ELECO PLC

("Eleco" or the "Group")

The Building Systems and Software Group

Preliminary Results for the Year Ended 30 June 2008

Group Highlights

• Turnover increased by 37.1% to £84.9m (2007: £61.9m) 

• Group operating profit increased by 37.8% to £8.0m (2007: £5.8m) 

• Profit before tax increased by 39.9% to £8.2m (2007: £5.9m) 

• Profit after tax increased by 24.2% to £6.1m (2007: £4.9m)

• Proposed final dividend 2.0p per share (2007: 1.8p) making total for year of 3.0p per share (2007: 2.5p) covered 3.5 times (2007: 3.7 times)  

Building Systems

• Turnover increased by 37.8 % to £71.4m (2007: £51.8m)

• Operating profit increased by 20.9% to £7.4m (2007: £6.1m)

• Substantial increased contribution from expanded Precast Concrete operations

• Limited exposure to housing markets

Software

• Turnover increased by 33.2% to £13.5m (2007: £10.1m)

• Operating profit of £945,000 (2007: Loss of £297,000) 

• Record turnover and profit for Construction Software operations

John Ketteley, Executive Chairman of Eleco plc, commented:

"Trading conditions will be tough this year. However, we will apply the same measured and positive approach to our business in the year ahead, albeit against a backdrop of increasingly difficult market conditions. Given our strong financial position and the strength we derive from the balance of the products and business that we now have in the Group, I am confident that Eleco will perform well in the circumstances." 

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 Chairman's Statement

I am pleased to present my statement for the year ended 30 June 2008, which includes the review of our business activities and the outlook for the current year.

Eleco continued its progress in the year under review due to a strong performance from our expanded precast concrete operations, limited exposure to the UK and Irish housing markets, accounting for only 14% of Group turnover, and a significantly improved performance from our software interests.

Performance Summary

Group turnover for the year increased by 37.1% to £84.9m (2007: £61.9m).

Group operating profit was 37.8% higher at £8.0m (2007: £5.8m). Group operating profit was arrived at after deducting intangible asset amortisation costs for the year of £531,000 (2007: £435,000) and included a first year contribution of £521,000 from Millbury Systems, which was acquired in November 2007, before deducting acquisition accounting adjustments of £128,000 and intangible asset amortisation costs of £108,000.

Profit on ordinary activities before tax was 39.9% higher at £8.2m (2007: £5.9m), after net interest receivable of £202,000 (2007: £59,000). 

Group profit for the year after tax increased 24.2% to £6.1m (2007: £4.9m) equivalent to 10.6p earnings per share (2007: 9.3p earnings per share). 

Operating cash flow was again strong and net funds in hand at 30 June 2008 increased to £5.8m (2007: £4.8m). The cash cost of financing the acquisition of Milbury Systems during the year was £2.9m net of the cash balances acquired with the company. 

Investment in new products and enhanced software development increased by 26.9% to £2.9m (2007: £2.3m).

Dividends

The Board proposes an increased final dividend of 2.00p per share (2007: 1.80p per share), which subject to approval by shareholders, will be paid on 14 November 2008 to shareholders on the Register on 17 October 2008.

The proposed final dividend, together with the interim dividend of 1.00p already paid, would result in total dividends in respect of the year ended 30 June 2008 of 3.00p per share (2007: 2.50p per share), an increase of 20%. 

The total of dividends paid and proposed was covered 3.5 times by earnings per share of 10.6p (2007 Dividend Cover: 3.7 times earnings per share of 9.3p per share).

Employees

I would like to thank our employees in the UK, Germany, Sweden and South Africa whose hard work, dedication and skill have made possible these significantly improved results in a particularly difficult trading environment.

Review of Business Activities

Building Systems

Our Building Systems products are designed and engineered for projects that lend themselves to the efficient application of Modern Methods of Construction. They give our customers a competitive edge by maximizing the speed, efficiency and economy of the build process.  

Turnover of our Building Systems operations increased by 37.9% to £71.4m (2007: £51.8m) and operating profit increased by 20.9% to £7.4m (2007: £6.1m). Operating profit before acquisition accounting adjustments and amortisation of intangible assets was £7.7m (2007: £6.2m).

Precast Concrete

Turnover of our Precast Concrete operations increased by 81.3% to £37.9m (2007: £20.9m) and operating profit increased by 57.7% to £4.1m (2007: £2.6m). Operating profit before acquisition accounting adjustments and amortisation of intangible assets was £4.4m (2007: £2.6m).

Bell & Webster Concrete achieved a significant increase in sales of its FastBuild Rooms for hotels and student accommodation projects in the second half of the year; sales of its retaining wall and other products also remained firm. As a consequence, operating profits were significantly higher than last year. 

Bell & Webster Concrete also acquired a new site at Hoveringham which now enables it also to supply pre-stressed reinforced concrete panels. The site opens up new markets such as schools, prisons, nursing/residential homes and key worker accommodation for its FastBuild Rooms and is now fully operational. The plant was commissioned on time and budget and the costs of commissioning have been fully accounted for in the year under review. 

Milbury Systems performed particularly well in its first full six month period as part of the Group and its management and employees are to be congratulated on the enthusiasm and initiative they have shown on joining Eleco. 

We are committed to a policy of good environmental practice and continual improvement. Bell & Webster Concrete and Milbury Systems are currently engaged on a major environmental improvement project at their production plants at Grantham, Hoveringham and Lydney with the object of gaining ISO14001:2004 accreditation, an international standard for environmental management that is applied and recognised worldwide. The initial audit for the registration process will take place in October 2008 and we are aiming to gain accreditation during February 2009. 

Bell & Webster Concrete has also applied to register its Grantham production, design and administrative operations for the British Standards Institute OHSAS 18001: 2007 standard for occupational health and safety management systems. The first stage of the registration process began in September 2008. Application for registration will also be made in respect of the site at Hoveringham and Milbury Systems' site at Lydney in due course. We are aiming for the first stage accreditation during January 2009.

I believe that the gaining of these accreditations will enhance our reputation as a leading manufacturer of precast concrete elements for the UK construction industry. 

Other Building Systems

Our Other Building Systems operations comprise roofing and cladding; timber frame and engineered timber products; and timber engineering systems.

Turnover increased by 8.7% to £33.5m (2007: £30.9m). Operating profit reduced by 8.3% to £3.3m (2007: £3.5m). Operating profit before amortisation of intangible assets was £3.3m (2007: £3.6m).

Roofing and Cladding

SpeedDeck Building Systems launched two new products at the Interbuild Exhibition in October, 2007. SpeedRoof®, a secret fix roofing product and Elan, a cladding product were well received by the market. SpeedDeck Building Systems also successfully directed its main marketing effort in the second half on the Government's educational building programme. Its order book at the end of the year was significantly higher than at the beginning.  Downer Cladding Systems also performed well in the second half. As a consequence the improvement in performance by our roofing and cladding operations that I reported in the first half year, continued in the second half. 

Timber frame and engineered timber products

Eleco Timber Frame made a higher profit in the second half in a weak market. However, by the end of the year even this sector of the housing market had come under severe pressure and steps have now been taken to market its patented ElecoFrame® product more actively for use in commercial projects as well as social housing projects. ElecoFrame® is particularly suitable for the latter, due to its ability to achieve level 4,5 and 6 of the Code for Sustainable Homes, in combination with relevant technologies. 

Timber Engineering Systems

In my interim statement, I reported that the overall profits of our timber engineering businesses were some 20% lower at the half year mainly because of significant weakness in the Irish, UK and South African housing markets. Lower profits from Gang-nail Systems in the UK and International Truss Systems in South Africa were offset to some extent by increased profits from Eleco Bauprodukte which is principally involved in the commercial market in Germany.

In the second half, the weakness in the Irish and UK housing markets accelerated and the South African market experienced a marked drop in confidence. As a consequence, profits of Gang-Nail Systems and International Truss Systems were significantly lower, offset again by increased profits from Eleco Bauprodukte. This limited the drop in profits of our timber engineering businesses overall to 26.2% for the year. 

Software

Our Software operations comprise Construction Software and Visualisation Software.

Turnover of our Software operations increased by 33.2% to £13.5m (2007: £10.1m).

Our Software operations made an operating profit of £0.9m, after total acquisition accounting adjustments and amortisation of intangible assets of £0.4m (2007: Operating loss £0.3m, after total acquisition accounting adjustments and amortisation of intangible assets: £0.5m). Fully expensed development costs were £2.3m (2007: £1.8m).

Operating profit before acquisition accounting adjustments and amortisation of intangible assets was £1.4m (2007: £0.2m). 

Construction Software

Consultec and Asta Development both performed well.  Consultec Sweden achieved a significant improvement in profit for the year and Asta Development record turnover and profit. However, Consultec UK's was adversely affected by the downturn in the UK housing market and its profits were lower.

Consultec Sweden successfully completed the development of its new .Net based Bidcon® Estimating package, which will be launched this autumn in Sweden. Asta Development also successfully released a new version of the Asta Powerproject software and expanded their distribution network to include Australia and Dubai. The release of Consultec UK's new objectivised Timber Frame software program was also well received.

Visualisation Software

Sales of Visualisation Software, particularly of our retail products, increased in the period. We also reached agreement with 9 of the 10 international distributors that we had targeted for our consumer applications. Increased costs of investing in new programs again resulted in a modest loss, but Visualisation Software improved its position overall during the year and is well placed for the year ahead. For example, we recently secured a trademark license to produce software in the UK under the highly successful "Grand Designs" brand. "Grand Designs 3D" will be launched in October 2008 and will mark a significant step change in the profile and performance of Eleco's home design software in the UK. 

Finance

We have consistently applied sound financing policies since the Company's recovery in the past decade and I am again pleased to report that our strong operating cash flows in the year under review improved our net cash position at the year end. Our cash resources, together with the committed medium term banking facilities that we put in place last year, in anticipation of the tightening credit conditions, provides a strong underpinning for our trading operations and will also enable us to take advantage of investment opportunities as they arise. As credit conditions in the financial markets continue to tighten, increasing importance is being placed by customers on the financial standing of their suppliers. Given our strong financial position, Eleco is well placed to provide the necessary assurances and I believe that this may well give us a competitive edge in current conditions. 

Outlook

Trading conditions will be tough this year. However, we will apply the same measured and positive approach to our business in the year ahead, albeit against a backdrop of increasingly difficult market conditions. Our Building Systems operations will concentrate their efforts on opportunities in the infrastructure, hotel and educational sectors; and our Software operations will focus on international and consumer markets. Given our strong financial position and the strength we derive from the balance of the products and business that we now have in the Group, I am confident that Eleco will perform well in the circumstances

Consolidated Income Statement

For the year ended 30 June 2008

Consolidated Statement of Recognised Income and Expense

For the year ended 30 June 2008

Consolidated Balance Sheet

As at 30 June 2008

  Consolidated Cash Flow Statement

For the year ended 30 June 2008

Business Segment Analysis 

For the year ended 30 June 2008

Business Segment Analysis 

For the year ended 30 June 2007

Notes