Eckoh plc Annual Report 2020

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FY2020 Annual Report · Eckoh plc

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AnnuAl RepoRt
2020

AnnuAl RepoRt 2020

Contents

Strategic Report
Highlights
3
Chairman’s Statement
6
8
Chief executive's Review
16 principal Risks and uncertainties
18

Financial Review

Corporate Responsibility
20 Business ethics
21 employee engagement
24 Community
25 environment

Corporate Governance
26 Board of Directors
27 Chairman’s Report
34 Audit Committee Report
37 Remuneration Committee Chairman Statement
39 Annual Report on Remuneration
42 Directors’ Report
46

Independent Auditors’ Report

Financial Statements
51 Consolidated Statement of total Comprehensive Income
52 Consolidated Statement of Financial position
53 Company Statement of Financial position
54 Consolidated Statements of Changes in equity
55 Company Statements of Changes in equity
56 Consolidated Statement of Cash Flows
57 notes to the Financial Statements
83 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 2020.

£m unless otherwise stated

Revenue

Gross profit

Adjusted operating profit2

Profit before taxation

Diluted earnings per share

Adjusted diluted earnings pence per share3

Net cash

Total business contracted4

New business contracted5

FY201

33.2

26.3

4.7

3.3

1.20p

1.75p

11.6m

35.9

18.6

FY19

28.7

24.1

3.1

1.2

0.36p

1.08p

8.3m

32.7

22.6

Change

16%

53%

171%

233%

62%

+3.3m

10%

(18%)

REVENUE
£33.2m
UP 16%
(FY19: £28.7)

RECURRING
REVENUE6
£24.8m (79%)
UP 4%
(FY19: £23.8m)

TOTAL
BUSINESS
CONTRACTED4
£35.9m
UP 10%
(FY19: £32.7m)

NEW
BUSINESS
CONTRACTED5
£18.6m
(FY19: £22.6m)

US SECURE
PAYMENT
REVENUE
$8.1m
UP 63%
(FY19: $5.0m)

ADJUSTED
OPERATING
PROFIT2
£4.7m
UP 53%
(FY19: £3.1m)

NET CASH
£11.6m
UP £3.3m
(FY19: £8.3m)

PATENTS
TOTAL 12

Granted FY20: 7

2020 results have been prepared under IFRS 16: Leases. Prior period
comparatives have not been restated

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

2. Adjusted operating profit is the profit before tax adjusted for expenses
relating to share option schemes and acquired intangibles amortisation

3. Adjusted diluted earnings per share (eps) is the diluted eps adjusted

for expenses relating to share option schemes and acquired intangibles
amortisation

5. New business contracted excluding renewals with existing customers

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.

AnnuAl RepoRt 20204

Strategic Report 1 HIGHLIGHTS

Financial highlights

• Results in line with market expectations

• Double-digit growth overall, with revenue growth in both the US and UK divisions

• Group revenues up 16% (14% at constant exchange rates4)

• UK up 6% to £20.5m: driven by new business deployed and clients’ transactional volume

• US up 32% to $16.1m: growth in Secure Payments and Coral offset the expected decline in Support

• Recurring revenue5 up 4% to £24.8m (FY19 £23.8m), representing 79% of total revenues

excluding the $3.8m Coral licence contract won in H1 (FY19: 83%)

• Profit before taxation increasing by 171% to £3.3m

• Adjusted operating profit1 increased strongly by 53% to £4.7m (FY19: £3.1m)

• Adjusted diluted earnings per share2 up 62%

• Strong cash generation and robust balance sheet: net cash £11.6m (FY19: £8.3m)

Strategic highlights

• Record total business contracted3, up 10% to £35.9m, with growth in orders both the UK and US

• Strong total business contracted3 for the UK; new business and renewals stronger in second half

•

Increasing focus on US Secure Payments growth opportunity with a managed transition away from
hardware-based support

• US Secure Payments driven by large deployments, increased regulation and fines for non-compliance

• Revenue increased by 63% to $8.1m (FY19: $5.0m)

• New contracts $10.7m (FY19: $13.7m, which included our largest single contract to date of $7.4m)

• Order book up 14% to $25.9m (FY19: $22.8m)

• Clients from the Fortune 250 increased to ten

• Significant progress in growing our patent portfolio, adding a record number of new granted patents

1. Adjusted operating profit is the profit before tax adjusted for expenses
relating to share option schemes and acquired intangibles amortisation

2. Adjusted diluted earnings per share (eps) is the diluted eps adjusted

for expenses relating to share option schemes and acquired intangibles
amortisation

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

4. Constant currency (using last year exchange rates)

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.

AnnuAl RepoRt 2020

COVID-19 update

• Eckoh’s business model, with high levels of recurring revenue, a record order book, blue chip enterprise

clients and a strong balance sheet, means we are well placed to manage the impact of COVID-19

• A strong cash position and compliance with bank covenants where required

• Precautionary measures, including a salary and hiring freeze, already taken to maintain financial strength

during the COVID-19 pandemic

• Maintenance of headcount ensures we are well-placed to meet recovery in demand when conditions stabilise

• US revenue 100% underpinned by fixed fees. UK transactional volumes were impacted in March to May,

but revenue not proportionately impacted due to contractual commitments

• Strong new demand for CallGuard Remote to enable business continuity by facilitating secure payments

in remote working environments

• Guidance remains withdrawn and dividend will be reviewed by the Board when market conditions stabilise.

Outlook

• New financial year trading is encouraging with Group revenue and profit comparable to the previous year

• Notwithstanding the disruption relating to COVID-19, the Board remains confident of the future prospects
for the Group, underpinned by balance sheet resilience, high recurring revenues, excellent sales pipelines
and the long-term market opportunity

Strategic Report 1 CHAIRMAN'S STATEMENT

Chairman's Statement

The outbreak of the COVID-19 pandemic
overshadows what were an excellent
set of results for FY 2020 with revenue
and profit growth in both the UK and US
operation. Whilst we continue to operate
in a challenging and uncertain macro
economy, Eckoh’s business model and
market position means we are well placed
to manage the impact of COVID-19 on
our clients’ businesses, with high levels
of recurring revenue (79% excluding our
Coral contract from the first half), a record
order book, blue chip enterprise clients
and a strong balance sheet. In addition,
Eckoh’s security and engagement products
can assist businesses to respond to the
demands the coming months are likely to
bring.

Results

In the year total business contracted1 in both the UK and US
was strong at £35.9 million (FY19: £32.7m), an increase year
on year of 10%.

In the US we have seen continued success in the new business
contracted2 for Secure Payments, during the year the US
team secured $10.7 million new orders (FY19: $13.7m, which
included our largest single contract to date of $7.4 million)
and we now have 10 customers from the Fortune 250.
This continued and strong progress in Secure Payments
underpins the decision to manage the transition away from
the US hardware Support contracts other than those that are
purely software based.

In the UK we grew total business contracted, revenue and
gross profit. New business contracted was £6.6 million (FY19:
£10.1m), which was impacted by the uncertain business
climate in the first half of the year with respect to Brexit.

Adjusted operating profit3 was £4.7 million (FY19: £3.1
million), an increase of 53%, included in the first half of the
year were Coral licences of £0.8 million and for the year there
was a foreign currency gain of £0.3 million. The Group has
adopted IFRS 16: Leases from 1st April 2019, the adjustment
to adjusted EBITDA4 and depreciation was £0.5 million, with
nil impact to adjusted operating profit.

During the year the Group has continued to have strong cash
generation and the year-end net cash balance grew to £11.6
million (FY19: £8.3m).

Going concern and COVID-19

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. The entire Eckoh team have been working
remotely since March and I would like to thank them on
behalf of the Board, not only for their dedication and hard
work over the last 12 months but particularly during the
recent pandemic.

I, and all my Board colleagues, plan to attend the AGM on
16 September 2020 and we look forward to the opportunity
to meet with as many Shareholders as possible on the day.

Christopher Humphrey
CHAIRMAN
16 June 2020

The Board has carried out a going concern review and
concluded that the Group has adequate cash to continue in
operational existence for the foreseeable future.

Despite the short-term disruption to market conditions
relating to COVID-19, the Board remains confident of the
future prospects for the Group, underpinned by balance
sheet resilience, high recurring revenues, excellent sales
pipelines and the long-term market opportunity. We have also
maintained headcount at current levels to manage ongoing
demand, sustain our high service levels, and ensure we are
well-placed for a recovery in demand.

The Directors have prepared cash flow forecasts for a period
in excess of 12 months from the date of signing the financial
statements. In all scenarios tested, the Directors were able to
conclude that the Group has adequate cash to continue in
operational existence for the foreseeable future.

Board

In the financial year ended 31 March 2020, there were no
significant changes to the Board.

Full details of the current Directors are on page 26.

Corporate Governance

As a Board of Directors, we feel the Quoted Companies
Alliance Corporate Governance Code (QCA Code) is the most
appropriate code for Eckoh plc to apply, given the Group’s
size, risk, complexity and stage of maturity. In the Governance
section of this report starting on page 27 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.

Full details of the Company’s Principal Risks and Uncertainties
are on page 16 and 17.

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.

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. Adjusted operating profit is operating profit adjusted for expenses relating to share option schemes and

amortisation on acquired intangible assets

4. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is the profit before tax adjusted
for depreciation, amortisation on acquired intangible assets and expenses relating to share option schemes.

AnnuAl RepoRt 2020
8

Chief Executive Review

Introduction

Eckoh delivered a strong performance
in the 2020 financial year, with double
digit revenue growth for the Group, a
significant increase in profit, and record
levels of total business contracted. Both
the UK and US operations grew, with the
UK up 6% and the US up 36%.

This growth reflects our progress against our core
strategic objectives. We continue to see excellent
momentum in our US Secure Payments business,
with revenue and new business growth driven by
our continued success in deploying into the largest
enterprises. This reflects increasing regulation
governing payments and data security, with the
prospect of significant fines and brand damage for
corporates who do not comply.

Total revenue for the year was £33.2 million, an increase year
on year of 16% (FY19: £28.7 million) or 14% adjusting for
constant exchange rates.

Total business contracted1 for the financial year in the Group
was a record £35.9 million compared to £32.7 million in the
prior year, an increase of 10%. New business in the year was
£18.6 million (FY19: £22.6 million), against particularly strong
prior year comparators for both the UK and US divisions
including our largest single US contract of $7.4 million. The UK
saw strong renewals with a number of large clients renewing
contracts earlier than scheduled in the second half as signalled
at the interim results.

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

2. Adjusted operating profit is the operating profit adjusted for expenses
relating to share option schemes and the amortisation on acquired
intangible assets

3. Adjusted diluted earnings per share (eps) is the diluted eps adjusted
for expenses relating to share option schemes and amortisation on
acquired intangible assets.

Gross profit grew by 9% to £26.3 million (FY19 £24.1 million).
US gross profit grew 22% to £9.3 million (FY19: £7.6 million),
with gross profit margin decreasing to 73% (FY19: 81%) due
to the impact of the lower margin Coral contract. Excluding
the Coral Licences, gross profit margin would have been 76%.
UK gross profit grew by 3% to £17.1 million (FY19: £16.5
million), where gross profit margin decreased marginally by
2% to 83%.

Adjusted operating profit2 increased significantly by 53% to
£4.7 million (FY19: £3.1 million) and adjusted diluted earnings
per share3 increased 62% to 1.75p (FY19: £1.08p).

Cash and cash generation remain strong with a net cash
position of £11.6 million, an increase of £3.3 million compared
to the previous year end (FY19: £8.3 million). This comprises a
cash balance of £13.6 million, less an outstanding loan of £2.0
million, taken out in 2015 in part to purchase the Group’s UK
head office.

IFRS 16: Leases has been implemented from 1st April 2019,
but prior year comparators have not been restated. The impact
of the implementation is £0.5m of costs are now included in
depreciation. After the accounting change for IFRS 16: Leases,
costs have been held, as expected, at the run-rate at the end
of the last financial year following the investments made in
headcount, Sales, IT and Marketing.

Strategic Report 1 CHIEF EXECUTIVE REVIEW
9

Impact of COVID-19 and
Current Trading

Eckoh’s business model and market position, with high levels
of recurring revenue, a record order book, blue chip enterprise
clients and a strong balance sheet, means we are well placed
to manage the impact that COVID-19 has had on many of our
clients’ businesses.

A clear growth strategy

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:

Our US revenues are entirely underpinned by fixed fee
contracts. The UK also delivers a high level of guaranteed
revenue, in aggregate, from a combination of fixed fees
and transactional commitments, albeit from a wide range of
different commercial structures.

• Being the market leader for Contact Centre payment

security in premised, hosted and Cloud delivery

• Capitalise on the fast-growing US market for Contact

Centre payment security

In addition, we have taken a number of precautionary
measures to sustain our position of financial strength,
including limiting discretionary spend, freezing new hires,
postponing salary increases for 2021 and deferring the
quarterly loan repayments in April 2020 and July 2020.

The significant disruption to businesses that has arisen from
the pandemic will, we believe, lead to a long-term adjustment
in the way that organisations approach their customer
engagement strategy. In particular, we foresee a proportion
of remote working agents becoming a permanent feature
of large contact centre operations, that will force a greater
number of organisations to adopt a more rigorous approach
to data and payment security. Furthermore, we expect an
even faster adoption of emerging engagement technologies
such as conversational bots working in tandem with human
agents. Eckoh will be able to assist new and existing clients
in responding to these changes and the increased levels of
interest in CallGuard Remote, which facilitates the taking of
payments securely in remote working environments.

In the first two months of the new financial year our trading
has been encouraging with both revenue and profits
comparable to the previous year, illustrating the resilience
of our model. As a measure of prudence, the Board has
agreed that guidance will remain withdrawn until there is
greater certainty. As announced previously, the Board does
not currently intend to propose a year-end dividend, but that
decision will be kept under consideration if conditions stabilise.

• Maximise client value through cross-selling to
generate higher levels of recurring income

• Continue to enhance the Eckoh Experience Portal
to enable faster and more flexible delivery of our
solutions

• Use Cloud Native technologies to develop next-

generation products and enhance our proprietary
technologies

•

Identify and evaluate acquisition opportunities that
can support our growth strategy in Contact Centre
security and customer engagement

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 the organisation has, the more
attractive they are to Eckoh, and the larger the contact centre
operation supporting the organisation is likely to be.

We are well placed to manage the
impact that COVID-19 has had on many
of our clients' businesses..

AnnuAl RepoRt 202010

Strategic Report 1 CHIEF EXECUTIVE REVIEW

The contact centre industry in both the UK and US is extremely
large, representing around 4% of the entire workforce in
both markets, 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, patented technology and with very limited
competition to our offering, this represents a huge opportunity
for Eckoh in the coming years.

With regulation tightening and the financial impact of data
breaches and fraud growing, organisations are increasingly
looking for ways to secure themselves and consequently
information security budgets and remit are broadening, and
we see that trend only continuing. Moreover, the current
crisis and the ensuring reliance on greater numbers of remote
working agents are only likely to accentuate these security
concerns. This can only benefit Eckoh as our payments
proposition enables companies to effectively remove the risk
of data breach from some of the most challenging parts of
their businesses.

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
Standard (“PCI DSS”) and wider security regulations such
as the General Data Protection Regulation (“GDPR”) or
the California Consumer Privacy Act. 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 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 client’s 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 just over five years ago, the
focus has been 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. The introduction of Web Chat and
ChatGuard at the beginning of this financial year was the first
step in opening up our Customer Contact proposition in the
US, focusing on the newer customer engagement channels.
With the continued progress in Secure Payments, which
is our primary objective in the US, we have also taken the
strategic decision to focus more of our resource on this activity
and have a managed transition away from hardware-based
Support.

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 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.

Operational Review

US Division: (38% of group revenues)

In the US revenue grew to $16.1 million, an increase of 32%
(FY19: $12.2 million). There was strong growth in Secure
Payments and Coral. This included $2.1 million for Coral
licences that were part of the $3.8 million contract win we
secured in the first half. As indicated previously, the third-party
Support business declined in the second half of the year and
will continue to decline into the new financial year as we focus
resource on the growth opportunity of Secure Payments and
target Support contracts that are purely software based.

Total business contracted was up 4% to a record $19.9 million
(FY19: $19.1 million). New business contracted was $15.3
million, a decrease of 6% (FY19: $16.3 million) against a
strong comparator which included our largest single contract
to date of $7.4m.

The Group’s US focus remains on three sales activities where it
has the greatest differentiation and the least competition. The
performance of these activities in the US is summarised below.

• Secure Payments revenue grew 63% to $8.1 million
(FY19: $5.0 million), and now represents 51% of US
revenue (FY19: 41%). During the year we successfully
deployed our largest contract won to date.

• Coral had revenues of $3.5 million in the year (FY19: $1.8
million), reflecting the $2.1 million revenues for Coral
licences, and accounted for 22% of US revenue (FY19:
14%). The timing of large Coral orders remains hard to
forecast and we would not expect a further deal of this
size in FY21.

• Support revenue was $4.4 million, a decrease year on

year of 20% (FY19: $5.4 million) and now accounts for a
much lower share of US revenues, 27% compared to 45%
in FY19. With Secure Payments now our largest revenue
stream a strategic decision was taken to focus our staff
and resources on this growth opportunity and manage a
transition away from hardware-based Support and only
continue with software-based activity, which represented
$1.4 million in the period.

Secure Payments, where we deliver a patented solution
that enables enterprises to take card payments securely within
their contact centre operations, continued to have excellent
momentum, with $10.7 million won, compared to

$13.7 million in FY19, which included our largest contract to
date valued at $7.4 million. A number of contracts that we
anticipated would close before year end were put on hold as
a consequence of the pandemic crisis and this prevented us
from exceeding the previous year’s total. The largest contracts
remain on hold or have been delayed to a specified date, but
none have been cancelled.

Since 2015, when we launched our Secure Payments product
in the US, the total of new business contracted has grown
significantly each year, as shown below.

Financial Year

$m
FY15

$m
FY16

$m
FY17

$m
FY18

$m
FY19

$m
FY20

New Business
Contracted

0.3

1.6

8.3

9.3

13.7

10.7

The Company continues to successfully focus on large
enterprise contracts, and consequently in the period the
average contract value was again greater than the $750k
size we initially indicated we would expect to see. We now
have 10 customers from the Fortune 250 list. Most contracts
won continue to be for deployment into the customer’s
environment. However, we won a three-year cloud contract
with a Healthcare provider, which was substantial and our
largest cloud deal to date by some margin. We also won our
first deal in the Gaming sector and contracts with two of the
five largest retailers, continuing our success with the largest
US corporates. In addition, we secured the first significant
contract for our patented ChatGuard product that allows
payments to be made securely within a live web chat session.

The average length of contracts for Secure Payments is three
years, and as indicated previously the first large contract was
due for renewal in the second half. This contract was renewed
successfully, mirroring the successful trend of strong contract
renewal in the UK.

External factors, such as the impending change to the
Payment Card Industry Data Security Standard (PCI DSS),
the implementation of new data laws like the California
Consumer Privacy Act and significant fines levied on US
organisations through the GDPR legislation, are undoubtedly
helping raise awareness of the risks of not protecting sensitive
data properly. This will assist us in continuing to build our
pipeline which is substantial and growing. Our focus on these
larger contracts means that in future periods the timing of
contract wins continues to be hard to predict given the typically
longer sales cycle.

AnnuAl RepoRt 202012

Strategic Report 1 CHIEF EXECUTIVE REVIEW

Coral is a browser-based agent desktop that increases
efficiency by bringing all the contact centre agent’s
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. In the period and as
previously announced, we secured a contract extension with
a Fortune 100 telecommunications company for our agent
desktop tool Coral. The contract is worth a minimum of $3.8
million, and of this, $2.1 million relating to the purchase of
licences has been recognised in the year. We would not expect
a further deal of additional licences of this size in FY21.

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. Our
largest contract, which commenced in July 2016 for a major
US telecommunications company, started to reduce in scope
and value from September 2017, and came to an end as
expected in the second half of the year. The majority of the
employees servicing the Support channel have been switched
to increasingly service the more lucrative Secure Payments
opportunities, and this will continue.

As stated, we will transition away from hardware-based
Support but continue to target Support business tactically
where we see cross-selling opportunities for Secure Payments,
particularly the software-based Support contracts such as
Aspect. We also see good opportunities from our partnership
with Ribbon Communications. Eckoh already uses Ribbon’s
session border controllers (a device that protects and regulates
IP communications flows) for some of our on-site Secure
Payments solutions, and this partnership will allow us to derive
greater margin from these installations as well as target new
Support contracts.

Recurring revenues in the US, after adjusting for the one-off
$2.1 million of Coral licences, were 61%, lower than the 68%
a year ago because of the disproportionately large value of
non-recurring revenue relating to hardware and set-up fees
from our largest Secure Payment contract that went live in the
period. We would expect recurring revenue to increase in the
new year as more clients have solutions deployed.

The US operation has seen a temporary slowing of new
business closing since the outbreak of COVID-19. However,
for the clients contracted and deployed, revenues are based
on fixed contractual fees giving us continued resilience in
the current situation. A number of recent deployments were
delayed due to not being able to physically access customers’
data centres, but workarounds were implemented and these
clients are now live.

UK Division (62% of group revenues)

The UK division has delivered revenue and gross profit growth
in the financial year, as new business contracted in the prior
year is deployed and with high levels of transactional revenue
coming through from some of our largest clients.

Revenue in the period was £20.5 million, an increase on last
year of 6% (FY19: £19.4 million), and gross profit increased
3% to £17.1 million (FY19: £16.5 million). Gross margins in
the UK decreased in the period by 2% to 83% (FY19: 85%)
and recurring revenue decreased slightly as expected, to
88% from 90% in FY19. As indicated previously, we expect
recurring revenue to return to pre-IFRS 15 levels and a steady
state of approximately 86% - 88%.

The UK had a strong year with total business contracted up
11% to £20.2 million (FY19: £18.2 million). In the year there
were significant contract renewals, and as anticipated in
our interim statement some larger renewals were confirmed
earlier than scheduled in the second half of the year. Last
year was our strongest period for new business for the last
five years. Against this strong prior year comparator, new
business improved in the second half compared to the first
half and finished the year at £6.6 million (FY19: £10.1 million).
The decrease in new business year on year was largely due
to the uncertain business climate in the UK due to the Brexit
negotiations, which resulted in delays to buying decisions, and
latterly projects being put on hold because of COVID-19. This
weakness was mirrored in the sales performance of some of
our major partners, who have experienced similar challenges.
Despite the current situation, we are seeing activity levels
increase in the UK and the pipeline continues to be strong.

Despite the current situation,
we are seeing activity levels
increase in the UK and the
pipeline continues to be strong.

The new business and consistent renewals of existing clients
gives us, in normal circumstances, high revenue visibility
and our UK clients are underpinned by contractual fees or
minimum transaction levels. However, the UK business does
have some exposure to consumer-facing clients and due to
the impact of COVID-19 we saw volumes in March initially
dropping for these clients before stabilising at the end of
April. As the country takes the first steps to come out of
lockdown, it is pleasing to see that from the end of May
overall volumes have been rising and in some cases individual
client’s transactional volumes have reverted largely to normal
levels. There are some clients where there has been a positive
impact on volumes during this period, however, there still
remains much uncertainty during these times and it is difficult
to predict the future transactional volume of our clients and
therefore revenue visibility.

Looking at the segmentation of UK revenue, 23% came
from Secure Payment services (FY19: 23%), 38% from
Customer Contact Solutions (FY19: 31%) and the remaining
39% from clients where we provide a combination of both
solutions (FY19: 46%). The increase in the Customer Contact
only services is largely due to Omnichannel clients going
live, particularly the large client won through our Capita
framework. We would expect some of these clients to also
adopt our Secure Payments technology which would move this
revenue into the combined solution segment, meaning that
the split of revenue is likely to readjust this year.

New business in the UK is increasingly coming from sales
delivered through our recently launched Eckoh Experience
Portal (“EXP”), which enables organisations to buy and
deploy our Customer Contact and Secure Payment solutions
in a modular fashion. The increase in Customer Contact
solutions has largely come from the focus of the Sales team
on larger, more complex opportunities, typically known as
‘digital transformations’, where Eckoh’s breadth of portfolio
and proven expertise delivers more value to the client and
differentiates us. A digital transformation is where Eckoh
provides a fully integrated solution in which newer digital
channels for customer engagement such as web chat,
chatbots and social media messaging sit alongside more
conventional ones such as voice and email. This can then be
overlaid with our Secure Payment proposition encompassing
CallGuard, ChatGuard and our alternative payment capability.
New clients in the period included Vanquis Bank, the
Department of Education and Bosch.

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
increasing the lifetime value of the Group’s customers. Of the
new business secured in the year of £6.6 million, £3.9 million
(FY19: £2.4 million) was contracted with existing customers
for delivery of new solutions or modifications. At 60% this
was a much higher percentage of total new business than we
would normally see, and points to organisations being more
willing to invest in the uncertain business climate with existing
suppliers than seek new ones.

During the year, that strong track record with existing clients
has continued to be demonstrated through the levels of
renewal business contracted, which were £13.6 million in the
period. There were a number of larger clients who renewed
their contracts, notably Premier Inn which was the largest to
arise, but also some of whom renewed earlier than required.
These included allpay, who renewed for a five-year term,
Transport for London and a global financial services company.

AnnuAl RepoRt 202014

Strategic Report 1 CHIEF EXECUTIVE REVIEW

Innovation

Eckoh has partnered with global payments technology
provider Mastercard to offer the Pay by Bank app (“PbBa”) as
an alternative payment capability for contact centres over the
phone. PbPa, which was created by Vocalink, a Mastercard
company, is an easy and secure way for customers to pay from
their current bank account, using their trusted mobile banking
app. It is designed to simplify the checkout experience, giving
customers more control and visibility of their finances when
they make a payment

Eckoh has already broadened our CallGuard solution to
encompass alternative payment methods such as eWallet
services like Apple Pay, Google Pay and Paypal. PbPa is yet
another example of Eckoh leading the market by being a
payments enabler for our clients, as well as ensuring every
transaction is secure.

Our ongoing compliance with PCI DSS reached a milestone
in the period with our 10-year anniversary of being a PCI
DSS level 1 Service Provider, the longest of any company
operating in our target market. With onerous changes in the
Data Security Standard expected in version 4 of the code, we
anticipate this will be a further driver for businesses to look
to de-scope entirely their environments of card data using
Eckoh’s services.

Project Leapfrog

We have previously highlighted our intent to embrace Cloud
Native practices and capabilities which we named Project
Leapfrog. As the name implies, leveraging our existing best-of-
breed solutions, Cloud Native offers technologies and practices
with nearly limitless computing power, alongside cutting-edge
data and application services for product development.

Working alongside a third-party specialist in Cloud Native
practices over several months, to accelerate our learning
and help to upskill our team, we have made very significant
progress to the point where Leapfrog as a project is largely
complete. Any net new development of any significance
will now be done following the Cloud Native process, and
whilst it will be a long transition, we do expect over time to
have replaced our whole technology stack with Cloud Native
technology.

When companies build and operate applications in a Cloud
Native fashion, they bring new ideas to market faster and
respond sooner to client demands. This is at the core of

Eckoh’s client-focused delivery model. We are pursuing this
methodology so that we can stay ahead of our competitors
across the technical landscape, enhance our product portfolio
even faster, at higher margins, and with a focus on assured
quality, and win the ongoing talent war for attracting and
retaining high quality developers.

Patent Update

Eckoh continues to invest engineering and financial resources
into developing its products and services. As a result, Eckoh
takes intellectual property (IP) policy very seriously. IP includes
patent rights, trademarks and service marks, domain names,
copyright (including copyright in software), design rights,
database rights, rights in know-how or other confidential
information (including trade secrets) and rights under IP-
related agreements. Eckoh's IP provides significant market
and technological advantages. The company is committed to
preserving and enhancing its competitive position through
strategic capture and, where necessary, enforcement of IP.
Unauthorised use of Eckoh's IP damages our business and our
partners. Eckoh expects others to respect its IP and would not
knowingly infringe third party IP.

During the period we made significant progress in growing
our portfolio and added a record number of new patents.
Our granted patents have now reached twelve, seven of which
were granted in this year.

For our core Secure Payments technology our two key patents
of CallGuard and Secure Proxy (our tokenisation solution)
now cover the jurisdictions of the UK, US, Belgium, France,
Germany, Italy, Netherlands and Spain.

We also have three further patents comprising ‘Authenticating
users for data exchange’, ‘Session handoff’ and ‘Contact
Centre authentication’ which have all been granted in the US,
as well as partially in the UK and Canada.

Since period end Eckoh and Syntec Limited have reached
a confidential settlement of their dispute over alleged
infringement of Eckoh's Secure Proxy patent (UK No.
GB2497940). Syntec has agreed to pay Eckoh an undisclosed
sum in settlement of the claim.

During the period we made significant
progress in growing our portfolio and added
a record number of new patents.

AnnuAl RepoRt 2020

Outlook

Although the outlook still remains
uncertain, with a highly relevant product
portfolio, resilient business model and
strong balance sheet, Eckoh is well
prepared to successfully manage the
current challenges and assist our clients
to do the same.

Nik Philpot
CHIEF EXECUTIVE OFFICER
16 June 2020

Strategic Report 1 PRINCIPAL RISKS AND UNCERTAINTIES

Principal Risks
& Uncertainties

Eckoh is exposed to a number of risk factors which may affect its performance.
The Group has a frame-work 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

Pandemic risk

The outbreak of COVID-19 could cause shortage of staff if they become ill
or die. The UK business has exposure to consumer-facing customers where
contact volumes during social distancing are impacted. Our US operation is
underpinned by fixed contractual fees. The supply of components for our on-
site Secure Payment solution for the US operation could become impacted.

All employees in the US and UK are able to work remotely from home
during the pandemic. Due to the digital and physically remote nature of
our technology and solutions we are able to maintain high service levels
during these periods. We continually monitor our suppliers to ensure the
components we require for our on-site solution in the US are available.

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 Standard (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 trademark laws to protect our intellectual property. The Group
also 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.

AnnuAl RepoRt 2020

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 payment 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.

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.

Dependence on key clients

While the Group has a wide customer base, the loss of a key customer,
or a significant worsening in their success or financial performance,
could result in a material impact on the Group’s results. Eckoh’s largest
customer accounted for 9.1% (2019: 5.9%) of total revenue.

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

Economic growth

Executing the US opportunity

The Group has a low market share in the US, where there is significant
market opportunity for its Secure Payments 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 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. 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. There is an on-going uncertainty
of how the UK would trade with the EU after the end of 2020 and
this may increase Sterling volatility in the next few years, which in
turn may have a material impact on the Group’s translated results.

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, our control.

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.

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.

Strategic Report 1 FINANCIAL REVIEW

Financial Review

The Group has adopted IFRS 16: Leases with effect from 1st
April 2019. Right-of-use assets were 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. Note 13 sets out the new accounting policy
and summarises the impact of the implementation of IFRS16:
Leases, the impact to adjusted EBITDA and depreciation being
£0.5 million for the full year. Interest charged in the year was
£18k. There is no impact to profit after tax.

Revenue for the year increased by 15.5% to £33.2 million
(FY19: £28.7m) and at constant exchange3 rates by 14.0%.
Adjusted operating profit1 was £4.7 million compared to £3.1
million last year. Profit after tax for the year was £3.1 million
(FY19: £0.9m).

Basic earnings per share for the year ended 31 March 2020
was 1.22 pence per share (FY19: 0.37 pence per share).

Divisional performance

Revenue in the UK, which represents 62% (FY19: 68%) of
total group revenues, increased by 5.5% to £20.5 million
(FY19: £19.4m). The US represented 38% (FY19: 32%) of
total group revenues and revenues increased in the period
by 36% to £12.7 million (FY19: £9.3m), revenues in local
currency grew by 32% year on year.

Gross profit

The Group’s gross profit increased to £26.3 million (FY19:
£24.1 million). Gross profit margin was 79% for the year
compared to 84% for the full year 2019. The UK gross profit
margin decreased to 83% and is expected to remain at this
level. In the US the full year margin decreased from 81% to
73% due in principle to the Coral licences. Excluding the Coral
licences, gross profit margin was 76%.

FY20
(UK)
£000

FY20
(US)
£000

FY20
Total
£000

FY19
(UK)
£000

FY19
(US)
£000

FY19
Total
£000

Revenue

20,468

12,710

33,178

19,399

9,320

28,719

Gross Profit

17,074

9,250

26,324

16,527

7,578

24,105

Gross Profit %

83%

73%

79%

85%

81%

84%

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 83-84%. In the US,
due to the impact of IFRS 15, and the growth of the Secure
Payments activities, we would expect gross profit margin
to gradually decrease to approximately 70% - 75% in the
next two years. This is because currently our Secure Payment
activities are typically deployed into the client’s environment
and require hardware to be provided. When clients renew
their contracts without additional significant hardware
the gross profit margin should gradually start to increase
marginally.

Administrative expenses

Total administrative expenses for the year were £23.0 million
(FY19: £22.9 million). Adjusted administrative expenses4 for
the year were £21.6m (FY19: £21.0 million), the last year
comparator has not been restated for IFRS16: Leases, an
impact of £0.5 million. The adjusted administrative expenses
of £21.6 million are in line with the run-rate exiting the
second half last year following investment in headcount, IT,
Sales and Marketing. Included in administrative expenses is a
trading foreign currency gain of £0.3 million.

Profitability measures

Adjusted operating profit1 was £4.7 million (FY19: £3.1
million), an increase year on year of 53.4%. Included in the
first half of FY20 were Coral licences of £0.9 million and for
the year there was a foreign currency gain of £0.3 million.
Adjusted EBITDA2 for the year was £6.4 million, an increase
year on year of 47.8% (FY19: £4.3 million).

Profit from operating activities

Amortisation of acquired intangible assets

Expenses relating to share option schemes

Adjusted operating profit1

Amortisation of intangible assets

Depreciation of owned assets

Depreciation of leased assets

Adjusted EBITDA2

Year ended
31 March
2020
£000

Year ended
31 March
2019
£000

3,286

979

468

4,733

314

848

491

1,194

1,325

567

3,086

275

960

6,386

4,321

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 £0.4 million (FY19: £0.3m) added
in the year to the value of the intangible assets of the
Company. Included in the £0.4 million is £0.2 million related
to the Cloud-Native project. In addition to the internal costs
capitalised, a further £0.5 million was capitalised relating to
a third-party vendor. 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 2020, the interest
payable charge was £68k (FY19: £77k). The interest charge is
made up of bank interest of £50k and interest on leased assets
of £18k following the implementation of IFRS 16.

Taxation

For the financial year ended 31 March 2020, there was a tax
charge of £166k (FY19: £209k charge). Further details are
included in note 9.

Earnings per share

Contract liabilities and contract assets

Contract liabilities and contract assets relating to IFRS 15
Revenue from Contracts with Customers have both increased
as new business contracted continues to increase more 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
contract liabilities were £14.4 million (FY19: £14.6m), included
in this balance are £13.2 million of contract liabilities relating
to the Secure Payments product or hosted platform product,
an increase from £11.7 million at the same time in the
previous year, a year on year increase of 13%. Contract assets
as at 31 March were £5.6 million (FY19: £4.2m)

Cashflow and liquidity

Gross cash at 31 March 2020 was £13.6 million, this is offset
by a loan to Barclays Bank of £2.0 million, giving net cash at
31 March 2020 of £11.6 million, an improvement of £3.3
million from net cash of £8.3 million as at 31 March 2019.
In the period the Company has repaid £1.3 million 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
from working capital of £1.1 million (FY19: £3.1 million cash
inflow). In addition, a dividend payment of £1.6 million was
made in October 2019.

As a result of the current COVID-19 pandemic, the Board of
Directors took advantage of the ability to defer the repayment
of capital under the loan as a precautionary measure. The
Bank has approved a delay to the April 2020 and July 2020
quarterly repayment of £325,000. The remaining balance
on the loan of £1,950,000 will be repaid evenly over the
remaining life of the loan. There will be four quarterly
repayments of £487,500 commencing October 2020.

Dividends

Basic earnings per share was 1.23 pence per share (FY19: 0.37
pence per share). Diluted earnings per share was 1.20 pence
per share (FY19: 0.36 pence per share).

Chrissie Herbert
CHIEF FINANCIAL OFFICER
16 June 2020

1. Adjusted operating profit is the profit before adjustments for

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

expenses relating to share option schemes and amortisation of
acquired intangible assets

2. Adjusted earnings before interest, tax, depreciation and amortisation

(EBITDA) is the profit before tax adjusted for depreciation of owned
assets and leased assets, amortisation of acquired intangible assets
and expenses relating to share option schemes

4. Adjusted administrative expenses are administrative expenses

excluding expenses relating to share option schemes and amortisation
of acquired intangible assets.

AnnuAl RepoRt 202020

Corporate Responsibility 3
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, which is encapsulated in our
value called ‘humanity’. We encourage all our employees to
work together in a 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.

AnnuAl RepoRt 2020

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.

Throughout the year employees in both the UK and US
business unit are kept informed of the business performance,
this is through six-monthly presentations following the
announcement of results to the markets. In addition, trading
statements, are circulated and explained to the teams once
publicly available.

We actively encourage two-way communication and we
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
the survey were shared with employees and action plans
were formulated at a team and business level to address the
identified opportunities for improvement.

One of the business-wide actions was to redefine our
Company values and these were relaunched.

Our values sit at the heart of the culture at Eckoh and are summarised below:

E encourage
E encourage
We encourage and support everyone
We Encourage
to grow with Eckoh
and support everyone to
We encourage and support everyone
to grow with Eckoh
grow with Eckoh

C challenge
C challenge
We listen, are open minded to change
We Challenge, listen,
and suggestions from others
and are open minded to
We listen, are open minded to change
and suggestions from others
change and suggestions
from others

K knowledge
K knowledge
As trusted advisors, we use our
As trusted advisors,
knowledge to solve challenges and
deliver the best for our clients
we use our Knowledge to
As trusted advisors, we use our
knowledge to solve challenges and
solve challenges and deliver
deliver the best for our clients
the best for our clients

O ownership
O ownership
We take personal ownership to strive
We take personal
for excellence in whatever we do
Ownership to strive for
We take personal ownership to strive
for excellence in whatever we do
excellence in whatever
we do

H humanity
H humanity
We are welcoming, embrace diversity
and respect each other
We are welcoming,
We are welcoming, embrace diversity
embrace diversity and
and respect each other
respect each other in a spirit
of true Humanity

A second action was to improve the communication
and collaboration across the teams. In the UK, a team of
employees representing each of the departments across the
business formed the ‘Escape’ committee. The Committee
is responsible for the Eckoh events calendar, this involves
planning and organising the social and team building events
and organising charity activities. In addition, they co-ordinate
the teams across the business, who are responsible for
organising one event annually for the wider business.
The focus of the events is about bringing the teams together
across the business in a fun way and, where possible, linked
to the Humanity value. Events have included a Halloween
quiz, a gaming competition, a Christmas fayre in the office
and an opportunity for employees to give blood locally.

Corporate Responsibility 3 EMPLOYEE ENGAGEMENT

In the US, where a large number of employees work remotely,
it is more difficult for them to engage in the social events on
a monthly basis, so, they formed a charity committee with
employees representing the teams across the business. In the
Omaha office, where there are approximately 14 employees,
there are regular social events. On an annual basis, the whole
of the US 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.

As a business we embrace technology to enable remote
working, teleconferencing and effective collaboration across
the UK and US divisions. With the impact of COVID-19, all
employees are currently working remotely both in the UK and
US. In these unusual circumstances communication is key so,
for both the UK and US businesses, there is a weekly call with
all employees to start the week. Whilst these calls are focussed
on updating all employees on the business, they also involve
recognition and celebrating success.

Under normal circumstances, 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.

AnnuAl RepoRt 2020

Employee recognition

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 Standard (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.

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 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 224 employees in total, with approximately
175 employees in the UK and 49 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, 51 employees participate in the
scheme out of approx. 163 eligible in the UK.

Following feedback from our US employees, a Sharesave
scheme for US employees, a 423 plan was approved by
Shareholders at the AGM last year and launched in December
2019. Currently 22 employees participate in the scheme out of
approx. 28 eligible in the US.

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.

Corporate Responsibility 3 EMPLOYEE ENGAGEMENT

Health, 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.

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.

Waterways Experience and
the Canal and River Trust

Eckoh encourages employees based in their office in Hemel
Hempstead to support the local community. A group of
employees spent a day clearing up the local Bulbourne River,
close to the office in Hemel Hempstead for the Canal and
River Trust, they were provided with a working narrow barge
by the Waterways Experience to help clear the foliage over
the canal. The Canal and River Trust look after, and bring life
to, 2,000 miles of waterways and encourage people to spend
time on the waterways to improve the wellbeing of millions
of people. The canals and rivers run through some of the
most heavily populated communities in England and Wales,
providing accessible green and blue space where it is needed
the most.

Herts Youth Homeless

Each Christmas, Eckoh employees raise money through
various activities in the office in Hemel Hempstead. Each year
a charity is nominated by employees and this year the Herts
Youth Homeless charity was chosen. Herts Youth Homeless is
a local charity in Hertfordshire and provides services to support
vulnerable people. Its focus is to prevent homelessness and
provide services to empower young people to be able to deal
with the difficult situations in their lives. In total the money
donated through money raised by employees and a Company
contribution was £2,078.

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 organised an event to raise money for Breast Cancer.

AnnuAl RepoRt 2020

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:

• All our office and communal working area lights are LED,
thus reducing the electricity the Company uses on an on-
going basis

• 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.

Corporate Governance 3

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

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).

David Coghlan
Non-Executive Director

Appointed to the Board – 1 December 2017

Committee Membership:

Remuneration (Chair), Audit, Nominations

Executive Directors

Nik Philpot

Executive Director -
Chief Executive Officer

Appointed to the Board – 2 February 1999
Appointed to Chief Executive Officer –
September 2006

Skills & Experience:
David is currently Chairman of Synectics plc, an AIM-quoted provider of high-end
electronic security systems and Chairman of Quadrant Group Limited, a supplier of
aviation simulation and training software and services, with subsidiaries in the UK and
US. Until its takeover in December 2019, David was also a Non-Executive Director,
and Chairman of the Audit Committee, of SCISYS plc, a software company quoted
on AIM. He has extensive experience with technology companies in the business-
tobusiness 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.

Chrissie Herbert

Skills & Experience:

Executive Director - Chief Financial
Officer & Company Secretary

Appointed to the Board – 2 May 2017

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.

AnnuAl RepoRt 2020

Chairman’s Statement on
Corporate Governance

Dear Shareholder,

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, risk, complexity and stage of
maturity.

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

As Chairman of Eckoh plc, I am ultimately responsible for the
Corporate Governance of the Group but the Board as a whole
considers that good corporate governance is a key driver in the
success of the business and accountability to the Company’s
stakeholders, including Shareholders, customers, suppliers and
employees is a vital element in that governance.

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. It is the intention that
the information contained within the report will be updated
annually alongside the publication of the Group’s Annual
Report or more frequently for any fundamental changes.

Christopher Humphrey
CHAIrMAN
16 June 2020

Corporate Governance 3 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 in Section 1, pages 3 to 19 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 the strategic plan to the Board which the
Board challenges in order to determine the strategic priorities.
On an ongoing basis the Board ensures that the strategic plan
is taken into consideration in its decision-making process.

Seek to understand and meet Shareholders’ needs
and expectations

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. Feedback from these meetings
is reported to the Board. In addition, the Non-Executive
Chairman has held meetings with the major Shareholders,
independently of the Executive Directors.

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.
David Coghlan, and Guy Millward 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 20 to 25.

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. In the UK there is an annual Customer
Satisfaction survey which we are also planning to launch in the
US in the next financial year.

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

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 36.

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 16 and 17.

AnnuAl RepoRt 2020

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.

Directors’ meeting attendance 2019/20

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 two meetings at short notice.
Directors in principle attend all meetings either in person or by
video or telephone conference arrangements. The table below
shows Directors’ attendance of Board and Committee meetings.

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

112

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.

2. David Coghlan was unable to join the March 2020 Board meeting

due to illness

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

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

- Review of annual report and preliminary announcement

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

- Review of Executive Director’s presentation of the full

year results to analysts and investors

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

monitoring mechanism

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

- Management report which is prepared and presented by

the Chief Executive Officer

- Review and approval of the interim management

statements for release to the market

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

- Recommendation of the final dividend

- Company secretarial & legal

- Setting of the Board calendar for the year.

Corporate Governance 3 CHAIRMAN'S REPORT

Divisions of roles and responsibilities

Chief Executive

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

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

Chairman

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 2020.

- 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

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

- 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.

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

All members bring different experiences and knowledge to
the Board and between them they provide a blend of business
understanding, technical knowhow, experience of public
markets and financial expertise. The Board consider that this
is appropriate to enable it to successfully execute its long-term
strategy.

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.

The biographies of each of the Directors can be found on
page 26.

AnnuAl RepoRt 2020

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

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 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.

A Board evaluation process will be carried out in the current
financial year.

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

Our Corporate Responsibility section on pages 20 to 25 set
out the importance of business ethics to Eckoh and the way
we do business. The employee engagement section on pages
21 to 24 demonstrates the value we place on our employees
and the culture we drive in the UK and US business.

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 report on the Nomination Committee is set out below and
the reports of the Audit Committee and the Remuneration
Committee are set out on pages 34 to 36 and 37 to 42
respectively.

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

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

The Company is committed to open communication with
all its Shareholders. Communications 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.

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

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

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.

Corporate Governance 3 CHAIRMAN'S REPORT

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 29.

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.

Section 172(1) Statement –

Board engagement with our stakeholders

Section 172 of the Companies Act 2006 requires a Director
of a Company to act in the way he or she considers, in good
faith, would be most likely to promote the success of the
Company for the benefit of its members as a whole. In doing
this, section 172 requires a Director to have regard, among
other matters, to: the likely consequences of any decision in
the long-term; the interests of the Company’s employees;
the need to foster the Company’s business relationships with
suppliers, customers and others; the impact of the Company’s
operations on the community and the environment; the
desirability of the Company maintaining a reputation for high
standards of business conduct; and the need to act fairly
with members of the Company. The Directors give careful
consideration to the factors set out above in discharging their
duties under section 172. The stakeholders we consider in this
regard are the people who work for us, buy from us, supply to
us, own us, regulate us, and live in the societies we serve and
the planet we all inhabit. The Board recognises that building
strong relationships with our stakeholders will help us deliver
our strategy in line with our long-term values and operate
the business in a sustainable way. The Board is committed to
effective engagement with all its stakeholders.

For further details of how the Board operates and the
way in which it makes decisions, including key activities
during the financial year ended 31 March 2020 and Board
governance, see pages 28 to 31 and the Board Committee
reports thereafter. The Board regularly receives reports
from Management on issues concerning customers, the
environment, communities, suppliers, employees, regulators,
governments and investors, which it takes into account in its
decision-making process under section 172. In addition to
this, the Board seeks to understand the interests and views
of the Group’s stakeholders by engaging with them directly
as appropriate. The Board receives updates from Executive
Management on various metrics and feedback tools in
relation to employees, including an annual employee survey.
Engagement with employees is two-way to ensure that
employees are kept well-informed about the business and
valuable feedback is received to ensure continuation of being
a trusted employer.

The Board regularly receives updates on feedback from
investors from the Executive Management. In addition, the
Chairman, CEO and CFO meet frequently with institutional
investors to discuss and provide updates about – and seek
feedback on – the business, strategy, long-term financial
performance, Directors’ remuneration policy and dividend
policy to the extent appropriate. Members of the Board also
met Shareholders at the 2019 AGM. Considering the capital
growth aims of Shareholders, the Directors are focussed on
growing the US Secure Payments business and enhancing
our market leader position for contact centre security into
the cloud. The Directors will continue to evaluate acquisition
opportunities that can support the growth strategy in contact
centre security and customer engagement.

Relationships with customers are fostered and we listen to
feedback through customer surveys. We also develop the
relationships with clients through cross-selling appropriate
additional product and services, which maximises client value
and also ensures high retention of clients.

It is the Group’s policy to manage and operate worldwide
business activities in conformity with applicable laws and
regulations as well as with the highest ethical standards.
Both the Group’s Board of Directors and Executive
Management are determined to comply fully with the
applicable law and regulations, and to maintain the
Company’s reputation for integrity and fairness in business
dealings with third parties.

AnnuAl RepoRt 2020

Corporate Governance 3

Audit Committee report

Dear Shareholder,

On behalf of the Audit Committee, I am pleased to
present our report for the year ended 31st March 2020.
The Committee has considered the integrity of the Group’s
financial reporting and provided advice to the Board that
the 2020 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 26.

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

• overseeing the quality of the external audit process.

The Committee has met three times during the year inviting
the external auditors, the Chief Financial Officer and the Chief
Executive Officer to each of these meetings. During one of
the Audit Committee Meetings, the auditors were present,
without the Chief Financial Officer or the Chief Executive
Officer being present. The details of meeting attendance are
set out on page 29.

Guy Millward
CHAIrMAN AuDIT COMMITTEE
16 June 2020

AnnuAl RepoRt 2020

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)

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

Consideration of the going concern basis for
preparation of the financial statements. Review
of internal forecasts as a result of COVID-19,
focusing on the risk to revenue, costs and
profit and the recoverability of debtors and
cash collection

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 16 and 17.

Review and monitor the effectiveness and
robustness of the Company's internal financial
controls and processes and determine whether
an internal audit function is required.

Committee
governance

Review and update of the Audit Committee
terms of reference.

The significant issues considered by the Committee
in relation to the 2020 Financial statements,
and how these were addressed, were:

• risk of fraud in revenue recognition

(including contract accounting)
Following the implementation of IFRS 15: Revenue from
Contracts with Customers the revenue recognition is
more complex and involves calculation schedules and can
be judgemental. 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.

• Management override of controls

We are satisfied adequate controls are in place and use
the monthly management reporting and the results of the
external audit to assess this on an on-going basis.

Impact of IFrS 16: Leases

The Group has adopted IFRS 16: Leases using the modified
retrospective approach from 1 April 2019 and has not restated
comparatives for the reporting period to 31 March 2019 as
permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in retained
earnings as at 1 April 2019. In adopting IFRS 16: Leases, the
Group has taken advantage of practical expedients permitted
by the standard, namely the accounting of operating leases
with a remaining lease term of less than 12 months as at
1 April 2019 as short-term leases. A number of the leases
have implicit interest rates, where the lease does not have
an implicit interest rate management have used average
incremental rates obtained from their UK and US bank as the
discount rates used to calculate the lease liabilities for each
of the leases. In addition, a number of the leases include
some element of variable lease payments and some leases
have options for the extension of the lease period. Each lease
has been reviewed and management has made a decision
on the likely term of the lease taking into account leases
that will be extended. On adoption of IFRS 16: Leases, the
Group recognised lease liabilities in relation to leases which
had previously been classified as ‘operating leases’ under the
principles of IAS 17 Leases. These liabilities were measured at
the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of 1 April 2019.

External audit

An annual review of the effectiveness of the external audit is
undertaken by the Committee.

The effectiveness of the audit process is underpinned by the
appropriate audit planning and risk identification at the outset
of the audit cycle. The auditor provides a detailed audit plan,
which includes the level of materiality and its assessment of
the risks and other key matters for review. For the year ended
31 March 2020, the primary risks identified were: risk of fraud
in revenue recognition (including contract accounting) and
management override of controls. The Committee reviews
and challenges the work undertaken by the auditor to test
management’s assumptions on these matters. An assessment
of the effectiveness of the audit process in addressing these
items is performed through the reporting received from the
auditors at the 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 2020 and the
quality of the audit process was assessed to be good.

Corporate Governance 3 AUDIT COMMITTEE REPORT

Based on the Committee’s assessment, the Committee has
provided the Board with its recommendation to the Share-
holders on the re-appointment of PricewaterhouseCoopers LLP
as external auditors for the year ending 31 March 2021. 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 the
auditors’ independence is safeguarded. There were no non-
audit fees paid to PricewaterhouseCoopers LLP in the year
ended 31 March 2020.

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 review of risks facing the Group is shown on pages 16
and 17. The Group has clearly defined lines of accountability
and delegation of authority which are closely adhered to
and include policies and procedures that cover financial
planning and reporting, accounts preparation, information
security, project governance and operational management.
The reporting and review processes provide regular assurance
to the Board as to the adequacy and effectiveness on internal
controls.

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. During the year ended 31 March
2020 the Committee has decided that as the Group continues
to grow, particularly in the US, Grant Thornton UK LLP be
engaged to review the internal controls of the US Finance
function during the financial year ending 31 March 2021.

Guy Millward
CHAIrMAN AuDIT COMMITTEE
16 June 2020

AnnuAl RepoRt 2020

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 2020, which has been approved by the Board.

This report is divided into two sections:

• The annual statement setting out the work of the

Remuneration Committee in the financial year ended
31 March 2020; and

• 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 2020.

The membership and responsibilities of the Remuneration
Committee are set out on page 39 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:

• Due to COVID-19, the Executive Directors recommended
to the Committee that no pay rises be awarded from
1 April 2020 to any employee in the organisation,
including the Executive Directors. The Committee agrees
with this approach and will review the position throughout
the financial year ending 31 March 2021 as the impact of
COVID-19 continues to be monitored.

• A review of the Annual Bonus Plan for the financial year
ended 31 March 2020 and for the financial year ending
31 March 2021. The Remuneration Committee sought
advice from FIT Remuneration Consultants LLP (“FIT”)
given the current situation with COVID-19. After
deliberation, the following was proposed to the Board:

° Due to the strong business performance in the

financial year ending 31 March 2020 and the fact
that the bonus criteria had been achieved, it was
recommended that under the Annual Bonus Plan for
FY20 the Bonus payments were made for the Executive
Directors and Senior Management for the financial
year ended 31 March 2020. For the Executive Directors
these are set out on page 26. Bonus payments for
staff members were accrued at an average of 5%
(FY19: 5%) of salary

° The Remuneration Committee considered that it was
inappropriate at that point to define an Annual Bonus
Plan for the financial year ending 31 March 2021.
It was agreed to revisit this decision in the summer of
2020 when the situation and the impact of COVID-19
is more fully understood. If an Annual Bonus Plan
were deemed appropriate at this time, it would be
more modest in its nature and likely to cover only the
remaining part of the financial year.

• US Sharesave scheme was approved at the 2019 AGM
and launched to the US employees in December 2019.
Of the 28 eligible employees in the US, 22 employees
enrolled in the first year of the scheme.

• During the financial year ended 31 March 2020, the
Committee reviewed the succession plans for Senior
Management, who report to the Executive Directors.
There will be continued focus on this area in the financial
year ending 31 March 2021.

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 16 September 2020. I encourage all
Shareholders to vote in favour of this resolution and, subject to
government restrictions, I look forward to the opportunity to
meet with Shareholders at the 2020 AGM.

David Coghlan
CHAIrMAN rEMuNErATION COMMITTEE
16 June 2020

Corporate Governance 3 REMUNERATION REPORT

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.

Measurement criteria 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 approximately 5 years
from the 2017 AGM, ending 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 the
measurement criteria and targets 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 Total

Shareholder Return (“TSR”) of 10% pa

• 100% vesting for compound growth in TSR of

25% pa or greater

• 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 2020

Annual report on 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 2019 AGM

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

For (including discretionary)

Against

Total number
of votes

131,263,136

13,400

% of
votes cast

99.99%

0.01%

Total votes cast (excluding withheld votes)

131,276,536

Total votes withheld

1,330

Total votes cast (including withheld votes)

131,277,866

The following section provides details of how Eckoh’s
Remuneration Policy was implemented during the financial
year ended 31 March 2020. 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 three times during the year.
The details of meeting attendance are set out on page 29.

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.

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 2020 and 2019:

Base salary/fees

Benefits1

Pension

Annual bonus

Total

2020

£’000

2019

£’000

2020

£’000

2019

£’000

2020

£’000

2019

£’000

2020

£’000

2019

£’000

2020

£’000

2019

£’000

186

320

180

289

118

125

292

454

288

459

640

600

193

203

880

878

Executive Directors

Chrissie Herbert

Nik Philpot2

Non-Executive Directors

David Coghlan

Christopher Humphrey

Guy Millward

Total

Benefits includes car allowance, healthcare cover & death in service

2. N Philpot has elected to have all his Company pension contribution added to his salary. The pension contribution has been
reduced by the employer’s national insurance that is payable by the Company for the amount added to his base salary.

Corporate Governance 3 ANNUAL REPORT ON REMUNERATION

Incentive outcomes for the year
ended 31 March 2020

Scheme interests awarded in the year
ended 31 March 2020

Annual bonus in respect of 2019/20 performance

Performance Share Plan (“PSP”) (audited)

The annual bonus for the Executive Directors and Senior
Management for the year ended 31 March 2020 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 40% of their base salary (FY19:
45%). Bonus payments for staff members were accrued at an
average of 5% (FY19: 5%) of salary.

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 2020, no awards
were made to any employee in the UK and US. Details of
awards made in previous years 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 2020:

role

Chairman

Non-Executive Director

Chairman of a Committee

2020 Annual fee £k

Fees for the Chairman, Non-Executive Directors and
Committee Chairmen are reviewed annually. As a result of the
pay-freeze in light of COVID-19, the fees for the Chairman
and Non-Executive Directors base salaries will remain at their
current levels and an increase will not be applied from 1 June
2020. In addition, a Committee Chairman fee for the Audit
Committee and Remuneration Committee of £5,100 per
annum will not be increased from 1 June 2020.

Payments to past Directors (audited)

Directors’ shareholdings

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

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 2020:

31 March 2020
Ordinary Shares of
0.25 pence each

1 April 2019
Ordinary Shares of
0.25 pence each

Nik Philpot1

Chrissie Herbert

Christopher Humphrey

6,976,285

20,000

500,000

6,976,285

20,000

400,000

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

included above.

AnnuAl RepoRt 2020

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
2019
(number)

Granted
in year
(number)

Forfeited
in year
(number)

Exercised
in year
(number)

At 31 March
2020
(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 2020

1 April 2019

Ordinary Shares of

0.25 pence each

Nik Philpot1

Chrissie Herbert

Christopher Humphrey

6,976,285

20,000

500,000

6,976,285

20,000

400,000

Corporate Governance 3 ANNUAL REPORT ON REMUNERATION

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 2019 and 2020, Chrissie Herbert participates in the UK scheme and the details are shown below:

Number of
Partnership
Shares
purchased
at 31 March
2019

Number of
Matching
Shares
purchased
at 31 March
2019

Dividend
Shares1
acquired at
31 March
2019

Total
Shares at
31 March
2019

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
2020

Chrissie
Herbert

6,714

13,428

189

20,331

4,465

8,930

276

Nov 20

34,002

1. Dividend Shares are Ordinary Shares of the Company purchased

with 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 £0.3738
to £0.4375).

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.

Executive Directors’ service contracts

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 receives independent advice from FIT
Remuneration Consultants LLP as the Committee’s appointed
remuneration advisor during the financial year ended 31
March 2020. During the year the level of fees paid to
remuneration advisors totalled £nil (2019: £6k).

David Coghlan
CHAIrMAN rEMuNErATION
COMMITTEE
16 June 2020

AnnuAl RepoRt 2020

Directors' report

The Directors present the Directors’ Report,
together with the audited Financial Statements
for the year ended 31 March 2020.

Principal activities, results and likely future
developments

Substantial shareholdings

As at 31 March 2020, 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 principal activities of the Group are:

Name of holder

•

Secure Payment products, which help organisations reduce
the risk of fraud; secure sensitive data, comply with the
Payment Card Industry Data Security Standard (“PCI DSS”)
and wider security regulations such as the General Data
Protection Regulation (“GDPR”).

• Customer Contact solutions, which help organisations
transform the way they engage with their customers.

The profits for the year after taxation amounted to £3.1
million (2019: £0.9 million). Further comments on the
development of the business are included in the Chairman’s
Statement, Chief Executive’s Report and Financial Review on
pages 6 to 19.

Statutory information

Eckoh plc (The Company) is a Public Limited Company
incorporated in the United Kingdom (Registration number
03435822). The Company’s Ordinary Shares are traded on
the Alternative Investment Market of the London Stock
Exchange (AIM).

The Company has a trading subsidiary, located in the USA,
whose operations and results are included in the financial
statements of the Company.

The subsidiary undertakings are listed in note 15.

Share capital

The Company has only Ordinary Shares of 0.25 pence nominal
value in issue along with 1,466,670 of shares held in treasury.
Note 20 to the consolidated financial statements summarises
the rights of the Ordinary Shares as well as the number issued
during the year ended 31 March 2020.

No.of ordinary
shares/voting
rights

% of issued
capital/voting
rights

Hargreave Hale

Kestrel Partners

Blackrock Investment
Management

Herald Investment
Management

Close Brothers

Cavendish Asset
Management

Chelverton Asset
Management

AXA Investment
Mangers uK

41,222,484

33,025,524

24,984,269

16,192,890

9,467,984

9,434,061

8,500,000

7,815,024

16.16

12.95

9.80

6.35

3.71

3.70

3.33

3.06

Annual General Meeting (AGM)

The 2020 AGM will be held at 11:00 on 16 September 2020.

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.

Directors’ and Officers’ liability insurance and
indemnification of Directors

The Group has purchased and maintained throughout the year
Directors’ and Officers’ liability insurance in respect of itself
and its Directors and these remain in force at the date of this
report.

Corporate Governance 3 DIRECTORS' REPORT

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.

Political contributions

Neither the Company nor any of its subsidiaries made any
political donations or incurred any political expenditure during
the year (2019: nil).

A key business indicator is our total orders and new business
orders. We anticipate the new business wins for the current year
to be impacted, particularly in the US as we are experiencing
smaller deals continuing to progress but larger deals being
put on hold in the short term. We anticipate the renewal
rate for the UK and US businesses to remain unchanged
during this period. When preparing the cash flow forecasts
the Directors have reviewed a number of scenarios with
respect to levels of new business. In all scenarios the Directors
were able to conclude that the Group has adequate cash to
continue in operational existence for the foreseeable future.

Going concern

Subsequent events

In determining the appropriate basis of preparation of the
financial statements, the Directors are required to consider
whether the Group can continue in operational existence for the
foreseeable future.

In the early months of 2020, a global pandemic had broken
out causing governments around the world to impose
various restrictions on economies and human populations.

The Board has carried out a going concern review and concluded
that the Group has adequate cash to continue in operational
existence for the foreseeable future.

The Directors have prepared cash flow forecasts for a period
in excess of 12 months from the date of signing the financial
statements.

Our US operation is underpinned completely by fixed contractual
fees. In the UK, clients have a variety of commercial models
including fixed fees and transactional arrangements, with
varying levels of commitment. Volumes were impacted
significantly from mid-March, but this was not reflected
proportionately in revenue. Volumes have been steadily
increasing since mid-May and we anticipate this continued
improvement into July. We are continually monitoring our
clients’ ability to pay invoices and for the year ended 31 March
2020 we have provided against a small number of smaller
clients’ debts and this information can be found in Note 17.

There were no events after the balance sheet date.

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 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.

Dividends

No interim dividend was paid during the year (2019: nil).

As a result of the swift and fundamental impact of COVID-19
on global economic conditions, and the current impact to
some of Eckoh’s clients, the Board considers it prudent not to
propose a year-end dividend unless conditions change, such
that the outlook is clearer, which would support us doing
so. Final dividend for 2019 was 0.61p per ordinary share
amounting to £1.6 million and was paid in October 2019

Independent Auditors

PricewaterhouseCoopers LLP have expressed their willingness
to continue as the Company’s auditors. As outlined in the Audit
Committee report on page 36, resolutions proposing their
appointment and to authorise their remuneration will be
proposed at the 2020 AGM.

AnnuAl RepoRt 2020

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 of the Company’s financial statements published on
the ultimate parent Company’s website. Legislation in the
United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.

By order of the Board

Chrissie Herbert
COMPANy SECrETAry
16 June 2020

Statement of Directors’ responsibilities

The Directors are responsible for preparing the Annual Report
financial statements in accordance with applicable law and
regulation.

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.

Corporate Governance 3 INDEPENDENT AUDITORS' REPORT

Eckoh
plc
Annual
Report
2020

Independent auditors’ report to the members of Eckoh plc
Independent auditors’ report to the members of Eckoh plc

Eckoh plc Annual Report 2019

Report on the audit of the financial statements
Report on the audit of the financial statements

Opinion

In our opinion:

Independent auditors’ report to the members of Eckoh plc
Opinion
In our opinion:
Report on the audit of the financial statements
Opinion

• 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 2020 and of the
group’s profit and cash flows for the year then ended;

In our opinion:

•

•
•
•

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 group financial statements have been properly prepared in accordance with International Financial
•
• Eckoh plc’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair
Reporting Standards (IFRSs) as adopted by the European Union;
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 company financial statements have been properly prepared in accordance with United Kingdom Generally
the Group financial statements have been properly prepared in accordance with International Financial Reporting
Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced
Standards (IFRSs) as adopted by the European Union;
Disclosure Framework”, and applicable law); and
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
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
applicable law); and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual
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 as at 31 March 2020; the
Report”), which comprise: the consolidated and company statements of financial position as at 31 March 2020; the
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”),
consolidated statement of total comprehensive income, the consolidated statement of cash flows, and the consolidated
consolidated statement of total comprehensive income, the consolidated statement of cash flows, and the consolidated
which comprise: the consolidated and Company statements of financial position, the consolidated statement of total
and company statements of changes in equity for the year then ended; and the notes to the financial statements, which
and company statements of changes in equity for the year then ended; and the notes to the financial statements, which
comprehensive income, the consolidated and Company statements of changes in equity, the consolidated statement of cash flows;
include a description of the significant accounting policies.
include a description of the significant accounting policies.
and the notes to the financial statements, which include a description of the significant accounting policies.

•

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

Independence
Independence
Independence

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

Our audit approach
Our audit approach
Our audit approach
Overview
Overview
Overview

• Overall Group materiality: £214,700 (2018: £115,000), based on 0.75% of total
• Overall group materiality: £331,000 (2019: £214,700), based on 1% of total
• Overall group materiality: £331,000 (2019: £214,700), based on 1% of total
• Overall Company materiality: £150,000 (2018: £100,000), based on 1% of total
• Overall company materiality: £332,000 (2019: £321,000) – based on 1% of
• Overall company materiality: £332,000 (2019: £321,000) – based on 1% of

revenue.
revenue.

revenue.

assets.
total assets, restricted for group reporting.

total assets, restricted for group reporting.

Eckoh
plc
Annual
Report
2020

Independent auditors’ report to the members of Eckoh plc

• We conducted full scope audit work over the operations of Eckoh UK and Eckoh
• We conducted full scope audit work over the operations of Eckoh UK and
• We conducted full scope audit work over the operations of Eckoh UK and
US due to their financial significance to the group.
Eckoh US due to their financial significance to the group.
Eckoh US due to their financial significance to the group.
•
In addition, we performed full scope audits of Eckoh plc (“the Company”).
• In addition, we performed full scope audit of Eckoh plc ("the company").
• In addition, we performed full scope audit of Eckoh plc ("the company").
•
The reporting entities subject to audit procedures accounted for 100% of both the
• The reporting entities subject to audit procedures accounted for 100% of
• The reporting entities subject to audit procedures accounted for 100% of
Group's revenue and profit for 2019 and 71% of net assets at 31 March 2019.
both group's revenue and profit for 2020 and 100% of net assets as at 31
March 2020.

both group's revenue and profit for 2020 and 100% of net assets as at 31
March 2020.

• Contract revenue and IFRS 15 transition.
•
Impairment of goodwill and intangible assets.
• Revenue from contracts with customers
• Revenue from contracts with customers
• Impact of Covid-19
• Impact of Covid-19

Report on the audit of the financial statements

The scope of our audit
The scope of our audit
The scope of our audit
Opinion
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
In our opinion:
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
financial statements. In particular, we looked at where the directors made subjective judgements, for example in
financial statements. In particular, we looked at where the directors made subjective judgements, for example in
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
• Eckoh plc’s group financial statements and company financial statements (the “financial statements”) give a
respect of significant accounting estimates that involved making assumptions and considering future events that are
respect of significant accounting estimates that involved making assumptions and considering future events that are
true and fair view of the state of the group’s and of the company’s affairs as at 31 March 2020 and of the
inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there
group’s profit and cash flows for the year then ended;
was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

•

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

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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.

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 as at 31 March 2020; the

consolidated statement of total comprehensive income, the consolidated statement of cash flows, and the consolidated

and company statements of changes in equity for the year then ended; 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

• Overall group materiality: £331,000 (2019: £214,700), based on 1% of total

revenue.

• Overall company materiality: £332,000 (2019: £321,000) – based on 1% of

total assets, restricted for group reporting.

• We conducted full scope audit work over the operations of Eckoh UK and

Eckoh US due to their financial significance to the group.

• In addition, we performed full scope audit of Eckoh plc ("the company").

• The reporting entities subject to audit procedures accounted for 100% of

both group's revenue and profit for 2020 and 100% of net assets as at 31

March 2020.

• Revenue from contracts with customers

• Impact of Covid-19

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,

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AnnuAl RepoRt 2020

Eckoh
plc
Annual
Report
2020

including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.

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

Revenue from contracts with customers - Group
The approach to revenue recognition as set out under IFRS
15 is complex and can be judgemental especially where
contracts with customers have variable considerations and
include multi-element arrangements. For the year ended 31
March 2020 the group had revenues of £33,178k (FY19:
£28,719k). See Note 2 of the group’s financial statements.

Due to its expected impact on the group, we deem contract
revenue recognition to be a key audit matter.

Impact of Covid-19 – Group and Company
Management and the board have considered the potential
impact caused by the global pandemic of Covid-19 on the
current and future operations of the group. In doing so,
management has focused on the group’s ability to continue
as a going concern and comply with banking covenants.

In order to conclude that it is appropriate for the financial
statements to be prepared on a going concern basis,
management has performed detailed analysis of the impact
of Covid-19 on revenue, profit and cashflows. In doing so,
management had made estimates and judgements that are
critical to the outcome of these considerations. See “Going
concern” within Note 1 of the group’s financial statements.

Given the magnitude of the potential implications of the
Covid-19 on the group’s performance and economy as a
whole, we deem this as a key audit matter.

Our procedures included the following:

•

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

• Recalculated revenue recognition schedules to

confirm their accuracy.

•

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.

Performed testing on unusual revenue journal
entries.

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

Our procedures included the following:

• Agreeing key inputs and assumptions used in the
forecasts prepared by management to appropriate
audit evidence (such as actual performance since 1
April 2020, communications with customers
regarding contract renewals etc.).

• Considering the historical accuracy of the budgeting

process to gain assurance over the reliability of the
forecasted numbers.

• Discussing underlying assumptions such as

considerations of significant contracts, potential
renewals and recoverability of trade receivables with
management and using our understanding of the
industry to confirm reasonableness of these
assumptions.

• Reviewing management’s stress testing of the group’s
cash flow forecast model to assess cash burn out after
accounting for various sensitivities (such as reduced
revenue and no new contracted business scenarios).

• Obtaining and auditing management’s forward-

looking banking covenant calculations to confirm no
potential covenant breaches where appropriate.

• Reviewing the disclosures included within the

Annual Report.

On the basis of the procedures performed we found the
assumptions used and disclosures provided to be appropriate.

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.

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Corporate Governance 3 INDEPENDENT AUDITORS' REPORT

Eckoh
plc
Annual
Report
2020

Eckoh plc has both its corporate and operating headquarters in Hemel Hempstead, United Kingdom. The audit
engagement team is aligned to Eckoh plc’s geographical organisation and largely reflects the management structure. As
Eckoh plc’s corporate headquarters are based in the UK, the group audit engagement team is also based in the UK 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 revenue and profit and 100% of
consolidated net assets.

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

£331,000 (2019: £214,700).

£332,000 (2019: £321,000) - restricted for group
reporting.

How we determined it

1% 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 used 1% of total assets as the benchmark
which is a generally accepted auditing practice for
non-profit oriented holding entities.

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 £240,000 and £300,000.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£16,000 (group audit) (2019: £10,700) and £12,000 (company audit) (2019: £7,500) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you
where:

•

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.

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.

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.

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AnnuAl RepoRt 2020

Eckoh
plc
Annual
Report
2020

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 2020 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.

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 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:

• we have not received all the information and explanations we require for our audit; or

•

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.

• We have no exceptions to report arising from this responsibility.

Matthew Mullins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Uxbridge
16 June 2020

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Financial Statements 4

Financial Statements

51 Consolidated statement of total comprehensive income

52 Consolidated statement of financial position

53 Company statement of financial position

54 Consolidated statements of changes in equity

55 Company statements of changes in equity

56 Consolidated statement of cash flows

57 Notes to the financial statements

83 Shareholder Information

Consolidated statement of total comprehensive income

for the year ended 31 March 2020

Continuing operations

Revenue

Cost of sales

Gross profit

Administrative expenses

Operating profit

Adjusted operating profit

Amortisation of acquired intangible assets

Expenses relating to share option schemes

Profit from operating activities

Finance charges

Finance income

Profit before taxation

Taxation

Profit for the financial year

Other comprehensive (expense)/ income

Items that will be reclassified subsequently to profit or loss:

Foreign currency translation differences - foreign operations

Other comprehensive (expense)/ income for the year, net of income tax

Total comprehensive income for the year attributable to the equity holders
of the Company

Profit per share

Basic earnings per 0.25p share

Diluted earnings per 0.25p share

Notes

2020
£’000

2019
£'000

33,178

(6,854)

26,324

28,719

(4,614)

24,105

(23,038)

(22,911)

3,286

4,733

(979)

(468)

3,286

(68)

3,302

(166)

3,136

(48)

3,088

2020

pence

1.23

1.20

1,194

3,086

(1,325)

(567)

1,194

(77)

1,154

(209)

945

580

1,525

2019

pence

0.37

0.36

AnnuAl RepoRt 202052

Financial Statements 4 PRIMARY STATEMENTS

Consolidated statement of financial position

as at 31 March 2020

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Right-of-use leased 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

Lease liabilities

Non-current liabilities

Other interest-bearing loans and borrowings

Lease liabilities

Deferred tax liabilities

Net assets

Shareholders’ equity

Called up share capital

Share premium account

Capital redemption reserve

Merger reserve

Currency reserve

Retained earnings

Total Shareholders’ equity

Notes

2020
£’000

2019
£’000

7,313

3,851

277

3,805

15,246

312

13,494

13,541

27,347

42,593

7,464

4,118

4,081

15,663

458

13,209

11,582

25,249

40,912

(21,078)

(975)

(233)

(19,983)

(1,300)

(22,286)

(21,283)

(975)

(33)

(290)

(1,298)

19,009

638

2,663

198

2,697

848

11,965

19,009

(1,950)

(495)

(2,445)

17,184

635

2,659

198

2,697

896

10,099

17,184

The financial statements were approved by the Board of Directors on 16 June 2020 and signed on its behalf by:

Chrissie Herbert
CHIEF FINANCIAL OFFICER

Company Registration Number 3435822

Company statement of financial position

for at 31 March 2020

Assets

Non-current assets

Property, plant and equipment

Investments in group companies

Deferred tax asset

Current assets

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

Deferred tax liabilities

Net assets

Shareholders’ equity

Called up share capital

Share premium account

Capital redemption reserve

Merger reserve

Retained earnings

Total Shareholders’ equity

Notes

2020
£’000

2019
£’000

2,843

19,854

22,699

3,889

6,661

10,550

33,249

2,886

19,451

22,337

4,886

4,932

9,818

32,155

(19,053)

(975)

(20,028)

(15,644)

(1,300)

(16,944)

(975)

(133)

(1,108)

12,113

638

2,663

198

2,697

5,917

(1,950)

13,261

635

2,659

198

2,697

7,072

12,113

13,261

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 year was £329,000 (2019: profit after tax of £925,000). The financial statements were approved
by the Board of Directors on 16 June 2020 and signed on its behalf by:

Chrissie Herbert
CHIEF FINANCIAL OFFICER

Company Registration Number 3435822

AnnuAl RepoRt 202054

Financial Statements 4 PRIMARY STATEMENTS

Consolidated statement of changes in equity

for the year ended 31 March 2020

Called
up share
capital

Share
premium
account

Capital
redemption
reserve

£’000

635

£’000

2,659

£’000

198

Merger
reserve

£’000

2,697

Currency
reserve

Retained
earnings

Total
Share-
holders'
equity

£’000

896

£’000

10,099

17,184

(48)

3,136

(48)

3,088

(1,558)

(187)

(146)

407

214

(187)

(146)

407

214

(1,270)

(1,263)

Balance at 1 April 2019

Total comprehensive income / (expense)
for the period

Profit for the financial year

Other comprehensive expense for the period

Total comprehensive (expense) / income for
the period

Dividends paid in the year

Shares transacted through Employee Benefit Trust

Shares purchased for share ownership plan

Shares issued under the share option schemes

Share based payment charge

Deferred tax on share options

Total contributions by and distributions
to owners

Balance at 31 March 2020

638

2,663

198

2,697

848

11,965

19,009

Called
up share
capital

Share
premium
account

Capital
redemption
reserve

£’000

631

£’000

2,640

£’000

198

Merger
reserve

£’000

2,697

Currency
reserve

Retained
earnings

Total
Share-
holders'
equity

£’000

316

£’000

10,176

16,658

580

945

580

1,525

(1,392)

(3)

(155)

567

(39)

(3)

(155)

567

(39)

(867)

(999)

Balance at 1 April 2018

Total comprehensive income for the period

Profit for the financial year

Other comprehensive income for the period

Total comprehensive income for the period

Dividends paid in the year

Shares transacted through Employee Benefit Trust

Shares purchased for share ownership plan

Shares issued under the share option schemes

Share based payment charge

Deferred tax on share options

Total contributions by and distributions
to owners

Balance at 31 March 2019

635

2,659

198

2,697

896

10,099

17,184

Company statement of changes in equity

for the year ended 31 March 2020

Balance at 1 April 2019

Total comprehensive income for the period

Profit for the financial year and total
comprehensive income

Total comprehensive income for the period

Dividends paid in the year

Shares transacted through Employee Benefit Trust

Shares purchased for share ownership plan

Shares issued under the share option schemes

Share based payment charge

Total contributions by and distributions
to owners

Called up
share capital

£’000

635

Share
premium
account

Capital
redemption
reserve

£’000

2,659

£’000

198

Merger
reserve

£’000

2,697

Retained
earnings

£’000

7,072

Total
Shareholders'
equity

£’000

13,261

329

(1,558)

(187)

(146)

407

(187)

(146)

407

(1,484)

(1,477)

Balance at 31 March 2020

638

2,663

198

2,697

5,917

12,113

Balance at 1 April 2018

Total comprehensive income for the period

Profit for the financial year and total
comprehensive income

Total comprehensive income for the period

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 by and distributions
to owners

Called up
share capital

£’000

631

Share
premium
account

Capital
redemption
reserve

£’000

2,640

£’000

198

Merger
reserve

£’000

2,697

Retained
earnings

£’000

7,183

Total
Shareholders'
equity

£’000

13,349

925

(1,392)

(3)

(155)

553

(39)

(3)

(155)

553

(39)

(1,036)

(1,013)

Balance at 31 March 2019

635

2,659

198

2,697

7,072

13,261

AnnuAl RepoRt 2020

Financial Statements 4 PRIMARY STATEMENTS

Consolidated statement of cash flows

for the year ended 31 March 2020

Cash flows from operating activities

Cash generated from operations

Taxation

Interest paid

Interest paid on lease liability

Net cash generated from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Purchase of intangible assets

Interest received

Net cash utilised in investing activities

Cash flows from financing activities

Dividends paid

Repayment of borrowings

Principal elements of lease payments

Shares purchased for share ownership plan

Issue of shares

Shares acquired/sold by Employee Benefit Trust

Net cash utilised 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 57 to 80 form an integral part of these financial statements.

Notes

2020
£'000

7,240

(88)

(50)

(18)

7,084

(571)

(951)

(1,438)

(1,558)

(1,300)

(503)

(187)

(146)

(3,687)

1,959

11,582

13,541

2019
£'000

7,488

(227)

(77)

7,184

(541)

(435)

(939)

(1,392)

(1,300)

(155)

(3)

(2,827)

3,418

8,164

11,582

Notes to the Financial Statements
for the year ended 31 March 2020

GENERAL INFORMATION

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

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

Eckoh plc (the “Company”) is a global provider of Secure
Payment products and Customer Contact solutions.

The Group financial statements consolidate its subsidiaries
(together referred to as the “Group”). The Company’s
financial statements present information about the Company
as a separate entity and not about its Group.

1. Basis of preparation

The Group’s financial statements have been prepared and
approved by the Directors in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the
European Union (“Adopted IFRSs”) and the Company’s
financial statements have been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS101
“Reduced Disclosure Framework”, and applicable law). On
publishing the Company’s financial statements here together
with the Group’s financial statements, the Company is
taking advantage of the exemptions provided in s408 of the
Companies Act 2006 not to present its individual Income
Statement and related notes that form part of these approved
financial statements. The Company has also 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

•

IFRS 2 Share based payments in respect of group settled
share-based payments.

This financial information has been on a going concern basis
and prepared under the historical cost convention.

The Group’s and Company’s 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.

These financial statements have been prepared in accordance
with those IFRS standards and IFRIC interpretations issued
and effective or issued and adopted as at 31 March 2020 as
endorsed by the EU.

NEw ACCOuNTING STANdARdS EFFECTIvE FOR
THE GROuP ANd COMPANy IN THESE FINANCIAL
STATEMENTS:

IFRS 16 Leases (IFRS 16) changes the way in which operating
leases are treated within the financial statement. Right of use
assets and related liabilities are recognised for all material
leases from 1 January 2019. The effects of IFRS 16 are
included in note 13 to these financial statements.

The Group has considered the following amendments to
published standards that are effective for the Group for the
financial year beginning 1 April 2019 and concluded that they
are either not relevant to the Group or that they do not have
a significant impact on the Group’s financial statements, other
than in disclosure. These standards and interpretation have
been endorsed by the European Union.

•

IFRIC 23 Uncertainty over income tax treatments

• Amendments to IAS 19 Plan Amendment, Curtailment

or Settlement

• Prepayment Features with Negative Compensation

(Amendments to IFRS 9)

• Long-term Interests in Associates and Joint Ventures

(Amendments to IAS 28)

• Annual Improvements to IFRS Standards 2015-17 Cycle

The International Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations Committee
(IFIC) have issued the following standards and interpretations
with an effective date after the date of these accounts which
are not expected to have significant impact on the Group’s
consolidated financial statements:

• Amendments to References to Conceptual Framework in

IFRS Standards

• Definition of a Business (Amendments to IFRS 3)

• Definition of Material (Amendments to IAS 1 and IAS 8)

•

IFRS 17 Insurance contracts

AnnuAl RepoRt 202058

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

GOING CONCERN

In the early months of 2020, a global pandemic had broken
out causing governments around the world to impose various
restrictions on economies and human populations.

The Board has carried out a going concern review and
concluded that the Group has adequate cash to continue in
operational existence for the foreseeable future.

The Directors have prepared cash flow forecasts for a period
in excess of 12 months from the date of signing the financial
statements.

Our US operation is underpinned completely by fixed
contractual fees. In the UK, clients have a variety of
commercial models including fixed fees and transactional
arrangements, with varying levels of commitment. Volumes
were impacted significantly from mid-March, but this was
not reflected proportionately in revenue. Volumes have
been steadily increasing since mid-May and we anticipate
this continued improvement into July. We are continually
monitoring our clients’ ability to pay invoices and for the
year ended 31 March 2020 we have provided against a small
number of smaller clients’ debts and this information can be
found in note 17.

A key business indicator is our total orders and new business
orders. We anticipate the new business wins for the current
year to be impacted, particularly in the US as we are
experiencing smaller deals continuing to progress but larger
deals being put on hold in the short term. We anticipate
the renewal rate for the UK and US businesses to remain
unchanged during this period. When preparing the cash flow
forecasts the Directors have reviewed a number of scenarios
with respect to levels of new business. In all scenarios the
Directors were able to conclude that the Group has adequate
cash to continue in operational existence for the foreseeable
future.

CHANGES IN ACCOuNTING POLICy

The Group has adopted IFRS 16: Leases from 1 April 2019,
which has resulted in new accounting policies as set out
below.

IFRS 16: LEASES

On adopting the standard there was no adjustment to
opening equity and the comparative amounts presented in the
Consolidated Income Statement and Consolidated Balance
Sheet have not been restated.

On adoption the Group recognised lease liabilities of
£769,000 for leases previously classified as operating leases,
measured at the present value of the remaining lease
payments. In accordance with the transition provisions of IFRS
16, the Group discounted the future lease payments at the

incremental borrowing rate of the lessee at the date of
adoption. The weighted average lessee’s incremental
borrowing rate applied to lease liabilities at 1 April 2019
was 4.3%. At the same time, the Group recognised right-
of-use assets of £769,000, measured as if the standard had
been applied since commencement date of the lease, and
discounted using the lessee’s incremental borrowing rate at
the date of adoption. The expected impact to adjusted EBITDA
is an increase of approximately £491,000, but there is no
overall impact to profit before tax.

A difference arises between the present value of operating
lease commitments disclosed at 31 March 2019 and the lease
liabilities recognised by the Group at 1 April 2019. As explained
in the financial statements as at 31 March 2019, this is due to
the Group taking advantage of the exemptions in IFRS 16 that
permit lease payments for short term leases and leases of low
value assets to continue to be accounted for as an expense on
a straight line basis over the lease term.

2. Summary of principal
accounting policies

CRITICAL ACCOuNTING 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 and Company’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.

CRITICAL ACCOuNTING ESTIMATES ANd ASSuMPTIONS

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

Following the implementation of IFRS 15: Revenue from
Contracts with Customers with effect from 1 April 2018 the
revenue recognition is more complex and involves calculation
schedules and can be judgemental. 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 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
contract assets and released over the contract term, thereby
also deferring costs to later periods.

Leases & transition to IFRS 16

The Group has adopted IFRS 16: Leases using the modified
retrospective approach from 1 April 2019 and has not restated
comparatives for the reporting period to 31 March 2019 as
permitted under the specific transitional provisions in the
standard. In adopting IFRS 16: Leases, the Group has taken
advantage of practical expedients permitted by the standard,
namely the accounting of operating leases with a remaining
lease term of less than 12 months as at 1 April 2019 as short-
term leases. A number of the leases have implicit interest
rates, where the lease does not have an implicit interest rate
management have used average incremental rates obtained
from their UK and US bank as the discount rates used to
calculate the lease liabilities for each of the leases.

Goodwill and Intangible assets impairment

The Group has goodwill and intangible assets as a result
of the acquisitions for the Veritape, PSS and Eckoh Omni
(previously known as Klick2Contact (EU)) businesses over the
last few years. Since the Eckoh Omni Management earn-out
period finished in July 2018 Management have integrated
Eckoh Omni 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 Eckoh Omni
into Eckoh UK, the CGU’s are Eckoh UK and Eckoh US.

Impairment of investments in subsidiaries (Company only)

The Company has an investment in subsidiaries balance of
£19.9 milliion and intercompany receivables of £3.9 million.
Management have reviewed the investment in subsidiaries and
concluded that there is no impairment.

Share based payments

The fair value of share-based payments is estimated using
the methods detailed in note 22 and using certain
assumptions. The Black Scholes 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.

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 2020, the Group
recognised deferred tax assets of £3.8 million, including £2.5
million in respect of tax losses and tax credits. Deferred tax
assets amounting to £6.0 million were not recognised in
respect of trading losses and £0.5 million in respect of capital
losses of £5.5million. It is possible that the deferred tax assets
actually recoverable may differ from the amounts recognised if
actual taxable profits differ from estimates.

CRITICAL ACCOuNTING judGEMENTS

Leases & transition to IFRS 16

The Group has adopted IFRS 16: Leases using the modified
retrospective approach from 1 April 2019 and has not restated
comparatives for the reporting period to 31 March 2019 as
permitted under the specific transitional provisions in the
standard. In adopting IFRS 16: Leases, the Group has taken
advantage of practical expedients permitted by the standard,
namely the accounting of operating leases with a remaining
lease term of less than 12 months as at 1 April 2019 as short-
term leases. In addition, a number of the leases include some
element of variable lease payments and some leases have
options for the extension of the lease period. Each lease has
been reviewed and management has made a decision on the
likely term of the lease taking into account leases that will be
extended.

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.

AnnuAl RepoRt 202060

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

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

(c) Research and development
Research costs are charged to the income statement in the
year in which they are incurred. Development expenses include
expenses incurred by the Group to 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.

IMPAIRMENT OF NON-FINANCIAL ASSETS

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

PROPERTy, PLANT ANd EquIPMENT

Property, plant and equipment is stated at cost or fair
value at acquisition, net of depreciation and any provisions
for impairment. Cost includes expenditure that is directly
attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period
in which they are incurred.

The gain or loss arising on the disposal of an asset is
determined by comparing the disposal proceeds and the
carrying amount of the asset and is recognised in the income
statement. Depreciation is calculated using the straight-line
method to allocate the cost of each asset to its estimated
residual value over its expected useful life, as follows:

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.

The Company holds an investment property, which comprises
of freehold land and office buildings that are held for capital
appreciation.

The Investment Property was initially recognised at cost and
subsequently carried at cost less accumulated depreciation and
accumulated impairment losses.

INvESTMENTS IN SuBSIdIARIES

Investments in subsidiaries are held at cost less accumulated
impairment losses.

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.

FINANCIAL ASSETS

Trade and other receivables

Trade and other receivables do not carry interest and are stated
at their fair value as reduced by allowances for estimated
irrecoverable amounts. 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 in the statement of financial
position comprise cash at bank and in hand, short-term
deposits and other short-term liquid investments.

In the cash flow statement, cash and cash equivalents
comprise cash and cash equivalents as defined above, net of
bank loans.

EquITy

Equity comprises the following:

Share capital represents the nominal value of ordinary shares.
Capital redemption reserve represents the maintenance of
capital following the share buy back and tender offer.
Share premium account 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.

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. Such
translation differences would be reclassified to profit and loss
in the period in which the operation is disposed of.

Credit and liquidity risk management is described in note 3.

LEASES

In prior years, assets leased under operating leases were
not recorded in the statement of financial position. Rental
payments were charged directly to the income statement
in the period in which they are incurred. Lease incentives,
primarily up-front cash payments or rent-free periods, were
spread over the period of the lease term. Payments made
to acquire operating leases were treated as prepaid lease
expenses and amortised over the life of the lease.

AnnuAl RepoRt 202062

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

From 1 April 2019, each lease is recognised as a right-of-use
asset with a corresponding liability at the date at which the
lease asset is available for use by the Group. Interest expense is
charged to the consolidated income statement over the lease
period so as to produce a constant periodic rate of interest on
the remaining balance of the liability. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured
on a present value basis. The lease payments are discounted
using the interest rate implicit in the lease. If that rate cannot
be determined, the lessee’s incremental borrowing rate is
used, being the rate that the lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value
in a similar economic environment with similar terms and
conditions.

Right-of-use assets are measured at cost comprising the
amount of the initial measurement of the lease liability, any
lease payments made at or before the commencement date
less any lease incentives received, any initial direct costs and
restoration costs.

Where leases include an element of variable lease payment
or the option to extend the lease at the end of the initial term,
each lease is reviewed and a decision is made on the likely
term of the lease.

Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in the consolidated income statement, during the year
there was a Company car lease, which was returned in January
2020, a franking machine and the rental of a storage unit.

EMPLOyEE BENEFITS

(a) Pensions

The Group operates a defined contribution scheme to the
benefit of its employees. Contributions payable are charged to
income in the year they are payable.

(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.

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 Black
Scholes 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.

(e) uS share save scheme

The Eckoh plc 2019 US Sharesave Scheme (the “2019
Sharesave Scheme”), was approved by Shareholders at the
2019 AGM and introduced to employees in December 2019.
Employees who enrol in the 2019 Sharesave Scheme are
granted an option to purchase up to a number of Ordinary
Shares. The number is determined by dividing the total payroll
deductions credited to the employee’s account as of the
exercise date by the option price. The option price is equal to
the closing price of the Ordinary Shares on the London Stock
Exchange on either the (i) the date the offering period begins,
or (ii) the date of exercise, whichever results in the lowest price
per share. Any shares acquired will be held in accordance with
the terms of the Scheme.

REvENuE RECOGNITION

The Group recognises revenue in accordance with IFRS 15:
Revenue from Contracts with Customers (“IFRS 15”). 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 onsite Secure Payments solution
are typically received at the beginning of the contract
and held on the balance sheet as contract liabilities.
This revenue is 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 are deferred onto the balance sheet
and held as contract assets 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 licence 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 as the service is provided.

TAxATION

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

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

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

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

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

FINANCIAL LIABILITIES

Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group or
Company 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.

AnnuAl RepoRt 202064

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

3. Financial risk management

FOREIGN CuRRENCy RISk

The operations of the Group expose it to a variety of financial
risks: liquidity risk, interest rate risk, foreign currency risk and
credit 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.

LIquIdITy RISk

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

The contractual maturities of financial liabilities are set out in
note 21.

INTEREST RATE RISk

The Group principally finances its operations through
Shareholders’ equity and working capital. The Group and
Company 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

(155)

155

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

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 16 and 17.

CAPITAL MANAGEMENT

The Board’s policy is to maintain a strong capital base with
the joint objectives to maintain investor, creditor and market
confidence and to sustain future development of the business.

Capital comprises all components of equity (i.e. share capital,
capital redemption reserve, share premium and retained
earnings). The Board manages the capital structure and makes
adjustments as required in the light of changes in economic
conditions. The Board may return capital to Shareholders,
issue new shares or sell assets in order to maintain capital.

Credit risk management is described in note 17.

FINANCIAL ASSETS

Current financial assets

Trade receivables (note 17)

Other receivables (note 17)

Cash and cash equivalents (note 18)

Total financial assets

2020
£’000

4,464

748

13,541

18,753

2019
£’000

4,340

525

11,582

16,447

FINANCIAL LIABILITIES

All financial liabilities held by the Group and Company are
measured at amortised cost and comprise trade payables of
£2,510,000 (2019: £1,404,000), other payables of £188,000
(2019: £108,000), other taxation and social security of
£1,028,000 (2019: £1,072,000) and accruals and deferred
income of £17,352,000 (2019: £17,399,000). See note 19 for
further details. Lease liabilities are £266,000 in total (2019:
nil), with current lease liabilities of £233,000 and non-current
lease liabilities of £33,000. See note 13 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.

ALTERNATIvE PERFORMANCE MEASuRES (APMS)

The Directors consider that disclosing alternative performance
measures enhances Shareholders’ ability to evaluate and
analyse the underlying financial performance of the Group.
They have identified adjusted operating profit and adjusted
EBITDA as measures that enable the assessment of the
performance of the Group and assists in financial, operational
and commercial decision-making. In adjusting for this measure
the Directors have sought to eliminate those items of income
and expenditure that do not specifically relate to the normal
operational performance of the Group in a specific year.
The table below reconciles operating profit to adjusted
operating profit1 and adjusted EBITDA2 identifying those
reconciling items of income and expense.

year
ended
31 March
2020
£’000

3,286

979

Year
ended
31 March
2019
£’000

1,194

1,325

468

567

Operating profit

Amortisation of acquired
intangible assets

Expenses relating to share
option schemes

Adjusted operating profit1

4,733

3,086

Amortisation of intangible assets

Depreciation of owned assets

Depreciation of leased assets

314

848

491

275

960

Adjusted EBITdA2

6,386

4,321

1. Adjusted operating profit is the profit before adjustments for

expenses relating to share option schemes and amortisation of
acquired intangible assets.

2. Adjusted earnings before interest, tax, depreciation and amortisation

(EBITDA) is the profit before tax adjusted for depreciation of owned
assets, amortisation of acquired intangible assets and expenses
relating to share option schemes.

Non-current financial liabilities

Secured bank loans

2020
£’000

975

2019
£’000

1,950

Current financial liabilities

Current portion of secured bank loans

975

1,300

Terms and debt repayment schedule

Currency

Bank Loan

Sterling

Nominal
interest
rate

1.25% plus
LIBOR.

Maturity
date

See note
21

Carrying
amount
2020
£’000

1,950

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

EARNINGS PER SHARE

The Group presents basic and diluted earnings per share
(“EPS”) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to Ordinary Shareholders
of the Company by the weighted average number of Ordinary
Shares outstanding during the reporting period. Diluted EPS
is determined by adjusting the weighted average number of
Ordinary Shares outstanding for the effects of all potential
dilutive Ordinary Shares.

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 recorded in the financial
statements in the period in which they are approved and paid.

dETERMINATION ANd PRESENTATION
OF OPERATING SEGMENTS

The Eckoh Group determines and presents operating
segments based on the information that internally is provided
to the Executive Management team, considered to be the
Chief Operating Decision Maker.

An operating segment is a component of the Eckoh Group
that engages in business activities from which it may earn
revenues and incur expenses.

AnnuAl RepoRt 2020

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

4. Segment analysis

The segmentation is based on analysing Eckoh UK (including
Eckoh Omni) and Eckoh US.

Information regarding the results of each operating segment
is included below. Performance is measured on operating
segments based on the information that internally is provided
to the Executive Management team, considered to be the
Chief Operating Decision Maker.

Current period segment analysis

Segment Revenue

Gross profit

Administrative expenses

Operating profit

Adjusted operating profit

Other expenses1

Operating profit

Profit before 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 of property, plant & equipment

Depreciation of leased assets

Amortisation

Eckoh UK
£’000

20,468

17,074

(13,962)

3,112

3,662

(550)

3,112

3,139

2,900

3,335

Eckoh US
£’000

12,710

9,250

(9,076)

174

1,071

(897)

174

163

1,564

470

Total
2020
£’000

33,178

26,324

Total
2019
£’000

28,719

24,105

(23,038)

(22,911)

3,286

4,733

1,194

3,086

(1,447)

(1,892)

3,286

3,302

4,464

3,805

1,194

1,154

4,340

4,081

2,604

2,212

4,816

3,237

502

951

660

394

624

188

669

571

951

848

491

1,293

541

435

960

1,600

1. Other expenses include expenses relating to share option schemes

and amortisation of acquired intangible assets

In 2019/20 and 2018/19 there was no one customer that
individually accounted for more than 10% of the total revenue
of the continuing operations of the Group.

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

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
£’000

20,275

193

20,468

Eckoh US
£’000

12,504

206

12,710

2020
£’000

20,275

12,504

399

33,178

2019
£’000

19,132

8,997

590

28,719

Eckoh UK
£’000

Eckoh US
£’000

Total 2020
£’000

Total 2019
£’000

17,926

2,542

20,468

9,289

3,421

12,710

27,215

5,963

33,178

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’

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 costs directly attributable to the
delivery of the hardware and the implementation fees are
capitalised as contract assets and released over the contract
term, thereby also deferring costs to later periods and revenue
earnt not yet invoiced.

2020
£’000

4,464

5,587

(13,194)

(3,143)

2019
£’000

4,340

4,221

(11,666)

(3,105)

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. Contract liabilities are released as revenue is recognised.

Contract assets and contract liabilities 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 year are as follows:

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

Current year billings recognised in contract liabilities

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

Costs deferred in current year and unbilled revenue included in contract assets

Contract assets
£’000

31 March 2020
Contract
liabilities
£’000

1,864

3,376

4,846

7,117

AnnuAl RepoRt 2020

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

Contract costs

Deferred implementation fees

Deferred hardware costs

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 £13.2
million (FY19: £11.7 million). We expect to recognise
approximately £6.3 million (FY19: £4.8 million) in the next 12
months, £6.7 million (FY19: £6.8 million) in 1-3 years and the
remainder in 3 years or more in time.

Prior period segment analysis

Segment revenue

Gross profit

Administrative expenses

Operating profit

Adjusted operating profit / (loss)

Other expenses1

Operating profit / (loss)

Profit / (loss) before taxation

Segment assets

Trade receivables

Deferred tax asset

Segment liabilities

Trade and other payables

Capital expenditure

Purchase of property, plant & equipment

Purchase of intangible assets

depreciation and amortisation

Depreciation

Amortisation

1. Other expenses include expenses relating to share option schemes

and amortisation of acquired intangible assets.

Revenue by geography

United States of America

Rest of the World

Total Revenue

31 March
2020
£’000

2,209

1,167

3,376

31 March
2019
£’000

2,121

2,100

4,221

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.

Eckoh UK
£’000

19,399

16,527

(14,140)

2,387

3,621

(1,234)

2,387

2,347

Eckoh US
£’000

9,320

7,578

(8,771)

(1,193)

(535)

(658)

(1,193)

Total
2019
£’000

28,719

24,105

(22,911)

1,194

3,086

(1,892)

1,194

1,154

2,477

3,522

1,863

559

4,340

4,081

1,811

1,426

3,237

443

435

751

942

209

658

Eckoh UK
£’000

19,132

267

19,399

Eckoh US
£’000

8,997

323

9,320

541

435

960

1,600

2019
£’000

19,132

8,997

590

28,719

5. Profit from operating activities

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

Employee benefits expense (note 6)

Depreciation of property, plant and equipment (note 12)

Depreciation of leased assets (note 13)

Amortisation of intangible assets (note 11)

Inventory recognised as an expense (note 16)

2020
£’000

2019
£’000

14,505

12,267

848

491

1,293

205

960

1,600

189

6. Employee benefits expense

7. Auditors remuneration

Wages and salaries

Less: Internal development costs capitalised
in the year

Amortisation of internal development costs

Social security costs

Other pension costs

Share based payments

2020
£’000

2019
£’000

12,768

10,578

(371)

(271)

245

1,193

202

468

255

987

151

567

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

Fees payable for the audit of the Company
and consolidated financial statements

Fees payable for other services:

The audit of subsidiary undertakings
comprising continuing operations

2020
£’000

2019
£’000

14,505

12,267

Total fees payable to the Group’s auditor

101

124

The Directors’ report on page 43 provides further details on
the Directors’ emoluments. The monthly average number of
people (including Executive Directors) employed by the Group
during the year was:

8. Finance income and finance expense

Technical support

Customer services

Administration and management

2020
Number

2019
Number

107

213

110

230

Interest receivable

Bank interest receivable

Excluded from the table above are 19 (2019: 33) full time
equivalent casual call centre employees who cost £352,737
(2019: £424,912) in the year.

Finance expense

Bank interest payable

Lease interest payable

2020
£’000

2019
£’000

2020
£’000

2019
£’000

(50)

(18)

(68)

(77)

AnnuAl RepoRt 202070

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

9. 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

2020
£’000

2019
£’000

(229)

(227)

555

176

(7)

(331)

393

166

229

(10)

(8)

(9)

(20)

209

A credit of £214,000 (2019: charge of £39,000) for deferred
taxation in relation to share options was recognised directly in
equity.

The tax charge for the year is different (2019: different) to
the standard rate of corporation tax in the UK of 19% (2019:
19%). The differences are explained below:

Continuing operations

Profit before taxation

Profit multiplied by rate of corporation tax in the UK of 19% (2019: 19%)

Additional foreign tax suffered

Effect of expenses not deductible for tax purposes

Adjustments in respect of prior periods (current and deferred)

Movement on deferred tax not recognised

Deferred tax impact of UK rate change

Deferred tax impact of rate change on intangible assets

Tax charge for the year

2020
£’000

3,287

624

(53)

(40)

(41)

(331)

166

2019
£’000

1,154

220

(15)

(38)

(9)

209

Recognition of deferred tax assets and liabilities

Assets

Liabilities

Net

Capital allowances differences

Short term timing differences

Tax losses

Property, plant and equipment

Intangible assets

Tax losses carried forward

2020
£’000

913

2,477

415

3,805

2019
£’000

1,168

2,438

475

4,081

2020
£’000

2019
£’000

(226)

(64)

(290)

(385)

(110)

(495)

Movement in deferred tax balances during the year

Balance at 1 April

Recognised in income statement

Recognised in equity

Balance at 31 March

2020
£’000

913

2,477

189

(64)

3,515

2020
£’000

3,586

(393)

322

3,515

2019
£’000

1,168

2,438

(110)

3,586

2019
£’000

3,607

(40)

3,586

unrecognised deferred tax assets

There are unprovided deferred taxation assets totalling
£6,042,000 (2019: £5,855,000). These have arisen in
respect of trading losses of £559,000 (2019: £597,000) and in
respect of capital losses of £5,483,000 (2019: £5,258,000).

The trading losses have not been recognised due to the
uncertainty of future taxable profits being available to utilise
these. The capital losses have not been recognised due to
restrictions over their utilisation. There is no expiry date on the
trading losses or the capital losses carried forward.

10. Earnings per share

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 Company.

Earnings for the purposes of basic and diluted earnings per share

denominator

Weighted average number of shares in issue in the period

Shares held by employee ownership plan

Shares held in Employee Benefit Trust

Number of shares used in calculating basic earnings per share

Dilutive effect of share options

Number of shares used in calculating diluted earnings per share

2020
£’000

3,136

2019
£’000

945

2020
£’000

255,085

(1,630)

253,455

8,782

262,237

2019
£’000

253,117

(1,363)

251,754

10,263

262,017

AnnuAl RepoRt 2020
72

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

11. Intangible assets

Group

Cost

At 1 April 2018

Additions

Transfer from tangible assets

Foreign exchange

At 31 March 2019

Additions

Foreign exchange

At 31 March 2020

Accumulated amortisation

At 1 April 2018

Charge for the year

Transfer from tangible assets

Foreign exchange

At 31 March 2019

Charge for the year

Foreign exchange

At 31 March 2020

Carrying amount

At 31 March 2020

At 31 March 2019

Goodwill

Computer
software

Customer
relationships

Intellectual
property

£’000

Trade
name

£’000

Total

£’000

4,832

2,579

3,355

7,182

355

18,303

182

5,014

152

5,166

5,014

417

225

3,221

922

4,147

2,005

339

2,376

358

2,739

1,408

845

271

3,626

149

3,775

1,621

729

2,381

743

117

3,241

534

1,245

7,236

7,287

6,533

445

6,984

120

7,122

165

252

384

400

185

276

360

108

435

225

518

19,481

951

343

20,775

10,344

1,600

12,017

1,293

152

13,462

7,313

7,464

The Company has no intangible assets. (2019: nil).

Within the intangible category of computer software in the above
table is internally developed computer software, as at 31 March
2020 this had a net book value of £1,269k (2019: £591k).

Amortisation of acquired intangible assets included in the
charge for the year in the above table was £979k (2019:
£1,325k), within the internally generated software is an
intangible asset acquired when Eckoh Omni Limited (previously
known as Klick2Contact (EU) Limited) was purchased.

On an annual basis an 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
Eckoh Omni and Eckoh US in the prior year. Management

have performed a profitability forecast for the next five years
for each of the CGUs, which are based on the latest three
year plan approved by the Board and modified as appropriate
to reflect the latest COVID-19 forecasts as approved by the
Board. 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:

• 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

Total

Goodwill
31 March 2020
£’000

Goodwill
31 March 2019
£’000

2,373

2,793

5,166

2,373

2,641

5,014

Market growth
rate %

20%

Discount
rate %

13.9%

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 expectations 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 and have been adjusted
downwards in the near term to reflect the impact of COVID-19.

Sensitivity to the changes in assumptions

If forecast revenues fell by 30%, 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.

12. Property, plant and equipment

Leasehold
improvements
£’000

Land an
buildings
£’000

Fixtures and
equipment
£’000

Cost

At 1 April 2018

Additions

Transfer to intangible assets

Foreign exchange

At 31 March 2019

Additions

Foreign exchange

At 31 March 2020

Accumulated depreciation

At 1 April 2018

Charge for the year

Transfer to intangible assets

Foreign exchange

At 31 March 2019

Charge for the year

Foreign exchange

At 31 March 2020

Carrying amount

At 31 March 2020

At 31 March 2019

3,068

138

181

225

2,843

2,887

6,720

541

(225)

7,062

569

7,695

4,958

906

(32)

(1)

5,831

804

6,687

1,008

1,231

The land and buildings are held by the Company, the gross
book value at both 31 March 2019 and 31 March 2020 is as
above £3,068k. The net book value at 31 March 2019 was
£2,887k and at 31 March 2020 £2,843k. This is the only
property, plant and equipment held by the Company.

Total
£’000

9,817

542

(225)

10,160

569

10,795

5,114

960

(32)

6,042

848

6,944

3,851

4,118

AnnuAl RepoRt 2020

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

13. Leases

The Group enters into leases of buildings in relation to
offices in the US. In addition, in the UK the Group leases
equipment either in the datacentres or in the offices.

In some cases, the contracts entered into by the Group
include extension options which provide the Group with
additional operational flexibility. If the Group considers it
reasonably certain that an extension option will be exercised
the additional period is included in the lease term.

The change in accounting policy affected the following
items in the balance sheet on 1 April 2019:

- Right of use asset – increase

by £769,000 as detailed in the below table,

- Lease liabilities – increase by

£769,000 as detailed in the table below.

The net impact on retained earnings on 1 January 2019 was
£nil. There was no impact to any other balance sheet balance.

Reconciliation to prior year lease commitment

Operating lease commitments disclosed as at 31 March 2019 (note 25)

Less: short-term leases not recognised as a liability & low-value leases not recognised as a liability

Add: adjustments as a result of a different treatment of extension and termination options

Lease liability recognised as at 1 April 2019

Of which are:

- Current lease liabilities

- Non-current liabilities

Right-of-use assets

Buildings

Equipment

Lease liabilities

Current

Non-current

There were no additions to the right of use assets during the financial year ended 31 March 2020.

depreciation charge of right-of-use assets

Buildings

Equipment

Interest expense (included in finance cost costs)

Expenses relating to short-term leases (included in cost of goods sold and administrative expenses)

The total cash outflow for leases in 2020 was £521,000, made up of
principle lease payments of £503,000 and lease interest payments of £18,000.

The Company does not hold any leased assets. (2019: £nil)

2020
£’000

703

(4)

769

490

278

769

1 April
2019
£’000

221

548

769

562

207

769

2020
£’000

123

154

277

233

266

31 March
2020
£’000

1 April
2019
£’000

394

491

(18)

(11)

14. Investments in Group companies

At 1 April 2018

Additions

Transfer to subsidiary

Amortisation

At 31 March 2019

Additions

Amortisation

At 31 March 2020

Accumulated Impairment

At 1 April 2018, 31 March 2019 and at 31 March 2020

Net Book value

At 31 March 2020

At 31 March 2019

Shares in
subsidiary
undertakings
£’000

Other
investment
£’000

26,351

(5,104)

(11)

21,236

(4)

21,232

(6,985)

14,247

14,252

4,647

553

5,200

407

5,607

5,200

Total
£’000

30,998

553

(5,104)

(11)

26,436

407

(4)

26,839

(6,985)

19,854

19,451

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.

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.

AnnuAl RepoRt 2020

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

15. 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 Road,

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.

16. Inventories

Finished goods

GROuP

2020
£’000

2019
£’000

312

458

The cost of inventory recognised as an expense during the
year was £205k (2019: £189k). The Company does not hold
any inventory. (2019: nil)

17. Trade and other receivables

GROuP

COMPANy

Current

Trade receivables

Less: Loss allowance

Net trade receivables

Amount receivable from subsidiary undertakings

Other receivables

Prepayments and contract assets

2020
£’000

4,575

(111)

4,464

748

8,282

13,494

2019
£’000

4,340

525

8,344

13,209

2020
£’000

3,882

3,889

2019
£’000

4,883

4,886

Trade receivables are stated after loss allowance of £111k (2019: £nil).

Gross trade receivables - ageing

Current

1-30 days

30-60 days

61-90 days

Over 90 days

GROuP
Gross carrying amount-trade
receivables

GROuP
Expected loss rate

2020
£’000

3,727

611

103

120

4,575

2019
£’000

3,005

885

266

157

4,340

2020
%

1.0%

0.1%

30.3%

29.8%

2.4%

2019
%

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.

AnnuAl RepoRt 2020

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

18. Cash and cash equivalents

GROuP

COMPANy

Sterling

Euro

US dollars

Floating rate

Euro

US dollars

2020
£’000

11,354

2,178

13,541

2020
£’000

11,354

2,178

13,541

2019
£’000

10,963

588

11,582

2019
£’000

10,963

588

11,582

2020
£’000

4,983

1,678

6,661

2020
£’000

4,983

1,678

6,661

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 0.78% (2019: 0.55%).

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

19. Trade and other payables

GROuP

COMPANy

2020
£’000

2,510

188

1,028

17,352

21,078

2019
£’000

1,404

108

1,072

17,399

19,983

2020
£’000

19,038

19,052

Trade payables

Other payables

Other taxation and social security

Accruals and contract liabilities

Amounts payable to subsidiary undertakings

As set out in note 4, £6.7 million (FY19: £6.8 million)
of the contract liabilities are due in more than one year.

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 £518,000 (2019: £24,514).

The increase year on year of the balance greater than 3
months represents hardware for a US Secure Pay contract.

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

2019
£’000

4,932

2019
£’000

4,932

2019
£’000

15,626

15,644

20. Called up share capital

22. Share based payments

Allotted called up and fully paid

Number of
shares

Nominal
value
£’000

Share type

Ordinary Shares of 0.25p each

At 1 April 2019

Shares issued under the share
option schemes

254,121,768

1,229,488

At 31 March 2020

255,351,256

635

638

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.

21. Other Interest-bearing loans
& borrowings

At 1 April 2019

Movement during the year

Repaid during the year

At 31 March 2020

Loans and borrowings

Bank loans
£’000

(3,250)

1,300

(1,950)

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

The loan of £6.5 million 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%. As a result
of the current COVID-19 pandemic, the Board of Directors
took advantage of the ability to defer the repayment of
capital under the loan as a precautionary measure. In March
2020 the Bank approved a delay to the April 2020 and July
2020 quarterly repayment of £325,000. The remaining
balance on the loan of £1,950,000 will be repaid evenly over
the remaining life of the loan. There will be four quarterly
repayments of £487,500 commencing October 2020.

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

975

The Eckoh plc Share Option Scheme (‘the Scheme’) was
introduced in November 1999 and re-approved by the Board
in the year ended 31 March 2018. Under the Scheme the
Board can grant options over shares in the Company to Group
employees. The grant price of share options is the middle
market quotation price as derived from the Daily Official List
of the London Stock Exchange on the date of the grant. The
contractual life of an option is ten years. Options granted
under the Scheme become exercisable subject to the share
price exceeding RPI plus 15% after the third anniversary of
the grant date. Exercise of an option is subject to continued
employment, with certain exceptions, as specified in the
Scheme rules.

The Eckoh plc Enterprise Management Incentive Scheme
(‘the EMI Scheme’) was introduced in February 2007. Under
the Scheme the Board can grant options over shares in the
Company to Group employees. The grant price of share
options is the middle market quotation price as derived
from the Daily Official List of the London Stock Exchange
on the date of the grant. The contractual life of an option is
ten years. Options granted under the EMI Scheme become
exercisable subject to the percentage growth in earnings per
share in the three years following the year of grant being at
least 5% (compounded) per annum. Exercise of an option
is subject to continued employment, subject to certain
exceptions as specified in the EMI Scheme rules.

The Eckoh plc Share Incentive Plan (“the Plan”) was
introduced in September 2016. The Plan 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 page 37. 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.

AnnuAl RepoRt 202080

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

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)

No. of employees

26 Mar
2012

08 jun
2012

23 Mar
2016

11.00

11.25

43.50

2 May
2016

43.50

13 Oct
2016

38.875

38.88

31 Mar
2017

39.50

21 jun
2017

47.50

23 Nov
2017

51.25

23 jul
2018

37.81

26 Sep
2018

34.38

Shares under option

225,000

44,000

1,900,000

500,000

2,950,000

500,000

6,000,000

1,420,000

100,000

Vesting period (years)

Expected volatility

Option life (years)

Expected life (years)

Risk free rate

Expected dividends expressed
as a dividend yield

42%

2.75%

1.00%

40%

2.75%

1.70%

32%

0.78%

0.89%

31%

0.24%

1.03%

33%

0.56%

1.16%

35%

0.56%

1.14%

35%

0.56%

1.22%

4.33

35%

4.33

0.56%

1.14%

47%

0.56%

1.53%

47%

0.56%

1.53%

Fair value per option (pence)

3.15

3.18

12.00

8.50

8.19

11.0

10.6

17.00

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 Share
Incentive 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)

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

1 dec
2018

37.38

0.00

1 jun
2019

43.75

0.00

208,632

178,428

164,182

208,878

195,766

181,146

185,450

3.00

A reconciliation of option movements over the year to 31 March 2020 is shown below:

Outstanding at 1 April1

Granted

Exercised

Lapsed

Forfeited

Outstanding at 31 March

Exercisable at 31 March

2020

2019

Number of share
options

weighted
average exercise
price (pence)

Number of
share options

Weighted average
exercise price
(pence)

18,788,125

563,811

(2,225,904)

(1,295,838)

15,830,194

6,358,414

18.53

17.55

13.59

22.33

18.51

38.27

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

The opening balance of share options has been adjusted to include the partnership
shares in the Share Incentive Scheme that were not included in the 2019 analysis.

2020

weighted average
remaining life

2019

Weighted average
remaining life

Range of
exercise
prices
(pence)

0 - 0.5

4.5 - 6.5

10.5 - 12.5

37.5 - 39.5

42.5 - 44.5

46.5 – 48.5

60.0 – 62.0

weighted
average
exercise
price
(pence)

Number
of shares
(000’s)

0.22

11.04

39.33

43.50

47.55

60.67

8,684

269

3,680

2,400

708

Expected

Contractual

1.78

5.68

0.50

2.66

1.82

1.86

6.57

6.00

5.44

2.66

Weighted
average
exercise price
(pence)

0.20

5.13

11.06

39.42

43.50

47.5

Number
of shares
(000’s)

10,226

265

300

3,850

3,350

500

Expected

Contractual

2.43

0.94

0.01

1.22

2.89

0.92

2.80

7.94

6.99

8.22

The total charge for the year relating to employee share-based
payment plans was £468,000 (2019: £567,000) all of which
related to equity-settled share-based payment transactions.

AnnuAl RepoRt 202082

Financial Statements 4 NOTES TO THE FINANCIAL STATEMENTS

23. Pension commitments

25. Operating lease 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 15.

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

There are 2 Directors accruing benefits under the pension
scheme.

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

directors

Aggregate emoluments

2020
£’000

2019
£’000

880

878

Further details of the Directors’ emoluments are disclosed within
the Remuneration Report on page 38.

Rented Apartment

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 (2019: £15,000). The amount outstanding to them
at the end of the current year was £3,953 (2019: £nil). There
were no amounts written off in the current or prior year.

The Group and Company do not have material operating
leases that have not been capitalised under IFRS 16 from
1st April 2019. The 2019 operating leases disclosures are
as follows:

Land and buildings

Less than one year

Between one and five years

2019
£’000

404

299

703

26. Cash flow from operating activities

Profit after taxation

Interest income

Interest payable

Taxation

Depreciation of property, plant and
equipment

Depreciation of leased assets

Amortisation of intangible assets

Exchange differences

Share based payments

2020
£’000

3,136

(84)

166

848

491

1,293

(264)

468

2019
£’000

945

(37)

209

960

1,600

567

Operating profit before changes in
working capital and provisions

6,122

4,399

Decrease in inventories

146

266

(Increase) in trade and other receivables

(285)

(1,267)

Increase in trade and other payables

Net cash generated from operating activities

1,257

7,240

4,090

7,488

27. Events after the statement of

financial position date

There were no events after the balance sheet date.

AnnuAl RepoRt 2020

Shareholder Information

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

Directors and Company Secretary

C.J. Humphrey

Non-Executive Chairman

D.J. Coghlan

Non-Executive Director

G.l. Millward

Non-Executive Director

n.B. philpot

Chief Executive Officer

C.G. Herbert

Chief Financial Officer and Company Secretary

Registered 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

Independent Auditors - 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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