Preliminary Results

RNS Number : 0648D

Ubisense Group PLC

25 March 2014

Ubisense Group plc

Audited results for the year ended 31 December 2013

Ubisense Group plc ("Ubisense" or the "Company") (LSE: UBI), a market leader in real time location intelligence solutions, announces its audited results for the year ended 31 December 2013.

Highlights

Strategic highlights

· Broadening reach of addressable market in Japan and South Korea with acquisition of Geoplan

· Customer bookings in the year up 32.1% to £32.5 million, including multi-year contracts

· Order book up 75.5% year-on-year to £17.9 million as at 31 December 2013 and continues to provide good revenue visibility

· Appointment as Google Enterprise partner

Financial highlights

· Group revenue increased by 11.2% to £27.0 million (FY 2012: £24.3 million)

· Organic revenue increased by 8.2% to £26.3 million (excluding acquisitions)

· Recurring revenues up, representing 26.5% of total revenues (FY 2012: 25.1%)

· Accelerated investment in product development with gross R&D costs of £4.0 million (FY 2012: £3.2 million)

· Adjusted EBITDA* of £1.1 million (FY 2012: £1.2 million) reflecting strong second half in line with previous guidance

· Cash and cash equivalents of £4.0 million, following acquisition of Geoplan, and net funds of £0.5 million (FY 2012: £2.7 million)

· Adjusted loss per share** 3.5p (FY 2012: 0.5p earnings per share); Basic and diluted loss per share 8.9p (FY 2012: 2.8p loss per share)

· New £5.0 million bank facility to provide capacity to meet future working capital requirements, with £3.5 million drawn

Operational highlights

· Product certification granted in Japan and South Korea enabling deployment of RTLI solutions

· Significant orders during the period from leading European telecoms network operator, the largest US agricultural manufacturer, a Top-5 US Telecoms operator and a leading US energy utility

· All three German automotive groups deploying Ubisense Smart Factory System in a step and repeat cycle

· Robert Parker appointed Chief Financial Officer on 10 February 2014

* Measured as operating profit excluding depreciation, amortisation, share-based payments charge and non-recurring costs such as reorganisation costs, AIM listing expenses and acquisition costs

** Earnings measured as profit for the period excluding amortisation on acquired intangible assets, share-based payments charge and non-recurring exceptional items such as acquisition and reorganisation costs.

Richard Green, Chief Executive Officer, commented:

"2013 was a year of promising progress for the Group. The investment we made in our converged location intelligence platform has been rewarded with strong customer momentum, reflected in solid revenue growth and acceleration in cash bookings. With an established and growing presence in the three German automotive OEMs, our progress in this strategic market has been a key driver of the 2013 performance and importantly it represents the model which we can replicate in North America and Asia, large attractive markets where we have a strategic foothold and see a vast near term opportunity. The Group enters 2014 with increasing momentum. With a robust order book and broadening pipeline of opportunities across new markets and applications, the Board looks to the future with confidence."

Contact:

Ubisense Group	Tel: +44 (0) 12 2353 5170
Richard Green
Robert Parker

Canaccord Genuity Limited (NOMAD)	Tel: +44 (0) 20 7523 8000
Simon Bridges
Lucy Tilley

FTI Consulting	Tel: +44 (0) 20 7831 3113
Jon Snowball Tracey Bowditch

About Ubisense

Ubisense is a market leader in real time location intelligence solutions which enable companies to optimise their business processes. By keeping track of key assets, Ubisense solutions bring clarity to complex operations whilst also improving quality and reliability. Ubisense Real-Time Location Intelligence Solutions are used by a number of blue chip customers across the world, such as AGCO, Airbus, Aston Martin, BMW, Cablevision, Daimler, Deutsche Telekom, Duke Energy, John Deere, MINI and VW.

Ubisense is headquartered in Cambridge, UK, with offices in the USA; Canada; France; Germany; Japan; Korea; Philippines and Singapore. For more information visit: http://www.ubisense.net

Chairman's statement

Introduction

2013 was a busy year for the Group, driving forward our aim to be synonymous with enterprise location intelligence. We have seen significant developments in our strategy to transform our business to a single Real Time Location Intelligence (RTLI) solution, fully leveraging our product IP across our customer base. To strengthen this further and expand our global footprint, on 3 December 2013 we completed the acquisition of the Geoplan Interworks K.K. ("Geoplan") group of companies.

We are still in the early stages of the integration process but I am delighted with the progress to date and am excited by the potential we see in Asia over the next few years.

Overview

Group revenue increased by 11.2% to £27.0 million and we achieved an Adjusted EBITDA of £1.1 million. The Group's Gross Profit was £9.2 million, representing a gross margin of 34.2%. The Group has a robust balance sheet with Net Assets of £19.4 million, including cash and cash equivalents of £4.0 million.

During 2013 we experienced continued momentum across the business as we migrated to a RTLI solutions focused business, through the strengthening of key customer relationships, acquisition of new customers, improved market reach and our approach to product management. We have also ensured that our resources are fully focused on delivering our leading location intelligence technology for markets where we add the most value.

The necessary investments and progress we have made has allowed Ubisense to experience solid growth through major new strategic client wins, as the use of real time location intelligence solutions is becoming increasingly widespread through many industries. Our year-end order book is up 75.5% year-on-year to £17.9 million - a significant achievement and this continues to provide us with good revenue visibility going forward.

We have also delivered excellent progress and further market traction in the conversion of our consulting services customers into RTLI solutions customers. Our market leading RTLI solutions offering is benefiting from the acceleration in enterprise acceptance as it allows customers across high value manufacturing, utility and telecommunication sectors to achieve substantial improvements in efficiency and cost savings. Our reputation with all our customers continues to be one of value, reliability and exceptional service.

Our aim is to deliver a single enterprise location intelligence platform to address all our customer base and target markets.

Current trading and outlook

In the period since the year end, trading has been in line with the Board's expectations. Ubisense has entered 2014 with increasing momentum in the business and we are extremely well positioned to capitalise on the opportunities we see.

We will continue to pursue growth both organically and through acquisitions that align with our strategic objectives, enhance our offering and deliver value for our shareholders. Although the world economic recovery is still in an early stage, we are able to provide market-leading innovative solutions for our customers and we begin 2014 with a robust order book and pipeline which gives us confidence for the future.

Conclusion

On behalf of the Board, I would like to thank our customers, partners and employees for their support in making 2013 such a strong year for the Ubisense Group. I look ahead with confidence for the 2014 financial year.

Andy Hopper, CBE

Chairman

24 March 2014

Chief Executive's review

Overview

The Group made exceptional progress in 2013, delivering on our stated strategy. In the year, we decided to bring together all of our leading location based technologies into one converged offering in order to meet the increasing demands of our customers. Our single RTLI business allows the Company to benefit from the emerging trends of smart devices and the growth in cloud technologies.

The implementation of this strategy has allowed us to achieve pleasing growth in the year. We experienced growing awareness and increased deployment with a number of large manufacturers and network operators.

Our strategic objectives are as follows:

· Continue to evolve as a Solutions-based business with a Services capability, developing IP licensed on perpetual or term basis to customers

· Develop additional software licence offerings for specific business problems that deliver ROI to customers and represent upsell opportunities and additional Maintenance and Support revenue

· Focus direct business on manufacturing, telecoms and utility enterprises - particularly automotive manufacturing, cable television and triple play operators as well as gas and electric utilities

· Drive step and repeat business in Automotive manufacturing across new site locations where we have demonstrated business value in initial deployments

· Use channel partners to reach other vertical markets at low cost of sale with specific domain know-how and market access

· Continue to innovate and provide a rewarding work environment to attract and retain talented staff

Business observations:

· We continue to see location as a key asset attribute for many critical business processes and the focal point for integration of enterprise data

· In our telecoms and utility markets, new mobile-based capabilities are realising business opportunities for software products in Field Operations, where real-time data access and updates demonstrate improved business efficiency for the mobile workforce

· In our manufacturing markets, we see opportunities to penetrate upstream and downstream around initial points of deployment as customers recognise the value of location

Our value proposition is, and remains, our main growth driver as customers are seeing clear return on investment from increased operational efficiencies and reduced costs in their operations.

Customer momentum

In the year, the growth momentum in our Solutions business continued, as we extended our product sales into our existing client base and leveraged these existing relationships. Our focus remained on our priority markets in high-value manufacturing and network operators, where we delivered year-on-year growth in revenues of 18%. Our RTLI solutions have strengthened our customer relationships as we continue to innovate and offer a growing range of applications to support their drive towards end-to-end location intelligence solutions across their whole business.

Ubisense products and solutions have now been installed in 8 out of the top 15 auto manufacturers and we continue to penetrate the global automotive market with installations at more new plants in North America, Europe and South Korea. Crucially, in the year, our RTLS solution was authorised for certification for sale into Japan which, along with the development of the Smart Warehouse System by Daifuku for their large customer base, has opened up a large number of new opportunities and potential new customers.

During the year, we saw repeat orders from our existing customer base and won several new solutions contracts including major strategic wins at customers such as VW, Honda and Toyota and we have extended our installations at existing customers including Airbus, Aston Martin, BMW, Cummins, Daimler and John Deere.

We continue to deliver into Telecoms and Utility network operators, servicing both existing and new customers. We remain committed to this customer base and strongly believe that we will be able to further sell our enhanced RTLI solutions to them as a trusted supplier. We are pleased to report new customer wins with Swisscom, Central Hudson, Piedmont Gas and Kepco.

Chief Executive's review (continued)

Acquisitions

Geoplan was acquired for a maximum consideration of £3.4 million, with initial consideration of £2.3 million and £1.1 million being deferred. Of the initial consideration, £0.6 million consists of cash and the remainder Ubisense shares. Of the deferred consideration, £0.2 million has been paid as at 24 March 2014.

The acquisition of Geoplan contributed £0.7 million to revenues in the year. We are integrating the company into our existing business and operations are being consolidated, providing us with cross-selling opportunities and a strong presence in Japan to open up the manufacturing market there. We are delighted with the progress we have made so far in both Japan and South Korea and will look to take advantage of the vast opportunities this acquisition has brought to us across Asia.

We continue to look for acquisition opportunities to enhance our market penetration, geographical footprint and product portfolio.

Strategic Partnerships

Substantial progress was achieved with our strategic partners Atlas Copco, Google and our partnership with the Daifuku Corporation in Japan.

We remain committed to developing partnerships that deliver differentiated value propositions, leveraging each other's expertise and relationships to provide substantial benefit for our joint customers.

Products

Implementing intelligent concepts through the development of unique IP is core to our product offering and differentiates us from our competitors. We continue to invest heavily in research and development as well as extending our collaboration with university and research institute partners.

We have continued with the consolidation of current products into more market focused application suites such as Smart Factory, our flagship, end-to-end manufacturing solution. Feedback has been very positive and we are ultimately moving to a single enterprise location intelligence platform to address all our customers' requirements.

Additionally we have focused on integration with other enterprise system platforms such as SAP, and this makes for more effective deployment for our customers as integration timescales and costs are much lower.

Conclusion

By continuing to invest in our product suite and working in close co-operation with our customers we have established a strong platform for growth and are in a good position to build on our successes. We look forward to the future with confidence.

Richard Green

Chief Executive Officer

24 March 2014

Financial review

Orders

2013 saw a number of major new contract awards and extensions to existing contracts resulting in record new orders for the period of £32.5 million (2012: £24.6 million) including a number of multi-year managed services deals. £31.5 million of these orders were organic.

As a result of the record customer orders in the period, the order book as at 31 December 2013 stood at £17.9 million (2012: £10.2 million) - a 75.5% increase year-on-year. £14.7 million of the order book comes from the organic business. This continues the trend of an increasing order book and gives the Company good visibility on revenues into 2014 and beyond.

Revenue

At the start of 2013, Ubisense reorganised into a single Real Time Location Intelligence (RTLI) business integrating all our leading location based technologies driving to a single platform which we are increasingly converging. The RTLI strategy is outlined further in the Strategic Report. While we market, organise and report a single offering, Ubisense has two revenue streams which are serviced by a common cost base:

• Solutions - revenues driven from the Ubisense product suites (Smart Factory System, netSolutions, netPlanning, myWorld, Verotrack), technical expertise and exclusive reseller arrangements. A solution sale will include a mixture of application software (licences in perpetuity and subscription based), installation and commissioning services, hardware and maintenance and support. Margins in any given period will vary depending upon the make-up and phase of the given set of Solutions being delivered. The Company sees this revenue stream as critical to driving the long term growth and profitability of the business.

• Services - revenues not involving the Ubisense product suites as defined above. These revenues are typically multi-year managed services contracts, consultancy and training. The Company generally has good visibility on future revenue from Services and believes it is critical to driving customer loyalty and providing a customer base into which it can sell its Solutions.

Total revenues grew by 11.2% to £27.0 million (2012: £24.3 million). Of the total revenue for 2013, an incremental £0.7million was contributed by the Geoplan acquisition made at the beginning of December 2013. Excluding Geoplan, organic revenue increased by 8.2% to £26.3 million.

Solutions revenue grew by 6.7% to £13.4 million (2012: £12.5 million). Services revenue grew by 15.9% to £13.6 million (2012: £11.8 million) primarily as a result of large contract wins in the US in the Utility and Telecoms markets. Recurring revenues, comprising managed services and maintenance and support, grew to £7.2 million (2012: £6.1 million) or 26.5% of total revenues (2012: 25.1%) as the installed base of products increases and more customers adopt our managed services offering.

The majority of our revenues relate to a small number of large deals the timing of which is not solely within our control and each can carry a significant impact on our results in any single reporting period.

Gross margin

The gross margin reduced from 39.5% to 34.2% in 2013. This was the result of a number of factors: (i) an increase in Services revenue in the revenue mix, (ii) within those Services revenues a greater proportion was derived from lower margin data cleansing services which will ultimately allow us greater access to sell our solutions as a trusted partner, and (iii) our Solutions revenues, which are generally higher margin, were in part delivered using contractors to fill delivery capacity which has a direct impact on the margin.

Operating expenses

Operating expenses of £10.9 million (2012: £10.4 million) increased by 4.8% year-on-year. Operating expenses includes Sales & Marketing, Product Marketing, Product Development, General & Administration and foreign exchange. Gross expenditure on Product Development increased 26% to £4.0 million (2012: £3.2 million) reflecting increased investment in our flagship Smart Factory and myWorld products. Capitalised product development costs at £3.0 million (2012: £1.8 million) represented 76% (2012: 58%) of gross development spend whilst amortisation of the capitalised development costs was £1.2 million (2012: £0.9 million).

The Group incurred exceptional items of £0.8 million, of which £0.7 million related to strategic Asia Pacific market entry costs comprising £0.5 million acquisition costs relating to Geoplan and £0.2 million relating to product certification costs in Japan and South Korea and the termination of our previous agent network in the region.

In addition, the Group incurred £0.1 million of costs, mainly comprising professional fees, in connection with an acquisition which did not proceed. The Board continues to evaluate suitable acquisition opportunities to enhance its geographical footprint, product offerings, delivery capacity and customer base.

EBITDA and operating profit

Group Adjusted EBITDA for the period was £1.1 million (2012: £1.2 million). To provide a better guide to underlying business performance adjusted EBITDA excludes share-based payment charges and exceptional items along with depreciation, amortisation, interest and tax from the measure of profit.

Both the operating loss of £1.6 million (2012: £0.8 million) and loss before tax of £1.7 million (2012: £0.7 million) includes amortisation and depreciation charges of £1.9 million (2012: £1.4 million) which have increased as a result of the increased amortisation of capitalised product development costs, as well as the exceptional items noted above of £0.8 million (2012: £0.4 million).

Interest and tax

Net interest payable for the period was £0.1 million (2012: £nil) as a result of drawing down on our HSBC bank loan.

The Group has a net tax expense of £0.2 million (2012: £0.1 million income) almost entirely a result of non-cash deferred tax on capitalised development costs and acquired intangible assets. Management's best estimate of the effective current tax rate is nil due to the availability of prior years' losses. The Group has substantial tax losses carried forward and expects to benefit from the Patent Box tax regime being introduced in the UK.

EPS and dividend

Adjusted diluted loss per share was 3.6 pence (2012: 0.5 pence earnings). Reported basic and diluted loss per share was 8.9 pence (2012: 2.8 pence). The Board does not feel it appropriate at this time to commence paying dividends.

Balance sheet, cash and cash flow

The Group has a robust balance sheet with Net Assets at 31 December 2013 of £19.4 million (31 December 2012: £18.9 million).

In August 2013, the Group agreed a £5.0 million three-year loan to provide future working capital replacing the previous £2.0 million facility negotiated in 2012 and drawn down in 2013. £3.5 million of the new loan was drawn as at 31 December 2013 (2012: £nil) of which £2.0 million was used to repay the original facility.

Cash and cash equivalents held in the balance sheet at 31 December 2013 was £4.0 million (31 December 2012: £2.7 million). With the bank loan outstanding of £3.5 million, net funds at 31 December 2013 were £0.5 million (31 December 2012: £2.7 million).

The main components to the gross cash increase of £1.3 million for the year (2012: £3.3 million decrease) were operating cash outflow of £0.8 million (2012: £0.8 million outflow), the cash consideration paid for Geoplan of £0.7 million in December 2013 (2012: £0.4 million outflow on prior acquisitions), the cash acquired with Geoplan of £2.5 million, capital investment in plant and equipment and intangibles including product development of £3.2 million (2012: £2.3 million) and the receipt of the new bank loan of £3.5 million (2012: £nil).

Capital structure

The issued share capital at 31 December 2013 was 23,079,146 (December 2012: 21,919,744) ordinary shares of £0.02 each. The increase of 1,159,402 shares related to 759,809 shares issued as part of the consideration of acquiring Geoplan and 399,593 shares as a result of share option exercises by employees. In addition, 421,500 share options were granted to employees on 19 April 2013 at an exercise price of £2.055, being the share price at the time. The total number of unexercised share options at 31 December 2013 was 2,023,180.

Robert Parker

Chief Financial Officer

24 March 2014

Strategic report

Strategy and business model

Ubisense is a market leader in real time location intelligence solutions which enable companies to optimise their business processes. By keeping track of key assets, Ubisense solutions bring clarity to complex location based operations that facilitate improved human decision making whilst also improving quality, efficiency and reliability. Ubisense Real-Time Location Intelligence Solutions are used by a number of blue chip customers across the world, such as AGCO, Airbus, Aston Martin, BMW, Cablevision, Daimler, Deutsche Telekom, Duke Energy, John Deere, MINI and VW.

Ubisense is headquartered in Cambridge, UK, with offices in the USA; Canada; France; Germany; Japan; South Korea; Philippines and Singapore.

In recent years, there has been a significant demand from customers requiring a single solution which combines indoor and outdoor components as well as dynamic and static data. This overlap of our traditional Geospatial and RTLS businesses enabled us to integrate both divisions into a single Real Time Location Intelligence (RTLI) business that brings together all of our leading location based technologies.

The enterprise acceptance of our RTLI solutions has been accelerated by several factors such as the consumerisation of maps led by Google, the proliferation of smart devices and the growth in cloud technologies. Ubisense's software products and services capability benefits from these trends enabling enterprises across the high value manufacturing, utility and telecommunications sectors to deliver significant improvements in efficiency and cost savings. This also opens up new, adjacent markets for Ubisense.

With the business reorganised, the strategy of the Group is to:

· Continue to evolve as a Solutions-based business with Services capability

· Develop next-generation applications that deliver ROI to customers

· Focus direct business on Manufacturing, Telecoms and Utility enterprises

· Drive step and repeat business in Automotive manufacturing across new site locations

· Use channel partners to reach other vertical markets at low cost of sale

· Continue to innovate and provide a rewarding work environment to attract and retain talented staff

Business review and future developments

Business development

A significant increase in customer bookings, over 30% year-on-year, validates our new strategy focused on real time location intelligence and the investment we have made in our next generation platforms and sales and marketing infrastructure.

Considerable effort and investment in key strategic accounts in both Europe and North America has resulted in Ubisense securing contracts with three major manufacturing customers with global presence and reach which will result in lower cost of sales and increased profitability going forward. Furthermore, the Group now has relationships with all three German auto manufacturers and is targeting repeat orders across these groups in the coming months.

It is still too early to see the momentum of our increased solution sales being reflected in the Group accounts, but on a regional basis we can start to see the delivery of our strategy. Our European business shows the acceleration of solution revenues over services and resultant increase in margins and profits whilst the Americas business is still transitioning and we look forward to the acceleration of its solutions revenues this year.

In our telecommunications and utility markets, new mobile technologies, embodied in our myWorld product, have opened up new business opportunities for our software products in real time operational use, not traditionally an area of focus for us. Customer wins for the period included a leading European telecoms network operator, a Top-5 US Telecoms operator and a leading US energy utility.

As the Company's products become more generally accepted across its chosen industries and markets, Ubisense expects to be able to penetrate deeper into its customer base to deploy multiple applications on each site. It's acquisition strategy aims to enhance the Company's product portfolio, geographical reach and the ability to service its customers from a local office. The Company expects repeat business to have a more profitable product mix and a lower cost of sale which ultimately will drive up margins and profitability.

Partnerships

While our direct sales channel is receiving strong customer traction, our channel partners have also contributed to the strong customer bookings performance. Notably, we became an official enterprise partner of Google in the year.

Our channel partner relationships have resulted in an increase in the number of pipeline deals. This gives us confidence in achieving our growth goals for 2014. Furthermore, developments with partners such as Daifuku in Asia Pacific have increased our optimism with regards to the opportunities to significantly increase the Company's presence in this key market.

Strategic report (continued)

Key performance indicators

The primary financial key performance indicator for the Group is adjusted EBITDA, on which it reports monthly. Adjusted EBITDA for the year was £1.1 million (2012: £1.2 million). The Group also monitors the order pipeline and cash balances. At the close of the year the outstanding orderbook totalled 69% of annual sales (2012: 47%). The closing cash balance for the Group was £4.0 million (2012: £2.7 million). Having regularly reviewed the KPIs in respect of changes within periods and changes between reporting periods the Directors believe that the Group has made satisfactory progress against the KPIs, especially the order pipeline, compared to budget.

Financial instruments

Information on both the Group's financial risk management objectives and the Group's policies on exposure to relevant risks in respect of financial instruments are set out in note 27 of the preliminary financial information.

Principal risks and uncertainties

The Group faces competitive and strategic risks that are inherent in a rapidly growing emerging market. The Board of the Company and the Executive Management Team review strategy and risks to the business regularly. Where possible, processes are in place to monitor and mitigate the identified risks.

The key business risks affecting the Group are set out below:

Technological risks

The Group operates in an industry where competitive advantage is heavily dependent on technology. It is possible that technological development may reduce the importance of the Group's function in the market or render the patents on which it relies redundant. For instance, the Group's real time location systems rely on ultra-wideband radio signals to operate. There is no guarantee that technological advances will not render systems based on ultra-wideband radio obsolete. The Group's existing reference designs may become obsolete or may be superseded by new technologies or changes in customer requirements. The technology used in the Group's products is still evolving and is highly complex and may change rapidly.

In order to mitigate this risk, Ubisense invests in a range of research and development activities to maintain its competitive advantage and participates in industry and research forums in order to keep abreast of technological advances.

Growth management and acquisitions

The Directors believe that further expansion, either organic or via acquisition, will be required in the future to capitalise on the anticipated increase in demand for the Group's solutions. The Group's future success will depend, in part, on its ability to manage this anticipated expansion. Such expansion is expected to place demands on management, support functions, accounting, sales and marketing and other resources. If the Group is unable to manage its expansion effectively, its business and financial results could suffer.

In order to mitigate this risk, the Group undertakes extensive due diligence on acquisition targets and uses dedicated project teams to integrate acquisitions into the Group.

Staff recruitment and retention

The contribution made by Ubisense's highly skilled and experienced staff is vital to the Group's success. As the Group grows, it is important to recruit and retain staff.

The Group has in place appropriate incentivisation structures to attract and retain the calibre of employees necessary to ensure the efficient management and development of the Group.

Strategic report (continued)

Reliance on third parties, including manufacturers

The Group relies on third party equipment manufacturers in the completion of its products and, therefore, does not always have complete control over the equipment and materials it requires to comply with its obligations under customer contracts. To the extent that the Group cannot acquire equipment or materials according to its plans and budgets, its ability to complete its work for its customers within the timetable laid down by the contract or at a profit may be impaired. If a manufacturer is unable to deliver the products for any reason, the Group may be required to purchase such equipment or materials from another source at a higher price. The resulting additional costs may be substantial and the Group may be in breach of its contracts with customers, which may result in a financial loss on a particular contract or a loss of business. In addition, any resulting failure to fulfil contracts with customers and other business partners may have an adverse effect on the Group's future profitability and reputation. One key supplier supplies more than 75 per cent hardware required annually by the Group.

In order to mitigate this risk, the Group closely manages and reviews its relationship with key suppliers on a regular basis.

Dependence on key customers

The Group is dependent on a number of key contracts and customer relationships for its current and future growth and development. Ubisense has strong customer relationships with considerable repeat business from a number of large international organisations. In the financial year to 31 December 2013 the Group's ten largest customers accounted for 60% of the Group's revenue (2012: 67%), of which one customer accounted for in excess of 10% (2012: 2). The loss of a major customer could result in a decrease in Group revenues, margins and profitability.

In order to mitigate this risk, the Group has extensive sales and account management processes and procedures.

Contracts

Some of the Group's commercial contracts include terms where revenues and/or invoicing are related to customer acceptance.

The Group's exposure under such contracts is review regularly by the Executive Management Team and the main Board.

Credit

The main credit risk is attributable to trade receivables owed by customers. As the majority of the Group's customers are very large, blue chip utilities, telecoms and manufacturing companies, the risk of non-payment tends to be less of a traditional credit nature and more related to customer satisfaction.

Credit exposure by customer is reviewed regularly by the Executive Management Team and the main Board with provision made for doubtful receivables when there are circumstance which, based on experience, are evidence of a likely reduction in the recoverability of the receivable.

Bank covenants

In August 2013, the Group agreed a £5.0 million loan facility with HSBC Bank plc to provide future working capital capacity. The loan is repayable in three years and the outstanding balance at 31 December 2013 was £3.5 million.

The Group is required to meet certain financial criteria agreed as covenants for the bank loan. The financial measures are regularly reviewed against covenant requirements to ensure the Group's obligations can be met. All covenants tests during the year were met and all tests for the forthcoming twelve months are forecast to be met based on our annual operating plan and our latest rolling forecast.

Research and development (R&D)

The Group continues to invest in R&D, spending £4.0 million in its R&D programmes in the year (2012: £3.2 million) of which £3.0 million (2012: £1.8 million) was capitalised. In the opinion of the directors, these investments will maintain and generate significant revenues in future years.

Intellectual property

The Group owns intellectual property both in its software tools and the products derived from them. The Directors consider such properties to be of significant value to the business.

Strategic report (continued)

Employee involvement

The Group aims to attract, retain and motivate the best staff regardless of race, religion, sexual orientation, age or disability. To that end it is committed to offering equal employment opportunities.

The Group provides its employees systematically with information on matters of concern to them and regularly consults its staff, or their representatives, for views on matters affecting them.

The Group encourages employee involvement in the Group's performance by granting share options and Group performance related variable compensation, and ensures that employees are fully aware of financial and economic factors affecting the performance of the Group.

Employee policies

The Group is committed to following the applicable employment laws in each territory in which it operates.

The Group is committed to ensuring that disabled persons, whether registered or not, have equal opportunities when applying for vacancies, with due regard to their aptitudes and abilities. In addition to complying with legislative requirements, procedures ensure that disabled employees are fairly treated and that their training and career development needs are carefully managed. For those employees becoming disabled during the course of their employment, every effort is made, whether through retraining or redeployment, to provide an opportunity for them to remain with the Group.

Health and safety environment

The Group is committed to maintaining a safe and healthy working environment for all staff. To that end it provides appropriate training and supervision and complies with all applicable regulatory requirements.

The Group seeks wherever possible to minimise its impact on the environment for the benefit of its staff and the public at large. The Group is committed to complying with environmental regulations in particular WEEE and encourages and supports staff in waste recycling within its offices.

Approved by the Board of Directors

And signed on behalf of the Board

Gordon Campbell

Company Secretary

24 March 2014

Ubisense Group plc

Registered number: 05589712

Consolidated income statements

For the year ended 31 December 2013

	Notes	2013 £'000	2012 £'000
Revenue	5	27,002	24,292
Cost of revenues		(17,761)	(14,690)
Gross profit		9,241	9,602
Operating expenses		(10,867)	(10,368)
Operating loss		(1,626)	(766)
Analysed as:
Gross profit		9,241	9,602
Other operating expenses		(8,100)	(8,445)
Adjusted EBITDA		1,141	1,157
Depreciation		(266)	(227)
Amortisation of acquired intangible assets		(313)	(257)
Amortisation of other intangible assets		(1,332)	(953)
Share-based payments charge	21.2	(92)	(63)
Exceptional items	9.2	(764)	(423)
Operating loss		(1,626)	(766)
Finance income	8	10	38
Finance costs	8	(103)	-
Loss before tax	9	(1,719)	(728)
Income tax	10.1	(219)	90
Loss for the year		(1,938)	(638)
Loss attributable to:
- Equity shareholders of the Company		(1,968)	(638)
- Non-controlling interest		30	-
		(1,938)	(638)

Loss per share attributable to the equity shareholders of the parent (pence)
Basic	11	(8.9p)	(2.8p)
Diluted	11	(8.9p)	(2.8p)

The notes 1 to 27 are an integral part of the preliminary financial information.

Consolidated statement of comprehensive income

For the year ended 31 December 2013

	2013 £'000	2012 £'000
Loss for the year	(1,938)	(638)
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
	(203)	33

Total comprehensive loss for the year	(2,141)	(605)

Attributable to:
- Equity shareholders of the Company	(2,141)	(605)
- Non-controlling interest	-	-
Total comprehensive loss for the year	(2,141)	(605)

The notes 1 to 27 are an integral part of the preliminary financial information.

Consolidated statement of changes in equity

For the year ended 31 December 2013

	Attributable to equity shareholders of the parent company
	Share Capital £'000	Share Premium £'000	Other Reserves £'000	Retained Earnings £'000	Sub-total £'000	Non-controlling interest £'000	Total £'000
Balance at 1 January 2012	433	22,031	510	(3,736)	19,238	-	19,238
Loss for the year	-	-	-	(638)	(638)	-	(638)
Exchange difference on retranslation of net assets and results of overseas subsidiaries	-	-	33	-	33	-	33
Total comprehensive loss for the year	-	-	33	(638)	(605)	-	(605)
Reserve credit for equity-settled share-based payment	-	-	63	-	63	-	63
Issue of new share capital	5	-	-	-	5	-	5
Premium on new share capital	-	220	-	-	220	-	220
Transactions with owners	5	220	63	-	288	-	288
Balance at 31 December 2012	438	22,251	606	(4,374)	18,921	-	18,921
Loss for the year	-	-	-	(1,968)	(1,968)	30	(1,938)
Exchange difference on retranslation of net assets and results of overseas subsidiaries	-	-	(173)	-	(173)	(30)	(203)
Total comprehensive loss for the year	-	-	(173)	(1,968)	(2,141)	-	(2,141)
Reserve credit for equity-settled Share-based payment	-	-	92	-	92	-	92
Non-controlling interest in new subsidiary	-	-	-	-	-	704	704
Issue of new share capital	23	-	-	-	23	-	23
Premium on new share capital	-	1,799	-	-	1,799	-	1,799
Transactions with owners	23	1,799	92	-	1,914	704	2,618
Balance at 31 December 2013	461	24,050	525	(6,342)	18,694	704	19,398

The notes 1 to 27 are an integral part of the preliminary financial information.

A reconciliation of the components of Other reserves is given in note 22.

Consolidated statement of financial position

For the year ended 31 December 2013

	Notes	2013 £'000	2012 £'000
Assets
Non-current assets
Intangible assets	12	15,962	10,319
Property, plant and equipment	13	628	621
Total non-current assets		16,590	10,940
Current assets
Inventories	14	3,106	862
Trade and other receivables	15	11,547	10,302
Cash and cash equivalents	16	3,964	2,716
Total current assets		18,617	13,880
Total assets		35,207	24,820
Liabilities
Current liabilities
Trade and other payables	17	(10,023)	(5,246)
Total current liabilities		(10,023)	(5,246)
Non-current liabilities
Deferred income tax liabilities	10	(1,856)	(653)
Bank loans	18	(3,500)	-
Other payables	19, 25	(430)	-
Total non-current liabilities		(5,786)	(653)
Total liabilities		(15,809)	(5,899)
Net assets		19,398	18,921

Consolidated statement of financial position (continued)

For the year ended 31 December 2013

	Notes	2013 £'000	2012 £'000

Equity attributable to owners of the parent company
Ordinary share capital	20	461	438
Share premium	20	24,050	22,251
Other reserves	22	525	606
Retained earnings		(6,342)	(4,374)
Equity attributable to shareholders of the Company		18,694	18,921
Non-controlling interests		704	-
Total equity		19,398	18,921

The notes 1 to 27 are an integral part of the preliminary financial information.

The preliminary financial information was approved by the Board of Directors on 24 March 2014 and signed on its behalf by:

Richard Green, Chief Executive Officer Robert Parker, Chief Financial Officer

Ubisense Group plc

Registered Number: 05589712

Consolidated statement of cash flows

For the year ended 31 December 2013

	Notes	2013 £'000	2012 £'000
Loss before tax		(1,719)	(728)
Adjustments for:
Depreciation	9, 14	266	227
Amortisation	9, 13	1,645	1,210
Loss on the disposal of property, plant and equipment 9		-	5
Share-based payments charge	6.2, 21.2	92	63
Finance income	8	(10)	(38)
Finance costs	8	103	-
Operating cash flows before working capital movement		377	739
Change in inventories		(639)	805
Change in receivables		242	(839)
Change in payables		(727)	(1,691)
Cash used in operations before tax		(747)	(986)
Net income taxes (paid)/received		(7)	203
Net cash flows from operating activities		(754)	(783) 3)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired	25	1,846	(400)
Purchases of property, plant and equipment		(140)	(492)
Proceeds on disposal of property, plant and equipment		-	1
Expenditure on intangible assets		(3,085)	(1,849)
Interest received		10	38
Net cash flows from investing activities		(1,369)	(2,702)
Cash flows from financing activities
Proceeds of borrowings		3,500	-
Interest paid		(92)	-
Proceeds from the issue of ordinary share capital		111	225
Net cash flows from financing activities		3,519	225
Net increase/(decrease) in cash and cash equivalents		1,396	(3,260)
Cash and cash equivalents at start of period		2,716	6,034
Exchange differences on cash and cash equivalents 7		(148)	(58)
Cash and cash equivalents at end of period	16	3,964	2,716

The notes 1 to 27 are an integral part of the preliminary financial information.

Notes to the Preliminary financial information

1 General information

Ubisense Group plc ("the Company") and its subsidiaries (together, "the Group") deliver mission-critical location-based smart technology which enables companies to optimise their business processes.

The Company is a public limited company which is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange (UBI) and is incorporated and domiciled in the United Kingdom. The value of Ubisense Group plc shares, as quoted on the London Stock Exchange plc at 31 December 2013, was 246.0 pence per share (31 December 2012: 230.0 pence).

The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to Ubisense Group plc on 31 May 2011 ahead of its initial public offering and listing on AIM on 22 June 2011. The address of its registered office is St. Andrew's House, St. Andrew's Road, Chesterton, Cambridge, CB4 1DL.

The Group has its main operations in the UK, US, Canada, France, Germany, Japan, S. Korea, Singapore and the Philippines and sells mainly in North America, Europe and Asia. The Group legally consists of twelve companies headed by Ubisense Group plc (UK). A full list of subsidiaries is given in note 24 of the financial statements.

The Board of Ubisense Group plc approved the release of this audited preliminary announcement on 24 March 2013.

The preliminary financial information does not constitute statutory financial statements for the years ended 31 December 2013 and 2012 within the meaning of section 435 of the Companies Act 2006, but is extracted from those financial statements. Statutory accounts for Ubisense Group plc for the year ended 31 December 2012 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2013 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

2 New accounting standards

For the purposes of the preparation of the preliminary financial information, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 January 2013.

During 2013, the Group has applied several new revised and amended standards and interpretations which became effective in the year: IFRS13 "Fair value measurement", the Annual Improvements to IFRS and IAS 1 (amended) "Presentation of items of Other Comprehensive Income". The Group has early adopted "Recoverable Amount Disclosures for Non-Financial Assets" (Amendments to IAS36). Their adoption has not had a material impact on the disclosures and amounts reported. Otherwise the accounting policies used are the same as set out in detail in the Report and Accounts 2012 and have been applied consistently to all periods presented in the preliminary financial information. No new standards, amendments or interpretations to existing standards that have been published and that are mandatory for the Group's accounting periods beginning on or after 1 January 2014, or later periods, have been adopted early. The Directors do not consider that the adoption of these standards and interpretations would have a material impact on the Group's financial statements.

Standards and interpretations not yet applied by the Group

The following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the preliminary financial information.

· IFRS 10 Consolidated Financial Statements (effective date financial year commencing on/after 1 January 2014).

· IAS 27 (revised) Separate Financial Statements (effective date financial year commencing on/after 1 January 2014).

· Amendments to IAS 32 offsetting financial assets and financial liabilities (effective date financial year commencing on/after 1 January 2014).

· Amendments to IFRS 10 transition guide (effective date financial year commencing on/after 1 January 2014).

· Amendments to IAS 36 Recoverable amount disclosures for non-financial assets (effective date financial year commencing on/after 1 January 2014).

All standards and interpretations are not expected to have any significant impact on the financial statements when applied.

The principal accounting policies applied in the preparation of the preliminary financial information are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Notes to the Preliminary financial information (continued)

3 Summary of significant accounting policies

Basis of preparation

The preliminary financial information of Ubisense Group plc has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union (IFRSs as adopted by the EU) and the Companies Act 2006 applicable to companies reporting under IFRS. The preliminary financial information has been prepared under the historical cost convention. The preliminary financial information are presented in Sterling 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 preliminary financial information, are disclosed in note 4.

Going concern basis

The Group meets it day-to-day working capital requirements through its bank facilities. The Group had cash of £4.0 million at the balance sheet date along with a £1.5 million undrawn bank facility as well as an order book equivalent to 69% of annual revenue. In this context, the Group's forecasts and projections, 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 its 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 so as to obtain benefits from its activities.

Co-terminous 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.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interest's share of changes in equity since the date of combination.

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 preliminary financial information is presented in Sterling, which is the Company's functional and presentation currency.

(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 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 preliminary financial information, 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 Sterling are translated into Sterling 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

Notes to the Preliminary financial information (continued)

3 Summary of significant accounting policies (continued)

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 as a single Real-Time Location Intelligence (RTLI) business. This is the basis of the Group's external market offering and internal organisational and management structure and is the primary way in which the Chief Executive Officer, who is the Chief Operating Decision Maker, receives financial information to assess Group performance. As a result, the Group has therefore determined that it has only one reportable segment as defined by IFRS 8.

The internal management accounting information is prepared on an IFRS basis but has a non-GAAP "Adjusted EBITDA" as the primary measure of profit and this is reported on the face of the income statement.

In addition, the Board and Management Team consider the business to have two revenue streams with different characteristics, Solutions and Services, which are generated from the same asset and cost base.

Revenue recognition

Revenue represents amounts derived from the provision of goods and services which fall within the Group's ordinary activities, exclusive of value added tax and other similar sales taxes. Revenue is measured by reference to the fair value of consideration received or receivable.

Revenues on product sales are recognised at the time that units are shipped, except for shipments under arrangements involving significant acceptance requirements. Under such arrangements, revenue is recognised when the Group has substantially met all its performance obligations.

Revenue earned from sales under licence agreements is recognised when the software is made available. When the sale includes a period of support and maintenance, a proportion of the revenue is deferred and recognised rateably over the period of support. For licence rental fees, amounts are recognised over the period of the contract, commencing from when the software is available for use.

Services and training revenue from time and materials contracts is recognised in the period that the services and training 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, including customisation and modification, is recognised on 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 income statement.

Where bundled sales including a combination of some or all of the above are made, the revenue attributable to the deal is apportioned across the constituents of the bundle, and then recognised according to the policies stated above.

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 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 statement of financial position.

(b) Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant using the Black-Scholes pricing model. The fair value is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based on the Group's estimate of the number of shares that will eventually vest.

(c) Termination benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than twelve months after the reporting date, then they are discounted to their present value.

Notes to the Preliminary financial information (continued)

3 Summary of significant accounting policies (continued)

Operating lease income and expense

(a) Rental expense

Operating lease rentals are charged as operating expenses to the income statement in equal annual amounts over the lease term. Assets leased under operating leases are not recorded in the statement of financial position because the lessor retains a significant portion of the risks and rewards of ownership.

(b) Lease incentives

The benefit of lease incentives such as rent-free periods or up-front cash payments are spread equally on a straight-line basis over the lease term.

Exceptional items

Exceptional 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 non-recurring items of income or expense that have been shown separately due to the significance of their nature or amount.

Interest income and expense

Interest income and expense is included in the 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 to 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 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.

(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 preliminary financial information 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 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 fair values at the acquisition date. 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 acquiree's identifiable net assets.

Acquisition-related costs are expensed as incurred.

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 IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.

Notes to the Preliminary financial information (continued)

3 Summary of significant accounting policies (continued)

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

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.

Development activities involve a plan or design for the production on 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 income statement. The estimated useful lives of current development projects are three years. Upon completion the assets are subject to impairment testing.

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 to 5 years.

Intangible assets acquired through a business combination are initially measured at fair value and amortised on a straight line basis over their useful economic lives. Amortisation is shown within operating expenses in the income statement. The useful economic lives of the intangible assets recognised on acquisition are as follows:

· Software products recognised on acquisition: 3 years

· Customer relationships recognised on acquisition: 5 - 10 years

· Order backlog: based on contract life recognised on acquisition, typically less than 1 year

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 income statement so as to write off the cost orvaluation less estimated residual values over their expected useful lives on a straight-line basis over the following periods:

· Fixtures and fittings: 5 to 8 years, or period of the lease if shorter

· Computer equipment: 3 years

· Demonstration equipment: 1 year

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.

Impairment of non-financial assets

Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready to use - are not subject to amortisation and are tested annually for impairment. 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.

Notes to the Preliminary financial information (continued)

3 Summary of significant accounting policies (continued)

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). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in, first out basis. Net realisable value is based on estimated selling price less additional cost to completion and disposal. Provision is made for obsolete, slow moving or defective items where appropriate and are recognised as an expense in the period in which the write-down or loss occurs.

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.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

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.

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.

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 income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of debt facilities are recognised as transaction costs of the debt to the extent that it is probable that some or all of the facility will be drawn-down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

All borrowing costs are recognised in the income statement in the period they are incurred.

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.

4 Critical accounting judgements and key sources of estimation and uncertainty

The Group makes estimates and assumptions concerning the future. Actual results may differ from these estimates. 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.

Impairment of goodwill and intangible assets

The Group tests goodwill for impairment annually. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The Group uses pre-tax discount rates of between 10.0% and 14.5% for this purpose. The carrying amount of goodwill at 31 December 2013 is £9,116,000. Further consideration of the impairment of goodwill is included in note 12.

Notes to the Preliminary financial information (continued)

4 Critical accounting judgements and key sources of estimation and uncertainty (continued)

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 2013 is £3.9 million.

Revenue recognition

Significant management judgement is applied in determining the allocation and timing of the recognition of revenue on contracts. In this process management takes into account milestones, hardware supplied, actual work performed and further obligations and costs expected to complete the work. The carrying amount of amounts recoverable on contracts at 31 December 2013 is £3.3 million.

Inventories

The provision for obsolete, slow-moving or defective inventory is based on management's estimation of the commercial life of inventory lines and is applied on a prudent basis. In assessing this, management takes into consideration the sales history or products and the length of time that they have been available for resale.

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. No deferred tax asset is currently recognised.

Valuation of separately identifiable intangible assets

As detailed in note 3, separately identifiable intangible assets are identified and amortised over defined periods. The Directors use an acknowledged valuation approach but this is reliant upon certain judgements which they determine are reasonable by reference to companies in similar industries.

Contingent consideration

The Group initially estimates the amounts payable under 'earn-out' plans to the former shareholders of acquired companies based on the business model produced at the time of acquisition. Earn-out clauses within acquisition agreements typically contain provisions for amounts payable to the former shareholders based on future financial performance. In order to calculate the expected future payments, the acquisition business model contains estimates of the future financial performance for the acquired business.

The post-acquisition performance and expected future performance of acquired companies is reviewed throughout the year. Any adjustments required to contingent consideration arising from a significant departure of financial performance from the original acquisition plan are made as required.

The Directors do not consider that there are any other critical accounting judgements or key sources of estimation uncertainty.

5 Segment information

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. As announced in September 2013, the Group is now organised on a global basis as a single Real-Time Location Intelligence (RTLI) business. This is the basis of the Group's external market offering and internal organisational and management structure and is the primary way in which the Chief Executive Officer, who is the Chief Operating Decision Maker, receives financial information to assess Group performance. As a result, the Group has therefore determined that it has only one reportable segment as defined by IFRS 8. The prior year disclosures have been restated to reflect these changes.

Notes to the Preliminary financial information (continued)

5 Segment information (continued)

5.1 Revenue by nature

	2013 £'000	2012 £'000
Solutions	13,375	12,537
Services	13,627	11,755
Total Revenues	27,002	24,292

In addition 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.

5.2 Geographical areas

The Group's revenue from external customers and information about its non-current assets (excluding goodwill and deferred tax) by geography is detailed below:

	Revenue		Non-current assets
	2013 £'000	2012 £'000	2013 £'000	2012 £'000
UK	539	1,441	4,239	2,576
Europe	12,478	10,533	294	239
Americas	11,988	9,585	477	675
Asia Pacific	1,997	2,733	2,464	-
	27,002	24,292	7,474	3,490

Revenues from external customers in the Group's domicile, the UK, as well as its major markets, Europe, Americas and Asia Pacific, have been identified on the basis of the customer's geographical location. Non-current assets are allocated based on their physical location.

5.3 Information about major customers

During 2013, revenues of £6.0 million (2012: £2.6 million) derived from one European customer and revenues of £1.1 million (2012: £2.6 million) from one Americas customer. There were no other customers in 2013 or 2012 who contributed in excess 10% of revenue.

Notes to the Preliminary financial information (continued)

6 Employee information

6.1 Employee numbers

The average monthly number of people, including Executive Directors, employed by the Group during the year was:

	Actual number of people as at 31 December		Average monthly number of people
By activity	2013 Number	2012 Number	2013 Number	2012 Number
Technical Consultants	130	93	97	96
Sales & Marketing	40	32	34	37
Research & Development	40	32	35	31
Administration	29	18	20	20
	239	175	186	184
By geography	2013 Number	2012 Number	2013 Number	2012 Number
United Kingdom	53	48	51	51
Europe	54	55	56	58
Americas	72	68	71	71
Asia Pacific	60	4	8	4
	239	175	186	184

6.2 Employee benefits

	Notes	2013 £'000	2012 £'000
Wages and salaries		13,152	12,286
Social security costs		1,346	1,265
Contributions to defined contribution pension arrangements		626	562
Share-based payments	21.2	92	63
Total aggregate employee benefits		15,216	14,176

Included in the above are termination benefits of £nil (2012: £404,000) which are presented as reorganisation costs in the income statement - see note 9.2.

Notes to the Preliminary financial information (continued)

6 Employee information (continued)

6.3 Key management compensation

Key management includes Directors (Executive and non-executive) and members of the Global Management Team. During the year, there were 12 key management personnel (2012: 13). The compensation paid or payable to key management for employee services is shown below:

	2013	2012
	£'000	£'000
Short-term employee benefits
Wages and salaries	998	879
Social security costs	151	84
Other benefits	28	21
	1,177	984
Post employment benefits
Contributions to defined contribution pension arrangements	49	52
Share-based payments
Equity-settled share-based payments	37	24
Total key management compensation	1,263	1,060

7 Directors' remuneration and interests

7.1 Directors' remuneration

					Employer's
					contributions
					to defined
					contribution
	Basic	Performance	Benefits		pension	Total	Total
	Salary	Payments	in kind	Subtotal	arrangements	2013	2012
Director	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gordon Campbell*	93	56	2	151	18	169	124
Richard Green*	132	116	3	251	16	267	201
Peter Harverson	15	-	-	15	-	15	15
Andrew Hopper	25	-	-	25	-	25	25
J Keith Lomas	15	-	-	15	-	15	15
Richard Newell	15	-	-	15	-	15	15
Robert Sansom**	-	-	-	-	-	-	-
Paul Taylor	15	-	-	15	-	15	15
Total	310	172	5	487	34	521	410

* The directors are remunerated through the Company's flexible benefits scheme under which they can elect to switch basic salary into pension contributions and other benefits. The basic salary entitlement in the year was: Richard Green £140,000; Gordon Campbell £105,000.

** Robert Sansom has waived his entitlement to annual remuneration in the year of £15,000

Notes to the Preliminary financial information (continued)

7 Directors' remuneration and interests (continued)

7.2 Directors' interests - share options

Director	Award date Years	Vests Years	Expires Year	Exercise Price £	Awards Outstanding at 1 January 2013 number	Granted during the year number	Exercised during the year number	Lapsed during the year number	Awards outstanding at 31 December 2013 number	Awards exercisable at 31 December 2013 number
Gordon Campbell	2010	2011-13	2020	0.140	120,500	-	-	-	120,500	120,500
	2011	2012-14	2021	1.050	32,500	-	-	-	32,500	21,667
	2012	2013-15	2022	2.125	40,000	-	-	-	40,000	13,333
	2013	2014-16	2023	2.055	-	40,000	-	-	40,000	-
					193,000	40,000	-	-	233,000	155,500
Richard Green	2010	2011-13	2020	0.140	76,278	-	(76,278)	-	-	-
	2011	2012-14	2021	1.050	100,000	-	-	-	100,000	66,667
	2012	2013-15	2022	2.125	60,000	-	-	-	60,000	20,000
	2013	2014-16	2023	2.055	-	60,000	-	-	60,000	-
					236,278	60,000	(76,278)	-	220,000	86,667
Peter Harverson	2010	2011-13	2020	0.140	91,333	-	-	-	91,333	91,333
Andrew Hopper	2010	2011-13	2020	0.140	20,278	-	-	-	20,278	20,278
Richard Newell	2010	2011-13	2020	0.140	1,056	-	-	-	1,056	1,056
Total					541,945	100,000	(76,278)	-	565,667	354,834

The 2013 grants vest subject to meeting performance criteria set out in the long-term incentive plan ("LTIP"). No other Directors have been granted share options in the Company or other Group entities. None of the terms and conditions of the share options were varied during the year. All options were granted in respect of qualifying services. There have been no options granted to or exercised by Directors between 31 December 2013 and 25 March 2014.

The market price of the Company's shares at the end of the financial year was £2.46. The range of market prices during the year was between £1.825 and £2.50.

Directors' gains on share options
	Gain on	Gain on
	exercise	exercise
	2013	2012
	£'000	£'000
Richard Green	155	-

Notes to the Preliminary financial information (continued)

7 Directors' remuneration and interests (continued)

7.3 Directors' interests - shares

Directors' interests in the ordinary shares of Ubisense Group plc, at 31 December 2013 and 31 December 2012, were as follows:

	2013	2012
	Number	Number
Gordon Campbell	87,987	87,987
Richard Green	1,619,289	1,543,011
Peter Harverson	65,161	65,161
Andrew Hopper	225,000	225,000
J Keith Lomas	47,712	47,712
Richard Newell	643,354	643,354
Robert Sansom	2,493,676	2,493,676
	5,182,179	5,105,901

There has been no change in the interests set out above between 31 December 2013 and 24 March 2014.

8 Finance income and costs

2013

£'000

2012

£'000

Interest income from cash and cash equivalents

Finance income

Interest payable - bank	(103)	-
Finance costs	(103)	-
Net finance (costs)/income	(93)	38

9 Loss before tax: analysis of expenses by nature

9.1 Expenses by nature

The following items have been charged/ (credited) to the income statement in arriving at loss before tax:

	Notes	2013 £'000	2012 £'000
Amortisation of acquired intangible assets	12	313	257
Amortisation of other intangible assets	12	1,332	953
Depreciation of owned property, plant and equipment	13	266	227
Loss on disposal of property, plant and equipment		-	5
Operating lease rental charges - land and buildings		445	355
Operating lease rental charges - other		135	124
Inventory recognised as an expense		1,057	1,571
Research and development costs expensed		946	1,312
Net foreign currency (gains)/losses		(153)	153
Exceptional items	9.2	764	423
Auditors' remuneration	9.3	216	81

Notes to the Preliminary financial information (continued)

9 Loss before tax: analysis of expenses by nature (continued)

9.2 Exceptional items

	Notes	2013 £'000	2012 £'000
Strategic Asia Pacific market entry costs		650	-
Aborted acquisition costs		114	-
Reorganisation costs		-	423
		764	423

During 2013, the Group incurred exceptional items of £764,000 of which £650,000 related to strategic Asia Pacific market entry costs comprising £464,000 acquisition costs relating to Geoplan and £186,000 costs relating to product certification costs in Japan and S. Korea and the termination of the Group's previous agent network in the region. In addition, the Group incurred £114,000 costs, mainly comprising professional fees, in connection with an acquisition which did not proceed.

During 2012, the Group incurred reorganisation costs totalling £423,000 comprising mainly redundancy costs in order to integrate acquisitions made in 2011 and to centralise the Research and Development and Sales and Marketing functions.

9.3 Auditors' remuneration

During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's auditor and its associates:

	2013 £'000	2012 £'000
Fees payable to the Group's auditor for the audit of:
Parent Company and consolidated financial statements	16	14
Financial statements of subsidiaries, pursuant to legislation	91	43
	107	57
Fees payable to the Group's auditor for other services:
Tax services	26	15
Corporate Finance services	75	-
Other services	8	9
	109	24
Auditors' remuneration	216	81

The auditor of Ubisense Group plc is Grant Thornton UK LLP.

During the year, the auditor was used for due diligence work as this was considered most beneficial to the Group due to the auditor's established knowledge and experience of the Group's activities. The auditor's independence and objectivity was safeguarded through the use of separate engagement teams. No services were provided pursuant to contingent fee arrangements.

Notes to the Preliminary financial information (continued)

10 Income tax

10.1 Income tax recognised in the income statement

	2013 £'000	2012 £'000
Current tax
UK Corporation Tax	2	-
Foreign tax	36	9
Research and development tax credits - prior years	(177)	(203)
Total current tax credit	(139)	(194)
Deferred tax
Origination and reversal of temporary differences	358	104
Total deferred tax expense	358	104
Total income tax expense/(credit)	219	(90)

The tax expense (2012: credit) differs from the standard rate of corporation tax in the UK for the year of 23% (2012: 24%) for the following reasons:

	2013 £'000	2012 £'000
Loss before tax	(1,719)	(728)
Loss before tax multiplied by the standard rate of corporation tax in the UK of 23% (2012: 24%)	(395)	(175)
Tax effects of:
Expenses not deductible for tax purposes	219	21
Accrued contingent consideration released not subject to tax	-	(38)
Utilisation of previously unrecognised tax losses	(96)	(259)
Tax losses for which no deferred tax asset was recognised	708	832
Tax unprovided in prior years	38	9
Research and development tax credits - prior years	(188)	(203)
Difference on tax treatment of share options	74	-
Differential on overseas tax rates	(149)	(233)
Remeasurement of deferred tax - change of rate	-	(58)
Other temporary differences	8	14
Total income tax expense/(credit)	219	(90)

10.2 Factors that may affect future tax charges

The Group has tax losses of £8.9 million (2012: £4.4 million) 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.

As a result of the reduction in the UK corporation tax rate to 23% that was substantively enacted on 3 July 2012 and effective from 1 April 2013, the deferred tax balances have been remeasured. The UK Government has also announced a further reduction in the main rate of corporation tax to 21% effective from 1 April 2014 and has proposed a further reduction of 1% by 1 April 2015. These further tax rate reductions had not been substantively enacted at the balance sheet date and, therefore, are not recognised in the financial statements.

Notes to the Preliminary financial information (continued)

10 Income tax (continued)

10.3 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
	2013 £'000	2012 £'000	2013 £'000	2012 £'000
At 1 January	-	-	(653)	(549)
Arising on acquisition of subsidiaries	-	-	(844)	-
Deferred tax credited to the income statement	-	-	57	88
Deferred tax charged to the income statement	-	-	(416)	(192)
At 31 December	-	-	(1,856)	(653)

The components of deferred tax included in the Consolidated statement of financial position are as follows:

	2013 £'000	2012 £'000
Development costs capitalised	(901)	(485)
Intangible assets recognised on acquisition of subsidiaries	(955)	(168)
Total deferred income tax liabilities	(1,856)	(653)

Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profits will be available against which the Group can utilise the benefits:

	2013 £'000	2012 £'000
Tax losses carried forward	2,537	1,343
Equity-settled share options temporary differences	452	289
Total unrecognised deferred tax assets	2,989	1,632

Notes to the Preliminary financial information (continued)

11 Earnings per share (EPS)

Basic and diluted earnings per share	2013	2012
Earnings
Earnings for the purposes of basic and diluted EPS being net loss attributable to equity holders of the parent company (£'000)	(1,968)	(638)
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS ('000)	21,984	21,764
Effect of dilutive potential ordinary shares:
- - Share options ('000)	1,034	1,383
Weighted average number of ordinary shares for the purposes of diluted EPS ('000)	23,018	23,147
Basic EPS (pence)	(8.9p)	(2.8p)
Diluted EPS (pence)	(8.9p)	(2.8p)

Basic earnings per share is calculated by dividing profit 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 hence the diluted loss per share for the year is the same as the basic loss per share.

The Group also presents an adjusted diluted earnings per share figure which excludes amortisation on acquired intangible assets, share-based payments charge and non-recurring exceptional items such as acquisition, integration or reorganisation costs from the measurement of profit for the period.

Adjusted diluted earnings per share	Notes	2013	2012
Earnings for the purposes of diluted EPS being net loss attributable to equity holders of the parent company (£'000)		(1,968)	(638)
Adjustments:
Reversal of amortisation on acquired intangible assets (£'000)	9, 12	313	257
Reversal of share-based payments charge (£'000)	21	92	63
Reversal of exceptional items (£'000)	9	764	423
Net adjustments (£'000)		1,169	743
Adjusted earnings (£'000)		(799)	105
Adjusted diluted EPS (pence)		(3.6p)	0.5p

The adjusted EPS information is considered to provide a fairer representation of the Group's trading performance.

Notes to the Preliminary financial information (continued)

12 Other intangible assets

	Goodwill £'000	Acquired customer relationships and order backlog £'000	Acquired software product £'000	Capitalised product development costs £'000	Software £'000	Total £'000
Cost
At 1 January 2012	7,418	449	529	2,579	295	11,270
Effects of movement in exchange rates	-	-	-	-	(12)	(12)
Additions	-	-	-	1,845	16	1,861
At 31 December 2012	7,418	449	529	4,424	299	13,119
Additions	-	-	-	3,037	161	3,198
Acquisition of Geoplan	1,698	1,593	626	-	173	4,090
At 31 December 2013	9,116	2,042	1,155	7,461	633	20,407
Accumulated amortisation
At 1 January 2012	-	(68)	(44)	(1,452)	(30)	(1,594)
Effects of movement in exchange rates	-	-	-	-	4	4
Charge for the year	-	(80)	(177)	(862)	(91)	(1,210)
At 31 December 2012	-	(148)	(221)	(2,314)	(117)	(2,800)
Charge for the year	-	(120)	(193)	(1,227)	(105)	(1,645)
At 31 December 2013	-	(268)	(414)	(3,541)	(222)	(4,445)
Net book amount
At 31 December 2013	9,116	1,774	741	3,920	411	15,962
At 31 December 2012	7,418	301	308	2,110	182	10,319

The acquired software products, customer relationships and order backlog assets arose on the acquisition in 2013 of the Geoplan Interworks K.K. group of companies and in 2011 of Integrated Mapping Solutions, Inc. (now merged into Ubisense Inc.) and Realworld OO Systems Limited (now re-named Geospatial Systems Limited). Capitalised development assets relate to expenditure that can be applied to a plan or design for the production of new or substantially improved products and processes. The software assets represent assets purchased from third parties.

In assessing whether goodwill has been impaired, the carrying amount of the cash-generating unit (CGU) or groups of CGUs (including goodwill) is compared with the recoverable amount of the CGU or groups of CGUs. The recoverable amount is the higher of fair value less costs to sell and value in use. In the absence of readily available information about the fair value of a cash-generating unit, the recoverable amount is deemed to be the value in use for the purposes of performing an impairment test of goodwill, unless this would lead to an impairment loss. If goodwill would be impaired using value in use as the recoverable amount, a fair value less costs to sell assessment would be performed as this may lead to a higher recoverable amount. The group calculates the value in use using a discounted cash flow model. The future cash flows are adjusted for risks specific to the cash-generating unit and are discounted using a pre-tax discount rate. The discount rate is derived from the group's post-tax weighted average cost of capital and is adjusted where applicable to take into account any specific risks. Discount rates of 12.5% and 14.5% have been used for goodwill impairment calculations performed in 2013 (2012: 9.7% and 12.5%). The recoverable amounts of all CGUs have been determined from value-in-use calculations based on 5 year forecasts projected from the 2014 annual operating plan approved by the Board for each CGU with an assumed terminal growth rate of nil and no improvement in relative operating margin after the forecast period. The Board has considered reasonable possible sensitivities in key assumptions on which the value-in-use calculations are based. If the underlying organic revenue growth rate reduced to 0%, or if the discount factor increased to 20%, this would not cause the carrying value to exceed estimated recoverable amount. There was no impairment of goodwill as the estimated recoverable amount exceeded the carrying value for all CGUs.

Notes to the Preliminary financial information (continued)

13 Property, plant and equipment

	Fixtures and Fittings £'000	Computer Equipment £'000	Total £'000
Cost
At 1 January 2012	221	605	826
Effect of movements in exchange rates	(7)	(13)	(20)
Reclassification	31	(31)	-
Additions	321	174	495
Disposals	(23)	(218)	(241)
At 31 December 2012	543	517	1,060
Effect of movements in exchange rates	(42)	4	(38)
Additions	52	88	140
Acquisition of subsidiaries	136	-	136
Disposals	-	(2)	(2)
At 31 December 2013	689	607	1,296
Accumulated depreciation
At 1 January 2012	(128)	(332)	(460)
Effect of movements in exchange rates	6	7	13
Charge for the year	(77)	(150)	(227)
Reclassification	(20)	20	-
Disposals	20	215	235
At 31 December 2012	(199)	(240)	(439)
Effect of movements in exchange rates	32	3	35
Charge for the year	(88)	(178)	(266)
Disposals	-	2	2
At 31 December 2013	(255)	(413)	(668)
Net book amount
At 31 December 2013	434	194	628
At 31 December 2012	344	277	621

14 Inventories

	2013 £'000	2012 £'000
Raw materials	811	182
Finished goods	2,295	680
Total inventories	3,106	862

Included in the analysis above are impairment provisions against inventory amounting to £nil (2012: £44,000). The Group's inventories are comprised of products which are not generally subject to rapid obsolescence on account of technological, deterioration in condition or market trends.

Notes to the Preliminary financial information (continued)

15 Trade and other receivables

	Notes	2013 £'000	2012 £'000
Trade receivables, gross		7,072	7,390
Allowances for doubtful debts	15.1	(141)	(80)
Trade receivables, net	15.2	6,931	7,310
Amounts recoverable on contracts		3,347	2,439
Other receivables		285	40
Prepayments and accrued income		645	502
Corporation tax recoverable		177	-
VAT and taxation receivable		162	11
Total trade and other receivables		11,547	10,302

All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.

Due to having a blue chip customer base and effective credit control procedures, the Group is not significantly exposed to the risk of bad debt. 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. Any impairment is assessed on a customer-by-customer basis following a 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.

15.1 Movement in allowance for doubtful debts

	2013 £'000	2012 £'000
At 1 January	(80)	(7)
Amounts recovered in the year	2	7
Allowance made	(63)	(80)
At 31 December	(141)	(80)

15.2 Ageing of past due but not impaired receivables

	2013 £'000	2012 £'000
Neither past due nor impaired	5,114	5,360
Past due but not impaired:
0 to 90 days overdue	1,500	1,360
More than 90 days overdue	317	590
Total	6,931	7,310

Notes to the Preliminary financial information (continued)

16 Cash and cash equivalents

	2013 £'000	2012 £'000
Cash at bank and in hand	3,848	2,716
Short-term bank deposits	116	-
Cash and cash equivalents	3,964	2,716

The carrying amount approximates to fair value because of the short-term maturity of these instruments, being no greater than three months.

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	2013 £'000	2012 £'000
British Pound (GBP)	489	723
Euro (EUR)	496	1,101
US Dollar (USD)	739	847
Japanese Yen (JPY)	1,718	-
South Korean Won (KRW)	352	-
Canadian Dollar (CAD)	11	45
Turkish Lira (TRY)	159	-
Cash and cash equivalents	3,964	2,716

17 Trade and other payables

	Notes	2013 £'000	2012 £'000
Payments received on account		2,765	1,002
Trade payables		3,570	1,936
Trade accruals		1,748	1,404
Current tax liability		41	-
Other taxation and social security		667	612
Other payables		705	292
Other liabilities - deferred consideration	25	172	-
Other liabilities - contingent consideration	25	355	-
Total trade and other payables		10,023	5,246

All amounts disclosed are short term. The carrying value of trade payables is considered a reasonable approximation of fair value.

Notes to the Preliminary financial information (continued)

18 Bank loans

In August 2013, the Group agreed a new three year bank loan of up to £5.0 million to provide additional future working capital capacity and is repayable in full in August 2016. Interest is payable at LIBOR plus 3% and the facility is secured on the fixed and floating assets of the Group. The facility is subject to certain operating performance and net worth covenants of the business. The loan replaced an existing loan which was drawn down in the year, was due to expire in November 2013 and on which there was an outstanding balance of £2.0 million which had been drawn down in full in April 2013. The new loan was used pay the outstanding balance on this previous loan. As at 31 December 2013, and as at 24 March 2014, £3.5 million (31 December 2012: £nil) is outstanding and is repayable by Ubisense Limited to HSBC Bank plc.

19 Other liabilities

Notes

2013

£'000

2012

£'000

Other liabilities - contingent consideration

430

20 Share capital and premium

	Number of ordinary shares of £0.02 each	Share capital £'000	Share premium £'000	Total £'000
Balance at 1 January 2012	21,657,698	433	22,031	22,464
Issued under share-based payment plans	154,937	3	29	32
Issued on conversion of warrants	107,109	2	191	193
Change in year	262,046	5	220	225
Balance at 31 December 2012	21,919,744	438	22,251	22,689
Issued under share-based payment plans	399,593	8	103	111
Issued on acquisition of subsidiary	759,809	15	1,696	1,711
Change in year	1,159,402	23	1,799	1,822
Balance at 31 December 2013	23,079,146	461	24,050	24,511

The Company has one class of ordinary shares which carry no right to fixed income.

During the period, the Company issued 1,159,402 shares, increasing the total number of shares in issue from 21,919,744 to 23,079,146 as follows:

· 399,593 shares as a result of options exercised with a weighted average exercise price of £0.28 per share for total cash consideration of £111,000; and

· 759,809 shares as a result of the acquisition of the Geoplan Interworks K.K. group of companies at £2.2525 per share for cash consideration of £nil.

Notes to the Preliminary financial information (continued)

21 Share-based payments: options and warrants

21.1 Equity-settled share-based payment arrangements

The Group operates a number of plans to award options over shares in the Company to the best performing employees of the Group around the world.

Options are generally granted at an exercise price equal to the market price of the shares under option at the date of the grant. The options generally vest evenly over three years on the anniversary from the date of the grant or entirely on the third anniversary from the date of grant, depending on continuing service during the vesting period. The contractual life of the options is ten years from the date of grant after which they expire if unexercised.

21.2 Analysis of amounts recognised in the financial statements

a) Analysis of amounts recognised in the Consolidated income statement

2013

£'000

2012

£'000

Total share-based payments charge recognised in operating profit

b) Analysis of amounts recognised in the Consolidated statement of changes in equity in the year

2013

£'000

2012

£'000

Net share-based payments credit recognised in Equity

c) Cumulative amounts included within equity in the Consolidated statement of financial position

2013

£'000

2012

£'000

Cumulative reserve credit for share-based payments

746

654

21.3 Reconciliation of movements in equity-settled share-based payment arrangements in the year

Arrangement	Award date Year	Vests Years	Expires Year	Exercise price £	Awards outstanding at 1 January 2013 number	Granted during the year number	Exercised during the year number	Forfeited during the year number	Awards outstanding at 31 December 2013 number	Awards exercisable at 31 December 2013 number
Options	2006	2007-09	2016	0.900	2,500	-	(2,500)	-	-	-
	2007	2008-10	2017	0.900	300	-	-	-	300	300
	2008	2009-11	2018	0.900	650	-	-	-	650	650
	2009	2009	2019	0.900	4,457	-	(707)	-	3,750	3,750
	2010	2011-13	2020	0.140	1,243,815	-	(360,338)	(333)	883,144	883,144
	2011	2012-14	2021	1.050	427,466	-	(14,902)	(4,114)	408,450	269,932
	2011	2012-14	2021	1.975	32,532	-	(21,146)	-	11,386	7,591
	2012	2013-15	2022	2.125	346,000	-	-	(2,000)	344,000	33,334
	2013	2014-16	2023	2.055	-	421,500	-	(50,000)	371,500	-
Total					2,057,720	421,500	(399,593)	(56,447)	2,023,180	1,198,701
Weighted average exercise price (£)					0.695	2.055	0.277	1.973	1.025	0.415

The weighted average share price at the date of exercise for options exercised during the year was £2.1053 (2012: £2.126).

21.4 Principal assumptions

The fair value of share-based payments grants has been valued using the Black-Scholes option-pricing model. Expected volatility was determined based on the historic volatility of comparable companies. The expected life is the expected period from grant to exercise based on management's best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations. The risk-free rate of return is an average yield on the zero-coupon UK Government Bond in issue at the date of grant with a similar life to the option or warrant.

Notes to the Preliminary financial information (continued)

21 Share-based payments: options and warrants (continued)

21.4 Principal assumptions (continued)

The following assumptions were used in the model for options granted during the years ended 31 December 2013 and 31 December 2012:

Instrument	Option	Option
Number granted	421,500	347,000
Grant date	19 April 2013	29 June 2012
Share price at grant date (£)	2.055	2.125
Exercise price (£)	2.055	2.125
Fair value per option (£)	0.3	0.3
Expected life (years)	3.0	3.0
Expected volatility (%)	20.00	20.00
Risk-free interest rate (%)	0.79	0.87
Expected dividends expressed as a dividend yield%	0.00	0.00

22 Other reserves

Share-based payment reserve

The share-based payment reserve relates to cumulative charge made in respect of share options granted by the Company to the Group's employees under its employee share option plans.

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 Sterling are recognised directly in other comprehensive income and accumulated in the translation reserve.

23 Operating lease commitments

	Share-based payment reserve £'000	Translation reserve £'000	Total £'000
Balance at 1 January 2012	591	(81)	510
Exchange difference on retranslation of net assets and results of overseas subsidiaries	-	33	33
Reserve credit for equity-settled share-based payment	63	-	63
Balance at 31 December 2012	654	(48)	606
Exchange difference on retranslation of net assets and results of overseas subsidiaries	-	(173)	(173)
Reserve credit for equity-settled share-based payment	92	-	92
Balance at 31 December 2013	746	(221)	525

Notes to the Preliminary financial information (continued)

23 Operating lease commitments (continued)

Leases as lessee

At 31 December 2013, the Group has lease agreements in respect of property and equipment for which payments extend over a number of years. The Group enters into these arrangements as these are a cost-efficient way of obtaining the short-term benefits of these assets. The Group lease rental charge is disclosed in note 9. There are no other material off-balance sheet arrangements.

The Group's future aggregate minimum lease payments under non-cancellable operating leases are as follows:

	Land and buildings		Other
	2013 £'000	2012 £'000	2013 £'000	2012 £'000
No later than one year	433	360	111	111
Later than one year and no later than five years	1,409	1,512	117	91
Later than five years	550	853	-	-
Total	2,392	2,725	228	202

The above table reflects the committed cash payments under operating leases, rather than the expected charge to the income statement in the relevant periods. The effect on the income statement will differ to the above figures due to the amortisation of rent-free and discounted rent periods included in a new property lease signed in 2012. The expected charge in 2014 for operating leases is expected to be £30,000 higher than the committed cash payments shown above.

The Group has guaranteed rent bonds issued by its banks on its behalf totalling £122,000 as at 31 December 2013 (2012: £125,000). These are not expected to result in any material financial loss.

24 Principal subsidiaries

Subsidiary	Country of incorporation	Principal activity	Proportion of ordinary shares held by group (%)	Proportion of ordinary shares held by non-controlling interests (%)
Ubisense Limited	UK	Location solutions	100	-
Ubisense AG	Germany	Location solutions	100	-
Ubisense SAS	France	Location solutions	100	-
Ubisense Inc.	US	Location solutions	100	-
Ubisense Solutions Inc	Canada	Location solutions	100	-
Geospatial Systems Limited	UK	Location solutions	100	-
Geoplan Interworks K.K.	Japan	Intermediate holding company	100	-
Geoplan Company Limited*	Japan	Location solutions	77	23
Binary Star Developments K.K.*	Japan	Non-trading	100	-
Geoplan Korea Company Limited*	South Korea	Location solutions	100	-
Geoplan Philippines, Inc.*	Philippines	Location solutions	100	-

All subsidiaries are directly held by Ubisense Group plc except those denoted* which are held by intermediate holding companies.

All subsidiaries prepare local statutory accounts up to 31 December each year except for Geospatial Systems Limited which prepares accounts up to 31 March, Geoplan Company Limited to 30 June and Binary Star Developments K.K. to 31 January. For subsidiaries who which have a different financial year-end to the Group, additional co-terminous accounts are prepared reflecting the same financial reporting as the Group for the purposes of consolidation.

Notes to the Preliminary financial information (continued)

25 Business combinations

25.1 Subsidiaries acquired

Subsidiary

Country of

incorporation

Principal

activity

Date of

acquisitions

Proportion of equity interest acquired

Geoplan Interworks K.K.

Japan

Location solutions

3 December 2013

100%

The Geoplan Interworks K.K group of companies ("Geoplan") was acquired to enhance the Group's geographic reach into the Asian market to deploy RTLI solutions to utility, telecoms and manufacturing customers in Japan, South Korea and Philippines. Geoplan, formerly the Master Distributor for the Group in Asia, is a location solutions business providing geospatial software products and consulting, with a focus on the utility and telecoms sectors. The acquisition will enhance the Group's product range, customer list, sector presence and geographical footprint, bringing locally based skills and presence to the Group. The Group expects Japan to be the headquarters for its Asian operations and to develop the markets in China from there.

25.2 Consideration transferred

		Total £'000
Cash consideration paid		635
Consideration satisfied by issue of Ubisense shares		1,711
Deferred consideration		178
Contingent cash consideration arrangement		816
Consideration transferred		3,340

Consideration satisfied by issue of Ubisense shares comprised 759,809 new ordinary shares of nominal value of £0.02 in Ubisense at a price of 225.25 pence per ordinary share, being the average of the volume weighted mid-market closing price on each of the preceding five business days.

The deferred consideration was paid in full in January 2014.

Under the contingent cash consideration arrangement, the Group is required to pay additional amounts to the vendors of Geoplan based on the achievement of two separate performance milestones that may arise between 2014 and 2017 with a combined undiscounted range of outcomes between nil and £892,000. The fair value of the contingent consideration of £816,000 recognised at the acquisition date was based on management's best estimate of the probability-adjusted estimated future cash outflows from the arrangement discounted at 3.5%. The discount rate used is 3.5%, based in the Group's estimated incremental borrowing rate for unsecured liabilities at the reporting date, and therefore reflects the Group's credit position. The effects on the fair value of risk and uncertainty in future cash flow are dealt with by adjusting the estimated cash flows rather than adjusting the discount rate.

As at 31 December 2013, the fair value amount recognised for this arrangement was unchanged based on the most recent management estimates although as the liability is denominated in Japanese Yen it is subject to the impact of exchange rates:

	Upon acquisition £'000	Effect of exchange rates £'000	At 31 December 2013 £'000
Deferred consideration - current	178	(6)	172
Contingent consideration - current	369	(14)	355
Contingent consideration - non-current	447	(17)	430
Total contingent consideration	816	(31)	785
Total	994	(37)	957

Acquisition related costs amounting to £464,000 have been excluded from the consideration transferred and have been recognised as an expense in the current year within the "operating expenses" line item in the consolidated income statement.

Notes to the Preliminary financial information (continued)

25 Business combinations (continued)

25.3 Assets acquired and liabilities recognised at the date of acquisition

		Total £'000
Assets
Non-current assets
Software products		626
Customer relationships		1,246
Order backlog		347
Other intangible assets		173
Property, plant and equipment		132
Total non-current assets		2,524
Current assets
Inventories		1,605
Trade and other receivables		1,080
Cash and cash equivalents		2,481
Total current assets		5,166
Liabilities
Current liabilities
Trade and other payables		(4,500)
Total current liabilities		(4,500)
Non-current liabilities
Deferred income tax liabilities		(843)
Total non-current liabilities		(843)
Non-controlling interest		(704)
Fair value of identifiable net assets acquired		1,643

The fair value of trade and other receivables of £1,080,000 includes trade receivables with a fair value and gross contractual value of £1,080,000 all of which is expected to be collectable.

As at 31 December 2013, the fair values of acquired assets, liabilities and goodwill for Geoplan have been determined on a provisional basis as these businesses were acquired in close proximity to the year end, pending finalisation of the post-acquisition review of the fair value of the acquired net assets.

25.4 Goodwill arising on acquisitions

		Total £'000
Fair value of consideration transferred		3,340
Less: fair value of identifiable net assets acquired		1,643
Goodwill arising on acquisitions		1,697

Goodwill arose on the acquisition of Geoplan in respect of the benefits of a highly knowledgeable workforce, expected operational synergies, revenue growth and future market development. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

Goodwill is not expected to be deductible for tax purposes.

Notes to the Preliminary financial information (continued)

25 Business combinations (continued)

25.5 Net cash inflow on acquisition of subsidiaries

		Total £'000
Cash consideration paid		(635)
Less: cash and cash equivalent balances acquired		2,481
Net cash inflow on acquisition of subsidiaries		1,846

25.6 Impact of acquisitions on the results of the Group

The incremental impact of acquisitions to the Group's results for the year are set out in the table below:

	Before acquisitions £'000	Geoplan £'000	Total £'000
Revenue	26,284	718	27,002
Adjusted EBITDA	929	212	1,141
(Loss)/profit before tax	(1,828)	109	(1,719)

If the acquisitions were effective from 1 Jan 2013, the Group's estimated results would have been as follows:

	Before acquisitions £'000	Geoplan £'000	Total £'000
Revenue	26,284	5,365	31,649
Adjusted EBITDA	929	(59)	870
Loss before tax	(1,828)	(75)	(1,903)

26 Related party transactions

Other than compensation of key management personnel disclosed in note 6.3 there are no transactions with other related parties. Full details of Directors' remuneration are given in note 7.

There were no other transactions with Directors of the Company.

27 Financial risk management

27.1 Risk management objectives and policies

The Group is exposed to various risks in relation to financial instruments. The Group's financial assets and liabilities by category are summarised below. The main types of risks are market risk, credit risk and liquidity risk. The Group is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk, which result from its operating activities.

The Group's risk management is coordinated at its headquarters, in close cooperation with the Board of Directors, and focuses on actively securing the Group's short to medium-term cash flows. The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant financial risks to which the Group is exposed are described below.

27.2 Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies. The Group's policy is to maintain natural hedges where possible, by matching foreign currency revenue and expenditure. The Group does not enter into forward exchange contracts to mitigate the exposure to foreign currency risk as the Group's currency transactions are not considered significant enough to warrant this.

The carrying amounts of the Group's foreign currency denominated monetary assets and liabilities at the reporting date, not denominated in the local functional currency, are as follows:

	Japanese Yen		US Dollars		Euros
	2013 £'000	2012 £'000	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Assets	-	-	777	752	623	817
Liabilities	-	-	(5)	(16)	(5)	(3)

Notes to the Preliminary financial information (continued)

27 Financial risk management (continued)

27.3 Foreign currency sensitivity analysis

The Group is mainly exposed to US Dollars, Euros and Japanese Yen. The Group seeks to manage cash inflows and outflows in each currency to mitigate currency exposure and exchange risk. The following table details the Group's sensitivity to a 5% increase and decrease in the Sterling exchange rate against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. A positive number indicates an increase in profit or equity.

	Japanese Yen		US Dollars		Euros
	2013 £'000	2012 £'000	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Effect of a 5% strengthening in relevant exchange rate on:
Income statement	-	-	41	37	33	39
Equity	-	-	41	37	33	39
Effect of a 5% weakening in relevant exchange rate on:
Income statement	-	-	(37)	(40)	(30)	(43)
Equity	-	-	(37)	(40)	(30)	(43)

27.4 Interest rate sensitivity

The Group's exposure to market risk for the changes in interest rates relates primarily to the Group's three year £5.0 million bank loan. Interest is payable at LIBOR plus 3% and £3.5 million of the loan was outstanding as at 31 December 2013 (2012: £nil).

The following table illustrates the sensitivity of the net profit of the Group for the year and equity to a possible change in interest rates of +0.5% and -0.5%, with effect from the beginning of the year. A positive number indicates an increase in profit or equity.

	2013 £'000	2012 £'000
Effect of a 0.5% decrease in interest rate on:
Income statement	17	-
Equity	17	-
Effect of a 0.5% increase in interest rate on:
Income statement	(17)	-
Equity	(17)	-

27.5 Credit risk analysis

The Group's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised in note 27.8, which are principally cash and cash equivalents and trade receivables.

Cash and cash equivalents are held at banks with good independent credit ratings in accordance with the Group Treasury policy. The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used.

The Group's policy is to deal only with creditworthy counterparties. The Group's management considers that its financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. All receivables are subject to regular review to ensure that they are recoverable and any issues identified as early as possible. In order to manage credit risk the Directors set limits for customers based on a combination of payment history and third party credit references. Credit limits are reviewed by the credit controller on a regular basis in conjunction with debt ageing and collection history. In addition many of the Group's customers, and approximately 80% by balance at any given time, are large utility companies and other blue-chip companies that would be considered a low credit risk.

None of the Group's financial assets are secured by collateral or other credit enhancements.

Notes to the Preliminary financial information (continued)

27 Financial risk management (continued)

27.6 Liquidity risk analysis

Liquidity risk is the risk arising from the Group not being able to meet its obligations as they fall due. The Group seeks to manage this risk by ensuring sufficient liquidity is available to meet the foreseeable needs and to invest cash assets safely and profitably. The Group manages its liquidity needs by carefully monitoring forecast cash inflows and outflows due in day-to-day business. Net cash requirements are compared to balances in order to determine headroom or any shortfalls. The Group policy throughout the year has been to place surplus funds on short-term treasury deposit or interest bearing reserve accounts based on its cash flow forecasting and to draw down on borrowing facilities for when required. As disclosed in note 18, the Group entered into a £5.0 million bank facility in the year, of which £3.5 million was drawn down as at 31 December 2013.

The Group's financial liabilities have contractual maturities as summarised below:

	Current		Non-current
	Within 6 months £'000	Between 6 and 12 months £'000	Between 1 and 5 years £'000	Later than 5 years £'000
As at 31 December 2013
Trade and other payables	6,195	355	430	-
Bank loan	-	-	3,500	-
As at 31 December 2012
Trade and other payables	3,632	-	-	-

Financial assets used for managing liquidity risk

Cash flows from trade and other receivables are contractually due within six months. Cash is generally held in accounts with immediate notice. Where surplus cash deposits are identified these are placed in accounts with access terms of no more than three months.

27.7 Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concern whilst maximising the return to stakeholders. The capital structure of the Group consists of cash and cash equivalents and capital and reserves attributable to the owners of the Company, and the Group's borrowing facilities.

The capital structure is continually monitored by the Group. In order to maintain or adjust the capital structure, the Group may issue shares, take on debt, sell assets to raise cash, adjust the amount of dividends payable to shareholders or return capital to shareholders. The Group is not subject to externally imposed capital requirements. The Group has entered into a £5 million bank facility in 2013 of which £3.5 million was drawn as at 31 December 2013 (2012: £nil) in order to provide working capital capacity to fund business growth.

27.8 Categories of financial instruments

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument, are disclosed in the accounting policies in note 3. The carrying amounts presented in the Consolidated Statement of Financial Position relate to the following categories of financial instrument:

Notes to the Preliminary financial information (continued)

27 Financial risk management (continued)

27.8 Categories of financial instruments (continued)

	Notes	2013 £'000	2012 £'000
Financial assets
Loans and receivables:
- Trade receivables	15	6,931	7,310
- Amounts recoverable on contracts	15	3,347	2,439
- Other receivables	15	285	40
- Cash and cash equivalents	16	3,964	2,716
Total financial assets		14,527	12,505

Financial liabilities
Amortised cost:
- Trade payables	17	3,570	1,936
- Trade accruals	17	1,748	1,404
- Other payables	17	705	292
- Deferred consideration	25.2	172	-
- Contingent consideration	25.2	785	-
- Bank loan	18	3,500	-
Total financial liabilities		10,480	3,632

This information is provided by RNS

The company news service from the London Stock Exchange

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