REG - Eleco PLC - Half-year Report
10/09/2024 07:00
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RNS Number : 5037D Eleco PLC 10 September 2024
RNS
10 September 2024
Eleco Plc
("Eleco", the "Group" or the "Company")
Interim Results
Interim Results for the six months ended 30 June 2024
The Board of Eleco plc (AIM: ELCO), the specialist software provider for the
built environment, is pleased to announce its interim results for the six
months ended 30 June 2024, based on unaudited management accounts:
Financial highlights
Revenues
· Annualised Recurring Revenue (ARR)(1 )up 31% to £25.8m (H1 2023:
£19.7m)
· Total Recurring Revenue (TRR)(2) of £12.0m (H1 2023: £9.7m), an
increase of 24%, representing 74% of total revenue (H1 2023: 72%)
· Total revenue increased by 21% to £16.3m (H1 2023: £13.5m) and at
constant currency £16.5m, or increase of 12% before revenue contribution from
acquisitions
Profitability
· Gross margins: 90.5% (H1 2023: 89.3%) and gross profit £14.7m (H1
2023: £12.0m)
· EBITDA(3): up 30% to £3.0m (H1 2023: £2.3m)
· Operating profit: up 36% to £1.5m (H1 2023: £1.1m)
· Profit before taxation (PBT): £1.6m (H1 2023: £1.3m, including ARCON
gain on disposal), an increase of 23%
· Profit after taxation (PAT): £1.3m (H1 2023: £1.0m), an increase of
30%
· Basic earnings per share: 1.5p (H1 2023: 1.2p), an increase of 25%
· Adjusted EBITDA(4): £3.3m (H1 2023: £2.6m), an increase of 27%
· Adjusted profit before taxation(4): £2.2m (H1 2023: £1.8m), an
increase of 22%
· Adjusted profit after taxation(4): £1.7m (H1 2023: £1.4m), an
increase of 21%
· Adjusted basic earnings per share(4): 2.1p (H1 2023: 1.7p), an
increase of 24%
Cash and dividend
· Cash as at 30 June 2024 was £12.0m (at 30 June 2023: £9.4m; at 31
December 2023: £10.9m) reflecting strong cash generation notwithstanding the
Vertical Digital acquisition consideration of £1.1m and an increased final
dividend payment of £0.5m (H1 2023: final dividend payment of £0.4m). The
Group remains free of debt.
· Interim dividend: 0.30p per share (H1 2023: 0.25p per share), an
increase of 20%
Operational highlights
M&A Strategy
· Acquisition and integration of Vertical Digital to enhance the Group's
technical capabilities to a multinational audience in April 2024, providing
agile and innovation software development, technical consulting and upskilling
solutions
Technology
· Asta Vision Live(TM) launched in May 2024 providing powerful multiple
project collaboration capabilities for planners and schedulers
· AstaGPT(TM), Generative AI support was developed in-house, and
launched in March 2024. Shortlisted for the Innovation of the Year at the
Digital Construction Awards 2024
Growth
· Record recurring revenue growth and record software year-on-year total
revenue growth
· Net revenue retention and net new customers progression
· Great Place to Work® certification achieved for all business units
that qualify
Jonathan Hunter, Chief Executive Officer of Eleco plc, said:
"I am proud to report strong momentum in Eleco's trading performance for the
first six months of the 2024 financial year, moving significantly ahead of the
first six months of 2023.
The impetus on organic growth has made Eleco a more resilient business with
greater revenue visibility and is expected to help the Group reach new heights
as positive momentum develops. As well as organic growth, we also continue
to focus on acquisitions, with our most recent, the Vertical Digital group of
companies in Romania ('Vertical Digital'), completed in mid-April 2024.
Our loyal customer base, customer centric culture and ongoing investment in
people and technology underpin our drive for growth and we are confident that
Eleco will maintain momentum and continue to take advantage of emerging
industry opportunities. We continue to trade in line with expectations."
(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. This ARR figure is calculated with the
inclusion of contributions from acquisitions as part of the Group business
going forward.
(2) TRR is defined as the recurring revenues from subscription licences,
contract values of annual support and maintenance, and SaaS contracts.
(3) EBITDA is defined as Earnings before Interest, Tax, Depreciation, and
Amortisation and Impairment of Intangible Assets.
(4) Adjusted measures are further defined in note 12.
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 +44 (0)20 7220 0500
Geoff Nash / Seamus Fricker (Corporate Finance)
Tim Redfern / 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, Vertical Digital and Veeuze from centres of
excellence in the UK, Sweden, Germany, the Netherlands, Romania and the USA.
The Company'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
I am delighted to report that Eleco has delivered an excellent set of interim
results, significantly ahead of H1 2023.
Eleco is well positioned to benefit from the built environment's ongoing
acceleration of technology adoption in fields including project delivery, cost
estimation and facilities management. This is a global trend as companies seek
to increase efficiency, strengthen risk management and in turn, improve
productivity.
Strategic Progress
Alongside improvements in the underlying performance of the core business, the
Group continues to expand its footprint inorganically.
Building on the divestment of the ARCON business and acquisition of
BestOutcome in 2023, the Group acquired the Romanian-based Vertical Digital
Group for £1.1m in April 2024. This added agile and enhanced R&D
capabilities for Eleco's innovation roadmaps as well as technical consultancy
for customers. We continue to identify and actively pursue potential M&A
opportunities in our chosen geographic and end-to-end customer offer.
Performance
H1 2024 builds on the improved business performance in 2023. As planned, we
delivered enhanced revenue and profitability.
Recurring revenues represented 74 per cent of total revenues in the period (H1
2023: 72 per cent). ARR (Annual Recurring Revenue) was up 31 per cent to
£25.8m (H1 2023: £19.7m). TRR (Total Recurring Revenue) increased by 24 per
cent to £12.0m (H1 2023: £9.7m). Total revenue increased by 21 per cent to
£16.3m (H1 2023: £13.5m) or 12 per cent, excluding revenue contribution from
acquisitions.
Showing improved operational leverage, Adjusted EBITDA increased by 27 per
cent to £3.3 million (H1 2023: £2.6m), with Adjusted profit before taxation
up 22 per cent to £2.2m (H1 2023: £1.8m). Adjusted EPS was 2.1 pence (H1
2023: 1.7 pence).
The Company also continues to enjoy strong cash generation, despite the
Vertical Digital acquisition and an increased final dividend payment to our
loyal shareholders in the period. Cash as at 30 June 2024 was £12.0m (at 30
June 2023: £9.4m; at 31 December 2023: £10.9m).
Environmental, Social & Governance (ESG)
I am pleased to report that we continue to make strides to both minimise our
own internal carbon footprint but also find ways to support our customers in
their journey to meet Net Zero. The ESG Implementation Team is progressing
internal measures and initiatives following on from our materiality
assessment.
While we expanded our Great Place to Work® certifications this year, we are
also undertaking further assessments of our employee offer and internal
training and progression. Likewise, we have updated some additional group
policies and work is underway to further enhance our risk-based governance
framework.
Employees
We continue to invest in senior leadership roles at both Group and subsidiary
company levels to support the next stage of Eleco's journey and its scaling up
ambitions.
Our employees, fostered by our Eleco-specific corporate culture, remain
central to our success and achievements. On behalf of the Board, my many
thanks go to them for their continued efforts, dedication and support.
Dividend
Eleco has a progressive and sustainable dividend policy. In line with the
continued success of the Group and its growth in profitability, the Board is
again increasing the interim dividend to 0.30 pence per share (H1 2024: 0.25
pence per share), a 20 per cent uplift. This interim dividend is payable on
4 October 2024 to shareholders on the Register on 20 September 2024, and the
ex-dividend date will be 19 September 2024.
Current trading and outlook
We have delivered significant improvements in operational and financial
business performance during H1 2024.
Our prospects are dynamic and exciting, and we are well positioned to further
deliver on our strategic plans via both inorganic and organic growth. We are a
high recurring revenue software business that is central to our customers'
success and delivers a level of predictable performance on behalf of our
shareholders.
Looking forward, we remain confident of continued international growth and the
Group continues to trade in line with market expectations for the full year
2024.
Mark Castle
Non-Executive Chairman
9 September 2024
CEO's Statement
Introduction
I am proud to report strong momentum in Eleco's trading performance for the
first six months of the 2024 financial year, moving significantly ahead of the
first six months of 2023.
The impetus on organic growth has made Eleco a more resilient business with
greater revenue visibility and is expected to help the Group reach new heights
as positive momentum develops. As well as organic growth, we also continue
to focus on acquisitions, with our most recent, the Vertical Digital group of
companies in Romania ('Vertical Digital'), completed in mid-April 2024.
Trading
The Group increased its revenue by 21% to £16.3m (H1 2023: £13.5m).
Excluding the effects of the BestOutcome acquisition, which took place after
the comparative period, we have delivered double digit growth with revenue
increasing by 12%, which is significantly higher than recent historic growth
levels.
Annualised Recurring Revenue (recurring revenue in the month of June 2024
multiplied by twelve) increased by a record 31 per cent to £25.8m (H1 2023:
£19.7m) and the Total Recurring Revenue (recurring revenue across the six
month period) increased a record 24 per cent to £12.0m (H1 2023: £9.7
million). Average ARR per customer and per licence improved in the period, as
did the average number of licences per customer.
Revenue growth was greater than growth in overheads (even including the cost
bases of acquisitions), such that margins improved and profits grew at a
higher rate than revenues.
Adjusted EBITDA increased by 27 per cent to £3.3m (H1 2023: £2.6m); with
Adjusted operating profit ahead by 29 per cent at £2.2m (H1 2024: £1.7
million); Adjusted profit before taxation up 22 per cent to £2.2m (H1 2023:
£1.8m) and Adjusted profit after taxation improving by 21 per cent to £1.7m
(H1 2023: £1.4m). Adjusted Earnings Per Share (EPS) at the period end was 2.1
pence (H1 2023: 1.7 pence), a 24 per cent rise.
Unadjusted measures of profitability showed similar improvements: EBITDA
increased by 30 per cent to £3.0m (H1 2023: £2.3 million); operating profit
improved by 36 per cent to £1.5m (H1 2023: £1.1m); profit before taxation
was ahead by 23 per cent to £1.6m (H1 2023: £1.3m); and profit after
taxation up 30 per cent to £1.3m (H1 2023: £1.0m). Basic EPS showed a 25
per cent increase at 1.5 pence per share (H1 2023: 1.2 pence per share).
The business continues to be cash generative, with the cash position of
£12.0m at 30 June 2024 (at 30 June 2023: £9.4m; at 31 December 2023:
£10.9m). This was despite the payment of £1.1m for the Vertical Digital
acquisition in April 2024 and increased dividend payments totaling £0.5m (H1
2023: final dividend payment of £0.4m).
Strategy
Eleco's purpose and mission is to solve the challenges of the built
environment through digital transformation by providing world-class software
to our customers who trust us as an established, proven and agile partner.
The Group is delivering this through a well-governed, profitable, scalable and
resilient operating business, which we refer to as the Growth Platform. The
Growth Platform underpins our three strategic pillars which are as follows:
· Go-to-Market
· Technology and Innovation
· Mergers and Acquisitions (M&A)
Go-to-Market
The Group continues to develop its Go-To-Market sales and marketing
capabilities, building on sales enablement and scaling initiatives undertaken
in 2023. Net revenue retention in the first six months was over 108 per cent
compared with 104 per cent for the 2023 year, with the total number of new
customers by value more than double that of existing customers lost by value.
The US Go-To-Market activity continues to demonstrate growth, with the first
six months of 2024 being ahead of last six months of 2023. In February 2024,
we hosted our USA Innovation Summit, where prestigious customers including
Mortenson Construction and PennDOT (Pennsylvania Department of Transportation)
shared their positive experiences of using our solutions. Whilst competition
in the US remains strong, Eleco's technology is proving to deliver advanced
capabilities and continuing to gain recognition.
Technology and Innovation
Asta Vision Live(TM), was released in the period, a powerful collaboration
feature which allows multiple project planners and stakeholders to work
simultaneously on a project in an encrypted, SaaS cloud-based environment.
Customer response to date has been very positive.
The use of AI provides better analysis and saves our customers' time; it is
not at a stage of replacing skilled human intervention completely in our
complex industry. Our customers have benefited from using AstaGPT(TM)
Generative AI to find instant tailored support from the wealth of our
knowledge bank of documentation. AstaGPT(TM) queries have overtaken those of
our support desk and are helping new customers familiarise themselves with
Asta for the first time. It was also pleasing to see AstaGPT(TM) shortlisted
for the Innovation of the Year at the Digital Construction Awards 2024.
Mergers and Acquisitions
The Group's acquisition strategy involves a considered approach to enhance the
scale and value of Eleco and expand its capabilities and profitability.
Acquisition opportunities seek to complement and/or extend the Group's
technological solutions, potentially also widening the customer base and
geographical footprint.
Integration of the April-acquired Vertical Digital business is progressing
well. This has bolstered our ability to meet our internal technical
resourcing demands, utilising its proven track record in agile and innovative
software development and consulting across many European and multinational
end-customers.
Our Markets
The construction and real-estate sector is often criticised for being slow to
adopt technology, but it is also a sector that is being challenged to deliver
increasingly complex projects in a safe and sustainable way whilst remaining
ever mindful of the competitive landscape.
Eleco operates across markets with several macroeconomic and macro societal
drivers including population growth, digitalisation, regulation and land
space. There is also continual pressure on margins in an industry which is
cost intensive, complex, multi-disciplined and multi-party, as well as
pressure to raise environmental standards and meet regulatory and compliance
requirements.
Eleco has excellent opportunities for organic growth across the core
geographies in which it operates, by expanding technology adoption with its
existing customer base and by attracting new customers who are on their
digital transformation journey.
With data becoming a common thread across all customer departments and in
particular referred to as the Golden Thread in property information, there are
opportunities to offer more capabilities across organisations and fulfil
joined-up thinking for our customers, as well as providing bespoke services
based on the Group's software being at the centre of these numerous
construction workstreams.
Summary and Outlook
The built environment market is buoyant and continues to present a significant
opportunity for Eleco, due to the increasing adoption of technology to solve
the challenges faced by construction and property management companies. As
Eleco expands its presence in its core geographical markets, it continues to
strengthen its reputation as a trusted provider of best-of-breed solutions.
The Executive team is committed to the delivery of growth through the
successful execution of its clearly defined strategy aimed at increasing
recurring revenues as well as seeking value-enhancing acquisition
opportunities that meet its strategic M&A criteria.
The excellent result in the first half of 2024 is due principally to the
outstanding effort, initiative and creativity of our employees across the
Group and I would like to thank them for their tremendous contribution. Our
loyal customer base, customer centric culture and ongoing investment in people
and technology underpin our drive for growth and we are confident that Eleco
will maintain momentum and continue to take advantage of emerging industry
opportunities. We continue to trade in line with expectations.
Jonathan Hunter
Chief Executive Officer
9 September 2024
Condensed Consolidated Income Statement
for the financial period ended 30 June 2024
Six months to 30 June Year ended
31 December
2023
£'000
Continuing operations Note 2024 2023
(unaudited) (unaudited)
£'000 £'000
Revenue 3, 4 16,252 13,486 28,006
Cost of sales (1,550) (1,440) (2,855)
Gross profit 14,702 12,046 25,151
Depreciation and amortisation of intangible assets (1,449) (1,128) (2,404)
Acquisition-related expenses and stamp duties (225) (262) (279)
Share-based payments (103) (148) (190)
Other selling and administrative expenses (11,378) (9,438) (19,075)
Selling and administrative expenses (13,155) (10,976) (21,948)
Operating profit 5 1,547 1,070 3,203
Gain on business disposal 14 - 150 152
Finance expense 6 (30) (25) (65)
Finance income 6 116 60 127
Profit before taxation 1,633 1,255 3,417
Taxation (358) (236) (762)
Profit after taxation for the financial period 1,275 1,019 2,655
Attributable to:
Equity holders of the parent 1,275 1,019 2,655
Earnings per share (pence per share)
Basic earnings per share 7 1.5p 1.2p 3.2p
Diluted earnings per share 7 1.5p 1.2p 3.2p
Condensed Consolidated Statement of Comprehensive Income
for the financial period ended 30 June 2024
Six months to 30 June Year ended
31 December
2023
£'000
2024 2023
(unaudited) (unaudited)
£'000 £'000
Profit for the period 1,275 1,019 2,655
Other comprehensive income/(expense):
Items that will be reclassified subsequently to profit or loss:
Translation differences on foreign operations (293) (376) (124)
Other comprehensive expense net of tax (293) (376) (124)
Total comprehensive income for the period 982 643 2,531
Attributable to:
Equity holders of the parent 982 643 2,531
Condensed Consolidated Statement of Changes in Equity
for the financial period ended 30 June 2024
Share capital Share premium Merger reserve Translation Share options reserve Employee share ownership trust Retained earnings
£'000 £'000 £'000 reserve £'000 £'000 £'000 Total
£'000 £'000
At 1 January 2024 832 2,418 1,002 (509) 621 (358) 23,353 27,359
Dividends - - - - - - (453) (453)
Share-based payments - - - - 103 - - 103
Deferred tax on intrinsic value of vested options - - - - 71 - - 71
Elimination of exercised share-based payments
- - - - (10) - 10 -
Issue of share capital 1 26 - - - - - 27
Transactions with owners 1 26 - - 164 - (443) (252)
Profit for the period - - - - - - 1,275 1,275
Other comprehensive expense:
Exchange differences on translation of net investments in foreign operations - - - (293) - - - (293)
Total comprehensive(expense)/ income for the period - - - (293) - - 1,275 982
At 30 June 2024 (unaudited) 833 2,444 1,002 (802) 785 (358) 24,185 28,089
Share capital Share premium Merger reserve Translation Share options reserve Employee share ownership trust Retained earnings
£'000 £'000 £'000 reserve £'000 £'000 £'000 Total
£'000 £'000
At 1 January 2023 832 2,406 1,002 (385) 553 (358) 21,792 25,842
Dividends - - - - - - (889) (889)
Share-based payments - - - - 148 - - 148
Elimination of exercised share-based payments - - - - (6) - 6 -
Issue of share capital - 12 - - - - - 12
Transactions with owners - 12 - - 142 - (883) (729)
Profit for the period - - - - - - 1,019 1,019
Other comprehensive (expense):
Exchange differences on translation of net investments in foreign operations - - - (376) - - - (376)
Total comprehensive (expense)/income for the period - - - (376) - - 1,019 643
At 30 June 2023 (unaudited) 832 2,418 1,002 (761) 695 (358) 21,928 25,756
Share capital Share premium Merger reserve Translation Share options reserve Employee share ownership trust Retained earnings
£'000 £'000 £'000 reserve £'000 £'000 £'000 Total
£'000 £'000
At 1 January 2023 832 2,406 1,002 (385) 553 (358) 21,792 25,842
Dividends - - - - - - (1,094) (1,094)
Share-based payments - - - - 190 - - 190
Deferred tax on intrinsic value of vested options - - - - (122) - - (122)
Issue of share capital - 12 - - - - - 12
Transactions with owners - 12 - - 68 - (1,094) (1,014)
Profit for the period - - - - - - 2,655 2,655
Other comprehensive (expense):
Exchange differences on translation of net investments in foreign operations - - - (124) - - - (124)
Total comprehensive (expense)/income for the period - - - (124) - - 2,655 2,531
At 31 December 2023 832 2,418 1,002 (509) 621 (358) 23,353 27,359
Condensed Consolidated Balance Sheet
at 30 June 2024
30 June
2024 2023 31 December
(unaudited) (unaudited) 2023
Note £'000 £'000 £'000
Non-current assets
Goodwill 18,987 18,834 18,544
Other intangible assets 10,024 8,188 9,000
Property, plant and equipment 775 947 766
Right-of-Use assets 1,012 982 1,274
Deferred tax assets 342 85 111
Total non-current assets 31,140 29,036 29,695
Current assets
Inventories 136 89 113
Trade and other receivables 4,847 4,512 5,033
Current tax assets 675 288 232
Cash and cash equivalents 12,002 9,410 10,903
Total current assets 17,660 14,299 16,281
Total assets 48,800 43,335 45,976
Current liabilities
Lease liabilities (583) (467) (542)
Trade and other payables (2,031) (1,788) (1,904)
Current tax liabilities (33) (109) (253)
Accruals and deferred income 10 (14,776) (12,025) (12,574)
Total current liabilities (17,423) (14,389) (15,273)
Non-current liabilities
Lease liabilities (762) (1,002) (918)
Deferred tax liabilities (2,500) (2,162) (2,400)
Provisions (26) (26) (26)
Total non-current liabilities (3,288) (3,190) (3,344)
Total liabilities (20,711) (17,579) (18,617)
Net assets 28,089 25,756 27,359
Equity
Share capital 833 832 832
Share premium 2,444 2,418 2,418
Merger reserve 1,002 1,002 1,002
Translation reserve (802) (761) (509)
Share options reserve 785 695 621
Employee share ownership trust (358) (358) (358)
Retained earnings 24,185 21,928 23,353
Equity attributable to shareholders of the parent 28,089 25,756 27,359
Condensed Consolidated Statement of Cash Flows
for the financial period ended 30 June 2024
Six months to 30 June Year ended
31 December
2023
£'000
Note 2024 2023
(unaudited) (unaudited)
£'000 £'000
Cash flows from operating activities
Profit after taxation for the financial period 1,275 1,019 2,655
Income tax expense 358 236 762
Amortisation of intangible assets 1,126 844 1,774
Depreciation charge 323 284 630
Profit on sale of property, plant and equipment - (15) (13)
Finance expense 31 25 65
Finance income (117) (60) (127)
Share-based payments expense 103 148 190
Gain on business disposal 14 - (150) (152)
Cash generated from operations before working capital movements 3,099 2,331 5,784
Decrease/(increase) in trade and other receivables 186 (428) (780)
Increase in inventories and work in progress (26) (45) (70)
Increase in trade and other payables, accruals and deferred income 2,570 700 1,461
Cash generated from operations 5,829 2,820 6,395
Net taxation paid (1,053) (131) (501)
Net cash inflow from operating activities 4,776 2,689 5,894
Investing activities
Investment in development expenditure (1,450) (996) (2,256)
Investment in other intangible assets (111) - (127)
Purchase of property, plant and equipment (11) (35) (133)
Acquisition of subsidiary undertakings net of cash acquired 15 (1,280) (3,827) (3,838)
Net proceeds on disposal of subsidiary undertakings - 511 510
Proceeds from sale of property, plant and equipment - 21 37
Net cash outflow from investing activities (2,852) (4,326) (5,807)
Financing activities
Finance expense (31) (24) (65)
Finance income 117 97 127
Repayments of principal of lease liabilities (309) (270) (595)
Equity dividends paid 8 (453) (889) (1,094)
Issue of share capital 26 12 12
Net cash outflow from financing activities (650) (1,074) (1,615)
Net increase/(decrease) in cash and cash equivalents 1,274 (2,711) (1,528)
Cash and cash equivalents at beginning of period 10,903 12,538 12,538
Exchange losses on cash and cash equivalents (175) (417) (107)
Cash and cash equivalents at end of period 12,002 9,410 10,903
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 2023
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 2024 have been prepared in accordance with the accounting policies
which will be applied in the twelve months financial statements to 31 December
2024. These accounting policies will be drawn up in accordance with applicable
law and UK-adopted International Accounting Standards (UK-IAS) that will be
effective at 31 December 2024.
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 2023.The comparative figures for the year ended 31
December 2023 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 2023.
Risks and uncertainties
A summary of the Group's principal risks and uncertainties was set out on
pages 27 to 29 of the 2023 Annual Report and Accounts. The Board considers
these risks and uncertainties are still relevant to the current financial year
and the impact of changes is reviewed in the Non-Executive Chairman's and
Chief Executive's statements contained in this report, where appropriate to do
so.
The Interim Report was approved by the Directors on 9 September 2024.
3. Revenue
Revenue disclosed in the income statement is analysed as follows:
Six months to 30 June Year to
31 December
2023
£'000
2024 2023
£'000 £'000
Perpetual licence revenue 724 1,028 1,532
Recurring maintenance, support, SaaS and subscription revenue 11,995 9,692 20,732
Services income 3,533 2,766 5,742
16,252 13,486 28,006
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 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 perpetual
software licences, software maintenance and support and related services.
Consequently, the Executive Directors review the management information on the
basis of this one unified segment of software.
Geographical, product and sales channel information
Revenue by geographical segment represents revenue from external customers
based upon the geographical location of the customer.
Six months to 30 June Year ended
31 December
2023
£'000
2024 2023
£'000 £'000
UK 7,634 5,676 13,034
Scandinavia 2,893 3,035 5,880
Germany 1,874 1,767 3.950
USA 752 570 1,184
Rest of Europe 2,637 2,123 3,364
Rest of World 462 315 594
16,252 13,486 28,006
Revenue by product group
Six months to 30 June Year ended
31 December
2023
£'000
2024 2023
£'000 £'000
Revenue from software and related services:
Building Lifecycle 11,832 9,328 19,824
CAD and Visualisation 3,643 3,499 6,775
Other - third party software 777 659 1,407
16,252 13,486 28,006
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
£'000
2024 2023
£'000 £'000
Direct 15,640 12,958 26,991
Reseller 612 528 1,015
16,252 13,486 28,006
5. Operating profit
Operating profit for the period is after charging/(crediting) the following
items:
Six months to 30 June Year ended
31 December
2023
£'000
2024 2023
£'000 £'000
Software product development expense 1,038 1,030 1,253
Depreciation of property, plant and equipment 64 76 120
Depreciation of right-of-use assets 259 208 510
Amortisation of acquired intangible assets 277 250 474
Amortisation of other intangible assets 849 594 1,300
Share-based payments 103 148 190
Profit on disposal of property, plant and equipment - (15) (13)
Foreign exchange losses 7 39 86
Acquisition-related expenses and stamp duties 225 262 279
6. Finance income and costs
Finance income and costs disclosed in the income statement are set out below:
Six months to 30 June Year ended
31 December
2023
£'000
2024 2023
£'000 £'000
Finance income:
Bank and other interest receivable 117 60 127
Finance costs:
Bank overdraft and loan interest - - (2)
Imputed interest expense for leasing arrangements (31) (25) (63)
Total finance costs (31) (25) (65)
Total net finance income 86 35 62
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
2024 2023 Year to 31 December 2023
Profit Weighted EPS Profit Weighted EPS Profit Weighted EPS
attributable average (p) attributable average (p) attributable average (p)
to number of to number of to number of
shareholders shares shareholders shares shareholders shares
(£'000) (millions) (£'000) (millions) (£'000) (millions)
Basic earnings per share 1,275 82.4 1.5 1,019 82.3 1.2 2,655 82.3 3.2
Diluted earnings per share 1,275 83.2 1.5 1,019 83.7 1.2 2,655 83.7 3.2
Adjusted earnings per share 1,729 82.4 2.1 1,421 82.3 1.7 3,272 82.3 4.0
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 12.
8. Dividends
Interim dividend
The Directors have recommended an interim dividend of 0.30 pence per ordinary
share (2023: interim dividend of 0.25 pence per ordinary share).
Dividends paid in the period
Dividends paid in the six months to 30 June 2024, consisting of a final
dividend, were 0.55 pence per ordinary share (2023: 1.08 pence per ordinary
share). Cash dividends of £453,000 (2023: £889,000) were paid in the six
months to 30 June 2024 as follows:
Six months to 30 June Year to 31 December
Ordinary Shares 2024 2024 2023 2023 2023 2023
per share £'000 per share £'000 per share £'000
Declared and paid during the period
Interim - current year - - - - 0.25 206
Special - previous year - - 0.58 477 0.58 477
Final - previous year 0.55 453 0.50 412 0.50 411
0.55 453 1.08 889 1.33 1,094
9. Cash and borrowings
The net cash position of the Group as at 30 June 2024 is set out below:
At 30 June At 31 December
2024 2023 2023
£'000 £'000 £'000
Cash and cash equivalents 12,002 9,410 10,903
Bank loans - - -
Lease liabilities (1,345) (1,469) (1,460)
10,657 7,941 9,443
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 per
cent over base rate (undrawn at 30 June 2024, 31 December 2023 and 30 June
2023).
10. Accruals and deferred income
At 30 June At 31 December
2023
£'000
2024 2023
£'000 £'000
Accruals 3,128 2,425 2,793
Deferred income 11,648 9,600 9,781
14,776 12,025 12,574
Deferred income represents income from the sale of software subscription
licences, SaaS licences and from software maintenance and support contracts
and is credited to revenue in the income statement on a straight-line basis in
line with the service and obligations over the term of the contract.
11. Related party disclosures
Transactions between Group undertakings, which are related parties, have been
eliminated on consolidation.
The Directors of the Company had no material transactions with the Company
during the period, other than a result of service agreements.
12. 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
£'000
2024 2023
£'000 £'000
Operating profit 1,547 1,070 3,203
Gain on business disposal - 150 152
Amortisation of intangible assets 1,126 844 1,774
Depreciation charge 323 284 630
EBITDA 2,996 2,348 5,759
EBITDA 2,996 2,348 5,759
Gain on business disposal - (150) (152)
Acquisition-related expenses and stamp duties 225 262 279
Share-based payments 103 148 190
Adjusted EBITDA 3,324 2,608 6,076
Operating profit 1,547 1,070 3,203
Acquisition-related expenses and stamp duties 225 262 279
Amortisation of acquired intangible assets 277 250 474
Share-based payments 103 148 190
Adjusted operating profit 2,152 1,730 4,146
Profit before taxation 1,633 1,255 3,417
Gain on business disposal -- (150) (152)
Acquisition-related expenses and stamp duties 225 262 279
Amortisation of acquired intangible assets 277 250 474
Share-based payments 103 148 190
Adjusted profit before taxation 2,238 1,765 4,208
Tax charge (358) (236) (762)
Gain on business disposal - 48 48
Acquisition-related expenses and stamp duties (56) (62) (66)
Amortisation of acquired intangible assets (69) (59) (111)
Share-based payments (26) (35) (45)
Adjusted taxation charge (509) (344) (936)
12. Additional performance measures continued
Six months to 30 June Year ended
31 December 2023
£'000
2024 2023
£'000 £'000
Profit after taxation 1,019 2,655
1,275
Gain on business disposal - (104) (104)
Acquisition-related expenses and stamp duties 169 200 213
Amortisation of acquired intangible assets 208 191 363
Share-based payments 77 113 145
Adjusted profit after taxation 1,729 1,421 3,272
Adjusted profit after taxation 1,729 1,421 3,272
Weighted average number of shares 82.4 82.3 82.3
Adjusted earnings per share (pence) 2.1 1.7 4.0
Six months to 30 June Year ended
31 December 2023
£'000
2024 2023
£'000 £'000
Cash generated from operations 2,820 6,395
5,829
Purchase of intangible assets (1,561) (996) (2,383)
Purchase of property, plant and equipment (11) (35) (133)
Acquisition-related expenses and stamp duties 225 262 279
Adjusted operating cash flow 4,482 2,051 4,158
Adjusted operating cash flow 4,482 2,051 4,158
Net interest received 86 73 62
Tax paid (1,053) (131) (501)
Proceeds from disposal of property, plant and equipment - 21 37
Free cash flow 3,515 2,014 3,756
13. Exchange rates
The following exchange rates have been applied in preparing the condensed
consolidated financial statements:
Income statement Balance sheet Year to 31 December 2023
Six months to 30 June As at 30 June
2024 2023 2024 2023 Income Balance
Statement sheet
Swedish Krona to Sterling 13.34 13.00 13.4 13.71 13.18 12.84
Euro to Sterling 1.17 1.14 1.18 1.16 1.15 1.15
US Dollar to Sterling 1.27 1.24 1.26 1.27 1.24 1.27
14. Disposal of subsidiary
In the prior half year period, the Group announced on 20 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 comparative half year period.
15. Acquisition of Vertical Digital group of companies
On 16 April 2024, the Group, through its wholly owned subsidiary Elecosoft
Limited, acquired 100 per cent of the share capital of the Vertical Digital
group of companies, consisting of Vertical Digital SRL and Sons of Coding SRL
(the 'Acquisition') for a consideration of €1.3m (£1.1m). The Acquisition's
completion date was 16 April 2024. The Group funded the Acquisition
exclusively by utilisation of its existing internal cash resources for this
initial consideration. Cash and cash equivalents within the Acquisition
entities at the acquisition date totaled £0.1m and the Acquisition had no
debt.
Vertical Digital has a proven track record, in providing agile and innovative
software development, technical consulting and upskilling solutions across
many European and multinational end-customers including Lufthansa Technik,
PwC, VW Financial Services, Deloitte and Zoopla.
The Acquisition adds critical capabilities to Eleco, including the ability to
service and scale its customers by connecting systems and providing technical
consulting which will support their digital transformation journeys, thus
increasing the Group's product breadth and focus on customer centricity.
The Acquisition also provides for elastic augmentation of our internal
research and development capacity which will further improve product time to
value.
The transaction terms provide for a cumulative potential deferred and
contingent outflow ('Earn Out') of up to €250,000 maximum for financial
years ending 31 December 2024 and 31 December 2025, based on the local senior
management (the former owners) attaining specific performance targets set by
Eleco plc in those years. These specific performance targets are linked to
achievement of revenue over those two financial years, subject to minimum
gross margin and net margin thresholds.
For the above explanatory reasons, including the ability to repurpose the
acquisition towards our internal research and development roadmap, combined
with the anticipated profitability of the Acquisition in other Group markets,
synergies arising, plus the ability to hire the assembled workforce of the
Acquisition (including the founders and management team), the Group
understandably paid a premium over the acquisition net assets, giving rise,
aside from the value of customer relationships, 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 customer relationships and goodwill.
Intangibles arising from the acquisition consist of customer relationships and
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 the Acquisition
(they will be subject to possible revision in the annual report and accounts
for the year ended 31 December 2024):
£'000
Intangible fixed assets:
Customer Relationships 469
Property, plant and equipment 49
Trade receivables and prepayments 196
Cash and cash equivalents 55
Trade and other payables (91)
Corporation tax (11)
Net assets acquired 667
Goodwill 443
Acquisition cost 1,110
There are no non-controlling interests in relation to the Acquisition.
Receivables at the acquisition date are expected to be collected in accordance
with the gross contractual amounts.
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.
15. Acquisition of Vertical Digital group of companies continued
The acquisition cost was satisfied by:
£'000
Cash 1,110
Share consideration -
Total consideration 1,110
The net cash outflow arising on acquisition was:
£'000
Cash consideration paid 1,110
Acquisition-related costs 225
Cash and cash equivalents within the Vertical Digital business on acquisition (55)
Total net cash outflow on acquisition 1,280
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, total £0.2m. These costs have been
charged in selling and administrative expenses in the consolidated income
statement.
The Vertical Digital group of companies, in common with other Group companies,
has a 31 December calendar year end. In the year to 31 December 2023, before
Eleco plc Group control, Vertical Digital delivered revenue of €1.2m
(c.£1.0m) and a net profit before taxation of €0.3m (c.£0.2m) based on
unaudited figures and Vertical Digital's accounting policies.
Had the acquisition taken place from the start of the Group's financial year
(from 1 January 2024) and based on figures and accounting policies prior to
Eleco plc Group control, management estimate that Acquisition would have
contributed revenue of £0.6m and profit before taxation of £0.1m to the
Group results in this first half year. For the first two and a half months
since the Acquisition date, the Vertical Digital group of companies
contributed £0.3m of revenue and net profit before taxation of £nil.
The above figures are provisional and the Group will work through the fair
value exercise under IFRS 3 and provisional disclosures will be reported in
the Group's annual report and accounts for the year ended 31 December 2024.
With regard to the BestOutcome acquisition announced on 27 June 2023, in the
prior period, the accounting for this as a business combination is complete,
and previously provisional amounts under IFRS 3 have been established and are
detailed in note 28 of the annual report for the year ended 31 December 2023.
Professional Advisors
Auditor
RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB
Bankers
Barclays Bank plc
Ashton House
497 Silbury Boulevard
Milton Keynes MK9 2LD
Company Secretary
Elemental Company Secretary Limited
+44 (0) 20 3286 6229
info@elementalcosec.com (mailto:info@elementalcosec.com)
Financial Public Relations
SEC Newgate
Sky Light City Tower
50 Basinghall Street
London EC2V 5DE
+44 (0) 20 3757 6882
eleco@secnewgate.co.uk (mailto:eleco@secnewgate.co.uk)
Nominated Advisor and Broker
Cavendish Capital Markets Limited
One Bartholomew Close
London EC1A 7BL
+44 (0) 20 7220 0500
www.finncap.com (http://www.finncap.com/)
Registrars and Transfer Agent
Neville Registrars
Neville House
Steelpark Road
Halesowen B62 8HD
+44 (0) 121 585 1131
info@nevilleregistrars.co.uk (mailto:info@nevilleregistrars.co.uk)
Solicitors - Employment and Company Law
Wedlake Bell LLP
71 Queen Victoria Street
London EC4V 4AY
+44 (0) 20 7395 3000
Solicitors - Corporate Transaction and Commercial Transaction
Reynolds Porter Chamberlain
Tower Bridge House
St Katharine's Way
London E1W 1AA
+44 (0) 20 3060 6000
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