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Eleco plc
Annual Report and
Accounts 2022
Creating certainty for
the built environment
Job No: 48476Proof Event: 9Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600
Overview
Introduction
At a Glance
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, the
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 delivery, estimation,
visualisation, Building Information Modelling
(BIM) and property management.
Download the digital
version of this report
www.eleco.com
Overview
00
Introduction
01 Highlights
Strategic Report
02 Chairman’s Statement
05 CEO Report
10 Our Purpose, Mission, Vision and Values
12 Our Products and Services
14 Our Business Model
16 Review of Principal Risks and Uncertainties
20 Section 172 Statement
25 Financial Review
Governance
28 Board of Directors
30
33
35
Corporate Governance Report
Audit Committee Report
Nomination Committee Report
37 Remuneration Committee Report
44 ESG Committee Report
54
Directors’ Report
Financial Statements
57
Independent Auditor’s Report
65 Consolidated Income Statement
66
Consolidated Statement of Comprehensive
Income
67
Consolidated Statement of Changes in Equity
68 Consolidated Balance Sheet
69
70
Consolidated Statement of Cash Flows
Significant Accounting Policies
80 Notes to the Consolidated Financial Statements
112 Company Statement of Changes in Equity
113 Company Balance Sheet
114 Statement of Company Accounting Policies
117 Notes to the Company Financial Statements
126 Five-Year Summary
127 Dormant Subsidiary Undertakings
128 Professional Advisors and Registered Offices
Job No: 48476Proof Event: 9Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600 Highlights
Financial Highlights
Total Revenue
Total Revenue: at constant currency rates
Total Recurring Revenue (TRR)
Annualised Recurring Revenues (ARR)*
Gross margin
EBITDA**
Profit before taxation
Profit after taxation
Basic earnings per share (pence per share)
Free cash flow***
Net cash
Total dividend**** (pence per share)
2022
£’000
2021
£’000
26,566
27,344
27,009
27,344
16,927
15,424
18,237
15,955
88.4% 89.9%
5,200
2,944
2,395
2.9
7,182
3,926
2,731
3.3
3,791
4,751
12,538
10,055
1.28
0.60
*
**
ARR is defined as normalised annualised recurring revenues and includes revenues from subscription licences, contract values of annual support and
maintenance, and SaaS contracts. Normalisation is calculated using the recurring revenue in the final month of the year multiplied by twelve.
EBITDA is defined as Earnings before Interest, Taxation, Depreciation, Amortisation and Impairment of Intangible Assets and former Directors’ payments in
2021.
***
Free cash flow represents cash generated in operations less purchase of intangible assets and property, plant and equipment, net of finance costs and
taxation plus any proceeds from disposals of property, plant and equipment.
**** Consists of a special dividend of 0.58 pence per share, a proposed dividend of 0.50 pence per share and interim dividend of 0.20 pence per share (2021:
proposed dividend of 0.40 pence per share and interim dividend of 0.20 pence per share).
Operational Highlights
• Successfully commenced phase two of
the Group’s Software as a Service (SaaS)
transition strategy, to offer subscription
licences to existing customers, thereby
supporting customer success initiatives and
enhancing our recurring revenue profile further.
• Development of a new Permit to Work
module for Eleco’s scalable maintenance and
facilities software, ShireSystem, released in
H2 2022. This will be a key component in
assisting customers with managing safety and
compliance procedures.
• A focus on ESG initiatives by establishing
an ESG committee, setting targets and
measuring performance as well as offsetting
our measured carbon emissions.
• Winner of the Megabuyte Quoted25 Award
for Best Performing Software Company in
Industrials in 2022.
• Certified as a Great Place to Work® and
implemented wellbeing and personal
development programmes for employees.
• Winner of Project Management Software of
the Year at the UK Construction Computing
Awards for the ninth successive year.
• A reinitiation of mergers and acquisitions
(M&A) activity as part of our ongoing growth
strategy, together with the disposal of non-
core German ARCON architectural business,
enhancing our focus on our main building
lifecycle solutions.
01
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600OverviewStrategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022
Strategic Report
Chairman’s Statement
I am delighted to report that 2022 has been another
year of solid progress for Eleco. Despite significant
macro-economic and geo-political upheaval, high
inflation and a tight labour market, the business has
delivered a robust performance and made considerable
headway towards meeting its strategic goals.
Thanks to management’s execution of our strategy
the Company’s transformation has been successfully
implemented and we are now extremely well-
positioned to accelerate our growth organically as well
as having a solid platform from which to successfully
undertake strategic acquisitions.
We are also uniquely placed to benefit from industry
trends. The construction and built environment
industries are seeking digitalisation; better productivity
of labour and materials costs; reduced carbon footprint;
minimised waste; more flexible modular solutions; and
4D Building Information Modelling solutions (4D BIM)
to add time and scheduling elements to their models.
Eleco offers all these solutions and so we are seeing an
increasing number of significant opportunities within
our markets.
In line with our customer-centric approach, Eleco has
continued to invest in product development, having
launched new versions of our core building lifecycle
products during the year. Our offerings are increasingly
focused on improving processes for our clients by
introducing new, more efficient workflows while
digitalising the least efficient of their manual processes.
Strategic Success
Eleco is now a customer-centric rather than product-
centric business with all developments based on
our clients’ needs. Across the Group we have been
focused on both delivering best of breed products
to core customer segments while also transitioning
our business to SaaS and maintaining high customer
retention rates. To that end, we have introduced an
R&D matrix structure built around customer segments,
enabling us to produce innovative solutions that are of
the highest value to our customer base.
Our transition to a SaaS-based, recurring revenue
business is progressing to plan. We grew Annualised
Recurring Revenues (ARR) by 14 per cent to £18.2m at
31 December 2022 from £16.0m at 31 December 2021.
Total Recurring Revenue (TRR) increased 10 per cent
to £16.9m (2021: £15.4m), such that recurring revenues
now account for 64 per cent of total revenues, up from
56 per cent in 2021.
02
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
Our strategic move to a SaaS licensing model inevitably
meant a temporary decline in revenue, something we
highlighted at the outset of this process. Nonetheless,
revenue for 2022 (£26.6m, or £27.0m on a constant
currency basis) is only marginally down on 2021
(£27.3m). We are satisfied with the trajectory of our
SaaS transition which we expect to result in significant
revenue growth and improved shareholder returns over
the years to come. Our move to SaaS licensing will
benefit us and our customers and will result in higher
Customer Lifetime Value (CLV). We expect revenues will
increase from the end of Q2 of this year, which marks
the midway point of our transition, and that revenue will
continue to increase for 2023 as a whole.
As well as our strategic realignment to a customer-
centric business, we have continued to grow our
customer base, achieving new customer growth in the
UK, growth in the USA and strong demand in Sweden.
Existing customers continue to expand their software
usage and we are seeing more demand for hosted
solutions.
In line with our previously announced strategy to focus
on our core customer segments and businesses, we
sold our German ARCON architectural CAD business,
following the year end, for a total consideration of
€600,000. This further streamlines our business toward
a common customer base and product type and will be
beneficial to all our stakeholders. It will enable our team
to be more focused, provide improved service levels to
our customers, and ultimately generate greater value
for shareholders.
Unfortunately, geo-political factors and inflationary
pressures have impacted the timing for our customers
of their operational programmes. This has resulted in
a slowdown in demand for services and sales of new
licences across Eleco’s portfolio, especially in Germany
where the economy has been hit more severely by
the repercussions of the war in Ukraine. However,
the Group is successfully absorbing these pressures
thanks to effective cost control and our strong cash
balance, with profits remaining in line with expectations.
Overall, we have continued to increase our customer
numbers and monthly recurring revenue, making
progress in our goal to become a much larger, world-
class, customer-centric organisation.
Awards
Powerproject won the Project Management Software
of the Year Award at 2022’s Construction Computing
Awards for the ninth year in a row, reflecting the high
regard in which our software is held by the industry.
In March 2022, we also won the Megabuyte Quoted25
Award for best performing software company in the
industrials peer group, highlighting the strength of our
overall financial performance.
We were also placed in the Top 50 ConTech Partners
list whose criteria include innovation, adoption and
customer satisfaction.
Environmental, Social and Governance (ESG)
We formed an ESG Committee early in the year,
chaired by Non-Executive Director, Mark Castle,
with a mandate to focus on the key elements of
Environmental, Social and Governance and identify the
core areas of Eleco’s Sustainability Plan. During the
past year, the ESG Committee set Key Performance
Indicators (‘KPI’) in line with Eleco’s Sustainability Plan,
which we used to measure our performance against in
2022, and looked at our Net Zero Strategy.
Environmentally, we made the move to more renewable
energy sources across the whole business and while
only a short-term solution, we offset our 2021 carbon
emissions during the year. We will continue to focus
on our impact on the environment and driving our
Net Zero plan. We are also reviewing how we can
positively contribute to global environmental challenges
by helping our customer base reduce their carbon
footprint and improve sustainability through the use of
our solutions.
Within our social strategy we recognise the importance
of working together with our colleagues, customers
and suppliers to promote fairness, equality and
inclusion. People are at the heart of Eleco. Attraction
and retention of talent and the wellness of our people
were key themes throughout 2022 in what was a tight
labour market.
We maintained investment in our people throughout
the year, introducing numerous initiatives including
an Employee Assistance Programme, Employee Hub
and encouraging colleagues to volunteer for charitable
causes. In addition, two-thirds of our employees
received a cost-of-living allowance, and we provided
pay awards across the whole Group. As the result of
many of our commitments to our colleagues, we were
delighted to receive Great Place to Work® certification
in the UK, Sweden and Germany.
03
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview Strategic Report
Chairman’s Statement continued
toward digitalisation, as well as more efficient and
sustainable building methodologies and techniques.
Eleco’s solutions are widely recognised for improving
decision-making and planning throughout the building
lifecycle and we currently have an excellent opportunity
to leverage our market position, strengthen our
platform and drive organic growth.
Over the coming year we will also build on the progress
we have made in achieving Great Place to Work®
status, providing an ever-improving work environment
that helps us motivate and retain our great people while
attracting new talent in a competitive labour market.
The Company has a number of strategic acquisition
prospects that could further enhance its positioning
and continues to actively review the market for
technology opportunities and threats.
Eleco has delivered a positive performance throughout
2022 despite the macro-economic background,
delivering growth in subscription revenues in line
with our core strategic goal. I would like to thank our
talented team for their superb efforts in achieving this
outcome and our loyal and valued customers for their
support. We are confident of continued robust progress
through 2023 and in meeting market expectations for
the year ahead.
Serena Lang
Chairman
27 March 2023
We were delighted to welcome Neil Pritchard, who was
appointed to the Board as Chief Financial Officer in
October 2022, further strengthening our leadership and
corporate governance. The Group Leadership Team
was also bolstered by the appointment of Luben Kirov
as Chief Technology Officer earlier in the year.
Dividend
Thanks to our strong cash position, we are able
to both retain earnings for corporate development
initiatives and maintain a progressive dividend policy.
Cash generation was very strong during the year,
with an increase in free cash flow ahead of market
expectations, resulting in a 25 per cent increase in
cash to £12.5m (including cash held within the held for
sale business at the year end) at 31 December 2022
(31 December 2021: £10.1m). The Board has therefore
decided to recommend a final cash dividend of 0.50
pence per share (2021: 0.40 pence per share). This is in
addition to an interim cash dividend of 0.20 pence per
share (2021: 0.20 pence per share). Furthermore, we
will propose a special dividend of 0.58 pence per share
to reward our shareholders’ loyalty as we go through
the SaaS transition, representing the cash proceeds
from the disposal of the non-core ARCON business.
The total dividends for the year will therefore be 1.28
pence per share (2021: 0.60 pence per share).
The full year and special dividend will follow approval
by shareholders at the AGM. The record date is the
close of business on 19 May 2023 and the ex-dividend
date will be 18 May 2023.
Outlook
Eleco is building a single customer platform, the
Elecoverse, that will enable our customers to access
and utilise all our solutions. It will also provide customer
success tools, training options through the Elecoversity,
as well as provide us with analytics that will help us
to further enhance our offerings to our customers. We
are enhancing our solutions to further our competitive
advantage in our areas of focus. We will continue
moving ahead in our transition to SaaS which will
increase organic recurring revenues and profits. Sales
enablement programmes are being implemented to
further enhance future organic growth.
The construction and built environment markets are
currently affected by a multitude of macro-economic
headwinds. Eleco’s software plays a crucial role in
helping companies mitigate the impact of these issues,
driving productivity, and enabling them to better plan
their resources. The industry is experiencing a move
04
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
CEO Report
I am delighted with the Group’s performance and
progress with delivering its growth strategy against a
backdrop of difficult economic conditions for the wider
market. I am pleased to be reporting financial results
in line with market expectations. Eleco is now better
positioned within its markets and we continue to make
meaningful progress towards our strategic goals.
Eleco solves the challenges of the built environment
by supporting the digital transformation of companies
who construct and maintain buildings and structures.
Our vision is to create certainty for the built
environment by being the trusted technology partner
to all stakeholders, which is especially important in the
current economic climate.
Eleco’s core customers are in the UK, Germany,
Sweden, the Netherlands and the USA. However, its
solutions reach all areas of the globe including the rest
of Europe, Australia and New Zealand.
The built environment is an exciting sector for
technology companies due to rising demands to meet
environmental targets and population growth, which
are driving companies in an industry that is recognised
as a slow adopter of technology to think differently
about data, process, and collaboration. A company
with the pedigree of Eleco however, with its technical
talent and experience, is more than capable of meeting
the growing demands of the industry.
Our Markets
Following a previous year in which construction
projects were significantly disrupted due to the global
pandemic, the trend continued into the beginning of
FY22 with related material price increases and the
energy and cost-of-living crisis which followed the
Russian invasion of Ukraine. The uncertainty caused
disruptions in projects, particularly in Germany.
During the pandemic, many businesses rapidly
increased their technology investments in order to
operate remotely and assist employees to work from
home. We found that many of the old and perhaps
inefficient processes had been digitalised but not
modernised to work in a digital environment and
this led to a decline in some areas of construction
workflows. This is where Eleco’s many years of
industry experience proved vital in supporting our
customers to transform their processes and become
truly modernised. Furthermore, new technology
entrants have found it challenging to break into the
built environment as our customers have become
more tech-savvy, again underpinning Eleco’s strategic
05
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview CEO Report continued
move to focus on customer centricity and customer
success.
Review of Operations
The Board has been greatly encouraged by the pace
of our transition to SaaS during the year. Many such
transitions suffer more severe revenue reductions,
however, it was the objective of Eleco colleagues to
work hard to deliver equivalent year-on-year revenues.
The strong uptake of subscription licensing has
resulted in significant growth in Annualised Recurring
Revenues (ARR) of 14 per cent, from £16.0m at 31
December 2021 to £18.2m at 31 December 2022. This
level of growth has not been seen in prior years and
signifies positive progress. We are on track to see the
total reported revenues further increase by the end of
2023.
As stated when we first embarked upon this
transformational journey, we expected a reduction in
revenues during the first 18 months of the process
as customers moved from perpetual licences to
subscription payments, with total revenues increasing
after that time. The midpoint of our journey to SaaS will
occur in H1 2023, and we are confident of delivering
solid revenue growth in the second half of the current
financial year.
Following the strategic focus for Eleco to become
a SaaS company, we will have greater predictability
of our revenues, more sustainable growth, lower
costs and improved scalability. Our customers are
also benefiting from a reduction in upfront costs,
while having flexible, scalable products that can run
anywhere on any device with simple maintenance and
automatic upgrades. Ultimately, our move to SaaS
will make Eleco a stronger and more resilient business
while increasing Customer Lifetime Value.
In keeping with our strategic focus on prioritising our
core customers, growth areas and increasing recurring
revenue we disposed of our non-profitable German
ARCON architectural CAD business in February 2023
for a total consideration of €600,000. This further
streamlines the Group toward a common customer
base and product type which benefits our employees
and customers.
We also reorganised the management teams in our
German Building Lifecycle and Veeuze companies,
which we expect to drive long-term growth in the
region.
Our ambition is to be identified as the preferred
international technology partner in the built
environment. We are therefore proud to be recognised
in the Top 50 ConTech Partners list. Launched by Build
in Digital, the list shows the ConTech firms that have
become an integral part of their clients’ supply chain,
helping them operate on time, on budget, and with a
minimal carbon footprint.
2022 was the ninth consecutive year in which we
received the Project Management Software of the Year
Award at the UK Construction Computing Awards, and
in March 2022, we also won the Megabuyte Quoted25
Award for best performing software company in the
industrials peer group, highlighting the strength of our
overall financial performance.
Our US channel partner programme was enhanced
which resulted in the introduction and first order
of Powerproject Vision, our cloud collaboration
solution, to Saunders Construction, an ENR Top 400
general contractor. This has sparked an interest in
Powerproject Vision among other customers in the US.
Central to us upholding innovation, adoption and
customer satisfaction is the attraction and retention
of the highest quality talent. During the year, we
introduced numerous measures to ensure this could
still be achieved in a highly competitive labour market.
Our employee value proposition was improved
throughout the year by the introduction of various
employee initiatives, well-being support and benefits.
As a result, in June 2022 we were awarded Great
Place to Work® status in the UK and Sweden following
a survey of Eleco colleagues, who worked tirelessly
to deliver FY22’s strong results while still making
excellent progress our strategy. I am pleased to say we
have retained that Great Place to Work® certification in
2023, and added Germany to the fold.
Strategy
The Group’s leadership team continued its
commitment to driving the vision and strategy whilst
creating an environment to deliver stakeholder value
and growth. These comprise three strategic pillars: Go-
to-Market, Innovation and Technology, and Mergers
and Acquisitions, underpinned by our Growth Platform.
Go-to-Market
Investment in cloud migration in 2022 has formed
the basis for new future applications as well as the
provision of cost-effective, secure and collaborative
solutions for Eleco’s current customers. Our revived
sales enablement programme will support existing
06
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
colleagues to perform at their best and also allow
Eleco to accelerate the onboarding of new colleagues
and scaling of its sales capabilities.
Solving the challenges of the built environment
requires collaboration and partnerships. Therefore as a
focus for 2023, Eleco will be the leading partner of the
C-Tech Startup Village at the UK Digital Construction
Week in May. This will connect the Company with over
100 early-stage technology businesses in our sector.
Further service partners and resellers play a key role
in providing Eleco scale in delivery to international
markets. Earlier this year, in conjunction with our US
value added resellers, we hosted our first US user
conference since the pandemic and not only was the
turnout excellent, but also the response was extremely
favourable, with Lorne Duncan from Petroglyph
commenting that, “It was the best user conference I
have been to in the last decade and probably the best
I have ever attended.”
Innovation and Technology
Our growth strategy called for a reorganisation of our
Research & Development function into an aligned
group of colleagues reporting to our Chief Technology
Officer. This change in H2 2022 has stimulated
creativity and innovation as the team now meet as one,
developing efficiencies by eliminating duplication and
supporting specialism and career pathways within the
Group.
Innovation is an area in which Eleco colleagues feel
confident, as we are both proud and fortunate to work
with the most forward-thinking engineers and planners
in the industry to solve the challenges they face. Our
solutions have an active educational audience of over
12,000 students and with the culture we promote,
customers can easily speak with Eleco colleagues to
discuss their challenges.
In 2023, our customers can expect to see more SaaS
modules which promote better collaboration; for
example, Asta Connect is our new last planner solution
designed to bring teams together on site. We also plan
to launch the first iteration of the Elecoverse, providing
greater access to the Eleco ‘universe’ and scalability
of services for our customers. We will continue to
enhance our existing portfolio to improve customer
experience and appeal to a diverse audience within
our core customer base.
Mergers & Acquisitions
The Group’s M&A strategy is driven by its ambitious
technology roadmap and customer needs whilst
further supplementing our organic growth.
There are three types of potential acquisition we are
pursuing:
•
•
Type A – Revenue & Profit enhancing in
complementary markets. An established company
with robust financial credentials and loyal customer
base.
Type B – Proven Technology that advances
our roadmap. An established technology and
capability-led businesses that would enable
Eleco to accelerate its roadmap through acquiring
developed IP and technical talent.
•
Type C – Next-Generation Technologies; innovative
solutions that add value to our existing customers.
Growth Platform
Developing and strengthening Eleco’s operational
platform has been a strategic focus since the launch
of the strategy in 2021, and will continue to play an
important role in the future success of Eleco. Core
elements to enable growth are our people, culture,
ESG credentials and resilient financial platform.
People & Talent
Eleco is a people business, and the calibre and talent
of our people, along with their enthusiasm to solve the
challenges of the built environment, continue to be key
in delivering our strategy.
During the period the Leadership Team was
strengthened with the recruitment of Neil Pritchard
who was appointed as Chief Financial Officer, and
to the Board, in October 2022. Neil has significant
experience of AIM-listed technology companies,
having been CFO of Corero Network Security plc
and CML Microsystems plc and having worked for a
number of internationally-quoted companies prior to
this. Neil’s background and skills are already proving
invaluable as we focus on continued and sustainable
organic and inorganic growth.
Luben Kirov joined as Chief Technology Officer, in
February of 2022. With over 15 years of professional
experience across Natural Resource Management,
Enterprise Services, Software Development, Data
Science and Consulting, Luben brings with him
comprehensive and diverse experience in the fields of
technology and business.
07
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview CEO Report continued
David Hernandez joined in July as Head of US
Operations, based in Texas, and is an experienced
sales leader, having spent almost a decade in
sales leadership and channel management in the
construction industry as well as having led his own
residential and commercial contracting company.
Dirk Dombert started as Regional Managing Director,
Northern Europe in November, and has 25 years of
sales and management experience with software
solutions and services in ecommerce and CAD/CAM
technologies.
Culture & Values
Fostering a strong company culture aligned to Eleco’s
purpose and vision is critical to the delivery of our
strategy. Accordingly we focused on strengthening
our cultural values by introducing our own behavioural
framework into employee objectives and our
recruitment process in the period.
This focus on cultural values has brought about
increased levels of trust and openness and has
created an environment in which colleagues feel
confident to contribute, collaborate, be innovative
and ultimately perform to the best of their ability.
Furthermore, these improved ways of working have
served to support the leadership team in implementing
transformational changes more swiftly.
Systems
Reliable and secure systems form a key element in
enabling our growth ambitions. During the period
we strengthened our cyber security posture by
implementing a cyber vulnerability scanning system to
regularly test our public-facing services. Furthermore
we updated our cyber security procedures and policies
in advance of applying for ISO 27001 in the UK in
2023.
ESG Credentials
Excellent environmental, social and governance
credentials have significant importance in supporting
our growth. In the period, we established an ESG
Committee and developed a scorecard to commence
the measurement of the initiatives we continue to
implement. Some initiatives included offsetting carbon
emissions, progression towards electrified vehicles
and making facility improvements in our offices to
reduce our impact on the environment.
Further supporting good governance, we reinvigorated
our group-wide policy framework which is being
introduced through our internal training platform. Every
employee was also trained and tested throughout
08
the year on the detection of cyber threats and
attacks. Our clients can therefore have confidence
that we adhere to the National Cyber Security Centre
(NCSC) guidelines for cyber security for construction
businesses, one of the many industries that we serve.
I am proud of the social responsibility measures
adopted by Eleco and for its recognition as a Great
Place to Work®. During the year, we introduced
several initiatives including an Employee Assistance
Programme, Employee Hub, volunteering days for
colleagues and support with additional external
training to build upon their existing skills and abilities.
In Q4 2022, and with the approaching colder weather,
we recognised the impact on colleagues of the rising
cost of living and, as a result, the Board made a one-
off support payment to two-thirds of our employees.
Resilient Financial Platform
Annualised Recurring Revenues (ARR) at 31 December
2022 increased by 14 per cent to approximately
£18.2m (£16.0m at 31 December 2021). Total
Recurring Revenues (TRR), a key metric for the Group,
increased to £16.9m, or 64 per cent of total revenue
in 2022, representing a 10 per cent uplift on the
comparable period (£15.4m in 2021 or 56 per cent of
total revenues).
As a result of the transition away from upfront
perpetual licences, revenues for the year ended 31
December 2022 were marginally lower than in the
prior year at £26.6m (£27.0m in constant currency
terms) (2021: £27.3m). This, together with profit before
tax for the period of £2.9m (2021: £3.9m), was in line
and ahead of market expectations. We expect total
revenues to grow in the second half of the coming year
as we pass the halfway mark of our SaaS transition.
Service revenue was in line with the previous year at
£6.0m (2021: £6.0m).
Due to the SaaS transition, Building Lifecycle total
revenue decreased by 2 per cent while CAD and
Visualisation revenue also decreased by 7 per cent.
Deferred income increased to £7.8m (2021: £7.1m).
Revenues by customer location were positive in the
USA and Rest of World, though other areas were lower
due to the SaaS transition and Germany showed a
decline due to the prevailing economic conditions, but
also reflected the reduced business by our ARCON
business that was disposed of after the year end.
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
We invested approximately 12 per cent of revenues in
product development across our portfolio during 2022
which was similar to prior year.
Cash generation remains strong, with an increase in
free cash flow ahead of market expectations resulting
in a significant increase in cash of 25 per cent to
£12.5m as at 31 December 2022, up from £10.1m as
at 31 December 2021.
The Company’s robust, debt-free cash status enables
us to have a progressive dividend policy while allowing
for the retention of surplus cash to continue to invest
in corporate development initiatives and the future
growth of the Group. An enhanced final dividend and a
payment of a special dividend (relating to the disposal
of the ARCON business) rewards our shareholders for
their support on our transformative journey.
Outlook
I am delighted with the meaningful progress that Eleco
has made towards its strategic goals this year. As
such, I would like to extend my thanks to the talented
colleagues in the Group for their valued contribution,
trust and dedication.
Eleco’s customers increasingly embrace digitalisation
as a critical means to solve the challenges they are
facing in their business. We expect the rising demand
for designing, constructing and operating buildings
with improved green credentials to be a key driver for
Eleco as our products support the reduction of waste,
drive efficiency and provide critical data to make better
decisions. Improving Eleco’s go-to-market abilities
will drive customer success, our ability to scale and
strengthen our reputation as a trusted technology
partner in the built environment.
We remain focused on growth, both organic and
through acquisition, and continue to seek acquisitions
which will increase the size of our customer base,
complement our technology stack, widen our
geographic reach and further develop our SaaS
platform.
As we successfully transform Eleco into a high
value SaaS recurring revenue business, and as
previously announced in 2021, we anticipate that H1
2023 revenues will be lower, but expect revenues
will accelerate in H2 of 2023 enabling us to return
to revenue growth in 2023. I wish to thank all
shareholders for their continued support during a
period of transformation into a world-class, high value
recurring revenue group.
Our customer-centric growth strategy, loyal customer
base, strong pipeline of opportunities and world-class
technology will open further exciting prospects for
growth in our core markets and therefore we look to
the year ahead with confidence.
Jonathan Hunter
Chief Executive Officer
27 March 2023
09
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview Strategic Report
Our Purpose, Mission, Vision and Values
Vision
Creating certainty for the built environment
Mission
Provide world-class software to companies in
the construction and built environment sectors
Purpose
Strategic Objectives
Values
Solve the challenges of the
built environment through
digital transformation
• Customer-centric Growth
• Be Customer Centric
• Prioritised Innovation
• Resilient Operations
• Strive for Excellence
• Be Open, Honest and
Constructive
• Collaborate
• Have a Growth Mindset
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, enabling stakeholders to achieve the
desired outcomes of reducing waste, mitigating risk,
being compliant, and remaining efficient and effective
in their resource management.
We base all that we do on our collective Values,
namely:
• Be Customer Centric
• Strive for Excellence
• Be Open, Honest and Constructive
• Collaborate
• Have a Growth Mindset
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
10
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
Strategic Report
Regions
£10.3m
£6.4m
United Kingdom
Scandinavia
The UK is Eleco’s largest territory by revenue
representing 39 per cent of the Group’s total revenue.
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.
£4.4m
£4.4m
£1.1m
Germany
Rest of Europe/World
USA
With 17 per cent revenue, Germany
is our third largest region. It has
particular strengths in Powerproject
and visualisation software.
The rest of the World represents
17 per cent of our Group revenue
and continues to present growth
opportunities through our success
in the Netherlands and 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 both
our direct sales and value-added
reseller channel.
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Annual Report and Accounts 2022
11
Job No: 48476
Customer: Eleco
Proof Event: 2
Blackline Level: 0
Park Communications Ltd Alpine Way London E6 6LA
Project Title: Annual Report 2022
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.
Design Standards &
Data Management
Planning & Project Management
Construction Estimating
CMMS/ CAFM
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 and
www.veeuze.com
Managing the
maintenance of a
major estate
Chester Zoo adopted
ShireSystem CMMS/CAFM
software to ensure every part
of their 128-acre site could
be maintained to the highest
standard. Moving to a unified
approach has given the facilities
management team full visibility
of workload along with the ability
to schedule planned preventative
maintenance.
Design to CNC in ten
minutes
Woodworking company
Staircom Pty Ltd, Melbourne
currently produce 40-50
staircases a week and have
been using Staircon software
since 2017 to combine greater
production efficiency and better
3D visualisation capability.
Staircon has even made it
possible for them to design
staircases on site and have them
ready to run on the CNC ten
minutes later.
12
12
Eleco plc | www.eleco.com
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 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 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.
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.
Software to deliver
complex and award-
winning projects
Willmott Dixon won gold at the
CIOB Construction Manager of
the Year Awards for its five-
phase project to build the £49
million South Wales Police
Learning Centre in Bridgend,
Wales, using Powerproject
to integrate the phases into a
cohesive plan of action, centrally
plan resourcing requirements
and allow resequencing of works
in real time.
Pilot programme rollout
to ENR #4 US contractor
Supporting sustainable
working procedures
US construction management
leader STO Building Group
has commenced a pilot
programme of Powerproject
and Powerproject Vision, with
on-site education programmes
rolling out in Dallas as well as
other offices this year. Structure
Tone London, the UK division
of STOBG, is already a long-
standing Powerproject customer
and advocate of the software.
Another gold-winning CIOB
Construction Manager of the
Year Award, this time for Kier in
the Secondary Schools category
with their complicated and time-
sensitive build of the Addington
Valley Academy. Powerproject
was used to identify efficiencies
as well as create programmes
which could then be applied
to future projects in support of
Kier’s Building a Sustainable
World framework.
Annual Report and Accounts 2022
13
13
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview 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 and thus delivering our ESG (Environmental, Social and Governance) credentials as
well as shareholder value.
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 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.
Key pillars of our growth strategy
are go-to-market, innovation and
technology, and mergers and
acquisitions.
Tru s t
Growing in
a customer-
centric way
F
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x
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b
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14
Custo
m
er c
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n
tri
c
it
y
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: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 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 impactful outcomes
for:
– The planet/environment and the wider society: being environmentally and socially responsible,
– Our people: creating an organisation/employer brand 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
Making life easier
through our products
and services by
enabling better
decision-making,
enabling waste
reduction and
increase in
compliance
A culture which
is socially and
environmentally
responsible
An organisation/
employer brand
people want to work
with and for
Technical
support
Providing shareholder
value
Environment
- Energy consumption
- CO2 production
- NetZero
Society
- Employee turnover (regretted)
- Employee and Customer satisfaction
- Volunteering and training
- Gender Pay Gap
Internal operations
- Financial indicators
- Customer measures
- Employee measures
Shareholder value
- Share price growth
- Profit margins
- Consistent dividend policy
Governance
- Diversity and Inclusion on the Board
- Women on the Board
- Independent directors on the Board
- Payment days to supply chain
- Separation of Chairman and CEO role
15
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview 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 customers.
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 Head of Innovation 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 endpoint
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: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 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.
Sub-optimal
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 and we have obtained Great Place
to Work® accreditations in Germany, the UK and
Sweden. 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) to build on and strengthen
the arrangements that are already in place, both
globally and regionally, and 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 to be
strengthened: this includes Group target setting
and clarifying roles and responsibilities in the
matrix organisation, particularly around the
key cross-cutting functions of sales/account
management, marketing, product, technology,
and the sharing of data.
In 2022, we undertook a number of initiatives
to position the organisation for further growth
including finalising the merger of our three UK
trading entities; merging our two German CAD
and Visualisation businesses into one ‘Veeuze’;
reviewing our policies and procedures across
the Group; and adapting our matrix structure;
for example all research and development
personnel reporting to the CTO. We have
centralised product innovation by recruiting a
Head of Innovation in 2023. Work continues 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 of skills and experience.
This will be supplemented by people policies
and procedures and cohesive learning and
development approaches.
17
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview 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
could adversely affect Eleco’s
performance. Additionally, the
Ukraine conflict and the associated
energy price rises and cost of living
pressures may impact widespread
economic activity.
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.
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.
Eleco’s position is further strengthened by
servicing the maintenance stages of the
building lifecycle and manufacturing, property
and retail markets. In recent times, in many
jurisdictions in which the Group operates, levels
of inflation, salary and other cost pressures
have substantially increased, itself following the
impact of the Russian Ukraine conflict. Eleco
has sought to mitigate this through geographic
diversification, not engaging directly with end
consumers, and recovery of such cost base
increases though price rises to its customers
where possible.
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 Group
values and ethics and operating on them and
being aware of relevant social media adverse
comments from stakeholders.
18
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Strategic Report
Financial Risk
Risk
Currency
Mergers and
Acquisitions
(M&A)
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.
The risk of conducting acquisitions
and subsequent integration
exists for future transactions. This
includes, among other things,
the inability to meet sales volume
targets, and higher than expected
integration costs, as well as the
failure to meet synergy goals.
Furthermore, risks are present that
the longer term understanding
of the business needs to be
assimilated when integrated into the
Group.
The Group does not engage in speculative
currency trading activity. Our businesses
predominantly trade in their own local currencies
and have local operational and development
staff cost bases which creates a natural hedge
against currency movements in revenues. In
addition, we will continue to monitor the need
for foreign exchange contracts to manage risk
where appropriate to do so.
We evaluate acquisitions for strategic and
cultural fit. We will be producing integration
plans right from the due diligence phase
and will be managing the acquisition against
those plans post-merger. The Group performs
strong due diligence processes and closely
managed integration processes; we seek to
reduce the likelihood of this risk materialising.
The integration plan will be for the long-term
positioning of the acquired business in the
ecosystem of the Group, not just the short-term
integration immediate plans.
19
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview Key Stakeholders: 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 2022
1. Strategy review and acceleration of 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;
I. business plan for the coming year
II. budget and any relevant investments
•
interests of the Company’s employees;
III. the impact that decisions will have in the long term.
•
•
•
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 in recent years has created a
strong platform for good governance and the balance
of skills, experience and expertise of the Board suits
the needs of Eleco.
Below we outline how we have considered the matters
found in Section 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. We then 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. For further
details regarding ESG initiatives, please see the ESG
Committee Report on page 44.
As reported in the Chairman’s Statement and CEO
Report, in 2021 the Company embarked on a
strategic transition toward SaaS and subscription-
based pricing. In 2022, given the Company’s strong
performance against the predicted softening of
revenue, the Directors endorsed an acceleration of
the strategy, to faster realise our transformation into a
customer-centric, high recurring revenue business and
enhancing shareholder value.
2. Reinitiation of Mergers and Acquisitions (M&A)
We paused our M&A strategy to focus on
implementing the SaaS transition. Now that this
is largely complete, we are reinitiating our M&A
endeavours and have been actively seeking
opportunities to accelerate revenue growth. Each
opportunity is considered through a rigorous screening
process, which evaluates the compatibility and
ultimate integration of the potential acquisition.
The acquisition strategy is determined according to
customer and market and business needs, which
is underpinned by our ongoing engagement with
customers.
3. AGM and shareholder response
Following various shareholder resolutions not being
carried in 2021, Eleco engaged with shareholders to
understand their concerns. Direct calls were made
to shareholders and a proxy advisor was engaged to
advise on approaches to addressing concerns. As a
result, all resolutions in the 2022 AGM were passed.
All resolutions proposed in the AGM Notice this year
remain fully in line with market practice. We continue
to go beyond the applicable corporate governance
requirements, submitting all Directors for annual
re-election and seeking share authorities below the
recommended levels for FTSE-listed companies.
20
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportEleco plc | www.eleco.com Strategic Report
4. Employee wellbeing
We continue to invest in the wellbeing of our people.
In the face of widespread economic pressures and
through consultation with the employee body, the
Board recognised a need to address the ‘cost of living’
crisis and in November we paid a one-time allowance
to two-thirds of our employees. This was in addition
to annual pay awards, and it was well received by
employees. During 2022, we also rolled out our
Employee Assistance Programme to all our Group
employees.
5. Capital allocation
Each year the Board considers the strength of
the Group’s balance sheet. Throughout 2022, the
Company has maintained a debt-free position and a
strong cash balance. We expect to invest cash into
upcoming acquisition initiatives that can widen our
customer base and develop our SaaS platform, in line
with market requirements and ultimately generating
greater shareholder value.
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
0.50 pence per share in respect of the year ended
31 December 2022. This is in addition to an interim
dividend of 0.20 pence per share. Furthermore, we will
propose a special dividend of 0.58 pence per share to
reward our shareholders loyalty as we go through the
SaaS transition, representing the cash proceeds from
the disposal of the non-core ARCON business. The
total full year dividends will therefore be 1.28 pence
per share (2021: 0.60 pence per share).
21
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview Key Stakeholders: 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.
For further details of those strategic decisions
please see the Chairman’s Statement on pages
2 to 4 and the CEO Report on pages 5 to 9.
The Board regularly seeks and reviews the
feedback from shareholders and investors,
which feeds into board discussions and informs
strategic decisions. For example, we regularly
engage with shareholders and potential
shareholders outside of Close Periods in
investor roadshows.
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
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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. For example, we conduct extensive
employee surveys as part of our Great Place to
Work® initiatives.
The Company looks to enhance and
consolidate supplier relationships, by means of
an ongoing 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 internal surveys
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
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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 decided in 2021 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 44 to 53.
24
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Financial Review
Since joining in October 2022, I have been impressed
by the strong and increasing recurring revenue growth
for the Group, itself a feature of sophisticated and
strong management of the SaaS transition process,
backed by loyal, experienced and dynamic colleagues
in all the operations.
The journey to a SaaS environment for our many
proven product solutions across the territories in
which we operate is not without short-term pain,
but nonetheless brings medium to long-term
gain. Earnings are more sustainable, resilient and
predictable, for our shareholders and providing a
higher total Customer Lifetime Value. To date, Eleco
plc has been more successful than most in managing
that transition to subscription and SaaS-based pricing.
Eleco Group for organic and inorganic growth have
never been brighter.
Revenue and gross margins
A SaaS transition, by its nature, will lead to a
temporary reduction of revenues as customers
transition from perpetual, one-off licence purchases to
Subscription and SaaS-based licences. In partnering
closely with our customers in this transition from
upfront perpetual licences, the Group’s revenues were
little changed at £26.6m (2021: £27.3m). In fact, in
constant currency terms we reported relatively flat
revenues of £27.0m. This is a significant achievement
in navigating the transition very successfully and is in
line with market expectations that the Group would be
able to deliver this.
The high gross margins and low churn rates of our
software businesses provide high cash generation,
enabling Eleco to have a strength and resilience on the
balance sheet that some other technology businesses
are not always so fortunate to call upon. Coupled with
very exciting R&D developments, improved dividend
returns to our shareholders and plans to add to the
Group scale through acquisitions, with the colleagues
and management we now have, the prospects for the
Key metrics for the subscription and SaaS transition
are Annualised Recurring Revenues (ARR) and Total
Recurring Revenues (TRR). ARR at the exit rate of the
year at 31 December 2022 (ie December’s recurring
revenues multiplied by twelve) were £18.2m (ARR at 31
December 2021: £16.0m). TRR increased to £16.9m,
or 64 per cent of total revenue in 2022, representing
a 10 per cent uplift on the comparable period (2021:
TRR of £15.4m, or 56 per cent of total revenues).
25
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsAnnual Report and Accounts 2022Overview Strategic Report
Financial Review continued
Services income was similar at £6.0m (2021: £6.0m).
The level of deferred income at the balance sheet
date increased by 10 per cent to £7.8m (2021: £7.1m),
another positive sign of future recurring revenue.
Gross margins are also notably impacted in these
initial phases of the SaaS journey because perpetual
licences involve more upfront income relative to the
cost of sales. That being a feature, overall gross
margins were only lower by 1.5 per cent to 88.4 per
cent (2021: 89.9 per cent), a remarkable result and
testament to the attractiveness of our solution offerings
and total Customer Lifetime Value, and to our staff in
the value proposition and minimising already low churn
rates.
Operating expenses and R&D investment
In totality, selling and administrative costs were
unchanged between the periods at £20.5m.
Amortisation and impairment of intangible assets
was significantly below the previous period at £1.6m
(2021: £2.4m); however, for comparability purposes,
in the prior period 2021 figure this included a £0.6m
impairment of a development investment. Operating
expenses also benefited from a £0.3m swing of
positive FX of £0.2m in 2022 (2021: FX loss of £0.1m).
In line with many corporates, the tight labour market
in 2022 proved a difficult climate to attract staff to
budgeted positions and retain existing staff, though
group employee numbers did increase to 255 (2021:
245 employees). Staff costs, excluding share-based
payments, were £15.4m (2021: £13.8m). In general,
operating expenses, for example depreciation and
those covering discretionary spend, were slightly lower
in most other areas reflecting more gradual pick-up in
levels of activity as economies moved into a new post
pandemic-impacted world.
Share option payment costs taken to the income
statement, was £0.2m (2021: £0.1m), and there was no
repeat of former director exceptional expenses in 2022
(2021: £0.1m).
Total software product research and development
investment broadly similar at £3.1m for the year (2021:
£3.3m) of which £1.6m (2021: £1.7m) was capitalised.
The Group continued to enhance its product offerings
and functionality and total R&D costs represents 12
per cent of revenue (2021: 12 per cent).
Profitability
Due to lower gross profits due to the SaaS transition,
and unchanged overheads, operating profit was
understandably lower at £3.0m (2021: £4.1m), at the
higher end of market expectations.
Net finance costs in the year of less than £0.1m
included interest expense for leasing arrangements
under IFRS 16, offset by a small amount of interest
receivable. In 2021: finance costs of £0.2m represents
costs relating to the Group’s debt, but this was largely
repaid in the second half of 2021.
Profit before tax was therefore £2.9m (2021: £3.9m).
The Group tax charge on this lower profit before tax
figure in the year was £0.5m (2021: £1.2m), an effective
rate of 19 per cent (2021: 30 per cent). The current
tax is on lower profits during the SaaS transition, a
differing profit mix between group companies and a
current tax adjustment in respect of previous years.
The deferred tax charge significantly 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, a substantially enacted rate which
remained for the 2022 period.
Profit after taxation is consequently £2.4m (2021:
£2.7m), giving a basic earnings per share figure of 2.9
pence (2021: 3.3 pence).
EBITDA, adjusting earnings for interest, taxation,
depreciation and amortisation and impairment of
assets was £5.2m (2021: £7.2m). A reconciliation for
EBITDA, adjusted EBITDA and adjusted operating
profit is provided in note 2. A reconciliation of diluted
and adjusted basic earnings per share is provided in
note 8.
Operating cash, cash and liquidity
With 64 per cent of the Group’s revenues as recurring
and high contract retention rates, this has enabled
us to remain resilient and cash generative during
2022 despite the impact of lower cash upfront from a
reducing number of perpetual licences, as we move
away from that business model.
£6.3m (2021: £7.7m) cash was generated from
operations, which given the lower profit levels
stemming from the transition to subscription and
SaaS licences, is a strong overall performance and
endorsement of the Group’s high, software-based
margins. Overall working capital movements have
contributed a net cash inflow of £0.9m (2021: £0.6m).
26
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Capital expenditure on intangible assets, principally
comprising the capitalisation of software product
development costs, was £1.6m (2021: £1.7m). Also
broadly similar, capital expenditure on property, plant
and equipment was £0.2m (2021: £0.3m).
2022 of 0.50 pence per share (2021: final dividend:
0.40 pence). Added to the interim dividend of 0.20
pence per share (2021: 0.20 pence per share) this total
dividend represents a 133 per cent increase over the
prior year.
Neil Pritchard
Chief Financial Officer
27 March 2023
Free cash flow, taking cash generated from operations
less the intangibles and tangibles additions, and net of
finance and taxation, was £3.8m (2021: £4.8m). This
represents 127 per cent of operating profits (2021: 117
per cent).
Financing activities, consisting of repayments of loans,
lease liabilities, equity dividends and any issue of
shares were net outflows of £1.2m (2021: net outflow
of £5.3m largely driven by substantial repayment of
borrowings in that period).
The net overall inflow of cash in the period was £2.6m
(2021: outflow of £0.6m).
Subsequent to the year end, in February 2023, the
Group disposed of its interest in its wholly owned
subsidiary Eleco Software GmbH, the German ARCON
architectural CAD business (“ARCON”), to FirstInVision
GesmbH, an Austrian architectural software business,
for a total consideration of €600,000. This business
was held for sale at the year end and categorised as
such on the consolidated balance sheet. The disposal
supports the Group’s strategy to focus on its core
customer segments and businesses.
Funding, Liquidity, Equity and Dividends
Taking in the cash in the ARCON Held for Sale
business, the Group ended the year with cash of
£12.5m and no borrowings, including cash held for
sale of £0.4m (2021: £nil). In 2021, the comparable
was net cash of £10.0m, being cash of £10.1m and
gross borrowings of £0.1m. Lease liabilities amounted
to £1.7m (2021: £1.9m).
The Company’s debt-free, robust cash status, while
maintaining an appropriate progressive dividend policy,
allows for the retention of surplus cash for corporate
development initiatives to promote and invest in
the future growth of the Group to the value of all
shareholders.
Mindful of some investor appetite for dividend income
alongside the SaaS journey to higher revenues and
growth levels, the Board has recommended the
payment of a special dividend of 0.58 pence per
share (2021: special dividend: nil pence) and a final
dividend in respect of the year ended 31 December
27
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Board of Directors
Jonathan Hunter
BBus BMm
Chief Executive Officer
Neil Pritchard
FCA BSc (Hons)
Chief Financial Officer
Serena Lang MBA
Non-Executive Chairman
Skills and Experience
Jonathan was appointed Chief Executive
Officer in September 2020 following
three years as Chief Operating Officer
with the Group, and is responsible for
implementing the Group’s strategy.
Having joined the Board in June 2016,
he played a fundamental role in the
transition to a software group during and
post divestment of the Building Systems
division and has been at the forefront
of the Group’s M&A and integration
activity since the commencement of his
directorship.
Jonathan holds bachelor’s degrees in
Business Management and Multimedia
from Griffith University, Australia and as
well as attending relevant professional
training and coaching, he continues to be
involved in growth company roundtables
and forums as a member of Criticaleye.
Committee Membership
E
Skills and Experience
Appointed to the Board in October 2022,
Neil brings a wealth of international
public company experience in
technology driven businesses to the
Board.
Neil has previously been Chief Financial
Officer (CFO) and Executive Director at
Corero Network Security plc, a global
leader in real-time, high-performance,
automatic DDoS cyber defence solutions
and, prior to this Group Financial
Director and Executive Director at
London listed technology business CML
Microsystems plc Group, and Finance
Director of the UK and Eire division of
the DAX-listed group Continental AG.
Neil also held senior financial positions
with quoted companies Delta plc Group,
now Valmont Industries, and Yule Catto
& Co plc, renamed to Synthomer plc
Group. Neil has successfully conducted
many merger and acquisition (M&A)
transactions throughout his career.
Neil is a qualified chartered accountant,
holding an FCA, having spent six years
with KPMG London in audit, treasury
and forensic transaction services (TS)
for M&A transaction roles. He holds an
Economics and Politics degree from the
University of Bath, UK.
Committee Membership
None
Key to Committee Membership
A Audit Committee
R Remuneration Committee
N Nomination Committee
E ESG Committee
Committee Chair
28
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 is now Non-Executive
Chairman. Serena’s distinguished and
multifaceted career includes working
as an Executive Consultant at Ernst &
Young, 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. Serena is a Non-Executive
Director at Henry Boot plc, listed on
the London Stock Exchange, where
she Chairs the Responsible Business
Committee and is a member of the
Remuneration and Audit Committees,
she is also a Non-Executive Director of
Ainscough Crane Hire Ltd.
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. Her passion for
Environmental, Social and Governance
(ESG) matters and sustainability
in general led her to establish the
Company’s ESG committee in 2021 and
she has a Certificate from Cambridge
University following the undertaking of
their course, ‘Sustainability in the Built
Environment’ in 2022.
Committee Membership
N E
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Dr. Annette Nabavi
MA (Oxon), Doc. de
3ième 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.
Dr Nabavi was a Non-Executive Director,
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, until its sale to Talan Group in
January 2023 and she is on the board
of EFI Limited, a specialised financial
services consultancy.
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
Paul Boughton FCA BSc
Non-Executive Director
Mark Castle FRICS
Non-Executive Director
Skills and Experience
Appointed as an Independent Non-
Executive Director in March 2021, Paul
is Chair of Quartix Technologies plc,
the AIM listed telematics and vehicle
analytics company, where he also
Chairs the Audit Committee. He has
over 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 joined the Eleco plc Board as an
Independent Non-Executive Director in
September 2021 and is Chair of the ESG
Committee.
He is also a Non-Executive Director
at Taylor Wimpey plc the FTSE 100
Housebuilder and Mace Group the
privately owned global construction
and consultancy business. Mark is also
Chairman of the private equity backed
Triangle Fire Group.
He joined the industry in 1981 as an
apprentice and during his executive
career held senior positions at Wates
Group, StructureTone and Mace Group
where he was Chief Operating Officer
until 2021 having joined the business in
2005.
Mark was Chairman of Build UK the
construction industry body from 2017
- 2019 and is a Fellow of the Royal
Institute of Chartered Surveyors.
Committee Membership
A R N E
29
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Corporate Governance Report
Chairman’s Introduction to Governance
As Chairman of the Company, it is my responsibility
to manage the Board in the best interests of our
many stakeholders, which include shareholders and
employees.
Good corporate governance is key to safeguarding
those interests, and the Board seeks to ensure that
the Company is committed to the highest standards
of corporate governance and continually evaluates its
policies, procedures and structures to ensure they are
fit for purpose. In 2022, for example, Eleco established
our Environmental, Social and Governance (ESG)
strategy, and refreshed our suite of internal governance
policies.
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.
Composition of the Board
During this past year, Eleco successfully recruited a
permanent CFO, Neil Pritchard, who has settled into
the role quickly. Thanks are extended to Rose Clark,
who supported us as interim CFO during the transition
period.
The Board now comprises the Non-Executive
Chairman, three independent Non-Executive Directors
(including the Senior Independent Director) and two
Executive Directors, being the CEO and CFO. The
Directors maintain and enhance their experience and
skillsets through exposure to other (listed) companies,
attendance at industry events, academic certifications,
reading and research around subjects, use of advisors,
discussions with staff, and training as appropriate.
As we continue in our SaaS transition journey, we are
confident the current Board, having been refreshed
at the start of the journey in 2021, encompasses the
right mix of experience and skills to see us through
the journey. Nonetheless, 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.
30
Membership of the Board’s sub-committees remain
the same since being refreshed in the previous year. I
am pleased to report that we held our inaugural ESG
Committee meeting in February 2022. We have made
excellent progress in aligning our ESG initiatives to the
Company’s Purpose, Mission, Vision and Values and
have established a scorecard of performance metrics.
These quantifiable metrics will feed into the executive
KPIs for each year.
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 Non-Executive Chairman, along with the Senior
Independent Director, the Executive Directors and the
Company Secretary, ensures that the Board functions
effectively and has established Board processes
designed for this purpose. The three independent
Non-Executive Directors provide scrutiny of these
processes.
The Board aims to be accountable and give utmost
consideration to governance arrangements. It also
seeks to:
• Provide direction for management;
• Demonstrate ethical leadership;
• Make well-informed and high-quality decisions;
•
Create the framework for helping Directors meet
their duties; and
• Be accountable to all stakeholders.
The Board met 14 times during the year. These
meetings were held through a combination of in-
person and virtual meetings via Microsoft Teams. We
value the opportunity to discuss complex issues in
depth in-person and the team bonding opportunity it
provides. Equally, we appreciate that virtual meetings
are efficient, time- and cost-saving opportunities. The
attendance of individual directors at board meetings
in 2022 is set out in the table on the following page
and committee meetings in the committee reports on
pages 33 to 53.
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Board Meetings in 2022
•
Possible
Attended
Executive
J Hunter
N Pritchard
(appointed October 2022)
R Tearle
(resigned February 2022)
Non-Executive
S Lang (Chairman)
P Boughton
M Castle
A Nabavi
14
3
1
14
14
14
14
14
3
1
14
14
13
14
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.
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.
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 Executive Directors during the year, without the
other Non-Executive Directors being present, to
discuss matters as appropriate.
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 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.
In 2022, the Company undertook a governance
framework review aimed at strengthening the internal
control environment and establishing the global and
local policy structure. As part of this, a thorough review
of the Group Policy Framework, headed by the Group
Transformation Director, was completed. Updated
policies are being rolled out throughout 2023.
The Board Evaluation Process
The performance of Executive Directors is reviewed
on an annual basis by the Remuneration Committee,
headed by Annette Nabavi along with the other
Non-Executive Directors. The review looks at the
31
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Corporate Governance Report continued
are considered independent and with no conflicts of
interest with Eleco employees or shareholders. Any
historic employment relationships are disclosed in
the Board of Directors on 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 Secretarial firm to advise the
Chairman and facilitate 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 implementing good
governance procedures in the Company;
assisting Executives in ensuring that the Group
complies with legal, statutory, and regulatory
requirements;
assisting the Chairman with the effective planning
and 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 128.
Serena Lang
Chairman
27 March 2023
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
using an external board evaluation platform to facilitate
this process, which is QCA and Wates Principles
compliant. This will provide a 360˚ evaluation and
will foster top team alignment and will influence our
development as a board in future years.
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
32
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Audit Committee Report
Dear Shareholder
This report sets out how the Audit Committee has
discharged its responsibilities during the financial year.
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 adopted on 20 March 2023.
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 relevant and recent financial
expertise to fulfil the role.
Committee Composition and Meeting Attendance
in 2022
Director
P Boughton (Chair)
M Castle
A Nabavi
Possible
Attended
4
4
4
4
4
4
The Committee met four times during the year and
considered the 2022 audit plan, the audit findings
report for the year end, the financial statements for the
year ended 31 December 2021 and the interim report
for the six months ended 30 June 2022.
Although not members of the Audit Committee,
Company officers invited to the Audit Committee
meetings to answer specific questions were the
Chairman, the interim CFO, the CFO, Group Financial
Controller and Company Secretary.
External Auditor
RSM UK Audit LLP (“RSM”) was reappointed as the
Company’s external auditor in 2022, following their
first year as auditor in 2020, and has been engaged
to undertake the audit of the Group’s financial year
ended 31 December 2022. 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 2022. 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 2022 and had provided an
appropriate level of challenge to management.
33
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Internal Audit
The Committee considered, as an ongoing matter,
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
Audit Committee Chair
27 March 2023
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.
The total fees paid to the Company’s Auditor in the
year are shown on page 84.
The Group 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:
•
•
•
•
•
Accounting treatment of the ARCON business unit
held for sale;
Ongoing enhancements to the control environment
and continuity of controls;
The carrying values of operating companies
and the need for reviewing the carrying value of
goodwill;
The capitalisation and amortisation of research and
development (R&D) costs; and
The planning of the Audit and the performance of
the Company’s Auditor.
During the prior year, the external auditor highlighted
a number of control environment weaknesses
stemming from the lack of one central group reporting
system and oversight. As part of the year-end audit
for the year ended 31 December 2022, additional
procedures were conducted by component auditors,
and no significant matters or errors have been noted
in respect to significant errors or management
override of control. Alongside the recruitment of new
senior personnel, and rolled-out group policies, it is
envisaged that the forthcoming implementation of the
previously paused new group-wide systems in 2023
will lead to further improvements in the reporting and
control environment.
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.
34
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Nomination Committee Report
Committee Composition and Meeting Attendance
in 2022
Director
S Lang (Chair)
A Nabavi
M Castle
P Boughton
Possible
Attended
1
1
1
1
1
1
1
1
Dear Shareholder
On behalf of the Board and Committee I am pleased to
present the Nomination Committee Report for the year
ended 31 December 2022.
Key Activities During the Year
During the year, the Board welcomed Neil Pritchard as
the Company’s CFO, taking over from Rose Clark to
whom we extend our thanks as interim CFO.
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 for 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 adopted on 30 September 2021
and may be found by visiting: www.eleco.com.
The composition of Board Committees is monitored
on an ongoing basis but had not changed since 2021
when the full Board was refreshed.
The 2022 Board evaluation was carried out internally,
led by the Chair and facilitated by the Company
Secretary. Appropriate debates were held over areas
including internal controls; Board dynamics; and the
balance between operational and strategic focus of
meetings.
In line with corporate governance best practice, all
directors shall stand for re-election at the Annual
General Meeting (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. Typically this consists
of meetings with senior management and receipt of
key information relating to the Company’s structure,
strategy, headline risks and issues.
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.
35
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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
27 March 2023
36
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Remuneration Committee Report
Committee Composition and Meeting Attendance
in 2022
Director
A Nabavi (Chair)
P Boughton
M Castle
S Lang (resigned 14 April 2022)
Possible
Attended
4
4
4
2
4
4
4
2
Dear Shareholder
On behalf of the Board I have pleasure in presenting
the Report of the Remuneration Committee for the
year ended 31 December 2022.
The Committee comprises three independent Non-
Executive Directors: Annette Nabavi (Chair), Paul
Boughton and Mark Castle. Serena Lang stepped
down as a member of the Committee in April 2022,
having served as a member of the Committee to
ensure continuity during a period of Board refreshment
and transition in 2021-2022.
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 helps 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 four
times during 2022.
The Committee also met informally throughout the year
and recorded its decisions via written resolutions. All
Committee members approved all written resolutions.
The full terms of reference for the Remuneration
Committee were last adopted 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.
37
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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 2023 and
separately, the basis for the remuneration of Executive Directors in 2022.
As detailed elsewhere in this report, the Company has performed well during the year. 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. Option grants were made to Jonathan Hunter and various members of the senior
management and wider Group senior management team. The Committee believes that the overall remuneration
delivered in relation to 2022 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
Purpose and link to Strategy
Policy and Approach
Base Salary
To recruit and reward executives
of a suitable calibre to execute
the Company’s strategy by
paying a competitive level of fixed
remuneration.
Base salaries are reviewed annually
by the Committee in January.
Inflationary increases will be in
line with the Company’s overall
budgetary increases and approach.
Other increases reflect changes in
role and in responsibility. Benchmark
comparisons are also made with
other companies of a similar size and
complexity.
Benefits typically include car
allowance, medical insurance, and
life assurance. Executive Directors
are entitled to 25 days’ leave per
annum.
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.
Benefits
Pension
38
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
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, Free Cash Flow
(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 had
historically used market priced
options coupled with KPIs, issued
on an ad hoc basis to senior staff.
However, in recent 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, with size
of grant the key consideration. 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 and Non-Executive service contracts is three months (although
due to his length of tenure and older contract status Jonathan Hunter’s termination period is six months).
Service contracts are available for inspection at the Company’s registered office.
39
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Part 2: How the Remuneration Policy will be applied in 2023
2023 salary review for Executive Directors
The salary of Jonathan Hunter, Chief Executive Officer, was increased from £220,000 to £230,000 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 and the decision to give lower than inflation increases to Senior Executives, allowing
more generous rewards as required for lower paid staff.
The salary of Neil Pritchard, Chief Financial Officer, was increased from £185,000 to £190,000 for 2023 using the
same comparisons and rationale as the increase for the Chief Executive Officer.
Performance targets for the 2023 Annual Cash Bonus
The annual bonus is 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 is paid against other measures including the ESG Scorecard and core strategic
initiatives. 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 this and other
related matters.
In line with market practice, the Company adopts upper thresholds of 100 per cent and 70 per cent base salary
for the CEO and CFO bonuses respectively, with no opportunities for deferral.
LTIP Awards to be granted in 2023
The Committee intends to grant additional options to Jonathan Hunter, Neil Pritchard and other members of the
Senior Leadership Team when the Company is in a position to do so.
Directors’ Remuneration in 2022
Basic
salary
Bonus
£’000
£’000
Fees
£’000
Sub-
committee
fees
Benefits
LTIP
Pension
Year to
31 December
2022
Year to
31 December
2021
£’000
£’000
£’000
£’000
£’000
£’000
—
220
—
—
76
46
—
—
—
—
—
—
—
146
—
—
—
22
—
—
—
—
—
—
—
5
—
—
3
—
80
40
40
—
—
40
—
—
—
—
—
—
—
4
4
—
—
8
—
5
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20
—
—
6
2
—
—
—
—
—
—
—
396
—
—
88
70
80
44
44
—
—
48
415
426
159
130
114
—
21
32
13
36
45
18
Executive
S Lang1
J Hunter
A Karlsson2
B Moralee3
R Tearle4
N Pritchard5
Non-Executive
S Lang1
P Boughton6
M Castle7
K Craig8
D Dannhauser9
A Nabavi10
1
2
3
4
S Lang moved from Executive to Non-Executive Chairman on 25 September 2021.
A Karlsson resigned as Executive Director from the Board on 31 August 2021.
B Moralee resigned as CFO on 26 March 2021. Included in the basic salary figure is a settlement amount of £69,000.
R Tearle was appointed as CFO on 29 March 2021 and resigned on 4 February 2022. Included in his basic salary figure is an amount for working his notice
of £69,000.
N Pritchard was appointed as CFO on 3 October 2022.
P Boughton was appointed as Non-Executive Director on 23 March 2021.
5
6
7 M Castle was appointed as Non-Executive Director on 20 September 2021.
8
K Craig resigned as Non-Executive Director on 31 August 2021.
9
D Dannhauser resigned as Non-Executive Director on 31 August 2021.
10 A Nabavi was appointed as Non-Executive Director on 12 August 2021.
40
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Details of the LTIP options currently in issue to the Executive Directors and Senior Management are tabled
below:
Options
2022
Expiry
date
Outstanding
number of
options
Criteria for vesting options
31/07/2032
550,000 Market priced options with no vesting criteria other than to remain in
employment by the Group and shall vest after a 3-year vesting period.
2022
31/07/2032
100,000
2021
23/02/2031
600,000
The Option shall vest (if at all) in three parts on the third anniversary of the
date of grant subject to having met the Performance Targets (as defined
in the Rules) as detailed below:
(a) 40% of the option grant: Recurring revenue % target by end 2024:
this KPI is subject to a sliding scale.
(b) 40% of the option grant: Organic revenue growth of a % target pa,
from £27.3m at end 2021 to £m target, net of acquisitions, at end
2024: this KPI is subject to a sliding scale.
(c) 20% of the option grant: share price growth of a target % per annum
from a starting price at the time of grant of £0.70 the share price is
expected to reach a target £price by end June 2025 (measured as
an average over the previous 30 days): this KPI is subject to a sliding
scale.
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 31 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 31 May 2023.
(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) nor (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 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.
41
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Remuneration Committee Report continued
Expiry
date
Outstanding
number of
options
Criteria for vesting options
31/05/2030
650,000 Half of the options are exercisable after 3.0 years, subject to the share
Options
2020
price being equal to or exceeding 117 pence per share for 20 consecutive
dealing days between the date of issue and 31 May 2023.
(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) nor (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 per cent 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.
The vested performance target for the year ended 31 December 2019
was an EPS of at least 2.97 pence.
Directors’
options
in issue at
year end
Issued
during
year
2022
Exercisable
2021
Exercisable
£
£ Total
Issued
during
year
£
£ Total
850,000 150,000
0.70 105,000
250,000
1.004 251,000
100,000
0.01
1,000
500,000
–
–
–
250,000
1.004 251,000
1,350,000 250,000
500,000
2017
08/08/2027
500,000
Total
2,650,000
Directors’ Share Options
J Hunter
S Lang1
1
S Lang received share options, with performance conditions attached, during her tenure as Executive in 2020/21.
There were no shares that vested during the year. There were no gains from exercise of options by Directors
during the year.
42
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com
Governance
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.
In 2022, no new Non-Executive Directors were appointed. 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 in 2021.
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
2022
£
–
2021
£
Company
4,500 Political Lobbying
& Media Relations
Limited
Position
Service
Former Director
and Shareholder
Website Consultancy
Cost of Living Allowance
Eleco paid a one-time cost-of-living allowance (total: £109,000) to two-thirds of employees in November 2022.
This was in addition to salary increases as per Company-wide salary policy. No senior management or directors
participated in this cost-of-living allowance payment as it was aimed at alleviating financial pressure possibly
faced by employees on the lower end of the staff income spectrum.
Gender Pay Gap
Eleco plc and its UK subsidiaries had 107 employees (2021: 103) in the UK at the year end.
Under current legislative thresholds, 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 over 34 per cent (2021: over 30 per cent) of UK employees are female.
Dr. Annette Nabavi
Remuneration Committee Chair
27 March 2023
43
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022
ESG Committee Report
Committee Composition and Meeting Attendance
in 2022
Director
Mark Castle (Chair)
Serena Lang
Annette Nabavi
Paul Boughton
Jonathan Hunter
Possible
Attended
2
2
2
2
2
2
2
2
2
2
For the first time, Eleco publishes a more
comprehensive view of our ESG activity in this Annual
Report. In defining our ESG strategy for 2023 and
beyond, we are reviewing how we can positively
contribute to the global environmental challenges by
maximising the value of our products and services,
and thereby reducing our global footprint. Our
environmental policy will underpin those aims, driving
effectiveness and performance.
As part of this endeavour, we are working closely with
our ESG partners. We aim to carry out an expert-led
materiality assessment this year, which will help us
review our longer-term ESG strategy and activities,
Net Zero plan and scorecard measures. As part of this
assessment, we will be looking to set science-based
targets in alignment with SBTi (Science Based Targets
initiative).
Within our social strategy we recognise the importance
of working together with our stakeholders to promote
fairness, equality, and inclusion. We aim to become the
brand that people want to work with and for, and to
retain and recruit top talent in our colleagues.
As part of our Governance review and recognising best
practice Eleco reviews their 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,
adopted on 30 September 2021, may be found by
visiting: www.eleco.com.
Dear Shareholder,
I am pleased to introduce this year’s Environmental,
Social and Governance (ESG) report and proud to say
that we have made considerable progress with our
ESG strategy, the development and implementation of
which is overseen by our ESG Committee.
The members of the Committee comprise the Non-
Executive Directors and the CEO. The Committee
which is chaired by Mark Castle was formed in 2021
with the first meeting held in 2022.
Our ESG commitments support our Purpose, Mission,
Vision and Values and are based around a balanced
scorecard of metrics which aim to capture year-on-
year performance.
Eleco engages with its stakeholders across the
organisation as we embrace the wider ESG agenda
and our ESG performance is taken into consideration
when deciding Executive remuneration.
Key highlights for 2022 have been the tracking of
our balanced scorecard Key Performance Indicators
(KPIs) for the first time; reducing carbon emissions
globally from 140 tonnes to 115 tonnes (an 18 per cent
reduction); offsetting our scope 1 and 2 emissions plus
scope 3 business mileage through Verified Carbon
Standard projects including REDD+ Protecting the
Amazon; Providing Clean Cookstoves in Kenya and
Renewable Energy; delivering wind generation in India;
introducing a group policy framework and encouraging
colleagues to engage in volunteering activities and
training. Furthermore I am pleased to confirm that we
have retained our Great Place To Work® accreditation
for Sweden and the UK as well as gaining the
accreditation in Germany.
44
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Streamlined Energy Carbon Reporting
In line with The Companies (Directors’ Report) and 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 2022 to 31 December 2022.
Eleco Energy Use and Associated Greenhouse Gas Emissions (SECR UK only)
Jan-Dec
2022
Jan-Dec
2021
Jan-Dec
2020
Percentage
change 2021
to 2022
Percentage
change 2020
to 2022
Reasons for
change from 2021
to 2022
Total Energy consumption
237,458
kWh
214,271
kWh
286,860
kWh
+11%
-17% Higher mileage claims
in 2022 compared to
2021, lower during
2021 reflecting
Covid-19 pandemic
Emissions from combustion of gas
(Scope 1)
15
tCO2e
Emissions from combustion of
fuel for the purposes of transport
(Scope 1)
0.5
tCO2e
17
tCO2e
1
tCO2e
20
tCO2e
5
tCO2e
-12%
-25%
See commentary
below
-50%
-90% Less mileage covered
by company car
Emissions from purchased
electricity (Scope 2)
10
tCO2e
21
tCO2e
25
tCO2e
-52%
-60%
Increased use of
renewable electricity
resulting in less
emissions
Emissions from business travel in
rental cars or employee-owned
vehicles where company is
responsible for purchasing the fuel
(Scope 3)
Total gross emissions
Emissions per £m turnover*
Total Gross Scope 1, Scope
2 [market based] & Scope 3
emissions (tCO2e) [optional]*
22
tCO2e
7
tCO2e
7
tCO2e
+214% +214% Reason for increase is
due to more travel post
Covid-19 paired with
improved data reporting
51
tCO2e
4.1
tCO2e
47
tCO2e
46
tCO2e
57
tCO2e
4.2*
tCO2e
6.0
tCO2e
+11%
-11%
Due to increase in
mileage claim in 2022
-2%
-32% See commentary below
42
tCO2e
53
tCO2e
+12%
-11% Significant increase in
mileage claim causing a
spike in emissions post
Covid-19 pandemic
* Corrected as last year used global turnover rather than UK turnover.
During Covid-19 the organisation incurred less business travel as people were mainly working from home and
utilising online meetings. Post Covid-19, during 2022 colleagues were starting to meet face-to-face again,
resulting in an increase in business travel and, therefore, absolute emissions.
45
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022 ESG Committee Report continued
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
70,831 13.70 68,860 13.77
1,860
0.45
89,738 21.50 231,290 49.41
Eleco plc
3,303
0.64
3,791
0.76
0.00
0.00
0.00
0.00
7,095
1.40
Eleco Software Ltd
194
0.04
223
0.04
0.00
0.00
0.00
0.00
418
0.08
* Distance by cars from Scope 1 transport fuels company cars and Scope 3 Mileage was converted into kWh to show consistency with what methodology was
understood to be used in the previous accounting. This conversion was made using the conversion rate of 12.5 km/L fuel.
Quantification and Reporting Methodology
The carbon footprint of the reporting organisation is determined for the considered period of 1 January 2022
– 31 December 2022 following the Greenhouse Gas Protocol, ISO 14064, SECR regulations requirements,
as well as the Environmental Reporting Guidelines from the UK Department for Business, Energy and
Industrial Strategy (BEIS). This report covers Scope 1 and Scope 2 emissions, as well as partial data from
scope 3 business travel category which includes data from mileage claims by Eleco employees for business
travel purposes. The reporting methodology for the considered period aligns with Eleco plc’s previous year
carbon reporting methodology.
The operational control approach is applied to determine the organisational and operational boundaries
of the carbon footprint. This implies that all organisational entities and all sources of greenhouse gas
emissions which are under operational control of the reporting organisation are included in the carbon
footprint. An organisation has operational control over an entity or activity if it has the ability to change
operational policies related to that entity or activity.
Emission factors for Scope 1 and 2 emissions were taken from the UK Department for Business, Energy
and Industrial Strategy (BEIS). Carbon offsets are not reported in this report, nor have they been subtracted
from the total. The reporting organisation is responsible for the correctness and completeness of activity
data included in the carbon footprint.
Full-time employees (FTE) for extrapolations (part time employees to be assumed to be 50 per cent) and
accounted for as such in the employees’ number to FTE.
No major changes impacting Eleco plc’s GHG emissions occurred in this reporting period and consequently
there was no need to recalculate the SECR baseline year emissions. It should be noted that there was a
structural change in Eleco plc’s subsidiaries during the year and Integrated Computing & Office Networking
Ltd and Shire Systems Ltd were merged into Elecosoft UK Ltd.
Intensity Ratio
We have chosen to report our gross emissions against £m Sales Revenue. The value for the intensity ratio
was 4.1 tCO2e per £m sales revenue (2021: 4.2 tCO2e per £m sales revenue).
Energy Efficiency Action
In the period covered by the report, Eleco continued using a hybrid powered car as the only company car
for business travel for Elecosoft UK Ltd’s fleet.
Mark Castle
ESG Committee Chair
27 March 2023
46
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Environmental
At Eleco, we are taking steps to maximise the positive impact
we have on our planet by facilitating resource efficiency and
environmental performance tracking through our software,
whilst at the same time minimising our own carbon footprint.
Where we have come from Achievements to date
Where we are heading
•
•
•
•
Annual SECR reports since
2020 and annual global carbon
footprint reporting since 2021.
Carbon reduction target for
scopes 1 and 2.
Production of Net Zero
roadmap.
Developed ESG scorecard,
measures and targets and
tracked progress.
•
•
•
•
•
•
•
Strengthening the Net
Zero roadmap to include
greater impact within our
value chain.
Implementation
and education of
environmental group
policy with employees.
Improve operational
boundary reporting for
scope 3.
Set science-based targets
in alignment with SBTi.
Offset 2022 carbon
emissions (scopes 1 and
2).
Offset remaining
emissions with quality
carbon credits.
Materiality assessment –
environmental materiality
beyond carbon.
•
•
•
•
•
Produced an
environmental Group
policy.
Switched to 100 per cent
cloud-based servers in
the UK and monitor their
usage with dashboards.
Delivery of Net Zero
roadmap initiatives in
2022: switching to electric/
hybrid powered cars,
switching to renewable
energy contracts where
we are in control of energy
supply, setting timers on
heaters, lock to specific
temperature bands,
insulating pipework and
cleaning condenser units
which had a positive
impact on our global
energy consumption.
Offset 2021 carbon
emissions (scopes 1 and 2
and business mileage for
scope 3).
Partnered with a ‘zero
waste to landfill’ certified
electronics company to
recycle our old electronic
equipment.
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Annual Report and Accounts 2022
47
Job No: 48476
Customer: Eleco
Proof Event: 9
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Project Title: Annual Report 2022
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Governance
Social
We believe in having a positive impact on stakeholders
and the wider society, including our own colleagues,
their families, current and prospective customers, our
shareholders and suppliers. We want to be a recognised
employer brand people want to work with and for.
Where we have come from Achievements to date
Where we are heading
Internal:
The dedication, motivation and
commitment our people provide
continues to make a positive
impact on the business. In 2022 we
carried out our first Great Place to
Work® employee survey, the results
of which are helping us shape the
future of our People Strategy, as we
continue our journey to become a
recognised employer brand people
want to work with and for.
External:
By maintaining open dialogue
and a partnership culture with our
customers we can ensure that our
product offerings provide the best
added value. In 2021 we conducted
a systematic measurement of
customer satisfaction.
Internal:
•
Maintain our accreditation
in the UK, Sweden and
Germany.
•
•
Active use of our
Behavioural Framework
in recruitment, objective
setting, 1-2-1s and
performance appraisals.
Embed our values and
behaviours in reward/
recognition and talent/
succession management.
External:
•
The (employer) brand
people want to work with
and for including all external
stakeholders: investors,
suppliers, customers and
the wider community.
•
Harnessing the value
our products add to our
customers and a more
sustainable world.
Internal:
• Achieved Great Place to
Work® accreditation in the
UK and Sweden.
• Developed a ‘Behavioural
Framework’ linking
company values to the
behaviours of our teams.
• Started embedding
these in our recruitment,
objective setting, 1-2-1
and performance appraisal
processes.
• Approved an Equality,
Diversity and Inclusion
policy in January 2023.
• Implemented the option
for employees to use
one volunteering day per
year and supported with
volunteering guidelines.
• Continued development
of our Employee Value
Proposition (EVP).
• Encouraged colleagues
to undertake two – three
training days per year.
• Partnered with the Microsoft
Enterprise Skills Initiative
programme for training
and certification for our
colleagues.
External:
• Second customer
satisfaction survey.
• Working on becoming the
(employer) brand people
want to work with and
for including all external
stakeholders: investors,
suppliers, customers and
the wider community.
48
Eleco plc | www.eleco.com
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Customer: Eleco
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Governance
Governance
Good governance is a key ingredient to our success. As an
organisation we adhere to the Quoted Companies Alliance Corporate
Governance Code for AIM-listed companies. We have made good
progress in proactively assessing our impact on the wider world and
all stakeholder groups in an increasingly holistic way.
Where we have come from Achievements to date
Where we are heading
We recognise that it is the
responsibility of our Board and our
Leadership Team to uphold our
values (trust, customer centricity,
flexibility, innovation and teamwork)
and lead by active example. We
believe in embedding equality,
transparency and ethics in our
dealings with all stakeholders as a
central ethos.
•
•
•
Working with external
consultants to conduct
expert-led materiality
assessment.
In light of that, review
and evolve our scorecard
measures and targets for
2023.
Embed Group policies
through our e-learning
platform and Q&A
sessions.
These foundations have
been laid to guide our path to
progress:
•
Developed ESG
scorecard, measures
and targets and tracked
progress.
• Active ESG Committee.
•
•
Developed a Group policy
framework and signed off
16 group policies in 2022.
Specifically on Ethics, we
signed off Whistleblowing,
Anti-Facilitation of Tax
Evasion, Slavery and
Human Trafficking,
Conflicts of Interest
and Anti-Bribery and
Corruption Group policies.
•
Linked Leadership Team
remuneration to ESG
targets.
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Annual Report and Accounts 2022
49
Job No: 48476
Customer: Eleco
Proof Event: 9
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Park Communications Ltd Alpine Way London E6 6LA
Project Title: Annual Report 2022
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ESG Scorecard
We commit to measuring and communicating our progress overtime on clear Key Performance Indicators
(KPIs). The development of Eleco, as with any company, is a continuous journey. With this overview we provide
a transparent picture of not only where we are making progress, but also the areas where we need an increased
focus. This helps us maintain integrity and accountability on the things that are key to what makes Eleco a trusted
and responsible partner to all stakeholders.
Where 2022 targets had been set, these are shown in brackets alongside 2021 previous year actuals:
2021
2022 Target
2022 Actual
Environmental Energy consumption (SECR)
214,271 kWh
Energy consumption (global)
779,303 kWh
Renewable energy supplies
Electrified vehicles
Hybrid
C02 production
25%
6%
39%
–
–
35%
15%
–
237,458 kWh (+11%) ●
730,153 kWh (-6%) ●
45%
19%
63%
●
●
●
140 tonnes
< 140 tonnes
115 tonnes (-18%) ●
Social
Employee satisfaction
Customer satisfaction
Gender Pay Gap
Employee Turnover – regretted
Governance
Female representation on the Board
Independent directors on the Board
69%
82%
27%
9%
33%
67%
69%
–
26%
9%
33%
50%
75%
82%
21%
11.7%
33%
50%
●
●
●
●
●
●
Payment days to supply chain
36 days
61% within 60 days
35 days
65% within 60 days
16 days
98% within 60 days ●
CEO and Chair role split
Yes
Yes
Yes
●
50
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
People and Stories
Comments from the 2022 Great Place To Work® survey:
“Very pleasant atmosphere
and people always willing to
help. You simply feel like at
home here.”
“The team overall is well
motivated, performs well as a
team and wants to succeed!
A great family oriented
environment.”
“It’s a company that is on a
journey and has the will to
change things for the better
for its people, customers,
shareholders and investors.”
“The people. Everyone is
good at what they do & make
you feel part of something
special.”
“Constructive and
emotionally free dispute
culture in the sense of
mutual success.”
Comments from the 2023 Great Place To Work® survey:
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“The company has done well
in supporting its employees
financially in 2022.”
“Colleagues care very much
about each other. Everyone
takes care of each other and
trusts each other.”
“You are given the
opportunity to get on with
the job and make decisions.”
S
t
a
t
e
m
e
n
t
s
“A lot of freedom to develop
myself as a person but also
to develop the success of the
organisation.”
“Working is flexible, work-life
balance is respected, we can
work at home.”
Annual Report and Accounts 2022
Annual Report and Accounts 2022
51
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Customer: Eleco
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People and Stories continued
We realise that becoming the employer brand people want to work with and for is a continuous journey, so here
are some comments for improvement mentioned in the Great Place To Work® survey:
•
•
Embedding of our values and behaviours in
the organisation across all levels – this is an
ongoing commitment and we have started to
embed values and behaviours in our recruitment
and also objective setting/1-2-1s/performance
appraisals. The plan is to build them into our
reward and recognition and also talent/succession
management plus any manager/leader training
across the organisation.
Promoting a sense of camaraderie for
people which can be easily lost when not
working in an office environment and also
across geographical borders – something
that we encourage and will need to do perhaps
more formally as we continue to develop our
collaborative culture.
•
•
•
Improved benefits package/options and
salary – we have carried out a benefits review and
are implementing the findings; we have started a
role and benchmarking review which will carry on
into 2023 and 2024. In addition, we have awarded
a cost-of-living payment to support colleagues on
lower salaries in these challenging times.
Continuous development and training and
career progression – we have started by setting a
scorecard target for training. We will be introducing
a leadership programme for all line managers in
2023 and subsequent years and developing a
technical framework, starting with the development
roles, which we can evolve into a career path and
development programme.
More women in senior leadership – at 33 per
cent we meet our ESG scorecard target “female
representation on the Board” meaning that 2 out
of 6 Board members are female. In addition, we
encourage all executives and their line managers
to ensure that they have a longlist of candidates
with diverse backgrounds for every role they recruit,
including senior leadership roles. This includes all
spectrums of diversity and gender is one of them.
52
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
Customer stories
Customers are increasingly using our software to drive efficiency and sustainability:
Powerproject underpins Willmott
Dixon’s move to modern off-site
manufacturing techniques
Willmott Dixon is pioneering off-site manufacturing
techniques nationally after winning awards for
its prefabricated construction of the University of
Warwick’s Interdisciplinary Biomedical Research
Building.
Global sustainability concerns are driving
construction companies to look for alternative,
technology-driven ways to assemble buildings.
By manufacturing 50% of the building off-site and
coordinating operations using Powerproject by
Elecosoft, Willmott Dixon Construction Manager,
Nick Preedy, reduced site deliveries by nearly
40%, lowering the building’s carbon footprint.
The project has unlocked a whole new revenue
stream for the company, which is now growing its
off-site manufactured projects to promote greater
sustainability in construction.
The Net Zero World initiative is driving construction
companies to look for alternative, technology-
driven ways to construct off-site manufactured
buildings. Willmott Dixon is paving the way
for environmentally-friendlier processes which
is evidenced in the successful erection of the
University of Warwick’s 7,000 square metre,
five-storey Interdisciplinary Biomedical Research
Building (IBRB) in 2020.
Asda customise IconSystem to bring
data-driven accuracy to the shelf edge
With over 630 stores used by 18 million+
customers, Asda is constantly evolving its
product offering to meet changing demand.
Precision planning is required to display new stock
effectively – but legacy processes meant fixtures
and fittings were frequently being inaccurately or
excessively ordered.
Asda was already using IconSystem by Elecosoft
to manage equipment information, so it was a
natural step for Elecosoft to build a bespoke
‘profiles and specials’ module aligning Visual
Merchandising plans with Fixture Management
data.
“Data is now infinitely more accurate, we can
easily access granular detail that isn’t captured
anywhere else, and we can be much smarter with
the information we already have.”
The profiles and specials dashboard is already
delivering value for Asda, and the supermarket’s
mission to improve equipment ordering and
management continues. Zoe Mitchell, Model
Planner, and her colleagues meet with their
IconSystem Account Manager every month to
look at how the software is performing, and to see
where functionality can be enhanced.
“IconSystem has been a really worthwhile
investment, and the profiles and specials interface
that Elecosoft has created within the software will
drive long-term cost savings for Asda. Now that
we can see all our data clearly and easily make
changes, the sky is the limit!”
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Annual Report and Accounts 2022
Annual Report and Accounts 2022
53
53
Job No: 48476
Customer: Eleco
Proof Event: 9
Blackline Level: 0
Park Communications Ltd Alpine Way London E6 6LA
Project Title: Annual Report 2022
T: 0207 055 6500 F: 020 7055 6600
Directors’ Report
The Directors present their report and the audited financial statements for the year ended 31
December 2022.
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. In addition, the disclosures in Section 172 Statement address the
requirements of Schedule 7.11B(1) and (2) of the Companies Act 2006.
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 and Uncertainties
Going concern
Notes to the Consolidated Financial Statements
Page 28
Page 30
Page 40
Page 33
Page 19
Page 71
Group’s treasury policies
Notes to the Consolidated Financial Statements
Pages 103 to 107
Research and development activities Notes to the Consolidated Financial Statements
Risk management
Share capital
Strategic review
Review of Principal Risks and Uncertainties
Notes to the Consolidated Financial Statements
Our Software
Page 74
Page 16
Page 98
Page 12
Results for the Year Ended 31 December 2022
The Group profit on ordinary activities before taxation was £2,944,000 (2021: £3,926,000). The detailed financial
statements of the Group are set out on pages 66 to 111.
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.
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.
54
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Governance
With effect from 1 January 2022 ESIGN GmbH and
Active Online GmbH were merged under one German
trading company, Veeuze GmbH.
Dividends
The Directors have recommended a final dividend of
0.50 pence (2021: 0.40 pence). An interim dividend of
0.20 pence was paid on 7 October 2022 (2021: 0.20
pence). A further special dividend of 0.58 pence per
share, representing the proceeds from the disposal
of the non-core ARCON business, has also been
proposed (2021: nil special dividend).
Share Price
The middle market price of the Company’s Ordinary
Shares on 31 December 2022 was 68.5 pence and the
range during the period under review was 63.5 pence
to 109.5 pence.
Directors
The current composition of the Board of Directors is
shown on pages 28 to 29. Directors who held office
during the 2022 year were:
• S Lang
• J Hunter
• P Boughton
• A Nabavi
• M Castle
• R Tearle (resigned 4 February 2022)
• N Pritchard (appointed 3 October 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 2022
were as follows:
J Hunter
S Lang
2022
2021
28,361
28,361
77,234
77,234
Substantial Interests
As at 31 December 2022, the Company has been
notified of the following interests in the issued share
capital by substantial (3 per cent or over) shareholders:
Shareholder
H A Allen
J H B Ketteley
J D Lee
Jupiter Asset Management
IBIM2 Limited
Tikvah Management
Hargreaves Lansdown
Janus Henderson Investors
P R & Mrs M J Ketteley
Long Path Partners
No. of shares
11,882,584
9,130,335
5,462,064
4,520,781
4,314,307
3,905,614
3,286,472
3,153,443
3,016,440
2,831,466
%
14.29
10.98
6.57
5.44
5.19
4.70
3.95
3.79
3.63
3.41
Political Donations
The Group did not make any political donations in
2022 (2021: £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 70.
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 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.
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
55
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Directors’ Report continued
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 Section 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 Corporate Governance 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 the 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:
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 the 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.
Strategic Report Sign-Off
In accordance with Section 414D(1) of the Companies
Act 2006, the Strategic Report on pages 2 to 27 is
signed 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–
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
By order of the Board
Jonathan Hunter
Chief Executive Officer
27 March 2023
Eleco plc
Dawson House
5 Jewry Street
London
EC3N 2EX
•
•
•
•
56
GovernanceJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 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 2022 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 Practices).
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 2022 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 Practices; 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 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
•
Impairment of Goodwill
Parent Company
• None
Group
• Overall materiality: £230,000 (2021: £198,000)
• Performance materiality: £149,000 (2021: £148,000)
Parent Company
• Overall materiality: £109,000 (2021: £50,000)
• Performance materiality: £70,800 (2021: £37,500)
Our audit procedures covered 100% of revenue, 100%
of total assets and 100% of profit before tax.
57
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to the members of Eleco plc
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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 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
— Accounting Policies: Significant accounting judgements and
estimates; Impairment of Goodwill
— Note 9 – Goodwill.
As at 31 December 2022, the Group had Goodwill totalling £15,337k
(2021: £15,593) arising from past acquisitions.
Under IAS 36 management are required to test each of the cash
generating units (“CGUs”) to which Goodwill is allocated for impairment
on an annual basis. Management has prepared discounted cash flows
(“DCF”) models to estimate the value in use of each of the Group’s
CGUs and compare these to the carrying value of the relevant CGU.
The use of the DCF model requires management to make estimates
relating to revenue growth, gross and operating margin, profitability,
inflationary growth, and the application of appropriate discount rates.
Management have prepared DCF models using a pre-tax discount
rate based on a weighted average cost of capital (“WACC”) range from
11.4% to 13.6% (2021: range from 14.1% to 16.9%).
Given the material nature of the balances, the significant management
estimations involved, and the potential impact on the financial
statements, we have determined Goodwill 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’s expert.
58
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the audit
Our audit approach included:
•
Obtain an understanding of the Cash Generating Units (CGUs) to
which Goodwill is attributable and reperform management’s annual
impairment review, comparing the value in use (calculated through
the DCF model at a CGU level) to the carrying value of each CGU’s
Goodwill.
• Agreeing the mathematical accuracy and integrity of the calculations.
•
•
•
•
•
Reviewing the consistency of approach year on year and challenging
management on changes in the approach used to develop the
model through discussion and comparison to previous years’
models.
Reviewed the accuracy of previous forecasting models against
actual results.
Challenging the models’ assumptions and the conclusions of
management through:
–
–
–
–
–
Consulting with an internal valuations expert regarding the
discount rate used and assessing the impact of a range of
alternative rates calculated by our expert.
Considering the sensitivity analysis performed by management
and the sensitivity to, and likelihood of, changes in key
assumptions that would result in an impairment.
Challenging management on the assumptions used in their
models regarding key drivers around revenue growth rates,
operating profits and cost-saving efficiencies.
Assessing the sensitivity to changes by performing a reverse-
sensitivity analysis to identify the breakeven points for key
drivers of the model.
Considered the probability and circumstance that might
result in each breakeven scenario occurring and challenged
management on the mitigations for each scenario. This has
included review of isolated changes in key assumption and the
combined impact of multiple factor changes.
Comparing forecast cash flows to actual results observed to
assess accuracy of forecasting and applied variances to our model
assessment.
Considering any evidence of management bias in assumptions used
in the annual impairment review on the basis of approach taken and
assumptions used in the cashflow model.
• Reviewing disclosures in the financial statements.
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Independent Auditor’s Report continued
to the members of Eleco plc
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:
Group
£230,000 (2021: £198,000)
Parent company
£109,000 (2021: £50,000)
0.8% of Net Assets (as restricted for the
purposes of providing a Group opinion).
(2021: 5.0% of Net Assets)
The key benchmark for the parent company
is considered to be net assets.
3.7% of EBITDA (2021: 5.0% of Profit Before
Tax)
Most common financial information used
by the users as a group is EBITDA. This is
the main measurement used to assess the
business performance as this shows the
underlying performance of the entities before
depreciation and amortisation which is a large
sum in the financial statements due to the
value attributable to intangible assets.
We note in the prior year(s), a profit before
tax (PBT) benchmark was used at 5%,
however we consider EBITDA to be a more
appropriate benchmark as per discussions
with management and note the key differences
between PBT and EBITDA to primarily relate to
amortisation of intangibles.
£149,000 (2021: £148,000)
£70,800 (2021: £37,500)
65% of overall materiality (2021: 75%)
65% of overall materiality (2021: 75%)
Overall
materiality
Basis for
determining
overall materiality
Rationale for
benchmark
applied
Performance
materiality
Basis for
determining
performance
materiality
Reporting of
misstatements
to the Audit
Committee
Misstatements in excess of £11,500 (2021:
£9,920) and misstatements below that
threshold that, in our view, warranted reporting
on qualitative grounds.
Misstatements in excess of £5,450 (2021:
£2,500) and misstatements below that
threshold that, in our view, warranted
reporting on qualitative grounds.
60
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 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
• Australia
Full scope audits were performed for 6 components, specific audit procedures for 3 components and analytical
procedures at group level for the remaining 6 components.
Of the above, full scope audits for 1 component and specific audit procedures for 3 components were
undertaken by component auditors.
Number of
components
Revenue
Total assets
Profit before tax
Full scope audit
Specific audit
procedures
Analytical Review
Procedure
Total
6
3
6
15
69%
25%
6%
100%
93%
3%
4%
100%
81%
13%
6%
100%
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,
Australian, 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 2024, including
challenging the assumptions made by management.
Checking the arithmetic accuracy of the forecasts that form the basis of the directors’ going concern
assessment.
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to the members of Eleco plc
•
•
Corroborating the cash balance that is used as the starting point for the forecasts by agreeing to bank
confirmations and obtaining an updated cash position subsequent to the balance sheet date.
Agreeing the Group’s main external debt as fully repaid pre-year end to bank confirmations and repayments
to the bank statement.
• Auditing the disclosures in the financial statements in respect of going concern.
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.
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.
62
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 56, 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.
63
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022Financial Statements Independent Auditor’s Report continued
to the members of Eleco plc
The most significant laws and regulations were determined as follows:
Legislation/Regulation
UK-adopted IAS, FRS102 and
Companies Act 2006
Additional audit procedures performed by the Group audit engagement team and component auditors
included:
Review of the financial statement disclosures and testing to supporting
documentation;
Completion of disclosure checklists to identify areas of non-compliance.
Tax compliance regulations
Inspection of advice received from internal / 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
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 test whether revenues related to the next
accounting period have been appropriately deferred.
Management override of controls
Testing the appropriateness of journal entries and other adjustments;
Assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and
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
27 March 2023
64
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com
Consolidated Income Statement
For the year ended 31 December 2022
Continuing operations
Revenue
Cost of sales
Gross profit
Notes
2022
£’000
2021
£’000
1, 2
26,566
27,344
(3,087)
(2,754)
23,479
24,590
Amortisation and impairment of intangible assets
2, 3, 10
(1,596)
(2,361)
Former Directors’ payments
Share-based payments
Other administrative expenses
Administrative expenses
Operating profit
Net finance costs
Profit before tax
Taxation
Profit for the financial period
Attributable to:
Equity holders of the parent
Earnings per share – (pence per share)
Basic earnings per share
Diluted earnings per share
3
21
–
(201)
(69)
(81)
(18,699)
(17,980)
3
(20,496)
(20,491)
2, 3
2,983
4,099
5
6
8
8
(39)
(173)
2,944
3,926
(549)
(1,195)
2,395
2,731
2,395
2,731
2.9p
2.9p
3.3p
3.3p
65
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022Financial Statements
Consolidated Statement of Comprehensive
Income
For the year ended 31 December 2022
Profit for the year
Other comprehensive expense:
Items that will be reclassified subsequently to profit or loss:
Translation differences on foreign operations
Other comprehensive expense net of taxation
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
2022
£’000
2021
£’000
2,395
2,731
(107)
(107)
(258)
(258)
2,288
2,473
2,288
2,473
66
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
At 1 January 2021
Dividends
Share-based payments
Elimination of exercised share-based
payments
Issue of share capital
Transactions with owners
Profit for the year
Other comprehensive (expense)/
income:
Exchange differences on translation of
net investments in foreign operations
Other
Total comprehensive (expense)/
income for the year
Share
capital
£’000
825
Share
premium
£’000
2,182
Merger
reserve
£’000
1,002
–
–
–
7
7
–
–
–
–
–
–
–
253
253
–
–
(29)
(29)
–
–
–
–
–
–
–
–
–
At 31 December 2021
832
2,406
1,002
Dividends
Share-based payments
Transactions with owners
Profit for the year
Other comprehensive expense:
Exchange differences on translation of
net investments in foreign operations
Total comprehensive income for the
year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2022
832
2,406
1,002
Translation
reserve
£’000
Other
reserve
£’000
Retained
earnings
£’000
Total
£’000
(8)
–
–
–
–
–
–
(270)
(1)
(271)
(279)
–
–
–
–
(107)
(107)
(386)
(2)
–
81
(83)
–
(2)
–
–
(1)
(1)
(5)
–
201
201
–
–
–
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
(493)
–
(493)
(493)
201
(292)
2,395
2,395
–
(107)
2,395
2,288
196
21,792
25,842
67
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022Financial Statements Consolidated Balance Sheet
At 31 December 2022
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
Assets of the disposal group held for sale
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Borrowings
Lease liabilities
Trade and other payables
Provisions
Liabilities of the disposal group held for sale
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
Merger reserve
Translation reserve
Other reserve
Retained earnings
Equity attributable to shareholders of the parent
Notes
2022
£’000
2021
£’000
9
10
11
22
19
13
14
29
16
16, 22
15
17
29
18
16
16, 22
19
17
20
15,337
6,591
745
1,479
51
24,203
44
4,057
356
794
12,137
17,388
41,591
15,593
6,554
717
1,728
65
24,657
16
4,277
216
–
10,055
14,564
39,221
–
(45)
(467)
(1,523)
–
(428)
(10,305)
(12,723)
(471)
(1,793)
(10)
–
(9,689)
(12,008)
–
(56)
(1,215)
(1,785)
(26)
(3,026)
(15,749)
25,842
(1,464)
(1,806)
(41)
(3,367)
(15,375)
23,846
832
2,406
1,002
(386)
196
21,792
25,842
832
2,406
1,002
(279)
(5)
19,890
23,846
The financial statements of Eleco plc, registered number 00354915, on pages 65 to 111 were approved by the
Board of Directors on 27 March 2023 and signed on its behalf by:
Jonathan Hunter
Chief Executive Officer
68
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
Cash flows from operating activities
Profit before taxation for the year
Net finance costs
Depreciation charge
Amortisation and impairment charge
Profit on sale of property, plant and equipment
Share-based payments expense
Decrease in provisions
Note
2022
£’000
2021
£’000
2,944
3,926
39
621
173
722
1,596
2,361
(24)
201
(25)
(7)
81
(115)
Cash generated from operations before working capital movements
5,352
7,141
Decrease/(increase) in trade and other receivables
(Increase)/decrease in inventories and work in progress
Increase in trade and other payables and accruals and deferred income
Cash generated from operations
Interest paid
Net taxation 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 increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Effects of changes in foreign exchange rates
Cash and cash equivalents at 31 December
Cash and cash equivalents comprise:
Cash and short-term deposits
Cash held for sale
193
(27)
755
(366)
7
942
6,273
7,724
(27)
(719)
(124)
(903)
5,527
6,697
(1,631)
(1,727)
(158)
53
(279)
60
(1,736)
(1,946)
(102)
(556)
(493)
–
(4,447)
(650)
(493)
260
(1,151)
(5,330)
2,640
(579)
10,055
10,668
(157)
(34)
12,538
10,055
16
22
12,137
10,055
29
401
–
12,538
10,055
69
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022Financial Statements
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 2022 comprise the Company and its subsidiaries (together referred
to as the “Group”). The consolidated and parent company financial statements were authorised for issuance on
27 March 2023.
The address of the registered office is given on page 128. 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 54 to 56.
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 2022.
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 unless otherwise stated.
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.
70
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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 of technical viability 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 Russian/Ukraine conflict and the wider macro
economic environment in 2022. 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 at least 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 previous period has allowed the Company to repay
the entirety of borrowings and to grow its net cash position to £12,538,000 (2021: £9,954,000). The Group has
both cash and undrawn credit facilities available and headroom comprising £1.0m bank overdraft facility (2021:
£1.0m) 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 transition and 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 include a substantial and increasing deferred income balance.
Notwithstanding the Group has net current assets of £4,665,000 at 31 December 2022 (2021: £2,556,000)
these amounts are after deferred income of £7,787,000 (2021: £7,086,000) 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 64 per cent (2021:
56 per cent) of the Group’s revenue is from recurring revenue contracts.
71
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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 on consolidation.
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.
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The table below shows the main revenue recognition policies for each stream 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. Under IFRS 15, revenue is
recognised 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).
73
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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.
74
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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:
Leasehold Buildings
– 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, 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. Right-of-use assets are assessed for impairment when
such indicators exist or adjusted for any remeasurement of lease liabilities.
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L. Right-of-use assets continued
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 such as photocopiers.
The Group consider low value assets to be those that are less than £1,000. 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).
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 on an average cost basis. 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.
76
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 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.
77
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S. Financial instruments
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 then
allowed to be 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. Retained earnings refer to reserves where past and current year profits accumulate.
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Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 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)
IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies
IAS 1 Classification of Liabilities as Current or Non-Current
IAS 12 Deferred Tax related to Assets and Liabilities arising from Single
transaction
IAS 8: Definition of Accounting Estimates
Effective date
1 January 2023 & 1 January 2024
1 January 2023
1 January 2023
1 January 2023
The impact of adoption of minor amendments to these standards is not expected to give rise to a material
impact to the Group.
Y. Held For Sale Assets and Liabilities
A non-current asset (or disposal group) is classified as held for sale where its carrying value will be recovered
principally through a sale (rather than through continuing use in the business).
A non-current asset or disposal group is measured at the lower of its carrying amount and fair value less costs to
sell.
Costs to sell are the incremental costs directly attributable to the disposal of an asset (or disposal group) and
exclude finance costs and corporate tax. They also exclude cash (where this will not be disposed of with the
business) and intercompany balances.
Non-current assets (whether held as part of a disposal group) or otherwise, classified as a disposal group,
are not depreciated. Interest and other expenses associated with liabilities held for sale should continue to be
recognised.
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Notes to the Consolidated Financial Statements
1. Revenue
Revenue from continuing operations disclosed in the income statement is analysed as follows:
Licence sales
Recurring maintenance, support and subscription revenue
Services income
Total revenue
Revenue is recognised for each category as follows:
2022
£’000
2021
£’000
3,606
5,913
16,927
15,424
6,033
6,007
26,566
27,344
• Licence sales – recognised at the point of transfer (delivery) of the licence to a customer.
•
Recurring revenue: SaaS, maintenance, support and subscriptions – as these services are provided over the
term of the contract, revenue is recognised over the life of the contract.
• Services – recognised on delivery of the service.
Revenue recorded in the year includes £7.1m (2021: £6.4m) 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:
2022
£’000
2021
£’000
10,263
10,446
6,388
4,449
1,101
3,808
557
6,550
4,911
1,030
3,916
491
26,566
27,344
UK
Scandinavia
Germany
USA
Rest of Europe
Rest of World
80
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 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
2022
£’000
2021
£’000
17,248
17,650
7,432
1,886
7,997
1,697
26,566
27,344
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
2022
£’000
2021
£’000
25,317
26,068
1,249
1,276
26,566
27,344
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-makers have 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.
During the year, the Executive Directors, reviewed the three revenue streams, having previously reviewed these
as one. 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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Notes to the Consolidated Financial Statements
continued
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 taxation
Taxation
Segment profit after taxation
Operating profit
Amortisation and impairment of intangible assets
Depreciation charge
EBITDA
Former Directors’ payments
Share-based payments
Adjusted EBITDA
Adjusted basic earnings per share is shown in note 8.
2022
Software
£’000
2021
Software
£’000
26,566
27,344
5,200
7,251
(1,097)
(1,786)
(621)
(722)
3,482
4,743
(499)
–
(575)
(69)
2,983
4,099
(39)
(173)
2,944
3,926
(549)
(1,195)
2,395
2,983
1,596
621
2,731
4,099
2,361
722
5,200
7,182
–
201
69
81
5,401
7,251
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 2022 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.
82
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Group assets and liabilities
Segment assets
Total Group assets
Segment liabilities
Total Group liabilities
2022
Software
£’000
2021
Software
£’000
41,591
39,221
41,591
39,221
15,749
15,375
15,749
15,375
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. These include assets that were held at the year end as
Held For Sale Assets.
Non-current assets by geographical location are as follows:
UK
Scandinavia
Germany
USA
Rest of Europe
Rest of World
2022
£’000
2021
£’000
14,680
14,780
6,769
2,706
6,759
3,072
2
44
2
2
44
–
24,203
24,657
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 (2021: below 10 per cent reporting threshold).
83
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continued
3. Operating profit
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
Profit on disposal of property, plant and equipment
Foreign exchange (gains)/losses
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
Former Directors’ payments
2022
£’000
1,526
147
474
499
1,097
–
201
–
(24)
(206)
134
119
9
–
2021
£’000
1,660
213
509
575
1,150
636
81
135
(7)
127
83
104
8
69
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
84
2022
Number
2021
Number
58
86
70
41
57
76
69
43
255
245
2022
£’000
2021
£’000
12,446
11,145
2,268
1,985
654
201
648
81
15,569
13,859
(1,550)
(1,578)
14,019
12,281
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 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 are 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
Gain on share-based payment
Employers NI
Total remuneration in respect of 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)
2022
£’000
512
28
–
2021
£’000
994
58
69
540
1,121
–
66
606
216
2022
–
250
–
123
134
1,378
165
2021
–
700
–
The emoluments of the highest paid Director totalled £396,000 (2021: £426,000).
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 40 of the Remuneration Committee Report.
5. Finance cost
Finance income and costs from continuing operations is set out below:
Finance income:
Bank and other interest receivable
Finance costs:
Bank overdraft and loan interest
Interest expense for leasing arrangements
Total net finance costs
2022
£’000
2021
£’000
20
–
(4)
(55)
(39)
(110)
(63)
(173)
85
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Notes to the Consolidated Financial Statements
continued
6. Taxation
(a) Taxation 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 consolidated income statement
2022
£’000
2021
£’000
359
(104)
255
276
531
9
–
9
18
549
433
–
433
329
762
8
370
55
433
1,195
Income tax for the UK has been calculated at the weighted average rate of UK corporation tax of 19 per cent
(2021: 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.
86
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(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 (2021: 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% (2021: 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
2022
£’000
2021
£’000
2,944
3,926
559
746
45
(64)
(96)
131
(26)
549
125
(71)
11
394
(10)
1,195
(c) Unrecognised tax losses
The Group has tax losses of £1,623,000 (2021: £1,623,000) arising in the UK. The potential deferred tax asset not
recognised in respect of losses in UK subsidiaries is £406,000 (2021: £406,000). 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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continued
7. Dividends
Dividends paid in the year were 0.60 pence per ordinary share (2021: 0.60 pence per ordinary share). Cash
dividends of £493,000 (2021: £493,000) were paid during the year:
Ordinary Shares
Declared and paid during the year
Interim – current year
Final – previous year
2022
pence per
share
2021
pence per
share
2022
£’000
2021
£’000
0.20
0.40
0.60
0.20
0.40
0.60
164
329
493
164
329
493
The Directors have recommended a final dividend of 0.50 pence (2021: 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. In
addition, a special dividend of 0.58 pence per share, representing the proceeds from the disposal of the non-
core ARCON business, will be proposed at the AGM as a further resolution (2021: nil special dividend).
8. Basic and diluted earnings per share
Ordinary Shares
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
2022
Weighted
average
number of
shares
(millions)
82.2
83.0
82.2
Net profit
attributable to
shareholders
£’000
2,395
2,395
2,799
Net profit
attributable to
shareholders
£’000
2,731
2,731
3,253
EPS
(pence)
2.9
2.9
3.4
2021
Weighted
average
number of
shares
(millions)
82.0
82.9
82.0
EPS
(pence)
3.3
3.3
4.0
In determining the diluted earnings per share the dilutive impact of share options on weighted average number of
shares was included. The reconciliations to the above figures are shown below:
Reconciliations of EPS measures
Ordinary Shares
Basic earnings per share
Dilutive effect of share options
Diluted earnings per share
Ordinary Shares
Basic earnings per share
Effect of adjusted profit (note 2)
Adjusted basic earnings per share
2022
Weighted
average
number of
shares
(millions)
82.2
0.8
83.0
2022
Weighted
average
number of
shares
(millions)
82.2
–
82.2
Net profit
attributable to
shareholders
£’000
2,395
–
2,395
Net profit
attributable to
shareholders
£’000
2,395
404
2,799
2021
Weighted
average
number of
shares
(millions)
82.0
0.9
82.9
2021
Weighted
average
number of
shares
(millions)
82.0
–
82.0
Net profit
attributable to
shareholders
£’000
2,731
–
2,731
Net profit
attributable to
shareholders
£’000
2,731
522
3,253
EPS
(pence)
2.9
–
2.9
EPS
(pence)
2.9
0.5
3.4
EPS
(pence)
3.3
–
3.3
EPS
(pence)
3.3
0.7
4.0
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.
88
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9. Goodwill
Cost:
As at 1 January
Assets Held for Sale
Exchange differences
As at 31 December
Net book value
2022
£’000
2021
£’000
15,593
15,762
(336)
–
80
(169)
15,337
15,593
15,337
15,593
There were no acquisitions in the year.
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
Veeuze Germany
Notes
29
2022
£’000
2021
£’000
8,703
8,703
239
227
4,422
4,438
21
–
20
336
1,952
1,869
15,337
15,593
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.
89
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic ReportGovernanceFinancial StatementsOverviewAnnual Report and Accounts 2022Financial Statements Notes to the Consolidated Financial Statements
continued
9. Goodwill continued
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 8 to 20 per cent (2021: 4 to 10 per cent) in
accordance with the SaaS transition; 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
Notes
2022
2021
Pre-tax
discount
rate
11.7%
13.6%
12.1%
11.4%
Nominal
long-term
growth
rate
0.4%
1.5%
2.1%
2.2%
Pre-tax
discount
rate
Nominal
long-term
growth
rate
14.6% 0.30%
16.9% 0.40%
15.0% 0.50%
14.1% 0.40%
29
–
–
16.9% 0.40%
13.6%
1.5%
16.9% 0.40%
These budgets and strategic plans cover a five-year period. The growth rates used to extrapolate the cash flows
beyond this period ranges between 0.4 per cent and 2.2 per cent depending on the geographical location of the
CGU.
Management have performed sensitivity analysis on key assumptions including discount rate and revenue
growth rates. There are no reasonable scenarios in which a change in the assumptions would lead to an
impairment loss being recognised for the year ended 31 December 2022.
90
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com
10. Other intangible assets
Cost:
At 1 January 2021
Additions
Additions – internal development
Disposals
Transfers
Exchange differences
Customer
relationships
£’000
Intellectual
property
£’000
Notes
7,149
–
–
–
–
(2)
8,694
149
1,578
(48)
(27)
2
Total
£’000
15,843
149
1,578
(48)
(27)
–
At 31 December 2021 and 1 January 2022
7,147
10,348
17,495
Additions
Additions – internal development
Assets held for sale
Disposals
Exchange differences
At 31 December 2022
Accumulated amortisation and impairment:
At 1 January 2021
Amortisation charge for the year
Impairment charge for the year
Disposals
Transfers
Exchange differences
At 31 December 2021 and 1 January 2022
Amortisation charge for the year
Disposals
Exchange differences
At 31 December 2022
Net book value:
At 31 December 2021 and 1 January 2022
At 31 December 2022
29
–
–
–
–
2
81
1,550
(2)
(29)
7
81
1,550
(2)
(29)
9
7,149
11,955
19,104
4,141
324
–
–
–
1
4,466
499
–
1
4,507
1,401
636
(48)
(27)
6
8,648
1,725
636
(48)
(27)
7
6,475
1,097
10,941
1,596
(29)
4
(29)
5
4,966
7,547
12,513
2,681
2,183
3,873
4,408
6,554
6,591
Values attributed to internal development costs meet criteria as set out in section 1J of the Accounting Policies.
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.
91
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Notes to the Consolidated Financial Statements
continued
10. Other intangible assets continued
Additions in the year represent purchased intangible assets of £81,000 (2021: £149,000) and internal development
costs capitalised of £1,550,000 (2021: £1,578,000). 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. There were no indicators of impairment in the current
year. An impairment charge of £nil (2021: £636,000) 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 is
included in amortisation and impairment of intangible assets within the Consolidated Income Statement.
92
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 11. Property, plant and equipment
Cost:
At 1 January 2021
Additions
Disposals
Exchange differences
At 31 December 2021 and 1 January 2022
Additions
Disposals
Transfer to assets of disposal group
Exchange differences
At 31 December 2022
Accumulated depreciation and impairment:
At 1 January 2021
Depreciation charge for the year
Disposals
Exchange differences
At 31 December 2021 and 1 January 2022
Depreciation charge for the year
Disposals
Transfer to assets of disposal group
Exchange differences
At 31 December 2022
Net book value:
At 31 December 2021 and 1 January 2022
At 31 December 2022
Plant,
equipment
and
vehicles
£’000
Leasehold
buildings
£’000
Total
£’000
1,553
278
(1)
(43)
954
268
(1)
(21)
1,200
1,787
158
(359)
(14)
(4)
981
715
173
(1)
(22)
865
127
(330)
(5)
(25)
632
335
349
158
(364)
(14)
14
1,581
902
213
(1)
(44)
1,070
147
(335)
(5)
(41)
836
717
745
599
10
–
(22)
587
–
(5)
–
18
600
187
40
–
(22)
205
20
(5)
–
(16)
204
382
396
Included in plant, equipment and vehicles is £122,000 (2021: £122,000) in respect of assets under construction.
12. Capital commitments
Capital expenditure commitments of £nil (2021: £nil) have been placed with suppliers at 31 December 2022.
93
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Notes to the Consolidated Financial Statements
continued
13. Inventories
Finished goods
At 31 December 2022 the Group’s inventory provisions were £nil (2021: £nil).
14. Trade and other receivables
Gross trade receivables
Provision for credit losses
Net trade receivables
Other receivables
Prepayments and accrued income
2022
£’000
44
44
2021
£’000
16
16
2022
£’000
3,419
(83)
3,336
191
530
2021
£’000
3,730
(102)
3,628
99
550
4,057
4,277
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 to determine the lifetime expected credit losses attributable to the receivables. 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 Eleco Group
company’s credit check process. The average credit period taken on the sales of goods and services is 31 days
(2021: 41 days). No interest is charged on past due trade receivables (2021: £nil).
The carrying amounts of trade and other receivables are denominated in the following currencies:
Sterling
Euro
Swedish Krona
US Dollar
Other
2022
£’000
1,381
1,333
1,119
186
38
2021
£’000
1,524
1,134
1,364
205
50
4,057
4,277
Movement in the provision for credit losses in respect of trade receivables during the year was as follows:
At 1 January
Written off as uncollectable
Recovered during the period
Provided against during the period
Exchange
At 31 December
94
2022
£’000
(102)
31
71
(83)
–
(83)
2021
£’000
(66)
33
–
(75)
6
(102)
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com 15. Trade and other payables
Trade payables
Other taxation and social security
Other payables
2022
£’000
452
706
365
2021
£’000
637
730
426
1,523
1,793
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 16 days (2021: 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
2022
£’000
2021
£’000
–
467
467
–
1,215
1,215
1,682
45
471
516
56
1,464
1,520
2,036
(12,538)
(10,055)
(10,856)
(8,019)
The UK banking facilities are with Barclays Bank plc and the Group facilities comprised a £1.0m overdraft facility,
carrying an interest rate of 2.75 per cent over base rate (undrawn at 2022 and 2021).
The UK term loan facility with Barclays Bank plc was fully paid down in 2021.
95
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continued
16. Borrowings continued
Included in bank loans was an outstanding loan of £nil (2021: £101,000) in a German subsidiary company. The
loan was secured against the freehold property in the German 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
2022
£’000
2021
£’000
–
–
–
–
45
56
–
101
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 2022
Credit to the income statement
Utilised in the year
At 31 December 2022
Current liabilities
Non-current liabilities
2022
£’000
51
(25)
–
26
–
26
26
2021
£’000
166
(98)
(17)
51
10
41
51
Provisions principally relate to re-organisation 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.
96
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Accruals
Deferred income
2022
£’000
2,518
7,787
10,305
2021
£’000
2,603
7,086
9,689
Deferred income represents income from software subscription licences and 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 2021
(Charge)/credit to the
income statement
Exchange differences
At 31 December 2021
(Charge)/credit to the
income statement
Exchange differences
At 31 December 2022
Deferred tax assets
Deferred tax liabilities
Tax losses
carried
forward
£’000
Excess of
amortisation
over tax
allowances
£’000
Other
temporary
differences
£’000
–
–
–
–
–
–
–
84
(20)
–
64
(14)
–
50
1
–
–
1
–
–
1
Intangible
assets
£’000
Accelerated
capital
allowances
£’000
Other
temporary
differences
£’000
Total
£’000
(1,145)
(3)
(269)
(1,417)
(354)
–
(1,499)
(23)
–
(1,522)
(2)
–
(5)
–
–
(5)
(56)
23
(412)
23
(302)
(1,806)
19
25
(4)
25
(258)
(1,785)
Total
£’000
85
(20)
–
65
(14)
–
51
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 £406,000 (2021: £406,000) 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.
97
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Notes to the Consolidated Financial Statements
continued
20. Share capital
Authorised:
Ordinary Shares of 1p each
Allotted, called up and fully paid:
2022
Nominal
Value
£’000
2021
Nominal
Value
£’000
No. of shares
No. of shares
85,000,000
850
85,000,000
850
Ordinary Shares of 1p each at start of year
83,154,650
832
82,464,650
Issue of Ordinary Shares
690,000
Ordinary Shares of 1p each at end of year
83,154,650
832
83,154,650
825
7
832
There was no increase in called up and fully paid share capital in the year and issuance of £nil (2021: 690,000)
shares of nominal value 1 pence at a premium of £nil (2021: £253,000).
21. Share-based payments
The Company operates one share scheme and options outstanding at 31 December 2022 over Ordinary Shares
granted under the scheme were as follows:
Date awarded
9 August 2017
18 May 2020
12 November 2020
23 February 2021
1 August 2022
Number
of Ordinary
Shares
500,000
650,000
250,000
600,000
650,000
2,650,000
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
31 July 2025
31 July 2032
Weighted average
remaining
contractual
life (years)
4.6
7.4
7.9
8.2
9.6
7.6
Further details of these historical share awards are detailed below:
650,000 options were granted during 2022 under the Company’s Long Term Incentive Plan (“LTIP”) at an
exercise price of 70.0 pence per share. During the year no options relating to the 2022 issue had been forfeited
and no options relating to prior issues were forfeited. Of these, 150,000 are market priced options, which have
no vesting criteria other than to remain in employment by the Group and shall vest after a 3-year vesting period.
100,000 are nominal cost options which shall vest after 3 years if certain performance criteria related to recurring
revenue growth, overall revenue growth and share price growth are met. The remaining 400,000 were awarded
to senior management in the Group, which have no vested criteria other than to remain in employment by the
Group.
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. These options will vest if the
EPS for the year ended 31 December 2023 is 20 per cent or more greater than 3.9p.
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
31 May 2023.
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21. Share-based payments continued
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) nor (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 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 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
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) nor (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.
99
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continued
21. Share-based payments continued
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
2022
2021
Weighted
average
exercise
price
Number
Number
2,000,000
76.9 2,240,000
650,000
70.0
700,000
–
–
–
–
(690,000)
(250,000)
2,650,000
75.2 2,000,000
–
–
Weighted
average
exercise
price
56.6
100.4
35.7
74.3
76.9
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 2022 was £201,000 (2021: £81,000).
A valuation model is used to value the share options and the key assumptions used for the outstanding awards
granted during 2022 and 2021 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
2022
70.0p
70.0p
98%
5.0
2021
97.5p
100.4p
98%
5.0
0.73% 0.53%
81%
43.4p
36%
38.0p
100
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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 resulted in the period in a reduction in the Group’s annual operating expenses
of £619,000 (2021: £655,000) and additional depreciation costs of £474,000 (2021: £509,000) and finance costs
payable of £55,000 (2021: £63,000). Details of lease liabilities and right-of-use assets are provided below.
Under IFRS 16, on transition at the date of initial application, the Group recognised a lease liability for leases
previously classified as an operating lease under IAS 17, 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 elects to not 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
2022
£’000
2021
£’000
1,190
1,400
289
–
328
–
1,479
1,728
Below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Right-of-Use-assets
At 1 January 2021
Additions and measurements
Disposals
Exchange difference
Depreciation charge for the year
At 31 December 2021 and 1 January 2022
Additions and measurements
Disposals
Exchange difference
Depreciation charge for the year
At 31 December 2022
Property
£’000
1,747
116
–
(91)
(373)
1,399
98
–
55
(363)
1,189
Motor
vehicles
£’000
Other
plant and
equipment
£’000
Total
£’000
435
120
(84)
(31)
(111)
329
96
(19)
(5)
(111)
290
26
2,208
–
–
(1)
(25)
–
–
–
–
–
–
236
(84)
(123)
(509)
1,728
194
(19)
50
(474)
1,479
101
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Notes to the Consolidated Financial Statements
continued
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 2021
Additions
Interest charge
Interest income on lease liabilities
Lease payments
Exchange difference
At 31 December 2021 and 1 January 2022
Additions
Interest charge
Interest income on lease liabilities
Lease payments
Exchange difference
At 31 December 2022
Motor
vehicles
£’000
Other
plant and
equipment
£’000
Total
£’000
444
120
11
(5)
(201)
(32)
337
59
7
(3)
(82)
8
23
2,432
–
–
–
(26)
(1)
(4)
–
–
–
–
–
236
63
(5)
(650)
(141)
1,935
221
55
(3)
(556)
30
Property
£’000
1,965
116
52
–
(423)
(108)
1,602
162
48
–
(474)
22
1,360
326
(4)
1,682
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
Cash 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
2022
£’000
2021
£’000
12,538
10,055
3,527
3,727
16,065
13,782
1,167
1,063
–
100
2,577
2,603
–
–
3,744
3,766
The carrying value of the Group’s financial assets and liabilities are considered to approximate their respective
fair values.
102
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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 2022
Sterling
Euro
Swedish Krona
US Dollar
South African Rand
Other
At 31 December 2021
Floating
rate
£’000
1,360
1,127
1,226
25
6
–
3,744
1,715
756
Total
£’000
1,360
1,127
1,226
25
6
–
3,744
1,715
756
1,284
1,284
5
6
–
5
6
–
Floating
rate
£’000
6,993
3,083
5,430
448
46
65
Total
£’000
6,993
3,083
5,430
448
46
65
Net
financial
(assets)/
liabilities
£’000
5,633
1,956
4,204
423
40
65
16,065
16,065
12,321
4,183
3,664
4,768
1,056
44
67
4,183
3,664
4,768
1,056
44
67
2,468
2,908
3,484
1,051
38
67
3,766
3,766
13,782
13,782
10,016
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 2022
Sterling
Euro
Swedish Krona
At 31 December 2021
–
–
–
–
–
–
–
–
Euro
£’000
299
–
291
590
486
–
279
765
Swedish
Krona
£’000
US Dollar
£’000
Other
£’000
–
–
–
–
–
–
–
–
177
–
27
204
837
–
76
913
–
–
–
–
36
–
31
67
Total
£’000
476
–
318
794
1,359
–
386
1,745
103
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Notes to the Consolidated Financial Statements
continued
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 finance cost for the year from continuing operations was £39,000 (2021: £173,000). 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 19 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 £399,000 lower (2021:
£373,000 lower) if Sterling strengthened by 10 per cent and £439,000 higher (2021: £411,000) if Sterling
weakened by 10 per cent.
Net financial (assets)/liabilities:
Profit/(loss)
Equity
Effect of change in
Sterling +/-10%
2022
£’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
(5,633)
(6,715)
(12,348)
–
616
616
–
(677)
(677)
–
(42)
(42)
–
47
47
–
(399)
(399)
–
439
439
Effect of change in
Sterling +/-10%
Denominated in Sterling
Not denominated in Sterling
Total net financial liabilities
Net financial (assets)/liabilities:
Profit/(loss)
Equity
2021
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
Rate +10%
£’000
Rate -10%
£’000
(2,468)
(7,606)
(10,074)
–
691
691
–
(761)
(761)
–
(132)
(132)
–
145
145
–
(373)
(373)
–
411
411
104
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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 23 (b) 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.
2022
Effect of increase in interest rates
of 1%
Effect of decrease in interest rates
of 1%
Net finance cost
(39)
(10)
(10)
(10)
10
As
reported
£’000
Rate +1%
£’000
Profit/
(loss)
£’000
Equity
£’000
Rate -1%
£’000
Profit/
(loss)
£’000
10
Equity
£’000
10
2021
Effect of increase in interest rates
of 1%
Effect of decrease in interest rates
of 1%
Net finance cost
(173)
(46)
(46)
As reported
£’000
Rate +1%
£’000
Profit/(loss)
£’000
Equity
£’000
(46)
Rate -1%
£’000
Profit/(loss)
£’000
46
46
Equity
£’000
46
(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 2022
Trade and other payables
Bank loans and overdraft
Lease liabilities
At 31 December 2021
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
1,523
1,523
–
1,682
3,205
1,793
101
1,935
3,829
–
19
1,542
1,793
–
22
1,815
–
–
19
19
–
–
23
23
–
–
428
428
–
45
426
471
–
–
27
27
–
45
75
120
–
–
1,189
1,189
–
11
1,389
1,400
The amounts for bank loans, overdraft and lease liabilities are inclusive of interest payable in the comparative
period. The Group’s overdraft facilities with Barclays Bank plc are explained in note 16.
At 31 December, the Group had no committed borrowing facilities expiring in the periods shown (2021:
£101,000).
Expiring in one year or less
Expiring between one and two years
Expiring between two and five years
2022
£’000
2021
£’000
–
–
–
–
45
56
–
101
105
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Notes to the Consolidated Financial Statements
continued
23. Financial instruments continued
(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. 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 before provision for credit losses at the
reporting date by geographic region is as follows:
UK
Germany
Scandinavia
USA
Rest of Europe
Rest of World
2022
£’000
2021
£’000
1,093
1,170
559
910
282
431
144
580
1,079
284
464
153
3,419
3,730
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.
(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.
During the prior period when borrowings were in place covenants made to the bank were in operation 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 course of the year ended 31 December 2022.
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 2022, the continuing operations EBITDA for the year was £5,200,000 (2021: £7,251,000) and
the net bank cash position was £12,538,000 (2021: net bank cash position £9,954,000).
106
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(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 2022
Cash flows:
– Repayment
– Additions
Non-cash:
– Acquisition
– Fair value
– Reclassification
At 31 December 2022
At 1 January 2021
Cash flows:
– Repayment
– Additions
Non-cash:
– Acquisition
– Fair value
– Reclassification
At 31 December 2021
Long-term
borrowings
£’000
Short-term
borrowings
£’000
Lease
liabilities
£’000
56
45
1,935
Total
£’000
2,036
(56)
(45)
–
–
–
–
–
–
–
–
–
–
(474)
221
(575)
221
–
–
–
–
–
–
1,682
1,682
Long-term
borrowings
£’000
Short-term
borrowings
£’000
2,867
1,647
Lease
liabilities
£’000
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
107
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continued
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 2022 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 55 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 £nil (2021: £58,697) was paid to JHB Ketteley & Co Limited under a former lease for occupation by
the Group of 66 Clifton Street, London, EC2A 4HB. There was £nil (at 31 December 2021: £6,197) outstanding
in 2022. JHB Ketteley was a former Executive 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 2021. The final settlement on
dilapidations was £33,250 and this was settled in March 2022.
An amount of £nil (2021: £4,500) was paid to Political Lobbying & Media Relations Ltd (PLMR) in respect of
training costs. There were no amounts outstanding at 31 December 2022 (at 31 December 2021: £nil). K Craig
was a former Director of the Company and is a Director of PLMR.
108
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The Group uses adjusted figures, which are not defined by generally accepted accounting principles (“GAAP”)
such as UK-IAS. Adjusted figures and underlying growth rates are presented as additional performance
measures used by management, as they provide relevant information in assessing the Group’s performance,
position and cash flows. We believe that these measures enable investors to track more clearly the core
operational performance of the Group, by separating out items of income or expenditure relating to acquisitions,
disposals and capital items. Our management uses these financial measures, along with UK-IAS financial
measures, in evaluating the operating performance of the Group.
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 from 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
2022
£’000
Year ended
31 December
2021
£’000
2,983
–
–
499
3,482
2,944
–
–
499
3,443
(549)
–
–
(95)
(644)
2,395
–
–
404
2,799
6,273
(1,631)
(158)
–
–
4,484
4,484
(27)
(719)
53
–
–
3,791
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
109
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continued
27. Post-balance sheet events
On 17 February 2023, the Group sold its wholly owned subsidiary Eleco Software GmbH, the German ARCON
architectural CAD business, to FirstInVision GesmbH, an Austrian architectural software business, for a total
consideration of €600,000. This is the business that was held for sale at the 31 December 2022 year end and
referred to in note 29.
The transaction supports the Group’s strategy to focus on its core customer segments and businesses.
The €600,000 consideration is to be satisfied in cash, with €550,000 immediately payable on completion, and
€25,000 in two deferred instalments (without performance conditions attached) over the next two years.
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
2022
12.46
1.17
1.24
2021
11.80
1.16
1.37
2022
12.61
1.13
1.21
2021
12.23
1.19
1.35
110
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In line with our previously announced strategy to focus on our core customer segments and businesses, we
held our Eleco Software GmbH, the German ARCON architectural CAD business, for sale at the year end in
accordance with the provisions of IFRS 5.
Assets of the disposal group held for sale
The table below reflects assets of the disposal group held for sale measured at the lower of carrying amount
and fair value less costs to sell in the Consolidated Balance sheet. There was no revaluation from reclassification
required as a result of this business classification under IFRS 5. As at 17 February 2023, the business was
disposed of to an Austrian buyer (see Post Balance sheet event note 27).
Assets held for sale
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-Use assets
Trade and other receivables
Cash and cash equivalents
Total assets held for sale
At
31 December
2022
£’000
At
31 December
2021
£’000
336
2
9
19
27
401
794
–
–
–
–
–
–
–
Liabilities of the disposal group held for sale
Liabilities classified as liabilities of the disposal group held for sale on the face of the Consolidated Balance
Sheet are as follows:
Liabilities held for sale
Lease liabilities
Trade and other payables
Accruals and deferred income
Total liabilities held for sale
At
31 December
2022
£’000
At
31 December
2021
£’000
(19)
(350)
(59)
(428)
–
–
–
–
111
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For the year ended 31 December 2022
At 1 January 2021
Dividends
Share-based payments
Elimination of exercised share-based payments
Issue of share capital
Transactions with owners
Profit for the year
Exchange differences on translation of net
investments in foreign operations
Other
Total comprehensive income for the year
At 31 December 2021
Dividends
Share-based payments
Transactions with owners
Profit for the year
Exchange differences on translation of net
investments in foreign operations
Total comprehensive income for the year
Share
capital
£’000
825
Share
premium
£’000
2,182
Merger
reserve
£’000
1,002
–
–
–
7
7
–
–
–
–
–
–
–
253
253
–
–
(29)
(29)
–
–
–
–
–
–
–
–
–
832
2,406
1,002
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other
reserve
£’000
Retained
earnings
£’000
Total
£’000
57
–
57
(83)
–
(26)
–
80
(28)
52
83
–
176
176
–
63
63
7,285
11,351
(493)
(493)
–
83
–
(410)
609
–
27
636
57
–
260
(176)
609
80
(30)
659
7,511
11,834
(493)
–
(493)
(493)
176
(317)
1,944
1,944
–
63
1,944
2,007
At 31 December 2022
832
2,406
1,002
322
8,962
13,524
112
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At 31 December 2022
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
2022
£’000
2021
£’000
3
4
5
6
7
125
133
88
127
6,546
6,546
17,719
18,085
24,523
24,846
2,470
4,886
7,356
3,584
1,769
5,353
8
10
(18,320)
(18,314)
(26)
(51)
(10,990)
(13,012)
13,533
11,834
9
(9)
–
13,524
11,834
11
13
832
2,406
1,002
322
832
2,406
1,002
83
8,962
7,511
13,524
11,834
The parent company’s profit for the year was £1,944,000 (2021: £609,000) and total comprehensive income
attributable to the equity shareholders was £2,007,000 (2021: £659,000).
The financial statements of Eleco plc, registered number 00354915, on pages 112 to 125 were approved by the
Board of Directors on 27 March 2023 and signed on its behalf by:
Jonathan Hunter
Chief Executive Officer
113
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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 its 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.
114
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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.
Operating 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.
115
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continued
Taxation
Current UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and
laws that have been enacted or substantially enacted by the balance sheet date.
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the
balance sheet date where transactions or events have occurred at the date will result in an obligation to pay
more tax or a right to pay less or to receive more tax, with the following exceptions:
•
•
provision is made for deferred tax that would arise on remittance of the retained earnings of overseas
subsidiary undertakings only to the extent that, at the balance sheet date, dividends have been accrued as
receivable; and
deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not
that there will be suitable taxable profits from which the future reversal of the underlying timing differences
can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in
which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance
sheet date.
Employee Share Ownership Trust
Equity shares in 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.
116
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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 £1,944,000
(2021: £609,000).
2. Employee information
The average number of employees during the period, including Directors, was made up as follows:
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
2022
Number
2021
Number
–
1
13
14
1
1
10
12
2022
£’000
1,241
212
52
176
1,681
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)
2022
£’000
2021
£’000
508
28
–
536
216
752
2022
–
250
–
876
32
69
977
165
1,142
2021
–
700
–
The emoluments of the highest paid Director totalled £396,000 (2021: £426,000).
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.
117
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continued
Intellectual
property
£’000
1,301
77
–
1,378
46
–
1,424
1,271
19
–
1,290
9
–
1,299
88
125
3. Intangible fixed assets
Cost:
At 1 January 2021
Additions
Disposals
At 31 December 2021 and 1 January 2022
Additions
Disposals
At 31 December 2022
Accumulated amortisation and impairment:
At 1 January 2021
Amortisation charge for the year
Disposals
At 31 December 2021 and 1 January 2022
Amortisation charge for the year
Disposals
At 31 December 2022
Net book value at 31 December 2021
Net book value at 31 December 2022
118
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Cost:
At 1 January 2021
Additions
Disposal
At 31 December 2021 and 1 January 2022
Additions
Disposal
At 31 December 2022
Accumulated depreciation:
At 1 January 2021
Depreciation charge for the year
Disposal
At 31 December 2021 and 1 January 2022
Depreciation charge for the year
Disposal
At 31 December 2022
Net book value at 31 December 2021
Net book value at 31 December 2022
Plant,
equipment
and
vehicles
£’000
Total
£’000
169
123
–
292
12
–
304
149
16
–
165
6
–
171
127
133
169
123
–
292
12
–
304
149
16
–
165
6
–
171
127
133
Included in plant, equipment and vehicles is £122,000 (2021: £122,000) in respect of assets under construction.
119
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Notes to the Company Financial Statements
continued
5. Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Cost:
At 1 January 2021
Disposals
Reclassification
At 31 December 2021 and 1 January 2022
Disposals
Reclassification
At 31 December 2022
Accumulated provision:
At 1 January 2021
Disposals
At 31 December 2021 and 1 January 2022
Disposals
At 31 December 2021
Net book value at 31 December 2021
Net book value at 31 December 2022
Shares
at cost
£’000
Investments
£’000
Total
£’000
21,858
728
22,586
–
–
–
–
–
–
21,858
728
22,586
–
–
–
–
–
–
21,858
728
22,586
16,040
–
16,040
–
16,040
5,818
5,818
–
–
–
–
–
728
728
16,040
–
16,040
–
16,040
6,546
6,546
Investments include £728,000 (2021: £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 on the following
page. 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 127.
120
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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
Veeuze GmbH
Elecosoft LLC
Elecosoft BV
Elecosoft Pty Ltd
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
US
Netherlands
Australia
UK
UK
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
100% Software and services
Software
100%
Holding company
100%
Holding company
100%
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, Veeuze GmbH, Elecosoft (Pty) Ltd and Elecosoft Consultec
AB. Following a merger of the three UK trading companies’ operations on 1 January 2022, the carrying value of
the investments have been aligned accordingly.
6. Debtor due after more than one year
Amounts due from subsidiary undertakings
2022
£’000
2021
£’000
17,719
17,719
18,085
18,085
Amounts due from subsidiary undertakings comprise the holding company Elecosoft Limited and the loan is
interest bearing The interest rate applied to the interest-bearing loans was in the range of 1.6 per cent to 3.0 per
cent.
121
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Notes to the Company Financial Statements
continued
7. Debtors
Trade debtors
Other debtors
Prepayments and accrued income
Other taxation and social security
Current tax
Deferred taxation
Amounts due from subsidiary undertakings
2022
£’000
2021
£’000
14
37
110
14
56
–
2,239
2,470
14
27
172
12
–
10
3,349
3,584
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
Trade creditors
Other creditors
Accruals and deferred income
Current tax
Amounts due to subsidiary undertakings
2022
£’000
2021
£’000
216
69
557
–
290
82
786
146
17,478
17,010
18,320
18,314
Amounts due to subsidiary undertakings comprise of interest-bearing loans of £16,874,000 (2021: £16,568,000)
and intercompany current accounts of £604,000 (2021: £442,000) 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.
122
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The Company’s facilities with Barclays Bank plc are explained in note 16 to the Consolidated Financial
Statements.
Deferred tax liabilities
10. Provisions for liabilities
At 1 January
Charge to the profit and loss account
Utilised in the year
At 31 December
2022
£’000
2021
£’000
9
9
2022
£’000
51
(25)
–
26
–
–
2021
£’000
166
(98)
(17)
51
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
2022
Nominal
value
£’000
2021
Nominal
Value
£’000
No. of shares
No. of shares
85,000,000
850
85,000,000
850
83,154,650
–
83,154,650
832
–
832
82,464,650
690,000
83,154,650
825
7
832
123
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Notes to the Company Financial Statements
continued
12. Share-based payments
The Company operates one share scheme and options outstanding at 31 December 2022 over Ordinary Shares
granted under the scheme were as follows:
9 August 2017
18 May 2020
12 November 2020
23 February 2021
1 August 2022
Number
of Ordinary
Shares
500,000
650,000
250,000
600,000
650,000
2,650,000
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
31 July 2025
31 July 2032
Weighted average
remaining
contractual
life (years)
5.6
8.4
8.9
9.2
9.6
7.5
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
2022
2021
Weighted
average
exercise
price
Pence
Number
Number
2,000,000
76.9 2,240,000
650,000
70.0
700,000
–
–
–
–
(690,000)
(250,000)
2,650,000
75.2 2,000,000
–
–
–
Weighted
average
exercise
price
Pence
56.6
100.4
35.7
74.3
76.9
–
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 2022 was £176,000 (2021: £57,000).
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 2022 (2021: 907,849 shares) with a
market value of £622,000 (2021: £835,000) and has waived its entitlement to dividends on Ordinary Shares held
by it until such time as they are vested in employees.
124
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14. Operating lease commitments
Leases expiring:
Within one year
Between two and five years
Property
2022
£’000
Other
2022
£’000
Property
2021
£’000
Other
2021
£’000
58
–
58
–
–
–
–
–
–
–
–
–
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 42.
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 55 of the
Directors’ Report.
The following relate to matters in previous years for past Board Directors:
•
•
•
An amount of £nil (2021: £58,697) was paid to JHB Ketteley & Co Limited under a former lease for
occupation by the Group of its former Group headquarters at 66 Clifton Street, London, EC2A 4HB
and £nil (2021: £nil) for a contribution to the former office costs at Burnham-on-Crouch. There was £nil
outstanding at 31 December 2022 (at December 2021: £6,197). 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 2021. The final settlement
on dilapidations was £33,250 and settled in March 2022.
An amount of £nil (2021: £4,500) was paid to Political Lobbying & Media Relations Ltd (PLMR) in respect of
training costs. There were no amounts outstanding at 31 December 2022 or 31 December 2021. K Craig was
a former Director of the Company and is a Director of PLMR.
125
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Revenue
EBITDA
Adjusted EBITDA
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
26,566
27,344
25,232
25,398
22,220
5,200
5,200
7,182
7,251
6,675
7,003
Amortisation and impairment of intangible assets
(1,097)
(1,786)
(1,068)
Depreciation
Adjusted operating profit
Amortisation of acquired intangible assets
Exceptionals
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit after taxation
(621)
3,482
(499)
–
2,983
(39)
2,944
(722)
4,743
(575)
(69)
4,099
(173)
3,926
(549)
(1,195)
2,395
2,731
Basic earnings per share (continuing operations)
2.9p
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
Shareholders’ equity
Final dividend per share
25,842
23,846
21,524
17,924
15,479
0.50p
0.40p
0.40p
0.30p
0.68p
126
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Eleco plc | www.eleco.com Dormant Subsidiary Undertakings
The dormant subsidiary undertakings are unlisted and wholly owned and set out in the table below:
Company
Asta Group Limited
Bell and Webster Limited
Citehow Limited
Eleco (DCS) Limited
Elecosoft Limited
Elecoprecast Limited
Elecosoft Pvt Limited
Falconer Road Property Limited
RB Fabrications (Norwich) Limited
Webster Homes (Southern) Limited
Webster Properties Limited
Consultec Group AB
Elecosoft (Pty) Limited
Country of
operations
Class of share
capital held
Proportion held
within Group
UK
UK
UK
UK
UK
UK
India
UK
UK
UK
UK
Sweden
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
South Africa Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of business
Holding company
Dormant
Dormant
Dormant
Holding company
Holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Holding company
Dormant
127
Financial StatementsJob No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual Report and Accounts 2022Strategic ReportGovernanceFinancial StatementsOverview
Professional Advisors and Registered Offices
Nominated Advisor and Broker
finnCap Ltd
One Bartholomew Close
London EC1A 7BL
+44 (0) 20 7220 0500
www.finncap.com
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 Consultec AB
Storgatan 40
931 31 Skellefteå
Sweden
Asta Development GmbH
Egon-Eierman-Allee 8,
76187 Karlsruhe,
register court Mannheim HRB 706289
Veeuze GmbH
Warmbüchenstraße 17,
30159 Hannover,
register court Hannover HRB 222415
Elecosoft LLC
12600 Hill Country Blvd
Suite R-275
Austin
TX 78738
Elecosoft BV
Bennekomseweg 41
6717 LL Ede
Nederland
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
Dawson House, 5 Jewry Street,
London, England EC3N 2EX
+44 (0) 20 7422 8000
ir@eleco.com
www.eleco.com
Registered Number 00354915
Elecosoft UK Limited
Eleco Software Limited
Elecosoft Limited
Asta Group Limited
Parkway House
Haddenham Business Park
Pegasus Way
Bucks
HP17 8LJ
128
Job No: 48476Proof Event: 11Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecoProject Title: Annual Report 2022T: 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: 48476Proof Event: 9Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600 l
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Eleco plc
Dawson House
5 Jewry Street
London EC3N 2EX
+44 (0) 20 7422 8000
www.eleco.com
Job No: 48476Proof Event: 9Blackline Level: 0Park Communications Ltd Alpine Way London E6 6LACustomer: ElecsoftProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600