TIDMELCO
RNS Number : 2267T
Elecosoft PLC
19 March 2019
19 March 2019
Elecosoft plc
("Elecosoft", the "Company" or the "Group")
Preliminary Results for the Year Ended 31 December 2018
Based on unaudited annual accounts
Elecosoft plc (AIM: ELCO), the construction software specialist,
is pleased to announce its results for the year ended 31 December
2018.
Financial Highlights
-- Revenue up 11% to GBP22.2m (2017: GBP20.0m) of which 57% was
recurring maintenance, support and subscription revenue (2017:
55%)
-- Revenue from acquisitions contributed 8% of reported revenue growth
-- Recurring revenues up 14% to GBP12.6m
-- Reported operating profit up 11% to GBP2.6m (2017: GBP2.4m)
-- Profit before tax up 8% to GBP2.4m (2017: GBP2.3m)
-- Reported basic earnings per share down 4% to 2.4p (2017: 2.5p)
-- Adjusted operating profit* up 41% to GBP3.9m (2017: GBP2.8m)
-- Adjusted earnings per share* up to 3.9p (2017: 2.9p)
-- Cash generated from operations up 7% to GBP4.5m (2017: GBP4.2m)
-- Free cash flow** down 2% to GBP2.6m (2017: GBP2.6m)
-- Adjusted free cash flow before cash impact of exceptional
items** up 24% to GBP3.3m (2017: GBP2.6m)
-- 101% of adjusted operating profit converted into adjusted operating cashflow (2017: 102%)
-- Net debt of GBP2.1m, with GBP6.0m cash at year end (2017: GBP1.0m net cash)
-- Full year dividend up 13% (0.08p) to 0.68p (2017: 0.60p) with
final recommended dividend of 0.40p
-- Software development spend up 1% to GBP2.8m (2017: GBP2.7m), representing 13% of revenue
(* Adjusted profit measures exclude acquisition related expenses
and amortisation of acquired intangible assets.)
(* Non-gaap measures, see note 9.)
(** Free cash flow is defined as cashflow from operating
activities less capitalised software, capex and adding back
proceeds from the disposal of assets.)
Operational Highlights
-- Significant progress made in relation to Elecosoft's strategy
to extend its software portfolio to cover each stage of a
building's life cycle, both before and after completion of the
build phase
o Acquisition of Shire Systems Limited ("ShireSystem"), a
leading UK provider of computerised maintenance management software
("CMMS") in July 2018
o Acquisition of Active Online GmbH ("ActiveOnline"), a
visualisation software business which specialises in soft
furnishings and materials for photographic room scenes with AR and
VR capabilities in November
-- Launch of Powerproject Vision in the UK the new cloud-based
collaboration and construction planning software solution
-- Launch of Memmo in Sweden, Elecosoft's new site management software
-- UK nationwide Powerproject User Forum, Powerproject also won
Project Management/ Planning Product of the Year for the 5(th)
consecutive year at Construction Computing Awards
-- Continued success in the sales of Staircon, Elecosoft's stair
design SW, with a new all-time-high in sales 2018 and launch of
Staircon Online Designer
-- Bidcon Climate Module shortlisted by Swedish Boverket, the
Swedish National Board of Housing, Building and Planning, as one of
three preferred LCA estimation solutions.
-- Appointment of Ben Moralee as Finance Director and Mukul
Mistry as Corporate Development Director
Executive Chairman, John Ketteley said:
"2018 was a year of continuing growth and progress for
Elecosoft, despite uncertainties attributable to the Brexit saga.
However our management is conscious of the need in such conditions
to apply sound financial policies, maintain a strong balance sheet
and ensure that the fundamentals of our business remain in good
shape. Elecosoft is increasingly seen as evolving into a leading
international provider of construction software, with applications
in various phases of construction projects, with software for
property maintenance, digital storage of property data and
visualisation software of the highest quality for internal property
applications. Our co-ordinated software range has also enabled
Elecosoft to initiate an increasingly successful strategy of cross
selling in markets it serves. Brexit may well continue to effect
markets in 2019. However, given the strength of Elecosoft's
finances, the international spread of its markets, and the
creativity and quality of Elecosoft's market leading software
portfolio, I look forward to the year ahead with confidence."
For further information, please contact:
Elecosoft plc Tel: +44 (0)20 7422 8000
John Ketteley, Executive Chairman
Jonathan Hunter, Chief Operating Officer
Ben Moralee, Group Finance Director
finnCap Limited Tel: +44 (0)20 7220 0500
Geoff Nash/ Kate Bannatyne (Nomad)
Camille Gochez (ECM)
Newgate Communications Tel: +44 (0)20 3757 6880
Elisabeth Cowell / Fiona Norman elecosoft@newgatecomms.com
About Elecosoft plc
Elecosoft is a specialist international provider of software and
related services to the Architectural, Engineering, Construction
and Owner/Operator (AECO) industries 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 solutions cover project management, construction site
management, estimating, timber engineering, 3D design and
visualisation, property management and cloud based digital
marketing solutions. Elecosoft is listed on the Alternative
Investment Market in London (AIM: ELCO).
Executive Chairman's Statement
"I am pleased to report on a year of continuing growth and
significant progress in the year ended 31 December 2018."
Trading
Revenues
Group Revenues for the year ended 31 December 2018 were GBP22.2m
(2017: GBP20m), an increase of 11 per cent. Group Revenues are
generated from Project Management Software, Site Management
Software, Estimating Software, Engineering Software, CAD/Design
Software, Information Management Software, Visualisation Software
and Maintenance Management Software and related training and
support.
UK revenues increased 27 per cent to GBP8.2m (2017: GBP6.5m)
equivalent to 37 per cent of Group revenues. UK revenues included
sales of GBP1.1m by ShireSystem from 5 July 2018, the date of
acquisition.
Overseas revenues increased of 3.0 per cent to GBP14.0m (2017:
GBP13.5), equivalent to 63 per cent of Group revenues. However our
Swedish revenues were adversely affected by the weakness of the
Swedish Krona in the year under review. Overseas revenues included
GBP0.4m revenues of Active Online from 6 November 2018, the date of
acquisition.
Overseas revenues were generated as follows: Scandinavia:
GBP6.8m (2017: GBP7.2m); Germany: GBP3.4m (2017: GBP3.1m); Rest of
Europe: GBP2.5m (2017: GBP2.2m); and Rest of World GBP1.3m (2017:
GBP1.1m).
Profits
Adjusted operating profit for the year, before deduction of
exceptional items and amortisation of acquired intangible assets
was GBP3.9m (2017: GBP2.8m), an increase of 41 per cent; and
adjusted earnings per share were 3.9 pence (2017: 2.9 pence), an
increase of 34 per cent.
Operating profit for the year under review was GBP2.6m (2017:
GBP2.4m). Profit before tax for the year under review was GBP2.4m
(2017: GBP2.3m) and profit after tax for the year was GBP1.8m
(2017: GBP1.9m) a decrease of 4 per cent.
Financial Performance
The Board is very conscious of the need of a fast-growing
technology business, such as Elecosoft, to have in place adequate
access to the Companies own cash resources and banking
facilities.
Cash generated from operations, in the year under review,
amounted to GBP4.5m (2017: GBP4.2m) and Adjusted Free Cash Flow
(before exceptional items), also increased by 24 per cent to
GBP3.3m (2017: GBP2.6m).
We entered a facility agreement with Barclays Bank on the 4(th)
July for a GBP8.0m sterling, 5 year term loan facility, with a 3
year fixed rate term basis reverting to a Floating Rate thereafter.
Deducting cash balances of GBP6.0m, Elecosoft's net debt as at 31
December 2018 was GBP2.1m (2017: GBP1.0m net cash).
I would like to record the appreciation of the Board for the
excellent well-structured banking facilities and support that we
have received from Barclays to finance our growing business.
Group net assets at 31 December 2018 amounted to GBP15.7m (31
December 2017: GBP11.5m).
Software Development
Market leading software has been key to the success of
Elecosoft's business and its software portfolio has been developed
over the years by its own teams of developers in the UK, Germany,
Sweden and now Spain.
Our development teams which are the lifeblood of a software
company, have continued to grow as a result of developers joining
our existing teams of experienced colleagues and through
acquisition.
I am proud to say that our development teams have made
remarkable progress in developing market-leading construction
software over the years because of the complexity and speed of
innovation that is required in the development of construction
software. Our software development teams are undoubtedly a valuable
resource and the Board has therefore decided that we should develop
a strategy specifically aimed at retaining our software developers
and, where necessary, strengthening our development teams.
Mukul Mistry, Group Corporate Development Director, will be the
Director responsible for the co-ordination and management of all
the Group's software development interests, its software
development teams and a comprehensive group wide software
strategy.
Software development expenditure in the year under review
increased to GBP2.8m (2017: GBP2.7m), which included expenditure on
major software development projects totalling GBP1.0m, which were
capitalised in the year (2017: GBP1.1m).
Acquisition, trading and marketing highlights
2018 has been another significant year for Elecosoft with the
acquisition of both Shire Systems Ltd ("ShireSystem") and
ActiveOnline GmbH ("ActiveOnline"), each of which complement
existing Elecosoft business.
ShireSystem, based in Southampton, was acquired in July 2018,
and provided Elecosoft with an immediate foothold in the
strategically important Computerised Maintenance Management Systems
(CMMS) market. It also increased Elecosoft's coverage of software
solutions across the life cycle of property assets and
facilities.
ActiveOnline which is based in Wesel, Germany, was acquired in
November 2018, and will collaborate closely with ESIGN, Elecosoft's
international software visualisation business based in Hannover,
Germany. ESIGN specialises in the development of software for the
visualisation of hard and flat surfaces, and ActiveOnline
specialises in the development of software for the visualisation of
curved surfaces, soft fabrics and coverings. ActiveOnline has
created and maintains an extensive world class visualisation
software database of fabrics and materials.
Both companies are already actively pursuing cross-selling of
products across the Group.
IconSystem which is based in Market Harborough also successfully
increased its market penetration of the property related data
storage market in the year under review. It also won "EE" the
mobile telephone company as a major client.
Marketing highlights included the launch of Elecosoft's German
website, www.elecosoft.de; successful participations at trade
events such as Nordbygg in Sweden and the BAU Show in Munich,
Germany in January 2019. Esign also released "Pixmo" a new internet
platform for visualising ceramic tiles in Germany www.pixmo.live ;
Elecosoft Sweden also launched Memmo, a new site management
software, in Sweden.
Elecosoft UK launched Powerproject Vision, it's new cloud-based
collaboration application for construction planning. Elecosoft
celebrated Powerproject(R) winning the award for Best Project
Planning Software at the 2018 Construction Software Awards ("the
Hammers") for the fifth year running. This is a truly momentous
achievement for Powerproject and its dedicated team of developers.
Elecosoft also plans to launch Version 15 of its flagship
Powerproject(R) project management software in April 2019, together
with the latest version of Elecosoft's Site Progress Mobile. The
release in Germany of the latest version of Elecosoft's Arcon Evo
and Arcon Professional, Elecosoft's 3D CAD software, was also
well-received by the German architectural sector resulting in
strong direct and online sales of both products.
Brexit
As a Group, Elecosoft finds itself in the enviable position to
be able to mitigate any uncertainty by continuing to refine the
cash management strategies started in the period leading up to the
Referendum on 23 June 2016.
Since this period, we have actively managed our revenue streams
and local income and expenditures within and without the EU to
ensure there is adequate cash generated and held in these
regions.
This spread of business with local income and expenditures
creates a natural hedge to volatility and uncertainty and while
closely monitored we have yet to undertake any additional actions
outside the normal course of business.
The Elecosoft Team and the Board
Employees
I am delighted that the average number of employees in the
Elecosoft team has increased from 201 in 2017 to 228 in 2018. They
are a strong and talented group of people who work with skill,
enthusiasm and humour in all the markets we serve. On behalf of the
Board and shareholders, I would like to take this opportunity to
thank them for all their efforts and support in 2018 and to wish
them every success in the year ahead. I also extend a warm welcome
to those new employees, who have joined us during the year.
The Elecosoft Board
Executive Directors
Jonathan Hunter, Chief Operating Officer
Jonathan Hunter, Chief Operating Officer, is responsible for
monitoring the management of the Group's existing operations and
also for identifying potential acquisition opportunities and
technologies which are compatible with our existing operations.
Accordingly, he played a leading role in identifying and acquiring
ShireSystem in the UK and in the acquisition of ActiveOnline in
Germany, in the year under review. He is now collaborating with
colleagues to maximise the synergistic potential of both these
businesses.
Anders Karlsson, Managing Director of Elecosoft Consultec AB
Anders Karlsson, Managing Director Elecosoft Consultec AB, is
responsible for our Swedish operations which generates
approximately a third of the group revenues as well as developing
and managing almost half of our products.
He has over 20 years of business development and management
experience, he was initially appointed Managing Director of
Consultec Byggprogram AB in August 2005 and then re-joined the
Group after four years as CEO of an international signage company.
He has been responsible for the growth of Staircon in both the US
and Australia, the delivery of Elecosoft's Memmo and Bidcon Climate
module software products. I would like to take this opportunity to
congratulate him and his team on their delivery.
Mukul Mistry, Corporate Development Director
I take this opportunity formally to welcome Mukul Mistry, BSc to
the Board. He joined the Board in June 2018 and was appointed
Corporate Development Director. Mukul has 20 years of experience in
the technology industry spanning continents, industries and a range
of niche and mainstream technology specialties. He is responsible
for business development initiatives in the US, international
channels and our German operations where he will oversee the
integration of ActiveOnline with our ESIGN business. As mentioned
elsewhere in this report, he has also been appointed Group Head of
Software.
Ben Moralee, FCA. Group Finance Director
Ben Moralee was appointed Group Finance Director in September
2018. Ben joined Elecosoft following the departure of Simon Morgan,
in September 2018. He held a number of senior financial positions
before joining Elecosoft, including Financial Controller at Serena
Software Europe Limited, a subsidiary of MicroFocus PLC; and Head
of Finance at Figleaves, a subsidiary of N Brown Group PLC.
Non-Executive Directors
The importance of the contribution effective Non-Executive
Directors to ensuring appropriate standards of Corporate Governance
cannot be overstated and on behalf of my executive colleagues and
myself and shareholders, I would also like to thank, our
Non-Executive Directors, Serena Lang, our Deputy Chairman, David
Dannhauser and Kevin Craig, for their sound judgements and
constructive comments during the year.
Tomas Astrom
I would like to take this opportunity to thank Tomas Astrom,
Finance Director of our Swedish business, on his 16 years of
outstanding service to Elecosoft and wish him well in his
retirement.
Proposed Dividend
In light of Elecosoft's strong trading performance and cash
generation in 2018, the Board has decided to recommend a final
scrip dividend of 0.40 pence per share, with a cash alternative
dividend of 0.40 pence per share, to give a total dividend for the
year of 0.68 pence per share.
This represents an increase of 13 per cent relative to the
previous year (2017 total dividend: 0.60 pence per share). The
scrip reference price is 74.74 pence, 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 18(th) March
2018.
Payment of the final dividend will be subject to approval by
shareholders at the Annual General Meeting and will be paid on 31
May 2019 to shareholders on the register at the close of business
on 29 March 2019; the ex-dividend date will be 28 March 2019.
Outlook
Despite the uncertainties engendered by Brexit, Elecosoft has
performed well in the first two months of the current financial
year. We also anticipate releasing a number of new products in the
next few months, including the eagerly awaited Version 15 of
Powerproject and Site Progress Mobile.
ShireSystem has performed very well since its acquisition and is
already demonstrating the potential for cross selling its products.
The potential of the combination of ActiveOnline with ESIGN has
also been evident since the acquisition of ActiveOnline.
Our Development Centres in the UK, Sweden, Germany and now
Spain, are close to our main customers, which is important because
the success of our software development activities depends on close
collaboration with our customers so that we are able to deliver to
them software that exactly meets their requirements.
The rate of growth and international spread of our businesses
also requires us to maintain close and prudent financial monitoring
and financial policies. With these key elements in place and with a
highly skilled development and management team, I believe that
Elecosoft is well placed to improve further its performance and
growth in 2019 for the benefit of our customers, our employees and
our shareholders and I look forward with confidence in the year
ahead.
John Ketteley
Executive Chairman
19 March 2019
Financial Review
2018 was another successful financial year, with both reported
revenue growth and operating profits up 11% on 2017. The core
business has grown in spite of the macroeconomic uncertainties and
unfavourable movements in trading currencies.
We successfully completed the acquisitions of ShireSystem, a
computerised maintenance management software business extending our
software portfolio further into the building lifecycle, and
ActiveOnline a visualisation software business, complementary to
our existing ESIGN business.
Funding for the acquisition of ShireSystem was secured by way of
entering into a new term loan facility of GBP8m and raising a
further GBP2.25m through a share placement to accelerate the
acquisition and integration of ActiveOnline with our existing
visualisation business ESIGN.
We have continued to convert a high proportion of cash from our
operating profits into operating cashflow and at the year-end we
have shown a net debt position of GBP2.1m, following the GBP8m term
loan.
Revenue
Revenue from continuing operations for the year increased 11% to
GBP22.2m (2017: GBP20.0m). Underlying revenue growth (excluding the
impact of acquisitions and movements in foreign exchange rates) was
5%. The acquisitions of ShireSystem and ActiveOnline in July 2018
and November 2018 respectively contributed a further 8%, while the
overall negative impact of a foreign exchange offset the underlying
revenue growth by 2%.
The overall revenue profile of the Group remains strong, with
the proportion of revenue derived from recurring maintenance,
support and subscription revenue which increased to 57% (2017:
55%). The level of deferred income at the balance sheet date,
measuring future maintenance revenue, increased by 18% to GBP5.7m
(2017: GBP4.8m).
Reported revenue growth was driven by direct sales with an
increase of 12% to GBP21.0m (2016: GBP18.8m). Sales through
reseller channels grew by 4% to GBP1.3m.
The Group delivered solid revenue growth of 23% in its core
mature markets of the UK and Germany, which together comprise 53%
of total revenue. Scandinavia revenues were down by 6%, driven by
unfavourable foreign currency impact between Sterling and Krona.
The Group's strategy to penetrate new geographic markets was
reflected in strong revenue growth in the USA, which grew 18% to
GBP0.8m, in the Rest of Europe, which grew 14% to GBP2.5m and the
Rest of World, which grew 34% to GBP0.5m.
Profit
Gross profit is revenue less the direct cost of providing
products and services to customers, principally the costs of
training and consultancy staff.
Reported operating profit grew 11% to GBP2.6m (2017:
GBP2.4m).
The period includes costs of GBP0.7m in relation to the
acquisition of ShireSystem and ActiveOnline. After excluding the
impact of these costs, together with the impact of the non-cash
amortisation of acquired intangible assets as set out below,
adjusted operating profit for the Group increased by 41%.
2018 2017
GBP'000 GBP'000
-------------------------------------------- -------- --------
Operating profit 2,619 2,361
Acquisition expenses 689 -
Amortisation of acquired intangible assets 595 412
--------------------------------------------- -------- --------
Adjusted operating profit 3,903 2,773
--------------------------------------------- -------- --------
Software product development expenses amounted to GBP2.8m for
the year (2017: GBP2.7m) of which GBP1.0m (2017: GBP1.0m) was
capitalised demonstrating the commitment to investing increasingly
in new product development and substantial product upgrades. The
spend capitalised in the year includes investments in Memmo,
Staircon Online Designer and Powerproject Vision all launched in
the second half of 2018, and investment in Powerproject Version 15
to be launched in 2019. The carrying value of these software assets
together with the carrying value of software assets capitalised in
previous periods was reviewed for impairment at the balance sheet
date and no impairment was required.
Finance costs in the year, largely in respect of the Group's
term debt, totalled GBP0.2m (2017: GBP0.1m), resulting in a profit
before tax of GBP2.4m (2017: GBP2.3m).
The Group tax charge in the year was GBP0.6m (2017: GBP0.3m) and
represented 24.6% of profit before tax (2017: 15.8%). The increase
in rate compared with 2017 reflects the disallowable nature of the
acquisition related expenses.
The net profit attributable to ordinary shareholders decreased
by 4% to GBP1.8m (2017: GBP1.9m).
After adjusting for the post-tax effect of acquisition expenses
and amortisation of acquired intangible assets adjusted net profit
attributable to ordinary shareholders increased by 37% to GBP3.0m
(2017: GBP2.2m).
2018 2017
GBP'000 GBP'000
-------------------------------------------- -------- --------
Net profit after tax 1,829 1,897
Acquisition expenses 689 -
Amortisation of acquired intangible assets 482 291
--------------------------------------------- -------- --------
Adjusted net profit after tax 3,000 2,188
--------------------------------------------- -------- --------
Cash flows
Cash generated from operations increased to GBP4.5m (2017:
GBP4.2m), reflecting the strong trading performance of the Group
and continued focus on management of working capital. Overall
working capital movements were favourable, contributing a net cash
inflow of GBP0.4m (2017: GBP0.5m).
Capital expenditure on intangible assets, principally comprising
the capitalisation of software product development costs of GBP1m,
was GBP1.1m (2017: 1.2m), reflecting the increased focus on the
development of new products and major product upgrades. Capital
expenditure on property, plant and equipment was GBP0.1m (2017:
GBP0.2m)
After deducting capital expenditure and acquisition related
expenses, adjusted operating cashflow, as set out below, was
GBP4.0m (2017: GBP2.8m), meaning that 101% of adjusted operating
profit (2017: 102%) was converted into cash. This reflects the
strength of the overall business model where 57% of the group's
revenue is recurring and typically invoiced annually in advance,
and the close focus on management of working capital.
2018 2017
GBP'000 GBP'000
------------------------------------------- -------- --------
Cash generated in operations 4,455 4,167
Purchase of intangible assets (1,064) (1,154)
Purchase of property, plant and equipment (123) (180)
Acquisition expenses 689 -
Adjusted operating cashflow 3,957 2,833
-------------------------------------------- -------- --------
Free cash flow before dividends and acquisition related expenses
increased by 24% in the year to GBP3.3m (2017: GBP2.6m). Cash
dividends paid to shareholders amounted to GBP0.2m (2017:
GBP0.2m).
2018 2017
GBP'000 GBP'000
-------------------------------------------- -------- --------
Adjusted operating cashflow 3,957 2,833
Net interest paid (151) (98)
Tax paid (618) (251)
Proceeds from disposals of property, plant
and equipment 83 161
Adjusted free cash flow 3,271 2,645
--------------------------------------------- -------- --------
Acquisition expenses (689) -
-------------------------------------------- -------- --------
Free cash flow 2,582 2,645
--------------------------------------------- -------- --------
Funding and liquidity
The Group ended the year with a net debt position of GBP2.1m
(2017: net cash GBP1.m)
The Group's net cash position comprises cash at hand of GBP6.0m
(2017: GBP4.7m), offset in part by gross borrowings of GBP7.9m
(2017: GBP3.4m) and obligations under finance leases of GBP0.3m
(2017: GBP0.3m). Gross borrowings comprise a term debt of GBP7.6m
from Barclays and a loan balance against the ActiveOnline property
acquired GBP0.3m.
The GBP7.6m term debt taken out in July, replaced a previous
loan balance of GBP2m. The loan is repayable in quarterly
instalments over the next five years, with GBP1.6m to be paid
annually. The term debt carries a fixed interest rate of 3.768%
over the next three years.
Security provided to the bank for the provision of these
facilities is a cross guarantee and debenture between the parent
company and certain UK subsidiary companies and a commitment of the
shares of the operating companies.
Covenants have been made to the bank in respect of three
elements: EBITDA to gross financing costs, EBITDA to gross
borrowings and cash flow to debt service. These covenants are
tested quarterly.
Earnings per share (EPS) and dividends
Basic EPS decreased 4% to 2.4p (2017: 2.5p).
Adjusted basic EPS, adjusted for the impact of exceptional
acquisition related expenses, amortisation of acquired intangibles
assets and the for associated tax impact, increased 34% to 3.9p
(2017: GBP2.9p)
The Board has recommended the payment of a final scrip dividend
in respect of the year ended 31 December 2018 of 0.40p per share
(2017 final dividend: 0.40p), with a cash alternative to be made
available. This gives total dividends in respect of the financial
year of 0.68p per share (2017: 0.60p), an increase of 13% over
2017.
Consolidated Income Statement
For the year ended 31 December 2018
2018 2017
GBP'000 GBP'000
------------------------------------------- ---------- ----------
Continuing operations
Revenue 22,220 19,996
Cost of sales (2,684) (2,421)
Gross profit 19,536 17,575
Amortisation and impairment of intangible
assets (1,124) (1,035)
Acquisition expenses (689) -
Other selling and administrative
expenses (15,104) (14,179)
Selling and administrative expenses (16,917) (15,214)
----------
Operating profit 2,619 2,361
Finance income - -
Finance cost (192) (107)
Profit before
tax 2,427 2,254
Tax (598) (357)
------------------------------------------------ ---------- ----------
Profit for the financial
period 1,829 1,897
--------------------------------------------- ---------- ----------
Attributable
to:
Equity holders of the
parent 1,829 1,897
--------------------------------------------- ---------- ----------
Earnings per share -
(pence per share)
--------------------------------------------- ---------- ----------
Basic 2.4 p 2.5p
Diluted 2.3 p 2.5p
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
2018 2017
GBP'000 GBP'000
---------------------------------------------- -------- --------
Profit for the
period 1,829 1,897
Other comprehensive income:
------------------------------------------------ -------- --------
Items that will be reclassified subsequently
to profit and loss:
Translation differences on
foreign operations (82) 14
Other comprehensive income net
of tax (82) 14
Total comprehensive income for
the period 1,747 1,911
------------------------------------------------- -------- --------
Attributable
to:
Equity holders of the
parent 1,747 1,911
------------------------------------------------ -------- --------
Consolidated Statement of Changes in Equity
For the year 31 December 2018
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 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
Dividends - - - - - (188) (188)
Share-based payments - - - - 106 - 106
Issue of share capital 44 2,050 429 - - - 2,523
Transactions with owners 44 2,050 429 - 106 (188) 2,441
----------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 1,829 1,829
Exchange differences
on translation of net
investments in foreign
operations - - - (82) - - (82)
Other - (1) - - - 1 -
Total comprehensive income
for the period - (1) - (82) - 1,830 1,747
----------------------------- --------- --------- --------- ------------ --------- ---------- --------
At 31 December 2018 818 2,049 1,004 (148) (177) 12,128 15,674
============================= ========= ========= ========= ============ ========= ========== ========
Consolidated Balance Sheet
At 31 December 2018
2018 2017
GBP'000 GBP'000
------------------------------------- --------- ---------
Non-current assets
Goodwill 15,746 11,480
Other intangible
assets 7,536 3,432
Property, plant and equipment 1,203 833
Deferred tax assets 139 219
Total non-current assets 24,624 15,964
--------------------------------------- --------- ---------
Current assets
Inventories 8 16
Trade and other receivables 4,491 3,738
Current tax assets 54 37
Cash and cash equivalents 6,036 4,737
Total current
assets 10,589 8,528
-------------------------------------- --------- ---------
Total assets 35,213 24,492
-------------------------------------- --------- ---------
Current liabilities
Bank overdraft
and borrowings (1,648) (1,802)
Obligations under finance
leases (98) (120)
Trade and other payables (1,600) (1,496)
Provisions (144) (209)
Current tax liabilities (343) (241)
Accruals and deferred
income (7,713) (6,592)
Total current
liabilities (11,546) (10,460)
-------------------------------------- --------- ---------
Non-current liabilities
Borrowings (6,202) (1,580)
Obligations under finance
leases (197) (204)
Deferred tax liabilities (1,553) (721)
Non-current provisions (41) (41)
Total non-current liabilities (7,993) (2,546)
--------------------------------------- --------- ---------
Total liabilities (19,539) (13,006)
-------------------------------------- --------- ---------
Net assets 15,674 11,486
========================================== ========= =========
Equity
Share capital 818 774
Share premium
account 2,049 -
Merger reserve 1,004 575
Translation reserve (148) (66)
Other reserve (177) (283)
Retained earnings 12,128 10,486
Equity attributable to shareholders
of the parent 15,674 11,486
======================================== ========= =========
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
2018 2017
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Cash flows from operating
activities
Profit
before
tax 2,427 2,254
Net finance costs 192 107
Depreciation charge 263 247
Amortisation charge 1,124 1,035
Profit on sale of property,
plant and equipment (16) (15)
Share-based payments
charge 106 56
Decrease in provisions (63) (20)
Cash generated in operations
before working capital movements 4,033 3,664
Increase in trade and other
receivables (753) (65)
Decrease/(increase) in inventories
and work in progress 15 (5)
Increase in trade and other
payables and accruals and
deferred income 1,160 573
Cash generated in
operations 4,455 4,167
Interest
paid (151) (98)
Interest received - -
Income tax paid (618) (251)
Net cash inflow from operating
activities 3,686 3,818
------------------------------------------------------- -------- --------
Investing activities
Purchase of intangible
assets (1,064) (1,154)
Purchase of property, plant
and equipment (123) (180)
Acquisition of subsidiary
undertakings net of cash
acquired (7,169) -
Proceeds from sale of property,
plant, equipment and intangible
assets 83 161
Sale of business net of expenses - -
Net cash inflow from investing
activities (8,273) (1,173)
------------------------------------------------------- -------- --------
Financing activities
Proceeds from new
bank loan 6,025 -
Repayment of bank
loans (807) (790)
Repayments of obligations under finance leases (139) (226)
Equity dividends
paid (188) (197)
Issue of share capital 2,083 -
Net cash (outflow)/inflow from financing activities 6,974 (1,213)
-------------------------------------------------------- -------- --------
Net increase in cash and
cash equivalents 2,387 1,432
------------------------------------------------------- -------- --------
Cash and cash equivalents at beginning of
period 3,725 2,237
Effects of changes in foreign
exchange rates (76) 56
Cash and cash equivalents
at end of period 6,036 3,725
------------------------------------------------------- -------- --------
Cash and cash equivalents
comprise:
Cash and short-term
deposits 6,036 4,737
Bank overdrafts - (1,012)
6,036 3,725
----------------------------------------------------- -------- --------
Extract from Notes to the Consolidated Financial Statements
1. Revenue
Revenue disclosed in the income statement is analysed as
follows:
2018 2017
GBP'000 GBP'000
Licence sales 5,271 5,135
Recurring maintenance, support
and subscription revenue 12,595 11,018
Services income 4,354 3,843
--------------------------------- -------- --------
Total revenue 22,220 19,996
--------------------------------- -------- --------
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 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.
2018 2017
Software Software
GBP'000 GBP'000
Revenue 22,220 19,996
------------------------------ --------- ---------
Adjusted EBITDA 4,695 3,643
Amortisation and impairment
of purchased intangible
assets (529) (623)
Depreciation (263) (247)
------------------------------
Adjusted Operating profit 3,903 2,773
Amortisation of acquired
intangible assets (595) (412)
Acquisition expenses (689) -
----------------------------- --------- ---------
Operating profit 2,619 2,361
Net finance cost (192) (107)
------------------------------ --------- ---------
Segment profit before tax 2,427 2,254
Tax (598) (357)
------------------------------
Segment profit after tax 1,829 1,897
============================== ========= =========
Operating profit 2,619 2,361
Amortisation of intangible
assets 1,124 1,035
Depreciation charge 263 247
Acquisition expenses 689 -
Adjusted EBITDA 4,695 3,643
============================== ========= =========
Development project costs are expensed as incurred unless they
meet the accounting policy requirements for capitalisation. The
software projects that have been capitalised in the twelve months
to 31 December 2018 are explained in the Financial Review. Adjusted
EBITDA is earnings before interest, tax, depreciation and
amortisation, and adjusted to exclude acquisition expenses.
2. Segment information continued
2018 2017
Software Software
GBP'000 GBP'000
Group assets and liabilities
Segment assets 35,213 24,492
Unallocated assets - -
------------------------------ --------- ---------
Total Group assets 35,213 24,492
------------------------------- --------- ---------
Segment liabilities 19,539 13,006
Unallocated liabilities - -
------------------------------ --------- ---------
Total Group liabilities 19,539 13,006
------------------------------- --------- ---------
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:
2018 2017
GBP'000 GBP'000
UK 8,227 6,468
Scandinavia 6,772 7,239
Germany 3,442 3,066
USA 777 656
Rest of Europe 2,482 2,178
Rest of World 520 389
22,220 19,996
---------------- -------- --------
Revenue by product group represents continuing operations
revenue from external customers.
Revenue by product group is as follows:
Software for:
2018 2017
GBP'000 GBP'000
Project management 9,774 9,161
Site management 411 460
Estimating 2,843 2,973
Engineering 2,350 2,008
CAD/Design 2,070 2,352
Information management 1,180 1,044
Visualisation 2,395 1,998
Maintenance
management 1,197 -
22,220 19,996
------------------------ -------- --------
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:
2018 2017
GBP'000 GBP'000
Direct 20,950 18,780
Reseller 1,270 1,216
22,220 19,996
---------- -------- --------
2. Segment information continued
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:
2018 2017
GBP'000 GBP'000
UK 15,104 8,836
Scandinavia 6,208 5,893
Germany 3,242 1,156
USA 2 3
Rest of Europe 68 76
Rest of World - -
24,624 15,964
---------------- -------- --------
Information about major customers
Revenues arising from sales to the Group's largest customer were
below the reporting threshold of 10% of Group revenue (2017: Below
10% reporting threshold).
3. Operating profit
The continuing operations operating profit for the period is
stated after charging/(crediting) the following items.
2018 2017
GBP'000 GBP'000
Software product development 1,770 1,694
Depreciation of property, plant and
equipment 263 247
Amortisation of acquired intangible
assets 595 412
Amortisation of other intangible
assets 529 401
Impairment of other intangible
assets - 222
Receipt from administrators of former
group company - (166)
Profit on disposal of property, plant
and equipment (16) (15)
Foreign exchange (gains)/losses (31) 55
Fees payable to the Company's
auditor for: - -
The audit of the parent company and consolidated
financial statements 43 33
Fees payable to the Company's auditor and its
associates for other services: - -
The audit of the Company's
subsidiaries 64 49
Other services 14 8
Operating lease rentals:
Plant, equipment and
vehicles 267 56
Properties 214 440
Acquisition
expenses 689 -
4. Employee information
The average number of employees during the period, including
Directors, in continuing operations was made up as follows:
2018 2017
number Number
Sales & marketing 56 55
Client services 74 59
Software development 58 50
Management and administration 40 37
228 201
------------------------------- ------- -------
Staff costs during the period, including Directors amounted
to:
2018 2017
GBP'000 GBP'000
Wages and salaries 9,584 8,977
Social security 1,951 1,833
Pension costs 679 582
Share-based payments 105 56
12,319 11,448
Less: Development staff
costs capitalised (1,014) (1,052)
----------------------------
11,305 10,396
------------------------- -------- --------
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.
5. Net finance
2018 2017
GBP'000 GBP'000
Finance costs:
Bank overdraft and
loan interest (187) (101)
Finance leases and hire purchase
contracts (5) (6)
Total net finance
cost (192) (107)
------------------------------------ -------- --------
6. Taxation
(a) Tax on profit on ordinary activities
The tax charge in the income statement from continuing
operations is as follows:
2018 2017
GBP'000 GBP'000
Current tax:
UK corporation tax on profits
of the year 276 122
Tax adjustments in respect of previous
years (27) 72
249 194
Foreign tax 324 231
Total current
tax 573 425
----------------------------------------- -------- --------
Deferred tax:
Origination and reversal of temporary
differences (4) (55)
Tax adjustments in respect of previous
years 29 (13)
Total deferred
tax 25 (68)
----------------------------------------- -------- --------
Tax charge in the income
statement 598 357
------------------------------------------- -------- --------
Income tax for the UK has been calculated at the weighted
average rate of UK corporation tax of 19% (2017: 19.25%) on the
estimated assessable profit for the period. Taxation for foreign
companies is calculated at the rates prevailing in the relevant
jurisdictions.
(b) Reconciliation of continuing operations tax charge
The tax assessed on continuing operations accounting profit
before income tax for the year is the same as the standard rate of
UK corporation tax of 19% (2017: 19.25%) for the period under
review. The reconciliation is explained below:
2018 2017
GBP'000 GBP'000
Profit on continuing operations
before tax 2,427 2,254
------------------------------------------------- -------- --------
Tax calculated at the average standard rate
of UK corporation tax of 19% (2017: 19.25%)
applied to profits before tax 462 434
Effects
of:
Expenses not deductible for
tax purposes 171 32
Research & development tax
relief (101) (36)
Deferred tax not recognised - (16)
Prior year adjustments 34 (23)
Utilisation
of losses (26) (60)
Tax rate differences in foreign
jurisdictions 56 26
Other differences 2 -
Continuing operations tax charge
for the year 598 357
-------------------------------------------------- -------- --------
6. Taxation continued
(c) Unrecognised tax losses
The Group has tax losses of GBP1,673,000 (2017: GBP1,673,000)
arising in the UK. The potential deferred tax asset not recognised
in respect of losses in UK subsidiaries is GBP291,000 (2016:
GBP293,000). No deferred tax is recognised on the unremitted
earnings of overseas subsidiaries.
7. Dividends
Dividends paid during the year comprised a final 2017 dividend
of 0.40p per ordinary share (2017: 0.25) and a 2018 interim
dividend of 0.28p per ordinary share (2017: 0.20p).
Shareholders were offered an opportunity to receive the 2017
final dividend in the form of new shares in lieu of the proposed
final dividend. The 2018 interim dividend was declared as a scrip
dividend, with shareholders having the option to receive an
alternative cash dividend of the same value.
Cash dividends of GBP188,000 (2017: GBP197,000) were paid during
the year as follows.
2018 2017 2018 2017
pence pence
Ordinary shares per share per share GBP'000 GBP'000
------------------------------- ----------- ----------- -------- --------
Declared and paid during the
year
Interim - current
year 0.28 0.20 88 64
Final - previous year 0.40 0.25 100 133
0.68 0.45 188 197
------------------------------ ----------- ----------- -------- --------
Scrip dividends were issued in the year as follows.
Value of shares issued
Shares issued (GBP'000)
------------------ -------------------------
Ordinary shares 2018 2017 2018 2017
--------------------------- -------- -------- ------------ -----------
Declared and paid during
the year
Interim - current year 153,240 204,629 126 89
Final - previous year 414,178 146,721 202 57
567,418 351,350 328 146
-------------------------- -------- -------- ------------ -----------
The directors have recommended a final scrip dividend of 0.40p
per share, with an alternative cash dividend of 0.40 pence per
share, to give a total dividend for the year of 0.68 pence per
share. The scrip reference price is 74.74p, 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 18 March
2019.
If the 2018 final dividend is approved at the Annual General
Meeting in May 2019 the dividend will be paid on 31 May 2019 to
shareholders on the register at the close of business on 29 March
2019 (ex-div date 28 March 2019). In accordance with IFRS, the
dividend is not provided for as a liability in the accounts until
it becomes a legal liability of the Company and therefore will be
recorded in the interim and annual accounts for 2019.
8. Basic and diluted earnings per share
2018 2017
---------------------------------------- ----------------------------------------
Weighted Weighted
Net profit average Net profit average
attributable number attributable number
to shareholders of shares EPS to shareholders of shares EPS
GBP'000 (millions) (pence) GBP'000 (millions) (pence)
Basic earnings per
share 1,829 77.4 2.4 1,897 76.3 2.5
Diluted earnings
per share 1,829 78.2 2.3 1,897 76.7 2.5
Adjusted basic earnings
per share 3,000 77.4 3.9 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.
9. 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 Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Operating profit 2,619 2,361
Acquisition related expenses 689 -
Amortisation of acquired intangible
assets 595 412
Adjusted operating profit 3,903 2,773
------------------------------------------- ------------ ------------
Profit before tax 2,427 2,254
Acquisition related expenses 689 -
Amortisation of acquired intangible
assets 595 412
Adjusted profit before tax 3,711 2,666
------------------------------------------- ------------ ------------
Tax charge (598) (357)
Amortisation of acquired intangible
assets (113) (121)
Adjusted tax charge (711) (478)
------------------------------------------- ------------ ------------
Profit after tax 1,829 1,897
Acquisition related expenses 689 -
Amortisation of acquired intangible
assets 482 291
Adjusted profit after tax 3,000 2,188
------------------------------------------- ------------ ------------
Cash generated in operations 4,454 4,167
Purchase of intangible assets (1,064) (1,154)
Purchase of property, plant and equipment (123) (180)
Acquisition related expenses 689 -
Adjusted operating cash flow 3,956 2,833
------------------------------------------- ------------ ------------
Notes
1. Elecosoft plc ("the Company") and its subsidiaries (together
"the Group") are primarily involved in software sales and
development. Elecosoft plc, a Public Limited Company incorporated
and domiciled in England, is the Group's ultimate parent Company.
The address of Elecosoft plc's registered office is 66 Clifton
Street, London, EC2A 4HB and the principal place of business is 66
Clifton Street, London, EC2A 4HB.
The unaudited financial information set out in this statement
does not constitute the Company's statutory accounts for the years
ended 31 December 2018 or 31 December 2017, as defined in section
434 of the Companies Act 2006. The auditors have not yet reported
on the 2018 accounts.
Statutory accounts for 2017 have been delivered to the Registrar
of Companies and those for 2018 will be delivered in due course.
The Company's auditors Grant Thornton UK LLP, have reported on the
2017 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. Whilst the financial information included in this
announcement has been computed in accordance with International
Financial Reporting Standards as adopted by the EU ("IFRS") this
announcement does not itself contain sufficient information to
comply with IFRS.
The principal accounting policies used in preparing this
preliminary results announcement are those that the Company will
apply in its statutory accounts for the year ended 31 December 2018
and are unchanged from those disclosed in the Company's Annual
Report and Accounts for the year ended 31 December 2017 except for
the adoption of new standards effective 1 January 2018 as described
in notes to the financial statements for the year ended 31 December
2017. The adoption of those new standards did not have a material
impact on the financial statements.
Full financial statements for the year ended 31 December 2018
will be posted to shareholders in due course.
2. During the period Elecosoft acquired ShireSystem and Active
Online. The Directors have performed a provisional analysis of the
fair value of both ShireSystem and ActiveOnline which are included
in the consolidated balance sheet in line with IFRS3.
3. The Group's activities, together with the factors likely to
affect its future development, performance and position are set out
in the Operating Review and Financial Review.
4. The Group's clients include many top contractors in the
building and construction sector in the UK, Sweden, Germany,
Benelux and the United States with no significant client
concentration. The software products and services provided by the
Group are reasonably embedded in their client's core operations and
57% (2017: 55%) of the Group's revenue is from recurring revenue
contracts.
These maintenance contracts are renewed throughout the year
although there is a slightly greater weighting in the fourth
quarter. For these reasons, the Group has good visibility on any
potential deterioration in its trading outlook and potential risk
to the business. Not-withstanding the Group has net current
liabilities of GBP957,000 at 31 December 2018 (2017: GBP1,932,000)
these amounts are after deferred income of GBP5,660,000 (2017:
GBP4,789,000) relating to annual maintenance contracts which are
non-refundable. Historically, there is a low level of maintenance
cancellations each year and the Board closely monitors clients that
are potentially at risk of cancellation as well as the pipeline of
new business.
The Group has both cash and undrawn credit facilities available
to support its business operations and therefore the Board believes
that the Group is well-positioned to manage the business risks.
Revenue, operating profit and cash flow budgets have been prepared
at business unit level. After making appropriate enquiries, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operation for the foreseeable future.
Accordingly, the Group continues to adopt the going concern basis
in preparing its consolidated financial statements
5. The information herein has been prepared on the basis of the
accounting policies adopted for the year ended 31 December 2018,
set out in the Company's Annual Report and Accounts and as
previously disclosed in the Company's Annual Report and Accounts
for the year ended 31 December 2017.
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
FR CKFDQBBKBFND
(END) Dow Jones Newswires
March 19, 2019 03:01 ET (07:01 GMT)
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