Final Results

Eckoh Technologies PLC 27 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 outsourced automated solutions, today announced preliminary results for the year ended 31 March 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 76,529 Acquisitions 21,012 18,566 39,578 - --------------------------- -------- -------- -------- -------- Total continuing operations 72,077 54,127 126,204 76,529 Discontinued 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 and discontinued operations (note 6) Martin Turner, Chief Executive Officer, commented today: "The last twelve months have witnessed a considerable period of change for the Group. We have made fundamental changes to our organisational structure coupled with some strategic disposals. The £17.3m all cash offer by Redstone plc to acquire Symphony will provide a satisfactory realisation of our 64.64% shareholding in Symphony, while significantly increasing the Group's cash resources. The Group remains confident in the financial and trading prospects for the current financial year and we are continuing to review a number of strategic options and will update the market at the appropriate time." For further enquiries, please contact Eckoh Technologies plc Martin Turner, Chief Executive Officer Nik Philpot, Chief Operating Officer Adam Moloney, Group Finance Director www.eckoh.com Tel: 08701 100 700 Buchanan Communications Mark 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 of Redstone plc ("Redstone") reached agreement on the terms of a recommended offer to be made by Evolution Securities plc, on behalf of Redstone, for the entire issued share capital of Symphony. The offer is being made on the basis of 54.5p in cash for each Symphony ordinary share at a premium of 14.7% to the mid-market closing share price on 21 June 2006 and 32.9% compared to last September's placing price of 41p per ordinary share. Since the admission of Symphony on AIM on 15 September 2005, Eckoh has held 20,099,999 shares representing 64.64% of the issued ordinary share capital of Symphony. On 21 September 2005 at an extraordinary general meeting of the Company, Eckoh shareholders approved a resolution to dispose of its Symphony ordinary shares at a future point in time, and the Eckoh board therefore intends to support the Redstone offer which will realise approximately £11 million in cash for the Company and repayment of its £4.7 million subordinated loan over a 4-year period. Overview The Group has seen another year of strong growth, generating a profit before taxation (excluding intangible asset amortisation and impairment, exceptional items and discontinued operations of £2.3m (2005 - £0.8m). The profit before tax for 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's remaining businesses into two independent divisions, each within separate legal entities. Speech Solutions and Client IVR Services have now merged and operate under the "Eckoh" brand, while the Advertised IVR Services operation has been re-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 will make 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 Group has an exclusive partnership with BT to provide its top corporate customers with hosted speech recognition services. To date this alliance has supplied speech solutions services to in excess of 20 clients and created over 30 applications, generating more than 40 million minutes of self-service speech transactions. The BT alliance was extended in July 2005 until 2010, which will enable BT to fulfil the increasing requirement from its customers for long term, multi-year contracts for Eckoh's outsourced speech recognition services. Turnover for the year grew 6% to £5.3m (2005 - £5.0m), and gross margin increased 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% on H1 and 28% on H2 2005. Eckoh management intends to deliver high growth rates in this area of operation, and has increased its sales and marketing investment as part of the strategy to achieve this. The results of this investment are bearing fruit with recent contract wins with Empire Cinemas, Her Majesty's Court Services (HMCS), the Government Department for Environment, Food and Rural Affairs (DEFRA), Scottish Power, and Hitachi Capital. Today we also announced two significant new contracts. The first is a 5-year agreement with National Rail Enquiries to provide a new speech enabled travel information solution which will supersede the already highly successful TrainTrackerTM service that Eckoh and our partner BT have been operating since January 2005. The new service, expected to be launched in July, is anticipated to generate significantly higher call volumes than the existing service which currently generates around 225,000 calls per month and is worth a minimum of £3m to Eckoh and BT. The second new speech contract announced today is a 3-year deal with Parcelforce Worldwide to provide a new automated information service that allows customers to track parcels and make re-delivery arrangements over the phone, 24 hours a day. This marks Eckoh's entry into the £23 billion European express logistics market and when the service launches later this summer it is expected to generate a minimum of 1 million calls per annum. A change in the revenue model away from large initial build fees to greater transactional based charges has enabled clients to fully evaluate the benefit of an outsourced speech recognition solution. This has enabled the company to sign significant clients to long term contracts, with revenue recognised over the term of the contract rather than as significant, one-off fees. The benefit of this approach started to became visible in the second half of the year. There have also been key contract renewals with William Hill and TD Waterhouse indicating that Eckoh's proposition remains competitive and is delivering appropriate value to clients. In addition, "Journey Finder", a speech-based product developed by Eckoh and BT and utilised in the successful TrainTrackerTM service for National Rail Enquiries, was voted "Product of the Year 2005" at last year's European Call Centre Awards. Accelerating interest in the product and a strengthening pipeline has reaffirmed the Directors confidence that there is potential for significant growth in the UK and European speech recognition markets. Eckoh Speech Solutions has some clear differentiators from its competitors including one of the largest call processing platforms in Europe, highly experienced management and technical teams, an exclusive alliance with BT and a flexible pricing model benefiting from Eckoh's group call traffic volumes. These factors have placed Eckoh in a prime position to cement its position as the European market leader in outsourced speech solutions. Client IVR Services Eckoh is one of the UK's largest providers of IVR and mobile interactive services, and works with a number of prominent media owners such as ITV, Trinity Mirror, Channel 4, IPC Magazines, EMAP and Northcliffe Newspapers. Eckoh delivers 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 client services on one of the largest call processing platforms in the UK, by offering very competitive rates and providing top quality customer support. These contracts generate an extremely large aggregated call volume which allows Eckoh to negotiate the best commercial contracts from carriers such as BT and C&W as well as through Eckoh's own network. Although margins are low from its direct activity, the division complements both Speech Solutions and Connection Makers who benefit from accessing the same rate structure, as well as cross-selling their higher margin services. Eckoh management has focused efforts on its most significant customers which has enabled overheads to be reduced without compromising quality. This strategy has been 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 competitive market since March 2004 and it was announced recently that this agreement had been renewed again for a minimum of 18 months. In addition, this most recent negotiation was of particular significance due to the inclusion of a new contract to supply services to ITV Play, a new "participation TV" channel which launched in April 2006 on digital terrestrial television and is due to launch on the digital satellite television platform. The new formats commissioned by ITV Play are also being shown across ITV's family of channels, and these have resulted in a quantum jump in the revenues delivered by ITV, which are expected to 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 the proportion of traffic generated by the broadcast clients increasing substantially. 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. This division has operated profitably for many years and specialises in dating and chat services which it provides to clients on a revenue share basis or advertises directly in newspapers, magazines and on television. Gross margins from individual marketing campaigns fluctuate with advertising efficiency, which is influenced by price, seasonality, TV programming and availability. During the year the contract with Trinity Mirror to supply dating services to its large range of national and regional newspapers was renewed until December 2006 and a number of IPC magazines launched editorial dating services for the first time. Eckoh intends to consolidate its share of the chat and dating market by establishing a market leading telephone and mobile speed dating brand in the UK. This new and ground breaking service will enable participants to speed date over the phone or on their mobile with other local users from the comfort of their homes. The launch of the service will require a sizeable marketing investment in the coming year and the new service will also be offered to existing and prospective clients. In February 2006 changes to the Sky Electronic Programming Guide (EPG) on the digital satellite television platform, resulted in Eckoh's L!VE TV channel being moved to a different channel number and a new index category. The format of the channel has had to change significantly because of this move and has resulted in some uncertainty as to whether the good performance in the second half of the year can be maintained. Turnover from Connection Makers increased to £12.1m (2005 - £11.6m) with gross profit 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 the enlarged Symphony group floated on AIM (London Stock Exchange ticker: SMY), at the same time placing 35.36% of shares with new investors. Since then, Symphony has operated as a 64.64% subsidiary of Eckoh and its financial results have been fully consolidated into Eckoh's financial statements (including Anglia since the date of acquisition). On 22 June 2006 Symphony released its standalone results for the full year ended 31 March 2006, and the following are extracts from the announcement: "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. O perating profit, before exceptional items of £0.4m (2005: £nil) and intangible asset amortisation of £2.0m (2005: £nil) amounted to £2.1m (2005: £1.3m). The exceptional 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 share 4.0p (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 Company website, www.symphony.com Discontinued Operations Eckoh disposed of Freecom.net Limited, its internet services company, to eDirectory.co.uk plc ("eDirectory"') on 29 July 2005. The consideration comprises 4,155,844 eDirectory ordinary shares. Further to this, and subject to certain conditions, a further £1.6 million of deferred consideration is receivable in eDirectory ordinary shares or a cash equivalent. eDirectory shares are currently traded on Ofex. The business has been included within discontinued operations in Eckoh's financial statements. The loss on disposal has been recorded at £0.2m in the financial statements. Exceptional Items During the year, there were three exceptional gains. A gain of £1.5m arose from the 35% disposal as a result of the flotation of Symphony, £0.1m was received following 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 Group plc. The amortisation charge of £2.2m predominantly relates to the amortisation of the goodwill arising on the acquisition of Anglia. In addition, there were restructuring costs of £0.4m, largely consisting of integration costs following the acquisition of Anglia, and costs of £0.08m were incurred during the group restructure to establish the Symphony Telecom Holdings group. Following the sale of 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 in line with management's expectations, with exceptionally high turnover being generated from the new ITV Play channel. The Directors remain confident in the Group's financial and trading prospects for the current financial year and are continuing to review a number of strategic options post the proposed cash sale of the 64.64% stake in Symphony to Redstone plc, which is expected to be completed by the end of July 2006. Consolidated profit and loss account for 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 76,529 Acquisitions 39,578 - --------------------------------- ----- --------- --------- Total continuing operations 126,204 76,529 Discontinued operations 880 3,191 --------------------------------- ----- --------- --------- Cost of sales (102,696) (59,675) --------------------------------- ----- --------- --------- Gross profit 24,388 20,045 --------------------------------- ----- --------- --------- Net operating expenses before intangible asset amortisation and impairment and restructuring costs (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 asset amortisation and impairment and restructuring costs 2,265 512 --------------------------------- ----- --------- --------- Continuing operations 284 469 Acquisitions 2,214 - --------------------------------- ----- --------- --------- Total continuing operations 2,498 469 Discontinued 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 other similar items (205) 372 --------------------------------- ----- --------- --------- Profit/(loss) on ordinary activities before taxation 1,145 (9,411) Taxation (166) (6) --------------------------------- ----- --------- --------- Profit/(loss) on ordinary activities after taxation 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 losses for 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 sheet as at 31 March 2006 31 March 31 March 2006 2005 Note £'000 £'000 Fixed assets Intangible fixed assets 8,604 918 Tangible fixed assets 1,498 1,571 Investments 288 - -------- -------- 10,390 2,489 Current assets Stock 479 22 Debtors 22,537 11,021 Short term investments 3,000 7,000 Cash 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 than one year (1,493) (65) Provisions for liabilities and charges (172) (152) -------- -------- Net assets 12,201 9,258 -------- -------- Capital and reserves 3 Called up share capital 681 679 Share premium account 227 147 Profit 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 statement for 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 finance Interest received 286 410 Interest paid (335) (38) Loan issue costs (298) - -------- -------- (347) 372 -------- -------- Taxation (362) - Capital expenditure and financial investment Purchase 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 disposals Purchase of subsidiary undertakings (9,722) (250) Net cash acquired with subsidiary undertakings 796 - Contingent consideration paid in respect of a prior year 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 a prior year 108 -------- -------- (5,655) (250) -------- -------- Cash (outflow)/inflow before use of liquid resources and financing (4,029) 3,140 Management of liquid resources Decrease/(increase) in short-term investments 4,000 (500) Financing Issue of shares 82 26 Loan 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 prepared using accounting policies consistent with those set out in the Group's consolidated 2005 statutory accounts. These statements do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The statements have been extracted from the audited consolidated financial statements of the Group for the year ended 31 March 2006 which have not yet been filed with the Registrar of Companies. The auditors' reports on those accounts were unqualified and did not contain any statement under section 237 of the Companies Act 1985. The balances and results as at 31 March 2005 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 preliminary results for the year ended 31 March 2006 were approved by the Board 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 is calculated on the basis of the weighted average number of ordinary shares of 271,957,745 (2005 - 271,226,435) in issue during the year and the profit for the year, after minority interests, of £1.275m (2005 - loss of £9.440m). Diluted earnings/(loss) per share In calculating diluted earnings/(loss) per share, the weighted average number of ordinary shares in issue is 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 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 of share 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 8,125 Profit for the year - - 1,275 Net exchange adjustments - - (34) Shares issued under the share option schemes 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 fixed assets 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 2,539 Impairment of intangible fixed assets - 7,756 Restructuring 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 Exchange MSMSELM

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