Eckoh 's (ECK) full-year figures were always likely to be seen in the context of two strategically important deals in the US secured earlier this month. But we think the contracts shouldn't detract from what we see as the secure payment and digital identity specialist's key metric, namely a 620 basis point increase in the organic gross margin. And the gross margin of 75 per cent only pulled back slightly despite Eckoh having to integrate the lower margin Product Support Services (PSS) business acquired in November.
But we're not downplaying the potential significance of the US deals. The new contracts are not only worth around $7m (£4.9m) in aggregate over their three-year term, but they could help to accelerate market penetration across the pond. With nine contracts secured in US secure payments, against four in the prior year, the process seems to be gathering momentum anyway.
Performance within the domestic market is also encouraging, evidenced by a 9 per cent rise in UK revenue and 13 new client wins, including secure payment deals with Thames Water, the Co-op and Ecotricity. Management stressed that customer churn remains "virtually zero", implying a satisfied client base.
N+1 Singer increased its revenue forecast by 9 per cent and gives adjusted profit of £5.3m and EPS of 1.7p for the March 2017 year-end, against £4.1m and 1.4p in FY2016.
| ECKOH (ECK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 54.5p | MARKET VALUE: | £130m | |
| TOUCH: | 53-56p | 12-MONTH HIGH: | 56p | LOW: 38p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 63 | |
| NET ASSET VALUE: | 8p* | NET CASH: | £1.9m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit ($m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 10.4 | 1.3 | 1.3 | 0.20 |
| 2013 | 11.0 | 1.2 | 0.9 | 0.25 |
| 2014 | 14.0 | -1.4 | 0.1 | 0.31 |
| 2015 (restated) | 17.2 | -0.9 | -0.4 | 0.38 |
| 2016 | 22.5 | 2.4 | 0.9 | 0.45 |
| % change | +31 | - | - | +20 |
Ex-div: 6 Oct Payment: 4 Nov *Includes intangible assets of £9.26m, or 3.9p a share | ||||
