Profits jump 25% April YTD

Elecosoft have reported that although revenues declined 3% April YTD (2% constant currency: ED estomated split -14% month vs +2% Q1’20) PBT had jumped an impressive 25% YoY – as tradeshows were postponed and less money was spent on travel, hotels, marketing & other discretionary items.

Altogether, lifting year-to-date EBIT margins to circa 21% (ED estimate) vs 16.8% H1’19, and closing April with net cash of £3.1m, vs £1.1m in Dec’19.

Customers are also accelerating their own adoption of cloud & SaaS applications. Which in turn, helped to drive ELCO’s recurring revenues (re maintenance, support, SaaS) 6% higher April YTD, representing approx. 59% of the group (vs 56.8% FY19).

Looking ahead, given the more stable macro environment, we hope to reintroduce our forecasts and valuation - either in September at the interims, or perhaps at the H1 trading update in late July.

The stock at 77p appears attractively priced - trading on 2.4x 2019 EV/sales compared to typical industry multiples (pre COVID-19) of 4.0x – 7.0x. With the two closest rivals, Nemetschek & Autodesk, presently priced at >10x EV/turnover.