ANNUAL REPORT 2021
2
Contents
1
2
3
Strategic Report
Highlights
3
Chairman’s Statement
6
8
Chief Executive's Review
16 Principal Risks and Uncertainties
18
Financial Review
20 Responsible Business
Corporate Governance
26 Board of Directors
27 Chairman’s Report
34 Audit Committee Report
37 Remuneration Committee Chairman Statement
39 Annual Report on Remuneration
43 Directors’ Report
46
Independent Auditors’ Report
Financial Statements
52 Consolidated Statement of Total Comprehensive Income
53 Consolidated Statement of Financial Position
54 Company Statement of Financial Position
55 Consolidated Statements of Changes in Equity
56 Company Statements of Changes in Equity
57 Consolidated Statement of Cash Flows
58 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 2021.
£m unless otherwise stated
Revenue
Gross profit
Adjusted EBITDA1
Adjusted operating profit2
Profit before taxation
Diluted earnings per share
Net cash
FY21
30.5
24.2
6.4
4.7
3.5
1.06
11.7
Proposed Full Year Dividend per share
0.61p
Total business contracted3
New business contracted4
30.7
15.7
3
1
FY20
Change
33.2
26.3
6.4
4.7
3.3
1.20p
11.6
0.61p
35.9
18.6
(8%)
(8%)
-
-
6%
(12%)
+0.1
-
(14%)
(15%)
REVENUE
£30.5m
DOWN 8%
(FY20: £33.2)
US SECURE
PAYMENT
REVENUE
$12.8m
UP 57%
(FY20: $8.1m)
REVENUE
SPLIT
UK 59%
US 41%
TOTAL
BUSINESS
CONTRACTED3
£30.7m
(FY20: £35.9m)
NEW
BUSINESS
CONTRACTED4
£15.7m
(FY20: £18.6m)
US SECURE
PAYMENT
NEW BUSINESS
CONTRACTED
$11.6m
(FY20: $10.7m)
ADJUSTED
OPERATING
PROFIT2
£4.7m
NO CHANGE
(FY20: £4.7m)
PROFIT
BEFORE TAX
£3.5m
UP 6%
(FY20: £3.3m)
NET CASH
£11.7m
UP £0.1m
(FY20: £11.6m)
1. 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.
2. Adjusted operating profit is the
profit before tax adjusted for
expenses relating to share option
schemes and acquired intangibles
amortisation.
3.
Total business contracted includes
new business from new clients,
new business from existing clients
as well as renewals with existing
clients.
4. New business contracted excluding
renewals with existing customers.
2021ANNUAL REPORT 4
Strategic Report 1 HIGHLIGHTS
Financial highlights
• Results in line with market expectations
• Revenue down 8% overall due to the pandemic, 7% at constant currency5
• Adjusted operating profit in line with prior year at £4.7m despite the pandemic, the planned exit from US Support and
currency headwinds, and 13% higher excluding the FY20 Coral contract
• Profit before taxation increased by 6% to £3.5m (FY20: £3.3m)
• US Secure Payments’ revenue increased significantly by 57% to $12.8m (FY20: $8.1m)
• UK revenue down 12%, with repeated lockdowns impacting some transactional revenues
• Recurring revenue6 71% (FY20: 75%), impacted by the decline in UK transactional revenue
• Proposed final Dividend is maintained at 0.61p per share (FY20: 0.61p)
• Continued strong cash position and robust balance sheet: net cash £11.7m (FY20: £11.6m)
Strategic highlights
• US Secure Payments revenue grew strongly by 57% and now represents 79% of total US revenues
• New Secure Payments contracted business of $11.6m exceeded (FY20: $10.7m)
• Cloud contracts accounted for over half of the contract value and more than 80% of the number of contracts, compared to
20% in the prior year
• Record number of contracts won in a year since Eckoh entered the US market
• Total contracted business3, £30.7m (FY20: £35.9m), excluding Coral contract down 9% (FY20: £32.9m)
• New contracted business4, £15.7m (FY20: £18.6m), excluding Coral contract down 4% (FY20: £16.3m)
• UK total business, £18.9m (FY20: £20.1m) with 59% of new business coming from existing clients
• Strong renewals including TfL, Tenpin, Yodel, 1st Central, Welsh Water and Ministry of Justice
• Major CallGuard release in January 2021, consolidating market leading position
1. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA)
4. New business contracted excluding renewals with existing customers.
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.
2. Adjusted operating profit is the profit before tax adjusted for expenses
relating to share option schemes and acquired intangibles amortisation.
3.
Total business contracted includes new business from new clients, new
business from existing clients as well as renewals with existing clients.
5. Constant currency (using last year exchange rates)
6.
Recurring revenue is defined as on-going revenue on a transactional basis,
rather than revenue derived from the set-up and delivery of a new service or
hardware.
5
Outlook
• Shift to remote working driving opportunities and demand for Eckoh’s products and model
• The Board expects revenue and profit for FY22 to be comparable to FY21, and material year-on-year revenue
and profit growth in FY23. These expectations are subject to no further lockdowns in the UK or US, and
ongoing uncertainty in the macro-economic climate because of the COVID-19 pandemic.
2021ANNUAL REPORT 6
Strategic Report 1 CHAIRMAN'S STATEMENT
Chairman's Statement
2021 was a challenging year with the uncertainty of the macro economy
due to the COVID-19 pandemic. Eckoh’s business model and market
position meant we were well placed to manage the impact of COVID-19
on our clients’ businesses, with high levels of recurring revenue, a strong
order book, blue chip enterprise clients and a strong balance sheet.
The management team has navigated the Company well through this
unprecedented period, achieving a credible performance and ensuring
that we are well placed to take advantage of growth opportunities as
our markets fully reopen.
At the onset of the COVID-19 pandemic, in March 2020, we took a
number of precautionary measures, to sustain our position of financial
strength, including limiting discretionary spend, freezing new hires,
postponing salary increases for 2021, deferring the quarterly loan
repayments in April 2020 and July 2020. In October 2020 we
recommenced the loan repayments ahead of paying
the Special Dividend to Shareholders. I was pleased
we were able to pay a Special Dividend at the
same level as previous years and at the same
timing as the Final dividend would normally
be paid in October. In January 2021 we also
awarded employees a pay rise, the 2021
pay rise three months early.
7
Results
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 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.
During the pandemic, the Board has not been able to function
as normal, with all of our meetings held remotely via Microsoft
Teams. Despite the obvious drawbacks, the Board performed
very well. We conducted an internal Board performance
evaluation at the end of the year and we are confident that
the Board continues to operate to high standards. Full details
are in the Governance section of this Annual Report.
Full details of the Company’s Principal Risks and Uncertainties
are on page 16 to 17.
People
The Board and I would like to thank our employees for their
efforts and sacrifices during this most challenging of years.
Thanks to the fantastic response of our people, the Company
is well placed for the future.
The whole Board plan to attend the AGM on 1 September
2021 subject to restrictions, and we look forward to the
opportunity to meet with as many Shareholders as possible on
the day.
Christopher Humphrey
CHAIRMAN
15 June 2021
In the year total contracted business1 was £30.7 million (FY20:
£35.9 million), a decrease year on year of 14% but a credible
outcome given the continued disruption and uncertainty to
market conditions, which were particularly acute in the first
half of the financial year.
In the US we have seen continued success in the new
contracted business2 for Secure Payments and during the
year the US team secured $11.6 million of new orders (FY20:
$10.7 million). This continued and strong progress in Secure
Payments underpins the decision to manage the transition
away from the US Support contracts and I am pleased that this
is now largely complete.
In the UK new contracted business was £5.9 million (FY20:
£6.6 million), a year on year decrease of 11%.
Adjusted operating profit3 was £4.7 million (FY20: £4.7
million), in line with the prior year, although included in this
year are Coral licences of £0.4 million (FY20: £0.8 million)
and a foreign currency loss of £0.4 million (FY20: gain of £0.3
million).
The Group continues to have a strong balance sheet with
a year-end net cash balance of £11.7 million (FY20: £11.6
million).
Going concern and COVID-19
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 approving 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. Further
information is included in the Directors’ Report on page 43.
Board
In the financial year ended 31 March 2021, there were no
significant changes to the Board.
Full details of the current Directors are on page 26.
1.
Total contracted business includes new business from new clients, new contracted
business from existing clients as well as renewals with existing clients
2. New contracted 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.
2021ANNUAL REPORT
8
Chief Executive Review
Introduction
Eckoh delivered a resilient performance in
the 2021 financial year, with a robust level
of adjusted operating profit2, £4.7 million,
level with the prior year. The Board views
this as a very creditable performance,
given the impact of our planned exit from
US Support (as previously indicated), a
significant negative currency movement,
a tough comparator due to the material
Coral contract in the prior year, and the
challenges of the COVID-19 pandemic.
This outcome reflects particularly strong growth in our
US Secure Payments operation, which grew by 57%
and now accounts for nearly 80% of US revenues, as
well as a resilient UK performance despite the trading
conditions continuing to be impacted by the ongoing
lockdown.
Total contracted business1 for the financial year at the
Group level was £30.7 million compared to the record total
contracted business in the prior year of £35.9 million. New
business won in the year was £15.7 million (FY20: £18.6
million), an excellent outcome given the continued disruption
and uncertainty in market conditions, which were particularly
acute in the first half of the financial year.
Total revenue for the year was £30.5 million, a decrease year
on year of 8% (FY20: £33.2 million) or 7% adjusting for
constant exchange rates. Excluding the Coral licence orders in
the 2021 and 2020 financial years, revenue in FY21 was £29.8
million, a decrease of only 5%.
1.
Total contracted business 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.
Gross profit was £24.2 million (FY20 £26.3 million) with gross
profit margin 79%, level year on year. US gross profit was
£8.9 million (FY20: £9.3 million), with gross profit margin
decreasing as expected to 71% (FY20: 73%) due to the
growth in the Secure Payments activity. UK gross profit was
£15.3 million (FY20: £17.1 million), a decrease of 11% and
gross profit margin increased by 200 basis points to 85%.
From March 2020 and then throughout the year there has
been prudent cost control, which included a freeze on new
hires where appropriate, postponing salary increases and
limiting discretionary spend.
Adjusted operating profit2 was £4.7 million (FY20: £4.7
million) a credible result given the continued disruption and
uncertainty in market conditions, which were particularly acute
in the first half of the financial year.
Our balance sheet remains robust with a strong net cash
position of £11.7 million, (FY20: £11.6 million), which
comprises a cash balance of £12.7 million, less an outstanding
loan of £1.0 million, taken out in 2015 in part to purchase the
Group’s UK head office.
Strategic Report 1 CHIEF EXECUTIVE REVIEW
A clear growth strategy
Our strategic objectives reflect our
primary goal to become the global leader
in our areas of expertise, and in particular,
Contact Centre payment security.
Our objectives include:
• Being the market leader for Contact Centre
payment security
• Capitalise on the fast-growing US market for
Secure Payments
• Maximise client value and retention through cross-
selling to generate higher levels of recurring income
• Continue to enable faster and more flexible delivery
of our solutions in the UK and then export to the
US tactically
• Make Cloud our primary platform and use Cloud
technologies to develop and enhance our
proprietary solutions
• 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 payment
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.
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 2,510 in the UK and
9
12,050 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, not just make
themselves compliant leading to broadening information
security budgets and remits. Moreover, the current crisis
and the consequent reliance on more contact centre agents
working remotely are only likely to accentuate these security
requirements. We see the trend of remote working agents
becoming a permanent feature, and this can only benefit
Eckoh as our payments proposition enables companies to
effectively further reduce or remove the risk of data breaches
from one of the most challenging parts of their businesses.
We are well placed to manage the
impact that COVID-19 has had on many
of our clients' businesses.
2021ANNUAL REPORT 10
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 US Consumer Privacy Acts. 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 clients’ existing processes or
systems; enjoy extremely high renewal rates and provide
an excellent platform from which to cross-sell other Eckoh
solutions to our customer base.
• The Group’s Customer Contact solutions help
organisations transform the way they engage with their
customers. Eckoh’s proposition, which is delivered through
the Eckoh Experience Portal (“EXP”), enables enquiries
and transactions to be performed on whatever device the
customer chooses, through any inbound communication
channel and allows customers to self-serve or to engage
with a customer service advisor. It enables our clients to
increase efficiency, lower operational costs and increase
customer satisfaction by providing a true Omnichannel
experience.
Our UK operations sell the entire product portfolio, but in
the US - a territory that Eckoh entered just over six years ago
- the focus has been on Secure Payments, where we have
the greatest differentiation and the least competition. At the
beginning of the last financial year we introduced Web Chat
and ChatGuard into the US market and this was the first step
in opening up our Customer Contact proposition, focusing
on the newer customer engagement channels. Consistent
with our longstanding goal to focus on Secure Payments,
we have continued our planned transition away from third-
party Support contracts. This approach, which will improve
revenue quality and visibility in the future, has seen Support
revenues decline, as previously indicated, from 27% of total
US revenues in financial year 2020 to 9% in the financial year
2021. There were also a small number of Support contracts
in the UK that were largely operated from the US, which have
also been discontinued in line with our strategy.
Contracts for both Secure Payments and Customer Contact
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. In the US, one positive consequence of the
pandemic has been the rapid increase in the number of Secure
Payment contracts won and delivered through Eckoh’s Cloud
platforms, as larger enterprises have accelerated their move to
the Cloud.
Operational review
US Division: (41% of group revenues)
The US division continues to account for an increasing
proportion of Group revenues, in line with our stated strategy
of the US becoming the largest part of the business in the
medium term. The US division represented a 41% share of
Group revenues in 2021, an increase of 300 basis points
compared to the prior year (38%). Revenue in the period was
$16.4 million, an increase of 2% (FY20: $16.1 million). Secure
Payments grew significantly by 57% to $12.8 million and
was offset by the planned transition away from Support and
an expected decline in Coral. If the Coral order is excluded,
revenue grew by 14% in the US, despite the planned decline
in the US Support business.
Strategic Report 1 CHIEF EXECUTIVE REVIEW 11
Total contracted business was $15.5 million (FY20 $19.9
million) of which 83% (£12.9 million) was new business,
highlighting that Secure Payment renewals are still at an early
stage. In the year, newly contracted Secure Payments’ business
was $11.6 million, an increase of 9% despite the challenges of
the pandemic (FY20: $10.7 million).
In the US, the Group’s focus remains on the US Secure
Payments opportunity, where it has the greatest differentiation
and the least competition. The performance of the Secure
Payments’ business is summarised below, together with the
Support business that we are strategically exiting, as well as
the Coral business.
• Secure Payments' revenue grew 57% to $12.8 million
(FY20: $8.1 million), and now represents 79% of US
revenue. This will continue to grow, however in FY22 this
will be at a slower rate, due to the low value of new orders
in the first 5 months of last financial year because of the
pandemic. Also, our largest contract signed to date ($7.4
million) is due for renewal in September, from which point
the revenues from the hardware and implementation fees
will have been fully recognised.
• Coral had revenues of $2.0 million in the year (FY20: $3.5
million), included is the $1.0m of one-off Coral licences
(FY20: $2.1 million). Coral accounted for 12% of US
revenue (FY20: 22%). As noted previously, the timing of
Coral orders remains hard to forecast and they will be
lumpy in nature.
• Support revenue declined as expected to $1.5 million, a
decrease of 65% (FY20: $4.4 million) and represents 9%
of the US revenue (FY20: 27%). It is expected to continue
to fall in the current financial year in line with the strategic
decision taken last year to focus our staff and resources
on the high growth opportunity of Secure Payments and
manage a transition away from Support. This will be the
last year that we break out Support revenues separately, as
in FY22 it will be considered a de minimis percentage.
Secure Payments, where we deliver a patented solution that
enables enterprises to take card payments securely within their
Contact Centre operations, continued to generate excellent
financial momentum. Compound Annual Growth Rate (CAGR)
over the last four years has been 36%. The pandemic made it
extremely difficult to close new contracts in the first quarter,
as many sales processes were put on hold by the customer
while they dealt with the disruption to their businesses. In
the second quarter momentum started to build, and from
September 2020 we secured $9.3 million of the $11.6 million
new contracted Secure Payments business in the year. The
number of individual contracts won in the year is also the
highest since Eckoh entered the US market.
Since 2015, when we launched Secure Payments in the US,
the total of new contracted business is shown below.
Financial Year
$m
FY15
$m
FY16
$m
FY17
$m
FY18
$m
FY19
$m
FY20
$m
FY21
New Business
Contracted
0.3
1.6
8.3
9.3
13.7
10.7
11.6
The Company is focused on large enterprise contracts.
However, during the first half of the year many of the
sales processes for the largest companies were temporarily
suspended and there was a greater emphasis on contracts
with medium-sized organisations, which generally have a
lower average contract value than the $750k previously
indicated. A larger proportion of contracts won in the year
will be delivered through Eckoh’s Cloud platforms. Where
possible, organisations have fast-tracked their plans to deploy
in the Cloud, a trend accelerated by the circumstances of the
pandemic. More than half the contract value Eckoh has won,
and more than 80% of the number of contracts, have been
for Cloud delivery, this compares to only 20% of contracts
in FY20.
We do anticipate that a lasting impact of the pandemic will
be a general acceleration in Cloud deployments, although
very large enterprises are still likely to take many years to
achieve that goal. We have recently started to see some of
these large organisations re-commence their sales processes
and depending on when these are concluded we should see
the average contract values rising again. Contracts secured in
the period came from a range of sectors including healthcare,
business process outsourcing, insurance, utilities, retail, and
financial services.
Our sales channels, which we have been developing over
the past year, are now starting to bear real fruit. The largest
contract won in the second half, with a very significant
Healthcare provider, was brought to us by a new partner in the
Healthcare sector. Partner sales opportunities now represent
25% of our total pipeline, and this share is expected to grow
this year.
2021ANNUAL REPORT
12
The average length of contracts for Secure Payments is three
years, so it is only this year that the first meaningful contracts
have been due for renewal. The two larger contracts that
were due for renewal in the second half of the year renewed
successfully, mirroring the trend of the UK.
External factors, such as the impending change to version 4 of
the Payment Card Industry Data Security Standard (PCI DSS),
the implementation of new data laws such as US Consumer
Privacy Acts 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.
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 prior
period, we secured a contract extension with a Fortune 100
telecommunications company for the Coral product. The
contract was worth a minimum of $3.8 million, and of
this, $2.1 million relating to the purchase of licences was
recognised in the prior first half revenue. As we indicated
at the time, we did not expect a further deal of additional
licences of this size in the financial year 2021, however we
did secure additional licences and functionality of $1.0m in
the year.
In Support, as we stated last year, we are transitioning
away from this activity to focus on the high growth Secure
Payments’ opportunity. The majority of the employees
servicing the Support channel have been switched to service
the more substantial and higher growth Secure Payments
opportunities, and this will continue.
Recurring revenues in the US were 57% in the period
compared to 61% for the same period last year after adjusting
for the one-off Coral licences of $1.0 million and $2.1 million
in FY21 and FY20 respectively. Recurring revenue for the
Secure Payments’ activity was 49% compared to 44% in the
prior year. We would expect recurring revenue to continue
to increase over time as we continue to deploy new clients
live, but also as more clients’ solutions are delivered in the
Cloud, where there is a much lower level of one-off revenue
initially. Recurring revenue for Secure Payments is lower than
the UK operation due to the hardware component and in
particular 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 2019 and is due for
renewal in the summer of 2021. The US operation’s revenues
are based on fixed contractual fees giving us continued
resilience in the current situation.
UK Division: (59% of group revenues)
The UK division has delivered a resilient performance despite
the challenging environment presented by the pandemic
and the impact of numerous lockdowns. Notwithstanding
that backdrop, we continued to see high levels of demand
and new business wins coming particularly from our existing
clients, evidencing the strength of our relationships.
Total contracted business was £18.9 million, a decrease of
6% compared to the prior year of £20.2 million, which was
a record level. New contracted business was £5.9 million
(FY20: £6.6 million), an excellent outcome given the abnormal
conditions relating to the pandemic. Renewals in the period
were £13.1 million, slightly lower than last year’s renewals of
£13.6 million but due to the timing of when renewals fall due.
Revenue in the period was £18.0 million, a decrease on last
year of 12% (FY20: £20.5 million), and gross profit decreased
11% to £15.3 million (FY20: £17.1 million). The revenue
decline was directly due to the impact that the pandemic had
on our clients’ activity, particularly some of our largest clients
in the travel, retail and leisure sectors such as Premier Inn,
Tenpin and Transport for London. Because our UK business
has been operating for many years, there are a range of
commercial models that have evolved over time, unlike the US
business which has only been operating since 2015. Where
the commercial model is transactional, which remains the
most common model, it is usual for a client to commit to
a high percentage of its expected volumes and in so doing
achieve the most competitive buying rate. However, this is not
the case for a few of our longstanding clients, some of which
are Eckoh’s largest. At the peak of the pandemic’s impact,
Despite the current situation,
we are seeing activity levels
increase in the UK and the
pipeline continues to be strong.
Strategic Report 1 CHIEF EXECUTIVE REVIEW 13
their contracts, in August 2020, we secured a six-year renewal
of our contract with Capita for the provision of services for the
Congestion Charge to Transport for London, at a minimum
total contract value of £4 million. In the second half of our
financial year we successfully renewed contracts with Tenpin,
Ministry of Justice, Target, Welsh Water, Yodel and 1st Central
insurance.
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. The continued uncertain business
climate in the UK and the on-going impact from the pandemic
on the transactional volumes of our larger clients, will continue
into the current financial year until such time as restrictions are
lifted and volumes can return to pre-pandemic levels.
transactional volumes were significantly reduced, but because
of the blend of our contracts the aggregated impact on
revenue across our client base was much less than this figure.
Gross margins in the UK increased in the period by 200 basis
points to 85% (FY20: 83%) and recurring revenue decreased
as expected, to 84% (FY20: 88%). With the level of new
business from existing clients over the last two years, we
would expect recurring revenue to be in the range of
82% - 84%.
Looking at the segmentation of UK revenue, 27% came
from Secure Payment services (FY20: 23%), 36% from
Customer Contact Solutions (FY20: 38%) and the remaining
37% from clients where we provide a combination of both
solutions (FY20: 39%). The increase in the Secure Payments
only services offsets a decrease in the clients with combined
solution which is largely due to the clients that have been
impacted most during the pandemic.
As organisations adapt their customer engagement strategy
to reflect the increase in remote working that is now set
to become a permanent feature, we have seen improved
interest in and sales for our CallGuard Remote product, which
facilitates the taking of payments securely in remote working
environments. Furthermore, we expect an even faster adoption
of emerging engagement technologies such as conversational
bots working in tandem with human agents, and the number
of companies who are accelerating their shift to Cloud-based
solutions. Eckoh will be able to assist new and existing clients
in responding to these changes, with deployment through
the Eckoh Experience Portal (“EXP”). This portal enables
organisations to buy and deploy our Customer Contact and
Secure Payment solutions in a modular fashion.
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 £5.9 million, £3.5 million
(FY20: £3.9 million) was contracted with existing customers
for delivery of new solutions or modifications. At 59% (FY20:
60%) this continues to be a much higher proportion of our
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, our strong track record with existing clients
has continued to be demonstrated through the levels of
renewal business contracted, which were £13.1 million in the
period. There were a number of larger clients who renewed
2021ANNUAL REPORT 14
Product update
In January we made a significant new release of our core
Secure Payments product CallGuard to ensure we maintain our
market leading position. We are the only company operating
in our relatively small competitive landscape that uses a
fundamentally different and patented technical approach,
where we replace the sensitive information with a placeholder
or token as it enters the client’s environment that can then be
safely stored as it is not payment data. All other companies
simply block the information.
Our approach provides us with significant advantages in the
elegance of our implementations, and requires no low-level
integration, again a feature of many competitors. Our clients
can make changes to their systems, processes or third-party
suppliers (such as their Payment Service Provider) without us
needing to make any changes to our solution. This is a unique
feature of the Eckoh solution. The new CallGuard release
builds on our award-winning product with three significant
new enhancements:
• Agent Control Panel – a more intuitive interface for the
Contact Centre Agent to take the payment securely and
help reduce the average handling time of that process.
In an industry where the reduction or addition of a few
seconds on every agent’s call can have a very meaningful
cost impact, it is essential that the tools they use are as
‘frictionless’ as possible.
• CallGuard Reporting Dashboard – an enhanced
reporting package with powerful visual elements, that
leverages the market-leading information product Domo.
This will be provided in either a standard format, or the
client can opt at their cost to have more detailed bespoke
reports based on their own needs.
• CallGuard Speech Capture – enhanced speech
recognition option with multiple languages (primarily for
the US market). We have seen a much higher level of
interest in the US for taking the payment securely using
speech rather than the keypad. Whilst this means the call
must be muted temporarily from the agent whilst the card
information is provided, the process is otherwise the same.
The reaction from both existing and new clients has been
extremely positive to the new release. Furthermore, we intend
to make another release later this year which will provide an
even more flexible delivery method, as well as a version of the
product tailored for much smaller clients, who we typically do
not target, that will enable our sales partners to effectively
syndicate to these organisations and manage the deployment
process themselves.
Cloud native
Eckoh continues its Cloud Native journey focusing on both
transition and net-new products and services. Cloud Native
harnesses the Cloud’s most powerful advantages — flexible,
on-demand infrastructure and powerful managed services
— and pairs them with Cloud-optimised practices and
technologies. It allows drastically faster and better building,
testing, and deploying of software, features and functionality
— more easily, securely and rapidly, whilst minimising
disruption of services.
As part of these initiatives, this past year we have expanded
our delivery pipeline to Cloud platforms across both the UK
and US in multi-regions and high availability zones. Aligning
with our payment products portfolio and PCI DSS, they have
been included in our annual PCI DSS assessment and resultant
Attestation of Compliance (AOC). Also, in line with Eckoh’s
security first practices, we have embraced a DevSecOps culture
focused on all stages of the software supply chain. This allows
Eckoh and its product and service offerings to maintain a high
and alert security posture in the face of emerging security
threats. We are pleased with the progress we have made
overall and can state that Cloud Native designed and delivered
applications are running across these geo locations supporting
some of our largest customers today.
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 and exemplified in our
January CallGuard release which greatly enhanced the product
suite. These technologies and methodologies aim to keep
us ahead of our competitors across the technical landscape,
enhance our product portfolio even faster, at higher margins,
and with a focus on security and assured quality, and win the
ongoing talent war for attracting and retaining high quality
developers.
Strategic Report 1 CHIEF EXECUTIVE REVIEW
15
Amazon Connect
A strategic initiative for FY22 is increased investment and
resource in progressing the delivery of Eckoh ‘stack solutions’
that include Amazon Connect as the Cloud telephony layer.
When combined with Eckoh’s Secure Payments, Omnichannel
and advanced voice capability as well as the Coral agent
desktop, this creates a compelling bundled solution that will
enable Eckoh clients to have complex and feature rich Cloud
customer engagement but delivered in a truly flexible and
agile way.
Current trading and outlook
The Board expects revenue and profit for the financial
year 2022 to be comparable to the financial year 2021,
and material year-on-year revenue and profit growth in the
financial year 2023. These expectations are subject to no
further lockdowns in the UK or US, and ongoing uncertainty
in the macro-economic climate because of the COVID-19
pandemic.
In the financial year 2022, we expect two fundamental
dynamics to affect our business. Eckoh’s market leadership
in US Secure Payments, high levels of recurring revenue and
strong order book is expected to drive continued growth in
this geography. This is offset, in the short term particularly
in the UK, by the impact of the pandemic on new business
activity, delayed incremental recurring revenue, and lower
transactional volumes at a time when we will be increasing
investment in our Cloud-based Secure Payments offering to
capture the market opportunity and deliver sustained high
levels of future revenue growth.
In the financial year 2023, our expectation of material growth
reflects an anticipated return to normal UK trading activity,
returns being generated from the investment in Cloud-based
Secure Payments offering, and ongoing momentum in US
Secure Payments supported by long-term structural growth
drivers, Cloud adoption and Eckoh’s strengthening partner
offering. This revenue momentum is expected to combine
with the benefits of operational gearing to drive material
growth in profitability.
Nik Philpot
CHIEF EXECUTIVE OFFICER
15 June 2021
2021ANNUAL REPORT 16
Principal Risks
& Uncertainties
Eckoh is exposed to a number of risk factors which may affect its performance.
The Group has a framework for reviewing and assessing these risks on a regular basis
and has put in place appropriate processes and procedures to mitigate against them.
However, no system of control or mitigation can completely eliminate all risks.
The Board has determined that the following are the principal risks facing the Group.
SPECIFIC RISK
MITIGATION
Pandemic risk
COVID-19 has continued to impact the US and UK economies. In the UK, the
business has exposure to consumer-facing customers where contact volumes
during social distancing are impacted. Our US operation is underpinned by
fixed contractual fees and has been impacted less.
All employees in the US and UK are able to immediately transition between
office and home working as required. 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 wider
security regulations such as the General Data Protection Regulation (GDPR)
or the US Consumer Privacy Acts. 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 across
all operating locations with rigorous cyber security controls. In addition,
a dedicated Security Operations Centre function provides Group wide
monitoring, recruitment and training schemes and active threat hunting. 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 Cyber Essentials, to add
to PCI DSS and 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.
Strategic Report 1 CHIEF EXECUTIVE REVIEW 17
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 11.6% (2020: 9.1%) 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
The Group is exposed to the US dollar and the translation of net assets and
income statements of its US division.
We regularly review and assess our exposure to changes in exchange
rates. The Group does not hedge the translation effect of exchange rate
movements on the Income Statement or Balance Sheet of the US division.
Reputation of the Eckoh Group
Damage to our reputation and our brand name can arise from a range of
events such as poor solution design or product performance, unsatisfactory
client services and other events either within, or outside, our control.
We address this risk by recognising the importance of our reputation and
attempting to identify any potential issues quickly and address them
appropriately. We recognise the importance of providing high quality
solutions, good client services and managing our business in a safe and
professional manner. Eckoh has concluded its program of ISO 9001:2015
certification to further audit these measures.
2021ANNUAL REPORT 18
Strategic Report 1 FINANCIAL REVIEW
Financial Review
Eckoh’s business model and market position, with high levels of
recurring revenue, a solid order book, enterprise clients
and a strong balance sheet, combined with prudent cost
control, have enabled Eckoh to manage the impact of the
global pandemic effectively and deliver a robust performance
for the year.
Revenue for the year decreased by 8.1% to £30.5 million
(FY20: £33.2 million) and at constant exchange3 rates by 6.7%.
Adjusted operating profit1 was £4.7 million level with last
year. Profit after tax for the year was £2.8 million (FY20: £3.1
million).
Basic earnings per share for the year ended 31 March 2021
was 1.09 pence per share (FY20: 1.23 pence per share).
Divisional performance
Revenue in the UK, which represents 59% (FY20: 62%) of
total group revenues, decreased by 11.9% to £18.0 million
(FY20: £20.5 million). The US represented 41% (FY20: 38%) of
total group revenues and revenues decreased in the period by
2.0% to £12.4 million (FY20: £12.7 million), revenues in local
currency grew by 1.8% year on year.
Gross profit
The Group’s gross profit decreased to £24.2 million (FY20:
£26.3 million). Gross profit margin was 79% for the year level
with last year. The UK gross profit margin increased to 85%
and is expected to remain at this level. In the US, the full year
margin decreased from 73% to 71%, a reduction of 200 basis
points, due to the continued increase in Secure Payments, the
planned transition away from the third-party Support business
and the impact of one-off Coral licences. Excluding the Coral
licences, gross profit margin was 73% (FY20: 76%).
FY21
(UK)
£000
FY21
(US)
£000
FY21
Total
£000
FY20
(UK)
£000
FY20
(US)
£000
FY20
Total
£000
Revenue
18,037
12,449
30,486
20,468
12,710
33,178
Gross Profit
15,299
8,896
24,195
17,074
9,250
26,324
Gross Profit %
85%
71%
79%
83%
73%
79%
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 at 84-85%. In the US, we would
expect the gross profit margin to gradually start to increase
from 71% to approx. 75% over the next two years. This is
driven by the acceleration in growth of the Secure Payments’
activities for Cloud solutions coupled with clients renewing
their contracts without additional significant hardware.
Administrative expenses
Total administrative expenses for the year were £20.6 million
(FY20: £23.0 million). Adjusted administrative expenses4 for the
year were £19.4 million (FY20: £21.6 million). In March 2020,
because of the pandemic we took a number of precautionary
measures including a freeze on new hires, postponing salary
increases for 2021 and limiting discretionary spend.
For our Contact Centre agents on zero-hour contracts we
utilised the Government furlough scheme and received £0.3
million. These staff members were severely impacted during
the pandemic, as the hours we were able to offer them
were significantly reduced in line with our clients who were
also heavily impacted during this period. By utilising the
Government furlough scheme we were able to pay these their
historic average hours during the period.
In the second half of the year, we identified a number of key
hires that we needed to recruit to sustain our high service
levels and ensure we are well-placed for a recovery in demand.
Having frozen salaries throughout 2020, employees were
awarded a salary increase from 1st January 2021 of on average
2.5%, which will last until the next formal salary review in April
2022. Included in administrative expenses is a trading foreign
currency loss of £0.4 million (FY20: £0.3 million gain).
Profitability measures
Adjusted operating profit was £4.7 million (FY20: £4.7 million),
level year on year. Included in the year were Coral licences of
£0.3 million (FY20 £0.8 million) and a foreign currency loss of
£0.4 million (FY20: gain £0.3 million). Adjusted EBITDA2 for the
year was £6.4 million, in line with the prior year (FY20: £6.4
million).
19
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 2021
£000
Year ended
31 March 2020
£000
3,550
663
536
4,749
398
704
505
3,286
979
468
4,733
314
848
491
6,356
6,386
Statement of financial position
While Eckoh continues 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 (FY20: £0.4 million)
added in the year to the value of the intangible assets of the
Company. While taking a prudent approach to capitalising
salary cost, which 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 2021, the interest
payable charge was £87k (FY20: £68k). The interest charge is
made up of bank interest of £54k (FY20: £50k) and interest on
leased assets of £33k (FY20: £18k).
Contract liabilities and contract assets
Contract liabilities and contract assets relating to IFRS 15
Revenue from Contracts with Customers have decreased in
the current year, principally as new contracted business in the
US has been predominantly for Cloud-based solutions. Where
clients contract for their services to be provided in the Cloud
or on our internal cloud platform, the level of hardware is
significantly reduced and implementation fees are typically
lower. This reduces the level of upfront cash received but
drives a greater level of revenue visibility and earnings quality.
Total contract liabilities were £12.5 million (FY20: £14.4
million), included in this balance are £11.3 million of contract
liabilities relating to the Secure Payments’ product or hosted
platform product, a decrease from £1.8 million at the same
time in the previous year. Contract assets as at 31 March 2021
were £4.4 million (FY20: £5.6 million).
Cashflow and liquidity
Gross cash at 31 March 2021 was £12.7 million, this is offset
by a loan to Barclays Bank of £1.0 million, giving net cash at
31 March 2021 of £11.7 million, an improvement of £0.1
million from net cash of £11.6 million as at 31 March 2020.
In the period the Company has repaid £1.0 million of the loans
outstanding to Barclays Bank in accordance with the terms
of the loan. There are two further quarterly loan repayments
to make and following these repayments scheduled for April
2021 and July 2021 the business will be debt free. During the
year, there has been a net cash outflow from working capital
of £2.3 million (FY20: £1.1 million cash inflow). In addition,
a Special Dividend payment of £1.6 million was made in
October 2020.
Taxation
Dividends
For the financial year ended 31 March 2021, there was a tax
charge of £717k (FY20: £166k charge). The effective tax rate
in the financial year ended 31 March 2021 was 20.4% (FY20:
5.0%). The prior year tax rate was impacted as a result of a
change in tax rate in the UK and the subsequent impact on
the deferred tax balances.
Earnings per share
Basic earnings per share was 1.09 pence per share (FY20: 1.23
pence per share). Diluted earnings per share was 1.06 pence
per share (FY20: 1.20 pence per share).
Post year end the Directors are recommending that a final
dividend for the year ended 31 March 2021 of 0.61 pence
per ordinary share be paid to the Shareholders whose
names appear on the register at the close of business on
24 September 2021, with payment on 22 October 2021.
The ex-dividend date will be 23 September 2021. This
recommendation will be put to the Shareholders at the Annual
General Meeting. Based on the shares in issue at the year end,
this payment would amount to £1.6 million.
Chrissie Herbert
CHIEF FINANCIAL OFFICER
15 June 2021
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 legal fees and settlement costs and expenses relating to
share option schemes and amortisation of acquired intangible assets.
2021ANNUAL REPORT 20
Strategic Report 1 RESPONSIBLE BUSINESS
Responsible business
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.
The impact of COVID-19 and the changes it has bought can
not be underestimated. In addition, climate change and the
negative impact it is having, and will continue to have, on all
society is something that Eckoh and our employees can work
harder at addressing. We all have a part to play and the Board
and I are firmly committed to ensuring that Eckoh enhances its
sustainability initiatives. There are also continuing issues around
inclusivity, diversity and opportunity in wider society to which
Eckoh can contribute.
We are a small company but with an international footprint
and we aim to improve our environment, social and
governance credentials. Over the next year we will formalise
our objectives and targets and track and measure our
performance in these areas.
The following pages show our commitment to being a socially
responsible company, what we have done in the last financial
year despite the challenge presented by COVID-19 and that
we have a sound basis upon which to develop further. I am
confident that we can deliver significantly on this over the next
few years and that our people will rise to this great challenge
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.
21
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.
During the last year the UK team, normally based in Hemel
Hempstead have been working remotely from home and as a
result the way we have engaged with the team during the last
year has changed and evolved.
In the US, the majority of the team are home-based, with a
small number of employees based in an office in Omaha. In
March 2021, we moved to larger offices to accommodate the
increased number of employees in Omaha, the office is in a
better location to attract technical employees. The number
of employees now based in the Omaha office is 20 of the
50 employees in the US team. The US office has been open
through the year, subject to local restrictions, and at all times
rotation schedules have been in place to enable employees to
have contact with their colleagues in a safe manner.
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 worked remotely during the last year both in the
UK and US. In these unusual circumstances communication is
key so, for both the UK and US businesses, there has been a
weekly call with all employees to start the week. While these
calls are focussed on updating all employees on the business,
they also involve recognition and celebrating success.
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
During the last year and in response to COVID-19, we
increased the amount of engagement with our employees.
Each month the HR team organised virtual social events for
the whole business, these ranged from escape room quizzes
to celebrations and games for Halloween, Thanksgiving,
Christmas and St. Patrick’s Day, a ‘Dare to Care’ challenge in
January, a celebration around International Women’s day and
most recently, a presentation around Earth Day.
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. These have been replaced with a ‘Tea
at Three’ which are themed sessions on Microsoft Teams,
2021ANNUAL REPORT 22
Strategic Report 1 EMPLOYEE ENGAGEMENT
bringing employees from the UK and US together for a social
event in an informal environment for employees to relax and
get to know other team members from across the business.
At each stage of the COVID-19 pandemic and the changes
to restrictions through the year with multiple lockdowns
in the UK, we consulted with our employees through all-
employee staff surveys, and sought feedback on employees’
well-being, whether employees wanted to return to the office
when restrictions lifted and about the Company’s response
to the pandemic. Feedback was overwhelmingly positive
demonstrating that our employees are highly engaged and
supportive of the business.
From September 2020, we were able to safely open both
the UK and US offices, for those employees who expressed
a wish to be office-based for their health and well-being.
We implemented changes in the offices to ensure the
safety of those employees, from socially distanced seating
arrangements, wearing of masks, to safe workflows around
the office, air filter units were introduced, door pulls were put
on doors to facilitate the opening of doors with employees’
feet rather than hands. All these measures meant that
for those employees who wished to return to the office,
they could do so with peace of mind that it was as safe an
environment as it could be.
As a result of the employee responses to the survey, as
restrictions ease, we plan to re-open the UK office, where
the expectation is that employees will return to the office
for approx. 3 days per week, with the remainder days being
worked remotely. This will ensure collaboration across the
team to meet the business needs, but also acknowledge
the change in approach that our employees and society are
requesting.
We also offer an Employee Assistance programme for all
employees and their direct families. This is a confidential
and free service delivered by a third-party company and
is accessible 24 hours a day, 365 days a year. It includes
counselling sessions, practical guidance and support on legal,
financial, family and work matters as well as online health and
wellbeing resources.
Throughout the year employees in both the UK and US
businesses 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. In addition to the business performance
updates, there has also been a briefing to communicate the
business strategy.
On an annual basis, the whole of the US team, under normal
circumstances, 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. These conferences have been held
via Microsoft Teams during the year.
At Eckoh, we strive to create a really positive working
environment, listening to our employees and helping our
employees enjoy their work and be successful in their role and
deliver on business goals.
At each stage of the COVID-19 pandemic
we consulted with our employees.
Feedback was overwhelmingly positive
demonstrating that our employees are
highly engaged and supportive of the
business.
Employee recognition
Training & development
23
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 and US, as part
of the induction, every new employee meets with the CEO
and CFO in their first two weeks and has a further opportunity
after three months 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.
The check-in process has been re-launched during the year
and is linked to our values, with two full check-ins annually
and one ‘light’ check-in with the ability to provide 360-degree
feedback.
Given the nature of our business there are regular security
awareness initiatives and training sessions for employees
across the business.
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 and despite the
difficult circumstances with COVID-19 we have had a number
of success stories where employees have been appointed into
junior roles or have progressed from these junior roles into
more senior positions within the organisation.
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.
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 encourage the
nominations to be based on employees demonstrating the
Eckoh values. 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 230 employees in total, with approximately
180 employees in the UK and 50 employees in the US. The
benefits package is managed separately in each country to
ensure that we attract the talent we need in each of the
businesses.
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, 65 employees participate in the
scheme out of approx. 169 eligible in the UK.
In December 2019, a Sharesave scheme for US employees, a
423 plan, was approved by Shareholders at the 2019 AGM
and launched in December 2019. Currently 26 employees
participate in the scheme out of approx. 38 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.
2021ANNUAL REPORT 24
Strategic Report 1 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 our employees is our highest
priority. During the year, employees have largely been
working remotely, and employees’ health and well-being
has been monitored through employee surveys, HR and
Line Managers. In addition, in October all employees were
encouraged to have 2 hours away from their screens, doing
something for them. In January, the employee theme was
‘Dare to Care’ and centred around healthy eating and fitness.
When we are in the office, our UK and US offices are fully
accessible with elevators to each floor and disabled parking
spaces allowing our employees or guests with reduced
mobility to move around easily.
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.
Personal charities
A number of employees based in the US Omaha office also
adopted a family at Christmas through The Salvation Army.
This involved, for a specific family, buying winter clothing,
Christmas presents, their Christmas lunch and paying their
electricity bill, $600 was donated.
DENS Helping Build Lives and The
Salvation Army
Each Christmas, Eckoh employees choose a charity they
would like to support. The UK team chose to support DENS,
helping build lives, which is a charity for people local to the
UK office in Hemel Hempstead. The aim of the charity is
to be the first port of call for people in Dacorum who are
facing homelessness, poverty and social exclusion. The US
team chose to support The Salvation Army, whose services
are diverse and responsive to the realities of life in the
communities we serve. In total the money donated through
money raised by employees and a Company contribution was
£2,720 for DENS and $928 for The Salvation Army.
25
In the environment
Although operationally we do not manufacture products, Eckoh
understands the impact our business and our employees can have
on the environment and have acknowledged, over the last year, the
changes in behaviour, due to the COVID-19 pandemic that have
been to the benefit of the environment. For Earth Day, we organised
a briefing for employees covering the environment, not only did it
provide useful information on the impact we are all having on the
environment, it also provided useful ideas of how we can all do our
bit for the environment. As the COVID-19 pandemic restrictions are
lifted over the coming months, we will be mindful of the changes
in the business and our employees and ensure that we continue as
a business to adopt, where possible, the behaviours that make a
difference. Over the coming months we will also be setting out our
objectives and targets for this area.
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 areas lights are LED, thus
reducing the electricity the Company uses on an on-going basis
• Energy efficient and motion sensor lighting installed in our offices
• Comprehensive recycling programmes established in all possible
locations
• Encouraged working habits to, where possible, move away from
paper to digitalisation of documents
• Photocopiers set to double-sided, black and white printing to
reduce paper/ink use, although during the last year, this has
further reduced significantly
• During the pandemic, the amount of business travel has reduced
significantly and it will be monitored to ensure as restrictions
ease that we continue, where appropriate to use web and
phone-based conferencing systems
• Encouraged alternative methods of transport to travel to and
from work e.g. cycle to work scheme, or local transport due to
the location of the new Omaha office
2021ANNUAL REPORT 26
Corporate Governance 2
Corporate Governance
Corporate Governance
Board of Directors
INDEPENDENT DIRECTORS
2
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 Senior Non-Executive Director and Audit Chairman
of both AVEVA Group plc and The Vitec Group 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 and SDL 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 Wilmington plc. He has extensive
experience in senior finance positions at several publicly 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, Quixant plc, Metapack Limited and Bighand Limited, Group Finance
Director at Alterian plc, Morse plc and Kewill plc. Guy 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
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 leading independent supplier of aviation simulation and training, 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-to-business field. David was
previously a partner at Bain & Company, a leading strategy consulting firm.
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:
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 several senior finance positions with both publicly listed
and privately held businesses. Her considerable background in high growth,
consumer facing organisations includes Collect+ and Travelodge Hotels Ltd and
she has gained payments experience from PayPoint plc, where she was UK &
Ireland Finance Director.
Chrissie qualified as a Chartered Accountant with KPMG and is a Fellow of the
ICAEW.
27
Chairman’s Statement on
Corporate Governance
Dear Shareholder,
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.
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.
In 2021 the Board will adopt an ESG strategy and will formalise our objectives and targets and track and measure our
performance in these areas. During the current year we will also evaluate and disclose, as a key performance indicator our
Annual Recurring Revenue.
Christopher Humphrey
CHAIRMAN
15 June 2021
2021ANNUAL REPORT 28
Quoted Companies Alliance
Code Compliance
The following paragraphs set out the 10 QCA Code
principles and how Eckoh has complied with those
principles.
1
Establish a strategy and business model which
promotes long-term value for Shareholders
The strategy and business model which explains the strategic
objectives of the Group and how the Company generates
and preserves value over the longer term are set out in the
Strategic Report on pages 3 to 15 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.
2
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 normal circumstances,
the Non-Executive Chairman would hold meetings with the
major Shareholders, independently of the Executive Directors,
however, during the pandemic this has not been possible.
The Non-Executive Chairman intends to meet with the major
Shareholders over the coming months.
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 planning to
be 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.
Christopher Humphrey and Chrissie Herbert will retire by
rotation and put themselves forward for re-election at the AGM.
3
Take into account wider stakeholder and social
responsibilities and their implications for long-term
success
Eckoh’s Business 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 in the process of rolling out
to our US customers.
4
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 34.
The Directors have carried out a robust assessment of the
principal risks facing the Group and how these risks could
affect the business, financial condition or operations of the
Group. The explanation of these principal risks including how
they are being mitigated can be found on pages 16 to 17.
Corporate Governance 2 CHAIRMAN'S STATEMENT 29
5
Maintain the Board as a well-functioning, balanced team led by the Chair
The Board, led by the Chairman, has a collective responsibility
and legal obligation to promote the interests of the Group.
The Chairman is ultimately responsible for Corporate
Governance. However, the Board is responsible for defining
the corporate governance policies.
The Board is made up of three Non-Executive Directors and
two Executive Directors and has delegated certain roles and
responsibilities to its Audit, Nomination and Remuneration
Committees whilst retaining overall responsibility.
Directors’ meeting attendance 2020/21
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
12
12
12
12
12
6
6
6
6
6
31
31
3
3
3
-
-
-
-
-
31
31
3
3
3
1
1
1
1
1
11
11
1
1
1
-
-
-
-
-
1.
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.
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:
The agenda for each Board meeting includes the following
as standing items:
- Risk analysis, including by risk, the risk factor and the
monitoring mechanism
- Management report which is prepared and presented by
the Chief Executive Officer
-
Finance report, which is prepared and presented by the
Chief Financial Officer and includes the management
accounts and business performance, including forecast as
appropriate.
Other matters which are covered by the Board routinely during
the year include:
- Review of annual report and preliminary announcement
- Review of Executive Director’s presentation of the full year
results to analysts and investors
- One-day strategy session at which the Board considers
management’s presentation of the Strategic Plan and gives
its approval
- Review and approval of the interim management
statements for release to the market
- Recommendation of the final dividend
- Company secretarial & legal
- Setting of the Board calendar for the year.
2021ANNUAL REPORT 30
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 2021.
- 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, compliance with the
Board’s approved procedures
- Ensuring that the Chairman is alerted to forthcoming
complex, contentious or sensitive issues affecting the
Group of which he might not otherwise be aware
- Providing information and advice on succession planning
to the Chairman, the 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.
6
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.
Corporate Governance 2 CHAIRMAN'S STATEMENT 31
7
Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.
During the financial year ended 31 March 2021, 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 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 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 report on the Nomination Committee is set out below and
the reports of the Audit Committee and the Remuneration
Committee are set out on page 34 and page 37 respectively.
the Committees’ terms of reference, leadership, the
frequency and time allotted to the Committee meetings
and their agendas
The role and responsibilities of the Chairman, Chief Executive
and other Directors have been set out under principle 5 on
pages 29 to 30 of the Annual Report.
the Directors’ feedback was free-ranging and unstructured
with guidance on areas to consider.
10
A Board evaluation process will be carried out annually.
8
Promote a corporate culture that is based on ethical
values and behaviours.
Our Business Responsibility section on pages 20 to 25 sets 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.
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. Communication with Shareholders is
predominantly through the Annual Report and AGM. The
last AGM results can be found on the Group’s website.
Other communications are in the form of full-year and half-
year announcements, periodic market announcements (as
appropriate) one-to-one meetings and investor roadshows.
The Remuneration Committee report is included on pages 37
to 42.
9
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.
2021ANNUAL REPORT 32
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, customer 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 2021 and Board
governance, see pages 27 to 32 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 the Executive Management
on various metrics and feedback tools in relation to
employees, particularly over the last year with the impact of
COVID-19. The results of the regular employee surveys have
been feedback to the Board, as well as the additional safety
measures that have been put in place in the offices to ensure a
safe working environment for employees.
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. 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.
Corporate Governance 2 CHAIRMAN'S STATEMENT 33
2021ANNUAL REPORT 34
Corporate Governance 2 AUDIT COMMITTEE REPORT
Audit Committee Report
Dear Shareholder,
On behalf of the Audit Committee, I am pleased to present
our report for the year ended 31st March 2021. The
Committee has considered the integrity of the Group’s
financial reporting and provided advice to the Board that
the 2021 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 auditors 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 internal and external audit
processes
• monitoring and reviewing the scope and areas internal
audit should cover alongside the other programmes and
process reviews the Company has.
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
15 June 2021
35
In the year under review the Audit Committee’s
activities were as follows:
Topic:
Actions:
• 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.
Financial
reporting
Review of the preliminary and interim results
announcement and the Annual Report
Review of significant accounting issues (as
reported below)
Consideration of the going concern basis for
preparation of the financial statements and
recommendation of the going concern statement
to the Board
Advising the Board on whether the Annual Report
and financial statements taken as a whole, is fair
balanced and understandable
Review of the external auditors’ reports and the
outcomes of the audit process
Review of internal audit reports presented during
the year
Ensuring the Company is fully prepared for Brexit
On-going financial monitoring through the
COVID-19 pandemic, ensuring financial reporting
is relevant and timely and covering revenue,
debtors, cost control and cashflow
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 page 16 to 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 2021 Financial statements, and how these were
addressed, were:
• Risk of fraud in revenue recognition
(including contract accounting)
Revenue recognition is 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.
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 auditors provide 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 2021, 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 auditors 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 2021 and the quality of
the audit process was assessed to be good.
Based on the Committee’s assessment, the Committee has
provided the Board with its recommendation to the
Shareholders on the re-appointment of
PricewaterhouseCoopers LLP as external auditors for the year
ending 31 March 2022. 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 2021.
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 auditors
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.
2021ANNUAL REPORT 36
Corporate Governance 2 AUDIT COMMITTEE REPORT
Risk management and internal control
Internal audit
The review of risks facing the Group is shown on pages 16
to 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.
The Audit Committee annually reviews the requirement for
an internal audit function. The Committee proposed in the
year ended 31 March 2020, that as the Group continues
to grow, particularly in the US, Grant Thornton UK LLP
would be engaged to review the internal controls of the US
Finance function during the financial year ending 31 March
2021. Grant Thornton UK LLP executed a review of the US
Finance internal controls and reported the results to the Audit
Committee.
Guy Millward
CHAIRMAN AUDIT COMMITTEE
15 June 2021
37
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 2021, 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 2021; 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 2021.
The membership and responsibilities of the Remuneration
Committee are set out on page 26 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 agreed with
this approach and reviewed the position throughout the
financial year ending 31 March 2021. I was pleased that as
a business we felt able to award the pay rises that would
normally have been awarded from 1 April 2021 three
months early, so with effect from 1 January 2021.
•
In April 2020, the Remuneration Committee sought advice
from FIT Remuneration Consultants LLP given the situation
with COVID-19. After deliberation, the following was
proposed to the Board:
° 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
was more fully understood. The Remuneration
Committee reviewed the situation in September and
decided it remained inappropriate to define an Annual
Bonus Plan for FY21 for the Executive Directors.
° During the year there were no Share Options awarded
to Senior Management in the business.
° The Executive Management team have recommended
a small level of discretionary bonuses be paid to staff
generally for the year ended 31 March 2021.
• Monitor the functioning and take-up of the US Share Save
Scheme. I am pleased that of the 38 employees eligible,
26 employees participate in the scheme.
• During the year under review, the Committee has
continued to assess the succession plans for Senior
Management reporting to the Executive Directors. The US
Senior Management team was strengthened during the
year.
The Remuneration Report in respect of the financial year
ended 31 March 2021, 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
1 September 2021. 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, subject to restrictions at the AGM.
David Coghlan
CHAIRMAN REMUNERATION COMMITTEE
15 June 2021
2021ANNUAL REPORT 38
Corporate Governance 2 REMUNERATION COMMITTEE 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 is
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 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.
39
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 2020 AGM
The following table shows the results of the Shareholder
advisory vote on Annual Remuneration Report:
For (including discretionary)
Against
Total number
of votes
128,518,093
8,000
% of
votes cast
99.99%
0.01%
Total votes cast (excluding withheld votes)
128,526,093
Total votes withheld
19,657
Total votes cast (including withheld votes)
128,545,750
The following section provides details of how Eckoh’s
Remuneration Policy was implemented during the financial
year ended 31 March 2021. 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 2020/21
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 2021 and 2020:
Base salary/fees
Benefits1
Pension
Annual bonus
Total
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
187
322
36
63
36
186
320
36
62
36
13
16
-
-
-
13
16
-
-
-
18
18
-
-
-
-
-
-
-
-
644
640
29
29
18
18
-
-
-
-
-
-
75
118
-
-
-
218
338
36
63
36
292
454
36
62
36
193
691
880
Executive Directors
Chrissie Herbert
Nik Philpot2
Non-Executive Directors
David Coghlan
Christopher Humphrey
Guy Millward
Total
1.
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.
2021ANNUAL REPORT 40
Corporate Governance 2 ANNUAL REPORT ON REMUNERATION
Incentive outcomes for the year
ended 31 March 2021
Scheme interests awarded in the year
ended 31 March 2021
Annual bonus in respect of 2020/21 performance
Performance Share Plan (“PSP”) (audited)
Annual bonus in respect of 2020/21 performance
There were no bonus payments accrued for the Executive
Directors for the year ended 31 March 2021 (FY20: 40%). A small
level of discretionary bonuses were accrued for staff members
(FY20: 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. 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
1.
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 2021, 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.
Payments to past Directors (audited)
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 were not increased from 1 June 2020. In
addition, a Committee Chairman fee for the Audit Committee
and Remuneration Committee of £5,100 per annum was not
increased from 1 June 2020. Both the fees for the Chairman and
Non-Executive Directors base salaries and the Committee Chairman
fee for the Audit Committee and Remuneration Committee were
increased by 2% from 1 January 2021. There will be no further
increase on 1 June 2021.
Directors’ shareholdings
The shareholdings of the Directors and their connected persons
in the Ordinary Shares of the Company against their respective
shareholding requirement as at 31 March 2021:
31 March 2021
Ordinary Shares of
0.25 pence each
1 April 2020
Ordinary Shares of
0.25 pence each
7,001,285
6,976,285
35,000
525,000
20,000
500,000
In the financial year ended 31 March 2021 and 2020, there were
no payments made to past Directors.
Chairman and Non-Executive Director fees
Nik Philpot1
Chrissie Herbert
Christopher Humphrey
The Chairman and Non-Executive Directors were paid the
following fees in the financial year ending 31 March 2021:
1. Nik Philpot's spouse is the beneficial owner of 80,000 shares that are
included above.
Role
Chairman
Non-Executive Director
Chairman of a Committee
2021 Annual fee £k
63
31
5
41
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
2020
(number)
Granted
in year
(number)
Forfeited
in year
(number)
Exercised
in year
(number)
At 31 March
2021
(number)
Exercise
price
(pence)
Earliest
date for
exercise
Latest
date for
exercise
Nik Philpot
Chrissie Herbert
Chrissie Herbert
1
2
1
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
28
1
2
21
1
4,100,000
500,000
500,000
4,000,000
500,000
43.5
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.
Nik Philpot1
Chrissie Herbert
Christopher Humphrey
31 March 2021
1 April 2020
Ordinary Shares of
Ordinary Shares of
0.25 pence each
0.25 pence each
7,001,285
6,976,285
35,000
525,000
20,000
500,000
2021ANNUAL REPORT 42
Corporate Governance 2 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 2020 and 2021, Chrissie Herbert participates in the UK scheme and the details are shown below:
Number of
Partnership
Shares
purchased
at 31 March
2020
Number of
Matching
Shares
purchased
at 31 March
2020
Dividend
Shares1
acquired at
31 March
2020
Total
Shares at
31 March
2020
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
2021
Chrissie
Herbert
11,179
22,358
465
34,002
3,083
6,166
366
Dec 21
43,617
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.
2.
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 £0.56 to
£0.61).
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.
4.
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 2021. During the year the level of fees paid to
remuneration advisors totalled £nil (2020: £nil).
David Coghlan
CHAIRMAN REMUNERATION
COMMITTEE
15 June 2021
43
Directors' Report
The Directors present the Directors’ Report,
together with the audited Financial Statements
for the year ended 31 March 2021.
Principal activities, results and likely future
developments
Substantial shareholdings
As at 31 March 2021, 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 £2.8
million (2020: £3.1 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 1,577,138 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 2021.
No.of ordinary
shares/voting
rights
% of issued
capital/voting
rights
Canaccord Genuity
Group Inc
Kestrel Investment
Partners
Liontrust Asset Mgt
Blackrock Inc
43,761,942
29,778,125
24,818,636
21,066,514
Herald Investment Mgt
16,273,723
Chelverton Asset Mgt
9,142,000
17.16
11.68
9.73
8.26
6.38
3.58
Annual General Meeting (AGM)
The 2021 AGM will be held at 11:00 on 1 September 2021.
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.
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.
2021ANNUAL REPORT 44
Corporate Governance 2 DIRECTORS' REPORT
Political contributions
Neither the Company nor any of its subsidiaries made any
political donations or incurred any political expenditure during
the year (2020: nil).
Going concern
In determining the appropriate basis of preparation of the
financial statements, the Directors are required to consider
whether the Group and Company can continue in operational
existence for the foreseeable future.
The Board has carried out a going concern review and
concluded that the Group and Company have 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 approving the financial
statements. Bank covenants have been reviewed and the
current bank loan will be fully repaid in July 2021.
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. The UK operation continued
to operate in an uncertain business climate and the ongoing
lockdown inevitably resulted in further delays to projects and
purchasing decisions. Some of our largest clients in the travel,
retail and leisure sectors have had their transactional activity
severely reduced during the financial year ended 31 March
2021, which continued to impact our UK revenue, but this
was not reflected proportionately in revenue. This will continue
into the current financial year until such time as restrictions are
lifted and volumes can return to pre-pandemic levels. We are
continually monitoring our clients’ ability to pay invoices and for
the year ended 31 March 2021 we have not had to provide for
any debts and this information can be found in note 17.
A key business indicator is our total orders and new business
orders. In the US, one positive consequence of the pandemic
has been the rapid increase in the number of Secure Payments
contracts won and delivered through Eckoh’s Cloud platforms,
as large enterprises have accelerated their move into the Cloud.
We do not anticipate this trend to reverse and whilst this
reduces the upfront payments (and cash received) for
implementations, it increases the proportion of recurring
revenue and improves the operational gearing, earnings quality
and visibility in the business. 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, including the severe
yet plausible downside scenario, 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.
Subsequent events
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 (2020: nil),
however, due to cancelling the Final Dividend for the year
ended 31 March 2020, a Special Dividend was paid in October
2020. The Special dividend paid was £0.61 pence per share, the
same level as the Final Dividend for the year ended 31 March
2019 and amounted to £1.6 million.
The Directors recommend the payment of a Final dividend
of 0.61p (2020: nil) per Ordinary Share amounting to £1.6
million (2020: nil) to be paid on 22 October 2021. This
recommendation will be put to the Shareholders at the Annual
General Meeting.
Independent Auditors
PricewaterhouseCoopers LLP have expressed their willingness
to continue as the Company’s auditors. As outlined in the
Audit Committee report on page 34, resolutions proposing
their appointment and to authorise their remuneration will be
proposed at the 2021 AGM.
45
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’s and
Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
By order of the Board
Chrissie Herbert
COMPANY SECRETARY
15 June 2021
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the 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 accounting standards in
conformity with the requirements of the Companies Act
2006 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, 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 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 international accounting
standards in conformity with the requirements of the
Companies Act 2006 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.
2021ANNUAL REPORT 46
Corporate Governance 2 INDEPENDENT AUDITORS' REPORT
Eckoh plc Annual Report 2021
Independent auditors’ report to the members of Eckoh plc
Report on the audit of the financial statements
Opinion
In our 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 2021 and of the group’s profit
and the group’s cash flows for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006;
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 2021 (the “Annual
Report”), which comprise: the Consolidated statement of financial position and Company statement of financial position as
at 31 March 2021; the Consolidated statement of total comprehensive income, the Consolidated statement of changes in
equity and Company statement of changes in equity and the Consolidated statement of cash flows 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
Audit scope
• 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 2021 and 100% of
net assets as at 31 March 2021.
Key audit matters
• Revenue recognition (group)
•
Impact of Covid-19 (group and company)
Materiality
• Overall group materiality: £305,000 (2020: £331,000) based on 1% of total revenue.
• Overall company materiality: £322,600 (2020: £332,500) based on 1% of total assets (restricted for the purpose
of the group audit to £232,000 (2020: £240,000).
• Performance materiality: £228,700 (group) and £241,900 (company).
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.
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Eckoh plc Annual Report 2021
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. The key audit matters below are consistent with last year.
Key audit matter
Revenue recognition – group
Revenue in the year ended 31 March 2021 was
£30,486k (FY20: £33,178k). See note 4 to the
financial statements
The approach to revenue recognition as set out
under IFRS 15 is complex and can be judgemental
especially where contracts with customers have
variable consideration.
Due to its expected impact on the group, we deem
the contract revenue recognition as 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 and company.
In doing so, management has focused on the group
and company’s ability to continue as a going
concern with adequate liquidity and to comply
with banking covenants if required. 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 for the group and company. In
doing so, management had made estimates and
judgements that are critical to the outcome of
these considerations.
Given the magnitude of the potential implications
of the Covid-19 on the group and company
performance and economy as a whole, we deem
this as a key audit matter.
How our audit addressed the 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;
Recalculating revenue recognition schedules to confirm the
accuracy of these schedules;
For a sample of customer contracts with deferred revenue and
costs at the year-end, we assessed management’s judgements
used in estimating the amounts deferred; and
Performing 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 used in the forecasts prepared by
management to appropriate audit evidence (such as actual
performance since 1 April);
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;
Performing stress testing of the group and company cashflow
forecast model to assess cash burn out after accounting for various
sensitivities (such as reduced revenue and no new contracted
business scenarios); and
• Obtaining and auditing management’s forward-looking banking
covenant calculations to confirm no potential covenant breaches.
On the basis of the analysis 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.
Eckoh plc has both its corporate and operating headquarters in London, 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 London, the Group audit engagement team is also based in London with no support required from
any auditors from other territories. The largest trading entity is Eckoh UK. This entity, along with Eckoh US and the company
were the only components requiring an audit of its complete financial information for the purposes of the consolidated group
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Corporate Governance 2 INDEPENDENT AUDITORS' REPORT
Eckoh plc Annual Report 2021
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:
Financial statements – group
Financial statements – company
Overall materiality
£305,000 (2020: £331,000).
How we determined it
Based on 1% of total revenue
Rationale for benchmark
applied
We have applied this benchmark as a generally accepted
auditing practice for groups at the growth stage and based
on what management deems to be a key performance
indicator.
£322,600 (2020: £332,500).
Based on 1% of total assets
Total assets is 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 £232,000 to £280,000.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope
of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example
in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to £228,700 for the group
financial statements and £241,900 for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our
normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit
above £15,200 (group audit) (2020: £16,500) and £16,100 (company audit) (2020: £16,600) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the going concern
basis of accounting included:
• Performing stress testing of the group’s cashflow 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.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group's and the company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's
and the company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
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.
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Eckoh plc Annual Report 2021
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
based on these responsibilities.
With respect to the Strategic report and Directors' report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires 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 2021 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, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to breaches of health and safety regulations, employment law, AIM regulations, Payment Card Industry
Data Security Standards (PCI DSS), General Data Protection Regulation (GDPR) and taxation, and we considered the extent to
which non-compliance might have a material effect on the financial statements. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and
determined that the principal risks were related to the risk that group and company management may record inappropriate
journal entries, and the risk of bias in accounting estimates and judgements;. Audit procedures performed by the engagement
team included.
• Enquiring of management and those charged with governance together with inspection of policy documentation
as to the group’s and company's high-level policies and procedures to prevent and detect fraud and inspection of
regulatory correspondence, to identify actual and potential breaches of laws and regulations. These enquiries
were corroborated through review of board minutes provided;
• Enquiring of those charged with governance and management as to whether they have knowledge of any actual,
suspected or alleged fraud;
• Auditing the risk of management override of controls, including using Computer Assisted Audit Techniques
(“CAATS”) in identifying journal entries to test based on risk criteria (such as unusual entries to revenue) and
comparing the identified entries to supporting documentation; and
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2021ANNUAL REPORT
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Corporate Governance 2 INDEPENDENT AUDITORS' REPORT
Eckoh plc Annual Report 2021
• Testing accounting estimates (because of the risk of management bias), including challenging assumptions and
judgements made by management in their significant accounting estimates.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
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. In our engagement letter, we also
agreed to describe our audit approach, including communicating key audit matters.
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 obtained 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
Watford
15 June 2021
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51
3
Financial Statements
52 Consolidated statement of total comprehensive income
53 Consolidated statement of financial position
54 Company statement of financial position
55 Consolidated statements of changes in equity
56 Company statements of changes in equity
57 Consolidated statement of cash flows
58 Notes to the financial statements
83 Shareholder Information
2021ANNUAL REPORT 52
Financial Statements 3 PRIMARY STATEMENTS
Consolidated statement of total comprehensive income
for the year ended 31 March 2021
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 income/(expense)
Items that will be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations
Other comprehensive income/(expense) 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
2021
£’000
2020
£'000
4
4
11
22
5
8
8
9
10
10
30,486
(6,291)
24,195
33,178
(6,854)
26,324
(20,645)
(23,038)
3,550
4,749
(663)
(536)
3,550
(87)
48
3,511
(717)
2,794
3,286
4,733
(979)
(468)
3,286
(68)
84
3,302
(166)
3,136
134
134
(48)
(48)
2,928
3,088
2021
pence
1.09
1.06
2020
pence
1.23
1.20
Consolidated statement of financial position
as at 31 March 2021
53
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
Equity
Called up share capital
Share premium account
Capital redemption reserve
Merger reserve
Currency reserve
Retained earnings
Total equity
Notes
11
12
13
9
16
17
18
19
21
13
21
13
9
20
2021
£’000
6,527
4,307
1,310
3,211
2020
£’000
7,313
3,851
277
3,805
15,355
15,246
174
13,277
12,706
26,157
41,512
312
13,494
13,541
27,347
42,593
(18,482)
(21,078)
(975)
(517)
(975)
(233)
(19,974)
(22,286)
-
(825)
(296)
(1,121)
20,417
638
2,663
198
2,697
982
13,239
20,417
(975)
(33)
(290)
(1,298)
19,009
638
2,663
198
2,697
848
11,965
19,009
The financial statements were approved by the Board of Directors on 15 June 2021 and signed on its behalf by:
C Herbert
CHIEF FINANCIAL OFFICER
Company Registration Number 3435822
2021ANNUAL REPORT 54
Financial Statements 3 PRIMARY STATEMENTS
Company statement of financial position
as at 31 March 2021
Assets
Non-current assets
Property, plant and equipment
Investments in group companies
Deferred tax asset
Long-term debtor
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
Equity
Called up share capital
Share premium account
Capital redemption reserve
Merger reserve
Retained earnings
Total equity
Notes
2021
£’000
2020
£’000
12
14
17
17
18
19
21
21
9
20
2,909
20,153
2
3,506
26,570
643
5,055
5,698
32,268
2,843
19,854
2
-
22,699
3,889
6,661
10,550
33,249
(16,388)
(975)
(17,363)
(19,053)
(975)
(20,028)
-
(133)
(133)
14,772
638
2,663
198
2,697
8,576
(975)
(133)
(1,108)
12,113
638
2,663
198
2,697
5,917
14,772
12,113
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 loss after tax for the year was £372,000 (2020: profit after tax of
£329,000). The financial statements were approved by the Board of Directors on 15 June 2021 and signed on its behalf by:
C Herbert
CHIEF FINANCIAL OFFICER
Company Registration Number 3435822
55
Consolidated statement of changes in equity
for the year ended 31 March 2021
Balance at 1 April 2020
Profit for the financial year
Other comprehensive income for the year
Total comprehensive income for the year
Dividends paid in the year
Shares transacted through Employee Benefit Trust
Shares purchased for share ownership plan
Share based payment charge
Deferred tax on share options
Total contributions by and distributions to
owners
Called
up share
capital
Share
premium
account
Capital
redemption
reserve
£’000
638
£’000
2,663
£’000
198
Merger
reserve
£’000
2,697
Currency
reserve
Retained
earnings
Total
Share-
holders'
equity
£’000
848
£’000
£’000
11,965
19,009
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
134
134
-
-
-
-
-
-
2,794
-
2,794
2,794
134
2,928
(1,558)
(1,558)
(138)
(241)
303
114
(138)
(241)
303
114
(1,520)
(1,520)
Balance at 31 March 2021
638
2,663
198
2,697
982
13,239
20,417
Balance at 1 April 2019
Profit for the financial year
Other comprehensive expense for the year
Total comprehensive income for the year
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
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
£’000
10,099
17,184
-
-
-
-
-
-
3
-
-
3
-
-
-
-
-
-
4
-
-
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(48)
(48)
-
-
-
-
-
-
-
3,136
-
3,136
3,136
(48)
3,088
(1,558)
(1,558)
(187)
(146)
-
407
214
(187)
(146)
7
407
214
(1,270)
(1,263)
Balance at 31 March 2020
638
2,663
198
2,697
848
11,965
19,009
2021ANNUAL REPORT
56
Financial Statements 3 PRIMARY STATEMENTS
Company statement of changes in equity
for the year ended 31 March 2021
Balance at 1 April 2020
Profit for the financial year and total
comprehensive income
Dividends paid in the year
Shares transacted through Employee Benefit Trust
Shares purchased for share ownership plan
Share based payment charge
Total contributions by and distributions to
owners
Called up
share capital
£’000
638
Share
premium
account
Capital
redemption
reserve
£’000
2,663
£’000
198
Merger
reserve
£’000
2,697
Retained
earnings
£’000
5,917
Total
Shareholders'
equity
£’000
12,113
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,293
4,293
(1,558)
(1,558)
(138)
(241)
303
(138)
(241)
303
(1,634)
(1,634)
Balance at 31 March 2021
638
2,663
198
2,697
8,576
14,772
Balance at 1 April 2019
Profit for the financial year and total
comprehensive income
Dividends paid in the year
Shares transacted through Employee Benefit Trust
Purchase of own shares
Shares issued under the share option schemes
Share based payment charge
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
-
-
-
-
3
-
3
-
-
-
-
4
-
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
329
329
(1,558)
(1,558)
(187)
(146)
-
407
(187)
(146)
7
407
(1,484)
(1,477)
Balance at 31 March 2020
638
2,663
198
2,697
5,917
12,113
57
Consolidated statement of cash flows
for the year ended 31 March 2021
Cash flows from operating activities
Cash generated from operations
Tax paid
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
Cash outflow from acquiring shares from the Employee Benefit Trust
Net cash utilised in financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the start of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the period
Cash and cash equivalents at the end of the period
The notes on pages 58 to 82 form an integral part of these financial statements.
Notes
25
8
8
12
11
8
18
1818
2021
£'000
4,385
(10)
(54)
(33)
4,288
(1,175)
(573)
48
(1,700)
(1,558)
(975)
(461)
(241)
-
(138)
(3,373)
(785)
13,541
(50)
12,706
12,706
2020
£'000
7,240
(88)
(50)
(18)
7,084
(571)
(951)
84
(1,438)
(1,558)
(1,300)
(503)
(187)
7
(146)
(3,687)
1,959
11,582
--
13,541
13,541
2021ANNUAL REPORT 58
Notes to the Financial Statements
for the year ended 31 March 2021
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.
NEW ACCOUNTING STANDARDS EFFECTIVE FOR
THE GROUP AND COMPANY IN THESE FINANCIAL
STATEMENTS:
There has been no material impact on the financial statements
of adopting new standards or amendments.
An amendment to IFRS 16: Leases was issued by The
International Accounting Standards Board (IASB) on 28 May
2020. The amendment provides lessees with a practical
expedient from assessing whether a COVID-19-related rent
concession is a lease modification. The amendment was not
applicable to the Group.
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 financial
statements 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
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
accounting standards in conformity with the requirements
of the Companies Act 2006 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 prepared on a going
concern basis and under the historical cost convention.
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS 59
GOING CONCERN
In determining the appropriate basis of preparation of the
financial statements, the Directors are required to consider
whether the Group and Company can continue in operational
existence for the foreseeable future.
The Board has carried out a going concern review and
concluded that the Group and Company have 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 approving 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. The UK
operation continued to operate in an uncertain business
climate and the ongoing lockdown inevitably resulted in
further delays to projects and purchasing decisions. Some
of our largest clients in the travel, retail and leisure sectors
have had their transactional activity severely reduced during
the financial year ended 31 March 2021, which continued
to impact our UK revenue, but this was not reflected
proportionately in revenue. This will continue into the current
financial year until such time as restrictions are lifted and
volumes can return to pre-pandemic levels. We are continually
monitoring our clients’ ability to pay invoices and for the year
ended 31 March 2021 we have not had to provide for any
debts and this information can be found in note 17.
A key business indicator is our total orders and new business
orders. In the US, one positive consequence of the pandemic
has been the rapid increase in the number of Secure Payments
contracts won and delivered through Eckoh’s Cloud platforms,
as large enterprises have accelerated their move into the
Cloud. We do not anticipate this trend to reverse and whilst
this reduces the upfront payments (and cash received) for
implementations, it increases the proportion of recurring
revenue and improves the operational gearing, earnings
quality and visibility in the business. 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, including
the severe yet plausible downside scenario which assumes no
new business, 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.
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:
Impairment of investments in subsidiaries (Company only)
The Company has an investment in subsidiaries balance
of £20.1m (2020: £19.9m) and intercompany receivables
of £4.1m (2020: £3.9m). 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.
CRITICAL ACCOUNTING JUDGEMENTS
Contract revenue
In accordance with IFRS 15: Revenue from Contracts with
Customers, the revenue recognition is 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.
2021ANNUAL REPORT 60
Deferred taxation
(b) Subsidiaries
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 2021, the Group
recognised deferred tax assets of £3.2 million, including £2.0
million in respect of tax losses and tax credits. Deferred tax
assets amounting to £6.1 million were not recognised in
respect of trading losses of £0.6 million and capital losses of
£5.5 million. It is possible that the deferred tax assets actually
recoverable may differ from the amounts recognised if actual
taxable profits differ from estimates.
BASIS OF CONSOLIDATION
(a) Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date – i.e. when control is
transferred to the Group. Control is the power to govern the
financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, the Group
takes into consideration potential voting rights that are
currently exercisable.
The Group measures goodwill at the acquisition date as:
•
•
•
•
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in
the acquiree; plus
if the business combination is achieved in stages, the fair
value of the pre-existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Transaction costs, other than those associated with the issue of
debt or equity securities, that the Group incurs in connection
with a business combination are expensed as incurred.
Any contingent consideration payable is measured at fair
value at the acquisition date. If the contingent consideration is
classified as equity, then it is not re-measured and settlement
is accounted for within equity. Otherwise, subsequent changes
in the fair value of the contingent consideration are recognised
in profit or loss.
If share-based payment awards (replacement awards) are
required to be exchanged for awards held by the acquiree’s
employees (acquiree’s awards) and relate to past services, then
all or a portion of the amount of the acquirer’s replacement
awards is included in measuring the consideration transferred
in the business combination. This determination is based on
the market-based value of the replacement awards compared
with the market-based value of the acquiree’s awards and the
extent to which the replacement awards relate to past and/or
future service
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.
(c) Loss of control
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
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS 61
of the asset, which is generally assumed to be three years.
INVESTMENTS IN SUBSIDIARIES
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 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.
Credit and liquidity risk management is described in note 3.
EQUITY
Equity comprises the following:
Share capital represents the nominal value of Ordinary
Shares.
Capital redemption reserve represents the maintenance of
capital following the share buy back and tender offer.
Share premium 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
2021ANNUAL REPORT 62
functional currency at the foreign exchange rate ruling at that
date. Foreign exchange differences arising on translation are
recognised in the income statement, with the exception of
exchange differences arising on quasi-equity liabilities which
are recognised in other comprehensive income. 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.
LEASES
Following the implementation of IFRS 16 Leases, 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 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.
(c) Share-based payments
From time to time on a discretionary basis, the Board of
Directors award high-performing employees bonuses in the
form of share options. The options are subject to a three-
year vesting period and their fair value is recognised as an
employee benefits expense with a corresponding increase in
equity over the vesting period. The fair value of share options
granted is recognised within staff costs with a corresponding
increase in equity. The proceeds received are credited to share
capital and share premium when the options are exercised.
The fair value of share options was measured using the 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
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS 63
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 are invited to enrol in the 2019 Sharesave
Scheme annually and are granted an option to purchase up
to a number of Ordinary Shares at the end of the offering
period. 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 (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.
GOVERNMENT GRANTS
The Group has received government assistance as a result
of the COVID-19 pandemic in the form of contributions
towards employee costs. For Government assistance which
meets the definition of a Government grant, under IAS 20
the Group applies the income approach to account for the
grants received. As such, the grant is recognised in the Income
Statement as a reduction of the related costs incurred. In the
period ending 31 March 2021, grant income of £311k, (FY20:
£nil) relating to claims made for Contact Centre Agents, who
are employed on Zero-hour contracts, was received. There are
no unfulfilled conditions or other contingencies attached to
this government assistance.
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
and clients’ reliance on Eckoh’s PCI-DSS Level 1 compliance,
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.
2021ANNUAL REPORT 64
TAXATION
LIQUIDITY RISK
Current tax is the tax currently payable based on taxable profit
for the year.
Deferred taxation is provided in full, using the liability method,
on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred tax is not provided
if it arises from initial recognition of an asset or liability in a
transaction, other than a business combination, that at the
time of the transaction affects neither accounting nor taxable
profit or loss. Deferred tax is calculated at tax rates that are
expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the
balance sheet date.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred tax on temporary differences associated with shares
in subsidiaries is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable
that reversal will not occur in the foreseeable future.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the income statement, except
where they relate to items that are charged or credited directly
to equity in which case the related deferred tax is also charged
or credited directly to equity.
FINANCIAL LIABILITIES
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group 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.
3. Financial risk management
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.
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
(74)
74
Impact on financial interest in the
income statement: (loss)/gain
FOREIGN CURRENCY RISK
The Group’s principal exposure to exchange rate fluctuations
arises on the translation of overseas net assets, profits and
losses into the presentation currency. This risk is managed
by taking differences that arise on the retranslation of the
net overseas investments to the currency reserve. Foreign
currency risk on cash balances is monitored through cash
flow forecasting and currency is held in foreign currency bank
accounts only to the extent that it is required for working
capital purposes. No sensitivity analysis is provided in respect
of foreign currency risk as due to the Group’s working capital
management practices the risk is considered to be moderate.
The risk is further explained in the principal risks and
uncertainties on pages 16 to 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 Statements 3 NOTES TO THE FINANCIAL STATEMENTS 65
FINANCIAL ASSETS
Current financial assets
Trade receivables (note 17)
Other receivables (note 17)
Cash and cash equivalents (note 18)
Total financial assets
FINANCIAL LIABILITIES
Current financial liabilities
Trade payables (note 19)
Other payables (note 19)
Accrued liabilities (note 19)
Lease liabilities (note 13)
Total financial liabilities
2021
£’000
4,551
838
12,706
18,095
2021
£’000
2,193
294
3,771
1,342
7,600
2020
£’000
4,464
748
13,541
18,753
2020
£’000
2,510
188
4,158
266
7,122
Other interest-bearing loans and borrowings
Information about the contractual terms of the Group’s
interest-bearing loans and borrowings, which are measured
at amortised cost are disclosed below. For more information
about the Group’s exposure to interest rate and foreign
currency risk, see above.
Non-current financial liabilities
Secured bank loans
2021
£’000
-
2020
£’000
975
Current financial liabilities
Current portion of secured bank loans
975
975
Terms and debt repayment schedule
Currency
Bank Loan
Sterling
Nominal
interest
rate
1.25% plus
LIBOR.
Maturity
date
See note
21
Carrying
amount
2021
£’000
975
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 and Special 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.
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
underlying 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
2021
£’000
3,550
663
Year
ended
31 March
2020
£’000
3,286
979
536
468
Operating profit
Amortisation of acquired intangible
assets
Expenses relating to share option
schemes
Adjusted operating profit1
4,749
4,733
Amortisation of other intangible assets
Depreciation of owned assets
Depreciation of leased assets
398
704
505
314
848
491
Adjusted EBITDA2
6,356
6,386
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.
2021ANNUAL REPORT
66
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 leases
Purchase of intangible assets
Depreciation and amortisation
Depreciation of property, plant & equipment
Depreciation of leased assets
Amortisation
1. Other expenses comprise expenses relating to share option schemes
and amortisation of acquired intangible assets
Eckoh UK
£’000
18,037
15,299
(13,022)
2,277
3,069
(792)
2,277
2,285
2,648
3,335
Eckoh US
£’000
12,449
8,896
(7,623)
1,273
1,680
(407)
1,273
1,226
1,903
422
Total
2021
£’000
30,486
24,195
Total
2020
£’000
33,178
26,324
(20,645)
(23,038)
3,550
4,749
3,286
4,733
(1,199)
(1,447)
3,550
3,511
4,551
3,757
3,286
3,302
4,464
3,805
3,581
1,562
5,143
4,816
698
1,138
573
542
408
665
368
408
-
162
97
396
1,066
1,546
573
704
505
1,061
569
769
951
848
491
1,293
In 2020/21 there was one customer that individually
accounted for more than 10% of the total revenue of the
continuing operations of the Group. In 2019/20 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.
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS
Revenue by geography
UK
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
67
Eckoh UK
£’000
17,804
-
233
18,037
Eckoh US
£’000
-
12,321
128
12,449
2021
£’000
17,804
12,321
361
30,486
2020
£’000
20,275
12,504
399
33,178
Eckoh UK
£’000
Eckoh US
£’000
Total 2021
£’000
Total 2020
£’000
15,462
2,575
18,037
7,778
4,671
12,449
23,240
7,246
30,486
27,215
5,963
33,178
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 and other payables’
2021
£’000
4,551
4,359
(11,347)
(2,437)
2020
£’000
4,464
5,587
(13,194)
(3,143)
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 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.
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.
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 2021
Contract
liabilities
£’000
-
-
2,846
2,014
7,092
5,971
-
-
2021ANNUAL REPORT
68
Contract costs
Deferred implementation costs
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 £11.3m
(FY20: £13.2m). We expect to recognise approximately £5.4m
(FY20: £6.3m) in the next 12 months, £5.9m (FY20: £6.7m) 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
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
31 March
2021
£’000
1,698
316
2,014
31 March
2020
£’000
2,209
1,167
3,376
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
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
(23,038)
3,286
4,733
(1,447)
3,286
3,302
4,464
3,805
2,604
2,212
4,816
1. Other expenses include expenses relating to share option schemes and amortisation of acquired intangible assets.
Revenue by geography
UK
United States of America
Rest of the World
Total Revenue
Eckoh UK
£’000
20,275
-
193
20,468
Eckoh US
£’000
-
12,504
206
12,710
502
951
660
394
624
67
-
188
97
669
569
951
848
491
1,293
2020
£’000
20,275
12,504
399
33,178
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS
5. Profit from operating activities
The Group’s profit from operating activities is arrived at after charging:
Employee benefits expense (note 6)
Amortisation of intangible assets (note 11)
Depreciation of property, plant and equipment (note 12)
Depreciation of leased assets (note 13)
Inventory recognised as an expense (note 16)
69
2021
£’000
2020
£’000
14,104
1,061
704
505
32
14,505
1,293
848
491
205
6. Employee benefits expense
7. Auditors' remuneration
Government grants receivable towards
employee costs
Wages and salaries
Less: Internal development costs capitalised
in the year
2021
£’000
(311)
2020
£’000
-
12,502
12,768
(379)
(371)
Amortisation of internal development costs
327
245
Social security costs
Other pension costs
Share based payments
1,235
1,193
194
536
202
468
14,104
14,505
The Remuneration Report on page 37 provides further details
on the Directors’ emoluments. The monthly average number
of people (including Executive Directors) employed by the
Group during the year was:
Technical support
Customer services
Administration and management
2021
Number
2020
Number
97
38
59
194
107
37
69
213
Excluded from the table above are 23 (2020: 19) full time
equivalent casual call centre employees who cost £305,398
(2020: £352,737) in the year.
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
2021
£’000
2020
£’000
39
32
85
69
Total fees payable to the Group’s auditors
124
101
8. Finance income and finance charges
Interest receivable
Bank interest receivable
Finance expense
Bank interest payable
Lease interest payable
2021
£’000
2020
£’000
48
48
84
84
2021
£’000
2020
£’000
(54)
(33)
(87)
(50)
(18)
(68)
2021ANNUAL REPORT 70
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
2021
£’000
2020
£’000
1
2
3
697
3
21
(7)
714
717
2
(229)
(227)
555
176
(7)
(331)
393
166
A credit of £114k (2020: credit of £214k) for deferred taxation
in relation to share options was recognised directly in equity.
The tax charge for the year is different (2020: different) to
the standard rate of corporation tax in the UK of 19% (2020:
19%). The differences are explained below:
Continuing operations
Profit before taxation
Profit multiplied by rate of corporation tax in the UK of 19% (2020: 19%)
Additional foreign tax suffered
Effect of expenses not deductible for tax purposes
Non-taxable income
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
2021
£’000
3,511
667
1
10
(20)
5
16
45
(7)
717
2020
£’000
3,302
627
2
2
-
(53)
(40)
(41)
(331)
166
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS 71
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
2021
£’000
-
954
2,006
251
-
3,211
2020
£’000
-
913
2,477
415
-
3,805
2021
£’000
-
(100)
-
(182)
(14)
(296)
2020
£’000
-
-
-
(226)
(64)
(290)
Included in the deferred tax liability is £133k (FY20: £133k)
which relates to the Company and comes from acquired
deferred tax liabilities.
Movement in deferred tax balances during the year
Balance at 1 April
Recognised in income statement
Recognised in equity
Balance at 31 March
2021
£’000
-
854
2,006
69
(14)
2,915
2021
£’000
3,515
(714)
114
2,915
2020
£’000
-
913
2,477
189
(64)
3,515
2020
£’000
3,586
(393)
322
3,515
Unrecognised deferred tax assets
There are unprovided deferred taxation assets totalling
£6,058k (2020: £6,042k). These have arisen in respect of
trading losses of £575k (2020: £559k) and in respect of capital
losses of £5,483k (2020: £5,483k). 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
2021
£’000
2,794
2020
£’000
3,136
2021
£’000
255,351
(1,862)
-
2020
£’000
255,085
(1,630)
-
253,489
253,455
9,426
8,782
262,915
262,237
2021ANNUAL REPORT
72
11. Intangible assets
Group
Cost
At 1 April 2019
Additions
Foreign exchange
At 31 March 2020
Additions
Transfer of assets
Foreign exchange
Disposals
At 31 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
Foreign exchange
At 31 March 2020
Charge for the year
Transfer of assets
Foreign exchange
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Goodwill
Computer
software
Customer
relationships
Intellectual
property
£’000
£’000
£’000
£’000
Trade
name
£’000
Total
£’000
5,014
-
152
5,166
-
-
(283)
-
4,883
-
-
-
-
-
-
-
-
4,883
5,166
3,221
922
4
4,147
525
(372)
(7)
-
4,293
2,376
358
5
2,739
362
(273)
(7)
2,821
1,472
1,408
3,626
-
149
3,775
-
-
(277)
-
3,498
2,381
743
117
3,241
498
-
(267)
3,472
26
534
7,236
29
22
7,287
48
372
(42)
(2)
7,663
6,984
120
18
7,122
163
273
(40)
7,518
145
165
384
-
16
400
-
-
(29)
-
371
276
72
12
360
38
-
(28)
370
1
40
19,481
951
343
20,775
573
-
(638)
(2)
20,708
12,017
1,293
152
13,462
1,061
-
(342)
14,181
6,527
7,313
The Company has no intangible assets. (2020: nil).
Within the intangible category of computer software in the
above table is internally developed computer software, as at
31 March 2021 this had a net book value of £1,466k (2020:
£1,269k).
Amortisation of acquired intangible assets included in the
charge for the year in the above table was £663k (2020:
£979k). This is made up of Customer Relationships, Intellectual
Property and Trade name, with the exception of £36k of
Intellectual Property which relates to amortisation on self-
generated assets in Eckoh UK Limited. Within Intellectual
Property 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 current and 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. Management
is 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.
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS
73
Eckoh – UK
Eckoh – US
Total
Goodwill
31 March 2021
£’000
Goodwill
31 March 2020
£’000
2,373
2,510
4,883
2,373
2,793
5,166
Market growth
rate %
10%
20%
Discount
rate %
13.9%
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 businesses.
Sensitivity to the changes in assumptions
If forecast revenues fell by 70%, 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 2019
Additions
Foreign exchange
At 31 March 2020
Additions
Foreign exchange
Disposals
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
Foreign exchange
At 31 March 2020
Charge for the year
Foreign exchange
Disposals
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
30
-
2
32
-
(3)
-
29
30
-
2
32
-
(3)
-
29
-
-
3,068
-
-
3,068
109
-
-
3,177
181
44
-
225
43
-
-
268
2,909
2,843
7,062
569
64
7,695
1,066
(126)
(181)
8,454
5,831
804
52
6,687
661
(114)
(178)
7,056
1,398
1,008
The land and buildings are held by the Company, the gross book
value as at 31 March 2021 was £3,177k (2020: £3,068k). The
increase is due to the purchase of additional car parking spaces at
the UK Office in Hemel Hempstead. The net book value at 31 March
2021 was £2,909k (2020: £2,843k). This is the only property, plant
and equipment held by the Company.
Total
£’000
10,160
569
66
10,795
1,175
(129)
(181)
11,660
6,042
848
54
6,944
704
(117)
(178)
7,353
4,307
3,851
2021ANNUAL REPORT
74
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.
The total cash outflow for leases in 2021 was £494k (2020:
£521k), made up of principle lease payments of £461k (2020:
£503k) and lease interest payments of £33k (2020: £18k).
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 Company does not hold any leased assets. (2020: £nil).
Buildings
£’000
Equipment
£’000
Right-of-use assets
At 1 April 2019
Additions
At 31 March 2020
Additions
Foreign exchange
Disposals
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
Foreign exchange
At 31 March 2020
Charge for the year
Foreign exchange
Disposals
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Lease liabilities
Current
Non-current
Lease interest and expenses
Interest expense (included in finance costs)
Expenses relating to short-term leases (included in cost of goods sold and administrative expenses)
-
220
220
407
(22)
-
605
-
97
1
98
96
(14)
-
180
425
122
Total
£’000
-
769
769
1,546
(22)
(518)
1,775
-
491
1
492
505
(14)
(518)
465
1,310
277
2020
£’000
233
33
266
(18)
(11)
-
549
549
1,139
-
(518)
1,170
-
394
-
394
409
-
(518)
285
885
155
2021
£’000
517
825
1,342
(33)
(8)
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS
14. Investments in Group companies
At 1 April 2019
Additions
Amortisation
At 31 March 2020
Additions
Amortisation
At 31 March 2021
Accumulated Impairment
At 1 April 2019, 31 March 2020
Movement in the year
At 31 March 2021
At 31 March 2020
75
Shares in
subsidiary
undertakings
£’000
Other
investment
£’000
21,236
-
(4)
21,232
-
-
21,232
(6,985)
(4)
(6,989)
-
(6,989)
14,243
14,247
5,200
407
-
5,607
303
-
5,910
-
-
5,910
5,607
Total
£’000
26,436
407
(4)
26,839
303
-
27,142
(6,985)
(4)
(6,989)
20,153
19,854
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.
2021ANNUAL REPORT
76
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
Eckoh Omni Ltd
England and Wales (ii)
United States of America (iii)
United States of America (iv)
France (v)
England and Wales (ii)
England and Wales (ii)
England and Wales (ii)
England and Wales (ii)
England and Wales (ii)
England and Wales (ii)
England and Wales (ii)
England and Wales (ii)
England and Wales (ii)
Secure Payment & Customer
Engagement Solutions
Non trading
Non trading
Secure Payment Solutions &
Support Solutions
Non trading
Dormant
Non trading
Dormant
Dormant
Dormant
Non-Trading
Non-Trading
Dormant
Dormant
England and Wales (ii)
Cloud-based Software Provider
100%
100%
100%
100%
100%(i)
67% & 33%(i)
100%
100%(i)
100%(i)
100%
100%(i)
100%(i)
100%
100%(i)
100%
(i)
Share capital held by a subsidiary undertaking.
(ii) The registered office is Telford House, Corner Hall, Hemel
Hempstead, HP3 9HN.
(iii) The registered office is c/o National Registered Agents Inc., 160
Greentree Drive, Suite 101, Dover, Delaware 19904.
(iv) The registered office is 7172 Regional Street. #431, Dublin,
California 94568.
(v) 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
2021
£’000
2020
£’000
174
174
312
312
The cost of inventory recognised as an expense during
the year was £32k (2020: £205k). The Company
does not hold any inventory. (2020: £nil)
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS
77
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
Long-term assets
Amount receivable from subsidiary undertakings
2021
£’000
4,640
(89)
4,551
-
838
7,888
13,277
-
-
2020
£’000
4,575
(111)
4,464
-
748
8,282
13,494
-
-
2021
£’000
-
-
-
618
-
25
4,149
3,506
3,506
2020
£’000
-
-
-
3,882
-
7
3,889
-
-
Trade receivables are stated after loss allowance of £89k (2020: £111k).
No expected credit loss has been calculated for the amount receivable from subsidiary
undertakings as the directors expect the full amount to be recoverable.
Gross trade receivables - ageing
Current
1-30 days
31-60 days
61-90 days
Over 90 days
GROUP
Gross carrying amount-trade
receivables
GROUP
Expected loss rate
2021
£’000
3,803
626
83
17
111
4,640
2020
£’000
3,727
611
103
14
120
4,575
2021
%
0.0%
0.0%
0.0%
0.0%
80.3%
1.9%
2020
%
1.0%
0.0%
0.1%
30.3%
29.8%
2.4%
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 reputable nature of the Group’s current
customer base limits exposure to credit risk.
2021ANNUAL REPORT
78
18. Cash and cash equivalents
GROUP
COMPANY
Sterling
Euro
US dollars
Floating rate
Euro
US dollars
2021
£’000
10,897
24
1,785
12,706
2021
£’000
10,897
24
1,785
12,706
2020
£’000
11,354
9
2,178
13,541
2020
£’000
11,354
9
2,178
13,541
2021
£’000
4,370
-
685
5,055
2021
£’000
4,370
-
685
5,055
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 0.04% (2020: 0.78%).
The Group’s financial risk management is disclosed in note 3.
19. Trade and other payables
GROUP
COMPANY
2021
£’000
2,193
294
877
15,118
-
18,482
2020
£’000
2,510
188
1,028
17,352
-
21,078
2021
£’000
-
-
-
22
16,366
16,388
Trade payables
Other payables
Other taxation and social security
Accruals and contract liabilities
Amounts payable to subsidiary undertakings
As set out in note 4, £5.9 million (FY20: £6.7 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 £180,000 (2020: £518,000).
The Group’s exposure to liquidity risk is disclosed in note 3.
2020
£’000
4,983
-
1,678
6,661
2020
£’000
4,983
-
1,678
6,661
2020
£’000
-
-
-
14
19,039
19,053
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS
79
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 2020
255,351,256
Shares issued under the share
option schemes
-
At 31 March 2021
255,351,256
638
-
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 2020
Repaid during the year
At 31 March 2021
Loans and borrowings
Bank loans
£’000
(1,950)
975
(975)
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 is being repaid evenly over the remaining life of the
loan. There have been two quarterly repayments of £487,500
in October 2020 and January 2021 with the remaining two
repayments due in April and July 2021.
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 nil awards have been granted to Senior
Management. Each of the PSP awards is subject to a Total
Shareholder Return performance condition, measured over a
3-year performance period.
2021ANNUAL REPORT 80
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.
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
01 Jan
2013
23 Mar
2016
11.00
11.00
3
0.00
0.25
1
43.50
43.50
13
2 May
2016
43.50
43.50
1
13 Oct
2016
38.875
38.88
2
31 Mar
2017
39.50
39.50
14
21 Jun
2017
47.50
47.50
1
23 Nov
2017
51.25
-
2
23 Jul
2018
37.81
-
26
26 Sep
2018
34.38
-
1
Shares under option
75,000
109,744
1,700,000
500,000
400,000
2,450,000
500,000
6,000,000
1,340,000
100,000
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk free rate
Expected dividends expressed
as a dividend yield
3
42%
10
3
2.75%
1.00%
3
42%
10
3
2.75%
1.70%
3
32%
10
3
0.78%
0.89%
3
31%
10
3
0.24%
1.03%
3
33%
10
3
0.56%
1.16%
3
35%
10
3
0.56%
1.14%
3
35%
10
3
0.56%
1.22%
4.33
35%
4.33
4.33
0.56%
1.14%
3
47%
3
3
0.56%
1.53%
3
47%
3
3
0.56%
1.53%
Fair value per option (pence)
3.15
3.15
12.00
8.50
8.19
11.0
10.6
17.00
16.00
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
23
5 Dec
2016
47.5
0.00
25
7 Jun
2017
46.6
0.00
31
1 Dec
2017
48.50
0.00
37
1 Jun
2018
39.95
0.00
35
1 Dec
2018
37.38
0.00
37
1 Jun
2019
47.15
0.00
45
1 Dec
2019
62.8
0.00
48
1 Jun
2020
64.0
0.00
54
103,176
104,020
107,824
154,554
140,520
149,198
161,728
120,998
151,994
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
The assumptions used in the US Sharesave Scheme fair value
calculation are as follows:
Commencement date
Share price (pence)
Exercise price (pence)
Number of employees
Shares under option
Vesting period (years)
1 Dec
2019
61.00
51.85
22
60,131
2.00
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS 81
A reconciliation of option movements over the year to 31 March 2021 is shown below:
Outstanding at 1 April1
Granted
Exercised
Lapsed
Forfeited
Outstanding at 31 March
Exercisable at 31 March
Number of share
options
2021
Weighted
average exercise
price (pence)
15,830,194
499,622
(911,672)
-
(351,445)
15,066,699
5,710,481
18.51
23.37
31.21
-
25.35
17.74
37.83
2020
Weighted
average exercise
price (pence)
18.53
17.55
13.59
-
22.33
18.51
38.27
Number of
share options
18,788,125
563,811
(2,225,904)
-
(1,295,838)
15,830,194
6,358,414
1.
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.
2021
Weighted average
remaining life
2020
Weighted average
remaining life
Range of
exercise
prices
(pence)
0 - 0.5
10.5 - 12.5
37.2 - 40.0
42.5 - 44.5
46.5 - 48.5
50.0 - 54.5
55.0 - 59.5
60.0 - 64.0
Weighted
average
exercise
price
(pence)
Number
of shares
(000’s)
Expected
Contractual
Weighted
average
exercise price
(pence)
Number
of shares
(000’s)
0.21
11.00
39.33
43.50
47.55
51.85
56.00
62.18
8,771
75
3,053
2,200
685
40
76
262
0.89
-
4.84
-
0.14
0.67
2.67
1.95
0.91
0.98
5.56
5.00
4.68
0.67
2.67
1.95
0.22
11.04
39.33
43.50
47.55
-
-
60.67
8,684
269
3,680
2,400
708
-
-
88
Expected
Contractual
1.78
-
5.68
-
0.50
-
-
1.82
1.86
6.57
6.00
5.44
-
-
2.66
2.66
The total charge for the year relating to employee share-based
payment plans was £536,000 (2020: £468,000) all of which
related to equity-settled share-based payment transactions.
2021ANNUAL REPORT 82
23. Pension commitments
25. Cash flow from operating activities
The Group operates a group personal pension scheme and, in
addition, the subsidiary company Eckoh UK Limited operates
a defined contribution pension scheme. The assets of the
pension schemes are held separately from those of the Group
in independently administered funds. The pension charge
represents contributions payable by the Group to the funds.
There were no outstanding or proposed contributions at the
balance sheet date.
24. Related party transactions
Eckoh plc is the parent and ultimate controlling company of
the Eckoh Group, the Consolidated financial statements of
which include the results of the subsidiary undertakings set
out in note 14.
Each subsidiary is 100% owned by the Eckoh Group and is
considered to be a related party.
There are 2 Directors accruing benefits under the pension
scheme.
The aggregate Directors’ emoluments are shown in the table
below.
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
Operating profit before changes in
working capital and provisions
Decrease in inventories
Decrease/ (increase) in trade and other
receivables
(Decrease)/ Increase in trade and other
payables
2021
£’000
2020
£’000
2,794
3,136
(48)
87
717
704
505
1,061
522
303
(84)
68
166
848
491
1,293
(264)
468
6,645
6,122
138
217
146
(285)
(2,615)
1,257
Net cash generated from operating activities
4,385
7,240
Directors
Aggregate emoluments
2021
£’000
2020
£’000
691
691
880
880
26. Events after the statement of
financial position date
There were no events after the balance sheet date.
Further details of the Directors’ emoluments are disclosed within
the Remuneration Report on page 37.
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 (2020: £15,000). The amount outstanding to them
at the end of the current year was £4,098 (2020: £3,953).
There were no amounts written off in the current or prior year.
Financial Statements 3 NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
2021
83
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 Office - Eckoh plc - Telford House, Corner Hall, Hemel Hempstead, Hertfordshire, HP3 9HN
www.eckoh.com
Registered number 3435822.
Registrar - Link Group - Central Square, 29 Wellington Street, Leeds, LS1 4DL
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 - 40 Clarendon Road, Watford, WD17 1JJ
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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