Eckoh plc
Annual Report 2023

Plain-text annual report

Annual Report 2023 2 2 Strategic Report | Contents 3 3 Contents 01 Strategic Report Highlights of the Year 05 Chairman’s Statement 08 Chief Executive’s Review 10 Principal Risks & Uncertainties 20 Financial Review 24 Sustainability Report Board of Directors 28 36 02 Chairman’s Statement on Corporate Governance 38 Audit Committee Report 44 Corporate Governance Remuneration Committee Report 47 Directors' Report 53 Independent Auditors’ Report 56 Consolidated Statement of Total Comprehensive Income 64 03 Consolidated Statement of Financial Position 65 Company Statement of Financial Position 66 Financial Statements Consolidated Statement of Changes in Equity 67 Company Statement of Changes in Equity Consolidated Statement of Cash Flows 68 69 Notes to the Financial Statements 70 4 04 Strategic Report | Eckoh Annual Report 2023 5 05 Strategic Report Eckoh plc (AIM: ECK), the global provider of Customer Engagement Data Security Solutions, is pleased to announce full year audited results for the year ended 31 March 2023. Highlights of the Year REVENUE £38.8m £21.3m UK&I and ROW REVENUE Up 22% from FY22 Up 10% on FY22 UK&I and ROW 55% NA 45% NORTH AMERICA REVENUE $21.3m Up 25% from FY22 TOTAL CONTRACTED BUSINESS NET CASH £34.5m £5.7m GROUP ANNUAL RECURRING REVENUE Up 18% £30.4m ADJUSTED EARNINGS PER SHARE 2.09 pence per share 56%Up from FY22 NORTH AMERICA SECURE PAYMENTS ANNUAL RECURRING REVENUE $15.9mUp 34% £7.7m ADJUSTED OPERATING PROFIT 48% Up from FY22 UK&I and ROW - UK&I and Rest of World NA - North America 6 08 Strategic Report | Highlights of the Year 7 09 Highlights of the Year Financial highlights Strategic highlights • Revenue for the year increased by 22% to £38 8 million (FY22: • Strategic focus and a cloud-first product proposition supports £31 8 million) and at constant exchange rates by 16%, driven by our scalable growth: organic growth and the full year impact from the acquisition – By offering cloud platform choice and multiple SaaS solutions of Syntec in December 2021 without additional deployment effort, we deliver scalability into larger client opportunities in the NA territory and • Adjusted operating profit4 up 48% to £7 7m, driven by sales across international mandates, with significant cross-sell growth, increased cross-selling, operational leverage, and a opportunities and faster new client deployments, increasing £0 5m favourable impact from FX movements total client value • Growth in adjusted diluted earnings per share demonstrates • Our proprietary cloud Secure Call-Recording product was good organic growth from the underlying business combined launched in April 2023, to an encouraging response with the impact of the earnings enhancing acquisition of – Expected to support the growth in cross-selling and generate FY23 FY22 Change Syntec in December 2021 Revenue Gross profit North America Secure Payments ARR ($m)1 Total ARR2 Adjusted EBITDA3 Adjusted operating profit4 Profit before taxation Basic earnings pence per share Adjusted diluted earnings pence per share5 Net cash Proposed final dividend (pence) Total contracted business6 New contracted business7 38.8 31.2 15.9 30.4 9.4 7.7 5.0 1.58 2.09 5.7 0.74 34.5 14.4 31.8 25.4 11.9 25.8 6.8 5.2 2.3 0.59 1.34 2.8 0.67 22.5 10.8 +22% +23% +34% +18% +38% +48% +117% +167% +56% +102% +10% +53% +33% 1 ARR is the annual recurring revenue of all contracts billing at the end of the period 2 Included within Total ARR is all revenue that is contractually committed and an element of UK&I revenue that has proven to be repeatable, but not contractually committed 3 Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is the profit from operating activities adjusted for depreciation of owned and leased assets, amortisation, expenses relating to share option schemes, exceptional items and costs relating to business combinations 4 Adjusted operating profit is the profit from operating activities adjusted for amortisation of acquired intangible assets, expenses relating to share option schemes, exceptional items and costs relating to business combinations 5 Adjusted earnings per share and adjusted diluted earnings per share uses the adjusted operating profit and applies a normalised tax rate to both years of 19%. 6 Total contracted business includes new business from new clients, new business from existing clients as well as renewals with existing clients 7 New contracted business includes new business from new clients and new business from existing clients, including product upsells and cross-sells 8 Eckoh believes that consensus market expectations for the year ending 31 March 2023 is revenue of £40.25 million, adjusted operating profit of £7.45 million and cash of £5.2m new client contracts at a time when 24% of US contact centres are looking to update their call recording solution • Excellent performance from North American Data Security in the next 12 months Solutions, where we have the largest addressable market and a significant opportunity for continued strong growth: • Global Commercial team now fully aligned to our strategic – North America Security Solutions ARR1 up 34% and revenue focus on the North America market: up 25% – Embedded a unified proposition into our new go-to-market – Recurring revenue increased 54% driven by ongoing cloud vision of Customer Engagement Data Security Solutions, transition and successful contract renewals formally launched in April 2023 – Total Addressable Market (TAM) is currently estimated to be • Refreshed go-to-market strategy drove up new contracted 20 times the size of the UK market business chiefly through winning cloud deals and international mandates in North America, which accounted for 71% of all • Total contracted business6 showed strong growth through new business securing new business wins and several successful renewals • UK & Ireland and Rest of World showed a resilient performance with revenue up 10% • Notable new client wins and successful renewals during the with key clients in North America • Growth in adjusted diluted earnings per share demonstrates – A Fortune 100 retailer, purchasing two solutions; first client to growth from the underlying business and the earnings go-live on our new Azure cloud platform enhancing acquisition of Syntec in December 2021 – New two-year voice security contract across more than 20 • Balance sheet remains strong with net cash ahead of – New global reseller contract with a US based unified expectations8 at £5 7m (FY22: £2 8m) communications company, 3 contracts delivered to date territories with a leading, global hotel company period included: • Proposed final dividend of 0.74p per share (FY22: 0.67p), demonstrating confidence in our product portfolio and the clear opportunity to capitalise on the scale of the North American opportunity Current trading and Outlook • Positive start to the year with total order value more • Eckoh is well placed to benefit from favourable industry than £7m in the first two months. trends in its target markets including the shift to hybrid • The Board is confident of further progress in the year ahead, supported by an encouraging new business pipeline, increased revenue visibility through continued ARR growth and a robust balance sheet and cash position contact centre working and increasing regulatory requirements around personal data management 8 08 Strategic Report | Chairman’s Statement 9 Chairman’s Statement We made significant progress in the year to March 2023. The business has focused on the integration of Syntec, which was acquired in December 2021. Revenue and profits increased by the amounts that were expected at the time of the acquisition. The acquisition of Syntec has facilitated a catalyst in product development and continued growth especially in North America (NA). Results Board Total revenue for the year was £38 8 million, an increase year- In the financial year ended 31 March 2023, there were no on-year of 22% (FY22: £31 8 million) or 16% adjusting for constant significant changes to the Board. Full details of the current exchange rates Growth has been driven both organically and Directors are on pages 36 to 37 from the full year impact of the acquisition of Syntec Adjusted operating profit was £7.7 million, an increase of 48% (FY22: £5 2 million) Adjusted operating profit margin has increased to 19 9% up from 16 5% the previous year, this coupled with the improvement in adjusted diluted earnings per share at 2 09 pence (FY22: £1 34 pence), demonstrate the strong set of results with growth from the underlying business and the earnings enhancing acquisition of Syntec in December 2021 Group and North America Security Solutions ARR1 has grown strongly with group ARR at £30 4 million as at 31 March 2023, an 18% increase year-on-year (FY22: £25 8 million, restated to include Coral in North America) The North America Security Solutions ARR is $15 9 million, an increase of 34% from the same time last year, demonstrating the strong underlying growth in the business and the strong visibility of revenues across the business The Group continues to have a strong balance sheet with a year-end net cash balance of £5 7 million (FY22: £2 8 million) Going Concern The Board has carried out a going concern review and concluded that the Group will generate 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 will generate adequate cash to continue in operational existence for the foreseeable future Further information is included in the Directors’ Report on pages 53 to 55 Dividend 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 pages 38 to 43, 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 Over the last year, we have focused on our Environmental, Social and Governance strategy (ESG) and I am pleased our Sustainability report on pages 28 to 33 reflects the progress we have made It details the four key areas of our approach, the objectives set, and the targets we have delivered in the financial year to March 2023 Full details of the Company’s Principal Risks and Uncertainties are on pages 20 to 23 People We would also like to thank all employees for their continued commitment and resilience through what has been a busy period The collaboration across the technical team has been exceptional and has resulted in the significant strides being made in the product enhancements and the multi-cloud capability In addition, the Sales, Client Services and Marketing teams have embraced the change and moved to the Global commercial team to maximise the opportunity we have as a Group focussing on our key North American market The whole Board plan to attend the AGM on 13 September 2023 The Board has increased the proposed dividend by 10% to 0 74 and we look forward to the opportunity to meet with as many pence per share (FY22: 0 67 pence per share) Shareholders as possible on the day Christopher Humphrey Chairman 14 June 2023 10 Strategic Report | Chief Executive Review 11 09 Chief Executive Review I am pleased to report Eckoh performed strongly in the financial year ended 31 March 2023 delivering organic growth alongside the positive impact of our earnings enhancing acquisition of Syntec in December 2021, and making significant progress with our overall strategy. Adjusted operating profit and cash were both ahead of market expectation, and ARR growth was strong, especially in our key North American market. In the 18 months following the acquisition we have completed the integration of Syntec, also a provider of data security solutions, which brought complementary technology, IP, clients, learnings, and people into Eckoh. e are already seeing positive impacts in both our To support our strategy to be the market leader in Customer W strategic progress and financial performance and we have started the new year positively with over £7 million in total contracted business in the first two months. As indicated at our interim results in November 2022, following the integration of Syntec these financial results have been presented on a territory basis for this period A clear growth strategy At Eckoh, we’re on a mission to set the standard for secure interactions between consumers and the world’s leading brands Companies today need to provide an exceptional customer experience with a frictionless and secure payment or process journey Every interaction and transaction should be secure We make sure that happens through our innovative products which build trust and deliver value through exceptional experiences We’re trusted by well-known global brands, predominantly from the retail, healthcare, telecoms, financial services, utilities, and travel sectors, to help process customer enquiries and payments safely, usually via their customer contact centres, which are either operated in-house or outsourced Given the sensitive nature of the solutions we sell, it is unusual for these companies to be willing to be publicly named, but they are often happy to provide client references Our secure engagement solutions help protect sensitive customer data and can be utilised over any customer engagement channel (voice, live chat, messaging, email, social channels etc ) and via any device the customer chooses Our philosophy when it comes to data security is that the best way to protect your data is not to collect it Many of the most sensitive engagement processes, especially taking a payment itself, do not require the enterprise to collect and store data, and if the process can be performed without doing this, then this removes the risk of breach or fraud for the customer This is our specialism and an approach for which we have a growing portfolio of patents Our strategy is driving strong growth in our key markets with total revenue for the year increasing to £38 8 million, an increase year-on-year of 22% (FY22: £31 8 million) or 16% adjusting for constant exchange rates Recurring revenue for the period was 80% of Group revenue at £31 0 million, a year- on-year increase of 29% North America ARR1 was $15 9 million, an increase of 34% year-on-year, again demonstrating strong progress and the high level of visibility we now have in our business model Engagement Data Security Solutions, we completed the acquisition of Syntec, in December 2021 Our “Syntegration” plan (our process of integrating and unifying Syntec into Eckoh’s operations), was split into three phases and covered people, process and product & technology. Over the last financial year, we have combined the underlying platform technology for delivering Eckoh’s existing voice security product branded as, CallGuard, and Syntec’s solution, branded CardEasy, to create a new unified platform appliance, we call our Secure Voice Appliance (SVA) The SVA is the cornerstone of our new global Secure Voice Cloud platform, which supports our Secure Engagement Suite of solutions that can be bought either singly or in multiples by our enterprise clients and delivered through the same platform Our delivery infrastructure for new clients and new products is now fully integrated across the Secure Voice Cloud platform Aligned to this, we have integrated our operational teams and processes through Eckoh’s Global Network Operation Centre (NOC), to provide a unified, cross-trained global support capability across our client base Phases 1 & 2 are complete and during the third phase, we are tasking the unified development team to develop new solutions for the Secure Engagement Suite in key growth areas I am pleased to confirm that we launched our first new solution from the unified team as planned at the beginning of the new financial year - our new Secure Call Recording solution. We are only a few weeks into showcasing and demonstrating the solution, but we are very encouraged by the reaction of existing and new clients alike Progressing well against our strategic goals We have made excellent progress during the year with our strategic objectives, which reflect our ambition to be the global leader in Customer Engagement Data Security Solutions Our strategic goals are outlined below: Our overarching strategic goal is our mission To set the standard for secure interactions between consumers and the world’s leading brands. By delivering on our five strategic goals this will take us closer to achieving this overall goal 12 Strategic Report | Chief Executive Review 13 Our overarching strategic goal is our mission - to set the standard for secure interactions between customers and the world's leading brands. By delivering on our five strategic goals this will take us closer to achieving this overall goal. 1 Capitalise on external global market trends and regulation to help protect customer data through continual innovation 5 Evaluate acquisition opportunities that can support our growth strategy in Customer Engagement Data Security 2 Grow our leadership position in Customer Engagement Data Security Solutions to increase Shareholder value Our strategic goals 4 Maximise lifetime client value and aid retention by cross and up-selling to increase recurring revenue 3 Use cloud technologies to develop and enhance our proprietary solutions to support scalable growth 1. Capitalise on external global market trends and regulation to help protect customer data through continual innovation key account tier we have around 30 accounts all of which are based in the North America region, reinforcing again the rationale for the realignment of our precious resources Eckoh is well placed to capitalise on favourable industry trends with a more focused Commercial team With the launch of our unified go-to-market proposition of Customer Engagement Data Security Solutions combined with our global Commercial team, we are better positioned to drive growth This is underpinned by our new Secure Engagement Eckoh has historically targeted organisations that either Suite of solutions plus our expanding and scalable cloud transact or engage with its customers at scale, at volume platforms, which provide us with the opportunity not only and utilise contact centres with more than 50 agent seats to extend our reach geographically, but also increase the in either the UK or US This represented a target market of opportunity within every client account to land and expand over 2,500 potential customers in the UK and 12,000 in the US During the last year and spearheaded by our new Group Marketing Director we have invested in and implemented new MarTech tools which have provided us with a more granular Increasing regulation and data security challenges drive demand way of assessing the global opportunity for our solutions By With increasing regulation regarding the management of being more granular in our analysis we have identified a total personal data and the financial impact of data breaches and addressable market (TAM) of over 150,000 companies, with the fraud growing, organisations are increasingly looking for ways North American market representing 48% of that TAM making to move beyond the requirement of merely being compliant to it nearly ten times larger than the UK & Ireland at 5% However, securing their data more comprehensively This has made IT when looking at the average value of a North American information security budgets one of the most protected areas contract compared to one in the UK that would increase of spend within enterprises Eckoh is well placed to navigate the North American TAM value to more than 20 times the UK these data security challenges, working behind the scenes as & Ireland To better pursue this opportunity, in the fourth quarter we actively re-organised our Commercial teams (comprising our Sales, Marketing and Client Services teams) to service the market and clients globally, and specifically to focus more of a ‘sales enabler’, converting sales in a secure way on behalf of an increasingly diversified and global client base. Our addressable target market is large and has fundamentally changed post pandemic our collective resources on the large North American market The contact centre industry globally is extremely large, Prior to this the UK-based team, which was larger in size than representing around 4% of the entire workforce in both the the US one, was focused predominantly on the UK market Now UK and US markets The pandemic and the current economic our unified global team is set up to sell globally, mobilised in an climate have fundamentally changed the way our industry effective way with no geographical boundaries to service the operates and the added pressures it has brought to navigating client need, anywhere in the world the new remote and hybrid working environments Looking at the largest market, the US, the figures shown below, outlined A year ago, it would arguably have been too soon to make in Contact Babel’s ‘US Contact Centers 2022-2026’ research this change, as we only had a single product line, that of voice document, are particularly striking: security, available to sell through a common cloud platform in the US market But with the advent of our cloud-based Secure Engagement Suite we now have multiple complementary solutions that are available to any client anywhere in the world and this means that our existing North American client base are prime targets for cross-selling Percentage of US contact centres with more than 50% of agents working remotely 2019 2020 2021 2022* 10% 87% 89% 77% Across the Group we have around 200 clients, which range *Estimate greatly in both size and opportunity Given this we have Pre-pandemic only 10% of US contact centres had more than reorganised how we support and service our client accounts 50% of their agents working remotely A huge shift to using globally to ensure the most focus is given to the key accounts remote agents peaked in 2021 with 89% of US contact centres with the largest perceived opportunity for growth The sales having more than half their agents working from home Even team and account managers have been assigned specific those organisations who were very reluctant to use remote accounts to manage and develop across these different tiers working have been forced to adapt In 2022 the estimate is that of client opportunity and have significant cross-selling and this figure is 77% and is expected to remain at these levels for up selling targets as well as new business targets In the top the foreseeable future 14 15 Shift to home-based agents creates new data security challenges, driving significant new opportunities environments when customers engage with an enterprise and make payments for goods and services With a chief aim of not compromising the quality of the customer experience, as a unified offering all our new customer engagement offerings 3. Use cloud technologies to develop and enhance our proprietary solutions to support scalable growth We are excited by the growing proportion of cloud deployments secured in the North American market The share of North America ARR from cloud revenue is now 50%, rising from a 35% share a year ago Landing and expanding within our Post pandemic, contact centres have been under acute will be underpinned with security features and capabilities The procurement of data security solutions to be deployed client base is a key focus and has the benefit of increased pressure to adapt in order to retain agent staff as the to assist our clients to address data security concerns and across multiple territories is certainly increasing, and our focus visibility of revenue through recurring revenues and improved convenience of working from home is popular, enabling increasing regulation is on investing in our Customer Engagement Data Security margin With our product roadmap extending into a broader flexibility of working hours. This flexibility is also a positive for Solutions to be deployed on our scalable cloud platform to data security proposition, we expect to be able to increase the the enterprises that employ such agents as they can deploy This clarity of approach has led us to rationalise and retire support the growth from our largest territory and absolute lifetime value of our clients and continue to have high renewal agents to work short shifts to cope with unexpected customer several product offerings, especially those that require strategic focus, North America Our market leadership lies in rates and very low levels of churn demand This changed landscape does however bring many significant levels of bespoke implementation and professional and varied complications to the running of such remote services Going forward our new Secure Engagement Suite will our ability to offer our clients a choice of cloud platform and delivering multiple complementary SaaS solutions without any and hybrid contact centres and the companies now need to focus on those offerings that deliver value to our enterprise additional deployment effort or complex integrations We’re flexible to client needs, retaining the ability to deploy locally tackle the challenges and inherent data security risks that clients through that security layer and whilst we will retain come from remote working agents A managed facility is far flexibility in delivery, the overall methodology will be SaaS. Our unified team developed the new Secure Call Recording The proportion of cloud contracts won in North America remains easier to control from a data security point of view than many solution using the cloud native methodology and technology very high at over 80%, and whilst we still expect a small number remote locations It is largely impossible to replicate such an In recent years Eckoh has been developing a highly relevant that we implemented some years ago This approach has of on-premise deployments, these will reduce over time While environment, which presents a significant challenge if the suite of data security solutions, designed to protect without not only reduced the time it takes us to launch new solutions, cloud deployment is a key goal and advantage, many of the agent is handling customer data and especially payment data compromising user experience, and delivered in the cloud (or but it has simplified the process of continual development largest enterprises, especially those in North America, may on premise if that is still required) For example, our live chat and sped up the addition of new features It also enables still take several years to achieve that objective Retaining the Within Eckoh’s new solutions suite, our real time transcription offering incorporates our patented and unique ChatGuard us to automatically scale up or down the size of our cloud capability to deploy as required in a client’s own data centres solution will offer sentiment analysis and AI led agent capability This enables payment or personal information platforms responding instantly to changes in demand from our and environment and then migrate those accounts to a cloud assistance, which ensures that all customers can be triaged to be entered by a customer into a live chat session without clients, leading to optimum operational performance and cost solution at some later point, continues to give us a tactical and dealt with swiftly and effectively, without compromising any of that information traversing the clients’ environment to serve their customer experience or the security of their personal data or being shared with an advisor The key difference now advantage over our competitors. During the first half, we saw two clients migrate from on-site deployments to our cloud is that those solutions which we consider to be part of our One of the largest contracts won in the year was for a Fortune platform and as part of the renewal process, three more clients This trend provides a massive opportunity for Eckoh’s solutions, go-forward proposition have been amalgamated in our 100 retailer who purchased two cloud-based solutions, voice have now contracted to migrate in FY24 not just for data security but also agent performance and Secure Engagement Suite and delivered from our Secure Voice security and digital payments, and was the first client to go- efficiency. Our data security proposition enables companies Cloud platforms, enabling clients to more easily deploy and live on our new Azure cloud platform The time to revenue for to reduce further, or remove, the risk of data breaches by purchase them ensuring that sensitive data isn’t just blocked but replaced with placeholders that can be safely stored in the client’s Our patented products already help organisations to reduce new clients is significantly improved when they opt to use a cloud deployed solution, and it enables their ability to access the other offerings in our Secure Engagement Suite with little or systems Our patented technology wraps around the the risk of fraud; secure sensitive data; comply with the no additional implementation effort client’s infrastructure seamlessly and means that from the Payment Card Industry Data Security Standard (“PCI DSS”) and client’s point of view, they do not actually collect any sensitive wider security regulations such as the General Data Protection personal data 2. Grow our leadership position in Customer Engagement Data Security Solutions to increase Shareholder value Leverage our trusted supplier status to broaden the scope of our offering to our clients Regulation (“GDPR”) or the US Consumer Privacy Acts We can grow our leadership position most quickly by adding additional solutions that assist our clients to protect wider forms of data and in different ways, as well as broader security requirements such as identifying fraudulent customers The nature of the solution we have initially sold the client has already established Eckoh as a trusted advisor, and we can leverage that position to get access more readily to potential buyers of other complementary solutions within the organisation, such The acquisition and then integration of Syntec served as a as the recently launched Secure Call Recording catalyst for us to refine how we go to market and how we want Eckoh to be perceived in the market. We unified and clarified our proposition into Customer Engagement Data Security Solutions which is delivered to our clients through our Secure Engagement Suite Over the past 20 years we have delivered many different products and services, but our differentiator and strength in the customer engagement market, which has led to our success and growth, is our ability to deliver great customer experience with a data security focus Eckoh prevents sensitive personal and payment data from entering IT and contact centre 16 Strategic Report | Chief Executive Review 17 Secure Engagement Suite Our suite of data security solutions called Eckoh’s Secure Engagement Suite, which has been developed and refined through the Syntegration process is displayed in the honeycomb visual below. 8. Verification and Fraud Prevention 6. Secure Call Recording 7. Transcription and AI 3. Digital Payments Reporting and Analytics 1. Voice Security 4. DataGuard 2. Secure Chat 5. Advanced Speech Live In flight Future 1 2 3 4 5 6 7 8 Voice Security Our core product to protect phone payments under the CallGuard or CardEasy brand Secure Chat Live chat incorporating our patented ChatGuard solution to take payments securely Digital Payments Allowing customers to pay through a secure mobile link whilst connected live to an advisor DataGuard Securing other forms of personal data as well as payment information Advanced Speech Using speech recognition to take payment information securely where key entry is unviable Secure Call Recording Recording, transcribing and analysing calls, and redacting sensitive information Transcription and AI Using real time transcription to enable agents to deliver effective and fast assistance Verification and Fraud Improving the verification process to help identifiy fraudulent activity 4. Maximise lifetime client value and aid retention by cross and up-selling to increase recurring revenue Enterprise provides significant cross sell opportunity The significant enterprise deals we won during the period particularly with the expansion and enhancement of our show the merit of Eckoh’s long-standing strategy to pursue security suite and the global nature of our cloud platform larger opportunities and reflects the continuing trend towards Given our long-standing cross-selling experience in the UK cloud adoption and more international mandates in our target market we believe it is entirely credible that potential customer Enterprise expands our total addressable market even further, markets The Eckoh offering value could double compared to what was achievable from just the sale of the core voice security product Our suite of data security solutions called Eckoh’s Secure It is encouraging that in the period the proportion of new Engagement Suite, which has been developed and refined business in North America coming from existing clients was through the Syntegration process is displayed in the honeycomb already 38% What is uncertain at this point is how many visual opposite and includes the following segments: additional organisations will be appropriate targets for the call recording, transcription, and verification products, which The first six are all now available, with the first release of Secure arguably have an even wider applicability Call Recording launched as planned in April this year and delivered through our new Secure Voice Appliance and Secure Voice Cloud Later this year we will add the seventh, which will be the real 5. Evaluate acquisition opportunities that can support our growth strategy in Customer Engagement Data Security time transcription solution that uses AI and machine learning Syntec has been a strategically important acquisition in terms to assist advisors to provide the best possible assistance of reinforcing Eckoh’s position as the market leader in our field, whether they are experienced agents or not It will also allow being the catalyst for expanding our security suite and re- contact centre managers and supervisors to identify problem engineering our core cloud platform We believe that through calls instantly through the sentiment analysis tool which will an ongoing focus on both organic growth and selective M&A, provide a heatmap across all agent conversations in real time, we are well placed to seize the opportunities we see in our highlighting where issues may be occurring With so many sizeable addressable market agents now working remotely, this oversight task is critical to ensure performance is not compromised because of hybrid working Both this solution and Secure Call Recording should have an even larger TAM than our other solutions as neither necessitate the client to be taking payments to make them attractive solutions This gives us the opportunity to target new companies that historically would not have featured in our marketing efforts Our first solution in the Verification and Fraud area is on our solution roadmap for the end of FY24 This will include commercialising patents that we already have granted, notably our reverse authentication patent This enables a consumer to verify the identity of an adviser contacting them regarding activity on their account, conveniently and easily We all know these inbound customer calls are a common route for scamming and fraud and so for the end customer to be able to verify that the call is genuine, we believe will be a unique and valuable solution This will streamline the process for both parties, thereby improving efficiency for our enterprise clients and increasing satisfaction for the end customer 18 Strategic Report | Chief Executive Review 19 Operational review In the following section all comparatives have been restated for Total and New Contracted Business Coral New contracted business the new reporting territories • Increase in sales momentum as anticipated in H1, with new In the period, Coral had revenue of $2 0 million (FY22: $1 8 million • Most global deals, which drive the revenue and growth in North America (NA) Territory (45% of group revenues) on-year of 70% (FY22: $7 4 million) desktop aids the following: Sales team This will change with the new alignment of the Following a thorough review of the opportunity and our go-to- • Security Solutions new contracted business of $11 3 million with global commercial team market strategy, we are delighted that North America continues 38% of this coming from existing clients • to increase efficiency by bringing all the contact centre agent’s • Contract for voice security won with the Irish division of one of to power strong growth across all key KPIs underlining our • Combination of new contracted business and the increasing communication tools into a single screen; the world’s largest insurance companies, worth $0 6 million strategic focus and the significant market opportunity we are number of contract renewals has grown the total contracted • to enable organisations, particularly those grown by This is one of the first clients to utilise the new enhanced cloud targeting in this territory business by 91% year-on-year to $20 9 million (FY22 $10 9 acquisition to standardise their contact centre facilities; and platform developed through “Syntegration” contracted business wins of $12 6 million, an increase year- Coral & Third-Party Support) Coral, a browser-based agent Ireland and the ROW, have been contracted through the UK This is best demonstrated through Security Solutions ARR, which grew 34% to $15 9 million (FY22: $11 9 million) Total NA ARR, which Contract Renewals million) • to be implemented in environments that operate on entirely • A further new UK contract also worth £0 6 million was won with different underlying technology a financial services company to provide voice security for their debt collection service includes both our Security Solutions and Coral (our agent • Recurring revenue increased to 76% (FY22: 69%), because Coral contracts remain small in number but high in value when desktop product) grew to $16 9 million (FY22: $12 6 million) of the ongoing cloud transition and six clients’ initial they occur, and they have a very long sales cycle (usually years) Contract renewals Revenue for the period was $21 3 million, an increase of 25% (FY22: and implementation fees from the initial contract are fully makes the timing of any new agreements both lumpy and hard contract through Capita for a large public service organisation $17 1 million) and North America now accounts for a 45% share of recognised to predict There is a proof of concept being planned with a large worth £2 1 million Group revenue (FY22: 40%) In FY24, we expect North American • Six further contracts renewed during the year, three of which global financial services company, however, there is no certainty • Contract through BT for the Ministry of Justice for taking revenue will at least be of equal size to revenue from the UK and migrated from on premise solutions to the cloud at this stage if this will lead to a contract payments for fixed penalty notices and magistrates fines also Ireland territory • One client did not renew due to a sale of their business renewed, the second largest in the year contract renewals At the point of renewal, the hardware as the decision has long term ramifications for the client. This • Successfully renewed the year’s largest contract; a 5-year During the period, in the region we have seen twelve successful Cross-selling renewals, an increase in the level of cloud deployments and We continue to focus on winning new large enterprise contracts, UK & Ireland (UK&I) Territory, and Rest of World (ROW) • Other important renewals this year include Kingfisher, Target, Territory (55% of group revenues) PowerNI, Transport for London and Allied Irish Bank cross-selling of additional licences and product, strengthening alongside cross-selling additional products introduced to the • Total revenue for the year was £21 3 million, an increase of 10% our recurring revenue and gross profit. North American territory in H1 with new and existing clients (FY: £19 3 million) Two large enterprise deals were contracted in the period outlined below: New enterprise deal #1 A Fortune 100 retailer New enterprise deal #2 A leading, global hotel company • Secured purchase of two product lines • Won a $1 3 million, 2-year contract • 3-year enterprise contract included a $1 4m fee for voice • Cloud deployment model to incorporate voice • ARR1 at the end of the year was £16 3million (FY22: £16 5 million) with growth hindered by the loss of a significant (non-security) client in the first half. • Gross profit in the period was £17.5 million, an increase of 9% (FY22: £16 1 million) and gross margin was 82%, a decrease year-on-year of 1% (FY22: 83%), due principally to the inclusion of the Syntec UK & Ireland and ROW business • Total contracted business was £17 2 million compared to £13 4 million in the prior year and new contracted business was £4 2 million, a decrease of 12% year-on-year (FY22: £4 7 million) • The ROW territory is expected to grow quickly with the large international contracts deployed, but for FY23 as this territory accounts for 2% of total revenue it has been reported together security to secure their phone agents and a $0 6m fee payment security, digital payments, and advanced with the UK&I for digital payments to secure their live chat agents speech recognition • Multiproduct contract and first client to go-live on new • Single cloud deployment that will cover more than Azure cloud platform 20 territories and an equivalent number of speech recognition languages • Because of the realignment of the global commercial team and focus on North America, we think it is reasonable to expect UK & Ireland growth to be modest at best The effort involved in growing this territory would be disproportionate to the value generated compared to the more lucrative and larger market in North America Outlook The year’s performance reflects the continued progress of Eckoh’s strategy to pursue large enterprise opportunities, cross-sell from a broader product suite and continue the trend towards cloud adoption and more international mandates With a refreshed go-to-market approach, coupled with an encouraging pipeline, a resilient business model of high recurring revenues, operational efficiencies, on-going cloud adoption and a robust balance sheet, the Board remains confident in delivering its expectations and achieving continued growth in FY24 Nik Philpot Chief Executive Officer 14 June 2023 20 Strategic Report | Principal Risks & Uncertainties 21 Principal Risks & Uncertainties Specific Risk Mitigation Cyber, technology & processes The Group's approach is to minimise exposure to reputational, financial and operational risk while accepting and recognising a risk/ reward trade-off in the pursuit of its strategic and commercial objectives. The nature of the products and services the Group provides means that the integrity of the business is crucial and cannot be put at risk. 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. Loss or inappropriate usage of data The Group has established physical and logical security 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 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 is signed up to the National Cyber Security Centre which aids the monitoring of cyber activity Continued investments are made in cyber security, infrastructure, monitoring and services, improvements in email, web filtering and enhanced data loss prevention tools The Group also screens new employees carefully Eckoh has maintained its program of PCI DSS, ISO27001 and Cyber Essentials Syntec Limited operated to these same standards, and the Group is on track to integrate the acquired Syntec business into the Group programs Interruptions in business processes or systems Comprehensive business continuity plans and The Group’s ability to provide reliable services largely depends on the efficient and uninterrupted operation of our platforms, 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 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 In addition, and following the COVID-19 pandemic, the business operates a hybrid working policy, where all staff work regularly between office and home as required This provides greater resilience to the business and ensures we are able to maintain high service levels at all times We continually monitor our suppliers to ensure the components we require for our on-site solution in NA are available Legal, regulatory and industry standards Risk of non-compliance with legal and industry standards We continually audit, review and enhance our controls, 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. processes and employee knowledge to maintain good governance and to comply with legal requirements and industry standards Our new employees are carefully screened and follow a robust induction and security training and are required to maintain ongoing security awareness 22 Strategic Report | Principal Risks & Uncertainties 23 Specific Risk Mitigation Specific Risk Mitigation Legal, regulatory and industry standards Loss or infringement of intellectual property rights 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 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 HR & personnel Dependence on recruitment and retention of highly The Management team reviews key individuals regularly 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 Following the Great Resignation in FY22, resources are more stable both in our current workforce and where we need to recruit in the open market for individuals with appropriate knowledge and experience in payment security, IT development, telecoms 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 and career development plans are put in place for individuals. Compensation and benefits programmes were extensively reviewed in FY22 and a larger number of Managers and employees than previously were granted share awards to ensure Eckoh remains competitive in the marketplace Employee feedback is encouraged, an employee engagement survey has been undertaken in the year with results and actions communicated with employees Unchanged risk Increased risk Products & clients Technological & product development The Group is committed to continued research and The Group provides technical solutions for clients and their end customers As customer preferences and technology solutions develop, competitors may develop products and services that are superior to ours, which could result in the loss of clients or a reduction in revenue Dependence on key clients While the Group has a wide customer base, the loss of a key customer, or a significant worsening in their success or financial performance, could result in a material impact on the Group’s results Eckoh’s largest customer accounted for less than 10% (FY22: < 10% of revenue) of total revenue Economic growth Executing the NA opportunity The Group has a low market share in NA, where there is significant market opportunity for its Customer Engagement Data Security Solutions The inability to execute in NA, winning new clients and implementing the wider Customer Engagement Data Security Solutions for clients, could have a material impact on the Group’s results Exchange rate The Group is exposed to the US Dollar and the translation of net assets and income statements of its North America territory and, following the acquisition of Syntec, is also exposed to client contracts denominated in US Dollars and Euros Reputation of the Eckoh Group investment in both existing and new products and technology to support its strategic plan Product development roadmaps for Customer Engagement Data Security Solutions are managed centrally in the UK We mitigate this risk by monitoring closely our contract performance, churn and renewal success with all customers by maintaining strong relationships We continue to expand our customer base, particularly in the NA business The Group sets clear targets for growth expectations for the NA 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 NA Cloud-based solutions have been adopted to ensure Eckoh offer all potential solutions that clients may demand 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 North America division Damage to our reputation and our brand name can We address this risk by recognising the importance of our arise from a range of events such as poor solution reputation and attempting to identify any potential issues design or product performance, unsatisfactory client quickly and address them appropriately We recognise services and other events either within, or outside, the importance of providing high quality solutions, good our control client services and managing our business in a safe and professional manner Eckoh has concluded its program of ISO9001 certification to further audit these measures. 24 Strategic Report | Financial Review 25 Financial Review Eckoh has had a successful year delivering a robust level of adjusted operating profit of £7.7 million, an increase of 48% year-on-year (FY22: £5.2 million) and ahead of consensus market expectations. Adjusted operating profit margin was 19.9%, an improvement from last year of 340 basis points (FY22: 16.5%). The growth was driven by North America and the focus on large enterprise clients, our cloud-based offering and the full year impact of the acquisition of Syntec Holdings Limited on 21 December 2021, integration of Syntec (“Syntegration”) and a £0.5 million EBITDA foreign currency benefit (FY22: loss £0.1 million and first half gain of £0.7 million) arising from the strength of our North American activity. R evenue for the year increased by 22% to £38 8 million (FY22: £31 8 million) and at constant exchange3 rates by 16% This is split £31 8 million recurring revenue (FY22: £24 1 million and £7 8 million one-off revenue (FY22: £7 1 million) with recurring revenue increasing year-on-year by 29% and one-off revenue by 2% Group recurring revenue was therefore 80% (FY22: 76%), the increase being driven from the North America territory. Adjusted operating profit1 was £7 7 million an increase of 48% year-on-year (FY22: £5.2 million). Profit after tax for the year was £4 6 million, compared to £1 6 million in FY22. The prior year profit after tax of £1.6 million, included £1.0 million of transaction costs relating to the acquisition of Syntec and exceptional restructuring costs of £0 9 million In the current year there is an exceptional legal cost and settlement agreement item of £0 2 million Group ARR showed strong progress and demonstrates the high level of visibility we have in our business model As of 31 March 2023, Group ARR was £30 4 million, an increase of 18% year-on- year after restating last year’s Group ARR to include the North American Coral business (FY22 restated: £25 8 million) Group ARR increased by 11% at constant exchange rates Total contracted business5 for the financial year at the Group level was £34 5 million (FY22: £22 5 million), a year-on-year increase of 53% New contracted business increased 33% to £14 4 million (FY22: £10.8 million) and the strong first half continued into the second half Basic earnings per share for the year ended 31 March 2023 was 1 58 pence per share (FY22: 0 59 pence per share) Adjusted earnings per share for the year ended 31 March 2023 was 2 14 pence per share (FY22: 1 57 pence per share) demonstrating both the strong organic growth and accretion following the acquisition of Syntec in December 2021 Revenue in North America, which represents 45% of total group revenues, increased to £17 5 million (FY22: £12 5m) UK&I represented 53% of total group revenues at £20 6 million and ROW represented 2% of group revenues Further explanations of movements in revenue between North America, UK & Ireland and ROW territories have been addressed in the Operational Review above Gross profit The Group’s gross profit increased to £31.2 million (FY22: £25.4 million), an increase year-on-year of 23%. Gross profit margin was 80% for the year, in line with last year (FY22: 80%) The UK&I gross profit margin was 82%, a 1% decrease based on the new territories or a 2% decrease from the UK division last year In North America, the full year margin was 79% an increase from last year’s NA margin of 75% or 74% for last year’s US division This increase in margin as previously indicated is as a result of the continued deployment of the new Customer Engagement Data Security Solutions in the cloud environment together with the successful renewals of the earlier contracted on-site solution deployments, where the lower margin hardware component becomes fully recognised at the point of renewal In the UK&I, 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 82-83% In North America, we would expect the gross profit margin to continue to marginally increase from 79% to c 80% This is driven by the continued growth of the Secure Payments activities for cloud solutions coupled with a small number of clients with on-site solutions, who in the coming year are due to renew their initial contract, at which point the hardware component will be fully recognised Territory performance – NA, UK&I, & ROW Administrative expenses Total administrative expenses for the year were £26 2 million (FY22: £23 0 million) Included in administrative expenses, is the Historically we have focused solely on the UK and US markets, but £2 5 million of amortisation for the acquired intangible assets with the integration of the Syntec business into Eckoh’s operations from the acquisition of Syntec Holdings Limited on 21 December and an increasingly cloud-based security proposition enabling increased activity to come from an expanding international 2021 (FY22: £0 8m) and exceptional legal fees and settlement agreements of £0 2 million Adjusted administrative expenses4 market, we have shifted to segmenting our activity into North for the year were £23 5 million (FY22: £20 2 million) America (NA), UK and Ireland (UK&I) and Rest of World (ROW) revenue streams 26 Strategic Report | Financial Review 27 Profitability measures Earnings per share Adjusted operating profit was £7.7 million, an increase of 48% Adjusted diluted earnings per share was 2 09 pence per share year-on-year (FY22: £5.2 million). Included in the profit was a (FY22: 1 34 pence per share) a year-on-year increase of 56%, foreign currency gain of £0 5 million (FY22: loss £0 1 million), which due to the increase in adjusted profit before tax and essentially is unlikely to be repeated to the same extent in the financial year to 31 March 2024 Adjusted EBITDA2 for the year was £9 4 million, an unchanged number of issued Ordinary Shares Basic earnings per share was 1 58 pence per share (FY22: 0 59 pence per share) increase of 38% year-on-year (FY22: £6 8 million) Diluted earnings per share was 1 55 pence per share (FY22: 0 51 Year ended 31 March 2023 £'000 Year ended 31 March 2022 £'000 pence per share) Client contracts Contract liabilities and contract assets Contract liabilities and contract assets relating to IFRS 15 Revenue from Contracts with Customers has continued, as expected, to decrease in the current year, principally as new contracted business in NA 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 £9 9 million (FY22: £12 5 million), included Dividends Post year end the Board are proposing a final dividend for the year ended 31 March 2023 of 0 74 pence per Ordinary Share be paid to the Shareholders whose names appear on the register at the close of business on 22 September 2023, with payment on 20 October 2023 The ex-dividend date will be 21 September 2023 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 £2 2m Chrissie Herbert Chief Financial Officer 14 June 2023 Profit from operating activities Amortisation of acquired intangible assets Expenses relating to share option schemes Exceptional restructuring costs Exceptional legal costs and settlement agreements Costs relating to business combinations Adjusted operating profit1 Amortisation of other intangible assets Depreciation of owned assets Depreciation of leased assets Adjusted EBITDA2 Finance charges 5,020 2,473 40 - 203 - 7,736 398 643 617 9,394 2,386 751 241 866 - 985 5,229 392 680 495 6,796 Client contracts are typically multi-year in length and have a in this balance are £6 3 million of contract liabilities relating to the high proportion of recurring revenues, usually underpinned by Secure Payments product, hosted platform product or Syntec’s minimum commitments With a greater proportion of contracts CardEasy Secure Payments’ product, a decrease of £1 8 million at being delivered through the cloud the initial set up fees and the same time in the previous year Contract assets as at 31 March 1 Adjusted operating profit is the profit before adjustments for expenses relating to share hardware costs associated with larger customer premise 2023 were £2 4 million (FY22: £3 8 million) deployments will be reducing, leading over time to an increase in operating margin Statement of financial position Cashflow and liquidity Gross cash at 31 March 2023 was £5 7 million (FY22: £2 8 million), as at 31 March 2023 there was no drawdown of debt (FY22: £nil million Our balance sheet remains robust with a strong net cash position debt). As a result of the acquisition of Syntec in the financial year option schemes, amortisation of acquired intangible assets, exceptional costs and costs relating to business combinations 2 Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is the profit from operating activities adjusted for depreciation of owned and leased assets, amortisation, expenses relating to share option schemes, exceptional items and costs relating to business combinations 3 At constant exchange rates (using last year exchange rates) 4 Adjusted administrative expenses are administrative expenses excluding expenses relating to share option schemes, depreciation of owned and leased assets, amortisation of acquired intangible assets, exceptional items and costs relating to business combinations 5 Total contracted business includes new business from new clients, new business from of £5 7 million, an increase of £2 9 million year-on-year (FY22: £2 8 to 31 March 2022, we secured a new £10 million debt facility with existing clients as well as renewals with existing clients million) The business has a Revolving Credit Facility of £5 million, Barclays Bank, which comprised a £5 0 million overdraft and a £5 0 secured against the Group’s UK head office, which is an asset million revolving credit facility In November 2022, the overdraft we own outright As at 31 March 2023 our revolving credit facility facility was cancelled and the RCF remains in place, but undrawn remains undrawn as at 31 March 2023 While Eckoh continues to innovate by developing new products During the year there has been a net cash outflow from working and features such as those detailed in the Chief Executive Officer’s capital of £1.6 million (FY22: £1.7 million cash outflow) due to the For the financial year ended 31 March 2023, the interest payable review, there has been an increase in the amount capitalised to charge was £53k (FY22: £74k) The interest charge is made up of intangible assets in the financial year to £0.6 million relating to timing of invoicing and cash receipts and as the deferred revenue for the NA large on-site deployments has been recognised over bank interest of £nil (FY22: £23k) and interest on leased assets the Call-Recording product (FY22: £0 3m), which was launched the term of the contract, generally three years of £53k (FY22: £51k). The finance interest received was £53k as expected in April 2023 (FY22: £6k) Taxation For the financial year ended 31 March 2023, there was a tax charge of £383k (FY22: £743k charge). The effective tax rate in the financial year ended 31 March 2023 was 7 6% (FY22: 43 8%) The current year tax rate is impacted by a prior year adjustment relating to Syntec Holdings balance sheet as they adopted International Accounting Standards 28 Strategic Report | Sustainability Report 29 Sustainability Report During the year we have been working on our Environmental Social and Governance strategy (ESG). This is underpinned by our mission as a business, which is to set the standard for secure interactions between consumers and the world’s leading brands because we care about making the world a secure place. Our sustainability strategy is split into four key areas; the product we provide our customers and their customers; the security first approach we adopt across the business, which also encompasses the knowledge and the experts we have in our team; the culture we create through our values and the environmental responsibility we take in the way we do business. As we successfully drive progress against our broader strategic objectives, we remain committed to making sustainable business decisions. We continue to listen to our stakeholders and we will continue to refine our sustainability strategy to ensure that it drives long term value for all of them. I am pleased that in the financial year to March 2023, we have made significant progress in terms of setting targets and working towards those targets. The following section lays out the targets and progress made against each of the four areas. Our Products Core objective: Environmental Responsibility Core objective: • Use cloud technology to develop and enhance our • Reduce environmental impact by minimising our carbon proprietary solutions footprint and committing to our cloud-first approach. • Our products lessen the burden of compliance for our clients, reduce fraud and the impact of a data breach and Delivering stakeholder value in turn makes the world a safer place • Committing to environmental responsibility protects the Delivering stakeholder value future of our people and demonstrates to customers that we strive to deliver products with minimal environmental • Grow our market leadership position in Customer Engagement impact Data Security solutions to increase Shareholder value • The growing number of our patents demonstrate that we Meeting our 2023 targets protect our IP and the integrity of our solutions • Transitioned to renewable energy supplies for all energy • Our Secure Customer Engagement Suite of solutions provide contracts managed directly a robust payments solution for our clients, enhancing their • Completed and published our first carbon reduction plan governance and enabling our clients’ contact centre and set targets to achieve net zero by 2045 agents to take payments securely as well as preventing • Invested in one of our US datacentres, which will reduce our the exposure of sensitive customer data to contact carbon footprint due to the enhanced technology centre agents Meeting our 2023 targets • Becoming system-agnostic to offer freedom of choice to our customers, we delivered our first live client as a multi- cloud provider • Delivery of a new unified cloud platform, based on our Secure Voice Appliance (SVA) • Delivery of a Secure Call Recording product Security First Governance Core objective: Our Culture Core objective: • We maintain a Security First approach in the design, build • Create an inclusive workplace that supports, empowers, and operation of our service develops and fairly rewards all our people Delivering stakeholder value Delivering stakeholder value • People, Process and Technology aligned to drive a Security • Fostering a positive culture will attract and retain the First decision tree to identify and mitigate risks best talent, accelerating delivery of our strategy • Project delivery cycles, product development, legal • Investing in our people benefits the communities we operate contracts aligned to support the security and availability in by delivering an exceptional employee experience of our solutions and operations • Trusted advisor to our customers Meeting our 2023 targets Meeting our 2023 targets • March 2022 completed an employee survey Results were shared with employees in April 2022 and three key focus • PCI-DSS Level 1 Service Provider for 13 successive years areas identified. • Dedicated Security Operations Centre monitoring our • Members of the Leadership team led each of the three key security posture both internally and externally focus areas and used focus groups with representation • Maintained and renewed all the Groups ISO certifications from across the business to develop action plans All actions and Cyber Essentials from the focus areas were delivered in the year • Encouraging our team to fundraise through the year for local charities in the UK and US 30 Strategic Report | Sustainability Report 31 Our Products Security First Governance Our Culture Environmental Responsibility At the heart of our sustainability strategy is our mission as a As the compliance landscape continually evolves, whether Alongside our Security First Governance approach, our culture Our commitment to environmentally responsible operations is business, which is to set the standard for secure interactions this is currently the introduction of Version 4 of the PCI-DSS and our values are key In particular our Humanity value an essential part of our contribution to creating a healthy planet between consumers and the world’s leading brands because or USA’s strengthening data privacy rules, we act as trusted reflects our welcoming spirit, embracing diversity and respect for our people, our clients and our employees Our biggest we care about making the world a secure place This starts advisors to our clients. In order to be experts in our field, we for each other We draw on our Humanity value in the way direct impacts on the planet come from our datacentres, our with the products we provide to our customers Our data need to ensure we adopt robust and responsible business we treat each other, our clients, partners and suppliers and offices and our employees travel, which includes an estimate Our aim is to be flexible to our clients’ needs, to do this we retain the ability to deploy locally to clients’ datacentres or we can offer our clients a choice of cloud platform, providing our solutions in a system-agnostic way. practices across the organisation This is achieved through our mantra of Security First, which encompasses our people, our processes and our technology to drive a Security First decision tree This approach feeds the project delivery cycles, product development and legal contracts to align in order to support the security and availability of our solutions and operations The Security First approach means security solutions help protect sensitive customer data and responsible business practices are at the heart of how can be performed via any customer engagement channel we operate and this can be demonstrated through the (voice, live chat, advanced speech, digital) and on any device certifications we hold as an organisation. Alongside being a the customer chooses The best way to secure data is not to PCI-DSS Level 1 Service Provider, we also hold certifications for collect it and this is our specialism Cyber Essentials; ISO27001 – which covers how we manage the also how we interact with our local community We recognise of their commuting the significant benefits of a diverse workforce and we do not tolerate discrimination, harassment, or victimisation in the We have set net-zero carbon targets with a baseline year of workplace Instead we encourage an inclusive workplace with 2022 and have developed a carbon reduction plan to progress strong employee engagement and participation by all to carbon neutrality in advance of 2050 We have set ambitious Alongside our Security First Governance approach, our culture and our values are key. In particular our Humanity value reflects our welcoming spirit, embracing diversity and respect for each other. reduction targets in respect of Scope 1 and 2 emissions in advance of 2050 The full extent of Scope 3 emissions will be refined in the current financial year as we collate and gather the data from sources we do not directly control The following are our targets: • Scope 1 emissions will be eliminated by 2030 • Scope 2 emissions which are driven by our datacentres and our offices, will be reduced and be net zero by 2045 • Scope 3 emissions will be net zero by 2045 Our aim is to be flexible to our clients’ needs, to do this we details or information entrusted to us by third parties; In March 2022 we completed a staff survey, listening to our conversion factors published by the Department for retain the ability to deploy locally to clients’ datacentres or we and ISO9001 – which demonstrates our Quality Management employees is important to us The results were fedback to our Environment, Food and Rural Affairs (‘Defra’) and the can offer our clients a choice of cloud platform, providing our System process and our ability to consistently meet customer employees in April 2022. As a Management team we identified Department for Business Energy and Industrial Strategy (‘BEIS’) solutions in a system-agnostic way. During the financial year and regulatory requirements three areas to focus on and created employee focus groups All group entities have been included in the reporting security of assets such as financial information, IP, employee Energy use has been assessed using the 2022 emission we delivered our first client live through a new cloud provider, for each area with developed action plans being shared with giving us a multi-cloud proposition going forward In addition to the certifications demonstrating our Security and the wider business Over a period of six months the agreed The baseline year includes the acquired Syntec Holdings Over the last financial year and following the acquisition the global PCI Security Standards of Syntec, we have combined Eckoh’s existing technology As we advocate high standards internally we echo this coupled with the return to travel post the COVID pandemic has inclusion of the Syntec business for a full twelve months underpinning the voice security product solution, CallGuard, Internally we manage and monitor our security risk through our sentiment in respect of our external stakeholders by taking a increased our energy consumption and carbon footprint year- with Syntec’s technology underpinning their payment solution Security Operations Centre A dedicated team use a number of zero-tolerance approach to any forms of unethical behaviour on-year. During the financial year to 31 March 2024, we expect for contact centres, CardEasy This has enabled us to develop KPI measurements - third party scorecards, internal scanning within our wider operations and supply chains the Scope 2 – indirect emissions to decrease Control credentials, we are also a participating organisation of actions have been implemented Limited for a three-month period from December 2021 The a new core component of our unified platform, which we call and vulnerability monitoring and active threat hunting to seek our Secure Voice Appliance (SVA). The SVA takes the benefits out and increase our security posture across the board The from each of the CallGuard and CardEasy products and results of the Security Operations Centre are shared across the provides significantly improved density of telephony traffic business as a way to continually educate our employees with for our clients This in turn will provide improvements for our best practice, raise awareness and ensure the Security First clients’ environmental footprint as well as Eckoh’s operational approach is delivered consistently across the business efficiency as the new appliances are rolled out across new and existing clients We remain committed to the highest standards of compliance in this area and in the year we achieved our goals to deliver: Building on the unified platform, at the end of the financial year • >99% acceptance of acceptable use and data protection we launched a new Secure Call-Recording product As well as policies; recording calls, the product enables the client to transcribe • >99% completion of annual online security training; and analyse the calls delivering business intelligence and • 0 phishing incidents resulting in the loss of data; and redact sensitive information • externally monitor our Security Scorecard to maintain A Rating Global carbon footprint assessment Emissions from: Scope 1 – direct emissions Scope 2 – indirect emissions CO2 turnover ratio Scope 1 and 2 (tonnes of Co2 per £m revenue) CO2 EBITDA ratio Scope 1 and 2 (tonnes of Co2 per £m EBITDA) Scope 3 – other indirect emissions Total (all Scope 1, 2 & 3) Total UK energy consumption (kWh) Total global energy consumption (kWh) 31 March 2022 Baseline Tonnes of CO2e 31 March 2023 Baseline Tonnes of CO2e Change since baseline % 18 13 335 09 0 014 0 061 59 12 412.34 978,759 1,158,197 21 82 431 78 0 013 0 060 107 79 561.39 1,259,930 1,397,021 +20% +29% +11% (1%) +82% +36% +29% +21% 32 Strategic Report | Sustainability Report 33 Reducing our environmental impact Our Group strategy to drive investment in our product and We are currently reviewing options for our two UK offices to cloud-first approach will have a significant impact on our eliminate Scope 1 emissions and have set a target these will be carbon footprint in the future years By migrating our data- eliminated by 2030 centres into the cloud, we will be both more operationally efficient and reduce our carbon footprint. Our targets for the During the year to 31 March 2023 and post the COVID-19 reduction of our Scope 2 emissions all focus on our data- pandemic our emissions from travel have increased compared centres and the continued adoption of cloud technology for to the prior year to 31 March 2022 The increase is driven from our solutions employees commuting under a hybrid working arrangement and international travel for our US and UK employees having With respect to our UK offices and locations where we contract face-to-face meetings We are therefore working on initiatives directly, we procure our energy from renewable sources, to adapt our approach to travel in a way that allows us to reap our lighting is energy efficient and LED lights are utilised the benefits of face-to-face interaction whilst minimising the throughout our UK offices, with motion sensor lighting too. associated carbon footprint We do not provide company vehicles to employees or Directors or operate any form of vehicle fleet, we do offer our UK employees a cycle to work scheme to promote healthy living practises and further reducing our carbon footprint from daily commuting Our Scope 3 emissions include our employee travel, whether commuting or business travel, our water usage in our office and our office waste management. Other than specific business travel, all calculations in this area are based on estimates Nik Philpot Chief Executive Officer 14 June 2023 Our Group strategy to drive investment in our product and cloud- first approach will have a significant impact on our carbon footprint in the future years. By migrating our data- centres into the cloud, we will be both more operationally efficient and reduce our carbon footprint. 34 35 Corporate Governance 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. 36 Corporate Governance | Board of Directors 37 Board of Directors Independent Directors Executive Directors Christopher Humphrey BA MBA FCIMA Nik Philpot Non-Executive Chairman Committee Membership: Appointed to the Board – 21 June 2017 Nominations (Chair), Audit, Remuneration Appointed Chairman – 21 September 2017 Skills & Experience: Christopher is currently Chairman at Group Chief Executive Officer of Anite plc Heywood Pension Technologies Limited from 2008 until August 2015, having joined He was previously a Non-Executive Anite in 2003 as Group Finance Director Director at AVEVA Group plc, Videndum plc He has held senior positions in finance at (previously The Vitec Group plc), Alterian Conoco, Eurotherm International plc and plc and SDL plc Christopher was formerly Critchley Group plc Guy Millward Non-Executive Director Committee Membership: Appointed to the Board – 1 October 2016 Audit (Chair), Nominations, Remuneration Skills & Experience: Guy is currently Chief Financial Officer Group plc, Advanced Computer Software at Wilmington plc He has extensive Group plc, Quixant plc, Metapack Limited experience in senior finance positions and Bighand Limited, Group Finance at several publicly and privately held Director at Alterian plc, Morse plc and companies in the electronics, software Kewill plc Guy is a Fellow of the Institute and IT sectors His previous roles include of Chartered Accountants in England and that of CFO at Imagination Technologies Wales (ICAEW) David Coghlan Non-Executive Director Committee Membership: Appointed to the Board – 1 December 2017 Remuneration (Chair), Audit, Nominations Skills & Experience: David is currently Chairman of Quadrant Chairman of the Audit Committee, of Group Limited, a leading independent SCISYS plc, a software company quoted supplier of aviation simulation and on AIM He has extensive experience training, with subsidiaries in the UK and US with technology companies in the Until February 2023 he was Chairman of business-to-business field. In his Synectics plc, an AIM-quoted provider of earlier career, David was a partner at high-end electronic security systems and Bain & Company, a leading strategy previously a Non-Executive Director, and consulting firm. 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 leading provider of Customer Engagement 30 years’ experience in the voice services Data Security Solutions working with some industry; he was originally at British Telecom of the largest global brands to enhance and before establishing a number of start-up protect interactions with their customers businesses in the telecoms and technology sectors As CEO of Eckoh, he has created a Chrissie Herbert Executive Director – Chief Financial Officer & Company Secretary Appointed to the Board – 2 May 2017 Skills & Experience: Chrissie has held several senior finance from PayPoint plc, where she was positions with both publicly listed UK & Ireland Finance Director and privately held businesses Her considerable background in high growth, Chrissie qualified as a Chartered consumer facing organisations includes Accountant with KPMG and is a Collect+ and Travelodge Hotels Ltd and Fellow of the ICAEW she has gained payments experience 38 Corporate Governance | Chairman’s Statement 39 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 During the year we have been working on our ESG strategy This is underpinned by our mission as a business, which is to set the standard for secure interactions between consumers and the world’s leading brands because we care about making the world a secure place The ESG strategy encompasses the products we provide our clients, the way we provide them, the way we do business, both from an ethical approach and also with consideration for the environment In January 2023 we issued our Carbon Reduction Plan, the targets we have committed to and the progress to date can be found in the Sustainability report on pages 28 to 33 Christopher Humphrey Chairman 14 June 2023 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 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success The strategy and business model which explains the strategic Eckoh’s Sustainability report focuses on our environmental, social objectives of the Group and how the Company generates and and governance strategy and is found on pages 28 to 33 preserves value over the longer term are set out in the Strategic Report on pages 4 to 33 of this Annual Report In addition to the stakeholders covered in the Sustainability Report, our customers are also important stakeholders, whose The Board is collectively responsible for the long-term success opinions and voice Eckoh values highly We have various of the Company and provides effective leadership by setting channels for customers and prospects to communicate with the the strategic aim of the Company and overseeing the efficient Group, through regular business reviews, which are conducted implementation of these aims in order to achieve a successful by our Client Services team, to post project reviews An annual and sustainable business In practice the Executive Directors Customer Satisfaction survey was conducted in the year for our prepare and present the strategic plan to the Board which the UK&I and ROW, and we intend to carry out a similar survey for our Board challenges in order to determine the strategic priorities NA customers in the financial year 2024. On an ongoing basis the Board ensures that the strategic plan is taken into consideration in its decision-making process Seek to understand and meet Shareholders’ needs and expectations The Directors consider that the Annual Report and Financial 2. 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 Statements play an important role in providing Shareholders systems, and for the monitoring of these systems to ensure with an evaluation of the Company’s position and prospects The that they are effective and fit for purpose. The Audit Committee Board aims to achieve clear reporting of financial performance provides support to the Board in this regard and oversees the to all Shareholders The Board acknowledges the importance monitoring process Further information on the risk management of an open dialogue with its institutional Shareholders and and internal control system is set out in the Audit Committee welcomes correspondence from private investors report on pages 44-46 The Executive Directors have an ongoing programme of meetings The Directors have carried out a robust assessment of the with institutional investors and analysts twice a year for up to principal risks facing the Group and how these risks could affect two weeks at a time Feedback from these meetings is reported the business, financial condition or operations of the Group. The to the Board The Non-Executive Chairman has held meetings explanation of these principal risks, including how they are being during the year with the major Shareholders, independently of mitigated, can be found on pages 20 to 23 the Executive Directors In addition to the Annual Report and the Company’s website, the Annual General Meeting (AGM) is an ideal forum at which 5. Maintain the Board as a well-functioning, balanced team led by the Chair The Board, led by the Chairman, has a collective responsibility to communicate with investors, and the Board encourages and legal obligation to promote the interests of the Group The Shareholder participation All Board members are planning to Chairman is ultimately responsible for Corporate Governance be present at the AGM and are available to answer questions However, the Board is responsible for defining the Corporate from Shareholders Governance policies The articles of association require that at the AGM one third, or as The Board is made up of three Non-Executive Directors and near as possible, of the Directors will retire by rotation However, two Executive Directors and has delegated certain roles and as is best practice, all Director’s will retire and put themselves responsibilities to its Audit, Nomination and Remuneration forward for re-election at the AGM Committees while retaining overall responsibility 40 Corporate Governance | Chairman’s Statement on Corporate Governance 41 Non-Executive Directors are all independent and are Company’s corporate calendar There were twelve scheduled expected to devote sufficient time to the Company to meet meetings during the year and two meetings at short notice their responsibilities Directors in principle attend all meetings either in person or by video or telephone conference arrangements The table The Board and its Committees met regularly throughout the below shows Directors’ attendance of Board and Committee year with the meetings scheduled around key dates in the meetings Directors’ meeting attendance 2022/23 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 12 112 12 2 2 2 2 2 31 31 3 3 3 - - - - - 31 31 3 3 3 2 2 2 2 2 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. 2 David Coghlan was unable to attend the January Board meeting due to an overseas commitment At Board meetings the Chairman ensures that effective decisions are reached by facilitating debate and consultations with Management and external advisors as necessary The work undertaken by the Board during the year is set out in the table below: Divisions of roles and responsibilities The Chairman is responsible for the leadership of the Board and ensuring the effectiveness on all aspects of its role There is a clear division of responsibility between the Chairman and the Chief Executive, which is as follows: Chairman Chief Executive Christopher Humphrey is the Non-Executive Chairman Nik Philpot is the Chief Executive and he is responsible and he is responsible for managing the Board and for running the Group’s business by proposing ensuring it works effectively Below are the roles and and developing the Group’s strategy and overall responsibilities of the Chairman for the financial year commercial objectives, which he does in close ended 31 March 2023 consultation with the Chairman and the Board • Setting the Board’s agenda and ensuring the Board • Providing input to the Board’s agenda and ensuring receives accurate, timely and clear information on that reports provided to the Board are accurate, all matters reserved to its decision and the Group’s timely and include accurate information The agenda for each Board meeting includes the following as standing items: performance and operations • Risk analysis, including by risk, the risk factor and the • Finance report, which is prepared and presented monitoring mechanism by the Chief Financial Officer and includes the management accounts and business performance, • Management report which is prepared and presented including forecast as appropriate by the Chief Executive Officer Other matters which are covered by the Board routinely during the year include: • Review of Annual Report and preliminary • Review and approval of the interim management announcement statements for release to the market • Review of Executive Directors’ presentation of the full • Recommendation of the final dividend year results to analysts and investors • Strategy session at which the Board considers • Company secretarial & legal Management’s presentation of the Strategic Plan • Setting of the Board calendar for the year and gives its approval • Ensuring compliance with the Board’s approved Company Secretary as appropriate, compliance procedures with the Board’s approved procedures • Ensuring, in consultation with the Chairman and the • Chairing the Nomination Committee and facilitating • Ensuring that the Chairman is alerted to forthcoming the appointment of effective and suitable members complex, contentious or sensitive issues affecting and Chairman of Board Committees the Group of which he might not otherwise be aware • Ensuring that there is effective communication • Providing information and advice on succession by the Group with its Shareholders, including by planning to the Chairman, the Nomination the Chief Executive and Chief Financial Officer Committee, and other members of the Board, ensuring that members of the Board develop an particularly in respect of Executive Directors understanding of the views of the major investors in the Group • Promoting the highest standards of integrity, probity • Leading the communication programme with Shareholders and corporate governance throughout the Group • Promoting and conducting the affairs of the and particularly at Board level Group with the highest standards of integrity and corporate governance 42 Corporate Governance | Chairman’s Statement on Corporate Governance 43 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 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board The Board provides the strategic leadership for the Company the Board and between them they provide a blend of business and ensures that the business operates within the Corporate understanding, technical knowhow, experience of public Governance framework that has been adopted Its prime markets and financial expertise. The Board consider that this is purpose is to ensure the delivery of Shareholder value in the long appropriate to enable it to successfully execute its long-term term by setting the business model and defining the strategic strategy goals to achieve this All members of the Board attend seminars and regulatory events The Board is supported by a Remuneration Committee, Audit to ensure that their knowledge is up to date and relevant Where Committee and Nomination Committee Each Committee has the Board considers it does not possess the necessary expertise formally delegated duties and responsibilities and the terms 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 40 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 or experience it will engage the services of professional advisors of reference for the Committees are reviewed annually The objective criteria 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. The Board considers that the three non-Executive Directors, Committee Chair is responsible for reporting, throughout the including the Chairman, are independent year, to the Board any recommendations or issues which require further consideration by the Board The Board reviews annually The biographies of each of the Directors can be found on pages the list of matters that are reserved for the Board 36 to 37 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement 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 44 and page 47 respectively During the financial year ended 31 March 2023, the Chairman The role and responsibilities of the Chairman, Chief Executive led a formal review of the Board, its Committees and each and other Directors have been set out under principle 5 on page Director The performance evaluation of the Chairman was 41 of the Annual Report undertaken by the Chair of the Remuneration Committee, David Coghlan The review centred on the following areas: • the Board’s role and scope of its authority, how it is led by 10. Communicate how the Group is governed and is performing by maintaining a dialogue with Shareholders and other the Chairman, the frequency and time allotted to the Board relevant stakeholders meetings and their agendas The Company is committed to open communication with • the Committees’ terms of reference, leadership, the all its Shareholders Communication with Shareholders is frequency and time allotted to the Committee meetings and predominantly through the Annual Report and AGM The their agendas last AGM results can be found on the Group’s website Other • the Directors’ feedback was free-ranging and unstructured communications are in the form of full-year and half-year with guidance on areas to consider announcements, periodic market announcements (as appropriate) one-to-one meetings and investor roadshows The A Board evaluation process will be carried out annually Remuneration Committee report is included on pages 47 to 52 The Group’s website www.eckoh.com is regularly updated Annual Reports and Notices of Meetings can be found on the Group website 8. Promote a corporate culture that is based on ethical values and behaviours Our Sustainability report on page 28 sets out our ESG strategy Our ESG strategy starts with our mission as a business, which is to set the standard for secure interactions between consumers and the world’s leading brands because we care about making the world a secure place Our ESG strategy also covers the way we do business and includes the value we place on our employees and the culture we drive in the NA and UK&I business, with our Humanity value playing a significant part in the way we operate both internally with our employees and also with the communities we operate within Section 172(1) Statement – Board engagement with our stakeholders Section 172 of the Companies Act 2006 requires a Director of a The Board regularly receives updates on feedback from investors Company to act in the way he or she considers, in good faith, from the Executive Management In addition, the Chairman, would be most likely to promote the success of the Company CEO and CFO meet frequently with institutional investors to for the benefit of its members as a whole. In doing this, section discuss and provide updates about – and seek feedback on 172 requires a Director to have regard, among other matters, – the business, strategy, long-term financial performance, to: the likely consequences of any decision in the long-term; Directors’ remuneration policy and dividend policy to the the interests of the Company’s employees; the need to foster extent appropriate Considering the capital growth aims of the Company’s business relationships with suppliers, customer Shareholders, the Directors are focused on growing the NA and others; the impact of the Company’s operations on the business through the enhanced Customer Engagement Data community and the environment; the desirability of the Company Security Solutions The Group is successfully integrating Syntec maintaining a reputation for high standards of business conduct; Holdings Limited, which it acquired in December 2021, into the and the need to act fairly with members of the Company The Eckoh business and its portfolio of solutions, this together with Directors give careful consideration to the factors set out above our organic growth will further strengthen our market leading in discharging their duties under section 172 The stakeholders we position in the Customer Engagement Data Security Solutions consider in this regard are the people who work for us, buy from market Going forward we will continue to evaluate acquisition us, supply to us, own us, regulate us, and live in the societies we opportunities that can support our growth strategy in Customer serve and the planet we all inhabit The Board recognises that Engagement security building strong relationships with our stakeholders will help us deliver our strategy in line with our long-term values and operate Relationships with customers are fostered and we listen to the business in a sustainable way The Board is committed to feedback through customer surveys We also develop the effective engagement with all its stakeholders relationships with clients through cross-selling appropriate additional product and services, which maximises client value For further details of how the Board operates and the way in and also ensures high retention of clients which it makes decisions, including key activities during the financial year ended 31 March 2023 and Board governance, see It is the Group’s policy to manage and operate worldwide pages 38 to 43 and the Board Committee reports thereafter The business activities in conformity with applicable laws and Board regularly receives reports from Management on issues regulations as well as with the highest ethical standards Both concerning customers, the environment, communities, suppliers, the Group’s Board of Directors and Executive Management employees, regulators, governments and investors, which it takes are determined to comply fully with the applicable law and into account in its decision-making process under section 172 regulations, and to maintain the Company’s reputation In addition to this, the Board seeks to understand the interests for integrity and fairness in business dealings with and views of the Group’s stakeholders by engaging with them third parties directly as appropriate 44 Corporate Governance | Audit Committee Report 45 Audit Committee Report In the year under review the Audit Committee’s activities were as follows: Topic Actions Dear Shareholder, On behalf of the Audit Committee, I am pleased to present our report for the year ended 31 March 2023. The Committee has considered the integrity of the Group’s financial reporting and provided advice to the Board that the 2023 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 pages 36 to 37. 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 Financial reporting Assessed and reported to the Board on whether the Annual Report and Accounts were fair, balanced and understandable Reviewed and discussed with the external auditors the key accounting considerations and judgements reflected in the Group’s results for the year to 31 March 2023 (as reported below). Reviewed, together with the Board, the Risk Assessment and the going concern basis for preparation of the financial statements and recommendation of the going concern statement to the Board. Reviewed the post-acquisition performance of Syntec Holdings Limited, to ensure the expected value from the acquisition was being achieved Audit plans and audit findings Reviewed and agreed the external auditors’ plan in advance of their audit for the year ended 31 March 2023 Discussed the report received from the external auditors regarding their audit in respect of the year ended 31 March 2023 which included comments on their findings on internal control and a statement of their independence and objectivity Risk management and internal controls Reviewed the principal risks and the mitigation of these risks as set out on page 20 to 23 Reviewed and monitored 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 • monitoring and reviewing the scope and areas internal audit should cover alongside the other programmes and process reviews Committee in relation to the 2023 financial statements, and how these were addressed, were: 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. Details of meeting attendance are set out on page 40. • Risk of fraud in revenue recognition (including contract • Management override of controls accounting) We are satisfied adequate controls are in place and use Revenue recognition is complex, involves calculation the monthly management reporting and the results of the schedules and can be judgemental Controls are in place to external audit to assess this on an on-going basis Guy Millward Chairman Audit Committee 14 June 2023 ensure revenue is only recognised for product solutions such as the hosted Customer Engagement 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 the ongoing licence fee revenue, which includes support and maintenance, 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 46 Corporate Governance | Audit Committee Report 47 External audit An annual review of the effectiveness of the external audit is Non-audit services The Committee reviews the level of non-audit fees for services undertaken by the Committee provided by the auditors in order to satisfy itself that the No significant issues were raised with respect to the audit process for the financial year ended 31 March 2023 and the quality of the audit process was assessed to be good. The effectiveness of the audit process is underpinned by the appropriate audit planning and risk identification at the outset auditors’ independence is safeguarded There were no non- audit fees paid to PricewaterhouseCoopers LLP in the year ended 31 March 2023 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 of the audit cycle The auditors provide a detailed audit plan, Details of the remuneration paid to the auditors for the statutory which includes the level of materiality and its assessment of audit are set out in note 7 the risks and other key matters for review For the year ended 31 March 2023, the primary risks identified were: risk of fraud in revenue recognition (including contract accounting) and Risk management and internal control The review of risks facing the Group is shown on pages 20 to management override of controls The Committee reviews 23. The Group has clearly defined lines of accountability and and challenges the work undertaken by the auditors to test delegation of authority which are closely adhered to and include Management’s assumptions on these matters An assessment of policies and procedures that cover financial planning and the effectiveness of the audit process in addressing these items reporting, accounts preparation, information security, project is performed through the reporting received from the auditors at governance and operational management The reporting and the year end During the audit for the year ended 31 March 2023, review processes provide regular assurance to the Board as to the auditors implemented the new audit standard ISA (UK) 315 the adequacy and effectiveness on internal controls (Revised) The Committee seeks feedback from management on the effectiveness of the audit process. No significant issues There are ongoing processes for identifying, evaluating and were raised with respect to the audit process for the financial managing the Company’s significant risks and related internal year ended 31 March 2023 and the quality of the audit process controls that are integrated into the Company’s operations was assessed to be good Such processes are reported to, and reviewed by, the Board at each meeting. These processes have identified the risks Based on the Committee’s assessment, the Committee has most important to the Company (business, operational, provided the Board with its recommendation to the Shareholders financial, security and compliance), determined the financial on the re-appointment of PricewaterhouseCoopers LLP implications, and assessed the adequacy and effectiveness of as external auditors for the year ending 31 March 2024 their control The reporting and review process provide routine PricewaterhouseCoopers LLP was appointed as auditors to the assurance to the Board as to the adequacy and effectiveness acquired Syntec Holdings Limited and its subsidiaries There are of the internal controls 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 Internal audit The Audit Committee annually reviews the requirement for an included in the Notice of Meeting which accompanies this report internal audit function Eckoh Group is subject to a number of externally audited certifications which were updated this year as well as the external audit of its financial statements; the Audit Committee has therefore not needed to recommend that the Board requires an internal audit function Guy Millward Chairman Audit Committee 14 June 2023 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 2023, 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 2023; 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 2023 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. The membership and responsibilities of the Remuneration Committee are set out on page 49 of this report Amongst its objectives, the Committee strives to ensure the Executive In respect of the year under review the Remuneration Committee’s activities were as follows: • Share options equal to 200% of salary were granted to the CEO and CFO in July 2022, in respect of FY23 (the FY23 Awards) This was in line with the consultation with Shareholders in FY22 and the granting of share options in January 2022 to the CEO and CFO equal to 200% of their respective salaries (in line with the exceptional grant limit) (the FY22 Awards), – From FY24 on, further annual awards will be considered per the scheme Rules up to the normal 120% of salary award level Further details of the award targets are on page 50 • The Remuneration Committee has also reviewed the Remuneration Policy for Senior Management and key employees At the beginning of the financial year there continued to be a difficult employment market in the technology sector. As a result, share options were awarded in July 2022 to a larger number of key employees in the business • The Committee approved an increase in the Chief Executive Officer’s and Chief Financial Officer’s salaries with effect from 1 April 2023 of 4%, reflecting pay increases within the Group’s workforce and current market conditions. • The Base and Committee Chair fee of the Chairman and Non-Executive Directors were also increased by 4% from 1 April 2023 • Bonus payments were accrued for the Executive Directors and Senior Management for the financial year ended 31 March 2023. Those relating to the Executive Directors are set out on page 50 Bonus payments for staff members were accrued at an average of 5% of salary (FY22: 5%) The Remuneration Report in respect of the financial year ended 31 March 2023, 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 13 September 2023 I encourage all Shareholders to vote in favour of this resolution and I look forward to the opportunity to meet with Shareholders at the AGM David Coghlan Chairman Remuneration Committee 14 June 2023 49 Annual Report on Remuneration The following section provides details of how Eckoh’s Remuneration Policy was implemented during the financial year Summary of Shareholder voting at the 2022 AGM The following table shows the results of the Shareholder advisory ended 31 March 2023 The following pages contain information vote on the Annual Remuneration Report: 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 2022/23 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 five times during the year. The Total number of votes % of votes cast For (including discretionary) 102,442,048 63 46% Against 58,993,836 36 54% Total votes cast (excluding withheld votes) Total votes withheld Total votes cast (including withheld votes) 161,435,884 45,873 161,481,757 details of meeting attendance are set out on page 40 Following the 2022 AGM held on 26 September 2022, the Remuneration Committee and Board noted the significant During the year, the Committee sought internal support from minority vote against the Company’s Remuneration Report the Chief Executive Officer and Chief Financial Officer, who The Remuneration Committee was aware of the guidance from attended Committee meetings by invitation from the Chairman, Institutional Shareholder Services Inc (ISS) which states that to advise on specific questions raised by the Committee. The payment of transaction-related bonuses is not in line with its Chief Executive Officer and the Chief Financial Officer were not policy. The Remuneration Committee specifically considered present for any discussions that related directly to their own this point, together with the guidance from ISS, at the time the remuneration payment was approved and determined that, in this case, a modest transaction-related bonus of the level approved was In undertaking its responsibilities, the Committee seeks entirely appropriate in recognition of the additional and intensive independent external advice as necessary To this end, for work involved during and immediately following the acquisition the year under review the Committee received advice from FIT of Syntec Holdings Limited, which provided savings in terms of Remuneration Consultants LLP professional fees significantly in excess of the approved amount. 48 Corporate Governance | 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 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 Not applicable Reviewed annually, with any increases taking effect from 1 April each year 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 To provide Executive Directors with ancillary benefits to assist them in carrying out their duties effectively. 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 To provide a material incentive to drive Executive Directors to deliver stretching strategic and financial performance and to grow long-term sustainable Shareholder value. 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 Currently, up to 75% of the annual bonus is based on the achievement of annual targets set for the Group’s adjusted earnings before interest, tax, depreciation and amortisation The remainder is based on 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 Initial Awards • 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 As the performance was below threshold none of the award vested FY22 & FY23 Awards: 50% based on three-year TSR Return targets • 25% vesting for compound growth in TSR of 7 5% pa • 100% vesting for compound growth in TSR of 15% pa or greater Straight line vesting for intermediate performance between threshold and maximum performance 50% based on three-year adjusted Earnings Per Share (EPS) growth targets • 25% vesting for compound growth in EPS of 7 5% pa • 100% vesting for compound growth in EPS of 15% pa or greater Straight line vesting for intermediate performance between threshold and maximum performance 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. Under the PSP, the Initial Awards were made over a fixed number of shares and 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 The performance conditions were not met and the Initial Awards lapsed FY22 and FY23 Awards were granted to the Executive Directors, representing in each case 200% of the CEO’s and CFO’s respective salaries The FY22 and FY23 Awards will vest three years from the respective grant dates, subject to continued service and certain performance targets From FY24 on, further annual awards will be considered per the scheme Rules at up to the normal 120% of salary award level 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. 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 l y r a a S e s a B s t fi e n e B s u n o B l a u n n A l ) ” P S P “ ( n a P e r a h S e c n a m r o f r e P n o i t u b i r t n o c n o i s n e P 50 Corporate Governance | Remuneration Committee Report 51 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 2023 and 2022: Base salary/fees Benefits1 Pension Annual bonus Total 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Awards will normally vest on the later of the expiry of the third Fees for the Chairman, Non-Executive Directors and anniversary of the date of grant of the award and the date that Committee Chairmen are reviewed annually Both the fees for the Committee determines the extent to which the applicable the Chairman and Non-Executive Directors base salaries and performance criteria have been satisfied and provided in normal the Committee Chairman fee for the Audit Committee and circumstances that the participant is still a Director or employee of Remuneration Committee were increased by 4% from 1 April £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 the Company’s Group 2023 (FY22: 4% from 1 April 2022) Executive Directors Chrissie Herbert Nik Philpot2 Non-Executive Directors David Coghlan Christopher Humphrey Guy Millward Total 196 339 38 66 38 189 326 37 64 37 677 653 14 18 - - - 32 14 17 - - - 31 20 - - - - 20 19 - - - - 19 61 96 - - - 55 48 - - - 291 453 38 66 38 277 391 37 64 37 157 103 886 806 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 Incentive outcomes for the Scheme interests awarded in year ended 31 March 2023 the year ended 31 March 2023 Annual bonus in respect of 2022/23 performance The annual bonus for the Executive Directors and Senior Performance Share Plan (“PSP”) (audited) The table below provides details of the Awards made under the PSP During the financial year ended 31 March 2023, awards were made to Senior Management and key individuals of Eckoh UK, Eckoh US and Directors’ shareholdings (audited) The shareholdings of the Directors and their connected persons Syntec Details of awards can be found in note 24 in the Ordinary Shares of the Company against their respective shareholding requirement as at 31 March 2023 Payments to past Directors (audited) In the financial year ended 31 March 2023 and 2022, there were no payments made to past Directors Chairman and Non-Executive Director fees The Chairman and Non-Executive Directors were paid the Nik Philpot1 31 March 2023 Ordinary Shares of 0.25 pence each 31 March 2021 Ordinary Shares of 0.25 pence each 7,051,285 7,051,285 following fees in the financial year ending 31 March 2023: Chrissie Herbert 35,000 35,000 Role Chairman Non-Executive Director Chairman of a Committee 2023 Annual fee £k Christopher Humphrey 525,000 525,000 66 33 5 David Coghlan2 325,000 200,000 1 Nik Philpot's spouse is the beneficial owner of 80,000 shares included above. 2 Members of David Coghlan’s family have a beneficial interest in Scawton Limited, which owns 325,000 shares Management for the year ended 31 March 2023 was based on in the year ended 31 March 2022 and 31 March 2023 to Nik Philpot Directors’ interests in shares in Eckoh’s long-term incentive plans and all-employee plans the achievement of Adjusted Operating Profit before interest, tax, and Chrissie Herbert Performance for these awards is measured depreciation and amortisation (AOP) and personal objectives over three years from Grant Bonus payments were accrued for the Executive Directors at 30% of their base salary (FY22: 16%), compared to a maximum In the ten-year period from the 2017 AGM, the Company may not issue potential of 50%. The profit related element of the bonus was under the PSP and any other employees’ Share plan adopted by the based on a sliding scale formula for achieving AOP in excess Company, interests in shares comprising in aggregate more than 10% of a threshold established at the beginning of the year Bonus of the issued Ordinary Share Capital of the Company payments for staff members were accrued at an average of 5% of salary (FY22: 5%) Executive Director Face value (% of salary) Number of shares awarded Face value3 £ Potential award for minimum performance Performance measures Nik Philpot 25% of face value • 25% vesting for compound growth in TSR of 7 5% pa • 100% vesting for compound growth in TSR of 15% pa 73% 1,190,4431 601,174 50% based on three-year TSR Return targets 67% 1,477,0142 625,220 or greater 73% 749,9851 378,742 50% based on three-year adjusted Earnings Per Share (EPS) growth targets • 25% vesting for compound growth in EPS of 7 5% pa • 100% vesting for compound growth in EPS of 15% pa Chrissie Herbert 25% of face value or greater 67% 930,5272 393,892 Straight line vesting for intermediate performance between threshold and maximum performance 1 FY22 Awards made under the PSP on 17 January 2022 2 FY23 Awards made under the PSP on 20 July 2022 3 Face value has been calculated using the Company’s closing share price on the date of the Initial Award of £0 5125; for the FY22 Award the three-day average immediately prior to the award of £0 505 and for the FY23 Award the three-day average immediately prior to the award of £0 4233 Directors’ share options (audited) The Directors’ interests in share options are shown in the following table: Note At 1 April 2022 (number) Granted in year (number) Lapsed in year (number) Exercised in year (number) At 31 March 2023 (number) Exercise price (pence) Nik Philpot Nik Philpot Nik Philpot Chrissie Herbert Chrissie Herbert Chrissie Herbert Chrissie Herbert 1 1 1 2 1 1 1 3,750,000 1,190,443 - - - 1,477,014 500,000 2,250,000 749,985 - - - - 930,527 (3,750,000) - - - (2,250,000) - - - - - - - - - - 1,190,443 1,477,014 500,000 - 749,985 930,527 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) Earliest date for exercise 15 07 22 17 01 25 Latest date for exercise 22 11 27 17 01 32 20 07 25 20 07 32 0 00 0 00 0 00 47 50 21 06 20 21 06 27 0 00 0 00 0 00 15 07 22 17 01 25 22 11 27 17 01 32 20 07 25 20 07 32 52 Corporate Governance | Remuneration Committee Report 53 Directors’ Report The Directors present the Directors’ Report, together with the audited financial statements for the year ended 31 March 2023 Principal activities, results and likely future developments The principal activities of the Group are providing Customer Engagement Data Security solutions, through a suite of patented products Our products help protect sensitive customer data and can be performed via any customer engagement channel (voice, live chat, advanced speech, digital) and any device the customer chooses In addition, our solutions, which will enable our clients to ‘Engage, Secure and Protect’ their customers, will all be delivered through our multi-vendor and global cloud platforms Further comments on the development of the business are included in the Chairman’s Statement, Chief Executive’s Report and Financial Review on pages 8 to 27 The profits for the year after taxation amounted to £4.6 million (2022: £1.6 million). Long-Term Incentive arrangements for Directors In addition to the PSP described above, the Company operates March 2017 to a total of 34 Senior Management employees an additional long-term share incentive scheme for Directors The Chief Executive Officer was not awarded any share options and Senior Managers (“the 2016 LTIP”) The 2016 LTIP was in the years ended 31 March 2016 and 31 March 2017 implemented following prior discussions with major Shareholders of the Company Under this scheme, the Company may issue a Share options of 500,000 were awarded under the 2016 LTIP to maximum of 2% of the share capital each year for the three years Chrissie Herbert, Chief Financial Officer following her appointment ending 31 March 2019 to the Senior Managers of the business on 2 May 2017 These are disclosed in the above and below tables All options granted under this scheme carry an exercise price Total grants under the 2016 LTIP have been as follows: 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 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 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 2022 and 2023, Chrissie Herbert participates in the UK scheme and the details are shown below: Number of Partnership Shares purchased at 31 March 2022 Number of Matching Shares purchased at 31 March 2022 Dividend Shares1 acquired at 31 March 2022 Total Shares at 31 March 2022 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 2023 Chrissie Herbert 17,292 34,584 1,371 53,247 4,583 9,166 1,056 Dec 21 – June 26 68,052 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 38 to £0 41) 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 External advisors The Committee received independent advice from FIT months’ notice by either party while Chrissie Herbert has a service Remuneration Consultants LLP as the Committee’s appointed contract that is terminable on nine months’ notice by either party remuneration advisor during the financial year ended 31 March 2023 During the year the level of fees paid to remuneration Chairman and Non-Executive Directors The Chairman and Non-Executive Directors do not have service advisors totalled £4k (2022: £11k) contracts but serve under letters of appointment terminable by David Coghlan six months’ notice on either side Chairman Remuneration Committee 14 June 2023 54 Corporate Governance | Directors Report 55 Statutory information Eckoh plc (The Company) is a Public Limited Company Financial instruments The financial risk management objectives and policies of the incorporated in the United Kingdom (Registration number Group and the exposure of the Group to foreign currency risk, 03435822) The Company’s Ordinary Shares are traded on the interest rate risk, and liquidity risk are outlined in note 3 to the Alternative Investment Market of the London Stock Exchange (AIM) consolidated financial statements. The Company has a trading subsidiary, located in the USA, whose operations and results are included in the financial statements of Political contributions Neither the Company nor any of its subsidiaries made any the Company The subsidiary undertakings are listed in note 17 political donations or incurred any political expenditure during Share capital The Company has only Ordinary Shares of 0 25 pence nominal value in issue along with 2,075,117 of shares held in treasury Note Going concern In determining the appropriate basis of preparation of the 22 to the consolidated financial statements summarises the financial statements, the Directors are required to consider the year (2022: £nil) Subsequent events Prior to the 31 March 2023, the Group were in settlement Under company law, Directors must not approve the financial discussions with a third party An agreement was reached with statements unless they are satisfied that they give a true and the third party and a settlement agreement entered into in favour fair view of the state of affairs of the Group and Company and of the Group The income and costs are included in exceptional of the profit or loss of the Group for that period. In preparing the items in Note 9 financial statements, the Directors are required to: 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 • select suitable accounting policies and then apply them consistently; is no relevant audit information of which the Company’s auditors • state whether applicable UK adopted international are unaware; and each Director has taken all the steps that they accounting standards in conformity with the requirements ought to have taken as a Director to make themselves aware of of the Companies Act 2006 have been followed for the any relevant audit information and to establish that the Company’s Group financial statements and United Kingdom Accounting rights of the Ordinary Shares as well as the number issued during whether the Group and Company can continue in operational auditors are aware of that information the year ended 31 March 2023 existence for the foreseeable future Substantial shareholdings As at 31 March 2023, the Company had been advised under the The Board has carried out a going concern review and concluded that the Group and Company have adequate cash to continue Dividends No interim dividend was paid during the year (2022: £nil) Standards, comprising FRS 101, have been followed for the Company financial statements, subject to any material departures disclosed and explained in the financial statements; Disclosure Guidance and Transparency Rules, or had ascertained in operational existence for the foreseeable future The Directors recommend the payment of a final dividend • make judgements and accounting estimates that are from its own analysis, that the following held more than 3% of the of 0 74p (2022: 0 67p) per Ordinary Share amounting to £2 2 reasonable and prudent; and issued capital: The Directors have prepared cash flow forecasts for a period million (2022: £2 0 million) to be paid on 20 October 2023 in excess of 12 months from the date of approving the financial This recommendation will be put to the Shareholders at the • prepare the financial statements on the going concern basis statements As at 31 March 2023, the £5 million of Revolving Credit Annual General Meeting Name of holder No. of Ordinary Shares/voting rights % of issued capital/voting rights Canaccord Genuity Wealth Mgt 48,245,544 Liontrust Asset Mgt Chelverton Asset Mgt Herald Investment Mgt 41,029,706 18,250,000 16,048,723 Blackrock Investment Mgt 12,436,498 16 50 14 03 6 24 5 49 4 25 Facility (RCF) from Barclays Bank is undrawn Bank covenants have been reviewed and are comfortably achieved for the year to 31 March 2023 and are forecast to continue to be so for at least 12 months from the date of approval of the financial statements. that we are billing, demonstrate strong visibility of future revenue In NA, we continue to see the majority of the Secure Payments contracts won and delivered through Eckoh’s cloud platforms, as large enterprises have accelerated their move into the cloud The unless it is inappropriate to presume that the Group and Company will continue in business Independent Auditors The independent auditors, PricewaterhouseCoopers LLP, have The Directors are responsible for safeguarding the assets of the expressed their willingness to continue as the Company’s Group and Company and hence for taking reasonable steps for auditors As outlined in the Audit Committee report on page 44, the prevention and detection of fraud and other irregularities Statement of Directors’ responsibilities The Directors are responsible for preparing the Annual Report the Group’s and Company's transactions and disclose with reasonable accuracy at any time the financial position of the and the financial statements in accordance with applicable Group and Company and enable them to ensure that the The Directors are also responsible for keeping adequate accounting records that are sufficient to show and explain Our key business indicators, total orders, new business orders resolutions proposing their appointment and to authorise their and Annual Recurring Revenue (ARR), which includes all clients remuneration will be proposed at the 2023 AGM Annual General Meeting (AGM) proportion of recurring revenue is higher for contracts delivered law and regulation financial statements comply with the Companies Act 2006. The 2023 AGM will be held at 11:00 on 13 September 2023 through the cloud, which also improves our operational gearing, The notice of the AGM and an explanation of the resolutions the renewal rate for the UK&I and NA businesses to remain to be put to the meeting are set out in the Notice of Meeting unchanged during this period. When preparing the cash flow statements for each financial year. Under that law the Directors of the Company’s website Legislation in the United Kingdom have prepared the Group Financial Statements in accordance governing the preparation and dissemination of financial accompanying this Annual Report The Board fully supports forecasts the Directors have reviewed a number of scenarios, with UK-adopted international accounting standards and statements may differ from legislation in other jurisdictions earnings quality and visibility in the business We anticipate Company law requires the Directors to prepare financial The Directors are responsible for the maintenance and integrity all the resolutions and encourages Shareholders to vote in including a severe but plausible downside scenario which the company financial statements in accordance with United favour of each of them as they intend to in respect of their own assumes no new business In all scenarios the Directors were Kingdom Generally Accepted Accounting Practice (United shareholdings able to conclude that the Group has adequate cash to continue Kingdom Accounting Standards, comprising FRS 101 “Reduced in operational existence for the foreseeable future Disclosure Framework”, and applicable law) Directors The Directors who were in office during the financial year and at the date of approving this report is provided on pages 36 to 37 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 By order of the Board Chrissie Herbert Company Secretary 14 June 2023 56 Corporate Governance | Independent auditors report 57 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 2023 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 UK-adopted international accounting standards as applied in accordance with the provisions 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, including 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 2023 (the “Annual Report”), which comprise: the Consolidated statement of financial position and Company statement of financial position as at 31 March 2023; the Consolidated statement of total comprehensive income, the Consolidated statement of changes in equity and the 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, Eckoh US and Syntec Limited due to their financial significance to the group. In addition, we performed a full scope audit of Eckoh plc ("the Company"). The audit procedures performed accounted for 100% of both the Group's revenue and profit for 2023 as well as net assets as at 31 March 2023. Key audit matters • Revenue recognition (group) • Recoverability of investment in, and the loan to, subsidiary (parent) Materiality • Overall group materiality: £388,000 (2022: £317,800) based on 1% of total revenue. • Overall company materiality: £639,000 (2022: £610,000) based on 1% of total assets (capped for the purpose of the group audit). • Performance materiality: £291,000 (2022: £238,300) (group) and £479,000 (2022: £457,000) (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. 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. Accounting for the acquisition of Syntec, which was a key audit matter last year, is no longer included because no such acquisitions have occurred during the financial year ended 31 March 2023. Otherwise, the key audit matters below are consistent with last year. Key audit matter How our audit addressed the key audit matter Revenue recognition (group) Our procedures included the following: Revenue in the year ended 31 March 2023 was £38,821k (FY22: £31,780k) as set out in the consolidated statement of total comprehensive income. The approach to revenue recognition as set out under IFRS 15 is complex and can be judgemental especially where contracts with customers have variable considerations. Due to its expected impact on the Group, we deem the contract revenue recognition as a key audit matter. Recoverability of investment in, and the loan to, subsidiary (parent) The company held an investment in subsidiary undertakings and other investments of £51,528k (2022: £51,629k) as disclosed in Note 16 and had amounts receivable from subsidiary undertakings of £4,297k (2022: £4,034k) as disclosed in Note 19. The assessment of the recoverability of these assets required the application of management judgement, particularly in determining whether any impairment indicators have arisen that trigger the need for a formal impairment assessment and in assessing whether the carrying value of each investment and amounts owed by group undertakings are recoverable. As changes to these judgements and estimates could have a material impact on the company financial statements, we consider this to be a key audit matter. • 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 and 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. • We also performed testing on certain unusual revenue journal entries Based on the procedures performed, we noted no material uncorrected issues. Our procedures included the following: • Evaluating management’s assessment of whether any indicators of impairment existed. • Assessing the recoverable value by reference to the net assets of the underlying subsidiaries and amounts owed by group undertakings with reference to the Directors' intentions for the settlement of group-wide intercompany balances. • Verifying that Eckoh plc's market capitalisation is higher than the total of the company's non-current and current assets. Based on the procedures performed, we noted no material issues from our work. 58 Corporate Governance | Independent auditors report 59 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 the United Kingdom. The audit engagement team is aligned to Eckoh plc's geographical organisation and largely reflects the management structure. As Eckoh plc's corporate headquarters are based in the UK, the Group audit engagement team is also based in the UK with no support required from any auditors from other territories. The largest trading entity is Eckoh UK. This entity, along with Eckoh US, Syntec Limited and the Company were the only components requiring an audit of their complete financial information for the purposes of the consolidated Group audit. In total the audit work performed accounted for 100% of both consolidated revenue, profit and net assets. The impact of climate risk on our audit As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the group’s and company’s financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the group’s and company’s financial statements. 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 £388,000 (2022: £317,800). £639,000 (2022: £610,000). How we determined it 1% of total revenue. Rationale for benchmark applied We have applied this benchmark as a generally accepted auditing practice for Group’s at the growth stage and based on what management deems to be a key performance indicator. 1% of total assets (capped at for the purpose of the group audit). We believe that total assets is the primary measure used by the shareholders in assessing the performance of the company, and is a generally accepted benchmark. The value is capped for the purpose of the group audit. 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 £200,000 to £340,000. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. 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% (2022: 75%) of overall materiality, amounting to £291,000 (2022: £238,300) for the group financial statements and £479,000 (2022: £457,000) 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 £19,400 (group audit) (2022: £15,800) and £31,900 (company audit) (2022: £30,500) 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: • We reviewed the Directors’ model supporting their going concern assumption. We discussed with management the assumptions applied in the going concern review so we could understand and challenge the rationale for those assumptions, using our knowledge of the business. We tested the model’s mathematical accuracy and considered the reasonableness of the revenue and cost assumptions made and the available headroom throughout a period of at least twelve months from the date of approval of the financial statements; and • We reviewed management’s sensitivity scenarios including their severe but plausible downside. We considered potential mitigating actions available to the Group that are achievable and within management’s control. We then assessed the availability of liquidity under the different scenarios and the associated covenant tests applicable. 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. 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. 60 Corporate Governance | Independent auditors report 61 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 2023 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 AIM regulations, Payment Card Industry Data Security Standards (PCI DSS), General Data Protection Regulation (GDPR), and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the requirements of the Companies Act 2006 and UK tax regulations. 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, 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 and breaches of laws and regulations; Identifying and testing journal entries, in particular certain journal entries posted with unusual account combinations (for example credit to revenue with a debit entry to an unexpected account) or journals posted by senior management; and 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. 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 14 June 2023 62 Corporate Governance | Independent auditors report 63 Financial Statements Consolidated Statement of Total Comprehensive Income 64 Consolidated Statement of Financial Position 65 Company Statement of Financial Position 66 Consolidated Statement of Changes in Equity 67 Company Statement of Changes in Equity 68 Consolidated Statement of Cash Flows 69 Notes to the Financial Statements 70 Shareholder Information 102 Financial Statements |64 Consolidated and Company Statements 65 Consolidated statement of total comprehensive income Consolidated statement of financial position for the year ended 31 March 2023 as at 31 March 2023 Notes 2023 £’000 2022 £’000 Notes 2023 £’000 2022 £’000 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 Exceptional restructuring costs Exceptional legal fees and settlement agreements Costs relating to acquisition Profit from operating activities Finance charges Finance income Profit before taxation Taxation Profit for the financial year Other comprehensive income Items that will be reclassified subsequently to profit or loss: Foreign currency translation differences - foreign operations Other comprehensive (expense) / income for the year, net of income tax Total comprehensive income for the year attributable to the equity holders of the Company Profit per share Basic earnings per 0.25p share Diluted earnings per 0.25p share 4 4 13 24 8 9 5 5 10 10 11 12 12 38,821 31,780 (7,578) (6,357) 31,243 25,423 (26,223) (23,037) 5,020 7,736 (2,473) (40) - (203) - 5,020 (53) 53 5,020 (383) 4,637 (389) (389) 4,248 2,386 5,229 (751) (241) (866) - (985) 2,386 (74) 6 2,318 (743) 1,575 139 139 1,714 2023 2022 pence pence 1.58 1.55 0.59 0.51 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 Lease liabilities Non-current liabilities 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 13 14 15 11 18 19 20 21 15 15 11 22 22 37,500 39,664 4,181 995 129 4,189 1,516 1,789 42,805 47,158 254 11,778 5,740 17,772 268 12,283 2,840 15,391 60,577 62,549 (16,190) (18,286) (482) (609) (16,672) (18,895) (569) (928) (1,528) (2,983) (2,097) (3,911) 41,808 39,743 732 732 22,180 22,180 198 2,697 732 15,269 198 2,697 1,121 12,815 41,808 39,743 The financial statements were approved by the Board of Directors on 14 June 2023 and signed on its behalf by: C Herbert Chief Financial Officer Company Registration Number 3435822 Financial Statements | 66 Consolidated and Company Statements 67 Company statement of financial position Consolidated statement of changes in equity as at 31 March 2023 for the year ended 31 March 2023 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 Net assets Equity Called up share capital Share premium account Capital redemption reserve Merger reserve Retained earnings Total equity Notes 2023 £’000 2022 £’000 14 16 19 19 20 2,824 51,528 2 4,297 58,651 34 5,222 5,256 2,866 51,629 2 4,034 58,531 93 2,383 2,476 63,907 61,007 21 (31,555) (26,896) (31,555) (26,896) 32,352 34,111 22 22 732 732 22,180 22,180 198 2,697 6,545 32,352 198 2,697 8,304 34,111 The Company has taken advantage of the exemption under Section 408 of the Companies Act 2006 from presenting its own income statement in these financial statements. The Company’s profit after tax for the year was £424,000 (2022: £1,120,000). The financial statements were approved by the Board of Directors on 14 June 2023 and signed on its behalf by: C Herbert Chief Financial Officer Company Registration Number 3435822 Called up share capital Share premium account Capital redemption reserve Merger reserve Currency reserve Retained earnings Total Shareholders’ equity Balance at 1 April 2022 732 22,180 198 2,697 1,121 12,815 £’000 £’000 £’000 £’000 £’000 £’000 Total comprehensive income for the year 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 Share based payment charge Transactions with owners recorded directly in equity - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,637 (389) (389) - - - - - - 4,637 (1,959) (2) (120) (102) (2,183) Balance at 31 March 2023 732 22,180 198 2,697 732 15,269 £’000 39,743 4,637 (389) 4,248 (1,959) (2) (120) (102) (2,183) 41,808 Called up share capital Share premium account Capital redemption reserve Merger reserve Currency reserve Retained earnings Total Shareholders’ equity Balance at 1 April 2021 638 2,663 198 2,697 982 13,239 £’000 £’000 £’000 £’000 £’000 £’000 Total comprehensive income for the year 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 Purchase of own shares Shares purchased for share ownership plan Shares issued under the share options schemes Share based payment charge Shares issued as part of acquisition Deferred tax on share options Transactions with owners recorded directly in equity Balance at 31 March 2022 - - - - - - - 3 - 91 - 94 732 - - - - - - - 226 - 19,291 - 19,517 22,180 £’000 20,417 1,575 139 1,714 1,575 - 1,575 (1,559) (1,559) (75) (126) (111) - 464 - (592) (1,999) (75) (126) (111) 229 464 19,382 (592) 17,612 - - - - - - - - - - - - - - - - - - - - - - - - - 139 139 - - - - - - - - - 198 2,697 1,121 12,815 39,743 Financial Statements | 68 Consolidated and Company Statements 69 Company statement of changes in equity Consolidated statement of cash flows for the year ended 31 March 2023 for the year ended 31 March 2023 Called up share capital Share premium account Capital redemption reserve Merger reserve Retained earnings Total equity Notes 2023 £’000 2022 £’000 Balance at 1 April 2022 732 22,180 198 2,697 8,304 £’000 £’000 £’000 £’000 £’000 £’000 34,111 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 Transactions with owners recorded directly in equity - - - - - - - - - - - - - - - - - - - - - - - - Balance at 31 March 2023 732 22,180 198 2,697 6,545 424 424 (1,959) (1,959) (2) (120) (102) (2,183) (2) (120) (102) (2,183) 32,352 Called up share capital Share premium account Capital redemption reserve Merger reserve Retained earnings Total Shareholders’ equity Balance at 1 April 2021 638 2,663 198 2,697 8,576 £’000 £’000 £’000 £’000 £’000 £’000 14,772 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 purchased for share ownership plan Shares issued under the share option schemes Share based payment charge Shares issued as part of acquisition Transactions with owners recorded directly in equity Balance at 31 March 2022 - - - - - 3 - 91 94 732 - - - - - 226 - 19,291 19,517 - - - - - - - - - - - - - - - - - - (75) (126) (111) - 479 - (1,392) 22,180 198 2,697 8,304 1,120 1,120 (1,559) (1,559) Cash flows from operating activities Cash generated from operations Tax (paid) / received 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 Business acquisition Interest received Net cash used in investing activities Cash flows from financing activities Dividends paid Repayment of borrowings Principal elements of lease payments Purchase of own shares Shares purchased for share ownership plan Issue of shares net of issue costs (75) (126) (111) 229 479 19,382 18,219 34,111 Cash outflow from acquiring shares from the Employee Benefit Trust Net cash (used in) / generated from financing activities Increase / (decrease) 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 The notes on pages 70 to 101 form an integral part of these financial statements. 27 10 10 14 13 - 10 15 22 20 20 6,956 (178) - (53) 6,725 (613) (570) - 53 3,362 88 (23) (51) 3,376 (308) (375) (22,500) 6 (1,130) (23,177) (1,959) (1,559) - (564) - (120) - - (975) (500) (126) (110) 13,311 (75) (2,643) 9,966 2,952 2,840 (52) 5,740 (9,835) 12,706 (31) 2,840 Financial Statements | 70 Notes to the Financial Statements 71 Notes to the financial statements for the year ended 31 March 2023 General Information New accounting standards effective for the Group and The accounting policies set out below have, unless otherwise Company in these financial statements: 2. Summary of principal accounting policies losses of £7.2 million due to the statutory entity the losses are held. It is possible that the deferred tax assets actually stated, been applied consistently to all periods presented in No new or revised accounting standards were adopted in Critical accounting estimates and judgements recoverable may differ from the amounts recognised if actual these consolidated financial statements. the year. The preparation of financial statements in accordance with IFRS taxable profits and capital expenditure differ from estimates. requires the use of certain critical accounting estimates. It also Eckoh plc is a public Company limited by shares and is There are a number of other amendments and clarifications requires management to exercise judgement in the process Critical accounting judgements incorporated in the United Kingdom and registered in England to IFRS effective in future years, which are not expected to of applying the Group’s and Company’s accounting policies. Contract revenue under the Companies Act 2006. The address of the Company’s significantly impact the Group’s consolidated results or Estimates and judgements are continually evaluated and are Following the acquisition of Syntec Holdings Limited in registered office is Telford House, Corner Hall, Hemel financial position. Hempstead, HP3 9HN. Going concern based on historical experience and reasonable expectations of December 2021, IFRS 15: Revenue from Contracts with future events. Actual results may differ from those estimates. Customers was implemented. As Syntec do not have a system for capturing implementation costs on a client-by-client Eckoh plc (the “Company”) is a global provider of Customer In determining the appropriate basis of preparation of the Critical accounting estimates and assumptions basis, management have applied judgement in estimating Engagement Data Security Solutions. financial statements, the Directors are required to consider The accounting policies cover areas that are considered by the that the implementation costs per contract should be 20% whether the Group and Company can continue in operational Directors to require estimates and assumptions which have a based on historical performance of the Eckoh NA business The Group financial statements consolidate its subsidiaries existence for the foreseeable future. significant risk of causing a material adjustment to the carrying as well as Management’s views on the efficiency of the (together referred to as the “Group”). The Company’s financial amounts of assets and liabilities within the next financial year. Syntec implementation process. During FY23 a process was statements present information about the Company as a The Board has carried out a going concern review and The policies, and the related notes to the financial statements, implemented to novate all client contracts from Syntec Limited separate entity and not about its Group. concluded that the Group and Company have adequate cash are found below: to continue in operational existence for the foreseeable future. The Company has net current liabilities, as balances are owed Impairment of investments in subsidiaries (Company only) project by project within the respective Eckoh business. to either Eckoh Inc or Eckoh UK Limited. Once the client contracts have been novated implementation costs will be captured 1. Basis of preparation to subsidiary companies. The Board can confirm the subsidiary The Company has an investment in subsidiaries balance of companies will not request repayment within 12 months of £51.5million (2022: £51.6million) and intercompany receivables Deferred taxation The Group’s financial statements have been prepared and approval of the financial statements. of £4.3million (2022: £4.0million). The company assess the Deferred tax liabilities are recognised for all taxable temporary approved by the Directors in accordance with UK adopted carrying values of its investments in subsidiaries and the differences but, where there exist deductible temporary international accounting standards in conformity with the The Directors have prepared cash flow forecasts for a period recoverability of intercompany receivables at the end of differences, judgement is required as to whether a deferred tax requirements of the Companies Act 2006 and the Company’s in excess of 12 months from the date of approving the financial each reporting period. Where indicators of impairment are asset should be recognised based on the availability of future financial statements have been prepared in accordance with statements. As at 31 March 2023, the £5 million of Revolving identified the estimation of the recoverable values requires taxable profits. Judgement is also required regarding the rate United Kingdom Generally Accepted Accounting Practice Credit Facility (RCF) from Barclays Bank is undrawn. Bank an estimation of future cash flows from each subsidiary and at which deferred tax is recognised, following the substantial (United Kingdom Accounting Standards, comprising FRS101 covenants have been reviewed and are comfortably achieved selection of appropriate discount rates in order to determine enactment of Finance Bill 2021, resulting in an increase in the UK “Reduced Disclosure Framework”, and applicable law). The for the year to 31 March 2023 and are forecast to continue to the net present value of the cash flows. tax rate to 25% from 1 April 2023. As at 31 March 2022, UK deferred Company has also applied the exemptions available under be so for at least 12 months from the date of approval of the FRS 101 in respect of the following disclosures: financial statements. Share-based payments tax assets and liabilities expected to unwind prior to 1 April 2023 were recognised at 19%, with those expected to unwind after 1 • 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. 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. Our key business indicators, total orders, new business orders and Annual Recurring Revenue (ARR), which includes all clients that we are billing, demonstrate strong visibility of future revenue. In NA, we continue to see the majority of the Security Solution contracts won and delivered through Eckoh’s cloud platforms, as large enterprises have accelerated their move into the cloud. The proportion of recurring revenue is higher for contracts delivered through the cloud, which also improves The fair value of share-based payments is estimated using the April 2023 being recognised at 25%. At 31 March 2023, the Group methods detailed in note 24 and using certain assumptions. recognised deferred tax assets of £1.5 million and deferred tax The Black Scholes and Monte Carlo valuation models have been liabilities of £2.8 million. Included within the deferred tax asset used in determining the fair value of share-based payments. of £1.5 million is £1.1 million in respect of tax losses and tax The key assumptions around volatility, expected life and risk- credits and included within the deferred tax liabilities of £2.8 free rate of return are based, respectively, on historic volatility million is £2.3 million in respect of the intangible asset from the over a similar previous period, management’s estimate of acquisition of Syntec. the average expected period to exercise, and the yield on zero-coupon UK government bonds of a term consistent with Basis of consolidation our operational gearing, earnings quality and visibility in the assumed option life. (a) Business combinations business. We anticipate the renewal rate for the NA and UK&I businesses to remain unchanged during this period. When Deferred taxation Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control preparing the cash flow forecasts the Directors have reviewed a number of scenarios including a severe but plausible downside scenario which assumes no 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. The key estimates made for deferred taxation are on the future is transferred to the Group. Control is the power to govern the profitability of the business and the Company the trading financial and operating policies of an entity so as to obtain will reside in or capital expenditure to determine whether benefits from its activities. In assessing control, the Group deferred tax assets should be recognised. Deferred tax assets takes into consideration potential voting rights that are amounting to £9.4 million were not recognised in respect currently exercisable. of trading and non-trading losses of £2.2 million and capital Financial Statements |72 Notes to the Financial Statements 73 The Group measures goodwill at the acquisition date as: is accounted for as an equity-accounted investee or as an amortised on a straight-line basis over the estimated useful The Company holds an investment property, which comprises • the fair value of the consideration transferred; plus available-for-sale financial asset depending on the level of life of the asset, which is generally assumed to be three years. of freehold land and office buildings that are held for capital • the recognised amount of any non-controlling interests in influence retained. the acquiree; plus Amortisation is charged to administrative expenses in the appreciation. • if the business combination is achieved in stages, the fair (d) Transactions eliminated on consolidation income statement. 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 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 related to the settlement of pre-existing relationships. Such of impairment. 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. Intangible assets (a) Goodwill Goodwill represents the excess of the fair value of the consideration paid over the fair value attributable to the separately identifiable net assets acquired and is capitalised Any contingent consideration payable is measured at fair on the Group balance sheet. 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 Goodwill is not amortised and is reviewed for impairment at least annually. Any impairment is recognised in the period in in the fair value of the contingent consideration are recognised which it is identified. in profit or loss. If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service. (b) Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the Consolidated financial statements from the date that control commences (b) Acquired intangible assets Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date, which is regarded as their cost. Where necessary the fair value of assets at acquisition and their estimated useful lives are based on independent valuation reports. Acquired intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over estimated lives, on the following bases: Customer relationships – 5 years Intellectual property – 5 years Trade name – 3 years until the date that control ceases. (c) Research and development (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 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 The Investment Property was initially recognised at cost and subsequently carried at cost less accumulated depreciation The carrying value of intangible assets is assessed at the end and accumulated impairment losses. of each financial year for impairment. Investments in subsidiaries Impairment of non-financial assets Investments in subsidiaries are held at cost less accumulated An impairment loss is recognised in the income statement for impairment losses. the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of Inventories the asset’s fair value less costs to sell, and the value-in-use Inventories are valued at the lower of cost and net realisable based on an internal discounted cash flow evaluation. For value. The cost of finished goods and work in progress the purpose of assessing impairment, assets are grouped at comprises design costs, direct labour and other direct costs. the lowest levels for which there are separately identifiable Net realisable value is the estimated selling price in the cash flows. All assets are subsequently reassessed for ordinary course of business less applicable selling expenses. indications that an impairment loss previously recognised may no longer exist. Financial assets Trade and other receivables Property, plant and equipment Trade and other receivables do not carry interest and are stated Property, plant and equipment is stated at cost or fair at their fair value as reduced by allowances for estimated value at acquisition, net of depreciation and any provisions irrecoverable amounts. The Group applies the IFRS 9 simplified for impairment. Cost includes expenditure that is directly approach to measure expected credit losses which uses a attributable to the acquisition of the items. lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have Subsequent costs are included in the asset’s carrying amount been grouped based on shared credit risk characteristics and or recognised as a separate asset, as appropriate, only when the number of days past due. Trade receivables are written it is probable that future economic benefits associated with off when there is no reasonable expectation of recovery. the item will flow to the Group and the cost of the item can Indicators that there is no reasonable expectation of recovery be measured reliably. All other repairs and maintenance are include, amongst others, the failure of a debtor to engage charged to the income statement during the financial period in in a repayment plan with the Group and a failure to make which they are incurred. contractual payments for an extended period. The gain or loss arising on the disposal of an asset is determined Cash and cash equivalents by comparing the disposal proceeds and the carrying amount Cash and cash equivalents in the statement of financial of the asset and is recognised in the income statement. position comprise cash at bank and in hand, short-term Depreciation is calculated using the straight-line method to deposits and other short-term liquid investments. allocate the cost of each asset to its estimated residual value over its expected useful life, as follows: In the cash flow statement, cash and cash equivalents comprise cash and cash equivalents as defined above. Credit and liquidity risk management is described in note 3. Land – is not depreciated Buildings – 25 years Fixtures and equipment – between 3 and 6 years Leasehold improvements – over the term of the lease Material residual values and useful lives are reviewed, and adjusted if appropriate, at least annually. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Financial Statements |74 Notes to the Financial Statements 75 Equity Leases Equity comprises the following: Following the implementation of IFRS 16 Leases, from 1 April • 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. 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 • Merger reserve represents consideration in excess of the straight-line basis. nominal value of shares issued on certain acquisitions. • Currency reserve represents exchange differences arising on consolidation of Group companies with a functional currency different to the presentation currency. • Retained earnings represent retained profits less losses and distributions. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional 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 currency at the foreign exchange rate ruling at that date. restoration costs. 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 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 assets and liabilities that are measured in terms of historical cost the lease. 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. 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. 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. Employee Benefits (a) Pensions market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on The Group operates a defined contribution scheme to the the number of awards that meet the related service and non- benefit of its employees. Contributions payable are charged to market performance conditions at the vesting date. For share- income in the year they are payable. based payment awards with non-vesting conditions, the grant (b) Bonus schemes date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences The Group recognises a liability and an expense for bonuses between expected and actual outcomes. payable to i) employees based on achievement of a series of financial targets; and ii) Senior Management and Executive The fair value of the amount payable to employees in respect Directors based on achievement of a series of financial and of share appreciation rights, which are settled in cash, is non-financial targets. (c) Share-based payments 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 From time to time on a discretionary basis, the Board of each reporting date and at settlement date. Any changes Directors award high-performing employee’s bonuses in the in the fair value of the liability are recognised as personnel form of share options. The options are subject to a three- expenses in profit or loss. year vesting period and their fair value is recognised as an employee benefits expense with a corresponding increase in (d) Employee Share Ownership Plan equity over the vesting period. The fair value of share options The Group’s Employee Share Ownership Plan (‘ESOP’) is a granted is recognised within staff costs with a corresponding separately administered trust. The assets of the ESOP comprise increase in equity. The proceeds received are credited to share shares in the Company and cash. The assets, liabilities, income capital and share premium when the options are exercised. and costs of the ESOP have been included in the financial The fair value of share options was measured using the purpose entities’ and IAS 32, ‘Financial Instruments: Disclosure Black Scholes and Monte Carlo valuation models, taking into and Presentation’. The shares in the Company are included at account the terms and conditions upon which the grants were cost to the ESOP and deducted from Shareholders’ funds. When made. The amount recognised as an expense is adjusted to calculating earnings per share these shares are treated as if statements in accordance with SIC 12, ‘Consolidation - Special reflect the actual number of share options that vest except they were cancelled. where forfeiture is only due to share prices not achieving the threshold of vesting. (e) US share save scheme The Eckoh plc 2019 US Sharesave Scheme (the “2019 Sharesave IFRS 2 has been applied to all options granted after 7 November Scheme”), was approved by Shareholders at the 2019 AGM 2002 that have not vested on or before 1 April 2006. A deferred and introduced to employees in December 2019. Employees tax adjustment is also made relating to the intrinsic value of the are invited to enrol in the 2019 Sharesave Scheme annually share options at the balance sheet date (see separate policy). and are granted an option to purchase up to a number of Ordinary Shares at the end of the offering period. The number As a result of the grant of share options since 6 April 1999 the is determined by dividing the total payroll deductions credited Company will be obliged to pay employer’s National Insurance to the employee’s account as of the exercise date by the contributions on the difference between the market value of option price. The option price is equal to the closing price of the underlying shares and their exercise price when the options the Ordinary Shares on the London Stock Exchange on either are exercised. A provision is made for this liability using the (i) the date the offering period begins, or (ii) the date of value of the Company’s shares at the balance sheet date and exercise, whichever results in the lowest price per share. Any is spread over the vesting period of the share options. shares acquired will be held in accordance with the terms of The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, Government Grants the Scheme. with a corresponding increase to equity, over the period that The Group received government assistance as a result of the employees unconditionally become entitled to the awards. the COVID-19 pandemic in the form of contributions towards The amount recognised as an expense is adjusted to reflect employee costs. For Government assistance which meets the number of awards for which the related service and non- the definition of a Government grant, under IAS 20 the Group Financial Statements |76 Notes to the Financial Statements 77 applies the income approach to account for the grants In addition to the initial set-up costs, there are on-going Deferred tax on temporary differences associated with shares Interest rate risk received. As such, the grant is recognised in the Income licence fees as well as support and maintenance and running in subsidiaries is not provided if reversal of these temporary The Group principally finances its operations through Statement as a reduction of the related costs incurred. In the costs of the service. In the NA business and the Syntec business differences can be controlled by the Group and it is probable Shareholders’ equity and working capital. The Group and period ending 31 March 2023, grant income of £nil, (FY22: £12k) where the Secure Payments business is contracted on an Opex that reversal will not occur in the foreseeable future. Company has exposure to interest rate fluctuations on the relating to claims made for Contact Centre Agents, who are style basis the monthly licence fee charged to the client is loan, its cash and short-term deposits. employed on Zero-hour contracts, was received. There are no recognised in the month it relates to. In the UK&I, clients have Changes in deferred tax assets or liabilities are recognised as unfulfilled conditions or other contingencies attached to this a variety of commercial models including fixed licence fees a component of tax expense in the income statement, except The Group has adopted a sensitivity analysis that measures government assistance. and transactional arrangements, the revenue, whether it is the fixed monthly fee or based on transactions is recognised in the Exceptional items month it relates to. If the Group incurs irregular or one-off costs for example due to the closure of an activity, following the acquisition of (ii) Coral product a business or for one-off legal costs and settlement income Revenue arises from the sale of licences, historically on a these costs and income are disclosed in the Income Statement perpetuity basis and in more recent years on an Opex/ SaaS as exceptional items and excluded from adjusted earnings style basis; implementation fees and on-going support and before interest, tax, depreciation and amortisation (Adjusted maintenance. Under IFRS 15, each component is defined as EBITDA) and excluded from Adjusted Operating Profit. Adjusted a performance obligation. Revenue is recognised for sales where they relate to items that are charged or credited directly changes in the fair value of financial instruments and to equity in which case the related deferred tax is also charged interest-bearing loans and any resultant impact on the or credited directly to equity. income statement of an increase or decrease of 2% in market interest rates. 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. 2% decrease in interest rates £’000 2% increase in interest rates £’000 (35) 35 Impact on financial interest in the income statement: (loss)/gain measures are used by management in order to eliminate of licences when they are delivered to the client; revenue A financial liability is derecognised only when the obligation is factors which distort year-on-year comparisons. from implementation fees is recognised by estimating a discharged, is cancelled or it expires. Revenue recognition percentage of completion based on the direct labour costs incurred to date as a proportion of the total estimated costs The Group recognises revenue in accordance with IFRS 15: required to complete the implementation; and revenue for on- Revenue from Contracts with Customers (“IFRS 15”). IFRS 15 going support and maintenance is recognised each month as provides a single, principles-based five-step model to be the service is provided. applied to all sales contracts, based on the transfer of control of goods and services to customers. Revenue represents the fair (iii) Telephony services 3. Financial risk management Foreign currency risk The Group’s principal exposure to exchange rate fluctuations arises on the translation of overseas net assets, profits and The operations of the Group expose it to a variety of financial losses into the presentation currency. This risk is managed risks: liquidity risk, interest rate risk, foreign currency risk and by taking differences that arise on the retranslation of the credit risk. Policies for managing these risks are set by the net overseas investments to the currency reserve. Foreign value of the sale of goods and services and after eliminating Syntec is Ofcom regulated and has a small number of Board following recommendations from the Chief Financial currency risk on cash balances is monitored through cash sales within the Group and excluding value added tax or contracts with clients to provide telecommunication services. Officer. All financial risks are managed centrally. The policy for flow forecasting and currency is held in foreign currency overseas sales taxes. The following summarises the method of These revenues are based on transactional volume and are each of the above risks is described in more detail below. bank accounts only to the extent that it is required for recognising revenue for the solutions and products delivered recognised in the month it relates to. working capital purposes. No sensitivity analysis is provided in by the Group. Taxation The Group’s financial instruments comprise cash, short- respect of foreign currency risk as due to the Group’s working term deposits and various items, such as receivables and capital management practices the risk is considered to be (i) Secure Payment solutions and hosted services Current tax is the tax currently payable based on taxable profit payables that arise directly from its operations. It is, and has moderate. The risk is further explained in the principal risks and Due to the unique nature of the Secure Payments solution for the year. and clients’ reliance on Eckoh’s and Syntec’s PCI-DSS Level been throughout the year under review, the Group’s policy uncertainties on pages 20 to 23. that no trading in financial instruments shall be undertaken. 1 compliance, the delivery and on-going support and Deferred taxation is provided in full, using the liability method, Similarly, the Group did not undertake any financial hedging Capital management maintenance of the Secure Payments solution under IFRS 15 on temporary differences arising between the tax bases arrangements during the year under review. The year-end The Board’s policy is to maintain a strong capital base with is one single performance obligation. Therefore, revenue for of assets and liabilities and their carrying amounts in the position reflects these policies and there have been no the joint objectives to maintain investor, creditor and market implementation fees for our hosted Secure Payments solution consolidated financial statements. Deferred tax is not provided changes in policies or risks since the year-end. confidence and to sustain future development of the business. and our hosted Customer Contact services; and revenue if it arises from initial recognition of an asset or liability in a for hardware and implementation fees for our hosted or transaction, other than a business combination, that at the Liquidity risk Capital comprises all components of equity (i.e. share capital, onsite Secure Payments solution are typically received at the time of the transaction affects neither accounting nor taxable Through detailed cash flow forecasting and capital expenditure capital redemption reserve, share premium and retained beginning of the contract and held on the balance sheet as profit or loss. Deferred tax is calculated at tax rates that are planning, the Group monitors working capital and capital earnings). The Board manages the capital structure and makes contract liabilities. This revenue is recognised evenly over the expected to apply to their respective period of realisation, expenditure requirements and through the use of rolling adjustments as required in the light of changes in economic period of the contract from the point of delivery of the solution provided they are enacted or substantively enacted at the short-term investments ensures that cash is available to conditions. The Board may return capital to Shareholders, issue to the client. Costs directly attributable to the delivery of the balance sheet date. hardware, the implementation fees and the sales commission costs are deferred onto the balance sheet and held as contract Deferred tax assets are recognised to the extent that it is assets and released over the contract term from the point of probable that future taxable profit will be available against delivery of the solution to the client. which the temporary differences can be utilised. meet obligations as they fall due. Cash at bank is pooled and new shares or sell assets in order to maintain capital. invested in overnight money market accounts and deposits. Credit risk management is described in note 19. Financial Statements | 78 Notes to the Financial Statements 79 Financial assets – amortised costs Other interest-bearing loans and borrowings Dividends Current financial assets 2023 £’000 2022 £’000 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 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 Trade receivables (note 19) 5,151 4,860 about the Group’s exposure to interest rate and foreign statements in the period in which they are approved and paid. Operating profit 2023 £’000 2022 £’000 - - - - 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. Following the acquisition of Amortisation of acquired intangible assets Expenses relating to share option schemes Exceptional restructuring costs Exceptional legal costs and settlement agreements Costs relating to business combinations Year ended 31 March 2023 £’000 Year ended 31 March 2022 £’000 5,020 2,473 40 - 203 - 2,386 751 241 866 - 985 Other receivables (note 19) Accrued income (note 19) 670 2,364 852 1,501 Cash & cash equivalents (note 20) 5,740 2,840 Total financial assets 13,925 10,053 currency risk, see above. Non-current financial liabilities Secured bank loans Financial liabilities – amortised costs Current financial liabilities Trade payables (note 21) Other payables (note 21) 2023 £’000 2022 £’000 1,271 289 899 508 Current portion of secured bank loans Terms and debt repayment schedule As a result of the acquisition of Syntec Holdings Limited in December 2021, the Group entered into new banking Accrued liabilities (note 21) 3,726 4,416 arrangements with Barclays Bank for a £5.0 million Revolving Lease liabilities (note 15) 1,051 1,537 credit Facility (RCF) and a £5.0 million overdraft facility. The RCF is for a term of three years, interest is 2.5% above the Bank of Total financial liabilities 6,337 7,360 England base rate and there is a non-utilisation fee of 0.88%. Maturity The overdraft is reviewed annually by the bank, has an interest rate of 1.75% above the Bank of England base rate. In November Syntec Holdings Limited on 22nd December 2021, and as part Adjusted operating profit1 7,736 5,229 of the integration strategy of the acquired business, we have during the financial year ended 31st March 2023, revised our key segments. The key segments reviewed at Board level are North America (NA), UK & Ireland (UK&I) and Rest of World Amortisation of other intangible assets Depreciation of owned assets (ROW). Prior to the acquisition of Syntec in December 2021, the Depreciation of leased assets 398 643 617 392 680 495 segments used for reporting were Eckoh US and Eckoh UK, in last year’s annual report for the 3 month period Syntec was owned by the Group, Syntec was disclosed separately. Syntec Adjusted EBITDA2 9,394 6,796 had clients based in the US, Canada, UK, Ireland, Europe and 1. Adjusted operating profit is the profit from operating activities adjusted for expenses relating The table below analysis the Group’s financial liabilities into 22, the overdraft facility was cancelled. Australia. relevant maturity groupings on the remaining period at the balance sheet date to the contractual maturity date. As at 31 March 2023 there was no debt drawn under the RCF. Alternative performance measures (APMs) to share option schemes, amortisation of acquired intangible assets, exceptional items and costs relating to business combinations. 2. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is the profit from operating activities adjusted for depreciation, amortisation, expenses relating to share The amounts disclosed in the table are the contractual undiscounted cash flows: The collateral to these loans is the land and buildings carrying Maturity of financial liabilities 2023 <1yr 1 – 2yrs 2 – 5 yrs Trade and other payables1 Lease liabilities Total financial liabilities 5,143 482 5,625 - 266 266 143 303 446 Maturity of financial liabilities 2022 <1yr 1 – 2yrs 2 – 5 yrs 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 Trade and other payables1 Lease liabilities Total financial liabilities 1. Excluding deferred revenue 5,823 609 6,432 - 443 443 - dilutive Ordinary Shares. 485 485 The Group presents adjusted basic and diluted earnings per share (“Adjusted EPS”) data for its Ordinary Shares. Adjusted EPS is defined as profit before tax, expenses relating to share option schemes, amortisation of acquired intangible assets, restructuring costs and costs relating to business combinations with tax applied at the standard corporation tax rate. The Directors consider that disclosing alternative performance option schemes, exceptional items and costs relating to business combinations. 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. Financial Statements | 80 Notes to the Financial Statements 81 4. Segment analysis Following the acquisition of Syntec Holdings Limited on 22 December 2021, and as part of the integration strategy of the acquired business, we have during the financial year ended 31 March 2023, revised our key segments. The key segments reviewed at Board level are North America (NA), UK & Ireland (UK&I) and Rest of World (ROW). 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 and other receivables Prepayments and contract assets Segment liabilities Trade and other payables Accruals and contract liabilities 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 NA £’000 17,513 13,752 UK&I £’000 20,573 16,780 ROW £’000 Total 2023 £’000 735 711 38,821 31,243 (9,350) (16,475) (398) (26,223) 4,402 4,552 (150) 4,402 4,371 2,864 2,503 344 7,099 519 - - 189 162 - 305 2,871 (2,566) 305 337 2,784 3,259 2,147 6,156 94 77 570 444 443 2,871 313 313 - 313 312 173 195 8 384 - - - 10 12 - 5,020 7,736 (2,716) 5,020 5,020 5,821 5,957 2,499 13,639 613 77 570 643 617 2,871 1. Other expenses comprise expenses relating to share option schemes, amortisation of acquired intangible assets, exceptional costs and costs from business combinations. In 2022/23 there was no one customer that individually accounted for more than 10% of the total revenue of the continuing operations of the Group. In 2021/22 there was no one customer that individually accounted for more than 10% of the total revenue of the continuing operations of the Group. Current period segment analysis Revenue by geography United States of America & Canada UK & Ireland Rest of the World Total Revenue NA £’000 UK&I £’000 ROW £’000 Total 2023 £’000 17,513 - - - 20,573 - 17,513 20,573 - - 735 735 17,513 20,573 735 38,821 Timing of revenue recognition Services transferred at a point in time Services transferred over time NA £’000 3,371 14,142 17,513 UK & I £’000 3,372 17,201 20,573 ROW £’000 Total 2023 £’000 169 566 735 6,912 31,909 38,821 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’ 2023 £’000 5,151 2,364 (9,909) (2,394) 2022 £’000 4,860 3,828 (9,470) (782) 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 in arrears following the delivery of the solutions or services. Differences in timing between revenue recognition and invoicing result in trade receivables, contract assets, or contract liabilities in the statement of financial position. Contract assets result when costs directly attributable to the delivery of the hardware and the implementation fees are capitalised as contract assets and released over the contract term, thereby also deferring costs to later periods and revenue earnt not yet invoiced. Contract liabilities result from client payments in advance of the satisfaction of the associated performance obligations and relates primarily to revenue for hardware and implementation fees. Contract liabilities are released as revenue is recognised. Contract assets and contract liabilities are reported on a contract-by-contract basis at the end of each reporting period. Significant changes in the contract assets and contract liabilities balances during the year are as follows: 31 March 2023 31 March 2022 Contract assets £’000 Contract liabilities £’000 Contract assets £’000 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 - - 2,600 1,115 6,754 3,575 - - - - 2,640 1,538 Contract liabilities £’000 6,938 4,108 - - Contract costs Deferred implementation costs Deferred hardware costs 31 March 2023 £’000 31 March 2022 £’000 958 157 1,115 1,028 510 1,538 Financial Statements |82 Notes to the Financial Statements 83 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. Prior period segment analysis on old basis The contract liabilities and contract assets has continued, as expected, to decrease in the current year, principally as new contracted business in North America 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. Transaction price allocated to the remaining performance obligations The total amount of revenue allocated to unsatisfied performance obligations is £9.9m (FY22: £9.5m). We expect to recognise approximately £7.6m (FY22: £3.9m) in the next 12 months, £1.7m (FY22: £5.5m) in 1-3 years and the remainder in 3 years or more in time. The amount represents our best estimate of contractually committed revenues that are due to be recognised as we satisfy the contractual performance obligations in these contracts. A large proportion of the Group’s revenue is transactional in nature or is invoiced monthly for support and maintenance and these are not included in the contract liabilities. Prior period segment analysis on new basis Segment revenue Gross profit Administrative expenses Operating profit Adjusted operating profit Other expenses2 Operating profit Profit before taxation Segment assets Trade and other receivables Prepayments and contract assets Deferred tax asset Segment liabilities Trade and other payables Accruals and contract liabilities 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 NA £’000 12,454 9,344 (7,916) 1,428 1,983 (555) 1,428 1,404 2,379 3,351 513 809 8,000 120 - - 150 130 - UK&I £’000 18,961 15,727 ROW £’000 Total 2022 £’000 365 352 31,780 25,423 (14,878) (243) (23,037) 849 3,138 (2,289) 849 805 3,295 3,004 1,276 1,516 7,342 188 686 375 523 360 1,143 109 109 - 109 109 38 216 - 11 608 - - - 7 5 - 2,386 5,229 (2,844) 2,386 2,318 5,712 6,571 1,789 2,336 15,950 308 686 375 680 495 1,143 1. Since date of acquisition of Syntec Holdings Limited on 22 December 2021. 2. Other expenses comprise expenses relating to share option schemes, amortisation of acquired intangible assets, exceptional restructuring costs and costs from business combinations. Segment revenue Gross profit Administrative expenses Operating profit Adjusted operating profit Other expenses2 Operating profit Profit before taxation Segment assets Trade and other receivables Prepayments and contract assets Deferred tax asset Segment liabilities Trade and other payables Accruals and contract liabilities 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 Revenue by geography in new segments United States of America & Canada UK & Ireland Rest of the World Total Revenue Revenue by geography in old segments UK United States of America Rest of the World Total Revenue Eckoh UK £’000 Eckoh US £’000 Syntec1 £’000 Total 2022 £’000 18,596 15,593 11,487 8,473 1,697 1,357 31,780 25,423 (14,399) (7,300) (1,338) (23,037) 19 307 2,386 5,229 (289) (2,844) 19 13 2,386 2,318 1,194 3,194 (2,000) 1,194 1,156 2,904 2,798 1,103 1,364 6,216 187 - 375 525 353 1,143 NA £’000 12,454 - - 1,173 1,728 (555) 1,173 1,149 2,059 954 513 607 4,191 120 686 - 130 108 - UK & I £’000 - 18,961 - 12,454 18,961 Eckoh UK £’000 Eckoh US £’000 Syntec £’000 18,117 339 140 - 11,314 173 739 776 182 18,596 11,487 1,697 749 2,819 173 367 5,543 1 - - 25 34 - ROW £’000 - - 365 365 5,712 6,571 1,789 2,336 15,950 308 686 375 680 495 1,143 2022 £’000 12,454 18,961 365 31,780 2022 £’000 18,856 12,429 495 31,780 Financial Statements |84 Notes to the Financial Statements 85 Timing of revenue recognition in new segments Services transferred at a point in time Services transferred over time Timing of revenue recognition in old segments Services transferred at a point in time Services transferred over time NA £’000 3,559 8,895 12,454 UK & I £’000 3,451 15,510 18,961 29 336 365 Eckoh UK £’000 Eckoh US £’000 Syntec £’000 3,403 15,193 18,596 3,411 8,076 11,487 225 1,472 1,697 1. The split between services transferred at a point in time and overtime were incorrectly disclosed in the Annual Report 2022 and have been corrected. 5. Profit from operating activities The Group’s profit from operating activities is arrived at after charging / (crediting): Employee benefits expense (note 6) Foreign currency gains Exceptional restructuring costs (note 8) Exceptional legal fees and settlement agreements (note 9) Exceptional costs relating to acquisition1 Amortisation of intangible assets (note 13) Depreciation of property, plant and equipment (note 14) Depreciation of leased assets (note 15) Inventory recognised as an expense (note 18) 1. Acquisition of Syntec Holdings Limited on 22 December 2021. 6. Employee benefits expense Government grants receivable towards employee costs Wages and salaries Less: Internal development costs capitalised in the year Social security costs Other pension costs Share-based payments 2023 £’000 14,618 (516) - 203 - 2,871 643 617 4 2023 £’000 - 13,814 (544) 1,168 203 40 ROW £’000 Total 20221 £’000 The Remuneration Report on page 47 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 2023 Number 2022 Number 91 43 54 188 97 45 49 191 Excluded from the table above are 28 (2022: 25) full time equivalent casual contact centre employees who cost £374,563 (2022: £238,361) in the year. 7. Auditors’ remuneration 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 the audit of the financial statements of subsidiary undertakings Total fees payable to the Group’s auditors 8. Exceptional restructuring costs 2023 £’000 71 128 199 2022 £’000 72 129 201 The exceptional restructuring costs are presented separately as irregular costs unlikely to reoccur in the near future. The exceptional restructuring costs incurred in financial year ended 31 March 2022 of £866k have been incurred in Syntec Holdings Limited £289k, Eckoh US £531k and Eckoh UK £46k. The Syntec costs of £289k relate to redundancy costs and contract termination costs post- acquisition. The Eckoh US costs of £577k relate to redundancy costs for employees associated with the planned exit from the Third- Party Support activity. There were no exceptional restructuring costs incurred in the financial year ended 31 March 2023. 9. Exceptional legal fees and settlement agreements In the financial year ended 31 March 2023 legal fees and settlement agreements of £0.2 million (settlement income of £950k received has been netted off against legal fee expenses), have been incurred regarding commercially sensitive matters which are required to be kept confidential by agreements with third parties or ongoing legal negotiations. 7,039 24,741 31,780 20221 £’000 7,039 24,741 31,780 2022 £’000 13,797 (95) 866 - 985 1,143 680 495 11 2022 £’000 (12) 12,618 (343) 1,097 183 254 14,681 13,797 Financial Statements |86 Notes to the Financial Statements 87 10. Finance income and finance charges Interest receivable Bank interest receivable Total Finance expense Bank interest payable Lease interest payable Total 11. 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 2023 £’000 2022 £’000 53 53 6 6 2023 £’000 2022 £’000 - (53) (53) (23) (51) (74) 2023 £’000 2022 £’000 132 18 150 746 (409) - (104) 233 383 13 (3) 10 1,198 (54) 4 (415) 733 743 A charge of £nil (2022: charge of £592k) for deferred taxation in relation to share options was recognised directly in equity. The tax charge for the year is different to the standard rate of corporation tax in the UK of 19% (2022: 19%). The differences are explained below: Continuing operations Profit before taxation Profit multiplied by rate of corporation tax in the UK of 19% (2022: 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 Impact of change in tax rate on opening deferred tax Opening deferred tax rate change impact of share options Impact of difference between current and deferred tax rates Deferred tax impact of share options Tax charge for the year 2023 £’000 5,020 954 28 18 (6) (391) (85) - - (12) (123) 383 2022 £’000 2,318 440 11 181 (9) (57) (25) (119) (296) 102 515 743 The 2021 Finance Bill was substantively enacted on 24 May 2021. The main rate of UK corporation tax increased from 19% to 25% with effect from 1 April 2023. The Group’s UK deferred tax assets and liabilities have therefore been calculated at 25% in financial year to 31st March 2023. Recognition of deferred tax assets and liabilities Assets Liabilities Short term timing differences Tax losses Property, plant and equipment Intangible assets Tax assets and liabilities Offset Total assets and liabilities after offset 2023 £’000 183 997 206 - 1,386 (1,257) 129 2022 £’000 145 1,421 223 - 1,789 - 1,789 2023 £’000 (283) - (198) (2,304) (2,785) 1,257 2022 £’000 - - (224) (2,759) (2,983) - (1,528) (2,983) Included in the deferred tax liability is £nil (FY22: £nil) which relates to the Company. Deferred tax assets and liabilities have been offset where they relate to Companies’ resident in the same tax jurisdiction and are expected to be realised on a net basis. Movement in deferred tax balances during the year Balance at 1 April Arising through a business combination Recognised in income statement Recognised in equity Other – Forex Balance at 31 March 2023 £’000 (1,194) 2022 £’000 2,915 - (2,797) (233) - 28 (733) (592) 9 (1,399) (1,194) Financial Statements |88 Notes to the Financial Statements 89 Unrecognised deferred tax assets There are unprovided deferred taxation assets in respect of tax losses totalling (gross) £37,711k (2022: £38,152k). These have arisen in respect of trading and non-trading losses of £8,853k (2022: £9,294k) and in respect of capital losses of £28,858k (2022: £28,858k). The historic trading and non-trading losses in Eckoh plc and the pre-acquisition non-trading losses in Syntec Holdings Limited have not been recognised for deferred tax purposes as a result of the conditions restricting their use. The capital losses have not been recognised due to restrictions over their utilisation. There is no expiry date on the trading and non-trading losses or the capital losses carried forward. 12. 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 Earnings for the purposes of adjusted basic and diluted earnings per share Reconciliation of earnings for the purposes of adjusted basic and diluted earnings per share. Earnings for the purposes of basic and diluted earnings per share Taxation Amortisation of acquired intangible assets Expenses relating to share option schemes Exceptional restructuring costs Exceptional legal fees and settlement agreements Costs relating to acquisition Adjusted profit before tax Tax charge based on standard corporation tax rate of 19%1 (2022: 19%) Earnings for the purposes of adjusted basic and diluted earnings per share 1. Majority of Group taxable profit is in the UK so for an adjusted measure a tax rate of 19% is utilised. 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 Dilutive effect of shares for acquisition Dec 21 Dilutive effect of placing Dec 21 Number of shares used in calculating diluted earnings per share 2023 £’000 4,637 6,266 2023 £’000 4,637 383 2,473 40 - 203 - 7,736 (1,470) 6,266 2022 £’000 1,575 4,181 2022 £’000 1,575 743 751 241 866 - 985 5,161 (980) 4,181 2023 £’000 2022 £’000 292,893 265,968 (2,338) (2,028) - - 290,555 263,940 9,210 - - 299,765 20,558 7,889 18,494 310,881 Profit per share Basic earnings per 0.25p share Diluted earnings per 0.25p share Adjusted earnings per 0.25p share Adjusted diluted earnings per 0.25p share 13. Intangible assets Group Cost At 1 April 2021 Additions Additions from business combinations Foreign exchange Disposals At 31 March 2022 Additions Foreign exchange At 31 March 2023 Accumulated amortisation At 1 April 2021 Charge for the year Foreign exchange At 31 March 2022 Charge for the year Foreign exchange At 31 March 2023 Carrying amount At 31 March 2023 At 31 March 2022 2023 pence 2022 pence 1.58 1.55 2.14 2.09 0.59 0.51 1.57 1.34 Goodwill £’000 Computer software £’000 Customer relationships £’000 Intellectual property £’000 Trade name £’000 Total £’000 4,883 - 21,422 117 - 4,293 364 - 3 - 3,498 7,663 371 20,708 - 12,367 115 - 11 - 17 (3) - - 12 - 375 33,789 264 (3) 26,422 4,660 15,980 7,688 383 55,133 - 152 559 4 - 150 11 8 - 16 570 330 26,574 5,223 16,130 7,707 399 56,033 - - - - - - - 2,821 357 3 3,181 371 4 3,556 26,574 26,422 1,667 1,479 3,472 7,518 727 113 4,312 2,473 151 6,936 9,194 11,668 370 - 12 14,181 1,143 145 59 17 7,594 382 15,469 27 22 - 16 2,871 193 7,643 398 18,533 64 94 1 1 37,500 39,664 Financial Statements |90 Notes to the Financial Statements 91 The Company has no intangible assets. (2022: £nil). Within the intangible category of computer software in the above table is internally developed computer software, as at 31 March 2023 this had a net book value of £1,653k (2022: £1,441k). No impairment has been recorded in the current year for NA, UK&I or ROW. 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. Amortisation of acquired intangible assets included in the charge for the year in the above table was £2,473k (2022: £751k). This is made up of Customer Relationships, Intellectual Property and Trade name, with the exception of £27k of Intellectual Property (2022: Sensitivity to the changes in assumptions £34k) which relates to amortisation on self-generated assets in Eckoh UK Limited. Within Intellectual Property is an intangible asset If forecast revenues fell by 40%, no impairment in the carrying values of NA, UK&I or ROW would be required, In addition, if there was acquired when Eckoh Omni Limited (previously known as Klick2Contact (EU) Limited) was purchased. no further growth in either NA, UK&I or ROW, no impairment in the carrying value of NA, UK&I or ROW would be required. 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 North America (NA), UK & Ireland (UK&I) and Rest of World (ROW) in the current year and in the prior year Eckoh UK, Eckoh US and Syntec. 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: • North America (NA) • UK & Ireland (UK & I) • Rest of World (ROW) These represent the lowest level within the Group at which Goodwill is monitored for internal management purposes. NA UK&I & ROW Total Eckoh – UK Eckoh - US Syntec Total Goodwill 31 March 2023 £’000 31 March 2023 Revenue growth rate % 31 March 2023 Discount rate % 20,069 6,505 26,574 12% 1% 13.9% 13.9% Goodwill 31 March 2022 £’000 31 March 2022 Revenue growth rate % 31 March 2022 Discount rate % 2,373 2,627 21,422 26,422 10% 20% 15% 13.9% 13.9% 12.0% 14. Property, plant and equipment Cost At 1 April 2021 Additions Additions from business combinations Foreign exchange Disposals At 31 March 2022 Additions Foreign exchange Disposals At 31 March 2023 Accumulated depreciation At 1 April 2021 Charge for the year Foreign exchange Disposals At 31 March 2022 Charge for the year Foreign exchange Disposals At 31 March 2023 Carrying amount At 31 March 2023 At 31 March 2022 Leasehold improvements £’000 Land and buildings £’000 Fixtures and equipment £’000 Assets under construction £’000 29 - - - - 29 - - - 29 29 - - - 29 - - - 29 - - 3,177 8,454 - - 30 - 3,207 - 2 - 3,209 268 43 30 - 341 43 1 - 385 2,824 2,866 308 235 45 (350) 8,692 178 341 (287) 8,924 7,056 637 26 (350) 7,369 600 320 (287) 8,002 922 1,323 - - - - - - 435 - - 435 - - - - - - - - - 435 - Total £’000 11,660 308 235 75 (350) 11,928 613 343 (287) 12,597 7,353 680 56 (350) 7,739 643 321 (287) 8,416 4,181 4,189 Financial Statements |92 Notes to the Financial Statements 93 The land and buildings are held by the Company, the gross book value as at 31 March 2023 was £3,209k (2022: £3,207k). The net book value at 31 March 2023 was £2,824K (2022: £2,866k). This is the only property, plant and equipment held by the Company. Assets under construction are assets relating to a US datacentre, as at 31 March 2023 the assets were not yet being utilised. Following the year end these assets are fully utilised and the project has been completed. Lease liabilities Current Non-current 15. 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. Right-of-use assets Cost At 1 April 2021 Additions from business combinations Foreign exchange At 31 March 2022 Additions Foreign exchange Lease extinguishment At 31 March 2023 Accumulated depreciation At 1 April 2021 Charge for the year Foreign exchange At 31 March 2022 Charge for the year Foreign exchange Lease extinguishment At 31 March 2023 Carrying amount At 31 March 2023 At 31 March 2022 Buildings £’000 Equipment £’000 605 686 28 1,319 - 36 (219) 1,136 180 134 13 327 226 17 (219) 351 785 992 1,170 - - 1,170 77 - - 1,247 285 361 - 646 391 - - 1,037 210 524 Total £’000 1,775 686 28 2,489 77 36 (219) 2,383 465 495 13 973 617 17 (219) 1,388 995 1,516 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. 2023 £’000 482 569 1,051 2023 £’000 (53) (11) 2022 £’000 609 928 1,537 2022 £’000 (51) (17) 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) The total cash outflow for leases in 2023 was £617k (2022: £551k), made up of principle lease payments of £564k (2022: £500k) and lease interest payments of £53k (2022: £51k). The Company does not hold any leased assets (2022: £nil). 16. Investments in Group companies At 1 April 2021 Additions At 31 March 2022 Disposals1 At 31 March 2023 Accumulated Impairment Shares in subsidiary undertakings £’000 Other investments £’000 21,232 52,229 479 – 52,229 5,910 479 6,389 (101) 6,288 Total £’000 27,142 31,476 58,618 (101) 58,517 At 1 April 2021 and at 31 March 2022 and 2023 (6,989) - (6,989) Net Book Value At 31 March 2023 At 31 March 2022 1. The disposal relates to the net share options credit in the year. 45,240 45,240 6,288 6,389 51,528 51,629 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 24 of the consolidated financial statements. Financial Statements |94 Notes to the Financial Statements 95 17. Investment in subsidiary undertakings The Company has the following investments in subsidiaries, which are included in the consolidated financial statements: Subsidiary undertakings Country of incorporation Principal activities Percentage of share capital held Eckoh UK Limited Veritape Limited England and Wales (ii) Customer Engagement Data Security Solutions England and Wales (ii) Non trading Eckoh Inc United States of America (iii) Secure Payment Solutions & Support Solutions 100% 100% 100% 18. Inventories Finished goods Group 2023 £’000 254 254 2022 £’000 268 268 The cost of inventory recognised as an expense during the year was £4k (2022: £11k). The Company does not hold any inventory. (2022: £nil) Eckoh France SAS France (iv) Eckoh Enterprises Limited England and Wales (ii) Eckoh Projects Limited England and Wales (ii) Avorta Limited England and Wales (ii) Eckoh Technologies Limited England and Wales (ii) Intelliplus Group Limited England and Wales (ii) Intelliplus Limited England and Wales (ii) Medius Networks Limited England and Wales (ii) Telford Projects Limited England and Wales (ii) Swwwoosh Limited England and Wales (ii) Eckoh Omni Ltd England and Wales (ii) Cloud-based Software Provider Syntec Holdings Limited (v) England and Wales (ii) Syntec Limited (v) England and Wales (ii) Syntec Investment Limited (v) England and Wales (ii) CardEasy North America Inc United States of America (vi) Agentcall Limited CardEasy Limited England and Wales (ii) England and Wales (ii) Response Track Limited England and Wales (ii) Syntec Telecom Limited England and Wales (ii) Synpbx Limited England and Wales (ii) Non-Trading Trading Non-Trading Dormant Dormant Dormant Dormant Dormant Dormant Non trading 100% (i) Dormant 67% & 33% (i) Non trading Dormant Dormant Dormant Non-Trading Non-Trading Dormant Dormant 100% 100% (i) 100% (i) 100% 100% (i) 100% (i) 100% 100% (i) 100% 100% 100% 100% 100% (i) 100% (i) 100% (i) 100% (i) 100% (i) 100% (i) 19. Trade and other receivables Current assets Trade receivables Less: Loss allowance Net trade receivables Other receivables Prepayments and contract assets Long-term debtor Amount receivable from subsidiary undertakings Group Company 2023 £’000 5,219 (68) 5,151 670 5,957 11,778 - - 2022 £’000 5,056 (196) 4,860 852 6,571 12,283 2023 £’000 2022 £’000 - - - - 34 34 - - - - 93 93 - - 4,297 4,297 4,034 4,034 Trade receivables are stated after loss allowance of £68k (2022: £196k). Included in prepayments and contract assets is £2,364k (2022: £1,501k) relating to accrued income. Amounts receivable from subsidiary undertakings are unsecured, due in 4 - 6 years and have an interest rate of 1.35% to 4.66%. No expected credit loss has been calculated for the amount receivable from subsidiary undertakings as the Directors expect the (i) Share capital held by a subsidiary undertaking. (iv) The registered office is Rue De La Vieille Poste Parc, Industriel et Technologique de la full amount to be recoverable. (ii) The registered office is Telford House, Corner Hall, Hemel Hempstead, HP3 9HN. Pompignane, 34000 Montpellier. (iii) The registered office is 7172 Regional Street. #431, Dublin, California 94568. (v) Acquired as part of acquisition of Syntec Holdings Limited. (vi) The registered office is 12 Timber Creek Lane, Newark, New Castle 19711. 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 undertakings Eckoh Omni Limited (registered number: 07553916), Syntec Holdings Limited (registered number: 04690987), Syntec Investments Limited (registered number: 10385059) are 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. 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 2023 £’000 4,273 607 103 83 153 2022 £’000 3,703 1,082 75 13 183 5,219 5,056 2023 % 0.0% 0.1% 0.5% 0.0% 43.3% 1.3% 2022 % 0.3% 1.0% 13.9% 78.3% 84.2% 3.9% Financial Statements |96 Notes to the Financial Statements 97 The Directors consider that the carrying value of the trade and other receivables approximate to their fair value. As set out in note 4, £2.3 million (2022: £5.5 million) of the contract liabilities are due in more than one year. Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its Included in accruals and contract liabilities is £3,726K (2022: £4,416k) relating to accrued liabilities. 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 All of the amounts above are payable within one year and trade payables that are more than three months’ old at the year-end of the Group’s customer base. The reputable nature of the Group’s current customer base limits exposure to credit risk. represent £13,000 (2022: £99,000). 20. Cash and cash equivalents Sterling Euro US dollars Floating rate Euro US dollars Group Company 2023 £’000 5,005 90 645 2022 £’000 2,266 6 568 2023 £’000 4,807 - 415 2022 £’000 1,898 - 485 5,740 2,840 5,222 2,383 Group Company 2023 £’000 5,005 90 645 2022 £’000 2,266 6 568 2023 £’000 4,807 - 415 2022 £’000 1,898 - 485 5,740 2,840 5,222 2,383 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 2.14% (2022: 0.02%). The Group’s financial risk management is disclosed in note 3. 21. Trade and other payables Trade payables Other payables Other taxation and social security Amounts payable to subsidiary undertakings Accruals and contract liabilities Group Company 2023 £’000 1,271 289 995 - 13,635 16,190 2022 £’000 899 508 929 - 15,950 18,286 2023 £’000 2022 £’000 19 - - - - - 31,515 26,832 21 64 31,555 26,896 Amounts payable to subsidiary undertakings are unsecured, payable on demand and interest free. The Group’s exposure to liquidity risk is disclosed in note 3. 22. Called up share capital and share premium account Allotted called up and fully paid Share type Ordinary Shares of 0.25p each At 1 April 2022 Shares issued under the share option schemes At 31 March 2023 Number of shares Nominal value £’000 Share Premium £’000 292,869,261 40,000 292,909,261 732 - 732 22,180 - 22,180 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 24. 23. Other interest-bearing loans and borrowings At 1 April 2022 Repaid during the year At 31 March 2023 Loans and borrowings Bank Loans £’000 - - - In December 2021 and in conjunction with the acquisition of Syntec Holdings Limited, Eckoh secured a new £10 million debt facility with Barclays Bank, which comprised a £5.0 million overdraft and a £5.0 million Revolving Credit Facility (RCF). The RCF is for a term of three years, interest is 2.5% above the Bank of England base rate and there is a non-utilisation fee of 0.88%. The overdraft is reviewed annually by the bank and has an interest rate of 1.75% above the Bank of England base rate. In November 22, the overdraft facility was cancelled. As at 31 March 2023, there was no debt drawn under the RCF. Financial Statements |98 Notes to the Financial Statements 99 24. Share-based payments The Eckoh plc Share Option Scheme (‘the Scheme’) was details are included in the Remuneration Committee report on introduced in November 1999 and re-approved by the Board in page 48. During the financial year awards have been granted the year ended 31 March 2018. Under the Scheme the Board can to Senior Management, key employees and the Executive grant options over shares in the Company to Group employees. Directors. The PSP awards granted to Management are subject The grant price of share options is the middle market quotation to a Total Shareholder Return performance condition, measured price as derived from the Daily Official List of the London over a 3-year performance period, the PSP awards granted to 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 (SIP) was measured using the valuation model. The number of share options in the SIP as at 31 March 2023 was 2,338,549. The charge for the year was £98k (2022: £83k) Stock Exchange on the date of the grant. The contractual life the Executive Directors and two Directors from the acquisition The assumptions used in the US Sharesave Scheme fair value calculation are as follows: of an option is ten years. Options granted under the Scheme of Syntec are subject to both a Total Shareholder Return and become exercisable subject to the share price exceeding RPI Adjusted Earnings per Share performance condition, measured plus 15% after the third anniversary of the grant date. Exercise over a 3-year performance period. of an option is subject to continued employment, with certain exceptions, as specified in the Scheme rules. The Eckoh plc 2019 US Sharesave Scheme (the “2019 Sharesave Scheme”), was approved by Shareholders at the 2019 AGM and The Eckoh plc Share Incentive Plan (“the Plan”) was introduced introduced to employees in December 2019. Employees who in September 2016. The Plan provides employees with the enrol in the 2019 Sharesave Scheme are granted an option to opportunity to acquire shares in Eckoh plc. Shares are purchase up to a number of Ordinary Shares. The number is purchased on behalf of the employee from amounts sacrificed determined by dividing the total payroll deductions credited to from their salary on a monthly basis and matched on a two for the employee’s account as of the exercise date by the option one basis by the company. Any shares acquired will be held price. The option price is equal to the closing price of the Ordinary in a trust in accordance with the terms of the Plan. In order to Shares on the London Stock Exchange on either the (i) the date maximise the tax benefits available, the employee must remain the offering period begins, or (ii) the date of exercise, whichever employed with the company and hold the shares within the results in the lowest price per share. Any shares acquired will be Trust for a minimum of five years. held in accordance with the terms of the Scheme. The Eckoh plc Performance Share Plan (“the PSP”) was introduced The fair value of share options granted under the Scheme and in November 2017, following approval by Shareholders at the the PSP were measured using the QCA-IRS option valuer based 2018 AGM. Initial Awards, at Nominal cost were granted to each on the Monte-Carlo valuation models, taking into account the of the Executive Directors in November 2017. Each of the PSP Initial terms and conditions upon which the grants were made. The awards is subject to a Total Shareholder Return performance fair value per option granted and the assumptions used in the condition, measured over a 5-year performance period. Further calculation are as follows: 23 Mar 2016 2 May 2016 13 Oct 2016 31 Mar 2017 21 Jun 2017 23 Jul 2018 24 Jun 2021 10 Jan 2022 10 Mar 2022 20 Jul 2022 20 Jul 2022 Share price (pence) 43.50 43.50 38.875 39.50 Exercise price (pence) 43.50 43.50 38.88 39.50 No. of employees 10 1 1 9 47.50 47.50 1 37.81 63.50 50.00 43.00 44.00 40.57 - 13 - 53 - 2 - 94 - 2 - 3 Shares under option 1,350,000 500,000 400,000 2,000,000 500,000 635,000 2,415,000 1,940,428 7,850,000 2,435,457 180,000 Vesting period (years) Expected volatility Option life (years) Expected life (years) 3 32% 10 3 3 31% 10 3 3 3 3 33% 35% 35% 10 3 10 3 10 3 3 47% 3 3 3 3 3 30% 30% 30% 3 3 3 3 3 3 3 33% 3 3 3 33% 3 3 Risk free rate 0.78% 0.24% 0.56% 0.56% 0.56% 0.56% 0.18% 0.91% 1.36% 1.94% 1.94% Expected dividends expressed as a dividend yield Fair value per option (pence) 0.89% 1.03% 1.16% 1.14% 1.22% 1.53% 0.00% 0.00% 0.00% 0.00% 0.00% 12.00 8.50 8.19 11.0 10.6 16.00 23.90 18.4+ 49.76 20.481 22.3+ 43.76 25.0 1. Included in the Share options granted on 10 March 2022 are 1,000,000 awards made to Directors, which have a fair value of 17.69 pence (50% TSR) and 42.76 pence (50% adjusted eps). Commencement date Share price (pence) Exercise price (pence) Number of employees Shares under option Vesting period (years) 1 Dec 2020 60.0 51.0 20 50,331 2.00 1 Dec 2021 41.5 35.3 12 54,715 2.00 A reconciliation of option movements over the year to 31 March 2023 and 31 March 2022 is shown below: Outstanding at 1 April Granted Exercised Lapsed Forfeited Outstanding at 31 March Exercisable at 31 March 2023 2022 Number of share options Weighted average exercise price (pence) Number of share options Weighted average exercise price (pence) 25,618,344 3,303,254 (205,229) (6,000,000) (1,071,680) 21,644,689 6,538,084 17.74 4.61 20.81 0.25 0.24 11.38 33.83 15,066,669 12,861,774 (1,762,022) - (548,077) 25,618,344 6,213,495 17.74 1.17 16.33 - 18.83 9.44 34.19 Financial Statements |100 Notes to the Financial Statements 101 2023 Weighted average remaining life 2022 Weighted average remaining life Range of exercise prices (pence) Weighted average exercise price (pence) Number of shares (000’s) Expected Contractual Weighted average exercise price (pence) Number of shares (000’s) Expected Contractual 0 - 0.5 35.0 – 40.0 40.5 - 45.0 46.5 – 48.5 50.0 – 54.5 55.0 – 59.5 60.0 – 64.0 0.23 39.17 43.37 47.54 52.58 56.00 62.58 15,966 2,731 1,937 633 152 60 166 1.71 3.04 0.10 – 0.77 0.67 0.47 1.71 3.56 2.97 3.34 0.77 0.67 0.47 0.23 39.33 43.50 47.54 52.53 56.00 62.57 20,074 2,567 1,850 652 178 65 181 1.76 3.89 - 0.02 0.91 1.67 1.17 1.76 4.60 4.00 4.03 1.36 1.67 1.35 Further details of the Directors’ emoluments are disclosed within the Remuneration Report on page 50. 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 £18,000 (2022: £15,000). The amount outstanding to them at the end of the current year was £Nil (2022: £Nil). There were no amounts written off in the current or prior year. 27. Cash generated from operations Profit for the financial year Finance income Finance charges Taxation The total charge for the year relating to employee share-based payment plans was £40,000 (2022: £241,000 charge) all of which Depreciation of property, plant and equipment related to equity-settled share-based payment transactions. Included in the charge is a fair value share-based payment credit of £102,000 (2022: £479,000 charge) offset by a charge of £142,000 for the employers NI accrual. 25. Pension commitments The Group operates a group personal pension scheme and, in addition, the subsidiary company Eckoh UK Limited operates a defined contribution pension scheme. The assets of the pension schemes are held separately from those of the Group in independently administered funds. The pension charge represents contributions payable by the Group to the funds. There were no outstanding or proposed contributions at the balance sheet date. 26. Related party transactions Depreciation of leased assets Amortisation of intangible assets Exchange differences Expenses relating to share option schemes Operating profit before changes in working capital and provisions Decrease) / (increase) in inventories Decrease in trade and other receivables Decrease in trade and other payables Cash generated from operations Eckoh plc is the parent and ultimate controlling company of the Eckoh Group, the consolidated financial statements of which 28. Events after the statement of financial position date include the results of the subsidiary undertakings set out in note 17. Each subsidiary is 100% owned by the Eckoh Group and is considered to be a related party. There is 1 Director accruing benefits under the pension scheme, employer pension contributions were £20k (FY22: £19k). 1 Director has elected to have all his Company pension contributions 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. The aggregate Directors’ emoluments are shown in the table below. Directors Aggregate emoluments 2023 £’000 886 886 2022 £’000 806 806 Prior to the 31 March 2023, the Group were in settlement discussions with a third party. An agreement was reached post year end with the third party and a settlement agreement entered into in favour of the Group. The income and costs are included in exceptional items in Note 9. 2023 £’000 4,637 (53) 53 383 643 617 2,871 (516) 40 8,675 14 505 2022 £’000 1,575 (6) 74 743 680 495 1,143 (95) 241 4,850 (5) 2,423 (2,238) (3,906) 6,956 3,362 Financial Statements |102 Shareholder Information 103 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 Joint Broker Investec Bank PLC 30 Gresham Street London EC2V 7QP C.G. Herbert – Chief Financial Officer and Company Secretary Solicitor 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 Singer Capital Markets Limited One Barthlomew Lane London, EC2N 2AX 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 Financial Statements | Eckoh plc, Telford House, Corner Hall, Hemel Hempstead, Hertfordshire, HP3 9HN 01442 458 300 tellmemore@eckoh.com www.eckoh.com 

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