Eckoh – orders increasing significantly, as too are its profits
We are looking for this £123m market capitalised customer engagement security solutions business to push its profits up by around 50% in this current trading year.
We are also looking for the shares of Eckoh (LON:ECK) to rise substantially in response to further items of good news.
About The Company
Set up way back in 1997, this Hemel Hempstead based Group provides secure payment products and customer contact solutions in the UK, the US, and internationally.
It offers customer engagement solutions, such as advanced interactive voice response (IVR), speech recognition IVR, visual IVR, chatbots, and an artificial intelligence (AI) customer service.
Its solutions enable enquiries and transactions to be performed on whatever device the customer chooses, allowing organisations to increase efficiency, lower operational costs and provide a true omnichannel experience.
The company also provides secure payment solutions, which include CallGuard, an automated IVR system; DataGuard for payments made over the web or a mobile; ChatGuard for payments made through a web chat or chatbot; EckohPAY, automating recurring payments through secure IVR; Pay by Link, a secure digital payment link; online payments, payment methods, personal customer data, remote agent payments; and payment card industry compliance solutions.
In addition, it supplies customer engagement, support, and cloud-based software solutions.
Impressive Client Lists
The Group’s large portfolio of clients come from a broad range of vertical markets and includes government departments, telecoms providers, retailers, utility providers and financial services organisations.
Named customers include Transport for London, MetLife, tenpin, Capita, Thames Water, Boots, BMW, B&Q, Premier Inn, allpay, Ministry of Justice, O2, Addison Lee, The Body Shop, Barclays, Affinity Water, 1st Central, Bosch Siemens, Carnival, Concentrix, Co-Op, HM Passport Office, Legal & General, National Rail Enquiries, NFU Mutual, ScrewFix, Telefonica, Tesco Mobile, VW, Welsh Water, and Whitbread amongst hundreds of others.
A Very Healthy ARR
The Group for its last year to end March 2022 recorded a very strong annual recurring revenue figure of £25.2m out of its £31.8m total revenues, representing some 79.25% ARR.
That is always an investment signal that I look for when judging such technology companies as Eckoh.
Just imagine how you would feel if you were the Group’s Chief Financial Officer plotting out future capital expenditure. There is real strength for any company with such a high recurring cash figure to be used to counter future spend.
What is more it also gives tremendous confidence to its bankers.
And for that matter it should too be important for the Group’s investors, both professional and private.
A Very Good Shareholder’s List
With around 293m shares in issue the Group is currently capitalised at some £123m.
Canaccord Genuity Wealth is the largest holder with 16.6% of the equity, while Liontrust Investment Partners have 14.0%.
Other institutional holders include Herald Investment Management (5.59%), Butterfield Bank (Guernsey) (4.33%), BlackRock (4.08%), Cavendish Asset (3.86%), Chelverton (3.14%), Kestrel (2.99%), AXA (2.76%) and Close Asset (2.69%).
Recent Contract Wins
In April the company announced the renewal of its contract with Capita for a large public sector organisation. The core purpose of the service provided by Capita to its client is to maximise the successful collection of payments from the general public.
The new contract is for 5 years and has a minimum value of £2.1m over the term, which is both longer and higher in value than the original agreement.
Then in the middle of this month it announced that it had won a 2-year contract worth a minimum of $1.3m with a leading, global hotel company following a successful competitive process.
Eckoh will provide a cloud solution to the new client, incorporating both voice payment security, digital payments, and advanced speech recognition. When fully deployed, it is expected to cover more than 20 territories and an equivalent number of different languages.
At the same time the Group noted that it had a contract win following a competitive tender for voice payment security with the Irish division of one the world's largest insurance companies. The deal is worth a minimum of £0.6m over 5 years.
Current Trading – Significant Advances
In June, when the Group’s finals were announced, there were indications that its order levels had grown substantially in the first two months of trading, compared to the prior year.
Also, its new business pipeline had significantly strengthened, including major opportunities for large blue-chip organisations.
It now appears that trend is continuing, with orders showing even more strength, being far ahead of the same Q1 period in the last year.
In fact, the Group stated very clearly that its attractive pipeline of opportunities leads it to expect order levels to maintain their strength resulting in H1 for this year being significantly higher than the previous corresponding period last year.
At the same time as announcing its recent wins Nik Philpot, the Group’s CEO, stated that:
"It is pleasing to see such a positive start to the financial year with the renewed strength of Eckoh's order levels and our new business pipeline delivering significant wins. These and other recent contract wins are important for three reasons.
First, they underline the momentum behind our decision to invest in broadening our cloud proposition geographically, with multiple suppliers and product offerings to support the growing international mandates.
Second, they show the success of our strategy to cross-sell from our new suite of products.
Third, they show progress for our strategy to target attractive sectors which are best suited to our model, technology, and product suite.
We expect the momentum we have seen in the first few months to help support our expectations of significant revenue and profit growth for Eckoh this year."
Analysts Opinion – Broker has a 92p Target Price
The Group’s NOMAD and Joint Broker is Singer Capital Markets, their analysts Kevin Ashton, Caspar Erskine and Harold Evans rate this company’s shares as a Buy.
For the current year to end March 2023 they are looking for revenues of £40.0m (£31.8m), while going for adjusted pre-tax profits of £7.6m (£5.2m), earning 2.0p (1.6p) per share and covering a 0.70p (0.61p) dividend.
Looking further ahead into the next trading year the analysts have £43.2m of sales, £8.3m of profits, earnings of 2.0p and a dividend of 0.80p a share.
They note that the company is winning more and more international deals and that the cross-selling potential that the Group has on its various offerings.
The broker has a twelve-month Target Price of 92.0p for the shares.
Conclusion – increased awareness will increase the share price
There are various corporate events ahead that will help to spur more interest in the Group’s shares.
First of all, the company’s AGM is being held on Monday 26th September – at that time there should be a Trading Update covering the run-up to the close of the company’s first half-year to end September.
Then on Tuesday 11th October the Group will be hosting a Capital Markets Day for analysts and investors at its Hemel Hempstead offices. That should see insights and demonstrations being given by the company. It will also spell out its product and technology strategies supporting the Group’s growth going forward.
It is apparent that the Group is really looking to up its market exposure, which in turn help to push investor awareness of its abilities and its potential.
The shares, which peaked at nearly 64p last December, are now trading at 44p, at that level they offer a very attractive upside, especially if its broker’s price hopes are fulfilled.