At the intersection of AI and BuildTech
2019 proved to be challenging period for many corporates, with S&P500 EPS growth set to climb just 0.2% YoY ($162/share). Even the poster child of the tech world, Enterprise Software (ES), hit a pot-hole, limping along at a comparatively modest 8.5% to $456bn (source: Synergy Research) vs 13.5% for 2018.However C-suite confidence is returning, with Gartner predicting the ES market will accelerate back up to normal cruise speed (ie +10.5% to $503bn) this year.
Encouragingly too, Elecosoft said this morning that 2019 PBT would be “ahead of LY†(£3.67m) and “in line with expectations†(consensus £4.1m) - despite being impacted by forex (ED est -2%, weaker SEK vs £) and macro uncertainties (eg Brexit, General Election and subdued Eurozone).
We think this is a creditable outcome. Not least because it underlines the resilience of the business - while the results are actually a touch better than our previous (bottom of the range) profit & cashflow estimates, albeit with revenues a smidgeon shy.
Consequently, we have tweaked our 2019 numbers to: EBIT of £4.40m (margin 17.5%) on turnover up 14% to £23.35m (3% LFL CC) with net cash closing Dec’19 at £1.50m (vs -£1.81m LY). Going forward, the 2020 PBT & EPS targets remain unchanged at £4.6m and 4.5p respectively, notwithstanding a further small forex headwind of c.-1% (£’s recent rise vs $/€).
Elsewhere, our valuation inches up from 100p to 105p/share - reflecting the improved economic climate, new product launches (eg AI visualisation tool), stabilisation in the SEK and significant future up/x-selling opportunities.
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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