Eckoh Technologies Regulatory News (ECK)

17 Dec 2007 07:01

Eckoh PLC17 December 2007 Eckoh plc Unaudited Interim Results for the six months ended 30 September 2007 Highlights of the period: • Good progress made with restructuring and repositioning the Group as a specialised speech solutions business with the sale of Connection Makers divisions for £2.75m - Chat division sold to Antiphony Ltd for £1.75m - TV division sold for £1.0m • Speech Solutions revenues increase by 5% to £3.1m (H1 2006/7: £3.0m) with GP increasing by 14% to £1.9m (H1 2006/7: £1.6m) • Gross margin in Speech Solutions increases to 60% (H1 2006/7: 56%) • Revenues from continuing operations reflect lower call volumes in the Groups' Client IVR division • Balance Sheet holds £5.7m cash, a £4.7m receivable from Symphony Telecom and £1.0m receivable from sale of TV channel; it does not include the £1.75m receivable for the Chat sale • Initiated a cost reduction programme to streamline the business and align operating costs with ongoing revenues which is expected to reduce group expenses by £1m+ for the Full Year 2008/2009 Significant contract renewals and developments: • 5 year contract extension with TFCC Inc for the provision of services to UK utilities • 2 year contract on new terms with Trinity Mirror to provide network facilities and interactive services to their national and regional publications • Traintracker speech service provided to National Rail Enquiries awarded "Innovation of the Year" at Transport Innovations Event and "Best Use of Technology Partnership" in the Customer Contact Association's Excellence Awards Nik Philpot, Chief Executive Officer, commented today: "We are pleased with the progress made in repositioning ourselves as aspecialised speech solutions company following the disposal of ConnectionsMakers and our balance sheet remains extremely strong. The conditions in the media sector have been challenging and we expect this tobe a smaller business going forward, but despite this we have a good portfolioof clients with which we can maintain a strong and profitable position in themarket. Looking ahead into 2008, our entire focus will be on aggressively drivingforward the speech business and as a result we have renewed confidence, vigourand belief that we can deliver real value for shareholders." For further enquiries, please contact: Eckoh plcNik Philpot, Chief Executive Officer Tel: 01442 458 300Adam Moloney, Group Finance DirectorJim Hennigan, Executive Directorwww.eckoh.com Corfin CommunicationsHarry Chathli / Neil Thapar / Ben Hunt Tel: 020 7977 0020 Seymour PierceJonathan Wright / Parimal Kumar Tel: 020 7107 8000 Introduction The Board of Eckoh reports that steady progress has been made towards its aim ofbecoming the clear market leader for hosted Speech Recognition services inEurope. During the period, Eckoh have pursued the long held strategy of focusing thebusiness on the core Speech Solutions division. To this end, we closed theDating division of Connection Makers at the end of September 2007, announced thesale of the TV division of that subsidiary on 1 October 2007, and we canannounce today the sale of the final part of the Connection Makers business toAntiphony Limited for a cash consideration of £1.75m. It has become clear during 2007 that the benefits available from running theClient IVR division were disproportionate to the risks and that thesignificantly reduced call volumes have meant that the low margins inherent inthe activity were no longer sustainable. To that end the Group has re-contractedwith all of its clients to provide maximum protection from regulatory issues andwhere appropriate we have renegotiated the terms of the arrangements. The IVRdivision has also worked with its major TV client in this sector, ITV, to exitthis contract (which we expect to end early in 2008), from which point ITV isexpected to operate the provision of services in-house. The combination of Connection Makers exiting the Group and the changes in ClientIVR has had an immediate impact on the short term profitability of the Group incomparison to last year. To address this we have initiated a cost reductionprogramme within the business that will take out over £1m of operating expenseswhich will enable us to deliver significantly improved financial results during2008/9. Going into 2008, the focus of the business will be concentrated on the highmargin Speech Solutions activity. 1.1 Speech Solutions Revenue in the Speech Solutions division increased by 5% to £3.1m (H1 2006/7:£3.0m) during the period, with the gross margin increasing to 60% (H1 2006/7:56%) allowing gross profit to increase by 14% to £1.9m (H1 2006/7: £1.6m). The division delivered growth and was able to offset the loss of revenue fromits largest margin client, UGC cinemas, following their acquisition byCineworld. Adjusting for the loss of that client, revenues in the division haveactually increased by 18% and the gross profit has increased by 33%. The loss ofUGC was unusual in that it is has been the only major contract lost in over 4years, our normal experience is for clients to contract for an initial term ofbetween 3-5 years, and to then renew and extend the scope of their contracts. Byway of illustration we have been able to generate 29% more revenue from our top7 clients than in the same period last year. As well as growing existing clients, additional revenue streams have beenachieved by bringing in significant new clients such as AXA PPP, ParcelforceWorldwide, United Utilities and Three Valleys Water, all of whom were notgenerating revenue in the first half of last year. These developments, a strongsales pipeline and developments in the US market serve to reinforce belief inthe Speech Solutions market. During the period, extensive research and discussions have taken place toidentify potential acquisition targets in mainland Europe. This exercise has,however, proven difficult as there are few suitable candidates and those thathave been identified are typically private businesses whose valuations areguided by transactions in the United States as well as a long term confidence inthe market. As a result Eckoh will continue to focus on organically growing the UK businessand will look opportunistically at possible consolidation opportunities withinthe UK. To support that strategy there are efforts to diversify the saleschannels by establishing more indirect relationships as illustrated by thepartnership put in place earlier in the year with Genesys, an Alcatel-Lucentcompany focused on the call centre market. 1.2 Client IVR The Client IVR division has been severely impacted by the adverse mediapublicity in relation to the use of premium rate telephony, particularly in thebroadcast sector. Revenues in this division have fallen by 66% to £13.2m (H12006/7: £38.8m) due to a reduction in the volumes of calls coming into ITV andthe ITV Play formats. Gross profit in this division was £0.8m (H1 2006/7:£1.8m). Eckoh has not lost any clients in this division over the period so these reducedfinancials have come purely from a lower number of calls coming into the sameservices. The Group has taken significant steps during the period to execute on itsstrategy of becoming a "best practice" service provider in this area. As statedpreviously, the combination of decreasing call volumes and increased regulatorypressures meant that the approach to the business has had to change. As a resultall clients in this area have been asked to sign new contracts and whereappropriate the terms have been renegotiated. Trinity Mirror is an example of aclient who has recognised the value and importance of the compliance expertisethat we can provide and has entered into a new contract with us for a two yearperiod. We resigned the contract that we had with ITV in September as it was no longercommercially viable at the lower call volumes, and agreed instead a monthly feebased contract from October. As publicly stated in the announcement accompanyingthe Deloittes report, ITV are looking to take this activity in-house and to thatend we anticipate our agreement coming to an end in early 2008. The Client IVR division remains complementary to the Speech Solutions division,but going forward Eckoh will only operate in this area with clients who arelooking for a top quality service, who consider regulatory compliance to be ofparamount importance and are willing to pay an appropriate price for receivingthis professional service. 2. Connection Makers Following a long term review of the Connection Makers activity the Board tookthe decision to close the Dating division, which had become unprofitable, at theend of September 2007. On 1 October 2007, it was announced that the TV divisionhad been sold for £1m payable in cash over the following two years subject toregulatory approval. We are pleased to announce today that we have sold thefinal part of the business, the Chat division of Connection Makers for £1.75mpayable in cash over 2 years. The financial results for the Dating division and the TV division are includedwithin discontinued operations. The results for the Chat division are includedwithin continuing operations for the period on the basis that at 30 September2007 it could not be demonstrated that the sale was highly probable under therequirements of IFRS 5 'Non-current assets held for sale and discontinuedoperations'. During the period, revenue was £5.1m compared to £3.9m in H1 2006/7. Grossmargin was £1.9m compared to £2.2m in H1 2006/7. 3. Administrative expenses The administrative expenses in the business have remained steady at £4.5m. Thereduced level of calls in Client IVR has had little effect on the amount ofresource required to run these accounts, however, the expected exit from the ITVcontract and disposal of the Connection Makers division has enabled us to reviewthese costs in full. A cost reduction programme will be completed over the coming weeks to reduce thelevel of expenses to be proportionate to the size of the remaining business. Itis anticipated that over £1m per annum of costs will be removed as part of thisexercise. 4. Liquidity and capital resources Eckoh continues to hold a very strong balance sheet with shareholders' equity of£8.7m (2006: £18.1m) including £5.7m of cash and cash equivalents (2006:£16.4m). The decrease in cash and cash equivalents from the comparative interimperiod is due to the cash outflow of £10.2m in respect of the tender offer andshare buyback completed in February 2007, with the remaining reduction almostentirely due to a reduction in working capital as a result of the decline inClient IVR activity. Also on the balance sheet are the £4.7m receivable from Symphony Telecom Limited("Symphony") and the £1.0m receivable from the sale of the TV division ofConnection Makers. The first instalment of the receivable from Symphony will bereceived in December 2007 at £1.5m. The remaining instalments are due to be paidannually in June with the final repayment in June 2010. The £1.0m receivablefrom the sale of the TV division will be fully paid by October 2009. The disposal of the Chat division, which although not reflected in the balancesheet at 30 September 2007, will further strengthen the business with £1.75m tobe paid over the next two years. 5. International Financial Reporting Standards Due to the requirement for the Group to report under International FinancialReporting Standards ("IFRS") from 1 April 2007, the interim financial statementsare lengthier than in previous years. The adjustments between UK GAAP and IFRSfor the period relate mainly to discontinued operations. A full reconciliationis shown in the notes to the financial statements. 6. Outlook The second half of the year will see the emergence of a smaller Group which ismuch more focused on the Speech Solutions division, where we ultimately seevalue being created for shareholders. The impact of the restructuring will see areduction in the level of costs but it will not be until 2008/9 that we will seethe full benefit of the steps taken in 2007/8. Although the first half of the financial year has been difficult for a number ofreasons, it has served to accelerate the strategic plans for the business.Looking ahead to 2008, with our focus entirely on aggressively driving forwardthe speech business, we have renewed confidence, vigour and belief that we candeliver real value for shareholders. Consolidated interim income statementfor the period ended 30 September 2007 Six months Six months ended 30 ended 30 Year ended September September 31 March 2007 2006 2007 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Continuing operationsRevenue 17,954 43,994 81,539Cost of sales (14,529) (39,763) (72,568)------------------ ----------- ----------- -----------Gross profit 3,425 4,231 8,971Administrative expenses (4,467) (4,529) (9,539) ------------------ ----------- ----------- -----------Loss from operating activities (1,042) (298) (568) Interest receivable 271 406 882 Interest payable - (1) (1)------------------ ----------- ----------- -----------(Loss)/profit before taxation (771) 107 313Taxation (15) - -Loss for the period from continuing operations (786) 107 313 Discontinued operationsPost tax profit for the periodfrom discontinued operations 567 7,552 8,062 ------------------ ----------- ----------- -----------(Loss)/profit for the period (219) 7,659 8,375================== =========== =========== =========== Attributable to:Minority interests - 142 144Equity holders of the parent (219) 7,517 8,231------------------ ----------- ----------- ----------- (219) 7,659 8,375================== =========== =========== =========== (Loss)/earnings per share expressedin pence per shareBasic (0.11) 2.76 3.13Diluted (0.11) 2.70 3.07 (Loss)/earnings per share fromcontinuing operations expressed inpence per shareBasic (0.40) 0.04 0.12Diluted (0.40) 0.04 0.12 Earnings per share from discontinuedoperations expressed in pence pershareBasic 0.29 2.77 3.06Diluted 0.28 2.71 3.00 Consolidated interim balance sheetas at 30 September 2007 30 September 2007 30 September 2006 31 March 2007 £'000 £'000 £'000 (unaudited) (unaudited) (audited) AssetsNon-current assetsIntangible assets 104 246 180Property, plant and equipment 909 1,256 1,148Financial assets - available for sale 288 288 288 investments Other receivables 2,879 4,700 3,273--------------------- ---------- ---------- ---------- 4,180 6,490 4,889--------------------- ---------- ---------- ---------- Current assetsInventories 6 80 17Trade and other receivables 8,224 13,132 8,644Current tax assets 68 - -Cash and cash equivalents 5,736 16,422 9,601--------------------- ---------- ---------- ---------- 14,034 29,634 18,262--------------------- ---------- ---------- ---------- Assets held for sale 902 - - Total assets 19,116 36,124 23,151 LiabilitiesCurrent liabilitiesTrade and other payables (9,198) (17,691) (13,682)Current tax liabilities (488) (196) (257)Obligations under finance lease (7) (20) (7)--------------------- ---------- ---------- ---------- (9,693) (17,907) (13,946)--------------------- ---------- ---------- ---------- Liabilities directlyassociated with assets heldfor sale (606) - - Non-current liabilitiesObligations under finance lease (2) - - Provisions (75) (123) (516)--------------------- ---------- ---------- ---------- (77) (123) (516)--------------------- ---------- ---------- ------------------------------- ---------- ---------- ----------Net assets 8,740 18,094 8,689===================== ========== ========== ========== Shareholders' equityShare capital 499 685 491Capital redemption reserve 198 - 198Share premium 703 335 477Currency reserve (69) 37 (61)Retained earnings 7,409 17,037 7,584--------------------- ---------- ---------- ----------Total shareholders' equity 8,740 18,094 8,689===================== ========== ========== ========== Consolidated interim statement of changes in equityas at 30 September 2007(unaudited) Share Capital Share Retained Currency Minority Total Capital redemption premium earnings reserve interests reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance as 1April 2006 681 - 227 9,345 - 1,592 11,845Minority shareof losses forthe period - - - - - (144) (144)Disposal ofsubsidiary - - - - - (1,448)(1,448)Exchangedifferences - - - - 37 - 37Profit for theperiod - - - 7,659 - - 7,659---------------- ------- -------- ------- ------- ------- ------- ------Totalrecognisedincome andexpense - - - 7,659 37 (1,592) 6,104---------------- ------- -------- ------- ------- ------- ------- ------Share basedpayment charge - - - 33 - - 33Shares issuedunder theoption schemes 4 - 108 - - - 112---------------- ------- -------- ------- ------- ------- ------- ------Balance at 30September 2006 685 - 335 17,037 37 - 18,094---------------- ------- -------- ------- ------- ------- ------- ------ Balance at 1October 2006 685 - 335 17,037 37 - 18,094Exchangedifferences - - - - (98) - (98)Profit for theperiod - - - 716 - - 716---------------- ------- -------- ------- ------- ------- ------- ------Totalrecognisedincome andexpense - - - 716 (98) - 618---------------- ------- -------- ------- ------- ------- ------- ------Share basedpayment charge - - - 78 - - 78Shares issuedunder theoption schemes 4 - 142 - - - 146Share buy backand tenderoffer (198) 198 - (10,247) - -(10,247)---------------- ------- -------- ------- ------- ------- ------- ------Balance at 31March 2007 491 198 477 7,584 (61) - 8,689---------------- ------- -------- ------- ------- ------- ------ ------ Balance at 1April 2007 491 198 477 7,584 (61) - 8,689Exchangedifferences - - - - (8) - (8)Loss for theperiod - - - (219) - - (219)---------------- ------- -------- ------- ------- ------- ------- ------Totalrecognisedincome andexpense - - - (219) (8) - (227)---------------- ------- -------- ------- ------- ------- ------- ------Share basedpayment charge - - - 44 - - 44Shares issuedunder theoption schemes 8 - 226 - - - 234---------------- ------- -------- ------- ------- ------- ------- ------Balance at 30September 2007 499 198 703 7,409 (69) - 8,740================ ======= ======== ======= ======= ======= ======= ====== Consolidated interim cash flow statementfor the period ended 30 September 2007 Six months ended Six months ended Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 (unaudited) (unaudited) (audited)Cash flows from operatingactivitiesContinuing operations(Loss)/profit after taxation (786) 107 313Interest expense (271) (405) (881)Depreciation of property,plant and equipment 329 328 756Amortisation of intangibleassets 118 27 172Decrease/(increase) ininventories 11 (38) 25(Increase)/decrease intrade and other receivables (237) (2,355) 7,204(Decrease)/increase intrade and other payables (3,794) (3,302) (7,750)--------------------- ---------- ---------- ----------Cash utilised in operations (4,630) (5,638) (161)Interest paid - (1) (1)--------------------- ---------- ---------- ----------Net cash utilised incontinuing operatingactivities (4,630) (5,639) (162)--------------------- ---------- ---------- ---------- Discontinued operationsProfit after taxation 567 7,552 8,062Taxation recognised inincome statement 15 80 80Interest expense - 75 75Depreciation of property,plant and equipment 30 - -Amortisation of intangibleassets 21 - -Disposal of property, plantand equipment (141) - -Inventories - (45) (45)(Increase)/decrease intrade and other receivables (5) 7,387 7,016Increase/(decrease) intrade and other payables 127 (12,499) (13,920)--------------------- ---------- ---------- ----------Cash generated fromoperations 614 2,550 1,268Interest paid - (169) (169)Taxation (15) (80) (80)--------------------- ---------- ---------- ----------Net cash generated fromdiscontinued operatingactivities 599 2,301 1,019--------------------- ---------- ---------- ---------- Cash flows from investingactivitiesContinuing operationsPurchase of property, plantand equipment (221) (550) (947)Purchases of intangiblefixed assets (62) (151) (230)Interest received 267 481 785--------------------- ---------- ---------- ----------Net cash utilised incontinuing investingactivities (16) (220) (392)--------------------- ---------- ---------- ---------- Discontinued operationsPurchase of property, plant and equipment (13) (42) (13)Purchases of intangible fixed assets (37) - (37)Proceeds on disposal of subsidiary - 10,728 10,188undertakingNet cash disposed with subsidiary - (3,165) (3,165)undertakingInterest received - 18 18--------------------- ---------- ---------- ----------Net cash (utilised)/generated fromdiscontinued investing activities (50) 7,539 6,991--------------------- ---------- ---------- ---------- Cash flows from financing activitiesContinuing operationsIssue of shares 234 112 60Share buyback and tender offer - - (10,247)Capital element of finance payments lease rental (2) (8) (5) ---------- ---------- ---------- ---------------------Net cash generated from continuing investing activities 232 104 (10,192)--------------------- ---------- ---------- ---------- Discontinued operationsLoans repaid - (400) (400)--------------------- ---------- ---------- ----------Net cash utilised in discontinued investing activities - (400) (400)--------------------- ---------- ---------- ------------------------------- ---------- ---------- ----------Decrease in cash and cash equivalents (3,865) 3,685 (3,136)Cash and cash equivalents at the start of the period 9,601 12,737 12,737 --------------------- ---------- ---------- ----------Cash and cash equivalents at the end of the period 5,736 16,422 9,601 ===================== ========== ========== ========== Eckoh plc Consolidated Interim Financial Statements for the period ended 30September 2007 1. General information The financial information set out in this interim report for the six monthsended 30 September 2007 and the comparative figures for the six months ended 30September 2006 are unaudited. The UK GAAP figures for the year ended 31 March2007 were audited, however the IFRS conversion figures are not audited. Thisfinancial information does not constitute statutory accounts as defined inSection 240 of the Companies Act 1985. The Group's statutory financialstatements for the year ended 31 March 2007 were prepared under UK GAAP. Theauditors report on these financial statements was unqualified and did notinclude references to any matters to which the auditors drew attention by way ofemphasis without qualifying their report and did not contain statements undersection 237(2) of the Companies Act 1985. The financial statements for the yearended 31 March 2007 have been filed with the Registrar of Companies. 2. Basis of preparation These consolidated interim financial statements ("the interim financialstatements") of Eckoh plc are for the six months ended 30 September 2007. Theytake into account the requirements of IFRS1, First-time Adoption of IFRS, asthey are part of the period covered by the Group's first IFRS financialstatements for the year ended 31 March 2008. These interim financial statementshave been prepared in accordance with those IFRS standards and IFRICinterpretations issued and effective or issued and early adopted as at the timeof preparing these statements (November 2007). The IFRS standards and IFRICinterpretations that will be applicable at 31 March 2008, including those thatwill be applicable on an optional basis, are not known with certainty at thetime of preparing these interim financial statements. The interim financialstatements do not include all of the information required for full annualfinancial statements and should be read in conjunction with the consolidatedfinancial statements of the Group for the year ended 31 March 2007. These interim financial statements have been prepared in accordance with theaccounting policies set out below which are based on the recognition andmeasurement principles of IFRS in issue as adopted by the European Union ("EU")and effective at 31 March 2008 or are expected to be adopted and effective at 31March 2008, the first annual reporting date at which we are required to use IFRSaccounting standards adopted by the EU. As permitted by the AIM Listing Rules,the Group has elected not to comply with IAS 34 'Interim financial reporting'. Eckoh plc's consolidated financial statements were prepared in accordance withapplicable United Kingdom Generally Accepted Accounting Principles ("UK GAAP")until 31 March 2007. The date of transition was 1 April 2006. UK GAAP differs insome areas from IFRS. In preparing Eckoh plc's 2007 consolidated interimfinancial statements, management has amended certain accounting methods appliedin the UK GAAP financial statements to comply with IFRS. The comparative figuresin respect of 2006 have been restated to reflect these adjustments. Reconciliations and descriptions of the effect of the transition from UK GAAP toIFRS on the Group's equity, net income and cash flows are provided in Note 7. These consolidated interim financial statements have been prepared under thehistorical cost convention, as modified by the revaluation of available-for-salefinancial assets, and financial assets and financial liabilities at fair valuethrough profit and loss. The preparation of financial statements requires the use of certain criticalaccounting estimates. It also requires management to exercise judgement in theprocess of applying the Group's accounting policies. The principal accountingpolicies, which have been consistently applied to all of the periods presented,are described below. 3. Summary of principal accounting policies Basis of Consolidation The Group financial statements consolidate the accountsof the Company and its subsidiary undertakings. The results of subsidiariesacquired are included in the consolidated income statement from the date onwhich control passes to the Group and are included until the date on which theGroup ceases to control them. Subsidiaries are all entities over which the Grouphas power to control the financial and operating policies so as to obtainbenefits from their activities. Transactions between Group companies areeliminated on consolidation. Investments in subsidiary undertakings are accounted for using the purchasemethod of accounting. The cost of an acquisition is measured as the fair valueof the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are measured initially at theirfair values at the acquisition date. The excess of the cost of acquisition overthe fair value of the Group's share of the identifiable net assets acquired isrecorded as goodwill. If the cost of acquisition is less than the fair value ofthe Group's share of the net assets of the subsidiary acquired, the differenceis recognised directly in the income statement. Business combinations prior to 1 April 2006 have not been restated onto an IFRSbasis due to the application of an exemption under IFRS1. Intangible fixed assets (a) Goodwill Goodwill represents the excess of the fair value of theconsideration paid over the fair value attributable to the net assets acquiredand is capitalised on the Group balance sheet. Goodwill is carried at cost lessamortisation charged prior to the Group's transition to IFRS on 1 April 2006. Prior to the adoption of IFRS, goodwill was amortised over a period notexceeding 20 years. Following the adoption of IFRS, goodwill is not amortisedand is reviewed for impairment at least annually. Any impairment is recognisedin the period in which it is indentified. (b) Intangible fixed assets Intangible fixed assets (including customer basesand client contracts) acquired by the Group are capitalised at the fair value ofthe consideration paid and amortised over their expected useful economic lives.The expected useful economic life of an acquired customer base is generallyassumed to be 3-5 years. The useful economic lives for other intangible assetsare assessed for each acquisition as it arises. (c) Research and development Research costs are charged to the income statementin the year in which they are incurred. Development expenses include expensesincurred by the Group to develop new products and enhance its systems.Development costs are capitalised as intangible fixed assets when it is probablethat the project will be a success, considering its commercial and technologicalfeasibility, and costs can be measured reliably. Development costs that do notmeet those criteria are expensed as incurred. Capitalised development costs areamortised on a straight line bases over the estimated useful life of the asset,which is generally three years. The carrying value of intangible fixed assets is assessed at the end of eachfinancial year for impairment. See the policy entitled impairment of assetsbelow. Impairment of assets An impairment loss is recognised in the income statementfor the amount by which the asset's carrying amount exceeds its recoverableamount. The recoverable amount is the higher of the asset's fair value lesscosts to sell, and the value-in-use based on an internal discounted cash flowevaluation. For the purpose of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash flows. All assetsare subsequently reassessed for indications that an impairment loss previouslyrecognised may no longer exist Property, plant and equipment Property, plant and equipment is stated at cost orfair value at acquisition, net of depreciation and any provisions forimpairment. Cost includes expenditure that is directly attributable to theacquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as aseparate asset, as appropriate, only when it is probable that future economicbenefits associated with the item will flow to the Group and the cost of theitem can be measured reliably. All other repairs and maintenance are charged tothe income statement during the financial period in which they are incurred. The gain or loss arising on the disposal of an asset is determined by comparingthe disposal proceeds and the carrying amount of the asset and is recognised inthe income statement. Depreciation is calculated using the straight-line methodto allocate the cost of each asset to its estimated residual value over itsexpected useful life, as follows: Motor vehicles - over 3 yearsFixtures and equipment - over 3 years Material residual values and useful lives are reviewed, and adjusted ifappropriate, at least annually. An asset's carrying amount is written downimmediately to its recoverable amount if the asset's carrying amount is greaterthan its estimated recoverable amount. Financial assets Financial assets include investments in companies other thanGroup companies, financial receivables held for investment purposes, treasuryshares and other securities. Financial fixed assets are recorded at cost,including additional direct expenses. A permanent impairment is provided as adirect reduction of the securities account. The Group classifies its investments in the following categories: financialassets at fair value through profit and loss, loans and receivables,held-to-maturity investments and available-for-sale investments. Theclassification depends on the purpose for which the investments were acquired.The classification is determined by management at initial recognition and thedesignation is re-evaluated at each balance sheet date.(a) financial assets at fair value through profit and loss: a financialasset is classified in this category if acquired principally for the purpose ofselling in the short term or if so designated by management.(b) loans and receivables: loans and receivables are non-derivativefinancial assets with fixed or determinable payments that are not quoted in anactive market and with no intention of trading. They are included within currentassets, with the exception of those with maturities greater than one year, whichare included within non-current assets. Loans and receivables are includedwithin trade and other receivables in the balance sheet.(c) held-to-maturity investments: held-to-maturity investments arenon-derivative financial assets with fixed or determinable payments and fixedmaturities that management has the intention and ability to hold to maturity.The Group did not hold any investments in the category during the year.(d) available-for-sale investments: are non-derivative financial assets thatare either designated in this category or not classified in any of the othercategories. They are included within non-current assets unless managementintends to dispose of the investment within 12 months of the balance sheet date. Gains and losses arising from investments classified as available-for-sale arerecognised in the income statement when they are sold or when the investment isimpaired. In the case of impairment of available-for-sale assets, any loss previouslyrecognised in equity is transferred to the income statement. Impairment lossesrecognised in the income statement on equity instruments are not reversedthrough the income statement. Impairment losses recognised previously on debtsecurities are reversed through the income statement when the increase can berelated objectively to an event occurring after the impairment loss wasrecognised in the income statement. An assessment for impairment is undertaken annually. A financial asset is derecognised only where the contractual rights to the cashflows from the asset expire or the financial asset is transferred and thattransfer qualifies for derecognition. A financial asset is transferred if thecontractual rights to receive the cash flows of the asset have been transferredor the Group retains the contractual rights to receive the cash flows of theasset but assumes a contractual obligation to pay the cash flows to one or morerecipients. A financial asset that is transferred qualifies for derecognition ifthe Group transfers substantially all the risks and rewards of ownership of theasset, or if the Group neither retains nor transfers substantially all the risksand rewards if ownership but does transfer control of that asset. Inventories Inventories are valued at the lower of cost and net realisablevalue. The cost of finished goods and work in progress comprises design costs,direct labour and other direct costs. Net realisable value is the estimatedselling price in the ordinary course of business less applicable sellingexpenses. Trade and other receivables Trade and other receivables are recognised at fairvalue. A provision for the impairment of trade receivables is made when there isobjective evidence that the Group will not be able to collect all amounts due toit in accordance with the original terms of those receivables. The amount of theprovision is determined as the difference between the asset's carrying amountand the present value of estimated future cash flows, discounted at theeffective interest rate. The amount of the provision is recognised in the incomestatement. Other receivables are stated at amortised cost less provision forimpairment. Cash and cash equivalents Cash and cash equivalents comprise cash in hand,deposits held at call with banks, other short-term investments, with maturitiesof three months of less that are readily convertible into known amounts of cashand which are subject to an insignificant risk of changes in value and bankoverdrafts. Bank overdrafts are shown within borrowings in current liabilitieson the balance sheet. Equity Equity comprises the following: (a) "Share capital" represents the nominal value of ordinary shares. (b) "Capital redemption reserve" represents the maintenance of capital followingthe share buy back and tender offer. (c) "Share premium reserve" represents consideration for ordinary shares inexcess of the nominal value. (d) "Currency reserve" represents exchange differences arising on consolidationof Group companies with a functional currency different to the presentationcurrency. (e) "Retained earnings" represents retained profits. Foreign currency transactions (a) Functional and presentation currency Items included in the financialstatements of each of the Group's entities are measured using the currency ofthe primary economic environment in which the entity operates (the "functionalcurrency"). The consolidated financial statements are presented in Sterling,which is the Group's functional and presentation currency. (b) Group companies The results and position of all Group companies that have afunctional currency different from the presentation currency are translated intothe presentation currency as follows: (i) assets and liabilities are translated at the closing rates of exchangeruling at the balance sheet date; (ii) income and expenses are translated at the average exchange rates. Ifhowever the average exchange rate is not a reasonable approximation of theexchange rates prevailing on the date of the transactions, the income andexpenses are translated at the exchange rates at the transaction dates; and (iii) resulting exchange differences are recognised as a separate component ofequity. Differences on exchange arising from the retranslation of the net investment inforeign entities are taken to shareholders equity on consolidation. When aforeign entity is sold, such exchange differences are recognised in the incomestatement as part of the profit or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity and as suchare translated at the closing rate. Leases Leases are classified as finance leases whenever the terms of the leasetransfer substantially all the risks and rewards of ownership to the lessee. Allother leases are classified as operating leases. Assets held under finance leases are recognised assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability tothe lessor is included in the balance sheet as a finance lease obligation. Leasepayments are apportioned between finance charges and reduction of the leaseobligation so as to achieve a constant rate of interest on the remaining balanceof the liability. Finance charges are charged directly against income. Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Benefits received and receivable asan incentive to enter into an operating lease are also spread on a straight-linebasis over the lease term. Provisions Provisions are recognised when: the Group has a present legal orconstructive obligation as a result of past events; it is more likely than notthat an outflow of resources will be required to settle the obligation; and theamount has been reliably estimated. Provisions are not recognised for futureoperating losses. Provisions are measured at the present value of management's best estimate ofthe expenditure required to settle the present obligation at the balance sheetdate. The discount rate used reflects current market assessments of the timevalue of money and the increases specific to the liability. Employee Benefits (a) Pensions The Group operates a group personal pension scheme and one Groupcompany operates a defined contribution pension scheme. The assets of theschemes are held separately from those of the Group in independentlyadministered funds. Contributions payable are charged in the income statement inthe year in which they are incurred. (b) Bonus schemes The Group recognises a liability and an expense for bonusespayable to: i) employees based on a formula that takes in to account grossprofit; and ii) senior management and executive directors based on a formulathat takes in to account operating profit. A provision is recognised where thereis a past practice that has created a constructive obligation. (c) Share-based payments From time to time on a discretionary basis, the Boardof Directors award high-performing employees bonuses in the form of shareoptions. The options are subject to a three year vesting period and their fairvalue is recognised as an employee benefits expense with a correspondingincrease in equity over the vesting period. The proceeds received are creditedto share capital and share premium when the options are exercised. The Company operates a share option scheme which allowed certain employees toacquire shares in the Company. The fair value of share options granted isrecognised within staff costs with a corresponding increase in equity. The fairvalue is measured at grant date and spread over the period up to the date whenthe recipient becomes unconditionally entitled to payment. The fair value of share options was measured using the QCA-IRS option valuerusing the Black-Scholes formula, taking into account the terms and conditionsupon which the grants were made. The amount recognised as an expense is adjustedto reflect the actual number of share options that vest except where forfeitureis only due to share prices not achieving the threshold of vesting. IFRS 2 has been applied to all options granted after 7 November 2002 which havenot vested on or before 1 April 2006. A deferred tax adjustment is also maderelating to the intrinsic value of the share options at the balance sheet date. As a result of the grant of share options since 6 April 1999 the Company will beobliged to pay employer's National Insurance contributions on the differencebetween the market value of the underlying shares and their exercise price whenthe options are exercised. A provision is made for this liability using thevalue of the Company's shares at the balance sheet date and is spread over thevesting period of the share options. (d) Employee Share Ownership Plan The Group's Employee Share Ownership Plan("ESOP") is a separately administered trust. The assets of the ESOP compriseshares in the Company and cash. The assets, liabilities, income and costs of theESOP have been included in the financial statements in accordance with SIC 12,Consolidation - Special purpose entities and IAS 32 - Financial Instruments:Disclosure and Presentation. The shares in the Company are included at cost tothe ESOP and deducted from shareholders' fund. When calculating earnings pershare these shares are treated as if they were cancelled. Revenue recognition Revenue represents the fair value of the sale of goods andservices, net of Value-Added Tax, and after eliminating sales within the Group.Revenue is recognised as follows: Speech Solutions build fee revenue is recognised on delivery of the speechapplication. Call revenue from speech services is recognised when the Group hasdetermined that users have accessed its services via a telephone carrier networkand/or the Group's telecommunication call processing equipment connected to thatnetwork. In the event that build, call and maintenance revenue are included inthe same contract, each component part is separately valued and individualcomponent revenues are recognised when that component is delivered. Client Services and Connection Makers revenue is recognised when the Group hasdetermined that users have accessed its services via a telephone carrier networkand/or the Group's telecommunication call processing equipment connected to thatnetwork. Cost of sales includes media costs, network charges, production costsand facility costs, and is expensed in the accounting period in which therelated revenues are generated Taxation Current tax is the tax currently payable based on taxable profit forthe year. The interim tax charge on underlying business performance is calculated byreference to the estimated effective rate for the full year. Tax on disposalsand other related items is based on the expected tax impact of each item. Deferred taxation is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the consolidated financial statements. Deferred tax is notprovided if it arises from initial recognition of an asset or liability in atransaction, other than a business combination, that at the time of thetransaction affects neither accounting nor taxable profit or loss. Deferred taxis calculated at tax rates that are expected to apply to their respective periodof realisation, provided they are enacted or substantively enacted at thebalance sheet date. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. Deferred tax on temporary differences associated with shares in subsidiaries isnot provided if reversal of these temporary differences can be controlled by theGroup and it is probable that reversal will not occur in the foreseeable future. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity in which case the related deferred tax isalso charged or credited directly to equity. Financial liabilities Financial liabilities are obligations to pay cash or otherfinancial assets and are recognised when the Group becomes a party to thecontractual provisions of the instrument. Financial liabilities are recordedinitially at fair value, net of direct issue costs. A financial liability is derecognised only when the obligation is discharged, iscancelled or it expires. 4. Segment analysis The Group's primary and only reporting format is by business. Eckoh plc operatesthree business segments Speech Solutions, Client IVR and Connection Makers. Allrevenue originates from the United Kingdom. The revenues and operating resultsgenerated by each of the business segments within continuing operations aresummarised as follows: Six months ended Connection Speech Client Central Total30 September 2007 Makers Chat Solutions IVR costs continuing division operations £'000 £'000 £'000 £'000 £'000 -------------- --------- -------- -------- -------- --------Revenue 1,698 3,099 13,157 - 17,954-------------- --------- -------- -------- -------- --------Gross profit 708 1,873 844 - 3,425-------------- --------- -------- -------- -------- --------Administrativeexpenses (287) (1,498) (1,074) (1,608) (4,467)Net interestreceivable - - - 271 271-------------- --------- -------- -------- -------- --------Loss beforetaxation 421 375 (230) (1,337) (771)-------------- --------- -------- -------- -------- -------- Six months ended Connection Speech Client Central Total30 September 2006 Makers Chat Solutions IVR costs continuing division operations £'000 £'000 £'000 £'000 £'000 -------------- --------- -------- -------- -------- --------Revenue 2,284 2,956 38,754 - 43,994-------------- --------- -------- -------- -------- --------Gross profit 761 1,641 1,829 - 4,231-------------- --------- -------- -------- -------- --------Administrativeexpenses (318) (1,290) (1,117) (1,804) (4,529)Net interestreceivable - - - 405 405-------------- --------- -------- -------- -------- --------Profit beforetaxation 443 351 712 (1,399) 107-------------- --------- -------- -------- -------- -------- Year ended Connection Speech Client Central Total31 March 2007 Makers Chat Solutions IVR costs continuing division operations £'000 £'000 £'000 £'000 £'000 -------------- --------- -------- -------- -------- --------Revenue 3,964 6,260 71,315 - 81,539-------------- --------- -------- -------- -------- --------Gross profit 1,602 3,888 3,481 - 8,971-------------- --------- -------- -------- -------- --------Administrativeexpenses (613) (2,690) (2,363) (3,873) (9,539)Net interestreceivable - - - 881 881-------------- --------- -------- -------- -------- --------Profit beforetaxation 989 1,198 1,118 (2,992) 313-------------- --------- -------- -------- -------- -------- 5. Earnings per share Basic earnings per ordinary share is calculated on the basis of the weightedaverage number of ordinary shares of 198,605,468 (2006: 272,807,584) in issueduring the six months ended 30 September 2007 after adjusting for shares held bythe Employee Share Ownership Plan of 157,679 (2006: Nil) and the loss for theperiod attributable to equity holders of the parent of £0.2m (2006: profit of£7.5m). In calculating diluted earnings per share, the weighted average number ofordinary shares in issue, after adjusting for shares held by the Employee ShareOwnership Plan is further adjusted to include the dilutive effect of potentialordinary shares. The potential ordinary shares represent share options grantedto employees where the exercise price is less than the average market price ofordinary shares in the period. The dilutive effect of potential ordinary sharesis 1,729,539 (2006: 5,419,079). Six months Six months ended 30 ended 30 Year ended September September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Weighted average number of shares inissue in the period (number in thousands) 198,605 272,808 263,383Shares held by employee ownership plan (158) - ------------------------- --------- --------- --------Number of shares used in calculatingbasic earnings per share (number in thousands) 198,447 272,808 263,383Dilutive effect of share options 1,730 5,419 5,152------------------------ --------- --------- --------Number of shares used in calculatingdiluted earnings per share (number in thousands) 200,177 278,227 268,535------------------------ --------- --------- -------- (Loss)/earnings per share expressedin pence per shareBasic (0.11) 2.76 3.13Diluted (0.11) 2.70 3.07 (Loss)/earnings per share fromcontinuing operations expressed inpence per shareBasic (0.40) 0.04 0.12Diluted (0.40) 0.04 0.12 (Loss)/earnings per share fromdiscontinued operations expressed inpence per shareBasic 0.29 2.77 3.06Diluted 0.28 2.71 3.00 6. Transition to IFRS As stated in the Basis of Preparation, these are the Group's first consolidatedinterim financial statements for part of the period covered by the first IFRSannual consolidated financial statements prepared in accordance with IFRS. IFRS 1 permits companies adopting IFRS for the first time to take certainexemptions from the full requirements of IFRS in the transition period. Theseconsolidated interim financial statements have been prepared on the basis oftaking the following optional exemptions: i) Business combinations prior to 1 April 2006, the Group's date of transitionto IFRS, have not been restated to comply with IFRS 3 "Business Combinations". ii) Cumulative translation differences existing at the date of transition toIFRS are deemed to be zero. The gain or loss on a subsequent disposal of anyforeign operation shall exclude translation differences that arose before thedate of transition to IFRS and shall include later translation differences. The following reconciliations show the effect of the transition from UK GAAP toIFRS. The first reconciliation provides an overview of the impact on equity ofthe transition at 1 April 2006, 30 September 2006 and 31 March 2007 followed byreconciliations of equity and net income. Summary of Equity 30 September 31 March 1 April 2006 2007 2006 £'000 £'000 £'000--------------------- ---------- ---------- ----------Total equity under UK GAAP 18,120 8,699 12,201--------------------- ---------- ---------- ------------------------------- ---------- ---------- ----------Total equity under IFRS 18,094 8,689 11,845--------------------- ---------- ---------- ---------- Effect of UK GAAP transition IFRS Group to IFRS GroupReconciliation of equity at 1 April 2006 £'000 £'000 £'000 Notes------------------------ ------- -------- ------- ------ AssetsNon-current assetsGoodwill 8,036 (8,036) - aIntangible assets 568 (446) 122 a,bProperty plant and equipment 1,498 (466) 1,032 aFinancial assets - available for saleinvestments 288 - 288------------------------ ------- -------- ------- 10,390 (8,948) 1,442------------------------ ------- -------- ------- Current assetsInventories 479 (437) 42 aTrade and other receivables 22,537 (3,060) 19,477 aCash and cash equivalents 12,737 (4,470) 8,267 a------------------------ ------- -------- ------- 35,753 (7,967) 27,786------------------------ ------- -------- ------------------------------- ------- -------- -------Assets held for sale - 21,221 21,221 a------------------------ ------- -------- ------- Total assets 46,143 4,306 50,449 LiabilitiesCurrent liabilitiesTrade and other payables (28,771) 8,640 (20,131) cCurrent tax liabilities (1,476) 397 (1,079) cObligations under finance leases (23) 7 (16) cBank loans and overdrafts (2,007) 1,895 (112) c------------------------ ------- -------- ------- (32,277) 10,939 (21,338)------------------------ ------- -------- ------- Liabilities directly associated withassets held for sale - (17,114) (17,114) c Non-current liabilitiesBank loans (1,473) 1,473 - cObligations under finance leases (20) 16 (4) cProvisions (172) 24 (148) c------------------------ ------- -------- ------- (1,665) 1,513 (152)------------------------ ------- -------- ------------------------------- ------- -------- -------Net assets 12,201 (356) 11,845======================== ======= ======== ======= Shareholders' equityShare capital 681 - 681Share premium 227 - 227Retained earnings 9,366 (21) 9,345 d------------------------ -------- -------- --------Equity attributable to equity holdersof the 10,274 (21) 10,253parentMinority interest in equity 1,927 (335) 1,592 e------------------------ -------- -------- --------Total equity 12,201 (356) 11,845======================== ======== ======== ======== Explanation of the effect of the transition to IFRS The material adjustments to the balance sheet are explained below: a Assets held for saleOn the transition from UK GAAP to IFRS the assets, as at 1 April 2006, ofSymphony Telecom Holdings plc ("Symphony"), a 65.64% owned, AIM listedsubsidiary of Eckoh plc, have been included within the heading 'assetsclassified as held for sale' as the investment met the IFRS 5 criteria for suchclassification. The line items affected are described below: GoodwillOverall impact of recognising goodwill within assets held for sale 8,036 Intangible assetsOverall impact of recognising intangible assets within assets heldfor sale 425 Property, plant and equipmentOverall impact of recognising property, plant and equipment withinassets held for sale 466 InventoriesOverall impact of recognising inventories within assets held for sale 437 Trade and other receivablesOverall impact of recognising trade and other receivables withinassets held for sale 7,387 Cash and cash equivalentsOverall impact of recognising cash and cash equivalents within assetsheld for sale 4,470---------------------------------------- -------Total impact - assets held for sale 21,221---------------------------------------- ------- b Intangible assetsOverall impact of derecognising intangible assets in accordance withIAS 38 21---------------------------------------- -------Total impact - decrease in intangible assets 21---------------------------------------- ------- c Liabilities directly associated with assets held for sale On the transition from UK GAAP to IFRS the liabilities, as at 1 April 2006, ofSymphony have been included within the heading 'liabilities directly associatedwith assets held for sale'. The line items affected are described below: Trade and other payablesOverall impact of recognising trade and other payables withinliabilities directly associated with assets held for sale 13,302 Current tax liabilitiesOverall impact of recognising current tax liabilities withinliabilities directly associated with assets held for sale 397 Obligations under finance leasesOverall impact of recognising obligations under finance leases withinliabilities directly associated with assets held for sale 7 Bank loans and overdraftsOverall impact of recognising bank loans and overdrafts withinliabilities directly associated with assets held for sale 1,895 Bank loansOverall impact of recognising bank loans within liabilities directlyassociated with assets held for sale 1,473 Obligations under finance leasesOverall impact of recognising obligations under finance leases withinliabilities directly associated with assets held for sale 16 ProvisionsOverall impact of recognising provisions within liabilities directlyassociated with assets held for sale 24--------------------------------------- -------Total impact - liabilities directly associated with assets held forsale 17,114--------------------------------------- ------- d Retained earningsOverall impact of derecognising intangible assets in accordance withIAS 38 (21)--------------------------------------- -------Total impact - decrease in retained earnings (21)--------------------------------------- ------- e Minority interest in equityOverall impact of accounting for Joint Ventures in accordance with IAS31 (335)--------------------------------------- -------Total impact - reduction in minority interest in equity (335)--------------------------------------- ------- Effect of UK GAAP transition IFRS Group to IFRS GroupReconciliation of equity at 30 £'000 £'000 £'000 NotesSeptember 2006 ------- -------- ------- ------ AssetsNon-current assetsIntangible assets 272 (26) 246 aProperty plant and equipment 1,256 - 1,256Financial assets - available for saleinvestments 288 - 288Other receivables 4,700 - 4,700------------------------ ------- -------- ------- 6,516 (26) 6,490------------------------ ------- -------- ------- Current assetsInventories 80 - 80Trade and other receivables 13,132 - 13,132Cash and cash equivalents 16,422 - 16,422------------------------ ------- -------- ------- 29,634 - 29,634------------------------ ------- -------- ------- Total assets 36,150 (26) 36,124 LiabilitiesCurrent liabilitiesTrade and other payables (17,691) - (17,691)Current tax liabilities (196) - (196)Obligations under finance leases (20) - (20)------------------------ ------- -------- ------- (17,907) - (17,907)------------------------ ------- -------- ------- Non-current liabilitiesProvisions (123) - (123)------------------------ ------- -------- ------- (123) - (123)----------------------- ------- -------- ------------------------------- ------- -------- -------Net assets 18,120 (26) 18,094======================== ======= ======== ======= Shareholders' equityShare capital 685 - 685Share premium 335 - 335Currency reserve - 37 37 bRetained earnings 17,100 (63) 17,037 c------------------------ -------- -------- --------Equity attributable to equity holdersof the 18,120 (26) 18,094parent ======== ======== ================================ Explanation of the effect of the transition to IFRS The material adjustments to the balance sheet are explained below: a Intangible assetsOverall impact of derecognising intangible assets in accordance withIAS 38 (26)----------------------------------------- ------Total impact - decrease in intangible assets (26)----------------------------------------- ------ b Currency reserveOverall impact of separate disclosure of currency reserve 37----------------------------------------- ------Total impact - separate disclosure of currency reserve 37----------------------------------------- ------ c Retained earningsOverall impact of derecognising intangible assets in accordance withIAS 38 (26)Overall impact of separate disclosure of currency reserve (37)----------------------------------------- ------Total impact - increase in retained earnings (63)----------------------------------------- ------ Effect of UK GAAP transition IFRS Group to IFRS GroupReconciliation of equity at 31 March £'000 £'000 £'000 Notes2007 ------- -------- ------- ------ AssetsNon-current assetsIntangible assets 190 (10) 180 aProperty plant and equipment 1,148 - 1,148Financial assets - available for saleinvestments 288 - 288Other receivables 3,273 - 3,273------------------------ ------- -------- ------- 4,899 (10) 4,889------------------------ ------- -------- ------- Current assetsInventories 17 - 17Trade and other receivables 8,644 - 8,644Cash and cash equivalents 9,601 - 9,601------------------------ ------- -------- ------- 18,262 - 18,262------------------------ ------- -------- ------- Total assets 23,161 (10) 23,151 LiabilitiesCurrent liabilitiesTrade and other payables (13,682) - (13,682)Current tax liabilities (257) - (257)Obligations under finance leases (7) - (7)------------------------ ------- -------- ------- (13,946) - (13,946)------------------------ ------- -------- ------- Non-current liabilitiesProvisions (516) - (516)------------------------ ------- -------- ------- (516) - (516)------------------------ ------- -------- ------------------------------- ------- -------- -------Net assets 8,699 (10) 8,689======================== ======= ======== ======= Shareholders' equityShare capital 491 - 491Capital redemption reserve 198 - 198Share premium 477 - 477Currency reserve - (61) (61) bRetained earnings 7,533 51 7,584 c------------------------ -------- -------- --------Equity attributable to equity holdersof the parent 8,699 (10) 8,689======================== ======== ======== ======== Explanation of the effect of the transition to IFRS The material adjustments to the balance sheet are explained below: a Intangible fixed assetsOverall impact of derecognising intangible assets in accordance with IAS38 (10)----------------------------------------- ------Total impact - decrease in intangible assets (10)----------------------------------------- ------ b Currency reserveOverall impact of separate disclosure of currency reserve (61)----------------------------------------- ------Total impact - separate disclosure of currency reserve (61)----------------------------------------- ------ c Retained earningsOverall impact of derecognising intangible assets in accordance with IAS38 (10)Overall impact of separate disclosure of currency reserve 61----------------------------------------- ------Total impact - increase in retained earnings 51----------------------------------------- ------ Effect of UK GAAP transition IFRSReconciliation of net income for the six Group To IFRS Group Notesmonths ended 30 September 2006 £'000 £'000 £'000----------------------- ------- -------- ------- ------ Continuing operationsRevenue 43,994 - 43,994Cost of sales (39,763) - (39,763)------------------------ ------- -------- -------Gross profit 4,231 - 4,231Administrative expenses (4,511) (18) (4,529) a------------------------ ------- -------- -------Operating loss (280) (18) (298) Interest receivable 406 - 406Interest payable (1) - (1)------------------------ ------- -------- -------Profit before taxation 125 (18) 107Taxation - - ------------------------- ------- -------- -------Profit attributable to equity holders of theparent from continuing operations 125 (18) 107 Discontinued operationsPost tax profit for the period fromdiscontinued operations 7,552 - 7,552------------------------ ------- -------- -------Profit for the period 7,677 (18) 7,659------------------------ ------- -------- ------- Attributable to:Minority interests 26 116 142 bEquity holders of the parent 7,651 (134) 7,517 c------------------------ ------- -------- ------- 7,677 (18) 7,659------------------------ ------- -------- ------- Explanation of the effect of the transition to IFRS The material adjustments to the income statement are explained below: a Administrative expensesEffect of the derecognition of advertisements classified withinintangible fixed assets under UK GAAP, but derecognised in accordancewith the IAS 38 criteria:- Amortisation charge reversal 32- Additions charged to income statement (50)----------------------------------------- ------Total impact - increase in administrative expenses (18)----------------------------------------- ------ b Profit attributable to minority interestsEffect of accounting for the Joint Ventures of Symphony TelecomHoldings plc in accordance with the IAS 31 criteria 116----------------------------------------- ------Total impact - increase in profit attributable to minority interests 116----------------------------------------- ------ c Profit attributable to equity holders of the parentIncrease in administrative expenses (see a) (18)Increase in profit attributable to minority interests (see b) (116)----------------------------------------- ------Total impact - decrease in profit attributable to equity holders ofthe parent (134)----------------------------------------- ------ Effect of UK GAAP transition IFRSReconciliation of net income for year Group To IFRS Group Notesended 31 March 2007 £'000 £'000 £'000----------------------- ------- -------- ------- ------ Continuing operationsRevenue 81,539 - 81,539Cost of sales (72,568) - (72,568)------------------------ ------- -------- -------Gross profit 8,971 - 8,971Administrative expenses (9,548) 9 (9,539) a------------------------ ------- -------- -------Operating loss (577) 9 (568) Interest receivable 882 - 882Interest payable (1) - (1)------------------------ ------- -------- -------Profit before taxation 304 9 313Taxation - - ------------------------- ------- -------- -------Profit attributable to equity holders of the parent from continuing operations 304 9 313 Discontinued operationsPost tax profit for the period fromdiscontinued operations 8,062 - 8,062------------------------ ------- -------- -------Profit for the period 8,366 9 8,375------------------------ ------- -------- ------- Attributable to:Minority interests 28 116 144 bEquity holders of the parent 8,338 (107) 8,231 c------------------------ ------- -------- ------- 8,366 9 8,375------------------------ ------- -------- ------- Explanation of the effect of the transition to IFRS The material adjustments to the income statement are explained below: a Administrative expensesEffect of the derecognition of advertisements classified withinintangible fixed assets under UK GAAP, but derecognised in accordancewith the IAS 38 criteria:- Amortisation charge reversal 64- Additions charged to income statement (55)----------------------------------------- ------Total impact - decrease in administrative expenses 9----------------------------------------- ------ b Profit attributable to minority interestsEffect of accounting for the Joint Ventures of Symphony TelecomHoldings plc in accordance with the IAS 31 criteria 116----------------------------------------- ------Total impact - increase in profit attributable to minority interests 116----------------------------------------- ------ c Profit attributable to equity holders of the parentDecrease in administrative expenses (see a) 9Increase in profit attributable to minority interests (see b) (116)----------------------------------------- ------Total impact - decrease in profit attributable to equity holders ofthe parent (107)----------------------------------------- ------ 7. Explanation of material adjustments to the cash flow statement The definition of cash is narrower under UK GAAP than under IAS 7 "Cash FlowStatements". Under IFRS highly liquid investments, readily convertible to aknown amount of cash and with an insignificant risk of changes in value, areregarded as cash equivalents. The cash flow statement in the last UK GAAPfinancial statements reported movements in cash. The cash flow statement inthese IFRS consolidated interim financial statements reports movements in cashand cash equivalents. Application of IFRS has resulted in reclassification of certain items in thecash flow statement as follows: (i) interest paid and interest received are classified as cash flows fromoperating activities and cash flows from investing activities respectively underIFRS, but were included in the 'Returns on investments and servicing of finance'category in cash flows under UK GAAP. (ii) taxation is classified as operating cash flows under IFRS, but was includedin a separate category of 'Taxation' cash flows under UK GAAP. (iii) payments to acquire property, plant and equipment and payments to acquireintangible fixed assets have been classified as part of 'Investing activities'under IFRS. Under UK GAAP such payments were classified as part of 'Capitalexpenditure and financial investment'. (iv) cash flows arising from the disposal of subsidiary undertakings areclassified as cash flows from investing activities under IFRS, but were includedin a separate category of 'Acquisitions and disposals' under UK GAAP. (v) included within cash flows from investing activities under IFRS are cashflows classified as 'Financing' under UK GAAP. There are no other material differences between the cash flow statementpresented under IFRS and the cash flow statement presented under UK GAAP. Dealings permitted on Alternative Investment Market (AIM) of the London StockExchange. Directors and Company SecretaryH.R.P. Reynolds - Non-executive ChairmanN.B. Philpot - Chief Executive OfficerA.P. Moloney - Group Finance Director and Company SecretaryJ.P. Hennigan - Executive Director Registered OfficeEckoh plcTelford HouseCorner HallHemel HempsteadHertfordshire, HP3 9HNwww.eckoh.com Registered in England and Wales, Company number 3435822.RegistrarCapita RegistrarsThe Registry34 Beckenham RoadBeckenhamKent, BR3 4TU Nominated Advisor and Nominated BrokerSeymour Pierce Limited20 Old BaileyLondon, EC4M 7EN SolicitorTravers Smith10 Snow HillLondon, ECA 2ALBanker Barclays Bank plc11 Bank CourtHemel HempsteadHertfordshire, HP1 1BX AuditorBDO Stoy Hayward LLPProspect Place85 Great North RoadHatfieldHertfordshire, AL9 5BS This information is provided by RNS The company news service from the London Stock Exchange