Preliminary Results

RNS Number : 4929D

Eleco PLC

16 September 2008

 



For Immediate Release

16 September 2008

ELECO PLC

('Eleco' or the 'Group')

The Building Systems and Software Group

Preliminary Results for the Year Ended 30 June 2008

Group Highlights

• Turnover increased by 37.1% to £84.9m (2007: £61.9m) 

• Group operating profit increased by 37.8% to £8.0m (2007: £5.8m) 

• Profit before tax increased by 39.9% to £8.2m (2007: £5.9m) 

• Profit after tax increased by 24.2% to £6.1m (2007: £4.9m)

• Proposed final dividend 2.0p per share (2007: 1.8p) making total for year of 3.0p per share (2007: 2.5p) covered 3.5 times (2007: 3.7 times)  

Building Systems

• Turnover increased by 37.8 % to £71.4m (2007: £51.8m)

• Operating profit increased by 20.9% to £7.4m (2007: £6.1m)

• Substantial increased contribution from expanded Precast Concrete operations

• Limited exposure to housing markets

Software

• Turnover increased by 33.2% to £13.5m (2007: £10.1m)

• Operating profit of £945,000 (2007: Loss of £297,000) 

• Record turnover and profit for Construction Software operations

John Ketteley, Executive Chairman of Eleco plc, commented:

'Trading conditions will be tough this year. However, we will apply the same measured and positive approach to our business in the year ahead, albeit against a backdrop of increasingly difficult market conditions. Given our strong financial position and the strength we derive from the balance of the products and business that we now have in the Group, I am confident that Eleco will perform well in the circumstances.' 

For further information please contact:

Eleco plc	Tel: [phone]
John Ketteley, Executive Chairman [e-mail]	http://www.eleco.com
David Dannhauser, Finance Director [e-mail]
Collins Stewart Europe Limited	020 7523 8350
Nick Ellis
Buchanan Communications	020 7466 5000
Tim Anderson / Isabel Podda / Christian Goodbody

 Chairman's Statement

I am pleased to present my statement for the year ended 30 June 2008, which includes the review of our business activities and the outlook for the current year.

Eleco continued its progress in the year under review due to a strong performance from our expanded precast concrete operations, limited exposure to the UK and Irish housing markets, accounting for only 14% of Group turnover, and a significantly improved performance from our software interests.

Performance Summary

Group turnover for the year increased by 37.1% to £84.9m (2007: £61.9m).

Group operating profit was 37.8% higher at £8.0m (2007: £5.8m). Group operating profit was arrived at after deducting intangible asset amortisation costs for the year of £531,000 (2007: £435,000) and included a first year contribution of £521,000 from Millbury Systems, which was acquired in November 2007, before deducting acquisition accounting adjustments of £128,000 and intangible asset amortisation costs of £108,000.

Profit on ordinary activities before tax was 39.9% higher at £8.2m (2007: £5.9m), after net interest receivable of £202,000 (2007: £59,000). 

Group profit for the year after tax increased 24.2% to £6.1m (2007: £4.9m) equivalent to 10.6p earnings per share (2007: 9.3p earnings per share). 

Operating cash flow was again strong and net funds in hand at 30 June 2008 increased to £5.8m (2007: £4.8m). The cash cost of financing the acquisition of Milbury Systems during the year was £2.9m net of the cash balances acquired with the company. 

Investment in new products and enhanced software development increased by 26.9% to £2.9m (2007: £2.3m).

Dividends

The Board proposes an increased final dividend of 2.00p per share (2007: 1.80p per share), which subject to approval by shareholders, will be paid on 14 November 2008 to shareholders on the Register on 17 October 2008.

The proposed final dividend, together with the interim dividend of 1.00p already paid, would result in total dividends in respect of the year ended 30 June 2008 of 3.00p per share (2007: 2.50p per share), an increase of 20%. 

The total of dividends paid and proposed was covered 3.5 times by earnings per share of 10.6p (2007 Dividend Cover: 3.7 times earnings per share of 9.3p per share).

Employees

I would like to thank our employees in the UK, Germany, Sweden and South Africa whose hard work, dedication and skill have made possible these significantly improved results in a particularly difficult trading environment.

Review of Business Activities

Building Systems

Our Building Systems products are designed and engineered for projects that lend themselves to the efficient application of Modern Methods of Construction. They give our customers a competitive edge by maximizing the speed, efficiency and economy of the build process.  

Turnover of our Building Systems operations increased by 37.9% to £71.4m (2007: £51.8m) and operating profit increased by 20.9% to £7.4m (2007: £6.1m). Operating profit before acquisition accounting adjustments and amortisation of intangible assets was £7.7m (2007: £6.2m).

Precast Concrete

Turnover of our Precast Concrete operations increased by 81.3% to £37.9m (2007: £20.9m) and operating profit increased by 57.7% to £4.1m (2007: £2.6m). Operating profit before acquisition accounting adjustments and amortisation of intangible assets was £4.4m (2007: £2.6m).

Bell & Webster Concrete achieved a significant increase in sales of its FastBuild Rooms for hotels and student accommodation projects in the second half of the year; sales of its retaining wall and other products also remained firm. As a consequence, operating profits were significantly higher than last year. 

Bell & Webster Concrete also acquired a new site at Hoveringham which now enables it also to supply pre-stressed reinforced concrete panels. The site opens up new markets such as schools, prisons, nursing/residential homes and key worker accommodation for its FastBuild Rooms and is now fully operational. The plant was commissioned on time and budget and the costs of commissioning have been fully accounted for in the year under review. 

Milbury Systems performed particularly well in its first full six month period as part of the Group and its management and employees are to be congratulated on the enthusiasm and initiative they have shown on joining Eleco. 

We are committed to a policy of good environmental practice and continual improvement. Bell & Webster Concrete and Milbury Systems are currently engaged on a major environmental improvement project at their production plants at Grantham, Hoveringham and Lydney with the object of gaining ISO14001:2004 accreditation, an international standard for environmental management that is applied and recognised worldwide. The initial audit for the registration process will take place in October 2008 and we are aiming to gain accreditation during February 2009. 

Bell & Webster Concrete has also applied to register its Grantham production, design and administrative operations for the British Standards Institute OHSAS 18001: 2007 standard for occupational health and safety management systems. The first stage of the registration process began in September 2008. Application for registration will also be made in respect of the site at Hoveringham and Milbury Systems' site at Lydney in due course. We are aiming for the first stage accreditation during January 2009.

I believe that the gaining of these accreditations will enhance our reputation as a leading manufacturer of precast concrete elements for the UK construction industry. 

I am pleased to say that a Bell & Webster Concrete project has again been shortlisted for a Construction Excellence Award in the ‘Project of the Year Category’. The shortlisted project is the highly acclaimed Mason Hall student accommodation project for the University of Birmingham.

Other Building Systems

Our Other Building Systems operations comprise roofing and cladding; timber frame and engineered timber products; and timber engineering systems.

Turnover increased by 8.7% to £33.5m (2007: £30.9m). Operating profit reduced by 8.3% to £3.3m (2007: £3.5m). Operating profit before amortisation of intangible assets was £3.3m (2007: £3.6m).

Roofing and Cladding

SpeedDeck Building Systems launched two new products at the Interbuild Exhibition in October, 2007. SpeedRoof®, a secret fix roofing product and Elan, a cladding product were well received by the market. SpeedDeck Building Systems also successfully directed its main marketing effort in the second half on the Government's educational building programme. Its order book at the end of the year was significantly higher than at the beginning.  Downer Cladding Systems also performed well in the second half. As a consequence the improvement in performance by our roofing and cladding operations that I reported in the first half year, continued in the second half. 

Timber frame and engineered timber products

Eleco Timber Frame made a higher profit in the second half in a weak market. However, by the end of the year even this sector of the housing market had come under severe pressure and steps have now been taken to market its patented ElecoFrame® product more actively for use in commercial projects as well as social housing projects. ElecoFrame® is particularly suitable for the latter, due to its ability to achieve level 4,5 and 6 of the Code for Sustainable Homes, in combination with relevant technologies. 

Timber Engineering Systems

In my interim statement, I reported that the overall profits of our timber engineering businesses were some 20% lower at the half year mainly because of significant weakness in the Irish, UK and South African housing markets. Lower profits from Gang-nail Systems in the UK and International Truss Systems in South Africa were offset to some extent by increased profits from Eleco Bauprodukte which is principally involved in the commercial market in Germany.

In the second half, the weakness in the Irish and UK housing markets accelerated and the South African market experienced a marked drop in confidence. As a consequence, profits of Gang-Nail Systems and International Truss Systems were significantly lower, offset again by increased profits from Eleco Bauprodukte. This limited the drop in profits of our timber engineering businesses overall to 26.2% for the year. 

Software

Our Software operations comprise Construction Software and Visualisation Software.

Turnover of our Software operations increased by 33.2% to £13.5m (2007: £10.1m).

Our Software operations made an operating profit of £0.9m, after total acquisition accounting adjustments and amortisation of intangible assets of £0.4m (2007: Operating loss £0.3m, after total acquisition accounting adjustments and amortisation of intangible assets: £0.5m). Fully expensed development costs were £2.3m (2007: £1.8m).

Operating profit before acquisition accounting adjustments and amortisation of intangible assets was £1.4m (2007: £0.2m). 

Construction Software

Consultec and Asta Development both performed well.  Consultec Sweden achieved a significant improvement in profit for the year and Asta Development record turnover and profit. However, Consultec UK's was adversely affected by the downturn in the UK housing market and its profits were lower.

Consultec Sweden successfully completed the development of its new .Net based Bidcon® Estimating package, which will be launched this autumn in Sweden. Asta Development also successfully released a new version of the Asta Powerproject software and expanded their distribution network to include Australia and Dubai. The release of Consultec UK's new objectivised Timber Frame software program was also well received.

Visualisation Software

Sales of Visualisation Software, particularly of our retail products, increased in the period. We also reached agreement with 9 of the 10 international distributors that we had targeted for our consumer applications. Increased costs of investing in new programs again resulted in a modest loss, but Visualisation Software improved its position overall during the year and is well placed for the year ahead. For example, we recently secured a trademark license to produce software in the UK under the highly successful 'Grand Designs' brand. 'Grand Designs 3D' will be launched in October 2008 and will mark a significant step change in the profile and performance of Eleco's home design software in the UK. 

Finance

We have consistently applied sound financing policies since the Company's recovery in the past decade and I am again pleased to report that our strong operating cash flows in the year under review improved our net cash position at the year end. Our cash resources, together with the committed medium term banking facilities that we put in place last year, in anticipation of the tightening credit conditions, provides a strong underpinning for our trading operations and will also enable us to take advantage of investment opportunities as they arise. As credit conditions in the financial markets continue to tighten, increasing importance is being placed by customers on the financial standing of their suppliers. Given our strong financial position, Eleco is well placed to provide the necessary assurances and I believe that this may well give us a competitive edge in current conditions. 

Outlook

Trading conditions will be tough this year. However, we will apply the same measured and positive approach to our business in the year ahead, albeit against a backdrop of increasingly difficult market conditions. Our Building Systems operations will concentrate their efforts on opportunities in the infrastructure, hotel and educational sectors; and our Software operations will focus on international and consumer markets. Given our strong financial position and the strength we derive from the balance of the products and business that we now have in the Group, I am confident that Eleco will perform well in the circumstances

Consolidated Income Statement

For the year ended 30 June 2008

						2008		2007
						£'000		£'000
	Revenue					84,909		61,923
	Cost of sales					(46,090)		(32,142)
	Gross profit					38,819		29,781
	Distribution costs					(4,087)		(2,818)
	Administrative expenses					(26,710)		(21,142)
	Profit from operations					8,022		5,821
	Finance income					475		306
	Finance cost					(273)		(247)
	Profit before tax					8,224		5,880
	Tax					(2,091)		(942)
	Profit for the period					6,133		4,938
	Attributable to:
	Equity holders of the parent					6,133		4,938
	Total and continuing earnings per share (EPS)
	- basic					10.6p		9.3p
	- diluted					10.5p		9.3p

Consolidated Statement of Recognised Income and Expense

For the year ended 30 June 2008

						2008		2007
						£'000		£'000
	Actuarial (loss)/gain on retirement benefit obligation					(3,992)		1,125
	Associated deferred tax on retirement benefit obligation					986		(407)
	Translation differences on foreign currency net investments					(57)		(154)
	Net (expense)/income recognised directly in equity					(3,063)		564
	Profit for the period from operations					6,133		4,938
	Total recognised income and expense in the period					3,070		5,502
	Attributable to:
	Equity holders of the parent					3,070		5,502

Consolidated Balance Sheet

As at 30 June 2008

						2008		2007
						£'000		£'000
	Non-current assets
	Goodwill					14,174		10,249
	Other intangible assets					3,827		3,187
	Property, plant and equipment					12,175		8,372
	Deferred tax assets					1,969		984
	Total non-current assets					32,145		22,792
	Current assets
	Inventories					4,599		3,441
	Trade and other receivables					16,585		13,151
	Cash and cash equivalents					6,808		5,940
	Total current assets					27,992		22,532
	Total assets					60,137		45,324
	Current liabilities
	Borrowings					-		(410)
	Obligations under finance leases					(364)		(313)
	Trade and other payables					(16,222)		(11,103)
	Current tax liabilities					(1,687)		(982)
	Accruals and deferred income					(7,237)		(6,468)
	Total current liabilities					(25,510)		(19,276)
	Non-current liabilities
	Borrowings					-		(71)
	Obligations under finance leases					(596)		(386)
	Deferred tax liabilities					(1,110)		(1,051)
	Provisions					-		(85)
	Retirement benefit obligation					(7,034)		(3,514)
	Total non-current liabilities					(8,740)		(5,107)
	Total liabilities					(34,250)		(24,383)
	Net assets					25,887		20,941
	Equity
	Share capital					5,995		5,674
	Share premium account					6,224		6,224
	Merger reserve					7,371		4,453
	Translation reserve					(211)		(154)
	Other reserve					(321)		(306)
	Retained earnings					6,829		5,050
	Equity attributable to shareholders					25,887		20,941

  Consolidated Cash Flow Statement

For the year ended 30 June 2008

									2008		2007
									£'000		£'000
	Cash flows from operating activities
	Profit before interest and tax								8,022		5,821
	Depreciation charge								1,642		1,407
	Amortisation charge								531		425
	Profit on sale of property, plant and equipment								(37)		(250)
	Amortisation of share-based payments								252		181
	Retirement benefit obligation								(384)		(378)
	Cash generated from operations before working capital movements								10,026		7,206
	Increase in trade and other receivables								(1,474)		(2,335)
	Increase in inventories and work in progress								(140)		(628)
	Increase in trade and other payables								3,499		1,925
	Cash generated from operations								11,911		6,168
	Interest paid								(250)		(250)
	Interest received								388		241
	Income tax paid								(1,956)		(663)
	Net cash generated from operating activities								10,093		5,496
	Net cash used in investing activities
	Purchase of intangible assets								(70)		(115)
	Purchase of property, plant and equipment								(3,946)		(1,233)
	Acquisition of subsidiary undertakings net of cash acquired								(2,963)		(2,622)
	Proceeds from sale of property, plant, equipment and intangible assets								149		315
	Net cash outflow from investing activities								(6,830)		(3,655)
	Net cash used in financing activities
	Proceeds from new bank loan								4,600		-
	Repayment of bank loans								(5,140)		(891)
	Repayments of obligations under finance leases								(428)		(374)
	Equity dividends paid								(1,600)		(1,122)
	Own shares purchased by ESOT								(15)		(204)
	Net cash outflow from financing activities								(2,583)		(2,591)
	Net increase/(decrease) in cash and cash equivalents								680		(750)
	Cash and cash equivalents at beginning of period								5,940		6,852
	Effects of changes in foreign exchange rates								188		(162)
	Cash and cash equivalents at end of period								6,808		5,940

Business Segment Analysis 

For the year ended 30 June 2008

			Building Systems
			Precast	Other	Software	Elimination	Group
			£'000	£'000	£'000	£'000	£'000
	Revenue		37,864	33,554	13,491	-	84,909
	Inter-segment revenue		-	583	243	(826)	-
	Total segment revenue		37,864	34,137	13,734	(826)	84,909
	Adjusted operating profit		4,379	3,286	1,368		9,033
	Acquisition accounting adjustments		(128)		(33)		(161)
	Amortisation of intangible assets		(108)	(33)	(390)		(531)
	Segment result		4,143	3,253	945		8,341
	Abortive merger costs						(319)
	Profit from operations						8,022
	Net finance income						202
	Profit before tax						8,224
	Tax						(2,091)
	Profit after tax						6,133
	Segment assets		18,984	15,391	17,665		52,040
	Unallocated assets						8,097
	Total Group assets						60,137
	Segment liabilities		14,515	8,942	7,567		31,024
	Unallocated liabilities						3,226
	Total Group liabilities						34,250
	Other segment information
	Capital expenditure:
	Property, plant and equipment		3,450	862	394		4,706
	Intangible assets		1,071	-	70		1,141
	Goodwill acquired		3,902	-	-		3,902
	Depreciation		673	707	262		1,642

Business Segment Analysis 

For the year ended 30 June 2007

			Building Systems
			Precast	Other	Software	Elimination	Group
			£'000	£'000	£'000	£'000	£'000
	Revenue		20,900	30,893	10,130		61,923
	Inter-segment revenue			570	221	(791)	-
	Total segment revenue		20,900	31,463	10,351	(791)	61,923
	Adjusted operating profit		2,569	3,603	186		6,358
	Acquisition accounting adjustments				(112)		(112)
	Amortisation of intangible assets			(54)	(371)		(425)
	Segment result		2,569	3,549	(297)	-	5,821
	Exceptional items						-
	Profit from operations						5,821
	Net finance income						59
	Profit before tax						5,880
	Tax						(942)
	Profit after tax						4,938
	Segment assets		7,721	13,512	17,751		38,984
	Unallocated assets						6,340
	Total Group assets						45,324
	Segment liabilities		6,876	7,393	6,793		21,062
	Unallocated liabilities						3,321
	Total Group liabilities						24,383
	Other segment information
	Capital expenditure:
	Property, plant and equipment		620	503	300		1,423
	Intangible assets		-	-	3,241		3,241
	Goodwill acquired		-	-	4,804		4,804
	Depreciation		487	709	211		1,407

Notes

1.  The financial information in this announcement, which is audited, does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts of the Company, on which the Auditors will report, will be delivered to the Registrar of Companies. The comparative figures for the year to 30 June 2007 have been taken from, but do not constitute, the Company’s statutory financial statements for that financial year restated for the effect of transition to International Financial Reporting Standards.

 

2. The information herein has been prepared on the basis of the accounting policies adopted for the year ended 30 June 2008, set out in the Company’s Annual Report and Accounts and as previously disclosed in the Company’s Interim Report for the six months to December 2007.

 

3. A dividend of 1.0p per share was declared at the interim stage. A final dividend representing 2.0p per share is being proposed and, if approved at the Annual General Meeting, will be payable on the 14 November 2008 to shareholders on the Register on 17 October 2008.

 

4. The calculation of basic earnings per share is based on the profit attributable to equity shareholders of £6,133,000 (2007: £4,938,000) and on 57,970,071 ordinary shares (2007: 52,855,635), being the weighted average number of ordinary shares in issue during the year.

 

5. The calculation of diluted earnings per share is based on the profit attributable to equity shareholders of £6,133,000 (2007: £4,938,000) and on 58,675,041 ordinary shares (2007: 52,855,635), being the weighted average number of ordinary shares in issue during the year.

 

6. On 22 November 2007, the Group acquired the entire issued share capital of Milbury Systems Limited and the freehold of the property occupied by Milbury Systems Limited for a total consideration of £6,974,000 before expenses of which £1,030,000 relates to the separate purchase of the freehold property. At completion, £3,735,000 was settled in cash from the Group’s existing resources, £3,030,000 was settled by the issue and placing of shares on behalf of the vendors and £209,000 by allotment to the vendors of new ordinary shares in the Company.

During the year Milbury Systems Limited contributed turnover of £5,355,000 and an adjusted operating profit of £521,000 to the results of the Precast division which after the acquisition accounting adjustments related to profit in inventory at the date of acquisition of £128,000 and intangible asset amortisation £108,000, resulted in a reported operating profit of £285,000.

 

7. The Annual General Meeting of Eleco plc will be held at Brewers’ Hall, Aldermanbury Square, London EC2V 7HR on 5 November 2008 at 12 noon.

 

8. Copies of the Report and Accounts will be sent to shareholders from 25 September 2008 and will be available from the Secretary at the Company’s registered office, Eleco House, 15 Gentleman’s Field, Westmill Road, Ware, Hertfordshire, England, SG12 0EF.

 

END

 

 

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