GCIEleco reports record growth in recurring revenues for H1, driven by strong demand and strategic acquisitions
As an investor, I first purchased shares in SaaS Buildtech software developer () nearly 10 years ago - over which time I've never sold any stock, but instead added occasionally on pullbacks. Why?
Well, what interests me about the company is not only its blue-chip customer base, secular growth drivers, and healthy profit margins - but also 's low churn, strong cash generation, consistently high execution, and resilience - even in the face of major dislocations such as Brexit and Covid. All hallmarks of a high quality business.
Better still, I can now add double-digit organic sales growth to the list. Today, in a positive H1'24 trading update, the group delivered record ARR (up +31% YoY to £25.8m and +14% vs £22.6m Dec'23 ) and TRR (+24% YoY to £12.0m) thanks to turnover up 12% LFL (vs 7% FY23 - ie excludes M&A, forex and disc products), new client wins, up/cross-selling, increased average order values, and continued strong delivery. closed June 2024 with 74% recurring revenues and £12.0m of net cash (£10.9m Dec'23) or 14.5p/share - even after paying £1.1m for Vertical Digital in April and a £0.5m final dividend.
Indeed, the integration of Vertical Digital is progressing well, whilst the group remains on track to hit consensus expectations. Here house broker Cavendish is forecasting 2024 turnover, adjusted EBITDA, and EPS to come in at £32.3m, £7.0m, and 4.6p/share respectively - climbing to £44.1m, £9.9m, and 7.3p by 2026. This, while hypothetically putting the stock on modest multiples of 1x PEG and 4x EV/sales, would generate an intrinsic worth of between 160p to 200p/share (Cavendish at 160p).
CEO Jonathan Hunter commenting: "We are proud to report positive momentum in H1’24. As anticipated with the launch of AstaGPT, our customers have benefited from using Generative AI to find tailored support from the wealth of our knowledge bank of documentation. AstaGPT was shortlisted for the Innovation of the Year at the Digital Construction Awards 2024. We also recently launched Asta Vision LiveTM, a powerful new collaboration capability which allows multiple project planners and stakeholders to work simultaneously on a project in an encrypted, SaaS cloud-based environment.
Vertical Digital has bolstered our ability to meet our internal technical resourcing demands, utilising its proven track record in agile and innovative software development and consulting. Eleco is well positioned in an attractive market that is increasingly utilising technology to meet the demands of the built environment and the Company continues to strengthen its reputation as a trusted provider of best-of-breed technology solutions. The Board remains confident that Eleco will perform in line with FY'24 market expectations."
Finally, the Buildtech software sector is consolidating, so don't be too surprised if in due course one of the larger players comes knocking at the door.
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