Eleco prepares for 3D visual ‘explosion’

Veteran entrepreneur John Ketteley, executive chairman of building systems and software group Eleco, is convinced the £7.6 million the company spent in December buying project management software specialist Asta Development will prove one of the best investments it has ever made.

He is adamant that builders and architects alike must be braced for major changes to the way they do business and insists that Hertfordshire-based Eleco should be in the vanguard of this development, proclaiming a coming ‘explosion on 3D visualisation’ for efficient adaptation, modification and precise pricing of design plans in a fraction of the time such processes have hitherto taken.

Asta is a crucial part of Ketteley’s strategy. Eleco paid £3 million in cash and £4.7 million in shares for the company, which has sold its project management software in India and is believed to be playing a part in producing a masterplan for the staging of the 2012 Olympic Games. Ketteley says Asta, whose clients include Sweden’s leading construction group, Skanska, ‘has not lost a customer in ten years’, will be earnings enhancing from the outset and represents ‘a cracking acquisition’.

Asta’s software was used for Arsenal’s Emirates Stadium – ‘but not the [delayed and over-budget] new Wembley’. It has been bought by US defence giant Lockheed Martin and could play a part on the space shuttle. The company’s Asta Powerproject product is a market-leader in the UK and is used by 43 of the country’s top 50 contractors and nine out of the top ten housebuilders. The London Eye and Amsterdam’s Schipol airport have also used Asta software.

Paradoxically, Eleco – which moved its shares from the Full List to AIM in March last year – has lately been doing better in other areas. For the half to December the company increased pre-tax profits 17 per cent to £2.25 million on interim turnover nine per cent ahead at £28.9 million; this was despite a £442,000 loss in its own software division, where its Swedish Consultec arm, bought in 2004, provides project management products.

Ketteley, a former investment banker with UBS who held a string of chairmanships including BTP, Country Casuals and Prolific Income before taking the helm at Eleco, reflects: ‘Eleco has good software of its own, but needs the right management to make the most of it.’

Asta’s 44-year-old founder Michael McCullen turned his financially sluggish ‘lifestyle’ company into one making £980,000 last year; and since Eleco’s acquisition of Asta, Ketteley has put him onto the board as head of construction software.

There he will complement Dan Naylor, new chief executive of visualisation software. He is seeking to exploit the company’s ‘Bidcom’ estimating software in the UK market as well as the 3D visualisation software, which will also be linked to heat-loss software.

Elsewhere in the business the pre-cast concrete products and timber engineering operation put in ‘strong’ performances, with the concrete side recently invited to quote for the prison service. However, high winds delayed some roofing and cladding jobs, and soaring steel prices – which led in some cases to a virtual rationing of steel – held up several engineering projects, forcing the company to hold stocks of other materials for longer than it had planned.

First-half net assets nearly doubled to £17.4 million while net cash fell from £4.6 million to £1.4 million, reflecting the impact of the Asta deal; Eleco should now be building back its cash position. The company has a healthy order book and reports strong levels of enquiries on the building systems side.

Eleco made £4.65 million pre-tax in the year to last June on £55.2 million turnover. House broker Charles Stanley sees £6.05 million pre-tax this year, with £7.17 million on the cards for 2007-08, placing the shares on an undemanding prospective p/e ratio of 11.8. They are a speculative buy.