Our strategic objectives remain to continue to innovate and to grow, with the solid foundation of a stable and efficient organisation.

The outlook for the construction and built environment sector is looking very positive at present, with a sustained recovery anticipated over the coming years. (Glenigan UK report 2021).

Alongside that, rising material costs and increased regulation are anticipated to squeeze the industry’s margins, making technologies such as ours, which use automation and data to improve margins, ever more critical to our customers and potential customers.

Together these developments create a substantial opportunity for Eleco. The Company’s management team defined a growth strategy with a clear focus on securing a high-value customer base in both core and additional markets. The Company’s vision is aligned with industry drivers and the real core of its customer’s needs to drive better decision making, timely delivery, and the reduction of cost in a safe, sustainable way.

Eleco has an experienced team in place to create shareholder value. Eleco’s sales and marketing functions are built around customer segments, designed to target customer sweet-spots and to drive sales internationally. Its divisions are:

Building Lifecycle

Comprised of Eleco’s Project Management, Estimating, Property Management and Maintenance Management products. These solutions complement each other and can be adopted into core customer segments. The market for these solutions is circa £8 billion with an 8-15% CAGR.

CAD and Visualisation

Includes niche products with minimal synergies between customer segments of the Building Lifecycle portfolio. Eleco’s ESIGN and Active Online products are key players in a £450m market.

Eleco also intends to create value by building on its reputation as innovators and launching NextGen solutions. These will be developed in-house and secured through strategic partnerships and M&A.

Key Performance Indicators

The Eleco Board and businesses utilise a number of appropriate Key Performance Indicators (‘’KPIs’’) as well as a structured planning and reporting process. This begins with long term planning, through to annual budgeting, quarterly reviews and monthly reporting. KPIs regularly used by the Group include:

KPIs  2020
2019
Change
Product development spend (£m) 3.2 3.1 +3%
Revenue (£m) 25.2 25.4 -1%
Free cash flow (£m) 5.5 4.1 +36%
Net cash/ (debt) (£m)  6.2 1.1

Key facts

1 1939
Eleco listed on the London Stock Exchange, UK (LSE:ELCO).
1 13
Offices serve Eleco's core regions: UK (incl HQ), Sweden, Germany, Netherlands and the USA for direct sales.
1 246
Employees across client services, software development, sales, business development, marketing and administration.

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.

Product development risks

Description
Fast and constantly changing customer requirements, along with increased technology adoption, industry and technological innovation contribute to the risks and challenges associated with developing complex software applications.

Mitigation
Strengthen the product management organisation to better understand customers’ current and future needs which support R&D prioritisation and the alignment of development roadmaps to meet the needs of defined customer segments and geographical markets. Strengthen our understanding of in-country customer requirements to support the product development roadmaps and further differentiate our portfolio against global competitors.

Cyber risks and data protection

Description
There is an increasing reliance on IT systems, local and cloud, to perform the daily operations of a business. Exposure to technology in general is rapidly increasing with cloud offerings and remote connections.

Mitigation
Good, effective technology risk management and close monitoring is essential to robustly handle potential IT security incidents and system failures, as well as ensuring customer information is protected from unauthorised access or disclosure. Continued investment and adhering to regulatory standards mitigate these risks.

Human Resources/ Employees

Description
Eleco strives towards a creative work culture that embraces technology and builds on trust, accountability, and mutual respect. Loss of key employees or an inability to attract talent could have an impact on the Group’s operations. The ability of Eleco to retain and attract talented employees is a critical part of the culture of the business.

Mitigation
Eleco endeavours to ensure that employees are motivated in their work and there is regular feedback on their performance. There are pay reviews and a range of incentive schemes to reward achievement over different time periods. Eleco attracts new talent by maintaining its focus on developing new and innovative software.

Human Resources/ Employees

Description
Organisational structure results in siloed focus and siloed priorities between distinct business units, products, and geographies rather than collaborative efforts to reach group objectives.

Mitigation
Define the targets, roles and responsibilities, incentives, and culture of the organisation to align and focus on sales and marketing, product management and development to deliver against strategic priorities. Enhance our employee wellbeing and success through the ongoing assessment and improvement in human resource policies, procedures, and professional development.

Impact of economy and financial markets

Description
The health of domestic and global economies strongly influences the commercial construction business cycle. A downturn in the construction business cycle can adversely affect Eleco’s performance.

Mitigation
The construction software markets are changing as the built environment accelerates its digitalisation. Eleco works closely with customers and the market risk is mitigated through operational spread between countries with plans to expand geographically both directly and 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. Eleco remains conscious of the need to manage and conserve its cash resources carefully and in present conditions caused by Covid-19, Eleco has been even more vigilant in the control of operational costs. While Brexit may have an impact, as demonstrated through 2020 the Group has been able to meet challenges and remained resilient.

Competition

Description
Eleco’s products are subject to challenge from peers with significant resources.

Mitigation
Eleco has traditionally invested approximately 12-13 per cent of its revenue in product development, with 66 employees engaged in R&D. The objective of the R&D group is to provide efficient, easy to use solutions to customer needs and segments, whilst detecting new trends and requirements as the construction industry continues to digitise.

Currency

Description
The Group earns a proportion of its revenue in currencies other than Sterling. The two largest currencies in which it trades are Swedish Krona (SEK) and Euro (EUR). Changes in these exchange rates can expose Eleco to exchange translation gains and losses.

Mitigation
Our businesses predominantly trade in their own local currencies and have local operational and development staff which creates a natural hedge against currency movements. In addition, we will continue to review foreign exchange contracts to manage risk.

Protection of Intellectual Property

Description
Eleco’s success is built upon the development of advanced software which requires continual protection from competitive businesses who may seek to copy or otherwise replicate the software.

Mitigation
Eleco uses a variety of licensing technologies and defines the rights of customers in licence agreements. In addition, the Group seeks to ensure its intellectual property rights are protected by appropriate means and defends its rights where practicable.

Tax

Description
Eleco operates across a number of territories and geographies, local tax authorities follow their own local transfer pricing rules in the absence of global transfer pricing rules. Following Brexit, existing agreements in place may be further challenged by local tax authorities which could result in an increase to tax rates.

Mitigation
Transactions between group companies are carried out in accordance with Eleco’s interpretation of tax laws, tax treaties and OECD guidelines and these arrangements have been subject to review during 2020.

Protection of IT systems and platforms

Description
As is the case with all companies, Eleco relies on the physical and cyber security of its IT networks and platforms for the smooth day-to-day operation of its businesses. The cyber threat space is ever increasing, and has grown exponentially since the pandemic started, with new threats and vectors of attack emerging on a daily basis.

Mitigation
Eleco uses a multitude of cyber defence tools, including industrial-strength email- and web-filtering services, server- and end point security suites, and hardware and software firewall protection. All third-party main platforms used for communication, security or hosting services (such as Microsoft Office 365, Mimecast, Microsoft Azure and various IaaS/ PaaS providers) are protected and certified to ISO 27001 level, which includes physical as well as cyber security precautions and safeguards to mitigate against physical and cyber attacks.