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Eckoh – Maximising the power of technology
to deliver inspired communication solutions
www.eckoh.com
Eckoh plc Annual Report 2008
T19865 Eckoh Cover:T19865 Eckoh Cover 8/8/08 14:03 Page 2
Eckoh – Inspired speech solutions
for the contact centre industry
2 Highlights of the Year
26 Consolidated Income Statement
3 Chairman’s Statement
27 Consolidated Balance Sheet
6
The Business Review
28 Consolidated Statement of Changes in Equity
11 Board of Directors
14 Directors’ Report
29 Consolidated Cash Flow Statement
30 Notes to the Financial Statements
22 Corporate Governance
60 Company Financial Statements
24 Statement of Directors’ Responsibilities
64 Shareholder Information
25
Independent Auditors’ Report
Our Clients
Financial Services
AXA PPP healthcare
Barclays Stockbrokers
Hitachi Capital Consumer Finance
London Stock Exchange
TD Waterhouse
Public Sector
Central Office of Information
Ministry of Justice
Rural Payments Agency
Retail & Distribution
Electrolux
Ideal Shopping Direct
Parcelforce Worldwide
Rentokil Initial
Wyevale Garden Centres
Media & Broadcast
Bauer
IPC
ITV
Trinity Mirror
Outsourcing
Inkfish
MGt
Travel & Leisure
BAA
Empire Cinemas
Enterprise Rent-A-Car
National Rail Enquiries
William Hill
Vue Entertainment
Telecoms & Utilities
BT
Northern Ireland Electricity
O2
ScottishPower
Tesco Mobile
Three Valleys Water
TFCC
United Utilities
T19865 Eckoh Front Section 8/8/08 13:50 Page 2
Eckoh is the UK’s largest provider of hosted speech recognition services.
Our innovative, multi-channel solutions focus on speech recognition and
IVR technology but can also incorporate mobile and the web. They are
designed to significantly reduce costs, unlock new contact centre
revenues, provide the convenience of 24 by 7 service and make life easier
for both the client and their customers.
Every solution is delivered from our own highly
scalable technology platform, which frees
organisations from the burden of large upfront
technology investment. We are experts in
communication design and advanced customer
management, and our approach is ambitious – to
maximise the power of the technologies we use
to deliver inspired communication solutions.
Multi-channel, multi-contact From speech to
IVR, mobile and web – our automated solutions
provide a consistent and integrated customer
experience across multiple contact channels.
Operational flexibility Every solution is
underpinned by our on-demand self-service
platform, capable of handling over 650,000
contacts per hour and scalable to every
client need.
Extensive heritage & expertise With a large
portfolio of active clients, Eckoh delivers
automated solutions across an unmatched range
of industry sectors, with more deployments and
managing more interactions, than any other
company in our marketplace.
Bespoke and business proven At Eckoh, we
deliver a total solution, from expert consultation
to the creation of advanced services that are
unique to our clients’ business. Our on-demand
hosted model removes the burden of in-life capital
expenditure, enabling our clients to achieve a
return on investment in a matter of months if not
weeks.
Partners for success Our strategic alliance with
BT has delivered automated services to an
extensive range of blue chip organisations,
generating more than 80 million minutes of self-
service transactions.
1
T19865 Eckoh Front Section 6/8/08 15:42 Page 2
Highlights of the Year
• Completion of final phase of restructuring and repositioning the Group as a specialised speech
solutions business with the sale of Connection Makers’ trade and assets for £2.89m
• Reduced annual Group expenses by over £1m taking effect in 2008/9 following disposal of non-
core activities
• Significant improvement in second half with a 63% reduction in adjusted continuing loss before
tax excluding intangible asset amortisation, impairment charges and restructuring costs to £0.4m
over the first half (H1 2008: £1.2m)
• Net assets as at 31 March 2008 amounted to £9.5m (2007: £8.7m), comprising £6.8m (2007:
£9.6m) cash and short-term investments (equivalent to 3.4p per share (2007: 4.9p)), £3.3m
future receivables from Symphony Telecom and £1.8m future receivables from Connection Makers
disposal
• Profit for the year of £0.5m (2007: £8.2m)
• Profit per share of 0.24p (2007: 3.16p)
• 2 year renewal with current highest revenue generating IVR client, Trinity Mirror
• 5 year contract extension with Northern Ireland Electricity
• 3 year contract extension with TD Waterhouse
Outlook
• Capability to deliver calls from all European markets to Eckoh’s UK call platform nearing
completion
• Focus on executing opportunity presented by Speech division where significant contracts have
been signed already in the new year:
» 3 year contract with the Ministry of Justice to provide fine collection services to the English
and Welsh Magistrates’ Courts
» 3 year contract to provide the Traintracker Text service for National Rail Enquiries
» 3 year renewal with the highest revenue generating Speech client, Ideal Shopping Direct
• Significant growth in Speech division expected to occur in the medium term as companies
formulate their strategy to address the challenging macro-economic conditions
• Increased gross profits from both divisions along with a reduced cost base will see a far better
financial performance in 2008/9 than in 2007/8
2
T19865 Eckoh Front Section 6/8/08 15:42 Page 3
Chairman’s Statement
During the financial year ended 31 March 2008, the Board took the
last steps to restructure the Group by disposing of the Connection
Makers’ business operations, in order that our efforts could be focused
on the high margin, high growth speech solutions market. Connection
Makers had been in decline and was by its nature a very different
business activity, so we are extremely pleased with the outcome of
these transactions and the price achieved.
Peter Reynolds
Chairman
The high profile problems reported in the media
relating to TV programmes utilising premium
rate phone activity had a major impact on the
Company throughout the period and also
proved to be a constant distraction. The action
we took to establish ourselves as a “best
practice” service provider required a significant
degree of effort and resource, nevertheless it
was essential to position ourselves securely for
the future and to reassure our clients, to whom
we are grateful for their unwavering support.
The decline in the IVR revenues can be directly
attributed to the industry problems and it was
certainly a major factor in the flattening of the
Speech revenues. However, I am pleased to say
that the release of the Deloittes report,
commissioned by ITV, highlighted that Eckoh had
performed impeccably on these particular shows
over a number of years and it is testament to
the Company that ITV remained supportive
throughout the whole period and continues to
contract with Eckoh to this day.
Whilst currently smaller in size the IVR market
now has fewer credible suppliers and we believe
Eckoh has the opportunity to capitalise on its
clear strengths and benefits going forward.
Additionally we foresee a recovery in the market
as the issues of 2007 recede in the public
memory.
The problems in the IVR market led to Group
turnover from continuing operations falling by
67% to £25.6m, and pre-tax losses were £2.2m;
cash and short-term investments amounted to
£6.8m.
Within the Speech Solutions area there is a
renewed optimism with the completion of some
strategically important new contracts such as
that with the Ministry of Justice as well as a
number of significant contract renewals from
our existing client base.
As important is the work we have done to open
up the European markets by facilitating call
delivery to our facilities in the UK. This work is
nearing completion and should prove to be an
extremely cost effective way of satisfying client
demand for comparable services from multiple
territories. We are already seeing this capability
opening up extremely exciting opportunities for
large pan-European contracts.
We believe our strategic market leading position
in the on-demand UK speech market will deliver
clear shareholder value in the medium-term as
the continuing operations move into sustained
and growing profitability. The Speech Solutions
business continues to be the long-term focus of
the Group and is where the Board believes the
best value for shareholders will be realised.
I would like to take this opportunity to thank
Eckoh’s staff for their loyalty, commitment and
dedication over what has been at times a
difficult twelve months, as we all look forward
to an exciting and positive year ahead.
3
T19865 Eckoh Front Section 7/8/08 09:55 Page 4
“National Rail Enquiries is committed to providing travellers with comprehensive,
multi-channel travel information services.
With their ability to deliver complex messages succinctly, BT and Eckoh’s technology
will allow us to provide an enhanced level of information via this rapidly
expanding channel.”
Chris Scoggins CEO, National Rail Enquiries
4
T19865 Eckoh Front Section 6/8/08 15:42 Page 5
Heading 22pt
Multi-channel, multi-contact
Eckoh provides automated, multi-channel contact centre solutions that
use advanced speech recognition, IVR, mobile and web technologies to
create more cost effective and satisfying interactions between companies
and their customers.
Case in Point: TrainTracker™ for National Rail
Enquiries
In January 2008, National Rail Enquiries awarded a
new three year contract to Eckoh and strategic
business partner BT, to provide TrainTracker™ Text, an
interactive text-based journey planning solution. The
service, which went live in early April 2008,
complements the existing speech-enabled
TrainTracker™ journey planning and travel
information service (0871 200 4950), launched by BT
and Eckoh in January 2005.
TrainTracker™ Text is fully integrated with National
Rail Enquiries’ journey planning engine, ensuring that
up-to-the-minute and consistent information is given
to travellers, irrespective of channel. Like the
automated speech service, TrainTracker™ Text allows
customers to obtain real-time arrival and departure
information for UK journeys.
Furthermore, the service uses the same ‘built in
intelligence’ as the speech service to recognise callers
and to anticipate their requests. To use the service,
customers simply send a text message with their
requested departure and or arrival station to the
mobile short code 84950, to receive matching
journeys including real-time running information.
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T19865 Eckoh Front Section 8/8/08 13:53 Page 6
The Business Review
Introduction
2007/8 has been a challenging year for the Group but resulted in some significant
changes which have created a far stronger business going into 2008/9
The early months of the year were dominated
with dealing with the aftermath of a series of
adverse stories on the use of premium rate
telephony in Broadcasting. As a response Eckoh
has invested significant amounts of time and
money to ensure that not only are all services
compliant with the PhonepayPlus code (formerly
ICSTIS) but that as a business we have a clear
“best practice” approach in this area. These
steps have been welcomed by the clients across
our business, not just in the media sector, and
as a result of our action we have not only
retained all of our major clients but won
significant new contracts during the period.
Nevertheless, the adverse publicity meant that
public confidence in the sector was
undoubtedly damaged, with a huge reduction
in the number of calls into premium rate
services and consequential reduction in our
revenues. During Q4, as part of the wider cost
review, we reduced the headcount in the IVR
division. This action, combined with signs of
recovery in call volumes should lead to a more
profitable year for the division.
Whilst the Speech Solutions division operates
very independently from the IVR division, the
adverse publicity was undoubtedly a restricting
factor in attracting new business during this
period, although support from existing clients
was extremely strong. However, the signs
towards the end of the financial year were
positive with some significant new contract
wins and renewals from existing clients. The
announcement of the Ministry of Justice
contract demonstrates that this trend is
continuing.
With profit contributed by the Connection
Makers division having reduced from £2.7m in
2004/5 to £1.3m in 2006/7, it was decided that
the time was right to sell the trade of that
division in order to concentrate the Group
around the growing Speech division. This was
achieved through two separate asset sales of
the TV and Chat sub divisions for total cash
consideration of £2.89m payable over two
years. Removing this significant level of
profitability has had an immediate impact on
the overall profitability of the Group, but has
meant that the restructuring is now complete
and ensures the Company is now focused on
the highest value activity. The transactions have
also enabled us to take a hard view on central
overheads within the Group and allowed us to
6
reduce that cost going forward by over £1m per
annum. This action was taken in Q4 and was
achieved through a combination of factors
including a reduction in staff numbers and a
renegotiation of supplier contracts; the results
of which will be seen in 2008/9.
The new contracts and strong pipeline in the
Speech Solutions division, signs of recovery in
the IVR division, increased gross margin in both
divisions and the reduction in fixed costs have
positioned the Group for a much improved
financial performance in 2008/9.
Speech Solutions
Revenue in the Speech Solutions division fell by
3% to £6.1m (2006/7: £6.3m) while gross
margin increased to 64% (2006/7: 62%)
allowing gross profit to remain steady at £3.9m
(2006/7: £3.9m). It is extremely unusual for the
division to lose any clients, and indeed the only
major client loss that has ever been experienced
was when the UGC cinema chain was acquired
by Cineworld and the service was moved to
their incumbent provider, which had an impact
on the 2007/8 numbers. Adjusting for the loss
of UGC, revenue increased by 8%, with gross
profit increasing by 15%.
The model in the division is to generate
predictable revenue streams through securing
long term contracts, which are typically 3 years
or longer, and are usually underpinned by
minimum revenue or transactional volume
guarantees. It is also our experience that even
when these contracts expire, they are generally
renewed by the client due to the satisfaction
with the service Eckoh provides and the
ongoing cost savings that they experience. As a
result the division has excellent visibility of
future revenues and given the negligible churn,
benefits from a layering of revenues from
existing clients, supplemented with incremental
contracts from new clients.
It is also common for clients to expand their
offering as we have seen recently with TD
Waterhouse, who are currently piloting a phone
broker service to complement its existing stock
quote service and National Rail Enquiries
awarding us the contract for the Traintracker
text service.
The recently announced contract wins with the
T19865 Eckoh Front Section 6/8/08 15:42 Page 7
Nik Philpot Chief Executive Officer
Adam Moloney Group Finance Director
Jim Hennigan Executive Director
Ministry of Justice and National Rail Enquiries;
combined with the crucial contract renewals of
Ideal Shopping and TFCC have further reinforced
the confidence of the Directors that the future of
the Group lies with the offering from the Speech
Solutions division.
Outlook for the Speech Solutions division
Over the next year there are three key factors
which the Group believes will be important in
generating new business.
The first is the challenging economic climate,
which presents a potential opportunity for the
Speech division. With many companies having to
postpone significant capital expenditure
investment decisions but still requiring the
improvements to their customer contact services,
the on-demand solution that Eckoh provides
becomes an attractive option.
Secondly we are seeing an increasing trend
towards on-shoring, where companies either
through public pressure or poor performance, are
looking to repatriate their call centre activity back
to the UK. To avoid a significant increase in cost
a clear alternative for these businesses is to use
Eckoh’s automated solutions alongside a high
quality UK live agent operation. Customer
feedback shows that a well designed automated
service can score higher in satisfaction surveys
than live agents, whether in the UK or abroad,
so automation is an extremely valid choice at a
cost several times lower than an agent.
Finally in recent months Eckoh have been
working with BT to create a network which will
allow calls to be delivered from all major
European territories to the Eckoh call processing
platform in the UK. This will allow the major
European markets to be opened up to Eckoh
without necessarily having to establish a local
presence or even work with a local partner. The
first significant pan-European contract is in the
pipeline and if this can be secured it will provide
a strong foundation for further European
business which has always been a key part of
Eckoh’s strategy.
The recent contract wins have renewed
confidence that strong growth in the Speech
division will return in 2008/9. Eckoh will continue
to focus on organically growing the UK business
and will look to open up the European markets
through the new capability that has been put in
place. The Group is also looking at other indirect
partnerships both in the UK and in Europe that
we believe could accelerate growth in this division.
Client IVR
It has been a turbulent year for the Client IVR
division against the background of adverse media
publicity in relation to the use of premium rate
telephony, particularly in the broadcast sector.
Revenues in this division have fallen by 73% to
£19.5m (2006/7: £71.3m) mainly due to a
reduction in the volumes of calls coming into ITV
and the closure of the ITV Play formats. Gross
profits in this division were £2.1m (2006/7:
£3.5m).
As described in the interim results statement,
Eckoh has positioned itself as a “best practice”
service provider which has significantly altered
the proposition it offers to large media
operations. There has been a significant
investment in the compliance aspect of these
services which we believe to be unrivalled by
competitors. The professional nature of the
service provided has also allowed Eckoh to
introduce charging on a fee basis with some of
the clients rather than a traditional revenue
share. As a result of these steps, the gross
margin earned in the second half of the financial
year was 20% of revenue compared to 6% in
the first half of the year, and 5% for the whole
of 2006/7.
During the period, Eckoh have reviewed
contracts with all IVR clients to ensure that
contracts accurately reflect the trading
relationship between the parties from a
regulatory perspective. Significantly, Eckoh have
renewed a contract for two years with the most
revenue generative client within the division,
Trinity Mirror, and are in the process of renewing
with other major clients in the division.
Outlook for the IVR division The near term
size of the market is still somewhat uncertain
although signs of recovery are becoming more
evident. The competitive landscape has become
less crowded with a number of smaller
businesses either closing or being consolidated
and Eckoh feel confident that their position as
arguably the most credible provider will inevitably
mean that new business opportunities will
increase.
7
T19865 Eckoh Front Section 6/8/08 15:42 Page 8
Operational flexibility
Eckoh’s highly scalable self-service platform – one of Europe’s
largest – handles up to 650,000 contacts an hour and up to
8,000 simultaneously. Our hosted platform underpins every
solution we deliver, which means our clients’ call handling
requirements can be accommodated with ease, regardless of
seasonal fluctuations or dramatic peaks in demand.
Case in Point: Vue Entertainment
Cinema information and booking line
(Tel: 08712 240 240)
Eckoh provides Vue Entertainment (the UK’s largest
operator of modern multiplex cinemas) with a 24 by
7, one-number solution using advanced speech
recognition technology. Eckoh’s solution handles calls
from customers across the entire Vue cinema circuit,
encompassing 62 cinemas and 607 screens
throughout the UK and Ireland.
In 2006, Eckoh was also awarded the contract to
supply the live contact centre operation providing
Vue with a complete end-to-end telephony solution
for their cinema business. Vue believe in providing
high quality customer service and wished to offer
their customers the best automated solution
supported by a personal and tailored contact centre
that was easily accessible to users.
The automated service enables cinema goers to
request film information and screen times from their
nearest cinema as well as the ability to book and pay
for tickets in advance and receive confirmation by
text message. In the event that a particular film
showing is sold out, the service also offers the user
the nearest cinema that has availability at the desired
time. The service is hosted on Eckoh's 8,000 line call
processing platform and receives millions of calls
every year from Vue's customers. The on-demand
capability of Eckoh’s platform is of crucial importance
to Vue particularly during periods of unpredictable
weather or busy film blockbuster periods, enabling
callers to connect straight through to the information
and booking service without delay.
8
T19865 Eckoh Front Section 6/8/08 15:42 Page 9
“We have found that Eckoh were extremely responsive to our needs and have
demonstrated that they can deliver a top quality speech recognition service in a
tight timeframe. We wanted a provider who not only has the necessary capacity to
cope with the extreme peaks of response that the cinema market requires but also
has future growth plans to match our own. On that basis, we believe Eckoh to be
the best choice in the UK market today.”
Roland Jones IT Director, Vue Entertainment
9
T19865 Eckoh Front Section 6/8/08 15:42 Page 10
The Business Review continued
Connection Makers
As announced in the interim results, we have
successfully been able to dispose of the
Connection Makers division for a total of
£2.89m to be fully paid by the end of 2009. It
was felt that this mature operation which had
been in decline was no longer complementary to
the rest of the Group, with the sale enabling the
management to further focus on growing the
Speech Solutions division as we go into the
2008/9 financial year.
The financial results for the Connection Makers
division are included within discontinued
operations.
Administrative expenses
The administrative expenses in the continuing
operations have reduced to £8.8m (2007:
£8.9m). Whilst there has been a big reduction in
the IVR revenue streams, all clients were retained
during the year and the same resource was
required to service them. However, since the
disposal of Connection Makers, a full review of
the administrative costs has been undertaken. A
number of steps have been taken to significantly
reduce the cost base of the business going into
2008/9 which has resulted in the fixed costs of
the business reducing by over £1m with the full
result of this process to be seen in 2008/9.
Balance Sheet
Eckoh continues to hold a very strong balance
sheet with shareholders’ equity of £9.5m (2007:
£8.7m) including £6.8m of cash, cash
equivalents and short-term investments (2007:
£9.6m). The huge reduction of revenues has had
an impact on working capital contributing to a
net cash out flow of £3.7m from the reduction
in trade receivables and payables.
Included in other receivables is a balance of
£3.3m outstanding from Symphony Telecom
Limited who were a subsidiary sold in 2006.
Instalments are being paid in accordance with
the loan agreement with the loan to be fully
repaid by June 2010.There is also £1.8m
outstanding from the sale of the trade of
Connection Makers which is being paid in line
with the terms agreed and with full payment
due by the end of 2009.
Offer update
On 2 April, the Group announced that it had
terminated discussions with Telephonetics plc
however, the Board was still in discussions with
various parties in which other transactions are
being considered. These discussions have
continued although none of the discussions at
this stage contemplate an offer being made for
the entire issued share capital of the Group.
Group outlook
We firmly believe the impact of the adverse
publicity which affected the Group in the early
part of 2007 has now dissipated and this
combined with the sale of the Connection
Makers business will allow us to focus on
executing on the exciting opportunity presented
by the Speech division. Demand for these
systems, located in the UK, is set to grow, as
these provide a highly cost-effective, user-
friendly and lower risk alternative to outsourcing
abroad. With a streamlined business, proven
technology and a strong balance sheet, Eckoh is
now well positioned to capitalise on these
medium to long term trends and looks forward
to delivering shareholder value.
10
T19865 Eckoh Front Section 6/8/08 15:42 Page 11
Board of Directors
Board Committees
* Member of the Audit Committee
† Member of the Remuneration Committee
ß Member of the Nomination Committee
Peter Reynolds (70)
Non-executive Chairman *†ß
Joined the board in September 2003. Currently also Executive Chairman of Swallow Ventures
Limited, a company specialising in CRM software. Peter is also currently a non-executive director
of Silence Therapeutics plc, a European Biopharmaceutical company, Waltech plc, a payment systems
supplier and Vialogy plc, a USA based software company specialising in security and defence.
Peter is Chairman of the Board, as well as Chaiman of the Audit, Nomination and Remuneration
Committees.
Nik Philpot (44)
Chief Executive Officer ß
Joined the Board in February 1999, appointed COO and Deputy CEO in September 2001 and
appointed CEO in September 2006. Nik was a co-founder of Symphony Telecom and formerly
worked for British Telecom. As co-founder of Eckoh he has created the UK's largest automation
solutions provider for the contact centre and media industries. Nik has 21 years experience in
the voice services industry.
Adam Moloney (38)
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 in August 2005. Prior to joining Eckoh, he was Manager of Finance &
Operations for the UK arm of New York based computer reseller, Resilien Inc.
Jim Hennigan (46)
Executive Director
Following a 20 year career in IT, including senior roles at Apple and Marks & Spencer, Jim joined
Eckoh in 2000 as Group CTO, becoming Managing Director of its contact centre solutions business
in 2002, and appointed to the Board in February 2007. Jim is a recognised authority on automated
multi-channel contact centre solutions and their impact on business performance, staff and
customer satisfaction.
11
T19865 Eckoh Front Section 6/8/08 15:42 Page 12
“Eckoh has a proven track record and reputation for delivering high quality, hosted
automated solutions but we’ve also been tremendously impressed with their
innovative and flexible approach to our business, which made our decision to select
them an easy one. We have a clear strategy to improve the communication,
information and service that we provide to our customers and we know that Eckoh
will work in partnership with us to deliver on that goal over the next 3 years.”
Andrew Fryatt Chief Executive Officer, Ideal Shopping Direct
12
T19865 Eckoh Front Section 6/8/08 15:42 Page 13
Extensive heritage & expertise
Every Eckoh solution is based on an extensive suite of modules that have
been tried and tested across an unmatched range of client environments
and industry sectors. We are experts in communication design and
advanced customer management and our approach is ambitious – to
maximise the power of technology to deliver inspired communication
solutions.
Case in Point: Ideal Shopping Direct
Automated Orderline and customer service
solution
In May 2008, Eckoh was awarded a new three year
contact with Ideal Shopping Direct as their exclusive
network operator for inbound telephony services as
well as a new contract to be their exclusive supplier
of automated telephony solutions. Eckoh has worked
with ISD since 2005 and they are Eckoh’s largest
revenue generating speech client delivering over 5
million calls per annum.
ISD sells its products to consumers via the internet
and its three television shopping channels Ideal
World, Create and Craft and Vitality, which are
broadcast to 86% of all UK households.
Currently telephone orders can be placed either
through ISD’s contact centre or a legacy IVR system
with limited capacity, which means that it is extremely
difficult for ISD to process all orders quickly and
efficiently in times of high demand. The new solution
will be hosted on Eckoh’s highly scalable call
processing platform, which is capable of handling up
to 8,000 callers simultaneously. This will allow all ISD
customers to be serviced conveniently and quickly,
with the contact centre providing additional support
for any consumers who specifically require the
services of a live agent.
The new Orderline solution that Eckoh is deploying
will also streamline the process for the customer and
provide a more intuitive and personalised service
based upon their preferences and previous order
history. The new Customer Service solution will allow
new customers to register more easily and will
provide existing customers access to more detailed
information on tracking their orders or refunds.
13
T19865 Eckoh Front Section 6/8/08 15:42 Page 14
Directors’ Report
The Directors of Eckoh plc present their annual report, together with the
audited financial statements of the Company and the Group for the year
ended 31 March 2008.
Principal activity The principal activity of Eckoh
plc and its subsidiary undertakings ("the
Group") is the provision of hosted speech
recognition services and outsourced automated
solutions. The trade and assets of Connection
Makers, a subsidiary undertaking of the Group,
were disposed of during the year, the financial
results of which have been included within
discontinued operations. The Chairman's
Statement (page 3) and the Business Review
(pages 6 to 10) report on the progress made in
the financial year under review.
The principal subsidiary undertakings are listed
on page 42.
Results and dividends The audited financial
statements and related notes for the year ended
31 March 2008 are set out on pages 26 to 64.
The Group's profit for the year is set out in the
Income Statement on page 26.
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.
The Group’s financial risk management is
discussed in note 4. The Directors regularly
assess the Group’s key commercial risks, which
are considered to be the competitive market
sector and the infrastructure stability.
Commercial risks are managed through the
introduction of new products and services and
by maintaining high levels of customer service.
Infrastructure stability is managed through 24
hour technical monitoring.
Research and development The Group
capitalised £0.1m (2007 £0.1m) of research and
development expenditure during the year as an
intangible asset as it expanded its product
portfolio and produced bespoke solutions for
customers.
Financial instruments The financial instruments
of the Group are set out in the notes to the
financial statements on pages 30 to 64. Please
refer to note 3 for a summary of principal
accounting policies; to note 4 for the Group’s
financial risk management policies in relation to
liquidity risk or cash flow risk, interest rate risk
and foreign currency risk, as well as capital
management; to note 18 for credit risk and
loans and other receivables; to note 19 for short-
term investments; to note 20 for cash and cash
equivalents and to note 21 for trade and other
payables.
Related party transactions are disclosed in note
28.
Annual General Meeting The next Annual
General Meeting of the Company will be held at
10:00 on 24 September 2008. 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 11.
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.
Peter Reynolds will retire by rotation and put
himself forward for re-election at the Annual
General Meeting.
14
T19865 Eckoh Front Section 8/8/08 13:53 Page 15
Directors’ Remuneration
Notes:
Name
M R Turner (i)
N B Philpot
A P Moloney (ii)
J P Hennigan (iii)
H R P Reynolds
M E Smith (iv)
Total
Salary
and fees
£'000
Bonus
£'000
Other
benefits
£000
-
207
118
150
60
-
535
-
-
-
-
-
-
-
-
3
14
3
11
-
31
2008
Total
£'000
-
210
132
153
71
-
566
2007
Total
£'000
571
326
173
106
64
39
1,279
The information contained in this table has been audited.
Gains on the exercise of share options in the year ended 31 March 2008 totalled £116,000 (2007:
£nil) (see note (i) above).
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. 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.
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 are set out below:
31 May 2008
Ordinary shares
of 0.25 pence each
31 March 2008
Ordinary shares
of 0.25 pence each
1 April 2007
Ordinary shares
of 0.25 pence each
N B Philpot (i)
A P Moloney
H R P Reynolds (ii)
J P Hennigan
2,282,000
2,282,000
2,282,000
-
646,550
15,000
-
646,550
15,000
-
646,550
15,000
(i) M R Turner resigned on 1 December 2006.
Included within the 2007 figure above is an
amount totalling £297,000 which was paid
after the date of his resignation as a director in
connection with a compromise agreement. In
addition, following the exercise of share options
in 2008 M R Turner made gains of £116,000
which are not included in the table above.
(ii) Included within the other benefits paid to A P
Moloney is an employer pension contribution
of £12,000 (2007: £10,000). There were no
other pension costs during the year.
(iii) J P Hennigan was appointed as an Executive
Director on 1 February 2007. A resolution in
relation to the appointment was passed at the
Annual General Meeting held on 27 September
2007.
(iv) M E Smith resigned on 30 October 2006. As
Chairman of Symphony Telecom Holdings plc,
he also received fees totalling £12,500 which
are included in the 2007 figure above.
Notes:
(i) N B Philpot's spouse is the beneficial owner
of 80,000 shares which are included above.
(ii) Included in H R P Reynolds' shareholding is
258,620 shares held in the name of Brewin
Nominees Limited.
The Directors’ Report continues on page 18.
15
T19865 Eckoh Front Section 6/8/08 15:42 Page 16
“Eckoh’s platform can handle up to 8,000 concurrent calls without delay which
will cope with the most extreme volatile trading conditions. StockQuote provides
customers with alternative access to real-time share prices, and now PhoneBroker
goes one step further offering the choice of fully automated telephone trading.”
Darren Hepworth Customer Services Director, TD Waterhouse
16
T19865 Eckoh Front Section 6/8/08 15:43 Page 17
Bespoke and business proven
Eckoh creates solutions that are bespoke to our clients’ requirements.
Our automated speech solutions have been proven to significantly reduce
call handling costs without compromising service quality.
Case in Point: TD Waterhouse
Automated stock quotation service
(Tel: 0845 607 6001)
In April 2008, TD Waterhouse, one of the UK’s largest
execution-only stock brokers, extended its contract
for the provision of speech activated automated
services with Eckoh and strategic partner BT, for a
further three years.
Eckoh and BT, will continue to provide TD
Waterhouse with the hugely successful automated
StockQuote service, which was first introduced in
2004 and which gives customers an additional way to
access real-time share price and market index
information quickly and efficiently, without needing
to speak to a live agent. This service handles around
40% of all of TD Waterhouse’s incoming call traffic
and has delivered an increase in customer satisfaction
levels.
Eckoh and BT are also developing a further service
enhancement that will enable customers to complete
their entire stock trade transaction and receive
automated confirmation on the phone. The new
service, called PhoneBroker, is currently being piloted
using a small number of stocks with the intention to
extend this to all stocks traded through TD
Waterhouse in the future.
17
T19865 Eckoh Front Section 6/8/08 15:43 Page 18
Directors’ Report continued
Directors' Share Options The Directors' interests in share options under the Share Option Scheme
(1999) are shown in the following table.
Notes:
a Granted under the Inland Revenue approved
Appendix to the Eckoh plc Share Option
Scheme (1999).
b Granted under the Eckoh plc Share Option
Scheme (1999) but not qualifying for Inland
Revenue approval.
c Granted under the Eckoh plc 2007
Enterprise Management Incentive (“EMI”)
Share Option Plan.
The performance target attaching to the above
options is that the closing price of a share, on
any day following the third anniversary of the
date of grant, must be greater than the exercise
price of the Option by RPI plus 15%.
At 31 March
2007
(number)
Granted
in year
(number)
Lapsed in
year
(number)
Note
At 1 April Exercise
price
(pence)
2006
(number)
Earliest
date for
exercise
Latest
date for
exercise
N B Philpot
A P Moloney
J P Hennigan
b
a
b
b
c
b
a
b
c
b
b
b
a
b
c
3,000,000
380,710
337,702
1,000,000
-
-
-
-
800,000
800,000
200,000
200,000
250,000
750,000
-
-
900,000
900,000
100,000
100,000
200,000
800,000
34,014
500,000
-
-
-
-
1,000,000 1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
1,000,000
8.75
13.09.08 13.09.15
-
-
8.75
31.07.10 31.07.17
8.75
31.07.10 31.07.17
250,000
8.50
28.02.08 28.02.15
750,000
8.75
13.09.08 13.09.15
-
-
8.75
31.07.10 31.07.17
8.75
31.07.10 31.07.17
200,000
7.75
07.03.05 07.03.12
800,000 10.75
28.11.05 28.11.12
34,014
7.88
07.10.07 07.10.14
500,000
8.75
13.09.08 13.09.15
-
8.75
31.07.10 31.07.17
The information contained in this table has been audited.
Substantial share holdings At 30 June 2008, the company had been notified of the following
material interests representing 3% or more of its current issued share capital.
No of shares
% of issued share capital
Cavendish Asset Management
Universities Superannuation Scheme
Gartmore Investment Management
Peter O’Reilly
Herald Investment Trust Limited
19,928,000
18,566,991
14,788,465
13,457,941
9,202,390
9.98
9.29
7.40
6.74
4.61
18
T19865 Eckoh Front Section 6/8/08 15:43 Page 19
By order of the Board
Adam Moloney
Company Secretary
1 August 2008
Share capital and reserves Details of changes
in the authorised and issued share capital and
reserves of the Company are shown in notes 24
and 25 to the financial statements.
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
the share option schemes are set out in note 26
to the financial statements. All permanent
employees are eligible to join a scheme.
Charitable and political donations The Group
made no political donations during the year.
Charitable donations totalled £300 during the
year (2007: £600).
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.
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. 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 2008 the amount of
trade creditors shown in the balance sheet
represents 33 days of average purchases for the
Group (2007: 33 days). The Company had no
trade creditors at 31 March 2008.
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 During the year ended 31 March
2008, BDO Stoy Hayward LLP were appointed as
auditors of the Company in place of
PricewaterhouseCoopers LLP. A resolution to
reappoint BDO Stoy Hayward LLP as auditors of
the Company, and to authorise the Directors to
set their fees, will be submitted to the
forthcoming Annual General Meeting.
19
T19865 Eckoh Front Section 8/8/08 13:55 Page 20
Partners for success
At Eckoh, we’re experts in providing “best of breed” solutions.
Part of our success comes from choosing the right channel
partners. For instance, our strategic alliance with BT has delivered
automated services to over 25 leading clients, generating more
than 80 million minutes of self-service transactions.
Case in Point: Ministry of Justice
Automated fine payment service
In August 2008, Eckoh and BT announced a new
three year, multi-million pound contract with the
Ministry of Justice, to provide an automated fine
payment service for Magistrates’ Courts across
England and Wales. Eckoh and BT will also supply the
live contact centre operation to support the
automated service, providing the Courts with a
complete end-to-end telephony solution.
The service, which allows citizens to pay fines
conveniently 24 hours a day, has resulted in nearly 15
per cent of fines being paid out of office hours for
one Court already using it. It has also enabled them
to considerably lower the cost of collecting the fines
which will be reflected across other Courts as they
take up the service.
The current service processes an average of 278,000
fine payments per year. There are future plans to
extend the scope of the service for the payment of
fixed penalty notices, including speeding offences
and other on-the-spot charges which would see the
volume of transactions significantly increase even
further. The service will be hosted on Eckoh’s state-
of-the art call processing platform, which is capable
of handling over 650,000 calls an hour and 8,000
callers concurrently. The scalability and resilience of
the Eckoh platform ensures that callers will always be
connected immediately and that the service will be
available on a 24/7 basis. BT and Eckoh supply
speech services to over 25 clients.
20
T19865 Eckoh Front Section 6/8/08 15:43 Page 21
“Once considered an experimental technology, automated speech recognition is
now robustly allowing organisations to cut costs and inefficiencies whilst
responding to the citizen’s need to be able to conduct business with Government
quickly, easily and at a time convenient to them. We’re pleased that the benefits
the current users have seen have resulted in the service now being extended
nationally.”
Mark Quartermaine Managing Director, BT Public Sector
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T19865 Eckoh Front Section 6/8/08 15:43 Page 22
Corporate Governance
Compliance Statement The Board of Eckoh plc recognises its responsibilities to
maintain high standards of corporate governance throughout the Group. The Board
continues to give careful consideration to the principles of corporate governance as set
out in the Combined Code published by the Financial Services Authority, although as a
company listed on AIM it is not required to comply with 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.
Board of Directors The Chairman is
responsible for the effective running of the
Board of Directors. The Board currently has four
members, comprising the Non-executive
Chairman, the Chief Executive, the Group
Finance Director and an Executive Director. The
Board has considered the independence of its
Non-executive Chairman, Peter Reynolds, and
after due consideration, has concluded that he
is independent. He does 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 11.
There is a schedule of formal matters specifically
reserved for the full Board's consideration,
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 Chairman has 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.
Day-to-day management of the business is
delegated to the Management Team, consisting
of the three Executive Directors and certain
senior managers, which meets monthly. The
Board is dependent on the Management Team
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.
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 public
holidays. Details of membership of the
committees are given on page 11.
The Audit Committee formally met twice during
the period under review, with no absentees.
Adam Moloney, the Group Finance Director,
attends all Audit Committee meetings by
invitation and provides advice to the Committee
where appropriate. The Chief Executive Officer
was invited to and attended both meetings.
The Company's auditors attended both
meetings and the Committee considered reports
issued by them. 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 by reference to reports from
the external auditors. The Committee also
reviews the scope and results of the external
audit as well as its cost effectiveness.
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. Internal controls are
discussed under the internal control and risk
management section below.
The Nomination Committee is responsible for
the formal selection process of Executive and
Non-executive Directors. The normal selection
process involves the formulation of a clear job
description and ideal candidate profile, the
appointment of independent recruitment
22
T19865 Eckoh Front Section 6/8/08 15:43 Page 23
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.
The principal objectives of the Remuneration
Committee are to review the performance of the
Executive Directors and make recommendations
to the Board on matters relating to their
remuneration and terms of employment.
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.
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.
Shareholder Relations The Company holds
meetings with its major institutional investors
and general presentations are given covering the
interim and preliminary results. The Chairman,
Peter Reynolds met with shareholders and
brokers during the period under review. The
Chairman is available to attend presentation
meetings and other presentations on an ongoing
basis. All Directors have access to the Company's
nominated advisors who give feedback from
shareholders and receive copies of broker update
documents.
A long-term business plan and an annual
operating budget 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
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.
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.
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T19865 Eckoh Front Section 6/8/08 15:43 Page 24
Statement of Directors’ Responsibilities
The directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the group, for safeguarding the
assets of the company, for taking reasonable steps for the prevention and detection of
fraud and other irregularities and for the preparation of a Directors’ Report which
complies with the requirements of the Companies Act 1985.
Parent company financial statements
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 of the profit or loss
of the company for that period. In preparing
these financial statements, the directors are
required to:
• select suitable accounting policies and then
apply them consistently;
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the company will continue in
business.
• make judgements and estimates that are
reasonable and prudent; and
• state whether applicable accounting
standards have been followed, subject to any
material departures disclosed and explained
in the financial statements.
Financial statements are published on the
group's website in accordance with legislation in
the United Kingdom governing the preparation
and dissemination of financial statements, which
may vary from legislation in other jurisdictions.
The maintenance and integrity of the group's
website is the responsibility of the directors. The
directors' responsibility also extends to the
ongoing integrity of the financial statements
contained therein.
The directors are responsible for preparing the
annual report and the financial statements in
accordance with the Companies Act 1985. The
directors are also required to prepare financial
statements for the group in accordance with
International Financial Reporting Standards as
adopted by the European Union (IFRSs) and the
rules of the London Stock Exchange for
companies trading securities on the Alternative
Investment Market. The directors have chosen
to prepare financial statements for the company
in accordance with UK Generally Accepted
Accounting Practice.
Group financial statements International
Accounting Standard 1 requires that financial
statements present fairly for each financial year
the group’s financial position, financial
performance and cash flows. This requires the
faithful representation of the effects of
transactions, other events and conditions in
accordance with the definitions and recognition
criteria for assets, liabilities, income and
expenses set out in the International Accounting
Standards Board’s ‘Framework for the
preparation and presentation of financial
statements’. In virtually all circumstances, a fair
presentation will be achieved by compliance with
all applicable IFRSs. A fair presentation also
requires the Directors to:
• consistently select and apply appropriate
accounting policies;
• present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information; and
• provide additional disclosures when
compliance with the specific requirements in
IFRSs is insufficient to enable users to
understand the impact of particular
transactions, other events and conditions on
the entity’s financial position and financial
performance.
24
T19865 Eckoh Front Section 6/8/08 15:43 Page 25
Independent Auditors' Report to
the shareholders of Eckoh plc
We have audited the group and parent company
financial statements (the ''financial statements'')
of Eckoh plc for the year ended March 2008
which comprise the consolidated income
statement, the consolidated and company
balance sheets, the consolidated cash flow
statement, the consolidated statement of
changes in equity 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 group financial statements in
accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted
by the European Union and for preparing the
parent company 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.
Our responsibility is to audit the financial
statements in accordance with relevant legal and
regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the
financial statements give a true and fair view
and have been properly prepared in accordance
with the Companies Act 1985 and whether the
information given in the directors’ report is
consistent with those financial statements. We
also report to you if, in our opinion, 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 highlights of the
year, the chairman's statement, the business
review, the directors' report, the corporate
governance statement and the statement of
directors responsibilities. 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.
Our report has been prepared pursuant to the
requirements of the Companies Act 1985 and
for no other purpose. No person is entitled to
rely on this report unless such a person is a
person entitled to rely upon this report by virtue
of and for the purpose of the Companies Act
1985 or has been expressly authorised to do so
by our prior written consent. Save as above, we
do not accept responsibility for this report to any
other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
Basis of audit opinion
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 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 group financial statements give a true
and fair view, in accordance with IFRSs as
adopted by the European Union, of the state
of the group's affairs as at 31 March 2008
and of its profit for the year then ended;
• the parent company financial statements give
a true and fair view, in accordance with
United Kingdom Generally Accepted
Accounting Practice, of the state of the
parent company's affairs as at 31 March
2008;
• the financial statements 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.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
Hatfield
1 August 2008
25
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 26
Consolidated Income Statement
for the year ended 31 March 2008
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Loss from operating activities
Interest receivable
Interest payable
Loss before taxation
Taxation
Loss for the year from continuing operations
Discontinued operations
Notes
1
2008
£'000
5
5
5
6
5,9
5,9
5
10
25,590
(19,579)
6,011
(8,757)
(2,746)
569
-
(2,177)
-
(2,177)
Post tax profit for the year from discontinued operations
5,11
2,647
Profit for the year
Attributable to:
Minority interests
Equity holders of the parent
Earnings/(loss) per share attributable to equity
holders of the parent during the year (pence)
Basic and diluted
Continuing
Basic and diluted
12
13
13
26
Restated
2007
£'000
77,575
(70,206)
7,369
(8,865)
(1,496)
882
(1)
(615)
-
(615)
8,792
8,177
(144)
8,321
8,177
470
-
470
470
0.24
3.16
(1.09)
(0.23)
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 27
Consolidated Balance Sheet
as at 31 March 2008
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Financial assets
Loans and other receivables
Current assets
Inventories
Trade and other receivables
Short-term investments
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Obligations under finance leases
Non-current liabilities
Obligations under finance lease
Provisions
Net assets
Shareholders' equity
Share capital
Capital redemption reserve
Share premium
Currency reserve
Retained earnings
Total shareholders' equity
Notes
2008
£'000
2007
£'000
14
15
16
18
17
18
19
20
21
22
22
23
24,25
25
25
25
25
114
743
-
3,293
4,150
13
6,382
1,530
5,307
13,232
180
1,148
288
3,273
4,889
17
8,644
2,530
7,071
18,262
17,382
23,151
(7,896)
(5)
(7,901)
(2)
(17)
(19)
(13,939)
(7)
(13,946)
-
(516)
(516)
9,462
8,689
499
198
695
(27)
8,097
9,462
491
198
477
(7)
7,530
8,689
The financial statements on pages 26 to 64 were approved by the Board of Directors on 1 August 2008 and signed on its behalf by:
Adam Moloney – Group Finance Director
27
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 28
Consolidated Statement of Changes in Equity
as at 31 March 2008
Balance as 1 April 2006
Profit for the period
Exchange differences
Disposal of subsidiary
Net income recognised directly in equity
Total recognised income and expense
Disposal of subsidiary
Share based payment charge
Shares issued under the option schemes
Share buy back and tender offer
Balance at 31 March 2007
Balance at 1 April 2007
Profit for the period
Exchange differences and net income
recognised directly in equity
Total recognised income and expense
Share based payment charge
Shares issued under the option schemes
Shares held by Share Incentive Plan
Share
Capital
£'000
681
-
-
-
-
-
-
-
8
(198)
491
491
-
-
-
-
8
-
Capital
redemption
reserve
£'000
Share
premium
£'000
Retained
earnings
£'000
Currency
reserve
£'000
Total
Shareholders
Equity
£'000
Minority
interests
£'000
Total
£'000
-
-
-
-
-
-
-
-
-
198
198
198
-
-
-
-
-
-
9,345
8,321
-
-
-
8,321
-
111
-
(10,247)
7,530
7,530
470
-
470
97
-
-
-
-
(61)
54
(7)
(7)
-
-
-
-
(7)
(7)
-
(20)
(7)
-
-
-
227
-
-
-
-
-
-
-
250
-
477
477
-
-
-
-
226
(8)
695
10,253
1,592
11,845
8,321
(61)
54
(7)
(144)
8,177
-
-
-
(61)
54
(7)
8,314
(144)
8,170
-
(1,448)
(1,394)
111
258
(10,247)
8,689
8,689
470
(20)
450
97
234
(8)
-
-
-
-
-
-
-
-
-
-
-
-
111
258
(10,247)
8,689
8,689
470
(20)
450
97
234
(8)
9,462
8,097
(27)
9,462
Balance at 31 March 2008
499
198
28
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 29
Consolidated Cash Flow Statement
for the year ended 31 March 2008
Cash flows from operating activities
Continuing operations
Cash utilised in operations
Interest paid
Net cash utilised in continuing operating activities
Discontinued operations
Cash generated from operations
Interest paid
Taxation
Net cash generated from discontinued operating activities
Cash flows from investing activities
Continuing operations
Purchase of property, plant and equipment
Purchases of intangible fixed assets
Decrease in short-term investments
Loans repaid by third parties
Interest received
Net cash generated from continuing investing activities
Discontinued operations
Purchase of property, plant and equipment
Purchases of intangible fixed assets
Net proceeds on disposal of business operations undertaking
Net cash disposed with business operations
Interest received
Net cash generated from discontinued investing activities
Cash flows from financing activities
Continuing operations
Issue of shares
Share buy back and tender offer
Capital element of finance lease rental payments
Net cash generated from/(utilised in) continuing financing activities
Discontinued operations
Loans repaid
Capital element of finance lease rental payments
Net cash utilised in discontinued financing activities
Notes
1
2008
£'000
30
30
(5,870)
-
(5,870)
629
-
(10)
619
(336)
(109)
1,000
1,500
591
2,646
(13)
(38)
666
-
-
615
226
-
-
226
-
-
Decrease in cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
20
20
(1,764)
7,071
5,307
Restated
2007
£'000
(4,111)
(1)
( 4,112)
4,024
(82)
(162)
3,780
(786)
(230)
1,000
-
784
768
(204)
(56)
10,788
(2,715)
18
7,831
258
(10,247)
(13)
(10,002)
(400)
(1)
(401)
(2,136)
9,207
7,071
29
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 30
Notes to the Financial Statements
for the year ended 31 March 2008
1
Restatement of prior year comparatives
accounting periods beginning on or after 1
January 2009)
The 2007 comparative figures in both the
consolidated income statement and the
consolidated cash flow statement have been
restated since their publication in December
2007. The restatement was required in order to
reflect the results and cash flows from
Connection Makers within discontinued
operations (see notes 11 and 31). The reported
profit and net assets for the year are not
affected by the restatement.
2
Basis of preparation
The consolidated financial statements of Eckoh
plc have been prepared in accordance with
International Financial Reporting Standards.
They take into account the requirements of IFRS
1, ‘First-time Adoption of IFRS’, as they are the
Group's first IFRS financial statements. These
financial statements have been prepared in
accordance with those IFRS standards and IFRIC
interpretations issued and effective or issued
and early adopted as at 31 March 2008.
The Group has adopted IFRS 7, 'Financial
instruments: Disclosures', and the complementary
amendment to IAS 1, 'Presentation of financial
statements – Capital disclosures'. The adoption
introduces new disclosures relating to financial
instruments, however it does not have any impact
on the classification and valuation of the group’s
financial instruments, or the numerical disclosures
relating to taxation and trade and other payables.
IFRS 8, ‘Operating Segments’ is a new standard
which is effective for annual reporting periods
beginning on or after 1 January 2009. The
Group has adopted this standard in the year
ended 31 March 2008. The effect of the early
adoption is seen in the segmental disclosures
but it has had no impact on the financial results.
The following revised and amended standards
were issued before the year end but were not
effective for the year ended 31 March 2008:
IFRS 2 Share-based payment – vesting
conditions and cancellations (effective for
accounting periods beginning on or after 1
January 2009)
IAS 1 Presentation of financial statements – a
revised approach (effective for accounting
periods beginning on or after 1 January 2009)
IAS 23 Borrowing costs (effective for
accounting periods beginning on or after 1
January 2009)
IAS 32 Financial Instruments (effective for
IFRS 1 and IAS 27 Cost of an investment in a
subsidiary, jointly-controlled entity or associate
(effective for accounting periods beginning on
or after 1 January 2009)
IFRS 3 ‘Business combinations’ (effective for
accounting periods beginning on or after 1 July
2009)
IAS 27 Consolidated and separate financial
statements (effective for accounting periods
beginning on or after 1 July 2009)
Improvements to IFRS (effective for accounting
periods beginning on or after 1 July 2009)
The following IFRIC interpretations were issued
before the year end but were not effective for
the year ended 31 March 2008:
IFRIC 12 Service concession arrangements
(effective for accounting periods beginning on
or after 1 January 2008)
IFRIC 13 Customer loyalty programmes
(effective for accounting periods beginning on
or after 1 July 2008)
IFRIC 14 and IAS 19 The limit on a defined
benefit asset, minimum funding requirements
and their interaction (effective for accounting
periods beginning on or after 1 January 2008)
IFRIC 16 Hedges of a net investment in a
foreign operation (effective for accounting
periods beginning on or after 1 October 2008)
IFRIC 15 Agreements for the construction of
real estate (effective for accounting periods
beginning on or after 1 January 2009)
The Group is currently assessing the impact, if
any, that these standards will have on the
presentation of its consolidated financial
statements.
These financial statements have been prepared
in accordance with the accounting policies set
out below which are based on the recognition
and measurement principles of IFRS in issue as
adopted by the European Union (“EU”) and
effective at 31 March 2008, the first annual
reporting date at which Eckoh plc is required to
use IFRS accounting standards adopted by the
EU.
Eckoh plc’s consolidated financial statements
were prepared in accordance with applicable
United Kingdom Generally Accepted Accounting
Principles (“UK GAAP”) until 31 March 2007.
The date of transition was 1 April 2006. UK
GAAP differs in some areas from IFRS. In
preparing Eckoh plc’s 2007 consolidated
financial statements, management has amended
certain accounting methods applied in the UK
GAAP financial statements to comply with IFRS.
The comparative figures in respect of 2007 have
been restated to reflect these adjustments.
Reconciliations and descriptions of the effect of
the transition from UK GAAP to IFRS on the
Group's equity, net income and cash flows are
provided in Note 31.
These consolidated financial statements have
been prepared under the historical cost
convention, as modified by the revaluation of
available-for-sale financial assets, and financial
assets and financial liabilities at fair value
through profit and loss.
The principal accounting policies, which have
been consistently applied, are described below.
3
Summary of principal accounting policies
Critical accounting policies, estimates and
adjustments The preparation of financial
statements requires the use of certain critical
accounting estimates. It also requires
management to exercise judgement in the
process of applying the Group's accounting
policies. Estimates and judgements are
continually evaluated and are based on
historical experience and reasonable
expectations of future events. Actual results
may differ from those estimates.
The accounting policies cover areas that are
considered by the Directors to require estimates
and assumptions which have a significant risk of
causing a material adjustment to the carrying
amounts of assets and liabilities within the next
financial year. The policies, and the related notes
to the financial statements, are found below:
Intangible assets
Trade and other receivables
Provisions
Share based payment
note 14
note 18
note 23
note 26
Basis of Consolidation The Group financial
statements consolidate the accounts of the
Company and its subsidiary undertakings. The
results of subsidiaries acquired are included in
the consolidated income statement from the
date on which control passes to the Group and
are included until the date on which the Group
ceases to control them. Subsidiaries are all
entities over which the Group has power to
control the financial and operating policies so as
30
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 31
to obtain benefits from their activities.
Transactions between Group companies are
eliminated on consolidation.
Investments in subsidiary undertakings are
accounted for using the purchase method of
accounting. The cost of an acquisition is
measured as the fair value of the assets given,
equity instruments issued and liabilities incurred
or assumed at the date of exchange, plus costs
directly attributable to the acquisition.
Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business
combination are measured initially at their fair
values at the acquisition date. The excess of the
cost of acquisition over the fair value of the
Group's share of the identifiable net assets
acquired is recorded as goodwill. If the cost of
acquisition is less than the fair value of the
Group's share of the net assets of the subsidiary
acquired, the difference is recognised directly in
the income statement.
Business combinations prior to 1 April 2006
have not been restated under an IFRS basis due
to the application of an exemption under IFRS1.
Intangible fixed assets
(a) Goodwill Goodwill represents the excess of
the fair value of the consideration paid over the
fair value attributable to the net assets acquired
and is capitalised on the Group balance sheet.
Goodwill is carried at cost less amortisation
charged prior to the Group's transition to IFRS
on 1 April 2006.
Prior to the adoption of IFRS, goodwill was
amortised over a period not exceeding 20 years.
Following the adoption of IFRS, goodwill is not
amortised and is reviewed for impairment at
least annually. Any impairment is recognised in
the period in which it is indentified.
(b) Intangible fixed assets Intangible fixed
assets acquired by the Group are capitalised at
the fair value of the consideration paid and
amortised over their expected useful economic
lives. The expected useful economic life of
intangible fixed assets is assessed for each
acquisition as it arises, and is generally assumed
to be three years.
(c) Research and development Research costs
are charged to the income statement in the year
in which they are incurred. Development
expenses include expenses incurred by the
Group to develop new products and enhance its
systems. Development costs are capitalised as
intangible fixed assets when it is probable that
the project will be a success, considering its
commercial and technological feasibility, and
costs can be measured reliably. Development
costs that do not meet those criteria are
expensed as incurred. Capitalised development
costs are amortised on a straight line basis over
the estimated useful life of the asset, which is
generally three years.
Amortisation is charged to administrative
expenses in the income statement.
The carrying value of intangible fixed assets is
assessed at the end of each financial year for
impairment. See the policy entitled impairment
of assets below.
Impairment of non-financial assets An
impairment loss is recognised in the income
statement for the amount by which the asset's
carrying amount exceeds its recoverable
amount. The recoverable amount is the higher
of the asset's fair value less costs to sell, and the
value-in-use based on an internal discounted
cash flow evaluation. For the purpose of
assessing impairment, assets are grouped at the
lowest levels for which there are separately
identifiable cash flows. All assets are
subsequently reassessed for indications that an
impairment loss previously recognised may no
longer exist.
Property, plant and equipment Property,
plant and equipment is stated at cost or fair
value at acquisition, net of depreciation and any
provisions for impairment. Cost includes
expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the Group and the cost of
the item can be measured reliably. All other
repairs and maintenance are charged to the
income statement during the financial period in
which they are incurred.
The gain or loss arising on the disposal of an
asset is determined by comparing the disposal
proceeds and the carrying amount of the asset
and is recognised in the income statement.
Depreciation is calculated using the straight-line
method to allocate the cost of each asset to its
estimated residual value over its expected useful
life, as follows:
Motor vehicles
Fixtures and equipment
over 3 years
over 3 years
the asset's carrying amount is greater than its
estimated recoverable amount.
Financial assets Financial assets include
investments in companies other than Group
companies, trade and other receivables (see
separate policy) financial receivables held for
investment purposes, treasury shares and other
securities. A permanent impairment is provided
as a direct reduction of the securities account.
The Group classifies its financial assets in the
following categories: available for sale
investments and loans and receivables. The
classification depends on the purpose for which
the investments were acquired. The
classification is determined by management at
initial recognition and the designation is re-
evaluated at each balance sheet date.
(a) available-for-sale investments: are non-
derivative financial assets that are either
designated in this category or not classified
in any of the other categories. They are
included within non-current assets unless
management intends to dispose of the
investment within 12 months of the balance
sheet date.
(b) loans and receivables: are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market and with no intention of trading.
They are included within current assets, with
the exception of those with maturities
greater than one year, which are included
within non-current assets. Loans and
receivables are included within trade and
other receivables in the balance sheet.
In the case of impairment of available-for-sale
assets, any loss previously recognised in equity is
transferred to the income statement.
Impairment losses recognised in the income
statement on equity instruments are not
reversed through the income statement.
Impairment losses recognised previously on debt
securities are reversed through the income
statement when the increase can be related
objectively to an event occurring after the
impairment loss was recognised in the income
statement.
An assessment for impairment is undertaken
annually. Management consider the financial
information in respect of entities from which
receivables are due.
Material residual values and useful lives are
reviewed, and adjusted if appropriate, at least
annually. An asset's carrying amount is written
down immediately to its recoverable amount if
A financial asset is derecognised only where the
contractual rights to the cash flows from the
asset expire or the financial asset is transferred
and that transfer qualifies for derecognition. A
31
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 32
Notes to the Financial Statements
for the year ended 31 March 2008 continued
financial asset is transferred if the contractual
rights to receive the cash flows of the asset
have been transferred or the Group retains the
contractual rights to receive the cash flows of
the asset but assumes a contractual obligation
to pay the cash flows to one or more recipients.
A financial asset that is transferred qualifies for
derecognition if the Group transfers
substantially all the risks and rewards of
ownership of the asset, or if the Group neither
retains nor transfers substantially all the risks
and rewards of ownership but does transfer
control of that asset.
Inventories Inventories are valued at the lower
of cost and net realisable value. The cost of
finished goods and work in progress comprises
design costs, direct labour and other direct
costs. Net realisable value is the estimated
selling price in the ordinary course of business
less applicable selling expenses.
Trade and other receivables Trade and other
receivables are stated at amortised cost less
provision for impairment. A provision for the
impairment of trade receivables is made when
there is objective evidence that the Group will
not be able to collect all amounts due to it in
accordance with the original terms of those
receivables. The amount of the provision is
determined as the difference between the
asset's carrying amount and the present value
of estimated future cash flows, discounted at
the effective interest rate. The amount of the
provision is recognised in the income statement.
Other receivables are stated at amortised cost
less provision for impairment.
Cash and cash equivalents Cash and cash
equivalents comprise cash in hand, deposits
held at call with banks, other short-term
investments, with maturities of three months
or less that are readily convertible into known
amounts of cash and which are subject to an
insignificant risk of changes in value and
bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities on the
balance sheet.
Short-term investements Short-term
investments comprise funds which have been
invested in short-term deposit accounts with
maturities of less than twelve months and
amounts held in escrow. Liquidity and credit risk
management is described in note 4.
Equity Equity comprises the following:
Share capital represents the nominal value of
ordinary shares.
Capital redemption reserve represents the
maintenance of capital following the share buy
back and tender offer.
Share premium reserve represents
consideration for ordinary shares in excess of
the nominal value.
Currency reserve represents exchange
differences arising on consolidation of Group
companies with a functional currency different
to the presentation currency.
Retained earnings represents retained profits.
Foreign currency transactions
(a) Functional and presentation currency
Items included in the financial statements of
each of the Group's entities are measured
using the currency of the primary economic
environment in which the entity operates
(the 'functional currency'). The consolidated
financial statements are presented in Sterling,
which is the Group's functional and
presentation currency.
(b) Group companies The results and position
of all Group companies that have a functional
currency different from the presentation
currency are translated into the presentation
currency as follows:
(i) assets and liabilities are translated at the
closing rates of exchange ruling at the balance
sheet date;
(ii) income and expenses are translated at the
average exchange rates. If however the average
exchange rate is not a reasonable
approximation of the exchange rates prevailing
on the date of the transactions, the income and
expenses are translated at the exchange rates at
the transaction dates; and
(iii) resulting exchange differences are
recognised as a separate component of equity.
Differences on exchange arising from the
retranslation of the net investment in foreign
entities are taken to shareholders equity on
consolidation. When a foreign entity is sold,
such exchange differences are recognised in the
income statement as part of the profit or loss
on disposal.
The Group used an exemption available under
IFRS 1 'First time adoption of International
Financial Reporting Standards' which resulted in
the cumulative translation differences for all
foreign operations being deemed to be zero at
the date of transition. Any gain or loss on the
subsequent disposal of those foreign operations
would exclude translation differences that arose
before this date.
Goodwill and fair value adjustments arising on
the acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity and
as such are translated at the closing rate.
Leases Leases are classified as finance leases
whenever the terms of the lease transfer
substantially all the risks and rewards of
ownership to the lessee. All other leases are
classified as operating leases.
Assets held under finance leases are recognised
assets of the Group at their fair value or, if
lower, at the present value of the minimum
lease payments, each determined at the
inception of the lease. The corresponding
liability to the lessor is included in the balance
sheet as a finance lease obligation. Lease
payments are apportioned between finance
charges and reduction of the lease obligation so
as to achieve a constant rate of interest on the
remaining balance of the liability. Finance
charges are charged directly against income.
Rentals payable under operating leases are
charged to income on a straight-line basis over
the term of the relevant lease. Benefits received
and receivable as an incentive to enter into an
operating lease are also spread on a straight-line
basis over the lease term.
Provisions Provisions are recognised when: the
Group has a present legal or constructive
obligation as a result of past events; it is more
likely than not that an outflow of resources will
be required to settle the obligation; and the
amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Provisions are measured at the present value of
management’s best estimate of the expenditure
required to settle the present obligation at the
balance sheet date. The discount rate used
reflects current market assessments of the time
value of money and the risks specific to the
liability.
Employee Benefits
(a) Pensions The Group operates a group
personal pension scheme. The assets of the
schemes are held separately from those of
the Group in independently administered funds.
Contributions payable are charged in the
income statement in the year in which they
are incurred.
(b) Bonus schemes The Group recognises a
liability and an expense for bonuses payable to:
i) employees based on a formula that takes in to
account gross profit; and ii) senior management
and executive directors based on a formula that
takes in to account operating profit. A provision
is recognised where there is a past practice that
has created a constructive obligation.
32
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 33
(c) Share-based payments From time to time
on a discretionary basis, the Board of Directors
award high-performing employees bonuses in
the form of share options. The options are
subject to a three year vesting period and their
fair value is recognised as an employee benefits
expense with a corresponding increase in equity
over the vesting period. The fair value of share
options granted is recognised within staff costs
with a corresponding increase in equity. The
proceeds received are credited to share
capital and share premium when the options
are exercised.
The fair value of share options was measured
using the QCA-IRS option valuer using the
Black-Scholes formula, taking into account the
terms and conditions upon which the grants
were made. The amount recognised as an
expense is adjusted to reflect the actual number
of share options that vest except where
forfeiture is only due to share prices not
achieving the threshold of vesting.
IFRS 2 has been applied to all options granted
after 7 November 2002 which have not vested
on or before 1 April 2006. A deferred tax
adjustment is also made relating to the intrinsic
value of the share options at the balance
sheet date.
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.
(d) Employee Share Ownership Plan The
Group's Employee Share Ownership Plan
('ESOP') is a separately administered trust. The
assets of the ESOP comprise shares in the
Company and cash. The assets, liabilities, income
and costs of the ESOP have been included in the
financial statements in accordance with SIC 12,
'Consolidation – Special purpose entities' and
IAS 32, 'Financial Instruments: Disclosure and
Presentation'. The shares in the Company are
included at cost to the ESOP and deducted from
shareholders' funds. When calculating earnings
per share these shares are treated as if they were
cancelled.
Revenue recognition Revenue represents the
fair value of the sale of goods and services, net
of Value-Added Tax, and after eliminating sales
within the Group. Revenue is recognised as
follows:
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 IVR and Connection Makers 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
Taxation Current tax is the tax currently
payable based on taxable profit for the year.
Deferred taxation is provided in full, using the
liability method, on temporary differences
arising between the tax bases of assets and
liabilities and their carrying amounts in the
consolidated financial statements. Deferred tax
is not provided if it arises from initial recognition
of an asset or liability in a transaction, other
than a business combination, that at the time of
the transaction affects neither accounting nor
taxable profit or loss. Deferred tax is calculated
at tax rates that are expected to apply to their
respective period of realisation, provided they
are enacted or substantively enacted at the
balance sheet date.
Deferred tax assets are recognised to the extent
that it is probable that future taxable profit will
be available against which the temporary
differences can be utilised.
Deferred tax on temporary differences
associated with shares in subsidiaries is not
provided if reversal of these temporary
differences can be controlled by the Group and
it is probable that reversal will not occur in the
foreseeable future.
Changes in deferred tax assets or liabilities are
recognised as a component of tax expense in
the income statement, except where they
relate to items that are charged or credited
directly to equity in which case the related
deferred tax is also charged or credited directly
to equity.
Financial liabilities Financial liabilities are
obligations to pay cash or other financial assets
and are recognised when the Group becomes a
party to the contractual provisions of the
instrument. Financial liabilities are stated at
amortised cost.
A financial liability is derecognised only when
the obligation is discharged, is cancelled or it
expires.
4
Financial risk management
The operations of the Group expose it to a
variety of financial risks: liquidity risk, interest
rate risk and foreign currency risk. Policies for
managing these risks are set by the Board
following recommendations from the Group
Finance Director. All financial risks are managed
centrally. The policy for each of the above risks
is described in more detail below.
The Group's financial instruments comprise cash,
short-term deposits, finance leases and various
items, such as receivables and payables 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.
Liquidity risk Through detailed cash flow
forecasting and capital expenditure 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 as they fall
due. Cash at bank is pooled and invested in
overnight money market accounts and deposits.
The Group's treasury policy requires that surplus
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.
33
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 34
Notes to the Financial Statements
for the year ended 31 March 2008 continued
Interest rate risk The Group principally finances its operations through shareholders’ equity and working capital. The Group had no borrowings during the
year, other than finance leases and its only material exposure to interest rate fluctuations was on its cash deposits, short-term deposits and the Symphony
receivable.
The Group has adopted a sensitivity analysis that measures changes in the fair value of financial instruments and any resultant impact on the income
statement of an increase or decrease of 2% in market interest rates.
(Decrease)/increase in fair value of loans and other receivables
(Decrease)/increase in fair value of short-term investments
Impact on income statement: (loss)/gain
2% decrease in interest rates
£'000
2% increasein interest rates
£'000
(87)
(38)
(145)
87
38
145
Foreign currency risk The Group's principal exposure to exchange rate fluctuations arises on the translation of overseas net assets, profits and losses into
the presentation currency. This risk is managed by taking differences that arise on the retranslation of the net overseas investments to the currency reserve.
Foreign currency risk on cash balances 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. No sensitivity analysis is provided in respect of foreign currency risk as due to the Group's working capital
management practices, the risk is considered to be immaterial.
Capital management The Board’s policy is to maintain a strong capital base with the joint objectives to maintain investor, creditor and market confidence
and to sustain future development of the business. Capital comprises all components of equity (i.e. share capital, capital redemption reserve, share premium
and retained earnings). The Board manages the capital structure and makes adjustments as required in the light of changes in economic conditions. The
Board may return capital to shareholders, issue new shares or sell assets in order to maintain capital.
Credit risk management is described in note 18.
Categories of financial assets and financial liabilities
Loans and receivables
Available for sale financial assets
Current financial assets
Trade receivables (note 18)
Other receivables (note 18)
Loans and receivables (note 18)
Short-term investments (note 19)
Cash and cash equivalents (note 20)
Total current financial assets
Non-current financial assets
Available for sale (note 16)
Loans and receivables (note 18)
Total non-current financial assets
2008
£’000
968
53
1,752
1,530
5,307
9,610
-
3,293
3,293
2007
£’000
1,689
53
1,675
2,530
7,071
13,018
-
3,273
3,273
Total financial assets
12,903
16,291
Financial liabilities
2008
£’000
2007
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
288
-
288
288
All financial liabilities held by the Group are measured at amortised cost and comprise trade payables of £3,983,000 (2007: £8,610,000), other payables of
£84,000 (2007: £40,000) and obligations under finance leases of £7,000 (2007: £7,000). See notes 21 and 22 for further details.
34
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 35
5
Segment analysis
The Group's primary operating segments reflect the internal financial reporting structure. Eckoh plc operates two business segments Speech Solutions and
Client IVR, these business segments are reported within continuing operations. Discontinued operations relate to the Connection Makers business (see note
11). The business segments are described in detail in the business review on page 6 . All revenue originates from the United Kingdom. Unallocated central
costs, assets and liabilities and cashflows relate to the entity as a whole and can not be allocated to individual segments. The revenues and operating results
generated by the business segments are summarised as follows:
2008
Revenue
Gross profit
Administrative expenses
Net interest receivable-
Profit/(loss) before taxation
Taxation
Post tax gain from disposal of operations
Profit/(loss) after taxation
2007
Revenue
Gross profit
Administrative expenses
Net interest receivable
Profit/(loss) before taxation
Taxation
Post tax gain from disposal of operations
Profit/(loss) after taxation
Speech
Solutions
£'000
6,065
3,881
(2,845)
-
1,036
-
-
1,036
Speech
Solutions
£'000
6,260
3,888
(2,690)
-
1,198
-
-
Client
IVR
£'000
19,525
2,130
(2,065)
-
65
-
-
65
Client
IVR
£'000
71,315
3,481
(2,363)
-
1,118
-
-
Total
continuing
operations
£'000
Discontinued
operations
£'000
Central
costs
£'000
-
-
(3,847)
569
(3,278)
-
-
25,590
6,011
(8,757)
569
(2,177)
-
-
(3,278)
(2,177)
Central
costs
£'000
-
-
(3,812)
881
(2,931)
-
-
Total
continuing
operations
£'000
77,575
7,369
(8,865)
881
(615)
-
-
Total
£'000
30,272
8,188
4,682
2,177
(1,648)
(10,405)
62
591
(10)
2,066
2,647
Discontinued
operations
£'000
9,266
4,464
(3,509)
(76)
879
(80)
7,993
8,792
631
(1,586)
(10)
2,066
470
Total
£'000
86,841
11,833
(12,374)
805
264
(80)
7,993
8,177
1,198
1,118
(2,931)
(615)
Included within revenue attributable to Client IVR is an amount of £9,067,000 (2007: £56,242,000) generated from the division’s largest client.
6
Loss from operating activities
The Group's operating loss is arrived at after charging:
Employee benefits expense (note 7)
Depreciation (note 15)
Amortisation (note 14)
Impairment of available for sale financial assets (note 16)
Operating lease payments
Restructuring costs
Loss on disposal of property, plant and equipment
2008
£'000
2007
£'000
5,260
6,588
634
176
288
252
159
36
758
200
-
252
1,427
67
35
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 36
Notes to the Financial Statements
for the year ended 31 March 2008 continued
Restructuring costs
During the year ended 31 March 2008, the Group undertook a cost reduction programme, incurring restructuring costs totalling £108,000 in relation to
continuing operations. Included within discontinued operations are restructuring costs of £51,000 following the closure of the Connection Makers Dating
division. During the year ended 31 March 2007, the Group incurred restructuring costs of £1,427,000 in connection with the disposal of its holding in
Symphony Telecom Holdings plc, £646,000 of which was incurred in relation to continuing operations and £781,000 in relation to discontinued operations.
7
Employee benefits expense
Wages and salaries
Social security costs
Pension costs
Share based payments
2008
£'000
4,666
489
8
97
5,260
2007
£'000
5,850
617
10
111
6,588
The Directors' report on page 15 provides further details on the Directors' emoluments. The average number of people (including executive directors)
employed by the Group during the year was:
Technical support
Customer services
Administration and management
8 Auditor remuneration
2008
Number
45
37
38
120
During the year the Group obtained the following services from the Group's auditor at costs as detailed below:
Fees payable for the audit of the parent company and consolidated accounts
Fees payable for other services:
The audit of subsidiary undertakings comprising continuing operations
The audit of subsidiary undertakings comprising discontinued operations
Services relating to the premium rate services regulation
Taxation services
Total fees payable to the Group's auditor
2008
£'000
30
40
13
7
23
113
The fees payable for the audit of the parent company and consolidated accounts are borne by a subsidiary undertaking.
During the year ended 31 March 2008, the Group appointed BDO Stoy Hayward LLP as auditors.
2007
Number
45
56
62
163
2007
£'000
51
40
17
-
6
114
36
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 37
9
Interest receivable and interest payable
Interest receivable
Bank interest receivable
Interest receivable on loans and other receivables
Interest payable
Interest payable on bank loans and overdrafts
Interest payable on finance leases
2008
£'000
245
386
631
-
-
-
2007
£'000
702
198
900
(93)
(2)
(95)
For the year ended 31 March 2008, of the interest receivable, £62,000 relates to the unwinding of the discount on the deferred consideration for the
disposal of the Connection Makers trades and as such is included within discontinued operations (see notes 5 and 18). For the year ended 31 March 2007,
£76,000 interest payable relates to the Symphony Group and is reported within discontinued operations. Net interest receivable in respect of the continuing
operations for the year ended 31 March 2008 is £569,000 (2007: £881,000).
10 Taxation
Continuing operations
Current tax
Deferred tax
Taxation
2008
£'000
2007
£'000
-
-
-
-
-
-
The tax charge for the year is different to the standard rate of corporation tax in the UK (30%). The differences are explained below:
Continuing operations
Loss on ordinary activities before taxation
Loss on ordinary activities multiplied by rate of corporation tax in the UK of 30% (2007: 30%)
Effect of expenses not deductible for tax purposes
Effect of capital allowances in excess of depreciation
Effect of tax losses carried forward
Current tax charge for the year
2008
£'000
(2,177)
(653)
67
13
573
-
2007
£'000
(615)
(185)
56
(121)
250
-
No deferred tax assets have been recognised in respect of tax losses and other temporary differences on the grounds that there is insufficient evidence that
the assets will be recoverable. Unprovided deferred taxation assets total £6,823,000 (2007: £7,172,000).
The taxation charge within discontinued operations is in relation to an under provision of current tax in the prior year.
37
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 38
Notes to the Financial Statements
for the year ended 31 March 2008 continued
11 Post tax profit for the year from discontinued operations
Discontinued operations in the year ended 31 March 2008 relate to the three trading divisions of Connection Makers Limited, a wholly owned subsidiary.
Following a detailed review of the Connection Makers business, the Board took the decision to close the Dating division, which had become unprofitable, at
the end of September 2007. On 1 October 2007, the trade and assets of the Television division were sold for £1.00m payable in cash over two years. On 14
November 2007, the assets of the second television channel were sold for £0.14m payable in cash over two years. On 1 January 2008, the trade and assets
of the Chat division were sold for £1.75m payable in cash over two years. The results of Connection Makers are disclosed within discontinued operations.
The comparative information also includes information relating to the operating loss and disposal of Symphony Telecom Holdings plc on 18 July 2006.
The profit on discontinued operations was determined as follows:
Profit from disposal of operations
Consideration:
Cash
Deferred cash
Cash consideration
Discounting on deferred cash
Net consideration received
Cost of disposal - paid
- accrued
Net assets disposed:
Goodwill
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Minority interests
Currency reserve
Pre and post-tax gain from the disposal of operations
2008
£'000
2007
£'000
600
2,290
2,890
(197)
2,693
(319)
(154)
-
(1)
(120)
-
(33)
-
-
-
-
2,066
10,954
-
10,954
-
10,954
(166)
-
(8,036)
(313)
(414)
(483)
(8,154)
(2,715)
15,947
1,448
(54)
7,993
No cash or cash equivalents was disposed of with the sale of these operations (2007: £3,165,000 cash disposed with Symphony Telecom Holdings plc).
38
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 39
Trading result of discontinued operations
Revenue
Gross profit
Administrative expenses
Interest receivable/(payable)
Profit before taxation
Taxation
Post-tax profit for the year from discontinued operations
Post-tax gain from the disposal of operations
2008
£'000
4,682
2,177
(1,648)
62
591
(10)
581
2,066
2,647
2007
£'000
9,266
4,464
(3,509)
(76)
879
(80)
799
7,993
8,792
Basic and diluted earnings per share (note 13)
1.33 pence
3.39 pence
The taxation charge in the year ended 31 March 2008 is an adjustment in respect of the prior year.
12 Minority interests
Balance at beginning of year
Minority share of losses for the period
Disposals
Balance at end of year
13 Earnings per share
2008
£'000
-
-
-
-
2007
£'000
1,592
(144)
(1,448)
-
Basic earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares of 197,216,792 (2007: 263,382,969) in issue
during the year ended 31 March 2008 after adjusting for shares held by the Employee Share Ownership Plan of 70,866 (2007: nil) and the profit for the
period attributable to equity holders of the parent of £0.5m (2007: £8.4m).
In calculating diluted earnings per share, the weighted average number of ordinary shares in issue, after adjusting for shares held by the Employee Share Ownership
Plan is further 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 average market price of ordinary shares in the period. The total number of options in issue is disclosed in note 26.
Denominator
Weighted average number of shares in issue in the period
Shares held by employee ownership plan
Number of shares used in calculating basic earnings per share
Dilutive effect of share options
2008
£'000
2007
£'000
199,288
(71)
199,217
-
263,383
-
263,383
-
Number of shares used in calculating basic and diluted earnings per share
199,217
263,383
As continuing operations were loss making all of the options were antidilutive in the periods presented but could potentially dilute earnings per share in
future years.
39
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 40
Notes to the Financial Statements
for the year ended 31 March 2008 continued
Internally
developed
computer
software
£'000
Customer
contracts
£'000
Other
intangible
assets
£'000
200
227
427
144
(101)
470
86
168
254
170
(65)
359
111
173
199
-
199
-
(199)
-
199
-
199
-
(199)
-
-
-
14
31
45
3
(30)
18
6
32
38
6
(29)
15
3
7
Goodwill
£'000
17,980
-
17,980
-
(2,058)
15,922
17,980
-
17,980
-
(2,058)
15,922
-
-
Total
£'000
18,393
258
18,651
147
(2,388)
16,410
18,271
200
18,471
176
(2,351)
16,296
114
180
14 Intangible assets
Group
Cost
At 1 April 2006
Additions
At 31 March 2007
Additions
Disposals
At 31 March 2008
Amortisation
At 1 April 2006
Charge for the year
At 31 March 2007
Charge for the year
Disposals
At 31 March 2008
Carrying amount
At 31 March 2008
At 31 March 2007
40
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 41
15 Property, plant and equipment
Fixtures and
equipment
£'000
Motor
vehicles
£'000
Cost
At 1 April 2006
Additions
Disposals
At 31 March 2007
Additions
Disposals
At 31 March 2008
Depreciation
At 1 April 2006
Charge for the year
Disposals
At 31 March 2007
Charge for the year
Disposals
At 31 March 2008
Carrying amount
At 31 March 2008
At 31 March 2007
6,557
937
(2,690)
4,804
349
(235)
4,918
5,525
750
(2,619)
3,656
634
(115)
4,175
743
1,148
-
10
(6)
4
-
(4)
-
-
8
(4)
4
-
(4)
-
-
-
Total
£'000
6,557
947
(2,696)
4,808
349
(239)
4,918
5,525
758
(2,623)
3,660
634
(119)
4,175
743
1,148
The carrying amount of property, plant and equipment includes £7,000 (2007: £18,000) in respect of assets held under finance lease contracts.
The depreciation charge in respect of assets held under finance lease was £10,000 (2007: £12,000).
16 Financial assets - available for sale
Cost
At 1 April
Impairment
At 31 March
2008
£'000
288
(288)
-
2007
£'000
288
-
288
The financial asset, represented by unlisted UK equity securities in eDirectory.co.uk plc, was fully impaired during the financial year. On 1 May 2008, trading
in eDirectory shares on PLUS was suspended after an announcement that eDirectory's two operating subsidiaries, CTD Limited and Freecom.net Limited
were placed into administration on 29 April 2008. The goodwill and assets of both operating subsidiaries were sold by the Administrators. eDirectory's
shares were withdrawn from PLUS on 19 May 2008. Accordingly the impairment write off of £288,000 was taken directly to the income statement.
The financial asset was measured at cost because the fair value of the instruments cannot be reliably measured due to the lack of relevant financial
information available to the Group. The Group originally intended to dispose of the shareholding once eDirectory had achieved its AIM listing.
41
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 42
Notes to the Financial Statements
for the year ended 31 March 2008 continued
Investment in subsidiary undertakings
The following are the principal subsidiary undertakings of the Group:
Subsidiary undertakings
Country of incorporation
Principal activities
Percentage of share
capital held
Eckoh UK Limited
Eckoh France SAS
Eckoh Projects Limited (i)
Avorta Limited
Connection Makers TV Limited
Eckoh Technologies Limited
Intelliplus Group Limited
Intelliplus Limited
Medius Networks Limited
Telford Projects Limited
Swwwoosh Limited
365 Isle of Man Limited
England and Wales
Speech Solutions and Client IVR
100%
France
Speech Solutions and Client IVR
100%(ii)
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Isle of Man
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
100%
100%(ii)
100%
100%(ii)
100%
100%(ii)
100%(ii)
100%
100%(ii)
100%(ii)
(i) On 7 January 2008, the company name of Connection Makers Limited was changed to Eckoh Projects Limited.
(ii) Share capital held by a subsidiary undertaking.
All companies have March year-ends. All trading companies operate principally in their country of incorporation.
17 Inventories
Work in progress
18 Trade and other receivables
Amounts falling due within one year
Trade receivables
Less: provision for impairment of receivables
Net trade receivables
Loans and receivables
Other receivables
Prepayments and accrued income
42
2008
£'000
13
13
2008
£'000
994
(26)
968
1,752
53
3,609
6,382
2007
£'000
17
17
2007
£'000
1,733
(44)
1,689
1,675
53
5,227
8,644
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 43
Amounts falling due after one year
Loans and receivables (note 28)
2008
£'000
2007
£'000
3,293
3,293
3,273
3,273
The Directors’ consider that the carrying value of the trade and other receivables approximate to their fair value.
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk
arises principally from the Group’s trade and other receivables. Concentrations of credit risk with respect to trade receivables are limited due to i) working
capital practices of the market sector and the Group; and ii) the nature of the Group’s customer base. The working capital practices of the market sector
within which the Group operates are such that the majority of the trade receivables balance is due from the telephony carriers under a self bill agreement.
The working capital practices of the Group follow the PhonePayPlus regulations, making out-payments to clients once the relevant trade receivable has been
received. For other trade receivables, the reputable nature of the Group’s customer base limits exposure to credit risk. At 31 March 2008, trade receivables
that are past due but not impaired represent £144,000 or 14.7% of the total trade receivables (2007: £776,000 or 45.6%). The past due balance of
£144,000 represents receivables that are between 60 and 90 days past due (2007: £115,000 30 to 60 days past due and £678,000 60 to 90 days past due).
Due to this, management believe that the current provision for the impairment of receivables need not be increased. The movement on the provision in the
year relates to the impairment of an £18,000 receivable from Symphony Telecom Limited in respect of property costs which was not recovered (2007:
impairment of £6,000 due to an unrecoverable receivable).
Loans and receivables include amounts in respect of the consideration paid for the Connection Makers TV and Chat businesses totalling £1,770,000 (2007:
£nil). £1,177,000 (2007: £nil) is recognised within loans and receivables falling due within one year, and £593,000 (2007: £nil) is recognised within loans
and receivables falling due after one year. The credit risk associated with the consideration receivable is not considered to be material as due to the working
capital practices of the market sector described above, the amounts due are deducted from the out-payment made to the relevant purchaser. The
receivables for the Connection Makers businesses have been discounted at 10%. Also included within other receivables is the amount receivable from
Symphony Telecom of £3,275,000 (2007: £4,797,000). £575,000 (2007: £1,524,000) is recognised within other receivables falling due within one year, and
£2,700,000 (2007: 3,273,000) is recognised within other receivables falling due after one year (see note 28). Interest receivable during the year in respect of
this receivable totalled £287,000 (2007: £198,000). The effective rate of interest is 5.98% (2007: 4.01%).
The discount rate of 10% used in relation to the Connection Makers deferred consideration has been selected by assessing receivables with a similar risk
profile.
The previously disclosed contingent asset of up to £850,000 receivable in consideration for the disposal of Freecom.net Limited to eDirectory in July 2005 is
no longer recoverable (see note 16). Included within interest receivable (see note 9) is an amount of £38,000 received from eDirectory in respect of this
contingent asset, the capital amount received was £7,000.
19 Short-term investments
Sterling
Fixed rate
Floating rate
2008
£'000
1,530
1,530
2008
£'000
1,000
530
1,530
2007
£'000
2,530
2,530
2007
£'000
2,000
530
2,530
Of the amount presented within short-term investments, £530,000 (2007: £530,000) represents an amount held in escrow in connection with a client
contract. The amount will become available within three months of the contract termination, expiry or re-negotiation. Short-term deposits have an average
maturity of one month. The average interest rate on short-term deposits during the year was 5.77% (2007: 4.90%).
43
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 44
Notes to the Financial Statements
for the year ended 31 March 2008 continued
20 Cash and cash equivalents
Sterling
Euro
Floating rate
2008
£'000
5,223
84
5,307
2008
£'000
5,307
5,307
2007
£'000
6,954
117
7,071
2007
£'000
7,071
7,071
Cash and cash equivalents comprise cash held by the Group. Surplus cash is placed in an interest bearing account. The average interest rate on the interest
bearing account during the year was 5.70% (2007: 4.19%).
The Group's financial risk management is disclosed in note 4.
21 Trade and other payables
Trade payables
Other payables
Other taxation and social security
Accruals and deferred income
All of the above are payable within one year and are less than three months old at the year end.
The Group's exposure to liquidity risk is disclosed in note 4.
22 Obligations under finance leases
Amounts payable under finance leases:
Within one year
After one year
Less future finance charges
Present value of lease obligations
Less amount due for settlement within one year (shown under current liabilities)
Amount due for settlement after one year
44
2008
£'000
3,983
84
335
3,494
7,896
2007
£'000
8,610
40
257
5,032
13,939
Minimum
lease
payments
£'000
Present value
of minimum
lease payments
£'000
5
2
7
5
2
7
-
7
5
2
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 45
23 Provisions
At 1 April 2007
Utilisation in year
Release in year
At 31 March 2008
Provision for
regulatory review
£'000
Provision
for NIC
£'000
451
(434)
-
17
65
(32)
(33)
-
Total
£'000
516
(466)
(33)
17
The Directors consider that the carrying value of all financial liabilities is approximate to their fair value.
The provision for regulatory review relates to potential costs in connection with the regulatory review of the interactive television market. The utilisation of
the provision during the year ended 31 March 2008 includes professional advisory costs of £284,000 and the imposed PhonePayPlus (formerly ICSTIS) fine
of £150,000 in relation to a breach of its Code of Practice relating to the “You Say, We Pay” competition on the “Richard and Judy show”. The remaining
provision is expected to be fully utilised within one year.
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. During the year ended 31 March
2007, Eckoh plc transferred the provision for National Insurance on share options to Eckoh UK Limited, a subsidiary undertaking. Based on the market value
of the Company's shares at 31 March 2008, no provision is required and as such the provision was released to the income statement.
All of the above are payable within one year.
Eckoh UK Limited ('Eckoh UK') a Group company, has received particulars of claim from solicitors acting for Channel Four Television Corporation ('Channel
4') and 4 Ventures Limited claiming breach of various contractual and other duties allegedly owed to their clients by Eckoh UK in connection with Channel
4's breaches of the Ofcom Broadcasting Code in relation to the 'Richard and Judy' programme. Eckoh UK has denied any liability and the claim will be
strongly contested. Accordingly no provision has been made in respect of the claim.
24 Share Capital
Ordinary shares
At 1 April 2006
Shares issued under the share option scheme
Share buyback and tender offer
At 1 April 2007
Shares issued under the share option scheme
Shares held under Share Incentive Plan
At 31 March 2008
Number
of shares
Nominal
value
£'000
Consideration
received
£'000
272,456,475
3,399,185
(79,346,084)
196,509,576
3,250,000
(70,866)
199,688 ,710
681
8
(198)
491
8
-
499
258
-
234
(8)
-
Authorised share capital and significant terms and conditions The total authorised number of shares is 600,000,000 ordinary shares with a nominal
value of 0.25 pence per share. All ordinary shares in issue are fully paid. The holders of ordinary shares are entitled to receive dividends, if declared, and are
entitled to vote at general meetings of the Company. There were no changes to the authorised share capital during the period.
Potential ordinary shares are disclosed in note 26.
45
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 46
Notes to the Financial Statements
for the year ended 31 March 2008 continued
25 Reserves
At 1 April 2006
Profit for the year
Share based payment charge
Shares issued during the year under the share option schemes
Exchange differences
Transfer on disposal
Share buyback and tender offer
At 1 April 2007
Profit for the year
Share based payment charge
Shares issued during the year under the share option schemes
Shares held under Share Incentive Plan
Exchange differences
At 31 March 2008
Share
capital
£'000
Capital
redemption
reserve
£'000
Share
premium
reserve
£'000
Currency
reserve
£'000
Retained
earnings
£'000
681
-
-
8
-
-
(198)
491
-
-
8
-
-
-
-
-
-
-
-
198
198
-
-
-
-
-
499
198
227
-
-
250
-
-
-
477
-
-
226
(8)
-
695
-
-
-
-
(61)
54
-
(7)
-
-
-
-
(20)
(27)
9,345
8,321
111
-
-
-
(10,247)
7,530
470
97
-
-
-
8,097
The nature and purpose of each reserve within shareholders equity is described below:
Share capital represents the nominal value of ordinary shares. The capital redemption reserve represents the maintenance of capital following the share buy
back and tender offer. The share premium reserve represents consideration for ordinary shares in excess of the nominal value. The currency reserve
represents exchange differences arising on consolidation of Group companies with a functional currency different to the presentation currency and retained
earnings represents retained profits.
The Group's capital management policy is described in note 4.
26 Share based payment
The Eckoh plc Share Option Scheme (‘the Scheme’) was introduced in November 1999. Under the Scheme the Board can grant options over shares in the
Company to Group employees. The grant price of share options is the middle market quotation price as derived from the Daily Official List of the London
Stock Exchange on the date of the grant. The contractual life of an option is ten years. Options granted under the Scheme become exercisable subject to
the share price exceeding RPI plus 15% after the third anniversary of the grant date. Exercise of an option is subject to continued employment, with certain
exceptions, as specified in the Scheme rules.
The Eckoh plc Enterprise Management Incentive Scheme (‘the EMI Scheme’) was introduced in February 2007. Under the Scheme the Board can grant
options over shares in the Company to Group employees. The grant price of share options is the middle market quotation price as derived from the Daily
Official List of the London Stock Exchange on the date of the grant. The contractual life of an option is ten years. Options granted under the EMI Scheme
become exercisable subject to the percentage growth in earnings per share in the three years following the year of grant being at least 5% (compounded)
per annum. Exercise of an option is subject to continued employment, subject to certain exceptions as specified in the EMI Scheme rules.
The Eckoh plc Share Incentive Plan (‘the SIP’) was introduced in April 2007. Under the SIP, employees can buy partnership shares worth up to £1,500 per
annum and receive matching shares in the ratio of 2:1 by completing the partnership/matching share agreement. The purchase price will be the prevailing
market price on that day when the shares are purchased. The SIP trustees buy shares twice a year. Subject to continuing employment, within three years of
purchase partnership shares can be withdrawn from the SIP with a corresponding charge to income tax and national insurance however the associated
matching shares can not be withdrawn within the first three years. Subject to continuing employment, between three and five years of the purchase date,
both partnership and matching shares can be withdrawn from the SIP with a corresponding charge to income tax and national insurance. Subject to
continuing employment, five years after the purchase date, both partnership and matching shares can be withdrawn from the SIP without a corresponding
charge to income tax and national insurance. Both partnership and matching shares can be withdrawn from the SIP within five years of the purchase date
without a corresponding charge to income tax and national insurance subject to employment terminating for certain reasons as specified under the SIP
rules.
46
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 47
The fair value of share options granted under the Scheme, the EMI Scheme and the SIP was measured using the QCA-IRS option valuer based on the Black-
Scholes formula, taking into account the terms and conditions upon which the grants were made. The fair value per option granted and the assumptions
used in the calculation are as follows:
Share price at date of grant (pence)
Exercise price (pence)
Number of employees
Shares under option
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk free rate
Expected dividends expressed as a dividend yield
Fair value per option (pence)
7 Oct
2004
7.65
7.88
23
880,020
3
68%
10
3
13 Dec
2004
9.13
9.00
1
7,200
3
67%
10
3
4.73%
4.43%
-
3.64
-
4.38
28 Feb
2005
7.85
8.50
16
13 Sep
2005
8.61
8.75
2
31 Jul
2007
8.50
8.75
27
1,850,000
1,750,000
5,050,000
3
66%
10
3
4.76%
-
3.54
3
59%
10
3
3
43%
10
3
4.19%
5.49%
-
3.65
-
2.89
The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise. The risk free rate
of return is the yield on zero-coupon UK government bonds of a term consistent with assumed option life. A reconciliation of option movements over the
year to 31 March 2008 is shown below:
Outstanding at 1 April
Granted
Forfeited
Exercised
Outstanding at 31 March
Exercisable at 31 March
2008
Number
of share
options
Weighted
average exercise
price
2007
Number
of share
options
Weighted
average exercise
price
13,156,314
5,250,000
(254,064)
(3,250,000)
14,902,250
8,102,250
7.88
8.75
8.67
7.19
8.32
7.97
17,050,645
-
(495,146)
(3,399,185)
13,156,314
8,536,314
7.84
-
8.14
7.65
7.88
7.47
The weighted average fair value of options granted in the year was 2.89 pence (2007: nil). The weighted average share price on exercise was 9.02 pence
(2007: 11.85 pence).
Range of exercise
prices
(pence)
Weighted average
exercise price
(pence)
Number
of shares
(000's)
Weighted average
remaining life
Expected
Contractual
Weighted average
exercise price
(pence)
Number
of shares
(000's)
Weighted average
remaining life
Expected
Contractual
2008
2007
6.5 - 8.5
8.5 - 10.5
10.5 - 12.5
16.5 - 20.0
7.41
8.75
10.75
19.85
6,794
6,807
1,280
21
-
1.8
-
-
5.2
8.9
4.7
1.2
7.19
8.75
10.75
19.85
9,098
2,757
1,280
21
-
1.4
-
-
6.2
8.5
5.7
2.3
The weighted average share price for options exercised over the year was 9.02 pence (2007: 11.85 pence). The total charge for the year relating to
employee share based payment plans was £97,000 (2007: £111,000) all of which related to equity-settled share based payment transactions.
47
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 48
Notes to the Financial Statements
for the year ended 31 March 2008 continued
27 Pension commitments
The Group operates a group personal pension scheme and, in addition, the subsidiary company Eckoh UK Limited operates 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
28 Related party transactions
Eckoh plc is the parent and ultimate controlling company of the Eckoh Group, the consolidated financial statements of which include the results of the
following subsidiary undertakings (note 16):
(cid:129) Eckoh UK Limited
(cid:129) Eckoh France SAS
(cid:129) Eckoh Projects Limited
Each subsidiary is 100% owned by the Eckoh Group and is considered to be a related party.
The Company held 6.8% of the issued share capital of eDirectory.co.uk plc ('eDirectory') in addition to which a contingent asset of up to £850,000 was
receivable as consideration for the disposal of Freecom.net Limited ('Freecom') to eDirectory in July 2005. eDirectory is considered to be a related party.
During the year ended 31 March 2008, the investment was impaired to £nil (note 16) and the contingent asset is no longer considered to be recoverable
(note 18). Eckoh plc is the guarantor on the Freecom property lease. As Freecom was placed into administration on 29 April 2008, the amount payable by
Eckoh plc as lease guarantor up to the December 2009 break in the lease is £25,000. This amount has been fully provided at 31 March 2008. eDirectory plc
paid an amount of £10,000 (2007: £2,000) to Adam Moloney for services as a non-executive director up to the date of his resignation on 31 January 2008.
Adam Moloney is a director of the Company.
As part of the financing arrangements for the acquisition of Anglia Telecom Centres Limited in April 2006, Eckoh plc loaned Symphony Telecom Holdings plc
(‘Symphony’) £7,500,000. £3,500,000 was repaid during May 2006. On 18 July 2006, the date of the disposal of Symphony, amounts due to Eckoh plc
totalled £700,000. This amount was added to the principal of the loan, bringing the loan to £4,700,000. The remaining capital amount of £3,200,000 is
due to be repaid in three instalments, the third and final instalment is due to be paid in June 2010. The first capital repayment of £1,500,000 was received
during the year ended 31 March 2008. As at 31 March 2008, the balance on the loan to Symphony totals £3,275,000 (2007: £4,797,000). £575,000
(2007: £1,524,000) is reported within other receivables due within one year and £2,700,000 (2007: £3,273,000) is reported within other receivables due
after one year (note 18). The loan bears interest at 1% above the Bank of England base rate and interest is payable six monthly in arrears. The loan is not
secured. Symphony is considered to be a related party. Interest receiveable during the year ended 31 March 2008 amounted to £287,000 (2007: £198,000).
48
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 49
Directors and key management includes the staff costs of the Directors' and the Management Team.
Directors and other key management
Wages and salaries
Social security costs
Pension costs
Share based payments
2008
£'000
831
94
12
80
1,017
2007
£'000
1,702
200
10
89
2,001
The aggregate Directors' emoluments are shown in the table below. An analysis of Directors' emoluments is included in the Directors' Report on page 15.
Directors'
Aggregate emoluments
29 Operating lease commitments
The Group had total annual commitments under non-cancellable operating leases as follows:
Land and buildings
Expiring within one year
Expiring within two to five years
Expiring after five years
2008
£'000
566
566
2008
£'000
252
908
454
1,614
2007
£'000
1,279
1,279
2007
£'000
252
933
681
1,866
The principal property under operating lease is the Group's head office in Hemel Hempstead for which the annual operating lease charge is £227,000.
The term of the lease covers the period to 21 March 2015, and includes an option to break the lease in either March 2009 or March 2012 with six
months notice.
49
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 50
Notes to the Financial Statements
for the year ended 31 March 2008 continued
30 Cash flow from operating activities
Cash flows from operating activities
Continuing operations
Loss after taxation
Interest expense
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of investment
Share based payments
Disposal of property, plant and equipment
Exchange differences
Operating loss before changes in working capital and provisions
Decrease in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
(Decrease)/increase in provisions
Cash utilised in operations
Interest paid
Net cash utilised in continuing operating activities
Discontinued operations
Profit after taxation
Profit on disposal
Interest (income)/expense
Taxation recognised in income statement
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share based payments
Exchange differences
Disposal of property, plant and equipment
Operating profit before changes in working capital and provisions
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Decrease in provisions
Cash generated from operations
Interest paid
Taxation
Net cash generated from discontinued operating activities
50
2008
£'000
(2,177)
(569)
597
153
288
34
-
(20)
(1,694)
4
1,835
(5,516)
(499)
(5,870)
-
(5,870)
2,647
(2,066)
(62)
10
37
23
63
-
36
688
-
622
(681)
-
629
-
(10)
619
Restated
2007
£'000
(615)
(881)
723
179
-
54
67
(7)
(480)
25
4,409
(8,433)
368
(4,111)
(1)
( 4,112)
8,792
(7,993)
76
80
35
21
57
(54)
-
1,014
(46)
(1,612)
4,692
(24)
4,024
(82)
(162)
3,780
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 51
31 Transition to IFRS
As stated in the Basis of Preparation, these are the Group's first consolidated annual financial statements prepared in accordance with IFRS.
IFRS 1 permits companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period.
These consolidated financial statements have been prepared on the basis of taking the following optional exemptions:
i) Business combinations prior to 1 April 2006, the Group's date of transition to IFRS, have not been restated to comply with IFRS 3 'Business Combinations'.
ii) Cumulative translation differences existing at the date of transition to IFRS are deemed to be zero. The gain or loss on a subsequent disposal of any
foreign operation shall exclude translation differences that arose before the date of transition to IFRS and shall include later translation differences.
iii) IFRS2 'Share-based payments' has been applied to employee options granted after 7 November 2002 that had not vested by 1 April 2006.
The following reconciliations show the effect of the transition from UK GAAP to IFRS. The first reconciliation provides an overview of the impact on equity
of the transition at 1 April 2006 and also at 31 March 2007 followed by reconciliations of equity and net income.
Overview of impact on equity
Total equity under UK GAAP
Total equity under IFRS
2007
£'000
8,699
8,689
2006
£'000
12,201
11,845
51
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 52
Notes to the Financial Statements
for the year ended 31 March 2008 continued
Reconciliation of equity at 1 April 2006
Assets
Non-current assets
Goodwill
Intangible assets
Property plant and equipment
Financial assets - available for sale investments
Current assets
Inventories
Trade and other receivables
Short-term investments
Cash and cash equivalents
Assets held for sale
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Obligations under finance leases
Bank loans and overdrafts
Restated
UK GAAP
Group
£'000
Effect of
transition
to IFRS
£'000
8,036
568
1,498
288
10,390
479
22,537
3,530
9,207
35,753
(8,036)
(446)
(466)
-
(8,948)
(437)
(3,060)
-
(4,470)
(7,967)
IFRS
Group
£'000
-
122
1,032
288
1,442
42
19,477
3,530
4,737
27,786
-
21,221
21,221
46,143
4,306
50,449
(28,771)
(1,476)
(23)
(2,007)
(32,277)
8,640
397
7
1,895
10,939
(20,131)
(1,079)
(16)
(112)
(21,338)
Liabilities directly associated with assets held for sale
-
(17,114)
(17,114)
Non-current liabilities
Bank loans
Obligations under finance leases
Provisions
Net assets
Shareholders' equity
Share capital
Share premium
Retained earnings
Equity attributable to equity holders of the parent
Minority interest in equity
Total equity
52
(1,473)
(20)
(172)
(1,665)
1,473
16
24
1,513
-
(4)
(148)
(152)
12,201
(356)
11,845
681
227
9,366
10,274
1,927
12,201
-
-
(21)
(21)
(335)
(356)
681
227
9,345
10,253
1,592
11,845
Notes
a
a,b
a
a
a
a
a
c
c
c
c
c
c
c
c
d
e
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 53
The UK GAAP balance sheet as at 1 April 2006 has been restated to separately disclose short-term investments previously disclosed within cash and cash
equivalents. The effect of this has been to reduce the cash and cash equivalent balance by £530,000 with a corresponding increase in short-term
investments.
Explanation of the effect of the transition to IFRS
The material adjustments to the balance sheet are explained below:
a Assets held for sale
On the transition from UK GAAP to IFRS the assets, as at 1 April 2006, of Symphony Telecom Holdings plc ("Symphony"), a 64.64% owned, AIM listed
subsidiary of Eckoh plc, have been included within the heading 'assets classified as held for sale' as the investment met the IFRS 5 criteria for such
classification. The line items affected are described below:
Impact of recognising assets held for sale
Goodwill
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Amount receivable from subsidiary undertaking
Cash and cash equivalents
Total impact - assets held for sale
b Intangible assets
Overall impact of derecognising intangible assets in accordance with IAS 38
Total impact - decrease in intangible assets
8,036
425
466
437
3,060
4,327
4,470
21,221
21
21
53
T19865 Eckoh Back Section:T19865 Eckoh Back Section 13/8/08 09:26 Page 54
Notes to the Financial Statements
for the year ended 31 March 2008 continued
c Liabilities directly associated with assets held for sale
On the transition from UK GAAP to IFRS the liabilities, as at 1 April 2006, of Symphony have been included within the heading 'liabilities directly associated
with assets held for sale'. The line items affected are described below:
Impact of recognising liabilities associated with assets held for sale
Trade and other payables
Amount payable to subsidiary undertaking
Current tax liabilities
Obligations under finance leases
Bank loans and overdrafts
Bank loans
Obligations under finance leases
Provisions
Total impact - liabilities directly associated with assets held for sale
d Retained earnings
Overall impact of derecognising intangible assets in accordance with IAS 38
Total impact - decrease in retained earnings
e Minority interest in equity
Overall impact of equity accounting for Joint Ventures in accordance with
IAS 31, under UK GAAP these entities were accounted for as subsidiary undertakings
Total impact - reduction in minority interest in equity
8,640
4,662
397
7
1,895
1,473
16
24
17,114
(21)
(21)
(335)
(335)
54
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 55
Reconciliation of equity at 31 March 2007
Assets
Non-current assets
Intangible assets
Property plant and equipment
Financial assets - available for sale investments
Other receivables
Current assets
Inventories
Trade and other receivables
Short-term investments
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Obligations under finance leases
Non-current liabilities
Provisions
Net assets
Shareholders' equity
Share capital
Capital redemption reserve
Share premium
Currency reserve
Retained earnings
Equity attributable to equity holders of the parent
Restated
UK GAAP
Group
£'000
Effect of
transition
to IFRS
£'000
IFRS
Group
£'000
180
1,148
288
3,273
4,889
17
8,644
2,530
7,071
18,262
(10)
-
-
-
(10)
-
-
-
-
-
(10)
23,151
-
-
-
-
-
-
(13,682)
(257)
(7)
(13,946)
(516)
(516)
(10)
8,689
-
-
-
(7)
(3)
(10)
491
198
477
(7)
7,530
8,689
190
1,148
288
3,273
4,899
17
8,644
2,530
7,071
18,262
23,161
(13,682)
(257)
(7)
(13,946)
(516)
(516)
8,699
491
198
477
-
7,533
8,699
Notes
a
b
c
The UK GAAP balance sheet as at 31 March 2007 has been restated to separately disclose short-term investments previously disclosed within cash and cash
equivalents. The effect of this has been to reduce the cash and cash equivalent balance by £530,000 with a corresponding increase in short-term
investments.
55
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 56
Notes to the Financial Statements
for the year ended 31 March 2008 continued
Explanation of the effect of the transition to IFRS
The material adjustments to the balance sheet are explained below:
a Intangible fixed assets
Overall impact of derecognising intangible assets in accordance with IAS 38
Total impact - decrease in intangible assets
b Currency reserve
Overall impact of separate disclosure of currency reserve
Total impact - separate disclosure of currency reserve
c Retained earnings
Overall impact of derecognising intangible assets in accordance with IAS 38
Overall impact of separate disclosure of currency reserve
Total impact - increase in retained earnings
(10)
(10)
(7)
(7)
(10)
7
(3)
56
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 57
Reconciliation of net income for the year ended 31 March 2007
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating loss
Interest receivable
Interest payable
Profit before taxation
Taxation
Restated
UK GAAP
Group
£'000
81,539
(72,568)
8,971
(9,548)
(577)
882
(1)
304
-
Profit attributable to equity holders of the parent from continuing operations
304
Discontinued operations
Post tax profit for the period from discontinued operations
Profit for the period
Attributable to:
Minority interests
Equity holders of the parent
8,034
8,338
(28)
8,366
8,338
Effect of
transition
to IFRS
£'000
-
-
-
9
9
-
-
9
-
9
(170)
(161)
(116)
(45)
(161)
IFRS
Group
£'000
81,539
(72,568)
8,971
(9,539)
(568)
882
(1)
313
-
313
7,864
8,177
(144)
8,321
8,177
Notes
a
b
b
c
57
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 58
Notes to the Financial Statements
for the year ended 31 March 2008 continued
Explanation of the effect of the transition to IFRS
The material adjustments to the income statement are explained below:
a Administrative expenses
Effect of the derecognition of advertisements classified within intangible fixed assets under UK GAAP, but derecognised in accordance with the
IAS 38 criteria:
- Amortisation charge reversal
- Additions charged to income statement
Total impact - decrease in administrative expenses
b Profit attributable to minority interests
Effect of equity accounting for the Joint Ventures of Symphony Telecom Holdings plc in
accordance with the IAS 31 criteria, under UK GAAP these entities were accounted for
as subsidiary undertakings
Currency reserve transfer on disposal of subsidiary operations
Total impact - increase in loss attributable to minority interests
c Profit attributable to equity holders of the parent
Decrease in administrative expenses (see a)
Currency reserve transfer on disposal of subsidiary operations
Total impact - increase in profit attributable to equity holders of the parent
Explanation of material adjustments to the cash flow statement
64
(55)
9
(116)
(54)
(170)
9
(54)
(45)
The definition of cash is narrower under UK GAAP than under IAS 7 'Cash Flow Statements'. Under IFRS highly liquid investments, readily convertible to a
known amount of cash and with an insignificant risk of changes in value, are regarded as cash equivalents. The cash flow statement in the last UK GAAP
financial statements reported movements in cash. The cash flow statement in these IFRS consolidated financial statements reports movements in cash and
cash equivalents.
Application of IFRS has resulted in reclassification of certain items in the cash flow statement as follows:
(i) interest paid and interest received are classified as cash flows from operating activities and cash flows from investing activities respectively under IFRS,
but were included in the 'Returns on investments and servicing of finance' category in cash flows under UK GAAP.
(ii) taxation is classified as operating cash flows under IFRS, but was included in a separate category of 'Taxation' cash flows under UK GAAP.
(iii) payments to acquire property, plant and equipment and payments to acquire intangible fixed assets have been classified as part of 'Investing activities'
under IFRS. Under UK GAAP such payments were classified as part of 'Capital expenditure and financial investment'.
(iv) cash flows arising from the disposal of subsidiary undertakings are classified as cash flows from investing activities under IFRS, but were included in
a separate category of 'Acquisitions and disposals' under UK GAAP.
(v) included within cash flows from investing activities under IFRS are cash flows classified as 'Financing' under UK GAAP.
There are no other material differences between the cash flow statement presented under IFRS and the cash flow statement presented under UK GAAP.
58
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 59
Company Financial Statements
Prepared under UK GAAP
Company balance sheet as at 31 March 2008
Fixed assets
Investments
Current assets
Debtors: amounts falling due within one year
Debtors: amounts falling due after more than one year
Short-term investments
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Capital redemption reserve
Share premium account
Share based payment
Profit and loss account
Total shareholders' funds
Notes
ii
iii
iii
iv
vii, viii
viii
viii
viii
viii
2008
£'000
9,151
9,151
820
2,700
1,000
3,621
8,141
(8)
8,133
17,284
17,284
499
198
695
209
15,683
17,284
2007
£'000
9,928
9,928
1,766
3,273
2,000
6,146
13,185
(403)
12,782
22,710
22,710
491
198
477
67
21,477
22,710
59
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 60
Notes to the Company's Financial Statements
For the year ended 31 March 2008
Principal Accounting Policies
Basis of accounting The financial statements
for the Company 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.
A separate profit and loss account of Eckoh plc
itself is not presented, as permitted by Section
230 of the Companies Act.
The principal accounting policies adopted by the
Company are described below.
Investments Long-term investments, held as
fixed assets, are stated at cost less provision for
any impairment in value.
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.
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
Company has taken advantage of exemptions
under FRS 8 not to disclose transactions between
Group companies.
Share based payments The Company operates
a share option scheme which allowed certain
Group employees to acquire shares in the
Company. The fair value of share options granted
is recognised within the staff costs of the
relevant group company with a corresponding
increase in equity. The fair value is measured at
grant date and spread over the period up to the
date when the recipient becomes unconditionally
entitled to payment.
The fair value of share options was measured
using the QCA-IRS option valuer using the Black-
Scholes formula, taking into account the terms
and conditions upon which the grants were
made. The amount recognised as an expense is
adjusted to reflect the actual number of share
options that vest except where forfeiture is only
due to share prices not achieving the threshold
of vesting.
FRS 20 has been applied to all options granted
after 7 November 2002 which have not vested
on or before 1 January 2006. A deferred tax
adjustment is also made relating to the intrinsic
value of the share options at the balance
sheet date.
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
share price at the balance sheet date
and is spread over the vesting period of the
share options. The provision is held by the
relevant group company who employs the share
option holders.
Cash flow statement The cash flows of the
Company are included in the consolidated cash
flow statement on page 29. Consequently the
Company is exempt under the terms of FRS 1
60
T19865 Eckoh Back Section:T19865 Eckoh Back Section 8/8/08 14:02 Page 61
(revised) ‘Cash flow statements’ from publishing a cash flow statement.
i. Operating expenses
Staff costs
Details of the Directors’ emoluments are given in the Directors’ Report on page 15. The Director’s remuneration costs are borne by a subsidiary
undertaking. The Company did not incur any staff costs during the year (2007: £nil). The average number of employees employed by the company
during the year was 4 (2007: 4).
Services provided by the Group's auditor
Fees payable for the audit of the parent company and consolidated accounts of £30,000 (2007: £51,000) were borne by a subsidiary undertaking.
ii. Fixed asset investments
Cost
At 1 April 2007
Additions
Impairment
At 31 March 2008
31 March
2008
£'000
9,928
142
(919)
9,151
The additional investment represents the capital contribution to Eckoh UK Limited in respect of share based payment charges. Following the closure of
the Dating division and the disposal of the Chat and Television business divisions during the year ended 31 March 2008, an impairment charge of
£631,000 was recognised in respect of the investment in Eckoh Projects Limited. The investment in eDirectory.co.uk plc has been fully impaired as the
trading subsidiaries of eDirectory.co.uk plc went in to administration and the shares were withdrawn from trading on PLUS (see note 16 to the
consolidated financial statements).
61
T19865 Eckoh Back Section:T19865 Eckoh Back Section 8/8/08 14:02 Page 62
Notes to the Company's Financial Statements
For the year ended 31 March 2008 continued
The following are the principal subsidiary undertakings of the Company:
Subsidiary undertakings
Country of incorporation
Principal activities
Percentage of share capital held
Eckoh UK Limited
Eckoh France SAS
England and Wales
Speech Solutions and Client IVR
France
Speech Solutions and Client IVR
Eckoh Projects Limited (i)
England and Wales
IVR Services
100%
100%*
100%
(i) On 7 January 2008, the company name of Connection Makers Limited was changed to Eckoh Projects Limited.
*Share capital held by a subsidiary undertaking.
The Company also holds 100% of the issued share capital of nine non-trading or dormant companies, not shown above.
All trading companies operate principally in their country of incorporation and have March year-ends.
iii. Debtors
Other debtors
Amounts due from subsidiary undertakings
Prepayments and accrued income
Amounts due within one year
Other debtors
Amounts due after more than one year
iv. Creditors: amounts falling due within one year
Other creditors
Amounts owed to group undertakings
v. Provisions for liabilities and charges
Total unprovided deferred tax assets are as follows:
Tax losses available
Unprovided deferred tax asset
2008
£'000
621
181
18
820
2,700
2,700
2008
£'000
8
-
8
2008
£'000
(928)
(928)
2007
£'000
1,578
181
7
1,766
3,273
3,273
2007
£'000
-
403
403
2007
£'000
(825)
(825)
No deferred tax asset has been recognised on the grounds that there is insufficient evidence that the asset will be recoverable.
62
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 63
vi. Loss of Holding Company
The Directors have taken advantage of the exemption available under section 230 of the Companies Act 1985 and have not presented a profit and loss
account for the Company alone. During the year ended 31 March 2008 the Company made a loss of £5,794,000 (2007: profit of £11,662,000).
vii. Share capital
Company
Authorised
2008
£'000
2007
£'000
600,000,000 (2006: 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 2007
Shares issued under the share option scheme
1 April 2007 - 31 March 2008
Shares held under Share Incentive Plan
As at 31 March 2008
Number
of shares
Nominal value
£'000
Consideration
received
£'000
196,509,576
3,250,000
(70,866)
199,688,710
491
8
-
499
-
234
(8)
226
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 2007 and 31 March 2008 fell within the range 5.00p – 10.75p per share.
Details of ordinary shares issued for cash to employees following the exercise of share options during the year are shown in note 26 to the consolidated
financial statements.
63
T19865 Eckoh Back Section:T19865 Eckoh Back Section 7/8/08 16:15 Page 64
Notes to the Company's Financial Statements
For the year ended 31 March 2008 continued
viii. Share capital and reserves
Balance at 1 April 2007
Loss for the year
Share option charge
Shares issued under the share option schemes
Shares held under the Share Incentive Plan
Balance at 31 March 2008
ix. Share options and share based payments
Share
capital
£'000
491
-
-
8
-
Capital
redemption
reserve
£'000
Share
premium
account
£'000
Share
based
payment
£'000
198
-
-
-
-
477
-
-
226
(8)
695
67
-
142
-
-
Profit
and loss
account
£'000
21,477
(5,794)
-
-
-
499
198
209
15,683
Share options and share based payments are disclosed in note 26 to the consolidated financial statements.
x. Related party transactions
The Company has taken advantage of the exemption conferred by FRS 8 that transactions between Group companies do not need to be disclosed. FRS 8
also provides a disclosure exemption provided equivalent disclosure is made in the consolidated financial statements. Please refer to note 28.
Shareholder Information
Dealings permitted on Alternative Investment
Market (AIM) of the London Stock Exchange.
Directors and Company Secretary
H.R.P. Reynolds - Non-executive Chairman
N.B. Philpot - Chief Executive Officer
A.P. Moloney - Group Finance Director and
Company Secretary
J.P. Hennigan - Executive Director
Registered Office
Eckoh plc
Telford House
Corner Hall
Hemel Hempstead
Hertfordshire, HP3 9HN
www.eckoh.com
Registered in England and Wales, Company
number 3435822
64
Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Auditor
BDO Stoy Hayward LLP
Prospect Place
85 Great North Road
Hatfield
Hertfordshire, AL9 5BS
Nominated Advisor and Nominated Broker
Seymour Pierce Limited
20 Old Bailey
London, EC4M 7EN
Solicitor
Travers Smith
10 Snow Hill
London, ECA 2AL
Banker
Barclays Bank plc
11 Bank Court
Hemel Hempstead
Hertfordshire, HP1 1BX
T19865 Eckoh Cover:T19865 Eckoh Cover 7/8/08 16:16 Page 1
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Eckoh – Maximising the power of technology
to deliver inspired communication solutions
www.eckoh.com
Eckoh plc Annual Report 2008
T19865 Eckoh Cover:T19865 Eckoh Cover 8/8/08 14:03 Page 2
Eckoh – Inspired speech solutions
for the contact centre industry
2 Highlights of the Year
26 Consolidated Income Statement
3 Chairman’s Statement
27 Consolidated Balance Sheet
6
The Business Review
28 Consolidated Statement of Changes in Equity
11 Board of Directors
14 Directors’ Report
29 Consolidated Cash Flow Statement
30 Notes to the Financial Statements
22 Corporate Governance
60 Company Financial Statements
24 Statement of Directors’ Responsibilities
64 Shareholder Information
25
Independent Auditors’ Report
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