Final Results

Eleco plc

(“Eleco”, the “Company” or the “Group”)

Audited Results for the Year Ended 31 December 2021

 

The Board of Eleco plc (AIM: ELCO) is pleased to announce its results for the year ended 31 December 2021.

Financial Highlights

Operational Highlights

*               Adjusted to exclude former Directors’ payments.

**            EBITDA is defined as Earnings before Interest, Tax, Depreciation, and Amortisation and impairment of Intangible Assets

 

Eleco CEO Jonathan Hunter said:

“We are delighted to present these positive results just 12 months after unveiling our revised strategy for growth. The successful implementation of this strategy has enabled Eleco to embark on its transition to SaaS earlier than expected. This marks a pivotal change to our business as we focus on securing and increasing our predictable recurring revenues.

 

Our customers in the built environment are embracing technology to address issues such as compliance, improvements in productivity and efficiency, the reduction of waste, and other environmental considerations. Our established presence, customer-centric approach, strong values and clear vision make us well placed to compete with the best in the market, and we look forward with confidence to the year ahead.“

 

 

 

Enquiries

Eleco plc	+44 (0)20 7422 8000
Jonathan Hunter, Chief Executive Officer
Rose Clark, Interim Chief Financial Officer
finnCap Limited	+44 (0)20 7220 0500
Geoff Nash / Kate Bannatyne / James Balicki (Corporate Finance)
Charlotte Sutcliffe / Harriet Ward (ECM)
SEC Newgate UK	+44 (0)20 3757 6882
Elisabeth Cowell / Bob Huxford / Isabelle Smurfit	eleco@secnewgate.co.uk

 

Chairman’s Statement

As an award-winning specialist provider of world-class software to the £8.5bn built environment market, Eleco is well positioned to expand.

 

A year ago, we set out our refreshed strategy and the last twelve months have been focused on setting the foundations for further growth. It has been a truly transformative year for Eleco. We are very much a customer-focused organisation and have a clear purpose and a values statement developed through a truly interactive process with our people. A strong engaging culture is key to enable us to attract and retain talent in such a competitive market.

 

I am pleased to report that our strategy is already generating results, with our organic growth rate increasing to 8.0 per cent (2020: -1.0 per cent), underpinned by double-digit sales growth from our core Building Lifecycle portfolio. This was achieved at the same time as implementing our move to a subscription licensing model for new customers in the last quarter. Recurring revenue (subscription and SaaS licences, maintenance and support contracts) increased by 9.0 per cent to £15.4m.

 

We have maintained strong cash generation, despite Covid-19 continuing to impact our ability to undertake face to face sales and training, having fully repaid monies given to Eleco through the UK Government furlough scheme as well as clearing our UK bank debt. We are now debt free after settling the remaining £0.1m of subsidiary bank debt in Q1 2022.

 

We were delighted to win the Megabuyte Quoted 25 Award for best performing software company in the industrials peer group in March 2022 showing the strength of our overall financial performance.

 

Implementing our strategy for organic growth

 

We are aligning our business with clear customer segment strategies and through product portfolio alignment, driven by our Chief Product Officer (CPO) Fredrik Pantze who was appointed in April 2021, and we have started on the journey to adapt our software to become next generation cloud-based solutions. Our aim is to help our customers reimagine their businesses by creating software which allows them to better collaborate, get faster access to data for analytics and ensure interoperability. As a result, we are seeing an increase in new customer wins away from our competitors.

 

This has also been bolstered by the strengthening demand for our products in our core regions where we are in a strong position with Powerproject being used for the master construction plan. Collaboration is driving us to partner and share data with other parties. As a result, we have formed several partnerships and data integrations during the last 12 months, as we continue to leverage/understand our strong customer relationships.

With our move to subscription, we are more focused on customer success through account management and services. We believe that building on our customer relationships will allow Eleco to better support the management and leadership teams of those organisations which are starting to look for an integrated end to end approach.

Our new Chief Technology Officer, Luben Kirov, was appointed in December 2021  This role has the remit to bring together all the separate development teams, break down the product silos and drive forward our integrated technology roadmap in conjunction with our CPO. Having started in February 2022, we look forward to reporting on the results of this appointment as we go through the current year.

 

From a customer perspective, digitalisation is increasingly being recognised for its ability to manage the complex supply chain and inflationary issues, while rising pressures on companies to reduce wastage provides another tailwind as regulation around this increases. We are a well-known provider of innovative technology for the construction and built environment sectors, with 87 per cent of the top 100 UK construction contractors on our books. This provides us with a strong and established platform for growth and new contract wins.

 

The move to subscription-based pricing of our products will benefit our customers with a lower upfront cost for an enhanced product, as well as creating increased value for our shareholders through higher Recurring Revenue growth.

 

In the year, Eleco’s US business grew 16 per cent predominantly through our reseller channel which the Company will continue to support. Following this growth, the Executive team are re-focusing on potential strategic opportunities for expansion into the US.

 

We continue our strategy to provide best of breed software targeted at our chosen customer segments.

 

Board appointments and Environmental, Social and Governance (ESG)

 

Aligned to the new strategy, I undertook a full skills audit of the Board and in March we brought in Paul Boughton as a NED, adding more technology PLC experience to the business as well as additional financial and acquisition expertise.

 

In a desire to refresh our Board and further improve our corporate governance, this was followed by a further extensive search to recruit the best candidates for our other skills gaps. This led to two further NED appointments in the summer, with Dr Annette Nabavi and Mark Castle joining the Board in August and September, respectively. Annette Nabavi is a highly qualified board director with more than 30 years’ experience in the technology, telecoms and digital industries who brings additional expertise to advise with the shift from a perpetual to SaaS licence model while Mark Castle is an experienced business leader, bringing the voice of the customer to the Board – a vital stakeholder group for Eleco – with his wealth of experience in the Property, Construction, Consultancy and Built Environment sectors.

 

Kevin Craig and David Dannhauser stepped down from the Board at the end of August and I would like to take this opportunity to thank them both for the immense contribution that they made to this business throughout their tenure.

Paul Boughton took over as Chair of Audit and Annette Nabavi took over as Chair of Remuneration. Over the next twelve months, we plan to strengthen our ESG disclosures, building on the steps taken during 2021. With this in mind, we set up an ESG Committee at the end of period under review, chaired by Mark Castle. This will assist the Board in fulfilling its oversight responsibilities regarding environmental, health and safety, corporate social responsibility, sustainability, customer satisfaction, employee wellbeing and retention, corporate governance, diversity, equity and inclusion. We look forward to building our disclosure on these areas over the months and years ahead as we develop our Net Zero Strategy and our ESG Scorecard.

On 29 March 2021 Robert Tearle was appointed as CFO as we launched our refreshed strategy. On 7 February 2022 we announced that Robert was resigning from the Board. This is obviously disappointing for both the Company and for Robert personally. We thank Robert for his valued contribution to the planning of the steps needed for the delivery of our move towards a SaaS environment for our most successful products. The process to recruit a permanent CFO is underway. In the meantime, we have Rose Clark, an experienced CFO, covering the position.

 

Proposed dividend

 

In light of Eleco’s resilient trading performance and cash generation in 2021, the Board has decided to recommend a final cash dividend 0.40 pence per share.

 

Payment of the final dividend will follow approval by shareholders at the Annual General Meeting. The record date is the close of business on 27 May 2022; with the ex-dividend date being 26 May 2022.

 

Outlook

 

Eleco continues to be well positioned in a very exciting and attractive market as technology is seen as the catalyst to meet the growing demands of the building industry. Our customer base has been facing unprecedented labour challenges and escalating materials costs. Eleco’s software plays a crucial role in mitigating these issues, driving productivity for our customers, and enabling them to better plan their resources.  There is  a drive for more efficient and sustainable building methodologies and techniques. Our technology solutions are widely recognised for allowing better decision making and collaboration across our clients’ projects, positioning us to benefit from increasing digitalisation trends in our core markets. As a result, the increasing digital transformation within the built environment is a significant opportunity for Eleco to leverage its position as a proven provider of software for the construction and built environment sectors, strengthen its platform, and continue to drive organic growth.

 

Over the next twelve months, we intend to continue to focus the business on our core Building Lifecycle products and on further growing our recurring revenues. Our strategy, as previously announced, is to transition that part of our product portfolio which has traditionally been sold through perpetual licences towards a subscription pricing basis and eventually to a full SaaS service. This has well established benefits by giving choice for our customers and enhanced Customer Lifetime Value for our shareholders. While this is expected to reduce the revenues we report relating to perpetual licences moving forward, our Recurring Revenues will increase, creating strong visibility of income. This is an exciting transition that will deliver multiple benefits to both our customers and shareholders.

 

We will also continue to strengthen our business in our core markets and look for further opportunities for meaningful expansion in the US. Additionally, we will be proactively assessing the market for M&A opportunities, that will further place Eleco at the forefront in assisting our customers to solve the future challenges of the built environment.

 

By creating more value for our customers, we will be increasing our Customer Lifetime Value, expanding beyond our current users into the operations management of our customer base. The importance of our existing customers and growth opportunities leads us to continue to focus on direct sales in our core geographic regions.

 

2021 has been an exciting year for Eleco and I would like to take this opportunity to thank our skilled and hard-working team and valued customers for their support over the past twelve months. With the foundations set in place, we are well positioned for continued growth, and increased market share through further product evolution and potential acquisition opportunities, supported by favourable market dynamics.

 

 

 

 

Serena Lang

Chairman

30 March 2022

 

 

 

 

 

CEO Report

 

2021 was a transformational year for Eleco as we reshaped and repositioned the Group. We launched our refined growth strategy with a focus on our people and our organic performance.

 

As part of this strategy, we made new board appointments, implemented a new matrix organisational design and strengthened the leadership team to drive growth in the regions and across product solutions.

 

I am pleased to report that we are already seeing positive results. We have made strong progress towards Eleco becoming a world-class customer-centric organisation which people want to work with and for to meet the needs of our core customer segments, driven by our purpose: Solving the challenges of the built environment through digital transformation.

 

This is reflected in our three strategic objectives:

 

 

I believe that a highly-focused, empowered and high-performing workforce provides us with the greatest opportunity of success in delivering our vision. With this in mind, during the period we brought in our new Group Transformation Director, Birgit Lenton, appointed a Chief Product Manager, Fredrik Pantze and in February 2022, brought in our new Group Chief Technology Officer, Luben Kirov. Additionally, we have strengthened our sales teams and added in customer success management.

 

Culture will play an important part in the successful implementation of our strategy, and we have invested time with our people in 2021 to develop an expected behaviours approach for Eleco that aligns to our core values. Retaining and attracting talent has never been more challenging than in 2022 and we are committed to ongoing investment in our diverse workforce to complement and enhance the skills, thinking and decision-making throughout the organisation. We remain proud of the fact that over 30 per cent of our workforce comprises talented women across all areas of the business, which is above the industry average.

 

Importantly, our clear strategy and skilled team of people have driven our strong financial performance, with revenues experiencing organic growth of 8 per cent during the full year period. We also continued to expand our customer base in 2021, as well as introducing subscription licensing to new customers for our Building Lifecycle portfolio in the second half of the year. This is a significant step forward for the Group as we focus on expanding our already established recurring revenue to support our excellent cash generation.

 

Strengthening our engagement with our external stakeholders has also been a priority for the Board. Our strong customer loyalty is an investable quality of Eleco, and our strategic intent is to further enhance the offer to our customers. Throughout the year, we released new versions of our software and added measures to ensure the continued growth of the Group and retention of our customers, who value our products, our brand and the level of service we provide.

 

In this report, I will outline how we intend to build on our already robust position, refining our proposition and expanding our presence internationally beyond our current core areas of operation to create value for shareholders and customers alike.

 

2021 Review

 

The Board launched the refined Eleco growth strategy in March 2021, and this has focused and energised the whole organisation, resulting in growth in all regions. Eleco continued to add new customers and leveraged our strong customer relationships to support them with their digital transformation.

 

Eleco delivered a robust and resilient financial performance in another year of challenges brought about by the Covid-19 pandemic. The strong first half performance in 2021 facilitated the introduction of a subscription-based pricing model to new Building Lifecyle product customers in Q4. The introduction of subscription-based pricing is a key stage on our SaaS journey which will improve the predictability of our revenue and increase the Customer Lifetime Value. 

 

The transformation programme started with identifying and focusing on Eleco’s core customer segments of construction businesses, maintenance managers, building asset owners and specialist interior product manufacturers, staircase and timber frame manufacturers and residential architects. During the year, we reorganised our business to build our product strategies, sales and marketing functions around customer segments. As a result, our products are now defined in two groups: Building Lifecycle and CAD & Visualisation.

 

Our ‘Building Lifecycle’ portfolio is adopted by construction contractors, asset owners and maintenance managers. The second category, the ‘CAD and Visualisation’ solutions, comprise what can be defined as niche products with minimal synergies between customer segments of the Building Lifecycle portfolio.

 

Organising our business in this way has provided better understanding and focus on our core customer needs, or ‘sweet spots’, allowing Eleco to better solve the challenges of the built environment through digital transformation.

 

The Group Leadership Team, now comprising the Chief Executive Officer, Chief Product Officer, Chief Technology Officer and Group Transformation Director, is responsible for steering and implementing the Group’s strategy. The Operational Leadership Team comprises the Building Lifecycle operations which are managed by three Regional Managing Directors, along with a Managing Director for each of our CAD and Visualisation businesses, Veeuze, Staircon and Arcon, who are responsible for these product lines in their international markets. There is now a more diverse mix of nationalities, gender and experience and we have an opportunity to further enhance this team as we select our new Chief Financial Officer.

 

Building Lifecycle

 

Our focused and streamlined organisational design led us to strengthen our growth platform by merging our three UK operations under a single Building Lifecycle management team so that we are now offering all UK Building Lifecycle products from a single business unit.

 

Our regional focus delivered revenue growth in the core regions where our customers reside.

The US revenue increased through our reseller channel while efforts to sell Powerproject directly in the US were met with recruitment challenges and the resignation of our US country manager. 

 

We also worked on introducing ShireSystem into Germany, carrying out product development and localisation as well as setting up sales, marketing and support functions.  There were lessons learnt as we had underestimated the volume of work required, however I am pleased to report that we are showcasing ShireSystem at the Maintenance Dortmund exhibition at the end of March.

 

Project Management

 

Voted the Best Project Management Software of 2021 at the Construction Computing Awards, Powerproject continues to be central to driving digital innovation in project planning and critical to underpinning project success despite the myriad challenges the construction industry faces.

 

Some customer successes include:

 

·      Empowering organisations with the data necessary for informed decision making (Careys).

·      Supporting the use of pre-fabrication practices to model and streamline build process and reduce the project’s carbon footprint (Willmott Dixon).

·      Modelling and managing supply chain disruptions by bridging the gap between the office and site (JJ Rhatigan & Company).

·      Supporting business transformation with digital solutions that make best practice sustainable (Vinci).

 

Estimating

 

Our Bidcon estimating software revenues surpassed the all-time high of 2020, irrespective of the transition to SaaS for new customers. One of the reasons for our success was our investment in new product functionality to meet customer requirements and to secure larger customers. The importance of sustainability in construction and the fact that Swedish law now mandates climate declarations has resulted in a growing interest and demand for the Bidcon Climate module.

 

Site Management

 

We continued the development of mobile and SaaS site management applications used by construction and maintenance operations and valued by existing customers in our Swedish market.

 

Property Management

 

2021 was a record year for service delivery, with increased customer demand from non-essential retailers who began to recover somewhat from the pandemic closures. With less focus on new build, the emphasis in retail was the regeneration of existing property estates and development of in-store concepts.

New product enhancements to introduce workflow management continued and included the release of a new digital forms solution in Q4 2021.

Maintenance

 

I am proud of what our colleagues have achieved with our maintenance solution, ShireSystem, which was runner-up in Asset Management category at the UK Construction Computing Awards 2021 (‘The Hammers’).

ShireSystem’s revenue growth has made it the second largest product by revenue for Eleco. The migration to SaaS revenues continued across both existing and new customer contracts, with a third of customers now on hosted solutions. ShireSystem has managed to attract an impressive list of new accounts, including Cambridge Weight Plan and global food conglomerate Cargill. Existing customers also fueled growth, with further deployments at G’s Group and Fox’s Biscuits.

CAD and Visualisation

 

            Veeuze

 

The Active Online and ESIGN visualisation businesses experienced a significant year of change and improvement, relaunching as Veeuze (pronounced ‘views’), to combine the service portfolio and product material library of both companies and expand their offerings to all customers.

 

Veeuze now offers personalised product visualisation across a multitude of marketing channels with the support of its AI tools as well as Augmented Reality and Virtual Reality technologies. We released our Confimerce platform which provides our interior product business customers with a combined portfolio approach to online selling through ecommerce, with integrated visualisation tools and a Product Information Management (PIM) data management system.

 

Staircon

 

The development of our new generation Staircon CAD continued according to the releases planned in 2022 and 2023.  During 2021, the team also strengthened its management and sales capabilities by adding more than 18 years of stair manufacturing experience to the team via successful recruitments, including a new Head of Staircon. We also appointed new Staircon resellers in Poland and the Netherlands.

 

                Arcon

 

Our Arcon business experienced a challenging year, with a reduction in sales through partners and active competition in our core German market. Arcon direct sales were negatively impacted as major exhibitions did not take place during the period, and these have traditionally been a successful sales channel.

 

Financial Summary

 

Revenue increased by 8 per cent to £27.3m (2020: £25.2m)

 

Recurring Revenue (maintenance, subscription and SaaS revenue) increased by 9 per cent to £15.4m from £14.1m in 2020. Licence sales were £5.9m compared with £5.4m in 2020 representing an increase of 9 per cent, despite the introduction to subscription licensing in Q4 2021. The impact of the transition to subscription will change the profile of our revenue, with one-off perpetual licence revenue, which is recognised immediately, being transitioned to a higher lifetime value subscription revenue which is recognised over a longer period of time.  Thus our total reported revenue growth will temporarily soften during this transition to higher value and predictable recurring revenue.

 

Service revenue increased to £6.0m compared to £5.6m in 2020, which represents an increase of 7 per cent, despite continuing challenges presented by the pandemic during the period.

 

Building Lifecycle revenue increased by 11 per cent, which was driven by new customers and recurring revenue growth. CAD and Visualisation revenue increased by 2.9 per cent.

 

Revenues by customer location were positive, with the UK and Scandinavia increasing by 11 per cent and 8 per cent respectively. Overall, revenue from customers based in Germany was at a level comparable with 2020. This was largely due to increased sales in the building lifecycle customers offset by a decrease in CAD perpetual licence sales. The Rest of Europe grew by 7 per cent, USA revenue increased by 16 per cent and revenue from the Rest of World increased by 38 per cent, compared with 2020, which was supported by good growth in Australia.

 

We invested 12 per cent of Revenue in product development across our portfolio during 2021. One product was identified as unlikely to generate new customer revenues as anticipated however provides an upgrade path to existing supported customers.  The Board took a prudent approach and decided to impair the carrying value of the product during the year reducing Profit Before Tax by £0.6m.

 

Outlook

Eleco has proven its resilience during the pandemic, although the recent crisis in Ukraine has added a further level of uncertainty to the markets.  We have taken measures to temporarily cease providing our solutions to resellers and customers in Russia and Belarus, and we do not expect this to have a substantial impact on revenues.

 

Digitalisation is increasingly embraced as a critical solution for the issues that our customers are facing and is at the heart of our strategy.  We will invest in product development and our technology environment to create our next generation solutions with a customer-centric experience and the foundations of the Elecosoft Cloud for all our Building Lifecycle products. This will also enable our customers to have access to other Elecosoft products through a unified platform. We see the rising demand for buildings with green credentials as a key driver for Eleco, as our products support the reduction of waste, drive efficiency and deliver essential data required by our customers. Our roadmap will ensure that in the future we will be able to offer full lifecycle support, addressing carbon challenges, productivity improvements and compliance issues through one suite of solutions.

 

Our people are the lifeblood of our organisation, and their commitment is key to Eleco’s success. Our biggest challenge in the coming year, apart from rising inflation and the competitive job market, is our ability to retain and attract talent. During 2022 and beyond we will therefore continue to invest in our employee value proposition and global company culture by further embedding the cultural values in the way we do business. As Eleco grows, we will review and update our policies and procedures across the organisation to maintain good practice and gain the benefits of alignment whilst ensuring our people feel empowered.

 

Our customer-centric approach, strong values and clear vision make us well placed to compete with the best in the market, and we look forward with confidence to the year ahead. Our transition to subscription, continued investment in software development and increased focus on software strategies will open further exciting prospects for growth in our core markets. 

 

 

 

Jonathan Hunter

CEO

30 March 2022

 

Consolidated Income Statement

 

for the year ended 31 December 2021

 

 

 

		2021	2020
		£’000	£’000
	Continuing operations
	Revenue	27,344	25,232
	Cost of sales	(2,754)	(2,529)
	Gross profit	24,590	22,703
	Amortisation and impairment of intangible assets	(2,361)	(1,658)
	Former Directors’ payments	(69)	(328)
	Other administrative expenses	(18,061)	(16,566)
	Administrative expenses	(20,491)	(18,552)
	Operating profit	4,099	4,151
	Finance cost	(173)	(262)
	Profit before tax	3,926	3,889
	Tax	(1,195)	(726)
	Profit for the financial period	2,731	3,163
	Attributable to:
	Equity holders of the parent	2,731	3,163
	Earnings per share – (pence per share)
	Basic	3.3p	3.9p
	Diluted	3.3p	3.9p

 

 

Consolidated Statement of Comprehensive Income

 

for the year ended 31 December 2021

 

	2021	2020
	£’000	£’000
Profit for the period	2,731	3,163
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss:
Translation differences on foreign operations	(258)	193
Other comprehensive (loss)/  income net of tax	(258)	193
Total comprehensive income for the period	2,473	3,356
Attributable to:
Equity holders of the parent	2,473	3,356

 

 

Consolidated Statement of Changes in Equity

 

for the year ended 31 December 2021

 

 

 

 

	Share	Share	Merger	Translation	Other	Retained
	capital	premium	reserve	reserve	reserve	earnings	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 1 January 2020	822	2,047	1,002	(198)	(108)	14,359	17,924
Dividends	–	–	–	–	–	–	–
Share-based payments	–	–	–	–	131	–	131
Elimination of exercised share-based	–	25	–	–	(25)	–	–
payments	3	110	–	–	–	–	113
Transactions with owners	3	135	–	–	106	–	244
Profit for the period	–	–	–	–	–	3,163	3,163
Other comprehensive income:
Exchange differences on translation of
net investments in foreign operations	–	–	–	190	–	3	193
Other	–	–	–	–	–	–	–
Total comprehensive income for the
period	–	–	–	190	–	3,166	3,356
At 31 December 2020	825	2,182	1,002	(8)	(2)	17,525	21,524
Dividends	–	–	–	–	–	(493)	(493)
Share-based payments	–	–	–	–	81	–	81
Elimination of exercised share-based
payments	–	–	–	–	(83)	83	–
Issue of share capital	7	253	–	–	–	–	260
Transactions with owners	7	253	–	–	(2)	(410)	(152)
Profit for the period	–	–	–	–	–	2,731	2,731
Exchange differences on translation of
net investments in foreign operations	–	–	–	(270)	–	12	(258)
Other – reserve reclassifications	–	(29)	–	(1)	(1)	31	–
Total comprehensive income for the
period	–	(29)	–	(271)	(1)	2,774	2,473
At 31 December 2021	832	2,406	1,002	(279)	(5)	19,890	23,846

 

 

 

Consolidated Balance Sheet

 

At 31 December 2021

 

		2021	2020
	Notes	£’000	£’000
Non-current assets
Goodwill	9	15,593	15,762
Other intangible assets	10	6,554	7,195
Property, plant and equipment	11	717	651
Right-of-Use assets	22	1,728	2,208
Deferred tax assets	19	65	85
Total non-current assets		24,657	25,901
Current assets
Inventories	13	16	23
Trade and other receivables	14	4,277	3,911
Current tax assets		216	90
Cash and cash equivalents		10,055	10,668
Total current assets		14,564	14,692
Total assets		39,221	40,593
Current liabilities
Borrowings	16	(45)	(1,647)
Lease liabilities	16, 22	(471)	(582)
Trade and other payables	15	(1,793)	(1,660)
Provisions	17	(10)	(125)
Current tax liabilities		–	–
Accruals and deferred income	18	(9,689)	(8,880)
Total current liabilities		(12,008)	(12,894)
Non-current liabilities
Borrowings	16	(56)	(2,867)
Lease liabilities	16, 22	(1,464)	(1,850)
Deferred tax liabilities	19	(1,806)	(1,417)
Non-current provisions	17	(41)	(41)
Total non-current liabilities		(3,367)	(6,175)
Total liabilities		(15,375)	(19,069)
Net assets		23,846	21,524
Equity
Share capital	20	832	825
Share premium account		2,406	2,182
Merger reserve		1,002	1,002
Translation reserve		(279)	(8)
Other reserve		(5)	(2)
Retained earnings		19,890	17,525
Equity attributable to shareholders of the parent		23,846	21,524

 

 

 

Consolidated Statement of Cash Flows

           

for the year ended 31 December 2021

 

 

		2021	2020
	Note	£’000	£’000
Cash flows from operating activities
Profit before tax		3,926	3,889
Net finance costs		173	262
Depreciation charge		722	866
Amortisation and impairment charge		2,361	1,658
Profit on sale of property, plant and equipment		(7)	(16)
Share-based payments charge		81	131
Cash generated in operations before working capital movements		7,256	6,790
Decrease in provisions		(115)	(17)
(Increase)/decrease in trade and other receivables		(366)	428
Decrease in inventories and work in progress		7	23
Increase in trade and other payables and accruals and deferred income		942	914
Cash generated in operations		7,724	8,138
Interest paid		(124)	(206)
Net income tax paid		(903)	(785)
Net cash inflow from operating activities		6,697	7,147
Investing activities
Purchase of intangible assets		(1,727)	(1,603)
Purchase of property, plant and equipment		(279)	(99)
Proceeds from sale of property, plant, equipment and intangible assets		60	71
Net cash outflow from investing activities		(1,946)	(1,631)
Financing activities
Repayment of bank loans	16	(4,447)	(1,647)
Repayments of principal of lease liabilities	22	(650)	(761)
Equity dividends paid		(493)	–
Issue of share capital		260	–
Net cash (outflow) from financing activities		(5,330)	(2,408)
Net (decrease) / increase in cash and cash equivalents		(579)	3,108
Cash and cash equivalents at beginning of period		10,668	7,236
Effects of changes in foreign exchange rates		(34)	324
Cash and cash equivalents at end of period		10,055	10,668
Cash and cash equivalents comprise:
Cash and short-term deposits		10,055	10,668
		10,055	10,668

 

 

 

Extract from Notes to the Consolidated Financial Statements

 

1. Revenue

 

Revenue from continuing operations disclosed in the income statement is analysed as follows:

 

	2021	2020
	£’000	£’000
Licence sales	5,913	5,442
Recurring maintenance, support and subscription revenue	15,424	14,186
Services income	6,007	5,604
Total revenue	27,344	25,232

 

Revenue recorded in the year includes £6.4m (2020: £5.9m) of income that had been deferred in the balance sheet in the previous year because the associated performance obligations were not fully satisfied. Payments are received from certain customers on maintenance or subscription contracts either three months or one year in advance, which leads to the recognition of deferred income in advance of satisfaction of the performance obligation over time.

 

The Group has applied the practical expedient of IFRS15.121 in respect of transaction price allocated to remaining performance obligations as the performance obligations relate to contracts which have a duration of one year or less. Contract liabilities in respect of contracts with customers have been disclosed in note 18 under deferred income.

 

 

Geographical, Product and Sales Channel Information

 

Revenue by geographical area represents continuing operations revenue from external customers based upon the geographical location of the customer.

 

Revenue by geographical destination is as follows:

 

	2021	2020
	£’000	£’000
UK	10,446	9,470
Scandinavia	6,550	6,080
Germany	4,911	4,858
USA	1,030	890
Rest of Europe	3,916	3,538
Rest of World	491	396
	27,344	25,232

 

 

 

Revenue by product group represents continuing operations revenue from external customers.

 

Revenue by product group is as follows:

 

	2021	2020
	£’000	£’000
Software for:
Building Lifecycle	17,650	15,897
CAD and Visualisation	7,997	7,771
Other – third party software	1,697	1,564
	27,344	25,232

 

The Group utilises resellers to access certain markets. Revenue by sales channel represents continuing operations revenue from external customers.

 

Revenue by sales channel is as follows:

 

	2021	2020
	£’000	£’000
Direct	26,068	24,000
Reseller	1,276	1,232
	27,344	25,232

 

2. Segment information

 

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.

 

The chief operating decision maker has been identified as the Executive Directors. The Group revenue is derived entirely from the sale of software licences, software maintenance and support and related services. Consequently, the Executive Directors review the three revenue streams but during the year as the costs and profits are not monitored or recorded in the same way the information is presented as one segment and as such the information is presented in line with management information.

 

	2021	2020
	Software	Software
	£’000	£’000
Revenue	27,344	25,232
Adjusted EBITDA	7,251	7,003
Amortisation and impairment of purchased intangible assets	(1,786)	(1,068)
Depreciation	(722)	(866)
Adjusted operating profit	4,743	5,069
Amortisation of acquired intangible assets	(575)	(590)
Former Directors’ payments	(69)	(328)
Operating profit	4,099	4,151
Net finance cost	(173)	(262)
Segment profit before tax	3,926	3,889
Tax	(1,195)	(726)
Segment profit after tax	2,731	3,163
Operating profit	4,099	4,151
Amortisation and impairment of intangible assets	2,361	1,658
Depreciation charge	722	866
EBITDA	7,182	6,675
Former Directors’ payments	69	328
Adjusted EBITDA	7,251	7,003

 

 

Former Directors’ payments are upfront costs borne by the Group and are adjusted to reflect their services provided.

 

Development project costs are expensed as incurred unless they meet the accounting policy requirements for capitalisation.

 

	2021	2020
	Software	Software
	£’000	£’000
Group assets and liabilities
Segment assets	39,221	40,593
Total Group assets	39,221	40,593
Segment liabilities	15,375	19,069
Total Group liabilities	15,375	19,069

 

Non-current assets excluding deferred tax by geographical area represent the carrying amount of assets based in the geographical area in which the assets are located.

 

Non-current assets by geographical location are as follows:

 

	2021	2020
	£’000	£’000
UK	14.780	14,967
Scandinavia	6,759	7,737
Germany	3,072	3,146
USA	2	3
Rest of Europe	44	48
Rest of World	–	–
	24,657	25,901

 

Information about major customers

 

Revenues arising from sales to the Group’s largest customer were below the reporting threshold of 10 per cent of Group revenue (2020: Below 10 per cent reporting threshold).

 

3. Operating profit

 

The continuing operations operating profit for the period is stated after charging/(crediting) the following items:

 

	2021	2020
	£’000	£’000
Software product development expense	1,660	1,590
Depreciation of property, plant and equipment	213	220
Depreciation of right-of-use assets	509	646
Amortisation of acquired intangible assets	575	590
Amortisation of other intangible assets	1,150	1,068
Impairment of other intangible assets	636	–
Share-based payments	81	131
Employer furlough scheme repayments / (credits)	135	(150)
Profit on disposal of property, plant and equipment	(7)	(16)
Foreign exchange (gains)/losses	127	(34)
Fees payable to the Company’s auditor for:
The audit of the parent company and consolidated financial statements	83	70
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries	104	94
Other services	8	7
Operating lease rentals:
Plant, equipment and vehicles	13	30
Properties	68	13
Former Directors’ payments	69	328
4. Employee information
The average number of employees during the period, including Directors, in continuing operations was made up
as follows:
	2021	2020
	Number	Number
Sales & marketing	57	56
Client services	76	78
Software development	69	68
Management and administration	43	44
	245	246
Staff costs during the period, including Directors, in continuing operations amounted to:
	2021	2020
	£’000	£’000
Wages and salaries	11,145	11,350
Social security	1,985	2,002
Pension costs	648	547
Share-based payments	81	131
	13,859	14,030
Less: Development staff costs capitalised	(1,578)	(1,602)
	12,281	12,428

 

 

Pension costs relate to contributions to defined contribution pension schemes. Development staff costs are charged to projects and capitalised if those projects meet the criteria for capitalisation.

 

The remuneration of the Directors, who are the key management personnel of the Group, is set out below:

 

	2021	2020
	£’000	£’000
Short-term employee benefits	995	974
Post-employment benefits	58	52
Former Directors’ benefits	69	304
Share-based payments	123	112
Executive Directors	1,245	1,442
Fees – Non-Executive Directors	166	132
	1,411	1,574

 

The emoluments and share based payments of the highest paid Director totalled £426,000 (2020: £525,000).

 

The remuneration of the Non-Executive Directors is determined by the Board. The Non-Executive Directors are engaged through service contracts and each is appointed for an initial term of three years, which may thereafter be renewed. The Company has chosen for all directors to stand for annual re-election at each year’s AGM. The Non-Executive Directors do not participate in any of the Group’s share-based incentive or pension schemes. Share options currently held by Serena Lang were granted to her during her tenure as Executive Chairman.

 

 

5. Dividends

 

Dividends paid in the year were 0.60 pence per ordinary share (2020: nil pence per ordinary share)

 

Cash dividends of £493,000 (2020: £nil) were paid during the year:

 

	2021	2020
	pence per	pence per	2021		2020
Ordinary Shares	share	share		£’000	£’000
Declared and paid during the year
Interim – current year	0.20	–		164	–
Final – previous year	0.40	–		329	–
	0.60	–		493	–

 

The Directors have recommended a final dividend of 0.40 pence (2020: 0.40). The dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

 

 

6. Basic and diluted earnings per share

 

		2021				2020
		Weighted				Weighted
	Net profit	average			Net profit	average
	attributable to	number of			attributable to	number of
	shareholders	shares	EPS		shareholders	shares	EPS
Ordinary Shares	£’000	(millions)	(pence)		£’000	(millions)	(pence)
Basic earnings per share	2,731	82.0	3.3	3,163		81.4	3.9
Diluted earnings per share	2,731	82.9	3.3	3,163		82.0	3.9
Adjusted basic earnings per share	3,253	82.0	4.0	3,907		81.4	4.8

 

In determining the diluted earnings per share the dilutive impact of share options on weighted average number of shares was included. 

Shares held by the Employee Share Ownership Trust are excluded from the weighted average number of shares in the period.

 

7. Post-balance sheet events

 

With effect from 1 January 2022 the trade and assets of Integrated Computing and Office Networking Limited and Shire Systems Limited were transferred to Elecosoft UK Limited.

 

With effect from 1 January 2022 ESIGN GmbH and Active Online GmbH were merged under one German trading company VEEUZE GmbH.

 

Notes:

 

1.   Eleco plc (“the Company”) and its subsidiaries (together “the Group”) are primarily involved in software sales and development. Eleco plc, a Public Limited Company incorporated and domiciled in England, is the Group’s ultimate parent Company. The address of Eleco plc’s registered office is 6 Bevis Marks, London EC3A 7BA, United Kingdom and the principal place of business is 6 Bevis Marks,  London, EC3A 7BA.

 

2. Statutory accounts for 2020 have been delivered to the Registrar of Companies and those for 2021 will be delivered in due course. The Company’s auditors RSM UK LLP, have reported on the 2021 accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498 (2) or (3) Companies Act 2006. The 2020 audit report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498 (2) or (3) Companies Act 2006.

 

 Whilst the financial information included in this preliminary results’ announcement has been prepared in accordance with the recognition and measurement requirements of UK-adopted International Accounting Standards this announcement does not itself contain sufficient information to comply with UK-adopted International Accounting Standards and does not constitute statutory accounts for the purposes of section 434 of the Companies Act 2006.

 

The principal accounting policies used in preparing this preliminary results announcement are those that the Company has adopted for its statutory accounts for the year ended 31 December 2021 and are unchanged from those previously disclosed in the Group’s Annual Report and Accounts for the year ended 31 December 2020.

 

Full financial statements for the year ended 31 December 2021 will be posted and made available to shareholders in due course.