Interim Results
Eckoh Technologies PLC
28 November 2006
Immediate Release 28 November 2006
Eckoh Technologies plc
Interim results for the six months ended
30 September 2006
Eckoh Technologies plc ("Eckoh" or the "Company"), one of Europe's leading
providers of outsourced automated solutions, is pleased announce interim results
for the six months ended 30 September 2006.
6 months ended Restated Restated
30 Sept 2006 6 months ended Year
£'000 30 Sept 2005 ended
£'000 31 March 2006
£'000
Turnover 63,308 55,007 127,084
--------------------------------- -------- -------- --------
Total continuing operations 46,773 24,448 64,880
Discontinued operations 16,535 30,559 62,204
--------------------------------- -------- -------- --------
Gross profit 8,736 11,496 24,388
Operating loss (781) (273) (312)
--------------------------------- -------- -------- --------
Total continuing operations (111) (206) (772)
Discontinued operations (670) (67) 460
--------------------------------- -------- -------- --------
Profit before taxation 7,731 1,199 1,091
Adjusted profit before taxation 972 829 2,006
(1)
Profit for the period 7,677 942 1,221
Cash and short-term investments 16,422 12,501 12,737
Half-year highlights:
• Turnover from continuing operations increased by 91% to £46.8m (H1 2005/
6 - £24.4m)
• Adjusted PBT increased from £0.8m to £1.0m and continuing operations PBT
increased to £0.4m from a loss of £0.2m*
• Cash and short term investment balances total £16.4m (H1 2005/6 -
£12.5m)
• £11.0m proceeds from the disposal of the holding in Symphony Telecom
Holdings plc, generating £8.2m profit
Operational highlights:
• Speech revenues increased by 30% to £3.0m (H1 2005/6 - £2.3m)
• New ITV contract led to 141% increase in Client IVR revenue to £38.8m
(H1 2005/6 - £16.1m)
• Strong new business generation in the first six months of trading,
notable wins include:
- Contract renewal with Vue Cinemas until July 2009 and new contact centre
contract
- 5 year contract win with AXA PPP healthcare; expected to go live in early 2007
- 3 year contract with BAA for automated flight information from major UK
airports
• Appointment of Nik Philpot as Chief Executive Officer
Nik Philpot, Chief Executive Officer, commented today:
"The first six months of trading has significantly out-performed expectations
and the good levels of new business generation combined with a traditionally
strong second half means our overall prospects are excellent.
As a Board we remain extremely confident in the outlook for our core business
and totally committed to maximising shareholder value by ensuring all our assets
receive the required value they deserve."
For further enquiries, please contact
Eckoh plc
Nik Philpot, Chief Executive Officer
Adam Moloney, Group Finance Director
www.eckoh.com Tel: 01442 458 300
Buchanan Communications
Mark Edwards/Jeremy Garcia/Robin Haddrill Tel: 020 7466 5000
Corporate Synergy
John Prior/Brian Stockbridge Tel: 020 7448 4400
Introduction
The Eckoh Board is pleased with the significant progress made during the period.
On 18 July 2006, we announced the disposal of our 64.64% holding in Symphony
Telecom Holdings plc ("Symphony"), generating £11.0m of cash for the Company and
a profit of £8.2m from the transaction. The disposal was a satisfactory
conclusion following the AIM flotation of Symphony in September 2005, and the
increased cash reserves have broadened the available options and provided
increased flexibility for developing our core business going forward.
Further to the announcement on 14 August 2006, the Eckoh Board announced on 23
November 2006 that discussions regarding a possible offer from a third party for
the Company have terminated. As a result, the Board is now in a position to
consider the best course of action for the return of the majority of funds
received from the Symphony disposal to shareholders. These funds are not
considered necessary for current operations and details of how they will be
returned will be announced in the coming weeks.
Eckoh has seen turnover on continuing operations increase by 91% to £46.8m (H1
2005/6 - £24.4m) and profit before tax excluding intangible asset amortisation
and exceptional items increase from £829k to £972k despite the sale of Symphony.
Excluding discontinued operations, the adjusted profit before tax was £407k (H1
2005/6 - loss of £163k).
Continuing operations
1. Eckoh
Earlier in the year the Speech Solutions and Client IVR divisions were merged
under the "Eckoh" brand. Whilst the activities will continue to be reported
separately this development has proved to be extremely successful and is
reflected in the financial results below.
1.1 Speech Solutions
Eckoh sets the standard for outsourced automated speech solutions across Europe,
specialising in advanced speech recognition and interactive services. The Group
has an exclusive alliance with BT to provide its top corporate customers with
hosted speech recognition services.
The six months to 30 September 2006 has seen significant growth within the
Speech Solutions division of Eckoh, with revenue increasing by 30% to £3.0m (H1
2005/6 - £2.3m). Despite this increase in revenue, direct costs grew by only 18%
to £1.3m (H1 2005/6 - £1.1m), generating a contribution to central overheads of
£0.3m (H1 2005/6 - £0.05m). The high gross margin in this area has increased
further to 56% (H1 2005/6 - 51%).
The directors believe that the trends in the first half will continue into
future periods. Significant revenue growth at high margins, coupled with
moderate overhead increases due to economies of scale, will enable considerable
profits to be driven from this division.
New contract wins and renewals announced over the past six months with
Parcelforce Worldwide, National Rail Enquiries, Wembley National Stadium and Vue
Cinemas had not fully launched during the first half of the financial year. The
benefit of the revenues from these services will begin to be seen during the six
months to 31 March 2007, and will lead to an increasingly profitable second half
of the year.
Today we can also announce two more significant contract wins with a 5-year
speech contract with AXA PPP healthcare for a new service expected to go live in
early 2007 and a 3-year contract with BAA to provide automated flight
information for all of the major UK airports which launched with the Heathrow
service in October and is expected to be fully live within the next few months.
Following the acquisition of UGC Cinemas by Cineworld in December 2004 the
cinema information service provided for UGC by Eckoh was finally terminated in
September 2006. Whilst this will have only a minimal impact in this financial
year the contract value will need to be replaced in the future periods.
1.2 Client IVR Services
Eckoh is one of the UK's largest providers of IVR and mobile interactive
services to media owners, delivering an end to end solution including creation,
design, development, implementation, deployment, hosting and reporting.
In April it was announced that Eckoh had not only retained the contract to
provide interactive telephony services to ITV but had won the new contract to
provide services to ITV Play, a new business that ITV were launching in the area
of "Participation TV".
The technical solution that ITV Play required was far more complex than the
traditional services in the media sector and clearly supported the rationale for
bringing together the technical resources from both the Speech Solutions and
Client IVR teams.
The new ITV Play activity features a number of participation shows which are
broadcast live for up to 16 hours a day on the ITV Play channel and also
simulcasted across other ITV channels. This has led to massive revenue growth in
the period with revenues increasing by 141% to £38.8m (H1 2005/6 - £16.1m).
Whilst the high volumes generated by the new ITV contract have led to a
reduction in margin to 5% (H1 2005/6 - 8%), the value of gross profit has
increased to £1.8m (H1 2005/6 - £1.3m). In addition, direct expenses have
actually reduced to £1.1m (H1 2005/6 - £1.2m) leading to a significant increase
in the contribution to central overheads of £0.7m (H1 2005/6 - £0.1m).
The strategy in the media sector is to continue to concentrate efforts on
providing a premium level of service to a key number of high quality clients
such as ITV, Trinity Mirror and IPC Magazines. This will enable the division to
keep overheads to a minimum and still generate profits in spite of the low
margins. It is also anticipated that as media clients require more complex
solutions, such as ITV Play, that Eckoh can consolidate their market leading
position in what has historically been a very competitive sector and can
ultimately start to improve margins. We will continue to pursue this strategy
and seek to target quality clients that generate the high level of calls which
can benefit both parties.
2. Connection Makers
Connection Makers specialise in IVR, mobile dating and chat services, which are
advertised or distributed directly in newspapers, magazines or on television,
and provided to clients on a revenue share basis.
As predicted, the six months to 30 September 2006 have been challenging as a
result of changes on the Sky TV platform and regulatory pressures which have
particularly impacted the services that are promoted through television, and
which have necessitated adjustments to the business model. The first quarter in
particular saw a sharp decrease in revenue and contribution, but there has been
a recovery in the second quarter which is hoped to continue throughout the
second half of the year.
Revenues for the period were down 16% to £5.1m (H1 2005/6 - £6.1m). Whilst
revenues were down, Connection Makers continues to be a highly profit generative
part of the business with margins at 44% (H1 2005/6 - 44%) realising a gross
profit of £2.2m (H1 2005/6 - £2.7m). Direct expenses within the division
increased to £1.6m, reflecting the additional investment in the broadcast area
(H1 2005/6 - £1.2m) which gave a contribution to central overheads of £0.6m (H1
2005/6 - £1.5m).
During the last year, Connection Makers has been set up as a standalone business
with its own management team. The separable nature of this division has now
given Eckoh a greater level of flexibility with regard to its strategic options
for this part of the business.
3. Discontinued Operations
Eckoh's results include those for the discontinued Symphony operation for the
period prior to its disposal on 18 July 2006. During that period, Symphony
reported £0.7m of losses before interest and tax (H1 2005/6 - loss of £0.1m). As
part of the disposal process, there was an extensive review of the overhead in
the remaining business. This resulted in a restructuring cost of £718k in the
six month period but will lead to a cost saving of around £500k per annum going
forward.
4. Outlook
On 18 October 2006, Eckoh announced that the business had progressed well in the
first six months of the financial year and that the Company as a whole was
trading ahead of market expectations. These results confirm that announcement,
and with the second half of the financial year traditionally a more profitable
period than the first half, the directors are very confident in the Company's
prospects.
The £16.4m of cash reported in the balance sheet was negatively impacted by a
delay in the receipt of a £1.9m payment from a supplier. However, with £16.4m of
cash and short-term investments on the balance sheet, as well as a £4.7m loan
outstanding from Symphony, the directors are aware that they are in possession
of more cash than they require for an operation that is cash generative.
Following the announcement on 23 November that discussions regarding a possible
offer from a third party were at an end, the Eckoh Board is now in a position to
consider the best course of action for its surplus cash reserves. The Board
expects to return the majority of funds received from the recent disposal of its
holding in Symphony to shareholders. Details of how the funds will be returned
will be announced in the coming weeks.
The Board continues to believe that Eckoh's share price does not fully reflect
the value of the Group's constituent businesses and assets, and as such remains
committed to pursue a strategy to realise the true value for Eckoh shareholders.
Consolidated profit and loss account
for the six months ended 30 September 2006
Note 6 months ended Restated Restated
30 Sept 2006 6 months ended Year
unaudited 30 Sept 2005 ended
£'000 unaudited 31 Mar 2006
£'000 audited
£'000
Turnover 63,308 55,007 127,084
------------------------------- ---- -------- ------- -------
Total continuing operations 46,773 24,448 64,880
Discontinued operations 16,535 30,559 62,204
------------------------------- ---- -------- ------- -------
Cost of sales (54,572) (43,511) (102,696)
-------- ------- -------
Gross profit 8,736 11,496 24,388
------------------------------- ---- -------- ------- -------
Net operating expenses before
intangible asset amortisation
and restructuring costs (8,093) (10,573) (22,177)
Amortisation of intangible
assets (576) (998) (2,165)
Restructuring costs (130) (198) (358)
Restructuring costs relating to
discontinued operations (718) - -
------------------------------- ---- -------- ------- -------
Net operating expenses (9,517) (11,769) (24,700)
-------- ------- -------
------------------------------- ---- -------- ------- -------
Operating profit/(loss) before
intangible asset amortisation
and restructuring costs 643 923 2,211
------------------------------- ---- -------- ------- -------
Total continuing operations 78 (69) (568)
Discontinued operations 565 992 2,779
------------------------------- ---- -------- ------- -------
Operating (loss)/profit (781) (273) (312)
------------------------------- ---- -------- ------- -------
Total continuing operations (111) (206) (772)
Discontinued operations (670) (67) 460
------------------------------- ---- -------- ------- -------
Profit on disposal of
subsidiary 8,183 1,425 1,388
operations
Profit on disposal of fixed
asset investment - 141 300
Costs of group restructuring - - (80)
Net interest
receivable/(payable) and other
similar items 329 (94) (205)
-------- ------- -------
Profit on ordinary activities
before taxation 7,731 1,199 1,091
Taxation (80) (135) (166)
-------- ------- -------
Profit on ordinary activities
after taxation 7,651 1,064 925
Minority interests 26 (122) 296
-------- ------- -------
Profit for the period 7,677 942 1,221
-------- ------- -------
Basic earnings per 0.25p share 2 2.8p 0.3p 0.4p
Diluted earnings per 0.25p 2 2.7p 0.3p 0.4p
share
Statement of total recognised gains and losses
for the six months ended 30 September 2006
--------------------------------
6 months Restated Restated
ended 6 months ended Year
30 Sept 2006 30 Sept 2005 ended
unaudited unaudited 31 Mar 2006
£'000 £'000 audited
£'000
--------------------------------
Profit for the period 7,677 942 1,221
--------------------------------
Exchange adjustments offset in 25 22 (34)
reserves -------- ------- --------
--------------------------------
Total recognised gains for the 7,702 964 1,187
period -------- ------- --------
--------------------------------
Consolidated balance sheet
as at 30 September 2006
30 Sept 2006 30 Sept 31 Mar
2005 2006
unaudited unaudited audited
Note £'000 £'000 £'000
Fixed assets
Intangible fixed assets 272 9,546 8,604
Tangible fixed assets 1,256 1,454 1,498
Investments 288 306 288
-------- -------- --------
1,816 11,306 10,390
Current assets
Stock 80 766 479
Debtors 13,132 17,458 22,537
Short-term investments 13,000 2,000 3,000
Cash at bank and in hand 3,422 10,501 9,737
-------- -------- --------
29,634 30,725 35,753
Creditors: amounts falling due
within one (17,907) (26,146) (32,277)
year -------- -------- --------
Net current assets 11,727 4,579 3,476
Total assets less current 13,543 15,885 13,866
liabilities
Debtors: amounts falling due after
more 4,700 - -
than one year
Creditors: amounts falling due after
more - (3,278) (1,493)
than one year
Provisions for liabilities and (123) (269) (172)
charges
-------- -------- --------
Net assets 18,120 12,338 12,201
-------- -------- --------
Capital and reserves 3
Called up share capital 685 680 681
Share premium account 335 197 227
Profit and loss account 17,100 9,116 9,366
-------- -------- --------
Total shareholders' funds 4 18,120 9,993 10,274
Minority interests - 2,345 1,927
-------- -------- --------
Capital employed 18,120 12,338 12,201
-------- -------- --------
Consolidated cash flow statement
for the six months ended 30 September 2006
Note 6 months 6 months Year
ended ended ended
30 Sept 2006 30 Sept 2005 31 Mar 2006
unaudited unaudited audited
£'000 £'000 £'000
Net cash (outflow)/inflow
from 6 (3,313) (66) 3,232
operating activities
Return on investments and
servicing of finance
Interest received 499 115 286
Interest paid (170) (209) (335)
Loan issue costs - (257) (298)
-------- -------- --------
329 (351) (347)
-------- -------- --------
Taxation (80) (362) (362)
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (594) (376) (1,023)
Expenditure on intangible
fixed (188) (106) (186)
assets
Proceeds on disposal of
tangible fixed asset - - 12
Disposal of trade investment - 141 300
-------- -------- --------
(782) (341) (897)
-------- -------- --------
Acquisitions and disposals
Purchase of subsidiary
undertakings - (9,707) (9,722)
Net cash acquired with
subsidiary undertakings - 792 796
Contingent consideration paid
in respect of a prior year
acquisition - - (50)
Costs of group restructuring - - (80)
Cost of disposal of
subsidiary (226) (29) (29)
undertakings
Net cash disposed with
subsidiary undertakings (3,165) (107) (107)
Additional proceeds from
disposal of operations in a
prior year - 110 108
Proceeds on disposal of
subsidiary undertaking 10,954 3,878 3,429
-------- -------- --------
7,563 (5,063) (5,655)
-------- -------- --------
Cash inflow/(outflow) before
use of liquid resources and
financing 3,717 (6,183) (4,029)
Management of liquid
resources
(Increase)/decrease in
short-term investments (10,000) 5,000 4,000
Financing
Issue of shares 112 (51) 82
Loan raised - 6,000 6,000
Loan repaid - (540) (2,560)
Capital element of finance
lease rental payments (23) (21) (9)
-------- -------- --------
89 5,388 3,513
-------- -------- --------
-------- -------- --------
(Decrease)/increase in cash
in (6,194) 4,205 3,484
the period -------- -------- --------
Notes to the half-year results
1. Basis of preparation
The financial statements for the six months ended 30 September 2006 have been
prepared using accounting policies consistent with those set out in the
Company's consolidated 2006 statutory accounts. These statements do not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985 and are unaudited.
FRS 20, Share-based payment has been implemented. See note 5.
Financial information for the six months ended 30 September 2005 has been
extracted from the accounting records of the Group.
The balances as at 31 March 2006 and the results for the year then ended have
been extracted from the statutory accounts, which have been filed with the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain any statement under section 237 of the Companies Act 1985.
The results for the six months ended 30 September 2006 were approved by the
Board on 23 November 2006 and will be posted on the Company's web site,
www.eckoh.com, on 28 November 2006.
2.Earnings per ordinary share of 0.25p
each
-----------------------------------
6 months ended Restated Restated
30 Sept 6 months ended Year
2006 30 Sept ended
2005 31 March
2006
-----------------------------------
Weighted average number of ordinary
shares in the period 272,807,584 271,628,649 271,957,745
-----------------------------------
Dilutive effect of share options 7,634,103 5,033,720 6,393,610
----------------------------------- ------- ------- -------
Diluted weighted average number of
ordinary shares in the period 280,441,687 276,662,369 278,351,355
----------------------------------- ------- ------- -------
-----------------------------------
Basic earnings per ordinary share 2.8p 0.3p 0.4p
-----------------------------------
Diluted earnings per ordinary share 2.7p 0.3p 0.4p
-----------------------------------
3.Share capital and reserves
Ordinary share Share premium Profit and loss
capital account account
£'000 £'000 £'000
At 1 April
2006 681 227 9,366
Profit for the
period - - 7,677
Share option
charge - - 33
Exchange
adjustments
offset in
reserves - - 25
Shares issued
in respect of
share options
exercised 4 108 -
------- ------- -------
At 30
September 2006 685 335 17,100
------- ------- -------
4.Reconciliation of movement in shareholders' funds
6 months ended 6 months ended Year ended 31
March 2006
30 Sept 30 Sept £'000
2006 2005
£'000 £'000
Opening
shareholders'
funds 10,274 8,951 8,951
Profit for the
period (see note
5) 7,677 942 1,221
Share option
charge 33 27 54
Employee share
options exercised 111 51 82
Exchange
adjustments
offset in
reserves 25 22 (34)
------- ------- -------
Closing
shareholders'
funds 18,120 9,993 10,274
------- ------- -------
5. Impact of FRS 20, Share-based payment
Restated Restated
6 months ended Year ended 31
March 2006
30 Sept £'000
2005
£'000
Profit for the period as
previously reported 969 1,275
Share option charge relating to
the implementation of FRS 20 (27) (54)
------- -------
Profit for the period (see note 4) 942 1,221
------- -------
6. Net cash (outflow)/inflow from operating activities
6 months ended Restated Restated
30 Sept 6 months ended Year ended 31
March 2006
2006 30 Sept £'000
£'000 2005
£'000
Operating loss (781) (273) (312)
Depreciation of tangible
fixed assets 391 548 1,028
Amortisation of
intangible fixed assets 576 998 2,165
Share option charge 33 27 54
(Increase)/decrease in
stock (84) (172) 110
Increase in debtors (5,239) (3,660) (8,654)
Increase in
creditors/provisions 1,791 2,466 8,841
------- ------- -------
(3,313) (66) 3,232
------- ------- -------
7. Adjusted profit before taxation
6 months ended Restated Restated
30 Sept 6 months ended Year ended 31
March 2006
2006 30 Sept £'000
£'000 2005
£'000
Profit before taxation 7,731 1,199 1,091
Adjust for:
Profit on disposal of
subsidiary operations (8,183) (1,425) (1,388)
Profit on disposal of
fixed asset investment - (141) (300)
Costs of group
restructuring - - 80
Amortisation of
intangible fixed assets 576 998 2,165
Restructuring costs 130 198 358
Restructuring costs
relating to discontinued
operations 718 - -
------- ------- -------
Adjusted profit before
taxation 972 829 2,006
------- ------- -------
8. Adjusted profit before
taxation from continuing
operations
6 months ended Restated Restated
30 Sept 6 months ended Year ended 31
March 2006
2006 30 Sept £'000
£'000 2005
£'000
Adjusted profit before
taxation 972 829 2,006
Adjust for:
Operating profit before
intangible asset
amortization and
exceptional items from
discontinued operations (565) (992) (2,779)
------- ------- -------
Adjusted profit before
taxation from continuing
operations 407 (163) (773)
------- ------- -------
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