TIDMELCO
RNS Number : 3860U
Eleco PLC
28 March 2023
RNS
28th March 2023
Eleco Plc
("Eleco", "Group" or the "Company")
ANNUAL RESULTS
Audited Annual Results for the Year Ended 31 December 2022
The Board of Eleco Plc (AIM: ELCO), the AIM-listed construction
and building software specialist, is pleased to announce its
results for the year ended 31 December 2022.
Financial Highlights
-- Annualised Recurring Revenue (ARR)* up 14% to GBP18.2m (2021: GBP16.0m)
-- Total Recurring Revenue (TRR)** up 10% to GBP16.9m (2021:
GBP15.4m), representing 64% of total revenue (2021: 56% of total
revenue)
-- Revenues of GBP26.6m (GBP27.0m in constant currency terms) in
line with market expectations and similar to the prior year (2021:
GBP27.3m). Flat revenues were a consequence of our SaaS transition
as we move away from upfront perpetual licences
-- Profit measures were slightly ahead of market expectations
with EBITDA*** of GBP5.2m and Profit Before Taxation of GBP2.9m,
given the impact of the SaaS transition (2021: GBP7.2m and GBP3.9m
respectively)
-- Basic Earnings Per Share of 2.9 pence per share (2021: 3.3 pence per share)
-- Gross margins remain high at 88.4% (2021: 89.9%) and cash
generation remains strong with year-end cash of GBP12.5m (2021: net
cash of GBP10.0m)
-- Total dividends for the year (paid and proposed) of 1.28
pence per share (2021: 0.60 pence per share), consisting of:
o Proposed special dividend in relation to the cash proceeds
received from the 2023 disposal of non-core Arcon Architectural CAD
business of 0.58 pence per share (2021: Nil)
o Proposed final dividend of 0.50 pence per share (2021: 0.40
pence per share)
o Interim dividend paid of 0.20 pence per share (2021: 0.20
pence per share)
(*) ARR is defined as normalised annualised recurring revenues
and includes revenues from subscription licences, contract values
of annual support and maintenance, and SaaS contracts.
Normalisation is calculated as recurring revenue in the final month
of the year multiplied by twelve.
** TRR is defined as the recurring revenues from subscription
licences, contract values of annual support and maintenance, and
SaaS contracts.
*** EBITDA is defined as Earnings before Interest, Tax,
Depreciation, and Amortisation and Impairment of Intangible
Assets
Operational Highlights
-- Successfully commenced phase two of the Group's Software as a
Service (SaaS) transition strategy, to offer subscription licences
to existing customers, thereby supporting customer success
initiatives and enhancing our recurring revenue profile
further.
-- Among several new product enhancements, the anticipated
release of the new Permit to Work module for Eleco's scalable
maintenance and facilities software, was in H2 2022. This will be a
key component in assisting customers with managing safety and
compliance procedures.
-- A focus on ESG initiatives by establishing an ESG committee,
setting targets and measuring performance as well as offsetting our
measured carbon emissions.
-- Placed in the Top 50 ConTech Partner list whose criteria
include innovation, adoption and customer satisfaction.
-- Certified as a Great Place to Work(R) and implemented
wellbeing and personal development programmes for employees.
-- Winner of Project Management Software of the Year at the UK
Construction Computing Awards for the ninth successive year.
-- Continued to consider appropriate acquisitions as part of our
ongoing growth strategy whilst the disposal of non-core German
Arcon architectural business enhances the management's focus on its
core growth areas.
Jonathan Hunter, Eleco's CEO, said:
"I am delighted with the Group's performance and progress in
delivering its growth strategy against a backdrop of difficult
economic conditions for the wider market. I am pleased to be
reporting financial results in line with market expectations. Eleco
is now better positioned within its markets and we continue to make
meaningful progress towards our strategic goals.
As we successfully transition into a SaaS business, and as
previously announced in 2021, we anticipate that H1 2023 revenues
will be lower, but expect revenues will accelerate in H2 of 2023
enabling the Group to return to revenue growth in 2023. Post
transition we will have a substantially higher ARR and greater
visibility of revenue.
I wish to thank all shareholders for their continued support on
our business transformation into a world-class, higher
customer-lifetime-value recurring revenue group.
Our customer-centric growth strategy, loyal customer base,
strong pipeline of opportunities and our world-class technology
will open further exciting prospects for growth in our core markets
and therefore we look to the year ahead with confidence. "
Enquiries:
+44 (0)20
7422
Eleco plc 8000
Jonathan Hunter, Chief Executive Officer
-------------------------
Neil Pritchard, Chief Financial Officer
-------------------------
+44 (0)20
7220
finnCap Ltd 0500
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Geoff Nash/ Emily Watts/Seamus Fricker (Corporate Finance)
-------------------------
Charlotte Sutcliffe / Harriet Ward (Equity Capital Markets)
-------------------------
+44 (0)20
3757
SEC Newgate UK 6882
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Elisabeth Cowell/Bob Huxford eleco@secnewgate.co.uk
-------------------------
About Eleco plc
Eleco plc is a London Stock Exchange AIM-listed (AIM: ELCO)
specialist international provider of software and related services
to the Architectural, Engineering, Construction and Owner/Operator
(AECO) industries and interior furnishing industries from centres
of excellence in the UK, Sweden, Germany, Netherlands and the
US.
The Company's market-leading Elecosoft software solutions are
developed by teams in the United Kingdom, Sweden and Germany, and
its solutions cover project management, estimating, timber
engineering, CAD and visualisation, asset and facility management
and cloud-based digital marketing solutions. For further
information please visit www.eleco.com .
Chairman's Statement
I am delighted to report that 2022 has been another year of
solid progress for Eleco. Despite significant macro-economic and
geo-political upheaval, high inflation and a tight labour market,
the business has delivered a robust performance and made
considerable headway towards meeting its strategic goals.
Thanks to management's execution of our strategy the Company's
transformation has been successfully implemented and we are now
extremely well-positioned to accelerate our growth organically as
well as having a solid platform from which to successfully
undertake strategic acquisitions.
We are also uniquely placed to benefit from industry trends. The
construction and built environment industries are seeking
digitalisation; better productivity of labour and materials costs;
reduced carbon footprint; minimised waste; more flexible modular
solutions; and 4D Building Information Modelling solutions (4DBIM)
to add time and scheduling elements to their models. Eleco offers
all these solutions and so we are seeing an increasing number of
significant opportunities within our markets.
In line with our customer-centric approach, Eleco has continued
to invest in product development, having launched new versions of
our core building lifecycle products during the year. Our offerings
are increasingly focused on improving processes for our clients by
introducing new, more efficient workflows while digitalising the
least efficient of their manual processes.
Strategic Success
Eleco is now a customer-centric rather than product-centric
business with all developments based on our clients' needs. Across
the Group we have been focused on both delivering best of breed
products to core customer segments while also transitioning our
business to SaaS and maintaining high customer retention rates. To
that end, we have introduced an R&D matrix structure built
around customer segments, enabling us to produce innovative
solutions that are of the highest value to our customer base.
Our transition to a SaaS-based, recurring revenue business is
progressing to plan. We grew Annualised Recurring Revenues (ARR) by
14 per cent to GBP18.2m at 31 December 2022 from GBP16.0m at 31
December 2021. Total Recurring Revenue (TRR) increased 10 per cent
to GBP16.9m (2021: GBP15.4m), such that recurring revenues now
account for 64 per cent of total revenues, up from 56 per cent in
2021.
Our strategic move to a SaaS licensing model inevitably meant a
temporary decline in revenue, something we highlighted at the
outset of this process. Nonetheless, revenue for 2022 (GBP26.6m, or
GBP27.0m on a constant currency basis) is only marginally down on
2021 (GBP27.3m). We are satisfied with the trajectory of our SaaS
transition which we expect to result in significant revenue growth
and improved shareholder returns over the years to come. Our move
to SaaS licensing will benefit us and our customers and will result
in higher customer lifetime value (CLV). We expect revenues will
increase from the end of Q2 of this year, which marks the midway
point of our transition, and that revenue will continue to increase
for 2023 as a whole.
As well as our strategic realignment to a customer-centric
business, we have continued to grow our customer base, achieving
new customer growth in the UK, growth in the USA and strong demand
in Sweden. Existing customers continue to expand their software
usage and we are seeing more demand for hosted solutions.
In line with our previously announced strategy to focus on our
core customer segments and businesses, we sold our German ARCON
architectural CAD business, following the year end, for a total
consideration of EUR600,000. This further streamlines our business
toward a common customer base and product type and will be
beneficial to all our stakeholders. It will enable our team to be
more focused, provide improved service levels to our customers, and
ultimately generate greater value for shareholders.
Unfortunately, geo-political factors and inflationary pressures
have impacted the timing for our customers of their operational
programmes. This has resulted in a slowdown in demand for services
and sales of new licences across Eleco's portfolio, especially in
Germany where the economy has been hit more severely by the
repercussions of the war in Ukraine. However, the Group is
successfully absorbing these pressures thanks to effective cost
control and our strong cash balance, with profits remaining in line
with expectations.
Overall, we have continued to increase our customer numbers and
monthly recurring revenue, making progress in our goal to become a
much larger, world-class, customer-centric organisation.
Awards
Powerproject won the Project Management Software of the Year
Award at 2022's Construction Computing Awards for the ninth year in
a row, reflecting the high regard in which our software is held by
the industry.
In March 2022, we also won the Megabuyte Quoted25 Award for best
performing software company in the industrials peer group,
highlighting the strength of our overall financial performance.
We were also placed in the Top 50 ConTech Partners list whose
criteria include innovation, adoption and customer
satisfaction.
Environmental, Social and Governance (ESG)
We formed an ESG Committee early in the year, chaired by
Non-Executive Director, Mark Castle, with a mandate to focus on the
key elements of Environmental, Social and Governance and identify
the core areas of Eleco's Sustainability Plan. During the past
year, the ESG Committee set Key Performance Indicators ('KPI') in
line with Eleco's Sustainability Plan, which we used to measure our
performance against in 2022, and looked at our Net Zero
Strategy.
Environmentally, we made the move to more renewable energy
sources across the whole business and while only a short-term
solution, we offset our 2021 carbon emissions during the year. We
will continue to focus on our impact on the environment and driving
our Net Zero plan. We are also reviewing how we can positively
contribute to global environmental challenges by helping our
customer base reduce their carbon footprint and improve
sustainability through the use of our solutions.
Within our social strategy we recognise the importance of
working together with our colleagues, customers and suppliers to
promote fairness, equality and inclusion. People are at the heart
of Eleco. Attraction and retention of talent and the wellness of
our people were key themes throughout 2022 in what was a tight
labour market.
We maintained investment in our people throughout the year,
introducing numerous initiatives including an Employee Assistance
Programme, Employee Hub and encouraging colleagues to volunteer for
charitable causes. In addition, two-thirds of our employees
received a cost-of-living allowance, and we provided pay awards
across the whole Group. As the result of many of our commitments to
our colleagues, we were delighted to receive Great Place to Work(R)
certification in the UK, Sweden and Germany.
We were delighted to welcome Neil Pritchard, who was appointed
to the Board as Chief Financial Officer in October 2022, further
strengthening our leadership and corporate governance. The Group
Leadership Team was also bolstered by the appointment of Luben
Kirov as Chief Technology Officer earlier in the year.
Dividend
Thanks to our strong cash position, we are able to both retain
earnings for corporate development initiatives and maintain a
progressive dividend policy. Cash generation was very strong during
the year, with an increase in free cash flow ahead of market
expectations, resulting in a 25 per cent increase in cash to
GBP12.5m (including cash held within the held for sale business at
the year-end) at 31 December 2022 (31 December 2021: GBP10.1m). The
Board has therefore decided to recommend a final cash dividend of
0.50 pence per share (2021: 0.40 pence per share). This is in
addition to an interim cash dividend of 0.20 pence per share (2021:
0.20 pence per share). Furthermore, we will propose a special
dividend of 0.58 pence per share to reward our shareholders'
loyalty as we go through the SaaS transition, representing the cash
proceeds from the disposal of the non-core ARCON business. The
total dividends for the year will therefore be 1.28 pence per share
(2021: 0.60 pence per share).
The full year and special dividend will follow approval by
shareholders at the AGM. The record date is the close of business
on 19 May 2023 and the ex-dividend date will be 18 May 2023.
Outlook
Eleco is building a single customer platform, the Elecoverse,
that will enable our customers to access and utilise all our
solutions. It will also provide customer success tools, training
options through the Elecoversity, as well as provide us with
analytics that will help us to further enhance our offerings to our
customers. We are enhancing our solutions to further our
competitive advantage in our areas of focus. We will continue
moving ahead in our transition to SaaS which will increase organic
recurring revenues and profits. Sales enablement programmes are
being implemented to further enhance future organic growth.
The construction and built environment markets are currently
affected by a multitude of macro-economic headwinds. Eleco's
software plays a crucial role in helping companies mitigate the
impact of these issues, driving productivity, and enabling them to
better plan their resources. The industry is experiencing a move
toward digitalisation, as well as more efficient and sustainable
building methodologies and techniques. Eleco's solutions are widely
recognised for improving decision making and planning throughout
the building lifecycle and we currently have an excellent
opportunity to leverage our market position, strengthen our
platform and drive organic growth.
Over the coming year we will also build on the progress we have
made in achieving Great Place to Work(R) status, providing an
ever-improving work environment that helps us motivate and retain
our great people while attracting new talent in a competitive
labour market.
The Company has a number of strategic acquisition prospects that
could further enhance its positioning and continues to actively
review the market for technology opportunities and threats.
Eleco has delivered a positive performance throughout 2022
despite the macro-economic background, delivering growth in
subscription revenues in line with our core strategic goal. I would
like to thank our talented team for their superb efforts in
achieving this outcome and our loyal and valued customers for their
support. We are confident of continued robust progress through 2023
and in meeting market expectations for the year ahead.
Serena Lang
Chairman
27 March 2023
CEO's Report
I am delighted with the Group's performance and progress with
delivering its growth strategy against a backdrop of difficult
economic conditions for the wider market. I am pleased to be
reporting financial results in line with market expectations. Eleco
is now better positioned within its markets and we continue to make
meaningful progress towards our strategic goals.
Eleco solves the challenges of the built environment by
supporting the digital transformation of companies who construct
and maintain buildings and structures. Our vision is to create
certainty for the built environment by being the trusted technology
partner to all stakeholders, which is especially important in the
current economic climate.
Eleco's core customers are in the UK, Germany, Sweden, the
Netherlands and the USA. However, its solutions reach all areas of
the globe including the rest of Europe, Australia and New
Zealand.
The built environment is an exciting sector for technology
companies due to rising demands to meet environmental targets and
population growth, which are driving companies in an industry that
is recognised as a slow adopter of technology to think differently
about data, process, and collaboration. A company with the pedigree
of Eleco however, with its technical talent and experience, is more
than capable of meeting the growing demands of the industry.
Our Markets
Following a previous year in which construction projects were
significantly disrupted due to the global pandemic, the trend
continued into the beginning of FY22 with related material price
increases and the energy and cost-of-living crisis which followed
the Russian invasion of Ukraine. The uncertainty caused disruptions
in projects, particularly in Germany.
During the pandemic, many businesses rapidly increased their
technology investments in order to operate remotely and assist
employees to work from home. We found that many of the old and
perhaps inefficient processes had been digitalised but not
modernised to work in a digital environment and this led to a
decline in some areas of construction workflows. This is where
Eleco's many years of industry experience proved vital in
supporting our customers to transform their processes and become
truly modernised. Furthermore, new technology entrants have found
it challenging to break into the built environment as our customers
have become more tech-savvy, again underpinning Eleco's strategic
move to focus on customer centricity and customer success.
Review of Operations
The Board has been greatly encouraged by the pace of our
transition to SaaS during the year. Many such transitions suffer
more severe revenue reductions, however, it was the objective of
Eleco colleagues to work hard to deliver equivalent year-on-year
revenues.
The strong uptake of subscription licensing has resulted in
significant growth in Annualised Recurring Revenues (ARR) of 14 per
cent, from GBP16.0m at 31 December 2021 to GBP18.2m at 31 December
2022. This level of growth has not been seen in prior years and
signifies positive progress. We are on track to see the total
reported revenues further increase by the end of 2023.
As stated when we first embarked upon this transformational
journey, we expected a reduction in revenues during the first 18
months of the process as customers moved from perpetual licences to
subscription payments, with total revenues increasing after that
time. The midpoint of our journey to SaaS will occur in H1 2023,
and we are confident of delivering solid revenue growth in the
second half of the current financial year.
Following the strategic focus for Eleco to become a SaaS company
, we will have greater predictability of our revenues, more
sustainable growth, lower costs and improved scalability. Our
customers are also benefiting from a reduction in upfront costs,
while having flexible, scalable products that can run anywhere on
any device with simple maintenance and automatic upgrades.
Ultimately, our move to SaaS will make Eleco a stronger and more
resilient business while increasing Customer Lifetime Value.
In keeping with our strategic focus on prioritising our core
customers, growth areas and increasing recurring revenue we
disposed of our non-profitable German ARCON architectural CAD
business in February 2023 for a total consideration of EUR600,000.
This further streamlines the Group toward a common customer base
and product type which benefits our employees and customers.
We also reorganised the management teams in our German Building
Lifecycle and Veeuze companies, which we expect to drive long-term
growth in the region.
Our ambition is to be identified as the preferred international
technology partner in the built environment. We are therefore proud
to be recognised in the Top 50 ConTech Partners list. Launched by
Build in Digital, the list shows the ConTech firms that have become
an integral part of their clients' supply chain, helping them
operate on time, on budget, and with a minimal carbon
footprint.
2022 was the ninth consecutive year in which we received the
Project Management Software of the Year Award at the UK
Construction Computing Awards, and in March 2022, we also won the
Megabuyte Quoted25 Award for best performing software company in
the industrials peer group, highlighting the strength of our
overall financial performance.
Our US channel partner programme was enhanced which resulted in
the introduction and first order of Powerproject Vision, our cloud
collaboration solution, to Saunders Construction, an ENR Top 400
general contractor. This has sparked an interest in Powerproject
Vision among other customers in the US.
Central to us upholding innovation, adoption and customer
satisfaction is the attraction and retention of the highest quality
talent. During the year, we introduced numerous measures to ensure
this could still be achieved in a highly competitive labour market.
Our employee value proposition was improved throughout the year by
the introduction of various employee initiatives, well-being
support and benefits. As a result, in June 2022 we were awarded
Great Place to Work(R) status in the UK and Sweden following a
survey of Eleco colleagues, who worked tirelessly to deliver FY22's
strong results while still making excellent progress our strategy.
I am pleased to say we have retained that Great Place to Work(R)
certification in 2023, and added Germany to the fold.
Strategy
The Group's leadership team continued its commitment to driving
the vision and strategy whilst creating an environment to deliver
stakeholder value and growth. These comprise three strategic
pillars: Go-to-Market, Innovation and Technology, and Mergers and
Acquisitions, underpinned by our Growth Platform.
Go-to-Market
Investment in cloud migration in 2022 has formed the basis for
new future applications as well as the provision of cost-effective,
secure and collaborative solutions for Eleco's current customers.
Our revived sales enablement programme will support existing
colleagues to perform at their best and also allow Eleco to
accelerate the onboarding of new colleagues and scaling of its
sales capabilities.
Solving the challenges of the built environment requires
collaboration and partnerships. Therefore as a focus for 2023,
Eleco will be the leading partner of the C-Tech Startup Village at
the UK Digital Construction Week in May. This will connect the
Company with over 100 early-stage technology businesses in our
sector.
Further service partners and resellers play a key role in
providing Eleco scale in delivery to international markets. Earlier
this year, in conjunction with our US value added resellers, we
hosted our first US user conference since the pandemic and not only
was the turnout excellent, but also the response was extremely
favourable, with Lorne Duncan from Petroglyph commenting that, "It
was the best user conference I have been to in the last decade and
probably the best I have ever attended."
Innovation and Technology
Our growth strategy called for a reorganisation of our Research
& Development function into an aligned group of colleagues
reporting to our Chief Technology Officer. This change in H2 2022
has stimulated creativity and innovation as the team now meet as
one, developing efficiencies by eliminating duplication and
supporting specialism and career pathways within the Group.
Innovation is an area in which Eleco colleagues feel confident,
as we are both proud and fortunate to work with the most
forward-thinking engineers and planners in the industry to solve
the challenges they face. Our solutions have an active educational
audience of over 12,000 students and with the culture we promote,
customers can easily speak with Eleco colleagues to discuss their
challenges.
In 2023, our customers can expect to see more SaaS modules which
promote better collaboration; for example, Asta Connect is our new
last planner solution designed to bring teams together on site. We
also plan to launch the first iteration of the Elecoverse,
providing greater access to the Eleco 'universe' and scalability of
services for our customers. We will continue to enhance our
existing portfolio to improve customer experience and appeal to a
diverse audience within our core customer base.
Mergers & Acquisitions
The Group's M&A strategy is driven by its ambitious
technology roadmap, and customer needs whilst further supplements
our organic growth.
There are three types of potential acquisition we are
pursuing:
-- Type A - Revenue & Profit enhancing in complementary
markets. An established company with robust financial credentials
and loyal customer base.
-- Type B - Proven Technology that advances our roadmap. An
established technology and capability-led businesses that would
enable Eleco to accelerate its roadmap through acquiring developed
IP and technical talent.
-- Type C - Next-Generation Technologies; innovative solutions
that add value to our existing customers.
Growth platform
Developing and strengthening Eleco's operational platform has
been a strategic focus since the launch of the strategy in 2021,
and will continue to play an important role in the future success
of Eleco. Core elements to enable growth are our people, culture,
ESG credentials and resilient financial platform.
People & Talent
Eleco is a people business, and the calibre and talent of our
people, along with their enthusiasm to solve the challenges of the
built environment, continue to be key in delivering our
strategy.
During the period the Leadership Team was strengthened with the
recruitment of Neil Pritchard who was appointed as Chief Financial
Officer, and to the Board, in October 2022. Neil has significant
experience of AIM-listed technology companies, having been CFO of
Corero Network Security plc and CML Microsystems plc and having
worked for a number of internationally-quoted companies prior to
this. Neil's background and skills are already proving invaluable
as we focus on continued and sustainable organic and inorganic
growth.
Luben Kirov joined as Chief Technology Officer, in February of
2022. With over 15 years of professional experience across Natural
Resource Management, Enterprise Services, Software Development,
Data Science and Consulting, Luben brings with him comprehensive
and diverse experience in the fields of technology and
business.
David Hernandez joined as Head of US Operations, based in Texas,
in July and is an experienced sales leader, having spent almost a
decade in sales leadership and channel management in the
construction industry as well as having led his own residential and
commercial contracting company. Dirk Dombert started as Regional
Managing Director, Northern Europe in November, and has 25 years of
sales and management experience with software solutions and
services in ecommerce and CAD/CAM technologies.
Culture & Values
Fostering a strong company culture aligned to Eleco's purpose
and vision is critical to the delivery of our strategy. Accordingly
we focused on strengthening our cultural values by introducing our
own behavioural framework into employee objectives and our
recruitment process in the period.
This focus on cultural values has brought about increased levels
of trust and openness and has created an environment in which
colleagues feel confident to contribute, collaborate, be innovative
and ultimately perform to the best of their ability. Furthermore,
these improved ways of working have served to support the
leadership team in implementing transformational changes more
swiftly.
Systems
Reliable and secure systems form a key element in enabling our
growth ambitions. During the period we strengthened our cyber
security posture by implementing a cyber vulnerability scanning
system to regularly test our public-facing services. Furthermore we
updated our cyber security procedures and policies in advance of
applying for ISO 27001 in the UK in 2023.
ESG Credentials
Excellent environmental, social and governance credentials have
significant importance in supporting our growth. In the period, we
established an ESG Committee and developed a scorecard to commence
the measurement of the initiatives we continue to implement. Some
initiatives included offsetting carbon emissions, progression
towards electrified vehicles and making facility improvements in
our offices to reduce our impact on the environment.
Further supporting good governance, we reinvigorated our group
wide policy framework which is being introduced through our
internal training platform. Every employee was also trained and
tested throughout the year on the detection of cyber threats and
attacks. Our clients can therefore have confidence that we adhere
to the National Cyber Security Centre (NCSC) guidelines for cyber
security for construction businesses, one of the many industries
that we serve.
I am proud of the social responsibility measures adopted by
Eleco and for its recognition as a Great Place to Work(R). During
the year, we introduced several initiatives including an Employee
Assistance Programme, Employee Hub, volunteering days for
colleagues and support with additional external training to build
upon their existing skills and abilities. In Q4 2022, and with the
approaching colder weather, we recognised the impact on colleagues
of the rising cost of living and, as a result, the Board made a
one-off support payment to two-thirds of our employees.
Resilient Financial Platform
Annualised Recurring Revenues (ARR) at 31 December 2022
increased by 14 per cent to approximately GBP18.2m (GBP16.0m at 31
December 2021). Total Recurring Revenues (TRR), a key metric for
the Group, increased to GBP16.9m, or 64 per cent of total revenue
in 2022, representing a 10 per cent uplift on the comparable period
(GBP15.4m in 2021 or 56 per cent of total revenues).
As a result of the transition away from upfront perpetual
licences, revenues for the year ended 31 December 2022 were
marginally lower than in the prior year at GBP26.6m (GBP27.0m in
constant currency terms) (2021: GBP27.3m). This, together with
profit before tax for the period of GBP2.9m (2021: GBP3.9m), was in
line and ahead of market expectations. We expect total revenues to
grow in the second half of the coming year as we pass the halfway
mark of our SaaS transition. Service revenue was in line with the
previous year at GBP6.0m (2021: GBP6.0m).
Due to the SaaS transition, Building Lifecycle total revenue
decreased by 2 per cent while CAD and Visualisation revenue also
decreased by 7 per cent. Deferred income increased to GBP7.8m
(2021: GBP7.1m).
Revenues by customer location were positive in the USA and Rest
of World, though other areas were lower due to the SaaS transition
and Germany showed a decline due to the prevailing economic
conditions, but also reflected the reduced business by our ARCON
business that was disposed of after the year end.
We invested approximately 12 per cent of revenues in product
development across our portfolio during 2022 which was similar to
prior year.
Cash generation remains strong, with an increase in free cash
flow ahead of market expectations resulting in a significant
increase in cash of 25 per cent to GBP12.5m as at 31 December 2022,
up from GBP10.1m as at 31 December 2021.
The Company's robust, debt-free cash status enables us to have a
progressive dividend policy while allowing for the retention of
surplus cash to continue to invest in corporate development
initiatives and the future growth of the Group. An enhanced final
dividend and a payment of a special dividend (relating to the
disposal of the ARCON business) rewards our shareholders for their
support on our transformative journey.
Outlook
I am delighted with the meaningful progress that Eleco has made
towards its strategic goals this year. As such, I would like to
extend my thanks to the talented colleagues in the Group for their
valued contribution, trust and dedication.
Eleco's customers increasingly embrace digitalisation as a
critical means to solve the challenges they are facing in their
business. We expect the rising demand for designing, constructing
and operating buildings with improved green credentials to be a key
driver for Eleco as our products support the reduction of waste,
drive efficiency and provide critical data to make better
decisions. Improving Eleco's go-to-market abilities will drive
customer success, our ability to scale and strengthen our
reputation as a trusted technology partner in the built
environment.
We remain focused on growth, both organic and through
acquisition, and continue to seek acquisitions which will increase
the size of our customer base, complement our technology stack,
widen our geographic reach and further develop our SaaS
platform.
As we successfully transform Eleco into a high value SaaS
recurring revenue business, and as previously announced in 2021, we
anticipate that H1 2023 revenues will be lower, but expect revenues
will accelerate in H2 of 2023 enabling us to return to revenue
growth in 2023. I wish to thank all shareholders for their
continued support during a period of transformation into a
world-class, high value recurring revenue group.
Our customer-centric growth strategy, loyal customer base,
strong pipeline of opportunities and world-class technology will
open further exciting prospects for growth in our core markets and
therefore we look to the year ahead with confidence.
Jonathan Hunter
Chief Executive Officer
27 March 2023
Consolidated Income Statement
For the year ended 31 December 2022
Continuing operations 2022 2021
GBP'000 GBP'000
====================== ============== =============
Revenue 26,566 27,344
Cost of sales (3,087) (2,754)
======================= ============== =============
Gross profit 23,479 24,590
----------------------- -------------- -------------
Amortisation and impairment of in tangible assets
(1,596) ( 2 ,361)
Former Directors' payments
- (69)
Share-based payments
(201) (81)
Other administrative expenses
(18,699) (17,980)
Administrative expenses
(20,496) (20,491)
Operating profit 2,983 4,099
Net finance costs (39) (173)
------------------------------------------ ===== ==========
Profit before tax 2,944 3,926
Taxation (549) (1,195)
========================================== ===== ==========
Profit for the financial period 2,395 2,731
========================================== ===== ==========
Attributable to:
Equity holders of the parent 2,395 2,731
========================================== ----- ----------
Earnings per share - (pence per share)
------------------------------------------ ----- ----------
Basic earnings per share 2.9p 3.3p
Diluted earnings per share 2.9p 3.3p
------------------------------------------ ----- ----------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
GBP'000 GBP'000
=============================================== ======== ============
Profit for the year 2,395 2,731
Other comprehensive expense:
=============================================== ======== ============
Items that will be reclassified subsequently
to profit or loss:
Translation differences on foreign operations (107) (258)
=============================================== ======== ============
Other comprehensive (expense net of taxation (107) (258)
=============================================== ======== ============
Total comprehensive income for the year 2,288 2,473
=============================================== ======== ============
Attributable to:
Equity holders of the parent 2,288 2,473
=============================================== ======== ============
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
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 2021 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 year - - - - - 2,731 2,731
Other comprehensive
(expense)/income:
Exchange differences on
translation of net investments
in foreign operations - - - (270) - 12 (258)
Other - (29) - (1) (1) 32 1
================================== =========== ======== =========== ============== ======== =========== =======
Total comprehensive (expense)/
income for the year - (29) - (271) (1) 2,775 2,474
================================== =========== ======== =========== ============== ======== =========== =======
At 31 December 2021 832 2,406 1,002 (279) (5) 19,890 23,846
Dividends - - - - - (493) (493)
Share-based payments - - - - 201 - 201
Transactions with owners - - 201 (493) (292)
================================== =========== ======== =========== ============== ======== =========== =======
Profit for the year - - - - - 2,395 2,395
Other comprehensive expense:
Exchange differences on
translation of net investments
in foreign operations - - - (107) - - (107)
Total comprehensive income
for the year - - - (107) - 2,395 2,288
================================== =========== ======== =========== ============== ======== =========== =======
At 31 December 2022 832 2,406 1,002 (386) 196 21,792 25,842
================================== =========== ======== =========== ============== ======== =========== =======
Consolidated Balance Sheet
At 31 December 2022
2022 2021
GBP'000 GBP'000
======================================== === ============== ==============
Non-current assets
Goodwill 15,337 15,593
Other intangible assets 6,591 6,554
Property, plant and equipment 745 717
Right-of-Use assets 1,479 1,728
Deferred tax assets 51 65
============================================= ============== ==============
Total non-current assets 24,203 24,657
============================================= ============== ==============
Current assets
Inventories 44 16
Trade and other receivables 4,057 4,277
Current tax assets 356 216
Assets of the disposal group held for 794 -
sale
Cash and cash equivalents 12,137 10,055
============================================= ============== ==============
Total current assets 17,388 14,564
============================================= ============== ==============
Total assets 41,591 39,221
============================================= ============== ==============
Current liabilities
Borrowings - (45)
Lease liabilities (467) (471)
Trade and other payables (1,523) (1,793)
Provisions - (10)
Liabilities of the disposal group held
for sale -
Accruals and deferred income (428) (9,689)
(10,305)
============================================ ============== ==============
Total current liabilities (12,723) (12,008)
============================================= ============== ==============
Non-current liabilities
Borrowings - (56)
Lease liabilities (1,215) (1,464)
Deferred tax liabilities (1,785) (1,806)
Non-current provisions (26) (41)
============================================= ============== ==============
Total non-current liabilities (3,026) (3,367)
============================================= ============== ==============
Total liabilities (15,749) (15,375)
============================================= ============== ==============
Net assets 25,842 23,846
============================================= ============== ==============
Equity
Share capital 832 832
Share premium 2,406 2,406
Merger reserve 1,002 1,002
Translation reserve (386) (279)
Other reserve 196 (5)
Retained earnings 21,792 19,890
============================================= ============== ==============
Equity attributable to shareholders of
the parent 25,842 23,846
============================================= ============== ==============
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
GBP'000 GBP'000
====================================================== ============== =============
Cash flows from operating activities
Profit before taxation for the year 2,944 3,926
Net finance costs 39 173
Depreciation charge 621 722
Amortisation and impairment charge 1,596 2,361
Profit on sale of property, plant and equipment (24) (7)
Share-based payments expense 201 81
Decrease in provisions (25) (115)
======================================================= ============== =============
Cash generated from operations before working
capital movements 5,352 7,141
Decrease/(increase) in trade and other receivables 193 (366)
(Increase)/decrease in inventories and work in
progress (27) 7
Increase in trade and other payables and accruals
and deferred income 755 942
======================================================= ============== =============
Cash generated from operations 6,273 7,724
Interest paid (27) (124)
Net taxation paid (719) (903)
======================================================= ============== =============
Net cash inflow from operating activities 5,527 6,697
======================================================= ============== =============
Investing activities
Additions of intangible assets (1,631) (1,727)
Purchase of property, plant and equipment (158) (279)
Proceeds from sale of property, plant, equipment
and intangible assets 53 60
Net cash outflow from investing activities (1,736) (1,946)
======================================================= ============== =============
Financing activities
Repayment of bank loans (102) (4,447)
Repayments of principal of lease liabilities (556) (650)
Equity dividends paid (493) (493)
Issue of share capital - 260
======================================================= ============== =============
Net cash outflow from financing activities (1,151) (5,330)
======================================================= ============== =============
Net increase/ (decrease) in cash and cash equivalents 2,640 (579)
======================================================= ============== =============
Cash and cash equivalents at 1 January 10,055 10,668
Effects of changes in foreign exchange rates (157) (34)
======================================================= ============== =============
Cash and cash equivalents at 31 December 12,538 10,055
======================================================= ============== =============
Cash and cash equivalents comprise:
Cash and short-term deposits 12,137 10,055
Cash held for sale 401 -
======================================================= ============== =============
12,538 10,055
====================================================== ============== =============
Extract from Notes to the Consolidated Financial Statements
1. Revenue
Revenue from continuing operations disclosed in the income
statement is analysed as follows:
2022 2021
GBP'000 GBP'000
============================================================ =========== ==============
Licence sales 3,606 5,913
Recurring maintenance, support and subscription revenue 16,927 15,424
Services income 6,033 6,007
============================================================ ==============
Total revenue 26,566 27,344
============================================================ ----------- ==============
Revenue is recognised for each category as follows:
* Licence sales - recognised at the point of transfer
(delivery) of the licence to a customer.
-- Recurring revenue: SaaS, maintenance, support and
subscriptions - as these services are provided over the term of the
contract, revenue is recognised over the life of the contract.
-- Services - recognised on delivery of the service.
Revenue recorded in the year includes GBP7.1m (2021: GBP6.4m) 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.
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:
2022 2021
GBP'000 GBP'000
=============== ======== ==============
UK 10,263 10,446
Scandinavia 6,388 6,550
Germany 4,449 4,911
USA 1,101 1,030
Rest of Europe 3,808 3,916
Rest of World 557 491
=============== ==============
26,566 27,344
=============== -------- ==============
Revenue by product group represents continuing operations
revenue from external customers.
Revenue by product group is as follows:
2022 2021
GBP'000 GBP'000
======================================================================== =========== ==============
Software for:
Building Lifecycle 17,248 17,650
CAD and Visualisation 7,432 7,997
Other - third party software 1,886 1,697
======================================================================== =========== ==============
26,566 27,344
======================================================================== =========== ==============
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:
2022 2021
GBP'000 GBP'000
======================================== ======== ==============
Direct 25,317 26,068
Reseller 1,249 1,276
======================================== ==============
26,566 27,344
======================================== -------- ==============
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 makers have 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.
During the year , the Executive Directors, reviewed the three
revenue streams, having previously reviewed these as one. 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.
2022 2021
Software Software
GBP'000 GBP'000
==================================================== ========= =========
Revenue 26,566 27,344
==================================================== ========= =========
Adjusted EBITDA 5,200 7,251
Amortisation and impairment of purchased intangible
assets (1,097) (1,786)
Depreciation (621) (722)
==================================================== --------- =========
Adjusted operating profit 3,482 4,743
Amortisation of acquired intangible assets (499) (575)
Former Directors' payments - (69)
==================================================== ========= =========
Operating profit 2,983 4,099
Net finance cost (39) (173)
==================================================== --------- =========
Segment profit before taxation 2,944 3,926
Taxation (549) (1,195)
==================================================== --------- =========
Segment profit after taxation 2,395 2,731
==================================================== ========= =========
Operating profit 2,983 4,099
Amortisation and impairment of intangible assets 1,596 2,361
Depreciation charge 621 722
==================================================== =========
EBITDA 5,200 7,182
Former Directors' payments - 69
==================================================== ========= =========
Share-based payments 201 81
==================================================== ========= =========
Adjusted EBITDA 5,401 7,332
==================================================== ========= =========
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.
2022 2021
Software Software
GBP'000 GBP'000
============================= ========= =========
Group assets and liabilities
Segment assets 41,591 39,221
============================= ========= =========
Total Group assets 41,591 39,221
============================= ========= =========
Segment liabilities 15,749 15,375
============================= ========= =========
Total Group liabilities 15,749 15,375
============================= ========= =========
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. These include assets that
were held at the year-end as Held For Sale Assets.
Non-current assets by geographical location are as follows:
2022 2021
GBP'000 GBP'000
=============== ======== ==============
UK 14,680 14,780
Scandinavia 6,769 6,759
Germany 2,706 3,072
USA 2 2
Rest of Europe 44 44
Rest of World 2 -
=============== ==============
24,203 24,657
=============== -------- ==============
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
(2021: 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:
2022 2021
GBP'000 GBP'000
=========================================================== ======================= ============
Software product development expense 1,526 1,660
Depreciation of property, plant and equipment 147 213
Depreciation of right-of-use assets 474 509
Amortisation of acquired intangible assets 499 575
Amortisation of other intangible assets 1,097 1,150
Impairment of other intangible assets - 636
Share-based payments 201 81
Employer furlough scheme repayments - 135
Profit on disposal of property, plant and equipment (24) (7)
Foreign exchange (gains)/losses (206) 127
Fees payable to the Company's auditor for:
The audit of the parent company and consolidated
financial statements 134 83
Fees payable to the Company's auditor and its associates
for other services:
The audit of the Company's subsidiaries 119 104
Other services 9 8
Former Directors' payments - 69
=========================================================== ======================= ============
4. Employee information
The average number of employees during the period, including
Directors, in continuing operations was made up as follows:
2022 2021
Number Number
==================================================== ================ =============
Sales & marketing 58 57
Client services 86 76
Software development 70 69
Management and administration 41 43
==================================================== =============
255 245
==================================================== ---------------- =============
Staff costs during the period, including Directors,
in continuing operations amounted to:
2022 2021
GBP'000 GBP'000
==================================================== ================ =============
Wages and salaries 12,446 11,145
Social security 2,268 1,985
Pension costs 654 648
Share-based payments 201 81
==================================================== =============
15,569 13,859
Less: Development staff costs capitalised (1,550) (1,578)
==================================================== =============
14,019 12,281
==================================================== ---------------- =============
5. Taxation
Taxation on profit on ordinary activities
The tax charge in the income statement from continuing
operations is as follows:
2022 2021
GBP'000 GBP'000
======================================================= ==================== ============
Current tax:
UK corporation tax on profits of the year 359 433
Tax adjustments in respect of previous years (104) -
======================================================= ============
255 433
Foreign tax 276 329
======================================================= ============
Total current tax 531 762
======================================================= -------------------- ============
Deferred tax:
Origination and reversal of temporary differences 9 8
Change in tax rates - 370
Tax adjustments in respect of previous years 9 55
======================================================= ============
Total deferred tax 18 433
======================================================= -------------------- ============
Tax charge in the consolidated income statement 549 1,195
======================================================= -------------------- ============
Income tax for the UK has been calculated at the weighted
average rate of UK corporation tax of 19 per cent (2021: 19 per
cent) on the estimated assessable profit for the period. Taxation
for foreign companies is calculated at the rates prevailing in the
relevant jurisdictions.
A change to the main UK corporation tax rate was substantively
enacted for IFRS purposes. The Finance Bill 2021, substantively
enacted the rate from 1 April 2023 to 25 per cent, rather than the
previously enacted reduction to 19 per cent. These rates have been
applied to determine deferred tax assets and liabilities at the
Balance Sheet date.
6. Basic and diluted earnings per share
2022 2021
Weighted Weighted
Net profit average Net profit average
attributable number attributable number
to shareholders of EPS to shareholders of EPS
shares shares
Ordinary Shares GBP'000 (millions) (pence) GBP'000 (millions) (pence)
=========================== ================ =========== ======= ================= =========== =======
Basic earnings per share 2,395 82.2 2.9 2,731 82.0 3.3
Diluted earnings per share 2,395 83.0 2.9 2,731 82.9 3.3
Adjusted basic earnings
per share 2,799 82.2 3.4 3,253 82.0 4.0
=========================== ---------------- ----------- ------- ================= =========== =======
In determining the diluted earnings per share the dilutive
impact of share options on weighted average number of shares was
included.
7. Dividends
Dividends paid in the year were 0.60 pence per ordinary share
(2021: 0.60 pence per ordinary share). Cash dividends of GBP493,000
(2021: GBP493,000) were paid during the year:
2022 2021
pence per pence 2022 2021
per
Ordinary Shares share share GBP'000 GBP'000
============================= ========= ====== ======= =======
Declared and paid during the
year
Interim - current year 0.20 0.20 164 164
Final - previous year 0.40 0.40 329 329
============================= ====== =======
0.60 0.60 493 493
============================= --------- ====== ------- =======
The Directors have recommended a final dividend of 0.50 pence
(2021: 0.40 pence). The dividend is subject to approval by
shareholders at the AGM and has not been included as a liability in
these financial statements. In addition, a special dividend of 0.58
pence per share, representing the proceeds from the disposal of the
non-core ARCON business, will be proposed at the AGM as a further
resolution (2021: nil special dividend).
8. Post-balance sheet events
On 17 February 2023, the Group sold its wholly owned subsidiary
Eleco Software GmbH, the German ARCON architectural CAD business,
to FirstInVision GesmbH, an Austrian architectural software
business, for a total consideration of EUR600,000. This is the
business that was held for sale at the 31 December 2022 year
end.
The transaction supports the Group's strategy to focus on its
core customer segments and businesses.
The EUR600,000 consideration is to be satisfied in cash, with
EUR550,000 immediately payable on completion, and EUR25,000 in two
deferred instalments (without performance conditions attached) over
the next two years.
9. 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 Dawson House, 5 Jewry Street,
London EC3N 2EX, United Kingdom and the principal place of business
is Dawson House, 5 Jewry Street, London EC3N 2EX .
2. 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
2022 and are unchanged from those previously disclosed in the
Group's Annual Report and Accounts for the year ended 31 December
2021.
Statutory accounts for 2021 have been delivered to the Registrar
of Companies and those for 2022 will be delivered in due course.
The Company's auditors RSM UK LLP, have reported on the 2022
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 2021 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.
Full financial statements for the year ended 31 December 2022
will be posted and made available to shareholders in due
course.
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END
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