Eleco PLC Final Results (6823G)

TIDMELCO

RNS Number : 6823G

Eleco PLC

31 March 2022

Eleco plc

("Eleco", the "Company" or the "Group")

Audited Results for the Year Ended 31 December 2021

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

Financial Highlights

-- Revenue increased 8%, slightly ahead of expectations, to GBP27.3m with growth in all regions (2020: GBP25.2m)

   --      Recurring revenue up 9% to GBP15.4m, representing 56% of revenue (2020: 56%) 
   --      EBITDA ahead of expectations at GBP7.2m (2020: GBP6.7m) 
   --      Adjusted EBITDA of GBP7.3m (2020: GBP7.0m)* 
   --      Development spend at over 12% of revenue 

-- EPS at 3.3 pence per share (2020: 3.9 pence per share) - impacted by UK corporate tax rise in 2023

-- Net cash of GBP10.0m (2020: GBP6.2m) after full repayment of UK bank debt and furlough payments

-- Final recommended dividend of 0.40 pence per share: full year dividend 0.6 pence per share (2020:0.40 pence per share)

Operational Highlights

-- The introduction of subscription-based pricing to new Building Lifecycle customers in Q4 2021 will lead to increased Recurring Revenue and enhanced Customer Lifetime Value.

   --       The successful merger of our UK Building Lifecycle businesses and separately of our German Visualisation operations, providing greater business development opportunities. 

-- Winner of the Megabuyte Quoted 25 award for Best Performing Software Company in Industrials.

   --       Winner of Project Management Software of the Year at the UK Construction Computing awards. 
   *               Adjusted to exclude former Directors' payments. 

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

Eleco CEO Jonathan Hunter said:

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

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

Enquiries

 
   Eleco plc                                           [phone] 
   Jonathan Hunter, Chief Executive Officer 
                                                 ------------------------- 
   Rose Clark, Interim Chief Financial Officer 
                                                 ------------------------- 
 
   finnCap Limited                                     [phone] 
                                                 ------------------------- 
   Geoff Nash / Kate Bannatyne / James Balicki 
    (Corporate Finance) 
                                                 ------------------------- 
   Charlotte Sutcliffe / Harriet Ward (ECM) 
                                                 ------------------------- 
 
   SEC Newgate UK                                      [phone] 
                                                 ------------------------- 
   Elisabeth Cowell / Bob Huxford / Isabelle        [e-mail] 
    Smurfit 
                                                 ------------------------- 
 
 

Chairman's Statement

As an award-winning specialist provider of world-class software to the GBP8.5bn built environment market, Eleco is well positioned to expand.

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

I am pleased to report that our strategy is already generating results, with our organic growth rate increasing to 8.0 per cent (2020: -1.0 per cent), underpinned by double-digit sales growth from our core Building Lifecycle portfolio. This was achieved at the same time as implementing our move to a subscription licensing model for new customers in the last quarter. Recurring revenue (subscription and SaaS licences, maintenance and support contracts) increased by 9.0 per cent to GBP15.4m.

We have maintained strong cash generation, despite Covid-19 continuing to impact our ability to undertake face to face sales and training, having fully repaid monies given to Eleco through the UK Government furlough scheme as well as clearing our UK bank debt. We are now debt free after settling the remaining GBP0.1m of subsidiary bank debt in Q1 2022.

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

Implementing our strategy for organic growth

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

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

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

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

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

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

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

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

Board appointments and Environmental, Social and Governance (ESG)

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

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

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

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

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

Proposed dividend

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

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

Outlook

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

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

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

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

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

Serena Lang

Chairman

30 March 2022

CEO Report

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

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

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

This is reflected in our three strategic objectives:

   --      Growing in a customer-centric way 
   --      World-class through prioritised innovation 
   --      Efficient and effective through resilient operations 

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

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

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

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

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

2021 Review

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

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

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

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

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

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

Building Lifecycle

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

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

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

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

Project Management

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

Some customer successes include:

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

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

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

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

Estimating

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

Site Management

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

Property Management

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

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

Maintenance

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

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

CAD and Visualisation

Veeuze

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

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

Staircon

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

Arcon

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

Financial Summary

Revenue increased by 8 per cent to GBP27.3m (2020: GBP25.2m)

Recurring Revenue (maintenance, subscription and SaaS revenue) increased by 9 per cent to GBP15.4m from GBP14.1m in 2020. Licence sales were GBP5.9m compared with GBP5.4m in 2020 representing an increase of 9 per cent, despite the introduction to subscription licensing in Q4 2021. The impact of the transition to subscription will change the profile of our revenue, with one-off perpetual licence revenue, which is recognised immediately, being transitioned to a higher lifetime value subscription revenue which is recognised over a longer period of time. Thus our total reported revenue growth will temporarily soften during this transition to higher value and predictable recurring revenue.

Service revenue increased to GBP6.0m compared to GBP5.6m in 2020, which represents an increase of 7 per cent, despite continuing challenges presented by the pandemic during the period.

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

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

We invested 12 per cent of Revenue in product development across our portfolio during 2021. One product was identified as unlikely to generate new customer revenues as anticipated however provides an upgrade path to existing supported customers. The Board took a prudent approach and decided to impair the carrying value of the product during the year reducing Profit Before Tax by GBP0.6m.

Outlook

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

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

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

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

Jonathan Hunter

CEO

30 March 2022

Consolidated Income Statement

for the year ended 31 December 2021

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

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2021

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

Consolidated Statement of Changes in Equity

for the year ended 31 December 2021

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

Consolidated Balance Sheet

At 31 December 2021

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

Consolidated Statement of Cash Flows

for the year ended 31 December 2021

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

Extract from Notes to the Consolidated Financial Statements

1. Revenue

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

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

Revenue recorded in the year includes GBP6.4m (2020: GBP5.9m) of income that had been deferred in the balance sheet in the previous year because the associated performance obligations were not fully satisfied. Payments are received from certain customers on maintenance or subscription contracts either three months or one year in advance, which leads to the recognition of deferred income in advance of satisfaction of the performance obligation over time.

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

Geographical, Product and Sales Channel Information

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

Revenue by geographical destination is as follows:

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

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

Revenue by product group is as follows :

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

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

Revenue by sales channel is as follows:

 
              2021     2020 
           GBP'000  GBP'000 
 
Direct      26,068   24,000 
Reseller     1,276    1,232 
 
            27,344   25,232 
=========  =======  ======= 
 

2. Segment information

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

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

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

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

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

 
                                   2021      2020 
                               Software  Software 
                                GBP'000   GBP'000 
 
Group assets and liabilities 
Segment assets                   39,221    40,593 
 
Total Group assets               39,221    40,593 
 
Segment liabilities              15,375    19,069 
 
Total Group liabilities          15,375    19,069 
=============================  ========  ======== 
 

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

Non-current assets by geographical location are as follows:

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

Information about major customers

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

3. Operating profit

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

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

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

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

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

The emoluments and share based payments of the highest paid Director totalled GBP426,000 (2020: GBP525,000).

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

5. Dividends

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

Cash dividends of GBP493,000 (2020: GBPnil) were paid during the year:

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

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

6. Basic and diluted earnings per share

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

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

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

7. Post-balance sheet events

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

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

Notes:

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

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

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

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

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

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(END) Dow Jones Newswires

March 31, 2022 02:01 ET (06:01 GMT)