Elecosoft Regulatory News (ELCO)

20 September 2013

Eleco plc

("Eleco" or the "Group")

The Construction Software and Building Systems Group

Interim Results for the six month period ended 30 June 2013

 Group Performance

Continuing Operations

· Revenue of £13.2m (2012: £13.5m)

· Adjusted operating profit of £1.0m before product development costs of £1.3m (2012: profit of £1.0m before product development costs of £1.1m)

· Loss before tax of £0.6m (2012: Loss of £0.3m)

· Loss per share - basic and diluted of 1.1p (2012: loss 0.8p)

· EBITDA of £0.5m (2012: £0.6m)

Discontinued Operations

· Loss for the financial period £2.8m (2012: loss £0.4m)

Group Borrowings

· Net bank borrowings at 30 June 2013 of £6.3m (31 December 2012: £6.5m)

ElecoSoft®

· Revenue of £8.3m (2012: £8.2m)

· Adjusted operating profit of £2.0m before product development costs of £1.3m (2012: profit of £2.0m before product developments costs £1.1m)

· Profit before interest and tax of £0.8m (2012: £0.9m)

· EBITDA £1.1m (2012: £1.2m)

ElecoPrecast®

· Revenue of £4.9m (2012: £5.3m)

· Operating loss of £0.5m (2012: £0.5m)

· EBITDA loss £0.2m (2012: loss £0.2m)

Outlook

· The board remains optimistic about the prospects for the full year with a positive start to the second half at ElecoSoft® and a growing order book at ElecoPrecast®.

Executive Chairman, John Ketteley said:

"It is clear from the Group's performance over the past half year that trading conditions have been challenging. With that being said however, the increasing signs of both an upturn in our business and the wider economy are strongly encouraging.

The sale in May of our loss-making building systems businesses, alongside many other similarly tough decisions, now leaves the Group in a far stronger position now than it has been in for many a year. With the company's new-found ability to increasingly capitalise on profitable growth across its divisions and markets and with Eleco increasingly seeking to take advantage of growing activity across the building and construction sectors, I look to the Company regaining its poise and moving back onto the path of sustained growth."

Chairman's Statement

Operational Review

ElecoSoft®

Turnover of ElecoSoft® for the six months to 30 June 2013 from its software businesses in Sweden, Germany and the UK ("ElecoSoft®") increased marginally to £8.3m (H1 2012: £8.2m), despite lower turnover from our Swedish architectural services business of £1.3m (H1 2012: £1.1m), due to lower demand for new houses in Sweden. Furthermore, an architectural design contract for a flagship office building in Skeleftea was regrettably cancelled by a customer partway through the project, this also adversely impacted revenue and profit of our Swedish business units in the period.

ElecoSoft®'s share of Group turnover increased to 63 per cent (H1 2012: 61 per cent) during the period.

I am pleased to report that in April 2013, the Group acquired for £64,000 the business and certain assets of Wagemeyer, a Germany software development company specialising in the development of software for the timber stair design and manufacturing markets. This acquisition enhances ElecoSoft®'s StairCon existing range of staircase engineering software and will provide it with a direct channel to the largest market for stair design and manufacturing software in Europe.

As anticipated, the integration of these businesses initially impacted the profitability of Wagemayer with StairCon in the short term, due to the disruption and initial costs of amalgamating them. The merger has been very well received by both stair manufacturers and suppliers of computer aided machinery to the industry and we are confident that the Wagemayer with StairCon combination will establish itself as a leading force in the European market for stair design and manufacturing software.

Software Development costs of ElecoSoft® in the period mainly for software projects that have yet to be launched in the market were £200,000 higher at £1.3m (H1 2012: £1.1m). This accounted in some measure for ElecoSoft®'s EBITDA in the period being £100,000 lower at £1.1m (H1 2012: £1.2m). The strong profit growth at our UK software operations in the period was offset by a lower profit performance from our Swedish based software businesses due mainly to weaker markets for their products and services.

I am pleased to say that sentiment in the UK and German economies in which we operate continues to improve and our Swedish colleagues also recently reported an improvement in sentiment in the Swedish economy.

ElecoPrecast®

Turnover of ElecoPrecast® in the period under review was somewhat lower at £4.9m (H1 2012: £5.3m), mainly due to the extended winter conditions that affected the demand for standard products in the first quarter and as a consequence the EBITDA loss for ElecoPrecast® in the period was marginally worse at £214,000 (H1 2012: loss £152,000).

However, the RoomSolutions® order for Phase 3 of Reading University Student Accommodation which went into production at Bell & Webster's Grantham factory in January, 2013 progressed well and final delivery to site was made this month. Manufacturing has also begun recently on the Northern Developments student accommodation project for Newcastle University, the first delivery to site being scheduled for October 2013. I am pleased to say that earlier this month we also begun production for Galliford Try on a student accommodation project for High Wycombe University.

This recent rise in business activity at both our ElecoPrecast® sites has resulted in an increase in the workforce since the beginning of the year from 63 to 110 and includes the strengthening of the management teams at both locations.

Eleco Group

Group turnover from continuing operations for the six months ended 30 June 2013 amounted to £13.2m (H1 2012: £13.5m). The prior year comparatives in this report have been restated, where appropriate, following the disposal of the Yaxley based ElecoBuild® businesses in May 2013.

The EBITDA from continuing operations was £460,000 (H1 2012: £611,000) after higher development expenditure on Software of £1.3m (H1 2012: £1.1m).

Group operating loss from continuing operations was £220,000 (H1 2012: loss £115,000), after the deduction of product development costs and the amortisation of intangible assets.

The loss before tax from continuing operations and after net exceptional income of £160,000 (H1 2012: expense £283,000) was £610,000 (H1 2012: loss £327,000 restated).

The loss from continuing operations for the period amounted to £667,000, equivalent to 1.1p per share (H1 2012: loss £454,000, equivalent to 0.8p per share).

However despite the loss for the period, there was a reduction of £0.2m in the Group's net bank debt over the period from £6.5m at 1 January 2013 to £6.3m at 30 June 2013.

In May 2013, Eleco plc ("Eleco") disposed of its loss making ElecoBuild® businesses based at Yaxley, Suffolk, comprising SpeedDeck Building Systems, Downer Cladding, Stramit Panel Products and Prompt Profiles. The decision to sell these businesses was prompted by the fact that these businesses would have required significant additional cash injections to enable them to continue trading. The Board therefore reluctantly concluded that Eleco was no longer in a position to support financially these loss making businesses without placing the Company's own survival in jeopardy. In negotiating the terms of the sale, the Board secured a full TUPE agreement for the employees of these businesses, which inevitably had a bearing on the price achieved for the sale which gave rise to a book loss on this asset disposal before goodwill amounting to £1.7m, which is included in losses of discontinued businesses.

The loss for the period from discontinued operations, including the transaction loss referred to above was £2.8m, equivalent to 4.7p per share, (H1 2012: loss £405,000, equivalent to 0.6p per share).

Dividend

The board does not propose to recommend the payment of a dividend in respect of the period under review.

Outlook

Our UK Software interests again produced a solid profit performance in the period under review reflecting the fact that the UK construction industry is continuing to show increasing signs of recovery. The UK profit performance was due principally to the beneficial impact of the UK software business restructuring programme that was completed at the end of last year.

ElecoSoft®'s office in Bangalore, India is showing positive signs with orders received for both project management and visualisation software within the second month of opening. Our Indian subsidiary is tracking ahead of budget in the period under review.

Our software development teams have the flair, creativity and technology, to produce well-designed and relevant software programs and in this connection are working on some exciting new projects which include mobile applications, BIM (Building Information Modelling) tools and Arcon Next Generation®, a totally new architectural software program which has evolved from our original Arcon program, one of the most successful German visual architectural programs in its field.

As mentioned above, the period under review also saw the disposal of more of our loss making building systems businesses and the ongoing recovery of ElecoPrecast® as a well-balanced specialist precast concrete business.

ElecoPrecast® is continuing to grow its order book which increased to £5.4m at 30 June 2013 (31 December 2012: £4.0m). We have successfully completed the Reading University Student Accommodation Project; and have begun two more student accommodation projects, one for Newcastle and one for High Wycombe, and prospects are improving with the economy.

It will be apparent from the Group's performance in the period under review that trading conditions were very challenging, particularly in the first quarter. That said however, we are beginning to see increasing signs of an upturn in the markets in which our businesses are engaged as well as in the wider economy. This is encouraging.

The sale in May of our loss-making building systems businesses, alongside many other similarly tough decisions, now leaves the Group in a much stronger position now than it has been in for some time. I believe that Eleco is now in a position to take advantage of growing activity in both the construction software and precast concrete markets in which it operates.

Accordingly, I look forward to Eleco regaining its poise and taking advantage in due course of opportunities to improve the profits of its ElecoSoft software interests and to return its ElecoPrecast® interests to profit. We shall certainly be doing all we can to achieve these objectives.

John Ketteley

Executive Chairman

20 September 2013

Condensed Consolidated Income Statement

for the financial period ended 30 June 2013

Condensed Consolidated Statement of Comprehensive Income

for the financial period ended 30 June 2013

Condensed Consolidated Statement of Changes in Equity

for the financial period ended 30 June 2013

Condensed Consolidated Balance Sheet

at 30 June 2013

Condensed Consolidated Statement of Cash Flows

for the financial period ended 30 June 2013

Notes to the Condensed Consolidated Interim Financial Statements

1. General information

The 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 31 December 2012 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 preparation

The condensed consolidated interim financial statements for the six months to 30 June 2013 have been prepared in accordance with the accounting policies which will be applied in the twelve months financial statements to 31 December 2013. 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 2013.

The condensed consolidated 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 published financial statements as at 31 December 2012.

In accordance with IFRS 5, the prior year comparative figures for the six months to 30 June 2012 and the year ended 31 December 2012 have been restated to reflect discontinued operations reported in the Group's consolidated financial statements for the six months to 30 June 2013. The comparative figures for the year ended 31 December 2012 are not the Company's statutory accounts for that period but have been extracted from these accounts.

The Directors, having considered the Group's current financial resources, have concluded that they are adequate for the Group's present requirements. Thus the condensed consolidated interim financial information has been prepared on the going concern basis.

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.

Estimates

Application 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 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 31 December 2012.

Risks and uncertainties

A summary of the Group's principal risks and uncertainties was provided on page 13 of the 2012 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.

3. Segmental information

Operating segments

For management purposes, the Group is organised into two operating divisions based on the type of products and services supplied by each business unit.

The principal activities of each segment are as follows:

ElecoSoft: Developer and supplier of resource management software, building project software, design and engineering software and 3D design software.

ElecoPrecast: Manufacturer and supplier of precast concrete rooms, retaining walls, terracing units and pre-stressed and precast retaining structures.

Central costs that cannot reasonably be allocated to the operating divisions are reported under Corporate.