re-elected at intervals of
not more than three years, in accordance with
the provisions of the Combined Code on
Corporate Governance appended to the Listing
Rules of the United Kingdom Listing Authority.
The following Directors retire by rotation and put
themselves forward for re-election at the Annual
General Meeting:
Nik Philpot
Martin Smith
Principal activity The principal activity of Eckoh
Technologies plc and its subsidiary undertakings
("the Group") is the provision of
telecommunications services to businesses and
consumers, with a strategic focus on designing,
building and managing speech solutions for
large corporations and organisations using
advanced speech recognition technologies. The
Chairman's Statement (page 3) and the Business
Review (pages 4 to 7) report on the progress
made in the financial year under review.
The principal subsidiary undertakings are listed
on page 36.
Results and dividends The audited financial
statements and related notes for the year ended
31 March 2006 are set out on pages 24 to 48.
The Group's profit for the year is set out in the
Profit and Loss Account on page 24.
The Company intends to reinvest any future
earnings to finance the growth of its business
and does not anticipate paying any dividends in
the foreseeable future.
Research and development The Group
incurred £2.5m (2005 - £2.1m) of research and
development expenditure during the year £0.1m
(2005 - £0.1m) of which had been capitalised
during the year as an intangible asset, as it
expanded its product portfolio and produced
bespoke solutions for customers.
Annual General Meeting The next Annual
General Meeting of the Company will be held at
11
Directors’ Report continued
Directors Remuneration (audited)
Notes:
(i) A P Moloney was appointed as Group
Finance Director on 1 August 2005
(ii) M E Smith, as Chairman of Symphony
Telecom Holdings plc also received a fee of
£39,585
(iii)B D McArthur Muscroft resigned on 25
June 2004
(iv)D G Best resigned on 5 July 2004
Name
M R Turner
N B Philpot
A P Moloney (i)
H R P Reynolds
M E Smith (ii)
B D McArthur Muscroft (iii)
D G Best (iv)
Totals
Salary
and fees
£'000
195
195
61
69
25
-
-
Bonus
£'000
-
117
25
-
-
-
-
Other
benefits
£000
18
18
9
-
-
-
-
2006
Total
£'000
213
330
95
69
25
-
-
2005
Total
£'000
258
258
-
51
25
57
29
545
142
45
732
678
Directors' interests The interests of the
Directors in the share capital of the Company
and their options in respect of shares in the
Company are shown below. Except as disclosed
in Note 25 to the financial statements, no
Director has had any material interest in a
contract of significance (other than service
contracts) with the Company or with any
subsidiary company during the year.
Amendments to section 309 of the Companies
Act came into effect from 6 April 2005. A new
concept of a "qualifying third party indemnity
provision" which is referred to as a "QTPIP"
was introduced . A QTPIP is a provision which
indemnifies a director against liabilities in civil
action by a person other than the company (or
an associated company). The Company adopted
a QTPIP during the year under review. A copy of
this document will be open to inspection by
members 15 minutes before and during our
forthcoming Annual General Meeting.
Directors' Interests in Shares The interests, all
of which are beneficial, of the Directors (and
their immediate families) in the share capital of
the Company, as shown in the register kept by
the Company, are set out below:
21 June 2006
Ordinary shares
of 0.25 pence each
31 March 2006
Ordinary shares
of 0.25 pence each
1 April 2005
Ordinary shares
of 0.25 pence each
Notes:
M R Turner
N B Philpot (i)
A P Moloney (ii)
H R P Reynolds (iii)
M E Smith
1,139,000
2,282,000
-
646,550
1,034,482
1,139,000
2,282,000
-
646,550
1,034,482
1,139,000
2,282,000
-
646,550
1,034,482
(i) N B Philpot's spouse is the beneficial owner
of 80,000 shares which have been included
within the table.
(ii) A P Moloney was appointed as a Director
on 1 August 2005
(iii)Included in H R P Reynolds' shareholding is
258,620 shares held in the name of Brewin
Nominees Limited.
12
Directors' Share Options The Directors' interests in share options under the Share Option Scheme
(1999) are shown in the following table.
Notes:
At 31 March
2006
(number)
Granted
in year
(number)
Lapsed in
year
(number)
Note
At 1 April Exercise
price
(pence)
2005
(number)
Earliest
date for
exercise
Latest
date for
exercise
a Granted under the Inland Revenue approved
Appendix to the Eckoh Technologies plc
Share Option Scheme (1999).
M R Turner
N B Philpot
A P Moloney
c
a
b
a
b
c
a
b
a
b
a
b
c
3,000,000
380,710
337,702
-
-
-
342,857
342,857
657,143
657,143
3,000,000
380,710
337,702
-
-
-
342,857
342,857
657,143
657,143
250,000
-
342,857
342,857
407,143
407,143
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
6.50
27.06.05 27.06.12
b Granted under the Eckoh Technologies plc
380,710
7.88
07.10.07 07.10.14
337,702
7.88
07.10.07 07.10.14
-
-
8.75
13.09.08 13.09.15
8.75
13.09.08 13.09.15
3,000,000
6.50
27.06.05 27.06.12
380,710
7.88
07.10.07 07.10.14
337,702
7.88
07.10.07 07.10.14
-
-
8.75
13.09.08 13.09.15
8.75
13.09.08 13.09.15
250,000
8.50
28.02.07 28.02.14
-
-
8.75
13.09.08 13.09.15
8.75
13.09.08 13.09.15
Share Option Scheme (1999) but not
qualifying for Inland Revenue approval.
c Granted under the Eckoh Technologies plc
Share (1999) but not qualifying for Inland
Revenue approval. The objective conditions
of these share options were reviewed and
amended by the Remuneration Committee
on 13 September 2005. The performance
target attaching to the above options is the
closing middle market price of a share, on
any day on which the London Stock
Exchange is open for the transaction of
business following the third anniversary of
the date of grant, must be greater than the
exercise price of the Option by RPI plus
15%.
Relationship between the Eckoh Board and
Symphony Telecom Holdings Board
("Symphony") During the year the Chairman
and Chief Executive of Symphony were both
Directors of the Company. Both Martin Smith and
Martin Turner report on relevant Symphony
matters at Company Board meetings where
appropriate.
Substantial shareholdings At 21 June 2006,
the Company had been notified of the following
material interests, representing 3% or more of
and 19 to the financial statements. As at the
year end the Company had the authority to
purchase 27,141,659 of its own shares.
Share schemes The Directors believe that a key
element in attracting, motivating and retaining
employees of the highest calibre is employee
involvement in the performance of the Group
through participation in share schemes. By doing
so, the Directors believe that employees'
interests will be aligned with those of
shareholders. Details of options granted under
No of shares
% of issued share capital
Gartmore *
Herald Investment Trust Limited
Cavendish Asset Management
Universities Superannuation Scheme Ltd
40,515,798
19,845,000
13,883,000
12,175,000
14.87
7.28
5.09
4.47
its current issued share capital.
Share capital and reserves Details of changes
in the authorised and issued share capital and
reserves of the Company are shown in Notes 18
the share option schemes are set out in Note 20
to the financial statements. All permanent
employees are eligible to join a scheme. A new
Performance Share Plan was approved by
shareholders at the Annual General Meeting
* shares held in the name of Gartmore
Investments Limited, Gartmore Fund
Managers and Gartmore Global Partners.
In addition, the USB AG London Branch
Holding of 13,537,386 ordinary shares
(representing 4.97% of the issued share
capital of the company), is included in
the Gartmore holding.
13
February 2006: Eckoh in the
leisure sector
Britain’s newest cinema chain
“Empire” signs three-year speech
deal with Eckoh
In February 2006, Eckoh announced a
new three-year contract to supply
Empire Cinemas with an end-to-end
automated cinema information and
booking solution.
The automated information and
booking service is being rolled out to all
17 cinema outlets from March 2006,
providing Empire Cinema customers
with a 24/7, one-number solution for
accessing local cinema and film
information as well as the ability to
book tickets and specify seating
preference.
“Eckoh's reputation for providing best
of breed speech technology and their
proven track record of operating high
volume speech applications for other
leading cinema providers, made them
the natural provider of choice. By
partnering with Eckoh, we look
forward to leading the way in the
provision of highly sophisticated and
innovative cinema services to our
customer base.”
Justin Ribbons - CEO, Empire Cinemas
Directors’ Report continued
By order of the Board
Sam Driver
Company Secretary
26 June 2006
Payments to creditors The Company and its
subsidiaries have a variety of payment terms with
their suppliers. The Group agrees payment terms
with its suppliers when it enters into binding
purchasing contracts for the supply of goods and
services. Its suppliers are, in that way made
aware of these terms. The Company seeks to
abide by these payment terms when it is
satisfied that the supplier has provided the
goods or services in accordance with the agreed
terms and conditions. At 31 March 2006 the
amount of trade creditors shown in the balance
sheet represents 31 days of average purchases
for the Group (2005 - 46 days). The Company
had no trade creditors at 31 March 2006.
Statement of Disclosure of Information to
Auditors As far as the Directors are aware there
is no information relevant to the audit of which
the Company's auditors are unaware and the
Directors have taken all steps that they ought to
have taken as Directors in order to make
themselves aware of any such relevant
information and to establish that the Company's
auditors are aware of that information.
Auditors A resolution to reappoint
PricewaterhouseCoopers LLP as auditors of the
Company, and to authorise the Directors to set
their fees, will be submitted to the forthcoming
Annual General Meeting.
held on 28 July 2004.
Charitable and political donations The Group
made no political donations during the year.
Anglia Telcom Centres Limited made £2,500
of charitable donations during the year
(2005 - £918).
Employees The Directors believe that the
Group's employees are a source of competitive
advantage. The Directors recognise that
continued and sustained improvement in the
performance of the Group depends on its ability
to attract, motivate and retain employees of the
highest calibre.
The Group is committed to the principle of equal
opportunity in employment. It seeks to ensure
that no employee or applicant is treated less
favourably on the grounds of gender, marital
status, nationality, race, colour, ethnic or national
origin, religion, disability or sexual orientation or
is disadvantaged by conditions or requirements,
including age limits, which cannot be objectively
justified. Entry into and progression within the
Group are solely determined by the application of
job criteria, personal aptitude and competence.
It is the Group's policy to apply best practice in
the employment of disabled people. Full and fair
consideration is given to every application for
employment from disabled persons whose
aptitude and skills can be utilised in the business
and to their training and career development.
This includes, wherever possible, the retraining
and retention of staff who become disabled
during their employment.
All staff are informed of matters concerning their
interest as employees and the financial and
economic factors affecting the business.
Established management communication
channels have been supplemented by direct
presentations to staff by Directors to explain
developments of particular significance.
Environmental report The Directors recognise
the importance and responsibility of ensuring
that the Group's businesses are conducted with
respect and care for the environment.
Environmental management is regularly
monitored by the Board through the internal
control risk management process.
15
Corporate Governance
Compliance Statement The Board of Eckoh Technologies plc recognises its responsibilities to
maintain high standards of corporate governance throughout the Group. Except as stated in this
report, the Company complied with all the provisions of the Combined Code on Corporate
Governance (the "Combined Code"). The Company is committed to complying with the Combined
Code so far as is practicable and appropriate for a public company of its size and nature. This
statement explains how the Company has applied the principles of the Combined Code.
Board of Directors The Chairman is
responsible for the effective running of the
Board of Directors. The Board has five members,
comprising the Non-executive Chairman, the
Chief Executive, the Chief Operating Officer, the
Group Finance Director and one Non-executive
Director. The Board has considered the
independence of its Non-executive Directors.
The matters considered included but were not
limited to Martin Smith's position as Chairman
of Symphony Telecom Holdings plc, the
consultancy agreement that was in place for
part of the year under review (terminated on 30
June 2005) between the Company and MES
Investments Limited (Martin Smith, has an
interest in MES Investments Limited), the fee
paid to Martin Smith in relation to the
acquisition of Anglia Telecom Centres Limited
and the position of Peter Reynolds as Non-
executive Chairman of the Board. After due
consideration the Board considered that the
Chairman, Peter Reynolds, and the Non-
executive Director, Martin Smith, are
independent and do not have any involvement
in the day-to-day management of the Company
or its subsidiaries.
The biographical details of the Board members
are set out on page 9. The Board believes that
the balance achieved between Executive and
Non-executive Directors is appropriate and
effective for the control and direction of the
business.
The Board formally met eleven times during the
period under review, with full attendance on
each occasion, with the exception of the
February meeting, where the apology from
Martin Turner, was noted.
including a policy enabling Directors to take
independent professional advice in the
furtherance of their duties at the Company's
expense. The Board programme is designed so
that Directors have a regular opportunity to
consider the Group's strategy, policies, budgets,
progress reports and financial position and to
arrive at a balanced assessment of the Group's
position and prospects. In addition, strategic
developments are on the agenda at each Board
meeting, and where appropriate the Board
programme also includes a day set aside purely
for strategic review and planning.
The Company has a clear division of
responsibility between the roles of Chairman
and Chief Executive within the business.
The Non-executive Directors' letters of
appointment do not specify an expected time
commitment. However the relevant letters of
appointment do state that the Non-executive
Directors are to attend at least seven Board
meetings a year. In addition they are to make
themselves available on reasonable notice to
individual Directors throughout their appointment
as Non-executive Directors of the Board.
The Non-executive Directors have a
responsibility to ensure that the strategies and
policies proposed by the Executive Directors are
fully discussed and critically examined, not only
with regard to the best long-term interests of
shareholders, but also having regard to the
Company's relationships with its employees,
customers and suppliers. The Board and its
Committees are supplied with information and
papers to ensure that all aspects of the
Company's affairs are reviewed on at least an
annual basis.
There is a schedule of formal matters specifically
reserved for the full Board's consideration,
Day-to-day management of the business is
delegated to the Operating Board, consisting of
the three Executive Directors and certain senior
managers, which meets monthly. The Board is
dependent on the Operating Board for the
provision of accurate, complete and timely
information and the Directors may seek further
information where necessary. The Chairman is
responsible for ensuring that all Directors are
properly briefed on issues arising at Board
meetings.
The Board and the Operating Board are assisted
by the Company Secretary, who provides a point
of reference and regular support for all Directors
and senior managers. The Company Secretary
has responsibility for ensuring that Board
procedures are followed, for establishing the
Group's corporate governance policies with the
Chairman and the Chief Executive and for
assisting the Board in facilitating compliance by
the Company with its legal obligations. The
appointment and removal of the Company
Secretary is one of the matters reserved for the
full Board's decision, in accordance with the
formal schedule referred to above.
The Chairman, assisted by the Company
Secretary, ensures that all new Directors receive
an appropriate induction on joining the Board.
An evaluation of the performance of the Board
and its Committees is undertaken annually. A
Board Effectiveness Questionnaire is completed
by all Board members. The Company Secretary
co-ordinates the responses and provides
feedback to the Board, areas requiring
enhancement are discussed and actions agreed.
In addition the Chairman undertakes annual
performance evaluations of each of the
Directors. The Board, excluding the Chairman,
meets once a year to discuss the performance
of the Chairman. The Senior Independent
Director is responsible for providing appropriate
16
feedback of the outcome of his review to the
Chairman.
Under the Company's articles of association,
each year at least one third of the Directors must
retire and submit themselves for re-election by
the shareholders at the Annual General Meeting.
The communication accompanying the
Company's Notice of Annual General Meeting
sets out reasons for the Board's belief that the
individual should be re-elected.
Board Committees Certain responsibilities are
delegated to the Remuneration Committee, the
Audit and the Nomination Committees. The
three committees have written terms of
reference, which define their authorities, duties
and membership. The written terms of reference
are available for inspection at the Company's
registered office during normal business hours
on any weekday excluding Saturdays, Sundays
and public holidays. Details of membership of
the committees are given on page 9. The
Company has not sought to comply with the
requirements of the Combined Code to have
three independent Non-executive Directors as
members of the Audit Committee. An
exemption to this requirement for smaller
quoted companies is contained in the Combined
Code. The Audit Committee comprises Martin
Smith, who chairs the Committee, and Peter
Reynolds. The Company has not sought to
comply with the requirements of the Combined
Code, with regards to a member of the
Committee having recent and relevant financial
experience. However, Adam Moloney, the Group
Finance Director, attends all Audit Committee
meetings by invitation and provides advice to the
Committee where appropriate. The Committee
formally met twice during the period under
review, with no absentees. The Chief Executive
Officer and Group Finance Director were invited
to and attended both meetings. The Company's
auditors were available via telephone for the
interim results meeting and attended the
preliminary results meeting. The Committee
considered reports issued by the Company's
auditors at these meetings. The auditors have
direct access to the Audit Committee without
the presence of an Executive Director. The
Committee reviews the effectiveness of the
Company's internal financial controls and
receives regular reports from the external
auditors. The Committee also reviews the scope
and results of the external audit as well as its
cost effectiveness.
During the period of review, the terms of
reference of the Audit Committee were reviewed
and it was agreed that no changes thereto were
required.
During the year, the following non audit services
were performed: taxation and transaction
services. The Committee reviews the external
auditor's letter confirming their independence
on an annual basis. In accordance with the
Combined Code, the Committee's duties include
recommendations to the Board relating to the
appointment, re-appointment and removal of
the external auditor.
The Audit Committee annually reviews the
requirement for an internal audit function. The
Committee has decided that none is necessary at
present. Instead, other monitoring processes
have been applied to provide assurance to the
Board that the system of internal control is
functioning satisfactorily.
The Nomination Committee is responsible for
the formal selection process of Executive and
Non-executive Directors. It is made up of the
two independent Non-executive Directors and
the Chief Executive Officer and is chaired by
Martin Smith. The Committee met twice during
the period under review, with no absentees. The
normal selection process involves the
formulation of a clear job description and ideal
candidate profile, the appointment of
independent recruitment consultants, if
appropriate, and interviews of suitable
candidates by the Committee and one or more
of the Executive Directors. A short-list of
candidates then meets with the remaining
Directors. Following feedback from all Directors,
and after due consideration, the Nomination
Committee recommends the appointment of the
chosen candidate.
Internal Control and Risk Management The
Directors formally acknowledge their
responsibility for establishing effective internal
control within the Company. In this context,
control is defined as those policies, processes,
tasks and behaviours established to ensure that
business objectives are achieved most cost
effectively, assets and shareholder value are
safeguarded and laws, regulations and policies
are complied with.
The Board has put in place a system of internal
controls, set within a framework of a clearly
defined organisational structure, with well
understood lines of responsibility, delegation of
authority, accountability, policies and procedures
which is supported by training, budgeting,
reporting and review procedures. The
organisational structure includes the Operating
Board, which comprises the Company's
Executive Directors and senior managers, which
meet monthly.
An annual operating budget and long-term
business plan are prepared by management and
are reviewed and approved by the Board prior to
the commencement of each financial year.
Monthly reporting and analysis of results against
budget, risk assessment and related internal
controls and forecasts are received, discussed by
management and reported to the Board.
There are ongoing processes for identifying,
evaluating and managing the Company's
significant risks and related internal controls
which are integrated into the Company's
operations. Such processes are reported to, and
reviewed by, the Board at each meeting. These
processes have identified the risks most
important to the Company (business,
operational, financial and compliance),
determined the financial implications, and
assessed the adequacy and effectiveness of their
control. The reporting and review processes
provide routine assurance to the Board as to the
adequacy and effectiveness of the internal
controls. The Directors have reviewed the
effectiveness of the Company's system of
internal control in accordance with the
requirements of the Combined Code.
Shareholder Relations The Company holds
meetings with its major institutional investors
and general presentations are given covering the
interim and preliminary results. Peter Reynolds
met with shareholders, brokers and analysts
during the period under review. The Chairman is
available to attend presentation meetings and
other presentations on an ongoing basis. Martin
17
April 2006: Eckoh in broadcasting
Eckoh renews interactive telephony
contract with ITV and wins new
contract with ITV Play
In April 2006, Eckoh was re-appointed
by ITV, the UK's biggest commercial
television network, to provide premium
rate telephone services for channel
programming.
The new contract, which runs until at
least September 2007, was awarded
following a year in which Eckoh has
successfully managed telephone
services for ITV across more than thirty
hit shows including I'm a
Celebrity…Get Me Out of Here!,
Celebrity Love Island, Soapstar
Superstar, Ant and Dec's Gameshow
Marathon and This Morning. In this
period Eckoh has successfully handled
more than 30 million calls for ITV.
ITV HQ, Southbank, London
"Eckoh has delivered a first class
performance throughout 2005, making
it an easy decision to re-appoint the
company as our supplier of PRTS
services. The breadth of services Eckoh
provides and the clients that the
company works with gave us the
confidence that it remained the right
partner for ITV."
Jane Marshall - Commercial
Development Director of ITV Consumer
Corporate Governance continued
Smith, as the Senior Independent Director, is
available to shareholders to discuss any
concerns. All Directors have access to the
Company's nominated advisors who give
feedback from shareholders and receive copies
of broker update documents.
All shareholders have the opportunity to raise
questions at the Company's Annual General
Meeting, or leave written questions, which will
be answered in writing as soon as possible. At
the meeting the Chairman will give a statement
on the Group's performance during the year,
together with a statement on current trading
conditions. The Chairmen of the Audit,
Nomination and Remuneration Committees will
normally attend the AGM.
In addition to regular financial reporting,
significant matters relating to the trading or
development of the business are disseminated to
the market by way of Stock Exchange
announcements. The Company's Annual Report
and Accounts, Interim Statements and other
major announcements are published on the
Company's corporate web site at
www.eckoh.com.
Going Concern Under company law, the
Company's Directors are required to consider
whether it is appropriate to prepare financial
statements on the basis that the Company and
the Group are going concerns. As part of its
normal business practice the Group prepares
annual and longer term plans and, in reviewing
this information, the Company's Directors are
satisfied that the Group and the Company have
reasonable resources to enable them to continue
in business for the foreseeable future. For this
reason the Company and the Group continue to
adopt the going concern basis in preparing the
financial statements.
19
May 2006: Eckoh in interactive
entertainment
Eckoh launch the UK’s first mass
participation telephone game
In May 2006, Eckoh was commissioned
to provide ITV Play, the leading
participation TV channel, with the first
mass participation telephone quiz
format in the UK.
Eckoh was appointed as preferred
telephony supplier to ITV Play in April
2006; the new quiz format is expected
to become a central strand of Play
activity over the coming months.
"The Rovers Return Quiz Night is the
best in our new breed of formats,
combining Eckoh's cutting edge
interactive technology to bring
thousands of people together with the
nation's favourite soap. Eckoh's
experience has been invaluable in the
development of this show and the
team has pulled out all the stops to
ensure that ITV Play continues its
reputation as an innovator in
participation television."
William van Rest - Controller ITV Play
Statement of Directors’ Responsibilities
The following statement sets out the responsibilities of the Directors in relation to the financial
statements. The report of the Auditors, shown on page 23, sets out their responsibilities in
relation to the financial statements.
any time the financial position of the Company
and the Group and to enable them to ensure
that the financial statements comply with the
Companies Act 1985. They are also responsible
for taking reasonable steps to safeguard the
assets of the Company and the Group, and in
that context must have proper regard to the
establishment of appropriate systems of internal
control with a view to the prevention and
detection of fraud, theft and other irregularities.
Company law requires the Directors to prepare
financial statements for each financial year,
which give a true and fair view of the state of
affairs of the Company and the Group as at the
end of the financial year and of the profit or loss
and cash flow of the Group for the financial
year. In preparing those financial statements, the
Directors are required to:
• select appropriate accounting policies and
apply them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether applicable accounting
standards have been followed subject to any
material departures being disclosed and
explained; and
• prepare the financial statements on the going
concern basis, unless they consider it to be
inappropriate.
The Directors confirm that the financial
statements comply with the above requirements.
The maintenance and integrity of the web site of
Eckoh Technologies plc is the responsibility of
the Directors. Legislation in the United Kingdom
governing the preparation and dissemination of
financial statements may differ from legislation
in other jurisdictions.
The Directors are responsible for ensuring that
the Company keeps sufficient accounting
records to disclose with reasonable accuracy at
21
November 2006: Eckoh in the
government sector
Magistrates Courts to increase fine
payment revenues and reduce costs
with automated payment collection
service from Eckoh
In November 2005, Her Majesty's
Courts Service in the North East region
signed up to a 24/7, automated
payment solution to be deployed by
Eckoh and strategic business partner BT.
The automated solution is expected to
yield similar results to the West
Yorkshire HMCS, where it has already
yielded transformational cost savings
and an overwhelming 36% increase in
fine payments since June 2004.
"The self-service solution delivered by
Eckoh and BT will be particularly
helpful for customers who want to pay
their fines quickly and discreetly and
who are simply not able to make
payments during normal business
hours. We look forward to working
with Eckoh and BT to match the
significant cost savings and tremendous
operational achievement being enjoyed
by West Yorkshire HMCS.”
Paul Skelton North East Regional
Performance Manager
Independent Auditors' Report to the Members of
Eckoh Technologies plc
We have audited the Group and parent
company financial statements (the ''financial
statements'') of Eckoh Technologies plc for the
year ended 31 March 2006 which comprise the
Group Profit and Loss Account, the Group and
Company Balance Sheets, the Group Cash Flow
Statement, the Group Statement of Total
Recognised Gains and Losses, the Reconciliation
of Movements in Group Shareholders' Funds and
the related notes. These financial statements
have been prepared under the accounting
policies set out therein.
Respective responsibilities of directors and
auditors
The Directors' responsibilities for preparing the
Annual Report and the financial statements in
accordance with applicable law and United
Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting
Practice) are set out in the Statement of
Directors' Responsibilities.
the Companies Act 1985. We also report to you
if, in our opinion, the Directors' Report is not
consistent with the financial statements, if the
company has not kept proper accounting
records, if we have not received all the
information and explanations we require for our
audit, or if information specified by law
regarding directors' remuneration and other
transactions is not disclosed.
We read other information contained in the
Annual Report, and consider whether it is
consistent with the audited financial statements.
This other information comprises only the
Directors' Report, the Chairman's Statement and
the Business Review. We consider the
implications for our report if we become aware
of any apparent misstatements or material
inconsistencies with the financial statements.
Our responsibilities do not extend to any other
information.
Basis of audit opinion
Our responsibility is to audit the financial
statements in accordance with relevant legal and
regulatory requirements and International
Standards on Auditing (UK and Ireland). This
report, including the opinion, has been prepared
for and only for the company's members as a
body in accordance with Section 235 of the
Companies Act 1985 and for no other purpose.
We do not, in giving this opinion, accept or
assume responsibility for any other purpose or to
any other person to whom this report is shown
or into whose hands it may come save where
expressly agreed by our prior consent in writing.
We conducted our audit in accordance with
International Standards on Auditing (UK and
Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis,
of evidence relevant to the amounts and
disclosures in the financial statements. It also
includes an assessment of the significant
estimates and judgments made by the directors
in the preparation of the financial statements,
and of whether the accounting policies are
appropriate to the Group's and company's
circumstances, consistently applied and
adequately disclosed.
We report to you our opinion as to whether the
financial statements give a true and fair view
and are properly prepared in accordance with
We planned and performed our audit so as to
obtain all the information and explanations
which we considered necessary in order to
provide us with sufficient evidence to give
reasonable assurance that the financial
statements are free from material misstatement,
whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated
the overall adequacy of the presentation of
information in the financial statements.
Opinion
In our opinion the financial statements:
• give a true and fair view, in accordance with
United Kingdom Generally Accepted
Accounting Practice, of the state of the
Group's and the parent company's affairs as
at 31 March 2006 and of the Group's profit
and cash flows for the year then ended; and
• have been properly prepared in accordance
with the Companies Act 1985; and
• the information given in the Directors' Report
is consistent with the financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
26 June 2006
23
Group Profit and Loss Account
for the year ended 31 March 2006
Turnover
Continuing operations
Acquisitions
Total continuing operations
Discontinued operations
Cost of sales
Gross profit
Net operating expenses before intangible asset amortisation
and impairment and restructuring costs
Amortisation of intangible assets
Impairment of intangible assets
Restructuring costs
Net operating expenses
Operating profit/(loss) before intangible asset amortisation
and impairment and restructuring costs
Continuing operations
Acquisitions
Total continuing operations
Discontinued operations
Operating (loss)/profit
Continuing operations
Acquisitions
Total continuing operations
Discontinued operations
Profit on disposal of subsidiary operations
Profit on disposal of fixed asset investment
Costs of group restructuring
Net interest (payable)/receivable and other similar items
Profit/(loss) on ordinary activities before taxation
Taxation
Profit/(loss) on ordinary activities after taxation
Minority interests
Retained profit/(loss) for the year
Basic earnings/(loss) per 0.25p share
Diluted earnings/(loss) per 0.25p share
Notes
1,2
2
2
2
2,9
2,9
2
2
3
1,11
1
4
1
6
21
19
8
8
2006
£'000
127,084
86,626
39,578
126,204
880
(102,696)
24,388
(22,123)
(2,165)
-
(358)
(24,646)
2,265
284
2,214
2,498
(233)
(258)
(241)
216
(25)
(233)
1,388
300
(80)
(205)
1,145
(166)
979
296
1,275
0.5p
0.4p
2005
£'000
79,720
76,529
-
76,529
3,191
(59,675)
20,045
(19,533)
(2,539)
(7,756)
-
(29,828)
512
469
-
469
43
(9,783)
(9,826)
-
(9,826)
43
-
-
-
372
(9,411)
(6)
(9,417)
(23)
(9,440)
(3.5p)
(3.4p)
There is no difference between the profit on ordinary activities before taxation and the profit for the year stated above and their historical cost equivalents.
24
Group Statement of Total Recognised Gains and Losses
for the year ended 31 March 2006
Retained profit/(loss) for the year
Exchange adjustments offset in reserves
Total recognised gains/(losses) for the year
2006
£'000
1,275
(34)
1,241
2005
£'000
(9,440)
(8)
(9,448)
Reconciliation of Movements in Group Shareholders' Funds
for the year ended 31 March 2006
Retained profit/(loss) for the year
Exchange adjustments offset in reserves
Employee share options exercised (note 20)
Net increase/(decrease) in shareholders' funds
Shareholders' funds at beginning of year
Shareholders' funds at end of year
2006
£'000
1,275
(34)
82
1,323
8,951
10,274
2005
£'000
(9,440)
(8)
26
(9,422)
18,373
8,951
25
Balance Sheets at 31 March 2006
Fixed assets
Intangible fixed assets
Tangible fixed assets
Investments
Current assets
Stock
Debtors
Short-term investments
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Provisions for liabilities and charges
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Total shareholders' funds
Minority interests
Capital employed
Notes
9
10
11
12
13
16,28
16,28
14
15
17
1
18,19
19
19
21
Group
Company
31 March
2006
£'000
31 March
2005
£'000
31 March
2006
£'000
31 March
2005
£'000
8,604
1,498
288
10,390
479
22,537
3,000
9,737
35,753
(32,277)
3,476
13,866
(1,493)
(172)
12,201
681
227
9,366
10,274
1,927
12,201
918
1,571
-
2,489
22
11,021
7,000
6,296
24,339
(17,353)
6,986
9,475
(65)
(152)
9,258
679
147
8,125
8,951
307
9,258
-
-
9,624
9,624
-
9,029
3,000
31
12,060
(892)
11,168
20,792
-
(148)
20,644
681
227
19,736
20,644
-
20,644
-
-
10,401
10,401
-
4,036
7,000
398
11,434
(1,237)
10,197
20,598
-
(93)
20,505
679
147
19,679
20,505
-
20,505
The financial statements on pages 24 to 48 were approved by the Board of Directors on 26 June 2006 and were signed on its behalf by:
Martin Turner - Chief Executive Officer
26
Group Cash Flow Statement
for the year ended 31 March 2006
Notes
26
2006
£'000
2005
£'000
3,232
4,475
Net cash inflow from operating activities
Returns on investments and servicing of finance
Interest received
Interest paid
Loan issue costs
Taxation
Capital expenditure and financial investment
Purchase of tangible fixed assets
Expenditure on intangible fixed assets
Proceeds on disposal of tangible fixed asset
Disposal of trade investment
Acquisitions and disposals
Purchase of subsidiary undertakings
Net cash acquired with subsidiary undertakings
Contingent consideration paid in respect of a prior year acquisition
Costs of group restructuring (note 1)
Disposal of subsidiary undertaking
Net cash disposed with subsidiary undertaking
Proceeds on part disposal of subsidiary undertaking (note 3)
Additional proceeds from disposal of operations in a prior year (note 3)
22
22
22
22
Cash (outflow)/inflow before use of liquid resources and financing
286
(335)
(298)
(347)
(362)
(1,023)
(186)
12
300
(897)
410
(38)
-
372
-
(1,167)
(290)
-
-
(1,457)
(9,722)
(250)
796
(50)
(80)
(29)
(107)
3,429
108
(5,655)
(4,029)
-
-
-
-
-
-
-
(250)
3,140
Management of liquid resources
Decrease/(increase) in short-term investments
27,28
4,000
(500)
Financing
Issue of shares
Loan raised
Loans repaid
Capital element of finance lease rental payments
Increase in cash in the year
27,28
82
6,000
(2,560)
(9)
3,513
3,484
26
-
(80)
(29)
(83)
2,557
27
Notes to the Financial Statements
for the year ended 31 March 2006
Principal Accounting Policies
Basis of accounting These financial statements
have been prepared on the going concern basis,
under the historical cost convention and in
accordance with the Companies Act 1985 and
applicable Accounting Standards in the United
Kingdom.
The principal accounting policies adopted by the
Group are described below together with an
explanation of where changes have been made
to previous policies on the adoption of new
accounting standards in the year.
New accounting standards FRS 21 "Events
after the balance sheet date", FRS 22 "Earnings
per share", the presentation part of FRS 25
"Financial instruments: Disclosure and
presentation", FRS 27 "Life assurance" and FRS
28 "Corresponding amounts" all apply for the
first time in respect of the Group's 2006 year
end. None of these standards have had an
impact on either the current or previous
financial years.
Basis of consolidation The Group financial
statements consolidate the accounts of the
Company and its subsidiary undertakings, the
principal ones of which are set out in note 11.
The results of subsidiaries acquired are included
in the consolidated profit and loss account from
the date control passes. Intra-Group
transactions are eliminated fully on
consolidation. All companies over which the
Group actually exercises dominant influence are
consolidated as subsidiary undertakings.
Dominant influence is defined as the ability to
determine the operating and financial policies,
which includes determining budgets, product
offering and customer acceptance.
On acquisition of a subsidiary, all of the
subsidiary's assets and liabilities that exist at the
date of acquisition are recorded at their fair
values reflecting their condition at that date.
A separate profit and loss account of Eckoh
Technologies plc itself is not presented, as
permitted by Section 230 of the Companies
Act.
Goodwill Goodwill arising on consolidation
represents the excess of the fair value of the
consideration paid over the fair value of the
identifiable net assets acquired. Goodwill is
capitalised on the Group balance sheet and
amortised in equal instalments over its
estimated useful economic life. The expected
useful economic life is generally assumed to be
5 years for telecommunications businesses. The
useful economic life is assessed for each
acquisition as it arises. The carrying value of
goodwill is assessed at the end of the first full
28
financial year following the acquisition and
thereafter if there is any indication of
impairment. Any impairment in value is charged
to the profit and loss account.
Other intangible fixed assets Other
intangible fixed assets (including customer bases
and client contracts) acquired by the Group are
capitalised and amortised over their expected
useful economic lives. The expected useful
economic life of an acquired customer base is
generally assumed to be 3-5 years. The useful
economic lives for other intangible assets are
assessed for each acquisition as it arises. The
carrying value of intangible fixed assets is
assessed at the end of each financial year if
there is any indication of impairment. Any
impairment in value is charged to the profit and
loss account.
Tangible fixed assets Tangible fixed assets are
stated at cost or fair value on acquisition less
depreciation. Depreciation is provided at rates
calculated to write off the cost less the
estimated residual value of each asset over its
expected useful economic life by equal
instalments, as follows:
Motor vehicles
over 3 years
Fixtures, fittings and
office equipment
over 3 years
The carrying value of tangible fixed assets is
reviewed when necessary and any impairment
in value is charged to the profit and loss
account.
Investments Long-term investments, held as
fixed assets, are stated at cost less provision for
any impairment in value.
Borrowings Loans are stated at cost plus
interest accrued but not paid. Loan
arrangement fees are capitalised as part of the
loan and written off over the term of the loan
in proportion to the interest payable on the
loan. Amounts payable under the loan are
analysed between amounts falling due within
one year and amounts falling due after more
than one year.
Stock and work in progress Stock and work
in progress are valued at the lower of cost and
net realisable value. In general, cost is
determined on a first in first out basis and
includes transport and handling costs. Where
necessary, provision is made for obsolete and
slow moving items.
Foreign currency transactions Transactions in
foreign currencies are recorded in Sterling at the
rate ruling on the date of the transaction.
Assets and liabilities denominated in foreign
currencies are translated into Sterling at the
rates of exchange ruling at the balance sheet
date. The results of overseas subsidiary
undertakings are translated into Sterling at
average rates for the year. The assets and
liabilities are translated at rates of exchange
ruling at the end of the financial year.
Differences on exchange arising from the
retranslation of the net investment in overseas
subsidiary undertakings are taken to reserves
and are reported in the statement of total
recognised gains and losses. Other foreign
exchange gains or losses are taken to the profit
and loss account in the year in which they arise.
Finance and operating leases Assets acquired
under finance leases are recorded as tangible
fixed assets in the balance sheet. The
obligations to pay future capital instalments are
shown in creditors and are analysed between
amounts falling due within one year and
amounts falling due after more than one year.
The interest element of rental obligations is
charged to the profit and loss account over the
period of the lease in proportion to the balance
of capital repayments outstanding. The amount
capitalised in respect of finance leases is the
present value of the minimum lease payments
payable during the lease term. Rents payable
under operating leases are charged against
income on a straight line basis over the length
of the lease.
Pensions The Group operates a group personal
pension scheme and two Group companies
operate defined contribution pension schemes.
The assets of the schemes are held separately
from those of the Group in independently
administered funds. Contributions payable are
charged in the profit and loss account in the
year in which they are incurred.
Deferred taxation Deferred taxation is
recognised in respect of all timing differences
that have originated but not reversed at the
balance sheet date, where transactions or
events that result in an obligation to pay more
tax in the future or a right to pay less tax in the
future have occurred at the balance sheet date.
A net deferred tax asset is regarded as
recoverable and therefore recognised only
when, on the basis of all available evidence, it
can be regarded as more likely than not that
there will be suitable taxable profits against
which to recover carried forward tax losses and
from which the future reversal of underlying
timing differences can be deducted.
Deferred tax is measured at the average tax
rates that are expected to apply in the periods
in which the timing differences are expected to
reverse, based on tax rates and laws that have
been enacted or substantively enacted by the
balance sheet date. Deferred tax is measured
on a non-discounted basis.
Turnover Turnover represents the invoiced
amount, net of Value Added Tax, of goods sold
and services provided to customers.
Revenue recognition Symphony's revenue
from calls, which excludes value added tax and
trade discounts, is recognised in the profit and
loss account at the time the call is made. Calls
made in the year, but not billed by the year end,
are accrued within debtors as accrued income.
Revenue from line rentals is recognised in the
month which the charge relates to. Revenue
from the sale of handsets and the related costs
are recognised at the date of delivery.
Connection incentive bonuses are recognised
when specific performance criteria are met.
Provision is made for expected claw-backs.
Speech Solutions build fee revenue is recognised
on delivery of the speech application. Call
revenue from speech services is recognised
when the Group has determined that users have
accessed its services via a telephone carrier
network and/or the Group's telecommunication
call processing equipment connected to that
network. In the event that build, call and
maintenance revenue are included in the same
contract, each component part is separately
valued and individual component revenues are
recognised when that component is delivered.
Client Services and Advertised Services revenue
is recognised when the Group has determined
that users have accessed its services via a
telephone carrier network and/or the Group's
telecommunication call processing equipment
connected to that network. Cost of sales
includes media costs, network charges,
production costs and facility costs, and is
expensed in the accounting period in which the
related revenues are generated.
Advertising costs The Group places direct-
response advertisements to promote its Eckoh
IVR services in a variety of media, including
television, radio, magazines, newspapers and
other publications. The costs of such advertising
are expensed on the date on which the
advertisements first appear in the relevant
media.
Research and development Research and
development expenses include expenses
incurred by the Group to develop new products
and enhance its systems. Research costs are
charged to the profit and loss account in the
year in which they are incurred. Development
costs are expensed when incurred unless the
SSAP 13 criteria are met, in which case the
expenditure is capitalised and amortised over
the estimated useful life of the asset.
Related party transactions FRS 8, 'Related
Party Transactions', requires the disclosure of
the details of material transactions between the
reporting entity and related parties. The Group
has taken advantage of exemptions under FRS 8
not to disclose transactions between group
companies.
Costs of share option schemes Under UITF 17
the Company is required to recognise as a
charge to the profit and loss account the
amount by which the fair market value of any
shares or share options issued exceeds their
respective issue or exercise price on the date of
the grant. The charge is spread over the period
to vesting.
As a result of the grant of share options since 6
April 1999 the Company will be obliged to pay
employer's National Insurance contributions on
the difference between the market value of the
underlying shares and their exercise price when
the options are exercised. A provision is made
for this liability using the value of the
Company's shares at the balance sheet date and
is spread over the vesting period of the share
options.
Financial instruments In accordance with FRS
13, 'Derivatives and other financial
intstruments: disclosures', the Group has taken
advantage of the exemption available for short-
term debtors and creditors. All financial assets
and liabilities are recorded at historical cost,
apart from the net assets and liabilities of
overseas subsidiary undertakings, which are
translated into sterling at rates of exchange
ruling at the balance sheet date.
29
Notes to the Financial Statements
for the year ended 31 March 2006 continued
1
Segmental analysis
Business analysis
Symphony Telecom
Speech Solutions
Client Services
Advertised Services
Discontinued operations
Central costs
Net interest receivable (note 4)
Profit on part disposal of subsidiary operations (note 3)
Profit on disposal of fixed asset investment (note 11)
Costs of group restructuring
Total
Turnover
Contribution
2006
£'000
2005
£'000
2006
£'000
2005
£'000
Profit/(loss) before taxation
2006
£'000
2005
£'000
61,324
5,263
47,532
12,085
880
-
-
-
-
-
20,967
5,001
38,989
11,572
3,191
-
-
-
-
-
2,295
555
681
2,529
(214)
-
-
-
-
-
1,546
459
213
2,667
130
-
-
-
-
-
127,084
79,720
5,846
5,015
(637)
(106)
350
2,511
(233)
(2,522)
174
1,388
300
(80)
1,145
1,284
(150)
(10,306)
2,557
43
(3,249)
410
-
-
-
(9,411)
Analyses by business are based on the Group's management structure. Turnover between segments is immaterial. There are no material foreign entities, nor
are there material foreign customers thus no segmental information by geographical area is presented.
Contribution by segment is arrived at by taking the segmental turnover less opertating costs excluding depreciation.
Central costs comprise corporate costs, the cost of central support functions and head office costs. These costs are not apportioned across the business
segments. The reduction in central costs from the prior year is largely as a result of the allocation of costs to Symphony Telecom Holdings plc in respect of
shared central resources utilised.
Costs of group restructuring comprise advisory costs incurred in relation to setting up the Symphony Telecom Holdings plc group.
Business analysis
Symphony Telecom
Speech Solutions
Client Services
Advertised Services
Discontinued operations
Central short term investments
Central cash at bank and in hand
Central net assets
Total
Net assets
Net assets excluding
intangible fixed assets
2005
£'000
2006
£'000
2005
£'000
(600)
812
(3,038)
(63)
30
7,000
6,296
(1,179)
9,258
(4,018)
929
(6,829)
351
-
3,000
5,276
4,888
3,597
(1,075)
713
(3,382)
(63)
30
7,000
6,296
(1,179)
8,340
2006
£'000
4,442
1,019
(6,775)
351
-
3,000
5,276
4,888
12,201
Treasury is managed on a Group basis, as such, short-term investments and cash at bank and in hand can not be practicably divided between the business
segments.
30
2005
Total
£'000
79,720
(59,675)
20,045
19,533
16,345
3,188
2,539
7,756
-
29,828
7,012
22,816
(9,783)
2
Cost of sales, gross profit and net operating expenses
Acquisitions
£'000
Continuing
£'000
Discontinued
£'000
2006
Total
£'000
Continuing
£'000
Discontinued
£'000
Turnover
Cost of sales
Gross profit
39,578
86,626
880
127,084
76,529
(34,453)
(67,933)
(310)
(102,696)
(58,730)
5,125
18,693
570
24,388
17,799
Net operating expenses before intangible asset
amortisation and impairment and restructuring costs
Direct operating expenses
Group overhead
Amortisation of intangible assets
Impairment of intangible assets
Restructuring costs
Net operating expenses
Selling and distribution costs
Administrative expenses
Operating (loss)/profit
2,911
2,911
-
1,861
-
137
4,909
1,812
3,097
216
18,409
15,887
2,522
304
-
221
18,934
4,828
14,106
(241)
803
803
-
-
-
-
803
250
553
(233)
The Group's operating loss is stated after charging:
Staff costs (note 5)
Depreciation of tangible owned fixed assets (note 10)
Depreciation of tangible leased fixed assets (note 10)
Amortisation of intangible fixed assets (note 9)
Impairment of intangible fixed assets (note 9)
Loss on disposal of tangible fixed assets
Operating lease rentals - equipment
Operating lease rentals - land and buildings
Research and development costs
Auditors' remuneration - audit (Company £0.04m (2005 - £0.04m))
Auditors' remuneration - non-audit services
Restructuring costs
17,330
14,142
3,188
2,539
7,756
-
27,625
6,222
21,403
(9,826)
22,123
19,601
2,522
2,165
-
358
24,646
6,890
17,756
(258)
2006
£'000
9,169
1,008
20
2,165
-
-
65
298
2,486
280
9
358
3,191
(945)
2,246
2,203
2,203
-
-
-
-
2,203
790
1,413
43
2005
£'000
8,566
1,289
30
2,539
7,756
7
107
475
2,097
134
31
-
In addition to the auditors' remuneration for audit services, Symphony Telecom Holdings plc remunerated the auditors for non-audit services in respect of
the acquisition of Anglia Telecom Centres Limited, the flotation on AIM of the enlarged Symphony Group, raising bank debt finance and group
restructuring. The non-audit services amounted to £0.6m, of which the full amount has been capitalised within the balance sheet.
The auditors were remunerated for non-audit advisory services in respect of taxation and International Accounting Standards.
The restructuring costs relate to integration costs incurred by Symphony Telecom Holdings plc following acquisitions made during the year.
31
Notes to the Financial Statements
for the year ended 31 March 2006 continued
3
Profit/(loss) on disposal of subsidiary operations
Profit on part disposal of subsidiary undertaking
Loss on disposal of subsidiary undertaking
Additional proceeds from disposal of operation in a prior year
Profit on disposal of subsidiary operations
2006
£'000
1,512
(232)
108
1,388
2005
£'000
-
-
-
-
On 15 September 2005, Eckoh's telecoms subsidiary, Symphony Telecom Holdings plc ('Symphony'), floated on AIM, at the same time placing 10,997,561
ordinary shares, equivalent to 35.36% of the issued share captial with new investors. A gain of £1.512m arose on the 35.36% part disposal. Symphony
remains a 64.64% subsidiary of Eckoh and its financial results have been consolidated into Eckoh's financial statements.
Eckoh disposed of the entire issued share capital of Freecom.net Limited, its internet services company, to eDirectory.co.uk plc ('eDirectory') on 31 July 2005.
The consideration comprises 4,155,844 eDirectory ordinary shares. Further to this, subject to certain conditions, a further £1.6 million of deferred
consideration is payable in eDirectory ordinary shares or a cash equivalent. eDirectory shares are currently traded on Ofex. The accounting treatment for this
transaction was to show a net loss of £0.232m on disposal in the profit and loss account.
Symphony received proceeds of £0.1m in respect of the disposal of its hardware services operation in a prior year, not previously accounted for.
4 Net interest (payable)/receivable and other similar items
Interest receivable and other similar income
Bank interest receivable
Interest payable and other similar charges
Interest payable on bank loans and overdrafts
Amortisation of issue costs of bank loan
Interest payable finance leases
Net interest (payable)/receivable and other similar items
2006
£'000
286
286
(348)
(130)
(13)
(491)
(205)
2005
£'000
410
410
(25)
-
(13)
(38)
372
Of the net interest payable, £379,000 relates to the Symphony Group and has been reported within profit before tax attributable to Symphony Telecom in
the segmental analysis. Net interest receivable in respect of the Eckoh Group is £174,000 as reported in the segmental analysis (see note 1).
32
5
Staff costs
Details of Directors' emoluments are given in the Directors Report on page 12 and form part of the financial statements. The average monthly number of
employees (including directors) employed by the Group during the year was:
Technical support
Customer services
Administration and management
Staff costs for the above persons are:
Wages and salaries
Social security costs
Other pension costs
6
Taxation
Corporation tax based on the loss for the period was as follows:
UK Corporation tax charge at 30% (2005 - 30%)
2006
Number
38
137
67
242
£'000
8,265
874
30
9,169
2006
£'000
166
2005
Number
50
111
78
239
£'000
7,675
865
26
8,566
2005
£'000
6
At 31 March 2006 the Group had accumulated UK tax losses and overseas losses available to offset against future trading profits in certain Group
companies. No deferred tax asset has been recognised in respect of these losses (see note 17).
The tax charge assessed for the period is different to the standard rate of corporation tax in the UK (30%). The differences are explained below:
Profit/(loss) on ordinary activities before taxation
Corporation tax rate of 30% (2005 - 30%)
Effect of expenses not deductible for tax purposes
Effect of capital allowances in excess of depreciation
Effect of tax losses (utilised)/unutilised
Effect of marginal rate relief
Current tax charge for the year
7
Profit of Holding Company
2006
£'000
1,145
344
724
(27)
(865)
(10)
166
2005
£'000
(9,411)
(2,823)
2,736
(29)
122
-
6
Of the profit for the financial period, a profit of £57,000 (2005 - £1,302,000) is dealt with in the accounts of Eckoh Technologies plc. The Directors have
taken advantage of the exemption available under section 230 of the Companies Act 1985 and not presented a profit and loss account for the Company
alone.
33
Notes to the Financial Statements
for the year ended 31 March 2006 continued
8
Earnings/(loss) per share
Basic earnings/(loss) per share Basic earnings/(loss) per ordinary share is calculated on the basis of the weighted average number of ordinary shares of
271,957,745 (2005 - 271,226,435) in issue during the year and the profit for the year, after minority interests, of £1.275m (2005 - loss of £9.440m).
Diluted earnings/(loss) per share In calculating diluted earnings/(loss) per share, the weighted average number of ordinary shares in issue is adjusted to
include the dilutive effect of potential ordinary shares. The potential ordinary shares represent share options granted to employees where the exercise price is
less than the market price of ordinary shares as at 31 March 2006.
Earnings
attributable to
ordinary
shareholders
£'000
2006
Weighted
average
number of
shares
(number in
thousands)
Earnings
per share
(pence)
Loss
attributable
to ordinary
shareholders
£'000
2005
Weighted
average
number of
shares
(number in
thousands)
Basic earnings/(loss) per share
Dilutive effect of share options
Diluted earnings/(loss) per share
1,275
-
1,275
271,958
14,339
286,297
0.5p
-
0.4p
(9,440)
(9,440)
271,226
5,615
276,841
9
Intangible fixed assets
Group
Cost
At 1 April 2005
Additions
Disposals
At 31 March 2006
Amortisation
At 1 April 2005
Charge for the year
Disposals
At 31 March 2006
Net book value
At 31 March 2006
At 31 March 2005
Goodwill
£'000
Other intangible
assets
£'000
Development
expenditure
£'000
71,046
9,897
-
80,943
71,046
1,861
-
72,907
8,036
-
1,135
132
(479)
788
315
250
(247)
318
470
820
128
54
-
182
30
54
-
84
98
98
Loss
per
share
(pence)
(3.5p)
-
(3.4p)
Total
£'000
72,309
10,083
(479)
81,913
71,391
2,165
(247)
73,309
8,604
918
The other intangible assets purchased represent a customer base and a customer contract, of which the estimated useful economic lives were assessed to be
three years and one year respectively. The disposal represents a customer base that was disposed of on 31 July 2005 following the disposal of Freecom.net
Limited.
The capitalised development expenditure in the year represents costs in respect of developing additional speech technology solutions which meet the
SSAP13 capitalisation criteria. The estimated useful economic life is three years.
Company
The Company had no intangible fixed assets during the year (2005 - Nil).
34
10 Tangible fixed assets
Group
Cost
At 1 April 2005
Acquisitions (note 22)
Additions
Disposals
At 31 March 2006
Depreciation
At 1 April 2005
Charge for the year
Disposals
At 31 March 2006
Net book value
At 31 March 2006
At 31 March 2005
Fixtures, fittings
and equipment
£'000
Motor
vehicles
£'000
7,130
54
961
(215)
7,930
5,569
1,002
(112)
6,459
1,471
1,561
64
20
32
(61)
55
54
26
(52)
28
27
10
Total
£'000
7,194
74
993
(276)
7,985
5,623
1,028
(164)
6,487
1,498
1,571
The net book value of tangible fixed assets includes £0.042m (2005: £0.032m) in respect of assets held under finance lease contracts.
Company
The Company had no tangible fixed assets during the year (2005 - Nil).
11
Fixed asset investments
Cost
At 1 April 2005
Transfer of investments to subsidiary undertaking
Additions
At 31 March 2006
Group
£'000
-
-
288
288
Company
£'000
10,401
(777)
-
9,624
During the year ended 31 March 2006, Eckoh Technologies plc transferred three subsidiary undertakings, with a total book value of £777,000, to Eckoh
Technologies (UK) Limited.
The additional fixed asset investment represents the 4,155,844 eDirectory.co.uk plc ordinary shares received as consideration following the disposal of
Freecom.net Limited on 31 July 2005. eDirectory.co.uk plc shares are currently traded on Ofex. The accounting treatment for the disposal was to show a loss
of £0.232m in the profit and loss account (see note 3).
During the year ended 31 March 2006, the Group disposed of its investment shares held in Felix Group plc. The resulting gain on disposal of £300,000 has
been reported in the profit and loss account. Prior to disposal, the investment was carried at a nil book value.
35
Notes to the Financial Statements
for the year ended 31 March 2006 continued
The following are the principal subsidiary undertakings of the Group:
Subsidiary undertakings:
Eckoh Technologies (UK) Limited
Intelliplus Limited
Medius Networks Limited
Country of
ncorporation
England and Wales
England and Wales
England and Wales
Eckoh Technologies France SAS
France
Connection Makers Limited
Symphony Telecom Holdings Plc
Symphony Telecom Limited
Anglia Telecom Centres Limited
Telenet Communications Limited
IMS-PLUS Beheer
NT Independent Networks Limited
Unitel Networks Services Limited
Network Business Call Limited
BDR Networks Limited
Fenix Networks Limited (i)
Network Billing Services Limited
Open-Link Technology Limited
England and Wales
England and Wales
England and Wales
England and Wales
Ireland
Holland
England and Wales
England and Wales
England and Wales
England and Wales
Northern Ireland
England and Wales
England and Wales
IP Integration Network Services Limited
England and Wales
Class of
holdings
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Principal
activities
Percentage of share
capital held by
Eckoh
Technologies plc
Subsidiary
undertaking
IVR & Speech solutions
100%
IVR services
IVR services
Speech solutions
IVR services
Holding company
Network services
Network services
Network services
Network services
Network services
Network services
Network services
Network services
Network services
Network services
Network services
Network services
-
-
-
100%
64.64%
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
100%
100%
-
-
100%
100%
100%
100%
50%
50%
50%
50%
50%
50%
50%
50%
(i) On 8 May 2006, the company changed its name from Lloyd Network Services Limited to Fenix Networks Limited.
The eight subsidiary undertakings which are 50% owned are consolidated in accordance with Financial Reporting Standard 2. The Group determines the
budgets and key financial matters of each of these undertakings. The Group also determines key strategic and operational decisions such as product
offering, customer acceptance and provides substantially all of the back office support.
The Company also holds 100% of the issued share capital of sixteen non-trading or dormant companies, not shown above.
All trading companies operate principally in their country of incorporation and have March year-ends.
31 March
2006
£'000
437
42
479
31 March
2005
£'000
-
22
22
12 Stock
Group
Finished goods
Work in progress
At 31 March 2006
Company
The Company had no stock during the year (2005 - Nil).
36
13 Debtors
Amounts falling due within one year
Trade debtors
Other debtors
Amounts due from subsidiary undertakings
Loan to subsidiary undertaking (note 25)
Prepayments and accrued income
14 Creditors: amounts falling due within one year
Bank loans and overdrafts
Trade creditors
Amounts owed to group undertakings
Obligations under finance leases
UK Corporation tax
Other taxation and social security
Other creditors
Accruals and deferred income
31 March
2006
£'000
4,823
606
-
-
17,108
22,537
31 March
2006
£'000
2,007
10,221
-
23
194
1,282
271
18,279
32,277
Group
Company
31 March
2005
£'000
2,032
1,264
-
-
7,725
11,021
31 March
2006
£'000
-
53
4,904
4,000
72
9,029
Group
Company
31 March
2005
£'000
224
8,907
-
17
8
1,068
38
7,091
17,353
31 March
2006
£'000
-
-
892
-
-
-
-
-
892
1,237
31 March
2005
£'000
-
53
3,916
-
67
4,036
31 March
2005
£'000
-
-
1,237
-
-
-
-
-
The bank loan is secured on the assets of Symphony Telecom Holdings plc and those of its principal subsidiary undertakings. In addition, Eckoh Technologies
plc has provided a parental guarantee.
15 Creditors: amounts falling due after more than one year
Bank loan (note 14)
Obligations under finance leases
The finance leases are secured on certain assets of the Group.
31 March
2006
£'000
1,473
20
1,493
Group
Company
31 March
2005
£'000
-
65
65
31 March
2006
£'000
31 March
2005
£'000
-
-
-
-
-
-
37
Notes to the Financial Statements
for the year ended 31 March 2006 continued
16 Financial instruments
The Group's treasury policy requires that funds are invested in short-term (less than 12 months) deposit accounts with AA rated banks or building societies
with net assets exceeding £3 billion, to ensure that funds are available to meet current and future operating requirements.
The Group's financial instruments comprise cash, bank loans, finance leases, liquid resources and various items, such as debtors and creditors that arise
directly from its operations. It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be
undertaken. Similarly the Group did not undertake any financial hedging arrangements during the year under review. The year-end position reflects these
policies and there have been no changes in policies or risks since the year-end. The main risks arising from the Group's financial instruments are liquidity
risk, interest rate risk and foreign currency risk.
The Group monitors its liquidity risk and interest rate risk on cash deposits primarily through cash flow forecasting. Cash at bank is pooled and invested in
overnight money market accounts and deposits. Foreign currency risk is monitored through cash flow forecasting and currency is held in foreign currency
bank accounts only to the extent that it is required for working capital purposes.
Liquidity risk Through cash flow forecasting and acquisition planning, the Group monitors working capital and capital expenditure requirements and
through the use of rolling short-term investments ensures that cash is available to meet obligations and the cash element of acquisition considerations as
they fall due.
Interest rate risk The Group principally finances its operations through shareholders' funds and working capital. In addition Symphony Telecom Holdings
plc has a variable rate bank loan which is currently being repaid in instalments. The Group had no other borrowings during the year, other than finance
leases and its only material exposure to interest rate fluctuations was on its cash deposits, short-term investments and debt.
Foreign currency risk The Group's principal exposure to exchange rate fluctuations arises on the translation of overseas net assets and losses into sterling
for accounting purposes. This risk is managed by taking differences that arise on the retranslation of the net overseas investments to reserves.
Short-term debtors and creditors (other than finance leases) have been excluded from all the following disclosures.
Financial Assets
The currency and interest rate profile of the Group's financial assets at 31 March 2006 and 31 March 2005 were:
Sterling
EU currencies (other than Sterling)
At 31 March
Floating rate
Fixed rate
At 31 March
Cash at
bank and
in hand
£'000
9,526
211
9,737
Cash at
bank and
in hand
£'000
9,737
-
9,737
2006
Short-term
investments
£'000
3,000
-
3,000
Short-term
investments
£'000
-
3,000
3,000
Cash at
bank and
in hand
£'000
5,916
380
6,296
Cash at
bank and
in hand
£'000
6,296
-
6,296
2005
Short-term
investments
£'000
7,000
-
7,000
Short-term
investments
-
7,000
7,000
Total
£'000
12,526
211
12,737
Total
£'000
9,737
3,000
12,737
Total
£'000
12,916
380
13,296
Total
6,296
7,000
13,296
The short-term investments represent fixed rate short-term deposits, which are placed with financial institutions on a rolling basis and earn interest at an
average rate of 4.54% (2005 - 4.82%) per annum. Floating rate cash earns interest based on relevant national LIBOR equivalents.
38
Financial liabilities
The financial liabilities of the Group are detailed in the table below. The interest rate on the finance leases is fixed and the average rate for the year to 31
March 2006 was approximately 10.28% (2005 - 9%). The interest rate on the bank loan is variable and is linked to national LIBOR rates. The average rate
for the year to 31 March 2006 was approximately 7.45%. The provision for NIC and other similar taxes on share options and restructuring provision do not
bear interest.
The interest rate risk and maturity profile of the Group's financial liabilities, which are all denominated in Sterling, at 31 March 2006 was:
Fixed rate financial liabilities
Variable rate financial liabilities
Financial liabilities on which no interest is paid
Maturity profile:
Within 1 year, or on demand
Between 1 and 2 years
Between 2 and 5 years
Finance
leases
£'000
Restructuring
provision
£'000
Provision for
NIC and
other similar
taxes on
share options
£'000
43
-
-
43
23
12
8
43
-
-
93
93
93
-
-
93
-
-
79
79
79
-
-
79
31 March
2006
Total
£'000
43
3,525
172
3,740
2,220
1,512
8
3,740
Bank
loan
£'000
-
3,525
-
3,525
2,025
1,500
-
3,525
All the Group's creditors falling due within one year (other than finance leases and bank loans) are excluded from the above table due to the exclusion of
short-term items.
The interest rate risk and maturity profile of the Group's financial liabilities at 31 March 2005 was:
Fixed rate financial liabilities
Financial liabilities on which no interest is paid
Maturity profile:
Within 1 year, or on demand
Between 1 and 2 years
Between 2 and 5 years
Bank
loan
£'000
60
-
60
60
-
-
60
Finance
leases
£'000
Restructuring
provision
£'000
82
-
82
17
54
11
82
-
135
135
135
-
-
135
Provision for
NIC and
other similar
taxes on
share options
£'000
-
17
17
17
-
-
17
31 March
2005
Total
£'000
142
152
294
229
54
11
294
Borrowing facilities Apart from a fixed term, variable rate bank loan held by Symphony Telecom Holdings plc and repayable within 2 years, the Group has
no other borrowing facilities.
Fair value of financial assets and liabilities The fair values of the financial assets and liabilities approximate to their book values.
39
Notes to the Financial Statements
for the year ended 31 March 2006 continued
17 Provisions for liabilities and charges
Group
At 1 April 2005
Amounts paid
Additional provisions charged to the profit and loss account
At 31 March 2006
Company
At 1 April 2005
Amounts paid
Additional provisions charged to the profit and loss account
At 31 March 2006
Restructuring
provision
£'000
135
(400)
358
93
Restructuring
provision
£'000
76
(52)
69
93
Provision for
NIC and
other similar
taxes on
share options
£'000
17
-
62
79
Provision for
NIC and
other similar
taxes on
share options
£'000
17
-
38
55
Total
£'000
152
(400)
420
172
Total
£'000
93
(52)
107
148
The restructuring provision at 1 April 2005 consisted of residual costs relating to the termination of the Mobile Wholesale business.
The restructuring provision at 31 March 2006 consists of costs in relation to the post acquisition integration of Anglia Telecom Centres Limted in to the
Symphony Telecom Holdings group.
On exercise of share options issued after 6 April 1999, the Company will be required to pay National Insurance on the difference between the exercise price
and market value of the shares issued for employees subject to UK taxation. In addition a provision has also been made for similar social security taxes
affecting employees not subject to UK taxation. The Company will become unconditionally liable to pay the National Insurance and other similar taxes upon
exercise of the options, which are exercisable over a period of up to ten years from the date of grant. The Company spreads the liability over the period to
vesting and adjusts it according to the market value of the Company's shares at each subsequent balance sheet date.
All of the above are payable within one year.
Total unprovided deferred tax assets are as follows:
Accelerated capital allowances
Losses available to offset against deferred tax
Unprovided deferred tax asset
Group
Company
2006
£'000
(564)
(8,738)
(9,302)
2005
£'000
(532)
(9,176)
(9,707)
2006
£'000
-
(1,091)
(1,091)
2005
£'000
-
(1,119)
(1,119)
No deferred tax asset has been recognised as the Directors are not reasonably certain as to the likelihood of the asset being recoverable.
40
18 Share capital
Company and Group
Authorised
31 March
2006
£'000
31 March
2005
£'000
600,000,000 (2005: 600,000,000) ordinary shares of 0.25p each
1,500
1,500
Allotted, called up and fully paid
Date of issue and share type
Ordinary shares of 0.25p each
As at 1 April 2005
Shares issued under the share option scheme 1 April 2005
- 31 March 2006
As at 31 March 2006
Number of
shares
271,416,588
1,039,887
272,456,475
Nominal
Value
£'000
Fair value of
consideration
received
£'000
679
2
681
-
82
82
The issue of ordinary shares detailed in the above table were to employees following the exercise of share options listed below. The market values of the
ordinary shares issued between 1 April 2005 and 31 March 2006 fell within the range 6.75p - 12.5p per share.
On 1 August 2005 the Company issued 643,255 ordinary shares for cash to an employee following the exercise of share options granted in 2004.
On 14 December 2005 the Company issued 321,632 ordinary shares for cash to an employee following the exercise of share options granted in 2004.
On 21 December 2005 the Company issued 75,000 ordinary shares for cash to an employee following the exercise of share options granted in 2002.
19 Share capital and reserves
Group
Balance at 1 April 2005
Profit for the year
Net exchange adjustments
Shares issued under the share option schemes
Balance at 31 March 2006
Company
Balance at 1 April 2005
Profit for the year
Shares issued under the share option schemes
Balance at 31 March 2006
Share
capital
£'000
679
-
-
2
681
Share
capital
£'000
679
-
2
681
Share premium
account
£'000
Profit and
loss account
£'000
147
-
-
80
227
Share premium
account
£'000
147
-
80
227
8,125
1,275
(34)
-
9,366
Profit and
loss account
£'000
19,679
57
-
19,736
41
Notes to the Financial Statements
for the year ended 31 March 2006 continued
20 Share options
The number of shares subject to options, the period in which they were granted and the periods in which they may be exercised is given below:
Date of grant
Exercise price (pence)
Exercise period
31 March 2006
31 March 2005
30 April 1999
31 May 2001
7 March 2002
27 June 2002
29 August 2002
28 November 2002
7 October 2005
13 December 2005
28 February 2005
13 September 2005
20.0
16.75
7.75
6.5
7.5
10.75
7.88
9.0
8.5
8.75
2002-2012
2004-2011
2005-2012
2005-2012
2005-2012
2005-2012
2008-2015
2008-2015
2008-2015
2008-2015
20,000
2,000
1,335,000
6,050,000
368,500
1,280,000
2,734,783
40,362
2,170,000
3,000,000
40,000
2,000
1,532,500
6,050,000
552,500
1,280,000
3,717,516
40,362
2,320,000
-
Balance as at 31 March 2006
17,000,645
15,534,878
The following options were exercised during the year:
Date of exercise
1 August 2005
14 December 2005
21 December 2005
Number of shares
Exercise price (pence)
643,255
321,632
75,000
1,039,887
7.88
7.88
7.50
In addition, 494,328 options lapsed during the year, all of which related to options granted during prior years.
21 Minority interests
Balance at beginning of year
Additions
Minority share of losses for the year
Balance at end of year
31 March 2006
£'000
31 March 2005
£'000
307
1,916
(296)
1,927
34
250
23
307
The addition during the year relates to the minority interest in the net assets of Symphony Telecom Holdings plc on 15 September 2005, the date on which
the Company floated on AIM, at the same time placing 35.36% of shares with new investors.
42
22 Acquisitions and disposals
The Group made two acquisitions and one disposal during the year ended 31 March 2006. They are considered in turn below:
a) Acquisition of Anglia Telecom Centres Limited
On 29 April 2005, Symphony Telecom Holdings plc, a Group company, purchased the entire issued share capital of Anglia Telecom Centres Limited ('Anglia')
for total cash consideration of £9,699,000. Costs of £273,000 were capitalised as part of the investment. Total net liabilities acquired were £125,000 after
fair value adjustments of £348,000. From the date of acquisition Anglia contributed £38.0m to turnover, a profit of £2.3m to operating loss and £2.1m to
the profit for the year.
Tangible fixed assets
Stock
Debtors
Cash
Creditors
Net assets/(liabilities) acquired
Goodwill
Consideration
Consideration satisfied by:
Cash
Acquisition costs
Initial book value
of net assets
and fair value
£'000
67
572
2,777
792
(3,985)
223
Revaluations
£'000
Fair value
£'000
-
(15)
(136)
-
(197)
(348)
67
557
2,641
792
(4,182)
(125)
9,824
9,699
9,426
273
9,699
The book value of the assets and liabilities have been taken from the management accounts of Anglia at the date of acquisition.
The revaluations include adjustments to accruals in respect of unprovided liabilities and to debtors in respect of overstated assets. There were no other fair
value adjustments.
In its last financial year to 31 March 2005, Anglia Telecom made a profit after tax of £0.9m. For the period since that date to the date of acquisition, Anglia
Telecom generated turnover of £3.6m and recorded operating profits of £0.1m and profit after tax of £0.1m.
Goodwill arising on the acquisition is being amortised on a straight-line basis over the estimated useful economic life of 5 years.
b) Acquisition of IMS PLUS Beheer B.V.
On 28 June 2005 Eckoh Technologies plc ('Eckoh') acquired the entire issued share capital of IMS PLUS Beheer B.V. ('IMS') for Nil consideration from Cellular
Holdings Limited. Eckoh granted Symphony Telecom Holdings plc ('Symphony') an option to acquire IMS for Nil consideration. Symphony exercised the
option to purchase IMS on 30 November 2005. During the period that Eckoh held the shares in IMS Symphony was responsible for the day to day
budgetary, financial and operational control of IMS. The Directors believe that Symphony actually exercised dominant influence during the period that Eckoh
held the shares in IMS and on that basis the results of IMS have been consolidated within the financial results of Symphony from the date that Eckoh
acquired it. This has not been disclosed as a separate geographic segment due to its size.
Total net liabilities acquired were £49,000 after fair value and accounting policy alignment adjustments of £44,000. From the date of acquisition IMS
contributed £1.5m to turnover, a loss of £0.2m to both operating loss and profit for the year.
43
Notes to the Financial Statements
for the year ended 31 March 2006 continued
Tangible fixed assets
Stock
Debtors
Cash
Creditors
Net liabilities acquired
Goodwill
Consideration
Consideration satisfied by:
Acquisition costs
Initial book value
of net assets
£'000
Accounting
policy alignment
£'000
Revaulations
£'000
Fair value
£'000
8
10
299
4
(414)
(93)
-
-
(78)
-
46
(32)
-
-
-
-
76
76
8
10
221
4
(292)
(49)
72
23
23
23
The book value of the assets and liabilities have been taken from the management accounts of IMS at the date of acquisition.
The accounting policy alignment relates to the timing of recognition of revenue and cost of sales of mobile connection commissions. The revaluation
adjustment to creditors is in respect of overprovided liabilities. As the Directors consider the goodwill arising on consolidation to be immaterial it has been
written off in full to the profit and loss account.
In its last financial year to 31 March 2005 and since then until its acquisition on 31 May 2005, IMS was a dormant company, the trade having previously
been part of the vendor business.
c) Disposal of Freecom.net Limited
Eckoh disposed of the entire issued share capital of Freecom.net Limited, its internet services company, to eDirectory.co.uk plc ('eDirectory') on 31 July 2005.
The consideration comprises 4,155,844 eDirectory ordinary shares. Further to this, subject to certain conditions, a further £1.6 million of deferred
consideration is payable in eDirectory ordinary shares or a cash equivalent. eDirectory shares are currently traded on Ofex. The accounting treatment for this
transaction was to show a net loss of £0.232m on disposal in the profit and loss account.
Net liabilities disposed were £100,000 inclusive of cash reserves of £107,000. Costs of £29,000 were incurred in respect of the disposal.
23 Pension commitments
The Group operates a group personal pension scheme and, in addition, the subsidiary companies Symphony Telecom Limited and Eckoh Technologies (UK)
Limited operate a defined contribution pension scheme. The assets of the pension schemes are held separately from those of the Group in independently
administered funds. The pension charge represents contributions payable by the Group to the funds. There were no outstanding or proposed contributions
at the balance sheet date.
44
24 Financial commitments
The Group had annual commitments under non-cancelable operating leases as follows:
Land & buildings:
Expiring within one year
Expiring within two to five years
Expiring after five years
Other:
Expiring within one year
Expiring within two to five years
25 Related party transactions
At 31 March
2006
£'000
At 31March
2005
£'000
-
83
250
333
47
27
74
14
15
317
346
5
159
164
The Company has taken advantage of the exemption conferred by Financial Reporting Standard 8 that transactions between Group companies do not need
to be disclosed.
Related party transactions with directors and other companies are as follows:
A Group company, Eckoh Technologies (UK) Limited, paid an amount of £25,000 (2005 - £25,000) for the year ended 31 March 2006 to Martin Turner and
Nik Philpot, both directors of the Company, for the lease of Unit 6, Clifton Court, Hemel Hempstead. The transaction was conducted on an arms length
basis.
Eckoh Technologies (UK) Limited paid an amount of £6,000 (2005 - £19,000) for the year ended 31 March 2006 to Martin Smith, a non-executive director
of Eckoh Technologies plc, for consultancy services.
Eckoh Technologies (UK) Limited paid an amount of £38,000 (2005 - Nil) for the year ended 31 March 2006 to Lesley Innes, a non-executive director of
Symphony Telecom Holdings plc, for consultancy services.
Eckoh Technologies plc paid an amount of £100,000 (2005 - Nil) for the year ended 31 March 2006 to Martin Smith in relation to the acquisition of
Anglia Telecom Centres Limited.
There are no balances outstanding on any of the above at the year-end.
As part of the financing arrangements for the acquisition of Anglia Telecom Centres Limited in April 2005, Eckoh Technologies plc loaned Symphony
Telecom Holdings plc £7,500,000. £3,500,000 was repaid during May 2005. The loan has no set repayment terms but cannot be repaid until the bank
loan is repaid. The loan bears interest at 1.75% above national LIBOR rates. Apart from the £3,500,000 no repayments of capital or interest were made
during the year.
The partners to the 50% owned subsidiaries are considered to be related parties due to their 50% interest in the share capital of the respective entity.
Where such partners are corporates, companies and individuals related to these corporates are also considered to be related parties of the Symphony
Telecom Limited group.
45
Notes to the Financial Statements
for the year ended 31 March 2006 continued
Fees for management services charged by, and amounts due to, these parties are shown below.
Related party
M A McHugh
N Gravett
BDR Voice & Data Solutions Limited
Agreed Finance Limited
Nottingham Telephones Limited
NT Leasing Limited
Lloyd Communication Limited
Fenix Solutions Limited
Comec Voice & Data Limited
Connected entity
Network Billing Services Limited
Network Billing Services Limited
BDR Networks Limited
BDR Networks Limited
NT Independent Networks Limited
NT Independent Networks Limited
Fenix Networks Limited
Fenix Networks Limited
Open-Link Technology Limited
Telecommunications Management (UK) Limited
Unitel Network Services Limited
Digitel Europe Limited
Network Finance Limited
IP Integration Limited
Unitel Network Services Limited
Network Business Call Limited
IP Integration Network Services Limited
26 Cash flow from operating activities
Reconciliation of operating loss to net cash inflow from operating activities
31 March
2006
Amount
charged
£'000
31 March
2006
Creditor
balance
£'000
31 March
2005
Amount
charged
£'000
31 March
2005
Creditor
balance
£'000
38
38
68
55
-
130
-
15
77
128
-
127
9
24
24
32
55
5
59
30
15
(32)
85
-
79
9
24
24
121
-
20
137
25
-
28
98
-
93
-
17
17
66
-
5
94
30
-
(5)
37
2
45
-
Continuing
£'000
Acquisitions
£'000
Discontinued
£'000
31 March
2006
Total
£'000
(258)
1,028
2,165
-
110
(241)
968
304
4
(30)
216
41
1,861
(4)
140
(8,654)
(7,203)
(1,611)
8,841
3,232
9,206
3,008
(256)
387
31 March
2005
Total
£'000
(9,783)
1,319
10,295
7
40
(148)
2,745
4,475
Continuing
£'000
Discontinued
£'000
(9,840)
1,244
10,295
7
40
(280)
2,779
4,245
57
75
-
-
-
132
(34)
230
(233)
19
-
-
-
160
(109)
(163)
Operating (loss)/profit
Depreciation of tangible fixed assets
Amortisation and impairment of intangible assets
Loss/(profit) on disposal of tangible fixed assets
Decrease/(increase) in stock
(Increase)/decrease in debtors
Increase/(decrease) in creditors
Net inflow/(outflow) from operating activities
46
27 Reconciliation of net cash flow to net funds
Net funds at start of year
Increase in net cash
Movement in short-term investments
Movements in finance leases
Movements in debt
Net funds at end of year
28 Reconciliation of movement in net funds
Cash at bank and in hand
Debt due after 1 year
Debt due within 1 year
Finance leases due after 1 year
Finance leases due within 1 year
Short term investments
Total
31 March
2006
£'000
13,154
3,484
(4,000)
39
(3,460)
9,217
Cash
flow
£'000
3,484
(1,359)
(2,101)
45
(6)
(3,421)
(4,000)
(3,937)
31 March
2005
£'000
9,988
2,557
500
29
80
13,154
At 31 March
2006
£'000
9,780
(1,359)
(2,161)
(20)
(23)
(3,563)
3,000
9,217
At 1 April
2005
£'000
6,296
-
(60)
(65)
(17)
(142)
7,000
13,154
Short-term investments consist of short-term deposits with financial institutions that mature within 12 months of the date of inception.
29 Adjusted profit before taxation
Profit/(loss) on ordinary activities before taxation
Adjust for:
Amortisation of intangible fixed assets
Impairment of intangible fixed assets
Restructuring costs
Additional proceeds of disposal of operation in a prior year
Profit on disposal of fixed asset investment
Profit on part disposal of subsidiary undertaking
Loss on disposal of subsidiary undertaking
Costs of group restructuring
Discontinued operations
Adjusted profit before taxation
31 March
2006
£'000
1,145
2,165
-
358
(108)
(300)
(1,512)
232
80
233
2,293
31 March
2005
£'000
(9,411)
2,539
7,756
-
-
-
-
-
-
(43)
841
47
Notes to the Financial Statements
for the year ended 31 March 2006 continued
30 Post balance sheet events
On 22 June 2006 Eckoh Technologies plc ("Eckoh") announced that the Board of Symphony Telecom Holdings plc ("Symphony") and the Board of Redstone
plc ("Redstone") reached agreement on the terms of a recommended offer to be made by Evolution Securities Limited, on behalf of Redstone for the entire
issued share capital of Symphony. The offer is being made on the basis of 54.5p in cash for each Symphony ordinary share at a premium of 14.7% to the
mid-market closing share price on 21 June 2006 and 32.9% compared to last September's placing price of 41p per ordinary share, valuing the entire issued
and to be issued share capital of Symphony at £17.3 million. Eckoh has an interest in 20,099,999 ordinary shares representing 64.6% of the issued ordinary
share capital of Symphony.
The Eckoh Board has undertaken to accept the Redstone offer, which will realise approximately £11.0 million in cash for Eckoh, the proceeds of which will
be placed on deposit.
For the year ended 31 March 2006, Symphony reported an operating loss of £0.3 million on turnover of £61.3 million. As at 31 March 2006, Symphony
had net assets of £4.4 million, including cash balances of £4.5million.
Redstone is a leading provider of telecoms and IT solutions for businesses and organisations of all types and sizes.
Shareholder Information
Financial Calendar
Full year results
Preliminary announcement on 27 June 2006
Annual Report
To be posted to shareholders before 30 September 2006
Annual General Meeting
To be held at 11.00 am on 30 October 2006 at the offices of Buchanan
Communications, 45 Moorfields, London EC2Y 9AE
Half year results
Interim announcement November/December 2006
Registrar
Secretary
Please contact our Registrar at the address below to advise change of
address and also for any enquiries relating to lost share certificates or
other enquiries relating to share registration:
S J Driver
Telephone: 01442 458 300
Fax: 01442 458 486
Registered Office
Telford House, Corner Hall, Hemel Hempstead, Hertfordshire HP3 9HN.
Registered in England and Wales, No. 3435822
Capita Registrars
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Telephone: 0870 162 3100 (overseas): +44 208 639 2157
Fax: 020 8639 2342
Email: ssd@capitaregistrars.com
Website: www.capitaregistrars.com
Share Price Quotation
The Company's share price is quoted daily in national newspapers as well
as on-line at such sites as http://www.ft.com under the symbol "ECK".
Web Site
Additional shareholder information including press releases and links to
the Group's activities can be found on the Company's web site at:
http://www.eckoh.com
48