Preliminary Results

27 March 2018

Elecosoft plc

("Elecosoft", the "Company" or the "Group")

Preliminary Results

For the Year Ended 31 December 2017

Elecosoft plc (AIM: ELCO), the construction software specialist, is pleased to announce its audited results for the year ended 31 December 2017.

Financial Highlights

· Revenue up 12% to £20.0m (2016: £17.8m) of which 49% was from recurring maintenance and support revenue (2016: 48%)

· Revenue up 8% at constant currencies (2016: 8%)

· Reported operating profit up 48% to £2.4m (2016: £1.6m)

· Adjusted operating profit* up 26% to £2.8m (2016: £2.2m)

· Profit before tax up 50% to £2.3m (2016: £1.5m)

· EBITDA up 50% to £3.6m (2016: £2.4m)

· Software development spend up 6% to £2.7m (2016: £2.6m), representing 14% of revenue

· 102% of adjusted operating profit converted into cashflow (2016: 70%)

· Free cash flow up 117% to £2.6m (2016: £1.2m)

· Net borrowings eliminated, £1.0m net cash at year end (2016: £1.3m net borrowings)

· Reported basic earnings per share up 49% to 2.5p (2016: 1.7p)

· Adjusted earnings per share* up 20% to 2.9p (2016: 2.4p)

· Full year dividend up 50% to 0.60p (2016: 0.40p) with final recommended dividend of 0.40p

(* Adjusted profit measures exclude exceptional items and amortisation of acquired intangible assets.)

Operational Highlights

· Double award win at the Construction Computing Awards 2017

· 15% of the top ENR 400 US construction contractors now using Powerproject®

· Adoption of Bidcon® by IconSystem® customer McCarthy & Stone, the UK's largest builder of retirement homes

· Powerproject® SaaS released to UK market

· Icon successfully integrated following acquisition in October 2016

· Acquisition of new customers in Australia for Staircon® and Powerproject in Sweden

· Increased level of SaaS recurring sales in our German ESIGN operation

· Appointment of Jonathan Hunter as COO, and Simon Morgan as Group Finance Director

Executive Chairman, John Ketteley said:

"I am pleased to report that Elecosoft improved its performance significantly in 2017 and has also made a strong start in 2018. Although there is ongoing uncertainty, notably in relation to Brexit, the fundamental drivers of our business remain. Elecosoft is increasingly seen as a market-leading provider of construction software and training, across the phases of a construction project and beyond, in the on-going lifecycle of a building. We have a strong balance sheet, industry-leading software and training, and excellent customer relationships. Our unified branding and more coordinated approach across the Group open up exciting prospects to cross-sell our products as well as providing a stronger foundation for building new customer relationships. I look forward with confidence to the year ahead and beyond."

About Elecosoft plc

Elecosoft is a specialist international provider of software and related services to the Architectural, Engineering, Construction and Owner/Operator (AECO) industries and digital marketing industries from centres of excellence in the UK, Sweden, Germany and the US. Elecosoft's market leading software solutions are developed by teams in the United Kingdom, Sweden and Germany; and its software solutions cover project management, construction site management, estimating, timber engineering, 3D design and visualisation, and cloud based digital marketing solutions. Elecosoft is listed on the Alternative Investment Market in London (AIM: ELCO).

Executive Chairman's Statement

"I am pleased to report that in 2017 Elecosoft improved its performance significantly, eliminated its net borrowings, strengthened its management team and made a strong start in the first quarter of 2018."

Trading performance

Revenue

Elecosoft's total revenue for the year amounted to £20.0m (2016: £17.8m), an increase of 12 per cent, of which recurring maintenance revenue amounted to £9.9m (2016: £8.6m). Recurring maintenance revenue as a proportion of total revenue for the year marginally increased to 49 per cent (2016: 48 per cent).

Profit

Operating profit for the year was £2.4m (2016: £1.6m), an increase of 48 per cent. Adjusted operating profit, which excludes non-operating items and amortisation of acquired intangible assets, was £2.8m (2016: £2.2m), an increase of 26 per cent.

Profit after tax for the year was £1.9m (2016: £1.2m) an increase of 53 per cent; and basic earnings per share for the year were 2.5 pence (2016: 1.7 pence), an increase of 49 per cent. Adjusted earnings per share were 2.9 pence (2016: 2.4 pence), an increase of 20 per cent.

Finance

Cash generated from operations amounted to £4.2m (2016: £2.4m) and the strong conversion of operating profits into cash during the year eliminated Group net borrowings by the half year and produced a net cash position of £1.0m as at 31 December 2017 (2016: £1.3m net borrowings).

The net increase in cash and cash equivalents in the year under review totalled £1.4m, which together with £2.8m of net current assets (excluding deferred revenue), contributed to a further strengthening of Elecosoft's financial position at the end of the year.

Group net assets at 31 December 2017 totalled £11.5m (31 December 2016: £9.7m).

Software development

Elecosoft values its reputation for developing market leading construction software. The technical and creative contribution of Elecosoft's software development teams in the UK, Sweden and Germany continue to be critical elements in Elecosoft's success in developing an expanding portfolio of market leading software programs.

Our development teams performed magnificently in the year to satisfy the needs of our customers by responding to specific requests to adjust or enhance our existing software programs. They also liaise closely with our customers through user steering groups to define key elements to be incorporated in new software programs under development.

We very much value this close relationship with our customers and I would like to take this opportunity on behalf of our software development teams to thank our customers for their valuable, constructive and practical feedback and involvement in our software development process. We really do appreciate their input.

The Board adopted a policy some years ago of allocating a significant portion of Group cash flow annually to finance the development and enhancement of our software development programs and the expansion of our software development teams. I am pleased to say that this strategy has been effective and will continue.

Software development expenditure in the year under review increased to £2.7m (2016: £2.6m) and expenditure on major software development projects in Germany, Sweden and the UK which was capitalised in the year totalled £1.1m (2016: £0.6m).

Our Group software development program increasingly involves the development of SaaS web applications for existing software programs, such as our project management and site management offerings. I am pleased to say that the completed SaaS web applications have so far been very well received.

Trading and marketing highlights

Our sales and marketing teams made outstanding contributions to our growth in the year, evidenced by higher sales in all our markets. The year also saw increased success in securing new license sales together with higher revenue from our support and training propositions.

Our marketing teams have made determined and successful efforts to promote the Elecosoft® brand worldwide and I am confident that it will play an increasing part in our progress as we move to accelerate the impact of our latest cross-selling initiatives.

Our software programs are increasingly being used in combination with each other, as our customers become more aware of the significant improvement in performance that such combinations can now deliver.

Elecosoft's software portfolio

We refer to Elecosoft as an international specialist construction software group and I set out below a brief summary of our current software portfolio. It consists of software programs that on one hand have been designed and developed by our own software development teams and on the other hand have become part of our portfolio by acquisition. Our experience is that this is a pragmatic and effective way of building our business and enhancing the quality and scope of our construction software portfolio for the benefit of our customers and our shareholders.

Project Management

We continued to develop our flagship Powerproject® software by launching a SaaS proposition in the first half of the financial year. We also saw increased adoption of our BIM and Site Progress Mobile programs. For the fourth year running we celebrated Powerproject winning the award for Best Project Planning Software at the Construction Software Awards ("the Hammers"). We have sold Powerproject to over 90% of the top 100 construction contractors in the UK, and 35 out of the top 50 in Sweden, and I am pleased to say that Powerproject now ranks third in sales of project scheduling software to the US construction industry. Powerproject is now available in ten languages, with another five currently being translated.

Estimation

Bidcon®, our estimation software, which was enhanced with two releases in the year, continues to be the leading construction estimation software program in Sweden. I am pleased to say that in the UK Bidcon's BIM 3D quantity take-off feature became an attractive proposition for McCarthy & Stone, which installed Bidcon in the UK in the year.

Site Management

Our Swedish colleagues continued to enhance our Sitecon solution during the year. In parallel intensive work was put into the creation of the next generation SaaS-solution meeting international demands on a collaboration software, to be launched in 2018. Our Site Progress Mobile solution also gained increased market share during the year now serving over 1,500 active users.

Visualisation

Interiormarket and Marketingmanager are leading visualisation marketing programs sold to flooring and tiling companies and DIY stores in Germany, and increasingly also worldwide.

3D CAD

Arcon maintained its market share in its core market of Germany and increased its sales of complimentary third party applications.

Data Management

IconSystem®'s blue chip retail customer base is testament to the value delivered to them by its Specs and Standards and Property Information Management software.

IconSystem's data management capability is also being increasingly recognised by customers outside of the retail sector and McCarthy & Stone has adopted IconSystem to improve the coordination of its design, planning and construction processes.

Engineering

Our portfolio of timber engineering applications delivered growth in 2017. Demand increased in Australia for Staircon® with the receipt of the largest Staircon order to date. As demand for modular construction increases, our applications, including Statcon and Framing, continue to serve the industry requirements in design and off-site manufacturing.

The Elecosoft brand

The strength of Elecosoft's software portfolio was significantly enhanced in 2016 by the launch of the Elecosoft brand for the promotion of all our products. The response to the introduction of Elecosoft was very positive, as evidenced by the significant increase in our software sales to record levels in 2016 and 2017.

The unified brand not only signals a shift towards a more collaborative culture within the business, but also provides a sound platform for an increased focus on cross-selling initiatives.

Elecosoft colleagues

The number of Elecosoft employees increased to a record 201 in 2017 (2016: 190). On behalf of the Board and shareholders, I wish to thank all our highly skilled, and motivated people who are now located as far afield as Sweden, the Netherlands, Germany, the United States, Belgium and the UK, and to extend a warm welcome to our colleagues who joined us during the year. We have an outstanding, talented and balanced group of employees in all the markets that we serve.

Board and management

I also take this opportunity formally to welcome the following appointments to the Board during the year under review:

Jonathan Hunter was appointed Chief Operating Officer on 22 December 2017. In his previous role as Group Marketing and Business Development Director, Jonathan was responsible for establishing Elecosoft as a leading international software brand; and for negotiating the acquisition of IconSystem.

Anders Karlsson was appointed as an Executive Director on 27 March 2017. Anders initially joined Consultec Byggprogram AB as Managing Director in 2005 and then rejoined the Group in 2014 as Managing Director of Consultec. In March 2017 he was appointed Chief Executive Officer of the Company's wholly owned Swedish subsidiary, Consultec Elecosoft AB.

Simon Morgan, FCA was appointed Group Finance Director on 15 November 2017. Simon joined Elecosoft following the departure in August of David Pearson. Simon has held numerous senior financial and other directorships in digital publishing, SaaS and business services companies.

I also wish to thank Jason Ruddle, David Pearson and Jonathan Edwards who left Elecosoft in 2017 for their contribution to the success of Elecosoft during their time with us, and wish them well in their new endeavours.

There have also been some changes among the Non-Executive members of the Elecosoft Board.

Kevin Craig, joined the Elecosoft plc Board as a Non-Executive Director in March 2017. He is founder and CEO of the highly successful Political Lobbying and Media Relations Ltd (PLMR) communications agency.

Serena Lang, having joined the Board of Elecosoft as a Non-Executive Director in December 2014, was appointed Non-Executive Deputy Chairman in May 2017. Serena's distinguished and multifaceted career includes working as an Executive Consultant at E&Y where she was heavily involved in client M&A and integration activities, then onto BPs group leadership team where she was VP Transformation in the downstream and latterly onto Invensys Plc (now part of Schneider Electric) running the highly profitable £130m North Europe and Africa Division of their international software and process businesses as well as being the VP in charge of the BP account globally.

Following the retirement of Jonathan Edwards at the end of his term in office at the close of the financial year, David Dannhauser, FCA was appointed as a Non-Executive Director and Chairman of the Audit Committee in February 2018. David has been CFO of several listed companies, including Elecosoft from 1994 to 2010, during which time he was closely involved in the establishment and development of the Group's software activities.

Proposed Dividend

In light of Elecosoft's strong trading performance and cash generation, the Board has decided to recommend a final scrip dividend of 0.40 pence per share, with an alternative cash dividend of 0.40 pence per share, to give a total dividend for the year of 0.60 pence per share. This represents an increase of 50% relative to the previous year (2016 total dividend: 0.40 pence per share).

The scrip reference price is 49.6p, calculated from the average of the closing price for an ordinary share of the company as derived from the daily official list of the London Stock Exchange during the period of five dealing days ending 23 March 2018.

Payment of the final dividend will be subject to approval by shareholders at the Annual General Meeting and will be paid on 31 May 2018 to shareholders on the register at the close of business on 6 April 2018; the ex-dividend date will be 5 April 2018.

Outlook

We see significant and growing opportunities for our software to enhance the performance of businesses in construction and other sectors, by improving the timeliness, cost-efficiency and risk profiles of customers' projects. Thanks to the dedication and skills of our talented colleagues, Elecosoft is increasingly seen as a market-leading provider of construction software and training, across all phases of a construction project and beyond, in the on-going lifecycle of buildings with an excellent reputation for developing and delivering market leading software to our customers.

Although there is ongoing uncertainty in the market, notably in relation to Brexit, only 32% of our turnover and 32% of our operating profits were earned in the UK in the year. With the majority of our profits earned in, and employees based in Sweden, Germany, the Netherlands, Belgium and the United States, we remain resilient to the effects of Brexit, and the fundamental drivers of our business remain positive.

I am pleased to report that the Group has performed very well in the first months of the current financial year. We remain open to utilising our strong balance sheet for further bolt-on acquisitions, as the successful execution and integration of Icon provides a blueprint for future transactions.

I am confident that our unified branding, continued investment in software development and increased integration of our product portfolio will open up further exciting prospects to cross-sell our products.

My colleagues and I therefore look forward with confidence to the year ahead.

John Ketteley

Executive Chairman

26 March 2018

 Financial Review

2017 has been another successful year as we have maintained the trends in financial performance seen in 2016. Revenue and reported operating profit grew by 12% and 48% respectively, driven by the strong underlying performance of the group, the successful integration of the Icon business and favourable movements in the Group's core trading currencies. The Group remains in a strong financial position, with a high and increasing proportion of operating profits converted into cash resulting in the Group moving into a net cash position by the end of the year.

Revenue

Revenue for the year increased 12% to £20.0m (2016: £17.8m). Underlying revenue growth (excluding the impact of acquisitions and movements in foreign exchange rates) was 4%, driven by growth in new license sales and in revenue from maintenance and support contracts of 2% and 8% respectively. The acquisition of Icon in October 2016 contributed a further 4% to revenue growth, and the impact of a weaker sterling against the Swedish Krona, the US Dollar and the Euro adding a further 4% to revenue growth.

The overall revenue profile of the Group remains strong, with the proportion of revenue derived from recurring maintenance and support contracts increasing to 49% (2016: 48%). The level of deferred income at the balance sheet date, which is a measure of future maintenance revenue, increased by 9% to £4.8m (2016: £4.4m).

Revenue growth was driven by direct sales up 13% to £18.8m (2016: £16.7m) and growth through resellers up 8% to £1.2m (2016: £1.1m), reflecting the Group's strategy to accelerate revenue growth with partners.

The Group delivered solid underlying growth in its core mature markets of the UK and Sweden, which together comprise 69% of total revenue, of 3%. The Group's strategy to penetrate new geographic markets was reflected in strong underlying revenue growth in the USA, which grew 8% to £0.7m, in the Rest of Europe, which grew 25% to £2.2m and the Rest of World, which grew 23% to £0.4m (all growth rates are at constant rates of exchange).

Profit

Gross profit is revenue less the direct cost of providing products and services to customers, principally the costs of training and consultancy staff. In 2017 the gross profit margin increased by 1.2%pts to 87.9% reflecting cost control and revenue mix.

Reported operating profit grew 48% to £2.4m (2016: £1.6m), or 28% on an underlying basis (excluding the impact of acquisitions and movements in foreign exchange rates). This was driven by the strong revenue performance described above and reflects the benefit of tight cost control across the Group. 2016 also included costs of £0.3m in relation to the acquisition of Icon and the termination of a former director. After excluding the impact of these costs, together with the impact of the non-cash amortisation of acquired intangible assets as set out below, adjusted operating profit for the Group increased by 26%, or 18% on an underlying basis. The overall adjusted operating margin improved by 1.5%pts to 13.9% (2016: 12.4%).

Overheads included within adjusted operating profit increased by 3% on an underlying basis, reflecting tight cost management across the Group and the receipt of £0.2m from the administrators of a previously owned building company. Including the impact of acquisitions and foreign currency effects, overheads increased by 12%.

Software product development expenses amounted to £2.7m for the year (2016: £2.6m) of which £1.1m (2016: £0.6m) was capitalised, demonstrating the commitment to investing increasingly in new product development and substantial product upgrades. The spend capitalised in the year includes investments in Powerproject BIM, Powerproject Vision, Powerproject v15 and other new products scheduled to be launched in 2018. The carrying value of these software assets together with the carrying value of software assets capitalised in previous periods was reviewed for impairment at the balance sheet date and an impairment charge of £0.2m (2016: nil) was recorded in respect of two minor products.

Finance costs in the year, largely in respect of the Group's term debt, totalled £0.1m (2016: £0.1m), resulting in a profit before tax of £2.3m (2016: £1.5m).

The Group tax charge in the year was £0.4m (2016: £0.3m) and represented 15.8% of profit before tax (2016: 17.4%). The decrease in rate compared with 2016 reflected the reduced rate of corporation tax in the United Kingdom which impacted both tax on current year profits, as well as reducing the overall value of deferred tax liabilities.

The net profit attributable to ordinary shareholders increased by 53% to £1.9m (2016: £1.2m). The underlying increase, excluding the impact of acquisitions and currency effects, was 25%.

After adjusting for the post-tax effect of non-operating items and amortisation of acquired intangible assets, adjusted net profit attributable to ordinary shareholders increased by 23% to £2.2m (2016: £1.8m).

Cash flows

Cash generated from operations increased to £4.2m (2016: £2.4m), the increase reflecting the strong trading performance of the group and continued focus on management of working capital. Overall working capital movements were favourable, contributing a net cash inflow of £0.5m (2016: £0.1m).

Capital expenditure on intangible assets, principally comprising the capitalisation of software product development costs, was £1.2m (2016: 0.8m), reflecting the increased focus on the development of new products and major product upgrades. Capital expenditure on property, plant and equipment was £0.2m (2016: £0.4m).

After deducting capital expenditure, adjusted operating cashflow, as set out below, was £2.8m (2016: £1.5m), meaning that 102% of adjusted operating profit (2016: 70%) was converted into cash. This reflects the strength of the overall business model where 49% of the group's revenue is recurring and typically invoiced annually in advance, and the close focus on management of working capital.

Free cash flow before dividends and acquisitions, more than doubled in the year to £2.6m (2016: £1.2m). Cash dividends paid to shareholders amounted to £0.2m (2016: £0.1m).

Funding and liquidity

The strong cash generation enabled the Group to end the year with net cash of £1.0m (2016: net borrowings of £1.3m), as set out in the table below.

The Group's net cash position comprises cash at hand of £4.7m (2016: £2.6m), offset in part by gross borrowings of £3.4m (2016: £3.5m) and obligations under finance leases of £0.3m (2016: £0.4m). Gross borrowings comprise a fully drawn overdraft facility of £1.0m and term debt of £2.4m. The term debt is repayable in quarterly instalments over the next three years, with £0.8m repayable in 2018, £0.8m repayable in 2019 and £0.8m repayable in 2020. Both the overdraft and term debt carry an interest rate of 2.75% over the Bank of England base rate.

Security provided to the bank for the provision of these facilities is a cross guarantee and debenture between the parent company and certain UK subsidiary companies and a commitment of the shares of the operating companies.

Covenants have been made to the bank in respect of three elements: EBITA to gross financing costs, net borrowings to EBITDA and cash flow to debt service. These covenants are tested quarterly.

Earnings per share and dividends

Basic earnings per share increased 49% to 2.5p (2016: 1.7p).

After adjusting for the post-tax impact of non-operating items and amortisation of acquired intangible assets, adjusted earnings per share increased 20% to 2.9p per share (2016: 2.4p per share).

The Board has recommended the payment of a final scrip dividend in respect of the year ended 31 December 2017 of 0.40p per share (2016 final dividend: 0.25p), with a cash alternative to be made available. This gives total dividends in respect of the financial year of 0.60p per share (2016: 0.40p), an increase of 50% over 2016.

Simon Morgan

Group Finance Director

26 March 2018

Consolidated Income Statement

For the year ended 31 December 2017

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2017

Consolidated Statement of Changes in Equity

For the year 31 December 2017

Consolidated Balance Sheet

At 31 December 2017

Consolidated Statement of Cash Flows

For the year ended 31 December 2017

Extract from Notes to the Consolidated Financial Statements

1. Revenue

Revenue disclosed in the income statement is analysed as follows:

2. Segment information

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Groupthat are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.

The chief operating decision maker has been identified as the Executive Directors. The Group revenue is derived entirely from the sale of software licences, software maintenance and support and related services. Consequently, the Executive Directors review the three revenue streams but as the costs are not recorded in the same way the information is presented as one segment and as such the information is presented in line with management information.

Development project costs are expensed as incurred unless they meet the accounting policy requirements for capitalisation. The software projects that have been capitalised in the twelve months to 31 December 2017 are explained in the Financial Review. Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, and adjusted to exclude acquisition expenses and former director termination payments.

2. Segment information continued

Geographical, Product and sales channel information

Revenue by geographical area represents continuing operations revenue from external customers based upon the geographical location of the customer.

Revenue by geographical destination is as follows:

Revenue by product group represents continuing operations revenue from external customers.

Revenue by product group is as follows:

The Group utilises resellers to access certain markets. Revenue by sales channel represents continuing operations revenue from external customers.

Revenue by sales channel is as follows:

2. Segment information continued

Non-current assets excluding deferred tax by geographical area represent the carrying amount of assets based in the geographical area in which the assets are located.

Non-current assets by geographical location are as follows:

Information about major customers

Revenues arising from sales to the Group's largest customer were below the reporting threshold of 10% of Group revenue (2016: Below 10% reporting threshold).

3. Operating profit

The continuing operations operating profit for the period is stated after charging/(crediting) the following items.

4. Employee information

The average number of employees during the period, including Directors, in continuing operations was made up as follows:

Staff costs during the period, including Directors amounted to:

Pension costs relate to contributions to defined contribution pension schemes. Development staff costs are charged to projects and capitalised if those projects meet the criteria for capitalisation.

The remuneration of the Directors, who are the key management personnel of the Group, is set out below:

The emoluments of the highest paid Director were £291,000 (2016: £280,000).

The remuneration of the non-executive Directors is determined by the Board. The non-executive Directors do not have service contracts but are appointed for an initial term of three years, which may thereafter be renewed from year to year. They do not participate in any of the Group's share-based incentive or pension schemes.

5. Net finance income/(cost)

6. Taxation

(a) Tax on profit on ordinary activities

The tax charge in the income statement from continuing operations is as follows:

Income tax for the UK has been calculated at the weighted average rate of UK corporation tax of 19.25% (2016: 20.0%) on the estimated assessable profit for the period. Taxation for foreign companies is calculated at the rates prevailing in the relevant jurisdictions.

(b) Reconciliation of continuing operations tax charge

The tax assessed on continuing operations accounting profit before income tax for the year is the same as the standard rate of UK corporation tax of 19.25% (2016: 20.0%) for the period under review. The reconciliation is explained below:

6. Taxation continued

(c) Unrecognised tax losses

The Group has tax losses of £1,673,000 (2016: £1,764,000) arising in the UK. The potential deferred tax asset not recognised in respect of losses in UK subsidiaries is £293,000 (2016: £347,000). No deferred tax is recognised on the unremitted earnings of overseas subsidiaries.

7. Dividends

Dividends paid during the year comprised a final 2016 dividend of 0.25p per ordinary share (2016: nil) and a 2017 interim dividend of 0.20p per ordinary share (2016: 0.15p).

Shareholders were offered an opportunity to receive the 2016 final dividend in the form of new shares in lieu of the proposed final dividend. The 2017 interim dividend was declared as a scrip dividend, with shareholders having the option to receive an alternative cash dividend of the same value.

Cash dividends of £197,000 (2016: £111,000) were paid during the year as follows.

Scrip dividends were issued in the year as follows.

The directors have recommended a final scrip dividend of 0.40p per share, with an alternative cash dividend of 0.40 pence per share, to give a total dividend for the year of 0.60 pence per share. The scrip reference price is 49.6p, calculated from the average of the closing price for an ordinary share of the company as derived from the daily official list of the London Stock Exchange during the period of five dealing days ending 23 March 2018.

If the 2017 final dividend is approved at the Annual General Meeting in May 2018 the dividend will be paid on 31 May 2018 to shareholders on the register at the close of business on 6 April 2018 (ex-div date 5 April 2018). In accordance with IFRS, the dividend is not provided for as a liability in the accounts until it becomes a legal liability of the Company and therefore will be recorded in the interim and annual accounts for 2018.

8. Basic and diluted earnings per share

Shares held by the Employee Share Ownership Trust are excluded from the weighted average number of shares in the period.

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 12 months to 31 December 2016 have been taken from, but do not constitute, the Company's statutory financial statements for that financial year.

2. The Group's activities, together with the factors likely to affect its future development, performance and position are set out in the Operating Review and Financial Review.

3. The Group's clients include many top contractors in the building and construction sector in the UK, Sweden, Germany, Benelux and the United States with no significant client concentration. The software products and services provided by the Group are reasonably embedded in their client's core operations and 49% (2016: 48%) of the Group's revenue is from recurring revenue contracts.

These maintenance contracts are renewed throughout the year although there is a slightly greater weighting in the fourth quarter. For these reasons, the Group has good visibility on any potential deterioration in its trading outlook and potential risk to the business. Not-withstanding the Group has net current liabilities of £1,932,000 at 31 December 2017 (2016: £2,743,000) these amounts are after deferred income of £4,789,000 (2016: £4,401,000) relating to annual maintenance contracts which are non-refundable. Historically, there is a low level of maintenance cancellations each year and the Board closely monitors clients that are potentially at risk of cancellation as well as the pipeline of new business.

The Group has both cash and undrawn credit facilities available to support its business operations and therefore the Board believes that the Group is well-positioned to manage the business risks. Revenue, operating profit and cash flow budgets have been prepared at business unit level. After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing its consolidated financial statements

4. The information herein has been prepared on the basis of the accounting policies adopted for the year ended 31 December 2017, 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 31 December 2016.

5. The Annual General Meeting of Elecosoft plc will be held Brewers' Hall, Aldermanbury Square, London EC2V 7HR on 17th May 2018 at 12 noon.

6. The Annual Report and Accounts for the year ended 31 December 2017 will be sent to shareholders by 23 April 2018 and will be available to view on the Company's website, www.elecosoft.com, from that date.