FY 2020 adjusted PBT up 10% as H2 sales turn positive

Amid some of the toughest conditions in a century, Eleco impressively reported today that it had ended 2020 strongly. With H2 turnover climbing +6% sequentially vs H1 and +2% LFL to £12.9m, and FY performance broadly flat (-1%) at £25.1m. Moreover adjusted PBT rose 10% (at least) to £4.6m, reflecting favourable operating leverage & tight cost control. Similarly, pushing Dec’20 net cash up £5.0m to £6.1m, worth c. 7.4p/share (£1.1m LY, £4.4m June).

Encouragingly, nearly all the growth appears to have come from strategically important cloud based solutions, subscriptions & pure SaaS (+5%) thanks to new client wins & up/x-selling. In turn, lifting FY20 recurring revenues to above 56% of the group vs 53% LY. This improving mix was also partly due to declines in face-to-face services (Est -10%) and perpetual licenses (Est-5%).

Going forward, we anticipate continued progress in 2021 and accordingly value the group at a conservative 115p/share. Equally at 85p, Eleco shares trades on modest 2020 EV/sales & EV/EBITDA multiples of 2.5x and 9.5x respectively, representing a >50% discount to BuildTech peers.