Eleco (LSE:ELCO) — Full Year Results

0:01 Good afternoon, and welcome to the ELECO PUBLIC LIMITED COMPANY Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would

0:32 like to submit the following poll. I would now like to hand you over to CEO, Jonathan Hunter. Good afternoon to you. Thank you, Alex, and good afternoon or good morning, folks, depending on where you're dialing in from. Thank you for joining us today. Before we start, just some brief introductions. My name is Jonathan Hunter. I'm the chief executive of ELECO. I've been with ELECO for fourteen years now working in various management roles. I joined the board in 2016, and I was a chief operating officer until 2020 when I was appointed the chief executive. I'd like to allow Neil to introduce himself. Brilliant. Neil. Thank you, Jonathan. Appreciate it. Good afternoon, everybody.

1:20 Thank you very much for joining. I guess for those of you who don't know me, some of you will, I I've spent nearly thirty years working with listed businesses, specializing in the last eight or so in technology and software listed businesses, always working ways to drive both organic and and acquisition growth.

1:42 Why ELECO for me? I mean, I believe the prospects for property and the prospects for technology are very high. Lots of headroom for growth in those markets and put those together, it's in a space that is actually relatively uncluttered as well. ELECO has a very proud and long heritage, and the knowledge and the capability from that. And its best of breed solutions are really second to none. So, I was very excited to learn of the, CFO position at ELCO and joined. I'm really looking forward to adding even further value and driving through initiatives such as the continued successful implementation of the transition and, of course, m and a. So I'm absolutely delighted to have joined ELCO as CFO and and to work with Jonathan and the wider team. So thank you very much. Thank you, Neil, and we're delighted to have you with us.

2:41 So to take you just some highlights of the full year results for 2022. It was a progressive year for ELECO, and we delivered in line with market expectations as we said we would when we announced our, SaaS and strategy back in 2020 and 2021. It's important, I guess, to highlight that the results show twelve months of our SaaS transition. That's transitioning from a one off perpetual upfront software license to a recurring subscription license. And during this period,

3:18 as we announced during our strategy, we we said that there'll be a period of a temporary period of a reduction in our revenues due to this the way that the SaaS subscriptions are recognized. But a good measure that we're focused on is that annualized recurring revenue and recurring revenue, and that's growing as you can see. So 14% annualized recurring revenue at the end of December twenty twenty two, which is showing our progress that we're making. And despite all the inflationary pressures on overheads, we did, focus on cost control throughout the period as well. And while profits, are lower than prior year, we delivered ahead of the market expectations.

4:08 So we're very pleased with that result. I'll allow Neil to take you through more detail in a moment on the financials, but some key highlights on the operational side during the year is that we commenced our second phase of our SaaS transition. We initially, when we introduced SaaS in in quarter four of twenty twenty one, we, offered the subscription, offering to new customers only. And then, in quarter two of twenty twenty two, we introduced and started, offering it to existing customers and those were that were also on maintenance agreements. So we're very pleased with with that because, of course, it adds more value to our revenues and and and also, you know, we're supported by our customer success capabilities that we also implemented during the year.

5:00 There were several key enhancements to our portfolio, so we continue to, develop and enhance our core applications, but we also added more modules to the portfolio, which were additional upsells to our customers. And we made solid progress on environmental, social and governance, or ESG. It's really encouraging that we were recognized for all of our efforts there. We're awarded, or certified as a great place to work in The UK, Sweden, and Germany, which we're really proud of. It shows, trust from our people in in the management and the direction, the strategy, and the purpose of the organization. So that's that's really encouraging for us. We're also recognized as a top 50 construction tech partner during the year and awarded the best project management software of the year at the construction computing awards.

5:51 I'm really proud of those achievements. We we also announced, earlier this year, the strategic divestment of one of our CAD software businesses. It was our ARCON business, and, that was, you know, a progression forward in line with our strategy. It allowed us to focus on the growth areas within the business, but also, you know, that that operation didn't fit with, our customer base or our strategy towards being a high recurring revenue business.

6:26 We're really pleased with the progress we made in delivering the strategy throughout the year. We continue to deliver on our strategic road map as planned and during the of course, during a period of uncertainty for many businesses in in all markets across the world. Our customer centric approach led us to reorganize our r and d research and development teams. Traditionally, they were in each region reporting to a regional manager. We centralized that following the appointment of a chief technology officer in February of last year, and that's driven efficiencies. It's reduced duplication. In fact, no no duplication or redevelopment of the same thing in across two different regions.

7:13 It's it's supported creative thinking and also energize the team so that, you know, they're working across multiple products, focused on their area of expertise, which is is really, encouraging for for colleagues, and also career pathways through r and d. For our regional management teams and directors, they're focused on go to market sales, marketing, and delivery. So, you know, they do input and provide, that customer insight back to our product teams and r and d, but that that's how we've changed the organization to streamline and and be more customer centric. We also, during the period, we focused on our product strategies and our road maps around our building life cycle products and, working closely with customers and individuals, one in particular that had really taken the the strategic thinking forwards.

8:14 We we reenergized our our road map and looked for well, identified a number of, technologies across, our our sector, and businesses that could assist us in partnering or potentially merging to enhance and accelerate our road map. So that was quite quite, an important but also exciting, yeah, activity in that we, we managed to look at these business opportunities and run those through our m and a criteria and start to really, engage in in several of them. And we you know, part of our strategy is very much focused on either developing, r and d further, partnering, or acquiring to accelerate to market.

9:05 And traditionally, if you know ELECO, we've been very acquisitive in the past, and that's how we've, you know, we've formed such a strong market position. In terms of strengthening the business, we said we would focus, on on that in our strategic review when we announced that, and we've done so in the period. We're now really well placed, for growth. We we focus on cash generation. We hired some key leadership roles including, of course, Neil Pritchard, the chief technology officer as well. But also in The US, I appointed a sales and construction focused head of US that's driving out reseller channel there. And I'll I'll touch more on The US later in the presentation.

9:54 We also made significant progress on ESG improving our credentials, and that's really important for us as an enabler for growth. You know, that that will continue, and we're we're reporting our metrics, which you'll see in our our annual report, which is to come. Growth has been realized through the recurring revenue. We reenergized The US channel, which I just mentioned. We also invested further in The US going forward. So we've hired a marketing and lead generation resource there earlier this year. We're currently recruiting for a sales resource. So, yeah, we're we're seeing more positive signs coming from The US. And by leveraging our customer relationships that we have, that's going to drive growth as well, and it's it's continuing to do so. So we're very pleased with that. And lastly, I mentioned, m and a. We reinitiated the search for potential acquisition targets.

10:58 I would just for those new to the story, just a a little bit about ELECO and who we are. Founded, over a hundred and twenty five years ago, originally engineering and electric lighting companies. So that's where ELCO comes from and, responsible for the the electric lights across Victoria and Bankman as well as many street lights and and so forth across The UK. The company, moved into was always in design, but moved into construction and modern methods of construction in particular. And then it moved into software because the value of the software was was very much recognized, but also required for for those modern methods of, you know, manufacturing and and building.

11:44 And through the through the years and the transition, from 2014 onwards, we've been purely a software business focused in the built environment. We have 255 employees, based across Europe, UK, Europe, and The US. Core markets are The UK, Scandinavia, Germany, and Netherlands, and The US. We sell direct within those markets. So direct to customer, we support and provide training services, except for The USA and international markets where we sell through a reseller channel.

12:24 Although in The US, we're exploring, you know, and getting more traction in a in a direct model, but primarily, we're we're we're well covered across The States with resellers. Core market positions or key market positions, rather, you'll see on the bottom right, you'll see that we've actually, established a very respected, customer list there. And that's through many years of working in the markets in in those regions. And also, those customers have helped developed our our solutions by providing feedback and input and allowing us to solve their challenges. So the the products and solutions are very sticky. Our relationships with our customers are very strong.

13:12 There's high retention and renewal rates. It is important to point out that with while we have a strong market share, there's significant room for growth within those customer bases, and and we see a lot of additional value that we're adding to those customers in in the sense of more more software as they're, adopting more technology, but also new features and functions which we're upselling. So we're very, very, optimistic and and excited about the future. A little bit about our portfolio, before we get into the financials. We've we we group our products into two segments. So ELECO soft is our building life cycle products, and then the CAD and visualization products on the right are branded as individual brands, and they're they're managed in that way. And you'll see we report the financials in that way as well.

14:11 A little bit more as to why we do that. The building life cycle portfolio, you'll see we cover from, specifications and property data and design standards through to estimating, bit tendering, on-site construction planning, project delivery, and then maintenance and operations. So we've got this sort of end to end flow of products. Within each of those is a suite as well. So if we look at power project, which is planning around planning and the time aspects of a project, critical for all building projects. Within there, we've got a suite, as I say. So it's not just a planning application.

15:00 Now we're offering more cloud collaborative tools, which fit wider within the customer base up to c suite where there's they're getting dashboard reports and also down onto site. We provide site progress update tools and short term look ahead. So it really is an end to end within that segment. I won't read out all the customer comments, but I've I've added some customer comments there, which we're really proud of and just hopefully demonstrates that the quality of the software, we we hear it quite often that, you know, our customers are very pleased and they stay with us once they've switched to us. The visualization and CAD software, you'll see is more niche in nature and probably the screenshots can tell you that. They're they're they're quite technical and niche.

15:48 On the left is VUSE, which is a modular end to end marketing solution for the interiors industry. What we provide there to its end to end omnichannel interiors marketing. So interiors by interiors, flooring, tiling, paint surfaces, wallpapers, etcetera. We have, 70% of Europe's floor manufacturers are using our solution. We provide back end product information management and data asset management, systems to store all of the data, products, floors, so forth, pictures, prices, everything. And then we connect to the front end. So, consumers will use our software to log on to a floor manufacturer's website and configure their flooring within their room. We also provide mobile and AI tools there for consumers, ecommerce, connectivity, and install solutions as well.

16:49 If you've tried to buy flooring in the past, you may have found that that there is a need for for digitization within that sector, and and that's where, you know, we're really addressing that. The the other three blocks of software, so Sterecon, Sterecon framing are all timber engineering engineering products. They're all niche, in in specialists in nature. Probably the common threads is that they, they all use three d CAD and visualization. They comply with building standards and regulations like euro codes and and and so forth. And they cater to off-site methods of off-site methods of construction and and manufacturing. They're best of breed, so they're they're well liked, very sticky, but niche. So we we we let the those businesses focus on on that niche and and and operate on their own.

17:45 So hopefully, gives you insights into who we are and and some of our products. I'd like to hand across to Neil to take you deeper into the financials. Super. Thanks very much, Sean. That's great. So, yes, I'd like to take you through the highlights of the '22 period that we've year end 12/31/2022 that we just reported on against some imperatives of clearly of 2021 numbers. I follow on from the highlights here with a more detailed group p and l, revenue analysis, cash flow, and the balance sheet slides. So there will be an opportunity to take you through a little bit more detail there. But really here, just in terms of the headlines, first of all, you know, as part of the our SaaS transition, our our recurring revenues advanced 10% to 16,900,000, and that's about 64% of revenue. So getting on to two thirds of our revenue there being recurring.

18:41 What we've introduced the start of this year is an additional metric in terms of the investor and and analyst community and and in terms of the ARR and the annualized recurring revenue, which takes the exit amount of recurring revenue in the December month of a year and then multiplies that by 12 for pure clarity purposes. And so what that does is is give you an indication of where the business is going into the very latest elements of those recurring. And and that actually stood at 18,200,000, which is up 14% and a really good, as I say, indicator of that upward trajectory and that that momentum within the business. Revenues in general were broadly flat, certainly in constant currency terms, 27,000,000, which in itself, so many businesses that do go through a SaaS transition see a softening, a considerable softening in the first few years of, you know, the the SaaS transition. But, actually, we were able to report those flat revenues, so sort of ahead of things there. And then on on the profitability measures, they they do obviously soften as part of that. So, you know, you can have the perpetual license under the old regime, if you like, which brings in more revenue, more cash as a one off at start, but obviously less overall benefit in doing so.

20:06 By do by doing that with relatively flat overheads, you then generate more more profitability. So clearly, as you have less upfront, that that does have an impact on profitability. But nevertheless, with many of those metrics actually, we were slightly ahead of expectations on that as well, which is fabulous. And that's despite, you know, underlying cost pressures that you've seen with many corporates, you know, particularly wage cost inflation that I'll come back to. Overall, cash or in our our case, cash or the net cash certainly in 2022 because we had no borrowings, you know, was up 25% to 12,500,000. The group as a feature, many of you will know, but has very high gross margins as a software business and is traditionally very cash generative.

21:00 And and that's continues to be the case even with those slightly lower sort of fewer perpetual license streams. And then, obviously, with that greater cash resource and as part of divestment as well within that number, which I'll come back to later, actually, the total dividends for the year have increased by a 113%. Just taking you on, if I may, to the next slide, which is really around the the overall group income statement. And and here, you know, the headline is look at the overall effect of the SaaS transition as anticipated and and and flagged before. I'll I'll come back to revenue in a little bit more detail on the next slide. So and that advancement on the recurring revenue side of things. So really just featuring perhaps, first of maybe on the gross margins, you can see the numbers towards the base of the table there.

21:49 But they've held up really remarkably well, again, in the SaaS transition. When I've also mentioned, you know, that perpetual licenses can tend to kind of slightly inflate that. So, actually, it's very, similar year on year. On the OpEx, on the headline numbers, the face of it, it was level at, 20,500,000 between the two periods, in comparison. But actually, you know, there are some other ups and downs as always with the within these things. So just to pull out some key things for you, really, in the comparative 2021 year, there was a small impairment expense on top of the normal amortization of about 0.6, which obviously took the cost up in that period.

22:36 And then equally in 2022, in for the sake of full transparency, you know, there was a positive FX swing of about point three between the periods. And otherwise, cost would have been point three more in in terms of in 2022. Certainly, staff related costs and other associated operating activity, if you then strip those away, they've increased by by about 700,000. But within that, even more sort of directly related staff costs were up because, obviously, there was both high inflationary environment and also we did recruit to an expanded budgeted headcount. But that's been mitigated, very conscious of of that to by areas of sort of more cost control and lower areas of expenditure and maybe in the discretionary side and on depreciation and so forth.

23:30 So that's that's been a way to kind of manage through because we're very conscious of shareholder value and to maintain that as we're going through the the very short term SaaS transition elements that, you know, before we then see all those full benefits coming through very markedly later. The overall tax rate was around about 19%, which is more in line with with what you'd see. Last year was a little bit higher. There was particularly one off depreciation tax element there. There's also, in this year, a sort of current tax estimate change in terms of a normal adjustment. And so, really, that's led to an overall profit after tax feeding into EPS of 2.4 against 2,700,000 last year, basic EPS at 2,900,000.

24:23 Just focusing a little bit more on the dividends and and where that's at. So there's an interim dividend that's the same as the previous year dividend of point two. We have increased the final proposed dividend to point five p against point four p from the previous year. So clearly, a a 25% increase there. And then actually, we announced the divestment of a noncore, slightly unprofitable, and and sort of, as as Jonathan mentioned earlier, not necessarily sort of recurring revenue business, architectural CAD business at ARCON. And the proceeds of disposal from there, you'll see the previous announcement was about 600,000, euros, so that equates to about 0.58 p. So we've returned that, to as a special onetime dividend to shareholders, conscious of, some shareholder preferences and the great support that we've had and continue to receive with regards to the SaaS transition, of course, as well.

25:23 Just a little bit more then on the next slide, if I may, on the dividend, sorry, on the revenue side of things and beyond the dividends. So just on the what you see there are three charts. You know, the left hand chart really shows the split in in kind of those the the different income streams and so forth. So, you know, we've mentioned about that those middle two columns on the left hand chart where the recurring revenues have increased in the year, But you can also clearly see on the left hand side, those charts, how the perpetual one off licenses have reduced from 22% down to 14% to to that sort of 3,600,000 mark. And then, yeah, there's some services income training and so forth that's broadly leveled between the years. The middle chart really shows, if you like, the product group mix. It's it's kind of that building life cycle going back to those slides that Jonathan showed you.

26:16 The, building life cycle being the largest proportion of the business. Actually, year on year between the two years we're looking at, very similar proportions to the business, and, clearly, building life cycle being, you know, the larger part, two thirds of the business. And then finally, on the the final chart on the right hand side, really, that's showing some of those core markets that Jonathan referred to, the effect of the SaaS transition. You would see each of those slightly going down. Actually, a tiny bit more of an impact in Germany that we've previously mentioned about, you know, that there's there's certainly some more challenges there from, you know, what what we've seen before in their sort of greater concentration of, say, of the views business and and the less recurring side also reported the ARCOM business that's now disposed of, of course.

27:03 So but then equally, on The US side and and the great, you know, strides we're making there on the strategy, Actually, The US, despite the SaaS strategy, was ahead as was indeed rest of the world through

27:15 the international footprint that we have. Moving on, if I may, to the next one, which is around cash. And so on the top left, you see really the balance sheet positions and the the green movement between the two years that we're looking at. In the main central diagram, it's really the ups and downs that you see in the in the cash flow statement. Actually, year on year, very similar numbers, very similar numbers in capitalization of r and d or the d element of r and d, let's put it like that, and another expenditure. So very, very similar between the periods there. As I mentioned earlier, the group has high software gross margins, which, you know, is always a key feature of how much value you add into the business, your gross margins, and, you know, recurring revenues and retention rates.

28:07 And so even despite that softening that you would anticipate with the perpetual license licenses diminishing under the SaaS transition. We continue to remain very cash generative and resilient. You know, a lot of tech businesses don't pay dividends. A lot of tech businesses don't have cash. A lot of tech businesses have borrowings. And it does make us very resilient and fleet of foot as in line with our agile r and d product roadmap mentality as well. If we look at cash generated

28:39 from operations, it was $66,300,000 in the year compared to 7.7 from the previous year. Again, impacted by the SaaS transition, but very healthy indeed. And free cash flow was 3,800,000 against 4.8, and we actually take quite a quite a strict view of what free cash flow is. We actually add in, you know, interest where there was interest and also, you know, tax payments as well into that number. And as a proportion, that number of our operating profits has actually gone up. So the the cash conversion from profits into cash is higher at that bottom left hand corner that you see there in the slide. So overall, cash in the period was before FX, FX 2.6, around about that 2.4 to 2.5 level. And in 2021, it was an outflow because at that point, we repaid our borrowings back then. So as I say, we are actually borrowings free.

29:33 Finally, just on the balance sheet, I know I've been going through lots of detail, but, you know, I think one of the great things on the balance sheet is, you know, we've obviously seen that growth in the balance sheet strength. It's growing by 2,000,000 or 8% between the periods that we've been looking at. And then other metrics like total and net current assets, you'll see at the base of the slide, they've also advanced well.

29:56 And, obviously, with the improved cash position that I've discussed, there's a portion of net assets, you know, that's 48% against prior year 42%. So, again, a good proportion there. You know? Yeah. Good good investment base. So most of the other balance sheet movements here, I won't go into each and every one of them, relate some of quite a lot of them are impacted just by reclassifying elements of that divested business I mentioned earlier that the special dividend was about. That divested business at the end of the year was held for sale in line with the accounting standards in one line. So that's our assets and liabilities of disposal group held for sale. And in that includes some cash, which hence why on the balance sheet, it says 12.1, but the overall cash in the business was 12.5 at the end of the year.

30:51 And you I suppose probably the other metric that I'd put out here would also be around the deferred income. Deferred income is actually higher by 10%, which is again consistent with those recurring revenues of the SaaS transition. So, again, that underpins and warrants quite a lot just going into 2023 from deferred revenues in '22 in line with the proper recognition strategy. So that actually helps underpin and provides more confidence as we move into the future. Clearly, with the SaaS transition, we have a lot more visibility and sustainability and quality of earnings and quality of and understanding of revenues. And you'll have seen that market guidance has extended way out now to 2026, providing, with that great sustainability and visibility of earnings that that we get through the SaaS transition.

31:45 So I think with that, I'll probably hand back to Jonathan. Thank you very much for your time. Excellent. So this part of the presentation, I'd like to take you through how ELCO solves the challenges of the built environment. Our strategic priorities are based on three strategic pillars of innovation, strengthen, and grow. Our m and a strategy is driven by our market leading road map, and, you know, that puts ELECO in a strong position for growth. We in regards to m and a, I put it into the statement with looking at businesses three types of businesses, Type a, which are revenue and profit led businesses that complement our customer base and, regions.

32:38 Type b, which is technology led, helps us accelerate our road map and would make make sense, of course, add value to the to the business, but makes sense to accelerate rather than develop ourselves. And then type c is, next generation technologies, which, we're seeing, new innovation entering the market. In terms of, in terms of the innovation, we have I mentioned earlier at the beginning of the presentation, we focused heavily on our strategic our innovation road map and product road map looking further into the future. We're looking at the industry today where it will be, and then where it could be. So we're looking beyond where our customers are thinking today. So we're very pleased with with the progress we've made there and the and the thinking and direction we're heading technically.

33:35 And we always have been a technical

33:37 product focused business. We'll continue to strengthen the platform for growth, so ensure that we have good ESG credentials. We retain and attract talent. We want to be known as the the the technology partner to work for and to work with and, of course, to invest in. We have strong culture and values, and that was a focus during 2022. That will continue because it's really driving the strategy. People are key for ensuring that, you know, the company is a success, and we've made huge progress and and we continue to strengthen the business through our people. Of course, systems are important, and and we continue to, you know, look at better ways of gaining visibility and operating and also implementing efficiencies in the business and, maintaining a diverse, workforce across the the world.

34:37 That's something we're very proud of. We have 34% of the the workforce, talented women now, so that's increased. But it really does enhance and drive, a different, level of thinking and decision making, having the people getting together with diverse backgrounds. So we're really proud of that, and we we encourage that. We'll continue to to grow the business through, our portfolio. Of course, we're looking at diversifying the customer base across the building life cycle, so adding value to other areas of that building stages from, you know, early stage through construction and operations. Go to market initiatives are are part of our strategy as well and important, of course, to be recognized, to to be known and, you know, approach the market and, of course, add value and and and bring on new customers and, of course, support existing customers. So we have some initiatives there that we'll continue to roll out through the period.

35:40 Customer centricity is our core. It's important for our strategy. So we further enhance that through customer success capabilities. It's important that we're continuing to add value to customers. They, continue to, you know, enjoy our software. They they they love the service we provide and our brand. So, you know, we've got a we've built up a very good reputation among our customer base, and hopefully, that that will show in in some of the following slides. Just a little bit about the the sector. The built environment remains buoyant, and we still see growth and adoption of digitalized digital technologies, and that's due to a number of drivers in the industry. The total addressable market that, we've identified based on on where we're targeting is just under 4,000,000,000 US dollars.

36:34 But the demand will continue, so the growth we're seeing in in market demand will continue, throughout the years. What's driving the use of technology is, of course, we're working in a sector that is, slow to adopt technology. So there's there's a driver to adopt more technology and modernize and digitalize workflows, but also, environmental, social, and governance is a key driver. There's a need and demand for greener construction and greener operation of buildings. In order to achieve this, there's a driver for or demand for new construction techniques, also new technology, data, and AI is also, we're seeing trends in that. And I think that AI is across all sectors. But as, the built environment has been developing and, you know, since the the government mandate in The UK for the use of building information modeling, the amount of data collected on a project is immense, and it's growing and, you know, processing and and storing and, and using making use of that data is, one of the challenges that our customers face.

37:51 There's there's a continued, of course, pressures on costs and margins for for all companies within the built environment being being more efficient. And, you know, there's uncertainty. Well, there has been volatility around material costs and also labor and so forth. But we're really excited, it is an exciting place, exciting industry for companies like ELECO. There there is demand and, you know, there's there's population which is driving construction as well. So I think the next five to ten years is going to look very different in terms of technology and and the way that the industry works, and we're very excited to enter that phase.

38:37 To give you some some more color around that and and, how our customers are using our software and how that aligns to our strategy, I'd like to just share three examples with you. PowerProject is our planning and scheduling software. That's a product that's won the the project management software of the year, but it's again, it's a it's a full seat suite of products. It was, instrumental in the planning and and and management of the South Wales Learning Centre, where the logistics were critical to sync because the building was still operational at the time. And, also, what we provided through Power Project was also four d. So it's a three d model and time. You can see a screenshot there.

39:23 It's it's completely active and real time changes are made so you can visually see the the the schedule and the plan. Very critical for this project because we also well, the project was had to be put on hold during the pandemic, so it all had to be completely rescheduled, which our software does extremely well, but we also provided contractor costs and and data around the project. The use of four d was was made, and that drove some key decisions. And one of those was to move to a traditional foundation solution rather than extensive piling because there there was, high pressure water mains on-site that was visualized in in three d. But that rescheduling, saved, £750,000 on the project, but also allowed the construction to start two months earlier. So due to that, actually, the the operations manager at Wilmot Dixon won the gold award at the construction manager of the year award, which is fantastic.

40:39 And, we're really proud to say that those construction manager of the year winners are all our customers using our software. So real testament to the quality of products. Another example of growth and how we're growing and leveraging our strong relationships, we work with a, a customer in The UK in London called Structure Tone. They have been a long term user of Power Project again, and last year, they expanded the portfolio and, adopted some of our collaboration and reporting tools. But also as we, through that relationship and some board relationships, we managed to meet, STO Building Group, their parent company in The US.

41:26 They are the fourth largest construction contractor in The US and probably the largest fit out company in the world. So we're very pleased to, earlier this year, start a pilot project working across three of their regions and actually using our software on those projects. So the first being in Dallas on the on the Federal Reserve Building. So they were very pleased. Very early, of course, because it's a pilot, but Steven Neeson, the senior vice president of technical operations in in their headquarters, was very, kind enough to to provide a quote and comment that's public. And, yeah, that's very encouraging. Finally, another another example of innovation and, something just to show you a bit of breadth in our customers and across our portfolio.

42:22 Chester Zoo is England's most visited attraction outside of London. They have 500 permanent staff, but also 500 temporary staff during the summer months. What they were looking for was a solution, a technology solution to maintain all aspects of their facilities and assets. So, you know, from vehicles, buildings, equipment, paths, pens, theme park rides, etcetera. So that all all facilities managing and maintaining those, and they chose Shire system, our maintenance management and facilities management software, on the base that it's, of course, very versatile. We work across many industries with the product, so it can, be configured in many ways. It's cloud and SaaS, so it's accessible, but also it's very intuitive to use. So, Chester Zoo's colleagues could get to grips very quickly with using the software, especially as many of them are not technical.

43:23 So, again, received a fortunate to receive a a quote there from the deputy facilities manager, but I'm pleased to be, working with such well known brands. So hopefully, that gives you better insight into our strongholds and our continued progress, in the year. Just to summarize, I think we've had a robust performance despite all the pressures that businesses are generally facing in the market. We delivered as we said we would with our SaaS strategy and also, ahead of the market expectations and with profit. We're making excellent progress on our strategic journey, which we're very pleased to say. That's thanks to our proven product portfolio, which we continue to enhance, and, of course, our loyal customers who support us and continue to work with us. We continue our momentum on our SaaS migration and deliver in line with, where we expected and where we said we would. So, when we announced our SaaS transition, we said there'd be a period of eighteen months when, we'd see the the revenues and on only because it's the way it is recognized, we would see them reduce and then, you know, we go we we increase and go back to accelerated rates.

44:46 The bottom of that u will be within this half of this year. So we see a continued softening, then an increase in the second half, and we expect to be ahead of full year revenues ahead of prior year. Our focus is on seeking, m and a targets and and as well as partnerships, to extend our portfolio, accelerate our roadmap, and, of course, service our customers and potentially some new customers. So we will continue to focus on that and also focus on go to market initiatives. So, ELCO is strengthened. We strengthened the platform. It's cash generative. It's well managed business with a talented team of people. It's a great place to work.

45:33 And also, you know, the group is well positioned for growth. So therefore, we're we're confident with the year ahead. With that, I'd like to hand back to Alex to open up for some questions. Jonathan and Neil, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard. Jonathan Neal, as you can see, we have received several questions throughout today's presentation. And thank you to all investors for submitting their questions. And if I may, Jonathan and Neil, hand back to you and ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you both at the end. Thank you.

46:25 Thank you, Alex. So the first question which was asked very early on from Howard m, please outline your plans for expanding in The US. So fantastic question. We, of course, I think like all all European software companies see opportunities in The US. Many companies have not been so successful in The US, and our approach, I think, is certainly the right one. We have been established in The US for a number several years selling through a reseller channel. We have out of the top 400 ENR, so engineering news record businesses, 80 are our customers, and we're very pleased with that. STO, of course, is one.

47:17 And we'll continue to support and enhance that reseller channel. So we've appointed two new resellers this year. We have learned a lot over the years of working with resellers. They they're very eager to sell products, but, you know, we you have to be selective on working with the right partners and those that will, of course, support the brand and represent the brand well. So we've got good coverage over The US, An area where we felt, you know, strategic review was an opportunity was Texas, the state of Texas where we have hired our head of US.

48:03 And in that in that region, we're, building a pipeline and, testing the direct to to market model. So I mentioned earlier in the presentation, we hired a marketing, resource. We have a technical, senior technical, colleague there that's supporting, technical queries that customers have that the channel partners are unable to answer. And we're currently recruiting a salesperson to follow-up on some of the pipeline and leads we've been developing over the last few months. Hopefully, that answers your question there. The next question is from David s. Thank you. With the transition to SaaS, where do you see admin costs as a percentage of sales and net margins trending?

48:55 So perhaps I'll ask Neil to come in and answer that one, please. Yeah. Thank you. And thanks for that, David. Yeah. No. I I think it's a good question. It's a question that a lot of people are asking because, obviously, all the the pressures that the corporates have have been under, you know, in terms of the wage inflation stemming from, you know, the the energy cost crisis stemming from, you know, the the unfortunate war, etcetera. And and also really just, think, a lot of sort of, you know, post COVID sort of employment moves and so forth. If you took the twenty two period that we're just under, I mean, if you stripped out sort of, you know, budgeted increases in headcount and things like that and a few other sort of other one offs related to that, you know, for example, recruitment costs and things like that. You you're talking about an underlying increase in the in the staff cost wage base of about five to 7%.

49:51 We, you know, we would see that probably trending roughly where we are in relation to to 2023. We're still seeing, obviously, as is everybody, those inflationary and and wage salary inflationary elements. But, nevertheless, we we we continue to, you know, see that as a as a similar percentage. Certainly, obviously, we are trying to, you know, find all ways to to obviously improve gross margins. And, you know, there's a lot more beyond the simple mathematics and and the and the benefits of coming through the SaaS transition. There's all the commercial benefits, for both customers and for shareholders there. And we also see, you know, with some of those things like increased marginalization, upsell value proposition, you know, we can actually improve margins, on on things, there that will that will that will more than sort of cover that that element.

50:50 So we do see, as a proportion taking another element of your question, David, in, we do see overall net margins improving gradually over now. What is that longer heightened timeline that you can see on the market consensus figures? Equally, another measure would be around the EBITDA percentage of of things. And, again, you know, traditionally, we've sort of been around, you know, pre pre SaaS transition, that sort of, you know, getting on for 25% or so. We we we can see that coming back up nicely. In 2526, we possibly will need to do a little bit more on the sales and marketing side to take things to the next level, and that's just simply because we are a very ambitious business. We can see a lot of extra opportunities there for the next level of scale up.

51:40 But all the same EBITDA percentages will get back to those sorts of levels and and hopefully beyond beyond that as well. So that's that's where we see things. There aren't there isn't anything near term that I would pick pick out per se, but we do have you know, all our r and d is not blue sky. It is around product initiatives and really adding value and obviously making sure that there is commercial benefit to doing what we're doing and that there's always shareholder value that is absolutely critical. So so that's, you know, that's that's where we see things going. Thanks, John. Yeah. Thank you. I think you mentioned r and d there and the work we do there. Probably just worth just adding on a different note that all of our r and d is fulfilled in house by our technical teams. Yeah.

52:31 And it's all about IP. So ELCO, 100%. So in terms of adding shareholder value, very, very, very limited open source. It's all, you know, built IP, which is has an extremely a lot of value. Yeah. Absolutely. So, David, sent a second question for myself. Could you please comment on the competition, market dynamics, and geographic opportunities? Happy to. The the products that we have, you see we've got a quite a a range of products across different, you know, verticals. The market the competition is quite fragmented based on each region. But the I guess, the the core sort of competition in terms of products that we we come and see across all regions of the sort of well known Microsoft and Oracle brands.

53:29 So, yeah, we we we see them their products as being used quite heavily in our sector. But look as well, there's basic tools like Excel and and and the construction sector still uses pen and paper. So it does it is quite, yeah, I guess, diverse and fragmented. But, yeah, I think, hopefully, that gives you gives you some sense of, the the competition. In other verticals such as maintenance management, again, that that is quite, there's there's different common tools that are used in each region. So we come up against different competition.

54:15 The largest, you know, would be IBM, and, there's other other companies out there which are sort of we do compete against, you know, the lower levels as well where where we we found that we're displacing them. So yeah. I think there's yeah. You could you could probably search and and see see the a long list of names. In fact, with a client that we presented to with our estimating software, they found about a 140 different estimating tools. But once they narrowed it down, they got to 10 that they were that had the capabilities they wanted, and then, you know, they chose us in the end. So we're you know, that that's sort of gives you some sense of the the competition.

55:06 There's a final question here unless someone else is gonna come in. Roger l, thank you for your question in advance. I'm not clear whether you have focus on particular verticals. Please explain. Absolutely. The we are focused and quite niche in in in in many ways on verticals within the sector. So if you look at planning, we traditionally sold to the planning and scheduling department. But what we've done is we've broadened the vertical. So same construction contractor vertical, but we've expanded the the use, or the adoption of the technology. So we're selling to the site manager, and site personnel with, you know, mobile tools, progress updating, but then also in the organization at a more broader level, providing portfolio, you know, management tools, collaboration tools across a portfolio of projects, and then dashboard reporting tools to to c suite. So we've broadened that vertical, but that construction contractors is just one, you know, sector as well. So, of course, it's similar in maintenance man maintenance management and facilities management.

56:27 What's what's driven that is traditionally, you know, we have we started with maintenance management software for managing production lines and and assets, And there's a driver to for those companies and and, maintenance managers to manage facilities or their colleagues that manage the facilities to to have the same solution. That, you know, that led us to, develop a facilities management solution within one package, which I think is actually a great USP for us. When we look at market trends, actually, the the there's a trend there as facilities managers at large segment are manufacturing companies of which we have about 20% of The UK's manufacturing businesses across lots of different sectors.

57:14 So hopefully, that's answered there. And and please jump in if I didn't answer fully. I'm happy to if you'd ask any further questions. That's great, Jonathan, Neil. I believe you have addressed those questions from investors today. So thank you for being so generous with your time. And of course, if any further questions do come through, we will the company will review your questions submitted and publish responses on the Investor Me company platform. But perhaps before we direct investors to provide you with their feedback, which one is particularly important to you and the company, Jonathan, can I please ask you for a few closing comments? Yes. Thank you. Thank you everyone for spending the time to to meet today. Really appreciate it. We hope you found the information and presentation helpful.

58:03 We really value your feedback, so please kindly leave some, and share your thoughts. We're we're, you know, a growing business. We have a growth mindset. We always want to improve and enhance. So please share your feedback, and really look forward to, sharing future positive updates. Thank you. That's great, Jonathan and Neil as well. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of ELECO PUBLIC LIMITED COMPANY, we would like to thank you for attending today's presentation, and good afternoon to you all.

58:49 Thank you.