What Eckoh does
CNPs are payments usually made either over the phone, online, or through mobile devices without face-to-face contact or verification. The company processes around £800mln in card payments every year for its customers.
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.
- In a trading update for the six months ended 30 September, the group said contracted business revenues in the US had risen 15% year-on-year to US$14.4mln, while in the UK incomes climbed 8% to £7.9mln. Both increases were in line with expectations
- In July, the company unveiled a significant contract win in the US to provide the Coral contact centre agent desktop product to a US-based Fortune 100 telecoms firm
- Pre-tax profit rose to £1.2mln in the year to the end of March 2019 from £1.1mln the year before, with revenue up 5% to £28.7mln. Total business sales jumped 62% to a record £32.7mln with new business up 47% to £22.6mln. The dividend was lifted by 11% to 0.61p per share
Interview - CEO Nick Philpot
What the broker thinks
Cannacord Genuity has a 'buy' rating on Eckoh's shares and raised its target price to 52p from 50p after the company's 2019 results beat expectations.
Following strong momentum in the US, Cannacord thinks Eckoh is well-placed to take further share of the 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.
With the shares trading at around 50.3p as of 29 October 2019, Eckoh carries a market cap of £127.7mln.