Eleco (LSE:ELCO) — Full Year Results

0:01 Good afternoon, and welcome to the ELECO PLC investor presentation. Throughout today's recorded presentation, attendees will be in listen only mode. Questions are encouraged and can be submitted via the q and a tab situated on the right hand side of your screen. Before we begin, I'd just like to submit the following poll, which I kindly ask you to submit your responses to. I'd now like to hand over to CEO, Jonathan Hunter. Jonathan, good afternoon. Good afternoon, everyone. And we're very pleased that you could join us as Neil Pritchard, CFO, and myself take you through an excellent set

0:32 of results for ELCO for the full year 2025. For those of you who may be new to the story, just as a reminder, we're a trusted technology partner for the built environment. We address mission critical mission critical areas across the building life cycle from planning and estimating, that's time planning, through to cost construction and project delivery and maintenance and operations. We support experts in these industries to be more productive, have visibility, meet safety and compliance. And we do this through our talented people, which we're very proud of. We are a people business.

1:19 We've got decades of experience and expertise and a passion for solving problems in the built environment and a culture that really is the foundation of our success. So, you know, highly engaged people are are really driving that performance that we're seeing in the business. And we're driving that through our portfolio of best of breed software solutions. They're best of breed across the building life cycle and cat and visualization. And within each of these sort of brands is a suite of software that's proven to add value to customers. And therefore, a common theme you'll see is that we've got very high customer retention rates and a lot of expansion and and upselling through the existing customer base. So it's really driving long term value for both customers and shareholders.

2:10 The group at a glance, we're 314 people. We're based in The UK, Ireland, Scandinavia, Germany, Netherlands, Romania, USA, and Australia. In those markets, we sell direct to customers. 97% of our revenues is direct through through those direct relationships, and 3% is through channel partners and and resellers. We'll go into a bit more of the the financials in a moment, but just as a high level, 81% of our revenues is SaaS subscription, I e recurring, 1% perpetual, and 18% services. And we've got very strong market positions in in terms of customer brands.

2:56 You see, for example, 90 of the top 100 UK general contractors, But this audience is very much on that technology adoption journey, and we're continuing to see further growth and up sales within this customer base. So to take you through to the the results for 2025, The year ended ahead of market expectations as a year of solid progress for ELCO both financially, but also operationally and strategically. We delivered double digit growth with momentum building up throughout the year. So, actually, we ended the year as December being our our highest or largest month in terms of recurring revenue. And that recurring revenue, multiplied by 12 is our ARR or annualized recurring revenue, which increased 29%.

3:50 And the recurring revenue is, as I said, it's 81% of the total group's revenue. So that's really what's driving the the revenue growth is high quality recurring revenues. The total total recurring revenue, that's a reported recognized revenue, that grew by 26%, which translated into meaningful adjusted EBITDA upside as well, and the EBITDA increasing by 32%. It reflects good execution of our strategy, our ARE strategy, which is really focused on attaining, retaining, and expanding our client base, and also careful cost control as the business is increasingly improving its operational leverage.

4:36 Not of course, the the results are important. How we grow is also important, and retention of, customers remains very strong. Our net revenue retention rate is a 110%, which is you know, anything over a 100% is very good. And, we're increasingly seeing customers expand organically into more enterprise led solutions, so standardizing with the product set across their organization. And that's that's excellent because it really drives that long term value for for the of revenues. From a strategic perspective, we continue to be active in terms of m and a, and we completed two targeted acquisitions, which strengthens our position in asset management as well as well as portfolio management.

5:28 And at the same time, we with post year end, we exited a non core visualization business, which was based in Germany, really sharpening our focus on the high growth, high quality software revenues. So I think that's covered everything in there. In terms of IT and and technology, we continue to release meaningful updates. And, you know, across all of our products, the emphasis really has been on connectivity, data, and readiness for an AI enabled workflows rather than just isolated features. And external recognition through the awards we won. So we won the best project management software of the year as well as company of the year at The UK Construction Computing Awards. It's really encouraging for us, but also importantly, you know, that that's that those awards and the software is really all being driven by our customer demand, and that's that's really key. So having that close relationship with customers.

6:37 So with that high level highlight, I would like to invite Neil to take over and introduce the financials. Super. Thanks very much, Jonathan. Afternoon, everybody. Thank you very much for joining. I'm very happy to take you through the financials for financial year '25 to the the calendar year effectively as well, to the end of December. Before I sort of go in in in great depth on some of those, what I'd like to do is really just take you through the first kind of position where we are in terms of our recent financial track record. This chart really talks about each half year period since 2021.

7:25 And why since 2021 was that's when we actually embarked on our financial SaaS journey to move to from perpetual one off license revenues through to the high recurring revenue model that we that we successfully did sort of three years later and and since. And you can see if you look at the total the total revenues there in terms of the dark the dark blue bar charts and the recurring within the lighter blue, and then there's a couple of profitability metrics at the bottom. And what you can see there is the financial track record for ELCO is one of consistent, robust and improving health and growth for the business, which I'm proud to say, and we're proud to say it's very pleased to see that moving from a recurring to 55%, as Jonathan said earlier, to the 81 that we've just reported now.

8:19 So why those high recurring revenues? Quick reminder. Well, you know, with those high retention rates as well that Jonathan mentioned, we have an underpin and a predictability of revenues for the business and and indeed for our shareholder investors. Very, very important to us. And and then resilience in in of business model, really, that in otherwise, as we see much more increasing sort of uncertain times. So what you can see is we had a really strong second half beyond what we reported to the first half as well, and that continued to to to very much improve. And I'll I'll take you through the actual main metrics around that. But I'm very much sort of scaling up to kind of the traditional rule of 40 type of company.

9:06 On the right hand side of this chart, there's there's just a few features just to quickly sort of remind ourselves on. So we are obviously embrace many different parts, as Jonathan said, across the whole portfolios and within those modules and suites of solutions. And that's very diversified across job fees as well, of course. Software is very scalable. It's quick to bring to market. It doesn't require huge inventory or working capital build up to do that. We're blessed with very high gross margins, typically in sort of 88 to 90% range. Our fixed cost base does, of course, grow with inflationary demands and so forth. But nonetheless, with other cost control and so forth, the operational gearing where we're gonna have more than proportionate increase in profitability for a certain percentage revenue increase has been a feature of recent years.

9:58 And we can continue to see that to be the case, which is fantastic. Of course, to do that, innovation is incredibly important as well as the culture and the people. And so the investment in r and d, the spend typically is about 15 to 17% of our overall revenues. And we're actually very prudent in our capitalization policy as as well compared to many software companies. The business is, of course, very cash generative with those margins that I've mentioned. But also, you know, typically, customers pay upfront and and, you know, with thirty day terms. It's a very mission critical in what we do. So very desired and needed by our customers. And, you know, that we've certainly seen some particularly excellent generation of of cash this time around that I'll take you through later as well.

10:48 We do overall have cash in a net cash position, cash positive, at 16,300,000. Again, I'll take you through that later. But that's fantastic. We have no debt. So, you know, and that cash is is over 50% of balance sheet net assets as well. So very reassuring vis a vis other software investments that you may be interested in as well. And of course, deferred income, which represents future incomes, even it's up by 39% this time, stripping out the acquisition effects, 31%. So we're really, really you know, bodes incredibly well for 2026. And we are also unusually, even now amongst some sort of software companies dividend paying. And we have a progressive and sustainable dividend policy.

11:39 And in fact, it was quite interesting in putting this together because the total dividends are actually over this sort of period have doubled for our investors. So we're very very keen to do that. And, course, that does reward them staying with the business and and being part of that journey for our future prospects. So if I just move on to the next slide. Thank you. And so, really, this sort of double clicks on the more involved metrics from financial year '25 itself, of course. And it is it is as Jonathan mentioned, we were ahead of market expectations, you know, which we show continued strong growth, record recurring revenues, enhanced underlying profitability, and the cash that I just mentioned. Along the top, you have some of those revenue metrics that we we sort of delved into a little bit. And the ARR, normalized, multiplied by 12, that's an exit measure. That's often used by many as a useful indicator of the future. That was actually up 29%.

12:46 And organically, that was 21%, particularly strong performance there in December as well. So very, very pleased with that. Overall recurring revenues across the whole of the twelve month period,

12:58 at 26%, as it says at the top middle there. And underlying organically, that was 18%. And again, that's somewhat ahead of the organic rates that we were seeing in the previous year as well. Overall overall revenues well, recurring revenues being 81% of the overall revenues. But overall revenues increased by 20% or very similar number on the sort of constant currency basis. We did actually have a contribution from our Irish acquisition that took place in January 2025. So that included about 2,700,000 for the year. So organically, that was 11 lower than say the recurring rates because obviously there's a service element to the business as well. The second row down really refers to profitability metrics.

13:46 And you can see that there's been that effect of operational gearing that I've mentioned before. And we have looked at various there are various other ones I'll take you through later. But on adjusted profit metrics, they're markedly improved, demonstrating, you know, that improved gearing. We did actually have an impairment of of a former subsidiary, the one that was disposed of after the year end, which has involved a one off charge for, again, some of the carrying value of its assets. But outside of that, and that obviously hit some statutory measures, but outside of that, you've seen adjusted measures move up significantly. For example, there are the 32% on adjusted EBITDA, the adjusted EBIT and PBIT there of 35, and adjusted EPS with some tax effects of about 24%.

14:42 Free cash flow, I mentioned, is very, very good. We were really pleased with being 30% ahead of last year. Cash, as I mentioned, is a very large part of the balance sheet now, which is really fantastic from a surety perspective. And that allows us to to move ahead with with dividends as well. Just on the cash itself, it although being 16% between the different period ends of December to December, Actually, had we not undertaken the cash element of the acquisition, then it would have been 49%. So really, really strong growth there. Very, very pleased with the performance of the business. And the final dividend, talked about the doubling in the last few years. We've also yeah. We do have to measure organic versus inorganic versus needs plus that, but it's very, important for us also to maintain that diversity and the return to our shareholders as well. So there's a final dividend proposed for 21% increase as well.

15:44 Thank you. And then moving on to just a little bit more of a deeper dive on the revenue. Three charts here. On the left hand side, you see revenue by business line, and we talked about perpetual moving down from really 4% to 1%. The recurring moving up to about 81% in the center of the diagram. And then to the right there, you see the services income. Services tends to be around 18 to 20% of of overall revenues. And here, the service revenue income was higher over the previous 2024, about 8% higher. However, I I will point out that that's probably just the one area of the business that remains a little bit more subject to challenge where expenditures are a little bit more discretionary and maybe deferred or or deferred really around that.

16:37 And so and does include a small contribution there also from the services and from PMAC. So really, in the second half, it continues to be the case following a number of initiatives that we closed the gap in in services. But if you strip the PMAC out, we're not quite up to where we were 2024, but as we anticipated and forecast that to be, of course. In the middle chart, we see the overall group mix and the outer ring, if you like, of the donut is twenty twenty five, the inner ring is twenty twenty four. And what we see is that the building life cycle part of the business is now 80% of the group. It was 74% of the group. And that really reflects that's been the focus and the mainstay of a lot of the business going forward in terms of the higher growth rates and so forth. CAD visualization and for these numbers, including that business, the visualization businesses, I suppose, after the year end, that that actually reduced down as a portion of the total pie. The pie obviously increasing to 15% compared to 20% of the previous year. There is some other as well, which relates to some other third party products that are sold through the group.

17:52 And on the right hand side, you can see that we these are really the core markets by customer geography. We are obviously, quite a euro European centric group and UK Centric Group. We with some other sort of businesses as well elsewhere on on on sort of high growth, but from low base perspectives. We pleasingly, we saw all areas really advancing even The US, which is ever so slightly behind. That was just due due to two substantial one off elements in 2024 that didn't obviously weren't looking to reoccur underneath the bonnet. That's still moving very nicely ahead as well. So I'll probably finish there on the actual revenue analysis and move on to the overall income statement.

18:40 Probably moving on from the, obviously, the revenue elements at the top of the p and l, and working way way down somewhat. And as I said before, you're seeing the benefits of underlying positive operational gearing, And gross profit itself at 5.9 ahead, we're particularly pleased with. And we saw a higher mix of recurring, which really with those higher margins associated around the software compared to, for example, services at 89.6% compared to 89.3. So actually, slightly ahead of, otherwise very strong twenty twenty four as well. In terms of the overheads, there's sort of four main breakouts there. We have amortization, depreciation. Depreciation not changing very much by about point one in the year. Amortization is higher, about point five relating to amortization of acquired intangibles, and then amortization more generally for all other intangibles, primarily, of course, r and d and so forth as we increase the investment and the innovation activity that we undertake.

19:57 And also have share based payments, which in itself were relatively higher in 2025. 2024 was somewhat lower simply due to some staff changes, which led to some cancellation cancellation of share options as well. So a little bit different in 2024. The other selling and op an admin cost there, OpEx, on the face of it, somewhat ahead from twenty one point two to 24,600,000. However, if you isolate out the cost base of acquisitions, the underlying movement was about 1,500,000 or about 7% up. If I break that down a little bit further, the 7% really relates to three to 4% in salaries across territories that we had.

20:45 And then the rest, heightened levels of go to marketing resourcing, some of which are around sort of, yes, extra heads to some degree within that, but also more focused, higher value heads selling into into higher level enterprise sales and more senior individuals as as we, you know, really up our game further, yeah, on those on those fronts as well. Mentioned there, obviously, below the OpEx, the impairment of the subsidiary, and that was really that's used the visualization business, our non core business we disposed of after the year end. That involves that as a business obviously involves some rather significant stagnant macroeconomic conditions, very DAC related even though it was a global business, with some specific challenges around customer sector for the business to business to consumer side that effect that actually very different very different to the business to business side of the remainder of ELCO.

21:48 But we did take action post year end to divest that business to imagine buying it and but carrying value was somewhat impacted and hence the the write down there. Underlying operating profit before the impairment was actually 5,200,000 against 4.1. So actually 27% ahead. Probably the other couple of things to call out as unusual features is really one around the net finance expense itself. Net finance income is is a little bit down, but that's not to be unexpected in in a slightly lower, benign, lower interest rate environment. But the net finance expense itself has an element of discounting there relating to some contingent earn out consideration for the Irish acquisition that we made.

22:35 And you can see that balance in the balance sheet. So there is a time value of money adjustment, a discount that got it's taken through that line according to the accounting standards. And then the other element really to pick out in part also down to some of the sort of more, you know, inorganic moves within the business was the tax charge, which in itself would have been higher obviously on on higher underlying tax, but the

23:04 was a lit much much higher as an effective tax rate. And probably the two things that I would probably, well, two and a half things I would call out really, would be around obviously views itself as a as a impairment charge itself isn't taxable, tax deductible item. Secondly, views in leaving the group after year end meant that any kind of deferred tax loss credits that could be taken were reversed. So that was reversed back through the tax charge there. And then finally, a less generous RDEF tax credit governance scheme for UK R and D tax credits, which again probably impacted a little bit more significantly and will do so just to flag for the future going forward, being slightly just this generous than the previous smaller company scheme.

23:57 Nevertheless, overall, recurring,

24:02 and is a great mainstay for the business and adjusted profitability increasing as well. So I mentioned the EBITDA, and you can see the adjusted EBITDA there at 32%. Adjusted profit before tax, 35%. The tax and the EPS profit after tax impacted by some of those tax elements I mentioned, the average 24%.

24:27 Moving just on to the cash. Thank you. So, as I mentioned earlier, 2025 was a period of very well, continued, but actually even greater cash generation. And that's despite, you know, some acquisition and other related acquisition related costs, for example, for the Irish acquisition. We have no borrowings, as I said earlier. Those are repaid back in 2021. And what you see here on this chart is on the overall left hand side, there's the overall balance sheet movement, which is up with some FX elements also up by about 2,300,000. And on the right hand side, the main chart, you know, really reflects some of the key movements that you see going through the group cash flow. On that, I suppose we would say that some of of the biggest movements would be obviously the the acquisition payment of 4,600,000 for PMAC, taking in some cash as well within their business.

25:22 The overall investment in d for r and d of about 3,500,000. That compares to about 3,000,000 in the previous year. Working capital, that's 3,100,000 positive. That does include bringing in some elements for the acquisition as a one time element. So so for example, the deferred income of point point nine or so and 1,200,000 for the earn out consideration. But even if you were to strip those out, they would still be net net

25:56 positive on all that. Obviously, we paid out increased dividends, so that's about 900,000. And then there's sort of other adjustments for non tax related elements such as the impend as well. The bottom left hand chart is quite an interesting one because what we're seeing we saw was actually the free cash flow not only being 30% higher, was actually a 158% of operating profits, and that compares to a 154. So so the quality of earnings coming through is even more enhanced or is that another measure added for the first time here was really the free cash flow as a portion of overall cash generated from operations in in the group cash flow, and and that again grew from 59% to 63. So very, very pleased with the overall cash position indeed. So thank you very much for that. And then finally, just moving on to the overall balance sheet.

26:55 Again, balance sheet detail. I think it's it's important to you know, clearly, it's relatively robust, resilient, growing, and, you know, a feature of where we are vis a vis other other investments as well, of course. And probably most of the significant balance sheet movements here relate to either the purchase of PMAC as an acquisition or the views impairment or frankly just overall growth in the trading and scale of the ELECO group.

27:26 So for by way of example, I'll let you probably read through the ones on the right hand side at your own leisure. Like a rewarding bet, for example, goodwill increasing by 1.4. Well, it goes up by 3.2 for p max and down for 1.9 for views, and the remainder is FX. But if you get into the trading balances, then the trading balances are also there. Overall,

27:50 probably the other features that are a little bit more different from from the rest really would be around, for example, there's the contingent consideration of £1,100,000 or €1,300,000, which reflects the time and the the difference there between between the two, the point two sorry. £1,300,000, I beg your pardon, is the point two that you saw in the discounting in in the p and l. That's about €1,500,000.

28:20 And and then so we've had some significant movements in in so that's a new element, if you like, that's come in. I mentioned earlier the deferred income. The deferred income had by 39% or 31 once you strip out the PEMAC. So again, showing really good and predominantly for those of you who hopefully, you know, a good portion of you that know us, you know, many of our contracts are around a one year renew renewing sort of cycle. So therefore, you know, the vast majority of that deferred income coming through within the next year, within 2026 as well, always and has been building for for some time. Overall, an advance in net assets by about 14% and net assets per share as well, of course.

29:10 The basic levels of EPS affected by that fees impairment, but outside of our adjusted levels have increased by about 24% I mentioned earlier. And that's given the board, together with the outlook for the company, the confidence to move ahead and to propose that final dividend by a similar sort of metric of about 21% as well. And that comes on top of an increase of the interim dividend as well, so a total 20% increase for the whole year. And with that, I think that's probably me for now. I look forward to your questions later. I'll hand you back to Jonathan. Thank you. Thank you, Neil. That was great. So for this final part of the presentation, I'd like to introduce you a little bit about the built environment and some of the things we're seeing as well as our strategy, a bit on AI, and also how our customers are using our software.

30:05 So in terms of the built environment, we still see strong demand for companies digitalizing, digit you know, in adopting technology to improve their businesses and also, mitigate some of the risks. In terms of the market characteristics, there is strong customer demand whilst we may be seeing fewer buildings being built. There is demand in terms of cost pressures, the increasing need to adapt buildings and structures for for different use, the complexity and sophistication of buildings and where they're built as well, and the increasing requirements for sustainability and safe building practices.

30:54 There's also drivers simply such as population growth, which is driving demand for infrastructure and housing, and stricter regulations and, of course, data management as well as dispute resolution. And there's there's emerging technologies within the built environment, And and, of course, you know, those are relating to a lot around project management and time. There's 70% of projects globally overrun or or delayed or or delivered late. So therefore, is still and project delivery is still really much an area of investment within our client base as well as, of course, cost estimating.

31:42 And then data plays a big part due to, you know, the ability to use AI. It's customers aren't able to use it without clean data. So, really exciting for companies like ELCO. We see the construction market in The UK recovering. It's it's, unevenly recovering. It's probably a good way to describe it. We've seen infrastructure, utilities, public estates driving activity where while private housing remains sensitive to interest rates and inflation. But the common theme across construction as well as manufacturing and industrials where we we also provide software into, there's an accelerating demand for software that improves productivity and predictability, which is is really exciting for ELECO.

32:40 The geopolitical uncertainty may affect timing with uncertainty around supply chains and and, you know, energy prices and so forth, but we still see high software adoption rates during the uncertain periods or low construction output periods. We see an impact in one off discretionary service services and training, but the subscriptions remain resilient for us. Our strategy is to build on the established market positions that we have. We've got an excellent customer base over 8,000 businesses supported, and really, you know, a a proof point that we're adding value to those customers with very high retention rates.

33:33 I'd say to to achieve that, we have three key pillars to our strategy, the the center being innovation and technology. We're very much a technology engineer, you know, group of people that are engineers, very good at solving problems and and quite passionate about the the industry. So, you know, we we continue to evolve and enhance our software with with client alongside clients and alongside their demand as well. And that's proven to work really well for us, but also it's allowed our products to be sticky as well and really valued by customers. And and moreover, you know, customers also, like the fact that they can join a steering group meeting and and influence, you know, what goes into our next release or, you know, in future releases. So we very much involve customers through that journey.

34:30 And to the to the left, the go to market pillar is, of course, extremely important. You can have the best technology, but if no one's using it, you know, it doesn't doesn't really count. So we've really, I think, invested quite a lot of time and effort into our go to market in 2025 as we said we would. And, you know, we saw that journey of revenue start to to increase in in h one two rather throughout the year. Really, I mentioned the ARE strategy, so breaking down how we market and sell to attain new customers, retain existing, and and expand. So we spend a bit of time on building out customer success teams, value proposition playbooks, and also modules and new features that we can up sell to to be able to expand share of wallet within the customer base.

35:27 Partnerships is also playing a a key part, which interfaces with our m and a strategy, which I'll come on to in a minute. But, really, when we're looking at new technologies in the market or looking to develop new software, we're also looking at, you know, potential partnerships as well, which could accelerate our our road map rather than having to, you know, rewrite what's already out there. And premium support and also diversifying into our customer base. So historically, we would sell into a department or an individual within a business, and we've been strategically expanding that relationship to sell more enterprise led solutions and reach a different different type of audience within the customer base.

36:14 So that's progressing well. And then on the the right side, the mergers and acquisitions pillar, you know, we we've been executing with some acquisitions and a divestment in the period. We're really looking for three types of business. It has to be profitable and come in complementary markets, primarily Europe and The US, and proven technologies that advance our road map. And and when we're looking at opportunities for acquisition, we are also really testing our product roadmap as well and and, you know, how long or how much it would take to to develop those features versus acquiring. And then the third type is next generation technology, which could be from a different industry or sector that may be of interest that we could introduce into into our audience.

37:09 Ultimately, it needs to enhance value. It needs to be the right strategic and cultural fit So that that, you know, there's many factors that go into our assessment of acquisition targets. And across the the bottom, finally, is that is our growth what we describe as our growth platform, and it's essentially just ensuring that the business is operating in a very well governed, you know, profitable way with good systems. Obviously, hiring very talented people, we'd we'd we'd emphasize that more, since, you know, AI has been adopted. Having that expertise and and industry understanding in the business is really important. That's been part of our hiring as well as strong culture and values because the engagement of of people, you know, drives productivity.

38:06 So in in terms of AI, our strategy for AI is aimed at augmenting expertise, not replacing it. There's a shortage of expertise in the construction and and industrial sectors, and, you know, we really see that that those individuals that we're serving are key to making decisions and also for taking ownership of risk and project delivery. So we still believe that there is a need for humans in the loop, but not just humans, ex experts in the loop. And AI really serves as a quicker, accurate ability to observe data, surface risks, generate options and recommendations for humans to ultimately take action.

38:59 And we've heard it from from some of the investors on our road show that they they definitely don't want AI building their buildings. And, you know, I think it it is important to ensure that we keep people in the loop and and not just at the end of the loop, if that makes sense. We use we've adopted AI in three different ways. So internally, within our software development, we've actually seen a slight production of seven to 8% in in r and d through the year. We've also seen a trend to to bringing on more senior level developers as well, so fewer junior developers, so higher quality, again, reflecting the need for expertise.

39:48 And we've proven to to be able to upgrade the code stack. We've been able to leverage existing developers to write code in a different language, whereas historically, we'd have to, you know, hire someone that was an expert in in a different language. And we've built rapid prototypes, really exciting, interesting prototypes that we can share with customers and and get their view on, before going into production. So that's that's been excellent, really sped up productivity there. In terms of AI embedded into our products, we've we've been using some of the the the models that are available for for enhancing the the adoption of the software.

40:35 Also, we've built our our unique sort of business intelligence that we've developed in our software, we've built that out to be accessible via secure APIs, and that allows these AI models to interrogate and and actually run the software through, through the the AI model. So truly sort of a gen being part of that agentic workflow, which is really exciting as well. And then on the, third pillar, sales and and services, but also consulting, AI's driven productivity and and the ability to scale within those departments. So really fantastic for our business. We see see AI as an opportunity.

41:26 I think in terms of a defense and against competition, we see AIs as being quite a compelling been a quite compelling mode for ELCO. Our software, the the the sort of themes we have across our suite is that they're very the products are very feature rich. They're used by experts to create data and also manage data through the unique business logic that's built into the software. So that's been as a result, the software is very difficult to switch and take out of of the customer, making it very sticky, and we've seen that in very good retention rates on an ongoing basis.

42:12 And then the business logic that we've developed by providing that to to customers through a secure API, it's opened up the opportunity to partner with other solutions and then also interrogate with AI. So that's really defeats the the desire of competitors trying to replicate too. Think that the the market validation and the the the sort of customer footprint that we have and the testimonials make it really compelling as well. So AI really is it provides scalability and resistance for us, strengthens our products, protects our installed base, and also reinforces our position within the markets that are complex, regulated, and human led.

43:06 So finally, I have a couple of case studies to share. WC Rowe is the first one, a Cornish baker. They've been in business for forty years, long established, but they had a legacy maintenance database, which is like a, you know, like a spreadsheet of how they manage their maintenance. They they took the bold step last year to to start completely fresh. They installed Shire Systems, our c m CMMS software, computerized maintenance management. They built a new asset register, maintenance workflow, etcetera, from the ground up, And that resulted in reduction in downtime to 2.6%. 90% of assets are now inspected every month, and everything all their records are digital, and audits run very, very smoothly as a result.

44:00 Their their planned maintenance workflow that they've they now implemented has improved their production output. But the next stage on that sort of technology adoption maturity journey that that we're taking customers through is to move towards predictive maintenance. So by identifying the trends of their maintenance patterns, we can use that to inform forward looking interventions and be more predictive. The next example is actually a partnership example where we've partnered with a company called Accumine.

44:45 Accumine provide building intelligence, specialist insights for projects, construction projects, and we've built a partnership and an interface with ASTA, in fact, ASTA Vision plus. ASTA Vision ASTA is our scheduling software, so it's it's core to to a project, any project, you know, what is what is planned, what is delivered on-site. Aster Vision Plus is our platform for scheduling with API integration. So with that partnership and the API, Acumine can now draw on Aster data in real time. So this is project information across a portfolio of projects, and they're reporting that to senior level management, highlighting potentials for delays before they actually occur.

45:39 So, traditionally, you know, a report would go to senior management when a delay has happened, and then, you know, intervention can't be taken to to mitigate against that when the the delay's already been recorded. So this is really trying to trying to prevent and and take actions before the delay happens. Acumine, the week before last, they announced that they a three year deal with Robertson Group, which is the largest UK family owned construction business, which is also an Aster customer. So we see this type of partnership providing reach within the organization. Our products are, you know, working in the planning department. They're giving us further reach into c suite.

46:25 And and also, it encourages customers, really gives them a good reason to standardize on software as well across all of their projects so they get that visibility across their portfolio. So I think that concludes the presentation. Perhaps I'll hand back to Jack to open us up for q and a. Perfect. Thank you both for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions via the q and a tab on the right hand side of your screen. For your reference, a recording of today's presentation will be made available on the Investor Meet company platform shortly after the meeting's ended. But for now, guys, as you can see, there are a number of questions which have been submitted.

47:11 Jonathan, can I please ask you to read out the questions and give your responses where appropriate to do so? And I'll pick up from you at the end. Yep. Thank you, Jack, and thanks everyone for your questions. There was one that was pre submitted, so I'm gonna read that one first and then move on to the others. So the question is, are you seeing any effect from the supposed threat of AI disintermediation of enterprise software? For example, client feedback to that end or elongating contract deliberations as clients weighing up their options? So it's a good question. And, of course, we see we see workflows being improved through AI.

47:58 I think as as presented, our products are very much mission critical, and the business logic that we've built that supports that that function makes them very difficult to replicate, and we've tried. You know, we've it it's it's really years and years of r and d that's gone into that. So with AI, it could, improve interface or it could improve, you know, the way forms work or, you know, the surface level capability, but the, the real sort of, intelligence and and business logic is is very difficult to to replace with AI.

48:44 It it's really I think it's driven more adoption of enterprise solutions. So we're seeing a positive benefit to the desire to use AI. I think our clients aren't explicitly asking for AI, but they're wanting they're wanting to be able to to leverage it through their data. Neil, was there anything I missed that you think on that or No. No. I I think the only thing I I'd add is, yeah, when we've I suppose when we've been on the m and a trial, we've seen businesses that cosmetically might look good, but they don't don't get down to that from that surface level as we say, jumping to the the underlying business logic.

49:30 Yeah. So it's it's very much the case around, you know, that deep sector expertise and the sort of defensive mode, and the reputation and track record and the relationships we have with our customers. Yeah. Yeah. Thank you. The next question's from John m. Thanks for the presentation and congratulations on the great results. A quick question. This is a great performance in the built environment that I think is quite weak. Is that your view? It's weak? And if so, would you get a tailwind as it improves, or is it quite strong and stable for your customers? Another good question. The yes. Construction output is is weak when you measure productivity even over the last decade, productivity on construction, it's flat, so we're not seeing improvements in productivity.

50:31 Therefore, you know, margins continually base and continually being squeezed, and risk risks obviously heightened as well. So our customers are are very brave. They think that they have challenges, but they're turning to software to really to mitigate that risk, to get better visibility, to measure what good performance looks like, and implement that across portfolios, and obviously manage and monitor costs as well. So we I think we're seeing we continue to see an adoption of technology, and that's, you know, that's why despite a weak market, ELCO is performing well.

51:18 When the market recovers, you know, we I think we'll still see, you know, similar similar growth. You know what? And it's it's during these times where I guess companies are looking to reduce waste. When they scale up, they have to they have to resource up, so they have to move move quickly. And, yeah, we could see some some link to that. But, historically, when we measure construction output versus our sales or or or revenue, the only area of real impact is in the service line. Although, you know, apart from that, we still see software sales continuing at a steady pace.

52:08 So thank you for that question. The next one is from Andrew f. Neil, I'm gonna let you answer this one. It's the question is, what was the views trading loss in 2025? Yeah. So views, the visualization business that we that we disposed of. When we disposed of it, we we we gave some metrics for for 2025, and I think we disposed of early twenty six. One of the one of the ones that we did mention was obviously the loss before tax of 1,300,000. And so that's probably my start point from my answer back to you. I think if I'm maybe slightly over reading into it, I think you'll talk about the trading element of that. And it is fair to say, well, I don't have all the numbers in front of me immediately, not right now, that the that 1.3 did reflect some one off elements.

53:04 We, as a business well, as a views business, obviously, we talked about the challenges and things that they face and the sort of very specific nature of that business relative to the rest of the ELCO portfolio. And we for us, while it was not quite performing in 2024 and was slightly negative, although it also had some other one off elements around it, For the most part, that did definitely become more pronounced in '25, and particularly in the second half of twenty twenty five where as the disclosure made on the RNS said, you know, it was it was one way or certainly require requiring sort of cash input into the business, you know, you can do as a holding company, of course, but so you you tend to prefer it to be the other way around.

53:59 And so yeah. There was someone on and so, for example, I can disclose there were two two rounds of restructuring to in sort of progression to right size the business within that within that number of 1.3. It is yeah. And the business now, I suppose, to move on. And therefore, there's a couple of elements. I think I think, obviously, clearly, we saw a path through, to restructuring further and and and getting it back into profitability, but very much a distraction and consumption of management time and resource and effort by everyone concerned, actually or elsewhere in the group.

54:46 Also, it's all the level of confidence that the management felt that they could take it forward and, for us, limit our downside risk and focus on higher growth building life cycle businesses as well. So that's really a little bit more color around around disposal. Yep. Thank you. Next question related to views from Jeff p. So following the the views disposal, is the remaining CAD and visualization businesses considered core or available for disposal? So, I mean, I think of of CAD and visualization, fees being the visualization visualization, the other businesses being visualization. You saw when I went through the revenue slide that that that moved down as much, you know, lot lower growth rates in in general, but obviously that one particular business not doing so well to about 15% of the overall revenues.

55:46 Going forward, the remaining sort of well, there are, in theory, three kind of businesses, but but two of them are are very small indeed. So it's just one of the one of the related one will be about 5% of overall group turnovers. They they all make make money and cash for the business. So we're not talking about a view situation or anything like that. They are niche businesses, long held, long understood, very excellent sort of staff and and, you know, fantastic customer bases, of course. So, you know, you wouldn't expect me to say anything different to that per se, but it it it certainly is the case that, obviously, building life cycle remains kind of the the greater focus for the business going forward. Each of those businesses, while profitable and cash generating, also are able to, you know, if you like, generate those returns and cash for their ongoing improvement as well within the business.

56:52 Yeah. That's perfect. Thanks. Yeah. The final question from James s, how do partnerships influence revenue growth? What's the visibility? And do partnerships potentially make m and a targets? Great question. And, yes, yeah, partnerships prove that, you know, you can you can sell into an an existing customer. So it does make an opportunity to, you know, to to come together. The how the partnerships influence revenue growth is we really, it embeds it it embeds us further within the customer, so it really reassures recurring revenue and future revenues.

57:42 It also that it also allows us to expand and upsell. So through the partnerships, once we're part of an ecosystem of of products within the customer, they they look to standardize and look to use that software throughout all their projects. When we when we win new customers, we they generally only buy, you know, single seat to use the the software on one project or two projects in the first year, and then they expand when the next project ends. They'll they'll expand further and further. So that's how we've built our customer base. It's been over many years of of working with customers and expanding the adoption of software.

58:30 Therefore, you know, long term value, but it does it does result in, you know, those existing customers are the ones that are really driving our our business forwards. We're obviously always adding new, but that's about eight to 9% of the revenues is the is the new business, and the the rest of it is through the existing customers. Great. So I think that that was the last question. Brilliant. Thank you both for answering those questions. Before we ask investors to share their feedback, which I know is important to you, Jonathan, if I could just ask you for a few closing comments to wrap up with, that'd be great. Yeah. Thank you. And thanks, everyone, for your questions again. So in summary, 2025 was ahead of market expectations, solid year of progress for ELECO.

59:22 We continue to to focus on the recurring revenues, 81% of the total. We've got good good future view of revenues as a result. M and A activity will continue, has continued, and, you know, we're well positioned for the future, so we remain confident in the year ahead. And just a a quick thank you again for everyone who dialed in and really appreciate your feedback. It it does mean mean a lot to us. So thank you. That's great. Thank you both once again. Ladies and gentlemen, could ask that you don't close the session just yet as you'll now be automatically redirected to a page to give your feedback, which helps the company better understand your views and expectations. On behalf of the management team, we'd like to thank you for attending today's presentation. I wish you all a good afternoon.