TIDMUBI
RNS Number : 4904U
Ubisense Group PLC
07 April 2016
Ubisense Group plc
Final results for the year ended 31 December 2015
Ubisense Group plc ("Ubisense" or the "Company") (AIM: UBI), a
market leader in enterprise location intelligence solutions,
announces its final results for the year ended 31 December
2015.
Overview * Restructuring complete - two clearly defined
divisions (RTLS and Geospatial) and reduced and
realigned costs
* New emphasis on sales leadership and order pipeline
* Refocused resources on core territories - North
America, Europe and Japan
* Continued investment into both product lines
* Next generation products developed, tested and ready
for the channel
============== =========================================================================
Financial * Group revenue GBP22.0m (2014: GBP35.1m)
overview
* Gross margin 35.0% (2014: 39.9%)
* Adjusted EBITDA loss GBP5.2m (2014: GBP1.8m profit)
* Non-recurring costs GBP4.1m (2014: GBP1.1m)
* Impairment charges GBP4.0m (2014: GBP1.3m)
* Operating loss GBP17.0m (2014: GBP4.6m loss)
* Cash GBP5.4m (2014: GBP3.7m) and net debt GBP0.2m
(2014: GBP3.2m)
============== =========================================================================
Operational * Signed contracts with BMW, Ford, General Motors, John
highlights Deere, Magna Steyr, Nissan, Telus, Comporium and
Nagoya Water
* Worked successfully with Atlas Copco, a key partner,
across three major Automotive OEMs
* Converted South Korean and Singaporean operations
into partners
* Next generation Dimension4 RTLS product deployed
============== =========================================================================
Post-period * Appointment of Peter Harverson as Chairman
highlights
* Three significant contracts announced
* myWorld 3.0 Geospatial product released
* Options to strengthen balance sheet at an advanced
stage
============== =========================================================================
Peter Harverson, Chairman of Ubisense, commented:
"We took steps to right-size the business in the period,
refocusing our resources on core geographies and reducing our staff
base appropriately. Our focus for 2016 is very much on improved
sales execution from a lower cost base in order to establish a
financially stable platform from which we can then begin to address
the growth potential of our market-leading solutions."
Contacts
Ubisense Group plc
Peter Harverson Tel: +44 (0)1223 535 170
Richard Green
Tim Gingell
Numis Securities Limited
Simon Willis, Jamie Lillywhite Tel: +44 (0)20 7260 1000
(Corporate Finance)
Toby Adcock (Corporate
Broking)
Redleaf Communications
Rebecca Sanders-Hewett, Tel: +44 (0)20 7382 4732
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 and Japan,. For more information
visit: www.ubisense.net.
Chairman's statement
Introduction
2015 was a challenging year for Ubisense, in managing the impact
of unprecedented market forces in key sectors and our continued
transition to an enterprise solutions business. In response to
reduced revenue expectations as the year progressed, we acted
swiftly to increase focus on sales effectiveness and adjust our
operating cost base to be better aligned to our revenues. These
actions, alongside the proven performance enhancements and reduced
costs we bring to customers, give us confidence that we can
capitalise on growth opportunities whilst maintaining financial
prudence.
Reflections on 2015
As we entered 2015, we were investing heavily in marketing
activities, growing the organisation and continuing to invest in
new markets, with the full expectation that revenue would
accelerate driving the profitable growth of the business.
The results for 2015 show that a combination of unforeseen
external market forces, together with poor execution, led to a
disappointing financial outcome. For the RTLS division, global
economic concerns and, in particular, the damage done to German
premium automotive suppliers, continue to resonate in the market
but, encouragingly, orders continue to be received from these
organisations even if at a lower level. For the Geospatial
division, customer commitment to our platform and applications
remains strong with new deployments achieving rapid adoption, and
the enhanced mobile capability with the next version release is
generating good levels of customer interest.
Strategy
The task now is to leverage our best-in-class products and
ensure we see a tangible return on our investment and a return to
profitability. We will achieve this by combining our direct sales
efforts with those of our strategic partners such as Atlas Copco
and leveraging our expanding network of reseller partners. Having
restructured the business, we are confident that incremental
revenue can be generated without further significant expansion of
the cost base, whilst still allowing for the right level of
investment in our products.
Board of Directors
In June, Robert Parker stepped down as Chief Financial Officer,
with Tim Gingell assuming his responsibilities as Interim Chief
Financial Officer and Company Secretary.
October saw Andy Hopper signal his intention to leave the
business at the end of the calendar year, officially stepping down
as Chairman and Director of the Group on 31 December 2015. I would
like to thank Andy for his hard work and commitment during his time
with the Group.
Originally a Non-executive Director of the Group, I was
appointed Vice Chairman in April 2015 and officially took over from
Andy as Chairman on 1 January 2016.
Outlook
The business went through a difficult period in 2015 and market
conditions remain challenging, so we continue to be prudent in our
expectations of a recovery in the near term. With a renewed focus
on sales and developing the partner channel, we have created a
solid platform from which to grow in a profitable way on a more
appropriately-sized cost base.
Whilst mindful of the challenging environment, we are well
positioned to take advantage of the demand for our products and
solutions in both divisions, and first quarter revenues are
marginally ahead of the prior year notwithstanding the
significantly reduced costs base. We pride ourselves on hiring and
developing the best location people in the business. I would like
to take this opportunity to thank our staff for their on-going
dedication and commitment during the restructuring and to express
our gratitude for the support and patience of our shareholders.
Peter Harverson
Chairman
06 April 2016
Chief Executive's review
Overview
Overall 2015 proved to be a disappointing year as the business
was hit by weaker than expected demand at the same time that we
were investing to grow both the organisation and our geographical
reach. At the start of the year, we anticipated growing the
organisational presence and reach into a market that showed signs
of material expansion.
Last year, our strategic focus was on accelerating the growth of
solutions sales with an increased proportion of software, whilst
anticipating the decline in Geospatial revenues, particularly in
Europe. The revenue growth required to offset this presented a
significant challenge. Before the end of the first half, some
delays in orders in the RTLS division from large German premium
automotive OEMs meant we had to reset our revenue expectations for
the second half of the year. Once it became clear that we would not
be able to recover the shortfall against the first half revenue
expectations by the end of the year, we took decisive action to
re-align our costs with the revised revenue expectations.
Our initiatives to refocus our resources on core geographies and
markets and reduce our staff base are now complete. Our reset cost
base means that we enter 2016 in a much better position to deliver
organic growth of the business.
Customer Successes
The opportunity for Ubisense continues to be considerable. Our
proven products are in use across 10 of the 12 leading automotive
manufacturers in the world, and over 12,000 utility &
telecommunications professionals are using our software every
day.
Both divisions of the business continued to expand their
respective customer bases in the period. Wins were made with BMW
Group, Ford, GM, John Deere, Magna Steyr, Nissan, Telus, Comporium
and Nagoya Water and we extended our systems in our existing
customer base with significant deployments in Utilities and
Telecoms in North America and many of our global Manufacturing
customers.
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We have successfully built on our initial entry into Japan, an
important strategic territory for us. In Geospatial, we won our
first notable Japanese myWorld contract with Nagoya Water and, on
the RTLS side, good progress was made building on proof of concept
deployments at both Nissan and Toyota.
Strategic Partnerships
The Atlas Copco relationship delivered on three opportunities in
Europe, Asia and the US, validating our strategy of scaling the
business through partner channels. Other industrial vendors have
also incorporated our technology into their wireless tools
recognising the market opportunity with location intelligence
enhancement. Other partners of note include itelligence (a NTT Data
company), VLS and Noldus.
Additionally, a partnership has been developed for the myWorld
platform with ONZO (a global provider of data science-based utility
analytics solutions) which was signed in the early part of
2016.
Product Development
We made considerable investment in the development of the
product lines of both divisions in the year, recognising that
continued investment in products is needed to support future
growth.
Dimension4, our next generation RTLS platform, was fully
deployed in three major production environments. The feedback has
been very positive, leading to a significant improvement in product
performance and installation efficiencies.
myWorld also continued on its development path with further
integrations to legacy GIS systems from Esri and Intergraph, as
well as enhancing the mobile capability of the solution which is
expected to deliver some key contract wins in 2016.
Summary
We believe that with the business having a renewed focus on the
two divisions and their respective product lines, there is a
considerable opportunity for us to both win new customers and
provide additional solutions for our existing customers. We are, as
ever, very grateful for the continued support of our stakeholders,
and are committed to driving value for them in 2016 and beyond.
Richard Green
Chief Executive Officer
06 April 2016
Strategic Report: Financial Review
Revenue
During the year the Group re-organised into two divisions, RTLS
and Geospatial, recognising the separate solutions and services and
targeting distinct sets of customers. The Group's strategy is
outlined further in the Strategic Report. Whilst we're organised as
two separate divisions supported by a central corporate team, the
revenue streams are best understood as follows:
-- Both divisions sell solutions whereby revenues are those
driven from the Ubisense product suites (RTLS -Smart Factory;
Geospatial - myWorld), technical expertise and reseller
arrangements. A solution sale will include a mixture of application
software (licences in perpetuity and subscription based),
installation and commissioning services, hardware (for RTLS) and
maintenance and support. Margins in any given period will vary
depending upon the mix and phase of the given set of solutions
being delivered. The Group sees this revenue stream as key to
driving the long term growth and profitability of the business and
there is a strategic shift towards this higher margin revenue
stream.
-- The Geospatial division also generates services revenues
which are those not involving the Ubisense product suites as
defined above. These revenues are typically multi-year or annually
renewed managed services contracts, consultancy and training. The
Group generally has good visibility on future revenue from these
services contracts, and drives customer loyalty in addition to
providing a customer base into which it can sell its solutions.
The majority of our revenues relate to a small number of large
deals, the timing of which is not solely within our control and
each can carry a significant impact on our results in any single
reporting period.
Total revenues fell 37.3% to GBP22.0 million (2014: GBP35.1
million). Within total revenues, the RTLS division's revenue fell
by 21.0% to GBP6.4 million (2014: GBP8.1 million) as a result of
the commercial challenges suffered by the German automotive OEMs.
Geospatial revenue fell by 42.6% to GBP15.5 million (2014: GBP27.0
million) primarily due to the reduction in low margin Geospatial
services contracts in Europe.
Recurring revenues declined by 30.8% to GBP6.8 million (2014:
GBP9.8 million) or 31.0% of total revenues (2014: 28.1%). GBP2.7
million of this was maintenance and support which decreased by
36.9% (2014: GBP4.2 million) and represents 12.1% of total revenues
(2014: 12.0%).
As a global business with activities focussed in Europe, North
America and Asia Pacific, the reported results are subject to
exchange rate volatility. During the period the GBP has weakened
against the US Dollar, but strengthened against the Euro and
Japanese Yen; currencies in which the Group derives a significant
proportion of its revenues. If currency exchange rates had remained
constant in 2015 compared to 2014, the Board estimates that Group
reported revenues would have been GBP0.3 million higher at GBP22.2
million and the adjusted EBITDA loss GBP0.2m larger.
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.
Orders
2015 saw a number of major new contract awards and extensions to
existing contracts resulting in new orders for the period of
GBP19.2 million (2014: GBP31.6 million). GBP5.1 million of this
related to RTLS and GBP14.1 million to Geospatial.
The order book as at 31 December 2015 stood at GBP9.6 million
(2014: GBP12.4 million), a 22.6% decrease from 2014. This reflects
the Group's strategy to focus on sales of solutions in both
divisions, which provides a shorter lead time between order and
revenue generation than Geospatial services, which in 2014 was
significantly made up of multi-year contracts at lower margin.
Gross margin
The gross margin fell from 39.9% in 2014 to 35.0% in 2015. This
was as a result of timing of new contracts and the revenue mix
between sales of new solution contracts, implementation of
installation projects and scale of Geospatial services.
Operating expenses
Operating expenses increased by GBP6.1 million (32.8%) to
GBP24.7 million (2014: GBP18.6 million).
Operating expenses includes sales, marketing, product marketing,
product development, administration, depreciation &
amortisation and foreign exchange and were increased in the first
half of 2015 with an increase in marketing and headcount costs to
match revenue expectations. Once it became clear that the expected
revenue increase would not arise then the Group initiated a
restructuring and streamlining of the organisation to reduce costs
going forward.
The re-organisation program included reverting to two divisions,
removing administration overheads, reducing marketing costs and
headcount, disposal of non-core operations in South Korea,
Singapore and the Philippines, and reducing certain business
development activities, incurring non-recurring expenditure of
GBP4.0 million split between cost saving GBP3.2 million (2014:
GBP0.5 million) and disposal of non-core operations GBP0.8 million
including a specific debtor provision, delivering GBP5.8 million of
annualised cost reductions.
In total, the Group incurred non-recurring expenditure mainly
relating to the reorganisation program of GBP4.1 million (2014:
GBP1.1 million). Additionally, a provision for impairment of
goodwill was made for GBP4.0 million recognising the challenging
trading period that the Group had during 2015. Acquired intangible
assets relating to Services revenues were not impaired during the
year (2014: GBP1.3 million).
Gross expenditure on product development was GBP3.1 million
(2014: GBP3.9 million) reflecting the continuing investment in our
flagship Smart Factory and myWorld products. Capitalised product
development costs at GBP2.5 million (2014: GBP3.0 million)
represented 81% (2014: 75%) of gross development spend.
Amortisation of the capitalised development costs remained at
GBP2.6 million (2014: GBP2.6 million) as a result of significant
investment in product development in recent years.
EBITDA and operating profit
Group Adjusted EBITDA for the period was a loss of GBP5.2
million (2014: GBP1.8 million profit). To provide a better guide to
underlying business performance, Adjusted EBITDA excludes
non-recurring items along with depreciation, amortisation, interest
and tax from the measure of profit.
Both the operating loss of GBP17.0 million (2014: GBP4.6
million) and the loss before tax of GBP17.3 million (2014: GBP4.8
million) includes amortisation/impairment charges of GBP7.2 million
(2014: GBP5.0 million), depreciation charges of GBP0.4 million
(2014: GBP0.4 million) and the non-recurring items noted above of
GBP4.1 million (2014: GBP1.1 million).
Interest and tax
Net interest payable for the period was GBP0.3 million (2014:
GBP0.2 million) as a result of drawing down our HSBC and Mizuho
bank loans.
The Group has a net tax credit of GBP0.6 million (2014: GBP0.7
million expense) as a result of cash received of GBP0.5 million
under the UK R&D tax credit regime and GBP0.1 million of
non-cash deferred tax on capitalised development costs and acquired
intangible assets. Management's best estimate of the effective
current tax rate is nil due to the availability of prior years'
losses. The Group has substantial tax losses carried forward but
does not currently recognise a deferred tax asset in respect of
these losses.
EPS and dividend
Adjusted diluted loss per share was 25.2 pence (2014: 3.5 pence
loss). Reported basic and diluted loss per share was 52.3 pence
(2014: 16.7 pence). No dividend has been declared.
Balance sheet, cash and cash flow
The Group has a balance sheet with net assets at 31 December
2015 of GBP12.0 million (31 December 2014: GBP18.8 million).
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In May 2015, the business completed a share placing raising
gross proceeds of GBP10.0 million with the placement of 11,111,112
new ordinary shares at a price of GBP0.90 per share from existing
and new shareholders. The net proceeds from the placing were used
by the Group to repay the GBP2 million HSBC acquisition loan,
support the development of the business and to enable a
restructuring to occur.
The Group has a three year working capital facility of GBP8.0
million agreed with HSBC in May 2015. GBP4.5 million of this
facility was drawn as at 31 December 2015 (2014: GBP4.0 million).
The Mizuho Bank facility was increased to 200 million Japanese Yen
in H2 2014 and JPY 200 million was drawn at 31 December 2015 (2014:
JPY 200 million). This facility was fully repaid on 31 March
2016.
In October 2014, the Group agreed an additional GBP2.0 million
four-year term loan with HSBC to provide funds for future
acquisitions. This facility was fully repaid in 2015.
Cash and cash equivalents held in the balance sheet at 31
December 2015 was GBP5.4 million (31 December 2014: GBP3.7
million). The movement in the cash position during the year is
summarised below:
2015
GBPm
---------------------------------------------------------------------------- -------
Loss before tax (17.3)
Depreciation and amortisation charges 7.7
Other non-cash expenses 0.3
----------------------------------------------------------------------------- -------
Operating cash inflow before working capital movement (9.3)
Working capital inflows 5.3
============================================================================= =======
Operating cash flows before capital expenditure (4.0)
Capital expenditure on product development and property, plant & equipment (2.8)
Net interest and tax received 0.3
----------------------------------------------------------------------------- -------
Cash outflow from trading activities (6.5)
----------------------------------------------------------------------------- -------
With bank loans outstanding of GBP5.6 million, net debt at 31
December 2015 was GBP0.2 million (31 December 2014: GBP3.2 million
net debt). The movement in the net debt position is summarised
below:
2015
GBPm
------------------------------------------------ ------
Net debt at 1 January 2015 (3.2)
Cash outflow from trading activities (6.5)
Share placing to institutional investors - net 9.5
================================================= ======
Net debt at 31 December 2015 (0.2)
------------------------------------------------- ------
Subsequent to the period end the further cash outflow related to
restructuring costs together with first quarter losses and working
capital movements have led to a net debt position of GBP2.4m at 31
March 2016.
Capital structure
The issued share capital at 31 December 2015 was 36,620,247
(December 2014: 25,062,842) ordinary shares of GBP0.02 each. The
increase of 11,557,405 shares relates to 11,111,112 shares issued
in the May 2015 placing and 446,293 share option exercises by
employees. The total number of unexercised share options at 31
December 2015 was 1,486,731.
Strategic Report: Business Review
Strategy and business model
Our vision is to be the most widely adopted location
intelligence software platform in our target markets - second to
none.
We help unlock previously inaccessible intelligence and insight
to empower our customers to realise dramatic benefits in diverse
application areas including vehicle manufacturing, network
operations, field operations and asset management. Ubisense
Enterprise Location Intelligence solutions are used by a number of
blue chip customers across the world, such as Toyota, VW, Airbus,
BMW, Telus, NiSource, Cablevision and Exelon.
Ubisense is headquartered in Cambridge, UK and has offices in
the USA, Germany and Japan.
Strategy
The opportunity for Ubisense continues to be large. As a
market-leading provider of location intelligence platform solutions
to some of the world's leading blue chip companies, with proven
success and established products in two distinct and growing
divisions, the foundations are now in place to enable the Company
to scale through partners.
Following what has been a year of considerable challenge for the
Group, the Board's focus in the coming year is on returning to
profitability through improving sales effectiveness in both
divisions across key territories and verticals combined with a
prudent approach to managing operating costs.
One consequence of our strategy of focusing on higher margin
revenue streams driven from Ubisense-owned IP and exiting from
specific lower margin business has been an impairment to goodwill
of GBP4.0m (2014: GBP1.2m).
Business Model - How we add value
Industry leading technology
Ubisense has already established very close commercial
relationships with blue-chip customers in end markets, partnering
with some of the world's most recognised and respected brands.
At the centre of this success has been the development of
flexible and highly configurable software platform technologies
which (whilst in the development phase) led to the identification
of critical commercial applications in automotive manufacturing,
telecom and utilities where we have been extremely successful in
using our first-mover IP advantage to build the market by creating
and delivering new classes of value added services, which are now
fully proven in the market.
Addressable market opportunities
The enterprise acceptance of our solutions has also accelerated
allowing consumerisation of maps led by Google, the proliferation
of smart devices, the growth in cloud technologies, Industry 4.0
and the modern device-to-device networking referred to as "Internet
of Things". Ubisense's software products and services capability
benefit from these trends, enabling enterprises to deliver
significant improvements in quality, efficiency and cost
savings.
Blue-chip customer base
In growing these capabilities we have worked with some of the
world's leading companies to address some of the most difficult and
pressing business issues for the customer, thereby giving us a
tremendous track record in delivery. The opportunity is to now
build on this experience and growing market demand to expand the
platform technologies and the range of applications that can be
supported.
Alongside this, the opportunity to deliver across new vertical
markets is significant. We have already identified and had success
across not only automotive manufacturing, telecoms and utilities,
but are now gaining traction and increasing sales success in
delivering applications in healthcare, mass transit, logistics and
entertainment where the flexibility, reliability and usability of
the platforms have been a key determinant of success.
Channel Scalability
The success and strong customer traction so far has been
established with a direct sales channel working alongside a growing
and increasingly successful set of sales solution partners. The
opportunity now is to expand the reseller channel to grow our
vertical and geographical market presence, taking advantage of
in-depth market knowledge, geographical coverage and considerably
lower cost of sale that the development of the indirect channel
would bring.
Business development
The Group's products are becoming generally accepted across its
chosen industries and Ubisense, with its partners, is increasingly
able to penetrate the target markets to deliver value-added
applications that address the needs of verticals.
Our strategic acquisition in Japan has delivered early wins for
the RTLS division in global OEMs through partners such as Meiji
Denki, further validating our approach in the market. Furthermore,
the adoption of myWorld by Nagoya Water endorses its utility for
the water industry in Japan.
The Group continues to invest in product development to deliver
leading edge location platforms upon which to build best in class
applications.
Key performance indicators
The primary financial key performance indicator for the Group,
which are reported monthly, are as follows;
-- Adjusted EBITDA
Adjusted EBITDA excludes amortisation, depreciation and
non-recurring items and is reported as it reflects the performance
of the Group. Adjusted EBITDA for the year was GBP5.2 million loss
(2014: GBP1.8 million profit).
-- Revenue and contribution by division
The revenue and contribution in each division is different with
the stage of completion of individual contracts together with the
mix of Geospatial services affecting divisional revenue, gross
margin and contribution results. Segmental results are outlined in
note 5.1 of the consolidated financial statements.
-- Cash and working capital
The Group closely monitors the cash balances and working capital
movements. The closing cash balance for the Group was GBP5.4
million (2014: GBP3.7 million) and net debt was GBP0.2 million
(2014: GBP3.2 million net debt). The movement in the cash position
is explained in detail in the Financial Review starting on page
9.
-- Order backlog
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Order backlog provides the Group visibility over future
revenues. At 31 December 2015, the order backlog was GBP9.6 million
(2014: GBP12.4 million). This decrease reflects the Group's
strategy of focussing on solutions revenues which attract shorter
lead times between order and revenue generation than Geospatial
services.
Non-financial key performance indicators for the Group
include:
-- Quantity and quality of lead generation, pipeline and
conversions to deals in the sales pipeline
-- Project duration including installation service days
-- Our reaction and solution times to customer requests
Following the reorganisation into two divisions in the middle of
the year, the Board regularly reviews the KPIs in respect of
changes within periods and changes between reporting periods. The
Board believes that the Group has made steady progress against the
KPIs, particularly in terms of driving the business towards
positive Adjusted EBITDA and improved cash flow.
Financial instruments
Information on both the Group's financial risk management
objectives and the Group's policies on exposure to relevant risks
in respect of financial instruments are set out in note 26 of the
consolidated financial statements.
Principal risks and uncertainties
The Group faces competitive and strategic risks that are
inherent in a rapidly growing emerging market. The Board and the
Executive Management Team review strategy and risks to the business
regularly. Where possible, processes are in place to monitor and
mitigate the identified risks.
The key business risks affecting the Group are set out
below:
Technological risks
The Group operates in an industry where competitive advantage is
heavily dependent on technology. It is possible that technological
development may reduce the importance of the Group's function in
the market or render the patents on which it relies redundant. For
instance, the Group's Enterprise location systems rely on
ultra-wideband radio signals to operate. There is no guarantee that
technological advances will not render systems based on
ultra-wideband radio obsolete.
In order to mitigate this risk, Ubisense invests in a range of
research and development activities to maintain its competitive
advantage and participates in industry and research forums in order
to keep abreast of technological advances. The Group spent GBP3.1m
in its R&D programmes in the year (2014: GBP3.9 million) of
which GBP2.5 million (2014: GBP3.0 million) was capitalised.
Growth management
The Directors believe that further expansion, either organic or
via acquisition, will be required in the future to capitalise on
the anticipated increase in demand for the Group's solutions. The
Group's future success will depend, in part, on its ability to
manage this anticipated expansion across the business and if the
Group is unable to manage its expansion effectively, its business
and financial results could suffer. In order to mitigate this risk,
the Group continues to develop its systems and processes that can
scale with the business whilst maintaining good financial
management.
Staff recruitment and retention
The contribution made by Ubisense's highly skilled and
experienced staff is vital to the Group's success. As the Group
grows, it is important to recruit and retain staff.
The Group has in place appropriate incentive structures to
attract and retain the calibre of employees necessary to ensure the
efficient development and management of the Group.
Reliance on third parties, including manufacturers
The Group relies on certain key third party equipment
manufacturers in the completion of its products, and therefore does
not always have complete control over the supply of the equipment
and materials it requires to comply with its obligations under
customer contracts. To the extent that the Group cannot acquire
equipment or materials according to its plans and budgets, its
ability to complete its work for its customers within the timetable
laid down by the contract or at a profit may be impaired. If a
manufacturer is unable to deliver the products for any reason, the
Group may be required to purchase such equipment or materials from
another source at a higher price. The resulting additional costs
may be substantial and the Group may be in breach of its contracts
with customers, which may result in a financial loss on a
particular contract or a loss of business. In addition, any
resulting failure to fulfil contracts with customers and other
business partners may have an adverse effect on the Group's future
profitability and reputation.
In order to mitigate this risk, the Group closely manages and
reviews its relationship with key suppliers on a regular basis.
Dependence on key customers
The Group has a concentrated customer base, many of which are
substantially larger enterprises than the Group. As such, the
purchasing power of the Group's customers is often significant,
which may impact the ability of the Group to negotiate terms which
are favourable to it in contracts. The Group is reliant on
significant projects with its key customers to deliver its
projected financial results. Changes to the timing and/or terms of
significant projects, to the investment decisions of key customers
or failure by the Group to retain key customers may have a
significant adverse effect on the Group's business and financial
results. In the financial year to 31 December 2015 the Group's ten
largest customers accounted for 41% of the Group's revenue (2014:
47%), of which one customer accounted for just under 6% (2014:
13%). The loss of a major customer could result in a decrease in
Group revenues, margins and profitability.
In order to mitigate this risk, the Group continues to invest in
the key customer relationships that it has successfully retained
over many years, whilst also maintaining a strategy to extend and
diversify its customer base.
Contracts
Some of the Group's commercial contracts include terms where
revenues and/or invoicing are related to customer acceptance. Other
contracts contain terms whereby the timing of cash collections is
contingent on the customer re-selling our products to end users.
The Group's exposure under such contracts is limited and reviewed
regularly by the Board.
A significant proportion of the Group's revenue is derived from
a small number of large deals, the timing of which is not within
the control of the Group. Such a profile makes forecasting
difficult and changes against expectations have had, and may
continue to have, a significant impact on the group's results,
particularly given the Group's significant level of operational
gearing. To mitigate this risk, the Group's management maintains
regular detailed reviews of the opportunity pipeline including
critical stages to complete the larger deals taking judgement on
the risks involved. The status of key deals in the current period
is reported on at Board meetings.
Credit
The main credit risk is attributable to trade receivables owed
by customers. As the majority of the Group's customers are very
large, blue chip utilities, telecoms and manufacturing companies,
the risk of non-payment tends to be less of a traditional credit
nature and more related to customer satisfaction.
Credit exposure by customer is reviewed regularly by the
Executive Management Team and the main Board with provision made
for doubtful receivables when there are circumstances which, based
on experience, are evidence of a likely reduction in the
recoverability of the receivable.
Bank covenants
In May 2015 the Group extended the 3 year working capital bank
loan facility to GBP8.0 million (2014: GBP5.0 million) with HSBC
Bank plc repayable in 2018, and as at 31 December 2015 the
outstanding balance was GBP4.5 million (2014: GBP4.0 million).
Following the fund raise in May 2015, the GBP2.0 million
acquisition loan with HSBC Bank plc that existed as at 31 December
2014 was repaid.
The Group is required to meet certain financial criteria agreed
as covenants for the bank loan as laid out in note 18 to the
Financial Statements. The financial measures are regularly reviewed
against covenant requirements to ensure the Group's obligations can
be met.
The Group notified HSBC of a breach of the covenants relating to
adjusted EBITDA as at 31 December 2015 and as at 31 March 2016,
against which HSBC provided Reservation of Rights letters
indicating that they do not intend to take further action.
With a covenant test based on a rolling 12 month adjusted EBITDA
calculation, the Group anticipates further covenant breaches in the
next 12 months until the full effect of the restructuring actions
taken in 2015 are delivered and the disappointing results of 2015
no longer have an impact on the calculation. The Group is engaged
in constructive discussions with HSBC on a multi-year repayment
loan with business appropriate covenants as a replacement of this
facility.
Intellectual property
The Group has a number of trademarks registered, and is pursuing
registration of a number of trademarks, in the major territories in
which it operates. The Group also has a patent portfolio comprising
a number of patents filed in territories worldwide. Should a third
party successfully demonstrate priority over any of these rights,
it could inhibit the Group, or the Group's customers, from selling
products in certain territories.
Any failure to protect the Group's intellectual property may
result in another party copying or otherwise obtaining and using
its proprietary technology without authorisation. There may not be
adequate protection for the intellectual property in every country
in which the Group's products are made available and policing
unauthorised use of proprietary information is difficult and
expensive. Due to the Group's size and limited cash resources, it
may not be able to detect and prevent infringement of its
intellectual property.
(MORE TO FOLLOW) Dow Jones Newswires
April 07, 2016 05:33 ET (09:33 GMT)
In addition, some of the Group's patents are licensed from a
third party. The terms of that licence are on relatively standard
commercial terms. However, there can be no guarantee that such
third party will adequately maintain such patents and therefore the
protection and benefit afforded to the Company by such patents
cannot be guaranteed.
The steps which the Group has taken to protect its intellectual
property may be inadequate to prevent the misappropriation of its
proprietary technology. Any misappropriation of the Group's
intellectual property could have an adverse impact on the Group's
business and its operating results. Furthermore, the Group may need
to take legal action to enforce its intellectual property, to
protect trade secrets or to determine the validity or scope of the
proprietary rights of others. Litigation relating to the Group's
intellectual property, whether instigated by the Group to protect
its rights or arising out of alleged infringement of third party
rights, may result in substantial costs and the diversion of
resources and management attention and there can be no guarantees
as to the outcome of any such litigation.
Employee involvement
The Group aims to attract, retain and motivate the best staff
regardless of gender, race, religion, sexual orientation, age or
disability. To that end it is committed to offering equal
employment opportunities.
The Group provides its employees systematically with information
on matters of concern to them and regularly consults its staff, or
their representatives, for views on matters affecting them.
The Group encourages employee involvement in the Group's
performance by periodically granting share options and Group
performance-related variable compensation, and ensures that
employees are fully aware of financial and economic factors
affecting the performance of the Group.
Employee policies
The Group is committed to following the applicable employment
laws in each territory in which it operates. The Group is committed
to ensuring that disabled persons, whether registered or not, have
equal opportunities when applying for vacancies, with due regard to
their aptitudes and abilities. In addition to complying with
legislative requirements, procedures ensure that disabled employees
are fairly treated and that their training and career development
needs are carefully managed. For those employees becoming disabled
during the course of their employment, every effort is made,
whether through retraining or redeployment, to provide an
opportunity for them to remain with the Group.
Health and safety environment
The Group is committed to maintaining a safe and healthy working
environment for all staff. To that end it provides appropriate
training and supervision and complies with all applicable
regulatory requirements.
The Group seeks wherever possible to minimise its impact on the
environment for the benefit of its staff and the public at large.
The Group is committed to complying with environmental regulations
in particular WEEE and encourages and supports staff in waste
recycling within its offices.
Digital infrastructure and cybersecurity
Breaches of the Group's digital security, through cyber attacks
or otherwise, or failure of the Group's digital infrastructure,
could seriously disrupt operations and result in the loss or misuse
of data or sensitive information, legal or regulatory breaches and
potentially legal liability. These could result in significant
costs or have reputational consequences.
Following a review of the resilience and disaster recovery
capability of the Group's critical systems and exchanges in 2015,
we have invested resources in enhancing site resilience and
defences, improving network monitoring and reviewing the incident
response processes to mitigate the impact of a security breach.
Review of investment in, and balances with, subsidiaries
An impairment review was undertaken of the standalone Company's
balance sheet, and in particular, it's investments in, and balances
with, subsidiaries, noting the results delivered in 2015 and the
outlook to future periods. Following this review, an impairment
charge was made in the Company's books.
Approved by the Board of Directors and signed on behalf of the
Board
Tim Gingell
Interim Chief Financial Officer and Company Secretary
06 April 2016
Ubisense Group plc
Registered number: 05589712
Strategic Report: Board of Directors
Peter Harverson, Chairman
Peter has held a number of senior international sales and
marketing roles in the IT industry. These included Regional
Director, Intel Corporation and Vice President Europe, Cadence
Design Systems. In 1995 he joined Sun Microsystems where he was
responsible for the development of the company's European Corporate
Accounts programme. Subsequently he became Director of Services
Sales - EMEA with a charter to develop new areas of business,
including professional services. Peter retired from Sun
Microsystems in December 2005. Most recently he was Non-Executive
Chairman of Aspex Semiconductors Limited, sold to Ericsson AB in
July 2012. Currently, Peter is a Non-Executive Director of Brady
plc, CRFS Limited, and Chairman of eoSemi Limited. Peter is also an
advisor to Cambridge IP Limited.
Richard Green, Chief Executive Officer
Richard initially trained as a mechanical engineer and has over
25 years' of experience in the software industry.
Having established Smallworld as one of the leading geographic
information system companies serving utility and telecoms companies
in Europe and the US, the company subsequently listed on NASDAQ in
1996 and was acquired by GE in 2000 for $214 million. Richard was
Ernst & Young UK's Science and Technology Entrepreneur of the
Year in 2010. Richard is a Fellow of the Institute of Mechanical
Engineers. He is also an Entrepreneur in Residence at the Cambridge
Judge Business School.
Dr. Robert Sansom, Non Executive Director
An active angel investor and mentor to start-ups, Robert is
founder of the Cambridge Angels, a group of seasoned technology and
bio-technology entrepreneurs who invest in and mentor technology
start-ups in the Cambridge area. Previously, Robert was co-founder,
CTO and Director of FORE Systems, Inc., a leading provider of
networking equipment. FORE was listed on NASDAQ in 1994 and
subsequently acquired by Marconi for $4.5 billion in 1999.
Additionally, Robert served as the Chief Technology Officer at
Marconi until 2000. Robert is a member of the Board of Directors of
Cambridge Communications Systems Limited, CRFS Limited,
Featurespace Ltd and Netronome Systems, Inc. He was elected as a
Fellow of the Royal Academy of Engineering in 2010 and is a trustee
of Camfed.
Paul Taylor, Non Executive Director
Paul is a Fellow of the Association of Chartered Certified
Accountants.
Paul joined AVEVA Group Plc in 1989 and was heavily involved in
the flotation process and was responsible for UK accounting and for
the development of AVEVA's overseas subsidiaries including
adherence to group standards. Between 1998 and 2001, Paul was also
UK Director of Human Resources and was appointed to the position of
Finance Director and Company Secretary of AVEVA Group plc on 1
March 2001. Before joining AVEVA, Paul trained within the
accountancy profession before moving to Philips Telecommunications
(UK) where he was responsible for the management accounts of its
Public Sectors division. Paul was a recipient of the FTSE250
Finance Director of the Year award and is also a Non- Executive
Director of Escher Group Holdings plc, Digital Barriers plc and KBC
Advanced Technologies plc.
Ian Kershaw, Non Executive Director
Ian has over 30 years' experience in the automotive,
manufacturing and power industries. He has global responsibility
for both transaction support and operational performance
improvement within Ricardo's strategic consulting division. Ian has
held management positions with Caterpillar, Rolls-Royce &
Bentley Motor Cars and Arthur D. Little.
Tim Gingell, Interim Chief Financial Officer and Company
Secretary
Tim has over 25 years of commercial and financial experience
across software, wireless and telecoms industries. Tim qualified as
a Chartered Accountant with Deloitte in London and most recently
was CFO or Director for a number of IBM's acquired companies having
joined IBM when they acquired i2 from Silver Lake Sumeru. Prior to
that Tim led the finance team at the venture capital backed company
The Cloud Networks, and previously had spent 10 years at MFS /
Worldcom in commercial roles.
Strategic Report: Directors' Report
The Directors present their annual report on the affairs of the
Group together with the audited financial statements for the year
to 31 December 2015.
Incorporation and constitution
Ubisense Group plc is domiciled in England and incorporated in
England and Wales under Company Number 05589712. Ubisense Group
plc's Articles of Association are available on the Group's website
at www.ubisense.net.
Capital structure
The Company has one class of ordinary share of two pence each
which carries no right to fixed income. Each share carries the
right to one vote at general meetings of the Company.
Details of the share capital of the Company, including shares
issued during the year, can be found in note 20 of the consolidated
financial statements.
Substantial shareholdings
(MORE TO FOLLOW) Dow Jones Newswires
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On 06 April 2016, the Company had been notified of the following
significant interests in its ordinary share capital:
Total holding Number % of issued share capital
---------------------------------- --------------------- --------------------------
Kestrel Partners 8,427,393 23.01%
Threadneedle Investments 4,227,636 11.54%
Robert Sansom 2,985,899 8.15%
NFU Mutual Insurance Society Ltd 2,336,490 6.38%
Ruffer LLP 1,935,671 5.28%
Richard Green* 1,844,462 5.04%
Living Bridge 1,432,049 3.91%
Charles Stanley 1,331,444 3.64%
Unicorn Asset Management 1,205,978 3.29%
---------------------------------- --------------------- --------------------------
* Includes 115,617 (2014: 115,617) shares held by the RT Green
Children's Trust of which Richard Green is a trustee.
Directors
The Directors serving at 31 December 2015 were as follows:
Richard Green
Peter Harverson
Ian Kershaw
Robert Sansom
Paul Taylor
Board Changes
On 29 June 2015, Robert Parker resigned his position as Chief
Financial Officer and left the company.
On 21 July 2015 Tim Gingell, having joined the Group in February
2015, was appointed as Company Secretary and is Interim Chief
Financial Officer whilst the Group reviews its options for a
permanent replacement.
On 9 October 2015, Andrew Hopper notified the Board of his
intention to resign both as Chairman and Non-Executive Director
after almost 10 years of service with Ubisense effective from 31
December 2015.
Directors' interests - shares
Directors' interests in the ordinary shares of Ubisense Group
plc at 31 December 2015 were as follows:
2015 2014
Number Number
----------------- ---------- ----------
Richard Green* 1,844,462 1,734,906
Peter Harverson 65,161 65,161
Andrew Hopper 277,401 225,000
Ian Kershaw 2,000 -
Robert Sansom 2,985,899 2,493,676
Paul Taylor 33,334 -
----------------- ---------- ----------
Total 5,208,257 4,518,743
----------------- ---------- ----------
* Includes 115,617 (2014: 115,617) shares held by the RT Green
Children's Trust of which Richard Green is a trustee.
There has been no change in the interests set out above between
31 December 2015 and 06 April 2016.
Directors' remuneration, share options and loans
Details of directors' remuneration and share options are
provided in note 7 of the financial statements. There are no loans
to or from the Directors.
Directors' indemnity arrangements
The Group has made qualifying third party indemnity provisions
for the benefit of its Directors which were made during the year
and remain in force at the date of this report.
The Group has purchased and maintained throughout the year
Directors' & Officers' liability insurance in respect of itself
and its Directors.
Corporate governance
The company's statement on corporate governance can be found in
the Corporate Governance report on pages 26 to 30 of these
financial statements. The Corporate Governance report forms part of
the Directors' report and is incorporated into it by
cross-reference.
Business review
The information that fulfils the requirements of the business
review, including details of financial performance for the year
ending 31 December 2015, key performance indicators, principle
risks and uncertainties and the future outlook are set out in the
Chairman's statement, Chief Executive's statement and Financial
Review.
Going concern review
The Board has considered the Going Concern position of the Group
which is discussed further in note 3.
Post balance sheet events
In the Financial Review, the Group outlined the fact that the
Mizuho loan was repaid on 31 March 2016, and that the Group had
notified HSBC Bank plc of the breach of covenants on its loan. In
response, HSBC Bank plc had responded indicating that it did not
plan to take action, remained supportive and desired to put in
place a more appropriate facility.
Dividends
The Directors do not recommend payment of a dividend for the
year (2014: GBPnil).
Auditor
A resolution to re-appoint Grant Thornton UK LLP as the Group's
auditor will be proposed at the forthcoming Annual General Meeting.
In accordance with normal practice, the Directors will be
authorised to determine the Auditor's remuneration.
Approved by the Board of Directors and signed on behalf of the
Board
Tim Gingell
Interim Chief Financial Officer and Company Secretary
06 April 2016
Ubisense Group plc
Registered number: 05589712
Corporate governance report
Although not required to do so by the AIM Listing Rules, the
Directors have chosen to provide selected corporate governance
disclosures with this report, which they consider to be valuable to
the reader.
The Directors believe that effective corporate governance,
appropriate to the Group considering its size and stage of
development, will assist in the delivery of corporate strategy, the
generation of shareholder value and the safeguarding of
shareholders' long-term interests. We do not comply with the UK
Corporate Governance Code September 2014 ("the code"). However, the
Directors are committed, wherever it is reasonably practicable, to
ensure that the Group is managed in accordance with the principles
set out in the Code.
Composition of the Board
The Board comprises the Non-Executive Chairman, three
Non-Executive Directors and one Executive Director. Biographical
details of all members of the Board are set out on pages 21 and
22.
Since the flotation of the Company in 2011, no equity-based
incentives have been granted to Non-Executive Directors and there
are no such plans for any such grants in the future. At the end of
the year, the Chairman and all Non-Executive Directors had shares
and share options in Ubisense Group Plc.
The holding of shares and share options by Non-Executive
Directors could, amongst other things, be relevant in determining
whether a Non-executive Director is independent. Therefore, after
detailed consideration, the Board has determined that Paul Taylor
and Ian Kershaw are the only independent Non-Executive Directors
within the meaning of the Code, noting that their shareholdings in
the Group are small.
The roles of Chairman and Chief Executive Officer are vested in
separate individuals, each with clear allocation of accountability
and responsibility. The Chairman has prime responsibility for
running the Board and the Chief Executive Officer has executive
responsibilities for the Group's strategic development, operations
and results. The structure of the Board and the integrity of each
Director ensures that there is no one individual or group
dominating the decision making process.
The role of the Board
The Board holds full meetings at least ten times per year, with
attendance required in person whenever possible. The principal
matters that it considers are as follows:
-- reviewing operating and financial performance;
-- ensuring that appropriate management development and succession plans are in place;
-- determining corporate strategy, including consideration and
approval of the Company's annual strategy review;
-- establishing dividend policy;
-- approving and accepting all new committed funding facilities;
-- approving and accepting major changes in the capital structure of the Company;
-- reviewing and approving formal treasury policies relating to
funding, liquidity, transactional foreign exchange and interest
rate risk management;
-- reviewing the health and safety and environmental performance of the Company;
-- approving corporate acquisitions, mergers, divestments, joint
ventures and major capital expenditure; and
-- receiving, reviewing and approving recommendations by the
designated committee on matters related to audit, nominations and
remuneration.
The Board is supplied with information in a timely manner and in
a form and of a quality appropriate to enable it to discharge its
duties. The Board has a policy to set out which matters are
reserved for the decision of the Board and those to which the
Executive Directors need not refer for approval. This policy also
requires that all recommendations and decisions by a Board
Committee are approved or ratified by the Board.
Summary of Board meeting attendance in 2015
The Board is expected to meet regularly on a formal basis at
least ten times a year. 20 Board meetings were held in 2015.
Attendance at the meetings was as follows:
Total meetings
Attended
================= ===============
Tim Gingell 9 (9)
Richard Green 20 (20)
Peter Harverson 19 (20)
Andrew Hopper 20 (20)
Ian Kershaw 17 (20)
Robert Parker 10 (11)
Robert Sansom 17 (20)
Paul Taylor 20 (20)
===================== ===============
Figures in brackets denote the maximum number of meetings that
could have been attended.
Board Committees
The Board has established three Committees: the Audit Committee,
the Nomination Committee and the Remuneration Committee.
Summary of Committee membership
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The Committee membership as at 31 December 2015, was as
follows;
Audit Committee Nomination Committee Remuneration Committee
================ ================ ===================== =======================
Tim Gingell Yes - -
Peter Harverson - Yes Chair
Ian Kershaw Yes - Yes
Robert Sansom - Chair -
Paul Taylor Chair Yes Yes
================ ================ ===================== =======================
On 1 January 2016, Ian Kershaw became Chair of the Remuneration
Committee whilst Peter Harverson remains on that Committee.
Summary of Committee meeting attendance
Audit Nomination Remuneration
Committee Committee Committee
================= =========== =========== =============
Tim Gingell 4 (4) - 1 (1)
Richard Green - - 1 (1)
Peter Harverson - 4 (4) 4 (4)
Ian Kershaw 4 (4) - 4 (4)
Robert Parker 2 (2) - -
Robert Sansom - 4 (4) -
Paul Taylor 4 (4) 4 (4) 4 (4)
=================== =========== =========== =============
Figures in brackets denote the maximum number of meetings that
could have been attended
The role of each Committee is described in more detail
below:
Audit Committee
The Audit Committee has responsibility for the following
matters:
-- Financial reporting
o Review of all financial reports released to the market and
shareholders.
o Review of significant reporting issues and key judgements.
o Review of accounting policies selected and their
application.
-- External audit
o Recommending appointment, re-appointment or removal of the
external auditors.
o Overseeing the Group's relationship with the external
auditors, including assessing their independence.
o Agreeing the annual audit plan and reviewing the finding and
effectiveness of the audit.
-- Whistleblowing
o Review of the Group's whistleblowing policies and
procedures.
As part of its procedures, the Committee discusses the interim
and annual financial statements with the external auditors. When
appropriate, non-Committee members are invited to attend. During
the period under review, the Committee has met four times on a
formal basis excluding meetings of the Chairman with external
advisers. The Committee is expected to meet formally four times a
year.
Nomination Committee
The Nomination Committee has responsibility for the following
matters:
-- Reviewing the size and composition of the Board to ensure
that an appropriate mix of skills, knowledge and experience is
achieved.
-- Succession planning for the Board and other key management roles.
-- Identifying and recommending to the Board candidates to fill Board vacancies.
-- Ensuring non-executive directors are able to make the
necessary time commitments to fulfil their role.
-- Ensuring non-executive directors receive letters of
appointment, detailing their responsibilities.
-- Making recommendations to the Board about the appointment,
removal or continuation in office of any director.
During the period under review, the Committee has met four times
on a formal basis. The Committee is expected to meet formally twice
a year.
Remuneration Committee
The Remuneration Committee has responsibility for the following
matters;
-- Agreeing the framework for the Group's remuneration policy
for Directors and key management personnel, including determining
individual remuneration policies for executive directors.
-- Approving the design and targets for short and long term incentive plans.
-- Determining the policy and scope of pension arrangements.
-- Ensuring contractual terms and payments made on termination
are fair to both the individual and the Group.
-- Agreeing the policy for authorising expense claims by the Chair and Chief Executive.
The Group has a formal and transparent procedure for developing
policy on Directors' remuneration. No Director is involved in
deciding his own remuneration.
The Committee aims to set levels of remuneration for executive
directors that are sufficient to attract, retain and motivate
directors of the quality required, without paying more than
necessary, and that are appropriate for the size and complexity of
the Group. It aims to see that a significant proportion of each
executive director's remuneration package is
performance-related.
During the period under review, the Committee has met four times
on a formal basis. The Committee is expected to meet formally twice
a year.
Internal control
The Board of Directors has overall responsibility for the
Group's system of internal control and for reviewing its
effectiveness. The risk managing process and systems of internal
control are designed to manage rather than eliminate the risk of
failure to achieve the Group's objectives. It should be recognised
that such systems can only provide reasonable but not absolute
assurance against material misstatement or loss. The directors
acknowledge their responsibilities for the Group's system of
internal control and for reviewing its effectiveness. The principal
features of the system of internal financial controls are:
-- Budgetary control over all operations, measuring performance
against pre-determined targets on at least a monthly basis.
-- Regular forecasting and reviews covering trading performance,
assets, liabilities, cash flows and bank covenants.
-- Delegated limits of authority covering key financial
commitments including capital expenditure and recruitment.
-- Identification and management of key business risks.
The Board continually reviews the effectiveness of other
internal controls, including financial, operational, compliance
controls and risk management.
Directors' responsibilities statement
The directors are responsible for preparing the Directors'
report, the Strategic report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the consolidated financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and have elected to prepare the
parent company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable laws). Under company law the
directors must not approve the financial statements unless they
give a true and fair view of the state of affairs and profit or
loss of the Company and Group for that period. In preparing these
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the consolidated
financial statements;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the Company financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Disclosure of information to auditor
Each of the persons who are Directors at the time when this
Directors' report is approved has confirmed that:
-- so far as that Director is aware, there is no relevant audit
information of which the Company's auditor are unaware; and
-- that Director has taken all the steps that ought to have been
taken as a Director in order to be aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Consolidated income statement
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For the year ended 31 December 2015
2015 2014
Notes GBP'000 GBP'000
------------------------------------------- ------ --------- ---------
Revenue 5 21,982 35,051
Cost of revenues (14,290) (21,053)
=========================================== ====== ========= =========
Gross profit 7,692 13,998
Operating expenses (24,671) (18,579)
=========================================== ====== ========= =========
Operating loss (16,979) (4,581)
Analysed as:
Gross profit 7,692 13,998
Other operating expenses (12,914) (12,169)
------------------------------------------- ------ --------- ---------
Adjusted EBITDA (5,222) 1,829
Depreciation 13 (388) (359)
Amortisation and impairment
of acquired intangible
assets 12 (309) (2,019)
Amortisation and impairment
of other intangible
assets 12 (6,985) (2,937)
Non-recurring items 9.2 (4,075) (1,095)
------------------------------------------- ------ --------- ---------
Operating loss (16,979) (4,581)
Finance income 8 12 14
Finance costs 8 (301) (211)
------------------------------------------- ------ --------- ---------
Loss before tax 9 (17,268) (4,778)
Income tax 10.1 632 736
------------------------------------------- ------ --------- ---------
Loss for the year (16,636) (4,042)
------------------------------------------- ------ --------- ---------
Loss attributable to:
* Equity shareholders of the Company (16,569) (4,085)
* Non-controlling interest (67) 43
------------------------------------------- ------ --------- ---------
(16,636) (4,042)
------------------------------------------- ------ --------- ---------
Loss per share attributable to the
equity shareholders of the parent
(pence)
--------------------------------------------------- --------- ---------
Basic 11 (52.3p) (16.7p)
Diluted 11 (52.3p) (16.7p)
------------------------------------------- ------ --------- ---------
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
------------------------------------------- --------- ---------
Loss for the year (16,636) (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 139 (531)
---------------------------------------------
Total comprehensive loss
for the year (16,497) (4,573)
-------------------------------------------- --------- ---------
Attributable to:
* Equity shareholders of the Company (16,423) (4,549)
* Non-controlling interest (74) (24)
-------------------------------------------- --------- ---------
Total comprehensive loss
for the year (16,497) (4,573)
-------------------------------------------- --------- ---------
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of changes in equity
For the year ended 31 December 2015
Attributable to equity
shareholders of the
parent company
=======================================================
Share
based
Share Share payment Translation Retained Sub- Non-controlling
capital premium reserve reserve earnings total interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ ======== ======== ======== ============ ========= ========== ================ =========
Balance at 1
January 2014 461 24,050 746 (221) (6,342) 18,694 554 19,248
================ ======== ======== ======== ============ ========= ========== ================ =========
Loss for the
year - - - - (4,085) (4,085) 43 (4,042)
Exchange
difference
on
retranslation
of net assets
and results of
overseas
subsidiaries - - - (464) - (464) (67) (531)
================ ======== ======== ======== ============ ========= ========== ================ =========
Total
comprehensive
loss for the
year - - - (464) (4,085) (4,549) (24) (4,573)
Reserve credit
for
equity-settled
share-based
payment - - 75 - - 75 - 75
Issue of new
share capital 40 - - - - 40 - 40
Premium on new
share capital - 4,230 - - - 4,230 - 4,230
Share issue
costs - (229) - - - (229) - (229)
Transactions
with owners 40 4,001 75 - - 4,116 - 4,116
================ ======== ======== ======== ============ ========= ========== ================ =========
Balance at 31
December 2014 501 28,051 821 (685) (10,427) 18,261 530 18,791
================ ======== ======== ======== ============ ========= ========== ================ =========
Loss for the
year - - - - (16,569) (16,569) (67) (16,636)
Exchange
difference
on
retranslation
of net assets
and results of
overseas
subsidiaries - - - 146 - 146 (7) 139
================ ======== ======== ======== ============ ========= ========== ================ =========
Total
comprehensive
loss for the
year - - - 146 (16,569) (16,423) (74) (16,497)
Reserve credit
for
equity-settled
share-based
payment - - 54 - - 54 - 54
Issue of new
share capital 231 - - - - 231 - 231
Premium on new
share capital - 9,845 - - - 9,845 - 9,845
Share issue
costs - (474) - - - (474) - (474)
Transactions
with owners 231 9,371 54 - - 9,656 - 9,656
================ ======== ======== ======== ============ ========= ========== ================ =========
Balance at 31
December 2015 732 37,422 875 (539) (26,996) 11,494 456 11,950
================ ======== ======== ======== ============ ========= ========== ================ =========
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of financial position
For the year ended 31 December 2015
2015 2014
Notes GBP'000 GBP'000
--------------------------------- ------ --------- ---------
Assets
Non-current assets
Intangible assets 12 9,786 14,363
Property, plant and equipment 13 943 1,112
Total non-current assets 10,729 15,475
================================= ====== ========= =========
Current assets
Inventories 14 2,815 2,881
Trade and other receivables 15 9,277 15,541
Cash and cash equivalents 16 5,392 3,697
================================= ====== ========= =========
Total current assets 17,484 22,119
================================= ====== ========= =========
Total assets 28,213 37,594
================================= ====== ========= =========
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Liabilities
Current liabilities
Trade and other payables 17 (8,629) (9,816)
Bank loans 18 (1,123) (927)
Total current liabilities (9,752) (10,743)
================================= ====== ========= =========
Non-current liabilities
Deferred income tax liabilities 10 (1,157) (1,336)
Trade and other payables (203) (120)
Bank loans 18 (4,500) (6,000)
Other payables 19 (651) (604)
================================= ====== ========= =========
Total non-current liabilities (6,511) (8,060)
================================= ====== ========= =========
Total liabilities (16,263) (18,803)
================================= ====== ========= =========
Net assets 11,950 18,791
================================= ====== ========= =========
2014
2015 Restated
Notes GBP'000 GBP'000
--------------------------- ------ --------- ----------
Equity attributable to owners
of the parent company
Ordinary share capital 20 732 501
Share premium 20 37,422 28,051
Share based payment
reserve 875 821
Translation reserves (539) (685)
Retained earnings (26,996) (10,427)
=========================== ====== ========= ==========
Equity attributable
to shareholders of the
Company 11,494 18,261
=========================== ====== ========= ==========
Non-controlling interests 456 530
=========================== ====== ========= ==========
Total equity 11,950 18,791
=========================== ====== ========= ==========
The notes are an integral part of these consolidated financial
statements.
The financial statements were approved by the Board of Directors
on 06 April 2016 and signed on its behalf by:
Richard Green, Chief Executive Officer
Ubisense Group plc
Registered Number: 05589712
Consolidated statement of cash flows
For the year ended 31 December 2015
2015 2014
Notes GBP'000 GBP'000
---------------------------------- ------ --------- ---------
Loss before tax (17,268) (4,778)
Adjustments for:
9,
Depreciation 13 388 359
9,
Amortisation and impairment 12 7,294 4,956
Loss on the disposal
of property, plant and
equipment 9 - 22
Share-based payments
charge 21.2 54 75
Finance income 8 (12) (14)
Finance costs 8 301 211
Operating cash flows
before working capital
movement (9,243) 831
Change in inventories 66 (293)
Change in receivables 6,264 (3,661)
Change in payables (1,010) 447
---------------------------------- ------ --------- ---------
Cash used in operations
before tax (3,923) (2,676)
---------------------------------- ------ --------- ---------
Net income taxes received/(paid) 436 47
---------------------------------- ------ --------- ---------
Net cash flows from
operating activities (3,487) (2,629)
---------------------------------- ------ --------- ---------
Cash flows from investing
activities
Acquisition of subsidiaries,
net of cash acquired - (509)
Disposal of subsidiaries,
net of cash disposed 24 (3) -
Purchases of property,
plant and equipment (196) (885)
Proceeds on disposal of
property, plant and equipment 4 1
Expenditure on intangible
assets (2,652) (3,500)
Interest received 12 14
---------------------------------- ------ --------- ---------
Net cash flows from
investing activities (2,835) (4,879)
---------------------------------- ------ --------- ---------
Cash flows from financing
activities
Proceeds of borrowings 522 3,427
Repayment of borrowings (2,000) -
Interest paid (277) (151)
Proceeds from the issue
of ordinary share capital 9,602 4,041
---------------------------------- ------ --------- ---------
Net cash flows from
financing activities 7,847 7,317
Net (decrease)/increase
in cash and cash equivalents 1,525 (191)
Cash and cash equivalents
at start of period 3,697 3,964
Exchange differences
on cash and cash equivalents 170 (76)
Cash and cash equivalents
at end of period 16 5,392 3,697
================================== ====== ========= =========
The notes are an integral part of these consolidated financial
statements.
Notes to the Consolidated financial statements
1 General information
Ubisense Group plc ("the Company") and its subsidiaries
(together, "the Group") deliver best-in-class asset location
solutions that significantly improve operational effectiveness and
profitability for businesses around the world.
The Company is a public limited company which is listed on the
Alternative Investment Market ("AIM") of the London Stock Exchange
(UBI) and is incorporated and domiciled in the United Kingdom. The
value of Ubisense Group plc shares, as quoted on the London Stock
Exchange plc at 31 December 2015, was 43.0 pence per share (31
December 2014: 120.0 pence).
The Company was incorporated as Ubisense Trading Limited on 11
October 2005 and changed its name to Ubisense Group plc on 31 May
2011 ahead of its initial public offering and listing on AIM on 22
June 2011. The address of its registered office is St. Andrew's
House, St. Andrew's Road, Chesterton, Cambridge, CB4 1DL.
The Group has its main operations in the UK, USA, Canada,
Germany, France and Japan and sells mainly in North America, Europe
and Asia. The Group legally consists of ten companies headed by
Ubisense Group plc (UK). A full list of subsidiaries is given in
note 23 of the financial statements.
These consolidated financial statements have been approved for
issue by the Board of Directors on 06 April 2016.
2 New accounting standards
For the purposes of the preparation of these 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 after 1 January 2015.
The accounting policies used are the same as set out in detail
in the Report and Accounts 2014 and have been applied consistently
to all periods presented in these financial statements. No new
standards or amendments or interpretations to existing standards
have become effective in the year. No new standards, amendments or
interpretations to existing standards having an impact on these
financial statements that have been published and that are
mandatory for the Group's accounting periods beginning on or after
1 January 2016, or later periods, have been adopted early. The
Directors do not consider that the adoption of these standards and
interpretations would have a material impact on the Group's
financial statements.
Standards and interpretations not yet applied by the Group
The following new Standards and Interpretations, which are yet
to become mandatory, have not been applied in the Group's financial
statements.
-- Amendment to IAS 16 'Property, plant and equipment'
(effective date financial year commencing on/after 1 January
2016)
-- Amendment to IAS 38 'Intangible assets' (effective date
financial year commencing on/after 1 January 2016)
-- Annual improvements 2014 (effective date financial year commencing on/after 1 January 2016)
-- 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)
All standards and interpretations are not expected to have any
significant impact on the financial statements when applied.
3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these 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 (GBP'000) except
when otherwise indicated.
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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
The Directors are required to review the basis on which the
accounts are prepared and continue to believe that a Going concern
basis is appropriate. In reaching their conclusion they recognise
that the Group meets it day-to-day working capital requirements
through its bank facilities.
The Group had cash of GBP5.4 million at the balance sheet date
reducing to GBP2.2 million at the end of March 2016 following the
repayment of the Mizuho loan. As disclosed in note 18, the Group is
in breach of the financial and operating covenants associated with
its major bank facility of GBP4.5 million, however it is in
constructive discussions with its lending bank which remains
supportive and has indicated that it is not planning to take action
following the breaches at 31 December 2015 and 31 March 2016.
Further the Group and its lending bank anticipate concluding a new
loan facility with appropriate covenants having already agreed the
outline of a multi-year repayment plan.
In reaching their going concern conclusion, the Directors have
considered the following points:
- Net debt at end March 2016 was GBP2.35m with GBP2.15m cash and GBP4.5m HSBC debt
- An opportunity funnel mainly from existing customers that
exceeds revenue target for 2016 (H1 and Full Year)
- Customers continue to expand and extend deployments rather than decommission them
- Sales recruitment continues providing the headcount to build sales momentum
- Sales process work continues to be developed and embedded into the business
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, support the
conclusion that there is a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future, a period of not less than
twelve months from the date of this report. The Group, therefore,
continues to adopt the going concern basis in preparing its
financial statements.
In addition, the Group has considered its funding options and
expects to announce a conditional share placing in order to
strengthen the balance sheet, reduce the loan outstanding and
permit selective investment in the business.
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; Real-Time Location Systems
(RTLS) and Geospatial. The Directors believe that the Chief
Operating Decision Maker (CODM) is the Chief Executive Office 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, the Group.
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, for
senior employees, a diluted EPS performance target. Equity-settled
share-based payments are measured at fair value at the date of
grant using the Black-Scholes pricing model. The fair value is
expensed on a straight-line basis over the vesting period, together
with a corresponding increase in equity in the share based payment
reserve, based on the Group's estimate of the number of shares that
will eventually vest.
(c) Termination benefits
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Termination benefits are recognised as an expense when the Group
is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to either terminate
employment before the normal retirement date, or to provide
termination benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for voluntary
redundancies are recognised as an expense if the Group has made an
offer of voluntary redundancy, it is probable the offer will be
accepted, and the number of acceptances can be estimated reliably.
If benefits are payable more than twelve months after the reporting
date, then they are discounted to their present value.
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.
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 on-going 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.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the
acquisition date fair value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 either in profit or loss or as a change to other
comprehensive income. Contingent consideration that is classified
as equity is not remeasured and its subsequent settlement is
accounted for within equity.
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 3
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. The useful
economic lives of the intangible assets recognised on acquisition
are as follows:
-- Software products recognised on acquisition: 3 years
-- Customer relationships recognised on acquisition: 3 years
-- Order backlog: based on contract life recognised on acquisition, typically less than 1 year
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment loss.
Depreciation is charged to the income statement so as to write off
the cost or valuation less estimated residual values over their
expected useful lives on a straight-line basis over the following
periods:
-- Fixtures and fittings: 3 to 10 years, or period of the lease if shorter
-- Computer equipment: 3 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
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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.
Fees paid on the establishment of debt facilities are recognised
as transaction costs of the debt to the extent that it is probable
that some or all of the facility will be drawn-down. In this case,
the fee is deferred until the draw-down occurs. To the extent there
is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a pre-payment for
liquidity services and amortised over the period of the facility to
which it relates.
All borrowing costs are recognised in the income statement in
the period they are incurred.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds. The
nominal value of shares issued is classified as share capital and
the amounts paid over the nominal value in respect of share issues,
net of related costs, is classified as share premium.
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.
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.
Impairment of goodwill and intangible assets
The Group tests goodwill for impairment annually in accordance
with the accounting policy stated in note 3. This requires an
estimation of the value in use of the cash-generating units to
which the goodwill is allocated. Estimating the value in use
requires the Group to make an estimate of the expected future cash
flows from the cash-generating unit and also to choose a suitable
discount rate in order to calculate the present value of those cash
flows. The Group uses pre-tax discount rates of 11.5% for this
purpose. The carrying amount of goodwill at 31 December 2015 is
GBP4.3 million, following an impairment of GBP4.0 million. Further
consideration of the impairment of goodwill is included in note
12.
Capitalisation of development costs
The point at which development costs meet the criteria for
capitalisation is critically dependent on management's judgement of
the point at which technical and commercial feasibility is
demonstrable. The carrying amount of capitalised development costs
at 31 December 2015 is GBP4.0 million.
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 2015 is GBP2.1 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.
Valuation of separately identifiable intangible assets
As detailed in note 3, separately identifiable intangible assets
are identified and amortised over defined periods. The Directors
use an acknowledged valuation approach but this is reliant upon
certain judgements which they determine are reasonable by reference
to companies in similar industries.
Contingent consideration
The Group initially estimates the amounts payable under
'earn-out' plans to the former shareholders of acquired companies
based on the business model produced at the time of acquisition.
Earn-out clauses within acquisition agreements typically contain
provisions for amounts payable to the former shareholders based on
future financial performance. In order to calculate the expected
future payments, the acquisition business model contains estimates
of the future financial performance for the acquired business.
The post-acquisition performance and expected future performance
of acquired companies is reviewed throughout the year. Any
adjustments required to contingent consideration arising from a
significant departure of financial performance from the original
acquisition plan are made as required and recognised through the
profit and loss.
The Directors do not consider that there are any other critical
accounting judgements or key sources of estimation uncertainty.
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 3rd 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.
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The Geospatial division delivers software solutions that
integrates 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 deal 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 division 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 RTLS Geospatial Central Total
2015 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- --------- ---------
Revenues 6,445 15,458 79 21,982
Cost of revenues (3,694) (10,545) (51) (14,290)
Gross profit 2,751 4,913 28 7,692
============================= ========= =========== ========= =========
Sales and marketing
costs (2,810) (1,800) (472) (5,082)
============================= ========= =========== ========= =========
Contribution (59) 3,113 (444) 2,610
============================= ========= =========== ========= =========
Other operating costs (7,832) (7,832)
============================= ========= =========== ========= =========
Adjusted EBITDA (8,276) (5,222)
Depreciation (388) (388)
Amortisation of intangibles (7,294) (7,294)
Non-recurring items (4,075) (4,075)
============================= ========= =========== ========= =========
Operating loss (20,033) (16,979)
Finance costs (289) (289)
============================= ========= =========== ========= =========
Loss before tax (20,322) (17,268)
Income tax 632 632
============================= ========= =========== ========= =========
Loss after tax (19,690) (16,636)
============================= ========= =========== ========= =========
In the prior year, the Group was organised into a single
Enterprise Location Intelligence business unit. This was the basis
of the Group's external market offering and internal organisation
at that time and the CODM received information in this way. The
Group had one reportable segment under IFRS8 in the year ending 31
December 2014.
Data is not available to report full comparative information for
the current reportable segments due to the excessive effort and
cost that would be involved to develop it. Revenue is as
follows;
Year ended 31 December RTLS Geospatial Central Total
2014 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- ----------- --------- ---------
Revenues 8,053 26,984 14 35,051
In the previous year, revenue from the single Enterprise
Location Intelligence business unit was reported by the nature of
revenue. Information has been prepared for the year ending 31
December 2015, although it was not reported to the CODM during
2015.
2015 2014
GBP'000 GBP'000
================ ========= =========
Solutions 12,782 20,067
Services 9,200 14,984
Total revenues 21,982 35,051
=================== ========= =========
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.
Non-current
Revenue assets
-------------------- -------------------- --------------------
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- --------- --------- ---------
UK 487 1,584 6,412 7,607
France 616 784 4 24
Germany 3,074 11,782 1,242 2,197
Europe other 580 362 - -
USA 12,131 13,061 1,008 2,015
Canada 1,423 976 2 4
Japan 3,330 6,015 2,061 3,621
Asia Pacific other 337 416 - 7
Rest of World 4 71 - -
21,982 35,051 10,729 15,475
==================== ========= ========= ========= =========
5.3 Information about major customers
Included in revenues arising from the Geospatial division are
revenues of approximately GBP1.5 million (2014: GBP1.4 million)
which arose from sales to the Group's largest customer. No single
customer contributed 10% or more to the Group's revenue in 2015,
but another Geospatial customer contributed GBP4.4 million in
2014.
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 Average monthly
at 31 December number of people
------------------------ ------------------ --------------------
2015 2014 2015 2014
By activity Number Number Number Number
------------------------ -------- -------- --------- ---------
Technical consultants 89 134 103 135
Sales & marketing 38 46 45 45
Research & development 31 33 33 32
Administration 22 37 27 38
======================== ======== ======== ========= =========
180 250 208 250
======================== ======== ======== ========= =========
2015 2014 2015 2014
By geography Number Number Number Number
------------------------ -------- -------- --------- ---------
United Kingdom 44 61 54 63
Europe 39 69 44 63
Americas 63 79 71 80
Asia 34 41 39 44
======================== ======== ======== ========= =========
180 250 208 250
======================== ======== ======== ========= =========
6.2 Employee benefits
2015 2014
Notes GBP'000 GBP'000
------------------------------------ ------ --------- ---------
Wages and salaries 15,768 15,905
Social security costs 1,362 1,512
Contributions to defined
contribution pension arrangements 581 784
Share-based payments 21.2 54 75
====================================== ====== ========= =========
Total aggregate employee
benefits 17,765 18,276
====================================== ====== ========= =========
Included in the wages and salaries figure above are termination
benefits of GBP2.0 million (2014: GBP0.5 million) which are
presented as non-recurring costs in the income statement - see note
9.2.
6.3 Key management compensation
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Key management includes Directors (Executive and non-executive)
and members of the Executive Management Team. During the year,
there was an average number of 11 key management personnel (2014:
10) and 12 personnel at 31 December 2015 (2014: 11). The
compensation paid or payable to key management for employee
services is shown below:
2015 2014
GBP'000 GBP'000
======================================= ========= =========
Short-term employee benefits
Wages and salaries 1,371 973
Social security costs 95 95
Other benefits 5 19
1,471 1,087
--------------------------------------- --------- ---------
Post-employment benefits
Contributions to defined contribution
pension arrangements 26 47
Share-based payments
Equity-settled share-based payments 3 25
Total key management compensation 1,500 1,159
--------------------------------------- --------- ---------
Included in the wages and salaries figure above are termination
benefits of GBP263,000 (2014: GBPnil) which are presented as
non-recurring costs in the income statement - see note 9.2.
7 Directors' remuneration and interests
7.1 Directors' remuneration
Employer's
contributions
to defined
Basic Benefits Termination contribution Total Total
salary in kind benefits Subtotal pension 2015 2014
Director GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============== ========= ========= ============ ========= =============== ========== =========
Robert
Parker 83 1 132 216 4 220 200
Richard
Green* 180 3 - 183 20 203 289
Peter
Harverson** 94 - - 94 - 94 20
Andrew
Hopper 30 - - 30 - 30 28
Robert
Sansom*** - - - - - - -
Paul Taylor** 51 - - 51 - 51 20
Ian Kershaw 20 - - 20 - 20 12
Total 458 4 132 594 24 618 569
--------------- --------- --------- ------------ --------- --------------- ---------- ---------
* Remuneration is through the Group's flexible benefits scheme
under which the individual can elect to switch basic salary into
pension contributions and other benefits. The basic salary
entitlement in the year was GBP190,000.
** Included for Peter Harverson and Paul Taylor in 2015 (2014
GBPnil) are amounts of GBP25,000 each for directors fees and
GBP69,000 and GBP26,000 respectively for additional duties
requested by the Board.
*** Robert Sansom has waived his entitlement to annual
remuneration in the year of GBP20,000 (2014: GBP20,000 waived)
7.2 Directors' interests - share options
Ceased
to
be Awards
Awards a Awards exercisable
Outstanding Director Granted Exercised Lapsed outstanding at
at during during during during at 31 31
Award Exercise 1 January the the the the December December
date Vests Expires Price 2015 year year year year 2015 2015
Director Years Years Year GBP Number Number Number Number Number Number Number
=========== ======= ========= ========= ========= ============ ========= ======== ========== ======= ============ ============
Richard
Green 2011 2012-14 2021 1.050 100,000 - - - - 100,000 100,000
2012 2013-15 2022 2.125 60,000 - - - - 60,000 60,000
2013 2014-16 2023 2.055 60,000 - - - - 60,000 60,000
2014 2015-17 2024 2.250 75,000 - - - - 75,000 -
======= ========= ===================== ========= ============ ========= ======== ========== ======= ============ ============
295,000 - - - - 295,000 220,000
======================================= ========= ============ ========= ======== ========== ======= ============ ============
Robert
Parker 2014 2015-17 2024 2.250 60,000 (60,000) - - - - -
Peter
Harverson 2010 2011-13 2020 0.140 91,333 - - - - 91,333 91,333
Andrew
Hopper 2010 2011-13 2020 0.140 20,278 - - (20,278) - - -
Total 466,611 (60,000) - (20,278) - 386,333 311,333
========================================== ========= ============ ========= ======== ========== ======= ============ ============
During the year, no Directors have been granted share options in
the Company or other Group entities. None of the terms and
conditions of the existing share options were varied during the
year. The market price of the Company's shares at the end of the
financial year was GBP0.43. The range of market prices during the
year was between GBP1.26 and GBP0.42.
Ian Kershaw, Robert Sansom and Paul Taylor do not have any share
options at 31 December 2015 (31 December 2014: nil). There have
been no options granted to or exercised by Directors between 31
December 2015 and 06 April 2016.
Directors' gains on share options
Gain
Gain on
on exercise exercise
2015 2014
GBP'000 GBP'000
Andrew Hopper 6 -
-------------- ------------- ----------
7.3 Directors' interests - shares
Directors' interests in the ordinary shares of Ubisense Group
plc, at 31 December 2015 and 31 December 2014, were as follows:
2015 2014
Number Number
================= ============================= ==================
Richard
Green* 1,844,462 1,734,906
Robert
Sansom 2,985,899 2,493,676
Andrew
Hopper 277,401 225,000
Peter Harverson 65,161 65,161
Paul Taylor 33,334
Ian Kershaw 2,000 -
5,208,257 4,518,743
----------------- ----------------------------- ------------------
* Includes 115,617 (2014: 115,617) shares held by the RT Green
Children's Trust of which Richard Green is a trustee.
There has been no change in the interests set out above between
31 December 2015 and 06 April 2016.
8 Finance income and costs
2015 2014
GBP'000 GBP'000
============================ ========= =========
Interest income from
cash and cash equivalents 12 14
=============================== ========= =========
Finance income 12 14
=============================== ========= =========
Interest payable
- bank (287) (197)
Interest payable
- other (14) (14)
=============================== ========= =========
Finance costs (301) (211)
=============================== ========= =========
Net finance costs (289) (197)
=============================== ========= =========
9 Loss before tax: analysis of expenses by nature
9.1 Expenses by nature
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The following items have been charged/ (credited) to the income
statement in arriving at loss before tax:
2015 2014
Notes GBP'000 GBP'000
--------------------------------- ------ --------- ---------
Amortisation of acquired
intangible assets 12 309 751
Impairment of goodwill and
acquired intangibles 12 4,043 1,268
Amortisation and impairment
of other intangible assets 12 2,942 2,937
Depreciation of owned property,
plant and equipment 13 388 359
Loss on disposal of
property, plant and
equipment - 22
Operating lease rental
charges - land and buildings 677 715
Operating lease rental
charges - other 63 167
Inventory recognised
as an expense 1,478 2,884
Research and development
costs expensed 581 766
Net foreign currency
losses / (gains) 175 (180)
Non-recurring items
(excluding impairment
of goodwill) 9.2 4,075 1,095
Auditors' remuneration 9.3 166 254
=================================== ====== ========= =========
9.2 Non-recurring items
2015 2014
GBP'000 GBP'000
---------------------------------- --------- ---------
Reorganisation costs 3,163 458
Disposal of subsidiary companies 809 -
Strategic Asia-Pacific market
entry costs - 603
Unrealised foreign exchange 37 -
losses on intercompany trading
balances
Aborted acquisition costs 7 34
Others 59 -
Total non-recurring items 4,075 1,095
==================================== ========= =========
During 2015, the Group incurred reorganisation costs totalling
GBP3.2 million comprising mainly redundancy costs in order to align
the employee base with the future strategy of the Group. The
employment terminations in 2015 are expected to provide annualised
cost savings of GBP4.0 million in 2016.
The Group disposed of two subsidiary companies during the year
and incurred costs relating to exits from these markets. More
details are included in note 24.
Foreign exchange losses on unrealised intercompany trading
balances of GBP37,000 were incurred. These will be non-recurring
due to the conversion of trading balances to long-term loans in
2016.
The Group incurred GBP7,000 of costs (2014: GBP34,000), mainly
comprising professional fees, in connection with a potential future
acquisition. The acquisition plans have been aborted. During 2014,
the Group incurred GBP603,000 of non-recurring expenditure relating
to strategic Asia Pacific market entry. No such costs were incurred
in 2015.
9.3 Auditors' remuneration
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditor and its
associates:
2015 2014
GBP'000 GBP'000
--------------------------------------- --------- ---------
Fees payable to the
Group's auditor for
the audit of:
Parent Company and consolidated
financial statements 35 27
Financial statements of subsidiaries,
pursuant to legislation 91 100
========================================= ========= =========
Total audit fees 126 127
========================================= ========= =========
Fees payable to the Group's
auditor for other services:
Tax services 27 74
Corporate Finance services - 53
Other services 13 -
======================================= ========= =========
Total non-audit fees 40 127
========================================== ========= =========
Total auditors' remuneration 166 254
========================================== ========= =========
The auditor of Ubisense Group plc is Grant Thornton UK LLP.
10 Income tax
10.1 Income tax recognised in the income statement
2015 2014
GBP'000 GBP'000
---------------------------- --------- ---------
Current tax
UK corporation tax - -
Foreign tax 69 238
Research and development
tax credits - prior years (524) (537)
============================= ========= =========
Total current tax credit (455) (299)
=============================== ========= =========
Deferred tax
Origination and reversal
of temporary differences (177) (437)
=============================== ========= =========
Total deferred tax credit (177) (437)
=============================== ========= =========
Total income tax credit (632) (736)
=============================== ========= =========
The tax credit differs from the standard rate of corporation tax
in the UK for the year of 20.3% (2014: 21.5%) for the following
reasons:
2015 2014
GBP'000 GBP'000
=================================== ========= =========
Loss before tax (17,268) (4,778)
====================================== ========= =========
Loss before tax multiplied by the
standard rate of corporation tax
in the UK of 20.3%
(2014: 21.5%) (3,505) (1,027)
Tax effects of:
Expenses not deductible
for tax purposes 829 137
Accrued contingent consideration
released not subject to tax - 7
Utilisation of previously
unrecognised tax losses (94) 77
Tax losses for which no deferred
tax asset was recognised 3,526 734
Tax unprovided in prior 54 -
years
Research and development
tax credits - prior
years (524) (537)
Difference on tax treatment
of share options - unrecognised (223) 17
Re-measurement of deferred
tax - change of tax
rate (42) 120
Differential on overseas
tax rates (712) (31)
Other unrecognised temporary
differences 59 (233)
====================================== ========= =========
Total income tax credit (632) (736)
====================================== ========= =========
10.2 Factors that may affect future tax charges
The Group has tax losses of GBP10.5 million (2014: GBP9.3
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
2017, the UK corporation tax rate will reduce to 19% from 20% and
effective from 1 April 2020, the rate will further reduce to 18%.
As a result, the deferred tax balances have been re-measured at
19%, the rate of realisation expected.
10.3 Deferred tax
The movement in deferred tax in the Consolidated statement of
financial position during the year is as follows:
Deferred income Deferred income
tax assets tax liabilities
-------------------------- ---------------------- --------------------
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- ---------- --------- ---------
At 1 January - - (1,336) (1,773)
Deferred tax credited
to the income statement - - 780 1,085
Deferred tax charged
to the income statement - - (603) (648)
========================== ========== ========== ========= =========
At 31 December - - (1,157) (1,336)
========================== ========== ========== ========= =========
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The components of deferred tax included in the Consolidated
statement of financial position are as follows:
2015 2014
GBP'000 GBP'000
================================= ========= =========
Development costs capitalised (797) (888)
Intangible assets recognised
on acquisition of subsidiaries (360) (448)
Total deferred income
tax liabilities (1,157) (1,336)
==================================== ========= =========
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:
2015 2014
GBP'000 GBP'000
============================== ========= =========
Tax losses carried forward 2,864 2,546
Equity-settled share options
temporary differences 24 201
Total unrecognised deferred
tax assets 2,888 2,747
================================= ========= =========
11 Earnings per share (EPS)
2015 2014
------------------------------------- --------- --------
Earnings
Earnings for the purposes
of basic and diluted EPS being
net loss attributable to equity
holders of the parent company
(GBP'000) (16,569) (4,085)
======================================= ========= ========
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
EPS ('000) 31,657 24,541
Effect of dilutive potential
ordinary shares:
* Share options ('000) 418 969
Weighted average number of ordinary
shares for the purposes of diluted
EPS ('000) 32,075 25,510
======================================== ========= ========
Basic EPS (pence) (52.3) (16.7)
======================================== ========= ========
Diluted EPS (pence) (52.3) (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 all
dilutive share options and warrants outstanding at the end of the
year. Options have no dilutive effect in loss-making years, and
hence the diluted loss per share for the year is the same as the
basic loss per share.
The Group also presents an adjusted diluted earnings per share
figure which excludes amortisation on acquired intangible assets,
share-based payments charge and non-recurring items/impairment from
the measurement of profit for the period.
Notes 2015 2014
---------------------------------- ------ --------- --------
Earnings for the purposes
of diluted EPS being net loss
attributable to equity holders
of the parent company (GBP'000) (16,569) (4,085)
Adjustments:
Reversal of amortisation on
acquired intangible assets
(GBP'000) 9, 12 309 751
Impairment of goodwill and
acquired intangible assets
(GBP'000) 9, 12 4,043 1,268
Reversal of share-based payments
charge (GBP'000) 21.2 54 75
Reversal of non-recurring
items (GBP'000) 9.2 4,075 1,095
------------------------------------ ------ --------- --------
Net adjustments (GBP'000) 8,481 3,189
------------------------------------ ------ --------- --------
Adjusted earnings (GBP'000) (8,088) (896)
------------------------------------ ------ --------- --------
Adjusted diluted EPS
(pence) (25.2) (3.5)
------------------------------------ ------ --------- --------
The adjusted EPS information is considered to provide a fairer
representation of the Group's trading performance.
12 Intangible assets
Acquired
customer
relationships Capitalised
and Acquired product
order software development
Goodwill backlog products costs Software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================== ========= =============== ========== ============= ========= =========
Cost
At 1 January 2014 9,619 2,042 937 7,461 633 20,692
Effects of movement
in exchange rates (203) (205) (52) - (38) (498)
Additions - - - 2,956 544 3,500
At 31 December
2014 9,416 1,837 885 10,417 1,139 23,694
========================== ========= =============== ========== ============= ========= =========
Exchange difference 91 63 16 - 68 238
Additions - - - 2,499 152 2,651
Disposals (1,193) - (338) (511) (59) (2,101)
At 31 December
2015 8,314 1,900 563 12,405 1,300 24,482
========================== ========= =============== ========== ============= ========= =========
Accumulated amortisation
At 1 January 2014 - (268) (414) (3,541) (222) (4,445)
Effects of movement
in exchange rates - 36 11 (1) 24 70
Charge for the
year - (497) (254) (2,568) (289) (3,608)
Impairment for
the year (1,192) (76) - (80) - (1,348)
========================== ========= =============== ========== ============= ========= =========
At 31 December
2014 (1,192) (805) (657) (6,190) (487) (9,331)
========================== ========= =============== ========== ============= ========= =========
Effects of movement
in exchange rates - (24) (11) - (52) (87)
Charge for the
year - (189) (119) (2,609) (279) (3,196)
Elimination on
disposal 1,192 - 338 429 57 2,016
Impairment for
the year (4,043) - - (55) - (4,098)
========================== ========= =============== ========== ============= ========= =========
At 31 December
2015 (4,043) (1,018) (449) (8,425) (761) (14,696)
========================== ========= =============== ========== ============= ========= =========
Net book amount
========================== ========= =============== ========== ============= ========= =========
At 31 December
2015 4,271 882 114 3,980 539 9,786
========================== ========= =============== ========== ============= ========= =========
At 31 December
2014 8,224 1,032 228 4,227 652 14,363
========================== ========= =============== ========== ============= ========= =========
The acquired software products, customer relationships and order
backlog assets arose on the acquisition in 2013 of the Geoplan
group of companies and in 2011 of Integrated Mapping Solutions,
Inc. (now merged into Ubisense Inc.) and Realworld OO Systems
Limited (now re-named Geospatial Systems Limited). Capitalised
development assets relate to expenditure that can be applied to a
plan or design for the production of new or substantially improved
products and processes. The software assets represent assets
purchased from third parties.
During the year, an impairment expense of GBP4,043,000 was
recognised in respect of goodwill (2014: GBP1,192,000), GBP55,000
in respect of capitalised development costs (2014: GBP80,000) and
GBPnil in respect of acquired customer relationships and order
backlog (2014: GBP76,000).
The goodwill impairment expense in 2015 writes down the goodwill
to the present value of the future cash flows from services
revenues, which is lower than previously estimated due to the
challenging trading period that the Group had during 2015. The
impairment expense in 2014 relating to goodwill and unamortised
customer relationships attributable to the acquisition of Realworld
OO Systems Limited in 2011, which were written down to GBPnil
carrying value at 31 December 2014. The impairments in both years
have arisen as a result of the Group strategy, focussing on higher
margin revenue streams driven from Ubisense-owned IP and exiting
from specific lower margin business areas.
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The impairment of capitalised development costs in both 2015 and
2014 writes off expenditure on products that will not be launched
to the market.
In assessing whether intangible assets have been impaired, the
carrying amount of the cash-generating unit (CGU) is compared with
the recoverable amount of the CGU. The Board consider the CGUs to
reflect the two operating segments (RTLS - Smart Factory;
Geospatial - myWorld).
All goodwill relates to the Geospatial CGU. In the event of a
shortfall in estimated revenues of 10% a further goodwill
impairment of GBP506k would be required. In the event of a 20%
shortfall the further goodwill impairment would be GBP1,012k.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In the absence of readily available
information about the fair value of a cash-generating unit, the
recoverable amount is deemed to be the value in use for the
purposes of performing an impairment test of goodwill, unless this
would lead to an impairment loss. If goodwill would be impaired
using value in use as the recoverable amount, a fair value less
costs to sell assessment would be performed as this may lead to a
higher recoverable amount. The Group calculates the value in use
using a discounted cash flow model, based on the most recent
financial budgets approved by the Board. The future cash flows are
adjusted for risks specific to the cash-generating unit and are
discounted using a pre-tax discount rate. The discount rate is
derived from the Group's post-tax weighted average cost of capital
and is adjusted where applicable to take into account any specific
risks. A discount rate of 11.5% has been used for impairment
calculations performed in 2015 (2014: 11.5%) for each of the CGUs.
The recoverable amounts of all CGUs have been determined from
value-in-use calculations based on 3 - 5 year forecasts projected
from the 2016 budget approved by the Board for each CGU with an
assumed terminal growth rate of nil (2014: nil) and no improvement
in relative operating margin after the forecast period. The Board
has considered reasonable possible sensitivities in key
assumptions, particularly revenue, on which the value-in-use
calculations are based.
There was no further impairment of intangible assets as the
estimated recoverable amount exceeded the carrying value for all
CGUs.
13 Property, plant and equipment
Fixtures Computer
and fittings equipment Total
GBP'000 GBP'000 GBP'000
========================= ============== =========== =========
Cost
At 1 January 2014 689 607 1,296
Effect of movements
in exchange rates (23) (26) (49)
Additions 556 402 958
Disposals (331) (96) (427)
========================= ============== =========== =========
At 31 December
2014 891 887 1,778
========================= ============== =========== =========
Effect of movements
in exchange rates 58 (71) (13)
Transfers (194) 194 -
Additions 78 118 196
Disposals (35) (11) (46)
Disposal of subsidiary (12) - (12)
========================= ============== =========== =========
At 31 December
2015 786 1,117 1,903
========================= ============== =========== =========
Fixtures Computer
and fittings equipment Total
GBP'000 GBP'000 GBP'000
=========================== ====== =============== =========== =========
Accumulated depreciation
At 1 January 2014 (255) (413) (668)
Effect of movements
in exchange rates 17 13 30
Charge for the
year (139) (220) (359)
Disposals 239 92 331
=========================== === === ============== =========== ===========
At 31 December
2014 (138) (528) (666)
=========================== === === ============== =========== ===========
Effect of movements
in exchange rates (1) 43 42
Transfers 181 (181) -
Charge for the
year (233) (155) (388)
Elimination on
disposals 35 10 45
Disposal of subsidiary 7 - 7
At 31 December
2015 (149) (811) (960)
=========================== === === ============== =========== ===========
Net book amount
At 31 December
2015 638 305 943
=========================== === === ============== =========== ===========
At 31 December
2014 753 359 1,112
=========================== === === ============== =========== ===========
14 Inventories
2014
2015 Restated
GBP'000 GBP'000
------------------- --------- ----------
Raw materials 1,348 1,088
Finished goods 1,467 1,793
---------------------- --------- ----------
Total inventories 2,815 2,881
---------------------- --------- ----------
There are no impairment provisions against inventory included in
the above amounts (2014: GBPnil). The Group's inventories are
comprised of products which are not generally subject to rapid
obsolescence on account of technological, deterioration in
condition or market trends.
15 Trade and other receivables
2015 2014
Notes GBP'000 GBP'000
----------------------------- ------ --------- ---------
Trade receivables, gross 7,421 8,961
Allowances for doubtful
debts 15.1 (1,691) (68)
=============================== ====== ========= =========
Trade receivables, net 15.2 5,730 8,893
Amounts recoverable
on contracts 2,067 4,134
Other receivables 199 211
Prepayments 882 1,255
Corporation tax recoverable 1 521
VAT and taxation receivable 398 527
=============================== ====== ========= =========
Total trade and other
receivables 9,277 15,541
=============================== ====== ========= =========
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.
15.1 Movement in allowance for doubtful debts
2015 2014
GBP'000 GBP'000
---------------------------- --------- ---------
At 1 January (68) (141)
Exchange differences (10) -
Amounts recovered in the
year - 33
Amounts written off in the
year 43 41
Allowance made (1,656) (1)
At 31 December (1,691) (68)
=============================== ========= =========
Allowance made in 2015 includes GBP1,626k for two entities in
the Asia Pacific region. Provision has been made against these
balances as their recoverability is uncertain following the
disposals and cost reduction actions in that region.
15.2 Ageing of past due but not impaired receivables
2015 2014
GBP'000 GBP'000
---------------------------- --------- ---------
Neither past due nor
impaired 3,506 5,492
Past due but not impaired:
0 to 90 days overdue 920 2,494
More than 90 days overdue 1,304 907
Total 5,730 8,893
=============================== ========= =========
16 Cash and cash equivalents
2015 2014
GBP'000 GBP'000
--------------------------- --------- ---------
Cash at bank and in
hand 5,392 3,697
============================== ========= =========
Cash and cash equivalents 5,392 3,697
============================== ========= =========
The carrying amount approximates to fair value because of the
short-term maturity of these instruments, being no greater than
three months.
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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:
2015 2014
By currency GBP'000 GBP'000
--------------------------------------------- --------- ---------
British Pound (GBP) 1,718 904
Euro (EUR) 1,151 1,361
US Dollar (USD) 2,216 1,169
Japanese Yen (JPY) 130 122
South Korean Won (KRW) - 36
Canadian Dollar (CAD) 177 103
Philippine Peso (PHP) - 2
Cash and cash equivalents 5,392 3,697
============================================= ========= =========
17 Trade and other payables
2015 2014
GBP'000 GBP'000
--------------------------- --------- ---------
Payments received on
account 2,017 2,137
Trade payables 2,148 4,021
Trade accruals 3,668 2,020
Current tax liability - 51
Other taxation and social
security 661 822
Other payables 135 765
Total trade and other
payables 8,629 9,816
============================== ========= =========
All amounts disclosed are short term. The carrying value of
trade payables is considered a reasonable approximation of fair
value.
18 Bank loans
In May 2015, the Group renewed its working capital loan
facilities and repaid its GBP2 million 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 31 December 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 notified HSBC of a breach of the covenants relating to
adjusted EBITDA as at 31 December 2015 and as at 31 March 2016,
against which HSBC provided Reservation of Rights letters
indicating that they do not intend to take further action.
With a covenant test based on a rolling 12 month adjusted EBITDA
calculation, the Group anticipates further covenant breaches in the
next 12 months until the full effect of the restructuring actions
taken in 2015 are delivered and the disappointing results of 2015
no longer have an impact on the calculation. The Group is engaged
in constructive discussions with HSBC on a replacement of this
facility.
At 31 December 2014, the Group had the following bank loans with
HSBC Bank Plc in place, which were repaid in full in May 2015 by
Ubisense Limited:
-- A three year bank loan facility of up to GBP5.0 million,
repayable in full in August 2016. Interest was payable at LIBOR
plus 3%. The facility was secured on the fixed and floating assets
of the Group and was subject to certain operating performance and
net worth covenants of the business. As at 31 December 2014, GBP4.0
million was drawn.
-- A four year bank loan facility of GBP2.0 million, repayable
in quarterly instalments. Interest was payable at Bank of England
base rate plus 3%. The facility was secured on the fixed and
floating assets of the Group and was subject to certain operating
and net worth covenants of the business. As at 31 December 2014,
GBP2.0 million was outstanding.
The Group renewed a six month loan facility of 200 million
Japanese Yen (JPY) in June 2015 and which was further extended
until 31 March 2016 at which point it was repaid. The loan was
unsecured and interest was payable at 0.99%. As at 31 December
2015, the JPY 200 million facility was drawn down in full (31
December 2014: JPY 170 million of JPY 200 million facility
drawn).
19 Other payables
2015 2014
Notes GBP'000 GBP'000
-------------------------- ------ --------- ---------
Contingent consideration 19.2 448 414
Property provisions 179 179
Rent deposit repayable 24 11
---------------------------- ------ --------- ---------
Total other payables 651 604
---------------------------- ------ --------- ---------
In September 2014, Ubisense Limited entered a new 10 year lease
on the Group's headquarter offices. The property provision is a
dilapidation provision to restore the office to its original state.
It is included in fixtures and fittings within Property, Plant and
Equipment and is being depreciated over the lease term.
19.2 Contingent consideration
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,
under which the Group is required to pay additional amounts to the
vendors of Geoplan based on the achievement of two separate
performance milestones that may arise between 2014 and 2017 with a
combined undiscounted range of outcomes between JPY nil and JPY 149
million (GBPnil to GBP892,000).
At acquisition, the fair value of the contingent consideration
was JPY 136 million (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.
Effect At
At of Unwinding 31
1 January exchange of December
2015 rates discount 2015
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----------- ---------- ---------- ----------
Contingent consideration
- non-current 414 19 15 448
Total 414 19 15 448
========================== =========== ========== ========== ==========
20 Share capital and premium
Number of
ordinary shares Share Share
of GBP0.02 capital premium Total
each GBP'000 GBP'000 GBP'000
-------------------------- ------------------------------- --------- --------- ---------------------------
Balance at 1 January
2014 23,079,146 461 24,050 24,511
-------------------------- ------------------------------- --------- --------- ---------------------------
Issued under share-based
payment plans 54,107 1 23 24
Issued on placing
to institutional
shareholders 1,929,589 39 3,978 4,017
========================== =============================== ========= ========= ===========================
Change in year 1,983,696 40 4,001 4,041
-------------------------- ------------------------------- --------- --------- ---------------------------
Balance at 31 December
2014 25,062,842 501 28,051 28,552
-------------------------- ------------------------------- --------- --------- ---------------------------
Issued under share-based
payment plans 446,293 9 67 76
Issued on placing
to institutional
shareholders 11,111,112 222 9,304 9,526
Change in year 11,557,405 231 9,371 9,602
-------------------------- ------------------------------- --------- --------- ---------------------------
Balance at 31 December
2015 36,620,247 732 37,422 38,154
-------------------------- ------------------------------- --------- --------- ---------------------------
The Company has one class of ordinary shares which carry no
right to fixed income.
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During the period, the Company issued 11,557,405 shares,
increasing the total number of shares in issue from 25,062,842 to
36,620,247 as follows:
-- 11,111,112 shares at GBP0.90 per share for a total gross
consideration of GBP10.0 million with share issue costs of
GBP474,000 written off against the share premium account.; and
-- 446,293 shares as a result of options exercised with a
weighted average exercise price of GBP0.17 per share for total cash
consideration of GBP76,131.
21 Share-based payments: options
21.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over
shares in the Company to incentivise high performing key employees
of the Group periodically.
Options are generally granted at an exercise price equal to the
market price of the shares under option at the date of the grant.
The options generally vest evenly over three years on the
anniversary from the date of the grant or entirely on the third
anniversary from the date of grant, depending on continuing service
during the vesting period. The contractual life of the options is
ten years from the date of grant after which they expire if
unexercised.
21.2 Analysis of amounts recognised in the financial
statements
a) Analysis of amounts recognised in the Consolidated income statement
2015 2014
GBP'000 GBP'000
----------------------------------- ========= ---------
Total share-based payments charge
recognised in operating profit 54 75
=================================== ========= =========
b) Analysis of amounts recognised in the Consolidated statement
of changes in equity in the year
2015 2014
GBP'000 GBP'000
--------------------------------- ========= ---------
Net share-based payments credit
recognised in equity 54 75
================================= ========= =========
c) Cumulative amounts included within equity in the Consolidated
statement of financial position
2015 2014
GBP'000 GBP'000
=========================== ========= =========
Cumulative reserve credit
for share-based payments 875 821
============================ ========= =========
21.3 Reconciliation of movements in equity-settled share-based
payment arrangements in the year
Awards Awards Awards
outstanding outstanding exercisable
at Granted Exercised Forfeited at at
Award 1 during during during 31 31
date Exercise January the the the December December
Vests Expires price 2015 year year year 2015 2015
Arrangement Year Years Year GBP Number Number Number Number Number Number
============= ======= ========= ========= ========= ============ ======== ========== ========== ============ ============
Options 2007 2008-10 2017 0.900 300 - - - 300 300
2008 2009-11 2018 0.900 650 - - (650) - -
2009 2010-12 2019 0.900 3,750 - - (3,750) - -
2010 2011-13 2020 0.140 847,454 - (431,293) (7,700) 408,461 417,461
2011 2012-14 2021 1.050 386,117 - (15,000) (72,917) 298,200 298,200
2012 2013-15 2022 2.125 316,000 - - (114,500) 201,500 141,500
2013 2014-16 2023 2.055 351,500 - - (82,200) 269,300 112,867
2014 2015-17 2024 2.250 437,500 - - (137,500) 300,000 35,000
======= ========= ======================= ========= ============ ======== ========== ========== ============ ============
Total 2,343,271 - (446,293) (419,217) 1,477,761 1,005,328
============================================ ========= ============ ======== ========== ========== ============ ============
Weighted average
exercise price (GBP) 1.240 - 0.170 1.916 1.371 0.754
======================================================= ============ ======== ========== ========== ============ ============
No share options were granted in 2015. In May 2014, 447,500
share options were granted to employees with an exercise price of
GBP2.25 per share, being the market value at the date of exercise.
The weighted average share price at the date of exercise for
options exercised during the year was GBP0.754 (2014:
GBP1.921).
21.4 Principal assumptions
The fair value of share-based payments grants has been valued
using the Black-Scholes option-pricing model. Expected volatility
was determined based on the historic volatility of comparable
companies. The expected life is the expected period from grant to
exercise based on management's best estimate of the effects of
non-transferability, exercise restrictions and behavioural
considerations. The risk-free rate of return is an average yield on
the zero-coupon UK Government Bond in issue at the date of grant
with a similar life to the option or warrant.
The following assumptions were used in the model for options
granted during the year ended 31 December 2014. No options were
granted in the year ended 31 December 2015.
Instrument Option
===================== ========
Number granted 447,500
Grant date 23 May
2014
Share price at
grant date (GBP) 2.250
Exercise price
(GBP) 2.250
Fair value per
option (GBP) 0.60
Expected life
(years) 3.0
Expected volatility
(%) 34
Risk-free interest
rate (%) 1.83
Expected dividends -
expressed as a
dividend yield
(%)
======================= ========
22 Operating lease commitments
Leases as lessee
At 31 December 2015, the Group has lease agreements in respect
of property and equipment for which payments extend over a number
of years. The Group enters into these arrangements as these are a
cost-efficient way of obtaining the short-term benefits of these
assets. The Group lease rental charge is disclosed in note 9.1.
There are no other material off-balance sheet arrangements.
The Group's future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
Land and buildings Other
--------------------- --------------------
2015 2014 2015 2014
Lease ending GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------- --------- --------- ---------
No later than one year 606 785 59 121
Later than one year
and no later than five
years 2,320 2,441 113 85
Later than five years 1,282 3,043 - -
Total 4,208 6,269 172 206
========================= ========== ========= ========= =========
The above table reflects the committed cash payments under
operating leases, rather than the expected charge to the income
statement in the relevant periods. The effect on the income
statement will differ to the above figures due to the amortisation
of rent-free and discounted rent periods included in property
leases signed in 2012 and 2014. The expected charge in 2016 for
operating leases is expected to be GBP105,000 higher than the
committed cash payments shown above. From existing subleasing
agreements under non-cancellable operating leases which end in less
than one year, the Group will received income of GBP31,000.
The Group has guaranteed rent bonds issued by its banks on its
behalf totalling GBP122,000 as at 31 December 2015 (2014:
GBP134,000). These are not expected to result in any material
financial loss.
23 Subsidiaries
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The group consists of the parent company, Ubisense Group Plc,
incorporated in the UK, and a number of subsidiary companies which
operate and are incorporated around the world. Information about
the composition at the end of the reporting period is as
follows:
Proportion
of Proportion
ordinary of ordinary
shares shares
held held by
Country by non-controlling
of Principal group interests
Subsidiary incorporation activity (%) (%)
========================== ================ ==================== =========== =================
Ubisense Limited UK Location solutions 100 -
Ubisense GmbH Germany Location solutions 100 -
Ubisense SAS France Location solutions 100 -
Ubisense Inc. US Location solutions 100 -
Ubisense Solutions Canada Location solutions 100 -
Inc.
Geospatial Systems UK Location solutions 100 -
Limited
Ubisense Inc. Japan Intermediate 100 -
holding company
Geoplan Company
Limited* Japan Location solutions 77 23
Binary Star Developments Japan Non-trading 100 -
K.K.*
========================== ================ ==================== =========== =================
All subsidiaries are directly held by Ubisense Group plc except
those denoted* which are held by the intermediate holding company,
Ubisense Inc.
All subsidiaries prepare local statutory accounts up to 31
December each year except for Geospatial Systems Limited which
prepares accounts up to 31 March and Binary Star Developments K.K.
to 31 January. For subsidiaries which have a different financial
year-end to the Group, additional co-terminus accounts are prepared
reflecting the same financial reporting as the Group for the
purposes of consolidation.
During the year, the Group disposed of its 100% interest in
Ubisense Company Ltd, a company incorporated in South Korea and
Geoplan Philippines Inc, a company incorporated in the Philippines.
The proceeds on sale of USD 1,000 for each entity were received in
cash. No investment has been retained in either entity.
Neither subsidiary company was material to the financial
performance or position of the Ubisense Group therefore no amounts
have been classified as discontinued operations. The loss on
disposal of the subsidiary companies is disclosed in note 24.
24 Disposal of subsidiaries
As referred to in note 23, the Group disposed of two subsidiary
companies during the year.
On 18 May 2015, Ubisense Inc. disposed of its 100% equity
interest in its subsidiary, Geoplan Philippines Inc. for
consideration of USD 1,000. The net assets of Geoplan Philippines
Inc. at the date of disposal were as follows:
Total
GBP'000
Property, plant and equipment 2
Trade and other receivables 145
Cash and cash equivalents 4
Trade and other payables (165)
================================== =========
(14)
================================= =========
Gain on disposal 15
================================== =========
Total consideration 1
================================== =========
Satisfied by:
Cash and cash equivalents 1
Net cash outflow arising
on disposal
Consideration received in
cash and cash equivalents 1
Less: cash and cash equivalents
disposed of (4)
================================== =========
(3)
================================= =========
In the current year, Geoplan Philippines Inc. contributed GBPnil
to the Group's adjusted EBITDA (2014: loss of GBP41,000). Costs
associated with the disposal of GBP112,000 have been included in
non-recurring items.
On 30 September 2015, Ubisense Inc. disposed of its 100% equity
interest in its subsidiary, Ubisense Company Ltd. for consideration
of USD 1,000. The net assets of Ubisense Company Ltd at the date of
disposal were as follows:
Total
GBP'000
Property, plant and equipment 3
Inventories 913
Trade and other receivables 4
Trade and other payables (923)
================================== =========
(3)
================================= =========
Profit on disposal 4
================================== =========
Total consideration 1
================================== =========
Satisfied by:
Cash and cash equivalents 1
Net cash outflow arising
on disposal
Consideration received in
cash and cash equivalents 1
Less: cash and cash equivalents
disposed of -
================================= =========
1
================================= =========
In the current year, Ubisense Company contributed a loss of
GBP84,000 to the Group's adjusted EBITDA (2014: loss of
GBP272,000). Costs associated with the disposal of GBP644,000 have
been included in non-recurring items.
The disposals of both subsidiaries are not considered
discontinued operations as the subsidiary disposals have not exited
a major line of business or geographic area for the Group.
25 Related party transactions
Compensation of key management personnel disclosed in note 6.3
and full details of Directors' remuneration are given in note
7.
During the year, Ubisense Ltd contemplated entering into a
commercial sub-lease arrangement with a third party. One of the
Directors of Ubisense Group Plc, is also a Director of that third
party. The arrangement was not completed although as an outcome the
third party paid Ubisense GBP3,800 plus VAT (2014: GBPnil). As at
31 December 2015, Ubisense Ltd showed that GBP4,560 was owed by the
third party (31 December 2014: GBPnil). Full payment of this
balance outstanding was subsequently received in 2016.
There were no other related party transactions with Directors of
the Company.
26 Financial risk management
26.1 Risk management objectives and policies
The Group is exposed to various risks in relation to financial
instruments. The Group's financial assets and liabilities by
category are summarised below. The main types of risks are market
risk (including foreign currency risk and interest rate risk),
credit risk and liquidity risk.
The Group's risk management is coordinated at its headquarters,
in close cooperation with the Board of Directors, and focuses on
actively securing the Group's short to medium-term cash flows. The
Group does not actively engage in the trading of financial assets
for speculative purposes. The most significant financial risks to
which the Group is exposed are described below.
26.2 Foreign currency risk management
The Group operates globally and undertakes certain transactions
denominated in foreign currencies, predominantly in US dollars
(USD), Euros (EUR) and Japanese Yen (JPY), exposing the Group to
foreign currency risk. The Group's risk management policy is to
maintain natural hedges where possible, by matching foreign
currency revenue and expenditure. The Group does not enter into
forward exchange contracts to mitigate the exposure to foreign
currency risk as the Group's currency transactions are not
considered significant enough to warrant this.
Foreign currency denominated monetary assets and liabilities
which expose the Group to currency risk are disclosed below. The
amounts shown are those not denominated in the local functional
currency, translated into GBP at the closing rate.
Japanese US Dollars Euros
Yen
============= ========================= ========================== ====================
2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============= ============ =========== ============ ============ ========= =========
Assets - - 145 2,240 535 886
Liabilities - - (62) (199) (1) -
============= ============ =========== ============ ============ ========= =========
All foreign currency financial assets and liabilities are
classified as current.
26.3 Foreign currency sensitivity analysis
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April 07, 2016 05:33 ET (09:33 GMT)
The following table illustrates the sensitivity of profit and
equity in regards to the Group's financial assets and financial
liabilities and the USD/GBP, EUR/GBP and JPY/GBP exchange rates
'all other things being equal'. It assumes a +/- 5% change in the
GBP exchange rate against the relevant foreign currencies. The
percentages has been determined based on the average market
volatility in exchange rates in the previous 12 months.
The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation
at the period end. A positive number indicates an increase in
profit and equity.
Japanese
Yen US Dollars Euros
================== ======================== ======================== ====================
2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================== =========== =========== =========== =========== ========= =========
Effect of a 5% strengthening
in
relevant exchange rate on:
Income statement (43) (5) (27) 182 (95) 221
Equity (43) (5) (27) 182 (95) 221
Effect of a 5% weakening in
relevant exchange rate on:
Income statement 50 5 32 (201) 110 (244)
Equity 50 5 32 (201) 110 (244)
------------------ ----------- ----------- ----------- ----------- --------- ---------
Exposure to foreign currency exchange rates vary during the
year, depending on the volume of transactions. Nonetheless, the
analysis above is considered to be representative of the Group's
exposure to currency risk.
26.4 Interest rate sensitivity
The Group's exposure to interest rate risk relates primarily to
the Group's variable rate bank loan facilities of GBP8.0 million
which is partially offset by cash held at variable rates. Interest
is payable at LIBOR plus 3% on the GBP8.0 million facility and
GBP4.5 million was outstanding at 31 December 2015 (2014: GBP4.0
million). Other bank loans are at a fixed interest rate of
0.99%.
The following table illustrates the sensitivity of the net
profit of the Group for the year and equity to a reasonably
possible change in interest rates of +/-0.5%. These changes are
considered to be reasonably possible based on observation of
current market conditions. The calculations are based on a change
in the interest rate with effect from the beginning of the year and
the financial instruments held at the reporting date that are
sensitive to interest rate changes. All other variables are held
constant. A positive number indicates an increase in profit or
equity.
2015 2014
GBP'000 GBP'000
=========================== ========= =========
Effect of a 0.5% decrease
in interest rate on:
Income statement 30 23
Equity 30 23
Effect of a 0.5% increase
in interest rate on:
Income statement (30) (23)
Equity (30) (23)
----------------------------- --------- ---------
26.5 Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge a
contractual obligation resulting in financial loss to the Group.
The Group's maximum exposure to credit risk is limited to the
carrying amount of financial assets recognised at the reporting
date, as summarised in note 26.8, which are principally cash and
cash equivalents and trade receivables.
Cash and cash equivalents are held at banks with good
independent credit ratings in accordance with the Group Treasury
policy. The Group continuously monitors defaults of customers and
other counterparties, identified either individually or by the
Group, and incorporates this information into its credit risk
controls. Where available at reasonable cost, external credit
ratings and/or reports on customers and other counterparties are
obtained and used. The Group's policy is to deal only with
creditworthy counterparties.
The Group's management considers that its financial assets that
are not impaired or past due for each of the reporting dates under
review are of good credit quality. All receivables are subject to
regular review to ensure that they are recoverable and any issues
identified as early as possible. In order to manage credit risk the
Directors set limits for customers based on a combination of
payment history and third party credit references. Credit limits
are reviewed by the credit controller on a regular basis in
conjunction with debt ageing and collection history. In addition
many of the Group's customers, and approximately 80% by balance at
any given time, are large utility companies and other blue-chip
companies that would be considered a low credit risk.
The amount of exposure to any single counterparty or a group of
counterparties having similar characteristics is subject to a
limit, which is reassessed periodically by management. At 31
December 2015, one customer individually accounted for more than
10% of the trade receivables balance (31 December 2014: none).
None of the Group's financial assets are secured by collateral
or other credit enhancements.
Details of certain trade receivables at 31 December 2015 that
have not been settled by the contractual due date but are not
considered to be impaired are included in note 15.2.
26.6 Liquidity risk analysis
Liquidity risk is the risk arising from the Group not being able
to meet its obligations as they fall due. The Group seeks to manage
this risk by monitoring scheduled debt servicing payments for
long-term financial liabilities, regularly reviewing forecast
inflows and outflows due in day-to-day business and investing cash
assets safely and profitably. The data used for analysing these
cashflows is consistent with that used in the contractual maturity
analysis below.
Cashflow forecasting is performed at the subsidiary level and
aggregated by Group finance. Rolling cashflow forecasts are used by
the Group to monitor liquidity requirements to ensure it has
sufficient cash to meet operational needs, as well as maintaining
sufficient headroom so that loan covenants are not breached. The
Group policy throughout the year has been to remit surplus working
capital balances at the subsidiary level to Group treasury and
place on short-term deposit or interest bearing reserve accounts
and to draw down on borrowing facilities and distribute funds
locally when required. As disclosed in note 18, the Group has total
bank loan facilities of GBP9.1 million, of which GBP5.6 million was
drawn down at 31 December 2015 (2014: GBP8.1 million facility,
GBP6.9 million drawn down).
The Group considers expected cashflows from financial assets,
predominately cash and trade receivables, in assessing and managing
liquidity risk. The Group's cash and trade receivable resources at
31 December 2015 (see note 15) exceed the current cash outflow
requirements.
As at 31 December 2015, the Group's financial liabilities,
including interest payments where applicable, have contractual
maturities as summarised below:
Current Non-current
-------------------------- ----------------------- --------------------
Between Later
Between 1 than
Within 6 and and 5 5
6 months 12 months years Years
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- ----------- --------- ---------
As at 31 December 2015
Trade and other payables 7,924 705 203 -
Bank loan 1,123 - 4,500 -
Other payables - - 472 179
As at 31 December 2014
Trade and other payables 9,465 351 120 -
Bank loans 927 - 6,000 -
Other payables - - 425 179
========================== ========== =========== ========= =========
Financial assets used for managing liquidity risk
Cash flows from trade and other receivables are contractually
due within six months in the majority of cases. Extended credit
terms have been agreed with specific customers. Cash is generally
held in accounts with immediate notice. Where surplus cash deposits
are identified these are placed in accounts with access terms of no
more than three months.
26.7 Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concern whilst maximising
the return to stakeholders and to maintain an optimal capital
structure to reduce the long-term cost of capital. The capital
structure of the Group consists of cash and cash equivalents and
capital and reserves attributable to the owners of the Company, and
the Group's borrowing facilities.
In order to maintain or adjust the capital structure, the Group
may issue shares, take on debt, sell assets to raise cash, adjust
the amount of dividends payable to shareholders or return capital
to shareholders.
The capital structure is continually monitored by the Group. The
Group's strategy is to have a capital structure that allows
investment in long-term profitable growth, takes into account
prevailing trading conditions and seeks to improve balance sheet
efficiency over time. The Group is not subject to externally
imposed capital requirements.
(MORE TO FOLLOW) Dow Jones Newswires
April 07, 2016 05:33 ET (09:33 GMT)
The Group has bank facilities at 31 December 2015 of GBP9.1
million (31 December 2014: GBP8.1 million) of which GBP8.0 million
dominated in GBP and GBP1.1 million denominated in JPY (2014:
GBP7.0 million GBP, GBP1.1 million JPY). At 31 December 2015 GBP5.6
million of the facilities were drawn (31 December 2014: GBP6.9
million) of which GBP4.5 million is denominated in GBP and GBP1.1
million denominated in JPY (2014: GBP6.0 million GBP, GBP0.9
million JPY). The Group may need to seek further capital, through
equity or debt, in order to support the business. Currently, the
Group has considered its funding options and expects to announce a
conditional share placing in order to strengthen the balance sheet,
reduce the loan outstanding and permit selective investment in the
business.
26.8 Categories of financial instruments
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised in respect of each class of financial asset, financial
liability and equity instrument, are disclosed in the accounting
policies in note 3. The carrying amounts presented in the
Consolidated Statement of Financial Position relate to the
following categories of financial instrument:
2015 2014
Notes GBP'000 GBP'000
================================= ====== ========= =========
Financial assets
Loans and receivables:
Trade receivables 15 5,730 8,893
Amounts recoverable
on contracts 15 2,067 4,134
4
Other receivables 15 1,480 2,514
Cash and cash equivalents 16 5,392 3,697
================================= ====== ========= =========
Total financial assets 14,669 19,238
================================= ====== ========= =========
Financial liabilities
Amortised cost:
* Trade payables 17 2,148 4,021
* Trade accruals 17 3,668 2,020
* Other payables 17 2,813 3,775
* Provisions 19 203 190
* Bank loans 18 5,623 6,927
Fair value:
* Contingent consideration
- 19.2 448 414
================================= ====== ========= =========
Total financial liabilities 14,903 17,347
================================= ====== ========= =========
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UBUKRNNASRRR
(END) Dow Jones Newswires
April 07, 2016 05:33 ET (09:33 GMT)
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