Eckoh plc Annual Report 2010

← All annual reports

FY2010 Annual Report · Eckoh plc

Loading PDF…

Eckoh is the UK’s leading developer and specialist of choice
for hosted speech recognition services.

Eckoh plc
Telford House
Corner Hall
Hemel Hempstead
Hertfordshire, HP3 9HN

www.eckoh.com

annual report 2010

Eckoh Annual Report 2010

Contents

Highlights of the Year

Chairman’s Statement

Business Review

Board of Directors

Directors’ Report

Corporate Governance

Statement of Directors’ Responsibilities

Audit Report for Eckoh plc

Consolidated Financial Statements

Notes to the Financial Statements

Company Financial Statements

Notes to the Company Financial Statements

Shareholder Information

Overview

Eckoh is the UK’s leading developer of speech recognition
and IVR solutions for customer contact centres.

Eckoh is the specialist of choice for organisations looking to maximise the efficiency
of their contact centre operations.

Our sophisticated technology enables routine enquiries, transactions or payments
to be processed without the need for the consumer to actually talk to an agent.
This significantly reduces our client’s operational costs, whilst freeing up agents
to deal with more complex enquiries. Eckoh is the largest developer of such
hosted services in the UK.

Our secure and resilient infrastructure has the scalability to handle over 650,000
calls an hour and up to 8,000 calls simultaneously, which means calls can always
be answered no matter how unpredictable the circumstances.

Typical applications

Intelligent call routing (cid:129) Real-time information (cid:129) Bill and account payment
Product purchase (cid:129) Customer identification (cid:129) Balance enquiry
Subscription and renewals (cid:129) Membership services (cid:129) Delivery tracking
Fulfilment (cid:129) Ticket booking (cid:129) Service outage notifications

Eckoh Annual Report 2010

Highlights of the Year

Chairman’s Statement

Financial Highlights:

(cid:129) 19% growth in revenue from continuing operations from £6.7m to £7.9m
(cid:129) Increase in continuing gross margin to 72% (FY09: 64%) resulting in a

33% growth in continuing gross profit to £5.7m (FY09: £4.3m)

(cid:129) FY10 adjusted* profit before taxation of £0.7m (FY09: loss of £0.4m)
(cid:129) Adjusted* EBITDA amounted to a profit of £0.8m (FY09: loss of £0.3m)
(cid:129) Operating loss from continuing operations reduced to £0.5m

(FY09: loss of £1.8m)

(cid:129) Strong debt free financial position with a cash and short term

investment balance of £3.9m (FY09: £5.2m)

Operational Highlights and Recent Contract Wins:

(cid:129) Restructuring of Board composition during the year resulting in basic Board

cost reducing by 28%

(cid:129) 3 year contract renewal with William Hill for the provision of customer service options
(cid:129) New contracts for the provision of automated card payments services

to Northumbrian Water and D ^wr Cymru Welsh Water

(cid:129) 3 year contract renewals with two existing water utility clients for

the provision of card payment solutions

(cid:129) Major investment in technology strengthening market leading position
(cid:129) Good progress towards becoming PCI (“Payment Card Industry”) Compliant
(cid:129) Closure of office in Montpellier to produce cost saving and operational efficiencies.
The closure will be completed on 30 June 2010, all estimated costs in relation
to the closure have been provided for in 2009/10.

Post Period Developments:

(cid:129) Merger of Client Interactive Voice Response (“IVR”) division with
Telecom Express Limited, with Eckoh taking a 27.5% share of
the combined business

(cid:129) 3 year contract with a government executive agency to provide

service for logging the movement of livestock

* on continuing operations excluding exceptional items,

amortisation of intangible assets and share option charges.

The results for the year to 31 March 2010
demonstrate the progress made over the
financial year. There has been a 19% increase
in revenue from £6.7m to £7.9m. There
has also been a margin improvement on
those revenues resulting in a 33% increase
in gross margin from £4.3m to £5.7m.
The overall profitability of the Group is also
much improved with Earnings before Interest,
Tax, Depreciation and Amortisation of £0.2m
compared to a loss of £1.2m in the prior year.

Since the year end, we have been able
to announce the merger of the Client IVR
division with Telecom Express Limited. Eckoh
retain a 27.5% interest in the combined entity
and anticipates that this newly created
combination is well positioned to be profitable
in the years ahead. The financial performance
of the Client IVR division has been in decline
over recent years due to falling print circulations
and associated calls to interactive services.
Consolidation in the market will give both
Eckoh and Telecom Express Limited the
best opportunity of realising profit generation
from these activities in future years. The IVR
division is disclosed as a discontinued
operation within these results.

The Board and management are now able
to fully focus on the opportunity presented
by the Speech Solutions business. Over the
last two years, we have experienced revenue
growth of 31% and margin growth of 47%
against a background of global economic
crisis. Several significant contract wins have
been secured during the year as well as
enhancements and renewals with existing
clients. We now have long term contracts
with over 30 blue chip organisations.

With the excellent growth achieved and a strong
financial position including £3.9 million cash we
can look forward to the new financial year with
optimism. We are excited by the significant
increase in the number of opportunities in the
sales pipeline and thus the opportunity to further
increase revenues and the client portfolio.

This year saw a restructuring of the board and
functions within the company and I would like
to take this opportunity to thank both my board
colleagues and particularly the employees of Eckoh
for their ongoing efforts and commitment that has
been the single major factor behind the progress
made by the business. Eckoh have been
recognised during the year by the 2010 Sunday
Times “Best Companies to work for” survey and
we will continue to recognise the efforts of our
employees to ensure this progress continues.

We look forward to the future with confidence.

Chris Batterham,
Chairman

Eckoh Annual Report 2010

Business Review

Business Review
continued...

Introduction

The Directors are pleased to report a year of
significant financial improvement on the continuing
operations and the completion of the final steps
required to position Eckoh as a pure Speech
Solutions business.

During the year, strategic decisions were taken to
sell the Client Interactive Voice Response (“IVR”)
division, close the technical office in France and
reorganise the Board. This has left a rapidly growing
Speech Solutions business with an appropriate cost
base and an opportunity for significant shareholder
value to be generated.

consume very specialist resources for extended
periods. As a result, growth in revenue usually
contributes directly to the profitability of the business.

Administrative Expenses

Administrative expenses
before non recurring items

French office closure costs

Employee restructuring
EGM costs
Legal settlement
Aborted transaction costs

2010
£000’s

2009
£000’s

5,578

5,223

286

306
61
-
-

16
-
627
168

Total Administrative expenses 6,231

6,034

Financial Review

Revenue and Margin
The 2010 financial year built on the momentum of the
prior year, with revenue from continuing operations
increasing by 19% to £7.9m (FY09: £6.7m).
The margin achieved on these revenues has grown
to 72% (FY09: 64%), with gross profit increasing by
33% from £4.3m to £5.7m.

No single client represents more than 16% of the
margin generated. Consequently, there is no great
dependency on any individual client for the financial
sustainability of the business.

As detailed in the table above, administrative
expenses arising from the 33% increase in
margin increased by only 3% from £6.0m
to £6.2m. Adjusting the administrative expenses
for non-recurring items of expenditure, administrative
expenses still grew by only 7% from £5.2m to £5.6m.

Aside from the EGM costs, the non recurring items
of expenditure arising in 2009/10 will produce
significant operational and financial benefits in
future financial years. The employee restructuring
expense largely consists of the severance costs
arising from a restructuring of the Board, which
has reduced the basic cost of the Board by 28%.

The cost base of the Group is largely represented
by the employees, who are predominantly in the
areas of service development, delivery and support.
This headcount is deployed on a mix of delivering
new client business, maintaining and improving
existing clients’ services, developing Eckoh products
and special projects such as the PCI accreditation
process. When new business is won, this does
not typically require an increase in headcount and
associated overhead costs unless it is likely to

Eckoh has had a technical support office in
Montpellier, France, for over 10 years and has
benefitted from the expertise of some excellent
employees. Over this period, the number of
French staff has gradually declined whilst the
adverse exchange fluctuation of the Pound
against the Euro has significantly increased
the cost of the operation, leading to the
difficult decision being made to close the office.
Whilst the severance costs of French employees

Statement of Financial Position
During the year, there has been a significant
investment in the infrastructure supporting the
Speech Solutions business, from which it will
benefit for several years. This has resulted in
£1.0m of equipment acquisitions. This led to a
reduction in cash balances from £5.2m to £3.9m
in the year. No further capital expenditure of this
magnitude is planned in the medium term.
In addition to the £3.9m cash balance, a loan
of £2.9m is due to be repaid by Redstone plc
(“Redstone”) in two instalments in October 2011
and October 2012, which will further increase
the strength of the Group’s balance sheet.
The renegotiation of the terms of this loan
resulted in arrangement fee income of £0.2m
to be recognised in the year with a further £0.3m
being spread over the remaining term of the loan.
No significant impact on the statement of
financial position is anticipated to arise from
the discontinued Client IVR division.

are high, it was felt that the long term financial benefit
of closing the office, along with the operational
efficiency arising from having all Eckoh employees in
one location, was worthwhile. The Group is committed
to this closure, which will be completed by 30 June
2010. The estimated costs in relation to this closure
have been provided for at the year end.

Profitability Measures

Adjusted profit

Loss before tax from
continuing operations

2010
£’000

2009
£’000

(197)

(1,373)

Amortisation of intangible assets

Share option charges

157

Non-recurring items of expenditure

653

121

811

Adjusted profit /
(loss) before taxation

Net interest receivable

Depreciation

Arrangement fees on loans

Adjusted EBITDA

657

(387)

(99)

529

(238)

849

(382)

474

(295)

The table above illustrates the progress in the
profitability made by the Group with an adjusted
loss of £0.4m for FY09 converted into a profit
of £0.7m for this year. Adjusted EBITDA has
improved from a loss on continuing operations
of £0.3m to a profit of £0.8m. Excluding the
adjustments, the loss before tax from continuing
operations reduced from £1.4m to £0.2m.
The Speech Solutions business has reached
a level of maturity where it can be self-sustaining,
and is well-positioned to take advantage of
the market opportunity and further improve
profitability in the coming years.

Eckoh Annual Report 2010

Business Review
continued...

Operational Review

Speech Solutions
Eckoh is a leading developer of speech
recognition solutions for customer contact
centres and is the largest provider of such
hosted services in the UK.

Eckoh’s sophisticated technology enables
routine enquiries, transactions or payments
to be processed without the need for the
consumer to speak with a contact centre agent.
This significantly reduces the client’s operational
costs, whilst freeing up the agents to deal
with more complex and high-value enquiries.

For large organisations seeking to maximise
the efficiency of their contact centre operations
Eckoh is the specialist of choice and the services
it provides are used by a wide range of mass
market establishments to serve millions of their
customers each year.

The length of contracts with clients are generally
for periods of at least 3 years, and typically with
guaranteed minimum levels of revenue either
from fixed recurring fees or from specified volumes
of call traffic or transactions, which gives excellent
visibility on future revenues.

Eckoh’s technical infrastructure has the
scalability to handle up to 8,000 inbound
phone calls simultaneously, which means
calls can always be answered on a 24
hour-a-day basis no matter how unpredictable
the circumstances and at a fraction of the cost
of a live agent. During the year Eckoh made
a major investment in a new VoiceXML call
handling platform from Holly Connects and
the established industry leader in speech
recognition software, Nuance Recognizer 9.

The first complex speech-enabled application
to be launched on this new platform was a journey
planning service for Transport for London, which
went live in December 2009 (0843 222 1234).
The worst winter weather for many years saw call
levels to the new service increase dramatically in
January from their normal levels, whilst comparable
fluctuations occurred on National Rail Enquiries
TrainTracker™ service. Similarly during the travel
chaos following the eruption of the Eyjafjallajökull
volcano in Iceland, the real-time flight information
services that Eckoh provides for Heathrow and
Gatwick airports experienced massive increases
in demand during April. In all cases, the
on-demand hosted solutions that Eckoh provide
were able to deal effectively with the sudden
dramatic call increases, clearly demonstrating
the benefits offered by Eckoh’s hosted services.

Eckoh is undertaking a two-year process to
become compliant with the Payment Card
Industry Data Security Standards (“PCI DSS”).
£162,000 (FY09: £79,000) of expenses have been
capitalised on the PCI DSS project in the 2009/10
financial year. This is a comprehensive set of
requirements that all companies holding, processing
or transferring customer payment card details are
required to adopt. Eckoh is seeking to be accredited
at the highest level and recent changes in the
regulations extended the timescale of the project,
but the process is now nearing completion with
the conclusion expected by September 2010.
The Group’s client base in this area continues to
grow, along with the volume of card payments being
processed, which is now at an annual run rate of
£150 million, validating the effort Eckoh has
expended in this area. As an example Eckoh has
recently announced contract wins with Northumbrian
Water Limited and D ^wr Cymru Welsh Water,
together with contract renewals for two other
existing utility clients.

Other significant contract renewals with large clients
include William Hill, which renewed its agreement for
the provision of results, live commentary and call
centre services for 3 years.

New Products
EckohPAY, which offers customers the ability to make
real-time, secure and compliant phone and web card
payments, is the first of the productised offerings that
Eckoh has developed - and is designed specifically
for the expected demand from PCI. The ability to sell
such a product to a client and have the service live
within a matter of weeks significantly broadens the
market that Eckoh can target. Other products to be
launched this year include EckohID, which helps
companies identify callers and capture name and
address information; EckohLOCATE, which enables
calls to be routed efficiently and direct customers to
store or dealer locations; and EckohSECURE, which
allows companies to authenticate their customers
with just their voices. Earlier in the year, Eckoh
announced a 2-year contract to provide services
to Comic Relief, and EckohPAY was successfully
used on their behalf to collect over 38,000
donations totalling over £1.1m during the
Sport Relief weekend in March 2010.

Business Review continues on page 18.

Eckoh Annual Report 2010

Transport for London calls on Eckoh
to keep commuters on track

Eckoh were awarded a five year contract with Transport for London (TfL)
to provide automated telephone journey planning services
using Eckoh’s advanced speech recognition technology.

“Eckoh have an unrivalled track record in delivering highly successful and customer
centric speech recognition solutions on a truly mass market scale. Their ability to handle
such large numbers of calls simultaneously has enabled us to provide our customers
with real-time information in all circumstances to help them plan their journeys around
London more successfully.”

Ian Henderson,
Director of Customer Services,
Transport for London

TfL was created in 2000 and is the integrated
body responsible for the Capital's transport system.
Its main role is to implement the Mayor's Transport
Strategy for London and manage transport services
across the Capital. London’s transport system
caters for approximately 24 million trips a day,
across an integrated network of rail, underground
and bus links.

The service, which was successfully launched in
December 2009, gives callers the ability to obtain
real-time journey planning information between 921
London locations incorporating bus, tube, tram, and
rail services. In addition, it provides callers with the
ability to refine their journey details using a
combination of advanced search parameters
including time of travel, preferred mode of transport
and number of interchanges. Callers are presented
with real-time service bulletins to inform them if
there are delays that may impact their journey.

Other innovative features include the technology’s
ability to “learn” a caller’s travel preferences over
time; providing the caller with an even more
sophisticated and intuitive level of service.
The speech recognition technology, hosted on
our VoiceXML platform has been optimised to
deal with noisy environments such as bus stops
or station platforms; and a complementary
and comprehensive touchtone service using
a predictive text style interface is available.

TfL is the first of Eckoh’s clients to have launched
a complex speech recognition application on
our new VoiceXML platform. The service is an
integral element of a 21st century multimedia
contact centre, which has helped TfL deal with
an increase in call traffic whilst expanding the
variety of self-service options available to callers.

London’s transport system caters for approximately
24 million trips a day, across an integrated network
of rail, underground and bus links.

Eckoh Annual Report 2010

Our Products

EckohPAY
Real-time and secure phone and web card payments

EckohID
Identify callers and capture name and address information

EckohLOCATE
Route calls efficiently and direct customers to stores or locations

EckohSECURE
Authenticate callers and customers with just their voices

By using Eckoh’s innovative solutions our clients can increase
the efficiency of contact centre agents by allowing them to service
more complex or higher-value calls.

Eckoh’s contact centre solutions focus on improving customer
service, maximising agent productivity and reducing costs and risk.

EckohPAY

Bill payment (cid:129) Account payment (cid:129) Product purchase (cid:129) Balance enquiry
Subscription and renewals (cid:129) Membership services (cid:129) Ticket booking

Eckoh operates secure methods to capture,
process and transmit payment card data on
behalf of our clients. EckohPAY does not
retain the full card number after authorisation;
card details are either deleted or masked.

Eckoh also provides a secure web service to allow
customers to make card payments. The same
business rules and validation methods are used
from the phone service. All payments are collated
into a single accounts file, marked appropriately
to show the source channel for each transaction.

Eckoh currently process over £150m per annum
in card payments through EckohPAY.

Clients using EckohPAY include the Ministry
of Justice, Northumbrian Water, Comic Relief,
the BBC, Vue and Northern Ireland Electricity.

EckohPAY enables our client’s customers to
make card payments conveniently and securely
over the phone or on the web, 24 hours a day.

By using EckohPAY our clients can increase
the efficiency of their contact centre agents
by allowing them to service more complex
or higher-value calls.

Callers are greeted and guided through each
step of the service by a professionally recorded
voiceover and script. They have the choice of
either speech recognition or touch tone to
interact with the service.

To identify the caller and ensure accurate
reconciliation EckohPAY uses a suitable
identifier such as an account or customer
number, product or reference code, bill or
invoice number.

The card authorisation and settlement is
handled in real-time with one of the leading
merchant acquirers including Barclaycard,
BT Buynet and Realex and the caller is
given a confirmation number for reference.
As an option confirmation of the transaction
can be delivered by SMS to the caller’s
mobile phone.

Eckoh Annual Report 2010

EckohID

Eckoh LOCATE

Brochure and leaflet requests (cid:129) Ticket booking (cid:129) Change of address
Order confirmation and tracking (cid:129) Appointment requests
Redelivery requests (cid:129) Subscription and renewals

Localised branch, office or store locations (cid:129) SMS location-specific details
Provide opening times and contact details (cid:129) Provide localised offers
Connect callers directly to branch, office, store or name requested

EckohID is an effective method when responding
to requests for brochures, catalogues, leaflets
by replacing record and transcription or live
agents with a full data capture / fulfilment solution
or data capture / database supply solution.
EckohID provides an ideal way to minimise
costs while maintaining service levels and
operational efficiency.

Eckoh can seamlessly integrate the service
with our other products to provide a complete
end-to-end solution. For example; integration
with EckohLOCATE can route the caller to
their desired destination or with EckohPAY
to securely place an order and process
the payment.

EckohID is an automated speech recognition
solution ideal for capturing name and address
information.

EckohID enables our clients to increase the
efficiency of their contact centre agents by
handling campaigns or peaks with ease and
allowing them to service more complex or
higher-value calls.

EckohID provides an accurate and convenient
way to capture and validate a caller’s details
with full integration into our postcode database.
EckohID can instantly reduce call volumes to
live agents, minimise call waiting times and
improve the efficiency and accuracy for
fulfilment requests.

Callers are greeted and guided through
each step of the service by a professionally
recorded voiceover and script. They have
the choice of either speech recognition or
touch tone to interact with the service.

Once the nearest location has been identified,
the caller can receive information such as
the address details, opening hours, telephone
number, and services available, as well as
having the option of connecting directly
to that location.

EckohLOCATE can also distribute calls to
your various contact centres based upon
the location or needs of the caller. With more
callers accessing services from their mobile
phones the traditional methods of routing calls
based upon the caller’s landline telephone
number are becoming obsolete. This ensures
that unnecessary and costly re-routing of calls
between contact centres is eliminated.

If your organisation has a large number or
employees and locations EckohLOCATE
can route calls to the relevant location simply
by asking the caller to say the name of the
person they wish to speak to. This improves
efficiency and reduces cost from wasted calls.

EckohLOCATE provides our clients with a
convenient way for their customers to locate
or connect to their nearest branch, store
or outlet without ever needing to speak
to an agent.

By using EckohLOCATE our client’s can
increase the efficiency of their contact
centre agents by allowing them to service
more complex or higher-value calls.

EckohLOCATE is a speech-enabled service
that provides location specific information
and routes calls according to the caller’s
instructions.

Callers say the name of a town or city,
landmark or postcode and EckohLOCATE
will identify the nearest location to that
place by mapping the request against
a database of the client’s sites.

Specific rules can be applied to the service,
to ensure the caller receives the most relevant
and personal information by recognising
repeat callers. A geographic range can
be defined which could vary depending
on postcode, to only present locations
that are open at that time.

Eckoh Annual Report 2010

TrainTracker ™ – always prepared for the unexpected

TrainTracker™ and TrainTracker Text™ provide comprehensive
real-time passenger information, including end-to-end journey
planning capability, real-time train information and fare details.

“National Rail Enquiries is leading the way in maximising communications technology
to provide fast and accurate access to information. With technology and the demands
of customers’ ever-changing, it’s vital that we continue to provide timely information
to passengers – however, whenever and by whatever media they want it. Eckoh’s
expertise, approach and professionalism is excellent; they delivered us a series of
solutions and services designed specifically for our customers needs.”

Chris Scoggins,
Chief Executive, National Rail Enquiries

The service covers over 3,000 locations including
information for metro, ferry, tram, walking and bus
transfers.

TrainTracker™ was developed by Eckoh for
National Rail Enquiries (NRE) in 2005. NRE runs
one of the “top 5 super sites” and handles one
of the UK’s busiest and most volatile telephone
service receiving 160 million customer contacts
per annum.

The TrainTracker™ automated telephone service
on an average day handles between 8,000 and
15,000 calls. To date the service has received
22.5 million calls and 55 million minutes of traffic.
As a hosted solution, the service has the
scalability to easily cope with any sudden and
dramatic increase in call volumes no matter how
unpredictable the circumstances, at its busiest it
has dealt with over 100,000 calls in a single day.

TrainTracker™ Text was implemented in 2008 to
expand the choice of channels available to
callers. The SMS service has the same journey
planning functionality as the automated speech
recognition solution, providing live departure and
arrival information direct to a mobile. The service
has processed over 2 million text enquiries.

Both services have the ability to retain a caller’s
previous request and using a combination of
caller recognition and self learning capabilities the
service will provide personalised information the
next time the service is used for example offering
return journey information.

The TrainTracker™ services demonstrate how
speech recognition technology has been
successfully deployed to enable routine enquiries
to be effectively handled without the need to talk
to an agent, this has allowed NRE’s contact centre
advisors the ability to focus on callers that need
more complex advice and information.

Eckoh Annual Report 2010

As a hosted solution, the service has the scalability
to easily cope with any sudden and dramatic
increase in call volumes no matter how
unpredictable the circumstances, at its busiest it
has dealt with over 100,000 calls in a single day.

Business Review
continued...

Board of Directors

Key Post Period Developments

Discontinued Operations
On 28 May 2010, Eckoh announced that the
Group’s Client IVR division (“the Division”) had
merged with Telecom Express Limited (“TE”) in
return for 27.5% of the issued share capital of
the enlarged business. The Division had
experienced a continuing difficult period with
revenues falling by 29% to £8.8m for the year
(FY09: £12.4m) and margin declining by 35%
to £1.2m (FY09: £1.9m). As a result, the profit
contribution fell to £0.05m compared with £0.7m
for the previous year. The issues faced by the
Client IVR division have been shared by all
premium rate service providers as print circulations
fall. The need to focus management efforts on
the growing Speech Solutions business as well
as to remove the compliance risk around the
provision of premium rate services resulted in
an exercise being undertaken to seek a means
to remove the operation from the continuing
Eckoh group. An agreement was reached with
the owners of TE that a combination of the
respective businesses would generate significant
operational efficiencies and give the combined
operation a prospect of increased future profitability.
The results for the Client IVR division are shown
within the discontinued operation disclosures
on the income statement. The disclosures
around the disposal will be presented in the
interim results statement for the 6 months
ending 30 September 2010.

Contract Win
Eckoh achieved a significant client win after the
end of the period with the signing of a 3-year
contract with a Government Executive Agency.
This is for the provision of a speech recognition
solution, due to go live in June 2010, to allow
authenticated users to register the identity and
movement of livestock. This contract builds on
Eckoh’s long-standing relationship with the UK
government and its departments, including the
Ministry of Justice and Transport for London,
with the latter entering into a 5-year contract
with Eckoh and its partner BT in July 2009.

Outlook

As a result of the strong progress made in
growing the Speech division and the final
restructuring of the Group, the Board remains
highly confident of Eckoh’s prospects. The
strategic decisions, such as PCI compliance
and the investment in new technical infrastructure,
are already demonstrating their value and will
ensure that the services provided by Eckoh
remain ahead of those offered by its competitors.
Whilst the sales focus will continue to target the
high-value long-term contracts, the new range of
Eckoh products, including the highly successful
EckohPAY, will enable smaller size contracts
to be won and deployed quickly.

The future value of the Group will be derived
from the growth attained from the Speech
Solutions division, which is now the core
focus of the Board following the merger
of the Client IVR division with TE.

Chris Batterham,
Non-executive Chairman
Chris qualified as an accountant with Arthur Andersen and has significant
experience in the technology based business environment, including the
flotation of Unipalm on the London Stock Exchange. Currently on
the boards of a number of companies including SDL plc, Betfair Group
Limited, Iomart Group plc and Office2Office plc, Chris brings a wealth of
experience in the strategic development of companies in the IT sector.

Clive Ansell,
Non-executive Director
Clive joined the Board in July 2009 and is currently advising the board
at Royal Mail on the major changes facing the business. Formerly, he held
several senior executive and strategic roles at BT, spent three years as an
executive board director of Japan Telecom, and led major M&A projects in
the US. Clive is an Oxford graduate, a patron of Crimestoppers and sits on
the boards of a number of charities and business representative groups.

Nik Philpot,
Chief Executive Officer
Nik 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 speech
recognition specialist for the contact centre industry. Nik has 23 years
experience in the voice services industry.

Adam Moloney,
Group Finance Director
Adam has been Finance Director at Eckoh for almost 6 years and has seen
the Group through a period of continuous change over that time. Prior to
joining the company in 2003 he worked in senior financial roles for a
number of organisations and immediately prior to joining Eckoh, was
Manager of Finance & Operations for the UK arm of New York based
IT hardware reseller, Resilien Inc.

Eckoh Annual Report 2010

Directors’ Report

Directors’ Report
continued...

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 2010.

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 Chairman's Statement
(page 5) and the Business Review (pages 6 to 18)
report on the progress made in the financial year
under review.

The principal subsidiary undertakings are listed
on page 67.

Results and Dividends

The audited financial statements and related notes
for the year ended 31 March 2010 are set out on
pages 43 to 82. The Group's loss for the year is
set out in the Income Statement on page 43.

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 3. The Directors’ regularly
assess the Group’s key commercial risks,
which are considered to be the competitive
market sector and the stability of the infrastructure,
which supports the Group’s products and services.
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 and an approach to
continuous improvements of the operations of
the Group.

Research and Development

The Group capitalised £0.4m (2009 £0.4m) of
development expenditure during the year as an
intangible asset as it sought to become compliant
with Payment Card Industry Data Security
Standards (“PCI DSS”).

Financial Instruments

The financial instruments of the Group are set out
in the notes to the financial statements on pages 46
to 76. Please refer to note 2 for a summary of principal
accounting policies; to note 3 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 17 for
credit risk and loans and other receivables; to note
18 for short-term investments; to note 19 for cash
and cash equivalents and to note 20 for trade and
other payables.

Related party transactions are disclosed in note 25.

Annual General Meeting

The next Annual General Meeting of the Company
will be held at 10:00 on 22 September 2010.
Details of the business to be proposed at the
Annual General Meeting are contained within the
Notice of Meeting, which accompanies this Report.

Directors

Directors' Interests

The current Directors of the Company are
shown on page 19. Peter Reynolds resigned as
Non Executive Chairman on 11 September 2009.
Jim Hennigan resigned as Executive Director on
21 December 2009. 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. Adam Moloney will retire by
rotation and puts himself forward for re-election
at the Annual General Meeting.

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 2010
Ordinary shares
of 0.25 pence each

31 March 2010
Ordinary shares
of 0.25 pence each

1 April 2009
Ordinary shares
of 0.25 pence each

N B Philpot (i)

A P Moloney

C M Batterham

2,752,000

135,000

500,000

2,752,000

135,000

500,000

2,282,000

Notes:
(i) N B Philpot's spouse is the beneficial owner of 80,000 shares which are included above.

Eckoh Annual Report 2010

Directors’ Report
continued...

Directors' Share Options

The Directors' interests in share options are shown in the following table:

Note

At 31 March

Granted in year

Lapsed in year

(number)

At 1 April Exercise price
(pence )

2009
(number)

Earliest date
for exercise

Latest date
for exercise

N B Philpot

A P Moloney

J PHennigan

2010
(numbered)

3,000,000

380,710

337,702

1,000,000

800,000

200,000

1,000,000

250,000

750,000

900,000

100,000

1,000,000

200,000

800,000

34,014

500,000

1,000,000

3,000,000

380,710

337,702

1,000,000

800,000

200,000

250,000

750,000

900,000

100,000

200,000

800,000

34,014

500,000

1,000,000

6.50

7.88

8.75

5.13

8.50

8.75

5.13

7.75

27.06.05

27.06.12

07.10.07

07.10.14

07.10.07

07.10.14

13.09.08

13.09.15

31.07.10

31.07.17

31.07.10

31.07.17

05.03.13

05.03.20

28.02.08

28.02.15

13.09.08

13.09.15

31.07.10

31.07.17

31.07.10

31.07.17

05.03.13

05.03.20

07.03.05

16.11.10

10.75

28.11.05

16.11.10

7.88

8.75

07.10.07

16.11.10

13.09.08

16.11.10

31.07.10

16.11.10

The information contained in this table has been audited. J P Hennigan resigned as a Director on
21 December 2009. His share options can be exercised up until 16 November 2010.

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%.

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 23 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 £2,668 during
the year (2009: £1,380). The business of the Group
does include the support of charities and their fund
raising programmes, but this is operated solely on
a commercial basis.

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 monthly
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 Group 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 2010 the
amount of trade creditors shown in the balance
sheet represents 37 days of average purchases
for the Group (2009: 44 days). The Company
had no trade creditors at 31 March 2010.

Eckoh Annual Report 2010

Directors’ Report
continued...

Statement of Disclosure
of Information to Auditors

As far as the Directors are aware there is no
information relevant to the audit of which the
Company’s auditors are unaware and the
Directors have taken all steps that they ought
to have taken as Directors in order to make
themselves aware of any such relevant information
and to establish that the Company’s auditors
are aware of that information.

Auditors

A resolution to reappoint BDO LLP as auditors
of the Company, and to authorise the Directors
to set their fees will be submitted to the
forthcoming Annual General Meeting.

Shareholder Relations

The Company holds meetings with its major
institutional investors and general presentations
are given covering the interim and preliminary
results. The former Chairman, Peter Reynolds,
and the current Chairman, Christopher Batterham,
have both 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 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 website 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 a going concern.
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.

All Directors have access to the Company's
nominated advisors who give feedback from
shareholders and receive copies of broker
update documents.

By order of the Board:

Adam Moloney
Company Secretary - 18 June 2010

The strategic decisions, such as PCI compliance
and the investment in new technical infrastructure,
are already demonstrating their value and will
ensure that the services provided by Eckoh
remain ahead of those offered by its competitors.

Eckoh Annual Report 2010

Eckoh supports Comic Relief

Eckoh provided a number of services for the charity
including real-time card payment processing,
speech recognition enabled transcription
and call routing

“Eckoh delivered us a diverse range of solutions that not only met all our requirements,
but also reduced our operational costs through the implementation of automated
speech recognition technology.”

Caroline Lien,
Operations Director, Comic Relief

General enquires from the public were routed
through to the Sport Relief contact centre, where
calls were answered by live advisors. The service
gave Comic Relief the functionality to manage
various features, such as the closed times and
related messages. Messages left out of hours
were delivered directly to the contact centre team
to ensure responses could be managed efficiently.

These services are based around two of
Eckoh’s core products: EckohPAY and EckohID.

As part of a wider network, Eckoh provided
the IVR component of Sport Relief’s donation
line, which was promoted during the Sport Relief
Weekend, which took place on Friday 19th March
through to Sunday 21st March 2010. Eckoh’s
scalable call handling platform and sophisticated
technology ensured a significant and robust
network was available for the automated
processing of the donations.

The fundraising kit request line allowed callers to
request a fundraising pack. The service utilised
speech recognition technology to capture name
and address, and data was transferred daily to
Comic Relief for fulfilment.

EckohPAY was successfully used on their behalf to
collect over 38,000 donations totalling over £1.1m
during the Sport Relief weekend in March 2010.

Eckoh Annual Report 2010

Ideal Shopping customers place over a
million orders using Eckoh’s service

Ideal Shopping Direct (ISD), a leading digital retailer, extended its
contract with Eckoh for a further two years until October 2013.

The service was originally launched in
May 2005 for the provision of inbound
telephony. The contract was renewed
in May 2008 and the services extended
to also include advanced speech recognition
and interactive voice response (IVR) solutions
to simplify the product ordering process
and improve customer service. The service
is fully integrated with ISD’s database
ensuring that up-to-date information on
products, stock levels and membership
details are available.

During periods of high demand and agent
availability, callers are given the option of
pressing 2 at anytime to beat the queue by
using the Eckoh automated service. When
100% of agents are utilised all calls switch
to the automated service, which is scalable.

Eckoh also provide the Customer Service line
for ISD. Improvements have been introduced
to allow new customers to register more easily
and provide existing customers access to
detailed information on product tracking.

ISD sells its products to consumers via the
internet and its four television shopping
channels: Ideal World, Ideal Extra, Ideal & More
and Create and Craft - broadcasting to more
than 23 million households in the UK.

The Orderline and Customer Service lines
have provided ISD with the capability to
deliver a much improved customer service.

Eckoh Annual Report 2010

“Customer service is a vital part of our strategy whilst maintaining operational
efficiency and Eckoh have a crucial role to play in helping us to fulfil this. We are
extremely pleased with the services that have been delivered and we’re thrilled to
have extended our relationship with Eckoh and to be able to continue working with
them to extend the automated services for our customers.”

David Peck,
Head of Customer Service, Ideal Shopping Direct

Corporate Governance

Corporate Governance
continued...

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 a Non-executive
Director. The Board has considered the
independence of its Non Executive Chairman,
Christopher Batterham, 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 19.

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 are subject to further ad hoc
review by the Board as triggered by relevant
external factors. Also, 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, now consisting of the two
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.

Eckoh Annual Report 2010

Corporate Governance
continued...

Board Committees

Certain responsibilities are delegated to the Remuneration and Audit Committees. Both committees have
written terms of reference, which define their authorities, duties and membership.

Audit Committee

The Audit Committee is responsible for reviewing the following:
(cid:129) accounting procedures and controls;
(cid:129) financial information published by the Group, including the Annual Report,

Preliminary & Interim Statements and on the Company’s website;

(cid:129) risk management and the effectiveness of the Group’s system of internal financial control;
(cid:129) the terms of reference for the Group’s external valuers; and
(cid:129) the results and effectiveness of the Company’s external audit.

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 full-time 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.

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.

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 against budget,
risk assessment and related internal controls and
forecasts are received, discussed by management
and reported formally to the Board. Informal reviews
take place more frequently.

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.

Remuneration Committee

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.

Directors’ remuneration for the financial year was as follows:

Name

Salary and fees
£’000

Bonus
£’000

Other benefits
£’000

2010 Total
£’000

2009 Total
£’000

C Ansell (i)

C M Batterham (ii)

J P Hennigan (iii)

A P Moloney (iv)

N B Philpot

H R P Reynolds (v)

Total

251

118

207

712

253

131

209

729

194

168

268

703

The information contained in this table has been audited.

Notes:
(i) C Ansell was appointed as a non Executive Director on 7 July 2009.
(ii) CM Batterham was appointed as non Executive Director on 15 July 2009 and further appointed as

Non Executive Chairman on 11 September 2009.

(iii) JP Hennigan resigned as a Director on 21 December 2009. Included within the salary and fees figure

is an amount totalling £163,000 which was paid after the date of his resignation as a director in connection
with a compromise agreement and his contractual 12 month notice period.

(iv) Included within the other benefits paid to A P Moloney is an employer pension contribution of £12,000

(2009: £12,000). There were no other pension costs during the year.

(v) HRP Reynolds formally resigned as Non Executive Chairman and Director on 11 September 2009.
Included within the salary and fees figure is a payment in respect of his contractual 12 month notice
period of £75,000 agreed in June 2009. HRP Reynolds continued in his role as Non Executive Chairman
without further payment from 30 June 2009 until he formally resigned on 11 September 2009.

Gains on the exercise of share options in the year ended 31 March 2010 totalled £nil (2009: £nil).

Eckoh Annual Report 2010

Corporate Governance
continued...

Remuneration and Service Contracts
A thorough review of the remuneration and structure of the Board has taken place during the financial
year resulting in the basic cost of the Board being reduced by 28% from £566,000 to £407,000.
The remuneration of NB Philpot and AP Moloney is determined by the Remuneration Committee.
During the year, independent professional advice has been gained to assist in determining Executive
remuneration. Remuneration Committee considers that both executive Directors are salaried appropriately
and does not propose an increase in salary for either Director. Neither executive Director has been awarded
an increase in salary since April 2007. Both executive directors have service contracts which are terminable
on twelve month’s notice.

Both non-executive Directors have service contracts terminable on six month’s notice.

Bonus Arrangements
There is an annual bonus scheme for executive Directors of up to 60% of salary, payable in cash.
Payments under the bonus scheme in 2009/10 were dependent on the achievement of profits targets
exceeding market expectation. Whilst significant progress has been made in the business during the
year and profits targets have been achieved, bonuses were to be funded from any excess of achievement
above target. As targets were met, but not exceeded, bonus payments have not been awarded in respect
of the year to 31 March 2010 (2009: NB Philpot £59,000; AP Moloney £36,000). Bonus payments in
2010/11 will be based on a series of targets to be set by the Remuneration committee which will
more accurately reward good performance.

Long-term Incentive Arrangements for Directors
1,000,000 share options were granted under the Eckoh plc Share Option Scheme (1999)
on 5 March 2010 to both remaining executive directors. These were the first share option
awards made since July 2007.

The remuneration committee considers that both executive directors are currently insufficiently
incentivised to deliver long term shareholder value, and to ensure that their interests are
comprehensively aligned with shareholders interests, it is intended that a Long Term Incentive Plan
(“LTIP”) will be developed during the coming months which will address the situation.

Nomination Committee

Eckoh has a clear vision and path for future growth and success.

The nomination committee meets at least once a year and is responsible for reviewing the size,
structure and composition of the board and making recommendations to the board if it considers
that any changes are required. It has a formal procedure for appointments to the board.

Eckoh Annual Report 2010

Swine flu information service for the
Department of Health and COI

Eckoh has been working with the Department of Health (DH)
and the Central Office of Information (COI), the Government’s
centre of excellence for marketing and communications,
for over 4 years in their Pandemic Influenza preparedness.

Eckoh were contracted to design, develop
and then host an interactive telephone
information service to deal with a pandemic
situation. The service was designed so that
it could be activated at extremely short
notice and was provided in standby mode
in early 2009.

On the 26 April 2009 the COI/DH requested
that the service go live. Eckoh ensured that
the service was updated with the relevant
information and the service was ready to take
calls that same day. A TV, radio and print media
campaign was organised by the COI/DH to
advertise the number with the first live calls
being taken on the 30 April.

The service allowed callers to obtain information
on swine flu, what to do if you think you had
contracted it, how to prevent contracting it, and
what action the Government was taking. It also
allowed the caller to request an information
leaflet in a variety of languages and accessibility
formats including brail and large type, during
2009 Eckoh handled over fifteen and a half
thousand requests for the leaflets. The caller’s
name and address details were taken
automatically using EckohID, an automated
speech recognition solution for capturing
name and address information.

The service handled over 1 million calls since
its launch with the busiest day on the 14 July,
which saw the service take over 58,000 calls.

Eckoh Annual Report 2010

“A level of service that exceeds our customers' expectations has
always been at the heart of the Enterprise brand and Eckoh continue
to ensure that we provide our customers with a fast, efficient and
easy-to-use branch locator service.”

Parthi Cumarasamy,
IT Director – Europe, Enterprise Rent-A-Car

Driving exceptional customer service with a
speech-enabled branch locator solution

Eckoh successfully renewed its contract with Enterprise Rent-A-Car,
the UK’s leading specialist in personal, business and replacement car
hire, for the provision of Eckoh’s speech-enabled locator service,
EckohLOCATE.

By using EckohLOCATE, Enterprise contact
centre agents are able to focus on more
complex calls and in-store queries whilst
routine and repetitive requests for basic
information are handled by the service.

Based on Eckoh’s specialist speech recognition
software, callers are able to say the name of
a town and EckohLOCATE will identify the
nearest Enterprise branch within a five mile
radius of that location – providing details such
as branch address, opening hours and contact
information as well as the option to connect
through directly to the branch. The Enterprise
National Reservations Number is available 24
hours a day, 7 days a week and, since its
launch in October 2004, has handled more
than 1.5 million call minutes.

In the UK, Enterprise is the sole specialist in
providing replacement vehicles and courtesy
cars, which are relied upon in the event of an
accident. Enterprise, which was established in
the UK in 1994, has rapidly expanded and
currently has over 330 locations across
the UK, with more than 3,000 staff.

Eckoh Annual Report 2010

The Enterprise National Reservations Number
is available 24 hours a day, 7 days a week
and, since its launch in October 2004, has
handled more than 1.5 million call minutes.

Statement of Directors’ Responsibilities

Audit Report for Eckoh plc

The directors are responsible
for reparing the annual report
and the financial statements
in accordance with applicable
law and regulations.

Company law requires the directors to prepare
financial statements for each financial year.
Under that law the directors have elected to
prepare the group financial statements in
accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European
Union and the company financial statements
in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
Under company law the directors must not approve
the financial statements unless they are satisfied
that they give a true and fair view of the state of
affairs of the group and company and of the profit
or loss of the group and company for that period.
The directors are also required to prepare financial
statements in accordance with the rules of the
London Stock Exchange for companies trading
securities on the Alternative Investment Market.

In preparing these financial statements,
the directors are required to:

(cid:129) select suitable accounting policies and then

apply them consistently;

(cid:129) make judgements and accounting estimates

that are reasonable and prudent;

(cid:129) state whether they have been prepared in
accordance with IFRSs as adopted by the
European Union, subject to any material
departures disclosed and explained in the
financial statements;

(cid:129) prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the company will continue in
business.

The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the company and enable them to
ensure that the financial statements comply with
the requirements of the Companies Act 2006.
They are also responsible for safeguarding the
assets of the company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.

Website Publication
The directors are responsible for ensuring the annual report and the financial statements are made
available on a website. Financial statements are published on the company'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 company's
website is the responsibility of the directors. The directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.

Independent Auditor’s Report to
The Members of Eckoh plc

Respective Responsibilities of Directors
and Auditors

We have audited the financial statements of
Eckoh plc for the year ended 31 March 2010
which comprise the consolidated statement
of comprehensive income, statement of financial
position, statement of changes in equity, statement
of cash flow, and the related notes. The financial
reporting framework that has been applied in the
preparation of the group financial statements is
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has
been applied in the preparation of the parent
company financial statements is applicable law
and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state
to the company’s members those matters we are
required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility
to anyone other than the company and the
company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.

As explained more fully in the statement of directors’
responsibilities, the directors are responsible for
the preparation of the financial statements and
for being satisfied that they give a true and fair view.
Our responsibility is to audit the financial statements
in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards
for Auditors.

Scope of the Audit of the Financial Statements

An audit involves obtaining evidence about the
amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the
financial statements are free from material
misstatement, whether caused by fraud or error.
This includes an assessment of: whether the
accounting policies are appropriate to the group’s
and the parent company’s circumstances and have
been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates
made by the directors; and the overall presentation
of the financial statements.

Eckoh Annual Report 2010

Audit Report for Eckoh plc
continued...

Consolidated Financial Statements

Opinion on Financial Statements

In our opinion:

(cid:129) the financial statements give a true and fair

view of the state of the group’s and the parent
company’s affairs as at 31 March 2010 and
of the group’s loss for the year then ended;

(cid:129) the group financial statements have been

properly prepared in accordance with IFRSs
as adopted by the European Union;

(cid:129) the parent company’s financial statements

have been properly prepared in accordance with
United Kingdom Generally Accepted
Accounting Practice; and

(cid:129) the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.

Opinion on other matters prescribed by
the Companies Act 2006

In our opinion the information given in the directors’
report for the financial year for which the financial
statements are prepared is consistent with the
financial statements.

Matters on which we are required to report
by exception

We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us
to report to you if, in our opinion:

(cid:129) adequate accounting records have not been kept
by the parent company, or returns adequate for
our audit have not been received from branches
not visited by us; or

(cid:129) the parent company financial statements are
not in agreement with the accounting records
and returns; or

(cid:129) certain disclosures of directors’ remuneration

specified by law are not made; or

(cid:129) we have not received all the information and

explanations we require for our audit.

Richard Kelly (senior statutory auditor)
For and on behalf of BDO LLP,
statutory auditor
Hatfield
United Kingdom
18 June 2010

BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).

Consolidated Statement of Comprehensive Income
for the year ended 31 March 2010

Continuing operations

Revenue

Cost of sales

Gross profit

Administrative expenses before non-recurring items

French office closure costs

Employee restructuring

EGM costs

Legal settlement

Aborted transaction costs

Total Administrative expenses

Loss from operating activities

Finance income

Finance expense

Loss before taxation

Taxation

Loss for the year from continuing operations

Discontinued operations

Notes

4,6

4,9

2010
£’000

7,923

(2,226)

5,697

(5,578)

(286)

(306)

(61)

(6,231)

(534)

340

(3)

(197)

2009
£’000

6,674

(2,395)

4,279

(5,223)

(16)

(627)

(168)

(6,034)

(1,755)

382

(1,373)

Post tax profit for the year from discontinued operations

495

Loss for the year attributable to the equity holders
of the parent company

Other comprehensive income

Exchange differences on translating foreign operations

Total comprehensive expense for the year attributable
to the equity holders of the parent company

Loss per share (pence)

Basic and diluted

Loss per share from continuing (pence)

Basic and diluted

(118)

(8)

(878)

(20)

(126)

(898)

(0.06)

(0.44)

(0.10)

(0.36)

Eckoh Annual Report 2010

Consolidated Financial Statements
continued...

Consolidated Statement of Financial Position
as at 31 March 2010

Consolidated Statement of Changes in Equity
as at 31 March 2010

Notes

13
14
17

16
17
18
19
28

20
21
28

Assets

Non-current assets
Intangible assets
Property, plant and equipment
Loans and other receivables

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
Obligations under finance leases
Liabilities directly associated with assets held for sale

Non-current liabilities
Provisions

Net assets

Shareholders’ equity
Share capital
Capital redemption reserve
Share premium
Currency reserve
Retained earnings
Total shareholders’ equity

(1,651)
(1)
(1,504)
(3,156)

(320)
(320)

8,536

499
198
695
(55)
7,199
8,536

(3,812)
(3)
-
(3,815)

(79)
(79)

8,618

499
198
695
(47)
7,273
8,618

The financial statements on pages 43 to 76 were approved by the Board of Directors on 18 June 2010
and signed on its behalf by:

Adam Moloney – Group Finance Director

Eckoh Annual Report 2010

2010
£’000

599
1,160
2,925
4,684

5
2,490
1,821
2,067
945
7,328

2009
£’000

376
714
1,700
2,790

4
4,476
2,821
2,421
-
9,722

Capital

Capital
redemption
reserve

premium

Retained Currency
reserve
earnings

Total
shareholders
equity

£’000

Balance at 1 April 2008

Total comprehensive expense for period

Share based payment charge

Balance at 31 March 2009

Balance at 1 April 2009

Total comprehensive expense for period

Share based payment charge

Balance at 31 March 2010

499

198

695

198

695

198

695

8,097

(878)

7,273

(118)

7,199

(27)

(20)

(47)

(8)

(55)

9,462

(898)

8,618

(126)

8,536

12,012

12,512

Consolidated Statement of Cash Flows
for the year ended 31 March 2010

Notes

Cash flows from operating activities
Cash utilised in operations
Interest paid
Taxation
Net cash utilised in operating activities

Cash flows from investing activities
Purchase of property, plant and equipment
Purchases of intangible fixed assets
Decrease / (Increase) in short-term investments
Loans repaid by third parties
Interest received
Net proceeds on disposal of business operations
Net cash generated / (utilised) in investing activities

Cash flows from financing activities
Capital element of finance lease rental payments
Net cash utilised in financing activities

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

19
19

2010
£’000

(979)
(3)
-
(982)

(1,003)
(380)
1,000
-
396
617
630

(2)
(2)

(354)
2,421
2,067

2009
£’000

(2,836)
-
(45)
(2,881)

(443)
(383)
(1,291)
500
382
1,234
(1)

(4)
(4)

(2,886)
5,307
2,421

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

1. Basis of preparation

The consolidated financial statements of Eckoh plc have been prepared in accordance with International
Financial Reporting Standards (“IFRS”). 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 2010 as endorsed by the EU.

In the current year the Group has adopted Amendment to IAS 23 "Borrowing Costs", Amendment to IFRS 2
"Share-based Payment: Vesting Conditions and Cancellations", Amendments to IAS 1 "Presentation of
Financial Statements: A Revised Presentation", Amendments to IAS 32 and IAS 1 "Puttable Financial
Instruments and Obligations Arising on Liquidation", Amendments to IFRS 1 and IAS 27 "Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or Associate", IAS 39 and IFRS 7 (Amendments)
"Reclassification of Financial Instruments", Amendment to IFRS 7 "Improving Disclosures about Financial
Instruments", IFRIC 13 "Customer Loyalty Programmes", IFRIC 15 "Agreements for the Construction of
Real Estate" and IFRIC 16 "Hedges of a Net Investment in a Foreign Operation".

IFRS 8 “Operating Segments” is mandatory for periods beginning on or after 1 January 2009. However,
the Group elected to apply the standard early in its financial statements for the year ended 31 March 2009.

None of these have had a material impact on the results or financial position of the Group. At the year-end,
the following standards and interpretations, which have not been applied in these financial statements,
were in issue but not yet effective:

(cid:129) Revised IAS 24 "Related Party Disclosures"
(cid:129) IAS 27 (amended) "Consolidated and Separate Financial Statements"
(cid:129) IAS 39 (amended) "Financial Instruments: Recognition and Measurement - Eligible Hedged Items"
(cid:129) IFRS 1 (Revised) "First Time Adoption of International Financial Reporting Standards"
(cid:129) IFRS 3 (revised) "Business Combinations"
(cid:129) IFRS 9 "Financial Instruments"
(cid:129) Amendment to IAS 32 "Financial Instruments: Presentation: Classification of Rights Issues"
(cid:129) Amendments to IFRS 2 "Group Cash-settled Share Based Payment Transactions"
(cid:129) Amendments to IFRIC 9 and IAS 39 "Embedded Derivatives"
(cid:129) Amendments to IFRIC 14 "IAS 19 - Limit on a Defined Benefit Asset, Minimum Funding Requirements

and their Interaction"

(cid:129) IFRIC 17 "Distribution of non-cash Assets to Owners".
(cid:129) IFRIC 18 "Transfers of Assets from Customers"
(cid:129) IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments"

The directors’ review newly issued standards and interpretations in order to assess the impact on the
financial statements of the Group in future periods.

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 2010.

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 consolidated financial statements are presented in Pounds Sterling, which is the company's
functional currency. All financial information presented has been rounded to the nearest one thousand.

The principal accounting policies, which have been consistently applied, are described below.

2. 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 13
note 17
note 22
note 23

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 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.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

Intangible 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 not amortised and is reviewed for impairment at least annually. Any impairment
is recognised in the period in which it is indentified.

(b) Intangible assets

Intangible 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 assets is assessed for each acquisition as it arises, and is generally assumed to be
three years.

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 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
minimum duration of the commercial contract that they arose from. In the absence of a specific
commercial contract the capitalised development costs are amortised over the estimated useful
life of the asset, which is generally assumed to be three years.

Amortisation is charged to administrative expenses in the income statement.

The carrying value of intangible 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:

Fixtures and equipment – between 3 and 5 years
Leasehold improvements – over the term of the lease

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 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.

(a) Available-for-sale investments

are non-derivative financial assets that are either designated in this catgory 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.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

Financial assets continued...

Gains and losses arising from investments classified as available-for-sale are recognised in the income
statement when they are sold or when the investment is impaired.

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.

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 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 investments
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. Credit and liquidity risk management
is described in note 3.

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 less losses and distributions.

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.

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.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

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.

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.

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.

(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.

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 (see separate policy).

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.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

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.

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 and acceptance 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 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
out-payments due to clients, production costs and
facility costs, and is expensed in the accounting
period in which the related revenues are generated.

Non-recurring items
The Group presents as non-recurring items on the
face of the income statement those material items
of expenditure which because of their nature and/
or expected infrequency of the events giving rise
to them, merit separate presentation to allow
shareholder to understand the elements of
financial performance in the period, so as to
facilitate comparison with prior periods.

Finance fee income
Finance fee income is credited to the income
statement over the term of the loan so that the
amount credited is at a constant rate on the
carrying amount of the receivable.

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.

Non-current assets held for sale and disposal groups
Non-current assets and disposal groups are classified as held for sale when:

(cid:129) They are available for immediate sale;
(cid:129) Management is committed to a plan to sell;
(cid:129) It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;
(cid:129) An active programme to locate a buyer has been initiated;
(cid:129) The asset or disposal group is being marketed at a reasonable price in relation to its fair value; and
(cid:129) A sale is expected to complete within 12 months from the date of classification.

Non-current assets and disposal groups classified as held for sale are measured at the lower of:

(cid:129) Their carrying amount immediately prior to being classified as held for sale in accordance with

the group’s accounting policy; and

(cid:129) Fair value less costs to sell.

Following their classification as held for sale, non-current assets (including those in a disposal group)
are not depreciated.

The results of operations disposed during the year are included in the consolidated statement of
comprehensive income up to the date of disposal.

A discontinued operation is a component of the Group’s business that represents a separate major
line of business or geographical area of operations or is a subsidiary acquired exclusively with a view
to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified
as held for sale.

Discontinued operations are presented in the consolidated statement of comprehensive income
(including the comparative period) as a single line which comprises the post tax profit or loss of the
discontinued operation and the post-tax gain or loss recognised on the re-measurement to fair value
less costs to sell or on disposal of the assets/disposal groups constituting discontinued operations.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

3. 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 banks or building societies
that can demonstrate governmental support,
to ensure that funds are available to meet
current and future operating requirements.

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 Redstone plc 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.

2% decrease
in interest rates

£’000

2% increase
in interest rates
£’000

(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

(57)

(21)

(78)

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 17.

Categories of financial assets and financial liabilities

Current financial assets

Trade receivables (note 17)

Other receivables (note 17)

Loans and receivables (note 17)

Short-term investments (note 18)

Cash and cash equivalents (note 19)

Total current financial assets

Non-current financial assets

Loans and receivables (note 17)

Total non-current financial assets

Total financial assets

Loans and receivables

2010

£’000

1,217

1,821

2,067

5,152

2,925

8,077

2009

£’000

1,020

1,620

2,821

2,421

7,909

1,700

9,609

Financial liabilities
All financial liabilities held by the Group are measured at amortised cost and comprise trade payables
of £501,000 (2009: £1,980,000), other payables of £302,000 (2009: £27,000) and obligations under
finance leases of £1,000 (2009: £3,000). See notes 20 and 21 for further details.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

4. Segment analysis

5. Loss from operating activities

Following the post year end disposal of the Client IVR business, the Group’s continuing operations represents
a single integrated business with only one reportable segment. In addition, there are no material foreign entities
and revenue is derived entirely from the UK therefore segmental information by geographical area is therefore
not presented. This analysis reflects the way that financial information is reported internally within the Group.
The statement of financial position is not split by segment for internal reporting purposes. Continuing operations
in the table below are represented by the Speech Solutions division with discontinued operations represented
by the Client IVR division.

2010

Revenue

Gross profit

Administrative expenses

Net interest receivable

(Loss)/profit before taxation

Taxation

(Loss)/profit after taxation

2009

Revenue

Gross profit

Administrative expenses

Net interest receivable

(Loss)/profit before taxation

Taxation

Post tax gain from disposal
of operations

(Loss)/profit after taxation

Continuing
operations
£’000

Discontinued
operations
£’000

7,923

5,697

(6,231)

337

(197)

(118)

8,769

1,227

(1,206)

Continuing
operations
£’000

Discontinued
operations
£’000

6,674

4,279

(6,034)

382

(1,373)

12,435

1,890

(1,272)

669

(45)

(129)

495

Total

£’000

16,692

6,924

(7,437)

395

(118)

Total

£’000

19,109

6,169

(7,306)

433

(704)

(45)

(129)

(878)

In 2009/10, there were two customers which individually accounted for more than 10% of the total revenue
of the continuing operations of the company (2008/9: three customers). Revenue from these customers in
2009/10 totalled £2,550,000 (2008/9: £3,380,000).

The Group’s operating loss is arrived at after charging:

Employee benefits expense (note 7)

Depreciation (note 14)

Amortisation (note 13)

Operating lease payments - property

Office closure costs (note 6)

Restructuring costs (note 6)

EGM costs (note 6)

Litigation costs (note 6)

Aborted corporate transaction costs (note 6)

Property reorganisation costs

6. Non-recurring items

2010
£’000

3,242

529

157

464

286

306

2009
£’000

3,034

474

121

501

627

168

131

During the year ended 31 March 2010, the Board took decisions for the long term benefit of the Group which
resulted in non recurring items of expenditure. The largest item arose from costs relating to the closure of the
Eckoh France SAS subsidiary. Due to increased costs arising from the unfavourable exchange movement
against the Euro, the company will close with effect from 30 June 2010, and a full provision has been made in
the 2009/10 financial year to cover the estimated costs relating to the closure. The total cost of closure during
the year amounted to £286,000 largely represented by the costs of the employee severance agreements.

On 21 July 2009, the Group’s largest shareholder requisitioned a General Meeting to remove the Chairman,
Peter Reynolds, who had already announced his resignation on 16 July 2009. They also sought to appoint
Mr John Samuel as Chairman and Director of the Group. All resolutions proposed were rejected at the
Meeting held on 4 September 2009 but the meeting resulted in costs arising of £61,000.

Also included within exceptional costs were severance costs of Directors, Jim Hennigan and Peter Reynolds
as well as another employee who was made redundant during the year. These costs totalled £306,000 during
the year ended 31 March 2010.

During the year ended 31 March 2009, the Group incurred some non recurring items of expenditure.
The largest item was £627,000 relating to the final settlement of a claim made by Channel Four Television
Corporation in relation to the “Richard and Judy” programme. There were also £168,000 of aborted
corporate transaction costs and £16,000 of employee restructuring costs.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

7. Employee benefits expense

9. Finance income

Wages and salaries

Less: Internal development costs capitalised in the year

Amortisation of internal development costs

Social security costs

Pension costs

Share based payments

2010
£’000

3,019

(267)

144

296

3,242

2009
£’000

2,972

(326)

300

3,034

Continuing operations

Bank interest receivable

Interest receivable on loans and other receivables

Arrangement fees on loans

Discontinued operations

Interest receivable on loans and other receivables (note 11)

2010
£’000

238

340

398

2009
£’000

247

135

382

433

The Directors’ report on page 20 provides further details on the Directors’ emoluments. The average
number of people (including executive directors) employed by the Group during the year was:

During the year ended 31 March 2010, the terms of a loan of £2,700,000 outstanding from
Redstone plc were renegotiated.

The key terms of the renegotiated loan are as follows:

(cid:129) £1,000,000 is repayable on 1 October 2011
and the balance of £1,700,000 is repayable
on 1 October 2012

(cid:129) Interest is payable monthly in arrears at
2% over the Bank of England base rate
(cid:129) Eckoh will be granted security which will
be subordinated to Barclays Bank PLC
and the holders of the Loan Note

Eckoh will receive arrangement fees totalling
£530,000 as a result of agreeing these revised
terms. Of this, £305,000 has been paid with
a final payment of £225,000 due when full
repayment of the loan is made in October 2012.
In accordance with the accounting policy,
£350,000 of the arrangement fee will be
recognised in the income statement across
the remaining term of the loan.

2010
Number

2009
Number

Technical support

Customer services

Administration and management

8. Auditor remuneration

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 aborted transaction due diligence

Taxation services

Total fees payable to the Group’s auditor

2010
£’000

The fees payable for the audit of the parent company and consolidated accounts are borne
by a subsidiary undertaking.

2009
£’000

123

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

10. Taxation

Continuing operations

Current tax

Deferred tax

Taxation

2010
£’000

The tax charge for the year is different to the standard rate of corporation tax in the UK (28%).
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 28% (2009: 28%)

Effect of expenses not deductible for tax purposes

Effect of capital allowances in excess of depreciation

Effect of income not chargeable to tax

(Utilisation of) / unutilised tax losses

Current tax charge for the year

2010
£’000

(197)

(55)

148

(131)

2009
£’000

(718)

(201)

(12)

199

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 £6,444,000 (2009: £6,597,000) in respect of trading losses and £8,768,700 (2009: £8,768,700)
in respect of capital losses of which £6,277,000 (2009: £6,277,000) are restricted. In addition, there are other
temporary timing differences resulting in unprovided deferred tax assets of £616,000 (2009: £456,000).

11. Post tax profit for the year from discontinued operations

Discontinued operations relate to the Client IVR division of Eckoh UK Limited and three trading
divisions of Eckoh Projects Limited (formerly Connection Makers Limited), a wholly owned subsidiary.

On 28 May 2010, the Company announced that it had reached agreement to sell the Client IVR
division of Eckoh UK Limited to Telecom Express Limited in return for 27.5% of the issued share
capital of Telecom Express Limited. The Board decided that it wished to focus efforts on the growth
of the Speech Solutions business and that the Client IVR division would have a greater opportunity
for future success if it were to become part of a larger business.

The loss on discontinued operations relates to the disposal of the three trading divisions of
Eckoh Projects Limited in the year ended 31 March 2008 and can be detailed as follows:

Profit from disposal of operations

Consideration:

Deferred cash

Cash consideration

Discounting on deferred cash

Net consideration received

Pre and post-tax loss from the disposal of operations

2010
£’000

(30)

No cash or cash equivalents was disposed of with the sale of these operations (2009: £nil).

Trading result of discontinued operations

Revenue

Cost of Sales

Gross Profit

Administrative expenses

Interest receivable

Profit before taxation

Taxation

Post-tax profit for the year from discontinued operations

Post-tax loss from the disposal of operations

2010
£’000

8,769

(7,542)

1,227

(1,206)

2009
£’000

(150)

(129)

2009
£’000

12,435

(10,545)

1,890

(1,272)

669

(45)

624

(129)

495

Basic and diluted earnings per share (note 12)

0.04 pence

0.25 pence

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

11. Post tax profit for the year from discontinued operations continued

13. Intangible assets

The taxation charge in the year ended 31 March 2009 is an adjustment in respect of the prior year.

The cash flow statement includes the following amounts relating to discontinued operations from
the sale of the Client IVR division:

Operating activities

Investing activities

Net cash utilised in discontinued operations

12. Earnings per share

2010
£’000

(502)

(28)

(530)

2009
£’000

(1,689)

Basic earnings per ordinary share is calculated on the basis of the weighted average number of ordinary
shares of 199,688,710 (2009: 199,688,710) in issue during the year ended 31 March 2010 after
adjusting for shares held by the Employee Share Ownership Plan of 70,866 (2009: 70,866) and the
loss for the period attributable to equity holders of the parent of £126,000 (2009: loss of £898,000).

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 23. The dilutive effect of potential
ordinary shares outstanding at the end of the year is 2,000 (2009: nil).

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

2010
‘000

199,760

(71)

199,689

2009
‘000

199,760

(71)

199,689

Number of shares used in calculating diluted earnings per share

199,691

199,689

Group

Cost

At 1 April 2008

Additions

At 31 March 2009

Additions

At 31 March 2010

Amortisation

At 1 April 2008

Charge for the year

At 31 March 2009

Charge for the year

At 31 March 2010

Carrying amount

At 31 March 2010

At 31 March 2009

Internally
developed
computer
software

Other
intangible
assets

£’000

470

381

851

380

1,231

359

119

478

156

634

597

373

Goodwill

£’000

15,922

Total

£’000

16,410

383

16,793

380

17,173

16,296

121

16,417

157

16,574

599

376

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

14. Property, plant and equipment

Cost
At 1 April 2008

Additions

Disposals

At 31 March 2009

Additions

Disposals

Transfer to assets held for sale

At 31 March 2010

Depreciation

At 1 April 2008

Charge for the year

Disposals

At 31 March 2009

Charge for the year

Disposals

Transfer to assets held for sale

At 31 March 2010

Carrying amount

At 31 March 2010

At 31 March 2009

Fixtures and equipment
£’000
4,918

443

(291)

5,070

1,003

(29)

(30)

6,014

4,175

474

(293)

4,356

529

(29)

(2)

4,854

1,160

714

The carrying amount of property, plant and equipment includes £nil (2009: £3,000) in respect of assets
held under finance lease contracts. The depreciation charge in respect of assets held under finance
lease was £3,000 (2009: £4,000).

15. 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

England and Wales

Eckoh France SAS

France

Speech Solutions
and Client IVR

100%

100% (i)

Eckoh Enterprises LBG

England and Wales

Dormant

67% & 33% (i)

Eckoh Projects Limited

England and Wales

Non trading

Avorta Limited

England and Wales

Eckoh Technologies Limited

England and Wales

Intelliplus Group Limited

England and Wales

Intelliplus Limited

England and Wales

Medius Networks Limited

England and Wales

Telford Projects Limited

England and Wales

Swwwoosh Limited

England and Wales

365 Isle of Man Limited

Isle of Man

Dormant

Non Trading

Dormant

(i) Share capital held by a subsidiary undertaking.

100%

100% (i)

100%

100% (i)

100%

100% (i)

All companies have March year-ends. All trading companies operate principally in their country of incorporation.

16. Inventories

Work in progress

2010
£’000

2009
£’000

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

17. Trade and other receivables

Current

Trade receivables

Less: provision for impairment of receivables

Net trade receivables

Loans and receivables

Other receivables

Prepayments and accrued income

Non-current

Loans and receivables (note 28)

2010

£’000

1,336

(72)

1,264

1,181

2,490

2,925

2009

£’000

1,051

(31)

1,020

1,620

1,809

4,476

1,700

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 working capital
practices of the market sector and the Group;
and 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 current customer base limits
exposure to credit risk. At 31 March 2010, trade
receivables that are past due but not impaired
represent £19,000 or 1.5% of the total trade
receivables (2009: £158,000 or 15.0%). The past
due balance of £19,000 represents receivables
that are between 60 and 90 days past due (2009:

£158,000 60 to 90 days past due). Management
believe that the current provision for the impairment
of receivables need not be increased on the basis
of their historic experience and current knowledge
of customers and amounts due. The movement on
the provision in the year relates to the impairment of
an £41,000 receivable from ACP Retail Limited who
have entered into administration (2009: impairment
of £5,000 due to an impaired receivable).

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. Since the
commencement of the loan £2,000,000 of capital
repayments have been made. However, no capital
repayments were received during the year ended 31

March 2010 (2009: £500,000). In September 2009
it was agreed that the loan should be transferred to
the acquirer of Symphony, Redstone plc (“Redstone”)
and repayment of the remaining capital amount of
£2,700,000 could be deferred to be repaid in two
instalments, of £1,000,000 in October 2011 and
£1,700,000 in October 2012. As part of the
agreement, arrangement fees totalling £530,000
were agreed. £180,000 was paid in July 2009 and
recognised in full during the 2009/10 financial year.
The remaining fee of £350,000 is to be paid in
two instalments with the first received in September
2009 of £125,000 and the final instalment of
£225,000 to be paid with the final capital payment
in October 2012.

(2009: £1,700,000) is reported within other
receivables due after one year. The loan now bears
interest at 2% above the Bank of England base rate
and interest is payable monthly in arrears. The loan
is secured on the assets of Redstone. Interest
receivable and arrangements fees from the loan
recognised during the year ended 31 March 2010
amounted to £304,000 (2009: £135,000). The
effective rate of interest is 2.08% (2009: 4.54%).

Included within loans and receivables as at 31 March
2009 is consideration paid for the Connection Makers
TV and Chat divisions totalling £nil (2009: £456,000).
£nil (2009: £456,000) is recognised within loans
and receivables falling due within one year. These
receivables were discounted at 10%.

As at 31 March 2009, the balance on the loan to
Redstone totals £2,927,000 (2009: £2,722,000).

£2,000 (2009: £1,022,000) is reported within other
receivables due within one year and £2,925,000

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.

18. Short-term investments

Sterling

Fixed rate
Floating rate

2010
£’000
1,821
1,821

1,504
317
1,821

2009
£’000
2,821
2,821

2,504
317
2,821

Of the amount presented within short-term investments, £316,600 (2009: £316,600) 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 4 months
(2009: 3 months). The average interest rate on short-term deposits during the year was 1.49% (2009: 4.95%).

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

19. Cash and cash equivalents

21. Obligations under finance leases

Sterling

Euro

Floating rate

2010
£’000

2,027

2,067

2009
£’000

2,409

2,421

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 0.47% (2009: 4.13%).

The Group’s financial risk management is disclosed in note 3.

20. Trade and other payables

Trade payables

Other payables

Other taxation and social security

Accruals and deferred income

2010
£’000

501

302

375

473

1,651

2009
£’000

1,980

447

1,358

3,812

All of the amounts above are payable within one year and are less than three months old at the year end
(2009: £48,000 of the payable balance was more than three months old at the year end).

The Group’s exposure to liquidity risk is disclosed in note 3.

2010

2009
Minimum lease Present value of Minimum lease
minimum lease
payments

payments

2010

2009
Present value of
minimum lease
payments

£’000

Amounts payable under
finance leases:

Within 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

22. Provisions

At 1 April 2009

Provided in year

Utilisation in year

At 31 March 2010

Provision for
Dilapidations

French office
closure

£’000

(39)

£’000

280

Total

£’000

280

(39)

320

The dilapidation provision will not be payable until the end of the lease on the Group’s Telford House offices
in 2015. £39,000 of the prior year provision was utilised on termination of the lease relating to premises in
Dudley, West Midlands.

The Group is committed to closing the office of Eckoh France SA (see note 6). The provision of £280,000
is to cover the estimated costs of employee redundancy and associated premises and legal costs.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

23. 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 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.

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 (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)

31 Jul 2007
8.50
8.75
21
4,525,000
3
43%
10
3
5.49%
-
2.89

5 March 2010
5.0
5.13
21
4,500,000
3
43%
10
3
2.83%
-
1.56

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
2010 is shown below:

2010

2009

Number of Weighted average
exercise price

share options

Number of Weighted average
exercise price

share options

Outstanding at 1 April

Granted

Forfeited

13,292,637

4,500,000

(357,970)

Outstanding at 31 March

17,434,667

Exercisable at 31 March

8,634,667

8.24

5.13

9.27

6.09

7.94

14,902,250

(1,609,613)

13,292,637

8,767,637

8.32

9.04

8.24

7.97

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

23. Share based payment continued

Directors and key management includes the staff costs of the Directors’ and the Management Team.

Range of Weighted Number
average of shares
exercise
exercise
prices
(000’s)
price
(pence)
(pence)

4.5-6.5

6.5-8.5

8.5-10.5

10.5-12.5

16.5-20.0

5.13

7.32

8.75

10.75

16.75

4,500

6,054

6,050

830

2010

Weighted average remaining life

Expected

Contractual Weighted Number
average of shares
exercise
(000’s)
price
(pence)

2009

Weighted average remaining life

Expected

Contractual

2.9

9.9

3.1

6.8

2.7

1.2

7.34

8.75

10.75

19.85

6,167

6,275

830

0.8

4.2

7.8

3.7

0.2

The total charge for the year relating to employee share based payment plans was £44,000
(2009: £54,000) all of which related to equity-settled share based payment transactions.

24. 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.

25. 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
(cid:129) Intelliplus Limited
(cid:129) Medius Networks Limited

Each subsidiary is 100% owned by the Eckoh Group
and is considered to be a related party.

Eckoh Annual Report 2010

JP Hennigan resigned as a Director on 21 December
2009. Included within the salary and fees figure
is an amount totalling £163,000 which was paid
after the date of his resignation as a director in
connection with a compromise agreement and his
contractual 12 month notice period. HRP Reynolds
formally resigned as Non Executive Chairman and
Director on 11 September 2009. Included within
the salary and fees figure is a payment in respect of
his contractual 12 month notice period of £75,000
agreed in June 2009. HRP Reynolds continued in
his role as Non Executive Chairman without further
payment from 30 June 2009 until he formally
resigned on 11 September 2009.

Directors and other key management

Wages and salaries

Social security costs

Pension costs

Share based payments

2010

£’000

899

120

2009

£’000

890

132

1,066

1,077

The aggregate Directors’ emoluments are shown in the table below. An analysis of Directors’ emoluments
is included in the Directors’ Report on page 20.

Directors’

Aggregate emoluments

2010

£’000

729

26. 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

2010
£’000

487

865

1,352

2009

£’000

703

2009
£’000

397

504

980

The principal property under operating lease is the Group’s head office in Hemel Hempstead for which the
annual operating lease charge is £103,000. The term of the lease covers the period to 21 March 2015.

The Group also have an operating lease for a data centre in Heathrow, London at which some of its call processing
platform is located. The term of the lease covers the period to July 2012 at a cost of £384,000 per annum.

Eckoh Annual Report 2010

Notes to the Financial Statements
for the year ended 31March 2010 continued...

Company Financial Statements
Prepared under UK GAAP

27. Cash flow from operating activities

Company balance sheet as at 31 March 2010

Cash flows from operating activities
Loss after taxation

Loss on disposal of business operations

Interest income

Interest paid

Taxation recognised in income statement

Depreciation of property, plant and equipment

Amortisation of intangible assets

Share based payments

Exchange differences

Operating profit / (loss) before changes in working capital and provisions

(Increase) / decrease in inventories

(Increase) / decrease in trade and other receivables

Decrease in trade and other payables

Increase in provisions

Net cash utilised in operating activities

28. Assets held for sale

Further disclosure on the assets held for sale can be found in note 11.

Net book value of property, plant and equipment

Current Assets
Net trade receivables
Other receivables
Prepayments and accrued income
Total Assets held for sale

Current Liabilities
Trade payables
Other payables
Accruals and deferred income
Total liabilities directly associated with assets held for sale

2010
£’000

(118)

(398)

529

157

(8)

239

(1)

(801)

(657)

241

(979)

2010
£’000

78
832
7
945

702
18
784
1,504

2009
£’000

(878)

129

(433)

474

121

(20)

(508)

1,687

(4,086)

(2,836)

2009
£’000

-
-
-
-

Company number: 3435822

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

iii

vii,viii

viii

2010

£’000

5,043

2,927

1,503

1,144

5,607

(301)

5,306

10,349

499

198

695
209

8,748

10,349

2009

£’000

5,451

1,240

1,700

2,504

2,071

7,515

(10)

7,505

12,956

499

198

695

209

11,355

12,956

The financial statements on pages 77 to 82 were approved and authorized for issue by the Board of Directors
on 18 June 2010 and signed on its behalf by:

Adam Moloney
Group Finance Director

Eckoh Annual Report 2010

Notes to the Company’s Financial Statements
For the year ended 31 March 2010

Notes to the Company’s Financial Statements
For the year ended 31 March 2010 continued...

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 2006 and applicable
Accounting Standards in the United Kingdom.

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 shares 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 22.

i. Operating expenses

Staff costs
Details of the Directors’ emoluments are given in the Directors’ Report on page 8. The Director’s
remuneration costs are borne by a subsidiary undertaking. The Company did not incur any staff
costs during the year (2009: £nil). The average number of employees employed by the company
during the year was 4 (2009: 4).

Services provided by the Group’s auditor
Fees payable for the audit of the parent company and consolidated accounts of £25,000
(2009: £25,000) were borne by a subsidiary undertaking.

ii. Fixed asset investments

Cost

At 1 April 2009

Additions

Impairment

At 31 March 2010

31 March
2010
£’000

5,451

(452)

5,043

Following final payment arising from the disposal of the Chat and Television business divisions and write
off of inter-company debt during the year ended 31 March 2010, an impairment charge of £452,000 was
recognised in respect of the investment in Eckoh Projects Limited.

Eckoh Annual Report 2010

Notes to the Company’s Financial Statements
For the year ended 31 March 2010 continued...

Additions in the year represent the accounting charge for share options issued by the parent
company to employees of subsidiary undertakings.

iv. Creditors: amounts falling due within one year

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

England and Wales

Eckoh France SAS

France

Speech Solutions
and Client IVR

Eckoh Projects Limited

England and Wales

IVR Services

100%

100%*

100%

* 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

31 March
2010

£’000

2,925

31 March
2009

£’000

1,048

181

1,240

1,700

The amounts due after more than one year relate to amounts due from Redstone plc
(see note 17 of the consolidated financial statements).

Other creditors

v. Provisions for liabilities and charges

Total unprovided deferred tax assets are as follows:
Tax losses available
Unprovided deferred tax asset

31 March
2010

31 March
2009

£’000
301
301

2010
£’000

1,382
1,382

£’000
10
10

2009
£’000

767
767

No deferred tax asset has been recognised on the grounds that there is insufficient evidence that
the asset will be recoverable.

vi. Loss of Holding Company

The Directors have taken advantage of the exemption available under section 408 of the Companies Act 2006
and have not presented a profit and loss account for the Company alone. During the year ended 31 March
2010 the Company made a loss of £2,647,000 (2009: £4,328,000).

Eckoh Annual Report 2010

Notes to the Company’s Financial Statements
For the year ended 31 March 2010 continued...

Shareholder information

vii. Share capital

Allotted, called up and fully paid

Date of issue and share type

Number of shares

Nominal value
£’000

Ordinary shares of 0.25p each

As at 1 April 2009

As at 31 March 2010

viii. Share capital and reserves

199,688,710

499

Share
capital

Capital
redemption
reserve

Share
premium
account

Share
based
payment

Profit and
loss
account

£’000

499

£’000

198

£’000

695

£’000

209

£’000

11,351

(2,647)

8,748

Balance at 1 April 2009

Loss for the year

Share option charge

Balance at 31 March 2010

ix. Share options and share based payments

Shareholder information

Dealings permitted on Alternative Investment
Market (AIM) of the London Stock Exchange.

Directors and Company Secretary

C.M. Batterham
Non-executive Chairman

C. Ansell
Non-executive Director

N.B. Philpot
Chief Executive Officer

A.P. Moloney
Group Finance Director
and Company Secretary

Registered Office
Eckoh plc
Telford House
Corner Hall
Hemel Hempstead
Hertfordshire, HP3 9HN

www.eckoh.com

Share options and share based payments are disclosed in note 25 to the consolidated financial statements.

Registered in England and Wales,
Company number 3435822.

Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU

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

Auditor
BDO LLP
Prospect Place
85 Great North Road
Hatfield
Hertfordshire, AL9 5BS

x. Related party transactions

The Company has taken advantage of the exemption conferred by FRS 8 that transactions between
wholly owned Group companies do not need to be disclosed.

JP Hennigan resigned as a Director on 21 December 2009. Included within the salary and fees figure is an
amount totalling £163,000 which was paid after the date of his resignation as a director in connection with a
compromise agreement and his contractual 12 month notice period. HRP Reynolds formally resigned as
Non Executive Chairman and Director on 11 September 2009. Included within the salary and fees figure is a
payment in respect of his contractual 12 month notice period of £75,000 agreed in June 2009. HRP Reynolds
continued in his role as Non Executive Chairman without further payment from 30 June 2009 until he formally
resigned on 11 September 2009. The current directors of Eckoh plc receive all contractual payments through
the wholly owned subsidiary, Eckoh UK Limited, but have employment contracts with Eckoh plc.

Eckoh Annual Report 2010