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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Eleco Public Limited Company | LSE:ELCO | London | Ordinary Share | GB0003081246 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.50 | 0.52% | 96.50 | 95.00 | 98.00 | 98.50 | 96.50 | 97.50 | 183,334 | 15:15:04 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Computer Programming Service | 26.57M | 2.4M | 0.0291 | 33.16 | 79.42M |
TIDMELCO
RNS Number : 4771A
Elecosoft PLC
12 September 2018
12 September 2018
Elecosoft plc
("Elecosoft", the "Company" or the "Group")
Interim Results for the Six Months Ended 30 June 2018
and Directorate Change
Elecosoft plc (AIM: ELCO), the AIM-listed international construction software specialist, is pleased to announce its unaudited results for the six months ended 30 June 2018, and a directorate change.
Financial Highlights
-- Revenue up 5% to GBP10,554,000 (2017 H1: GBP10,010,000); up 7% at constant exchange rates -- Operating profit up 15% to GBP1,221,000 (2017 H1: GBP1,059,000)
-- Operating profit before acquisition related costs up 46% to GBP1,544,000 (2017 H1: GBP1,059,000)
-- Adjusted operating profit* up 34% to GBP1,755,000 (2017 H1: GBP1,314,000) -- Basic earnings per share up 18% to 1.3p (2017 H1: 1.1p) -- Adjusted earnings per share* up 38% to 1.8p (2017 H1: 1.3p) -- 55% of revenue recurring (2017 H1: 54% of revenue) -- Cash generated in operations up 71% to GBP2,865,000 (2017 H1: GBP1,676,000) -- Net cash GBP2,668,000 (2017 H1: GBP259,000) -- Interim dividend up 40% to 0.28p per share (2017 interim: 0.20p per share)
(* Adjusted profit measures exclude acquisition related costs and amortisation of acquired intangible assets.)
Operational Highlights
-- Acquisition in July of Shire Systems, a leading UK provider of computerised maintenance management software (CMMS)
-- Increased adoption of Powerproject BIM including its adoption by Ballast Nedam, a leading Dutch construction company, as their standard 4D planning tool
-- Release of a new retailer platform Pixmo for visualising ceramic tiles
-- Showcased the pre-release version of Memmo(R), Elecosoft's new site management software, alongside Powerproject(R) and Bidcon(R) at Nordbygg, Northern Europe's largest construction exhibition in Sweden
-- Appointment of Mukul Mistry, BSc - Corporate Development Director -- Appointment of David Dannhauser, FCA - Non-Executive Director
Directorate Change
Today the Company announces that Simon Morgan has resigned from the Board of the Company with immediate effect to pursue other interests. The Company also announces the appointment of Benjamin Moralee as Finance Director to replace Simon Morgan with immediate effect.
Benjamin Moralee has been Interim Deputy Finance Director of the Company since March 2018, working alongside the Board of the Company. Ben has extensive further experience in international finance positions having previously been Interim Head of Finance at Figleaves (part of N Brown Group PLC) and being Financial Controller for Serena Software Europe Limited (part of Micro Focus PLC), the international provider of IT management products, for ten years. Mr. Moralee qualified as a chartered accountant with Deloitte and is a Fellow of the ICAEW.
Executive Chairman, John Ketteley said: "Elecosoft has performed well in the first half of 2018. Our revenue growth has accelerated, cashflow remains strong, we have made good progress with our software development and the acquisition of Shire Systems has broadened and strengthened our product portfolio. I would like to thank Simon Morgan for his contribution in his time with the Company and wish him the best for the future, and welcome Ben to the Board. In light of the Company's first half performance, we look forward to the remainder of 2018 with confidence."
About Elecosoft plc
Elecosoft is listed on the Alternative Investment Market in London (AIM: ELCO). It is a specialist international provider of software and related services to the architectural, engineering, construction and digital marketing industries from centres of excellence in the UK, Sweden, Germany and the US. Elecosoft's market-leading software solutions are developed by teams in the United Kingdom, Sweden and Germany, and its software programs cover project management, construction site management, estimating, timber engineering, 3D design and visualisation, and cloud based digital marketing solutions.
For further information please contact: Elecosoft plc www.elecosoft.com JHB Ketteley, Executive Chairman Tel: 020 7422 8000 Jonathan Hunter, Chief Operating Officer finnCap Ltd Adrian Hargrave / Kate Bannatyne (Corporate Tel: 020 7220 0500 Finance) Camille Gochez (Corporate Broking) Redleaf Communications Elisabeth Cowell / Fiona Norman Tel: 020 3757 6880 elecosoft@redleafpr.com
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
The following information regarding the appointment of Benjamin Stuart Moralee, aged 40, is disclosed under Schedule 2(g) of the AIM Rules for Companies:
Current directorships and/or Former directorships and/or partnerships: partnerships (within the last five years): Moralee Davis Consultants Limited Serena Software Nordic AB
Mr. Moralee has no shareholding in the Company.
There are no further disclosures required under Schedule 2(g) of the AIM Rules for Companies.
Chairman's Statement
Trading Performance
Unaudited revenues in the first half of 2018 were GBP10,554k (2017: GBP10,010k), and the rate of increase in revenue at constant currencies was 7% (2017 full year: 4%, excluding acquisitions).
The revenue profile of the Group remains strong. The proportion of revenues derived from recurring maintenance and support contracts, as well as subscription-based contracts, was 55% of revenues in the period (2017: 54%).
Unaudited operating profit for the period was GBP1,221k (2017: GBP1,059k), and is stated after deducting GBP323k of acquisition related expenses. Before deducting the GBP323k of acquisition related expenses, operating profit from trading was up 46%. Adjusted operating profit from trading, before charging acquisition related expenses and amortisation of acquired intangible assets was GBP1,755k (2017: GBP1,314k), up 34%, and the adjusted operating margin improved to 16.6% (2017: 13.1%). This improved profitability reflects the strength of our core business, the benefits of scale as the business grows, and a continuing focus on cost management.
After deducting interest charges in the period of GBP38k (2017: GBP52k), profit before tax was GBP1,183k (2017: GBP1,007k). The tax charge in the period was GBP225k (2017: GBP203k).
Unaudited profit for the financial period was GBP958k (2017: GBP804k), an increase of 19% compared with the prior period, and equivalent to basic earnings per share of 1.3p per share (2017: 1.1p), an increase of 18%. Adjusted earnings per share, before charging acquisition related expenses and amortisation of acquired intangible assets, was 1.8p per share (2017: 1.3p), an increase of 38%.
A reconciliation of adjusted profit measures to reported measures is presented in note 13.
Financial Performance
The Group generated cash from operations in the period of GBP2,865k (2017: 2,277k), an increase of 26% compared with the comparative period. Adjusted operating cash flow, after deducting capital expenditures of GBP621k (2017: GBP593k) and before acquisition related cashflows of GBP43k (2017: nil), was GBP2,287k (2017: GBP1,684k), meaning that over the last 12 months the Group has converted 107% of adjusted operating profits into cash.
The strong cash flow generation of the business resulted in an improvement in our net cash position to GBP2,668k as at 30 June 2018, up from GBP1,031k at 31 December 2017.
Software Development
Software development expenditure in the period under review was broadly the same at GBP1,403k (2017: GBP1,398k) and represents the equivalent of 13% of revenue in the period (2017: 14%). We remain committed to the continued enhancement of our market-leading construction software portfolio offering to our customers worldwide.
Development expenditure that was capitalised in the period totalled GBP531k (2017: GBP494k). In Germany, Sweden and the UK, the major component of these software development projects have involved the introduction of SaaS web applications.
Operational Highlights
We continued to make progress toward our strategic priorities set-out on page 17 of the 2017 Annual Report to expand our portfolio and to address additional phases of the building lifecycle with the acquisition of Shire Systems.
We also continue to invest in research and development to expand our SaaS offerings and deliver best practice among development teams with the beta-release of our new SaaS site management tool Memmo(R) and our new SaaS project collaboration solution in the UK. We launched a new retailer platform Pixmo for the ceramic tile industry which produces room visualisations. We successfully exhibited at Nordbygg, Northern Europe's largest construction exhibition in Sweden, showcasing Memmo(R) alongside Powerproject(R) and Bidcon(R). Powerproject BIM was chosen by Ballast Nedam, a leading Dutch construction company, as their standard 4D planning solution.
Elecosoft successfully increased UK licence sales by 30% compared to the same period in 2017. We experienced challenges in the US due to slower uptake through resellers however this shortfall has been somewhat offset by growth in other international markets, principally Australia.
Acquisition and Financing of Shire Systems Ltd
On 4 July 2018 Elecosoft completed the acquisition of Shire Systems Ltd, a leading UK provider of computerised maintenance management software (CMMS), for a total consideration of GBP6.3m in cash; comprising an enterprise value of GBP5.1m on a cash and debt free basis, and an estimated GBP1.2m net cash, subject to a review satisfactory to Elecosoft of the cash, debt and working capital of Shire as shown in the completion accounts.
The acquisition represents a significant advancement in Elecosoft's successful strategy of investing in synergistic software products and technologies to strengthen its construction software portfolio. It will extend Elecosoft's software portfolio beyond early stage project planning, design and construction applications, to asset maintenance management applications for plant and equipment and building life cycle maintenance management. As at the end of 2017 Shire boasted over 800 active customers and 3,500 users of its products including organisations engaged in a diverse range of industries. Shire Systems reported unaudited revenues of GBP1.9m for the year to 31 December 2017, and unaudited profit before tax of GBP0.7m, adjusted to add back GBP0.3m of exceptional vendor remuneration.
The acquisition was financed by incremental borrowings of GBP6m as part of a new five-year fixed term loan of GBP8m from Barclays Bank, which consolidated Elecosoft's outstanding borrowings from Barclays of GBP2m. The Directors consider that in the absence of unforeseen circumstances, the Group will be in a position to comfortably service and repay its medium-term Sterling borrowings in accordance with their terms.
My colleagues and I extend a warm welcome to the Shire Systems team who bring extensive knowledge and experience to the Elecosoft group.
Board and Management
I was pleased to announce in February the appointment of David Dannhauser, FCA as a Non-Executive Director. David Dannhauser has been CFO of a number of listed companies in the past 20 years, including the position of CFO of Elecosoft from 1994 to 2010, at which time he was closely involved in the establishment and development of the Group's software activities, which today form the core of Elecosoft's software operations. He has also advised a number of companies on their capital raising, M&A and strategic planning activities.
In June Mukul Mistry was appointed to the Board as Corporate Development Director. Mukul has extensive international experience in the software industry, having previously served on the board of systems integration and services business HTSA Pty Ltd in South Africa and advised the boards of a number of international software technology companies on their strategic development. I believe that Mukul's international experience and technical background will be invaluable to us as we focus increasingly on the development and strategic direction of Elecosoft.
I am sad to also report that Simon Morgan has resigned as Finance Director of Elecosoft in order to pursue opportunities elsewhere. He will be replaced by Ben Moralee, who has been with Elecosoft since March 2018 working on a number of projects, including the successful acquisition of Shire Systems. I am delighted to welcome Ben to the Board. The whole Board and I are very grateful for Simon's contribution to the business over the last year and wish him every success with his future career.
Interim Dividend
Having regards to Elecosoft's strong trading performance and cash generation in the period under review, the Board has decided to declare an increased interim scrip dividend of 0.28p per ordinary share (2017: 0.20p), or alternative cash dividend of 0.28p per ordinary share (2017: 0.20p), an increase of 40%, covered 4.6 times by unaudited earnings for the period of 1.3p per ordinary share.
The scrip reference price is 84.8p, calculated from the average of the closing price for an ordinary share of the company as derived from the daily official list of the London Stock Exchange during the period of five dealing days ending 10 September 2018. The interim dividend will be paid on 31 October 2018 to shareholders on the register at the close of business on 21 September 2018 and the ex-dividend date will be 20 September 2018. The cash alternative election will close at 5pm on 17 October 2018.
Outlook
Elecosoft is a people business, and I am pleased to say that every unit whether in the UK, Sweden, the Netherlands, Germany or the US, has performed well in the period under review. We have also made good progress with new software development initiatives in the period and also with our branding and sales reach.
Approximately a third of our revenue in the first half of 2018 was earned in the UK, with two thirds in Scandinavia, elsewhere in Europe, Australia or the US. The majority of our operating profits are earned in, and employees based in Sweden, Germany, the Netherlands, Belgium and the United States. This, combined with the recurring nature of our revenues, means that I believe we remain resilient to any potential effects of Brexit.
We continue to see significant opportunities particularly in construction, but also in other related sectors that we currently serve, as we further develop our software to improve the timeliness, cost-efficiency and risk profiles of our customers' projects. The launch of products such as Memmo, our new site management tool, and the addition of Shire Systems' CMMS software further enhances our position as a market leading provider of software across all the phases of a construction project and the lifecycle of a building.
My colleagues and I look forward with confidence to the future.
Condensed Consolidated Income Statement
for the financial period ended 30 June 2018
Six months to 30 June Year Ended -------------------------- 2018 2017 31 December (unaudited) (unaudited) 2017 Notes GBP'000 GBP'000 GBP'000 ------------------------------------- ------ ------------ ------------ ------------ Revenue 3,4 10,554 10,010 19,996 Cost of sales (1,230) (1,293) (2,421) Gross profit 9,324 8,717 17,575 Amortisation and impairment of intangible assets (435) (420) (1,035) Acquisition related expenses (323) - - Other selling and administrative expenses (7,345) (7,238) (14,179) --------------------------------------- ------ ------------ ------------ ------------ Selling and administrative expenses (8,103) (7,658) (15,214) Operating profit 4,5 1,221 1,059 2,361 Finance cost 6 (38) (52) (107) Profit before tax 1,183 1,007 2,254 Tax (225) (203) (357) Profit for the financial period 958 804 1,897 --------------------------------------- ------ ------------ ------------ ------------ Attributable to: Equity holders of the parent 958 804 1,897 -------------------------------------- ------ ------------ ------------ ------------ Earnings per share (pence per share) Basic earnings per share 7 1.3p 1.1p 2.5p -------------------------------------- ------ ------------ ------------ ------------ Diluted earnings per share 7 1.2p 1.0p 2.5p -------------------------------------- ------ ------------ ------------ ------------
Condensed Consolidated Statement of Comprehensive Income
for the financial period ended 30 June 2018
Six months to 30 June Year Ended -------------------------- 2018 2017 31 December (unaudited) (unaudited) 2017 GBP'000 GBP'000 GBP'000 --------------------------------------- ------------ ------------ ------------ Profit for the period 958 804 1,897 Other comprehensive income: Items that will be reclassified subsequently to profit or loss: Translation differences on foreign operations (70) (23) 14 Other comprehensive (loss)/ income net of tax (70) (23) 14 Total comprehensive income for the period 888 781 1,911 ------------------------------------------ ------------ ------------ ------------ Attributable to: Equity holders of the parent 888 781 1,911 ---------------------------------------- ------------ ------------ ------------
Condensed Consolidated Statement of Changes in Equity
for the financial period ended 30 June 2018
Share Merger Translation Other Retained capital reserve reserve reserve earnings Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------------- --------- --------- ------------ --------- ---------- -------- At 1 January 2018 774 575 (66) (283) 10,486 11,486 Dividends - - - - (110) (110) Share-based payments - - - 52 - 52 Issue of share capital 5 (5) - - - - Transactions with owners 5 (5) - 52 (110) (58) ------------------------------------- --------- --------- ------------ --------- ---------- -------- Profit for the period - - - - 958 958 Other comprehensive income: Exchange differences on translation of net investments in foreign operations - - (70) - - (70) Total comprehensive income for the period - - (70) - 958 888 ------------------------------------- --------- --------- ------------ --------- ---------- -------- At 30 June 2018 (unaudited) 779 570 (136) (231) 11,334 12,316 ===================================== ========= ========= ============ ========= ========== ======== Share Merger Translation Other Retained capital reserve reserve reserve earnings Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------------- --------- --------- ------------ --------- ---------- -------- At 1 January 2017 771 578 (80) (339) 8,786 9,716 Dividends - - - - (135) (135) Share-based payments - - - 6 - 6 Transactions with owners - - - 6 (135) (129) ------------------------------------- --------- --------- ------------ --------- ---------- -------- Profit for the period - - - - 804 804 Other comprehensive income: Exchange differences on translation of net investments in foreign operations - - (23) - - (23) Total comprehensive income for the period - - (23) - 804 781 ------------------------------------- --------- --------- ------------ --------- ---------- -------- At 30 June 2017 (unaudited) 771 578 (103) (333) 9,455 10,368 ===================================== ========= ========= ============ ========= ========== ======== Share Merger Translation Other Retained capital reserve reserve reserve earnings Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------------- --------- --------- ------------ --------- ---------- -------- At 1 January 2017 771 578 (80) (339) 8,786 9,716 Dividends - - - - (197) (197) Share-based payments - - - 56 - 56 Issue of share capital 3 (3) - - - - Transactions with owners 3 (3) - 56 (197) (141) ------------------------------------- --------- --------- ------------ --------- ---------- -------- Profit for the period - - - - 1,897 1,897 Other comprehensive income: Exchange differences on translation of net investments in foreign operations - - 14 - - 14 Total comprehensive income for the period - - 14 - 1,897 1,911 ------------------------------------- --------- --------- ------------ --------- ---------- -------- At 31 December 2017 774 575 (66) (283) 10,486 11,486 ===================================== ========= ========= ============ ========= ========== ========
Condensed Consolidated Balance Sheet
at 30 June 2018
30 June -------------------------- 2018 2017 31 December (unaudited) (unaudited) 2017 Notes GBP'000 GBP'000 GBP'000 ------------------------------- ------ ------------ ------------ ------------ Non-current assets Goodwill 11,439 11,487 11,480 Other intangible assets 9 3,545 3,434 3,432 Property, plant and equipment 759 786 833 Deferred tax assets 202 - 219 Total non-current assets 15,945 15,707 15,964 --------------------------------- ------ ------------ ------------ ------------ Current assets Inventories 8 3 16 Trade and other receivables 2,838 2,871 3,738 Current tax assets 36 77 37 Cash and cash equivalents 10 5,253 3,510 4,737 Total current assets 8,135 6,461 8,528 -------------------------------- ------ ------------ ------------ ------------ Total assets 24,080 22,168 24,492 -------------------------------- ------ ------------ ------------ ------------ Current liabilities Bank overdraft 10 (335) (179) (1,012) Borrowings 10 (790) (790) (790) Obligations under finance leases (109) (123) (120) Trade and other payables (1,152) (1,050) (1,496) Provisions (209) (243) (209) Current tax liabilities (137) (233) (241) Accruals and deferred income 11 (6,930) (6,398) (6,592) Total current liabilities (9,662) (9,016) (10,460) -------------------------------- ------ ------------ ------------ ------------ Non-current liabilities Borrowings 10 (1,185) (1,975) (1,580) Obligations under finance leases (166) (184) (204) Deferred tax liabilities (710) (584) (721) Non-current provisions (41) (41) (41) Total non-current liabilities (2,102) (2,784) (2,546) --------------------------------- ------ ------------ ------------ ------------ Total liabilities (11,764) (11,800) (13,006) -------------------------------- ------ ------------ ------------ ------------ Net assets 12,316 10,368 11,486 ================================== ====== ============ ============ ============ Equity Share capital 779 771 774 Merger reserve 570 578 575 Translation reserve (136) (103) (66) Other reserve (231) (333) (283) Retained earnings 11,334 9,455 10,486 Equity attributable to shareholders of the parent 12,316 10,368 11,486 ========================================== ============ ============ ============
Condensed Consolidated Statement of Cash Flows
for the financial period ended 30 June 2018
six months to 30 June Year Ended -------------------------- 2018 2017 31 December (unaudited) (unaudited) 2017 GBP'000 GBP'000 GBP'000 -------------------------------------------- ------------ ------------ ------------ Cash flows from operating activities Profit before tax 1,183 1,007 2,254 Net finance costs 38 52 107 Depreciation charge 124 119 247 Amortisation charge 435 420 1,035 Profit on sale of property, plant and equipment (5) (8) (15) Share-based payment charge 52 6 56 Decrease in provisions - (5) (20) Cash generated in operations before working capital movements 1,827 1,591 3,664 Decrease/(increase) in trade and other receivables 916 890 (65) Decrease/(increase) in inventories and work in progress 7 8 (5) Increase/(decrease) in trade and other payables 115 (212) 573 Cash generated in operations 2,865 2,277 4,167 Interest paid (38) (54) (98) Net income tax paid (314) (50) (251) Net cash inflow from operating activities 2,513 2,173 3,818 ---------------------------------------------- ------------ ------------ ------------ Investing activities Purchase of intangible assets (551) (531) (1,154) Purchase of property, plant and equipment (70) (62) (180) Proceeds from sale of property, plant, equipment and intangible assets 47 96 161 Net cash outflow from investing activities (574) (497) (1,173) ---------------------------------------------- ------------ ------------ ------------ Financing activities Repayment of bank loans (395) (395) (790) Repayments of obligations under finance leases (75) (133) (226) Equity dividends paid (110) (135) (197) Net cash outflow from financing activities (580) (663) (1,213) ----------------------------------------------- ------------ ------------ ------------ Net increase in cash and cash equivalents 1,359 1,013 1,432 ---------------------------------------------- ------------ ------------ ------------ Cash and cash equivalents at beginning of period 3,725 2,237 2,237 Effects of changes in foreign exchange rates (166) 81 56 Cash and cash equivalents at end of period 4,918 3,331 3,725 ---------------------------------------------- ------------ ------------ ------------ Cash and cash equivalents comprise: Cash and short-term deposits 5,253 3,510 4,737 Bank overdrafts (335) (179) (1,012) 4,918 3,331 3,725 -------------------------------------------- ------------ ------------ ------------
Notes to the Condensed Consolidated Interim Financial Statements
1. General information
The company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 66 Clifton Street, London EC2A 4HB.
The company is listed on the Alternative Investment Market ("AIM").
The condensed consolidated interim financial information does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's consolidated financial statements for the year ended 31 December 2017 have been filed at Companies House. The audit report was not qualified and did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.
2. Basis of preparation
The condensed consolidated interim financial statements for the six months to 30 June 2018 have been prepared in accordance with the accounting policies which will be applied in the twelve months financial statements to 31 December 2018. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted for use in the European Union that are effective at 30 June 2018.
The condensed consolidated interim financial statements are unaudited. They do not include all the information and disclosures required in the annual financial statements, and therefore should be read in conjunction with the Group's published financial statements for the year ended 31 December 2017. The comparative figures for the year ended 31 December 2017 are not the Company's statutory accounts for that period but have been extracted from these accounts.
The Directors, having considered the Group's current financial resources, have concluded that they are adequate for the Group's present requirements. Therefore, the condensed consolidated interim financial information has been prepared on the going concern basis.
The Group has adopted new accounting pronouncements, which have become effective this year, as follows:
IFRS 15 "Revenue from Contracts with Customers". IFRS 15 'Revenue from Contracts with Customers' and the related 'Clarifications to IFRS 15 Revenue from Contracts with Customers' (hereinafter referred to as 'IFRS 15') replace IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related Interpretations. A review of Elecosoft's existing products and contracts has concluded that the adoption of IFRS 15 has no impact on the results or financial position of the Group.
IFRS 9 "Financial Instruments". IFRS 9 replaces IAS 39 'Financial Instruments: Recognition and Measurement'. It makes major changes to the previous guidance on the classification and measurement of financial assets and introduces an 'expected credit loss' model for the impairment of financial assets, as well as containing new requirements on the application of hedge accounting. The adoption of IFRS 9 has had no impact on the results or financial position of the Group.
Furthermore, new standards, new interpretations and amendments to standards and interpretations that have been issued but are not effective for the current period have not been adopted early.
Estimates
Application of the Group's accounting policies in preparing condensed consolidated interim financial statements requires management to make judgements and estimates that affect the reported amount of assets and liabilities, revenues and expenses. Actual results may ultimately differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017.
Risks and uncertainties
A summary of the Group's principal risks and uncertainties was set out on pages 24 to 25 of the 2017 Annual Report and Accounts. The Board considers these risks and uncertainties are still relevant to the current financial year and the impact of changes in the UK economy is reviewed in the Chairman's statement contained in this report.
The Interim Report was approved by the Directors on 11 September 2018.
3. Revenue
Revenue disclosed in the income statement is analysed as follows:
Six months to 30 Year to June 31 December ------------------- 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------------------ --------- -------- ------------- Licence sales 2,771 2,585 5,135 Recurring maintenance, support and subscription revenue 5,792 5,384 11,018 Services income 1,991 2,041 3,843 10,554 10,010 19,996 ------------------------------------ --------- -------- -------------
The categories of revenue have been updated to include subscription-based revenue in recurring maintenance, support and subscription revenue, and prior period amounts have been restated accordingly.
Revenue is recognised for each category as follows:
-- Licence sales - recognised on delivery of the software licence
-- Maintenance, support and subscriptions - recognised systematically over the contractual period of contract
-- Services - recognised on delivery of the service
4. Segmental information
Operating segments
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 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.
six months to 30 June Year ended ------------------- 31 December 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------------------- --------- -------- ------------ Revenue 10,554 10,010 19,996 -------------------------------------- --------- -------- ------------ Adjusted EBITDA 2,103 1,598 3,643 Amortisation and impairment of purchased intangible assets (224) (165) (623) Depreciation (124) (119) (247) -------------------------------------- --------- -------- ------------ Adjusted operating profit 1,755 1,314 2,773 Amortisation of acquired intangible assets (211) (255) (412) Acquisition related expenses (323) - - ------------------------------------- --------- -------- ------------ Operating profit 1,221 1,059 2,361 Net finance cost (38) (52) (107) -------------------------------------- --------- -------- ------------ Segment profit before tax 1,183 1,007 2,254 Tax (225) (203) (357) -------------------------------------- --------- -------- ------------ Segment profit after tax 958 804 1,897 -------------------------------------- --------- -------- ------------
Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, and adjusted to exclude acquisition related expenses.
Geographical, product and sales channel information
Revenue by geographical segment represents revenue from external customers based upon the geographical location of the customer.
Six months to 30 June Year ended ------------------- 31 December 2018 2017 2017 GBP'000 GBP'000 GBP'000 ---------------- --------- -------- ------------ UK 3,732 3,325 6,468 Scandinavia 3,593 3,638 7,239 Germany 1,479 1,565 3,066 USA 337 350 656 Rest of Europe 1,160 999 2,178 Rest of World 253 133 389 10,554 10,010 19,996 ---------------- --------- -------- ------------
Revenue by product group represents revenue from external customers.
Year ended Six months to 30 June 31 December ------------------------ 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------ ----------- ----------- ------------ Project management 5,015 4,559 9,161 Site management 219 225 460 Estimating 1,464 1,521 2,973 Engineering 1,225 1,070 2,008 CAD/Design 1,052 1,164 2,352 Information management 595 492 1,044 Visualisation 984 979 1,998 10,554 10,010 19,996 ------------------------ ----------- ----------- ------------
The Group utilises resellers to access certain markets. Revenue by sales channel represents revenue from external customers.
Year ended Six months to 30 June 31 December ------------------- 2018 2017 2017 GBP'000 GBP'000 GBP'000 ---------- --------- -------- ------------ Direct 9,945 9,398 18,780 Reseller 609 612 1,216 10,554 10,010 19,996 ---------- --------- -------- ------------
5. Operating profit
Operating profit for the period is after charging the following items:
Year ended Six months to 30 June 31 December ------------------- 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------------------- --------- -------- ------------ Software product development 872 904 1,694 Depreciation of property, plant and equipment 124 119 247 Amortisation of acquired intangible assets 211 255 412 Amortisation of other intangible assets 224 165 401 Impairment of other intangible assets - - 222 Receipt from administrators of a former group company - - (166) Profit on disposal of property, plant and equipment (6) (8) (15) Foreign exchange losses 24 13 55 Acquisition related expenses 323 - - -------------------------------------- --------- -------- ------------
6. Net finance cost
Finance income and costs disclosed in the income statement is set out below:
Year ended Six months to 30 June 31 December ------------------- 2018 2017 2017 GBP'000 GBP'000 GBP'000 --------------------------------------------- --------- -------- ------------ Finance costs: Bank overdraft and loan interest (35) (49) (101) Finance leases and hire purchase contracts (3) (3) (6) Total net finance cost (38) (52) (107) ---------------------------------------------- --------- -------- ------------
7. Earnings per share
The calculations of the earnings per share are based on profit after tax attributable to the ordinary equity shareholders of the Company and the weighted average number of shares in issue for the reporting period.
Six months to 30 June -------------------------------------------------------------------- Year to 31 December 2018 2017 2017 --------------------------------- --------------------------------- -------------------------------- Profit Weighted Profit Weighted Profit Weighted attributable average attributable average attributable average to number to number to number shareholders of shares EPS shareholders of shares EPS shareholders of shares EPS (GBP'000) (millions) (p) (GBP'000) (millions) (p) (GBP'000) (millions) (p) ---------- ------------- ----------- ----- ------------- ----------- ----- ------------- ----------- ---- Basic earnings per share 958 76.6 1.3 804 76.2 1.1 1,897 76.3 2.5 Diluted earnings
per share 958 77.2 1.2 804 77.2 1.0 1,897 76.7 2.5 Adjusted earnings per share 1,416 76.6 1.8 1,008 76.2 1.3 2,188 76.3 2.9 ---------- ------------- ----------- ----- ------------- ----------- ----- ------------- ----------- ----
Shares held by the Employee Share Ownership Trust are excluded from the weighted average number of shares in the period. Adjusted profit attributable to shareholders is reconciled to reported profit attributable to shareholders in note 13.
8. Dividends
Dividends paid in the six months to 30 June 2018 comprised the 2017 final dividend of 0.40 pence per ordinary share (2017: 0.20 pence per ordinary share).
The 2017 final dividend was declared as a scrip dividend, with a scrip reference price of 49.6, with shareholders having the opportunity to receive an alternative cash dividend of 0.40p per share.
Scrip dividends were issued in the six months to 30 June 2018 as follows:
Year to 31 Six months to 30 June December -------------------------------------- 2018 2018 2017 2017 2017 2017 shares shares shares Ordinary shares issued GBP'000 issued GBP'000 issued GBP'000 -------------------------- -------- -------- -------- -------- -------- -------- Declared and paid during the year Interim - current year - - - - 204,629 89 Final - previous year 414,178 205 146,721 57 146,721 57 414,178 205 146,721 57 351,350 146 -------------------------- -------- -------- -------- -------- -------- --------
Cash dividends of GBP110k (2017: GBP133k) were paid in the six months to 30 June 2018 as follows:
Year to 31 Six months to 30 June December ------------------------------------ 2018 2018 2017 2017 2017 2017 per per per Ordinary shares share GBP'000 share GBP'000 share GBP'000 -------------------------- ------- -------- ------- -------- ------- -------- Declared and paid during the year Interim - current year - - - - 0.20 64 Final - previous year 0.40 110 0.25 133 0.25 133 0.40 110 0.25 133 0.45 197 -------------------------- ------- -------- ------- -------- ------- --------
The Directors have recommended the payment of an interim scrip dividend of 0.28p per ordinary share, or an alternative cash dividend of 0.28p per ordinary share (2017 interim: 0.20p). The scrip reference price is 84.8p, calculated from the average of the closing price for an ordinary share of the Company as derived from the official list of the London Stock Exchange during the period of five dealing days ending 10 September 2018.
9. Other intangible assets
Other intangible assets comprise capitalised development costs, acquired customer relationships and purchased intangible assets. Additions in the six months to 30 June 2018 represent purchased intangible assets of GBP20,000 (2017: GBP37,000) and internal development costs capitalised of GBP531,000 (2017: GBP494,000) Internal development relates to software development projects that meet the accounting policy criteria for capitalisation.
10. Cash and borrowings
The net cash position of the group as at 30 June 2018 is set out below.
At 31 At 30 June December ------------------ 2018 2017 2017 GBP'000 GBP'000 GBP'000 Cash and cash equivalents 5,253 3,510 4,737 Bank overdraft and borrowings (2,310) (2,944) (3,382) Obligations under finance leases (275) (307) (324) 2,668 259 1,031 ---------------------------------- -------- -------- ---------- Maturity profile of borrowings In one year or less (1,125) (969) (1,802) Between one and two years (790) (790) (790) Between two and five years (395) (1,185) (790) (2,310) (2,944) (3,382) ---------------------------------- -------- -------- ----------
On 4 July 2018 the group refinanced its existing borrowings into a new five year fixed term loan of GBP8m with Barclays Bank. The new facility was used to finance the acquisition of Shire Systems Ltd for GBP5.1m on a cash and debt free basis.
The new facility is repayable over five years, with equal quarterly instalments of GBP0.4m, commencing from October 2018. The interest rate has been fixed for three years at 3.768%. The group also retains its existing GBP1.0m overdraft facility. Security provided to the bank comprises a cross guarantee and debenture between Elecosoft plc and certain group subsidiaries.
11. Accruals and deferred income
At 31 At 30 June December ------------------ 2018 2017 2017 GBP'000 GBP'000 GBP'000 Accruals 2,030 1,760 1,803 Deferred income 4,900 4,638 4,789 6,930 6,398 6,592 ----------------- -------- -------- ----------
Deferred income represents income from software maintenance and support contracts and is taken to revenue in the income statement on a straight-line basis in line with the service and obligations over the term of the contract.
12. Related Party Disclosures
Transactions between Group undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
The Directors of the Company had no material transactions with the Company during the six months to 30 June 2018, other than a result of service agreements. An amount of GBP36,250 (2017: nil) was paid to JHB Ketteley & Co Limited under a lease for occupation by the Group of its London head office and GBP2,500 (2017: GBP3,000) was paid to JHB Ketteley & Co Limited for a contribution to the office costs at Burnham-on-Crouch.
13. Additional performance measures
The Group uses adjusted figures, which are not defined by generally accepted accounting principles ("GAAP") such as IFRS. Adjusted figures and underlying growth rates are presented as additional performance measures used by management, as they provide relevant information in assessing the Group's performance, position and cash flows. We believe that these measures enable investors to track more clearly the core operational performance of the Group, by separating out items of income or expenditure relating to acquisitions, disposals and capital items. Our management uses these financial measures, along with IFRS financial measures, in evaluating the operating performance of the Group.
Year ended Six months to 30 June 31 December ------------------ 2018 2017 2017 GBP'000 GBP'000 GBP'000 ------------------------------------- -------- -------- ------------ Operating profit 1,221 1,059 2,361 Acquisition related expenses 323 - - Amortisation of acquired intangible assets 211 255 412 Adjusted operating profit 1,755 1,314 2,773 ------------------------------------- -------- -------- ------------ Profit before tax 1,183 1,007 2,254 Acquisition related expenses 323 - - Amortisation of acquired intangible assets 211 255 412 Adjusted profit before tax 1,717 1,262 2,666 ------------------------------------- -------- -------- ------------ Tax charge (225) (203) (357) Acquisition related expenses (40) - - Amortisation of acquired intangible assets (36) (51) (121) Adjusted tax charge (301) (254) (478) ------------------------------------- -------- -------- ------------ Profit after tax 958 804 1,897 Acquisition related expenses 283 - - Amortisation of acquired intangible assets 175 204 291 Adjusted profit after tax 1,416 1,008 2,188 ------------------------------------- -------- -------- ------------ Cash generated in operations 2,865 2,277 4,167
Purchase of intangible assets (551) (531) (1,154) Purchase of property, plant and equipment (70) (62) (180) Acquisition related expenses 43 - - Adjusted operating cash flow 2,287 1,684 2,833 ------------------------------------- -------- -------- ------------
14. Post balance sheet events
On 4 July 2018, the Group acquired Shire Systems Limited ("Shire Systems"), a profitable leading UK provider of computerised maintenance management software (CMMS), from Shiresoft Ltd, for a total consideration of GBP6.3m in cash; comprising an enterprise value of GBP5.1m on a cash and debt free basis, and an estimated GBP1.2m net cash, subject to review of the completion accounts and working capital. Professional and other fees of GBP0.3m in relation to the acquisition were expensed in the period to 30 June 2018 as acquisition related expenses.
Shire Systems reported revenues of GBP1.9m for the year to 31 December 2017, and profit before tax of GBP0.7m, adjusted to add back GBP0.3m of exceptional vendor remuneration. Net assets reported at 31 December 2017 were GBP1.1m. Unaudited management accounts of Shire Systems for the first six months of 2018 show revenue of GBP1.2m and profit before tax of GBP0.5m, after adjusting for revenue deferrals to align with Generally Accepted Accounting Principles. The acquisition was financed by a new five-year fixed term loan, as set out in note 10.
The Group is in the process of determining the fair values of the acquired assets and assumed
liabilities of Shire Systems. The valuation is expected to be completed before year-end.
15. Exchange rates
The following exchange rates have been applied in preparing the condensed consolidated financial information:
Year to 31 December Income statement Balance sheet 2017 ------------------- ---------------- ---------------------- Six months to 30 June As at 30 June Income Balance 2018 2017 2018 2017 statement sheet ----------------------- --------- -------- ------- ------- ------------ -------- Swedish Krona to Sterling 11.58 11.15 11.81 10.96 11.03 11.08 Euro to Sterling 1.14 1.16 1.13 1.14 1.14 1.13 US Dollar to Sterling 1.37 1.27 1.32 1.30 1.30 1.35 ----------------------- --------- -------- ------- ------- ------------ --------
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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