Final Results
22 March 2022
IQGeo Group plc
(the "Company" or the "Group")
Final results for the year ended 31 December 2021
Success in building recurring revenues through organic growth and acquisition
IQGeo Group plc (AIM: IQG), a market leading provider of geospatial productivity and collaboration software for the telecoms and utility industries, is pleased to announce its results for the twelve months ended 31 December 2021 (the "Year" or "Period").
Operational highlights:
· Substantial progress in all regions with a record 76 new customer logos signed in the year
· £3.4 million of new Annual Recurring Revenue ("ARR") added, up from £1.4 million in the prior year
· Successful integration of OSPInsight International Inc ("OSPI") which was acquired in December 2020 with 54 new customer logos signed in the year and new ARR of £1.1 million more than double the prior acquisition run rate
· Successful launch of Network Manager Electric product and first sale of this to an electrical utility provider in the US
· 113% recurring revenue Net Retention Rate ("NRR" *) (2020: 140%)
· 5-year contract for a Total Contract Value ("TCV") of $4.5 million for a software subscription signed with a major US telecom network operator in December 2021. Post year end, the same customer has placed a further order for TCV of $1.5 million subscription
Financial highlights:
· Headline figures continued to exceed market expectations
· Revenue growth of 51% to £13.8 million (2020: £9.2 million)
· Recurring revenue growth of 80% to £5.8 million (2020: £3.2 million)
· Recurring revenues now account for 42% of all revenues (2020: 35%)
· Material increase in exit ARR** of 54% to £8.2 million (2020: £5.3 million)
· Gross margin increased to 64% (2020: 52%)
· Substantially reduced adjusted EBITDA*** loss of £0.8 million (2020: £2.5 million) and reduced loss for the year of £1.9 million (2020: £4.1 million)
· Cash, net of debt at 31 December of £11.5 million (2020: £10.5 million)
Outlook:
· Our customers' end markets have remained very resilient and our contract wins of new and existing software modules in both Telecommunications and Utilities markets give us great confidence that we have the right product set to meet our customers' demands moving forwards
· Exit ARR** of £8.2 million provides strong visibility of future revenues and cash flows
· Continued progress in financial metrics with adjusted EBITDA and cash flow break even expected during FY22
*NRR is the growth in recurring revenues from existing customers, less any customer churn
**Exit ARR is defined as the current go forward run rate of annually renewable subscription and M&S agreements
***Adjusted EBITDA excludes amortisation, depreciation, share option expense, foreign exchange gains/losses on intercompany trading balances and non-recurring items and is reported as it reflects the performance of the Group
Richard Petti, Chief Executive Officer, said:
"We are very pleased to report that we have come out ahead of our own expectations for the financial year and made real progress towards our aim of building a high recurring revenue software business. Our performance this year is testament to our team's ability to build market-leading software and to win and deliver on long-term contracts. This has further strengthened the Group's blue chip client base and established a solid platform for future organic and acquisitive growth.
We remain well poised to capitalise on changing market dynamics with telecom and utility operators making once-in-a-generation investments into new fibre, 5G, and decarbonised distributed energy networks. IQGeo sees high levels of investment for next generation networks and operators are making strategic decisions now that will be deployed for decades to come. Because of this, demand for IQGeo's single solution to plan, build and operate networks remains strong. We believe that we are in the right place, with the right product, at the right time.
Our progress this year, along with our capabilities and the market opportunities provides us with a high level of confidence and optimism as we move to FY22 and beyond."
For further information contact:
IQGeo Group plc +44 1223 606655
Richard Petti
Haywood Chapman
finnCap Ltd +44 20 7220 0500
Henrik Persson, Seamus Fricker (Corporate Finance)
Tim Redfern, Richard Chambers (ECM)
Notes to Editors
About IQGeo
IQGeo™ (AIM: IQG), delivers award-winning geospatial software solutions to telecommunication and utility network operators around the world ranging from large multinationals to smaller regional providers. The IQGeo software suite improves productivity and collaboration across enterprise planning, design, construction, maintenance, and sales processes reducing costs and operational risks while enhancing customer satisfaction. Our mobile-first, cloud-native software helps companies create and maintain an accurate view of their increasingly complex network assets that is easily accessible by anyone, wherever and whenever needed. Whether using our Enterprise IQGeo Platform or targeted OSPInsight fiber planning and design software, we enable a "System of Action" that breaks down information silos, improves data quality and accelerates decision making. Headquartered in Cambridge, with offices in Denver, Salt Lake City, Frankfurt and Tokyo, we work with some of the largest network infrastructure operators in the world. For more information visit: www.iqgeo.com/
Chair's statement
Overview
The Group has made strong progress in the year, delivering growth, winning new customers and expanding existing relationships by applying our software solutions to a rapidly developing and changing market.
Results overview
This last year has seen IQGeo deliver results which show excellent performance against all our key metrics of; revenue growth 51% to £13.8 million, increase in recurring revenue which now accounts for 42% of total revenue (2020: 35%), new customer wins of 76, and an increase in R&D expenditure of 47% to £2.5 million (2020: £1.7 million). We have also seen a material reduction in losses shown at both adjusted EBITDA of £0.8 million (2020: £2.5 million) and reported loss for the year of £1.9 million (2020: £4.1 million). Cash, net of debt increased to £11.5 million from £10.5 million in prior year.
This was also our first full year since the acquisition of OSPI and with the organisational integration now complete, we continue to benefit from the ability to address a wider market. This will allow us to better serve the large and developing industry need for proven solutions in our tier 3 and tier 4 markets.
Organisation
Having successfully managed the challenges brought upon us all in the last two years, our people and our organisation as a whole have remained flexible and focused, allowing us to stay close to our markets and the growing opportunities that our existing and developing products can address.
We continue to invest in our technology solutions aimed at specific market and customer demand, while expanding our market presence in certain geographical territories.
Board developments
We continue in our commitment to good corporate governance by continuing to apply the QCA Corporate Governance Code in our reporting structure. As such we recognise that Robert Sansom, Max Royde and I are no longer regarded as independent Non-Executive Directors. Ian Kershaw, Andy MacLeod and Carolyn Rand remain independent. As our business progresses, we will continue to look for additional experience and independence to continue to support and supplement the Board.
In May we appointed Carolyn Rand to the Board as a Non-Executive Director and Chair of the Audit Committee and consequently I have now stepped down from the Audit Committee. Carolyn brings a wealth of experience in financial and business leadership, governance and strategy planning across public and private enterprises and will undoubtedly be a valuable asset to the Company.
Outlook
This year has seen IQGeo continue to develop and deliver a set of first class solutions to our key markets of telecommunications and utilities, where our customers look to address the rapidly growing and challenging market expectations with a robust, scalable and proven technology. As a trusted partner across these industries and within our key geographical markets, we continue to see new customer wins, existing customer expansion and high levels of retention. All these factors help support our key ambitions and confidence to continue to grow our business across all levels.
Finally, I would like to extend the Board's thanks to all our stakeholders, and the valuable input and support given over the past year, our outstanding teams across all our geographies for the hard work and flexibility needed in the current markets and, key to all this, is the trust our partners and customers have shown in IQGeo.
Paul Taylor
Chair
21 March 2022
Chief Executive Officer's statement
Today, IQGeo is a stronger, more focused and more successful company than it was before it entered the recent pandemic. We have exceeded our financial forecasts, delivered on our client commitments, and made impressive investments into both our products and our organisation. Together, these achievements mean that IQGeo enters 2022 with a clear sense of purpose and confidence in its ability to achieve its goals.
In 2019 when IQGeo first focused itself on its core mission of building better networks, we could see that telecommunications and utility industries were on the cusp of a once-in-a-generation investment process. The growth of fibre broadband, 5G and renewable energy is a global phenomenon touching every economy and attracting trillions of Dollars of annual investments1.
We also could see that the technology network operators had to design, build and operate these new networks as current infrastructure was no longer fit for purpose and that the providers of these legacy solutions had failed to grasp the importance of using cloud technology to connect enterprise activities along the network lifecycle2 with a single solution, using a single source of geospatially referenced enterprise data.
Fast forward to 2021 and our sales performance is evidence that world class network operators around the world agree with us. A record haul of new clients and orders, and a new high of projects successfully delivered provide strong validation for our vision, our technology, and our business strategy. In 2022 we will continue executing on what is proving to be a very successful formula.
Our operational and financial success in 2021 has been thanks to a relentless pursuit of our core business objectives:
1. Successful global growth
2. Increased recurring revenue
3. Outstanding product innovation
We have seen growth across all our core geographies of North America, Europe and Asia. Our ability to create long-term relationships with our customers based on recurring ARR software revenue is now well established, and we continue to break new ground in technology innovation as we work closely with our customers.
In addition to building a successful business, in 2022 we will also establish a new focus internally and externally on decarbonisation, working to support our customers with their net-zero carbon initiatives, while measuring and mitigating IQGeo's own carbon footprint3.
Products and markets
We welcomed 76 new customers in 2021- a record high - including partnerships with many influential network operators that have a clear digital transformation vision in which IQGeo plays a strategic role. The IQGeo team is designing and delivering software products that have caught the attention of the industries we serve and our organisation is evolving quickly from a market challenger to a leader. Our innovative software is now well established in two investment-rich markets that require our mission-critical software to meet their growth objectives.
2021 was the first full year for the acquisition of the OSPInsight software that makes up our offering to small and more niche customers, typically Tier 3 and Tier 4 out of a 4 tier hierarchy - our Small and Medium Business (SMB) offering. We are extremely pleased with the way we have integrated the business and of the performance during the year. Targeting smaller fibre network operators including corporate and municipal customers, the team closed 54 new accounts on top of an already firm foundation, growing their exit recurring revenue by over £0.8 million. Selling into a very dynamic market, the SMB team secured new customers around the globe in verticals as diverse as healthcare, highways, mining, and education in addition to its core markets of broadband providers.
For our Enterprise customers, typically large network operators, we released a full suite of our Network Manager software for fibre, electric, and gas networks to attract and close a number of major new deals. Our product leadership in the Enterprise market translated into 22 new customers and together with significant expansions at existing customer accounts, we achieved own product orders growth of 77%.
Listening to and working closely with our customers has also led to an expanding number of new application use cases for our software. For example, in Japan we are working with two of the country's largest electrical utility operators, TEPCO and Chubu Electric Power Grid, to provide a damage assessment and disaster response solution to manage increasingly frequent and severe weather incidents. We are also expanding the use of our Workflow management software to support bid management applications at Bell in Canada, as well as construction management applications with several customers. These use cases are readily transferable to other customers elsewhere in the world and demonstrate one of IQGeo's greatest competitive advantages; the ability to support our customers with a single geospatial solution across their entire operational lifecycle.
Business strategy
We were pleased to exceed our financial forecasts in 2021 through the successful acquisition of new customers and expansion within existing accounts. This two-prong approach has been successfully demonstrated across both our SMB and Enterprise customers and is central to our high-growth strategy. Once sold into a customer account, our award-winning software is quickly established as a strategic asset, resulting in further sales of both new seats of existing software and new software modules. Our overall net retention for recurring revenue during 2021 was 113%.
To promote expansion within existing accounts the SMB offering continues to develop specific "add-ons" of new functionality that keeps the product fresh and relevant. For our Enterprise customers, we have added separately licensable applications to the Enterprise product suite. These additional capabilities, together with the growth of new software user licences as our products become more widely used across an organisation, are delivering significant incremental revenue and increasing our "stickiness" within existing accounts.
The SMB short sales cycle revenue channel with smaller customers and the Enterprise higher revenue stream within large accounts is proving highly complementary. Combine this with our ability to expand functionality and user licences within existing accounts and we have created a strong sales engine. The strengths of both offerings are complementary and provide consistency to IQGeo's overall revenue stream by delivering a resilient mix of many smaller customers with shorter buying cycles and large accounts with long-term, high-value projects. This mix reduces month-on-month revenue volatility and improves the quality of forecasting, which in turn means that as a business we can time our investments for maximum effect.
Looking forward, we see growth coming through organic performance and where the right opportunities exist, potential future acquisitions.
Organisational structures
The IQGeo business model has adapted well to the Covid-19 restrictions. Our sales, marketing and delivery models have been enhanced to reflect our customers' changed behaviour. The management team is aware of the impact on individuals and continues to make extra effort to support the team and develop personalised career growth strategies. In our most recent staff survey, NPS numbers from our team remain very high, and is well above competitive organisations within our industry. The management team is also clear in its mission to create social capital within the organisation by providing frequent communications including monthly all-hands meetings to provide clarity on our goals, how we are achieving them and to celebrate the achievements of our high performance organisation.
As IQGeo grows, recruitment is a clear focus. Many technology companies are recruiting in the same talent pool, but our job to hire and retain the brightest minds in the industry is made easier by the impressive reputation that IQGeo is building. Strong referencing has proven to be one of our best recruiters and it has been satisfying to see individuals working across the industry reach out to us for employment opportunities, giving IQGeo the chance to hire proven talent eager to join a highly professional and winning team.
Decarbonisation market drivers
2021 was the year of COP26, creating an even greater imperative to understand and address the climate change crisis. As global industries, many telecom and utility network operators must develop net-zero carbon initiatives and the IQGeo software is supporting this process. Electrical network operators are planning new grids that support distributed energy generation, and telecom operators are helping society reduce carbon emissions through fibre broadband connectivity that enables remote commerce, education, social care, and many other applications. In these cases, the IQGeo geospatial software plays a key role by helping the industry efficiently design, build, and maintain the new, lower carbon networks of the future. The drive to decarbonisation will continue to grow in importance as governments around the world mandate new C02 standards and at IQGeo we will continue to work closely with our customers to develop applications and process optimisation that advances net-zero initiatives.
As an engaged and responsible business, the IQGeo team is also working to develop our own carbon footprint initiative. In 2021 we worked with an independent third party to capture and analyse our corporate carbon footprint over the previous three years. Based on this research and analysis, in 2022 we will be putting in place recommendations and policies to completely offset the IQGeo carbon footprint.
Summary
I am very pleased with the progress we have made in 2021. Our technology, business and market strategies gathered significant momentum and we exceeded the targets we set for the business. The IQGeo team has stepped up to the challenges we faced and are consistently delivering on key objectives. We enter 2022 with a clear sense of purpose and confidence in our abilities to build better networks for our customers and create an attractive and successful business for all our stakeholders.
Richard Petti
Chief Executive Officer
21 March 2022
1. https://www.statista.com/statistics/870924/worldwide-digital-transformation-market-size/
2. The network lifecycle are those activities that take any network (telecoms or utilities) from the drawing board to connecting and supporting a fee-paying customer.
3. Please refer to the decarbonisation section of the Annual Report for more details on this business goal.
Chief Financial Officer's statement
Principal events and overview
2021 has been a very successful year for the Group as we continue to focus on increasing Annual Recurring Revenue ("ARR") and growing our customer base through subscription-based software sales and maintaining long-term relationships with customers. As we continue to be successful in the markets in which we operate we will continue to grow revenue and achieve sustained profitability and cash inflows.
On 21 December 2020, the Group acquired OSPI for a total consideration of up to $8.75 million. The OSPI business or Small and Medium Business ("SMB") unit of IQGeo has been successfully integrated into IQGeo's operations during the first half of 2021, and the positive results of the acquisition along with the organic growth achieved by IQGeo's pre-existing operations are reflected in the Group KPIs. The integration of OSPI has gone very well with the SMB unit winning 54 new logos during the year and more than doubling the new ARR won to £1.1 million compared to the year before the acquisition.
As at 31 December 2021, the Exit ARR of the Group was £8.2 million and this will give us greater visibility of revenues and cash flows moving forwards. 42% of the Group's revenues during the year were recurring compared to 35% in 2020.
Key performance indicators
On a monthly basis, the Directors review revenue, operating costs, cash and KPIs to ensure the continued growth and development of the Group. Primary KPIs for 2020 and 2021 were:
KPIs | 2021 | 2020 |
| £'000 | £'000 |
Total revenue | 13,849 | 9,155 |
Recurring revenue | 5,751 | 3,195 |
Recurring revenue % | 42% | 35% |
New ARR added in year | 3,370 | 1,419 |
Exit recurring revenue run rate | 8,178 | 5,302 |
IQGeo own product orders | 18,887 | 10,700 |
Gross margin % | 64% | 52% |
Adjusted EBITDA loss | (829) | (2,495) |
Loss for the year | (1,929) | (4,111) |
Recurring revenue net retention | 113% | 140% |
Cash, net of debt | 11,499 | 10,478 |
Annual recurring revenue
ARR arises from both subscription-based software sales and also maintenance and support arrangements from perpetual licence sales. The Group has been successful in continuing to increase ARR with £3.4 million being won in year, a 137% increase over the £1.4 million added during 2020. £1.1 million of the increase was due to OSPI, acquired in December 2020 and therefore not included in the 2020 figure, albeit that under IQGeo ownership, OSPI ARR won has increased from £0.5 million in 2020 to £1.1 million in 2021. Whilst ARR won was partly due to new customers, with 76 new logos won in the year compared to 13 in 2020, the increase was also due to expansion sales to existing customers. The Group achieved a recurring revenue net retention figure of 113% which reflects the Group's continued ability to grow existing customer accounts through new products and increasing the user count, along with excellent logo retention. The driver behind the 2020 Net Retention figure of 140% was the large order received from Tokyo Electric and Power Company, an existing customer, in March 2020. We are, however, still very pleased with the 113% net retention figure achieved.
The Exit ARR of the Group as of 31 December 2021 has increased by 54% to 8.2 million (2020: 5.3 million). Recurring revenues now account for 42% of all revenue, compared to 35% in 2020, and as this percentage continues to grow, this will bring increased visibility of revenues and cash flows as well as increased margins given the 90% gross margin that our subscription and maintenance and support revenues bring.
Additionally to recurring revenue, revenue is derived from consultancy services on own IP products and also consultancy services connected to third party products. Revenues from third party product services have declined in the current period and are still expected to decline in future periods as the Group continues to focus on growing recurring revenues.
Orders
Bookings of orders related to IQGeo own products increased by 77% to £18.9 million during 2021 (2020: £10.7 million) with new customers being added in all three of our key markets (North America, Europe and Japan).
IQGeo own product order backlog (the value of revenue to be recognised over future years) as at 31 December 2021 was £14.1 million (2020: £8.3 million), an increase of 70%.
Bookings of orders related to third party Geospatial Services were £0.7 million (2020: £1.2 million) with order backlog decreasing to £0.5 million (2020: £0.9 million) reflecting the managed decline in this legacy revenue stream.
Revenue
Revenue composition by revenue stream is summarised in the table below:
Revenue by stream | 2021 £'000 | % of total revenue | 2020 £'000 | % of total revenue | Year-on-year growth |
Recurring IQGeo product revenue | 5,751 | 42% | 3,195 | 35% | 80% |
Perpetual software | 2,011 | 15% | 299 | 3% | 573% |
Services | 5,089 | 36% | 3,846 | 42% | 32% |
Non-recurring IQGeo product revenue | 7,100 | 51% | 4,145 | 45% | 71% |
Total IQGeo product revenue | 12,851 | 93% | 7,340 | 80% | 75% |
Geospatial services from third party products | 998 | 7% | 1,815 | 20% | (45)% |
Total revenue | 13,849 | 100% | 9,155 | 100% | 51% |
The Group has achieved recurring revenue growth of 80% during 2021 to £5.8 million (2020: £3.2 million) largely as a result of the ARR won during 2020/2021 and the acquired OSPI customer base which brought £2.0 million Exit ARR at the point of acquisition.
Sales of perpetual software licences have increased significantly from the prior year as while the Group continues to focus on subscription sales, some customers - particularly in the utility market - prefer a perpetual software offering. It is anticipated that this one-off revenue will continue to fluctuate year on year.
Associated service revenues from initial deployments and expansion orders have also grown by 32% and the Group went into 2022 with a strong backlog of services orders, providing visibility of services revenues for six months and beyond. Labour backlog as at 31 December 2021 was £3.3 million with a further £1.4 million of services orders being won in January 2022.
Gross profit
Gross profit | 2021 £'000 | Gross margin % | 2020 £'000 | Gross margin % | Gross margin mvt |
Gross profit/gross margin | 8,797 | 64% | 4,746 | 52% | 12% |
Gross margin percentage has increased during 2021 by 12%. High margin recurring product revenues are 42% of total revenues for 2021 (2020: 35%). This shift in product mix has driven the increase in gross margin percentage along with improved services margins.
Operating expenses and adjusted EBITDA
Operating expenses were £11.4 million (2020: £9.1 million) and are summarised as follows:
| 2021 | 2020 |
| £'000 | £'000 |
Other operating expenses | 9,626 | 7,241 |
Depreciation | 315 | 369 |
Amortisation | 1,656 | 1,002 |
Share option expense | 282 | 130 |
Unrealised foreign exchange loss on intercompany trading balances | 42 | 43 |
Non-recurring items | (550) | 289 |
Total operating expense | 11,371 | 9,074 |
Other operating expenses of the Group include sales, product development, marketing and administration costs, net of costs capitalised.
Other operating costs during the period have increased with the addition of the OSPI acquired business adding £1.6 million of operating costs to the Group. The Covid-19 pandemic has continued to restrict travel and face-to-face sales activities which has resulted in reduced costs. Operating costs are anticipated to increase in the future to drive further revenue growth.
Non-recurring items in 2021 includes a £0.6 million credit relating to a loan waiver. In April 2020, IQGeo America Inc, a subsidiary of IQGeo Group plc, applied for and received a loan of $819,000 under the USA CARES Act's "Paycheck Protection Program" in order to support the USA operations during the uncertainty caused by the impact of the global Covid-19 pandemic. This loan was forgiven by the US Small Business Administration along with interest accrued in June 2021.
Adjusted EBITDA excludes amortisation, depreciation, share option expense, foreign exchange gains/losses on intercompany trading balances and non-recurring items and is reported as it reflects the performance of the Group. Adjusted EBITDA for the year was an improved £0.8 million loss (2020: Adjusted EBITDA £2.5 million loss).
The operating loss for the period was £2.6 million (2020: £4.3 million).
EPS and dividends
Adjusted diluted loss per share was 3.1 pence (2020: 7.3 pence). Reported basic and diluted loss per share was 3.4 pence (2020: 8.2 pence). The Board does not feel it appropriate at this time to commence paying dividends.
Consolidated statement of financial position
As at 31 December 2021, the Group had a cash position of £11.5 million and no debt (2020: £11.1 million with debt of £0.6 million).
Assets
Total assets were £27.4 million (2020: £27.5 million). Total current assets decreased marginally to £16.7 million (2020: £16.8 million) although this included movements on the RTLS SmartSpace investment. The consideration for disposal of the RTLS SmartSpace business in 2018 included £2.0 million in a rollover investment into the sold business. On 29 December 2020, the Group entered into an agreement to sell its shares in the rollover investment for a consideration of £2.5 million. As at 31 December 2020, the investment was included within current assets as an asset held for sale. In January 2021, the sale was completed and £2.5 million cash was received by IQGeo. The movement in the assets held for sale has been largely offset by the movement in trade and other receivables from £2.9 million in 2020 to £5.0 million, the increase driven by the growth of the business and timing of deals closed in December 2021.
Total non-current assets were £10.7 million (2020: £10.6 million). Capitalised development costs at 31 December 2021 were £2.5 million (2020: £1.8 million) with the increase reflecting the investment in the IQGeo product suite, offset by the amortisation charge. No change has been made to the current three-year amortisation period, due to the fast-moving nature of the technology.
Liabilities
Total current liabilities increased to £8.8 million (2020: £6.2 million) which includes an increase in deferred revenue of £1.7 million as would be expected in a business that is increasing annual recurring revenue through subscription-based customer contracts. Current liabilities also include £0.8 million of contingent consideration in respect of the OSPI acquisition which will be settled before the end of April 2022.
Total non-current liabilities decreased to £1.4 million (2020: £2.9 million restated) due to the forgiveness of the bank loan granted under the USA CARES Act's Paycheck Protection Programme and settlement of outstanding balances in relation to the OSPI acquisition.
Net assets
Net assets decreased to £17.2 million (2020: £18.4 million restated).
Cash and cash flow
Operating cash outflow before working capital movement was £0.9 million (2020: £2.8 million). Operating cash inflow from operating activities after adjusting for working capital and tax was £0.7 million (2020: £2.3 million outflow).
The Group had investment outflows of £0.1 million (2020: £5.5 million). The 2021 figures included £2.5 million received from the RTLS disposal which partially offset £1.9 million of capitalised R&D costs and £0.6 million of deferred payments in relation to the OSPI acquisition. The 2020 figure included £4.0 million initial consideration for the OSPI acquisition.
Cash outflows from financing activities were £0.3 million (2020: £5.8 million inflow) with the year-on-year movement primarily due to the fundraise completed in December 2020.
Going concern
As at 31 December 2021, the Group had £11.5 million of cash (2020: £11.1 million). The Directors have prepared detailed cash flow projections including sensitivity analysis on key assumptions. The projections prepared until 31 March 2023 show that the Group will be able to operate comfortably within the current levels of cash available and, based on this, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing its consolidated financial statements.
Haywood Chapman
Chief Financial Officer
21 March 2022
Consolidated income statement
for the year ended 31 December 2021
| Notes | 2021 £'000 | 2020 £'000 |
|
Revenue | 5 | 13,849 | 9,155 |
|
Cost of revenue |
| (5,052) | (4,409) |
|
Gross profit |
| 8,797 | 4,746 |
|
Operating expenses |
| (11,371) | (9,074) |
|
Operating loss |
| (2,574) | (4,328) |
|
Analysed as: |
|
|
|
|
Gross profit |
| 8,797 | 4,746 |
|
Other operating expenses |
| (9,626) | (7,241) |
|
Adjusted EBITDA |
| (829) | (2,495) |
|
Depreciation | 14, 15 | (315) | (369) |
|
Amortisation and impairment of intangible assets | 13 | (1,656) | (1,002) |
|
Share option expense |
| (282) | (130) |
|
Unrealised foreign exchange losses on intercompany trading balances |
| (42) | (43) |
|
Non-recurring items | 10 | 550 | (289) |
|
Operating loss |
| (2,574) | (4,328) |
|
Finance income | 9 | 7 | 7 |
|
Finance costs | 9 | (174) | (105) |
|
Loss before tax |
| (2,741) | (4,426) |
|
Income tax | 11 | 812 | 315 |
|
Loss for the year |
| (1,929) | (4,111) |
|
Earnings/(Loss) per share |
|
|
| |
Basic | 12 | (3.4p) | (8.2p) |
|
Diluted | 12 | (3.4p) | (8.2p) |
|
Consolidated statement of comprehensive income
for the year ended 31 December 2021
| 2021 £'000 | 2020 £'000 |
Loss for the year | (1,929) | (4,111) |
Other comprehensive income: |
|
|
Items that may be reclassified subsequently to profit and loss |
|
|
Exchange difference on retranslation of net assets and results of overseas subsidiaries | 170 | 80 |
Items that will not be reclassified to profit and loss |
|
|
Changes in the fair value of equity investments at fair value through other comprehensive income | - | 500 |
Total comprehensive loss for the year | (1,759) | (3,531) |
Consolidated statement of changes in equity
for the year ended 31 December 2021
|
|
|
| |||||||||
|
|
|
| |||||||||
| Ordinary share capital £'000 | Share premium £'000 | Share based payment reserve £'000 | Capital redemption reserve £'000 | Merger relief reserve £'000 | Translation reserve £'000 | Retained earnings £'000 | Total £'000 | ||||
Balance at 1 January 2020 as previously reported | 990 | 17,454 | 632 | 476 | - | (1,866) | (2,114) | 15,572 | ||||
Restatement in respect of deferred tax asset | - | - | - | - | - | - | 285 | 285 | ||||
Balance at 1 January 2020 restated | 990 | 17,454 | 632 | 476 | - | (1,866) | (1,829) | 15,857 | ||||
Loss for the year | - | - | - | - | - | - | (4,111) | (4,111) | ||||
Exchange difference on retranslation of net assets and results of overseas subsidiaries | - | - | - | - | - | 80 | - | 80 | ||||
Other comprehensive income | - | - | - | - | - | - | 500 | 500 | ||||
Total comprehensive loss for the year | - | - | - | - | - | 80 | (3,611) | (3,531) | ||||
Issue of shares - fundraise, net of costs | 136 | 5,030 | - | - | - | - | - | 5,166 | ||||
Issue of shares - acquisition | 18 | - | - | - | 739 | - | - | 757 | ||||
Exercise of share options | 2 | 10 | (3) | - | - | - | 3 | 12 | ||||
Lapse of share options | - | - | (569) | - | - | - | 569 | - | ||||
Equity-settled share-based payment | - | - | 130 | - | - | - | - | 130 | ||||
Transactions with owners | 156 | 5,040 | (442) | - | 739 | - | 572 | 6,065 | ||||
Balance at 31 December 2020 restated | 1,146 | 22,494 | 190 | 476 | 739 | (1,786) | (4,868) | 18,391 | ||||
|
|
|
|
|
|
|
|
| ||||
Balance at 31 December 2020 as previously reported | 1,146 | 22,494 | 190 | 476 | 739 | (1,786) | (5,153) | 18,106 | ||||
Restatement in respect of deferred tax asset | - | - | - | - | - | - | 285 | 285 | ||||
Balance at 31 December 2020 restated | 1,146 | 22,494 | 190 | 476 | 739 | (1,786) | (4,868) | 18,391 | ||||
Loss for the year | - | - | - | - | - | - | (1,929) | (1,929) | ||||
Exchange difference on retranslation of net assets and results of overseas subsidiaries | - | - | - | - | - | 170 | - | 170 | ||||
Total comprehensive loss for the year | - | - | - | - | - | 170 | (1,929) | (1,759) | ||||
Issue of shares - acquisition | 3 | - | - | - | 220 | - | - | 223 | ||||
Exercise of share options | 1 | 13 | (6) | - | - | - | 6 | 14 | ||||
Lapse of share options | - | - | (12) | - | - | - | 12 | - | ||||
Equity-settled share-based payment | - | - | 282 | - | - | - | - | 282 | ||||
Transactions with owners | 4 | 13 | 264 | - | 220 | - | 18 | 519 | ||||
Balance at 31 December 2021 | 1,150 | 22,507 | 454 | 476 | 959 | (1,616) | (6,779) | 17,151 | ||||
Restatement in respect of deferred tax asset
When IQGeo Group plc listed in 2011 an adjustment was made to the consolidated statement of financial position to recognise a deferred tax liability in respect of capitalised research and development costs. In recognising the deferred tax liability, an equal and opposite deferred tax asset should have been recognised to fully offset that deferred tax liability, reducing the net deferred tax position to £Nil.
The restatement of the 2019 closing position within the consolidated statement of changes of equity, reflects the recognition of a deferred tax asset of £285,000 which would fully offset the value of the deferred tax liability recognised within the consolidated statement of financial position as previously reported.
The effect of the error was to understate the net asset position reported within the consolidated statement of financial position by £285,000 as at 31 December 2019.
Consolidated statement of financial position
for the year ended 31 December 2021
| Notes | 2021 £'000 | 2020 restated £'000 | 2019 restated £'000 |
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Intangible assets | 13 | 9,207 | 8,902 | 1,596 |
Property, plant and equipment | 14 | 167 | 167 | 86 |
Right-of-use assets | 15 | 1,336 | 1,567 | 73 |
Investments |
| - | - | 2,000 |
Total non-current assets |
| 10,710 | 10,636 | 3,755 |
Current assets |
|
|
|
|
Trade and other receivables | 16 | 5,025 | 2,850 | 2,353 |
Corporation tax receivable |
| 176 | 413 | 16 |
Asset held for sale | 7 | - | 2,500 | - |
Cash and cash equivalents | 17 | 11,499 | 11,078 | 13,053 |
Total current assets |
| 16,700 | 16,841 | 15,422 |
Total assets |
| 27,410 | 27,477 | 19,177 |
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables | 18 | (8,579) | (5,828) | (3,241) |
Bank loans payable | 19 | - | (167) | - |
Lease obligation | 20 | (246) | (208) | (79) |
Total current liabilities |
| (8,825) | (6,203) | (3,320) |
Non-current liabilities |
|
|
|
|
Deferred tax | 11 | - | (66) | - |
Trade and other payables | 18 | - | (746) | - |
Bank loans | 19 | - | (433) | - |
Lease obligation | 20 | (1,434) | (1,638) | - |
Total non-current liabilities |
| (1,434) | (2,883) | - |
Total liabilities |
| (10,259) | (9,086) | (3,320) |
Net assets |
| 17,151 | 18,391 | 15,857 |
Equity attributable to owners of the Company |
|
|
|
|
Ordinary share capital | 21 | 1,150 | 1,146 | 990 |
Share premium | 21 | 22,507 | 22,494 | 17,454 |
Share-based payment reserve |
| 454 | 190 | 632 |
Capital redemption reserve |
| 476 | 476 | 476 |
Merger relief reserve |
| 959 | 739 | - |
Translation reserve |
| (1,616) | (1,786) | (1,866) |
Retained earnings |
| (6,779) | (4,868) | (1,829) |
Equity attributable to shareholders of the Company |
| 17,151 | 18,391 | 15,857 |
The financial statements were approved and authorised for issue by the Board of Directors on 21 March 2022 and signed on its behalf by:
Richard Petti Haywood Chapman
Chief Executive Officer Chief Financial Officer
IQGeo Group plc
Registered Number: 05589712
Consolidated statement of cash flows
for the year ended 31 December 2021
| Notes | 2021 £'000 | 2020 £'000 |
Loss before tax from operating activities |
| (2,741) | (4,426) |
Adjustments for: |
|
|
|
Depreciation | 14,15 | 315 | 369 |
Amortisation | 13 | 1,656 | 1,002 |
Unrealised foreign exchange losses on intercompany trading balances |
| 42 | 43 |
Forgiveness of bank loan |
| (592) | - |
Share-based payment charge |
| 282 | 130 |
Finance income | 9 | (7) | (7) |
Finance costs | 9 | 174 | 105 |
Operating cash flows before working capital movement |
| (871) | (2,784) |
Change in receivables |
| (2,175) | 190 |
Change in payables |
| 2,807 | 295 |
Cash used in operations before tax |
| (239) | (2,299) |
Net income taxes received/(paid) |
| 984 | (17) |
Net cash flows from/(used in) operating activities |
| 745 | (2,316) |
Cash flows from investing activities |
|
|
|
Purchases of property, plant and equipment |
| (72) | (165) |
Expenditure on intangible assets |
| (1,907) | (1,307) |
Cash received on sale of the RTLS SmartSpace business unit | 7 | 2,500 | - |
Acquisition of subsidiaries, net of cash acquired | 6 | (580) | (3,990) |
Interest received |
| 7 | 7 |
Net cash flows used in investing activities |
| (52) | (5,455) |
Cash flows from financing activities |
|
|
|
Borrowings |
| - | 662 |
Payment of lease liability |
| (269) | (78) |
Proceeds from the issue of ordinary share capital |
| 14 | 5,178 |
Net cash flows (used in)/from financing activities |
| (255) | 5,762 |
Net increase/(decrease) in cash and cash equivalents |
| 438 | (2,009) |
Cash and cash equivalents at start of period |
| 11,078 | 13,053 |
Exchange differences on cash and cash equivalents |
| (17) | 34 |
Cash and cash equivalents at end of period | 17 | 11,499 | 11,078 |
Notes to the consolidated financial statements
1 General information
IQGeo Group plc ("the Company") and its subsidiaries (together, "the Group") delivers geospatial software solutions that integrate data from any source - geographic, real-time asset, GPS, location, corporate and external cloud-based sources - into a live geospatial common operating picture, empowering all users in the customer's organisation to access, input and analyse operational intelligence to proactively manage their networks, respond quickly to emergency events and effectively manage day-to-day operations.
The Company is a public limited company which is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange (IQG) and is incorporated and domiciled in the United Kingdom. The value of IQGeo Group plc shares, as quoted on the London Stock Exchange at 31 December 2021, was 129.0 pence per share (31 December 2020: 96.0 pence).
The address of its registered office is Nine Hills Road, Cambridge, United Kingdom, CB2 1GE.
The Group has its operations in the UK, USA, Canada, Germany and Japan, and sells its products and services in North America, Japan, UK and Europe. The Group legally consists of six subsidiary companies headed by IQGeo Group plc.
The consolidated financial statements have been approved for issue by the Board of Directors on 21 March 2022.
2 New accounting standards
The consolidated financial statements are prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006.
The accounting policies used are the same as set out in detail in the Annual Report and Accounts 2020 and have been applied consistently to all periods presented in the financial statements.
There were no new standards or amendments or interpretations to existing standards that became effective during the year that were material to the Group.
No new standards, amendments or interpretations to existing standards having an impact on the financial statements that have been published and that are mandatory for the Group's accounting periods beginning on or before 1 January 2022, or later periods, have been adopted early.
Standards and interpretations not yet applied by the Group
The following new Standards and Interpretations, which are yet to become mandatory and have not been applied in the Group's financial statements, are not expected to have a material impact on the Group's financial statements.
• IFRS 17 Insurance Contracts
• Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)
• References to the Conceptual Framework
• Proceeds before Intended Use (Amendments to IAS 16)
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
• Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 1, IFRS 9, IFRS 16, IAS 41)
• Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
These amendments are not expected to have a significant impact on the financial statements in the period of initial application and therefore the disclosures have not been made.
3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of IQGeo Group plc are prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS'). The consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements are presented in GBP and all values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
The preparation of these financial statements in conformity with IFRS requires the Directors to make certain critical accounting estimates and judgements that affect the amounts reported in the financial statements and accompanying notes. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 4.
Going concern basis
In determining the basis for preparing the consolidated financial statements, the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the consolidated financial statements.
Management prepares detailed cash flow forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding the opportunity funnel from both existing and new clients, growth plans, risks and mitigating actions. In particular, operating cash flow and profitability are highly sensitive to revenue mix and the positive contribution of continuing growth in software sales whether on a perpetual licence or subscription basis.
In reaching their going concern conclusion, the Directors have considered that the Group had cash of £11.5 million as at 31 December 2021 and sufficient working capital to continue operations. Management have also prepared analysis to support that even in the event of a significant downturn in performance, cash reserves are sufficient to continue trading.
The Group's forecasts and projections to 31 March 2023, taking account of reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. The Group, therefore, continues to adopt the going concern basis in preparing the consolidated financial statements.
Consolidation
The Group financial statements include the results, financial position and cash flows of the Company and all of its subsidiary undertakings. Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control arises when the Company has the power to govern the financial and operating policies of an entity, uses this power to affect the returns from that entity and has exposure to variable returns from its investment in the entity.
Financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies. Businesses acquired or disposed during the year are accounted for using acquisition method principles from, or up to, the date control passed. Intra-group transactions and balances are eliminated on consolidation. All subsidiaries use uniform accounting policies for like transactions and other events and similar circumstances.
Foreign currencies
a. Functional and presentation currency
The functional currency of each Group entity is the currency of the primary economic environment in which each entity operates. The consolidated financial statements are presented in GBP.
b. Transactions and balances
Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the period end date. Such exchange differences are included in the consolidated income statement within "operating expenses". Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
c. Consolidation
For the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities (none of which have the currency of a hyperinflationary economy) that have a functional currency other than GBP are translated into GBP as follows:
· assets and liabilities for each statement of financial position are translated at the exchange rate at the period end date;
· income and expenses for each income statement are translated at the exchange rate ruling at the time of each period the transaction occurred; and
· all resulting exchange differences are recognised in other comprehensive income.
Business reporting
IFRS 8 requires a "management approach" under which information in the financial statements is presented on the same basis as that used for internal management reporting purposes.
The Group is organised on a global basis. The Directors believe that the Chief Operating Decision Maker (CODM) is the Chief Executive Officer of the Group. The CODM and the rest of the Board are provided with information as a single business unit to assess its financial performance.
The internal management accounting information is prepared on an IFRS basis but has non-GAAP "Adjusted EBITDA" as the primary measure of profit and this is reported on the face of the consolidated income statement.
Revenue recognition
Revenue represents the consideration that the entity expects to receive for the sales of goods and services net of discounts and sales taxes. Revenue is recognised based on the distinct performance obligations under the relevant customer contract as set out below. Where goods and/or services are sold in a bundled transaction or on a subscription basis, the Group allocates the total consideration under the contract to the different individual elements based on actual amounts charged by the Group on a standalone basis.
Perpetual software
Software is also sold under perpetual licence agreements. Under these arrangements revenue is recognised at a point in time, when the software is made available to the customer for use, provided that all obligations associated with the sale of the licence have been made fulfilled.
If contracts include performance obligations which result in software being customised or altered, the software cannot be considered distinct from the labour service. Revenue recognition is dependent on the contract terms and assessment of whether the performance obligation is satisfied over time. If the conditions of IFRS 15 to recognise revenue over time are not satisfied, revenue is deferred until the software is available for customer use, because once software has been installed by the customer, the Group has no further obligations to satisfy.
Recurring IQGeo Product revenue - maintenance and support
Maintenance and support is recognised on a straight-line basis over the term of the contract, which is typically one year. Revenue not recognised in the consolidated income statement is classified as deferred revenue on the consolidated statement of financial position.
Recurring IQGeo Product revenue - subscription
Subscription services, which may include hosting services, are considered to be a single distinct performance obligation due to the promises stated within the contract. Revenue is recognised evenly over the subscription period as the customer receives the benefits of the subscription services.
Services
Services revenue includes consultancy and training. Services revenue from time and materials contracts is recognised in the period that the services are provided on the basis of time worked at agreed contractual rates and as direct expenses are incurred.
Revenue from fixed price, long-term customer specific contracts is recognised over time following assessment of the stage of completion of each assignment at the period end date compared to the total estimated service to be provided over the entire contract where the outcome can be estimated reliably. If a contract outcome cannot be estimated reliably, revenues are recognised equal to costs incurred, to the extent that costs are expected to be recovered. An expected loss on a contract is recognised immediately in the consolidated income statement.
Timing of payment
Maintenance and support income and subscription income is invoiced annually in advance at the commencement of the contract period. Other revenue is invoiced based on the contract terms in accordance with performance obligations. Amounts recoverable in contracts (contract assets) relate to our conditional right to consideration for completed performance obligations under the contract prior to invoicing. Deferred income (contract liabilities) relates to amounts invoiced in advance of services performed under the contract.
Employee benefits
a. Retirement benefits
The Group operates various defined contribution pension arrangements for its employees.
For defined contribution pension arrangements, the amount charged to the consolidated income statement represents the contributions payable in the period. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the consolidated statement of financial position.
b. Share-based payments
The Group issues equity-settled share-based payments to certain employees. Vesting conditions are continuing employment. Equity-settled share-based payments are measured at fair value at the date of grant using an appropriate pricing model. The fair value is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity in the share-based payment reserve. Non-market vesting conditions include assumptions about the number of options expected to vest.
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material one-off items of income or expense that have been shown separately due to the significance of their nature or amount and do not reflect the ongoing cost base or revenue-generating ability of the Group.
Interest income and expense
Interest income and expense is included in the consolidated income statement on a time basis, using the effective interest method by reference to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and deferred tax:
a. Current tax
The current tax charge represents an estimate of the amounts payable or receivable to or from tax authorities in respect of the Group's taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs from profit before tax as reported in the consolidated income statement because it excludes certain items of income and expense that are taxable or deductible in other years or are never taxable or deductible. Taxation received is recognised only when it is probable that the Group is entitled to the asset.
b. Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the reporting date. Deferred tax is recognised as a component of tax expense in the consolidated income statement, except where it relates to items charged or credited directly to other comprehensive income or equity when it is recognised in other comprehensive income or equity.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their provisional fair values at the acquisition date. Fair values are reassessed during the measurement period and updated if required. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 in the consolidated income statement. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid and the net fair value of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses.
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Costs relating to ongoing obligations of customer contracts are expensed.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is only capitalised if all of the following conditions are met:
· completion of the intangible asset is technically feasible so that it will be available for use or sale;
· the Group intends to complete the intangible asset and use or sell it;
· the Group has the ability to use or sell the intangible asset;
· the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
· there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
· the expenditure attributable to the intangible asset during its development can be measured reliably.
Internally generated intangible assets, consisting mainly of direct labour costs, are amortised on a straight-line basis over their useful economic lives. Amortisation is shown within administrative expenses in the consolidated income statement. The estimated useful lives of current development projects are three years. Upon completion the assets are subject to impairment testing if impairment triggers are identified, based on expected future sales.
Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as software licences that do not form an integral part of related hardware, are capitalised at cost and amortised on a straight-line basis over their useful economic life which is typically 3 years.
Customer relationships acquired following a business combination are amortised on a straight-line basis over their useful economic life which is 10 years.
Brands acquired following a business combination are amortised on a straight-line basis over their useful economic life which is 2 years.
Acquired software recognised following a business combination is amortised on a straight-line basis over their useful economic life which is 3 years.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged to the consolidated income statement so as to write off the cost or valuation less estimated residual values over their expected useful lives on a straight-line basis over the following periods:
· Fixtures and fittings: three to ten years, or period of the lease if shorter
· Computer equipment: three years
Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in operating expenses.
Leased assets
The Group as a lessee
For any new contracts entered into, the Group considers whether a contract is, or contains, a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:
• the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group
• the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract
• the Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the consolidated statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in-substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
On the consolidated statement of financial position, right-of-use assets have been presented as non-current assets and lease liabilities presented within current and non-current liabilities.
Impairment of non-financial assets
Assets that have an indefinite useful life - for example, goodwill - are not subject to amortisation and are tested at least annually for impairment and whenever there is an indication that the asset may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Impairment losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss is reversed, it is reversed to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
• amortised cost;
• fair value through profit or loss (FVTPL); and
• fair value through other comprehensive income (FVOCI).
The classification is determined by both:
• the entity's business model for managing the financial asset; and
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than 'hold to collect' or 'hold to collect and sell' are categorised at fair value through profit and loss. Further, irrespective of business model, financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL.
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.
Investments
As part of the sale transaction of the RTLS business unit on 31 December 2018, the Group held a rollover equity investment in Abyssinian Topco Limited (registered number: 11650137) which following the transaction, is the parent company of the RTLS SmartSpace business unit. This asset was classified as an asset held for sale in the consolidated statement of financial position as at 31 December 2020. The asset was subsequently disposed of during 2021.
Trade receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.
The Group assesses impairment of trade receivables on a collective basis as they possess shared credit risk characteristics and they have been grouped based on the days past due.
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and other payables.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in the profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement over the period of the borrowings using the effective interest method.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital and the amounts paid over the nominal value in respect of share issues, net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by the Company to the Group's employees under its employee share option plans.
Capital redemption reserve
The capital redemption reserve relates to the repurchase and subsequent cancellation of issued ordinary share capital.
Merger relief reserve
The merger relief reserve relates to the issue of shares as consideration for acquisitions of direct or indirect 100% owned subsidiaries within the Group.
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency of GBP, are recognised directly in other comprehensive income and accumulated in the translation reserve.
Retained earnings
Retained earnings include all current and prior period retained profits/losses.
4 Critical accounting judgements and key sources of estimation and uncertainty
When preparing the financial statements, management makes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are the judgements made by management in applying the accounting policies of the Group that have the most significant effect on the financial statements.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management's judgement of the point at which technical and commercial feasibility is demonstrable. The carrying amount of capitalised development costs at 31 December 2021 is £2.5 million (2020: £1.8 million). After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.
Revenue recognition
Significant management judgement is applied in determining the distinct performance obligations included within contracts involving multiple deliverables. In particular, where additional services are sold alongside perpetual licence sales, management must make an assessment if contracts include performance obligations which would result in software being customised or altered, prior to reaching a conclusion as to whether the software can or cannot be considered distinct from the labour service.
Deferred tax
A deferred tax asset is recognised where the Group considers it probable that future tax profits will be available against which the tax credit will be utilised in the future. This specifically applies to tax losses and to outstanding vested share options at the statement of financial position date. In estimating the amount of the deferred tax asset that should be recognised, the Directors make judgements based on current budgets and forecasts about the amount of future taxable profits and the timings of when these will be realised.
Estimating uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Amortisation and impairment of development costs
Capitalised development costs are amortised over a three year period which is management's estimate of the useful lives of current development projects. In reaching this conclusion, management have made assumptions in respect of future customer requirements and developments within the industry. These estimates have a high level of uncertainty and are matters outside of management's control.
The Group reviews capitalised development costs for indicators of impairment annually in accordance with the accounting policy stated in note 3. In assessing if an indication of impairment exists management review current year sales of each product capitalised. For the majority of products capitalised, current year sales support management's assessment that no indication of impairment exists. Where current year sales do not support this conclusion, such as for new products developed, management are required to make assumptions of the future cash flows generated from these software products. This includes consideration of both the current business pipeline, the expected conversion of that pipeline and the future cash flows to be generated through recurring revenue contracts, including the application of a suitable discount rate.
Revenue recognition
For each identified significant performance obligation management are required to determine which obligations meet the criteria to recognise revenue over time. As revenue from fixed price services agreements is recognised over time, the amount of revenue recognised in a reporting period depends on the extent to which the performance obligation has been satisfied. This requires an estimate of the time and value to deliver the services to be provided, based on historical experience with similar contracts. In a similar way, recognising revenue requires the estimated number of hours required to complete the promised work.
5 Business information
5.1 Operating segments
Management provides information reported to the Chief Operating Decision Maker (CODM) for the purpose of assessing performance and allocating resources. The CODM is the Chief Executive Officer.
The business delivers software solutions that integrate data from any source - geographic, real-time asset, GPS, location, corporate and external cloud-based sources - into a live geospatial common operating picture, empowering all users in the customer's organisation to access, input and analyse operational intelligence to proactively manage their networks, respond quickly to emergency events and effectively manage day-to-day operations. These geospatial operations are reported to the CODM as a single operating segment.
5.2 Revenue by type
The following table presents the different revenue streams of the IQGeo Group.
Revenue by stream | 2021 £'000 | % of total revenue | 2020 £'000 | % of total revenue | Year-on-year growth |
Subscription | 3,964 | 29% | 1,860 | 20% | 113% |
Maintenance and support | 1,787 | 13% | 1,335 | 15% | 34% |
Recurring IQGeo product revenue | 5,751 | 42% | 3,195 | 35% | 80% |
Perpetual Software | 2,011 | 15% | 299 | 3% | 573% |
Services | 5,089 | 36% | 3,846 | 42% | 32% |
Non-recurring IQGeo product revenue | 7,100 | 51% | 4,145 | 45% | 71% |
Total IQGeo product revenue | 12,851 | 93% | 7,340 | 80% | 75% |
Geospatial services from third party products | 998 | 7% | 1,815 | 20% | (45)% |
Total revenue | 13,849 | 100% | 9,155 | 100% | 51% |
5.3 Geographical areas
The Board and management team also review the revenues on a geographical basis, based around the regions where the Group has its significant subsidiaries or markets.
The Group's revenue from external customers in the Group's domicile, the UK, and its major worldwide markets have been identified on the basis of the customers' geographical location. Non-current assets are allocated based on their physical location.
The following table represents the Group's operational revenue and non-current assets by geographical region:
| Revenue |
| Non-current assets |
| ||
| 2021 £'000 | 2020 £'000 |
| 2021 £'000 | 2020 £'000 | |
UK | 278 | 316 |
| 2,575 | 1,927 | |
Europe | 275 | 146 |
| - | - | |
USA | 9,211 | 5,990 |
| 8,129 | 8,705 | |
Canada | 2,297 | 1,233 |
| 1 | 2 | |
Japan | 1,556 | 1,437 |
| 5 | 2 | |
Rest of World | 232 | 33 |
| - | - | |
| 13,849 | 9,155 |
| 10,710 | 10,636 | |
2021 revenues include £2.8 million from income deferred at the beginning of the period (2020: £1.1 million) relating to performance obligations satisfied over time.
5.4 Information about major customers
During 2021, the Group had no customer who generated revenues of greater than 10% of total Geospatial revenue.
During 2020, the Group had one customer who generated revenues of greater than 10% of total Geospatial revenue. £1.6 million was generated from one US customer.
6 Acquisitions
On 21 December 2020 the Group acquired 100% of the equity instruments of OSPInsight International Inc. ('OSPI'), a business based in Utah, USA, thereby obtaining control.
Consideration transferred
The acquisition of OSPI was settled in December 2020 through cash payment of £4.0 million and through issue of 923,294 ordinary 2p shares of IQGeo Group plc, to the sellers of OSPI.
The acquisition included deferred consideration which was satisfied in December 2021 by cash payment of £580,000 and the issue of 173,446 ordinary 2p shares of IQGeo Group plc.
The purchase agreement included an additional consideration of up to 796,000 subject to achievement of defined levels of recurring revenue invoicing and subsequent cash collection of those invoices during the year ended 31 December 2021. Management anticipate this earn out will be settled in full with amounts payable during the first half of 2022.
Deferred and contingent consideration were discounted on recognition in 2020 with £86,000 recognised as an interest expense during the year.
OSPI's contribution to the Group results
During the year ended 31 December 2021, OSPI contributed £2,988,000 of revenue and £407,000 of profit to the consolidated income statement.
During the year ended 31 December 2020, OSPI contributed £60,000 of revenue and £1,000 of profit to the consolidated income statement during the period 21 December 2020 to 31 December 2020.
7 Asset held for sale
On 31 December 2018, the Group disposed of its RTLS SmartSpace business unit for a consideration of up to £35.0 million, with £30.0 million paid in cash on completion (subject to adjustments for net debt and net working capital) in addition to a £2.0 million rollover investment in Abyssinian Topco Limited. Abyssinian Topco Limited is a UK registered company (company number 11649721) and is the ultimate UK parent company of Ubisense Limited which, along with its subsidiary companies, comprise the former RTLS SmartSpace business unit.
On 29 December 2020, the Group entered into an agreement to sell its shares in Abyssinian Topco Limited, with the sale completing during January 2021 for a consideration of £2.5 million. Any adjustments to the value of the asset prior to disposal were recognised as fair value through other comprehensive income (FVOCI), resulting in no gain or loss being recorded in the consolidated income statement.
8 Employee information
8.1 Employee numbers
The number of people as at 31 December and the average monthly number of people employed during the year, including Executive Directors, was:
| Actual number of people as at 31 December |
| Average monthly number of people | ||
By activity | 2021 Number | 2020 Number |
| 2021 Number | 2020 Number |
Technical consultants | 34 | 36 |
| 34 | 24 |
Sales & marketing | 35 | 29 |
| 33 | 19 |
Research & development | 21 | 20 |
| 23 | 15 |
Administration | 12 | 11 |
| 11 | 10 |
| 102 | 96 |
| 101 | 68 |
By geography | 2021 Number | 2020 Number |
| 2021 Number | 2020 Number |
United Kingdom | 22 | 18 |
| 21 | 16 |
Europe | 2 | 2 |
| 3 | 3 |
North America | 74 | 72 |
| 73 | 46 |
Asia | 4 | 4 |
| 4 | 3 |
| 102 | 96 |
| 101 | 68 |
8.2 Employee benefits
The aggregate employee benefit expense, including Executive Directors, comprised:
|
| 2021 £'000 | 2020 £'000 |
Wages and salaries |
| 10,694 | 8,169 |
Social security costs |
| 700 | 638 |
Contributions to defined contribution pension arrangements |
| 465 | 340 |
Share-based payments |
| 282 | 130 |
Total aggregate employee benefits |
| 12,141 | 9,277 |
9 Finance income and costs
| 2021 £'000 | 2020 £'000 |
Interest income from cash and cash equivalents | 7 | 7 |
Finance income | 7 | 7 |
Bank loan interest | - | (8) |
Interest expense for lease arrangements | (88) | (97) |
Interest expense for deferred and contingent consideration | (86) | - |
Finance costs | (174) | (105) |
Net finance costs | (167) | (98) |
10 Loss before tax: analysis of expenses by nature
10.1 Expenses by nature
The following items have been charged / (credited) to the consolidated income statement in arriving at a gain before tax:
| Notes | 2021 £'000 | 2020 £'000 |
Amortisation of capitalised development and software costs | 13 | 1,267 | 1,002 |
Amortisation and impairment of acquired intangible assets | 13 | 389 | - |
Depreciation of owned property, plant and equipment | 14 | 73 | 68 |
Depreciation of right-of-use assets | 15 | 242 | 301 |
Lease rental charges - land and buildings | 20 | 248 | 242 |
Research & development costs expensed |
| 584 | 320 |
Net foreign currency expense/(gains) |
| 40 | (14) |
Unrealised foreign exchange losses on intercompany trading balances |
| 42 | 43 |
Non-recurring items (credit) / expense | 10.2 | (550) | 289 |
10.2 Non-recurring items
| 2021 £'000 | 2020 £'000 |
Waiver of loan | 592 | - |
Acquisition costs | (42) | (289) |
Total non-recurring items | 550 | (289) |
Waiver of loan
In April 2020, IQGeo America Inc, a subsidiary of IQGeo Group plc, applied for and received a loan of $819,000 under the USA CARES Act's "Paycheck Protection Program" in order to support the USA operations during the uncertainty caused by the impact of the global Covid-19 pandemic. The loan was provided by HSBC Bank USA and accrued interest at a rate of 1.0% p.a. In June 2021, the loan was forgiven by the US Small Business Administration along with interest accrued. The waiver of the loan resulted in a credit to the income statement which was recognised during 2021.
Acquisition costs
On 21 December 2020, the Group acquired OSPInsight International Inc. Costs of acquisition have been expensed during the year.
10.3 Auditor's remuneration
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Company's auditor and its associates:
| 2021 £'000 | 2020 £'000 |
Fees payable to the Group's auditor for the audit of: |
|
|
Parent Company and consolidated financial statements | 91 | 85 |
Financial statements of subsidiaries, pursuant to legislation | 12 | 12 |
Total audit fees | 103 | 97 |
Fees payable to the Group's auditor for other services: |
|
|
Tax advisory | 28 | 43 |
Audit-related assurance services | 16 | 16 |
Tax compliance services | 26 | 6 |
Total non-audit fees | 70 | 65 |
Total auditor's remuneration | 173 | 162 |
The auditor of IQGeo Group plc is Grant Thornton UK LLP.
11 Income tax
11.1 Income tax recognised in the consolidated income statement
|
| 2021 £'000 | 2020 £'000 |
Current tax |
|
|
|
Corporation tax |
| (746) | (399) |
Adjustment in respect of prior year |
| (2) | 18 |
Foreign tax |
| 2 | - |
Total current tax credit |
| (746) | (381) |
Deferred tax |
|
|
|
Origination and reversal of temporary differences |
| (66) | 66 |
Total deferred tax charge |
| (66) | 66 |
Total income tax credit for the year |
| (812) | (315) |
The tax credit differs from the standard rate of corporation tax in the UK for the year of 19% (2020: 19%) for the following reasons:
| 2021 £'000 | 2020 £'000 |
Loss before tax | (2,741) | (4,426) |
Loss before tax multiplied by the standard rate of corporation tax in the UK of 19% (2020: 19%) |
(521) |
(841) |
Tax effects of: |
|
|
Expenses not deductible for tax purposes | 382 | 318 |
Income not chargeable for tax purposes | (112) | - |
Additional overseas tax deduction | (28) | (162) |
Utilisation of previously unrecognised tax losses | (364) | - |
Unrecognised deferred tax movements | 435 | 806 |
Tax unprovided/(overprovided) in prior years | (2) | 18 |
Research & development tax credits - prior years | (570) | (399) |
Difference on tax treatment of share options - unrecognised | 54 | 25 |
Differential on overseas tax rates | (86) | (80) |
Total income tax debit/(credit) | (812) | (315) |
During the current and prior year IQGeo UK Limited has submitted claims for UK Research & Development tax credit relief ("R&D tax claim") under the HMRC SME scheme. IQGeo UK Limited submitted its first claim during 2020 in respect of the 2019 financial year. IQGeo elected to receive a cash refund for this claim and the funds were received during 2021. As at 31 December 2020, the Group financial statements reflected an asset for the cash amount received in respect of the 2019 financial year, as the claim had been accepted and paid at the point the 2020 financial statements were issued. Due to the significant risk and uncertainty in respect of acceptance of an R&D tax claim by HMRC, no additional asset was recognised as at 31 December 2020 to reflect a potential future claim in respect of the 2020 financial year. As the claim is now more established, the 2021 consolidated income statement reflects both the tax credit for the 2020 financial year and an additional estimate for a claim which will be submitted during 2022 in respect of the 2021 financial year.
11.2 Factors that may affect future tax charges
The Group has tax losses of £18.0 million (2020: £17.5 million restated) that are available for offset against future taxable profits of those subsidiary companies in which the tax losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group, and they have arisen in subsidiaries whose future taxable profits are uncertain. No deferred tax has been recognised on the unremitted earnings of overseas subsidiaries, because the earnings are continually reinvested by the Group and no tax is expected to be payable on them in the foreseeable future.
The deferred tax balances have been measured at 25%, based on the expected UK tax rate as at April 2023 (2020: 19%).
11.3 Deferred tax
The movement in deferred tax in the consolidated statement of financial position during the year is as follows:
| Deferred income tax assets |
| Deferred income tax liabilities | |||
| 2021 £'000 | 2020 restated £'000 |
| 2021 £'000 | 2020 £'000 | |
At 1 January | 285 | 285 |
| (351) | (285) | |
Deferred tax charged to the income statement | 345 | - |
| (279) | (66) | |
At 31 December | 630 | 285 |
| (630) | (351) | |
The components of deferred tax included in the consolidated statement of financial position are as follows:
| 2021 £'000 | 2020 restated £'000 |
Deferred tax liability on development costs capitalised | (630) | (351) |
Deferred tax asset on losses | 630 | 285 |
Total net deferred tax liabilities | - | (66) |
Deferred tax assets have not been recognised in respect of the following amounts because it is not probable that future taxable profits will be available against which the Group can utilise the benefits:
| 2021 £'000 | 2020 restated £'000 |
Tax losses carried forward | 4,062 | 3,416 |
Equity-settled share options temporary differences | 230 | 18 |
Total unrecognised deferred tax assets | 4,292 | 3,434 |
12 Earnings/(Loss) per share (EPS)
| 2021 | 2020 |
Earnings attributable to ordinary shareholders |
|
|
Loss from operations (£'000) | (1,929) | (4,111) |
Number of shares |
|
|
Weighted average number of ordinary shares for the purposes of basic EPS ('000) | 57,314 | 50,195 |
Effect of dilutive potential ordinary shares: |
|
|
- Share options ('000) | 2,416 | 1,002 |
Weighted average number of ordinary shares for the purposes of diluted EPS ('000) | 59,730 | 51,197 |
EPS |
|
|
Basic and diluted EPS (pence) | (3.4) | (8.2) |
Basic earnings per share is calculated by dividing profit/(loss) for the period attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. For diluted earnings per share, the weighted average number of shares is adjusted to allow for the effects of all dilutive share options and warrants outstanding at the end of the year. Options have no dilutive effect in loss-making years and are therefore not classified as dilutive for EPS since their conversion to ordinary shares does not decrease earnings per share or increase loss per share.
The Group also presents an adjusted diluted earnings per share figure which excludes amortisation of acquired intangibles, share-based payments charge, unrealised foreign exchange gains/(losses) on intercompany trading balances and non-recurring items from the measurement of loss for the period.
| Notes | 2021 | 2020 | |
Earnings for the purposes of diluted EPS, being net loss attributable to equity holders of the parent company (£'000) |
| (1,929) | (4,111) | |
Adjustments: |
|
|
| |
Amortisation and impairment of acquired intangible assets (£'000) |
| 389 | - | |
Reversal of share-based payments charge (£'000) |
| 282 | 130 | |
Unrealised foreign exchange gains/(losses) on intercompany trading balances (£'000) |
|
42 |
43 | |
Reversal of non-recurring items (£'000) | 10 | (550) | 289 | |
Net adjustments (£'000) |
| 163 | 462 | |
Adjusted earnings (£'000) |
| (1,766) | (3,649) | |
Adjusted diluted EPS (pence) |
| (3.1) | (7.3) | |
The adjusted EPS information is considered to provide an alternative representation of the Group's trading performance and in particular it excludes non-recurring items. Options have no dilutive effect in loss-making years.
13 Intangible assets
| Goodwill £'000 | Acquired customer relationships £'000 | Acquired software products £'000 |
Acquired brands £'000 | Capitalised product development costs £'000 | Software £'000 | Total £'000 |
Cost |
|
|
|
|
|
|
|
At 1 January 2020 | 2,970 | - | - | - | 7,521 | 124 | 10,615 |
Additions | - | - | - | - | 1,305 | 2 | 1,307 |
Additions as a result of acquisition | 4,454 | 2,118 | 480 | 58 | - | - | 7,110 |
Effect of movements in exchange rates | (51) | (46) | (10) | (2) | - | - | (109) |
At 31 December 2020 | 7,373 | 2,072 | 470 | 56 | 8,826 | 126 | 18,923 |
Additions | - | - | - | - | 1,905 | 2 | 1,907 |
Effect of movements in exchange rates | 35 | 21 | 4 | 1 | - | - | 61 |
At 31 December 2021 | 7,408 | 2,093 | 474 | 57 | 10,731 | 128 | 20,891 |
Accumulated amortisation |
|
|
|
|
|
|
|
At 1 January 2020 | (2,970) | - | - | - | (6,022) | (27) | (9,019) |
Charge for the year | - | - | - | - | (961) | (41) | (1,002) |
At 31 December 2020 | (2,970) | - | - | - | (6,983) | (68) | (10,021) |
Charge for the year | - | (206) | (155) | (28) | (1,225) | (42) | (1,656) |
Effect of movements in exchange rates | - | (3) | (3) | (1) | - | - | (7) |
At 31 December 2021 | (2,970) | (209) | (158) | (29) | (8,208) | (110) | (11,684) |
Net book amount |
|
|
|
|
|
|
|
At 31 December 2021 | 4,438 | 1,884 | 316 | 28 | 2,523 | 18 | 9,207 |
At 31 December 2020 | 4,403 | 2,072 | 470 | 56 | 1,843 | 58 | 8,902 |
On 21 December 2020 the Group acquired 100% of the equity instruments of OSPInsight International Inc. ('OSPI'), a business based in Utah, USA, thereby obtaining control. Goodwill, acquired customer relationships, acquired software products and acquired brands have been recognised following the business combination.
Management have undertaken a detailed review of the future cash flows which are anticipated to be generated from the OSPI business acquired and following a successful integration during 2021, and the continued expectation of growth, management have concluded that no impairment is required to Goodwill as at 31 December 2021. Management have projected cash flows to 2026 and then applied a terminal growth rate of 1% to future periods. The key underlying assumption is that the acquired OSPI business will continue to add additional annual recurring revenue contracts through subscription sales at a rate consistent to that achieved in 2021, with operations driven by a similar cost base to that of 2021. A discount rate of 11% has been applied to future cash flows. No reasonably possible changes to the assumptions would lead to an impairment. Management believe the assumptions used after considering the market factors are appropriate.
Capitalised product development costs relate to expenditure that can be applied to a plan or design for the production of new or substantial improvements to software products. Management have assessed the underlying products capitalised to identify if any indicators of impairment exist. Where an indication of impairment does exist management have completed impairment reviews through estimating the future discounted cash flows to be generated from these assets and concluded that no impairment is required as the discounted cash inflows exceeded the carrying value of the asset as at the year end.
The remaining average amortisation period for capitalised product development costs is 2 years.
The software assets represent assets purchased from third parties.
Goodwill, acquired customer relationships, acquired software products and acquired brands relate to the OSPI acquisition.
14 Property, plant and equipment
| Fixtures and fittings £'000 | Computer equipment £'000 | Total £'000 |
Cost |
|
|
|
At 1 January 2020 | 181 | 186 | 367 |
Effect of movements in exchange rates | (5) | (4) | (9) |
Additions | 147 | 18 | 165 |
Disposals | (160) | (7) | (167) |
At 31 December 2020 | 163 | 193 | 356 |
Effect of movements in exchange rates | 2 | 1 | 3 |
Additions | - | 72 | 72 |
Disposals | - | (26) | (26) |
At 31 December 2021 | 165 | 240 | 405 |
Accumulated depreciation |
|
|
|
At 1 January 2020 | (164) | (117) | (281) |
Effect of movements in exchange rates | (9) | 2 | (7) |
Charge for the year | (27) | (41) | (68) |
Disposals | 160 | 7 | 167 |
At 31 December 2020 | (40) | (149) | (189) |
Effect of movements in exchange rates | (1) | (1) | (2) |
Charge for the year | (33) | (40) | (73) |
Disposals | - | 26 | 26 |
At 31 December 2021 | (74) | (164) | (238) |
Net book amount |
|
|
|
At 31 December 2021 | 91 | 76 | 167 |
At 31 December 2020 | 123 | 44 | 167 |
15 Right-of-use assets
Details of the Group's right-of-use assets and their carrying amount are as follows:
|
| 2021 £'000 | 2020 £'000 |
Cost |
|
|
|
At 1 January |
| 1,775 | 492 |
Effect of movements in exchange rates |
| 18 | (66) |
Additions |
| - | 1,770 |
Lease related to acquisition |
| - | 71 |
Disposal |
| - | (492) |
Cost at 31 December |
| 1,793 | 1,775 |
Amortisation |
|
|
|
At 1 January |
| (208) | (419) |
Effect of movements in exchange rates |
| (7) | 20 |
Charge for the year |
| (242) | (301) |
Disposal |
| - | 492 |
Amortisation at 31 December |
| (457) | (208) |
Net book amount at 31 December |
| 1,336 | 1,567 |
16 Trade and other receivables
| Notes | 2021 £'000 | 2020 £'000 |
Trade receivables, gross |
| 3,570 | 1,888 |
Allowances for expected credit losses | 16.1 | (250) | (31) |
Trade receivables, net | 16.2 | 3,320 | 1,857 |
Amounts recoverable on contracts |
| 943 | 457 |
Other receivables |
| 77 | 70 |
Prepayments |
| 611 | 466 |
VAT and taxation receivable |
| 74 | - |
Total trade and other receivables |
| 5,025 | 2,850 |
All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value. Expected credit losses are not material.
The following disclosures are in respect of trade receivables that are either impaired or past due. The individually impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations and are assessed on a customer-by-customer basis following detailed review of the particular circumstances. To the extent they have not been specifically provided against, the trade receivables are considered to be of sound credit rating.
16.1 Movement in allowance for expected credit losses
| 2021 £'000 | 2020 £'000 |
At 1 January | (31) | (4) |
Allowance acquired | - | (21) |
Allowance made | (219) | (6) |
At 31 December | (250) | (31) |
16.2 Ageing of past due but not impaired receivables
|
| 2021 £'000 | 2020 £'000 |
Neither past due nor impaired |
| 2,765 | 1,666 |
Past due but not impaired: |
|
|
|
0 to 90 days overdue |
| 541 | 191 |
More than 90 days overdue |
| 14 | - |
Total |
| 3,320 | 1,857 |
17 Cash and cash equivalents
| 2021 £'000 | 2020 £'000 |
Cash at bank and in hand | 11,499 | 11,078 |
Cash and cash equivalents | 11,499 | 11,078 |
Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term cash deposits earn interest at fixed rates for the term of the deposit.
The composition of cash and cash equivalents by currency is as follows:
By currency | 2021 £'000 | 2020 £'000 |
British Pound (GBP) | 8,917 | 8,951 |
Euro (EUR) | 54 | 23 |
US Dollar (USD) | 585 | 745 |
Japanese Yen (JPY) | 813 | 486 |
Canadian Dollar (CAD) | 1,130 | 873 |
Cash and cash equivalents | 11,499 | 11,078 |
18 Trade and other payables
|
Notes | 2021 £'000 | 2020 £'000 |
Trade and other payables due within 1 year: |
|
|
|
Deferred income |
| 4,501 | 2,833 |
Trade payables |
| 458 | 74 |
Trade accruals |
| 2,339 | 1,741 |
Other taxation and social security |
| 452 | 430 |
Deferred acquisition consideration | 6 | - | 746 |
Contingent acquisition consideration | 6 | 796 | - |
Other payables |
| 33 | 4 |
Total trade and other payables due within 1 year |
| 8,579 | 5,828 |
Trade and other payables due after 1 year: |
|
|
|
Contingent acquisition consideration | 6 | - | 746 |
Trade and other payables due after 1 year |
| - | 746 |
Total trade and other payables |
| 8,579 | 6,574 |
The carrying value of trade payables is considered a reasonable approximation of fair value.
19 Bank loans
In April 2020, IQGeo America Inc, a subsidiary of IQGeo Group plc, applied for and received a loan of $819,000 under the USA CARES Act's "Paycheck Protection Program" in order to support the USA operations during the uncertainty caused by the impact of the global Covid-19 pandemic. The loan was provided by HSBC Bank USA and accrued interest at a rate of 1.0% p.a. In June 2021, the loan was forgiven by the US Small Business Administration along with interest accrued.
20 Lease obligation
The Group has measured lease liabilities at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at the date of initial application.
Details of the Group's liability in respect of right-of-use assets and their carrying amount are as follows:
| 2021 £'000 | 2020 £'000 |
At 1 January | 1,846 | 79 |
Effect of movements in exchange rates | 15 | (76) |
New leases entered into during the year | - | 1,753 |
Lease related to acquisition | - | 71 |
Finance costs incurred | 88 | 97 |
Payments made during the year | (269) | (78) |
At 31 December | 1,680 | 1,846 |
Presented as: |
|
|
Lease liability payable within 1 year | 246 | 208 |
Lease liability payable in more than 1 year | 1,434 | 1,638 |
At 31 December | 1,680 | 1,846 |
During 2020, the Group commenced a 7 year lease running to February 2028 on new premises in Denver as the lease on the existing premises in Denver ended on 30 April 2020.
The OSPI business acquired during the year operates from premises in Utah which are leased until 31 January 2023.
The lease liability consists of £2.0 million of lease payments after deduction of £0.3 million of future finance charges.
Leases as lessee
The Group maintains short-term office rental agreements within Germany, Japan and the UK. The leases entered into are 12 months or less and the Group has elected to apply the practical expedient permitted under IFRS 16 to not recognise a right-of-use asset and lease liability in respect of these leases due to their short-term nature. The 2021 operating expense presented within the consolidated income statement includes £248,000 of rent expense in respect of these leases. The future obligations for the new short-term leases are reported within the table below.
The Group enters into these arrangements as these are a cost-efficient way of obtaining the short-term benefits of these assets.
The Group's future aggregate minimum lease payments under non-cancellable short-term leases are as follows:
| Land and buildings 2021 £'000 | Land and buildings 2020 £'000 |
No later than one year | 178 | 160 |
Total | 178 | 160 |
The above table reflects the committed cash payments under short-term leases, rather than the expected charge to the consolidated income statement in the relevant periods.
21 Share capital and premium
| Number of ordinary shares of £0.02 each | Share capital '000 | Share premium £'000 |
Merger relief reserve £'000 | Total £'000 |
Balance at 1 January 2020 | 49,503,429 | 990 | 17,454 | - | 18,444 |
Issued under share-based payment plans | 90,657 | 2 | 10 | - | 12 |
Issued on placing to institutional investors | 6,794,872 | 136 | 5,030 | - | 5,166 |
Issued as part consideration for acquisition | 923,294 | 18 | - | 739 | 757 |
Balance at 31 December 2020 | 57,312,252 | 1,146 | 22,494 | 739 | 24,379 |
Issued under share-based payment plans | 29,998 | 1 | 13 | - | 14 |
Issued as part consideration for acquisition | 173,446 | 3 | - | 220 | 223 |
Balance at 31 December 2021 | 57,515,696 | 1,150 | 22,507 | 959 | 24,616 |
The Company has one class of ordinary shares which carry no right to fixed income.
Where shares have been issued as part of the consideration for the acquisition of OSPI by IQGeo America Inc, excess proceeds over nominal value are recognised in a merger relief reserve.
22 Final Results Announcement
This final results announcement, which has been agreed with the auditors, was approved by the Board of Directors on 21 March 2022. It is not the Group's statutory accounts for the year ended 31 December 2021 within the meaning of section 435 of the Companies Act 2006 but is extracted from those financial statements. Copies of the Group's audited statutory accounts for the year ended 31 December 2021 will be available at the Company's website, www.iqgeo.com, promptly after the release of this preliminary announcement and a printed version will be dispatched to shareholders shortly. Copies will also be delivered to the registrar of Companies following the Annual General Meeting.
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
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