TIDMECK
RNS Number : 3601Q
Eckoh PLC
29 November 2016
For immediate release 29 November 2016
Eckoh plc
("Eckoh" or the "Group")
Unaudited interim results for the six months ended 30 September
2016
Strong revenue growth and significant US progress
Eckoh plc (AIM: ECK), the global provider of secure payment
products and customer contact solutions, is pleased to announce its
unaudited results for the six months to 30 September 2016 showing a
period of significant revenue growth.
Financial Highlights:
-- Revenue increased by 57% to GBP13.5m (H1 FY16: GBP8.6m)
o US operations increased from GBP31,000 to GBP4.0m and now
represent 30% of Group revenues
o Group recurring revenue 76% (H1 FY16: 78%) UK recurring
revenue 85%, US 57%
-- Gross profit increased 25% to GBP8.8m (H1 FY16: GBP7.1m)
-- As expected, adjusted* operating profit reduced to GBP1.2m
(H1 FY16: GBP1.5m) due to a GBP0.6m loss made by a discontinued
division of acquired subsidiary, Product Support Solutions Inc.
("PSS"), and transition to a recurring revenue model in the US
-- Adjusted* EBITDA of GBP2.0m (H1 FY16: GBP2.0m)
-- Loss from operating activities of GBP0.2m (H1 FY16: GBP0.1m profit)
Operational Highlights:
-- Completed the acquisition of Klick2Contact EU Limited ("K2C")
in July 2016 to strengthen Eckoh's Omni-channel service
offering
-- Three-year US contact centre support services contract worth $5m signed in June
-- UK business continues to build:
o UK client base increased to 74 clients (FY16: 66)
o UK contract wins include deals in France, Holland and
Spain
o All significant UK clients renewed
Current Trading:
-- Significant US progress:
o Secure Payments total contract value of $3.6m won to date this
year ($1.5m in FY16) with an average contract value of $0.6m
o Five of six US secure payments contracts won this year to date
use new recurring revenue model
-- Whitbread PLC contract for Premier Inn, the largest to be
renewed this financial year, extended for three years
-- Eckoh and Worldpay partnered to deliver the world's first
Apple Pay payment via a telephone voice call
-- On track to deliver FY17 expectations, with contracts won in
the first half feeding through strongly into second half of
financial year
*excludes expenses relating to share option schemes,
non-recurring items and expenses relating to acquisitions
Nik Philpot, Chief Executive Officer, commented today:
"The significant revenue growth we have seen in the first half
of the year, especially from the US operation, supports our belief
that the US business will surpass the UK in the foreseeable future.
In addition, the acquisitions of PSS and K2C have strengthened our
market proposition considerably and are supporting further progress
in both our Secure Payments and Contact Centre businesses
internationally.
"Taking into account the contracts we have already won so far
this year, the excellent near-term sales pipeline and the closure
of the loss-making division of PSS, we are anticipating a strong
second half. Looking beyond this year, with the rapid growth we are
seeing in the US and the improvement we will see there in recurring
revenues, the prospects for Eckoh remain as exciting as ever."
For more information, please contact:
Eckoh plc
Nik Philpot, Chief Executive Officer Tel: 01442 458 300
Adam Moloney, Group Finance Director
www.eckoh.com
Buchanan
Sophie McNulty, Stephanie Watson, Giles Sanderson Tel: 020 7466
5000
www.buchanan.uk.com
N+1 Singer (Nomad & Joint Broker)
Shaun Dobson, Lauren Kettle Tel: 020 7496 3000
www.n1singer.com
Berenberg (Joint Broker)
Ben Wright, Chris Bowman, Amritha Murali Tel: 020 3207 7800
www.berenberg.de/en
About Eckoh plc
Eckoh is a global provider of secure payment products and
customer contact solutions, supporting an international client base
from its offices in the UK and US.
Our secure payments products, which include the patented
CallGuard, can be hosted in the Cloud or deployed on the client's
site and remove sensitive personal and payment data from contact
centres and IT environments. The products offer merchants a simple
and effective way to reduce the risk of fraud, secure sensitive
data and become compliant with the Payment Card Industry Data
Security Standards ("PCI DSS") and wider data security regulations.
Eckoh has been a PCI DSS Level One accredited Service Provider
since 2010, processing over $1bn in card payments annually.
Eckoh's customer contact solutions enable enquiries and
transactions to be performed on whatever device the customer
chooses, allowing organisations to increase efficiency, lower
operational costs and provide a true Omni-channel experience. We
also assist organisations in transforming the way that they engage
with their customers by providing support and transition services
as they implement our innovative customer contact solutions.
Our large portfolio of clients come from a broad range of
vertical markets and includes government departments, telecoms
providers, retailers, utility providers and financial services
organisations.
Introduction
The first six months of the financial year have seen significant
revenue growth across the Group and in the US in particular. This
has been a result of a combination of organic growth and the impact
of the acquisitions of PSS in November 2015 and K2C in July 2016.
The US operation now accounts for 30% of Group revenues and the
expectation is that the US operation will in time become larger
than the existing UK business.
As indicated in our Trading Update on 2 September 2016, profit
in the current year has been constrained by the GBP0.6m loss in the
non-core Professional Services division within PSS and the
transition in the US to a recurring revenue model. However, despite
this setback we believe that the underlying business is in
excellent health and we have been pleased with the contracts
secured this year and the continuing strength of the new business
pipeline, which will support progress in the second half and
beyond. The Professional Services division has now been closed and
going forward the growing proportion of Software as a Service
("SaaS") style contracts in the US will provide greater revenue
visibility, longer-term client relationships and higher overall
gross margins, in line with our UK business. We anticipate
therefore that full year results will be in line with market
expectations and believe the future prospects for the Group remain
excellent.
Operational Review
UK Division
In the UK, revenue has increased by 11% to GBP9.5m (H1 FY16:
GBP8.6m). Gross margins in the UK have remained high at 81% (H1
FY16: 82%) and pleasingly recurring revenue has increased to 85%
from 78% in the same period last year.
In our full year results we highlighted that we were looking for
acquisition opportunities that would bring complementary
technologies to the Eckoh portfolio, so we were pleased to announce
the acquisition of K2C in July. K2C brings significant expertise in
customer contact services that are complementary to those provided
by Eckoh. The K2C suite of live help and customer engagement
services consists of Web Chat, Instant Call-Back, Knowledge Base,
Social Media Monitoring and Engagement, Full Workflow and Email
Management, all of which are offered in real time. K2C's solutions
are cloud-based like Eckoh's, enabling a fast, secure and simple
implementation process.
K2C has an established and international client base and a
number of sales relationships with Business Process Outsourcers
("BPO"). It has been successful in securing new contracts with
First Group, through its relationship with Capita, River Island and
Sainsbury's through The Contact Company and BMW through Arvato. A
number of existing Eckoh customers have already shown a keen
interest in purchasing services from K2C and we also expect to be
able to leverage K2C's BPO relationships for sales across the whole
Eckoh service portfolio. The activity from the K2C subsidiary has
been included from 1 August 2016 and contributed GBP145,000 of
revenue in the reported period.
The increased attention on new sales channel opportunities that
has arisen from the acquisition of K2C has led to the creation of a
new Strategic Account sales team, which will manage the
relationship with the key partners and look to extend the service
offering to our largest customers. In this period 25% of UK
revenues came through partner channels and the Group continues to
extend this network, for example the new partner and client,
allpay, is a leading UK payments specialist to the public sector,
processing over GBP5.0bn per annum. Eckoh has entered into a
three-year agreement to deliver a hosted CallGuard solution to
allpay and it will in turn be reselling this service to its own
customers, notably housing associations. allpay has already secured
its first indirect customer with a number of others in the
pipeline.
One of the key partnerships in recent years has been that of
Capita, which has brought us over GBP15.0m in contracted revenue
since the partnership began in 2013 and which accounted for 11% of
H1 revenues. The O2 contract through Capita, our largest to date
worth GBP11m over ten years, is now fully live and the
implementation has been extremely successful. We have recently
added some mobile-based services which are incremental to the core
contract. We have also entered into a partnership with an
international contact centre operator and have recently signed a
five-year contract with it for an existing client who was
previously contracted through another partner. This contract is on
enhanced terms and is expected to be worth more than GBP1.5m over
the term.
The UK operation has once again won a number of new contracts
during the period. As well as UK-based contracts we have also won
secure payments agreements with clients in France, Holland and
Spain. The number of UK clients which generate more than GBP25,000
per annum has increased to 74 in total during the period, eight
more than in FY16. The average value of these clients on an
annualised basis is GBP244,000. In addition, all significant
clients were renewed during the period including a three-year
renewal with Whitbread PLC for Premier Inn, which is the largest
contract to come up for renewal this financial year. We have also
gone live with Target, a provider of software services to the
financial services sector, which is our first hosted client for the
patented tokenisation payments solution. This was implemented in
only six weeks and illustrates how easily Eckoh's solution can be
implemented with no disruption to existing infrastructure or
processes, despite it providing complete protection for clients by
removing sensitive card data from their entire environment.
US Division
Eckoh Inc. and the PSS business have now been fully integrated
and are operating as a single entity. The management team is led by
Dan Arntz, who joined in May 2016 after four years as the Senior
Vice President of Sales at West Corporation ("West"). Dan is
supported by an experienced US team but also by the senior
management group in the UK who are spending an increasing amount of
time developing the US opportunity.
This is the first financial year to include a full year of
contribution from the PSS subsidiary and, combined with strong
organic growth in Secure Payments activity, this has driven a shift
in the Group's revenue profile with 30.5% of revenues now coming
from outside the UK and primarily in the US. In the first six
months of the previous financial year, only GBP31,000 came from our
US subsidiary compared to GBP4.0m in the current year; GBP0.5m of
revenue has come from Secure Payment revenues with the remainder
coming from PSS. Recurring revenue has risen to 57% and as the
proportion of revenue from Secure Payments increases, this will
continue to rise.
Our sales pipeline is at record levels and we have seen the
sales momentum accelerating in our Secure Payments offering. Since
the beginning of the year six Secure Payments contracts have been
won, representing $3.6m of contracted revenue, with an average
contract value of $0.6m. This compares to nine contracts in the
whole of the last financial year with total contracted revenue of
$1.55m and an average value of $173,000. Of the $3.6m value won so
far this year, only $0.2m of revenue is included in the first half
results.
In line with the recurring revenue model in the UK business, we
have been transitioning our US payments clients to contracting on a
SaaS style pricing model that sees the cost of the service being
provided evenly across the term of the contract, as opposed to a
large upfront cost with a small annual support and maintenance fee.
Five of the six contracts won this year have been on this basis and
of these two are hosted agreements, the first hosted deals we have
won since entering the US market in 2014. These will be delivered
through the West hosted platform and are expected to go live in the
spring of 2017. Through our partnership with West, we have also won
our largest US payments contract to date, a three-year deal with a
global provider of insurance services in the Fortune 500. This is
an implementation of our market-leading tokenisation payments
solution, which is proving to be our leading payments product and
for which we already have a patent granted in the UK. Lastly we
have won a three-year contract with a financial services company,
which represents our first success in cross-selling secure payments
into a customer of PSS.
The majority of the revenues seen in the US in the first half of
the year has come through Customer Contact Services, which have
traditionally been provided by the acquired PSS business. The two
key revenue streams are for Contact Centre Support and Product
sales. The Support division provides third party support for
infrastructure such as Avaya, Cisco, Genesys and Aspect within
large Contact Centre operations. In June we were successful in
securing our largest ever contract win for support, signing a
three-year contract with a major US telecommunications company. The
contract, which commenced in July, will see the customer pay a
monthly fee for the support provided and will be worth a minimum of
$3.0m over the term but is expected to be worth more than $5.0m.
This contract is being delivered by the existing employee base with
minimal additional overhead added.
The Product division sells and implements contact centre
technology solutions owned by both Eckoh and third parties. Most
notably in the period, a three-year agreement was secured with one
of the largest US telecommunications providers to provide the
browser-based agent desktop, Coral, to over 3,000 contact centre
agents in a new facility. We are seeing a number of significant
size pipeline opportunities for this solution that enables agents
to handle calls in a more efficient manner.
The acquired PSS business traditionally also had a third revenue
stream through its Professional Services division, performing
one-off professional services tasks for client projects on a fixed
price basis. As announced in September, this division saw
significant cost overruns particularly on a large and complex
project, which resulted in losses of approximately GBP0.6m in H1.
The decision was taken to close the division and this closure is
now substantially complete with all projects and activity within
the division expected to have concluded before the end of the
calendar year.
Innovation
Following the success of our CallGuard and tokenisation
products, we continue to look to innovate and remain at the
forefront of the development of new payment technologies. In
October we partnered with Worldpay to process the world's first
Apple Pay payment over a telephone voice call. Eckoh is continuing
to develop our Apple Pay functionality with the intention of
releasing it in the near future as part of our overall contact
centre secure payments capability, alongside other alternative
payment methods. We will continue to explore other innovation
opportunities to ensure that we remain a market leader for both
secure payment and customer engagement technologies.
Board Changes
Following the decision by Clive Ansell to step down from his
role as Non-Executive Director at the Group's Annual General
Meeting in September, we were delighted to appoint Peter Simmonds
to the Board in July 2016 as Non-Executive Director. Peter brings
with him over 35 years of experience at senior management and board
level, principally in the areas of software, banking, insurance,
finance and outsourcing, including eight years as Chief Executive
Officer of dotDigital Group plc. Subsequently, Guy Millward joined
the Board as a Non-Executive Director with effect from 1 October
2016, representing a further strengthening of the Board in line
with our stated intentions. Guy is currently Chief Financial
Officer of Imagination Technologies Group plc, a leading
multimedia, communications and processor technology company and has
in-depth expertise in finance across both publicly listed and
privately held technology companies.
In July, Adam Moloney, current Group Finance Director, also
indicated his intention to step down from the Company after 13
years in order to pursue new opportunities. As announced on 3
November, Chrissie Herbert has now been appointed as Chief
Financial Officer. Chrissie joins Eckoh from her current role as UK
and Ireland Finance Director at PayPoint plc, the FTSE 250 retail
technology and multi-channel payment solutions business. A further
announcement will be made in due course regarding her start date,
with Adam continuing to act as Group Finance Director in the
meantime.
Current Trading and Outlook
Eckoh has always operated a model where the second half of the
financial year is significantly more profitable than the first,
driven by seasonal factors with higher second half volumes in
travel, retail and logistics.
In the UK, we continue to have a substantial sales pipeline as
well as developing the new partner relationships and integrating
the K2C activity. We continue to expect the UK operation to grow
but it is in the US where the exciting opportunity for exceptional
growth exists, as the market for contact centre operations is more
than seven times larger than the UK and competition for secure
payments is very limited. We are therefore confident that our US
business will grow significantly in the foreseeable future.
Having completed three acquisitions in the past three and a half
years, the coming months will be focused on extracting value from
these businesses, consolidating our market proposition and
aggressively driving sales execution in both the UK and US markets.
We anticipate full year results will be in line with market
expectations, underpinned by a strong second half, and in view of
the increasing structural demand drivers for our products and
excellent pipeline, combined with our recurring revenue model, we
believe that the future prospects for the Group remain
excellent.
Financial Review
Revenue
Revenue for the period was 57% higher than the prior financial
year at GBP13.5m (H1 FY16: GBP8.6m). The majority of the increase
came from increased activity in the US.
H1 FY17 H1 FY17 H1 FY17 H1 FY16 H1 FY16 H1 FY16
(UK)
GBP000 (US) Total (UK) (US) Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 9,459 4,001 13,460 8,554 31 8,585
Gross Profit 7,700 1,132 8,832 7,055 25 7,080
Gross margin 81% 28% 66% 82% 81% 82%
Margins within the traditional PSS activity have typically been
lower than those seen in the Eckoh business due to the service
nature of its offering. The first half of the year saw particularly
low margins due to the short-term losses from the Professional
Services business. We will see margins increase in the US as Secure
Payments represent an increasing percentage of the whole and the
impact of closing the Professional Services division takes
effect.
Profitability Measures
Profitability in the period was impacted by the previously
disclosed significant cost overruns in the Professional Services
division of the newly acquired PSS business. These cost overruns
resulted in a loss of GBP0.6m being made in that division in the
first half of the financial year. This division has now been closed
and losses in the second half of the financial year are expected to
be no more than GBP0.1m. Despite the impact of this issue, adjusted
EBITDA for the period fell by only 4% to GBP2.0m (H1 FY16:
GBP2.0m).
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
Profit / (loss) before tax (170) 74 2,406
Amortisation of intangible
assets 1,254 850 2,008
Depreciation 562 366 799
Transactions relating to acquisitions 243 369 (500)
Expenses relating to share
option schemes 2 343 585
Interest receivable (5) (6) (11)
Finance expense 70 36 77
Adjusted EBITDA 1,956 2,032 5,364
----------- ----------- ----------
Statement of financial position
The Company increased its loan by GBP1.75m to GBP6.5m to assist
the financing of the acquisition of K2C in the period. Some
significant payables were settled in the early part of the
financial year which has seen payables reduce from GBP10.7m to
GBP8.0m. This payable reduction and the acquisition of K2C have
been the primary reasons that cash has fallen from GBP6.6m on 31
March 2016 to GBP4.4m on 30 September 2016.
Consolidated statement of comprehensive income
for the six months ended 30 September 2016
Six months Six months
ended 30 ended Year ended
September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Continuing operations
Revenue 13,460 8,585 22,450
Cost of sales (4,628) (1,505) (5,607)
-------------------------------------------------------- ------------ -------------- -----------
Gross profit 8,832 7,080 16,843
Administrative expenses (7,655) (5,604) (12,702)
-------------------------------------------------------- ------------ -------------- -----------
Adjusted Operating Profit 1,177 1,476 4,141
Amortisation of acquired intangible
assets (1,037) (660) (1,584)
Expenses relating to share option
schemes (2) (343) (585)
Transactions relating to acquisitions (243) (369) 500
-------------------------------------------------------- ------------ -------------- -----------
(Loss) / profit from operating activities (105) 104 2,472
Interest payable (70) (36) (77)
Interest receivable 5 6 11
(Loss) / profit before taxation (170) 74 2,406
Taxation (94) (135) (468)
Total comprehensive (loss) / income
for the period (264) (61) 1,938
======================================================== ============ ============== ===========
(Loss) / Profit
per share expressed
in pence
Basic (0.11) (0.03) 0.86
Diluted (0.10) (0.02) 0.77
Consolidated statement of financial position
as at 30 September 2016
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Assets
Non-current assets
Intangible assets 11,296 4,347 9,262
Tangible assets 5,122 5,203 5,376
Deferred tax asset 4,516 5,137 4,774
------------------------------ --------------- ------------- -----------
20,934 14,687 19,412
------------------------------ --------------- ------------- -----------
Current assets
Inventories 999 245 748
Trade and other receivables 9,809 6,497 9,127
Cash and cash equivalents 4,447 3,677 6,617
15,255 10,419 16,492
------------------------------ --------------- ------------- -----------
Total assets 36,189 25,106 35,904
Liabilities
Current liabilities
Trade and other payables (7,959) (4,530) (10,676)
Other interest-bearing loans
and borrowings (1,300) (636) (1,000)
(9,259) (5,166) (11,676)
------------------------------ --------------- ------------- -----------
Non-current liabilities
Other interest-bearing loans
and borrowings (5,200) (1,787) (3,750)
Contingent consideration (912) - -
Deferred tax liability (1,599) (730) (1,633)
(7,711) (2,517) (5,383)
------------------------------ --------------- ------------- -----------
Net assets 19,219 17,423 18,845
============================== =============== ============= ===========
Shareholders' equity
Share capital 603 558 600
ESOP Reserve (7) (135) (17)
Capital redemption reserve 198 198 198
Share premium 3,010 2,589 2,612
Merger reserve 2,353 1,081 2,353
Currency reserve 337 47 157
Retained earnings 12,725 13,085 12,942
------------------------------ --------------- ------------- -----------
Total shareholders' equity 19,219 17,423 18,845
============================== =============== ============= ===========
Consolidated interim statement of changes in equity
as at 30 September 2016
(unaudited)
ESOP Capital Total
Share Reserve redemption Share Merger Retained Currency shareholders'
capital reserve premium reserve earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2015 558 (135) 198 2,561 1,081 12,581 56 16,900
Total comprehensive
expense for the
period - - - - - (61) - (61)
Shares issued under
the share option
schemes - - - 28 - - - 28
Retranslation - - - - - - (9) (9)
Share based payment
charge - - - - - 101 - 101
Deferred tax on
share options - - - - - 464 - 464
Balance as at 30
September 2015 558 (135) 198 2,589 1,081 13,085 47 17,423
-------------------- --------- --------- ------------ --------- --------- ---------- --------- ---------------
Balance as at 1
October 2015 558 (135) 198 2,589 1,081 13,085 47 17,423
Total comprehensive
income for the
period - - - - - 1,999 - 1,999
Shares issued on
acquisition of
PSS Inc. 7 - - - 1,272 - - 1,279
Shares transacted
through Employee
Benefit Trust - 118 - 29 - (116) - 31
Dividends paid
in the year - - - - - (826) - (826)
Shares issued under
the share option
schemes 35 - - (6) - - - 29
Retranslation - - - - - - 110 110
Share based payment
charge - - - - - (1,179) - (1,179)
Deferred tax on
share options - - - - - (21) - (21)
Balance at 31 March
2016 600 (17) 198 2,612 2,353 12,942 157 18,845
-------------------- --------- --------- ------------ --------- --------- ---------- --------- ---------------
Balance at 1 April
2016 600 (17) 198 2,612 2,353 12,942 157 18,845
Total comprehensive
income for the
period - - - - - (264) - (264)
Shares issued on
acquisition of
Klick2Contact (EU)
Limited 2 - - 344 - - - 346
Shares issued under
the share option
schemes 1 - - 49 - - - 50
Shares transacted
through Employee
Benefit Trust - 10 - 5 - (8) - 7
Retranslation - - - - - - 180 180
Share based payment
charge - - - - - 55 - 55
Balance at 30
September
2016 603 (7) 198 3,010 2,353 12,725 337 19,219
==================== ========= ========= ============ ========= ========= ========== ========= ===============
Consolidated statement of cash flows
for the six months ended 30 September 2016
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows from operating
activities
(Loss) / Profit after taxation (264) (61) 1,938
Interest income (5) (6) (11)
Interest payable 70 36 77
Taxation 94 135 468
Increase in deferred tax - -
asset
Depreciation of property,
plant and equipment 562 366 799
Amortisation of intangible
assets 1,254 850 2,008
Share based payments 55 101 (1,078)
Exchange differences 180 (9) 79
Operating profit before
changes in working capital
and provisions 1,946 1,412 4,280
(Increase) / Decrease in
inventories (251) (21) 49
(Increase) / Decrease in
trade and other receivables (495) 552 (218)
(Decrease)/Increase in
trade and other payables (2,780) (1,689) 1,116
Cash (utilised) / generated
from operations (1,580) 254 5,227
Taxation (15) - (53)
--------------------------------- -------------- ---------------------- -----------
Net cash (utilised) / generated
from continuing operating
activities (1,595) 254 5,174
--------------------------------- -------------- ---------------------- -----------
Cash flows from investing
activities
Purchase of property, plant
and equipment (286) (378) (927)
Purchase of intangible
fixed assets (107) (298) (537)
Interest paid (70) (36) (77)
Interest received 5 6 11
Acquisition of subsidiary,
net of cash acquired (1,920) - (2,717)
--------------------------------- -------------- ---------------------- -----------
Net cash utilised in continuing
investing activities (2,378) (706) (4,247)
--------------------------------- -------------- ---------------------- -----------
Cash flows from financing
activities
Dividends paid - - (826)
Proceeds from new loan 2,000 - 5,000
Repayment of borrowings (250) (318) (2,991)
Issue of shares 51 28 57
Shares acquired by Employee
Benefit Trust 2 - 31
Net cash generated / (utilised)
in continuing investing
activities 1,803 (290) 1,271
--------------------------------- -------------- ---------------------- -----------
(Decrease) / Increase in
cash and cash equivalents (2,170) (742) 2,198
Cash and cash equivalents
at the start of the period 6,617 4,419 4,419
--------------------------------- -------------- ---------------------- -----------
Cash and cash equivalents
at the end of the period 4,447 3,677 6,617
================================= ============== ====================== ===========
1. Acquisition of Klick2Contact EU Limited
On 20 July 2016, the Company acquired the entire issued share
capital of Klick2Contact EU Limited ("K2C"), a provider of live web
help and Omni-channel customer engagement services. The initial
consideration comprised GBP2.2m of cash primarily funded by
increasing the bank loan facility and GBP0.3m payable in ordinary
shares of Eckoh plc. This has resulted in an increase in share
capital and share premium of GBP0.3m during the period.
The Company incurred acquisition related costs of GBP199,000
relating to external legal fees, due diligence and valuation fees,
which have been included in Administrative expenses in the Group's
Consolidated Statement of Comprehensive Income.
Fair value
GBP000's on acquisition
----------------------------------- ----------------
Intangible assets 1,156
Tangible assets 22
Trade debtors 180
Prepayments and accrued income 7
Deferred tax asset 69
Deferred revenue (11)
Trade creditors (31)
Taxation & Social Security (3)
Accruals & other creditors (18)
Cash and cash equivalents 288
Deferred tax liability (214)
------------------------------------- ----------------
Net assets acquired 1,445
Goodwill 2,025
------------------------------------- ----------------
Consideration paid 3,470
------------------------------------- ----------------
Satisfied by
Cash 2,212
Shares 346
Cash - contingent consideration 456
Shares - contingent consideration 456
------------------------------------- ----------------
Total purchase consideration 3,470
------------------------------------- ----------------
Net cash outflow on acquisition
Cash consideration paid 2,212
Cash acquired (288)
------------------------------------- ----------------
Cash outflow on acquisition 1,924
------------------------------------- ----------------
On acquisition of K2C, all assets were fair valued and
appropriate intangible assets recognised following the principles
of IFRS 3. Management identified three intangible assets:
i. Customer relationships
K2C has relationships with customers that can be divided into
two categories (i) Sales through reseller organisations which
distribute to third party businesses; and (ii) Direct sales to
business customers. These customer arrangements give rise to the
requirement under IFRS 3 to recognise K2C's customer relationships
as intangible assets. The fair value for this was GBP710,000.
ii. Software
K2C owns a suite of software products which form an
'Omni-channel' product offering, allowing companies to engage with
their customers through a variety of channels. With the exception
of the social media product (where K2C acts as a reseller), the IP
to all software is held by the Company. The fair value of this was
GBP372,000.
iii. Brand
The Company goes to market under the 'Klick2Contact' brand and
we have therefore recognised a brand asset.The fair value of this
was GBP74,000.
The acquired business contributed to revenues of GBP145k and net
profit of GBP42k to the Group for the period 1 August to 30
September 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFEALDLTFIR
(END) Dow Jones Newswires
November 29, 2016 02:00 ET (07:00 GMT)
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