07:00 Tue 20 Nov 2018
Eckoh PLC - Half-year Report
Unaudited interim results for the six months ended
In line results; strong growth in
£m unless otherwise stated |
H1 FY19 |
H1 FY18 Restated1 |
Change |
New business contracted 5 |
14.2 |
8.7 |
63% |
Total business contracted |
16.8 |
12.2 |
38% |
Revenue |
13.1 |
13.4 |
(2%) |
Recurring Revenue % 2 |
87% |
86% |
+100 bps |
Gross profit |
11.0 |
11.4 |
(4%) |
Adjusted EBITDA 3 |
1.6 |
1.9 |
(15%) |
(Loss)/ profit before taxation |
(0.2) |
0.8 |
|
Diluted Earnings per share |
(0.07p) |
0.31p |
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3.4 |
1.7 |
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Strategic highlights:
· Results in line with Board expectations
· Strong momentum in the
· New business contracted in half year exceeds entire prior year in the
· Significant progress in US Secure Payments: revenues up 67%, record new business contracted in the half year, including our largest ever contract valued at
· Return to growth in
Financial Highlights:
· Recurring revenue up to 87% (H1 FY 181: 86%)
· Significant increase in deferred revenue to
· US Secure Payments order book grew 78% to
· Revenues down 2%, or 1.4% at constant currency 4
o
o US down 14%: growth in Secure Payments offset by short-term decline in Support and Coral
· Balance sheet strengthened with net cash of
Current Trading:
· Year to date new contracted business now exceeds FY18 total of
· Strong and growing pipeline in US Secure Payments, further contracts won since period end
· Largest contract renewal secured with
· Record visibility for second half
1. See note 6 for details regarding the restatement as a result of adoption of IFRS15 - Revenue from Contracts and Customers
2. Recurring revenue is defined as on-going revenue on a transactional basis, rather than revenue derived from the set-up and delivery of a new service or hardware.
3. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is the profit before tax adjusted for depreciation, amortisation, finance income, finance expense, legal fees and settlement costs and expenses relating to share option schemes.
4. Constant currency (using last year exchange rates)
5. New business contracted excluding renewals with existing customers.
"
Whilst the IFRS 15 accounting rule changes have reduced reported revenue and profit, we have excellent revenue visibility from the increasing levels of deferred revenue and a fast growing order book, which provides a solid platform for predictable significant growth and further confidence in the outlook for future periods. We remain excited by the prospects for the Group."
For more information, please contact:
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Tel: +44 (0) 1442 458 300 |
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Tel: +44 (0) 203 727 1000 |
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N+1 Singer (Nomad & Joint Broker) |
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Tel: +44(0) 20 7496 3000 |
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Tel: +44(0) 20 7523 8000 |
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About
Our secure payments products help our customers take payments securely from their clients through multiple channels. Our 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. Our 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.
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 implementation of IFRS 15 Revenue from Contracts with Customers ("IFRS 15") has had the anticipated impact on
In 2019 we will evolve our reported financial KPIs to ensure they accurately measure the performance and financial health of the business. As a result, we will cease reporting some KPI's used historically, if no longer deemed appropriate.
Given the delay in revenue being recognised following adoption of IFRS 15, an important KPI will be our levels of new business contracted. We are therefore pleased to report in the first six months of the financial year we have seen a significant increase in new business contracted, which grew 63% year on year to
Including renewals of existing client contracts, the total contracted business for the half-year is
In the US, total new business contracted was
In the
A clear growth strategy
Our strategic objectives remain consistent, reflecting our aim to become the global leader in our areas of expertise, and in particular, Contact Centre security.
Our objectives include:
· Expanding our US footprint and the size of our team to capitalise on the fast-growing market for secure payment opportunities
· Broadening channel partnerships in both
· Continuing to extract value from the businesses acquired in recent years
· Continuing to invest in R&D to underpin next generation product development; protect and enhance our proprietary technologies; and maintaining our market leading position
· Maximising client value through cross-selling
· Continuing to evaluate acquisition opportunities that can support our growth strategy, where timely and accretive, but on an opportunistic basis
Operational Review
US Division (55% of Group new business won, 28% of Group revenue, 79% recurring revenue)
The US division achieved new business contracted of
US Secure Payments continued to see strong growth, with revenues up 67%. Since Eckoh entered the US market in 2015, new business contracted has grown from
The reason for the overall reduction in US revenue is twofold. Secure Payments revenue is the only sales activity in the US impacted by IFRS 15, but only for our lead tokenisation solution. Our other payments offering, which has a more limited scope (it protects just the contact centre agent, desktop and call recording equipment), is not impacted. Previously, approximately 25% of new contracts were for this payments solution, but there were none in this period. This meant that a proportion of Secure Payment revenues expected to be recognised in this year have instead been contracted as arguably better-quality earnings, which will now be recognised over future periods. This is reflected in the increase and size of the Secure Payments order book that has grown by 78% to
Secondly, we saw a reduction in revenue from Support and Coral. The nature of Support agreements is that they generally begin and end with relatively little notice making them harder to predict. Coral, as previously stated, has low visibility. This can lead to greater variation in any one period from these activities compared to Secure Payments, which is largely underpinned by high levels of recurring revenue. Support declined year on year because our largest client ceased part of their contract during the previous year, but we would expect it to grow again in the second half. Similarly, Coral had no new license orders in the first half, in contrast to last year, however we do expect orders in the second half. So, we would not expect the overall reduction in revenue in the first half to be repeated in the second half. Indeed, the improved visibility from new business and revenue deferred under IFRS 15 shows current year US revenue now at
The Group's US focus remains on three sales activities where it has the greatest differentiation and the least competition. The performance of these activities in the US is summarised below.
· Secure Payments revenue grew 67% to
· Support revenue accounted for 50% of revenue in the period at
· Coral had revenue of
Secure Payments
Since
Financial Year |
FY15 |
FY16 |
FY17 |
FY18 |
H1 FY19 |
New Business Contracted |
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|
|
In the first half of 2019 a record level of new business has been won with a value of
The Company is focused on large enterprise contracts, the size and timing of which are difficult to forecast and in the first half we won our largest ever payments contract at
Recurring revenues for the year in the US were 79% (H1 FY181: 72%) and we anticipate this to grow further as the proportion of revenue from Secure Payments increases. Progress continues to be made on broadening our partner channels for Secure Payments, and we have added NICE InContact as a partner in expectation that we will start to see opportunities in the Cloud Contact centre space that are of a sufficient size and value. However, all contracts won so far this year have again been for solutions where we implement on site and we expect this trend to continue for some time for the large enterprises. Nevertheless, our recent annual PCI DSS audit for our level 1 accreditation also included our platform in
Support
In Support, we provide third party support within large Contact Centre operations for software and hardware from vendors such as Avaya, Cisco, Genesys and Aspect. Revenues declined year on year by 28%, principally due to the large three-year contract that commenced in
Coral
In the period there have been no additional licence sales achieved for the Coral product, but as explained previously, the sale of the licences is unpredictable in timing although we do anticipate orders in the second half. Coral is a browser-based desktop that increases efficiency by bringing all the contact centre agent's communication tools into a single screen. It also enables organisations, particularly those who have grown by acquisition, to standardise their Contact Centre facilities, as Coral can be implemented in environments that operate on entirely different underlying technology.
The
The division achieved new business contracted of
In the
Revenue in the period was
It was pleasing to see the improvement in revenue and new business, which can be attributed to the action taken last year when revenue reduced for the first time in many years. The sales function was restructured and the team re-focused on larger, more complex opportunities, where
There was also greater emphasis placed on our indirect sales channel and this has in turn yielded positive results. The Capita relationship which delivered no new contracts last year returned to more normal activity with the fifth significant contract won through the channel since the partnership was created in 2013, worth a minimum of
Looking at the segmentation of
Since the period end, we are pleased to report that the Vue contract, which is expected to be worth
Innovation
Building upon the successful acquisition of Klick2Contact in
The newest service to be incorporated into EXP is a Cloud call recording service that will enable clients to capture and store recordings with full MiFID II compliance. This will be followed before the end of the year by the addition of sentiment analysis that will enable clients to determine not just what a customer's requirement is, but what their emotional state is. Vue, who have recently renewed their contract, will be one of the first clients to deploy EXP.
Current Trading and Outlook
Given the nature of its business,
As we continue to make progress in the US, combined with the size of the opportunity in that market, it is our belief that the US will ultimately surpass the
As we enter the second half, considering the contracts we have already won and the forecast of delivery of the solutions to our clients, we have a solid platform for predictable significant growth and remain confident in the outlook for future periods. We are excited by the prospects for the Group.
Financial Review
The Group has adopted IFRS 15 from 1st
As a result of the implementation of IFRS 15, to understand the growth of the business, the revenue reported in the profit and loss account, needs to be reviewed in conjunction with the new business that has been secured during the first half and the level of deferred costs and liabilities held on the balance sheet. This new business and increased levels of deferred revenue will continue to support future revenue growth as our solutions are delivered to clients and we are able, under IFRS 15 to start to recognise revenue.
Revenue
Revenue for the period was
|
H1 FY19 (
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H1 FY19 (US)
|
H1 FY19 Total
|
H1 FY18 ( Restated |
H1 FY18 (US) Restated |
H1 FY18 Total Restated |
Revenue |
9,433 |
3,676 |
13,109 |
9,007 |
4,379 |
13,386 |
Gross Profit |
7,992 |
2,980 |
10,972 |
7,602 |
3,777 |
11,379 |
Gross margin |
85% |
81% |
84% |
84% |
86% |
85% |
Gross profit margin was 84% for the first half of 2019 compared to 85% for the first half of 2018. The
In the
Administrative expenses
Total administrative expenses were
Profitability Measures
Adjusted EBITDA for the period was
|
Six months ended 30 Sept 2018
£'000 |
Six months ended 30 Sept 2017 Restated £'000 |
Year ended 31 March 2018 Restated £'000 |
(Loss) / profit before tax |
(197) |
822 |
1,084 |
Amortisation of intangible assets |
773 |
1,031 |
2,329 |
Legal fees and settlement costs |
- |
- |
595 |
Expenses relating to share option schemes |
420 |
315 |
793 |
Interest receivable |
(16) |
(3) |
(34) |
Finance income |
- |
(975) |
(975) |
Interest payable |
40 |
47 |
118 |
Adjusted operating profit1 |
1,020 |
1,237 |
3,910 |
Depreciation |
495 |
485 |
914 |
Amortisation |
102 |
188 |
325 |
Adjusted EBITDA2 |
1,617 |
1,910 |
5,149 |
Finance income
In the six months ended
Finance expense
For the financial period ended
Deferred liabilities and assets
Deferred liabilities and deferred assets have both increased as a result of the adoption of IFRS 15 Revenue from Contracts with Customers, with the increase in deferred revenue, the Group has an improved visibility of future revenues. Total deferred liabilities were
Cashflow and liquidity
Net cash at
Consolidated statement of comprehensive income
for the six months ended
|
|
Six months ended 30 September 2018 |
Six months ended 30 September 2017 |
Year ended 31 March 2018 |
|
|
£'000
|
£'000 Restated |
£'000 Restated |
|
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Continuing operations |
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Revenue |
|
13,109 |
13,386 |
27,237 |
Cost of sales |
|
(2,137) |
(2,007) |
(3,747) |
Gross profit |
|
10,972 |
11,379 |
23,490 |
Administrative expenses |
|
(11,145) |
(11,488) |
(23,297) |
(Loss)/ profit from operating activities
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(173)
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(109)
|
193
|
Adjusted operating profit |
|
1,020 |
1,237 |
3,910 |
Amortisation of acquired intangible assets |
|
(773) |
(1,031) |
(2,329) |
Legal fees and settlement costs |
|
- |
- |
(595) |
Expenses relating to share option schemes |
|
(420) |
(315) |
(793) |
Loss from operating activities |
|
(173) |
(109) |
193 |
Interest payable |
|
(40) |
(47) |
(118) |
Finance income |
|
- |
975 |
975 |
Interest receivable |
|
16 |
3 |
34 |
(Loss) / profit before taxation |
|
(197) |
822 |
1,084 |
Taxation credit / (charge) |
|
30 |
(41) |
482 |
(Loss) / profit for the period |
|
(167) |
781 |
1,566 |
|
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|
(Loss) / profit per share expressed in pence |
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|
|
Basic earnings per 0.25p share |
|
(0.07) |
0.32 |
0.63 |
Diluted earnings per 0.25p share |
|
(0.07) |
0.31 |
0.60 |
Other comprehensive income |
|
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|
|
Items that will be reclassified subsequently to profit or loss: |
|
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|
|
Foreign currency translation differences - foreign operations |
|
(392) |
(242) |
(157) |
Other comprehensive income for the period, net of income tax |
|
(392) |
(242) |
(157) |
Total comprehensive (loss) / income for the period attributable to the equity holders of the parent company |
|
(559) |
539 |
1,409 |
Consolidated statement of financial position
as at
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30 September 2018 |
30 September 2017 |
31 March 2018 |
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£'000
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£'000 Restated |
£'000 Restated |
Assets |
|
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Non-current assets |
|
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Intangible assets |
|
7,433 |
8,811 |
7,959 |
Tangible assets |
|
4,637 |
4,818 |
4,703 |
Deferred tax asset |
|
3,701 |
3,275 |
3,790 |
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15,771 |
16,904 |
16,452 |
|
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Current assets |
|
|
|
|
Inventories |
|
585 |
622 |
724 |
Trade and other receivables |
|
14,248 |
11,233 |
11,943 |
Cash and cash equivalents |
|
7,324 |
6,909 |
8,164 |
|
|
22,157 |
18,764 |
20,831 |
|
|
|
|
|
Total assets |
|
37,928 |
35,668 |
37,283 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(16,694) |
(13,683) |
(15,891) |
Other interest-bearing loans and borrowings |
|
(1,300) |
(1,300) |
(1,300) |
|
|
(17,994) |
(14,941) |
(17,191) |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Other interest-bearing loans and borrowings |
|
(2,600) |
(3,900) |
(3,250) |
Deferred tax liability |
|
(563) |
(976) |
(674) |
|
|
(3,163) |
(4,876) |
(3,924) |
|
|
|
|
|
Net assets |
|
16,771 |
15,809 |
16,168 |
|
|
|
|
|
Shareholders' equity |
|
|
|
|
Share capital |
|
632 |
630 |
631 |
ESOP Reserve |
|
(318) |
(158) |
(238) |
Capital redemption reserve |
|
198 |
198 |
198 |
Share premium |
|
2,640 |
2,641 |
2,640 |
Merger reserve |
|
2,697 |
2,697 |
2,697 |
Currency reserve |
|
708 |
231 |
316 |
Retained earnings |
|
10,214 |
9,570 |
9,924 |
Total shareholders' equity |
|
16,771 |
15,809 |
16,168 |
Consolidated interim statement of changes in equity
as at
|
Share capital |
ESOP Reserve |
Capital redemption reserve |
Share premium |
Merger reserve |
Retained earnings |
Currency reserve |
Total shareholders' equity |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Balance at |
611 |
(83) |
198 |
2,660 |
2,697 |
13,172 |
473 |
19,728 |
Restatement (IFRS 15) |
- |
- |
- |
- |
- |
(4,532) |
- |
(4,532) |
Balance at |
611 |
(83) |
198 |
2,660 |
2,697 |
8,640 |
473 |
15,196 |
Total comprehensive income for the period |
- |
- |
- |
- |
- |
781 |
- |
781 |
Shares transacted through |
- |
1 |
- |
- |
- |
(8) |
- |
(7) |
Purchase of own shares |
- |
(76) |
- |
- |
- |
- |
- |
(76) |
Shares issued under the share option schemes |
19 |
- |
- |
(19) |
- |
- |
- |
- |
Retranslation |
- |
- |
- |
- |
- |
- |
(242) |
(242) |
Share based payment charge |
- |
- |
- |
- |
- |
157 |
- |
157 |
Balance as at |
630 |
(158) |
198 |
2,641 |
2,697 |
9,570 |
231 |
15,809 |
1. Balance at
|
||||||||
Balance at |
631 |
(238) |
198 |
2,640 |
2,697 |
9,924 |
316 |
16,168 |
Total comprehensive income for the period |
- |
- |
- |
- |
- |
(167) |
- |
(167) |
Shares transacted through |
- |
- |
- |
- |
- |
3 |
- |
3 |
Purchase of own shares |
- |
(80) |
- |
- |
- |
- |
- |
(80) |
Dividends paid in the year |
- |
- |
- |
- |
- |
- |
- |
- |
Shares issued under the share option schemes |
1 |
- |
- |
- |
- |
- |
- |
1 |
Retranslation |
- |
- |
- |
- |
- |
- |
392 |
392 |
Share based payment charge |
- |
- |
- |
- |
- |
454 |
- |
456 |
Balance at |
632 |
(318) |
198 |
2,640 |
2,697 |
10,214 |
708 |
16,771 |
Consolidated statement of cash flows
for the six months ended
|
Six months ended 30 September 2018
|
Six months ended 30 September 2017 Restated |
Year ended 31 March 2018 Restated |
|
£'000 |
£'000 |
£'000 |
Cash flows from operating activities |
|
|
|
Cash generated from operations |
247 |
1,921 |
5,855 |
Taxation |
120 |
- |
(12) |
Net cash generated from continuing operating activities |
367 |
1,921 |
5,843 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Purchase of property, plant and equipment |
(441) |
(280) |
(647) |
Purchase of intangible fixed assets |
(22) |
(39) |
(323) |
Proceeds from sale of tangible fixed assets |
6 |
- |
- |
Proceeds from sale of intangible fixed assets |
- |
- |
6 |
Interest paid |
(40) |
(47) |
(118) |
Interest received |
16 |
3 |
34 |
Net cash utilised in continuing investing activities |
(481) |
(362) |
(1,048) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Dividends paid |
- |
- |
(1,209) |
Repayment of borrowings |
(650) |
(650) |
(1,300) |
Purchase of own shares |
(80) |
(76) |
(156) |
Issue of shares |
1 |
- |
- |
Shares acquired by |
3 |
(7) |
(49) |
Net cash utilised in continuing investing activities |
(726) |
(733) |
(2,714) |
(Decrease) / increase in cash and cash equivalents |
(840) |
826 |
2,081 |
Cash and cash equivalents at the start of the period |
8,164 |
6,083 |
6,083 |
Cash and cash equivalents at the end of the period |
7,324 |
6,909 |
8,164 |
Notes to the interim financial statements
For the six months ended
1. Basis of preparation
These consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the
The unaudited interim financial information for the period ended
The statutory financial statements for the year ended
The directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. The Group's liquidity and going concern review can be found in the Management Report on page 7.
2. Dividends
The proposed dividend of
3. Earnings per share
The basic and diluted earnings per share are calculated on the following profit and number of shares. Earnings for the calculation of earnings per share is the net profit attributable to equity holders of the parent.
|
Six months ended 30 September 2018
|
Six months ended 30 September 2017 Restated |
Year ended 31 March 2018 Restated |
|
|
|
|
(Loss) / earnings for the purposes of basic and diluted earnings per share |
(167) |
781 |
1,566 |
|
Six months ended 30 September 2018 |
Six months ended 30 September 2017 |
Year ended 31 March 2018 |
Denominator |
'000 |
'000 |
'000 |
Weighted average number of shares in issue in the period |
247,425 |
245,641 |
247,424 |
Shares held by employee ownership plan |
(1,070) |
(550) |
(805) |
Number of shares used in calculating basic earnings per share |
246,355 |
245,091 |
246,619 |
Dilutive effect of share options |
11,040 |
10,902 |
12,384 |
Number of shares used in calculating diluted earnings per share (where applicable) |
257,396 |
255,993 |
259,003 |
4. Cash flow from operating activities
|
Six months ended 30 September 2018 |
Six months ended 30 September 2017 |
Year ended 31 March 2018 |
|
£'000 |
£'000 |
£'000 |
(Loss) / profit after taxation |
(167) |
781 |
1,566 |
Interest income |
(16) |
(3) |
(34) |
Finance income |
- |
(975) |
(975) |
Interest payable |
40 |
47 |
118 |
Taxation |
(142) |
41 |
(485) |
Depreciation of property, plant and equipment |
495 |
485 |
914 |
Exchange differences |
71 |
(241) |
(264) |
Amortisation of intangible assets |
875 |
1,219 |
2,654 |
Legal fees and settlement costs |
(443) |
- |
(152) |
Share based payments |
454 |
157 |
554 |
Operating profit before changes in working capital and provisions |
1,167 |
1,511 |
3,896 |
Decrease/ (increase) in inventories |
139 |
91 |
(11) |
(Increase)/ decrease in trade and other receivables |
(2,305) |
1,046 |
488 |
Decrease/ (increase) in trade and other payables |
1,246 |
(727) |
1,482 |
Net cash generated in operating activities |
247 |
1,921 |
5,855 |
5. Subsequent events to 30 September 2018
As at the date of these statements there were no such events to report.
6. Changes in accounting policies
This note explains the impact of the adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments on the Group's financial statements and also discloses the new accounting policies that have been applied from 1st April 2018, where they are different to those applied in prior periods.
Impact on the financial statements
As a result of the changes in the entity's accounting policies, prior year financial statements had to be restated. IFRS 9 Financial Instruments was implemented without restating comparative information, on the grounds of materiality. IFRS 15 Revenue from Contracts with Customers was adopted and the prior year financial statements have been restated. The tables below show the adjustments recognised for each individual line item for the periods ending 30 September 2017 and 31 March 2018. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed can not be recalculated from the numbers provided. The adjustments are explained in more detail below.
|
30 September 2017 As originally presented |
IFRS 15 |
30 September 2017 Restated |
Balance sheet (extract) |
£'000 |
£'000 |
£'000 |
Deferred tax asset |
3,139 |
136 |
3,275 |
Total Non-Current assets |
16,768 |
136 |
16,904 |
|
|
|
|
Trade and other receivables |
9,805 |
1,428 |
11,233 |
Total Current assets |
17,336 |
1,428 |
18,764 |
|
|
|
|
Total assets |
34,104 |
1,564 |
35,668 |
|
|
|
|
Trade and other payables |
(6,975) |
(6,708) |
(13,683) |
Total Current Liabilities |
(8,275) |
(6,708) |
(14,983) |
|
|
|
|
Net assets |
20,953 |
(5,144) |
15,809 |
|
|
|
|
Currency reserve |
263 |
(32) |
231 |
Retained earnings |
14,682 |
(5,112) |
9,570 |
Net cash generated in operating activities |
20,953 |
(5,144) |
15,809 |
Statement of profit or loss and other comprehensive income (extract) - 6 months to 30 September 2017 |
As originally presented |
IFRS 15 |
Cost of Sales1 |
Restated |
|
£'000 |
£'000 |
£'000 |
£'000 |
Revenue |
14,809 |
(1,423) |
- |
13,386 |
Cost of sales |
(3,807) |
638 |
1,162 |
(2,007) |
Gross profit |
11,002 |
(785) |
1,162 |
11,379 |
Administrative expenses |
(10,395) |
69 |
(1,162) |
(11,488) |
Profit/ (loss) from operating activities |
607 |
(716) |
- |
(109) |
|
|
|
|
|
Profit / (loss) before taxation |
1,538 |
(716) |
- |
822 |
Taxation |
(177) |
136 |
- |
(41) |
Profit for the period |
1,361 |
(580) |
- |
781 |
|
|
|
|
|
Profit per share expressed in pence |
pence |
pence |
pence |
Pence |
Basic earnings per 0.25p share |
0.55 |
(0.23) |
- |
0.32 |
Diluted earnings per 0.25p share |
0.53 |
(0.22) |
- |
0.31 |
1. As a result of the implementation of IFRS 15 Revenue from Contracts with Customers management have reviewed the type of costs being recorded in cost of sales in the
Balance sheet (extract)
|
31 March 2018 As originally presented |
IFRS 15 |
31 March 2018 Restated |
|
£'000 |
£'000 |
£'000 |
Deferred tax asset |
3,533 |
257 |
3,790 |
Total Non-Current assets |
16,195 |
257 |
16,452 |
|
|
|
|
Trade and other receivables |
9,835 |
2,108 |
11,943 |
Total Current assets |
18,723 |
2,108 |
20,831 |
|
|
|
|
Total assets |
34,918 |
2,365 |
37,283 |
|
|
|
|
Trade and other payables |
(7,885) |
(8,006) |
(15,891) |
Total Current Liabilities |
(9,185) |
(8,006) |
(17,191) |
|
|
|
|
Net assets |
21,809 |
(5,641) |
16,168 |
|
|
|
|
Currency reserve |
329 |
(13) |
316 |
Retained earnings |
15,552 |
(5,628) |
9,924 |
Net cash generated in operating activities |
21,809 |
(5,641) |
16,168 |
Statement of profit or loss and other comprehensive income (extract) - 12 months to 31 March 2018
|
As originally presented |
IFRS 15 |
Cost of Sales1 |
Restated |
|
£'000 |
£'000 |
£'000 |
£'000 |
Revenue |
30,005 |
(2,768) |
|
27,237 |
Cost of sales |
(7,120) |
1,250 |
2,123 |
(3,747) |
Gross profit |
22,885 |
(1,518) |
2,123 |
23,490 |
Administrative expenses |
(21,341) |
167 |
(2,123) |
(23,297) |
Profit from operating expenses |
1,544 |
(1,351) |
- |
193 |
Profit / (loss) before taxation |
2,435 |
(1,351) |
- |
1,084 |
Taxation |
225 |
257 |
- |
482 |
Profit for the year |
2,660 |
(1,094) |
- |
1,566 |
|
|
|
|
|
Profit per share expressed in pence |
pence |
pence |
pence |
pence |
Basic earnings per 0.25p share |
1.08 |
(0.45) |
- |
0.63 |
Diluted earnings per 0.25p share |
1.03 |
(0.43) |
- |
0.60 |
1. As a result of the implementation of IFRS 15 Revenue from Contracts with Customers management have reviewed the type of costs being recorded in cost of sales in the
IFRS 15 - Revenue from Contracts with Customers - Impact of adoption
The Group has adopted IFRS 15 from 1 April 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in IFRS 15, the group has adopted the new rules retrospectively and has restated comparatives both for the 2018 financial year and the opening balance sheet. In summary, the following adjustments were made to the amounts recognised in the balance sheet at the date of initial application (1 April 2018).
(i) Revenue
From 1st April 2017 hardware and implementation fees previously recognised in revenue during the implementation phase of the client projects delivering either a Secure Payments solution or hosted service have been restated under IFRS 15, the hardware & implementation fees have been deferred into deferred revenue and held in the balance sheet. In addition the opening balance sheet has been restated for current contracts, where implementation fees and hardware have been recognised in revenue prior to 1 April 2017. The net impact of this restatement is a reduction in previously reported revenue of £1.4m for the 6 month period to 30 September 2017 and £2.8m for the 12 month period to 31 March 2018. The total deferred liability restated at 30 September 2017 is £6.7m and at 31 March 2018 is £8.0m.
Recurring revenue, a Key performance Indicator for the business has been restated and was 86% for the 6 month period to 30 September 2017 and 85% for the 12 month period to 31 March 2018. This is as management expect and will gradually, over the next 3 years, fall back to somewhat higher than the 76% group recurring revenue reported for the year ended 31 March 2018 due to the growth of the US secure payments.
(ii) Cost of Sales
Costs directly attributable to the delivery of the hardware and the implementation fees have been capitalised as 'costs to fulfil a contract'. The net impact of this restatement is a reduction in previously reported cost of sales of £0.6m for the 6 month period to 30 September 2017 and £1.3m for the 12 month period to 31 March 2018. The total deferred costs restated at 30 September 2017 is £1.4m and at 31 March 2018 is £2.1m.
(iii) Commission costs (administrative expenses)
Commission paid to members of the sale team for the signing of specific contracts has been deferred onto the balance sheet and held in other current assets and will be matched to the revenue over the period of the contract term. Commission costs of £0.1m for the 6 month period to 30 September 2017 and £0.2m for the 12 month period to 31 March 2018 have been capitalised into other current assets. No further restatement was made to the opening balance sheet due to materiality.
(iv) Deferred tax assets - remeasurement
As a result of the adjustments under the above three headings the impact to the profit of the business for the 6 month period to 30 September 2017 was reduced by £0.6m and for the 12 month period to 31 March 2018 was reduced by £1.1. The tax charge and utilisation of deferred tax was remeasured and an adjustment of £0.1m made for the 6 month period to 30 September 2017 and £0.3m for the 12 month period to 31 March 2018.
IFRS 15 - Revenue from Contracts with Customers - Accounting policies
IFRS 15 provides a single, principles-based five-step model to be applied to all sales contracts, based on the transfer of control of goods and services to customers. Revenue represents the fair value of the sale of goods and services and after eliminating sales within the Group and excluding value added tax or overseas sales taxes. The following summarises the method of recognising revenue for the solutions and products delivered by the Group.
(i) Secure Payment solutions and hosted services
Due to the unique nature of the secure payments solution, the delivery and on-going support and maintenance of the secure payments solution under IFRS 15 is one single performance obligation, therefore revenue for implementation fees for our hosted Secure Payments solution and our hosted Customer Contact services; and revenue for hardware and implementation fees for our hosted or onsite Secure Payments Audio tokenisation solution will be recognised evenly over the period of the contract from the point of delivery of the solution to the client. Costs directly attributable to the delivery of the hardware, the implementation fees and the sales commission costs will be capitalised as 'costs to fulfil a contract' and released over the contract term from the point of delivery of the solution to the client.
In addition to the initial set-up costs, there are on-going support and maintenance and running costs of the service. In the
(ii) Support services
Revenue is earnt from providing expert third party support for Contact Centre infrastructure and is recognised on a pro-rated basis over the period of the contract.
(iii) Coral product
Revenue arises from the sale of licences, implementation fees and on-going support and maintenance. Under IFRS 15, each component is defined as a performance obligation. Revenue is recognised for sales of licences when they are delivered to the client; revenue from implementation fees is recognised by estimating a percentage of completion based on the direct labour costs incurred to date as a proportion of the total estimated costs required to complete the implementation; and revenue for on-going support and maintenance is recognised each month.
IFRS 9 - Financial Instruments - Accounting policies
The Group does not enter into forward contracts to hedge forecast transactions.
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