Eleco continues to be well positioned in a very exciting and attractive market as technology is seen as the catalyst to meet the growing demands of the building industry. Our customer base has been facing unprecedented labour challenges and escalating materials costs.
Eleco’s software plays a crucial role in mitigating these issues, driving productivity for our customers, and enabling them to better plan their resources. There is a drive for more efficient and sustainable building methodologies and techniques. Our technology solutions are widely recognised for allowing better decision making and collaboration across our clients’ projects, positioning us to benefit from increasing digitalisation trends in our core markets.
As a result, the increasing digital transformation within the built environment is a significant opportunity for Eleco to leverage its position as a proven provider of software for the construction and built environment sectors, strengthen its platform, and continue to drive organic growth.
Purpose
To solve the challenges of the built environment through digital transformation
Mission
To provide best-of-breed software to companies in the built environment
Vision
To create certainty for the built environment
Our values and behaviours play a key part in driving through our purpose: we believe that our brand values should be reinforced by our cultural values and behaviours. As the foundation of our culture, this combination defines how we engage with those we work with and for in order to achieve value-adding impactful outcomes for:
• The planet/environment and the wider society: being environmentally and socially responsible,
• Our people: creating an organisation/employer brand people want to work with and for,
• Our customers: making life easier for our customers through our products and services,
• Our shareholders: providing a return on our shareholders’ investment.
We measure the impact of our actions through Environmental, Social and Governance (ESG) performance indicators and outcomes as well as internal operational and external shareholder value measures.
Summary of principal risks
Eleco aims to deliver sustainable growth combined with continued investment in software product development, sales and marketing resources.
The development of new products and the enhancing of existing requires continual appraisal of investments and the returns. Product development is planned, reported and reviewed frequently, and Eleco works closely with key customers and channel partners while monitoring industry trends to ensure that new products and features align to market needs and expectations.
Risk
Eleco provides digital solutions for clients and their end customers. In an environment of constantly changing customer requirements, increased technology adoption, and industry and technological innovation, there is a risk that competitors may develop solutions that are superior to ours. This could result in a loss of customers and related revenue. Note that as Artificial Intelligence (AI) is developing rapidly and becoming more consequential, we have
separated out AI as a risk in its own right.
Mitigating actions/controls
In 2024 Eleco acquired Vertical Digital, a software development company providing Eleco with extra capacity and expertise to update our products. The Head of Innovation, CTO and other key staff develop roadmaps for Eleco’s products, factoring in: the broader technological environment; existing customer feedback; and, existing and future competition in the building and property sectors. We are feeding the new capacity and expertise from Vertical Digital into the product roadmapping process. As part of this, product development spend is continually reviewed to ensure that we are generating sufficient revenue or gaining a competitive advantage to justify the investment.
Risk
Artificial Intelligence (AI) carries a risk of competitors developing new functionality and an opportunity for Eleco to do the same. Further, AI may impact the operating model at Eleco’s clients, changing the demand for Eleco’s products. There are related risks that as we use AI to develop software, we lose understanding and control of the software, and that employees inadvertently share confidential data with AI tools on the internet.
Mitigating actions/controls
Eleco is assessing trends for AI. AI is now incorporated into the highest revenue roadmaps, with internal capability to monitor for emerging threats and changing circumstances. An AI Usage Policy has been implemented to prevent accidental sharing of data. Eleco follows good practice for software development to ensure that software is documented and tested.
Risk
As a technology business, Eleco plc and its companies rely on the security and availability of their technologies and underlying infrastructure for their own operations and for the purpose of serving and supporting customers. Like virtually all other businesses, Eleco plc faces daily potential cyber security threats such as:
- Disruption to customers’ use of Eleco products, whether hosted by us as SaaS, or on their own infrastructure.
- Breaches leading to the theft of confidential data, both internal and that of customers, which could lead to reduced sales, penalties, and reputational harm.
- Breaches and attacks which could impact Eleco plc’s own operational capability by compromising key business-critical systems.
Mitigating actions/controls
Effective technology risk management and close monitoring are crucial for addressing potential IT security incidents and system failures, as well as protecting customer information from unauthorised access or disclosure. Consistent investment and adherence to regulatory standards help mitigate these risks. Eleco plc employs a range of cyber defence tools, including industrial-strength email and web filtering services, server and endpoint security suites, and hardware and software firewall protection suites. This includes a Secure Development Policy to enable our products to be secure when running on customers’ infrastructure.
All third-party partners used for communication, security, or hosting services are certified to ISO 27001 and SOC2 levels, which encompasses physical and cyber security measures to guard against attacks. Additionally, all Eleco plc employees receive regular cyber awareness and data protection training, and cyber security insurance is in place to further mitigate threats. Many Group companies are already certified to ISO 27001 standard.
As a requirement of ISO 27001, Eleco constantly reviews security measures and follows recruitment, confidentiality, and data security practices for the people aspects of security. In the extreme case, our End User Licence Agreement and Terms & Conditions provide protection against breaches and data protection.
Risk
Eleco’s employees develop and maintain our solutions, serve our customers, and provide leadership to the business. Loss of key employees or an inability to attract talent could have an impact on the Group’s operations.
Mitigating actions/controls
Eleco has won many awards for its products and has been recognised as a top performer in the market and we have obtained The Great Place to Work® accreditations in many of our operating subsidiaries. Remaining in this space means we need to ensure we retain and continue to attract the best talent the industry has to offer. To do that we will continue to develop our employee value proposition (EVP) and benchmarking to build on and strengthen the arrangements that are already in place, both globally and regionally. We will strike a balance between affordability, effectiveness and performance behaviours, and the desire to be a top employer within our industry. Communicating our EVP remains key to building our employer brand amongst our competition.
Risk
Several key economies in which Eleco operates from time to time face economic challenges including the UK and Germany. The impact of the Trump Administration on the US and global economy presently remains unclear, but a wave of protectionism and attendant disruption may occur. These factors can impact demand and the commercial construction business cycle. A downturn in the built environment business cycle may adversely affect Eleco’s performance, though historically it has been resilient in these circumstances (for example during the pandemic). Additionally ongoing cost of living pressures (arising from a high inflationary and interest rate environment), may impact wider economic activity.
Mitigating actions/controls
The building lifecycle software markets are changing as the built environment accelerates its digitalisation. Elecosoft works closely with customers and the market risk is mitigated through diversity of our product portfolio and distributed geographic market exposure. Eleco maintains strong cost control to stay financially competitive and recovers such cost base increases through price rises where possible. Our product solutions and services help clients save time and bring efficiencies in a highly cost effective and value-for-money manner. Eleco’s position is further strengthened by servicing the maintenance stages of the building lifecycle and manufacturing, property and retail markets. These markets experience different economic pressures and can be stable when demand is low in other markets.
Risk
Eleco faces potential and actual competitors, including new entrants, attempting to attract both new customers and Eleco’s existing customers. Competitors could also develop new functionality to try to outperform Eleco products. We are seeing Microsoft Project positioned as a competitor as well as specific entrants in the Swedish, Dutch and German markets. In some of these non-English markets, we are competing with local organisations with products in local languages. Further, BIM products may extend into planning.
Mitigating actions/controls
Eleco’s group structure with local business units enables us to be aware of trends in our markets and to respond locally. We continue to focus on excellent service, deep functionality and competitive pricing to ward off competitors. Customers are well versed in Eleco product solutions and our expanded service offerings. Feedback from customers and market trends are fed into our product roadmapping process.
Risk
The geopolitical situation across Europe remains uncertain, for example the situation in Ukraine, and changes in government in a number of countries. Impacts may vary from an increase in investment in housing in the UK to widespread increases in government spending such as Defence. Climate change remains a long-term threat to global economies, but with short-term impacts ranging from the possibility of green investment to changes to building regulations/practices or the repealing of Net Zero policies. Further environmental and health uncertainty arises from the possibility of a further pandemic or pandemics.
Mitigating actions/controls
Eleco works closely with customers and the market risk is mitigated through operational spread between countries with plans to expand geographically both directly and in non-geographically present countries through reseller partner channels. Eleco’s position is further strengthened by servicing the maintenance stages of the building lifecycle and manufacturing, property and retail markets, with different cycles and exposures to construction. As a flexible, geographically distributed and multi-product solution organisation, Eleco is well-positioned to leverage demand from green projects. The wide use of remote working and supporting technology across the Group means greater resilience in the event of any pandemic-related lockdown.
Risk
The risk of failure to meet stakeholder expectations as a result of any event, behaviour, action or inaction, either by Eleco itself, our employees or partners, that may cause stakeholders to form an adverse view. The risk may not only affect revenue and resulting cost of mitigation but could also have an effect on confidence and market value.
Mitigating actions/controls
Eleco takes an active role in identifying, assessing and escalating reputational risks for example through regular client meetings and, in the UK, through the Customer Success programme. Our policies aim to ensure reputational risk matters are managed in a globally consistent manner and align with our strategy. Eleco governance of reputational risk is an integral component of overall risk management, with a distinct category and reporting for reputational risk. Eleco mitigates these risks by taking steps to protect against data breaches; project management of customer deliveries; listening to customer and employee feedback to address areas of improvement and any training needs; developing strong company values and ethics and operating on them; and being aware of relevant social media adverse comments from stakeholders.
Risk
Irrespective of the fact that acquisitions made in the past have been successfully completed, the risk of conducting acquisitions and subsequent integration exists for future transactions. This includes, among other things, the inability to meet sales volume targets, and higher than expected integration costs, as well as the failure to meet any synergy goals. Furthermore, risks are present that the longer-term understanding to the business needs to be assimilated when integrated into the Group.
Mitigating actions/controls
The Group performs strong due diligence processes and closely managed integration processes; we seek to reduce the likelihood of this risk materialising. The integration plan is for the long-term positioning of the acquired business in the ecosystem of the Group. The integrations of BestOutcome, Vertical Digital and PEMAC were and are managed as specific integration projects and there is now a documented Eleco best practice approach for integrating new acquisitions.
Risk
Eleco operates across several territories and geographies which are each subject to their own laws, regulations and tax jurisdictions. This includes strict controls on data access e.g. GDPR in the EU. There is a risk of noncompliance which could result in fines, claims, and reputational damage.
Mitigating actions/controls
Eleco uses the services of professional advisors, who are experts in their fields, to complement in-house knowledge. Transactions between group companies are carried out in accordance with Eleco’s interpretation of tax laws, tax treaties and OECD guidelines. Eleco has many systems, processes and controls in place to ensure compliance with regulations. Intercompany transactions are conducted at arm’s length and transfer pricing arrangements remain under continued review.