Interim Results
Eleco PLC
19 March 2004
19 March 2004
ELECO PLC
The Building Systems and Construction Software Group
INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2003
Enquiries to:
John Ketteley, Executive Chairman Tel: 01920 443 830
Eleco plc john@ketteley.com
David Dannhauser, Finance Director Tel: 01920 443 830
Eleco plc mail@elecoplc.co.uk
Tarquin Edwards/Chris Steele Tel: 020 7929 5599
Holborn tarquin.edwards@holbornpr.co.uk
chris.steele@holbornpr.co.uk
Summary
• Turnover up 19 per cent. to £21,615,000 (2002: £18,167,000)
• Operating profits of continuing operations £620,000 (2002: £1,017,000)
after a substantial increase in investment on construction software
development
• Loss on ordinary activities after tax of £633,000 (after exceptional costs
of £870,000 relating to the restructuring of new media interests, including
a provision of £766,000 for impairment of goodwill) (2002:Profit £572,000)
• Interim dividend maintained at 0.375p per share. Interim dividend covered
1.7 times by earnings per share of the continuing operations
• Building Systems division has made encouraging progress across most
businesses with significant volume increases in sales
• Arcon 2004, our leading 3D visual architectural software program was
launched this week at the International CeBiT Show in Hanover, Germany
• Acquisition today of Prompt Profiles, the manufacturer and supplier of
flashings, guttering and other profiled metal products, for a consideration
of £1.2 million
John Ketteley, Executive Chairman of Eleco plc, commented:
'Our Building Systems division's order books are at healthy levels and we expect
that it will continue to perform well. Looking ahead, I am confident of the
profit potential of our Construction Software interests and that as we establish
marketing networks and bring our new programs to market the investment will bear
fruit.'
Chairman's Statement
Turnover in the six months ended 31 December 2003 amounted to £21,615,000 (2002:
£18,167,000) an increase of 19 per cent over the corresponding period last year.
Turnover of Eleco Building Systems was £19,179,000 (2002: £17,659,000), an
increase of 8.6 per cent, while turnover of Eleco Construction Software was also
higher at £2,436,000 (2002: £508,000) due mainly to the addition of Consultec in
February 2003.
Operating profits from continuing operations amounted to £620,000 (2002
£1,017,000.) Losses of discontinued operations amounted to £166,000 (2002: loss
£80,000). Eleco Building Systems contributed a profit of £1,588,000, before
allocation of £303,000 of Corporate costs (2002: £1,487,000); Construction
Software incurred a loss of £538,000 (2002: £80,000) before allocation of
£127,000 of Corporate costs and after goodwill amortisation of £129,000 (2002:
£15,000).
Interest charges amounted to £99,000 (2002: £29,000) due principally to higher
borrowings arising from the financing of acquisitions.
After making provision for a loss on termination of discontinued operations of
£870,000, the loss on ordinary activities after tax amounted to £633,000 (2002:
profit £572,000), giving a loss per share equivalent to 1.3p (2002: earnings per
share 1.4p). Earnings per share on continuing operations amounted to 0.7p
(2002: 1.5p).
The Board has declared an unchanged interim dividend of 0.375p per share (2002:
0.375p), which will be payable on 20 April 2004 to shareholders on the Register
on 2 April 2004. The interim dividend is covered 1.7 times by earnings per share
of the continuing operations.
In response to a tightening in the new media market the Board decided to
rationalise our new media interests by merging the operations of Forma
Communications in London with those of Leonardo Internet in Staffordshire. The
total provision made in connection with the restructuring includes an amount of
£766,000 in respect of the impairment of goodwill arising from the cessation of
Forma Communications as an independent unit. The restructuring of the two
businesses will reduce the cost base.
Acquisition
The acquisition of Prompt Profiles for a consideration of £1,210,000 was
announced today and demonstrates our commitment to expanding our successful
Building Systems manufacturing operations when suitable opportunities arise.
Prompt Profiles specializes in the manufacture and supply of flashings,
guttering and other profiled metal products which are complementary to our own
roofing systems. I am delighted to welcome Prompt Profiles and its employees
into the Group.
Eleco Building Systems
Structural Precast Concrete
At the time of the Annual General Meeting in November 2003, I referred to the
fact that Bell & Webster Concrete had experienced delays and disruption to
production on some major projects, due principally to circumstances beyond its
control. It was anticipated that these factors would adversely affect
performance in the period under review. I am pleased to say that, in the event,
Bell & Webster Concrete's turnover was only 1% down on the corresponding period
last year; and operating profits, although lower than originally anticipated,
were maintained at a level close to those achieved in the corresponding period
last year. Demand for standard products was good and Bell & Webster Concrete
continues to win significant new orders.
Roofing, Cladding and Panels
Sales of SpeedDeck Building Systems were 17% up on turnover for the
corresponding period last year, which had been depressed by extremely difficult
trading conditions. I am encouraged by recent progress made by SpeedDeck in
rebuilding its order book to healthy levels to carry forward into the second
half year. SpeedZip(R) has now been established as an additional brand in the
standing seam metal roofing market and there has been good demand for Vitesse(R)
panels.
Stramit Industries' performance suffered due to the ending of a major OEM
contract. There has been a good initial reception for ElecoFloor(R), a flooring
product developed by Stramit Industries to enable house builders and other users
to comply with the acoustic requirements of Part E of the new Building
Regulations.
Downer Cladding experienced stiff competition particularly from imports in the
period under review and as a consequence sales were down 13% on the
corresponding period last year. We have taken steps to reduce the cost base by
relocating the warehousing and administration to Yaxley.
Timber Engineering
Gang-Nail Systems achieved an excellent performance in the period. Sales were
up 19% on the corresponding period of the previous year. Sales of Ecojoist(R)
in particular continue to grow well. Raw material and steel prices have begun
to rise and indications are that there may be further increases ahead.
Eleco Bauprodukte produced an improved result on the corresponding period last
year with sales volumes up 16% due to increased market share as a result of good
all round product and service performance and despite strong price competition
in difficult market conditions.
The very good performance by International Truss Systems last year continued in
the period under review. Sales volumes were 27% higher than the corresponding
period last year and a strong trading performance was also enhanced in Sterling
terms by favourable movements in the SA Rand exchange rate.
ELECO CONSTRUCTION SOFTWARE
Development costs relating to new software products and to the upgrading of
existing software programs in the period under review were well above those
incurred in the first half of last year, mainly as a consequence of the
acquisition of Consultec Group in Sweden and Eleco Software in Germany. Software
development costs, which were expensed in the period under review, amounted to
£494,000 (2003: £154,000) of which £182,000 related to software programs that
had not been introduced to the market in the period.
Consultec Sweden produced a somewhat disappointing performance due mainly to the
weakness of the Swedish construction industry and recorded a small loss. The
result was struck after expensing software development costs of £120,000 in the
period.
Consultec UK showed an improvement in trading performance compared with last
year, before expensing £48,000 on the development of StairCon(R) and Whole House
Engineering(R), two new software programs for the UK market.
Gang-Nail Systems introduced GNM@trix, its new Enterprise Management software to
its customers at its Fabricator Conference in November, 2003.
Eleco Software GmbH (formerly Softhold GmbH) was acquired on 1 July 2003 and
steps taken to resolve outstanding issues relating to the rights to ArCon(R)
software, a leading 3D architectural visual software program in Germany and
France. Development costs of £135,000 were incurred in connection with the
continuing development of ArCon(R) 8.
We also received an encouraging increase in the number of enquiries from the
construction engineering and aerospace industries for o2c, a 3D visualization
and compression software technology
Outlook
In recent years, the use of technology by the construction industry for design,
engineering, estimating, project planning and project management has increased
significantly. This trend towards increased use of technology is accelerating
and Eleco itself has benefited considerably from it. This is reflected in the
strong performance in recent years of our Building Systems division which uses
such technology in its own businesses and as a means of strengthening its links
with its construction industry customer base. Our Construction Software division
has already had a positive influence on the Building Systems division and I am
confident that it will continue to do so. The Building Systems division's order
books are at healthy levels and we expect that it will continue to perform well.
Against this background, we are continuing to upgrade established software
programs and develop new ones. However, because of the requirement to write off
this expenditure as it is incurred this investment will adversely affect profits
in the short term. Thus a major part of the loss attributed to the Construction
Software division in the period under review represented the cost of upgrading
and localising of software programs such as Staircon(R) and Arcon(R), and the
cost of developing new products such as Whole House Engineering(R). Looking
ahead, I am confident of the profit potential of our Construction Software
interests and that as we establish marketing networks and bring our new programs
to market the investment will bear fruit.
John Ketteley
EXECUTIVE CHAIRMAN
Eleco plc
Consolidated Profit and Loss Account
(Unaudited) (Audited)
Half year ended Year ended
31 December 30 June
2003 2002 2003
£'000 £'000 £'000
Turnover
Continuing operations 21,235 17,923 36,665
Acquisitions 144 - -
Total Continuing operations 21,379 17,923 36,665
Discontinued operations 236 244 495
21,615 18,167 37,160
Operating profit
Continuing operations 673 1,017 2,132
Acquisitions (53) - -
Total Continuing operations 620 1,017 2,132
Discontinued operations (166) (80) (157)
454 937 1,975
Provision for loss on termination of discontinued operations (Note 2) (870) - -
Loss on disposal of tangible assets of continuing operations - (37) (33)
(Loss)/profit on ordinary activities before interest (416) 900 1,942
Net interest payable (99) (29) (86)
(Loss)/profit on ordinary activities before tax (515) 871 1,856
Tax on ordinary activities (118) (299) (615)
(Loss)/profit on ordinary activities after tax (633) 572 1,241
Minority interests - - -
(Loss)/ profit attributable to shareholders (650) 572 1,241
Dividend on ordinary shares (Note 3) (184) (163) (571)
Retained (loss)/profit (817) 409 670
Dividends per share 0.375p 0.375p 1.20p
(Loss)/earnings per share (Note 4) (1.3)p 1.4p 2.8p
Diluted (loss)/earnings per share (Note 5) (1.3)p 1.4p 2.8p
Earnings per share on continuing operations (Note 6) 0.7p 1.5p 3.1p
Notes
1. The interim results have been prepared on the basis of the accounting policies adopted for the year
ended 30 June 2003, as set out in the Company's Annual Report and Accounts except for the adoption of
UITF abstract 38 - Accounting for ESOP Trusts. These interim accounts do not constitute the Company's
statutory accounts for the period.
Under UITF 38, shares in the company held by the Eleco plc Employee Share Ownership Trust (ESOT) are
stated at cost and included as a deduction from shareholders' funds. When share awards and share
option awards are granted to employees, the difference between market price at the date of grant and
the price, if any, payable on exercise is recognised in the profit and loss account over the relevant
performance period, or, where there are no performance conditions, the period until the date when the
employees become unconditionally entitled to the award.
2. Included in the loss on termination of discontinued operations is a provision for impairment of
goodwill amounting to £766,000.
3. The dividend will be payable on 20 April 2004 to shareholders on the register on 2 April 2004.
4. Based on the profit attributable to shareholders and a weighted average of 48,038,303 ordinary shares
(Dec 2002 - 41,828,190 and Jun 2003 - 44,326,775).
5. Based on the profit attributable to shareholders and a diluted weighted average of 48,416,682
ordinary shares (Dec 2002 - 42,017,296 and Jun 2003 - 44,571,887). The dilution is caused by
outstanding share options.
6. Based on the profit attributable to shareholders after adding back the after-tax losses attributable
to discontinued operations of £955,000 (Dec 2002 - £63,000 and Jun 2003 - £136,000) and the weighted
average number of shares shown in note 4 above.
7. On 1 July 2003 the Group acquired the entire issued share capital of Softhold GmbH, the owner of the
intellectual property in the Arcon software, for a total consideration, including acquisition
expenses and the matter referred to below, of £458,000.
Under a software licence agreement with Softhold GmbH, Eleco plc acquired on 5 May 2003 certain
limited rights to the Arcon software of Softhold GmbH at a cost of £189,000, the receipt of which was
included within the reserves of Softhold GmbH at the date of acquisition.
The Directors consider that, in view of the fact that the relevant rights are not rights acquired
from a third party to the Group, the £189,000 paid represents in substance an increase in the
effective price paid to acquire the 100% shareholding in Softhold Gmbh. Accordingly in the
consolidated accounts, the amount has been included as part of the consideration paid and the
goodwill increased.
Goodwill on acquisition of £381,000 has been capitalised and included within fixed assets. The total
consideration of £458,000, including expenses and the £189,000 referred to above, was paid in cash
and £15,000 cash was acquired.
8. The comparative figures for the year ended 30 June 2003 have been taken from but do not constitute
the Company's statutory accounts for that financial year. Those accounts have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
9. Copies of this interim statement and results, which were approved by the Board on 17 March 2004, are
available from the registered office of the Company, which is at Eleco House, 15 Gentlemen's Field,
Westmill Road, Ware, Herts. SG12 0EF.
Statement of Total Recognised Gains and Losses
(Unaudited) (Audited)
Half year ended Year ended
31 December 30 June
2003 2002 2003
£'000 £'000 £'000
(Loss)/profit for the period (633) 572 1,241
Restatement - -
Profit for the period as restated (650) 572 1,241
Currency translation differences on foreign currency net investments 63 68 221
Total recognised (losses)/gains for the period (570) 640 1,462
The cumulative effect of the prior period adjustment on the profit and loss account brought forward at 1
July 2003 occasioned by the adoption of UITF abstract 38, was an increase of £180,000 (1 July 2002:
£228,000)
Reconciliation of Movement in Equity Shareholders' Funds
(Unaudited) (Audited)
Half year ended Year ended
31 December 30 June
2003 2002 2003
(Restated) (Restated)
£'000 £'000 £'000
(Loss)/ profit for the period (633) 572 1,241
Other recognised gains/(losses) 63 68 221
LTIP amortisation expense net of vesting charge 51 (106) (48)
Decrease in own shares held by ESOT 37 108 108
Dividends (184) (163) (571)
Issue of ordinary shares 39 45 45
Issue of ordinary shares on acquisition of subsidiary undertakings - - 1,455
Net (reduction) / increase in equity shareholders' funds (627) 524 2,451
Opening equity shareholders' funds 11,636 9,185 9,185
Closing equity shareholders' funds 11,009 9,709 11,636
Opening equity shareholders' funds at 1 July 2002 have been restated from £9,247,000 for the impact of
own shares held by the Eleco plc Employee Share Ownership Trust (ESOT) and of the LTIP under the
requirements of UITF abstract 38.
There has been no material impact on the current or prior year results arising from the implementation
of UITF 38.
Eleco plc
Summarised Consolidated Balance Sheet
(Unaudited) (Audited)
31 December 30 June
2003 2002 2003
(Restated) (Restated)
£'000 £'000 £'000
Fixed assets
Intangible assets 5,617 2,025 6,192
Tangible assets 7,579 7,280 7,514
Investments 474 197 369
13,670 9,502 14,075
Current assets
Stocks 1,998 1,886 1,864
Debtors 9,885 6,175 8,704
Cash and bank balances 2,425 3,924 2,334
14,308 11,985 12,902
Creditors falling due within one year
Bank loans
Bank overdrafts
Bank loans and overdrafts (4,180) (1,663) (2,614)
Obligations under finance leases (184) (155) (186)
Proposed dividend (182) (158) (407)
Corporation Tax (28) (715) (368)
Other creditors (excluding Corporation (10,229) (7,450) (9,443)
Tax)
Other creditors (10,422) (8,323) (10,218)
Net current (liabilities) / assets (478) 1,844 (116)
Creditors falling due after more than one year
Bank loans (1,411) (1,262) (1,737)
Obligations under finance leases (255) (102) (202)
Overseas tax - - -
(1,666) (1,364) (1,939)
Provisions for deferred consideration (124) - -
Deferred Tax (393) (273) (384)
Provisions for liabilities and charges (517) (273) (384)
Net assets 11,009 9,709 11,636
Capital and reserves
Called up share capital 4,894 4,309 4,879
Share premium account 6,007 5,098 5,983
Merger reserve 367 367 367
Other reserve - own shares held by ESOT (145) (182) (182)
Profit and loss account (131) 117 589
Equity shareholders' funds 11,009 9,709 11,636
Eleco plc
Consolidated cash flow statement
(Unaudited) (Audited)
Half year ended Year ended
31 December 30 June
(Restated) (Restated)
2003 2002 2003
£'000 £'000 £'000
Operating activities
Net cash inflow from continuing operating activities 840 1,998 2,616
Net cash outflow from discontinued operating activities (91) (107) (56)
Net cash inflow from operating activities 749 1,891 2,560
Returns on investment and servicing of finance
Interest received
Net interest paid (86) (29) (89)
Interest element of finance lease rentals
Net cash outflow from returns on investment and servicing of finance (86) (29) (89)
Taxation (408) 25 (632)
Capital expenditure and financial investment
Purchase of fixed assets (671) (1,271) (1,457)
Sale of tangible fixed assets and investments 70 7 22
Purchase of investment (105) - (369)
Sale of investment - - 73
Net cash outflow from capital expenditure and financial investment
Net cash outflow from capital expenditure and financial investment (706) (1,264) (1,731)
Acquisitions and disposals
Purchase of subsidiary undertakings net of cash acquired (254) (6) (2,383)
Sale of subsidiary undertaking's operations - 10 -
Net cash (outflow) / inflow from acquisitions and disposals (254) 4 (2,383)
Equity dividends paid (410) (339) (497)
Net cash (outflow) / inflow before financing (1,115) 288 (2,772)
Financing
New bank loans - - 1,000
Repayment of principal under finance leases (126) (115) (246)
Repayment of bank loans (325) (226) (551)
Issue of ordinary shares 39 45 45
Own shares purchased by Employee Share Ownership Trust - (39) (39)
Net cash (outflow) / inflow from financing (412) (335) 209
Decrease in cash in the period (1,527) (47) (2,563)
Eleco plc
Consolidated cash flow statement - reconciliations
Reconciliation of operating profit to net cash flow from operating activities
Continuing Discontinued
(Unaudited) (Audited) (Unaudited) (Audited)
Half year ended Year ended Half year ended Year ended
31 December 30 June 31 December 30 June
2003 2002 2003 2003 2002 2003
£'000 £'000 £'000 £'000 £'000 £'000
Operating profit 620 997 2,046 (166) (60) (71)
Depreciation charge 595 523 1,112 11 7 14
Amortisation of intangible 168 44 166 - - -
assets
Amortisation of LTIP Awards 88 41 99 - - -
Loss / (profit) on sale of 23 (7) (12) - - -
fixed assets
Changes in intra-group (134) 10 - 134 (10) -
indebtedness
Working capital (increase) / (520) 390 (795) (70) (44) 1
decrease
Net cash inflow / (outflow) 840 1,998 2,616 (91) (107) (56)
from operating activities
Reconciliation of net cash flow to movement in net debt
(Unaudited) (Audited)
Half year ended Year ended
31 December 30 June
2003 2002 2003
£'000 £'000 £'000
Decrease in cash in the period (1,527) (47) (2,563)
Cash flow from movements in debt and lease financing 451 341 (203)
(Increase) / decrease in net debt resulting from cash (1,076) 294 (2,766)
flows
New finance leases (174) (64) (173)
Finance lease obligations disposed of on sale of - - -
business
Finance lease obligations acquired with subsidiary - - (144)
undertakings
Effects of changes in foreign exchange rates 50 48 214
(Increase) / decrease in net debt (1,200) 278 (2,869)
Opening net (debt) / cash (2,405) 464 464
Closing net (debt) / cash (3,605) 742 (2,405)
Segmental analysis
Group turnover and profits were attributable as follows
External sales (Loss)/Profit
(Unaudited) (Audited) (Unaudited) (Audited)
Half year ended Year ended Half year ended Year ended
31 December 30 June 31 December 30 June
2003 2002 2003 2003 2002 2003
£'000 £'000 £'000 £'000 £'000 £'000
Continuing activities
Building systems 19,179 17,659 34,494 1,285 1,487 2,667
Software systems 2,436 508 2,666 (665) (80) (535)
Corporate - - - - (390) -
Total continuing 21,615 18,167 37,160 620 1,017 2,132
Discontinued activities
Software systems 236 244 495 (166) (80) (157)
Other - - - - - -
Total discontinued 236 244 495 (166) (80) (157)
Exceptional losses - discontinued (870) (37) (33)
activities
(Loss)/Profit before interest (416) 900 1,942
For the period to 31 December 2003, corporate costs of £430,000 (June 2003: £863,000) have been
allocated, £303,000 (June 2003: £670,000) to the Building Systems division and £127,000 (June 2003:
£193,000) to the Software Systems division, to the continuing sub-groups. In the interim results for
the period to 31 December 2002, these costs were not allocated.
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