Eleco 2nd Interim Report 2011

Building ontechnology

Eleco plcSecond Interim Report 2011

Eleco plc66 Clifton StreetLondon EC2A 4HBTel: +44 (0)20 7422 0044E-mail: [email protected]: www.eleco.com

“Building on technology” defines Eleco which applies the latest technologies to drive improved Modern Methods of Construction, Improved Project Management and Execution and continuing improvement in Sustainable Construction methods.

Eleco people and companies aspire to deliver value to Eleco customers, employees, shareholders and their communities by providing them with economical and environmentally sound construction methodologies, first class service and technical support.

Mission and Vision

Building on Technology

Modern Methods of Construction

Improved Project Management and Execution

Sustainable Construction

Eleco applied the principles of modern methods of construction (MMC) prior to 1997, the year when Sir John Egan highlighted the benefits to be gained from the application of MMC to the build process. MMC is now increasingly regarded as a key aid to improving quality, reducing time spent on site, improving on-site safety and overcoming skills shortages.


Construction companies and their clients are increasingly turning to software, and latterly especially to Building Information Modelling (BIM), in pursuit of greater efficiency.

Eleco began investing in 3D visualisation and construction management software more than a decade ago and as a consequence now has a suite of construction software tools to manage each stage of the construction project life cycle

from project visualisation, through design, cost estimation, project management and site management. Creative software development teams are now established in the UK, Germany and Sweden.

Thus Eleco is now very well placed to participate in the growth of the application of these technologies in the construction industry in international markets.


“Meeting the needs of the present without compromising the ability of future generations to meet their own needs”.

Eleco recognises that sustainability is about the environmental performance of the building and building product throughout its lifespan. Eleco is focused on achieving materials efficiency, faster construction times and efficient resource management.







Mission and Vision















Group HighlightsGroup Operations

Group Financial Performance – Continuing Operations

Turnover: £47.9m (2010: £53.0m restated).•Group operating loss before exceptional items: £0.4m •(2010: loss £3.4m restated).Loss before tax: £1.2m (2010: loss £3.8m restated).•Loss per share: 2.2p (2010: loss 5.6p restated).•Net bank debt at 30 June 2011: £8.6m (2010: £1.9m).•

Group Operational Performance

Software delivered strong growth in the twelve months •ended 30 June 2011, with turnover and profit both at record levels; turnover and profits of our Software activities now account for 32% of Group turnover. Lubekonsult AB acquired earlier in year performing ahead of targets.Improved operational performance of remaining •Building Systems activities, before exceptional items, due to better margin performance and reduced fixed costs.Steps are being taken to improve trading in Precast •Concrete which has been adversely impacted by margin pressure and poor operational performance.Significant progress made with our strategy of closing •or disposing of loss making Building Products and Precast Concrete operations, including the exit from timber frame and custodial precast concrete loss making activities.

Strategy and Outlook

Strategic direction to concentrate on expansion of •Software activities reducing historic emphasis on Building Products and Precast Concrete.Current trading in line with management’s expectations.•

Change of Accounting Reference Date

The preliminary results for the 18 months ended •31 December 2011 will be released no later than 31 March 2012.

Eleco is focused on key components of a modern construction project. Software tools used to manage the building information and the construction project; Building Systems used in the fabric of the building; and Sustainable Construction principles and disciplines to enhance the building’s environmental performance.

Eleco Building Systems Eleco Software

Our Building Systems interests, focus their effort on applying modern methods of construction (MMC) to deliver materials efficiency and construction speed while maintaining high levels of quality in precast concrete, timber and metal.

Our Software interests, create software applications to assist construction businesses to manage each stage of their project life cycle, satisfying their drive for greater efficiency through improved building information and management of projects.

© Sellar

Eleco plc

Partition Walls

Precast Concrete

Timber Engineering

Building Products

Metal Roofing & Cladding

Project Management

Design & Engineering

Estimation CAD and 3D Visualisation

Visualisation

Milbury Systems Ltd

International Truss Systems

(Pty) Ltd

Downer Cladding

Systems Ltd

Prompt Profiles Ltd

ASTA Development

GmbHConsultec A&K AB

Eleco Software GmbH

Stramit Panel Products

Bell & Webster

Concrete LtdGang-Nail

Systems LtdSpeedDeck

Building Systems Ltd

ASTA Development

LtdConsultec System AB

Consultec Byggprogram

ABEleco

Software LtdEsign GmbH

Building Systems Software














© Sellar

Eleco plc

Partition Walls

Precast Concrete

Timber Engineering

Building Products


Project Management



Visualisation

Milbury Systems Ltd


(Pty) Ltd

Downer Cladding

Systems Ltd

Prompt Profiles Ltd

ASTA Development


Eleco Software GmbH


Bell & Webster




ASTA Development



ABEleco



01Eleco plc Second Interim Report 2011

Divisional Highlights

Software

Turnover increased 16% to £15.8m (2010: £13.7m).•Adjusted operating profit before amortisation and •restructuring costs increased to £1.6m (2010: £0.6m).Lubekonsult AB, the ventilation software and •estimating business, acquired earlier this year in Sweden is performing ahead of plan.All our software interests are now profitable and •growing both top line and operating profit.

Building Products

Turnover increased 17% to £17.5m (2010: £14.9m).•Adjusted operating profit before amortisation and •restructuring costs of £0.7m (2010: loss £0.7m).Our Building Products interests continue to experience •challenging market conditions, but improved margins and reduced cost base has contributed to an overall improvement in operational performance.

Precast Concrete

Turnover amounted to £14.9m (2010: £24.7m).•Adjusted operating loss of £2.2m before amortisation •and restructuring costs (2010: loss £2.8m).Trading was adversely impacted due to downward •pressure on margins and poor operational performance on room contracts during the year combined with adverse weather experienced during December and January.

3D visualisation of Downer Cladding’s Secret Fix Façade System

02 Eleco plc Second Interim Report 2011

Contents

03 Chairman’s Statement06 Condensed Consolidated Income Statement07 Condensed Consolidated Statement

of Comprehensive Income08 Condensed Consolidated Statement

of Changes in Equity10 Condensed Consolidated Balance Sheet11 Condensed Consolidated Statement of Cash Flows12 Notes to the Condensed Consolidated

Interim Financial Statements18 Board of Directors and Company Advisors19 Group Directory


John KetteleyExecutive Chairman

Chairman’s Statement

In the second six months of this extended accounting period, we have sought to reduce costs, increase our sales, enhance our margins, improve our finances and begin to implement our corporate strategy of de-risking the Eleco Group by concentrating on the expansion of our construction software interests and reducing the emphasis that we had previously placed on our Precast Concrete and Building Products interests.

Group PerformanceContinuing OperationsGroup turnover for the twelve months ended 30 June 2011 was £47.9m (2010: £53.0m restated), down 10% compared to the same period last year. However, it should be noted that turnover for the six month period to 30 June 2011 was £24.5m, up 12% compared with the same six month period last year.

Group turnover in the twelve months to 30 June 2011 was adversely impacted, primarily by lower turnover of our Precast Concrete interests, down £9.8m compared with the same period last year, due to a reduced level of student accommodation and hotel contracts. On the other hand, turnover in Building Products was up 17% and turnover of our Software interests was up 16% compared with the same period last year.

The improvement in gross profit margin was partly due to the change in revenue mix between Building Systems and Software but also a modest increase in margins at both Precast Concrete and Building Products divisions. Software increased its share of Group turnover to 32% from 25% before discontinued operations.

Adjusted Group operating profit before amortisation of intangible assets and restructuring costs amounted to £126,000 compared with an adjusted Group operating loss of £2.9m for the same period last year.

Loss before tax from continuing operations of £1.2m is reached after amortisation charges of £0.5m (2010: £0.5m) and restructuring costs of £0.4m (2010: £1.1m) and net financing expenditure of £0.4m (2010: £0.5m).

Net bank debt at 30 June 2011 increased to £8.6m (2010: £1.9m). Of this £6.7m increase, £4.4m relates to the financing of losses at our timber frame operations and Precast Concrete custodial activities. The remaining increase is due to higher working capital at Precast Concrete and Building Products divisions. The Group continues to focus on managing its debt and working capital to maximise cash inflows and minimise its exposure to bad debts.

Discontinued OperationsThe Precast Concrete factory at Hoveringham, Nottinghamshire used to manufacture and supply the loss making precast concrete custodial contracts was closed in May and the site is being marketed for sale. As recently announced, the Group has divested itself of its loss making timber frame manufacturing business based in Speke, Liverpool. Both these operations have been classified as discontinued operations in the twelve month period to 30 June 2011.

DividendAs the Group has not yet returned to profit the Board has decided not to pay an interim dividend.

Divisional PerformanceSoftwareSoftware delivered strong growth in the twelve months ended 30 June 2011, with turnover and profit both at record levels.

Turnover increased 16% to £15.8m compared to £13.7m in the same period last year.

Adjusted operating profit was £1.6m before amortisation of intangible assets and restructuring costs for the twelve months compared to £0.6m last year.

Consultec Sweden acquired the business of Lubekonsult AB (“Lube”) on 1 September 2010. Lube, provides cost estimation services and software to the Swedish ventilation market and is already exceeding our expectations in terms of turnover and profit.

The significant profit growth in these businesses in the past three years, including loss reduction and elimination, has taken place despite the unprecedented economic difficulties. This continued growth was largely driven by increased turnover of software and services in the UK, Sweden and Germany, together with the acquisition of Lubekonsult in Sweden, which has proved successful in delivering the anticipated benefits. Software continues to explore opportunities in other overseas markets with a view to expand its profitable reseller and distributor network.

Building SystemsOur continuing Precast Concrete and Building Products operations each showed significant improvement in their trading profit in the twelve months to 30 June 2011 compared with the same period last year. Adjusted operating profit before amortisation of intangible assets and restructuring costs was up £2.1m of which £1.5m was at Building Products and £0.6m at Precast Concrete.

Building ProductsTurnover was £17.5m in the twelve months, up 17% compared to the same period last year. Turnover in the six months to 30 June 2011 was £8.9m, up 18% against the same period last year.

Adjusted operating profit before amortisation and restructuring costs was £0.7m for the twelve months to 30 June 2011 compared to an adjusted operating loss of £0.7m for the same period last year.


Chairman’s Statement (continued)

The improvement is due to better trading performance at the roofing, cladding and nail plate businesses in the UK and South Africa. In addition, the elimination of trading losses at the German nail plate business which was sold on 30 June 2010 has benefited the current year performance.

Building Products has successfully reduced its cost base and has started to reinvest again in its sales resources with a renewed effort to profitably grow its market share.

Precast ConcreteTurnover in the twelve months ended 30 June 2011 was £14.9m compared with £24.7m achieved in the same period last year. In contrast, the turnover in the six months to 30 June 2011 of £7.3m was the same as the six month period to 30 June 2010.

Adjusted operating loss before intangible asset amortisation and restructuring costs for the twelve months was £2.2m compared with a loss of £2.8m in the same period last year.

The adverse profit performance of Precast Concrete was largely due to low contract margins and poor operational performance in connection with certain hotel and student accommodation contracts that were manufactured during the period. We were also unable to recover variation costs incurred during manufacturing and installation from some clients. These operational issues have been addressed internally and the design, manufacturing and erection process of all contracts now have to comply with a much more rigorous evaluation and control process.

Financial ReviewDespite the Group’s significant progress in reducing its fixed costs and restructuring certain businesses the overall financial performance was behind the Board’s expectations for the twelve months ended 30 June 2011. This result partially reflects the time lag between the implementation of the restructuring plan and the realisation of its benefits.

The Group’s cash position was particularly impacted by the adverse performance of the custodial contracts at Precast Concrete and the timber frame operation at Building Products. In addition, increased retentions and the failure of some major customers of our Building Systems businesses also put a further strain on the Group’s financial resources, although some of these amounts will be recoverable under the Group’s credit insurance policy. Increased restructuring spend, mainly redundancy costs and closure expenses related to the rationalisation of the Group’s properties, together with reduced profitability, accounted for cash used in operations during the period.

The Group continues to closely monitor its cash flow and working capital and efforts are being made to recover overdue debt and retentions as speedily as possible.

Pension StrategyAs stated in the annual report, the Group has been working with the Trustees to reduce investment risk and manage the deficit of the pension plan, which was closed to future accrual in December 2009.

Revisions to the investment strategy have now been agreed, and detailed aspects of the transition are being implemented with a view to full implementation in the coming weeks.

In parallel, certain liability reduction measures have now been agreed and others are under discussion with the Trustees. These are expected to lead in certain cases to increased choices for the members and reduced liabilities and exposure for the fund.

Implementation of some of these measures is dependent upon final agreement between the Trustees and the Group and the overall financial impact of the measures cannot therefore be disclosed at this time.

The Group intends to disclose further details of the above once confirmed. In the meantime the deficit shown in the accounts at 30 June 2011 has reduced by £1.9m from £9.8m to £7.9m.

Change of Accounting Reference DateAs announced on 1 March 2011, the Board decided, for operational reasons, to change the accounting reference date of Eleco plc to 31 December. Accordingly, the next audited report and accounts will be for the 18 month period ending 31 December 2011. The preliminary announcement of results for the 18 month period ending 31 December 2011 will be made no later than 31 March 2012 and the audited accounts will be published shortly thereafter.

We believe this change will give operational advantages in dealing with year end procedures at our overseas businesses, particularly Sweden and Germany.

OutlookThree quarters of our Software profits were made outside the UK and we believe that Eleco now has the management and technology to take advantage of opportunities from further profitable expansion in its software interests in the UK, Germany and Sweden as they arise. We are encouraged by the progress made by Eleco’s manufacturing operations in the six months ended 30 June 2011, despite the tough economic climate. However, these interests are almost all located in the UK and in common with the UK manufacturing and construction industry generally they will continue to be affected by the severe economic downturn in these sectors.


Avonmouth TShed by Milbury Systems

Corporate StrategyThe Board of Eleco is determined to reduce the operational and financial risk profile of the Group. Our strategy for achieving this objective will be to continue our efforts to expand our successful and profitable international software interests in the UK, Germany, Sweden and other markets. Our existing software interests have produced record turnover and profit in the period under review. We shall also work towards reducing the Group’s risk profile by returning our existing Building Products and Precast Concrete interests to a satisfactory level of profit or eliminating or disposing of loss making businesses.

I am confident that this strategy will enable Eleco to achieve its objective of reducing the Group’s risk profile to an appropriate degree in the current economic climate, of placing our Building Systems and Precast Concrete businesses back onto a sound financial and operational footing, enabling Eleco to concentrate on the expansion of its successful international software interests.

John KetteleyExecutive Chairman19 September 2011


Notes

6 months to 30 June12 months to

30 June 2011

(unaudited) £’000

Year to 30 June

2010 (restated)

£’000

2011 (unaudited)

£’000

2010 (restated)

£’000

Revenue 3 24,527 21,913 47,853 52,981Cost of sales (12,401) (12,076) (23,710) (31,036)

Gross profit 12,126 9,837 24,143 21,945Distribution costs (1,542) (1,639) (3,737) (4,022)Administrative expenses (11,017) (10,978) (20,769) (21,359)

Operating loss before exceptionals (433) (2,780) (363) (3,436)

Exceptional items 5 (195) (2,303) (388) (3,216)Gain on disposal of business – 3,378 – 3,378

Loss from operations 3 (628) (1,705) (751) (3,274)

Finance income 6 57 126 103 155Finance cost 6 (160) (312) (514) (660)

Loss before tax (731) (1,891) (1,162) (3,779)Tax (208) 301 (182) 419

Loss for the financial period from continuing operations (939) (1,590) (1,344) (3,360)

Loss for the financial period from discontinued operations 4 (2,697) (1,762) (3,972) (2,096)

Loss for the financial period (3,636) (3,352) (5,316) (5,456)

Attributable to:Equity holders of the parent (3,636) (3,352) (5,316) (5,456)

Loss per share – basic and dilutedContinuing operations 7 (1.6)p (2.7)p (2.2)p (5.6)pDiscontinued operations 7 (4.5)p (2.9)p (6.7)p (3.5)p

Total operations 7 (6.1)p (5.6)p (8.9)p (9.1)p

Condensed ConsolidatedIncome StatementFor the period ended 30 June 2011



30 June 2011


Year to 30 June

2010 £’000

2011 (unaudited)

£’000

2010 (unaudited)

£’000

Loss for the period (3,636) (3,352) (5,316) (5,456)

Other comprehensive incomeActuarial (loss)/gain on retirement benefit obligation (119) (2,561) 1,307 (625)Deferred tax on retirement benefit obligation (126) 605 (525) 63Translation differences on foreign currency net investments (98) (4) 12 (44)

Other comprehensive income net of tax (343) (1,960) 794 (606)

Total comprehensive income for the period (3,979) (5,312) (4,522) (6,062)

Attributable to:Equity holders of the parent (3,979) (5,312) (4,522) (6,062)

Condensed Consolidated Statement of Comprehensive IncomeFor the period ended 30 June 2011


Share capital

£’000

Share premium

£’000

Merger reserve

£’000

Translation reserve

£’000

Other reserve

£’000

Retained earnings

£’000Total

£’000

At 1 January 2011 6,066 6,396 7,371 217 (358) (4,889) 14,803

Transactions with owners – – – – – – –

Loss for the period – – – – – (3,636) (3,636)Other comprehensive income:Actuarial gain on defined benefit pension scheme net

of tax – – – – – (245) (245)Exchange differences on translation of net investments

in foreign operations – – – (98) – – (98)

Total comprehensive income for the period – – – (98) – (3,881) (3,979)

At 30 June 2011 (unaudited) 6,066 6,396 7,371 119 (358) (8,770) 10,824

Share capital £’000

Share premium

£’000

Merger reserve

£’000

Translation reserve

£’000

Other reserve

£’000

Retained earnings

£’000Total

£’000

At 1 January 2010 6,066 6,396 7,371 111 (383) 1,097 20,658

Share-based payments – – – – – (25) (25)Other – – – – 25 – 25

Transactions with owners – – – – 25 (25) –

Loss for the period – – – – – (3,352) (3,352)Other comprehensive income:Actuarial gain on defined benefit pension scheme net

of tax – – – – – (1,956) (1,956)Exchange differences on translation of net investments



At 30 June 2010 6,066 6,396 7,371 107 (358) (4,236) 15,346

Condensed Consolidated Statement of Changes in EquityFor the period ended 30 June 2011



Share premium

£’000

Merger reserve

£’000

Translation reserve

£’000

Other reserve

£’000

Retained earnings

£’000Total

£’000

At 1 July 2010 6,066 6,396 7,371 107 (358) (4,236) 15,346

Transactions with owners – – – – – – –

Loss for the period – – – – – (5,316) (5,316)Other comprehensive income:Actuarial loss on defined benefit pension scheme net

of tax – – – – – 782 782Exchange differences on translation of net investments

in foreign operations – – – 12 – – 12

Total comprehensive income for the period – – – 12 – (4,534) (4,522)

At 30 June 2011 (unaudited) 6,066 6,396 7,371 119 (358) (8,770) 10,824


Share premium

£’000

Merger reserve

£’000

Translation reserve

£’000

Other reserve

£’000

Retained earnings

£’000Total

£’000

At 1 July 2009 6,066 6,396 7,371 151 (383) 1,965 21,566

Dividends – – – – – (239) (239)Share-based payments – – – – – 56 56Other – – – – 25 – 25

Transactions with owners – – – – 25 (183) (158)

Loss for the period – – – – – (5,456) (5,456)Other comprehensive income:Actuarial loss on defined benefit pension scheme net

of tax – – – – – (562) (562)Exchange differences on translation of net investments



At 30 June 2010 6,066 6,396 7,371 107 (358) (4,236) 15,346


30 June

Notes

2011 (unaudited)

£’0002010

£’000

Non-current assetsGoodwill 13,425 12,950Other intangible assets 2,592 2,927Property, plant and equipment 8,863 11,342Deferred tax assets 2,065 2,750

Total non-current assets 26,945 29,969

Current assetsInventories 3,526 3,977Trade and other receivables 11,335 11,639Current tax assets – 325Cash and cash equivalents 5,456 6,009Assets of disposal group held for sale 4 894 –

Total current assets 21,211 21,950

Total assets 48,156 51,919

Current liabilitiesBorrowings 8 (900) (225)Obligations under finance leases (147) (293)Trade and other payables (8,203) (10,177)Provisions (8) (1,120)Current tax liabilities (102) (96)Accruals and deferred income (6,435) (6,763)

Total current liabilities (15,795) (18,674)

Non-current liabilitiesBorrowings 8 (13,175) (7,675)Obligations under finance leases (270) (100)Deferred tax liabilities (27) (303)Other non-current liabilities (123) –Retirement benefit obligation (7,942) (9,821)

Total non-current liabilities (21,537) (17,899)

Total liabilities (37,332) (36,573)

Net assets 10,824 15,346

EquityShare capital 6,066 6,066Share premium account 6,396 6,396Merger reserve 7,371 7,371Translation reserve 119 107Other reserve (358) (358)Retained earnings (8,770) (4,236)

Equity attributable to shareholders of the parent 10,824 15,346

Condensed Consolidated Balance Sheet


Notes


30 June 2011


Year to 30 June

2010 £’000

2011 (unaudited)

£’000

2010 (unaudited)

£’000

Cash flows from operating activitiesLoss before interest and tax (3,426) (3,454) (4,840) (5,355)Depreciation and impairment charge 1,189 1,307 2,211 2,254Amortisation and impairment charge 361 1,015 593 1,284(Profit)/loss on sale of property, plant and equipment (5) 34 (283) 16Profit on sale of business – (3,378) – (3,378)Share-based payment charge – 1 – 82Retirement benefit obligation (463) (633) (803) (964)(Decrease)/increase in provisions (447) 892 (1,112) 892

Cash generated from operations before working capital movements (2,791) (4,216) (4,234) (5,169)Decrease in trade and other receivables 2,955 3,138 681 1,332Decrease/(increase) in inventories and work in progress 221 (298) 314 (248)Decrease in trade and other payables (2,828) (1,273) (2,955) (1,289)

Cash used in operations (2,443) (2,649) (6,194) (5,374)Interest paid (94) (53) (161) (112)Interest received 119 146 166 185Income tax paid (173) (216) (28) (362)

Net cash outflow from operating activities (2,591) (2,772) (6,217) (5,663)

Net cash used in investing activitiesPurchase of intangible assets (61) (127) (235) (178)Purchase of property, plant and equipment (251) (541) (738) (1,049)Acquisition of subsidiary undertakings net of cash acquired 9 – – (172) –Proceeds from sale of property, plant, equipment and intangible assets 98 54 824 133Sale of business net of expenses – 3,679 – 3,679

Net cash (outflow)/inflow from investing activities (214) 3,065 (321) 2,585

Net cash used in financing activitiesProceeds from new bank loan 4,900 6,200 6,400 7,200Repayment of bank loans (225) (2,800) (225) (3,800)Repayments of obligations under finance leases (160) (197) (357) (388)Equity dividends paid – – – (239)

Net cash inflow from financing activities 4,515 3,203 5,818 2,773

Net increase/(decrease) in cash and cash equivalents 1,710 3,496 (720) (305)

Cash and cash equivalents at beginning of period 3,746 2,398 6,009 6,091Effects of changes in foreign exchange rates – 115 167 223

Cash and cash equivalents at end of period 5,456 6,009 5,456 6,009

Condensed Consolidated Statement of Cash FlowsFor the period ended 30 June 2011


1. General informationThe Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 66 Clifton Street, London, EC2A 4HB.

The Company is listed on the Alternative Investment Market (AIM).

The condensed consolidated interim financial information does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group’s consolidated financial statements for the year ended 30 June 2010 have been filed and the audit report was not qualified and did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.

2. Basis of preparationThe second interim statement is provided due to the change in the year end of Eleco plc from 30 June to 31 December.

The condensed consolidated second interim financial statements for the twelve months to 30 June 2011 have been prepared in accordance with the accounting policies which will be applied in the 18 months financial statements to 31 December 2011. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted for use in the European Union that are effective at 30 June 2011.

The condensed consolidated second interim financial statements are unaudited and have not been subject to review. They do not include all the information and disclosures required in the annual financial statements, and therefore should be read in conjunction with the Group’s annual financial statements as at 30 June 2010.

The implementation of the Group’s strategy identified in the interim report for the six months to December 2010 is on track to deliver the planned results. Of the current bank loans in place at 30 June 2011, repayments on the term loan commenced in April 2011 and are scheduled to continue quarterly until January 2016. The revolving credit facility is due for repayment on 10 July 2012 and the Directors are currently in negotiations with the Group’s bankers to discuss the detail of the facility required beyond that date. Following the progress on the elimination of loss making operations and a forecast reduction in bank borrowings over the next twelve months the Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the condensed consolidated second interim financial information.

New accounting standards and interpretations are effective for the first time in the current period but have had no impact on the results or financial position of the Group. 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.

In accordance with IFRS 5, prior year income statement comparatives have been restated so as to report the timber frame operation based in Liverpool and the Precast Concrete custodial operation based at Hoveringham, Nottinghamshire as a discontinued operation.

Assets held for sale and discontinued operationsAssets and businesses are classified as held for sale, and stated at the lower of carrying amount and fair value less costs to sell, if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. A discontinued operation is a component of the Group’s business that represents a separate major line of business that has been disposed of, has been abandoned or meets the criteria to be classified as held for sale.

EstimatesApplication of the Group’s accounting policies in preparing condensed consolidated interim financial statements requires management to make judgements and estimates that affect the reported amount of assets and liabilities, revenues and expenses. Actual results may ultimately differ from these estimates.

In preparing these condensed consolidated second interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 June 2010.

Risks and uncertaintiesA summary of the Group’s principal risks and uncertainties was provided on page 11 of the 2010 annual report and accounts. The Board considers these risks and uncertainties are still relevant to the current financial year and the impact of changes in the UK economy is reviewed in the Chairman’s statement contained in this report.

Notes to the Condensed Consolidated Interim Financial Statements


3. Segmental informationOperating segmentsFor management purposes, the Group is organised into three operating divisions, Software, Building Products and Precast Concrete.

Discontinued operations comprise timber frame operations at Liverpool that were actively being marketed for sale at 30 June. In addition, the Group previously recorded its intention to exit the Precast Concrete custodial market and closed its Hoveringham factory in May, principally used to supply this market, are included under discontinued operations.

Building Systems

6 months to 30 June 2011 (unaudited)Software

£’000

Building Products

£’000

Precast Concrete

£’000Elimination

£’000

Continuing operations

£’000

Discontinued operations

£’000Group £’000

Revenue 8,330 8,944 7,253 – 24,527 2,178 26,705Inter-segment revenue 172 – – (172) – – –

Total segment revenue 8,502 8,944 7,253 (172) 24,527 2,178 26,705

Adjusted operating profit/(loss) 839 377 (1,388) (172) (2,158) (2,330)Amortisation of intangible assets (210) – (51) (261) (3) (264)Impairment charges (11) – – (11) (375) (386)Restructuring costs (15) (42) (127) (184) (262) (446)

Segment result 603 335 (1,566) (628) (2,798) (3,426)Net finance cost (103) 37 (66)

Loss before tax (731) (2,761) (3,492)Tax (208) 64 (144)

Loss after tax (939) (2,697) (3,636)

Building Systems

6 months to 30 June 2010 (restated)Software

£’000

Building Products

£’000

Precast Concrete

£’000Elimination

£’000


£’000


£’000Group £’000

Revenue 7,065 7,584 7,264 – 21,913 3,597 25,510Inter-segment revenue 131 – – (131) – – 131


Adjusted operating profit/(loss) 385 (273) (2,607) (2,495) (1,707) (4,202)Amortisation of intangible assets (189) (3) (93) (285) (6) (291)Gain on disposal of business – 3,378 – 3,378 – 3,378Impairment charges – – (1,151) (1,151) – (1,151)Restructuring costs (101) (148) (539) (788) (36) (824)Intellectual property dispute – (364) – (364) – (364)

Segment result 95 2,590 (4,390) (1,705) (1,749) (3,454)Net finance cost (186) (13) (199)

Loss before tax (1,891) (1,762) (3,653)Tax 301 – 301

Loss after tax (1,590) (1,762) (3,352)


3. Segmental information continuedBuilding Systems

12 months to 30 June 2011 (unaudited)Software

£’000

Building Products

£’000

Precast Concrete

£’000Elimination

£’000


£’000


£’000Group £’000

Revenue 15,525 17,473 14,855 – 47,853 10,641 58,494Inter-segment revenue 264 – – (264) – – –


Adjusted operating profit/(loss) 1,593 719 (2,186) 126 (3,237) (3,111)Amortisation of intangible assets (387) – (102) (489) (7) (496)Impairment charges (11) – – (11) (375) (386)Restructuring costs (30) (195) (152) (377) (470) (847)

Segment result 1,165 524 (2,440) (751) (4,089) (4,840)Net finance cost (411) 18 (393)

Loss before tax (1,162) (4,071) (5,233)Tax (182) 99 (83)

Loss after tax (1,344) (3,972) (5,316)

Building Systems

12 months to 30 June 2010 (restated)Software

£’000

Building Products

£’000

Precast Concrete

£’000Elimination

£’000


£’000


£’000Group £’000

Revenue 13,412 14,905 24,664 – 52,981 5,028 58,009Inter-segment revenue 249 – – (249) – – 249


Adjusted operating profit/(loss) 648 (742) (2,795) (2,889) (2,034) (4,923)Amortisation of intangible assets (357) (5) (185) (547) (11) (558)Gain on disposal of business – 3,378 – 3,378 – 3,378Impairment charges – – (1,151) (1,151) – (1,151)Restructuring costs (101) (441) (605) (1,147) (36) (1,183)Intellectual property dispute – (918) – (918) – (918)

Segment result 190 1,272 (4,736) (3,274) (2,081) (5,355)Net finance cost (505) (15) (520)

Loss before tax (3,779) (2,096) (5,875)Tax 419 – 419

Loss after tax (3,360) (2,096) (5,456)

Geographical segmentsSegment revenue by geographical segment represents revenue from external customers based on the geographical location of the customer.


30 June 2011

£’000

Year to 30 June

2010 £’000

2011 £’000

2010 £’000

UK 15,905 14,859 32,073 39,593Scandinavia 4,354 3,361 7,959 6,283Rest of Europe 2,497 2,355 4,351 4,446Rest of World 1,771 1,338 3,470 2,659

24,527 21,913 47,853 52,981

Notes to the Condensed Consolidated Interim Financial Statements (continued)


4. Discontinued operationsOn 1 March 2011, Eleco plc announced it wanted to reduce its commitment to certain operations within its Building Product division and Precast Concrete division. Following a detailed review of operations the Group has put the timber frame operation based in Liverpool up for sale and ceased production of custodial contracts at the Hoveringham factory and is marketing the site.

The assets and liabilities related to both these business operations have been presented as held for sale and the disposal group has been classified as a discontinued operation in the consolidated income statement. In the cash flow statement, the cash flows of both timber frame and custodial operations mentioned above have been aggregated with those of continuing operations, but are shown separately in the note below.

The information presented in this note is presented at the lower of cost and fair value less costs to sell as prescribed in IFRS 5. As a result of this treatment an impairment charge of £375,000 relating to leasehold improvements and plant and equipment at both sites has been recognised in the condensed consolidated income statement in the six months to 30 June 2011.

The results from discontinued operations which have been included in the condensed consolidated income statement are set out below:


30 June 2011

£’000

Year to 30 June

2010 £’000

2011 £’000

2010 £’000

Revenue 2,178 3,597 10,641 5,028Cost of sales (3,299) (4,164) (11,775) (5,520)

Gross profit (1,121) (567) (1,134) (492)Distribution costs (28) (73) (73) (106)Administrative expenses (912) (1,068) (1,938) (1,431)Other operating costs (362) (41) (568) (52)Loss on re-measurement (375) – (375) –

Operating loss (2,798) (1,749) (4,088) (2,081)

Finance income 75 – 75 –Finance cost (38) (13) (57) (15)

Loss before tax (2,761) (1,762) (4,070) (2,096)Taxation on discontinued operations 64 – 98 –

Loss for the period from discontinued operations (2,697) (1,762) (3,972) (2,096)

30 June 2011

£’000

Assets classified as held for saleOther intangible assets 4Property, plant and equipment 711Other assets 179

Assets classified as held for sale 894

Liabilities classified as held for saleLiabilities classified as held for sale –

Net assets of disposal group 894


4. Discontinued operations continuedCash flows from investing activities relates to capital expenditure. Cash flows from financing activities comprise finance lease principal payments.


30 June 2011

£’000

Year to 30 June

2010 £’000

2011 £’000

2010 £’000

Operating activities (2,198) (1,578) (4,245) (2,096)Investing activities (42) (175) (68) (199)Financing activities (24) (28) (37) (28)

Total cash flows (2,264) (1,781) (4,350) (2,323)

5. Exceptional itemsExceptional items represent costs considered necessary to be separately disclosed by virtue of their size or nature.


30 June 2011

£’000

Year to 30 June

2010 £’000

2011 £’000

2010 £’000

Impairment of intangible assets 11 726 11 726Impairment of tangible assets – 425 – 425Restructuring costs 184 788 377 1,147Intellectual property dispute – 364 – 918

195 2,303 388 3,216

Restructuring costs comprise cash and non-cash costs associated with the Group restructuring programme, mainly in the UK, and primarily relate to redundancy and business relocation costs.

6. Net finance (cost)/income


30 June 2011

£’000

Year to 30 June

2010 £’000

2011 £’000

2010 £’000

Finance incomeBank and other interest receivable 57 26 103 55Loan note interest receivable – 100 – 100

Finance costsBank overdraft and loan interest (67) (31) (104) (66)Finance leases and hire purchase contracts (8) (13) (19) (33)Net return on pension scheme assets and liabilities (85) (268) (391) (561)

Total net finance cost (103) (186) (411) (505)

7. Loss per shareThe calculations of the loss per share are based on the total loss after tax attributable to ordinary equity shareholders of the Company and the weighted average number of shares in issue for the reporting period.


30 June 2011

Year to 30 June

20102011 2010

Loss after taxation £(3,636,000) £(3,352,000) £(5,316,000) £(5,456,000)

Weighted average number of shares in issue in the period 59,761,646 59,725,713 59,761,646 59,713,514Dilutive effect of share options – – – –

Number of shares for diluted earnings per share 59,761,646 59,725,713 59,761,646 59,713,514

Loss per share – basic and dilutedContinuing operations (1.6)p (2.7)p (2.2)p (5.6)pDiscontinued operations (4.5)p (2.9)p (6.7)p (3.5)p

Total operations (6.1)p (5.6)p (8.9)p (9.1)p

There is no dilution in the loss per share calculation at 30 June 2011 due to the loss for the period. The diluted loss per share is the same as the basic loss per share for the current period.

Notes to the Condensed Consolidated Interim Financial Statements (continued)


8. BorrowingsThe bank loans are repayable as follows:

At 30 June 2011

£’000

At 30 June 2010

£’000

In one year or less 900 225Between one and two years 10,700 4,300Between two and five years 2,475 2,700More than five years – 675

14,075 7,900

9. AcquisitionsOn 1 September 2010 the Group acquired the business and certain assets of Lube, which provides cost estimation services and software to the Swedish ventilation market, for a total consideration of £393,000. The consideration comprised the payment of £172,000 in cash satisfied from the Group’s existing resources and deferred consideration of £221,000.

An analysis of the provisional fair value of the Lube net assets acquired and the fair value of the consideration paid is set out below:

Book value £’000

Fair value adjustments

£’000

Provisional fair value

£’000

Tangible assets 20 – 20Inventories 11 – 11Other debtors 3 – 3

34 – 34Deferred income (7) – (7)Other creditors (14) – (14)

(21) – (21)

Net assets 13 – 13

Goodwill 380

Total consideration 393

Satisfied by:Cash 172Deferred purchase consideration 221

393

Goodwill recognised above contains certain intangible assets that cannot be individually, separately and reliably measured from the acquiree due to their nature. These items include the value of the management and workforce together with synergies that are expected to be gained from being part of the Group.

10. Related Party DisclosuresAll intra-group transactions have been eliminated on consolidation at 30 June 2011.

An amount of £13,000 (H1 2010: £13,000) was paid to J H B Ketteley & Co Limited under a lease for occupation by the Group of 66 Clifton Street, London, EC2A 4HB.


John Ketteley FCAExecutive ChairmanAppointed Executive Chairman in 1997, John Ketteley has an investment banking background. He was formerly Non-Executive Chairman of BTP plc, Country Casuals plc and Prolific Income plc.

Matthew Turner FCA BEng (Hons)Group Finance DirectorAppointed a Director in January 2011. Matthew Turner, formerly a partner in Grant Thornton UK LLP, is currently a partner in Shore Mountain LLP and a Director of Tingdene Homes Limited.

Michael McCullen BSc MBADivisional Chief Executive – SoftwareMichael McCullen was founder member of Asta Development and Managing Director from 2000 to 2009 leading the company up to its acquisition by Eleco plc in 2006. He joined the board in 2007.

Jonathan Cohen TD MA FCA*Chairman of the Remuneration CommitteeAppointed a Non-Executive Director in November 2002. Jonathan Cohen was previously Chief Executive of County NatWest Limited and Vice Chairman of Charterhouse Bank Limited. He is currently Chairman of Savile Group plc and a Director of Clearwater Hampers Limited.

Jonathan Edwards LLB ACA*Chairman of the Audit CommitteeA Chartered Accountant and Barrister, Jonathan Edwards is a Director of Guildhall Asset Management (Guernsey) Limited, Guildhall Research and Management Limited and Harpenden Sports Group Limited.

* Member of the Audit, Remuneration and Nominations Committees.

Board of Directors and Company Advisors

SecretaryIvor A Barton ACIS

Registered office66 Clifton Street London EC2A 4HBTel: +44 (0) 20 7422 0044E-mail: [email protected]: http://www.eleco.com

Registered number354915

AuditorsGrant Thornton UK LLP

BankersLloyds TSB Bank Plc

Nominated Adviser & BrokerCenkos Securities plc

SolicitorsBerwin Leighton Paisner LLPReynolds Porter Chamberlain LLP

Registrars and transfer officeCapita RegistrarsThe Registry 34 Beckenham Road Beckenham Kent BR3 4TUTel: +44 (0) 871 664 0300 E-mail: [email protected]


SoftwareAsta Development plcThame, OxfordshireTel: +44 (0) 1844 261700 E-mail: [email protected]: www.asta.eleco.com Developer and supplier of project and resource management software.

Asta Development GmbHKarlsruhe, GermanyTel: +49 (0) 721 95 250 Email: [email protected]: www.astagmbh.eleco.comSupplier of project and resource management software.

Consultec Byggprogram ABSkellefteå, SwedenTel: +46 (0) 910 87800 E-mail: [email protected]: www.consultecbp.eleco.comDeveloper and supplier of building project software.

Consultec System ABSkellefteå, SwedenTel: +46 (0) 910 87800 E-mail: [email protected]: www.consultec.eleco.comDeveloper and supplier of design and engineering software.

Consultec Arkitekter & Konstruktorer ABSkellefteå, SwedenTel: +46 (0) 910 87800 E-mail: [email protected]: www.consultecak.eleco.comArchitectural consultancy and software reseller.

Eleco Software LimitedAldershot, HampshireTel: +44 (0) 1252 339132 E-mail: [email protected]: www.softwareuk.eleco.comDeveloper and supplier of 3D design software.

Eleco Software GmbHHameln, GermanyTel: +49 (0) 5151 822 390 E-mail: [email protected]: www.softwaregmbh.eleco.comDeveloper and supplier of 3D design software.

Esign Software GmbHHanover, GermanyTel: +49 (0) 511 856 14340 E-mail: [email protected]: www.esign.eleco.comDeveloper and supplier of software solutions for the floor coverings industry.

Group Directory

Building Products Gang-Nail Systems LimitedAldershot, HampshireTel: +44 (0) 1252 334691 E-mail: [email protected]: www.gangnail.eleco.comManufacturer and supplier of roof truss connector plates, EcoJoist® floor joist webs and associated design and engineering software.

International Truss Systems (Pty) LimitedJohannesburg, South AfricaTel: +27 (0) 11 397 4441 E-mail: [email protected]: www.its.eleco.com Supplier of roof truss connector plates and associated design and engineering software.

SpeedDeck Building Systems LimitedYaxley, SuffolkTel: +44 (0) 1379 788166 E-mail: [email protected]: www.speeddeck.eleco.comManufacturer and supplier of secret-fix and standing seam metalroofing and Vitesse® wall and rainscreen cladding systems.

Downer Cladding Systems LimitedYaxley, SuffolkTel: +44 (0) 1379 787215 E-mail: [email protected]: www.downercladding.eleco.comSupplier and manufacturer of fixing solutions for man-made and natural rainscreen facade materials.

Prompt Profiles LimitedYaxley, SuffolkTel: +44 (0) 1379 787211 E-mail: [email protected]: www.promptprofiles.eleco.comManufacturer and supplier of profiled metal products for the roofing systems industry.

Eleco Timber Frame LimitedYaxley, SuffolkTel: +44 (0) 1379 783465E-mail: [email protected]: www.stramit.eleco.comEleco Timber Frame Yaxley; operating as Stramit Panel Products, is a manufacturer and supplier of ElecoFloor® acoustic flooring products, ConCor and CanBerra partitioning panels.

Precast ConcreteBell & Webster Concrete LimitedGrantham, LincolnshireTel: +44 (0) 1476 562277 E-mail: [email protected]: www.bellandwebster.eleco.comManufacturer and supplier of precast concrete RoomSolutions™, retaining walls and other concrete products.

Milbury Systems LimitedLydney, GloucestershireTel: +44 (0) 1594 847500 E-mail: [email protected]: www.milbury.eleco.comManufacturer and supplier of prestressed and precast retaining structures.


Notes














© Sellar

Eleco plc

Partition Walls

Precast Concrete

Timber Engineering

Building Products


Project Management



Visualisation

Milbury Systems Ltd


(Pty) Ltd

Downer Cladding

Systems Ltd

Prompt Profiles Ltd

ASTA Development


Eleco Software GmbH


Bell & Webster




ASTA Development



ABEleco








Mission and Vision















Documents

Eleco 2nd Interim Report 2011