“I am pleased to report on a year of continuing growth and significant progress in 2018.”
Group revenues for the year ended 31 December 2018 were £22.2m (2017: £20m), an increase of 11 per cent. Group revenues are generated from Project Management Software, Site Management Software, Estimating Software, Engineering Software, CAD/Design Software, Information Management Software, Visualisation Software and Maintenance Management Software and related
training and support.
UK revenues increased 27 per cent to £8.2m (2017: £6.5m) equivalent to 37 per cent of Group revenues. UK revenues included sales of £1.1m by ShireSystem from 5 July 2018, the date of acquisition.Overseas revenues increased 3.0 per cent to £14.0m (2017: £13.5), equivalent to 63 per cent of Group revenues. However our Swedish revenues were adversely affected by the weakness of the Swedish Krona in the year under review.
Overseas revenues included £0.4m revenues of ActiveOnline from 6 November 2018, the date of acquisition. Overseas revenues were generated as follows:
Scandinavia: £6.8m (2017: £7.2m); Germany: £3.4m (2017: £3.1m); Rest of Europe: £2.5m (2017: £2.2m); and Rest of World £1.3m (2017: £1.0m).
Adjusted operating profit for the year, before deduction of exceptional items and amortisation of acquired intangible assets was £3.9m (2017: £2.8m), an increase of 41 per cent; and adjusted earnings per share were 3.9 pence (2017: 2.9 pence), an increase of 34 per cent.
Operating profit for the year under review was £2.6m (2017: £2.4m). Profit before tax for the year under review was £2.4m (2017: £2.3m) and profit after tax for the year was £1.8m (2017: £1.9m) a decrease of 4 per cent.
The Board is very conscious of the need for a fast-growing technology business, such as Elecosoft, to have in place adequate access to the Company’s own cash resources and banking facilities.
Cash generated from operations, in the year under review, amounted to £4.5m (2017: £4.2m) and Adjusted Free Cash Flow (before exceptional items), also increased by 24 per cent to £3.3m (2017: £2.6m).
We entered a facility agreement with Barclays Bank on 4 July for a £8.0m Sterling, five-year term loan facility, with a three-year fixed rate term basis reverting to a Floating Rate thereafter. Deducting cash balances of £6.0m, Elecosoft’s net debt as at 31 December 2018 was £2.1m (2017: £1.0m net cash).
I would like to record the appreciation of the Board for the excellent well-structured banking facilities and support that we have received from Barclays to finance our growing business.
Group net assets at 31 December 2018 amounted to £15.7m (31 December 2017: £11.5m).
Market-leading software has been key to the success of Elecosoft’s business and its software portfolio has been developed over the years by its own teams of developers in the UK, Germany, Sweden and now Spain.
Our development teams which are the lifeblood of a software company, have continued to grow as a result of developers joining our existing teams of experienced colleagues and through acquisition.
I am proud to say that our development teams have made remarkable progress in developing market-leading construction software over the years because of the complexity and speed of innovation that is required in the development of construction software. Our software development teams are undoubtedly a valuable resource and the Board has therefore decided that we should develop a strategy specifically aimed at retaining our software developers and, where necessary, strengthening our development teams.
Mukul Mistry, Group Corporate Development Director, will be the Director responsible for the co-ordination and management of all the Group’s software development interests, its software development teams and a comprehensive Group-wide software strategy.
Software development expenditure in the year under review increased to £2.8m (2017: £2.7m), which included expenditure on major software development projects totalling £1.0m, which were capitalised in the year (2017: £1.1m).
2018 has been another significant year for Elecosoft with the acquisition of both Shire Systems Ltd (“ShireSystem”) and ActiveOnline GmbH (“ActiveOnline”), each of which complement existing Elecosoft business.
ShireSystem, based in Southampton, was acquired in July 2018, and provided Elecosoft with an immediate foothold in the strategically important Computerised Maintenance Management Systems (“CMMS”) market. It also increased Elecosoft’s coverage of software solutions across the lifecycle of property assets and facilities.
ActiveOnline which is based in Wesel, Germany, was acquired in November 2018, and will collaborate closely with ESIGN, Elecosoft’s international software visualisation business based in Hannover, Germany.ESIGN specialises in the development of software for the visualisation of hard and flat surfaces, and ActiveOnline specialises in the development of software for the visualisation of curved surfaces, soft fabrics and coverings. ActiveOnline has created and maintains an extensive world class visualisation software database of fabrics and materials.
Both companies are already actively pursuing cross-selling of products across the Group.
IconSystem® which is based in Market Harborough also successfully increased its market penetration of the property related data storage market in the year under review. It also won “EE” the mobile telephone company as a major client.
Marketing highlights included the launch of Elecosoft’s German website, www.elecosoft.de; successful participation at trade events such as Nordbygg in Sweden and the BAU trade fair in Munich, Germany in January 2019. ESIGN also released “Pixmo” a new internet platform for visualising ceramic tiles in Germany www.pixmo.live; Elecosoft Sweden also launched Memmo, a new Site Management software, in Sweden.
Elecosoft celebrated Powerproject winning the award for Best Project Planning Software at the 2018 Construction Software Awards (“the Hammers”) for
the fifth year running, a truly momentous achievement for Powerproject and its dedicated team of developers. Elecosoft UK also launched Powerproject Vision, its new cloud-based collaboration application for construction planning in the year under review. It will also launch Powerproject XV, the latest version of its market-leading project management software in April 2019. The release in Germany of the latest version of Elecosoft’s Arcon Evo® and Arcon Professional, Elecosoft’s 3D CAD software, was also well-received by the German architectural sector resulting in strong direct and online sales of both products.
As a Group, Elecosoft finds itself in the enviable position to be able to mitigate any uncertainty by continuing to refine the cash management strategies started in the period leading up to the Referendum on 23 June 2016.
Since this period, we have actively managed our revenue streams and local income and expenditures within and without the EU to ensure there is adequate cash generated and held in these regions.
This spread of business with local income and expenditures creates a natural hedge to volatility and uncertainty and while closely monitored we have yet to undertake any additional actions outside the normal course of business.
I am delighted that the average number of employees in the Elecosoft team has increased from 201 in 2017 to 228 in 2018. They are a strong and talented group of people who work with skill, enthusiasm and humour in all the markets we serve. On behalf of the Board and shareholders, I would like to take this opportunity to thank them for all their efforts and support in 2018 and to wish them every success in the year ahead. I also extend a warm welcome to those new employees, who have joined us during the year.
Jonathan Hunter, Chief Operating Officer
Jonathan Hunter, Chief Operating Officer, is responsible for monitoring the management of the Group’s existing operations and also for identifying potential acquisition opportunities and technologies which are compatible with our existing operations. Accordingly, he played a leading role in identifying and acquiring ShireSystem in the UK and in the acquisition of ActiveOnline in Germany, in the year under review. He is now collaborating with colleagues to maximise the synergistic potential of both these businesses.
Anders Karlsson, Managing Director of Elecosoft Consultec AB
Anders Karlsson, Managing Director of Elecosoft Consultec AB, is responsible for our Swedish operations which generate approximately a third of the
Group revenues as well as developing and managing almost half of our products. He has over 20 years of business development and management experience, he was initially appointed Managing Director of Consultec Byggprogram AB in August 2005 and then rejoined the Group after four years as CEO of an international signage company. He has been responsible for the growth of Staircon in both the US and Australia, and for the delivery of Elecosoft’s Memmo® and Bidcon Climate module software products. I would like to take this opportunity to congratulate him and his team on their delivery.
Mukul Mistry, Corporate Development Director
I take this opportunity formally to welcome Mukul Mistry, BSc to the Board. He joined the Board in June 2018 and was appointed Corporate Development Director. Mukul has 20 years of experience in the technology industry spanning continents, industries and a range of niche and mainstream technology specialties. He is responsible for business development initiatives in the US, international channels and our German operations where he will oversee the integration of ActiveOnline with our ESIGN business. As mentioned elsewhere in this report, he has also been appointed Group Head
Ben Moralee, FCA. Group Finance Director
Ben Moralee was appointed Group Finance Director in September 2018. Ben joined Elecosoft following the departure of Simon Morgan, in September 2018.
He held a number of senior financial positions before joining Elecosoft, including Financial Controller at Serena Software Europe Limited, a subsidiary of Micro Focus International plc; and Head of Finance at Figleaves, a subsidiary of N Brown Group Plc.
The importance of the contribution effective Non‑Executive Directors make to ensuring appropriate standards of Corporate Governance cannot be overstated and on behalf of my Executive colleagues and myself and shareholders, I would also like to thank our Non-Executive Directors, Serena Lang, our Deputy Chairman, David Dannhauser and Kevin Craig, for their sound judgements and constructive comments during the year.
I would like to take this opportunity to thank Tomas Astrom, Finance Director of our Swedish business, on his 16 years of outstanding service to Elecosoft and wish him well in his retirement.
In light of Elecosoft’s strong trading performance and cash generation in 2018, the Board has decided to recommend a final scrip dividend of 0.40 pence per share, with a cash alternative dividend of 0.40 pence per share, to give a total dividend for the year of 0.68 pence per share.
This represents an increase of 13 per cent relative to the previous year (2017 total dividend: 0.60 pence per share). The scrip reference price is 74.74 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 18 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 2019 to shareholders on the register at the close of business on 29 March 2019; the ex-dividend date will be 28 March 2019.
Despite the uncertainties engendered by Brexit, Elecosoft has performed well in the first two months of the current financial year. We also anticipate releasing a number of new products in the next few months, including the eagerly awaited Powerproject XV and Site Progress Mobile.
ShireSystem has performed very well since its acquisition and is already demonstrating the potential for cross-selling its products. The potential of the combination of ActiveOnline with ESIGN has also been evident since the acquisition of ActiveOnline.
Our Development Centres in the UK, Sweden, Germany and now Spain, are close to our main customers, which is important because the success of our software development activities depends on close collaboration with our customers so that we are able to deliver to them software that exactly meets their requirements.
The rate of growth and international spread of our businesses also requires us to maintain close and prudent financial monitoring and financial policies. With these key elements in place and with a highly skilled development and management team, I believe that Elecosoft is well placed to improve further its performance and growth in 2019 for the benefit of our customers, our employees and our shareholders and I look forward with confidence in the year ahead.
5 April 2019
Download the 2018 Annual Report
The Elecosoft annual accounts for the period ended 31st December 2018 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.