Eleco : Interim Report

Introduction

Eleco plc (AIM: ELCO) is a specialist international provider of world-class software and related services to the built environment through its operating brands Elecosoft, and Veeuze, from centres of excellence in the UK, Sweden, Germany, Netherlands, and the USA.

The Company's software solutions are trusted by international customers and used throughout the building lifecycle from early planning and design stages through to construction, interior fit out, asset management and facilities management to support project management, estimation, visualisation, Building Information Modelling (BIM) and property management.

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www.eleco.com

Overview

00 Introduction

01

Highlights

Strategic Report

• 02 Chairman's Statement

• 05 CEO Report

• 10 Our Purpose, Mission and Vision

• 12 Our Products and Services

• 14 Our Business Model

• 16 Review of Principal Risks

• 20 Section 172 Statement

• 25 Financial Review

Governance

• 28 Board of Directors

• 30 Corporate Governance Report

• 34 Audit Committee Report

• 36 Nomination Committee Report

• 38 Remuneration Committee Report

• 45 ESG Committee Report

• 48 Directors' Report

Financial Statements

• 51 Independent Auditor's Report

• 58 Consolidated Income Statement

• 59 Consolidated Statement of Comprehensive Income

• 60 Consolidated Statement of Changes in Equity

• 61 Consolidated Balance Sheet

• 62 Consolidated Statement of Cash Flows

• 63 Significant Accounting Policies

• 74 Notes to the Consolidated Financial Statements

• 103 Company Statement of Changes in Equity

• 104 Company Balance Sheet

• 105 Statement of Company Accounting Policies

• 108 Notes to the Company Financial Statements

• 117 Five-Year Summary

• 118 Dormant Subsidiary Undertakings

• 119 Professional Advisors and Registered Offices

Highlights

Overview

2021	2020
£'000	£'000	Change
Financial
Revenue	27,344	25,232	+8%
Of which: Recurring Revenue	15,424	14,186	+9%
EBITDA*	7,182	6,675	+8%
Adjusted EBITDA**	7,251	7,003	+4%
Operating profit	4,099	4,151	-1%
Profit before tax	3,926	3,889	+1%
Basic earnings per share (pence per share)	3.3	3.9	-15%
Free cash flow***	4,751	5,516	-14%

• * EBITDA is defined as Earnings before Interest, Tax, Depreciation, Amortisation and Impairment of Intangible Assets

• ** Adjusted to exclude former Directors' payments

• *** Free cash flow represents cash generated in operations less purchase of intangible assets and property, plant and equipment, net of finance costs and tax plus any proceeds from disposals of property, plant and equipment

Strategic ReportGovernance

Operational
• The introduction of subscription-based pricing	•	Winner of the Megabuyte Quoted 25 award
to new Building Lifecycle customers in Q4	for Best Performing Software Company in
2021 will lead to increased Recurring Revenue	Industrials.
and enhanced Lifetime Customer Value.
•	Winner of Project Management Software of
the Year at the UK Construction Computing
Awards.

Financial Statements

• • The successful merger of our UK Building Lifecycle businesses and separately of our German visualisation operations, providing greater business development opportunities.

01

Chairman's Statement

As an award-winning specialist provider of world-class software to the £8.5bn built environment market, Eleco is well-positioned to expand.

A year ago, we set out our refreshed strategy and the last twelve months have been focused on setting the foundations for further growth. It has been a truly transformative year for Eleco. We are very much a customer-focused organisation and have a clear purpose and a values statement developed through a truly interactive process with our people. A strong, engaging culture is key to enable us to attract and retain talent in such a competitive market.

I am pleased to report that our strategy is already generating results, with our organic growth rate increasing to 8 per cent (2020: -1 per cent), underpinned by double-digit sales growth from our core Building Lifecycle portfolio. This was achieved at the same time as implementing our move to a subscription licensing model for new customers in the last quarter. Recurring revenue (subscription and SaaS licences, maintenance and support contracts) increased by 9 per cent to £15.4m.

We have maintained strong cash generation, despite Covid-19 continuing to impact our ability to undertake face to face sales and training, having fully repaid monies given to Eleco through the UK Government furlough scheme as well as clearing our UK bank debt. We are now debt free after settling the remaining £0.1m of subsidiary bank debt in Q1 2022.

We were delighted to win the Megabuyte Quoted 25 Award for best performing software company in the industrials peer group in March 2022, showing the strength of our overall financial performance.

Implementing our strategy for organic growth We are aligning our business with clear customer segment strategies and through product portfolio alignment, driven by our Chief Product Officer (CPO) Fredrik Pantze, who was appointed in April 2021, and we have started on the journey to adapt our software to become next generation cloud-based solutions. Our aim is to help our customers reimagine their businesses by creating software which allows them to better collaborate, get faster access to data for analytics and ensure interoperability. As a result, we are seeing an increase in new customer wins away from our competitors.

02

Eleco plc |www.eleco.com

Overview

This has also been bolstered by the strengthening demand for our products in our core regions where we are in a strong position with Powerproject being used for the master construction plan. Collaboration is driving us to partner and share data with other parties. As a result, we have formed several partnerships and data integrations during the last twelve months, as we continue to leverage/ understand our strong customer relationships.

With our move to subscription, we are more focused on customer success through account management and services. We believe that building on our customer relationships will allow Eleco to better support the management and leadership teams of those organisations which are starting to look for an integrated end to end approach.

Our new Chief Technology Officer, Luben Kirov, was appointed in December 2021. This role has the remit to bring together all the separate development teams, break down the product silos and drive forward our integrated technology roadmap in conjunction with our CPO. Having started in February 2022, we look forward to reporting on the results of this appointment as we go through the current year.

From a customer perspective, digitalisation is increasingly being recognised for its ability to manage the complex supply chain and inflationary issues, while rising pressures on companies to reduce wastage provides another tailwind as regulation around this increases. We are a well-known provider of innovative technology for the construction and built environment sectors, with 87 per cent of the top 100 UK construction contractors on our books. This provides us with a strong and established platform for growth and new contract wins.

The move to subscription-based pricing of our products will benefit our customers with a lower upfront cost for an enhanced product, as well as creating increased value for our shareholders through higher Recurring Revenue growth.

In the year, Eleco's US business grew 16 per cent predominantly through our reseller channel, which the Company will continue to support. Following this growth, the Executive team are refocusing on potential strategic opportunities for expansion into the US.

We continue our strategy to provide best of breed software targeted at our chosen customer segments.

Board appointments and Environmental, Social and Governance (ESG)

Aligned to the new strategy, I undertook a full skills audit of the Board and in March we brought in Paul Boughton as a NED, adding more technology PLC experience to the business as well as additional financial and acquisition expertise.

In a desire to refresh our Board and further improve our corporate governance, this was followed by a further extensive search to recruit the best candidates for our other skills gaps. This led to two further

NED appointments in the summer, with Dr Annette Nabavi and Mark Castle joining the Board in August and September, respectively. Annette Nabavi is a highly-qualified board director with more than 30 years' experience in the technology, telecoms and digital industries who brings additional expertise to advise with the shift from a perpetual to SaaS licence model, while Mark Castle is an experienced business leader, bringing the voice of the customer to the Board - a vital stakeholder group for Eleco - with his wealth of experience in the Property, Construction, Consultancy and Built Environment sectors.

Kevin Craig and David Dannhauser stepped down from the Board at the end of August, and I would like to take this opportunity to thank them both for the immense contribution that they made to this business throughout their tenure.

Paul Boughton took over as Chair of Audit and Annette Nabavi took over as Chair of Remuneration. Over the next twelve months, we plan to strengthen our ESG disclosures, building on the steps taken during 2021. With this in mind, we set up an ESG Committee at the end of period under review, chaired by Mark Castle. This will assist the Board in fulfilling its oversight responsibilities regarding environmental, health and safety, corporate social responsibility, sustainability, customer satisfaction, employee wellbeing and retention, corporate governance, diversity, equity and inclusion. We look forward to building our disclosure on these areas over the months and years ahead as we develop our Net Zero Strategy and our ESG Scorecard.

On 29 March 2021, Robert Tearle was appointed as CFO as we launched our refreshed strategy. On 7 February 2022, we announced that Robert was resigning from the Board. This is obviously disappointing for both the Company and for Robert personally. We thank Robert for his valued contribution to the planning of the steps needed for the delivery of our move towards a SaaS environment

Strategic Report

GovernanceFinancial Statements

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