Eleco plc (AIM: ELCO) profit jumps 160% as £207.6m Accel-KKR takeover caps SaaS shift

Eleco plc (AIM: ELCO) has delivered a dramatic set of interim results just five days after agreeing to be acquired by Accel-KKR-backed Avocet Bidco Limited. First-half revenue increased 8% to £19.9 million, annualised recurring revenue rose 16% to £35.5 million and adjusted EBITDA advanced 30% to £5.6 million. Statutory profit before tax increased 160% to £5.2 million, demonstrating why Accel-KKR was willing to offer 235p per share for a business that had closed at just 134.5p immediately before the takeover announcement.

Eleco shares were around 229p during September 15 trading, essentially unchanged and approximately 2.6% below the 235p cash consideration. The stock is therefore no longer trading primarily on quarterly software fundamentals; it is trading on the time value and completion risk attached to the recommended acquisition.

How strong were Eleco’s results before Accel-KKR agreed to pay 235p per share?

The improvement reached well beyond revenue. Adjusted operating profit increased 89% to £5.1 million, adjusted profit before tax rose 93% to £5.2 million and adjusted basic earnings per share increased 85% to 5.0p. On a statutory basis, operating profit more than doubled to £4.0 million and profit after tax increased 156% to £4.1 million.

Recurring revenue quality strengthened at the same time. Total recurring revenue increased 14% to £16.9 million and represented 85% of total revenue compared with 81% in the prior period, while organic ARR growth was approximately 23%. Eleco also remained debt free and held £15.4 million of cash despite acquisition payments, deferred consideration, investment in the Veeuze management buyout and an increased dividend outflow.

Those figures provide useful context for the takeover premium. Accel-KKR is not acquiring a distressed software company whose public valuation collapsed because growth disappeared. It is acquiring a profitable, cash-rich recurring-revenue platform at a point when operating leverage is becoming increasingly visible.

Why did Accel-KKR offer a 75% premium for Eleco?

The 235p cash offer represents a 74.7% premium to Eleco’s 134.5p closing price on September 9 and values the fully diluted share capital at approximately £207.6 million. The implied enterprise value is around £192.4 million, corresponding to approximately 20.2 times Eleco’s EBITDA for the year ended December 2025. Investors representing roughly 45.2% of the shares had provided irrevocable undertakings or letters of intent supporting the transaction when it was announced.

Accel-KKR’s investment thesis centres on Eleco’s transformation from a legacy building-products group into a specialist construction-technology software platform. Products now cover planning, scheduling, estimating, asset management and facilities management, while the group has progressively moved from perpetual software licences toward subscription and SaaS revenue. That shift explains why recurring-revenue growth commands more strategic value than historical hardware-oriented business metrics.

Artificial intelligence and cloud investment also create a capital requirement that private ownership may accelerate. Eleco has released new products including Asta Vision Plus and Asta Estimate while integrating Kivue, and Accel-KKR has indicated that it intends to support further technology and international expansion. The buyer appears to be paying for the future scalability of the software platform rather than merely capitalising current earnings.

What does the 229p Eleco share price say about completion risk?

A share price near 229p against a 235p cash offer leaves a gross spread of approximately 6p, or about 2.6% of the takeover consideration. Such a spread is normal in an agreed transaction because shareholders still face the waiting period, shareholder approvals, court process and residual risk that completion does not occur. The scheme is expected to complete during or before the first quarter of 2027 if the necessary conditions are satisfied.

The market is therefore pricing a high probability of completion but not treating the cash as already received. Eleco’s 70% jump on September 10 carried the shares from 134.5p to around the current level almost immediately after the bid became public, effectively crystallising most of the acquisition premium in a single session.

The September 15 results are unlikely to cause the stock to trade materially above the offer without the prospect of a competing bidder. Strong earnings may reinforce the argument that Accel-KKR identified an attractive asset, but shareholders who remain invested are now principally evaluating the merger spread and deal timetable.

Could Eleco’s strong interim results attract a higher competing offer?

The possibility cannot be eliminated, especially when the reported business is growing faster than the valuation implied before the offer. Organic revenue increased 15%, recurring revenue reached 85% of sales and profit growth substantially exceeded revenue growth. Those are characteristics that could appeal to other software-focused private-equity or strategic buyers.

However, Accel-KKR already secured meaningful shareholder support and Eleco’s board unanimously recommended the offer. The 235p price also represents a very substantial premium to the undisturbed market valuation, raising the hurdle for another buyer to justify paying materially more. The absence of an obvious premium above 235p in current trading suggests investors are not presently assigning a large probability to an interloper.

For Eleco shareholders, the investment story has consequently changed almost overnight. The company has demonstrated that its SaaS transition is producing powerful earnings growth, but the value question is increasingly whether the agreed £207.6 million cash exit proceeds as planned rather than how much standalone ARR Eleco can generate in 2027.