Robust performance, driven by high recurring revenues
Eckoh plc (AIM:ECK), the global provider of secure payment products and customer contact solutions, announces a trading update for the six months ended 30 September 2020.
Eckoh delivered a robust performance in the period and in line with Board expectations, generating comparable levels of profit to the prior year, reflecting the resilience of its business model. High levels of recurring revenue, a solid order book, enterprise clients and a strong balance sheet, combined with prudent cost control, have enabled Eckoh to manage the impact of the global pandemic effectively. This performance is a testament to the quality and commitment of our team, who have adapted well to the challenges and worked so effectively under the difficult conditions of recent months.
The first quarter of our financial year, April to June, was unsurprisingly challenging for new business, especially for larger deals, where many tender processes were put on hold. We have, however, seen momentum building in the second quarter, particularly for US Secure Payments contracts delivered in the Cloud. These projects are easier to execute and deliver in the current environment and illustrate ongoing demand for our innovative technology and solutions that are designed to safeguard our clients’ migration to digital, remote working. US Secure Payment new contract value was $5.9m compared to $7.3m last year, but with a larger number of contracts won in the period.
Total revenue was slightly lower, excluding the large one-off Coral contract from last year, driven mainly by the expected decline in US Support (which declined from $2.8m to $1.1m in the period), and the initial revenue impact on the UK business from the pandemic. US Secure Payments enjoyed significant growth of 80%, reflecting demand driven by the long-term structural drivers of tightening regulation, and the risk of data breaches and fraud within challenging parts of our clients' operations.
In the UK, both new and total business were higher than last year, with total business contracted increasing 8% to £8.6m. We are seeing excellent levels of business coming from existing clients, and in August 2020, we secured a six-year renewal of our contract with Capita for the provision of services for the Congestion Charge to Transport for London, at a total contract value of £4m. There are a number of other sizeable renewals expected to close in the second half of our financial year.
US total business contracted was lower than last year, reflecting two previously highlighted factors: a tough prior year comparator in Coral (because of a large contract win that delivered $3.9m in contract value and $2.1m in revenue, and which was not expected to repeat), and the managed transition away from hardware-based Support business. In our full year results in June, we noted that third-party Support will continue to decline in the current financial year as we focus resources on the significant growth opportunity of Secure Payments.
Business performance and prudent balance sheet management has ensured Eckoh remains in a strong financial position, with net cash of £12.9m at 30 September 2020 (30 September 2019: £10.9m).
The Group expects to report its results for the six months ended 30 September 2020 on Tuesday, 24 November 2020.
This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.
For more information contact
Nik Philpot, Chief Executive Officer
Chrissie Herbert, Chief Financial Officer