Operating Review

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In this “question and answer”-based Operating Review, Jonathan Hunter, our Chief Operating Officer, outlines what he believes sets Elecosoft apart from the competition and describes some of the opportunities for the Group.

Why do customers choose to use Elecosoft solutions?

At Elecosoft, we have well-established software applications which are highly regarded by a large number of high profile building companies, applications which they have been using for a number of years. The relationships my colleagues have built with our customers are in appreciation of the challenges that they face. Our objective is to add value in our customers’ businesses and to the industry, through the use of well-developed technology and exceptional services. As a result, Elecosoft’s applications have been built on many years of research, customer engagement, consultancy, planning, refinement and code writing.

As our software solutions are being continually refined to provide the best technical tools available, we have clear evidence that is the reason customers choose us in the first place and then stay using our solutions for years to come.

Where is BIM used in the construction value chain and beyond?

BIM is being used at the early design stages of the building lifecycle; we have seen the adoption of the processes by many of the main construction contractors and increasingly we are seeing more medium-sized building companies and house builders adopting the technology as it becomes more affordable and delivers tangible benefits.

We understand that a key part of any project is managing costs; the greater accuracy we can achieve at the start of a project, the higher the chance of keeping within budget. That is why our software is used by Estimators and Quantity Surveyors to help them build rugged and accurate cost plans that can exploit the power of 5D project planning.

Elsewhere in the building lifecycle, property owners use our IconSystem® software in conjunction with their architects and designers. Once a building is operational, we partner with facilities management and maintenance providers, connecting via secure APIs, to allow data to be read from our systems for ongoing management of maintenance of a building.

We hold a significant market position with the main contractors and subcontractors. Although our software is used prior to construction, I see opportunity to continue to gain closer relationships during the design and specification stages and manage the data collected throughout the construction process to the end client for the maintenance throughout the operational life of the building.

Analysis on Building Life-Cycle costs has identified that as little as 10 per cent of a building’s cost is related to construction, with circa 90 per cent being related to maintenance.

By passing BIM data from the build programme, through to the operations and maintenance phase of the building lifecycle, the property manager would know where all the services, fixtures and fittings are, together with installation dates, certificates, service intervals and so on; all from the original construction details. Traditionally, an archive of documents is delivered to the building operator along with the keys.

Increasingly, and in the near future, the use of BIM construction data will be used to support the predictive and automated maintenance schedules during the building life.

What have been the primary developments in the market?

Digitising the building industry means managing and delivering large volumes of data. The trend toward consolidating the number of software systems and storing of data into a Common Data Environment (“CDE”)
has been an increasing movement. Correspondingly, our customers are seeking access to accurate and live reporting to allow decisions to be made on accurate information.

As the industry continues to modernise, hosted and web applications are playing an increasingly important role in seamlessly transferring and communicating this data. Elecosoft is right at the forefront in the UK, which is itself at the forefront of BIM. BIM is a truly international initiative and construction companies must modernise using intelligent building information to prevent replicating effort and to support the collaboration with the disparate parties involved in a building project.

BIM take-up is increasing beyond the large construction projects, as technology offers more affordable BIM solutions. Our technical teams at Elecosoft have achieved amazing results by integrating BIM designs into our appropriate applications. Previously there was a requirement for bespoke data sharing between systems and technical Data Managers to control data. What our technical teams have achieved is strict data integrity by providing BIM in a single application; as a result making BIM more affordable. Subsequently, as I already mentioned, we are seeing the adoption of BIM methodologies and technologies filter down to mediumsized companies.

What have been the highlights of the last financial year?

In 2017 we continued to work intensively on our strategy to become recognised as a leading provider of software to the AECO industry. This is evidenced by our dominant market share in our core territories, which includes over 90 per cent of the UK’s leading construction contractors, seven of the UK’s top 10 retailers, 40 of Sweden’s top 50 construction companies and 95 per cent of German floor manufacturers. As well as continuing to build on our extensive technical know-how, we continue to align our organisation to global trends and maintain strong customer relationships. Elecosoft has a network of strong recognised product brands and further progress was made in 2017 to strengthen our company’s brand in our core markets. The consolidation of our websites to elecosoft.com, elecosoft.se and elecosoft.de has proved successful as website interest continues to reach record figures with exposure to all of our brands with every visit.

My marketing colleagues concentrated efforts to unify our brand, as part of our move towards greater centralisation and collaboration, to put ourselves in a strengthened market position. This feeds into our
strategic objective of offering a full solution for businesses. Rather than product-centric marketing, in recent months we have been moving to a portfolio approach, with our communications now all referencing the Elecosoft Group.

Our customary investment in research and development, at a rate of circa 15 per cent of revenue, continues to be a cornerstone to maintaining our intelligent solutions. Future technologies have played a focus in 2017 with Software as a Service (“SaaS”) collaboration and business intelligence web applications scheduled to be launched in 2018, in addition to updates to our existing applications.

In parallel, the Board’s reseller strategy has focused on growing Elecosoft’s geographical presence through controlled investment and risk. We have seen encouraging sales in Australia, where our stair manufacturing software, Staircon®, has been sold directly from Europe. My colleagues report that one of the Australian orders is the largest Staircon order to date. Staircon is typically installed when a factory upgrades its CNC machines, which can mean long sales cycles but also long-term customers and with that, long-term revenue.

Award wins included our customer McCarthy & Stone (the UK’s leading retirement house builder) winning the Digital Construction award with the use of our IconSystem building information management solution. We also won the Best use of IT in a construction project award with the same customer. Finally, we were recognised for the fourth consecutive year as having the best project management and planning software at the Construction Computing Awards. While the awards we receive are commonly related to our well-regarded technology, our support and client services teams must be applauded for working exceptionally hard to deliver the tangible value to our customers. They ensure that the adoption of Elecosoft technology within our customer’s organisation is seamless and painless to their operations. Evidence of the commitment to client services is demonstrated by the high customer retention and by the high level of maintenance and support renewals which, together with services income, combined to account for 71 per cent of total revenue.

What is the Group’s vision, and priorities to achieve it?

The Group’s ambition remains to be the market-leading technology provider in the industries we serve. We believe that to achieve this and to build long-lasting customer relationships, we must excel in every aspect of our business and continue ‘Building on Technology®’. Accordingly, my colleagues are challenged to iteratively improve in all areas of their work.

A key priority for Elecosoft is to deliver intelligent and efficient working practices through its software and services.

We are proud of our customer base which provides evidence that our technology delivers what the user requires. We continue to focus on communicating and delivering our value proposition, whether through direct sales, channel sales, or cross-selling. We have developed our solutions through many years of close discussions with customers and, as a result, we hold a strong market position in our core markets of UK, Sweden, Benelux and Germany. 2017 delivered strong growth in revenue from existing customer which reinforces our commitment to building customer relationships and maintaining loyalty for a robust future.

Download the 2017 annual report

The Elecosoft annual accounts for the period ended 31st December 2017 are now available to download.

Shareholders can elect to receive hard copy shareholder documents at any time by informing Link Asset Services at The Registry, 34 Beckenham Rd, Kent, BR3 4TU.