TIDMUBI
RNS Number : 7707H
Ubisense Group PLC
15 March 2018
Ubisense Group plc
("Ubisense" or the "Company" or the "Group")
Final results for the year ended 31 December 2017
Ubisense Group Plc (AIM: UBI) a market leader in high
performance Enterprise Location Intelligence Solutions, announces
its final results for the year ended 31 December 2017.
Strategic highlights
-- 2017: Strong progress was demonstrated in terms of revenue
growth of our own products, cost management and order book
-- Software focus: New strategy is delivering significant wins
across both sides of the business, with a 21% increase in software
sales
-- Global growth: Demand for Ubisense solutions has increased
across new centres of manufacturing such as Turkey and Thailand
-- RTLS SmartSpace product development: Modularised the
enterprise software platform to address Industry 4.0 and emerging
opportunities for Industrial Internet of Things ("IIoT")
applications
-- Geospatial myWorld product development: Extended the product
portfolio to include an analytics suite that significantly reduces
time to market for cable and telecoms network builds and
upgrades
Financial highlights
-- Revenue generated from Ubisense's own products increased by
28% and now represents over 60% of revenue (2016: 49%)
-- Total revenue increased to GBP27.3 million (2016: GBP26.5
million) while managing a 22% planned decline in services
associated with third party products
-- Operating loss reduced to GBP3.1 million (2016: GBP6.2
million) and adjusted EBITDA* profits of GBP0.4 million (2016:
GBP0.3 million)
-- GBP5.5 million (gross) raised from shareholders in November
2017 to accelerate go-to-market and development activity
-- Cash balance of GBP9.1 million (2016: GBP3.5 million) and net
cash of GBP6.6 million (2016: 0.2 million)
Richard Petti, Chief Executive Officer, commented,
"I am pleased to report on Ubisense's first full year of results
since becoming CEO. The Company made strong progress in 2017 and we
sold more of our own products to more customers than ever before,
resulting in a 28% increase in Ubisense' own product sales. Our
solutions are chosen because they combine industry-leading
technology that includes: indoor and outdoor geolocation,
wirelessly enabled machine-to-machine and machine-to-device
communication, advanced analytics and big data middleware. By
accelerating the sales of our own products, we plan to drive
improved gross margins and profitability. We have an exciting
pipeline of opportunities in both divisions and look forward to
delivering for our customers in 2018."
* Measured as operating loss excluding depreciation,
amortisation, unrealised intercompany foreign exchange, share based
payments and non-recurring costs.
Contact
Ubisense Group plc Tel: + 44 (0) 1223 535170
Richard Petti, Tim Gingell
Numis Securities Limited Tel: + 44 (0) 20 7260
Jamie Lillywhite, Toby 1000
Adcock
Tulcan Communications Tel: +44 (0) 20 7353
LLP 4200
James Macey White, Matt
Low, Deborah Roney
============================== ============================
About Ubisense
Ubisense (AIM: UBI), a global leader in enterprise location
intelligence solutions, helps businesses in sectors including
manufacturing, communications and utilities to improve operational
efficiency, data quality and boost profitability. Ubisense location
intelligence systems bring clarity to complexity, enabling
customers to revolutionise their operational effectiveness in a
measurable way. Founded in 2002, Ubisense is headquartered in
Cambridge, England, with offices in North America, France, Germany
and Japan. For more information visit: www.ubisense.net.
Chairman's statement
Results overview
2017 results continued to demonstrate that Ubisense has
excellent products which deliver measurable benefits for customers
as they strive for productivity improvements. In total, Ubisense
has delivered 28% revenue growth for the company's own products,
RTLS SmartSpace and Geospatial myWorld, offsetting the planned
decline in Geospatial revenues associated with third party
products. We have continued to see growth in our own software
revenues, which remains of key importance to us as we drive growth
in new and recurring revenues.
The RTLS SmartSpace agreement with Lockheed Martin for the F35
program highlighted the productivity gains that industrial
customers need to make, with integration of location information a
key success-enabling factor. The strength of our technology
alongside a flexible, highly scalable software platform that can
integrate multiple location technologies were key factors in this
aerospace win. A win in the satellite and space sector highlights
the further opportunities that exist in high-tech
manufacturing.
Our Geospatial myWorld customers are now exploiting the
flexibility of the platform to create new use cases liberating
geospatial information across their organisation, integrating with
other platforms and driving productivity improvements. For
Ubisense, this drives sales of additional licences, further
services engagements and involvement in customers' longer term IT
strategy.
Board of directors and Governance
At the end of 2016, we welcomed Richard Petti to the Board as
the new Chief Executive Officer. I'm delighted that he has stepped
into the role successfully, enabling me to resume my non-Executive
Chairman role in August 2017. Richard has led the business,
clarifying the positioning and strategy of the company's two
product portfolios, focusing and training the sales force whilst we
continue to build the sales capacity.
The structure of the Board and individual responsibilities
remain unchanged from last year. We ensure that the Company adopts
proper standards of corporate governance and that the principles of
best practice as set out in the UK Corporate Governance Code are
followed where reasonably practicable. The Board continually
reviews its composition and that of its committees and feels that,
at this stage of the Group's development, the skills and mix of its
members best serves our current needs.
Group strategy
In October 2017 we led a successful GBP5.5 million fundraise
with new and existing shareholders, to allow us to capitalise on
our strategy and accelerate our go-to-market and development
activity.
Some of the customer productivity improvement opportunities
based on Ubisense software platforms include:
RTLS SmartSpace: substantial investment in Industry 4.0 / Smart
Factory / Industrial Internet of Things (IIoT) in industry with
automation of non-linear processes using location information.
Geospatial myWorld: communications and utility operators
spending billions of dollars upgrading their networks, needing to
optimise the workflow across their organisation with accurate
real-time geographically-based information.
For the Geospatial business, we will continue to leverage the
highly specialist skills that we have in the team, focusing on
increasing the volume of myWorld activity. In line with our
strategy to reduce third party Geospatial consulting services,
agreement was reached in March 2018 to dispose of that part of the
Japanese business effective 30 March 2018.
To strengthen sales of our own products we have recruited strong
new sales leadership in Japan and are making good progress on sales
of myWorld and SmartSpace with our Japanese and Thai partners.
Corporate social responsibility
We are committed to corporate social responsibility that is
tangible, practical and fits with the ethos of the business; this
ensures that it is supported globally. During 2017 we continued our
charity day program, allowing employees to take time off to support
their charity of choice as well as organising local fundraising
events. We continue to collaborate with local and national
organisations to engage interns, industrial placements,
apprenticeships and mentoring schemes, as well as being active
members of local networks and clubs.
Current trading and outlook
The market opportunity for the Group is excellent for both
divisions, with software-led strategies targeting
productivity-enhancing opportunities in industry sectors that are
growing and investing heavily in digitisation. By enabling our
customers to create digital twins of their physical environments,
we are helping companies worldwide to improve their profitability
and meet the most stringent quality control requirements.
Trading in the first two months of 2018 has been in line with
our expectations and we intend to build on our strengths through
continued focus on developing and commercialising our software
portfolio. We have improved the sales and go-to-market skills of
the organisation and intend to further accelerate the momentum of
sales of our own products through both divisions, which will
ultimately drive improved gross margin and profitability.
We expect that the run-off of legacy third party services
revenues will largely complete over the course of 2018, following
which our results should better reflect the growth we are targeting
in our own products, and as the proportion of third party services
revenue in our mix declines, our gross margin will also naturally
increase.
The growing success of our products, our stronger pipeline and
discussions with customers lead us to be very excited about the
prospects for our myWorld and RTLS SmartSpace products.
Our success is thanks to our people; we have a great team who
have not only made this growth possible but are well positioned to
take the business forwards.
I would like to thank our shareholders - old and new - for their
continued support and our employees for their commitment in
delivering success across both divisions.
Peter Harverson
Chairman
14 March 2018
Chief Executive's statement
Market opportunity
Ubisense excels at helping customers to convert their physical
worlds into a living, breathing digital twin of their core
operational assets, products and processes. In fact, Lockheed
Martin, a giant in the aerospace industry, recently listed digital
twins as the number one technology trend of 2018. This is why in
2017 we have sold more of our own products to more customers.
Looking at the trends in our main markets of automotive,
aerospace, telecoms and utilities we see some common challenges
such as increased competition from globalisation, more demanding
technical savvy customers and ageing workforces with skill
gaps.
However, as we look more closely within our target segments we
also see some very positive indicators including automotive
manufacturing output at an all-time high of 93.5m units, aircraft
order backlogs at an all-time high of 8-10 years and global rollout
plans for millions of homes worldwide to be connected to fibre
broadband services in the next few years.
These long term trends are creating tremendous opportunities for
us. This is why Lockheed Martin has trusted Ubisense with its
mission critical function of controlling all shop floor tool
operations for its high profile F-35 fighter program. This is also
why Daimler has standardised every plant worldwide to work with our
SmartSpace software to deliver their global vision of a "paperless
factory". And this is why one of the largest North American
utilities business has employees using our myWorld solution every
day.
Our solutions are chosen because they combine industry-leading
technology that includes: indoor and outdoor geolocation,
wirelessly enabled machine-to-machine and machine-to-device
communication, advanced analytics and big data middleware.
Underlying strategic focus
Our progress in 2017 can most easily be measured by observing
the percentage of revenue our own products generate. For 2017 I am
proud to report that not only did we break the 50% barrier but that
we exceeded 60%. This important shift in our revenue mix has been
achieved by focusing on a three-point strategy:
1. Refocusing the business:
Since 2016 we have been growing our focus on own-product sales
into four main verticals: automotive, aerospace, telecoms and
utilities. In doing so we are actively managing out our legacy
third-party Geospatial service business which has now been reduced
by 22% year on year. This has allowed greater management focus on
building a stronger business that is based on our own products. Our
goal is to become a market standard in each of our chosen
verticals, we are focusing on the top global quartile of our
selected market, which means concentrating our efforts on a group
of approximately 200 global companies worldwide.
Focusing ensures that we develop a deeper understanding of our
chosen markets. In 2017 we seeded our product roadmaps with
extensive customer research which has helped us understand new
areas where existing and prospective customers are facing specific
problems. This market research has led to the launch of important
new products in both product lines and increased pipeline
generation. By increasing our focus on specific verticals we have
been able to offer existing customers new product roadmaps that
align with their challenges, and give new customers reasons to
adopt Ubisense technology.
2. Improved sales execution:
Within our own organisation we have strengthened our
go-to-market capabilities by recruiting market leading sales,
pre-sales and marketing talent over 2017 and we have invested in
training to help our organisation successfully complete complex
multi-stakeholder buying processes.
As a result of this we have seen a significant shift in the
shape of our pipeline, and across both business lines we have seen
increases in the number of opportunities in the GBP250K-GBP1m band
by an average of 115% and the GBP1M+ band by 25%. We have also
increased our presence in new markets such as Thailand and Turkey
by signing new distribution agreements with carefully selected
partners that have both sales and delivery capabilities into our
strategic markets of automotive, aerospace, telecoms and
utilities.
3. Repositioning the product portfolio:
Thanks to our renewed engagement with our chosen markets we have
invested in the development of our two enterprise class software
solutions: SmartSpace and myWorld. Both product sets have been
elevated from a positioning perspective so that our ability to
solve enterprise level problems are more clearly communicated to
our target markets. This elevation takes the form of positioning
our products in the context of enterprise systems already in place
(in manufacturing, for example, this is referred to as the
'manufacturing enterprise systems stack') and targeting our
messaging directly at specific job roles.
In addition to elevating the two products, we have invested in
modularising them, separating functionality into applications which
can be packaged to address customer specific needs. This approach
allows us to position both products along the value chains of our
target market and illustrates how our products can improve core
operations at each node in the value chain of their added-value
operations. By positioning our product along the value chain we
have been able to offer specific solutions to the challenges in
particular areas, thereby eliminating the need to purchase
enterprise licenses to solve discrete problems and preserving more
value for future sales.
Financial results
The repositioning work has allowed us to increase the percentage
of software across the board and in a typical transaction software
will be the dominant source of revenue and margin. This ability to
drive software sales underpins our goal of increasing margin and
recurring revenue by way of maintenance and support services.
With respect to financial performance, we were able to grow our
top line to GBP27.3 million, more than overcoming the decline in
our legacy third party service revenues. This top line growth is
thanks to the increased sales of our own products, which grew at an
impressive rate of 28%. Our margins made some positive progress
which will improve further as the momentum builds from the sales of
our own products.
Above all, the Ubisense team continues to work hard to deliver
improved returns for your investment.
Richard Petti
Chief Executive Officer
14 March 2018
Chief Financial Officer's statement
I'm pleased to present the 2017 results which reflect the
continued progress that we've made in redefining our software-led
strategy and building our go-to-market activity. Our strategy to
enable digital twins for both divisions is aligned to our
customers' desire to drive productivity and operational performance
improvements in line with the digitisation and Industry 4.0 themes
which are attracting significant investment spend. With our new
modularised software offerings aiding the Return on Investment
proposition to our target customers, we have developed a stronger
pipeline of better qualified opportunities including increased
software values, which will lead to further growth in orders,
revenues and margins delivering profitability.
A 28% increase in revenues of Ubisense products has exceeded the
decline in services associated with third-party and non-core
products within the Geospatial division. The successful placing in
November 2017 supports the future growth plans of the Group through
investment in go-to-market and product development capacity.
Revenue
The Group is organised into two divisions, RTLS SmartSpace and
Geospatial myWorld. Both divisions provide software solutions and
services to enterprise customers, with RTLS SmartSpace additionally
providing hardware solutions. The revenue composition by division
is summarised in the table below:
Revenue by division 2017 % of 2016 % of Year
GBP total GBP total on year
m revenue m revenue growth
------------------------ ----- --------- ----- --------- ---------
RTLS SmartSpace
revenue 10.8 40% 9.1 34% 18%
------------------------ ----- --------- ----- --------- ---------
- Geospatial myWorld 5.8 21% 3.8 15% 52%
- Geospatial services
from third party
products 10.7 39% 13.6 51% -22%
------------------------ ----- --------- ----- --------- ---------
Total Geospatial
revenue 16.5 60% 17.4 66% (5%)
------------------------ ----- --------- ----- --------- ---------
Total revenue 27.3 100% 26.5 100% 3%
------------------------ ----- --------- ----- --------- ---------
Further revenue composition detail is summarised in the table
below:
Revenue detail 2017 % of 2016 % of Year
GBP total GBP total on year
m revenue m revenue growth
------------------------- ----- --------- ----- --------- ---------
Software 3.9 14% 3.2 12% 21%
Maintenance and
support 1.8 7% 1.4 5% 34%
Hardware 4.8 18% 3.8 14% 30%
Services 6.1 22% 4.5 18% 31%
------------------------- ----- --------- ----- --------- ---------
Total revenue generated
from own products 16.6 61% 12.9 49% 28%
------------------------- ----- --------- ----- --------- ---------
Geospatial services
from third party
products 10.7 39% 13.6 51% -22%
------------------------- ----- --------- ----- --------- ---------
Total revenue 27.3 100% 26.5 100% 3%
------------------------- ----- --------- ----- --------- ---------
The software focus in both divisions delivered good progress in
2017 with sales into new sectors as well as expanding deployments
with existing customers. Modularisation of our software platform
offerings together with sales of the new myWorld Fiber Planning
product have been key factors in supporting 2017 growth and provide
a foundation for growth in future years. The increase in software
revenue leads directly to increasing maintenance and support
revenues with a 34% increase shown in 2017 over 2016. These
maintenance and support revenues are recurring contracts, which are
expected to be renewed by customers annually.
Orders
Bookings for own products in 2017 were GBP17.5 million (2016:
GBP15.5 million). The increase was in line with the strategy to
focus on our own products. GBP10.7 million of new orders related to
RTLS SmartSpace (2016: GBP10.9 million), GBP6.8 million related to
Geospatial myWorld (2016: GBP4.6 million). Total bookings of new
customer orders in 2017 were GBP22.7 million (2016: GBP29.3
million).
The order book backlog as at 31 December 2017 was GBP8.7 million
(2016: GBP12.6 million), most of which will be recognised during
2018. GBP3.6 million of this related to RTLS SmartSpace (2016:
GBP3.7 million), GBP2.9 million related to Geospatial myWorld
(2016: GBP1.8 million) and GBP2.2 million to Geospatial third party
Services (2016: GBP7.1 million).
Gross margin
The Group gross margin increased to 40% in 2017 from 39% in
2016.
Gross margin by division is summarised as follows;
Gross margin by 2017 Gross 2016 Gross Gross
division GBP margin GBP margin margin
m % m % movement
-------------------- ----- -------- ----- -------- ----------
RTLS SmartSpace 4.5 42% 4.0 44% (2%)
Geospatial 6.4 39% 6.2 36% 3%
-------------------- ----- -------- ----- -------- ----------
Total gross margin 10.9 40% 10.2 39% 1%
-------------------- ----- -------- ----- -------- ----------
The gross margin of the RTLS SmartSpace division has reduced
compared to 2016 due to a revenue mix with a higher proportion of
lower margin hardware and services revenues. The Geospatial
division's gross margin increased due to growth in myWorld software
revenues partially offset by the 3rd party costs of the
mathematical model embedded in the myWorld Fiber Planning
product.
Operating expense and adjusted EBITDA
Operating expenses were GBP13.9 million (2016: GBP16.4 million)
and are summarised as follows:
2017 2016
GBP m GBP m
----------------------------- ------ ------
Other operating expense 10.5 9.9
Depreciation 0.4 0.3
Amortisation and impairment 2.4 8.4
Share based payments 0.3 -
expense
Unrealised forex on
intercompany trading
balances 0.3 (1.9)
Non-recurring items - (0.3)
----------------------------- ------ ------
Total operating expense 13.9 16.4
----------------------------- ------ ------
Other operating expenses include sales, marketing, product
development, administration. Operating loss reduced to GBP3.1
million (2016: GBP6.2 million) due to impairments recognised in
2016. Share based payments expense of GBP0.3 million (2016: GBPnil)
relates to shares options granted in December 2016.
Adjusted EBITDA excludes amortisation and impairment,
depreciation, share based payments, unrealised foreign exchange
gains on intercompany trading balances and non-recurring items and
is reported as it reflects the performance of the Group. Adjusted
EBITDA was GBP0.4 million (2016: GBP0.3 million) with the
improvement driven by higher revenues at an increased gross
margin.
Finance costs
Net interest payable for the period was GBP0.1 million (2016:
GBP0.3 million) with reduced costs in 2017 following the
restructuring of the HSBC debt in 2016.
Income tax
The Group has a net tax credit of GBP0.1 million (2016: GBP1.1
million) as a result of non-cash deferred tax movements. The Group
does have substantial tax losses carried forward but does not
currently recognise a deferred tax asset in respect of these
losses.
Earnings and dividend
Loss before tax reduced to GBP3.1 million (2016:GBP6.4 million)
and loss after tax was GBP3.1 million (2016: GBP5.3 million).
The adjusted diluted loss per share was 4.3 pence (2016: 3.9
pence loss per share). Reported basic and diluted loss per share
was 5.2 pence (2016: 10.4 pence).
The Board does not propose a dividend for the year.
Impact of IFRS 15
IFRS 15 Revenue from Contracts with Customers will replace IAS
18 Revenue. The new standard is applicable from 1 January 2018,
however 2017 comparatives will be restated under IFRS 15. IFRS 15
introduces a number of new concepts and requirements relating to
revenue recognition, and also provides guidance and clarification
on existing practice.
The Group has assessed the impact of IFRS 15 and the results of
the assessment are stated in note 2 to the financial statements.
The majority of Ubisense's sales are for products sold on a
standalone basis and it is expected that the revenue recognition
policy applied to these sales will be unaffected by the application
of IFRS 15. Larger, more complex contracts, which involve multiple
performance obligations, that include a combination of products and
services, are affected by the application of IFRS 15. IFRS 15
requires the Group to evaluate the performance obligations for the
contracted products and services to identify to whether these
components are distinct. Accordingly, the significance of the
impact of IFRS 15 is dependent upon the details of those complex
contracts particularly those with delivery close to a financial
reporting period end.
The financial impact of the adoption of IFRS 15 will be
disclosed within the interim results to 30 June 2018.
Impact of IFRS 16
IFRS 16 Leases will replace IAS 17 and three related
interpretations. Leases will be recorded on the statement of
financial position in the form of a right-of-use asset and a lease
liability. The consolidated income statement will be impacted
through reduced operating expenses, and higher depreciation and
finance costs. The new standard is applicable from 1 January 2019
with an option to adopt it early. The Group intend to early adopt
IFRS 16 from 1 January 2018 alongside IFRS 15 Revenue.
The Group leases all of the premises from which it conducts
business with annual commitments under operating leases totalling
GBP0.7 million and therefore the impact of IFRS 16 will be material
to the financial statements. The Group has assessed the impact of
IFRS 16 and the results of the assessment are stated in note 2 to
the financial statements.
Consolidated statement of financial position
In November 2017, the Group completed a share placing raising
gross proceeds of GBP5.5 million with the placement of 17,187,500
new ordinary shares at a price of GBP0.32 per share with new and
existing shareholders. The net proceeds of GBP5.2 million from the
placing will be used to grow the business, investing in
go-to-market capacity and product development.
Alongside the fundraise, the terms of the HSBC loan were
renegotiated and this is discussed further in note 17 to the
consolidated financial statements.
As at 31 December 2017, the Group had a positive net cash
position of GBP6.6 million (2016: GBP0.2 million) being GBP9.1
million of cash and GBP2.5 million of debt. In January 2018 a
further repayment of GBP0.8 million was made.
Non-current assets
Total non-current assets were GBP3.5 million (2016: GBP4.4
million).
Capitalised development costs represent the key intangible
assets of the Group whereby this investment in Ubisense's own
products will deliver the future growth of the business.
Capitalised development costs of GBP1.6 million (2016: GBP1.9
million) were recognised in 2017 offset by amortisation of GBP2.2
million (2016: GBP2.6 million). The appropriateness of the
assessment of the useful life of current development projects was
reviewed, but no change has been made to the current three year
amortisation period, due to the fast moving nature of the
technology. The recoverable amount of the capitalised development
costs is supported through the growth in revenues of Ubisense's own
RTLS SmartSpace and myWorld products achieved in 2017 and
anticipated in future periods.
Current assets
Total current assets increased to GBP21.1 million (2016: GBP17.8
million).
Cash increased to GBP9.1 million (2016: 3.5 million).
Trade receivables net of provisions decreased to GBP6.2 million
(2016: GBP9.2 million) due to the timing of deals during the
year.
Amounts recoverable on contracts totaled GBP2.7 million (2016:
GBP2.9 million) which are generated from services contracts or end
of period deliveries, and are then invoiced in the following month
or as the relevant milestone is reached.
Hardware inventories increased to GBP1.5 million (2016: GBP1.1
million) due to the completion of a RTLS SmartSpace sensor build
program prior to the year end. The Group continues to manage its
investment in inventory through the sales forecasting process and
regular review of the expected lead times to create RTLS SmartSpace
hardware. The sensor build programs are sized to try to balance
volume demands against unit cost efficiency and need to work on a
4-6 month lead time as increased global demand is extending
component lead times.
Total assets
Total assets increased to GBP24.6 million (2016: GBP22.1
million).
Current liabilities
Total current liabilities decreased to GBP10.0 million (2016:
GBP9.0 million). Trade payables increased to GBP3.0 million (2016:
GBP1.5 million) which was partly due to inventory related purchases
close to the year end.
Non-current liabilities
Total non-current liabilities decreased to GBP2.5 million (2016:
GBP3.4 million) following the reduction in long-term debt from
GBP2.5 million in 2016 to GBP1.8 million as at 31 December
2017.
Net assets
Net assets increased to GBP12.1 million (2016: GBP9.8 million)
following the placement of 17,187,500 new ordinary shares at
GBP0.32 in November 2017.
Cash and cash flow
Operating cash flow before working capital movement was GBP0.4
million inflow (2016: GBP0.3 million).
Operating cash flows from operating activities after adjusting
for working capital and tax was GBP3.6 million inflow (2016: GBP2.0
million outflow). Working capital improvements were driven by a
reduction in the trade receivables balance at year end.
The Group had investment outflows of GBP2.1 million (2016:
GBP2.0 million), which is largely made up of expenditure on product
development.
Cash inflows from financing activities were GBP4.3 million
(2016: GBP1.8 million). This included net proceeds from placings of
GBP5.2 million (2016: GBP4.5 million) offset by repayment of
borrowings and interest on those borrowings.
Tim Gingell
Chief Financial Officer
14 March 2018
Consolidated income statement
For the year ended 31 December 2017
2017 2016
Notes GBP'000 GBP'000
------------------------------------------------ ------- ---------- ----------
Revenue 5 27,255 26,523
Cost of revenues (16,398) (16,280)
================================================ ======= ========== ==========
Gross profit 10,857 10,243
Operating expenses (13,912) (16,408)
================================================ ======= ========== ==========
Operating loss (3,055) (6,165)
------------------------------------------------ ------- ---------- ----------
Analysed as:
Gross profit 10,857 10,243
Other operating expenses (10,492) (9,919)
------------------------------------------------ ------- ---------- ----------
Adjusted EBITDA 365 324
Depreciation 12 (417) (345)
Amortisation and impairment
of acquired intangible
assets 11 - (1,223)
Amortisation and impairment
of other intangible
assets 11 (2,435) (7,143)
Share option expense (316) -
Unrealised foreign exchange
gains/(losses) on intercompany
trading balances (252) 1,877
Non-recurring items 8 - 345
------------------------------------------------ ------- ---------- ----------
Operating loss (3,055) (6,165)
------------------------------------------------ ------- ---------- ----------
Finance income 7 8 44
Finance costs 7 (87) (323)
------------------------------------------------ ------- ---------- ----------
Loss before tax (3,134) (6,444)
Income tax 9 61 1,136
------------------------------------------------ ------- ---------- ----------
Loss for the year (3,073) (5,308)
------------------------------------------------ ------- ---------- ----------
Loss attributable to:
* Equity shareholders of the Company (3,055) (5,196)
* Non-controlling interest (18) (112)
------------------------------------------------ ------- ---------- ----------
(3,073) (5,308)
------------------------------------------------ ------- ---------- ----------
Loss per share attributable to
the equity shareholders of the
parent (pence)
--------------------------------------------------------- ---------- ----------
Basic 10 (5.2p) (10.4p)
Diluted 10 (5.2p) (10.4p)
------------------------------------------------ ------- ---------- ------------
Consolidated statement of comprehensive income
For the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Loss for the year (3,073) (5,308)
Other comprehensive
income:
Items that may be reclassified
subsequently to profit and
loss
Exchange difference on retranslation
of net assets and results
of overseas subsidiaries (33) (1,357)
--------------------------------------------------
Total comprehensive loss
for the year (3,106) (6,665)
------------------------------------------------- --------- ---------
Attributable to:
* Equity shareholders of the Company (3,067) (6,682)
* Non-controlling interest (39) 17
------------------------------------------------- --------- ---------
Total comprehensive loss
for the year (3,106) (6,665)
------------------------------------------------- --------- ---------
Consolidated statement of changes in equity
For the year ended 31 December 2017
Attributable to equity
shareholders of the
parent company
=========================================================
Share
based
Share Share payment Translation Retained Non-controlling
capital premium reserve reserve earnings Sub-total interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ ======== ======== ======== ============ ========= ============ ================= ========
Balance at 1
January 2016 732 37,422 875 (539) (26,996) 11,494 456 11,950
================ ======== ======== ======== ============ ========= ============ ================= ========
Loss for the
year - - - - (5,196) (5,196) (112) (5,308)
Exchange
difference
on
retranslation
of net assets
and results of
overseas
subsidiaries - - - (1,486) - (1,486) 129 (1,357)
================ ======== ======== ======== ============ ========= ============ ================= ========
Total
comprehensive
loss for the
year - - - (1,486) (5,196) (6,682) 17 (6,665)
Reserve credit
for
equity-settled
share-based
payment - - (52) - - (52) - (52)
Issue of new
share capital 386 - - - - 386 - 386
Premium on new
share capital - 4,427 - - - 4,427 - 4,427
Share issue
costs - (295) - - - (295) - (295)
Transactions
with owners 386 4,132 (52) - - 4,466 - 4,466
================ ======== ======== ======== ============ ========= ============ ================= ========
Balance at 31
December 2016 1,118 41,554 823 (2,025) (32,192) 9,278 473 9,751
================ ======== ======== ======== ============ ========= ============ ================= ========
Loss for the
year - - - - (3,055) (3,055) (18) (3,073)
Exchange
difference
on
retranslation
of net assets
and results of
overseas
subsidiaries - - - (12) - (12) (21) (33)
================ ======== ======== ======== ============ ========= ============ ================= ========
Total
comprehensive
loss for the
year - - - (12) (3,055) (3,067) (39) (3,106)
Reserve credit
for
equity-settled
share-based
payment - - 316 - - 316 - 316
Issue of new
share capital 344 - - - - 344 - 344
Premium on new
share capital - 5,158 - - - 5,158 - 5,158
Share issue
costs - (337) - - - (337) - (337)
Transactions
with owners 344 4,821 316 - - 5,481 - 5,481
================ ======== ======== ======== ============ ========= ============ ================= ========
Balance at 31
December 2017 1,462 46,375 1,139 (2,037) (35,247) 11,692 434 12,126
================ ======== ======== ======== ============ ========= ============ ================= ========
Consolidated statement of financial position
For the year ended 31 December 2017
2017 2016
Notes GBP'000 GBP'000
------------------------------- ------ --------- ---------
Assets
Non-current assets
Intangible assets 11 2,962 3,616
Property, plant and
equipment 12 493 745
Total non-current assets 3,455 4,361
=============================== ====== ========= =========
Current assets
Inventories 13 1,459 1,064
Trade and other receivables 14 10,544 13,221
Cash and cash equivalents 15 9,114 3,498
=============================== ====== ========= =========
Total current assets 21,117 17,783
=============================== ====== ========= =========
Total assets 24,572 22,144
=============================== ====== ========= =========
Liabilities
Current liabilities
Trade and other payables 16 (9,211) (8,239)
Bank loans 17 (750) (750)
Total current liabilities (9,961) (8,989)
=============================== ====== ========= =========
Non-current liabilities
Deferred income tax
liabilities 9 (516) (683)
Trade and other payables (40) (42)
Bank loans 17 (1,750) (2,500)
Other payables 18 (179) (179)
=============================== ====== ========= =========
Total non-current liabilities (2,485) (3,404)
=============================== ====== ========= =========
Total liabilities (12,446) (12,393)
=============================== ====== ========= =========
Net assets 12,126 9,751
=============================== ====== ========= =========
Equity attributable to owners
of the parent company
Ordinary share capital 19 1,462 1,118
Share premium 19 46,375 41,554
Share based payment
reserve 1,139 823
Translation reserves (2,037) (2,025)
Retained earnings (35,247) (32,192)
=============================== ====== ========= =========
Equity attributable
to shareholders of the
Company 11,692 9,278
=============================== ====== ========= =========
Non-controlling interests 434 473
=============================== ====== ========= =========
Total equity 12,126 9,751
=============================== ====== ========= =========
Consolidated statement of cash flows
For the year ended 31 December 2017
2017 2016
Notes GBP'000 GBP'000
---------------------------------- ------ --------- ---------
Loss before tax (3,134) (6,444)
Adjustments for:
Depreciation 12 417 345
Amortisation and impairment 11 2,435 8,366
Adjustments to contingent
consideration 8 - (355)
Loss on the disposal
of property, plant and
equipment 8 2 24
Revaluation of intercompany
balances 252 (1,877)
Share-based payments
charge 316 (20)
Finance income 7 (8) (44)
Finance costs 7 87 323
Operating cash flows
before working capital
movement 367 318
Change in inventories (395) 1,751
Change in receivables 2,678 (3,941)
Change in payables 987 (743)
---------------------------------- ------ --------- ---------
Cash used in operations
before tax 3,637 (2,615)
---------------------------------- ------ --------- ---------
Net income taxes (paid)/received (14) 579
---------------------------------- ------ --------- ---------
Net cash flows from
operating activities 3,623 (2,036)
---------------------------------- ------ --------- ---------
Cash flows from investing
activities
Payment of contingent (197) -
consideration
Purchases of property,
plant and equipment (140) (26)
Expenditure on intangible
assets (1,813) (2,059)
Interest received 8 44
---------------------------------- ------ --------- ---------
Net cash flows from
investing activities (2,142) (2,041)
---------------------------------- ------ --------- ---------
Cash flows from financing
activities
Repayment of borrowings (750) (2,373)
Interest paid (110) (352)
Proceeds from the issue
of ordinary share capital 5,165 4,518
---------------------------------- ------ --------- ---------
Net cash flows from
financing activities 4,305 1,793
Net (decrease)/increase
in cash and cash equivalents 5,786 (2,284)
Cash and cash equivalents
at start of period 3,498 5,392
Exchange differences on
cash and cash equivalents (170) 390
========================================== ========= =========
Cash and cash equivalents
at end of period 15 9,114 3,498
================================== ====== ========= =========
Notes to the consolidated financial statements
1 General information
Ubisense Group plc ("the Company") and its subsidiaries
(together, "the Group") deliver Enterprise Location Intelligence
solutions that enable customers with complex operations to track
the precise location of assets across their business in real-time
to deliver operational efficiencies, increase flexibility, quality
and reduce costs. We offer in-depth knowledge of the sectors in
which we operate and have long-standing relationships with many of
our customers across target markets including automotive,
aerospace, communications and utilities.
The Company is a public limited company which is listed on the
Alternative Investment Market ("AIM") of the London Stock Exchange
(UBI) and is incorporated and domiciled in the United Kingdom. The
value of Ubisense Group plc shares, as quoted on the London Stock
Exchange at 31 December 2017, was 45 pence per share (31 December
2016: 41.5 pence).
The Company was incorporated as Ubisense Trading Limited on 11
October 2005 and changed its name to Ubisense Group plc on 31 May
2011 ahead of its initial public offering and listing on AIM on 22
June 2011. The address of its registered office is St. Andrew's
House, St. Andrew's Road, Chesterton, Cambridge, CB4 1DL.
The Group has its main operations in the UK, USA, Canada,
Germany, France and Japan and sells its products and services
mainly in North America, Europe and Asia. The Group legally
consists of ten companies headed by Ubisense Group plc.
The consolidated financial statements have been approved for
issue by the Board of Directors on 14 March 2018.
2 New accounting standards
For the purposes of the preparation of the consolidated
financial statements, the Group has applied all standards and
interpretations as adopted in the European Union that are effective
for accounting periods beginning on or before 1 January 2017.
The accounting policies used are the same as set out in detail
in the Report and Accounts 2016 and have been applied consistently
to all periods presented in the financial statements. No new
standards or amendments or interpretations to existing standards
that became effective during the year were material to the Group.
No new standards, amendments or interpretations to existing
standards having an impact on the financial statements that have
been published and that are mandatory for the Group's accounting
periods beginning on or after 1 January 2018, or later periods,
have been adopted early.
Standards and interpretations not yet applied by the Group
The following new Standards and Interpretations, which are yet
to become mandatory, have not been applied in the Group's financial
statements.
-- IFRS 9 'Financial Instruments' (effective date financial year
commencing on/after 1 January 2018)
-- IFRS 15 'Revenue from contracts with customers' (effective
date financial year commencing on/after 1 January 2018)
-- IFRS 16 'Leases' (effective date financial year commencing on/after 1 January 2019)
IFRS 9
The Directors are of the opinion, that the application of IFRS 9
will not have a significant impact, other than increased
disclosures, on the financial statements of the Group.
IFRS 15
IFRS 15 Revenue from Contracts with Customers will replace IAS
18 Revenue. The new standard is applicable from 1 January 2018.
IFRS 15 introduces a number of new concepts and requirements
relating to revenue recognition, and also provides guidance and
clarification on existing practice.
For sales within the RTLS SmartSpace division, the Group
contracts with customers to provide software, maintenance &
support, hardware or services. The contractual arrangements may be
to provide one of these elements on a standalone basis or to
provide a combination of products and services. Currently, software
licence revenue is recognised at the point the software is
delivered to the customer, hardware is recognised on dispatch to
the customer, maintenance and services are recognised over the term
of the agreement on a straight line basis and installation and
consultancy services are recognised as the service is
performed.
For sales connected to the myWorld product, the Group contracts
with customers to provide software, maintenance & support, or
services. The contractual arrangements may be to provide one of
these elements on a standalone basis or to provide a combination of
the products and services. Currently, software licence revenue is
recognised at the point the software is delivered to the customer
provided that only configuration is required. Maintenance and
service revenues are recognised over the term of the agreement on a
straight line basis and installation. Consultancy and customisation
services are recognised as the service is performed.
The majority of Ubisense's sales are for products sold on a
standalone basis and it is expected that the revenue recognition
policy applied to these sales will be unaffected by the application
of IFRS 15. Larger, more complex contracts, which involve multiple
performance obligations that include a combination of products and
services, are affected by the application of IFRS 15. Accordingly,
the significance of the impact of IFRS 15 is dependent upon the
timing of the delivery of performance obligations within complex
contracts close to a financial reporting period end. The key area
under review is the number of distinct performance obligations for
sales which include a combination of some or all of the above
products and services. Under IFRS 15, the Group must evaluate the
performance obligations for the promised goods or services to
identify whether the products and / or services are distinct. A
promised good or service is distinct if both the customer benefits
from the item either on its own or together with other readily
available resources and it is separately identifiable from other
promises in the contract (i.e. the Group does not provide a
significant service integrating, modifying or customising it). The
details of the performance obligations within complex contracts
with a combination of goods and services is currently being
assessed, and will be considered further to ensure an accurate
conclusion is reached. The financial impact of the adoption of IFRS
15 will be disclosed within the interim results to 30 June
2018.
IFRS 16
IFRS 16 Leases will replace IAS 17 and three related
interpretations. Leases will be recorded on the statement of
financial position in the form of a right-of-use asset and a lease
liability. The consolidated income statement will be impacted
through reduced operating expenses, and higher depreciation and
finance costs. The new standard is applicable from 1 January 2019
with an option to adopt it early. The Group intend to early adopt
IFRS 16 from 1 January 2018 alongside IFRS 15 Revenue.
The Group leases all of the premises from which it conducts
business with annual commitments under operating leases totalling
GBP0.7 million. Application of IFRS 16 will result in the Group no
longer recognising rental expense associated with the leased
premises within operating expenses in the consolidated income
statement. The Group will recognise a right-of-use asset in respect
of the leasehold premises within the consolidated statement of
financial position alongside a liability for the leasehold
commitments, and depreciation and finance costs in the consolidated
income statement. Accordingly, total assets will increase as will
total liabilities. Additionally, the Group leases other assets
including motor vehicles, however, the impact of application of
IFRS 16 to these leases will not be material.
3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
the consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Basis of preparation
The consolidated financial statements of Ubisense Group plc have
been prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union (IFRSs as
adopted by the EU) and the Companies Act 2006 applicable to
companies reporting under IFRS. The consolidated financial
statements have been prepared under the historical cost convention.
The consolidated financial statements are presented in GBP and all
values are rounded to the nearest thousand pounds (GBP'000) except
when otherwise indicated.
The Board of Ubisense Group plc approved the release of this
preliminary announcement on 14 March 2018.
The preliminary financial information does not constitute
statutory financial statements for the year ended 31 December 2017
within the meaning of section 435 of the Companies Act 2006, but is
extracted from those financial statements. Statutory accounts for
Ubisense Group plc for the year ended 31 December 2016 have been
delivered to the Registrar of Companies. Statutory accounts for the
year ended 31 December 2017 will be delivered to the Registrar of
Companies following the Group's Annual General Meeting.
The auditors have reported on those accounts; their reports were
(i) unqualified, (ii) did not include references to any matters to
which the auditors drew attention by way of emphasis without
qualifying their reports and (iii) did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
The preparation of these financial statements in conformity with
IFRS requires the Directors to make certain critical accounting
estimates and judgements that affect the amounts reported in the
financial statements and accompanying notes. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements, are disclosed in note 4.
Going concern basis
In determining the basis for preparing the consolidated
financial statements, the Directors are required to consider
whether the Company can continue in operational existence for the
foreseeable future, being a period of not less than twelve months
from the date of the approval of the consolidated financial
statements.
The Group had cash of GBP9.1 million at the balance sheet date.
As disclosed in note 17, the Group amended the terms of it's HSBC
loan in November 2017, with covenants requiring GBP750,000
repayable on or before each of 31 December 2017 and 31 January 2018
and then GBP187,500 each quarter starting on 31 March 2019. The
amended financial covenant on operating cash flow before working
capital adjustments is GBP2 million negative in 2017, GBP2 million
negative in 2018, GBP1 million negative in 2019 and GBP1 million
positive from 2020 onwards. The balance of this facility as at 31
December 2017 was GBP2.5 million.
Management prepares detailed working capital forecasts which are
reviewed by the Board on a regular basis. The forecasts include
assumptions regarding the opportunity funnel from both existing and
new clients, growth plans, risks and mitigating actions. In
particular, operating cashflow and profitability are highly
sensitive to revenue mix and the positive contribution of
continuing growth in software sales.
In reaching their going concern conclusion, the Directors have
considered the following points:
- The Group had cash, net of debt of GBP6.6 million as at 31 December 2017.
- It is not anticipated that the Group will breach the covenants
of the existing working capital facility which are described in
note 17.
- The Group has met the next repayment instalment of GBP0.75
million during January 2018 and no further capital repayments are
due within the next 12 months.
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, support the
conclusion that there is a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future, a period of not less than
twelve months from the date of this report. The Group, therefore,
continues to adopt the going concern basis in preparing the
consolidated financial statements.
Consolidation
The Group financial statements include the results, financial
position and cash flows of the Company and all of its subsidiary
undertakings. Subsidiary undertakings are those entities controlled
directly or indirectly by the Company. Control arises when the
Company has the power to govern the financial and operating
policies of an entity, uses this power to affect the returns from
that entity and has exposure to variable returns from its
investment in the entity.
Co-terminus financial statements of the subsidiaries are
prepared for the same reporting year as the Company, using
consistent accounting policies. Businesses acquired or disposed
during the year are accounted for using acquisition method
principles from, or up to, the date control passed. Intra-group
transactions and balances are eliminated on consolidation. All
subsidiaries use uniform accounting policies for like transactions
and other events and similar circumstances.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
non-controlling interest's share of changes in equity since the
date of combination.
Foreign currencies
(a) Functional and presentation currency
The functional currency of each Group entity is the currency of
the primary economic environment in which each entity operates. The
consolidated financial statements are presented in GBP.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency of each Group entity using the exchange rates prevailing
at the dates of transactions. Monetary assets and liabilities
denominated in foreign currencies are translated at rates ruling at
the period end date. Such exchange differences are included in the
income statement within "operating expenses". Non-monetary items
that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates as at the dates of the
initial transactions.
(c) Consolidation
For the purpose of presenting consolidated financial statements,
the results and financial position of all the Group entities (none
of which have the currency of a hyperinflationary economy) that
have a functional currency other than GBP are translated into GBP
as follows:
-- assets and liabilities for each statement of financial
position are translated at the exchange rate at the period end
date;
-- income and expenses for each income statement are translated
at the exchange rate ruling at the time of each period the
transaction occurred; and
-- all resulting exchange differences are recognised in other comprehensive income.
Segment reporting
IFRS 8 requires a "management approach" under which information
in the financial statements is presented on the same basis as that
used for internal management reporting purposes.
The Group is organised on a global basis into two operating
segments based on the Group's divisions: RTLS SmartSpace and
Geospatial. The Directors believe that the Chief Operating Decision
Maker (CODM) is the Chief Executive Officer of the Group. The CODM
and the rest of the Board are provided with information on a
divisional basis to assess the financial performance of, and
allocate resources to, each division and central resources.
The internal management accounting information is prepared on an
IFRS basis but has a non-GAAP "Adjusted EBITDA" as the primary
measure of profit and this is reported on the face of the income
statement.
Revenue recognition
Revenue represents amounts derived from the provision of goods
and services which fall within the Group's ordinary activities,
exclusive of discounts, value added tax and other similar sales
taxes. Revenue is measured by reference to the fair value of
consideration received or receivable.
Revenues on product sales are recognised at the time that units
are shipped, except for shipments under arrangements involving
significant acceptance requirements. Under such arrangements,
revenue is recognised when the Group has substantially met all its
performance obligations.
Revenue earned from sales under licence agreements is recognised
when the software is made available. When the sale includes a
period of support and maintenance, a proportion of the revenue is
deferred and recognised straight line over the period of support.
For licence rental fees, amounts are recognised over the period of
the contract, commencing from when the software is available for
use.
Services and training revenue from time and materials contracts
is recognised in the period that the services and training are
provided on the basis of time worked at agreed contractual rates
and as direct expenses are incurred.
Revenue from fixed price, long-term customer specific contracts,
including customisation and modification, is recognised on the
stage of completion of each assignment at the period end date
compared to the total estimated service to be provided over the
entire contract where the outcome can be estimated reliably. If a
contract outcome cannot be estimated reliably, revenues are
recognised equal to costs incurred, to the extent that costs are
expected to be recovered. An expected loss on a contract is
recognised immediately in the income statement.
Where bundled sales including a combination of some or all of
the above are made, the revenue attributable to the deal is
apportioned across the constituents of the bundle, and then
recognised according to the policies stated above.
Employee benefits
(a) Retirement benefits
The Group operates various defined contribution pension
arrangements for its employees.
For defined contribution pension arrangements, the amount
charged to the income statement represents the contributions
payable in the period. Differences between contributions payable in
the period and contributions actually paid are shown as either
accruals or prepayments in the statement of financial position.
(b) Share-based payments
The Group issues equity-settled share-based payments to certain
employees. Vesting conditions are continuing employment and can
include, for senior employees, a diluted EPS performance target or
share price target. Equity-settled share-based payments are
measured at fair value at the date of grant using an appropriate
pricing model. The fair value is expensed on a straight-line basis
over the vesting period, together with a corresponding increase in
equity in the share-based payment reserve, based on the Group's
estimate of the number of shares that will eventually vest.
Operating lease income and expense
The Group as the lessor
(a) Rental income
Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating the lease are recognised
straight-line over the lease term. Rental income is presented
within the Geospatial division within note 5
The Group as the lessee
(b) Rental expense
Operating lease rentals are charged as operating expenses to the
income statement in equal annual amounts over the lease term.
Assets leased under operating leases are not recorded in the
statement of financial position because the lessor retains a
significant portion of the risks and rewards of ownership.
(c) Lease incentives
The benefit of lease incentives such as rent-free periods or
up-front cash payments are spread equally on a straight-line basis
over the lease term.
Non-recurring items
Non-recurring items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are
material one-off items of income or expense that have been shown
separately due to the significance of their nature or amount and do
not reflect the ongoing cost base or revenue-generating ability of
the Group.
Interest income and expense
Interest income and expense is included in the income statement
on a time basis, using the effective interest method by reference
to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and
deferred tax:
(a) Current tax
The current tax charge represents an estimate of the amounts
payable or receivable to or from tax authorities in respect of the
Group's taxable profits and is based on an interpretation of
existing tax laws. Taxable profit differs from profit before tax as
reported in the income statement because it excludes certain items
of income and expense that are taxable or deductible in other years
or are never taxable or deductible. Taxation received is recognised
only when it is probable that the Group is entitled to the
asset.
(b) Deferred tax
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amounts of assets and liabilities in the consolidated
financial statements with their respective tax bases. In addition,
tax losses available to be carried forward as well as other income
tax credits to the Group are assessed for recognition as deferred
tax assets. However, deferred tax is not provided on the initial
recognition of goodwill, nor on the initial recognition of an asset
or liability, unless the related transaction is a business
combination or affects tax or accounting profit.
Deferred tax liabilities are always provided in full. Deferred
tax assets are recognised to the extent that it is probable that
the underlying deductible temporary differences will be able to be
offset against future taxable income. Deferred tax assets and
liabilities are calculated, without discounting, at tax rates that
are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the reporting
date. Deferred tax is recognised as a component of tax expense in
the income statement, except where it relates to items charged or
credited directly to other comprehensive income or equity when it
is recognised in other comprehensive income or equity.
Business combinations
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their provisional fair values
at the acquisition date. Fair values are reassessed during the
measurement period and updated if required. The Group recognises
any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised
amounts of the acquiree's identifiable net assets.
If the business combination is achieved in stages, the
acquisition date fair value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 either in profit or loss or as a change to other
comprehensive income. Contingent consideration that is classified
as equity is not remeasured and its subsequent settlement is
accounted for within equity.
Goodwill
Goodwill is initially measured as the excess of the aggregate of
the consideration transferred and the fair value of non-controlling
interest over the net identifiable assets acquired and liabilities
assumed. If this consideration is lower than the fair value of the
net assets of the subsidiary acquired, the difference is recognised
in profit or loss.
Goodwill arising on an acquisition of a business is the
difference between the fair value of the consideration paid and the
net fair value of the assets and liabilities acquired. Goodwill is
carried at cost less accumulated impairment losses.
Research and development
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
Development activities involve a plan or design for the
production of new or substantially improved products and processes.
Development expenditure is only capitalised if all of the following
conditions are met:
-- completion of the intangible asset is technically feasible so
that it will be available for use or sale;
-- the Group intends to complete the intangible asset and use or sell it;
-- the Group has the ability to use or sell the intangible asset;
-- the intangible asset will generate probable future economic
benefits. Among other things, this requires that there is a market
for the output from the intangible asset or for the intangible
asset itself, or, if it is to be used internally, the asset will be
used in generating such benefits;
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset; and
-- the expenditure attributable to the intangible asset during
its development can be measured reliably.
Internally-generated intangible assets, consisting mainly of
direct labour costs, are amortised on a straight-line basis over
their useful economic lives. Amortisation is shown within
administrative expenses in the income statement. The estimated
useful lives of current development projects are three years. Upon
completion the assets are subject to impairment testing.
Where no internally-generated intangible asset can be
recognised, development expenditure is recognised as an expense in
the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as
software licences that do not form an integral part of related
hardware, are capitalised at cost and amortised on a straight-line
basis over their useful economic life which is typically three
years.
Acquired intangible assets
Intangible assets acquired through a business combination are
initially measured at fair value and amortised on a straight-line
basis over their useful economic lives. Amortisation is shown
within operating expenses in the income statement. All acquired
intangibles were fully amortised or impaired as at 31 December 2016
and 2017.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment loss.
Depreciation is charged to the income statement so as to write-off
the cost or valuation less estimated residual values over their
expected useful lives on a straight-line basis over the following
periods:
-- Fixtures and fittings: three to ten years, or period of the lease if shorter
-- Computer equipment: three years
Residual values and useful economic lives are assessed annually.
The gain or loss on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in operating
expenses.
Impairment of non-financial assets
Assets that have an indefinite useful life - for example,
goodwill or intangible assets not ready to use - are not subject to
amortisation and are tested at least annually for impairment and
whenever there is an indication that the asset may be impaired.
Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
Impairment losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at
each reporting date. Where an impairment loss is reversed, it is
reversed to the extent that the increased carrying amount does not
exceed the carrying amount that would have been determined had no
impairment loss been recognised in prior years. A reversal of an
impairment loss is recognised immediately in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is the actual cost of third-party components and
labour, and is applied on a first in, first out basis. Net
realisable value is based on estimated selling price less
additional cost to completion and disposal. Provision is made for
obsolete, slow moving or defective items where appropriate and are
recognised as an expense in the period in which the write-down or
loss occurs.
Trade receivables
Trade receivables are amounts due from customers for products
sold or services performed in the ordinary course of business. If
collection is expected in one year or less, they are classified as
current assets. If not, they are presented as non-current
assets.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash
equivalents includes cash in hand, deposits held at call with banks
and other short-term highly liquid investments with original
maturities of three months or less.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
All borrowing costs are recognised in the income statement in
the period they are incurred.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds. The
nominal value of shares issued is classified as share capital and
the amounts paid over the nominal value in respect of share issues,
net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge
made in respect of share options granted by the Company to the
Group's employees under its employee share option plans.
Translation reserve
Exchange differences relating to the translation of the results
and net assets of the Group's foreign operations from their
functional currencies to the Group's presentation currency of GBP,
are recognised directly in other comprehensive income and
accumulated in the translation reserve.
Retained earnings
Retained Earnings include all current and prior period retained
profits/losses.
Non-controlling interests
Non-controlling interests, presented as part of equity,
represent a proportion of a subsidiary's profit or loss and net
assets that is not held by the Group. The Group attributes total
comprehensive income or loss of subsidiaries between the assets of
the parent and the non-controlling interests based on their
respective ownership interests.
4 Critical accounting judgements and key sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are addressed below.
Capitalisation, amortisation and impairment of development
costs
The point at which development costs meet the criteria for
capitalisation is critically dependent on management's judgement of
the point at which technical and commercial feasibility is
demonstrable. The carrying amount of capitalised development costs
at 31 December 2017 is GBP2.7 million (2016: GBP3.3 million).
Capitalised development costs are amortised over a three year
period which is management's estimate of the useful lives of
current development projects. In reaching this conclusion,
management have made assumptions in respect of future customer
requirements and developments within the industry.
The Group tests capitalised development costs for impairment
annually in accordance with the accounting policy stated in note 3.
In performing the impairment review, management is required to make
assumptions of the future cash flows generated from the SmartSpace
and myWorld products. This includes consideration of both the
current business pipeline and estimations beyond the existing
pipeline.
Revenue recognition
Significant management judgement is applied in determining the
allocation and timing of the recognition of revenue on fixed price,
long-term customer specific contracts. In this process, management
takes into account milestones, hardware supplied, actual work
performed, and further obligations and costs expected to complete
the work. The carrying value of amounts recoverable on contracts at
31 December 2017 is GBP2.7 million (2016: GBP2.9 million).
Inventories
The provision for obsolete, slow-moving or defective inventory
is based on management's estimation of the commercial life of
inventory lines and is applied on a prudent basis. In assessing
this, management takes into consideration the sales history of
products and the length of time that they have been available for
resale.
Deferred tax
A deferred tax asset is recognised where the Group considers it
probable that future tax profits will be available against which
the tax credit will be utilised in the future. This specifically
applies to tax losses and to outstanding vested share options at
the statement of financial position date. In estimating the amount
of the deferred tax asset that should be recognised, the Directors
make judgements based on current budgets and forecasts about the
amount of future taxable profits and the timings of when these will
be realised. No deferred tax asset is currently recognised.
5 Segment information
5.1 Operating segments
Management has determined the operating segments to be the
Group's divisions based on the information reported to the Chief
Operating Decision Maker (CODM) for the purpose of assessing
performance and allocating resources. The CODM is the Chief
Executive Officer.
The Real-Time Location Systems (RTLS) division takes real-time
location data from Ubisense's own sensing hardware, or from
standards based integration with third party hardware, and
transforms this data into high value spatial event information,
delivering highly reliable, automatic, adaptive asset
identification, precise real-time location and spatial-monitoring
to offer meaningful insights that help businesses make smarter
decisions.
The Geospatial division delivers software solutions that
integrate data from any source - geographic, real-time asset, GPS,
location, corporate and external cloud-based sources - into a live
geospatial common operating picture, empowering all users in the
customer's organisation to access, input and analyse operational
intelligence to proactively manage their networks, respond quickly
to emergency events and effectively manage day-to-day
operations.
Each operating segment is managed separately by a business unit
leader as each deals with different technologies and predominately
a different customer base. The performance of the operating
segments is assessed on a measure of contribution, being gross
profit less sales and business unit marketing expenditure. Assets
and liabilities are not presented to the CODM on a divisional
basis.
Costs incurred centrally or not directly attributable to either
the RTLS or Geospatial divisions are reported in the Central
division. The results of each segment are prepared using accounting
policies consistent with those of the Group as a whole. No
intra-segmental transactions are reported.
Year ended 31 December RTLS Geospatial Central Total
2017 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ -------------- ------------ ------------
Revenues 10,796 16,459 - 27,255
Cost of revenues (6,310) (10,088) - (16,3988)
Gross profit 4,486 6,371 - 10,857
================================= ============ ============== ============ ============
Sales and marketing
costs (3,062) (2,004) - (5,066)
================================= ============ ============== ============ ============
Contribution 1,424 4,367 - 5,791
================================= ============ ============== ============ ============
Other operating costs (5,426) (5,426)
================================= ============ ============== ============ ============
Adjusted EBITDA (5,426) 365
Depreciation (417) (417)
Amortisation and impairment
of intangibles (2,435) (2,435)
Share option expense
Unrealised foreign exchange
gains/(losses) on intercompany
trading balances (316) (316)
Unrealised foreign exchange
gains/(losses) on intercompany
trading balances (252) (252)
Non-recurring items - -
================================= ============ ============== ============ ============
Operating loss (8,846) (3,055)
Net finance costs (79) (79)
================================= ============ ============== ============ ============
Loss before tax (8,925) (3,134)
Income tax 61 61
================================= ============ ============== ============ ============
Loss after tax 1,424 4,367 (8,864) (3,073)
================================= ============ ============== ============ ============
Year ended 31 December RTLS Geospatial Central Total
2016 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ -------------- ------------ ------------
Revenues 9,113 17,410 - 26,523
Cost of revenues (5,097) (11,183) - (16,280)
Gross profit 4,016 6,227 - 10,243
============================= ============ ============== ============ ============
Sales and marketing
costs (2,931) (1,792) (91) (4,814)
============================= ============ ============== ============ ============
Contribution 1,085 4,435 (91) 5,429
============================= ============ ============== ============ ============
Other operating costs (5,105) (5,105)
============================= ============ ============== ============ ============
Adjusted EBITDA (5,196) 324
Depreciation (345) (345)
Amortisation and impairment
of intangibles (8,366) (8,366)
Non-recurring items 2,222 2,222
============================= ============ ============== ============ ============
Operating loss (11,685) (6,165)
Net finance costs (279) (279)
============================= ============ ============== ============ ============
Loss before tax (11,964) (6,444)
Income tax 1,136 1,136
============================= ============ ============== ============ ============
Loss after tax 1,085 4,435 (10,828) (5,308)
============================= ============ ============== ============ ============
5.2 Geographical areas
The Board and Management Team also review the revenues on a
geographical basis, based around the regions where the Group has
its significant subsidiaries or markets.
The Group's revenue from external customers in the Group's
domicile, the UK, and its major worldwide markets have been
identified on the basis of the customers' geographical location.
Non-current assets are allocated based on their physical
location.
Non-current
Revenue assets
-------------------- -------------------------- --------------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------ ------------ ------------ ------------
UK 383 365 3,132 3,940
France 303 313 5 3
Germany 8,218 6,456 29 106
Europe other 554 936 - -
USA 10,954 12,325 180 183
Canada 2,845 1,664 3 -
Japan 3,545 4,328 106 129
Asia Pacific other 187 91 - -
Rest of World 266 45 - -
27,255 26,523 3,455 4,361
==================== ============ ============ ============ ============
5.3 Information about major customers
During 2017, the Group had two customers who generated revenues
of greater than 10% of total revenue. GBP2.8 million was generated
from a European customer and GBP3.2 million was generated from a US
customer.
During 2016, the Group had two customers who generated revenues
of greater than 10% of total revenue. GBP3.7 million was generated
from a European customer and GBP3.4 million was generated from a US
customer.
6 Employee information
6.1 Employee numbers
The average monthly number of people, including Executive
Directors, employed by the Group during the year was:
Actual number
of people as Average monthly
at 31 December number of people
------------------------ ------------------------ ------------------------
2017 2016 2017 2016
By activity Number Number Number Number
------------------------ ----------- ----------- ----------- -----------
Technical consultants 55 59 58 64
Sales & marketing 41 38 38 42
Research & development 20 22 20 25
Administration 22 23 23 23
138 142 139 154
======================== =========== =========== =========== ===========
2017 2016 2017 2016
By geography Number Number Number Number
------------------------ ----------- ----------- ----------- -----------
United Kingdom 41 43 41 46
Europe 20 19 21 26
Americas 48 53 49 57
Asia 29 27 28 25
======================== =========== =========== =========== ===========
138 142 139 154
======================== =========== =========== =========== ===========
6.2 Employee benefits
The aggregate employee benefit expense, including Executive
Directors, comprised:
2017 2016
Notes GBP'000 GBP'000
------------------------------------ ------- --------- ---------
Wages and salaries 11,591 12,392
Social security costs 1,126 1,162
Contributions to defined
contribution pension arrangements 584 521
Share-based payments 316 (20)
=============================================== ========= =========
Total aggregate employee
benefits 13,617 14,055
=============================================== ========= =========
Included in the wages and salaries figure above are termination
benefits of GBPnil (2016: GBP0.1 million) which are presented as
non-recurring costs in the income statement - see note 8.2.
7 Finance income and costs
2017 2016
GBP'000 GBP'000
============================ ========= =========
Interest income from
cash and cash equivalents 8 44
=============================== ========= =========
Finance income 8 44
=============================== ========= =========
Interest payable
- bank (86) (302)
Interest payable
- other (1) (21)
=============================== ========= =========
Finance costs (87) (323)
=============================== ========= =========
Net finance costs (79) (279)
=============================== ========= =========
8 Loss before tax: analysis of expenses by nature
8.1 Expenses by nature
The following items have been charged/(credited) to the income
statement in arriving at loss before tax:
2017 2016
Notes GBP'000 GBP'000
--------------------------------- ------ --------- ---------
Amortisation and impairment
of acquired intangible
assets 11 - 1,223
Amortisation and impairment
of other intangible assets 11 2,435 7,143
Depreciation of owned property,
plant and equipment 12 417 345
Loss on disposal of
property, plant and
equipment 2 24
Operating lease rental
charges - land and buildings 648 625
Operating lease rental
charges - other 94 89
Inventory recognised
as an expense 2,408 1,532
Research & development
costs expensed 457 466
Net foreign currency
(gains)/losses (102) (350)
Unrealised foreign exchange
(gains)/losses on intercompany
trading balances 252 (1,877)
Non-recurring items
(excluding impairment
of goodwill) 8.2 - (345)
Auditors' remuneration 8.3 157 212
=================================== ====== ========= =========
8.2 Non-recurring items
2017 2016
GBP'000 GBP'000
---------------------------------------- ---------- ---------
Reorganisation costs - 139
Adjustment to contingent consideration - (355)
Others - (129)
Total non-recurring items - (345)
========================================== ========== =========
During the year ended 31 December 2016, non-recurring items
included GBP0.1 million reorganisation costs and a GBP0.4 million
gain in respect of adjustments to contingent consideration.
8.3 Auditors' remuneration
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditor and its
associates:
2017 2016
GBP'000 GBP'000
--------------------------------------- --------- ---------
Fees payable to the
Group's auditor for
the audit of:
Parent Company and consolidated
financial statements 39 28
Financial statements of subsidiaries,
pursuant to legislation 72 89
Interim reporting fees 14 15
========================================= ========= =========
Total audit fees 125 132
========================================= ========= =========
Fees payable to the Group's
auditor for other services:
Tax services 30 25
Other services 2 55
========================================== ========= =========
Total non-audit fees 32 80
========================================== ========= =========
Total auditors' remuneration 157 212
========================================== ========= =========
The auditor of Ubisense Group plc is Grant Thornton UK LLP.
9 Income tax
9.1 Income tax recognised in the income statement
2017 2016
GBP'000 GBP'000
---------------------------- --------- ---------
Current tax
UK corporation tax - -
Foreign tax 106 (2)
Research & development
tax credits - prior years - (579)
============================= ========= =========
Total current tax credit 106 (581)
=============================== ========= =========
Deferred tax
Origination and reversal
of temporary differences (167) (555)
=============================== ========= =========
Total deferred tax credit (167) (555)
=============================== ========= =========
Total income tax credit (61) (1,136)
=============================== ========= =========
The tax credit differs from the standard rate of corporation tax
in the UK for the year of 19.3% (2016: 20.0%) for the following
reasons:
2017 2016
GBP'000 GBP'000
===================================== ========= =========
Loss before tax (3,134) (6,444)
======================================== ========= =========
Loss before tax multiplied by the
standard rate of corporation tax
in the UK of 19.3%
(2016: 20.0%) (603) (1,289)
Tax effects of:
Expenses not deductible
for tax purposes 129 780
Utilisation of previously
unrecognised tax losses (82) (270)
Unrecognised deferred tax movements 429 450
Tax unprovided in prior 106 -
years
Research & development
tax credits - prior
years - (579)
Difference on tax treatment
of share options - unrecognised 60 (4)
Differential on overseas
tax rates (100) (224)
Total income tax credit (61) (1,136)
======================================== ========= =========
9 Income tax (continued)
9.2 Factors that may affect future tax charges
The Group has tax losses of GBP24.5 million (2016: GBP17.6
million) that are available for offset against future taxable
profits of those subsidiary companies in which the tax losses
arose. Deferred tax assets have not been recognised in respect of
these losses as they may not be used to offset taxable profits
elsewhere in the Group, and they have arisen in subsidiaries whose
future taxable profits are uncertain. No deferred tax has been
recognised on the unremitted earnings of overseas subsidiaries,
because the earnings are continually reinvested by the Group and no
tax is expected to be payable on them in the foreseeable
future.
On 26 October 2015, the UK Government substantially enacted
reductions to the UK corporation tax rates. Effective from 1 April
2020, the rate will further reduce to 18%. The deferred tax
balances have been measured at 19%, the rate of realisation
expected.
9.3 Deferred tax
The movement in deferred tax in the consolidated statement of
financial position during the year is as follows:
Deferred income Deferred income
tax assets tax liabilities
---------------------------- ---------------------------- --------------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------- ------------- ------------ ------------
At 1 January - - (683) (1,157)
Deferred tax credited
to the income statement - - 403 958
Deferred tax charged
to the income statement - - (236) (403)
Foreign exchange movements - - - (81)
============================ ============= ============= ============ ============
At 31 December - - (516) (683)
============================ ============= ============= ============ ============
The components of deferred tax included in the consolidated
statement of financial position are as follows:
2017 2016
GBP'000 GBP'000
=============================== ========= =========
Development costs capitalised (516) (669)
Other - (14)
Total deferred income
tax liabilities (516) (683)
================================== ========= =========
Deferred tax assets have not been recognised in respect of the
following items because it is not probable that future taxable
profits will be available against which the Group can utilise the
benefits:
2017 2016
GBP'000 GBP'000
============================== ========= =========
Tax losses carried forward 5,637 4,823
Equity-settled share options
temporary differences 19 18
Total unrecognised deferred
tax assets 5,656 4,841
================================= ========= =========
10 Earnings per share (EPS)
Basic and diluted earnings
per share 2017 2016
------------------------------------- -------- --------
Earnings
Earnings for the purposes
of basic and diluted EPS being
net loss attributable to equity
holders of the parent company
(GBP'000) (3,055) (5,196)
======================================= ======== ========
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
EPS ('000) 58,479 49,756
Effect of dilutive potential
ordinary shares:
* Share options ('000) 215 211
Weighted average number of ordinary
shares for the purposes of diluted
EPS ('000) 58,694 49,967
======================================== ======== ========
Basic EPS (pence) (5.2) (10.4)
======================================== ======== ========
Diluted EPS (pence) (5.2) (10.4)
======================================== ======== ========
Basic earnings per share is calculated by dividing profit/(loss)
for the period attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding
during the period. For diluted earnings per share, the weighted
average number of shares is adjusted to allow for the effects of
all dilutive share options and warrants outstanding at the end of
the year. Options have no dilutive effect in loss-making years, and
hence the diluted loss per share for the year is the same as the
basic loss per share.
The Group also presents an adjusted diluted earnings per share
figure which excludes amortisation and impairment of acquired
intangible assets and goodwill, share-based payments charge,
unrealised foreign exchange gains/(losses) on intercompany trading
balances and non-recurring items from the measurement of profit for
the period.
Adjusted diluted earnings
per share Notes 2017 2016
---------------------------------- ------ -------- --------
Earnings for the purposes of
diluted EPS being net loss
attributable to equity holders
of the parent company (GBP'000) (3,055) (5,196)
Adjustments:
Amortisation and impairment
of acquired intangible assets 8,
(GBP'000) 11 - 1,223
8,
Impairment of goodwill (GBP'000) 11 - 4,271
Reversal of share-based payments
charge (GBP'000) 316 (20)
Unrealised foreign exchange
gains/(losses) on intercompany
trading balances 252 (1,877)
Reversal of non-recurring items
(GBP'000) 8 - (345)
------------------------------------ ------ -------- --------
Net adjustments (GBP'000) 568 3,252
------------------------------------ ------ -------- --------
Adjusted earnings (GBP'000) (2,487) (1,944)
------------------------------------ ------ -------- --------
Adjusted diluted EPS
(pence) (4.3) (3.9)
------------------------------------ ------ -------- --------
The adjusted EPS information is considered to provide a fairer
representation of the Group's trading performance. Options have no
dilutive effect in loss-making years, and hence the diluted loss
per share for the year is the same as the basic loss per share.
11 Intangible assets
Acquired
customer Capitalised
relationships Acquired product
and 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
2016 8,314 1,900 563 12,405 1,300 24,482
===================== ========= =============== =========== ============= ========= =========
Exchange difference 491 340 87 - 150 1,068
Additions - - - 1,948 111 2,059
Disposals - - - - (315) (315)
At 31 December
2016 8,805 2,240 650 14,353 1,246 27,294
===================== ========= =============== =========== ============= ========= =========
Exchange difference - - - - (69) (69)
Additions - - - 1,583 230 1,813
At 31 December
2017 8,805 2,240 650 15,936 1,407 29,038
===================== ========= =============== =========== ============= ========= =========
Accumulated
amortisation
At 1 January
2016 (4,043) (1,018) (449) (8,425) (761) (14,696)
===================== ========= =============== =========== ============= ========= =========
Effects of movement
in exchange
rates (491) (134) (66) - (240) (931)
Charge for the
year - (119) (135) (2,585) (287) (3,126)
Elimination
on disposal - - - - 315 315
Impairment for
the year (4,271) (969) - - - (5,240)
===================== ========= =============== =========== ============= ========= =========
At 31 December
2016 (8,805) (2,240) (650) (11,010) (973) (23,678)
===================== ========= =============== =========== ============= ========= =========
Effects of movement
in exchange
rates - - - - 37 37
Charge for the
year - - - (2,210) (225) (2,435)
At 31 December
2017 (8,805) (2,240) (650) (13,220) (1,161) (26,076)
===================== ========= =============== =========== ============= ========= =========
Net book amount
===================== ========= =============== =========== ============= ========= =========
At 31 December
2017 - - - 2,716 246 2,962
===================== ========= =============== =========== ============= ========= =========
At 31 December
2016 - - - 3,343 273 3,616
===================== ========= =============== =========== ============= ========= =========
Capitalised product development costs relate to expenditure that
can be applied to a plan or design for the production of new or
substantial improvements to SmartSpace and myWorld products. The
Group is loss making and this is an indicator for potential
impairment of development costs. Management have completed
impairment reviews through estimating the future discounted cash
flows to be generated from these assets and concluded that no
impairment is required as the cash flows exceeded the carrying
value of the asset.
The remaining average amortisation period for the capitalised
product development costs is two years.
The software assets represent assets purchased from third
parties.
12 Property, plant and equipment
Fixtures Computer
and fittings equipment Total
GBP'000 GBP'000 GBP'000
=============================== === ============== =========== ===================
Cost
At 1 January 2016 786 1,117 1,903
=========================== === === ============== =========== ===================
Effect of movements
in exchange rates 88 211 299
Additions 7 19 26
Disposals (47) (131) (178)
--------------------------- --- --- -------------- ----------- -------------------
At 31 December
2016 834 1,216 2,050
=========================== === === ============== =========== ===================
Effect of movements
in exchange rates (9) (19) (28)
Additions 30 110 140
Disposals (122) (15) (137)
--------------------------- --- --- -------------- ----------- -------------------
At 31 December
2017 733 1,292 2,025
=========================== === === ============== =========== ===================
Accumulated depreciation
At 1 January 2016 (149) (811) (960)
============================ === ============== =========== =================
Effect of movements
in exchange rates 10 (164) (154)
Charge for the
year (197) (148) (345)
Elimination on
disposals 41 113 154
At 31 December
2016 (295) (1,010) (1,305)
============================ === ============== =========== =================
Effect of movements
in exchange rates 3 52 55
Charge for the
year (221) (196) (417)
Elimination on
disposals 122 13 135
At 31 December
2017 (391) (1,141) (1,532)
============================ === ============== =========== =================
Net book amount
============================ === ============== =========== =================
At 31 December
2017 342 151 493
============================ === ============== =========== =================
At 31 December
2016 539 206 745
============================ === ============== =========== =================
13 Inventories
2017 2016
GBP'000 GBP'000
------------------- --------- ---------
Raw materials 414 412
Finished goods 1,045 652
---------------------- --------- ---------
Total inventories 1,459 1,064
---------------------- --------- ---------
The Group's inventories are comprised of products which are not
generally subject to rapid obsolescence on account of deterioration
in condition, market trends or technological reasons. The balance
as at 31 December 2017 includes a GBP0.6 million impairment
provision (2016: GBP0.4 million).
14 Trade and other receivables
2017 2016
Notes GBP'000 GBP'000
----------------------------- ------ --------- ---------
Trade receivables, gross 7,663 11,304
Allowances for doubtful
debts 14.1 (1,460) (2,151)
=============================== ====== ========= =========
Trade receivables, net 14.2 6,203 9,153
Amounts recoverable
on contracts 2,666 2,912
Other receivables 275 220
Prepayments 933 933
Corporation tax recoverable 4 3
VAT and taxation receivable 463 -
============================= ====== ========= =========
Total trade and other
receivables 10,544 13,221
=============================== ====== ========= =========
All amounts disclosed are short term. The carrying value of
trade receivables is considered a reasonable approximation of fair
value.
The following disclosures are in respect of trade receivables
that are either impaired or past due. The individually impaired
receivables mainly relate to customers who are in unexpectedly
difficult economic situations, and are assessed on a
customer-by-customer basis following detailed review of the
particular circumstances. To the extent they have not been
specifically provided against, the trade receivables are considered
to be of sound credit rating.
14.1 Movement in allowance for doubtful debts
2017 2016
GBP'000 GBP'000
---------------------------- --------- ---------
At 1 January (2,151) (1,691)
Exchange differences 50 (158)
Amounts recovered in the
year 519 6
Amounts written off in the 217 -
year
Allowance released 30 -
Allowance made (125) (308)
At 31 December (1,460) (2,151)
=============================== ========= =========
As at 31 December 2017, the allowance for doubtful debts
includes GBP1,326,000 (2016: GBP2,065,000) in respect of amounts
owed by two entities in the Asia Pacific region. Provision was made
in 2015 against these balances as their recoverability is
uncertain.
14.2 Ageing of past due but not impaired receivables
2017 2016
GBP'000 GBP'000
---------------------------- --------- ---------
Neither past due nor
impaired 4,784 7,179
Past due but not impaired:
0 to 90 days overdue 1,084 1,227
More than 90 days overdue 335 747
Total 6,203 9,153
=============================== ========= =========
15 Cash and cash equivalents
2017 2016
GBP'000 GBP'000
--------------------------- --------- ---------
Cash at bank and in
hand 9,114 3,498
============================== ========= =========
Cash and cash equivalents 9,114 3,498
============================== ========= =========
The carrying amount approximates to fair value because of the
short-term maturity of these instruments, being no greater than
three months.
Cash at bank earns interest at floating rates based on daily
bank overnight deposit rates. Short-term cash deposits earn
interest at fixed rates for the term of the deposit. The
composition of cash and cash equivalents by currency is as
follows:
2017 2016
By currency GBP'000 GBP'000
------------------------------ --------- ---------
British Pound (GBP) 4,474 320
Euro (EUR) 1,829 675
US Dollar (USD) 1,693 1,947
Japanese Yen (JPY) 480 335
Canadian Dollar (CAD) 638 221
Cash and cash equivalents 9,114 3,498
============================== ========= =========
16 Trade and other payables
2017 2016
GBP'000 GBP'000
--------------------------- --------- ---------
Deferred income 2,386 2,279
Trade payables 3,040 1,549
Trade accruals 2,840 2,919
Current tax liability 101 -
Other taxation and social
security 768 1,223
Contingent consideration - 197
Other payables 76 72
Total trade and other
payables 9,211 8,239
============================== ========= =========
All amounts disclosed are short term. The carrying value of
trade payables is considered a reasonable approximation of fair
value.
Ubisense Group plc acquired the Ubisense Inc (formerly named
Geoplan Interworks K.K.) group of companies ("Geoplan") in December
2013. The purchase consideration contained a contingent cash
element, which was settled in full during 2017.
17 Bank loans
In October 2016, an GBP8.0 million HSBC working capital facility
was restructured, becoming a GBP4.0 million repayment loan with
GBP0.75 million repayable each year. GBP0.75 million of this
facility was repaid in each of December 2016 and December 2017.
This loan is secured on the fixed and floating assets of the
Group, attracts an interest charge of LIBOR + 3% and is subject to
an operating covenant linked to "operating cash flow" performance
(profit or loss before tax adding back any non-recurring items,
finance costs, foreign exchange costs, share based payments,
depreciation, amortisation or capitalisation of product
development). Following the placing in November 2017, the terms of
the operating covenant were amended as follows: 2017 - from nil to
GBP2 million negative; 2018 - from GBP1 million positive to GBP2
million negative; 2019 - from GBP1 million positive to GBP1 million
negative, 2020 and beyond - remained at GBP1 million positive.
The covenants require future repayments of GBP750,000 before 31
January 2018 and then GBP187,500 each quarter starting on 31 March
2019.
18 Other payables
2017 2016
Notes GBP'000 GBP'000
---------------------- ------- --------- ---------
Property provisions 179 179
Total other payables 179 179
--------------------------------- --------- ---------
The property provision is a dilapidation provision to restore
leased offices to their original state. Part of this provision is
expected to be used in 2018 with the remainder expected to be
utilised in 2027.
19 Share capital and premium
Number of
ordinary shares Share Share
of GBP0.02 capital premium Total
each GBP'000 GBP'000 GBP'000
-------------------------- ----------------- --------- --------- ---------
Balance at 1 January
2016 36,620,247 732 37,422 38,154
-------------------------- ----------------- --------- --------- ---------
Issued under share-based
payment plans 32,907 1 4 5
Issued on placing
to institutional
shareholders 19,230,000 385 4,128 4,513
========================== ================= ========= ========= =========
Change in year 19,262,907 386 4,132 4,518
-------------------------- ----------------- --------- --------- ---------
Balance at 31 December
2016 55,883,154 1,118 41,554 42,672
-------------------------- ----------------- --------- --------- ---------
Issued under share-based
payment plans 17,250 - 2 2
Issued on placing
to institutional
shareholders 17,187,500 344 4,819 5,163
Change in year 17,204,750 344 4,821 5,165
-------------------------- ----------------- --------- --------- ---------
Balance at 31 December
2017 73,087,904 1,462 46,375 47,837
-------------------------- ----------------- --------- --------- ---------
The Company has one class of ordinary shares which carry no
right to fixed income.
During the period, the Company issued 17,204,750 shares,
increasing the total number of shares in issue from 55,883,154 to
73,087,904 as follows:
-- 17,187,500 shares at GBP0.32 per share for a total gross
consideration of GBP5,500,000 with share issue costs of GBP337,000
written off against share premium; and
-- 17,250 shares as a result of options exercised with a
weighted average exercise price of GBP0.14 per share for total cash
consideration of GBP2,415.
20 Post balance sheet events
On 6 March, Ubisense Group plc entered into agreements to carve
out the third party geospatial services business of its Japanese
subsidiary, Geoplan Company Limited. Under the terms of the
agreement customer relationships, the Geoplan brand name, fixed
assets including certain market specific products, stock and 13
employees will be transferred to a new company, with the new
company being sold for a consideration of JPY 100 million
(approximately GBP0.7 million). The assets being sold have an
immaterial carrying value within the consolidated statement of
financial position as at 31 December 2017.
The agreed completion date of the transaction is 30 March 2018.
Alongside this transaction, Ubisense has agreed, subject to
contract completion, to acquire the 23% minority interest of
Geoplan Company Limited. The acquisition of this minority interest
will give the group 100% ownership of its remaining Japanese
operations. Geoplan Company Limited will be renamed Ubisense Japan
K.K.
These transactions are consistent with Ubisense's strategy of
refocusing the Group on growing revenues from its own IP whilst
managing the reduction in third party geospatial services
revenues.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FZLLFVXFBBBL
(END) Dow Jones Newswires
March 15, 2018 03:00 ET (07:00 GMT)
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