Eckoh plc Annual Report 2019

FY2019 Annual Report · Eckoh plc

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Annual Report
2019

ANNUAL REPORT 2019

Contents

Strategic Report
Highlights
3
Chairman’s Statement
5
6
Chief Executive Review
12 Principal Risks & Uncertainties
14
Financial Review
Business Model
16 Digital Transformation
17 Contact Centre Security
18 Customer Engagement
19 Eckoh Experience Portal
20 Contact Centre Solutions
21 Client References -

Vue Entertainment, 1st Central, Regtransfers
Corporate Responsibility
24 Business Ethics
25 Employee Engagement
27 Communities
27 Environment
Corporate Governance
28 Board of Directors
29 Chairman’s Report
34 Audit Committee Report
37 Remuneration Committee Chairman Statement
38 Annual Report on Remuneration
43 Directors’ Report
46
Independent Auditor’s Report
Financial Statements
50 Primary Statements
55 Basis of Preparation and notes to the Financial Statements
80 Company Financial Statements
87 Shareholder Information

Strategic Report

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 2019.

£m unless otherwise stated

New business contracted5

Total business contracted7

Revenue

Recurring Revenue % 2

Gross profit

Adjusted EBITDA3

Profit before taxation

Diluted earnings per share

Proposed Full Year dividend per share

Net cash

FY19

FY18 Restated1

Change

22.6

32.7

28.7

83%

24.1

4.3

1.2

0.36

0.61

8.3

15.3

20.2

27.2

82%

23.5

5.1

1.1

0.52

0.55

3.6

47%

62%

+5%

+100 bps

+3%

(16%)

+7%

(31%)

+11%

+4.7

NEW BUSINESS
CONTRACTED
up 47%
TOTAL BUSINESS
CONTRACTED
up 62%

MORE THAN
$16M IN
NEW BUSINESS
IN THE USA

MORE THAN
£10m IN NEW
BUSINESS
IN THE UK

DEFERRED
REVENUE6
UP 44% to
£14.6m
(FY181: £10.1m)

REVENUES
up 5%

RECURRING
REVENUE2
UP TO
83%
(FY181: 82%)

INVESTMENT
IN INNOVATION
5 NEW
PATENTS
GRANTED DURING
THE YEAR

FINAL
DIVIDEND
INCREASED BY
11% to 0.61p
per share

(FY18: 0.55p)

1. Restatement as a result of adoption of IFRS 15 – Revenue from Contracts

4. Constant currency (using last year exchange rates)

and Customers

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

3. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA)
is the profit before tax adjusted for depreciation, amortisation, finance income,
finance expense, legal fees, settlement costs and expenses relating to share
option schemes (see page 15)

5. New business contracted excluding renewals with existing customers

6. Deferred revenue is defined in IFRS 15: Revenue from Contracts with

Customers as contract liabilities

7. Total business contracted includes new business from new clients, new

business from existing clients as well as renewals from existing clients

ANNUAL REPORT 20194

Strategic Report 1 CHIEF EXECUTIVE REVIEW

Strategic Highlights:

• Strong UK & US momentum – record levels of new and total business contracted, up 47% and 62%

• US Secure Payments – new business up 48% to $13.7m and order book grew 63% to $22.7m (FY181:$13.9m)

• UK grew strongly – more than £10m in new business driven by improved sales channel

•

Investment in innovation – five new patents granted during the year

Financial Highlights:

• Results in line with market expectations

• Revenues up 5%, or 5% at constant currency4, with growth in the UK and US

• Recurring revenue2 up to 83% (FY181: 82%)

• Deferred revenue6 up 44% to £14.6m (FY181: £10.1m), reflecting business wins and impact of IFRS 151

• Adjusted EBITDA3 £4.3m reduced by 16% (FY181: £5.1m) demonstrating a planned increase in headcount,

investment in Sales, Marketing and IT ahead of the recognition of deferred revenue6 under IFRS 151

• Strong cash performance – Net Cash of £8.3m (FY18: £3.6m)

• Proposed final dividend increased by 11% to 0.61p per share (FY18: 0.55p)

Current Trading:

• Significant new contracts won since period end

• Three-year UK contract for Contact Centre digital transformation project

• Five-year Secure Payments Cloud contract covering the US, UK and Europe

• Largest UK contract renewal for FY20 signed with Premier Inn

• Strong sales pipeline in both the UK and US Secure Payments

• Record visibility for current year

1. Restatement as a result of adoption of IFRS 15 – Revenue from Contracts

4. Constant currency (using last year exchange rates)

and Customers

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

5. New business contracted excluding renewals with existing customers

6. Deferred revenue is defined in IFRS 15: Revenue from Contracts with

Customers as contract liabilities

7. Total business contracted includes new business from new clients, new

business from existing clients as well as renewals from existing clients

I am pleased to present this Annual Report
2019, which demonstrates strong progress
in both the UK and US markets, with
growth in revenue and gross profit in both
divisions in the year.

Results

With the implementation of IFRS 15 Revenue from Contracts
with Customers from 1 April 2018, the business has introduced
new Key Performance Indicators (KPIs), one of which is
reporting against business contracted. In the year total business
contracted1 in both the UK and US was strong at £32.7million
(FY18: £20.2m), an increase year on year of 62%.

In the US we have seen further growth in new business won
in the Secure Payments channel, and this opportunity remains
the largest single opportunity for the group. During the year
the US team secured $13.7 million new orders (FY18: $9.3m)
in this revenue channel, an increase of 48%.

In the UK we grew revenue and gross profit as well as new
business contracted2. In addition to the strong new business
contracted of £10.1million (FY18: £6.0m), a growth of 69%
year on year, the value of renewals more than doubled on the
previous year, demonstrating the strong client retention levels.

Adjusted EBITDA4 is £4.3 million (FY181: £5.1m) a decrease on
last year of 16%. During the year we have invested in people,
IT, Sales and Marketing to grow the business and the costs
have hit the income statement ahead of the revenue from
the new business contracted, which is deferred under IFRS 15
Revenue from Contracts with Customers until the solution has
been delivered to the client.

During the year the Group has continued to have strong cash
generation and the year-end net cash balance grew to £8.3
million (FY18: £3.6m). As indicated previously the commercial
model has not been impacted by the implementation of IFRS 15
Revenue from Contracts with Customers and this strong cash
generation demonstrates the strength of the growing business.

Following the implementation of IFRS 15 Revenue from
Contracts with Customers from 1 April 2018 we now have
improved revenue visibility from the increasing levels of deferred
revenue3 coupled with the fast-growing order book, which
provides a solid platform for predictable significant growth.

The Board recommends a final dividend of 0.61 pence per
Ordinary Share (2018: 0.55p), which, subject to approval by
Shareholders at the 2019 AGM, will be paid on 25 October 2019.

Chairman's Statement

Board

In the financial year ended 31 March 2018, there were
significant changes to the Board. In the Annual Report 2018
I committed to carry out an internal evaluation of the Board
during the financial year ended 31 March 2019, which I am
pleased to report has been carried out and the results of
which, are detailed in the Governance section on page 28.

Full details of the current Directors are on page 28.
Corporate Governance

On 30 March 2018 the AIM Rules were amended to require
all companies quoted on AIM to implement a recognised
corporate governance code from 28 September 2018. With
the release of the Quoted Companies Alliance Corporate
Governance Code (QCA code) and the changes to the
Financial Reporting Council UK Corporate Governance Code.
We undertook a review over the summer and as a Board
decided that the QCA code was the code most appropriate
for the size and complexity of the business. In the Governance
section we outline how we have complied with the 10
principles of the QCA Code. The Board considers that it does
not depart from any principles of the QCA code.

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
18 September 2019 and we look forward to the opportunity
to meet with as many Shareholders as possible on the day.
Christopher Humphrey
CHAIRMAN
12 June 2019

Total business contracted includes new business from new clients,
new business from existing clients as well as renewals with existing
clients

2. New business contracted excluding renewals with existing customers

3. Deferred revenue is defined in IFRS 15: Revenue from Contracts with

Customers as contract liabilities

4. 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 (see page 15)

ANNUAL REPORT 20196

Chief Executive Review

A clear growth strategy

Introduction

Our strategic objectives remain
largely consistent, reflecting our aim
to become the global leader in our
areas of expertise, and in particular,
Contact Centre security.

Our objectives include:

• Expanding our US footprint to capitalise on the fast-
growing market for Secure Payment opportunities

• Extending our market leader position for Contact Centre

security into the Cloud

• Further enhancing the Eckoh Experience Portal to enable

faster and more flexible delivery of our solutions

• 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 in Contact Centre security
and Customer Engagement.

Eckoh enjoyed a strong performance in the 2019 financial
year, in line with market expectations, with record levels of
new business sales and total business contracted1 in the Group
growing 62% to £32.7m (FY18: £20.2m). This included a
return to revenue growth in the UK with significant growth in
both new business and renewals with existing clients. Once
again, the US had a strong period with Secure Payments new
business contracted growing by 48% to $13.7m.

Total revenue for the year was £28.7m, an increase year
on year of 5.4% (FY181: £27.2m) or adjusting for constant
exchange rates 5.0%. Both the UK and the US operations
grew their revenue year on year, the UK at 5.2% and the US
at 5.9%.

In 2019 we have evolved our reported financial KPIs to ensure
they accurately measure the performance and financial health
of the business. As a result, we will cease reporting some KPIs
used historically, if no longer deemed appropriate.

Cash and cash generation will become an even more
important KPI and we finished the year with a strong Net Cash
position of £8.3m, an increase of £4.7m on the previous year.
This comprises a cash balance of £11.6m, less an outstanding
loan of £3.2m, taken out in 2015 in part to purchase the
Group’s UK head office.

Given the delay in revenue being recognised following
adoption of IFRS 15, we introduced new business contracted1
as a new KPI in the half year. We are pleased to report a
significant increase in new business contracted, which grew
47% year on year to £22.6m (FY18: £15.3m).

In the US, total new business contracted was $16.3m, an
increase of 33% (FY18: $12.3m). US Secure Payments
performed especially well, with $13.7m of new business
contracted, our strongest period since we entered the US
market in FY15 (FY18: $9.3m). Our continued focus on
larger contracts means that the timing of new customer wins
remains hard to predict given the typically longer sales cycle.

Total business contracted includes new business from new clients, new
business from existing clients as well as renewals with existing clients

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

3. Deferred revenue is defined in IFRS 15: Revenue from Contracts with

Customers as contract liabilities

Strategic Report 1 CHIEF EXECUTIVE REVIEW
7

or a mobile (‘DataGuard’), or through a Web Chat or
Chatbot (‘ChatGuard’). Our Secure Payments products are
straightforward to deploy as they require no change to
our clients' existing processes or systems; 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. Eckoh’s proposition, which is delivered through
the Eckoh Experience Portal (“EXP”), enables enquiries
and transactions to be performed on whatever device the
customer chooses, through any inbound communication
channel and allows customers to self-serve or to engage
with a customer service advisor. It enables our clients to
increase efficiency, lower operational costs and increase
customer satisfaction by providing a true Omnichannel
experience.

The UK has the entire product portfolio, but in the US, a
territory that Eckoh entered only five years ago, the focus
is on products where we have the greatest differentiation
and the least competition – Secure Payments, Contact
Centre infrastructure support and our browser-based agent
desktop tool, Coral. With the introduction of Web Chat and
ChatGuard at the beginning of this financial year this is the
first step in opening up our Customer Contact proposition
in the US, focusing on the newer Customer Engagement
channels.

Contracts for both propositions are typically multi-year in
length and have a high proportion of recurring charges,
usually underpinned by minimum commitments. In the UK,
almost all solutions are currently delivered from Eckoh’s hosted
managed service platform, whilst in the US customers are still
more predicated to deploy our solutions on-site. However,
with Eckoh’s AWS Cloud platform now fully covered by our
level 1 PCI DSS accreditation we expect this to be a growing
destination, particularly for our smaller customers.

In the UK we grew revenue and gross profit, as well as new
business contracted, showing the benefit of the restructure
of the sales function in FY18. New business contracted was
£10.1m (FY18: £6.0m), the highest level in five years.

Including renewals of existing client contracts, total contracted
business for the year is £32.7m, compared to £20.2m in
the prior year, an increase of 62%. Going forward, given
the length of contracts and the revenue of individual clients
is varied, we expect total renewal value to be somewhat
unevenly spread between periods.

During the year, as indicated a year ago, the business invested
in headcount, IT, Sales and Marketing. This investment is
in line with the growth of the business, however as IFRS
15: Revenue from Customers and Contracts has delayed
the revenue recognition over the length of the contract for
the areas of the business that are growing, the costs have
impacted the income statement ahead of the revenue.
In the near term, IFRS15 has reduced reported revenue
and profitability, particularly in the US operation, but has
strengthened recurring revenues and substantially increased
levels of deferred revenue, which gives the Group even better
revenue visibility and an excellent platform for continued,
predictable growth in future periods. Add to that the
significant increase in the value of our newly contracted
business and we expect this to lead to faster levels of revenue
growth over the coming periods.

Highly complementary products
and attractive proposition

Eckoh’s go-to-market proposition encompasses two
highly complementary areas: Secure Payment products
and Customer Contact solutions.

• The Group’s patented Secure Payment products help

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 the General Data Protection Regulations (“GDPR”).
Eckoh prevents sensitive personal and payment data
from entering IT and contact centre environments when
customers make payments for goods and services.
Eckoh can secure all engagement channels including
payments made over the phone through a live agent
or an automated IVR system (‘CallGuard’), on the web

ANNUAL REPORT 20198

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.

With regulation tightening and the financial impact of data
breaches and fraud growing, organisations 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 a data breach from some of the most
challenging parts of their businesses.

The contact centre industry in both the UK and US is extremely
large, representing around 4% of the entire workforce, and
the industry continues to grow. We target organisations that
utilise contact centres with more than 50 agent seats and this
represents over 2,500 in the UK and 14,000 in the US. 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.

Operational Review

US Division:
US Division (55% of Group new business won, 32% of
Group revenue, 68% recurring revenue2)

The US division achieved new business contracted of $16.3m
(FY18: $12.3m), an increase year on year of 32%. Revenue
in the period was $12.2m, an increase of 4.6% (FY181:
$11.7m), with growth in Secure Payments and Coral offset by
a short-term decline in our Support business in the first half of
the year. In the second half of the year the Support business
returned to year on year growth leading to overall growth in
H2 of 29.5%. Recurring revenues for the year in the US were
68% (FY181: 67%) and we anticipate this to grow further as
the proportion of revenue from Secure Payments increases.

The US remains focused on three sales activities where it has
the greatest differentiation and the least competition.

• Secure Payments revenue grew 35% to $5.0m,

representing 41% of the US division’s revenue compared
to $3.7m and 32% for the same period last year.

• Support revenue accounted for 45% of revenue in the
period at $5.4m, a decline of 6% (FY18: $5.8m) due to
our largest client partially ceasing some of their support
activity but grew in the second half.

• Coral had revenue of $1.8m in the period an increase
of 6% year on year (FY18: $1.7m) and other product
revenues in the period were nil (FY18: $0.5m).

Secure Payments continued to see significant momentum,
with revenues up 35%, despite limited revenue arising from
the new contracts won during the period due to IFRS 15.

Since Eckoh entered the US market in 2015, new business
contracted has grown from $0.3m in FY15 to $13.7m in FY19,
as shown below.

Financial Year

FY15

FY16

FY17

FY18

FY19

New Business Contracted

$0.3m $1.6m $8.3m $9.3m $13.7m

Strategic Report 1 CHIEF EXECUTIVE REVIEW9

The Company is focused on large enterprise contracts, the size
and timing of which are difficult to forecast, but the record
levels of new business contracted this year included our largest
ever contract win. This was a two-year contract worth $7.4m
and won in a competitive tender process, to provide Secure
Payment solutions to one of the largest telecommunications
corporations in the United States. No revenue was recognised
for this contract during the year, but billing has now begun.
As a result of this contract, the average contract value in this
period is significantly greater than the $750k average contract
size we have typically expected to see. Our pipeline remains
strong and is growing.

Other contracts won in the year came from a range of vertical
markets including financial services, insurance, retail and
healthcare; and these were almost all for on-site deployment.
We have, however, seen an increasing interest in Cloud
delivery although this is currently coming from predominantly
small clients.

In Support, we provide third party support within large
Contact Centre operations for software and hardware from
vendors such as Avaya, Cisco, Genesys and Aspect. Revenues
declined year on year by 6%, principally due to the large
three-year contract that commenced in July 2016 with a major
US telecommunications company reducing in scope and value
as expected from September 2017.

The nature of Support contracts is that they begin and end
with relatively short notice, which can lead to a fluctuation in
revenue between periods. To illustrate this point in the second
half we have seen Support revenues grow 25% year on year;
this came largely from an enhanced contract with an existing
telecommunications client and a new contract with a financial
services company. Since period end we have also added a
further new contract with a US mobile operator.

Support remains a key part of our US strategy as we seek to
leverage our US staff across all our sales channels. The clients
for whom we provide Support can be excellent prospects for
both our Secure Payments and Coral product, as seen from the
lucrative contracts the Group has already won through cross
selling. To supplement future Support opportunities we have
entered into a new partnership with Ribbon Communications,
a communications solutions company, which will enable Eckoh
to not only support but also install Ribbon equipment. Eckoh
already uses Ribbon’s session border controllers (“SBCs”)
for some of its on-site Secure Payments solutions, and this
partnership should allow us to derive greater margin from
these installations as well as target new Support contracts.

Coral is a browser-based desktop that increases efficiency by
bringing all the contact centre agents' communication tools
into a single screen. It also enables organisations, particularly
those who have grown by acquisition, to standardise their
Contact Centre facilities, as Coral can be implemented in
environments that operate on entirely different
underlying technology. Coral, as has been
previously stated, has low visibility that
can lead to greater variation in any one
period from these activities compared
to Secure Payments, which is largely
underpinned by high levels of
recurring revenue. Coral had some
new licence orders in this period,
and recurring support fees, which
saw revenue grow modestly to
$1.8m. We remain confident that
Coral can deliver sizeable future
contracts.

The improved visibility from new business
and revenue deferred under IFRS 15 gives us
tremendous confidence for the future growth
prospects for the division, and current year US
revenue visibility stands at $14.4m, 18% higher than last year.

UK Division
UK Division (45% of Group new business won, 68%
of Group revenue, 90% recurring revenue2)

The UK division delivered a strong performance with total new
contract value growing 69% to £10.1m (FY18: £6.0m), and
renewal values more than doubling on the previous year.

In the UK, unlike the US, the Group sells its full portfolio of
services, the vast majority of which are delivered through
Eckoh’s hosted platform. IFRS 15 impacts these, although
the impact is not as great as the US due to the more mature
nature of our business in the UK, and the lower proportion
of upfront fees.

Revenue in the period was £19.4m, an increase on last year
of 5.2% (FY181: £18.4m), and gross profit increased 4.4% to
£16.5m (FY181: £15.8m). Gross margins in the UK decreased
marginally by 1% to 85% (FY181: 86%) but recurring
revenue2 increased marginally to 90% from (FY181: 89%).
Over the next three years, we would expect recurring revenue
to fall back to the level pre-implementation of IFRS 15,
a steady state of approximately 86%.

ANNUAL REPORT 2019
10

Strategic Report 1 CHIEF EXECUTIVE REVIEW

It was very pleasing to see the improvement in revenue and
new business, which can be attributed to the action taken last
year when revenue reduced for the first time in many years.
The sales function was restructured and the team re-focused
on larger, more complex opportunities, where Eckoh’s breadth
of portfolio and expertise delivers more value to the client and
differentiates us.

There has also been greater emphasis placed on our indirect
sales channel that has in turn yielded positive results. The
Capita relationship, which delivered no new contracts last year,
returned to more normal activity with two sizeable contracts
in this period. The first new contract, worth a minimum of
£1.4m, was the fifth significant deal won through Capita
since the partnership was created in 2013. The second, worth
a minimum of £1m, is to deliver Omnichannel capability
including live Web Chat to a key Capita account, with the
expectation that further Capita customers will follow. This
was the largest Omnichannel win since the acquisition of
Kick2Contact (“K2C”) in 2016 and is expected to go live in
2019. The ability to effectively deliver our comprehensive
Omnichannel capability integrated with our longstanding voice
and Secure Payments proposition is a key part of our strategy,
and we will continue to invest in our Eckoh Experience Portal
to improve the speed and agility of deploying this combined
offering to our customers.

The strong new business and
consistent renewals of existing clients
gives us high revenue visibility for this
year. At this early point in the year
we have visibility in excess of 90% of
expected revenue.

The BT partnership, which has been in place since the outset
of the Company, has also been rejuvenated delivering more
new contracts than for some years, the majority of which
have been for Secure Payments. There were also significant
contacts won through Maintel and Unify Communications,
and since period end a significant 3-year contract has
been secured through a new partner for a contact centre
transformation project with a large building society. We have
also won a 5-year contract for Secure Payments on behalf of
an international manufacturer of home appliances, that will
see us deliver them a Cloud solution for operations in the US,
UK and Europe.

Looking at the segmentation of UK revenue, 23% came
from Secure Payment only services (FY181: 28%), 31% from
Customer Contact Solutions (FY181: 26%) and the remaining
46% from those clients where we provide a combination of
both solutions (FY181: 45%). This shift towards Customer
Contact has largely come from the injection of Omnichannel
capability that was acquired with K2C and has been now
integrated into the core Eckoh offering.

Our model of cross-selling to existing clients remains a key
part of the Eckoh strategy, not just to generate incremental
revenue but also to continue the trend of strong client
retention and to further increase the lifetime value of the
Group’s customers. Of the new business contracted in the
year of £10.1m secured, £2.4m was contracted with existing
customers for delivery of new solutions or modifications.

During the year, our strong track record with existing clients
has continued to be demonstrated through the levels of
renewal business contracted. The largest contract to come up
for renewal during the year was the Vue contract, which was
renewed at £2.0m over three years, taking the relationship
to 15 years, making them the longest serving client. Whilst
renewals were extremely high this year, and our very high
customer retention is expected to continue, the aggregate
value of renewals will, by its nature, fluctuate from year to
year depending on when the largest contracts come up for
renewal.

Since the period end we have also renewed the contract
with Premier Inn, who have been a customer since 2010,
which was the largest contract to come up for renewal in this
financial year.

The strong new business and consistent renewals of existing
clients gives us high revenue visibility for this year. At this
early point in the year we have visibility in excess of 90% of
expected revenue.

Innovation

Eckoh has a long track record of creating innovative solutions
to challenging problems and where we can we seek to protect
these solutions with patents. During the year we were granted
a further five patents covering not only our existing Secure
Payments proposition but also in the wider area of fraud and
security around Customer Engagement.

We now have patents granted in the UK, US and the EU
that cover our lead Secure Payments proposition. This is the
‘secure proxy’ process, which is the way that we exchange
sensitive data, such as card numbers, for valueless tokens or
placeholders prior to a payment being made. This patented
approach is a key differentiator from our competitors as it
allows us to protect our clients' environment without any
major integration or the need to change any of their processes
or systems. This lack of change also means that limited time
is required from the client’s IT team, which is always seen as a
huge benefit compared to other approaches. Since period end,
we have had a further patent granted.

Current Trading and Outlook

Following the strong performance in FY19 the new financial
year has started in line with our expectations, with the Group
continuing to grow the UK and US operations. We have
strong sales pipelines in both markets and our high client
retention rates and investment in our business and people,
provide an excellent platform for future growth. The exact
timing of deployments, which triggers revenue recognition
can sometimes be hard to predict, particularly for the large
enterprise contracts on which we are focussed. However, our
high levels of recurring revenue combined with the record
levels of new business contracted in FY19 provides excellent
revenue visibility for the year and beyond and reinforces the
Board’s confidence that the long-term prospects for Eckoh
remain extremely positive.

Nik Philpot
CHIEF EXECUTIVE OFFICER
12 June 2019

...reinforces the Board’s
confidence that the long-term
prospects for Eckoh remain
extremely positive.

ANNUAL REPORT 201912

Strategic Report 1 CHIEF EXECUTIVE REVIEW

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). 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. Eckoh has
concluded its program of ISO 27001:2017 certification to further
audit these measures.

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 audit, 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. Employee feedback is encouraged and
an employee engagement survey has been undertaken in the year.

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.

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
5.9% (2018: 9.4%) of total revenue.

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
products. 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 is committed to continued research and investment
in products and technology to support its strategic plan. Product
development roadmaps for Secure Payment and Customer Contact
solutions are managed centrally in the UK.

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.

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. Product offerings are being extended
to expand the reach of the services offered in the US. AWS
Cloud based solutions have been adopted to ensure Eckoh
offer all potential solutions that clients may demand.

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 increased
uncertainty of the Brexit negotiations have increased the risk and
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 address 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. Eckoh has concluded its program
of ISO 9001:2015 certification to further audit these measures.

ANNUAL REPORT 201914

Strategic Report 1 CHIEF EXECUTIVE REVIEW

Financial Review

The Group has adopted IFRS 15 Revenue from Contracts with
Customers with effect from 01 April 2018, the prior year
financial statements and the opening retained earnings at 01
April 2017 have been restated. Full disclosure of the impact
of the adoption of IFRS 15 are in note 28. In principal, IFRS 15
has impacted the business as revenue for product solutions
such as the hosted Customer Contact solutions and Secure
Payment solutions in the UK and the on-site Secure Payment
solutions in the US, which are in effect a hosted solution,
are only recognised from the point the client accepts the
service. The provision of the solution is deemed to be one
single performance obligation, which includes the hardware
revenue, the implementation fees and ongoing support and
maintenance revenue which are spread evenly over the term
of the contract once the solution has been delivered to the
client. 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.

As a result of the implementation of IFRS 15, to understand
the growth of the business, the revenue reported in the
income statement needs to be reviewed in conjunction with
the new business that has been secured during the year and
the level of deferred costs and liabilities held on the balance
sheet. This new business and increased levels of deferred
revenue will continue to support future revenue growth as our
solutions are delivered to clients and we are able, under IFRS
15, to start to recognise revenue.

Revenue for the year increased by 5.4% to £28.7 million
(FY181: £27.2m) and at constant exchange4 rates by 5.0%.
Adjusted operating profit2 was £3.1 million compared to £3.9
million last year. Profit after tax for the year was £0.9 million
(FY181: £1.4m). Earnings per share for the year ended 31 March
2019 was 0.37 pence per share (FY181: 0.55 pence per share).

FY19
(UK)
£000

FY19
(US)
£000

FY19
Total
£000

FY181
(UK)
£000

FY181
(US)
£000

FY181
Total
£000

Revenue

19,399

9,320

28,719

18,434

8,803

27,237

Gross Profit

16,527

7,578

24,105

15,807

7,683

23,490

Gross Profit %

85%

81%

84%

86%

87%

86%

Divisional performance

Revenue in the UK, which represents 68% (FY181: 68%) of
total group revenues, increased by 5.2% to £19.4 million
(FY181: £18.4m). The US represented 32% (FY181: 32%) of
total group revenues and revenues increased in the period
by 4.6% to £12.2 million (FY181: £11.7m), revenues in local
currency grew by 5.9% year on year.

Gross profit

The Group’s gross profit increased to £24.1m (FY181: £23.5m).
Gross profit margin was 84% for the year compared to 86%
for the full year 2018. The UK gross profit margin decreased
by 1% year on year. In the US the full year margin decreased
from 87% to 81% due principally to the loss of revenue
from Support activity in the first half of the year and the
implementation of US Secure Payment clients. In the second
half of the year the US revenue grew by 29.5%.

In the UK, as the service is hosted on an Eckoh platform there
is typically no hardware provided to clients and the gross profit
margin is expected to remain level at 85%. In the US, due to
the impact of IFRS 15, and the growth in the Secure Payments
activities, which are typically provided on-site and require
hardware, we would expect, over the next three years the gross
profit margin to gradually decrease to approximately 75%.

Administrative expenses

Total administrative expenses for the year were £22.9m (FY18:
£23.3m). Adjusted administrative expenses5 for the year
were £21.0m (FY18: £19.6m). During the year, as indicated
a year ago, the business invested in headcount, IT, Sales and
Marketing. This investment is in line with the growth of the
business, however as IFRS 15: Revenue from Customers and
Contracts has delayed the revenue recognition over the length
of the contract for the areas of the business that are growing,
the costs have impacted the income statement ahead of the
revenue. In the first half of 2019, the intangible asset from
the acquisition of Veritape became fully amortised. In the first
half of 2018, the deferred consideration in relation to the K2C
earn-out was released.

Profitability measures

Deferred liabilities and assets

Adjusted EBITDA3 for the year was £4.3m, a decrease year on
year of 16% (FY181: £5.1m).

Profit from operating activities

Amortisation of acquired intangible assets

Legal fees and settlement costs

Expenses relating to share option schemes

Adjusted operating profit2

Amortisation of intangible assets

Depreciation

Adjusted EBITDA3

Year ended
31 March
2019 £’000

Year ended
31 March
20181 £’000

1,194

1,325

567

3,086

275

960

4,321

193

2,329

595

793

3,910

325

914

5,149

Legal fees and settlement costs

There were no legal fees and settlement costs in the financial
year ended 31 March 2019. During the financial year ended
31 March 2018, the Group chose to settle a claim relating to
the US closed professional services division. 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 (FY18: £0.3m) added in the
year to the value of the intangible 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.

Finance charges

For the financial year ended 31 March 2019, the net interest
charge was £77k (FY18: £118k).

Taxation

For the financial year ended 31 March 2019, there was a
tax charge of £209k (FY181: £269k credit). IFRS 15: Revenue
from Contracts and Customers has not impacted the US tax
position, in the UK as part of the implementation of IFRS 15,
a deferred tax asset was set up to amortise as the deferred
revenue and costs are released through the income statement.
Further details are included in note 10.

Earnings per share

Basic earnings per share were 0.37 pence per share (FY181:
0.55 pence per share). Diluted earnings per share were 0.36
pence per share (FY181: 0.52 pence per share).

Deferred liabilities6 and deferred assets6 have both increased
as new business contracted continues to increase greater than
the amounts of revenue and costs being released to the profit
and loss account under IFRS 15: Revenue from Contracts with
Customers, where revenue and costs for our hosted products
are deferred until the solution is accepted by the client.
Total deferred liabilities were £14.6 million (FY181: £10.1m),
included in this balance are £11.7m of deferred liabilities
relating to the Secure Payments product or hosted platform
product, an increase from £8.0m at the same time in the
previous year, a year on year increase of 46%. Deferred assets
as at 31 March were £4.2m (FY181: £1.9m)

Cashflow and liquidity

Net Cash at 31 March 2019 was £8.3m, an improvement
of £4.7m from Net Cash of £3.6m as at 31 March 2018.
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 £3.1m (FY181: £2.0m
cash inflow). In addition, a dividend payment of £1.4m was
made in November 2018.

Dividends

Post year end the Directors are recommending that a final
dividend for the year ended 31 March 2019 of 0.61 pence
per Ordinary Share be paid to the Shareholders whose
names appear on the register at the close of business on
27 September 2019, with payment on 25 October 2019.
The ex-dividend date will be 26 September 2019. 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 £1.5m.

Chrissie Herbert
CHIEF FINANCIAL OFFICER
12 June 2019

Restated as a result of adoption of IFRS 15 – Revenue from Contracts
and Customers

2. 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

3. 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

4. At constant exchange rates (using last year exchange rates)

5. Adjusted administrative expenses are administrative expenses

excluding legal fees and settlement costs and expenses relating
to share option schemes and amortisation and depreciation from
acquisitions

6. Deferred liabilities and deferred costs are defined in IFRS 15 Revenue
from Contracts and Customers as contract liabilities and contract
assets

ANNUAL REPORT 201916

Business Model 2

Business Model

Digital Transformation

Digital engagement technology is
dramatically changing the balance
of power between customers and
businesses. While customers gain the
power of information and choice,
digital technology can significantly
improve business economics.

This means that the rules of business are being rewritten,
virtually every day. Today, Eckoh is applying its extensive
experience to continually reinvent and adapt its business
to provide the solutions that the market demands. While
technology has always been at the core of what we do,
the emphasis today is on creating winning and innovative
combinations of solutions that truly bring positive impact
to our customers’ bottom line, customer satisfaction and
business performance. We recognise that this is a key
factor to thriving in the customer contact sector where
it’s paramount to be proficient in digital transformation.
Our portfolio of solutions plays a critical part in the digital
transformation of an organisation’s customer engagement
and data security, producing tangible results individually
or as part of a wider partner-led delivery.

...the emphasis today is on creating
winning and innovative combinations
of solutions that truly bring positive
impact to our customers...

Contact Centre Security

Organisations that take card payments,
or e-Wallet Payments, in their contact
centres are exposed to sensitive card
and personal data. This makes them
vulnerable to data theft and fraud, as
well as the devastating impact of a data
breach. Criminals continue to exploit
the weakest areas and Card-Not-Present
(CNP) crime via telephone, web or app
– where the cardholder is not physically
visible to the merchant - is rising and
expected to reach £680 million in the
UK by 20211 and to $7.2 billion in the
US by 20202.

Existing and new regulations continue to have a significant
impact on contact centre security and today the Payment
Card Industry Data Security Standard (PCI DSS) and the
General Data Protection Regulation (GDPR) form the key to
compliance. However, MiFID II, HIPAA, FCA and others present
different challenges for contact centres which our Secure
Payment solutions help address.

For ultimate security, Eckoh has long advocated the removal
of the entire contact centre from the scope of a PCI DSS
audit – known as ‘de-scoping' – by opting for our CallGuard
solution. This ensures that sensitive data does not enter the
organisation's environment at all. If there is nothing there, it
cannot be stolen.

This ensures that sensitive data
does not enter the organisation's
environment at all. If there is nothing
there, it cannot be stolen.

Eckoh’s portfolio of Secure Payment solutions comprises;

CallGuard – For payments taken by an agent over the phone
in a contact centre. CallGuard enables PCI DSS compliance
and reduces risk. It is the simplest solution on the market and
patented in the UK and US.

ChatGuard – For PCI DSS compliant payments within the
actual Web Chat window, whether this is Eckoh’s own Web
Chat solution or another provider.

EckohPAY – For PCI DSS compliant automated payments
enabling customers to make payments via the phone, web,
mobile, app or SMS at any time of day, on any device.

e-Wallet Payments – For customers to pay using apps such
as Apple Pay, Google Pay, Paypal, or Pay by Bank and extends
Eckoh's secure solutions into non-card-based payments.

PCI DSS contact centre – For handling payments on behalf
of our customers we’ve operated our own contact centre for
the last 10 years. As a result, we’ve gained a unique insight
into the challenges faced and have taken the opportunity to
develop our solutions to solve them. This is how we know that
they work.

1. National Audit Office

2. Aite Group

ANNUAL REPORT 201918

Business Model 2

Customer Engagement

With customer expectations driving
engagement, today’s customer service
must cater for different priorities.
It needs to understand people’s
preferences and concerns, and be
available on all channels
at all times.

Being able to deliver a world-class customer experience (CX)
matters more than ever for successful organisations today.
When a contact centre gets it right, customer relationships
deepen, brand loyalty rises, and revenue grows.

By embracing a combination of Omnichannel and Self-
Service customer engagement solutions organisations can
meet all these needs without increasing the pressure on
existing contact centre agents. In fact, embracing technology
will make life easier for everyone, allowing technology to
share the load with agents, freeing them to handle more
sensitive or valuable calls. Customers have the choice to self-
serve or take agent assistance or a combination of the two.

• OUR OMNICHANNEL PORTFOLIO CONSISTS OF:

Web Chat, Call-Back, Social Agent, Knowledge Base,
Email Management, Messaging and Co-Browsing,
all of which bring benefits to the agent and customer.

• OUR SELF-SERVICE PORTFOLIO CONSISTS OF:

IVR, Natural Language, Identification & Verification,
Chatbot and Visual IVR so that customers have the
choice to sort things out for themselves, at a time that
suits them.

Chatbot

ROUTEMOB

Visual IVR

The Eckoh Experience Portal

As leaders in the Secure Payment and Customer Engagement
sector, we recognise that customers want to interact with an
organisation in their channel of choice, whenever they want,
wherever they are and on their preferred device. This can be
difficult to achieve if organisations have lots of legacy solutions
strung together over the years, and from different suppliers.
The Eckoh Experience Portal efficiently and effectively delivers
our range of solutions from one platform. Our customers
can now take solutions that they need today and add new
ones when they need them. It brings choice, flexibility and
opportunity as well as an enhanced customer experience.

In the words of Steve Jobs, You’ve got to
start with the customer experience and
work backwards to the technology.

Eckoh’s success is down to us being able to understand
what customers want next. Then, we apply our expertise
and technology to deliver that.

ANNUAL REPORT 2019
20

Business Model 2

Contact Centre Solutions

Eckoh is an expert in transforming contact centre
operations, ensuring that technology investment is
maximised and productivity solutions reflect the
needs of today's operations.

Third Party Support

As a leading provider of contact centre technology,
Eckoh has identified a niche in the market for providing
contact centre support which enables customers to
extend the life of their technology at a lower cost than
their original vendor.

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. We believe that organisations
should have the choice to remain with their current contact
centre infrastructure if it provides them with a stable, reliable
service. We also believe that an organisation should make
the transition in a timeframe that suits them – rather than
the vendor. When they are ready to make a move, we can
help them make the transition as well as decommission their
existing infrastructure.

Agent Desktop

Unique to Eckoh, this single interface brings disparate
agent systems together to make it easier and quicker
to find the answers to resolve customer queries
successfully, the first time.

A contact centre agent’s desktop is the driving force behind
an organisation’s customer experience, and we recognised
that, too often, agents had to log in to and operate multiple
systems. 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 negatively impacts
the customer experience.

Coral is a single, unified agent desktop solution that creates
a presentation layer so agents log in 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 are 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.

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

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, rather
than years.

...it’s scalable, quick to deploy,
secure, simple to maintain and easy
to change.

To provide a more human and personal experience, Eckoh
provides a dedicated contact centre team in combination
with the latest customer service solutions. This empowers the
contact centre team by providing a common, consistent set
of knowledge content and a unique visitor contact history,
enabling each journey to be customised and personalised
based on previous interactions.

Solutions delivered currently include Secure Payments
including CallGuard, ChatGuard and e-Wallet Payments,
Conversational Voice, Natural Language, Visual IVR, Chat,
Agent Virtual Assistant, Knowledge Base, Email Management
and Call Recording.

Client references

Vue Entertainment

Vue was founded in the UK following
the acquisition of the Warner Village
Cinemas in 2003 and is part of the
largest cinema group in Europe, Vue
International. Today they are a leader
in the premium entertainment cinema
sector in the UK and one of the world’s
leading cinema operators.

Eckoh and Vue have enjoyed a good relationship for over 15
years, and Eckoh's most recent innovations address their new
visitor demands. Being the existing Vue partner gives us a
practical insight into their visitors, teams and operations.
It also means that we understand the company ethos –
overcoming challenges together and sharing successes along
the way. At the same time, harnessing Eckoh's insight into
Vue's operation means we will advance Vue's customer
engagement for many years to come.

With Vue's visitors wanting quicker responses and expecting
more proactive communication, they had two primary goals –
to improve efficiency and customer engagement.

The Eckoh Experience Portal is at the heart of delivery
for Vue and provides more than just a contact centre –
it’s a complete Omnichannel customer experience
solution that places Vue on the front row of the
entertainment industry. The portal also incorporates
PCI DSS compliant Secure Payments to protect customer
data and ensure Vue’s data security obligations are met.

ANNUAL REPORT 201922

Business Model 2 CLIENT REFERENCES

1st Central

1st Central emerged in 2008 to exploit
the opportunities from the evolving
price comparison sites. Following rapid
growth, 1st Central became established
as a top 10 supplier on UK price
comparison websites. Today it continues
to strive to make buying car insurance
a more convenient and effortless
experience.

The contact centre was taking an increasing volume of calls,
which tied up agents’ time and led to the need to consider
increasing the number of agents; and the associated costs.
1st Central recognised that technology could be applied to
help ease this situation, improving the experience for agents
and customers.

To do this, 1st Central wanted to embrace a full Omnichannel
customer communication strategy that would enable
customers to choose how they get in touch.

The Eckoh Experience Portal delivers Web Chat, Email
Management, Social Agent and Knowledge Base solutions
for 1st Central’s contact centre. With this portal, 1st Central
will be able to offer customers a choice of communication
channels that meet their expectations today and easily add
new channels as they are needed.

Today, 1st Central can handle more customer enquiries
without increasing agent numbers; reduce the agent handling
time; provide consistent responses, for customers and agents,
across all channels and offer a choice of communication
channels.

As we continued to grow, our contact
centre was experiencing increasing
pressure to provide our usual high-
quality customer service. We looked
to technology for the answer and
chose Eckoh because of the breadth
of its solutions and ease of delivery
through the Eckoh Experience Portal.

Lisa Beeching
HEAD OF OPERATIONS
1st Central

Regtransfers

Regtransfers was established in 1982
and has since grown into a dynamic
company employing more than
100 people. It was one of the first
independent registration specialist
companies and is now the largest,
in terms of the number of employees
and its stock of registration plates.
Regtransfers embraced market changes
and digital channels to enhance and
grow its business. As the company
has grown, so has the volume of calls
they take from customers wishing to
purchase number plates.

These calls often require that card payment industry is taken
at the time of purchase and means that the business needs to
comply with the Payment Card Industry Data Security Standard
(PCI DSS).

Eckoh implemented its patented CallGuard solution which
completely removes their contact centre from the
scope of PCI DSS audit and so simplifies the whole compliance
process and reduces risk.

Today, Regtransfers can take secure payments over the
telephone; prevent customer data from entering the
company’s systems; reassure customers over payment
security; extend payment channels further with Apple Pay
and ChatGuard and ensure their business is PCI DSS
compliant every minute of every day.

We’re not payment security experts,
which is why we turned to Eckoh.
Regtransfers have used competitor
solutions in the past but found that
these did not extend to alternative
payment methods such as Apple
Pay for Cardholder-Not-Present or
Secure Payment in Chat. That’s why
we decided to move to the CallGuard
solution, which seems to be the most
future proof PCI DSS compliance
solution for securing payments.
This means we can get on with
growing our business, which is what
we do best.

Ian Clayton
IT MANAGER
Regtransfers

ANNUAL REPORT 201924

Corporate Responsibility 3

Corporate Responsibility
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 practices 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 and 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 and 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
so 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 a bi-annual Sales Team conference, which is led
by the US management team and focuses on the new business
sales targets for the current financial year and includes product
training for the Sales Team. The CEO and CFO also attend the
bi-annual 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 March 2019, we invited all employees in the
UK and US divisions to take part in an employee survey, the
results of which have been shared with employees and action
plans are being formulated to address opportunities for
improvement identified.

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 share 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.

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 package is 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. Currently, 60 employees participate in the
scheme out of approx. 250 eligible in the UK.

Following feedback from our US employees, we are currently
in the process of defining a Sharesave scheme for US
employees, a 423 plan. The details of the scheme will be
put to the Company’s Shareholders for a vote at the Annual
General Meeting (AGM) to be held on Wednesday 18
September 2019.

ANNUAL REPORT 2019Health, safety, security, wellbeing
and accessibility

Our employees’ 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.

Corporate Responsibility 3 EMPLOYEE ENGAGEMENT

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 the 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-in that team members have with their line managers.

One of the Eckoh values is to be always 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
practice or 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 to junior roles in the organisation. We have a
number of success stories, where employees have progressed
from these junior roles into more senior positions over a
period of time. We have introduced an Apprenticeship
programme that has identified and introduced appropriate
roles for apprentices across the organisation. We have worked
with local training providers to ensure the Apprentices
are supported in their roles with good quality training
programmes.

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.

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.

Gadebridge Community Association –
Youth Club Centre

Eckoh encourages employees based in their office in Hemel
Hempstead to support the local community. In the last year
an employee requested that Eckoh support the Gadebridge
Community Association, which has been supporting the
community for over 50 years. The centre itself has been
promoting activities that benefit Gadebridge and the
surrounding areas. A group of employees spent the day
helping the local Association by painting and revitalising the
Youth Club Centre. As well as supporting the local community
and making a difference the employees had a fun day
supported by Eckoh.

The British Thyroid Foundation

Each Christmas, Eckoh employees raise money through various
activities in the office in Hemel Hempstead. Each year a charity
is nominated by employees and for the second year running
The British Thyroid Foundation was chosen. The charity has
directly supported an Eckoh employee and so is close to the
hearts of many Eckoh employees. The money was raised
by employees and a Company contribution of £1,000 was
donated to the 2018 Christmas charity. 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 itself and other
pieces of advice, they also help with research into treatment
options.

Personal charities

The Company actively encourages and supports our employees
to raise money for charities. During the year employees
collected food and warm clothing for the local DENS charity
and a pyjama day raised £150 for Children in Need.

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:

• Converted all our office working area lights to LED, thus

reducing the electricity the Company uses on an on-going
basis. In the current year we will be converting the lights in
the communal office areas
to LED.

• 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

• Encouraged working habits to, where possible move away

from paper to digitalisation of documents.

• 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.

ANNUAL REPORT 201928

Corporate Governance 4

Corporate Governance
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

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.

Guy Millward

Non-Executive Director

Appointed to the Board – 1 October 2016

Committee Membership:

Audit (Chair), Nominations, Remuneration

David Coghlan

Non-Executive Director

Appointed to the Board – 1 December 2017

Committee Membership:

Remuneration (Chair), Audit, Nominations

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:
Guy is currently Chief Financial Officer at Quixant plc. He has extensive
experience as Finance Director of several public and privately held
companies in the electronics, software and IT sectors. His previous roles
include that of CFO at Imagination Technologies Group plc, Advanced
Computer Software Group plc, Metapack Limited and Bighand Limited,
Group Finance Director at Alterian plc, Morse plc and Kewill plc.
He qualified as a Chartered Accountant at Ernst & Young in 1989.

Guy has an honours degree in Economics from the University of Sheffield
and is a Fellow of the Institute of Chartered Accountants in England and
Wales (ICAEW).

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.

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.

Chrissie has an honours degree in European Finance and Accounting
from Leeds Beckett University, a Betriebs-Wirtin from Bremen Hochschule
and is a Fellow of the ICAEW.

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.

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.

On 30 March 2018 the AIM Rules were amended to require
all companies quoted on AIM to implement a recognised
corporate governance code and comply with that code from 28
September 2018. As a Board of Directors, we felt the Quoted
Companies Alliance Corporate Governance Code (QCA Code)
is the most appropriate code for Eckoh plc to apply, given the
Group's size, complexity and stage of maturity.

The QCA Code follows 10 basic principles that requires
companies to provide an explanation of how they consider
they are meeting those principles through a set of disclosures
on their website and in their Annual Report.

In this Governance section we outline the Company’s
approach to Corporate Governance and how we have
complied with the QCA Code. The Board considers that it does
not depart from any principles of the QCA code.

Christopher Humphrey
CHAIRMAN
12 June 2019

ANNUAL REPORT 201930

Corporate Governance 4 CHAIRMAN'S REPORT

Quoted Companies Alliance
Code Compliance

The following paragraphs set out the 10 QCA Code
principles and how Eckoh has complied with those
principles.

Establish a strategy and business model which
promotes long-term value for Shareholders

The strategy and business model which explains the strategic
objectives of the Group and how the Company generates
and preserves value over the longer term are set out in the
Strategic Report on pages 3 to 11 of this Annual Report.

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 practice the Executive Directors
prepare and present, at a one-day strategy session, the
strategic plan to the Board, which the Board challenges in
order to determine the strategic priorities.

The strategic plan was presented to the Board by Senior
Management, led by the Chief Executive and represented 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.

In addition to the Annual Report and the Company’s
website, the Annual General Meeting (AGM) is an ideal forum
at which to communicate with investors, and the Board
encourages Shareholder participation. All Board members are
present at the AGM and are available to answer questions
from Shareholders.

The articles of association require that at the AGM one third
or as near as possible, of the Directors will retire by rotation.
Nik Philpot, Chief Executive Officer and Chrissie Herbert, Chief
Financial Officer will retire by rotation and put themselves
forward for re-election at the AGM.

Take into account wider stakeholder and social
responsibilities and their implications for long-term
success

Eckoh’s Corporate Responsibility statement, which focuses
on our business ethics, employee engagement, our local
community and the environment is found on pages 24 to 27.

In addition to the stakeholders covered in the Corporate
Responsibility statement, our Customers are also important
stakeholders, whose opinions and voice Eckoh values highly.
We have various channels for Customers and prospects to
communicate with the Group, through regular business
reviews, that are conducted by our Client Services Team,
to post project reviews and in the UK an annual Customer
Satisfaction survey.

Seek to understand and meet Shareholders’ needs
and expectations

Embed effective risk management, considering both
opportunities and threats, throughout the organisation

The Directors consider that the Annual Report and Financial
Statements 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.

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, Edinburgh and Paris, 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. In addition, the Non-Executive Chairman has held
meetings with the top six Shareholders, independently of the
Executive Directors.

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.

Directors’ meeting attendance 2018/19

Board

Audit

Remuneration

Nomination

Scheduled

Short notice

Scheduled

Short notice

Scheduled

Short notice

Scheduled

Short notice

Executive Directors

Chrissie Herbert

Nik Philpot

Non-Executive Directors

Christopher Humphrey

David Coghlan

Guy Millward

1/2*

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.

5 Maintain the Board as a well-functioning,

balanced team led by the Chair

The Board, led by the Chairman, has a collective responsibility
and legal obligation to promote the interests of the Group.
The Chairman is ultimately responsible for Corporate
Governance. However, the Board is responsible for defining
the Corporate Governance policies.

The Board is made up of three Non-Executive Directors and
two Executive Directors and has delegated certain roles and
responsibilities to its Audit, Nomination and Remuneration
Committees whilst retaining overall responsibility.

Non-Executive Directors are all independent and are expected
to devote sufficient time to the Company to meet their
responsibilities.

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 twelve scheduled
meetings during the year and one meeting at short notice.
The table above shows Directors’ attendance at 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.

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.

ANNUAL REPORT 201932

Corporate Governance 4 CHAIRMAN'S REPORT

Divisions of roles and responsibilities

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:

Chairman

Christopher Humphrey is the Non-Executive Chairman and he
is responsible for managing the Board and ensuring it works
effectively. The below are the roles and responsibilities of the
Chairman for the financial year ended 31 March 2019.

- 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 Nomination Committee and facilitating

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

- Ensuring that there is effective communication by

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

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 Nomination Committee.

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

Ensure that between them, the Directors have the
necessary up-to-date experience, skills and capabilities.

Chief Executive

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.

- 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, comply 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 Nomination Committee, and other
members of the Board, particularly in respect of Executive
Directors

Leading the communication programme with Shareholders

- Promoting and conducting the affairs of the Group

with the highest standards of integrity and corporate
governance.

The Board considers its current composition and overall size
to be both appropriate and suitable with the adequate skills,
experience and capabilities to make informed decisions,
evaluate performance and constructively challenge strategy. The
biographies of each of the Directors can be found on page 28.

All members of the Board attend seminars and regulatory
events to ensure that their knowledge is up to date and
relevant. Where the Board considers it does not possess the
necessary expertise or experience it will engage the services of
professional advisors. The Board considers that the three non-
Executive Directors, including the Chairman, are independent.

During the year, the Board commenced a search for an
additional Non-Executive Director. The search will continue
into the new financial year, to ensure the additional Non-
Executive Director has the appropriate industry experience.
Whilst the Directors do not see a gap in experience with the
current Directors, it is felt as the Group continues to grow and
evolve that a Non-Executive Director with industry experience
could add value.

The Nomination Committee, through a thorough evaluation
of the skills, knowledge and experience of a proposed new
Director, makes recommendations to the Board who then
make the final decision on the appointment of a new Director.

Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.

Following the changes of the Board in the financial year ended
31 March 2018 and as explained in the Annual Report 2018,
during the financial year ended 31 March 2019, the Chairman
led a formal review of the Board, its Committees and each
Director. The performance evaluation of the Chairman was
undertaken by the Chair of the Remuneration Committee,
David Coghlan. The review centred on the following areas

The report on the Nomination Committee is set out below and
the reports of the Audit Committee and the Remuneration
Committee are set out on page 34 and page 37 respectively.

The role and responsibilities of the Chairman, Chief Executive
and other Directors have been set out under principle 5 on
pages 30 to 32 of the Annual Report.

Communicate how the Group is governed and is
performing by maintaining a dialogue with Shareholders
and other relevant stakeholders.

the Board’s role and scope of its authority, how it is led
by the Chairman, the frequency and time allotted to the
Board meetings and their agendas

the Committees' terms of reference, leadership, the
frequency and time allotted to the Committee meetings
and their agendas

the Directors' feedback was free-ranging and unstructured
with guidance on areas to consider.

Promote a corporate culture that is based on ethical
values and behaviours.

Our Corporate Responsibility section on pages 24 to 27 set
out the importance of business ethics to Eckoh and the way
we do business. The employee engagement section on pages
25 to 26 demonstrates the value we place on our employees
and the culture we drive in the UK and US business.

Maintain governance structures and processes that are
fit for purpose and support good decision-making by the
Board.

The Board provides the strategic leadership for the Company
and ensures that the business operates within the Corporate
Governance framework that has been adopted. Its prime
purpose is to ensure the delivery of Shareholder value in the
long term by setting the business model and defining the
strategic goals to achieve this.

The Board is supported by a Remuneration Committee, Audit
Committee and Nomination Committee. Each Committee has
formally delegated duties and responsibilities and the terms
of reference for the Committees are reviewed annually. The
Committee Chair is responsible for reporting, throughout
the year, to the Board any recommendations or issues which
require further consideration by the Board. The Board reviews
annually the list of matters that are reserved for the Board.

The Company is committed to open communication with
all its Shareholders. Communication with Shareholders is
predominantly through the Annual Report and AGM.
The last AGM results can be found on the Group’s website.
Other communications are in the form of full-year and
half-year announcements, periodic market announcements
(as appropriate) one-to-one meetings and investor roadshows.
The Remuneration Committee report is included on pages
37 to 42.

The Group’s website www.eckoh.com is regularly updated.
Annual Reports and Notices of Meetings can be found on the
Group website.

Committees of the Board

Nomination Committee

The Nomination Committee currently comprises David
Coghlan, Guy Millward and Christopher Humphrey, who is the
Committee Chairman. It met once during the period and the
details of meeting attendance are set out on page 31.

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.

ANNUAL REPORT 201934

Corporate Governance 4

Audit Committee Report

Dear Shareholder,

On behalf of the Audit Committee, I am pleased to present
our report for the year ended 31 March 2019. In the year
under review, the Audit Committee recommended to
the Board that the Company undertook a review of the
auditors. An audit tender process was completed and
PricewaterhouseCoopers LLP were appointed as auditors on
19 November 2019 in place of KPMG LLP. The Committee has
considered the integrity of the Group’s financial reporting and
provided advice to the Board that the 2019 Annual Report and
Financial Statements, 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. 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;

• 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 four
times during the year. The details of meeting attendance are
set out on page 31.

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
12 June 2019

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

Topic:

Actions:

Financial
reporting

Review of the preliminary and interim
results announcement and the annual report

Review of significant accounting issues
(as reported below)

On-going review and monitoring
of the impact of IFRS 15: Revenue
from Contracts with Customers

Review of the impact of the implementation
of IFRS 16: Leases

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 2019 Financial Statements, and how
these were addressed, were:

Contract revenue & IFRS 15 transition

• The business has transitioned to IFRS 15: Revenue from
Contracts with Customers with effect from 1 April
2018 and controls are in place to ensure revenue is only
recognised for product solutions such as the hosted
Customer Contact solutions and Secure Payment solutions,
which are in effect a hosted solution, when the client
accepts the service. The provision of the solution is
deemed to be one single performance obligation, which
includes the hardware revenue, the implementation fees
and ongoing support and maintenance revenue which
are spread evenly over the term of the contract once the
solution has been delivered to the client. 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.

Goodwill and intangible assets impairment

• The Group has goodwill and intangible assets as a result

of the acquisitions for the Veritape, PSS and Klick2Contact
(K2C) businesses over the last few years. Since the K2C
Management earn-out period finished in July 2018
Management have been integrating K2C into the Eckoh
UK business. On an annual basis the Group undertakes
an impairment review of goodwill and intangible assets
for each cash generating unit (CGU) using cashflow
projections. Following the integration of K2C into Eckoh
UK, the CGUs are Eckoh UK and Eckoh US.

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.

Impact of IFRS 16: Leases

The Group will apply IFRS 16: Leases from its mandatory
adoption date of 1 April 2019. Right of use assets will be
measured on transition as if the new rules had always applied.
The Group has taken advantage of the practical expedients
available for transition under the standard.

External audit

An annual review of the effectiveness of the external audit is
undertaken by the Committee. KPMG LLP had been external
auditors for the Group since year ended 31 March 2012, as a
result of the review of the effectiveness of auditors in 2018,
the Audit Committee recommended to the Board that an
audit tender process was undertaken in the financial year
ended 31 March 2019.

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 2019, the
primary risks identified were: fraud in revenue recognition,
management override of controls, contract revenue and IFRS
15 transition and goodwill & intangible assets and investments
(company only) impairment. 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
auditors 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 financial year ended 31 March 2019 and
the quality of the audit process was assessed to be good.

ANNUAL REPORT 201936

Corporate Governance 4 AUDIT COMMITTEE REPORT

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
PricewaterhouseCoopers LLP as external auditors for the year
ending 31 March 2020. There are no contractual obligations
restricting the Committee’s choice of auditors. A resolution
for appointment of the auditors 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 auditors in order to satisfy itself that auditors'
independence is safeguarded. There were no non-audit fees
paid to PricewaterhouseCoopers LLP in the year ended 31
March 2019.

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 auditors 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
Shareholders' 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
12 June 2019

Remuneration Committee Report

Dear Shareholder,

On behalf of the Remuneration Committee I am pleased to
present our Remuneration Report for the financial year ended
31 March 2019, 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 2019;

• The Remuneration Report, which sets out the Company's
Remuneration Policy for Executive Directors and the
Annual Remuneration Report detailing remuneration paid
to Directors in the year ended 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 made PSP awards, in line with the

approved PSP rules, to 30 Senior Management based in
the UK and US on 23 July 2018 and 26 September 2018,
as set out in the formal report below.

• The Committee approved an increase in the Chief

Executive Officer’s and Chief Financial Officer’s salaries
with effect from 1 April 2019 of 2% and 3% respectively,
reflecting pay increases within the Group’s workforce and
current market conditions.

• The Base fee of the Chairman and Non-Executive Directors
have also been increased by 2% from 1 June 2019. In
addition, the Committee Chair fee, which was introduced
last year has been increased by 2%, with effect from
1 June 2019.

• Bonus payments were made for the Executive Directors
and Senior Management for the financial year ended
31 March 2019 and for the Executive Directors are set
out on page 39. Last year no bonus was paid to Senior
Management or Executive Directors. Bonus payments for
staff members were accrued at an average of 5% (FY18:
3%) of salary.

• The Committee approved the structure of the 2020 Annual
Bonus Plan to reward Executive Directors for delivering
against challenging targets for the year ending 31 March
2020. The structure is consistent with the Annual Bonus
Plan for the financial year ended 31 March 2019.

• During the financial year ended 31 March 2019, the

Committee has reviewed the succession plans for Senior
Management. There will be further focus on this area in
the financial year ending 31 March 2020.

The Remuneration Report in respect of last year, which
includes the Remuneration Policy, as set out below, will
be put to the Company’s Shareholders for an advisory
vote at the AGM to be held on Wednesday 18 September
2019. I encourage all Shareholders to vote in favour of this
resolution and I look forward to the opportunity to meet with
Shareholders at the 2019 AGM.

David Coghlan
CHAIRMAN REMUNERATION COMMITTEE
12 June 2019

ANNUAL REPORT 201938

Corporate Governance 4

Annual Report on Remuneration

Remuneration Policy Report

The following is a summary of the Policy that covers remuneration for Executive Directors of the Company.

Purpose and link to strategy Operation

Performance measures

Base salary

Base salary is set at a level to
secure the service of talented
Executive Directors with the
ability to develop and deliver a
growth strategy

Fixed contractual cash amount usually paid
monthly in arrears.

Reviewed annually, with any increases taking
effect from 1 April each year.

Not applicable

This review is dependent on continued
satisfactory performance in the role of an
Executive Director. It also includes a number of
other factors, including experience, development
and delivery of Group strategy and Group
profitability, as well as external market conditions
and pay awards across the Company.

Executive Directors are entitled to a range of
benefits including car allowance, private health
insurance and life assurance.

Executive Directors are entitled to participate on
the same terms as all UK employees in the UK
Share Incentive Plan, the maximum contribution
being £1,800 pa.

Not applicable

Paid annually and based on performance in the
relevant financial year.

Measures and targets for the annual bonus are set
annually by the Committee.

Award levels for Executive Directors are up
to 50% of the Executive’s Base salary. The
performance measures are reviewed annually
and the Committee ensures that performance
measures remain aligned to the Company’s
business objectives and strategic priorities for the
year.

Under the PSP, awards are made over a fixed
number of shares, which will vest based on the
achievement of performance conditions over
a performance period of approx. 5 years from
the 2017 AGM and will end 30 days after the
announcement of the 2022 Full Year Financial
Results.

Currently, up to 50% of the annual bonus is based
on the achievement of annual targets set against
the Group’s adjusted earnings before Interest, tax,
depreciation and amortisation. The remainder are
based on the new business target in the year and
the achievement of annual personal objectives.

The Committee reserves the right to vary these
properties and also the measures annually to ensure
the annual bonus remains appropriate and challenging.

Targets are measured over a one-year period.
Payments range between 0% and 50% of base
salary for threshold and maximum performance.

• 25% vesting for compound growth

in TSR of 10%

• 100% vesting for compound growth

in TSR of 25% pa

• Straight line vesting for intermediate performance
between threshold and maximum performance.

• Below threshold none of the award will vest.

Usually paid monthly in arrears.

Not applicable

Executive Directors may receive a contribution of
10% of base salary into the Company’s Defined
Contribution Plan, a personal pension arrangement
and/or a payment as a cash allowance.

Benefits

To provide Executive Directors
with ancillary benefits to assist
them in carrying out their
duties effectively.

Annual
Bonus

To provide a material incentive
to drive Executive Directors to
deliver stretching strategic and
financial performance and to
grow long-term sustainable
Shareholder value.

Performance
Share Plan
(“PSP”)

Pension
contribution

To provide a long-term
performance and retention
incentive for the Executive
Directors involving the
Company’s shares. To link long-
term rewards to the creation
of long-term sustainable
Shareholder value by way of
delivering on the Group’s
agreed strategic objectives.

To provide a benefit comparable
with market rates, helping with
the recruitment and retention
of talented Executive Directors
able to deliver a long-term
growth strategy.

Annual Report on Remuneration

The following section provides details of how Eckoh’s
Remuneration Policy was implemented during the financial
year ended 31 March 2019. 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.

Remuneration Committee membership in 2019/20

The Remuneration Committee currently comprises myself,
Christopher Humphrey and Guy Millward. The committee
members are all independent Directors and are responsible for
developing policy on remuneration for the Executive Directors.

The Remuneration Committee is formally constituted with written
terms of reference which set out the full remit of the Committee.
The Remuneration Committee met four times during the year.
The details of meeting attendance are set out on page 31.

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.

Summary of shareholder voting at the 2018 AGM

The following table shows the results of the Shareholder advisory
vote on Annual Remuneration Report:

For (including discretionary)

Against

Total number
of votes

113,675,727

140,093

% of
votes cast

99.88%

0.12%

Total votes cast (excluding withheld votes)

113,815,820

Total votes withheld

54,586

Total votes cast (including withheld votes)

113,870,406

Directors’ single figure of total remuneration (audited)

The following table sets out the single figure of total remuneration for Directors for the financial year ended 31 March 2019 and 2018:

Base salary/fees

Benefits1

Pension

Annual bonus2

Total

2019

£’000

2018

£’000

2019

£’000

2018

£’000

2019

£’000

2018

£’000

2019

£’000

2018

£’000

2019

£’000

2018

£’000

180

289

160

283

125

600

608

203

288

459

187

313

878

670

Executive Directors

Chrissie Herbert

Adam Moloney

Nik Philpot

Non-Executive Directors

Chris Batterham

David Coghlan

Christopher Humphrey

Guy Millward

Peter Simmonds

Total

Benefits includes car allowance, healthcare cover & death in service

The Executive Directors did not receive any bonus payment in respect of the financial year ended 31 March 2018

Incentive outcomes for the year ended 31 March 2019

Annual bonus in respect of 2018/19 performance

The annual bonus for the Executive Directors and Senior Management for the year ended 31 March 2019 was based on the
achievement of Adjusted Earnings before interest, tax, depreciation and amortisation, new business targets and personal objectives.
Bonus payments were accrued for the Executive Directors at 45% of their base salary (FY18: nil). Bonus payments for staff members
were accrued at an average of 5% (FY18: 3%) of salary.

ANNUAL REPORT 201940

Corporate Governance 4 REMUNERATION COMMITTEE REPORT

Scheme interests awarded in the year ended 31 March 2019

Performance Share Plan (“PSP”) (audited)

In line with the PSP rules, no further awards were made to any recipients of the Initial Awards. The table below provides details of
the Initial Awards made under the PSP on 23 November 2017 to Nik Philpot and Chrissie Herbert in the financial year ended 31
March 2018. 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.

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.

During the financial year ended 31 March 2019, awards were
made to 30 Senior Management in the UK and US. Details of
these awards can be found in note 22.

Chairman and Non-Executive Director fees

The Chairman and Non-Executive Directors were paid the
following fees in the financial year ending 31 March 2019:

Role

Chairman

Non-Executive Director

Chairman of a Committee

2019 Annual fee

£61k

£31k

£4k

Fees for the Chairman, Non-Executive Directors and
Committee Chairmen are reviewed annually. As a result of
the review the fees for the Chairman and Non-Executive
Directors' base salaries will increase by 2% from 1 June
2019. In addition, a Committee Chairman fee for the Audit
Committee and Remuneration Committee of £5,000 per
annum was introduced with effect from 1 June 2018, this will
increase by 2% from 1 June 2019.

Payments to past Directors (audited)

Directors’ shareholdings

In the financial year ended 31 March 2019, there were no
payments made to past Directors.

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.

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 2019:

31 March 2019
Ordinary Shares of
0.25 pence each

1 April 2018
Ordinary Shares of
0.25 pence each

Nik Philpot1

Chrissie Herbert

Christopher Humphrey

6,976,285

20,000

400,000

6,926,285

20,000

400,000

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:

Note

At 1 April
2018
(number)

Granted
in year
(number)

Forfeited
in year
(number)

Exercised
in year
(number)

At 31 March
2019
(number)

Exercise
price
(pence)

Earliest
date for
exercise

Latest
date for
exercise

Nik Philpot

Chrissie Herbert

3,750,000

500,000

2,250,000

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 2017 Eckoh plc Performance Share Plan (“PSP”), as approved at the 2017 AGM.

2. 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.

31 March 2019

1 April 2018

Ordinary Shares of

0.25 pence each

Nik Philpot1

Chrissie Herbert

Christopher Humphrey

6,976,285

20,000

400,000

6,926,285

20,000

400,000

ANNUAL REPORT 201942

Corporate Governance 4 REMUNERATION COMMITTEE REPORT

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 and 2019, Chrissie Herbert participates in the UK scheme and the details are shown below:

Number of
Partnership
Shares
purchased
at 31 March
2018

Number of
Matching
Shares
purchased
at 31 March
2018

Dividend
Shares1
acquired at
31 March
2018

Total
Shares at
31 March
2018

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
2019

Chrissie
Herbert

1,930

3,860

5,790

6,714

13,428

189

Nov 20

20,331

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 £0.3725 to
£0.3800).

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. Matching Shares will be released as each six-month
Partnership Agreement matures, 3.5 years after commencing.

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 Committee's appointed
remuneration advisor during the financial year ended 31
March 2019. During the year the level of fees paid to
remuneration advisors totalled £6k. (2018: £32k) and this
fee covered advice on the long-term Performance Share Plan
proposed at the 2017 AGM and the granting of the Awards
to Senior Management. The Committee is satisfied that the
advice it received from FIT during the year was objective and
independent.

David Coghlan
CHAIRMAN REMUNERATION
COMMITTEE
12 June 2019

Directors' Report

The Directors present the Directors’ Report,
together with the audited Financial Statements
for the year ended 31 March 2019.

Strategic Report

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.

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 on pages 24 to 27.

Corporate Governance

Share capital

The Company has only Ordinary Shares of 0.25 pence nominal
value in issue along with 1,290,037 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 2019.

The subsidiary undertakings are listed in note 14.

Substantial shareholdings

As at 31 March 2019, 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:

The Group’s report on Corporate Governance is on pages 28
to 45 and forms part of this Directors’ Report.

Name of holder

Results for the period

The consolidated income statement, statement of financial
position and cash flow statement for the year ended 31 March
2019 are set out on pages 51 to 54. An analysis of risk is set
out on pages 12 & 13 and of risk management on page 61.
The statement of financial position and cash flow statement of
the holding Company for the year ended 31 March 2019 are
set out on page 80. Since 1 April 2019, there have been no
material events likely to impact the future development of the
Company.

Directors

The Directors who held office at 31 March 2019 and up to the
date of this report are set out on pages 28 along with their
biographies and photographs.

During the year and up to the date of this report there were
no changes to the Directors who held office.

Details of the Directors, who will be standing for reappointment
at the forthcoming AGM to be held on 18 September 2019
are detailed on page 30. The remuneration of the Directors
including their respective shareholdings in the Company is set
out in the Remuneration Report on pages 37 to 42.

No.of ordinary
shares/voting
rights

% of issued
capital/voting
rights

Hargreave Hale

Kestral Partners

Herald Investment
Management

Cavendish Asset
Management

Chelverton Asset
Management

Blackrock Investment
Management

Close Brothers

AXA Investment
Mangers UK

Hargreaves Lansdown
Asset Management

River & Mercantile
Asset Management

42,118,141

37,397,644

17,314,890

11,239,061

10,500,000

10,336,068

10,184,234

8,025,613

7,906,986

7,678,284

16.60

14.74

6.82

4.43

4.14

4.07

4.01

3.16

3.12

3.03

The Company’s issued share capital as at 31 March 2019 is set
out in note 19.

ANNUAL REPORT 201944

Corporate Governance 4 DIRECTORS' REPORT

Committees of the Board

Political donations

The Board has established Audit, Nomination 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.

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 1,290,037 Ordinary Shares in treasury;

• There exist no securities carrying special rights with regard

to the control of the Company;

• Details of the substantial Shareholders and their

shareholdings in the Company are listed on page 41;

• 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.

Conflicts of interest

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 24.

The Group made no political donations during the year
(2018: £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.

Going concern

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 auditors

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
auditors are 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 auditors are aware of that information.

Annual General Meeting (AGM)

The 2019 AGM will be held at 11:00 on 18 September 2019.

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 0.61p (2018: 0.55p) per ordinary share
amounting to £1.5m (2018: £1.4 million) to be paid on
25 October 2019. This recommendation will be put to
the Shareholders at the Annual General Meeting.

Independent Auditors

PricewaterhouseCoopers LLP have expressed their
willingness to continue as the Company’s auditors.
As outlined in the Audit Committee report on page 34,
resolutions proposing their appointment and to authorise
their remuneration will be proposed at the 2019 AGM.

Statement of Directors’ responsibilities in respect
of the Financial Statements.

The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law
and regulations.

Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the
Directors have prepared the Group Financial Statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and Company
Financial Statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law). Under company law the
Directors must not approve the Financial Statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and Company and of the profit or loss
of the Group and Company for that period. In preparing the
Financial Statements, the Directors are required to:

•

select suitable accounting policies and then apply them
consistently;

state whether applicable IFRSs as adopted by the European
Union have been followed for the group financial
statements and United Kingdom Accounting Standards,
comprising FRS 101, have been followed for the company
financial statements, subject to any material departures
disclosed and explained in the financial statements;

• make judgements and accounting estimates that are

reasonable and prudent; and

• prepare the financial statements on the going concern

basis unless it is inappropriate to presume that the group
and company will continue in business.

The Directors are also responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
and enable them to ensure that the Financial Statements
comply with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

Directors' confirmations

The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group and Company’s position and
performance, business model and strategy.

By order of the Board

Chrissie Herbert
COMPANY SECRETARY
12 June 2019

ANNUAL REPORT 201946
46

Corporate Governance 4 INDEPENDENT AUDITORS' REPORT

Eckoh plc Annual Report 2019

Independent auditors’ report to the members of Eckoh plc

Report on the audit of the financial statements
Opinion

In our opinion:

(cid:127)

(cid:127) Eckoh plc’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Company’s affairs as at 31 March 2019 and of the Group’s profit and cash flows
for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and
applicable law); and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

(cid:127)

We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”),
which comprise: the consolidated and Company statements of financial position, the consolidated statement of total
comprehensive income, the consolidated and Company statements of changes in equity, the consolidated statement of cash flows;
and the notes to the financial statements, which include a description of the significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Independence

We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.

Our audit approach

Overview

(cid:127) Overall Group materiality: £214,700 (2018: £115,000), based on 0.75% of total

revenue.

(cid:127) Overall Company materiality: £150,000 (2018: £100,000), based on 1% of total

assets.

(cid:127) We conducted full scope audit work over the operations of Eckoh UK and Eckoh

(cid:127)
(cid:127)

US due to their financial significance to the group.
In addition, we performed full scope audits of Eckoh plc (“the Company”).
The reporting entities subject to audit procedures accounted for 100% of both the
Group's revenue and profit for 2019 and 71% of net assets at 31 March 2019.

(cid:127) Contract revenue and IFRS 15 transition.
(cid:127)

Impairment of goodwill and intangible assets.

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.

As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there
was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

Eckoh plc Annual Report 2019

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, 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, and any comments we make on the
results of our procedures thereon, 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. This is not a complete list of all risks identified by
our audit.

Key audit matter

How our audit addressed the key audit matter

Contract revenue and IFRS 15 transition
The Group transitioned to IFRS 15 : revenue from contracts
with customers, in the financial year ended 31 March 2019.
The approach to revenue recognition as set out under IFRS 15
is complex and can be judgemental especially where contracts
with customers have variable consideration. Due to its
expected impact on the Group, we deem the adoption of IFRS
15 as a key audit matter.

Our procedures included the following:

(cid:127)

Understanding how management performed their impact
assessment over the transition to IFRS 15, and the key
judgments involved.
For a sample of customer contracts, determined whether the
correct judgement was exercised in recognising revenue
according to the five-step revenue recognition approach set
out by IFRS 15.
Recalculating revenue recognition schedules to confirm the
accuracy of these schedules.
For a sample of customer contracts with deferred revenue and
costs at the year-end, we assessed management’s judgements
used in estimating the amounts deferred.

Based on procedures performed, we noted no material uncorrected
issues.

Impairment of goodwill and intangible assets
The Group has goodwill and intangible assets of £7.5m which
is significant in the context of the overall balance sheet of the
Group. We focussed on this area because estimates
underlying the recoverability of goodwill and intangible assets
are subject to high estimation uncertainity. In particular, we
focussed our audit effort on the "value-in-use" calculations
supporting the valuation of goodwill and intangible assets.
The directors’ assessment of the "value-in-use" of the Group's
cash generating units (CGU's) involves judgements about the
future results of the business, particularly the assumptions
around growth rates and the discount rates applied to future
cash flow forecasts, where there is a higher degree of
sensitivity.

Our procedures included the following:

(cid:127)

(cid:127)
(cid:127)

(cid:127)

Understanding the business processes and controls related to
the impairment of goodwill and intangible assets.
Assessing the reasonableness of the impairment model and
understanding management's process and judgements utilised
for developing estimates and assumptions. This included
testing of the underlying "value-in-use" calculation.
Considering any contrary evidence to the assumptions used.
Performing a sensitivity analysis based on reasonably possible
outcomes.

Checking the mathematical accuracy of the calculation.

Based on procedures performed, we noted no material issues.

We determined that there were no key audit matters applicable to the Company to communicate in our report.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls,
and the industry in which they operate.

Eckoh plc has both its corporate and operating headquarters in London, United Kingdom. The audit engagement team is aligned to
Eckoh plc’s geographical organization and largely reflects the management structure. As the Eckoh plc corporate headquarters are
based in London, the Group audit engagement team is also based in London with no support required from any auditors from
other territories.

The largest trading entity is Eckoh UK. This entity, along with Eckoh US and the Company were the only components requiring an
audit of its complete financial information for the purposes of the consolidated Group audit.

In total the audit work performed accounted for 100% of both consolidated Group revenue and profit and 71% of consolidated net
assets.

ANNUAL REPORT 2019

Corporate Governance 4 INDEPENDENT AUDITORS' REPORT

Eckoh plc Annual Report 2019

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements

Company financial statements

Overall materiality

£214,700 (2018: £115,000).

£150,000 (2018: £100,000).

How we determined it

0.75% of total revenue.

1% of total assets.

Rationale for benchmark
applied

We have applied this benchmark as a
generally accepted auditing practice for
Group’s at the growth stage and based
on what management deems to be a key
performance indicator.

We have applied this benchmark as a generally
accepted auditing practice for non-profit oriented
holding entities. We believe that total assets
provides us with a consistent year on year basis for
determining materiality.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was between "£130,000 and "£150,000".

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £10,700
(Group audit) (2018: £5,750) and £7,500 (Company audit) (2018: £5,750) as well as misstatements below those amounts that, in
our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

ISAs (UK) require us to report to you when:

(cid:127)

the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Group’s and Company’s ability to continue to adopt the going concern basis of accounting for a period of
at least twelve months from the date when the financial statements are authorised for issue.

We have nothing to report in respect of the above matters.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and
Company’s ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the
European Union are not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade, customers,
suppliers and the wider economy.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement,
we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report based on these
responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to
report certain opinions and matters as described below.

Strategic Report and Directors’ Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the year ended 31 March 2019 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.

Eckoh plc Annual Report 2019

In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of Directors' responsibilities in respect of the financial statements set out on page 45, the
directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view. The directors are also 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.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the 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 the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but
to do so.

Auditors’ responsibilities for the audit of the financial statements

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 an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a 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 the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

(cid:127) we have not received all the information and explanations we require for our audit; or
(cid:127)

adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the Company financial statements are not in agreement with the accounting records and returns.

(cid:127)
(cid:127)

We have no exceptions to report arising from this responsibility.

Other voluntary reporting

Directors’ remuneration

The Company voluntarily prepares a Directors’ Remuneration Report in accordance with the provisions of the Companies Act
2006. The directors requested that we audit the part of the Directors’ Remuneration Report specified by the Companies Act 2006
to be audited as if the Company were a quoted Company.

In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.

Matthew Mullins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Uxbridge
12 June 2019

ANNUAL REPORT 201950

Financial Statements

50 Primary Statements
55 Basis of Preparation and notes to the Financial Statements
80 Company Financial Statements

Consolidated statement of total comprehensive income

for the year ended 31 March 2019

Continuing operations

Revenue

Cost of sales

Gross profit

Administrative expenses

Profit from operating activities

Adjusted operating profit

Amortisation of acquired intangible assets

Legal fees and settlement costs

Expenses relating to share option schemes

Profit from operating activities

Finance charges

Change in contingent consideration

Finance income

Profit before taxation

Taxation

Profit for the financial 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

2019

£’000

2018
Restated
£'000

Notes

28,719

(4,614)

24,105

27,237

(3,747)

23,490

(22,911)

(23,297)

1,194

3,086

193

3,910

(1,325)

(2,329)

(567)

1,194

(77)

1,154

(209)

945

580

1,525

2019

pence

0.37

0.36

(595)

(793)

193

(118)

975

1,084

269

1,353

(157)

1,196

2018
Restated

pence

0.55

0.52

ANNUAL REPORT 2019
52

Financial Statements 5 PRIMARY STATEMENTS

Consolidated statement of financial position

as at 31 March 2019

Assets

Non-current assets

Intangible assets

Tangible assets

Deferred tax assets

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 liabilities

Net assets

Shareholders’ equity

Called up share capital

Share premium

ESOP Reserve

Capital redemption reserve

Merger reserve

Currency reserve

Retained earnings

Total Shareholders’ equity

Notes

2019

£’000

7,464

4,118

4,081

15,663

458

13,209

11,582

25,249

2018
Restated
£’000

1 Apr 2017
Restated
£’000

7,959

4,703

4,280

16,942

724

11,943

8,164

20,831

10,150

5,023

4,369

19,542

713

12,279

6,083

19,075

40,912

37,773

38,617

(19,983)

(1,300)

(21,283)

(15,891)

(1,300)

(17,191)

(14,512)

(1,300)

(15,812)

(1,950)

(495)

(2,445)

17,184

635

2,659

(393)

198

2,697

896

10,492

17,184

(3,250)

(674)

(3,924)

16,658

631

2,640

(238)

198

2,697

316

10,414

16,658

(4,550)

(975)

(1,383)

(6,908)

15,897

611

2,660

(83)

198

2,697

473

9,341

15,897

The financial statements were approved by the Board of Directors on 12 June 2019 and signed on its behalf by:

Chrissie Herbert
CHIEF FINANCIAL OFFICER

Company Registration Number 3435822

Consolidated statement of changes in equity

for the year ended 31 March 2019

Share
premium

ESOP
reserve

Capital
redemption
reserve

Merger
reserve

Currency
reserve

Retained
earnings

Total
Shareholders'
equity

£’000

2,640

(238)

198

2,697

316

10,414

Called
up share
capital

£’000

631

Balance at 1 April 2018

Total comprehensive income

Profit for the financial year

Foreign currency translation difference

Total comprehensive income

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 2019

(155)

635

2,659

(393)

198

2,697

896

10,492

17,184

for the year ended 31 March 2018

Called
up share
capital

Share
premium

ESOP
reserve

Capital
redemption
reserve

Merger
reserve

Currency
reserve

Retained
earnings

Total
Shareholders'
equity

£’000

2,660

(83)

198

2,697

473

13,172

(3,831)

2,660

(83)

198

2,697

473

9,341

Balance at 1 April 2017 (as previously reported)

Restatement (note 1)

Balance at 1 April 2017 (restated)1

Total comprehensive income

Profit for the financial year

Foreign currency translation difference

Total comprehensive income (restated)

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

611

(20)

(156)

(155)

Balance at 31 March 2018 (restated)

631

2,640

(238)

198

2,697

316

10,414

16,658

1. Restated due to the implementation of IFRS 15

£’000

16,658

945

580

1,525

580

945

(1,392)

(3)

567

(39)

(867)

(3)

(155)

567

(39)

(999)

£’000

19,728

(3,831)

15,897

1,353

(157)

1,196

1,353

(157)

(1,209)

(49)

554

424

(280)

(48)

(156)

554

424

(435)

ANNUAL REPORT 2019
54

Financial Statements 5 PRIMARY STATEMENTS

Consolidated statement of cash flows

for the year ended 31 March 2019

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

Purchase of intangible assets

Proceeds from sale of intangible assets

Interest paid

Interest received

Net cash utilised in investing activities

Cash flows from financing activities

Dividends paid

Repayment of borrowings

Purchase of own shares

Issue of shares

Shares acquired/sold by Employee Benefit Trust

Net cash generated in financing activities

Increase in cash and cash equivalents

Cash and cash equivalents at the start of the period

Cash and cash equivalents at the end of the period

The notes on pages 50 to 86 form an integral part of these financial statements.

Notes

2019

£'000

7,488

(227)

7,261

(541)

(435)

(77)

2018
Restated
£'000

5,829

5,841

(646)

(323)

(118)

(1,016)

(1,047)

(1,392)

(1,300)

(155)

(3)

(2,827)

3,418

8,164

11,582

(1,209)

(1,300)

(156)

(48)

(2,713)

2,081

6,083

8,164

Notes to the Financial Statements
for the year ended 31 March 2019

GENERAL INFORMATION

Eckoh plc is a public limited Company and is incorporated
and domiciled in England and Wales under the Companies
Act 2006. The address of the Company’s registered office is
Telford House, Corner Hall, Hemel Hempstead, HP3 9HN.

Eckoh plc is a global provider of Secure Payment products
and Customer Contact solutions.

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 2019 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 2020

•

IFRS 16 Leases, the impact is material and is set out below

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 16 Leases -
effective for the year ending 31 March 2020

IFRS 16 “Leases” (IFRS 16) was issued in January 2016.
It requires lessees to recognise most leases on the balance
sheet, as the distinction between operating and finance
leases is removed. Currently, under IAS 17, leases categorised
as operating leases are not recognised on the balance sheet.
Under the new standard, a right-of-use asset and a lease
liability are recognised. The only exceptions are for short-term
leases and leases of low-value assets.

As at the reporting date, the Group has non-cancellable
operating lease commitments of £0.6 million (note 25
Operating lease commitments). Of these commitments, an
immaterial amount relates to short-term leases and leases of
low-value assets which will continue to be expensed in the
Income Statement. For the remaining lease commitments,
the Group expects to recognise right-of-use assets of
approximately £0.8 million and lease liabilities of £0.8 million
on 1 April 2019. The expected impact to operating profit
is an increase of approximately £0.4 million but no overall
effect on the profit before tax.

The Group will apply the standard from its mandatory
adoption date of 1 April 2019. Right of use assets will
be measured on transition as if the new rules had always
applied. The Group has taken advantage of the practical
expedients available for transition under the standard.

Other amended standards and interpretations are not
expected to have a significant impact on the Group’s
consolidated financial statements.

These Financial Statements have been prepared in accordance
with the accounting policies set out below which are based
on the recognition and measurement principles of IFRS in
issue as adopted by the European Union (“EU”) and effective
at 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.

ANNUAL REPORT 201956

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

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

Changes in accounting policy

As a result of the changes in the entity’s accounting policies,
prior year financial statements had to be restated. IFRS 9
Financial Instruments was implemented without restating
comparative information, on the grounds of materiality.
IFRS 15 Revenue from Contracts with Customers was adopted
and the prior year financial statements have been restated.
Note 28 sets out the adjustments recognised for each
individual line item for the year ended 31 March 2018.

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:

Contract revenue & IFRS 15 transition

The business has transitioned to IFRS 15: Revenue from
Contracts with Customers with effect from 1 April 2018.
Revenue is recognised for product solutions such as the hosted
Customer Contact solutions and Secure Payment solutions,
which are in effect a hosted solution, when the client goes
live with the service. The provision of the solution is deemed
to be one single performance obligation and the hardware
revenue, the implementation fees and ongoing support and
maintenance revenue are spread evenly over the term of the
contract once the solution has been delivered to the client.
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.

Goodwill and Intangible assets impairment

The Group has goodwill and intangible assets as a result of
the acquisitions for the Veritape, PSS and Klick2Contact (K2C)
businesses over the last few years. Since the K2C Management
earn-out period finished in July 2018 Management have been
integrating K2C into the Eckoh UK business. On an annual
basis the Group undertakes an impairment review of goodwill
and intangible assets for each cash generating unit (CGU)
using cashflow projections. Following the integration of K2C
into Eckoh UK, the CGU’s are Eckoh UK and Eckoh US.

Share based payments

The fair value of share-based payments is estimated using the
methods detailed in note 22 and using certain assumptions.
The Monte Carlo valuation model has been used in
determining the fair value of share-based payments. 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 £143k. An increase in risk free rate of 1% would
result in an increase in the charge of £6k.

Deferred taxation

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 2019, the Group
recognised deferred tax assets of £4.1 million, including £2.4
million in respect of tax losses and tax credits. Deferred tax
assets amounting to £5.9 million were not recognised in
respect of trading losses and £0.6 million in respect of capital
losses of £5.3 million which 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.

The Group measures goodwill at the acquisition date as:

•

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 re-measured 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.

(d) Transactions eliminated on consolidation

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.

Impairment of non-financial assets

An impairment loss is recognised in the income statement for
the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher
of the asset’s fair value less costs to sell, and the value-in-use
based on an internal discounted cash flow evaluation. For the
purpose of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash
flows. All assets are subsequently reassessed for indications
that an impairment loss previously recognised may no longer
exist.

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.

ANNUAL REPORT 2019
58

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

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 6 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.

INVENTORIES

Inventories are valued at the lower of cost and net realisable
value. The cost of finished goods and work in progress
comprises design costs, direct labour and other direct costs.
Net realisable value is the estimated selling price in the
ordinary course of business less applicable selling expenses.

TRADE AND OTHER RECEIVABLES

Trade and other receivables are recognised initially at fair
value, and subsequently at amortised cost using the effective
interest rate method, less provision for impairment. The Group
applies the IFRS 9 simplified approach to measure expected
credit losses which uses a lifetime expected loss allowance
for all trade receivables. To measure the expected credit
losses, trade receivables have been grouped based on shared
credit risk characteristics and the number of days past due.
Trade receivables are written off when there is no reasonable
expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of
a debtor to engage in a repayment plan with the Group and a
failure to make contractual payments for an extended period.

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.

DIVIDENDS

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

FOREIGN CURRENCY TRANSACTIONS

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 Group does not enter into forward contracts to hedge
forecast transactions.

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.
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.

ANNUAL REPORT 201960

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

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 Monte
Carlo valuation model, taking into account the terms and
conditions upon which the grants were made. The amount
recognised as an expense is adjusted to reflect the actual number
of share options that vest except where forfeiture is only due to
share prices not achieving the threshold of vesting.

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

REVENUE RECOGNITION

The Group recognises revenue in accordance with IFRS 15:
Revenue from Contracts with Customers. 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. Revenue represents the fair value of the sale of
goods and services and after eliminating sales within the Group
and excluding value added tax or overseas sales taxes.
The following summarises the method of recognising revenue
for the solutions and products delivered by the Group.

(i) Secure Payment solutions and hosted services

Due to the unique nature of the Secure Payments solution,
the delivery and on-going support and maintenance
of the Secure Payments solution under IFRS 15 is one
single performance obligation, therefore 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 on-site Secure Payments solution will be
recognised evenly over the period of the contract from
the point of delivery of the solution to the client. Costs
directly attributable to the delivery of the hardware, the
implementation fees and the sales commission costs will be
capitalised as ‘costs to fulfil a contract’ and released over the
contract term from the point of delivery of the solution to
the client.

In addition to the initial set-up costs, there are on-going
support and maintenance and running costs of the service.
In the UK the revenue is typically recognised on a transaction
basis, where the business has determined that users have
accessed its services via a telephone carrier network and/or
the Group’s telecommunications call processing equipment
connected to that network. 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.

(ii) Third party support services

Revenue is earnt from providing expert Third Party Support
for contact centre infrastructure and is recognised on a pro-
rated basis over the period of the contract.

(iii) Coral product

Revenue arises from the sale of licences, implementation
fees and on-going support and maintenance. Under IFRS
15, each component is defined as a performance obligation.
Revenue is recognised for sales of licences when they are
delivered to the client; revenue from implementation fees
is recognised by 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
the implementation; and revenue for on-going support and
maintenance is recognised each month.

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.

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 below.

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

TAXATION

LIQUIDITY RISK

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.

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 21.

INTEREST RATE RISK

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

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

(27)

ANNUAL REPORT 2019
62

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

FOREIGN CURRENCY RISK

FINANCIAL ASSETS

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 & 13.

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.

Current financial assets

Trade receivables (note 16)

Other receivables (note 16)

Cash and cash equivalents (note 17)

Total financial assets

2019
£’000

4,340

525

11,582

16,447

2018
£’000

5,149

8,164

13,399

FINANCIAL LIABILITIES

All financial liabilities held by the Group, except for contingent
consideration, are measured at amortised cost and comprise
trade payables of £1,404,000 (2018: £2,958,000) and other
payables of £108,000 (2018: £72,000). 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

2019
£’000

1,950

2018
£’000

3,250

Current financial liabilities

Current portion of secured bank loans

1,300

Terms and debt repayment schedule

Nominal
interest
rate

1.25% plus
LIBOR.

Maturity
date

See note
21

Currency

Sterling

Bank
Loan

Carrying
amount
2019
£’000

3,250

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

4. Segment analysis

The segmentation is based on analysing Eckoh UK including PSS UK and K2C, and Eckoh US which includes PSS Inc.

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

Profit from operating activities

Adjusted operating profit

Other expenses1

Operating profit

Interest received

Finance charges

Profit before taxation

Taxation (charge) / credit

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

Eckoh UK

Eckoh US

£’000

19,399

16,527

£’000

9,320

7,578

Total
2019

£’000

28,719

24,105

Total
2018
Restated
£’000

27,237

23,490

(14,140)

(8,771)

(22,911)

(23,297)

2,387

3,621

(1,234)

2,387

(77)

2,347

(65)

2,282

(1,193)

(535)

(658)

(1,193)

(144)

(1,337)

1,194

3,086

(1,892)

1,194

(77)

1,154

(209)

945

193

3,910

(3,717)

193

1,009

(118)

1,084

269

1,353

2,477

3,522

1,863

559

4,340

4,081

5,149

3,790

1,811

1,426

3,237

3,030

443

435

751

942

209

658

541

435

960

1,600

646

323

914

2,654

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

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

In 2018/19 and 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.

The key segments reviewed at Board level are the UK,
including K2C (renamed as Eckoh Omni) and US operations.

ANNUAL REPORT 2019

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

Revenue by geography

United States of America

Rest of the World

Total Revenue

Timing of revenue recognition

Services transferred at a point in time

Services transferred over time

Eckoh UK

Eckoh US

2019

£’000

19,132

267

19,399

£’000

8,997

323

9,320

£’000

19,132

8,997

590

28,719

2018
Restated
£’000

18,152

8,675

410

27,237

Eckoh UK
£’000

17,467

1,932

19,399

Eckoh US
£’000

Total 2019
£’000

8,121

1,199

9,320

25,588

3,131

28,719

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

Receivables, which are included in, ‘Trade and other receivables’

Contract assets which are included in ‘Trade and other receivables’

Contract liabilities which are included in ‘Trade liabilities’

Total Revenue

2019

£’000

464

4,221

(11,666)

(6,981)

2018
Restated
£’000

263

1,943

(8,006)

(5,800)

Payment terms and conditions in client contracts may vary. In some cases, clients pay in advance of the delivery of solutions or services;
in other cases, payment is due as services are performed or in arrears following the delivery of the solutions or services. Differences in
timing between revenue recognition and invoicing result in trade receivables, contract assets, or contract liabilities in the statement of
financial position.

Contract assets result when amounts allocated to distinct performance obligations are recognised when or as control of a good or
service is transferred to the client but invoicing or revenue recognition is contingent on performance of other performance obligations
such as delivery of the solution to the client.

Contract liabilities result from client payments in advance of the satisfaction of the associated performance obligations and relates
primarily to revenue for hardware and implementation fees. Deferred revenue is released as revenue is recognised. Contract assets and
deferred revenues are reported on a contract by contract basis at the end of each reporting period.

Significant changes in the contract assets and contract liabilities balances during the period are as follows:

Contract assets
£’000

31 Mar 2019
Contract liabilities
£’000

Revenue recognised that was included in the contract liability balance at the beginning of the period

Cost of sales recognised that was included in the contract assets balance at the beginning of the period

656

Contract costs

Deferred implementation fees

Deferred hardware costs

3,131

31 Mar
2019
£’000

2,121

2,100

4,221

Contract costs are capitalised as ‘costs to fulfil a contract’ and are amortised when the related revenues are recognised, which are
spread evenly over the length of the contract, typically 3 years.

Transaction price allocated to the remaining performance obligations

The total amount of revenue held in contract liabilities and allocated to unsatisfied performance obligations is £11.7m. We expect to
recognise approximately £4.8m in the next 12 months, £6.8m in 1-3 years and the remainder in 3 years or more in time.

The amount represents our best estimate of contractually committed revenues that are due to be recognised as we satisfy the
contractual performance obligations in these contracts. A large proportion of the Group’s revenue is transactional in nature or is
invoiced monthly for support and maintenance and these are not included in the contract liabilities.

Prior period segment analysis

Segment revenue

Gross profit

Administrative expenses

Operating profit

Adjusted operating profit

Other expenses1

Operating profit / (loss)

Interest received

Finance charges

Profit / (loss) before taxation

Taxation credit / (charge)

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

Eckoh UK

Eckoh US

£’000

17,601

15,113

(13,533)

1,580

4,701

(3,121)

1,580

1,008

(94)

2,494

2,558

2,801

4,035

£’000

8,803

7,683

(9,159)

(1,476)

(880)

(596)

(1,476)

(24)

(1,500)

218

(1,282)

2,175

454

Total
2019

£’000

833

694

Total
2018
Restated
£’000

27,237

23,490

(605)

(23,297)

(13)

173

193

3,910

(3,717)

193

1,009

(118)

1,084

269

1,353

5,149

4,537

1,349

1,608

3,030

590

318

741

2,633

162

646

323

912

2,654

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

Eckoh UK
£’000

17,354

137

110

17,601

Eckoh US
£’000

8,535

268

8,803

K2C
£’000

798

833

2018
£’000

18,152

8,675

410

27,237

ANNUAL REPORT 2019

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

•

5. Profit from operating activities

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

2019
£’000

2018
£’000

12,267

11,324

960

1,600

450

914

2,654

467

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

2019
£’000

2018
£’000

10,578

10,301

(271)

(254)

255

987

151

567

239

381

103

554

12,267

11,324

The Directors’ report on pages 43 to 45 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

2019
Number

2018
Number

110

230

106

214

Legal fees and settlement costs

2019
£’000

2018
£’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 divisions in the acquired PSS Inc business.

The Group has vigorously defended the claim, however, in
the year ended March 2018 we chose 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. Finance income and finance charges

Excluded from the table above are 33 (2018: 38) full time
equivalent casual call centre employees who cost £424,912
(2018: £354,832) in the year.

Interest receivable

Bank interest receivable

7. Auditor remuneration

During the year the Group obtained the following services
from the Group’s auditors at costs as detailed below:

Finance charges

Bank interest payable

Fees payable for the audit of the parent
company and consolidated accounts

Fees payable for other services:

2019
£’000

2018
£’000

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

124

2019
£’000

2018
£’000

2019
£’000

(77)

(118)

•

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

Adjustments in respect of prior periods

Foreign exchange translation

Effect of tax rate change

Total tax charge / (credit)

2019

£’000

2018
Restated
£’000

229

(10)

(8)

(9)

(20)

209

126

(54)

(350)

(271)

(269)

A charge of £39,000 (2018: credit of £424,000) for deferred
taxation in relation to share options was recognised directly in
equity.

The tax charge for the year is different (2018: different)
to the standard rate of corporation tax in the UK of 19%
(2018: 19%). The differences are explained below:

Continuing operations

Profit before taxation

Profit multiplied by rate of corporation tax in the UK of 19% (2018: 19%)

Additional foreign tax suffered

Effect of expenses not deductible for tax purposes

Adjustments in respect of prior periods (current and deferred)

Non-taxable income

Movement on deferred tax not recognised

Effect of tax rate adjustment on closing recognised deferred tax balance

Deferred tax impact of rate change on intangible assets

Tax charge / (credit) for the year

2019

£’000

1,154

2018
Restated
£’000

1,084

220

(15)

(38)

(9)

209

206

(53)

(23)

(90)

(350)

(269)

ANNUAL REPORT 2019
68

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

•

Recognition of deferred tax assets and liabilities

Capital allowances differences

Short term timing differences

Tax losses

Property, plant and equipment

Intangible assets

Tax losses carried forward

Assets

2019

£’000

1,168

2,438

475

4,081

2018
Restated
£’000

1,632

2,088

560

4,280

Liabilities

2019

£’000

2018
Restated
£’000

(385)

(110)

(495)

(113)

(561)

(674)

Net

2019

£’000

1,168

2,438

(110)

3,586

2018
Restated
£’000

1,632

2,088

447

(561)

3,606

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 in OCI

Other

2019

£’000

3,607

(40)

2018
Restated
£’000

2,340

559

2,899

271

424

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

2019

£’000

945

2018
Restated
£’000

1,353

2019
£’000

2018
£’000

253,117

247,424

Balance at 31 March (restated)

3,586

3,607

Denominator

Unrecognised deferred tax assets

There are unprovided deferred taxation assets totalling
£5,855,000 (2018 restated: £5,870,000) in respect of trading
losses and £597,000 (2018: £612,000) in respect of capital
losses of £5,258,000 (2018: £5,258,000) which are restricted.
The trading losses have not been recognised due to the
uncertainty of the profits being available to utilise these.

Weighted average number of shares in
issue in the period

Shares held by employee ownership plan

(1,363)

(805)

Shares held in Employee Benefit Trust

Number of shares used in calculating
basic earnings per share

251,754

246,619

Dilutive effect of share options

10,263

12,384

Number of shares used in calculating
diluted earnings per share

262,017

259,003

•

12. Intangible assets

Group

Cost

Goodwill

Computer
software

Customer
relationships

Intellectual
property

£’000

Trade
name

£’000

Total

£’000

At 1 April 2017 (restated)

5,120

3,951

3,596

7,066

381

20,114

Additions

Reclass of assets

Foreign exchange

Disposals

At 31 March 2018

Additions

Transfer from tangible assets

Foreign exchange

At 31 March 2019

Accumulated amortisation

At 1 April 2017

Reclass of assets

Charge for the year

Foreign exchange

Disposals

At 31 March 2018

Charge for the year

Transfer from tangible assets

Foreign exchange

At 31 March 2019

Carrying amount

At 31 March 2019

At 31 March 2018

(288)

4,832

182

5,014

261

(95)

(7)

(1,531)

2,579

417

225

3,221

3,157

(15)

387

(1,530)

2,005

339

(241)

3,355

271

3,626

819

802

1,621

729

(36)

(5)

7,182

7,236

5,153

1,365

6,533

445

(26)

355

384

100

185

323

(598)

(1,536)

18,303

435

225

518

19,481

9,214

2,654

(1,530)

10,344

1,600

2,376

2,381

6,984

276

12,017

5,014

4,832

845

574

1,245

1,734

252

649

108

170

7,464

7,959

ANNUAL REPORT 2019

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

Within the intangible category of computer software in the
above table is internally developed computer software, as at
31 March 2019 this had a net book value of £591k (2018:
£574k).

Amortisation of acquired intangible assets included in the
charge for the year in the above table was £1,325k (2018:
£2,329k), within the internally generated software is an
intangible asset acquired when K2C was purchased.

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 based on the
expected performance of the CGUs.

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

On an annual basis the impairment review of goodwill is
undertaken to determine a value in use calculation for each
cash generating unit (CGU) using cashflow projections.
Management have identified the CGUs as Eckoh UK, including
K2C (renamed in 2018/19 as Eckoh Omni) and Eckoh US in
the prior year. Management have performed a profitability

• Eckoh – UK
• Eckoh – US

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 Mar 2019
£’000

Goodwill
31 Mar 2018
£’000

2,373

2,641

5,014

348

2,459

2,025

4,832

Market growth
rate %

20%

10%

Discount
rate %

13.9%

15.8%

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, in
addition if there was no further growth in either Eckoh UK or
Eckoh US, no impairment in the carrying value of Eckoh UK
and Eckoh US would be required.

As at 31 March 2018, there was Goodwill relating to the
acquisition of K2C, following the earn-out period of K2C
Management ceasing in July 2018, this is now held as part of
the CGU Eckoh UK Limited.

No impairment has been recorded in the current year for
Eckoh UK or Eckoh US. 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.

13. Tangible assets

Cost

At 1 April 2017

Additions

Foreign exchange

Disposals

At 31 March 2018

Additions

Transfer to intangible assets

Foreign exchange

At 31 March 2019

Depreciation

At 1 April 2017

Charge for the year

Foreign exchange

Disposals

At 31 March 2018

Charge for the year

Transfer to intangible assets

Foreign exchange

At 31 March 2019

Carrying amount

At 31 March 2019

At 31 March 2018

Leasehold
improvements
£’000

Land and
buildings
£’000

Fixtures and
equipment
£’000

(3)

(1)

3,068

138

181

2,887

2,930

10,837

646

(99)

(4,664)

6,720

541

(225)

7,062

8,808

863

(49)

(4,664)

4,958

906

(32)

(1)

5,831

1,231

1,762

Total
£’000

13,937

646

(102)

(4,664)

9,817

542

(225)

10,160

8,914

914

(50)

(4,664)

5,114

960

(32)

6,042

4,118

4,703

ANNUAL REPORT 2019

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

•

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

England and Wales (ii)

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

Eckoh Omni Ltd

England and Wales (ii)

United States of America (iii)

United States of America (iv)

France (vi)

England and Wales (ii)

Isle of Man (v)

Secure Payment & Customer
engagement Solutions

Non trading

Secure Payment Solutions
& Support Solutions
Non trading

Dormant

Non trading

Dormant

Non-Trading

Dormant

England and Wales (ii)

Cloud-based Software Provider

100%

100% (i)

67% & 33% (i)

100%

100% (i)

100%

100% (i)

100%

100% (i)

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 7172 Regional Street. #431, Dublin, California

94568.

(v) The registered office is First Names House, Victoria Street, Douglas,

Isle of Man, IM2 4DF.

(vi) 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 Eckoh Omni 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.

15. Inventories

Finished goods

Work in progress

2019
£’000

2018
£’000

458

718

724

The cost of inventory recognised as an expense
during the year was £189k (2018: £72k).

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

2019

£’000

4,340

2018
Restated
£’000

5,175

(26)

4,340

5,149

525

8,344

6,689

13,209

11,943

Trade receivables are stated after provisions
for impairment of £nil (2018: £26k).

•

Gross trade receivables - ageing

Current

1-30 days

31-60 days

61-90 days

Over 90 days

2019
£’000

3,005

885

266

157

2018
£’000

4,082

963

4,340

5,175

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

2019
£’000

2018
£’000

10,963

7,950

588

163

11,582

8,164

2019
£’000

2018
£’000

10,963

7,950

588

163

11,582

8,164

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 0.55% (2018: 0.22%).

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

2019

£’000

2018
Restated
£’000

1,404

2,958

108

1,072

732

17,399

12,129

19,983

15,891

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 £24,514 (2018: £39,829).

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

19. Called up share capital

Allotted called up and fully paid

Share type

Ordinary Shares of 0.25p each

At 1 April 2018

Shares issued under the share
option schemes

Number of
shares

Nominal
value
£’000

252,513,520

1,608,248

631

At 31 March 2019

254,121,768

635

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 22.

20. ESOP reserve

ESOP reserve

2019
£’000

393

2018
£’000

238

During the year the Eckoh plc Share Incentive Plan purchased
613,170 shares for the two for one matching element of
the UK Share Incentive Plan. Shares are held in a trust in
accordance with the terms of the Plan. 928,015 matching
shares are held as at 31 March 2019 (2018: 527,032).
In addition to the shares held for the ‘Matching’ element
of the Share Incentive Plan, there are also 362,022 Treasury
shares, in total 1,290,037 (2018: 889,054).

ANNUAL REPORT 2019

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

•

21. Non-current liabilities

At 1 April 2018

Movement during the year

Repaid during the year

At 31 March 2019

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 0.82%

Maturity of debt

Less than one year (quarterly)

More than one year but not more than 2 years

More than 2 years but no more than five years

More than five years

Bank loans
£’000

1,300

650

22. 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.

Bank
Loans
£’000

(4,550)

1,300

(3,250)

Cash & cash
equivalents
£’000

8,164

3,418

11,582

Net debt

£’000

3,614

3,418

1,300

8,332

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 in
November 2017. 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 pages 37 to 42.
During the financial year awards have been granted to Senior
Management at Nominal cost. Each of the PSP awards is
subject to a Total Shareholder Return performance condition,
measured over a 3 year performance period.

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

8 Jun
2012

11.125

11.25

05 Dec
2014

25 Mar
2015

23 Mar
2016

31 Mar
2017

21 Jun
2017

46.25

37.50

46.5

43.50

39.50

47.50

23 Nov
2017

51.25

23 Jul
2018

37.81

26 Sep
2018

34.38

Shares under option

75,000

150,000

500,000

3,600,000

4,000,000

500,000

6,000,000

1,760,000

100,000

Vesting period (years)

Expected volatility

Option life (years)

Expected life (years)

40%

20%

22%

32%

35%

4.33

35%

4.33

47%

Risk free rate

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%

12.00

1.14%

1.22%

8.84

10.6

1.14%

17.00

1.53%

16.00

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:

Commencement date

Share price (pence)

Exercise price (pence)

Number of employees

Shares under option

Vesting period (years)

Annual attrition

Years to vesting (years)

Discounted charge

2 Sep
2016

35.0

0.00

5 Dec
2016

47.5

0.00

7 Jun
2017

46.6

0.00

1 Dec
2017

48.50

0.00

1 Jun
2018

39.95

0.00

209,706

178,445

164,204

208,878

195,766

3.50

1.17

3.50

15%

1.67

3.50

12%

2.17

3.50

13%

1.67

3.50

19%

3.17

70,278

45,952

41,506

44,491

41,289

A reconciliation of option movements over the year to 31 March 2019 is shown below:

Outstanding at 1 April

Granted

Exercised

Lapsed

Forfeited

Outstanding at 31 March

Exercisable at 31 March

2019

2018

Number of share
options

Weighted
average exercise
price (pence)

Number of
share options

Weighted average
exercise price
(pence)

19,714,835

2,264,644

(1,638,248)

(2,050,000)

18,291,231

4,624,232

7.68

0.20

0.50

40.97

17.93

27.82

21,279,160

6,842,649

(8,306,974)

(100,000)

19,714,835

4,062,480

18.43

3.88

0.11

43.50

20.91

7.68

ANNUAL REPORT 2019
76

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

2019

Weighted average
remaining life

Expected

Contractual

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

46.5 – 48.5

0.20

5.13

11.06

39.42

43.50

47.50

10,226

2.43

265

300

3,850

3,350

500

0.94

0.01

1.22

2.89

0.92

2.80

7.94

6.99

8.22

Number of
shares (000's)

Weighted
average
exercise price
(pence)

0.16

5.13

11.05

39.24

43.50

47.50

8,325

265

375

5,000

4,100

500

2018

Weighted average
remaining life

Expected

Contractual

1.83

1.75

0.99

2.22

8.17

1.92

3.84

8.75

7.99

9.22

The total charge for the year relating to employee share based payment plans was £567,000 (2018: £554,000) all of which related
to equity-settled share based payment transactions.

There are 2 Directors accruing benefits under the
pension scheme.

The aggregate Directors’ emoluments are shown in the
table below.

Directors

Aggregate emoluments

Rented Apartment

2019
£’000

2018
£’000

878

670

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
£15,000 (2018: £17,388). The amount outstanding to them
at the end of the current year was £Nil (2018: £4,347). There
were no amounts written off in the current or prior year.

23. 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.

24. 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.

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

Directors and other key management

Wages and salaries

Social security costs

Pension costs

Share based payments

2019
£’000

2018
£’000

1,157

130

856

619

1,315

1,562

25. 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

2019
£’000

2018
£’000

404

299

703

428

534

962

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 2022 at a cost of £31,850 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. Cash flow from operating activities

27. 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 2019 of 0.61 pence
per ordinary share be paid to the Shareholders whose
names appear on the register at the close of business on
27 September 2019 with payment on 25 October 2019.
The ex-dividend date will be 26 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 £1.5m.

28. Impact on the financial statement
for changes in accounting policy

As a result of the changes in the entity’s accounting policies,
prior year financial statements had to be restated. IFRS 9:
Financial Instruments was implemented without restating
comparative information, on the grounds of materiality.
IFRS 15: Revenue from Contracts with Customers was
adopted and the prior year financial statements have been
restated. The tables below show the adjustments recognised
for each individual line item for the year ended 31 March
2018. Line items that were not affected by the changes
have not been included. As a result, the sub-totals and totals
disclosed can not be recalculated from the numbers provided.
The adjustments are explained in more detail overleaf.

Profit after taxation

Interest income

Finance income

Interest payable

Taxation

Depreciation of property, plant and
equipment

Exchange differences

Legal fees and settlement costs

Amortisation of intangible assets

Share based payments

Operating profit before changes in
working capital and provisions

Decrease / (Increase) in inventories

(Increase) /Decrease in trade and other
receivables

Increase in trade and other payables

Net cash generated in operating activities

2019

£’000

2018
Restated
£’000

945

(37)

209

960

1,353

(34)

(975)

118

(269)

914

(293)

(152)

1,600

2,654

567

554

4,399

3,870

266

(1,267)

(11)

488

4,090

7,488

1,482

5,829

ANNUAL REPORT 2019
78

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

Balance sheet (extract)

Deferred tax asset

Total non-current assets

Trade and other receivables

Total current assets

Total assets

Trade and other payables

Total current liabilities

Net assets

Currency reserve

Retained earnings

Total equity

Balance sheet (extract)

Deferred tax asset

Total non-current assets

Trade and other receivables

Total current assets

Total assets

Trade and other payables

Total current liabilities

Net assets

Retained earnings

Total equity

31 Mar 2018
As originally
presented
£’000

IFRS 15
£’000

3,533

16,195

9,835

18,723

34,918

(7,885)

(9,185)

21,809

329

15,552

21,809

1 Apr 2017
As originally
presented
£’000

3,578

18,738

11,557

18,353

36,947

(9,155)

(10,455)

19,728

13,172

19,728

747

2,108

2,855

(8,006)

(5,151)

(13)

(5,138)

(5,151)

IFRS 15
£’000

791

722

1,513

(5,271)

(3,831)

Statement of profit or loss and
other comprehensive income (extract)
– 12 months to 31 March 2018

31 Mar 2018
As originally
presented
£’000

IFRS 15
£’000

Reclassification1
£’000

Revenue

Cost of sales

Gross profit

Administrative expenses

Profit from operating expenses

Profit / (loss) before taxation

Taxation credit / (charge)

Profit for the year

Profit per share expressed in pence

Basic earnings per 0.25p share

Diluted earnings per 0.25p share

30,005

(7,120)

22,885

(21,341)

1,544

2,435

225

2,660

pence

1.08

1.03

(2,768)

1,250

(1,518)

167

(1,351)

(1,307)

pence

(0.53)

(0.51)

2,123

(2,123)

pence

31 Mar 2018

Restated
£’000

4,280

16,942

11,943

20,831

37,773

(15,891)

(17,191)

16,658

316

10,414

16,658

1 Apr 2017

Restated
£’000

4,369

19,529

12,279

19,075

38,604

(14,499)

(15,799)

15,897

9,341

15,897

31 Mar 2018

Restated
£’000

27,237

(3,747)

23,490

(23,297)

193

1,084

269

1,353

pence

0.55

0.52

1. As a result of the implementation of IFRS 15: Revenue from Contracts with Customers management have reviewed the type of costs being recorded in cost
of sales in the UK division and the US division. As part of this review, it was identified that the costs relating to the on-going support of client solutions were
not being treated consistently. The above reclassification of costs from cost of sales to administrative expenses aligns the US business to the UK business.

IFRS 15 – Revenue from Contracts with Customers –
Impact of adoption

The Group has adopted IFRS 15 from 1 April 2018 which
resulted in changes in accounting policies and adjustments
to the amounts recognised in the financial statements. In
accordance with the transition provisions in IFRS 15, the Group
has adopted the new rules retrospectively and has restated
comparatives both for the 2018 financial year and the opening
balance sheet. In summary, the following adjustments were
made to the amounts recognised in the balance sheet at the
date of initial application (1 April 2018).

(iv) Deferred tax assets – remeasurement

As a result of the adjustments under the above three headings
the impact to the profit of the business for the 12 month
period to 31 March 2018 was reduced by £1.3. The tax
charge and utilisation of deferred tax was remeasured and an
adjustment of £0.1m for the 12 month period to 31 March
2018.

The opening balance sheet has been adjusted by £0.7m to
recognise the deferred tax asset arising on the adjustments
made under the above headings to the opening balance sheet.

29. Acquisition of Klick2Contact

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
ended 31 March 2018, it became apparent that the financial
criteria were not going to be met. As a result the contingent
consideration of £975,000 which had previously been provided
for was released during the year ended 31 March 2018.

(i) Revenue

From 1st April 2017 hardware and implementation fees
previously recognised in revenue during the implementation
phase of the client projects delivering either a Secure Payments
solution or hosted service have been restated under IFRS 15,
the hardware & implementation fees have been deferred into
deferred revenue and held in the balance sheet. In addition
the opening balance sheet has been restated for current
contracts, where implementation fees and hardware have been
recognised in revenue prior to 1 April 2017. The net impact of
this restatement is a reduction in previously reported revenue
of £2.8m for the 12 month period to 31 March 2018. The
total deferred liability restated at 31 March 2018 is £8.0m.

Recurring revenue, a Key Performance Indicator for the
business has been restated as 85% for the 12 month period
to 31 March 2018. This is as management expect and will
gradually, over the next 3 years, fall back to somewhat higher
than the 76% group recurring revenue reported for the year
ended 31 March 2018 due to the growth of the US secure
payments.

(ii) Cost of sales

Costs directly attributable to the delivery of the hardware and
the implementation fees have been capitalised as ‘costs to fulfil
a contract’. The net impact of this restatement is a reduction
in previously reported cost of sales of £1.3m for the 12 month
period to 31 March 2018. The total deferred costs restated at
31 March 2018 is £2.1m.

(iii) Commission costs (administrative expenses)

Commission paid to members of the sale team for the signing
of specific contracts has been deferred onto the balance sheet
and held in other current assets and will be matched to the
revenue over the period of the contract term. Commission
costs of £0.2m for the 12 month period to 31 March 2018
have been capitalised into other current assets. No further
restatement was made to the opening balance sheet due to
materiality.

ANNUAL REPORT 201980

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

Company Financial Statements

Company Statement of Financial Position
as at 31 March 2019

Non-current assets

Investments

Land and Buildings

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

Called up share capital

Share premium

ESOP Reserve

Capital redemption reserve

Merger reserve

Share based payment

Currency reserve

Retained earnings

Shareholders’ funds

Notes

iii

viii

2019
£’000

19,451

2,886

22,337

4,886

4,932

9,818

32,155

2018
£’000

24,012

2,929

26,941

6,309

6,311

33,252

(16,944)

(16,653)

(1,950)

(3,250)

(18,894)

13,261

(19,903)

13,349

635

2,659

(393)

198

2,697

3,022

925

3,518

13,261

631

2,640

(238)

198

2,697

2,469

4,881

13,349

The Company has taken advantage of the exemption under Section 408 of the Companies Act 2006 from presenting its own income
statement in these financial statements. The Company’s profit after tax for the financial year was £71k (2018: profit after tax of £1,065k).
The financial statements were approved and authorised for issue by the Board of Directors on 12 June 2019 and signed on its behalf by:

Chrissie Herbert
CHIEF FINANCIAL OFFICER

Company Registration Number 3435822

Statement of changes in equity

Called
up share
capital

Share
premium
account

Balance at 1 April 2018

Profit for the financial year and
total comprehensive expense

£’000

631

Transactions with owners of the company

Contributions and distributions

£’000

2,640

(155)

635

2,659

(155)

(393)

(156)

(20)

631

(20)

2,640

(155)

(238)

Dividends

Purchase of own shares
Shares issued under the share
option schemes
Shares acquired by Employee
Benefit Trust

Currency reserve

Share option charge

Deferred tax on share options

Total contributions and
distributions

Balance at 31 March 2019

Profit for the financial year and
total comprehensive 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

Currency
reserve
account

£’000

Retained
earnings

£’000

4,881

Total
Shareholders'
equity

£’000

13,349

(1,392)

(3)

854

(39)

(1,363)

3,518

854

925

(1,392)

(155)

(3)

854

553

(39)

(88)

13,261

ESOP
reserve

£’000

(238)

Capital
redemption
reserve

£’000

198

Merger
reserve

£’000

2,697

Share
based
payment

£’000

2,469

198

2,697

553

3,022

198

2,697

554

2,469

(76)

5,074

1,065

13,219

1,065

(1,209)

(49)

(1,209)

(156)

(48)

(76)

554

(1,258)

4,881

(935)

13,349

Balance at 1 April 2018

611

2,660

(83)

198

2,697

1,915

147

2,697

3,022

925

ANNUAL REPORT 201982

Financial Statements 5 NOTES TO THE FINANCIAL STATEMENTS

Notes to the Company's Financial Statements
for the year ended 31 March 2019

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 income
statement.

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.

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.

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 54.

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 the Monte
Carlo valuation model, taking into account the terms and
conditions upon which the grants were made. The amount
recognised as an expense is adjusted to reflect the actual
number of share options that vest except where forfeiture is only
due to share prices not achieving the threshold of vesting.

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.

ANNUAL REPORT 201984

Financial Statements 5 NOTES TO THE COMPANY'S FINANCIAL STATEMENTS

Land and Buildings

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 pages 43 to 45. The Directors’ remuneration costs are
borne by a subsidiary undertaking. The Company did not incur
any staff costs during the year (2018: £nil). The average number
of employees employed by the Company during the year was 5
(2018: 5).

Services provided by the Group’s auditor

Fees payable for the audit of the parent company and
consolidated accounts of £39,000 (2018: £16,000) were borne
by a subsidiary undertaking.

iii. Investments

At 1 April 2017

Additions

At 31 March 2018

Additions

Transfer to subsidiary

Amortisation

At 31 March 2019

Impairment

Shares in
subsidiary
undertakings
£’000

Other
investments
£’000

26,351

(5,104)

(11)

21,236

4,093

554

4,647

553

5,200

Total
£’000

30,444

554

30,998

553

(5,104)

(11)

26,436

At 31 March 2019, 31 March 2018 and at 31 March 2018

(6,985)

Net Book Value

At 31 March 2019

At 31 March 2018

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.

14,252

19,365

5,200

4,647

19,451

24,012

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

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

England and Wales (i)

Secure Payment & Customer
engagement solutions

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)

Non trading

Dormant

Eckoh Inc

United States of America (iii)

Secure Payment & Customer
engagement solutions

Eckoh Omni Ltd

England and Wales (i)

Cloud-based Software Provider

100%

(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.

The subsidiary undertaking Eckoh Omni 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.

iv. Land and Buildings

Cost

At 1 April 2018

Additions

At 31 March 2019

Accumulated depreciation

At 1 April 2018

Charge for the year

At 31 March 2019

Carrying amount

At 31 March 2019

At 31 March 2018

v. Trade and other receivables

Amounts due from Group undertakings

Prepayments and accrued income

Amounts due within one year

31 Mar 2019
£’000

4,883

4,886

UK Office
£’000

3,068

139

182

2,886

2,929

31 Mar 2018
£’000

ANNUAL REPORT 2019
86

Financial Statements 5 NOTES TO THE COMPANY'S FINANCIAL STATEMENTS

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. Called up share capital

Allotted, called up and fully paid

Share type

Ordinary Shares of 0.25p each

As at 1 April 2018

Shares issued under the share option schemes

As at 31 March 2019

31 Mar 2019
£’000

31 Mar 2018
£’000

15,626

1,300

16,944

1,950

18,894

15,333

1,300

16,653

3,250

19,903

31 Mar 2019
£'000

10,666

1,813

31 Mar 2018
£’000

10,757

1,829

Number of shares

Nominal value £’000

252,513,520

1,608,248

254,121,768

631

635

ix. Share options and share-based

xi. Events after the balance sheet date

payments

Share options and share based payments are disclosed in note
22 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 2019 of 0.61 pence per
ordinary share be paid to the shareholders whose names appear
on the register at the close of business on 27 September 2019
with payment on 25 October 2019. The ex-dividend date will
be 26 September 2019. 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
£1.5m.

ANNUAL REPORT 2019

Shareholder Information

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

Directors and Company Secretary

C.J. Humphrey

Non-Executive Chairman

G.L. Millward

Non-Executive Director

D.J. Coghlan

Non-Executive Director

N.B. Philpot

Chief Executive Officer

C.G. Herbert

Chief Financial Officer and Company Secretary

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

www.eckoh.com

Registered in England and Wales - Company number 3435822.

Registrar - Link Asset Services - The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU

Nominated Advisor and Joint Broker - Nplus1 Singer Capital Markets Limited - One Barthlomew Lane, London EC2N 2AX

Joint Broker - Canaccord Genuity Limited - 88 Wood Street, London, EC2V 7QR

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 - PricewaterhouseCoopers LLP - The Atrium, 1 Harefield Road, Uxbridge, Middlesex, UB8 1EX

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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