TIDMFST
RNS Number : 0306S
Frontier Smart Technologies Grp Ltd
28 September 2017
For immediate release 28 September 2017
Frontier Smart Technologies Group Limited
('Frontier', the 'Group' or the 'Company')
Half-Year Results
Frontier Smart Technologies Group Limited (AIM: FST), a pioneer
in technologies for Digital Audio devices, is pleased to announce
its half-year results for the six months ended 30 June 2017.
Key Highlights
-- H1 2017 financial highlights:
o Revenues up 44% at GBP19.7 million (H1 2016: GBP13.7 million);
up 27% on a constant currency basis
o EBITDA of GBP1.1 million (H1 2016: loss of GBP0.04
million)
o R&D expenditure stable at GBP2.9 million (H1 2016: GBP2.8
million)
o As at 30 June 2017, cash and cash equivalents were up 41% at
GBP4.8 million (31 December 2016: GBP3.4 million).
-- H1 2017 operational highlights:
o Strong growth in Digital Radio and Advanced Radio(1) driven by
Digital Switchover in Norway and robust DAB volumes in continental
Europe
o First material revenues from Smart Audio(2)
-- Full year 2017 outlook
o Trading since the end of H1 2017 has continued to be strong
and the Board now expects FY 2017 EBITDA(3) to be significantly
ahead of current market expectations(4) .
Anthony Sethill, CEO of Frontier, commented: "The Group has
performed well in the first half of the year. In Digital and
Advanced Radio, we have benefited from underlying growth in the
sector and the impact of the Digital Switchover in Norway. In Smart
Audio, we have secured the first material revenues for our Google
Chromecast product.
"In the second half of the year, we expect trading to hold up
well and our full year EBITDA performance should be significantly
ahead of current market expectations."
Notes:
(1) Advanced Radio is an established business line for Frontier,
in previous reports referred to as Smart Audio. The business offers
technologies for Internet radios (devices often also providing
access to online music services, such as Spotify).
(2) Smart Audio, as now defined, is the Group's newest business
line. It encompasses technologies for Wi-Fi enabled audio devices
(e.g. speakers, soundbars, AVRs), excluding Internet radios. These
devices are generally based on software platforms from major
technology players such as Google.
(3) EBITDA is defined as earnings before interest, tax,
depreciation, amortisation, and before share based payments.
(4) Current market expectations prior to this announcement for
the Group's EBITDA for the year ending 31 December 2017 are approx.
GBP1.5 million.
Certain statements made in this release are forward-looking
statements. Such statements have been made by the Directors in good
faith using information available up until the date that they
approved this update. Forward-looking statements should be regarded
with caution because of the inherent uncertainties in economic
trends and business risks.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation. Upon the publication of this
announcement via a regulatory information service, this inside
information is now considered to be in the public domain.
Enquiries:
Frontier Smart Technologies +44 (0) 20 7391
Group Limited 0630
Anthony Sethill, Chief Executive
Officer
Jonathan Apps, Chief Financial
Officer
N+1 Singer (Nominated Adviser +44 (0) 20 7496
and Broker) 3000
Shaun Dobson / James Hopton
+44 (0) 20 7466
Buchanan 5000
Henry Harrison-Topham / Steph FST@buchanan.com
Watson / Gemma Mostyn-Owen
About Frontier
The Frontier Smart Technologies Group is a pioneer in
technologies for digital audio devices. The original company,
Frontier Silicon, was incorporated in 2001. Customers include many
leading consumer audio brands: Bose, Denon, Grundig, harman/kardon,
Onkyo, Panasonic, Philips, Pioneer, Pure, Roberts, Sony, TechniSat,
Yamaha, and many more. The Company is headquartered in London, with
engineering, sales and operations teams in Cambridge, Timisoara
(Romania), Hong Kong, and Shenzhen. www.frontiersmart.com
Introduction
In this statement, Frontier reports on three business lines:
Digital Radio, Advanced Radio and Smart Audio.
-- In Digital Radio, Frontier provides chips and modules for DAB
radios (consumer and automotive aftermarket).
-- In Advanced Radio, Frontier provides solutions for Internet
radios (devices often also offering access to online music
services).
-- The Group's Smart Audio business is focused on solutions for
Wi-Fi enabled audio devices such as Wi-Fi speakers, soundbars and
AVRs. Generally, these devices incorporate software platforms from
major technology companies such as Google.
Digital and Advanced Radio are well-established business lines
where Frontier has market leading technologies and strong customer
relationships, with both generating positive cashflows.
Smart Audio is the Group's newest business line and offers
potentially attractive growth prospects. Market volumes are
forecast by Strategy Analytics to rise from 14 million units in
2016 to 76 million in 2020. Whilst still in the early stages of
development, growth in this sector is being driven by platforms
such as Google Chromecast and voice technologies on devices such as
the Amazon Echo and Google Home. Frontier's role is to work with
third party brands to develop Smart Audio devices based on these
proprietary technologies.
In 2016, Frontier returned its first positive EBITDA of GBP0.7
million with revenues of GBP32.1 million.
In previous reports, Advanced Radio was reported as part of the
Group's Smart Audio activities. In future, starting with the
Group's 2017 Full Year Results, the Group intends to report Digital
and Advanced Radio as a single business line. However, to aid
transparency, in this report Advanced Radio has been broken out as
a separate business line.
Overview of H1 2017 performance
H1 2017 saw a strong financial performance for the Group, with
reported revenues of GBP19.7 million up 44% (H1 2016: GBP13.7
million) and EBITDA improving to GBP1.1 million (H1 2016: loss of
GBP0.04 million).
This growth in Group revenues was assisted by the decline in
Sterling against the US Dollar. On a constant currency basis,
revenues grew by 27% to US$25.0 million (H1 2016: US$19.7
million).
Digital Radio and Advanced Radio both saw strong growth in the
period. Digital Radio dollar revenues were up 20% to US$16.1
million (H1 2016: US$13.4 million); and Advanced Radio revenues
grew 11% to US$7.0 million (H1 2016: US$6.3 million). Digital Radio
benefited from the start of the switch-off of FM broadcasts in
Norway, a process which will continue throughout 2017, on top of
robust underlying growth in DAB volumes in continental Europe. Both
Radio businesses benefited from the introduction of new EU
regulation (the Radio Equipment Directive), which encouraged some
customers to bring forward orders into the first half of the
year.
Smart Audio produced its first significant revenues, US$1.8
million in H1 2017 (H1 2016: zero). These sales were generated by
design wins for Minuet, Frontier's Smart Audio solution
incorporating Google Chromecast. Customers include Harman JBL,
Urbanears, Brookstone, Jensen and SOLIS.
Group R&D expenditure in H1 2017 was broadly flat at GBP2.9
million (H1 2016: GBP2.8 million).
At 30 June 2017, the Group's cash balance was GBP4.8 million (31
December 2016: GBP3.4 million). This equates to a net cash position
of GBP1.3 million (31 December 2016: net debt GBP0.7 million).
Prospects
The Digital Radio and Advanced Radio business lines are expected
to continue generating positive cashflows for the medium term.
Smart Audio is a new business sector driven by large US technology
companies such as Google and Amazon. The Smart Audio market is
expected to be substantially larger than that of DAB. The Group's
aim over the next 18 months is to establish itself as the leading
system integrator in this sector.
Digital Radio
Digital Radio volumes for 2018 may remain at similar levels to
2017 following the completion of Digital Switchover ('DSO') in
Norway. Thereafter prospects for Digital Radio remain favourable,
with continued progress across Europe and the beginning of DSO in
Switzerland in 2020.
Advanced Radio
Advanced Radio is expected to remain a relatively niche business
concentrated in Germany and the UK. Frontier is expected to
maintain its leadership of this sector, a position which should be
boosted by the introduction in Q3 2017 of a new module,
specifically targeting the 'entry price point' segment.
In Q3 2017, Frontier has also since announced that it is working
on technologies which will allow its Advanced Radios and wireless
speakers to be controlled via Amazon's Echo and Echo Dot
devices.
Smart Audio
Frontier continues to be one of a small number of technology
providers working with Google on its Chromecast platform. Having
delivered the first design wins for the Group's Minuet platform,
there are now two strands to Frontier's engineering spend; first,
continuing to enhance the existing solution (e.g. by adding new
features such as wireless stereo) and; second, the development of a
new version of Minuet incorporating Google's Voice Assistant.
Subject to Google approvals, this voice-enabled solution should
be ready for mass production in H1 2018. Discussions with potential
customers are currently under way.
Financial Review
H1 2017 revenues of GBP19.7 million were up 44% year-on-year (H1
2016: GBP13.7 million).
Gross margin of GBP8.1 million was up 35% (H1 2016: GBP6.0
million). In percentage terms, gross margin fell from 44% to 41% of
revenues. This decline reflects the lower margins attributable to
the Smart Audio business (where the Group uses third party silicon;
whereas in Digital and Advanced Radio the Group uses its own
silicon). As Smart Audio grows, a further decline in the Group's
percentage margins is expected.
EBITDA for H1 2017 improved to GBP1.1 million (H1 2016: loss of
GBP0.04 million), driven by a combination of Digital Radio US
dollar revenues, which were up 20% to US$16.1 million (H1 2016:
US$13.4 million), and Advanced Radio revenues which grew 11% to
US$7.0 million (H1 2016: US$6.3 million). The Group has benefited
from the continued growth of DAB Digital Radio in continental
Europe and the ongoing switch-off of the analogue transmission
network in Norway.
Smart Audio now refers only to the Group's new technologies for
Wi-Fi enabled audio devices (excluding Internet radios, which are
based on the Group's older solutions).
This change is designed to give visibility to the separate
performance of each of the Group's established business lines
(Digital and Advanced Radio) and its new business line (Smart
Audio). Smart Audio is expected to deliver greater long term growth
than Digital and Advanced Radio, but is still in the early stages
of development and currently accounts for a significant proportion
of Group R&D.
Smart Audio revenues from Minuet based products in H1 2017 were
US$1.8 million (H1 2016: zero).
The Group has benefited during the period under review from the
movement in the USD/GBP exchange rate as the majority of its
revenue is booked in US Dollars. Offsetting these gains, however,
are a slight decline in UK volumes (following an increase in UK
retail selling prices due to the decline in Sterling) and certain
overhead costs denominated in currencies other than Sterling. Gross
margin in H1 2017 has increased by 35% to GBP8.1 million (H1 2016:
GBP6.0 million).
EBITDA can be calculated as:
H1 2017 H1 2016
GBP'000 GBP'000
--------- ---------
Revenue 19,727 13,659
Cost of sales 11,641 7,657
Gross margin 8,086 6,002
Research and development 2,868 2,762
Sales and administrative
expenses 4,141 3,275
EBITDA 1,077 (35)
Certain R&D costs related to future Minuet software
development were expensed as the conditions required for
capitalisation under IFRS were not met. As stated previously,
research and development ('R&D') expenditure has been broadly
consistent year-on-year. Sales and administrative expenses
increased by 26% year-on-year, reflecting a combination of exchange
rate effects and an increased investment in sales and marketing to
support the Group's entry into Smart Audio.
Frontier is now cash flow positive as evidenced by an increase
in the net cash position from net debt at 31 December of GBP0.7
million to a net cash position of GBP1.3 million.
Group pre-tax loss was GBP0.8 million (2016: loss GBP2.0
million) with a loss per share on the continuing business of 2.88
pence (2016: loss 1.38 pence).
Outlook
Based on the strong performance in H1 2017 and with good
visibility of the Group's H2 order book, the Board now expects FY
2017 EBITDA to be significantly ahead of current market
expectations.
Reported revenue growth for H2 2017 is expected to be lower than
H1 2017, as the decline in Sterling against the US Dollar has
started to reverse.
Underlying Digital Radio and Advanced Radio revenue growth is
expected to slow on H1 2017 as the benefits of the Norway
switchover are likely to have passed their peak. Nevertheless,
growth in Digital Radio volumes in continental Europe should remain
robust.
The slowing of growth in Digital and Advanced Radio is however
expected to be offset by Smart Audio. Group revenues from Smart
Audio are currently on an upward trend, with H2 2017 revenues
expected to be significantly higher than in H1 2017. Whilst the
sector remains in the early stages of development, several new
models based on Frontier solutions have recently received Google
certification and initial orders for these products are
encouraging.
The net impact of the strong performance in H1 2017 and
continued growth in H2 2017 is that FY 2017 revenues (in Sterling)
are expected to be significantly ahead of FY 2016.
Anthony Sethill
Chief Executive Officer
27 September 2017
Statement of Comprehensive Income
for the period ended 30 June 2017
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 2017 30 June 2016 2016
Note Restated Restated
GBP'000 GBP'000 GBP'000
Revenue 4 19,727 13,659 32,135
Cost of sales (11,641) (7,657) (18,000)
---------------------------- ---- ------------- ------------- ------------
Gross profit 8,086 6,002 14,135
---------------------------- ---- ------------- ------------- ------------
Research & development (2,868) (2,762) (6,588)
Sales & administrative
expenses (4,141) (3,275) (6,876)
EBITDA 1,077 (35) 671
---------------------------- ---- ------------- ------------- ------------
Amortisation (1,182) (1,186) (2,377)
Depreciation (151) (175) (355)
Share based payment (357) (380) (633)
---------------------------- ---- ------------- ------------- ------------
Total administrative
expenses (8,699) (7,778) (16,829)
---------------------------- ---- ------------- ------------- ------------
Loss from continuing
operations (613) (1,776) (2,694)
Finance income 6 5 9
Finance charges (148) (189) (361)
---------------------------- ---- ------------- ------------- ------------
Loss before taxation (755) (1,960) (3,046)
Taxation (475) 1,373 1,607
---------------------------- ---- ------------- ------------- ------------
Loss for the period
from continuing operations (1,230) (587) (1,439)
---------------------------- ---- ------------- ------------- ------------
Loss for the period
from discontinued
operations - (15,879) (15,892)
Loss for the Period (1,230) (16,466) (17,331)
---------------------------- ---- ------------- ------------- ------------
Other comprehensive
income/ (expense)
Items that will be
reclassified subsequently
to profit or loss
Exchange differences
on translating foreign
operations 65 (31) 17
Other comprehensive
income/(expense) for
the period 65 (31) 17
---------------------------- ---- ------------- ------------- ------------
Total comprehensive
loss for the period (1,165) (16,497) (17,314)
---------------------------- ---- ------------- ------------- ------------
Earnings per share
---------------------------- ---- ------------- ------------- ------------
Basic earnings per
share
- From continuing
operations 5 (2.88)p (1.38)p (3.36)p
- From discontinued
operations 5 - (37.2)p (37.1)p
---------------------------- ---- ------------- ------------- ------------
Consolidated Statement of Financial Position at 30 June 2017
Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2017 2016 2016
Restated Restated
Assets GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 6 8,536 8,536 8,536
Other intangible assets 7 7,348 9,701 8,510
Property, plant and equipment 339 514 401
16,223 18,751 17,447
------------------------------------------------------------------- ------ --------- --------- ------------
Current assets
Inventories 4,154 3,144 2,588
Tax receivable 319 934 1,123
Trade and other receivables 8 4,688 5,621 8,209
Cash and cash equivalents 4,816 3,378 3,376
------------------------------------------------------------------- ------ --------- --------- ------------
Total current assets 13,977 13,077 15,296
------------------------------------------------------------------- ------ --------- --------- ------------
Assets included in disposal group classified as held for sale - 3,592 -
------------------------------------------------------------------- ------ --------- --------- ------------
Total assets 30,200 35,420 32,743
------------------------------------------------------------------- ------ --------- --------- ------------
Liabilities
Current liabilities
------------------------------------------------------------------- ------ --------- --------- ------------
Trade and other payables 9 10,957 10,013 12,112
------------------------------------------------------------------- ------ --------- --------- ------------
Total current liabilities 10,957 10,013 12,112
------------------------------------------------------------------- ------ --------- --------- ------------
Other liabilities > 1 year 10 2,291 3,453 2,872
Liabilities included in disposal group classified as held for sale - 3,631 -
Total liabilities 13,248 17,097 14,984
------------------------------------------------------------------- ------ --------- --------- ------------
Equity
Share capital 11 4,276 4,275 4,275
Share premium 115,300 115,300 115,300
Share based payment reserve 5,491 4,881 5,134
Foreign exchange reserve 47 (66) (18)
Retained earnings (108,162) (106,067) (106,932)
Total equity 16,952 18,323 17,759
------------------------------------------------------------------- ------ --------- --------- ------------
Total equity and liabilities 30,200 35,420 32,743
------------------------------------------------------------------- ------ --------- --------- ------------
Consolidated Statement of Changes in Equity at 30 June 2017
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2017 4,275 115,300 5,134 (106,932) (18) 17,759
Share-based
payments - - 357 - - 357
Issue of share
capital 1 - - - - 1
Transactions
with owners 1 - 357 - - 358
--------- -------- --------- --------- ---------- -------
Loss for the
period - - - (1,230) - (1,230)
Other comprehensive
losses
Exchange differences
on translating
foreign operations - - - - 65 65
Total comprehensive
loss - - - (1,230) 65 (1,165)
--------- -------- --------- --------- ---------- -------
At 30 June 2017 4,276 115,300 5,491 (108,162) 47 16,952
========= ======== ========= ========= ========== =======
Consolidated Statement of Changes in Equity
for the period ended 30 June 2016
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2016 4,262 115,300 4,501 (89,601) (35) 34,427
Share-based
payments - - 380 - - 380
Issue of share
capital 13 - - - - 13
Transactions
with owners 13 - 380 - - 393
------- -------- --------- --------- ---------- --------
Loss for the
period (restated) - - - (16,466) - (16,466)
Other comprehensive
losses
Exchange differences
on translating
foreign operations - - - - (31) (31)
Total comprehensive
loss - - - (16,466) (31) (16,497)
------- -------- --------- --------- ---------- --------
At 30 June 2016 4,275 115,300 4,881 (106,067) (66) 18,323
======= ======== ========= ========= ========== ========
Consolidated Statement of Changes in Equity
for the period ended 31 December 2016
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2016 4,262 115,300 4,501 (89,601) (35) 34,427
Share-based
payments - - 633 - - 633
Issue of share
capital 13 - - - - 13
Transactions
with owners 13 - 633 - - 646
--------- -------- --------- --------- ---------- --------
Loss for the
period (restated) - - - (17,331) - (17,331)
Other comprehensive
losses
Exchange differences
on translating
foreign operations - - - - 17 17
Total comprehensive
loss - - - (17,331) 17 (17,314)
--------- -------- --------- --------- ---------- --------
At 31 December
2016 4,275 115,300 5,134 (106,932) (18) 17,759
========= ======== ========= ========= ========== ========
Consolidated Cash Flow Statement
for the period ended 30 June 2017
Unaudited
Unaudited six months Audited
six months ended year ended
ended 30 June 31 December
30 June 2016 2016
2017 Restated Restated
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Loss before taxation (755) (1,960) (3,046)
Amortisation 1,182 1,186 2,377
Depreciation 151 175 355
Share based payments 357 380 633
Net interest paid 142 184 352
(Increase)/ decrease
in inventories (1,566) (478) 78
Decrease/ (increase)
in trade and other receivables 3,495 662 (1,881)
(Decrease)/ increase
in trade and other payables (1,136) (1,208) 900
Foreign exchange movements 74 (31) (559)
Tax refund 429 1,685 1,805
Net cash inflow / (outflow)
from continuing operations 2,373 595 1,014
--------------------------------- ----------- ----------- ------------
Net cash outflow from
discontinuing operations - (4,476) (5,200)
--------------------------------- ----------- ----------- ------------
Net cash flow from operating
activities 2,373 (3,881) (4,186)
--------------------------------- ----------- ----------- ------------
Cash flow from investing
activities
-------------------------------- ----------- ----------- ------------
Purchase of property,
plant and equipment (97) (56) (81)
Purchase of intangible
assets (21) (63) (143)
Proceeds from sale of
subsidiaries, net of
cash sold - - 714
Net cash (used in) /
provided by investing
activities (118) (119) 490
--------------------------------- ----------- ----------- ------------
Cash flow from financing
activities
Loan (600) (300) (900)
Proceeds from issue of
share capital 1 - -
Loan interest payable (148) (189) (361)
Interest receivable 6 5 9
Net cash used in financing
activities (741) (484) (1,252)
--------------------------------- ----------- ----------- ------------
Net change in cash and
cash equivalents 1,514 (4,484) (4,948)
--------------------------------- ----------- ----------- ------------
Cash and cash equivalents
at beginning of period 3,376 7,748 7,748
Exchange differences
on cash and cash equivalents (74) 114 576
Cash and cash equivalents
at end of period 4,816 3,378 3,376
--------------------------------- ----------- ----------- ------------
Notes to the Interim Report
For the period ended 30 June 2017
1. Nature of operations and general information
Frontier Smart Technologies Group Limited and subsidiaries' (the
'Group') principal activity is the development and commercial
exploitation of technologies for consumer digital audio
devices.
Frontier Smart Technologies Group Limited is the Group's
ultimate parent company. It is incorporated in the Cayman Islands.
The address of Frontier Smart Technologies Group Limited's
registered office is Elgin House, 119 Elgin Avenue, George Town,
Grand Cayman, Cayman Islands. Frontier Smart Technologies Group
Limited's shares are listed on the Alternative Investment Market of
the London Stock Exchange. Frontier Smart Technologies Group
Limited's consolidated interim financial statements are presented
in Pounds Sterling (GBP), which is also the functional currency of
the parent company.
The financial information set out in this interim report does
not constitute statutory accounts. The Group's statutory financial
statements for the year ended 31 December 2016 are available from
the Group's website. The auditor's report on those financial
statements was unqualified.
2. Accounting Policies
Basis of Preparation
These interim condensed consolidated financial statements are
for the six months ended 30 June 2017. They have been prepared
following the recognition and measurement principles of IFRS. They
do not include all of the information required for full annual
financial statements, and should be read in conjunction with the
consolidated financial statements of the Group for the year ended
31 December 2016.
These financial statements have been prepared on the going
concern basis and under the historical cost convention.
These condensed consolidated interim financial statements have
been prepared in accordance with the accounting policies adopted in
the last annual financial statements for the year to 31 December
2016.
The accounting policies have been applied consistently
throughout the Group for the purposes of preparation of these
condensed consolidated interim financial statements.
3. Prior Period Restatement
Shortly after the completion of the full year accounts for 2016
the company became aware that an inter-company debtor of GBP1.7
million in respect of the discontinued business should have been
provided for in the period to 31 December 2016. In preparing these
half year statements for the period to 30 June 2017, and having
regard to the materiality of the debtor in respect of the half year
2017, the Board have concluded that the item should be treated as a
prior year adjustment. The discontinued loss for the year to 31
December 2016 has therefore increased to GBP15.9 million from the
GBP14.2 million previously reported.
4. Revenue by sector
Unaudited Audited
Unaudited 30 June 31 December
30 June 2017 2016 2016
GBP'000 GBP'000 GBP'000
Digital Radio 12,745 9,273 22.332
Advanced Radio 5,531 4,364 9,349
Smart Audio 1,451 22 454
Revenue 19,727 13,659 32,135
--------------- ------------- --------- ------------
Segmental information
As described under Segmental Reporting in the Principal
Accounting Policies, Management currently identifies four divisions
as operating segments.
For the period Digital Advanced Smart Group Total
ended 30 June 2017 Radio Radio Audio
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 12,745 5,531 1,451 - 19,727
Cost of sales (6,966) (3,491) (1,184) - (11,641)
------------ --------- --------- --------- ---------
Gross profit 5,779 2,040 267 - 8,086
------------ --------- --------- --------- ---------
Research & development (310) (540) (2,018) - (2,868)
Sales & administrative
expenses - other (1,103) (604) (1,351) (1,083) (4,141)
------------------------ ------------ --------- --------- --------- ---------
EBITDA 4,366 896 (3,102) (1,083) 1,077
------------------------ ------------ --------- --------- --------- ---------
Amortisation of
intellectual property (1,176) (1) (2) (3) (1,182)
Depreciation (105) (13) (27) (6) (151)
Share based payment (357) (357)
------------ --------- --------- --------- ---------
Total administrative
expenses (2,694) (1,158) (3,398) (1,449) (8,699)
------------ --------- --------- --------- ---------
Profit/ (loss)
from continuing
operations 3,085 882 (3,131) (1,449) (613)
Net finance payable - - - (142) (142)
Profit/ (loss)
before taxation 3,085 882 (3,131) (1,591) (755)
------------ --------- --------- --------- ---------
For the period Digital Advanced Smart Group Total
ended 30 June 2016 Radio Radio Audio
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 9,273 4,364 22 - 13,659
Cost of sales (4,934) (2,708) (15) - (7,657)
--------- --------- --------- --------- ---------
Gross profit 4,339 1,656 7 - 6,002
--------- --------- --------- --------- ---------
Research & development (557) (618) (1,587) - (2,762)
Sales & administrative
expenses - other (670) (342) (761) (1,502) (3,275)
------------------------ --------- --------- --------- --------- ---------
EBITDA 3,112 696 (2,341) (1,502) (35)
------------------------ --------- --------- --------- --------- ---------
Amortisation of
intellectual property (1,179) (7) - - (1,186)
Depreciation (133) (42) - - (175)
Share based payment - - - (380) (380)
--------- --------- --------- --------- ---------
Total administrative
expenses (2,539) (1,009) (2,348) (1,882) (7,778)
--------- --------- --------- --------- ---------
Profit/ (loss)
from continuing
operations 1,800 647 (2,341) (1,882) (1,776)
Net finance payable - - - (184) (184)
Profit/ (loss)
before taxation 1,800 647 (2,341) (2,066) (1,960)
--------- --------- --------- --------- ---------
For the period Digital Advanced Smart Group Total
ended 31 December Radio Radio Audio
2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 22,332 9,349 454 - 32,135
Cost of sales (11,553) (6,129) (318) - (18,000)
--------- --------- --------- --------- ---------
Gross profit 10,779 3,220 136 - 14,135
--------- --------- --------- --------- ---------
Research & development (896) (1,444) (4,248) - (6,588)
Sales & administrative
expenses - other (1,196) (840) (1,870) (2,970) (6,876)
------------------------ --------- --------- --------- --------- ---------
EBITDA 8,687 936 (5,982) (2,970) 671
------------------------ --------- --------- --------- --------- ---------
Amortisation of
intellectual property (2,367) (10) - - (2,377)
Depreciation (262) (93) - - (355)
Share based payment - - - (633) (633)
--------- --------- --------- --------- ---------
Total administrative
expenses (4,721) (2,387) (6,118) (3,603) (16,829)
--------- --------- --------- --------- ---------
Profit/ (loss)
from continuing
operations 6,058 833 (5,982) (3,603) (2,694)
Net finance payable - - - (352) (352)
Profit/ (loss)
before taxation 6,058 833 (5,982) (3,955) (3,046)
--------- --------- --------- --------- ---------
5. Loss per share
The calculation of the basic loss per share is based on the loss
attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the period. The impact of
the share options on the loss per share is anti-dilutive.
Basic loss per share
Unaudited Audited
Unaudited Six months Year ended
Six months ended 31 December
ended 30 June 2016 2016
30 June 2017 Restated Restated
GBP'000 GBP'000 GBP'000
Loss for the period attributable
to equity shareholders
- continuing operations GBP1,230 GBP587 GBP1,439
Loss for the period attributable
to equity shareholders
- discontinuing operations - GBP15,879 GBP15,892
Weighted average number
of 10p ordinary shares 42,751,710 42,643,509 42,832,269
(Loss) per share - basic
and diluted - continuing
operations (2.88)p (1.38)p (3.36)p
(Loss) per share - basic
and diluted - discontinuing
operations - (37.2)p (37.1)p
6. Goodwill
Frontier Sensium Frontier
Silicon Healthcare Microsystems Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2016 8,536 10,582 5,951 25,069
Additions - - - -
-------- ----------- ------------- --------
At 30 June 2016 8,536 10,582 5,951 25,069
Additions
Disposals - (10,582) - (10,582)
-------- ----------- ------------- --------
At 31 December 2016 8,536 - 5,951 14,487
Additions - - - -
At 30 June 2017 8,536 - 5,951 14,487
======== =========== ============= ========
Impairment
At 1 January 2016 - - 5,951 5,951
Charge in period - - - -
-------- ----------- ------------- --------
At 30 June 2016 - - 5,951 5,951
Charge in period - - - -
-------- ----------- ------------- --------
At 31 December 2016 - - 5,951 5,951
Charge in period - - - -
-------- ----------- ------------- --------
At 30 June 2017 - - 5,951 15,398
Net book amount at
30 June 2017 8,536 - - 8,536
======== =========== ============= ========
Net book amount at
30 June 2016 8,536 - - 8,536
======== =========== ============= ========
Net book amount at
31 December 2016 8,536 - - 8,536
======== =========== ============= ========
Marketing Customer Other Licence
intellectual intellectual intellectual &
property property property Development
fees Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2016 4,000 1,690 17,009 16,573 39,261
Foreign exchange
on opening balances - - - 3 3
Additions - - - 80 80
Disposals - - - (14) (14)
Assets held for disposal - - - (933) (933)
------------- ------------- ------------- ------------ -------
At 30 June 2016 4,000 1,690 17,009 15,709 40,644
Additions - - - 1 1
Adjustment to assets
held for disposal - - - 118 118
Disposals - - (6,805) - (6,805)
------------- ------------- ------------- ------------ -------
At 31 December 2016 4,000 1,690 10,204 15,828 33,958
Foreign exchange
on opening balances - - - (1) (1)
Additions - - - 21 21
Disposals - - - - -
At 30 June 2017 4,000 1,690 10,204 15,848 31,742
============= ============= ============= ============ =======
Amortisation
At 1 January 2016 1,333 470 11,095 14,855 27,753
Charge in period 200 70 634 282 1,186
Disposals (11) (11)
Assets held for disposal - - - (221) (221)
------------- ------------- ------------- ------------ -------
At 30 June 2016 1,533 540 11,729 14,905 28,707
Charge period 200 71 634 286 1,191
Adjustment to assets
held for disposal - - - 119 119
Disposals - - (6,805) - (6,805)
------------- ------------- ------------- ------------ -------
At 31 December 2016 1,733 611 5,558 15,310 23,212
Charge period 200 70 634 278 1,182
Disposals - - - - -
At 30 June 2017 1,933 681 6,192 15,588 24,394
============= ============= ============= ============ =======
Net book amount at
30 June 2017 2,067 1,009 4,012 260 7,348
============= ============= ============= ============ =======
Net Book amount at
30 June 2016 2,467 1,150 5,280 804 9,701
============= ============= ============= ============ =======
Net book amount at
31 December 2016 2,267 1,079 4,646 518 8,510
============= ============= ============= ============ =======
7. Other intangible assets
Intellectual property
Intellectual property relates to the valuation of beneficial
licence agreements, trade names and customer relationships at the
date of their original acquisition.
Licence & development fees
The licences relate to technology on new projects essential to
the future development of the new generation digital chips. The
licences will be amortised in accordance with the Group accounting
policy and will be subject to an annual impairment review.
Marketing
Marketing-related intangible assets are defined as those assets
that are primarily used in the marketing or promotion of products
and services. The Frontier solutions are well known and preferred
by a majority of the consumer electronic brands who specifically
instruct their manufacturers to use Frontier modules and solutions
in their audio systems.
Customer relationships
Customer-related intangible assets may consist of customer
lists, order or production backlogs, customer contracts and
relationships, and non-contractual customer relationships. Frontier
has developed relationships with both consumer electronic brands
and manufacturers. The customer relationship valuation captures the
economic benefits of having these trading relationships.
8. Trade and other receivables
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2015
GBP'000 GBP'000 GBP'000
Trade receivables 3,390 4,909 6,719
Other debtors 858 376 821
Prepayments and accrued
income 440 336 669
Trade and other receivables 4,688 5,621 8,209
---------------------------- --------- --------- ------------
Trade and other receivables are usually due within 30 - 60 days
and do not bear any effective interest rate.
The fair value of these short term financial assets is not
individually determined as the carrying amount is a reasonable
approximation of fair value.
9. Trade and other payables
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Trade payables 5,475 5,283 6,740
Other payables 753 528 664
Accruals and deferred
income 3,569 3,039 3,548
Loan 1,160 1,163 1,160
Trade and other payables 10,957 10,013 12,112
------------------------- --------- --------- ------------
10. Creditors: amounts falling due after more than one year
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Loan 2,291 3,453 2,872
Total 2,291 3,453 2,872
------ --------- --------- ------------
Loan
Frontier Smart Technologies Group Limited entered into a loan
facility agreement in October 2015 for a maximum of GBP5,000,000.
The loan accrues interest monthly at 6.8% with interest repayable
in 12 quarterly instalments commencing 29 December 2015. Capital
repayments are payable quarterly in ten instalments commencing
March 2016, made up of nine instalments of GBP300,000 and a final
instalment of GBP2,300,000. The loan carries a fixed and floating
charge over all the property, assets and undertakings of the
Group.
11. Share capital
Audited
Unaudited Unaudited 31 December
30 June 2017 30 June 2016 2016
GBP GBP GBP
Authorised
100,000,000 ordinary
shares of 10p 10,000,000 10,000,000 10,000,000
Allotted, issued and
fully paid 42,761,636 42,745,772 42,748,464
GBP 4,276,163 4,274,577 4,274,846
------------------------------------- ------------- ------------- ---------------
The movement in the number of shares
is as follows:
Number of
ordinary
shares
At 1 January 2016 1,704,779,379
Shares issued 5,051,486
At 30 June 2016 1,709,830,865
Shares issued 107,724
Share consolidation 40:1 (1,667,190,125)
At 31 December 2016 42,748,464
Shares issued 13,172
At 30 June 2017 42,761,636
---------------
All shares are equally eligible to receive dividends and the
repayment of capital and represent equal votes at meetings of
shareholders with the exception of 2,238,462 shares held jointly by
the Employee Benefit Trust and participants for the purpose of the
Company's joint share ownership plan in relation to which all
voting rights have been waived.
Allotments
2 May 2017 7,497 ordinary shares of 10p were issued in relation
to the exercise of share options by employees.
5 June 2017 5,675 ordinary shares of 10p were issued in relation
to the exercise of share options by employees.
12. Financial Instruments
The Group uses financial instruments comprising cash and cash
equivalents, other loans and various other short-term instruments
such as trade receivables and trade payables which arise from its
operations. The main purpose of these financial instruments is to
fund the Group's business strategy and the short-term working
capital requirements of the business.
Financial assets by category
The IAS 39 categories of financial asset included in the balance
sheet and the headings in which they are included are as
follows:
30 June 2017
Loans Non Balance
and financial sheet
receivables assets total
GBP'000 GBP'000 GBP'000
Goodwill - 8,536 8,536
Other intangibles
assets - 7,348 7,348
Property,
plant and
equipment - 339 339
Inventories - 4,154 4,154
Trade receivables 3,390 - 3,390
Other receivables 858 - 858
Prepayments
and accrued
income - 440 440
Tax receivable - 319 319
Cash and cash
equivalents 4,816 - 4,816
Total 9,064 21,136 30,200
============ ========== =======
30 June 2016
Loans Non Balance
and financial sheet
receivables assets total
GBP'000 GBP'000 GBP'000
Goodwill - 8,536 8,536
Other intangibles
assets - 9,701 9,701
Property,
plant and
equipment - 514 514
Inventories - 3,144 3,144
Trade receivables 4,909 - 4,909
Other receivables 376 - 376
Prepayments
and accrued
income - 336 336
Assets held
for sale 3,592 3,592
Tax receivable - 934 934
Cash and cash
equivalents 3,378 - 3,378
------------ ---------- -------
Total 12,255 23,165 35,420
============ ========== =======
31 December
2016
Loans Non Balance
and financial sheet
receivables assets total
GBP'000 GBP'000 GBP'000
Goodwill - 8,536 8,536
Other intangibles
assets - 8,510 8,510
Property, plant
and equipment - 401 401
Inventories - 2,588 2,588
Trade receivables 6,719 - 6,719
Other receivables 821 - 821
Prepayments
and accrued
income - 669 669
Tax receivable - 1,123 1,123
Cash and cash
equivalents 3,376 - 3,376
Total 10,916 21,827 32,743
============ ========== =======
Financial liabilities by category
The IAS 39 categories of financial liability included in the
balance sheet and the headings in which they are included are as
follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
30 June 30 June 30 June 30 June 31 December 31 December
2017 2017 2016 2016 2016 2016
Other Other Other
financial financial financial
liabilities liabilities liabilities
at at at
amortised amortised amortised
cost Fair cost Fair cost Fair
Value Value Value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade
payables 5,475 5,475 5,283 5,283 6,740 6,740
Other
payables 753 753 528 528 664 664
Accruals
and deferred
income 3,569 3,569 3,039 3,039 3,548 3,548
Liabilities
held for
disposal - - 3,631 3,631 - -
Loan 3,451 3,451 4,616 4,616 4,032 4,032
Total 13,248 13,248 17,097 17,097 14,984 14,984
============== ========== ============== ========== ============== =============
All financial assets and liabilities are stated at amortised
cost.
The Group is exposed to a variety of financial risks which
result from both its operating and investing activities. The Board
is responsible for co-ordinating the Group's risk management and
focuses on actively securing the Group's short to medium term cash
flows. Long term financial investments are managed to generate
lasting returns.
The Group does not actively engage in the trading of financial
assets and has no financial derivatives. The most significant risks
to which the Group is exposed are described below:
Credit risk
The Group's credit risk is primarily attributable to its trade
receivables, recoverable taxation and cash and cash equivalents.
The amounts presented in the balance sheet are net of any allowance
for doubtful receivables, estimated by the Directors. The Group has
a concentration of credit risk due to exposure from a limited
number of customers. This is managed at the highest level in the
Group. Cash at bank is all held with highly rated banks, the
suitability of which is periodically reviewed.
Liquidity risk
The Group seeks to manage risks to ensure sufficient liquidity
is available to meet foreseeable needs and to invest cash assets
safely and profitably. Short term flexibility is achieved by the
use of money markets to deposit excess cash which is not required
in the short term. The Directors prepare rolling cash flow
forecasts and seek to raise additional funding whenever a shortfall
in facilities is forecast. Details of the funding status of the
Group are included in the going concern paragraph in the principal
accounting policies.
Currency risks
The Group is exposed to translation foreign exchange risk in
connection with its investment in Frontier Silicon Ltd whose
subsidiaries are Frontier Silicon (Hong Kong) Ltd incorporated in
Hong Kong and Frontier Silicon SRL incorporated in Romania. The
Group does not hedge any transactions. As a result, the Group is
subject to foreign currency risk in respect of accounting for its
investment in the subsidiaries.
13. Post Balance Sheet Events
There have been no material events since 30 June 2017.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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