“ I am pleased to report a significantly improved trading and financial performance by Elecosoft in 2016, and comment on the acquisition of Icon during the year. My statement for the year ended 31 December 2016 is set out below.”
Elecosoft’s revenues for the year under review rose from £15,260,000 to £17,795,000, an increase of 17 per cent. The proportion of recurring maintenance revenue remained steady at approximately 48 per cent in the year under review and this recurring revenue increased by 18 per cent to £8,622,000 from £7,278,000 last year.
Operating profit for the year under review was £1,594,000 (2015: £1,126,000) an increase of £468,000 or 42 per cent in the year under review. This result is after acquisition expenses of £212,000 being legal and professional fees relating to the acquisition of Icon in October 2016 and a former Director’s termination payment of £109,000. On the basis of these adjustments, adjusted operating profit for the year was £1,915,000 (2015: £1,137,000) an increase of 68 per cent.
Profit after tax on continuing operations for the year under review was £1,243,000 (2015: £802,000) an increase of 55 per cent. Basic
earnings per share of continuing operations for the year under review was 1.7 pence (2015: 1.1 pence), an increase of 0.6 pence
or 55 per cent. Adjusted EPS as set out in the paragraph above was 2.1 pence (2015: 1.1 pence), an increase of 94 per cent. EBITDA for the year under review was £2,432,000 (2015: £1,795,000) an increase of £637,000 or 35 per cent in the year under review.
Elecosoft continued to generate cash from operations in the year under review and at 31 December 2016 Net Assets increased to £9,716,000 (31 December 2015: £7,893,000). The net increase in cash and cash equivalents in the year under review amounted to £694,000, which, together with the beneficial effect of changes in exchange rates used to translate overseas cash balances of £260,000, contributed to a significant improvement in Elecosoft’s financial position during the year.
I am pleased to say that in many ways 2016 was a record year. For example, the number of Elecosoft employees increased to a record 190 (2015: 178). Elecosoft UK Limited won the award for Best Project Planning Software at the Construction Computing Software Awards for the third year running; turnover and profits in 2016 were at record levels; Elecosoft Sweden launched its latest Bidcon BIM and Bidcon Climate module in conjunction with Tyrens AB; and ESIGN® made its first sale to a Chinese flooring manufacturer who claims to be the largest laminated flooring manufacturer in the world.
The acquisition of Icon was also significant for Elecosoft, being the first substantial acquisition made by the Group for a number of years. Icon brought with it a number of good things, beginning with its enthusiastic team of outstanding software professionals, who had successfully
promoted their building specification and information management systems to the giants of the UK retail industry – its clients include seven of the top ten UK retailers, including Boots, Sainsbury’s, Asda, Morrisons, John Lewis, Waitrose and The Co-operative. Icon has also worked closely with McCarthy & Stone, the largest UK specialist in the construction of retirement homes, in the development of state-of-the art construction software.
Icon has also provided an excellent SaaS capability to Elecosoft, with the opportunities to link with Elecosoft’s Bidcon® estimating software and Asta Powerproject® software, which is developed in the UK. During our discussions leading up to the acquisition of Icon in October, we were pleased to hear that Jim Awe, Chief Software Architect at Autodesk Inc with which Icon had collaborated in the development of its
web-based viewer, had made the following comment:
“For far too long, designers have been forced to sync associated data back into the original 3D model where it doesn’t really belong. What Icon has done is an awesome demonstration of the principle of Internet enabled design data. The data can reside and be managed in the appropriate place, but is still visible and accessible in the context of the model.”
I am pleased to say that my colleagues are already beginning to exploit Icon’s potential and we are confident of the opportunities that Icon will present to Elecosoft in the form of the expertise of the developers and staff of Icon and also the potential to cross-sell Icon and Elecosoft’s products to each other’s customers.
The total consideration payable for Icon was £2.4m and was partly financed by a new term loan of £1.8m from Barclays Bank, and £600,000 by way of an issue of 2.2m ordinary shares of Elecosoft to the vendors of Icon. As part of this transaction, the Group also took the opportunity to refinance its existing term loan.
Software development expenditure for the year under review increased to £2,593,000 (2015: £2,305,000) of which the amount capitalised was £625,000 (2015: £665,000). The total development spend for the period represented 15 per cent of sales (2015: 15 per cent) and is consistent with our commitment to our customers to maintain and enhance our market-leading software programmes.
For some years now regular monthly meetings of our lead developers across the Group have taken place to facilitate the interchange of ideas and technical opportunities. Our Lead Developer Community is a major contributor to the technology strategies that emerge from these meetings. I hesitate to say much more because I don’t wish to ‘shine light onto magic’. But I would like thank those involved in the Lead Developer Community for the creativity, the flair, the imagination and the technical know-how that they exercise as they strive to keep our technology ahead of the curve.
The initial “Elecosoft” rebranding exercise was announced by our Consultec colleagues at the Nordbygg Fair in Stockholm in 2016 and was
positively received by both customers and the market at that time. More importantly, the rebrand has since had a very beneficial effect on our business in Scandinavia and Elecosoft Sweden, becoming the leading construction software provider in the Swedish construction market. We intend to rebrand the remaining elements of the Group worldwide in 2017, while seeking ways to retain some of our original brands which are well established with our customers.
The Board will continue in its present form and following the addition of two new Directors, whom shareholders are invited to elect, would consist of five Executive Directors and three Non-Executive Directors.
The five Executive Directors together will constitute a newly constituted Group Executive Committee, who will be responsible for the day to day running of the Group; and the three Non-Executive Directors will continue to be responsible for maintaining and enhancing Elecosoft’s
corporate governance standards and will participate in the Audit, Remuneration, and Nomination Committee.
The Group Executive Committee and all other Committees will be responsible to the Board, to which they will provide regular reports on those matters for which they are responsible.
The Board of Elecosoft will comprise the following Directors in the year ahead:
Group Finance Director
Managing Director of Elecosoft UK Limited
Managing Director of Elecosoft Sweden
Marketing and Business Development Director
Non-Executive Deputy Chairman
I am pleased to welcome Anders Karlsson, the Managing Director of Elecosoft Consultec AB to the Board and I am delighted that the two Executives, who are Managing Directors of their respected companies which are the largest operations in the Elecosoft Group will serve as Directors of Eleco plc.
Also announced earlier this year was that Graham Spratling, who has been with Elecosoft for nine years, of which two were as Finance Director, has decided for personal reasons to stand down. I am pleased to say that Graham volunteered to assist David Pearson, who joined us very recently, to complete the accounts which you have before you. I would like to thank him for his contribution to our affairs during
the time that he has spent with us and wish him well.
David Pearson, has had a distinguished career in IT and Finance and has led a number of high level investigations in these areas, has agreed to join the Board as Finance Director and we welcome him on board as we continue the progress of the Group.
Finally, we have announced today the appointment of Kevin Craig as a Non- Executive Director with immediate effect. Kevin brings with him a wealth of advisory and media industry experience and we look forward to working with him.
Having regard to Elecosoft’s strong trading and financial performance in the second half of the year, the Board has decided to recommend the payment of a final dividend of 0.25 pence per share. The Board has also proposed that subject to the necessary approval by shareholders at the Annual General Meeting, that shareholders will be offered an opportunity to elect to receive dividends in the form of new shares in
Elecosoft in lieu of the proposed final dividend.
Payment of the final dividend will be subject to approval by shareholders at the Annual General Meeting and will be paid on 24 May 2017 to shareholders on the register at the close of business on 7 April 2017; the ex-dividend date will be 6 April 2017. As mentioned above, and subject to approval by shareholders at the Annual General Meeting, arrangements will also be made to provide a scrip dividend alternative. The latest date to elect for the scrip dividend alternative will be 10 May 2017. The scrip reference price is 38.95p calculated from the average of the closing price for an ordinary share of the company as derived from the daily official list of the London Stock Exchange during the period of five dealing days ending on 24 March 2017. The Company will, on or before 10 April 2017, post to shareholders a letter containing additional information on the scrip dividend alternative and how shareholders may participate. At the same time, a copy of this letter will be available on the Company’s website: www.elecosoft.com
In the period leading up to the Referendum on 23 June 2016, the Board concluded that the pattern of cash generation across the Group was such that each of Elecosoft’s operations, and in particular its UK operations, would be in a position to service and repay their borrowing
obligations in accordance with their terms.
The Board also decided that our overseas interests, which are profitable and cash generative, should retain their cash balances in their own currencies because the Board’s view was that, whichever way the Referendum vote went, the Group would still be in a position to meet all its
financial obligations as they fall due, whether in Sterling or our other major trading currencies, namely the Swedish Krona, the Euro and the US Dollar. This position is not only logically sound to match cash position with operations, given the movement of currencies in 2016, this
alignment has also strengthened the Group’s financial position in Sterling terms.
Elecosoft has development, testing, marketing, sales, training, finance, administration and support teams and our people are our greatest asset. In 2016 they worked very hard to produce what I consider to be a good result achieved in not the easiest of markets. I would therefore
like to take this opportunity to thank them all on your behalf for their contribution to Elecosoft’s performance in 2016 and to say that I am confident that they will produce another good result in 2017, of which they will be proud.
These are uncertain times and with added uncertainties that events such as Brexit may bring, we know that new challenges will present themselves as we go forward. That said, we are confident that we shall be able to meet them because of the resilience, innovative skills, dedication and application of our employees and the urgent need for companies such as Elecosoft to provide the means to enhance
the performance of industries in which we involved and in particular, the construction industry. I believe that it is because of the effort, creativity and collaboration of all our employees in all the countries in which Elecosoft operates that Elecosoft is fast becoming a truly international provider of market-leading construction software applications for 5D BIM, project management, estimation, 3D architectural
design, timber engineering, digital visualisation, and augmented reality software applications.
I am therefore pleased to say that the current year has started well, our financial position is strong and Elecosoft is particularly well placed post the EU referendum, from a trading standpoint. Therefore, against this background, we will continue to invest in our core business of
developing market leading software solutions and also to ensure that high quality training is available to our customers in the markets we serve. We will also be taking additional measures to enhance the co-ordination between our sales, support and training teams to improve our service to our customers and remain open to inorganic growth opportunities to accelerate our development should they arise.
24 March 2017
Download the 2016 Annual Report
The Elecosoft annual accounts for the period ended 31st December 2016 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.