Elecosoft transformation complete

"The transformation of Elecosoft into a profitable international construction software specialist is complete," a proud executive chairman John Ketteley told the City Monday. But despite a surge in profit last year, chief executive Nick Caw is on his way out of the AIM-listed firm after less than two years in the job.

"It's about a change of emphasis," said Ketteley of Caw's departure, "it's like having a football team that's playing OK, but changing one player might make the difference." It boils down to Caw being very software-focused. Jason Ruddle, who joins the board as chief operating officer, is steeped in construction and software, and construction is where the company makes its money.

Indeed, last year Elecosoft increased pre-tax profit by 47% to £1 million on revenue flat at £15.3 million. Strip out the impact of a strong pound - the Swedish Krona and euro account for over 50% of group sales - and sales rose 9% to £16.6 million, driving profit up 54% to £1.1 million. Saving over £100,000 of interest costs following a refinancing certainly helped.

There was strong sales growth in the UK where sales jumped 13% to £4.9 million, and in the Rest of the World, up 72%, which includes a 250% rise in US revenue to £571,000. Chiefs tell us that the 10 resellers they have in America could triple in the next 18 months.

Elsewhere, Scandinavia and Germany were flat at actual currency, but up 2% and 4% respectively at constant exchange rates.

Crucially, net borrowing fell sharply, down 61% to £0.8 million. That's because of a big drop in loan repayments and decent free cash flow. Elecosoft also received £862,000 from the sale of its non-core architectural consultancy business in Sweden in December.

"The debt should be paid off during 2017 and a share capital reduction has paved the way for future dividends," says Lorne Daniel, an analyst at house broker finnCap. "The outlook is bright, with significant revenue and profit growth expected, in line with market expectations. Thus our full-year 2016 forecasts remain largely unchanged and we reiterate our 35p target price."

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