REG - Elecosoft PLC - Preliminary Results <Origin Href="QuoteRef">ELCO.L</Origin> - Part 1

ElecoAnnouncement

18/04/2016 07:05

RNS Number : 4450V
Elecosoft PLC
18 April 2016
18 April 2016
Elecosoft plc
("Elecosoft", the "Company" or the "Group")
Preliminary Results 
For the Year Ended 31 December 2015
Elecosoft plc (AIM: ELCO), the AIM-listed construction software specialist, today announces its audited results for the year ended 31 December 2015.
Financial Highlights
Continuing operations
 Revenue 15.3m (2014 restated: 15.2m) of which 48% was from recurring maintenance and support revenue (2014 restated: 48%)
 Operating profit up 24% to 1.1m (2014 restated: 0.9m)
 Profit before tax up 47% to 1.0m (2014 restated: 0.7m) 
 EBITDA up 23% to 1.8m (2014 restated: 1.5m)
 Free cash flow increased to 0.7m (2014: outflow of 0.3m)
 Earnings per share - basic and diluted up 37% to 1.1p (2014 restated: 0.8p)
 Net borrowings decreased 61% to 0.8m (31 December 2014: 2.0m)
 Share capital reduction successfully completed on 1 July 2015 - positive distributable reserves at 31 December 2015
At constant exchange rates
 Revenue 16.6m, up 1.4m, 9% (2014: 15.2m)
 Operating profit 1.2m, up 29% (2014: 0.9m)
 Profit before tax 1.1m, up 54% (2014: 0.7m)
 Sales growth across all product areas and regions at constant exchange rates
Operational Highlights
 Launched new products including Bidcon, the leading Swedish project estimating software, into the UK market
 Won a significant order to supply a US Government department
 Won 'Project Management/Planning Software 2015' award at the Construction Computing awards for the second year in a row
 Investment in overseas markets including set up of own operation in the US supporting and growing existing reseller network
 Disposal of non-core architectural consultancy business in Sweden to focus on software and related services
 Board restructuring as outlined in separate announcement released today
Executive Chairman, John Ketteley said:
"I am pleased to report sales growth across all product areas and regions in 2015 at constant exchange rates and to confirm that the transformation of Elecosoft into a profitable international construction software specialist is complete. We now have the people with the skills, the experience and the flair together with an appropriate level of financial resources to achieve our objective of becoming a key provider of leading-edge software solutions and related services to the international construction, interior design and to the architectural industries worldwide.
I am pleased to report that 2016 has started encouragingly and that we expect to deliver significant revenue and profit growth in line with market expectations"
 For further information please contact:
Elecosoftplc
JHB Ketteley , Executive Chairman
Jason Ruddle, Chief Operating Officer
www.elecosoft.com
Tel: 0207 422 0044
Graham Spratling, Group Finance Director 
finnCap Ltd
Adrian Hargrave / Kate Bannatyne (Corporate Finance)
Malar Velaigam (Corporate Broking)
Tel: 0207 220 0500
Redleaf Communications
Rebecca Sanders-Hewett / David Ison
/ Susie Hudson
Tel: 0207 382 4730
elecosoft@redleafpr.com
About Elecosoft plc
Elecosoft is listed on the Alternative Investment Market in London (AIM: ELCO). It is a specialist international provider of software and related services to the architectural, engineering, construction and digital marketing industries from centres of excellence in the UK, Sweden, Germany and the US. Elecosoft's market leading software solutions are developed by teams in the United Kingdom, Sweden and Germany; and its software programs cover project management, construction site management, estimating, timber engineering, 3D design and visualisation, and cloud based digital marketing solutions.
For more information, please visitwww.elecosoft.com
Chairman's Statement
Elecosoft 
I am pleased to report growth across all product areas and regions in 2015 at constant exchange rates and to confirm that the transformation of Elecosoft into a profitable international construction software specialist is complete. We now have the people with the skills, the experience and the flair together with an appropriate level of financial resources to achieve our objective of becoming a key provider of leading-edge software solutions and related services to the international construction, interior design and to the architectural industries worldwide. 
Financial Performance in 2015
We continued to expand our sales channels and reseller networks in our markets in 2015 and established a new sales and marketing team in the United States during the year despite the fact that the strength of Sterling against the Swedish Krona, the Euro and the US Dollar for most of 2015 put considerable pressure on Group Revenue. Nevertheless, in the year under review, as reported, we succeeded in maintaining Group Revenue in Sterling terms at 15.3m, compared with Group Revenue of 15.2m in 2014. Group recurring maintenance and support revenue was also relatively flat at 7.3m (2014: 7.4m). 
The adverse impact of the strength of Sterling on Group Revenue for most of 2015 can be illustrated by the fact that in constant currency terms, Group Revenue would have been 16.6m in 2015 compared with 15.2m in 2014, an increase of 9 per cent. 
Thus, Operating Profit in 2015 was 1.1m, compared with 0.9m in 2014, an increase of 22 per cent; Profit before Tax was 1.0m compared with 0.7m in 2014, an increase of 43 per cent; EBITDA was 1.8m compared with 1.5m in 2014, an increase of 20 per cent; and Continuing Operations Earnings per share for 2015 were 1.1p compared with 0.8p in 2014, an increase of 37 per cent. 
The negative effect of the strength of Sterling in 2015 was less severe with regards to Operating Profit, Profit before Tax, EBITDA and Earnings per share. For example, Operating Profit at constant currency would have been 1.2m compared to 1.1m at actual rates.
Current trading and potential resumption of dividends in 2016
The Board decided not to propose the payment of a dividend in respect of the year ended 31 December 2015. However, the Board will continue to monitor the possibility of a resumption of dividends under review and will consider whether the declaration of a well-covered dividend in the latter part of 2016 would be merited.
Current financial position and Banking arrangements with Barclays Bank
The agreement with Barclays Bank to provide the banking facilities which enabled the Board of Elecosoft to complete the successful refinancing of the Group also resulted in much lower interest costs in the year under review. Continuing operations interest costs for 2015 were 120,000 compared with 220,000 in 2014, a reduction which I consider represents an appropriate reflection of the improvement in Elecosoft's financial position in the period. Better than anticipated cash flows from trading in the year under review and the receipt of the proceeds of the divestment of our Swedish architectural consultancy business provided an additional boost. 
Group net borrowings at 1 January 2015 consisted of net bank borrowings of 1.6m, together with finance leases of 0.4m; and Group net borrowings at 31 December 2015 consisted of net bank borrowings of 0.4m, together with finance leases of 0.4m. Thus we were able to reduce Group net borrowings totalling 2.0m on 1 January 2015, to 0.8m on 31 December 2015 and we expect interest costs to be reduced significantly going forward.
Divestment of our Swedish Consultancy business and Software Development Collaboration Agreement with Tyrens
The second half of 2015 saw the divestment of our Swedish architectural consultancy operations to Tyrens, a leading Swedish international construction consultancy firm. The consideration for the acquisition was Swedish Krona 11.1m (862,000) in cash. As a consequence, Elecosoft is now able to concentrate on the development of its specialist construction software interests, particularly in Sweden.
Prior to entering into the above negotiations with Tyrens in the latter part of 2015 we had been collaborating with our Swedish colleagues on the development of a state-of-the-art environmental software program for the construction industry. This was regarded by both parties as a very worthwhile project. Accordingly the parties concluded that there would be considerable merit in continuing with our software development collaboration. We have now entered into a formal collaboration agreement and look forward to working with Tyrens on new and innovative software projects within the framework of this agreement.
Software Development, Program Launches and Awards
Software development and maintenance continued to be one of Elecosoft's largest areas of expenditure in 2015. Of our total workforce of 178 employees during the year, 41, or 23 per cent, of our employees are software developers who work in centres of excellence in the UK, Sweden and Germany. These teams are responsible for the development of new software programs as well as the maintenance of our current portfolio of market leading software. In 2015,Elecosoft's development and maintenance spend was 2.3m, (2014: 2.6m) of which 665,000 (2014: 553,000) was capitalised as required pursuant to IAS 38. Software assets amortised in the year amounted to 495,000 (2014: 372,000). 
For the second year in succession our development team based at Elecosoft UK must be congratulated on Asta Powerproject project management software being voted the "Best Project Management and Planning Software of 2015" by peers at the Construction Industry Software Awards., 
Our Swedish colleagues also successfully launched Bidcon BIM, the new BIM estimating software, which will complement Asta Powerproject BIM and thus become a key element of Elecosoft's 5D BIM solution. Bidcon has been very well received by the Swedish estimating software market and has already penetrated the UK and Norwegian markets.
Our German colleagues also launched Arcon Evo, our new 3D architectural visualisation program. It is the successor to the original, highly regarded Arcon Classic program, which had for so long dominated this sector of the German 3D architectural visualisation market. We have also entered into a collaboration agreement with Buildit magazine to market the Arcon Evo program in conjunction with the Buildit magazine in the spring of 2016 in the UK.
The Board
This year has seen a couple of changes to the Company's Board. Nick Caw has left the Company to pursue other interests and we appreciate his significant contribution to the transformation of Elecosoft since his appointment as CEO in July 2014 and wish him every success in the future. In addition, it is my pleasure on your behalf to welcome Jason Ruddle to the Board. He is currently the Managing Director of Elecosoft UK and has agreed to become Chief Operating Officer of the Group. 
Jason began his career some 30 years ago as an apprentice in the construction industry; and early in his career gained a reputation as an individual who was keen to embrace change by embracing technology. He also enjoys a reputation among his colleagues for having a sound and common sense approach to business and under his leadership Elecosoft UK, of which he became Managing Director, began to travel very well and it is now our most profitable business. I was therefore delighted when he agreed to join the Board and we wish him well in his new Group role.
Employees
Elecosoft is a committed people business and when I say "committed people" I mean all my fellow Elecosoft employees in the United States, Sweden, Germany, Belgium, the Netherlands and the UK and thank them for their continuing dedicated contribution to Elecosoft, year in and year out, 
Our employees consist of software developers who strive to develop the most innovative products and related services for Elecosoft's customers worldwide; of support coaches who are the link between our software and our software users; of sales teamsand trainers who continue to service and expand our customer base and attend to the requirements of our existing customers; of market and digital specialists who generate new ideas and bring our products to the attention of the markets we serve; of our communications experts and "back office" colleagues, who together administer Elecosoft's finance, legal, communication and accounting functions and maintain the fabric of Elecosoft's corporate structure; and finally of my colleagues on the Board. These are the people that make Elecosoft tick, and I would like to thank them on your behalf for what they all do for your Company. 
Outlook
Elecosoft has now established itself as an international provider of market leading software applications for 5D BIM project management, estimation, 3D architectural visualisation, visual business systems, engineering software, and cloud based solutions. Although our software and related services are aimed principally at the internationalconstruction industry market, we also develop market leading software for digital marketing and architectural applications. Elecosoft has a major presence in the markets it serves; it is financially sound; and above all has outstanding teams of highly dedicated, talented, and creative developers backed by a strong management team. For these reasons, I have every confidence in the future of Elecosoft as we move forward. I am pleased to report that 2016 has started encouragingly and that we expect to deliver significant revenue and profit growth in line with market expectations
John Ketteley
Executive Chairman
15 April 2016
Operating Review
As a management team we have a number of medium-term objectives which include moving to become a genuinely integrated business, achieving predictable growth in both revenue and profit ahead of the wider software market, financial stability and being recognised as a creator of innovative solutions. With our legacy business largely behind us, 2015 allowed us to concentrate solely on our future as a software business and on making progress towards these objectives. There were of course challenges but I believe the progress made in the year has set us well for another solid performance in 2016.
An integrated business
Historically, due to our structure, we had made limited efforts to integrate our businesses - something we addressed in 2015. As our customers are increasingly seeing the benefit of integrating offerings and owning a range of complementary, marketing-leading solutions it was a logical step to consolidate our branding. We changed the majority of our Operating Company and our plc to Elecosoft - reflecting both our long heritage (Eleco) and our future focus (Software). From early 2016, we now trade in all markets bar Germany under the Elecosoft banner. This is part of a wider marketing restructure covering all major areas including product branding, websites and collateral. That work continues and we hope will be largely completed in 2016.
We brought disparate teams together, most notably our developer community to meet and talk regularly, to a structured agenda for the first time. This has already led us to work collectively in a number of areas including planning a common licensing platform, integrated product roadmap, sharing of resource for problem solving and a move towards a standard User Interface Design across our platform.
Predictable growth in revenue and profits, ahead of industry averages market
2015 was the first timeas a software-only businessthat we gave external guidance to the market on our performance. Taking into account currency we were in-line on revenue and ahead on PBT. In part this was due to improvements made to our reporting and planning activities. Our business model is based on growing revenue and profitability in tandem which we achieved in the year under review.Resource investment in 2015 (and budgeted for 2016) was predominately in sales and marketing roles and, in the main, hiring for new positions such as dedicated UK Bidcon, US channel resource and French Staircon sales staff.
Delivering Innovation
2015 saw the launch of two significant releases of our BIM tool, a 3D viewer for our project scheduling tool (AstaPowerproject) and estimating (Bidcon). That the tool is designed to link to our Estimation tool has also helped us differentiate by bringing our two core products together to deliver a unique 5D BIM. Our ability to be agile and accommodating to customer specific requirements also helps set us apart from competitors who lack this flexibility due to their size or structure.
The complete rewrite of our main estimating solution, Bidcon gave us the opportunity to sell meaningfully in markets outside of Sweden for the first time. Despite competition from well-established local providers we were able to win customers in these new markets due to the technical strength of the offering. This was a significant milestone, validating the rewrite and underscoring the quality of the original Swedish-based approach.
The anticipated release of a new version of our CAD solution, Arcon Evo, also highlighted the benefit of our Research and Development (R&D) programme, with a significant increase in maintenance contracts reflecting customer confidence in the future development path of the products
Brands
Project management
Our project management solution (Asta Powerproject) remains in great health and was the engine of our growth again in 2015. Our commitment to the US coincided with our largest license deal of the year, through a reseller to a US state department of transport which was strong validation of what great resellers can do in assisting with the scaling of our business. We also had a record turnout for our UK National User Forum in the Autumn.
Our Swedish based businesses had a mixed year - a stable domestic performance in Bidcon and Statcon was not matched internationally and we also faced challenges in our growing Staircon businesses.Considerable progress was made in the year to address the issues as part of a wider restructuring of our Swedish businesses.
Visualisation
We continued to see a strong performance from our Flooring visualisation business (ESIGN) and solid German domestic activity by Arcon. Growth was slower overall in our Arcon Evo business due to issues with our international reseller activity but work is underway to address this.
Territories
With the backdrop of a buoyant UK construction market, we saw another strong year of growth in this market in our core offerings. We introduced two significant new offerings across our BIM and Bidcon solutions and saw increased interest in both product areas through the year that have carried into 2016.
As reported in our 2014 accounts, in Sweden we undertook a complete overhaul of our business, including installing an entirely new management team and a complete reorganisation of our operations. This included the disposals of our non-core consulting business to Tyrens AB, a consolidation of development teams, and restructuring of our sales teams. We believe this makes us more streamlined and better places us for an improved financial performance in 2016.
We expanded our direct investment in three key markets - the US, the Netherlands and Germany. The focus in the first two will initially be on Asta Powerproject but will expand beyond this as we become more established in these markets in 2016. The timing and size of our largest US win has helped create the momentum we needed to gain credibility in the market and saw underlying sales grow by 55% even with that deal excluded.
Operations
One of our biggest challenges in 2015, as with 2014 was the impact of currency and consequently our activity in mainland Europe was adversely impacted by the strengthening of Sterling. We made improvements to our day to day reporting and enhanced our budgeting process - all aimed at providing a more cohesive, standardised operating model across the Group.
Outlook
Elecosoft's long-term goal remains to be a leading provider of integrated software solutions to the global architectural, engineering and construction ("AEC") industry. We made good progress towards this goal in 2015, in 2016 we will focus predominately in growing in the markets we are already committed to.
John Ketteley
Executive Chairman
15 April 2016
Financial Review
Earnings per share*
1.1p
2014: 0.8p
+38%
* continuing operations basic EPS.
The execution of the Group's strategy to grow its market share in existing and new markets during the year had a positive impact on the scale and growth rate of the Group's operations and financial performance. Exchange rate movements in the Group's core trading currencies during the year had an adverse impact but the Group enjoyed strong underlying sales growth.
Revenue
Continuing operations revenue for the year increased 1% to 15.3m.This increase was adversely impacted by the strength of Sterling against the Swedish Krona and Euro which account for over 50% of the Group's sales. On a constant currency basis revenue would have been 16.6m which represents a growth of 9%. 
The Group continues to enjoy high levels of recurring revenue from maintenance and support with the balance of the revenue coming from services and licence sales. The level of deferred income at the balance sheet date, which is a measure of future maintenance revenue, increased from 3.4m to 3.7m during the year representing a growth rate of over 7%.
Revenue through resellers grew 44% in the year to 1.0m and is key growth area moving into 2016. The revenue mix has changed since the disposal of the Swedish architectural consultancy business during the year with a reduced contribution from lower margin services income. The mix is now at: Licences 30% (2014: 24%), Maintenance 48% (2014: 45%) and Services 22% (2014: 31%) 
The geographic performance of the Group was mixed with strong sales growth in the UK up 13% to 4.9m (2014: 4.3m) and the Rest of World up 100% to 0.8m (2014: 0.4m). These upsides were partly offset by weaker sales across the Rest of Europe due to the currency headwinds referred to above. On a constant currency basis revenue grew in both Scandinavia and Germany by 2% and 4% respectively.
Gross profit
Gross profit is revenue less the direct cost of providing products and services to customers, principally the costs of training and consultancy staff. In 2015 the gross profit margin improved slightly from 88% to 89% due to a changed mix of Licences, Maintenance and Services revenue. 
Overheads
Selling and administrative expenses were broadly flat at 12.4m after amortisation of intangible assets of 0.5m (2014: 0.4m) as the Group continued its tight control on overheads. The average number of employees during the year was 178 (2014: 170).
Software product development expenses amounted to 2.3m for the year (2014: 2.6m) of which 0.7m (2014: 0.6m) was capitalised. The projects which met the requirements of the accounting policy for capitalisation and were therefore capitalised in the year relate to the following products: Arcon Evo, BIM APP v2, BIM APP v3 and Bidcon.net. The carrying value of these software assets together with the carrying value of software assets capitalised in previous periods was reviewed for impairment at the balance sheet date and no impairment was required. 
Net borrowings
803,000
2014: 2.0m
-61%
Profit 
Continuing operations operating profit was 1.1m (2014: 0.9m) a growth of 24% over the prior period. Profit before tax was 1.0m, up 0.3m, over 46% compared to the prior period. Taxation cost was 0.2m in the period (2014: 0.2m) representing 20% of profit before tax. (2014: 25%)
Balance Sheet and Cash Flow
Shareholder's equity increased to 7.9m, up 1.2m, 17% at 31 December compared to 2014. Net borrowings, including finance leases, were significantly lower at 0.8m compared to 2.0m in the prior period. This improvement was driven by strong free cash flow and business disposal proceeds and resulted in a significant drop in gearing from 30% at 1 January 2015 to 10% at 31 December. 
Trade and other receivables decreased to 2.9m (2014: 3.1m) partly due to the business disposal during the year. This represented 48 days sales outstanding compared to 49 for the prior period. Trade and other payables decreased to 1.3m (2014: 1.6m) and accruals were lower at 1.4m (2014: 1.7m).
Cash generated from operations amounted to 1.6m in the year, compared to a cash outflow of 0.4m in the prior period. Free cash flow increased to 0.7m compared to a cash outflow of 0.3m in the prior period.
The table below summarises the cash flow performance in the year. 
2015
2014
'000
'000
Cash generated/(used) in operations
1,640
(353)
Net capital (expenditure)/proceeds
(645)
392
Net interest paid
(152)
(237)
Income tax paid
(127)
(94)
Free cash flow
716
(292)
Acquisitions and disposals
726
448
Loan (repayments)/proceeds
(1,091)
1,487
Finance lease repayments
(251)
(283)
Issue of share capital
-
2,948
Net cash inflow
100
4,308
Exchange difference
(15)
(97)
Net increase in cash and cash equivalents
85
4,211
Capital and financing
The UK banking facilities are with Barclays Bank plc and the Group facilities comprise the following:
 a term loan of 3.0m, with 16 quarterly loan repayments of 187,500 commencing from October 2014, carrying an interest rate of 3.25% over base rate; and
 a 1.0m overdraft facility, carrying an interest rate of 2.75% over base rate
Security provided to the bank for the provision of these facilities is a cross guarantee and debenture between the parent company and certain UK subsidiary companies and a commitment of the shares of the operating companies.
Covenants have been made to the bank in respect of three elements: EBITA to gross financing costs, net borrowings to EBITDA and cash flow to debt service. These covenants are tested quarterly.
A share capital reduction was completed on 1 July 2015 and consequently the share capital, share premium and other reserve accounts have been adjusted in both the Group and Company Balance Sheets. 
Business disposal / Discontinued operations
The Group disposed of its non-core architectural consultancy business in Sweden in December 2015 for a total consideration of 862,000 (Swedish Krona 11,075,000). The profit before tax on disposal of this business, net of related purchased goodwill, was 468,000. Consequently the trading results of this operation for the period up to the disposal date have been presented under discontinued operations and the prior period has been restated accordingly. 
Earnings per share and dividends
The basic earnings per share on continuing operations is 1.1p (2014: 0.8p).The basic earnings per share on total operations is 1.6p (2014: loss 0.2p before discontinued exceptional items).
The successful completion of the share capital reduction and improved trading performance during the year will give the Board the opportunity to consider and recommend dividends in the foreseeable future. At present the Board has not recommended the payment of a dividend in respect of the year ended 31 December 2015. 
Graham Spratling
Group Finance Director
15 April 2016
Consolidated Income Statement
For the year ended 31 December 2015 
2014
2015
(restated)
Notes
'000
'000
Continuing operations
Revenue
1,2
15,260
15,172
Cost of sales
(1,688)
(1,858)
Gross profit
13,572
13,314
Operating expenses before amortisation of intangible assets and exceptionals
(11,951)
(11,898)
Amortisation of intangible assets
(495)
(372)
Exceptional items
3
-
(138)
Selling and administrative expenses
(12,446)
(12,408)
Operating profit
2,4
1,126
906
Finance income
6
1
3
Finance cost
6
(121)
(223)
Profit before tax
1,006
686
Tax
7
(204)
(173)
Profit for the financial period from continuing operations
802
513
Profit for the financial period from discontinued operations
8
360
5,554
Profit for the financial period
1,162
6,067
Attributable to:
Equity holders of the parent
1,162
6,067
Earnings per share - basic
Continuing operations
9
1.1
p
0.8
p
Discontinued operations
9
0.5
p
8.3
p
Total operations
9
1.6
p
9.1
p
Earnings per share - diluted
Continuing operations
9
1.1
p
0.8
p
Discontinued operations
9
0.5
p
8.3
p
Total operations
9
1.6
p
9.1
p
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2015
2015
2014
'000
'000
Profit for the period
1,162
6,067
Other comprehensive income:
Items that will be reclassified subsequently to profit and loss:
 Translation differences on foreign operations
(11)
60
Other comprehensive income net of tax
(11)
60
Total comprehensive income for the period
1,151
6,127
Attributable to:
Equity holders of the parent
1,151
6,127
Consolidated Statement of Changes in Equity
For the year 31 December 2015
Share capital
Share premium
Merger reserve
Translation reserve
Other reserve
Retained earnings
Total
'000
'000
'000
'000
'000
'000
'000
At 1 January 2015
7,487
7,923
4,086
(161)
(358)
(12,255)
6,722
Share-based payments
-
-
-
-
20
-
20
Capitalisation of merger reserve
4,086
-
(4,086)
-
-
-
-
Capital reduction
(10,824)
(7,923)
-
-
-
18,747
-
Transactions with owners
(6,738)
(7,923)
(4,086)
-
20
18,747
20
Profit for the period
-
-
-
-
-
1,162
1,162
Other comprehensive income:
Exchange differences on translation of net investments in foreign operations
-
-
-
(11)
-
-
(11)
Total comprehensive income for the period
-
-
-
(11)
-
1,162
1,151
At 31 December 2015
749
-
-
(172)
(338)
7,654
7,893
Share capital
Share premium
Merger reserve
Translation reserve
Other reserve
Retained earnings
Total
'000
'000
'000
'000
'000
'000
'000
At 1 January 2014
6,066
6,396
4,086
(221)
(358)
(18,322)
(2,353)
Issue of share capital
1,421
1,527
-
-
-
-
2,948
Transactions with owners
1,421
1,527
-
-
-
-
2,948
Profit for the period
-
-
-
-
-
6,067
6,067
Other comprehensive income:
Exchange differences on translation of net investments in foreign operations
-
-
-
60
-
-
60
Total comprehensive income for the period
-
-
-
60
-
6,067
6,127
At 31 December 2014
7,487
7,923
4,086
(161)
(358)
(12,255)
6,722
Consolidated Balance Sheet
At 31 December 2015
2015
2014
'000
'000
Non-current assets
Goodwill
10,152
10,571
Other intangible assets
1,910
1,683
Property, plant and equipment
503
575
Total non-current assets
12,565
12,829
Current assets
Inventories
9
8
Trade and other receivables
2,871
3,110
Current tax assets
173
148
Cash and cash equivalents
1,957
1,198
Total current assets
5,010
4,464
Total assets
17,575
17,293
Current liabilities
Bank overdraft
(674)
-
Borrowings
(750)
(750)
Obligations under finance leases
(139)
(141)
Trade and other payables
(1,255)
(1,586)
Provisions
(203)
(142)
Current tax liabilities
(2)
-
Accruals and deferred income
(5,068)
(5,189)
Total current liabilities
(8,091)
(7,808)
Non-current liabilities
Borrowings
(972)
(2,063)
Obligations under finance leases
(225)
(279)
Deferred tax liabilities
(242)
(162)
Non-current provisions
(139)
(220)
Other non-current liabilities
(13)
(39)
Total non-current liabilities
(1,591)
(2,763)
Total liabilities
(9,682)
(10,571)
Net assets
7,893
6,722
Equity
Share capital
749
7,487
Share premium account
-
7,923
Merger reserve
-
4,086
Translation reserve
(172)
(161)
Other reserve
(338)
(358)
Retained earnings
7,654
(12,255)
Equity attributable to shareholders of the parent
7,893
6,722
Consolidated Statement of Cash Flows
for the year ended 31 December 2015
2015
2014
'000
'000
Cash flows from operating activities
Profit before tax (including discontinued operations)
881
7,788
Net finance costs
123
228
Depreciation charge
174
198
Amortisation charge
495
397
Profit on sale of property, plant and equipment
(18)
(109)
Share-based payments charge
20
-
Retirement benefit obligation - derecognition
-
(7,738)
Decrease in provisions
(20)
(618)
Cash generated in operations before working capital movements
1,655
146
Decrease/(increase) in trade and other receivables
349
(155)
(Increase)/decrease in inventories and work in progress
(1)
8
Decrease in trade and other payables
(363)
(244)
Net increase in discontinued operations working capital
-
(108)
Cash generated/(used) in operations
1,640
(353)
Interest paid
(153)
(240)
Interest received
1
3
Income tax paid
(127)
(94)
Net cash inflow/(outflow) from operating activities
1,361
(684)
Investing activities
Purchase of intangible assets
(754)
(637)
Purchase of property, plant and equipment
(58)
(85)
Acquisition of subsidiary undertakings net of cash acquired
(28)
(26)
Proceeds from sale of property, plant, equipment and intangible assets
167
1,114
Sale of business net of expenses
754
474
Net cash inflow from investing activities
81
840
Financing activities
Proceeds from new bank loan
-
3,000
Repayment of bank loans
(1,091)
(1,513)
Repayments of obligations under finance leases
(251)
(283)
Issue of share capital
-
2,948
Net cash (outflow)/inflow from financing activities
(1,342)
4,152
Net increase in cash and cash equivalents
100
4,308
Cash and cash equivalents at beginning of period
1,198
(3,013)
Effects of changes in foreign exchange rates
(15)
(97)
Cash and cash equivalents at end of period
1,283
1,198
Cash and cash equivalents comprise:
Cash and short-term deposits
1,957
1,198
Bank overdrafts
(674)
-
1,283
1,198
Extract from Notes to the Consolidated Financial Statements 
1. Revenue
Revenue from continuing operations disclosed in the income statement is analysed as follows:
2015
2014
'000
'000
Licence sales
4,536
4,008
Recurring maintenance and support revenue
7,278
7,351
Services income
3,446
3,813
Total revenue
15,260
15,172
2. Segment information
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.
The chief operating decision 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.
2015
2014
Software
Software
'000
'000
Revenue
15,260 
15,172 
Adjusted operating profit
3,930 
3,999 
Depreciation charge
(174) 
(187) 
Product development costs
(1,640) 
(2,024) 
Operating profit before exceptionals and amortisation
1,621 
1,416 
Amortisation of intangible assets
(495) 
(372) 
Exceptional items
-
(138) 
Operating profit
1,126 
906 
Net finance cost
(120) 
(220) 
Segment profit before tax
1,006 
686 
Tax
(204) 
(173) 
Segment profit after tax
802 
513 
Development costs capitalised
(665) 
(553) 
Total development costs
(2,305) 
(2,577) 
Operating profit
1,126 
906 
Amortisation of intangible assets
495 
372 
Depreciation charge
174 
187 
EBITDA
1,795 
1,465 
2015
2014
Software
Software
'000
'000
Group assets and liabilities
Segment assets
17,575 
17,293 
Unallocated assets
-
-
Total Group assets
17,575 
17,293 
Segment liabilities
9,682 
10,571 
Unallocated liabilities
-
-
Total Group liabilities
9,682 
10,571 
Geographical, Product and sales channel information
Revenue by geographical area represents continuing operations revenue from external customers based upon the geographical location of the customer. 
Revenue by geographical destination is as follows:
2015
2014
'000
'000
UK
4,857
4,291
Scandinavia
5,950
6,605
Germany
2,308
2,447
Rest of Europe
1,359
1,404
Rest of World
786
425
15,260
15,172
Rest of World includes revenue from customers in the USA of 571,000 (2014: 163,000)
Revenue by product group represents continuing operations revenue from external customers.
Revenue by product group is as follows:
2015
2014
'000
'000
Project management
7,493
6,779
Site management
396
398
Estimating
2,557
2,885
Engineering
2,373
2,533
CAD/Design
1,001
1,036
Visualisation
1,440
1,541
15,260
15,172
The Group utilises resellers to access certain markets.. Revenue by sales channel represents continuing operations revenue from external customers.
Revenue by sales channel is as follows:
2015
2014
'000
'000
Direct
14,236
14,462
Reseller
1,024
710
15,260
15,172
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:
2015
2014
'000
'000
UK
7,130
6,780
Scandinavia
4,350
4,902
Germany
1,040
1,147
Rest of Europe
44
-
Rest of World
1
-
12,565
12,829
Information about major customers
Revenues arising from sales to the Group's largest customer were below the reporting threshold of 10% of Group revenue (2014: Below 10% reporting threshold). 
3. Exceptional items
Exceptional items represent income and costs considered necessary to be separately disclosed by virtue of their size or nature:
2015
2014
'000
'000
Restructuring costs
-
(113)
Capital reduction expenses
-
(25)
-
(138)
4. Operating profit
The continuing operations operating profit for the period is stated after charging/(crediting) the following items.
2015
2014
'000
'000
Software product development
1,640
2,024
Depreciation of property, plant and equipment
174
187
Amortisation of intangible assets acquired
380
360
Amortisation of capitalised development costs
115
12
Profit on disposal of property, plant and equipment
(18)
(17)
Foreign exchange losses
85
58
Fees payable to the Company's auditor for:
 The audit of the parent company and consolidated financial statements
35
47
Fees payable to the Company's auditor and its associates for other services:
 The audit of the Company's subsidiaries
32
47
 Other services
22
8
Operating lease rentals:
 Plant, equipment and vehicles
47
144
 Properties
359
247
Non-recurring items:
 Directors termination payment
11
100
5. Employee information
The average number of employees during the period, including Directors, in continuing operations was made up as follows:
2015
2014
number
number
Sales and marketing
57
50
Client services
52
50
Software development
41
42
Management and administration
28
28
178
170
Staff costs during the period, including Directors, in continuing operations amounted to:
2015
2014
'000
'000
Wages and salaries
6,279
6,546
Social security
1,255
1,381
Pension costs
379
370
Share-based payments
20
-
7,933
8,297
Less: Development staff costs capitalised
(665)
(553)
7,268
7,744
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:
2015
2014
'000
'000
Short-term employee benefits
643
647
Post-employment benefits
22
23
Termination benefits
11
100
Share based payments
20
-
Executive Directors
696
770
Fees - non-executive Directors
90
61
786
831
The emoluments of the highest paid Director were 361,000 (2014: 382,000). Employers NIC payments in respect of the Directors remuneration was 95,000 (2014: 83,000)
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:
2015
2014
'000
'000
Finance income:
 Bank and other interest receivable
1
3
Finance costs:
 Bank overdraft and loan interest
(107)
(209)
 Finance leases and hire purchase contracts
(14)
(14)
Total net finance cost
(120)
(220)
7. Taxation 
(a) Tax on profit on ordinary activities
The tax charge in the income statement from continuing operations is as follows:
2015
2014
'000
'000
Current tax:
UK corporation tax on profits of the year
2
-
2
-
Foreign tax
121
153
Total current tax
123
153
Deferred tax:
Origination and reversal of temporary differences
74
20
Tax adjustments in respect of previous years
7
-
Total deferred tax
81
20
Tax charge in the income statement
204
173
Income tax for the UK has been calculated at the standard rate of UK corporation tax of 20.25% effective from 1 April 2015 (2014: 21.49%) 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 the same as the standard rate of UK corporation tax of 20.25% for the period under review. The reconciliation is explained below:
2015
2014
'000
'000
Profit on continuing operations before tax
1,006
686
Tax calculated at the average standard rate of UK corporation tax of 20.25% (2014: 21.49%) applied to profits before tax
204
147
Effects of:
Expenses not deductible for tax purposes
46
73
Research & development tax relief
(94)
(81)
Group relief/losses surrendered not paid
4
(13)
Non taxable statutory compensation
(15)
-
Deferred tax not recognised
39
31
Share option deduction
4
-
Prior year adjustments
7
-
Utilisation of losses
(17)
-
Tax rate differences in foreign jurisdictions
24
12
Other differences
2
4
Continuing operations tax charge for the year
204
173
(c) Unrecognised tax losses
The Group has tax losses of 762,000 (2014: 828,000) arising at one of its operations in Germany for which no deferred tax asset has been recognised and tax losses of 1,874,000 (2014: 2,127,000) arising in the UK. Deferred tax un-provided in respect of losses in UK subsidiaries is 390,000 (2014: 440,000). No deferred tax is recognised on the unremitted earnings of overseas subsidiaries.
8. Discontinued operations
The trading results and profit on the disposal of the Swedish architectural consultancy business net of costs of disposal in the twelve months to 31 December 2015 are reported under discontinued operations. 
The results from discontinued operations which have been included in the income statement are set out below: 
2015
2014
'000
'000
Revenue
1,400
1,312
Cost of sales
(717)
(657)
Gross profit
683
655
Administrative expenses
(685)
(1,024)
Other operating costs
(120)
(259)
Operating loss before exceptionals
(122)
(628)
Exceptionals
-
7,738
Operating (loss)/profit
(122)
7,110
Finance cost
(3)
(8)
(Loss)/profit before tax
(125)
7,102
Taxation on discontinued operations
22
(1,548)
(Loss)/profit for the period from discontinued operations before disposals
(103)
5,554
Profit on disposals after tax
463
-
Profit for the period from discontinued operations
360
5,554
The net profit from the disposal of the Swedish architectural consultancy business sold during the year and included in the income statement are set out below:
2015
2014
'000
'000
Consideration on disposal
862
-
Net liabilities on disposal
17
-
Goodwill on disposal
(395)
-
Other disposal costs
(21)
-
Profit on disposal before tax
463
-
Tax on disposal of discontinued operations
-
-
Profit on disposal after tax
463
-
The cash consideration received on the disposal of the Swedish architectural consultancy business before liabilities transferred and expenses was 862,000. The net cash proceeds on the disposal after liabilities transferred and expenses was 754,000.
The results from discontinued operations which have been included in the cash flow statement are set out below:
2015
2014
'000
'000
Operating activities
92
(1,250)
Investing activities
54
960
Financing activities
(124)
(11)
Total cash flows
22
(301)
9. Basic and diluted earnings per share
The calculation of the basic and diluted earnings per ordinary share from continuing operations and discontinued operations is based on the data below:
2015
2014
Continuing operations
802,000
513,000
Discontinued operations before exceptionals
360,000
(636,000)
Discontinued operations exceptionals
0
6,190,000
Discontinued operations
360,000
5,554,000
Total profit after taxation
1,162,000
6,067,000
Basic weighted average number of shares
73,970,534
66,610,703
Dilutive effect of share options
882,000
-
Diluted weighted average number of shares
74,852,534
66,610,703
Basic earnings per ordinary share is calculated from 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 basic 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.
Basic earnings/(loss) per share 
2015
2014
Continuing operations
1.1
p
0.8
p
Discontinued operations before exceptionals
0.5
p
(1.0)
p
Discontinued operations exceptionals
-
p
9.3
p
Discontinued operations
0.5
p
8.3
p
Total operations
1.6
p
9.1
p
Dilutive earnings per ordinary share is calculated by adjusting the weighted average number of shares in issue for the reporting period to include the assumed conversion of the dilutive share options outstanding at 31 December 2015. 
Diluted earnings/(loss) per share
2015
2014
Continuing operations
1.1
p
0.8
p
Discontinued operations before exceptionals
0.5
p
(1.0)
p
Discontinued operations exceptionals
-
p
9.3
p
Discontinued operations
0.5
p
8.3
p
Total operations
1.6
p
9.1
p
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 2014 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, Germany, Benelux and the United States. The software products provided by the Group are reasonably embedded in their client's core operations and 48% (2014 restated: 48%) 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. For these reasons, the Group has good visibility on any potential deterioration in its trading outlook and potential risk to the business.
Historically, there is a low level of maintenance cancellations each year and the Board closely monitors clients that are potentially at risk of cancellation as well as the pipeline of new business.
The Group has both cash and undrawn credit facilities available to support its business operations and therefore the Board believes that the Group is well-positioned to manage the business risks. 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. Accordingly, the Group 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 2015, 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 2014.
4. The Annual General Meeting of Elecosoft plc will be held at Founders' Hall, 1 Cloth Fair, London EC1A 7HT on 26 May 2016 at 12 noon.
5. The Annual Report and Accounts for the year ended 31 December 2015 will be sent to shareholders by 29 April 2016 and will be available to view on the Company's website, www.elecosoft.com, from that date. 

This information is provided by RNS
The company news service from the London Stock Exchange
  END
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