Elecosoft Regulatory News (ELCO)

RNS Number : 5635T

Eleco PLC

30 September 2010

 

For Immediate Release	30 September 2010

 

 

 

ELECO PLC

("Eleco" or the "Group")

 

The Building Systems and Software Group

Preliminary Results for the Year Ended 30 June 2010

 

Group

·; Turnover declined by 17.8% to £58.0m (2009: £70.6m)

·; Group operating loss before exceptionals of £5.5m (2009: profit £0.5m)

·; Loss before tax of £5.9m (2009: £1.4m)

·; Loss per share of 9.1p (2009: 2.5p)

·; Having regard to the Company's current financial position and performance, the Board is not in a position to recommend a dividend

·; Implementation of Building Systems turnaround plan well underway with £4.0m of annualised overhead costs eliminated to date

·; Robust financial position with net bank borrowings of £1.9m (2009: net funds £1.6m)

 

Software

·; Strong performance against the market trend

·; Turnover increased to £13.7m (2009: £13.4m)

·; Adjusted operating profit of £0.8m (2009: £0.3m)

·; Project Resource Management Software strongly defensive and gaining market share

·; Estimating, Site Control and Timber Engineering Software showing good growth and offering strengthened with acquisition of LUBEKonsult AB - ventilation estimating specialist

·; Visualisation Software restructured to eliminate losses

 

Building Systems

·; Turnover declined to £44.6m (2009: £57.4m)

·; Adjusted operating loss of £5.7m (2009: profit £0.9m)

·; Building Systems turnaround plan well underway

·; Business restructured with costs and capacity reduced in response to weak market conditions

·; Disposal of loss making EBP, German Connector Plate business, for £3.9m

 

 

John Ketteley, Executive Chairman of Eleco plc, commented:

 

"During the second half of the year we have taken fundamental steps to restructure our Building Systems businesses and strengthen the Group in these unprecedented market conditions. Our Software businesses are performing well while our Building Systems businesses are recovering following the restructuring.

 

I am confident that Eleco has the management at all levels to deal with significant challenges as they arise and to take advantage of any upturn in the markets that the Group serves. I am also confident that Eleco is sufficiently well financed to enable it to deliver further growth in its Software businesses and to deliver its Plan for the turnaround of its Building Systems businesses."

 

For further information please contact:

 

Eleco plc	Tel: 01920 443 830
John Ketteley, Executive Chairman john.ketteley@eleco.com	http://www.eleco.com
Craig Slater, Cheif Operating Officer craig.slater@eleco.com
Collins Stewart Europe Limited	020 7523 8359
Bruce Garrow
Buchanan Communications	020 7466 5000
Tim Anderson / Isabel Podda

 

 

 

 

 

 

 

 

 

Chairman's Statement

 

During the second half of the year we have taken fundamental steps to restructure our businesses and strengthen the Group in these unprecedented market conditions. As indicated in the trading update released on 28 July 2010, an improvement in profits from our software interests was more than offset by significantly greater losses from our concrete and timber frame businesses, which increased in the second half year through further volume reductions and lower margins. The Group also initiated a turnaround plan (the "Plan") during the second half of the financial year, which resulted in significant additional restructuring and other one-off costs of £2.3m. However, more than £4.0m of annualised overhead costs have already been eliminated and I am pleased to be able to report that the Plan is currently on track.

 

The Plan, which was described in detail within the trading update, involves taking fundamental steps to restructure our Building Systems businesses, reducing costs and capacity to suit the economic environment, increasing sales resources and changing processes and structures to meet market demands.

 

The purpose of the Plan, together with the continuing anticipated growth of our Software businesses is to put the Group back onto a firm and profitable footing. Further details are given in the Operating and Financial Review section of this report.

 

Group Performance Summary

 

Group turnover for the year declined by 18% to £58.0m (2009: £70.6m).

 

Group operating loss before exceptionals amounted to £5.5m (2009: profit £0.5m) and the reported loss from operations was £5.4m (2009: loss £1.2m).

 

The Group reported a loss before tax of £5.9m (2009: loss £1.4m) and a loss for the year of £5.5m (2009: loss £1.5m), equivalent to a loss per share of 9.1p (2009: 2.5p loss per share).

 

The reported loss includes £3.5m of non-cash items arising through depreciation, amortisation and impairment of assets and the cash benefit of the gain on disposal of a business of £2.8m. Total cash outflow was limited to £3.5m. However, an increase in provisions to £1.1m will also convert into an equivalent cash outflow in the current year.

 

In the light of the sharp reduction in volumes in the Group's concrete and building products interests and the short-term prospects for certain of these businesses, the Group has moderated its investment in new capital projects and product development. Capital investment for the year was significantly lower at £1.2m (2009: £2.9m) and we expect this lower level of investment to continue in the current year.

 

The Group will continue to seek opportunities for strategic disposals of non-core businesses and surplus operating assets.

 

Operational overview

 

Software

Our Software businesses performed well and contributed positively to the Group. Revenues grew by 2% to £13.7m (2009: 13.4m). The Adjusted operating profit was £0.8m (2009: £0.3m) and the Segment result overall was positive £0.3m (2009: negative £0.5m). I expect to see continued improvement in these businesses during the current year.

 

Building Systems

Our Concrete businesses experienced difficulties in the markets they operate in and revenues fell by 16% to £26.8m (2009: £31.8m). The Adjusted operating loss was £3.9m (2009: profit £0.8m) and the Segment result overall was a loss of £5.8m (2009: loss £0.6m) as the Group's exceptional items were largely incurred in these businesses at the commencement of the Plan to recover the businesses' performance.

 

Our Building Products businesses suffered in the economic circumstances and revenues fell to 31% to £17.8m (2009: £25.6m). The Adjusted operating loss was £1.8m (2009: £0.0m) and the Segment result was positive £0.2m (2009: negative £0.1m) as the businesses benefited from the net effect of the gain on disposal of our German Connector Plate business and the exceptional items incurred in these businesses at the commencement of the Plan to recover the businesses' performance.

 

 

Disposal of Eleco Bauprodukte GmbH

 

On 30 June 2010, the Group announced the legal completion of the disposal of Eleco Bauprodukte GmbH ("EBP"), its German Connector Plate business, to Mitek Industries Inc. ("Mitek") for a total consideration of £3.9m. The date of disposal of the EBP was 24 April 2010.

 

EBP made a loss of £0.5m in the year ended 30 June 2010 and the net assets at the date of disposal were £0.1m.

 

Financing

 

The disposal of EBP, the significant reduction in capital expenditure and the cash contribution from the profitable trading of our software businesses have partially offset the adverse cash impact of the performance of our concrete and timber frame businesses most badly affected by difficult trading conditions.

 

Accordingly, the Group remains in a robust financial position with net bank borrowings of £1.9m (2009: net bank funds £1.6m).

 

Our total banking facilities of £14.5m from Lloyds Banking Group, consisting of an unsecured revolving credit facility of £10.0m, which is due for renewal during July 2012, and an unsecured term loan of £4.5m repayable in 20 quarterly instalments commencing during April 2011.

 

Dividends

 

Having regard to the Company's current financial position and performance, the Board is not in a position to recommend the payment of a dividend in respect of the year ended 30 June 2010 but will consider a return to recommending dividend payments as and when the company's trading position and performance permits.

 

Employees

 

Implementing the changes noted above in current markets has placed significant demands on all our employees and, on behalf of the Board, I wish to thank them for their hard work and dedication during the year.

 

Directors

 

There have been significant changes to the composition of the Board in the past year.

 

Paul Taylor, Chief Executive of our Roofing, Cladding and Timber frame businesses, resigned from the Board on 8 October 2009 after nine years with the Group.

 

Craig Slater was appointed to the Board as Chief Operating Officer on 7 December 2009. He has been primarily responsible for the formulation and implementation of the Plan for the Group's Building Systems businesses and for the operations of the Group as a whole. Following the resignation of Fred Newby from the Board each of our Building Systems businesses will report directly to him.

 

Jonathan Edwards was appointed to the Board as a Non Executive director on 1 April 2010. He is also Chairman of the Audit Committee.

 

Tom Quinn also retired from the Board on 30 June 2010, after nine years service as a Non Executive director and I would like to thank him on behalf of the Board for his excellent counsel in that time.

 

David Dannhauser resigned on 15 July 2010 after more than 15 years in his role as Finance Director and I would like to thank him for his undoubted contribution to the Group over that period.

 

Tim Sykes is acting in an interim capacity following David Dannhauser's resignation.

 

Fred Newby, Deputy Chairman and Divisional Chief Executive Building Systems gave notice in March 2010 of his intention to retire in June 2011. Fred continues to support our work at Bell & Webster designed to return that business to sustainable profitability but resigned today from the Board. I would like to thank Fred for his significant contribution to the Group over the last 18 years.

 

Outlook

 

The Software businesses are performing well with further improvement against that already achieved in the year to 30 June 2010. I expect the momentum in these businesses to continue.

 

The Building Systems businesses have been through a restructuring process that was initiated as part of the comprehensive turnaround Plan designed to deliver a much improved performance in the current year. Demand in some markets in which our Building Systems businesses operate remains low and the pipeline is still predictably weak in comparison to prior years. However, we have taken significant steps to reduce costs and capacity in response to these market conditions and will react promptly and with vigour to any further weakening in demand. Thus far in the current year, we have been encouraged by the level of progress against the turnaround Plan.

 

I am confident that Eleco has the management at all levels to deal with significant challenges as they arise and to take advantage of any upturn in the markets that the Group serves. I am also confident that Eleco is sufficiently well financed to enable it to deliver further growth in its Software businesses and to deliver against the Plan for the turnaround of its Building Systems businesses.

 

John Ketteley

Executive Chairman

29 September 2010

Operating and Financial Review

 

Market background

 

Eleco serves a number of different construction markets in the UK, parts of Europe and South Africa.

 

During the year under review the markets served by the Group's Building Systems businesses continued to decline with the exception of house-building with both volumes and prices under increasing pressure as finance for projects of all types has become scarcer.

 

Latterly, the threat of further significant cutbacks in Government spending in the UK has added to these pressures and Group strategy has been developed against this background. As the markets in which the Group operates remain fragmented, the Group's strategy is to focus on capturing market share and delivering resultant work profitably.

 

Through its Software businesses, Eleco serves the above markets but to a much broader extent, along with related timber engineering, IT and retail markets. The Software businesses have more repeat income, less reliance on individual customers or projects and they benefit from their broader market presence.

 

Group results and turnaround plan

 

Group revenues fell by 18% to £58.0m (2009: £70.6m). The operating loss before exceptionals was £5.5m (2009: profit £0.5m) and the reported loss from operations was £5.4m (2009: loss £1.2m).

 

In the second half of the financial year, a comprehensive review of the Group was undertaken and a turnaround plan formed (the "Plan"). This Plan comprises six elements, as follows:-

·; Individual plans for the then loss-making businesses in the Building Systems operation, with the aim of returning them to profitability;

·; Elimination of remaining losses in the Visualisation software business;

·; Sale of surplus freehold property and cessation of surplus property leases;

·; A significant reduction in central costs;

·; Conclusion of the legal action in progress and disposal of EBP; and,

·; Creation of a company-led pension strategy focused on deficit reduction, investment strategy and management of the ongoing cash contributions.

Accordingly, the Group has restructured a number of its operations in the second half of the year to reduce costs, increase sales and marketing efforts and focus on those businesses capable of making sustainable and acceptable returns. As a result, it has necessarily incurred restructuring costs of £1.2m for the year (2009: £0.4m), largely reflecting the cost of headcount reduction programmes in the businesses where volumes have suffered most acutely and also at the corporate level.

 

The impact of these actions is now being reflected in improved management figures so far this financial year and is being monitored by the Board in detail, with further corrective actions being taken where appropriate. The most immediate impact has been felt through the reduction of overhead, amounting to more than £4.0m year on year, with the impact of work on sales following closely. Gross margins are proving more difficult to affect in the short term, with most of the desired improvement in this area still to be achieved.

 

The Group has also taken further impairment charges against its tangible and intangible assets totalling £1.1m for the year (2009: £1.3m). The Board's annual impairment review identified further risk to forward profitability and cash generation of the Cash Generating Unit at Milbury Systems and an impairment charge of £0.8m has been taken, in the main generated by the adoption of a more cautious discount rate. An impairment charge of £0.3m has been taken against the carrying value of long leasehold buildings at one of our main operating sites as the long-term visibility of cash generation from that site has reduced.

 

These exceptional items have been more than offset by the gain on the disposal of EBP, realising gross proceeds of £3.9m and a profit of £2.5m after legal and other costs.

 

Net interest receivable excluding pension related items was £41,000 (2009: £46,000). The reduction was due to the reduction in net cash balances during the year and the continued low interest rates. Under IAS19, a finance charge of £0.6m (2009: £0.3m) is reported, being the difference between the net investment return on assets of the Eleco Retirement and Benefits Scheme expected at the outset of the year and the unwinding of the discount during the year used to determine the Scheme liabilities at the beginning of the year.

 

Segmental Results

 

Software

	2010 £000	2009 £000
Revenue	13,661	13,395
Adjusted operating profit	769	343
Segment result	311	(461)

 

Software comprises three main businesses; Project and Resource Management software primarily in the UK, Estimating, Site Control and Timber Engineering software primarily in Sweden and Visualisation software. Each of these businesses grew revenue this year as their business models benefit from stable recurring maintenance revenues. Losses sustained in our Visualisation software business through its development years have been stemmed through cost reductions.

 

Project and Resource Management software

Construction software reported revenue growth.

 

ASTA Powerproject, with an impressive customer base, provides customers with market leading project and resource management tools and has a strong level of recurring income that allows it to develop further its service offerings and its core software. This business gained market share and is now offered directly and through partners in approximately 20 countries.

 

ASTA produced a good, consistent result in the year in spite of the difficulties experienced in its dominant market, construction. These defensive qualities are believed to be due to the software's ability to enhance efficiency and to enable the more efficient use of resources. It therefore remains a compelling purchase in tough conditions as in more benign conditions.

 

Estimating, Site Control and Timber Engineering software

CONSULTEC, again with an impressive customer base, offers estimation and site control software for a number of specialised vertical markets, mainly in construction. The software suites enable companies to produce reliable estimates efficiently and effectively, to proactively monitor and manage sites and to design and manufacture a number of engineered timber products.

 

CONSULTEC grew both sales and profits in the year, notably in estimation software and services, and is well placed to repeat that performance in the current financial year.

 

We added complementary capability to our offer during September 2010 with the acquisition of LUBEkonsult AB, a specialist in ventilation estimating in Sweden. This is expected to add expertise in a specialist sector along with a complementary customer base.

 

Visualisation software

This business was restructured during the year and the resultant reduction in overhead and reformed development activity has enabled it to eliminate losses on a month on month basis by the end of the financial year. Shortly after the year end, further IP and development resource was added in Germany that will enable the delivery of next generation professional design software.

 

Building Systems

Concrete

	2010 £000	2009 £000
Revenue	26,838	31,769
Adjusted operating (loss)/profit	(3,898)	843
Segment result	(5,839)	(599)

 

Bell & Webster Concrete targets new build hotel and student accommodation and has recently moved into the more technically demanding adjacent market of custodial projects. The number of projects coming to market in the UK from our core hotel and student accommodation markets has decreased significantly due to the fact that some clients continue to experience difficulty and delays in funding projects. This has suppressed demand which has led to intense competition and difficult pricing levels.

 

The more technically demanding level of product in the two custodial projects that contributed to the result during the year has proved challenging to execute. The pricing and technical aspects of the custodial projects have adversely affected gross margins. We have implemented extensive steps to take direct and indirect costs out of the business to match the reduced levels of demand and the effectiveness of these measures is being closely monitored.

 

Milbury Systems targets the agricultural, waste recycling, flood defence and construction markets and it has continued to concentrate its efforts on higher margin business in its core markets. Following relocation onto a single site in the second half of the year and a significant sales effort, Milbury Systems is performing profitably in the current financial year.

 

Bell & Webster Concrete is an important constituent of the Group and its recovery is paramount. Significant attention and time is therefore being spent on this business, expanding its sales resource and returning profitability to its project delivery. Milbury has a single site and reduced cost base and is now focused on achieving a more regular and higher level of profitable order intake and profit.

 

Building products

	2010 £000	2009 £000
Revenue	17,759	25,600
Adjusted operating (loss)/profit	(1,794)	19
Segmental result	173	(90)

 

Building Systems - Building Products comprises the SpeedDeck, Stramit and Prompt roofing and partitioning businesses, the Downer cladding business and the timber engineering businesses.

 

SpeedDeck, Stramit and Prompt suffered from the difficult and highly competitive market conditions although performance improved towards the end of the financial year and in the current year to date. These businesses now all operate from one site.

 

Timber engineering comprised the UK, German and South African connector plate businesses and the UK timber frame business. We disposed of our German connector plate business, EBP, following the loss of almost all of its business to a competitor and realised gross proceeds through its disposal of £3.9m.

 

 

KPIs and monitoring

 

The Plan is monitored in detail by the Board and is specific to each business. There are more than one hundred specific actions and the affect of each action is reviewed regularly with appropriate adjustments being undertaken as required.

 

Business performance is monitored against the following measures:-

·; Sales and order intake

·; Project and product profitability

·; Profitability and forecast profitability

·; Historic and forecast cash flow monitored weekly and monthly

·; Headcount

Key risks

 

The Board considers that the key risks to the Group are the conditions of the various the markets in which the Group operates, the effectiveness of the Plan and attracting and retaining high quality staff to achieve and then deliver sales and profitability.

- In common with many others, our markets are expected to be inherently uncertain for the foreseeable future. They depend upon a reasonable level of Government and private sector capital and infrastructure spend and the availability of finance to initiate projects;

- The turnaround plan is extensive and will necessarily require amendment and refinement during its delivery. Whilst monitored closely there is inherent risk to its successful implementation; and

- The success of the Group depends upon attracting and retaining high quality staff. Cost cutting and reorganisation form one part of the turnaround plan, but the improvement of sales and delivery is equally important and the latter can be adversely impacted by the former.

Pension strategy

 

Having closed the pension scheme to future accrual in December 2009, the Group is now taking an increasingly active role in discussions with the fund Trustee Company. The following actions have been agreed in principle with the Trustee Company:-

- Revised investment strategy that aims to significantly lower the investment risk but maintain a return at or in excess of the valuation assumptions;

- Implementation of a number of deficit reduction measures in respect of which the Company, the Trustee Company and beneficiary interests are aligned; and

- Examination of the potential impact of Government-led changes on the deficit

Implementation of these measures is dependent upon final agreement in detail between the Trustee Company and the Group and the financial impact cannot therefore be disclosed at this time.

 

Loss per share and dividend

 

The loss per share was 9.1p (2009: 2.5p).

 

Having regard to the Company's current financial position and performance, the Board is not in a position to recommend the payment of a dividend in respect of the year ended 30 June 2010 but will consider a return to recommending dividend payments as and when the company's trading position and performance permits.

 

Shareholders' equity and net assets

 

At 30 June 2010, shareholders' equity amounted to £15.3m (2009: £21.6m), after recognising £7.1m (2009: £6.9m), net of the related deferred tax asset, as a retirement benefits liability. Reflecting the impact of the triennial valuation and updating of the actuarial assumptions to 30 June 2010, £0.6m (2009: £1.2m) of actuarial losses net of deferred tax were recognised directly to shareholders' equity.

 

The Group's overall deficit, before related deferred tax, in the Eleco Retirement and Benefits Scheme (the "Scheme") increased to £9.8m (2009: £9.6m). During the year £0.5m (2009: £0.5m) of deficit recovery contributions were made and, following the latest triennial valuation, these have been agreed at £0.8m per year. In view of the high and increasing cost of the ongoing defined benefits provided under the Scheme and the necessity of giving priority to reducing, over the years ahead, the deficit position of the Scheme, consultations have been had with existing members of the Scheme to close the Scheme to new members and to future accrual, which has been accepted.

 

At 30 June 2010, net tangible assets, after taking account of the retirement benefits liability now accounted for under IAS19, represent 43% (2009: 53%) of total net assets.

	2010		2009
	£000	%	£000	%
Intangible assets	15,877	103%	16,958	79%
Retirement benefits liability (net of deferred tax)	(7,071)	(46%)	(6,912)	(32%)
Net tangible assets	6,540	43%	11,520	53%
Total net assets	15,346	100%	21,566	100%

 

  

 

Summary Group Cash Flow

	2010 £000	2009 £000
Cash flow from operations	(4,456)	1,529
Net capital expenditure	(1,094)	(2,870)
Net finance income	73	9
Taxation	(362)	(1,949)
Free cash flow	(5,839)	(3,281)
Acquisitions and disposals	2,761	(205)
Loan to Employee Share Ownership Trust	-	(62)
Repayment of principal under finance leases	(388)	(397)
Equity dividends paid	(239)	(1,423)
Net cash flow	(3,705)	(5,368)
Exchange adjustment	223	151
Decrease in net cash balances	(3,482)	(5,217)

 

The Group's cash position reflects trading performance and was in net debt at 30 June 2010 of £1.9m (2009: net cash £1.6m). The net cash outflow from operations was £4.5m (2009: inflow £1.5m). The cash flow for the second half of the year was positive at £0.2m, benefitting from the receipt of the net proceeds from the disposal of EBP of £2.8m, with a £3.7m outflow in the first half.

 

The Group has moderated its investment programme with capital expenditure of £1.1m (2009: £2.9m) reducing down to a maintenance level in its Building Systems businesses. Strategic investment will continue where appropriate in the Software businesses, and we have made a small acquisition of a complementary ventilation estimating business, LUBEKonsult, during September 2010.

 

Capital and financing

 

The Group's capital structure has changed during the year such that it is now in a net debt position. The Group's bank debt facilities are described in Note 2 along with their maturity profile and that of the Group's lease borrowings.

 

Summary

 

Eleco has many well known brands and businesses that offer great customer service. The Group is now adjusting to a different level of demand and competition in many of its markets. The Software businesses have eliminated losses and are now steadily developing for growth. The Building Systems businesses are now recovering following the changes that have already been made and aim, during this financial year, to return to profitable trading.

 

Craig Slater

Chief Operating Officer

29 September 2010

 

Consolidated Income Statement

for the year ended 30 June 2010

 

							2010		2009
							£'000		£'000
	Revenue						58,009		70,555
	Cost of sales						(36,556)		(40,601)
	Gross profit						21,453		29,954
	Distribution costs						(4,128)		(3,503)
	Administrative expenses						(22,806)		(25,958)
	Operating (loss)/profit before exceptionals						(5,481)		493
	Exceptional items						(2,334)		(1,643)
	Gain on disposal of business						2,460		-
	Loss from operations						(5,355)		(1,150)
	Finance income						155		216
	Finance cost						(675)		(496)
	Loss before tax						(5,875)		(1,430)
	Tax						419		(39)
	Loss for the year						(5,456)		(1,469)
	Attributable to:
	Equity holders of the parent						(5,456)		(1,469)
	Total and continuing loss per share (EPS)
	- basic and diluted						(9.1)p		(2.5)p

 

Consolidated Statement of Comprehensive Income 

for the year ended 30 June 2010

 

					2010		2009
					£'000		£'000
	Loss for the period				(5,456)		(1,469)
	Other comprehensive income
	Actuarial Loss on retirement benefit obligation				(625)		(1,705)
	Deferred tax on retirement benefit obligation				63		458
	Translation differences on foreign currency net investments				(44)		362
	Other comprehensive income net of tax				(606)		(885)
	Total comprehensive income for the period				(6,062)		(2,354)
	Attributable to:
	Equity holders of the parent				(6,062)		(2,354)

 

Consolidated Statement of Changes in Equity

for the year ended 30 June 2010

 

		Share capital	Share premium	Merger reserve	Translation reserve	Other reserve	Retained earnings	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
	At 1 July 2009	6,066	6,396	7,371	151	(383)	1,965	21,566
	Dividends	-	-	-	-	-	(239)	(239)
	Share based payments	-	-	-	-		56	56
	Other	-	-	-	-	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 in foreign operations	-	-	-	(44)	-	-	(44)
	Total comprehensive income for the period	-	-	-	(44)	-	(6,018)	(6,062)
	At 30 June 2010	6,066	6,396	7,371	107	(358)	(4,236)	15,346
	At 1 July 2008	5,995	6,224	7,371	(211)	(321)	6,162	25,220
	Dividends	-	-	-	-	-	(1,423)	(1,423)
	Issue of shares	71	172	-	-	-	(243)	-
	Share based payments	-	-	-	-	-	185	185
	Other	-	-	-	-	(62)	-	(62)
	Transactions with owners	71	172	-	-	(62)	(1,481)	(1,300)
	Loss for the period	-	-	-	-	-	(1,469)	(1,469)
	Other comprehensive income:
	Actuarial loss on defined benefit pension scheme net of tax	-	-	-	-	-	(1,247)	(1,247)
	Exchange differences on translation of net investments in foreign operations	-	-	-	362	-	-	362
	Total comprehensive income for the period	-	-	-	362	-	(2,716)	(2,354)
	At 30 June 2009	6,066	6,396	7,371	151	(383)	1,965	21,566

 

 

 

Consolidated Balance Sheet

at 30 June 2010

 

							2010		2009
							£'000		£'000
	Non-current assets
	Goodwill						12,950		13,473
	Other intangible assets						2,927		3,485
	Property, plant and equipment						11,342		12,552
	Deferred tax assets						2,750		2,687
	Total non-current assets						29,969		32,197
	Current assets
	Inventories						3,977		3,687
	Trade and other receivables						11,639		12,985
	Current tax assets						325		242
	Cash and cash equivalents						6,009		6,091
	Total current assets						21,950		23,005
	Total assets						51,919		55,202
	Current liabilities
	Borrowings						(225)		-
	Obligations under finance leases						(293)		(365)
	Trade and other payables						(10,177)		(11,424)
	Provisions						(1,120)		-
	Current tax liabilities						(96)		(347)
	Accruals and deferred income						(6,763)		(6,158)
	Total current liabilities						(18,674)		(18,294)
	Non-current liabilities
	Borrowings						(7,675)		(4,500)
	Obligations under finance leases						(100)		(318)
	Deferred tax liabilities						(303)		(804)
	Other non current liabilities						-		(121)
	Retirement benefit obligation						(9,821)		(9,599)
	Total non-current liabilities						(17,899)		(15,342)
	Total liabilities						(36,573)		(33,636)
	Net assets						15,346		21,566
	Equity
	Share capital						6,066		6,066
	Share premium account						6,396		6,396
	Merger reserve						7,371		7,371
	Translation reserve						107		151
	Other reserve						(358)		(383)
	Retained earnings						(4,236)		1,965
	Equity attributable to shareholders of the parent						15,346		21,566

 

Consolidated Statement of Cash Flows 

for the year ended 30 June 2010

 

							2010		2009
							£'000		£'000
	Cash flows from operating activities
	Loss before interest and tax						(5,355)		(1,150)
	Depreciation and impairment charge						2,254		1,869
	Amortisation and impairment charge						1,284		1,981
	Loss/(profit) on sale of property, plant and equipment						16		(6)
	Profit on disposal of business						(2,460)		-
	Share-based payment charge						82		185
	Retirement benefit obligation						(964)		(403)
	Increase in provisions						892		-
	Cash (used)/generated from operations before working capital movements						(4,251)		2,476
	Decrease in trade and other receivables						1,332		4,023
	Increase/(decrease) in inventories and work in progress						(248)		993
	Decrease in trade and other payables						(1,289)		(5,963)
	Cash (used)/generated from operations						(4,456)		1,529
	Interest paid						(112)		(177)
	Interest received						185		186
	Income tax paid						(362)		(1,949)
	Net cash outflow from operating activities						(4,745)		(411)
	Net cash used in investing activities
	Purchase of intangible assets						(178)		(626)
	Purchase of property, plant and equipment						(1,049)		(2,315)
	Acquisition of subsidiary undertakings net of cash acquired						-		(205)
	Proceeds from sale of property, plant, equipment and intangible assets						133		71
	Sale of business net of expenses						2,761		-
	Net cash inflow/(outflow) from investing activities						1,667		(3,075)
	Net cash used in financing activities
	Proceeds from new bank loan						7,200		11,100
	Repayment of bank loans						(3,800)		(6,600)
	Repayments of obligations under finance leases						(388)		(397)
	Equity dividends paid						(239)		(1,423)
	Own shares purchased by ESOT						-		(62)
	Net cash inflow from financing activities						2,773		2,618
	Net Decrease in cash and cash equivalents						(305)		(868)
	Cash and cash equivalents at beginning of period						6,091		6,808
	Effects of changes in foreign exchange rates						223		151
	Cash and cash equivalents at end of period						6,009		6,091

 

 

Segment Information

 

Operating segment analysis 2010

 

			Building Systems
			Precast	Building Products	Software	Elimination		Total Group
			£'000	£'000	£'000	£'000		£'000
	Revenue		26,838	17,759	13,412	-		58,009
	Inter-segment revenue		-	-	249	(249)		-
	Total segment revenue		26,838	17,759	13,661	(249)		58,009
	Adjusted operating profit		(3,898)	(1,794)	769			(4,923)
	Amortisation of intangible assets		(185)	(16)	(357)			(558)
	Gain on sale of business		-	2,460	-			2,460
	Impairment charges		(1,151)	-	-			(1,151)
	Restructuring costs		(605)	(477)	(101)			(1,183)
	Segment result		(5,839)	173	311			(5,355)
	Net finance cost							(520)
	Loss before tax							(5,875)
	Tax							419
	Loss after tax							(5,456)
	Segment assets		17,667	10,130	14,715			42,512
	Unallocated assets							9,407
	Total Group assets							51,919
	Segment liabilities		8,024	4,474	5,060			17,558
	Unallocated liabilities							19,015
	Total Group liabilities							36,573
	Other segment information
	Capital expenditure:
	Property, plant and equipment		831	314	115			1,260
	Intangible assets		49	7	171			227
	Depreciation		1,249	614	247			2,110

 

 

Operating segment analysis 2009

 

			Building Systems
			Precast	Building Products	Software	Elimination		Group
			£'000	£'000	£'000	£'000		£'000
	Revenue		31,769	25,600	13,186	-		70,555
	Inter-segment revenue		-	-	209	(209)		-
	Total segment revenue		31,769	25,600	13,395	(209)		70,555
	Adjusted operating profit		843	19	343			1,205
	Amortisation of intangible assets		(185)	(36)	(491)			(712)
	Impairment charges		(1,000)	-	(269)			(1,269)
	Restructuring costs		(257)	(73)	(44)			(374)
	Segment result		(599)	(90)	(461)			(1,150)
	Net finance cost							(280)
	Loss before tax							(1,430)
	Tax							(39)
	Loss after tax							(1,469)
	Segment assets		19,480	11,401	15,241			46,122
	Unallocated assets							9,080
	Total Group assets							55,202
	Segment liabilities		8,179	4,125	5,096			17,400
	Unallocated liabilities							16,236
	Total Group liabilities							33,636
	Other segment information
	Capital expenditure:
	Property, plant and equipment		1,526	519	268			2,313
	Intangible assets		-	-	626			626
	Goodwill acquired		-	-	260			260
	Depreciation		809	756	304			1,869
								-

 

Exceptional items

 

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

							2010	2009
							£'000	£'000
	Impairment of intangible assets						726	1,269
	Impairment of tangible assets						425	-
	Restructuring costs						1,183	374
							2,334	1,643

 

As a result of the annual goodwill impairment review required under IAS 36 Impairment of Assets an impairment of £500,000 has been recognised in the accounts in respect of goodwill related to Milbury Systems. In addition, a review of the intangible assets at Milbury Systems identified certain licence agreements that were considered to have no future value to the business. As such, the carrying value of £226,000 was impaired at 30 June 2010.

 

Factory buildings of £280,000 and precast moulds of £145,000 relating to discontinued products, were impaired in the year.

A review of the Group's operating costs was carried out in response to the downturn in the construction sector, primarily in the UK, and resulted in restructuring of certain businesses with associated reductions in employee numbers.

 

Gain on disposal of business

 

The Group disposed EBP during the year. The date of disposal was 24 April 2010 and legal completion took place on 30 June 2010.

							2010	2009
							£'000	£'000
	Gain on disposal						2,460	-

The gain on disposal is reported net of legal fees of £1,020,000. 

 

Cash and cash equivalents

 

Cash and cash equivalents include the following for the purposes of the cash flow statement:

						2010	2009
						£'000	£'000
	Cash and cash equivalents					2,009	6,091
	Restricted cash					4,000	-
						6,009	6,091

 

Disposal proceeds on the disposal of EBP of £4,000,000 including interest receivable of £100,000 were in escrow at 30 June 2010 and cleared the Group's bank account on 2 July 2010. The carrying amount of these assets approximates to their fair value.

 

Notes

 

1. The financial information in this announcement, which is audited, does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. Statutory accounts of the Company, on which the Auditors will report, will be delivered to the Registrar of Companies. The comparative figures for the year to 30th June 2009 have been taken from, but do not constitute, the Company's statutory financial statements for that financial year restated for the effect of transition to International Financial Reporting Standards.

 

2. The Group's day-to-day working capital requirements are supported through the use of a revolving credit facility of £10.0m that is due for renewal in July 2012. Further, it has a longer term debt financing requirement which it funds through a term loan of £4.5m which is available to it until July 2016. The current economic conditions create uncertainty particularly over the level of demand for an element of the Group's products and over the availability of bank finance which the directors are mindful of. In addition, the Group has incurred significant losses over the last 18-24 months of which a substantial element is in cash.

 

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance and the implementation of the Group's own turnaround plan show that the Group should operate within the level of its current facilities. The Group intends to open renewal negotiations with its bankers in due course and has recently confirmed that its current facilities remain in place.

 

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 annual financial statements on which these preliminary results are based.

 

3. The information herein has been prepared on the basis of the accounting policies adopted for the year ended 30 June 2010, set out in the Company's Annual Report and Accounts and as previously disclosed in the Company's Annual Report and Accounts for the year ended 30 June 2009.

 

4. The calculation of the loss per share are based on the total loss after tax attributable to ordinary equity shareholders of £5,456,000 (2009: £1,469,000) and on 59,713,514 ordinary shares (2009: 59,351,220), being the weighted average number of ordinary shares in issue during the year.

 

5. The Annual General Meeting of Eleco plc will be held at Brewers' Hall, Aldermanbury Square, London EC2V 7HR on 11 November 2010 at 12 noon.

 

6. Copies of the Report and Accounts will be sent to shareholders from 13 October 2010 and will be available from the Secretary at the Company's registered office, Eleco House, 15 Gentleman's Field, Westmill Road, Ware, Hertfordshire, England, SG12 0EF.