Eckoh plc Annual Report 2018

FY2018 Annual Report · Eckoh plc

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AnnuAl RepoRt & ACCountS 2018

2018 AnnuAl RepoRt & ACCountS

Contents

Strategic Report
Highlights
3
Chairman’s Statement
5
6
Chief Executive Review
12 Principal risks & uncertainties
14
Financial Review
Business Model
16 Eckoh Experience
17 Card & Data Security
18 Customer Engagement
20 Coral - Agent Desktop
21 Third Party Support
22 Solution Synopses

Case Studies: Ideal World, thames Water, BMW
Corporate Responsibility
24 Business Ethics
25 Employee Engagement
26 Community
27 Environment
Corporate Governance
28 Board of Directors
29 Chairman’s Report
34 Audit Committee Report
37 Remuneration Committee Report
38 Annual Report on Remuneration
43 Directors’ Report
46
Independent auditor’s report
Financial Statements
51 Primary Statements
56 Basis of Preparation and notes to the accounts
80 Company Financial Statements
87 Shareholder Information

Strategic Report

AnnuAl RepoRt & ACCountS 2018

Highlights of the year

eckoh plc (AIM: eCK), the global provider of Secure payment
products and Customer Contact solutions, is pleased to announce
its final results for the year ended 31 March 2018.

£m unless otherwise stated

Revenue

Recurring Revenue %1

US revenue mix %

Gross profit

Adjusted EBITDA2

Adjusted Operating Profit3

Adjusted operating profit margin

Statutory PBT

Diluted Earnings per share

Proposed Full Year Dividend per share

Net Cash

FY18

30.0

76%

37%

22.9

6.5

5.3

17.7%

2.4

1.03p

0.55p

3.6

FY17

29.1

76%

33%

20.3

5.8

4.3

14.8%

1.6

0.56p

0.48p

0.2

change

- bps

+ 400 bps

13%

22%

+290 bps

50%

84%

15%

n.m.

Strategic highlights:

• Full year results in line with market expectations

• Growth in revenues, margin and profit

• US revenues up 16%, or 32% at organic local currency, representing 37% of Group revenues

• Excellent progress in US Secure Payments revenues up 179% to $6.7m (FY17: $2.4m)

• 12 payment contracts won worth $9.3m (FY17: nine contracts worth $8.3m)

• unrecognised payments revenue of $9.7m (FY17 $6.5m); encouraging pipeline for 2018

• two new 20 year patents awarded, underpinning all uS payments revenue

• Year of transition in the UK

• Restructured uK sales function and focus on larger strategic accounts bearing fruit

• More than twice the number of contracts won in H2 compared to H1

• Strong order book offering renewed momentum

Recurring revenue is defined as on-going monthly revenue, rather
than revenue derived from the set-up and delivery of a new service
or the delivery of hardware.

2. Adjusted earnings before interest, tax, depreciation and amortisation (eBItDA)
is the profit before tax adjusted for depreciation, amortisation, finance
income, finance expense, legal fees and settlement costs, and expenses
relating to share option schemes and acquisitions. A reconciliation of this
adjusted measure to statutory profit before tax can be found on page 14.

3. Adjusted operating profit is the profit before adjustments for finance

income, finance expense, legal fees and settlement costs, and expenses
relating to share option schemes and acquisitions. A reconciliation of this
adjusted measure to statutory profit can be found on page 14.

Strategic Report 01 HIGHlIGHtS oF tHe YeAR

AnnuAl RepoRt & ACCountS 2018

Financial Highlights

REVENUE
UP 3% TO
£30.0m
or 7.6% at organic
constant currency1

gROss
PROfiT
iNCREAsEd
13% TO
£22.9m
(FY17: £20.3m)

AdjUsTEd
OPERATiNg
PROfiT2
£5.3m
(FY17: £4.3m)

PROfiT
BEfORE
TAXATiON
£2.4m
(FY: £1.6m)

BALANCE
sHEET
significantly
strengthened
with net cash of
£3.6m
(FY17: £0.2m)

fiNAL
diVidENd
iNCREAsEd
proposed dividend of
0.55p
per share

(FY17: 0.48p)

Current trading:

• Two three-year UK contracts worth a combined

£1.3m won in the insurance sector since period end

• Four-year US payment contract win worth $1.1m
with large healthcare company since period end

• Significant increase in interest in Omni-channel

offering and chatbot technology

Chairman's Statement

Results

Board

I am pleased to report on the progress Eckoh has made
over the past twelve months. The financial results to
31 March 2018, show continued progress with both
revenue and adjusted operating profit1 growth.

In the uS the Secure payments opportunity remains the largest
single opportunity for the Group and during the year the uS
team secured $9.3 million new orders (2017: $8.3m) in this
revenue channel. the first deal, worth a minimum of $1.9
million, was signed through West since it was acquired by
Apollo Global Management in May 2017. Strategically, the
business is developing partnership arrangements, with the
intention of accelerating the future growth rate and I am
delighted that Kathleen phillips has joined the uS team as
Head of Channel Sales.

In the uK business, we made progress in the second half of
the year after the restructuring of the Sales team. In the uK
we secured a number of sizeable contract wins in the second
half, which will start to deliver revenues in the coming year.
the uK business now has a stronger pipeline of opportunities
that they are working on.

the Company will be implementing IFRS 15 Revenue from
Contracts with Customers, with effect from 1 April 2018,
on a fully retrospective basis. When the Company reports
the Interim Results in november, the Financial Statements
will be presented against restated Financial Statements for
the year ended 31 March 2018. Whilst, the impact of IFRS
15 is significant for the Group’s results, particularly in the uS
market, where the Group has the most opportunity and the
business is the least mature, it is important to note that neither
the business model nor the Group’s market opportunity
is impacted. the Group does not intend to change the
commercial model of the business, so cash generation is also
not impacted by the implementation of IFRS 15.

Firstly, I would like to thank Chris Batterham for his significant
contribution as Chairman over the last 8 years together with
peter Simmonds who served as a non-executive Director
and Remuneration Committee Chairman over 18 months,
until he resigned in December 2017. I would also like to
welcome David Coghlan to the Board; David joined the
Board on 1 December 2017 as a non-executive Director and
Remuneration Committee Chairman. Full details of the current
Directors are on page 28.

Corporate Governance

In the governance section we outline how we have complied
with the uK Corporate Governance Code (the Code); where
our policies depart from the code; and an explanation of the
reasons for that departure. During the current year, with the
recent release of the Quoted Companies Alliance Corporate
Governance Code and the impending changes to the Financial
Reporting Council uK Corporate Governance Code, we
will review the Corporate Governance Code that is most
appropriate to the Group.

In addition, whilst risks & uncertainties have been monitored
internally for some time these have not previously been
disclosed in the Annual Report. Full details of the Company’s
principal risks and uncertainties are on page 12 to 13.

people

our strong progress in the last year and future success is down
to the hard work and dedication of all our employees across the
Group, and on behalf of the Board I would like to thank them
for their dedication and hard-work over the last 12 months.

I, and all my Board colleagues, plan to attend the AGM on
19 September 2018 and we look forward to the opportunity
to meet with as many Shareholders as possible on the day.

the Board recommends a final dividend of 0.55 pence per
ordinary Share (2017: 0.48p), which, subject to approval by
Shareholders at the 2018 AGM will be paid on 26 october 2018.

Christopher Humphrey
CHAIRMAN 13 June 2018

1. organic constant currency excludes the closed professional Services division

and K2C division and uses last year’s exchange rates to translate both last year
and this year revenues for a comparison.

2. Adjusted operating profit is the profit before adjustments for finance

I am delighted to have been asked to join the
Board as a Non-Executive Director in June last year
and subsequently, at the AGM, be appointed as
Chairman of the Company and its Board.

1. Adjusted operating profit is the profit before

adjustments for finance income, finance expense,
legal fees and settlement costs, and expenses
relating to share option schemes and acquisitions.
A reconciliation of this adjusted measure to
statutory profit can be found on page 14.

Strategic Report 01

AnnuAl RepoRt & ACCountS 2018

Chief Executive Review

I am pleased to report a year of
growth for Eckoh, and a particularly
strong performance in the United
States as we scale our Secure
Payments proposition.

Our momentum in US Payments is pleasing, where
we are the market leader in contact centre security.
Another strong year of US Secure Payments contract
wins was further strengthened by many of our largest
Secure Payments deployments successfully going live,
which gives us positive case studies and customer
references that we can leverage for further new
customer growth. In US Payments, given the size of
the market opportunity, the quality of our patented
products and the limited competition, we expect to
see strong US growth over the coming years.

As outlined at the half year, trading in the uK has been more
challenging, but the changes we have made halfway through
the year to the sales team and further organisational changes
at the beginning of this year have resulted in a marked
improvement and renewed activity both direct and via channel
partners. Second half sales performance and contract wins
were significantly improved on the first half and the pipeline
is strong. Whilst the Group did not secure any new contracts
through the Capita channel during the year, for the first time
since our partnership started five years ago, current activity
levels give us cause for optimism that this year will see a more
normal picture and improved performance. As a result, in
overall terms we would anticipate that the uK operation will
have a stronger year than last.

Highly complementary products
and attractive proposition

eckoh’s go-to-market proposition encompasses two highly
complementary areas: Secure payments products and
Customer Contact solutions. We continue to see good
demand in both areas, as customers recognise the value of our
combined offering. With the recent arrival of the General Data
protection Regulation (“GDpR”), we anticipate further demand
for our proposition, as businesses are required to increase their
commitment to best-in-class data protection and focus on
greater levels of compliance with security regulation.

Our proposition comprises two key parts:

• the Group’s patented Secure payment products remove

sensitive personal and payment data from It environments
and contact centres. this helps organisations to reduce
the risk of fraud; secure sensitive data; comply with the
payment Card Industry Data Security Standards (“pCI
DSS”) and wider security regulations such as GDpR. our
Secure payments products are generally straightforward
to deploy; enjoy extremely high renewal rates and provide
an excellent platform from which to cross-sell other eckoh
solutions to our customer base.

• the Group’s Customer Contact solutions help

organisations transform the way they engage with their
customers by enabling enquiries and transactions to be
performed on whatever device the customer chooses,
through whatever form of communication. eckoh’s
proposition includes interactive voice, web, email, SMS,
mobile, WebChat, Chatbots and social media, enabling
our clients to increase efficiency, lower operational costs
and provide a true omni-channel experience.

the uS market is five times larger than the uK with over
40,000 contact centres and over 3.6 million agent seats,
employing 6 million staff. there are 14,000 uS contact centres
with more than 50 seats, representing 2.9 million agent seats
in total. With a base of 462 clients in the uS today (FY17: 41)
we cover less than 1% of our addressable uS market.

With regulation tightening and the financial impact of data
breaches and fraud growing, organisations around the world
are increasingly looking for ways to secure themselves and
we see that trend only continuing. Information security
budgets and remit is broadening, and this can only benefit
eckoh with our payments proposition enabling companies to
effectively remove the risk of data breach from some of the
most challenging parts of their businesses. With so little of
our target market currently addressed, and with very limited
competition to our offering, this represents a huge opportunity
for eckoh in the coming years.

But mining this potentially huge opportunity requires a
disciplined approach. As a result, we are focusing our sales
and R&D resources on segments where clients prioritise the
volume or value of payment transactions, the sensitivity of the
data handled or the level of engagement with the customer.
our priority sectors include companies in the insurance,
retail and distribution, financial services, transport and travel,
healthcare and utilities industries.

A clear growth strategy

Our strategic objectives reflect our
aim to become the global leader
in our areas of expertise, and in
particular, Secure Payments in the US.

Our objectives include:

• expanding our uS footprint and the size of our

team to capitalise on the fast-growing market for secure
payment opportunities

• Broadening channel partnerships in both uK

and uS markets

• Continuing to extract value from the businesses acquired

in recent years

• Continuing to invest in R&D to underpin next generation

product development; protect and enhance our proprietary
technologies; and maintaining our market leading position

• Maximising client value through cross-selling

• Continuing to evaluate acquisition opportunities that can
support our growth strategy, where timely and accretive,
but on an opportunistic basis.

Contracts for both propositions are typically multi-year in
length and have a high proportion of recurring charges,
usually underpinned by minimum commitments. eckoh’s two
key markets are the uK and uS, although the Group also sells
its payments services in other international markets. In the
uK, almost all solutions are delivered from eckoh’s hosted
managed service platform, whilst in the uS customers are
currently more predicated to deploy our solutions on site.

In the uK the Group sells its full portfolio of services and over
the course of the last 15 years has built a client base of 901
customers, many of which have been with the Group for more
than a decade. of these 90 clients, 45% take a combination
of both our payment services and Customer Contact solutions.
In the uS, a territory that eckoh entered only four years ago,
the Group’s focus is on products where we have the greatest
differentiation and the least competition – such as secure
payments, contact centre infrastructure support and our
browser-based agent desktop tool, Coral. It is anticipated that
we will be taking some of the omni-channel offering, notably
secure Webchat, into the uS market this year.

A significant and largely untapped
market opportunity

our target market both in the uK and uS is any sizeable
enterprise or organisation that either transacts or engages
with its customers at scale and at volume. this activity will
usually be supported either by an in-house or outsourced
contact centre provider. the greater the volume of transactions
or customer engagement activity that organisation has, the
more attractive they are to eckoh, and the larger the contact
centre operation supporting the organisation is likely to be.

the contact centre industry in the uK and uS is so large that,
in each case, it represents around 4% of the entire workforce,
and the industry continues to grow. According to ContactBabel,
at the end of 2017 there were 6,200 contact centres in the uK
with 770,000 agent seats employing nearly 1.3 million staff.
We typically target organisations that utilise contact centres
with more than 50 agent seats and this represents over 2,500
in number and over 500,000 agent seats. With 90 clients each
generating more than £25k of annual revenue, we cover just
over 3% of our addressable uK market.

1. Clients who each generate more than £25,000 of revenue per annum.

2. Clients who each generate more than $35,000 of revenue per annum

Strategic Report 01 CHIeF eXeCutIVe ReVIeW

AnnuAl RepoRt & ACCountS 2018

Operational Review

uS Division (37% of Group revenue,
57% recurring revenue1)

this was a strong performance from the uS Division. Revenue
from uS operations increased by 14% to £11.1m (FY17:
£9.7m) and now represents 37% of Group revenues. Included
in the results for last year was the closed professional Services
activity (FY17: $1.6m). excluding the closed professional
Services activity, uS division grew by 32% year on year.

In the uS, the Group focuses on three activities where we have
the greatest differentiation and the least competition: Secure
payments; Support (of contact centre infrastructure); and
product (notably Coral, an omni-Channel contact centre agent
desktop product).

• Secure payments revenue more than doubled

(179% increase) to $6.7m (FY17: $2.4m), representing
46% of the uS division’s revenue compared to 20% for
the same period last year.

• Support revenue accounted for 39% of revenue

in the period at $5.8m and decreased by 3% year on year
(FY17: $6.0m).

• Coral product had revenue of $1.7m in the period and

decreased by 26% year on year (FY17: $2.2m) and other
product revenues in the period were
$0.5m (FY17: $0.3m).

the uS division continues to strengthen its base of contracted
revenues and enters the new financial year with a monthly run
rate of revenue from existing customers at the period end of
$1.0m (FY17: $0.7m). Recurring revenues for the year in the
uS were improved to 57% (FY17: 54%) and this is anticipated
to grow further in the coming year as the focus remains on
securing long term ‘opex’ contracts and the proportion of
revenue from Secure payments increases.

excellent progress has been made in Secure payments with
new contract value increasing once again. We have moved
our contracts almost entirely to the ‘SaaS style’ (which we
refer to as ‘opex’ pricing) as our preferred model, and in
the period all but one of the new contract wins were of this
nature. With this model, typically 15%-35% of the contract
value is recognised over the implementation period, which
can be between six to eight months for our patented, on-site
tokenisation solution, CallGuard, which is selected by the clear
majority of our clients.

the opex method of pricing provides the Group with greater
visibility on future revenues and higher levels of recurring
revenue in line with the uK financial model.

the balance of the revenue is recognised equally each month
over the remainder of the contract once the solution is
operational, which is generally three years. this is compared to
the ‘Capex pricing’, where customers would pay 65%-70% of
the contract up front for the implementation of their service
followed by a three-year annual support and maintenance
contract representing the remaining 30%-35%.

Recurring revenue is defined as on-going monthly revenue, rather
than revenue derived from the set-up and delivery of a new service
or the delivery of hardware.

over the last two years the change in contracting strategy
for payment clients has been extremely successful as shown
in the table below;

Contract
wins

Total
Contract
Value

Average
Contract
Value

Capex
Pricing

Opex
Pricing

FY15

FY16

FY17

FY18

$0.3m

$53K

$1.6m

$173K

$8.3m

$918K

$9.3m

$776k

Nil

During the year, twelve contracts were secured with a total
contract value of $9.3m (FY17: $8.3m). We have stated that
we expect average contract values for direct sales to generally
be in the range of $700k-$750k. our average contract value
this year was slightly above the level we typically expect.
this was, as expected, lower than last year’s average, which
was distorted by a large contract worth $3.7m. the total of
unrecognised payments revenue, our Secure payments order
Book, as at 31 March 2018 is $9.7m (FY17: $6.5m), which will
largely be recognised over the next three years.

We have successfully gone live during the period with many
of our larger implementations and this has provided us with
excellent customer references in many of our key sectors.
this is helping us achieve a high win rate in competitive sales
processes and as an illustration since the period end we have
won a four year contract worth £$1.1m with a very large
healthcare company through such a process. We currently
have more live uS secure payments customers than any of
our narrow universe of competitors, and these customers
are typically large household names. A particularly significant
new contract this year was with a well-known uS retailer who
had previously suffered a very large data breach relating to
card data. to be chosen by such a customer who is acutely
aware of the importance of managing data securely, supports
our belief that we are the established market leader. our
payment products have been developed and evolved over
many years and in February 2018 we secured two further uS
patents, which means that all of our uS payments revenue is
now under-pinned by at least one patent (see the Innovation
section for more detail).

this year we expect to increase our pipeline and sales from
our uS partner Channel, and to support this strategy we have
employed a Head of Channel Sales. We have added a small
number of new partners so far this calendar year, but we are
focused on only adding partners that we believe will be able
to deliver a sustainable volume and scale of opportunities in
our target market. It is not our intention to pursue partners
who may deliver high numbers of small deals. Given the scale
of the opportunity in the uS, the Group is focused on the
largest value opportunities due to the disproportionate level of
effort and cost required for low value customers.

In Support, where we provide expert third party support for
Contact Centre infrastructure from vendors such as Avaya,
Cisco, Genesys and Aspect guidance, revenue declined by 3%.
this was mainly due to one of our largest customers reducing
the overall level of support they required in the second half of
the year. the average length of a specific support engagement
is three years, but many of our customers take multiple
support contracts so the overall relationship can last for much
longer and given the nature of the service we provide it is
very common for us to contract with historic customers after
a break of some years. We continue to pursue new Support
opportunities and see this activity as a key part of our uS
strategy as we seek to leverage the team who work in Support
across our other sales channels. our customers in this area are
typically large enterprises and as such can often be excellent
prospects for both our Secure payments and Coral product, as
seen from the lucrative contracts the Group has won through
cross selling.

the third of our sales activities is our browser-based
agent desktop tool Coral, which increases efficiency and
reduces Average Handling time (“AHt”) by bringing all
agent communications into a single screen. It also enables
organisations, particularly those which have grown by
acquisition, to standardise their contact centre facilities, as
Coral can be implemented in environments that operate on
entirely different underlying technology. In the year, revenues
declined by 26%, reflecting no additional licence sales for
the Coral product. As stated previously, the exact timing of
licence orders is unpredictable. However, one of our largest
uS customers has approved Coral as its standard desktop, so
the expectation is that there will be significant future licence
orders, although the timing is uncertain. eckoh has been the
exclusive reseller for Coral since the product was launched
some years ago and in the period the contract has been
renewed for a six-year period, with the exclusive arrangement
in place until at least 2021.

Recurring revenue is defined as on-going revenue based on a transactional
basis, rather than revenue derived from the set-up and delivery of a new
service or the delivery of hardware.

Over the last two years the
change in contracting strategy
for payment clients has been
extremely successful.

Strategic Report 01 CHIeF eXeCutIVe ReVIeW

AnnuAl RepoRt & ACCountS 2018

uK Division (63% of Group revenue,
86% recurring revenue1)

In the uK, revenue decreased by 2% to £18.8m (FY17:
£19.4m). Recurring revenue1 was 86% in the year (FY17:
87%), with the small reduction reflecting the improvement
in new business in the second half of the year and the
implementation fees recognised. the uK business had an
exit monthly recurring revenue run rate of £1.4m, in line with
last year. Gross margins in the uK have improved to 85%
(FY17: 83%).

the uK operation had a somewhat disappointing performance
compared to recent years, with a weak sales performance in
the first half of the year and lower than expected new activity
from our channel partners, notably Capita.

to improve our focus and performance, we have taken swift
and decisive action to restructure our uK sales team. this led
to a much-improved second half performance with nine new
contracts won. these contracts came from important sectors
including healthcare, insurance, retail, telecoms and payments.
one of the payment contract wins was with a subsidiary of
one of our new uS customers, pointing to a growing trend of
companies looking to standardise their secure payments with
the same supplier on an international basis. Since period end
the improved performance has continued with contract wins
including two three-year deals in the insurance sector worth a
total of £1.3m.

We now have 90 (FY17: 87) uK clients who each generate
more than £25k per annum of revenue, more than twice the
level we had four years ago (FY14: 43). the largest contract
renewal this year was with tenpin, for a further three years
to December 2020, to provide both Secure payments and
Customer Contact Services.

of these uK clients, those who only take Secure payment
services represented 28% (FY17: 23%), whilst those only
taking Customer Contact solutions accounted for 27%
(FY17: 33%). this means the largest segment at 45% (FY17:
44%) take a combined solution of both Secure payment and
Customer Contact and the average contract value of these
clients is £521k, significantly higher than the overall average
client contract value of £205k per annum and higher than
contracts for just one of our services. Cross selling to existing
clients in this way is a key part of the eckoh strategy, not only
to drive incremental revenue but to continue the trend of
extremely high levels of client retention and to increase the
lifetime value of the customer.

partnerships remain an important channel to market for us
and our largest partners are Capita, Bt and teleperformance.
In the period 32% of revenue came through partners. Capita
has been a key partner over the last five years and this was
the first year since our partnership began not to result in a
new contract. We had started working on a new opportunity
with Capita in the latter part of the year that ultimately did
not come to fruition, but we are hopeful following their
successful restructuring earlier this year that the relationship
will once again begin delivering sizeable contracts. We have
renewed our partnership agreement with our long-standing
partner Bt for a further three years and our relationship with
teleperformance, which to date has predominantly been for
our omni-Channel solutions, has strengthened and we now
have two of their customers who have contracted for our full
product suite, one of which is Her Majesty’s passport office.
We also have strategic relationships with specialists like allpay,
who provide payment services to housing associations, and
during the year we have supplied, through allpay, secure
payment services to eight more of their associations.

With GDpR having come into force in May 2018 organisations
face the prospect of very significant fines for non-compliance
and need to take even greater steps to secure their customers'
personal data. eckoh is well placed to assist in that regard with
our solutions which ensure that personal data including card
data is handled compliantly and removed or de-scoped from
our clients’ It environment.

Recurring revenue is defined as on-going revenue based on a transactional
basis, rather than revenue derived from the set-up and delivery of a new
service or the delivery of hardware.

Innovation

In February, the uS patent and trademark office granted us
two further 20-year patents for our industry-leading contact
centre security solution, CallGuard.

In 2015, eckoh was awarded a uS patent for part of its
CallGuard offering but these new awards will ensure that all
current eckoh uS payments revenue and future contracts will
be protected by at least one eckoh patent. With $18m of uS
payments contracts won in the last two years, and the uS
market growing rapidly, this protection of eckoh’s intellectual
property is strategically vital in ensuring we continue to lead
this key market.

the first new CallGuard patent was for eckoh’s tokenisation
process that automatically replaces real card payment data
or other personal data such as Social Security numbers with
valueless ‘placeholders’ thereby encrypting and protecting
customer’s sensitive data. these placeholders can flow safely
through a contact centre’s telephony and data networks,
reducing the risk of hacking and ensuring agents are not
exposed to customers’ sensitive data. the second patent
was for transformational technology that uses both voice
biometrics to authenticate a caller, and a phone ‘footprint’
to authenticate the caller’s mobile device. this dual
authentication mechanism will provide a more secure way for
merchants to verify that the caller is the genuine cardholder
and reduce the risk of fraud.

The long-term prospects for
Eckoh remain extremely positive.

In the uK the development team are working on integrating
the omni-Channel technology that was obtained through
the acquisition of Klick2Contact (“K2C”) in July 2016 into
the core eckoh platform. With a two-year earn out in place
on the K2C acquisition it has not been feasible to commit
significant technical resources from the K2C team until now.
once complete this will allow us to deliver a fully integrated
customer engagement solution, branded as the eckoh
experience portal (‘eXp’), with information about activity made
through any channel shared in real-time across our platform.
We will also be able to provide conversational interfaces
in both the voice and web channels utilising a common
knowledge base and leveraging artificial intelligence where
required. We see this use of new Chatbot technology working
in tandem with our long-established speech recognition
services as a key driver of new business over the coming years.

Board Changes

In May 2017 we were pleased to welcome Chrissie Herbert
to the Board as Chief Financial officer and in June 2017
Christopher Humphrey to the Board as a non-executive
Director. Christopher was appointed Chairman at the AGM in
September 2017. In December 2017, we were very pleased
to appoint David Coghlan as a non-executive Director,
David brings with him extensive experience with technology
companies in the business-to-business field. In December 2017
peter Simmonds retired from the Board.

Current trading and outlook

the new financial year has started in line with expectations,
with the Group continuing to scale uS operations, and seeing
early benefits from an improved uK sales performance,
continuing the momentum from the second half of the 2018
financial year. We have strong sales pipelines in both markets
with excellent revenue visibility from recurring revenue.
this, allied with high client retention rates, give the Board
confidence that the long-term prospects for eckoh remain
extremely positive.

nik philpot
CHIEF EXECUTIVE OFFICER
13 June 2018

Strategic Report 01

AnnuAl RepoRt & ACCountS 2018

Principal risks & uncertainties

Eckoh is exposed to a number of risk factors which may affect its performance. The Group has a framework for
reviewing and assessing these risks on a regular basis and has put in place appropriate processes and procedures
to mitigate against them. However, no system of control or mitigation can completely eliminate all risks.
The Board has determined that the following are the principal risks facing the Group.

SPECIFIC RISK

MITIGATION

Cyber, technology & processes

Loss or inappropriate usage of data

the Group’s business requires the appropriate and secure usage of
client, consumer and other sensitive information. Fraudulent activity,
cyber-crime or security breaches in connection with maintaining
data and the delivery of our products and services could harm our
reputation, business and operating results.

Interruptions in business processes or systems

the Group’s ability to provide reliable services largely depends on
the efficient and uninterrupted operation of our telecoms platform,
network systems, data and contact centres as well as maintaining
sufficient staffing levels. System or network interruptions, recovery
from fraud or security incidents or the unavailability of key staff
or management resulting from a pandemic outbreak could
delay and disrupt our ability to develop, deliver or maintain our
products and services. this could cause harm to our business
and reputation, resulting in loss of customers or revenue.

legal, regulatory and industry standards

Risk of non-compliance with legal and industry standards

the Group’s operations require it to be compliant with certain
standards including payment Card Industry Data Security
Standards (pCI-DSS) and General Data protection Regulation
(GDpR) effective May 2018. Failure to comply with such
regulations and standards could significantly impact the Group’s
reputation and could expose the Group to fines and penalties.

Loss or infringement of intellectual property rights

the Group’s success depends, in part, upon proprietary technology
and related intellectual property rights. Some protection can be
achieved but, in many cases little protection can be secured. third
parties may claim that the Group is infringing their intellectual
property rights or our intellectual property rights could be infringed by
third parties. If we do not enforce or defend the Group’s intellectual
property rights successfully, our competitive position may suffer, which
could harm our operating results. We may also incur cost from any
legal action that is required to protect our intellectual property.

the Group has established physical and logical security
controls at its data centres with rigorous cyber security controls,
monitoring procedures, recruitment and training schemes, which
are embedded throughout the business operations. the Group
also screens new employees carefully. Continued investments
are made in cyber security; infrastructure, monitoring and
services, improvements in email and web filtering as well as the
introduction of enhanced data loss prevention tools.

Comprehensive business continuity plans and incident
management programmes are maintained to minimise business
and operational disruptions, including system or platform
failure. testing and confirmation of plans is performed to ensure
Business continuity relevance and training is maintained.

We continually review and enhance our controls, processes and
employee knowledge to maintain good governance and to
comply with legal requirements and industry standards. our new
employees are carefully screened.

the Group, where appropriate and feasible, relies upon a
combination of patent and trade mark laws, to protect our
intellectual property and continues to monitor competitors in
the market to identify potential infringements of our intellectual
property rights. the Group would vigorously defend all third
party infringement claims.

SPECIFIC RISK

MITIGATION

HR & personnel

Dependence on recruitment and retention of highly skilled personnel

the ability of the Group to meet the demands of the market and
compete effectively is, to a large extent, dependent on the skills,
experience and performance of its personnel. Demand is high for
individuals with appropriate knowledge and experience in payments
security, telecoms, It development and support services. the
inability to attract, motivate or retain key talent could have a serious
consequence on the Group’s ability to service client commitments
and grow our business.

effective recruitment programmes are on-going across all business
areas, as well as personal and career development initiatives. the
Management team reviews key individuals on a quarterly basis and
retention plans are put in place for individuals identified at risk of
leaving. Compensation and benefits programmes are competitive
and are reviewed regularly.

products & Clients

Technological & product development

the Group provides technical solutions for clients and their end
customers. As customer preferences and technology solutions
develop, competitors may develop products and services that
are superior to ours, which could result in the loss of clients or a
reduction in revenue.

the Group is committed to continued research and investment
in products and technology to support its strategic plan. product
development for payment and Customer Contact solutions are
managed centrally in the uK.

Dependence on key clients

While the Group has a wide customer base, the loss of a key
customer, or a significant worsening in their success or financial
performance, could result in a material impact on the Group’s
results. eckoh’s largest customer accounted for 9.4% (2017: 11.5%)
of total revenue.

We mitigate this risk by monitoring closely our contract
performance, churn and renewal success with all customers by
maintaining strong relationships. We continue to expand our
customer base, particularly in the uS business.

economic growth

Executing the US opportunity

the Group has a low market share in the uS, where there is
significant market opportunity for its secure payments product. the
inability to execute in the uS, winning new clients and implementing
secure payment solutions for clients, could have a material impact
on the Group’s results.

the Group sets clear targets for growth expectations for the
uS business. We continually assess our performance and adapt
our approach taking into account our actual and anticipated
performance.

Exchange rate & Brexit

the Group is exposed to the uS dollar and the translation of net
assets and income statements of its uS division. the uncertain
outcome of Brexit negotiations may increase Sterling volatility in the
next few years, which in turn may have a material impact on the
Group’s translated results.

We regularly review and assess our exposure to changes in
exchange rates. the Group does not hedge the translation effect
of exchange rate movements on the Income Statement or Balance
Sheet of the uS division.

Reputation of the Eckoh Group

Damage to our reputation and our brand name can arise from
a range of events such as poor solution design or product
performance, unsatisfactory client services and other events either
within or outside of our control.

We recognise this risk by recognising the importance of our
reputation and attempting to identify any potential issues quickly
and address them appropriately. We recognise the importance of
providing high quality solutions, good client services and managing
our business in a safe and professional manner.

Strategic Report 01

AnnuAl RepoRt & ACCountS 2018

Financial Review

Revenue for the year increased by 3.2% to £30.0m
(FY17: £29.1m) and adjusted operating profit1 for the year
was 21.9% higher at £5.3m (FY17: £4.3m). At constant
exchange rates3 and adjusting for the closed professional
Services division and K2C in the prior year, revenue increased
by 7.6%. Adjusted operating profit1, after adjusting for the
loss from the closed professional Services division in the year
ended 31 March 2017, increased year on year by 5.0%.
earnings per share increased by 80% to 1.08 pence per share
(FY17: 0.60 pence per share).

Divisional performance

Revenue in the uK, which represents 63% (FY17: 67%) of
total Group revenues, decreased by 2.2% to £18.9m (FY17:
£19.4m). the uS represented 37% (FY17: 33%) of total
Group revenues and revenues increased in the period by
14.0% to £11.1m. Revenues in local currency and excluding
the closed professional Services division grew by 32% year
on year.

Gross Profit

the Group’s gross profit increased year on year by 12.6% to
£22.9m (FY17: £20.3m), with gross profit margin increasing
in both the uK and the uS division. Margins within the uS
division have typically been lower than those seen in the
eckoh uK business due to the nature of its offering, however,
as anticipated the gross profit margin has increased to 61%
(FY17: 43%). As the business mix continues to move to Secure
payments, the growth area of the division, it is anticipated that
we will continue to see gross margins increase to the same
extent they have increased in the underlying business, after
the closure of the professional Services activity, because of this
increased proportion of high margin activity, it is anticipated
that reported gross margins for the Group should increase.

FY18
(UK)
£000

FY18
(US)
£000

FY18
Total
£000

FY17
(uK)
£000

FY17
(uS)
£000

FY17
total
£000

Revenue

18,937

11,068

30,005

19,371

9,707

29,078

Gross profit

16,101

6,784

22,885

16,133

4,194

20,327

Gross profit %

85%

61%

76%

83%

43%

70%

Profitability Measures

Adjusted operating profit1 increased for the year by 21.9%
to £5.3m (FY17: £4.3m) and adjusted eBItDA2 for the year
increased by 13.3% to £6.5m (FY17: £5.8m). In the previous
year there were losses of £0.7m incurred for the now closed
professional Services division. In the year ended 31 March
2018, the deferred consideration in relation to the K2C earn-
out has been released. profit before tax increased from £1.6m
to £2.4m, an increase of 50%.

Profit before tax

Amortisation of acquired intangible assets

legal fees and settlement costs

transactions relating to acquisitions

expenses relating to share option schemes

Interest receivable

Change in contingent consideration

Finance charges

Adjusted operating profit1

Amortisation of intangible assets

Depreciation

Adjusted EBITDA2

Year ended 31
March 2018
£’000

Year ended
31 March 2017
£’000

2,435

2,329

595

793

(34)

(975)

118

5,261

325

914

6,500

1,623

2,186

319

(43)

205

4,314

433

1,059

5,806

1. Adjusted operating profit is the profit before adjustments for finance income, finance expense,
legal fees and settlement costs, and expenses relating to share option schemes and acquisitions.

2. Adjusted earnings before interest, tax, depreciation and amortisation (eBItDA) is the profit

before tax adjusted for depreciation, amortisation, finance income, finance expense, legal fees
and settlement costs, and expenses relating to share option schemes and acquisitions.

3. At constant exchange rates (using last year exchange rates) and excluding the closed

professional Services divisions and acquired K2C for the prior year.

Legal fees and settlement costs

Earnings per share

As disclosed in last year’s Annual Report and the Interim
Statement in november 2017, in the financial year ended
31 March 2017, the Group received a claim from a client that
had discontinued a project related to the closed professional
Services division. the Group has vigorously defended the
claim, however, in the year ended 31 March 2018 we have
chosen to settle the claim and bring this matter to a close.
the settlement and legal costs were £0.6m. the Group is not
aware of any other contractual commitments from the closed
professional services division.

Statement of financial position

Whilst eckoh continue to innovate by developing new
products and features such as those detailed in the Chief
executive officer’s review, little of this is capitalised on the
balance sheet with only £0.3m (FY17: £0.2m) added in
the year to the value of the intangible fixed assets of the
Company. Whilst taking a prudent approach to capitalising
salary cost reduces reported profit, management believes
this approach gives an accurate reflection of the trading
performance of the Company.

Change in contingent consideration

For the financial year ended 31 March 2018 finance income
includes a credit of £975k relating to the K2C contingent
consideration.

Finance charges

For the financial year ended 31 March 2018, the net interest
charge was £118k (FY17: £205k). In the full year ended
31 March 2017, included within finance expenses was a
charge of £63k relating to the unwinding of the discount
on the contingent consideration for the acquisition of K2C.
no such charges were incurred for the financial year ended
31 March 2018.

Taxation

For the financial year ended 31 March 2018, there was a tax
credit of £225k (FY17: 184k charge). this is principally due to
the uS tax rate of 21% enacted at the Balance sheet date of
31 March 2018. this resulted in a tax credit for deferred tax of
£350k in the period. Further details are included in note 10.

Basic earnings per share was 1.08 pence per share (2017: 0.60
pence per share). Diluted earnings per share was 1.03 pence
per share (2017: 0.56 pence per share).

Cashflow and liquidity

net cash at 31 March 2018 was £3.6m, an improvement
of £3.4m from 31 March 2017 of £0.2m. In the period the
Company has repaid £1.3m of the loans outstanding to
Barclays Bank in accordance with the terms of the loan. During
the year, there has been a net cash inflow for trade debtors
and trade creditors of £0.4m (FY17: (£3.4m) cash outflow).
In addition, a dividend payment of £1.2m was made in
november 2017.

Dividends

post year end the Directors are recommending that a final
dividend for the year ended 31 March 2018 of 0.55 pence
per ordinary share be paid to the Shareholders whose
names appear on the register at the close of business on
28 September 2018, with payment on 26 october 2018.
the ex-dividend date will be 27 September 2018. 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 £1.4m.

Prior Year Restatement

this company has reviewed the way the goodwill and
intangible assets and the related deferred tax liability for
the acquisition of pSS Inc in the year ended 31 March 2016
has been accounted for. At the point of acquisition on 17
november 2015, the Goodwill and intangible assets of both
the uS and uK business of pSS were translated into sterling
and held in the Company. on further analysis the proportion
of the Goodwill and intangible assets relating to the uS
business of pSS Inc (87% of the business) should have been
held in uS dollars in accordance with IAS 21. note 1 provides
further details of the restatement to the statement of financial
position and other Comprehensive Income.

Chrissie Herbert
COMPANY SECRETARY
13 June 2018

Business Model 02

AnnuAl RepoRt & ACCountS 2018

Business Model

Eckoh Experience

eckoh’s solution portfolio is all about
improving customer contact for
payments and engagement. to reflect
this, we now present our portfolio as
an experience portal, where customers
can take whatever level of service or
solution they need, at the time they
need it. the added value comes from
the flexible access our customers have
to the wide range of self-service,
agent-assisted and support options that
we provide.

For any business providing a customer engagement solution
today, their delivery needs to be consistent, responsive and
seamless if they are to deliver the experience that customers
now expect.

this can be hard to achieve using individual solutions,
especially if added to legacy infrastructure, and hampers
an organisation’s ability to evolve to meet changing
customer preferences.

The solution? A true Omni-Channel portal that
incorporates every engagement channel available and
future proofs a contact centre for the journey ahead –
no matter what sector the organisation operates in.

With all the solutions available
from just one place it makes life
so much easier - for our customers,
their agents and end users.

Card and Data Security

eckoh pAY

organisations that take card payments
in their contact centres will be exposed
to sensitive card and personal data. this
makes them vulnerable to data theft
and fraud. this is precisely the challenge
that we address with our patented
secure payment solutions.

Criminals continue to exploit the weakest areas and Card-not-
present (Cnp) crime – where the card holder is not physically
visible to the merchant - is rising and expected to reach £680
million in the uK by 20211. With over a third of this taking
place in contact centres there is a clear need for solutions to
address this issue.

The current market is particularly impacted by two
pieces of regulation:

1. PCI DSS (Payment Card Industry Data

Security Standard):

this is an industry standard which the card companies
require organisations to comply with if they store, process,
and/or transmit cardholder data. Compliance also brings
customer confidence and helps reduce the risk of
card fraud.

2. General Data Protection Regulation (GDPR):

personal information such as name and address, email,
national insurance number and bank details are also
valuable to criminals. GDpR, which became law in May
2018, is intended to improve data protection and increase
the accountability for those that suffer data breaches.
using an eckoh secure payment solution can assist a
business in complying with the regulation.

eckoh have long advocated the removal of an entire
contact centre from the scope of a pCI DSS audit through
‘de-scoping’. this ensures that the sensitive data does not
enter the organisation’s environment. If the data is not there
it cannot be stolen.

CallGuard – A secure payment solution for payments taken
over the phone in a contact centre via an agent, which
provides pCI DSS compliance and fraud risk reduction.
CallGuard, which is patented in the uK and uS, can de-scope
all or part of the contact centre from a pCI DSS audit, requires
minimal integration with an organisation’s systems and is the
simplest solution available today.

1. national Audit office online Fraud 2016

EckohPAY – A secure payment solution that enables
customers to self-serve by making an automated payment via
the phone, web, mobile, app or SMS at any time of day, on
any device.

Alternative Payment Methods – Digital Wallets or eWallets
are fast gaining in popularity so we have extended our award-
winning Apple pay by phone solution to include Google pay
and paypal. this gives our customers and their end users
access to the latest payment methods and extends eckoh’s
secure solutions into non-card-based payments.

Live Chat Pay – eckoh are the only pCI DSS level 1 service
provider that can enable a secure payment to be taken within
a web chat session, whether this is eckoh’s own web chat
solution or another provider. this increases sales conversions
by enabling payment to be taken within the consumer’s
channel of choice.

PCI DSS contact centre – We have been operating our own
contact centre for over 10 years, which has given us unrivalled
insight into the challenges these operations face. We use our
own solutions to meet these challenges, so we know that
they work.

If the data is not there
it cannot be stolen.

Business Model 02

AnnuAl RepoRt & ACCountS 2018

Customer Engagement

today, people want their home, work
and social lives to work seamlessly.
When life is disjointed, they get
frustrated. Consumers expect the ability
to choose any engagement channel and
to change that channel seamlessly at
any stage of their customer journey.

poor experiences with organisations are no longer tolerated,
which is why customer engagement is the most important
differentiator among businesses today, regardless of the
industry sector. Delivering consistent and amazing customer
engagement means the right message, at the right time, to
the right device - all from one place.

Today the Eckoh Experience Portal offers all this, with a wide range
of tools for improving customer engagement:

Artificial Intelligence – provides a deeper understanding of what a
customer is trying to achieve and the sentiment behind their enquiry.

Chatbot – this automated virtual assistant can deliver customer service
at any time of day, on any device. It can successfully resolve simple
and repetitive enquiries that would otherwise have to be handled by
a live agent.

Co-Browsing – By securely sharing their computer screen an agent can see
where the customer is and guide them to where they need to be.

Email Management – this powerful system brings all inbound emails and
web forms securely, intelligently and efficiently into the agent console.
It can prioritise and assign mails using a variety of rules to maximise service
and efficiency.

ID&V – Automated authentication of a customer helps a live agent or
another automated service to verify the person is who they say they are and
reduce the time to serve.

Instant Call-Back – prevents an organisation’s customers being kept
waiting in a queue by offering to call the customer back when it’s
convenient to them.

Interactive Response – this is the underlying engine to all self-service
solutions for phone, web, mobile and apps.

Knowledge Base – this acts as the brain behind any automation tool.
It also empowers agents with the information at their fingertips – helping
them to accurately and speedily resolve queries.

Live Chat – Allows organisations to increase online sales and improve
customer care as well as take a secure payment.

Natural Language – Advanced speech recognition that asks callers
‘how can I help you?’ and lets customers use their own words to state
what they want.

Social Media Agent – lets organisations see all their profiles in one place
and respond rapidly to their customers social conversations, as well as
allowing them to know what their customers are saying anywhere online.

Visual IVR – Combines spoken and visual interaction for smartphone
engagement.

Workflow – provides contact centre agents with all the information and
tools they need to respond and resolve queries accurately and quickly.

Chatbot

Visual IVR

Call Routing –
Automating the
routing of calls means
that through simple,
natural language
control a contact can
be directed to the
right place for help –
that could be an IVR
tool or a live agent.

RouteMoB

Chatbot – this automated
virtual assistant can deliver
customer service at any time
of day, on any device and
from anywhere. It can
successfully resolve simple and
repetitive enquiries that would
otherwise have to be handled
by a live agent.

Visual IVR –
Combines spoken
and visual interaction
for smartphone
engagement.

Delivering consistent and amazing
customer engagement means the
right message, at the right time, to
the right device - all from one place.

Business Model 02

AnnuAl RepoRt & ACCountS 2018

Coral – Agent Desktop

Third Party Support

Here’s what makes it special…

• Only desktop solution available on any device

• Designed with security as a key requirement - It’s
the only agent desktop solution that can offer pCI DSS
compliance for contact centres as a core function.

• Scale & flexibility - Coral is the only desktop browser
solution deployed at scale because it’s cloud-based and
has zero-footprint.

•

It’s the only solution that can accept card payments
securely via chat, voice or phone.

• Coral is only available via Eckoh (under exclusive
licence from Coral) - So users get access to eckoh’s
other market-leading Customer engagement and Secure
payment solutions.

In short, Coral reduces contact centre operating costs,
increases efficiency, joins up the technology, enhances the
customer experience and improves agent attrition.

Many of the world's largest
organisations currently use the
Coral Desktop solution.

A contact centre agent’s desktop is the
driving force behind an organisation’s
customer experience. We recognised
that too often agents had to login and
then operate multiple systems to be
able to have the information necessary
to handle their customer’s enquiries.
this means that it takes longer
than it should for agents to get the
answers they need to resolve queries
or complete sales. every time agents
switch between screens or systems
they lose time and focus, which impairs
customer experience.

traditional agent desktops weren’t built to adapt to changing
business requirements because it was never anticipated
that technology advances would happen as quickly as they
did. Consequently, these legacy agent desktops can end up
damaging profit, negatively impact security and are prone to
errors in transferring data.

Coral is a single, unified agent desktop solution that
creates a presentation layer so agents login just once
and easily navigate between multiple systems. Coral
integrates with any or multiple CTI, ACD and CRM
products, and as an HTML 5 web application with no
software to install at the agent seat it’s scalable, quick to
deploy, secure, simple to maintain and easy to change.
The features, graphics or layout can be configured for
each tenant, business group, skill group, or specific user
and with open APIs, it can even integrate with legacy and
custom-built technologies.

Its stability and rapid deployment make it ideal for any contact
centre, but particularly for large enterprises where there are
thousands of agents as it can be rolled out in months, not years.

As a leading provider of contact centre
technology, eckoh has identified a niche
in the market for providing contact
centre support.

Frequently eckoh encounters organisations who are being
pushed into upgrading their infrastructure to a vendor’s latest
version. When they resist they find that maintenance and
support costs for the existing system rise sharply while the
actual support drops off.

Eckoh provides a real alternative to this dilemma by
providing vendor-neutral, third party contact centre
support to a wide range of vendors – and at a lower
cost. This helps our customers to maximise their
investment in their contact centre technology and gain
the advantage of keeping a stable platform working
for longer.

We believe that organisations should have the choice to
remain with their existing contact centre infrastructure if it
provides them with a stable, reliable service. they should also
be able to manage multi-vendor technology environments
without the need for multiple support contracts. We also
believe that an organisation should make the transition in a
timeframe that suits them – rather than the vendor. until then,
we can provide a far better service at a lower price.

Companies across the world trust eckoh’s specialist contact
centre systems integration expertise. From uS and europe, to
Asia and Australia – millions of customers and hundreds of
companies use platforms designed and managed by eckoh
- delivering complete customer interactions and experiences
to support contact centre platforms and applications. eckoh’s
competencies cover all the major contact centre technologies
and provide legacy support and business-as-usual through
to the transition of existing architecture and contact centre
decommissioning.

No one who has ever come to Eckoh
for contact centre support has ever
gone back to their previous provider.

Business Model 02 SolutIon SYnopSeS

AnnuAl RepoRt & ACCountS 2018

Ideal World

Thames Water

BMW

Ideal World is incredibly passionate
about delivering a dynamic and
entertaining shopping experience
via their multi-channel approach to
tV and web retailing.

Ideal World handle inbound contacts through contact centres
in the uK, India and the philippines. their biggest challenge
was to manage the huge peaks and troughs in their call
volumes, driven by the popularity of items sold on their tV or
web channels. they wanted to improve the ordering process
to make it easier for their two million shoppers to order from
their tV channel or website.

eckoh’s solution for Ideal World was to implement a call
handling solution that would route calls to any contact centre
based upon agent availability, to avoid customers queuing,
or connect them to an automated purchasing system. Since
the initial implementation eckoh have continued to deliver
additional services to suit Ideal World’s business including
automated caller identification to speed up calls and
improve routing, as well as deploying live Chat and Social
Media tools.

today, eckoh’s solutions handle millions of contacts for
Ideal annually enabling full utilisation of valuable live agents
and prevent potential sales being lost. the solutions have
successfully reduced agent handling time, increased customer
satisfaction and provided a solution to those shoppers who
are happy to self-serve.

Eckoh have played a crucial role in
helping us to fulfil our customer
service strategy. We are extremely
happy with the services they have
delivered over many years and
we’re expecting that relationship to
continue to many more.

David peck
HEAD OF CUSTOMER SERVICE
Ideal Shopping

every day, thames Water serves 15
million customers across london and the
thames Valley. Increased competition
and changes in regulation led thames
Water to seek a transformation in their
business to provide better experiences
to retain and attract customers. they
also needed to make their customers
payments secure and so required pCI
DSS compliance.

thames Water chose eckoh’s CallGuard solution to
completely remove its entire contact centre from the scope
of the pCI DSS audit. the CallGuard solution ensures that
no sensitive data enters thames Water’s environment, which
means there is no data there for anyone to steal or mis-use.

In 2017, thames Water also adopted eckoh’s pCI DSS
solution for Apple pay over the phone – extending their
payment options to include the very latest payment methods.

Today, Thames Water and their customers benefit from:

• the knowledge that data and payments are secure

• Reduced risk of fraud

• the ability to use alternative payment methods

• Customer and agent interaction is maintained

throughout the call

Eckoh met all the requirements and
their solution was what we needed.
We found that there wasn’t another
partner that could do that for us.

Stuart ledger
CHIEF FINANCIAL OFFICER FOR RETAIL
Thames Water

Eckoh provided a flexible and
robust front-end integration and
were able to work as if they were
part of our digital team.

paul Kester
BMW, UK

BMW Group employs around 8,000
people directly in the uK with an
additional 11,000 in its 147-strong
retailer network representing BMW and
MInI brands. the uK is BMW Group’s
fourth largest sales market in the world.

the uK has an important role to play within the BMW Group.
It is the only place in the world where all three of BMW
Group’s brands – BMW, MInI and Rolls-Royce Motor Cars
– are represented by manufacturing operations.

BMW wanted to offer customised customer support to people
visiting their new eRetail platform where people can configure
their car online and begin the purchasing journey.

eckoh provided an omni-channel help solution using Web
Chat, Instant Call-back and email. the service integrates with
BMW’s other digital offerings so that with just a few clicks,
prospective BMW owners can build their perfect car online,
arrange a test drive if necessary, agree financing options and
payment method, and get a trade-in value for their own car
before finalising the delivery date.

Today BMW are benefitting from:

• 95% adoption by BMW uK retailers following

successful trial

• over 20,000 calls and chats handled in the first

two months

• 80% of customers who completed the after-engagement
survey and were very satisfied with the help they received

Corporate Responsibility 03

AnnuAl RepoRt & ACCountS 2018

Corporate Responsibility

eckoh is committed to running the business in an ethical and
responsible manner, and we focus our efforts on business ethics,
employee engagement, our local community and the environment.

Business Ethics

Eckoh has the following policies in place with respect
to business ethics:

Whistle-blowing – we are committed to ensuring that
practices and procedures in respect of all employees, business
partners and clients are of the highest quality. employees
are encouraged to raise any instances of irregular conduct in
the workplace.

Health and safety – we take all necessary steps to ensure
the health and safety of all employees, contractors and
visitors, through the provision and maintenance of a safe
working environment.

Dignity at work policy – all employees of eckoh have an
important part to play in the overall success of the business
and everyone is respected and valued for their contribution
at every level. At eckoh, we foster and promote a healthy,
collaborative and supportive environment. We encourage all
our employees to work together in harmonious manner that
encourages self-development, team success and knowledge
sharing. eckoh is committed to protecting the dignity and
wellbeing of everyone and encourages practises that take into
account the rights of all individuals and seeks to eliminate all
forms of unacceptable behaviour. It is in our best interests to
promote a safe, healthy and fair environment where people
are given every opportunity to excel and thrive in
their workplace.

Equality & diversity – we are committed to an active
equal opportunity policy, from recruitment and selection
through to training and development, performance reviews
and promotion. It is our policy to promote an environment
free from discrimination, harassment and victimisation,
where everyone will receive equal treatment regardless of
age, disability, gender, gender reassignment, pregnancy and
maternity, sexual orientation, race, ethnic origin, or hours
of work.

Anti-bribery – we set out clear standards for ethical
relationships and conduct to be maintained by employees and
contractors and conduct our business in accordance with the
highest ethical standards. We do not offer or accept bribes.

Disciplinary & grievance procedures – we provide a fair
and consistent method of dealing with disciplinary problems
and treat misconduct with appropriate action. We ensure we
treat any grievance an employee may have relating to their
employment in a fair and reasonable manner.

Employee engagement

Eckoh believes that its employees are the source of
our 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 talented
people of the highest calibre.

In the uK offices we’ve created an award-winning,
colourful, dynamic and collaborative working environment
where employees find flexibility, an open plan office and the
environment to thrive in their roles.

We embrace technology to enable remote working,
teleconferencing and effective collaboration across the uK
and uS divisions.

In the uS a large number of employees work remotely,
communication is key for them. there is a formal
communication structure, from weekly calls involving
all employees to monthly presentations updating all uS
employees on the uS performance. even though the team is
remote, effort is placed on recognising significant milestones
both in people’s working lives and their personal lives and the
team ensure they celebrate success. on an annual basis, the
whole team is brought together for an annual conference.
there is also an annual Sales team conference, which is led by
the uS management team and focuses on the next year ahead
including product training for the Sales team. the Ceo and
CFo also attend the Sales Conference and the Annual
uS Conference.

We actively encourage our employees to share their views
and preferences – positive and negative -, so that we can
address these to deliver the most vibrant, dynamic and
enjoyable workplace. In the uK there are also more informal
communications that take place, such as the Ceo and CFo
lunch, to which a number of employees are invited every two
months. this is an informal environment for employees to raise
feedback. In addition, our regular social and team building
events give us all a chance to relax together.

At eckoh, we strive to create a really positive working
environment to help our employees enjoy their work, be
successful in their role and deliver on business goals.

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

employee recognition

our employees deserve recognition and we do this through
our ‘RAVe’ programme (Reward and Value everyone), which
encourages employees, both in the uK and uS, to nominate
their peers to receive an award. We also run a twice-yearly
employee Award and have an annual long Service Award
recognising loyalty and commitment to us.

Benefits

We employ around 300 employees in total, with approximately
250 employees in the uK and 50 employees in the uS.
the benefits packages are managed separately in each
country to ensure that we attract the talent we need in each
of the divisions.

In the uS, our employees participate in a Health Benefits plan
that provides a valued level of healthcare.

employees are also given the option to join pension plans
appropriate to the uK and the uS. In the uK this involves a
Company approved pension plan with minimum employer
and employee contributions and in the uS a 401(k) plan.
Since April 2014 in the uK, all employees, except those that
have expressly opted out, are auto-enrolled into a qualifying
pension plan.

In September 2016, we introduced the eckoh plc Share
Incentive plan (“the plan”). the Scheme provides employees
based in the uK with the opportunity to acquire shares in
eckoh plc. Shares are purchased on behalf of the employee
from amounts sacrificed from their salary on a monthly basis
and matched on a two for one basis by the Company. Any
shares acquired will be held in a trust in accordance with
the terms of the plan. In order to maximise the tax benefits
available, the employee must remain employed with the
company and hold the shares within the trust for a minimum
of five years. 53 employees currently participate in the scheme
out of 250 eligible in the uK.

Corporate Responsibility 03 eMploYee enGAGeMent

AnnuAl RepoRt & ACCountS 2018

training & development

eckoh’s strength lies in the expert knowledge of our people.
It is vital that our employees understand, and are passionate
about, our products and technologies. every new employee to
eckoh undergoes a detailed and thorough induction plan over
a three-month period. the induction not only welcomes them
to the business, but it provides them with a comprehensive
overview of eckoh, insight into our market proposition, our
range of products, the security requirements of payment Card
Industry Data Security Standards (pCI-DSS), the organisational
structure and our commercial model. every induction plan
is tailored to the individual’s role, setting them up to be
successful in their new role. In the uK, after three months,
every new employee will have the opportunity to meet with
the Ceo and CFo to give feedback on their experiences
of eckoh.

We encourage our people to continue to develop their skills
and keep up to date with new technology, standards and
processes. training needs are identified through the regular
check-ins team members have with their line managers.

one of the eckoh values is to always be inspiring, to
encourage ideas and fresh thinking, continually searching for
new innovative and added value solutions. to encourage our
Developers and provide a healthy innovative environment, we
organise regular ‘thinking and Drinking’ sessions, where either
team members or external parties will share technology best
practises or they cover specific technical expertise.

We encourage young school leavers, who may have been
working in our uK contact centre, to progress from their
roles as agents in the contact centre to junior roles in the
organisation. We have a number of success stories, where
employees have progressed from these junior roles into more
senior roles over a period of time.

our investment in our employees helps to retain and motivate
our people, as well as enabling high achieving employees to
progress and flourish in their role.

Health, safety, security, wellbeing
and accessibility
our employee’s health matters to us and so the Company
continues to prioritise the provision of healthy working
environments for our employees and the health, safety,
security and wellbeing of the people on our premises are our
highest priority.

For employees or guests with reduced mobility, our uK and
uS offices are fully accessible with elevators to each floor and
disabled parking spaces.

In the uK, for those who choose to cycle, or run, as part
of their daily commute we have provided showers for their
use and convenience. We actively encourage a healthy
lifestyle providing fresh fruit in the office, reflexology,
pilates, meditation classes, sports massage services as well as
discounted gym memberships and cycle to work schemes.
our health assessments for blood pressure and flu jabs, also
encourage employees to keep tabs on their health.

Communities

At Eckoh, our employees are encouraged and supported
to give something back to our local community.
We do this through supporting local and national causes,
raising money for charity and offering employees the
opportunity to attend a volunteering day where they
can really make a difference.

The team worked hard all day and
helped us with some much-needed
jobs. They had great fun while
making a difference.

Sunnyside Rural trust

eckoh were pleased to support a local charity by organising for
14 keen volunteers to work at Sunnyside Rural trust on a team
building day organised by Connect Dacorum.

Sunnyside Rural trust is a charity based in Berkhamsted and
Hemel Hempstead and offer training and work skills for young
people and adults with learning disabilities. Gemma Vine from
Sunnyside Rural trust was delighted with the Group from
eckoh. “the team worked hard all day and helped us with
some much-needed jobs. they had great fun while making
a difference.”

Some of the uK eckoh team cleaned out chickens, some cleared
around the pond to help the local wildlife and some made up
hanging baskets which will be displayed along Kings langley
High Street over the summer. All of them made a positive
impact on the charity and came away from the day with a real
sense of achievement and able to see the fruits of their labour.

the British thyroid Foundation

personal charities

We were delighted to be able to raise £510 in December
2017 for our nominated Christmas Charity, the British thyroid
foundation. the British thyroid Foundation help with all
thyroid conditions which currently affect 1 in 20 people. An
underactive thyroid can leave you exhausted and unable to
lead a normal life. the British thyroid Foundation provides
those with thyroid conditions much needed information on
treatments, the thyroid and other pieces of advice, they also
help with research in to treatment options.

Recycling within the community

eckoh gladly donated office furniture and supplies to various
local charities and businesses. We believe in re-using and
recycling equipment that could be of significant use and value
to others.

In the environment

Although operationally we do not manufacture products,
eckoh understands the impact our business can have on the
environment. From the efficient lighting in our offices 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:

the Company believes in making donations to charities that
are important to our employees. For this reason we have
donated £500 to various charities who have supported
our employees and we actively encourage and support our
employees to raise money. During the year employees raised
£78 for Save the Children through a Christmas Jumper day
and £400 for Children in need with a sponsored silence and a
Bake Sale.

• Reduced business travel through the use of web

and phone-based conferencing systems

• energy efficient and motion sensor
lighting installed in our offices

• Comprehensive recycling programs established

in all possible locations

• photocopiers set to double-sided, black and
white printing to reduce paper/ink use

• provided reusable cups and glasses to reduce

waste associated with disposable cups

• encouraged alternative methods of transport to travel

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

•

In the current year we will be converting our
lights to leD, this will reduce the electricity
the Company uses on an on-going basis

Corporate Governance 04

AnnuAl RepoRt & ACCountS 2018

Corporate Governance

Board of Directors

Independent Directors

Christopher Humphrey BA MBA FCIMA

Non-Executive Chairman

Appointed to the Board – 21 June 2017

Appointed Chairman – 21 September 2017

Committee Membership:

nominations (Chair), Audit, Remuneration

Guy Millward

Non-Executive Director

Appointed to the Board – 1 october 2016

Committee Membership:

Audit (Chair), nominations, Remuneration

Skills & Experience:
Christopher is currently a non-executive Director, Senior Independent
Director and Audit Chairman of AVeVA Group plc and the Vitec
Group plc and a non-executive Director of SDl plc. Christopher was
formerly Group Chief executive officer of Anite plc from 2008 until
August 2015, having joined Anite in 2003 as Group Finance Director.
He has held senior positions in finance at Conoco, eurotherm
International plc and Critchley Group plc. He was previously a non-
executive Director at Alterian plc.

Skills & Experience:
Guy has held a number of senior finance positions with both publicly
listed and privately held technology companies. Guy’s roles include
CFo at Imagination technologies Group plc, Group Finance Director
at Morse plc, Alterian plc and Kewill plc and CFo at Advanced
Computer Software Group plc from 2013, until its sale to Vista equity
partners in mid-2015. Guy qualified as a chartered accountant with
eY in 1989.

David Coghlan

Non-Executive Director

Appointed to the Board – 1 December 2017

Committee Membership:

Remuneration (Chair), Audit, nominations

Skills & Experience:
David is currently Chairman of Synectics plc, an AIM-quoted provider of
high-end electronic security systems, and a non-executive Director, and
Chairman of the Audit Committee, of SCISYS plc, a software company
also quoted on AIM. He is also Chairman of Quadrant Group limited, a
leading independent supplier of aviation simulation and training, with
subsidiaries in the uK and uS. He has extensive experience with
technology companies in the business-to-business field. David was
previously a partner at Bain & Company, a leading strategy consulting firm.

executive Directors

Nik Philpot

Chief Executive Officer

Appointed to the Board – 2 February 1999

Appointed to Chief executive officer –
September 2006

Chrissie Herbert

Chief Financial Officer

Appointed to the Board – 2 May 2017

Skills & Experience:
nik is a founder of eckoh with more than 30 years’ experience
in the voice services industry; he was originally at British telecom
before establishing a number of start-up businesses in the telecoms
and technology sectors. As Ceo of eckoh, he has created a leading
provider of Secure payment solutions and Customer Contact services
for the contact centre industry.

Skills & Experience:
Chrissie has held a number of senior finance positions with both
publicly listed and privately held businesses. She gained payments
experience from paypoint plc, where she was uK & Ireland Finance
Director. In addition, having qualified as a Chartered Accountant
at KpMG, Chrissie gained considerable executive experience at
a number of high growth, consumer facing businesses including
Collect+ and travelodge Hotels ltd.

In accordance with the Code, the Board delegates certain
roles and responsibilities to its Audit, nominations and
Remuneration Committees whilst retaining overall
responsibility. During the year the Audit Committee has
focused on the impact of the new accounting standard IFRS
15: Revenue from Contracts with Customers (see page 35);
the nominations Committee led the non-executive Director
appointments; and the Remuneration Committee has overseen
the changes made to the executive remuneration and the
performance Share plan (pSp), as approved by the Shareholders
at the 2017 AGM.

We are confident as a Board that the correct strategy has
been adopted and that our culture of good governance and
accountability will enable us to work towards delivering the
strategic goals while maintaining eckoh as a sustainable
business. We hope that this Governance Report provides you
with insight into how governance operates in the Group.

Christopher Humphrey
CHAIRMAN
13 June 2018

Chairman’s Report

Dear Shareholder,

At eckoh, the Board embraces the collective responsibility
for the long-term success of the Group and is committed to
providing entrepreneurial leadership through good governance
and accountability for the benefit and protection of our
Shareholders.

In this governance section we outline how we have complied
with the uK Corporate Governance Code (the Code) and
where our policies depart from the Code, an explanation
of the reasons for that departure. During the current year,
with the recent release of the Quoted Companies Alliance
Corporate Governance Code and the impending changes to
the Financial Reporting Council uK Corporate Governance
Code, we will review the Corporate Governance Code that is
most appropriate to the Group.

the Board held a one-day strategy session in February 2018.
the strategic plan was presented by Senior Management,
representing both the uK and uS businesses. on an ongoing
basis the Board ensures that the strategic plan is taken into
consideration in its decision-making process.

During the year there were some changes to the Board.
on 21 June 2017 I was appointed to the Board and as was
notified in the last Annual Report, Chris Batterham, Chairman
retired from the Board on 20 September at the 2017 Annual
General Meeting. Following Chris’s retirement as Chairman
I was appointed Chairman on 20 September. David Coghlan
joined the Board on 1 December 2017 and peter Simmonds
retired from the Board on 14 December 2017. David was
appointed Chair of the Remuneration Committee on 17
January 2018. During the year the number of independent
directors for the purposes of the Code were met.

Details of the search process led by the nominations
Committee which resulted in my appointment and David’s
appointment are set out on page 33.

We are confident as a Board that the
correct strategy has been adopted...

Corporate Governance 04 CHAIRMAn'S RepoRt

AnnuAl RepoRt & ACCountS 2018

Compliance statement

Information on significant Shareholders in the Company
has been included in the Directors’ report on page 44.

the Directors recognise the importance of sound corporate
governance, whilst taking into account the size and nature
of the Group. this statement describes how the principles
of corporate governance in the Code are applied by the
Company.

the Board considers that it has complied with the provisions of
the uK Corporate Governance Code, (the Code) as issued by
the Financial Reporting Council throughout the year, with the
exception of the following areas:

• there is not a Senior Independent non-executive Director

due to the size of eckoh, however, it is the Board’s
intention to appoint an additional non-executive Director
to the Board during the current financial year;

• the Board have not carried out an evaluation of the

Board’s performance. In the past year there have been a
number of changes to the non-executive Directors and the
Chairman. therefore, we propose to carry out a formal
evaluation of the Board in the coming year; and

• All of the Directors will not be putting themselves forward
for re-election in accordance with the Code, instead we
will comply with eckoh’s Articles of Association. Further
details of the Director’s who will be re-elected at the AGM
are on page 32.

Directors’ meeting attendance 2017/18

leadership

the Board is collectively responsible for the long-term success
of the Company and provides effective leadership by setting
the strategic aim of the Company and overseeing the efficient
implementation of these aims in order to achieve a successful
and sustainable business. In practise the executive Directors
prepare and present the strategic plan to the Board, which the
Board challenges in order to determine the strategic priorities.
the Board also ensures that the appropriate framework of
controls is in place to enable the proper assessment and
management of risks. the executive Directors are responsible
for the management of the business and implementing the
Board’s decisions.

Meetings

the Board and its Committees met regularly throughout the
year with the meetings scheduled around key dates in the
Company’s corporate calendar. there were eleven scheduled
meetings during the year, and one meeting at short notice.
the table below shows Directors’ attendance of Board and
Committee meetings. Where a Director is unable to attend
a meeting, he or she receives and reads the papers for
consideration at that meeting and will provide input through
the Chairman, Chief executive officer, Chief Financial officer
or Company Secretary as appropriate.

Board

Audit

Remuneration

Nominations

Scheduled

Short notice

Scheduled

Short notice

Scheduled

Short notice

Scheduled

Short notice

Executive Directors

Chrissie Herbert

Adam Moloney

nik philpot

Non-Executive Directors

Chris Batterham

David Coghlan1

Christopher Humphrey

Guy Millward

peter Simmonds

10/10

1/1

2/2

6/6

2/3

9/9

8/8

0/1

1/1*

2/2

0/1

2/2

1/1

2/2

By invitation. the executive Directors are not members of any of the Board Committees
and they attended only the committee meetings to which they were specifically invited.

1. David Coghlan was unable to attend one scheduled Board Meeting and Audit Committee

meeting. the Auditors presented their planning approach for the audit and their
assessment of the Managements technical assessment of the impact of IFRS 15: Revenue
from Contracts with Customers.

At Board meetings the Chairman ensures that effective
decisions are reached by facilitating debate and consultations
with management and external advisors as necessary.
the work undertaken by the Board during the year is set
out in the table below:

The agenda for each Board meeting includes
the following as standing items:

- Risk analysis, including by risk, the risk factor and the

monitoring mechanism.

- Management report which is prepared and presented by

the Chief executive officer

Finance report, which is prepared and presented by the
Chief Financial officer and includes the management
accounts and business performance, including forecast
as appropriate.

Other matters which are covered by the Board
routinely during the year include:

- Review of annual report and preliminary announcement

- Review of executive Director’s presentation of the full

year results to analysts and investors

- one day strategy session at which the Board considers
management’s presentation of the Strategic plan and
gives its approval.

- Review and approval of the interim management

statements for release to the market

- Recommendation of the final dividend

- Company secretarial & legal

- Setting of the Board calendar for the year

Divisions of roles and responsibilities

Chief Executive

the Chairman is responsible for the leadership of the Board
and ensuring the effectiveness on all aspects of its role. there
is a clear division of responsibility between the Chairman and
the Chief executive, which is as follows:

nik philpot is the Chief executive and he is responsible for
running the Group’s business by proposing and developing the
Group’s strategy and overall commercial objectives, which he
does in close consultation with the Chairman and the Board.

Chairman

Chris Batterham retired from Chairman at the 2017 AGM
on the 20 September. Christopher Humphrey was appointed
Chairman at the 2017 AGM on 20 September. the below are
the roles and responsibilities of the Chairman for the financial
year ended 31 March 2018.

- Setting the Board’s agenda and ensuring the Board
receives accurate, timely and clear information on
all matters reserved to its decision and the Group’s
performance and operations

- ensuring compliance with the Board’s approved procedures

- Chairing the nominations Committee and facilitating

the appointment of effective and suitable members and
Chairman of Board Committees.

- providing input to the Board’s agenda and ensuring

that reports provided to the Board are accurate, timely
and include accurate information.

- ensuring, in consultation with the Chairman and the

Company Secretary as appropriate, compliance with the
Board’s approved procedures.

- ensuring that the Chairman is alerted to forthcoming
complex, contentious or sensitive issues affecting the
Group of which he might not otherwise be aware.

- providing information and advice on succession planning
to the Chairman, the nominations Committee, and other
members of the Board, particularly in respect of executive
Directors.

leading the communication programme with
Shareholders.

- ensuring that there is effective communication by

- promoting and conducting the affairs of the Group

the Group with its Shareholders, including by the Chief
executive and Chief Financial officer ensuring that
members of the Board develop an understanding of
the views of the major investors in the Group.

- promoting the highest standards of integrity, probity

and corporate governance throughout the Group and
particularly at Board level.

with the highest standards of integrity and corporate
governance.

Non-Executive Directors

All the non-executive Directors bring considerable knowledge
and experience to Board deliberations. non-executive Directors
do not participate in any of the Company’s share schemes
or bonus schemes and their service is non-pensionable. the
balance and independence of the Board is kept under review
by the nominations Committee.

Corporate Governance 04 CHAIRMAn'S RepoRt

AnnuAl RepoRt & ACCountS 2018

effectiveness

Composition

the Board is comprised of an appropriate balance of skills,
experience, independence and knowledge, which enables it to
discharge its responsibilities effectively. the balance of skill and
independence creates an environment that encourages the
effective challenge and development of proposals on strategy.
Currently there are five directors on the Board: Christopher
Humphrey, non-executive Chairman, two executive Directors,
nik philpot and Chrissie Herbert and two non-executive
Directors, Guy Millward and David Coghlan. the biographies
of each of the Directors can be found on page 28. each of the
non-executive Directors are independent for the purposes of
the Code.

the terms and conditions of appointment of the non-
executive Directors and the executive Directors’ service
contracts are available for inspection at the Company’s
registered office during normal business hours and will be
available at the Annual General Meeting.

the Directors have disclosed all their significant external
commitments which the Board has considered and is satisfied
that all Directors are able to allocate sufficient time to the
Company to discharge their responsibilities effectively.

Training and support

During the year two new directors joined the Board –
Christopher Humphrey and David Coghlan. Both received
an induction to the business covering product, technology
and finance. In addition, Christopher Humphrey met with a
number of the large Shareholders.

Directors are provided with clear and accurate information
pertaining to matters to be considered at the Board and its
Committee Meetings. the information is provided in a timely
manner to ensure an appropriate level of review by each of
the Directors ahead of the meetings.

Evaluation

the Board has not undergone a formal evaluation during the
financial year due to the change in composition of the Board.
the Board intends to carry out a formal evaluation of the
Board during the financial year ended 31 March 2019.

Re-election

the articles of association require that at the AGM one third,
or as near as possible, of the Directors will retire by rotation.
Christopher Humphrey, Chairman and Guy Millward, non-
executive Director will retire by rotation and put themselves
forward for re-election at the AGM. In addition, any Director
who has at the start of the AGM been in office for more than
three years since his last appointment or re-appointment
shall retire, there were no such Directors. In addition, David
Coghlan, non-executive Director will stand for election at the
AGM, this being his first AGM.

Insurance

the Company maintains appropriate insurance cover in
respect of legal action against the Directors.

Conflicts of interest

under the articles of association, the Board has authority to
approve any conflicts or potential conflicts of interest that are
declared by individual directors; conditions may be attached
to such approvals and directors will generally not be entitled
to participate in discussions or vote on matters in which they
have or may have a conflict of interest.

Accountability

Financial and business reporting

please refer to the following pages for information on how
the Board has carried out the financial and business reporting
obligations as stipulated under the Code:

• page 45 for the Board’s responsibility statement setting
out the steps taken to present a fair, balanced and
understandable assessment of the Company’s position and
prospects.

• pages 3 to 22 for the strategy and business model which
explains how the Company generates and preserves value
over the longer term and the strategy for delivering the
objectives of the Company.

• page 44 for the statement that the financial statements

have been prepared on a going concern basis.

Risk management and internal control

the Board has overall responsibility for establishing and
maintaining sound risk management and internal control
systems, and for the monitoring of these systems to ensure
that they are effective and fit for purpose. the Audit
Committee provides support to the Board in this regard and
overseas the monitoring process. Further information on the
risk management and internal control system is set out in the
Audit Committee report on page 34.

the Directors have carried out a robust assessment of the
principal risks facing the Group and how these risks could
affect the business, financial condition or operations of the
group. the explanation of these principal risks including how
they are being mitigated can be found on pages 12 to 13.

Remuneration

Nominations Committee

Details of how the Company applies the principles of the
Code in respect of Directors’ remuneration are set out in the
Remuneration report on pages 37 to 42.

Shareholder relations

the Directors consider that the Annual Report and Accounts
play an important role in providing Shareholders with an
evaluation of the Company’s position and prospects. the
Board aims to achieve clear reporting of financial performance
to all Shareholders. the Board acknowledges the importance
of an open dialogue with its institutional Shareholders and
welcomes correspondence from private investors.

In addition to the Annual Report and the Company’s website,
the Annual General Meeting is an ideal forum at which to
communicate with investors, and the Board encourages their
participation.

the executive Directors have an ongoing programme of
meetings with institutional investors and analysts twice a year
for up to two weeks at a time. During the year the meetings
took place in June and november and were held in the uK in
london and edinburgh; paris and Copenhagen, in addition to
meetings at the Company’s premises and investor conferences
in london and Boston. Feedback from these meetings is
reported to the Board.

Committees of the Board

the Audit, nominations and Remuneration Committees are
the formally constituted committees of the Board which deal
with specific aspects of the Group’s affairs in accordance with
the duties and responsibilities formally delegated to them by
the Board. the report on the nominations Committee is set
out below and the reports of the Audit Committee and the
Remuneration Committee are set out on pages 34 to 37.

the nominations Committee currently comprises David
Coghlan, Guy Millward and Christopher Humphrey, who is the
committee Chairman. It met four times during the period and
the details of meeting attendance are set out on page 30.

the Committee is responsible for considering and making
recommendations on the appointment of additional directors,
the retirement of existing directors and for reviewing the size,
structure and composition of the Board and membership of
Board Committees, which are considered against objective
criteria.

Diversity policy

the Board embraces the supporting principles enshrined in the
Code relating to Board diversity, including gender.

the Board is committed to ensuring an appropriate balance
of skills, knowledge and experience on its Board. Diversity is
a vital part of the continued assessment and enhancement of
Board composition and the Board recognises the benefits of
diversity amongst its members. the Board will take account of
all aspects of diversity in its considerations including, but not
limited to gender, industry experience, background and race.

All Board appointments are made on merit, in the context of
balance of the skills, experience, independence and knowledge
which the Board as a whole requires to be effective, taking
account of diversity in the manner described above.

Succession planning and Board appointments

the Committee, in making recommendations to the Board
on the appointment of new directors, adopts a transparent
procedure whereby the required skills, knowledge and
experience are carefully identified in order to complement and
create a balance with the existing skill set on the Board.

During the year, an external search was commissioned, using an
independent executive search firm, Blackwood Group plc, which
has no other connections with the Company, to search for a non-
executive Chairman following the retirement of Chris Batterham
from the Board at the 2017 Annual General Meeting.

Corporate Governance 04

AnnuAl RepoRt & ACCountS 2018

In the year under review the Audit Committee’s
activities were as follows:

Impact of IFRS 15: Revenue from
Contracts and Customers

Audit Committee Report

Topic:

Actions:

• overseeing the external auditor including its scope and
cost effectiveness and monitoring and reviewing the
independence of our external auditors and the provision of
non-audit services to the Group; and

• overseeing the quality of the external audit process.

the Committee continues to keep its activities under review
in light of regulatory and market developments and met three
times during the year. the details of meeting attendance are
set out on page 30.

By invitation, during the year, meetings were also attended by
the Chief executive officer, the Chief Financial officer and our
external auditor, as appropriate.

In order to maximise its effectiveness and as part of the
process of working with the Board, the Committee meetings
take place on the same day as, but prior to, the Company
Board meetings. the Chairman of the Committee reports to
the Board on the activity of the Committee.

Guy Millward
CHAIRMAN AUDIT COMMITTEE
13 June 2018

Dear Shareholder,

on behalf of the Audit Committee, I am pleased to present
our report for the year ended 31 March 2018. In the
year under review, the Audit Committee has focused on
understanding the impact on the business of IFRS 15:
Revenue from Contracts with Customers. the Committee
also considered the integrity of the Group’s financial
reporting and provided advice to the Board that the 2018
annual report and accounts, taken as a whole, is fair,
balanced and understandable, providing Shareholders
with the necessary information to assess the Company’s
position, performance, business model and strategy.
the activities of the Committee are kept under review
in line with regulatory and market developments.

the Audit Committee currently comprises myself, David
Coghlan and Christopher Humphrey. David Coghlan
joined the Committee on 1 December and Christopher
Humphrey joined the Committee on 21 June 2017. the
Board considers that I have recent and relevant financial
experience in accordance with the Code. Full biographical
details of each of the current committee members, including
relevant financial experience are set out on page 28.

the key responsibilities of the Audit Committee are as follows:

• monitoring the financial reporting process, including the
integrity of the financial statements of the Company and
any formal announcements relating to the Company’s
financial performance including reviewing significant
financial reporting judgements contained therein;

•

reporting to the Board on the appropriateness of the
significant accounting policies and practices of
the Group;

•

risk management and the effectiveness of the Group’s
system of internal financial control;

As the Eckoh business continues
to grow, particularly in the US, the
number and size of the contracts
have been increasing.

Financial
reporting

Review of the preliminary and interim results
announcement and the annual report
Review of significant accounting issues (as
reported below)
Review of the impact of the implementation
of IFRS 15: Revenue from Contracts with
Customers
Consideration of the going concern basis for
preparation of the financial statements
Advising the Board on whether the annual
report and accounts taken as a whole, is fair
balanced and understandable
Recommendation of the going concern
statement to the Board
Review of the external auditor reports and the
outcomes of the audit process.

Audit plans

Consideration and approval of the internal
and external audit plans

Risk
management
and internal
controls

Review of the principal risks and the mitigation
of these risks as set out on pages 12 to 13.
Review the effectiveness of the Company's
internal financial controls by reference to
reports from the external auditors.

Committee
governance

Review and update of the Audit Committee
terms of reference.

the significant issues considered by the Committee in relation
to the 2018 accounts, and how these were addressed, were:

Contract revenue & revenue recognition

• As the eckoh business continues to grow, particularly
in the uS, the number and size of the contracts have
been increasing. the Group has applied a consistent
accounting policy in relation to revenue recognition.
We have in place controls around the delivery of
implementations to ensure revenue is recognised
appropriately during the implementation phase. Revenue
is recognised based on a percentage of completion
basis using the direct labour costs incurred to date as
a proportion of the total estimated costs required to
complete a project. We have in place controls around
the project management and the underlying processes
supporting the calculation of revenue to prevent errors.

Goodwill and intangible assets impairment

• the Group has goodwill and intangible assets as a
result of the acquisitions for the Veritape, pSS and
Klick2Contact businesses over the last few years. on
an annual basis the Group undertakes an impairment
review of goodwill and intangible assets for each cash
generating unit (CGu) using cashflow projections.

Management override of controls

• We are satisfied adequate controls are in place and use

the results of the external audit and the internal reporting
mechanism to assess this on an on-going basis.

the Group will adopt IFRS 15: Revenue from Contracts with
Customers on 1 April 2018 and anticipates applying the
standard on a fully retrospective basis. For the accounting
period beginning 1 April 2018 it is currently intended that the
standard will be adopted and the prior year comparison will
be restated subject to the application of one or more practical
expedients available in the standard. During the year ended
31 March 2018, the Group has undertaken a review of all
the services and products the Group provides and the main
types of commercial arrangements used with each service and
product. Both the uK and the uS business will be impacted
by IFRS 15 and the most significant impact of implementing
the standard is for the hosted Customer Contact solutions
in the uK, the hosted Secure payment solutions in the
uK and the onsite Secure payment Audio tokenisation
solution in the uS, which is in effect a hosted solution.
Further details on the changes to the accounting policy and
the impact of the adoption of IFRS 15 are on page 56.

External audit

KpMG llp has been the external auditor for the Group since
year ended 31 March 2012. the appointment of KpMG
llp as external auditor, including the rotation of the audit
partner, is kept under annual review. David neale is the
current audit partner and he has completed two years of
his five-year term. An annual review of the effectiveness
of the external audit is undertaken by the Committee.

the effectiveness of the audit process is underpinned by
the appropriate audit planning and risk identification at the
outset of the audit cycle. the auditor provides a detailed
audit plan identifying its assessment of the risks and other
key matters for review. For the year ended 31 March 2018,
the primary risks identified were: contract revenue, revenue
recognition, goodwill & intangible assets impairment and
management override of controls. the Committee reviews
and challenges the work undertaken by the auditor to
test management’s assumptions on these matters. An
assessment of the effectiveness of the audit process in
addressing these items is performed through the reporting
received from the auditor at the half-year and year end.
the Committee seeks feedback from management on the
effectiveness of the audit process. no significant issues were
raised with respect to the audit process for the period and
the quality of the audit process was assessed to be good.

Corporate Governance 04 AuDIt CoMMIttee RepoRt

AnnuAl RepoRt & ACCountS 2018

the Audit Committee meets the external auditor without
the executive Directors being present and procedures are in
place, which allow access at any time of external auditors
to the Audit Committee. the Chairman of the Committee
reports the outcome of each meeting to the Board.

Based on the Committee’s assessment, the Committee
has provided the Board with its recommendation to
the Shareholders on the re-appointment of KpMG
llp as external auditor for the year ending 31 March
2019. there are no contractual obligations restricting
the Committee’s choice of auditor. A resolution for re-
appointment of the auditor will be proposed at the
forthcoming Annual General Meeting and is included in
the notice of Meeting which accompanies this report.

Non-audit services

the Committee reviews the level of non-audit fees for
services provided by the auditor in order to satisfy itself that
auditor independence is safeguarded. there were no non-
audit fees paid to KpMG in the year ended 31 March 2018.

In determining the most appropriate provider of non-audit
services, the committee will consider the knowledge and
expertise of the potential providers and the proposed costs.
non-audit services will only be undertaken by the auditor
where it is deemed to be the preferred provider and the
provision of services poses no threat to its independence.

Details of the remuneration paid to the auditor
for the statutory audit are set out in note 7.

Risk management and internal control

the Board is responsible for establishing and maintaining
the Group’s system of internal control, and for regularly
reviewing its effectiveness. the Board has carried out a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency or liquidity. these risks are
disclosed on pages 12 to 13 together with how they
are being managed or mitigated. procedures have been
designed to meet the particular needs of the Group and
its risks, safeguarding shareholder’s investments and the
Company’s assets. Such a system is designed to manage,
rather than eliminate, the risk of failure to achieve business
objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.

the key features of the Group’s internal control systems
that ensure the accuracy and reliability of financial reporting
include clearly defined lines of accountability and delegation
of authority, policies and procedures that cover financial
planning and reporting, preparation of monthly management
accounts, project governance and information security.

there are ongoing processes for identifying, evaluating
and managing the Company’s significant risks and related
internal controls that are integrated into the Company’s
operations. Such processes are reported to and reviewed by,
the Board at each meeting. these processes have identified
the risks most important to the Company (business,
operational, financial, security and compliance), determined
the financial implications, and assessed the adequacy and
effectiveness of their control. the reporting and review
process provide routine assurance to the Board as to the
adequacy and effectiveness of the internal controls.

Internal Audit

the Audit Committee annually reviews the requirement for an
internal audit function. the Committee has decided that none
is necessary at present. Instead, other monitoring processes
have been applied to provide assurance to the Board that
the system of internal control is functioning satisfactorily.

Guy Millward
CHAIRMAN AUDIT COMMITTEE
13 June 2018

Remuneration Committee Report

Dear Shareholder,

I am delighted to have taken on the role of Remuneration
Committee Chairman during the year. on behalf of the
Remuneration Committee I am pleased to present our
remuneration report for the financial year ended 31 March 2018,
which has been approved by the Board.

this report is divided into two sections:

• Firstly, the annual statement setting out the work of the

Remuneration Committee in 2018 and priorities for 2019; and

• the Annual Report on remuneration which sets out the

remuneration paid to Directors in the year ended 31 March
2018 as well as details of how the Committee intends to
implement our remuneration policy for the financial year
ending 31 March 2019.

the membership and responsibilities of the Remuneration
Committee are set out on page 38 of this report. Amongst its
objectives, the Committee strives to ensure the executive Directors’
remuneration is aligned with the interests of Shareholders. the
Remuneration Committee believes that Shareholders’ interests are
best served by linking a significant proportion of total potential
remuneration to long-term performance.

Short and long-term incentives are structured to reward executives
for enhancing shareholder value. the value received by executive
Directors under the current long-term share incentive arrangements
depends on the degree to which the associated performance
conditions are satisfied at the end of the five-year performance
period. this ensures that substantial rewards will be received only
if substantial value has been created for Shareholders.

In respect of the year under review the Remuneration
Committee’s activities were as follows:

• the Committee sought approval from Shareholders at the 2017
AGM for a new long-term performance Share plan (“pSp”)
for executive Directors and Senior Management following
a detailed Shareholder consultation in 2017. the pSp was
approved by 84.83% of Shareholders voting at the 2017 AGM.

• the Committee made pSp awards to executive Directors

on 23 november 2017, as set out in the formal report below,
in line with the approved pSp rules.

• the Committee approved an increase in the Chief
executive officer’s and Chief Financial officer’s
salaries with effect from 1 April 2018 of 2% and
3% respectively, reflecting pay increases within the
Group’s workforce and current market conditions.

• the Base fees of the Chairman and non-executive Directors
have also been increased by 2% from 1 June 2018. In
addition, a Committee Chair fee of £5,000 has been
introduced for the Chair of the Remuneration Committee
and Audit Committee, with effect from 1 June 2018.

• no bonus payments were made for the executive

Directors and Senior Management for the financial year
ended 31 March 2018. Bonus payments were accrued
at an average of 3% of salary for staff members.

• the Committee approved the structure of the 2019
Annual Bonus plan to reward executive Directors for
delivering against challenging targets for the year
ending 31 March 2019. the structure is a combination
of financial targets and personal objectives.

During the current financial year ending 31 March 2019, the
Committee intends to review the Group’s remuneration policy,
and the results of this review will be included in the Remuneration
Committee Report in the Annual Report next year.

the Annual Remuneration Report in respect of last year, set out
below, will be put to the Company’s Shareholders for an advisory
vote at the AGM to be held on Wednesday 19 September 2018.
I encourage all Shareholders to vote in favour of this resolution
and I look forward to the opportunity to meet with Shareholders
at the 2018 AGM.

David Coghlan
CHAIRMAN REMUNERATION
COMMITTEE
13 June 2018

Corporate Governance 04

AnnuAl RepoRt & ACCountS 2018

Annual Report on Remuneration

Summary of Shareholder voting at the 2017 AGM

Directors’ single figure of total remuneration (audited)

Total number
of votes

90,611,885

16,209,077

% of
votes cast

84.83%

15.17%

the following table shows the results of the
Shareholder advisory vote on the introduction of
the long-term performance Share plan (pSp) for
executive Directors and Senior Management:

Against

total votes cast (excluding withheld votes)

106,820,962

total votes withheld

11,596

total votes cast (including withheld votes)

106,832,558

...with very limited competition
to our offering, this represents
a huge opportunity for Eckoh in
the coming years.

Remuneration Committee membership in 2017/18

For (including discretionary)

the following section provides details of how eckoh’s
remuneration policy was implemented during the financial year
ended 31 March 2018. the following pages contain information
that is required to be audited in compliance with the Directors’
Remuneration requirements of the Companies Act 2006.
All narrative and quantitative tables are unaudited unless
otherwise stated.

the Remuneration Committee is responsible for developing
policy on remuneration for the executive Directors.
the committee members are all independent Directors.
peter Simmonds was the Chair of the Remuneration
Committee for the period from 1 April 2017 to his
resignation from the Board on 14 December 2017.
David Coghlan was appointed Chair of the Remuneration
Committee on 17 January 2018. Guy Millward and
Christopher Humphrey are also members. Christopher
Humphrey joined the Committee on 21 June 2017.

the Remuneration Committee is formally constituted
with written terms of reference which set out the
full remit of the Committee. the Remuneration
Committee met twice during the year. the details
of meeting attendance are set out on page 30.

During the year, the Committee sought internal support
from the Chief executive officer and Chief Financial officer,
who attended Committee meetings by invitation from
the Chairman, to advise on specific questions raised by
the Committee. the Chief executive officer and the Chief
Financial officer were not present for any discussions
that related directly to their own remuneration.

In undertaking its responsibilities, the Committee seeks
independent external advice as necessary. to this end,
for the year under review the Committee has received
advice from FIt Remuneration Consultants llp.

the following table sets out the single figure of total remuneration for Directors for the financial year ended 31 March 2018 and 2017:

Base salary/fees

Benefits1

Pension

Annual bonus

Total

2018

£’000

2017

£’000

2018

£’000

2017

£’000

2018

£’000

2017

£’000

2018

£’000

2017

£’000

2018

£’000

2017

£’000

160

283

608

180

269

552

187

313

670

204

319

626

Executive Directors

Chrissie Herbert

Adam Moloney

nik philpot

Non-Executive Directors

Clive Ansell

Chris Batterham

David Coghlan

Christopher Humphrey

Guy Millward

peter Simmonds

Total

Benefits includes car allowance, healthcare cover & death in service.

pensions have been separated out from benefits and the 2017 analysis restated. nik philpot and Chrissie Herbert receive pension contributions of 10%
of base salary. In 2017 there was an overpayment into nik philpot’s pensions, which was recovered during the financial year ended 31 March 2018.

the executive Directors did not receive any bonus payment in respect of the financial year ended 31 March 2018, or 31 March 2017.

Incentive outcomes for the year ended 31 March 2018

Annual bonus in respect of 2017/18 performance

the annual bonus for the executive Directors and Senior Management for the year ended 31 March 2018 was based on the
achievement of Adjusted operating profit. the level of Adjusted operating profit achieved, would have allowed for a small bonus
to be paid to the executive Directors, however, they proposed to the Remuneration Committee that no bonus be paid to either the
executive Directors or Senior Management and instead a bonus was accrued to pay the staff a bonus.

Scheme interests awarded in the year ended 31 March 2018

Performance Share Plan (“PSP”) (audited)

the table below provides details of the Initial Awards made under the pSp on 23 november 2017 to nik philpot and
Chrissie Herbert. performance for these awards is measured over approximately five years from the 2017 AGM and will end
30 days after the announcement of the 2022 Full Year Financial Results.

Executive
Director

Face value
(% of
salary)

Number
of shares
awarded

Face
value1
£

Potential award
for minimum
performance

Performance
measures

Nik Philpot

140%

3,750,000

1,921,875

Chrissie Herbert

112%

2,250,000

1,153,125

25% of face value

• 25% vesting for compound growth in tSR of 10% pa
• 100% vesting for compound growth in tSR of 25% pa
• Straight line vesting for intermediate performance between
• threshold and maximum performance

Face value has been calculated using the Company’s share price at the
end of the date of the award of £0.5125.

Corporate Governance 04 AnnuAl RepoRt on ReMuneRAtIon

AnnuAl RepoRt & ACCountS 2018

no further awards will be made to any recipients of the
Initial Awards until 2022 (when the Initial Awards are
expected to vest).

In the ten-year period from the 2017 AGM, the Company
may not issue, under the pSp and any other employees’ Share
plan adopted by the Company, interests in shares comprising
in aggregate more than 10% of the issued ordinary Share
Capital of the Company.

except for the Initial Awards, awards will normally vest on the
later of the expiry of the third anniversary of the date of grant
of the award and the date that the Committee determines
the extent to which the applicable performance criteria have
been satisfied, and provided in normal circumstances that the
participant is still a Director or employee of the Company’s
Group.

Payments to past Directors (audited)

there were no payments in the financial year ended 31 March
2017 to past Directors of the Company. In the financial year
ended 31 March 2018, payments made to Adam Moloney,
up to the date he ceased to be a Director are set out below:

• Salary totalling £32,000 for the period

to his departure.

• pension contribution totalling £3,076
for the period to his departure date.

• Benefits (including car allowance,

healthcare and income protection) totalling
£1,925 for the period to his departure.

Chairman and Non-Executive Director fees

the Chairman and non-executive Directors were paid the
following fees in the financial year ending 31 March 2018

Role

Chairman

Non-Executive Director

Chairman of a Committee

2018 Annual fee

£50,000

£30,000

nil

Fees for the Chairman, non-executive Directors and
Committee Chairmen have been reviewed with the support
of FIt Remuneration Consultants llp, who provided market
data. As a result of the review the fees for the Chairman and
non-executive Directors base salaries will increase by 2% from
1 June 2018. In addition, a Committee Chairman fee for the
Audit Committee and Remuneration Committee of £5,000 per
annum will be introduced, effective 1 June 2018.

Directors’ shareholdings

the shareholdings of the Directors and their connected
persons in the ordinary Shares of the Company against their
respective shareholding requirement as at 31 March 2018:

31 March 2018
Ordinary Shares of
0.25 pence each

1 April 2017
Ordinary Shares of
0.25 pence each

Nik Philpot1

Chrissie Herbert

Christopher Humphrey

6,926,285

20,000

400,000

5,854,873

1. nik philpot's spouse is the beneficial owner of 80,000 shares that are

included above.

Directors’ interests in shares in Eckoh’s long-term incentive plans and all-employee plans
Directors' share options (audited)

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

Granted
in year
(number)

Forfeited
in year
(number)

Nik Philpot

Chrissie Herbert

Note

At 1 April
2017
(number)

2,157,991

4,265,983

3,750,000

500,000

2,250,000

Exercised
in year
(number)

2,157,991

4,265,983

At 31
March
2018

Exercise
price
(pence)

44.00

Earliest
date for
exercise

Latest
date for
exercise

n/a

3,750,000

0.00

15.07.22

22.11.27

500,000

47.50

21.06.20

21.06.27

2,250,000

0.00

15.07.22

22.11.27

1. Granted under the 2012 eckoh plc long term Incentive plan (“2012 ltIp”). the number of shares that ultimately vested was subject to
the satisfaction of share price targets. the share price targets were comfortably exceeded and all of the share have now been exercised.

2. Granted under the 2012 eckoh plc long term Incentive plan (“2012 ltIp”). the number of shares that ultimately vested was subject to
the satisfaction of share price targets. the share price targets were comfortably exceeded and all of the share have now been exercised.

3. Granted under the 2017 eckoh plc performance Share plan (“pSp”), as approved at the 2017 AGM.

4. Granted under the 2016 ltIp (see below).

Long-Term Incentive arrangements for Directors

In addition to the pSp described above, the Company
operates an additional long-term share incentive scheme for
directors and senior managers (“the 2016 ltIp”). the 2016
ltIp was implemented following prior discussions with major
Shareholders of the Company. under this scheme, the
Company may issue a maximum of 2% of the share capital
each year for the 3 years ending 31 March 2019 to the

senior managers of the business. All options granted under
this scheme carry an exercise price equal to the market price
at the date of grant and are subject to vesting based on
achievement of performance criteria. Grants of options under
this arrangement were made in March 2016 and March 2017
to a total of 34 senior management employees. the Chief
executive officer was not awarded any share options in the
years ended 31 March 2016 and 31 March 2017.

Share options of 500,000 were awarded under the 2016 ltIp to Chrissie Herbert, Chief Financial officer following her appointment
on 2 May 2017. these are disclosed in the above and below tables. total grants under the 2016 ltIp have been as follows:

Date of issue

Number of senior
management

Granted in year
(number)

Exercise price
(pence)

Earliest date for
exercise

Latest date for
exercise

23 March 2016

2 May 2016

13 October 2016

31 March 2017

21 June 2017

4,100,000

500,000

4,000,000

500,000

43.5

38.875

39.5

47.5

23.03.19

02.05.19

13.10.19

31.03.20

21.06.20

23.03.26

02.05.26

13.10.26

31.03.27

21.06.27

the Company does not intend to grant any further awards under the 2016 ltIp.

Corporate Governance 04 AnnuAl RepoRt on ReMuneRAtIon

AnnuAl RepoRt & ACCountS 2018

Share Incentive Plan (audited)

the Group operates a Share Incentive plan (SIp) in the uK. the scheme and plan are open to all uK employees, including the
executive Directors. As at 31 March 2018, Chrissie Herbert participates in the uK scheme and the details are shown below:

number of
partnership
Shares
purchased
at 31 March
2017

number of
Matching
Shares
purchased
at 31 March
2017

Dividend
Shares1
acquired at
31 March
2017

total
Shares at
31 March
2017

number of
partnership
Shares2
purchased
during the
year

Matching
Shares3
awarded
during the
year

Dividend
Shares
acquired
during the
year

Dates of
release of
Matching
Shares4

Total
Shares at
31 March
2018

Chrissie
Herbert

1,930

3,861

nov 20

5,791

1. Dividend Shares are ordinary Shares of the Company purchased with

Executive Directors’ service contracts

the value of dividends paid in respect of all other shares held in the
plan.

partnership Shares are ordinary Shares of the Company purchased,
every six months by the Company with the monthly contributions
made by the employee, during the period (at prices from £0.3975 to
£0.46625).

3. Matching Shares are ordinary Shares of the Company awarded

conditionally in line with the purchase of the matching shares every
six months, during the period.

the dates used are based on the earliest allocation of the Matching
Shares.

nik philpot has a service contract that is terminable on twelve
months’ notice by either party while Chrissie Herbert has a
service contract that is terminable on nine months’ notice by
either party.

Chairman and Non-Executive Directors

the Chairman and non-executive Directors do not have service
contracts but serve under letters of appointment terminable by
six months’ notice on either side.

External advisors

the Committee received independent advice from FIt
Remuneration Consultants llp as the Committees appointed
remuneration advisor during the financial year ended 31
March 2018. During the year the level of fees paid to
remuneration advisors totalled £32k, (2017: £nil) and this
fee covered advice on the long-term performance Share plan
proposed at the 2017 AGM and the review of the non-
executive Directors base salary and Committee Chair Fee.
the Committee is satisfied that the advice it received from FIt
during the year was objective and independent.

David Coghlan
CHAIRMAN REMUNERATION
COMMITTEE
13 June 2018

Directors' Report

the Directors present the
Directors' report, together with
the audited accounts for the year
ended 31 March 2018.

Strategic Report

the statements and reviews on pages 3 to 15 comprises the
Strategic Report which contains certain information, outlined
below, that is incorporated into the Directors’ Report by
reference:

• An indication of the Group’s likely future business

developments;

• An indication of the Group’s research and development

activities; and

•

Information on the Group’s policies for the employment of
disabled persons and employee involvement; and

• the Corporate Responsibility statement.

Results for the period

the consolidated income statement, statement of financial
position and cash flow statement for the year ended 31
March 2018 are set out on pages 52 to 55. An analysis of
risk is set out on pages 12 to 13 and of risk management on
pages 64 to 65. the statement of financial position and cash
flow statement of the holding Company for the year ended
31 March 2018 are set out on page 80. Since 1 April 2018,
there have been no material events likely to impact the future
development of the Company.

Directors

the Directors who held office at 31 March 2018 and up to
the date of this report are set out on page 28 along with their
biographies and photographs.

Changes to the Board during the year and up to the date
of this report were as follows:

Name

Effective Date

Position

Chris Batterham

David Coghlan

Chrissie Herbert

Christopher Humphrey

Resigned on
20 September 2017

non-executive
Chairman

Appointed on
1 December 2017

non-executive
Director

Appointed on
2 May 2017

Appointed on
21 June 2017

Chief Financial
officer

non-executive
Director

Christopher Humphrey

Appointed on
20 September 2017

non-executive
Chairman

Peter Simmonds

Resigned on
14 December 2017

non-executive
Director

Details of the Directors, who will be standing for reappointment
at the forthcoming Annual General Meeting to be held on
19 September 2018 are detailed on page 32. the remuneration
of the Directors including their respective shareholdings in the
Company is set out in the Remuneration Report on pages 37 to 42.

Directors’ and Officers’ liability insurance
and indemnification of Directors

the Company maintains Directors’ and officers liability insurance
which gives appropriate cover for any legal action brought
against its Directors.

Share capital

the Company has only ordinary Shares of 0.25 pence nominal
value in issue along with 326,022 of shares held in treasury. note
19 to the consolidated financial statements summarises the rights
of the ordinary Shares as well as the number issued during the
year ended 31 March 2018.

the subsidiary undertakings are listed in note 14.

Corporate Governance 04 DIReCtoRS' RepoRt

AnnuAl RepoRt & ACCountS 2018

Substantial shareholdings

As at 31 March 2018, the Company had been advised under the
Disclosure Guidance and transparency Rules, or had ascertained
from its own analysis, that the following held more than 3%
of the issued capital:

Name of holder

No. of Ordinary
Shares/ voting
rights

% of issued
capital/ voting
rights

Hargreave Hale

48,440,874

19.21%

Kestral Partners

36,237,864

14.73%

Herald Investment
Management

Cavendish Asset
Management

Majedie Asset
Management

Hargreaves
Lansdown Asset
Management

River & Mercantile
Asset Management

17,814,890

7.06%

10,838,000

4.30%

7,760,381

3.08%

7,601,865

3.01%

the Company’s issued share capital as at 31 March 2018
is set out in note 19.

Committees of the Board

the Board has established Audit, nominations and Remuneration
Committees. Details of these Committees, including membership
and their activities during the year, are contained in the
Corporate Governance section of the Annual Report and in the
Remuneration Report.

Corporate responsibility

• Details of the substantial Shareholders and their
shareholdings in the Company are listed above;

• the rules concerning the appointment and replacement

of Directors, amendment to the Articles of Association
and powers to issue or buy back the Company’s shares are
contained in the Articles of Association of the Company and
the Companies Act 2006.

Articles of Association

the Company’s Articles of Association set out the rights
of Shareholders including voting rights, distribution rights,
attendance at general meetings, powers of directors,
proceedings of directors as well as borrowing limits and other
governance controls. unless expressly specified to the contrary
in the articles of association of the Company, the Company’s
articles of association may be amended by a special resolution
of the Company’s Shareholders. A copy of the Articles of
Association can be requested from the Company Secretary.

During the year no Director held any beneficial interest in any
contract significant to the Company’s business, other than a
contract of employment. the Company has procedures set
out in the Articles of Association for managing conflicts of
interest. Should a Director become aware that they or their
connected parties, have an interest in an existing or proposed
transaction with the Group, they are required to notify the Board
as soon as reasonably practicable. Related party transactions
that took place during the year can be found in note 23.

Political donations

the Group made no political donations
during the year (2017: £nil).

Financial instruments

the financial risk management objectives and policies
of the Group and the exposure of the Group to foreign
currency risk, interest rate risk, and liquidity risk are outlined
in note 3 to the consolidated financial statements.

8,760,898

3.47%

Conflicts of interest

the Group’s report on corporate responsibility is set out on
pages 24 to 27.

Going concern

Corporate governance

the Group’s report on corporate governance is on pages
28 to 42 and forms part of this Directors’ Report.

Companies Act 2006 disclosures

In accordance with Section 992 of the Companies Act 2006 the
Directors disclose the following information:

• the Company’s capital structure and voting rights are

summarised in note 19 and there are no restrictions on voting
rights nor any agreement between holders of securities that
result in restrictions on the transfer of securities or on
voting rights;

• the Company holds 326,022 ordinary Shares in treasury;

• there exist no securities carrying special rights with regard to

the control of the Company;

the Directors have made appropriate enquiries and consider that
the Group has adequate resources to continue in operational
existence for the foreseeable future, which comprises the
period of at least 12 months form the date of approval of the
financial statements. there are no material uncertainties that
would prevent the Directors from being unable to make this
statement. Accordingly, the Directors continue to adopt the
going concern basis in preparing the financial statements.

Disclosure of information to the auditor

the Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are each aware,
there is no relevant audit information (as defined in Section
418(2) of the Companies Act 2006) of which the Company’s
auditor is unaware; and each Director has taken all the steps
that they ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.

•

select suitable accounting policies and
then apply them consistently;

• make judgements and estimates that are
reasonable, relevant, reliable and prudent;

•

for the Group financial statements, state
whether they have been prepared in accordance
with IFRSs as adopted by the eu;

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;

• assess the Group and parent company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going concern; and

• use the going concern basis of accounting unless
they either intend to liquidate the Group or
the parent company or to cease operations, or
have no realistic alternative but to do so.

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 its financial statements comply
with the Companies Act 2006. they are responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and 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.

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.

By order of the Board

Chrissie Herbert
COMPANY SECRETARY
13 June 2018

Annual General Meeting (AGM)

the 2018 AGM will be held at 11:00 on 19 September 2018.

the notice of the AGM and an explanation of the resolutions
to be put to the meeting are set out in the notice of Meeting
accompanying this Annual Report. the Board fully supports all
the resolutions and encourages Shareholders to vote in favour
of each of them as they intend to in respect of their own
shareholdings.

Dividends

the Directors recommend the payment of a final
dividend of 0.55p (2017: 0.48p) per ordinary Share
amounting to £1.4m (2017: £1.2 million) to be paid on
26 october 2018. this recommendation will be put to
the Shareholders at the Annual General Meeting.

Auditor

KpMG llp have expressed their willingness to
continue as the Company’s Auditor. As outlined in
the Audit Committee report on page 35, resolutions
proposing their appointment and to authorise their
remuneration will be proposed at the 2018 AGM.

Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements.

the Directors are responsible for preparing the Annual Report
and the Group and parent company 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. under that law they have elected to prepare the
Group financial statements in accordance with International
Financial Reporting Standards as adopted by the european
union (IFRSs as adopted by the eu) 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), including FRS 101 Reduced Disclosure Framework.

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. In preparing each of the Group and parent company
financial statements, the Directors are required to:

The Group has adequate resources
to continue in operational existence
for the foreseeable future.

Corporate Governance 04

AnnuAl RepoRt & ACCountS 2018

Independent
auditor's report

to the members of Eckoh plc

1. Our opinion is unmodified

Basis for opinion

We have audited the financial statements of Eckoh
plc (“the Company”) for the year ended 31 March
2018 which comprise the Group Consolidated
statement of Profit and Loss and Other
Comprehensive Income, Group Consolidated
Statement of Financial Position, Group
Consolidated Statement of Changes in Equity,
Group Consolidated Statement of Cash Flows,
Parent Company Balance Sheet, Parent Company
Statement of Changes in Equity, and the related
notes, including the accounting policies in note 1 of
the Group accounts and note i of the Parent
Company accounts.

In our opinion:

— the financial statements give a true and fair
view of the state of the Group’s and of the
Parent Company’s affairs as at 31 March 2018
and of the Group’s profit for the year then
ended;

— the Group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union (IFRSs as
adopted by the EU);

— the Parent Company financial statements have
been properly prepared in accordance with UK
accounting standards, including FRS 101
Reduced Disclosure Framework; and

— the financial statements have been prepared in

accordance with the requirements of the
Companies Act 2006.

We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We have fulfilled our ethical
responsibilities under, and are independent of the
Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to
listed entities. We believe that the audit evidence
we have obtained is a sufficient and appropriate
basis for our opinion.

Overview

Materiality:
group financial
statements as a
whole

Coverage

£115k (2017: £110k)

4.7% (2017: 4.7%) of
normalised profit before tax

93% (2017: 100%) of
group profit before tax

Risks of material misstatement vs 2017

Recurring risks

Contract revenue
recognition

Goodwill impairment

Recoverability of
Parent Company’s
investment in
Subsidiaries

◄►

▲

◄►

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:

Contract revenue recognition

Subjective estimate:

Our procedures included:

The risk

Our response

Refer to page 35 (Audit
Committee Report), page 59
(accounting policy) and page 67
(financial disclosures).

The contractual arrangements that
underpin the measurement and
recognition of revenue by the Group can
be complex, with significant estimation
of future financial performance in
fulfilment of the contract required. Key
sources of estimation uncertainty
include the assessment of the stage of
completion by reference to estimated
costs to complete a contract.

— Our sector expertise: Assessing whether
the revenue recognition methodology
applied was consistent with accounting
standards;

— Our sector expertise: Challenged the
group’s costs to complete through
discussions with key management
personnel across the business and
inspection of relevant correspondence with
customers, including a sample of relevant
project stage sign-offs.

— Tests of detail: For a sample of contracts,
inspecting the detailed contractual terms to
identify the service obligations to determine
the appropriateness of revenue recognition;

— Tests of detail: For a sample of contracts,

inspecting customer sign off on acceptance
of the deliverables to determine the
appropriateness of completion of the
contract; and

— Assessing transparency: Assessing the
adequacy of the Group’s disclosure about
estimation uncertainty regarding contract
revenue.

Goodwill and intangible asset
impairment

(£7.3 million; 2017: £4.6 million)

Refer to page 35 (Audit
Committee Report), page 59
(accounting policy) and page 71
(financial disclosures).

Forecast based estimate:

Our procedures included:

The risk is that the goodwill and
acquired intangible assets in cash
generating units is not recoverable and
should be impaired. Factors that could
give rise to an impairment include
performance behind forecast which
would impact the performance of
separate cash generating units.

Due to the inherent uncertainty involved
in forecasting future cash flows,
determining growth rates and calculating
discount rates, which are the basis of
the assessment of recoverability, this is
one of the key judgemental areas for our
audit.

— Benchmarking assumptions: Comparing
management’s data used in the calculation
of discount rates against external sources.
We compared the projected growth rates to
externally derived data and assessed the
appropriateness of the discount rate;

— Sensitivity analysis: Performing breakeven
analysis on the assumptions noted above;
and

— Assessing transparency: Assessing

whether the Group’s disclosures about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions
reflected the risks inherent in the valuation
of goodwill.

Corporate Governance 04 InDepenDent AuDItoR'S RepoRt

AnnuAl RepoRt & ACCountS 2018

2. Key audit matters: our assessment of risks of material misstatement (continued)

Recoverability of Parent
Company’s investment in
subsidiaries

(£19.4 million; 2017: £19.4 million)

Refer to page 82 (accounting
policy) and page 84 (financial
disclosures).

The risk

Our response

Medium risk, high value:

Our procedures included:

The carrying amount of the Parent
Company’s investments in subsidiaries
represents 58.2% (2017: 66.5%) of the
Company’s total assets. Their
recoverability is not at a high risk of
significant misstatement or subject to
significant judgement. However, due to
their materiality in the context of the
Parent Company financial statements,
this is considered to be the area that had
the greatest effect on our overall Parent
Company audit.

— Tests of detail: Comparing the carrying
amount of material investments with the
relevant subsidiaries’ draft balance sheet to
identify whether their net assets, being an
approximation of their minimum recoverable
amount, were in excess of their carrying
amount and assessing whether those
subsidiaries have historically been profit
making;

— Assessing subsidiary audits: Assessing

the work performed where subsidiary audits
are performed and considering the results of
that work on those subsidiaries’ profits and
net assets. Where audits have not been
performed, we performed analytical
procedures on the balances within those
subsidiaries; and

— Test of details: For the investments where
the carrying amount exceeded the net asset
value, comparing the carrying amount of the
investment with the expected value of the
business based upon a discounted cash
flow model, see “goodwill impairment” risk
for procedures performed.

3. Our application of materiality and an overview

of the scope of our audit

Materiality for the Group financial statements as a
whole was set at £115k (2017: £110k), determined
with reference to a benchmark of Group profit
before tax, normalised to exclude this year’s one-
off, non-recurring gain from the release of
contingent consideration accrual as disclosed in
note 28, of £1.0m (2017: nil), non-recurring expense
from legal fees and settlement costs of £0.6m
(2017: nil) as disclosed in note 8 and other non-
recurring expense of £0.2m (2017: nil), of which it
represents approximately 4.9% (2017: 4.7%).

Materiality for the Parent Company financial
statements as a whole was set at £100k (2017:
£100k), based on component materiality. This is
lower than the materiality we would otherwise
have determined with reference to a benchmark of
Parent Company total assets, and represents 0.4%
(2017: 0.3%) of this benchmark.

We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £5.75k (2017: £5.5k), in addition to other
identified misstatements that warranted reporting
on qualitative grounds.

Of the Group’s four (2017: five) reporting
components, we subjected three (2017: four) to full
scope audits for group purposes. The components
within the scope of our work accounted for the
percentages illustrated opposite.

The remaining 3% (2017: nil) of total Group
revenue, 7% (2017: nil) of Group profit before tax
and 1% (2017: nil) of total Group assets is
represented by one (2017: nil) component. For this
component, we performed analysis at an
aggregated Group level to re-examine our
assessment that there were no significant risks of
material misstatement within these.

The Group team approved the component
materialities, all of which were £100k (2017: £60k
to £100k), having regard to the mix of size and risk
profile of the Group across the components. The
work on all of the three components (2017: all of
the four components), including the audit of the
Parent Company was performed by the Group
team.

Normalised Group profit
before tax
£2.3m (2017: £2.3m)

Group Materiality
£115k (2017: £110k)

£115k
Whole financial
statements materiality
(2017: £110k)

£100k
Range of materiality at four
components (£100k)
(2017: £60k to £100k)

Profit before tax
Group materiality

£5.75k
Misstatements reported to the
Audit Committee (2017: £5.5k)

Group revenue

Group profit before tax

97%(2017 100%)

100

93%(2017 100%)

100

Group total assets

99%(2017 100%)

100

Normalised Group
profit before tax

92%

(2017 100%)

100

Key:

Full scope for group audit purposes 2018

Full scope for group audit purposes 2017

Residual components

Corporate Governance 04 InDepenDent AuDItoR'S RepoRt

AnnuAl RepoRt & ACCountS 2018

Financial Statements

52 Primary Statements
56 Basis of Preparation and notes to the accounts
80 Company Financial Statements
87 Shareholder Information

4. We have nothing to report on going concern

7. Respective responsibilities

We are required to report to you if we have concluded that
the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty
that may cast significant doubt over the use of that basis for
a period of at least twelve months from the date of approval
of the financial statements. We have nothing to report in
these respects.

5. We have nothing to report on the other information in

the Annual Report

The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have
not identified material misstatements in the other
information.

Strategic report and directors’ report

Based solely on our work on the other information:

— we have not identified material misstatements in the

strategic report and the directors’ report;

— in our opinion the information given in those reports for

the financial year is consistent with the financial
statements; and

— in our opinion those reports have been prepared in

accordance with the Companies Act 2006.

6. We have nothing to report on the other matters on

which we are required to report by exception

Under the Companies Act 2006, we are required 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.

We have nothing to report in these respects.

Directors’ responsibilities

As explained more fully in their statement set out on page
45, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error; assessing the Group and
Parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless
they either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic
alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.

A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.

8. The purpose of our audit work and to whom we owe

our responsibilities

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

David Neale
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Altius House, One North Fourth Street
Milton Keynes, MK9 1NE

13 June 2018

Financial Statements 05

AnnuAl RepoRt & ACCountS 2018

Consolidated statement of profit and loss and other Comprehensive Income

for the year ended 31 March 2018

Continuing operations

Revenue

Cost of sales

Gross profit

Administrative expenses before expenses relating to share
options schemes, acquisition costs, legal fees and settlement
costs and amortisation of acquired intangible assets

profit from operating activities before expenses relating to
share option schemes, acquisition costs, legal fees and settlement
costs and amortisation of acquired intangible assets

Amortisation of acquired intangible assets

transactions relating to acquisitions

legal fees and settlement costs

expenses relating to share option schemes

total administrative expenses

Profit from operating activities

Finance charges

Change in contingent consideration

Interest receivable

Profit before taxation

taxation credit / (charge)

Profit for the year

Other comprehensive income

Items that will be reclassified subsequently to profit or loss:

Foreign currency translation differences - foreign operations

Other comprehensive income for the year, net of income tax

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

Profit per share

Basic earnings per 0.25p share

Diluted earnings per 0.25p share

Notes

2018
£’000

30,005

(7,120)

22,885

2017
£’000

29,078

(8,751)

20,327

(17,624)

(16,013)

5,261

(2,329)

(595)

(793)

4,314

(2,186)

(319)

(24)

(21,341)

1,544

(118)

975

2,435

225

2,660

2018
£’000

(907)

1,753

pence

1.08

1.03

(18,542)

1,785

(205)

1,623

(184)

1,439

2017
£’000
(restated –
see note 1)

845

2,284

pence

0.60

0.56

Consolidated statement of financial position

as at 31 March 2018

Assets

Non-current assets

Intangible assets

tangible assets

Deferred tax asset

Current assets

Inventories

trade and other receivables

Cash and cash equivalents

Total assets

Liabilities

Current liabilities

trade and other payables

other interest-bearing loans and borrowings

Non-current liabilities

other interest-bearing loans and borrowings

Contingent consideration

Deferred tax liability

Net assets

Shareholders’ equity

Share capital

eSop reserve

Capital redemption reserve

Share premium

Merger reserve

Currency reserve

Retained earnings

Total Shareholders’ equity

Notes

2018
£’000

2017
£’000
(restated –
see note 1)

2016
£’000
(restated –
see note 1

7,959

4,703

3,533

16,195

724

9,835

8,164

18,723

34,918

(7,885)

(1,300)

(9,185)

(3,250)

(674)

(3,924)

21,809

631

(238)

198

2,640

2,697

329

15,552

21,809

10,900

5,023

3,578

19,501

713

11,557

6,083

18,353

37,854

9,547

5,376

4,774

19,697

748

9,127

6,617

16,492

36,189

(9,155)

(1,300)

(10,455)

(10,676)

(1,000)

(11,676)

(4,550)

(975)

(1,383)

(6,908)

20,491

611

(83)

198

2,660

2,697

1,236

13,172

20,491

(3,750)

(1,684)

(5,434)

19,079

600

(17)

198

2,612

2,353

391

12,942

19,079

the financial statements were approved by the Board of Directors on 13 June 2018 and signed on its behalf by:

Chrissie Herbert
CHIEF FINANCIAL OFFICER

Company Registration number 3435822

Financial Statements 05 pRIMARY StAteMentS

AnnuAl RepoRt & ACCountS 2018

Consolidated statement of changes in equity

for the year ended 31 March 2018

Share
capital

eSop
reserve

Capital
redemption
reserve

£’000

Balance at 1 April 2016 (as previously reported)

600

(17)

Restatement (note 1)

198

Share
premium

Merger
reserve

Retained
earnings

Currency
reserve

total
shareholders'
equity

£’000

2,612

2,353

12,942

£’000

18,845

234

19,079

1,439

845

2,284

(1,084)

346

(82)

132

(243)

(872)

157

234

391

845

Balance at 1 April 2016 (restated)

600

(17)

198

2,612

2,353

12,942

Total comprehensive income

profit

Retranslation (restated)

Total comprehensive income (restated)

Transactions with owners of the Company

Contributions and distributions

Dividends paid in the year

Shares issued on acquisition of Klick2Contact eu ltd

Shares transacted through employee Benefit trust

purchase of own shares

Shares issued under the share option schemes

Share-based payment charge

Deferred tax on share options

Total contributions and distributions

Total transactions with owners
of the Company

(82)

(66)

1,439

(1,084)

344

(14)

132

(243)

344

(1,209)

Balance at 31 March 2017 (restated)

611

(83)

198

2,660

2,697

13,172

1,236

20,491

Balance at 1 April 2017 (restated)

Total comprehensive income

profit

Retranslation

Total comprehensive income

Transactions with owners of the Company

Contributions and distributions

Dividends paid in the year

Shares transacted through employee Benefit trust

purchase of own shares

Shares issued under the share option schemes

Share-based payment charge

Deferred tax on share options

Total contributions and distributions

Total transactions with owners
of the Company

Balance at 31 March 2018

Share
capital

eSop
reserve

Capital
redemption
reserve

Share
premium

Merger
reserve

Retained
earnings

Currency
reserve

total
shareholders'
equity

£’000

611

(83)

£’000

198

£’000

2,660

£’000

2,697

13,172

£’000

1,236

£’000

20,491

(156)

(155)

(20)

2,660

(907)

2,660

(907)

1,753

(1,209)

(49)

554

424

(280)

(1,209)

(48)

(156)

554

424

(435)

631

(238)

198

2,640

2,697

15,552

329

21,809

Consolidated statement of cash flows

for the year ended 31 March 2018

Cash flows from operating activities

Cash generated in operations

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 intangible fixed assets

Interest paid

Interest received

Acquisition of subsidiary, net of cash acquired

net cash utilised in investing activities

Cash flows from financing activities

Dividends paid

proceeds from new loan

Repayment of borrowings

purchase of own shares

Issue of shares

Shares acquired / sold by employee Benefit trust

net cash generated in financing activities

(Decrease) / 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

the notes on pages 56 to 86 form an integral part of these financial statements.

Notes

2018
£’000

5,844

(3)

5,841

(646)

(323)

(118)

(1,047)

(1,209)

(1,300)

(156)

(48)

(2,713)

2,081

6,083

8,164

2017
£’000

2,475

(263)

2,212

(598)

(200)

(142)

(1,860)

(2,739)

(1,084)

6,500

(5,400)

(82)

(7)

(534)

6,617

6,083

Financial Statements 05

AnnuAl RepoRt & ACCountS 2018

Notes to the Financial Statements
for the year ended 31 March 2018

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 2018 as
endorsed by the eu.

the following adopted IFRSs have been issued but have not
been applied by the Group in these Financial Statements.
their adoption is not expected to have a material effect on the
Financial Statements unless otherwise indicated:

effective for the year ending 31 March 2019

•

IFRS 15 Revenue from Contracts with Customers (IFRS 15)

•

IFRS 9 Financial Instruments – Finalised version,
incorporating requirements for classification and
measurement, impairment, general hedge accounting and
derecognition

•

IFRS 2 (amended) Classification and measurement of share-
based payment transactions

• 2014-2016 Cycle of annual improvements to IFRS

effective for the year ending 31 March 2020

•

IFRS 16 leases

•

IFRIC 23 uncertainty over Income tax treatments

• Amendments to IFRS 9 Financial instruments

• Amendments to IAS 28 Investments in Associates and Joint

Ventures

effective for the year ending 31 March 2022

•

IFRS 17 Insurance contracts

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.

IFRS 15 Revenue from Contracts with Customers –
effective for the year ending 31 March 2019

the review of IFRS 15 is ongoing and the Directors are
cognisant of industry practice, which is constantly evolving,
that could impact the Group in its implementation; however,
based on the current position the Directors have undertaken
an assessment of the impact of the standard on the Group
based on the standard’s latest authoritative guidance. the
Group will adopt IFRS 15 on 1 April 2018 and anticipates
applying the standard on a fully retrospective basis. For the
accounting period beginning on 1 April 2018 the standard
will be adopted and the prior year comparison will be restated
subject to the application of one or more of the practical
expedients available in the standard.

IFRS 15 provides a single, principles-based five-step model
to be applied to all sales contracts, based on the transfer
of control of goods and services to customers. the Group
has undertaken a review of all the services and products
the Company provides and the main types of commercial
arrangements used with each service and product. Both the
uK and the uS business will be impacted by IFRS 15 and the
most significant impact of implementing the standard is for
the hosted Customer Contact solutions and Secure payment
solutions, which are in effect a hosted solution. the most
significant effects identified are as follows:

• Revenue for implementation fees for our hosted Secure
payments solution and our hosted Customer Contact
services; and revenue for hardware and implementation
fees for our hosted or onsite Secure payments Audio
tokenisation solution, will no longer be recognised at
the point of delivery of hardware or implementation fees
recognised as the project is being delivered. under IFRS
15 these revenues will be deferred to later periods. only
once the solution has been delivered to the client will
revenue begin to be recognised and then it will be spread
evenly over the term of the contract. the costs directly
attributable to the delivery of the hardware and the
implementation fees will be capitalised as ‘costs to fulfil a
contract’ and released over the contract term, thereby also
deferring costs to later periods. the impact of this standard
means 15% - 35% of total contract value, which would
have been recognised in the 3 – 12 month period after
contract signing, will be delayed for a minimum of 3 – 12
months before any revenue is recognised. once revenue
starts to be recognised it will be spread on average over
3 years, the average length of contracts. the impact is to
delay revenue recognition of these specific fees by up to 4
years in total.

• Where contract modifications take place, these are
currently recognised as revenue at the point the
modification is delivered to the client. under IFRS 15
consideration will need to be given as to whether these
are for services that are distinct from the original contract.
Where they are treated as a continuation of the original
contract, there may be a cumulative adjustment to revenue
at the point the modification was delivered to the client
with a portion of the modification fees being recognised
over the remainder of the contract term.

the underlying business model and the market opportunity for
eckoh is not impacted by IFRS 15 nor is cash generation of the
business. In addition, in the uS business, the revenue for the
Support, Coral and other product are not impacted by IFRS
15, nor is the revenue impacted from the secure payments
CallGuard on-Site, the Group’s entry level product for pCI
compliance.

the Company estimates, the impact of adoption of IFRS 15
for the year ended 31 March 2018, would be to defer £3.7m
of revenue and costs of £1.3m into future periods. the net
impact is to reduce retained earnings by £2.4m, increase
deferred liabilities by £3.7m and increase deferred assets
by £1.3m. the development of these estimates has been
performed outside of the Group’s underlying financial systems.
As a result, on full transition the actual impact may differ from
the amounts disclosed once individual transactions have been
processed. the Directors will continue to monitor industry
practice and experience of implementation and update its
assessment of the impact for the Group as appropriate.

Cashflow from operating activities is not impacted nor is the
Company’s ability to pay dividends.

the company uses a number of Key performance Indicators
KpIs to monitor the performance of the business. these will be
impacted over the initial 3-4 years following adoption of IFRS
15, as follows:

• Recurring revenue will initially increase by approx. 10
percentage points and over the subsequent 3-4 years
following adoption of IFRS 15 will gradually fall back to
somewhat higher than current levels due to the anticipated
growth of the uS secure payments;

• operating profit margin, which for the year ended 31

March 2018 was 18%, will initially decrease by approx.
12% to 6% and over the subsequent 3-4 years following
adoption of IFRS 15 will increase to at least current levels
due to the anticipated growth of uS secure payments;

• uS Secure pay total contract value will not be impacted;

and

• Secure pay and hosted services order Book or

unrecognised revenue will increase by the amount of
revenue deferred into future periods.

IFRS 9 – Financial Instruments –
effective for the year ending 31 March 2019

the Group is planning to adopt IFRS 9 on 1 April 2019 and
anticipates applying the standard prospectively with no
retrospective adjustments. the Group does not anticipate any
material change on adoption of the standard.

IFRS 16 Leases –
effective for the year ending 31 March 2020

the Group is planning to adopt IFRS 16 leases on 1 April 2019.
the Standard will eliminate the classification of leases as either
operating leases or finance leases and, instead, introduce a
single lessee accounting model. An initial assessment has not
indicated a significant impact to the Group.

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 1 April
2018.

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, except where stated.

PRIOR YEAR RESTATEMENT

the Company has reviewed the way the goodwill and
intangible assets and the related deferred tax liability for
the acquisition of pSS Inc in the year ended 31 March 2016
has been accounted for. At the point of acquisition on 17
november 2015, the Goodwill and intangible assets of both
the uS and uK business of pSS were translated into sterling
and held in the Company. on further analysis the proportion
of the Goodwill and intangible assets relating to the uS
business of pSS Inc (87% of the business) should have been
held in uS dollars in accordance with IAS 21.

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

As a result, the value of goodwill and intangible assets has
increased since 17 november 2015 due to the fluctuation
in the sterling dollar exchange rate. As at 31 March 2016,
the value of Goodwill increased by £133k and the value
of Intangible assets increased by £152k. In the year ended
31 March 2017, the cumulative value of the Goodwill
increased by £482k and the value of the other Intangible
assets increased by £427k. the deferred tax liability for the
year ended 31 March 2016 was also revalued and resulted
in a credit to the deferred tax liability of £51k for the year
ended 31 March 2016. In the year ended 31 March 2017,
the cumulative value of the deferred tax liability increased by
£145k.

Intangible assets – Goodwill

Intangible assets – other

Intangible assets

Deferred tax liability

other assets/ liabilities not impacted

Net assets

Shareholders' equity

Currency reserve

Retained earnings

other equity entries not impacted

Total Shareholders' equity

Intangible assets - Goodwill

Intangible assets - other

Intangible assets

Deferred tax liability

other assets/ liabilities not impacted

Net assets

Shareholders' equity

Currency reserve

Retained earnings

other equity entries not impacted

Total Shareholders' equity

As a result, the amortisation charged in the years ending
31 March 2016 and 2017 was understated by £10k and
£92k respectively and the deferred tax liability release to
the tax charge was understated by £3k and £31k. the net
difference to profit after tax for the year ended 31 March
2016 and 31 March 2017 was £7k and £61k respectively.
the effect of these changes on amortisation and release of
the deferred tax credit to the Income Statement for each of
the two years ending 31 March 2016 and 2017 is immaterial
and the cumulative effect has been included in the income
statement for the year ended 31 March 2018. the cumulative
amortisation related to prior periods recognised in the year
ended 31 March 2018 is £102k (2016 £10k and 2017 £92k)
and the cumulative release of the deferred tax is £34k (2016
£3k and 2017 £31k).

2016
(as previously
reported)
£’000

Impact of prior
period adjustment
£’000

2016

(restated)
£’000

2,613

6,649

9,262

(1,633)

11,216

18,845

157

12,942

5,746

18,845

133

152

285

(51)

234

2017
(as previously
reported)
£’000

4,638

5,353

9,991

Impact of prior
period adjustment
£’000

482

427

909

(1,238)

10,974

19,727

472

13,172

6,083

19,727

(145)

764

2,746

6,801

9,547

(1,684)

11,216

19,079

391

12,942

5,746

19,079

2017

(restated)
£’000

5,120

5,780

10,900

(1,383)

10,974

20,491

1,236

13,172

6,083

20,491

Other Comprehensive Income

Balance at 1 April (as previously reported)

Foreign currency translation differences
- foreign operations

- Goodwill (note 12)

- Intangible assets (note 12)

- Deferred tax liability (note 10)

Balance at 31 March (restated)

2017

£’000

315

349

275

(94)

845

As previously noted, the impact on the consolidated profit and
loss of these adjustments have been processed in the current
year due to their immateriality. As such, there was no impact on
the consolidated statement of profit and loss and consequently
the earnings per share previously reported. there was also no
impact on the consolidated statement of cash flows.

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

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
the Group recognises revenue on certain contracts during the
period of performance prior to an invoice being raised, where
work has been completed and where there is a high degree
of certainty of the contract being completed, the invoice
raised and cash received. In relation to Customer Contact and
Secure payment Solutions implementation fee revenue, this
involves estimating a percentage of completion based on the
direct labour costs incurred to date as a proportion of the total
estimated costs required to complete a project.

Whilst these assessments are made on a recognised and
consistent basis, variation in the total estimated costs derived
from these assessments and estimates used by the Directors
could have a significant impact on the amount and timing of
revenue recognised on a project. the non-recurring element of
the uK business is 14% and the uS business is 43%. With the
adoption of IFRS 15: Revenue from Contracts with Customers
from 1 April 2018, this policy will be superseded.

Goodwill and Intangible assets impairment
the Group has goodwill and intangible assets as a result of the
acquisitions for the Veritape, pSS and Klick2Contact businesses
over the last few years. on an annual basis the Group
undertakes an impairment review of goodwill and intangible
assets for each cash generating unit (CGu) using cashflow
projections.

Share-based payments
the fair value of share-based payments is estimated using the
methods detailed in note 21 and using certain assumptions.
Both the Black Scholes and Monte Carlo valuation models
have been used in determining the fair value of share-based
payments, with management selecting the most appropriate
model for each scheme, based on the varying performance-
related or market-related conditions within those specific
schemes. the key assumptions around volatility, expected life
and risk free rate of return are based, respectively, on historic
volatility over a similar previous period, management’s estimate
of the average expected period to exercise, and the yield on
zero-coupon uK government bonds of a term consistent with
assumed option life. Were volatility to be reduced by 10%, the
approximate impact on the share-based payment charge in the
year is a reduction of £87k. An increase in risk free rate of 1%
would result in an increase in the charge of £15k.

Deferred taxation (note 10)
Deferred tax liabilities are recognised for all taxable temporary
differences but, where there exist deductible temporary
differences, judgement is required as to whether a deferred
tax asset should be recognised based on the availability
of future taxable profits. At 31 March 2018, the Group
recognised deferred tax assets of £3.6 million, including £2.1
million in respect of tax losses and tax credits. Deferred tax
assets amounting to £0.5m were not recognised in respect of
trading losses and £5.3m in respect of capital losses of which
£3.8m are restricted. It is possible that the deferred tax assets
actually recoverable may differ from the amounts recognised if
actual taxable profits differ from estimates.

BASIS OF CONSOLIDATION

(a) Business combinations

Business combinations are accounted for using the acquisition
method as at the acquisition date – i.e. when control is
transferred to the Group. Control is the power to govern the
financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, the Group
takes into consideration potential voting rights that are
currently exercisable.

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

•

AnnuAl RepoRt & ACCountS 2018

the Group measures goodwill at the acquisition date as:

(d) Transactions eliminated on consolidation

IMPAIRMENT OF NON-FINANCIAL ASSETS

•

the fair value of the consideration transferred; plus

•

the recognised amount of any non-controlling interests
in the acquiree; plus

if the business combination is achieved in stages, the fair
value of the pre-existing equity interest in the acquiree; less

the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.

the consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.

transaction costs, other than those associated with the issue of
debt or equity securities, that the Group incurs in connection
with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair
value at the acquisition date. If the contingent consideration is
classified as equity, then it is not remeasured and settlement is
accounted for within equity. otherwise, subsequent changes
in the fair value of the contingent consideration are recognised
in profit or loss.

If share-based payment awards (replacement awards) are
required to be exchanged for awards held by the acquiree’s
employees (acquiree’s awards) and relate to past services, then
all or a portion of the amount of the acquirer’s replacement
awards is included in measuring the consideration transferred
in the business combination. this determination is based on
the market-based value of the replacement awards compared
with the market-based value of the acquiree’s awards and the
extent to which the replacement awards relate to past and/or
future service.

(b) Subsidiaries

Subsidiaries are entities controlled by the Group. the Financial
Statements of subsidiaries are included in the Consolidated
Financial Statements from the date that control commences
until the date that control ceases.

on the loss of control, the Group derecognises the assets and
liabilities of the subsidiary, any non-controlling interests and
the other components of equity related to the subsidiary. Any
surplus or deficit arising on the loss of control is recognised in
profit or loss. If the Group retains any interest in the previous
subsidiary, then such interest is measured at fair value at the
date that control is lost. Subsequently that retained interest
is accounted for as an equity-accounted investee or as an
available-for-sale financial asset depending on the level of
influence retained.

Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions, are
eliminated in preparing the Consolidated Financial Statements.
unrealised gains arising from transactions with equity
accounted investees are eliminated against the investment to
the extent of the Group’s interest in the investee. unrealised
losses are eliminated in the same way as unrealised gains, but
only to the extent that there is no evidence of impairment.

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 identified.

(b) Acquired 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. the acquired intangibles currently held are amortised
over the following period:

Customer relationships - 5 years
Intellectual property - 5 years
trade name - 3 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 that 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 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 non-financial assets below.

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.

TANGIBLE ASSETS

(a) Land and buildings

land and buildings are 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.

(b) 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:

land - is not depreciated
Buildings - 25 years
Fixtures and equipment - between 3 and 5 years
leasehold improvements - over the term of the lease

Material residual values and useful lives are reviewed, and
adjusted if appropriate, at least annually. An asset’s carrying
amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its
estimated recoverable amount.

FINANCIAL ASSETS

Financial assets include investments in companies other than
Group companies, trade and other receivables (see separate
policy) financial receivables held for investment purposes,
treasury shares and other securities. A permanent impairment
is provided as a direct reduction of the securities account.

the Group classifies its financial assets in the following
categories: available for sale investments and loans and
receivables. the classification depends on the purpose for
which the investments were acquired. the classification is
determined by management at initial recognition.

(a) available-for-sale investments:

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

(b) loans and receivables:

are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and with
no intention of trading. they 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.

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

INVENTORIES

DIVIDENDS

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.

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

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.

ESOP reserve represents the amount paid for ordinary Shares
held by the employee Share ownership plan.

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.

Merger reserve represents consideration in excess of the
nominal value of shares issued on certain acquisitions.

Currency reserve represents exchange differences arising on
consolidation of Group companies with a functional currency
different to the presentation currency.

Retained earnings represent retained profits less losses and
distributions.

transactions in foreign currencies are translated to the
respective functional currencies of Group entities at the
foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are retranslated to the
functional currency at the foreign exchange rate ruling at that
date. Foreign exchange differences arising on translation are
recognised in the income statement. non-monetary assets
and liabilities that are measured in terms of historical cost in
a foreign currency are translated using the exchange rate at
the date of the transaction. non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value
are retranslated to the functional currency at foreign exchange
rates ruling at the dates the fair value was determined.

the assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation,
are translated to the Group’s presentational currency, Sterling,
at foreign exchange rates ruling at the balance sheet date. the
revenues and expenses of foreign operations are translated
at an average rate for the year where this rate approximates
to the foreign exchange rates ruling at the dates of the
transactions.

exchange differences arising from this translation of foreign
operations are reported as an item of other comprehensive
income and accumulated in the translation reserve or non-
controlling interest, as the case may be. When a foreign
operation is disposed of, such that control, joint control or
significant influence (as the case may be) is lost, the entire
accumulated amount in the FCtR, net of amounts previously
attributed to non-controlling interests, is recycled to profit or
loss as part of the gain or loss on disposal. When the Group
disposes of only part of its interest in a subsidiary that includes
a foreign operation while still retaining control, the relevant
proportion of the accumulated amount is reattributed to non-
controlling interests. When the Group disposes of only part
of its investment in an associate or joint venture that includes
a foreign operation while still retaining significant influence
or joint control, the relevant proportion of the cumulative
amount is recycled to profit or loss.

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.

IFRS 2 has been applied to all options granted after 7
november 2002 that 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.

the grant date fair value of share-based payment awards
granted to employees is recognised as an employee expense,
with a corresponding increase to equity, over the period that
the employees unconditionally become entitled to the awards.
the amount recognised as an expense is adjusted to reflect
the number of awards for which the related service and non-
market vesting conditions are expected to be met, such that
the amount ultimately recognised as an expense is based on
the number of awards that meet the related service and non-
market performance conditions at the vesting date. For share-
based payment awards with non-vesting conditions, the grant
date fair value of the share-based payment is measured to
reflect such conditions and there is no true-up for differences
between expected and actual outcomes.

the fair value of the amount payable to employees in respect
of share appreciation rights, which are settled in cash, is
recognised as an expense with a corresponding increase in
liabilities, over the period that the employees unconditionally
become entitled to payment. the liability is re-measured at
each reporting date and at settlement date. Any changes
in the fair value of the liability are recognised as personnel
expenses in profit or loss.

(d) Employee Share Ownership Plan
the Group's employee Share ownership plan (‘eSop’) is a
separately administered trust. the assets of the eSop comprise
shares in the Company and cash. the assets, liabilities, income
and costs of the eSop have been included in the financial
statements in accordance with SIC 12, ‘Consolidation - Special
purpose entities’ and IAS 32, ‘Financial Instruments: Disclosure
and presentation’. the shares in the Company are included
at cost to the eSop and deducted from Shareholders' funds.
When calculating earnings per share these shares are treated
as if they were cancelled.

lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability.
Finance charges are charged directly against income.

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

PROVISIONS

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

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

EMPLOYEE BENEFITS

(a) Pensions
the Group operates a Group personal pension scheme. the
assets of the schemes are held separately from those of the
Group in independently administered funds. Contributions
payable are charged in the income statement in the year in
which they are incurred.

(b) Bonus schemes
the Group recognises a liability and an expense for bonuses
payable to: i) employees based on a formula 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.

(c) Share-based payments
From time to time on a discretionary basis, the Board of
Directors award high-performing employees bonuses in the
form of share options. the options are subject to a three
year vesting period and their fair value is recognised as an
employee benefits expense with a corresponding increase in
equity over the vesting period. the fair value of share options
granted is recognised within staff costs with a corresponding
increase in equity. the proceeds received are credited to share
capital and share premium when the options are exercised.

the fair value of share options was measured using the more
appropriate of 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.

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

REVENUE RECOGNITION

Revenue represents the fair value of the sale of goods and
services, net of Value-Added tax, and after eliminating sales
within the Group. Group revenue has four elements, being
transactional, build fee, support and maintenance, and sale of
hardware. Revenue is recognised as follows:

• the majority of revenue in the uK business is derived

and 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. this is measured by the minute when a
user accesses our services and is billed to our customer on
this basis. In the uS business, where the Secure payments
business is contracted on an opex style basis the monthly
license fee charged to the client is recognised in the month
it relates to.

•

Implementation fee revenue in the Group is recognised on
delivery and acceptance of a customer service application.
In the event that work on a project which results in an
implementation 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.

• the revenue derived from the sale of hardware and the

purchase of software licenses is recognised when the risks
and rewards of ownership are passed to the customer. the
Group assesses whether it is acting as agent or principal
depending on the terms of the contract. Where the Group
acts as agent the amount of revenue recognised is limited
to the commission fee receivable for that service. Coral
revenue is recognised as principal due to eckoh holding
ultimate responsibility for establishing price and bearing
credit risk.

•

In the event that multiple revenue sources are included
in the same contract, each component part is separately
fair valued and individual component revenues are
recognised when the revenue recognition criteria for that
component has been met. neither build fee or support and
maintenance revenue are considered to be a significant
proportion of the overall revenue, and are not separately
disclosed.

ALTERNATIVE PERFORMANCE MEASURES (APMS)

this report provides ApMs which are not defined or specified
under the requirements of International Financial Reporting
Standards (IFRS). We believe these ApMs provide readers with
additional information on our business to understand trading
performance and facilitate the reader to compare performance
against prior years more easily. In particular, the Group
presents 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 Shareholders to understand
the elements of financial performance in the period. the
measures used are adjusted operating profit, adjusted earnings
before interest, tax, depreciation and expenses and adjusted
administrative expenses.

FINANCE FEES

Finance fees are credited or charged to the income statement
and reflects movements in contingent consideration in the year.

TAXATION

Current tax is the tax currently payable based on taxable profit
for the year.

Deferred taxation is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the Consolidated Financial Statements. Deferred tax is not
provided if it arises from initial recognition of an asset or
liability in a transaction, other than a business combination,
that at the time of the transaction affects neither accounting
nor taxable profit or loss. Deferred tax is calculated at tax
rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted
at the balance sheet date.

Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against
which the temporary differences can be utilised.

Deferred tax on temporary differences associated with shares
in subsidiaries is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable
that reversal will not occur in the foreseeable future.

Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the income statement, except
where they relate to items that are charged or credited directly
to equity in which case the related deferred tax is also charged
or credited directly to equity.

FINANCIAL LIABILITIES

Financial liabilities are obligations to pay cash or other financial
assets and are recognised when the Group becomes a party to
the contractual provisions of the instrument. Financial liabilities
are stated at amortised cost.

A financial liability is derecognised only when the obligation is
discharged, is cancelled or it expires.

3. Financial risk management

the operations of the Group expose it to a variety of financial
risks: liquidity risk, interest rate risk and foreign currency
risk. policies for managing these risks are set by the Board
following recommendations from the Chief Financial officer.
All financial risks are managed centrally. the policy for each of
the above risks is described in more detail opposite.

the Group’s financial instruments comprise cash, short-term
deposits, finance leases and various items, such as receivables
and payables that arise directly from its operations. It is, and
has been throughout the year under review, the Group’s policy
that no trading in financial instruments shall be undertaken.
Similarly the Group did not undertake any financial hedging
arrangements during the year under review. the year-end
position reflects these policies and there have been no
changes in policies or risks since the year-end.

LIqUIDITY RISK

through detailed cash flow forecasting and capital expenditure
planning, the Group monitors working capital and capital
expenditure requirements and through the use of rolling
short-term investments ensures that cash is available to meet
obligations as they fall due. Cash at bank is pooled and
invested in overnight money market accounts and deposits.

the contractual maturities of financial liabilities are set out in
note 20.

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 16.

FINANCIAL ASSETS

Current financial assets

trade receivables (note 16)

other receivables (note 16)

Cash and cash equivalents (note 17)

2018
£’000

5,149

8,164

2017
£’000

7,076

245

6,083

INTEREST RATE RISK

Total financial assets

13,399

13,404

the Group principally finances its operations through
Shareholders’ equity and working capital. the Group took
borrowings during the year applying variable interest rates,
and now has exposure to interest rate fluctuations on the
loan, its cash and short-term deposits.

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

2%
decrease
in interest
rates
£’000

2%
increase
in interest
rates
£’000

(29)

Impact on financial interest in the
income statement: (loss)/gain

FOREIGN CURRENCY RISK

the Group’s principal exposure to exchange rate fluctuations
arises on the translation of overseas net assets, profits and
losses into the presentation currency. this risk is managed
by taking differences that arise on the retranslation of the
net overseas investments to the currency reserve. Foreign
currency risk on cash balances is monitored through cash
flow forecasting and currency is held in foreign currency bank
accounts only to the extent that it is required for working
capital purposes. no sensitivity analysis is provided in respect
of foreign currency risk as due to the Group’s working capital
management practices, the risk is considered to be moderate.
the risk is further explained in the principal risks and
uncertainties on pages 12 to 13.

FINANCIAL LIABILITIES

All financial liabilities held by the Group, except for
contingent consideration, are measured at amortised cost and
comprise trade payables of £2,958,000 (2017: £3,173,000)
and other payables of £72,000 (2017: £49,000). See note 18
for further details.

OTHER INTEREST-BEARING LOANS AND BORROWINGS

Information about the contractual terms of the Group’s
interest-bearing loans and borrowings, which are measured
at amortised cost are disclosed below. For more information
about the Group’s exposure to interest rate and foreign
currency risk, see above.

Non-current financial liabilities

Secured bank loans

2018
£’000

3,250

2017
£’000

4,550

Current financial liabilities

Current portion of secured bank loans

1,300

TERMS AND DEBT REPAYMENT SCHEDULE

Bank
loan

Currency

Sterling

Nominal
interest
rate

1.25% plus
lIBoR.

Maturity
date

See note
20

Carrying
amount
2018
£’000

4,550

the collateral to these loans is the land and buildings carrying
value of £3m.

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

4. Segment analysis

the segmentation is based on analysing eckoh uK including pSS uK, eckoh uS which includes pSS Inc, and K2C.

Information regarding the results of each operating segment is included below. performance is measured based on segment
profit or loss before taxation as included in the internal management reports provided to the Chief executive officer.

Current period segment analysis

Segment Revenue

Gross profit

Administrative expenses before expenses relating to share options
schemes, acquisition costs, legal fees and settlement costs and
amortisation of acquired intangible assets

Eckoh UK

Eckoh US

K2C

£’000

18,016

15,319

£’000

11,068

6,784

£’000

921

782

Total
2018
£’000

30,005

22,885

Total
2017
£’000

29,078

20,327

(10,481)

(6,538)

(605)

(17,624)

(16,013)

profit from operating activities before expenses relating to share
options schemes, acquisition costs, legal fees and settlement costs
and amortisation of acquired intangible assets

4,838

246

other expenses1

Operating profit

Interest received

Finance charges

Profit before taxation

taxation credit / (charge)

Profit after taxation

Segment assets

trade receivables

Deferred tax asset

Segment liabilities

trade and other payables

Capital expenditure

purchase of tangible assets

purchase of intangible assets

Depreciation and amortisation

Depreciation

Amortisation

1. other expenses include expenses relating to share option schemes,

acquisition costs, legal fees and settlement costs and, amortisation of
acquired intangible assets.

(2,378)

2,460

1,008

(94)

3,374

3,394

(1,339)

(1,093)

(24)

(1,117)

218

(899)

2,801

3,262

2,175

240

177

178

(13)

165

173

5,261

4,314

(3,717)

1,544

1,009

(118)

2,435

225

2,660

(2,529)

1,785

(205)

1,623

(184)

1,439

5,149

3,533

7,076

3,578

1,349

1,608

3,030

3,222

590

318

643

1,890

262

764

646

323

914

2,654

598

200

1,058

2,619

In 2017/18, there was no one customer that individually
accounted for more than 10% of the total revenue of
the continuing operations of the company (2016/17: one
customer). In 2016/17 revenue from the largest customer,
who is a major uS telecommunications company, totalled
£3,354,000 which represented 11.5% of total revenue for
the year.

the key segments reviewed at Board level are the uK, uS
and K2C operations.

Revenue by geography

united States of America

Rest of the World

Total Revenue

Prior period segment analysis

Segment revenue

Gross profit

Eckoh UK
£’000

17,769

137

110

18,016

Eckoh US
£’000

K2C
£’000

10,800

268

11,068

886

921

Eckoh UK
£’000

Eckoh US
£’000

18,703

15,531

9,707

4,194

2018
£’000

18,655

10,940

410

30,005

K2C
£’000

668

602

2017
£’000

19,147

9,302

629

29,078

Total
2017
£’000

29,078

20,327

Administrative expenses before expenses relating to share options schemes,
acquisition costs, legal fees and settlement costs and amortisation of acquired
intangible assets

profit from operating activities before expenses relating to share options
schemes, acquisition costs, legal fees and settlement costs and amortisation of
acquired intangible assets

other expenses1

Operating profit / (loss)

Interest received

Finance charges

Profit / (loss) before taxation

taxation

Profit / (loss) after taxation

Segment assets

trade receivables

Deferred tax asset

Segment liabilities

trade and other payables

Capital expenditure

purchase of tangible assets

purchase of intangible assets

Depreciation and amortisation

Depreciation

Amortisation

1. other expenses include expenses relating to share option schemes,
acquisition costs, legal fees and settlement costs and, amortisation
of acquired intangible assets.

Revenue by geography

united States of America

Rest of the World

Total Revenue

(11,293)

(4,310)

(410)

(16,013)

4,238

(116)

(2,450)

1,788

(168)

1,663

(140)

1,523

(79)

(195)

(37)

(232)

(19)

(251)

4,391

3,519

2,469

1,904

1,267

529

195

883

2,598

162

192

(25)

167

216

4,314

(2,529)

1,785

(205)

1,623

(184)

1,439

7,076

3,578

3,222

598

200

1,058

2,619

Eckoh UK
£’000

18,441

254

18,703

Eckoh US
£’000

9,294

357

9,707

K2C
£’000

650

668

2017
£’000

19,147

9,302

629

29,078

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

5. profit from operating activities

Current period segment analysis

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

employee benefits expense (note 6)

Depreciation (note 13)

Amortisation (note 12)

operating lease payments – property

2018
£’000

11,324

914

2,654

467

2017
£’000

9,742

1,058

2,619

582

6. employee benefits expense

8. legal fees and settlement costs

Wages and salaries

less: Internal development costs capitalised
in the year

Amortisation of internal development costs

Social security costs

pension costs

Share-based payments

2018
£’000

2017
£’000

10,301

8,887

(254)

(120)

239

381

103

554

323

395

125

132

11,324

9,742

the Directors’ report on page 43 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

2018
Number

2017
Number

106

214

196

excluded from the table above are 38 (2017: 30) full time
equivalent casual call centre employees who cost £354,832
(2017: £323,297) 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:

2018
£’000

2017
£’000

the audit of subsidiary undertakings
comprising continuing operations
Total fees payable to the Group’s auditor

Legal fees and settlement costs

£’000

595

As disclosed in the 2017 Annual Report and the Interim
Statement in november 2017, in the financial year 2016/17,
the Group received a legal claim from a client that had
discontinued a project related to the closed professional
services division in the acquired pSS Inc business.

the Group has vigorously defended the claim, however,
in the year ended March 2018 we have chosen to settle
the claim with the client to bring this matter to a close.
the Group is not aware of any other contractual commitments
from the closed professional services division.

9. Interest receivable and finance charges

Interest receivable

Bank interest receivable

Finance Charges

Bank interest payable

unwind of discount on contingent
consideration

2018
£’000

2017
£’000

2018
£’000

2017
£’000

(118)

(142)

(63)

(118)

(205)

10. taxation

Tax recognised in profit and loss

Current tax expense

Current year

Adjustments in respect of prior periods

Deferred tax credit

origination and reversal of temporary differences

prior year adjustment

Foreign exchange translation

Change in tax rates

Total tax (credit)/ charge

2018
£’000

2017
£’000

170

(54)

(350)

(227)

(225)

(243)

185

198

427

184

A credit of £424,000 (2017: charge of £243,000) for
deferred taxation in relation to share options was recognised
directly in equity.

the tax charge for the year is different to the standard
rate of corporation tax in the uK of 19% (2017: 20%).
the differences are explained below:

Continuing operations

profit for the year

total tax (credit) / charge

profit excluding tax

profit multiplied by rate of corporation tax in the uK of 19% (2017: 20%)

Additional foreign tax suffered

effect of expenses not deductible for tax purposes

Adjustments in respect of prior periods (current and deferred)

non-taxable income

Deferred tax not recognised

effect of tax rate adjustment on closing recognised deferred tax balance

Deferred tax impact of uS tax rate reduction

tax (credit)/ charge for the year

2018
£’000

2,660

(225)

2,435

463

(53)

(198)

(23)

(90)

(350)

(225)

2017
£’000

1,439

184

1,623

325

(199)

(24)

(11)

184

on December 22, 2017, president trump signed into law the
tax Cuts and Jobs Act of 2017 (tCJA). the tCJA reduced the
statutory u.S. Corporate income tax rate from its previous
maximum progressive rate of 35% to a flat 21% tax rate
effective January 1, 2018.

As this rate was enacted at the balance sheet date, the
deferred tax in relation the uS assets and liabilities has been
recognised at the reduced rate. the company recorded a
deferred tax credit of £295k in the period in respect of the
rate reduction.

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

Recognition of deferred tax assets and liabilities

12. Intangible assets

Capital allowances differences

Short term timing differences

tax losses

property, plant and equipment

Intangible assets

2018

£’000

561

884

2,088

Assets

2017

£’000

347

1,011

2,220

Tax losses carried forward

3,533

3,578

Liabilities

2017
(Restated –
note 1)
£’000

(1,383)

2018

£’000

(113)

(561)

(674)

Net

2017
(Restated –
note 1)
£’000

347

1,011

2,220

(1,383)

2,195

2018

£’000

561

884

2,088

(113)

(561)

2,859

Movement in deferred tax balances during the year

11. earnings per share

Balance at 1 April (as previously reported)

Restatement (note 1)

Balance at 1 April (restated)

Recognised in income statement

Recognised in equity

Recognised through business combinations

Recognised in oCI

other

2018
£’000

2,340

(145)

2,195

227

424

2017
£’000

3,141

(145)

2,996

(428)

(243)

(127)

(3)

Balance at 31 March (restated)

2,859

2,195

Unrecognised deferred tax assets

there are unprovided deferred taxation assets totalling
£545,000 (2017: £564,000) in respect of trading losses and
£5,325,000 (2017: £5,325,000) in respect of capital losses
of which £3,811,000 (2017: £3,811,000) are restricted.
the trading losses have not been recognised due to the
uncertainty of the profits being available to utilise these.

the basic and diluted earnings per share are calculated on
the following profit and number of shares. earnings for the
calculation of earnings per share is the net profit attributable
to equity holders of the parent.

Earnings for the purposes of basic and
diluted earnings per share

Denominator

Weighted average number of shares
in issue in the period

2018
£’000

2017
£’000

2,660

1,439

2018
£’000

2017
£’000

247,424

241,550

Shares held by employee ownership plan

(805)

(323)

Shares held in employee Benefit trust

(2)

number of shares used in calculating
basic earnings per share

Dilutive effect of potential shares relating to
the Klick2Contact contingent consideration

246,619

241,225

1,260

Dilutive effect of share options

12,384

14,021

Number of shares used in calculating
diluted earnings per share

259,003

256,506

Group

Cost

Internally
developed
computer
software

Goodwill

Customer
relationships

Intellectual
property

£’000

Balance at 1 April 2016 (as previously reported)

Restatement (note 1)

At 1 April 2016 (restated)

Acquired through business combination

Additions

Foreign exchange

Disposals

2,613

133

2,746

2,025

349

3,389

372

200

(18)

2,565

121

2,686

691

219

7,015

7,033

Trade
name

£’000

271

284

Total

£’000

15,853

285

16,138

3,162

200

632

(18)

At 31 March 2017 (restated)

5,120

3,951

3,596

7,066

381

20,114

Additions

Reclass of assets

Foreign exchange

Disposals

At 31 March 2018

Amortisation

At 1 April 2016

Charge for the year

Foreign exchange

At 31 March 2017

Charge for the year

Reclass of assets

Foreign exchange

Disposals

At 31 March 2018

Carrying amount

At 31 March 2018

At 31 March 2017

(288)

4,832

261

(95)

(7)

(1,531)

2,579

2,677

476

3,157

387

(15)

(1,530)

2,005

(241)

3,355

211

608

819

802

(36)

(5)

7,182

3,682

1,471

5,153

1365

(26)

355

100

1,621

6,533

185

323

(598)

(1,536)

18,303

6,591

2,619

9,214

2,654

(1,530)

10,344

4,832

5,120

574

794

1,734

2,777

649

1,913

170

296

7,959

10,900

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

During the financial year ended 31 March 2018, the
intangible assets have been reviewed and assets that are no
longer held in the business have been identified and disposed
of. this resulted in a nil net book value for disposal.

Amortisation of acquired intangible assets included in the
charge for the year in the above table was £2,329k (FY17:
£2,186k), within the internally generated software is an
intangible asset acquired when K2C was purchased.

on an annual basis the impairment review of goodwill
is undertaken to determine a value in use calculation for
each generating unit (CGu) using cashflow projections.
Management have identified the CGus as eckoh uK,
eckoh uS and K2C, which was acquired in the prior year.

Management have performed a profitability forecast for the
next five years for each of the CGus, which are based on the
latest three year plan approved by the Board and modified
as appropriate to reflect the latest conditions. Management
are satisfied that the carrying value of Goodwill and other
Intangible Assets are supported.

Goodwill acquired through business combinations have been
allocated to the following CGus:

• eckoh - uK
• eckoh - uS
• K2C

these represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

eckoh - uK

eckoh - uS

K2C

Total

Goodwill
31 March 2018
£’000

Goodwill
31 March 2017
£’000

Market growth
rate %

348

2,459

2,025

4,832

348

2,747

2,025

5,120

20%

10%

Discount
rate %

13.9%

15.8%

no impairment has been recorded in the current year for
eckoh uK, eckoh uS or K2C. the main assumptions which
related to sales volume, selling prices and cost changes, are
based on recent history and explanations of future changes
in the market. the discount rate applied to the cash flow
forecasts is based on a market participant’s pre – tax weighted
average cost of capital adjusted for the specific risks in the
CGus. Growth rate used to extrapolate beyond the plan
year and terminal values are based upon minimum expected
growth rates of the individual business.

Sensitivity to the changes in assumptions
If forecast revenues fell by 40%, no impairment in the carrying
values of eckoh uK and eckoh uS would be required.

Within the K2C CGu there is a reasonable possibility that
a change in a key assumption on which the value in use of
the CGu has been generated would cause the unit’s carrying
amount to exceed the recoverable amount. the recoverable
amount of the unit exceeds the carrying amount by £935k.
An increase in discount rate from 15.8% to 18% would
reduce headroom to £383k. A decrease in forecast cashflows
by 5% would reduce headroom to £203k. If forecast revenues
fell by up to 4.5%, no impairment in the carrying values of
K2C would be required.

13. tangible assets

Cost

At 1 April 2016

Acquired through business combination

Additions

Foreign exchange

Disposals

At 31 March 2017

Additions

Foreign exchange

Disposals

At 31 March 2018

Depreciation

At 1 April 2016

Charge for the year

Foreign exchange

Disposals

At 31 March 2017

Charge for the year

Foreign exchange

Disposals

At 31 March 2018

Carrying amount

At 31 March 2018

At 31 March 2017

Leasehold provements
£’000

Land and buildings
£’000

Fixtures and
equipment
£’000

Total
£’000

(3)

(1)

3,068

10,212

13,280

3,068

138

2,930

2,972

566

137

(100)

10,837

646

(99)

(4,664)

6,720

7,851

1,005

(100)

8,808

863

(49)

(4,664)

4,958

1,762

2,029

598

137

(100)

13,937

646

(102)

(4,664)

9,817

7,904

1,058

(100)

8,914

914

(50)

(4,664)

5,114

4,703

5,023

During the financial year ended 31 March 2018, the tangible assets have been reviewed and assets that are no
longer held in the business have been identified and disposed of. this resulted in a nil net book value for disposal.

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

14. Investment in subsidiary undertakings

the company has the following investments in subsidiaries, which are included in the Consolidated Financial Statements:

Subsidiary undertakings

Country of incorporation

Principal activities

Percentage of share capital held

eckoh uK limited

Veritape limited

eckoh llC

eckoh Inc
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 (ii)

united States of America (iii)

united States of America (iv)
France (vii)

Speech Solutions

non trading

Secure payment Solutions
non trading

england and Wales (ii)

Isle of Man (v)

Dormant

non trading

Dormant

non trading

Dormant

product Support Solutions Inc

united States of America (vi)

Support Solutions

Klick2Contact eu ltd

england and Wales (ii)

Cloud-based Software provider

100%

100% (i)
100% (i)

67% & 33% (i)

100%

100% (i)

100%

100% (i)

100%

100% (i)

100%

(i)

Share capital held by a subsidiary undertaking.

(ii) the registered office is telford House, Corner Hall,

Hemel Hempstead, Hp3 9Hn.

(iii) the registered office is c/o national Registered Agents Inc.,
160 Greentree Drive, Suite 101, Dover, Delaware 19904.

(iv) the registered office is 9900 nicholas Street, Suite 175,

omaha, ne 68114.

(v) the registered office is First names House, Victoria Street,

Douglas, Isle of Man, IM2 4DF.

(vi) the registered office is 7172 Regional Street. #431,

Dublin, California 94568.

(vii) the registered office is Rue De la Vieille poste parc, Industriel
et technologique de la pompignane, 34000 Montpellier.

All companies hold ordinary class shares and have March year-
ends, with the exception of Veritape, which has a September
year end. Information in relation to geographical operations is
set out in note 4.

the subsidiary undertaking Klick2Contact eu limited
(registered number: 07553916) is exempt from the Companies
Act 2006 requirements relating to the audit of their individual
accounts by virtue of Section 479A of the Act as this company
has guaranteed the subsidiary company under Section 479C
of the Act.

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 0.22% (2017: 0.30%).

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

18. trade and other payables

trade payables

other payables

other taxation and social security

Accruals and deferred income

2018
£’000

2017
£’000

2,958

3,173

732

4,123

7,885

1,513

4,420

9,155

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 £39,829 (2017: £203,780).

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

19. Share Capital

Allotted called up and fully paid

Share type

ordinary Shares of 0.25p each

At 1 April 2017

Shares issued under the share
option schemes

number of
shares

nominal
value
£’000

244,299,546

8,213,974

611

At 31 March 2018

252,513,520

631

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.
potential ordinary Shares are disclosed in note 21.

15. Inventories

the company has the following investments in subsidiaries,
which are included in the Consolidated Financial Statements:

Finished goods

Work in progress

2018
£’000

2017
£’000

718

724

711

713

16. trade and other receivables

Current

Trade receivables

Less: provision for impairment
of receivables

net trade receivables

Corporation tax debtor

other receivables

prepayments and accrued income

2018
£’000

2017
£’000

5,175

7,087

(26)

(11)

5,149

7,076

289

245

4,581

9,835

3,947

11,557

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

Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations. Credit risk arises principally
from the Group’s trade and other receivables. Concentrations
of credit risk with respect to trade receivables are limited due
to working capital practices of the market sector and the
Group; and the nature of the Group’s customer base.
the working capital practices of the market sector within
which the Group operates are such that the majority of the
trade receivables balance is due from the telephony carriers
under a self-bill agreement. the reputable nature of the
Group’s current customer base limits exposure to credit risk.

17. Cash and cash equivalents

Sterling

euro

uS dollars

Floating rate

euro

uS dollars

2018
£’000

2017
£’000

7,950

4,477

163

8,164

161

1,445

6,083

2018
£’000

2017
£’000

7,950

4,477

163

8,164

161

1,445

6,083

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

20. non-current liabilities

At 1 April 2017 (as previously reported)

Restated (note 1)

At 1 April 2017 (restated)

Movement during the year (note 10)

Repaid during the year

At 31 March 2018

the deferred tax movement of £709k in the year can be
explained through an increase in balance from property, plant
and equipment (£113k), a decrease from intangible assets
(£460k), a reduction in the uS tax rate (£350k) and foreign
exchange movements for the year ended 31 March 2018 of
£12k.

Loans
£’000

4,550

(1,300)

3,250

Deferred tax
£’000

1,238

145

1,383

(709)

674

Total
£’000

5,788

145

5,933

(709)

(1,300)

3,924

Loans and borrowings

In July 2016 the Group secured a bank loan with a
carrying amount of £6.5m to assist with the acquisition of
Klick2Contact eu ltd and to repay the existing bank loan that
had a balance of £3.75m at 31 March 2016 due over 1 year.

the loan of £6.5m is repayable over a period of 5 years.
twenty quarterly repayments of £325,000 commenced in
July 2016. A fixed interest is payable at a rate of 1.25 % per
annum plus a variable base rate currently 0.25%.

21. Share-based payments

The Eckoh plc Share Option Scheme (‘the Scheme’) was
introduced in november 1999 and re-approved by the Board
in the year ended 31 March 2018. 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 plan”) was
introduced in September 2016. the Scheme provides employees
with the opportunity to acquire shares in eckoh plc. Shares are
purchased on behalf of the employee from amounts sacrificed
from their salary on a monthly basis and matched on a two for
one basis by the Company. Any shares acquired will be held
in a trust in accordance with the terms of the plan. In order to
maximise the tax benefits available, the employee must remain
employed with the company and hold the shares within the
trust for a minimum of five years.

The Eckoh plc Performance Share Plan (“the pSp”) was
introduced in november 2017, following approval by Shareholders
at the 2018 AGM. Initial Awards, at nominal cost were granted
to each of the executive Directors. each of the pSp awards is
subject to a total Shareholder Return performance condition,
measured over a 5 year performance period. Further details are
included in the Remuneration Committee report on page 37.

the fair value of share options granted under the Scheme, the
eMI Scheme and the pSp were 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

8 June
2012

11.125

11.25

05 Dec
2014

25 March
2015

23 March
2016

31 March
2017

21 June
2017

46.25

37.50

46.5

43.50

39.50

47.50

23 Nov
2017

51.25

75,000

150,000

500,000

3,600,000

4,000,000

500,000

6,000,000

40%

20%

22%

32%

35%

4.33

35%

4.33

2.75%

1.76%

0.78%

0.56%

expected dividends expressed as a
dividend yield

Fair value per option (pence)

3.18

6.89

6.08

0.89%

9.19

1.14%

8.84

1.22%

10.6

1.14%

48.8

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 share options granted under the plan was measured using the valuation model. the assumptions used in the
calculation are as follows:

Share price (pence)

exercise price (pence)

number of employees

Shares under option

Vesting period (years)

Annual attrition

Discount rate

Years to vesting (years)

Discounted charge

2 September
2016

5 December
2016

35.0

0.00

47.5

0.00

7 June
2017

46.6

0.00

209,706

178,445

164,204

3.50

1.5%

2.92

3.50

15%

1.5%

2.92

3.50

12%

1.5%

2.92

70,278

45,952

41,506

A reconciliation of option movements over the year to 31 March 2018 is shown below:

outstanding at 1 April

Granted

exercised

lapsed

Forfeited

outstanding at 31 March

exercisable at 31 March

Number of share
options

2018

Weighted
average exercise
price

2017

number of share
options

Weighted average
exercise price

21,279,160

6,842,649

(8,306,974)

(100,000)

19,714,835

4,062,480

18.43

20,694,299

3.88

0.11

43.50

20.91

7.68

5,209,706

(3,724,845)

(900,000)

21,279,160

11,719,454

0.85

38.23

1.54

45.17

18.43

0.55

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

Range of
exercise prices
(pence)

Weighted
average
exercise
price (pence)

Number of
shares (000s)

0 - 0.5

4.5 - 6.5

10.5 - 12.5

37.5 - 39.5

42.5 - 44.5

44.5 - 46.5

46.5 – 48.5

0.16

5.13

11.05

39.24

43.50

46.25

47.50

8,325

265

375

5,000

4,100

150

500

2018

Weighted average
remaining life

Expected

Contractual

2017

Weighted average
remaining life

number of
shares (000s)

expected

Contractual

Weighted
average
exercise price
(pence)

1.83

1.75

0.99

2.22

8.17

1.92

3.84

8.75

7.99

6.68

9.22

11,166

5.13

11.04

39.24

43.50

46.25

335

428

5,000

4,200

150

0.1

2.8

2.0

0.7

5.8

2.9

4.9

9.8

9.0

7.7

the total charge for the year relating to employee share-
based payment plans was £554,000 (2017: £132,000)
all of which related to equity-settled share based payment
transactions.

22. 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.

23. 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 subsidiary undertakings
set out in note 14.

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

there are 2 Directors accruing benefits under the pension
scheme.

the aggregate Directors’ emoluments are shown in the table
opposite.

Directors

Aggregate emoluments

2018
£’000

2017
£’000

670

626

During the year share options were exercised by one Director,
nik philpot. nik philpot exercised options over 6,423,974
ordinary Shares making a gain of £2,826,549. From the
proceeds of the gain, nik philpot satisfied the income tax arising
from the exercise and retained 1,021,412 ordinary Shares with
a value of £449,421. During the financial year ending 31 March
2017, nik philpot did not exercise any share options.

Directors and key management includes the staff costs
of the Directors and the Management team.

Rented Apartment

Directors and other key management

Wages and salaries

Social security costs

pension costs

Share-based payments

2018
£’000

2017
£’000

856

619

806

235

1,562

1,135

An apartment owned by a director, nik philpot, is rented
to eckoh Group for use by company employees when on
business. the rent is paid on a monthly basis and was charged
at comparable market rates. the expense in the year was
£17,388 (2017: £16,920). the amount outstanding to them
at the end of the current year was £4,347 (2017: £4,230).
there were no amounts written off in the current or prior year.

Chris Batterham is also a director of nCC Group Security
Services limited who provide services to eckoh Group. Chris
Batterham resigned as non-executive Chairman to eckoh plc
on 20 September 2017. the amount outstanding to nCC
Group Security Services limited at the end of the current year
was £nil (2017: £5,328). the expense in the year was £60,907
(2017: £59,933).

24. operating lease commitments

the Group had total commitments under non-cancellable
operating leases, payable as follows:

Land and buildings

less than one year

Between one and five years

2018
£’000

2017
£’000

428

534

962

209

226

435

the Group has an operating lease for a data centre in Heathrow,
london at which some of its call processing platform is located.
the lease was renewed in July 2017 for a further 3 years at a
cost of £333,740 per annum.

the Group took out a lease on a car in March 2018. the lease
covers the period to February 2020 at a cost of £4,811 per annum.

eckoh uS has a lease on a new York office which covers the
period to March 2019 at a cost of £27,977 per annum. they
have a further lease on an omaha office which covers the period
to February 2021 at a cost of £61,136 per annum.

26. 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 2018 of 0.55 pence
per ordinary share be paid to the Shareholders whose
names appear on the register at the close of business on
28 September 2018 with payment on 26 october 2018.
the ex-dividend date will be 27 September 2018. 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 £1.4m.

27. transactions relating to acquisitions

In the prior year, the Company incurred acquisition related
costs of £319,000 to the income statement which were
included in exceptional expenses in the Group’s Consolidated
Statement of Comprehensive Income. £219,000 of these
related to external legal fees, due diligence and valuation fees
relating to the acquisition of K2C. £21,000 related to aborted
acquisition costs. £79,000 related to ongoing costs in relation
to the acquisition of pSS.

28. Acquisition of Klick2Contact

25. Cash flow from operating activities

eu limited

When the company was acquired on 20 July 2016, it was
agreed that additional consideration would be paid based on
the performance of the K2C business against certain financial
criteria in the first 24 months post acquisition. During the year,
it has become apparent that the financial criteria is not going
to be met. As a result contingent consideration of £975,000,
which had previously been provided for was released during
the year.

profit after taxation

Interest income

Finance income

Interest payable

taxation

Deferred tax

Depreciation of property, plant and
equipment

exchange differences

Amortisation of intangible assets

Share based payments

operating profit before changes in working
capital and provisions

(Increase)/decrease in inventories

Decrease/(increase) in trade and other
receivables

2018
£’000

2017
£’000

2,660

1,439

(34)

(975)

118

(225)

(43)

142

184

914

1,058

(263)

2,654

554

226

2,619

132

5,403

5,757

(11)

1,722

(2,243)

Increase in trade and other payables

(1,270)

(1,074)

net cash generated in operating activities

5,844

2,475

Financial Statements 05 noteS to tHe FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

Company Financial Statements

Company Statement of Financial position
as at 31 March 2018

Non-current assets

Investments

Investment property

Current assets

trade and other receivables

Cash and cash equivalents

Total assets

Current liabilities

trade and other payables

Non-current liabilities

other interest-bearing loans and borrowings

total liabilities

Net assets

Equity attributable to equity holders of the parent

Share capital

eSop reserve

Capital redemption reserve

Share premium

Merger reserve

Share-based payment

Currency reserve

profit and loss account

Shareholders’ funds

Notes

iii

viii

2018
£’000

24,012

2,929

26,941

6,309

6,311

33,252

2017
£’000

23,458

2,972

26,430

2,670

29,100

(16,653)

(10,356)

(3,250)

(5,525)

(19,903)

13,349

(15,881)

13,219

631

(238)

198

2,640

2,697

2,469

4,881

13,349

611

(83)

198

2,660

2,697

1,915

147

5,074

13,219

the financial statements were approved and authorised for issue by the Board of Directors on 13 June 2018
and signed on its behalf by:

Chrissie Herbert
CHIEF FINANCIAL OFFICER

Company Registration number 3435822

Statement of changes in equity

Share
capital

eSop
reserve

£’000

600

(17)

Balance at 1 April 2016

Total comprehensive income

profit for the year

Total comprehensive income

Transactions with owners of the company

Contributions and distributions

Dividends

purchase of own shares

Shares issued on acquisition of K2C
Shares issued under the share
option schemes
Shares acquired by employee
Benefit trust

Currency reserve

Share option charge
Total contributions and
distributions
Balance at 31 March 2017

(82)

Capital
redemption
reserve

Merger
reserve

Share
emium

Share
based
payment

Currency
reserve
account

profit and
loss account

total
shareholders'
equity

£’000

198

£’000

2,353

£’000

2,612

£’000

1,783

£’000

344

132

132
1,915

91
147

£’000

6,386

(242)

£’000

13,971

(242)

(1,084)

(82)

346

132

(1,070)
5,074

(510)
13,219

11
611

(66)
(83)

-
198

344
2,697

48
2,660

Balance at 1 April 2017

611

(83)

198

2,697

2,660

1,915

147

5,074

13,219

Total comprehensive income

loss for the year

Total income

Transactions with owners of the company

Contributions and distributions

Dividends

purchase of own shares
Shares issued under the share
option schemes
Shares acquired by employee
Benefit trust

Currency reserve

Share option charge
Total contributions and
distributions
Balance at 31 March 2018

(156)

(20)

20
631

(155)
(238)

-
198

-
2,697

(20)
2,640

554

554
2,469

(76)

(76)
71

1,065

(1,209)

(49)

(1,258)
4,881

(1,209)

(156)

(48)

(76)

554

(935)
13,349

Financial Statements 05

AnnuAl RepoRt & ACCountS 2018

Notes to the Company's Financial Statements
for the year ended 31 March 2018

i. principal Accounting policies

the following accounting policies have been applied consistently
in dealing with items which are considered material in relation to
the financial statements, except as noted below.

Basis of preparation

these financial statements were prepared in accordance
with Financial Reporting Standard 101 Reduced Disclosure
Framework (“FRS 101”).

In preparing these financial statements, the Company applies
the recognition, measurement and disclosure requirements of
International Financial Reporting Standards as adopted by the
eu (“Adopted IFRSs”), but makes amendments where necessary
in order to comply with Companies Act 2006 and has set out
below where advantage of the FRS 101 disclosure exemptions
has been taken.

under section s408 of the Companies Act 2006 the company is
exempt from the requirement to present its own profit and loss
account.

In these financial statements, the company has applied the
exemptions available under FRS 101 in respect of the following
disclosures:

• A Cash Flow Statement and related notes;

• Comparative period reconciliation for share capital;

• Disclosures in respect of transactions with wholly owned

subsidiaries;

• Disclosures in respect of capital management;

• the effects of new but not yet effective IFRSs;

• Disclosures in respect of the compensation of Key

Management personnel; and

As the consolidated financial statements include the equivalent
disclosures, the Company has also taken the exemptions under
FRS 101 available in respect of the following disclosures:

•

IFRS 2 Share Based payments in respect of Group settled
share-based payments

the Company proposes to continue to adopt the reduced
disclosure framework of FRS 101 in its next financial statements.

the accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in
these financial statements.

no judgements made by the Directors, in the application
of these accounting policies have a significant effect on the
financial statements.

Non-derivative financial instruments

non-derivative financial instruments comprise investments in
equity, cash and cash equivalents and loans and borrowings.

Investments
Investments in subsidiaries are stated at amortised cost less
impairment.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and
form an integral part of the Company’s cash management are
included as a component of cash and cash equivalents for the
purpose only of the cash flow statement.

Deferred taxation

Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax in the future or a right to pay less tax
in the future have occurred at the balance sheet date.

A net deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence,
it can be regarded as more likely than not that there will be
suitable taxable profits against which to recover carried forward
tax losses and from which the future reversal of underlying
timing differences can be deducted.

Deferred tax is measured at the average tax rates that are
expected to apply in the periods in which the timing differences
are expected to reverse, based on tax rates and laws that have
been enacted or substantively enacted by the balance sheet
date. Deferred tax is measured on a non-discounted basis.

Non-derivative financial instruments

Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised
cost using the effective interest method, less any impairment
losses.

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 by 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.

Related Party transactions

IAS 24 Related party requires to disclose related party
transactions entered into between two or more members of
a group, provided that any subsidiary which is a party to the
transaction is wholly owned by such a member. there is an
exemption in the reduced disclosure framework from disclosing
a related party transaction where the related part as entered into
between two or more members of a group, provided that any
subsidiary which is a party to a transaction is wholly owned by
such a member.

Own shares held by ESOP trust

transactions of the Company-sponsored employee Share
ownership plan (‘eSop’) trust are treated as being those of the
Company and are therefore reflected in the Company’s financial
statements. In particular, the trust’s purchases and sales of shares
in the Company are debited and credited directly to equity.

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.

the Company also operates a 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.

IFRS 2 has been applied to all options granted after 7 november
2002 which have not vested on or before 1 January 2006.
A deferred tax adjustment is also made relating to the intrinsic
value of the share options at the balance sheet date.

As a result of the grant of share options since 6 April 1999 the
Company will be obliged to pay employer’s national Insurance
contributions on the difference between the market value of the
underlying shares and their exercise price when the options are
exercised. A provision is made for this liability using the value of
the Company’s shares at the balance sheet date and is spread
over the vesting period of the share options. the provision is
held by the relevant Group company who employs the share
option holders.

the grant date fair value of share-based payment awards
granted to employees is recognised as an employee expense,
with a corresponding increase to equity, over the period that
the employees unconditionally become entitled to the awards.
the amount recognised as an expense is adjusted to reflect
the number of awards for which the related service and non-
market vesting conditions are expected to be met, such that the
amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market
performance conditions at the vesting date. For share-based
payment awards with non-vesting conditions, the grant date
fair value of the share-based payment is measured to reflect
such conditions and there is no true-up for differences between
expected and actual outcomes.

the fair value of the amount payable to employees in respect of
share appreciation rights, which are settled in cash, is recognised
as an expense with a corresponding increase in liabilities, over
the period that the employees unconditionally become entitled
to payment. the liability is re-measured at each reporting date
and at settlement date. Any changes in the fair value of the
liability are recognised as personnel expenses in profit or loss.

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.

Cash flow statement

the cash flows of the Company are included in the Consolidated
Cash Flow Statement on page 55.

Financial Statements 05 noteS to tHe CoMpAnIeS FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

Investment property

ii. operating expenses

the Investment property comprises of freehold land and office
buildings that are held for capital appreciation.

Staff costs

the land is recognised at cost and is not depreciated.
the Investment property was initially recognised at cost and
subsequently carried at cost less accumulated depreciation and
accumulated impairment losses. Depreciation is calculated using
a straight-line method to allocate the depreciable amounts over
the estimated useful life of years which is 25 years. the residual
value, useful life and depreciation method of the investment
property is reviewed, and adjusted as appropriate, at each
balance sheet date. the effects of any revision are included in
the profit or loss when the changes arise.

Details of the Directors’ emoluments are given in the Directors’
Report on page 43. the Director’s remuneration costs are borne
by a subsidiary undertaking. the Company did not incur any
staff costs during the year (2016: £nil). the average number of
employees employed by the company during the year was 5
(2016: 4).

Services provided by the Group’s auditor

Fees payable for the audit of the parent company and
consolidated accounts of £15,000 (2017: £15,000) were borne
by a subsidiary undertaking.

iii. Fixed asset investments

At 1 April 2016

Additions

At 31 March 2017

Additions

At 31 March 2018

Impairment

Shares in
subsidiary
undertakings
£’000

Other
investments
£’000

22,881

3,470

26,351

3,961

132

4,093

554

4,647

Total
£’000

26,842

3,602

30,444

554

30,998

At 1 April 2016, 31 March 2017 and At 31 March 2018

(6,986)

Net Book Value

At 31 March 2018

At 31 March 2017

the Directors have assessed the carrying values of the
Company’s investments, and concluded that no impairment
triggers exist that would require the Company’s investments to
be impaired. the investment in eckoh projects limited has been
fully returned in previous years and therefore has no current
value.

19,365

4,647

4,093

24,012

23,458

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 21 of the consolidated
financial statements. the disclosure of these amounts has been
reclassified between categories during the year.

100%

the Company has the following investments in subsidiaries, which are included in the Consolidated Financial Statements:

Country of
incorporation

Principal
activities

Percentage of
share capital held

Subsidiary
undertakings

eckoh uK limited

Veritape limited

eckoh llC

eckoh projects limited

Intelliplus Group limited

telford projects limited

england and Wales (i)

united States of America (ii)

england and Wales (i)

Speech Solutions

non trading

Dormant

product Support Solutions Inc

united States of America (iii)

Support Solutions

Klick2Contact eu ltd

england and Wales (i)

Cloud-based Software provider

(i)

the registered office is telford House, Corner Hall,
Hemel Hempstead, Hp3 9Hn.

(ii) the registered office is c/o national Registered Agents Inc.,
160 Greentree Drive, Suite 101, Dover, Delaware 19904.

(iii) the registered office is 7172 Regional Street. #431, Dublin,

California 94568.

iv. Investment property

Cost

At 1 April 2017

Additions

At 31 March 2018

Depreciation

At 1 April 2017

Charge for the year

At 31 March 2018

Carrying amount

At 31 March 2018

At 31 March 2017

UK Office
£’000

3,068

139

2,929

2,972

v. trade and other receivables

prepayments and accrued income

Amounts due within one year

31 March 2018
£’000

31 March 2017
£’000

Financial Statements 05 noteS to tHe CoMpAnIeS FInAnCIAl StAteMentS

AnnuAl RepoRt & ACCountS 2018

vi. trade and other payables

Current

Amounts owed to Group undertakings

other creditors and accruals

loan due within one year

Amounts due within one year

Non-Current

loan due over one year

Contingent consideration

Amounts due over one year

the loan is detailed further in note 3 to the consolidated accounts.

vii. Deferred taxation

total unprovided deferred tax assets are as follows:

tax losses available

unprovided deferred tax asset

viii. Share capital

Allotted, called up and fully paid

Share type

ordinary Shares of 0.25p each

As at 1 April 2017

Shares issued under the share option schemes

As at 31 March 2018

31 March 2018
£’000

31 March 2017
£’000

Shareholder Information

Dealings permitted on Alternative Investment Market (AIM) of the london Stock exchange.

Directors and Company Secretary

G.L. Millward

non-executive Director

C.M. Batterham non-executive Chairman (resigned 20 September 2017)

C.J. Humphrey

non-executive Chairman (appointed 21 June 2017)

D.J. Coghlan

non-executive Director (appointed 1 December 2017)

N.B. Philpot

Chief executive officer

A.P. Moloney

Group Finance Director and Company Secretary (resigned 2 May 2017)

C.G. Herbert

Chief Financial officer and Company Secretary (appointed 2 May 2017)

Registered Office
eckoh plc
telford House
Corner Hall
Hemel Hempstead
Hertfordshire Hp3 9Hn

www.eckoh.com

Registered in england and Wales
Company number 3435822.

15,333

1,300

16,653

3,250

19,903

8,996

1,300

10,356

4,550

975

5,525

15,881

31 March 2018
£'000

31 March 2017
£’000

10,757

1,829

10,870

1,848

Number of shares

Nominal value £’000

244,299,546

8,213,974

252,513,520

611

631

ix. Share options and share-based

xi. events after the balance sheet date

payments

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

x. Related party transactions

the Company has taken advantage of the exemption conferred
by IAS 24 that transactions between wholly owned Group
companies do not need to be disclosed.

post year end the Directors are recommending that a final
dividend for the year ended 31 March 2018 of 0.55 pence per
ordinary share be paid to the Shareholders whose names appear
on the register at the close of business on 28 September 2018
with payment on 26 october 2018. the ex-dividend date will
be 27 September 2018. 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
£1.4m.

Registrar
link Asset Services
the Registry
34 Beckenham Road
Beckenham
Kent BR3 4tu

Nominated
Advisor and
Nominated Broker
nplus1 Singer Capital
Markets limited
one Barthlomew lane
london eC2n 2AX

Solicitor
Mills & Reeve llp
Botanic House
100 Hills Road
Cambridge CB2 1pH

Banker
Barclays Bank plc
11 Bank Court
Hemel Hempstead
Hertfordshire Hp1 1BX

Auditor
KpMG llp
Altius House
one north Fourth Street
Milton Keynes MK9 1ne

eckoh uK plc, telford House, Corner Hall, Hemel Hempstead, Herts Hp3 9Hn
08000 630 730 | tellmemore@eckoh.com | www.eckoh.com

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