REG - Elecosoft PLC - Preliminary Results <Origin Href="QuoteRef">ELCO.L</Origin> - Part 2
27/03/2017 07:06
- Part 2: For the preceding part double click ID:nRSa5702Aa
2,323 1,361
Investing activities
Purchase of intangible assets (754) (754)
Purchase of property, plant and equipment (449) (58)
Acquisition of subsidiary undertakings net of cash acquired (1,700) (28)
Proceeds from sale of property, plant, equipment and intangible assets 100 167
Sale of business net of expenses - 754
Net cash (outflow)/inflow from investing activities (2,803) 81
Financing activities
Proceeds from new bank loan 3,160 -
Repayment of bank loans (1,722) (1,091)
Repayments of obligations under finance leases (153) (251)
Equity dividends paid (111) -
Net cash inflow/(outflow) from financing activities 1,174 (1,342)
Net increase in cash and cash equivalents 694 100
Cash and cash equivalents at beginning of period 1,283 1,198
Effects of changes in foreign exchange rates 260 (15)
Cash and cash equivalents at end of period 2,237 1,283
Cash and cash equivalents comprise:
Cash and short-term deposits 2,576 1,957
Bank overdrafts (339) (674)
2,237 1,283
Extract from Notes to the Consolidated Financial Statements
1. Revenue
Revenue from continuing operations disclosed in the income statement is
analysed as follows:
2016 2015
£'000 £'000
Licence sales 4,955 4,536
Recurring maintenance and support revenue 8,622 7,278
Services income 4,218 3,446
Total revenue 17,795 15,260
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.
2016 2015
Software Software
£'000 £'000
Revenue 17,795 15,260
Adjusted operating profit 4,721 3,446
Depreciation charge (207) (174)
Product development costs (1,968) (1,640)
Operating profit before amortisation of intangible assets and exceptionals 2,546 1,632
Amortisation of intangible assets (631) (495)
Acquisition expenses (212) -
Former directors' termination payments (109) (11)
Operating profit 1,594 1,126
Net finance cost (90) (120)
Segment profit before tax 1,504 1,006
Tax (261) (204)
Segment profit after tax 1,243 802
Internal development costs capitalised (625) (665)
Total development costs (2,593) (2,305)
Operating profit 1,594 1,126
Amortisation of intangible assets 631 495
Depreciation charge 207 174
EBITDA 2,432 1,795
Adjusted operating profit of £4,721,000 (2015: £3,446,000) is stated before
depreciation and amortisation of intangible assets, product development costs
and certain items considered as non-recurring. The latter includes acquisition
expenses and termination payments relating to former directors.
Development project costs are expensed as incurred unless they meet the
accounting policy requirements for capitalisation. The software projects that
have been capitalised in the twelve months to 31 December 2016 are explained
in the Financial Review.
2016 2015
Software Software
£'000 £'000
Group assets and liabilities
Segment assets 21,986 17,595
Unallocated assets - -
Total Group assets 21,986 17,595
Segment liabilities 12,270 9,682
Unallocated liabilities - -
Total Group liabilities 12,270 9,682
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:
2016 2015
£'000 £'000
UK 5,498 4,857
Scandinavia 6,745 5,950
Germany 2,982 2,308
Rest of Europe 1,653 1,359
Rest of World 917 786
17,795 15,260
Rest of World includes revenue from customers in the USA of £633,000 (2015:
£571,000).
Revenue by product group represents continuing operations revenue from
external customers.
Revenue by product group is as follows:
2016 2015
£'000 £'000
Project management 8,572 7,493
Site management 474 396
Estimating 2,964 2,557
Engineering 2,827 2,373
CAD/Design 1,137 1,001
Visualisation 1,821 1,440
17,795 15,260
The Group utilises resellers to access certain markets. Revenue by sales
channel represents continuing operations revenue from external customers.
2. Segment information continued
Revenue by sales channel is as follows:
2016 2015
£'000 £'000
Direct 16,674 14,236
Reseller 1,121 1,024
17,795 15,260
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:
2016 2015
£'000 £'000
UK 8,027 7,130
Scandinavia 6,145 4,350
Germany 1,396 1,040
Rest of Europe 88 44
Rest of World 2 1
15,658 12,565
Information about major customers
Revenues arising from sales to the Groups' largest customer were below the
reporting threshold of 10% of Group revenue (2015: Below 10% reporting
threshold).
3. Operating profit
The continuing operations operating profit for the period is stated after
charging/(crediting) the following items.
2016 2015
£'000 £'000
Software product development 1,968 1,640
Depreciation of property, plant and equipment 207 174
Amortisation of intangible assets acquired 389 380
Amortisation of capitalised development costs 242 115
Profit on disposal of property, plant and equipment (28) (18)
Foreign exchange (gains)/losses (73) 85
Fees payable to the Company's auditor for the audit of the Company's financial statements 38 35
Fees payable to the Company's auditor for other services:
- Audit of the subsidiaries financial statements 54 39
- Other assurance services 2 -
Operating lease rentals:
Plant, equipment and vehicles 42 47
Properties 394 359
Acquisition expenses 212 -
Former directors termination payments 109 11
4. Employee information
The average number of employees during the period, including Directors, in
continuing operations was made up as follows:
2016 2015
number number
Sales & marketing 54 57
Client services 56 52
Software development 46 41
Management and administration 34 28
190 178
Staff costs during the period, including Directors, in continuing operations
amounted to:
2016 2015
£'000 £'000
Wages and salaries 8,194 6,814
Social security 1,680 1,419
Pension costs 566 485
Share-based payments 13 20
10,453 8,739
Less: Development staff costs capitalised (625) (665)
9,828 8,074
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 details of the criteria for
capitalisation is set out in the Significant Accounting Policies under section
I.
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below:
2016 2015
£'000 £'000
Short-term employee benefits 576 643
Post-employment benefits 23 22
Termination benefits 100 11
Share based payments 13 20
Executive Directors 712 696
Fees - non-executive Directors 82 90
794 786
The emoluments of the highest paid Director were £280,000 (2015: £361,000).
Employers NIC payments in respect of the Directors' remuneration was £85,000
(2015: £95,000)
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 Groups' share based incentive
or pension schemes.
5. Net finance income/(cost)
Finance income and costs from continuing operations is set out below:
2016 2015
£'000 £'000
Finance income:
Bank and other interest receivable 3 1
Finance costs:
Bank overdraft and loan interest (84) (107)
Finance leases and hire purchase contracts (9) (14)
Total net finance cost (90) (120)
6. Taxation
(a) Tax on profit on ordinary activities
The tax charge in the income statement from continuing operations is as
follows:
2016 2015
£'000 £'000
Current tax:
UK corporation tax on profits of the year 34 2
34 2
Foreign tax 145 121
Total current tax 179 123
Deferred tax:
Origination and reversal of temporary differences 87 74
Tax adjustments in respect of previous years (5) 7
Total deferred tax 82 81
Tax charge in the income statement 261 204
Income tax for the UK has been calculated at the standard rate of UK
corporation tax of 20.0% effective from 1 April 2015 (2015: 20.25%) 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 the same as the standard rate of UK corporation tax of 20.0%
for the period under review. The reconciliation is explained below:
2016 2015
£'000 £'000
Profit on continuing operations before tax 1,504 1,006
Tax calculated at the average standard rate of UK corporation tax of 20.0% (2015: 20.25%) applied to profits before tax 301 204
Effects of:
Expenses not deductible for tax purposes 90 46
Research & development tax relief (54) (94)
Group relief/losses surrendered not paid - 4
Non taxable statutory compensation - (15)
Deferred tax not recognised (15) 39
Share option deduction - 4
Prior year adjustments (5) 7
Utilisation of losses (80) (17)
Tax rate differences in foreign jurisdictions 16 24
Other differences 8 2
Continuing operations tax charge for the year 261 204
(c) Unrecognised tax losses
The Group has tax losses of £696,000 (2015: £762,000) arising at one of its
operations in Germany for which no deferred tax
asset has been recognised and tax losses of £1,764,000 (2015: £1,874,000)
arising in the UK. Potential deferred tax asset not recognised in respect of
losses in UK subsidiaries is £347,000 (2015: £390,000). No deferred tax is
recognised on the unremitted earnings of overseas subsidiaries.
7. Dividends
Dividends of £111,000 (2015: £nil) were paid during the year as follows:
2016 2015 2016 2015
Ordinary shares per share per share £'000 £'000
Declared and paid during the year
Interim - current year 0.15 - 111 -
Final - previous year - - - -
0.15 - 111 -
The directors have recommended a final dividend of 0.25p per ordinary share
for 2016 (2015: 0.0p) resulting in a total dividend for the year of 0.40p per
ordinary share (2015: 0.0p) If the 2016 final dividend is approved at the
Annual General Meeting the dividend will be paid on 24 May 2017 to
shareholders on the register at the close of business on 7 April 2017 (ex-div
date 6 April 2017) In accordance with IFRS, the dividend is not provided for
as a liability in the accounts until it becomes a legal liability of the
Company and therefore will be recorded in the interim and annual accounts for
2017.
8. Basic and diluted earnings per share
The calculation of the basic and diluted earnings per ordinary share from
continuing operations is based on the data below:
2016 2015
Continuing operations £1,243,000 £802,000
Discontinued operations - £360,000
Total profit after taxation £1,243,000 £1,162,000
Basic weighted average number of shares 74,433,243 73,970,534
Dilutive effect of share options 1,029,000 882,000
Diluted weighted average number of shares 75,462,243 74,852,534
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.
Basic earnings per share 2016 2015
Continuing operations 1.7 p 1.1 p
Discontinued operations - p 0.5 p
Total operations 1.7 p 1.6 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
2016.
Diluted earnings per share 2016 2015
Continuing operations 1.6 p 1.1 p
Discontinued operations - p 0.5 p
Total operations 1.6 p 1.6 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 2015 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.
3. The Groups' clients include many top contractors in the building and
construction sector in the UK, Sweden, Germany, Benelux and the United States
with no significant client concentration. The software products and services
provided by the Group are reasonably embedded in their client's core
operations and 48% (2015: 48%) of the Groups' 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. Not-withstanding the Group has net
current liabilities of £2,743,000 at 31 December 2016 (2015: £3,081,000) these
amounts are after deferred income of £4,401,000 (2015: £3,708,000) relating to
annual maintenance contracts which are non-refundable. 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. After making
appropriate enquiries, 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
4. The information herein has been prepared on the basis of the accounting
policies adopted for the year ended 31 December 2016, 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 2015.
5. The Annual General Meeting of Elecosoft plc will be held Brewers' Hall,
Aldermanbury Square, London EC2V 7HR on 4th May 2017 at 12 noon.
6. The Annual Report and Accounts for the year ended 31 December 2016 will
be sent to shareholders by 10 April 2017 and will be available to view on the
Company's website, www.elecosoft.com, from that date.
This information is provided by RNS
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