Since 2016, Elecosoft (ELCO) has been working to move beyond the construction software market. Management’s logic is sound enough: the design and build costs typically constitute 5-10 per cent of the money spent on a building over its 70-75 year average life, while maintenance costs make up 90-95 per cent. With this in mind, the group completed two acquisitions in the year. One was ShireSystem, a maintenance management software company, while the other was ActiveOnline, which creates visualisation software. Management says the group is not actively seeking new deals but is open to opportunities that fit within the portfolio and are earnings accretive.
Recurring revenues are a key indicator for the group, hinting at customer stickiness. Reassuringly, sales from maintenance, support and subscriptions continued to grow as a proportion of overall sales, reaching 57 per cent from 55 per cent in 2017. Deferred income, reflecting future maintenance revenues, likewise rose 18 per cent to £5.7m. Growth was spread broadly across the group’s geographies and product groups, with a drop in Scandinavian revenues more than offset by growth across the rest of its operations.
House broker finnCap is forecasting adjusted pre-tax profits of £4.6m in 2019, giving EPS of 4.5p, up from £3.8m and 3.8p in 2018.
| ELECOSOFT (ELCO) | ||||
| ORD PRICE: | 69p | MARKET VALUE: | £56m | |
| TOUCH: | 68-70p | 12-MONTH HIGH: | 92p | LOW: 48p |
| DIVIDEND YIELD: | 1% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 19p* | NET DEBT: | 13% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 15.2 | 0.69 | 0.80 | nil |
| 2015 | 15.3 | 1.01 | 1.10 | nil |
| 2016 | 17.8 | 1.50 | 1.70 | 0.40 |
| 2017 | 20.0 | 2.25 | 2.50 | 0.60 |
| 2018 | 22.2 | 2.43 | 2.40 | 0.68 |
| % change | +11 | +8 | -4 | +13 |
| Ex-div: | 28 Mar | |||
| Payment: | 31 May | |||
| *Includes intangible assets of £23.3m, or 28p a share | ||||
