Eleco (ELCO), a software provider specialising in solutions for the built environment, said it has acquired BestOutcome, a successful SaaS business based in Buckinghamshire, for an initial cash sum of £4.825m along with a deferred consideration of £0.5m dependent on performance.
BestOutcome is a leading provider of simple and scalable project portfolio management (PPM) software, with a highly complementary product set to Eleco’s core Powerproject software. Its main products, PM3 and PM3 Time, are widely used for managing strategic programs and multiple portfolio management projects, and offer Eleco an in-house timesheet resource for the first time.
The company brings over 60 active clients, with a strong track record of wining public sector contracts, including with the NHS, universities, and county councils, complementing Eleco’s strength in the private sector.
In the year leading up to December 31, 2022, BestOutcome reported SaaS-related revenues of £2.0 million and pre-tax profits of £0.2 million, while for the first five months of 2023 indicate revenues of approximately £0.9 million and pre-tax profits of around £0.2 million. BestOutcome had cash reserves of £1.3 million at the end of May.
This strategic move strengthens Eleco's Building Lifecycle portfolio and aligns with its growth strategy to enhance predictable recurring revenue and provide greater value to shareholders by investing in synergistic software products and technologies. The acquisition – fully funded from existing resources - is expected to increase both annualized recurring revenue and earnings, starting in the second half of the fiscal year ending on December 31, 2023.
On the back of the deal, broker finnCap upgraded its 2023 and 2024 revenue forecasts by 4% and 8%, respectively, while boosting EPS by 3-5%, to 3.7p this year and 4.6p in 2024, reflecting BestOutcome’s c.90% gross margin. “Today’s acquisition reflects excellent execution of Eleco’s M&A strategy, by acquiring a profitable, complementary, and proven technology, which significantly accelerates the group’s roadmap,” the broker said.
The deal continues Eleco’s development as a leading technology provider to the building industry, helping the industry’s digital transformation to manage ongoing labour challenges and rising materials costs. It’s also well positioned to support increasing demand for sustainable building processes to help clients meet ever-tougher environmental and energy performance standards.
According to the UK Green Building Council, the built environment is responsible for a quarter of the UK’s carbon emissions, second only to surface transportation, meaning making buildings greener is a key component of helping the UK meet its 2050 Net Zero commitments. As property consultancy Allsop put it in a recent report, “Environmental, Social and Governance (ESG) standards are becoming the core driver of how real estate will be designed and valued over the coming years”.