Divestment of Precast Concrete Interests

For immediate release

20 December 2013

Eleco plc (AIM: ELCO)

(“Eleco”)

Divestment of Precast Concrete Interests

Eleco emerges as an international software group

The Board of Eleco announces the sale of certain precast concrete manufacturing assets to FP McCann Limited (“FP McCann”), for a total consideration of £2,500,000 in cash. FP McCann is a leading specialist manufacturer of precast concrete products in the United Kingdom.

As a consequence, Eleco’s continuing businesses now consist solely of its profitable software interests, which are based in the United Kingdom, Sweden and Germany and in effect Eleco has emerged as an international construction software specialist.

Sale of certain precast assets to FP McCann

The assets sold to FP McCann are as follows, (i) the business and assets of Milbury Systems Limited (“Milbury Systems”); (ii) the freehold land and buildings at Lydney, Gloucestershire, where Milbury Systems is based; and (iii) the freehold land and buildings at Grantham, Lincolnshire, where Bell & Webster Concrete Limited (“Bell & Webster”) is based.

Application of proceeds

The proceeds from the sale of these assets have been applied by Eleco to reduce its bank borrowings.

Recent Performance of ElecoPrecast

Based on audited accounts for the 12 months ended 31 December 2012, turnover of ElecoPrecast was £9.06m, of which Milbury contributed £5.87m and Bell & Webster £3.19m. The loss before tax of ElecoPrecast in the period was £1.74m, of which Milbury contributed £0.26m and Bell & Webster £1.48m.  

The total book value of the assets sold as at 31 December 2012 represented £6.4m.

Appointment of Administrators to Bell & Webster

John Alexander and John Dickinson of Carter Backer Winter LLP were today appointed as Administrators of Bell & Webster.  

Eleco has been informed that FP McCann approached the Administrators following their appointment and have now reached agreement to acquire the business and assets of Bell & Webster (in administration).

Employees

Eleco has been informed by FP McCann that of the employees of Milbury Systems and Bell & Webster have transferred to FP McCann, pursuant to the TUPE regulations, and each employee’s continuity of service, together with all other rights, has been preserved.

Pension Scheme

Bell & Webster is a statutory employer under the Eleco Retirement and Benefits Scheme, a defined benefits pension scheme, which was closed to ongoing service accrual in 2010.  The Administrators are expected to notify the Pension Protection Fund of the administration, whereupon the Pension Protection Fund will determine if the Eleco PLC Retirement & Benefits Scheme will enter into an assessment period to assess the eligibility of its members for compensation from the Pension Protection Fund.  

John Ketteley, Executive Chairman of Eleco commented:

“We are pleased to have found in FP McCann, a highly regarded and successful precast concrete specialist in the UK and Northern Ireland, with a breadth of operations and capabilities that will enable our former precast interests to be integrated into a larger scale precast business.

“Our skilled and experienced workforce will now become part of FP McCann’s workforce and I would like to thank them for all their efforts and contribution to Eleco, while they were part of the Eleco Group.  I would also like to thank John Stothard MBA and Carol Lound for their outstanding leadership and service since they became respectively Managing Director and Finance Director of ElecoPrecast in a very difficult market”.

“The disposal of our former precast concrete interests eliminates an activity that had a lack of visibility of future performance, required major capital investment and generated substantial losses in recent years in very hostile market conditions. The divestment also represents the last stage in the transformation of Eleco from a Group dominated by loss making and capital intensive construction and building products companies, into a Group that is now wholly populated by consistently profitable, cash generative and growing construction software companies based in the United Kingdom, Sweden and Germany.”

“Eleco’s software interests have increased their profits in each of the past 5 years, having written off software development expenditure as it was incurred. They have also consistently been strongly cash generative throughout the period. We again expect to launch a number of new software programs in the year ahead and we look forward with confidence to 2014.”

-ENDS –