Interim Results for the six months ended 30 June 2023

Chairman’s Statement

“The Group’s transformation to a high recurring revenue, SaaS driven business is now well advanced and entering a new phase that will bring further significant operational and financial benefits.”

In an era of increased global instability and macroeconomic headwinds, it is pleasing to report, in this first statement in my capacity as Interim Chair, that Eleco continues to execute on its strategy and deliver stable, more predictable and growing recurring revenues as it successfully navigates through its SaaS transition.

Eleco, alongside its customer centricity, continues to benefit from international industry trends and drivers, such as digitalisation and the incorporation of Artificial Intelligence (AI) to improve productivity, the reduction of waste and carbon footprint, efficient delivery models across the lifecycle utilising greater data collaboration and integration.

Performance and future
Recurring revenue in the first half grew by 18 per cent to £9.7m (H1 2022: £8.2m) and now accounts for 72 per cent of total revenue (H1 2022: 61 per cent of total revenue). This significant uplift in performance emphasises the benefits in our SaaS transition. Similarly, annualised recurring revenues increased by 18 per cent to £19.7m (H1 2022: £16.7m). Revenue was slightly ahead of forecast, despite the absence of revenue from a number of Swedish-based end-of-life products and a planned disposal. Profitability was in line with management’s expectations.

For the full year 2023, we expect to see revenues in line with our plan and as a result of the SaaS transition, longer term sustainable growth and overall shareholder returns coming through.

Strategic progress
These organic developments and overall prospects have been supplemented by progress in other corporate activity. In February 2023, we sold the ARCON architectural CAD business, enabling increased focus on our core Building Lifecycle businesses.

In June 2023, we acquired a UK provider of easy-to-use, scalable Project Portfolio Management (PPM) software for a net consideration of £3.6m. The value enhancing addition of the BestOutcome business broadens our customer base and provides potential extended cross fertilisation of solutions to our existing customers.

Environmental, Social and Governance (ESG)
As Chair of our ESG Committee, I am keen to ensure that Eleco is at the forefront of initiatives that deliver on and fulfil our important responsibilities and ESG commitments. Having adopted a balanced scorecard approach, environmentally, we are measuring our performance against KPIs, building on the short-term objective of our Net Zero carbon offset. Internal measures continue to minimise our own footprint and we are looking at other ways to assist our customers’ ability to measure and reduce their own emissions.

Socially, we have been building our Employee Value Proposition, internal management training, and Eleco’s impact in the community through volunteering and wellness initiatives. We were pleased to achieve higher scoring in the Great Place to Work® certifications this year, deepening the bonds within and across the Group. Also, in Governance, new Group policies are being progressively and regularly rolled out to employees via an internal training platform.

Having regard to both the organic and inorganic needs of the business and recent performance, the Board is increasing the interim dividend by 25 per cent to 0.25 pence per share (H1 2022: 0.20 pence per share), payable on 6 October 2023 to shareholders on the Register on 22 September 2023, and the ex-dividend date will be 21 September 2023.

The key to any successful business, and our biggest asset, is our people; the management and colleagues without whom the Group cannot achieve the success it strives for. We are very fortunate in having highly dedicated, talented and hardworking colleagues across the world. On behalf of the Board, I wish to express my thanks for their continued efforts and their support.

Board updates
We are currently at an advanced stage of recruiting a new Chair and an Independent Non-Executive Director who will in turn become Chair of the Audit & Risk Committee. Announcements on these two roles are expected to be forthcoming prior to the year end.

Current trading and outlook
The Group’s transformation to a high recurring revenue, SaaS driven business is now well advanced and entering a new phase that will bring further significant operational and financial benefits.

We are confident that we will continue to weather economic and market headwinds given our clearly defined and executed strategy for growth. Our technological solutions help our customers drive efficiencies in these challenging environments. We continue to deliver organic growth and accelerate delivery of our plan via complementary acquisitions that enable us to scale up and exploit market opportunities. We are well positioned to grow our international markets and see continued progress and positive momentum for the future with current trading in line with our internal expectations for the full year.