RNS Number : 5037D
Eleco PLC
10 September 2024
 

RNS

 

10 September 2024

 

 

 

Eleco Plc

 

("Eleco", the "Group" or the "Company")

 

Interim Results

 

Interim Results for the six months ended 30 June 2024

 

The Board of Eleco plc (AIM: ELCO), the specialist software provider for the built environment, is pleased to announce its interim results for the six months ended 30 June 2024, based on unaudited management accounts:

 

Financial highlights

 

Revenues

·    Annualised Recurring Revenue (ARR)up 31% to £25.8m (H1 2023: £19.7m)

·    Total Recurring Revenue (TRR)2 of £12.0m (H1 2023: £9.7m), an increase of 24%, representing 74% of total revenue (H1 2023: 72%)

·    Total revenue increased by 21% to £16.3m (H1 2023: £13.5m) and at constant currency £16.5m, or increase of 12% before revenue contribution from acquisitions

 

Profitability

·    Gross margins: 90.5% (H1 2023: 89.3%) and gross profit £14.7m (H1 2023: £12.0m)

·    EBITDA3: up 30% to £3.0m (H1 2023: £2.3m)

·    Operating profit: up 36% to £1.5m (H1 2023: £1.1m)

·    Profit before taxation (PBT): £1.6m (H1 2023: £1.3m, including ARCON gain on disposal), an increase of 23%

·    Profit after taxation (PAT): £1.3m (H1 2023: £1.0m), an increase of 30%

·    Basic earnings per share: 1.5p (H1 2023: 1.2p), an increase of 25%

·    Adjusted EBITDA4: £3.3m (H1 2023: £2.6m), an increase of 27%

·    Adjusted profit before taxation4: £2.2m (H1 2023: £1.8m), an increase of 22%

·    Adjusted profit after taxation4: £1.7m (H1 2023: £1.4m), an increase of 21%   

·    Adjusted basic earnings per share4: 2.1p (H1 2023: 1.7p), an increase of 24%

 

Cash and dividend

·    Cash as at 30 June 2024 was £12.0m (at 30 June 2023: £9.4m; at 31 December 2023: £10.9m) reflecting strong cash generation notwithstanding the Vertical Digital acquisition consideration of £1.1m and an increased final dividend payment of £0.5m (H1 2023: final dividend payment of £0.4m). The Group remains free of debt. 

·    Interim dividend: 0.30p per share (H1 2023: 0.25p per share), an increase of 20%

 

Operational highlights

 

M&A Strategy

·    Acquisition and integration of Vertical Digital to enhance the Group's technical capabilities to a multinational audience in April 2024, providing agile and innovation software development, technical consulting and upskilling solutions 

 

Technology

·    Asta Vision LiveTM launched in May 2024 providing powerful multiple project collaboration capabilities for planners and schedulers

·    AstaGPTTM, Generative AI support was developed in-house, and launched in March 2024. Shortlisted for the Innovation of the Year at the Digital Construction Awards 2024

 

Growth

·    Record recurring revenue growth and record software year-on-year total revenue growth

·    Net revenue retention and net new customers progression

·    Great Place to Work® certification achieved for all business units that qualify

 

Jonathan Hunter, Chief Executive Officer of Eleco plc, said:

 

"I am proud to report strong momentum in Eleco's trading performance for the first six months of the 2024 financial year, moving significantly ahead of the first six months of 2023.   

 

The impetus on organic growth has made Eleco a more resilient business with greater revenue visibility and is expected to help the Group reach new heights as positive momentum develops.  As well as organic growth, we also continue to focus on acquisitions, with our most recent, the Vertical Digital group of companies in Romania ('Vertical Digital'), completed in mid-April 2024. 

Our loyal customer base, customer centric culture and ongoing investment in people and technology underpin our drive for growth and we are confident that Eleco will maintain momentum and continue to take advantage of emerging industry opportunities. We continue to trade in line with expectations."

1 ARR is defined as normalised annualised recurring revenues and includes revenues from subscription licences, contract values of annual support and maintenance, and SaaS contracts.  This ARR figure is calculated with the inclusion of contributions from acquisitions as part of the Group business going forward.  

2 TRR is defined as the recurring revenues from subscription licences, contract values of annual support and maintenance, and SaaS contracts.

3 EBITDA is defined as Earnings before Interest, Tax, Depreciation, and Amortisation and Impairment of Intangible Assets. 

4 Adjusted measures are further defined in note 12. 

 

For further information, please contact:

Eleco plc

+44 (0)20 7422 8000

Jonathan Hunter, Chief Executive Officer


Neil Pritchard, Chief Financial Officer




Cavendish Capital Markets Limited

+44 (0)20 7220 0500

Geoff Nash  / Seamus Fricker (Corporate Finance)


Tim Redfern / Harriet Ward (ECM)




SEC Newgate UK

+44 (0)20 3757 6882

Elisabeth Cowell / Bob Huxford

eleco@secnewgate.co.uk




 

About Eleco plc

Eleco plc is an AIM-listed (AIM: ELCO) specialist international provider of software and related services to the built environment through its operating brands Elecosoft, BestOutcome, Vertical Digital and Veeuze from centres of excellence in the UK, Sweden, Germany, the Netherlands, Romania and the USA.

The Company's software solutions are trusted by international customers and used throughout the building lifecycle from early planning and design stages to construction, interior fit out, asset management and facilities management to support project management, estimation, visualisation, Building Information Modelling (BIM) and property management.

For further information please visit www.eleco.com.

 

Chairman's Statement

 

Introduction

I am delighted to report that Eleco has delivered an excellent set of interim results, significantly ahead of H1 2023.

Eleco is well positioned to benefit from the built environment's ongoing acceleration of technology adoption in fields including project delivery, cost estimation and facilities management. This is a global trend as companies seek to increase efficiency, strengthen risk management and in turn, improve productivity.

Strategic Progress

Alongside improvements in the underlying performance of the core business, the Group continues to expand its footprint inorganically.

Building on the divestment of the ARCON business and acquisition of BestOutcome in 2023, the Group acquired the Romanian-based Vertical Digital Group for £1.1m in April 2024. This added agile and enhanced R&D capabilities for Eleco's innovation roadmaps as well as technical consultancy for customers. We continue to identify and actively pursue potential M&A opportunities in our chosen geographic and end-to-end customer offer.

Performance

H1 2024 builds on the improved business performance in 2023. As planned, we delivered enhanced revenue and profitability.

Recurring revenues represented 74 per cent of total revenues in the period (H1 2023: 72 per cent). ARR (Annual Recurring Revenue) was up 31 per cent to £25.8m (H1 2023: £19.7m). TRR (Total Recurring Revenue) increased by 24 per cent to £12.0m (H1 2023: £9.7m). Total revenue increased by 21 per cent to £16.3m (H1 2023: £13.5m) or 12 per cent, excluding revenue contribution from acquisitions.

Showing improved operational leverage, Adjusted EBITDA increased by 27 per cent to £3.3 million (H1 2023: £2.6m), with Adjusted profit before taxation up 22 per cent to £2.2m (H1 2023: £1.8m). Adjusted EPS was 2.1 pence (H1 2023: 1.7 pence).

The Company also continues to enjoy strong cash generation, despite the Vertical Digital acquisition and an increased final dividend payment to our loyal shareholders in the period. Cash as at 30 June 2024 was £12.0m (at 30 June 2023: £9.4m; at 31 December 2023: £10.9m).

Environmental, Social & Governance (ESG)

I am pleased to report that we continue to make strides to both minimise our own internal carbon footprint but also find ways to support our customers in their journey to meet Net Zero. The ESG Implementation Team is progressing internal measures and initiatives following on from our materiality assessment.

While we expanded our Great Place to Work® certifications this year, we are also undertaking further assessments of our employee offer and internal training and progression. Likewise, we have updated some additional group policies and work is underway to further enhance our risk-based governance framework.

Employees

We continue to invest in senior leadership roles at both Group and subsidiary company levels to support the next stage of Eleco's journey and its scaling up ambitions. 

Our employees, fostered by our Eleco-specific corporate culture, remain central to our success and achievements. On behalf of the Board, my many thanks go to them for their continued efforts, dedication and support.

Dividend

Eleco has a progressive and sustainable dividend policy. In line with the continued success of the Group and its growth in profitability, the Board is again increasing the interim dividend to 0.30 pence per share (H1 2024: 0.25 pence per share), a 20 per cent uplift.  This interim dividend is payable on 4 October 2024 to shareholders on the Register on 20 September 2024, and the ex-dividend date will be 19 September 2024.  

Current trading and outlook

We have delivered significant improvements in operational and financial business performance during H1 2024.

Our prospects are dynamic and exciting, and we are well positioned to further deliver on our strategic plans via both inorganic and organic growth. We are a high recurring revenue software business that is central to our customers' success and delivers a level of predictable performance on behalf of our shareholders.

Looking forward, we remain confident of continued international growth and the Group continues to trade  in line with market expectations for the full year 2024.

 

Mark Castle

Non-Executive Chairman

9 September 2024

 

 

CEO's Statement

 

Introduction

 

I am proud to report strong momentum in Eleco's trading performance for the first six months of the 2024 financial year, moving significantly ahead of the first six months of 2023.   

 

The impetus on organic growth has made Eleco a more resilient business with greater revenue visibility and is expected to help the Group reach new heights as positive momentum develops.  As well as organic growth, we also continue to focus on acquisitions, with our most recent, the Vertical Digital group of companies in Romania ('Vertical Digital'), completed in mid-April 2024.  

 

Trading

 

The Group increased its revenue by 21% to £16.3m (H1 2023: £13.5m). Excluding the effects of the BestOutcome acquisition, which took place after the comparative period, we have delivered double digit growth with revenue increasing by 12%, which is significantly higher than recent historic growth levels. 

 

Annualised Recurring Revenue (recurring revenue in the month of June 2024 multiplied by twelve) increased by a record 31 per cent to £25.8m (H1 2023: £19.7m) and the Total Recurring Revenue (recurring revenue across the six month period) increased a record 24 per cent to £12.0m (H1 2023: £9.7 million). Average ARR per customer and per licence improved in the period, as did the average number of licences per customer.

 

Revenue growth was greater than growth in overheads (even including the cost bases of acquisitions), such that margins improved and profits grew at a higher rate than revenues. 

 

Adjusted EBITDA increased by 27 per cent to £3.3m (H1 2023: £2.6m); with Adjusted operating profit ahead by 29 per cent at £2.2m (H1 2024: £1.7 million); Adjusted profit before taxation up 22 per cent  to £2.2m (H1 2023: £1.8m) and Adjusted profit after taxation improving by 21 per cent to £1.7m (H1 2023: £1.4m). Adjusted Earnings Per Share (EPS) at the period end was 2.1 pence (H1 2023: 1.7 pence), a 24 per cent rise. 

 

Unadjusted measures of profitability showed similar improvements: EBITDA increased by 30 per cent to £3.0m (H1 2023: £2.3 million); operating profit improved by 36 per cent to £1.5m (H1 2023: £1.1m); profit before taxation was ahead by 23 per cent to £1.6m (H1 2023: £1.3m); and profit after taxation up 30 per cent to £1.3m (H1 2023: £1.0m).   Basic EPS showed a 25 per cent increase at 1.5 pence per share (H1 2023: 1.2 pence per share).    

 

The business continues to be cash generative, with the cash position of £12.0m at 30 June 2024 (at 30 June 2023: £9.4m; at 31 December 2023: £10.9m). This was despite the payment of £1.1m for the Vertical Digital acquisition in April 2024 and increased dividend payments totaling £0.5m (H1 2023: final dividend payment of £0.4m).

 

 

Strategy

 

Eleco's purpose and mission is to solve the challenges of the built environment through digital transformation by providing world-class software to our customers who trust us as an established, proven and agile partner. 

The Group is delivering this through a well-governed, profitable, scalable and resilient operating business, which we refer to as the Growth Platform. The Growth Platform underpins our three strategic pillars which are as follows:

·    Go-to-Market

·    Technology and Innovation

·    Mergers and Acquisitions (M&A)

Go-to-Market

 

The Group continues to develop its Go-To-Market sales and marketing capabilities, building on sales enablement and scaling initiatives undertaken in 2023.  Net revenue retention in the first six months was over 108 per cent compared with 104 per cent for the 2023 year, with the total number of new customers by value more than double that of existing customers lost by value.   

 

The US Go-To-Market activity continues to demonstrate growth, with the first six months of 2024 being ahead of last six months of 2023.  In February 2024, we hosted our USA Innovation Summit, where prestigious customers including Mortenson Construction and PennDOT (Pennsylvania Department of Transportation) shared their positive experiences of using our solutions.  Whilst competition in the US remains strong, Eleco's technology is proving to deliver advanced capabilities and continuing to gain recognition.

 

Technology and Innovation

 

Asta Vision LiveTM, was released in the period, a powerful collaboration feature which allows multiple project planners and stakeholders to work simultaneously on a project in an encrypted, SaaS cloud-based environment.  Customer response to date has been very positive.

 

The use of AI provides better analysis and saves our customers' time; it is not at a stage of replacing skilled human intervention completely in our complex industry. Our customers have benefited from using AstaGPTTM Generative AI to find instant tailored support from the wealth of our knowledge bank of documentation. AstaGPTTM queries have overtaken those of our support desk and are helping new customers familiarise themselves with Asta for the first time. It was also pleasing to see AstaGPTTM shortlisted for the Innovation of the Year at the Digital Construction Awards 2024. 

 

Mergers and Acquisitions

 

The Group's acquisition strategy involves a considered approach to enhance the scale and value of Eleco and expand its capabilities and profitability. Acquisition opportunities seek to complement and/or extend the Group's technological solutions, potentially also widening the customer base and geographical footprint.

 

Integration of the April-acquired Vertical Digital business is progressing well.  This has bolstered our ability to meet our internal technical resourcing demands, utilising its proven track record in agile and innovative software development and consulting across many European and multinational end-customers.

 

Our Markets

 

The construction and real-estate sector is often criticised for being slow to adopt technology, but it is also a sector that is being challenged to deliver increasingly complex projects in a safe and sustainable way whilst remaining ever mindful of the competitive landscape.

 

Eleco operates across markets with several macroeconomic and macro societal drivers including population growth, digitalisation, regulation and land space. There is also continual pressure on margins in an industry which is cost intensive, complex, multi-disciplined and multi-party, as well as pressure to raise environmental standards and meet regulatory and compliance requirements. 

 

Eleco has excellent opportunities for organic growth across the core geographies in which it operates, by expanding technology adoption with its existing customer base and by attracting new customers who are on their digital transformation journey. 

 

With data becoming a common thread across all customer departments and in particular referred to as the Golden Thread in property information, there are opportunities to offer more capabilities across organisations and fulfil joined-up thinking for our customers, as well as providing bespoke services based on the Group's software being at the centre of these numerous construction workstreams.

 

Summary and Outlook

 

The built environment market is buoyant and continues to present a significant opportunity for Eleco, due to the increasing adoption of technology to solve the challenges faced by construction and property management companies.  As Eleco expands its presence in its core geographical markets, it continues to strengthen its reputation as a trusted provider of best-of-breed solutions.

 

The Executive team is committed to the delivery of growth through the successful execution of its clearly defined strategy aimed at increasing recurring revenues as well as seeking value-enhancing acquisition opportunities that meet its strategic M&A criteria.

 

The excellent result in the first half of 2024 is due principally to the outstanding effort, initiative and creativity of our employees across the Group and I would like to thank them for their tremendous contribution. Our loyal customer base, customer centric culture and ongoing investment in people and technology underpin our drive for growth and we are confident that Eleco will maintain momentum and continue to take advantage of emerging industry opportunities.  We continue to trade in line with expectations. 

 

Jonathan Hunter

Chief Executive Officer

9 September 2024


Condensed Consolidated Income Statement

for the financial period ended 30 June 2024

 



Six months to 30 June

Year ended

31 December

2023

£'000

Continuing operations

Note

2024

(unaudited)

£'000

2023

(unaudited)

£'000

Revenue

3, 4

16,252

13,486

28,006

Cost of sales


(1,550)

(1,440)

(2,855)

Gross profit


14,702

12,046

25,151

Depreciation and amortisation of intangible assets


(1,449)

(1,128)

(2,404)

Acquisition-related expenses and stamp duties


(225)

(262)

(279)

Share-based payments


(103)

(148)

(190)

Other selling and administrative expenses


(11,378)

(9,438)

(19,075)

Selling and administrative expenses


(13,155)

(10,976)

(21,948)

Operating profit

5

1,547

1,070

3,203

Gain on business disposal

14

-

150

152

Finance expense

6

(30)

(25)

(65)

Finance income

6

116

60

127

Profit before taxation


1,633

1,255

3,417

Taxation


(358)

(236)

(762)

Profit after taxation for the financial period


1,275

1,019

2,655

Attributable to:





Equity holders of the parent


1,275

1,019

2,655

Earnings per share (pence per share)

 

 

 

 

Basic earnings per share

7

1.5p

1.2p

3.2p

Diluted earnings per share

7

1.5p

1.2p

3.2p

 

Condensed Consolidated Statement of Comprehensive Income

for the financial period ended 30 June 2024 

 


Six months to 30 June

Year ended

31 December

2023

£'000


2024

(unaudited)

£'000

2023

(unaudited)

£'000

Profit for the period

1,275

1,019

2,655

Other comprehensive income/(expense):

 



Items that will be reclassified subsequently to profit or loss:

 

 

 

Translation differences on foreign operations

(293)

(376)

(124)

Other comprehensive expense net of tax

(293)

(376)

(124)

Total comprehensive income for the period

982

643

2,531

Attributable to:

 

 

 

Equity holders of the parent

982

643

2,531

 

Condensed Consolidated Statement of Changes in Equity

for the financial period ended 30 June 2024

 

 

 

Share capital

£'000

Share premium

£'000

Merger reserve

£'000

Translation

reserve

£'000

Share options reserve

£'000

Employee share ownership trust

£'000

Retained earnings

£'000

 

Total

£'000

At 1 January 2024

832

2,418

1,002

(509)

621

(358)

23,353

27,359

Dividends

-

-

-

-

-

-

(453)

(453)

Share-based payments

-

-

-

-

103

-

-

103

Deferred tax on intrinsic value of vested options

-

-

-

-

71

-

-

71

Elimination of exercised share-based payments

 

-

 

-

 

-

 

-

 

         (10)

 

-

 

10

 

-

Issue of share capital

1

26

-

-

-

-

-

27

Transactions with owners

1

26

-

-

164

-

(443)

(252)

Profit for the period

-

-

-

-

-

-

1,275

   1,275

Other comprehensive expense:









Exchange differences on translation of net investments in foreign operations

-

-

-

(293)

-

-

-

(293)

Total comprehensive(expense)/ income for the period

-

-

-

(293)

-

-

1,275

982

At 30 June 2024 (unaudited)

833

2,444

1,002

(802)

785

(358)

24,185

28,089

 


Share capital

£'000

Share premium

£'000

Merger reserve

£'000

Translation

reserve

£'000

Share options reserve

£'000

Employee share ownership trust

£'000

Retained earnings

£'000

 

Total

£'000

At 1 January 2023

832

2,406

1,002

(385)

553

(358)

21,792

25,842

Dividends

-

-

-

-

-

-

(889)

(889)

Share-based payments

-

-

-

-

148

-

-

148

Elimination of exercised share-based payments

-

-

-

-

(6)

-

6

-

Issue of share capital

-

12

-

-

-

-

-

12

Transactions with owners

-

12

-

-

142

-

(883)

(729)

Profit for the period

-

-

-

-

-

-

1,019

1,019

Other comprehensive (expense):









Exchange differences on translation of net investments in foreign operations

-

-

-

(376)

-

-

-

(376)

Total comprehensive (expense)/income for the period

-

-

-

(376)

-

-

1,019

643

At 30 June 2023 (unaudited)

832

2,418

1,002

(761)

695

(358)

21,928

25,756

 


Share capital

£'000

Share premium

£'000

Merger reserve

£'000

Translation

reserve

£'000

Share options reserve

£'000

Employee share ownership trust

£'000

Retained earnings

£'000

 

Total

£'000

At 1 January 2023

832

2,406

1,002

(385)

553

(358)

21,792

25,842

Dividends

-

-

-

-

-

-

(1,094)

(1,094)

Share-based payments

-

-

-

-

190

-

-

190

Deferred tax on intrinsic value of vested options

-

-

-

-

(122)

-

-

(122)

Issue of share capital

-

12

-

-

-

-

-

12

Transactions with owners

-

12

-

-

68

-

(1,094)

(1,014)

Profit for the period

-

-

-

-

-

-

2,655

2,655

Other comprehensive (expense):









Exchange differences on translation of net investments in foreign operations

-

-

-

(124)

-

-

-

(124)

Total comprehensive (expense)/income for the period

-

-

-

(124)

-

-

2,655

2,531

At 31 December 2023

832

2,418

1,002

(509)

621

(358)

23,353

27,359


Condensed Consolidated Balance Sheet

at 30 June 2024

 



30 June



 

 

Note

2024

(unaudited)

£'000

2023

(unaudited)

£'000

31 December

2023

£'000

Non-current assets





Goodwill


18,987

18,834

18,544

Other intangible assets


10,024

8,188

9,000

Property, plant and equipment


775

947

766

Right-of-Use assets


1,012

982

1,274

Deferred tax assets


342

85

111

Total non-current assets


31,140

29,036

29,695

Current assets


 



Inventories


136

89

113

Trade and other receivables


4,847

4,512

5,033

Current tax assets


675

288

232

Cash and cash equivalents


12,002

9,410

10,903

Total current assets


17,660

14,299

16,281

Total assets


48,800

43,335

45,976

Current liabilities


 



Lease liabilities


(583)

(467)

(542)

Trade and other payables


(2,031)

(1,788)

(1,904)

Current tax liabilities


(33)

(109)

(253)

Accruals and deferred income

10

(14,776)

(12,025)

(12,574)

Total current liabilities


(17,423)

(14,389)

(15,273)

Non-current liabilities


 



Lease liabilities


(762)

(1,002)

(918)

Deferred tax liabilities


(2,500)

(2,162)

(2,400)

Provisions


(26)

(26)

(26)

Total non-current liabilities


(3,288)

(3,190)

(3,344)

Total liabilities


(20,711)

(17,579)

(18,617)

Net assets


28,089

25,756

27,359

Equity


 



Share capital


833

832

832

Share premium 


2,444

2,418

2,418

Merger reserve


1,002

1,002

1,002

Translation reserve


(802)

(761)

(509)

Share options reserve


785

695

621

Employee share ownership trust


(358)

(358)

(358)

Retained earnings


24,185

21,928

23,353

Equity attributable to shareholders of the parent


28,089

25,756

27,359

 

Condensed Consolidated Statement of Cash Flows

for the financial period ended 30 June 2024

 


Six months to 30 June

Year ended

31 December

2023

£'000


Note

2024

(unaudited)

£'000

2023

(unaudited)

£'000

Cash flows from operating activities


 



Profit after taxation for the financial period


1,275

1,019

2,655

Income tax expense


358

236

762

Amortisation of intangible assets


1,126

844

1,774

Depreciation charge


323

284

630

Profit on sale of property, plant and equipment


-

(15)

(13)

Finance expense


31

25

65

Finance income


(117)

(60)

(127)

Share-based payments expense


103

148

190

Gain on business disposal

14

-

(150)

(152)

Cash generated from operations before working capital movements


3,099

2,331

5,784

Decrease/(increase) in trade and other receivables


186

(428)

(780)

Increase in inventories and work in progress


(26)

(45)

(70)

Increase in trade and other payables, accruals and deferred income


2,570

700

1,461

Cash generated from operations


5,829

2,820

6,395

Net taxation paid


(1,053)

(131)

(501)

Net cash inflow from operating activities


4,776

2,689

5,894

 


 



Investing activities


 



Investment in development expenditure


(1,450)

(996)

(2,256)

Investment in other intangible assets


(111)

-

(127)

Purchase of property, plant and equipment


(11)

(35)

(133)

Acquisition of subsidiary undertakings net of cash acquired

15

(1,280)

(3,827)

(3,838)

Net proceeds on disposal of subsidiary undertakings


-

511

510

Proceeds from sale of property, plant and equipment


-

21

37

Net cash outflow from investing activities


(2,852)

(4,326)

(5,807)

 


 



Financing activities


 



Finance expense


(31)

(24)

(65)

Finance income


117

97

127

Repayments of principal of lease liabilities


(309)

(270)

(595)

Equity dividends paid

8

(453)

(889)

(1,094)

Issue of share capital


26

12

12

Net cash outflow from financing activities


(650)

(1,074)

(1,615)

Net increase/(decrease) in cash and cash equivalents


1,274

(2,711)

(1,528)



 



Cash and cash equivalents at beginning of period


10,903

12,538

12,538

Exchange losses on cash and cash equivalents


(175)

(417)

(107)

Cash and cash equivalents at end of period


12,002

9,410

10,903

 

Notes to the Condensed Consolidated Interim Financial Information

 

1. General information

 

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Dawson House, 5 Jewry Street, London, EC3N 2EX.

 

The Company is listed on AIM, a market operated by the London Stock Exchange plc.

 

The condensed consolidated interim financial information does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The Group's consolidated financial statements for the year ended 31 December 2023 have been filed at Companies House. The audit report was not qualified and did not contain a reference to any matter to which the auditor drew attention by way of emphasis and did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.

 

2. Basis of preparation

 

The condensed consolidated interim financial statements for the six months to 30 June 2024 have been prepared in accordance with the accounting policies which will be applied in the twelve months financial statements to 31 December 2024. These accounting policies will be drawn up in accordance with applicable law and UK-adopted International Accounting Standards (UK-IAS) that will be effective at 31 December 2024.

 

The condensed consolidated interim financial statements are unaudited. They do not include all the information and disclosures required in the annual financial statements or for full compliance with UK-IAS, and therefore should be read in conjunction with the Group's published financial statements for the year ended 31 December 2023.The comparative figures for the year ended 31 December 2023 are not the Company's statutory accounts for that period but have been extracted from these accounts.

 

The Directors, having considered the Group's current financial resources, have concluded that they are adequate for the Group's present requirements. Therefore, the condensed consolidated interim financial information has been prepared on the going concern basis.

 

Estimates

Application of the Group's accounting policies in preparing condensed consolidated interim financial statements requires management to make judgements and estimates that affect the reported amount of assets and liabilities, revenues and expenses. Actual results may ultimately differ from these estimates.

 

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2023.

 

Risks and uncertainties

A summary of the Group's principal risks and uncertainties was set out on pages 27 to 29 of the 2023 Annual Report and Accounts. The Board considers these risks and uncertainties are still relevant to the current financial year and the impact of changes is reviewed in the Non-Executive Chairman's and Chief Executive's statements contained in this report, where appropriate to do so.

 

The Interim Report was approved by the Directors on 9 September 2024.

 

3. Revenue

 

Revenue disclosed in the income statement is analysed as follows:

 


Six months to 30 June

Year to

31 December

2023

£'000


2024

£'000

2023

£'000

Perpetual licence revenue

724

1,028

1,532

Recurring maintenance, support, SaaS and subscription revenue

11,995

9,692

20,732

Services income

3,533

2,766

5,742


16,252

13,486

28,006

Revenue is recognised for each category as follows:

·      Perpetual licences - recognised at the point of transfer (delivery) of the licence to a customer.

·      Recurring revenue: other licences: SaaS, maintenance, support and subscriptions - as these services are provided over the term of the contract, revenue is recognised over the life of the contract.

·      Services - recognised on delivery of the service.

 

4. Segmental information

 

Operating segments

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.

 

The chief operating decision makers have been identified as the Executive Directors. The Group revenue is derived entirely from the sale of perpetual software licences, software maintenance and support and related services. Consequently, the Executive Directors review the management information on the basis of this one unified segment of software.

 

Geographical, product and sales channel information

Revenue by geographical segment represents revenue from external customers based upon the geographical location of the customer.

 


Six months to 30 June

Year ended

31 December

2023

£'000


2024

£'000

2023

£'000

UK

7,634

5,676

13,034

Scandinavia

2,893

3,035

5,880

Germany

1,874

1,767

3.950

USA

752

570

1,184

Rest of Europe

2,637

2,123

3,364

Rest of World

462

315

594


16,252

13,486

28,006

 

Revenue by product group


Six months to 30 June

Year ended

31 December

2023

£'000


2024

£'000

2023

£'000

Revenue from software and related services:

 



Building Lifecycle

11,832

9,328

19,824

CAD and Visualisation

3,643

3,499

6,775

Other - third party software

777

659

1,407


16,252

13,486

28,006

 

The Group utilises resellers to access certain markets. Revenue by sales channel represents revenue from external customers.

 


Six months to 30 June

Year ended

31 December

2023

£'000


2024

£'000

2023

£'000

Direct

15,640

12,958

26,991

Reseller

612

528

1,015


16,252

13,486

28,006

 

 

5. Operating profit

 

Operating profit for the period is after charging/(crediting) the following items:

 


Six months to 30 June

Year ended

31 December

2023

£'000


2024

£'000

2023

£'000

Software product development expense

1,038

1,030

1,253

Depreciation of property, plant and equipment

64

76

120

Depreciation of right-of-use assets

259

208

510

Amortisation of acquired intangible assets

277

250

474

Amortisation of other intangible assets

849

594

1,300

Share-based payments

103

148

190

Profit on disposal of property, plant and equipment

-

(15)

(13)

Foreign exchange losses

7

39

86

Acquisition-related expenses and stamp duties

225

262

279

 

6. Finance income and costs

 

Finance income and costs disclosed in the income statement are set out below:

 


Six months to 30 June

Year ended

31 December

2023

£'000


2024

£'000

2023

£'000

Finance income:




Bank and other interest receivable

117

60

127

Finance costs:

 



Bank overdraft and loan interest

-

-

(2)

Imputed interest expense for leasing arrangements

(31)

(25)

(63)

Total finance costs

(31)

(25)

(65)

Total net finance income

86

35

62

 

7. Basic and diluted earnings per share

 

The calculations of the earnings per share are based on profit after tax attributable to the ordinary equity shareholders of the Company and the weighted average number of shares in issue for the reporting period.

 


Six months to 30 June





2024

2023

Year to 31 December 2023


Profit

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

1,275

82.4

1.5

1,019

82.3

1.2

2,655

82.3

3.2

Diluted earnings per share

1,275

83.2

1.5

1,019

83.7

1.2

2,655

83.7

3.2

Adjusted earnings per share

1,729

82.4

2.1

1,421

82.3

1.7

3,272

82.3

4.0

 

Shares held by the Employee Share Ownership Trust are excluded from the weighted average number of shares in the period. Adjusted profit attributable to shareholders is reconciled to reported profit attributable to shareholders in note 12.

 

8. Dividends

 

Interim dividend

The Directors have recommended an interim dividend of 0.30 pence per ordinary share (2023: interim dividend of 0.25 pence per ordinary share).

 

Dividends paid in the period

Dividends paid in the six months to 30 June 2024, consisting of a final dividend, were 0.55 pence per ordinary share (2023: 1.08 pence per ordinary share). Cash dividends of £453,000 (2023: £889,000) were paid in the six months to 30 June 2024 as follows:

 


Six months to 30 June


Year to 31 December

Ordinary Shares

2024

per share

2024

£'000

2023

per share

2023

£'000


2023

per share

2023

£'000

Declared and paid during the period

 

 






Interim - current year

-

-

-

-


0.25

206

Special - previous year

-

-

0.58

477


0.58

477

Final - previous year

0.55

453

0.50

412


0.50

411


0.55

453

1.08

889


1.33

1,094

 

9. Cash and borrowings

The net cash position of the Group as at 30 June 2024 is set out below:

 


At 30 June

At 31 December


2024

£'000

2023

£'000

2023

£'000

Cash and cash equivalents

12,002

9,410

10,903

Bank loans

-

-

-

Lease liabilities

(1,345)

(1,469)

(1,460)


10,657

7,941

9,443

 

The UK banking facilities are with Barclays Bank plc and the Group facilities comprise a £1.0m overdraft facility, carrying an interest rate of 2.75 per cent over base rate (undrawn at 30 June 2024, 31 December 2023 and 30 June 2023).

 

10. Accruals and deferred income

 


At 30 June

At 31 December

2023

£'000

2024

£'000

2023

£'000

Accruals

3,128

2,425

2,793

Deferred income

11,648

9,600

9,781


14,776

12,025

12,574

 

Deferred income represents income from the sale of software subscription licences, SaaS licences and from software maintenance and support contracts and is credited to revenue in the income statement on a straight-line basis in line with the service and obligations over the term of the contract.

 

11. Related party disclosures

Transactions between Group undertakings, which are related parties, have been eliminated on consolidation.

 

The Directors of the Company had no material transactions with the Company during the period, other than a result of service agreements.

  

12. Additional performance measures

The Group uses adjusted figures, which are not defined by generally accepted accounting principles ("GAAP") such as UK-IAS. Adjusted figures and underlying growth rates are presented as additional performance measures used by management, as they provide relevant information in assessing the Group's performance, position and cash flows. We believe that these measures enable investors to track more clearly the core operational performance of the Group, by separating out items of income or expenditure relating to acquisitions, disposals and capital items. Our management uses these financial measures, along with UK-IAS financial measures, in evaluating the operating performance of the Group.

 


Six months to 30 June

Year ended

31 December 2023

£'000


2024

£'000

2023

£'000

Operating profit

1,547

1,070

3,203

Gain on business disposal

-

150

152

Amortisation of intangible assets

1,126

844

1,774

Depreciation charge

323

284

630

EBITDA 

2,996

2,348

5,759

 

EBITDA

 

2,996

 

2,348

 

5,759

Gain on business disposal

-

(150)

(152)

Acquisition-related expenses and stamp duties

225

262

279

Share-based payments

103

148

190

Adjusted EBITDA

3,324

2,608

6,076

 

Operating profit

 

1,547

 

1,070

 

3,203

Acquisition-related expenses and stamp duties

225

262

279

Amortisation of acquired intangible assets

277

250

474

Share-based payments

103

148

190

Adjusted operating profit

2,152

1,730

4,146

 

Profit before taxation

 

1,633

 

    1,255

 

3,417

Gain on business disposal

--

(150)

(152)

Acquisition-related expenses and stamp duties

225

262

279

Amortisation of acquired intangible assets

277

250

474

Share-based payments

103

148

190

Adjusted profit before taxation

2,238

1,765

4,208

 

Tax charge

 

(358)

 

(236)

 

(762)

Gain on business disposal

-

48

48

Acquisition-related expenses and stamp duties

(56)

(62)

(66)

Amortisation of acquired intangible assets

(69)

(59)

(111)

Share-based payments

(26)

(35)

(45)

Adjusted taxation charge

(509)

(344)

(936)

 

12. Additional performance measures continued

 


Six months to 30 June

Year ended

31 December 2023

£'000


2024

£'000

2023

£'000

Profit after taxation

 

1,275

1,019

2,655

Gain on business disposal

-

(104)

(104)

Acquisition-related expenses and stamp duties

169

200

213

Amortisation of acquired intangible assets

208

191

363

Share-based payments

77

113

145

Adjusted profit after taxation  

1,729

1,421

3,272

 

Adjusted profit after taxation

 

1,729

 

1,421

 

3,272

Weighted average number of shares

82.4

82.3

82.3

Adjusted earnings per share (pence)

2.1

1.7

4.0

 


Six months to 30 June

Year ended

31 December 2023

£'000


2024

£'000

2023

£'000

Cash generated from operations

 

5,829

2,820

6,395

Purchase of intangible assets

(1,561)

(996)

(2,383)

Purchase of property, plant and equipment

(11)

(35)

(133)

Acquisition-related expenses and stamp duties

225

262

279

Adjusted operating cash flow

4,482

2,051

4,158

 

Adjusted operating cash flow

 

4,482

 

2,051

 

4,158

Net interest received

86

73

62

Tax paid

(1,053)

(131)

(501)

Proceeds from disposal of property, plant and equipment

-

21

37

Free cash flow

3,515

2,014

3,756

 

13. Exchange rates

The following exchange rates have been applied in preparing the condensed consolidated financial statements:

 

 


Income statement

Six months to 30 June

Balance sheet

As at 30 June

Year to 31 December 2023


2024

2023

2024

2023

Income

Statement

Balance

sheet

Swedish Krona to Sterling

13.34

13.00

13.4

13.71

13.18

12.84

Euro to Sterling

1.17

1.14

1.18

1.16

1.15

1.15

US Dollar to Sterling

1.27

1.24

1.26

1.27

1.24

1.27

 

14. Disposal of subsidiary

In the prior half year period, the Group announced on 20 February 2023 the sale of its wholly owned subsidiary Eleco Software GmbH, the German ARCON architectural CAD business ("ARCON") to FirstInVision GesmbH, an Austrian architectural software business, for a total consideration of €600,000, effective 1 January 2023. Following deduction of net assets, costs relating to the disposal and recycling of reserves, a pre-tax gain on disposal of £150,000 was recognised in the comparative half year period.

 

15. Acquisition of Vertical Digital group of companies

On 16 April 2024, the Group, through its wholly owned subsidiary Elecosoft Limited, acquired 100 per cent of the share capital of the Vertical Digital group of companies, consisting of Vertical Digital SRL and Sons of Coding SRL (the 'Acquisition') for a consideration of €1.3m (£1.1m). The Acquisition's completion date was 16 April 2024. The Group funded the Acquisition exclusively by utilisation of its existing internal cash resources for this initial consideration. Cash and cash equivalents within the Acquisition entities at the acquisition date totaled £0.1m and the Acquisition had no debt.

 

Vertical Digital has a proven track record, in providing agile and innovative software development, technical consulting and upskilling solutions across many European and multinational end-customers including Lufthansa Technik, PwC, VW Financial Services, Deloitte and Zoopla.

 

The Acquisition adds critical capabilities to Eleco, including the ability to service and scale its customers by connecting systems and providing technical consulting which will support their digital transformation journeys, thus increasing the Group's product breadth and focus on customer centricity.

 

The Acquisition also provides for elastic augmentation of our internal research and development capacity which will further improve product time to value.

 

The transaction terms provide for a cumulative potential deferred and contingent outflow ('Earn Out') of up to €250,000 maximum for financial years ending 31 December 2024 and 31 December 2025, based on the local senior management (the former owners) attaining specific performance targets set by Eleco plc in those years. These specific performance targets are linked to achievement of revenue over those two financial years, subject to minimum gross margin and net margin thresholds.

 

For the above explanatory reasons, including the ability to repurpose the acquisition towards our internal research and development roadmap, combined with the anticipated profitability of the Acquisition in other Group markets, synergies arising, plus the ability to hire the assembled workforce of the Acquisition (including the founders and management team), the Group understandably paid a premium over the acquisition net assets, giving rise, aside from the value of customer relationships, to goodwill. All intangible assets, in accordance with IFRS3 Business Combinations, were recognised at their provisional fair values on acquisition date, with the residual excess over net assets being recognised as customer relationships and goodwill.

 

Intangibles arising from the acquisition consist of customer relationships and have been independently valued by professional advisors.

 

The following table summarises the consideration and provisional fair values of assets acquired and liabilities assumed at the date of the Acquisition (they will be subject to possible revision in the annual report and accounts for the year ended 31 December 2024):

 


£'000

Intangible fixed assets:


Customer Relationships

469

Property, plant and equipment

49

Trade receivables and prepayments

196

Cash and cash equivalents

55

Trade and other payables

(91)

Corporation tax

(11)

Net assets acquired

667

Goodwill

443

Acquisition cost

1,110

 

There are no non-controlling interests in relation to the Acquisition. Receivables at the acquisition date are expected to be collected in accordance with the gross contractual amounts.

 

Fair values in the above table have only been determined provisionally and may be subject to change in the light of any subsequent new information becoming available in time. The review of the fair value of assets and liabilities acquired will be completed within twelve months of the acquisition date.

15. Acquisition of Vertical Digital group of companies continued

 

The acquisition cost was satisfied by:

 

 

£'000

Cash

1,110

Share consideration

-

Total consideration

1,110

 

The net cash outflow arising on acquisition was:

 

 

£'000

Cash consideration paid

1,110

Acquisition-related costs

225

Cash and cash equivalents within the Vertical Digital business on acquisition

    (55)

Total net cash outflow on acquisition

 1,280

 


Other costs relating to the acquisition have not been included in the consideration cost. Directly attributable acquisition costs include external legal and accounting costs incurred in compiling the acquisition legal contracts and the performance of due diligence activity and the fair value exercise, together with stamp duty, total £0.2m. These costs have been charged in selling and administrative expenses in the consolidated income statement.

 

The Vertical Digital group of companies, in common with other Group companies, has a 31 December calendar year end. In the year to 31 December 2023, before Eleco plc Group control, Vertical Digital delivered revenue of €1.2m (c.£1.0m) and a net profit before taxation of €0.3m (c.£0.2m) based on unaudited figures and Vertical Digital's accounting policies.

 

Had the acquisition taken place from the start of the Group's financial year (from 1 January 2024) and based on figures and accounting policies prior to Eleco plc Group control, management estimate that Acquisition would have contributed revenue of £0.6m and profit before taxation of £0.1m to the Group results in this first half year. For the first two and a half months since the Acquisition date, the Vertical Digital group of companies contributed £0.3m of revenue and net profit before taxation of £nil.  

 

The above figures are provisional and the Group will work through the fair value exercise under IFRS 3 and provisional disclosures will be reported in the Group's annual report and accounts for the year ended 31 December 2024.  With regard to the BestOutcome acquisition announced on 27 June 2023, in the prior period, the accounting for this as a business combination is complete, and previously provisional amounts under IFRS 3 have been established and are detailed in note 28 of the annual report for the year ended 31 December 2023.

 

Professional Advisors

 

Auditor

RSM UK Audit LLP

25 Farringdon Street

London EC4A 4AB

 

Bankers

Barclays Bank plc

Ashton House

497 Silbury Boulevard 

Milton Keynes MK9 2LD

 

Company Secretary

Elemental Company Secretary Limited

+44 (0) 20 3286 6229

info@elementalcosec.com

 

Financial Public Relations

SEC Newgate

Sky Light City Tower

50 Basinghall Street

London EC2V 5DE

+44 (0) 20 3757 6882

eleco@secnewgate.co.uk

 

Nominated Advisor and Broker

Cavendish Capital Markets Limited

One Bartholomew Close

London EC1A 7BL

+44 (0) 20 7220 0500

www.finncap.com

 

Registrars and Transfer Agent

Neville Registrars

Neville House

Steelpark Road

Halesowen B62 8HD

+44 (0) 121 585 1131

info@nevilleregistrars.co.uk

 

Solicitors - Employment and Company Law

Wedlake Bell LLP

71 Queen Victoria Street

London EC4V 4AY

+44 (0) 20 7395 3000

 

Solicitors - Corporate Transaction and Commercial Transaction

Reynolds Porter Chamberlain

Tower Bridge House

St Katharine's Way

London E1W 1AA

+44 (0) 20 3060 6000

 

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