“I am pleased to report that in 2017 Elecosoft improved its performance significantly, eliminated its net borrowings, strengthened its management team and made a strong start in the first quarter of 2018.”
Elecosoft’s total revenue for the year amounted to £20.0m (2016: £17.8m), an increase of 12 per cent, of which recurring maintenance revenue amounted to £9.9m (2016: £8.6m). Recurring maintenance revenue
as a proportion of total revenue for the year marginally increased to 49 per cent (2016: 48 per cent).
Operating profit for the year was £2.4m (2016: £1.6m), an increase of 48 per cent. Adjusted operating profit, which excludes non-operating items and amortisation of acquired intangible assets, was £2.8m (2016: £2.2m), an increase of 26 per cent. Profit after tax for the year was £1.9m (2016: £1.2m) an increase of 53 per cent; and basic earnings per share for the year were 2.5 pence (2016: 1.7 pence), an increase
of 49 per cent. Adjusted earnings per share were 2.9 pence (2016: 2.4 pence), an increase of 20 per cent.
Cash generated from operations amounted to £4.2m (2016: £2.4m) and the strong conversion of operating profits into cash during the year eliminated Group net borrowings by the half year and produced a net cash
position of £1.0m as at 31 December 2017 (2016: £1.3m net borrowings). The net increase in cash and cash equivalents in the year under review totalled £1.4m, which together with £2.8m of net current assets (excluding deferred revenue), contributed to a further strengthening of Elecosoft’s financial position at the end of the year. Group net assets at 31 December 2017 totalled £11.5m (31 December 2016: £9.7m).
Elecosoft values its reputation for developing market leading construction software. The technical and creative contribution of Elecosoft’s software development teams in the UK, Sweden and Germany continue to be critical elements in Elecosoft’s success in developing an expanding portfolio of market-leading software programs.
Our development teams performed magnificently in the year to satisfy the needs of our customers by responding to specific requests to adjust or enhance our existing software programs. They also liaise closely with our customers through user steering groups to define key elements to be incorporated in new software programs under development.
We very much value this close relationship with our customers and I would like to take this opportunity on behalf of our software development teams to thank our customers for their valuable, constructive and practical feedback and involvement in our software development process. We really do appreciate their input.
The Board adopted a policy some years ago of allocating a significant portion of Group cash flow annually to finance the development and enhancement of our software development programmes and the expansion of our software development teams. I am pleased to say that this strategy has been effective and will continue.
Software development expenditure in the year under review increased to £2.7m (2016: £2.6m) and expenditure on major software development projects in the UK, Sweden and Germany which were capitalised in the year totalled £1.1m (2016: £0.6m).
Our Group software development programme increasingly involves the development of SaaS web applications for existing software programs, such as our project management and site management offerings. I am pleased to say that the completed SaaS web applications have so far been very well received.
Our sales and marketing teams made outstanding contributions to our growth in the year, evidenced by higher sales in all our markets. The year also saw increased success in securing new license sales together with higher revenue from our support and training propositions.
Our marketing teams have made determined and successful efforts to promote the Elecosoft® brand worldwide and I am confident that it will play an increasing part in our progress as we move to accelerate the impact of our latest cross-selling initiatives.
Our software programs are increasingly being used in combination with each other, as our customers become more aware of the significant improvement in performance that such combinations can now deliver.
We refer to Elecosoft as an international specialist construction software group and I set out below a brief summary of our current software portfolio. It consists of software programs that on one hand have been designed and developed by our own software development teams and on the other hand have become part of our portfolio by acquisition. Our experience is that this is a pragmatic and effective way of building our business and enhancing the quality and scope of our construction software portfolio for the benefit of our customers and our shareholders.
We continued to develop our flagship Powerproject® software by launching a SaaS proposition in the first half of the financial year. We also saw increased adoption of our BIM and Site Progress Mobile programmes. For the fourth year running we celebrated Powerproject winning the award for Best Project Planning Software at the Construction Software Awards (“the Hammers”). We have sold Powerproject to over 90 per cent of the top 100 construction contractors in the UK, and 35 out of the top 50 in Sweden, and I am pleased to say that Powerproject now ranks third in sales of project scheduling software to the US construction industry. Powerproject is now available in ten languages, with another five currently being translated.
Bidcon®, our estimation software, which was enhanced with two releases in the year, continues to be the leading construction estimation software program in Sweden. I am pleased to say that in the UK Bidcon’s BIM 3D quantity take-off feature became an attractive proposition for McCarthy & Stone, which installed Bidcon in the UK in the year.
Our Swedish colleagues continued to enhance our Sitecon solution during the year. In parallel intensive work was put into the creation of the next generation SaaS-solution meeting international demands on a collaboration software, to be launched in 2018. Our Site Progress Mobile solution also gained increased market share during the year now serving over 1,500 active users.
Interiormarket and Marketingmanager are leading visualisation marketing programs sold to flooring and tiling companies and DIY stores in Germany, and increasingly also worldwide.
Arcon maintained its market share in its core market of Germany and increased its sales of complementary third party applications.
IconSystem®’s blue chip retail customer base is testament to the value delivered to them by its Specs and Standards and Property Information Management software.
IconSystem’s data management capability is also being increasingly recognised by customers outside of the retail sector and McCarthy & Stone has adopted IconSystem to improve the coordination of its design, planning and construction processes.
Our portfolio of timber engineering applications delivered growth in 2017. Demand increased in Australia for Staircon® with the receipt of the largest Staircon order to date. As demand for modular construction increases, our applications, including Statcon® and Framing, continue to serve the industry requirements in design and off-site manufacturing.
The strength of Elecosoft’s software portfolio was significantly enhanced in 2016 by the launch of the Elecosoft brand for the promotion of all our products. The response to the introduction of Elecosoft was very positive, as evidenced by the significant increase in our software sales to record levels in 2016 and 2017. The unified brand not only signals a shift towards a more collaborative culture within the business, but also provides a sound platform for an increased focus on cross-selling initiatives.
The number of Elecosoft employees increased to a record 201 in 2017 (2016: 190). On behalf of the Board and shareholders, I wish to thank all our highly skilled and motivated people who are now located as far afield as Sweden, the Netherlands, Germany, the United States, Belgium and the UK, and to extend a warm welcome to our colleagues who joined us during the year. We have an outstanding, talented and balanced
group of employees in all the markets that we serve.
I also take this opportunity formally to welcome the following appointments to the Board during the year under review:
Jonathan Hunter was appointed Chief Operating Officer on 22 December 2017. In his previous role as Group Marketing and Business Development Director, Jonathan was responsible for establishing Elecosoft as a
leading international software brand; and for negotiating the acquisition of IconSystem.
Anders Karlsson was appointed as an Executive Director on 27 March 2017. Anders initially joined Consultec Byggprogram AB as Managing Director in 2005 and then rejoined the Group in 2014 as Managing Director of Consultec. In March 2017 he was appointed Chief Executive Officer of the Company’s wholly owned Swedish subsidiary, Consultec Elecosoft AB.
Simon Morgan, FCA, was appointed Group Finance Director on 15 November 2017. Simon joined Elecosoft following the departure in August of David Pearson. Simon has held numerous senior financial and other
directorships in digital publishing, SaaS and business services companies.
I also wish to thank Jason Ruddle, David Pearson and Jonathan Edwards who left Elecosoft in 2017 for their contribution to the success of Elecosoft during their time with us, and wish them well in their new endeavours.
There have also been some changes among the Non-Executive members of the Elecosoft Board.
Kevin Craig, joined the Eleco plc Board as a Non-Executive Director in March 2017. He is founder and CEO of the highly successful Political Lobbying and Media Relations Ltd (“PLMR”) communications agency.
Serena Lang, having joined the Board of Elecosoft as a Non-Executive Director in December 2014, was appointed Non-Executive Deputy Chairman in May 2017. Serena’s distinguished and multifaceted career includes working as an Executive Consultant at E&Y where she was heavily involved in client M&A and integration activities, then on to BP’s group leadership team where she was VP Transformation in the downstream and latterly onto Invensys Plc (now part of Schneider Electric) running the highly profitable £130m North Europe and Africa Division of their international software and process businesses as well as being the VP in charge of the BP account globally.
Following the retirement of Jonathan Edwards at the end of his term in office at the close of the financial year, David Dannhauser, FCA, was appointed as a Non-Executive Director and Chairman of the Audit Committee in February 2018. David has been CFO of several listed companies, including Elecosoft from 1994 to 2010, during which time he was closely involved in the establishment and development of the Group’s software activities.
In light of Elecosoft’s strong trading performance and cash generation, the Board has decided to recommend a final scrip dividend of 0.40 pence per share, with an alternative cash dividend of 0.40 pence per share, to give a total dividend for the year of 0.60 pence per share.
This represents an increase of 50 per cent relative to the previous year (2016 total dividend: 0.40 pence per share). The scrip reference price is 49.6 pence, 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 23 March 2018.
Payment of the final dividend will be subject to approval by shareholders at the Annual General Meeting and will be paid on 31 May 2018 to shareholders on the register at the close of business on 6 April 2018; the ex-dividend date will be 5 April 2018.
We see significant and growing opportunities for our software to enhance the performance of businesses in construction and other sectors, by improving the timeliness, cost-efficiency and risk profiles of customers’ projects. Thanks to the dedication and skills of our talented colleagues, Elecosoft is increasingly seen as a market-leading provider of construction software and training, across all phases of a construction project and beyond, in the on-going lifecycle of buildings with an excellent reputation for developing and delivering market leading software to our customers.
Although there is ongoing uncertainty in the market, notably in relation to Brexit, only 32 per cent of our turnover and 32 per cent of our operating profits were earned in the UK in the year. With the majority of our profits earned in, and employees based in Sweden, Germany, the Netherlands, Belgium and the United States, we remain resilient to the effects of Brexit, and the fundamental drivers of our business remain positive.
I am pleased to report that the Group has performed very well in the first months of the current financial year. We remain open to utilising our strong balance sheet for further bolt-on acquisitions, as the successful execution and integration of ICON provides a blueprint for future transactions.
I am confident that our unified branding, continued investment in software development and increased integration of our product portfolio will open up further exciting prospects to cross-sell our products. My colleagues and I therefore look forward with confidence to the year ahead.
26 March 2018
Download the 2017 Annual Report
The Elecosoft annual accounts for the period ended 31st December 2017 are now available to download.
Shareholders can elect to receive hard copy shareholder documents at any time by informing Link Asset Services at The Registry, 34 Beckenham Rd, Kent, BR3 4TU.