Payment and customer contact provider Eckoh’s share price (LON:ECK) is on a tear. At the time of writing this, it has reached the highest level in over one year, following the release of its latest results. While its revenue and gross profit levels increased by a modest 5% and 3% respectively for the year ending March 31, 2019; investors are clearly impressed with the numbers for business contracted.
New business contracted, which excludes renewals, rose by a strong 47%, indicating an expansion in customer base. Total business contracted rose by an even stronger 62%, which gives greater faith in the company’s ability to provide satisfactory services for its existing customers. It reports almost 100% customer retention in its latest result update.
The multi-year nature of secured business also works in the company’s favour, since it gives clear perspective on which direction it is headed. For instance, Eckoh has reported acquiring a three year contract in the UK under its contact services and secured a five year contract for secure payments covering multiple geographies.
Company CEO Nik Philpot’s statement further bolsters optimism about the company’s future. He points out to greater revenue visibility, investment in business and people and its patented intellectual property, as factors that will encourage a positive outlook.
The company’s business is divided into two parts – secure payments and customer contact solutions. The first of these removes personal and payment data from IT environments to reduce fraud risks. The latter enables users to make enquiries and perform transactions more easily across devices, making the process more efficient and cost effective for companies.
With growing need for both services, the larger business environment is conducive to business expansion as well. It is estimated that Eckoh currently services only 3% of the UK market for contact centres. Its share is even lesser in the US at 1%, indicating much room for growth. The company aims at addressing companies with contact centre operations of over 50 agent seats. At present, in the US there are 14,000 such centres and 2,500 in the UK, accounting for $4bn and $572m in terms of payments respectively.
Conclusion: It is worth noting that the company has no homegrown US competitors, which bodes well for its expansion plans. At present, 68% of its revenues are derived from the UK while the remaining 32% is sourced from the US. Expanding into the US market is one of its strategic goals now, however.
And there is little to doubt that it will in fact be able to make further in-roads in the market, going by the progress so far. As per the latest annual results, it saw a 32% increase in its US revenues, which has seen a steady rise in new business contracted since Eckoh entered it in 2015. On balance, the stock has upside and may be deemed a 'buy' on weight of its performance.