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Eckoh getting good vibes stateside

Published: 03:58 24 Oct 2016 EDT

Eckoh getting good vibes stateside
The firm has secured three contracts worth over US$2.5mln in the USA over the next three years

In June, secure payments and customer contact group Eckoh PLC (LON:ECK) revealed it was increasingly confident about its chances in the US this financial year - something which appears to have rung true.

Certainly, there have been glitches and growing pains associated with the expansion along the way, but the general mood from the company on US activity is positive, as underscored by news today.

Three new US deals

The company, which boasts a secure payments business and contact centre software, told investors it had secured three contracts worth over US$2.5mln in the USA over the next three years.

Two of them are based on the software as a service (SaaS) pricing model and are expected to go live by spring next year, generating recurring revenue in the new financial year, which starts in April.

The first is a two-year deal for the group's secure payments solution  with one of the largest manufacturers and suppliers of nutritional supplements in the US, while the second is a three-year deal with a Fortune 500 corporation in financial services.

The third is a three-year agreement with one of the largest US telecoms groups, where Eckoh will provides its browser-based agent desktop 'Coral' to more than 3,000 contact centre agents in a new facility opening at the end of 2016.

Momentum building

Nik Philpot, Eckoh's chief executive, said momentum in the US market was building.

"...the move to a SaaS style price model will over time build a base of recurring revenue in the US comparable to the UK operation and we would expect this to underpin the growing value of the company in future years," he said.

"Our trading performance at the end of the first half of the year has been strong and we remain confident that the revised market expectations for this financial year will be achieved."

Notably, the Fortune 500 group is a long-standing customer of Product Support Solutions (PSS), a contact centre services provider, which Eckoh acquired for U$7.6mln in November last year, and which has a number of blue chip clients on the books.

This is the first success in cross-selling Eckoh's secure payments solutions into the extensive PSS customer base, Eckoh revealed.

It comes after last month the firm issued a trading update, in which it warned profits for the year to end March would be flat and miss market expectations because of issues in the US.

To increase  recurring revenues in the US and to bring it in-line with the recurring revenue model in the group's UK business, Eckoh is moving its secure payments customers to a software as a service (SaaS) pricing model and away from upfront client payments.

This transition will require some upfront investment, which in turn will hit profit margins this year.

At the same time, a division of PSS acquired last year has incurred cost overruns of £600,000 for a complex fixed-price project that it is carrying out. That figure is set to rise to £700,000, Eckoh said. It is now accelerating closing this division.

But the group added: "The medium and longer term outlook for the company remains positive, with the transition to a recurring revenue model and decisive actionat the PSS professional services division resulting in an improvement in the certainty and the quality of its earnings."

Revenue and margin growth last financial year

US revenues in the year to March 30, 2016  shot up to £4mln 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.

Meanwhile, in the home market, 79% of revenues are of the recurring variety, up from 76% the previous year.

Adjusted underlying earnings (EBITDA) surged 20% to £5.4mln from £4.5mln the previous year.

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.

The year saw nine contracts won in US Secure Payments operation, and 13 new UK contracts secured including Thames Water, the Co-operative Group, Ecotricity and a global on-line retailer.

Eckoh shares nudged 0.69% higher to stand at 36.25p.

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