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Eckoh – full-year results argue “excellent” future prospects, but what’s already in the valuation?

By Steve Moore | Monday 12 June 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

“Eckoh plc (ECK), the global provider of secure payment products and customer contact solutions, is pleased to announce its final results for the year ended 31 March 2017”. Hmmm, this though follows a profit warning in September.

The results emphasise “adjusted operating profit rose to £4.3m (FY16: £4.1m)” on revenue 30% higher to £29.1 million, though this followed acquisitions and the company ended the year with net cash of just £0.2 million. Net current assets of £18.4 million compared to current liabilities of £10.5 million and non-current liabilities of £6.8 million, though also the noted assets included an increased £11.6 million of receivables.

The company emphasises “an excellent sales pipeline… extremely high revenue visibility from the contracted commitments of our recurring base (increased to 76% of total revenue) and with the trend of high client retention rates the future prospects of the group remain excellent” and particularly that “the pipeline of opportunity suggests that the US is beginning to catch up with the need to look after customer data and Eckoh is extremely well placed to execute on this opportunity”.

Another positive is a 6.7% increased final dividend per share of 0.48p. However, this all compares to a current share price approaching 50p and a market cap of circa £120 million.

I’d suggest such a valuation demands much greater underlying growth than what has just been delivered and thus, while awaiting to see what the stated “excellent” future prospects actually deliver, currently I continue to avoid.

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