Cloud migration gives Eckoh a platform for future growth

Eckoh reported good underlying results for the year to March 2022 as the move to cloud service delivery combines with the acquisition of Syntec to reshape the business for the future. Nik Philpot, CEO said “We have shown the resilience of our business model, with growth in revenue and operating profit and improved quality of earnings.”

Along with Sycurio and PCI PAL, Eckoh is one of a small number of specialists that help contact centres communicate securely with their clients. This includes payments and secure messaging through a variety of customer engagement channels. It’s a growth industry as increasing regulation drives ever greater compliance scrutiny..

While the much smaller PCI PAL reported sales up 62% in its latest results, Eckoh’s turnover was up just 4% in FY 22 to £31.8m, split evenly between the UK and USA but underlying growth looks stronger. Cloud gives Eckoh the scalability it needs to win larger, international deployments. For example, it signed a new client for a three year contract worth $1.4m for voice security and another for $0.6m for enabling secure live chat with digital payments.

Overall new business won in the year was £10.8 million, well down on the £15.7m signed in 2021. Philpot admitted this was an unsatisfactory outcome. He blamed the pandemic and war in Ukraine but said he is now “very encouraged by trading in the first quarter of the new year, with order levels already significantly higher than last year, and with a much stronger pipeline.”

UK division revenue was up 3% to £18.6mwhich is particularly pleasing given the challenging beginning to the year, when the country remained impacted by the pandemic.“ Business recovered in the second half when call centres went back to normal working. Contract renewals included Capita for the congestion charge (£4m), Premier Inn, Rail Delivery Group, Thames Water and Boots. Cross-selling engagement technology and secure payments is working well. £3.6m of new business was contracted in the year to existing customers for new solutions. 

US division revenue was down 8% to £11.5m as Eckoh exited 3rd party customer support. Core revenues from US Secure Payments – sold through the CallGuard and CardEasy brands – were up 8% and recurring revenues up 38%. Management sees a good opportunity to upsell customer engagement security to is US payments customers. “We made structural changes to the US Sales team in the second half of the year and increased our focus on ‘vertical selling’ – targeting sectors such as healthcare, which are well suited to our model.”

Syntec was part of the group for only three months and contributed £1.7m revenue. The £31m acquisition is said to be performing to expectations and the integration is on track. “Unification of the technology and product offering is making progress and we expect to deliver a unified and enhanced go-to-market proposition.”

Total group gross profit was up 5% to £25.4m with margins ticking up 60bps to 80.0%

Administrative expenses were up 12% to £23.0m resulting in operating profit falling from £3.5m to £2.4m.

After removing £2.8m of amortisation, share options, restructuring and acquisition expenses, adjusted operating profit grew 10% to £5.2m with margins expanding 90bps to 16.5%. Management says this gives a better measure of the underlying profitability of the business. 

Ekcoh is very positive about prospects for its FY 23 expecting “revenue and profit to be significantly higher than FY22” and backing its confidence with a 10% increase in the dividend.

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