Interim Results

Eckoh PLC 17 December 2007 Eckoh plc Unaudited Interim Results for the six months ended 30 September 2007 Highlights of the period: â€¢ Good progress made with restructuring and repositioning the Group as a specialised speech solutions business with the sale of Connection Makers divisions for Â£2.75m - Chat division sold to Antiphony Ltd for Â£1.75m - TV division sold for Â£1.0m â€¢ Speech Solutions revenues increase by 5% to Â£3.1m (H1 2006/7: Â£3.0m) with GP increasing by 14% to Â£1.9m (H1 2006/7: Â£1.6m) â€¢ Gross margin in Speech Solutions increases to 60% (H1 2006/7: 56%) â€¢ Revenues from continuing operations reflect lower call volumes in the Groups' Client IVR division â€¢ Balance Sheet holds Â£5.7m cash, a Â£4.7m receivable from Symphony Telecom and Â£1.0m receivable from sale of TV channel; it does not include the Â£1.75m receivable for the Chat sale â€¢ Initiated a cost reduction programme to streamline the business and align operating costs with ongoing revenues which is expected to reduce group expenses by Â£1m+ for the Full Year 2008/2009 Significant contract renewals and developments: â€¢ 5 year contract extension with TFCC Inc for the provision of services to UK utilities â€¢ 2 year contract on new terms with Trinity Mirror to provide network facilities and interactive services to their national and regional publications â€¢ Traintracker speech service provided to National Rail Enquiries awarded 'Innovation of the Year' at Transport Innovations Event and 'Best Use of Technology Partnership' in the Customer Contact Association's Excellence Awards Nik Philpot, Chief Executive Officer, commented today: 'We are pleased with the progress made in repositioning ourselves as a specialised speech solutions company following the disposal of Connections Makers and our balance sheet remains extremely strong. The conditions in the media sector have been challenging and we expect this to be a smaller business going forward, but despite this we have a good portfolio of clients with which we can maintain a strong and profitable position in the market. Looking ahead into 2008, our entire focus will be on aggressively driving forward the speech business and as a result we have renewed confidence, vigour and belief that we can deliver real value for shareholders.' For further enquiries, please contact: Eckoh plc Nik Philpot, Chief Executive Officer Tel: 01442 458 300 Adam Moloney, Group Finance Director Jim Hennigan, Executive Director www.eckoh.com Corfin Communications Harry Chathli / Neil Thapar / Ben Hunt Tel: 020 7977 0020 Seymour Pierce Jonathan Wright / Parimal Kumar Tel: 020 7107 8000 Introduction The Board of Eckoh reports that steady progress has been made towards its aim of becoming the clear market leader for hosted Speech Recognition services in Europe. During the period, Eckoh have pursued the long held strategy of focusing the business on the core Speech Solutions division. To this end, we closed the Dating division of Connection Makers at the end of September 2007, announced the sale of the TV division of that subsidiary on 1 October 2007, and we can announce today the sale of the final part of the Connection Makers business to Antiphony Limited for a cash consideration of Â£1.75m. It has become clear during 2007 that the benefits available from running the Client IVR division were disproportionate to the risks and that the significantly reduced call volumes have meant that the low margins inherent in the activity were no longer sustainable. To that end the Group has re-contracted with all of its clients to provide maximum protection from regulatory issues and where appropriate we have renegotiated the terms of the arrangements. The IVR division has also worked with its major TV client in this sector, ITV, to exit this contract (which we expect to end early in 2008), from which point ITV is expected to operate the provision of services in-house. The combination of Connection Makers exiting the Group and the changes in Client IVR has had an immediate impact on the short term profitability of the Group in comparison to last year. To address this we have initiated a cost reduction programme within the business that will take out over Â£1m of operating expenses which will enable us to deliver significantly improved financial results during 2008/9. Going into 2008, the focus of the business will be concentrated on the high margin Speech Solutions activity. 1.1 Speech Solutions Revenue in the Speech Solutions division increased by 5% to Â£3.1m (H1 2006/7: Â£3.0m) during the period, with the gross margin increasing to 60% (H1 2006/7: 56%) allowing gross profit to increase by 14% to Â£1.9m (H1 2006/7: Â£1.6m). The division delivered growth and was able to offset the loss of revenue from its largest margin client, UGC cinemas, following their acquisition by Cineworld. Adjusting for the loss of that client, revenues in the division have actually increased by 18% and the gross profit has increased by 33%. The loss of UGC was unusual in that it is has been the only major contract lost in over 4 years, our normal experience is for clients to contract for an initial term of between 3-5 years, and to then renew and extend the scope of their contracts. By way of illustration we have been able to generate 29% more revenue from our top 7 clients than in the same period last year. As well as growing existing clients, additional revenue streams have been achieved by bringing in significant new clients such as AXA PPP, Parcelforce Worldwide, United Utilities and Three Valleys Water, all of whom were not generating revenue in the first half of last year. These developments, a strong sales pipeline and developments in the US market serve to reinforce belief in the Speech Solutions market. During the period, extensive research and discussions have taken place to identify potential acquisition targets in mainland Europe. This exercise has, however, proven difficult as there are few suitable candidates and those that have been identified are typically private businesses whose valuations are guided by transactions in the United States as well as a long term confidence in the market. As a result Eckoh will continue to focus on organically growing the UK business and will look opportunistically at possible consolidation opportunities within the UK. To support that strategy there are efforts to diversify the sales channels by establishing more indirect relationships as illustrated by the partnership put in place earlier in the year with Genesys, an Alcatel-Lucent company focused on the call centre market. 1.2 Client IVR The Client IVR division has been severely impacted by the adverse media publicity in relation to the use of premium rate telephony, particularly in the broadcast sector. Revenues in this division have fallen by 66% to Â£13.2m (H1 2006/7: Â£38.8m) due to a reduction in the volumes of calls coming into ITV and the ITV Play formats. Gross profit in this division was Â£0.8m (H1 2006/7: Â£1.8m). Eckoh has not lost any clients in this division over the period so these reduced financials have come purely from a lower number of calls coming into the same services. The Group has taken significant steps during the period to execute on its strategy of becoming a 'best practice' service provider in this area. As stated previously, the combination of decreasing call volumes and increased regulatory pressures meant that the approach to the business has had to change. As a result all clients in this area have been asked to sign new contracts and where appropriate the terms have been renegotiated. Trinity Mirror is an example of a client who has recognised the value and importance of the compliance expertise that we can provide and has entered into a new contract with us for a two year period. We resigned the contract that we had with ITV in September as it was no longer commercially viable at the lower call volumes, and agreed instead a monthly fee based contract from October. As publicly stated in the announcement accompanying the Deloittes report, ITV are looking to take this activity in-house and to that end we anticipate our agreement coming to an end in early 2008. The Client IVR division remains complementary to the Speech Solutions division, but going forward Eckoh will only operate in this area with clients who are looking for a top quality service, who consider regulatory compliance to be of paramount importance and are willing to pay an appropriate price for receiving this professional service. 2. Connection Makers Following a long term review of the Connection Makers activity the Board took the decision to close the Dating division, which had become unprofitable, at the end of September 2007. On 1 October 2007, it was announced that the TV division had been sold for Â£1m payable in cash over the following two years subject to regulatory approval. We are pleased to announce today that we have sold the final part of the business, the Chat division of Connection Makers for Â£1.75m payable in cash over 2 years. The financial results for the Dating division and the TV division are included within discontinued operations. The results for the Chat division are included within continuing operations for the period on the basis that at 30 September 2007 it could not be demonstrated that the sale was highly probable under the requirements of IFRS 5 'Non-current assets held for sale and discontinued operations'. During the period, revenue was Â£5.1m compared to Â£3.9m in H1 2006/7. Gross margin was Â£1.9m compared to Â£2.2m in H1 2006/7. 3. Administrative expenses The administrative expenses in the business have remained steady at Â£4.5m. The reduced level of calls in Client IVR has had little effect on the amount of resource required to run these accounts, however, the expected exit from the ITV contract and disposal of the Connection Makers division has enabled us to review these costs in full. A cost reduction programme will be completed over the coming weeks to reduce the level of expenses to be proportionate to the size of the remaining business. It is anticipated that over Â£1m per annum of costs will be removed as part of this exercise. 4. Liquidity and capital resources Eckoh continues to hold a very strong balance sheet with shareholders' equity of Â£8.7m (2006: Â£18.1m) including Â£5.7m of cash and cash equivalents (2006: Â£16.4m). The decrease in cash and cash equivalents from the comparative interim period is due to the cash outflow of Â£10.2m in respect of the tender offer and share buyback completed in February 2007, with the remaining reduction almost entirely due to a reduction in working capital as a result of the decline in Client IVR activity. Also on the balance sheet are the Â£4.7m receivable from Symphony Telecom Limited ('Symphony') and the Â£1.0m receivable from the sale of the TV division of Connection Makers. The first instalment of the receivable from Symphony will be received in December 2007 at Â£1.5m. The remaining instalments are due to be paid annually in June with the final repayment in June 2010. The Â£1.0m receivable from the sale of the TV division will be fully paid by October 2009. The disposal of the Chat division, which although not reflected in the balance sheet at 30 September 2007, will further strengthen the business with Â£1.75m to be paid over the next two years. 5. International Financial Reporting Standards Due to the requirement for the Group to report under International Financial Reporting Standards ('IFRS') from 1 April 2007, the interim financial statements are lengthier than in previous years. The adjustments between UK GAAP and IFRS for the period relate mainly to discontinued operations. A full reconciliation is shown in the notes to the financial statements. 6. Outlook The second half of the year will see the emergence of a smaller Group which is much more focused on the Speech Solutions division, where we ultimately see value being created for shareholders. The impact of the restructuring will see a reduction in the level of costs but it will not be until 2008/9 that we will see the full benefit of the steps taken in 2007/8. Although the first half of the financial year has been difficult for a number of reasons, it has served to accelerate the strategic plans for the business. Looking ahead to 2008, with our focus entirely on aggressively driving forward the speech business, we have renewed confidence, vigour and belief that we can deliver real value for shareholders. Consolidated interim income statement for the period ended 30 September 2007 Six months Six months ended 30 ended 30 Year ended September September 31 March 2007 2006 2007 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Continuing operations Revenue 17,954 43,994 81,539 Cost of sales (14,529) (39,763) (72,568) ------------------ ----------- ----------- ----------- Gross profit 3,425 4,231 8,971 Administrative expenses (4,467) (4,529) (9,539) ------------------ ----------- ----------- ----------- Loss from operating activities (1,042) (298) (568) Interest receivable 271 406 882 Interest payable - (1) (1) ------------------ ----------- ----------- ----------- (Loss)/profit before taxation (771) 107 313 Taxation (15) - - Loss for the period from continuing operations (786) 107 313 Discontinued operations Post tax profit for the period from discontinued operations 567 7,552 8,062 ------------------ ----------- ----------- ----------- (Loss)/profit for the period (219) 7,659 8,375 ================== =========== =========== =========== Attributable to: Minority interests - 142 144 Equity holders of the parent (219) 7,517 8,231 ------------------ ----------- ----------- ----------- (219) 7,659 8,375 ================== =========== =========== =========== (Loss)/earnings per share expressed in pence per share Basic (0.11) 2.76 3.13 Diluted (0.11) 2.70 3.07 (Loss)/earnings per share from continuing operations expressed in pence per share Basic (0.40) 0.04 0.12 Diluted (0.40) 0.04 0.12 Earnings per share from discontinued operations expressed in pence per share Basic 0.29 2.77 3.06 Diluted 0.28 2.71 3.00 Consolidated interim balance sheet as at 30 September 2007 30 September 2007 30 September 2006 31 March 2007 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Assets Non-current assets Intangible assets 104 246 180 Property, plant and equipment 909 1,256 1,148 Financial assets - available for sale 288 288 288 investments Other receivables 2,879 4,700 3,273 --------------------- ---------- ---------- ---------- 4,180 6,490 4,889 --------------------- ---------- ---------- ---------- Current assets Inventories 6 80 17 Trade and other receivables 8,224 13,132 8,644 Current tax assets 68 - - Cash and cash equivalents 5,736 16,422 9,601 --------------------- ---------- ---------- ---------- 14,034 29,634 18,262 --------------------- ---------- ---------- ---------- Assets held for sale 902 - - Total assets 19,116 36,124 23,151 Liabilities Current liabilities Trade and other payables (9,198) (17,691) (13,682) Current tax liabilities (488) (196) (257) Obligations under finance lease (7) (20) (7) --------------------- ---------- ---------- ---------- (9,693) (17,907) (13,946) --------------------- ---------- ---------- ---------- Liabilities directly associated with assets held for sale (606) - - Non-current liabilities Obligations under finance lease (2) - - Provisions (75) (123) (516) --------------------- ---------- ---------- ---------- (77) (123) (516) --------------------- ---------- ---------- ---------- --------------------- ---------- ---------- ---------- Net assets 8,740 18,094 8,689 ===================== ========== ========== ========== Shareholders' equity Share capital 499 685 491 Capital redemption reserve 198 - 198 Share premium 703 335 477 Currency reserve (69) 37 (61) Retained earnings 7,409 17,037 7,584 --------------------- ---------- ---------- ---------- Total shareholders' equity 8,740 18,094 8,689 ===================== ========== ========== ========== Consolidated interim statement of changes in equity as at 30 September 2007 (unaudited) Share Capital Share Retained Currency Minority Total Capital redemption premium earnings reserve interests reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance as 1 April 2006 681 - 227 9,345 - 1,592 11,845 Minority share of losses for the period - - - - - (144) (144) Disposal of subsidiary - - - - - (1,448)(1,448) Exchange differences - - - - 37 - 37 Profit for the period - - - 7,659 - - 7,659 ---------------- ------- -------- ------- ------- ------- ------- ------ Total recognised income and expense - - - 7,659 37 (1,592) 6,104 ---------------- ------- -------- ------- ------- ------- ------- ------ Share based payment charge - - - 33 - - 33 Shares issued under the option schemes 4 - 108 - - - 112 ---------------- ------- -------- ------- ------- ------- ------- ------ Balance at 30 September 2006 685 - 335 17,037 37 - 18,094 ---------------- ------- -------- ------- ------- ------- ------- ------ Balance at 1 October 2006 685 - 335 17,037 37 - 18,094 Exchange differences - - - - (98) - (98) Profit for the period - - - 716 - - 716 ---------------- ------- -------- ------- ------- ------- ------- ------ Total recognised income and expense - - - 716 (98) - 618 ---------------- ------- -------- ------- ------- ------- ------- ------ Share based payment charge - - - 78 - - 78 Shares issued under the option schemes 4 - 142 - - - 146 Share buy back and tender offer (198) 198 - (10,247) - -(10,247) ---------------- ------- -------- ------- ------- ------- ------- ------ Balance at 31 March 2007 491 198 477 7,584 (61) - 8,689 ---------------- ------- -------- ------- ------- ------- ------ ------ Balance at 1 April 2007 491 198 477 7,584 (61) - 8,689 Exchange differences - - - - (8) - (8) Loss for the period - - - (219) - - (219) ---------------- ------- -------- ------- ------- ------- ------- ------ Total recognised income and expense - - - (219) (8) - (227) ---------------- ------- -------- ------- ------- ------- ------- ------ Share based payment charge - - - 44 - - 44 Shares issued under the option schemes 8 - 226 - - - 234 ---------------- ------- -------- ------- ------- ------- ------- ------ Balance at 30 September 2007 499 198 703 7,409 (69) - 8,740 ================ ======= ======== ======= ======= ======= ======= ====== Consolidated interim cash flow statement for the period ended 30 September 2007 Six months ended Six months ended Year ended 30 September 30 September 31 March 2007 2006 2007 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Cash flows from operating activities Continuing operations (Loss)/profit after taxation (786) 107 313 Interest expense (271) (405) (881) Depreciation of property, plant and equipment 329 328 756 Amortisation of intangible assets 118 27 172 Decrease/(increase) in inventories 11 (38) 25 (Increase)/decrease in trade and other receivables (237) (2,355) 7,204 (Decrease)/increase in trade and other payables (3,794) (3,302) (7,750) --------------------- ---------- ---------- ---------- Cash utilised in operations (4,630) (5,638) (161) Interest paid - (1) (1) --------------------- ---------- ---------- ---------- Net cash utilised in continuing operating activities (4,630) (5,639) (162) --------------------- ---------- ---------- ---------- Discontinued operations Profit after taxation 567 7,552 8,062 Taxation recognised in income statement 15 80 80 Interest expense - 75 75 Depreciation of property, plant and equipment 30 - - Amortisation of intangible assets 21 - - Disposal of property, plant and equipment (141) - - Inventories - (45) (45) (Increase)/decrease in trade and other receivables (5) 7,387 7,016 Increase/(decrease) in trade and other payables 127 (12,499) (13,920) --------------------- ---------- ---------- ---------- Cash generated from operations 614 2,550 1,268 Interest paid - (169) (169) Taxation (15) (80) (80) --------------------- ---------- ---------- ---------- Net cash generated from discontinued operating activities 599 2,301 1,019 --------------------- ---------- ---------- ---------- Cash flows from investing activities Continuing operations Purchase of property, plant and equipment (221) (550) (947) Purchases of intangible fixed assets (62) (151) (230) Interest received 267 481 785 --------------------- ---------- ---------- ---------- Net cash utilised in continuing investing activities (16) (220) (392) --------------------- ---------- ---------- ---------- Discontinued operations Purchase of property, plant and equipment (13) (42) (13) Purchases of intangible fixed assets (37) - (37) Proceeds on disposal of subsidiary - 10,728 10,188 undertaking Net cash disposed with subsidiary - (3,165) (3,165) undertaking Interest received - 18 18 --------------------- ---------- ---------- ---------- Net cash (utilised)/generated from discontinued investing activities (50) 7,539 6,991 --------------------- ---------- ---------- ---------- Cash flows from financing activities Continuing operations Issue of shares 234 112 60 Share buyback and tender offer - - (10,247) Capital element of finance payments lease rental (2) (8) (5) ---------- ---------- ---------- --------------------- Net cash generated from continuing investing activities 232 104 (10,192) --------------------- ---------- ---------- ---------- Discontinued operations Loans repaid - (400) (400) --------------------- ---------- ---------- ---------- Net cash utilised in discontinued investing activities - (400) (400) --------------------- ---------- ---------- ---------- --------------------- ---------- ---------- ---------- Decrease in cash and cash equivalents (3,865) 3,685 (3,136) Cash and cash equivalents at the start of the period 9,601 12,737 12,737 --------------------- ---------- ---------- ---------- Cash and cash equivalents at the end of the period 5,736 16,422 9,601 ===================== ========== ========== ========== Eckoh plc Consolidated Interim Financial Statements for the period ended 30 September 2007 1. General information The financial information set out in this interim report for the six months ended 30 September 2007 and the comparative figures for the six months ended 30 September 2006 are unaudited. The UK GAAP figures for the year ended 31 March 2007 were audited, however the IFRS conversion figures are not audited. This financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The Group's statutory financial statements for the year ended 31 March 2007 were prepared under UK GAAP. The auditors report on these financial statements was unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under section 237(2) of the Companies Act 1985. The financial statements for the year ended 31 March 2007 have been filed with the Registrar of Companies. 2. Basis of preparation These consolidated interim financial statements ('the interim financial statements') of Eckoh plc are for the six months ended 30 September 2007. They take into account the requirements of IFRS1, First-time Adoption of IFRS, as they are part of the period covered by the Group's first IFRS financial statements for the year ended 31 March 2008. These interim financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (November 2007). The IFRS standards and IFRIC interpretations that will be applicable at 31 March 2008, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements. The interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2007. These interim financial statements have been prepared in accordance with the accounting policies set out below which are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union ('EU') and effective at 31 March 2008 or are expected to be adopted and effective at 31 March 2008, the first annual reporting date at which we are required to use IFRS accounting standards adopted by the EU. As permitted by the AIM Listing Rules, the Group has elected not to comply with IAS 34 'Interim financial reporting'. Eckoh plc's consolidated financial statements were prepared in accordance with applicable United Kingdom Generally Accepted Accounting Principles ('UK GAAP') until 31 March 2007. The date of transition was 1 April 2006. UK GAAP differs in some areas from IFRS. In preparing Eckoh plc's 2007 consolidated interim financial statements, management has amended certain accounting methods applied in the UK GAAP financial statements to comply with IFRS. The comparative figures in respect of 2006 have been restated to reflect these adjustments. Reconciliations and descriptions of the effect of the transition from UK GAAP to IFRS on the Group's equity, net income and cash flows are provided in Note 7. These consolidated interim financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities at fair value through profit and loss. The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The principal accounting policies, which have been consistently applied to all of the periods presented, are described below. 3. Summary of principal accounting policies Basis of Consolidation The Group financial statements consolidate the accounts of the Company and its subsidiary undertakings. The results of subsidiaries acquired are included in the consolidated income statement from the date on which control passes to the Group and are included until the date on which the Group ceases to control them. Subsidiaries are all entities over which the Group has power to control the financial and operating policies so as to obtain benefits from their activities. Transactions between Group companies are eliminated on consolidation. Investments in subsidiary undertakings are accounted for using the purchase method of accounting. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group's share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Business combinations prior to 1 April 2006 have not been restated onto an IFRS basis due to the application of an exemption under IFRS1. Intangible fixed assets (a) Goodwill Goodwill represents the excess of the fair value of the consideration paid over the fair value attributable to the net assets acquired and is capitalised on the Group balance sheet. Goodwill is carried at cost less amortisation charged prior to the Group's transition to IFRS on 1 April 2006. Prior to the adoption of IFRS, goodwill was amortised over a period not exceeding 20 years. Following the adoption of IFRS, goodwill is not amortised and is reviewed for impairment at least annually. Any impairment is recognised in the period in which it is indentified. (b) Intangible fixed assets Intangible fixed assets (including customer bases and client contracts) acquired by the Group are capitalised at the fair value of the consideration paid and amortised over their expected useful economic lives. The expected useful economic life of an acquired customer base is generally assumed to be 3-5 years. The useful economic lives for other intangible assets are assessed for each acquisition as it arises. (c) Research and development Research costs are charged to the income statement in the year in which they are incurred. Development expenses include expenses incurred by the Group to develop new products and enhance its systems. Development costs are capitalised as intangible fixed assets when it is probable that the project will be a success, considering its commercial and technological feasibility, and costs can be measured reliably. Development costs that do not meet those criteria are expensed as incurred. Capitalised development costs are amortised on a straight line bases over the estimated useful life of the asset, which is generally three years. The carrying value of intangible fixed assets is assessed at the end of each financial year for impairment. See the policy entitled impairment of assets below. Impairment of assets An impairment loss is recognised in the income statement for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell, and the value-in-use based on an internal discounted cash flow evaluation. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist Property, plant and equipment Property, plant and equipment is stated at cost or fair value at acquisition, net of depreciation and any provisions for impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The gain or loss arising on the disposal of an asset is determined by comparing the disposal proceeds and the carrying amount of the asset and is recognised in the income statement. Depreciation is calculated using the straight-line method to allocate the cost of each asset to its estimated residual value over its expected useful life, as follows: Motor vehicles - over 3 years Fixtures and equipment - over 3 years Material residual values and useful lives are reviewed, and adjusted if appropriate, at least annually. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Financial assets Financial assets include investments in companies other than Group companies, financial receivables held for investment purposes, treasury shares and other securities. Financial fixed assets are recorded at cost, including additional direct expenses. A permanent impairment is provided as a direct reduction of the securities account. The Group classifies its investments in the following categories: financial assets at fair value through profit and loss, loans and receivables, held-to-maturity investments and available-for-sale investments. The classification depends on the purpose for which the investments were acquired. The classification is determined by management at initial recognition and the designation is re-evaluated at each balance sheet date. (a) financial assets at fair value through profit and loss: a financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. (b) loans and receivables: loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and with no intention of trading. They are included within current assets, with the exception of those with maturities greater than one year, which are included within non-current assets. Loans and receivables are included within trade and other receivables in the balance sheet. (c) held-to-maturity investments: held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the intention and ability to hold to maturity. The Group did not hold any investments in the category during the year. (d) available-for-sale investments: are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included within non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired. In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment losses recognised previously on debt securities are reversed through the income statement when the increase can be related objectively to an event occurring after the impairment loss was recognised in the income statement. An assessment for impairment is undertaken annually. A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards if ownership but does transfer control of that asset. Inventories Inventories are valued at the lower of cost and net realisable value. The cost of finished goods and work in progress comprises design costs, direct labour and other direct costs. Net realisable value is the estimated selling price in the ordinary course of business less applicable selling expenses. Trade and other receivables Trade and other receivables are recognised at fair value. A provision for the impairment of trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the provision is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. Other receivables are stated at amortised cost less provision for impairment. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term investments, with maturities of three months of less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. Equity Equity comprises the following: (a) 'Share capital' represents the nominal value of ordinary shares. (b) 'Capital redemption reserve' represents the maintenance of capital following the share buy back and tender offer. (c) 'Share premium reserve' represents consideration for ordinary shares in excess of the nominal value. (d) 'Currency reserve' represents exchange differences arising on consolidation of Group companies with a functional currency different to the presentation currency. (e) 'Retained earnings' represents retained profits. Foreign currency transactions (a) Functional and presentation currency Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The consolidated financial statements are presented in Sterling, which is the Group's functional and presentation currency. (b) Group companies The results and position of all Group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities are translated at the closing rates of exchange ruling at the balance sheet date; (ii) income and expenses are translated at the average exchange rates. If however the average exchange rate is not a reasonable approximation of the exchange rates prevailing on the date of the transactions, the income and expenses are translated at the exchange rates at the transaction dates; and (iii) resulting exchange differences are recognised as a separate component of equity. Differences on exchange arising from the retranslation of the net investment in foreign entities are taken to shareholders equity on consolidation. When a foreign entity is sold, such exchange differences are recognised in the income statement as part of the profit or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and as such are translated at the closing rate. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. Provisions Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used reflects current market assessments of the time value of money and the increases specific to the liability. Employee Benefits (a) Pensions The Group operates a group personal pension scheme and one Group company operates a defined contribution pension scheme. The assets of the schemes are held separately from those of the Group in independently administered funds. Contributions payable are charged in the income statement in the year in which they are incurred. (b) Bonus schemes The Group recognises a liability and an expense for bonuses payable to: i) employees based on a formula that takes in to account gross profit; and ii) senior management and executive directors based on a formula that takes in to account operating profit. A provision is recognised where there is a past practice that has created a constructive obligation. (c) Share-based payments From time to time on a discretionary basis, the Board of Directors award high-performing employees bonuses in the form of share options. The options are subject to a three year vesting period and their fair value is recognised as an employee benefits expense with a corresponding increase in equity over the vesting period. The proceeds received are credited to share capital and share premium when the options are exercised. The Company operates a share option scheme which allowed certain employees to acquire shares in the Company. The fair value of share options granted is recognised within staff costs with a corresponding increase in equity. The fair value is measured at grant date and spread over the period up to the date when the recipient becomes unconditionally entitled to payment. The fair value of share options was measured using the QCA-IRS option valuer using the Black-Scholes formula, taking into account the terms and conditions upon which the grants were made. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold of vesting. IFRS 2 has been applied to all options granted after 7 November 2002 which have not vested on or before 1 April 2006. A deferred tax adjustment is also made relating to the intrinsic value of the share options at the balance sheet date. As a result of the grant of share options since 6 April 1999 the Company will be obliged to pay employer's National Insurance contributions on the difference between the market value of the underlying shares and their exercise price when the options are exercised. A provision is made for this liability using the value of the Company's shares at the balance sheet date and is spread over the vesting period of the share options. (d) Employee Share Ownership Plan The Group's Employee Share Ownership Plan ('ESOP') is a separately administered trust. The assets of the ESOP comprise shares in the Company and cash. The assets, liabilities, income and costs of the ESOP have been included in the financial statements in accordance with SIC 12, Consolidation - Special purpose entities and IAS 32 - Financial Instruments: Disclosure and Presentation. The shares in the Company are included at cost to the ESOP and deducted from shareholders' fund. When calculating earnings per share these shares are treated as if they were cancelled. Revenue recognition Revenue represents the fair value of the sale of goods and services, net of Value-Added Tax, and after eliminating sales within the Group. Revenue is recognised as follows: Speech Solutions build fee revenue is recognised on delivery of the speech application. Call revenue from speech services is recognised when the Group has determined that users have accessed its services via a telephone carrier network and/or the Group's telecommunication call processing equipment connected to that network. In the event that build, call and maintenance revenue are included in the same contract, each component part is separately valued and individual component revenues are recognised when that component is delivered. Client Services and Connection Makers revenue is recognised when the Group has determined that users have accessed its services via a telephone carrier network and/or the Group's telecommunication call processing equipment connected to that network. Cost of sales includes media costs, network charges, production costs and facility costs, and is expensed in the accounting period in which the related revenues are generated Taxation Current tax is the tax currently payable based on taxable profit for the year. The interim tax charge on underlying business performance is calculated by reference to the estimated effective rate for the full year. Tax on disposals and other related items is based on the expected tax impact of each item. Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not provided if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity. Financial liabilities Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities are recorded initially at fair value, net of direct issue costs. A financial liability is derecognised only when the obligation is discharged, is cancelled or it expires. 4. Segment analysis The Group's primary and only reporting format is by business. Eckoh plc operates three business segments Speech Solutions, Client IVR and Connection Makers. All revenue originates from the United Kingdom. The revenues and operating results generated by each of the business segments within continuing operations are summarised as follows: Six months ended Connection Speech Client Central Total 30 September 2007 Makers Chat Solutions IVR costs continuing division operations Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 -------------- --------- -------- -------- -------- -------- Revenue 1,698 3,099 13,157 - 17,954 -------------- --------- -------- -------- -------- -------- Gross profit 708 1,873 844 - 3,425 -------------- --------- -------- -------- -------- -------- Administrative expenses (287) (1,498) (1,074) (1,608) (4,467) Net interest receivable - - - 271 271 -------------- --------- -------- -------- -------- -------- Loss before taxation 421 375 (230) (1,337) (771) -------------- --------- -------- -------- -------- -------- Six months ended Connection Speech Client Central Total 30 September 2006 Makers Chat Solutions IVR costs continuing division operations Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 -------------- --------- -------- -------- -------- -------- Revenue 2,284 2,956 38,754 - 43,994 -------------- --------- -------- -------- -------- -------- Gross profit 761 1,641 1,829 - 4,231 -------------- --------- -------- -------- -------- -------- Administrative expenses (318) (1,290) (1,117) (1,804) (4,529) Net interest receivable - - - 405 405 -------------- --------- -------- -------- -------- -------- Profit before taxation 443 351 712 (1,399) 107 -------------- --------- -------- -------- -------- -------- Year ended Connection Speech Client Central Total 31 March 2007 Makers Chat Solutions IVR costs continuing division operations Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 -------------- --------- -------- -------- -------- -------- Revenue 3,964 6,260 71,315 - 81,539 -------------- --------- -------- -------- -------- -------- Gross profit 1,602 3,888 3,481 - 8,971 -------------- --------- -------- -------- -------- -------- Administrative expenses (613) (2,690) (2,363) (3,873) (9,539) Net interest receivable - - - 881 881 -------------- --------- -------- -------- -------- -------- Profit before taxation 989 1,198 1,118 (2,992) 313 -------------- --------- -------- -------- -------- -------- 5. Earnings per share Basic earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares of 198,605,468 (2006: 272,807,584) in issue during the six months ended 30 September 2007 after adjusting for shares held by the Employee Share Ownership Plan of 157,679 (2006: Nil) and the loss for the period attributable to equity holders of the parent of Â£0.2m (2006: profit of Â£7.5m). In calculating diluted earnings per share, the weighted average number of ordinary shares in issue, after adjusting for shares held by the Employee Share Ownership Plan is further adjusted to include the dilutive effect of potential ordinary shares. The potential ordinary shares represent share options granted to employees where the exercise price is less than the average market price of ordinary shares in the period. The dilutive effect of potential ordinary shares is 1,729,539 (2006: 5,419,079). Six months Six months ended 30 ended 30 Year ended September September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Weighted average number of shares in issue in the period (number in thousands) 198,605 272,808 263,383 Shares held by employee ownership plan (158) - - ------------------------ --------- --------- -------- Number of shares used in calculating basic earnings per share (number in thousands) 198,447 272,808 263,383 Dilutive effect of share options 1,730 5,419 5,152 ------------------------ --------- --------- -------- Number of shares used in calculating diluted earnings per share (number in thousands) 200,177 278,227 268,535 ------------------------ --------- --------- -------- (Loss)/earnings per share expressed in pence per share Basic (0.11) 2.76 3.13 Diluted (0.11) 2.70 3.07 (Loss)/earnings per share from continuing operations expressed in pence per share Basic (0.40) 0.04 0.12 Diluted (0.40) 0.04 0.12 (Loss)/earnings per share from discontinued operations expressed in pence per share Basic 0.29 2.77 3.06 Diluted 0.28 2.71 3.00 6. Transition to IFRS As stated in the Basis of Preparation, these are the Group's first consolidated interim financial statements for part of the period covered by the first IFRS annual consolidated financial statements prepared in accordance with IFRS. IFRS 1 permits companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period. These consolidated interim financial statements have been prepared on the basis of taking the following optional exemptions: i) Business combinations prior to 1 April 2006, the Group's date of transition to IFRS, have not been restated to comply with IFRS 3 'Business Combinations'. ii) Cumulative translation differences existing at the date of transition to IFRS are deemed to be zero. The gain or loss on a subsequent disposal of any foreign operation shall exclude translation differences that arose before the date of transition to IFRS and shall include later translation differences. The following reconciliations show the effect of the transition from UK GAAP to IFRS. The first reconciliation provides an overview of the impact on equity of the transition at 1 April 2006, 30 September 2006 and 31 March 2007 followed by reconciliations of equity and net income. Summary of Equity 30 September 31 March 1 April 2006 2007 2006 Â£'000 Â£'000 Â£'000 --------------------- ---------- ---------- ---------- Total equity under UK GAAP 18,120 8,699 12,201 --------------------- ---------- ---------- ---------- --------------------- ---------- ---------- ---------- Total equity under IFRS 18,094 8,689 11,845 --------------------- ---------- ---------- ---------- Effect of UK GAAP transition IFRS Group to IFRS Group Reconciliation of equity at 1 April 2006 Â£'000 Â£'000 Â£'000 Notes ------------------------ ------- -------- ------- ------ Assets Non-current assets Goodwill 8,036 (8,036) - a Intangible assets 568 (446) 122 a,b Property plant and equipment 1,498 (466) 1,032 a Financial assets - available for sale investments 288 - 288 ------------------------ ------- -------- ------- 10,390 (8,948) 1,442 ------------------------ ------- -------- ------- Current assets Inventories 479 (437) 42 a Trade and other receivables 22,537 (3,060) 19,477 a Cash and cash equivalents 12,737 (4,470) 8,267 a ------------------------ ------- -------- ------- 35,753 (7,967) 27,786 ------------------------ ------- -------- ------- ------------------------ ------- -------- ------- Assets held for sale - 21,221 21,221 a ------------------------ ------- -------- ------- Total assets 46,143 4,306 50,449 Liabilities Current liabilities Trade and other payables (28,771) 8,640 (20,131) c Current tax liabilities (1,476) 397 (1,079) c Obligations under finance leases (23) 7 (16) c Bank loans and overdrafts (2,007) 1,895 (112) c ------------------------ ------- -------- ------- (32,277) 10,939 (21,338) ------------------------ ------- -------- ------- Liabilities directly associated with assets held for sale - (17,114) (17,114) c Non-current liabilities Bank loans (1,473) 1,473 - c Obligations under finance leases (20) 16 (4) c Provisions (172) 24 (148) c ------------------------ ------- -------- ------- (1,665) 1,513 (152) ------------------------ ------- -------- ------- ------------------------ ------- -------- ------- Net assets 12,201 (356) 11,845 ======================== ======= ======== ======= Shareholders' equity Share capital 681 - 681 Share premium 227 - 227 Retained earnings 9,366 (21) 9,345 d ------------------------ -------- -------- -------- Equity attributable to equity holders of the 10,274 (21) 10,253 parent Minority interest in equity 1,927 (335) 1,592 e ------------------------ -------- -------- -------- Total equity 12,201 (356) 11,845 ======================== ======== ======== ======== Explanation of the effect of the transition to IFRS The material adjustments to the balance sheet are explained below: a Assets held for sale On the transition from UK GAAP to IFRS the assets, as at 1 April 2006, of Symphony Telecom Holdings plc ('Symphony'), a 65.64% owned, AIM listed subsidiary of Eckoh plc, have been included within the heading 'assets classified as held for sale' as the investment met the IFRS 5 criteria for such classification. The line items affected are described below: Goodwill Overall impact of recognising goodwill within assets held for sale 8,036 Intangible assets Overall impact of recognising intangible assets within assets held for sale 425 Property, plant and equipment Overall impact of recognising property, plant and equipment within assets held for sale 466 Inventories Overall impact of recognising inventories within assets held for sale 437 Trade and other receivables Overall impact of recognising trade and other receivables within assets held for sale 7,387 Cash and cash equivalents Overall impact of recognising cash and cash equivalents within assets held for sale 4,470 ---------------------------------------- ------- Total impact - assets held for sale 21,221 ---------------------------------------- ------- b Intangible assets Overall impact of derecognising intangible assets in accordance with IAS 38 21 ---------------------------------------- ------- Total impact - decrease in intangible assets 21 ---------------------------------------- ------- c Liabilities directly associated with assets held for sale On the transition from UK GAAP to IFRS the liabilities, as at 1 April 2006, of Symphony have been included within the heading 'liabilities directly associated with assets held for sale'. The line items affected are described below: Trade and other payables Overall impact of recognising trade and other payables within liabilities directly associated with assets held for sale 13,302 Current tax liabilities Overall impact of recognising current tax liabilities within liabilities directly associated with assets held for sale 397 Obligations under finance leases Overall impact of recognising obligations under finance leases within liabilities directly associated with assets held for sale 7 Bank loans and overdrafts Overall impact of recognising bank loans and overdrafts within liabilities directly associated with assets held for sale 1,895 Bank loans Overall impact of recognising bank loans within liabilities directly associated with assets held for sale 1,473 Obligations under finance leases Overall impact of recognising obligations under finance leases within liabilities directly associated with assets held for sale 16 Provisions Overall impact of recognising provisions within liabilities directly associated with assets held for sale 24 --------------------------------------- ------- Total impact - liabilities directly associated with assets held for sale 17,114 --------------------------------------- ------- d Retained earnings Overall impact of derecognising intangible assets in accordance with IAS 38 (21) --------------------------------------- ------- Total impact - decrease in retained earnings (21) --------------------------------------- ------- e Minority interest in equity Overall impact of accounting for Joint Ventures in accordance with IAS 31 (335) --------------------------------------- ------- Total impact - reduction in minority interest in equity (335) --------------------------------------- ------- Effect of UK GAAP transition IFRS Group to IFRS Group Reconciliation of equity at 30 Â£'000 Â£'000 Â£'000 Notes September 2006 ------- -------- ------- ------ Assets Non-current assets Intangible assets 272 (26) 246 a Property plant and equipment 1,256 - 1,256 Financial assets - available for sale investments 288 - 288 Other receivables 4,700 - 4,700 ------------------------ ------- -------- ------- 6,516 (26) 6,490 ------------------------ ------- -------- ------- Current assets Inventories 80 - 80 Trade and other receivables 13,132 - 13,132 Cash and cash equivalents 16,422 - 16,422 ------------------------ ------- -------- ------- 29,634 - 29,634 ------------------------ ------- -------- ------- Total assets 36,150 (26) 36,124 Liabilities Current liabilities Trade and other payables (17,691) - (17,691) Current tax liabilities (196) - (196) Obligations under finance leases (20) - (20) ------------------------ ------- -------- ------- (17,907) - (17,907) ------------------------ ------- -------- ------- Non-current liabilities Provisions (123) - (123) ------------------------ ------- -------- ------- (123) - (123) ----------------------- ------- -------- ------- ------------------------ ------- -------- ------- Net assets 18,120 (26) 18,094 ======================== ======= ======== ======= Shareholders' equity Share capital 685 - 685 Share premium 335 - 335 Currency reserve - 37 37 b Retained earnings 17,100 (63) 17,037 c ------------------------ -------- -------- -------- Equity attributable to equity holders of the 18,120 (26) 18,094 parent ======== ======== ======== ======================== Explanation of the effect of the transition to IFRS The material adjustments to the balance sheet are explained below: a Intangible assets Overall impact of derecognising intangible assets in accordance with IAS 38 (26) ----------------------------------------- ------ Total impact - decrease in intangible assets (26) ----------------------------------------- ------ b Currency reserve Overall impact of separate disclosure of currency reserve 37 ----------------------------------------- ------ Total impact - separate disclosure of currency reserve 37 ----------------------------------------- ------ c Retained earnings Overall impact of derecognising intangible assets in accordance with IAS 38 (26) Overall impact of separate disclosure of currency reserve (37) ----------------------------------------- ------ Total impact - increase in retained earnings (63) ----------------------------------------- ------ Effect of UK GAAP transition IFRS Group to IFRS Group Reconciliation of equity at 31 March Â£'000 Â£'000 Â£'000 Notes 2007 ------- -------- ------- ------ Assets Non-current assets Intangible assets 190 (10) 180 a Property plant and equipment 1,148 - 1,148 Financial assets - available for sale investments 288 - 288 Other receivables 3,273 - 3,273 ------------------------ ------- -------- ------- 4,899 (10) 4,889 ------------------------ ------- -------- ------- Current assets Inventories 17 - 17 Trade and other receivables 8,644 - 8,644 Cash and cash equivalents 9,601 - 9,601 ------------------------ ------- -------- ------- 18,262 - 18,262 ------------------------ ------- -------- ------- Total assets 23,161 (10) 23,151 Liabilities Current liabilities Trade and other payables (13,682) - (13,682) Current tax liabilities (257) - (257) Obligations under finance leases (7) - (7) ------------------------ ------- -------- ------- (13,946) - (13,946) ------------------------ ------- -------- ------- Non-current liabilities Provisions (516) - (516) ------------------------ ------- -------- ------- (516) - (516) ------------------------ ------- -------- ------- ------------------------ ------- -------- ------- Net assets 8,699 (10) 8,689 ======================== ======= ======== ======= Shareholders' equity Share capital 491 - 491 Capital redemption reserve 198 - 198 Share premium 477 - 477 Currency reserve - (61) (61) b Retained earnings 7,533 51 7,584 c ------------------------ -------- -------- -------- Equity attributable to equity holders of the parent 8,699 (10) 8,689 ======================== ======== ======== ======== Explanation of the effect of the transition to IFRS The material adjustments to the balance sheet are explained below: a Intangible fixed assets Overall impact of derecognising intangible assets in accordance with IAS 38 (10) ----------------------------------------- ------ Total impact - decrease in intangible assets (10) ----------------------------------------- ------ b Currency reserve Overall impact of separate disclosure of currency reserve (61) ----------------------------------------- ------ Total impact - separate disclosure of currency reserve (61) ----------------------------------------- ------ c Retained earnings Overall impact of derecognising intangible assets in accordance with IAS 38 (10) Overall impact of separate disclosure of currency reserve 61 ----------------------------------------- ------ Total impact - increase in retained earnings 51 ----------------------------------------- ------ Effect of UK GAAP transition IFRS Reconciliation of net income for the six Group To IFRS Group Notes months ended 30 September 2006 Â£'000 Â£'000 Â£'000 ----------------------- ------- -------- ------- ------ Continuing operations Revenue 43,994 - 43,994 Cost of sales (39,763) - (39,763) ------------------------ ------- -------- ------- Gross profit 4,231 - 4,231 Administrative expenses (4,511) (18) (4,529) a ------------------------ ------- -------- ------- Operating loss (280) (18) (298) Interest receivable 406 - 406 Interest payable (1) - (1) ------------------------ ------- -------- ------- Profit before taxation 125 (18) 107 Taxation - - - ------------------------ ------- -------- ------- Profit attributable to equity holders of the parent from continuing operations 125 (18) 107 Discontinued operations Post tax profit for the period from discontinued operations 7,552 - 7,552 ------------------------ ------- -------- ------- Profit for the period 7,677 (18) 7,659 ------------------------ ------- -------- ------- Attributable to: Minority interests 26 116 142 b Equity holders of the parent 7,651 (134) 7,517 c ------------------------ ------- -------- ------- 7,677 (18) 7,659 ------------------------ ------- -------- ------- Explanation of the effect of the transition to IFRS The material adjustments to the income statement are explained below: a Administrative expenses Effect of the derecognition of advertisements classified within intangible fixed assets under UK GAAP, but derecognised in accordance with the IAS 38 criteria: - Amortisation charge reversal 32 - Additions charged to income statement (50) ----------------------------------------- ------ Total impact - increase in administrative expenses (18) ----------------------------------------- ------ b Profit attributable to minority interests Effect of accounting for the Joint Ventures of Symphony Telecom Holdings plc in accordance with the IAS 31 criteria 116 ----------------------------------------- ------ Total impact - increase in profit attributable to minority interests 116 ----------------------------------------- ------ c Profit attributable to equity holders of the parent Increase in administrative expenses (see a) (18) Increase in profit attributable to minority interests (see b) (116) ----------------------------------------- ------ Total impact - decrease in profit attributable to equity holders of the parent (134) ----------------------------------------- ------ Effect of UK GAAP transition IFRS Reconciliation of net income for year Group To IFRS Group Notes ended 31 March 2007 Â£'000 Â£'000 Â£'000 ----------------------- ------- -------- ------- ------ Continuing operations Revenue 81,539 - 81,539 Cost of sales (72,568) - (72,568) ------------------------ ------- -------- ------- Gross profit 8,971 - 8,971 Administrative expenses (9,548) 9 (9,539) a ------------------------ ------- -------- ------- Operating loss (577) 9 (568) Interest receivable 882 - 882 Interest payable (1) - (1) ------------------------ ------- -------- ------- Profit before taxation 304 9 313 Taxation - - - ------------------------ ------- -------- ------- Profit attributable to equity holders of the parent from continuing operations 304 9 313 Discontinued operations Post tax profit for the period from discontinued operations 8,062 - 8,062 ------------------------ ------- -------- ------- Profit for the period 8,366 9 8,375 ------------------------ ------- -------- ------- Attributable to: Minority interests 28 116 144 b Equity holders of the parent 8,338 (107) 8,231 c ------------------------ ------- -------- ------- 8,366 9 8,375 ------------------------ ------- -------- ------- Explanation of the effect of the transition to IFRS The material adjustments to the income statement are explained below: a Administrative expenses Effect of the derecognition of advertisements classified within intangible fixed assets under UK GAAP, but derecognised in accordance with the IAS 38 criteria: - Amortisation charge reversal 64 - Additions charged to income statement (55) ----------------------------------------- ------ Total impact - decrease in administrative expenses 9 ----------------------------------------- ------ b Profit attributable to minority interests Effect of accounting for the Joint Ventures of Symphony Telecom Holdings plc in accordance with the IAS 31 criteria 116 ----------------------------------------- ------ Total impact - increase in profit attributable to minority interests 116 ----------------------------------------- ------ c Profit attributable to equity holders of the parent Decrease in administrative expenses (see a) 9 Increase in profit attributable to minority interests (see b) (116) ----------------------------------------- ------ Total impact - decrease in profit attributable to equity holders of the parent (107) ----------------------------------------- ------ 7. Explanation of material adjustments to the cash flow statement The definition of cash is narrower under UK GAAP than under IAS 7 'Cash Flow Statements'. Under IFRS highly liquid investments, readily convertible to a known amount of cash and with an insignificant risk of changes in value, are regarded as cash equivalents. The cash flow statement in the last UK GAAP financial statements reported movements in cash. The cash flow statement in these IFRS consolidated interim financial statements reports movements in cash and cash equivalents. Application of IFRS has resulted in reclassification of certain items in the cash flow statement as follows: (i) interest paid and interest received are classified as cash flows from operating activities and cash flows from investing activities respectively under IFRS, but were included in the 'Returns on investments and servicing of finance' category in cash flows under UK GAAP. (ii) taxation is classified as operating cash flows under IFRS, but was included in a separate category of 'Taxation' cash flows under UK GAAP. (iii) payments to acquire property, plant and equipment and payments to acquire intangible fixed assets have been classified as part of 'Investing activities' under IFRS. Under UK GAAP such payments were classified as part of 'Capital expenditure and financial investment'. (iv) cash flows arising from the disposal of subsidiary undertakings are classified as cash flows from investing activities under IFRS, but were included in a separate category of 'Acquisitions and disposals' under UK GAAP. (v) included within cash flows from investing activities under IFRS are cash flows classified as 'Financing' under UK GAAP. There are no other material differences between the cash flow statement presented under IFRS and the cash flow statement presented under UK GAAP. Dealings permitted on Alternative Investment Market (AIM) of the London Stock Exchange. Directors and Company Secretary H.R.P. Reynolds - Non-executive Chairman N.B. Philpot - Chief Executive Officer A.P. Moloney - Group Finance Director and Company Secretary J.P. Hennigan - Executive Director Registered Office Eckoh plc Telford House Corner Hall Hemel Hempstead Hertfordshire, HP3 9HN www.eckoh.com Registered in England and Wales, Company number 3435822. Registrar Capita Registrars The Registry 34 Beckenham Road Beckenham Kent, BR3 4TU Nominated Advisor and Nominated Broker Seymour Pierce Limited 20 Old Bailey London, EC4M 7EN Solicitor Travers Smith 10 Snow Hill London, ECA 2AL Banker Barclays Bank plc 11 Bank Court Hemel Hempstead Hertfordshire, HP1 1BX Auditor BDO Stoy Hayward LLP Prospect Place 85 Great North Road Hatfield Hertfordshire, AL9 5BS This information is provided by RNS The company news service from the London Stock Exchange ND IR ILFEAFSLRLID

Companies

Eckoh (ECK)

Thursday, 21st November 2024

COMPANIES COVERED:

HLMA JD. ITH

JD Sports tanks after management tighten profit guidance towards the lower end of expectations, Halma finds support from strong earnings and capital return commitment cheers shareholders in Ithica Energy.

Full Archive

UK 100

Latest directors dealings

49 minutes ago Alphawave IP Group
1 hour ago WH Smith
2 hours ago Staffline Group
2 hours ago Manchester & London Investment Trust
2 hours ago Associated British Foods

All directors dealings today