• Annualised Recurring Revenue (ARR)* up 14% to £18.2m (2021: £16.0m)
• Total Recurring Revenue (TRR)** up 10% to £16.9m (2021: £15.4m), representing 64% of total revenue (2021: 56% of total revenue)
• Revenues of £26.6m (£27.0m in constant currency terms) in line with market expectations and similar to the prior year (2021: £27.3m). Flat revenues were a consequence of our SaaS transition as we move away from upfront perpetual licences
• Profit measures were slightly ahead of market expectations with EBITDA*** of £5.2m and Profit Before Taxation of £2.9m, given the impact of the SaaS transition (2021: £7.2m and £3.9m respectively)
• Basic Earnings Per Share of 2.9 pence per share (2021: 3.3 pence per share)
• Gross margins remain high at 88.4% (2021: 89.9%) and cash generation remains strong with year-end cash of £12.5m (2021: net cash of £10.0m)
• Total dividends for the year (paid and proposed) of 1.28 pence per share (2021: 0.60 pence per share), consisting of:
  • Proposed special dividend in relation to the cash proceeds received from the 2023 disposal of non-core Arcon Architectural CAD business of 0.58 pence per share (2021: Nil)
  • Proposed final dividend of 0.50 pence per share (2021: 0.40 pence per share)
  • Interim dividend paid of 0.20 pence per share (2021: 0.20 pence per share)

* ARR is defined as normalised annualised recurring revenues and includes revenues from subscription licences, contract values of annual support and maintenance, and SaaS contracts. Normalisation is calculated as recurring revenue in the final month of the year multiplied by twelve.
** TRR is defined as the recurring revenues from subscription licences, contract values of annual support and maintenance, and SaaS contracts.
*** EBITDA is defined as Earnings before Interest, Tax, Depreciation, and Amortisation and Impairment of Intangible Assets

Eleco is now a customer-centric rather than product centric business with all developments based on our clients’ needs. Across the Group we have been focused on both delivering best of breed products to core customer segments while also transitioning our business to SaaS and maintaining high customer retention rates. To that end, we have introduced an R&D matrix structure built around customer segments, enabling us to produce innovative solutions that are of the highest value to our customer base.

Our transition to a SaaS-based, recurring revenue business is progressing to plan. We grew Annualised Recurring Revenues (ARR) by 14 per cent to £18.2m at 31 December 2022 from £16.0m at 31 December 2021. Total Recurring Revenue (TRR) increased 10 per cent to £16.9m (2021: £15.4m), such that recurring revenues now account for 64 per cent of total revenues, up from 56 per cent in 2021.

Our strategic move to a SaaS licensing model inevitably meant a temporary decline in revenue, something we highlighted at the outset of this process. Nonetheless, revenue for 2022 (￡26.6m, or ￡27.0m on a constant currency basis) is only marginally down on 2021 (￡27.3m). We are satisfied with the trajectory of our SaaS transition which we expect to result in significant revenue growth and improved shareholder returns over the years to come. Our move to SaaS licensing will benefit us and our customers and will result in higher Customer Lifetime Value (CLV). We expect revenues will increase from the end of Q2 of this year, which marks the midway point of our transition, and that revenue will continue to increase for 2023 as a whole.

As well as our strategic realignment to a customer-centric business, we have continued to grow our customer base, achieving new customer growth in the UK, growth in the USA and strong demand in Sweden. Existing customers continue to expand their software usage and we are seeing more demand for hosted solutions.

In line with our previously announced strategy to focus on our core customer segments and businesses, we sold our German ARCON architectural CAD business, following the year end, for a total consideration of €600,000. This further streamlines our business toward a common customer base and product type and will be beneficial to all our stakeholders. It will enable our team to be more focused, provide improved service levels to our customers, and ultimately generate greater value for shareholders.

Unfortunately, geo-political factors and inflationary pressures have impacted the timing for our customers of their operational programmes. This has resulted in a slowdown in demand for services and sales of new licences across Eleco’s portfolio, especially in Germany where the economy has been hit more severely by the repercussions of the war in Ukraine. However, the Group is successfully absorbing these pressures thanks to effective cost control and our strong cash balance, with profits remaining in line with expectations.

Overall, we have continued to increase our customer numbers and monthly recurring revenue, making progress in our goal to become a much larger, worldclass, customer-centric organisation.

We formed an ESG Committee early in the year, chaired by Non-Executive Director, Mark Castle, with a mandate to focus on the key elements of Environmental, Social and Governance and identify the core areas of Eleco’s Sustainability Plan. During the past year, the ESG Committee set Key Performance Indicators (‘KPI’) in line with Eleco’s Sustainability Plan, which we used to measure our performance against in 2022, and looked at our Net Zero Strategy.

Environmentally, we made the move to more renewable energy sources across the whole business and while only a short-term solution, we offset our 2021 carbon emissions during the year. We will continue to focus on our impact on the environment and driving our Net Zero plan. We are also reviewing how we can positively contribute to global environmental challenges by helping our customer base reduce their carbon footprint and improve sustainability through the use of our solutions.

Within our social strategy we recognise the importance of working together with our colleagues, customers and suppliers to promote fairness, equality and inclusion. People are at the heart of Eleco. Attraction and retention of talent and the wellness of our people were key themes throughout 2022 in what was a tight labour market.

We maintained investment in our people throughout the year, introducing numerous initiatives including an Employee Assistance Programme, Employee Hub and encouraging colleagues to volunteer for charitable causes. In addition, two-thirds of our employees received a cost-of-living allowance, and we provided pay awards across the whole Group. As the result of many of our commitments to our colleagues, we were delighted to receive Great Place to Work® certification in the UK, Sweden and Germany.

We were delighted to welcome Neil Pritchard, who was appointed to the Board as Chief Financial Officer in October 2022, further strengthening our leadership and corporate governance. The Group Leadership Team was also bolstered by the appointment of Luben Kirov as Chief Technology Officer earlier in the year.

Thanks to our strong cash position, we are able to both retain earnings for corporate development initiatives and maintain a progressive dividend policy. Cash generation was very strong during the year, with an increase in free cash flow ahead of market expectations, resulting in a 25 per cent increase in cash to £12.5m (including cash held within the held for sale business at the year end) at 31 December 2022 (31 December 2021: £10.1m). The Board has therefore decided to recommend a final cash dividend of 0.50 pence per share (2021: 0.40 pence per share). This is in addition to an interim cash dividend of 0.20 pence per share (2021: 0.20 pence per share). Furthermore, we will propose a special dividend of 0.58 pence per share to reward our shareholders’ loyalty as we go through the SaaS transition, representing the cash proceeds from the disposal of the non-core ARCON business. The total dividends for the year will therefore be 1.28 pence per share (2021: 0.60 pence per share).

The full year and special dividend will follow approval by shareholders at the AGM. The record date is the close of business on 19 May 2023 and the ex-dividend date will be 18 May 2023.

Eleco is building a single customer platform, the Elecoverse, that will enable our customers to access and utilise all our solutions. It will also provide customer success tools, training options through the Elecoversity, as well as provide us with analytics that will help us to further enhance our offerings to our customers. We are enhancing our solutions to further our competitive advantage in our areas of focus. We will continue moving ahead in our transition to SaaS which will increase organic recurring revenues and profits. Sales enablement programmes are being implemented to further enhance future organic growth.

The construction and built environment markets are currently affected by a multitude of macro-economic headwinds. Eleco’s software plays a crucial role in helping companies mitigate the impact of these issues, driving productivity, and enabling them to better plan their resources. The industry is experiencing a move toward digitalisation, as well as more efficient and sustainable building methodologies and techniques. Eleco’s solutions are widely recognised for improving decision-making and planning throughout the building lifecycle and we currently have an excellent opportunity to leverage our market position, strengthen our platform and drive organic growth.

Over the coming year we will also build on the progress we have made in achieving Great Place to Work® status, providing an ever-improving work environment that helps us motivate and retain our great people while attracting new talent in a competitive labour market.

The Company has a number of strategic acquisition prospects that could further enhance its positioning and continues to actively review the market for technology opportunities and threats.

Eleco has delivered a positive performance throughout 2022 despite the macro-economic background, delivering growth in subscription revenues in line with our core strategic goal. I would like to thank our talented team for their superb efforts in achieving this outcome and our loyal and valued customers for their support. We are confident of continued robust progress through 2023 and in meeting market expectations for the year ahead.