Eleco (ELCO) , an AIM-listed specialist software provider for the built environment, provided a first-half trading update that showed recurring revenue growth of 18% year-on-year, underpinned by the excellent execution of its software-as-a-servcice (SaaS) transition.
Total revenues for the period are expected to be around £13.5m, coming in marginally higher than the £13.4m it delivered in H1 2022. More importantly, its SaaS transition has driven recurring revenue to 72% of group revenue from 64% in FY22, Annualised recurring revenues increased 18% to £19.7m, up from £16.7m in the same period last year.
Revenues in the period were also impacted by the end-of-life of Eleco’s Memmo and Sitecon products, the end-of-life of a third-party resold product in Sweden, and the absence of the revenue contribution from the German ARCON business disposed of in February 2023.
Its cash position stood at £9.4m at the end of the period, with this figure reflecting the impact of the recently announced acquisition of BestOutcome Ltd. The period end balance is a result of the net cash consideration of £3.5m, combined with an increased final dividend and special dividend payments totaling £0.9m, compared to £0.3m in H1 2022.
Jonathan Hunter, Chief Executive Officer of Eleco plc said: "As we emerge from H1 2023, which we previously flagged would be the low point of the temporary financial impact of the SaaS transition, we are reporting revenues above those of H1 2022 and we look forward to an acceleration in total revenue growth for the remainder of the year and beyond.
"We commence the second half of 2023 with the reintroduction of the recognised and respected Asta product brand to reflect our suite of broader project scheduling solutions.
"The recent addition of BestOutcome Ltd to the Eleco family, with its SaaS recurring revenues, strengthens the existing Building Lifecycle portfolio and further builds our offering to a more diverse customer base to solve the challenges of the Built Environment. Integration work is already well underway.
View from Vox
Today’s H1 update from Eleco demonstrates that it is in a prime position to scale revenues moving into H2, with strong operational gearing driving robust growth and returns to shareholders.
Eleco's software solutions are used throughout the building lifecycle from early planning and design stages to construction, interior fit out, asset management and facilities management. Its software has been used for high profile projects such as the V&A Museum in London UK, Warsaw Metro Extension in Poland and Oxford University’s Beecroft physics building in the UK, and is becoming increasingly important in ensuring that new buildings meet ever-more stringent environmental regulation.
Following today’s update, the broker finnCap reiterates its group forecasts for FY23-26, while increasing recurring revenue forecasts by c.£1m pa following the progress migrating to SaaS in H1.
Follow Eleco for more News and Updates: