REG - Eleco PLC - Preliminary Results <Origin Href="QuoteRef">ELCO.L</Origin> - Part 2
15/07/2015 15:59
- Part 2: For the preceding part double click ID:nRSE1485Ma
operating profit 3,861 4,331
Product development costs (2,024) (2,598)
Operating profit before exceptionals and amortisation 1,440 1,357
Amortisation of intangible assets (397) (376)
Exceptional items (138) -
Segment result 905 981
Net finance cost (221) (357)
Segment profit before tax 684 624
Tax (173) (174)
Segment profit after tax 511 450
Development costs capitalised (553) -
Total development costs (2,577) (2,598)
Segment result 905 981
Amortisation of intangible assets 397 376
Depreciation charge 198 222
EBITDA 1,500 1,579
The chief operating decision maker has been identified as the Executive
Directors. The Group revenue is derived entirely from the sale of software
licences, software maintenance and support and related services. Consequently,
the Executive Directors review the three revenue streams but as the costs are
not recorded in the same way the information is presented as one segment and
as such the information is presented in line with management information.
Development project costs are expensed as incurred unless they meet the
accounting policy requirements for capitalisation. The projects that have been
capitalised in the twelve months to 31 December 2014 are explained in the
Operating Review.
2014 2013
Software Software
£'000 £'000
Statement of financial position
Segment assets 17,293 18,730
Unallocated assets - 5,007
Total Group assets 17,293 23,737
Segment liabilities 10,571 15,658
Unallocated liabilities - 10,432
Total Group liabilities 10,571 26,090
Unallocated assets are £nil. (2013: Deferred tax assets £1.5m and assets of
disposal group £3.5m) Unallocated liabilities are £nil. (2013: Retirement
benefit obligation £7.7m and liabilities of disposal group £2.7m).
Geographical 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:
2014 2013
£'000 £'000
UK 4,291 3,598
Scandinavia 7,917 8,333
Germany 2,447 2,428
Rest of Europe 1,404 1,666
Rest of World 425 293
16,484 16,318
The Group utilises Business Partners to access certain markets as resellers.
Revenue by sales channel represents continuing operations revenue from
external customers.
Revenue by sales channel is as follows:
2014 2013
£'000 £'000
Direct 15,774 15,606
Reseller 710 712
16,484 16,318
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.
Non-current assets by geographical location are as follows:
2014 2013
£'000 £'000
UK 6,780 5,512
Scandinavia 4,902 5,787
Germany 1,147 1,442
12,829 12,741
Information about major customers
Revenues arising from sales to the Group's largest customer were below the
reporting threshold (2013: Below reporting threshold).
3. Exceptional items
Exceptional items represent income and costs considered necessary to be
separately disclosed by virtue of their size or nature:
2014 2013
£'000 £'000
Restructuring costs (113) -
Capital reduction expenses (25) -
(138) -
Restructuring costs mainly relate to non-recurring banking fees and charges
that cannot be directly attributed to the discontinued ElecoBuild businesses.
Legal fees associated with the proposed balance sheet reconstruction are
reported under exceptional items.
4. Operating profit
The continuing operations operating profit for the period is stated after
charging/(crediting) the following items
2014 2013
£'000 £'000
Product development 2,024 2,598
Non-recurring staff costs 102 -
Depreciation of property, plant and equipment 198 222
Amortisation of intangible assets acquired 385 376
Amortisation of capitalised development costs 12 -
(Profit)/loss on disposal of property, plant and equipment (17) 5
Foreign exchange losses 58 31
Fees payable to the Company's auditor for:
The audit of the parent company and consolidated financial statements 47 48
Fees payable to the Company's auditor and its associates for other services:
The audit of the Company's subsidiaries 47 73
Other services 8 26
Operating lease rentals:
Plant, equipment and vehicles 180 10
Other assets 250 342
Other services provided by the Company's auditors amounted to £8,000 in the
year (2013: £26,000) of which £4,000 was incurred by the Group's German
subsidiaries and £4,000 by its Swedish subsidiaries.
5. Employee information
The average number of employees during the period, including Directors, in
continuing operations was made up as follows:
2014 2013
number number
Sales & marketing 50 50
Client services 65 64
Product development 42 41
Management and administration 29 28
186 183
Staff costs during the period, including Directors, in continuing operations
amounted to:
2014 2013
£'000 £'000
Wages and salaries 7,211 7,729
Social security 1,586 1,753
Pension costs 470 567
9,267 10,049
Less: Development staff costs capitalised (553) -
8,714 10,049
Pension costs relate to contributions to defined contribution pension schemes.
Development staff costs are charged to projects and capitalised if those
projects meet the criteria for capitalisation.
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below:
2014 2013
£'000 £'000
Short-term employee benefits 654 653
Post employment benefits 23 16
Termination benefits 100 -
Executive Directors 777 669
Fees - non-executive Directors 61 56
838 725
The emoluments of the highest paid Director were £382,000 (2013: £395,000).
Employers NIC payments in respect of the Directors remuneration was £83,000
(2013: £73,000)
The remuneration of the non-executive Directors is determined by the Board.
The non-executive Directors do not have service contracts but are appointed
for an initial term of three years, which may thereafter be renewed from year
to year. They do not participate in any of the Group's share based incentive
or pension schemes.
6. Net finance income/(cost)
Finance income and costs from continuing operations is set out below:
2014 2013
£'000 £'000
Finance income
Bank and other interest receivable 3 10
Finance costs
Bank overdraft and loan interest (209) (350)
Finance leases and hire purchase contracts (15) (17)
Total net finance cost (221) (357)
7. Taxation
(a) Tax on profit on ordinary activities
The tax charge in the income statement from continuing operations is as
follows:
2014 2013
£'000 £'000
Current tax:
UK corporation tax on profits of the year - -
Tax adjustments in respect of previous years - -
- -
Foreign tax 153 169
Total current tax 153 169
Deferred tax:
Origination and reversal of temporary differences 20 (36)
Tax adjustments in respect of previous years - 41
Total deferred tax 20 5
Tax charge in the income statement 173 174
Income tax for the UK has been calculated at the standard rate of UK
corporation tax of 21.49% effective from 1 April 2014 (2013: 23.25%) on the
estimated assessable profit for the period. Taxation for foreign companies is
calculated at the rates prevailing in the relevant jurisdictions.
(b) Reconciliation of continuing operations tax charge
The tax assessed on continuing operations accounting profit before income tax
for the year is higher than the standard rate of UK corporation tax of 21.49%
for the period under review. The differences are explained below:
2014 2013
£'000 £'000
Profit on continuing operations before tax 684 624
Tax calculated at the average standard rate of UK corporation tax of 21.49% (2013: 23.25%) applied to profits before tax 147 145
Effects of:
Expenses not deductible for tax purposes 73 93
Research & development tax relief (81) -
Group relief/losses surrendered not paid (13) (200)
Deferred tax not recognised 31 102
Prior year adjustments - 41
Utilisation of losses - (31)
Tax rate differences in foreign jurisdictions 12 28
Other differences 4 (4)
Continuing operations tax charge for the year 173 174
(c) Unrecognised tax losses
The Group has tax losses of £828,000 (2013: £888,000) arising overseas for
which no deferred tax asset has been recognised and tax losses of £2,127,000
(2013: £1,393,000) arising in the UK. No deferred tax is recognised on the
unremitted earnings of overseas subsidiaries.
8. Discontinued operations
Profit on the disposal of the Yaxley property that was occupied by the
ElecoBuild businesses net of costs of disposal in the twelve months to 31
December 2014 are reported under discontinued operations. In addition,
non-recurring corporate overhead costs which are attributable to the
ElecoBuild businesses during the year are reported under discontinued
operations.
The de-recognition of the pension scheme liability related to the ELECO
Retirement and Benefit Scheme (ERBS) and the associated deferred tax is
reported as an exceptional item under discontinued operations.
The results from discontinued operations which have been included in the
income statement are set out below:
2014 2013
£'000 £'000
Revenue - 16,144
Cost of sales - (13,154)
Gross profit - 2,990
Distribution costs - (1,211)
Administrative expenses (459) (4,524)
Other operating costs (259) (1,279)
Loss on re-measurement - (1,471)
Operating loss before exceptionals (718) (5,495)
Exceptionals 7,738 -
Operating profit/(loss) 7,020 (5,495)
Finance cost (7) (264)
Profit/(loss) before tax 7,013 (5,759)
Taxation on discontinued operations (1,548) 26
Profit/(loss) for the period from discontinued operations before disposals 5,465 (5,733)
Profit/(loss) on disposals after tax 91 (4,935)
Profit/(loss) for the period from discontinued operations 5,556 (10,668)
The net profit from the disposal of the property and included in the income
statement are set out below:
2014 2013
£'000 £'000
Consideration on disposals 960 3,160
Net assets on disposals (764) (5,628)
Goodwill on disposal - (2,346)
Other disposal costs (105) (121)
Profit/(loss) on disposals before tax 91 (4,935)
Tax on disposal of discontinued operations - -
Profit/(loss) on disposals after tax 91 (4,935)
The net profit from the de-recognition of the ERBS pension scheme liability
and associated deferred tax included in the income statement is set out
below.
2014 2013
£'000 £'000
Retirement benefit obligation 7,738 -
Profit before tax 7,738 -
Deferred tax (1,548) -
Profit after tax 6,190 -
The results from discontinued operations which have been included in the cash
flow statement are set out below:
2014 2013
£'000 £'000
Operating activities (1,250) (1,620)
Investing activities 960 387
Financing activities (11) (69)
Total cash flows (301) (1,302)
9. Earnings/(Loss) per share
The calculation of the earnings per share from continuing operations is based
on the continuing operations profit after tax attributable to ordinary equity
shareholders of the Company and the weighted average number of shares in issue
for the reporting period. The earnings per share from discontinued operations
is based on the discontinued operations profit before exceptional items after
tax attributable to ordinary equity shareholders of the Company and the
weighted average number of shares in issue for the reporting period.
The de-recognition impact of the pension scheme liability and associated
deferred tax in the period on the calculation of the earnings per share is
reported as an exceptional item in the table below:
2014 2013
Continuing operations £511,000 £450,000
Discontinued operations before exceptionals £(634,000) £(10,668,000)
Discontinued operations exceptionals £6,190,000 -
Discontinued operations £5,556,000 £(10,668,000)
Total operations profit/(loss) after taxation £6,067,000 £(10,218,000)
Weighted average number of shares in issue in the period 66,610,703 59,761,646
Dilutive effect of share options - -
Number of shares for diluted earnings per share 66,610,703 59,761,646
Earnings/(loss) per share - basic and diluted
Continuing operations 0.8 p 0.8 p
Discontinued operations before exceptionals (1.0) p (17.9) p
Discontinued operations exceptionals 9.3 p - p
Discontinued operations 8.3 p (17.9) p
Total operations 9.1 p (17.1) p
There were no outstanding share options at 31 December 2014 and therefore no
dilution effect on the basic earnings per share. Shares held by the Employee
Share Ownership Trust are excluded from the weighted average number of shares
in the period.
Notes
1. The financial information in this announcement, which is audited, does
not constitute statutory accounts within the meaning of section 435 of the
Companies Act 2006. Statutory accounts of the Company, on which the Auditors
will report, will be delivered to the Registrar of Companies. The comparative
figures for the 12 months to 31 December 2013 have been taken from, but do not
constitute, the Company's statutory financial statements for that financial
year.
2. The Group's activities, together with the factors likely to affect its
future development, performance and position are set out in the Operating
Review and Financial Review.
The Groups' clients include many top contractors in the building and
construction sector in the UK, Sweden and Germany. The software products
provided by the Group are reasonably embedded in their client's core
operations and 45% of the Group's revenue is from recurring revenue contracts.
These maintenance contracts are renewed throughout the year although there is
a slightly greater weighting in the fourth quarter. Historically, there is a
low level of cancellations each year. For these reasons, the Group has good
visibility on any potential deterioration in its trading outlook and potential
risk to the business.
The Group's forecasts and projections, taking into account reasonably possible
changes in trading performance of the Group show that the Group should be able
to operate within the level of its current facilities. Revenue, operating
profit and cash flow budgets have been prepared at business unit level and as
a result, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operation for the foreseeable future. The
Group therefore continues to adopt the going concern basis in preparing its
consolidated financial statements.
3. The information herein has been prepared on the basis of the accounting
policies adopted for the year ended 31 December 2014, set out in the Company's
Annual Report and Accounts and as previously disclosed in the Company's Annual
Report and Accounts for the year ended 31 December 2013.
4. The calculation of the earnings per share is based on the total profit
after tax attributable to ordinary equity shareholders of £6,067,000 (2013:
Loss £10,218,000) and on 66,610,703 ordinary shares (2013: 59,761,646), being
the weighted average number of ordinary shares in issue during the year.
5. The Annual General Meeting of ELECO plc will be held at Brewers' Hall,
Aldermanbury Square, London EC2V 7HR on 8 June 2015 at 12 noon.
6. The Annual Report and Accounts for the year ended 31 December 2014 will
be sent to shareholders on 11 May 2015 and will be available to view on the
Company's website, www.eleco.com, from that date.
This information is provided by RNS
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