1st class software, customers and cashflows
Nowadays almost every organization is moving up the tech-curve, with the aim of transforming productivity, communication and products/services, whilst equally helping to enhance their customers’ operations.Enter Elecosoft, whose proprietary BuildTech software materially improves the whole property life-cycle (eg 75 years). Starting from digital design, project management and visualisation, right through to ongoing repairs and support. Not only saving clients (eg builders, operators and landlords) time, money and resource, but also reducing their carbon footprints.
Better still, the company is expanding rapidly, profitable and generating strong cashflows. Here H1’19 cash conversion came in at 118%, with adjusted EBIT climbing 20% to £2.14m (margin 16.8%) on revenues up 20.4% to £12.7m (22% constant currency).
That said, Elecosoft is not totally immune to the economic cycle. Experiencing “some slowing of momentum†of late, reflecting a temporary dip in UK construction, Brexit kerfuffle, global trade wars (re manufacturing) and general weakness in Northern Europe. Indeed, we calculate H1’19 organic growth decelerated to an estimated 2% (vs 5% FY19) – below our previous expectations of 5%. On top, there was a -2% forex headwind due to the devaluation of the Swedish Krona vs £.
Exec Chairman John Ketteley explaining: “We have experienced some slowing of momentum in some of our markets,… but Elecosoft remains resilient. Much of our software is aimed at delivering ease of use and efficiencies to our customers, to enable them to reduce their own, and their customers costs in difficult markets.â€
Consequently, we’ve prudently trimmed our FY19 turnover and adjusted EBIT forecasts to £25.6m (from £26.4m before) and £4.35m (£4.52m) respectively – alongside nudging down the valuation to 100p/share (vs 115p before), equivalent to c.3x FY20 EV/sales.
Elecosoft is a provider of integrated software applications and related services to international architectural, engineering and construction marketplaces and property management industries. Co. develops its specialist software through its own development teams in Sweden, Germany and the UK. Co. services its customers directly in its primary markets of Sweden, Germany, Benelux, the U.S and the U.K and indirectly to its non-core markets through a network of channel partners.
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