GCIEleco reports record H1 with strong recurring revenues and profit growth
After decades of underinvestment, the world urgently needs to refresh its infrastructure in order to meet the challenges of urbanisation, decarbonisation and improved living conditions whilst equally balancing the books.
SaaS Buildtech software developer () is at the vanguard of this shift, providing cutting-edge project management, real-time collaboration and visualisation applications that are used by hundreds of customers across the architecture, engineering and construction industries - further enabling them to create precise digital twins to deliver increasingly complex projects on time, within budget and to the correct specifications.
Ok, so how is the business performing?
Well I've owned the shares for almost a decade now - and for me, Eleco has never been in better shape. Its always had great customers, high retention rates, healthy profit margins and excellent cashflow. But now I can add strong organic sales growth and attractive recurring revenues to the list.
Indeed, today Eleco reported record H1'24 results and 'in line' guidance, with ARR and sales rising 31% and 12% LFL respectively to £25.8m and £16.3m, of which 74% was recurring. This standout performance was driven by client wins, up/x-selling (re 108% NRR), new products (AstaGPT & Asta Vision), overseas expansion (US) and increased average order sizes - in turn propelling H1 adjusted EBITDA and EPS to £3.3m (+27%) and 2.1p (+24%) thanks to positive operating leverage and continued tight cost control.
That's not all though. Net funds closed June at a £12.0m (or 14p/share), even after paying £1.1m for Vertical Digital in April and a £0.5m final dividend. Plus, the integration of Vertical Digital is progressing well, and there's robust visibility over the rest of the year.
Here house broker Cavendish (target price 160p/share) is forecasting 2024 turnover, adjusted EBITDA and EPS to come in at £32.3m, £7.0m and 4.6p/share - climbing to £37.2m, £8.5m and 6.0p in 2025 - which, hypothetically putting the stock on 3x-5x EV/sales, would generate an intrinsic worth of 150-240p/share. In comparison, larger listed peers Autodesk, Nemetschek and Bentley Systems trade on 9x-11x multiples or 3x Eleco's current rating.
CEO Jonathan Hunter commenting: "The built environment market is buoyant due to the increasing adoption of technology to solve the challenges faced by construction and property management companies.
Our loyal customer base, customer centric culture and ongoing investment in people & technology underpin our drive for growth. We continue to trade in line with expectations."
Finally, the Buildtech software sector is consolidating, so don't be too surprised if ultimately one day someone comes knocking at the door. Who and how much would be anyone's guess - albeit with 90.5% gross margins, the synergies would be material.
Follow News & Updates from Eleco:
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.