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Eckoh "in a very good position" during coronavirus crisis

Snapshot

  • Develops secure payments technology
  • Offers customer service solutions
  • Most revenue is recurring
Online payment

Quick facts: Eckoh PLC

Price: 62.5 GBX

AIM:ECK
Market: AIM
Market Cap: £158.67 m
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What Eckoh does

Eckoh PLC (LON:ECK) provides secure payments and customer contact technology, specialising in card-not-present (CNP) transactions.

CNPs are payments usually made either over the phone, online, or through mobile devices without face-to-face contact or verification.

Eckoh also offers customer service solutions that allow client companies to manage their multi-channel customer communications more efficiently.

The firm’s products allow the client’s customers to self-serve (i.e. make enquiries, retrieve information, and make payments) through automated processes, which can help remove burdens from call centres and other advisors, which helps cut down on operational costs and reduce customer enquiry queue.

These products include systems like chatbots, which are loaded with pre-set responses to queries, as well as social media management that can track comments made about companies online across platforms like Facebook and Twitter.

 

How it is doing

In the year ended March 31, trading was “in line with market expectations” with revenue growth across both its UK and US businesses. The group also reported record order levels, up 10% to £35.9mln.

The firm said it is "well-placed" to navigate the coronavirus crisis.

The US business had seen “little impact” from the worldwide switch to remote working, having been mostly operated in that fashion from the outset, and all its revenue is recurring. Instead, the UK has a mix of customers with that same model, though others have a blend between fixed and transactional fees.

However, the UK saw significantly higher order levels in the second half of the year as several larger contracts renewed earlier than scheduled.

Around 80% of group revenue is recurring and it is expected to be cashed in.

 

What the boss says: Nik Philpot, chief executive

“We’re in a very good position. We won’t be needing to raise cash because we have net cash of £11.5mln… I think the service we provide is important to help companies operate effectively and communicate with their customers, and they’re going to need to do that more than ever over the coming months.”

“We’re very fortunate that our services, by and large, still need to be used by companies and are something that people are not able to do without."

 

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What the broker thinks

Cannacord thinks Eckoh is well-placed to take a further share of the US secure payments solutions market for contact centres.

"Eckoh has so far won several 10's of customers, which implies that the US is a multi-year growth opportunity for the company," the broker said.

It expects a compound annual growth rate (CAGR) in US secure payment revenue of 35% for fiscal years 2019 to 2022, putting Eckoh "on a path to double-digit group top-line growth in 2020 and high single digits beyond".

Coupled with an estimated margin rise of 150 basis points, the broker's new estimates imply a 26% CAGR in adjusted earnings (EBIT) for 2019-22. 

"Should management achieve its long-term goal of growing US revenues to the same level as its UK business by 2022, we see scope for earnings per share upgrades and long-term upside potential for the shares to 80p," Cannacord said. 

 

Inflexion points

  • Higher order levels during coronavirus pandemic
  • Momentum builds as size of customers grows
  • Payments sector is consolidating with big deals 

 

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Watch

Eckoh PLC 'well placed to emerge unscathed from crisis'

Eckoh PLC's (LON:ECK) Nik Philpot tells Proactive London's Andrew Scott remote working for the business has gone 'extremely well' and adds that the US business has had little impact as it has essentially been working remotely from the start. ''Like other businesses we'll probably be...

on 15/4/20

3 min read