REG - Eleco PLC - Interim Results
12/09/2023 07:00
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RNS Number : 0814M Eleco PLC 12 September 2023
12 September 2023
Eleco Plc
("Eleco", the "Group" or the "Company")
Interim Results for the Six Months Ended 30 June 2023:
Recurring Revenue up 18%
Eleco plc (AIM: ELCO), the specialist software provider for the built
environment, has published its results for the six months ended 30 June 2023,
based on unaudited management accounts:
Financial highlights:
· Annualised Recurring Revenue (ARR)(1) up 18% to £19.7m (at 30
June 2022: £16.7m); organic ARR growth of 24%
· Total Recurring Revenue (TRR) up 18% to £9.7m (H1 2022: £8.2m),
representing 72% of total revenue (H1 2022: 61% of total revenue); organic TRR
growth of 21%
· Revenues slightly ahead of expectations at £13.5m (£13.6m in
constant currency terms) (H1 2022: £13.4m) despite products' end-of-life, and
business disposal. Excluding these, revenues were 5% ahead organically,
following the effects of the SaaS transition
· EBITDA(2) of £2.2m (H1 2022: £2.8m)
· Adjusted EBITDA(3) of £2.6m (2022: £2.9m) as anticipated
· Profit Before Taxation £1.3m (H1 2022: £1.7m)
· Adjusted Profit Before Taxation(4) £1.8m (H1 2022: £2.0m)
· Basic EPS of 1.2 pence per share (H1 2022: 1.6 pence per share)
· Adjusted EPS(5) of 1.7 pence per share (H1 2022: 1.9 pence per share)
· Cash at 30 June 2023 £9.4m (£11.3m at 30 June 2022; £12.5m at
31 December 2022) after acquisition payment of £3.6m
· Interim dividend up 25% to 0.25 pence per share (H1 2022: 0.20
pence per share)
Operational highlights:
· Execution of M&A strategy:
o Acquisition of profitable SaaS business, BestOutcome - a leading UK
provider of simple, scalable Project Portfolio Management (PPM) software, to
complement Building Lifecycle products and broaden Eleco's customer base
o Profitable disposal of non-core German architectural CAD business
· Strategic partnerships announced with:
o C-Tech Club, partnerships with innovative construction technology
start-ups
o Nodes & Links, to bring AI into the world of construction planning
· Return of Asta brand, drawing on our innovation heritage
· On-going improvements in ESG initiatives such as environmental
data gathering and monitoring; enhanced scores with our Great Place to Work®
certifications, and implemented training and updated group policy framework
for all employees
· Elecosoft UK obtained ISO 27001 certification in continued
commitment to customer data security
Jonathan Hunter, Chief Executive Officer of Eleco plc said:
"We are extremely well-positioned within our markets with an established loyal
customer base, world-class technology, positive market growth trends and
drivers, and a clear customer-focussed growth strategy. We are very pleased
with our recent acquisition of BestOutcome, which, through its integration
into the Eleco family, strengthens the existing Building Lifecycle offering
and further builds our SaaS recurring revenue portfolio with a wider, more
diverse customer base. We shall continue to identify appropriate acquisitions
that will widen our customer base, complement our technological innovation,
extend our geographic capabilities, and further enhance our recurring revenues
and overall financial performance.
"Eleco is fundamentally delivering on its SaaS strategy which will bring
further significant operational and financial benefits. We remain focussed on
the continued growth of organic recurring revenues, supplemented by further
inorganic growth opportunities. We are confident in continued progress and
positive momentum for the future, underpinned by our current trading tracking
in line with management's expectations for the full year."
The Company also announces that its nominated adviser and broker finnCap Ltd,
has changed its name to Cavendish Capital Markets Limited.
(1) 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 using the
recurring revenue in the final month of the period, multiplied by twelve. This
ARR figure is calculated prior to the inclusion of the forthcoming
contribution from the BestOutcome Ltd acquisition.
(2) EBITDA is defined as Earnings before Interest, Taxation, Depreciation,
Amortisation and Impairment of Intangible Assets. This includes the gain on
disposal of the ARCON business in H1 2023. See note 14.
(3) Adjusted EBITDA is adjusted for acquisition related expenses and
amortisation of acquired intangibles. See note 14.
(4) Adjusted profit before tax is adjusted for acquisition related expenses
and amortisation of acquired intangibles. See note 14.
(5) Adjusted earnings per share represents profit after tax as adjusted for
acquisition related expenses and amortisation of acquired intangibles, divided
by a weighted average number of shares. See note 7 and note 14.
(6) Organic refers to the underlying financials after adjusting for revenues
from the disposed ARCON business and for adjusting for the ending of life of
several products.
For further information, please contact:
Eleco plc +44 (0)20 7422 8000
Jonathan Hunter, Chief Executive Officer
Neil Pritchard, Chief Financial Officer
Cavendish Capital Markets Limited (previously finnCap Limited) +44 (0)20 7220 0500
Geoff Nash/ Emily Watts/ Seamus Fricker (Corporate Finance)
Charlotte Sutcliffe/ Harriet Ward (ECM)
SEC Newgate UK +44 (0)20 3757 6882
Elisabeth Cowell/ Bob Huxford eleco@secnewgate.co.uk (mailto:eleco@secnewgate.co.uk)
About Eleco plc
Eleco plc is an AIM-listed (AIM: ELCO) specialist international provider of
software and related services to the built environment through its operating
brands Elecosoft, BestOutcome and Veeuze from centres of excellence in the UK,
Sweden, Germany, the Netherlands and the USA.
The Group's software solutions are trusted by international customers and used
throughout the building lifecycle from early planning and design stages to
construction, interior fit out, asset management and facilities management to
support project management, estimation, visualisation, Building Information
Modelling (BIM) and property management.
For further information please visit www.eleco.com
(http://www.elecosoft.com/)
Chairman's Statement
Introduction
In an era of increased global instability and macroeconomic headwinds, it is
pleasing to report, in this first statement in my capacity as Interim Chair,
that Eleco continues to execute on its strategy and deliver stable, more
predictable and growing recurring revenues as it successfully navigates
through its SaaS transition.
Eleco, alongside its customer centricity, continues to benefit from
international industry trends and drivers, such as digitalisation and the
incorporation of Artificial Intelligence (AI) to improve productivity, the
reduction of waste and carbon footprint, efficient delivery models across the
lifecycle utilising greater data collaboration and integration.
Performance and future
Recurring revenue in the first half grew by 18 per cent to £9.7m (H1 2022:
£8.2m) and now accounts for 72 per cent of total revenue (H1 2022: 61 per
cent of total revenue). This significant uplift in performance emphasises the
benefits in our SaaS transition. Similarly, annualised recurring revenues
increased by 18 per cent to £19.7m (H1 2022: £16.7m). Revenue was slightly
ahead of forecast, despite the absence of revenue from a number of
Swedish-based end-of-life products and a planned disposal. Profitability was
in line with management's expectations.
For the full year 2023, we expect to see revenues in line with our plan and as
a result of the SaaS transition, longer term sustainable growth and overall
shareholder returns coming through.
Strategic progress
These organic developments and overall prospects have been supplemented by
progress in other corporate activity. In February 2023, we sold the ARCON
architectural CAD business, enabling increased focus on our core Building
Lifecycle businesses.
In June 2023, we acquired a UK provider of easy-to-use, scalable Project
Portfolio Management (PPM) software for a net consideration of £3.6m. The
value enhancing addition of the BestOutcome business broadens our customer
base and provides potential extended cross fertilisation of solutions to our
existing customers.
Environmental, Social and Governance (ESG)
As Chair of our ESG Committee, I am keen to ensure that Eleco is at the
forefront of initiatives that deliver on and fulfil our important
responsibilities and ESG commitments. Having adopted a balanced scorecard
approach, environmentally, we are measuring our performance against KPIs,
building on the short-term objective of our Net Zero carbon offset. Internal
measures continue to minimise our own footprint and we are looking at other
ways to assist our customers' ability to measure and reduce their own
emissions.
Socially, we have been building our Employee Value Proposition, internal
management training, and Eleco's impact in the community through volunteering
and wellness initiatives. We were pleased to achieve higher scoring in the
Great Place to Work® certifications this year, deepening the bonds within and
across the Group. Also, in Governance, new Group policies are being
progressively and regularly rolled out to employees via an internal training
platform.
Dividend
Having regard to both the organic and inorganic needs of the business and
recent performance, the Board is increasing the interim dividend by 25 per
cent to 0.25 pence per share (H1 2022: 0.20 pence per share), payable on 6th
October 2023 to shareholders on the Register on 22 September 2023, and the
ex-dividend date will be 21st September 2023.
Employees
The key to any successful business, and our biggest asset, is our people; the
management and colleagues without whom the Group cannot achieve the success it
strives for. We are very fortunate in having highly dedicated, talented and
hardworking colleagues across the world. On behalf of the Board, I wish to
express my thanks for their continued efforts and their support.
Board updates
We are currently at an advanced stage of recruiting a new Chair and an
Independent Non-Executive Director who will in turn become Chair of the Audit
& Risk Committee. Announcements on these two roles are expected to be
forthcoming prior to the year end.
Current trading and outlook
The Group's transformation to a high recurring revenue, SaaS driven business
is now well advanced and entering a new phase that will bring further
significant operational and financial benefits.
We are confident that we will continue to weather economic and market
headwinds given our clearly defined and executed strategy for growth. Our
technological solutions help our customers drive efficiencies in these
challenging environments.
We continue to deliver organic growth and accelerate delivery of our plan via
complementary acquisitions that enable us to scale up and exploit market
opportunities.
We are well positioned to grow our international markets and see continued
progress and positive momentum for the future with current trading in line
with our internal expectations for the full year.
Mark Castle
Interim Non-Executive Chairman
11 September 2023
Chief Executive's Statement
Introduction
We are encouraged by Eleco's trading performance for the first six months of
the financial year, in which we have continued to deliver on our strategy. We
previously flagged that H1 2023 would be the low point of the temporary
financial impact of the SaaS transition. However, we are pleased to report we
have grown compared to H1 2022.
Despite continued macroeconomic pressures, which have negatively impacted
revenue streams, we remain resolute in our focus on our growth strategy and
delivery of business performance and in our ambition to be the world-class,
global leader in software for the built environment. Building on the H1 2023
milestone of the SaaS transition, we believe we have the people, technology,
know-how and culture to further execute on this successful journey.
Strategy and strategic developments
Eleco's vision is to solve the challenges of the built environment for our
customers through digital transformation. We do this by providing
best-of-breed software and living by our core values, such as collaboration,
excellence and customer-centricity: in short, we aim to be our customers'
trusted, proven technology partner. The SaaS transition is but one major
change in our transformational journey. Artificial intelligence (AI) is
another: AI capabilities will provide greater reliability and programme
forecasting whilst improved risk management will reduce the time and cost
overruns that continue to impact projects, in turn improving productivity.
The Group has a strong pedigree within an industry that is currently
increasing data adoption from historically low levels. This is a long-term
underlying trend to meet the demands of population growth on housing and
infrastructure, environmental needs and targets, increased regulation and
compliance, the need to reduce time, cost and waste, modularised formats, data
sharing, 4D Building Information Modelling (BIM) demands and more. The growth
strategy is therefore focussed on go-to-market initiatives to further develop
the awareness of Eleco's best technical capabilities, meeting the needs of
customers and accordingly delivering digital transformation.
Eleco's customer-focussed approach extends beyond simply knowing the many
inputs of a project; we understand what our customers are seeking to achieve
with their digital transformation and how planning, estimating and maintenance
management can be adjusted to ensure they stay on course. This understanding
informed strategic decision to acquire BestOutcome in June 2023, providing
greater opportunities for our customers and widening our total addressable
market.
BestOutcome is a profitable, high quality SaaS business and leading UK
provider of easy-to-use, highly configurable, scalable Project Portfolio
Management (PPM) software. It strengthens our Building Lifecyle portfolio in
line with Eleco's growth strategy to enhance its predictable recurring revenue
(alongside our SaaS transition) and to invest in synergistic software products
and technologies. The incumbent directors and owners of BestOutcome have
reinvested profits into doubling its world-class development team over the
last few years, enabling a highly secure and practical solution for planning
and managing programmes for customers in public and private sectors. The
integration process is already progressing well.
During H1 2023, Eleco sold Eleco Software GmbH, the German 'ARCON'
architectural CAD business, a non-core operation.
Business developments, operations and performance
We revisited our growth strategy in the US and reinitiated our approach to
direct sales in April, targeting general contractors in the US and while our
resellers commenced the SaaS transition. The customer interest and increased
level of new customers provided confidence to incrementally investing in our
US operation, introducing marketing and sales resources in Q2 and a finance
resource in Q3.
The Group is proud to partner with the C-Tech Club - a networking group of
over 386 founders and CEOs of construction technology start-ups - and in May
2023, we sponsored the C-Tech Start-Up Village at the Digital Construction
Week (DCW) 'Innovation in the Built Environment' event in London's Excel
Centre.
At DCW, we announced the reintroduction of the widely recognised and respected
Asta product brand in response to customer feedback and in conjunction with
the release of the lean planning module, Asta Connect, and Version 17 of Asta
Powerproject. Asta now covers the whole suite of broader project scheduling
solutions from end-to-end visibility of project changes and progress reporting
across organisations and locations, to on-site task updates.
The Leadership team continued to evolve our technology roadmap to drive
targeted M&A search and to continue to steer our investment in our
innovative software solutions. Several product development initiatives are
underway, including those focusing on document and data management, our
customer portal, the Elecoverse, as well as modularisation and enhancements in
our core offerings.
Though we have been using Artificial Intelligence (AI) and Machine Learning
(ML) in a number of our solutions for many years, for example in our Veeuze
visualisation configurators, we have entered a new phase in this development.
We have recently entered into a strategic partnership with Nodes & Links
where we will draw upon their cumulative AI investments to offer enhanced
functionality as a next-gen enabler to our mutually held end-customers.
We are also pleased that Elecosoft has obtained the sought-after ISO
27001/27002 certifications in its continued commitment to customer data
security in the UK. ISO 27001 Information Security Management standard (ISMS)
details the requirements for businesses to securely manage information assets
and data to an internationally recognised standard and 27002 has the detailed
controls that back this up. It provides a robust approach for managing assets
such as customer and employee details, intellectual property, financial
information, third-party data, and reducing the risks of breaches and
cybercrime.
As previously highlighted, many companies in SaaS transitions see significant
reductions in revenues, but the Group broadly maintained revenues and in this
first half of 2023, delivered a slight increase over H1 2022. Total recurring
revenues increased by 18 per cent (H1 2022: 9 per cent; and against 10 per
cent for 2022 as a whole). Annualised recurring revenues at 30 June also grew
18 per cent; organic growth rates for continuing operations' for the period
showed a 21 per cent rise for total recurring revenue and 24 per cent increase
for annualised recurring revenue.
These revenue growth levels are testament to the strength of our customer
software offerings. Within this total, we have seen a reduction in service
revenues due to macroeconomic market pressures, which has caused purchasing
delays in particular with our CAD and Visualisation solutions. Revenues in
Germany have reduced following the disposal of our non-core German ARCON
business in February 2023. Furthermore there was a reduction in Scandinavian
revenues from the planned impact of the end-of-life of the Group's Memmo and
Sitecon products, and the announced end-of-life of a third-party product
resold in Sweden.
The move by our customers from upfront and one-off perpetual licences to
high-quality subscription and SaaS licences where revenues are recognised over
time, set against an operating cost base subject to current inflationary
factors, impacted profitability, as anticipated. Nevertheless, with the
benefit of the profit on disposal of the ARCON business, Adjusted Profit
Before Taxation of £1.8m, adjusted for acquisition costs and share based
payments was as anticipated (H1 2022: Adjusted Profit Before Taxation of
£2.0m). With a lower tax charge, Adjusted earnings per share was 1.7 pence
per share (H1 2022: 1.9 pence per share).
Underlying cash generation remains strong, despite the impact of the SaaS
transition, with free cash flow of £1.8m (H1 2022: £2.1m). The overall cash
balance of £9.4m (£11.3m at 30 June 2022; £12.5m at 31 December 2022) is
after a net cash consideration for BestOutcome of £3.5m and an increased
final dividend and one-off special dividend payments made in the first half
totalling £0.9m (H1 2022: £0.3m).
Appointments
We were pleased to welcome David Hughes as Regional Managing Director, UK in
March of this year, with his extensive background in go-to-market and customer
success through SaaS transitions, drawing on his time as Managing Director at
Excitech, the former largest Autodesk reseller in the UK.
Mark Chapman also joined as Head of Innovation in April of this year, bringing
with him a wealth of experience as a construction technology innovator and
leader, with almost 30 years of planning and delivering civil, building, rail
and marine projects internationally, as well as advising companies of all
sizes on the wider adoption of digital technology.
Summary
We continue to successfully execute on our growth strategy. We are the trusted
technology partner for our customers, who increasingly look to us to help them
solve their challenges and provide certainty for the built environment. I am
proud of our world-class team of talented colleagues, their energy, collective
culture, enthusiasm and determination to drive our success into the future.
Eleco is a "Great Place to Work".
Although some customers are belt-tightening due to macroeconomic pressures, we
are extremely well-positioned within our markets with an established and loyal
customer base, outstanding technology, positive market growth trends and
drivers, and a clear customer-focussed growth strategy. We are very pleased
with our recent acquisition of BestOutcome, which, through its integration
into the Eleco family, strengthens the existing Building Lifecycle offering
and further builds our SaaS recurring revenue portfolio with a wider, more
diverse customer base. We shall continue to identify appropriate acquisitions
that will strengthen our customer relationships, complement our technological
innovation, extend our geographic capabilities, and further enhance our
recurring revenues and overall financial performance.
Eleco is fundamentally delivering on its SaaS strategy which will bring
further significant operational and financial benefits. We remain focussed on
the continued growth of organic recurring revenues, supplemented by further
inorganic growth opportunities. We are confident in continued progress and
positive momentum for the future, underpinned by our current trading tracking
in line with expectations for the full year.
Jonathan Hunter
Chief Executive Officer
11 September 2023
Condensed Consolidated Income Statement
for the financial period ended 30 June 2023
Six months to 30 June Year ended
2023 2022 31 December
(unaudited) (unaudited) 2022
Notes £'000 £'000 £'000
Revenue 3, 4 13,486 13,435 26,566
Cost of sales (1,440) (1,607) (3,087)
Gross profit 12,046 11,828 23,479
Amortisation and impairment of intangible assets (844) (744) (1,596)
Acquisition expenses and stamp duties (262) - -
Share-based payments (148) (69) (201)
Other selling and administrative expenses (9,722) (9,221) (18,699)
Selling and administrative expenses (10,976) (10,034) (20,496)
Operating profit 4, 5 1,070 1,794 2,983
Finance income / (expense) 6 35 (61) (39)
Gain on business disposal 16 150 - -
Profit before tax 1,255 1,733 2,944
Tax (236) (394) (549)
Profit for the period 1,019 1,339 2,395
Attributable to:
Equity holders of the parent 1,019 1,339 2,395
Earnings per share (pence per share)
Basic earnings per share 7 1.2p 1.6p 2.9p
Diluted earnings per share 7 1.2p 1.6p 2.9p
Condensed Consolidated Statement of Comprehensive Income
for the financial period ended 30 June 2023
Six months to 30 June Year ended
2023 2022 31 December 2022
(unaudited) (unaudited) £'000
£'000 £'000
Profit for the period 1,019 1,339 2,395
Other comprehensive income/(expense):
Items that will be reclassified subsequently to profit or loss:
Translation differences on foreign operations
(376) (115) (107)
Other comprehensive (loss) net of tax (376) (115) (107)
Total comprehensive income for the period 643 1,224 2,288
Attributable to:
Equity holders of the parent 643 1,224 2,288
Condensed Consolidated Statement of Changes in Equity
for the financial period ended 30 June 2023
Share capital Share Merger reserve Translation Other Retained
£000 Premium £000 Reserve Reserve earnings Total
£000 £000 £000 £000 £000
At 1 January 2023 2,406 1,002 (386) 196 21,792 25,842
832
Dividends - - - - (889) (889)
-
Share-based payments - - - 148 - 148
-
Elimination of exercised share-based - - - (6) 6 -
-
Payments
12 - - - - 12
Issue of share
capital
-
Transactions with owners 12 - - 142 (883) (729)
-
Profit for the period - - - - 1,019 1,019
-
Other comprehensive income/(expense):
Exchange differences on translation of net
investments in foreign operations - - (376) - - (376)
-
Total comprehensive income for the period - - (376) - 1,019 643
-
At 30 June 2023 (unaudited) 2,418 1,002 (762) 338 21,928 25,756
832
Share Share Merger Translation Other Retained
Capital Premium Reserve Reserve Reserve Earnings Total
£000 £000 £000 £000 £000 £000
At 1 January 2,406 1,002 (279) (5) 19,890 23,846
2022
832
Dividends - - - - (329) (329)
-
Share-based - - - 69 - 69
payments
-
Elimination of exercised - - - (69) 69 -
share-based
-
payments
Transactions with - - - - (260) (260)
owners
-
Profit for the - - - - 1,339 1,339
period
-
Other comprehensive income/(expense):
Exchange differences on translation of net investments in foreign operations
- (115) - - (115)
- -
Total comprehensive income for the period - (115) - 1,339 1,224
- -
At 30 June 2022 (unaudited) 832 2,406 1,002 (394) (5) 20,969 24,810
Share Share Merger Translation Other Retained
capital premium reserve reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 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 period - - - - - 2,395 2,395
Other comprehensive income/(expense):
Exchange differences on translation of net investments in foreign operations
- - - (107) - - (107)
Total comprehensive income for the period - - - (107) - 2,395 2,288
At 31 December 2022 832 2,406 1,002 (386) 196 21,792 25,842
Condensed Consolidated Balance Sheet
at 30 June 2023
30 June
2023 2022 31 December
(unaudited) (unaudited) 2022
Notes £'000 £'000 £'000
Non-current assets
Goodwill 18,834 15,247 15,337
Other intangible assets 9 8,188 6,713 6,591
Property, plant and equipment 947 728 745
Right-of-Use assets 982 1,436 1,479
Deferred tax assets 85 85 51
Total non-current assets 29,036 24,209 24,203
Current assets
Inventories 89 26 44
Trade and other receivables 4,512 3,746 4,057
Current tax assets 288 305 356
Assets of disposal group held for sale 10 - 842 794
Cash and cash equivalents 9,410 10,926 12,137
Total current assets 14,299 15,845 17,388
Total assets 43,335 40,054 41,591
Current liabilities
Lease liabilities (467) (402) (467)
Trade and other payables (1,788) (1,748) (1,523)
Current tax liabilities (109) - -
Liabilities of disposal group held for sale 10 - (184) (428)
Accruals and deferred income 12 (12,025) (9,831) (10,305)
Total current liabilities (14,389) (12,165) (12,723)
Non-current liabilities
Lease liabilities (1,002) (1,216) (1,215)
Deferred tax liabilities (2,162) (1,837) (1,785)
Non-current provisions (26) (26) (26)
Total non-current liabilities (3,190) (3,079) (3,026)
Total liabilities (17,579) (15,244) (15,749)
Net assets 25,756 24,810 25,842
Equity
Share capital 832 832 832
Share premium account 2,418 2,406 2,406
Merger reserve 1,002 1,002 1,002
Translation reserve (762) (394) (386)
Other reserve 338 (5) 196
Retained earnings 21,928 20,969 21,792
Equity attributable to shareholders of the parent 25,756 24,810 25,842
Condensed Consolidated Statement of Cash Flows
for the financial period ended 30 June 2023
Six months to 30 June Year ended
2023 2022 31 December
(unaudited) (unaudited) 2022
Notes £'000 £'000 £'000
Cash flows from operating activities
Profit before taxation 1,255 1,733 2,944
Net finance costs (35) 61 39
Depreciation charge 284 271 621
Amortisation charge 844 744 1,596
Profit on sale of property, plant and equipment (15) (6) (24)
Gain on business disposal 16 (150) - -
Share-based payment charge 148 69 201
Acquisition expenses 262 - -
Decrease in provisions - (25) (25)
Cash generated in operations before working capital movements 2,587 2,847 5,352
(Increase)/Decrease in trade and other receivables (428) 498 193
Increase in inventories and work in progress (45) (10) (27)
Increase in trade and other payables and accruals and deferred income 706 206 755
Cash generated in operations 2,820 3,541 6,273
Interest received/(paid) 73 38 (27)
Net income tax paid (131) (470) (719)
Net cash inflow from operating activities 2,762 3,109 5,527
Investing activities
Purchase of intangible assets (996) (902) (1,631)
Purchase of property, plant and equipment (35) (134) (158)
Acquisition of subsidiary undertakings net of cash acquired 17 (3,827) - -
Proceeds from sale of property, plant, equipment and intangible assets 21 15 53
Net proceeds on disposal of subsidiary undertakings 511 - -
Net cash outflow from investing activities (4,326) (1,021) (1,736)
Financing activities
Repayment of bank loans
- (101) (102)
Repayments of leasing liabilities (270) (265) (556)
Issue of share capital 12 - -
Equity dividends paid (889) (329) (493)
Net cash (outflow) from financing activities (1,147) (695) (1,151)
Net (decrease)/increase in cash and cash equivalents (2,711) 1,393 2,640
Cash and cash equivalents at beginning of period 12,538 10,055 10,055
Effects of changes in foreign exchange rates (417) (110) (157)
Cash and cash equivalents at end of period 9,410 11,338 12,538
Notes to the Condensed Consolidated Interim Financial Information
1. General information
The Company is a public limited company incorporated and domiciled in the UK.
The address of its registered office is Dawson House, 5 Jewry Street, London,
EC3N 2EX.
The Company is listed on AIM, a market operated by the London Stock Exchange
plc.
The condensed consolidated interim financial information does not constitute
statutory accounts as defined in section 435 of the Companies Act 2006. The
Group's consolidated financial statements for the year ended 31 December 2022
have been filed at Companies House. The audit report was not qualified and did
not contain a reference to any matter to which the auditor drew attention by
way of emphasis and did not contain a statement under section 498(2) or
section 498(3) of the Companies Act 2006.
2. Basis of preparation
The condensed consolidated interim financial statements for the six months to
30 June 2023 have been prepared in accordance with the accounting policies
which will be applied in the twelve months financial statements to 31 December
2023. These accounting policies will be drawn up in accordance with applicable
law and UK-adopted International Accounting Standards (UK-IAS) that are
effective at 31 December 2023.
The condensed consolidated interim financial statements are unaudited. They do
not include all the information and disclosures required in the annual
financial statements or for full compliance with UK-IAS, and therefore should
be read in conjunction with the Group's published financial statements for the
year ended 31 December 2022. The comparative figures for the year ended 31
December 2022 are not the Company's statutory accounts for that period but
have been extracted from these accounts.
The Directors, having considered the Group's current financial resources, have
concluded that they are adequate for the Group's present requirements.
Therefore, the condensed consolidated interim financial information has been
prepared on the going concern basis.
Estimates
Application of the Group's accounting policies in preparing condensed
consolidated interim financial statements requires management to make
judgements and estimates that affect the reported amount of assets and
liabilities, revenues and expenses. Actual results may ultimately differ from
these estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements for the year ended 31
December 2022 with the addition of fair values acquisition accounting for
BestOutcome Ltd.
Risks and uncertainties
A summary of the Group's principal risks and uncertainties was set out on
pages 16 to 19 of the 2022 Annual Report and Accounts. The Board considers
these risks and uncertainties are still relevant to the current financial year
and the impact of changes in the UK economy is reviewed in the Chairman's
statement contained in this report.
The Interim Report was approved by the Directors on 11 September 2023.
3. Revenue
Revenue disclosed in the income statement is analysed as follows:
Six months to 30 June Year to 31 December
2023 2022 2022
£'000 £'000 £'000
Perpetual licences 1,028 2,247 3,606
Recurring revenue - other licences 9,692 8,204 16,927
Services income 2,766 2,984 6,033
13,486 13,435 26,566
Revenue is recognised for each category as
follows:
· Perpetual licences - recognised at the point of transfer (delivery)
of the licence to a customer.
· Recurring revenue: other licences: 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.
4. Segmental information
Operating Segments
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the chief
operating decision makers 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. Consequently,
the Executive Directors review the three revenue streams, but as the costs are
not recorded in the same way, the information is presented as one segment and
as such the information is presented in line with management information.
Year ended 31 December
Six months to 30 June
2023 2022 2022
£'000 £'000 £'000
Revenue 13,486 13,435 26,566
Adjusted EBITDA 2,608 2,878 5,401
Share-based payments (148) (69) (201)
Amortisation and impairment of purchased intangible assets (594) (494) (1,097)
Depreciation (284) (271) (621)
Adjusted operating profit 1,582 2,044 3,482
Amortisation of acquired intangible assets (250) (250) (499)
Acquisition expenses and stamp duties (262) - -
Operating profit 1,070 1,794 2,983
Net finance income/(cost) 35 (61) (39)
Gain on business disposal 150 - -
Segment profit before tax 1,255 1,733 2,944
Tax (236) (394) (549)
Segment profit after tax 1,019 1,339 2,395
Operating profit 1,070 1,794 2,983
Amortisation of intangible assets 844 744 1,596
Depreciation charge 284 271 621
EBITDA 2,198 2,809 5,200
EBITDA 2,198 2,809 5,200
Acquisition expenses 262 - -
Share-based payments 148 69 201
Adjusted EBITDA 2,608 2,878 5,401
Geographical, product and sales channel information
Revenue by geographical segment represents revenue from external customers
based upon the geographical location of the customer.
Year ended 31 December
Six months to 30 June
2023 2022 2022
£'000 £'000 £'000
UK 5,676 5,276 10,263
Scandinavia 3,035 3,354 6,388
Germany 1,767 2,180 4,449
USA 570 594 1,101
Rest of Europe 2,123 1,742 3,808
Rest of World 315 289 557
13,486 13,435 26,566
Revenue by product group represents revenue from external customers.
Six months to 30 June Year ended 31 December
2023 2022 2022
£'000 £'000 £'000
Revenue from software & related services:
Building Lifecycle 9,328 8,883 17,248
CAD & Visualisation 3,499 3,638 7,432
Other - third party software 659 914 1,886
13,486 13,435 26,566
The Group utilises resellers to access certain markets. Revenue by sales
channel represents revenue from external customers.
Six months to 30 June Year ended 31 December
2023 2022 2022 £'000
£'000 £'000
Direct 12,958 12,749 25,317
Reseller 528 686 1,249
13,486 13,435 26,566
5. Operating profit
Operating profit for the period is after charging the following items:
Year ended 31 December
Six months to 30 June
2023 2022 2022
£'000 £'000 £'000
Software product development expense 1,030 887 1,526
Depreciation of property, plant and equipment 76 98 147
Depreciation of Right-of-Use assets 208 173 474
Amortisation of acquired intangible assets 250 250 499
Amortisation of other intangible assets 594 494 1,097
Share-based payments 148 69 201
Profit on disposal of property, plant and equipment (15) (6) (24)
Foreign exchange losses/(gains) 39 10 (206)
Acquisition expenses and stamp duties 262 - -
6. Net finance cost
Finance income and costs disclosed in the income statement is set out below:
Six months to 30 June Year ended 31 December
2023 2022 2022
£'000 £'000 £'000
Finance income:
Bank and other interest receivable
60 - 20
Finance costs:
Bank overdraft and loan interest - (1) (4)
Inputted interest expense for leasing arrangements (25) (60) (55)
Total net finance income/(cost) 35 (61) (39)
7. Basic and diluted earnings per share
The calculations of the earnings per share are based on profit after tax
attributable to the ordinary equity shareholders of the Company and the
weighted average number of shares in issue for the reporting period.
Six months to 30 June
2023 2022 Year to 31 December 2022
Profit Weighted Profit Weighted Profit Weighted
attributable average attributable average attributable average
to number of to number of to number of
shareholders shares EPS shareholders shares EPS shareholders shares EPS
(£'000) (millions) (p) (£'000) (millions) (p) (£'000) (millions) (p)
Basic earnings per share 1,019 82.3 1.2 1,339 82.2 1.6 2,395 82.2 2.9
Diluted earnings per share
1,019 83.7 1.2 1,339 82.7 1.6 2,395 83.0 2.9
Adjusted earnings per share
1,433 82.3 1.7 1,541 82.2 1.9 2,799 82.2 3.4
Shares held by the Employee Share Ownership Trust are excluded from the
weighted average number of shares in the period. Adjusted profit attributable
to shareholders is reconciled to reported profit attributable to shareholders
in note 14.
8. Dividends
Interim dividend
The Directors have recommended an interim dividend of 0.25 pence per ordinary
share (2022: interim dividend of 0.20 pence per ordinary share).
Dividends paid in the period
Dividends paid in the six months to 30 June 2023, consisting of a final and
special dividend, were 1.08 pence per ordinary share (2022: 0.40 pence per
ordinary share). Cash dividends of £889,000 (2022: £329,000) were paid in
the six months to 30 June 2023 as follows:
Six months to 30 June Year to 31 December
2023 2023 2022 2022 2022 2022
Ordinary Shares per share £'000 per share £'000 per share £'000
Declared and paid during the year
Interim - current year 0.20 164
- -
Special - previous year 0.58 477 - - - -
Final - previous year 0.50 412 0.40 329 0.40 329
1.08 889 0.40 329 0.60 493
9. Other intangible assets
Other intangible assets comprise capitalised development costs, acquired
customer relationships and purchased intangible assets. Additions in the six
months to 30 June 2023 represent purchased intangible assets of £1,448,000
relating to intangible assets recognised on acquisition of BestOutcome (see
Note 17) (2022 half year: £164,000) and internal development costs
capitalised of £996,000 (2022 half year: £738,000). Internal development
relates to software development projects that meet the accounting policy
criteria for capitalisation. At the year ended 31 December 2022, purchased
intangible assets comprised £81,000 of additions and £1,550,000 of internal
development cost additions.
10. Disposal Group held for sale
In line with our previously announced strategy to focus on our core customer
segments and businesses, we held our Eleco Software GmbH, the German ARCON
architectural CAD business, for sale at the year end in accordance with the
provisions of IFRS 5. Assets of the disposal group held for sale.
The table below reflects assets of the disposal group held for sale measured
at the lower of carrying amount and fair value less costs to sell in the
Consolidated Balance Sheet. There was no revaluation from reclassification
required as a result of this business classification under IFRS 5. Effective 1
January 2023, the business was disposed of to an Austrian buyer (see note 16).
At 30 June 2023 At 31 December
2023 2022 2022
(unaudited) (unaudited)
Assets Held for Sale £'000 £'000 £'000
Goodwill - 336 336
Other intangible assets - 1 2
Property, plant and equipment - 9 9
Right-of-Use assets - 74 19
Trade and other receivables - 10 27
Cash and cash equivalents - 412 401
Total Assets Held for sale - 842 794
Liabilities of disposal group held for sale
Liabilities classified as held for sale on the face of the Consolidated
Balance Sheet are as follows:
Six months to 30 June Year ended 31 December
2023 2022 2022
(unaudited) (unaudited)
Liabilities Held for Sale £'000 £'000 £'000
Lease liabilities - (76) (19)
Trade and other payables - (53) (350)
Accruals and deferred income - (55) (59)
Total Liabilities Held for Sale - (184) (428)
11. Cash and borrowings
The net cash position of the Group as at 30 June 2023 is set out below:
At 30 June At
31 December
2023 2022 2022
£'000 £'000 £'000
Cash and cash equivalents 9,410 11,338 12,538
Bank loans - - -
Lease liabilities (1,469) (1,693) (1,682)
7,941 9,645 10,856
The UK banking facilities are with Barclays Bank plc and the Group facilities
comprise a £1.0m overdraft facility, carrying an interest rate of 2.75
percent over base rate (undrawn at 30 June 2023, 31 December 2023 and 30 June
2022).
12. Accruals and deferred income
At 31 December
At 30 June
2023 2022 2022
£'000 £'000 £'000
Accruals 2,425 2,570 2,518
Deferred income 9,600 7,261 7,787
12,025 9,831 10,305
Deferred income represents income from the sale of software subscription
licences, SaaS licences and from software maintenance and support contracts
and is taken to revenue in the income statement on a straight-line basis in
line with the service and obligations over the term of the contract.
13. Related party disclosures
Transactions between Group undertakings, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
The Directors of the Company had no material transactions with the Company
during the period, other than a result of service agreements.
14. Additional performance measures
The Group uses adjusted figures, which are not defined by generally accepted
accounting principles ("GAAP") such as UK-IAS. 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 UK- IAS financial measures, in evaluating the operating performance
of the Group.
Six months to 30 June Year ended 31 December
2023 2022 2022
£'000 £'000 £'000
Operating profit 1,070 1,794 2,983
Acquisition expenses and stamp duties 262 - -
Amortisation of acquired intangible assets 250 250 499
Adjusted operating profit 1,582 2,044 3,482
Profit before tax 1,255 1,733 2,944
Acquisition expenses and stamp duties 262 - -
Amortisation of acquired intangible assets 250 250 499
Adjusted profit before tax 1,767 1,983 3,443
Tax charge (236) (394) (549)
Acquisition expenses and stamp duties (50) - -
Amortisation of acquired intangible assets (48) (48) (95)
Adjusted tax charge (334) (442) (644)
Profit after tax 1,339 2,395
1,019
Acquisition expenses and stamp duties 212 - -
Amortisation of acquired intangible assets 202 202 404
Adjusted profit after tax 1,433 1,541 2,799
Cash generated in operations 2,820 3,541 6,273
Purchase of intangible assets (996) (902) (1,631)
Purchase of property, plant and equipment (35) (134) (158)
Acquisition expenses and stamp duties 262 - -
Adjusted operating cash 2,051 2,505 4,484
flow
Adjusted operating cash flow 2,051 2,505 4,484
Net interest received/(paid) 73 38 (27)
Tax paid (131) (470) (719)
Proceeds from disposal of PPE 21 15 53
Acquisition expenses and stamp duties (262) - -
Free cashflow 1,752 2,088 3,791
15. Exchange rates
The following exchange rates have been applied in preparing the condensed
consolidated financial statements:
Income Statement Balance sheet
six months to 30 June as at 30 June
Year to 31 December 2022
Income Balance
2023 2022 2023 2022 Statement sheet
Swedish Krona to Sterling 13.00 12.41 13.71 12.45 12.46 12.61
Euro to Sterling 1.14 1.19 1.16 1.16 1.17 1.13
US Dollar to Sterling 1.24 1.30 1.27 1.22 1.24 1.21
16. Disposal of subsidiary
The Company announced on 20(th) February 2023 the sale of its wholly owned
subsidiary Eleco Software GmbH, the German Arcon architectural CAD business
("Arcon") to FirstInVision GesmbH, an Austrian architectural software
business, for a total consideration of €600,000, effective 1 January 2023.
Following deduction of net assets, costs relating to the disposal and
recycling of reserves, a pre-tax gain on disposal of £150,000 was recognised
in the period.
17. Acquisition of BestOutcome Ltd
The Company announced on 27 June 2023 that it has acquired 100 per cent of
Buckinghamshire-based BestOutcome Limited ("BestOutcome"), a UK provider of
simple, scalable Project Portfolio Management (PPM) software, for an initial
consideration of £4.825m in cash (and an adjusted initial value of £3.525m
on a cash-and-debt-free equivalent with £1.3m of cash in the business at the
time of the acquisition) ("the Acquisition"). The Acquisition is exclusively
financed by the Company's internal cash resources.
The transaction includes a potential deferred outflow of £0.5m by the end of
the year ended 31 December 2024 with this remuneration subject to the
BestOutcome management team attaining specific performance targets in 2023 and
2024.
BestOutcome's core products PM3 and PM3 Time are used to manage strategic
programmes and multiple portfolio management projects. The Acquisition
strengthens Eleco's Building Lifecycle portfolio, representing further
progress in Eleco's growth strategy to enhance its predictable recurring
revenue and to increase value to its shareholders by investing in synergistic
software products and technologies, scalable and building on and with its
existing Building Lifecycle portfolio. BestOutcome has a particular strength
in winning public sector business, including the NHS, universities and county
councils. This gives Eleco Group a greater foothold in the wider built
environment, while also complementing its private sector exposure.
For the above reasons, combined with the anticipated profitability of
BestOutcome's products in other Group markets, synergies arising, plus the
ability to hire the assembled workforce of BestOutcome (including the founders
and management team), the Group understandably paid a premium over the
acquisition net assets, giving rise, aside from other valued intangibles
(principally values of brands), to goodwill. All intangible assets, in
accordance with IFRS3 Business Combinations, were recognised at their
provisional fair values on acquisition date, with the residual excess over net
assets being recognised as brands and goodwill. Intangibles arising from the
acquisition consist of brand values, and along with an assessment of other
potential intangibles such as customer relationships, intellectual property
and R&D, have been independently valued by professional advisors.
The following table summarises the consideration and provisional fair values
of assets acquired and liabilities assumed at the date of acquisition:
£'000
Intangible fixed assets:
Brands 770
Development expenditure 675
Other intangibles 3
Property, plant and equipment 18
Trade receivables and prepayments 179
Cash and cash equivalents 1,266
Trade and other payables (162)
Deferred income (1,047)
Corporation tax (72)
Deferred tax liabilities (342)
Net assets acquired 1,288
Goodwill 3,543
Acquisition cost 4,831
There are no non-controlling interests in relation to the BestOutcome Ltd
acquisition. Fair values in the above table have only been determined
provisionally and may be subject to change in the light of any subsequent new
information becoming available in time. The review of the fair value of assets
and liabilities acquired will be completed within twelve months of the
acquisition date. Receivables at the acquisition date are expected to be
collected in accordance with the gross contractual amounts.
The acquisition cost was satisfied by:
£'000
Cash 4,831
Share consideration -
Total consideration 4,831
The net cash outflow arising on acquisition was:
£'000
Cash consideration paid 4,831
Acquisition related costs 262
Cash and cash equivalents within the BestOutcome business on acquisition (1,266)
Total net cash outflow on acquisition 3,827
Other costs relating to the acquisition have not been included in the
consideration cost. Directly attributable acquisition costs include external
legal and accounting costs incurred in compiling the acquisition legal
contracts and the performance of due diligence activity and the fair value
exercise, together with stamp duty, and total £262,000. These costs have been
charged in distribution and administrative expenses in the consolidated income
statement.
BestOutcome Ltd, in common with other Group companies, has a 31 December
calendar year end. In the preceding financial year 2022 BestOutcome Ltd
generated revenue of £2.0m and net profit before taxation of £0.2m based on
figures and accounting policies prior to Eleco plc Group control.
Had the acquisition taken place from the start of the Group's financial year
(from 1 January 2023) and based on figures and accounting policies prior to
Eleco plc Group control, management estimate that BestOutcome Ltd would have
contributed revenue of £1.0m and profit before taxation of £0.2m to the
Group results in this first half year.
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