Performance Review of Three AIM Listed Tech Players: ECK, IDE and VELA

Amid the positive sentiments of global economic recovery, FTSE AIM All-Share Index inched up by 0.15 percent. The index was trading at 894.64 (as on 3 July 2020, before the market close at 12.51 PM GMT+1).

The other critical factors to watch out today are:

  • The UK government sets out relaxed rules for travellers. The transport ministry has released a list of quarantine exempted countries. Under the new law, travellers would not be required to 14-days self-quarantine on return from listed countries.
  • The UK will reopen the doors of the pubs and restaurants from tomorrow 4 July 2020.
  • As per the industry experts, the UK manufacturing sector is likely to lay-off a large number of workforce.

In view of the above market conditions, we will discuss three FTSE AIM-All Share listed stocks - Eckoh PLC (LON: ECK), IDE Group Holdings PLC (LON: IDE) and Vela Technologies PLC (LON: VELA). Let’s see their operational and financial updates.

Eckoh PLC (LON: ECK) – The increasing need for data security is an opportunity

Eckoh PLC is a technology provider of Secure Payment products and Customer Contact solutions. Secure Payment products include the patented CallGuard and ChatGuard, which are used to secure customers data at the contact centres. Eckoh has been a Payment Card Industry Data Security Standards (PCI DSS) provider since 2010 and has secured over £2 billion in payments annually. Customer Contact solutions allow organizations to increase efficiency, lower operational costs and provide a real Omnichannel experience.

FY 2020 Annual Results (ended 31 March 2020) as reported on 16 June 2020

The Company reported revenue of £33.2 million that increased by 16 percent year on year from £28.7 million a year ago. The gross profit was £26.3 million, whereas the adjusted operating profit was £4.7 million. The diluted earnings per share improved significantly to 1.2 pence from 0.36 pence in FY19. The total business contracted was £35.9 million, whereas the new business contracted was £18.6 million. The total business includes new business from new clients and new & renewed business from existing clients.

The UK and US businesses reported revenue of £20.5 million and £12.7 million, respectively. The UK business revenue increased by 6 percent, mainly driven by the new business deployed and clients transaction volume. The US business grew by 36 percent. The increased regulation and fines for non-compliance in the US supported the growth of secured payments. The value of new contracts was £10.7 million, and client portfolio includes ten companies from Fortune 250.

At the end of FY20, the Company had cash of £13.6 million and a loan of £2.0 million. The Company had a net cash inflow of £1.1 million, after repaying £1.3 million of borrowings outstanding with Barclays. Given the current economic situation, the Company has deferred the loan repayment of about £325,000 for April and July quarter. It will make four quarterly repayments of £487,500 starting from October 2020 to repay the full loan. It has suspended the final dividend payment for FY20.

Trading Analysis

(Source: Company Website)

Share Price Performance

1-Year Chart as at July-3-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Eckoh PLC’s shares were trading at GBX 62.25 (as on 3 July 2020, before the market close at 12.59 PM GMT+1). Stock 52 week High and Low were GBX 67.00 and GBX 40.00, respectively. The Company had a market capitalization of £158.62 million.

Business Outlook

The Company generates a significant portion as recurring revenue, and the US revenue is based on fixed fees. The Company believes that as more people move in to work from home, there will be a greater need to secure customers data; thus, Eckoh products can play a vital role. The regulation tightening and increasing penalty for a data breach will force companies to implement security tools. The Company will continue to target the contact centres with more than 50 contact agents in the US and UK.

IDE Group Holdings PLC (LON: IDE) – Pipeline projects deferred to H2 FY20

IDE Group Holdings PLC is an IT specialist solution provider. The Company provides services in Cloud & Hosting, Network & Connectivity, Collaboration tools for Telephony and IT infrastructure, Device Management and Managed Services.

Trading Update (ended 31 December 2019) as reported on 30 June 2020

The Company reported revenue of £28.2 million for FY2019, which was down from £41.1 million reported in FY18. The gross profit margin improved to 22.8 percent from 16.1 percent in the previous financial year. The gross profit margin before the impact of IFRS-16 was 22.1 percent. The adjusted EBITDA profit was £1.1 million from EBITDA loss of £3.9 million in FY18. The adjusted EBITDA improved by £0.9 million following IFRS-16 implementation. The Company raised a six-year loan of £11.5 million from existing shareholders; the Company does not have any external borrowings apart from the loan with existing shareholders.

On 5 June 2020, Andy Parker has been appointed as the Non-Executive Chairman of the Company. He was previously Executive Chairman of the Company. Mark Fletcher has been appointed as the Chief Financial Officer.

Services Offered by IDE

Share Price Performance

1-Year Chart as at July-3-2020, before the market close (Source: Refinitiv, Thomson Reuters)

IDE Group Holdings PLC’s shares were trading at GBX 2.68 (as on 3 July 2020, before the market close at 11.55 AM GMT+1). Stock 52 week High and Low were GBX 10.50 and GBX 1.10, respectively. The Company had a market capitalization of £11.22 million.

Business Outlook

The Company focuses on generating revenue from public sectors through the partnership channels. IDE has reliable partners and direct customer pipeline. The Company won a few projects in the Managed Services division, which supports mobile workings. The projects in the pipeline have been deferred to the second half of 2020. The Company would continue to enhance operational efficiency.

Vela Technologies PLC (LON: VELA) – Liquidates stake in Rosslyn Data

Vela Technologies Plc is a UK based investment company. The Company targets investments in early-stage and pre-IPO technology companies with a recent interest in listed technology companies.

Disposal of holding in Rosslyn Data Technologies PLC as reported on 27 April 2020

The Company sold 1,411,111 ordinary shares in Rosslyn Data Technologies PLC at an average price of 4.17 pence per share. The disposal of shares generated proceeds of £58,868. The funds will be used for working capital activity.

Extension of Bonds Repayment Date as reported on 14 February 2020

The Company has extended the repayment date for the £550,000 10% secured bonds by six months. The bonds repayment was due on 17 February 2020, which will now be paid in August. The bonds were issued in February 2017 for high net worth bondholders and are secured by the Company’s assets.

As on 30 September 2019, Vela had cash of £120,000, and the total value of the investments were £2.14 million. The Company would be able to repay the bond principal by liquidating some of the investments.

Financial Updates

(Source: Company Website)

Share Price Performance

6-Month Chart as at July-3-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Vela Technologies PLC’s shares were trading at GBX 0.07 (as on 3 July 2020, before the market close at 1.07 PM GMT+1). Stock 52 week High and Low were GBX 0.14 and GBX 0.04, respectively. The Company had a market capitalization of £1.22 million.

Business Outlook

Vela is actively seeking a business transaction, which could include significant investment or acquisition to utilize Vela as a reverse takeover vehicle. The Company is also looking for options to repay the bond by the extended date.

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