Ubisense Group plc Annual Report 2017
Ubisense Group plc
("Ubisense" or the "Company" or the "Group")
Final results for the year ended 31 December 2017
Ubisense Group Plc (AIM: UBI) a market leader in high performance Enterprise Location Intelligence Solutions, announces its final results for the year ended 31 December 2017.
Strategic highlights
· 2017: Strong progress was demonstrated in terms of revenue growth of our own products, cost management and order book
· Software focus: New strategy is delivering significant wins across both sides of the business, with a 21% increase in software sales
· Global growth: Demand for Ubisense solutions has increased across new centres of manufacturing such as Turkey and Thailand
· RTLS SmartSpace product development: Modularised the enterprise software platform to address Industry 4.0 and emerging opportunities for Industrial Internet of Things ("IIoT") applications
· Geospatial myWorld product development: Extended the product portfolio to include an analytics suite that significantly reduces time to market for cable and telecoms network builds and upgrades
Financial highlights
· Revenue generated from Ubisense's own products increased by 28% and now represents over 60% of revenue (2016: 49%)
· Total revenue increased to £27.3 million (2016: £26.5 million) while managing a 22% planned decline in services associated with third party products
· Operating loss reduced to £3.1 million (2016: £6.2 million) and adjusted EBITDA* profits of £0.4 million (2016: £0.3 million)
· £5.5 million (gross) raised from shareholders in November 2017 to accelerate go-to-market and development activity
· Cash balance of £9.1 million (2016: £3.5 million) and net cash of £6.6 million (2016: 0.2 million)
Richard Petti, Chief Executive Officer, commented,
"I am pleased to report on Ubisense's first full year of results since becoming CEO. The Company made strong progress in 2017 and we sold more of our own products to more customers than ever before, resulting in a 28% increase in Ubisense' own product sales. Our solutions are chosen because they combine industry-leading technology that includes: indoor and outdoor geolocation, wirelessly enabled machine-to-machine and machine-to-device communication, advanced analytics and big data middleware. By accelerating the sales of our own products, we plan to drive improved gross margins and profitability. We have an exciting pipeline of opportunities in both divisions and look forward to delivering for our customers in 2018."
* Measured as operating loss excluding depreciation, amortisation, unrealised intercompany foreign exchange, share based payments and non-recurring costs.
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Contact |
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Ubisense Group plc Richard Petti, Tim Gingell |
Tel: + 44 (0) 1223 535170 |
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Numis Securities Limited Jamie Lillywhite, Toby Adcock
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Tel: + 44 (0) 20 7260 1000 |
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Tulcan Communications LLP James Macey White, Matt Low, Deborah Roney
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Tel: +44 (0) 20 7353 4200 |
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About Ubisense
Ubisense (AIM: UBI), a global leader in enterprise location intelligence solutions, helps businesses in sectors including manufacturing, communications and utilities to improve operational efficiency, data quality and boost profitability. Ubisense location intelligence systems bring clarity to complexity, enabling customers to revolutionise their operational effectiveness in a measurable way. Founded in 2002, Ubisense is headquartered in Cambridge, England, with offices in North America, France, Germany and Japan. For more information visit: www.ubisense.net.
Chairman's statement
Results overview
2017 results continued to demonstrate that Ubisense has excellent products which deliver measurable benefits for customers as they strive for productivity improvements. In total, Ubisense has delivered 28% revenue growth for the company's own products, RTLS SmartSpace and Geospatial myWorld, offsetting the planned decline in Geospatial revenues associated with third party products. We have continued to see growth in our own software revenues, which remains of key importance to us as we drive growth in new and recurring revenues.
The RTLS SmartSpace agreement with Lockheed Martin for the F35 program highlighted the productivity gains that industrial customers need to make, with integration of location information a key success-enabling factor. The strength of our technology alongside a flexible, highly scalable software platform that can integrate multiple location technologies were key factors in this aerospace win. A win in the satellite and space sector highlights the further opportunities that exist in high-tech manufacturing.
Our Geospatial myWorld customers are now exploiting the flexibility of the platform to create new use cases liberating geospatial information across their organisation, integrating with other platforms and driving productivity improvements. For Ubisense, this drives sales of additional licences, further services engagements and involvement in customers' longer term IT strategy.
Board of directors and Governance
At the end of 2016, we welcomed Richard Petti to the Board as the new Chief Executive Officer. I'm delighted that he has stepped into the role successfully, enabling me to resume my non-Executive Chairman role in August 2017. Richard has led the business, clarifying the positioning and strategy of the company's two product portfolios, focusing and training the sales force whilst we continue to build the sales capacity.
The structure of the Board and individual responsibilities remain unchanged from last year. We ensure that the Company adopts proper standards of corporate governance and that the principles of best practice as set out in the UK Corporate Governance Code are followed where reasonably practicable. The Board continually reviews its composition and that of its committees and feels that, at this stage of the Group's development, the skills and mix of its members best serves our current needs.
Group strategy
In October 2017 we led a successful £5.5 million fundraise with new and existing shareholders, to allow us to capitalise on our strategy and accelerate our go-to-market and development activity.
Some of the customer productivity improvement opportunities based on Ubisense software platforms include:
RTLS SmartSpace: substantial investment in Industry 4.0 / Smart Factory / Industrial Internet of Things (IIoT) in industry with automation of non-linear processes using location information.
Geospatial myWorld: communications and utility operators spending billions of dollars upgrading their networks, needing to optimise the workflow across their organisation with accurate real-time geographically-based information.
For the Geospatial business, we will continue to leverage the highly specialist skills that we have in the team, focusing on increasing the volume of myWorld activity. In line with our strategy to reduce third party Geospatial consulting services, agreement was reached in March 2018 to dispose of that part of the Japanese business effective 30 March 2018.
To strengthen sales of our own products we have recruited strong new sales leadership in Japan and are making good progress on sales of myWorld and SmartSpace with our Japanese and Thai partners.
Corporate social responsibility
We are committed to corporate social responsibility that is tangible, practical and fits with the ethos of the business; this ensures that it is supported globally. During 2017 we continued our charity day program, allowing employees to take time off to support their charity of choice as well as organising local fundraising events. We continue to collaborate with local and national organisations to engage interns, industrial placements, apprenticeships and mentoring schemes, as well as being active members of local networks and clubs.
Current trading and outlook
The market opportunity for the Group is excellent for both divisions, with software-led strategies targeting productivity-enhancing opportunities in industry sectors that are growing and investing heavily in digitisation. By enabling our customers to create digital twins of their physical environments, we are helping companies worldwide to improve their profitability and meet the most stringent quality control requirements.
Trading in the first two months of 2018 has been in line with our expectations and we intend to build on our strengths through continued focus on developing and commercialising our software portfolio. We have improved the sales and go-to-market skills of the organisation and intend to further accelerate the momentum of sales of our own products through both divisions, which will ultimately drive improved gross margin and profitability.
We expect that the run-off of legacy third party services revenues will largely complete over the course of 2018, following which our results should better reflect the growth we are targeting in our own products, and as the proportion of third party services revenue in our mix declines, our gross margin will also naturally increase.
The growing success of our products, our stronger pipeline and discussions with customers lead us to be very excited about the prospects for our myWorld and RTLS SmartSpace products.
Our success is thanks to our people; we have a great team who have not only made this growth possible but are well positioned to take the business forwards.
I would like to thank our shareholders - old and new - for their continued support and our employees for their commitment in delivering success across both divisions.
Peter Harverson
Chairman
14 March 2018
Chief Executive's statement
Market opportunity
Ubisense excels at helping customers to convert their physical worlds into a living, breathing digital twin of their core operational assets, products and processes. In fact, Lockheed Martin, a giant in the aerospace industry, recently listed digital twins as the number one technology trend of 2018. This is why in 2017 we have sold more of our own products to more customers.
Looking at the trends in our main markets of automotive, aerospace, telecoms and utilities we see some common challenges such as increased competition from globalisation, more demanding technical savvy customers and ageing workforces with skill gaps.
However, as we look more closely within our target segments we also see some very positive indicators including automotive manufacturing output at an all-time high of 93.5m units, aircraft order backlogs at an all-time high of 8-10 years and global rollout plans for millions of homes worldwide to be connected to fibre broadband services in the next few years.
These long term trends are creating tremendous opportunities for us. This is why Lockheed Martin has trusted Ubisense with its mission critical function of controlling all shop floor tool operations for its high profile F-35 fighter program. This is also why Daimler has standardised every plant worldwide to work with our SmartSpace software to deliver their global vision of a "paperless factory". And this is why one of the largest North American utilities business has employees using our myWorld solution every day.
Our solutions are chosen because they combine industry-leading technology that includes: indoor and outdoor geolocation, wirelessly enabled machine-to-machine and machine-to-device communication, advanced analytics and big data middleware.
Underlying strategic focus
Our progress in 2017 can most easily be measured by observing the percentage of revenue our own products generate. For 2017 I am proud to report that not only did we break the 50% barrier but that we exceeded 60%. This important shift in our revenue mix has been achieved by focusing on a three-point strategy:
1. Refocusing the business:
Since 2016 we have been growing our focus on own-product sales into four main verticals: automotive, aerospace, telecoms and utilities. In doing so we are actively managing out our legacy third-party Geospatial service business which has now been reduced by 22% year on year. This has allowed greater management focus on building a stronger business that is based on our own products. Our goal is to become a market standard in each of our chosen verticals, we are focusing on the top global quartile of our selected market, which means concentrating our efforts on a group of approximately 200 global companies worldwide.
Focusing ensures that we develop a deeper understanding of our chosen markets. In 2017 we seeded our product roadmaps with extensive customer research which has helped us understand new areas where existing and prospective customers are facing specific problems. This market research has led to the launch of important new products in both product lines and increased pipeline generation. By increasing our focus on specific verticals we have been able to offer existing customers new product roadmaps that align with their challenges, and give new customers reasons to adopt Ubisense technology.
2. Improved sales execution:
Within our own organisation we have strengthened our go-to-market capabilities by recruiting market leading sales, pre-sales and marketing talent over 2017 and we have invested in training to help our organisation successfully complete complex multi-stakeholder buying processes.
As a result of this we have seen a significant shift in the shape of our pipeline, and across both business lines we have seen increases in the number of opportunities in the £250K-£1m band by an average of 115% and the £1M+ band by 25%. We have also increased our presence in new markets such as Thailand and Turkey by signing new distribution agreements with carefully selected partners that have both sales and delivery capabilities into our strategic markets of automotive, aerospace, telecoms and utilities.
3. Repositioning the product portfolio:
Thanks to our renewed engagement with our chosen markets we have invested in the development of our two enterprise class software solutions: SmartSpace and myWorld. Both product sets have been elevated from a positioning perspective so that our ability to solve enterprise level problems are more clearly communicated to our target markets. This elevation takes the form of positioning our products in the context of enterprise systems already in place (in manufacturing, for example, this is referred to as the 'manufacturing enterprise systems stack') and targeting our messaging directly at specific job roles.
In addition to elevating the two products, we have invested in modularising them, separating functionality into applications which can be packaged to address customer specific needs. This approach allows us to position both products along the value chains of our target market and illustrates how our products can improve core operations at each node in the value chain of their added-value operations. By positioning our product along the value chain we have been able to offer specific solutions to the challenges in particular areas, thereby eliminating the need to purchase enterprise licenses to solve discrete problems and preserving more value for future sales.
Financial results
The repositioning work has allowed us to increase the percentage of software across the board and in a typical transaction software will be the dominant source of revenue and margin. This ability to drive software sales underpins our goal of increasing margin and recurring revenue by way of maintenance and support services.
With respect to financial performance, we were able to grow our top line to £27.3 million, more than overcoming the decline in our legacy third party service revenues. This top line growth is thanks to the increased sales of our own products, which grew at an impressive rate of 28%. Our margins made some positive progress which will improve further as the momentum builds from the sales of our own products.
Above all, the Ubisense team continues to work hard to deliver improved returns for your investment.
Richard Petti
Chief Executive Officer
14 March 2018
Chief Financial Officer's statement
I'm pleased to present the 2017 results which reflect the continued progress that we've made in redefining our software-led strategy and building our go-to-market activity. Our strategy to enable digital twins for both divisions is aligned to our customers' desire to drive productivity and operational performance improvements in line with the digitisation and Industry 4.0 themes which are attracting significant investment spend. With our new modularised software offerings aiding the Return on Investment proposition to our target customers, we have developed a stronger pipeline of better qualified opportunities including increased software values, which will lead to further growth in orders, revenues and margins delivering profitability.
A 28% increase in revenues of Ubisense products has exceeded the decline in services associated with third-party and non-core products within the Geospatial division. The successful placing in November 2017 supports the future growth plans of the Group through investment in go-to-market and product development capacity.
Revenue
The Group is organised into two divisions, RTLS SmartSpace and Geospatial myWorld. Both divisions provide software solutions and services to enterprise customers, with RTLS SmartSpace additionally providing hardware solutions. The revenue composition by division is summarised in the table below:
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Revenue by division |
2017 £ m |
% of total revenue |
2016 £ m |
% of total revenue |
Year on year growth |
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RTLS SmartSpace revenue |
10.8 |
40% |
9.1 |
34% |
18% |
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- Geospatial myWorld |
5.8 |
21% |
3.8 |
15% |
52% |
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- Geospatial services from third party products |
10.7 |
39% |
13.6 |
51% |
-22% |
|
Total Geospatial revenue |
16.5 |
60% |
17.4 |
66% |
(5%) |
|
Total revenue |
27.3 |
100% |
26.5 |
100% |
3% |
Further revenue composition detail is summarised in the table below:
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Revenue detail |
2017 £ m |
% of total revenue |
2016 £ m |
% of total revenue |
Year on year growth |
|
Software |
3.9 |
14% |
3.2 |
12% |
21% |
|
Maintenance and support |
1.8 |
7% |
1.4 |
5% |
34% |
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Hardware |
4.8 |
18% |
3.8 |
14% |
30% |
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Services |
6.1 |
22% |
4.5 |
18% |
31% |
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Total revenue generated from own products |
16.6 |
61% |
12.9 |
49% |
28% |
|
Geospatial services from third party products |
10.7 |
39% |
13.6 |
51% |
-22% |
|
Total revenue |
27.3 |
100% |
26.5 |
100% |
3% |
The software focus in both divisions delivered good progress in 2017 with sales into new sectors as well as expanding deployments with existing customers. Modularisation of our software platform offerings together with sales of the new myWorld Fiber Planning product have been key factors in supporting 2017 growth and provide a foundation for growth in future years. The increase in software revenue leads directly to increasing maintenance and support revenues with a 34% increase shown in 2017 over 2016. These maintenance and support revenues are recurring contracts, which are expected to be renewed by customers annually.
Orders
Bookings for own products in 2017 were £17.5 million (2016: £15.5 million). The increase was in line with the strategy to focus on our own products. £10.7 million of new orders related to RTLS SmartSpace (2016: £10.9 million), £6.8 million related to Geospatial myWorld (2016: £4.6 million). Total bookings of new customer orders in 2017 were £22.7 million (2016: £29.3 million).
The order book backlog as at 31 December 2017 was £8.7 million (2016: £12.6 million), most of which will be recognised during 2018. £3.6 million of this related to RTLS SmartSpace (2016: £3.7 million), £2.9 million related to Geospatial myWorld (2016: £1.8 million) and £2.2 million to Geospatial third party Services (2016: £7.1 million).
Gross margin
The Group gross margin increased to 40% in 2017 from 39% in 2016.
Gross margin by division is summarised as follows;
|
Gross margin by division |
2017 £ m |
Gross margin % |
2016 £ m |
Gross margin % |
Gross margin movement |
|
RTLS SmartSpace |
4.5 |
42% |
4.0 |
44% |
(2%) |
|
Geospatial |
6.4 |
39% |
6.2 |
36% |
3% |
|
Total gross margin |
10.9 |
40% |
10.2 |
39% |
1% |
The gross margin of the RTLS SmartSpace division has reduced compared to 2016 due to a revenue mix with a higher proportion of lower margin hardware and services revenues. The Geospatial division's gross margin increased due to growth in myWorld software revenues partially offset by the 3rd party costs of the mathematical model embedded in the myWorld Fiber Planning product.
Operating expense and adjusted EBITDA
Operating expenses were £13.9 million (2016: £16.4 million) and are summarised as follows:
|
|
2017 |
2016 |
|
|
£ m |
£ m |
|
Other operating expense |
10.5 |
9.9 |
|
Depreciation |
0.4 |
0.3 |
|
Amortisation and impairment |
2.4 |
8.4 |
|
Share based payments expense |
0.3 |
- |
|
Unrealised forex on intercompany trading balances |
0.3 |
(1.9) |
|
Non-recurring items |
- |
(0.3) |
|
Total operating expense |
13.9 |
16.4 |
Other operating expenses include sales, marketing, product development, administration. Operating loss reduced to £3.1 million (2016: £6.2 million) due to impairments recognised in 2016. Share based payments expense of £0.3 million (2016: £nil) relates to shares options granted in December 2016.
Adjusted EBITDA excludes amortisation and impairment, depreciation, share based payments, unrealised foreign exchange gains on intercompany trading balances and non-recurring items and is reported as it reflects the performance of the Group. Adjusted EBITDA was £0.4 million (2016: £0.3 million) with the improvement driven by higher revenues at an increased gross margin.
Finance costs
Net interest payable for the period was £0.1 million (2016: £0.3 million) with reduced costs in 2017 following the restructuring of the HSBC debt in 2016.
Income tax
The Group has a net tax credit of £0.1 million (2016: £1.1 million) as a result of non-cash deferred tax movements. The Group does have substantial tax losses carried forward but does not currently recognise a deferred tax asset in respect of these losses.
Earnings and dividend
Loss before tax reduced to £3.1 million (2016:£6.4 million) and loss after tax was £3.1 million (2016: £5.3 million).
The adjusted diluted loss per share was 4.3 pence (2016: 3.9 pence loss per share). Reported basic and diluted loss per share was 5.2 pence (2016: 10.4 pence).
The Board does not propose a dividend for the year.
Impact of IFRS 15
IFRS 15 Revenue from Contracts with Customers will replace IAS 18 Revenue. The new standard is applicable from 1 January 2018, however 2017 comparatives will be restated under IFRS 15. IFRS 15 introduces a number of new concepts and requirements relating to revenue recognition, and also provides guidance and clarification on existing practice.
The Group has assessed the impact of IFRS 15 and the results of the assessment are stated in note 2 to the financial statements. The majority of Ubisense's sales are for products sold on a standalone basis and it is expected that the revenue recognition policy applied to these sales will be unaffected by the application of IFRS 15. Larger, more complex contracts, which involve multiple performance obligations, that include a combination of products and services, are affected by the application of IFRS 15. IFRS 15 requires the Group to evaluate the performance obligations for the contracted products and services to identify to whether these components are distinct. Accordingly, the significance of the impact of IFRS 15 is dependent upon the details of those complex contracts particularly those with delivery close to a financial reporting period end.
The financial impact of the adoption of IFRS 15 will be disclosed within the interim results to 30 June 2018.
Impact of IFRS 16
IFRS 16 Leases will replace IAS 17 and three related interpretations. Leases will be recorded on the statement of financial position in the form of a right-of-use asset and a lease liability. The consolidated income statement will be impacted through reduced operating expenses, and higher depreciation and finance costs. The new standard is applicable from 1 January 2019 with an option to adopt it early. The Group intend to early adopt IFRS 16 from 1 January 2018 alongside IFRS 15 Revenue.
The Group leases all of the premises from which it conducts business with annual commitments under operating leases totalling £0.7 million and therefore the impact of IFRS 16 will be material to the financial statements. The Group has assessed the impact of IFRS 16 and the results of the assessment are stated in note 2 to the financial statements.
Consolidated statement of financial position
In November 2017, the Group completed a share placing raising gross proceeds of £5.5 million with the placement of 17,187,500 new ordinary shares at a price of £0.32 per share with new and existing shareholders. The net proceeds of £5.2 million from the placing will be used to grow the business, investing in go-to-market capacity and product development.
Alongside the fundraise, the terms of the HSBC loan were renegotiated and this is discussed further in note 17 to the consolidated financial statements.
As at 31 December 2017, the Group had a positive net cash position of £6.6 million (2016: £0.2 million) being £9.1 million of cash and £2.5 million of debt. In January 2018 a further repayment of £0.8 million was made.
Non-current assets
Total non-current assets were £3.5 million (2016: £4.4 million).
Capitalised development costs represent the key intangible assets of the Group whereby this investment in Ubisense's own products will deliver the future growth of the business. Capitalised development costs of £1.6 million (2016: £1.9 million) were recognised in 2017 offset by amortisation of £2.2 million (2016: £2.6 million). The appropriateness of the assessment of the useful life of current development projects was reviewed, but no change has been made to the current three year amortisation period, due to the fast moving nature of the technology. The recoverable amount of the capitalised development costs is supported through the growth in revenues of Ubisense's own RTLS SmartSpace and myWorld products achieved in 2017 and anticipated in future periods.
Current assets
Total current assets increased to £21.1 million (2016: £17.8 million).
Cash increased to £9.1 million (2016: 3.5 million).
Trade receivables net of provisions decreased to £6.2 million (2016: £9.2 million) due to the timing of deals during the year.
Amounts recoverable on contracts totaled £2.7 million (2016: £2.9 million) which are generated from services contracts or end of period deliveries, and are then invoiced in the following month or as the relevant milestone is reached.
Hardware inventories increased to £1.5 million (2016: £1.1 million) due to the completion of a RTLS SmartSpace sensor build program prior to the year end. The Group continues to manage its investment in inventory through the sales forecasting process and regular review of the expected lead times to create RTLS SmartSpace hardware. The sensor build programs are sized to try to balance volume demands against unit cost efficiency and need to work on a 4-6 month lead time as increased global demand is extending component lead times.
Total assets
Total assets increased to £24.6 million (2016: £22.1 million).
Current liabilities
Total current liabilities decreased to £10.0 million (2016: £9.0 million). Trade payables increased to £3.0 million (2016: £1.5 million) which was partly due to inventory related purchases close to the year end.
Non-current liabilities
Total non-current liabilities decreased to £2.5 million (2016: £3.4 million) following the reduction in long-term debt from £2.5 million in 2016 to £1.8 million as at 31 December 2017.
Net assets
Net assets increased to £12.1 million (2016: £9.8 million) following the placement of 17,187,500 new ordinary shares at £0.32 in November 2017.
Cash and cash flow
Operating cash flow before working capital movement was £0.4 million inflow (2016: £0.3 million).
Operating cash flows from operating activities after adjusting for working capital and tax was £3.6 million inflow (2016: £2.0 million outflow). Working capital improvements were driven by a reduction in the trade receivables balance at year end.
The Group had investment outflows of £2.1 million (2016: £2.0 million), which is largely made up of expenditure on product development.
Cash inflows from financing activities were £4.3 million (2016: £1.8 million). This included net proceeds from placings of £5.2 million (2016: £4.5 million) offset by repayment of borrowings and interest on those borrowings.
Tim Gingell
Chief Financial Officer
14 March 2018
Consolidated income statement
For the year ended 31 December 2017
|
|
Notes |
|
|
2017 £'000 |
2016 £'000 |
|
|
Revenue |
5 |
|
|
27,255 |
26,523 |
|
|
Cost of revenues |
|
|
|
(16,398) |
(16,280) |
|
|
Gross profit |
|
|
|
10,857 |
10,243 |
|
|
Operating expenses |
|
|
|
(13,912) |
(16,408) |
|
|
Operating loss |
|
|
|
(3,055) |
(6,165) |
|
|
Analysed as: |
|
|
|
|
|
|
|
Gross profit |
|
|
|
10,857 |
10,243 |
|
|
Other operating expenses |
|
|
|
(10,492) |
(9,919) |
|
|
Adjusted EBITDA |
|
|
|
365 |
324 |
|
|
Depreciation |
12 |
|
|
(417) |
(345) |
|
|
Amortisation and impairment of acquired intangible assets |
11 |
|
|
- |
(1,223) |
|
|
Amortisation and impairment of other intangible assets |
11 |
|
|
(2,435) |
(7,143) |
|
|
Share option expense |
|
|
|
(316) |
- |
|
|
Unrealised foreign exchange gains/(losses) on intercompany trading balances |
|
|
|
(252) |
1,877 |
|
|
Non-recurring items |
8 |
|
|
- |
345 |
|
|
Operating loss |
|
|
|
(3,055) |
(6,165) |
|
|
Finance income |
7 |
|
|
8 |
44 |
|
|
Finance costs |
7 |
|
|
(87) |
(323) |
|
|
Loss before tax |
|
|
|
(3,134) |
(6,444) |
|
|
Income tax |
9 |
|
|
61 |
1,136 |
|
|
Loss for the year |
|
|
|
(3,073) |
(5,308) |
|
|
Loss attributable to: |
|
|
|
|
|
|
|
- Equity shareholders of the Company |
|
|
|
(3,055) |
(5,196) |
|
|
- Non-controlling interest |
|
|
|
(18) |
(112) |
|
|
|
|
|
|
(3,073) |
(5,308) |
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to the equity shareholders of the parent (pence) |
|
|
|
|||
|
Basic |
10 |
|
|
(5.2p) |
(10.4p) |
|
|
Diluted |
10 |
|
|
(5.2p) |
(10.4p) |
|
Consolidated statement of comprehensive income
For the year ended 31 December 2017
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Loss for the year |
|
|
|
(3,073) |
(5,308) |
|
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 |
|
|
|
||
|
|
(33) |
(1,357) |
|||
|
|
|
|
|||
|
Total comprehensive loss for the year |
|
|
(3,106) |
(6,665) |
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
- Equity shareholders of the Company |
|
|
(3,067) |
(6,682) |
|
|
- Non-controlling interest |
|
|
(39) |
17 |
|
|
Total comprehensive loss for the year |
|
|
(3,106) |
(6,665) |
|
Consolidated statement of changes in equity
For the year ended 31 December 2017
|
|
|
Attributable to equity shareholders of the parent company |
|
|
|
|
|
|||||||
|
|
Share capital £'000 |
Share premium £'000 |
Share based payment reserve £'000 |
Translation reserve £'000 |
Retained earnings £'000 |
|
|
Total £'000 |
|
|
||||
|
Balance at 1 January 2016 |
732 |
37,422 |
875 |
(539) |
(26,996) |
11,494 |
456 |
11,950 |
|
|
||||
|
Loss for the year |
- |
- |
- |
- |
(5,196) |
(5,196) |
(112) |
(5,308) |
|
|
||||
|
Exchange difference on retranslation of net assets and results of overseas subsidiaries |
- |
- |
- |
(1,486) |
- |
(1,486) |
129 |
(1,357) |
|
|
||||
|
Total comprehensive loss for the year |
- |
- |
- |
(1,486) |
(5,196) |
(6,682) |
17 |
(6,665) |
|
|
||||
|
Reserve credit for equity-settled share-based payment |
- |
- |
(52) |
- |
- |
(52) |
- |
(52) |
|
|
||||
|
Issue of new share capital |
386 |
- |
- |
- |
- |
386 |
- |
386 |
|
|
||||
|
Premium on new share capital |
- |
4,427 |
- |
- |
- |
4,427 |
- |
4,427 |
|
|
||||
|
Share issue costs |
- |
(295) |
- |
- |
- |
(295) |
- |
(295) |
|
|
||||
|
Transactions with owners |
386 |
4,132 |
(52) |
- |
- |
4,466 |
- |
4,466 |
|
|
||||
|
Balance at 31 December 2016 |
1,118 |
41,554 |
823 |
(2,025) |
(32,192) |
9,278 |
473 |
9,751 |
|
|
||||
|
Loss for the year |
- |
- |
- |
- |
(3,055) |
(3,055) |
(18) |
(3,073) |
|
|
||||
|
Exchange difference on retranslation of net assets and results of overseas subsidiaries |
- |
- |
- |
(12) |
- |
(12) |
(21) |
(33) |
|
|
||||
|
Total comprehensive loss for the year |
- |
- |
- |
(12) |
(3,055) |
(3,067) |
(39) |
(3,106) |
|
|
||||
|
Reserve credit for equity-settled share-based payment |
- |
- |
316 |
- |
- |
316 |
- |
316 |
|
|
||||
|
Issue of new share capital |
344 |
- |
- |
- |
- |
344 |
- |
344 |
|
|
||||
|
Premium on new share capital |
- |
5,158 |
- |
- |
- |
5,158 |
- |
5,158 |
|
|
||||
|
Share issue costs |
- |
(337) |
- |
- |
- |
(337) |
- |
(337) |
|
|
||||
|
Transactions with owners |
344 |
4,821 |
316 |
- |
- |
5,481 |
- |
5,481 |
|
|
||||
|
Balance at 31 December 2017 |
1,462 |
46,375 |
1,139 |
(2,037) |
(35,247) |
11,692 |
434 |
12,126 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated statement of financial position
For the year ended 31 December 2017
|
|
Notes |
|
|
2017 £'000 |
2016 £'000 |
|
Assets |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Intangible assets |
11 |
|
|
2,962 |
3,616 |
|
Property, plant and equipment |
12 |
|
|
493 |
745 |
|
Total non-current assets |
|
|
|
3,455 |
4,361 |
|
Current assets |
|
|
|
|
|
|
Inventories |
13 |
|
|
1,459 |
1,064 |
|
Trade and other receivables |
14 |
|
|
10,544 |
13,221 |
|
Cash and cash equivalents |
15 |
|
|
9,114 |
3,498 |
|
Total current assets |
|
|
|
21,117 |
17,783 |
|
Total assets |
|
|
|
24,572 |
22,144 |
|
Liabilities |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
16 |
|
|
(9,211) |
(8,239) |
|
Bank loans |
17 |
|
|
(750) |
(750) |
|
Total current liabilities |
|
|
|
(9,961) |
(8,989) |
|
Non-current liabilities |
|
|
|
|
|
|
Deferred income tax liabilities |
9 |
|
|
(516) |
(683) |
|
Trade and other payables |
|
|
|
(40) |
(42) |
|
Bank loans |
17 |
|
|
(1,750) |
(2,500) |
|
Other payables |
18 |
|
|
(179) |
(179) |
|
Total non-current liabilities |
|
|
|
(2,485) |
(3,404) |
|
Total liabilities |
|
|
|
(12,446) |
(12,393) |
|
Net assets |
|
|
|
12,126 |
9,751 |
|
Equity attributable to owners of the parent company |
|
|
|
|
|
|
Ordinary share capital |
19 |
|
|
1,462 |
1,118 |
|
Share premium |
19 |
|
|
46,375 |
41,554 |
|
Share based payment reserve |
|
|
|
1,139 |
823 |
|
Translation reserves |
|
|
|
(2,037) |
(2,025) |
|
Retained earnings |
|
|
|
(35,247) |
(32,192) |
|
Equity attributable to shareholders of the Company |
|
|
|
11,692 |
9,278 |
|
Non-controlling interests |
|
|
|
434 |
473 |
|
Total equity |
|
|
|
12,126 |
9,751 |
Consolidated statement of cash flows
For the year ended 31 December 2017
|
|
Notes |
|
|
2017 £'000 |
2016 £'000 |
|
Loss before tax |
|
|
|
(3,134) |
(6,444) |
|
Adjustments for: |
|
|
|
|
|
|
Depreciation |
12 |
|
|
417 |
345 |
|
Amortisation and impairment |
11 |
|
|
2,435 |
8,366 |
|
Adjustments to contingent consideration |
8 |
|
|
- |
(355) |
|
Loss on the disposal of property, plant and equipment |
8 |
|
|
2 |
24 |
|
Revaluation of intercompany balances |
|
|
252 |
(1,877) |
|
|
Share-based payments charge |
|
|
|
316 |
(20) |
|
Finance income |
7 |
|
|
(8) |
(44) |
|
Finance costs |
7 |
|
|
87 |
323 |
|
Operating cash flows before working capital movement |
|
|
|
367 |
318 |
|
Change in inventories |
|
|
|
(395) |
1,751 |
|
Change in receivables |
|
|
|
2,678 |
(3,941) |
|
Change in payables |
|
|
|
987 |
(743) |
|
Cash used in operations before tax |
|
|
|
3,637 |
(2,615) |
|
Net income taxes (paid)/received |
|
|
|
(14) |
579 |
|
Net cash flows from operating activities |
|
|
|
3,623 |
(2,036) |
|
Cash flows from investing activities |
|
|
|
|
|
|
Payment of contingent consideration |
|
|
|
(197) |
- |
|
Purchases of property, plant and equipment |
|
|
|
(140) |
(26) |
|
Expenditure on intangible assets |
|
|
|
(1,813) |
(2,059) |
|
Interest received |
|
|
|
8 |
44 |
|
Net cash flows from investing activities |
|
|
|
(2,142) |
(2,041) |
|
Cash flows from financing activities |
|
|
|
|
|
|
Repayment of borrowings |
|
|
|
(750) |
(2,373) |
|
Interest paid |
|
|
|
(110) |
(352) |
|
Proceeds from the issue of ordinary share capital |
|
|
|
5,165 |
4,518 |
|
Net cash flows from financing activities |
|
|
|
4,305 |
1,793 |
|
Net (decrease)/increase in cash and cash equivalents |
|
|
|
5,786 |
(2,284) |
|
Cash and cash equivalents at start of period |
|
|
|
3,498 |
5,392 |
|
Exchange differences on cash and cash equivalents |
|
|
(170) |
390 |
|
|
Cash and cash equivalents at end of period |
15 |
|
|
9,114 |
3,498 |
Notes to the consolidated financial statements
1 General information
Ubisense Group plc ("the Company") and its subsidiaries (together, "the Group") deliver Enterprise Location Intelligence solutions that enable customers with complex operations to track the precise location of assets across their business in real-time to deliver operational efficiencies, increase flexibility, quality and reduce costs. We offer in-depth knowledge of the sectors in which we operate and have long-standing relationships with many of our customers across target markets including automotive, aerospace, communications and utilities.
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 at 31 December 2017, was 45 pence per share (31 December 2016: 41.5 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, USA, Canada, Germany, France and Japan and sells its products and services mainly in North America, Europe and Asia. The Group legally consists of ten companies headed by Ubisense Group plc.
The consolidated financial statements have been approved for issue by the Board of Directors on 14 March 2018.
2 New accounting standards
For the purposes of the preparation of the consolidated financial statements, the Group has applied all standards and interpretations as adopted in the European Union that are effective for accounting periods beginning on or before 1 January 2017.
The accounting policies used are the same as set out in detail in the Report and Accounts 2016 and have been applied consistently to all periods presented in the financial statements. No new standards or amendments or interpretations to existing standards that became effective during the year were material to the Group. No new standards, amendments or interpretations to existing standards having an impact on the financial statements that have been published and that are mandatory for the Group's accounting periods beginning on or after 1 January 2018, or later periods, have been adopted early.
Standards and interpretations not yet applied by the Group
The following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the Group's financial statements.
· IFRS 9 'Financial Instruments' (effective date financial year commencing on/after 1 January 2018)
· IFRS 15 'Revenue from contracts with customers' (effective date financial year commencing on/after 1 January 2018)
· IFRS 16 'Leases' (effective date financial year commencing on/after 1 January 2019)
IFRS 9
The Directors are of the opinion, that the application of IFRS 9 will not have a significant impact, other than increased disclosures, on the financial statements of the Group.
IFRS 15
IFRS 15 Revenue from Contracts with Customers will replace IAS 18 Revenue. The new standard is applicable from 1 January 2018. IFRS 15 introduces a number of new concepts and requirements relating to revenue recognition, and also provides guidance and clarification on existing practice.
For sales within the RTLS SmartSpace division, the Group contracts with customers to provide software, maintenance & support, hardware or services. The contractual arrangements may be to provide one of these elements on a standalone basis or to provide a combination of products and services. Currently, software licence revenue is recognised at the point the software is delivered to the customer, hardware is recognised on dispatch to the customer, maintenance and services are recognised over the term of the agreement on a straight line basis and installation and consultancy services are recognised as the service is performed.
For sales connected to the myWorld product, the Group contracts with customers to provide software, maintenance & support, or services. The contractual arrangements may be to provide one of these elements on a standalone basis or to provide a combination of the products and services. Currently, software licence revenue is recognised at the point the software is delivered to the customer provided that only configuration is required. Maintenance and service revenues are recognised over the term of the agreement on a straight line basis and installation. Consultancy and customisation services are recognised as the service is performed.
The majority of Ubisense's sales are for products sold on a standalone basis and it is expected that the revenue recognition policy applied to these sales will be unaffected by the application of IFRS 15. Larger, more complex contracts, which involve multiple performance obligations that include a combination of products and services, are affected by the application of IFRS 15. Accordingly, the significance of the impact of IFRS 15 is dependent upon the timing of the delivery of performance obligations within complex contracts close to a financial reporting period end. The key area under review is the number of distinct performance obligations for sales which include a combination of some or all of the above products and services. Under IFRS 15, the Group must evaluate the performance obligations for the promised goods or services to identify whether the products and / or services are distinct. A promised good or service is distinct if both the customer benefits from the item either on its own or together with other readily available resources and it is separately identifiable from other promises in the contract (i.e. the Group does not provide a significant service integrating, modifying or customising it). The details of the performance obligations within complex contracts with a combination of goods and services is currently being assessed, and will be considered further to ensure an accurate conclusion is reached. The financial impact of the adoption of IFRS 15 will be disclosed within the interim results to 30 June 2018.
IFRS 16
IFRS 16 Leases will replace IAS 17 and three related interpretations. Leases will be recorded on the statement of financial position in the form of a right-of-use asset and a lease liability. The consolidated income statement will be impacted through reduced operating expenses, and higher depreciation and finance costs. The new standard is applicable from 1 January 2019 with an option to adopt it early. The Group intend to early adopt IFRS 16 from 1 January 2018 alongside IFRS 15 Revenue.
The Group leases all of the premises from which it conducts business with annual commitments under operating leases totalling £0.7 million. Application of IFRS 16 will result in the Group no longer recognising rental expense associated with the leased premises within operating expenses in the consolidated income statement. The Group will recognise a right-of-use asset in respect of the leasehold premises within the consolidated statement of financial position alongside a liability for the leasehold commitments, and depreciation and finance costs in the consolidated income statement. Accordingly, total assets will increase as will total liabilities. Additionally, the Group leases other assets including motor vehicles, however, the impact of application of IFRS 16 to these leases will not be material.
3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of Ubisense Group plc have 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 consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements are presented in GBP and all values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
The Board of Ubisense Group plc approved the release of this preliminary announcement on 14 March 2018.
The preliminary financial information does not constitute statutory financial statements for the year ended 31 December 2017 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 2016 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2017 will be delivered to the Registrar of Companies following the Group'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.
The preparation of these financial statements in conformity with IFRS requires the Directors to make certain critical accounting estimates and judgements that affect the amounts reported in the financial statements and accompanying notes. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 4.
Going concern basis
In determining the basis for preparing the consolidated financial statements, the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the consolidated financial statements.
The Group had cash of £9.1 million at the balance sheet date. As disclosed in note 17, the Group amended the terms of it's HSBC loan in November 2017, with covenants requiring £750,000 repayable on or before each of 31 December 2017 and 31 January 2018 and then £187,500 each quarter starting on 31 March 2019. The amended financial covenant on operating cash flow before working capital adjustments is £2 million negative in 2017, £2 million negative in 2018, £1 million negative in 2019 and £1 million positive from 2020 onwards. The balance of this facility as at 31 December 2017 was £2.5 million.
Management prepares detailed working capital forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding the opportunity funnel from both existing and new clients, growth plans, risks and mitigating actions. In particular, operating cashflow and profitability are highly sensitive to revenue mix and the positive contribution of continuing growth in software sales.
In reaching their going concern conclusion, the Directors have considered the following points:
- The Group had cash, net of debt of £6.6 million as at 31 December 2017.
- It is not anticipated that the Group will breach the covenants of the existing working capital facility which are described in note 17.
- The Group has met the next repayment instalment of £0.75 million during January 2018 and no further capital repayments are due within the next 12 months.
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 the consolidated financial statements.
Consolidation
The Group financial statements include the results, financial position and cash flows of the Company and all of its subsidiary undertakings. Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control arises when the Company has the power to govern the financial and operating policies of an entity, uses this power to affect the returns from that entity and has exposure to variable returns from its investment in the entity.
Co-terminus 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 consolidated financial statements are presented in GBP.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the period end date. Such exchange differences are included in the income statement within "operating expenses". Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
(c) Consolidation
For the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities (none of which have the currency of a hyperinflationary economy) that have a functional currency other than GBP are translated into GBP as follows:
· assets and liabilities for each statement of financial position are translated at the exchange rate at the period end date;
· income and expenses for each income statement are translated at the exchange rate ruling at the time of each period the transaction occurred; and
· all resulting exchange differences are recognised in other comprehensive income.
Segment reporting
IFRS 8 requires a "management approach" under which information in the financial statements is presented on the same basis as that used for internal management reporting purposes.
The Group is organised on a global basis into two operating segments based on the Group's divisions: RTLS SmartSpace and Geospatial. The Directors believe that the Chief Operating Decision Maker (CODM) is the Chief Executive Officer of the Group. The CODM and the rest of the Board are provided with information on a divisional basis to assess the financial performance of, and allocate resources to, each division and central resources.
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.
Revenue recognition
Revenue represents amounts derived from the provision of goods and services which fall within the Group's ordinary activities, exclusive of discounts, 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 straight line 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. Vesting conditions are continuing employment and can include, for senior employees, a diluted EPS performance target or share price target. Equity-settled share-based payments are measured at fair value at the date of grant using an appropriate pricing model. The fair value is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity in the share-based payment reserve, based on the Group's estimate of the number of shares that will eventually vest.
Operating lease income and expense
The Group as the lessor
(a) Rental income
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating the lease are recognised straight-line over the lease term. Rental income is presented within the Geospatial division within note 5
The Group as the lessee
(b) 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.
(c) 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.
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material one-off items of income or expense that have been shown separately due to the significance of their nature or amount and do not reflect the ongoing cost base or revenue-generating ability of the Group.
Interest income and expense
Interest income and expense is included in the income statement on a time basis, using the effective interest method by reference to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and deferred tax:
(a) Current tax
The current tax charge represents an estimate of the amounts payable or receivable to or from tax authorities in respect of the Group's taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs from profit before tax as reported in the income statement because it excludes certain items of income and expense that are taxable or deductible in other years or are never taxable or deductible. Taxation received is recognised only when it is probable that the Group is entitled to the asset.
(b) Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the reporting date. Deferred tax is recognised as a component of tax expense in the income statement, except where it relates to items charged or credited directly to other comprehensive income or equity when it is recognised in other comprehensive income or equity.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their provisional fair values at the acquisition date. Fair values are reassessed during the measurement period and updated if required. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with 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.
Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid and the net fair value of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses.
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is only capitalised if all of the following conditions are met:
· completion of the intangible asset is technically feasible so that it will be available for use or sale;
· the Group intends to complete the intangible asset and use or sell it;
· the Group has the ability to use or sell the intangible asset;
· the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
· there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
· the expenditure attributable to the intangible asset during its development can be measured reliably.
Internally-generated intangible assets, consisting mainly of direct labour costs, are amortised on a straight-line basis over their useful economic lives. Amortisation is shown within administrative expenses in the 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 three years.
Acquired intangible assets
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. All acquired intangibles were fully amortised or impaired as at 31 December 2016 and 2017.
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 or valuation less estimated residual values over their expected useful lives on a straight-line basis over the following periods:
· Fixtures and fittings: three to ten years, or period of the lease if shorter
· Computer equipment: three years
Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in operating expenses.
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 at least annually for impairment and whenever there is an indication that the asset may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Impairment losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss is reversed, it is reversed to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is the actual cost of third-party components and labour, and is applied 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.
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.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by the Company to the Group's employees under its employee share option plans.
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency of GBP, are recognised directly in other comprehensive income and accumulated in the translation reserve.
Retained earnings
Retained Earnings include all current and prior period retained profits/losses.
Non-controlling interests
Non-controlling interests, presented as part of equity, represent a proportion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the assets of the parent and the non-controlling interests based on their respective ownership interests.
4 Critical accounting judgements and key sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Capitalisation, amortisation and impairment 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 2017 is £2.7 million (2016: £3.3 million).
Capitalised development costs are amortised over a three year period which is management's estimate of the useful lives of current development projects. In reaching this conclusion, management have made assumptions in respect of future customer requirements and developments within the industry.
The Group tests capitalised development costs for impairment annually in accordance with the accounting policy stated in note 3. In performing the impairment review, management is required to make assumptions of the future cash flows generated from the SmartSpace and myWorld products. This includes consideration of both the current business pipeline and estimations beyond the existing pipeline.
Revenue recognition
Significant management judgement is applied in determining the allocation and timing of the recognition of revenue on fixed price, long-term customer specific 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 value of amounts recoverable on contracts at 31 December 2017 is £2.7 million (2016: £2.9 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 of 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.
5 Segment information
5.1 Operating segments
Management has determined the operating segments to be the Group's divisions based on the information reported to the Chief Operating Decision Maker (CODM) for the purpose of assessing performance and allocating resources. The CODM is the Chief Executive Officer.
The Real-Time Location Systems (RTLS) division takes real-time location data from Ubisense's own sensing hardware, or from standards based integration with third party hardware, and transforms this data into high value spatial event information, delivering highly reliable, automatic, adaptive asset identification, precise real-time location and spatial-monitoring to offer meaningful insights that help businesses make smarter decisions.
The Geospatial division delivers software solutions that integrate data from any source - geographic, real-time asset, GPS, location, corporate and external cloud-based sources - into a live geospatial common operating picture, empowering all users in the customer's organisation to access, input and analyse operational intelligence to proactively manage their networks, respond quickly to emergency events and effectively manage day-to-day operations.
Each operating segment is managed separately by a business unit leader as each deals with different technologies and predominately a different customer base. The performance of the operating segments is assessed on a measure of contribution, being gross profit less sales and business unit marketing expenditure. Assets and liabilities are not presented to the CODM on a divisional basis.
Costs incurred centrally or not directly attributable to either the RTLS or Geospatial divisions are reported in the Central division. The results of each segment are prepared using accounting policies consistent with those of the Group as a whole. No intra-segmental transactions are reported.
|
Year ended 31 December 2017 |
RTLS £'000 |
Geospatial £'000 |
Central £'000 |
Total £'000 |
|
Revenues |
10,796 |
16,459 |
- |
27,255 |
|
Cost of revenues |
(6,310) |
(10,088) |
- |
(16,3988) |
|
Gross profit |
4,486 |
6,371 |
- |
10,857 |
|
Sales and marketing costs |
(3,062) |
(2,004) |
- |
(5,066) |
|
Contribution |
1,424 |
4,367 |
- |
5,791 |
|
Other operating costs |
|
|
(5,426) |
(5,426) |
|
Adjusted EBITDA |
|
|
(5,426) |
365 |
|
Depreciation |
|
|
(417) |
(417) |
|
Amortisation and impairment of intangibles |
|
|
(2,435) |
(2,435) |
|
Share option expense Unrealised foreign exchange gains/(losses) on intercompany trading balances |
|
|
(316) |
(316) |
|
Unrealised foreign exchange gains/(losses) on intercompany trading balances |
|
|
(252) |
(252) |
|
Non-recurring items |
|
|
- |
- |
|
Operating loss |
|
|
(8,846) |
(3,055) |
|
Net finance costs |
|
|
(79) |
(79) |
|
Loss before tax |
|
|
(8,925) |
(3,134) |
|
Income tax |
|
|
61 |
61 |
|
Loss after tax |
1,424 |
4,367 |
(8,864) |
(3,073) |
|
Year ended 31 December 2016 |
RTLS £'000 |
Geospatial £'000 |
Central £'000 |
Total £'000 |
|
Revenues |
9,113 |
17,410 |
- |
26,523 |
|
Cost of revenues |
(5,097) |
(11,183) |
- |
(16,280) |
|
Gross profit |
4,016 |
6,227 |
- |
10,243 |
|
Sales and marketing costs |
(2,931) |
(1,792) |
(91) |
(4,814) |
|
Contribution |
1,085 |
4,435 |
(91) |
5,429 |
|
Other operating costs |
|
|
(5,105) |
(5,105) |
|
Adjusted EBITDA |
|
|
(5,196) |
324 |
|
Depreciation |
|
|
(345) |
(345) |
|
Amortisation and impairment of intangibles |
|
|
(8,366) |
(8,366) |
|
Non-recurring items |
|
|
2,222 |
2,222 |
|
Operating loss |
|
|
(11,685) |
(6,165) |
|
Net finance costs |
|
|
(279) |
(279) |
|
Loss before tax |
|
|
(11,964) |
(6,444) |
|
Income tax |
|
|
1,136 |
1,136 |
|
Loss after tax |
1,085 |
4,435 |
(10,828) |
(5,308) |
5.2 Geographical areas
The Board and Management Team also review the revenues on a geographical basis, based around the regions where the Group has its significant subsidiaries or markets.
The Group's revenue from external customers in the Group's domicile, the UK, and its major worldwide markets have been identified on the basis of the customers' geographical location. Non-current assets are allocated based on their physical location.
|
|
Revenue |
Non-current assets |
||
|
|
2017 £'000 |
2016 £'000 |
2017 £'000 |
2016 £'000 |
|
UK |
383 |
365 |
3,132 |
3,940 |
|
France |
303 |
313 |
5 |
3 |
|
Germany |
8,218 |
6,456 |
29 |
106 |
|
Europe other |
554 |
936 |
- |
- |
|
USA |
10,954 |
12,325 |
180 |
183 |
|
Canada |
2,845 |
1,664 |
3 |
- |
|
Japan |
3,545 |
4,328 |
106 |
129 |
|
Asia Pacific other |
187 |
91 |
- |
- |
|
Rest of World
|
266 |
45 |
- |
- |
|
|
27,255 |
26,523 |
3,455 |
4,361 |
5.3 Information about major customers
During 2017, the Group had two customers who generated revenues of greater than 10% of total revenue. £2.8 million was generated from a European customer and £3.2 million was generated from a US customer.
During 2016, the Group had two customers who generated revenues of greater than 10% of total revenue. £3.7 million was generated from a European customer and £3.4 million was generated from a US customer.
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 |
2017 Number |
2016 Number |
2017 Number |
2016 Number |
|
Technical consultants |
55 |
59 |
58 |
64 |
|
Sales & marketing |
41 |
38 |
38 |
42 |
|
Research & development |
20 |
22 |
20 |
25 |
|
Administration |
22 |
23 |
23 |
23 |
|
|
138 |
142 |
139 |
154 |
|
By geography |
2017 Number |
2016 Number |
2017 Number |
2016 Number |
|
United Kingdom |
41 |
43 |
41 |
46 |
|
Europe |
20 |
19 |
21 |
26 |
|
Americas |
48 |
53 |
49 |
57 |
|
Asia |
29 |
27 |
28 |
25 |
|
|
138 |
142 |
139 |
154 |
6.2 Employee benefits
The aggregate employee benefit expense, including Executive Directors, comprised:
|
|
|
|
Notes |
2017 £'000 |
2016 £'000 |
|
Wages and salaries |
|
|
|
11,591 |
12,392 |
|
Social security costs |
|
|
|
1,126 |
1,162 |
|
Contributions to defined contribution pension arrangements |
|
|
584 |
521 |
|
|
Share-based payments |
|
|
|
316 |
(20) |
|
Total aggregate employee benefits |
|
|
|
13,617 |
14,055 |
Included in the wages and salaries figure above are termination benefits of £nil (2016: £0.1 million) which are presented as non-recurring costs in the income statement - see note 8.2.
7 Finance income and costs
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
|
|
Interest income from cash and cash equivalents |
|
|
|
8 |
44 |
|
|
|
Finance income |
|
|
|
8 |
44 |
|
|
|
Interest payable - bank |
|
|
|
(86) |
(302) |
|
|
|
Interest payable - other |
|
|
|
(1) |
(21) |
|
|
|
Finance costs |
|
|
|
(87) |
(323) |
|
|
|
Net finance costs |
|
|
|
(79) |
(279) |
|
|
8 Loss before tax: analysis of expenses by nature
8.1 Expenses by nature
The following items have been charged/(credited) to the income statement in arriving at loss before tax:
|
|
|
|
Notes |
2017 £'000 |
2016 £'000 |
|
|
Amortisation and impairment of acquired intangible assets |
|
|
11 |
- |
1,223 |
|
|
Amortisation and impairment of other intangible assets |
11 |
2,435 |
7,143 |
|
||
|
Depreciation of owned property, plant and equipment |
12 |
417 |
345 |
|
||
|
Loss on disposal of property, plant and equipment |
|
|
|
2 |
24 |
|
|
Operating lease rental charges - land and buildings |
|
|
|
648 |
625 |
|
|
Operating lease rental charges - other |
|
|
|
94 |
89 |
|
|
Inventory recognised as an expense |
|
|
|
2,408 |
1,532 |
|
|
Research & development costs expensed |
|
|
|
457 |
466 |
|
|
Net foreign currency (gains)/losses |
|
|
|
(102) |
(350) |
|
|
Unrealised foreign exchange (gains)/losses on intercompany trading balances |
|
|
|
252 |
(1,877) |
|
|
Non-recurring items (excluding impairment of goodwill) |
|
|
8.2 |
- |
(345) |
|
|
Auditors' remuneration |
|
|
8.3 |
157 |
212 |
|
8.2 Non-recurring items
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Reorganisation costs |
|
|
|
- |
139 |
|
Adjustment to contingent consideration |
|
- |
(355) |
||
|
Others |
|
- |
(129) |
||
|
Total non-recurring items |
|
- |
(345) |
||
During the year ended 31 December 2016, non-recurring items included £0.1 million reorganisation costs and a £0.4 million gain in respect of adjustments to contingent consideration.
8.3 Auditors' remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's auditor and its associates:
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Fees payable to the Group's auditor for the audit of: |
|
|
|
|
|
|
Parent Company and consolidated financial statements |
|
|
39 |
28 |
|
|
Financial statements of subsidiaries, pursuant to legislation |
|
72 |
89 |
||
|
Interim reporting fees |
|
14 |
15 |
||
|
Total audit fees |
|
125 |
132 |
||
|
Fees payable to the Group's auditor for other services: |
|
|
|
||
|
Tax services |
|
|
|
30 |
25 |
|
Other services |
|
|
|
2 |
55 |
|
Total non-audit fees |
|
|
|
32 |
80 |
|
Total auditors' remuneration |
|
|
|
157 |
212 |
The auditor of Ubisense Group plc is Grant Thornton UK LLP.
9 Income tax
9.1 Income tax recognised in the income statement
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
|
Current tax |
|
|
|
|
|
|
|
UK corporation tax |
|
|
|
- |
- |
|
|
Foreign tax |
|
|
106 |
(2) |
|
|
|
Research & development tax credits - prior years |
|
|
- |
(579) |
|
|
|
Total current tax credit |
|
|
|
106 |
(581) |
|
|
Deferred tax |
|
|
|
|
|
|
|
Origination and reversal of temporary differences |
|
|
|
(167) |
(555) |
|
|
Total deferred tax credit
|
|
|
|
(167) |
(555) |
|
|
Total income tax credit |
|
|
|
(61) |
(1,136) |
|
|
|
|
|
|
|
|
|
The tax credit differs from the standard rate of corporation tax in the UK for the year of 19.3% (2016: 20.0%) for the following reasons:
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Loss before tax |
|
|
|
(3,134) |
(6,444) |
|
Loss before tax multiplied by the standard rate of corporation tax in the UK of 19.3% (2016: 20.0%) |
(603) |
(1,289) |
|||
|
Tax effects of: |
|
|
|
|
|
|
Expenses not deductible for tax purposes |
|
|
|
129 |
780 |
|
Utilisation of previously unrecognised tax losses |
|
|
|
(82) |
(270) |
|
Unrecognised deferred tax movements |
429 |
450 |
|||
|
Tax unprovided in prior years |
|
|
|
106 |
- |
|
Research & development tax credits - prior years |
|
|
|
- |
(579) |
|
Difference on tax treatment of share options - unrecognised |
|
|
|
60 |
(4) |
|
Differential on overseas tax rates |
|
|
|
(100) |
(224) |
|
Total income tax credit |
|
|
|
(61) |
(1,136) |
9 Income tax (continued)
9.2 Factors that may affect future tax charges
The Group has tax losses of £24.5 million (2016: £17.6 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.
On 26 October 2015, the UK Government substantially enacted reductions to the UK corporation tax rates. Effective from 1 April 2020, the rate will further reduce to 18%. The deferred tax balances have been measured at 19%, the rate of realisation expected.
9.3 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 |
||
|
|
2017 £'000 |
2016 £'000 |
2017 £'000 |
2016 £'000 |
|
At 1 January |
- |
- |
(683) |
(1,157) |
|
Deferred tax credited to the income statement |
- |
- |
403 |
958 |
|
Deferred tax charged to the income statement |
- |
- |
(236) |
(403) |
|
Foreign exchange movements |
- |
- |
- |
(81) |
|
At 31 December |
- |
- |
(516) |
(683) |
The components of deferred tax included in the consolidated statement of financial position are as follows:
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Development costs capitalised |
|
|
|
(516) |
(669) |
|
Other |
|
|
- |
(14) |
|
|
Total deferred income tax liabilities |
|
|
|
(516) |
(683) |
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:
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Tax losses carried forward |
|
|
|
5,637 |
4,823 |
|
Equity-settled share options temporary differences |
|
|
19 |
18 |
|
|
Total unrecognised deferred tax assets |
|
|
|
5,656 |
4,841 |
10 Earnings per share (EPS)
|
Basic and diluted earnings per share
|
|
|
|
2017 |
2016 |
|
Earnings |
|
|
|
|
|
|
Earnings for the purposes of basic and diluted EPS being net loss attributable to equity holders of the parent company (£'000) |
|
(3,055) |
(5,196) |
||
|
Number of shares |
|
|
|
|
|
|
Weighted average number of ordinary shares for the purposes of basic EPS ('000) |
58,479 |
49,756 |
|||
|
Effect of dilutive potential ordinary shares: |
|
|
|
|
|
|
- - Share options ('000) |
|
|
|
215 |
211 |
|
Weighted average number of ordinary shares for the purposes of diluted EPS ('000) |
58,694 |
49,967 |
|||
|
Basic EPS (pence) |
|
|
|
(5.2) |
(10.4) |
|
Diluted EPS (pence) |
|
|
|
(5.2) |
(10.4) |
Basic earnings per share is calculated by dividing profit/(loss) for the period attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. For diluted earnings per share, the weighted average number of shares is adjusted to allow for the effects of all dilutive share options and warrants outstanding at the end of the year. Options have no dilutive effect in loss-making years, and 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 and impairment of acquired intangible assets and goodwill, share-based payments charge, unrealised foreign exchange gains/(losses) on intercompany trading balances and non-recurring items from the measurement of profit for the period.
|
Adjusted diluted earnings per share |
|
|
Notes |
2017 |
2016 |
|
Earnings for the purposes of diluted EPS being net loss attributable to equity holders of the parent company (£'000) |
|
(3,055) |
(5,196) |
||
|
Adjustments: |
|
|
|
|
|
|
Amortisation and impairment of acquired intangible assets (£'000) |
8, 11 |
- |
1,223 |
||
|
Impairment of goodwill (£'000) |
8, 11 |
- |
4,271 |
||
|
Reversal of share-based payments charge (£'000) |
|
316 |
(20) |
||
|
Unrealised foreign exchange gains/(losses) on intercompany trading balances |
|
252 |
(1,877) |
||
|
Reversal of non-recurring items (£'000) |
8 |
- |
(345) |
||
|
Net adjustments (£'000) |
|
568 |
3,252 |
||
|
Adjusted earnings (£'000) |
|
(2,487) |
(1,944) |
||
|
Adjusted diluted EPS (pence) |
|
|
|
(4.3) |
(3.9) |
The adjusted EPS information is considered to provide a fairer representation of the Group's trading performance. 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.
11 Intangible assets
|
|
Goodwill £'000 |
Acquired customer relationships and order backlog |
Acquired software products £'000 |
Capitalised product development costs £'000 |
Software |
Total £'000 |
|
Cost |
|
|
|
|
|
|
|
At 1 January 2016 |
8,314 |
1,900 |
563 |
12,405 |
1,300 |
24,482 |
|
Exchange difference |
491 |
340 |
87 |
- |
150 |
1,068 |
|
Additions |
- |
- |
- |
1,948 |
111 |
2,059 |
|
Disposals |
- |
- |
- |
- |
(315) |
(315) |
|
At 31 December 2016 |
8,805 |
2,240 |
650 |
14,353 |
1,246 |
27,294 |
|
Exchange difference |
- |
- |
- |
- |
(69) |
(69) |
|
Additions |
- |
- |
- |
1,583 |
230 |
1,813 |
|
At 31 December 2017 |
8,805 |
2,240 |
650 |
15,936 |
1,407 |
29,038 |
|
Accumulated amortisation |
|
|
|
|
|
|
|
At 1 January 2016 |
(4,043) |
(1,018) |
(449) |
(8,425) |
(761) |
(14,696) |
|
Effects of movement in exchange rates |
(491) |
(134) |
(66) |
- |
(240) |
(931) |
|
Charge for the year |
- |
(119) |
(135) |
(2,585) |
(287) |
(3,126) |
|
Elimination on disposal |
- |
- |
- |
- |
315 |
315 |
|
Impairment for the year |
(4,271) |
(969) |
- |
- |
- |
(5,240) |
|
At 31 December 2016 |
(8,805) |
(2,240) |
(650) |
(11,010) |
(973) |
(23,678) |
|
Effects of movement in exchange rates |
- |
- |
- |
- |
37 |
37 |
|
Charge for the year |
- |
- |
- |
(2,210) |
(225) |
(2,435) |
|
At 31 December 2017 |
(8,805) |
(2,240) |
(650) |
(13,220) |
(1,161) |
(26,076) |
|
Net book amount |
|
|
|
|
|
|
|
At 31 December 2017 |
- |
- |
- |
2,716 |
246 |
2,962 |
|
At 31 December 2016 |
- |
- |
- |
3,343 |
273 |
3,616 |
Capitalised product development costs relate to expenditure that can be applied to a plan or design for the production of new or substantial improvements to SmartSpace and myWorld products. The Group is loss making and this is an indicator for potential impairment of development costs. Management have completed impairment reviews through estimating the future discounted cash flows to be generated from these assets and concluded that no impairment is required as the cash flows exceeded the carrying value of the asset.
The remaining average amortisation period for the capitalised product development costs is two years.
The software assets represent assets purchased from third parties.
12 Property, plant and equipment
|
|
|
|
Fixtures and fittings |
Computer equipment |
Total £'000 |
|||||||
|
Cost |
|
|
|
|
|
|||||||
|
At 1 January 2016 |
|
|
786 |
1,117 |
1,903 |
|||||||
|
Effect of movements in exchange rates |
|
|
88 |
211 |
299 |
|||||||
|
Additions |
|
|
7 |
19 |
26 |
|||||||
|
Disposals |
|
|
(47) |
(131) |
(178) |
|||||||
|
At 31 December 2016 |
|
|
834 |
1,216 |
2,050 |
|||||||
|
Effect of movements in exchange rates |
|
|
(9) |
(19) |
(28) |
|||||||
|
Additions |
|
|
30 |
110 |
140 |
|||||||
|
Disposals |
|
|
(122) |
(15) |
(137) |
|||||||
|
At 31 December 2017 |
|
|
733 |
1,292 |
2,025 |
|||||||
|
Accumulated depreciation |
|
|
|
|
|
|
||||||
|
At 1 January 2016 |
|
|
(149) |
(811) |
(960) |
|
||||||
|
Effect of movements in exchange rates |
|
|
10 |
(164) |
(154) |
|
||||||
|
Charge for the year |
|
|
(197) |
(148) |
(345) |
|
||||||
|
Elimination on disposals |
|
|
41 |
113 |
154 |
|
||||||
|
At 31 December 2016 |
|
|
(295) |
(1,010) |
(1,305) |
|
||||||
|
Effect of movements in exchange rates |
|
|
3 |
52 |
55 |
|
||||||
|
Charge for the year |
|
|
(221) |
(196) |
(417) |
|
||||||
|
Elimination on disposals |
|
|
122 |
13 |
135 |
|
||||||
|
At 31 December 2017 |
|
|
(391) |
(1,141) |
(1,532) |
|
||||||
|
Net book amount |
|
|
|
|
|
|
||||||
|
At 31 December 2017 |
|
|
342 |
151 |
493 |
|
||||||
|
At 31 December 2016 |
|
|
539 |
206 |
745 |
|
||||||
13 Inventories
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Raw materials |
|
|
|
414 |
412 |
|
Finished goods |
|
|
|
1,045 |
652 |
|
Total inventories |
|
|
|
1,459 |
1,064 |
The Group's inventories are comprised of products which are not generally subject to rapid obsolescence on account of deterioration in condition, market trends or technological reasons. The balance as at 31 December 2017 includes a £0.6 million impairment provision (2016: £0.4 million).
14 Trade and other receivables
|
|
|
|
Notes |
2017 £'000 |
2016 £'000 |
|
Trade receivables, gross |
|
|
|
7,663 |
11,304 |
|
Allowances for doubtful debts |
|
|
14.1 |
(1,460) |
(2,151) |
|
Trade receivables, net |
|
|
14.2 |
6,203 |
9,153 |
|
Amounts recoverable on contracts |
|
|
|
2,666 |
2,912 |
|
Other receivables |
|
|
|
275 |
220 |
|
Prepayments |
|
|
|
933 |
933 |
|
Corporation tax recoverable |
|
|
|
4 |
3 |
|
VAT and taxation receivable |
|
|
|
463 |
-
|
|
Total trade and other receivables |
|
|
|
10,544 |
13,221 |
All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.
The following disclosures are in respect of trade receivables that are either impaired or past due. The individually impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations, and are assessed on a customer-by-customer basis following detailed review of the particular circumstances. To the extent they have not been specifically provided against, the trade receivables are considered to be of sound credit rating.
14.1 Movement in allowance for doubtful debts
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
At 1 January |
|
|
|
(2,151) |
(1,691) |
|
Exchange differences |
|
|
50 |
(158) |
|
|
Amounts recovered in the year |
|
|
519 |
6 |
|
|
Amounts written off in the year |
|
|
217 |
- |
|
|
Allowance released |
|
|
30 |
- |
|
|
Allowance made |
|
|
(125) |
(308) |
|
|
At 31 December |
|
|
|
(1,460) |
(2,151) |
As at 31 December 2017, the allowance for doubtful debts includes £1,326,000 (2016: £2,065,000) in respect of amounts owed by two entities in the Asia Pacific region. Provision was made in 2015 against these balances as their recoverability is uncertain.
14.2 Ageing of past due but not impaired receivables
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Neither past due nor impaired |
|
|
|
4,784 |
7,179 |
|
Past due but not impaired: |
|
|
|
|
|
|
0 to 90 days overdue |
|
|
1,084 |
1,227 |
|
|
More than 90 days overdue |
|
|
335 |
747 |
|
|
Total |
|
|
|
6,203 |
9,153 |
15 Cash and cash equivalents
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Cash at bank and in hand |
|
|
|
9,114 |
3,498 |
|
Cash and cash equivalents |
|
|
|
9,114 |
3,498 |
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 |
2017 £'000 |
2016 £'000 |
|||
|
British Pound (GBP) |
|
|
|
4,474 |
320 |
|
Euro (EUR) |
|
|
|
1,829 |
675 |
|
US Dollar (USD) |
|
|
|
1,693 |
1,947 |
|
Japanese Yen (JPY) |
|
|
|
480 |
335 |
|
Canadian Dollar (CAD) |
|
|
|
638 |
221 |
|
Cash and cash equivalents |
|
|
|
9,114 |
3,498 |
16 Trade and other payables
|
|
|
|
|
2017 £'000 |
2016 £'000 |
|
Deferred income |
|
|
|
2,386 |
2,279 |
|
Trade payables |
|
|
|
3,040 |
1,549 |
|
Trade accruals |
|
|
|
2,840 |
2,919 |
|
Current tax liability |
|
|
|
101 |
- |
|
Other taxation and social security |
|
|
|
768 |
1,223 |
|
Contingent consideration |
|
|
|
- |
197 |
|
Other payables |
|
|
|
76 |
72 |
|
Total trade and other payables |
|
|
|
9,211 |
8,239 |
All amounts disclosed are short term. The carrying value of trade payables is considered a reasonable approximation of fair value.
Ubisense Group plc acquired the Ubisense Inc (formerly named Geoplan Interworks K.K.) group of companies ("Geoplan") in December 2013. The purchase consideration contained a contingent cash element, which was settled in full during 2017.
17 Bank loans
In October 2016, an £8.0 million HSBC working capital facility was restructured, becoming a £4.0 million repayment loan with £0.75 million repayable each year. £0.75 million of this facility was repaid in each of December 2016 and December 2017.
This loan is secured on the fixed and floating assets of the Group, attracts an interest charge of LIBOR + 3% and is subject to an operating covenant linked to "operating cash flow" performance (profit or loss before tax adding back any non-recurring items, finance costs, foreign exchange costs, share based payments, depreciation, amortisation or capitalisation of product development). Following the placing in November 2017, the terms of the operating covenant were amended as follows: 2017 - from nil to £2 million negative; 2018 - from £1 million positive to £2 million negative; 2019 - from £1 million positive to £1 million negative, 2020 and beyond - remained at £1 million positive.
The covenants require future repayments of £750,000 before 31 January 2018 and then £187,500 each quarter starting on 31 March 2019.
18 Other payables
|
|
|
|
Notes |
2017 £'000 |
2016 £'000 |
|
Property provisions |
|
|
|
179 |
179 |
|
Total other payables |
|
|
|
179 |
179 |
The property provision is a dilapidation provision to restore leased offices to their original state. Part of this provision is expected to be used in 2018 with the remainder expected to be utilised in 2027.
19 Share capital and premium
|
|
Number of ordinary shares of £0.02 each |
Share capital £'000 |
Share premium £'000 |
Total £'000 |
|
Balance at 1 January 2016 |
36,620,247 |
732 |
37,422 |
38,154 |
|
Issued under share-based payment plans |
32,907 |
1 |
4 |
5 |
|
Issued on placing to institutional shareholders |
19,230,000 |
385 |
4,128 |
4,513 |
|
Change in year |
19,262,907 |
386 |
4,132 |
4,518 |
|
Balance at 31 December 2016 |
55,883,154 |
1,118 |
41,554 |
42,672 |
|
Issued under share-based payment plans |
17,250 |
- |
2 |
2 |
|
Issued on placing to institutional shareholders |
17,187,500 |
344 |
4,819 |
5,163 |
|
Change in year |
17,204,750 |
344 |
4,821 |
5,165 |
|
Balance at 31 December 2017 |
73,087,904 |
1,462 |
46,375 |
47,837 |
The Company has one class of ordinary shares which carry no right to fixed income.
During the period, the Company issued 17,204,750 shares, increasing the total number of shares in issue from 55,883,154 to 73,087,904 as follows:
· 17,187,500 shares at £0.32 per share for a total gross consideration of £5,500,000 with share issue costs of £337,000 written off against share premium; and
· 17,250 shares as a result of options exercised with a weighted average exercise price of £0.14 per share for total cash consideration of £2,415.
20 Post balance sheet events
On 6 March, Ubisense Group plc entered into agreements to carve out the third party geospatial services business of its Japanese subsidiary, Geoplan Company Limited. Under the terms of the agreement customer relationships, the Geoplan brand name, fixed assets including certain market specific products, stock and 13 employees will be transferred to a new company, with the new company being sold for a consideration of JPY 100 million (approximately £0.7 million). The assets being sold have an immaterial carrying value within the consolidated statement of financial position as at 31 December 2017.
The agreed completion date of the transaction is 30 March 2018. Alongside this transaction, Ubisense has agreed, subject to contract completion, to acquire the 23% minority interest of Geoplan Company Limited. The acquisition of this minority interest will give the group 100% ownership of its remaining Japanese operations. Geoplan Company Limited will be renamed Ubisense Japan K.K.
These transactions are consistent with Ubisense's strategy of refocusing the Group on growing revenues from its own IP whilst managing the reduction in third party geospatial services revenues.
This information is provided by RNS
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