Frontier Smart Tech

Half-Year Results

RNS Number : 6319K
Frontier Smart Technologies Grp Ltd
30 August 2019
 

For immediate release

30 August 2019

 

 

Frontier Smart Technologies Group Limited

 

('Frontier', the 'Group' or the 'Company')

 

Half-Year Results

 

Frontier Smart Technologies Group Limited (AIM: FST), a pioneer in technologies for Digital Radio and Smart IoT devices, announces its half-year results for the six months ended 30 June 2019 ('H1-2019' or the 'period').

 

Summary

·         Results for H1-2019 are in line with the Group's trading update issued in May 2019. In H1-2019:

o Revenues were US$14.2 million (H1-2018: US$17.0 million)

o Adjusted EBITDA1 loss was US$1.3 million (H1-2018: loss US$2.1 million)

o Trading EBITDA2 loss was US$1.8 million (H1-2018: loss US$2.1 million)

o Period-end cash was US$3.6 million (31 December June 2018: US$3.8 million)

o Net debt was US$2.7 million (31 December 2018: net debt US$2.5 million)

 

 

Notes:

1 Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, and before share-based payments and restructuring charges.

2 Trading EBITDA means Adjusted EBITDA less R&D costs capitalised in compliance with IAS 38 'Intangible Assets'.

 

For Further Enquiries:

 

Frontier Smart Technologies Group Limited

+44 (0) 20 7391 0630

Anthony Sethill, Chief Executive Officer

 

Jonathan Apps, Chief Financial Officer

 

Patrick Hannon, Vice President, Corporate Development

 

 

 

N+1 Singer (Nominated Adviser and Broker)

+44 (0) 20 7496 3000

Sandy Fraser / Lauren Kettle / Ben Farrow

 

 

About Frontier Smart Technologies Group Limited

Frontier Smart Technologies is a pioneer in technologies for Digital Radio and Smart IoT devices. The Group's customers include many leading consumer audio brands: Bose, Denon, harman/kardon, JBL, Onkyo, Panasonic, Sony, Yamaha, Altec Lansing, Blaupunkt, Grundig, Hama, Klipsch, Marshall, Pioneer, Pure, Roberts, TechniSat, Teufel and many more. Established in 2001, the Group is headquartered in London, with engineering, sales and operations teams in Cambridge, Timisoara (Romania), Hong Kong and Shenzhen. For more information, see frontiersmart.com.

 

Forward-looking statements

The information in this release is based on management information. This announcement includes statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the AIM Rules and applicable law, the Group undertakes no obligation to update, revise or change any forward-looking statements to reflect events or developments occurring after the date of this announcement.

 

MAR

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation. Upon the publication of this announcement via a regulatory information service, this inside information is now considered to be in the public domain.

 

 

 

Overview of H1-2019 performance

Group H1-2019 revenues were US$14.2 million (H1-2018: US$17.0 million) and Trading EBITDA loss, after the capitalisation of R&D costs, was US$1.8 million (H1-2018: Trading EBITDA loss of US$2.1 million). Adjusted EBITDA loss was US$1.3 million (H1-2018: Adjusted EBITDA loss of US$2.1 million).

 

Digital Radio (DAB and Smart Radio) revenues were US$13.1 million (H1-2018: US$14.9 million) reflecting increased competition for low cost DAB solutions, partly offset by a stronger performance in Smart Radio.

 

Digital Radio Adjusted EBITDA was US$1.6 million (H1-2018: US$3.0 million).

 

R&D expenditure for Digital Radio in the period was US$1.0 million. The major development programme over the last 12 months has been the Group's new Smart Radio solution, Venice X, which entered mass production at the end of Q2-2019.

 

Smart IoT revenues in H1-2019 were US$1.1 million (H1-2018: US$2.2 million). This business line is switching its focus from smart audio hardware modules to licensing.

 

A significant reduction in Research & Development costs resulted in the Adjusted EBITDA loss for Smart IoT reducing to a loss of $2.7 million (H1-2018: loss of US$4.7 million).

 

The Group achieved gross margin of US$5.3 million (H1-2018: US$7.1 million). In percentage terms, gross margin fell from 42% to 38% of revenues, with both business lines seeing a narrowing of margins partly due to price pressure and partly due to product mix.

 

R&D expenditure was reduced by 39% to US$2.8 million (H1-2018: US$4.6 million) due largely to a US$1.8 million reduction in Smart IoT R&D expenditure. Group sales and administrative expenses fell 15% to US$4.0 million (H1-2018: US$4.7 million).

Central group Adjusted EBITDA loss was US$0.2 million (H1-2018: US$0.5 million) an improvement of US$0.3 million due to a reduction in professional fees.

 

From 1 January 2019, the Group has adopted IFRS 16 "Leases".  This has primarily affected the accounting for leasehold properties occupied by the Group and has resulted in overheads reducing by US$0.42 million and depreciation and interest costs increasing by US$0.4 million and US$0.02 million, respectively.

 

EBITDA can be calculated as:

 

H1-2019

US$'000

H1-2018

US$'000

Revenue

14,168

17,042

Cost of sales

(8,831)

(9,906)

Gross margin

5,337

7,136

Other income

150

-

Research and development

(2,769)

(4,563)

Sales and administrative expenses

(3,977)

(4,683)

Adjusted EBITDA

(1,259)

(2,110)

Capitalised research and development

(560)

-

Trading EBITDA

(1,819)

(2,110)

 

 

 

Below Adjusted EBITDA, the Group reports non-recurring costs, interest, tax, depreciation and amortisation.

 

At 30 June 2019, the Group's gross cash balance was US$3.6 million (31 December 2018: US$3.8 million; 30 June 2018: US$3.4 million). This equates to a net cash position of US$(2.7) million (31 December 2018: net cash US$(2.5) million; 30 June 2018: US$(3.2) million).

 

Group pre-tax loss was US$3.5 million (H1-2018: loss US$4.5 million) with a loss per share of 8.23 cents (H1-2018: loss 10.86 cents).

 

The Board

Following the emergence of Science Group plc ('Science Group') as the Group's largest shareholder, the following changes were made to the composition of Frontier's Board. In July 2019 Martin Harriman, Non-Executive Director, stepped down from the Board and in August, Sir Hossein Yassaie, Chairman, and the Group's other Non-Executive Director, Paul Taylor, stepped down from the Board. In September, Science Group's Martyn Ratcliffe and Sarah Cole are expected to take positions on the Board following the publication of the Company's Interim Results - with Martyn becoming Chairman of the Board and Sarah becoming a Non-Executive Director.

 

 

Anthony Sethill

Chief Executive Officer

30 August 2019

 

  

 

 

Consolidated Condensed Statement of Comprehensive Income

 

 

Note

Unaudited

six months

ended

30 June 2019

Unaudited

six months

ended

30 June 2018

 

Audited

year ended

31 December

2018

 

 

 

$'000

$'000

$'000

Revenue

4

14,168

17,042

41,754

Cost of sales

 

(8,831)

(9,906)

(24,613)

Gross profit

 

5,337

7,136

17,141

Other income

 

150

-

300

Research & development1

 

(2,769)

(4,563)

(7,457)

Sales & administrative expenses

 

(3,977)

(4,683)

(8,604)

Adjusted EBITDA2

 

(1,259)

(2,110)

1,380

Amortisation

 

(1,192)

(1,261)

(2,461)

Depreciation

 

(548)

(214)

(381)

Non-recurring costs

 

-

(234)

(729)

Share based payment

 

(138)

(279)

(507)

Total administrative expenses

 

(8,474)

(11,234)

(19,839)

Operating loss

 

(3,137)

(4,098)

(2,698)

Finance income

 

1

1

1

Finance charges

 

(266)

(394)

(588)

Loss before taxation

 

(3,402)

(4,491)

(3,285)

Taxation

 

(85)

(154)

330

Loss for the Period

 

(3,487)

(4,645)

(2,955)

Other comprehensive income/ (expense)

Items that will be reclassified subsequently to profit or loss

 

 

 

 

Exchange differences on translating foreign operations

 

(24)

(384)

(828)

Other comprehensive income/(expense) for the period

 

(24)

(384)

(828)

Total comprehensive loss for the period

 

(3,511)

(5,029)

(3,783)

 

 

1Research & development expensed is net of the capitalised Venice X development costs of $560k (HY2018: Nil) (FY2018: $619k).

2Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share option charge and non-recurring costs but includes the capitalised development cost credit 

 

Loss per share

 

 

 

 

Basic & diluted earnings per share

 

 

 

 

- From continuing operations

5

(8.23)c

(10.86)c

(6.90)c

 

 

 

 

 

 

  

 

Consolidated Condensed Statement of Financial Position at 30 June 2019

 

 

Unaudited

30 June

2019

Unaudited

30 June

2018

 

Audited

31 December

2018

Assets

 

$'000

$'000

$'000

Non-current assets

 

 

 

 

Goodwill

6

10,840

11,273

10,892

Other intangible assets

7

5,708

6,999

6,275

Property, plant and equipment

8

2,314

579

419

 

 

18,862

18,851

17,586

Current assets

 

 

 

 

Inventories

 

3,845

6,253

2,839

Tax receivable

 

340

170

340

Trade and other receivables

9

9,133

7,458

9,294

Cash and cash equivalents

 

3,559

3,385

3,817

Total current assets

 

16,877

17,266

16,290

Total assets

 

35,739

36,117

33,876

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

10

18,957

18,646

14,928

Total current liabilities

 

18,957

18,646

14,928

Other liabilities > 1 year

 

1,206

-

-

Total liabilities

 

20,163

18,646

14,928

Equity

 

 

 

 

Share capital

12

6,848

6,844

6,847

Share premium

 

187,971

187,971

187,971

Share based payment reserve

 

9,666

9,300

9,528

Foreign exchange reserve

 

(9,877)

(9,409)

(9,853)

Retained earnings

 

(179,032)

(177,235)

(175,545)

Total equity

 

15,576

17,471

18,948

Total equity and liabilities

 

35,739

36,117

33,876

 

 

 

 

Consolidated Condensed Statement of Changes in Equity

 for the period ended 30 June 2019

 

 

 

 

 

 

 

Share

capital

Share

premium

 

 

 

Share

based

payment

reserve

Retained

earnings

 

 

 

 

Foreign

exchange

reserve

Total

equity

 

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

At 1 January 2019 (audited)

6,847

187,971

9,528

(175,545)

(9,853)

18,948

 

 

 

 

 

 

 

Share-based payments

-

-

138

-

-

138

Issue of share capital

1

-

-

-

-

1

Transactions with owners

1

-

138

-

-

139

 

 

 

 

 

 

 

Loss for the period

 

-

 

-

 

-

(3,487)

 

-

(3,487)

 

 

 

 

 

 

 

Other comprehensive losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(24)

 

 

(24)

Total comprehensive loss

-

-

-

(3,487)

(24)

(3,511)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2019 (unaudited)

6,848

187,971

9,666

(179,032)

(9,877)

15,576

 

  

 

Consolidated Condensed Statement of Changes in Equity

for the period ended 30 June 2018

 

 

 

 

 

 

 

Share

capital

Share

premium

 

 

 

Share

based

payment

reserve

Retained

earnings

 

 

 

 

Foreign

exchange

reserve

Total

equity

 

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

At 1 January 2018 (audited)

6,836

187,971

9,021

(172,590)

(9,025)

22,213

 

 

 

 

 

 

 

Share-based payments

-

-

279

-

-

279

Issue of share capital

8

-

-

-

-

8

Transactions with owners

8

-

279

-

-

287

 

 

 

 

 

 

 

Loss for the period

 

-

 

-

 

-

(4,645)

 

-

(4,645)

 

 

 

 

 

 

 

Other comprehensive losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(384)

 

 

(384)

Total comprehensive loss

-

-

-

(4,645)

(384)

(5,029)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2018 (unaudited)

6,844

187,971

9,300

(177,235)

(9,409)

17,471

               

 

 

 

 

Consolidated Condensed Statement of Changes in Equity

for the period ended 31 December 2018

 

 

 

 

 

 

 

Share

capital

Share

premium

 

 

 

Share

based

payment

reserve

Retained

earnings

 

 

 

 

Foreign

exchange

reserve

Total

equity

 

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

At 1 January 2018 (audited)

6,836

187,971

9,021

(172,590)

(9,025)

22,213

 

 

 

 

 

 

 

Share-based payments

-

-

507

-

-

507

Issue of share capital

11

-

-

-

-

11

Transactions with owners

11

-

507

-

-

518

 

 

 

 

 

 

 

Loss for the period

 

-

 

-

 

-

(2,955)

 

-

(2,955)

 

 

 

 

 

 

 

Other comprehensive losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(828)

 

 

(828)

Total comprehensive loss

-

-

-

(2,955)

(828)

(3,783)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2018 (audited)

6,847

187,971

9,528

(175,545)

(9,853)

18,948

 

 

 

 

 

Consolidated Condensed Cash Flow Statement

for the period ended 30 June 2019

 

 

 

Unaudited

six months

ended

30 June 2019

$'000

Unaudited

six months

ended

30 June 2018

$'000

Audited

year ended

31 December

2018

$'000

Cash flows from operating activities

 

 

 

 

Loss before taxation

 

(3,402)

(4,491)

(3,285)

Amortisation

 

1,192

1,261

2,461

Depreciation

 

548

214

381

Share based payments

 

138

279

507

Net interest paid

 

265

393

587

(Increase)/ decrease in inventories

 

(1,006)

(1,469)

1,945

Decrease/ (increase) in trade and other receivables

 

161

(3,050)

(4,886)

Increase/ (decrease) in trade and other payables

 

3,196

520

(3,572)

Foreign exchange movements

 

32

55

355

Tax refund

 

-

-

373

Net cash provided by/(used in) operating activities

 

1,124

(6,288)

(5,134)

Cash flow from investing activities

 

 

 

 

Purchase of property, plant and equipment

 

(100)

(397)

(403)

Purchase on intangible assets

 

(629)

(37)

(729)

Net cash (used in) investing activities

 

(729)

(434)

(1,132)

Cash flow from financing activities

 

 

 

 

Loan repayments

 

-

(420)

(3,989)

Loan proceeds

 

-

2,992

6,876

Proceeds from issue of share capital

 

1

8

11

Loan interest payable

 

(245)

(394)

(588)

Lease payments

 

(410)

-

-

Interest receivable

 

1

1

1

Net cash (used in) / provided by financing activities

 

(653)

2,187

2,311

Net change in cash and cash equivalents

 

(258)

(4,535)

(3,955)

Cash and cash equivalents at beginning of period

 

3,817

7,920

7,920

Exchange differences on cash and cash equivalents

 

-

-

(148)

Cash and cash equivalents at end of period

 

3,559

3,385

3,817

 

 

Condensed Notes to the Interim Report

for the period ended 30 June 2019

 

1.  Nature of operations and general information

 

Frontier Smart Technologies Group Limited and subsidiaries' (the 'Group') principal activity is that of commercial exploitation of wireless infrastructure technologies with commercial propositions for the consumer electronic sector.

 

Frontier Smart Technologies Group Limited is the Group's ultimate parent company.  It is incorporated in the Cayman Islands.  The address of Frontier Smart Technologies Group Limited's registered office is Elgin House, 119 Elgin Avenue, George Town, Grand Cayman, Cayman Islands.  Frontier Smart Technologies Group Limited's shares are listed on the Alternative Investment Market of the London Stock Exchange.  Frontier Smart Technologies Group Limited's consolidated condensed interim financial statements are presented in US Dollars ($).

 

The financial information set out in this interim report does not constitute statutory accounts.  The interim financial statements have not been audited or reviewed by the Group's auditor.  The Group's statutory financial statements for the year ended 31 December 2018 are available from the Group's website.  The auditor's report on those financial statements was unqualified.

 

2.  Accounting Policies

 

Basis of Preparation

 

These interim condensed consolidated financial statements are for the six months ended 30 June 2019.  They have been prepared following the recognition and measurement principles of IFRS as adopted by the European Union.  The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.  They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2018.

 

These financial statements have been prepared on the going concern basis and under the historical cost convention.

 

These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2018.

 

3.  IFRS 16 'Leases' 

 

IFRS 16: Leases came into effect on 1 January 2019, this is the first set of accounts which incorporates the adoption of the new standard.

 

The main impact of the standard is to capitalise the Group's rental leases as "right-of-use assets" within Property, Plant and Equipment on the Statement of Financial Position with corresponding liabilities representing the commitment to fulfil those lease obligations. The assets are then depreciated over the life of the lease and a notional interest charge is made against the liability.

The standard allows for different transition options and the Group has adopted the Modified Retrospective: Asset equals liability approach, resulting in the Group adopting the standard from 1 January 2019 with no adjustment to reserves or comparative numbers. On adoption, the Group's assets increased by US$2.3m with liabilities increasing by the same value. The group has elected not to recognise a lease liability for short term leases (leases of expected term of 12 months or less) or for leases of low value. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred.

 

For the six months to 30 June 2019 reported EBITDA has increased by US$0.42m as a result of rental costs no longer being charged to overhead expenses. Additional depreciation and interest costs of US$0.4m and US$0.02m respectively have been incurred.

 

The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability in connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.

 

The following is a reconciliation from IAS17 to IFRS 16 at 1 January 2019:

 

 

Carrying amount at 31 December 2018

$000

 

 

Reclassification

$000

 

 

Remeasurement

$000

IFRS 16 carrying amount at 1 January 2019

$000

Property, plant & equipment

419

-

2,344

2,763

Lease liabilities

-

-

(2,344)

(2,344)

 

 

The following is a reconciliation of total operating lease commitments as 31 December 2018 to the lease liabilities recognized at 1 January 2019:

 

 

 

$000s

Total operating lease commitments disclosed at 31 December 2018

2,743

Leases with remaining lease term of less than 12 months

(356)

Operating leases before discounting

2,387

Discounted using incremental borrowing rate

(43)

Total lease liability recognised under IFRS 16 at 1 January 2019

2,344

 

 

Of which are:

 

-          Current lease liabilities

779

-          Non-current lease liabilities

1,565

 

 

4.  Revenue by sector

 

 

Unaudited

30 June 2019

$'000

Unaudited

30 June

2018

$'000

Audited

31 December

2018

$'000

Radio

13,074

14,862

35,688

Smart IoT

1,094

2,180

6,066

Revenue

14,168

17,042

41,754

 

In accordance with IFRS 15, the Group's revenue disaggregated by pattern of revenue recognition is as follows:

 

For the year ended 30 June 2019 (unaudited)

 

Goods

$'000

Services

$'000

Total

$'000

Goods transferred at a point in time

13,965

-

13,965

Services transferred over time

30

173

203

Total

13,995

173

14,168

 

 

 

For the year ended 30 June 2018 (unaudited)

 

Goods

$'000

Services

$'000

Total

$'000

Goods transferred at a point in time

16,357

-

16,357

Services transferred over time

17

668

685

Total

16,374

668

17,042

 

 

For the year ended 31 December 2018 (audited)

 

Goods

$'000

Services

$'000

Total

$'000

Goods transferred at a point in time

40,525

-

40,525

Services transferred over time

43

1,186

1,229

Total

40,568

1,186

41,754

 

 

 

Segmental information

Management currently identifies three divisions as operating segments.

 

 

For the period ended 30 June 2019 (unaudited)

Radio

 

$'000

Smart

IoT

$'000

Group

 

$'000

Total

 

$'000

 

 

 

 

 

Revenue

13,074

1,094

-

14,168

Cost of sales

(8,115)

(716)

-

(8,831)

Gross profit

4,959

378

-

5,337

 

 

 

 

 

Other income

-

150

-

150

Research & development

(958)

(1,811)

-

(2,769)

Sales & administrative expenses - other

(2,353)

(1,427)

(197)

(3,977)

Adjusted EBITDA

1,648

(2,710)

(197)

(1,259)

Non-recurring costs

-

-

-

-

Amortisation of intellectual property

(1,192)

-

-

(1,192)

Depreciation

(484)

(64)

-

(548)

Share based payment

-

-

(138)

(138)

Total administrative expenses

(4,987)

(3,152)

(335)

(8,474)

 

 

 

 

 

Loss from continuing operations

(28)

(2,774)

(335)

(3,137)

 

 

 

 

 

Net finance payable

(18)

(2)

(245)

(265)

 

 

 

 

 

Loss before taxation

(46)

(2,776)

(580)

(3,402)

 

 

 

 

 

 

 

 

For the period ended 30 June 2018 (unaudited)

Radio

 

$'000

Smart

IoT

$'000

Group

 

$'000

Total

 

$'000

 

 

 

 

 

Revenue

14,862

2,180

-

17,042

Cost of sales

(8,647)

(1,259)

-

(9,906)

Gross profit

6,215

921

-

7,136

 

 

 

 

 

Research & development

(976)

(3,587)

-

(4,563)

Sales & administrative expenses - other

 

(2,218)

 

(1,995)

 

(470)

 

(4,683)

Adjusted EBITDA

3,021

(4,661)

(470)

(2,110)

Non-recurring costs

-

-

(234)

(234)

Amortisation of intellectual property

(1,261)

-

-

(1,261)

Depreciation

(171)

(43)

-

(214)

Share based payment

-

-

(279)

(279)

Total administrative expenses

(4,626)

(5,625)

(983)

(11,234)

 

 

 

 

 

Profit/ (loss) from continuing operations

 

1,589

 

(4,704)

 

(983)

 

(4,098)

 

 

 

 

 

Net finance payable

1

-

(394)

(393)

 

 

 

 

 

Profit/ (loss) before taxation

1,590

(4,704)

(1,377)

(4,491)

 

 

 

 

 

 

 

 

For the period ended 31 December 2018 (audited)

Radio

 

$'000

Smart

IoT

$'000

Group

 

$'000

Total

 

$'000

 

 

 

 

 

Revenue

35,688

6,066

-

41,754

Cost of sales

(20,198)

(4,415)

-

(24,613)

Gross profit

15,490

1,651

-

17,141

 

 

 

 

 

Other income

-

300

-

300

Research & development

(1,254)

(6,203)

-

(7,457)

Sales & administrative expenses - other

 

(3,901)

 

(3,878)

 

(825)

 

(8,604)

Adjusted EBITDA

10,335

(8,130)

(825)

1,380

Amortisation of intellectual property

(2,460)

(1)

-

(2,461)

Depreciation

(300)

(81)

-

(381)

Non-recurring costs

-

-

(729)

(729)

Share based payment

-

-

(507)

(507)

Total administrative expenses

(7,915)

(9,863)

(2,061)

(19,839)

 

 

 

 

 

Profit/ (loss) from continuing operations

7,575

(8,212)

(2,061)

(2,698)

 

 

 

 

 

Net finance payable

1

-

(588)

(587)

 

 

 

 

 

Profit/ (loss) before taxation

7,576

(8,212)

(2,649)

(3,285)

 

 

 

 

 

 

  

5.  Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.  The impact of the share options on the loss per share is anti-dilutive.

 

 

 

 

 

Unaudited

Six months ended

30 June 2019

$'000

Unaudited

Six months ended

30 June 2018

$'000

Audited

Year ended

31 December 2018

$'000

Loss for the period attributable to equity shareholders

$3,487

$4,645

$2,955

 

 

 

 

Weighted average number of 10p ordinary shares

42,381,800

42,784,343

 

42,813,487

 

 

 

 

(Loss) per share - basic and diluted

(8.23)c

(10.86)c

(6.90)c

 

 

 

 

 

 

 

 

6. Goodwill

 

 

Frontier

Smart Technologies

 

Frontier

Microsystems

Total

 

$'000

$'000

$'000

Cost

 

 

 

At 1 January 2018 (audited)

11,548

8,051

19,599

Foreign exchange in period

(275)

-

(275)

Additions

-

-

-

At 30 June 2018 (unaudited)

11,273

8,051

19,324

Foreign exchange in period

(381)

(457)

(838)

Additions

-

-

-

At 31 December 2018 (audited)

10892

7,594

18,486

Foreign exchange in period

(52)

(37)

(89)

Disposals

-

-

-

At 30 June 2019 (unaudited)

10,840

7,557

18,397

 

 

 

 

Impairment

 

 

 

At 1 January 2018 (audited)

-

8,051

8,051

Foreign exchange in period

-

-

-

At 30 June 2018 (unaudited)

-

8,051

8,051

Foreign exchange in period

-

(457)

(457)

At 31 December 2018 (audited)

-

7,594

7,594

Foreign exchange in period

-

(37)

(37)

At 30 June 2019 (unaudited)

-

7,557

7,557

Net book amount at 30 June 2019 (unaudited)

10,840

-

10,840

Net book amount at 30 June 2018 (unaudited)

11,273

-

11,273

Net book amount at 31 December 2018 (audited)

10,892

-

10,892

 

  

7. Other intangible assets

 

 

Marketing

intellectual

property

Customer

intellectual

property

Other

intellectual

property

Licence &

Development

fees

Total

 

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

Cost

 

 

 

 

 

At 1 January 2018 (audited)

5,411

2,286

13,804

21,426

42,927

Foreign exchange on opening balances

(129)

(54)

(330)

167

(346)

Additions

-

-

-

37

37

Disposals

-

-

-

(19,393)

(19,393)

At 30 June 2018 (unaudited)

5,282

2,232

13,474

2,237

23,225

Foreign exchange on opening balances

(178)

(76)

(454)

(2)

(710)

Additions

-

-

-

692

692

Disposals

-

-

-

-

-

At 31 December 2018 (audited)

5,104

2,156

13,020

2,927

23,207

Foreign exchange on opening balances

(24)

(10)

(62)

(4)

(100)

Additions

-

-

-

629

629

Disposals

-

-

-

(3)

(3)

At 30 June 2019 (unaudited)

5,080

2,146

3,549

23,733

 

 

 

 

 

 

Amortisation

 

 

 

 

 

At 1 January 2018 (audited)

2,886

1,017

9,234

21,418

34,555

Foreign exchange on opening balances

(80)

(28)

(255)

166

(197)

Charge in period

275

96

873

17

1,261

Disposals

-

-

-

(19,393)

(19,393)

At 30 June 2018 (unaudited)

3,081

1,085

2,208

16,226

Foreign exchange on opening balances

(108)

(38)

(347)

(1)

(494)

Charge period

260

93

822

25

1,200

Disposals

-

-

-

-

-

At 31 December 2018 (audited)

3,233

1,140

10,327

2,232

16,932

Foreign exchange on opening balances

(21)

(10)

(65)

-

(96)

Charge in period

259

91

822

20

1,192

Disposals

-

-

-

(3)

(3)

At 30 June 2019 (unaudited)

3,471

1,221

11,084

2,249

18,025

 

 

 

 

 

 

Net book amount at 30 June 2019 (unaudited)

1,609

925

1,874

1,300

5,708

Net Book amount at 30 June 2018 (unaudited)

2,201

1,147

3,622

29

6,999

Net book amount at 31 December 2018 (audited)

1,871

1,016

2,693

695

6,275

 

 

Intellectual property

 

Intellectual property relates to the valuation of beneficial licence agreements, trade names and customer relationships at the date of their original acquisition.

 

 

 

 

 

Licence & development fees

 

Intellectual property

Intellectual property relates to the valuation of beneficial licence agreements, trade names and customer relationships in Frontier Smart at the date of their original acquisition.

Licence & development expenditure

The Group capitalises certain licence, third-party development fees and internally generated development where, in the view of management, they have intrinsic value to ongoing software and hardware development programmes. Additions in the year relate to technology on new projects essential to the future development of new generation solutions. The capitalised costs are amortised in accordance with the Group accounting policy and are subject to a regular impairment reviews.

During the year all licences that no longer provide any benefit to the Group have been disposed of from the Financial Statements, the carrying value of these licences was nil.

Marketing

Marketing-related intangible assets are defined as those assets that are primarily used in the marketing or promotion of products and services. The Frontier solutions are well known and preferred by a majority of the consumer electronic brands who specifically instruct their manufacturers to use Frontier modules and solutions in their audio systems.

Customer relationships

Customer-related intangible assets may consist of customer lists, order or production backlogs, customer contracts and relationships, and non-contractual customer relationships. Frontier has developed relationships with both consumer electronic brands and manufacturers. The customer relationship valuation captures the economic benefits of having these trading relationships.

Impairment reviews

The Directors have considered impairment indicators for all intangible assets and tested for impairment in conjunction with their testing for goodwill, in accordance with the Group's accounting policy. 

8. Property, Plant and Equipment

 

 

 

 

Plant and machinery

 

 

Office equipment

 

 

Fixtures and fittings

 

 

Office Buildings

Total

 

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

Cost

 

 

 

 

 

At 1 January 2018 (audited)

2,493

70

4,160

-

6,723

Foreign exchange on opening balances

-

-

(4)

-

(4)

Additions

286

-

111

-

397

Disposals

(2,268)

(70)

(2,608)

-

(4,946)

At 30 June 2018 (unaudited)

511

-

1,659

-

2,170

Foreign exchange on opening balances

-

-

-

-

-

Additions

-

-

6

-

6

Disposals

-

-

-

-

-

At 31 December 2018 (audited)

511

-

1,665

-

2,176

Foreign exchange on opening balances

-

-

(3)

-

(3)

Additions

45

-

55

-

100

Right-of-use assets adjustment on transition to IFRS 16

-

-

-

2,344

2,344

Disposals

-

-

(14)

-

(14)

At 30 June 2019 (unaudited)

556

-

1,703

2,344

4,603

 

 

 

 

 

 

Amortisation

 

 

 

 

 

At 1 January 2018 (audited)

2,473

70

3,769

-

6,312

Foreign exchange on opening balances

-

-

11

-

11

Charge in period

57

-

157

-

214

Disposals

(2,268)

(70)

(2,608)

-

(4,946)

At 30 June 2018 (unaudited)

262

-

1,329

-

1,591

Foreign exchange on opening balances

-

-

(1)

 

(1)

Charge period

58

-

109

-

167

Disposals

-

-

-

-

-

At 31 December 2018 (audited)

320

-

1,437

-

1,757

Foreign exchange on opening balances

-

-

(2)

-

(2)

Charge in period

56

-

91

401

548

Disposals

-

-

(14)

-

(14)

At 30 June 2019 (unaudited)

376

-

1,512

401

2,289

 

 

 

 

 

 

Net book amount at 30 June 2019 (unaudited)

180

-

192

1,943

2,314

Net Book amount at 30 June 2018 (unaudited)

249

-

330

-

579

Net book amount at 31 December 2018 (audited)

191

-

228

-

419

  

 

9.  Trade and other receivables

 

 

Unaudited

30 June

2019

Unaudited

30 June

2018

Audited

31 December

2018

 

$'000

$'000

$'000

 

 

 

 

Trade receivables

6,969

5,339

7,799

Other debtors

1,003

854

857

Prepayments and accrued income

1,161

1,265

638

Trade and other receivables

9,133

7,458

9,294

 

Trade and other receivables are usually due within 30 - 60 days and do not bear any effective interest rate.

 

The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

  

 

10.  Trade and other payables

 

 

Unaudited

30 June

2019

Unaudited

30 June

2018

Audited

31 December

2018

 

$'000

$'000

$'000

 

 

 

 

Trade payables

8,959

7,353

5,715

Other payables

711

1,391

566

Accruals

2,005

3,364

2,073

Contract liabilities

226

-

247

Loan

6,308

6,538

6,327

Lease

748

-

-

Trade and other payables

18,957

18,646

14,928

 

 

 

Loan

 

Frontier Smart Technologies Group Limited entered into a loan facility agreement in October 2015 for a maximum of £5,000,000. The loan accrued interest monthly at 6.25% above three-month LIBOR with interest repayable in 12 quarterly instalments commencing 29 December 2015. Capital repayments were payable quarterly in ten instalments commencing March 2016, made up of nine instalments of £300,000 and a final instalment of £2,300,000. The loan carried a fixed and floating charge over all the property, assets and undertakings of the Group.

This loan was repaid on 23 May 2018 and replaced by a new revolving credit facility with Clydesdale of £5,000,000 over three years. The facility accrues interest monthly at 4.75% above three-month LIBOR with interest repayable quarterly, interest on any amount not drawn down is 1.9%. The loan carries a fixed and floating charge over all the property, assets and undertakings of the Group. At the 30 June 2019 the amount drawn down was £5,000,000. The loan carries certain covenants on the business which are monitored at a historic and forecast level on a monthly and quarterly basis by the Board. 

11.  Leases

The Group has leases for all office buildings. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability.

Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease.

The table below describes the nature of the Group's leasing activities by type of right-of-use asset recognised on the balance sheet:

Right-of-use asset

No of right-of-use assets leased

Range of term

Average remaining term of lease

No. of leases with extension options

No. of leases with purchase options

No. of leases with variable payments linked to an index

No. of leases with termination options

Office buildings

4

1-5 years

2.75 years

4

0

0

0

 

Lease liabilities

Lease liabilities are presented in the statement of financial position as follows:

 

Unaudited

30 June

2019

Unaudited

30 June

2018

Audited

31 December

2018

 

$'000

$'000

$'000

 

 

 

 

Current

748

-

-

Non-current

1,206

-

-

 

1,954

-

-

 

 

 

12. Share capital

 

Unaudited

30 June 2019

Unaudited

30 June 2018

Audited

31 December 2018

 

 

 

 

Authorised

 

 

 

100,000,000 ordinary shares of 10p

10,000,000

10,000,000

10,000,000

 

 

 

 

Allotted, issued and fully paid

42,853,494

42,825,554

42,853,025

$

6,847,549

6,843,975

6,847,490

 

 

 

 

The movement in the number of shares is as follows:

 

 

 

 

 

 

Number of

ordinary shares

 

 

 

 

At 1 January 2018

 

 

42,766,171

Shares issued

 

 

59,383

At 30 June 2018

 

 

42,825,554

Shares issued

 

 

27,471

At 31 December 2018

 

 

42,853,025

Shares issued

 

 

469

At 30 June 2019

 

 

42,853,494

             

 

All shares are equally eligible to receive dividends and the repayment of capital and represent equal votes at meetings of shareholders with the exception of 2,119,841 shares held jointly by the Employee Benefit Trust and participants for the purpose of the Company's joint share ownership plan in relation to which all voting rights have been waived.

 

Allotments

 

13 June 2019, 469 ordinary shares of 10p were issued in relation to the exercise of share options by employees.

 

 

 

 

13.  Financial Instruments

 

The Group uses financial instruments comprising cash and cash equivalents, other loans and various other short-term instruments such as trade receivables and trade payables which arise from its operations. The main purpose of these financial instruments is to fund the Group's business strategy and the short-term working capital requirements of the business.

Financial assets by category

The categories of financial asset included in the balance sheet and the headings in which they are included are as follows:

 

30 June 2019 (unaudited)

 

 

Loans

and

receivables

Non

financial

assets

Balance

sheet

total

 

$'000

$'000

$'000

 

 

 

 

Goodwill

-

10,840

10,840

Other intangibles assets

-

5,708

5,708

Property, plant and equipment

-

2,314

2,314

Inventories

-

3,845

3,845

Trade receivables

 

 

 

Other receivables

7,972

-

7,972

Prepayments and accrued income

1,161

-

1,161

Tax receivable

340

-

340

Cash and cash equivalents

3,559

-

3,559

Total

13,032

22,707

35,739

 

 

30 June 2018 (unaudited)

 

 

Loans

and

receivables

Non

financial

assets

Balance

sheet

total

 

$'000

$'000

$'000

 

 

 

 

Goodwill

-

11,273

11,273

Other intangibles assets

-

6,999

6,999

Property, plant and equipment

-

579

579

Inventories

-

6,253

6,253

Trade receivables

5,339

-

5,339

Other receivables

854

-

854

Prepayments and accrued income

1,265

-

1,265

Tax receivable

170

-

170

Cash and cash equivalents

3,385

-

3,385

Total

11,013

25,104

36,117

 

 

31 December 2018 (audited)

 

 

Loans

and

receivables

Non

financial

assets

Balance

sheet

total

 

$'000

$'000

$'000

 

 

 

 

Goodwill

-

10,892

10,892

Other intangibles assets

-

6,275

6,275

Property, plant and equipment

 

-

 

419

 

419

Inventories

-

2,839

2,839

Trade receivables

7,799

-

7,799

Other receivables

857

-

857

Prepayments and accrued income

-

638

638

Tax receivable

-

340

340

Cash and cash equivalents

3,817

-

3,817

Total

12,473

21,403

33,876

 

Financial liabilities by category

 

The categories of financial liability included in the balance sheet and the headings in which they are included are as follows:

 

Unaudited

30 June

2019

Unaudited

30 June

2019

Unaudited

30 June

2018

Unaudited

30 June

2018

Audited

31 December

2018

Audited

31 December

2018

 

 

Other

financial

liabilities

at

amortised

cost

 

 

 

 

 

 

Fair Value

 

Other

financial

liabilities

at

amortised

cost

 

 

 

 

 

 

Fair Value

 

Other

financial

liabilities

at

amortised

cost

 

 

 

 

 

 

Fair Value

 

$'000

$'000

$'000

$'000

$'000

$'000

Trade payables

 

8,959

 

8,959

 

7,353

 

7,353

 

5,715

 

5,715

Other payables

 

937

 

936

 

1,391

 

1,391

 

813

 

813

Accruals and deferred income

 

 

2,005

 

 

2,005

 

 

3,364

 

 

3,364

 

 

2,073

 

 

2,073

Lease

1,954

1,954

-

-

-

-

Loan

6,308

6,308

6,538

6,538

6,327

6,327

Total

20,163

20,163

18,646

18,646

14,928

14,928

 

All financial assets and liabilities are stated at amortised cost.

The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Board is responsible for co-ordinating the Group's risk management and focuses on actively securing the Group's short to medium term cash flows. Long term financial investments are managed to generate lasting returns.

The Group does not actively engage in the trading of financial assets and has no financial derivatives. The most significant risks to which the Group is exposed are described below:

 

Credit risk

The Group's credit risk is primarily attributable to its trade receivables, recoverable taxation and cash and cash equivalents. The amounts presented in the balance sheet are net of any allowance for doubtful receivables, estimated by the Directors. The Group has a concentration of credit risk due to exposure from a limited number of customers. This is managed at the highest level in the Group. Cash at bank is all held with highly rated banks, the suitability of which is periodically reviewed. The Group monitors debtor levels continuously and all customers have defined credit limits.

 

Credit risk management

The credit risk is managed on a group basis based on the Group's credit risk management policies and procedures.

The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification of bank deposits and are only with major reputable financial institutions.

The Group continuously monitors the credit quality of new customers. Where available, external credit ratings and/or reports on customers are obtained and used. The group's policy is to deal only with credit worthy counterparties. The standard credit terms range between 30 and 90 days. The ongoing credit risk is managed through regular review of ageing analysis, together with credit limits per customer.

                                           

Liquidity risk

The Group holds all of its financial assets as cash or cash equivalents which are entirely liquid.  Trade receivables are recorded in the normal course of business and have maturities of less than three months. The Directors prepare rolling cash flow forecasts and would seek to raise additional funding whenever a shortfall in facilities is forecast. Details of the funding status of the Group are included in the going concern paragraph in the principal accounting policies.

All the current financial liabilities recorded in the balance sheet are expected to result in cash outflow within six months of the year end, with the exception of the revolving credit facility which is disclosed in note 10.

The Group is exposed to interest rate risk on its loan. The Group does not manage this risk with the use of derivatives. No other liabilities accrue interest.

 

Currency risks

The Group is exposed to translation foreign exchange risk in connection with its investment in Frontier Smart Technologies Limited whose subsidiaries are Frontier Silicon (Hong Kong) Ltd incorporated in Hong Kong and Frontier Silicon SRL incorporated in Romania. The Group does not hedge any transactions. As a result, the Group is subject to foreign currency risk in respect of accounting for its investment in the subsidiaries.

 

 

14.  Post Balance Sheet Events

 

Since the period end, Martin Harriman and Paul Taylor have resigned as non-executive directors (30 July and 14 August, respectively).  In addition, Sir Hossein Yassaie has resigned as non-executive chairman with effect from 14 August.

On 27 August 2019, Science Group have taken a majority stake in the Company and in addition have subscribed for 4 million new ordinary shares in the Company at a subscription price of 25p.  These new shares were admitted to AIM on 28 August 2019.  As disclosed to the market on 21 August it is expected that Martyn Ratcliffe and Sarah Cole (both existing directors of Science Group) will step up to the Board of Frontier with effect from 2 September 2019.

 

- Ends -


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END
 
 
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