REG - Eleco PLC - Interim Results
24 September 2020
Eleco Public Limited Company
("Eleco", the "Company" or the "Group")
Interim Results for the Six Months Ended 30 June 2020
Eleco Public Limited Company (AIM: ELCO), the AIM-listed international construction software specialist, is pleased to announce its unaudited results for the six months ended 30 June 2020.
Financial Highlights
· Revenue down 4 per cent to £12,215,000 (2019 H1: £12,711,000); down 3 per cent at constant exchange rates
· 57% of revenue recurring (2019 H1: 53% of revenue)
· Operating profit up 19 per cent to £2,071,000 (2019 H1: £1,746,000)
· Adjusted operating profit* up 11 per cent to £2,366,000 (2019 H1: £2,138,000)
· Profit before tax up 23 per cent to £1,930,000 (2019 H1: £1,567,000)
· Basic earnings per share up 19 per cent to 1.9p (2019 H1: 1.6p)
· Adjusted earnings per share** up 10% to 2.2p (2019 H1: 2.0p)
· Free cash flow*** up 76 per cent to £3,711,000 (2019 H1: £2,111,000)
· Net cash £4,435,000 (2019 H1: £198,000 net bank debt)
(* Adjusted profit measures exclude acquisition and corporate finance related costs and amortisation of acquired intangible assets.)
(** Adjusted earnings per share represents adjusted profit after tax, divided by a weighted average number of shares.)
(*** Free cash flow represents net cash inflow from operating activities less net cash outflow from investing activities.)
Operational Highlights
· ShireSystem further diversified software offering to Top 4 Sectors of Food & Drink Manufacturing, Health & Social Care, Chemical & Pharmaceutical and Construction
· Construction planning community offered complimentary Powerproject training to planners on furlough
· Extended licence agreements to enable customers to work remotely
· Implemented full home working to maintain support for customers
· Offered virtual training and consultancy to enable customers to maximise their use of the software
Chairman, Serena Lang said: "The challenges for the first half of the year were significant for many companies and I am pleased to report that Eleco performed creditably during these times.
Continuing successfully to address the near-term challenges that the current economic conditions present and focusing on our future growth strategy will be ever more important as we continue to recover from the impact of Covid-19.
Our excellent suite of products, loyal customer base and the strength of our Executive team and employees gives me the confidence that we will be able to continue to ride the wave of the storm and focus on the major opportunities ahead of us."
For further information, please contact:
Eleco Public Limited Company
Tel: +44 (0)20 7422 8000
Serena Lang, Chairman
Jonathan Hunter, Interim Chief Executive Officer
Ben Moralee, Group Finance Director
finnCap Limited
Tel: +44 (0)20 7220 0500
Geoff Nash / Kate Bannatyne (Nomad)
Richard Chambers (ECM)
Newgate Communications
Tel: +44 (0)20 3757 6880
Elisabeth Cowell / Isabelle Smurfit
elecosoft@newgatecomms.com
About Eleco Public Limited Company
Eleco plc is an 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.
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
Chairman's Statement
John Ketteley, after 23 years in the role, has decided it is the right time for him to stand down as Executive Chairman of Eleco and hand the reins over as we report on the results for the 6 months to 30th June. On behalf of all our stakeholders, I would like to take this opportunity to thank John for his enormous contribution over the last 23 years in developing the Elecosoft business and delivering the profitable and growing software business we have today. We wish him all the very best for the future.
I congratulate Jonathan Hunter, our current COO, on his appointment as Interim CEO. Having worked closely with John for the last decade, Jonathan is acutely familiar with the operations and is well placed to lead the business going forward. I very much look forward to working closely with him and the Executive team over the coming months.
Eleco performed well in the first half of 2020, dealing effectively with the Covid-19 threat to its business and delivering a creditable operational and trading performance as very difficult market conditions developed in the period.
This has been made possible by the thorough planning and rapid response in dealing with the initial threat of the Covid-19 breakout by our management and I thank all our employees for adapting to their new working environment whilst continuing to provide our customers with continued excellent service. The initiatives that were taken enabled the Group to remain resilient and cash generative.
Trading Performance
Revenues
Revenues in the first half of 2020 were £12,215,000 (2019: £12,711,000), a decrease in turnover of 4 per cent; or 3 per cent at constant currencies. In my view, our sales, marketing and support colleagues are to be congratulated on their performance given the challenges affecting most of our markets in the period.
Revenues from recurring maintenance, support, and other subscription-based contracts amounted to £6,953,000 (2019: £6,763,000), equivalent to 57 per cent of total unaudited revenues (2019: 53 per cent).
Profit
Operating Profit for the period was £2,071,000 (2019: £1,746,000), an increase of 19 per cent, after crediting £133,000 (2019: £nil) relating to the UK Government's Covid-19 Job Retention Scheme and the comparable schemes in Sweden and Germany and after charging £nil (2019: £97,000) of acquisition and corporate finance related costs.
Adjusted operating profit, before charging acquisition and corporate finance related expenses £nil (2019: £97,000) and amortisation of acquired intangible assets of £295,000 (2019: £295,000) was £2,366,000 (2019: £2,138,000), representing an increase of 11 per cent that reflects the continuing strength of our core business and a strong focus on cost management during the period.
Profit before tax was £1,930,000 (2019: £1,567,000), an increase of 23 per cent.
The earnings per share for the period was 1.9 pence (2019: 1.6 pence), an increase of 19 per cent.
Software
Our software portfolio, developed by our inhouse development teams, is the lifeblood of our business. Total software development spend (both capitalised and expensed elements) in the period amounted to £1,623,000 (2019: £1,524,000) and reflect our continuing efforts to enhance our software offering to the market. Software development expenditure capitalised in the period totalled £760,000 (2019: £633,000).
Financial Performance
We worked hard to improve the Group's already strong financial position and, as at 30 June 2020, Eleco had net cash balances of £4,435,000 (2019: £198,000 net bank debt), an amount which included £396,000 of deferred VAT payments as allowed under HMRC guidance (2019: Nil).
Operational Highlights
While retaining existing customers, we have also noted a welcome increase in the number of new accounts that we have gained across different industries in the period. For example, ShireSystem further diversified its customer base in the UK with additions from Food & Drink Manufacturing, Health & Social Care, Chemical & Pharmaceutical and Construction.
Elecosoft supported the construction planning community during a difficult period for the industry by providing complimentary Powerproject training and temporary software licences to planners who had been placed on furlough. We also supported some of our construction customers by offering complimentary extended licence agreements to enable them to work remotely during the Covid-19 lockdown.
We held a number of well received, complimentary webinars, which dealt with construction delays, pauses and using our software to support the reopening of construction sites.
Other varied opportunities that have enabled us to provide service to our customers include:
· ShireSystem CMMS prevented downtime for Kingspan Insulated Panels across nine sites in six countries.
· Eleco's subsidiary ESIGN launched its new Artificial Intelligence visualisation tool at Domotex, Hanover, in January 2020.
· Powerproject Vision aided the Carey Group to boost business visibility and control.
· Minsur used Powerproject 4D BIM to visualise and report on complex tailings reprocessing plant construction.
· Project planning precision enabled with Powerproject at Oxford University's Beecroft physics building.
· John Sisk & Sons deployed Site Progress Mobile to deliver woodland cabins for Center Parcs.
Recent events have demonstrated the need for us to satisfy our customers' requirements to be able to work more remotely and our software developers and trainers are increasingly seeking opportunities to support our customers in achieving their goals in this regard.
Company Name Change
The Board made the decision to re-instate the former company name, Eleco plc. We had experienced confusion by customers and shareholders between the business brand and the subsidiaries' businesses and the Company's name. There will now be a clearer distinction between the operational activities under the Elecosoft brand, launched in 2015, and the Company itself.
Interim Dividend
Eleco's strong trading performance and cash generation in the six months to 30 June 2020, would normally have warranted the payment of an interim dividend. However, having regard to the uncertainties created by the Covid-19 pandemic, the Board has decided to not recommend an interim dividend.
Outlook
The Board believes that there is a greater need now than ever before for our customer base to adopt technology that brings innovation and efficiency. Elecosoft's suite of solutions continues to be focused on delivering improved efficiencies to our customers, thus enabling them to reduce their own and their customers' costs and project risk. The actions we have taken and the continuing availability of our software, training and services, will enable us to assist our customers to maintain the momentum of their businesses in the year ahead despite the prevailing difficulties they face.
The challenges for the first half of the year were significant for many companies and I am pleased to report that Eleco performed creditably during these times and that all affected staff have been taken off furlough and returned to full time work.
Continuing successfully to address the near-term challenges that the current economic conditions present and focusing on our future growth strategy will be ever more important as we continue to recover from the impact of Covid-19.
Our excellent suite of products, loyal customer base and the strength of our Executive team and employees gives me the confidence that we will be able to continue to ride the wave of the storm and address the major opportunities ahead of us.
Serena Lang
Chairman
24 September 2020
Condensed Consolidated Income Statement
for the financial period ended 30 June 2020
Six months to 30 June
Year Ended
2020
2019
31 December
(unaudited)
(unaudited)
2019
Notes
£'000
£'000
£'000
Revenue
3,4
12,215
12,711
25,398
Cost of sales
(1,298)
(1,319)
(2,647)
Gross profit
10,917
11,392
22,751
Amortisation and impairment of intangible assets
(786)
(653)
(1,445)
Acquisition and corporate finance related expenses
-
(97)
(143)
Other selling and administrative expenses
(8,060)
(8,896)
(17,351)
Selling and administrative expenses
(8,846)
(9,646)
(18,939)
Operating profit
4,5
2,071
1,746
3,812
Finance income
6
-
-
-
Finance cost
6
(141)
(179)
(339)
Profit before tax
1,930
1,567
3,473
Tax
(414)
(279)
(772)
Profit for the financial period
1,516
1,288
2,701
Attributable to:
Equity holders of the parent
1,516
1,288
2,701
Earnings per share
Basic earnings per share
7
1.9p
1.6p
3.3p
Diluted earnings per share
7
1.8p
1.6p
3.3p
Condensed Consolidated Statement of Comprehensive Income
for the financial period ended 30 June 2020
Six months to 30 June
Year Ended
2020
2019
31 December
(unaudited)
(unaudited)
2019
£'000
£'000
£'000
Profit for the period
1,516
1,288
2,701
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss:
Translation differences on foreign operations
58
8
(51)
Other comprehensive income net of tax
58
8
(51)
Total comprehensive income for the period
1,574
1,296
2,650
Attributable to:
Equity holders of the parent
1,574
1,296
2,650
Condensed Consolidated Statement of Changes in Equity
for the financial period ended 30 June 2020
Share capital
Share premium
Merger reserve
Translation reserve
Other reserve
Retained earnings
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2020 (restated)
822
2,047
1,002
(198)
(108)
14,359
17,924
Dividends
-
-
-
-
-
-
-
Share-based payments
-
-
-
-
(9)
-
(9)
Issue of share capital
1
15
-
-
-
-
16
Transactions with owners
1
15
-
-
(9)
-
7
Profit for the period
-
-
-
-
-
1,516
1,516
Other comprehensive income:
Exchange differences on translation of net investments in foreign operations
-
-
-
58
-
-
58
Total comprehensive income for the period
-
-
-
58
-
1,516
1,574
At 30 June 2020 (unaudited)
823
2,062
1,002
(140)
(117)
15,875
19,505
Share capital
Share premium
Merger reserve
Translation reserve
Other reserve
Retained earnings
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2019 (restated)
818
2,049
1,004
(148)
(177)
11,933
15,479
Adjustments for prior periods (IFRS 16)
-
-
-
-
-
-
-
At 1 January 2019 (restated)
818
2,049
1,004
(148)
(177)
11,933
15,479
Dividends
-
-
-
-
-
(141)
(141)
Share-based payments
-
-
-
-
12
-
12
Issue of share capital
2
-
(2)
-
-
-
-
Transactions with owners
2
-
(2)
-
12
(141)
(129)
Profit for the period
-
-
-
-
-
1,288
1,288
Other comprehensive income:
Exchange differences on translation of net investments in foreign operations
1
-
-
8
-
-
9
Total comprehensive income for the period
1
-
-
8
-
1,288
1,297
At 30 June 2019 (restated unaudited)
821
2,049
1,002
(140)
(165)
13,080
16,647
Share capital
Share premium
Merger reserve
Translation reserve
Other reserve
Retained earnings
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2019 (originally stated)
818
2,049
1,004
(148)
(177)
11,933
15,479
Adjustments for prior periods (IFRS 16)
-
-
-
-
-
-
-
At 1 January 2019 (restated)
818
2,049
1,004
(148)
(177)
11,933
15,479
Dividends
-
-
-
-
-
(275)
(275)
Share-based payments
-
-
-
-
70
-
70
Issue of share capital
4
(4)
-
-
-
-
-
Transactions with owners
4
(4)
-
-
70
(275)
(205)
Profit for the period
-
-
-
-
-
2,701
2,701
Other comprehensive income:
Exchange differences on translation of net investments in foreign operations
-
-
-
(51)
-
-
(51)
Other
-
2
(2)
1
(1)
-
-
Total comprehensive income for the period
-
2
(2)
(50)
(1)
2,701
2,650
At 31 December 2019 (restated)
822
2,047
1,002
(198)
(108)
14,359
17,924
Condensed Consolidated Balance Sheet
at 30 June 2020
30 June
2020
2019
31 December
(unaudited)
(unaudited)
2019
Notes
£'000
£'000
£'000
Non-current assets
Goodwill
15,643
15,684
15,598
Other intangible assets
9
7,223
7,445
7,242
Property, plant and equipment
702
821
734
Right-of-Use assets
2,033
2,151
2,048
Deferred tax assets
87
155
118
Total non-current assets
25,688
26,256
25,740
Current assets
Inventories
16
85
46
Trade and other receivables
3,035
3,920
4,339
Current tax assets
82
54
105
Cash and cash equivalents
9,779
6,763
7,236
Total current assets
12,912
10,822
11,726
Total assets
38,600
37,078
37,466
Current liabilities
Borrowings
10
(1,648)
(1,647)
(1,645)
Lease liabilities
(589)
(588)
(558)
Trade and other payables
(1,529)
(1,304)
(1,704)
Provisions
(142)
(144)
(142)
Current tax liabilities
(87)
(375)
(117)
Accruals and deferred income
11
(8,263)
(7,786)
(7,747)
Total current liabilities
(12,258)
(11,844)
(11,913)
Non-current liabilities
Borrowings
10
(3,696)
(5,314)
(4,490)
Lease liabilities
(1,663)
(1,767)
(1,691)
Deferred tax liabilities
(1,437)
(1,465)
(1,407)
Non-current provisions
(41)
(41)
(41)
Total non-current liabilities
(6,837)
(8,587)
(7,629)
Total liabilities
(19,095)
(20,431)
(19,542)
Net assets
19,505
16,647
17,924
Equity
Share capital
823
821
822
Share premium account
2,062
2,049
2,047
Merger reserve
1,002
1,002
1,002
Translation reserve
(140)
(140)
(198)
Other reserve
(117)
(165)
(108)
Retained earnings
15,875
13,080
14,359
Equity attributable to shareholders of the parent
19,505
16,647
17,924
Condensed Consolidated Statement of Cash Flows
for the financial period ended 30 June 2020
six months to 30 June
Year Ended
2020
2019
31 December
(unaudited)
(unaudited)
2019
£'000
£'000
£'000
Cash flows from operating activities
Profit before tax
1,930
1,567
3,473
Net finance costs
141
179
339
Depreciation charge
426
450
902
Amortisation charge
786
653
1,445
Profit on sale of property, plant and equipment
-
(4)
(8)
Share-based payment charge
(9)
12
70
Decrease in provisions
-
-
(2)
Cash generated in operations before working capital movements
3,274
2,857
6,219
Increase in trade and other receivables
1,304
571
152
Decrease/(increase) in inventories and work in progress
30
(75)
(39)
Decrease in trade and other payables and accruals and deferred income
341
(223)
337
Cash generated in operations
4,949
3,130
6,669
Interest paid
(112)
(150)
(268)
Interest received
-
-
-
Net income tax paid
(354)
(239)
(1,052)
Net cash inflow from operating activities
4,483
2,741
5,349
Investing activities
Purchase of intangible assets
(760)
(633)
(1,237)
Purchase of property, plant and equipment
(35)
(50)
(110)
Acquisition of subsidiary undertakings net of cash acquired
-
-
-
Proceeds from sale of property, plant, equipment and intangible assets
23
53
67
Sale of businesses net of expenses
-
-
-
Net cash outflow from investing activities
(772)
(630)
(1,280)
Financing activities
Proceeds from new bank loan
-
-
-
Repayment of bank loans
(812)
(823)
(1,646)
Repayments of obligations under finance leases
(375)
(392)
(755)
Issue of share capital
-
-
-
Equity dividends paid
-
(141)
(275)
Intercompany
-
-
-
Net cash (outflow)/inflow from financing activities
(1,187)
(1,356)
(2,676)
Net increase in cash and cash equivalents
2,524
755
1,393
Cash and cash equivalents at beginning of period
7,236
6,036
6,036
Effects of changes in foreign exchange rates
19
(28)
(193)
Cash and cash equivalents at end of period
9,779
6,763
7,236
Cash and cash equivalents comprise:
Cash and short term deposits
9,779
6,763
7,236
Bank overdrafts
-
-
-
9,779
6,763
7,236
Notes to the Condensed Consolidated Interim Financial Statements
1. General information
The company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 66 Clifton Street, London, EC2A 4HB. The company changed its name from Elecosoft plc to Eleco plc on 17 July 2020.
The company is listed on the Alternative Investment Market ("AIM").
The condensed consolidated interim financial information does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's consolidated financial statements for the year ended 31 December 2019 have been filed at Companies House. The audit report was not qualified 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 2020 have been prepared in accordance with the accounting policies which will be applied in the twelve months financial statements to 31 December 2019. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted for use in the European Union that are effective at 30 June 2020.
The condensed consolidated interim financial statements are unaudited. They do not include all the information and disclosures required in the annual financial statements, and therefore should be read in conjunction with the Group's published financial statements for the year ended 31 December 2019. The comparative figures for the year ended 31 December 2019 are not the Company's statutory accounts for that period but have been extracted from these accounts. The accounting policies applied in these interim financial statements are the same as those applied in the annual financial statements for the year ended 31 December 2019, with the addition of a Government Grant policy.
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 2018.
Risks and uncertainties
A summary of the Group's principal risks and uncertainties was set out on page 10 of the 2019 annual report and accounts. The Board considers these risks and uncertainties are still relevant to the current financial year and the impact of changes in the UK economy is reviewed in the Chairman's statement contained in this report.
The Interim Report was approved by the Directors on 24 September 2020.
3. Revenue
Revenue disclosed in the income statement is analysed as follows:
Six months to 30 June
Year to 31 December
2020
2019
2019
(restated)
(restated)
£'000
£'000
£'000
Licence sales
2,721
3,018
5,877
Recurring maintenance, support and subscription revenue
6,953
6,763
13,557
Services income
2,541
2,930
5,964
12,215
12,711
25,398
The categories of revenue have been updated to include subscription-based revenue in recurring maintenance, support and subscription revenue, and prior period amounts have been adjusted to conform them to the current year presentation.
Revenue is recognised for each category as follows:
· Licence sales - recognised at the point of transfer (delivery) of the licence to a customer.
· 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.
For the year ended 31 December 2019, reclassification of revenue types has been made with a net effect that £878,000 has been reclassified from Recurring to Services, while £169,000 has been reclassified from Licence to Services.
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 maker has been identified as the Executive Directors. The Group revenue is derived entirely from the sale of software licenses, software maintenance and support and related services. Consequently, the Executive Directors review the three revenue streams, but as the costs are not recorded in the same way, the information is presented as one segment and as such the information is presented in line with management information.
Six months to 30 June
Year ended
31 December
2020
2019
2019
£'000
£'000
£'000
Revenue
12,215
12,711
25,398
Adjusted EBITDA
3,283
2,946
6,302
Amortisation and impairment of purchased intangible assets
(491)
(358)
(855)
Depreciation
(426)
(450)
(902)
Adjusted operating profit
2,366
2,138
4,545
Amortisation of acquired intangible assets
(295)
(295)
(590)
Acquisition expenses
-
(97)
(143)
Operating profit
2,071
1,746
3,812
Net finance cost
(141)
(179)
(339)
Segment profit before tax
1,930
1,567
3,473
Tax
(414)
(279)
(772)
Segment profit after tax
1,516
1,288
2,701
Operating profit
2,071
1,746
3,812
Amortisation of intangible assets
786
653
1,445
Depreciation charge
426
450
902
Acquisition expenses
-
97
143
Adjusted EBITDA
3,283
2,946
-
6,302
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
2020
2019
2019
£'000
£'000
£'000
UK
4,645
4,704
9,436
Scandinavia
2,995
3,380
6,548
Germany
2,216
2,206
4,487
USA
438
442
1,021
Rest of Europe
1,750
1,717
3,407
Rest of World
171
262
499
12,215
12,711
25,398
Revenue by product group represents revenue from external customers.
Year ended
Six months to 30 June
31 December
2020
2019
2019
£'000
£'000
£'000
Project management
4,708
5,104
10,090
Site management
187
192
395
Estimating
1,381
1,403
2,737
Engineering
988
1,100
2,232
CAD/Design
836
1,037
1,969
Information management
584
710
1,400
Visualisation
2,205
2,020
4,150
Maintenance management
1,326
1,145
2,425
12,215
12,711
25,398
The Group utilises resellers to access certain markets. Revenue by sales channel represents revenue from external customers.
Year ended
Six months to 30 June
31 December
2020
2019
2019
£'000
£'000
£'000
Direct
11,628
12,077
24,149
Reseller
587
634
1,249
12,215
12,711
25,398
5. Operating profit
Operating profit for the period is after charging the following items:
Year ended
Six months to 30 June
31 December
2020
2019
2019
£'000
£'000
£'000
Software product development
864
891
1,862
Depreciation of property, plant and equipment
141
158
241
Depreciation of right-of-use assets
285
292
661
Amortisation of acquired intangible assets
295
295
590
Amortisation of other intangible assets
491
358
855
Share based payments
(9)
12
70
Employer furlough scheme
(133)
-
-
Profit on disposal of property, plant and equipment
-
(4)
(8)
Foreign exchange (gains)/losses
(10)
23
110
Acquisition and other project related expenses
-
97
143
6. Net finance cost
Finance income and costs disclosed in the income statement is set out below:
Year ended
Six months to 30 June
31 December
2020
2019
2019
£'000
£'000
£'000
Finance costs:
Bank overdraft and loan interest
(104)
(136)
(259)
Interest expense for leasing arrangements
(37)
(43)
(80)
Total net finance cost
(141)
(179)
(339)
7. 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
2020
2019
Year to 31 December 2019
Profit attributable to shareholders
(£'000)Weighted average number of shares
(millions)EPS (p)
Profit attributable to shareholders
(£'000)Weighted average number of shares
(millions)EPS (p)
Profit attributable to shareholders
(£'000)Weighted average number of shares
(millions)EPS (p)
Basic earnings per share
1,516
81.3
1.9
1,288
81.1
1.6
2,701
81.1
3.3
Diluted earnings per share
1,516
82.0
1.8
1,288
81.9
1.6
2,701
81.8
3.3
Adjusted earnings per share
1,755
81.3
2.2
1,621
81.1
2.0
3,322
81.1
4.1
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 13.
8. Dividends
No dividends have been paid in the six months to 30 June 2020 (2019: 0.40 pence per ordinary share).
Scrip dividends were issued in the six months to 30 June 2020 as follows:
Six months to 30 June
Year to 31 December
2020
2020
2019
2019
2019
2019
Ordinary shares
shares issued
£'000
shares issued
£'000
shares issued
£'000
Declared and paid during the year
Interim - current year
-
-
-
-
171,658
133
Final - previous year
-
-
248,585
186
248,585
186
-
-
248,585
186
420,243
319
Cash dividends of £nil (2019: £141,000) were paid in the six months to 30 June 2020 as follows:
Six months to 30 June
Year to 31 December
2020
2020
2019
2019
2019
2019
Ordinary shares
per share
£'000
per share
£'000
per share
£'000
Declared and paid during the year
Interim - current year
-
-
-
-
0.30
134
Final - previous year
0.40
-
0.40
141
0.40
141
0.40
-
0.40
141
0.70
275
The Directors have not recommended an interim dividend (2019: 0.30 pence per ordinary share).
9. Other intangible assets
Other intangible assets comprise capitalised development costs, acquired customer relationships and purchased intangible assets. Additions in the six months to 30 June 2020 represent purchased intangible assets of £nil (2019: £nil) and internal development costs capitalised of £760,000 (2019: £633,000) Internal development relates to software development projects that meet the accounting policy criteria for capitalisation.
10. Cash and borrowings
The net cash position of the group as at 30 June 2020 is set out below.
At 30 June
At 31 December
2020
2019
2019
(restated)
£'000
£'000
£'000
Cash and cash equivalents
9,779
6,763
7,236
Bank loans
(5,344)
(6,961)
(6,135)
Bank overdrafts
-
-
-
Lease liabilities
(2,252)
(2,355)
(2,249)
2,183
(2,553)
(1,148)
Maturity profile of borrowings
In one year or less
(1,648)
(1,647)
(1,645)
Between one and two years
(1,648)
(1,647)
(1,648)
Between two and five years
(2,048)
(3,667)
(2,842)
(5,344)
(6,961)
(6,135)
The Group's borrowings include a five-year fixed term loan of £8.0m with Barclays Bank.
The new facility is repayable over five years, with equal quarterly instalments of £400,000. The interest rate has been fixed for three years at 3.768%. The group also retains its existing £1.0m overdraft facility. Security provided to the bank comprises a cross guarantee and debenture between Elecosoft plc and certain group subsidiaries.
11. Accruals and deferred income
At 30 June
At 31 December
2020
2019
2019
£'000
£'000
£'000
Accruals
2,020
1,957
1,885
Deferred income
6,243
5,829
5,862
8,263
7,786
7,747
Deferred income represents income from software maintenance and support contracts and is taken to revenue in the income statement on a straight-line basis in line with the service and obligations over the term of the contract.
12. Related Party Disclosures
Transactions between Group undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
The Directors of the Company had no material transactions with the Company during the year, other than a result of service agreements.
An amount of £36,667 (2019: £37,500) was paid to JHB Ketteley & Co Limited under a lease for occupation by the Group of 66 Clifton Street, London, EC2A 4HB and £2,500 (2019: £2,500) for a contribution to the office costs at Burnham-on-Crouch. J H B Ketteley is a director of JHB Ketteley & Co Limited.
An amount of £14,400 (2019: £9,900) was paid to Political Lobbying & Media Relations Ltd (PLMR) in respect of website development costs. K Craig is a director of PLMR.
13. Additional performance measures
The Group uses adjusted figures, which are not defined by generally accepted accounting principles ("GAAP") such as IFRS. Adjusted figures and underlying growth rates are presented as additional performance measures used by management, as they provide relevant information in assessing the Group's performance, position and cash flows. We believe that these measures enable investors to track more clearly the core operational performance of the Group, by separating out items of income or expenditure relating to acquisitions, disposals and capital items. Our management uses these financial measures, along with IFRS financial measures, in evaluating the operating performance of the Group.
Year ended
Six months to 30 June
31 December
2020
2019
2019
£'000
£'000
£'000
Operating profit
2,071
1,746
3,812
Acquisition related expenses
-
97
143
Amortisation of acquired intangible assets
295
295
590
Adjusted operating profit
2,366
2,138
4,545
Profit before tax
1,930
1,567
3,473
Acquisition related expenses
-
97
143
Amortisation of acquired intangible assets
295
295
590
Adjusted profit before tax
2,225
1,959
4,206
Tax charge
(414)
(279)
(772)
Acquisition related expenses
-
-
-
Amortisation of acquired intangible assets
(56)
(59)
(112)
Adjusted tax charge
(470)
(338)
(884)
Profit after tax
1,516
1,288
2,701
Acquisition related expenses
-
97
143
Amortisation of acquired intangible assets
239
236
478
Adjusted profit after tax
1,755
1,621
3,322
Cash generated in operations
4,949
3,130
6,669
Purchase of intangible assets
(760)
(633)
(1,237)
Purchase of property, plant and equipment
(35)
(50)
(110)
Acquisition related expenses
-
72
143
Adjusted operating cash flow
4,154
2,519
5,465
Adjusted operating cash flow
4,154
2,519
5,465
Net interest paid
(112)
(150)
(268)
Tax paid
(354)
(239)
(1,052)
Proceeds from disposal of PPE
23
53
67
Acquisition expenses
-
(72)
(143)
Free cashflow
3,711
2,111
4,069
14. Exchange rates
The following exchange rates have been applied in preparing the condensed consolidated financial statements:
Income statement
Balance sheet
Year to 31 December 2019
Six months to 30 June
As at 30 June
Income
Balance
2020
2019
2020
2019
Statement
sheet
Swedish Krona to Sterling
12.17
11.97
11.52
11.79
12.06
12.39
Euro to Sterling
1.15
1.14
1.10
1.12
1.14
1.18
US Dollar to Sterling
1.27
1.29
1.24
1.27
1.28
1.33
15. Government Grants
Grants related to income are presented as part of the profit and loss and have been deducted against the related expense in the period.
Grants, across the Group, amounted to £133,000 during the six months ended 30 June 2020.
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