Eckoh PLC (LON:ECK) notched up its third successive year of double digit percentage revenue and margin growth in the year to 31 March 2016.
While the performance last year was impressive, the secure payment products and customer contact solutions provider is becoming increasingly confident that the current year could be a breakthrough period for the US business, with the US arm having already closed two multi-million dollar deals in June, which will have the effect of making this year’s full-year results more second half-weighted than usual.
There is a large pipeline of opportunity in the US with particular interest in the payment tokenisation products that have recently launched; tokenisation entails substituting sensitive data with a non-sensitive equivalent.
US revenues in the year to end-March 2014 shot up to £4.0mln from £0.2mln the year before, contributing to a 31% increase in total group revenues to £22.5mln from £17.5mln the year before. House broker N+1 Singer had forecast revenues of £21.7mln, rising to £27.7mln in the current financial year.
In the home market, 79% of revenues are of the recurring variety, up from 76% the previous year.
Adjusted underlying earnings (EBITDA) jumped 20% to £5.4mln from £4.5mln the previous year, while good old profit before tax was £2.47mln, compared to a loss the previous year of £872,000, when transactions relating to acquisitions put a £1.47mln dent in profits.
Cash flow from operations improved markedly during the reporting period to £5.2mln from £0.7mln the previous year, resulting in cash increasing to £6.6mln at the end of March 2016 from £4.4mln a year earlier.
More of a growth stock than a yield play
The full-year dividend has been hiked to 0.45p a share from 0.375p the previous year, but that still leaves the shares on a relatively skinny 0.9% yield, and this stock remains very much a growth play, especially in view of the opportunities available on the other side of the pond.
The acquisition of Product Support Solutions (PSS) in November 2015 for, effectively, £4.0mln after adjusting for cash balances, has enabled the company to accelerate its growth in the US market as well as broaden its offering to prospective customers.
“When we entered the US market the expectation was originally that the bulk of the Secure Payments contracts would be for hosted solutions, as they are in the UK; however, it became clear that US corporations had a greater predilection for owning infrastructure than we see in the UK, requiring a shift in how we addressed the market. The subsequent acquisition of PSS meant that we would be able to successfully implement and support secure payment on-site installations across the vast US continent, without incurring unsustainable levels of operational expenditure,” the company said in its annual results.
The main reason for acquiring PSS was to support the anticipated growth of the group’s secured payments business in the US, but PSS’s established and profitable contact centre support business has enabled Eckoh to create a new and profitable US customer contact operation.
Having two business lines has worked well for the company in the UK in terms of cross-selling opportunities, and the company expects the same will be true of the US.
PSS acquisition pays offNine contracts won in US Secure Payments operation
“The addition of PSS has meant that we now are able to offer both Secure Payments and Customer Contact solutions in the US as we do in the UK. The benefit of having an end-to-end and comprehensive solution set that allows us to both support and advise organisations as they transition and secure their contact centre infrastructure has been self-evident in the progress we have made in recent months, including winning significant contracts in both product areas in each of our key markets,” said Nike Philpot, chief executive of Eckoh.
“The contracts secured recently, which will deliver significant benefit once live in the second half of the new financial year, give us the confidence that the strong growth we have consistently delivered in the past few years will continue. The board remains excited by the prospects for the company and continues to evaluate opportunities for scaling the business even further alongside our organic growth," Philpot said.
Shares were off 1.5p at 51p in a falling market in mid-morning trade.