Eckoh plc Annual Report 2012

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FY2012 Annual Report · Eckoh plc

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annual report 2012

Contents

Overview

Highlights of the Year

Chairman’s Statement

Business Review

Board of Directors

Directors’ Report

Corporate Governance

Market Drivers for Evolving Services

How Eckoh is Adapting to Market
Demands and Customer Needs

Our Technology

What our Clients Think

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

£10m

10.4

Financial Highlights

£8m

£6m

£4m

£2m

9.0

7.9

6.7

6.4

5.7

Up 15%

Up 18%

Up 77%

Up 68%

Up 65%

Up £0.7m

1.1

0.6

2.1

1.5

1.2

0.9

2012
Revenue

2011

2012
Gross Profit

2011

2012
2011
Operating Profit

2012
EBITDA

2011

2012
Cash Generation

2011

2012
Cash

2011

annual report 2012

Overview

Eckoh is the UK’s leading provider of speech
recognition and associated payment solutions,
across voice, web and mobile channels.

Our sophisticated technology enables payments,
transactions and enquiries to be processed without
the need for a customer to speak to a contact centre
agent. This signifi cantly reduces our client’s operational
costs, and frees up their agents to deal with more
complex enquiries.

Eckoh is the largest provider of such hosted services
in the UK with the infrastructure and scalability to handle
up to 6,000 calls simultaneously. This means that calls
will always be answered no matter how unpredictable
the circumstances.

Eckoh is a Payment Card Industry Data Security
Standards (PCI DSS) level one compliant service
provider, annually processing over £250 million
in card payments.

Across the voice, web and mobile channels Eckoh
processes around 30 million transactions a year.

Our Clients

Eckoh clients are large companies or organisations
who receive a high volume of customer enquiries
that are typically handled by a live contact centre.
They generally contract with us for an initial three
year period. Once the value of the service has
been proven it is usual for the contract to be
extended, ensuring an excellent client
retention level.

The contractual arrangements usually involve a usage
commitment based upon calls, minutes or transactions.
This provides us with a regular and predictable level of
revenue across the duration of the contract.

Call and transactional volumes and fi xed monthly
fees represented 87% of Group revenue for 2010/11
and gives excellent visibility on forecasted income.
Our clients include:

Typical applications include:

 Intelligent call routing

 Customer identifi cation

 Real-time information

 Bill and account payment

 Ticket booking

 Product purchase

 Membership services

 Subscription and renewals

 Balance enquiry

 Delivery tracking

 Fulfi lment

 Service outage notifi cations

Utilities
 Bristol Water
 Bournemouth Water
 D ^wr Cymru Welsh Water
 Northumbrian Water
 Power NI
 United Utilities
 Utilita
 Veolia Water
 Wessex Water

Travel
 Addison Lee
 BAA
 Gatwick Airport
 National Rail Enquiries
 Transport for London

Financial Services
 Barclays
 London Stock Exchange
 RCI Financial Services
 TD Waterhouse
 VF Services
 Paratus AMC

Outsourcing and distribution
 IPSOS MORI
 Orbital Response
 Parcelforce Worldwide
 Royal Mail
 Rentokil

Telecoms
 BT
 O2
 Resilient Networks
 Serco
 Telecom Express

Public Sector
 Central Offi ce of Information
 Defra - Rural Payments Agency
 Essex County Council
 Ministry of Justice

Leisure and Media
 Premier Inn
 Vue
 William Hill
 Comic Relief

Retail
 Electrolux
 Ideal Shopping Direct
 Lead the Good Life
 Ten Pin
 The Garden Centre Group

4
4

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Chairman’s Statement

I am delighted to be able to report on a further year
of excellent progress for Eckoh. In the 2011/12 fi nancial
year, we have seen a fourth successive year of double
digit revenue and margin growth with revenue breaking
through the £10m barrier. Much of this top line growth
has translated into increased profi tability with the
operating profi t of the business increasing from £0.6m
to £1.1m. Pleasingly, this improved fi nancial performance
has been achieved whilst still investing in the business
to enable the growth seen in recent years to continue
into future periods.

Last year we reported that amongst our key strategic goals
was an expansion of our indirect sales channels and to
continue to develop innovative new products to maintain
our market leading position.

We have made signifi cant progress in both areas. In October
2011, we announced that we have renewed our long term
partnership with BT until 2014 and have since announced
other collaborations with Servebase Global Payment Solutions
and Azzurri Communications. The latter has already resulted
in a contract with Essex County Council, our fi rst in the local
authority sector. We are in discussions with a number of
other organisations about similar collaborative arrangements
as the value of the services we supply is increasingly being
recognised by other parties.

This year we launched two products - EckohPROTECT and
EckohASSIST. EckohPROTECT enables contact centre agents
to process credit card payments from callers without being
made aware of their card details. EckohASSIST uses natural
language speech technology to identify how to best route
calls within an organisation removing the need for a caller to
navigate cumbersome menus. We believe these products
will be key drivers for further growth in the year ahead.

The Board has encouraged the management team to recruit
high quality members of staff into key new roles and to
promote a number of high performing individuals within the
organisation. This has included the creation of a team within
the business that specialises in developing smartphone
applications that complement existing services over voice
and web channels. This growth in headcount, combined
with a lack of meeting space for client meetings, has led us
to increase capacity within our offi ce space and lease an
additional fl oor at our existing Hemel Hempstead offi ce.

Chris Batterham
Chairman

This increased headcount will better equip us to deal with
an ongoing increase in demand for services from clients.
It will also promote an environment of innovation within
the business to broaden our technology capabilities and
to take it into new markets.

The strong growth in operating profi t and cash fl ow has
enabled us to propose a signifi cantly increased dividend
of 0.2 pence per share (FY11: 0.1 pence per share) enabling
long standing shareholders to see a return on the investment
that they have made. We will be working hard to ensure that
this trend continues.

The quality of the solutions provided by Eckoh is directly
related to the high level of expertise within our development
team and the accomplished way that those services are then
supported by the rest of the company. The excellence and
diligence of the employees at Eckoh has continued to deliver
the sustained growth and progress that the business has
experienced, and it is particularly pleasing to see the high
level of incremental sales into our existing customer base.
I would like to take this opportunity to thank our staff for all
their efforts and continued commitment to the Company.

Going into 2012/13 with a portfolio of blue chip clients
contracted for signifi cant periods and a product set which
meets increasing demand in the market leads the Board
to be optimistic that the progress made in recent years
will continue into the future.

Highlights of the Year

Financial Highlights:

• Revenue from continuing operations up 15% to £10.4m

(FY11: £9.0m) - 87% of FY12 revenue is of a recurring nature

• Gross profi t from continuing operations up 18% to £7.9m

(FY11: £6.7m) - Gross margin increased to 76% (FY11: 74%)

• Operating profi t increased by 77% to £1.1m (FY11: £0.6m)

• EBITDA* increased by 68% to £2.1m (FY11: £1.2m)

• Cash generated from operating activities increased by 65%

to £1.5m (FY11: £0.9m)

• Strong debt free fi nancial position with a cash and short term

investment balance up to £6.4m (FY11: £5.7m)

• Deferred tax asset of £1.3m recognised

• Basic EPS of 1.29p (FY11: loss of 0.12p)

•

The Board recommends a full year dividend of 0.2 pence
per share for the year ended 31 March 2012
(FY11: 0.1 pence per share)

“

Operating proﬁ t
increased by
77% to £1.1m
(FY11: £0.6m).

”

Operational Highlights:

Current Trading:

• Contract win with Transport for London for EckohASSIST

• Strong new customer traction during the period. Contract
wins include: the Legal Services Commission, GEOAmey,
IPSOS MORI, Luxup, Orbital Marketing Services Group
and Tenpin

• Strategic relationship with BT renewed for a further

three years

• Additional sales channel partner agreements signed
with Azzurri Communications and a global payment
service provider

• Successfully passed fi rst annual audit of compliance

with the Payment Card Industry Data Security Standards
(PCI DSS)

•

First contract win with a local authority, Essex County Council

£2.2m contract renewal with global fi nancial
services organisation

• Payment solution contract wins with Paratus AMC,

Sembcorp Bournemouth Water Limited, Bristol Water
and Wessex Water

• Contract renewal with National Rail Enquiries

• EckohASSIST and EckohPROTECT emerging as leading

products within the product range

* EBITDA is the profi t before tax adjusted for depreciation, amortisation,
fi nance income and fi nance expense

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7
7

Business Review

Introduction

The 2011/12 fi nancial year has been one of
signifi cant progress for the Group both strategically
and operationally. Demand for our solutions is at
an all-time high with the public and private sector
examining ways to minimise their cost base
whilst refusing to compromise customer service.

Alongside our operational progress we have
embarked on a strategic investment programme
for the business that is designed to ensure our
current growth is sustained over a prolonged
period and that our scale is suffi cient to meet
the demands of our expanding client base.

Inspired by the introduction of services such as Apple’s Siri,
Samsung’s S Voice and Nuance’s Dragon Go, corporate
interest and demand for voice-enabled services has increased
signifi cantly, creating a market opportunity that spans phones,
tablets, PCs and a host of other devices.

As a result of these initiatives in the speech sector by companies
such as Nuance, Apple, Google, Microsoft and Samsung we
have witnessed a positive reassessment and popularisation
of speech technology and the business benefi ts it can deliver.
The surge in appetite for devices that understand the spoken
word is being similarly refl ected in an increased demand for the
types of business process solutions using speech recognition
that Eckoh provides.

The evolution of our EckohASSIST and EckohPAY products
and the development of our mobile offering are testament
to this heightened interest surrounding speech.

Operational Review

In 2011, we highlighted a number of strategic initiatives
designed to accelerate the growth of our business.
These were to:

 Expand our indirect sales channels to broaden

our customer reach

 Continue to innovate through new product
development to maintain our market
leading position

 Offer alternative ways of providing our solutions
to our clients (e.g. hosted, ‘bunkered’, premises
based), to increase sales from fi nancial services
and public sector

 Increase incremental sales from our existing
customer base by expanding the range of
multi-channel services; and

 Maximise our level one PCI DSS status

and EckohPAY product

We have made signifi cant progress on all these
goals over the last 12 months which will continue
to form the cornerstone of growth across our
business in the medium term.

“

Demand for our solutions is
at an all-time high with the
public and private sector
examining ways to minimise
their cost base whilst
refusing to compromise
customer service.

”

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9

Business Review

Expansion of Indirect Sales Channels

In October 2011 we announced the extension of our strategic
relationship with BT for a further three years to 2014.
Our mutually exclusive relationship with BT dates back to
2003 and helped establish Eckoh as the market leader in
the provision of hosted speech solutions. Over time it became
evident that this exclusive relationship was potentially preventing
other organisations collaborating with Eckoh and therefore
the new contract is on a non-exclusive basis enabling the
Group to extend our sales channel by collaborating with new
potential partners. Since our interim results we have signed
formal agreements with Azzurri Communications and a global
payment service provider. We are in active discussions with a
number of other potential partners and we expect to announce
further collaborations in the year ahead, which we anticipate
will serve to accelerate our sales growth.

We have recently announced the fi rst new contract won
alongside Azzurri, which will see Eckoh develop and implement
a hosted speech recognition solution across Essex County
Council’s customer service operations. The agreement was
secured through a formal tender process and represents
the fi rst implementation of Eckoh’s speech technology by
a local authority. The Council provides services for 1.4 million
people and is one of the largest local authorities in the UK.
The fi rst phase of the solution, which is based on a variety
of Eckoh’s products including EckohLOCATE, EckohID and
EckohSURVEY, began at the beginning of April 2012.

The core focus of this service will be to reduce call waiting
times, thus freeing up agents to deal with more complex
enquiries and achieve signifi cant cost savings.

Innovate Through New Product
Development

We have continued to develop our product range
throughout the year, but we are particularly excited about
the prospects for EckohPROTECT and EckohASSIST,
both of which were launched during the period.

Companies are increasingly under pressure to fi nd ways
of processing card payments in a manner which is
compliant with the Payment Card Industry Data Security
Standards (PCI DSS) and this pressure is driving up
the number of sales opportunities for Eckoh’s payment
solutions. Implementing EckohPROTECT or EckohPAY
makes it much more straightforward for organisations to
be compliant with PCI DSS standards and the model that
Eckoh offers makes this a very effi cient way of achieving
compliance both quickly and economically.

EckohASSIST is a product which ensures that caller’s
requirements are understood immediately, so that they are
provided with the correct information or are connected to
the appropriate contact centre agent on the fi rst attempt.
Organisations waste large amounts of money because
calls are routed incorrectly which also negatively impacts
customer satisfaction.

The product enables all inbound calls to be answered with
an automated greeting that simply asks the caller “How
can I help you?” and allows them to reply in a completely
natural manner. EckohASSIST works by utilising the
speech recognition technology alongside a complex
statistical engine to determine what the caller requires
and how the call should be handled. This could result
in the call being routed through to a particular skills
group within a contact centre, being passed to an
automated service or having an application launch on
a mobile device. On the minority of occasions when it
is diffi cult to confi rm their requirement automatically, the
caller’s spoken audio is streamed to a ‘hidden’ contact
centre agent who can classify the call manually and
assist the service. Because each call processed
increments the statistical engine, over time the
success rate of the automation will increase.

Transport for London has over 30 different contact
telephone numbers and research has shown that on
some numbers up to 40% of callers are misdirected.
Eckoh won the contract to provide TFL with
EckohASSIST in October 2011 and the fi rst phase of
the service went live in April 2012. It is anticipated that
by using EckohASSIST the number of misrouted calls
will be reduced by over 75%, which will save a minimum
of £0.5m per annum. It will also ultimately allow TFL to
remove the large number of phone numbers in circulation
and promote a single telephone number, which will reduce
marketing expense and improve public awareness.

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11
11

Business Review

Provide Alternative Ways of Providing
Solutions to Clients

Expanding the Range of
Multi-channel Services

A key development over the past year has been the
extended reach of the Eckoh telephony platform.
The platform, which is located in secure data centres
in the UK, has managed calls delivered to it from
throughout Europe since 2009, but this year has
begun receiving calls from all over the world.

The announcement of the renewal of our multi-million
pound contract with a global fi nancial services company
highlighted that we are now terminating calls from
Australia and New Zealand and we expect further
territories to be added over the coming period.
We also expect through this extended agreement to
work on a number of speech applications covering
a wide range of geographies. In anticipation of these
developments we have added an additional 1,000 Nuance
speech recognition licences and have expanded our
licence agreement with Nuance to include all the global
languages that they support. This provides a hosted
speech capacity and capability that we believe
is unrivalled in the UK and Europe.

Whilst we believe that the majority of interactions between
clients and their customers will continue to remain over
the voice channel, we recognise that it is important that
we have capabilities in other channels. We have been
providing services over the web and through SMS for
a number of years, but this year we have added to that
capability by recruiting a development team to deliver
smartphone applications. This is initially a small team
but the applications we have already sold to clients have
enabled it to become self-funding and we are anticipating
further growth in the year ahead.

The initial focus has been to develop solutions that
are complementary to the services that Eckoh already
provides in other channels. In particular, smartphone
payment applications have been added to EckohPAY
and these have already been successfully sold to existing
clients. As an example, Power NI (formerly NIE Energy)
who have been processing IVR and web payments
through Eckoh for a number of years, launched iPhone
and Android payment apps in the Autumn of 2011.
Within months there had been over 10,000 downloads
of the apps and around 12% of all payments were being
made through this channel.

We have been particularly successful in the 2011/12 year
at upselling additional services to our existing client base.
Many of these clients have been working with Eckoh
for a number of years and we are viewed as a trusted
supplier. We have implemented quarterly service reviews
with all clients to evaluate the services we provide, update
them on new offerings and review what we are doing for
other organisations. This has increased awareness of
our capabilities and seen large amounts of incremental
revenues coming through from the existing client base.

Critically, for this up-sales process we continue to renew
agreements with our most important clients and our churn
rate in overall terms remains extremely low. In addition to
the global fi nancial service organisation highlighted earlier,
other renewals have included Addison Lee, National Rail
Enquiries and a leading UK logistics organisation.

“

We have been particularly
successful in the 2011/12
year at upselling additional
services to our existing
client base.

”

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Business Review

Maximise PCI Level One PCI DSS Status

We announced in November 2011 that we had maintained
our status as a Payment Card Industry Data Security Standard
(PCI DSS) Level One Service Provider. This accreditation forms
the basis for our proposition in the payment sector with the
promotion of the EckohPAY and EckohPROTECT products.

During the period and in the fi rst quarter of this year we have
won a number of new contracts with organisations where
taking secure card payments have been the initial business
driver for the agreement. These include the Legal Services
Commission, GEOAmey, Orbital Marketing Services Group,
Sembcorp Bournemouth Water, Bristol Water and Wessex
Water. We have also recently signed a new agreement for
EckohPAY with Paratus AMC.

It is frequently the case, however, that whilst taking PCI DSS
compliant card payments may be the key part of the solution,
Eckoh also delivers other speech-enabled services over time.
Where these services do not form part of an initial solution,
there is an on-going opportunity to upsell them through the
quarterly service reviews.

Payment contracts are typically three years in length and
generally there are minimum levels of card payment transactions
guaranteed by the client as part of the agreement. The service
is charged on a per transaction basis with usually a modest
set-up fee paid at the outset of the contract. We believe that our
proposition in the payment sector, particularly with the addition
of EckohPROTECT to our product range, will continue to be a
large growth area in the years ahead.

Current Trading

The new fi nancial year has started extremely positively
with a number of new contracts and renewals being
secured. In recent weeks the Company has made
the following announcements:

 Renewal of our most valuable contract with a global

fi nancial services company until at least 2014

 Renewal of the contract with National Rail

Enquiries until 2014

 Contract win alongside Azzurri to provide a range
of services to Essex County Council (this fi rst win
with a council is signifi cant as it provides a reference
site for a other opportunities arising within this sector)

 A three year contract to provide payment

services to Paratus AMC

 Further contract wins in the water utility sector

with Sembcorp Bournemouth Water,
Bristol Water and Wessex Water

 A partnership agreement with a global

payment services provider

 The EckohASSIST service going live with

Transport for London

We are currently recruiting in a number of key areas in
order to meet the level of new business queries we have
witnessed across our business. We are particularly
buoyed by the response from our EckohASSIST and
EckohPROTECT products, and we believe these two
initiatives will be at the centre of our growth. We continue
to look to develop our partner network and direct sales
and marketing effort in order to enable us to maximise
the opportunity that we believe currently exists across
the broader market.

Outlook

The Board remains confi dent that the Company is well
positioned to continue its trend of growth seen in recent
years. Our key drivers for growth will continue to be
determined by the need for organisations to reduce
their cost base and process card payments in a way
that complies with Payment Card Industry Data Security
Standards. The EckohPROTECT and EckohASSIST
products have been designed to specifi cally meet these
demands and form the basis of our on-going strategic
growth initiatives.

The Board are continuing with a progressive dividend
policy and will make a payment of 0.2p per share
following anticipated approval at the AGM.

Eckoh has made a strong start to the current fi nancial
year and we remain confi dent that trading will continue
in line with market expectations.

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Financial Review

Revenue and Margin

We are pleased to report that 2011/12 is the fourth successive
year that Eckoh has reported double digit growth in revenue
and margin. Revenue increased by 15% to £10.4m (FY11:
£9.0m) while margin increased by 18% to £7.9m (FY11: £6.7m).
The gross margin achieved on revenues continues to increase
steadily from 74% in the previous year to 76% in this most
recent fi nancial year.

87% of the revenue recognised in the 2011/12 fi nancial year is
of a recurring nature which provides excellent earnings visibility.
We expend a great deal of effort ensuring that our clients are
provided with the highest level of service so that renewal rates
following the expiry of an initial contract term are extremely
good. Securing these clients over long periods means that our
growth rates are determined by our ability to win new business.
This new business may be won by fi nding new clients but is also
supplemented by our ability to upsell additional services to our
existing client base. The development of a strong product set
has made the upselling of additional services somewhat simpler
with a large proportion of current clients paying for new services
or enhancements to existing services.

“

87% of the revenue
recognised in the 2011/12
ﬁ nancial year is of a recurring
nature which provides
excellent earnings visibility.

”

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17
17

“

In the 2011/12 ﬁ nancial
year, we have seen
a fourth successive year
of double digit revenue
and margin growth.

”

Financial Review

Profi tability Measures

The table below demonstrates that the growth in revenue
seen in recent years has translated into signifi cant increases
in profi tability. Since the 2008/9 fi nancial year, margin has
increased by 85% to £7.9m, an increase of £3.6m. Over the
same period, the administrative expenses (adjusted for
non-recurring items) have increased by only £1.6m, leading
to a £2m increase in operating profi t from a loss of £0.9m
to a profi t of £1.1m.

Administrative expenses increased by 12% in the most recent
fi nancial year from £6.0m to £6.8m. This increase is directly
attributed to our planned investment programme as we look to

put in place the necessary infrastructure and systems capable
of supporting our future revenue and profi t growth. We have
added strategic headcount in key areas and therefore expanded
our Hemel Hempstead offi ce to accommodate this growth.
At the same time, we have been gradually expanding the size
of the VoiceXML telephony platform, embracing the most
up-to-date technology available, leading to additional support
costs. The business continues to enjoy the benefi ts of excellent
operational gearing and we would expect the growth in revenue
and margin to continue to comfortably outstrip any on-going
increase in administrative expenses, thereby improving profi ts.

Other measures of profi tability continue to see a very positive
trend with a 68% increase in EBITDA from £1.2m to £2.1m.
Again, this follows a trend of growth seen in recent years.
This has led to good levels of cash generation with cash
generated from operating activities increasing by 31%
from £1.2m to £1.6m.

“

The business continues to
enjoy the beneﬁ ts of excellent
operational gearing and we
would expect the growth
in revenue and margin to
also continue.

”

Turnover

Gross profi t

Administrative Expenses

Non Recurring Administrative Expenses

Adjusted* Administrative Expenses

Operating profi t / (loss)

Adjusted* Operating profi t / (loss)

*excludes non recurring administrative expenses

Year ended
31 March 2012

Year ended
31 March 2011

Year ended
31 March 2010

Year ended 31
March 2009

£’000

10,392

7,895

6,788

1,107

£’000

9,003

6,663

6,036

627

£’000

7,923

5,697

6,231

(653)

5,578

(534)

119

£’000

6,674

4,279

6,034

(811)

5,223

(1,755)

(944)

Profi t before tax

Amortisation of intangible assets

Depreciation

Net interest receivable

EBITDA

2012

£’000

1,256

349

505

(49)

2,061

2011

£’000

(615)

290

446

1,104

1,225

2010

£’000

(197)

157

529

(337)

152

2009

£’000

(1,373)

121

474

(382)

(1,160)

Statement of Financial Position

The statement of fi nancial position remains debt free
with a cash and short term investment balance at
31 March 2012 of £6.4m (31 March 2011: £5.7m)
despite a dividend of £0.2m being paid to shareholders
during the year. The statement was further strengthened
by the recognition of a deferred tax asset during the
year of £1.3m. This asset refl ects the amount
of losses forecasted to be consumed by the profi ts
of the company over the three coming fi nancial years.
There is a further £3.2m of deferred tax assets
which have yet to be recognised on the statement
of fi nancial position.

18
18

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19

Board of Directors

Adam Moloney

Nik Philpot

Chris Batterham

Nik Philpot
Chief Executive Offi cer

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 a founder of Eckoh he has created the UK’s largest provider of customer
service solutions using speech recognition for the contact centre industry.
Nik has 25 years experience in the voice services industry.

“

The Board remains conﬁ dent
that the Company is well
positioned to continue its
trend of growth seen in
recent years.

”

Clive Ansell

Chris Batterham
Non-executive Chairman

Adam Moloney
Group Finance Director

Clive Ansell
Non-executive Director

Chris qualifi ed as an accountant with
Arthur Andersen and has signifi cant
experience in the technology based
business environment, including the
fl otation of Unipalm on the London
Stock Exchange. Currently on the
boards of a number of companies
including SDL plc, Iomart plc and
Offi ce2Offi ce plc, Chris brings a
wealth of experience in the strategic
development of companies in the
IT sector.

Adam has been Finance Director
at Eckoh for 8 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 fi nancial 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.

Clive joined the Board in July 2009
and is currently the CEO of Tribal
Technology at Tribal Group plc.
Formerly, he had held several senior
executive and strategic roles at BT,
worked as a strategic consultant to
the Board of Royal Mail, 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.

20
20

annual report 2012
annual report 2012

annual report 2012

Directors’ Report

The Directors of Eckoh plc present their annual
report, together with the audited financial
statements of the Company and the Group
for the year ended 31 March 2012.

Principal Activity

The principal activity of Eckoh plc and its subsidiary
undertakings (“the Group”) is the provision of speech
recognition services and outsourced automated solutions
for customer contact centres. The Chairman’s Statement
(page 7) and the Business Review (pages 8 to 19) report
on the progress made in the financial year under review.

The principal subsidiary undertakings are listed on page 66.

Post Balance Sheet Events

Annual General Meeting

Directors’ Interests

Post year end the Directors are recommending a dividend
for the year of 0.2 pence per share that will be paid on 21
September 2012 to shareholders on the register at 24 August
2012, subject to approval at the Company’s Annual General
Meeting on 15 August 2012. Based on the shares in issue at
the year end, this payment would amount to £0.4m.

The next Annual General Meeting of the Company will be
held at 11:00 on 15 August 2012. Details of the business to
be proposed at the Annual General Meeting are contained
within the Notice of Meeting, which accompanies this Report.

Directors

The 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.

Research and Development

The current Directors of the Company are shown on page 20.

Directors’ Interests in Shares

The Group capitalised £0.1m (2011: £0.3m) of development
expenditure during the year. The majority of this cost arose
from the effort required to develop the product range along
with enhancements to client services.

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. N B Philpot will retire by rotation and puts
himself forward for re-election at the Annual General Meeting.

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:

Results and Dividends

Financial Instruments

The audited financial statements and related notes for the
year ended 31 March 2012 are set out on pages 46 to 74.
The Group’s profit for the year is set out in the Consolidated
statement of comprehensive income on page 46.

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.

The financial instruments of the Group are set out in the notes
to the financial statements on pages 50 to 74. 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.

The significant accounting policies applied to the
financial statements are included within note 2.

N B Philpot (i)

A P Moloney

C M Batterham

Notes:

11 June 2012
Ordinary shares
of 0.25 pence each

3,052,000

135,000

750,000

31 March 2012
Ordinary shares
of 0.25 pence each

3,052,000

135,000

750,000

1 April 2011
Ordinary shares
of 0.25 pence each

2,902,000

135,000

750,000

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

22
22

annual report 2012
annual report 2012

23
23

In addition, the Executive Directors have been granted an award of Performance Units (“Units”) subject to the rules of the LTIP on 30
June 2010 from a total of 1,000 Units available to the participants of the LTIP as follows;

N B Philpot

A P Moloney

Number of Units

Percentage of options allocated

500

250

50%

25%

Units have no value at grant, but on a change of control of the Company and the achievement of a minimum share price target,
Units will convert to a pre-determined number of nil-cost options. The value of the options will be calculated depending on the
value obtained for shareholders in excess of the minimum share price target.

Directors’ Report

Directors’ Share Options

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

At 31 March
2012
(number)

Granted in
year
(number)

Lapsed in
year
(number)

Note

N B Philpot

A P Moloney

3,000,000

380,710

337,702

1,000,000

800,000

200,000

1,000,000

3,000,000

150,000

380,643

247,000

250,000

750,000

900,000

100,000

1,000,000

1,846,153

238,020

167,200

247,000

167,200

At 1 April
2011
(number)

3,000,000

380,710

337,702

1,000,000

800,000

200,000

1,000,000

3,000,000

150,000

380,643

250,000

750,000

900,000

100,000

1,000,000

1,846,153

238,020

Exercise
price
(pence)

Earliest date
for exercise

Latest date
for exercise

6.50

7.88

8.75

5.13

0.25

0.00

8.50

8.75

5.13

0.25

0.00

27.06.05

07.10.07

13.09.08

31.07.10

05.03.13

30.06.13

30.06.12

30.06.13

30.06.14

28.02.08

13.09.08

31.07.10

05.03.13

30.06.13

30.06.12

30.06.13

30.06.14

27.06.12

07.10.14

13.09.15

31.07.17

05.03.20

30.06.20

30.06.21

30.06.22

28.02.15

13.09.15

31.07.17

05.03.20

30.06.20

30.06.21

30.06.22

The information contained in this table has been audited.

Notes:

a. Granted under the Inland Revenue approved Appendix to the Eckoh plc Share

Option Scheme (1999). The performance target attaching to these 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%.

b. Granted under the Eckoh plc Share Option Scheme (1999) but not qualifying

for Inland Revenue approval. The performance target attaching to these 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%.

c. Granted under the Eckoh plc 2007 Enterprise Management Incentive (“EMI”)
Share Option Plan. The Performance target attached to these options is
satisfi ed if the percentage growth in the Earnings per Share (before exceptional
items and intangible asset amortisation) over the Prescribed Period comparing
the Basis Year with the Latest Year is at least 5 per cent (compounded) per
annum higher.

d. Granted under the Eckoh plc Long Term Incentive Plan (“LTIP”). The number
of shares that will ultimately vest are subject to the satisfaction of stretching
Earnings per Share and Total Shareholder Return targets. Further details are
available in the Remuneration report on page 32.

e. Granted under the 2010 Eckoh plc Bonus plan. Half of the bonus awards made
to executives in respect of the two most recent fi nancial years were made in the
form of deferred shares with the calculation for the year ending 31 March 2012
to be fi nalised on 30 June 2012 (“calculation date”). The table above shows
an estimate of the number of shares to be awarded at that date based on the
share price at the year end. The deferred shares will vest in tranches of 50%
on the fi rst and second anniversary of the calculation date. Further details are
available in the Remuneration report on page 32.

annual report 2012

Directors’ Report

Share Capital and Reserves

Details of changes in the authorised and issued share
capital and reserves of the Company are shown in
note 21 to the fi nancial statements.

Share Schemes

The Directors believe that a key element in attracting,
motivating and retaining employees of the highest calibre is
employee involvement in the performance of the Group through
participation in share schemes. By doing so, the Directors
believe that employees’ interests will be aligned with those
of shareholders. Details of options granted under the share
option schemes are set out in note 23 to the fi nancial
statements. All permanent employees are eligible to join
a scheme.

Statement of Disclosure of Information
to Auditors

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

Auditors

During the year ended 31 March 2012, KPMG Audit Plc was
appointed as auditor of the Company in place of BDO LLP.
A resolution to reappoint KPMG Audit Plc as auditor, and to
authorise the Directors to set their fees, will be submitted to
the forthcoming Annual General Meeting.

Payments to Creditors

Shareholder Relations

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 satisfi ed that
the supplier has provided the goods or services in accordance
with the agreed terms and conditions. At 31 March 2012 the
amount of trade creditors shown in the balance sheet represents
69 days of average purchases for the Group (2011: 62 days).
The Company had no trade creditors at 31 March 2012.

The Company holds meetings with its major institutional
investors and general presentations are given covering the
interim and preliminary results. The Chairman, C M Batterham,
has met with shareholders and brokers during the period
under review. The Chairman is available to attend presentation
meetings and other presentations on an ongoing basis. All
Directors have access to the Company’s nominated advisors
who give feedback from shareholders and receive copies of
broker update documents.

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 fi nancial reporting, signifi cant matters
relating to the trading or development of the business are
disseminated to the market by way of Stock Exchange
announcements. The Company’s Annual Report and
Accounts, Interim Statements and other major
announcements are published on the Company’s
corporate web site at www.eckoh.com.

Going Concern

Under company law, the Company’s Directors are required
to consider whether it is appropriate to prepare fi nancial
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
satisfi ed 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 fi nancial statements.

“

Strong debt free ﬁ nancial
position with a cash and
short term investment
balance up to £6.4m
(FY11: £5.7m).

”

26
26

annual report 2012
annual report 2012

27
27

For employees or guests with reduced mobility, our offi ces
are fully accessible with elevators to each fl oor. For those who
choose to cycle or run as part of their daily commute, we have
provided showers for their use and convenience.

In the Environment

Although operationally we do not manufacture products,
Eckoh understands the impact our business can have on
the environment. From the effi cient lighting in our offi ces to
the fair-trade coffee in our kitchen areas, we carefully consider
the purchases we make and encourage our suppliers to be
equally considerate in the way they conduct their business.

Eckoh has taken the following steps to ensure that we are
doing all we can for the environment and to set a good
example to those who we come into contact with:

 Reduced business travel through the use of web

and phone based conferencing systems

 Energy effi cient and motion sensor lighting in our offi ces
 Comprehensive recycling programs in all

possible locations

 Photo copiers set to double-sided printing

to reduce paper use

 Provide reusable cups and glasses to reduce
waste associated with disposable cups

 Encourage alternative methods of transport to travel

to and from work e.g. cycle to work scheme.

In the Community

Eckoh recognises the importance of giving something back
to the local community, as well as supporting national causes.
During the year, we have raised over £3,000 for our nominated
charity, Voice. Two Eckoh team members, Sean Ryan and
Ashley Burton ran the London Marathon raising £1,546
between them. A series of other fund raising events took
place involving all of the employees of the business.
As corporate sponsor to Voice, Eckoh has committed
to match this fi gure.

Voice is an independent national charity committed to
empowering children and young people in care and in need
and campaigning for lasting change to improve their lives.
The charity was founded in 1975 by an experienced social
worker, Gwen James, in response to the high-profi le death
of seven year old Maria Colwell, tragically murdered by her
stepfather. ‘Voice for the Child in Care’, as they were known
then, began as a small networking pressure group, passionate
about enabling children in care to have their voices heard.

Additionally, Eckoh has again been involved with other
community projects. This year, we specifi cally aimed to
improve the environment of three local schools in Hertfordshire.
Through The Volunteer Centre Dacorum, team members from
Eckoh transformed the children’s play areas at Aycliffe Drive
School Pre-school, Aycliffe Drive Primary school and
Woodfi eld School.

In addition to the amounts raised for Voice, Eckoh has made
charitable donations totalling £2,531 during the year (2011:
£1,755). 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.

By order of the Board

Adam Moloney, Company Secretary
11 June 2012

Corporate Responsibility

Our Business

Eckoh is committed to running the business in an ethical and
responsible manner and we focus our efforts on three distinct
areas: workplace, environment and community.

In the Workplace

Eckoh believes that its employees are the source of its
competitive advantage and a valuable asset to the business.
We 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.

Eckoh is an equal opportunities employer. No applicants or
employees will be unfairly discriminated against on the grounds
of criteria unrelated to their job performance. We are proud of
our high staff retention level and we often see people return to
Eckoh after a short time of leaving the business.

Our people are proud to work for Eckoh which has retained
Best Companies Accreditation status in 2012; nominated by
staff as a great employer to work for. We are also profi led in the
Best Companies Guide 2011, an annual reference report that
offers a unique insight into the UK’s top employers.

Development
We encourage our people to develop their skills and keep up to
date with new technology, standards and processes. To build a
high performance culture at Eckoh and support advancement,
we have introduced a programme of training and development
which is offered to every employee within the business.

Our investment in staff helps to retain and motivate our people,
as well as assisting high achieving employees to progress and
fl ourish in their role.

Communication
We maintain our enthusiastic and motivated workforce through
effective two-way communication. Staff members are regularly
informed of matters, both positive and negative, that are
affecting the business. This news is relayed with a feedback
request through monthly presentations to staff by Directors
and regular email bulletins.

Health, Safety and Accessibility
The health, safety and wellbeing of the people on our premises,
is our highest priority. We hold regular risk management reviews
which scrutinise the safety of our working environment.
We actively encourage staff to protect each other from potential
harm and be aware of their surroundings, mitigating any risk
of slips, trips or falls.

annual report 2012

annual report 2012
annual report 2012

“

Our people are proud to work for
Eckoh which has retained Best
Companies Accreditation status
in 2012; nominated by staff as a
great employer to work for.

”

29
29

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.

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 fi nancial 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.

Internal Control and Risk Management

The Directors formally acknowledge their responsibility for
establishing effective internal control within the Company.
In this context, control is defi ned 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 defi ned 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.

There are ongoing processes for identifying, evaluating and
managing the Company’s signifi cant 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 identifi ed the risks most
important to the Company (business, operational, fi nancial
and compliance), determined the fi nancial 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.

Corporate Governance

Compliance Statement

The Board of Eckoh plc recognises its responsibilities to
maintain high standards of corporate governance throughout
the Group. The Board continues to give careful consideration
to the principles of corporate governance as set out in the
UK Corporate Governance Code published by the Financial
Reporting Council, although as a company listed on AIM it is not
required to comply with the UK Corporate Governance Code.
The Company is committed to complying with the UK Corporate
Governance 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, C M 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 20.

There is a schedule of formal matters specifi cally 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 fi nancial 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, 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.

Board Committees

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

Audit Committee Report

The Audit Committee is responsible for reviewing the following:

 accounting procedures and controls;
 fi nancial information published by the Group, including

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

 risk management and the effectiveness of the Group’s

system of internal fi nancial control;

 the terms of reference for the Group’s external valuers; and
 the results and effectiveness of the Company’s

external audit.

The Audit Committee formally met twice during the period under
review, with no absentees. A P Moloney, the Group Finance
Director, attends all Audit Committee meetings by invitation and
provides advice to the Committee where appropriate. The Chief
Executive was invited to and attended both meetings. In June
2011, four leading fi rms were invited to make presentations to
the Audit Committee with a view to replacing BDO LLP as the
Company auditor. After due consideration, KPMG Audit Plc
was selected as auditor and were formally appointed at the
2011 Annual General Meeting. The Company’s auditor attended
both meetings and the Committee considered reports issued
by them. The auditor has direct access to the Audit Committee
without the presence of an Executive Director. The Committee
reviews the effectiveness of the Company’s internal fi nancial
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.

annual report 2012

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annual report 2012

31
31

Corporate Governance

Remuneration Committee Report

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:

Bonus Arrangements

The Bonus plan adopted allowed for awards based on
achievement of a series of financial and non-financial
targets weighted as follows;

• Margin growth

• Profit before tax

• Cash generation

30%

20%

Salary and fees
£’000

Cash Bonus
£’000

Other benefits
£’000

2012 Total
£’000

2011 Total
£’000

• Non financial measures

relating to the operations of the business

20%

Long-Term Incentive Arrangements
for Directors

The Long Term Incentive Plan is designed to incentivise
senior executives to deliver increasing levels of value to
shareholders. Part 1 of the plan awards nominal value
options to participants upon achievement of stretching
earnings per share targets over a three year period.
Vesting of these options are also subject to a Total
Shareholder Return target being achieved over the
corresponding period.

Part 2 of the plan releases value to participants in the
event that there is a change of control in the business at a
value which is significantly in excess of the market value of
the company at the date of the award made in June 2010.
Further details of the awards made are disclosed in the
Directors share options section of the Director’s report on
page 24-25.

Nomination Committee

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.

To deliver a maximum payment bonus award of 100%
of salary, targets must be exceeded by 15%. In the year
ended 31 March 2012, performance against targets
resulted in a bonus payment of 58% of salary being
awarded to both executive directors. Half of the bonus
award has been paid in cash shortly after the year end
with the other half to be paid in the form of deferred
shares vesting in two halves on 30 June 2013 and 30
June 2014. A similar scheme has been instigated for
the year ended 31 March 2013.

Name

C Ansell (i)

C M Batterham (ii)

A P Moloney (iii)

N B Philpot (iv)

Total

132

207

404

183

265

513

169

270

504

Remuneration and Service Contracts

(i) C Ansell was appointed as a Non-Executive Director on 7 July 2009.

The information contained in this table has been audited.

Notes:

(i) C M Batterham was appointed as Non-Executive Director on 15 July 2009 and

further appointed as Non-Executive Chairman on 11 September 2009.

(i)

Included within the other benefits paid to A P Moloney is an employer pension
contribution of £12,000 (2011: £12,000). The remainder of the other benefits
paid to A P Moloney relate to private healthcare costs of £1,000 (2011: £1,000)

(i) The amount of £2,000 (2011: £2,000) paid to N B Philpot within other benefits

relate to private healthcare costs.

None of the directors exercised any share options in the current or prior year.

The remuneration of the Executive Directors is determined by
the Remuneration Committee. The Remuneration Committee
has reviewed the salaries of both Executive Directors as neither
Executive Director had been awarded an increase in salary
since April 2007. With effect from 1 April 2011, the salary of A P
Moloney was increased from £118,000 to £132,000. The salary
of N B Philpot remains unchanged. Both Executive Directors
have service contracts which are terminable on twelve months’
notice. No further increases have been proposed for the new
financial year for either Executive Director.

Both Non-Executive Directors have service contracts terminable
on six months’ notice. The fees payable to the Non-Executive
Directors had been unchanged since their appointment in July
2009. Upon review, it was agreed that the fees paid were below
market rates and were increased. With effect from 1 April 2012,
the fee payable to C M Batterham increased from £40,000 to
£45,000 per annum and the fee payable to C Ansell increased
from £25,000 to £30,000.

During the 2010/11 financial year, independent professional
advice was obtained to review the incentive arrangements in
place for senior executives. The result of the advice was the
creation of a new Bonus plan and Long Term Incentive Plan.
Major shareholders were fully consulted before both plans were
adopted by the Board in June 2010. These plans still form the
basis of incentive arrangements for senior executives.

annual report 2012

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33
33

Market Drivers for Evolving Services

Payment Card Security Enforcement

A New Empowered, Self-serving Customer

Gone are the days when a customer will only contact an
organisation through phone or email. Consumers are now in
control and are defining how and where they will be serviced
- through mobile phone and tablets apps; laptop/desktop
internet browsers; as well as traditional landlines. People want
immediate assistance when they contact a company and
expect to be dealt with quickly and without delay.

76% of Adults have Broadband (Fixed and
Mobile) in the UK, and 14% have Mobile
Broadband (Ofcom, 2012)

How businesses offer access to real-time information is critical
to their on-going success. To increase and retain customer
loyalty, organisations need to assess the potential that innovative
customer service solutions can have in differentiating their
business. Effectively deploying these new technologies will
determine if customer demand is truly satisfied.

Customers Still Need to Speak to Someone

Despite the increasing trend to use web and mobile channels to
access information, there is still a need to use the phone (mobile
or landline) to contact organisations. The voice channel is still
forecast to remain the dominant channel for some years
to come.

However, operating contact centre agents in the UK or off shore
is expensive, and this explains to some extent why automated
solutions for contact centres are on the increase. Not only do
they reduce costs but they address customers’ needs. Improved
technologies and innovative applications make phoning
organisations easier, friendlier and more convenient to use,
resulting in increased customer satisfaction.

Speech Recognition Systems Have Come a
Long Way Over The Last Few Years.

Payment Card Industry Data Security
Standards (PCI DSS)

Since its introduction in 2004, the Payment Card Industry
Data Security Standards (PCI DSS) has had a significant
impact on organisations that store, process or transmit
card holder data. The aim of the standard is to ensure
that organisations manage card data securely through
a complete and multifaceted array of security policies,
practices and controls.

PCI DSS directly impacts contact centres, specifically
the management of call recordings, their storage and
the control of the agent/caller interface. An increasingly
hard line is being taken to enforce the standard through
assessments and significant fines are being levied for non-
compliance.

Europe is now following the strict approach of the USA
where businesses are instructed not to use a service
provider to support their payment processing operations,
unless they are PCI DSS compliant.

Customers should no longer have to deal with the frustration of
words, phrases or accents being misunderstood, being put on
hold or being redirected incorrectly. Technology and application
design has become more sophisticated to meet the increasing
high expectations from customers. In addition, to compete with
rivals, contact centres and businesses also recognise the value of
the timely deployment of advanced solutions to retain customers.

When designed properly, speech recognition systems allow
callers to speak to a system just as they would to a contact
centre agent. The technology has evolved to make precise
recognition of extremely large grammars viable, even in difficult
environmental conditions. This makes it possible not just for the
system to understand and respond to the caller accurately, but to
do so in an intuitive and personalised manner.

Going Mobile – Enriching Customer
Relationships

Whilst the voice channel continues to be the preeminent method
to service customer enquiries, consumer demand to access
services and get information on the move continues to increase,
and the mobile web accounts for an even greater proportion of
customer contact. Developing mobile channels to meet customer
contact needs, is a natural evolutionary step, and one that many
businesses are keen to make use of.

The rapid adoption of smartphones and other next-generation
devices, that can blend spoken and keyed interactions via touch
screen and the mobile browser, has provided businesses with an
opportunity to enhance relationships with their customers.

Non-Compliance can be Devastating

PCI DSS compliance violations can be catastrophic to
an organisation; the resulting fines levied by the card
schemes can be high. Per card or monthly fines can be
enforced and ultimately card processing facilities can be
suspended or stopped.

A full investigation by a Qualified Forensic Investigator will
be carried out if cardholder data is compromised. Failing
to meet just one requirement of the PCI DSS, regardless
of whether it contributed to the security breach, is deemed
‘non-compliant, with no protection against card scheme
fines’.

Over 63% of Contact Centres are not
PCI DSS Compliant

Recent research reveals that despite 36.7% of contact
centres judging themselves to be fully compliant with
the Payment Card Industry Data Security Standards
(PCI DSS), the vast majority (89%) admitted to not
understanding its requirements and penalties*. PCI
DSS also has four levels of compliance and the lowest
levels only require self-accreditation, so it seems entirely
possible that of those contact centres who claim
compliance many are in reality still in potential breach.

To further illustrate the high level of disarray in the market,
a third of all contact centre respondents (33%) claimed
to be years away from full PCI DSS compliance, with a
fifth (21%) stating that their processes will never be in full
accordance with the standard’s stringent requirements.

* Callcentrehelper.com, 6 January 2011

annual report 2012

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35
35

How Eckoh is Adapting to Market Demands
and Customer Needs

Redefi ning the Speech Recognition
Customer Experience

Our clients benefi t from the latest self-service technologies
including advanced speech recognition, voice biometrics,
natural language statistical modelling, application and dialogue
design. The latest technology combined with enhanced
application design has seen improved accuracy, increased
personalisation and greater customer acceptance.

Using the most advanced speech technologies, Eckoh has
created a natural sounding application and dialogue:

EckohASSIST – Intelligent Speech
Recognition Technology

EckohASSIST greets callers through a single phone number
to the organisation with “how can we help you?”. The caller
can describe the reason for their call in their own words and
based on their reply they will be routed appropriately.

To provide a natural and straightforward customer experience,
Eckoh uses the most advanced speech technology combined
with complex statistical language models. It not only provides
a compelling and satisfying customer experience, but also
delivers a signifi cant cost saving to the organisation.

With EckohASSIST, callers can now take control of the
interaction. It minimises any frustration and increases
their confi dence in the organisation’s ability to provide
them with the right service and support.

The Hidden Agent and Intelligent Systems

On the minority of occasions when it is diffi cult to be suffi ciently
confi dent of the caller’s requirement, their spoken audio is
streamed to a ‘hidden’ contact centre agent to categorise
the call and assist the service, which then routes the call.
This correction is fed back into the knowledge engine, which
tunes and improves the accuracy and breadth of the speech
recognition on an on-going basis. The hidden agent is never
connected to the caller, as this allows them to manage several
calls within the same time period it would take to speak directly
to a single caller. From the caller’s perspective they assume their
call is being handled by the speech recognition service at all
times, which provides a positive reinforcement of the veracity
of the technology.

Calls can be routed based on specifi c call types; this may be
to another automated service, a particular agent skill set or
department. By offering callers the opportunity to use their
own words, the call abandonment rates and misrouted calls
are drastically reduced.

This type of automation has become popular in the US
marketplace, where consumers are now demanding a more
natural, conversational style of service. UK consumers are
also becoming more comfortable and familiar with using
speech recognition systems so it is anticipated that this
trend will soon follow here.

“

Paramount to us is the delivery
of excellent customer service
to the general public. Eckoh’s
industry-leading technology will
deliver this and enable us to
ensure that calls are directed
to the right place, ﬁ rst time and
provide a quick, convenient and
positive experience.

Will Judge, Head of Future Ticketing
Transport for London

”

Case Study:
Transport for London

London’s transport system caters for approximately 24
million trips a day, across an integrated network of rail,
underground and bus links. TfL’s contact centre takes
10.5 million calls per annum, which equates to 320 years
of talk time. Following a feasibility study undertaken by
Eckoh, we determined that 30-40% of calls were being
misdirected and suggested EckohASSIST as a solution.

EckohASSIST began to go live in May 2012. The feasibility
study showed that EckohASSIST should reduce misrouted
calls to below 10 per cent, saving TfL a minimum of £0.5m
annually. Calls are routed based on specifi c call types;
either to a range of automated services or skilled agent
groups. The caller can also be directed to a website or
mobile web application.

Benefi ts:

•

Improved customer satisfaction by routing callers to
the right place, fi rst time

• Customer friendly method of interaction

• Savings of at least £0.5m per annum

• Reduction of misrouted calls from 40%

to less than 10 per cent

• Reduction in number of call transfers

• Outbound call costs are reduced

• Potential reduction in number of contact points within

TfL’s wider service offering

• Ability to handle spiky, unpredictable call volumes

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37
37

Payment Solutions from a PCI DSS Compliant
Level One Service Provider

By implementing Eckoh’s technology solutions,
businesses can stop card data being handled
by contact centre agents. This signifi cantly
reduces the risk of data being compromised
and the scope of a PCI DSS compliance project.
Protecting personal customer data means
businesses mitigate risk, safeguard brand
reputation and increase customer confi dence.

Case Study: RCI Financial Services

RCI Financial Services provide fi nance solutions to Renault
and Nissan customers of new and used cars and light
commercial vehicles.

payment requests, but to offer an alternative solution for
dealing with the more routine requests for settlement
information. RCI wanted to free up agents to handle the
more complex customer service requests.

All customer service calls, which include payment
requests, contract settlement fi gures and dealer calls
were dealt with by contact centre agents. The majority
of the calls received into the contact centre were for
information on contract settlement amounts with the
centre receiving more than 400,000 calls annually.
A critical requirement for RCI was to select a provider
that was not only PCI DSS compliant to automate the

Eckoh proposed its real-time PCI DSS compliant payment
solution, EckohPAY combined with EckohID to securely
authenticate the caller. The solution was implemented in
April 2011 and was an instant success processing £3.2
million in payments in the fi rst 3 months and helping RCI
to de-scope their PCI DSS compliance project avoiding
costly capital expenditure.

Our experience has shown that consumers fi nd it reassuring
not having to communicate their card details to a contact
centre agent and that using an automated payment system
that is available 24 hours a day to be more convenient with
their busy modern lifestyles.

EckohPROTECT – Real-time Payments with
Contact Centre agents where Card Details
are kept Private.

EckohPROTECT is a payments solution targeting organisations
that are processing card payments over the phone. Unlike
the EckohPAY product the contact centre agent remains on
the phone with the caller throughout the payment, providing
assistance where required. Many businesses prefer to retain
the customer and agent contact throughout the process to
minimise call abandonment, provide the opportunity for up
selling and to close the call.

When a payment is requested, the caller will be asked to
enter their card details using their telephone keypad which
generates Dual Tone Multi Frequency (‘DTMF’) tones.

EckohPROTECT prevents these tones (and the sensitive
information they convey) from being heard by the contact
centre agent which allows call recording to continue.
The agent sees the payment progress on their desktop,
but the actual card numbers are not shown.

As a fully accredited PCI DSS compliant Level One Service
Provider, Eckoh can offer solutions to process credit and debit
card payments using this method. EckohPROTECT mitigates the
risk of credit card fraud for our clients by eliminating the handling
of card data by agents, ensuring cardholder data remains
isolated from the contact centre environment.

EckohPAY – Payments made over the Phone,
Web, Smartphone or SMS without the need
to talk to an agent

EckohPAY enables customers of our clients to make card
payments conveniently and securely over the phone, web,
SMS or smartphone. By using our PCI DSS compliant
automated payment solutions the effi ciency of contact
centre agents is increased by freeing them up to service
more complex or higher-value calls. EckohPAY is also fully
integrated with the leading Payment Service Providers
(‘PSP’s’) including Barclaycard, BT Buynet, WorldPay,
SagePay and Realex.

By implementing Eckoh’s payment solutions, businesses
can stop card data being handled by contact centre agents.
This signifi cantly reduces the risk of data being compromised
and the scope of a PCI DSS compliance project. Protecting
personal customer data means businesses mitigate risk,
safeguard brand reputation and increase customer confi dence.

EckohPAY is a fully automated, real-time, and secure phone,
web, SMS and smartphone card payments service. Unlike
EckohPROTECT it does not require agent participation which
makes it an ideal choice for organisations looking to take
payments outside the normal hours of operation of the
contact centre.

Eckoh currently processes over £250 million per annum
in card payments through EckohPAY.

“

It was critical for RCI to work with a payment supplier who
could demonstrate full PCI DSS compliance. Eckoh not
only provide this but they have the infrastructure required
to serve our customers securely, quickly and efﬁ ciently.
They have shown themselves to be highly responsive to
our business needs and have given us the conﬁ dence that
our customers’ future demands will be well catered for.

Alan Heaffey, Director of Operations
RCI Financial Services

”

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39
39
39

Web and Mobile Applications

Our Technology

Developing mobile phone apps and websites that
complement our speech recognition solutions and
enabling businesses to meet customer contact
needs, is a natural evolutionary step for Eckoh.

We have successfully provided clients with the
means to complement their existing contact centre
technologies with web and mobile applications
for customers.

Eckoh can enable businesses to interact with their customers
through any contact channel they prefer—including phone,
web, mobile/ smartphones and other devices. Services can
be highly personalised, recognising customers from previous
interactions and meeting their needs using information already
known about them.

Reduce Operational Costs and Increase
agent Productivity

Whilst Eckoh is probably best known for speech recognition
solutions delivered over the telephone, our solutions are truly
multi-channel and can be supplied across the voice, web and
mobile channels.

As a single supplier for all customer contact channels, our clients
can provide more choice for less cost. They will also benefi t from
the consistent and integrated experience that is applied across
all channels.

Eckoh has a long track record of delivering innovative, automated
customer service solutions which mean organisations can invest
in improving customer experience with the confi dence that we’ll
be here for them whenever they need us.

Holly Connects

Nuance Verifi er

For the past year, Eckoh has been successfully using
a call handling platform from Holly Connects, a leading
vendor of software voice platforms and a subsidiary of
West Corporation. The Holly platform is a Next Generation
Voice Platform providing a fl exible, reliable, VoiceXML
standards-based framework for delivering voice
self-service applications.

Nuance Verifi er voice authentication software creates
individual voiceprints to authenticate callers and
customers with just their voices, enabling secure
access to information.

Enhanced Capability, Performance
and Quality

Nuance Recognizer

This platform has enabled us to:

In addition, the latest best-of-breed speech recognition
software from Nuance (Nuance Recognizer V9) has been
running throughout the new Holly platform. In April 2012
Eckoh extended the capability of the Nuance technology
by adding all language models that Nuance support
globally. This ensures that Eckoh can support and operate
speech recognition services from our operations in the
UK in every major language across the globe.

• enhance the capability, performance and quality
of Eckoh’s contact centre solutions; providing
exceptional accuracy, reliability and ease of use
for the consumer,

• provide a more natural and conversational style.

Eckoh predicts clients will demand this style of
service, resulting in even higher levels of successful
automation, and

• offer an identifi cation and verifi cation solution, with
the ability to confi dently ensure access to sensitive
information is secure whilst reducing the risk of
exposure to fraud and identity theft.

“

Client Example: Power NI

Eckoh has been working with Power NI since
2005 initially delivering the EckohPAY speech
recognition solution. This service has now
been extended to include a web-based
and smartphone based solutions.

Power NI is the largest electricity retailer in
Northern Ireland, supplying over 740,000
customers and has seen more and more
of its customers opting to ‘pay as they go’.
A quarter of a million people in Northern
Ireland now have electricity keypads
installed in their homes.

We have been delighted to work with Eckoh to develop
a multi-channel payment model for our customers,
which includes a telephone, web and smartphone
payment service – all with discount. The smartphone
apps enable us to offer our customers yet another way
to purchase discounted electricity for their ‘pay as you
go’ keypad, and are designed to make the process
even easier for them.

Ralph Graham, Business Analyst
Power NI

”

40
40

annual report 2012

What Our Clients Think

We work hard to ensure that our clients get
the maximum benefi t from their Eckoh solution
throughout the lifetime of their contract and not
just at the outset. We meet regularly with them,
to report on and discuss the performance of
the system, and we are always looking for
ways to deliver improvements and add value.

In an independent survey to our client base in 2011,* 100%
of our clients said they were satisfi ed or very satisfi ed with the
service Eckoh offers. They also agree, that compared to our
competitors, we have a better service provision, are easy to
do business with and demonstrate invoicing accuracy,
process and timeliness. According to the majority of our
clients, Eckoh is meeting or exceeding their expectations
of service benefi ts.

Whether it is helping transform their contact centre operation,
maximising their agent productivity, introducing new technology
or reducing operational costs, we help our clients to focus on
running their businesses. We have been commended for our
superior, professional and client facing approach to account
and project management, and is the reason many of our
clients stay with us. A fact we’re very proud of.

*Research conducted by Versatility Consultants on behalf of Eckoh UK Ltd, 2011

“

100% of our clients
said they were satisﬁ ed
or very satisﬁ ed with the
service Eckoh offers.

”

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43
43

Website Publication

The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.

Directors’ Responsibilities

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

Company law requires the directors to prepare group and
parent company financial statements for each financial year.
As required by the AIM Rules of the London Stock Exchange
they are required to prepare the group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and applicable
law, and have elected to prepare the parent company financial
statements in accordance with UK Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice).

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 parent company
and of their profit or loss 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 each of the group and the parent company
financial statements, the directors are required to:

 select suitable accounting policies and then apply

them consistently;

 make judgements and accounting estimates that

are reasonable and prudent;

 for the group financial statements, state whether they
have been prepared in accordance with IFRSs as
adopted by the European Union;

 for the parent company financial statements, state whether

applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained
in the financial statements;

 prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
parent company will continue in business.

The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions, and disclose with reasonable accuracy
at any time the financial position of the parent company and
enable them to ensure that the financial statements comply
with the requirements of the Companies Act 2006. They have
general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the group and to
prevent and detect fraud and other irregularities.

Audit Report for Eckoh plc
Independent Auditor’s Report to the Members of Eckoh plc

We have audited the financial statements of Eckoh plc for
the year 31 March 2012, which comprise the Consolidated
statement of comprehensive income, Consolidated statement of
financial position, Consolidated statement of changes in equity,
Consolidated statement of cash flows, Company balance sheet
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 preparation
of the parent company financial statements is applicable law
and UK Accounting Standards (UK Generally Accepted
Accounting Practice).

This report is made solely to the company’s members, as a
body, in accordance with sections 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.

Opinion on Financial Statements

In our opinion:

 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 2012 and of the group’s profit for the
year then ended;

 the group financial statements have been properly
prepared in accordance with IFRSs as adopted by
the European Union;

 the parent company’s financial statements have been

properly prepared in accordance with UK Generally
Accepted Accounting Practice; and

 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.

Respective Responsibilities of
Directors and Auditor

Matters on Which We Are Required to
Report by Exception

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 and express
an opinion on 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

A description of the scope of an audit of financial statements is
provided on the APB’s website at www.frc.org.uk/apb/scope/
private.cfm.

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:

 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

 the parent company financial statements are not in

agreement with the accounting records and returns; or

 certain disclosures of directors’ remuneration specified

by law are not made; or

 we have not received all the information and explanations

we require for our audit.

M Matthewman (Senior Statutory Auditor)
For and on behalf of KPMG Audit Plc, Statutory Auditor

Chartered Accountants
Altius House
One North Fourth Street
Milton Keynes
MK9 1NE

annual report 2012

Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2012

Consolidated Statement of Financial Position
as at 31 March 2012

Continuing operations

Revenue

Cost of sales

Gross profit

Total Administrative expenses

Profit from operating activities

Finance expense

Finance income

Profit from sale of investment

Share of loss in associate

Impairment of investment in associate

Profit / (loss) before taxation

Taxation

Profit / (loss) for the year from continuing operations

Discontinued operations

Notes

4,6

2012
£’000

10,392

(2,497)

7,895

(6,788)

1,107

100

1,256

1,320

2,576

Post tax profit for the year from discontinued operations

4, 10

Profit / (loss) for the year attributable to the equity holders
of the parent company

Other comprehensive income

Exchange differences on translating foreign operations

Adjustment for change in fair value of available for sale equity instruments

Transferred to profit or loss on sale

Total comprehensive income / (expense) for the year attributable
to the equity holders of the parent company

Profit / (loss) per share (pence)

Basic earnings per 0.25p share

Diluted earnings per 0.25p share

Profit / (loss) per share from continuing operations (pence)

Basic earnings per 0.25p share

Diluted earnings per 0.25p share

Profit per share from discontinued operations (pence)

Basic earnings per 0.25p share

Diluted earnings per 0.25p share

2,576

1.29

1.23

1.29

1.23

2011
£’000

9,003

(2,340)

6,663

(6,036)

627

(1,225)

121

(23)

(115)

(615)

316

(299)

(232)

(160)

160

(218)

(0.12)

(0.15)

0.03

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Deferred Tax Asset

Current assets

Inventories

Trade and other receivables

Short-term investments

Cash and cash equivalents

Total assets

Liabilities

Current liabilities

Trade and other payables

Non-current liabilities

Provisions

Net assets

Shareholders’ equity

Share capital

Capital redemption reserve

Share premium

Currency reserve

Retained earnings

Total shareholders’ equity

Notes

2012
£’000

386

1,488

1,320

3,194

3,583

1,000

5,370

9,972

13,166

(2,261)

(43)

2011
£’000

607

1,348

1,955

3,097

317

5,370

8,788

10,743

(2,319)

(43)

10,862

8,381

499

198

695

(41)

9,511

10,862

499

198

695

(41)

7,030

8,381

The financial statements were approved by the Board of Directors on 11 June 2012 and signed on its behalf by:
Adam Moloney – Group Finance Director

Company Registration Number 3435822

annual report 2012

Consolidated Financial Statements

Consolidated Statement of Changes in Equity
as at 31 March 2012

Balance at 1 April 2010

Total comprehensive expense for period

Other comprehensive income - exchange
differences

Share based payment charge

Balance at 31 March 2011

Balance at 1 April 2011

Total comprehensive expense for period

Dividends paid in the year

Share based payment charge

Balance at 31 March 2012

Share
Capital
£’000

499

Capital
redemption
reserve
£’000

Share
premium
£’000

Retained
earnings
£’000

Currency
reserve
£’000

Total
shareholders
equity
£’000

198

695

198

695

7,030

695

7,199

(232)

7,030

2,576

(200)

105

9,511

(55)

(41)

8,536

(232)

8,381

2,576

(200)

105

(41)

10,862

499

198

695

Consolidated Statement of Cash Flows
for the year ended 31 March 2012

Cash flows from operating activities

Cash generated in operations

Interest paid

Taxation

Net cash generated in operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Purchases of intangible fixed assets

Proceeds from sale of investment in associate

(Increase) / decrease in short-term investments

Loans repaid by third parties

Disposal of available for sale equity instrument

Interest received

Net cash (utilised) / generated in investing activities

Cash flows from financing activities

Dividends paid

Capital element of finance lease rental payments

Net cash utilised in financing investing activities

Increase 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

Notes

2012
£’000

1,507

(645)

(128)

100

(683)

(1,307)

(200)

5,370

2011
£’000

914

316

1,230

(635)

(298)

1,504

975

500

2,074

(1)

3,303

2,067

5,370

annual report 2012

Notes to the Financial Statements
For the year ended 31 March 2012

1. Basis of Preparation

The consolidated financial statements of Eckoh plc have been
prepared in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the EU (“endorsed 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 2012
as endorsed by the EU.

In the current year the Group has adopted the following
standards and interpretations:

 Classification of Rights Issues (Amendment to IAS 32)
 IFRIC 19 Extinguishing Financial Liabilities with

Equity Instruments

 Revised IAS 24 Related Party Disclosures
 Amendments to IFRIC 14 IAS 19 – Limit on a Defined
Benefit Asset, Minimum Funding Requirements and
their Interaction

 Improvements to IFRSs (2010) (effective for annual
periods beginning on or after 1 January 2011)

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.

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.

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.

None of these have had a material impact on the results
or financial position of the Group.

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

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:

 Disclosures – Transfers of Financial Assets

(Amendments to IFRS 7 – effective 1 July 2011)
 Severe Hyperinflation and Removal of Fixed Dates

for First-time Adopters (Amendments to IFRS 1 –
effective 1 July 2011)

 Deferred Tax: Recovery of Underlying Assets

(Amendments to IAS 12 – effective 1 January 2012)
 IFRS 9 Financial Instruments (this standard will eventually
replace IAS39 in its entirety – effective 1 January 2013)

The directors’ review newly issued standards and interpretations
in order to assess the impact (if any) 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 2012.

2. Summary of Principal Accounting Policies

Critical Accounting Policies, Estimates
and Judgements

The preparation of financial statements in accordance with
IFRS 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:

Revenue recognition

Investment in associate undertaking

Intangible assets

Trade and other receivables

Share based payment

note 2

note 11

note 13

note 17

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 acquisition 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.

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 set up or enhance services
to clients. Development costs which mainly relate to staff
salaries 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.

annual report 2012

Notes to the Financial Statements

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 category or not
classified in any of the other categories. They are included
within non-current assets unless management intends to
dispose of the investment within 12 months of the balance
sheet date and they are carried at fair value.

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 arise
principally through the provision of services to customers
(e.g. trade receivables), but also incorporate other types of
contractual monetary assets. Trade and other receivables
which principally represent amounts due from customers
and other third parties, are carried at original invoice value
less an estimate made for bad and doubtful debts. 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.

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.

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.

Dividends

Final dividends are recorded in the Group’s financial statements
in the period in which they are approved by the shareholders.
Interim dividends are recognised when paid.

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 companies
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.

Leases

Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as
operating leases.

Assets held under finance leases are recognised assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of
the lease. The corresponding liability to the lessor is included
in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability.
Finance charges are charged directly against income.

Rentals payable under operating leases are charged to income
on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into
an operating lease are also spread on a straight-line basis over
the lease term.

Provisions

Provisions are recognised when: the Group has a present legal
or constructive obligation as a result of past events; it is more
likely than not that an outflow of resources will be required
to settle the obligation; and the amount has been reliably
estimated. Provisions are not recognised for future
operating losses.

Provisions are measured at the present value of management’s
best estimate of the expenditure required to settle the present
obligation at the balance sheet date. The discount rate used
reflects current market assessments of the time value of money
and the risks specific to the liability.

annual report 2012

Notes to the Financial Statements

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.

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.

(b) Bonus schemes

Revenue Recognition

The Group recognises a liability and an expense for bonuses
payable to: i) employees based on a formula derived from
management assessment of individual performance; and
ii) senior management and executive directors based on
achievement of a series of financial and non-financial targets.
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 more
appropriate of the QCA-IRS option valuer using the Black-
Scholes formula or a Monte Carlo valuation model, 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.

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. In the
event that work on a project which results in a build fee
has commenced but not completed within an accounting
period, revenue is recognised in line with the percentage
that the project is complete at the end of the accounting
period. The percentage of completion is calculated by
taking the costs incurred on the project at the end of an
accounting period and expressing that as a percentage of
the total estimated costs that are anticipated to be incurred
in order to complete the project.

 Call revenue from speech services is recognised on a

transaction basis, 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.

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.

Associate

(d) Employee Share Ownership Plan

The Group’s Employee Share Ownership Plan (‘ESOP’) is a

Where the Group has the power to participate in (but not
control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially

recognised in the consolidated balance sheet at their fair value.
The Group’s share of post-acquisition profits and losses is
recognised in the consolidated income statement, except that
losses in excess of the Group’s investment in the associate are
not recognised unless there is an obligation to make good
those losses.

Profits and losses arising on transactions between the Group
and its associates are recognised only to the extent of unrelated
investors’ interests in the associate. The investor’s share in the
associate’s profits and losses resulting from these transactions
is eliminated against the carrying value of the associate.

Any premium paid for an associate above the fair value of the
Group’s share of the identifiable assets, liabilities and contingent
liabilities acquired is capitalised as goodwill and included in
the carrying amount of the associate. The carrying amount of
investment in associate is subject to impairment in the same way
as goodwill arising on a business combination described above.

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.

Where cash payments are received from HM Revenue and
Customs relating to claims for investment tax credits relating
to Research and Development relief, they are recognised in
the statement of comprehensive income when they are
received as a credit to taxation.

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:

 They are available for immediate sale;
 Management is committed to a plan to sell;
 It is unlikely that significant changes to the plan will be

made or that the plan will be withdrawn;

 An active programme to locate a buyer has been initiated;
 The asset or disposal group is being marketed at a
reasonable price in relation to its fair value; and

 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:

 Their carrying amount immediately prior to being classified
as held for sale in accordance with the group’s accounting
policy; and

 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.

annual report 2012

Notes to the Financial Statements

3. Financial Risk Management

Foreign Currency Risk

Categories of Financial Assets and Financial Liabilities

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.

Since the closure of Group subsidiary in France undertaken
in June 2010, no cash or assets are held in foreign currencies.
Very few transactions undertaken by the company are in a
currency other than Sterling. No sensitivity analysis is provided
in respect of foreign currency risk as 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.

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.

Interest Rate Risk

The Group principally finances its operations through
shareholders’ equity and working capital. The Group
had no borrowings during the year, and its only material
exposure to interest rate fluctuations was on its cash
and short-term deposits.

The Group has adopted a sensitivity analysis that measures
changes in the fair value of financial instruments and any
resultant impact on the income statement of an increase
or decrease of 2% in market interest rates.

(Decrease)/increase in fair value of short-term investments

Impact on income statement: (loss)/gain

2% decrease in interest rates
£’000

2% increase in interest rates
£’000

(118)

118

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

Total financial assets

Financial Liabilities

Loans and receivables

2012
£’000

1,564

134

1,000

5,370

8,068

2011
£’000

1,326

317

5,370

7,073

All financial liabilities held by the Group are measured at amortised cost and comprise trade payables of £1,047,000
(2011: £1,071,000) and other payables of £208,000 (2011: £245,000). See note 20 for further details.

4. Segment Analysis

The Group’s continuing operations are considered to represent a single integrated business with only one reportable segment.
Internal financial reporting within the Group is prepared on an individual customer basis, rather than on a product basis; however
management consider all customers to have similar characteristics, and, therefore, financial analysis and decision-making is
performed at an aggregated level rather than customer level. In addition, there are no material foreign entities and revenue
is derived entirely from the UK therefore segmental information by geographical area is not presented. Continuing operations
in the table below are represented by the Speech Solutions division with discontinued operations represented by the Client IVR
division, sold in June 2010.

annual report 2012

Notes to the Financial Statements

2012

Revenue

Gross profit

Administrative expenses

Net interest receivable

Profit from sale of investment

(Loss)/profit before taxation

Taxation

(Loss)/profit after taxation

2011

Revenue

Gross profit

Administrative expenses

Net interest receivable

Finance expense

Share of loss in associate

Impairment of investment

(Loss)/profit before taxation

Taxation

Post tax gain from disposal of operations

(Loss)/profit after taxation

Continuing operations
£’000

Discontinued operations
£’000

10,392

7,895

(6,788)

100

1,256

1,320

2,576

Continuing operations
£’000

Discontinued operations
£’000

9,003

6,663

(6,036)

121

(1,225)

(23)

(115)

(615)

316

(299)

1,269

243

(207)

Total
£’000

10,392

7,895

(6,788)

100

1,256

1,320

2,576

Total
£’000

10,272

6,906

(6,243)

121

(1,225)

(23)

(115)

(579)

316

(232)

In 2011/12, there were two customers that individually accounted for more than 10% of the total revenue of the continuing operations
of the company (2010/11: two customers). Revenue from these customers in 2011/12 totalled £3,753,000 (2010/11: £3,456,000).

5. Profit from Operating Activities

The Group’s profit from operating activities is arrived at after charging:

Employee benefits expense (note 6)

Depreciation (note 14)

Amortisation (note 13)

Operating lease payments – property (note 26)

2011
£’000

3,251

505

349

588

2011
£’000

2,784

446

290

487

6. Employee Benefits Expense

Wages and salaries

Less: Internal development costs capitalised in the year

Amortisation of internal development costs

Social security costs

Pension costs

Share based payments

2012
£’000

2,650

(109)

227

372

105

3,251

2011
£’000

2,403

(251)

253

311

2,784

The Directors’ report on page 22 provides further details on the Directors’ emoluments. The average number of people (including
executive directors) employed by the Group during the year was:

Technical support

Customer services

Administration and management

2012
Number

2011
Number

Excluded from the table above are 27 (2010/11: 17) full time equivalent casual call centre employees who cost £333,000 (2010/11:
£200,000) in the year.

7. 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

Taxation services

Total fees payable to the Group’s auditor

2012
£’000

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

8. Finance Income

Continuing operations

Bank interest receivable

Interest receivable on loans and other receivables

Arrangement fees on loans

2012
£’000

2011
£’000

121

The arrangement fees on loans related to a loan payable by Redstone plc to Eckoh plc. Details on the settlement of this loan are
given in note 17.

annual report 2012

Notes to the Financial Statements

9. Taxation

Tax recognised in profit and loss

Current tax expense/(credit)

Current year

Adjustments in respect of prior periods

Deferred tax expense/(credit)

Origination and reversal of temporary differences

Recognition of previously unrecognised tax losses

Tax credit from continuing operations

Tax from discontinued operations (note 10)

Total tax credit

No taxation was recognised directly in equity.

2012
£’000

(1,320)

As restated

2011
£’000

(316)

The tax charge for the year is different to the standard rate of corporation tax in the UK (26%). The differences are explained below:

Continuing operations

Profit / (loss) for the year

Total tax credit

Profit / (loss) excluding tax

Profit / (loss) multiplied by rate of corporation tax in the UK of 26% (2011: 28%)

Effect of expenses not deductible for tax purposes

Effect of income not taxable for tax purposes

Adjustments in respect of prior periods

Deferred tax not recognised

Effect of tax rate adjustment on closing recognised deferred tax balance

Tax charge for the year

2012
£’000

2,576

(1,320)

1,256

327

(17)

(1,740)

110

(1,320)

As restated

2011
£’000

(299)

(316)

(615)

(172)

(316)

142

(316)

During the year ended 31 March 2012, £nil (2011: £316,000) was received in respect of HMRC Research and Development tax
credits in relation to the years ended 31 March 2008, 31 March 2009 and 31 March 2010. This is disclosed in the table above as
an adjustment in respect of prior periods.

Recognition of Deferred Tax Assets and Liabilities

Tax losses carried forward

2012
£’000

1,320

Assets

2011
£’000

Liabilities

2011
£’000

2012
£’000

Net

2011
£’000

1,320

The ongoing growth of the business into increasing profitability has provided sufficient evidence that £1,320,000 of previously
unprovided deferred tax assets in respect of trading losses will be recoverable, and is therefore being recognised as an asset on the
statement of financial position. This asset has been valued based on the projected profits over the next three financial years.

Movement in Deferred Tax Balances During the Year

Balance
1 April 2011

Recognised in profit
or loss

Recognised in Other
Comprehensive Income

Balance
31 March 2012

£’000

1,320

£’000

1,320

Tax losses carried forward

Unrecognised Deferred Tax Assets

There are unprovided deferred taxation assets totalling £3,239,000 (2011: £5,314,000) in respect of trading losses and £7,509,000
(2011: £8,142,000) in respect of capital losses of which £5,380,000 (2011: £5,829,000) are restricted. In addition, there are other
temporary timing differences resulting in unprovided deferred tax assets of £697,000 (2011: £706,000), comprising Accelerated
Capital Allowances of £571,000 (2011: £487,000) and Short term temporary differences of £126,000 (2011: £109,000).

In the 2012 Budget, the Chancellor announced a reduction in the main rate of corporation tax from 24% to 22%, to be phased
in over three years as follows:

 With effect from 1 April 2012 - 24%
 With effect from 1 April 2013 - 23%
 With effect from 1 April 2014 - 22%

Under IFRS, deferred tax is measured by reference to the rates which are enacted or substantively enacted at the balance sheet date.
The reduction in the corporation tax rate to 24% was substantively enacted on 26 March 2012, and therefore the potential deferred
tax asset has been calculated at this rate.

The further reductions to 23% and 22% are not expected to be substantially enacted until June or July 2012 and 2013 respectively
and therefore have not been reflected in the deferred tax calculations for this period.

annual report 2012

Notes to the Financial Statements

10. Post-Tax Profit for the Year from Discontinued Operations

11. Profit on Sale of Investment

Discontinued operations relate to the Client IVR division of Eckoh UK Limited.

On 27 May 2010, the Company 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 (a company incorporated in England and Wales). 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.

Profit from disposal of operations

Consideration:

Shares in Telecom Express Limited

Deferred cash

Net consideration received

Cost of disposal

Net assets disposed: Property, plant and equipment

Pre and post tax gain from the disposal of operations

No cash or cash equivalents were disposed of with the sale of these operations (2011: £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 gain from the disposal of operations

Basic and diluted earnings per share (note 12)

2012
£’000

2011
£’000

138

(92)

(15)

2011
£’000

1,269

(1,026)

243

(207)

As detailed in note 10, Eckoh plc acquired a 27.5% holding in Telecom Express Limited (“TE”) on 27 May 2010 and a place on the
board. On 16 March 2012, this holding was sold back to Telecom Express for £100,000 to be paid in three equal instalments on 1
June 2012, 3 August 2012 and 1 February 2013.

The shares acquired were originally valued at £137,500 after discounting to take account of the fact that this is a minority holding in
a privately owned company. During the period from 1 June 2010 to 30 September 2010 TE made losses of £82k which prompted
a review of forecasted trading performance and led to the decision to fully impair the remaining value of the investment. TE operate
over a different accounting period than Eckoh plc, ending on 30 June each year. Movements in the carrying value of the investment
during the year can be summarised as follows:

Carrying value of investment in Telecom Express Limited

Investment accounted for using equity method

Share of loss from associate at 30 September 2010

Impairment of investment at 30 September 2010

Investment in equity accounted associate at 31 March 2011

Proceeds from sale of investment on 16 March 2012

Profit from sale of investment

12. Earnings per Share

£’000

138

(23)

(115)

100

Basic earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares of 199,759,576 (2011:
199,759,576) in issue during the year ended 31 March 2012 after adjusting for shares held by the Employee Share Ownership Plan of
9,156 (2011: 9,156) and the profit for the period attributable to equity holders of the parent of £2,576,000 (2011: loss of £232,000).

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 9,740,000 (2011: 4,943,000).

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

2012
£’000

2011
£’000

(559)

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

Number of shares used in calculating diluted earnings per share

0.03 pence

Denominator

2012
‘000

199,760

(9)

199,751

9,740

209,491

2011
‘000

199,760

(9)

199,751

4,943

204,694

annual report 2012

Notes to the Financial Statements

13. Intangible Assets

14. Property, Plant and Equipment

Group

Cost

At 1 April 2010

Additions

At 31 March 2011

Additions

At 31 March 2012

Amortisation

At 1 April 2010

Charge for the year

At 31 March 2011

Charge for the year

At 31 March 2012

Carrying amount

At 31 March 2012

At 31 March 2011

Internally developed

Goodwill

computer software Other intangible assets

£’000

15,922

£’000

1,231

298

1,529

128

1,657

634

288

922

349

1,271

386

607

£’000

Total

£’000

17,173

298

17,471

128

17,599

16,574

290

16,864

349

17,213

386

607

Included within the carrying value of intangible assets is £185,000 (2011: £301,000) capitalised in respect of the costs incurred to
enable Eckoh plc to become a Payment Card Industry Data Security Standard (PCI DSS) compliant level one service provider.
This investment has strengthened security around the infrastructure and procedures within the business enabling it to handle
credit card transactions for clients in a secure manner. These costs are being amortised over 3 years until October 2013.

Cost

At 1 April 2010

Additions

Disposals

At 31 March 2011

Additions

At 31 March 2012

Depreciation

At 1 April 2010

Charge for the year

Disposals

At 31 March 2011

Charge for the year

At 31 March 2012

Carrying amount

At 31 March 2012

At 31 March 2011

Fixtures and equipment
£’000

6,014

635

(475)

6,174

645

6,819

4,854

446

(474)

4,826

505

5,331

1,488

1,348

The carrying amount of property, plant and equipment includes £nil (2010: £nil) in respect of assets held under finance lease
contracts. The depreciation charge in respect of assets held under finance lease was £nil (2010: £nil).

annual report 2012

Notes to the Financial Statements

15. Investment in Subsidiary Undertakings

The following are the principal subsidiary undertakings of the Group, which are included in the consolidated financial statements:

Subsidiary undertakings

Country of incorporation

Principal activities Percentage of share capital held

Eckoh UK Limited

Eckoh France SAS

Eckoh Enterprises Limited

Eckoh Projects Limited

Avorta Limited

Eckoh Technologies Limited

Intelliplus Group Limited

Intelliplus Limited

Medius Networks Limited

Telford Projects Limited

Swwwoosh Limited

365 Isle of Man Limited

England and Wales

Speech Solutions

France

England and Wales

Isle of Man

Non trading

Dormant

Non trading

Dormant

Non Trading

Dormant

(i) Share capital held by a subsidiary undertaking.

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

16. Inventories

Work in progress

17. Trade and Other Receivables

Current

Trade receivables

Less: provision for impairment of receivables

Net trade receivables

Other receivables

Prepayments and accrued income

2012
£’000

1,564

134

1,885

3,583

The Directors’ consider that the carrying value of the trade and other receivables approximate to their fair value.

100%

100%(i)

67% & 33%(i)

100%

100%(i)

100%

100%(i)

100%

100%(i)

2011
£’000

1,333

(7)

1,326

1,711

3,097

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 reputable nature of the Group’s current customer base
limits exposure to credit risk. At 31 March 2012, there are
no trade receivables that are past due but not impaired
(2011: nil). 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 writing off a disputed amount outstanding
since 2005 from British Telecommunications plc. The remainder
of the movement of provision relates to items which were
provided for as being more than 60 days past due which
were subsequently settled with the provision released.
(2011: provision reduced by £65,000).

The financial results for the year ended 31 March 2010
disclosed that amounts outstanding totalling £2,927,000 were
owed to Eckoh plc by Redstone plc (“Redstone”). The loan was
a remaining balance of a loan of £7,500,000 originally made to
Symphony Telecom Holdings plc in 2006. Symphony Telecom
Holdings plc were acquired by Redstone in July 2006.

The Directors of Eckoh plc were approached by the Directors of Redstone to participate in a programme to restructure and refinance
Redstone and assist in securing the financial future of Redstone. On 24 August 2010, agreement was reached with Redstone plc
on a settlement to clear all outstanding amounts from the loan. Under the terms of the agreement Eckoh received;

 A settlement fee of £500,000 payable in cash (“Eckoh Settlement Fee”)
 200,000,000 Ordinary shares (“Eckoh Settlement Shares”) with an aggregate value of £1,000,000 at the placing price

of 0.5p per share

The Eckoh Settlement Shares had a market value of 0.66p on the day of issue and were sold over several transactions at 0.5p per
share with the final transaction being completed on 17 September 2010. In addition the balance of deferred arrangement fees was
released against the receivable balance.

The impairment of receivable has been recorded as a finance expense in the Statement of consolidated income and was determined
as follows:

Loan balance at 31 March 2010

Interest receivable accrued and unpaid

Cash from Eckoh Settlement Fee

Net proceeds from disposal of Eckoh Settlement Shares

Cash from immediate sale of shares

Release of deferred arrangement fee

Interest accrued and unpaid in the period

Impairment of Receivable

Adjustment for change in fair value of available for sale equity instrument transferred on sale

Finance expense in year ended 31 March 2011

£’000

2,927

(500)

(225)

(661)

1,065

160

1,225

annual report 2012

Notes to the Financial Statements

18. Short-Term Investments

Sterling

Fixed rate

Floating rate

2012
£’000

1,000

2012
£’000

1,000

2011
£’000

317

2011
£’000

317

The short term investments at floating rate in the prior year represent an amount held in escrow in connection with a client contract.
The short term investment at fixed rate represents an amount held with Natwest Bank for a fixed period of time. Short-term deposits
held during the year have an average maturity of 9 months (2011: 3 months) with an average interest rate of 1.04% (2011: 0.88%).

19. Cash and Cash Equivalents

Sterling

Floating rate

2012
£’000

5,370

2012
£’000

5,370

2011
£’000

5,370

2011
£’000

5,370

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 0.65% (2011: 0.59%).

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

2012
£’000

1,047

208

399

607

2,261

2011
£’000

1,071

245

349

654

2,319

All of the amounts above are payable within one year and trade payables that are more than three months old at the year-end
represent £13,000 (2011: £256,000).

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

21. Share Capital

Allotted called up and fully paid

Date of issue and share type

Ordinary shares of 0.25p each

At 1 April 2011

At 31 March 2012

Number of shares

Nominal Value

199,759,576

£’000

499

The total authorised number of shares is 1,000,000,000 ordinary shares with a nominal value of 0.25 pence per share. All ordinary
shares in issue are fully paid. The holders of the ordinary shares are entitled to receive dividends, if declared, and are entitled to vote
at general meetings of the Company. There were no changes to the authorised share capital during the period. Potential ordinary
shares are disclosed in note 23.

22. Provisions

At 1 April 2011

Provided in year

Utilisation in year

At 31 March 2012

Provision for Dilapidations
£’000

Total
£’000

The dilapidation provision will not be payable until the end of the lease on the Group’s Telford House offices in 2015. The effect of
discounting is not material and therefore has not been included within the calculation for the dilapidation provision.

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.

annual report 2012

Notes to the Financial Statements

The Eckoh plc 2010 Long Term Incentive Plan (“LTIP”) was
introduced in June 2010. Awards under the plan are made in
two parts. Part 1 awards are in the form of options exercisable
at 0.25 pence, which vest dependent on performance against
Earnings per share targets set at the beginning of each financial
period. None of the Part 1 awards are released until 3 years
have elapsed during which targets relating to Total Shareholder
Return must also be achieved. The Part 1 awards have a
matching mechanism whereby additional awards are made to
match any purchase of shares made by recipients up to a cap of
25% of the Executive’s remuneration. Part 2 awards are made
to executive directors and key management in the event that the
Company undergoes a change of control (“trigger event”).
The value of part 2 awards is dependent on the increase in value
obtained for shareholders from a trigger event in comparison to
the value of the Company shares at the date of award. Further
information is available in the remuneration report on page 32
and in the directors report on page 22. As there is currently no
probability of a “trigger event” taking place before the lapse
date of the awards of 30 June 2013, no charge was made to the
Statement of comprehensive income in respect of these awards.

The 2010 Eckoh plc Bonus scheme paid half of any bonus
payable to executives and key management personnel in
the form of deferred nil cost share options. The awards
relating to the 2010/11 financial year were made on 30 June
2011 (“calculation date”) with further detail available in the
Remuneration report on page 18. An award relating to the
2011/12 financial year is expected to be made on 30 June 2012
(“calculation date”). The deferred share options will vest in two
halves 12 and 24 months following the calculation dates.

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

5 March 2010

8 June 2011

26 March 2012

8.50

8.75

5.0

5.13

8.00

8.125

10.875

11.0

4,525,000

4,500,000

1,000,000

1,275,000

43%

5.49%

2.89

43%

2.83%

1.56

48%

4.00%

3.13

42%

2.75%

3.15

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.

The fair value of awards made under the LTIP scheme was
measured using a model using the Monte Carlo method, taking
into account the terms and conditions upon which the awards
were made. The fair value of awards made under the Bonus
scheme was measured using the QCA-IRS option valuer based
on the Black-Scholes formula. The fair value per award granted
and the assumptions used in the calculation are as follows;

Award type

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)

Award type

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)

30 June 2010

28 February 2011

LTIP

4.875

0.25

4,846,153

43%

1.38%

2.53

LTIP

7.125

0.25

150,000

2.34

43%

9.34

2.34

1.61%

4.98

30 June 2010

30 June 2011

Bonus

4.75

0.00

Bonus

4.75

0.00

Bonus

11.00

0.00

Bonus

11.00

0.00

845,162

443,108

43%

1.38%

4.75

43%

1.38%

4.75

43%

4.0%

11.00

43%

4.0%

11.00

annual report 2012

Notes to the Financial Statements

A reconciliation of option movements over the year to 31 March 2012 is shown below:

2012

2011

Number of share
options

Weighted average
exercise price

Number of share
options

Weighted average
exercise price

Outstanding at 1 April

Granted

Lapsed

Forfeited

Outstanding at 31 March

Exercisable at 31 March

20,394,304

3,134,483

(236,000)

(322,196)

22,970,591

8,999,632

2012

Weighted average
remaining life

4.80

7.07

7.79

5.87

5.04

7.91

17,434,667

6,686,476

(3,726,839)

20,394,304

9,307,828

6.09

0.25

8.97

4.80

7.91

2011

Range of
exercise
prices
(pence)

0-0.5

4.5-6.5

6.5 – 8.5

8.5 – 10.5

10.5 – 12.5

16.5 – 20.0

Weighted
average
exercise
price
(pence)

0.17

5.13

7.07

8.72

10.99

Number
of shares
(000’s)

7,546

4,150

4,820

5,150

1,305

Expected

Contractual

1.4

0.9

0.5

2.9

8.4

7.9

2.5

4.4

9.8

Weighted
average
exercise
price (pence)

Number
of shares
(000’s)

0.19

5.13

6.86

8.72

10.75

16.75

6,686

4,400

4,077

5,200

Weighted average remaining
life

Expected

Contractual

2.1

1.9

7.4

8.9

1.7

5.4

1.7

0.2

During the period, Eckoh plc held 27.5% of the share capital of Telecom Express Limited (“TE”) as disclosed in note 11 arising from
the sale of the IVR division. In addition, NB Philpot was a director of both Eckoh plc and TE during the period that the shareholding
was owned by Eckoh plc. As a result, TE is considered a related party. Eckoh plc have provided a speech recognition share
quote service to TE since April 2008 and generated revenue of £42,000 (2011: £35,000) in the year ended 31 March 2012 from
which payments of £23,000 (2011: £7,000) were made to TE as part of a revenue share arrangement. In addition, Eckoh plc have
recognised a further £140,000 (2011: £61,000) of revenue from TE for business support services supplied during the year ended
31 March 2012. At 31 March 2012 a balance of £63,000 (2011: £14,000) was owing from TE to Eckoh plc in respect of these
transactions. In addition, Eckoh have an arrangement with TE where traffic from some Eckoh clients uses a TE network.
TE receives the revenue from this traffic and passes it on to Eckoh plc. As at 31 March 2012, £198,000 (2011: £201,000)
was outstanding from TE in respect of these transactions.

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

Directors and other key management

Wages and salaries

Social security costs

Pension costs

Share based payments

2012
£’000

710

903

2011
£’000

720

883

The aggregate Directors’ emoluments are shown in the table below. An analysis of Directors’ emoluments is included in the Directors’
Report on page 11.

Directors

Aggregate emoluments

26. Operating Lease Commitments

2012
£’000

513

2012
£’000

234

284

518

2011
£’000

504

2011
£’000

487

379

866

The total charge for the year relating to employee share based payment plans was £105,000 (2011: £63,000) all of which related to
equity-settled share based payment transactions.

The Group had total annual commitments under non-cancellable operating leases as follows:

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.

Land and buildings

Expiring within one year

Expiring within two to five years

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 15):

 Eckoh UK Limited
 Eckoh France SAS
 Eckoh Projects Limited
 Intelliplus Limited
 Medius Networks Limited

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

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 for the ground and first floors. On 8 December 2011, an additional lease for the second floor of the same building
was agreed. The annual operating lease charge for the additional floor is £52,000 with rent commencing on 24 July 2012. 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.

annual report 2012

27. Cash Flow from Operating Activities

Cash flows from operating activities

Profit / (loss) after taxation

Gain on disposal of business operations

Profit on sale of investment in associate

Interest income

Interest paid

Share of loss in associate

Impairment of investment in associate

Increase in deferred tax asset

Taxation credit recognised in income statement

Depreciation of property, plant and equipment

Amortisation of intangible assets

Share based payments

Operating profit before changes in working capital and provisions

Increase / (decrease) in inventories

Increase / (decrease) in trade and other receivables

(Increase) / decrease in trade and other payables

Increase in provisions

Net cash generated in operating activities

2012
£’000

2,576

(100)

(49)

(1,320)

505

349

105

2,066

(15)

(486)

(58)

1,507

2011
£’000

(232)

(31)

(121)

1,225

115

(316)

446

290

1,462

564

(836)

(277)

914

28. Events after the Statement of Financial Position Date

Post year end the Directors are recommending that a final dividend for the year ended 31 March 2012 of 0.2 pence per ordinary
share be paid to the shareholders whose names appear on the register at the close of business on 24 August 2012 with payment
on 21 September 2012. The ex-dividend date will be 19 September 2012. This recommendation will be put to the shareholders at
the Annual General Meeting. Based on the shares in issue at the year end, this payment would amount to £0.4m.

Company Financial Statements
Prepared Under UK GAAP

Company Balance Sheet
as at 31 March 2012

Company number: 3435822

Fixed assets

Investments

Current assets

Debtors: amounts falling due within 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

viii, ix

2012
£’000

5,211

1,000

5,230

6,270

(9)

6,261

11,472

499

198

695

440

9,640

11,472

2011
£’000

5,043

4,963

4,992

(9)

4,983

10,026

499

198

695

272

8,362

10,026

The financial statements were approved and authorised for issue by the Board of Directors on 11 June 2012 and signed on its behalf
by: Adam Moloney – Group Finance Director

annual report 2012

Notes to the Company’s Financial Statements
For the year ended 31 March 2012

Principal Accounting Policies

Deferred Taxation

Related Party Transactions

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.

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.

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 is a going concern.
As part of its normal business practice, the Company is included
within annual and longer term plans prepared management,
and, in reviewing this information, the Company’s Directors are
satisfied that the Company has reasonable resources to enable
it to continue in business for the foreseeable future. For this
reason, the Company continues to adopt the going concern
basis in preparing these financial statements.

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.

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
wholly-owned 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 either a
Monte Carlo valuation model or 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.

During the year the company also introduced a new long term
incentive plan. The fair value of the conditional awards of shares
granted under the long term incentive plan determined at the
date of grant. The fair value is then expensed on a straight
line basis over the vesting period based on an estimate of the
number of shares that will eventually vest. At each reporting
date, the non-market based performance criteria and total
shareholder return defined in the long term incentive plan will
be reconsidered and the expense will be revised as necessary.

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.

Dividends

Final dividends are recorded in the financial statements in
the period in which they are approved by the shareholders.
Interim dividends are recognised when paid.

annual report 2012

The directors have assessed the carrying values of the Company’s investments in line with FRS 11 Impairment, and concluded
that no impairment triggers exist that would require the Company’s investment in Eckoh UK Limited to be further impaired.
The investment in Eckoh Projects Limited has been fully returned in previous years and therefore has no current value.

During the year the Directors have reviewed the disclosures in respect to investments, and believe it more appropriate to show
historic net increases to investments as a result of the write-off/write-back of intercompany balances, and the associated impairment
of those balances, on a gross basis, rather than a net basis. The impact of this grossing up is to increase Cost brought forward by
£6,986,000 and increase Impairment brought forward by £6,986,000. There is no impact on the net book value of Investments.

Other investments represent additional investments in Eckoh UK Limited as a result of the share-based payments arrangements in
place. As the Company grants options over its shares to employees of Eckoh UK Limited, the Company records an increase in its
investment in Eckoh UK Limited, the details of which are disclosed further in note 23 of the consolidated financial statements.
The disclosure of these amounts has been restated during the year.

Cash Flow Statement

Notes to the Company’s Financial Statements

The cash flows of the Company are included in the consolidated cash flow statement on page 27.

i. Operating Expenses

Staff Costs

Details of the Directors’ emoluments are given in the Directors’ Report on page 11. The Director’s remuneration costs are
borne by a subsidiary undertaking. The Company did not incur any staff costs during the year (2011: £nil). The average
number of employees employed by the company during the year was 4 (2010: 4).

Services Provided by the Group’s Auditor

Fees payable for the audit of the parent company and consolidated accounts of £15,000 (2011: £18,000)
were borne by a subsidiary undertaking.

ii. Fixed Asset Investments

Cost

At 1 April 2011 – as previously stated

Reclassification between categories (see page 54)

Additions – change to disclosures

At 1 April 2011 – as restated

Additions

At 31 March 2012

Impairment

Shares in subsidiary
undertakings
£’000

Other investments
£’000

5,043

(307)

6,986

11,722

307

168

475

Total
£’000

5,043

6,986

12,029

168

12,197

At 1 April 2011 and 31 March 2012

(6,986)

Net Book Value

At 31 March 2012

At 31 March 2011

4,736

475

307

5,211

5,043

Fixed rate

iii. Debtors

Other debtors

Prepayments and accrued income

Amounts due within one year

iv. Short-Term Investments

Sterling

31 March
2012
£’000

1,000

31 March
2012
£’000

1,000

31 March
2011
£’000

The following are the principal subsidiary undertakings of the Company:

Subsidiary undertakings

Country of incorporation

Principal activities

Percentage of share capital
held

Eckoh UK Limited

Eckoh Projects Limited

England and Wales

Speech Solutions

IVR Services

100%

The short term investment at fixed rate represents an amount held with Natwest Bank for a fixed period of time. Short-term deposits
held during the year have an average maturity of 9 months (2011: 3 months) with an average interest rate of 1.04% (2011: 0.88%).

v. Creditors: Amounts Falling Due Within One Year

The Company also holds 100% of the issued share capital of nine non-trading or dormant companies, not shown above.
The details of these non-trading and dormant companies are listed at Companies House and are included in note 15 of the
consolidated accounts.

Other creditors

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

31 March
2012
£’000

31 March
2011
£’000

annual report 2012

vi. Provisions for Liabilities and Charges

Total unprovided deferred tax assets are as follows:

Tax losses available

Other temporary differences

Unprovided deferred tax asset

31 March
2012
£’000

2,639

2,657

31 March
2011
£’000

1,551

1,570

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

vii. Profit and Loss Account

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 2012 the Company made a profit
of £1,478,000 (2011: loss of £386,000).

x. Share Options and Share Based Payments
Share options and share based payments are disclosed in note 23 to the consolidated financial statements.

xi. 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.

xii. Events after the Balance Sheet Date
Post year end the Directors are recommending that a final dividend for the year ended 31 March 2012 of 0.2 pence per ordinary
share be paid to the shareholders whose names appear on the register at the close of business on 24 August 2012 with payment on
21 September 2012. The ex-dividend date will be 19 September 2012. This recommendation will be put to the shareholders at the
Annual General Meeting on 15 August 2012. Based on the shares in issue at the year end, this payment would amount to £0.4m.

viii. Share Capital

Allotted, called up and fully paid

Date of issue and share type

Ordinary shares of 0.25p each

As at 1 April 2011

As at 31 March 2012

ix. Share Capital and Reserves

Share capital
£’000

Capital redemption
reserve
£’000

Balance at 1 April 2011

Profit for the year

Dividends paid in year

Share option charge

Balance at 31 March 2012

499

Number of shares

Nominal value £’000

199,759,576

499

Share
premium
account
£’000

695

As restated

Share based
payment
£’000

Profit and loss
account £’000

272

168

440

8,362

1,478

(200)

9,640

198

695

annual report 2012

Shareholder Information

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

Directors and Company Secretary

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

C.M. Batterham
Non-executive Chairman

C. Ansell
Non-executive Director

N.B. Philpot
Chief Executive Offi cer

A.P. Moloney
Group Finance Director and Company Secretary

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

www.eckoh.com

Registered in England and Wales, Company number 3435822.

Nominated Advisor and Nominated Broker
Singer Capital Markets Limited
One Hanover Street,
London, W1S 1YZ

Solicitor
Travers Smith
10 Snow Hill
London, ECA 2AL

Banker
Barclays Bank plc
11 Bank Court
Hemel Hempstead
Hertfordshire, HP1 1BX

Auditor
KPMG Audit Plc
Altius House
One North Fourth Street
Milton Keynes, MK9 1NE

annual report 2012

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

08000 630 730
tellmemore@eckoh.com
www.eckoh.com

annual report 2012