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Elecosoft plc
Annual Report & Accounts 2016
Elecosoft plc is a market-leading provider of
integrated software applications and related
services to the international construction and
property management industries.
Elecosoft plc is a well-established and profitable AIM-listed software
Company with interests based principally in Sweden, Germany,
Benelux, US and the UK. Elecosoft delivers a strong portfolio of
software for project management, estimation, visualisation, Building
Information Modelling (BIM), information management and digital
marketing disciplines. Elecosoft’s software and services are used
during early planning stages through to construction and facilities
management, driving the performance and day-to-day operations
of its customers’ businesses.
Elecosoft's software has been used on high-profile construction
projects; to name a few, The Shard in London, Hong Kong International
Airport, The Reichstag Dome in Berlin, Warsaw Metro in Poland and
The Jumeirah Park in Dubai, and widely used on infrastructure projects
by the Pennsylvania Department of Transportation.
In 2016 Elecosoft made further progress in its strategy and acquired
Integrated Computing and Office Networking Ltd (Icon), a web based
property portfolio management system.
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Overview
Highlights
Chairman’s Statement
01
02
Strategic Report
Who We Are
Transformative Year in Review
Business Model
Investment Proposition
Marketplaces and Trends
Strategy
Key Performance Indicators
and Business Monitoring
20
Principal Risks and Uncertainties 21
22
Operating Review
26
Financial Review
08
10
12
13
14
16
Governance
Board of Directors
Company Advisors
Directors’ Report
Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Changes in Equity
Consolidated Balance Sheet
Consolidated Statement
of Cash Flows
Significant Accounting Policies
Notes to the Consolidated
Financial Statements
Company Statement
of Changes in Equity
Company Balance Sheet
Statement of Company
Accounting Policies
Notes to the Company
Financial Statements
Five Year Summary
Group Directory
30
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www.elecosoft.com
You can download the digital
version of this: ir.elecosoft.com
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Elecosoft plc Annual Report and Accounts 2016
Highlights
for the year ended 31 December 2016
Financial Highlights
Continuing Operations
Revenue
Operating profit before exceptional items
Operating profit
Profit before tax
Earnings per share (basic) (continuing operations)
Recurring maintenance revenue
EBITDA
Net Borrowings
At constant exchange rates*
Revenue
Operating profit
Profit before tax
*
2016 restated at 2015 average exchange rates.
Operational Highlights
2016
£’000
2015
£’000
Change
£’000
17,795
15,260
+2,535
1,915
1,594
1,504
1.7p
8,622
2,432
1,304
1,137
1,126
1,006
1.1p
7,278
1,795
803
+778
+468
+498
+0.6p
+1,344
+637
+501
16,549
15,260
+1,289
1,514
1,424
1,126
1,006
+388
+418
• Acquired Icon in October 2016, which develops software for seven of the top ten UK retailers.
• Released updated versions of Asta Powerproject® and Asta Powerproject BIM, Staircon®, Statcon® and
launched a new product Bidcon BIM, that provides quantity take-off from a 3D BIM file.
• First ESIGN® sale to Chinese flooring manufacturer.
• For the third year running Elecosoft won the ‘Best Project Management/Planning Software’ award at the
UK Construction Computing awards.
• Achieved ISO 9001 accreditation recognising Elecosoft UK Limited as a ‘quality supplier’.
• An increasing number of customers are taking advantage of the Elecosoft product portfolio.
• Acquired an established Asta Powerproject® reseller in the Netherlands.
01
Strategic ReportGovernanceFinancial StatementsOverview Chairman’s Statement
02
“ 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.”
John Ketteley
Executive Chairman
Trading Performance
Revenues
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.
Profits
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.
Financial Performance
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.
The Business
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 Ltd
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.
Elecosoft plc Annual Report and Accounts 2016 Revenue £’000
17,795
17% increase
EBITDA £’000
2,432
35% increase
The Acquisition of Icon
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
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.
Rebranding
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.
Board and Management
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.
03
Strategic ReportGovernanceFinancial StatementsOverview Chairman’s Statement continued
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:
David Pearson
Group Finance Director
Jason Ruddle
Managing Director of Elecosoft UK Ltd
Anders Karlsson
Managing Director of Elecosoft Sweden
Jonathan Hunter
Marketing and Business Development
Director
Serena Lang
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 Elecosoft 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.
Jonathan Edwards
Non-Executive
Kevin Craig
Non-Executive
John Ketteley
Executive Chairman
Recurring revenue £’000
8,622
18% increase
Profit before tax £’000
1,504
50% increase
04
Elecosoft plc Annual Report and Accounts 2016
Dividend
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
Brexit
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.
Employees
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.
Outlook
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.
John Ketteley
Executive Chairman
24 March 2017
05
Strategic ReportGovernanceFinancial StatementsOverview Strategic
Report
Who We Are
08
Transformative Year in Review 10
12
Business Model
13
Investment Proposition
14
Marketplaces and Trends
Strategy
16
Key Performance Indicators
and Business Monitoring
Principal Risks
and Uncertainties
Operating Review
Financial Review
21
22
26
20
06
Elecosoft plc Annual Report and Accounts 2016 Overview
Strategic Report Governance
Financial Statements
07
Who We Are
Elecosoft plc is a market-leading provider of
integrated software applications and related
services to international architectural, engineering
and construction (AEC) marketplaces and
property management industries.
Who We Are
Elecosoft develops its specialist
software through its own development
teams in Sweden, Germany and the
UK. Elecosoft services its customers
directly in its core markets of Sweden,
Germany, Benelux, the US and the UK
and indirectly to its non-core markets
through a network of channel partners.
Our Journey
The Company has netted a legacy
proceeding over a century of delivering
building technology and innovation.
Although Elecosoft’s offerings now differ
from its origins, it remains committed to
the development and delivery of technical
innovation to maintain and develop strong
market position within the markets it serves.
Elecosoft continues to be headquartered in
the UK with a growing European presence.
What We Do
Elecosoft’s award-winning solutions cover
the core elements of a building project
from specification, design and visualisation
(3D), scheduling the resources needed
to deliver a project (4D) and estimating
and tracking the cost (5D), engineering,
manufacturing and building management.
08
Building Lifecycle
3D – Visualisation
Design/Planning
Visualisation
Designers
CAD/Design
Architects
Engineering
Structural Engineers
Estimating
Estimators
Project Management
Planners
Site Management
Information Management
Main Contractors
IconSystem
®
Elecosoft plc Annual Report and Accounts 2016 5D BIM refers to the process
of intelligent linking and tracking of
3D models over time, combined with
cost-related information. Elecosoft’s
integrated portfolio is aligned to
this framework:
4D – Time
Tracking activity and resources is
critical to timely delivery of projects.
Asta Powerproject® is a leading solution in
construction specific project scheduling.
3D – Visualisation
From a kitchen makeover to full-blown multi-
building sites – ESIGN® Interiormarket, Arcon
Evo® and o2c® help users to design, discuss
and modify their plans in three dimensions.
5D – Costs
Managing costs efficiently is key to
successful projects – Bidcon® has a
dominant position in the Scandinavian
cost estimation market and is expanding
in Europe.
Data Management
5D BIM is underpinned by Common Data
Environment stems that deliver ‘one version
of the truth’. Elecosoft’s data management
systems add value in reducing risk,
duplication and errors for collaborative
working across multiple teams, companies
and disciplines.
On-site Construction
Fill-out
Completion
Renovate/Renew
4D – Time
Floor/Surfaces Manufacturers
Interior Designers
Staircase Manufacturers
2nd Fix Contractors
Maintenance Contractors
Project Managers
Facility Managers
Site Managers
Main Contractors
Project Managers
Property Managers
Suppliers and Contractors
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Strategic ReportGovernanceFinancial StatementsOverview
Transformative Year in Review
2016 has been a transformative year
for the Elecosoft Group.
Acquired a reseller in the Netherlands,
thus further strengthening our growth
position in Benelux.
Elecosoft delivered its inaugural
user conference in the US,
Broomfield, Colorado.
World’s largest suspension bridge,
The Bosphorus Bridge in Turkey, opened
on time, after a ten year construction
managed with Asta Powerproject®.
One of the leading construction
companies in Sweden, Peab AB, has
added Asta Powerproject® to their
already installed Bidcon® product.
Successfully rebranded our largest
Swedish operation from Consultec
to Elecosoft.
10
Willmott Dixon, the contracting,
residential development and property
support business, choose
Asta Powerproject®.
“We surveyed the whole construction
business early in 2016, and we had a
really good response from between
200 and 300 people who were involved
with planning. 98 per cent of those who
responded said they’d like to move to
Asta Powerproject®. That included
people who had never used it, but were
interested in advantages we saw, both
immediately and also into the future.”
Elecosoft plc Annual Report and Accounts 2016 Pepper Construction Group, one of
the largest contractors in the Midwest,
selected Asta Powerproject® as their
planning application of choice.
For the third year running, Elecosoft was
awarded the Project Management/Planning
Software of the Year Award at the Construction
Computing Awards 2016 and Bidcon® was voted
runner-up in the Estimation & Visualisation
Software category.
Achieved ISO 9001 accreditation
recognising Elecosoft UK Limited
as a ‘quality supplier’. ISO 9001 is a
certified quality management system
(QMS) for organisations who want
to prove their ability to consistently
provide products and services that
meet the needs of their customers
and other relevant stakeholders.
Elecosoft and Tyrens AB,
Sweden’s largest construction
and environmental
consultancy, released
Bidcon® climate module for
estimating carbon output.
Epoch Ltd in New Zealand appointed
as a portfolio partner with initial focus
on Bidcon® and Asta Powerproject®.
Icon Acquisition Successfully Completed
Elecosoft acquired Integrated Computing
and Office Networking Ltd (Icon) in October
2016. Icon is a leading SaaS provider of
building information management and
storage systems, principally to the UK
retail sector, but was adopted by the
UK’s leading retirement home builder in
2016. The purchase of Icon is thus
consistent with Elecosoft’s strategy of
investing in SaaS technology to grow its
customer reach and strengthen its
position as an international provider of
innovative, market-leading visual software
applications.
There are two key opportunities ahead:
leverage Icon’s expertise and technical
capability in the SaaS environment
for strategic benefit across the suite
of Elecosoft products and to cross-
sell Icon and Elecosoft’s product
suites to their respective customer
bases. Icon brings a high-profile blue-
chip customer base including seven
of the top ten UK retailers: ASDA,
Boots, John Lewis, Co-operative,
Morrisons, Sainsbury’s and Waitrose.
The combination of Icon’s SaaS
business with Elecosoft’s visualisation,
estimation and project management
software suite enhances the already
significant recurring revenue base
and should enable the combined
business to access new markets and
gain cross-selling opportunities.
11
Strategic ReportGovernanceFinancial StatementsOverview Business Model
A well-balanced business focused
on growing sales in existing markets
and through our reseller network.
Elecosoft continues to develop and deliver
a strong portfolio of digital construction
software for project management,
estimation, visualisation and BIM,
information management and digital
marketing disciplines. Our software
solutions are developed by teams of
highly skilled and innovative developers
in the UK, Sweden and Germany. The
increasingly close collaboration between
these teams enables us to accelerate the
development process and facilitates the
incorporation of major drivers of change
into our software offering.
1 Our Strategy
Elecosoft is constantly making progress
towards its long-term goal of being
a preferred provider of integrated
software solutions to the worldwide
AEC community.
To that end, Elecosoft continues to uphold
the three pillars of activity:
• Innovation
• Growth
• Stability
2 How We Create Value
erships
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Services
Income
24%
Development
Training
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Customer
value
Support
28%
Licence
Sales
48%
Recurring
Maintenance &
Support Revenue
Acquisit i o n s
12
Elecosoft plc Annual Report and Accounts 2016 Investment Proposition
Scaling Business Operations
• Building Collaborations
• Commitment to Grow
The successful direct business model approach in Elecosoft’s
core markets across Sweden, Germany, US, Benelux and the
UK will continue to be complimented by expansion into wider
international markets through a professional reseller channel.
Strong Technology Base
• In-house Skilled Team
• Agile Development
• Continued Investment
Elecosoft’s software portfolio is developed by highly skilled
development teams which are based in three centres of
excellence: Sweden, Germany and the UK. The adoption
of agile development techniques delivers high-quality rapid
product releases meeting customers’ requirements. Elecosoft’s
structured approach delivering multilingual applications
for mobile, desktop and SaaS platforms, strengthens its
international presence. Annual software support renewals
account for 48 per cent of revenue, which underpins the
ability to continually develop existing and new applications.
Growing and Strengthening Market
• Strong Market Awareness
• Recognised Brands
• High Renewal of Support Revenue
Strong adoption of Elecosoft software in core markets with 90
per cent of the UK top 100 main construction contractors, seven
of the top ten UK retail companies, 20 of the top 22 Swedish
construction companies, 14 of the major German construction
companies, and 70 per cent of leading floor manufacturers in
EU. Increasing market share via wider penetration in market
verticals through multiple operational bases provides long-term
security and reduces risk and reliance on core applications.
13
3 How We Add Value
• Product Development
The flexibility of an in-house development team to
meet the needs of customers and partners promptly
and to a high standard.
• Industry Tailored Solutions
Elecosoft’s products and services are recognised
for their alignment to the specific needs of AEC
customers in its core markets.
• Improve Market Presence
The Group rebranding exercise is delivering
a cohesive message expanding the
integrated portfolio.
4 How We Protect Value
• People
Elecosoft employed an average of 190 people,
of which 46 are software developers and 56 are
client focused.
• Strong Customer Relationships
Working closely with customers and partners
generating recurring business and meeting their
strategic requirements.
• Market-leading Technology
Elecosoft has market-leading products
by continuing to invest 15 per cent of revenue
(2015: 15 per cent) innovative software solutions.
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Acquisit i o n s
Strategic ReportGovernanceFinancial StatementsOverview Marketplaces and Trends
Scandinavia
In Sweden gross domestic product (GDP)
is expected to rise 2.3 per cent in 2017.1
Sweden, the largest market in Scandinavia,
is the ideal location for centralised market
operations in Northern Europe. Swedish
companies use innovative technologies
and continue to find ways of building for
the extreme climates that the country
faces. Swedish companies work closely with
research institutes to develop new materials
for their products, which means there is a
potential for foreign companies within the
sector to collaborate with global leaders to
improve their own offering.2
UK
Construction remains Elecosoft’s core focus
in the UK despite the history of volatility in
the private and public sectors. Elecosoft
continues to exceed industry growth by
gaining new customers and improve
expansion within existing customers by
up-scaling with new products.
The housing sector remains the main
component of growth within the UK
construction industry over the longer term.
The value of all construction contracts
awarded in the UK was £70.6bn in 2016, a
decrease of 5 per cent compared to 2015.3
Elecosoft’s products are used in a number of
other verticals covering infrastructure, IT and
retail which help compliment its core strong
support of the construction sector.
Germany
The German Government has made
considerable efforts to shape the digitisation
of the construction sector. The German
construction sector has been increasingly
successful in securing international
infrastructure and civil engineering contracts.4
The construction sector is currently one of the
main growth drivers in Germany. The number
of residential building permits granted in
Germany jumped by nearly a third to over
84,000 in the first three months of 2016,
boosting expectations that construction
will continue to support growth.5
Rest of World
Economic activity is expected to pick up pace
in 2017 and 2018, especially in emerging
market and developing economies.6
The construction industry plays a pivotal
role in the US economy as construction and
engineering projects continue to symbolise
this nation’s vitality and aspirations. Market
continues to see the megaproject trend,
especially in the growth of projects sized
between $500m and $1bn.7
The Asia Pacific construction market is
expected to remain the largest market due to
rapid growth in rising per capita income along
with increasing urbanisation in the region.
Asia Pacific and North America are expected
to witness good growth over the forecast
period with growing housing starts and
infrastructural development.8
14
Map Key
Elecosoft Office
Reseller
Elecosoft plc Annual Report and Accounts 2016 Revenue by Region
Scandinavia
UK
Germany
Rest of Europe
Rest of World
38%
31%
17%
9%
5%
Laser scanning has also become a trend
of 2016. This technology could possibly
be used with 3D printers in the future
to manufacture and replace building
components, resulting in savings in the
storage of spares for maintenance.11
Elecosoft’s Market Position
Elecosoft’s software is used in construction
projects from early conceptual design
planning, costing through to fully managed
build programmes and long-term building
management. Elecosoft’s interior marketing
solutions are used by the majority of
flooring manufacturers in Europe.
Elecosoft provides digital construction
solutions that address the major parts
of a construction project. Combinations
of its software products enable 4D and
5D BIM by linking project schedules
with cost plans and 3D models to drive
greater collaboration and efficiency
benefits. Elecosoft also has a growing
user community outside of the construction
industry including pharmaceuticals,
transport, property management,
information technology and consumer
product sales and marketing.
BIM is the Way Moving Forward
In 2016 the UK Government’s BIM
Level 2 mandate came into force. The
four-year programme requires the use
of Level 2 BIM on centrally procured
UK construction projects, functionality
provided by Elecosoft. The future of
construction technology is a drive to
collaborative workspaces and looks at
BIM as ‘Better Information Management’.
The reason behind government
encouraging BIM is that BIM provides
clarity and certainty of project delivery.
BIM is becoming a routine way of designing
and constructing buildings. Looking back
to 2011, only 13 per cent of people were
using BIM (now 54 per cent) and 43 per
cent did not know what BIM was (now only
4 per cent). BIM adoption is set to increase,
it is the future.
Digital Construction Adoption
Assuming that ‘EU BIM’ national digital
programmes continue to be announced,
BIM adoption across Europe will expand.
Digital construction is set to become the
global trend for designing, building and
operating the world’s built environment and
will create new opportunities for growth
from the worldwide export market, which is
forecast to outstrip the European domestic
market performance over the next decade.9
Innovations in Construction
2016 has been an exciting year for the
enterprise cloud sector. Data management
has become a business currency,
and the world’s leading organisations
continue to stimulate data collection and
usage. In the coming year, integration
and data management must adjust
to meet growing volumes of data.10
1 Focus Economics. Economic Snapshot for the Nordic Economies. [online] Available at: http://www.focus-economics.com/regions/nordic-economies [Accessed 21 Feb. 2017].
2 The Swedish Trade and Invest Council. Infrastructure and Construction in Sweden. Sector Overview. Business opportunities for global infrastructure companies.
3 Barbour ABI. Economic & Construction Market Review. January 2017. [online] Available at: http://barbour-abi.com/zones/EconomicConstructionMarketReview
January2017FullHYS.pdf [Accessed 1 Feb. 2017].
4 European Commission. European Construction Sector Observatory. Country Profile: Germany. March 2016.
5 Michael Nienaber, (2016) German construction boom extends into 2016, supports growth. [online] Available at: http://www.reuters.com/article/us-germany-economy-
construction-idUSKCN0YB0OP [Accessed 2 Feb. 2017].
6 World Economic Outlook (WEO) Update. A Shifting Global Economic Landscape. January 2017.
7 FMI. US Markets Construction Overview 2016.
8 Growth Opportunities in the Global Construction Industry 2016-2021: Trends, Forecast, and Opportunity Analysis.
9 Adam Matthews, (2016) Working towards a unified approach to BIM in Europe. [online] Available at: https://www.thenbs.com/knoIBwledge/working-towards-a-unified-
approach-to-bim-in-europe [Accessed 13 Feb. 2017].
10 Liaison. 5 Data Trends that Will Dominate. [online] Available at: https://www.liaison.com/2016/12/22/5-data-trends-will-dominate-2017/ [Accessed 22 Feb. 2017].
11 Construct Digital. Top 5 Digital Construction Technology Innovations 2016. [online] Available at: http://construct-digital.uk/latest/top-5-digital-construction-technology-2016/
[Accessed 8 Feb. 2017].
15
Strategic ReportGovernanceFinancial StatementsOverview Strategy
Listed below are details of progress and Elecosoft’s plan for 2017
against its strategic objectives:
Growth
Expanding Elecosoft’s sales and marketing capabilities, channel
capacity and operational territories.
Innovation
Developing a portfolio of increasingly integrated software solutions,
available across multiple platforms and devices, that continue to
lead in their segments.
Stability
Continuing to strengthen Elecosoft’s financial position, whilst
consolidating and simplifying its operations.
2016 Update
Innovation
Product Releases
• Asta Powerproject BIM and Bidcon BIM releases that integrates
a common 3D viewing technology platform.
• Asta Powerproject® version 14 released, continuing to evolve
Elecosoft’s flagship product with customer input.
• Bidcon 2016/2017.1 released with good customer response.
• Bidcon Climate module release in Sweden.
•
IconSystem adopted by McCarthy & Stone, the leading UK
retirement house builder.
• New product releases for Staircon®, Framing and Statcon®.
• New easyBo augmented reality app released for the European
flooring market in Germany.
Advancement
2017 Strategic Priorities
• Expansion of our SaaS offerings.
• Release further BIM versions of our core software.
• Bidcon® 2017.2 release.
• Maintain our competitive product advantage by sharing
technology between development teams.
• For the third consecutive year, Elecosoft won Best Project
Management/Planning Software award and was runner-up with
Bidcon® in Estimating & Valuation software category at the UK
Construction Computing Awards.
Introduced online selling of Asta Powerproject® in the UK.
Increased investment levels in research and development to
meet industry needs.
•
•
• Expand reach of products through online selling.
• Continue product portfolio integration through enhanced API.
• Deliver best practice and standardisation amongst
development teams and continue to develop with industry
standards in mind.
• Seek opportunities to integrate with third party technology
to broaden our potential audience.
Growth
Territories
• Rebranding of Swedish operation leading to increased portfolio
• Concentrate efforts on existing territories to maximise
sales.
investment returns.
• Gained blue-chip retail clients through the acquisition of Icon.
• Hosted two US user conferences where the presenters included
• Continue pipeline and sales expansion in the US through
increased commitment to resellers.
our leading US customers and sales partners.
• Expand product branding in territories managed by channel
• Won a significant order from one of the top 100 US construction
partners to improve global expansion.
contracting firms.
Cross-selling
Increased sales through web marketing techniques.
•
• Added a new portfolio reseller ‘Epoch’ in New Zealand and
•
Australia.
Invested in offering more products through the reseller channel,
(Staircon® reseller channel in Canada and Statcon® international
sales initiated).
• Continued the success with portfolio sales primarily in Sweden.
16
• Raise portfolio awareness across industry exhibitions.
•
Increase portfolio led selling to existing customers within
home markets through the growing demand for BIM.
• Strengthen market position within home markets.
Licence Sales £’000
Services Income £’000
4,008
4,536
4,955
3,813
3,446
4,218
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
5,000
4,500
4,500
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2014
2015
2016
2014
2015
2016
Elecosoft plc Annual Report and Accounts 2016
2016 Update
Innovation
Product Releases
2017 Strategic Priorities
• Asta Powerproject BIM and Bidcon BIM releases that integrates
• Expansion of our SaaS offerings.
a common 3D viewing technology platform.
• Release further BIM versions of our core software.
• Asta Powerproject® version 14 released, continuing to evolve
• Bidcon® 2017.2 release.
Elecosoft’s flagship product with customer input.
• Maintain our competitive product advantage by sharing
• Bidcon 2016/2017.1 released with good customer response.
technology between development teams.
• Bidcon Climate module release in Sweden.
• IconSystem adopted by McCarthy & Stone, the leading UK
retirement house builder.
• New product releases for Staircon®, Framing and Statcon®.
• New easyBo augmented reality app released for the European
flooring market in Germany.
Advancement
• For the third consecutive year, Elecosoft won Best Project
• Expand reach of products through online selling.
Management/Planning Software award and was runner-up with
• Continue product portfolio integration through enhanced API.
Bidcon® in Estimating & Valuation software category at the UK
• Deliver best practice and standardisation amongst
Construction Computing Awards.
development teams and continue to develop with industry
• Introduced online selling of Asta Powerproject® in the UK.
standards in mind.
• Increased investment levels in research and development to
• Seek opportunities to integrate with third party technology
meet industry needs.
to broaden our potential audience.
Growth
Territories
sales.
contracting firms.
Cross-selling
Australia.
sales initiated).
• Gained blue-chip retail clients through the acquisition of Icon.
• Continue pipeline and sales expansion in the US through
• Hosted two US user conferences where the presenters included
increased commitment to resellers.
our leading US customers and sales partners.
• Expand product branding in territories managed by channel
• Won a significant order from one of the top 100 US construction
partners to improve global expansion.
investment returns.
• Increased sales through web marketing techniques.
• Raise portfolio awareness across industry exhibitions.
• Added a new portfolio reseller ‘Epoch’ in New Zealand and
•
Increase portfolio led selling to existing customers within
home markets through the growing demand for BIM.
• Invested in offering more products through the reseller channel,
• Strengthen market position within home markets.
(Staircon® reseller channel in Canada and Statcon® international
Product Development £’000
Licence Sales £’000
Services Income £’000
2,577
2,305
2,593
3,000
2,750
2,500
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
0
3,813
3,446
4,218
4,008
4,536
4,955
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
5,000
4,500
4,500
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2014
2015
2016
2014
2015
2016
2014
2015
2016
• Rebranding of Swedish operation leading to increased portfolio
• Concentrate efforts on existing territories to maximise
Revenue £’000
Profit Before Tax £’000
Continuing EPS (Basic) pence
686
1,006
1,504
15,172
15,260
17,795
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,00
4,000
2,000
0
2,000
1,750
1,500
1,250
1,000
750
500
250
0
0.8
1.1
1.7
2.00
1.75
1.50
1.25
1.00
0.75
0.50
0.25
0
• Continued the success with portfolio sales primarily in Sweden.
2014
2015
2016
2014
2015
2016
2014
2015
2016
17
Strategic ReportGovernanceFinancial StatementsOverview
Strategy continued
2016 Update
Growth continued
Strengthen Market Position
• Continued to grow international reseller network, acquiring
new partners in US, Australia, New Zealand, India, Spain
and South America.
Improved the portfolio-led marketing.
•
• Acquisition of Icon that is an opportunity to expand the
SaaS offering.
Stability
Financial Stability
2017 Strategic Priorities
• Continue to identify suitable technical resellers and partners
to reach new international customers.
• Continue to identify strategic acquisition opportunities that
will fit with Elecosoft’s product portfolio and provide a
competitive advantage in new markets.
• Simplify reporting structure and improve internal
team management.
• Successful completion of capital reduction.
• Significantly reduced level of bank borrowings.
• Completed disposal of non-core architectural consultancy
• Proactive management to mitigate currency exposure.
• Mitigate interest costs through cash pooling arrangements.
• Business overhead review by territory to improve efficiency
business in Sweden.
• Delivered strong free cash flow.
• Maintained tight control on overhead expenditure.
of operations.
• Maximise free cash flow through better working capital
management and tighter capital expenditure control.
• Review allocation of resources in support of key
growth objectives.
Strengthening the Team
• Strengthened the management team with new Board
appointments.
• New scrum development team established to focus on a new
• Continue improving HR tools and related policies.
•
Invest in customer-facing sales resources to support
new market growth opportunities.
product set.
Continued Investment
• Established a new development team in Sweden that is focused
• Where appropriate, progressively remove duplication
on international delivery.
Systems and procedures
and inefficiency.
Increase centralisation of functional management.
•
• Achieved ISO 9001 accreditation in the UK operation.
• Continued to simplify the Elecosoft product message to
• Continue to simplify Elecosoft’s corporate and product
brands to emphasise a single Company strategy.
emphasise a single Company.
18
Free Cash Flow £’000
EBITDA/Net Borrowings Cover (times)
Interest Cover (times)
(292)
716
1,220
0.7
2.2
1.9
4.1
9.4
17.1
1,500
1,250
1,000
750
500
250
0
-250
-500
2.5
2.0
1.5
1.0
0.5
0
20.0
17.5
15.0
12.4
10.0
7.5
5.0
2.5
0
2014
2015
2016
2014
2015
2016
2014
2015
2016
Elecosoft plc Annual Report and Accounts 2016 2017 Strategic Priorities
2016 Update
Growth continued
Strengthen Market Position
SaaS offering.
Stability
Financial Stability
• Continued to grow international reseller network, acquiring
• Continue to identify suitable technical resellers and partners
new partners in US, Australia, New Zealand, India, Spain
to reach new international customers.
and South America.
• Improved the portfolio-led marketing.
• Continue to identify strategic acquisition opportunities that
will fit with Elecosoft’s product portfolio and provide a
• Acquisition of Icon that is an opportunity to expand the
competitive advantage in new markets.
• Simplify reporting structure and improve internal
team management.
• Successful completion of capital reduction.
• Significantly reduced level of bank borrowings.
• Proactive management to mitigate currency exposure.
• Mitigate interest costs through cash pooling arrangements.
• Completed disposal of non-core architectural consultancy
• Business overhead review by territory to improve efficiency
business in Sweden.
• Delivered strong free cash flow.
of operations.
• Maximise free cash flow through better working capital
• Maintained tight control on overhead expenditure.
management and tighter capital expenditure control.
• Review allocation of resources in support of key
growth objectives.
• Strengthened the management team with new Board
• Continue improving HR tools and related policies.
•
Invest in customer-facing sales resources to support
• New scrum development team established to focus on a new
new market growth opportunities.
Strengthening the Team
appointments.
product set.
Continued Investment
• Established a new development team in Sweden that is focused
• Where appropriate, progressively remove duplication
on international delivery.
and inefficiency.
•
Increase centralisation of functional management.
Systems and procedures
emphasise a single Company.
• Achieved ISO 9001 accreditation in the UK operation.
• Continue to simplify Elecosoft’s corporate and product
• Continued to simplify the Elecosoft product message to
brands to emphasise a single Company strategy.
Free Cash Flow £’000
EBITDA/Net Borrowings Cover (times)
Interest Cover (times)
0.7
2.2
1.9
(292)
716
1,220
1,500
1,250
1,000
750
500
250
0
-250
-500
2.5
2.0
1.5
1.0
0.5
0
4.1
9.4
17.1
20.0
17.5
15.0
12.4
10.0
7.5
5.0
2.5
0
2014
2015
2016
2014
2015
2016
2014
2015
2016
19
Strategic ReportGovernanceFinancial StatementsOverview Key Performance Indicators and Business Monitoring
Elecosoft aims to deliver sustainable growth
combined with continued investment in
software product development, sales
and marketing resources.
Product Development % Sale
No change
20
18
16
14
12
10
8
6
4
2
0
Average Revenue per Employee* £’000
+2%
100
95
90
85
80
75
70
65
60
55
50
15%
15%
Reseller Sales Channel £’000
+9%
2015
2016
85.7
87.1
Free Cash Flow £’000
+70%
1,024
1,121
2015
2016
716
1,220
1,200
1,100
1,000
900
800
700
600
500
1,400
1,200
1,000
800
600
400
200
0
* Constant FX rates.
2015
2016
2015
2016
Elecosoft’s Board and Business Units utilise a number of Key
Performance Indicators (“KPIs”) as well as a structured planning
and reporting process. This begins with long-term planning,
through to annual budgeting, reviews and monthly reporting.
The charts above show some of the KPIs that are used by the Group
to monitor the performance of key activities.
In addition to the charts above, other KPIs that are used by
the Group include:
• New licensing and maintenance revenue
• Maintenance and support renewal rates
• Consultancy and training revenue utilisation rates
• Product contribution before general overheads
• Business Unit contribution
• Product development milestone delivery
20
Elecosoft plc Annual Report and Accounts 2016 Principal Risks and Uncertainties
Risk
Description
Mitigation
Product Development Risks
Market Risks
Foreign Exchange Risk
The development of new and enhancing
of existing products requires continual
appraisal of investments and the returns.
Changes in customer requirements,
industry and technological innovation
contribute to the challenges of developing
complex software products.
Product development is planned, reported
and reviewed frequently. Elecosoft works
closely with key customers and channel
partners while monitoring industry trends
to ensure that new products and features
align to market needs and expectations.
The health of domestic and global
economies strongly influences the
commercial construction business
cycle. A downturn in the construction
business cycle can adversely affect
Elecosoft’s performance.
The risk is mitigated by existing operations
spread between countries with plans to
expand the geographical reach further
through reseller channels. Elecosoft
continues to seek opportunities to
market its software solutions outside
of the construction industry.
The Group earns a proportion of its
revenue in currencies other than Sterling.
The two other largest currencies in
which it trades are Swedish Krona
(SEK) and Euro (EUR). Changes in these
exchange rates can expose Elecosoft
to exchange gains and losses.
Our businesses predominantly trade
in their own local currencies and have
local operational and development staff
which create a natural hedge against
currency movements. In addition,
we will continue to review foreign
exchange contracts to manage risk.
Protection of Intellectual Property
Elecosoft’s success is built upon the
development of sophisticated software
which requires continual protection from
competitive businesses who may seek to
copy or otherwise replicate the software.
Employees and Organisation
Elecosoft’s reputation depends upon
its products and services and in turn
these are built upon the innovation
and dedication of its employees.
Operations Risks
There is an increasing reliance on IT
systems, local and cloud, to perform
the daily operations of a business.
Exposure to technology in general
is rapidly increasing with cloud
offerings and remote connections.
Elecosoft uses a variety of licensing
technologies and defines the rights of
customers in licence agreements. In
addition, the Group seeks to ensure
its intellectual property rights are
protected by appropriate means and
defends its rights where practical.
Elecosoft endeavours to ensure that
employees are motivated in their work
and there is regular feedback on their
performance. There are pay reviews and
a range of incentive schemes to reward
achievement over different time periods.
Elecosoft attracts new talent by
maintaining its focus on developing
new and innovative applications.
Good, effective technology risk management
and close monitoring is essential to robustly
handle potential IT security incidents
and system failures, as well as ensuring
customer information is protected from
unauthorised access or disclosure.
Continued investment and adhering to
regulatory standards mitigates these risks.
21
Strategic ReportGovernanceFinancial StatementsOverview
Operating Review
A strong, stable and progressive year, our
wider software portfolio delivered revenue and
profit growth beyond market expectations.
Project management
software £’000
8,572
14% increase
Operating margin*
14.3%
3.6% increase
Capitalised product
development £’000
625
6% decrease
* Before amortisation of intangible
assets and non-recurring expenses.
22
With a new management team and
renewed focus on our core strengths
and strategy to grow Elecosoft as a
leading provider of innovative integrated
solutions, we stepped out of the blocks
and led from the start amongst growing
competition. Although we experienced
some challenges and timing delays in
our use of resellers this year, we continue
to have our sights set on expanding
through them going forward. The
performance of our leading applications
of Asta Powerproject® and Bidcon® within
project management and estimating was
outstanding, with double digit growth
achieved both in the UK and Sweden
which contributed to a successful year and
surpassed a number of key milestones.
• Revenue grew to £17.8m up from £15.3m
• Profit before tax of £1.5m up from £1.0m
Our Focus on Sales Growth
With an underlining growth performance
across our core revenue lines of licences,
maintenance and services, the Group
delivered results significantly ahead of
industry sector benchmarks. With a
prominent influence through our direct
model approach, we have proved that
amongst a number of major global
competitors Elecosoft is highly regarded
as a provider of quality software and
services. Revenue growth is pivotal
to our long-term strategy and with an
improved performance in all graphical
areas, Elecosoft is in a strong position
to maintain our current momentum.
A summary on revenue growth
in 2016 is as follows:
• UK revenue increased by 13 per cent
• Scandinavia revenue increased by
13 per cent
• Germany revenue increased by
29 per cent
• Rest of Europe increased by 22 per cent
• Rest of World increased by 17 per cent
Historically, our software portfolio has
centred on the PC market but with ever
increasing competition and expansion
into other verticals we have a growing
number of SaaS product offerings that sit
alongside and complement our existing
applications. Through continued investment
in our direct approach and through
channel expansion, Elecosoft is in a strong
position to maintain progressive growth
over and above the broader market.
Growing International Awareness
With a wide portfolio of products that
cover project management, construction
site management, estimating, timber
engineering, 3D design and visualisation,
cloud-based digital marketing and
data storage solutions, we have some
great opportunities in reaching out to
a wider audience with our integrated
offering. With a continuing trend across
the globe to standardise processes
through common data exchanges and a
collaborative approach to sharing of data,
Elecosoft is strongly placed to deliver
international awareness and growth.
Elecosoft plc Annual Report and Accounts 2016 In recent years, we have established
the cross-selling of our products to help
deliver on local government legislations
which in turn has positioned Elecosoft
as a major player in the provision of 4D
and 5D BIM. Our marketing teams have
successfully developed and implemented
promotional plans for market sector and
territory growth to help drive the increased
awareness out to the end client through
increased use of webinars, exhibition
attendance, event speaking and corporate
sponsorship. With the acquisition in
January of one of Asta Powerproject®
Dutch resellers, we have also delivered
on the plans to improve the performance
of the business and also commenced
the transition approach to selling more
products to existing and new customers.
Our colleagues in Sweden delivered
a sterling performance with the new
management team that was orchestrated
the previous year, and also expanded
their international reach by establishing
new resellers in New Zealand, Canada,
Finland and Denmark for Bidcon®,
Statcon® and Staircon®. We have
seen successful expansion within the
interior market with key business wins in
China and the US through our modular
marketing solution for simplifying and
automating data-based marketing activities
throughout the marketing chain.
Brand Awareness
Elecosoft is now a well-established
technology organisation focused on
delivering leading-edge applications
across multiple sectors with strong brand
identity both, at Company and product
level. The Company has been very
successful in leveraging the Elecosoft
name into established market spaces with
clear and directive marketing campaigns
directed from the Group management
team. Our new website now reflects a
product identity through the six main
disciplines of focus, these being:
Cullum Retunes its Project Planning to
Drive a High-performance Business
“ Although planning
was always a factor,
we needed to
become far slicker…”
These usually carry a percentage of
contract financial penalty and, in these
tougher economic times, customers will
often state that they will exercise their
right to levy those penalties. These can
be heavy, especially on a multi-million-
pound contract. Asta Powerproject®
enables us to see on the programme
whether something is likely to be
delivered late. Because we can see the
delay we can turn that into a clear cost to
the business, so people understand the
impact of those delays.”
Cullum Detuners Limited, a world-leading
engineering company with the
requirement to design, manufacture and
install high-specification engineered
equipment to exact timescales, chose
Asta Powerproject® to make further
efficiencies and de-risk its business
which was spurred by the economic
turbulence hit in the oil and gas sector.
Cullum Detuners has a proven track
record in providing advanced solutions
to the Aerospace, Energy, Marine and
Nuclear Sectors, in the form of high-
specification noise control equipment,
turbine support for power generation
and other solutions.
Hannah Whitmore, Project Coordinator at
Cullum Detuners Limited, said: “Asta
Powerproject is not just helping Cullum to
keep its complex engineering projects on
track, but also to mitigate risks that can
have financial consequences. It is
common for contracts to state deadlines
for the delivery of documents, such as
acoustic calculations and so on, that are
on the Vendor Documents List.
23
Strategic ReportGovernanceFinancial StatementsOverview Operating Review continued
Engineering
Our portfolio of timber engineering
applications maintain their strong market
presence in the UK, Sweden, Germany and
Benelux, and have recently seen adoption
through resellers in Canada, Finland and
Denmark. With local territories, demands of
increased housing stock and commercial
timber structures through focus on
modular construction, our applications of
Staircon®, Framing and Statcon® serve
the needs of design, manufacturing
and site management processes.
Information Management
The management of information in any
business is critical to gaining success, and
with our Marketingmanager offering to the
floor manufacturers which sits alongside
our visualisation tools, we have seen further
adoption within existing and new clients.
This is assisting organisations to efficiently
control multi-channel marketing from a
central database and saves considerable
time and expense in the company-wide
data workflow.
With the acquisition of Icon taking
place in late October, the opportunity to
expand its current offering outside the
retail sector is a strong focus moving
forward. Icon’s one-stop property asset
information system is a web-based building
information management system that
is used from concept design, through
construction and fit-out to completion and
management. This clearly complements
our existing project management and
cost estimating suite of programmes
and presents a great opportunity in
further upselling within the existing
client base across our territory bases.
Award-winning Software
Offering the best possible proposition to
our customers has remained our core focus
and is central to driving the growth of our
software offering, in both our direct markets
and reseller channel. Our customers
have continued to recognise the quality
of our products, service and extending
range of products, evidenced by the
continued success of our award-winning
software. Asta Powerproject® achieved
for the third year in succession the Project
Management/Planning Software of the
Year Award at the Construction Computing
Awards 2016. Recognition was also
made for our cost estimating application,
Bidcon®, as this was voted runner-up in the
Estimation & Valuation Software category.
We believe this reflects the strengthening
recognition of our consumer brand.
The retention rate of our customers is
important to support our growth and this
has remained in line with historical trends.
We have introduced to our markets product
releases across the whole software
portfolio that reflect the requirements
of our customers. We have seen
progression in our eCommerce product
offering with our CAD and visualisation
applications and have continuous plans
to expand the reach into new territories
using effective web platforms.
Outlook
2016 delivered a milestone year in revenue
and profit growth and the teams within
Elecosoft are excited about the future and
look forward to contributing to another
fruitful year, both in our direct markets and
growing international reach through the
reseller channel network.
John Ketteley
Executive Chairman
24 March 2017
Project Management
Asta Powerproject® has continued to
gain market share within its core focus
on construction and infrastructure
organisations across the globe. Many
leading contractors worldwide have
delivered major projects utilising the
project management tool and have
expanded their use on growing bolt-on
tools such as Asta Powerproject BIM and
Site Progress Mobile. The application
is now available in 13 languages and
continues to be enhanced based on client
feedback and industry requirements.
Estimating
Our cost estimating software Bidcon®
remains a key part of our integrated
solution, selling into new and existing
customers. With a strong adoption in
its home market in Sweden, Bidcon®
is now leading the way alongside Asta
Powerproject® in providing a full 5D
BIM solution to the wider audience
either through our direct model or
via the growing reseller channel.
CAD/Design
Our prominent position in Germany with
Arcon Evo® and o2c® is maintained with
continued development of the product
based on customer feedback and
technology advancements. This in turn
is growing the product awareness and
is being used to expand the use of the
software into new markets through our
eCommerce offering and a reseller channel.
Visualisation
Our reach into the interior market
through our ESIGN® portfolio highlights
the significant steps we’ve made in
gaining 80 per cent of the European
floor manufacturers who use our offering to
successfully market their interior products
through Digitalisation, Visualisation,
Configuration and Product Information
Management (PIM). During 2016 we
have seen good progress on wider global
adoption with floor manufacturers in China
and the US working with our German
colleagues on adopting our offering.
24
Elecosoft plc Annual Report and Accounts 2016 The Elecosoft IconSystem is Revolutionising the House
Building Sector
Elecosoft’s IconSystem was tailor-made
for McCarthy & Stone, using the Icon
Specs & Standards and Projects &
Properties solutions, and has been rolled
out across almost every department in
their business. After rigorous testing, all
construction data is now housed in a
single robust, trustworthy IconSystem
that can be accessed by all employees
and external consultants. Over 650
people, including McCarthy & Stone
Board members, have been trained to
use the system across nine regions.
As a consequence, McCarthy & Stone is
among the leading house builders in the
UK to fully realise the potential of BIM
and has developed the vital technical
partnership with web solutions software
developer Elecosoft.
Elecosoft and McCarthy & Stone
facilitated the installation of the Icon
web-based system at the beginning
of 2016. The IconSystem is now fully
integrated and introduces methodologies
to the Company, which enables McCarthy
& Stone to bring together a mass of
BIM-based construction data into one
easy-to-use platform. That enables it
to plan, implement and deliver a fully-
integrated BIM-based build programme,
which ensures that McCarthy & Stone will
benefit to the full from the comprehensive
application of BIM technologies in
the project.
The system’s implementation has set
McCarthy & Stone as a front-runner in its
sector, further proving the potential of
BIM for other house builders.
“ The introduction of the
IconSystem has been
instrumental in driving
increased product
standardisation
throughout the
business.”
Matthew Richardson, Design and
Information Manager at McCarthy &
Stone, said: “It helps ensure a consistent
and repeatable high-quality product whilst
helping to increase margins. The process
enables our teams and partners to work
more effectively together throughout a
development’s life cycle.”
25
Strategic ReportGovernanceFinancial StatementsOverview Financial Review
“The Group has had a successful year with
strong trading performances in all areas
validating the strategy. The acquisition
of Icon in October positions the Group for
the future. Exchange rate movements in
the Group’s core trading currencies
during the year had a positive impact on
the results which has accentuated the
Group’s strong underlying performance.”
David Pearson
Group Finance Director
Revenue
Revenue for continuing operations for the
year increased 17 per cent to £17.8m (2015:
£15.3m). This growth was accentuated by
the weakness of Sterling against the
Swedish Krona, the US Dollar and the Euro,
which collectively accounted for over 60 per
cent of the Group’s sales. The underlying
growth at constant exchange rates was 8
per cent (2015: 9 per cent).
The Group continues to drive high levels
of recurring revenue from maintenance
and support, with the balance of the
revenue coming from licence sales and
services. The level of deferred income
at the balance sheet date, which is
a measure of future maintenance
revenue, increased from £3.7m to
£4.4m during the year representing a
positive growth rate of 19 per cent.
Revenue growth was driven by direct
sales with an increase of 17 per cent to
£16.6m (2015: £14.2m), with the Group
committed to growing both, the direct
and reseller channels going forward.
The mix of sales across licences 28 per
cent (2015: 30 per cent), maintenance
48 per cent (2015: 48 per cent) and
services 24 per cent (2015: 23 per cent)
is balanced and similar to prior years.
26
The geographic revenue performance
of the Group was good on all fronts, with
Germany leading the growth at 29 per cent
to £3.0m (2015: £2.3m), while the UK and
Scandinavia both grew 13 per cent during
the year. The strategy to move into new
geographic markets continues to provide
strong results with the Rest of the World
up by 20 per cent to £2.6m (2015: £2.1m).
Gross Profit
Gross profit is revenue less the direct
cost of providing products and services to
customers, principally the costs of training
and consultancy staff. In 2016 the gross
profit margin fell slightly from 89 per cent to
87 per cent due to the slight changed mix
of licences, maintenance and services
revenue.
Overheads
Selling and administrative expenses
increased 11 per cent over the prior
year to £13.8m (2015: £12.4m). Tight
control of overheads is expected to be
a feature of the Group while ensuring
that development is prioritised. The
average number of employees during
the year was 190 (2015: 178).
Software product development expenses
amounted to £2.6m for the year (2015:
£2.3m) of which £0.6m (2015: £0.7m)
was capitalised demonstrating the
commitment to group-wide development.
The major projects during the year,
which met the requirements of the
accounting policy for capitalisation,
and were therefore capitalised in the
year, include the following: Arcon Evo
phase 2, Bidcon BIM and Bidcon.net
databases. The carrying value of these
software assets together with the carrying
value of software assets capitalised
in previous periods was reviewed for
impairment at the balance sheet date
and no impairment was required.
Profit
Continuing operations operating profit
was £1.6m (2015: £1.1m), a growth of
over 40 per cent over the prior period, a
reflection of strong revenue performance
with overhead control. Adjusted operating
profit for the year was £1.915m (2015:
£1.137m), an increase of 68 per cent.
Profit before tax was £1.5m, up £0.5m,
an increase of 50 per cent compared to
the prior period. Taxation amounted to
£0.3m in the period (2015: £0.2m).
Elecosoft plc Annual Report and Accounts 2016 Cash generated in operations
Net capital expenditure
Net interest paid
Income tax paid
Free cash flow
Acquisitions and disposals
Loan (repayments)/proceeds
Finance lease repayments
Equity dividends paid
Net cash inflow
Exchange difference
Net increase in cash and cash equivalents
2016
£’000
2,422
(1,103)
(82)
(17)
1,220
(1,700)
1,438
(153)
(111)
694
260
954
2015
£’000
1,640
(645)
(152)
(127)
716
726
(1,091)
(251)
–
100
(15)
85
Balance Sheet and Cash Flow
Shareholder’s equity increased to £9.7m,
up £1.8m, 23 per cent at 31 December
compared to 2015.
Net borrowings, including finance leases,
increased by £0.5m to £1.3m (2015: £0.8m)
as a result of additional borrowings of
£1.8m to complete the Icon acquisition.
Trade and other receivables increased to
£3.7m (2015: £2.9m) as anticipated and
in line with the growth of the Group. This
represented 54 days sales outstanding
compared to 48 for the prior period.
Trade and other payables increased
to £1.5m (2015: £1.3m) and accruals
were slightly higher at £1.6m (2015:
£1.4m) in line with Group activities.
Cash generated from operations
amounted to £2.4m in the year up from
£1.6m in 2015. Free cash flow increased
to £1.2m compared to £0.7m in 2015,
a continuing upward trend reflective
of the Group performance overall.
Capital and Financing
The UK banking facilities are with Barclays
Bank plc and the Group facilities comprise
the following:
• the previous loan was repaid and a new
term loan of £3.16m, with 16 quarterly
loan repayments of £197,500
commencing from October 2016, was
agreed to help fund the acquisition of
Icon, carrying an interest rate of 2.75 per
cent over base rate, a reduction of 0.5
per cent on the previous facility; and
• a £1.0m overdraft facility, carrying an
interest rate of 2.75 per cent over
base rate.
Security provided to the bank for the
provision of these facilities is a cross
guarantee and debenture between the
Parent Company and certain UK subsidiary
companies and a commitment of the
shares of the operating companies.
Covenants have been made to the bank in
respect of three elements: EBITA to gross
financing costs, net borrowings to EBITDA
and cash flow to debt service. These
covenants are tested quarterly.
Business Disposal/
Discontinued Operations
There were no disposals in the period.
Earnings per Share and Dividends
The basic earnings per share on continuing
operations is 1.7 pence (2015: 1.1 pence).
The basic earnings per share on total
operations is 1.7 pence (2015: 1.6 pence).
The Board has recommended the payment
of a final dividend in respect of the year
ended 31 December 2016 of 0.25 pence
per share, with a scrip alternative to be
made available.
David Pearson
Group Finance Director
24 March 2017
The Strategic Report, as set out
on pages 8 to 27, has been
approved by the Board.
John Ketteley
Executive Chairman
24 March 2017
27
Strategic ReportGovernanceFinancial StatementsOverview Governance
Board of Directors
Company Advisors
Directors’ Report
30
31
32
28
Elecosoft plc Annual Report and Accounts 2016 easyBo Live augmented reality app
29
Strategic ReportGovernanceFinancial StatementsOverview Board of Directors
John Ketteley FCA3
Executive Chairman
David Pearson FCMA, BA (Hons)
Group Finance Director and
Company Secretary
Jonathan Hunter BBus. BMm
Group Marketing and
Business Development Director
Appointed Executive Chairman in 1997,
John Ketteley has an investment banking
background as an Executive Director SG
Warburg & Co Ltd, Managing Director of
Rea Brothers plc and Executive Director of
Barclays De Zoete Wedd. He was formerly
Non-Executive Chairman of BTP plc, Country
Casuals plc and Prolific Income plc.
Appointed to the Board on 20 February 2017,
David has 25 years’ experience across Capital
Markets, Financial Services and Manufacturing
sectors and has held numerous directorate
positions during his career. Most recently,
David has been working as a consultant
in respect of some large-scale business
transformations and start-up businesses.
Previously he held finance functions across a
range of businesses including CFO of ICAP
Equities and Director of Finance Operations of
ICAP plc, where he was employed between
2007 and 2011 and has also previously
held a role at UBS. David is a member of
the Chartered Institute of Management
Accountants.
Appointed on 14 June 2016, Jonathan is
responsible for Marketing and Business
Development. In this capacity he became
Chairman of the Group Lead Developer
Community, which consists of the Group’s
leading software developers. Jonathan
also played a major part in the successful
acquisition of Icon, he identified the potential
of Icon’s software and SaaS technology in
collaboration with Elecosoft’s construction
software portfolio and is currently responsible
for the product integration. Jonathan joined
Elecosoft in 2010 as a Marketing Manager for
the Building Systems division and in 2011 he
became General Manager of Group Marketing.
Jason Ruddle
Managing Director of Elecosoft UK Limited
Anders Karlsson
Managing Director of Elecosoft Sweden
Appointed as Director on 29 February 2015,
Jason Ruddle has over 15 years of business
development experience in the construction
sector. Jason was appointed as Managing
Director of Elecosoft UK Limited in January
2015. He was previous Business Development
Manager for ITW Industry, a construction
products subsidiary of Illinois Tool Works Inc.
Prior to this, he worked at Gang-Nail Systems
and Consultec UK, both former subsidiaries
of Elecosoft.
Appointed in March 2017. Anders has
over 20 years of business development
experience from various companies in
different management positions. He was
initially appointed as Managing Director of
Consultec Byggprogram AB in August 2005
and then re-joined the Group again as the
Managing Director of Elecosoft Consultec
AB in November 2014 after a four-year
session as the CEO of an international digital
signage company.
Independent Non-Executive Director
*
1 Member of the Audit Committee
2 Member of the Remuneration Committee
3 Member of the Nominations Committee
30
Elecosoft plc Annual Report and Accounts 2016 Jonathan Edwards LLB ACA 1 2 3 *
Non-Executive Director
Serena Lang MBA 1 2 3 *
Non-Executive Director
Kevin Craig
Non-Executive Director
Appointed as a Non-Executive Director in
April 2010. Jonathan Edwards is the Senior
Non-Executive Director and is Chairman of the
Audit Committee. A barrister and chartered
accountant, he was previously Managing
Director of Argen Limited, a risk management
consultancy and is Chairman of the Caythorpe
& Ancaster Medical Equipment Trust.
Appointed as a Non-Executive Director in
December 2014. Serena Lang is Chairman
of the Remuneration Committee. She was
formerly a Senior Executive for the Operations
Management division of Invensys, a global
technology Company with market-leading
software and systems for industrial and
commercial sectors. Prior to working at
Invensys, she was a Senior Executive with BP.
Appointed as a Non-Executive Director in
March 2017, Kevin Craig is Founder and CEO
of the Political Lobbying and Media Relations
Ltd (PLMR) communications agency. He has
served over 11 years to date as a Councillor in
London local government and formerly worked
for Saatchi and Saatchi (Rowland Company)
and DLA Piper. He is also a Non-Executive
Director of Company Shop the UK’s leading
food and surplus redistribution company.
Company Advisors
Registered Office
Parkway House
Haddenham Business Park
Pegasus Way
Haddenham
Buckinghamshire
England HP17 8LJ
T +44 (0) 1844 261700
E info@elecosoft.com
W www.elecosoft.com
Registered Number
00354915
Auditors
Grant Thornton UK LLP
202 Silbury Boulevard
Milton Keynes
Buckinghamshire MK9 1LW
Solicitors
Bates Wells Braithwaite LLP
10 Queen Street
London EC4R 1BE
Reynolds Porter Chamberlain
Tower Bridge House
St Katherines Way
London E1W 1AA
Bankers
Barclays Bank PLC
Ashton House
497 Silbury Boulevard
Milton Keynes
Buckinghamshire
MK9 2LD
Financial Public Relations
Redleaf Polhill Limited
First Floor
4 London Wall Buildings
London EC2M 5NT
T +44 (0) 20 7382 4730
E elecosoft@redleafpr.com
Nominated Advisor and Broker
finnCap Ltd
60 New Broad Street
London EC2M 1JJ
T +44 (0) 20 7220 0500
W www.finncap.com
Registrars and Transfer Office
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
T +44 (0) 871 664 0300
E shareholderenquiries@capita.co.uk
31
Strategic ReportGovernanceFinancial StatementsOverview Directors’ Report
The Directors present their report
and the audited financial statements
for the year ended 31 December 2016.
Results for the Year Ended 31 December 2016
The Group profit on ordinary activities of continuing operations
before taxation was £1,504,000 (2015 restated: £1,006,000).
The detailed financial statements of the Group are set out on
pages 38 to 73.
Business Review and Future Developments
A review of the Groups’ operations during the year and its plans for
the future is set out in the Chairman’s Statement on pages 2 to 5,
the Operating Review on pages 22 to 25 and in Strategy on pages
16 to 19.
Dividends
An interim dividend of 0.15 pence per ordinary share (2015: 0.0
pence) totalling £111,000 (2015: £nil) was paid during the year.
The Directors intend to recommend a final dividend for the
year ended 31 December 2016 of 0.25 pence per ordinary share
totalling £193,000 (2015: £nil).
Share Capital
Details of the share capital are shown in note 21 on page 65 of the
consolidated financial statements.
Share Price
The middle market price of the Company’s ordinary shares on
31 December 2016 was 30.5 pence and the range during the
period under review was 19.63 pence to 30.45 pence.
Directors
The current composition of the Board of Directors is shown
on page 30. Directors who held office during the year were:
J H B Ketteley
J B Ruddle (appointed 29 February 2016)
J A Hunter (appointed 14 June 2016)
D B Pearson (appointed 20 February 2017)
A Karlsson (appointed 27 March 2017)
N J B Caw (resigned 18 April 2016)
G N Spratling (resigned 6 January 2017)
J B Edwards
S Lang
K Craig (appointed 27 March 2017)
Subsequent to the Year End
D B Pearson was appointed as Director on the 20 February 2017.
D B Pearson and J A Hunter will resign at the forthcoming
Annual General Meeting and, being eligible, will offer themselves
for re-election.
Directors’ Remuneration
The emoluments of the Directors for the year ended 31 December
2016 excluding pension entitlements were as per the table below.
In addition, on the 31 March 2016 J H B Ketteley received a
payment of £40,344 for deferred pension contributions brought
forward and disclosed in earlier years.
Executive
J H B Ketteley1
J B Ruddle
J A Hunter
G N Spratling3
N J B Caw2, 3
M A Greenwood
Non-Executive
J Cohen
J B Edwards
S Lang
Basic
salary
£’000
238
112
44
100
139
–
–
–
–
Fees
£’000
Benefits
£’000
LTIP
£’000
Pension
£’000
Year to
31 December
2016
Year to
31 December
2015
–
9
3
5
3
–
–
41
41
–
12
3
5
3
–
–
–
–
2
1
1
1
8
–
–
–
–
–
7
4
7
5
240
141
55
118
158
–
–
41
41
268
–
–
59
174
76
15
39
36
Included in the basic salary figure is an amount of £38,000 paid on 31 January 2017.
Included in the basic salary figure is an amount of £100,000 for compensation for loss of office.
1
2
3 The comparative remuneration figure has amended to include pension payments previously included by way of note.
32
Elecosoft plc Annual Report and Accounts 2016
Policy on Remuneration of Executive Directors
and Senior Executives
The Remuneration Committee aims to ensure that the remuneration
packages offered encourage and reward performance in a manner
which is consistent with the long-term interests of shareholders.
The remuneration of the Executive Directors normally comprises
four elements:
i) a basic salary and fees together with benefits-in-kind (such as
Company car, private petrol and medical insurance);
ii) a non-pensionable performance-related annual bonus based
on the Groups’ performance and individual contribution to that
performance. The Executive Directors are contractually entitled
to a bonus scheme, but the amount to be paid is determined by
the Remuneration Committee (if applicable); bonuses awarded
in respect of the year ended 31 December 2016 to J B Ruddle
£9,500 (2015: £nil);
iii) pension benefits based solely on basic salary; and
iv) performance-related share awards and non-pensionable
bonuses under the Company’s Long-term Incentive Plan
(if applicable); in the year ended 31 December 2016.
Share awards were made under the Company’s Long-term
Incentive Plan amounting to 750,000 (2015: 900,000) share options
at 28.7 pence, £215,250 (2015: 20.75 pence, £186,750) options to
subscribe for new ordinary shares in the Company under the
Elecosoft 2015 Share Option Plan, as adopted by the shareholders
at the AGM on 26 May 2016, to various Directors of the Company.
The options vest if the performance targets listed below are met:
i) Revenue for the year ended 31 December 2018 is at least
£21,400,000; and
ii) EPS for the year ended 31 December 2018 is at least 2.76 pence.
If either of the performance targets are not met, the options
shall lapse.
Performance criteria for the 2015 award: the Company’s audited
earnings per share for the year ended 31 December 2017 must be
at least 22.5 per cent higher than the Company’s audited earnings
per share for the year ended 31 December 2014.
The options are exercisable up to ten years after the grant date at
the dates specified in the table below. The 2016 options expire on
26 October 2026 and the 2015 options on 12 February 2025.
Executive Directors’ Contracts
The Executive Directors have service agreements, which
provide for a notice period as stated hereunder. In the event
that employment with the Company is terminated without notice,
the contracts do not provide for payment of a specific sum for
compensation.
Commencement dates and notice periods of contracts (as
amended) are as follows:
• J H B Ketteley (3 July 1997: twelve months);
• D B Pearson (20 February 2017: three months within the first six
months, six months thereafter);
• G N Spratling (8 July 2015: three months within the first year,
six months thereafter);
• J B Ruddle (29 February 2016: six months);
• J A Hunter (14 June 2016: three months);
• A Karlsson (27 March 2017: six months).
Interest in Contracts
There are no contracts of significance between the Company or its
subsidiary companies and any of the Directors. During the year, for
office services provided in the normal course of business, the Group
paid £5,000 (2015: £5,000) to J H B Ketteley & Co Limited of which
J H B Ketteley is a Director and in which he has an interest. An
amount of £43,000 (2015: £35,000) was paid to J H B Ketteley & Co
Limited under a lease for occupation by the Company of 66 Clifton
Street, London EC2A 4HB.
Consultancy services totalling £nil (2015: £20,328) was paid to
The Boardroom Partnership Limited, a Company in which J Cohen
resigned as a Director on 8 June 2015. Serena Lang received
£12,000 (2015: £nil) for HR consultancy services during the year.
Directors’ Shareholdings
The interests, beneficial unless otherwise indicated, in the ordinary
shares of 1 pence each in the Company of the Directors who held
office at 31 December 2016 were as follows:
J H B Ketteley
J B Edwards
J A Hunter
At 31 December
2016
At 31 December
2015
9,049,760
9,049,760
113,700
16,382
113,700
–
There have been no changes in the Directors’ interests since
31 December 2016.
J H B Ketteley
J B Ruddle
J A Hunter
G N Spratling2
N J B Caw1
2016
Exercisable
£
0.287
0.287
0.287
0.287
–
Issued
250,000
200,000
150,000
150,000
–
750,000
1 600,000 options issued to N Caw lapsed following his resignation.
2 150,000 options issued to G N Spratling lapsed following his resignation.
71,750
57,400
43,050
43,050
–
215,250
£
Issued
2015
Exercisable
£
–
–
–
–
£
–
–
–
–
–
–
–
–
900,000
900,000
0.2075
186,750
186,750
33
Strategic ReportGovernanceFinancial StatementsOverview Directors’ Report continued
Substantial Interests
As at the date of this report, the Company has been notified of the
following interests in the issued share capital of the Company:
Shareholder
H A Allen
J H B Ketteley
Number of
shares
11,513,891
9,049,760
Rights & Issues Investment Trust PLC
4,520,781
J D Lee
Lowland Investment Company PLC
P R & M J Ketteley
G V & S M Oury
3,994,850
3,153,443
3,127,408
2,663,853
Percentage
14.94
11.74
5.86
5.18
4.09
4.06
3.46
Political Donations
The Group did not make any political donations (2015: £nil).
Financial Risk Policies
A summary of the Groups’ treasury policies and objectives relating
to financial risk management, including exposure to associated
risks, is set out in note 24 on pages 68 to 73.
Corporate Governance
We do not comply with the UK Corporate Governance Code.
However, we have reported on our Corporate Governance
arrangements by drawing upon best practice available, including
those aspects of the UK Corporate Governance Code we consider
to be relevant to the Company and best practice.
The Board of Directors, which during the year consisted of the
Executive Chairman, Executive Directors and two independent
Non-Executive Directors, meet at least ten times throughout the
year. S Lang is the Senior Independent Director. The Directors have
access to independent professional advice in executing their duties
on behalf of the Company.
Policy on Appointment and Reappointment
In accordance with the Articles of Association, all Directors are
required to retire and submit themselves for re-election at least
every three years by rotation.
The Board has Established the Following Committees:
Audit Committee
The Audit Committee, which consists of the Non-Executive
Directors, and is chaired by J B Edwards, has specific Terms
of Reference and meets with the auditors at least twice a year.
The Committee reviews the financial statements prior to their
recommendation to the Board for approval and assists the Board
in ensuring that appropriate accounting policies, internal financial
controls and compliance procedures are in place.
Remuneration Committee
The Remuneration Committee, which consists of the Non-
Executive Directors, is chaired by S Lang and is responsible for
determining the remuneration arrangements of the Executive
Directors and for advising the Board on the Company’s
remuneration policy for Senior Executives.
34
Nominations Committee
The Nominations Committee consists of the Non-Executive
Directors and is chaired by the Executive Chairman. The Committee
is responsible for reviewing the structure, size and composition of
the Board and its Committees and evaluating potential candidates
for nomination when and if it is deemed necessary to appoint a new
Director to the Board. The Committee makes its recommendations
to the full Board for its consideration and approval.
Control Environment
The Board acknowledges its responsibility for the Groups’ systems
of internal financial and other controls. These are designed to give
reasonable, though not absolute, assurance as to the reliability of
information, the maintenance of adequate accounting records, the
safeguarding of assets against unauthorised use or disposition and
that the Groups’ businesses are being operated with appropriate
awareness of the operational risks to which they are exposed.
The Directors have established an organisational structure with
clear lines of responsibility and delegated authority.
The systems include:
• the appropriate delegation of responsibility to operational
management;
• financial reporting, within a comprehensive financial planning and
accounting framework, including the approval by the Board of
the detailed annual budget and the regular consideration by the
Board of actual results compared with budgets and forecasts;
• clearly defined capital expenditure and investment control
guidelines and procedures; and
• monitoring of business risks, with key risks identified and
reported to the Board.
Directors’ Responsibilities in Relation to the
Financial Statements
The Directors are responsible for preparing the Strategic Report,
the Directors’ Report and the financial statements in accordance
with applicable law and regulations.
UK Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. Under Company law the Directors must not
approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs and profit or loss of
the Company and Group for that period. In preparing these
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether applicable IFRS UK Accounting Standards
including FRS 102 “the Financial Reporting Standard applicable
to the UK and Republic of Ireland” have been followed, subject
to any material departures disclosed and explained in the
financial statements; and
• prepare financial statements on the going concern basis
unless it is inappropriate to presume the Company will
continue in business.
Elecosoft plc Annual Report and Accounts 2016 The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors confirm that:
• so far as each Director is aware, there is no relevant audit
information of which the Company’s auditors are not aware; and
• the Directors have taken all steps that they ought to have taken
as Directors in order to make themselves aware of any relevant
audit information and to establish that the Company’s auditors
are aware of that information.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
Going Concern
A statement regarding the going concern of the business is set out
in section C of the Significant Accounting Policies on page 46.
Research and Development
Product innovation and development is a continuous process.
The Group commits resources to the development of new
products and quality improvements to existing products and
processes in all its business segments.
A significant share of our software development expenditure
relates to the upgrade of existing products and is written off as
incurred. Development expenditure on new or substantially new
products is capitalised only if it meets the criteria set out in the
Significant Accounting Policies, on pages 45 to 50.
Employee Involvement
The Company is committed to a policy of involvement by keeping
its employees fully informed regarding its performance and
prospects. Employees are encouraged to present their
suggestions and views.
Employment of Disabled Persons
The Company’s policy is to provide equality of opportunity for all
employees without discrimination and continues to encourage
the employment, training and advancement of disabled persons
in accordance with their abilities and aptitudes, provided that
they can be employed in a safe working environment. Suitable
employment would, if possible, be found for an existing employee
who becomes disabled during the course of their employment with
the Group.
Directors’ Indemnities
Qualifying third party indemnity provisions (as defined in Section
234(2) of the Companies Act 2006) are in force for the benefit of
the Directors.
Auditors
Grant Thornton UK LLP has indicated their willingness to continue
in office and a resolution will be proposed at the Annual General
Meeting to reappoint them as auditors and to determine their
remuneration.
By Order of the Board
David Pearson
Group Finance Director and Company Secretary
Elecosoft plc
Parkway House
Pegasus Way
Haddenham Business Park
Haddenham
Buckinghamshire
HP17 8LJ
24 March 2017
35
Strategic ReportGovernanceFinancial StatementsOverview Financial
Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Changes in Equity
Consolidated Balance Sheet
Consolidated Statement
of Cash Flows
Significant Accounting Policies
Notes to the Consolidated
Financial Statements
Company Statement
of Changes in Equity
Company Balance Sheet
Statement of Company
Accounting Policies
Notes to the Company
Financial Statements
Five Year Summary
Group Directory
36
38
40
41
42
43
44
45
51
74
75
76
78
84
86
Elecosoft plc Annual Report and Accounts 2016 37
Strategic ReportGovernanceFinancial StatementsOverview Elecosoft plc Annual Report and Accounts 2016
Independent Auditors’ Report
To the members of Elecosoft plc
We have audited the financial statements of Elecosoft plc for the year ended 31 December 2016 which comprise the consolidated income
statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance
sheet, the consolidated statement of cash flows and consolidated notes together with the Company balance sheet and statement of
changes in equity and related notes. The financial reporting framework that has been applied in the preparation of the Group financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial
reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and UK
Accounting Standards (UK Generally Accepted Accounting Practice) including FRS 102 “The Financial Reporting Standard applicable
to the UK and Republic of Ireland”.
This report is made solely to the Company’s members, as a body, in accordance with Chapter three of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 34 the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December
2016 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting
Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements;
• the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the
audit, we have not identified any material misstatements in the Strategic Report and Directors’ Report.
38
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Malcolm Gomersall
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
24 March 2017
39
Strategic ReportGovernanceFinancial StatementsOverview
Elecosoft plc Annual Report and Accounts 2016
Consolidated Income Statement
for the year ended 31 December 2016
Continuing operations
Revenue
Cost of sales
Gross profit
Operating expenses before amortisation of intangible assets, acquisition expenses and termination
payments
Amortisation of intangible assets
Operating expenses before acquisition expenses and termination payments
Operating profit before acquisition expenses and termination payments
Acquisition expenses
Former Directors’ termination payments
Selling and administrative expenses
Operating profit
Finance income
Finance cost
Profit before tax
Tax
Profit for the financial period from continuing operations
Profit for the financial period from discontinued operations
Profit for the financial period
Attributable to:
Equity holders of the parent
Earnings per share – basic
Continuing operations
Discontinued operations
Total operations
Earnings per share – diluted
Continuing operations
Discontinued operations
Total operations
40
Notes
1,2
2016
£’000
2015
£’000
17,795
(2,374)
15,260
(1,688)
15,421
13,572
(12,875)
(11,940)
2,10
(631)
(495)
3
(13,506)
(12,435)
1,915
(212)
(109)
1,137
–
(11)
(13,827)
(12,446)
1,594
3
(93)
1,504
(261)
1,243
–
1,243
1,126
1
(121)
1,006
(204)
802
360
1,162
1,243
1,162
1.7p
0.0p
1.7p
1.6p
0.0p
1.6p
1.1p
0.5p
1.6p
1.1p
0.5p
1.6p
3
2,3
5
5
6
2,8
8
8
8
8
8
8
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2016
Profit for the period
Other comprehensive income:
Items that will be reclassified subsequently to profit and loss:
Translation differences on foreign operations
Other comprehensive income net of tax
Total comprehensive income for the period
Attributable to:
Equity holders of the parent
2016
£’000
1,243
2015
£’000
1,162
92
92
(11)
(11)
1,335
1,151
1,335
1,151
41
Strategic ReportGovernanceFinancial StatementsOverview
Elecosoft plc Annual Report and Accounts 2016
Consolidated Statement of Changes in Equity
for the year ended 31 December 2016
Share
premium
£’000
Merger
reserve
£’000
Translation
reserve
£’000
Other
reserve
£’000
(172)
(338)
–
–
–
–
–
–
92
92
(80)
Translation
reserve
£’000
–
13
(14)
–
(1)
–
–
–
(339)
Other
reserve
£’000
(161)
(358)
(12,255)
–
–
–
–
–
(11)
(11)
(172)
20
–
–
20
–
–
–
(338)
–
–
18,747
18,747
1,162
–
1,162
7,654
Retained
earnings
£’000
7,654
(111)
–
–
–
(111)
Total
£’000
7,893
(111)
13
(14)
600
488
1,243
1,243
–
1,243
8,786
Retained
earnings
£’000
92
1,335
9,716
Total
£’000
6,722
20
–
–
20
1,162
(11)
1,151
7,893
–
–
–
–
–
–
–
–
–
–
Merger
reserve
£’000
4,086
–
(4,086)
–
(4,086)
–
–
–
–
At 1 January 2016
Dividends
Share-based payments
Elimination of cancelled share based payments
Issue of share capital
Transactions with owners
Profit for the period
Other comprehensive income:
Exchange differences on translation of net
investments in foreign operations
Total comprehensive income for the period
Share
capital
£’000
749
–
–
–
22
22
–
–
–
–
–
–
–
578
578
–
–
–
At 31 December 2016
771
578
At 1 January 2015
Share-based payments
Capitalisation of merger reserve
Capital reduction
Transactions with owners
Profit for the period
Other comprehensive income:
Exchange differences on translation of net
investments in foreign operations
Total comprehensive income for the period
At 31 December 2015
Share
capital
£’000
7,487
–
4,086
(10,824)
(6,738)
–
–
–
749
Share
premium
£’000
7,923
–
–
(7,923)
(7,923)
–
–
–
–
42
Consolidated Balance Sheet
At 31 December 2016
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Bank overdraft
Borrowings
Obligations under finance leases
Trade and other payables
Provisions
Current tax liabilities
Accruals and deferred income
Total current liabilities
Non-current liabilities
Borrowings
Obligations under finance leases
Deferred tax liabilities
Non-current provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Translation reserve
Other reserve
Retained earnings
Equity attributable to shareholders of the parent
Notes
2016
£’000
2015
£’000
9
10
11
14
15
17
17
17
16
18
19
17
17
20
18
21
11,469
3,321
868
10,152
1,910
503
15,658
12,565
11
3,674
67
2,576
6,328
9
2,871
173
1,957
5,010
21,986
17,575
(339)
(790)
(163)
(674)
(750)
(139)
(1,459)
(1,255)
(228)
(89)
(6,003)
(9,071)
(2,370)
(218)
(570)
(41)
–
(3,199)
(12,270)
9,716
771
578
(80)
(339)
8,786
9,716
(203)
(2)
(5,068)
(8,091)
(972)
(225)
(242)
(139)
(13)
(1,591)
(9,682)
7,893
749
–
(172)
(338)
7,654
7,893
The financial statements of Elecosoft plc, registered number 00354915, on pages 40 to 73, were approved by the Board of Directors on
24 March 2017 and signed on its behalf by:
John Ketteley
Executive Chairman
43
Strategic ReportGovernanceFinancial StatementsOverview
Elecosoft plc Annual Report and Accounts 2016
Consolidated Statement of Cash Flows
for the year ended 31 December 2016
Cash flows from operating activities
Profit before tax
Net finance costs
Depreciation charge
Amortisation charge
Profit on sale of property, plant and equipment
Share-based payments charge
Decrease in provisions
Cash generated in operations before working capital movements
Decrease in trade and other receivables
Increase in inventories and work in progress
Decrease in trade and other payables
Cash generated in operations
Interest paid
Interest received
Income tax paid
Notes
2016
£’000
1,504
90
207
631
(28)
13
(75)
2,342
403
(1)
(322)
2,422
(85)
3
(17)
2015
£’000
881
123
174
495
(18)
20
(20)
1,655
349
(1)
(363)
1,640
(153)
1
(127)
Net cash inflow from operating activities
2,323
1,361
Investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Acquisition of subsidiary undertakings net of cash acquired
Proceeds from sale of property, plant, equipment and intangible assets
Sale of business net of expenses
Net cash (outflow)/inflow from investing activities
Financing activities
Proceeds from new bank loan
Repayment of bank loans
Repayments of obligations under finance leases
Equity dividends paid
Net cash inflow/(outflow) from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effects of changes in foreign exchange rates
Cash and cash equivalents at end of period
Cash and cash equivalents comprise:
Cash and short-term deposits
Bank overdrafts
44
(754)
(449)
23
(1,700)
17
100
–
(2,803)
3,160
(1,722)
(153)
(111)
1,174
694
1,283
260
2,237
2,576
(339)
2,237
(754)
(58)
(28)
167
754
81
–
(1,091)
(251)
–
(1,342)
100
1,198
(15)
1,283
1,957
(674)
1,283
Significant Accounting Policies
Elecosoft plc is a public limited Company incorporated and domiciled in the UK under the Companies Act 2006. The consolidated
financial statements for the year ended 31 December 2016 comprise the Company and its subsidiaries (together referred to as the
“Group”). The consolidated and Parent Company financial statements were authorised for issuance on 24 March 2017.
The address of the registered office is given on page 31. The nature of the Groups’ operations and its principal activities are set out in the
Chairman’s Statement on pages 2 to 5, Strategic Report on pages 8 to 27, Directors’ Report on pages 32 to 35 and note 2 on pages 51 to 53.
Elecosoft plc’s consolidated annual financial statements are presented in Pounds Sterling which is also the functional currency of the
Parent Company. Foreign operations are included in accordance with the accounting policies set out below.
A. Statement of compliance
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting
Standards (IFRS) adopted for use by the European Union and effective at 31 December 2016 and the Companies Act 2006 applicable for
companies reporting under IFRS.
B. Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis and all financial information has been rounded to
the nearest thousand.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
Significant accounting judgements and estimates
Application of the Groups’ accounting policies in conformity with generally accepted accounting principles requires judgements and
estimates that affect the amounts of assets, liabilities, revenues and expenses reported in the financial statements. These judgements
and estimates may be affected by subsequent events or actions such that actual results may ultimately differ from the estimates.
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a
significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are
discussed below.
Revenue recognition
Contracts with clients can include both, the sale of licences and the provision of services including maintenance and support.
The Directors apply appropriate judgement in recognition of the separable components of revenue based on the analysis of individual
contracts as this indicates the substance of the transaction as viewed by the client. The transfer of the risks and rewards of ownership
for a licence is usually on delivery and written or contractual acceptance of the software provided the contract is non-cancellable.
In addition, the Group utilises resellers to access certain markets. Where sales of the Groups’ products or services are made through a
reseller, the Directors judge that the reseller is responsible for the majority of the risks and responsibilities, therefore commission payable
to the reseller is offset against the sale and the net amount is treated as revenue of the Group.
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the
cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the
expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present
value of those cash flows. Further details are given in note 9 of the Consolidated Financial Statements.
Carrying value of other intangible assets
Development costs are capitalised in accordance with the Group accounting policy. Initial recognition is based on management’s
judgement that technological and economical feasibility is confirmed, usually when a product development project has reached a defined
milestone according to an established project management model. The carrying value of the capitalised development costs are reviewed
annually by management with reference to the expected future cash generation of the assets, discount rates to be applied and expected
period of the benefits. Further details are given in note 10 of the Consolidated Financial Statements.
Provisions and contingent liabilities
In accordance with the accounting policy outlined overleaf, judgement is made of the likely outcome of any disputes. Where it is judged to
be probable that an outflow of resources will be required to settle the obligation, an estimate will be made of the provision where it can be
reliably made based on the information available and advice from third parties where appropriate.
45
Strategic ReportGovernanceFinancial StatementsOverview Significant Accounting Policies continued
B. Basis of preparation continued
Brexit
In light of the referendum vote in favour of the UK leaving the EU the Board weighed the fiscal and operational impacts. The spread of
business across the EU landscape with local income and expenditures creates a natural hedge to volatility which is closely monitored and
no additional actions were undertaken outside the normal course of business.
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business that has been
disposed of, has been abandoned or meets the criteria to be classified as held for sale and where its operations and cash flows can be
clearly identified.
C. Going concern
The Groups’ clients include many top contractors in the building and construction sector in the UK, Scandinavia, Germany, Benelux and
US with no significant client concentration. The software products and services provided by the Group are reasonably embedded in their
client’s core operations and 48 per cent (2015: 48 per cent) of the Groups’ revenue is from recurring revenue contracts.
These contracts are renewed throughout the year although there is a slightly greater weighting in the fourth quarter. For these reasons, the
Group has good visibility on any potential deterioration in its trading outlook and potential risk to the business. Not-withstanding the Group
has net current liabilities of £2,743,000 at 31 December 2016 (2015: £3,081,000), these amounts are after deferred income of £4,401,000
(2015: £3,708,000) relating to annual maintenance contracts which are non-refundable. Historically, there is a low level of cancellations each
year and the Board closely monitors clients that are potentially at risk of cancellation as well as the pipeline of new business.
The Group has both, cash and undrawn credit facilities available to support its business operations and, therefore, the Board believes
that the Group is well positioned to manage the business risks. Revenue, operating profit and cash flow budgets have been prepared
at business unit level. After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operation for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in
preparing its consolidated financial statements.
D. Basis of consolidation
The Group financial statements consolidate those of Elecosoft plc and of its subsidiary undertakings at the Balance Sheet date and all
subsidiaries have a reporting date of 31 December. Subsidiaries are entities controlled by the Group and their results have been adjusted,
where necessary, to ensure accounting policies are consistent with those of the Group. Control exists where the Group has the power to
direct the activities that significantly affect the subsidiary’s returns and exposure or rights to variable returns from its investment with the
subsidiary and the ability to use its power over the subsidiary to affect the amount of the subsidiary’s returns. The Group obtains and
exercises control through Board representation and voting rights.
All inter-Company balances and transactions are eliminated in full.
The results of subsidiaries acquired or sold in the year are included in the consolidated income statement from or up to the date control
passes and until control ceases.
Business combinations
The acquisition of subsidiaries is dealt with using the acquisition method. The acquisition method involves the recognition at fair value of
all identifiable assets and liabilities at the acquisition date, including contingent liabilities of the subsidiary regardless of whether or not
they were recorded in the financial statements of the subsidiary prior to acquisition. Acquisition costs are expensed as incurred.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the consideration transferred
over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.
E. Revenue
Revenue from the sale of software licences represents the fair value of consideration received or receivable in respect of software
licences supplied to third parties in the period, excluding value added tax and trade discounts. This revenue is recognised when the
software licence is delivered. Revenue from software maintenance and support contracts is measured at fair value of consideration
receivable and is treated as deferred income and taken to revenue in the income statement on a straight line basis in line with the service
and obligations over the term of the contract.
Consultancy and professional service fee revenues, which are typically billed on a time and materials basis, are recognised as the work is
performed provided that the amount of revenue can be measured reliably, it is probable that the economic benefits of the work performed
will flow to the Group and the costs involved in providing the service can be reliably measured.
46
Elecosoft plc Annual Report and Accounts 2016 F. Exceptionals
Exceptional items are those significant items which are separately disclosed by their size or nature to enable a full understanding of the
financial performance of the Group.
G. Finance income and costs
Financing costs comprise interest payable on borrowings calculated on an effective interest basis. Interest income and cost is recognised
in the income statement as it accrues.
H. Taxation
Current tax is the tax payable based on taxable profit for the year, calculated using tax rates that have been enacted, or substantially
enacted, by the balance sheet date.
Deferred tax is calculated using the liability method on temporary differences and provided on the difference between the carrying
amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill nor on the
initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period of realisation, provided the expected tax rates are enacted or
substantively enacted at the balance sheet date and charged or credited to the income statement or statement of comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets
and liabilities on a net basis.
I. Intangible assets
Goodwill arising on consolidation represents the excess of the consideration transferred, excluding expenses, over the Group’s interest in
the fair value of the identifiable net assets acquired. The carrying value of goodwill is recognised as an asset and reviewed for impairment
and any impairment is recognised immediately in the income statement. On disposal, the amount of goodwill attributable to the disposal
is included in the determination of profit or loss on disposal.
Other intangible assets acquired separately are capitalised at cost and on a business combination are capitalised at fair value as at the
date of acquisition. Following initial recognition, an intangible asset is held at cost less accumulated amortisation and any accumulated
impairment losses.
Intangible assets excluding goodwill are amortised on a straight-line basis over their useful economic lives and shown separately in the
income statement. The useful economic life of each class of intangible asset is as follows:
Customer relationships
Intellectual property
– up to twelve years
– up to five years
The Group owns intellectual property both in its software tools and software products. Intellectual property purchased is capitalised at
cost and is amortised on a straight-line basis over its expected useful life.
Research expenditure is written off as software product development when incurred. Development expenditure on a project is written off
as incurred unless it can be demonstrated that the following conditions for capitalisation as intellectual property, in accordance with
IAS 38 “Intangible Assets”, are met:
• the intention to complete the development of the intangible asset and use or sell it;
• the development costs are separately identifiable and can be measured reliably;
• management are satisfied as to the ultimate technical and commercial viability of the project, so that it will be available
for use or sale;
• management are satisfied with the availability of technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
it is probable that the asset will generate future economic benefit.
•
Any subsequent development costs are capitalised and are amortised from the date the product or process is available
for use, on a straight-line basis over its estimated useful life.
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Strategic ReportGovernanceFinancial StatementsOverview
Significant Accounting Policies continued
I. Intangible assets continued
The carrying amounts of intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable and, in the case of capitalised development expenditure, reviewed for impairment annually while
the asset is not yet in use.
J. Property, plant and equipment
Property, plant and equipment is stated at purchase cost, together with any directly attributable costs of acquisition. The carrying amount
and useful lives of property, plant and equipment with material residual values are reviewed at each balance sheet date.
Depreciation is provided on all property, plant and equipment on a straight line basis to write down the assets to their estimated residual
value over the useful economic life of the asset as follows:
Long leasehold buildings
Short leasehold property
Plant, equipment and vehicles
– 50 years or term of the lease, if shorter
– over the term of the lease
– two to ten years
When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate
items of property, plant and equipment.
K. Impairment of assets
Goodwill
The carrying amounts of the Group’s goodwill assets are assessed annually as to whether an impairment adjustment may be required.
The assets under review are grouped under the appropriate cash-generating unit (CGU) for which there are separately identifiable cash
flows. Goodwill is held at CGU level and allocated directly to the CGU under review. The calculation requires an estimation of the value in
use of the CGU to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected
future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows.
An impairment charge is initially made against goodwill of the CGU and thereafter against other assets. Any impairment is charged to
the income statement under the relevant expense heading.
Property, plant and equipment and intangible assets excluding goodwill
At each balance sheet date the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated to determine the extent of any impairment loss. The recoverable amount is the higher of the asset’s value in use and
its fair value less costs to sell. Value in use is calculated using cash flow projections for the asset discounted at the specific discount rate for
the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. An impairment loss is recognised as an expense in the income statement.
A previously recognised impairment loss, other than goodwill, is reversed only if there has been a change in the previous indicator used to
determine the assets recoverable amount since the last impairment loss was recognised. The reinstated carrying amount cannot exceed
the carrying amount that would have been determined, net of amortisation, had no impairment loss been recognised for the asset in
prior years.
L. Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes expenditure incurred in acquiring the inventories and
bringing them to their existing location and condition. Net realisable value is based on estimated selling price less further costs expected
to be incurred to completion, such as marketing, selling and distribution.
M. Leases
Finance leases, which transfer to the Group substantially all of the benefits and risks of ownership of an asset, are capitalised at
the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease
payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of the estimated life of the asset or the lease term. Leases, which the lessor
retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are
recognised as an expense in the income statement on a straight line basis over the term of the lease.
48
Elecosoft plc Annual Report and Accounts 2016
N. Share-based payments
The Company issues share options to employees from time to time. Under IFRS the equity-settled, share-based payment awards
are valued at fair value at inception and this cost is recognised over the option vesting period of three years. The Board has used an
appropriate model to estimate the fair value of the options. Various assumptions affect the value of the options and the Board has
considered these assumptions in order to derive an appropriate charge for the cost of the options. The key assumptions used to
derive the charge include the probability of performance achievement and the expected future dividend yield of the shares.
O. Provisions and contingent liabilities
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or present obligations
where the outflow of resources is uncertain or cannot be measured reliably. Contingent liabilities are not recognised in the financial
statements but are disclosed unless they are remote.
P. Pensions
The Group provides contributions on behalf of certain Directors and employees to a series of defined contribution pension schemes.
Contributions payable in the year are charged to the income statement.
Q. Foreign currencies
The individual financial statements of each Group Company are presented in the currency of the primary economic environment in which
it operates (its functional currency). For the purposes of the consolidated financial statements, the results and financial position of each
Group Company are expressed in UK Pounds Sterling, which is the functional currency of the Company and the presentational currency
for the consolidated financial statements.
Transactions in foreign currencies are translated at the exchange rate ruling at the date of transaction. Foreign exchange differences
arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially
recorded are recognised in the income statement in the period in which they arise.
Assets and liabilities of subsidiaries denominated in a different functional currency to that of the Groups’ presentational currency are
translated into Pounds Sterling at the rate of exchange ruling at the balance sheet date and results are translated at the average rate of
exchange for the year. The use of an average exchange rate for the year rather than actual exchange rates at the dates of transactions is
considered to approximate to actual rates for the translation of the results of foreign subsidiaries.
Differences on exchange, arising from the retranslation of the opening net investment in subsidiary companies which have functional currencies
that differ to Pound Sterling, and from the translation of the results of those companies at an average rate, are taken to reserves and reported in
other comprehensive income. Exchange differences arising on the retranslation of non-trading intra-group balances reported in foreign
subsidiaries are regarded as part of the net investment in the subsidiary and treated as a movement in the translation reserve on consolidation.
When an operation is sold, amounts recognised in reserves on the translation of foreign operations are recycled through the income statement.
R. Financial instruments
Financial assets
Financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument and arise principally
through the provision of goods and services to customers (trade and other receivables). A financial asset is derecognised only where the
contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for de-recognition.
Trade receivables
Trade receivables do not carry any interest and are initially stated at their fair value. Subsequent measurement is at amortised cost as
reduced by appropriate allowances for estimated irrecoverable amounts. Allowances for irrecoverable amounts are made when there is
evidence that the Group may not be able to collect the amount due. The impairment recorded is the difference between the carrying
value of the receivables and the estimated future cash flows. Any impairment required is recorded in the income statement in
administrative expenses.
49
Strategic ReportGovernanceFinancial StatementsOverview Significant Accounting Policies continued
R. Financial instruments continued
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity
of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents are net of outstanding
bank overdrafts.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the
contractual provisions of the instrument. Trade payables and other short-term monetary liabilities are initially recorded at fair value and
subsequently carried at amortised cost using the effective interest rate method. Bank borrowings are initially recognised at the fair value
on initial recognition date, which in the case of an arm’s length transaction is the amount advanced, exclusive of any transaction costs
directly attributable to the issue of the instrument and subsequently carried at amortised cost. A financial liability is derecognised when
the obligation is discharged, cancelled or expires.
S. Equity
The balances classified as share capital represent the proceeds of the nominal value on the issue of the Company’s equity share capital
net of issue costs. The share premium reserve represents the value of the consideration shares that were issued to fund the acquisition of
Icon Limited in October 2016.
The translation reserve is used to record exchange differences arising from the retranslation of the opening net investment and income
statement of foreign subsidiaries. The amounts relating to share options issued but not yet exercised and shares in the Company held by
the Employee Share Ownership Trust are reported as other reserves.
T. Employee Share Ownership Trust
Equity shares in Elecosoft plc held by the Employee Share Ownership Trust (‘ESOT’) are treated as a deduction from the issued and
weighted average number of shares. The consideration paid is deducted from equity until the shares are cancelled, reissued or disposed
of. When such shares are subsequently sold or reissued, any consideration received, net of related transaction costs and income tax
effects, are included in equity attributable to the Company’s equity holders.
U. New standards and interpretations not applied
The following new amendments to standards were in issue but have not yet been endorsed by the EU are not yet effective for the financial
year beginning 1 January 2016:
International Accounting Standards (IAS/IFRS)
IFRS 9 Financial instruments – Classification and measurement
IFRS 15 Revenue from contracts with customers
IFRS 16 Leases
IAS 16 and IAS 41 (amendments) – Clarification of acceptable methods of depreciation and amortisation
IAS 16 and IAS 41 (amendments) – Agriculture: Bearer plants
IAS 27 (amendments) – Equity method in separate financial statements
Effective date
1 January 2018
1 January 2017
1 January 2019
No new standards becoming effective and applied in the current year have had a material impact on the financial statements.
The Directors expect that ‘IFRS 15 – Revenue from contracts with customers’ will require a review of the Group’s revenue recognition
policies. The timing and amount of revenue recognised may not change for simple contracts that have a single deliverable but certain
complex arrangements may have an impact on revenue recognition and related disclosures. The impact of ‘IFRS 16 – Leases’ will require
a change in the classification of operating leases to ‘on-balance sheet’ and the related interest expense will be front loaded. It is not
practicable to provide a reasonable estimate of the effect of IFRS 15 and IFRS 16 until a detailed review has been completed.
Otherwise, the Directors anticipate that the adoption of these standards in future periods will have no material impact on the financial
statements of the Group except for additional disclosures when the relevant standard comes into effect.
50
Elecosoft plc Annual Report and Accounts 2016
Notes to the Consolidated Financial Statements
1. Revenue
Revenue from continuing operations disclosed in the income statement is analysed as follows:
Licence sales
Recurring maintenance and support revenue
Services income
Total revenue
2016
£’000
4,955
8,622
4,218
2015
£’000
4,536
7,278
3,446
17,795
15,260
2. Segment information
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Executive Directors. The Group revenue is derived entirely from the sale of
software licences, software maintenance and support and related services. Consequently, the Executive Directors review the three
revenue streams, but as the costs are not recorded in the same way, the information is presented as one segment and as such the
information is presented in line with management information.
2016
Software
£’000
2015
Software
£’000
Revenue
Adjusted operating profit
Depreciation charge
Product development costs
Operating profit before amortisation of intangible assets, acquisition expenses and termination payments
Amortisation of intangible assets
Acquisition expenses
Former Directors’ termination payments
Operating profit
Net finance cost
Segment profit before tax
Tax
Segment profit after tax
Internal development costs capitalised
Total development costs
Operating profit
Amortisation of intangible assets
Depreciation charge
EBITDA
17,795
15,260
4,721
(207)
3,446
(174)
(1,968)
(1,640)
2,546
(631)
(212)
(109)
1,594
(90)
1,504
(261)
1,243
1,632
(495)
–
(11)
1,126
(120)
1,006
(204)
802
(625)
(665)
(2,593)
(2,305)
1,594
631
207
1,126
495
174
2,432
1,795
Adjusted operating profit of £4,721,000 (2015: £3,446,000) is stated before description and amortisation of intangible assets, product
development costs and certain items considered as non-recurring. The latter includes acquisition expenses and termination payments
relating to former Directors.
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Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
2. Segment information continued
Development project costs are expensed as incurred unless they meet the accounting policy requirements for capitalisation. The software
projects that have been capitalised in the twelve months to 31 December 2016 are explained in the Financial Review on page 26 and the
accounting policy requirements for capitalisation are set out on in the Significant Accounting Policies in section I.
Group assets and liabilities
Segment assets
Unallocated assets
Total Group assets
Segment liabilities
Unallocated liabilities
Total Group liabilities
2016
Software
£’000
2015
Software
£’000
21,986
17,595
–
21,986
12,270
–
–
17,595
9,682
–
12,270
9,682
Geographical, product and sales channel information
Revenue by geographical area represents continuing operations revenue from external customers based upon the geographical location
of the customer.
Revenue by geographical destination is as follows:
UK
Scandinavia
Germany
Rest of Europe
Rest of World
Rest of World includes revenue from customers in US of £633,000 (2015: £571,000).
Revenue by product group represents continuing operations revenue from external customers.
Revenue by product group is as follows:
Project management
Site management
Estimating
Engineering
CAD/Design
Visualisation
2016
£’000
5,498
6,745
2,982
1,653
917
2015
£’000
4,857
5,950
2,308
1,359
786
17,795
15,260
2016
£’000
8,572
474
2,964
2,827
1,137
1,821
2015
£’000
7,493
396
2,557
2,373
1,001
1,440
17,795
15,260
The Group utilises resellers to access certain markets. Revenue by sales channel represents continuing operations revenue from
external customers.
52
Elecosoft plc Annual Report and Accounts 2016
Revenue by sales channel is as follows:
Direct
Reseller
2016
£’000
16,674
1,121
17,795
2015
£’000
14,236
1,024
15,260
Non-current assets excluding deferred tax by geographical area represent the carrying amount of assets based in the geographical area
in which the assets are located.
Non-current assets by geographical location are as follows:
UK
Scandinavia
Germany
Rest of Europe
Rest of World
2016
£’000
8,027
6,145
1,396
88
2
2015
£’000
7,130
4,350
1,040
44
1
15,658
12,565
Information about major customers
Revenues arising from sales to the Group’s largest customer were below the reporting threshold of 10 per cent of Group revenue
(2015: below 10 per cent reporting threshold).
3. Operating profit
The continuing operations operating profit for the period is stated after charging/(crediting) the following items.
Software product development
Depreciation of property, plant and equipment
Amortisation of intangible assets acquired
Amortisation of capitalised development costs
Profit on disposal of property, plant and equipment
Foreign exchange (gains)/losses
Fees payable to the Company's auditor for the audit of the Company's financial statements
Fees payable to the Company's auditor for other services:
– Audit of the subsidiaries financial statements
– Other assurance services
Operating lease rentals:
Plant, equipment and vehicles
Properties
Acquisition expenses
Former Directors’ termination payments
2016
£'000
1,968
2015
£'000
1,640
207
389
242
(28)
(73)
38
54
2
42
394
212
109
174
380
115
(18)
85
35
39
–
47
359
–
(11)
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Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
4. Employee information
The average number of employees during the period, including Directors, in continuing operations was made up as follows:
Sales and marketing
Client services
Software development
Management and administration
Staff costs during the period, including Directors, in continuing operations amounted to:
Wages and salaries
Social security
Pension costs
Share-based payments
Less: Development staff costs capitalised
2016
number
2015
number
54
56
46
34
190
2016
£’000
8,194
1,680
566
13
10,453
(625)
9,828
57
52
41
28
178
2015
£’000
6,814
1,419
485
20
8,738
(665)
8,073
Pension costs relate to contributions to defined contribution pension schemes. Development staff costs are charged to projects and
capitalised if those projects meet the criteria for capitalisation. The details of the criteria for capitalisation are set out in the Significant
Accounting Policies under section I.
The remuneration of the Directors, who are the key management personnel of the Group, is set out below:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share based payments
Executive Directors
Fees – Non-Executive Directors
2016
£’000
576
23
100
13
712
82
794
2015
£’000
643
22
11
20
696
90
786
The emoluments of the highest paid Director were £280,000 (2015: £361,000). Employers’ NIC payments in respect of the Directors’
remuneration were £85,000 (2015: £95,000).
The remuneration of the Non-Executive Directors is determined by the Board. The Non-Executive Directors do not have service contracts
but are appointed for an initial term of three years, which may thereafter be renewed from year to year. They do not participate in any of
the Groups’ share based incentive or pension schemes.
54
Elecosoft plc Annual Report and Accounts 2016
5. Net finance income/(cost)
Finance income and costs from continuing operations is set out below:
Finance income:
Bank and other interest receivable
Finance costs:
Bank overdraft and loan interest
Finance leases and hire purchase contracts
Total net finance cost
6. Taxation
(a) Tax on profit on ordinary activities
The tax charge in the income statement from continuing operations is as follows:
Current tax:
UK corporation tax on profits of the year
Foreign tax
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Tax adjustments in respect of previous years
Total deferred tax
Tax charge in the income statement
2016
£’000
2015
£’000
3
1
(84)
(9)
(90)
(107)
(14)
(120)
2016
£’000
34
34
145
179
87
(5)
82
261
2015
£’000
2
2
121
123
74
7
81
204
Income tax for the UK has been calculated at the standard rate of UK corporation tax of 20.0 per cent effective from 1 April 2015 (2015:
20.25 per cent) on the estimated assessable profit for the period. Taxation for foreign companies is calculated at the rates prevailing in the
relevant jurisdictions.
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Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
6. Taxation continued
(b) Reconciliation of continuing operations tax charge
The tax assessed on continuing operations accounting profit before income tax for the year is the same as the standard rate of UK
corporation tax of 20.0 per cent for the period under review. The reconciliation is explained below:
Profit on continuing operations before tax
Tax calculated at the average standard rate of UK corporation tax of 20.0 per cent (2015: 20.25 per cent)
applied to profits before tax
Effects of:
Expenses not deductible for tax purposes
Research and development tax relief
Group relief/losses surrendered not paid
Non taxable statutory compensation
Deferred tax not recognised
Share option deduction
Prior year adjustments
Utilisation of losses
Tax rate differences in foreign jurisdictions
Other differences
Continuing operations tax charge for the year
2016
£’000
1,504
2015
£’000
1,006
301
204
90
(54)
–
–
(15)
–
(5)
(80)
16
8
261
46
(94)
4
(15)
39
4
7
(17)
24
2
204
(c) Unrecognised tax losses
The Group has tax losses of £696,000 (2015: £762,000) arising at one of its operations in Germany for which no deferred tax asset has
been recognised and tax losses of £1,764,000 (2015: £1,874,000) arising in the UK. Potential deferred tax asset not recognised in respect of
losses in UK subsidiaries is £347,000 (2015: £390,000). No deferred tax is recognised on the unremitted earnings of overseas subsidiaries.
7. Dividends
Dividends of £111,000 (2015: £nil) were paid during the year as follows:
Ordinary shares
Declared and paid during the year
Interim – current year
Final – previous year
2016
per share
2015
per share
0.15
–
0.15
–
–
–
2016
£’000
111
–
111
2015
£’000
–
–
–
The Directors have recommended a final dividend of 0.25 pence per ordinary share for 2016 (2015: nil) resulting in a total dividend for the
year of 0.40 pence per ordinary share (2015: nil). If the 2016 final dividend is approved at the Annual General Meeting, the dividend will be
paid on 24 May 2017 to shareholders on the register at the close of business on 7 April 2017 (ex-div date 6 April 2017). In accordance with
IFRS, the dividend is not provided for as a liability in the accounts until it becomes a legal liability of the Company and therefore will be
recorded in the interim and annual accounts for 2017.
56
Elecosoft plc Annual Report and Accounts 2016
8. Basic and diluted earnings per share
The calculation of the basic and diluted earnings per ordinary share from continuing operations is based on the data below:
Continuing operations
Discontinued operations
Total profit after taxation
Basic weighted average number of shares
Dilutive effect of share options
Diluted weighted average number of shares
2016
2015
£1,243,000
£802,000
–
£360,000
£1,243,000 £1,162,000
74,433,243 73,970,534
1,029,000
882,000
75,462,243 74,852,534
Basic earnings per ordinary share is calculated from continuing operations profit after tax attributable to ordinary equity shareholders of
the Company and the weighted average number of shares in issue for the reporting period.
Basic earnings per share
Continuing operations
Discontinued operations
Total operations
2016
1.7p
–p
1.7p
2015
1.1p
0.5p
1.6p
Dilutive earnings per ordinary share is calculated by adjusting the weighted average number of shares in issue for the reporting period to
include the assumed conversion of the dilutive share options outstanding at 31 December 2016.
Diluted earnings per share
Continuing operations
Discontinued operations
Total operations
2016
1.6p
–p
1.6p
2015
1.1p
0.5p
1.6p
Shares held by the Employee Share Ownership Trust are excluded from the weighted average number of shares in the period.
9. Goodwill
Cost:
B/f
Acquisition of business (note 23)
Disposal of business
Exchange differences
Impairment:
B/f
Net book value
2016
£’000
2015
£’000
10,152
1,245
–
72
10,571
–
(395)
(24)
11,469
10,152
–
–
–
–
11,469
10,152
The acquisition amount in the year includes Elecosoft BV based in the Netherlands, purchased in January 2016 and Icon Ltd based in
Leicestershire, purchased in October 2016. Goodwill denominated in currencies other than Pound Sterling is revalued at the appropriate
closing exchange rate.
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Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
9. Goodwill continued
Goodwill acquired through acquisitions net of impairments is set out below:
Elecosoft UK
Asta Development Germany
Elecosoft Sweden
Elecosoft Netherlands
Eleco Software Germany
ESIGN® Software Germany
Elecosoft Icon
2016
£’000
4,804
230
4,453
20
367
370
1,225
11,469
2015
£’000
4,804
199
4,416
–
363
370
–
10,152
The Directors consider each of the operating businesses listed above, which are those units for which a separate cash flow is computed,
to be a cash-generating unit (CGU) and each CGU is reviewed annually for impairment. For each CGU, the Directors have determined its
recoverable amount based on value-in-use calculations.
The value in use was derived from discounted post tax management cash flow forecasts for the businesses, using the budgets and
strategic plans based on past performance and expectations for the market development of the CGU incorporating an appropriate
business risk. The key assumptions for the value-in-use calculations are those regarding the discount rates, growth rates and expected
changes to revenues and operating cost during the period.
The key estimates and assumptions used in calculating each CGU's value in use are shown in the table below. The market growth rates
and inflation rates used are in line with external sources.
CGU
Elecosoft UK
Asta Development Germany
Elecosoft Sweden
Elecosoft Netherlands
Eleco Software Germany
ESIGN® Software Germany
Elecosoft Icon
Growth
rate pa
1.5%
1.6%
2.4%
2.2%
1.6%
1.6%
1.5%
Inflation
rate pa
2.0%
1.5%
1.7%
1.1%
1.5%
1.5%
2.0%
Discount
rate pa
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
Business risk
rate pa
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
1.0%
These budgets and strategic plans cover a five year period. The growth rates used to extrapolate the cash flows beyond this period
ranges between 1.8 per cent and 2.6 per cent depending on the geographical location of the CGU. A business risk factor between
1.0 per cent and 2.0 per cent is applied to cash flows to reflect the different business risks specific to the asset which is not adjusted in
the discount rate. The business risk is based on the estimated variability of the CGUs budget cash flows. Sensitivity analysis is carried out
on all budgets and strategic plans used in the calculations. The discount rates used for all CGUs is 12.00 per cent (2015: 12.00 per cent)
based on an adjusted Group estimated weighted average cost of capital.
The key sensitivities in assessing the value in use of goodwill are forecast cash flows and the discount rate applied. The headroom in the
value-in-use calculation for the CGUs with a significant amount of goodwill together with the results of the sensitivities are shown below:
Value-in-use headroom
Elecosoft UK
Elecosoft Sweden
The cumulative impairment charge recognised at 31 December 2016 was £nil (2015: £nil).
58
Base
scenario
£’000
16,792
3,281
Sensitivity 1%
reduction in
growth rate pa
£’000
Sensitivity 1%
increase in
discount rate pa
£’000
14,717
2,261
14,757
2,369
Elecosoft plc Annual Report and Accounts 2016
10. Other intangible assets
Cost:
At 1 January 2016
Acquisition of business (note 23)
Additions
Additions – internal development
Disposals
Exchange differences
At 31 December 2016
Accumulated amortisation and impairment:
At 1 January 2016
Amortisation charge for the year
Disposals
Exchange differences
At 31 December 2016
Net book value at 31 December 2016
Customer
relationships
£’000
Intellectual
property
£’000
3,258
782
–
–
–
1
2,234
495
129
625
(496)
25
Total
£’000
5,492
1,277
129
625
(496)
26
4,041
3,012
7,053
2,443
288
–
–
2,731
1,310
1,139
3,582
343
(495)
14
1,001
2,011
631
(495)
14
3,732
3,321
The values attributed to customer relationships represent the fair value of acquired customer contracts and relationships held by the
acquired Company at the date of acquisition. Similarly, values attributed to intellectual property represent the fair value of acquired
intellectual property. Acquisitions in the year include Integrated Computing and Office Networking Limited ‘Icon’ and Asta
Development BV.
Additions in the year represent purchased intangible assets of £129,000 (2015: £89,000) and internal development costs capitalised of
£625,000 (2015: £665,000). Internal development represents software development project costs that meet the accounting policy criteria
for capitalisation. Further details of the software development projects that have been capitalised in the period are set out in the Financial
Review on page 26.
Amortisation charges are shown separately in the Consolidated Income Statement.
Cost:
At 1 January 2015
Additions
Additions – internal development
Disposals
Exchange differences
At 31 December 2015
Accumulated amortisation and impairment:
At 1 January 2015
Amortisation charge for the year
Disposals
Exchange differences
At 31 December 2015
Net book value at 31 December 2015
Customer
relationships
£’000
Intellectual
property
£’000
Total
£’000
3,258
1,606
4,864
–
–
–
–
89
665
(100)
(26)
89
665
(100)
(26)
3,258
2,234
5,492
2,174
269
–
–
2,443
815
1,007
226
(76)
(18)
1,139
1,095
3,181
495
(76)
(18)
3,582
1,910
59
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
11. Property, plant and equipment
Cost:
At 1 January 2016
Acquisition of business
Additions
Disposals
Exchange differences
At 31 December 2016
Accumulated depreciation and impairment:
At 1 January 2016
Depreciation charge for the year
Disposals
Exchange differences
At 31 December 2016
Net book value at 31 December 2016
Leasehold
buildings
£’000
Plant,
equipment
and vehicles
£’000
Total
£’000
16
8
182
(19)
–
187
16
16
(19)
–
13
174
1,509
1,525
23
401
(311)
83
31
583
(330)
83
1,705
1,892
1,006
1,022
191
(259)
73
1,011
694
207
(278)
73
1,024
868
Additions in the year include £134,000 (2015: £223,000) of plant, equipment and vehicles acquired on a finance lease or hire purchase
agreement. The net book value of plant, equipment and vehicles includes an amount of £386,000 (2015: £371,000) in respect of assets
held under finance leases and hire purchase agreements.
Leasehold land
and buildings
£’000
Plant,
equipment and
vehicles
£’000
Total
£’000
16
–
–
–
16
16
–
–
–
16
–
1,550
1,566
281
(293)
(29)
281
(293)
(29)
1,509
1,525
975
174
(125)
(18)
1,006
503
991
174
(125)
(18)
1,022
503
Cost:
At 1 January 2015
Additions
Disposals
Exchange differences
At 31 December 2015
Accumulated depreciation and impairment:
At 1 January 2015
Depreciation charge for the year
Disposals
Exchange differences
At 31 December 2015
Net book value at 31 December 2015
60
Elecosoft plc Annual Report and Accounts 2016
12. Operating lease commitments
Future minimum rentals payable under non-cancellable operating leases are as follows:
Within one year
Between two and five years
After five years
Property
2016
£’000
405
1,184
1,167
2,756
Other
2016
£’000
30
20
9
59
Property
2015
£’000
355
932
1,046
2,333
Other
2015
£’000
30
75
–
105
Operating lease payments represent rentals payable by the Group for certain of its properties and other assets. The property leases are
subject to periodic rent reviews.
13. Capital commitments
Capital expenditure commitments of £nil (2015: £nil) have been placed with suppliers at 31 December 2016.
14. Inventories
Finished goods
At 31 December 2016 the Groups’ inventory provisions were £nil (2015: £nil).
15. Trade and other receivables
Gross trade receivables
Impairment
Net trade receivables
Other receivables
Prepayments and accrued income
2016
£’000
11
11
2015
£’000
9
9
2016
£’000
3,243
(75)
2015
£’000
2,427
(41)
3,168
2,386
84
422
134
351
3,674
2,871
The Group offers credit terms to customers depending on the credit status of the customer. The Group makes provision against trade
receivables when it considers them to be impaired and takes into account the specific circumstances of the receivable and the Groups’
relationship with the customer. The average credit period taken on the sales of goods and services is 54 days (2015: 48 days). No interest
is charged on past due trade receivables (2015: £nil).
The carrying amounts of trade and other receivables are denominated in the following currencies:
Sterling
Euro
Swedish Krona
US Dollar
Other
2016
£’000
937
732
2015
£’000
754
496
1,737
1,557
220
48
36
28
3,674
2,871
61
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
15. Trade and other receivables continued
Movement in the provision for doubtful debts in respect of trade receivables during the period was as follows:
B/f
Written off as uncollectable
Recovered during the period
Provided against during the period
Exchange differences
2016
£’000
(41)
8
19
(55)
(6)
(75)
2015
£’000
(155)
116
1
(5)
2
(41)
The ageing of trade receivables at the balance sheet date that are past due but against which no provision has been made is as follows:
Not more than three months
More than three months but less than six months
16. Trade and other payables
Trade payables
Other taxation and social security
Deferred consideration payable
Other liabilities
2016
£’000
499
21
520
2016
£’000
654
429
–
376
2015
£’000
265
–
265
2015
£’000
455
446
6
348
1,459
1,255
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for
trade purchases is 36 days (2015: 37 days). The Directors consider that the carrying amount of trade payables approximates to their
fair value.
17. Borrowings
Current liabilities:
Bank loans and overdrafts
Obligations under finance leases and hire purchase contracts
Non-current liabilities:
Bank loans
Obligations under finance leases and hire purchase contracts
Total loans and borrowings
Cash and cash equivalents
Net borrowings
62
2016
£’000
2015
£’000
1,129
163
1,292
2,370
218
2,588
3,880
1,424
139
1,563
972
225
1,197
2,760
(2,576)
(1,957)
1,304
803
Elecosoft plc Annual Report and Accounts 2016
The UK banking facilities are with Barclays Bank plc and the Group facilities comprise the following:
• a term loan of £3.2m, with 16 quarterly loan repayments of £197,500 commencing from January 2017, carrying an interest rate of
2.75 per cent over base rate; and
• a £1.0m overdraft facility, carrying an interest rate of 2.75 per cent over base rate.
Security provided to the bank for the provision of these facilities is a cross guarantee and debenture between the Parent Company and
certain UK subsidiary companies and a commitment of the shares of the operating companies.
The previous term loan with quarterly loan repayments of £187,500 commencing October 2014 was fully repaid in October 2016.
The bank loans and overdrafts are repayable as follows:
In one year or less
Between one and two years
Between two and five years
The principal commitments of the Group under finance leases are repayable as follows:
Plant, equipment and vehicles:
In one year or less
Between one and two years
Between two and five years
The minimum lease payments of the Group under finance leases are as follows:
In one year or less
Between one and two years
Between two and five years
At 31 December 2016
In one year or less
Between one and two years
Between two and five years
At 31 December 2015
2016
£’000
1,129
790
1,580
3,499
2016
£’000
163
91
127
381
2015
£’000
1,424
750
222
2,396
2015
£’000
139
129
96
364
Present lease
value
£’000
Interest
£’000
Minimum lease
payments
£’000
163
91
127
381
139
129
96
364
5
3
2
10
10
6
3
19
168
94
129
391
149
135
99
383
63
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
18. Provisions
At 1 January 2016
Reclassification
Charge to the income statement
Utilised in the year
Exchange
At 31 December 2016
Current liabilities
Non-current liabilities
Property
dilapidation
provision
£’000
Restructuring
provision
£’000
Insurance
premium
provision
£’000
12
–
–
(12)
–
–
–
–
–
100
117
–
(66)
–
151
151
–
151
230
(117)
38
(35)
2
118
77
41
118
Total
£’000
342
–
38
(113)
2
269
228
41
269
Reorganisation costs following the disposal of the former ElecoBuild businesses and the restructuring of head office together with part of
the overseas software operations are reported under the restructuring provision.
The expected ongoing cost of the professional indemnity run-off insurance premiums relating to the former ElecoBuild businesses and an
excess professional indemnity premium on a possible claim in Sweden is included under the insurance premium provision.
At 1 January 2015
Reclassification
Charge to the income statement
Utilised in the year
At 31 December 2015
Current liabilities
Non-current liabilities
19. Accruals and Deferred Income
Accruals
Deferred income
Property
dilapidation
provision
£’000
Restructuring
provision
£’000
Insurance
premium
provision
£’000
12
–
–
–
12
12
–
12
40
20
40
–
100
100
–
100
310
(20)
10
(70)
230
91
139
230
Total
£’000
362
–
50
(70)
342
203
139
342
2016
£’000
1,602
4,401
6,003
2015
£’000
1,360
3,708
5,068
Deferred income represents income from software maintenance and support contracts and is taken to revenue in the income statement
on a straight line basis in line with the service and obligations over the term of the contract.
64
Elecosoft plc Annual Report and Accounts 2016
20. Deferred Tax
At 1 January 2016
Reclassification
Acquisition of business
(Credit)/charge to the income statement
Exchange differences
At 31 December 2016
At 1 January 2015
Charge to the income statement
Exchange differences
At 31 December 2015
Temporary differences
Non-deductible
intangible
assets
£’000
332
20
241
(58)
–
535
275
57
–
332
Accelerated
capital
allowances
£’000
(123)
–
–
63
–
(60)
(147)
24
–
(123)
Other
£’000
33
(20)
–
77
5
95
34
–
(1)
33
Total
£’000
242
–
241
82
5
570
162
81
(1)
242
The charge to the Consolidated Income Statement comprises a charge to continuing operations of £82,000 (2015: £81,000). The
acquisition of business represents the deferred tax on the valuation of the acquired customer relationships and software.
Deferred tax on temporary differences has been calculated at the rate of 19.0 per cent (2015: 20.0 per cent).
Deferred tax liabilities are presented as non-current in the consolidated balance sheet. Deferred tax unprovided in respect of losses in UK
subsidiaries is £347,000 (2015: £390,000) due to the unpredictability of future profit streams against which these losses may be offset.
These losses may be carried forward indefinitely.
21. Called up share capital
Authorised:
2016
Nominal
value
£’000
2015
Nominal
value
£’000
85,000,000 (2015: 85,000,000) ordinary shares of 1 pence each (2015: 1 pence each)
850
850
Allotted, called up and fully paid:
77,089,350 (2015: 74,867,127) ordinary shares of 1 pence each (2015: 1 pence each)
771
749
The increase in called up and fully paid share capital in the year relates to the acquisition of Integrated Computing and Office Networking
Limited in October 2016 that was partly funded by issuing 2,222,223 of consideration shares.
22. Share-based payments
The Company operates one share scheme and options outstanding at 31 December 2016 over ordinary shares granted under the
scheme were as follows:
Date awarded
13 February 2015
27 October 2016
Vesting dates
Number of
ordinary shares
Earliest
Latest
300,000
1 February 2018
12 February 2025
750,000
1 June 2019
26 October 2026
1,050,000
weighted average
remaining contractual life
(months)
84
89
88
65
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
22. Share-based payments continued
Share awards were made under the Company’s Long Term Incentive Plan (LTIP) during the year amounting to 750,000 shares at an
exercise price of 28.70 pence per share and a fair value of £78,000 was calculated at the grant date and is used as a basis for charging
the income statement. Of the 900,000 options awarded during 2015, 600,000 lapsed in the year as a result of the employee leaving
the business.
During the year, a total of 750,000 share options were granted to the Executive Directors and are exercisable after 2.6 years (refer to the
Directors’ Report on page 33), subject to certain performance criteria being achieved. The criteria include (i) revenue for the twelve
months ended 31 December 2018 is at least £21.4m and (ii) EPS for the twelve months ended 31 December 2018 is at least 2.76 pence.
In the event that the employee leaves within the initial 2.6 year period he may (depending upon the timing and circumstances of his
departure) be entitled to retain some of his options, but only if certain yearly earnings per share targets have at that time been met. The
options are exercisable until 26 October 2026, ten years after the date of grant.
The options awarded in 2015 are exercisable after 3.0 years, subject to certain performance criteria being achieved, whereby the
Company’s audited earnings per share for the year ended 31 December 2017 must be at least 22.5 per cent. higher than the Company’s
audited earnings per share for the year ended 31 December 2014. In the event that the employee leaves within the three year period he
may (depending upon the timing and circumstances of his departure) be entitled to retain some of his options, but only if certain yearly
earnings per share targets have at that time been met. The options are exercisable until 12 February 2025, ten years after the date
of grant.
Details of the number of options over ordinary shares outstanding during the year are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
at 31 December 2016
at 31 December 2015
Weighted
average fair
value per
share
20.8
28.0
–
20.8
25.9
Weighted
average fair
value per
share
–
20.8
–
–
Number
–
900,000
–
–
900,000
20.8
–
Number
900,000
750,000
–
(600,000)
1,050,000
–
The options outstanding at 31 December 2016 had a weighted average exercise price of 26.4 pence and weighted average remaining
contractual life of 88 months.
The expense recognised by the Group for share-based payments under the LTIP scheme in respect of employee services during the year
ended 31 December 2016 was £13,000 (2015: £20,000).
An appropriate financial model is used to value the share options and the key assumptions used for the outstanding awards are
shown below:
Share price at grant date
Fair value per share
Exercise price per share
% Expected to vest (at date of grant)
Expected life (years)
Dividend yield
Fair value
66
2016
27.75p
28.0p
28.70p
98%
2.6
2015
20.5p
20.8p
20.75p
98%
3.0
1.80%
4.17%
£78,000
£73,000
Elecosoft plc Annual Report and Accounts 2016
23. Acquisitions
On 17 October 2016 the Group acquired the share capital of Integrated Computing and Office Networking Limited (‘Icon’), enhancing its
range of building information software, for a total consideration of £2,342,000. The consideration comprised the payment of £1,800,000
in cash from the Group’s existing resources (less a working capital adjustment of £58,000) and £600,000 in consideration shares.
An analysis of the fair value of the Icon net assets acquired and the fair value of the consideration paid is set out below:
Customer relationships
Software
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Accruals and deferred income
Deferred tax
Net assets
Goodwill
Total consideration
Satisfied by:
Cash
Shares
Book value
£’000
Fair value
adjustments
£’000
Provisional fair
value
£’000
–
28
28
224
110
390
(80)
(48)
(105)
–
(233)
157
748
453
–
–
–
748
481
28
224
110
1,201
1,591
–
–
–
(241)
(241)
960
(80)
(48)
(105)
(241)
(474)
1,117
1,225
2,342
1,742
600
2,342
Customer relationships relates to the value attributed to the customer list acquired as part of the acquisition of the business.
Goodwill contains certain intangible assets that cannot be individually, separately and reliably measured from the acquiree due to their
nature. These items include the value of the management and workforce together with synergies that are expected to be gained from
being part of the Group.
In the period since acquisition, Icon contributed £9,000 to the Group’s operating profit. It utilised £nil for purchase of property plant and
equipment and £nil for financing activities.
If the acquisition had been completed at the beginning of the reporting period, turnover from continuing operations would have been
£685,000 higher, and profit from continuing operations £153,000 higher.
On 4 January 2016 the Group acquired the business and assets of Asta Development BV, a reseller based in the Netherlands, for a total
consideration of £68,000. The consideration comprised the payment of £48,000 in cash from the Group’s existing resources on
completion and £20,000 deferred consideration payable on the successful collection of annual maintenance renewals.
67
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
23. Acquisitions continued
An analysis of the fair value of the Asta Development BV net assets acquired and the fair value of the consideration paid is set out below:
Customer relationships
Software
Property, plant and equipment
Net assets
Goodwill
Total consideration
Satisfied by:
Cash
Deferred consideration
Exchange difference
Book value
£’000
Fair value
adjustments
£’000
Provisional fair
value
£’000
–
–
3
3
3
34
14
–
48
48
34
14
3
51
51
20
71
48
20
3
71
Customer relationships relates to the value attributed to the customer list acquired as part of the acquisition of the business.
Goodwill contains certain intangible assets that cannot be individually, separately and reliably measured from the acquiree due to their
nature. These items include the value of the management and workforce together with synergies that are expected to be gained from
being part of the Group.
In the period since acquisition, the business made a loss of £41,000. It utilised £3,000 for purchase of property, plant and equipment and
£nil for financing activities.
24. Financial instruments
(a) Financial assets and liabilities
The carrying amount and fair value of financial assets and liabilities at the period end are set out below:
Loans and receivables:
Cash and cash equivalents
Trade and other receivables
Loans and receivables
Financial liabilities:
Trade and other payables
Bank loans and overdrafts
Accruals
Non-current liabilities
Financial liabilities held at amortised cost
2016
£’000
2015
£’000
2,576
3,252
5,828
1,029
3,499
1,603
–
6,131
1,957
2,520
4,477
809
2,396
1,360
13
4,578
The carrying value of the Groups’ financial assets and liabilities are considered to approximate their respective fair values.
68
Elecosoft plc Annual Report and Accounts 2016
(b) Interest rate and currency profile of financial assets and liabilities
Financial assets and liabilities comprise interest-bearing and non-interest-bearing assets and liabilities.
The interest rate and currency profiles of the Groups’ financial assets and liabilities are set out below:
Sterling
Euro
Swedish Krona
US Dollar
South African Rand
Other
At 31 December 2016
Sterling
Euro
Swedish Krona
US Dollar
South African Rand
Other
At 31 December 2015
Financial liabilities
Financial assets
Floating rate
£’000
Total
£’000
Floating rate
£’000
4,362
269
1,478
22
–
–
6,131
2,977
189
1,399
7
–
6
4,362
269
1,478
22
–
–
6,131
2,977
189
1,399
7
–
6
823
1,611
2,823
408
56
107
5,828
527
1,104
2,680
95
42
29
Total
£’000
823
1,611
2,823
408
56
107
5,828
527
1,104
2,680
95
42
29
4,578
4,578
4,477
4,477
Net financial
(assets)/
liabilities
£’000
3,539
(1,342)
(1,345)
(386)
(56)
(107)
303
2,450
(915)
(1,281)
(88)
(42)
(23)
101
There are no fixed rate financial assets.
The interest rate risk profile of the Groups’ finance leases at the period end is set out below:
Sterling
Euro
Swedish Krona
Weighted average
period
Weighted average
interest rate
2016
Years
0.9
n/a
1.8
2015
Years
1.3
n/a
2.0
2016
%
5.84
n/a
2.44
2015
%
5.77
n/a
5.09
The Group finances its operations through a mixture of retained profits, a term loan and a bank overdraft. The interest rate on the term
loan and the overdraft is 2.75 per cent over the Bank of England base rate.
69
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
24. Financial instruments continued
(c) Currency profile of net foreign currency monetary assets and liabilities
The table below shows the net unhedged monetary assets/(liabilities) of the Group that are not denominated in the functional currency of
the operating unit and which therefore give rise to exchange gains and losses in the income statement.
Functional currency of Group operation
Sterling
£’000
Euro
£’000
Swedish Krona
£’000
Sterling
Euro
Swedish Krona
At 31 December 2016
Sterling
Euro
Swedish Krona
At 31 December 2015
–
–
–
–
–
–
(5)
(5)
24
–
179
203
(2)
–
71
69
–
–
–
–
–
–
–
–
US Dollar
£’000
394
–
(1)
393
24
–
1
25
Other
£’000
9
–
91
100
10
–
19
29
Total
£’000
427
–
269
696
32
–
86
118
(d) Financial risk: objectives, policies and strategies
The Groups’ interest rate risks and currency risks are managed centrally within policies approved by the Board. The objective of these
policies is to mitigate the impact of movements in interest rates and currency rates on the consolidated results of the Group. In addition to
these policies, the Groups’ liquidity risk policies, approved by the Board, ensure appropriate funding is made available across the Group
and is managed centrally.
The net interest payable for the year from continuing operations was £90,000 compared to £120,000 last year. No speculative
transactions are undertaken.
At present there is no policy to hedge the Groups’ currency exposures arising from the translation of the Groups’ overseas net assets or
the effect of exchange rate movements on the Groups’ overseas earnings.
(e) Market risk: sensitivities
A sensitivity analysis for financial assets and liabilities affected by market risk is set out below. Each risk is analysed separately and
shows the sensitivity of financial assets and liabilities when a certain parameter is changed. The sensitivity analysis has been performed
on period end balances each year and therefore is not representative of transactions throughout the year. The rates used are based on
historical trends and, where relevant, projected forecasts.
70
Elecosoft plc Annual Report and Accounts 2016 (i) Currencies
The Group is exposed to currency risk in relation to the value of its financial assets and liabilities that are denominated in currencies
other than Sterling (see note 24b), arising from fluctuations in exchange rates. The Groups’ mitigation of its currency risk is set out on
page 21 of the Strategic Report. The table below shows the impact on the value of the Groups’ reported net financial assets at 31 December
of exchange rates either strengthening or weakening by 10 per cent against Sterling and the impact this would have on the reported profit or
loss and equity. The Groups’ reported equity would be £172,000 lower (2015: £190,000) if Sterling strengthen by 10 per cent and £211,000
higher (2015: £232,000) if Sterling weakened by 10 per cent.
Effect of change in
Sterling +/-10%
Denominated in Sterling
Not denominated in Sterling
Total net financial liabilities
Effect of change in
Sterling +/-10%
Denominated in Sterling
Not denominated in Sterling
Total net financial liabilities
Net financial (assets)/liabilities:
Profit/(loss)
Equity
2016
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
3,539
(3,236)
303
–
294
294
–
(359)
(359)
–
(79)
(79)
–
96
96
–
(172)
(172)
–
211
211
Net financial (assets)/liabilities:
Profit/(loss)
Equity
2015
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
2,450
(2,349)
101
–
217
217
–
(266)
(266)
–
(20)
(20)
–
24
24
–
(190)
(190)
–
232
232
(ii) Interest rates
Changes in market interest rates expose the Group to the risk of fluctuations in the cash flow relating to its financial assets and liabilities,
some of which attract interest at floating rates (see note 24b above). Based upon the interest rate profile of the Groups’ financial assets
and liabilities as at 31 December, the table below shows the impact of a one percentage point change in the market interest rates on the
Groups’ profit and equity.
Continuing operations
Net finance cost
Continuing operations
Net finance cost
Effect of increase in interest rates of 1%
Effect of decrease in interest rates of 1%
Rate +1%
£'000
Profit/(loss)
£'000
(90)
(21)
(21)
Equity
£'000
(21)
Rate -1%
£'000
Profit/(loss)
£'000
29
29
Equity
£'000
29
Effect of increase in interest rates of 1%
Effect of decrease in interest rates of 1%
2016
As reported
£'000
2015
As reported
£'000
Rate +1%
£'000
Profit/(loss)
£'000
(120)
(28)
(28)
Equity
£'000
(28)
Rate -1%
£'000
Profit/(loss)
£'000
31
31
Equity
£'000
31
71
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Consolidated Financial Statements continued
24. Financial instruments continued
(f) Liquidity risk
The Group monitors its liquidity to maintain a sufficient level of undrawn committed debt facilities together with central management of
the Groups’ cash resources to minimise liquidity risk.
Trade and other payables
Bank loans and overdraft
Obligations under finance leases
At 31 December 2016
Trade and other payables
Bank loans
Obligations under finance leases
Non-current liabilities
At 31 December 2015
Fair
Value
£’000
653
3,693
391
4,737
455
2,478
383
13
3,329
3 months
or less
£’000
653
568
42
1,263
455
204
37
–
696
3 to 6 months
£’000
6 to 12 months
£’000
Between 1 and
2 years
£’000
Between 2 and
4 years
£’000
–
219
42
261
–
202
37
–
239
–
433
84
517
–
1,072
75
–
1,147
–
848
94
942
–
776
135
13
924
–
1,625
129
1,754
–
224
99
–
323
The amounts for bank loans and overdraft and the obligations under finance leases are inclusive of interest payable in the period. The
Groups’ facilities with Barclays Bank plc are explained on page 27 of the Financial Review.
At 31 December, the Group had available to it the following committed borrowing facilities expiring in the periods shown:
Expiring in one year or less
Expiring between one and two years
Expiring between two and five years
2016
£’000
1,790
790
1,580
4,160
2015
£’000
1,750
750
222
2,722
(g) Credit risk
Group policies are aimed at minimising losses due to customer payment default. Deferred payment terms are only granted to those
customers who satisfy creditworthiness criteria and individual exposures to customers are monitored.
The maximum exposure to credit risk for uninsured trade receivables only at the reporting date by geographic region is as follows:
2016
£’000
702
2015
£’000
522
1,592
1,371
92
490
248
176
290
68
3,124
2,427
UK
Scandinavia
Germany
Rest of Europe
Rest of World
72
Elecosoft plc Annual Report and Accounts 2016
(h) Capital risk
The Groups’ objective is to minimise its cost of capital by optimising the efficiency of its capital structure, being the balance between
equity and debt. The objective is subject always to an overriding principle that capital must be managed to ensure the Groups’ ability to
continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.
Covenants have been made to the bank is respect of three elements: EBITA to gross financing costs, net borrowings to EBITDA and cash
flow to debt service. These covenants are tested quarterly.
The Group uses a range of financial metrics to monitor the efficiency of its capital structure, including its net debt to EBITDA and ensures
that its capital structure provides sufficient financial strength to allow it to secure access to debt finance at reasonable cost.
At 31 December 2016, the continuing operations EBITDA for the year was £2,432,000 (2015: £1,795,000) and net borrowings were
£1,304,000 (2015: £803,000).
25. Contingent liabilities
It is the Groups’ policy to make specific provisions at the balance sheet date for all liabilities which, in the opinion of the Directors,
represent a present obligation and outflow of resources to be probable at the balance sheet date.
The Directors have considered all the facts surrounding any open claims and any pending litigation against the Group at 31 December
2016 and have concluded that no material loss is likely to accrue from any such unprovided claims.
26. Related party transactions
Transactions between Group undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in
this note.
The Directors of the Company had no material transactions with the Company during the year, other than as a result of service
agreements. An amount of £43,000 (2015: £35,000) was paid to JHB Ketteley & Co Limited under a lease for occupation by the Group of
66 Clifton Street, London, EC2A 4HB and £5,000 (2015: £5,000) for a contribution to the office costs at Burnham-on-Crouch. An amount
of £12,000 was paid to S Lang for employee services during the year, who is a Non-Executive Director.
27. Post balance sheet events
There were no post balance sheet events to report.
73
Strategic ReportGovernanceFinancial StatementsOverview Company Statement of Changes in Equity
for the year ended 31 December 2016
At 1 January 2016
Dividends
Share-based payments
Elimination of cancelled share based payments
Issue of share capital
Transactions with owners
Profit for the period
Total comprehensive income for the period
Share
capital
£’000
749
–
–
–
22
22
–
–
Share
premium
£’000
Other
reserve
£’000
Retained
earnings
£’000
Total
£’000
–
–
–
–
578
578
–
–
(124)
2,951
3,576
–
13
(14)
–
(1)
–
–
(111)
–
–
–
(111)
711
711
(111)
13
(14)
600
488
711
711
At 31 December 2016
771
578
(125)
3,551
4,775
Share
capital
£’000
7,487
–
4,086
–
Share
premium
£’000
7,923
–
–
–
(10,824)
(7,923)
–
–
Other
reserve
£’000
3,860
20
(4,086)
82
–
–
Retained
earnings
£’000
(15,060)
–
–
(82)
18,747
–
(6,738)
(7,923)
(3,984)
18,665
–
–
749
–
–
–
–
–
(654)
(654)
(124)
2,951
3,576
Total
£’000
4,210
20
–
–
–
–
20
(654)
(654)
At 1 January 2015
Share-based payments
Capitalisation of merger reserve
Reclassification
Capital reduction
Issue of share capital
Transactions with owners
Loss for the period
Total comprehensive income for the period
At 31 December 2015
74
Elecosoft plc Annual Report and Accounts 2016
Company Balance Sheet
At 31 December 2016
Fixed assets
Intangible assets
Tangible assets
Investments
Debtor due after more than one year
Current assets
Debtors
Creditors: amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Provisions for liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserve
Profit and loss account
Shareholders’ equity
Notes
2
3
4
5
6
7
8
9
10
11
2016
£’000
66
9
1,099
15,717
16,891
1,776
1,776
2015
£’000
28
6
1,099
13,585
14,718
1,257
1,257
(11,303)
(11,095)
(9,527)
7,364
(2,370)
(219)
4,775
771
578
(125)
3,551
4,775
(9,838)
4,880
(972)
(332)
3,576
749
–
(124)
2,951
3,576
The financial statements of Elecosoft plc, registered number 00354915, on pages 74 to 83, were approved by the Board of Directors on
24 March 2017 and signed on its behalf by:
John Ketteley
Executive Chairman
75
Strategic ReportGovernanceFinancial StatementsOverview
Statement of Company Accounting Policies
The Company financial statements have been prepared in accordance with applicable UK accounting standards including Financial
Reporting Standard 102, the financial Reporting Standard applicable to the UK and Ireland, and with the Companies Act 2006.
A summary of the more important accounting policies, which have been applied consistently, is set out below:
Basis of accounting
The financial statements are prepared in accordance with the historical cost convention and are presented in Pounds Sterling.
The Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own Income Statement in
these financial statements. In addition, the Company has adopted the following disclosure exemptions under FRS 102:
• requirement to present a statement of cash flows and related notes; and
• financial instrument disclosures.
Significant accounting judgements and estimates
Application of the Company’s accounting policies in conformity with generally accepted accounting principles requires judgements and
estimates that affect the amounts of assets, liabilities, revenues and expenses reported in the financial statements. These judgements
and estimates may be affected by subsequent events or actions such that results may ultimately differ from the estimates.
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a
significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are
discussed below.
Inter-Company loan interest rates
The Company has interCompany loan balances with certain other subsidiary companies. These balances principally relate to the transfer
of funds between Group companies and the balances are subject to interest calculated on a daily basis. The Directors estimate an
appropriate market rate of interest that is applied to the interCompany loan balances after consideration of local interest rates and the
business risk of the borrower. Where the interest rate on such loans is considered to have been at below market rates, an adjustment is
made to the carrying value of the loan with a corresponding adjustment to investments in subsidiaries. The difference will subsequently
unwind through the profit and loss as interest receivable over the period of the loan. The estimation of the appropriate market rate is
therefore a key judgement.
Recoverability of interCompany investments and loans
InterCompany investments and loans to subsidiary companies are stated at their carrying value under fixed assets in the Balance Sheet.
The carrying value of the interCompany investments and loans are determined after consideration of the historical financial performance
and future financial projections of the subsidiary Company and the recoverability of the investments and loans. The judgement of the
carrying value of interCompany investments and loans is therefore a key judgement.
Intangible and tangible fixed assets
Tangible fixed assets are stated at their purchase cost, together with any incidental costs of acquisition, net of depreciation and provision
for impairment.
The Company owns intellectual property both, in its software tools and software products. Intellectual property acquired is capitalised at
cost and is amortised on a straight-line basis over its expected useful life not exceeding twelve years. The current intellectual property
assets held by the Company were attributed a useful life of five years and this amortisation period has been used in the accounts.
Depreciation is provided on all tangible fixed assets, except freehold and leasehold land, at annual rates calculated to write off the cost,
less the estimated residual value of each asset, over its expected useful life as follows:
Plant, equipment and vehicles
– from two to ten years.
Investments in subsidiaries
Fixed asset investments are shown at cost, together with any incidental costs of acquisition, less any provision for impairment. Provisions
are reviewed and adjusted annually to reflect any changes in the carrying value of the underlying subsidiary investments.
Finance and operating leases
The capital element of finance lease commitments is shown as obligations under finance leases. The capital element of finance lease
rentals is applied to reduce the outstanding obligations under finance leases. The interest element of the rental obligations is charged to
the profit and loss account over the period of the lease in proportion to the reducing capital balance outstanding. Amounts payable under
operating leases are recognised in the profit and loss account on a straight-line basis over the term of the lease.
76
Elecosoft plc Annual Report and Accounts 2016 Share-based payments
The Company issues share options to employees from time to time. Under IFRS, the equity-settled, share-based payment awards
are valued at fair value at inception and this cost is recognised over the option vesting period of three years. The Board has used an
appropriate model to estimate the fair value of the options. Various assumptions affect the value of the options and the Board has
considered these assumptions in order to derive an appropriate charge for the cost of the options. The key assumptions used to
derive the charge include the probability of performance achievement and the expected future dividend yield of the shares.
Provisions
A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past
event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
Interest-bearing loans and borrowings
All loans and borrowings are recognised at proceeds received less directly attributable transaction costs. Borrowing costs are recognised
as an expense over the period based on the maturity of the underlying instrument.
InterCompany loans that are not considered to be at market rate are adjusted to their fair value. The difference between the transaction
value and the fair value of the interCompany loans are recorded as an investment in the Balance Sheet. The difference unwinds to the
profit and loss as interest receivable over the period of the loan.
Foreign exchange
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date. Any gain or loss
arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain/loss in the profit and
loss account.
Taxation
Current UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been
enacted or substantially enacted by the balance sheet date.
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where
transactions or events have occurred at the date will result in an obligation to pay more tax or a right to pay less or to receive more tax,
with the following exceptions:
• provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiary undertakings only to
the extent that, at the balance sheet date, dividends have been accrued as receivable; and
• deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Employee Share Ownership Trust
Equity shares in Elecosoft plc held by the Employee Share Ownership Trust (“ESOT”) are treated as a deduction from the issued and
weighted average number of shares. The consideration paid is deducted from equity until the shares are cancelled, reissued or disposed
of. When such shares are subsequently sold or reissued, any consideration received, net of related transaction costs and income tax
effects, is included in equity attributable to the Company’s equity holders.
77
Strategic ReportGovernanceFinancial StatementsOverview Notes to the Company Financial Statements
1. Profit for the year
As permitted by section 408 of the Companies Act 2006, the Parent Company’s profit and loss account has not been included in these
financial statements. The Parent Company’s profit for the financial year was £711,000 (2015: loss £654,000).
Intellectual
property
£’000
1,679
49
(496)
1,232
1,651
11
(496)
1,166
66
28
Total
£’000
258
7
(155)
110
252
4
(155)
101
9
6
Leasehold land
and buildings
£’000
Plant,
equipment and
vehicles
£’000
19
–
(19)
–
19
–
(19)
–
–
–
239
7
(136)
110
233
4
(136)
101
9
6
2. Intangible fixed assets
Cost:
At 1 January 2016
Additions
Disposals
At 31 December 2016
Accumulated amortisation and impairment:
At 1 January 2015
Amortisation charge for the year
Disposals
At 31 December 2016
Net book value at 31 December 2016
Net book value at 31 December 2015
3. Tangible fixed assets
Cost:
At 1 January 2016
Additions
Disposal
At 31 December 2016
Accumulated depreciation:
At 1 January 2016
Depreciation charge for the year
Disposals
At 31 December 2016
Net book value at 31 December 2016
Net book value at 31 December 2015
78
Elecosoft plc Annual Report and Accounts 2016
4. Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Cost:
At 1 January 2016
At 31 December 2016
Accumulated provision:
At 1 January 2016
At 31 December 2016
Net book value at 31 December 2016
Net book value at 31 December 2015
Shares at cost
£’000
Investments
£’000
Total
£’000
21,076
21,076
728
728
21,804
21,804
20,705
20,705
–
–
20,705
20,705
371
371
728
728
1,099
1,099
Investments represent a fair value adjustment to a particular interCompany loan receivable and the amount represents the benefit passed
to that subsidiary as a result of the loan being at below market rate.
The carrying value and recoverability of investments in discontinued ElecoBuild operations were fully provided against at
31 December 2016.
The trading subsidiary undertakings are unlisted and wholly owned and set out in the table below. They are registered in England and
Wales, where their operations are located in the UK. Overseas subsidiary undertakings are incorporated in their country of operations.
All other subsidiary undertakings are dormant and are listed on page 85.
Company
Elecosoft UK Limited
Eleco Software Limited
Integrated Computing & Office Networking Ltd
Elecosoft Consultec AB
Asta Development GmbH
Eleco Software GmbH
ESIGN® Software GmbH
Elecosoft LLC
Elecosoft BV
Eleco Ltd
Country of
operations
Class of share
capital held
Proportion held
within Group
UK
UK
UK
Ordinary
Ordinary
Ordinary
Sweden
Ordinary
Germany
Ordinary
Germany
Ordinary
Germany
Ordinary
US
Ordinary
Netherlands
Ordinary
UK
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of business
Software and services
Software
Software and services
Software and services
Software and services
Software and services
Software and services
Software
Software and services
Holding Company
The ordinary shares in the above companies are held through an intermediate holding Company except ESIGN® Software GmbH.
79
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Company Financial Statements continued
5. Debtor due after more than one year
Amounts due from subsidiary undertakings
6. Debtors
Trade debtors
Other debtors
Prepayments and accrued income
Deferred tax
Amounts due from subsidiary undertakings
7. Creditors: amounts falling due within one year
Bank loans and overdrafts
Trade creditors
Other creditors
Accruals and deferred income
Other taxation and social security
Current tax
Amounts due to subsidiary undertakings
8. Creditors: amounts falling due after more than one year
The Groups’ facilities with Barclays Bank plc are explained on page 27 of the Financial Review.
Bank loans
Bank loans and overdrafts are repayable as follows:
In one year or less
Between one and two years
Between two and five years
2016
£’000
15,717
15,717
2015
£’000
13,585
13,585
2016
£’000
10
22
92
25
1,627
1,776
2016
£’000
1,542
214
35
233
(56)
59
2015
£’000
16
10
68
31
1,132
1,257
2015
£’000
1,639
159
36
116
(10)
40
9,276
11,303
9,115
11,095
2016
£’000
2,370
2,370
2016
£’000
1,542
790
1,580
3,912
2015
£’000
972
972
2015
£’000
1,639
750
222
2,611
80
Elecosoft plc Annual Report and Accounts 2016
9. Provisions for liabilities
At 1 January 2016
Reclassification
Charge to the profit and loss account
Utilised in the year
At 31 December 2016
At 31 December 2015
Property
dilapidation
provision
£’000
Restructuring
provision
£’000
Insurance
premium
provision
£’000
12
–
–
(12)
–
12
100
117
–
(66)
151
100
220
(117)
–
(35)
68
220
Total
£’000
332
–
–
(113)
219
332
Further information on the details of the provisions is set out in note 18 of the consolidated accounts.
10. Called up share capital
Authorised:
2016
Nominal
value
£’000
2015
Nominal
value
£’000
85,000,000 (2015: 85,000,000) ordinary shares of 1 pence each (2015: 1 pence each)
850
850
Allotted, called up and fully paid:
77,089,350 (2015: 74,867,127) ordinary shares of 1 pence each (2015: 1 pence each)
771
749
The increase in called up and fully paid share capital in the year relates to the acquisition of Integrated Computing and Office Networking
Limited in October 2016 that was partly funded by issuing 2,222,223 of consideration shares.
11. Share-based payments
The Company operates one share scheme and options outstanding at 31 December 2016 over ordinary shares granted under the
scheme were as follows:
Date awarded
13 February 2015
27 October 2016
Vesting dates
Number of
ordinary shares
Earliest
Latest
300,000
1 February 2018
12 February 2025
750,000
1 June 2019
26 October 2026
1,050,000
weighted
average
remaining
contractual life
(months)
84
89
88
Share awards were made under the Company’s Long Term Incentive Plan (LTIP) during the year amounting to 750,000 shares at an
exercise price of 28.70 pence per share and a fair value of £78,000 was calculated at the grant date and is used as a basis for charging
the income statement. Of the 900,000 options awarded during 2015, 600,000 lapsed in the year as a result of the employee leaving
the business.
During the year, a total of 750,000 share options were granted to the Executive Directors and are exercisable after 2.6 years (refer to the
Directors’ Report on page 33), subject to certain performance criteria being achieved. The criteria include (i) revenue for the twelve
months ended 31 December 2018 is at least £21.4m and (ii) EPS for the twelve months ended 31 December 2018 is at least 2.76 pence.
In the event that the employee leaves within the initial 2.6 year period he may (depending upon the timing and circumstances of his
departure) be entitled to retain some of his options but only if certain yearly earnings per share targets have at that time been met. The
options are exercisable until 26 October 2026, ten years after the date of grant.
81
Strategic ReportGovernanceFinancial StatementsOverview
Notes to the Company Financial Statements continued
11. Share-based payments continued
The options awarded in 2015 are exercisable after 3.0 years, subject to certain performance criteria being achieved, whereby the
Company’s audited earnings per share for the year ended 31 December 2017 must be at least 22.5 per cent higher than the Company’s
audited earnings per share for the year ended 31 December 2014. In the event that the employee leaves within the three year period he may
(depending upon the timing and circumstances of his departure) be entitled to retain some of his options, but only if certain yearly earnings
per share targets have at that time been met. The options are exercisable until 12 February 2025, ten years after the date of grant.
Details of the number of options over ordinary shares outstanding during the year are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
at 31 December 2016
at 31 December 2015
Weighted
average fair
value per
share
20.8
28.0
–
20.8
25.9
Weighted
average fair
value per
share
–
20.8
–
–
Number
–
900,000
–
–
900,000
20.8
–
Number
900,000
750,000
–
(600,000)
1,050,000
–
The options outstanding at 31 December 2016 had a weighted average exercise price of 26.4 pence and weighted average remaining
contractual life of 88 months.
The expense recognised by the Company for share-based payments under the LTIP scheme in respect of employee services during the
year ended 31 December 2016 was £13,000 (2015: £20,000).
An appropriate financial model is used to value the share options and the key assumptions used for the outstanding awards are
shown below:
Share price at grant date
Fair value per share
Exercise price per share
% Expected to vest (at date of grant)
Expected life (years)
Dividend yield
Fair value
2016
27.75p
28.0p
28.70p
98%
2.6
2015
20.5p
20.8p
20.75p
98%
3.0
1.80%
4.17%
£78,000
£73,000
12. Reserves
The other reserve carried forward includes the shares in the Company held by the Employee Share Ownership Trust and the share-based
payments reserve. The share premium reserve represents the value of the consideration shares that were issued to fund the acquisition
of Icon Limited in October 2016.
The Employee Share Ownership Trust held 896,593 shares at 31 December 2016 with a market value of £269,000 (2015: £247,000) and
has waived its entitlement to dividends on ordinary shares held by it until such time as they are vested in employees.
82
Elecosoft plc Annual Report and Accounts 2016
13. Operating lease commitments
Leases expiring:
Within one year
Between two and five years
Property
2016
£’000
Other
2016
£’000
Property
2015
£’000
–
–
–
–
–
–
9
–
9
Other
2015
£’000
2
1
3
14. Related party transactions
The Company has taken advantage of the exemption granted by paragraph FRS102.33.1A not to disclose transactions with other Group
companies as all subsidiaries are wholly owned. The Directors of Elecosoft plc had no material transactions with the Company during the
year, other than as result of service agreements or as disclosed in the Directors’ Report. Details of the Directors’ remuneration are
disclosed in the Directors’ Report on page 32.
An amount of £43,000 (2015: £35,000) was paid to JHB Ketteley & Co Limited under a lease for occupation by the Group of 66 Clifton
Street, London EC2A 4HB and £5,000 (2015: £5,000) for a contribution to the office costs at Burnham-on-Crouch. An amount of £12,000
was paid to S Lang for employee services during the year, who is a Non-Executive Director.
83
Strategic ReportGovernanceFinancial StatementsOverview
Five Year Summary
Revenue
Software
Discontinued operations
Operating profit before amortisation of intangible assets and
exceptionals
Software
Amortisation of intangible assets
Exceptionals
Operating profit
Finance expense
Profit/(loss) before taxation
Taxation
Profit after taxation
Basic earnings per share (continuing operations)
Shareholders’ equity/(deficit)
Dividend per share
* As reported.
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
Year ended
31 December
2014
(restated)
£’000
Year ended
31 December
2013*
£’000
Year ended
31 December
2012*
£’000
17,795
15,260
–
1,400
15,172
1,312
16,318
16,144
15,779
18,398
2,546
1,621
1,416
1,357
1,261
(631)
(321)
1,594
(90)
1,504
(261)
1,243
1.7p
9,716
0.15p
(495)
–
1,126
(120)
1,006
(204)
802
1.1p
7,893
0.00p
(372)
(138)
906
(220)
686
(173)
513
0.8p
(376)
–
981
(357)
624
(174)
450
0.8p
(419)
(152)
690
(223)
467
(69)
398
0.7p
6,722
0.00p
(2,353)
0.00p
8,850
0.00p
84
Elecosoft plc Annual Report and Accounts 2016
The dormant subsidiary undertakings are unlisted and wholly owned and set out in the table below:
Company
Asta Group Limited
A Neely Limited
B H Forwarding Limited
Belcon Structures Limited
Bell & Webster Limited
Bell & Webster Roofing Limited
Citehow Limited
Consultec Group Limited
Consultec Limited
D G Metal Products Limited
Davis Flooring Systems Limited
Durable Fabricators Limited
Eleco Building Products Limited
Eleco Construction Group Limited
Eleco Creative Technology
Eleco Directors Limited
Eleco Distribution Services Limited
Eleco Engineering Limited
Eleco (DCS) Limited
Eleco (GN Software Services) Limited
Eleco (GNS UK) Limited
Eleco (MS) Limited
Eleco (PP) Limited
Eleco Limited
Eleco Media Limited
Eleco Rail Limited
Eleco Technology Limited
Elecoprecast Limited
Falconer Road Property Limited
Forma Communications Limited
Online Warehouse Limited
RB Fabrications (Norwich) Limited (H)
Stramit Industries Limited
Webster Homes (Southern) Limited
Webster Properties (Developments) Limited
Webster Properties (Hoddesdon) Limited
Webster Properties Limited
Consultec System AB
Consultec Arkitekter & Konstruktorer AB
Elecosoft (Pty) Limited
Country of
operations
Class of share
capital held
Proportion held
within Group
Nature of
business
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Sweden
Sweden
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Holding Company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding Company
Dormant
Dormant
Dormant
Dormant
Holding Company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding Company
Dormant
Dormant
Dormant
Holding Company
Dormant
Dormant
Dormant
Holding Company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
85
Strategic ReportGovernanceFinancial StatementsOverview Group Directory
Asta Development GmbH
Karlsruhe, Germany
T +49 (0) 721 95 250
E astagmbh@elecosoft.com
W www.astagmbh.elecosoft.com
Elecosoft Consultec AB
Skellefteå, Sweden
T +46 (0) 10 130 87 00
E se@elecosoft.com
W www.se.elecosoft.com
Elecosoft Pvt Limited
Bangalore, India
T +91 (0) 8041 467455
E
in@elecosoft.com
W www.in.elecosoft.com
ELECO Software GmbH
Hameln, Germany
T +49 (0) 5151 822 390
E de@elecosoft.com
W www.de.elecosoft.com
Integrated Computing and Office Networking Limited
Market Harborough, UK
ELECO Software Limited
Aldershot, UK
T +44 (0) 1858 468345
E
iconsystem@elecosoft.com
W www.elecosoft.com/iconsystem
T +44 (0) 1252 267780
E elecosoftwareuk@elecosoft.com
W www.softwareuk.elecosoft.com
Elecosoft UK Limited
Haddenham, UK
T +44 (0) 1844 261700
E uk@elecosoft.com
W www.uk.elecosoft.com
Elecosoft LLC
Denver, USA
T +1 855 553 2782
E us@elecosoft.com
W www.us.elecosoft.com
ESIGN Software GmbH
Hanover, Germany
T +49 (0) 511 856 14340
E esign@elecosoft.com
W www.esign.elecosoft.com
Elecosoft BV
Ede, Netherlands
T +31 (0) 30 272 9976
E nl@elecosoft.com
W www.nl.elecosoft.com
86
Elecosoft plc Annual Report and Accounts 2016 Notes
87
Notes
88
Elecosoft plc Annual Report and Accounts 2016 Elecosoft plc
Parkway House
Haddenham Business Park
Pegasus Way
Haddenham
Buckinghamshire
England HP17 8LJ
T +44 (0) 203 857 5210
E
info@elecosoft.com
W www.elecosoft.com
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