Eleco (LSE:ELCO) — Full Year Results Presentation

0:01 Good morning, ladies and gentlemen, and welcome to the ELECO PLC full year results investor presentation. Throughout the presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated in the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question it received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor.me company dashboard, and you will be notified once they're ready

0:34 Thank Good Good morning and welcome to you all and thank you very much for joining us this morning. My name is Serena Lang. I'm the executive chair and I'm joined by Jonathan Hunter, our CEO. Jonathan's been with ELECO for many years now, the last ten years as part of the PLC. He was our chief operating officer and our CEO of The UK business most recently before he came to be the CEO of the business in February this year. And I'd like to introduce Robert Tearle, our new chief financial officer who joined us on Monday. Rob's extensive financial experience together with his SaaS background will really help us with our new growth strategy.

1:26 Just to take you now a little bit through the business at a very high level, ELECO has been around for many, many years and most recently 2014, we moved to being a pure software software play into the construction and the built environment. We have three core countries that we, established in The UK, Sweden, and Germany. And we have offices throughout Belgium, Netherlands, Australia, and The US as well.

1:55 Our core focus is around planning, estimation, site management, data management and maintenance. And we have a very strong business in visualization that is targeted very much at marketing managers for flooring, soft furnishings, paintwork, things like that. It's a very different target market for that business. We've around 250 employees in total overall throughout those three countries. And our model is both direct and indirect. So for those core countries, we run very much a direct go to market model. And for the expanding markets, we've gone through a reseller model. Just to give you an overview quickly, so we've had a very resilient performance in 2020 given the uncertainty that the pandemic has brought us.

2:47 We have increased our recurring revenue to 56% from 53% the prior year. We've had very strong cash position. We started the year off at 1,100,000, and we've moved to 6,200,000 at the 12/31/2020. Our customer retention rates are around 95%, across our portfolio, which is exceptionally strong. We've expanded our customer base and added new logos throughout 2020, and we've had strong PBT growth. I'll hand over to Jonathan now. And Jonathan, if you could take us through those highlights. Thank you, Serena, and good morning to everyone. And good afternoon if you're outside, you know, dialing in from other areas of the world.

3:37 So just to highlight on 2020, it was a difficult year. However, we maintained revenue and increased our profits through careful management of overhead. Cash generation and collection was a focus as we entered the initial lockdowns and we promptly transitioned all staff in The UK to work from home prior to the announcement of that initial lockdown. And then within a few weeks, I had mandated that the entire company work from home just to ensure the well-being of our colleagues and their families. In 2020, we continued to grow our customer base, adding new names to our accounts, and also we maintained our normal high retention rates with our existing customers.

4:26 And during the challenges of and uncertainty of the pandemic, I did I intensified our management reporting moving to monitoring daily our product usage, which gave us the option to to pause on certain development projects if we needed to. However, we did continue

4:47 to develop and that allowed us to release a number of new features and products in 2020. And I'm proud to say we won project management software of the year for the seventh consecutive year at the UK Construction Computing Awards. As we entered quarter four, we were we had more certainty and confidence. And at that point, we carried out a thorough and detailed strategic review. I will present the strategic review later in this presentation. But for now I'll pass over to Robert to provide an update of the 2020 financials.

5:33 Good morning, everyone. I'm delighted to be joining ELCO at this exciting time. Looking at the 2020 financials, you can see that ELCO has a sticky client base with 56% of recurring revenue and more importantly, growing 5% year on year. Recurring revenue was 14,200,000 this year with a further 6,400,000 deferred into 2021. That compares to 5,900,000 in the previous year. We are starting to see strong adoption of the hosted SHA system product and SaaS power project. Overall, high and predictable gross margins of 90% on total revenue show the strong predictability of revenue growth and gross margin.

6:28 Sorry. Overall, revenue was largely flat at 25,200,000 versus 25,400,000, with growth in Germany of 400,000, primarily from our visualization products, offset by lower revenue in Scandinavia at 500,000 due to delays in services and training due to COVID restrictions.

6:59 Board and management have acted promptly at the first quarter of twenty twenty to manage overheads. With a diverse customer base, the recurring nature of the revenue and resulting gross margins and the flexibility of the cost base, this has provided us a resilient platform for greater growth into 2021. The focus for 2020, however, has been to conserve cash during COVID with a cash balance at 10,700,000 with net cash increasing from 1,100,000 to 6,200,000. We did not pause product development during COVID and continue to develop a number of great next generation products with 1,600,000 of the spend capitalized versus 1,100,000 in prior years.

7:52 As mentioned before, early action by the Board to manage expenditure with reductions in marketing and travel, along with the closure of the Telford office and reduced operational spend in Sweden, has grown profit before tax by 12% from 3,500,000 to 3,900,000. Over to you Serena. Thank you Robert. So just summarizing that then, so we have strong and recurring strong and growing recurring revenues and as we, look at our strategy going forward, we intend to increase those. We have a very strong cash position, high customer retention rates. We've made a number of changes on corporate governance recently. We've, separated the roles of chair and CEO and, the the roles of are very clearly delineated now between the accountabilities of Jonathan and myself. Of course, my role as executive chair is temporary and I'll be moving over to being a non exec chair at the appropriate time.

8:54 We have appointed a full time company secretary now with a a background and degree in corporate governance. We've implemented, a strategy at the board level And we've just appointed last week a new independent non executive director and we are also still recruiting for a second one. So a good improvement there as well. And, you know, we have that strategic review which we shall go through now. I think importantly, the business has got a really strong management team behind it and, you know, one of the things when I joined as executive in September and I was talking to all the people, it was a good reminder of what a strong team that ELCO has throughout all its businesses. So a great strong foundation there.

9:41 Just to give you the high level then on our strategy, it's very focused on accelerating our organic growth. We have a number of pillars, Jonathan will take you through those, but it is very much about focus. We have a diverse customer and competitor set. On the competitive side, there are some very big players in the market with very deep pockets and much larger than the ELCO business. And we have quite a few smaller players entering the market, some of which have quite disruptive technologies. ELCO will be focusing very much on those areas where we have best of breed products and that we know that we can win in the market. And we will be focused very much on those geographies and we have identified and and and looked at where the biggest opportunities are to create shareholder value and those will be the areas that we deliver in.

10:32 And we'll be focused very much on a customer centric model and therefore on specific customer segments that we've identified again where we can win in the market. And the last pillar is very much about our next generation solutions and we will be shifting from the perpetual model we have today over time to the subscription and SaaS model and we'll see therefore the revenue recurring revenues increasing. This will be tough this will be complemented by targeted m and a very much in those focused sweet spots and by streamlining our efficient organize organizations to be more efficient as we pull together and merge some of those businesses that we have. Jonathan will now take you through that in more detail. Over to you, Jonathan.

11:20 Thank you, Serena. So the the board committed significant time to carry out an intensive strategic review process. And we spoke with customers, potential customers, industry experts. We looked at a lot of market data, competitors, and we built methodologies around the strategy that we pressure tested through internal workshops. Historically, ELECO has been successful in growing as a group of products with a broad set of customers. But what we identified is that we must focus to accelerate our organic growth. And to give you a bit of context, the construction software market is an attractive market for many tech players as technology is being seen as the catalyst for driving and meeting the demands of the industry.

12:09 And this creates real opportunities for players like ELECO. There's a continued focus on cost reduction and what we provide as accurate and reliable software solutions that allow our customers to make better decisions and to deliver on time and within budget. The development of new construction techniques is seeing even more demand when it comes to well thought out and orchestrated planning. And data is also very much key to driving the success of these new construction techniques. There's a global net zero emissions race which is driving the legislation and policies across the world. And this means that software tools like our BidCon climate estimation software will become mandatory in the future and not just a nice to have.

12:58 In the industry, which has been a laggard when it comes to technology adoption, the mindset has very much changed and there's ongoing development and adoption of new technologies. And we're seeing many different uses of technology which is making it very exciting for ELCO. And working remotely due to COVID-nineteen has really accelerated the rate of adoption and collaboration on construction projects making it a really critical time for us to revisit and revise our strategy.

13:35 What really an example of what our software or what we've been working on in 2020, our core planning product, Power Project, which is used for construction planning and then the management of that plan was used on a data room or control room. And that was working with one of our leading customers in The UK funded by Innovate UK and a number of software vendors and hardware vendors. This is a really interesting project and really plays to our strategy, you know, those themes of collaboration, data and technology and partnerships. In the top right, can see a touch screen, interactive touch screen. And this is on the construction site. So gone are the days with post it notes on a wall to manage the construction day to day.

14:31 This dashboard allows you to view the three d model, zoom in and out and and see the progress on-site in real time. Also, the dashboard on the bottom right is pulling in data from power project through our power project vision cloud platform. It's bringing in data from sensors, weather information, financial information, site deliveries, a number of different sources and displaying that. And if there's a delay in any of those processes,

15:01 it's it's fed back to into the plan. So the exciting and and core part that we play is that Power Project is providing that single source of data around the plan. And, you know, this has certainly been developed throughout COVID and it's potentially the template across all construction projects in The UK. But as we know, building information modelling, BIM, was driven by the UK government and mandated in 2016 but is actually an international initiative. So this is quite exciting for us. We also announced the release of our System wallboard leading performance indicator module.

15:54 And Shire System is a maintenance management and facilities management software that we provide. And the the wallboard is allows for visually configurating and sharing actionable data. So what is what is expected in the future?

16:12 And it's configured in a way that can be used within the factory to allow maintenance managers to see what what is upcoming, what needs attention, and then also in the boardroom to to drive the the dashboards there. What what's really exciting is that we carried out a number of API integrations with other software vendors throughout 2020. And that was to pull in data and automate some of the processes. We also have clients working with sensors and and driving data from equipment that maybe, you know, a sensor will be listening to a piece of equipment. And if it becomes louder or it's vibrating, then there's a trigger within Shire's system which will automatically raise a work order and a maintenance engineer will go and inspect that piece of equipment before it fails.

17:06 So this is this is quite exciting. This is in in that we're seeing more partnerships, data connectivity through APIs and some automated processes. And and this is really the future of maintenance as we see it.

17:33 So as part of our strategic review, we identified several initiatives to implement which will strengthen our platform and really set us up to take off and grow. The key initiative well, the the four key pillars of our strategy starts with focus.

17:54 We're moving from a portfolio of product driven businesses to focusing on our products that provide the most growth and potential, targeting customer segments where they where we have the strongest market position and those geographies that offer the greatest opportunity to expand.

18:15 We will reorganize our business to align with our customers that we've identified and really address their needs both currently and in the future. We'll build on our strengths that differentiate us today as a business to further secure our position against our competition in the marketplace. And with a focused and defined portfolio, focused customer segments and geographies, we have the ability to make better investment decisions towards our next generation software solutions.

18:56 So to just double click on the first pillar, focus is really important for ELECO. We've experienced we're we're a company that's gone through, a number of changes and and evolutions throughout the history of the business. And we've been shaped through acquisition, which is which has resulted in a long list of products within many regions, which is sold into a broad customer base. This has served us well. However, the market is moving on and there's an increasing number of players as Serena mentioned earlier. There's an increasing number of players entering the market with deep pockets and we're required to focus on our sweet spots.

19:40 We've already done this as part of our strategy. We've simplified our portfolio. We've defined our core customer segments and we've carried out an extremely thorough analysis of geographical markets which we've committed to provide the highest growth potential. So our portfolio has been grouped into two groups. The core of the business is our building life cycle portfolio. And this comprises our planning, estimating, site management, computerized maintenance management, and facility management software, and our design standards and and BIM data management software. And we've we've experienced the greatest synergies in this this portfolio in terms of customer segments. And we have examples of customers buying more than one application.

20:38 But what the the strategic review told us was that where the industry had been looking to share data around BIM, we found that no single customer wanted every application because there's different parties involved throughout the construction life cycle. So what is what is really key is ensuring that the data is shared and that provides the collaboration. But therefore, we our strategy in terms of integrating our products is is around data and API connections within the building lifecycle. To the right of of the building lifecycle portfolio, we've identified those products where we are market leading, but they're very niche in in customer segment and also the technology we provide.

21:36 So for example, our eSign and active online businesses, they sell into floor and wall sorry, floor manufacturers, wall coverings and paint and textiles manufacturers. And we're selling into the marketing departments. We're providing visualisation software to allow those businesses to better market their tools. And if you've if you've ever replaced the flooring in your home, you find that, you know, there's not many software tools out there that help you visualize what that floor can look like. That's really what we do. Our AI tool allows you to actually take a photograph of your room, upload it and change the floor. The AI element is identifying the floor area. So that's quite advanced technology that we're providing in there and all the data that sits behind those flooring products.

22:33 We also have a number of other, niche products in that, visualization and CAD segment. Stercon is an example that, is one of the leading international stem manufacturing applications. It allows, users to design the staircases in three d and our software actually drives CNC machines, up to five axis CNC machines. So so the production of staircases.

23:10 So our organization has been very product focused and we're shifting towards a customer centric focused organization. And and this is really you know, we have fantastic customer relationships already. And we'll be expanding on those to better meet the needs of a business organization. And examples of that is what I pointed out earlier in terms of the control room and the Shire system wallboard. We're making positive changes in the organization in terms of our sales and marketing initiatives. We'll move from a product led approach to a customer approach.

23:55 And therefore, our we'll have customer segment specialist sales managers. I'll strengthen our product management and r and d departments with the appointment of a chief product officer, a key role in a customer customer centric organization. And he will be commercial in mindset with a solid technical foundation. And this the role of this chief product officer is to coordinate all of our building life cycle road maps, product road maps to ensure that we're not developing features twice or for a single region. We'll also align our product strategies to focus in the direction of greatest return on investment. And therefore, that will flow into our product development as well where we'll be working closer together to ensure that we're we're deploying development resources in line with our product strategies.

24:54 And as a result of that, we will we will recruit based on skill set that can be utilized across the building life cycle. The direction of travel will be driven from the group leadership team. And this is really important in order to align our initiatives with our strategy and be agile and nimble and make adjustments to the strategy quickly and effectively over time. ELECO has many competitive strengths which we've identified and we will reinforce, some of which are our best of breed products which we will continue to build upon to drive our next generation customer solutions.

25:42 We'll leverage our loyal and long standing customer relationships to better validate their future needs and monetize on these relationships. We have a highly engaged and loyal employee base which I recently identified we have an average length of service of nine years which is fantastic for a software company. But really we'll be complementing this knowledge and experience as we grow with new colleagues joining. Finally, have solid foundations with growing our recurring revenue and cash generation which is really going to support our growth. So by building a focused customer centric organization with highly motivated and loyal employees, will leverage our strengths to identify our customers' future needs, which will drive the development of our next generation solutions.

26:45 And along the way, we will we will consider building and developing in house or or offshoring, buying or partnering to accelerate our time to market. In summary, growth will be achieved through a set of revenue and enabling initiatives. We'll launch highest value products in geographies identified as having the greatest potential. And some examples of that is our maintenance management software in Germany where we already have some customers and the product is translated. But we've got business unit a business unit there and colleagues there and we will we will give that you know, that's a revenue generating priority in terms of the strategy.

27:34 One example, Anyway, we'll expand our sales team to support growth. And that's really, you know, ensuring that our sales teams have the knowledge of the portfolio. They have the, the incentives and the objectives aligned with our strategy. We'll strengthen our product management function for the building life cycle, which, I referred to in previous slides with the appointment of a chief product officer. And that's really key for us to ensure that we're gaining the input and feedback from our local customers, feeding that through to an overarching view, which is where the CPO will sit and prioritize our strategies where we will gain the greatest return.

28:26 We'll launch direct sales capabilities in targeted geographies. And I mentioned Shire System in Germany. We'll be launching in The US as well with our power project software, but with a really focused approach into the state of Texas initially where we've we've seen opportunity there. We have a customer in The UK that's based there as well and and we've got our head of sales there with a partner to drive that. We will also continue to to manage the reseller channel in The US throughout other states, but we'll expand initially in the state of Texas. And there'll be a focus on a next generation r and d and building life cycle roadmap alignment.

29:13 And we we mentioned some real product releases in 2020. We are developing, you know, minimum viable products of our next generation solutions, and we'll continue to build on those but ensure they're they're aligned in terms of technology set and meeting the needs of the customer segments. So what to expect at the next results? We'll update you on our strategic initiatives. We'll deliver continued recurring revenue growth. We are planning to release a number of our core products releases including Power Project version 16. And we're going live on our new refreshed elicosoft.com customer facing website. And that's really in terms of marketing return on investment. It's it's got the biggest payback, but it's really quite exciting because our current site is very much provides the information that the visitors are looking for but our new site is driving those visitors through to a result and whether that's an existing customer or a potential new customer.

30:29 So I'll hand back to Paul and then we can, obviously, open up to answer some questions. Jonathan, thank you very much indeed. Serena and Robert, thank you as well for the presentation. Ladies and gentlemen, do you please continue to submit your questions using the q and a tab situated on the right hand corner of the screen? Just while the team take a few moments to review those investor questions submitted already, I'd like to remind you that recording the presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard in the investor meet company platform. I'd also like to remind you your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide your feedback in order the company can better understand your views and expectations. We have received a number of presubmitted questions, from investors, and perhaps we can start there before going on to the live q and a, if if I may. And, Robert, if I could address the first one to you here.

31:22 What are your thoughts on how to use your net cash and balance sheet structure? So in terms of the net cash and balance sheet structure, we don't envisage any change in terms of leverage in the business in terms of debt. Obviously, the forecasts have gone out and there is some organic investment that we need to spend in terms of the heads that we're bringing into the organization. But other than that, no no change. That's great. Thank you very much. And the next one, can I address you, Jonathan, actually, next couple? Reads as follows. Can you discuss how products are sold through your own and third party channels?

32:13 Just make sure. Yeah. So thank you, Paula. We sell direct to our client base that use our software to work on projects. Through the reseller channels, we're we're selling at a royalty rate so the cut so the reseller will sell. But all of our customers are stored on our CRM. So we we need to ensure that, you know, they they enter a end user license agreement with with us, a software vendor, and we have their up to date maintenance subscription records to provide that support and and software updates. So in terms of even though we're selling through a channel, we still maintain those customer records.

33:02 And we sell through a number of different methodologies, primarily perpetual license with a recurring maintenance subscription. And the maintenance includes software updates and support. And that's what we've we've received quite a high retention rate on. And we also sell we support that with SaaS subscription revenue as well as sales. And they're for products that we generally host like our power project vision, our icon system, and we're also hosting Shire system as well. Thank you. If you don't mind taking the next one as well. What are the challenges and solutions to reorganizing the business from product operating companies to regional companies selling across the product range?

33:53 Yeah. Okay. Well, we've actually you know, in in Sweden, we've actually consolidated our companies there into one and we've been operating as a single business for a number of years and that's worked quite well. For those who had followed us, you know, we've we've certainly aligned ourselves over the years. But this is, you know, a heavier focus on ensuring that we collaborate across the group. But we have, know, we have improved our collaboration across product development teams, sales teams as an example in The UK. Our sales leaders meet weekly and share opportunities across their customer segments and product lines. So the real conscious shift in my is mindset and culture.

34:44 We have colleagues that, you know, we certainly operate more as a single company today, but we will we'll embrace that and continue to to build on our culture as a single company. And therefore, you know, the HR and employee sentiment is really a focus part of our strategy as well. We have in terms of sales, we have segment and product specialists. And we'll be expanding that to and focusing on those customer segments by giving those sales colleagues a number of products to sell into that customer segment. So I think that's really exciting and and we'll be supporting that with a, you know, sales enablement program that we we have as part of the strategy.

35:33 Thank you, Jonathan. Next one we've got here is how will you ensure the salespeople build knowledge across the product ranges? Okay. I sort of touched on that, but we've I mean, over the over the past probably eighteen months, we've actually been working closer together as a sales organization. And sales colleagues have presented, you know, presented and provided training across different product sets, really to be able to provide a high level introduction when they're speaking to clients. And we're we're going to support that and develop that further with this sales enablement program. What what we're seeking to achieve is really build that sales bible and methodology that can be taken and repurposed across different territories. I mentioned that, you know, we're entering Germany with Shire Systems and, you know, we have the process that works well in terms of selling and offering Shire Systems in The UK and we'll take that knowledge into Germany through through the sales enablement process.

36:48 That's great. The penultimate question we've got, just one more for you before we move on to Robert. How we retain salespeople, customer specify relationships for each product? Yes. We I mentioned earlier that we we do have a half a high staff retention rate, which we're very proud of. You know, we I I'd like to, you know, I'd like to think and continue. You know, my objective really is to make all of ELCO's staff the envy of our competitors, and we'll be building on that through our through our HR initiatives. You know, for the first time since I've been with the company for over a decade, I'll be presenting to all of our staff and sharing an update live next week. And that's a real initiative that's bringing the teams together and just one of many.

37:42 So we're we're certainly improving communications, and and that will ensure staff retention. But all of those skills that we have in the company and and loyalty and commitment will be complemented as we bring in and grow with new employees joining us. So so that's really exciting. In terms of, you know, the sales the question relates directly to sales persons. We, you know, I think addressed that earlier in terms of the sales bible. That will certainly give new colleague joining that that sort of instruction manual on how to sell the product and and move that, you know, move that forwards. And really, it takes probably two two weeks to bring a new sales colleague up to speed.

38:33 And we'll we'll, you know, we'll just improve that onboarding process as we're as we're going along. So I hope that answers the question. Jonathan, thank you. And and the final pre submission we have here is for Robert. What will the addition of four senior staff cost the company? Will this be an impact on profits over the next two or three years? As you've seen, the forecasts have gone out. We haven't provided guidance yet. We expect some short term investment in our business, but in the long term, we will see some of those benefits in terms of the product roadmap and agile technology. Fantastic.

39:18 That concludes the pre submitted questions. Obviously, we've had a number of questions that have come in during the presentation itself today. Serena perhaps I may hand back to you if I can to respond to those questions where appropriate. If I could ask you just to read out the question that would be great. Thank you. Thank you Paul and thank you to all of you for submitting the questions. I'm gonna start with one of the last ones that's come in just because I think it follows on from Jonathan's earlier point from from Gerald Rory. Is there a system that ensures you effectively cross sell products to customers, incentives for example. I mean, I I think where we are heading in terms of the ability for us to now integrate our building life cycle businesses takes away some of the barriers that we found in terms of the cross selling and upselling.

40:10 So whilst that's not been the core focus around why we're doing the integration of the businesses, it will really help enable that. Jonathan, do you want to sort of add to you to that one? Yes. Yeah. I think, you know, it's question related to incentives. And that is important that we have this central leadership and ensuring that every part of our organization is aligned and focused in the right direction. And therefore, you know, real initiative will be reviewing every every employee's objectives. And, you know, pillar of our strategy is is identifying our strengths and building on our strengths, and that flows through to our colleagues.

40:57 So I want to ensure that every colleague is a success, you know. They're building on their strengths. They're in the in their sweet spot. We talk about sweet spots in our strategy. They understand what part they play, what their objectives are, and they're incentivized accordingly. And that's really key in building this single ELCO culture because, you know, the the the staff in the business is what's going to deliver this strategy. And that's a, you know, heavy focus that, you know, we ensure that every one of our employees is successful. Thank you, Jonathan. And I think because it leads on from there, if I could take Frank m's question here. Can you give an example of how the new strategy will change the approach to a particular customer segment.

41:43 Again, if I start off with that. So today, we sell, for example, if we use power project as as as the product, we sell we have salespeople selling power project into planners. In the future, what we're gonna have is a customer segment. Let's say for the example of this, it's a main contract it's a medium sized main contractor. And the account manager will be going in that owns that segment and going in and looking. So yes, firstly, they can sell the portfolio of products that are applicable to that business. But more importantly, they're understanding that customer segment and what the needs of the segment are, not just a particular customer. We'll maintain that one to one relationship that we have with the planners, for example, because that's critical to us ensuring that our product is really what they need, what they feel they need today.

42:33 But we'll take that one step further. And as Jonathan took us through earlier, the control room project of one of our key customers, I think that shows how the customer bases themselves are moving from working in silos within their organizations to moving more across the different functions. And they're not there yet either, you know, that is a move. And I think that's driven by the date the the adoption of technology driven by the BIM, as Jonathan said earlier. And so it'd be very much a customer centric approach. So we will be looking at solutions, not just the ones that we have today, but given those key points, the issues that they're dealing with, where are the pain points, how can we help them to improve their business metrics, will be where we're looking at how we develop our next generation solutions.

43:23 And I think that plays very much into a number of the m and a questions. So let me take one of those for an example. Nick Jay, with such a strong capital base with regards to m and a, what is your acquisition strategy and metrics? Jonathan took us through there the four pillars of our strategy, and and that is the strategy that works both on the organic side and the m and a. Our m and a will be very, very targeted. It will be targeted at looking at those customer pain points and really seeing where we can add value. So is it an adjacency to a current product we've got? Is it a new space, but it's it's within that customer segment we've got? So that the intent really is to rather than just own the end user as we do in in some markets for our products today, is to expand that out and have a much stronger relationship across, an end customer in in their multiple departments as well.

44:25 And I think when we look at that on an m and a side, if it's geographic, we may be looking at it from the perspective of we'd like to enter this new geography and therefore our m and a will be about acquiring new customer bases potentially, or it may be about acquiring technology. And we will look at each of those on their merit. So, you know, should we buy it? Should we partner? Or should we do m and a? So I think the metrics will be very much based around that. And, of course, one of the questions here, Ruben v, what are you looking for in m and a targets? How much are you willing to pay for acquisitions? Is there a hurdle rate, e g, return on capital employed or maximum EBIT multiple? Of course, we will be having hurdle rates and we will be looking at each each one on its merits as to which approach we take.

45:16 Jonathan, I've covered a number of questions off there. Is there anything that you would like to add to what I've said on those? I think the only the only element to add is that we, you know, it's around focus to ensure that we gain, you know, the quickest time to market or align ourselves with our geographical, you know, areas of priority. So that's in terms of M and A targets. We'll consider that as well as developing products and technology ourselves and partnerships. And, you know, I I talked to some of the partnerships that we've formed and I think that will continue as well as we build better solutions for our our customers. Thank you, Jonathan.

46:05 Just going back then, Kieran Gee, what is the company policy on the capitalization of development spend and how long is the amortization period? Rob, is that one that you'd like to answer? Yeah. It's my third day in, but from from what I understand, it will be in line with capitalization under IIS 38 and would need to derive future economic benefit. We We could go into more details separately offline if that's required. Yeah. That that that's exactly how we do it. Thank you, Rob. And let's see. Kieran, who are your main competitors? I'm gonna hand this over to you, Jonathan, but I'll read the rest of the question out first. You mentioned new entrants to the market. Is it possible to add a bit more detail on this? So first of all, who are your main competitors?

47:00 Yeah. I mean, we we have a number of competitors for our point solutions. Power project, for example, there's a numb there's probably only well, less than a handful of, you know, competitors competing on that level. Probably only one in particular, which would be Oracle p six. In The UK, we've got the major market share in the construction market with power project. In The US, it's sort of it's definitely p six dominant. But then there's many, many companies and individuals out there using products like Microsoft Excel for planning and estimating and, you know, keeping asset registers. So there's quite a broad, you know, set of competitors. But I think the question asks about who is entering the market.

47:55 We we are seeing a number of software vendors seeing construction as an opportunity because as I I mentioned earlier, it's it's quite an exciting time for tech companies in construction. And they're coming in from other sectors. But the the the solutions, when we talk about planning and project management or even estimating, they're they're quite broad in a sense that, you know, we've developed our products over many, many years of customer discussion, iteration, industry knowledge. And, you know, to replicate our our our products and the features that they have and the value they add is is nearly impossible. I mean, Power Project is over 30 old now in the market.

48:46 And, you know, our customers fight to use our software if they, you know, if they go to if they go and and move on to another company, they take it with them. So, you know, that that just speaks to how loyal our customers are, but how much they love our products. And while new new entrants are coming in and you see the, you know, the the marketing quite, you know, everywhere. The feedback is that, you know, we still have a strong position, but we realise that, you know, we need to keep that position and continue to evolve and and iterate on our our development and also continue to add value to our customers, which is, you know, which is our our core focus. So, therefore, we will, you know, by strengthening our product management function within our business, we will better understand our customers' needs, better validate their their needs and requirements, but also really understand where they're going as an organization, where they where their technology roadmap is in the future. You know, are they focusing on more three d? Are they looking at VR automation?

50:03 And that's really gonna drive our next generation solutions. Because with technology, I mean, we're an organization that's got such talent when it comes to technology development that we're we're confident we can build the technology, but it's introducing that at the right or the optimum time for it to be adopted. And that's really, you know, that really comes down to understanding our customer segments. Thank you, Jonathan. And to follow on from that, John g asks, how do you train and support customers? Yeah. That's a that's a good question because, you know, during the pandemic, we're unable to carry out classroom training, but we had shifted quite promptly to virtual training.

50:54 So we we you know, our products are feature rich and they pick they can be used out of the box. But, you know, there's many tips and tricks and that's where, you know, our customers find real value is that, you know, they learn how to how to be more efficient as well through the software. And and they do subscribe to quite a bit of training. So, you know, we haven't we have many delegates that require training or ask for training. And we've really refined that throughout 2020. We initially when we switched to virtual training, we went from the traditional one, two, three day classroom courses to breaking up our training into modules, two hour slots because we felt that, you know, our trainers and our customers wouldn't be able to sit there for a full day or or three.

51:53 But, you know, as as the the lockdowns continued and we progressed through the year, we realized that we could spend more and more time in training sessions and introduce, you know, different techniques to to break up the day and and make it more engaging. So we carried that out and we continue certainly in The UK to be training in the first quarter of this year in a virtual way. And and, you know, that's that's really positive. So we have we have shifted in that sense, but I think when we come out of lockdown, there will be some customers that will want face to face classroom training again. But but certainly the virtual delivery is here to stay.

52:41 In terms of supporting customers, the second part of that question, that's an that's actually one of our one of our unique strengths, I believe, because we always receive positive feedback from from our customers' sentiment surveys around our support services and how helpful our colleagues are even from, you know, the the really large enterprise customers that we have. They really appreciate, you know, being able to speak to someone in support that has a has a deep technical understanding. You know, some of our sort of high end planners are are the best planners in the world, you know, and they're they're extremely technical and they they they, you know, if they have some some support issue within their plan, it's generally, you know, around the plan that we pick up and solve and put every effort into solving. So, you know, that that control room project that I talked to earlier in The UK, that's an example of, you know, where we provided support, but we also provided, you know, technical support. So we had tech development colleagues involved in that project, our account management, our sales.

54:04 So, you know, there's a number of different departments that came in to really support that initiative. And that's an example of, you know, how we operate. And I think it relates to that earlier question around, you know, how do we retain staff and that knowledge or customers relationships if if someone moves on. We actually within our customer base, we have different contact points within our organization. So a customer will be speaking to a training department and and build that relationship or support department or sales or account management. And, you know, if you go out to talk to any of our our enterprise customers, they'll know Sam, you know, the training manager or, you know, Paul, the support manager, which is great. So, you know, we we have those relationships which we're we're really quite proud of and and that loyalty. And that that really comes through in our recurring revenue, which which is just demonstrates that, you know, once we got once we've acquired a new customer, we we certainly keep them and and and grow within that base.

55:13 Thank you, Jonathan. Recognizing that we're close to the end of the session, there are a couple of other questions in here. Oscar, do you track customer acquisition costs, stroke, lifetime value metric as other SaaS companies? It's a it's it's certainly a KPI that, you know, we the majority of our products are sold through perpetual, but there are products that, you know, we're we're introducing SaaS complimentary tools and products like our icon system, which are which is, you know, a 100% SaaS hosted. So we certainly we we use those metrics.

55:58 We also use customer profitability on a monthly basis, ensuring that, you know, services and support is providing, you know, delivering a contribution. We measure the utilization of of our support and trainers quite closely as well. So I hope that answers the question. But generally, you know, we we have many many KPIs, and we're reviewing those and implementing, you know, leading KPIs as we're making this reorganization to be more customer centric. So we will be introducing KPIs such as certainly, customer around the customer satisfaction and really measuring if we're you know, what value we're really adding to that customer and ensuring that we understand, you know, where they're heading as well. So we we certainly wanna measure the the our understanding with them of, you know, what their objectives are in terms of their strategic technology implementation.

57:14 Thank you, Jonathan. Couple more. Do you provide any data on customer concentration? This is from Kieran. Sorry. What proportion of revenue do the top 10 account for? What proportion of revenue does your largest customer account for? Yeah. Yeah. That so we we don't provide that publicly, but certainly I can I can talk to it? And we have a real spread across all of our customers. We have some significant names. I mean, BP refineries came on and and chose Shire Systems in 2020, which we're we're quite proud of. But, you know, so did many other customers and and there is a spread across the, you know, the top top probably twenty, thirty customers in each of our product lines.

58:08 But unfortunately, you know, we we don't share that publicly. Okay. Thank you. Last question on here and a thank you from from us, of course, for all those questions. This is from Gerald O. Are there initiatives to promote your products into universities, etcetera? Yes. Yeah. That's that's that's something we we certainly do. We provide educational licenses and they're twelve month term, so they're renewed annually. And in The UK, we provide our planning software into about 80 to 90 educational institutions and, you know, the number of actual licenses within those is immense. But we we find that well, actually, I often scan the job, you know, recruitment boards and see how many, you know, how many jobs are advertised that require power project knowledge.

59:07 And that's quite quite interesting. And, you know, we certainly see that as, you know, strength in in The UK in terms of, you know, getting our product usage into organizations as new planners enter the market. We've also continued we'll carry out the same initiative in our other regions and in The US. So we're making we continue to to grow that base of universities and, you know, specialist providers of construction construction learning. So I hope that answers your question, Gerald. Thank you Jonathan that concludes the questions and if I can hand back now to Paul.

59:55 Thank you very much Julia. Thank you very much indeed and I think you have addressed all those questions you can from investors but if any further questions do come through you will have the ability to review those. Jonathan, perhaps I could just ask for a few final words just to wrap up before we redirect investors to give you some feedback, please. Yes. Well, thank you very much, everyone, for attending. This is the the first company meet that we've done. And hopefully, you know, you'll see more of us. I think what our intention is is really to communicate and engage more with with all the stakeholders of ELCO. We're we're you know, it's important for us to to keep you all up to date, and we'll continue to do that. So thank you very much, everyone, and appreciate, you know, we'll do our best to answer any further questions you may have after the presentation.

1:00:53 Thank you, Jonathan. Thank you, Serena. Thank you, Robert, for updating investors today. Can I please ask investors not to close the session? It should be automatically redirected for the opportunity to provide your feedback. If you've accessed the meeting from our website, the feedback page will just appear in front of you. We've accessed it via the link sent to you by email. You'll be simply asked just to log back in. It just takes just a couple of seconds to do, so it'd be greatly appreciated if you could. On behalf of the management team of ELECO PUBLIC, we'd like to thank you for attending today's session. That now concludes the event. Many thanks, and good afternoon.