TIDMELCO
RNS Number : 0345N
Eleco PLC
25 September 2012
25 September 2012
Eleco PLC
("Eleco" or the "Group")
The Construction Software and Building Systems Group
Interim Results
for the 6 Month Period Ended 30 June 2012
Financial Performance - Continuing Operations
-- Revenue GBP18.4m (H1 2011: GBP18.3m restated)
-- Operating profit GBP48,000 before exceptional items of
GBP316,000 (H1 2011: loss of GBP334,000 before exceptional items of
GBP195,000 restated)
-- Loss from operations GBP268,000 (H1 2011: loss GBP529,000 restated)
-- Loss before tax GBP480,000 (H1 2011: loss GBP660,000 restated)
-- Loss per share - basic and diluted 1.0p (H1 2011: loss 1.4p restated)
Reduction in Group Borrowings
-- Net bank borrowings at 30 June 2012: GBP5.3m (30 June 2011: GBP8.6m)
-- Deferred consideration receivable held in Escrow at 30 June
2012: GBP1.2m (30 June 2011: GBPnil)
ElecoSoft(R)
-- Turnover GBP8.2m (H1 2011: GBP8.5m)
-- Operating profit before exceptional items GBP903,000 (H1 2011: GBP876,000)
ElecoBuild(R)
-- Turnover GBP10.1m (H1 2011: GBP10.3m)
-- Operating loss before exceptional items GBP418,000 (H1 2011: loss GBP655,000)
Strategy and Outlook
-- Eleco's strategy of reducing costs and capacity in its
building systems businesses to bring them more into line with
reduced demand in the UK construction industry together with its
effort to reduce its risk profile by continuing to invest in its
profitable software interests has resulted in a small profit from
continuing operations for the six months ended 30 June 2012.
-- Although the closer co-ordination of the Group's precast
concrete operations in the first half resulted inevitably in
additional exceptional costs, it is anticipated that these changes
will deliver operating and financial benefits in the second
half.
Executive Chairman, John Ketteley said:
"The past three years have been about steering Eleco through
financial and trading conditions, the severity of which have been
unprecedented. These conditions have abated to a degree, but
continue to be challenging. Against this background, our management
have had to take some very difficult decisions and actions in their
efforts to return Eleco to profitability and they remain committed
to achieving this objective, for the benefit of shareholders and
employees alike.."
"I continue to believe that further to our restructuring, Eleco
is well placed to take advantage of improvements in the markets it
serves and I look forward to our capturing the benefits of these
changes over the coming months."
For further information please contact:
Eleco plc 0207 422 0044
John Ketteley, Executive Chairman http://www.eleco.com
Matthew Turner, Group Finance Director
Peckwater PR - Tarquin Edwards 0207 808 7340
Cenkos Securities plc - Adrian Hargrave 0207 397 8900
Chairman's Statement
Group turnover for the 6 months ended 30 June 2012 improved
slightly to GBP18.4m (H1 2011: GBP18.3m restated), an increase of 1
per cent compared with the same period last year.
Revenue of our building systems businesses in the UK
("ElecoBuild") in the period under review was GBP10.1m (H1 2011:
GBP10.3m), due mainly to reduced levels of turnover from precast
concrete student accommodation and hotel projects. However, this
was partly offset by higher turnover in our standard precast
concrete products and metal roofing and cladding products
businesses.
Turnover of our software businesses in Sweden, Germany and the
UK ("ElecoSoft") reduced marginally to GBP8.2m (H1 2011: GBP8.5m),
due partly to the weakening of the Euro against Sterling but also
due to lower than anticipated turnover in the UK. ElecoSoft's share
of Group turnover in the period was 45 per cent (H1 2011: 46 per
cent)
Adjusted Group Operating Profit improved to GBP48,000 (H1 2011:
Loss GBP334,000), after the deduction of product development costs
and the amortisation of intangible assets, but before restructuring
costs. Software development costs were higher though at
GBP1,118,000 (H1 2011: GBP952,000) although amortization of
intangible assets relating to software were lower at GBP206,000 (H1
2011: GBP296,000)
Restructuring costs of GBP316,000 (H1 2011: GBP195,000) during
the period under review were incurred following the reduction in
capacity of our loss making precast concrete businesses.
Regrettably, this change in the business saw the need for
significant redundancies across both management and production
employees at Bell & Webster Concrete and Milbury Systems. The
process also involved the formation of ElecoPrecast and the
appointment to it of John Stothard and Carol Lound as Managing
Director and Finance Director respectively. Initial indications
suggest that the restructuring exercise is delivering the benefits
we anticipated.
Net finance costs for the period reflect principally the
increased utilisation of the Group's banking facilities, higher
interest charges and the net return on the pension scheme assets
and liabilities. In the case of ElecoBuild, finance costs amounted
to GBP430,000 (H1 2011 GBP240,000); and in the case of ElecoSoft,
finance costs were GBP50,000 (H1 2011: GBP22,000); and Corporate
was credited with GBP268,000 of interest (H1 2011: GBP131,000)
The loss before tax from continuing operations and after
exceptional restructuring costs of GBP316,000 (H1 2011: GBP195,000)
was GBP480,000 (H1 2011: GBP660,000)
The Group loss for the period amounted to GBP607,000, equivalent
to 1.0p per share (H1 2011:GBP847,000, equivalent to 1.4p per
share). The loss for the period from discontinued operations was
significantly lower at GBP252,000, equivalent to 0.4p per share,
compared with the loss for H1 2011 of GBP2,789,000, equivalent to
4.7p per share. Accordingly the loss per share from total
operations fell from 6.1p in the period ended 30 June 2011 to 1.4p
for the period ended 30 June 2012.
The Group saw a pleasing and substantial 38 per cent reduction
in its net bank debt during the period to GBP5.3m (2011: GBP8.6m).
Eleco is also the beneficiary of an Escrow Account of GBP1.2m
regarding the sale of its timber engineering businesses of which
GBP400,000 is payable in December 2012 and GBP800,000 in December
2013.
In the period under review, a further cash contribution of
GBP402,000 (H1 2011 GBP402,000) was made to the defined benefit
pension scheme that closed to future accrual in December 2009.
Dividend
With the Group not yet having returned to profit, the Board is
not in a position to recommend the payment of an interim dividend.
However, the Board will keep its future dividend policy closely
under review and will consider a return to recommending dividend
payments as and when the Company's trading position and performance
permits.
Financial Review
Despite the Group's solid progress in reducing its fixed costs
and restructuring certain businesses, its financial performance
during the period under review was behind Board expectations. This
is in large part a reflection of the time lag that exists between
the implementation of our precast concrete restructuring plan and
the realisation of its anticipated benefits.
Pension Scheme
On 10 September 2012, Eleco plc received notification from the
Trustees of The Eleco Retirement Benefit Scheme ("the Scheme") of
an obligation arising under Sections 75 and 75A of the Pensions Act
1995, pursuant to which, Eleco plc, the parent company of the
Group, was required to discharge an obligation of GBP595,000, as
certified by the Scheme Actuary, for the purpose of funding that
proportion of the deficit of the Scheme that was attributable to
past employees of Eleco plc, who were members of the Scheme as at
31 March 2006, together with an appropriate proportion of
liabilities relating to orphan beneficiaries of the Scheme as at
that date.
Eleco plc discharged this obligation on 21 September 2012 by the
payment of GBP595,000 to the Scheme and the Board has been advised
that accordingly, by law, Eleco plc is no longer a Statutory
Employer of the Scheme under Section 75 and 75A of the Pensions Act
1995 and Part 3 of the Pensions Act 2004 and that as a consequence,
Eleco plc will no longer be directly responsible for funding the
Scheme's current deficit or future funding, or for the payment of
expenses incurred by the Scheme; Bell & Webster Concrete
Limited, SpeedDeck Building Systems Limited, Stramit Panel Products
Limited and Eleco (GNS) Limited continue as Statutory Employers of
the Scheme.
Outlook
More than three quarters of ElecoSoft's profits were made in the
Swedish and German markets, but our UK software interests
experienced difficult trading conditions in the UK due to a
continuing lack of demand in the construction industry, which
affected its performance. Looking forward, our software teams have
the flair, creativity and technology, to produce well-designed and
relevant software programs and we are confident that with good
management and marketing, ElecoSoft will now be able to take
advantage of opportunities for further profitable expansion as they
arise.
The period under review saw the restructuring of our Precast
Concrete interests as well as a welcome improvement in the
performance of our roofing and cladding operations. However this
improvement was not sufficient to return ElecoBuild to profit in
the period. ElecoBuild's costs and production capacity over the
past three years have been substantially reduced so as to bring
them into line with the lower levels of activity in the UK
construction industry and as a consequence, we believe that
ElecoBuild is now in a better position to respond and take
advantage of an upturn in demand.
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