REG - Eleco PLC - Final Results
28/03/2023 07:15
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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 £18.2m (2021: £16.0m)
· Total Recurring Revenue (TRR)** up 10% to £16.9m (2021: £15.4m),
representing 64% of total revenue (2021: 56% of total revenue)
· Revenues of £26.6m (£27.0m in constant currency terms) in line with
market expectations and similar to the prior year (2021: £27.3m). 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 £5.2m and Profit Before Taxation of £2.9m, given the impact of
the SaaS transition (2021: £7.2m and £3.9m 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 £12.5m (2021: net cash of £10.0m)
· 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® 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:
Eleco plc +44 (0)20 7422 8000
Jonathan Hunter, Chief Executive Officer
Neil Pritchard, Chief Financial Officer
finnCap Ltd +44 (0)20 7220 0500
Geoff Nash/ Emily Watts/Seamus Fricker (Corporate Finance)
Charlotte Sutcliffe / Harriet Ward (Equity Capital Markets)
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 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
(http://www.elecosoft.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 £18.2m at
31 December 2022 from £16.0m at 31 December 2021. Total Recurring Revenue
(TRR) increased 10 per cent to £16.9m (2021: £15.4m), 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 (£26.6m, or £27.0m on a constant currency
basis) is only marginally down on 2021 (£27.3m). 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 €600,000. 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® 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 £12.5m (including cash held within the held for sale business at the
year-end) at 31 December 2022 (31 December 2021: £10.1m). 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® 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 £16.0m at 31
December 2021 to £18.2m 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 €600,000. 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® 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® 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®. 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 £18.2m (£16.0m at 31 December 2021). Total Recurring
Revenues (TRR), a key metric for the Group, increased to £16.9m, or 64 per
cent of total revenue in 2022, representing a 10 per cent uplift on the
comparable period (£15.4m 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 £26.6m (£27.0m in constant currency terms) (2021: £27.3m). This,
together with profit before tax for the period of £2.9m (2021: £3.9m), 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 £6.0m
(2021: £6.0m).
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 £7.8m (2021: £7.1m).
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 £12.5m as at 31 December 2022, up from £10.1m 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
£'000 £'000
Revenue 26,566
27,344
Cost of sales (3,087) (2,754)
Gross profit 23,479 24,590
Amortisation and impairment of intangible 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: 2,395
Equity holders of the parent 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
£'000 £'000
Profit for the year 2,395 2,731
Other comprehensive expense:
Items that will be reclassified subsequently to profit or loss: (107)
Translation differences on foreign operations (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
£'000 £'000 £'000 £'000 £'000 £'000 £'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 2,395 2,288
- - - (107) -
At 31 December 2022 832 2,406 1,002 (386) 196 21,792 25,842
Consolidated Balance Sheet
At 31 December 2022
2022 2021
£'000 £'000
Non-current assets 15,337
Goodwill 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 sale 794 -
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
£'000 £'000
Cash flows from operating activities 2,944
Profit before taxation for the year 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 (1,631)
Additions of intangible assets (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
12,137
Cash and cash equivalents comprise:
Cash and short-term deposits 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
£'000 £'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 £7.1m (2021: £6.4m) 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
£'000 £'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
£'000 £'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
£'000 £'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
£'000 £'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
£'000 £'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
£'000 £'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
£'000 £'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: 134 83
The audit of the parent company and consolidated financial statements
Fees payable to the Company's auditor and its associates for other services: 119
The audit of the Company's subsidiaries 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
£'000 £'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
£'000 £'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 average Weighted average
Net profit Net profit
attributable to shareholders number of attributable to shareholders number of
shares EPS shares EPS
Ordinary Shares £'000 (millions) (pence) £'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 £493,000 (2021: £493,000) were
paid during the year:
2022 2021
pence per pence per 2022 2021
Ordinary Shares share share £'000 £'000
Declared and paid during the year 0.20 164
Interim - current year 0.20 164
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
€600,000. 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 €600,000 consideration is to be satisfied in cash, with €550,000
immediately payable on completion, and €25,000 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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