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.
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.
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.
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 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.
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.
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 teams and 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.
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 international construction 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
15 April 2016
Download the 2015 annual report
The Elecosoft annual accounts for the period ended 31st December 2015 are now available to download.
Shareholders can elect to receive hard copy shareholder documents at any time by informing Capita Asset Services at The Registry, 34 Beckenham, Kent BR3 4TU.