TIDMUBI
RNS Number : 1577W
Ubisense Group PLC
17 August 2015
Ubisense Group plc
Interim results for the six months ended 30 June 2015
Ubisense Group plc ("Ubisense" or the "Company") (AIM: UBI), a
market leader in enterprise location intelligence solutions,
announces its interim results for the six months ended 30 June
2015
Overview * The strategic shift to Solutions, including the
ongoing exit from certain low margin consulting
services contracts, continues, however contract
slippage with Solutions customers has led to
disappointing first half revenues
* The good pipeline of Solutions opportunities to be
closed in the second half, including contracts that
have slipped from the first half, together with a
strategic focus on accelerating partner channel
development to expand business scale and reach, give
confidence on the full year outturn
* Significant restructuring is being implemented to
focus sales and marketing activity in key geographies,
reducing operating costs which had accelerated ahead
of revenue growth
============= ==================================================================
Financial * Total revenue was GBP10.4m (H1 2014: GBP17.3m)
highlights
* Solutions revenue was GBP5.7m (H1 2014: GBP8.5m), and
represents an increased proportion of total revenue
at 55% (H1 2014: 49%)
* Recurring revenues up GBP0.5m to GBP4.0m (H1 2014:
GBP3.5m)
* Adjusted EBITDA* loss of GBP3.7m (H1 2014: GBP0.2m
profit)
* Reported operating loss of GBP7.3m (H1 2014: GBP2.0m
loss) including GBP1.9m non-recurring costs (H1 2014:
GBP0.3m)
* Adjusted diluted loss per share** 19.0p (H1 2014:
5.5p loss)
* Placing of GBP10m before expenses to strengthen the
balance sheet and invest in growth of the Solutions
business
* Cash and cash equivalents of GBP7.8m and net funds of
GBP2.5m
* Increased the working capital bank facility from
GBP5.0m to GBP8.0m in June 2015 to support company
growth. Total debt facilities of GBP9.1m, of which
GBP5.3m drawn at 30 June. Net funds of GBP2.5m ensure
that HSBC bank covenants at 30 June 2015 are
satisfied
============= ==================================================================
Operational
highlights * Significant orders during the period from both new
and existing customers; including strategic wins at
General Motors, Magna Steyr and Telus
* RTLS Dimension4 product completed first production
deployment acceptance
* Significant Geospatial myWorld product sale with a
key North American communications provider and good
pipeline of new opportunities in North America and
Japan
* Major restructuring into two business lines (RTLS &
Geospatial) removing headcount, ceasing market entry
investment and exiting low margin consulting services
in certain geographies to deliver run rate cost
savings of over GBP2m
============= ==================================================================
Richard Green, Chief Executive, commented,
"The results for the first half are clearly disappointing. We
have continued to execute our shift to software solutions, by
exiting the consulting services business in Europe which combined
with customer order slippage resulted in a significant revenue
decrease in the first half. As a result of our strategic review and
significant restructuring activities, headcount reductions and
withdrawal from certain markets will result in a sustainable cost
base in line with our revenue expectations for the second half.
Having made the investment in our two business lines and developed
next generation products over the past 3 years, whilst building up
a blue chip customer base, the group is now better positioned to
scale with its strategic partner channels such as Atlas Copco. As a
result the Group is confident it is in a position to deliver a full
year outturn in line with the Board's expectations followed by
growth in the longer term."
* Measured as operating profit excluding depreciation,
amortisation, share-based payments charge and non-recurring costs
such as intercompany foreign exchange and reorganisation costs.
** Earnings measured as profit for the period excluding
amortisation on acquired intangible assets, share-based payments
charge and non-recurring costs such as acquisition and
reorganisation costs.
Contact
Ubisense Group plc Tel: + 44 (0) 1223 535170
Richard Green
Tim Gingell
Numis Securities Limited Tel: + 44 (0) 20 7260
Simon Willis, Jamie Lillywhite 1000
(Corporate Finance)
Rupert Krefting (Corporate
Broking)
Redleaf Communications Tel: +44 (0) 20 7382
Rebecca Sanders-Hewett, 4730
Richard Gotla,
David Ison, Harriet Lynch
================================= ==========================
About Ubisense
Ubisense (AIM: UBI), a global leader in enterprise location
intelligence solutions, helps manufacturing, communications and
utility companies improve operational efficiency 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, Japan, and Singapore. For more
information visit: www.ubisense.net.
Overview
In the first half of 2015, the Group has continued its shift
from low margin consulting services to selling and delivering
solutions based on our own IP. These changes we have implemented
have resulted in significant revenue reduction compared to last
year as a disappointingly slow closure rate on new Solutions
contracts in the first half has failed to offset the anticipated
revenue shortfall from the historic services business.
Strategy
The strategy of the Group is to:
-- Continue to evolve as a global, scalable Solutions-based business
-- Develop next-generation platforms & applications that
deliver strong ROI to our customers and partners
-- Use strategic channel partners to extend reach within our
vertical markets, expand our delivery capability and enhance margin
growth
The business focuses its resources on delivering business
critical location intelligence technology in markets where we add
the most value. As our market footprint increases, our reputation
with our customers continues to be one of value, reliability and
exceptional service.
Business development
In our RTLS business, considerable effort and investment in
Europe, North America and Japan has resulted in Ubisense securing
contracts with major manufacturing customers with global presence.
Deployment extensions continue to be signed, with Smart Factory
being implemented by a growing number of OEMs and across an ever
increasing number of production lines. This business allows for ROI
enhancement through our systems provided to customers and is a key
driver for the widespread adoption of Smart Factory implementations
to manufacturers around the globe.
Our Geospatial business continues to demonstrate continued
growth with contract wins during the period for the myWorld
application in a large US communication network operator. Our
position in the North American market is strengthening, supported
by our continued shift towards a Solutions-focused model. Initial
contacts have also been secured with Japanese water companies
during the period for the myWorld product.
However market entry investments in territories such as South
Korea and the Philippines have taken longer than anticipated and
are being discontinued, particularly where our reach can be
extended more effectively by our strategic partners.
Partnerships
In the RTLS business, the strategic partnership with Atlas Copco
has supported contract wins during the period on 3 continents, two
with completely new Automotive OEMs to the Group. In addition, but
still at an early stage, were sales wins with other partners
including Siemens and Meiji Denki during the period. Strategically,
we will look to expand in the focus on partnerships to deliver cost
efficient business growth.
Restructuring
Following a strategic review of the business operations, we have
restructured into two operating divisions (RTLS and Geospatial) to
better align our costs against the revenues of each product line.
This streamlining of the organisation has completed the exit of the
consulting services business in Europe, removed significant central
overheads and discontinued investment in territories yet to show a
return (South Korea & Philippines). By the end of the year the
headcount is expected to be in the region of 190 employees (30 June
2015: 200 employees, 31 December 2014: 250) driving a run rate cost
reduction of approximately GBP2 million per annum compared to the
H1 operating costs. The result will be a cost base that the
business can more comfortably support.
First half results included an exceptional charge of GBP1.9
million (H1 2014: GBP0.3 million) covering GBP0.8 million
redundancy and headcount exit costs, GBP0.7 million exit costs and
provisions relating to South Korea and Philippines, and GBP0.4
million unrealised intercompany foreign exchange costs.
Board changes and management team
On 30 April 2015, Peter Harverson was appointed Vice Chairman
and engaged to drive leadership of sales activities, and
subsequently to assist shaping the restructuring of the Group.
On 29 June 2015, the Group announced that Robert Parker would
leave the company. Whilst the Board undertakes a process to appoint
a replacement CFO, Tim Gingell has been appointed internally as
Interim CFO.
Operating and financial review
Orders
The first half of 2015 saw new customer orders of GBP8.5 million
(H1 2014: GBP14.2 million), and the customer order book as at 30
June 2015 stood at GBP9.4 million (H1 2014: GBP15.8 million).
Revenue
Following our strategic review, the focus remains on building
solutions sales to customers, and the Group is reorganising into
two business lines RTLS and Geospatial based on the key product
suites (Smart Factory and myWorld respectively), recognising that
it must focus on the key customer relationships and markets for its
products.
In the full year results, the group anticipates delivering
additional segmental reporting separating the RTLS and Geospatial
divisions, however as the restructuring decision has only recently
been actioned it is still too early to provide accurate revenue,
gross margin and contribution data. During the first half, the
Group was managed with two distinct revenue streams:
-- Solutions - revenues driven from the Ubisense RTLS and
Geospatial product suites (Smart Factory, myWorld respectively),
technical expertise and exclusive reseller arrangements. A solution
sale will include a mixture of application software (licences in
perpetuity and subscription based), installation and commissioning
services, hardware and maintenance and support. Margins in any
given period will vary depending upon the make-up and phase of the
given set of Solutions being delivered. The Group sees this revenue
stream as critical to driving the growth and profitability of the
business.
-- Services - Geospatial revenues not involving the Ubisense product suites as defined above.
In the six month period under review, total revenues were
GBP10.4 million (H1 2014: GBP17.3 million). Solutions revenue was
GBP5.7 million (H1 2014: GBP8.5 million), with growth expected in
the second half as has been the trend in prior years as customers
deploy their capital budgets later in the year and as a result of
Solutions contract slippage from the first half. Services revenue
was GBP4.7 million (H1 2014: GBP8.9 million) with the expected
decline resulting from exiting low margin business.
A significant proportion of our revenues and margins relate to a
small number of large Solutions deals, the timing of which is not
solely within our control, and each can carry a significant impact
on our results in any single reporting period. However, revenues
from managed services, maintenance and support grew to GBP4.0
million (H1 2014: GBP3.5 million) or 38.4% of total revenues (H1
2014: 20.1%) as the installed base of products increases with our
customers.
As a global business with activities focused in Europe, the
Americas and Asia Pacific, the reported results are subject to
exchange rate volatility. During the period, sterling has
strengthened against the US dollar, Euro and Japanese Yen;
currencies in which the Group derives a significant proportion of
its revenues. If currency exchange rates had remained constant in
H1 2015 compared to H1 2014, the Board estimates that Group
reported revenues would have been GBP0.4 million higher.
To mitigate currency effects, the Group's policy is to maintain
natural hedges where possible by matching foreign currency revenues
and expenditure. The Board regularly reviews the forecast currency
requirements and at this stage, does not consider external hedging
arrangements for profit and loss items to be appropriate for the
Group.
Gross margin
The gross margin decreased by 2.8 basis points to 31.1% (H1
2014: 33.9%). Gross margin is significantly dependent on the
product mix within the revenue streams with higher gross margin
revenues being recognised on signature of new contracts than during
the delivery phase. Despite the increased proportion of Solutions
revenue, the delays on the signature of new Solutions contracts has
driven the reduction in the gross margin percentage.
Operating expenses
Operating expenses increased to GBP10.5 million (H1 2014: GBP7.9
million) due to a significant increase in non-recurring costs
(GBP1.9 million, H1 2014: GBP0.3 million) relating to the
restructuring of the business and cessation of investment in
certain markets. Operating expenses include sales & marketing,
product marketing, product development, general &
administration, foreign exchange and exceptional costs.
Other operating expenses (which excludes depreciation,
amortisation and exceptional costs) increased to GBP6.9m (H1 2014:
GBP5.7m, H2 2014: GBP6.4m) driven by headcount increases and
additional marketing spend through the first half. Restructuring
and streamlining of the organisation will continue to reduce these
costs going forward, driving a run rate cost reduction of
approximately GBP2 million per annum compared to the H1 operating
costs.
Gross expenditure on product development was GBP1.4 million (H1
2014: GBP1.8 million) reflecting continued investment in our
flagship Smart Factory and myWorld products. Capitalised product
development costs at GBP1.2 million (H1 2014: GBP1.3 million)
represented 86% (H1 2014: 74%) of gross development spend whilst
amortisation of the capitalised development costs was GBP1.3
million (H1 2014: GBP1.2 million).
EBITDA and operating profit
Group adjusted EBITDA for the period was a loss of GBP3.7
million (H1 2014: GBP0.2 million profit). The operating loss for
the period was GBP7.3 million (H1 2014: GBP2.0 million loss) and
loss before tax for the period was GBP7.5 million (H1 2014: GBP2.1
million loss). The operating loss and loss before tax includes
amortisation and depreciation charges of GBP1.7 million (H1 2014:
GBP1.8 million).
Interest and tax
Net interest payable for the period was GBP192,000 (H1 2014:
GBP64,000) mainly reflecting the finance charge in renewing the
working capital facility and repaying the acquisition loan.
The Group has a net tax credit of GBP44,000 (H1 2014: GBP84,000
net credit), as a result of non-cash deferred tax on capitalised
development costs and acquired intangible assets and a small tax
charge in two subsidiary companies. Management's best estimate of
the effective current tax rate in all other group companies is nil
due to the availability of prior years' losses.
EPS and dividends
Adjusted diluted loss per share was 19.0 pence (H1 2014: 5.5
pence loss). Reported basic and diluted loss per share was 27.3
pence (H1 2014: 8.8 pence loss). The Board does not feel it
appropriate at this time to commence paying dividends.
Balance sheet, cash and cash flow
The Group has a robust balance sheet with shareholder funds at
30 June 2015 of GBP21.0 million (31 December 2014: GBP18.8
million). The Group raised GBP9.6 million net in May 2015 through a
placing of 11,111,112 shares in the Company.
The Group has a three year working capital facility of GBP8.0
million which was extended with HSBC in June 2015 (31 December
2014: GBP5.0 million) of which GBP4.5 million was drawn down at 30
June 2015 (31 December 2014: GBP4.0 million).
The 200 million Japanese Yen (JPY) denominated loan (GBP1.1
million) was renewed with Mizuho Bank in June 2015 with 160 million
JPY drawn down (31 December 2014: 170 million JPY), taking
advantage of the low interest rates available in that region and
acting as a natural hedge against the Group's assets in Asia.
Following the fund raising and extension of the HSBC working
capital facility, the Group repaid the outstanding balance on the
acquisition loan (31 December 2014: GBP2.0 million).
Cash held on the balance sheet at 30 June 2015 was GBP7.8
million (31 December 2014: GBP3.7 million) and net funds at 30 June
2015 were GBP2.5 million (31 December 2014: GBP3.2 million net
debt).
The main components of the cash movements in the first six
months of 2015 included net receipts of GBP9.6 million from a
placing to institutional shareholders (H1 2014: GBP4.0 million);
the net repayment of bank loans of GBP1.5 million (H1 2014: GBP1.3
million drawdown); outflows of GBP1.3 million (H1 2014: GBP1.9
million) for capital investment product development and plant and
equipment; and an operating cash outflow of GBP2.4 million (H1
2014: GBP1.7 million outflow).
Capital structure
The issued share capital at 30 June 2015 was 36,295,935 (31
December 2014: 25,062,842) ordinary shares of GBP0.02 each. The
increase of 11,233,093 shares relates to 11,111,112 shares issued
in the June 2015 placing and 121,981 share option exercises by
employees. No share options were granted to employees in the
period, and the total number of unexercised share options at 30
June 2015 was 2,078,423.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of
the business. The key risks that could affect the Group's medium
term performance, and the factors which mitigate these risks, have
not significantly changed from those set out on pages 25 to 27 of
the Group's Annual Report for 2014, a copy of which is available
from our website www.ubisense.net.
Current trading and outlook
Ubisense has started the second half of 2015 with a lower cost
base and a refreshed market focus through the RTLS and Geospatial
business lines, and a commitment to complete the market exits
outlined. The Group has entirely assessed its order pipeline,
including the Solutions contracts which slipped from the first
half, and is comfortable with the level and deliverability of this
pipeline. This together with the decisive action taken on costs,
the benefit of which will be felt in the second half, means that
the Group is confident it is on track to deliver full year results
in line with the Board's expectations, notwithstanding the
disappointing first half performance.
Interim income statement
For the six months ended 30 June 2015
Six months Six months 12 months
to to to
30 June 30 June 31 December
2015 2014 2014
unaudited unaudited audited
Notes GBP'000 GBP'000 GBP'000
----------------------------- ------ --- ----------- ----------- -------------
Revenues 4 10,357 17,331 35,051
Cost of revenues (7,133) (11,455) (21,053)
============================= ====== === =========== =========== =============
Gross profit 3,224 5,876 13,998
Operating expenses (10,541) (7,891) (18,579)
============================= ====== === =========== =========== =============
Operating loss (7,317) (2,015) (4,581)
Analysed as:
Gross profit 3,224 5,876 13,998
Other operating expenses (6,877) (5,695) (12,094)
============================= ====== === =========== =========== =============
Adjusted EBITDA (3,653) 181 1,904
Depreciation (204) (170) (359)
Amortisation of acquired
intangible assets (156) (374) (751)
Amortisation of other
intangible assets (1,343) (1,300) (2,937)
Share-based payments
charge (33) (37) (75)
Non-recurring costs 5 (1,928) (315) (2,363)
============================= ====== === =========== =========== =============
Operating loss (7,317) (2,015) (4,581)
Net finance costs (192) (64) (197)
============================= ====== === =========== =========== =============
Loss before tax (7,509) (2,079) (4,778)
9)
Income tax 44 84 736
----------------------------- ------ --- ----------- ----------- -------------
Loss for the period (7,465) (1,995) (4,042)
----------------------------- ------ --- ----------- ----------- -------------
Loss attributable
to:
Equity shareholders
of the Company (7,330) (2,121) (4,085)
Non-controlling interest (135) 126 43
----------------------------- ------ --- ----------- ----------- -------------
Loss per share attributable
to equity shareholders
of the parent (pence)
----------------------------- ------ --- ----------- ----------- -------------
Basic 6 (27.3) (8.8) (16.7)
Diluted 6 (27.3) (8.8) (16.7)
The notes 1 to 10 are an integral part of these
condensed interim financial statements.
Interim statement of comprehensive income
For the six months ended 30 June 2015
Six months Six months 12 months
to to to
30 June 30 June 31 December
2015 2014 2014
unaudited unaudited audited
GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- -------------
Loss for the period (7,465) (1,995) (4,042)
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 29 (208) (531)
Total comprehensive income
for the period (7,436) (2,203) (4,573)
-------------------------------- ----------- ----------- -------------
Interim statement of changes in equity
For the six months ended 30 June 2015
Share
based
payment
reserve
GBP'000
Trans-
Share Share lation Retained Non-controlling
capital premium reserve earnings Subtotal interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================== ========= ========= ========== ========= ========== ========= ================ =========
Balance at 1
January 2014
(audited, restated) 461 24,050 746 (221) (6,342) 18,694 554 19,248
===================== ========= ========= ========== ========= ========== ========= ================ =========
Loss for the
period - - - - (2,121) (2,121) 126 (2,121)
Exchange difference
on retranslation
of net assets
and results of
overseas
subsidiaries - - - (173) - (173) (35) (173)
===================== ========= ========= ========== ========= ========== ========= ================ =========
Total comprehensive
income for the
period - - - (173) (2,121) (2,294) 91 (2,203)
Reserve credit
for equity-settled
share-based payment - - 37 - - 37 - 37
Issue of new
share capital 40 - - - - 40 - 40
Premium on new
share capital - 4,222 - - - 4,222 - 4,222
Share issue costs (229) (229) (229)
Transactions
with owners 40 3,993 37 - - 4,070 - 4,070
===================== ========= ========= ========== ========= ========== ========= ================ =========
Balance at 30
June 2014
(unaudited) 501 28,043 783 (394) (8,463) 20,470 645 21,115
===================== ========= ========= ========== ========= ========== ========= ================ =========
Loss for the
period - - - - (1,966) (1,966) (83) (2,049)
Exchange difference
on retranslation
of net assets
and results of
overseas
subsidiaries - - - (291) - (291) (29) (320)
Total comprehensive
income for the
period - - - (291) (1,966) (2,257) (112) (2,369)
Reserve credit
for equity-settled
share-based payment - - 38 - - 38 - 38
Premium on new
share capital - 8 - - - 8 - 8
Transactions
with owners - 8 38 - - 46 - 46
===================== ========= ========= ========== ========= ========== ========= ================ =========
Balance at 31
December 2014
(audited) 501 28,051 821 (685) (10,427) 18,261 530 18,791
===================== ========= ========= ========== ========= ========== ========= ================ =========
Loss for the
period - - - - (7,330) (7,330) (135) (7,465)
Exchange difference
on retranslation
of net assets
and results of
overseas
subsidiaries - - - 58 - 58 (29) 29
Total comprehensive
income for the
period - - - 58 (7,330) (7,272) (164) (7,436)
Reserve credit
for equity-settled
share-based payment - - 33 - - 33 - 33
Issue of new
share capital 225 - - - - 225 - 225
Premium on new
share capital - 9,806 - - - 9,806 - 9,806
Share issue costs - (448) - - - (448) - (448)
Transactions
with owners 225 9,358 33 - - 9,616 - 9,616
===================== ========= ========= ========== ========= ========== ========= ================ =========
Balance at 30
June 2015
(unaudited) 726 37,409 854 (627) (17,757) 20,605 366 20,971
===================== ========= ========= ========== ========= ========== ========= ================ =========
Interim statement of financial position
At 30 June 2015
Restated
At At At
30 June 30 June 31 December
2015 2014 2014
unaudited unaudited audited
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ ----------- ----------- -------------
Assets
Non-current assets
Intangible assets 7 13,872 15,834 14,363
Property, plant and
equipment 1,064 819 1,112
=============================== ====== =========== =========== =============
Total non-current assets 14,936 16,653 15,475
=============================== ====== =========== =========== =============
Current assets
Inventories 2,509 3,031 2,881
Trade and other receivables 10,123 11,015 15,541
Cash and cash equivalents 7,806 5,537 3,697
=============================== ====== =========== =========== =============
Total current assets 20,438 19,583 22,119
=============================== ====== =========== =========== =============
Total assets 35,374 36,236 37,594
=============================== ====== =========== =========== =============
Liabilities
Current liabilities
Bank loans 10 (829) (758) (927)
Trade and other payables (7,217) (8,450) (9,816)
=============================== ====== =========== =========== =============
Total current liabilities (8,046) (9,208) (10,743)
=============================== ====== =========== =========== =============
Non-current liabilities
Deferred tax liability (1,191) (1,479) (1,336)
Bank loans 10 (4,500) (4,000) (6,000)
Other liabilities 9 (666) (434) (724)
=============================== ====== =========== =========== =============
Total non-current liabilities (6,357) (5,913) (8,060)
=============================== ====== =========== =========== =============
Total liabilities (14,403) (15,121) (18,803)
=============================== ====== =========== =========== =============
Net assets 20,971 21,115 18,791
=============================== ====== =========== =========== =============
Equity
Equity attributable
to owners of the parent
company
Share capital 8 726 501 501
Share premium 37,409 28,043 28,051
Share based payment
reserve 854 783 821
Translation reserve (627) (394) (685)
Retained earnings (17,757) (8,463) (10,427)
=============================== ====== =========== =========== =============
Equity attributable
to owners of the parent
company 20,605 20,470 18,261
=============================== ====== =========== =========== =============
Non-controlling interests 366 645 530
=============================== ====== =========== =========== =============
Total equity 20,971 21,115 18,791
=============================== ====== =========== =========== =============
The notes 1 to 10 are an integral part of these
condensed interim financial statements.
Interim statement of cash flows
For the six months ended 30 June 2015
Six months Six months 12 months
to to to
30 June 30 June 31 December
2015 2014 2014
unaudited unaudited audited
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -------------
Loss before tax (7,509) (2,079) (4,778)
Adjustments for:
Depreciation 204 170 359
Amortisation 1,499 1,674 4,956
Loss on disposal of
property, plant and
equipment - - 22
Share-based payment
charge 33 37 75
Non-cash non-recurring
items 602 - -
Finance income (12) (15) (14)
Finance costs 204 79 211
------------------------------------ ----------- ----------- -------------
Operating cash flows
before working capital
movements (4,979) (134) 831
Change in inventories (231) (443) (293)
Change in receivables 5,365 490 (3,661)
Change in payables (2,536) (1,766) 447
------------------------------------ ----------- ----------- -------------
Cash used in operations
before tax (2,381) (1,853) (2,676)
==================================== =========== =========== =============
Net income taxes received/(paid) (1) 141 47
------------------------------------ ----------- ----------- -------------
Net cash flows from
operating activities (2,382) (1,712) (2,629)
------------------------------------ ----------- ----------- -------------
Cash flows from investing
activities
Acquisition of subsidiaries,
net of cash acquired - (176) (509)
Purchases of property,
plant and equipment (99) (345) (885)
Proceeds on disposal
of property, plant
and equipment - - 1
Expenditure on intangible
assets (1,154) (1,403) (3,500)
Interest received 12 15 14
------------------------------------ ----------- ----------- -------------
Net cash flows from
investing activities (1,241) (1,909) (4,879)
------------------------------------ ----------- ----------- -------------
Cash flows from financing
activities
Proceeds of borrowings 4,500 1,258 3,427
Repayment of borrowings (6,000) - -
Interest paid (191) (84) (151)
Proceeds from the issue
of share capital 9,582 4,033 4,041
------------------------------------ ----------- ----------- -------------
Net cash flows from
financing activities 7,891 5,207 7,317
Net increase in cash
and cash equivalents 4,268 1,586 (191)
Cash and cash equivalents
at start of period 3,697 3,964 3,964
Exchange differences
on cash and cash equivalents (159) (13) (76)
------------------------------------ ----------- ----------- -------------
Cash and cash equivalents
at end of period 7,806 5,537 3,697
------------------------------------ ----------- ----------- -------------
Notes to the interim financial statements
1 General information
Ubisense Group plc ('the Company') and its subsidiaries
(together, 'the Group') deliver mission-critical location-based
smart technology which enables companies to optimise their business
processes.
The Group has operations in the UK, USA, Canada, France,
Germany, Japan, South Korea, and Singapore and sells mainly in the
Americas, Europe and Asia Pacific.
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 UK. The address of
its registered office is St. Andrew's House, St. Andrew's Road,
Chesterton, Cambridge, CB4 1DL.
The condensed consolidated interim financial statements were
approved by the Board of Directors for issue on 14 August 2015.
The condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006. Statutory accounts for the year ended 31
December 2014 were approved by the Board of Directors on 16 March
2015 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
The condensed consolidated interim financial statements have
been reviewed, not audited.
2 Basis of preparation
The condensed consolidated interim financial statements should
be read in conjunction with the annual financial statements of the
Group and are prepared in accordance with IFRSs as adopted by the
European Union.
Going concern basis
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, support the
conclusion that there is a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future, a period of not less than
twelve months from the date of this report. The Group therefore
continues to adopt the going concern basis in preparing its
condensed consolidated interim financial statements.
3 Accounting policies
The accounting policies adopted in the preparation of the
condensed consolidated interim financial statements are unchanged
from those set out in the Group's consolidated financial statements
for the year ended 31 December 2014. These policies have been
consistently applied to all the periods presented.
The operations of the Group display a degree of seasonality with
stronger performance typically seen in the second half of the year.
This is due to customers' budgetary cycles and the capital nature
of the products sold by the Group.
4 Segmental information
IFRS 8 requires a "management approach" under which information
in the financial statements is presented on the same basis as that
used for internal management reporting purposes. The Group was
organised on a global basis as a single Enterprise Location
Intelligence business. This was the basis of the Group's external
market offering and internal organisational and management
structure and was the primary way in which the Chief Executive
Officer, who is the Chief Operating Decision Maker, receives
financial information to assess Group performance. As a result, the
Group has therefore determined that it has only one reportable
segment, for the first half, as defined by IFRS 8.
In the full year results, the group anticipates delivering
additional segmental reporting separating the RTLS and Geospatial
divisions, however as the restructuring decision has only recently
been actioned it is still too early to provide accurate revenue,
gross margin and contribution data.
The internal management accounting information is prepared on an
IFRS basis but has a non-GAAP "Adjusted EBITDA" as the primary
measure of profit and this is reported on the face of the income
statement.
In addition, the Board and the Executive Management Team
consider the business to have two revenue streams with different
characteristics, Solutions and Services, which are generated from
the same asset and cost base.
4.2 Revenue by nature
Six months Six months 12 months
to to to
30 June 30 June 31 December
2015 2014 2014
unaudited unaudited audited
GBP'000 GBP'000 GBP'000
---------------- ----------- ----------- -------------
Solutions 5,704 8,476 20,067
Services 4,653 8,855 14,984
Total revenues 10,357 17,331 35,051
------------------ ----------- ----------- -------------
4.2 Revenue by geography
Six months Six months 12 months
to to to
30 June 30 June 31 December
2015 2014 2014
unaudited unaudited audited
GBP'000 GBP'000 GBP'000
---------------- ----------- ----------- -------------
United Kingdom 196 189 743
Americas 6,676 7,269 14,223
Europe 1,637 5,614 12,743
Asia Pacific 1,848 4,259 7,342
Total revenues 10,357 17,331 35,051
------------------ ----------- ----------- -------------
Revenues from external customers in the Group's domicile, the
UK, as well as its major markets, Europe, Americas and Asia
Pacific, have been identified on the basis of the customer's
geographical location.
5 Non-recurring costs
During the period, the Group incurred non-recurring expenditure
totaling GBP1,928,000. This includes:
-- Re-organisation costs of GBP768,000 comprising mainly redundancy and other exit costs
-- Cost and provisions of GBP745,000 relating to exiting from South Korea and the Philippines
-- Foreign exchange losses on unrealised intercompany trading
balances of GBP393,000, which will be non-recurring due to the
conversion of trading balances to long-term loans in H2 15
-- Other non-recurring expenditure of GBP22,000.
During 2014, the Group incurred non-recurring items of
GBP2,363,000. GBP315,000 was incurred in H1 2014 relating to
strategic Asia Pacific market entry. Additional non-recurring costs
of GBP2,048,000 were incurred in H2 2014 compromising:
-- Re-organisation costs of GBP458,000
-- Further Asia Pacific market entry costs of GBP288,000 (total 2014 costs of GBP603,000)
-- Professional fees in connection with an acquisition that did not proceed of GBP34,000
-- Impairment of an acquired intangible asset of GBP1,268,000.
6 Earnings per share
Six months Six months 12 months
to to to
30 June 30 June 31 December
2015 2014 2014
unaudited Unaudited Audited
------------------------------- ----------- ----------- -------------
Earnings
Loss for the period (GBP'000) (7,330) (2,121) (4,085)
================================ =========== =========== =============
Loss for the purposes
of diluted earnings per
share (GBP'000) (7,330) (2,121) (4,085)
================================ =========== =========== =============
Number of shares
Basic weighted average
number of shares ('000) 26,850 24,036 24,541
Effect of dilutive potential
ordinary shares:
- Share options ('000) 639 1,141 969
Diluted weighted average
number of shares ('000) 27,489 25,177 25,510
================================ =========== =========== =============
Basic loss per share
(pence) (27.3) (8.8) (16.7)
================================ =========== =========== =============
Diluted loss per share
(pence) (27.3) (8.8) (16.7)
================================ =========== =========== =============
Basic earnings per share is calculated by dividing profit for
the period attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares outstanding during
the period. For diluted earnings per share, the weighted average
number of shares is adjusted to allow for the effects of dilutive
share options. Options have no dilutive effect in loss-making
years, and hence the diluted loss per share for the periods ended
30 June 2015 and 2014 and 31 December 2014 is the same as the basic
loss per share.
The Group also presents an adjusted diluted earnings per share
figure which excludes amortisation on acquired intangible assets,
share-based payments charge and non-recurring expenditure such as
reorganisation costs from the measurement of profit for the
period.
Six months Six months 12 months
to to to
30 June 30 June 31 December
Adjusted diluted earnings 2015 2014 2014
per share unaudited unaudited audited
----------------------------- ----------- ----------- -------------
Loss for the purposes of
diluted earnings per share
(GBP'000) (7,330) (2,121) (4,085)
Adjustments
Reversal of amortisation
on acquired intangible
assets (GBP'000) 156 374 751
Reversal of share-based
payments charge (GBP'000) 33 37 75
Reversal of exceptional
items (GBP'000) 1,928 315 2,363
============================= =========== =========== =============
Net adjustments (GBP'000) 2,117 726 3,189
----------------------------- ----------- ----------- -------------
Adjusted earnings (GBP'000) (5,213) (1,395) (896)
----------------------------- ----------- ----------- -------------
Adjusted diluted loss per
share (pence) (19.0) (5.5) (3.5)
----------------------------- ----------- ----------- -------------
7 Intangible assets
At At At
30 June 30 June 31 December
2015 2014 2014
unaudited unaudited audited
Net book amount GBP'000 GBP'000 GBP'000
======================== =========== =========== ==============
Goodwill 8,155 9,587 8,224
Capitalised product
development costs 4,045 4,056 4,227
Software 604 373 652
Acquired software
products 162 377 228
Acquired customer
relationships and
backlog 906 1,441 1,032
-------------------------- ----------- ----------- --------------
Total other intangible
assets 13,872 15,834 14,363
-------------------------- ----------- ----------- --------------
8 Share capital
At At At
30 June 30 June 31 December
2015 2014 2014
Allotted, called-up unaudited unaudited audited
and fully paid GBP'000 GBP'000 GBP'000
--------------------- ----------- ----------- -------------
Ordinary shares of
GBP0.02 each 726 501 501
----------------------- ----------- ----------- -------------
At At At
30 June 30 June 31 December
2015 2014 2014
Movement in number unaudited unaudited audited
of shares GBP'000 GBP'000 GBP'000
-------------------------- ------------ ----------- -------------
Number of shares
at beginning of period 25,062,842 23,079,146 23,079,146
---------------------------- ------------ ----------- -------------
Issued under placing 11,111,112 1,929,589 1,929,589
Issued under share-based
payment plans 121,981 28,917 54,107
Change in number
of shares in period 11,233,093 1,958,506 1,983,696
============================ ============ =========== =============
Number of shares
at end of period 36,295,935 25,037,652 25,062,842
---------------------------- ------------ ----------- -------------
Share capital movements
During the period, the Company issued 11,233,093 shares,
increasing the total number of shares in issue from 25,062,842 to
36,295,935 as follows:
-- 11,111,112 shares at GBP0.90 per share for a total gross cash
consideration of GBP10,000,000, with share issue costs of
GBP448,000 written off against the share premium account; and
-- 121,981 share options exercised with a weighted average
exercise price of GBP0.25 per share for total cash consideration of
GBP30,727.
9 Interest in subsidiaries
9.1 Sale of subsidiary company
On 18 May 2015, the Group disposed of its 100% equity interest
in its subsidiary, Geoplan Philippines Inc. for USD 1,000. At the
previous period end of 31 December 2014, Geoplan Philippines Inc
had net liabilities of GBP69,000 and there was no material change
in the carrying value of net assets between 31 December 2014 and
the date of disposal.
9.2 Contingent consideration
The consideration to acquire the Geoplan group in December 2013
included cash, issue of Ubisense shares, deferred consideration and
contingent consideration. The deferred consideration was paid in
full in January 2014.
Under the contingent cash consideration arrangement, the Group
is required to pay additional amounts to vendors based on the
achievement of two separate performance milestones that may arise
between 2014 and 2017 with combined undiscounted range of outcomes
between nil and 149 million Japanese Yen (JPY) (GBPnil to
GBP892,000).
At acquisition, the fair value of the contingent consideration
was 136 million JPY (GBP816,000) being management's best estimate
of the probability-adjusted estimated discounted future cashflows.
The discount rate used is 3.5%, based on the Group's estimated
incremental borrowing rate for unsecured liabilities at the
reporting date, and therefore reflects the Group's credit position.
The fair value amount recognised for this arrangement is revised
based on the most recent management estimates and, as the liability
is denominated in JPY, it is subject to the impact of exchange
rates.
At 30 June 2015, the contingent consideration payable is
GBP406,000 and is included in other non-current liabilities.
10 Bank loans
In June 2015, the Group renewed its working capital loan
facilities and repaid its acquisition bank loan. The Group has an
GBP8.0 million bank loan facility agreed with HSBC Bank Plc to
provide working capital for the Group. This loan is repayable in
full in June 2018 by Ubisense Ltd, is secured on the fixed and
floating assets of the Group and attracts an interest charge of
LIBOR + 3%. As at 30 June 2015, GBP4.5 million of the GBP8.0
million facility is drawn down and is subject to certain operating
and net worth covenants of the business, being:
-- Total senior debt (net of cash balances) not exceeding 2x Adjusted EBITDA;
-- Interest charges and repayments of principal due in the next
12 months in respect of borrowings whose original stated term to
maturity exceed 12 months not exceeding 3x Adjusted EBITDA; and
-- Total senior debt (net of cash balances) not exceeding 2.5x
the aggregate of trade debtors (net of provisions) and
work-in-progress (Amounts recoverable on contracts).
The Group renewed a six month loan facility of 200 million
Japanese Yen (JPY) in June 2015, which is repayable in December
2015. The loan is unsecured and interest is payable at 0.99%. As at
30 June 2015, 160 million JPY of the 200 million JPY facility is
drawn down.
Independent review report to Ubisense Group plc
Introduction
We have been engaged by the company to review the financial
information in the half-yearly financial report for the six months
ended 30 June 2015 which comprises the interim income statement,
interim statement of comprehensive income, interim statement of
changes in equity, interim statement of financial position, interim
statement of cash flows and the related explanatory notes. We have
read the other information contained in the half yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
guidance contained in ISRE (UK and Ireland) 2410, 'Review of
Interim Financial Information performed by the Independent Auditor
of the Entity'. Our review work has been undertaken so that we
might state to the company those matters we are required to state
to them in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The AIM rules of the London
Stock Exchange require that the accounting policies and
presentation applied to the financial information in the
half-yearly financial report are consistent with those which will
be adopted in the annual accounts having regard to the accounting
standards applicable for such accounts.
As disclosed in Note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The financial information in the half-yearly
financial report has been prepared in accordance with the basis of
preparation in Note 2.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the financial information in the half-yearly financial report based
on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the financial information in the
half-yearly financial report for the six months ended 30 June 2015
is not prepared, in all material respects, in accordance with the
basis of accounting described in Note 2.
Grant Thornton UK LLP
Chartered Accountants
Registered Auditor
Cambridge
14 August 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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