Eckoh Technologies Regulatory News (ECK)

Eckoh plc

("Eckoh" or "the Company")

Acquisition of Veritape Limited

Eckoh, the UK's leading provider of multi-channel customer service and secure payment solutions, is pleased to announce the acquisition of Veritape Limited ('Veritape'), a provider of Payment Card Industry Data Security Standards ('PCI DSS') compliant call recording software solutions and on-premise secure payment solutions, for an initial consideration of £6.3m.

The initial consideration comprises of £5.2m payable in cash funded by existing cash resources from the combined entity and £1.1m represented by 7,095,044 new Eckoh ordinary shares. Additional deferred consideration of up to a maximum of £4.3m, payable in cash of £1.7m and new Eckoh ordinary shares of £2.6m, is dependent on the achievement of certain profit before tax targets. To earn the entire deferred consideration a profit before tax of £3.6m must be achieved over the 26 month period beginning 1 July 2013.

Veritape is a UK based specialist in PCI DSS compliant call recording software solutions and on premise secure payment solutions to contact centres. Veritape's core payment product is branded 'CallGuard' a self-install payment solution enabling customers to undertake transactions over the telephone without credit card details being shared with the agent or stored by the call recording software. The simplicity of the implementation process of the CallGuard solution has enabled Veritape to be successful in selling their solution both in the UK and overseas with over half their business in the last 12 months coming from international markets.

In addition to CallGuard, Veritape have also recently launched 'OneProx', a software solution that removes all cardholder data from any IT environment enabling merchants to reduce the costs of PCI DSS compliance considerably. OneProx requires no integration with existing payment processes or IT systems and avoids complex and time-consuming implementation projects.

For the year ended 31 August 2012 Veritape generated unaudited revenues of £766,000 and a profit before tax of £230,000. The transaction will be immediately earnings enhancing. In the 9 months since 31 August 2012, Veritape have experienced exceptional growth and have already doubled revenue from the previous year.

Application will be made shortly to the London Stock Exchange for 7,095,044 new ordinary shares to be admitted to trading on AIM pursuant to the initial share consideration. It is expected that Admission will become effective on 17 June 2013.

Strategic rationale:

The acquisition of Veritape is in line with Eckoh's stated strategy of maximising its level 1 PCI DSS status through its payment products and expanding its product offering in order to foster greater cross selling opportunities within its blue chip customer base.

This transaction provides Eckoh with an excellent opportunity to accelerate its growth in the UK and overseas whilst assisting in globalising the Company's product mix.

Key strategic benefits of the acquisition include:

·; Rapid increase in the number of Eckoh's customer base by 142%, which will now reach 121 (up from 50) allowing immediate cross selling opportunities

·; Provides Eckoh with a platform to offer a premised based PCI DSS compliant payment solution alongside their established EckohPAY and EckohPROTECT hosted products

·; Greater ability to cross sell the combined group's PCI DSS compliant payment products and customer service solutions - positioning Eckoh as a complete PCI DSS service provider

·; Accelerates the expansion of Eckoh's services in new overseas markets

·; The directors believe Veritape's established call recording solution can be combined with Eckoh's speech recognition platform to assist in answering a growing demand for speech analytic solutions

·; The addition of Veritape's management team into Eckoh brings established market profile and expertise in the payments sector

Transaction summary:

The acquisition will be financed through a combination of existing cash resources and a deferred consideration payable in new Eckoh ordinary shares, consisting of two elements:

·; £4.0m of initial cash consideration to be funded by existing Eckoh cash resources and £1.2m of cash to be funded from Veritape cash resources

·; £1.1m of initial consideration is payable by the issue of 7,095,044 new Eckoh ordinary shares, based on the average share price for the 20 dealing days preceding completion of the transaction

·; Deferred consideration of up to a maximum of £4.3m can be earned in the 26 month period following 1 July 2013. Deferred consideration is payable in cash of £1.7m and £2.6m of new Eckoh ordinary shares dependent on the achievement of certain profit before tax targets.

·; Within this 26 month period, the maximum of £4.3m deferred consideration is broken down into the following milestones:

- £2.15m can be earned (split between cash and shares on a ratio of 40:60) in the 14 month period following 1 July 2013 provided profit before tax is a minimum of £680,000. The full £2.15m consideration for this period is only earned in the event £1.55m of profit before tax is generated, with increments between calculated on a straight line basis

- A further £2.15m (split between cash and shares on a ratio of 40:60) can be earned in the 12 month period following 1 September 2014 provided profit before tax is a minimum of £812,000. The full £2.15m consideration for this period is only earned in the event £2.03m of profit before tax is generated, with increments between calculated on a straight line basis.

·; The number of new Eckoh ordinary shares to be issued as deferred consideration is based on the average share price for the 20 dealing days preceding completion of the transaction

·; The main beneficiaries of the deferred consideration will be the two founder Directors who will remain with the business for at least the 26 month deferred consideration period

Nik Philpot, Chief Executive Officer, commented today:

"We are delighted to be announcing the acquisition of Veritape which consolidates our market leading position in the UK for PCI DSS compliant payment products and strengthens our proposition in overseas markets. 

The market for PCI DSS compliant payment solutions continues to underpin our growth projections and with the regulatory requirements becoming more stringent, the ability to offer a broader product offering will enable us to satisfy more of this growing demand. 

This transaction and Veritape's complementary products will ensure that our payment solutions remain best in class and the strong cross selling opportunities across both customer bases will enable Eckoh to accelerate our growth."

For more information, please contact:

Eckoh plc

Nik Philpot, Chief Executive Officer

Adam Moloney, Group Finance Director

www.eckoh.com Tel: 01442 458 300

Buchanan

Jeremy Garcia, Gabriella Clinkard Tel: 020 7466 5000

www.buchanan.uk.com

N+1 Singer

Shaun Dobson Tel: 020 7496 3000

About Eckoh plc

Eckoh plc (AIM: ECK) is the UK's leading provider of multi-channel customer service and secure payment solutions. We are a PCI DSS Level One accredited Service Provider, currently processing over £250 million in card payments annually.

Eckoh's solutions enable payments, transactions and enquiries to be processed without the caller needing to talk to a contact centre agent. This significantly reduces our clients' costs, whilst freeing up their agents to deal with more complex enquiries. Eckoh is the largest provider of such hosted services in the UK.

Our secure and resilient infrastructure has the scalability to handle up to 8,000 calls simultaneously, which means that calls will always be answered no matter how unpredictable the circumstances.

For more information, visit: www.eckoh.com