Preliminary Results

 

 

 

 5 May 2015

 

              ELECO plc

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

Building on Technology.

 

Preliminary Results

For the Year Ended 31 December 2014

 

ELECO plc, the AIM listed construction software specialist, today announces its audited results for the year ended 31 December 2014.

 

 

Financial Highlights

Continuing operations

·      Revenue £16.5m (2013: £16.3m) of which 45% was from recurring maintenance and support revenue (2013: 45%)

·      Operating profit before amortisation of intangible assets and exceptionals £1.4m (2013: £1.4m)

·      Profit before tax and non-recurring exceptional and staff costs of £0.2m was £0.9m (2013: restated £0.6m)

·      Profit before tax £0.7m (2013: £0.6m)

·      EBITDA £1.5m (2013: restated £1.6m)

·      Earnings per share – basic and diluted of 0.8p (2013: restated 0.8p)

·      Net bank borrowings substantially lower and at 31 December 2014 were £1.6m (31 December 2013: £4.3m)

At constant exchange rates

·      Revenue £17.5m, up £1.2m, 7% (2013: £16.3m)

·      Operating profit before amortisation of intangible assets and exceptionals £1.5m, up £0.1m, 7% (2013: £1.4m)

·      Profit before tax £0.8m, up £0.2m, 20% (2013: £0.6m)

 

 

Operational Highlights

 

·      Reclassification to ‘Software’ company from ‘Construction and Materials’

·      Strengthened Board and management team

·      Successful equity raise and re-banking exercise

·      New product launches and expanded sales channels

 

 

Post Period Highlights

 

·      Positive start to the year in most of the core markets and the Board remains optimistic for 2015

 

 

Executive Chairman, John Ketteley, said:

 

“2014, the year under review, was a pivotal year for ELECO: a year in which we completed the refinancing and re-banking of the Group and put in place major operational adjustments which we judged necessary for ELECO to realise its potential and grow as a profitable, focussed, international specialist software Group.

 

Against this background of change and reorganisation, ELECO maintained the level of its revenue and profits in 2014 in Sterling terms in 2014 and  it was able to grow its revenue and profits in constant currency terms,

reflecting the strength of Sterling against both the Swedish Krona and Euro, and the fact that ELECO’s operations in Sweden and Germany are considerably larger than its operations in the UK.

  

We strengthened our Board and management team in the year under review, encouraged much greater collaboration between our international software teams; and we set our skilled and talented sales forces the task of increasing the market penetration of a number of our award winning software programs. These initiatives have already made a positive impact and I look to the future with confidence.” 

 

 

For further information please contact:
ELECO plc	Homepage
John Ketteley, Executive Chairman Nick Caw, Chief Executive Officer Andrew Greenwood, Chief Financial Officer	Tel: 0207 422 0044
Finncap Ltd
Geoff Nash / Kate Bannatyne (Corporate Finance) Malar Velaigam (Corporate Broking)	Tel: 0207 220 0500
Redleaf Communications
Rebecca Sanders-Hewett / David Ison / Susie Hudson	Tel: 0207 7382 4730 eleco@redleafpr.com

About ELECO plc

 

ELECO plc provides software solutions which cover the core elements of a construction project – design and visualisation (3D), resource planning (4D) and cost estimation / tracking (5D). It also provides a range of engineering software tools.

 

The Group operates principally in Sweden, Germany, the UK and increasingly in other markets worldwide.

 

ELECO plc is listed on the Alternative Investment Market in London (AIM:ELCO.L).

 

For more information please visit eleco.com 

Chairman’s Statement

 

2014 was a year of positive change for ELECO – a year in which it completed the divestment of its UK Building Systems interests and raised the necessary equity and bank finance to enable it to concentrate on realising the potential of its profitable software interests in the UK, Sweden, and Germany and began to implement the business strategy which we outlined in our 2013 Annual Report. We took a number of important steps in the period under review to strengthen our Board and software management; to improve and expand our sales channels; to improve the co-ordination of our software development teams and to improve our decision making processes. The implementation of these initiatives is continuing a pace across the Group to good effect.

 

I wish to preface my statement by thanking those shareholders who subscribed to the equity fund raising of £2.95m in July 2014 at a placing price that was broadly in line with the market price at the time. We also very much appreciate the decision of Barclays Bank to provide the necessary banking facilities on reasonable terms, which enabled us to complete the successful refinancing of the Group.

 

2015 has begun well and I believe that the equity raising and the decision to re-bank with Barclays will prove to have been the foundation for a significant and I hope sustained recovery in ELECO’s fortunes. In this connection, I am delighted that Nick Caw joined us as CEO from Microsoft UK in July 2014. I also welcome the appointment in February 2015 of Andrew Greenwood, who has spent most of his career in the software industry, as Finance Director. I have been impressed to see the effort and commitment that they have put into their respective roles since joining the Group.

 

Shareholders will be aware that the situation in which we found ourselves prior to the equity raise and re-banking had been extremely challenging and it is a matter of great regret that this resulted in the loss of employment of a significant number of our UK based employees in the year under review.

 

Performance

 

Given the substantial combined Sterling weighting of ELECO’s former Building Systems interests and its UK software interests, ELECO has not hitherto expressed its financial performance in both Sterling terms and in terms in constant currency. However, following the divestment of our Building Systems interests, we have decided that given the size of the currency exposure of our software interests to the Euro, Swedish Krona and latterly the US Dollar, we should provide constant currency estimates in our published accounts in future in order to illustrate the impact of currency fluctuations on our reported performance.

 

ELECO’s turnover for 2014 was £16.5m (2013: £16.3m), a rise of only 1% in Sterling terms due to the weakness of the Euro and the Swedish Krona against Sterling. At constant exchange rates, turnover for 2014 would have been £17.5m, an increase of £1.2m or 7%. EBITDA for 2014 was £1.5m (2013: £1.6m) and, at constant currency would have been £1.6m (2013: £1.6m). Profit before tax before charging non-recurring exceptional items and staff costs of £0.2m was £0.9m, and profit before tax was £0.7m (2013: £0.6m), which at constant currency would have been £0.8m (2013: £0.6m). The improvement in profit before tax compared with the previous year was due to improved operating margins and lower finance costs.

 

ELECO’s development spend in 2014 was £2.6m, of which £553,000 was required to be capitalised pursuant to the provisions of IFRS Section 38. Software assets amortised in the year amounted to £397,000 (2013: £376,000). ELECO Group Net Bank Borrowings as at 31 December 2014 were £1.6m, (31 December 2013: £4.3m), a reduction of £2.7m.

 

The above figures and comments thereon relate only to our Software interests. I have not commented on the performance of our former Building Systems interests. The figures relating to the latter are shown separately in the Consolidated Income Statement under the heading “Discontinued Operations”.

 

Refinancing and Re-banking

 

The equity capital raising to which I referred above consisted of a placing of 14.2m new ordinary Shares of ELECO in July 2014 at a price of 20.75p each, which raised £2.95m. These proceeds were used to reduce UK bank borrowings and in turn, supported ELECO’s decision to change its UK banking relationship to Barclays Bank, for the reasons stated above. The Board consider that the Group’s current bank facilities provide adequate working capital for its present requirements. The terms on which our current banking facilities were made available by Barclays enabled ELECO to significantly reduce its cost of borrowings in the second half of 2014.

 

Proposed restructuring of the Company’s Balance Sheet and Reserves and Future Dividend Policy

 

Shareholders will shortly receive a separate Circular, Notice and Proxy Card regarding proposals for a Scheme to restructure the Company’s Balance Sheet and Reserves for their consideration, and if thought fit, approval (“the Scheme”). Approval of the Scheme by the necessary majority of Shareholders at a General Meeting and the subsequent approval of the Scheme by the Court would permit the resumption of dividend payments as and when considered appropriate by the Directors. TheScheme would also permit the Company to resume the purchase of its own shares in the market, if the Directors were to consider it appropriate for the Company to do so.

 

On the assumption that the Scheme were approved by the necessary majority of Shareholders and also by the Court, it would be the intention of the Board to adopt a dividend policy which would require the company to conduct business in an appropriately cash generating manner, so that the payment of dividends would not hinder the growth of the business for lack of cash resources. It would be the Board’s intention to resume the payment of dividends only when it is satisfied that dividend payments would be well covered by earnings and positive cash flow.

 

External advisors

 

I am pleased to report that finnCap has been appointed our NOMAD and Broker. The team at finnCap has a strong track record in advising and raising capital, providing research and after-market care for ambitious growth companies.

I would also like to take this opportunity to thank Cenkos for their support and their service as our previous Nomad.

 

We are also pleased that Redleaf Communications has been appointed as our PR Advisers. Among its recent achievements, Redleaf Communications was voted the Best Financial PR Advisor at the UK Stock Market Awards 2015 and the PR Firm of the Year at the Grant Thornton Quoted Company Awards 2014. 

 

People

 

We welcome the appointment of Serena Lang MBA, as a Non-Executive Director. She was previously a senior Executive with BP within their Castrol Lubricants division and subsequently became a senior Executive in the Software Division of Invensys, which is now part of Siemens. She has also been appointed Chairperson of the Remuneration Committee.

 

We have established a Group Executive Committee with the initial remit to improve the flow of information across the Group, to provide co-ordinated and informed responses to issues and matters that are drawn to its attention and to initiate and co-ordinate the development of new software product initiatives. In a similar vein, we have also established a Software Developer Group, which meets regularly to engage in technical exchanges. This has already led to a number of interesting initiatives.

 

Earlier this year, Michael McCullen left ELECO by mutual consent to pursue a career as an independent consultant. He was a co-founder of Asta Development and made a significant contribution to the growth of ELECO’s software business since joining the Group in 2007. We will have a continuing relationship with him through his consultancy practice and wish him every success in the future.

 

I would also like to thank Jonathan Cohen who will be retiring from the Board at the end of the Annual General Meeting for his outstanding contribution to ELECO over the past decade in both good times and bad. During his time with ELECO he has to good effect, followed the advice he was given when he first became a Non-Executive Director, which was “to listen, to encourage and to warn”. I am grateful for Jonathan’s wise counsel as a member of our Board and we wish him well.

 

ELECO is a people business and our colleagues at Asta Development are to be congratulated on its latest BIM version of its Asta Powerproject software being voted “Best Project Management and Planning Software 2014” by the UK Construction Industry Software Association. The Award is a fitting illustration of the technical skill and drive of our software development and support teams across the Group. However, that said I hasten to add that our colleagues at Asta are not alone in their determination to develop and promote the most innovative products and services to our customers worldwide and, on your behalf, I would like to thank all those who work with us in Sweden, Germany, Belgium and the UK for their continuing outstanding contribution to ELECO, year in and year out, and especially so in the recent difficult economic climate and period of change.

 

Outlook

 

Having regard to the success of the refinancing and re-banking exercise, the strengthening of our management team and the skill and flair of our software development teams and sales and marketing teams in Sweden, Germany and the UK, we were able to maintain our revenue and profitability in 2014, a year of transition.  I believe that we have now laid a firm foundation for ELECO’s future growth as a leading international provider of outstanding software applications for project management, 3D architectural visualisation, 3D printing, engineering, e-commerce and cloud based solutions to the construction, engineering, and architectural sectors worldwide and we look to the future with confidence.

 

 

 

 

 

John Ketteley

Executive Chairman

5 May 2015

Chief Executive’s Operating Review

 

2014 was our first year as a solely software business, but crucially not our first year in business. As separate companies or as part of our former Software Division we have been supporting customers in the construction industry for nearly 40 years. Unravelling our legacy activities, ensuring a successful refinancing and re-banking and ongoing restructuring were necessary to provide a firm foundation for future activity, although it consumed significant management time. 2014 was a year of being able, for the first time as a Group, to plan, invest and focus on software, not supporting a wider construction business.

 

Despite this being a year of change, we surpassed a number of previous performance milestones.

 

·      Revenue grew £0.2m to £16.5m. At constant exchange rates revenue would have grown £1.2m to £17.5m.

·      Profit before tax was £0.7m up from £0.6m in 2013.

·      Net bank borrowings were down 63% from £4.3m at 1 January 2014 to £1.6m by year end.

 

Growth across multiple disciplines

 

We experienced growth across our core revenue lines of Licensing, Maintenance and Services. Driving net new licensing revenue is key for growth and we saw this improve by 5% at constant exchange rates. Our financial stability is also built on a strong maintenance business and we continued to see strong renewals and a resultant annuity growth of 7% at constant exchange rates.  Services, in particular consulting and training, also showed gains.

 

Awarding winning software

 

Our continued commitment to development both to support existing and develop new offerings was evident in a number of areas. We launched new services including our cloud based, collaborative ELECO BIMCloud solution which allows for the sharing of project data in the industry standard open BIM format.  It also provides a platform to integrate our own products into a more cohesive offering.

 

In addition, we released Asta Powerproject BIM, a 4D solution, including a 3D viewer within the project management timeline, Site Progress Mobile and ESIGN’s Marketing Manager Digital Asset Management offering.

 

This increase in our product line was delivered even though our development spend was largely in line with 2013 levels at £2.6m (2013: £2.6m). This investment represents 15.6% revenue (2013: 15.9%).

 

Development of new, “BIM enabled” versions of ELECO’s products for 3D CAD/design, project management and cost estimation also continued. These products are able to exchange data with each other via the ELECO BIMCloud^®, facilitating greater integration with our portfolio and in doing so, delivering improved collaboration between the different disciplines involved in construction projects. This cross Group development of our solutions will increase opportunities for cross-selling our products and help us to remain competitive.

 

Work on products to be launched in 2015 continued to make good progress in particular with two significant medium term product re-writes namely Bidcon (estimating) and Arcon EVO (visualisation) – both of which are core offerings in our portfolio. These upgrades will both assist in supporting existing customers and improve our opportunities in international markets.

 

Brands

 

Project management

 

Our project management business (Asta) continued to lead our performance in 2014, with double digit improvements in both revenue and contribution.  Asta Powerproject BIM was successfully demonstrated to customers at our National User Forum held in London in March 2014. After a period of beta testing, the offering was officially launched in the autumn of 2014.

 

As part of our strategy to develop solutions that operate cross platform, we also launched Asta Site Progress Mobile which was made available across all major mobile platforms during the year.

 

Internationally, Asta continued to make progress in the US market with the successful expansion of its reseller network. Growth of direct sales in non UK markets also performed well.

 

Estimation, engineering and consultancy

 

ELECO’s cost estimation, engineering and stair design software together with architectural and construction services are chiefly driven from our Swedish business under the Consultec brand.  The slow down experienced in 2013 extended in to 2014 and facilitated a need for an extensive restructuring exercise.  Whilst we saw an improving picture during the year, the resulting revenues and profits were below those achieved in 2013.

 

Our Swedish business develops and supplies a market leading estimation solution (BidCon^®) and resells our Asta project management software and services to 17 out of the top 20 construction companies in Sweden. We made progress in a complex rewrite of BidCon, bringing together a number of legacy applications in to a single product capable of producing cost estimations for construction, civil engineering, electrical and plumbing works.  We aim to make this upgrade available to existing customers in Q4 2015 and promote in new markets using a light weight solution earlier in the year. This is an important strategic move which will, amongst other benefits, assist us in retaining and increasing sales to larger customers. We also believe that in the long term, this will make Bidcon^® both easier and cheaper to maintain than the current multiple product-set.

 

Following collaboration with our Asta team in the UK, Consultec also developed direct links between Bidcon^® and Asta Powerproject^®, enabling us to offer a 5D BIM solution. Our Swedish business has begun marketing Asta Powerproject^® to its customers in Scandinavia.  In the past customers in Sweden had been supplied with Plancon, a third party project management system. Our aim is now to migrate these customers to Asta Powerproject^®, as soon as practicable.

 

International sales of our stair design and production system, Staircon, were driven by the integration of the acquisition in 2013 of a small but strategic competitor Wagemeyer GmbH, in Germany. The purchase has been a success, but we still faced challenges in the highly competitive German speaking markets which continues to impact our revenue and profitability during the period. Our innovation in this area was acknowledged by the EU which awarded us a development grant in November 2014.

 

Visualisation

 

ELECO’s visualisation software activity is predominately based in Germany and is represented by ESIGN, Arcon^® and o2c. ESIGN delivered increased revenues from its flooring visualisation systems.  Development efforts were focussed on its Marketing Management system which will help to make ESIGN’s product-set a strategic purchase for flooring manufacturers and wholesalers. Its visualisation system was extended from horizontal to vertical surfaces with the introduction of a door & tile modules, opening up the opportunity to target new market segments.

 

We continued our development of Arcon Evo, the next generation of our primary 3D CAD software. This is expected to be available in the first half of 2015. We also aim to have it “BIM enabled” so that it will form part of ELECO’s BIM suite of products and will be able to exchange data in the ELECO BIMCloud^® with ELECO’s project management software from Asta and Estimation software from Consultec.  This will start with an IFC data exchange capability. 

 

Territories

 

ELECO’s revenues remained predominantly centred in Europe and chiefly in our three home markets of UK, Germany and Sweden.

 

In the UK, we continued our restructuring and downsizing including our head office functions. Our business saw another strong year of growth, in part due to the growing confidence in the UK construction sector.

 

In Sweden we undertook changes in both our services businesses to adjust to local market conditions and brought in new management to strengthen our core estimating business. Our services business had some set-backs in the first half but recovered in the second half, a period in which we moved all our services business under one company.  Market conditions in both Sweden and Germany also appeared to be stabilising in 2014.

 

Operations

 

One of our biggest challenges in 2014 was the impact of currency and consequently our activity in mainland Europe was adversely impacted by the strengthening of Pound Sterling. We made improvements to our day to day reporting and enhanced our budgeting process – all aimed at providing a more cohesive, standardised operating model across the Group.

 

Though timely recruitment remains a constant challenge, we were able to strengthen our resources in key positions during the year, with an emphasis going forward on hiring sales and reseller resource.

 

Summary

 

ELECO’s long term aspiration is to be a leading provider of integrated software solutions to the global architectural, engineering and construction (“AEC”) industry – 2014 was an important year in reaching this goal – we operated for the first time as a software only business and laid many of the cornerstones.  Bringing together once independent software businesses into a cohesive, scalable operation takes time, but we made solid progress – ours aims in 2015 are to continue both growth in sales and the integration of our products and operations.  We have a great portfolio and a fantastic team – our job is to unlock that potential.

 

 

 

 

 

 

Nick Caw

Chief Executive Officer

5 May 2015

 

Financial Review

 

This was a year of transition as ELECO refocused around its software and services business. The individual businesses continued to show profitability and generate positive cash flow. These businesses, which are now supported by an improved balance sheet from additional equity and revised banking arrangements put in place in the second half of the year, have put ELECO in a strong position to exploit its product and geographic opportunities in the future.

 

Revenue

 

Revenue for the year under review grew 1% from £16.3m to £16.5m although this was impacted by the strength of sterling against the Swedish Krona and Euro where 66% of our business is generated. Without these currency headwinds, on a constant currency basis revenue growth would have been 7%. Year on year the average exchange rate for the Swedish Krona weakened from 10.23 to the British Pound to 11.32 to the British Pound. Year on year the average exchange rate for the Euro weakened from 1.18 to the British Pound to 1.24 to the British Pound.

 

The Group continues to have high levels of recurring revenue from maintenance with the balance of the revenue coming from services and licence sales. Recurring revenue in 2014 was £7.4m (2013:  £7.3m).

 

Revenue comprises the following elements:

 

Maintenance – 45% share of total revenue (2013: 45%)

·      Customer support

·      Regular software upgrades

·      Annual renewal rate in excess of 90%.

 

Services – 31% share of total revenue (2013: 30%)

·      Installation of products

·      Training and consultancy services

 

Licences – 24% share of total revenue (2013: 25%)

·      One-time payment for perpetual license

·      Additional payments for upgrades, additional usage and add-on products

·      Direct sales and sales through channel partners

 

The geographic performance of the group was mixed with strong growth in the UK of 19% to £4.3m (2013:  £3.6m) offset by weaker results in Sweden where revenue declined to £7.9m (2013: £8.3m) and Germany where revenue was constant at £2.4m (2013: £2.4m). Without the currency headwinds referred to above there would have been revenue growth in both Sweden and Germany of 5% and 6 % respectively.

 

The profit and loss account for 2013 has been restated to show a profit on the sale of excess land of £384,000, (previously disclosed as an exceptional item within normal activities), within discontinued operations which is consistent with the treatment of other items related to the Building products business.

 

Gross Profit

 

Gross profit is revenue less the direct cost of providing products and services to customers, principally the costs of training and consultancy staff. In 2014 the gross profit margin fell 3% from 87% to 84% due to a changed mix of licences, maintenance and services revenue together with a reclassification of consultancy staff costs from overhead to cost of sales.

 

Costs

 

Selling and administrative expenses fell 4% from £12.8m to £12.3m as the Group maintained a tight control on costs, only growing costs directly supporting revenue growth. Exceptional costs of £0.1m were fees related to the restructuring of the Group banking arrangements and balance sheet. Headcount at the end of the period was 197 an increase of 6 over the prior period as the group continued to invest in critical resources where revenue justified. Average headcount during the year was 186 which reflects the reduced headcount in the first half. Average headcount in Product development was 42 (2013: 41), Client services 65 (2013: 64), Sales and marketing 50 (2013: 50) and in Management and administration 29 (2013: 28).

 

Profit

 

Operating profit before depreciation, amortisation and exceptional items was £1.4m (2013: £1.4m) a growth of 6% over the prior period. Profit before tax was £0.7m (2013: £0.6m) a growth of 10% over the prior period. Taxation cost was £0.2m in the period (2013: £0.2m) representing 25% of profit before tax. (2013: 28%)

 

Balance Sheet and Cash Flow

 

The Group experienced a challenging period for cash flow in the first half of the year following the disposal of the building products businesses however as a result of the additional equity which contributed £2.9m and revised banking arrangements which contributed a net £1.5m the Group ended the year with net bank borrowings reduced to £1.6m, which is substantially lower than the 2013 closing position of £4.3m. The headroom at 31 December 2014 was significant based on the overdraft facility provided by the revised banking arrangements.

 

Trade and other receivables decreased to £3.1m (2013: £4.4m) representing 49 days sales outstanding compared to 52 for the prior period.  Trade and other payables decreased to £1.6m (2013:  £3.2m) and accruals and deferred income decreased to £5.2m (2013: £5.6m).

 

Capital and financing

 

The UK banking facilities were changed during the year to Barclays Bank plc and the new group facilities comprise the following:

 

·   a term loan of £3.0m, with 16 quarterly loan repayments of £187,500 commencing from October 2014, carrying an interest rate of 3.25% over base rate; and

·   a £1.0m overdraft facility, carrying an interest rate of 2.75% over base rate

 

Security provided to the bank for the provision of these facilities is:

 

·   Commitment of the shares of the operating companies

 

Covenants have been made to the bank is respect of three elements: EBITA to gross financing costs, net borrowings to EBITDA and cash flow to debt service. These covenants are tested quarterly. 

 

Discontinued operations

 

Discontinued operations are ongoing activity related to the ElecoBuild division which was sold or closed during 2013. Following the appointment of an Administrator to Bell & Webster Concrete Limited in early 2014, which was the last remaining trading statutory employer of the ELECO Retirement and Benefits Scheme, (“ERBS”) ELECO is in discussions with the Pension trustees about the transfer of the Pension Scheme to the Pensions Protection Fund. In the light of these discussions ELECO has de-recognised the pension scheme liability related to the ERBS and the related deferred tax asset from the Group balance sheet, which has resulted in an increase in the Group net assets of £6.2m compared to 31 December 2013. Other discontinued costs comprise staff costs (including redundancy costs) and professional fees which are directly related to the discontinued activities. Also included within discontinued operations is a profit of £91,000 arising from the disposal of a property previously occupied by some of the ElecoBuild businesses.

 

Earnings per share and dividends

 

The earnings per share on continuing operations are 0.8p (2013: 0.8p).The earnings per share on total operations including exceptional discontinued operations are 9.1p (2013: loss of 17.1p).

 

In consideration of the Company’s current financial position and performance, the Board is not in a position to recommend the payment of a dividend in respect of the year ended 31 December 2014.

 

A Greenwood

Chief Financial Officer

5 May 2015

Consolidated Income Statement

for the year ended 31 December 2014

									2013
							2014		(restated)
						Notes	£’000		£’000
	Continuing operations
	Revenue					1	16,484		16,318
	Cost of sales						(2,715)		(2,189)
	Gross profit						13,769		14,129
	Selling and administrative expenses						(12,329)		(12,772)
	Operating profit before amortisation of intangible assets and exceptional items						1,440		1,357
	Amortisation of intangible assets						(397)		(376)
	Exceptional items					3	(138)		–
	Operating profit					2/4	905		981
	Finance income					6	3		10
	Finance cost					6	(224)		(367)
	Profit before tax						684		624
	Tax					7	(173)		(174)
	Profit for the financial period from continuing operations						511		450
	Profit/(loss) for the financial period from discontinued operations					8	5,556		(10,668)
	Profit/(loss) for the financial period						6,067		(10,218)
	Attributable to:
	Equity holders of the parent						6,067		(10,218)
	Earnings/(loss) per share – basic and diluted
	Continuing operations						0.8	p	0.8	p
	Discontinued operations						8.3	p	(17.9)	p
	Total operations						9.1	p	(17.1)	p

 

 

 

 

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2014

							2014		2013
							£’000		£’000
	Profit/(loss) for the period						6,067		(10,218)
	Other comprehensive income:
	Items that will not be reclassified subsequently to profit and loss:
	Actuarial loss on retirement benefit obligation						–		(787)
	Deferred tax on retirement benefit obligation						–		159
	Other losses on retirement benefit obligation						–		(350)
							–		(978)
	Items that will be reclassified subsequently to profit and loss:
	Translation differences on foreign operations						60		(7)
	Other comprehensive income net of tax						60		(985)
	Total comprehensive income for the period						6,127		(11,203)
	Attributable to:
	Equity holders of the parent						6,127		(11,203)

 

 

 

Consolidated Statement of Changes in Equity

for the year ended 31 December 2014

		Share capital	Share premium	Merger reserve	Translation reserve	Other reserve	Retained earnings	Total
		£’000	£’000	£’000	£’000	£’000	£’000	£’000
	At 1 January 2014	6,066	6,396	4,086	(221)	(358)	(18,322)	(2,353)
	Issue of share capital	1,421	1,527	–	–	–	–	2,948
	Transactions with owners	1,421	1,527	–	–	–	–	2,948
	Profit for the period	–	–	–	–	–	6,067	6,067
	Other comprehensive income:
	Exchange differences on translation of net investments in foreign operations	–	–	–	60	–	–	60
	Total comprehensive income for the period	–	–	–	60	–	6,067	6,127
	At 31 December 2014	7,487	7,923	4,086	(161)	(358)	(12,255)	6,722
		Share capital	Share premium	Merger reserve	Translation reserve	Other reserve	Retained earnings	Total
		£’000	£’000	£’000	£’000	£’000	£’000	£’000
	At 1 January 2013	6,066	6,396	7,371	(214)	(358)	(10,411)	8,850
	Reclassification of merger reserve on business disposal			(3,285)			3,285	–
	Transactions with owners	–	–	(3,285)	–	–	3,285	–
	Loss for the period	–	–	–	–	–	(10,218)	(10,218)
	Other comprehensive income:
	Actuarial loss on defined benefit pension scheme net of tax and other scheme losses	–	–	–	–	–	(978)	(978)
	Exchange differences on translation of net investments in foreign operations	–	–	–	(7)	–	–	(7)
	Total comprehensive income for the period	–	–	–	(7)	–	(11,196)	(11,203)
	At 31 December 2013	6,066	6,396	4,086	(221)	(358)	(18,322)	(2,353)

 

 

 

Consolidated Balance Sheet

At 31 December 2014

								2014		2013
								£’000		£’000
	Non-current assets
	Goodwill							10,571		10,690
	Other intangible assets							1,683		1,462
	Property, plant and equipment							575		589
	Deferred tax assets							–		1,548
	Total non-current assets							12,829		14,289
	Current assets
	Inventories							8		17
	Trade and other receivables							3,110		4,447
	Current tax assets							148		281
	Cash and cash equivalents							1,198		770
	Other current assets							–		474
	Assets of disposal group							–		3,459
	Total current assets							4,464		9,448
	Total assets							17,293		23,737
	Current liabilities
	Bank overdraft							–		(3,783)
	Borrowings							(750)		(1,325)
	Obligations under finance leases							(141)		(247)
	Trade and other payables							(1,586)		(3,214)
	Provisions							(142)		(786)
	Current tax liabilities							–		(49)
	Accruals and deferred income							(5,189)		(5,643)
	Liabilities of disposal group							–		(2,694)
	Total current liabilities							(7,808)		(17,741)
	Non-current liabilities
	Borrowings							(2,063)		–
	Obligations under finance leases							(279)		(195)
	Deferred tax liabilities							(162)		(149)
	Non-current provisions							(220)		(195)
	Other non-current liabilities							(39)		(72)
	Retirement benefit obligation							–		(7,738)
	Total non-current liabilities							(2,763)		(8,349)
	Total liabilities							(10,571)		(26,090)
	Net assets							6,722		(2,353)
	Equity
	Share capital							7,487		6,066
	Share premium account							7,923		6,396
	Merger reserve							4,086		4,086
	Translation reserve							(161)		(221)
	Other reserve							(358)		(358)
	Retained earnings							(12,255)		(18,322)
	Equity attributable to shareholders of the parent							6,722		(2,353)

 

 

Consolidated Statement of Cash Flows

for the year ended 31 December 2014

						2014		2013
						£’000		£’000
	Cash flows from operating activities
	Profit/(loss) before tax (including discontinued operations)					7,788		(10,070)
	Net finance costs					228		622
	Depreciation and impairment charge					198		869
	Amortisation and impairment charge					397		514
	(Profit)/loss on sale of property, plant and equipment					(109)		210
	Loss on sale of businesses					–		5,319
	Retirement benefit obligation – derecognition					(7,738)		–
	(Decrease)/increase in provisions					(618)		648
	Cash generated/(used) in operations before working capital movements					146		(1,888)
	Decrease in trade and other receivables					(155)		769
	Decrease/(increase) in inventories and work in progress					8		(4)
	Decrease in trade and other payables					(244)		(234)
	Net (increase)/decrease in discontinued operations working capital					(108)		1,730
	Cash (used)/generated in operations					(353)		373
	Interest paid					(240)		(297)
	Interest received					3		2
	Income tax paid					(94)		(464)
	Net cash outflow from operating activities					(684)		(386)
	Investing activities
	Purchase of intangible assets					(637)		(78)
	Purchase of property, plant and equipment					(85)		(287)
	Acquisition of subsidiary undertakings net of cash acquired					(26)		(110)
	Proceeds from sale of property, plant, equipment  and intangible assets					1,114		3,047
	Sale of business net of expenses					474		274
	Net cash inflow from investing activities					840		2,846
	Financing activities
	Proceeds from new bank loan					3,000		4,000
	Repayment of bank loans					(1,513)		(5,600)
	Repayments of obligations under finance leases					(283)		(259)
	Issue of share capital					2,948		–
	Net cash inflow/(outflow) from financing activities					4,152		(1,859)
	Net increase in cash and cash equivalents					4,308		601
	Cash and cash equivalents at beginning of period					(3,013)		(3,613)
	Effects of changes in foreign exchange rates					(97)		(1)
	Cash and cash equivalents at end of period					1,198		(3,013)
	Cash and cash equivalents comprise:
	Cash and short-term deposits					1,198		770
	Bank overdrafts					–		(3,783)
						1,198		(3,013)

 

 

Notes to the Consolidated Financial Statements

 

1. Revenue

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

							2014	2013
							£’000	£’000
	Licence sales						4,008	4,003
	Recurring maintenance and support revenue						7,351	7,319
	Services income						5,125	4,996
	Total revenue						16,484	16,318

 

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.

				2014		2013
				Software		Software
				£’000		£’000
		Revenue		16,484		16,318
		Adjusted operating profit		3,861		4,331
		Product development costs		(2,024)		(2,598)
		Operating profit before exceptionals and amortisation		1,440		1,357
		Amortisation of intangible assets		(397)		(376)
		Exceptional items		(138)		–
		Segment result		905		981
		Net finance cost		(221)		(357)
		Segment profit before tax		684		624
		Tax		(173)		(174)
		Segment profit after tax		511		450
		Development costs capitalised		(553)		–
		Total development costs		(2,577)		(2,598)
		Segment result		905		981
		Amortisation of intangible assets		397		376
		Depreciation charge		198		222
		EBITDA		1,500		1,579

 

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 as the costs are not recorded in the same way the information is presented as one segment and as such the information is presented in line with management information.

 

Development project costs are expensed as incurred unless they meet the accounting policy requirements for capitalisation. The projects that have been capitalised in the twelve months to 31 December 2014 are explained in the Operating Review.

				2014		2013
				Software		Software
				£’000		£’000
	Statement of financial position
		Segment assets		17,293		18,730
		Unallocated assets		–		5,007
		Total Group assets		17,293		23,737
		Segment liabilities		10,571		15,658
		Unallocated liabilities		–		10,432
		Total Group liabilities		10,571		26,090

 

Unallocated assets are £nil. (2013: Deferred tax assets £1.5m and assets of disposal group £3.5m) Unallocated liabilities are £nil. (2013: Retirement benefit obligation £7.7m and liabilities of disposal group £2.7m).

Geographical 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:

							2014	2013
							£’000	£’000
	UK						4,291	3,598
	Scandinavia						7,917	8,333
	Germany						2,447	2,428
	Rest of Europe						1,404	1,666
	Rest of World						425	293
							16,484	16,318

 

 

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

 

Revenue by sales channel is as follows:

							2014	2013
							£’000	£’000
	Direct						15,774	15,606
	Reseller						710	712
							16,484	16,318

 

 

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:

							2014	2013
							£’000	£’000
	UK						6,780	5,512
	Scandinavia						4,902	5,787
	Germany						1,147	1,442
							12,829	12,741

 

 

Information about major customers

Revenues arising from sales to the Group’s largest customer were below the reporting threshold (2013: Below reporting threshold).

 

3. Exceptional items

Exceptional items represent income and costs considered necessary to be separately disclosed by virtue of their size or nature:

							2014	2013
							£’000	£’000
	Restructuring costs						(113)	–
	Capital reduction expenses						(25)	–
							(138)	–

 

Restructuring costs mainly relate to non-recurring banking fees and charges that cannot be directly attributed to the discontinued ElecoBuild businesses. Legal fees associated with the proposed balance sheet reconstruction are reported under exceptional items.  

 

4. Operating profit

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

							2014	2013
							£’000	£’000
	Product development						2,024	2,598
	Non-recurring staff costs						102	–
	Depreciation of property, plant and equipment						198	222
	Amortisation of intangible assets acquired						385	376
	Amortisation of capitalised development costs						12	–
	(Profit)/loss on disposal of property, plant and equipment						(17)	5
	Foreign exchange losses						58	31
	Fees payable to the Company’s auditor for:
	The audit of the parent company and consolidated financial statements						47	48
	Fees payable to the Company’s auditor and its associates for other services:
	The audit of the Company’s subsidiaries						47	73
	Other services						8	26
	Operating lease rentals:
	Plant, equipment and vehicles						180	10
	Other assets						250	342

Other services provided by the Company’s auditors amounted to £8,000 in the year (2013: £26,000) of which £4,000 was incurred by the Group’s German subsidiaries and £4,000 by its Swedish subsidiaries.

5. Employee information

The average number of employees during the period, including Directors, in continuing operations was made up as follows:

							2014	2013
							number	number
	Sales & marketing						50	50
	Client services						65	64
	Product development						42	41
	Management and administration						29	28
							186	183

Staff costs during the period, including Directors, in continuing operations amounted to:

							2014	2013
							£’000	£’000
	Wages and salaries						7,211	7,729
	Social security						1,586	1,753
	Pension costs						470	567
							9,267	10,049
	Less: Development staff costs capitalised						(553)	–
							8,714	10,049

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:

							2014	2013
							£’000	£’000
	Short-term employee benefits						654	653
	Post employment benefits						23	16
	Termination benefits						100	–
	Executive Directors						777	669
	Fees – non-executive Directors						61	56
							838	725

The emoluments of the highest paid Director were £382,000 (2013: £395,000). Employers NIC payments in respect of the Directors remuneration was £83,000 (2013: £73,000)

 

The remuneration of the non-executive Directors is determined by the Board. The non-executive Directors do not have service contracts but are appointed for an initial term of three years, which may thereafter be renewed from year to year. They do not participate in any of the Group’s share based incentive or pension schemes.

6. Net finance income/(cost)

Finance income and costs from continuing operations is set out below:

							2014	2013
							£’000	£’000
	Finance income
	Bank and other interest receivable						3	10
	Finance costs
	Bank overdraft and loan interest						(209)	(350)
	Finance leases and hire purchase contracts						(15)	(17)
	Total net finance cost						(221)	(357)

 

7. Taxation

(a) Tax on profit on ordinary activities

The tax charge in the income statement from continuing operations is as follows:

							2014	2013
							£’000	£’000
	Current tax:
	UK corporation tax on profits of the year						–	–
	Tax adjustments in respect of previous years						–	–
							–	–
	Foreign tax						153	169
	Total current tax						153	169
	Deferred tax:
	Origination and reversal of temporary differences						20	(36)
	Tax adjustments in respect of previous years						–	41
	Total deferred tax						20	5
	Tax charge in the income statement						173	174

 

Income tax for the UK has been calculated at the standard rate of UK corporation tax of 21.49% effective from 1 April 2014 (2013: 23.25%) on the estimated assessable profit for the period. Taxation for foreign companies is calculated at the rates prevailing in the relevant jurisdictions.

 

(b) Reconciliation of continuing operations tax charge

The tax assessed on continuing operations accounting profit before income tax for the year is higher than the standard rate of UK corporation tax of 21.49% for the period under review. The differences are explained below:

							2014	2013
							£’000	£’000
	Profit on continuing operations before tax						684	624
	Tax calculated at the average standard rate of UK corporation tax of 21.49% (2013: 23.25%) applied to profits before tax						147	145
	Effects of:
	Expenses not deductible for tax purposes						73	93
	Research & development tax relief						(81)	–
	Group relief/losses surrendered not paid						(13)	(200)
	Deferred tax not recognised						31	102
	Prior year adjustments						–	41
	Utilisation of losses						–	(31)
	Tax rate differences in foreign jurisdictions						12	28
	Other differences						4	(4)
	Continuing operations tax charge for the year						173	174

(c) Unrecognised tax losses

The Group has tax losses of £828,000 (2013: £888,000) arising overseas for which no deferred tax asset has been recognised and tax losses of £2,127,000 (2013: £1,393,000) arising in the UK. No deferred tax is recognised on the unremitted earnings of overseas subsidiaries.

 

8. Discontinued operations

Profit on the disposal of the Yaxley property that was occupied by the ElecoBuild businesses net of costs of disposal in the twelve months to 31 December 2014 are reported under discontinued operations.  In addition, non-recurring corporate overhead costs which are attributable to the ElecoBuild businesses during the year are reported under discontinued operations.

 

The de-recognition of the pension scheme liability related to the ELECO Retirement and Benefit Scheme (ERBS) and the associated deferred tax is reported as an exceptional item under discontinued operations.

 

 

  

The results from discontinued operations which have been included in the income statement are set out below:

		2014	2013
		£’000	£’000
	Revenue	–	16,144
	Cost of sales	–	(13,154)
	Gross profit	–	2,990
	Distribution costs	–	(1,211)
	Administrative expenses	(459)	(4,524)
	Other operating costs	(259)	(1,279)
	Loss on re-measurement	–	(1,471)
	Operating loss before exceptionals	(718)	(5,495)
	Exceptionals	7,738	–
	Operating profit/(loss)	7,020	(5,495)
	Finance cost	(7)	(264)
	Profit/(loss) before tax	7,013	(5,759)
	Taxation on discontinued operations	(1,548)	26
	Profit/(loss) for the period from discontinued operations before disposals	5,465	(5,733)
	Profit/(loss) on disposals after tax	91	(4,935)
	Profit/(loss) for the period from discontinued operations	5,556	(10,668)

 

The net profit from the disposal of the property and included in the income statement are set out below:

		2014	2013
		£’000	£’000
	Consideration on disposals	960	3,160
	Net assets on disposals	(764)	(5,628)
	Goodwill on disposal	–	(2,346)
	Other disposal costs	(105)	(121)
	Profit/(loss) on disposals before tax	91	(4,935)
	Tax on disposal of discontinued operations	–	–
	Profit/(loss) on disposals after tax	91	(4,935)

The net profit from the de-recognition of the ERBS pension scheme liability and associated deferred tax included in the income statement is set out below.

		2014	2013
		£’000	£’000
	Retirement benefit obligation	7,738	–
	Profit before tax	7,738	–
	Deferred tax	(1,548)	–
	Profit after tax	6,190	–

 

The results from discontinued operations which have been included in the cash flow statement are set out below:

		2014	2013
		£’000	£’000
	Operating activities	(1,250)	(1,620)
	Investing activities	960	387
	Financing activities	(11)	(69)
	Total cash flows	(301)	(1,302)

9. Earnings/(Loss) per share

The calculation of the earnings per share from continuing operations is based on the continuing operations profit after tax attributable to ordinary equity shareholders of the Company and the weighted average number of shares in issue for the reporting period. The earnings per share from discontinued operations is based on the discontinued operations profit before exceptional items after tax attributable to ordinary equity shareholders of the Company and the weighted average number of shares in issue for the reporting period.

 

The de-recognition impact of the pension scheme liability and associated deferred tax in the period on the calculation of the earnings per share is reported as an exceptional item in the table below:

		2014		2013
	Continuing operations	£511,000		£450,000
	Discontinued operations before exceptionals	£(634,000)		£(10,668,000)
	Discontinued operations exceptionals	£6,190,000		–
	Discontinued operations	£5,556,000		£(10,668,000)
	Total operations profit/(loss) after taxation	£6,067,000		£(10,218,000)
	Weighted average number of shares in issue in the period	66,610,703		59,761,646
	Dilutive effect of share options	–		–
	Number of shares for diluted earnings per share	66,610,703		59,761,646
	Earnings/(loss) per share – basic and diluted
	Continuing operations	0.8	p	0.8	p
	Discontinued operations before exceptionals	(1.0)	p	(17.9)	p
	Discontinued operations exceptionals	9.3	p	–	p
	Discontinued operations	8.3	p	(17.9)	p
	Total operations	9.1	p	(17.1)	p

There were no outstanding share options at 31 December 2014 and therefore no dilution effect on the basic earnings per share. Shares held by the Employee Share Ownership Trust are excluded from the weighted average number of shares in the period.

 

 

 

 

 

Notes

 

1.     The financial information in this announcement, which is audited, does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. Statutory accounts of the Company, on which the Auditors will report, will be delivered to the Registrar of Companies. The comparative figures for the 12 months to 31 December 2013 have been taken from, but do not constitute, the Company’s statutory financial statements for that financial year.

 

2.     The Group’s activities, together with the factors likely to affect its future development, performance and position are set out in the Operating Review and Financial Review.

 

The Groups’ clients include many top contractors in the building and construction sector in the UK, Sweden and Germany. The software products provided by the Group are reasonably embedded in their client’s core operations and 45% of the Group’s revenue is from recurring revenue contracts. These maintenance contracts are renewed throughout the year although there is a slightly greater weighting in the fourth quarter. Historically, there is a low level of cancellations each year. For these reasons, the Group has good visibility on any potential deterioration in its trading outlook and potential risk to the business.

 

The Group’s forecasts and projections, taking into account reasonably possible changes in trading performance of the Group show that the Group should be able to operate within the level of its current facilities. Revenue, operating profit and cash flow budgets have been prepared at business unit level and as a result, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.     

 

3.     The information herein has been prepared on the basis of the accounting policies adopted for the year ended 31 December 2014, set out in the Company’s Annual Report and Accounts and as previously disclosed in the Company’s Annual Report and Accounts for the year ended 31 December 2013.

 

4.     The calculation of the earnings per share is based on the total profit after tax attributable to ordinary equity shareholders of £6,067,000 (2013: Loss £10,218,000) and on 66,610,703 ordinary shares (2013: 59,761,646), being the weighted average number of ordinary shares in issue during the year.

 

5.     The Annual General Meeting of ELECO plc will be held at Brewers’ Hall, Aldermanbury Square, London EC2V 7HR on 8 June 2015 at 12 noon.

 

6.     The Annual Report and Accounts for the year ended 31 December 2014 will be sent to shareholders on 11 May 2015 and will be available to view on the Company’s website, eleco.com, from that date.