Half Year Trading Update
News & Insights
1 Nov 2023
News & Insights
1 Nov 2023
(“Eckoh”, the “Group”, or the "Company")
- Trading for the half in line with Board expectations
- Record level of contracted business and record North American pipeline
- Positive traction in cross-selling & upselling across our new solution set
Eckoh plc (AIM: ECK), the global provider of Customer Engagement Data Security Solutions, today announces an update on trading for the six months ended 30 September 2023 (the “Period”).
Trading was in line with the Board’s expectations for the Period. Newly contracted business and renewals (‘Total Contract Value’) was at a record level of £24.6m, up 40% on the prior year (£17.6m H1 2023), driven by strong multi-year renewals and successful cross-selling and up-selling of our new products.
The strong level of both cross-sell and up-sell initiatives to existing clients has been achieved through our enhanced Secure Engagement Suite, the ongoing shift to cloud and our new commercial strategy. Recent new product additions such as Secure Call Recording and our updated Secure Digital Payments platform have been extremely well received and we expect several clients to be live with these and other additional products from our Suite in the second half.
Overall, the Group is expecting to report revenues of c.£18.8m (H1 2023: £19.6m), reflecting the loss of a large (non- security) UK client, disclosed in our FY23 final results, and the ongoing transition to cloud-based delivery of our solutions. This transition increases the visibility and quality of our earnings as the proportion of one-off revenues in any period (from hardware and implementation) decrease.
Whilst this shift to cloud is tempering revenue growth in the short term, it has a positive impact on our recurring revenue, which has increased to 83% (H1 2023: 79%) and operating margins, which were strong at 21%. Adjusted operating profit (ex-forex) is expected to be c.£4.1m*, compared to £3.5m in H1 2023.
Eckoh has a record pipeline of new business opportunities in the North American market, validating the strategic decision at the beginning of the year to move to a single global commercial team and focus them on this market, where the scale of opportunity for Eckoh’s solutions is most compelling. The Company is, like others, experiencing a lengthening of sales cycles with new clients, especially in the contracting phase. Consequently, the completion of contracts is taking longer, and several sizeable enterprise deals where Eckoh is the chosen supplier, which were expected to close in the Period, will now shift to the second half. Despite this, Data Security Solutions annual recurring revenue (‘ARR’) for the key North American market still strongly increased year-on-year by 22% to $16.8m.
Outlook and financial position
Eckoh’s balance sheet remains robust. Strong cash generation continued during the Period with net cash of £7.3m at the end of the half year, up by £1.6m from £5.7m at year end (H1 2023: £4.4m) and no debt.
The Board is very encouraged by the record level of business contracted in the Period, the successful implementation of the new commercial strategy and the sales pipeline; most notably the large deals which are in a progressed position. The sales pipeline gives us confidence that the strong positive trend of growth in Total Contract Value will continue in the second half. Whilst the longer than expected sales cycles will marginally impact revenue, the Board is confident that the Company is on track to meet profit expectations for the full year.
Notification of Interim Results
Eckoh will provide further detail at the time of its results for the six months ended 30 September 2023 on Tuesday 21 November 2023.
*In H123, the Company’s operating performance benefitted from a £0.7m currency tailwind versus an £0.1m headwind in H1 2024.
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