Revenues in the first half of 2021 were £13,831,000 (2020: £12,215,000), an increase of 13 per cent; or 12 per cent at constant currencies.
Revenues derived from recurring maintenance, support contracts, and other subscription-based contracts in the period increased to £7,543,000 (2020: £6,953,000), equivalent in percentage terms to 55 per cent of total revenues in the period (2020: 57 per cent). The strong revenue growth in new licence sales from our Building Lifecycle businesses and increase in services revenue has resulted in the slightly lower recurring revenue as a percentage of total revenue. However, the growth in licence sales combined with the investment in transitioning the portfolio to subscription will lead to a further increase in recurring revenues going forward.
Operating profit for the period was £2,366,000 (2020: £2,071,000), an increase of 14 per cent. Following the positive underlying performance of Eleco in 2020, the Board took the decision last year to pay back furlough funds that qualified for repayment. This amounted to £135,000 in 2021 (2020: £nil).
Adjusted EBITDA, which is defined as operating profit before amortisation of intangible assets, depreciation and former Directors’ payments was £3,649,000 (2020: £3,282,000), an increase of 11 per cent.
Adjusted operating profit, which is defined as operating profit before former Directors’ payments was £69,000 (2020: £nil) and amortisation of acquired intangible assets of £295,000 (2020: £295,000) was £2,730,000 (2020: £2,366,000), representing an increase of 15 per cent, reflecting the continuing strength of our core business.
Profit before tax for the period ended 30 June 2021 was £2,260,000 (2020: £1,930,000), an increase of 17 per cent.
Profit after tax for the period ended 30 June 2021 was £1,797,000 (2020: £1,516,000), an increase of 19 per cent, equivalent to basic earnings per share for the period of 2.2 pence (2020: 1.9 pence), an increase of 16 per cent.
- Strategic focus on leveraging strong customer relationships enabled further market penetration.
- Implementation of Powerproject Vision, our SaaS portal for collaborating on construction schedules, to support the digital transformation of VINCI Construction’s planning process.
- Powerproject Vision launched in the Nordics, with a first order won from a Swedish residential property developer operating across 23 regions in nine countries.
- Continued to support customer success, evidenced by Frank Connolly of Mace Group, who won the CIOB Construction Manager of the Year award for his programmes that were managed using Powerproject.
- Collaboration Cloud solution launched in the UK and the latest version of Powerproject (v16) was released. • Won a high-value visualisation solutions order from a Japanese floor manufacturer.
- Commenced the digital transformation of backoffice systems to enhance efficiency, provide better real-time KPIs and streamline operations.
Having regard to the strong trading performance and cash generation in the period under review, a good start to the second half and a positive outlook for the remainder of the year, the Board has decided to declare a dividend of 0.2 pence (2020: nil pence), which would be covered 10.8 times by unaudited earnings for the period of 2.2 pence per share.
The interim dividend will be made on 22 October 2021 to shareholders on the register at the close of business on 24 September 2021 and the ex-dividend date will be 23 September 2021.
Eleco delivered a positive performance in the first half of 2021, with growth in all regions and all customer segments. Importantly we were also able to strengthen our financial position considerably in the period. We are confident of meeting market expectations for the full year to 31 December 2021.
The Company is strategically investing to grow its business, most notably having set up a direct business in Texas in the USA and taken its maintenance management portfolio into the German market. These projects will take time to seed but ultimately are about growth. As the Company continues to drive organic growth in its core markets, it will invest further in business development as well as software development to secure its market-leading positions. At a Group level, we have just recruited a Group Transformation Director and are still searching for a Chief Technology Officer.
The Company is also undergoing some major transformation projects including the digitisation of its back-office systems which will not only enable efficiencies but also allow us to be more agile and innovative. Additionally the Company is moving towards a SaaS subscription model for many new customers. Inevitably, this will soften revenues and profits in the short term as revenues are spread over a longer period of time and costs are added to drive growth. However, the shift will drive growth in customer lifetime value, lower customer acquisition costs and increase our recurring revenues as we move away from a perpetual licensing model.
We therefore expect a temporary reduction in our level of profitability over the next 18 months as the SaaS subscription model and strategic initiatives bed in and deliver our long term growth. We will continue to drive our strategy and concentrate our efforts on the software solutions that our customers require, focused on delivering ease of use and improved efficiencies to our customers, and thus enabling them to reduce their own and their customers’ costs in difficult markets. I am confident therefore that with the close collaboration with our customers, we will continue to build Eleco from strength to strength.