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Eckoh PLC: DEEP DIVE
OVERVIEW

Eckoh reaffirms positive outlook after strong 2019 results

The company's payment services specialise in card-not-present transactions, payments made without face-to-face contact or verification, usually online or via mobile
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OVERVIEW: ECK The Big Picture
Total business sales jumped 62% to a record £32.7mln in 2019
  • Record business sales in 2019
  • Greater revenue visability
  • Cannacord Genuity repeats 'buy' rating, raises target price

 

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. 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.

Inflexion points

  • Pre-tax profit rose to £1.2mln in the year to the end of March from £1.1mln last year 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.
  • The company achieved a return to revenue growth in the UK last year while the US continued to deliver a strong performance, led by growth in secure payments.  
  • Eckoh announced its biggest ever secure payments contract worth US$7.4mln in October with an unnamed client, described as one of the largest corporations in the US. 
  • The group has secured its largest contract renewal for fiscal year 2020 with hotel chain Premier Inn, who has been a customer since 2010.
  • Revenue visibility has improved thanks to a strong order book. CEO Nick Philpot said: "This, combined with our investment in our business and people, and our patented IP, provides an excellent platform for future growth and reinforces our confidence in the positive outlook for the group."

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. 

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