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Job No: 46561Proof Event: 15Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600
Overview
Introduction
Eleco plc (AIM: ELCO) is a
specialist international provider of
world-class software and related
services to the built environment
through its operating brands
Elecosoft, and Veeuze, from
centres of excellence in the UK,
Sweden, Germany, Netherlands,
and the USA.
The Company’s software solutions are
trusted by international customers and
used throughout the building lifecycle from
early planning and design stages through
to construction, interior fit out, asset
management and facilities management to
support project management, estimation,
visualisation, Building Information Modelling
(BIM) and property management.
Overview
00
Introduction
01 Highlights
Strategic Report
02 Chairman’s Statement
05 CEO Report
10 Our Purpose, Mission and Vision
12 Our Products and Services
14 Our Business Model
16 Review of Principal Risks
20 Section 172 Statement
25 Financial Review
Governance
28 Board of Directors
30
34
36
Corporate Governance Report
Audit Committee Report
Nomination Committee Report
38 Remuneration Committee Report
45 ESG Committee Report
48
Directors’ Report
Financial Statements
51
Independent Auditor’s Report
58 Consolidated Income Statement
59
Consolidated Statement of Comprehensive
Income
60
Consolidated Statement of Changes in Equity
61 Consolidated Balance Sheet
62
63
Consolidated Statement of Cash Flows
Significant Accounting Policies
74 Notes to the Consolidated Financial Statements
103 Company Statement of Changes in Equity
104 Company Balance Sheet
105 Statement of Company Accounting Policies
108 Notes to the Company Financial Statements
117 Five-Year Summary
118 Dormant Subsidiary Undertakings
119 Professional Advisors and Registered Offices
Download the digital
version of this report
www.eleco.com
Job No: 46561Proof Event: 15Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600
Highlights
Financial
Revenue
Of which: Recurring Revenue
EBITDA*
Adjusted EBITDA**
Operating profit
Profit before tax
Basic earnings per share (pence per share)
Free cash flow***
2021
£’000
2020
£’000
Change
27,344
25,232
15,424
14,186
7,182
7,251
4,099
3,926
3.3
6,675
7,003
4,151
3,889
3.9
4,751
5,516
+8%
+9%
+8%
+4%
-1%
+1%
-15%
-14%
*
EBITDA is defined as Earnings before Interest, Tax, Depreciation, Amortisation and Impairment of Intangible Assets
** Adjusted to exclude former Directors’ payments
***
Free cash flow represents cash generated in operations less purchase of intangible assets and property, plant and equipment, net of finance costs and tax
plus any proceeds from disposals of property, plant and equipment
Operational
• The introduction of subscription-based pricing
to new Building Lifecycle customers in Q4
2021 will lead to increased Recurring Revenue
and enhanced Lifetime Customer Value.
•
The successful merger of our UK Building
Lifecycle businesses and separately of our
German visualisation operations, providing
greater business development opportunities.
• Winner of the Megabuyte Quoted 25 award
for Best Performing Software Company in
Industrials.
• Winner of Project Management Software of
the Year at the UK Construction Computing
Awards.
01
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600OverviewStrategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021
Strategic Report
Chairman’s Statement
As an award-winning specialist provider of world-
class software to the £8.5bn built environment
market, Eleco is well-positioned to expand.
A year ago, we set out our refreshed strategy and
the last twelve months have been focused on setting
the foundations for further growth. It has been a truly
transformative year for Eleco. We are very much a
customer-focused organisation and have a clear
purpose and a values statement developed through
a truly interactive process with our people. A strong,
engaging culture is key to enable us to attract and
retain talent in such a competitive market.
I am pleased to report that our strategy is already
generating results, with our organic growth rate
increasing to 8 per cent (2020: -1 per cent),
underpinned by double-digit sales growth from our
core Building Lifecycle portfolio. This was achieved
at the same time as implementing our move to a
subscription licensing model for new customers in
the last quarter. Recurring revenue (subscription and
SaaS licences, maintenance and support contracts)
increased by 9 per cent to £15.4m.
We have maintained strong cash generation,
despite Covid-19 continuing to impact our ability
to undertake face to face sales and training, having
fully repaid monies given to Eleco through the UK
Government furlough scheme as well as clearing our
UK bank debt. We are now debt free after settling the
remaining £0.1m of subsidiary bank debt in Q1 2022.
We were delighted to win the Megabuyte Quoted 25
Award for best performing software company in the
industrials peer group in March 2022, showing the
strength of our overall financial performance.
Implementing our strategy for organic growth
We are aligning our business with clear customer
segment strategies and through product portfolio
alignment, driven by our Chief Product Officer (CPO)
Fredrik Pantze, who was appointed in April 2021, and
we have started on the journey to adapt our software
to become next generation cloud-based solutions.
Our aim is to help our customers reimagine their
businesses by creating software which allows them
to better collaborate, get faster access to data for
analytics and ensure interoperability. As a result, we
are seeing an increase in new customer wins away
from our competitors.
02
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
This has also been bolstered by the strengthening
demand for our products in our core regions where
we are in a strong position with Powerproject
being used for the master construction plan.
Collaboration is driving us to partner and share
data with other parties. As a result, we have formed
several partnerships and data integrations during
the last twelve months, as we continue to leverage/
understand our strong customer relationships.
With our move to subscription, we are more focused
on customer success through account management
and services. We believe that building on our
customer relationships will allow Eleco to better
support the management and leadership teams of
those organisations which are starting to look for an
integrated end to end approach.
Our new Chief Technology Officer, Luben Kirov, was
appointed in December 2021. This role has the remit
to bring together all the separate development teams,
break down the product silos and drive forward
our integrated technology roadmap in conjunction
with our CPO. Having started in February 2022,
we look forward to reporting on the results of this
appointment as we go through the current year.
From a customer perspective, digitalisation is
increasingly being recognised for its ability to manage
the complex supply chain and inflationary issues,
while rising pressures on companies to reduce
wastage provides another tailwind as regulation
around this increases. We are a well-known provider
of innovative technology for the construction and
built environment sectors, with 87 per cent of the top
100 UK construction contractors on our books. This
provides us with a strong and established platform for
growth and new contract wins.
The move to subscription-based pricing of our
products will benefit our customers with a lower
upfront cost for an enhanced product, as well as
creating increased value for our shareholders through
higher Recurring Revenue growth.
In the year, Eleco’s US business grew 16 per cent
predominantly through our reseller channel, which
the Company will continue to support. Following
this growth, the Executive team are refocusing on
potential strategic opportunities for expansion into
the US.
We continue our strategy to provide best of breed
software targeted at our chosen customer segments.
Board appointments and Environmental, Social
and Governance (ESG)
Aligned to the new strategy, I undertook a full skills
audit of the Board and in March we brought in Paul
Boughton as a NED, adding more technology PLC
experience to the business as well as additional
financial and acquisition expertise.
In a desire to refresh our Board and further improve
our corporate governance, this was followed by a
further extensive search to recruit the best candidates
for our other skills gaps. This led to two further
NED appointments in the summer, with Dr Annette
Nabavi and Mark Castle joining the Board in August
and September, respectively. Annette Nabavi is a
highly-qualified board director with more than 30
years’ experience in the technology, telecoms and
digital industries who brings additional expertise to
advise with the shift from a perpetual to SaaS licence
model, while Mark Castle is an experienced business
leader, bringing the voice of the customer to the
Board – a vital stakeholder group for Eleco - with his
wealth of experience in the Property, Construction,
Consultancy and Built Environment sectors.
Kevin Craig and David Dannhauser stepped down
from the Board at the end of August, and I would like
to take this opportunity to thank them both for the
immense contribution that they made to this business
throughout their tenure.
Paul Boughton took over as Chair of Audit and
Annette Nabavi took over as Chair of Remuneration.
Over the next twelve months, we plan to strengthen
our ESG disclosures, building on the steps taken
during 2021. With this in mind, we set up an ESG
Committee at the end of period under review, chaired
by Mark Castle. This will assist the Board in fulfilling
its oversight responsibilities regarding environmental,
health and safety, corporate social responsibility,
sustainability, customer satisfaction, employee
wellbeing and retention, corporate governance,
diversity, equity and inclusion. We look forward
to building our disclosure on these areas over the
months and years ahead as we develop our Net Zero
Strategy and our ESG Scorecard.
On 29 March 2021, Robert Tearle was appointed
as CFO as we launched our refreshed strategy.
On 7 February 2022, we announced that Robert
was resigning from the Board. This is obviously
disappointing for both the Company and for
Robert personally. We thank Robert for his valued
contribution to the planning of the steps needed for
the delivery of our move towards a SaaS environment
03
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Chairman’s Statement continued
We will also continue to strengthen our business in
our core markets and look for further opportunities
for meaningful expansion in the US. Additionally, we
will be proactively assessing the market for M&A
opportunities that will further place Eleco at the
forefront in assisting our customers to solve the future
challenges of the built environment.
By creating more value for our customers, we will be
increasing our Customer Lifetime Value, expanding
beyond our current users into the operations
management of our customer base. The importance
of our existing customers and growth opportunities
leads us to continue to focus on direct sales in our
core geographic regions.
2021 has been an exciting year for Eleco and I would
like to take this opportunity to thank our skilled
and hard-working team and valued customers for
their support over the past twelve months. With
the foundations set in place, we are well positioned
for continued growth and increased market share
through further product evolution and potential
acquisition opportunities, supported by favourable
market dynamics.
Serena Lang
Chairman
30 March 2022
for our most successful products. The process
to recruit a permanent CFO is underway. In the
meantime, we have Rose Clark, an experienced CFO,
covering the position.
Proposed Dividend
In light of Eleco’s resilient trading performance and
cash generation in 2021, the Board has decided to
recommend a final cash dividend 0.40 pence per
share.
Payment of the final dividend will follow approval
by shareholders at the AGM. The record date is the
close of business on 27 May 2022, with the ex-
dividend date being 26 May 2022.
Outlook
Eleco continues to be well-positioned in a very
exciting and attractive market as technology is
seen as the catalyst to meet the growing demands
of the building industry. Our customer base has
been facing unprecedented labour challenges and
escalating materials costs. Eleco’s software plays
a crucial role in mitigating these issues, driving
productivity for our customers, and enabling them to
better plan their resources. There is a drive for more
efficient and sustainable building methodologies
and techniques. Our technology solutions are widely
recognised for allowing better decision-making and
collaboration across our clients’ projects, positioning
us to benefit from increasing digitalisation trends
in our core markets. As a result, the increasing
digital transformation within the built environment
is a significant opportunity for Eleco to leverage
its position as a proven provider of software for
the construction and built environment sectors,
strengthen its platform, and continue to drive organic
growth.
Over the next twelve months, we intend to continue
to focus the business on our core Building Lifecycle
products and on further growing our recurring
revenues. Our strategy, as previously announced, is
to transition that part of our product portfolio which
has traditionally been sold through perpetual licences
towards a subscription pricing basis and eventually to
a full SaaS service. This has well established benefits
by giving choice for our customers and enhanced
Customer Lifetime Value for our shareholders. While
this is expected to reduce the revenues we report
relating to perpetual licences moving forward, our
Recurring Revenues will increase, creating strong
visibility of income. This is an exciting transition that
will deliver multiple benefits to both our customers
and shareholders.
04
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
CEO Report
I am delighted to present Eleco’s Annual Report for
2021.
2021 was a transformational year for Eleco as we
reshaped and repositioned the Group. We launched
our refined growth strategy with a focus on our
people and our organic performance.
As part of this strategy, we made new board
appointments, implemented a new matrix
organisational design and strengthened the
leadership team to drive growth in the regions and
across product solutions.
I am pleased to report that we are already seeing
positive results. We have made strong progress
towards Eleco becoming a world-class customer-
centric organisation which people want to work with
and for to meet the needs of our core customer
segments, driven by our purpose: solving the
challenges of the built environment through digital
transformation.
This is reflected in our three strategic objectives:
• Growing in a customer-centric way
• World-class through prioritised innovation
• Efficient and effective through resilient operations
I believe that a highly-focused, empowered and high-
performing workforce provides us with the greatest
opportunity of success in delivering our vision. With
this in mind, during the period we brought in our new
Group Transformation Director (GTD), Birgit Lenton,
appointed our CPO, Fredrik Pantze and in February
2022, brought in our new Group CTO, Luben Kirov.
Additionally, we have strengthened our sales teams
and added in customer success management.
Culture will play an important part in the successful
implementation of our strategy and we have invested
time with our people in 2021 to develop an expected
behaviours approach for Eleco that aligns to our core
values. Retaining and attracting talent has never been
more challenging than in 2022 and we are committed
to ongoing investment in our diverse workforce to
complement and enhance the skills, thinking and
decision-making throughout the organisation. We
05
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
CEO Report continued
remain proud of the fact that over 30 per cent of our
workforce comprises talented women across all areas
of the business, which is above the industry average.
Importantly, our clear strategy and skilled team of
people have driven our strong financial performance,
with revenues experiencing organic growth of 8 per
cent during the full year period.
We also continued to expand our customer base in
2021, as well as introducing subscription licensing to
new customers for our Building Lifecycle portfolio in
the second half of the year. This is a significant step
forward for the Group as we focus on expanding our
already established recurring revenue to support our
excellent cash generation.
Strengthening our engagement with our external
stakeholders has also been a priority for the Board.
Our strong customer loyalty is an investable quality of
Eleco, and our strategic intent is to further enhance
the offer to our customers. Throughout the year, we
released new versions of our software and added
measures to ensure the continued growth of the
Group and retention of our customers, who value
our products, our brand and the level of service we
provide.
In this report, I will outline how we intend to build on
our already robust position, refining our proposition
and expanding our presence internationally beyond
our current core areas of operation to create value for
shareholders and customers alike.
2021 Review
The Board launched the refined Eleco growth
strategy in March 2021, and this has focused and
energised the whole organisation, resulting in growth
in all regions. Eleco continued to add new customers
and leveraged our strong customer relationships to
support them with their digital transformation.
Eleco delivered a robust and resilient financial
performance in another year of challenges brought
about by the Covid-19 pandemic. The strong first half
performance in 2021 facilitated the introduction of
a subscription-based pricing model to new Building
Lifecycle product customers in Q4. The introduction
of subscription-based pricing is a key stage on our
SaaS journey which will improve the predictability
of our revenue and increase the Customer Lifetime
Value.
The transformation programme started with
identifying and focusing on Eleco’s core customer
segments of construction businesses, maintenance
managers, building asset owners and specialist
interior product manufacturers, staircase and timber
frame manufacturers and residential architects.
During the year, we reorganised our business to build
our product strategies, sales and marketing functions
around customer segments. As a result, our products
are now defined in two groups: Building Lifecycle and
CAD & Visualisation.
Our ‘Building Lifecycle’ portfolio is adopted by
construction contractors, asset owners and
maintenance managers. The second category, the
‘CAD and Visualisation’ solutions, comprise what can
be defined as niche products with minimal synergies
between customer segments of the Building Lifecycle
portfolio.
Organising our business in this way has provided
better understanding and focus on our core customer
needs, or ‘sweet spots’, allowing Eleco to better
solve the challenges of the built environment through
digital transformation.
The Group Leadership Team, now comprising the
Chief Executive Officer, Chief Product Officer, Chief
Technology Officer and Group Transformation
Director, is responsible for steering and implementing
the Group’s strategy. The Operational Leadership
Team comprises the Building Lifecycle operations
which are managed by three Regional Managing
Directors, Anders Karlsson, Richard Choi and Frank
van Riemsdijk, along with a Managing Director for
each of our CAD and Visualisation businesses,
Volker Ahring (Veeuze/Arcon) and Niklas Markgren
(Staircon), who are responsible for these product lines
in their international markets. There is now a diverse
mix of nationalities, gender and experience both from
within the industry and we have an opportunity to
further enhance this team as we select our new CFO.
Building Lifecycle
Our focused and streamlined organisational design
led us to strengthen our growth platform by merging
our three UK operations under a single Building
Lifecycle management team so that we are now
offering all UK Building Lifecycle products from a
single business unit.
Our regional focus delivered revenue growth in the
core regions where our customers reside.
06
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
The US revenue increased through our reseller
channel while efforts to sell Powerproject directly in
the US were met with recruitment challenges and the
resignation of our US country manager.
We also worked on introducing ShireSystem into
Germany, carrying out product development and
localisation as well as setting up sales, marketing
and support functions. There were lessons learnt
as we had underestimated the volume of work
required, however I am pleased to report that we
are showcasing ShireSystem at the Maintenance
Dortmund exhibition at the end of March.
Project Management
Voted the Best Project Management Software of 2021
at the Construction Computing Awards, Powerproject
continues to be central to driving digital innovation
in project planning and critical to underpinning
project success despite the myriad challenges the
construction industry faces.
Some customer successes include:
•
•
•
•
Empowering organisations with the data
necessary for informed decision making (Careys).
Supporting the use of pre-fabrication practices to
model and streamline build process and reduce
the project’s carbon footprint (Willmott Dixon).
Modelling and managing supply chain disruptions
by bridging the gap between the office and site
(JJ Rhatigan & Company).
Supporting business transformation with digital
solutions that make best practice sustainable
(Vinci).
Estimating
Our Bidcon estimating software revenues surpassed
the all-time high of 2020, irrespective of the transition
to SaaS for new customers. One of the reasons for
our success was our investment in new product
functionality to meet customer requirements and
to secure larger customers. The importance of
sustainability in construction and the fact that Swedish
law now mandates climate declarations has resulted in
a growing interest and demand for the Bidcon climate
module.
Site Management
We continued the development of mobile and SaaS
site management applications used by construction
and maintenance operations and valued by existing
customers in our Swedish market.
Property Management
2021 was a record year for service delivery, with
increased customer demand from non-essential
retailers who began to recover somewhat from the
pandemic closures. With less focus on new build, the
emphasis in retail was the regeneration of existing
property estates and development of in-store
concepts.
New product enhancements to introduce workflow
management continued and included the release of a
new digital forms solution in Q4 2021.
Maintenance
I am proud of what our colleagues have achieved
with our maintenance solution, ShireSystem, which
was runner-up in the Asset Management category at
the UK Construction Computing Awards 2021 (‘The
Hammers’).
ShireSystem’s revenue growth has made it the second
largest product by revenue for Eleco. The migration
to SaaS revenues continued across both existing and
new customer contracts, with a third of customers
now on hosted solutions. ShireSystem has managed
to attract an impressive list of new accounts, including
Cambridge Weight Plan and global food conglomerate
Cargill. Existing customers also fuelled growth, with
further deployments at G’s Group and Fox’s Biscuits.
CAD and Visualisation
Veeuze
The ActiveOnline and ESIGN visualisation businesses
experienced a significant year of change and
improvement, relaunching as Veeuze (pronounced
‘views’), to combine the service portfolio and product
material library of both companies and expand their
offerings to all customers.
Veeuze now offers personalised product visualisation
across a multitude of marketing channels with the
support of its AI tools as well as Augmented Reality
and Virtual Reality technologies. We released our
Confimerce platform which provides our interior
product business customers with a combined portfolio
approach to online selling through ecommerce, with
integrated visualisation tools and a Product Information
Management (PIM) data management system.
07
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
CEO Report continued
Staircon
The development of our new generation Staircon CAD
continued according to the releases planned in 2022
and 2023. During 2021, the team also strengthened its
management and sales capabilities by adding more
than 18 years of stair manufacturing experience to
the team via successful recruitments, including a new
Head of Staircon. We also appointed new Staircon
resellers in Poland and the Netherlands.
Arcon
Our Arcon business experienced a challenging year,
with a reduction in sales through partners and active
competition in our core German market. Arcon direct
sales were negatively impacted as major exhibitions
did not take place during the period, and these have
traditionally been a successful sales channel.
Financial Summary
Revenue increased by 8 per cent to £27.3m (2020:
£25.2m).
Recurring Revenue (maintenance, subscription and
SaaS revenue) increased by 9 per cent to £15.4m from
£14.1m in 2020. Licence sales were £5.9m compared
with £5.4m in 2020, representing an increase of
9 per cent, despite the introduction to subscription
licensing in Q4 2021. The impact of the transition to
subscription will change the profile of our revenue, with
one-off perpetual licence revenue, which is recognised
immediately, being transitioned to a higher lifetime
value subscription revenue which is recognised over a
longer period of time. Thus our total reported revenue
growth will temporarily soften during this transition to
higher value and predictable recurring revenue.
Service revenue increased to £6.0m compared to
£5.6m in 2020, which represents an increase of 7 per
cent, despite continuing challenges presented by the
pandemic during the period.
Building Lifecycle revenue increased by 11 per cent,
which was driven by new customers and recurring
revenue growth. CAD and Visualisation revenue
increased by 2.9 per cent.
Revenues by customer location were positive, with the
UK and Scandinavia increasing by 11 per cent and 8
per cent respectively. Overall, revenue from customers
based in Germany was at a level comparable with
2020. This was largely due to increased sales in the
Building Lifecycle customers offset by a decrease in
CAD perpetual licence sales. The Rest of Europe grew
by 7 per cent, USA revenue increased by 16 per cent
and revenue from the Rest of World increased by 38
per cent compared with 2020, which was supported
by good growth in Australia.
We invested 12 per cent of Revenue in product
development across our portfolio during 2021. One
product was identified as unlikely to generate new
customer revenues as anticipated, however provides
an upgrade path to existing supported customers.
The Board took a prudent approach and decided to
impair the carrying value of the product during the year
reducing Profit Before Tax by £0.6m.
Outlook
Eleco has proven its resilience during the pandemic,
although the recent crisis in Ukraine has added a
further level of uncertainty to the markets. We have
taken measures to temporarily cease providing
our solutions to resellers and customers in Russia
and Belarus, and we do not expect this to have a
substantial impact on revenues.
Digitalisation is increasingly embraced as a critical
solution for the issues that our customers are facing
and is at the heart of our strategy. We will invest in
product development and our technology environment
to create our next generation solutions with a
customer-centric experience and the foundations
of the Elecosoft Cloud for all our Building Lifecycle
products. This will also enable our customers to have
access to other Elecosoft products through a unified
platform. We see the rising demand for buildings
with green credentials as a key driver for Eleco, as
our products support the reduction of waste, drive
efficiency and deliver essential data required by our
customers. Our roadmap will ensure that in the future
we will be able to offer full lifecycle support, addressing
carbon challenges, productivity improvements and
compliance issues through one suite of solutions.
Our people are the lifeblood of our organisation, and
their commitment is key to Eleco’s success. Our
biggest challenge in the coming year, apart from rising
inflation and the competitive job market, is our ability
to retain and attract talent. During 2022 and beyond
we will therefore continue to invest in our employee
value proposition and global company culture by
further embedding the cultural values in the way we do
business. As Eleco grows, we will review and update
our policies and procedures across the organisation
to maintain good practice and gain the benefits of
alignment whilst ensuring our people feel empowered.
08
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
Our customer-centric approach, strong values
and clear vision make us well placed to compete
with the best in the market, and we look forward
with confidence to the year ahead. Our transition
to subscription, continued investment in software
development and increased focus on software
strategies will open further exciting prospects for
growth in our core markets.
Jonathan Hunter
Chief Executive Officer
30 March 2022
09
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Our Purpose, Mission and Vision
Vision
Creating certainty for the
built environment
Purpose
Mission
Strategic Objectives
Solve the challenges of
the built environment
through digital
transformation
Provide world-class
software to companies in
the construction and built
environment sectors
- Customer-centric Growth
- Prioritised Innovation
- Resilient Operations
Our Purpose is to solve the challenges of the built
environment through digital transformation.
The built environment has some serious challenges
ahead: increasing compliance at every stage of the
building process, being more sustainable, using
resources more efficiently and effectively as well
as facing the biggest digital transformation of how
it delivers its services. These aspects play an ever-
increasing role in how we design and construct the
world’s buildings, their fit-out and maintenance.
At Eleco we make it our Mission to play a part in
solving those challenges. How? By providing world-
class software to companies in the construction and
built environment sectors.
Imagine a built environment that produces less waste,
whose people are more productive and operate more
safely. Imagine a built environment that treads lightly
on the planet. That’s where we come in.
We take our mission seriously. We enable companies
supporting the Building Lifecycle and Visualisation/
CAD processes across a range of industries to drive
efficient operations through the use of market-leading,
integrated software: during the early planning stages
through to construction and facilities management
and digital marketing of interior products, driving
the performance and day-to-day operations of our
customers’ businesses and their customers.
We won’t rest until our Vision comes to pass: until
we have created certainty for the built environment.
In other words, until we have enabled the built
environment industry to be able to determine the true
efforts required to achieve the desired outcomes,
reduce waste, mitigate risk, be compliant and more
efficient and effective in its resource management.
10
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
Strategic Report
Regions
£10.4m
£6.6m
United Kingdom
Scandinavia
The UK remains Eleco’s largest territory by revenue
representing 38 per cent of the Group’s total revenues.
The UK research and development teams are
responsible for developing our project planning and
maintenance software.
Scandinavia contributes 24 per cent of the Group’s
revenue and is a key research and development
centre for Eleco for estimation, site management and
engineering.
£4.9m
£4.4m
£1.0m
Germany
Rest of Europe/World
USA
With 18 per cent revenue, Germany
remains our third largest region. It
has seen growth in revenues for
Powerproject and visualisation
software and has seen the launch
of ShireSystem in 2021.
The rest of the world presents
16 per cent of our Group revenue
and will continue to present growth
opportunities through our success
in the Netherlands and further
opportunities in Australia.
The USA represents 4 per cent of
the Group’s revenue. Powerproject
is being adopted by general
construction contractors to
manage their demanding project
schedules, serviced through our
value-added reseller channel.
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Annual Report and Accounts 2021
11
Job No: 46561
Customer: Eleco
Proof Event: 6
Blackline Level: 0
Park Communications Ltd Alpine Way London E6 6LA
Project Title: Annual Report 2021
T: 0207 055 6500 F: 020 7055 6600
Strategic Report
Our Products and Services
Solving the challenges of the built environment
through digital transformation
Building Lifecycle
Elecosoft is our world-class
Building Lifecycle portfolio
comprising planning and design
stages through to construction,
asset & standards management
and facilities management.
Planning & Project Management
Design Standards &
Data Management
Construction Estimating
CMMS/ CAFM
Site Management
Customer Stories
We recognise that the success
of our customers is key to the
success of our business, and
we work closely with them to
understand their challenges and
evolve our software to support
their changing needs.
With a drive for more efficient
and sustainable building
methodologies and techniques,
Eleco’s software plays a crucial
role in managing these issues,
driving productivity for our
customers and enabling them to
better plan their resources.
For more information visit
www.elecosoft.com
Better maintenance
means faster
manufacturing
Wren Kitchens has enhanced
its production capabilities by
investing in ShireSystem, using
smart facilities management
software to respond more
quickly to maintenance issues,
improve machinery run times,
and increase output.
Continuous brand
expansion through
digital software
InterContinental Hotels Group
(IHG) has used IconSystem to
innovate its processes around
the real-time management of
design standards, continuity
and building specification
compliance to give stakeholders
one version of the truth.
12
12
Eleco plc | www.eleco.com
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
Visualisation & CAD
Our portfolio focuses on niche vertical markets, including interior
room visualisation and marketing, staircase manufacturing,
timber frame manufacturing, residential building design and
structural engineering.
Veeuze offers personalised
product visualisation across
a multitude of marketing
channels with the support
of its AI tools as well as
Augmented Reality and Virtual
Reality technologies.
CAD/ Design
Staircase Manufacturing
Structural Engineering
Services
Solution implementation
Our consultancy services
are tailored to ensure your
implementation is seamless
during a transition to our
software at scale.
Professional training
We provide a wide range of
training to help both new and
more experienced users to
improve skills and maximise use
of our software.
Technical support
Our software support and
upgrade packages give you
access to technical support,
maintenance updates and
upgrades.
Addressing global
sustainability through
technology
Willmott Dixon manufactured
50 per cent of the University
of Warwick’s Interdisciplinary
Biomedical Research Building
offsite, using Powerproject to
coordinate operations, reducing
site deliveries by nearly 40 per
cent, and lowering the building’s
carbon footprint.
Keeping pace with
demand
AI-Tool for floors and
walls
Staircase specialist GL Joinery
has increased its production
capacity by 275 per cent and
turnover by 30 per cent using
Staircon.
Digitising design and automating
the production process has led to
the faster turnaround of customer
projects and the ability to offer
new, intricate design features.
Around 90 per cent of Veeuze’s
floor manufacturer and
wholesale customers are now
using the AI-Tool. An upload
increase of 143 per cent was
seen in 2021 compared to the
previous year, with over 3 million
room photos uploaded since the
product’s launch in 2020.
Annual Report and Accounts 2021
13
13
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Our Business Model
Our business model is all about embedding our purpose, mission and vision into everything that we do in order
to add value to our stakeholders – clients and their customers, employees and shareholders, as well as the wider
community and the planet.
Our products and services are designed to drive forward our purpose: solving the challenges of the built
environment through digital transformation. We achieve this by focusing on our three strategic goals:
World-class through
prioritised innovation
Efficient and effective
through resilient operations
Growing in a customer-
centric way
We are creating NextGen customer
solutions by leveraging our deep
knowledge of our customer base
to identify and address future
needs and create solutions in-
house, through partnership and/or
acquisition.
We capitalise on our unique
capabilities and strengths to
serve specific customer needs
(‘sweet spots’) through best-of-
breed products, strong customer
relationships, engaged employees
and a strong financial position. We
develop capabilities to better serve
specific customer segments’ needs
with tailored solutions.
We focus, reinforce and expand
the customer platform by growing a
more focused, high-value customer
base through product portfolio
alignment and clear customer
segment strategies using a
customer-centric approach.
Tru s t
Growing in a
customer-centric
way
F
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14
Custo
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World-
class through
prioritised
innovation
k
r
o
w
m
a
Te
Solving the challenges
of the built environment
through digital
transformation
Efficient
and effective
through resilient
operations
Innovation
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
Our values and behaviours play a key part in driving through our purpose: we believe that our brand values
should be reinforced by our cultural values and behaviours. As the foundation of our culture, this combination
defines how we engage with those we work with and for in order to achieve value-adding outcomes for:
• The planet/environment and the wider society: being environmentally and socially responsible,
• Our people: creating an organisation people want to work with and for,
• Our customers: making life easier for our customers through our products and services,
• Our shareholders: providing a return on our shareholders’ investment.
We measure the impact of our actions through Environmental, Social and Governance (ESG) performance
indicators and outcomes as well as internal operational and external shareholder value measures.
Building
Lifecycle
Visualisation &
CAD
Software
implementation
Professional
training
Technical
support
Enabling reduction
in waste creation
and directly by being
environmentally
responsible
Internal culture with
social responsibility
Making life easier
through our products
Providing a return on
investment
A recognised
employer brand
people want to work
with and for
Environment
- Energy/Water consumption
- CO2/Waste production
- NetZero
Society
- Employee turnover
- Employee satisfaction
- Volunteering days
- Training days
- Gender Pay Gap
- Value to society (formula)
Internal operations
- Financial indicators
- Customer measures
- Employee measures
Shareholder value
- Share price maximisation
- Profit margins
Governance
- Women on the Board
- Independent directors on the Board
- Payment days to supply chain
- R&D % of revenue
15
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Review of Principal Risks
Product Risk
Risk
Description
Mitigation
Product
development and
competition
Cyber risk and
data security
Eleco provides digital solutions for
clients and their end customer. In an
environment of constantly changing
customer requirements, increased
technology adoption, and industry
and technological innovation, there
is a risk that competitors may
develop solutions that are superior
to ours. This could result in a loss of
customers and related revenue.
The CPO and CTO will closely align in
prioritising the development activity such that
it keeps abreast of the broader technological
environment, existing customer feedback, as
well as existing and future competition in the
building sector. Product development is tested
with the market using an MVP (minimal viable
product) prior to major spend commitment.
Eleco continually reviews the spend on product
development to ensure that we are generating
sufficient revenue or gaining a competitive
advantage to justify the investment.
As a technology business, Eleco
places great reliance on the use of
technology to operate the business;
Eleco is also increasingly providing
SaaS and therefore consuming
globally available cloud services
to ensure the greatest uptime
for our customers and their end
clients. There is a risk of critical
IT systems being unavailable or
having restricted availability to
the business; there is also a risk
that access to confidential data is
compromised due to cyber-attacks
which could lead to reduced sales,
penalties and/or reputational
damage.
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 mitigate these
risks. Eleco uses a multitude of cyber defence
tools, including industrial-strength email- and
web-filtering services, server- and end point
security suites, and hardware and software
firewall protection. All third-party partners used
for communication, security or hosting services
are protected and certified to ISO 27001
level, which includes physical as well as cyber
security precautions and safeguards to mitigate
against physical and cyber-attacks.
16
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
People Risk
Risk
Description
Mitigation
Inability to
attract and/or
retain employees
Eleco’s employees develop and
maintain our solutions, serve our
customers, and provide leadership
to the business. Loss of key
employees or an inability to attract
talent could have an impact on the
Group’s operations.
Suboptimal
business
performance due
to siloed working
and conflicting
priorities
There is a risk that the organisational
structure results in siloed focus
and siloed priorities between
distinct business units, products,
and geographies rather than
collaborative efforts to reach group
objectives.
Eleco has won many awards for its products and
has been recognised as a top performer in the
market. Remaining in this space means we need
to ensure we retain and continue to attract the
best talent the industry has to offer. To do that
we will continue to look at our employee value
proposition (EVP), having already delivered our
new cultural values and associated behavioural
framework, our employee assistance programme
(EAP) and our Employee Hub. The continued
work will focus on the topics of pay/pay
progression, benefits, learning and development,
talent and succession management and
wellbeing; they will build on and strengthen the
arrangements that are already in place, both
globally and regionally, and will strike a balance
between affordability and the desire to be a top
employer within the industry. Communicating
our employee value proposition will be key to
building our employer brand.
There are various interventions that we have
already made which now need to be embedded
further and continue to be strengthened: this
includes group target setting and clarifying
roles and responsibilities in the matrix
organisation, particularly around the key cross-
cutting functions sales/account management,
marketing, product, technology, and the sharing
of data.
Early in 2022, we finalised the merger of our
three UK trading entities and we are in the
process of installing one common finance
system globally across our Building Lifecycle
business to increase transparency, improve
the control environment and make data more
readily available. As we build on this in 2022 we
will be reviewing our policies and procedures
across the Group and adapting our governance
model and matrix structure as we adapt the
organisation for growth.
In addition, the intention is for our work on the
employee value proposition (EVP, employee
offer) to include the design and implementation
of global career paths and harmonised roles
across the regions which will further enable
cross-fertilisation. This will be supplemented by
people policies and procedures and cohesive
learning and development approaches.
17
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Review of Principal Risks continued
Market Risk
Risk
Description
Mitigation
Impact of
economy and
financial markets
The health of domestic and global
economies strongly influences
the commercial construction
business cycle. A downturn in
the construction business cycle
can adversely affect Eleco’s
performance.
The construction software markets are
changing as the built environment accelerates
its digitalisation. Eleco works closely with
customers and the market risk is mitigated
through operational spread between countries
with plans to expand geographically both
directly and through reseller partner channels.
Reputational risk The risk of failure to meet
stakeholder expectations as a result
of any event, behaviour, action or
inaction, either by Eleco itself, our
employees or partners, that may
cause stakeholders to form an
adverse view. The risk may not only
affect revenue and resulting cost of
mitigation but could also have an
effect on confidence and market
value.
Eleco’s position is further strengthened by
servicing the maintenance stages of the building
lifecycle and manufacturing, property and retail
markets.
Eleco takes an active role in identifying,
assessing and escalating reputational risks. Our
policies aim to ensure reputational risk matters
are managed in a globally consistent manner
and align with our strategy. Eleco governance of
reputational risk is integrated with the broader
risk framework. Eleco looks to mitigate these
risks by taking steps to protect against data
breaches; listening to customer and employee
feedback to address areas of improvement and
any training needs; developing strong company
values and ethics and operating on them and
being aware of relevant social media adverse
comments from stakeholders.
Financial Risk
Risk
Currency
Description
Mitigation
The Group earns a proportion of
its revenue in currencies other than
Sterling. The two largest currencies
in which it trades are Swedish Krona
(SEK) and Euro (EUR). Changes in
these exchange rates can expose
Eleco to exchange translation gains
and losses.
Our businesses predominantly trade in their
own local currencies and have local operational
and development staff which creates a natural
hedge against currency movements. In addition,
we will continue to review foreign exchange
contracts to manage risk.
18
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
Legal and Compliance Risk
Risk
Description
Mitigation
Protection of
Intellectual
Property
Regulatory,
legal and tax
compliance
Eleco’s success is built upon the
development of advanced software
which requires continual protection
from competitive businesses who
may seek to copy or otherwise
replicate the software.
Eleco 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 practicable.
Eleco operates across several
territories and geographies which
are each subject to their own laws,
regulations and tax jurisdictions.
There is a risk of non-compliance
which could result in fines, claims,
and reputational damage.
Eleco uses the services of professional advisors,
who are experts in their field, to complement
in-house knowledge. Transactions between
group companies are carried out in accordance
with Eleco’s interpretation of tax laws, tax
treaties and OECD guidelines.
19
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Section 172 Statement
Section 172 of the Companies Act 2006 requires a
director of a company to act in the way he or she
considers, in good faith, would most likely promote the
Company’s success for the benefit of its members as
a whole. In doing this, s.172 requires a director to have
regard, amongst other matters, to the:
Key decisions of 2021
1. Strategy review and transition to subscription
pricing
The Board reviews the Company’s strategy annually.
As part of this, the Directors consider the following:
•
likely consequences of any decisions in the long
term;
•
interests of the Company’s employees;
•
•
•
need to foster the Company’s business
relationships with suppliers, customers, and others;
impact of the Company’s operations on the
community and environment;
desirability of the Company maintaining a
reputation for high standards of business conduct;
and
•
need to act fairly as between members of the
Company.
Eleco and the Board embrace and fully support these
reporting requirements. The Board ensures that regular
training is undertaken concerning directors’ obligations
and also that directors have access to advice from the
Company Secretary whenever necessary. By having a
good governance framework and procedures in place,
the Board aims to ensure that its decision-making is
open and transparent. We feel that the refresh of the
Non-Executive Directors during 2021 has created a
strong platform for good governance.
We set out below how we have considered the matters
found in s.172. First, we explain some of the key
decisions taken by the Board over the past year and
how stakeholder interests were considered over the
course of decision-making. Then we outline in the
form of a table how we engage with our stakeholders
generally and the influence that such engagements
have on our decision making as a board.
I. business plan for the coming year
II. budget and any relevant investments
III. the impact that decisions will have in the long term.
In considering the long-term success of the
Company, the Directors decided to embark on a
strategic transition toward SaaS, initially focussing
on subscription pricing, details of which have been
summarised in the Chairman’s Statement and CEO
Report.
The Directors also decided to streamline the corporate
structure and become more agile to better meet
the needs of the Company’s customer segments.
As part of this, ActiveOnline and ESIGN businesses
in Germany were merged into what is now Veeuze,
and all UK operations were brought under a single
UK trading entity, Elecosoft UK. This process was
commenced in 2021 and completed in January 2022.
The impact on employees and opportunities for
professional development arising through the Group
restructuring were also borne in mind throughout the
implementation of the programme.
2. AGM and shareholder response
In the interests of health and safety of all our
shareholders, employees and the wider community,
the AGM held in 2021 was held as a hybrid event.
This unfortunately meant that for the second year in a
row we missed the element of personal engagement
with shareholders. At the AGM, several shareholder
resolutions were voted down and we immediately
set out to understand the reasons for this result.
As a result of the consultation, the Board agreed
to go beyond the applicable corporate governance
requirements and has decided that all Directors will
stand for annual re-election. The Board has also
reviewed the level of share authorities requested at
the AGM and obtained external advice to ensure
that they are in line with investor best practice. The
Board is pleased to confirm that this is the case and
that the resolutions proposed in the AGM Notice that
accompanies this report are fully in line with investor
guidance.
20
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
3. Covid-19 response
Our people remain the critical resource in our business
and the Board has ultimate responsibility for ensuring
the safety and security of our people. As part of the
ongoing response to the Covid-19 pandemic, we
have maintained our working from home policy and
continued to utilise the government support packages
available in the territories in which we operate in order
to safeguard jobs where applicable. We have also
regularly sought the sentiment of our employees on
emerging issues that affect them, such as the timing of
returning to work in the office.
5. Capital allocation
Each year the Board considers the strength of the
Group’s balance sheet and as a result, the Board was
this year able to approve the repayment of the external
bank debt whilst maintaining a strong cash position.
The Board has reflected on the performance of
the business as well as the strength of the Group’s
balance sheet and has proposed to pay a final
dividend of 0.40 pence per share in respect of the year
ended 31 December 2021. This is in addition to an
interim dividend of 0.20 pence per share.
4. Employee wellbeing initiative
We continue to invest in the wellbeing of our people.
To that effect, we have invested in a state-of-the-
art, multilingual employee assistance programme
(EAP) which offers wellbeing support via a digital
platform, web chat and phone, as well as one-to-one
counselling support. Managers can also access one-
to-one help in dealing with wellbeing matters with their
teams.
6. Board appointments and Environmental, Social
and Governance (ESG)
As further set out in the Corporate Governance Report
and the Chairman’s Statement, the Board heightened
its focus on Corporate Governance, refreshed the
Independent Non-Executive Directors and established
an ESG Committee to ensure that the Company is
well-placed to thrive over the next twelve months and
beyond.
Building on the Covid-19 response, we recognise that
flexible working is a key differentiator in retaining and
attracting talent and we continue to work with our
people across our regions as to how, where and when
work gets done, meeting both the requirements of the
business and our people.
21
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Section 172 Statement continued
Stakeholder Engagement
The table below sets out how we engage with our key stakeholders.
How this engagement influenced
Board discussions and
decision-making
The Board receives regular updates on
customer feedback and sales throughout the
year, which informs its strategic decisions.
The Board regularly seeks and reviews the
feedback from shareholders and investors,
which feeds into board discussions and informs
strategic decisions.
Stakeholder
Engagement
Our customers are critical to
our business. Our products
and services are critical in the
construction supply chain. We aim
to:
•
•
•
Keep the supply chain operating
in the safest possible way.
Support the production of goods
used in construction.
Support customers to make
better decisions through
accurate software solutions.
The Company liaised and
interacted with a number of our
major shareholders this year to
understand those aspects which are
uppermost on their agenda.
The Company maintains open
communications with the wider
stakeholder community. The
Chairman and Executive directors
engage through results roadshows.
The Company utilises Investor Meet
Company to give access to a wider
group of investors. The Company
also hosts analyst meetings
to promote the business and
releases regular announcements
to keep investors informed on the
Company’s latest progress and
performance. We continue to look at
ways to improve our communication
with all of our shareholders.
Customers
Shareholders
and Investors
22
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
How this engagement influenced
Board discussions and
decision-making
Understanding the views of our people helps
us in improving our relationship with employees
and influences decisions such as spending
allocation.
The Company sought to enhance and
consolidate supplier relationships, with a
review of service agreements and supplier
relationships.
Prior to entering into any formal reseller or
API agreements with prospective partners,
the Board receives, reviews and approves all
arrangements.
Stakeholder
Engagement
Employees
Suppliers
Partners
(resellers and
technology
partners)
Our employees are a strong and
talented group of people who
work with skill and enthusiasm
in all of our target markets. Their
health, safety, and wellbeing are
fundamental to us.
We seek regular feedback through
staff surveys and have rolled
out a regular eNPS (Employee
Net Promoter Score) to assess
employee engagement, reduce
employee attrition and build
stronger teams.
The Company utilises a number
of key suppliers for IT services
including telecommunications,
data storage and security. These
relationships are generally reviewed
every two to three years.
Other suppliers and advisory
relationships are reviewed every
12-18 months.
The review process includes a
minimum of two comparable
proposals.
The Company engages with
resellers through a channel
management function. We also
provide technical support and
training on an ongoing basis to our
reseller community.
We maintain confidentiality when
partnering with other software
vendors by entering into API
(Application Programming Interface)
partnership agreements.
23
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Section 172 Statement continued
Stakeholder
Engagement
Wider
community
Our solutions directly and indirectly
impact a whole host of stakeholders
including end users and local
residents.
How this engagement influenced
Board discussions and
decision-making
Whilst the Board may not have direct
involvement with the wider community it
is mindful of the impact our business and
solutions have on the wider community as a
critical part of the building lifecycle. Therefore,
the Board has decided to establish an ESG
Committee to specifically consider the impact
of our decision-making on the community.
Further details of this can be found in the ESG
Committee report on pages 45 to 47.
24
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
Financial Review
I am pleased to report that 2021 was a year of strong
Recurring Revenue growth for Eleco, boosted by the
introduction of a subscription only offering for our
Building Lifecycle products to new customers. Our
overall revenue is up 8 per cent to £27.3m (2020:
£25.2m), with recurring revenue overall growing by
9 per cent to £15.4m (2020: £14.2m).
EBITDA for the year is £7.2m (2020: £6.7m) with free
cash flow at £4.8m (2020: £5.5m).
Cash generation has been strong, with net cash
at £10.0m (2020: £6.2m). In the second half of
2021, the strong net cash position of the Group
allowed the Company to repay the main bank debt
outstanding of £2.8m. The Company now has no
UK bank debt and the £0.1m of bank debt as at 31
December 2021 elsewhere in our Group was repaid
in full in Q1 2022.
Revenue
Recurring revenue grew from £7.5m in the first half
year to £7.9m in the second half year, primarily due
to the launch of subscription-based licence sales for
Powerproject, Bidcon and ShireSystem products to
new customers and markets.
Our double-digit growth in the core Building Lifecycle
software portfolio was driven by strong performance
from ShireSystem supplying facilities management
and Powerproject planning solutions growing 15
per cent and 13 per cent respectively year on year.
Powerproject Vision, our SaaS portal for collaborating
on construction schedules, is being used by VINCI
Construction’s planning processes and won our first
order from a Swedish residential property developer.
During the year, we also won a high value visualisation
solution order from a Japanese floor manufacturer.
The level of deferred income at the balance sheet date
increased by 11 per cent to £7.1m (2020: £6.4m), which
demonstrates a positive sign of future recurring revenue.
Profit
Gross profit has grown by 8 per cent to £24.6m (2020:
£22.7m). A 90 per cent margin on revenue along with
the low churn rate of our customers demonstrates a
high customer lifetime value.
Operating profit for the period was £4.1m (2020:
£4.2m). Following the positive underlying performance,
Eleco took the decision last year to pay back furlough
funds that qualified for repayment. This amounted to
£0.1m in 2021 (2020: £nil).
After excluding the impact of exceptional items,
together with the impact of the non-cash amortisation
of acquired intangible assets as set out below,
Adjusted Operating Profit for the Group decreased
by 7 per cent due to the impairment of an internally
developed product. £0.6m (2020: £nil).
Operating profit
Former Directors’ payments
Amortisation of acquired
intangible assets
2021
£’000
2020
£’000
4,099
4,151
69
328
575
590
Adjusted operating profit
4,743
5,069
Total software product research and development
costs increased to £3.3m for the year (2020: £3.2m)
of which £1.7m (2020: £1.6m) was capitalised. We are
committed to investing in product development and
our total software development cost represents 12 per
cent of revenue (2020: 13 per cent).
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 an impairment of £0.6m (2020:
£nil) was required for one of the products.
Finance costs in the year included interest expense for
leasing arrangements under IFRS 16. Finance costs in
respect of the Group’s term debt were £0.2m (2020:
£0.3m). In the second half of 2021, the Company
repaid the main UK bank debt outstanding of £2.8m as
referred to above.
Profit before tax was £3.9m (2020: £3.9m). The Group
tax charge in the year was £1.2m (2020: £0.7m) and
represented 30 per cent of profit before tax (2020:
18.7 per cent). The deferred tax charge has increased
in 2021 due to the substantively enacted deferred
tax rate increase from 19 per cent to 25 per cent with
effect from 1 April 2023.
25
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Strategic Report
Financial Review continued
The net profit attributable to Ordinary Shareholders has
consequently reduced to £2.7m (2020: £3.2m).
After adjusting for the post-tax effect of amortisation
of acquired intangible assets, impairment expenses
and former Directors’ payments adjusted net profit
attributable to Ordinary Shareholders decreased by
17 per cent to £3.3m (2020: £3.9m).
Net profit after tax
Former Directors’ payments
Amortisation of acquired
intangible assets
2021
£’000
2020
£’000
2,731
3,163
56
266
466
478
Adjusted net profit after tax
3,253
3,907
£7.7m (2020: £8.1m) cash was generated from
operations, this is a good reflection of the overall
performance of the Group during a challenging
time, with a continued focus on working capital and
resilience to market conditions. Overall working capital
movements have contributed a net cash inflow of
£0.5m (2020: £1.4m).
Capital expenditure on intangible assets, principally
comprising the capitalisation of software product
development costs, was £1.6m (2020: £1.6m).
Capital expenditure on property, plant and equipment
was £0.3m (2020: £0.1m).
After deducting capital expenditure and acquisition
related expenses, adjusted operating cash flow, as
set out below, was £5.8m (2020: £6.8m), meaning that
121 per cent of adjusted operating profit (2020: 133
per cent) was converted into cash.
Our overall business model, with 56 per cent of the
Group’s revenues as recurring and high contract
retention rates, has enabled us to remain resilient and
cash generative during 2021.
2021
£’000
2020
£’000
Cash generated in operations
7,724
8,138
Purchase of intangible assets
(1,727)
(1,603)
Purchase of property, plant and
equipment
Acquisition expenses
Former Directors’ payments
(279)
–
69
(99)
–
328
Adjusted operating cash flow
5,787
6,764
Adjusted free cash flow (before dividends, acquisition
related expenses and former Directors’ payments)
decreased by 18 per cent in the year to £4.8m (2020:
£5.8m).
2021
£’000
2020
£’000
Adjusted operating cash flow
5,787
6,764
Net interest paid
Tax paid
Proceeds from disposals of
property, plant and equipment
Adjusted free cash flow
Acquisition expenses
Former Directors’ payment
Free cash flow
(124)
(903)
(206)
(785)
60
71
4,820
5,844
–
–
(69)
(328)
4,751
5,516
Funding and Liquidity
The Group ended the year with a net bank cash of
£10.0m (2020: net bank cash of £6.2m).
The Group’s net cash position comprises cash at
hand of £10.1m (2020: £10.7m), offset in part by gross
borrowings of £0.1m (2020: £4.5m).
Gross borrowings comprises a loan balance against
the ActiveOnline property acquired of £0.1m (2020:
£0.2m).
The Group’s lease liabilities for Property, Motor
Vehicles and Other Plant and Equipment amounted to
£1.9m (2020: £2.4m).
26
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
Earnings Per Share
Basic earnings per share was 3.3 pence (2020:
3.9 pence). The reduction can be explained by the
increase in UK Corporation tax rates planned for 1
April 2023 increasing the deferred tax liability.
Adjusted basic EPS, adjusted for the impact of
exceptional items and acquisition related expenses,
amortisation of acquired intangible assets and for
the associated tax impact, was 4.0 pence (2020:
4.8 pence).
Dividends
The Board has recommended the payment of a final
dividend in respect of the year ended 31 December
2021 of 0.40 pence per share (2020 final dividend: 0.40
pence).
Jonathan Hunter
Chief Executive Officer
30 March 2022
27
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2021Overview Governance
Board of Directors
Jonathan Hunter
BBus BMm
Chief Executive Officer
Serena Lang MBA
Chairman
Skills and Experience
Appointed to the Board in June 2016
and with bachelor’s degrees in Business
Management and Multimedia from
Griffith University, Australia, Jonathan
is responsible for implementing the
Group’s strategy and has played a
major part in the Group’s M&A activity
since the commencement of his
directorship. Having held a number of
senior management positions within
Eleco plc since joining in 2010, he played
a fundamental role in the transition
to a software group during and post
divestment of the Building Systems
division. His appointment as interim CEO
in September 2020, which was made
permanent in February 2021, follows
three years as COO with the Group. As
well as continuing to attend relevant
professional training and coaching,
Jonathan has been involved in a number
of growth company roundtables and
forums throughout the year as a member
of Criticaleye.
Committee Membership
E
Skills and Experience
Serena was appointed to the Board
as a Non-Executive Director in 2014
and became Non-Executive Deputy
Chairman in May 2017. In September
2020, she was appointed Executive
Chairman and after a period of twelve
months is now Non-Executive Chairman.
Serena is also an executive member of
Carecent, York’s homeless breakfast
charity and a Governor at St Peters
School in York. Serena’s distinguished
and multifaceted career includes
working as an Executive Consultant at
E&Y, where she was heavily involved
in client M&A and integration activities,
then onto BP’s group leadership team
where she was VP Transformation in the
downstream and latterly onto Invensys
Plc (now part of Schneider Electric)
running the highly profitable £130m
North Europe and Africa Division of
their international software and process
businesses as well as being the VP in
charge of the BP account globally.
Serena brings a depth of experience to
bear on the long-term strategy of the
business, international growth, merger,
and acquisitions as well as software
development.
Committee Membership
R N E
Dr. Annette Nabavi MA
(Oxon), Doc. de 3ieme
cycle (Dijon)
Senior Independent
Non-Executive Director
Skills and Experience
Dr. Nabavi has held several Non-
Executive Director roles, including a
seven-year tenure at AIM-listed Maintel
Holdings Plc, a cloud and managed
services company, where she also
chaired the Remuneration Committee.
She has substantial experience in this
area through her involvement with the
Quoted Companies Alliance (QCA),
where she supported the update to the
Remuneration Committee Guide. In
2018, she was shortlisted for The Sunday
Times’ Non-Executive Director Awards
as AIM Director of the Year.
Her other Non-Executive roles include
RemCom Chair and Senior Independent
Director at Gemserv Ltd, a professional
services company providing policy
advisory and digital transformation
services to the energy and health care
sectors and EFI Limited, a high growth
fintech company.
Dr. Nabavi is also Finance Director for
Women in Telecoms and Technology, a
Not-for-Profit organisation, and serves
as a judge for the prestigious World
Communications Awards. She holds
an MA from Oxford University and a
Doctorate from the University of Dijon.
Committee Membership
A R N E
Key to Committee Membership
A Audit Committee
R Remuneration Committee
N Nomination Committee
E ESG Committee
Committee Chair
28
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Paul Boughton FCA BSc
Non-Executive Director
Mark Castle FRICS
Non-Executive Director
Skills and Experience
Appointed as a Non-Executive Director
in March 2021, Paul is Chair of Quartix
Technologies plc, the telematics and
vehicle analytics company. He has
30 years of executive experience in
identifying, negotiating and completing
acquisitions in the USA and Europe. Paul
spent 13 years as Business Development
Director for Spectris plc, and
subsequently held similar positions at IMI
plc, Consort Medical plc and Brammer
plc. He was a Non-Executive Director
of London Bridge Software plc and
Raymarine plc earlier in his career. Paul
has a BSc in Business and Managerial
Economics from the University of
Hull and is a Fellow of the Institute of
Chartered Accountants.
Committee Membership
A R N E
Skills and Experience
Mark Castle is currently a Non-Executive
Director of Mace Group, a global
construction, property investment,
consultancy, and facilities management
business, which he joined in 2005.
Working as Chief Operating Officer until
last year, Mark oversaw Mace Group’s
construction growth from start-up to
becoming a £1.6bn revenue company
within the group which operates in over
80 countries with 6,500 employees.
Prior to working at Mace Group, Mark
was Managing Director UK of New York
based Structure Tone, a $3bn revenue
construction company, and before this
was Managing Director London of Wates
Group, a £1.4bn revenue construction
business headquartered in London. Mark
was also Chairman of Build UK - the
leading representative organisation for
the UK Construction Industry from 2017-
2019. He is a Fellow of the Royal Institute
of Chartered Surveyors. On joining the
Board, Mark Castle will become Chair of
the newly created ESG Committee.
Committee Membership
A R N E
29
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021 Governance
Corporate Governance Report
Chairman’s Introduction to Governance
In 2021, Eleco heightened our focus on corporate
governance and purpose, refreshing the Board to
ensure the skills required to create long-term growth
were available moving forward, appointing an external
Company Secretary company for independent
oversight and adopting a Board evaluation tool
allowing us to check in with each Board meeting as
well as our annual evaluation.
People and Culture
Our people are our most important asset, and in
the year, we conducted a survey across employees
as part of the review of our purpose and culture.
Trust, customer centricity, flexibility, innovation and
teamwork are Eleco’s brand values, held by the Board
and translated into a culture and behaviours that are
becoming part of our DNA. It is essential that we
are able to attract and retain the right talent in the
competitive environment we are working in.
Board and Leadership Changes
At the beginning of the year, as Chairman, I undertook
a full skills audit of the Board against the refreshed
strategy. As a result of this, we appointed three new
independent Non-Executive Directors.
We brought in Paul Boughton, who was appointed in
March, adding more technology PLC experience to the
business as well as additional M&A experience.
This was followed by two further INED appointments
in the summer, with Dr. Annette Nabavi and Mark
Castle joining the Board in August and September,
respectively. Dr. Nabavi brings additional expertise to
advise with our shift from a perpetual to subscription
licence model while Mark Castle is an experienced
business leader, bringing the voice of the customer to
the Board with his wealth of experience in the property,
construction, consultancy and built environment
sectors.
Kevin Craig and David Dannhauser stepped down
from their NED positions on Board at the end of
August.
Paul Boughton took over as Chair of the Audit
Committee and Annette Nabavi took over as Chair of
the Remuneration Committee and took on the role of
Senior Independent Director.
On the executive side, Robert Tearle took over
as CFO from Ben Moralee in March and Anders
Karlsson stepped down from the Board in August.
We also appointed Elemental CoSec Limited in May
to provide independence and help support our drive
for governance best practice. As commented on in
the Chairman’s statement, Robert has since resigned
and we have appointed an experienced Interim CFO,
Rose Clark, while the Board reflects on the learnings
from this experience and carries out a formal search
process for the permanent CFO to take this business
forward.
ESG Committee
I am delighted to confirm that we also set up an ESG
Committee at the end of the year, chaired by Mark
Castle. The ESG Committee will assist the Board in
fulfilling its oversight responsibilities with regard to
environmental, health and safety, corporate social
responsibility, sustainability, customer satisfaction,
employee wellbeing and retention, corporate
governance, diversity, equity and inclusion. The ESG
Committee’s first meeting was held in early 2022 and
I look forward to the value it will bring in the coming
year.
Composition of the Board
The Board now comprises the Chairman, three
independent Non-Executive Directors (including the
Senior Independent Director) and one Executive
Director, being the CEO (the CFO having stepped
down on 7 February 2022). As referred to above, a
recruitment process for a permanent CFO is ongoing.
Governance and the Board
The Company’s shares trade on AIM. The Company
follows the Quoted Companies Alliance Corporate
Governance Code for Small and Mid-Size Quoted
Companies (the “QCA Code”). The Company is
cognisant of the fact that compliance is an organic
process and is to be embedded into every aspect of
operation and will continue to review and improve
its governance procedures so as to implement the
highest levels of governance.
Details of how the Company has dealt with each
principle of the QCA Code may be found by visiting:
www.eleco.com/governance.
Operation of the Board
The Chairman, along with the Senior Independent
Director, the Executive Director and the Company
Secretary, ensures that the Board functions effectively
and has established Board processes designed for this
purpose.
30
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
The Board aims to be accountable and give utmost
consideration to governance arrangements. It also
seeks to:
• Provide direction for management;
• Demonstrate ethical leadership;
•
In addition, the Board maintains regular electronic
communications and makes further decisions
by way of written resolutions to address largely
procedural issues between the scheduled board
meetings. An example of this would be the grant of
clearance to deal for PDMRs.
• Make well-informed and high-quality decisions;
•
•
Create the framework for helping Directors meet
their duties; and
• Be accountable to all stakeholders.
Key aspects of these processes are:
•
The Board met 16 times during the year. These
meetings were mostly held via Microsoft Teams
this year due to Covid-19 restrictions which meant
that it was not possible to convene in person.
The attendance of individual directors at board
meetings in 2021 is set out in the table below and
committee meetings in the committee reports on
pages 34 to 47.
Board Meetings
Possible
Attended
Executive
S Lang (Chairman) *
J Hunter
A Karlsson
B Moralee
R Tearle
Non-Executive
P Boughton
M Castle
K Craig
D Dannhauser
A Nabavi
16
15
10
5
11
11
3
10
10
6
16
14
10
4
11
10
3
9
7
6
*
•
•
S Lang moved from Executive to Non-Executive Chairman on
25 September 2021
Each regular, scheduled board meeting has an
overarching theme. These include the annual
budget, Group business strategy, interim and final
results.
Executive Directors and members of the senior
management team make presentations covering
progress against current strategy and key
objectives and ideas for future investment.
To enable the Board to discharge its duties,
all Directors receive appropriate and timely
information. Briefing papers are distributed by the
Company Secretary and made available via a board
portal to all Directors usually a minimum of four
working days in advance of board and committee
meetings.
A monthly reporting pack containing management
accounts with commentary, reports from each
Executive Director and individual business units’
reports is provided to the Board on a monthly
basis.
Meetings were held between the Chairman and the
Non-Executive Directors during the year, without
the other Executive Directors being present, to
discuss appropriate matters as necessary.
Both Executive and Non-Executive Directors
are encouraged to undertake annual training in
furtherance of their specific roles and general
duties as a director and to keep their skills up to
date and relevant to the Group. This includes but is
not limited to attending meetings and workshops
run by the London Stock Exchange and the Quoted
Companies Alliance.
•
•
•
Control Environment
The Board acknowledges its responsibility for the
Group’s 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 Group’s
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 authorities within the Group Controls
Handbook. The Audit Committee Report comments
further on this subject.
31
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021 Governance
Corporate Governance Report continued
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.
Monitoring of business risks, with key risks
identified and reported to the Board. These risks
can be identified on pages 16 to 19.
The Board Evaluation Process
The performance of Executive Directors is reviewed
on an annual basis by the Remuneration Committee,
headed by Annette Nabavi. The review looks at
the individual and the Group’s performance as well
as any feedback from the other board members,
including the Chairman. This review is discussed
with each individual Director and forms the basis for
any additional training or development that may be
required.
The Board considers board evaluation as critical to
sound corporate governance and sustainability and
considers that a robust evaluation process will create
transparency, better decision-making, stronger culture
and more effective meetings. To this end the Board
is now using an external board evaluation platform
to facilitate this process, which is QCA and Wates
Principals compliant. This will provide a 360˚ evaluation
and will foster top team alignment and will influence
our development as a board in future years.
A full board skills review was undertaken by the
Chairman at the point of the strategy formulation
as referred to above, and the Board has been fully
refreshed.
Succession Planning
During this past year, the Board has been refreshed
and updated following a process of identifying the
preferred skills and capabilities needed to deliver
the growth strategy. Also during 2021 and into 2022,
a diverse Executive Leadership Team has been
formed to provide a pool of skilled talent for executive
succession opportunities. During 2021, the members
of the Executive team received leadership training
and were given personal development opportunities.
The Company considers succession planning as very
important and continues to monitor the succession
requirements of both Executive and Non-Executive
Directors of the Board, in light of the Company’s
overall needs.
Policy on Appointment and Reappointment
In accordance with corporate governance best
practice, all Directors will retire and submit themselves
for re-election every year at the AGM. New Directors
are subject to election at the first AGM of the
Company following their appointment.
Senior Independent Director
Annette Nabavi is the Senior Independent Director,
whose key responsibilities are:
•
•
•
to act as a sounding board for the Chairman and
to carry out the performance evaluation of the
Chairman;
to be available to attend meetings with major
shareholders and key advisors to receive their
views regarding the Group; and
to act as a route of access for shareholders and
directors who have concerns that cannot be
addressed through normal channels.
Non-Executive Directors
Each of the Non-Executive Directors (not including the
Chairman) is considered independent of management
and free of any relationship that could materially
interfere with the exercise of their independent
judgement. At the date of appointment, Non-Executive
Directors were assessed for independence against the
main Corporate Governance Code and against the
QCA Code. Under the QCA Code, the Board should
have an appropriate balance between Executive
and Non-Executive Directors and should have at
least two independent Non-Executive Directors. The
Company satisfies this requirement, with their financial
or commercial involvement with Eleco being their
annual salaries, any publicly disclosed shareholding,
and interest in contracts. The Non-Executive Directors
are considered independent and with no conflicts of
interest with Eleco employees or shareholders. Any
32
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
historic employment relationships are disclosed in the
Board of Directors pages 28 to 29. No Non-Executive
Director (other than the Chairman) has been an
employee of the Company within the past seven years.
The Company remains committed to a board which
has a balanced representation of Executives and Non-
Executives.
Each Non-Executive Director is expected to attend
and be prepared for all main board meetings.
Company Secretary
In furtherance to our commitment to the highest levels
of corporate governance, in July 2021 we appointed
a professional Company Secretary firm to advise and
facilitate the Chairman and the Board and to act as a
go-between for the Company’s professional advisors
and the Board. The Company Secretary’s further
duties include:
•
•
•
•
assisting the Board in the Company implementing
good governance procedures;
assisting Executives in ensuring that the Group
complies with legal, statutory, and regulatory
requirements;
assisting the Chairman with the effective running of
board meetings; and
acting as a confidential sounding board for
directors.
The Directors have access to independent professional
advice, when they judge it necessary, in executing their
duties on behalf of the Company. The main external
advisors used by the Company during the year can be
found on page 119.
Serena Lang
Chairman
30 March 2022
33
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021 Governance
Audit Committee Report
Committee Composition and Meeting Attendance
Director
Possible
Attended
D Dannhauser
(Chair until August 2021)
P Boughton
(Chair from September 2021)
K Craig (resigned August 2021)
M Castle
(from September 2021)
A Nabavi (from August 2021)
3
1
3
0
1
3
1
3
0
1
Dear Shareholder
This report sets out how the Audit Committee has
discharged its responsibilities during the financial year.
Although not members of the Audit Committee,
Company officers invited to the Audit Committee
meetings were the Chairman, the CFO, Group
Financial Controller and Company Secretary.
The primary roles and responsibilities of the
Committee are:
•
•
•
•
•
monitoring and reviewing the financial statements,
including the appropriateness and application
of accounting policies used, prior to their
recommendation to the Board;
reviewing the effectiveness of the Group’s internal
controls and risk management systems;
monitoring the relationship with the external auditor,
including assessing auditor independence and the
effectiveness of the audit process;
reviewing the adequacy of the Group’s
whistleblowing arrangements; and
making recommendations to the Board for its
consideration and approval.
Terms of Reference
The full terms of reference for the Audit Committee
may be found by visiting: www.eleco.com. They were
last reviewed on 30 September 2021.
The members of the Committee comprise the
independent Non-Executive Directors, and the
Committee is chaired by Paul Boughton. Paul
Boughton is a Fellow of the Institute of Chartered
Accountants in England and Wales (ICAEW) and
possesses the necessary depth of financial expertise
to fulfil the role. The Committee met four times
during the year to consider the 2020 audit plan, the
audit findings report for that year-end, the financial
statements for the year ended 31 December 2020 and
the interim report for the six months ended 30 June
2021.
34
External Auditor
Following their appointment in 2020, RSM UK Audit
LLP (“RSM”) was reappointed as the Company’s
external auditor and has been engaged to undertake
the audit of the Group’s financial year ended
31 December 2021. The auditor appointment is
subject to ongoing monitoring and the Committee
revisited their review of RSM’s effectiveness following
the completion of the audit for the Group’s financial
year ended 31 December 2020. The Committee
considered several factors when determining the
effectiveness of the external auditor, including: the
overall quality and scope of the audit; the audit partner
and team; communication and engagement with the
Audit Committee, both formal and informal, and how
issues were reported, followed up and resolved; the
independence of RSM and whether an appropriate
level of challenge and scepticism existed in their work.
The Committee also sought the views of key members
of the finance team and senior management on the
audit process and the quality and experience of the
audit partner. Their feedback confirmed that RSM
had performed well during 2021 and had provided an
appropriate level of challenge to management.
RSM has indicated its willingness to continue in
office and a resolution will be proposed at the
AGM to reappoint it as auditor and to determine its
remuneration.
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
The total fees paid to the Company’s Auditor in the
year are shown on page 77.
The Company used separate advisors for taxation.
Significant issues considered by the Committee
A brief summary of the significant issues considered
in relation to the annual report and accounts is set out
below:
1. The timing and methodology of revenue
recognition, particularly since Eleco’s transition to a
SaaS business model was initiated during 2021;
2. The balance sheet value of intangible assets,
including capitalised research and development
costs and goodwill arising from acquisitions;
3. The Company’s financial reporting and the
effectiveness of the internal control processes
across the Group. In respect of this, the external
auditor has highlighted a number of control
environment weaknesses stemming from the
lack of one central group reporting system and
oversight. As is the case with many groups that
are formed from acquisitions over time, Eleco’s
businesses operate on a variety of accounting
and business systems across the Group. Work
commenced in 2021 to replace these disparate
systems with one common group-wide system
with the aim of improving oversight, control
environment, transparency and efficiency.
The system has been selected and the basic
configuration work has been done. The work
was paused in Q4 in order to allow for a number
of the operational businesses to be merged (as
referred to elsewhere in this report). Progress is
being assessed by our new Interim CFO and new
CTO who joined the business early in 2022. The
Board is fully aware of the weaknesses highlighted
and expect the new system and related control
environment changes to be fully operational in the
current financial year.
All of these matters were dealt with by enquiry with
Eleco’s financial and accounting staff, including
the CFO, Interim CFO, and by discussion with the
Company’s Auditor, RSM.
Internal Audit
The Committee considered, once again, whether the
Group’s internal controls process would be significantly
enhanced by an internal audit function separately
resourced from the finance function and has taken the
view, given the size of the Group, that an internal audit
function would not be cost-effective at this time.
However, the Committee will continue to monitor
this in the context of the Group’s increasing size and
complexity.
Risk Management
Internal controls and risk management are detailed on
pages 16 to 19 of the Report and Accounts.
Paul Boughton FCA BSc
Audit Committee Chair
30 March 2022
35
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Committee Composition and Meeting Attendance
Director
S Lang (Chair)
K Craig (resigned August 2021)
D Dannhauser (resigned
August 2021)
A Nabavi (from August 2021)
M Castle (from September 2021)
P Boughton
(from September 2021)
Possible
Attended
1
1
1
0
0
0
1
1
1
0
0
0
Key Activities During the Year
During the year, the Board has been refreshed to
position the Company to push forward the transition
to SaaS. Alongside this, the Committee reviewed
the composition of each of the Board Committees
and made its recommendations to the full Board.
Paul Boughton was appointed Chair of the Audit
Committee, Annette Nabavi was appointed Chair of
the Remuneration Committee and Senior Independent
Director, and Mark Castle was appointed Chair of the
newly formed ESG Committee.
The 2021 Board evaluation was carried out internally,
led by the Chair and facilitated by the Company
Secretary. A full Board evaluation was performed
twice in 2021 (May and December). To complement
the bi-annual surveys, the Company is introducing for
2022 brief pulse surveys to follow each Board meeting.
The Board will consider other ways of carrying out the
Board evaluation in future, particularly with regard to
using an external facilitator.
Following consultation with the Company’s
shareholders, the Board agreed that all directors
should stand for re-election at the AGM. Resolutions
relating to the re-election of each director are included
in the AGM Notice that accompanies this report.
Director Induction and Training
On appointment to the Board, Directors are given a
comprehensive induction tailored to provide each
individual with the information necessary for them to
perform their new role effectively. The programme
this year was primarily virtual due to Covid-19 and
consisted of meetings with senior management and
receipt of key information relating to the Company’s
structure, strategy, headline risks and issues.
Dear Shareholder
On behalf of the Board and Committee I am pleased to
present the Nomination Committee Report for the year
ended 31 December 2021.
The Committee formally met once during the year.
The Committee also met informally through the year
and recorded its decisions via written resolutions. All
Committee members approved all written resolutions.
The Nomination Committee consists of the Non-
Executive Directors and is chaired by the Chairman of
the Board.
The Role of the Committee
The Board has delegated the monitoring of the
organisation’s leadership requirements as well as
succession planning to the Committee, to ensure that
the Group has the best resources to perform effectively
now and in the future.
Key Responsibilities
The primary roles and responsibilities of the
Committee are:
•
•
reviewing the structure, size and composition of the
Board and its Committees;
evaluating potential candidates for nomination
when and if it is deemed necessary to appoint a
new director to the Board; and
•
making recommendations to the full Board for
consideration and approval.
The full terms of reference for the Nomination
Committee were last updated on 30 September 2021
and may be found by visiting: www.eleco.com.
36
GovernanceJob No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Directors are required to keep their skills up to date
in accordance with their professional qualifications.
Non-Executive Directors and Executive Directors are
encouraged annually to undertake relevant training;
courses may be suggested to them or they may
identify courses themselves.
Recruitment Process
The Committee takes the view that it should appoint
the best candidate for a role irrespective of gender,
age, marital status, disability, sexual orientation, race
and religion, ethnic or national origin – this is in respect
of all roles within the Company, not just the Board. It is
committed to equal opportunities and promoting from
within the organisation, with the current CEO working
for the Company before being appointed to the Board.
Serena Lang
Nomination Committee Chair
30 March 2022
37
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Committee Composition and Meeting Attendance
Director
Possible
Attended
A Nabavi (Chair from September
2021)
P Boughton (from March 2021)
M Castle (from September 2021)
S Lang (from September 2021)
K Craig (resigned August 2021)
D Dannhauser
(resigned August 2021)
1
2
0
0
1
1
1
2
0
0
1
1
Dear Shareholder
On behalf of the Board I have pleasure in presenting
the Report of the Remuneration Committee for the
year ended 31 December 2021.
The Committee comprises four Non-Executive
Directors: Annette Nabavi (Chair), Paul Boughton,
Mark Castle and Serena Lang. Annette Nabavi took
over as Chair from Kevin Craig in September 2021
shortly after taking up her Non-Executive Director
appointment. Paul Boughton and Mark Castle joined
the Committee when they took up their Non-Executive
Director appointments in March and September 2021
respectively. Serena Lang joined the Committee when
she stepped back to a Non-Executive position in
September. Kevin Craig and David Dannhauser left the
Committee when they resigned in August 2021.
All meetings are attended by the Company Secretary
and other individuals may be invited to attend as and
when appropriate and necessary.
The Remuneration Committee determines and agrees
with the Board the framework or broad policy for the
remuneration of the Company’s Chairman, Executive
Directors and, as appropriate, other senior members
of the executive management. No director is involved
with decisions as to their own remuneration. The
objective of the Committee is to ensure that senior
executive remuneration is competitive, incentivises
and rewards good performance, supports the
Company’s strategy and that it will help the Company
continue to grow profitably, thereby creating value for
shareholders. Due consideration is given to all relevant
factors including company performance and individual
performance; reference is also made to external
benchmarks. The Committee meets formally at least
twice a year and at such other times as the Committee
Chair shall require or as the Board may request. The
Committee met twice during 2021.
The full terms of reference for the Remuneration
Committee were last updated on 30 September 2021
and may be found by visiting: www.eleco.com.
The primary roles and responsibilities of the
Committee are:
•
•
•
•
•
•
agree with the Board the framework or broad policy
for the remuneration of the Company’s Chairman,
Executive Directors and, as appropriate, other
senior members of the executive management;
review the ongoing appropriateness and relevance
of the Company’s remuneration policy;
determine the total individual remuneration
package for each Executive Director and other
senior directors including bonuses, incentive
payments and share/option awards;
determine the policy for and scope of any pension
arrangements for each Executive Director and other
senior executives;
oversee any major changes in employee benefit
structures across the Company or Group;
review the performance and award of any options
granted under the Company’s 2014 option share
plan; and
•
agree the terms of reference of any remuneration
consultants.
This report is split into two parts. The first provides the
general principles that the Board has agreed should
govern executive remuneration, the second details
how we intend to apply these principles in 2022 and
separately, the basis for the remuneration of Executive
Directors in 2021.
38
GovernanceJob No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
As detailed elsewhere in this report, the Company
has performed well during the year despite a number
of significant changes. It has developed and shared
with the market a detailed three-year strategy which
will accelerate the move to a SaaS revenue model
and this is beginning to bear fruit with an increase in
recurring revenues in 2021. Stretching targets were set
at the beginning of the year for the bonus plan and I
am pleased to be able to confirm to shareholders that
a significant number of these targets have been met
or exceeded and this has guided the Committee’s
allocation of the bonus pool. No option awards were
due to vest in 2021, although new grants were made
to Jonathan Hunter, Anders Karlsson and Serena
Lang in their capacity as Executive Directors. The
Committee believes that the overall remuneration
delivered in relation to 2021 represents a fair outcome
with regard to the progress the Company has made
and the performance delivered to shareholders and
other stakeholders.
Part 1: Remuneration Policy for Executive Directors
As a software company, the Company operates in a particularly active and competitive sector and our Executive
Remuneration Policy is designed to attract, incentivise and retain our key staff.
The total package is designed such that a significant proportion is linked to performance conditions related to
the long-term success of the Company. However, when setting the levels of short-term and long-term variable
remuneration and the balance of cash and share elements, consideration is given to achieving the right balance,
so as not to encourage unnecessary risk-taking, or short-term actions which are not in the Company’s long-term
interests.
The key features of the Remuneration Policy are as follows:
Element of Remuneration
Base Salary
Purpose and link to
Strategy
To recruit and reward executives
of a suitable calibre to execute
the Company’s strategy by
paying a competitive level of fixed
remuneration.
Directors’ Fees
To recognise the Executive’s
position on the Board.
Policy and Approach
Base salaries are reviewed annually
by the Committee in January.
Inflationary increases will be in
line with the Company’s overall
budgetary increases. Other
increases reflect changes in role
and in responsibility. Benchmark
comparisons are also made with
other companies of a similar size and
complexity.
A fee of £5,000 is currently paid
to each Executive Director in
recognition of their appointment. This
fee is non-pensionable and is not
included in any bonus calculation.
However, going forward this fee will
be absorbed into the Executive’s
base salary.
Benefits typically include car
allowance, medical insurance, and
life assurance. Executive Directors
are entitled to 25 days’ leave per
annum.
Benefits
Pension
To ensure the well-being of
employees and complement the
base salary.
To provide assistance with post
retirement financial planning.
Pension is payable at up to 9 per
cent of base salary.
39
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Remuneration Committee Report continued
Element of Remuneration
Annual Bonus
Purpose and link to
Strategy
To incentivise the achievement
of the Company’s short-term
operational and financial goals.
Long-term Incentives
To incentivise the delivery of the
Company’s long-term strategic
objectives and provide alignment
with shareholders through the use
of share-based incentives.
Policy and Approach
Objectives and KPIs are set annually
for each Executive. Normally the KPIs
are weighted so that 50 per cent refer
to financial targets including revenue,
EBITDA, FCF and recurring revenue
growth whilst the remainder pick up
KPIs which reference the Company’s
ESG targets and other individual
targets.
The maximum bonus that the CEO
can receive is 100 per cent of base
salary. The maximum bonus for the
CFO is 70 per cent of base salary.
The maximum will only be achieved
if the KPIs are exceeded. A sliding
scale is in place.
The Company uses long-term
incentives to underpin the
Company’s growth strategy. It has
traditionally used market priced
options coupled with KPIs, issued
on an ad hoc basis to senior staff.
However, in the last couple of
years the Board has moved to
a more regular pattern of option
grants. The Board intends to use
a mix of market-priced options
and nominal cost options. The
nominal cost options will have KPIs
related to the Company’s strategy
and performance. All awards will
be subject to appropriate vesting
periods and require the option holder
to be in employment or an office
holder of the Company at the time of
vesting.
Executive Directors’ Service Agreements
The Committee reviews new Executive Directors’ service contracts before appointment to ensure that they meet
best practice.
The standard termination period for Executive service contracts is three months. Exceptionally, Robert Tearle’s
termination period was set at 6 months due to the competitive job market and to protect the Company from
any instability which might have occurred following the previous CFO’s departure. In addition, Anders Karlsson,
who served as an Executive Director until June 2021, and who runs the Company’s Swedish operation, has a
termination period of six months for historic reasons. Anders Karlsson has now reverted to his role as Regional
MD, Nordics. Serena Lang, who served as Executive Chairman for part of 2021, was on a twelve-month
contract. This terminated in September 2021 when she finished the agreed term. She has since returned to her
40
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role as Non-Executive and has entered into a standard Non-Executive Director appointment contract with a
three-month termination period.
Service contracts are available for inspection at the Company’s registered office.
Part 2: How the Remuneration Policy will be applied in 2022
2022 salary review
The salary of Jonathan Hunter has been increased from £200,000 to £220,000 in line with the Company’s
remuneration policy. This increase was based on a benchmarking exercise against other AIM-listed companies
of a similar size. Jonathan was recently appointed as CEO and transitioned from interim to permanent CEO in
February 2021. This uplift now better reflects his performance and the value he brings as permanent CEO.
The salary of Robert Tearle was not increased.
Performance targets for the 2022 Annual Cash Bonus
The annual bonus will be based on a number of different KPIs. 50 per cent of the bonus will be paid against
the achievement of financial KPIs including revenue, EBITDA, Free Cash Flow and Recurring Revenue growth.
The remaining 50 per cent will be paid against other measures including the ESG Scorecard, product roadmap
development and the US business plan. The bonus will be subject to a sliding scale and the payment of 100 per
cent of bonus will require overachievement of all KPIs. Normally no bonus will be paid if the financial results fall
substantially below consensus forecasts. However, the Committee reserves the right to exercise its discretion.
In line with market practice, going forward the Company will be adopting upper thresholds of 100 per cent and
70 per cent base salary for the CEO and CFO bonuses, respectively.
LTIP Awards to be granted in 2022
The Committee would like to grant additional options to Jonathan Hunter and other members of the Senior
Leadership Team when the Company is in a position to do so.
Directors’ Remuneration
Fees
£’000
£’000
Benefits
£’000
£’000
LTIP
£’000
£’000
Pension
£’000
£’000
Year to
31 December
2021
Year to
31 December
2020
£’000
£’000
Executive
S Lang
J Hunter
A Karlsson
B Moralee*
R Tearle
Non-Executive
S Lang
P Boughton
M Castle
K Craig
D Dannhauser
A Nabavi
Basic
salary
£’000
208
200
97
103
98
—
—
—
—
—
—
Bonus
£’000
£’000
150
150
11
13
–
—
—
—
—
—
—
0
5
6
1
4
21
32
13
28
45
18
4
5
4
1
4
—
—
—
8
—
—
53
48
15
6
0
—
—
—
—
—
—
0
18
26
6
8
—
—
—
—
—
—
415
426
159
130
114
21
32
13
36
45
18
*
Included in the basic salary figure is a settlement amount of £69,000. Resigned 26 March 2021.
160
265
216
166
—
48
—
—
37
47
—
41
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Remuneration Committee Report continued
Details of the LTIP options currently in issue are tabled below:
Options
2021
Expiry
date
Outstanding
number of
options
Criteria for vesting options
23/02/2031
600,000 The Option shall vest on the Vesting Date if the Adjusted EPS for the
year ended 31 December 2024 is at least 20 per cent greater than the
Adjusted EPS on 31st December 2020.
2020
12/11/2030
250,000 Half of the options are exercisable after 3.0 years, subject to the share
price being equal to or exceeding 117 pence per share for 20 consecutive
dealing days between the date of issue and the 31 May 2023.
(a) The basic EPS reported in the audited Accounts for the year ended
31 December 2022 is at least 7.1 pence; or
(b) if target (a) is not met but the basic EPS reported in the audited
Accounts for the year ended 31 December 2023 is at least 8.23
pence; or
(c) if neither target (a) or (b) is met but the basic EPS reported in the
audited Accounts for the year ended 31 December 2023 is at least
7.88 pence 2/3rds of the award will vest; or
(d) if none of targets (a), (b) or (c) is met but the basic EPS reported in the
audited Accounts for the year ended 31 December 2023 is at least
7.70 pence fifty percent of the award will vest; or
(e) if none of targets (a), (b), (c) or (d) is met but basic EPS reported in the
audited Accounts for the year ended 31 December 2023 is at least
7.53 pence 1/3rd of the option will vest, failing which the remaining
half of Options will lapse.
2020
31/05/2030
650,000 Half of the options are exercisable after 3.0 years, subject to the share
price being equal to or exceeding 117 pence per share for 20 consecutive
dealing days between the date of issue and the 31 May 2023.
(a) The basic EPS reported in the audited Accounts for the year ended
31 December 2022 is at least 7.1 pence; or
(b) if target (a) is not met but the basic EPS reported in the audited
Accounts for the year ended 31 December 2023 is at least 8.23
pence; or
(c) if neither target (a) or (b) is met but the basic EPS reported in the
audited Accounts for the year ended 31 December 2023 is at least
7.88 pence 2/3rds of the award will vest; or
(d) if none of targets (a), (b) or (c) is met but the basic EPS reported in the
audited Accounts for the year ended 31 December 2023 is at least
7.70 pence fifty percent of the award will vest; or
if none of targets (a), (b), (c) or (d) is met but basic EPS reported in the
audited Accounts for the year ended 31 December 2023 is at least 7.53
pence 1/3rd of the option will vest, failing which the remaining half of
Options will lapse.
2017
08/08/2027
500,000
The performance target for vesting for the year ended 31 December 2019
is an EPS of at least 2.97 pence.
2,000,000
42
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Governance
Directors’ Share Options
J Hunter
S Lang
Directors’
options
in issue at
year end
Issued
during
year
2021
Exercisable
£
£
Issued
during
year
2020
Exercisable
£
£
600,000 250,000
1.004 251,000
250,000
0.743 185,750
500,000 250,000
1.004 251,000
250,000
0.749 187,250
1,100,000 500,000
500,000
—
There were no gains from exercise of options by Director’s during the year.
Non-Executive Directors
The Non-Executive Directors do not have service contracts but instead have letters of appointment which
contain details of the terms of office, period of appointment, fees and reasonable expenses incurred in the
performance of their duties. The Non-Executives serve for a term of three years from the date of appointment in
accordance with the Articles of Association. In line with corporate governance best practice, the Company has
elected for all Non-Executive Directors along with the Executive Directors to stand for re-election at each AGM.
A Non-Executive Director can be reappointed for an additional term following the completion of their first term in
office.
During 2021 three new Non-Executive Directors were appointed and Serena Lang resumed her role as a Non-
Executive Director under a new Appointment Letter. Kevin Craig and David Dannhauser retired from the Board.
Interest in Contracts
There are no contracts of significance between the Company or its subsidiary companies and any of the
Directors during the year. However, transactions between Directors and the Group are detailed below:
Director
K Craig
2021
£
4,500
2020
£
Company
14,400 Political Lobbying
& Media Relations
Limited
Position
Service
Former Director
and Shareholder
Website Consultancy
43
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Governance
Remuneration Committee Report continued
Gender Pay Gap
Eleco plc and its UK subsidiaries currently has 103 employees (2020: 95) in the UK.
The Company is not obliged to undertake a formal review of a potential gender pay gap. However, it carries out a
review of gender and remuneration levels across the UK. The Board notes that the Company’s highest paid (pro
rata) employee in 2021 is female and that over 30 per cent (2020: 30 per cent) of UK employees are female.
Dr. Annette Nabavi MA (Oxon), Doc. de 3ieme cycle (Dijon)
Remuneration Committee Chair
30 March 2022
44
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ESG Committee Report
In support and recognition of industry best practice,
Eleco has formed an ESG Committee.
The members of the Committee comprise the Non-
Executive Directors and the CEO. The Committee is
chaired by Mark Castle, who possesses the broad
experience and leadership to fulfil the role. The ESG
Committee was formed in 2021 and the first meeting
held in 2022.
Our ESG commitments will support our Purpose,
Mission and Values and will be set around a balanced
scorecard of metrics which will aim to capture
improved year on year performance.
Eleco will engage with its stakeholders across the
organisation as we embrace the wider ESG agenda
and our ESG performance will play a part in Executive
remuneration going forward.
Eleco will publish a comprehensive report on the
activity and performance of Eleco against the
scorecard measures within its 2022 Annual Report.
In defining our ESG strategy for 2022 and beyond
we are reviewing how we can positively contribute to
the global environmental challenges recognising our
international footprint.
Within our social strategy we recognise the importance
of working together with our colleagues, customers,
and suppliers to promote fairness, equality, and
inclusion.
As part of our Governance review and recognising best
practice Eleco reviews our policies and procedures to
ensure they remain current, appropriate, and compliant
around latest legislation.
Terms of Reference
The full terms of reference for the ESG Committee may
be found by visiting: www.eleco.com.
45
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ESG Committee Report continued
Streamlined Energy Carbon Reporting
In line with the Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 our energy use and
greenhouse gas (GHG) emissions are set out below.
The data relates to UK emissions for the twelve-month period from 1 January 2021 to 31 December 2021.
Eleco Energy Use and Associated Greenhouse Gas Emissions
Total Energy consumption
Jan-Dec 2021
Jan-Dec 2020
214,271 kWh
286,860 kWh
Emissions from combustion of gas (Scope 1)
17 tCO2e
20 tCO2e*
Emissions from combustion of fuel for the purposes of
transport (Scope 1)
1 tCO2e
5 tCO2e
Emissions from purchased electricity (Scope 2)
21 tCO2e
25 tCO2e
Emissions from business travel in rental cars or
employee-owned vehicles where company is
responsible for purchasing the fuel (Scope 3)
7 tCO2e
7 tCO2e*
Total gross emissions
46 tCO2e
57 tCO2e
Emissions per £m turnover
2 tCO2e per £m
sales revenue
2 tCO2e per £m
sales revenue
Percentage
Change
-25%
-15%
-80%
-16%
N/A
-19%
NA
Total Gross Scope 1, Scope 2 [market based] &
Scope 3 emissions (tCO2e) [optional]
42 tCO2e
53 tCO2e
-20%
*Figures recalculated for 2020 in line with the methodology used for 2021
Eleco plc Energy Use and Associated Greenhouse Gas Emissions: Company Breakdown
The regulator advises that a group SECR report should state how the data reported relates to the subsidiaries
covered by the Group report. Below provides a breakdown by company based on the data provided.
Electricity
Gas
Transport Fuels
Company Cars
Mileage
Claims
Total
kWh
Total
tco2e
kWh
tco2e
kWh
tco2e
kWh
tco2e
kWh
tco2e
Elecosoft UK Ltd
60,025 12.75 36,341
6.66
129
0.03
13,124
3.17 109,619 22.61
Shire Systems Ltd
17,292
3.67
36,812
6.74
680
0.17
12,319
2.98
67,102 13.56
Integrated Computing
and Office Networking
Limited
16,740
3.55
0
0
Eleco Software Ltd
266
0.06
336
0.06
Eleco plc
3,846
0.82
14,716
2.70
0
0
0
0
0
0
580
0.14
17,320
3.69
0
0
602
0.12
1,066
0.26
19,627
3.77
46
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Intensity Ratio:
We have chosen to report our gross emissions
against £m Sales Revenue. The value for the
intensity ratio was 2 tCO2e per £m sales revenue.
Energy Efficiency Action:
In the period covered by the report, Eleco continued
using a hybrid car as the only company car for
business travel for Elecosoft UK Ltd’s fleet. Smart
meters were fitted at the Clifton Street London
office.
Mark Castle
ESG Committee Chair
30 March 2022
Governance
Quantification and Reporting Methodology:
The boundaries of this report are based on
operational control. We report our emissions with
reference to the latest Greenhouse Gas Protocol
Corporate Accounting and Reporting Standard
(GHG Protocol). In accordance with the 2018
Regulations, the energy use and associated
greenhouse gas emissions are for those within the
UK only that come under the operational control
boundary. Therefore, energy use and emissions
are aligned with financial reporting for the UK
subsidiaries and exclude the non-UK based
subsidiaries that would not qualify under the 2018
Regulations in their own right.
The 2021 UK Government GHG Conversion
Factors for Company Reporting published by the
UK Department for Environment Food & Rural
Affairs (DEFRA) are used to convert energy use
in our operations to emissions of CO2e. Carbon
emission factors for purchased electricity calculated
according to the ‘location-based grid average’
method. This reflects the average emission of the
grid where the energy consumption occurs. For
Market Harborough, all power is purchased from an
onsite solar farm, and an additional figure has been
calculated using market-based factors to account
for this as zero emissions in our report above. Data
sources include billing, invoices and the Group’s
internal systems. For some sites, the buildings are
leased where the utilities are included in the rent.
Benchmarking based on floor area against industry
benchmarks has been used to provide estimated
energy consumption in these buildings. For one
site, gas data was unavailable for the full January-
December period, and so data from the November-
October twelve month period was used instead as it
likely had similar consumption levels. For transport
data where actual usage data (e.g. litres) was
unavailable, conversions were made using average
fuel consumption factors to estimate the usage.
47
Job No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021 Directors’ Report
The Directors present their report and the audited financial statements for the year ended
31 December 2021.
The Company is a member of the Quoted Companies Alliance (“QCA”). The QCA publishes its own Corporate
Governance Code (“Code”) that recognises that good corporate governance helps deliver business success and
growth. During the year, the Board continued work on ensuring that it complies with the Code. In this regard,
please also see the Corporate Governance Report.
In accordance with section 414C of the Companies Act 2006, certain matters that would otherwise be required
in the Directors’ Report are included elsewhere in the financial statements as indicated in the table below and are
incorporated into this report by reference.
Biographical details of the Directors
Board of Directors
Corporate governance
Corporate Governance Report
Directors’ remuneration and interests Remuneration Committee Report
Independent auditor
Audit Committee Report
Financial risk management
Review of Principal Risks
Going concern
Notes to the Consolidated Financial Statements
Page 28
Page 30
Page 38
Page 34
Page 16
Page 64
Group’s treasury policies
Notes to the Consolidated Financial Statements
Pages 95 to 100
Research and development activities Notes to the Consolidated Financial Statements
Risk management
Share capital
Strategic review
Review of Principal Risks
Notes to the Consolidated Financial Statements
Our Software
Page 67
Page 16
Page 91
Page 12
Results for the Year Ended 31 December 2021
The Group profit on ordinary activities before taxation was £3,926,000 (2020: £3,889,000). The detailed financial
statements of the Group are set out on pages 58 to 102.
Business Review and Future Development
A review of the Group’s operations during the year and its plans for the future are set out in the Chairman’s
Statement on pages 2 to 4 and the CEO Report on pages 5 to 9.
48
GovernanceJob No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Dividends
The Directors have recommended a final dividend of
0.40 pence (2020: 0.40 pence). An interim dividend of
0.20 pence was paid on 22 October 2021 (2020: No
Interim Dividend).
Share Price
The middle market price of the Company’s Ordinary
Shares on 31 December 2021 was 92.0 pence and the
range during the period under review was 77 pence to
146 pence.
Directors
The current composition of the Board of Directors is
shown on pages 28 to 29. Directors who held office
during the year were:
• S Lang
• J Hunter
• P Boughton (appointed 23 March 2021)
• A Nabavi (appointed 12 August 2021)
• M Castle (appointed 20 September 2021)
• B Moralee (resigned 26 March 2021)
• A Karlsson (resigned 31 August 2021)
• D Dannhauser (resigned 31 August 2021)
• K Craig (resigned 31 August 2021)
•
R Tearle (appointed 29 March 2021, resigned
4 February 2022)
The Group carries and maintains Directors’ and
Officers’ liability insurance in respect of itself and its
Directors throughout the financial period.
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 on 31 December 2021
were as follows:
J Hunter
S Lang
2021
2020
28,361
16,514
77,234
–
Substantial Interests
As at the year end, the Company has been notified of
the following interests in the issued share capital:
Shareholder
H A Allen
J H B Ketteley
J D Lee
Discretionary Unit Fund
Managers*
IBIM2 Limited
Tikvah Management
No. of shares
11,882,584
9,359,957
5,462,064
4,520,781
4,120,563
3,905,614
Janus Henderson Investors**
3,153,443
P R & Mrs M J Ketteley
3,136,440
Schroder Investment Capital
2,492,325
*
**
formerly Rights & Issues Investment Trust PLC
formerly Lowland Investment Company PLC
%
14.29
11.26
6.57
5.44
4.96
4.70
3.79
3.77
3.00
Political Donations
The Group did not make any political donations in
2021 (2020: £nil).
Research and Development
Product innovation and development is a continuous
process. The Company 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 page 67.
Diversity and Inclusion
The Group is committed to keeping its employees
fully informed regarding its performance and
prospects. Employees are encouraged to present their
suggestions and views. The Company has invested in
an HR system and has introduced an employee survey
to gain feedback.
We are keen to promote diversity and equal
opportunities within our workforce, being mindful
that having a workforce that comprises people from
different backgrounds and with different perspectives
encourages the creation of a more dynamic and
inclusive environment. We aim to embed this into our
entire recruitment, training and promotion processes.
49
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The Company provides 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 their employment with
the Company.
Our impact on and engagement with our stakeholders
is set out in our s.172 Statement on pages 20 to 24.
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.
Company law requires the Directors to prepare Group
and Company financial statements for each financial
year. The Directors have elected under company law
and are required by the AIM Rules of the London Stock
Exchange to prepare the Group financial statements in
accordance with UK adopted International Accounting
Standards with the requirements of Companies Act
2006 and to prepare the Company financial statements
in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
The Group financial statements are required by law
and UK adopted International Accounting Standards
to present fairly the financial position and performance
of the Group; the Companies Act 2006 provides in
relation to such financial statements that references
in the relevant part of that Act to financial statements
giving a true and fair view are references to their
achieving a fair presentation.
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
of the Group and the Company and profit or loss of
the Group for that period. In preparing these financial
statements, the Directors are required to:
adopted International Accounting Standards within
the requirements of the Companies Act 2006;
•
state for the Company financial statements whether
applicable UK accounting standards have been
followed, subject to any material departures
disclosed and explained in the Company financial
statements; and
•
prepare financial statements on the going concern
basis unless it is inappropriate to presume the
Group and the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group’s and 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 Group and the
Company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Eleco website.
Legislation in the United Kingdom governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Disclosure of information to auditor
Each of the Directors who are in office at the date
when this report is approved has confirmed that,
as far as they are aware, there is no relevant audit
information of which the auditor is unaware. Each of
the Directors have confirmed that they have taken all
the steps that they ought to have taken as Directors
to make themselves aware of any relevant audit
information and to establish that the auditor is aware of
such information.
By order of the Board
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that
are reasonable and prudent;
for the Group financial statements, state whether
they have been prepared in accordance with UK
Jonathan Hunter
Chief Executive Officer
30 March 2022
Eleco plc
6 Bevis Marks
London
EC3A 7BA
•
•
•
50
GovernanceJob No: 46561Proof Event: 17Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Financial Statements
Independent Auditor’s Report
to the members of Eleco plc
Opinion
We have audited the financial statements of Eleco Plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 31 December 2021 which comprise Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated Balance
Sheet, Consolidated Statement of Cash Flows, Company Statement of Changes in Equity, Company Balance
Sheet and notes to the financial statements, including significant accounting policies. The financial reporting
framework that has been applied in the preparation of the group financial statements is applicable law and
UK-adopted International Accounting Standards. The financial reporting framework that has been applied in
the preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the
UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
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 2021 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with UK-adopted International
Accounting Standards;
the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the group and the parent company
in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
Group
Materiality
Scope
• Goodwill and other intangible impairment
Parent Company
• None
Group
• Overall materiality: £198,000 (2020: £194,000)
• Performance materiality: £148,000 (2020: £145,000)
Parent Company
• Overall materiality: £50,000 (2020: £194,000)
• Performance materiality: £37,500 (2020: £145,000)
Our audit procedures covered 100% of revenue, 100%
of total assets and 100% of profit before tax.
51
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to the members of Eleco plc
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the group financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on
the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the group [and parent company] financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Goodwill and other intangibles impairment
Key audit matter description
Refer to Accounting Policies – Significant accounting judgement and
estimates – Impairment of Goodwill, Note 9 – Goodwill, Accounting
Policies – Capitalisation of development costs and carrying value and
Note 10 – Other Intangible assets
As at 31 December 2021, the Group had Goodwill totalling £15,593k
(2020: £15,762k) arising from past acquisitions.
Management is required by IAS 36 to test cash generating units
(“CGUs”) to which goodwill is allocated for impairment on an annual
basis. Management has prepared discounted cash flow (“DCF”) models
to estimate the value in use of each of the Group’s CGUs and compare
these to the carrying value of the goodwill and other assets allocated to
the relevant CGU.
The use of DCF models requires management to make estimates
involving judgements, including forecasts of revenue, profitability,
and the application of appropriate discount rates. Management have
prepared their DCF models using a pre-tax discount rate based on
weighted average costs of capital (“WACC”) ranging from 14.1% to
16.9% (2020: 11.6% to 13.9%).
Furthermore, the group had £6,740k (2020: £7,195k) of other intangible
assets of which £4,059k (2020: £4,187k) relates to capitalised software
product development costs.
Management has carried out impairment testing of individual product
software / solutions and recognised an impairment loss of £636k (2020:
£nil) against one product during the period after comparing its carrying
value before impairment and its recoverable amount, being, its value in
use, at the year-end date.
Given the material nature of the balances, the significant management
judgements and estimations involved, and the potential impact on the
financial statements, we have determined Goodwill and other intangible
asset impairment to be a key audit matter. Furthermore, a significant
allocation of audit resources has been used in these areas, including
engagement of an auditor expert.
52
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com How the matter was addressed in
the audit
Our audit approach included:
•
•
Obtaining and understanding management’s initial assessment of
indicators of impairment on individual products.
Auditing management’s annual impairment reviews by comparing
the value in use to the carrying value of individual products and
the value in use of the relevant CGUs to the carrying value of the
goodwill and attributable operating assets.
• Agreeing the mathematical accuracy and integrity of the calculations.
•
•
•
•
Consulting with an internal valuations experts over the DCF model
used, including inputs and reasonableness of the discount rate used.
Considering the sensitivity analysis performed by management and
the reasonableness and likelihood of changes in key assumptions
that would result in an impairment.
Comparing forecast cash flows to actual results observed to date
including comparisons of prior year forecasts to actual results.
Considering any evidence of management bias in assumptions used
in the annual impairment review.
• Challenging management on the assumptions used in their model(s).
• Reviewing disclosures in the financial statements.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature,
timing and extent of our audit procedures. When evaluating whether the effects of misstatements, both
individually and on the financial statements as a whole, could reasonably influence the economic decisions
of the users we take into account the qualitative nature and the size of the misstatements. Based on our
professional judgement, we determined materiality as follows:
Overall
materiality
Basis for
determining
overall materiality
Group
£198,000 (2020: £194,000)
Parent company
£50,000 (2020: £194,000)
5% of profit before tax
5% of net assets (restricted for purposes of
providing a Group opinion).
Rationale for
benchmark
applied
As a listed entity, profit before taxation is
considered the most appropriate benchmark
for users of the financial statements.
Net assets is considered to be the most
appropriate benchmark for the parent
company as it is primarily a holding
company.
£148,000 (2020: £145,000)
£37,500 (2020: £145,000)
75% of overall materiality
75% of overall materiality
Performance
materiality
Basis for
determining
performance
materiality
Reporting of
misstatements
to the Audit
Committee
Misstatements in excess of £9,920 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
Misstatements in excess of £2,500 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
53
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to the members of Eleco plc
An overview of the scope of our audit
The group consists of 15 components, located in the following countries;
• United Kingdom
• Sweden
• Germany
• United States
• Netherlands
The coverage achieved by our audit procedures was:
4%
6% 2%
26%
Revenue
Total
assets
70%
92%
3%
3%
Profit
before
tax
94%
Full scope
Specific audit procedures
Analytical procedures
Full scope audit procedures were performed on Eleco Plc and its non-dormant UK (other than Integrated
Computing & Office Networking Limited (“ICON”)) and non-dormant Swedish subsidiaries. Specified procedures
were performed on the German subsidiaries and analytical review procedures were carried out on the ICON, US
and Dutch subsidiaries for the purposes of the Group audit.
Specific audit procedures were performed on components which are not financially significant by size but
include significant risks and to provide sufficient coverage for the Group opinion. Targeted procedures were
performed on the areas of the financial statements most likely to give rise to significant risks of material
misstatement of the group financial statements.
Component auditors were used to complete audit procedures for Swedish and German entities. The Group audit
team sent group instructions to the component auditors detailing the procedures to be completed for group
purposes for each component. The group audit team reviewed the audit working papers of the Swedish and
German component auditors and attended meetings with local and group management.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of
accounting included:
•
•
•
•
Obtaining, reviewing and evaluating management’s 18-month cash flow forecasts to June 2023, including
challenging the assumptions made by management.
Checking the arithmetic accuracy of the forecasts that form the basis of the directors’ going concern
assessment.
Corroborating the cash balance that is used as the starting point for the forecasts by confirming to bank
confirmations and obtaining an updating cash position subsequent to the balance sheet date.
Agreeing the Group’s main external debt as fully repaid pre-year end to confirmations and repayments to the
bank statement.
• Auditing the disclosures in the financial statements in respect of going concern.
54
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group’s or the parent company’s
ability to continue as a going concern for a period of at least twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information contained
within the annual report. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinions 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 the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the
Directors’ Report.
We have nothing to report in respect of the following matters in relation to which 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.
55
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Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 50, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain
sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on
the determination of material amounts and disclosures in the financial statements, to perform audit procedures
to help identify instances of non-compliance with other laws and regulations that may have a material effect on
the financial statements, and to respond appropriately to identified or suspected non-compliance with laws and
regulations identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the
financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud through designing and implementing appropriate responses and to respond
appropriately to fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with governance, to
ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and
for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group
audit engagement team and component auditors:
•
•
•
obtained an understanding of the nature of the industry and sector, including the legal and regulatory
frameworks that the group and parent company operates in and how the group and parent company are
complying with the legal and regulatory frameworks;
inquired of management, and those charged with governance, about their own identification and assessment
of the risks of irregularities, including any known actual, suspected or alleged instances of fraud;
discussed matters about non-compliance with laws and regulations and how fraud might occur including
assessment of how and where the financial statements may be susceptible to fraud.
All relevant laws and regulations identified at a Group level and areas susceptible to fraud that could have a
material effect on the financial statements were communicated to component auditors. Any instances of non-
compliance with laws and regulations identified and communicated by a component auditor were considered in
our audit approach.
56
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com The most significant laws and regulations were determined as follows:
Legislation/Regulation
UK-adopted IAS, FRS102 and Companies Act 2006 Review of the financial statement disclosures and
Additional audit procedures performed by the Group audit engagement team
and component auditors included:
Tax compliance regulations
testing to supporting documentation;
Completion of disclosure checklists to identify areas of
non-compliance
Inspection of advice received from external tax advisors
Inspection of correspondence with local tax authorities
Consideration of whether any matter identified during
the audit required reporting to an appropriate authority
outside the entity.
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Revenue recognition
Management override of controls
Audit procedures performed by the audit engagement team:
Obtaining an understanding of the processes and
controls around revenue recognition.
Transactions posted to nominal ledger codes outside of
the normal revenue cycle were identified using a data
analytic tool and investigated.
Cut-off testing.
Testing of deferred income to ensure revenues related
to the next accounting period have been appropriate
deferred.
Testing the appropriateness of journal entries and other
adjustments.
Assessing whether the judgements made in making
accounting estimates are indicative of a potential bias.
Evaluating the business rationale of any significant
transactions that are unusual or outside the normal
course of business.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 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.
Euan Banks
Senior Statutory Auditor
For and on behalf of RSM UK Audit LLP
Statutory Auditor, Chartered Accountants
25 Farringdon Street
London EC4A 4AB
30 March 2022
57
Job No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021Financial Statements
Consolidated Income Statement
for the year ended 31 December 2021
Continuing operations
Revenue
Cost of sales
Gross profit
Notes
2021
£’000
2020
£’000
1, 2
27,344
25,232
(2,754)
(2,529)
24,590
22,703
Amortisation and impairment of intangible assets
2, 3, 10
(2,361)
(1,658)
Former Directors’ payments
Other administrative expenses
Administrative expenses
Operating profit
Finance cost
Profit before tax
Tax
Profit for the financial period
Attributable to:
Equity holders of the parent
Earnings per share – (pence per share)
Basic
Diluted
3
3
(69)
(328)
(18,061)
(16,566)
(20,491)
(18,552)
2, 3
4,099
4,151
5
6
8
8
(173)
(262)
3,926
3,889
(1,195)
(726)
2,731
3,163
2,731
3,163
3.3p
3.3p
3.9p
3.9p
58
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com
Consolidated Statement of Comprehensive
Income
for the year ended 31 December 2021
Profit for the period
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss:
Translation differences on foreign operations
Other comprehensive (loss)/income net of tax
Total comprehensive income for the period
Attributable to:
Equity holders of the parent
2021
£’000
2020
£’000
2,731
3,163
(258)
(258)
193
193
2,473
3,356
2,473
3,356
59
Job No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Share
capital
£’000
822
Share
premium
£’000
2,047
Merger
reserve
£’000
1,002
Translation
reserve
£’000
Other
reserve
£’000
Retained
earnings
£’000
Total
£’000
(198)
(108)
14,359
17,924
–
–
–
–
–
–
190
–
190
(8)
–
–
–
–
–
–
(270)
(1)
(271)
(279)
–
131
(25)
–
106
–
–
–
–
(2)
–
81
(83)
–
(2)
–
–
(1)
(1)
(5)
–
–
–
–
–
–
131
–
113
244
3,163
3,163
3
–
193
–
3,166
3,356
17,525
21,524
(493)
–
83
–
(410)
(493)
81
–
260
(152)
2,731
2,731
12
32
(258)
1
2,775
2,474
19,890
23,846
At 1 January 2020
Dividends
Share-based payments
Elimination of exercised 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
Other
Total comprehensive income for the
period
–
–
–
3
3
–
–
–
–
–
–
25
110
135
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2020
825
2,182
1,002
Dividends
Share-based payments
Elimination of exercised share-based
payments
Issue of share capital
Transactions with owners
Profit for the period
Exchange differences on translation of
net investments in foreign operations
Other – reserve reclassifications
Total comprehensive income for the
period
–
–
–
7
7
–
–
–
–
–
–
–
253
253
–
–
(29)
(29)
–
–
–
–
–
–
–
–
–
At 31 December 2021
832
2,406
1,002
60
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Consolidated Balance Sheet
At 31 December 2021
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-Use assets
Deferred tax assets
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
Borrowings
Lease liabilities
Trade and other payables
Provisions
Current tax liabilities
Accruals and deferred income
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax liabilities
Non-current provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger reserve
Translation reserve
Other reserve
Retained earnings
Equity attributable to shareholders of the parent
Notes
2021
£’000
2020
£’000
9
10
11
22
19
13
14
16
16, 22
15
17
18
16
16, 22
19
17
20
15,593
6,554
717
1,728
65
15,762
7,195
651
2,208
85
24,657
25,901
16
4,277
216
10,055
23
3,911
90
10,668
14,564
14,692
39,221
40,593
(45)
(471)
(1,793)
(10)
–
(9,689)
(1,647)
(582)
(1,660)
(125)
–
(8,880)
(12,008)
(12,894)
(56)
(1,464)
(1,806)
(41)
(2,867)
(1,850)
(1,417)
(41)
(3,367)
(6,175)
(15,375)
(19,069)
23,846
21,524
832
2,406
1,002
(279)
(5)
19,890
825
2,182
1,002
(8)
(2)
17,525
23,846
21,524
The financial statements of Eleco plc, registered number 00354915, on pages 58 to 102 were approved by the
Board of Directors on 30 March 2022 and signed on its behalf by:
Jonathan Hunter
Chief Executive Officer
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Job No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021Financial Statements
Consolidated Statement of Cash Flows
for the year ended 31 December 2021
Note
2021
£’000
2020
£’000
3,926
3,889
173
722
262
866
2,361
1,658
(7)
81
(16)
131
7,256
6,790
(115)
(366)
7
942
(17)
428
23
914
7,724
8,138
(124)
(903)
(206)
(785)
6,697
7,147
(1,727)
(1,603)
(279)
60
(99)
71
(1,946)
(1,631)
(4,447)
(1,647)
(650)
(493)
260
(761)
–
–
(5,330)
(2,408)
(579)
10,668
(34)
3,108
7,236
324
10,055
10,668
10,055
10,668
10,055
10,668
16
22
Cash flows from operating activities
Profit before tax
Net finance costs
Depreciation charge
Amortisation and impairment charge
Profit on sale of property, plant and equipment
Share-based payments charge
Cash generated in operations before working capital movements
Decrease in provisions
(Increase)/decrease in trade and other receivables
Decrease in inventories and work in progress
Increase in trade and other payables and accruals and deferred income
Cash generated in operations
Interest paid
Net income tax paid
Net cash inflow from operating activities
Investing activities
Additions of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant, equipment and intangible assets
Net cash outflow from investing activities
Financing activities
Repayment of bank loans
Repayments of principal of lease liabilities
Equity dividends paid
Issue of share capital
Net cash (outflow) from financing activities
Net (decrease)/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
62
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com
Significant Accounting Policies
Eleco plc is a public limited company incorporated and domiciled in the United Kingdom under the Companies
Act 2006. The Company is limited by shares and the registered number is 00354915. The consolidated financial
statements for the year ended 31 December 2021 comprise the Company and its subsidiaries (together referred
to as the “Group”). The consolidated and parent company financial statements were authorised for issuance on
30 March 2022.
The address of the registered office is given on page 119. The nature of the Group’s operations and its principal
activities are set out in the Chairman’s Statement on pages 2 to 4, CEO Report on pages 5 to 9 and Directors’
Report on pages 48 to 50.
Eleco 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 UK-
adopted international accounting standards and the Companies Act 2006.
There were no new accounting standards effective for the year ended 31 December 2021.
Furthermore, new standards, new interpretations and amendments to standards and interpretations that have
been issued but are not effective for the current period have not been adopted early and are set out in note X.
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 Group’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 actual results may ultimately differ from the estimates.
The key assumptions concerning the future and other key sources of 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.
Impairment of goodwill – Estimate
The Group determines whether goodwill is impaired at least on an annual basis. This requires a judgement of the
value in use of the cash-generating units to which the goodwill is allocated. The value in use requires the Group
to make an estimate of the expected future cash flows from the cash-generating unit to which goodwill has been
allocated 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.
63
Job No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021Financial Statements Significant Accounting Policies continued
B. Basis of preparation continued
Capitalisation of development costs and carrying value – Judgement
Development costs are capitalised in accordance with the Group accounting policy. Initial recognition is based
on management’s judgement that technological and economic feasibility is confirmed, usually when a product
development project has reached a defined milestone according to an established project management model.
There are judgements used in apportioning costs relating to work that can be capitalised compared to those
of maintenance nature. 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.
C. Going concern
The Group has continued to monitor the consequences of Covid-19 and Brexit and the wider macro economic
environment in 2021. The Group continues to monitor and mitigate the risks and has taken this into account in
assessing the going concern position.
The Board is taking reasonable measures to consider likely factors to affect the ability of the Group to continue
as a Going Concern. The Directors have a reasonable expectation that the Group has adequate resources
to continue in operation for the foreseeable future, being the twelve-month period from approval of these
consolidated financial statements. Accordingly, the Group continues to adopt the going concern basis in
preparing its consolidated financial statements.
The Group continues to demonstrate strong cash generation from operations closely reflecting its EBITDA
performance. Our positive operating cash flow during the period has allowed the Company to repay the
entirety of its loan facility of £4,400,000 and to grow its net cash position to £9,954,000 (2020: £6,154,000). The
remaining bank debt of £0.1m in our German subsidiary was repaid in February 2022 leaving the Group debt
free. The Group has both cash and undrawn credit facilities available and headroom comprising £1.0m bank
overdraft facility (2020: £5.4m bank loan and overdraft facility) to support its business operations.
The Group regularly updates its budget and forecasts to take account of trading performance and the change
in market conditions and the continuing trend towards subscription pricing, which continue to demonstrate the
Group’s ability to generate sufficient liquidity. The Group is continuing to build on its recurring revenue and the
current liabilities includes a substantial and increasing deferred income balance.
Notwithstanding the Group has net current assets of £2,556,000 at 31 December 2021 (2020: £1,798,000)
these amounts are after deferred income of £7,086,000 (2020: £6,393,000) relating to annual maintenance
contracts which are non-refundable. These annual 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. 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’s clients include many top contractors in the building and construction sector in the UK, Scandinavia,
Germany, Benelux and the United States with no significant client concentration. The software products and
services provided by the Group are reasonably embedded in their client’s core operations and 56 per cent (2020:
56 per cent) of the Group’s revenue is from recurring revenue contracts.
64
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com D. Basis of consolidation
The Group financial statements consolidate those of Eleco 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 recognition
The Group recognises revenue in accordance with IFRS 15 “Revenue from Contracts with Customers”.
The core principle of IFRS 15 is that an entity will recognise revenue when control of goods or services is
transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. This core principle is delivered in a five-step model framework:
1. Identify the contract(s) with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognise revenue when (or as) the entity satisfies a performance obligation.
Application of this guidance will depend on the facts and circumstances present in a contract with a customer
and will require the exercise of judgement.
65
Job No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021Financial Statements Significant Accounting Policies continued
E. Revenue recognition continued
The table below shows the main revenue recognition differences for each performance obligation under IFRS 15:
Revenue Type
Licence revenues (perpetual)
Accounting Treatment under IFRS 15:
At the point of transfer (delivery) of the licence to a customer, the customer
has control and benefit of the software. It therefore remains appropriate
under IFRS 15 to recognise revenue at the point of sale and acceptance by
the customer. There is no obligation to provide updates which are provided
under maintenance contracts.
Subscription Licences
The licence does not provide the customer with the ownership of the
software, nor the right to use it in perpetuity.
The performance obligations associated with the software as a service
are access to software, hosting of software, hosting of client data and
maintaining software and client data. These performance obligations are not
distinct – the obligations are highly interdependent.
The customer simultaneously receives and consumes the benefits of the
contract as the Company provides the services. As these services are
provided over the term of the contract, revenue is recognised over the life of
the contract.
The customer simultaneously receives and consumes the benefits of the
contract as the Company provides the services. As these services are
provided over the term of the contract, revenue is recognised over the life of
the contract.
The licence is considered a separate service, and hence treated as a
separate performance obligation, where the customer could have the
licence installed on their own systems. For the licence element, the point
of transfer (delivery or access to the hosted system) of the licence to the
customer is the point to recognise revenue.
For Maintenance and Hosting Services, the customer simultaneously
receives and consumes the benefits of the contract as the Company
provides the services. As these services are provided over the term of the
contract, revenue is recognised over the life of the contract.
Benefits associated with consulting services are considered to have passed
to the customer upon consulting hours being worked. Revenue is therefore
recognised in line with delivery of consulting.
Benefits associated with training services are considered to have passed to
the customer upon delivery of training. Revenue is therefore recognised in
line with delivery of training.
Such projects are typically small in scale and completed over a relatively
short space of time. In such cases, control of the asset is assumed to pass
to the customer when they obtain possession of the developed software
and have accepted the software.
Maintenance and Support
Contracts
Hosted Services
(Licence, Maintenance and Hosted
Services performance obligations)
Consultancy
Training
Development Consultancy
Scanning and rendering
The performance obligation is satisfied on delivery of images to the
customers, and revenue is recognised at that point in time.
The Group recognised Deferred Income in respect of contract liabilities for consideration received in respect of
unsatisfied performance obligations and reports these as Deferred Income in the Consolidated Balance Sheet
(see note 18).
66
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com F. Government grants
Grants from the Government are recognised at their fair value where there is a reasonable assurance that the
grant will be received and the Group will comply with all attached conditions. Government grants relating to
costs are deferred and recognised in the statement of comprehensive income within administrative expenses
over the period necessary to match them with the costs that they are intended to compensate.
G. Exceptional items
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.
H. Finance income and costs
Financing costs comprise interest payable on borrowings and leasing arrangements, calculated on an effective
interest basis. Interest income and cost is recognised in the income statement as it accrues.
I. 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.
J. 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 –
up to twelve years
Intellectual property
–
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.
67
Job No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021Financial Statements Significant Accounting Policies continued
J. Intangible assets continued
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 the period of their expected benefit, being their finite life of up to
five years.
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.
K. Property, plant and equipment
Property, plant and equipment is stated at purchase cost, together with any directly attributable costs of
acquisition, and subsequently cost less accumulated depreciation and impairment. 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:
Short leasehold property
– over the term of the lease
Plant, equipment and vehicles
–
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. An item of property, plant and equipment is
derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and
losses between the carrying amount and the disposal proceeds are taken to profit or loss.
L. Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured
at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs
incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain
ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life.
Right-of-use assets are assessed for impairment when such indicators exist or adjusted for any remeasurement
of lease liabilities.
68
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for
short-term leases with terms of twelve months or less and leases of low-value assets. Lease payments on these
assets are expensed to profit or loss as incurred.
Lease liabilities
At the commencement date, the Group measures the lease liability at the present value of the lease payments
unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the
Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including
in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a
residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It
is remeasured to reflect any reassessment or modification, or if there are changes in substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or
profit and loss if the right-of-use asset is already reduced to zero.
M. 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.
N. 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.
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O. 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.
The Board has used a valuation 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.
P. 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.
Q. 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.
R. 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 Group’s
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.
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The Group has only basic financial assets measured at amortised cost which are held for collecting contractual
associated cash flows. These are initially recognised at fair value and subsequently measured at amortised cost.
Financial Assets
The Group applies the impairment requirements and recognises a loss allowance for expected credit losses on
its financial assets. At each reporting date, it will measure the loss allowance at an amount equal to the lifetime
expected credit losses.
The Group will recognise in profit or loss, as an impairment gain or loss, the amount of expected credit losses
(or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be
recognised in accordance with IFRS 9.
Trade and other receivables
Trade receivables are initially measured at fair value and subsequently at amortised cost. At each period end,
there is an assessment of the expected credit loss in accordance with IFRS 9; with any increase or reduction
in the credit loss provision charged or released to other selling and administrative expenses in the statement of
comprehensive income.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and short-term deposits with an original maturity of three
months or less, which are subject to an insignificant risk of changes in value.
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.
Financial liabilities are recorded initially at fair value and subsequently at amortised cost using the effective
interest method, with interest-related charges recognised as an expense in finance cost in the profit and loss.
A financial liability is derecognised when the obligation is extinguished.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of
the financial year in which are unpaid. Due to their short-term nature they are measured at amortised cost and
are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of issue costs.
They are subsequently measured at amortised cost using the effective interest method.
T. Equity
Share capital reflects the nominal value of the Company’s shares in issue. The share premium account reflects
any premium arising on the issuance of those shares, net of issue costs.
The merger reserve arose on the premium on shares issued to acquire 100 per cent of Integrated Computing &
Office Networking Limited (2016) and Active Online GmbH (2018). The reserve relates to merger relief applied
under s.612 of the Companies Act 2006.
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.
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U. Dividends
Dividends attributable to the equity holders of the Company approved for payment during the year are
recognised directly in equity.
V. Earnings per share
Basic earnings per share is calculated based on the Group’s profit after tax divided by the weighted average
number of shares in issue during the year.
Diluted earnings per share is calculated based on the Group’s profit after tax divided by the diluted weighted
average number of shares in issue during the year. Dilution to the weighted average shares issues in the year are
as a result of any share options granted, exercised, cancelled or lapsed in the year.
W. Employee Share Ownership Trust
Equity shares in Eleco plc held by the Employee Share Ownership Trust (“ESOT”) are treated as a deduction
from the weighted average number of shares. The consideration paid is deducted from equity (other reserves)
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.
X. New standards and interpretations not applied
At the date of authorisation of these financial statements, the following Standards and Interpretations relevant to
the Group operations that have not been applied in these financial statements were in issue but not yet effective:
International Accounting Standards (IAS/IFRS)
IFRS 3 Business Combinations
IAS 16 Property, Plant and Equipment
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
IAS 1 Presentation of Financial Statements
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Effective date
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
The impact of adoption of these standards is not expected to give rise to a material impact to the Group.
72
Financial StatementsJob No: 46561Proof Event: 10Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 1. Revenue
Revenue from continuing operations disclosed in the income statement is analysed as follows:
Licence sales
Recurring maintenance, support and subscription revenue
Services income
Total revenue
2021
£’000
2020
£’000
5,913
5,442
15,424
14,186
6,007
5,604
27,344
25,232
Revenue recorded in the year includes £6.4m (2020: £5.9m) of income that had been deferred in the balance
sheet in the previous year because the associated performance obligations were not fully satisfied. Payments
are received from certain customers on maintenance or subscription contracts either three months or one year
in advance, which leads to the recognition of deferred income in advance of satisfaction of the performance
obligation over time.
The Group has applied the practical expedient of IFRS15.121 in respect of contracts which have a duration of
one year or less. Contract liabilities in respect of contracts with customers have been disclosed in note 18 under
deferred income.
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
USA
Rest of Europe
Rest of World
2021
£’000
10,446
6,550
4,911
1,030
3,916
491
2020
£’000
9,470
6,080
4,858
890
3,538
396
27,344
25,232
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1. Revenue continued
Revenue by product group represents continuing operations revenue from external customers.
Revenue by product group is as follows:
Software for:
Building Lifecycle
CAD and Visualisation
Other – third party software
2021
£’000
2020
£’000
17,650
15,897
7,997
1,697
7,771
1,564
27,344
25,232
The Group utilises resellers to access certain markets. Revenue by sales channel represents continuing
operations revenue from external customers.
Revenue by sales channel is as follows:
Direct
Reseller
2021
£’000
2020
£’000
26,068
24,000
1,276
1,232
27,344
25,232
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 during the year as the costs and
profits are not monitored or recorded in the same way the information is presented as one segment and as such
the information is presented in line with management information.
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Revenue
Adjusted EBITDA
Amortisation and impairment of purchased intangible assets
Depreciation
Adjusted operating profit
Amortisation of acquired intangible assets
Former Directors’ payments
Operating profit
Net finance cost
Segment profit before tax
Tax
Segment profit after tax
Operating profit
Amortisation and impairment of intangible assets
Depreciation charge
EBITDA
Former Directors’ payments
Adjusted EBITDA
2021
Software
£’000
2020
Software
£’000
27,344
25,232
7,251
7,003
(1,786)
(1,068)
(722)
(866)
4,743
5,069
(575)
(69)
(590)
(328)
4,099
4,151
(173)
(262)
3,926
3,889
(1,195)
(726)
2,731
4,099
2,361
722
3,163
4,151
1,658
866
7,182
6,675
69
328
7,251
7,003
Former Directors’ payments are upfront costs borne by the Group and are adjusted to reflect their services
provided.
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 2021 are
explained in the Financial Review on pages 25 to 27 and the accounting policy requirements for capitalisation are
set out in the Significant Accounting Policies in section I.
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continued
2. Segment information continued
Group assets and liabilities
Segment assets
Total Group assets
Segment liabilities
Total Group liabilities
2021
Software
£’000
2020
Software
£’000
39,221
40,593
39,221
40,593
15,375
19,069
15,375
19,069
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
USA
Rest of Europe
Rest of World
2021
£’000
2020
£’000
14,780
14,967
6,759
3,072
7,737
3,146
2
44
–
3
48
–
24,657
25,901
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 (2020: Below 10 per cent reporting threshold).
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The continuing operations operating profit for the period is stated after charging/(crediting) the following items:
Software product development expense
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of acquired intangible assets
Amortisation of other intangible assets
Impairment of other intangible assets
Share-based payments
Employer furlough scheme repayments/(credits)
Profit on disposal of property, plant and equipment
Foreign exchange losses/(gains)
Fees payable to the Company’s auditor for:
The audit of the parent company and consolidated financial statements
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries
Other services
Operating lease rentals:
Plant, equipment and vehicles
Properties
Former Directors’ payments
2021
£’000
1,660
213
509
575
1,150
636
81
135
(7)
127
83
104
8
13
68
69
2020
£’000
1,590
220
646
590
1,068
–
131
(150)
(16)
(34)
70
94
7
30
13
328
4. Employee information
The average number of employees during the period, including Directors, in continuing operations was made up
as follows:
Sales & 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
2021
Number
2020
Number
57
76
69
43
56
78
68
44
245
246
2021
£’000
2020
£’000
11,145
11,350
1,985
2,002
648
81
547
131
13,859
14,030
(1,578)
(1,602)
12,281
12,428
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continued
4. Employee information continued
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 is set out in the Significant Accounting Policies under section J.
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
Former Directors’ benefits
Executive Directors
Share based payment charge
Employers NI
Total remuneration to key management personnel
Fees – Non-Executive Directors
Number of Directors exercised options
Number of options issued to the Directors (‘000)
Gain made in exercise of options (£000)
2021
£’000
994
58
69
2020
£’000
974
52
304
1,121
1,330
123
134
112
191
1,378
1,633
165
132
2021
–
700
–
2020
–
1,050
–
The emoluments and share based payments of the highest paid Director totalled £426,000 (2020: £525,000).
The remuneration of the Non-Executive Directors is determined by the Board. The Non-Executive Directors are
engaged through service contracts and each is appointed for an initial term of three years, which may thereafter
be renewed. The Company has chosen for all directors to stand for annual re-election at each year’s AGM. The
Non-Executive Directors do not participate in any of the Group’s share-based incentive or pension schemes.
Share options currently held by Serena Lang were granted to her during her tenure as Executive Chairman.
Further details of Directors emoluments are shown on page 41 of the Remuneration Committee Report.
5. Finance cost
Finance income and costs from continuing operations is set out below:
Finance costs:
Bank overdraft and loan interest
Interest expense for leasing arrangements
Total finance cost
2021
£’000
2020
£’000
(110)
(63)
(173)
(191)
(71)
(262)
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(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
Tax adjustments in respect of previous years
Foreign tax
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Change in tax rates
Tax adjustments in respect of previous years
Total deferred tax
Tax charge in the income statement
2021
£’000
2020
£’000
433
–
433
329
762
8
370
55
433
371
(25)
346
362
708
(19)
–
37
18
1,195
726
Income tax for the UK has been calculated at the weighted average rate of UK corporation tax of 19 per cent
(2020: 19 per cent) on the estimated assessable profit for the period. Taxation for foreign companies is calculated
at the rates prevailing in the relevant jurisdictions.
A change to the main UK corporation tax rate was substantively enacted for IFRS purposes. The Finance
Bill 2021, substantively enacted the rate from 1 April 2023 to 25 per cent, rather than the previously enacted
reduction to 19 per cent. These rates have been applied to determine deferred tax assets and liabilities at the
Balance Sheet date.
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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 19 per cent (2020: 19 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 19% (2020: 19%)
applied to profits before tax
Effects of:
Expenses not deductible for tax purposes
Research & development tax relief
Prior year adjustments
Tax rate differences in foreign jurisdictions
Other differences
Continuing operations tax charge for the year
2021
£’000
2020
£’000
3,926
3,889
746
739
125
(71)
11
394
(10)
67
(48)
(25)
(15)
8
1,195
726
(c) Unrecognised tax losses
The Group has tax losses of £1,623,000 (2020: £1,623,000) arising in the UK. The potential deferred tax asset not
recognised in respect of losses in UK subsidiaries is £405,000 (2020: £314,000). No deferred tax is recognised
on the unremitted earnings of UK and overseas subsidiaries as there are no future profits available in the
respective subsidiaries to offset the losses against.
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Dividends paid in the year were 0.40 pence per ordinary share (2020: nil pence per ordinary share).
Cash dividends of £493,000 (2020: £nil) were paid during the year:
Ordinary Shares
Declared and paid during the year
Interim – current year
Final – previous year
2021
pence per
share
2020
pence per
share
2021
£’000
2020
£’000
0.20
0.40
0.60
–
–
–
164
329
493
–
–
–
The Directors have recommended a final dividend of 0.40 pence (2020: 0.40 pence). The dividend is subject to
approval by shareholders at the AGM and has not been included as a liability in these financial statements.
8. Basic and diluted earnings per share
Ordinary Shares
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
2021
Weighted
average
number of
shares
(millions)
82.0
82.9
82.0
Net profit
attributable to
shareholders
£’000
2,731
2,731
3,253
Net profit
attributable to
shareholders
£’000
3,163
3,163
3,907
EPS
(pence)
3.3
3.3
4.0
2020
Weighted
average
number of
shares
(millions)
81.4
82.0
81.4
EPS
(pence)
3.9
3.9
4.8
In determining the diluted earnings per share the dilutive impact of share options on weighted average number of
shares was included.
Shares held by the Employee Share Ownership Trust are excluded from the weighted average number of
shares in the period. Adjusted profit attributable to shareholders is reconciled to reported profit attributable to
shareholders in note 26.
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Notes to the Consolidated Financial Statements
continued
9. Goodwill
Cost:
As at 1 January
Exchange differences
As at 31 December
Impairment:
At 1 January and 31 December
Net book value
There were no acquisitions in the year.
2021
£’000
2020
£’000
15,762
15,598
(169)
164
15,593
15,762
–
–
15,593
15,762
Goodwill denominated in currencies other than Sterling is revalued at the appropriate closing exchange rate.
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
Elecosoft Shire System
Active Online Germany
Veeuze Germany**
2021
£’000
2020
£’000
8,703
4,804
227
242
4,438
4,493
20
336
–
–
–
–
1,869
21
336
370
1,225
2,674
1,597
–
15,593
15,762
*
Elecosoft UK is represented as a combined CGU following the transfer to it of trade and assets of Elecosoft ICON and Elecosoft Shire System from
1 January 2022.
** Veeuze Germany is shown as a combined CGU following the merger of Active Online Germany and ESIGN Software Germany from 1 January 2022.
As the value in use calculations use forecasts and Budgets of the combined businesses then the goodwill values
above have been derived on that basis.
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 pre-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.
82
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The key judgement and assumptions used in calculating each CGU value in use are shown in the table below.
The market growth rates, nominal long-term growth rate and inflation rates used are in line with external sources.
The market growth rates for revenues for years one to five range from 4 to 10 per cent (2020: 5 to 10 per cent)
after this initial five years, the nominal long-term growth rates are used in subsequent years.
The pre-tax discount rate and nominal long-term growth rates are shown in the table below:
CGU
Elecosoft UK
Asta Development Germany
Elecosoft Sweden
Elecosoft Netherlands
Eleco Software Germany
Veeuze Germany
2021
2020
Pre-tax
discount
rate
Nominal
long-term
growth
rate
Pre-tax
discount
rate
Nominal
long-term
growth
rate
14.6% 0.30%
12.0% 0.01%
16.9% 0.40%
13.9% 0.60%
15.0% 0.50%
12.3% 0.40%
14.1% 0.40%
11.6% 0.50%
16.9% 0.40%
13.9% 0.60%
16.9% 0.40%
13.9% 0.60%
These budgets and strategic plans cover a five-year period. The growth rates used to extrapolate the cash flows
beyond this period ranges between 0.30 per cent and 0.50 per cent depending on the geographical location of
the CGU.
A sensitivity analysis has been performed based on changes in key assumptions considered to be reasonably
possible by management: an increase in the discount rate of 1 per cent, a decrease in the compound annual
growth rate for cash flow in the five-year forecast period of 1 per cent, and a decrease in the nominal long-term
market growth rates of 1 per cent. The sensitivity analysis shows that no impairment charges would result from
these scenarios.
83
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Notes to the Consolidated Financial Statements
continued
10. Other intangible assets
Cost:
At 1 January 2020
Additions
Additions – internal development
Disposals
Transfers
Exchange differences
At 31 December 2020
Additions
Additions – internal development
Disposals
Transfers
Exchange differences
At 31 December 2021
Accumulated amortisation and impairment:
At 1 January 2020
Amortisation charge for the year
Disposals
Transfers
Exchange differences
At 31 December 2020
Amortisation charge for the year
Impairment charge for the year
Disposals
Transfers
Exchange differences
At 31 December 2021
Net book value:
At 31 December 2020
At 31 December 2021
Customer
relationships
£’000
Intellectual
property
£’000
Total
£’000
7,147
7,375
14,522
–
–
–
–
2
7,149
–
–
–
–
(2)
1
1
1,602
1,602
(248)
(40)
4
8,694
149
1,578
(48)
(27)
2
(248)
(40)
6
15,843
149
1,578
(48)
(27)
–
7,147
10,348
17,495
3,818
324
–
–
(1)
4,141
324
–
–
–
1
3,462
1,334
(248)
(40)
(1)
4,507
1,401
636
(48)
(27)
6
7,280
1,658
(248)
(40)
(2)
8,648
1,725
636
(48)
(27)
7
4,466
6,475
10,941
3,008
2,681
4,187
3,873
7,195
6,554
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. There were no acquisitions in the year.
84
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10. Other intangible assets continued
Additions in the year represent purchased intangible assets of £149,000 (2020: £1,000) and internal development
costs capitalised of £1,578,000 (2020: £1,602,000). 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 pages 25 to 27.
Amortisation charges are shown separately on the Consolidated Income Statement.
An impairment review of internally generated intangibles is carried out when there is indication of impairment.
Some impairment indicators are shown below but are not limited to:
• Fall in revenue and product profitability
• Decline in marketability of a product
• Obsolescence of a product.
The recoverable amount for each asset was determined using a value in use calculation based upon
management forecasts for the performance of the development project.
An impairment charge of £636,000 (2020: £nil) was recorded in the year in respect of an internally developed
software product following a review of their recoverable amount which was £nil at the Balance Sheet date. This
included in amortisation and impairment of intangible assets within the Consolidated Income Statement.
The value in use calculations were based on:
• Budget cashflows for the 2022 financial year
• Extrapolated cash flow forecasts over the 5 year period of assessment
• Less estimated annual capital expenditure required to maintain the development project
• A post-tax discount rate of 11.8 per cent applied to the cash flow projections.
85
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continued
11. Property, plant and equipment
Cost:
At 1 January 2020
Additions
Disposals
Transfers
Exchange differences
At 31 December 2020
Additions
Disposals
Transfers
Exchange differences
At 31 December 2021
Accumulated depreciation and impairment:
At 1 January 2020
Depreciation charge for the year
Disposals
Transfers
Exchange differences
At 31 December 2020
Depreciation charge for the year
Disposals
Transfers
Exchange differences
At 31 December 2021
Net book value:
At 31 December 2020
At 31 December 2021
Plant,
equipment
and
vehicles
£’000
Leasehold
buildings
£’000
Total
£’000
560
36
(17)
–
20
599
10
–
–
(22)
587
149
55
(17)
–
–
187
40
–
–
(22)
205
412
382
1,057
1,617
63
(205)
–
39
954
268
(1)
–
(21)
99
(222)
–
59
1,553
278
(1)
–
(43)
1,200
1,787
734
165
(205)
–
21
715
173
(1)
–
(22)
865
239
335
883
220
(222)
–
21
902
213
(1)
–
(44)
1,070
651
717
Included in plant, equipment and vehicles is £122,000 (2020: £nil) in respect of assets under construction.
12. Capital commitments
Capital expenditure commitments of £nil (2020: £nil) have been placed with suppliers at 31 December 2021.
86
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13. Inventories
Finished goods
At 31 December 2021 the Group’s inventory provisions were £nil (2020: £nil).
14. Trade and other receivables
Gross trade receivables
Provision for credit losses
Net trade receivables
Other receivables
Prepayments and accrued income
2021
£’000
16
16
2020
£’000
23
23
2021
£’000
2020
£’000
3,730
3,455
(102)
(66)
3,628
3,389
99
550
82
440
4,277
3,911
The Group offers credit terms to customers depending on the credit status of the customer. Trade receivables
are initially measured at fair value and subsequently amortised at cost. The Group performed an impairment
exercise to determine whether the write down of amounts receivable was required, using an expected credit loss
model. In its assessment using the expected loss model, it was deemed provisions against receivables to be in
line with historic payment patterns for Eleco’s customer base where a significant number are repeat purchasers
and pass the Elecos credit check process. The average credit period taken on the sales of goods and services is
41 days (2020: 42 days). No interest is charged on past due trade receivables (2020: £nil).
The carrying amounts of trade and other receivables are denominated in the following currencies:
Sterling
Euro
Swedish Krona
US Dollar
Other
2021
£’000
1,524
1,134
1,364
205
50
2020
£’000
1,596
1,028
1,123
112
52
4,277
3,911
Movement in the provision for credit losses in respect of trade receivables during the period was as follows:
At 1 January
Written off as uncollectable
Recovered during the period
Provided against during the period
Exchange
At 31 December
2021
£’000
(66)
33
–
(75)
6
(102)
2020
£’000
(73)
24
–
(12)
(5)
(66)
87
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continued
15. Trade and other payables
Trade payables
Other taxation and social security
Other liabilities
2021
£’000
637
730
426
2020
£’000
558
708
394
1,793
1,660
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 36 days (2020: 36 days). The Directors consider that the carrying
amount of trade payables approximates to their fair value.
16. Borrowings
Current liabilities:
Bank loans
Lease liabilities
Non-current liabilities:
Bank loans
Lease liabilities
Total loans and borrowings
Cash and cash equivalents
Net (cash)/borrowings
2021
£’000
2020
£’000
45
471
516
56
1,464
1,520
2,036
1,647
582
2,229
2,867
1,850
4,717
6,946
(10,055)
(10,668)
(8,019)
(3,722)
The UK banking facilities are with Barclays Bank plc and the Group facilities comprise a £1.0m overdraft facility,
carrying an interest rate of 2.75 per cent over base rate (undrawn at 2021 and 2020).
The UK term loan facility with Barclays Bank plc was paid off during the year.
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Included in bank loans is an outstanding loan of £101,000 (2020: £154,000) in a German subsidiary company.
The loan is secured against the freehold property in the Germany subsidiary company. This loan was paid off in
full in February 2022.
The bank loans and overdrafts are repayable as follows:
In one year or less
Between one and two years
Between two and five years
2021
£’000
45
56
–
101
2020
£’000
1,647
1,647
1,220
4,514
The Group has leases for the properties it occupies, motor vehicles and other plant and equipment. With the
exception of short-term leases, each lease is reflected on the balance sheet as a right-of-use asset and a lease
liability. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment
for presentation purposes (see note 22).
Each lease imposes a restriction that the right-of-use asset can only be used by the Group. Some leases
have a break clause; however, the majority are either non-cancellable or may only be cancelled by incurring a
substantial termination fee.
17. Provisions
At 1 January 2021
Charge/(credit) to the income statement
Utilised in the year
At 31 December 2021
Current liabilities
Non-current liabilities
2021
£’000
166
(98)
(17)
51
10
41
51
2020
£’000
183
30
(47)
166
125
41
166
Provisions principally relate to reorganisation costs following the disposal of the former ElecoBuild businesses
and the expected ongoing cost of the professional indemnity run off insurance premiums relating to the former
ElecoBuild businesses.
89
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continued
18. Accruals and Deferred Income
Accruals
Deferred income
2021
£’000
2,603
7,086
9,689
2020
£’000
2,487
6,393
8,880
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.
19. Deferred Tax
At 1 January 2020
Credit/(charge) to the
income statement
Exchange differences
At 31 December 2020
Credit/(charge) to the
income statement
Exchange differences
At 31 December 2021
Deferred tax assets
Deferred tax liabilities
Tax losses
carried
forward
£’000
Excess of
amortisation
over tax
allowances
£’000
Other
temporary
differences
£’000
38
(39)
–
(1)
–
–
(1)
79
6
–
85
(20)
–
65
1
–
–
1
–
–
1
Total
£’000
118
Intangible
assets
£’000
(1,167)
(33)
–
85
(20)
–
65
22
–
(1,145)
(354)
–
(1,499)
Accelerated
capital
allowances
£’000
Other
temporary
differences
£’000
Total
£’000
(4)
1
–
(3)
(2)
–
(5)
(236)
(1,407)
(8)
(25)
15
(25)
(269)
(1,417)
(56)
23
(412)
23
(302)
(1,806)
The reclassification is to reallocate balances to correct the classification of deferred tax liabilities. This has had no
impact on the total deferred tax liability.
Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the end
of the reporting period, and which are expected to apply when the related deferred tax asset is realised or the
deferred tax liability is settled.
Deferred tax assets and liabilities are presented as non-current in the consolidated balance sheet. Potential
deferred tax assets in respect of losses in UK subsidiaries of £405,000 (2020: £314,000) have not been
recognised due to the unpredictability of future profit streams against which these losses may be offset. These
losses may be carried forward indefinitely.
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20. Called up share capital
Authorised:
Ordinary Shares of 1p each
Allotted, called up and fully paid:
At start of year
Issue of Ordinary Shares
At end of year
2021
Nominal
Value
£’000
2020
Nominal
Value
£’000
No. of shares
No. of shares
85,000,000
850
85,000,000
850
82,464,650
690,000
83,154,650
825
7
832
82,239,650
225,000
82,464,650
822
3
825
The increase in called up and fully paid share capital in the year was in respect of the exercise of share options
and the related issuance of 690,000 shares of nominal value 1 pence at a premium of £253,000.
21. Share-based payments
The Company operates one share scheme and options outstanding at 31 December 2021 over Ordinary Shares
granted under the scheme were as follows:
Date awarded
9 August 2017
18 May 2020
12 November 2020
23 February 2021
Number
of Ordinary
Shares
500,000
650,000
250,000
600,000
2,000,000
Vesting dates
Earliest
Latest
1 May 2020
8 August 2027
31 May 2023
31 May 2030
31 May 2023 12 November 2030
1 March 2024
23 February 2031
Weighted average
remaining
contractual
life (years)
5.6
8.4
8.9
9.2
8.0
Share awards were made under the Company’s Long Term Incentive Plan (“LTIP”) during the year amounting to
700,000 shares at an exercise price of 100.4 pence per share.
700,000 options were granted during 2021 (2020: 1,050,000). During the year 100,000 options relating to 2021
issue had been forfeited and 150,000 options relating to 2020 issue were forfeited.
The options awarded during 2020 amounted to 800,000 shares at an exercise price of 74.3 pence per share and
a further 250,000 shares at an exercise price of 74.9 pence per share.
Half of the options award of 800,000 shares are exercisable after 3.0 years, subject to the share price being
equal to or exceeding 117 pence per share for 20 consecutive dealing days between the date of issue and the
31 May 2023.
The remaining half of the options shall vest if, and only if:
(a) The basic EPS reported in the audited Accounts for the year ended 31 December 2022 is at least 7.1 pence;
or
(b) if target (a) is not met but the basic EPS reported in the audited Accounts for the year ended 31 December
2023 is at least 8.23 pence; or
(c) if neither target (a) or (b) is met but the basic EPS reported in the audited Accounts for the year ended 31
December 2023 is at least 7.88 pence 2/3rds of the award will vest; or
91
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Notes to the Consolidated Financial Statements
continued
21. Share-based payments continued
(d) if none of targets (a), (b) or (c). is met but the basic EPS reported in the audited Accounts for the year ended
31 December 2023 is at least 7.70 pence fifty percent of the award will vest; or
(e) if none of targets (a), (b), (c) or (d) is met but basic EPS reported in the audited Accounts for the year ended 31
December 2023 is at least 7.53 pence 1/3rd of the option will vest, failing which the remaining half of Options
will lapse.
In the event that the employee leaves within the initial 3.0 year period they may (depending upon the timing and
circumstances of their departure) be entitled to retain some of their options but only if certain yearly earnings per
share targets have at that time been met. The options are exercisable until 31 May 2030, 10 years after the date
of grant.
Half of the options award of 250,000 shares are exercisable after 3.0 years, subject to the share price being
equal to or exceeding 117 pence per share for 20 consecutive dealing days between the date of issue and the
31 May 2023.
The remaining half of the options shall vest if, and only if:
(a) The basic EPS reported in the audited Accounts for the year ended 31 December 2022 is at least 7.15 pence;
or
(b) if target (a) is not met, but the basic EPS reported in the audited Accounts for the year ended 31 December
2023 is at least 8.23 pence; or
(c) if neither target (a) or (b) is met, but the basic EPS reported in the audited Accounts for the year ended 31
December 2023 is at least 7.88 pence, 2/3rds of the award will vest; or
(d) if none of targets (a), (b) or (c) is met, but the basic EPS reported in the audited Accounts for the year ended
31 December 2023 is at least 7.70 pence, 50 per cent of the award will vest; or
(e) if none of targets (a), (b), (c) or (d) is met, but basic EPS reported in the audited Accounts for the year ended
31 December 2023 is at least 7.53 pence, 1/3rd of the option will vest, failing which the remaining half of
Options will lapse.
In the event that the employee leaves within the initial 3.0 year period they may (depending upon the timing and
circumstances of their departure) be entitled to retain some of their options but only if certain yearly earnings per
share targets have at that time been met. The options are exercisable until 12 November 2030, 10 years after the
date of grant.
The options awarded in 2017 are exercisable after 2.7 years, subject to certain performance criteria being
achieved. The criteria includes the EPS for the twelve months ended 31 December 2019 is at least 2.97 pence.
In the event that the employee leaves within the initial 2.7-year period they may (depending upon the timing and
circumstances of their departure) be entitled to retain some of their options but only if certain yearly earnings per
share targets have at that time been met. The options are exercisable until 8 August 2027, ten years after the
date of grant.
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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
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2021
2020
Weighted
average
exercise
price
Number
Number
2,240,000
56.6 1,415,000
700,000
100.4 1,050,000
(690,000)
(250,000)
35.7
74.3
(225,000)
–
Weighted
average
exercise
price
42.0
74.4
48.0
–
2,000,000
76.9 2,240,000
56.6
–
–
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 2021 was £81,000 (2020: £131,000).
A valuation 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
Exercise price per share
Per cent expected to vest (at date of grant)
Expected life (years)
Dividend yield
Share price volatility
Fair value per option
2021
97.5p
100.4p
98%
5.0
2020
72.5p
74.3p
98%
5.0
0.53% 0.39%
36%
38.0p
36%
27.6p
93
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Notes to the Consolidated Financial Statements
continued
22. Right-of-Use assets
The Group has historically purchased plant and equipment, the exception being a small number of leased
vehicles for the sales team. However, it has lease contracts for office accommodation in the UK, Sweden,
Germany and the Netherlands.
The financial impact of IFRS 16 has resulted in a reduction in the Group’s annual operating expenses of
£655,000 (2020: £769,000) and additional depreciation costs of £509,000 (2020: £646,000) and finance costs
payable of £63,000 (2020: £71,000). Details of lease liabilities and right-of-use assets are provided below.
Under IFRS 16, the Group recognised a lease liability at the date of initial application, for leases previously
classified as an operating lease under IAS17, at the present value of the remaining lease payments, discounted
using the Group’s estimated incremental borrowing rate.
The Group has assessed the lease liability on each individual lease and applied an appropriate incremental
borrowing rate determined by the type and geographical location of the right-of-use asset.
There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the
date of initial application.
The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of
twelve months or less). Payments made under such leases are expensed on a straight-line basis.
The recognised right-of-use assets relate to the following types of assets:
Right-of-Use assets
Properties
Motor vehicles
Other plant and equipment
2021
£’000
2020
£’000
1,400
1,747
328
–
435
26
1,728
2,208
Below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Right-of-Use-assets
Motor
vehicles
£’000
Other
plant and
equipment
£’000
513
134
(56)
38
(194)
435
120
(84)
(31)
(111)
329
24
39
–
1
(38)
26
–
–
(1)
(25)
–
Property
£’000
1,511
534
–
116
(414)
1,747
116
–
(91)
(373)
1,399
Total
2,048
707
(56)
155
(646)
2,208
236
(84)
(123)
(509)
1,728
At 1 January 2020
Additions and measurements
Disposals
Exchange difference
Depreciation charge for the year
At 31 December 2020
Additions and measurements
Disposals
Exchange difference
Depreciation charge for the year
At 31 December 2021
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22. Right-of-Use assets continued
The corresponding amounts of lease liabilities recognised under IFRS 16 and movements during the period are
set out below:
Lease liabilities
At 1 January 2020
Additions
Interest charge
Interest income on lease liabilities
Lease payments
Exchange difference
At 31 December 2020
Additions
Interest charge
Interest income on lease liabilities
Lease payments
Exchange difference
At 31 December 2021
Motor
vehicles
£’000
Other
plant and
equipment
£’000
520
135
14
(8)
(257)
40
444
120
11
(5)
(201)
(32)
337
25
39
1
–
(40)
(2)
23
–
–
–
(26)
(1)
(4)
Property
£’000
1,704
534
56
–
(464)
135
1,965
116
52
–
(423)
(108)
1,602
Total
2,249
708
71
(8)
(761)
173
2,432
236
63
(5)
(650)
(141)
1,935
23. 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:
Financial assets at amortised cost:
Cash and cash equivalents
Trade and other receivables
Loans and receivables
Financial liabilities at amortised cost:
Trade and other payables
Bank loans and overdrafts
Accruals
Non-current liabilities
Financial liabilities held at amortised cost
2021
£’000
2020
£’000
10,055
10,668
3,727
3,472
13,782
14,140
1,063
100
2,603
–
952
4,514
2,487
–
3,766
7,953
The carrying value of the Group’s financial assets and liabilities are considered to approximate their respective
fair values.
95
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Notes to the Consolidated Financial Statements
continued
23. Financial instruments continued
(b) Interest rate and currency profile of financial assets and liabilities
Loans comprise interest bearing and non-interest-bearing liabilities.
The currency profiles of the Group’s financial assets and liabilities are set out below:
Financial liabilities
Financial assets
Sterling
Euro
Swedish Krona
US Dollar
South African Rand
Other
At 31 December 2021
Sterling
Euro
Swedish Krona
US Dollar
South African Rand
Other
At 31 December 2020
Floating
rate
£’000
1,715
756
Total
£’000
1,715
756
1,228
1,228
5
6
–
5
6
–
3,710
5,635
961
3,710
5,635
961
1,340
1,340
11
6
–
11
6
–
Floating
rate
£’000
4,183
3,664
4,770
1,056
44
67
Total
£’000
4,183
3,664
4,770
1,056
44
67
Net
financial
(assets)/
liabilities
£’000
2,468
2,908
3,542
1,051
38
67
13,784
13,784
10,074
5,730
3,942
3,605
759
47
57
5,730
3,942
3,605
759
47
57
95
2,981
2,265
748
41
57
7,953
7,953
14,140
14,140
6,187
There are no fixed interest rate financial assets.
The Group finances its operations through a mixture of retained profits and a bank overdraft. The interest rate on
the overdraft is 2.75 per cent over the Bank of England base rate.
(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
Sterling
Euro
Swedish Krona
At 31 December 2021
Sterling
Euro
Swedish Krona
At 31 December 2020
96
–
–
–
–
–
–
–
–
Euro
£’000
486
–
279
765
380
–
233
613
Swedish
Krona
£’000
US Dollar
£’000
Other
£’000
–
–
–
–
–
–
–
–
837
–
76
913
719
–
65
784
36
–
31
67
9
–
48
57
Total
£’000
1,359
–
386
1,745
1,108
–
346
1,454
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23. Financial instruments continued
(d) Financial risk: objectives, policies and strategies
The Group’s 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 Group’s 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 £173,000 (2020: £262,000). No speculative
transactions are undertaken.
At present there is no policy to hedge the Group’s currency exposures arising from the translation of the Group’s
overseas net assets or the effect of exchange rate movements on the Group’s 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.
(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 23(c) above), arising from fluctuations in exchange rates.
The Group’s mitigation of its currency risk is set out on page 18 of the Strategic Report. The table below shows
the impact on the value of the Group’s 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 Group’s reported equity would be £371,000 lower (2020: £310,000) if Sterling
strengthened by 10 per cent and £409,000 higher (2020: £341,000) if Sterling weakened by 10 per cent.
Net financial (assets)/liabilities:
Profit/(loss)
Equity
Effect of change in
Sterling +/-10%
2021
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
Denominated in Sterling
Not denominated in Sterling
Total net financial liabilities
(2,468)
(7,606)
(10,074)
–
691
691
–
(761)
(761)
–
(132)
(132)
–
145
145
–
(373)
(373)
–
411
411
Effect of change in
Sterling +/-10%
Denominated in Sterling
Not denominated in Sterling
Total net financial liabilities
Net financial (assets)/liabilities:
Profit/(loss)
Equity
2020
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
(95)
(6,092)
(6,187)
–
554
554
–
(609)
(609)
–
(128)
(128)
–
141
141
–
(310)
(310)
–
341
341
97
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continued
23. Financial instruments continued
(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 • above). Based upon the
interest rate profile of the Group’s 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 Group’s profit and equity.
2021
Effect of increase in interest rates
of 1%
Effect of decrease in interest rates
of 1%
Net finance cost
(173)
(46)
(46)
(46)
46
As
reported
£’000
Rate +1%
£’000
Profit/
(loss)
£’000
Equity
£’000
Rate -1%
£’000
Profit/
(loss)
£’000
46
Equity
£’000
46
2020
Effect of increase in interest rates
of 1%
Effect of decrease in interest rates
of 1%
Net finance cost
(262)
(70)
(70)
As reported
£’000
Rate +1%
£’000
Profit/(loss)
£’000
Equity
£’000
(70)
Rate -1%
£’000
Profit/(loss)
£’000
70
70
Equity
£’000
70
(f) Liquidity risk
The Group monitors its liquidity to maintain a sufficient level of undrawn committed debt facilities together with
central management of the Group’s cash resources to minimise liquidity risk. The table below shows the maturity
of the Group’s debt:
Trade and other payables
Bank loans and overdraft
Lease liabilities
At 31 December 2021
Trade and other payables
Bank loans and overdraft
Lease liabilities
At 31 December 2020
Fair value
£’000
3 months
or less
£’000
3 to 6
months
£’000
6 to 12
months
£’000
Between 1
and 2 years
£’000
Between 2
and 5 years
£’000
1,793
1,793
101
1,935
3,829
1,660
4,735
2,432
8,827
–
22
1,815
1,660
439
27
2,126
–
–
23
23
–
435
28
463
–
45
426
471
–
859
527
–
45
75
120
–
1,720
90
1,386
1,810
–
11
1,389
1,400
–
1,282
1,760
3,042
The amounts for bank loans, overdraft and lease liabilities are inclusive of interest payable in the period. The
Group’s overdraft facilities with Barclays Bank plc are explained on note 16.
At 31 December, the Group had available to it the following committed borrowing facilities expiring in the periods
shown. As at 31 December 2021 the loan facilities were fully paid and overdraft facilities were not utilised.
Expiring in one year or less
Expiring between one and two years
Expiring between two and five years
98
2021
£’000
45
56
–
101
2020
£’000
1,647
1,647
1,220
4,514
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(g) Credit risk
Group policies are aimed at minimising losses due to customer payment default. The loss allowance on all
financial assets is measured by considering the probability of default. Receivables are considered to be in default
when the principal or any interest is more than 90 days past due, based on an assessment of past payment
practices and the likelihood of such overdue amounts being recovered. 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:
UK
Germany
Scandinavia
USA
Rest of Europe
Rest of World
2021
£’000
2020
£’000
1,170
1,280
580
494
1,079
1,111
284
464
153
133
315
122
3,730
3,455
Receivables are written off by the Group when there is no reasonable expectation of recovery, such as when
the counterparty is known to be going bankrupt, or into liquidation or administration. Receivables will also be
written off when the amount is more than 300 days past due and is not covered by security over the assets of
the counterparty or a guarantee.
(h) Capital risk
The Group’s 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 Group’s 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 in respect of three elements: EBITA to gross financing costs, gross
borrowings to EBITDA and cash flow to debt service. These covenants were tested quarterly through the year
ended 31 December 2021.
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 2021, the continuing operations adjusted EBITDA for the year was £7,251,000
(2020: £7,003,000) and the net bank cash position was £9,954,000 before lease liabilities (2020: net bank cash
position £6,154,000).
99
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continued
23. Financial instruments continued
(i) Reconciliation of liabilities arising from financing activities
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
At 1 January 2021
Cash flows:
– Repayment
– Additions
Non-cash:
– Acquisition
– Fair value
– Reclassification
At 31 December 2021
At 1 January 2020
Cash flows:
– Repayment
– Additions
Non-cash:
– Acquisition
– Fair value
– Reclassification
At 31 December 2020
Long-term
borrowings
£’000
Short-term
borrowings
£’000
Lease
liabilities
£’000
2,867
1,647
2,432
Total
£’000
6,946
(2,800)
(1,647)
–
–
–
(11)
56
–
–
–
45
45
(650)
228
(5,097)
228
–
–
–
–
(75)
(41)
1,935
2,036
Long-term
borrowings
£’000
Short-term
borrowings
£’000
4,490
1,645
Lease
liabilities
£’000
2,249
Total
£’000
8,384
(1,647)
–
–
–
24
–
–
–
–
2
2,867
1,647
(761)
741
(2,408)
741
–
–
203
2,432
–
–
229
6,946
24. Contingent liabilities
It is the Group’s 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 2021 and have concluded that no material loss is likely to accrue from any such
unprovided claims.
25. Related party transactions
Transactions between Group undertakings, which are related parties, have been eliminated on consolidation and
are not disclosed in this note. The key management personnel are the Directors who are listed on page 49 of the
Directors Report.
The Directors of the Company had no transactions with the Company during the year, other than a result of
service agreements.
An amount of £58,697 (2020: £71,667) was paid to JHB Ketteley & Co Limited under a lease for occupation by
the Group of 66 Clifton Street, London, EC2A 4HB and £nil (2020: £3,750) for a contribution to the office costs
at Burnham-on-Crouch. There was £6,197 outstanding at 31 December 2021 (2020: £nil). JHB Ketteley was a
former Director of the Company and is a Director of JHB Ketteley & Co Limited.
100
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The Company vacated their office at 66 Clifton Street, London, EC2A 4HB during the year. The final settlement
on dilapidations was £33,250 and settled in March 2022.
An amount of £4,500 (2020: £14,400) was paid to Political Lobbying & Media Relations Ltd (PLMR) in respect of
training costs, the costs for 2020 related to website development costs. There were no amounts outstanding at
31 December 2021 (2020: £nil). K Craig was a former Director of the Company and is a Director of PLMR.
26. Additional performance measures
Operating profit
Acquisition related expenses
Former Directors’ payments
Amortisation of acquired intangible assets
Adjusted operating profit
Profit before tax
Acquisition related expenses
Former Directors’ payments
Amortisation of acquired intangible assets
Adjusted profit before tax
Tax charge
Acquisition related expenses
Former Directors’ payments
Amortisation of acquired intangible assets
Adjusted tax charge
Profit after tax
Acquisition related expenses
Former Directors’ payments
Amortisation of acquired intangible assets
Adjusted profit after tax
Cash generated in operations
Purchase of intangible assets
Purchase of property, plant and equipment
Acquisition related expenses
Former Directors’ payments
Adjusted operating cash flow
Adjusted operating cash flow
Net interest paid
Tax paid
Proceeds from disposal of PPE
Acquisition related expenses
Former Directors’ payments
Free cashflow
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
4,099
-
69
575
4,743
3,926
–
69
575
4,570
(1,195)
–
(13)
(109)
(1,317)
2,731
–
56
466
3,253
7,724
(1,727)
(279)
–
69
5,787
5,787
(124)
(903)
60
-
(69)
4,751
4,151
–
328
590
5,069
3,889
–
328
590
4,807
(726)
–
(62)
(112)
(900)
3,163
–
266
478
3,907
8,138
(1,603)
(99)
–
328
6,764
6,764
(206)
(785)
71
–
(328)
5,516
101
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continued
27. Post-balance sheet events
With effect from 1 January 2022 the trade and assets of Integrated Computing and Office Networking Limited
and Shire Systems Limited were transferred to Elecosoft UK Limited.
With effect from 1 January 2022 ESIGN GmbH and ActiveOnline GmbH were merged under one German trading
company Veeuze GmbH.
28. Exchange rates
The following exchange rates have been applied in preparing the consolidated financial statements:
Swedish Krona to Sterling
Euro to Sterling
US Dollar to Sterling
Income statement
Average rate
Balance sheet
Year end rate
2021
11.80
1.16
1.37
2020
11.84
1.13
1.30
2021
12.23
1.19
1.35
2020
11.22
1.12
1.37
29. Government Grants
Grants related to income are presented as part of the profit and loss and have been deducted against the related
expense in the period.
Grants, across the Group, amounted to £nil (2020: £150,000) during the year ended 31 December 2021.
Given the underlying performance of Eleco for the year, the Board took the decision to repay furlough payments
that were possible to be repaid. During the period £135,000 (2020: £nil) furlough payments were repaid.
102
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for the year ended 31 December 2021
At 1 January 2020
Dividends
Share-based payments
Elimination of exercised share-based payments
Issue of share capital
Transactions with owners
Profit for the period
Exchange differences on translation of net
investments in foreign operations
Other
Total comprehensive income for the period
At 31 December 2020
Dividends
Share-based payments
Elimination of exercised share-based payments
Issue of share capital
Transactions with owners
Profit for the period
Exchange differences on translation of net
investments in foreign operations
Other – reserve classifications
Total comprehensive income for the period
Share
capital
£’000
822
Share
premium
£’000
2,047
Merger
reserve
£’000
1,002
–
–
–
3
3
–
–
–
–
–
–
25
106
131
–
–
4
4
–
–
–
–
–
–
–
–
–
825
2,182
1,002
–
–
–
7
7
–
–
–
–
–
–
–
253
253
–
–
(29)
(29)
–
–
–
–
-
–
–
–
-
At 31 December 2021
832
2,406
1,002
Other
reserve
£’000
Retained
earnings
£’000
Total
£’000
44
–
116
(25)
–
91
–
(74)
(4)
(78)
57
–
57
(83)
–
(26)
–
6,242
10,157
–
–
–
–
–
–
116
–
109
225
1,043
1,043
–
–
1,043
7,285
(74)
–
969
11,351
(493)
(493)
–
83
–
(410)
609
57
–
260
(176)
609
80
– 80
(28)
52
83
27
636
(30)
659
7,511
11,834
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At 31 December 2021
Fixed assets
Intangible assets
Tangible assets
Investments
Debtor due after more than one year
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Provisions for liabilities
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Other reserve
Profit and loss account
Shareholders’ equity
Notes
2021
£’000
2020
£’000
3
4
5
6
7
88
127
30
20
6,546
6,546
18,085
20,218
24,846
26,814
3,572
1,769
5,341
1,773
1,696
3,469
8
10
(18,302)
(16,006)
(51)
(166)
(13,012)
(12,703)
11,834
14,111
9
–
(2,760)
11,834
11,351
11
13
832
2,406
1,002
83
825
2,182
1,002
57
7,511
7,285
11,834
11,351
The parent company’s profit for the year was £609,000 (2020: £1,043,000) and total comprehensive income
attributable to the equity shareholders was £659,000 (2020: £969,000).
The financial statements of Eleco plc, registered number 00354915, on pages 58 to 102 were approved by the
Board of Directors on 30 March 2022 and signed on its behalf by:
Jonathan Hunter
Chief Executive Officer
104
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Statement of Company Accounting Policies
The Company financial statements have been prepared in accordance with applicable United Kingdom
accounting standards including Financial Reporting Standard 102, the Financial Reporting Standard applicable
to the United Kingdom and Ireland, and with the Companies Act 2006 including the provisions of the Large and
Medium sized Companies and Groups (Accounts and Reports) Regulations 2008, and under the historical cost
convention. 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 as the parent company consolidated financial statements are
publicly available:
• 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. 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 Company 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 recoverability 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.
Assets in the course of construction are carried at cost, less any identified impairment loss. Cost includes
professional fees and other directly attributable costs that are necessary to bring the assets to it’s operating
condition. Depreciation commences when the assets are ready for their intended use.
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.
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continued
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.
Assets under construction
–
not depreciated until available for use
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.
Share-based payments
The Company issues share options to employees from time to time. Under FRS 102 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 Company 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
Company 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.
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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 Eleco plc held by the Employee Share Ownership Trust (“ESOT”) are treated as a deduction
from the weighted average number of shares. The consideration paid is deducted from equity (other reserves)
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.
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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 £609,000
(2020: £1,043,000).
2. Employee information
The average number of employees during the period, including Directors, was made up as follows:
2021
Number
2020
Number
Marketing
Software development
Management and administration
Staff costs during the period, including Directors, amounted to:
Wages and salaries
Social security
Pension costs
Share-based payments
1
1
10
12
2021
£’000
1,663
141
37
57
1,898
Pension costs relate to contributions to defined contribution pension schemes. The remuneration of the
Directors, who are the key management personnel of the Company, is set out below:
Short-term employee benefits
Post-employment benefits
Former Directors’ payments
Executive Directors
Fees – Non-Executive Directors
Number of Directors exercised options
Number of options issued to the Directors (‘000)
Gain made in exercise of options (£000)
2021
£’000
876
32
69
977
165
1,142
2021
–
700
–
2
-
11
13
2020
£’000
1,400
145
36
116
1,697
2020
£’000
792
32
304
1,128
132
1,260
2020
–
1,050
–
The emoluments and share based payments of the highest paid Director totalled £426,000 (2020: £525,000).
The remuneration of the Non-Executive Directors is determined by the Board. The Non-Executive Directors are
engaged through service contracts and each is appointed for an initial term of three years, which may thereafter
be renewed. The Company has chosen for all directors to stand for annual re-election at each year’s AGM. The
Non-Executive Directors do not participate in any of the Group’s share-based incentive or pension schemes.
Share options currently held by Serena Lang were granted to her during her tenure as Executive Chairman.
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Cost:
At 1 January 2020
Additions
Disposals
At 31 December 2020
Additions
Disposals
At 31 December 2021
Accumulated amortisation and impairment:
At 1 January 2020
Amortisation charge for the year
Disposals
At 31 December 2020
Amortisation charge for the year
Disposals
At 31 December 2021
Net book value at 31 December 2020
Net book value at 31 December 2021
Intellectual
property
£’000
1,301
–
–
1,301
77
–
1,378
1,245
26
–
1,271
19
–
1,290
30
88
109
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continued
4. Tangible fixed assets
Cost:
At 1 January 2020
Additions
Disposal
At 31 December 2020
Additions
Disposal
At 31 December 2021
Accumulated depreciation:
At 1 January 2020
Depreciation charge for the year
Disposal
At 31 December 2020
Depreciation charge for the year
Disposal
At 31 December 2021
Net book value at 31 December 2020
Net book value at 31 December 2021
Plant,
equipment
and
vehicles
£’000
Total
£’000
169
169
–
–
169
123
–
292
128
21
–
149
16
–
165
20
127
–
–
169
123
–
292
128
21
–
149
16
–
165
20
127
Included in plant, equipment and vehicles is £122,000 (2020: £nil) in respect of assets under construction.
110
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5. Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Cost:
At 1 January 2020
Disposals
Reclassification
At 31 December 2020
Disposals
Reclassification
At 31 December 2021
Accumulated provision:
At 1 January 2020
Disposals
At 31 December 2020
Disposals
At 31 December 2021
Net book value at 31 December 2020
Net book value at 31 December 2021
Shares
at cost
£’000
26,523
(4,665)
Investments
£’000
Total
£’000
2,293
28,816
–
(1,565)
–
(4,665)
(1,565)
21,858
728
22,586
–
–
–
–
–
–
21,858
728
22,586
20,705
(4,665)
16,040
–
16,040
5,818
5,818
–
–
–
–
–
728
728
20,705
(4,665)
16,040
–
16,040
6,546
6,546
Investments include £728,000 in respect of 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
value.
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 United Kingdom. Overseas subsidiary
undertakings are incorporated in their country of operations. All other subsidiary undertakings are dormant and
are listed on page 118.
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Notes to the Company Financial Statements
continued
5. Investments in subsidiaries continued
Company
Elecosoft UK Limited
Eleco Software Limited
Integrated Computing & Office Networking
Limited
Shire Systems Limited
Elecosoft Consultec AB
Asta Development GmbH
Eleco Software GmbH
ESIGN Software GmbH*
ActiveOnline GmbH*
Elecosoft LLC
Elecosoft BV
Elecosoft Limited
Asta Group Limited
Country of
operations
Class of share
capital held
Proportion
held
within Group
Nature of business
UK
UK
UK
UK
Sweden
Germany
Germany
Germany
Germany
US
Netherlands
UK
UK
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100% Software and services
100%
Software
100% Software and services
100% Software and services
100% Software and services
100% Software and services
100% Software and services
100% Software and services
100% Software and services
Software
100%
100% Software and services
Holding company
100%
Holding company
100%
*
These two German entities merged after the year end under the name of Veeuze GmbH
The registered office of all the UK subsidiary undertakings is Parkway House, Haddenham Business Park,
Pegasus Way, Haddenham, Bucks, England, HP17 8LJ.
The registered office of the overseas subsidiary undertakings is shown in the Group Directory section of the
Annual Report and Accounts.
The ordinary shares in the above companies are held through an intermediate holding company except for
Integrated Computing & Office Networking Limited, ESIGN Software GmbH and ActiveOnline GmbH.
6. Debtor due after more than one year
Amounts due from subsidiary undertakings
2021
£’000
2020
£’000
18,085
18,085
20,218
20,218
Amounts due from subsidiary undertakings comprise the holding company Elecosoft Limited and the loan is
interest bearing.
112
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7. Debtors
Trade debtors
Other debtors
Prepayments and accrued income
Deferred tax
Amounts due from subsidiary undertakings
2021
£’000
2020
£’000
14
27
172
10
3,349
3,572
14
18
97
9
1,635
1,773
Amounts due from subsidiary undertakings comprise of interest-bearing loans and intercompany current
accounts which do not carry any interest receivable.
8. Creditors: amounts falling due within one year
Bank loans
Trade creditors
Other creditors
Accruals and deferred income
Other taxation and social security
Current tax
Amounts due to subsidiary undertakings
2021
£’000
–
290
82
786
(12)
146
2020
£’000
1,600
146
114
341
(21)
129
17,010
13,697
18,302
16,006
Amounts due to subsidiary undertakings comprise of interest-bearing loans of £16,568,000 (2020: £12,975,000)
and intercompany current accounts of £442,000 (2020: £722,000) which do not carry any interest receivable.
The interest rate applied to the interest-bearing loans was in the range of 1.6 per cent to 3.0 per cent.
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continued
9. Creditors: amounts falling due after more than one year
The Company’s facilities with Barclays Bank plc are explained in note 16 to the Consolidated Financial
Statements.
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
The UK term loan facility with Barclays Bank plc was paid off during the year.
10. Provisions for liabilities
At 1 January 2021
Charge to the profit and loss account
Utilised in the year
At 31 December 2021
2021
£’000
–
–
2021
£’000
–
–
–
–
2021
£’000
166
(98)
(17)
51
2020
£’000
2,760
2,760
2020
£’000
1,600
1,600
1,160
4,360
2020
£’000
179
30
(43)
166
Further information on the details of the provisions is set out in note 17 of the consolidated accounts.
11. Called up share capital
Authorised:
Ordinary Shares of 1p each
Allotted, called up and fully paid:
At start of year
Issue of Ordinary Shares
At end of year
2021
Nominal
value
£’000
2020
Nominal
Value
£’000
No. of shares
No. of shares
85,000,000
850
85,000,000
850
82,464,650
690,000
83,154,650
825
7
832
82,239,650
225,000
82,464,650
822
3
825
The increase in called up and fully paid share capital in the year was in respect of the exercise of share options
and the related issuance of 690,000 shares of nominal value 1 pence at a premium of £253,000.
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12. Share-based payments
The Company operates one share scheme and options outstanding at 31 December 2021 over Ordinary Shares
granted under the scheme were as follows:
9 August 2017
18 May 2020
12 November 2020
23 February 2021
Number
of Ordinary
Shares
500,000
650,000
250,000
600,000
2,000,000
Vesting dates
Earliest
Latest
1 May 2020
8 August 2027
31 May 2023
31 May 2030
31 May 2023 12 November 2030
1 March 2024
23 February 2031
Weighted average
remaining
contractual
life (years)
5.6
8.4
8.9
9.2
8.0
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
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2021
2020
Weighted
average
exercise
price
Pence
Number
Number
2,240,000
56.6 1,415,000
700,000
100.4 1,050,000
(690,000)
(250,000)
35.7
74.3
(225,000)
–
Weighted
average
exercise
price
Pence
42.0
74.4
48.0
–
2,000,000
76.9 2,240,000
56.6
–
–
–
–
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 2021 was £57,000 (2020: £116,000).
Further details of the share options and the valuation model used are included in note 21 of the Consolidated
Financial Statements of the Annual Report and Accounts.
13. 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 acquisitions of both Integrated Computing and Office
Networking Limited in October 2016 and ActiveOnline GmbH in November 2018.
The Employee Share Ownership Trust held 907,849 shares at 31 December 2021 (2020: 907,849 shares) with a
market value of £835,000 (2020: £731,000) and has waived its entitlement to dividends on Ordinary Shares held
by it until such time as they are vested in employees.
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Notes to the Company Financial Statements
continued
14. Operating lease commitments
Leases expiring:
Within one year
Between two and five years
Property
2021
£’000
Other
2021
£’000
Property
2020
£’000
Other
2020
£’000
–
–
–
–
–
–
70
–
70
–
–
–
15. 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 Eleco plc had
no material transactions with the Company during the year, other than a result of service agreements or as
disclosed in the Directors’ Report. Details of the Directors’ remuneration are disclosed in the Remuneration
Committee Report on pages 38 to 44.
The Directors of the Company had no transactions with the Company during the year, other than a result of
service agreements. The key management personnel are the Directors who are listed on page 49 of the Directors
Report.
An amount of £58,697 (2020: £71,667) was paid to JHB Ketteley & Co Limited under a lease for occupation by
the Group of 66 Clifton Street, London, EC2A 4HB and £nil (2020: £3,750) for a contribution to the office costs
at Burnham-on-Crouch. There was £6,197 outstanding at 31 December 2021 (2020: £nil). JHB Ketteley was a
former Director of the Company and is a Director of JHB Ketteley & Co Limited.
The Company vacated their office at 66 Clifton Street, London, EC2A 4HB during the year. The final settlement
on dilapidations was £33,250 and settled in March 2022.
An amount of £4,500 (2020: £14,400) was paid to Political Lobbying & Media Relations Ltd (PLMR) in respect of
training costs, the costs for 2020 related to website development costs. There were no amounts outstanding at
31 December 2021 (2020: £nil). K Craig was a former Director of the Company and is a Director of PLMR.
16. Post-balance sheet events
With effect from 1 January 2022 the trade and assets of Integrated Computing and Office Networking Limited
and Shire Systems Limited were transferred to Elecosoft UK Limited.
With effect from 1 January 2022 ESIGN GmbH and Active Online GmbH were merged under one German
trading company Veeuze GmbH.
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Revenue
Software
Discontinued operations
EBITDA*
Adjusted EBITDA
Amortisation and impairment of purchased
intangible assets
Depreciation
Adjusted operating profit
Amortisation of acquired intangible assets
Exceptionals
Operating profit
Finance expense
Profit before taxation
Taxation
Profit after taxation
Basic earnings per share (continuing operations)
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
Year ended
31 December
2017
£’000
27,344
25,232
25,398
22,220
19,996
–
7,182
7,251
–
6,675
7,003
(1,786)
(1,068)
(722)
4,743
(575)
(69)
4,099
(173)
3,926
(1,195)
2,731
3.3p
(866)
5,069
(590)
(328)
4,151
(262)
3,889
(726)
3,163
3.9p
–
6,159
6,302
(855)
(902)
–
4,006
5,257
(529)
(778)
4,545
3,950
(590)
(143)
3,812
(339)
3,473
(772)
2,701
3.3p
(595)
(689)
2,666
(272)
2,394
(598)
1,796
2.4p
–
3,643
3,643
(623)
(247)
2,773
(412)
–
2,361
(107)
2,254
(357)
1,897
2.5p
Shareholders equity
Dividend per share
23,846
21,524
17,924
15,479
11,486
0.40p
0.40p
0.30p
0.68p
0.60p
117
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The dormant subsidiary undertakings are unlisted and wholly owned and set out in the table below:
Country of
operations
Class of share
capital held
Proportion held
within Group
Company
Asta Group Limited
Bell and Webster Limited
Citehow Limited
D G Metal Products Limited
Durable Fabricators Limited
Eleco Building Products Limited
Eleco Directors Limited
Eleco (DCS) Limited
Eleco (MS) Limited
Eleco (PP) Limited
Elecosoft Limited
Elecoprecast Limited
Elecosoft Pvt Limited
Falconer Road Property Limited
Online Warehouse Limited
RB Fabrications (Norwich) Limited
Webster Homes (Southern) Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
India
UK
UK
UK
UK
Webster Properties (Developments) Limited UK
UK
Sweden
South Africa 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%
Nature of business
Holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding company
Holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding company
Dormant
Webster Properties Limited
Consultec Group AB
Elecosoft (Pty) Limited
118
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Professional Advisors and Registered Offices
Professional Advisors
Auditor
RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB
Bankers
Barclays Bank PLC
The Pinnacle
Midsummer Boulevard
Milton Keynes MK9 1BP
Company Secretary
Elemental Company Secretary
Limited
+44 (0) 20 3286 6229
info@elementalcosec.com
Financial Public Relations
SEC Newgate
Sky Light City Tower
50 Basinghall Street
London EC2V 5DE
+44 (0) 20 3757 6882
eleco@secnewgate.co.uk
Registered Offices
Eleco plc
6 Bevis Marks
London, England EC3A 7BA
+44 (0) 20 7422 8000
ir@eleco.com
www.eleco.com
Registered Number 00354915
Elecosoft UK Limited
Eleco Software Limited
Integrated Computing & Office
Networking Limited
Shire Systems Limited
Elecosoft Limited
Asta Group Limited
Parkway House
Pegasus Way
Haddenham Business Park
Bucks
HP17 8LJ
Nominated Advisor and Broker
finnCap Ltd
One Bartholomew Close
London EC1A 7BL
+44 (0) 20 7220 0500
www.finncap.com
Rule Three Advisor
Stephens Europe Limited
12 Arthur Street
London EC4R 9AB
Registrars and Transfer Agent
Neville Registrars
Neville House
Steelpark Road
Halesowen B62 8HD
+44 (0) 12 1585 1131
info@nevilleregistrars.co.uk
Solicitors – Employment and
Company Law
Bates Wells & Braithwaite
London LLP
10 Queen Street
London EC4R 1BE
+44 (0) 20 7551 7777
Solicitors – Corporate Transaction
and Commercial Transaction
Reynolds Porter Chamberlain
Tower Bridge House
St Katharine’s Way
London E1W 1AA
+44 (0) 20 3060 6000
Elecosoft LLC
12600 Hill Country Blvd
Suite R-275
Austin
TX 78738
Elecosoft BV
Bennekomseweg 41
6717 LL Ede
Nederland
Elecosoft Consultec AB
Storgatan 40
931 31 Skellefteå
Sweden
Asta Development GmbH
Egon-Eierman-Allee 8,
76187 Karlsruhe,
register court Mannheim HRB 706289
Eleco Software GmbH
Kastanienwall 56, 31785 Hameln,
register court Hannover HRB 60585
Veeuze GmbH
Warmbüchenstraße 17,
30159 Hannover,
register court Hannover HRB 222415
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Job No: 46561Proof Event: 15Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2021
120
Job No: 46561Proof Event: 15Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Eleco plc’s commitment to environmental issues is reflected in this Annual Report,
which has been printed on Galerie Satin an FSC® certified material. This document was
printed by Park Communications Limited using its environmental print technology, which
minimises the impact of printing on the environment. Vegetable-based inks have been
used and 99% of dry waste is diverted from landfill. The printer is a CarbonNeutral®
company.
Both the printer and the paper mill are registered to ISO 14001.
Produced by
Park Communications
Job No: 46561Proof Event: 15Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600 l
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Job No: 46561Proof Event: 15Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2021T: 0207 055 6500 F: 020 7055 6600