Interim results for 6 months ended 31st June 2020.

Chairman’s statement

“The challenges for the first half of the year were significant for many companies and I am pleased to report that Eleco performed creditably during these times.

Continuing successfully to address the near-term challenges that the current economic conditions present and focusing on our future growth strategy will be ever more important as we continue to recover from the impact of Covid19.

Our excellent suite of products, loyal customer base and the strength of our Executive team and employees gives me the confidence that we will be able to continue to ride the wave of the storm and focus on the major opportunities ahead of us.”

+ 1 19 %
Operating profit
+ 1 23 %
Profit before tax
+ 1 19 %
Basic earnings per share

Chairman’s statement continued…

John Ketteley, after 23 years in the role, has decided it is the right time for him to stand down as Executive Chairman of Eleco and hand the reins over as we report on the results for the 6 months to 30th June. On behalf of all our stakeholders, I would like to take this opportunity to thank John for his enormous contribution over the last 23 years in developing the Elecosoft business and delivering the profitable and growing software business we have today.  We wish him all the very best for the future.

I congratulate Jonathan Hunter, our current COO, on his appointment as Interim CEO. Having worked closely with John for the last decade, Jonathan is acutely familiar with the operations and is well placed to lead the business going forward. I very much look forward to working closely with him and the Executive team over the coming months.

Eleco performed well in the first half of 2020, dealing effectively with the Covid-19 threat to its business and delivering a creditable operational and trading performance as very difficult market conditions developed in the period.

This has been made possible by the thorough planning and rapid response in dealing with the initial threat of the Covid-19 breakout by our management and I thank all our employees for adapting to their new working environment whilst continuing to provide our customers with continued excellent service.  The initiatives that were taken enabled the Group to remain resilient and cash generative.

Financial highlights

 

2020
£’000
2019
£’000
Change
’%’
Continuing operations
Revenue 12,215 12,711 -4%
Operating profit 2,071 1,746 +19%
Profit before tax 1,930 1,567 +23%
Basic earnings per share (continuing operations) 1.9p 1.6p +19%
Recurring maintenance, support and subscription revenue 6,953 6,763 +3%
Adjusted operating profit* 2,366 2,138 +11%
Adjusted earnings per share**(pence per share) 2.2p 2.0p +10%
Free cash flow*** 3,711 2,111 +76%
Net cash/ (Net Bank Debt)
4,435 (198)
** Adjusted earnings per share represents adjusted operating profit less net finance costs and tax, divided by a weighted average number of shares.
*** Free cash flow represents cash generated in operations less purchase of intangible assets and property, plant and equipment, net of finance costs and tax plus any proceeds from disposals of property, plant and equipment.
Operational highlights

While retaining existing customers, we have also noted a welcome increase in the number of new accounts that we have gained across different industries in the period. For example, ShireSystem further diversified its customer base in the UK with additions from Food & Drink Manufacturing, Health & Social Care, Chemical & Pharmaceutical and Construction.

Elecosoft supported the construction planning community during a difficult period for the industry by providing complementary Powerproject training and temporary software licences to planners who had been placed on furlough. We also supported some of our construction customers by offering complimentary extended licence agreements to enable them to work remotely during the Covid-19 lockdown.

We held a number of well received, complimentary webinars, which dealt with construction delays, pauses and using our software to support the reopening of construction sites.

Other varied opportunities that have enabled us to provide service to our customers include:

  • ShireSystem CMMS prevented downtime for Kingspan Insulated Panels across nine sites in six countries.
  • Eleco’s subsidiary ESIGN launched its new Artificial Intelligence visualisation tool at Domotex, Hanover, in January 2020.
  • Powerproject Vision aided the Carey Group to boost business visibility and control.
  • Minsur used Powerproject 4D BIM to visualise and report on complex tailings reprocessing plant construction.
  • Project planning precision enabled with Powerproject at Oxford University’s Beecroft physics building.
  • John Sisk & Sons deployed Site Progress Mobile to deliver woodland cabins for Center Parcs.

 

Recent events have demonstrated the need for us to satisfy our customers’ requirements to be able to work more remotely and our software developers and trainers are increasingly seeking opportunities to support our customers in achieving their goals in this regard.

Revenues

Revenues in the first half of 2020 were £12,215,000 (2019: £12,711,000), a decrease in turnover of 4 per cent; or 3 per cent at constant currencies. In my view, our sales, marketing and support colleagues are to be congratulated on their performance given the challenges affecting most of our markets in the period.

Revenues from recurring maintenance, support, and other subscription-based contracts amounted to £6,953,000 (2019: £6,763,000), equivalent to 57 per cent of total unaudited revenues (2019: 53 per cent).

Profit

Operating Profit for the period was £2,071,000 (2019: £1,746,000), an increase of 19 per cent, after crediting £133,000 (2019: £nil) relating to the UK Government’s Covid-19 Job Retention Scheme and the comparable schemes in Sweden and Germany and after charging £nil (2019: £97,000) of acquisition and corporate finance related costs.

Adjusted operating profit, before charging acquisition and corporate finance related expenses £nil (2019: £97,000) and amortisation of acquired intangible assets of £295,000 (2019: £295,000) was £2,366,000 (2019: £2,138,000), representing an increase of 11 per cent that reflects the continuing strength of our core business and a strong focus on cost management during the period.

Profit before tax was £1,930,000 (2019: £1,567,000), an increase of 23 per cent.

The earnings per share for the period was 1.9 pence (2019: 1.6 pence), an increase of 19 per cent.

Software

Our software portfolio, developed by our inhouse development teams, is the lifeblood of our business. Total software development spend (both capitalised and expensed elements) in the period amounted to £1,623,000 (2019: £1,524,000) and reflect our continuing efforts to enhance our software offering to the market. Software development expenditure capitalised in the period totalled £760,000 (2019: £633,000).

Company Name Change

The Board made the decision to re-instate the former company name, Eleco plc. We had experienced confusion by customers and shareholders between the business brand and the subsidiaries’ businesses and the Company’s name.  There will now be a clearer distinction between the operational activities under the Elecosoft brand, launched in 2015, and the Company itself.

Interim Dividend

Eleco’s strong trading performance and cash generation in the six months to 30 June 2020, would normally have warranted the payment of an interim dividend. However, having regard to the uncertainties created by the Covid-19 pandemic, the Board has decided to not recommend an interim dividend.

Outlook

The Board believes that there is a greater need now than ever before for our customer base to adopt technology that brings innovation and efficiency.  Elecosoft’s suite of solutions continues to be focused on delivering improved efficiencies to our customers, thus enabling them to reduce their own and their customers’ costs and project risk. The actions we have taken and the continuing availability of our software, training and services, will enable us to assist our customers to maintain the momentum of their businesses in the year ahead despite the prevailing difficulties they face.

The challenges for the first half of the year were significant for many companies and I am pleased to report that Eleco performed creditably during these times and that all affected staff have been taken off furlough and returned to full time work.

Continuing successfully to address the near-term challenges that the current economic conditions present and focusing on our future growth strategy will be ever more important as we continue to recover from the impact of Covid19.

Our excellent suite of products, loyal customer base and the strength of our Executive team and employees gives me the confidence that we will be able to continue to ride the wave of the storm and address the major opportunities ahead of us.