Audited Results for the Year Ended 31 December 2021.

Chairman’s Statement

As an award-winning specialist provider of worldclass software to the £8.5bn built environment market, Eleco is well-positioned to expand.

A year ago, we set out our refreshed strategy and the last twelve months have been focused on setting the foundations for further growth. It has been a truly transformative year for Eleco. We are very much a customer-focused organisation and have a clear purpose and a values statement developed through a truly interactive process with our people. A strong, engaging culture is key to enable us to attract and retain talent in such a competitive market.

I am pleased to report that our strategy is already generating results, with our organic growth rate increasing to 8 per cent (2020: -1 per cent), underpinned by double-digit sales growth from our core Building Lifecycle portfolio. This was achieved at the same time as implementing our move to a subscription licensing model for new customers in the last quarter. Recurring revenue (subscription and SaaS licences, maintenance and support contracts) increased by 9 per cent to £15.4m.

We have maintained strong cash generation, despite Covid-19 continuing to impact our ability to undertake face to face sales and training, having fully repaid monies given to Eleco through the UK Government furlough scheme as well as clearing our UK bank debt.

We are now debt free after settling the remaining £0.1m of subsidiary bank debt in Q1 2022. We were delighted to win the Megabuyte Quoted 25 Award for best performing software company in the industrials peer group in March 2022, showing the strength of our overall financial performance.

£ 25232 27344 '000
Revenue
+ 1 8 %
EBITDA
Financial highlights
  • Revenue increased 8%, slightly ahead of expectations, to £27.3m with growth in all regions (2020: £25.2m)
  • Recurring revenue up 9% to £15.4m, representing 56% of revenue (2020: 56%)
  • EBITDA ahead of expectations at £7.2m (2020: £6.7m)
  • Adjusted EBITDA of £7.3m (2020: £7.0m)*
  • Development spend at over 12% of revenue
  • EPS at 3.3 pence per share (2020: 3.9 pence per share) – impacted by UK corporate tax rise in 2023
  • Net cash of £10.0m (2020: £6.2m) after full repayment of UK bank debt and furlough payments
  • Final recommended dividend of 0.40 pence per share: full year dividend 0.6 pence per share (2020:0.40 pence per share)
Operational highlights
  • The introduction of subscription-based pricing to new Building Lifecycle customers in Q4 2021 will lead to increased Recurring Revenue and enhanced Customer Lifetime Value.
  • The successful merger of our UK Building Lifecycle businesses and separately of our German Visualisation operations, providing greater business development opportunities.
  • Winner of the Megabuyte Quoted 25 award for Best Performing Software Company in Industrials.
  • Winner of Project Management Software of the Year at the UK Construction Computing awards.
*Adjusted to exclude former Directors’ payments.
**EBITDA is defined as Earnings before Interest, Tax, Depreciation, and Amortisation and impairment of Intangible Assets
Implementing our strategy for organic growth

We are aligning our business with clear customer segment strategies and through product portfolio alignment, driven by our Chief Product Officer (CPO) Fredrik Pantze who was appointed in April 2021, and we have started on the journey to adapt our software to become next generation cloud-based solutions. Our aim is to help our customers reimagine their businesses by creating software which allows them to better collaborate, get faster access to data for analytics and ensure interoperability. As a result, we are seeing an increase in new customer wins away from our competitors.

This has also been bolstered by the strengthening demand for our products in our core regions where we are in a strong position with Powerproject being used for the master construction plan. Collaboration is driving us to partner and share data with other parties. As a result, we have formed several partnerships and data integrations during the last 12 months, as we continue to leverage/understand our strong customer relationships.

With our move to subscription, we are more focused on customer success through account management and services. We believe that building on our customer relationships will allow Eleco to better support the management and leadership teams of those organisations which are starting to look for an integrated end to end approach.

Our new Chief Technology Officer, Luben Kirov, was appointed in December 2021  This role has the remit to bring together all the separate development teams, break down the product silos and drive forward our integrated technology roadmap in conjunction with our CPO. Having started in February 2022, we look forward to reporting on the results of this appointment as we go through the current year.

From a customer perspective, digitalisation is increasingly being recognised for its ability to manage the complex supply chain and inflationary issues, while rising pressures on companies to reduce wastage provides another tailwind as regulation around this increases. We are a well-known provider of innovative technology for the construction and built environment sectors, with 87 per cent of the top 100 UK construction contractors on our books. This provides us with a strong and established platform for growth and new contract wins.

The move to subscription-based pricing of our products will benefit our customers with a lower upfront cost for an enhanced product, as well as creating increased value for our shareholders through higher Recurring Revenue growth.

In the year, Eleco’s US business grew 16 per cent predominantly through our reseller channel which the Company will continue to support. Following this growth, the Executive team are re-focusing on potential strategic opportunities for expansion into the US.

We continue our strategy to provide best of breed software targeted at our chosen customer segments.

Environmental, Social and Governance (ESG)

Aligned to the new strategy, I undertook a full skills audit of the Board and in March we brought in Paul Boughton as a NED, adding more technology PLC experience to the business as well as additional financial and acquisition expertise.

In a desire to refresh our Board and further improve our corporate governance, this was followed by a further extensive search to recruit the best candidates for our other skills gapsThis led to two further NED appointments in the summer, with Dr Annette Nabavi and Mark Castle joining the Board in August and September, respectively. Annette Nabavi is a highly qualified board director with more than 30 years’ experience in the technology, telecoms and digital industries who brings additional expertise to advise with the shift from a perpetual to SaaS licence model while Mark Castle is an experienced business leader, bringing the voice of the customer to the Board – a vital stakeholder group for Eleco – with his wealth of experience in the Property, Construction, Consultancy and Built Environment sectors.

Appointments

Kevin Craig and David Dannhauser stepped down from the Board at the end of August and I would like to take this opportunity to thank them both for the immense contribution that they made to this business throughout their tenure.

Paul Boughton took over as Chair of Audit and Annette Nabavi took over as Chair of Remuneration. Over the next twelve months, we plan to strengthen our ESG disclosures, building on the steps taken during 2021. With this in mind, we set up an ESG Committee at the end of period under review, chaired by Mark Castle. This will assist the Board in fulfilling its oversight responsibilities regarding environmental, health and safety, corporate social responsibility, sustainability, customer satisfaction, employee wellbeing and retention, corporate governance, diversity, equity and inclusion. We look forward to building our disclosure on these areas over the months and years ahead as we develop our Net Zero Strategy and our ESG Scorecard.

On 29 March 2021 Robert Tearle was appointed as CFO as we launched our refreshed strategy. On 7 February 2022 we announced that Robert was resigning from the Board. This is obviously disappointing for both the Company and for Robert personally. We thank Robert for his valued contribution to the planning of the steps needed for the delivery of our move towards a SaaS environment for our most successful products. The process to recruit a permanent CFO is underway. In the meantime, we have Rose Clark, an experienced CFO, covering the position.

Proposed dividend

The Board has reflected on the performance of the business as well as the strength of the Group’s balance sheet and has proposed to pay a final dividend of 0.40 pence per share in respect of the year ended 31 December 2021. This is in addition to an interim dividend of 0.20 pence per share.

Outlook

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.

Over the next twelve months, we intend to continue to focus the business on our core Building Lifecycle products and on further growing our recurring revenues. Our strategy, as previously announced, is to transition that part of our product portfolio which has traditionally been sold through perpetual licences towards a subscription pricing basis and eventually to a full SaaS service. This has well established benefits by giving choice for our customers and enhanced Customer Lifetime Value for our shareholders. While this is expected to reduce the revenues we report relating to perpetual licences moving forward, our Recurring Revenues will increase, creating strong visibility of income. This is an exciting transition that will deliver multiple benefits to both our customers and shareholders.

We will also continue to strengthen our business in our core markets and look for further opportunities for meaningful expansion in the US. Additionally, we will be proactively assessing the market for M&A opportunities, that will further place Eleco at the forefront in assisting our customers to solve the future challenges of the built environment.

By creating more value for our customers, we will be increasing our Customer Lifetime Value, expanding beyond our current users into the operations management of our customer base. The importance of our existing customers and growth opportunities leads us to continue to focus on direct sales in our core geographic regions.

2021 has been an exciting year for Eleco and I would like to take this opportunity to thank our skilled and hard-working team and valued customers for their support over the past twelve months. With the foundations set in place, we are well positioned for continued growth, and increased market share through further product evolution and potential acquisition opportunities, supported by favourable market dynamics.