27th Jun 2006 07:01
Eckoh Technologies PLC27 June 2006 For Immediate Release 27 June 2006 Eckoh Technologies plc Preliminary results for the year ended 31 March 2006 & Recommended cash offer for Symphony Telecom Holdings plc Eckoh Technologies ("Eckoh"), one of Europe's largest providers of outsourcedautomated solutions, today announced preliminary results for the year ended 31March 2006. 6 months ended 6 months ended Year ended Year ended 31 March 2006 30 Sept 2005 31 March 2006 31 March 2005 £'000 £'000 £'000 £'000 Turnover 72,077 55,007 127,084 79,720--------------------------- -------- -------- -------- --------Continuing operations 51,065 35,561 86,626 76,529Acquisitions 21,012 18,566 39,578 ---------------------------- -------- -------- -------- --------Total continuing operations 72,077 54,127 126,204 76,529Discontinued operations - 880 880 3,191--------------------------- -------- -------- -------- -------- Gross profit 12,892 11,496 24,388 20,045 Operating (loss)/profit 220 (478) (258) (9,783) Profit/(loss) before taxation (81) 1,226 1,145 (9,411) Adjusted profit before taxation* 1,204 856 2,293 841 Profit/(loss) for the period 306 969 1,275 (9,440) Cash and short-term investments 12,737 12,501 12,737 13,296 Financial Highlights • Group turnover increased by 59% to £127.1m (2005 - £79.7m) • Adjusted PBT* increased to £2.3m from £0.8m. Profit before taxation £1.1m (2005 - loss £9.4m) • Profit for the year of £1.3m (2005 - loss £9.4m) • Cash and short-term investment balances total £12.7m (2005 - £13.3m) Operational Highlights • Recommended cash offer of 54.5p per share for Symphony Telecom Holdings plc by Redstone plc • 5-year contract with National Rail Enquiries for new TrainTrackerTM service • Contract renewal with ITV and new contract with "participation TV" channel ITV Play until Sept 2007 • New Speech contract wins with Parcelforce, Empire Cinemas, Hitachi Capital and DEFRA • Internal reorganisation to merge Speech Solutions and Client IVR divisions under the "Eckoh" brand, and to re-brand the Advertised IVR Services division as "Connection Makers" as part of the ongoing strategic review • BT Alliance extended until 2010 * before intangible asset amortisation and impairment, exceptional items anddiscontinued operations (note 6) Martin Turner, Chief Executive Officer, commented today: "The last twelve months have witnessed a considerable period of change for theGroup. We have made fundamental changes to our organisational structure coupledwith some strategic disposals. The £17.3m all cash offer by Redstone plc toacquire Symphony will provide a satisfactory realisation of our 64.64%shareholding in Symphony, while significantly increasing the Group's cashresources. The Group remains confident in the financial and trading prospects for thecurrent financial year and we are continuing to review a number of strategicoptions and will update the market at the appropriate time." For further enquiries, please contact Eckoh Technologies plcMartin Turner, Chief Executive OfficerNik Philpot, Chief Operating OfficerAdam Moloney, Group Finance Directorwww.eckoh.com Tel: 08701 100 700 Buchanan CommunicationsMark Edwards/Jeremy Garcia Tel: 020 7466 5000 Recommended cash offer for Symphony Telecom Holdings plc ("Symphony") On 22 June 2006, it was announced that the Board of Symphony and the Board ofRedstone plc ("Redstone") reached agreement on the terms of a recommended offerto be made by Evolution Securities plc, on behalf of Redstone, for the entireissued share capital of Symphony. The offer is being made on the basis of 54.5pin cash for each Symphony ordinary share at a premium of 14.7% to the mid-marketclosing share price on 21 June 2006 and 32.9% compared to last September'splacing price of 41p per ordinary share. Since the admission of Symphony on AIMon 15 September 2005, Eckoh has held 20,099,999 shares representing 64.64% ofthe issued ordinary share capital of Symphony. On 21 September 2005 at an extraordinary general meeting of the Company, Eckohshareholders approved a resolution to dispose of its Symphony ordinary shares ata future point in time, and the Eckoh board therefore intends to support theRedstone offer which will realise approximately £11 million in cash for theCompany and repayment of its £4.7 million subordinated loan over a 4-yearperiod. Overview The Group has seen another year of strong growth, generating a profit beforetaxation (excluding intangible asset amortisation and impairment, exceptionalitems and discontinued operations of £2.3m (2005 - £0.8m). The profit before taxfor the year was £1.1m (2005 - loss £9.4m). Turnover increased by 59% to £127.1m(2005 - £79.7m). Year end cash and short-term investments were £12.7m (2005 -£13.3m), but this excludes the impact of the sale of Symphony to Redstone. The ongoing strategic review has led to the reorganisation of the Group'sremaining businesses into two independent divisions, each within separate legalentities. Speech Solutions and Client IVR Services have now merged and operateunder the "Eckoh" brand, while the Advertised IVR Services operation has beenre-branded as "Connection Makers". Key reasons for these changes include: • Creation of two separately accountable, standalone operations • Merging complementary activities - including technical and product development teams • Appointment of dedicated management teams • Improvements in operating performance and efficiency • Enhancement of strategic options available The Directors are continuing to evaluate a number of strategic options, and willmake further announcements in due course. Business Review 1. Eckoh Speech Solutions Eckoh sets the standard for outsourced automated solutions across Europe,specialising in advanced speech recognition and interactive services. The Grouphas an exclusive partnership with BT to provide its top corporate customers withhosted speech recognition services. To date this alliance has supplied speechsolutions services to in excess of 20 clients and created over 30 applications,generating more than 40 million minutes of self-service speech transactions. TheBT alliance was extended in July 2005 until 2010, which will enable BT to fulfilthe increasing requirement from its customers for long term, multi-yearcontracts for Eckoh's outsourced speech recognition services. Turnover for the year grew 6% to £5.3m (2005 - £5.0m), and gross marginincreased to 56% (2005 - 53%). Direct operating expenses were £2.4m (2005 -£2.2m) resulting in an increased contribution to £0.6m (2005 - £0.5m) of which£0.5m was in the second half. Turnover for H2 was £3.0m, an increase of 28% onH1 and 28% on H2 2005. Eckoh management intends to deliver high growth rates inthis area of operation, and has increased its sales and marketing investment aspart of the strategy to achieve this. The results of this investment are bearingfruit with recent contract wins with Empire Cinemas, Her Majesty's CourtServices (HMCS), the Government Department for Environment, Food and RuralAffairs (DEFRA), Scottish Power, and Hitachi Capital. Today we also announced two significant new contracts. The first is a 5-yearagreement with National Rail Enquiries to provide a new speech enabled travelinformation solution which will supersede the already highly successfulTrainTrackerTM service that Eckoh and our partner BT have been operating sinceJanuary 2005. The new service, expected to be launched in July, is anticipatedto generate significantly higher call volumes than the existing service whichcurrently generates around 225,000 calls per month and is worth a minimum of £3mto Eckoh and BT. The second new speech contract announced today is a 3-year deal with ParcelforceWorldwide to provide a new automated information service that allows customersto track parcels and make re-delivery arrangements over the phone, 24 hours aday. This marks Eckoh's entry into the £23 billion European express logisticsmarket and when the service launches later this summer it is expected togenerate a minimum of 1 million calls per annum. A change in the revenue model away from large initial build fees to greatertransactional based charges has enabled clients to fully evaluate the benefit ofan outsourced speech recognition solution. This has enabled the company to signsignificant clients to long term contracts, with revenue recognised over theterm of the contract rather than as significant, one-off fees. The benefit ofthis approach started to became visible in the second half of the year. There have also been key contract renewals with William Hill and TD Waterhouseindicating that Eckoh's proposition remains competitive and is deliveringappropriate value to clients. In addition, "Journey Finder", a speech-basedproduct developed by Eckoh and BT and utilised in the successful TrainTrackerTMservice for National Rail Enquiries, was voted "Product of the Year 2005" atlast year's European Call Centre Awards. Accelerating interest in the product and a strengthening pipeline has reaffirmedthe Directors confidence that there is potential for significant growth in theUK and European speech recognition markets. Eckoh Speech Solutions has someclear differentiators from its competitors including one of the largest callprocessing platforms in Europe, highly experienced management and technicalteams, an exclusive alliance with BT and a flexible pricing model benefitingfrom Eckoh's group call traffic volumes. These factors have placed Eckoh in aprime position to cement its position as the European market leader inoutsourced speech solutions. Client IVR Services Eckoh is one of the UK's largest providers of IVR and mobile interactiveservices, and works with a number of prominent media owners such as ITV, TrinityMirror, Channel 4, IPC Magazines, EMAP and Northcliffe Newspapers. Eckohdelivers an end-to-end interactive solution including creation, design,development, implementation, deployment, hosting and reporting. Client IVR is able to secure and retain the largest contracts by hosting clientservices on one of the largest call processing platforms in the UK, by offeringvery competitive rates and providing top quality customer support. Thesecontracts generate an extremely large aggregated call volume which allows Eckohto negotiate the best commercial contracts from carriers such as BT and C&W aswell as through Eckoh's own network. Although margins are low from its directactivity, the division complements both Speech Solutions and Connection Makerswho benefit from accessing the same rate structure, as well as cross-sellingtheir higher margin services. Eckoh management has focused efforts on its most significant customers which hasenabled overheads to be reduced without compromising quality. This strategy hasbeen rewarded with contracts with: • The UK's largest commercial broadcasting company, ITV, who have renewed their contract to run until at least September 2007, • The UK's largest newspaper publishing group, Trinity Mirror, who have renewed their contract to run until at least December 2006, and • The UK's leading consumer magazine group, IPC Magazines, who agreed a three year contract from June 2005. Eckoh has been the interactive telephony partner of ITV in a highly competitivemarket since March 2004 and it was announced recently that this agreement hadbeen renewed again for a minimum of 18 months. In addition, this most recentnegotiation was of particular significance due to the inclusion of a newcontract to supply services to ITV Play, a new "participation TV" channel whichlaunched in April 2006 on digital terrestrial television and is due to launch onthe digital satellite television platform. The new formats commissioned by ITVPlay are also being shown across ITV's family of channels, and these haveresulted in a quantum jump in the revenues delivered by ITV, which are expectedto continue throughout the whole of the coming financial year. Turnover for the year from Client IVR increased by 22% to £47.5m (2004 -£39.0m), with gross profit decreasing to £3.1m (2005 - £3.4m) due to theproportion of traffic generated by the broadcast clients increasingsubstantially. However, direct operating expenses reduced to £2.4m (2005 -£3.1m) thus increasing the divisional contribution to £0.7m (2005 - £0.2m). 2. Connection Makers Connection Makers is the new brand for Eckoh's Advertised IVR Services. Thisdivision has operated profitably for many years and specialises in dating andchat services which it provides to clients on a revenue share basis oradvertises directly in newspapers, magazines and on television. Gross marginsfrom individual marketing campaigns fluctuate with advertising efficiency, whichis influenced by price, seasonality, TV programming and availability. During the year the contract with Trinity Mirror to supply dating services toits large range of national and regional newspapers was renewed until December2006 and a number of IPC magazines launched editorial dating services for thefirst time. Eckoh intends to consolidate its share of the chat and dating market byestablishing a market leading telephone and mobile speed dating brand in the UK.This new and ground breaking service will enable participants to speed date overthe phone or on their mobile with other local users from the comfort of theirhomes. The launch of the service will require a sizeable marketing investment inthe coming year and the new service will also be offered to existing andprospective clients. In February 2006 changes to the Sky Electronic Programming Guide (EPG) on thedigital satellite television platform, resulted in Eckoh's L!VE TV channel beingmoved to a different channel number and a new index category. The format of thechannel has had to change significantly because of this move and has resulted insome uncertainty as to whether the good performance in the second half of theyear can be maintained. Turnover from Connection Makers increased to £12.1m (2005 - £11.6m) with grossprofit of £5.5m (2005 - £5.0m). Direct operating expenses were £3.0m (2005 -£2.3m). 3. Symphony Telecom On 30 April 2005, Symphony acquired Anglia Telecom Centres Limited ("Anglia")from TTG Europe plc for cash consideration of £9.7m and on 15 September 2005 theenlarged Symphony group floated on AIM (London Stock Exchange ticker: SMY), atthe same time placing 35.36% of shares with new investors. Since then, Symphonyhas operated as a 64.64% subsidiary of Eckoh and its financial results have beenfully consolidated into Eckoh's financial statements (including Anglia since thedate of acquisition). On 22 June 2006 Symphony released its standalone resultsfor the full year ended 31 March 2006, and the following are extracts from theannouncement: "For the year ended 31 March 2006, turnover increased to £61.3m (2005: £21.0m),largely due to the acquisitions during the year which contributed £39.6m. Operating profit, before exceptional items of £0.4m (2005: £nil) and intangibleasset amortisation of £2.0m (2005: £nil) amounted to £2.1m (2005: £1.3m). Theexceptional items relate to restructuring, integration and other one-off costs.The operating loss for the year was £0.3m (2005: profit: £1.3m) After non-operating exceptional items and net interest payable of £0.7m (2005:£nil) the loss before tax was £0.9m (2005: £1.3m profit) and the loss per share4.0p (2005: 6.2p earnings per share). No dividend has been proposed. (2005:£nil)" The full text of the Symphony results for the period can be found on the Companywebsite, www.symphony.com Discontinued Operations Eckoh disposed of Freecom.net Limited, its internet services company, toeDirectory.co.uk plc ("eDirectory"') on 29 July 2005. The considerationcomprises 4,155,844 eDirectory ordinary shares. Further to this, and subject tocertain conditions, a further £1.6 million of deferred consideration isreceivable in eDirectory ordinary shares or a cash equivalent. eDirectory sharesare currently traded on Ofex. The business has been included within discontinuedoperations in Eckoh's financial statements. The loss on disposal has beenrecorded at £0.2m in the financial statements. Exceptional Items During the year, there were three exceptional gains. A gain of £1.5m arose fromthe 35% disposal as a result of the flotation of Symphony, £0.1m was receivedfollowing the disposal of the hardware services operation in a prior year and£0.3m was generated from the disposal of investment shares held in Felix Groupplc. The amortisation charge of £2.2m predominantly relates to the amortisationof the goodwill arising on the acquisition of Anglia. In addition, there wererestructuring costs of £0.4m, largely consisting of integration costs followingthe acquisition of Anglia, and costs of £0.08m were incurred during the grouprestructure to establish the Symphony Telecom Holdings group. Following the saleof Freecom.net Limited, a loss on disposal of £0.2m has been recognised. Outlook Since the start of the new financial year, the Company has continued to trade inline with management's expectations, with exceptionally high turnover beinggenerated from the new ITV Play channel. The Directors remain confident in theGroup's financial and trading prospects for the current financial year and arecontinuing to review a number of strategic options post the proposed cash saleof the 64.64% stake in Symphony to Redstone plc, which is expected to becompleted by the end of July 2006. Consolidated profit and loss accountfor the year ended 31 March 2006 Year ended Year ended 31 March 31 March 2006 2005 Note £'000 £'000--------------------------------- ----- --------- --------- Turnover 127,084 79,720--------------------------------- ----- --------- ---------Continuing operations 86,626 76,529Acquisitions 39,578 ---------------------------------- ----- --------- ---------Total continuing operations 126,204 76,529Discontinued operations 880 3,191--------------------------------- ----- --------- ---------Cost of sales (102,696) (59,675)--------------------------------- ----- --------- ---------Gross profit 24,388 20,045--------------------------------- ----- --------- --------- Net operating expenses before intangible assetamortisation and impairment and restructuringcosts (22,123) (19,533)Amortisation of intangible assets (2,165) (2,539)Impairment of intangible assets - (7,756)Restructuring costs (358) ---------------------------------- ----- --------- ---------Net operating expenses (24,646) (29,828)--------------------------------- ----- --------- ---------Operating profit/(loss) before intangible assetamortisation and impairment and restructuringcosts 2,265 512--------------------------------- ----- --------- ---------Continuing operations 284 469Acquisitions 2,214 ---------------------------------- ----- --------- ---------Total continuing operations 2,498 469Discontinued operations (233) 43--------------------------------- ----- --------- ------------------------------------------ ----- --------- ---------Operating (loss)/profit (258) (9,783)--------------------------------- ----- --------- ---------Continuing operations (241) (9,840)Acquisitions 216 ---------------------------------- ----- --------- ---------Total continuing operations (25) (9,840)Discontinued operations (233) 57--------------------------------- ----- --------- ---------Profit on disposal of subsidiary operations 1,388 -Profit on disposal of fixed asset investment 300 -Costs of group restructuring (80) -Net interest (payable)/receivable and othersimilar items (205) 372--------------------------------- ----- --------- ---------Profit/(loss) on ordinary activities beforetaxation 1,145 (9,411)Taxation (166) (6)--------------------------------- ----- --------- ---------Profit/(loss) on ordinary activities aftertaxation 979 (9,417)Minority interests 296 (23)--------------------------------- ----- --------- ---------Retained profit/(loss) for the year 1,275 (9,440)--------------------------------- ----- --------- --------- Basic earnings/(loss) per 0.25p share 2 0.5p (3.5p)Diluted earnings/(loss) per 0.25p share 2 0.4p (3.4p) Group statement of total recognised gains and lossesfor the year ended 31 March 2006 Year ended Year ended 31 March 31 March 2006 2005 £'000 £'000------------------------------------- --------- --------Retained profit/(loss) for the year 1,275 (9,440)Exchange adjustments offset in reserves (34) (8)------------------------------------- --------- --------Total recognised gains/(losses) for the year 1,241 (9,448)------------------------------------- --------- -------- Consolidated balance sheetas at 31 March 2006 31 March 31 March 2006 2005 Note £'000 £'000 Fixed assetsIntangible fixed assets 8,604 918Tangible fixed assets 1,498 1,571Investments 288 - -------- -------- 10,390 2,489 Current assetsStock 479 22Debtors 22,537 11,021Short term investments 3,000 7,000Cash at bank and in hand 9,737 6,296 -------- -------- 35,753 24,339 Creditors: amounts falling due within one year (32,277) (17,353) -------- --------Net current assets 3.476 6,986 Total assets less current liabilities 13,866 9,475 Creditors: amounts falling due after more thanone year (1,493) (65) Provisions for liabilities and charges (172) (152) -------- --------Net assets 12,201 9,258 -------- -------- Capital and reserves 3Called up share capital 681 679Share premium account 227 147Profit and loss account 9,366 8,125 -------- --------Total equity shareholders' funds 4 10,274 8,951 Minority interests 1,927 307 -------- --------Capital employed 12,201 9,258 -------- -------- Consolidated cash flow statementfor the year ended 31 March 2006 Note Year Year ended ended 31 March 31 March 2006 2005 £'000 £'000 Net cash inflow from operating activities 5 3,232 4,475 Return on investments and servicing of financeInterest received 286 410Interest paid (335) (38)Loan issue costs (298) - -------- -------- (347) 372 -------- -------- Taxation (362) - Capital expenditure and financial investmentPurchase of tangible fixed assets (1,023) (1,167)Expenditure on intangible fixed assets (186) (290)Proceeds on disposal of tangible fixed asset 12 -Disposal of trade investment 300 - -------- -------- (897) (1,457) -------- -------- Acquisitions and disposalsPurchase of subsidiary undertakings (9,722) (250)Net cash acquired with subsidiary undertakings 796 -Contingent consideration paid in respect of a prioryear acquisition (50) -Costs of group restructuring (80)Disposal of subsidiary undertaking (29) -Net cash disposed with subsidiary undertaking (107) -Proceeds on part disposal of subsidiary undertaking 3,429 -Additional proceeds from disposal of operations in aprior year 108 -------- -------- (5,655) (250) -------- --------Cash (outflow)/inflow before use of liquid resourcesand financing (4,029) 3,140 Management of liquid resourcesDecrease/(increase) in short-term investments 4,000 (500) FinancingIssue of shares 82 26Loan raised 6,000 -Loans repaid (2,560) (80)Capital element of finance lease payments (9) (29) -------- -------- 3,513 (83) -------- -------- -------- --------Increase in cash in the year 3,484 2,557 -------- -------- Notes to the preliminary results 1. Basis of preparation The preliminary results for the year ended 31 March 2006 have been preparedusing accounting policies consistent with those set out in the Group'sconsolidated 2005 statutory accounts. These statements do not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985.The statements have been extracted from the audited consolidated financialstatements of the Group for the year ended 31 March 2006 which have not yet beenfiled with the Registrar of Companies. The auditors' reports on those accountswere unqualified and did not contain any statement under section 237 of theCompanies Act 1985. The balances and results as at 31 March 2005 have been extracted from thestatutory accounts, which have been filed with the Registrar of Companies. Theauditors' report on those accounts was unqualified and did not contain anystatement under section 237 of the Companies Act 1985. The preliminary results for the year ended 31 March 2006 were approved by theBoard on 26 June 2006 and will be posted on the Company's web site,www.eckoh.com, on 27 June 2006. 2. Earnings/(loss) per ordinary share of 0.25p each Basic earnings/(loss) per share Basic earnings/(loss) per ordinary share iscalculated on the basis of the weighted average number of ordinary shares of271,957,745 (2005 - 271,226,435) in issue during the year and the profit for theyear, after minority interests, of £1.275m (2005 - loss of £9.440m). Diluted earnings/(loss) per share In calculating diluted earnings/(loss) pershare, the weighted average number of ordinary shares in issue is adjusted toinclude the dilutive effect of potential ordinary shares. The potential ordinaryshares represent share options granted to employees where the exercise price isless than the market price of ordinary shares as at 31 March 2006. 2006 2005 Earnings Loss attributable to Weighted attributable to Weighted ordinary average number Earnings ordinary average number shareholders of shares per share shareholders of shares Loss per share (number in (number in £'000 thousands) (pence) £'000 thousands) (pence)----------------- -------- -------- -------- -------- -------- -------Basic earnings/(loss) per share 1,275 271,958 0.5p (9,440) 271,226 (3.5p)Dilutive effect ofshare options - 14,339 - 5,615 ------------------ -------- -------- -------- -------- -------- -------Diluted earnings/(loss) per share 1,275 286,297 0.4p (9,440) 276,841 (3.4p)----------------- -------- -------- -------- -------- -------- ------- 3. Share capital and reserves Ordinary share Share premium Profit and loss capital account account £'000 £'000 £'000 At 1 April 2005 679 147 8,125Profit for the year - - 1,275Net exchange adjustments - - (34)Shares issued under the share optionschemes 2 80 - -------- -------- --------At 31 March 2006 681 227 9,366 -------- -------- -------- 4. Reconciliation of movements in Group shareholders' funds Year ended Year ended 31 March 31 March 2005 2006 £'000 £'000--------------------------------------Shareholders' funds at beginning of year 8,951 18,373--------------------------------------Retained profit/(loss) for the year 1,275 (9,440)--------------------------------------Employee share options exercised 82 26--------------------------------------Exchange adjustments offset in reserves (34) (8)-------------------------------------- -------- --------Shareholders' funds at end of year 10,274 8,951-------------------------------------- -------- -------- 5. Net cash inflow from operating activities Year ended Year ended 31 March 31 March 2005 2006 £'000 £'000--------------------------------------Operating loss (258) (9,783)--------------------------------------Depreciation of tangible fixed assets 1,028 1,319--------------------------------------Amortisation and impairment of intangible fixedassets 2,165 10,295--------------------------------------Decrease in stock 110 40--------------------------------------Increase in debtors (8,654) (148)--------------------------------------Increase in creditors 8,841 2,745--------------------------------------Loss on disposal of tangible fixed assets - 7-------------------------------------- -------- --------- 3,232 4,475-------------------------------------- -------- --------- 6. Adjusted profit before taxation Year ended Year ended 31 March 31 March 2005 2006 £'000 £'000 Profit/(loss) before taxation 1,145 (9,411)-------------------------------------- Adjust for:Amortisation of intangible fixed assets 2,165 2,539Impairment of intangible fixed assets - 7,756Restructuring costs 358 -Profit on disposal of subsidiary operations (1,388) -Profit on disposal of trade investment (300) -Costs of group restructuring 80 -Discontinued operations 233 (43)-------------------------------------- -------- ---------Adjusted profit before taxation 2,293 841-------------------------------------- -------- --------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Eckoh TechnologiesCTP.L