Eleco Public Share Discussion Threads

[smithie6] 25/3/2019 22:37

is it £1mn of capitalised costs ?

if one deducts that from EBITA the 5.7mn no. reduces to 4.7mn

& 1/5 tax...~900k
reduces it to £3.8mn...not as exciting as £5.7mn.

is it a p/e of around ~15 (60/3.8)

is the share price perhaps about right ?
noting the lfl growth in turnover of 5% excl currency effects

[ansc] 25/3/2019 12:54

Company broker (finnCap) have increased their target price - 93p from 88p. Their estimates for 2019 (2018 actual):- T/over £27.6m (£22.2m); EBITA £5.7m (£4.8m adj); EPS 4.5p (3.8p adj); DPS 0.8p (0.68p); pre-tax ROCE 18.1% (15.8%)

[illiswilgig] 21/3/2019 14:01

OK, good point, I didn't check that, thank you.

[smithie6] 21/3/2019 13:32

I think that the increase in the total of advance payment for future use of products not yet provided....ie. 'deferred income'

is due to the addition of the relevant numbers from the 2 acquisitions for the first time rather than any growth at ELCO's previous business

[smithie6] 20/3/2019 22:13

I agree with you & also see ELCO shares as not cheap...& also rate them as a hold

[illiswilgig] 20/3/2019 19:25

No I think my writing style is way too verbose!

So I will try to keep this one shorter.But that's not a promise.

Yes. I agree - this year's growth in turnover is too low, rescued only by the acquisitions (which may of course turn out to be a good buy in the end).

Shame (my understatement) that they are not more upfront about this in the results. There may be a reasonable explanation - but it doesn't help that they appear to dodge this?

I can only speculate on the large increase in adjusted operating profit relative to turnover.

My (very limted) understanding is that they are moving business model from being a seller of boxed software to Software As A Service type model with annual licence fees together with the provision of maintenance and service contracts.

These annual licence payments are very high margin. There is no cost associated with them?

While the Software as a Service type model tends to improve recurring revenue with annual licence payments and services it does have the big disadvantage that the upfront payment is much reduced.

So it is possible that the increase in annual licence payments is driving up the operating profits because its very high margin at the same time as initial sales revenue is held back by the much lower upfront payment?

The 1.2m in deferred income (cash received but not booked as turnover) as prepayments for maintenance is much larger than the previous year and so supports this view?

err - I think still too wordy?

Bottom line - increased - as a higher percentage of revenue is licence payments, but increase in sales is held back by lower upfront payments on signing the contracts?

I think I might have got it that time?

I am not saying this is the case - but it might be. And here is where the cashflow gives me some reassurance, as the increased cash is real, matching the level of adjust operating profits, somebody did pay it, rather than an accounting adjustment?

You'll understand that I don't use twitter! Way to brief for me :-)

However at 75p it's not cheap. It's a hold for me at the moment,

cheers

[smithie6] 20/3/2019 16:25

...thanks for taking the time to give a politely worded expansion/explanation

..I think I understand the general point of the first part....but overall I think your post is quite difficult to follow...although maybe that's my fault/deficiency not yours !

----

a pt I have made in recent post(s) is that the lfl growth in revenue was ~5% I think....which reduces to ~3% if one assumed that the real world general price inflation was 2%

& that 3% is not growth imo...
& that the growth that the prelim results states is only that resulting from acquisitions but it does state that, ie. that there is some intentional spin in the text in the prelims which imo is misleading or...wrong.
---

Im interested to know how the adj. profit generation increased by so much with such a small increase in lfl turnover.

[illiswilgig] 20/3/2019 14:28

Smithie - my apologies if you thought I was expressing an opinion - that was not my intention.

I was intending only to address the figures.

My comment regarding the cashflow seems to be open to misinterpretation and badly worded.

Let's see if I can do better. Though I may well fail just as badly.

Normally I am less than convinced by adjusted figures. I tend to take note of the unadjusted figures just as much, if not more.

In this case the cashflow exceeds the unadjusted figures - by quite a lot - which I find reassuring - in the sense that the adjusted operating profit may have some value.

It is not intended as a opinion just a badly worded statement that the level of cashflow backs up the adjusted operating profit figure. ie that the statutory figures are depressed by the exceptionals rather than the adjusted figures being inflated.

On the other hand - if they keep acquiring other companies regularly then regarding the acquisition costs and goodwill as exceptional is questionable. In which case the statutory operating profit carries more weight for me.

Hope that helps.

With regard to the 'growth phase' comment - again I am referring to the cashflow providing confidence in the accounts not the level of turnover - I used the descriptor 'not huge', whereas you state not so good.

Sadly I think the irony in my descriptor did not come over as intended!

Once again - my apologies for putting it so badly.


cheers

[deanroberthunt] 20/3/2019 07:17

Bear case 77p, Bull case 182p....fill ur boots

[edmonda] 19/3/2019 18:05

after today's record results for FY 2018, updated research note now published by Equity Dev with unchanged fair value reflecting their exciting market opportunity

Freely accessible here:

[losses] 19/3/2019 16:35

Added more today

[smithie6] 19/3/2019 15:14

your post is misguided imo

imo you should really look at lfl perf. since that is most of the turnover & profit & gives lfl/organic performance

& that is for turnover growth lower than 11% (lfl growth was 5% if exclude the effects if currency exchange movements)

while the adj. profits have grown nicely (growth in lfl profits = ??)...the lfl turnover of ELCO is up 5%...if inflation was 2% over the countries of the clients then the underlying growth would be

~3%...

which is not so good imo " for a company in a growth phase"
...saying "growth phase" while producing only 3% lfl growth after inflation...is a white lie imo...heavy spin...

3% is almost flat lfl turnover....with the reported/claimed "growth" only being due to acquisitions....which cost money to buy...

[illiswilgig] 19/3/2019 14:45

Total revenue up 11%

Operating profit also up 11%

Which for a software company is not too good as there should be quite some leverage of turnover through to the bottom line.

Turns out that 'acquisition expenses' (689k) and amortisation of acquired intangibles (595k) cause the big difference between the hike in operating profit and adjusted operating profits.

Operating cashflow of 4455k versus last years 4167k is an increase of 7%, which is not huge but the cash being generated does exceed both the operating and adjusted operating profit figures which is reassuring for a small company in a growth phase?

cheers

[ansc] 19/3/2019 13:34

The person to pose that question to is obviously the company FD, Ben Moralee; he's based at their Head Office (tel: [phone]). A very friendly chap and I'm sure he would speak with you.

[smithie6] 19/3/2019 12:14

ansc

have you ground thru the results....how are they getting the claimed underlying profit up by such a big %...with so little increase in turnover ?? (was it 3-5% ??...with/without exchange differences ??))

by reducing costs ??, if lfl turnover has hardly changed ??

---

Im out having my morning coffee and not yet tried grinding thru the numbers...just had a quick look earlier on my mobile and saw the same +ve adjusted profit numbers that you mentioned

[ansc] 19/3/2019 11:47

As usual, punters (they're not investors in my eyes) unable to see beyond the end of their noses and appear obsessed with what they read as the negative bits of the announcement hence the ludicrous mark-down in the share price What really matters is looking forwards not backwards and of greatest importance to me was this statement:

'Adjusted operating profit for the year, before deduction of exceptional items and amortisation of acquired intangible assets was GBP3.9m (2017: GBP2.8m), an increase of 41 per cent; adjusted earnings per share were 3.9 pence (2017: 2.9 pence), an increase of 34 per cent.

I've been invested in the company for 19+ years and don't see any reason for jumping overboard based on this report.

[chrisdgb] 19/3/2019 09:50

amazing opportunity to take advantage of short term selling to build long term position, very happy with results, I see 150p take out in 3 years.....

[smithie6] 19/3/2019 09:38

maybe some sellers didnt like the reported drop in EPS but that was due to some exceptionals like acq. costs

adj. EPS is up...which is good

or maybe some sellers were hoping for more organic growth

[clangor2] 19/3/2019 09:21

You'd think the Elecosoft ship was sinking seeing the amount of selling this morning. Personally, don't see much wrong with the announcement and with no end in sight of the Brexit farce plus the continuing confidence of chairman Ketteley ["Brexit may well continue to effect markets in 2019. However, given the strength of Elecosoft's finances, the international spread of its markets, and the creativity and quality of Elecosoft's market leading software portfolio, I look forward to the year ahead with confidence."], I'll be staying on board.

[smithie6] 19/3/2019 09:08

any comments on results ?

[clangor2] 18/3/2019 11:52

Can't get a price to buy any online at the mo but willing to take 5k @ 77.75p for those interested. With the results due out tomorrow, why would anyone want to sell ?

[ansc] 14/3/2019 18:34

Warfel Construction Co (USA) uses Powerproject:

[ansc] 08/3/2019 18:09

Wates Group uses Powerproject on V&A Museum renovation:



[Extract:] “You simply couldn’t do a job like this without a tool like Powerproject because it was so multi-disciplined, on so many different levels, with so many interfaces.”

[clangor2] 08/3/2019 15:06

With the chairman sounding confident in the trading update at the end of Jan, decided to tuck a few more under the mattress earlier this week. Had to pay 71.9p but looks as if timing was fortuitous. Could go a lot higher before the results announcement (imo).

[ansc] 05/3/2019 09:53

Results announced on 27th last year; bearing in mind that the company has acquired two further companies since then (and needed to integrate both), pleasantly surprised that they've managed to bring forward the announcement by eight days.