Eckoh turns to North America to drive growth

Eckoh (ECK) is not the kind of tech company that will ever sit at the top of the S&P 500. It makes “customer engagement data security solutions” – not mobile phones or semiconductor chips. 

However, the company says it is “trusted by many of the world’s leading brands” to help them safely manage personal data from transactions and customer enquiries. 

In practice, the group’s solutions remove sensitive personal and payment data from call centres and other IT environments where such information is handled. In an effort to become a leader in its field, Eckoh acquired Syntec, a UK-based rival, in December 2021. 

Over the last financial year, the company has merged its underlying platform technology with Syntec’s to create a unified solution for clients. It has also begun focusing more of its attention on the North American market, which it sees as a key driver of future growth. 

Recurring revenue for the year to the end of March was £31mn – and of this total some £13mn was sourced from North America, an increase of 34 per cent on FY 2022. At the same time, non-recurring revenue growth fell to around 2 per cent as a consequence of Eckoh’s ongoing shift toward cloud-based products.

Peel Hunt analysts said they viewed this shift positively, “as this should lead to higher revenue predictability [and] resilience”. The broker also sees Eckoh’s net cash figure improving to somewhere around £10mn in the next financial year. 

The group’s shares currently trade on a forward price-to-earnings multiple of 18.9x for the current financial year. We think that’s reasonable given its market-leading position in the all important, if slightly niche, field of data security. Buy.

Last IC View: Buy, 62p, 16 June 2020